Hosler v. Tweedlie, 2023 Pa. Super. LEXIS 511, 2023 WL 7173062 (November 1, 2023) BEFORE: PANELLA, P.J., OLSON, J., and KUNSELMAN, J. OPINION BY OLSON, J.
On August 2, 2016, Buyers filed a complaint against Sellers alleging causes of action for breach of contract, fraud, and failure to disclose pursuant to the Real Estate Seller Disclosure Law (“RESDL”) in connection with Buyers’ purchase of a residential property from Sellers.
The trial court awarded damages in favor of Buyers on their breach of contract claim. This award was based upon the trial court’s limited finding that Sellers breached the implied warranty of habitability. As such, our review of Sellers’ claims is limited to the applicability of the implied warranty of habitability as a means for awarding damages on a breach of contract claim in the case sub judice. See Ecksel v. Orleans Co., 360 Pa. Super. 119, 519 A.2d 1021, 1026 (Pa. Super. 1987) (stating that, because an implied warranty of habitability is inherent in a contract, the failure to couch a breach of contract cause of action in the exact terms of this implied warranty “does not preclude the [trial] court from ruling upon that theory”).
Based upon Elderkin v. Gaster, 447 Pa. 118, 288 A.2d 771 (Pa. 1972), and its progeny, the doctrine of implied warranty of habitability, which requires a builder-vendor to warrant that the construction of the new home was performed in a reasonably workmanlike manner and that the home is fit for habitation, arises impliedly in a contract between a builder-vendor and the first purchaser of the newly constructed home. See Elderkin, 288 A.2d at 777; see also Tyus, 476 A.2d at 431; Conway v. Cutler Group, Inc., 626 Pa. 660, 99 A.3d 67, 70-73 (Pa. 2014) (declining to extend the doctrine of implied warranty of habitability to second and subsequent purchasers of the home due to lack of privity between that purchaser and the builder-vendor). Therefore, in order to recover for a breach of contract claim based upon a breach of an implied warranty of habitability, a plaintiff must demonstrate that (1) the seller is a builder-vendor; (2) the plaintiff is a purchaser in privity of contract with the builder-vendor; (3) that the residential property involves a newly-constructed home; (4) that the construction was not performed in a reasonably workmanlike manner; and (5) as a result of the defective construction, the newly-constructed home is not habitable. See Elderkin, 288 A.2d at 777; see also Tyus, 476 A.2d at 431; Conway, 99 A.3d at 70-73. Pertinent to our disposition herein is the definition of a “builder-vendor,” which for purpose of the implied warranty of habitability is “one who buys land and builds a home upon that land for purpose of sale to the general public.” Elderkin, 288 A.2d at 774 n.10. Additionally, “[c]ompared to the ordinary home purchaser, the builder-vendor possesses superior knowledge and expertise in all aspects of building, including its legal aspects.” Tyus, 476 A.2d at 431 (citation and original quotations marks omitted).
Here, the trial court, in finding in favor of Buyers on their breach of contract claim, held Gary Tweedlie out as a “builder-vendor” who breached an implied warranty of habitability in the contract with Buyers for the purchase of the residential property because he failed “to provide a habitable [sunroom], which impacted the habitability of the entire residence.”
The implied warranty of habitability is limited to residential construction, as it was intended to equalize the positions of an experienced builder-vendor and a home buyer in negotiations involving a residential home. As such, a builder-vendor, for purpose of the implied warrant of habitability, is someone who possesses specialized skills in building all aspects of a residential home, including acquisition of any necessary building permits and occupancy permits, and does so with the intent of selling that residential home for profit. See Elderkin, 288 A.2d at 774 n.10. Here, Gary Tweedlie’s skill set was limited to the fabrication of steel and the erection of structural shells for commercial buildings that were later finished by a general contractor. Within the purview of Elderkin, and its progeny, even viewing the evidence in the light most favorable to Buyers, as verdict winners, Gary Tweedlie does not qualify as a “builder-vendor” for purpose of the implied warranty of habitability. Therefore, the trial court erred as a matter of law in relying on the doctrine of an implied warranty of habitability to find that Sellers breached their contract with Buyers.
It is well-established that
[t]o prove fraud, a plaintiff must demonstrate by clear and convincing evidence:
(1) a representation; (2) which is material to the transaction at hand; (3) made falsely, with knowledge of its falsity or recklessness as to whether it is true or false; (4) with the intent of misleading another into relying on it; (5) justifiable reliance on the misrepresentation; and (6) the resulting injury was proximately caused by the reliance.
