Christy v. Prestige Builders, Inc. , 415 Mich. 684 ( 1982 )

Levin, J.

I

The principal issue in this case is whether a vendor landowner has a common-law duty to subvendees of his vendee to avoid negligent behavior. We hold that this landowner had no such duty and reverse the jury verdict against him of common-law negligence. However, there is an allegation in the plaintiffs’ complaint, well supported by trial proofs, that this landowner violated a statutory duty to them. But since that statutory violation was not pleaded, submitted to the jury, or argued on appeal as a separate cause of action, we decline to grant relief on this basis. Instead, a majority of this Court is of the opinion that this case should be remanded to the trial court with leave to amend the complaint to specifically allege this basis of liability and retry the case on that issue alone.

II

On April 11, 1974, plaintiffs, numerous subdivision homeowners, initiated this action alleging that they had incurred property damage, inconvenience, and discomfort because the water supply in their recently purchased new homes was unfit for normal residential use. Named as defendants were Prestige Builders, Inc., which had built the homes, arranged for the drilling of wells that supplied water to them, and conveyed them to plaintiffs; Gary Young, the local office manager for Prestige; Russell Young, one of the three owners of Prestige; Leo and Vivian Glass, spouses who had platted the subdivision in which plaintiffs’ homes were built and had conveyed the property to Prestige; Anderson Well Drilling, Inc., the company that had drilled the water wells; and Art Anderson, president of Anderson Well Drilling, Inc. The complaint asserted that plaintiffs were entitled to recovery on four grounds from each defendant: express warranty, implied warranty, negligence, and fraud.

The jury trial began on October 7, 1977. The record reveals that in 1970, Leo and Vivian Glass owned property in Chocolay Township near Marquette. which they desired to sell. According to trial testimony, they entered into an agreement, whose precise terms were not in evidence, with Prestige Builders, Inc., under which the Glasses would plat the property for a subdivision of some 37 lots. After platting, the property was to be conveyed to Prestige which would construct and sell homes and drill wells for their water supply. While Leo Glass was pursuing his obligation to plat, the agreement permitted Prestige to begin constructing homes, drilling wells, and soliciting buyers.

Under this agreement, Prestige built a model home in 1971 and several other homes soon thereafter. The wells drilled for the first five homes built created no water problems for their residents.

While Prestige proceeded to develop the property, Glass, pursuant to the Subdivision Control Act of 1967,¹ began the process of seeking approval for the subdivision. One important step in that process was the submission of a preliminary plat to the appropriate health department for approval of the water and sewer arrangements which contemplated a water well and septic tank for each house. The Marquette County Health Department approved his preliminary plat in November, 1971, on the basis of a site report submitted by Glass’ engineer. Subsequent to that approval, Glass changed the preliminary plat, creating two subdivisions instead of one and reducing the total number of lots. The health department was not notified of this change.

In the summer of 1972, during which many of the plaintiffs’ homes were under construction, the health department received complaints from residents about water quality in the development. The department wrote twice in August, 1972, to Leo Glass noting complaints about the water’s palatability due to the presence of iron and tannins (organic matter). Copies of these letters were sent to Gary Young of Prestige Builders. The department advised Glass that it would require the drilling of test wells in order to answer the questions raised about the water’s quality. The test wells were never drilled, existing economical methods to alleviate the problems were never used, and construction of homes and platting of the subdivision proceeded unabated.

Chocolay Township gave final approval to the plat on September 19, 1972, and the Glasses conveyed the lots to Prestige on November 17, 1972.

The presence of water quality problems in the subdivision was confirmed on or about November 17, 1972, when Bill Cole, the owner of ABC Well Drilling Co., which had drilled wells for three of the plaintiffs, notified Gary Young that he had encountered a gravel shelf at a depth of about 42 feet while drilling a well. The water that was above the shelf was good but that which was below it was not. Cole was unable to drill all of the wells in the subdivision, but he advised Young to tell future well drillers to drill only so far as was needed to encounter water without breaking through the shelf.