Blumenstock v. Gibson, 2002 PA Super 339, 811 A.2d 1029, 1034 (Pa. Super. 2002), quoting Gibbs v. Ernst, 538 Pa. 193, 647 A.2d 882, 889 (Pa. 1994), appeal denied, 573 Pa. 714, 828 A.2d 349 (2003). “[F]raud consists of anything calculated to deceive, whether by single act or combination, or by suppression of truth, or suggestion of what is false, whether it be by direct falsehood or by innuendo, by speech or silence, word of mouth, or look or gesture.” Moser v. DeSetta, 527 Pa. 157, 589 A.2d 679, 682 (Pa. 1991). “The concealment of a material fact can amount to a culpable misrepresentation no less than does an intentional false statement.” Id.
In viewing the evidence in the light most favorable to Buyers, as verdict winners, we concur with the trial court, and the record supports, that Sellers failed to make a disclosure of a material defect pertaining to the sunroom, namely that neither a building permit nor an occupancy permit were obtained relative to the construction.
Therefore, relative to Buyers’ fraud claim, we discern no error or abuse of discretion in, and the record supports, the trial court’s determinations that Sellers, in the course of completing the RESDL form, made a representation that was material to the transaction, i.e., whether a building permit or occupancy permit had been obtained, and that the representation was made with reckless disregard as to its veracity with the intent of misleading Buyers.
Even when viewed in the light most favorable to Buyers as verdict winners, Benjamin Hosler’s testimony that he was not concerned about the lack of Sellers’ answers regarding the existence of a building permit or occupancy permit for the sunroom addition negates a finding, in the case sub judice, that Buyers justifiably relied upon the information provided, or lack of information, in deciding to purchase the residence.
In discussing the elements necessary to establish a cause of action for fraud, the trial court failed to recognize, and consider, inter alia, the element of “justifiable reliance.” Blumenstock, 811 A.2d at 1034.
In order to establish a cause of action for violation of RESDL, the buyer must establish that the seller had a duty to disclose the material defect, that the seller willfully or negligently breached that duty, and as a result of that breach, buyer suffered actual damages. See 68 Pa.C.S.A. § 7311; see also Medlock v. Chilmark Home Inspections, LLC, 2018 PA Super 243, 195 A.3d 277, 290 (Pa. Super. 2018). As such, nondisclosure under RESDL is a separate and distinct theory of relief that requires elements different from those required for a cause of action based on fraud. For example, “justifiable reliance” is not an element for establishing a violation of RESDL.
In viewing the evidence in the light most favorable to Buyers as verdict winners, the lack of a building permit and an occupancy permit for the sunroom affected the good and marketable title of the residence and impacted Buyers’ use and enjoyment of the sunroom. Therefore, the lack of these permits constituted a material defect. Gary Tweedlie violated RESDL when he failed to disclose that it was “unknown” whether a building permit or occupancy permit had been obtained for the addition. The notice to buyer contained within the RESDL form does not negate Sellers’ obligations to indicate “yes, no, or unknown” to the questions regarding the building permit or occupancy permit. Therefore, a challenge to the trial court’s verdict based upon RESDL is without merit.
In assessing damages based upon Sellers’ violation of RESDL, we concur with the trial court, and the record supports, that Buyers were entitled to receive replacement cost value as actual damages pursuant to RESDL. The replacement costs, in the case sub judice, represented the most cost-effective means of remedying Buyers’ damages and ultimately would allow their use and enjoyment of the sunroom once it was properly reconstructed in accord with building code provisions and upon the issuance of an occupancy permit. Therefore, Sellers’ challenge to the verdict in the amount of $38,370.94 is without merit.
Upon review, we discern that the trial court abused its discretion in awarding attorney’s fees. Although counsel for Buyers indicated that they would be seeking attorney’s fees, a motion for attorney’s fees was never filed.
The trial court found that “[t]he conduct of [Sellers] in first requiring that [Buyers] participate in arbitration, then ignoring the request, then appealing the decision of the arbitrators was clearly an attempt by [Sellers] to delay the proceedings and to incur unnecessary legal fees for [Buyers]” amounted to dilatory, obdurate, and vexatious conduct. The dialogue between counsel at trial (see N.T., 10/26/20, at 105-106) indicates factual disputes regarding the cause of the delays to bring this matter first to arbitration and then, ultimately, to trial. For example, Buyers first indicated that they resisted arbitration and incurred legal fees due to that resistance, and then argued Sellers did not avail themselves of arbitration and that they incurred legal fees as a result of Sellers’ resistance. Because factual disputes existed, the trial court erred in not conducting an evidentiary hearing before determining whether an award of attorney’s fees was established under Section 2503(7).
In sum, we find that the trial court erred as a matter of law and abused its discretion in entering judgment in favor of Buyers on the causes of action for breach of contract and fraud. We discern no error or abuse of discretion in the trial court’s verdict in favor of Buyers on the RESDL cause of action. Because the trial court awarded the same judgment, $38,370.94, upon finding in favor of Buyers on each cause of action, we affirm the judgment in the amount of $38,370.94 based upon the RESDL violation. We vacate a portion of the judgment in the amount of $11,508.93, awarded for attorney’s fees, and remand the case for further proceedings in accordance with this opinion.