Young employed Anderson Well Drilling, Inc., to sink the remaining wells. Although Young told Anderson that penetrating the gravel shelf would create an odor problem, it soon became apparent that there was not sufficient water above the shelf to supply all of the homes, and wells penetrating the shelf were drilled.

Subsequently, plaintiffs moved into their new homes and began having problems with their water supply. Plaintiffs from each complaining household recounted the problems that, in varying degrees, they had experienced: water that stained bathroom fixtures and laundry and that looked, tasted, and smelled so bad that they could not use it for cooking or drinking. When the plaintiffs complained of the water quality, some of them were told by Young of Prestige that filters would remedy the problems. In fact, filtering could not remedy them. Glass made no representations to the plaintiffs. Other testimony established that most of the remaining plaintiffs had some knowledge of the water problem before the plaintiffs moved into their homes.

Following the close of plaintiffs’ proofs, all defendants moved for directed verdicts. All motions were denied except that of defendant Russell Young, who was then dismissed as a defendant. At the conclusion of trial, the jury returned verdicts in favor of all plaintiffs against all remaining defendants except Art Anderson in his individual capacity. Prestige Builders and Gary Young were found liable on the basis of express warranty, implied warranty, and negligence. Leo and Vivian Glass and Anderson Well Drilling, Inc., were all held liable for breach of implied warranty and negligence. The jury specifically apportioned responsibility for the damages awarded each plaintiff among the several defendants.

All defendants who had been found by the jury to be liable to plaintiffs filed post-trial motions for new trial or judgment notwithstanding the verdict. The trial court denied all of the motions for new trial. In an opinion dated December 13, 1977, the lower court denied Prestige Builders’ motion for judgment notwithstanding the verdict in toto. Gary Young’s motion was granted with respect to the express warranty and implied warranty counts, but denied as to the count alleging negligence. The motions by Anderson Well Drilling and Vivian Glass were granted as to both counts on which they had been found liable to plaintiffs, implied warranty and negligence. Leo Glass was granted judgment notwithstanding the verdict only on the implied warranty count.

Of the defendants, only Leo Glass appealed. He challenged the lower court order insofar as it did not grant him judgment notwithstanding the verdict on the count of. negligence, claiming he owed the plaintiffs no duty. The Court of Appeals affirmed the trial court in all respects.²

This Court granted Glass leave to appeal on October 10, 1980, on three issues: 1) did the Court of Appeals err in affirming the trial court’s allowance of a post-trial amendment of the complaint?; 2) should he have been granted judgment notwithstanding the verdict on the negligence count because he owed no duty to these plaintiffs?; and 3) alternatively, did the Court of Appeals err in finding no abuse of discretion in the trial court’s denial of a motion for new trial?

Ill

A

Glass repeats his contention made in the Court of Appeals that the trial court erred in permitting plaintiffs’ post-trial amendment of their complaint under GCR 1963, 118.3. After an examination of the record, we agree with the evaluation of the Court of Appeals that the trial judge did not abuse his discretion in granting the amendment.³

B

This Court said in Moning v Alfono, 400 Mich 425; 254 NW2d 759 (1977), that the elements of a common-law action for negligence are:

"(i) duty, (ii) general standard of care, (iii) specific standard of care, (iv) cause in fact, (v) legal or proximate cause, and (vi) damage.”⁴

The first element, duty, is the pivotal one in this case.

"Duty is essentially a question of whether the relationship between the actor and the injured person gives rise to any legal obligation on the actor’s part for the benefit of the injured person.”⁵

There are three possible relationships between Glass and these plaintiffs which could have imposed duties on him upon which liability could be premised. The first possible duty-creating relationship would arise simply from the sale of land by Glass, with the plaintiffs as subvendees of his vendee, Prestige. Second, Glass, as platter, could have duties imposed on him by the Subdivision Control Act for the benefit of these plaintiffs. Finally, a duty-creating relationship could arise from efforts by Glass to improve the land by, for example, drilling water wells or building homes.

The third relationship, by analogy to the manufacture of chattels, has been held to create strict liability for defects.⁶ However, this relationship is not established by the facts here, since Glass’ only obligation was to plat the land — all construction, drilling, and so forth were the sole responsibility of Prestige. Even if Glass had improved the land, his liability might only extend to his vendee, Prestige. In all events, he had no duties to these plaintiffs arising from improvement of the land.

The first relationship has unanimously been held by the authorities not to constitute a duty-creating relationship. Under the common law, a land vendor who surrenders title, possession, and control of property shifts all responsibility for the land’s condition to the purchaser. Caveat emptor prevails in land sales, and the vendor, with two exceptions, is not liable for any harm due to defects existing at the time of sale.

The first exception is the vendor’s duty to disclose to the purchaser any concealed condition known to him which involves an unreasonable danger. Failure to make such a disclosure or efforts to actively conceal a dangerous condition render the vendor liable for resulting injuries. The second exception is that a vendor is liable to those outside the land for a dangerous condition on the land after the sale until the purchaser discovers or should have discovered it. Once the purchaser discovers the defect and has had a reasonable opportunity to take precautions, third parties such as subvendees have no further recourse against the vendor. Under both exceptions, then, knowledge of the defect on the part of the purchaser relieves the vendor of any duty or liability.⁷ Because of this knowledge requirement, neither of the exceptions to the general rule of vendor non-liability exists in this case.

Here Glass’ vendee, Prestige, knew of the water problems. Plaintiffs’ relief as subvendees, if any, is therefore limited to Prestige — they have no recourse against Glass since his vendee knew of the water problems, and it was Prestige who had the duty to inform the plaintiffs of the problems. Further, Glass did not actively conceal the water problem from Prestige, to whom he owed a duty to disclose. Even if Glass had failed to disclose or actively concealed the water problems, his only liability would be to Prestige.

Therefore, Glass had no duty to these plaintiffs as land vendor.

The Court of Appeals apparently held that Glass had a "general duty 'to conform to the legal standard of reasonable conduct in the light of the apparent risk’ ”, citing Moning.⁸ However, in so doing, the Court made the error Moning warned against: confusing the existence of a duty with the standard of conduct applied if a duty exists.⁹ The quoted phrase from Moning does not create a duty, but defines the scope of the obligation created by an existing duty.¹⁰

The trial court should have granted Glass judgment notwithstanding the verdict on the negligence count.¹¹

IV

The possibility that Glass had a duty as land platter in this case is raised in the third count of the plaintiffs’ complaint, where they alleged common-law negligence. One instance of negligence charged is violation of the "statutes, rules and regulations promulgated by the State of Michigan and the Department of Public Health”.

Much of the testimony at trial had to do with the obligation of Glass as platter to ensure an adequate quantity and quality of water under the 1967 Subdivision Control Act.¹² However, the question whether Glass violated the act was subsumed in the issue of common-law negligence throughout this case. The alleged statutory violation was presented only as some proof of common-law negligence. The plaintiffs did not attempt to prove liability based solely on this alleged statutory violation and, of course, the trial court did not rule on the many legal issues surrounding such liability, nor did the jury expressly decide whether the facts warranted relief on this basis. It follows that none of the many legal and factual issues surrounding this question were briefed or argued before this Court.

Since the issues surrounding this basis of liability were not briefed or argued before us and because our review of the record reveals that many factual and legal questions were not addressed at trial,¹³ we cannot justifiably order relief on this basis.

Given the central role the alleged statutory violations played in the plaintiffs’ case, the jury might well have based its negligence verdict at least in part on a finding of a statutory violation. Our holding that Glass owed no common-law duty to these plaintiffs as a vendor landowner removes the legal force of any such finding. However, the existence of a statutory duty would give that finding legal force. Thus the plaintiffs may be entitled to relief, but on a basis that has not been sufficiently clear in the case until now. Permitting amendment and a new trial will allow full development of the legal and factual issues, and will not prejudice Glass.

Accordingly, we reverse and remand for proceedings consistent with this opinion.

Kavanagh and Williams, JJ., concurred with Levin, J._

1 MCL 560.101-560.293; MSA 26.430(101)-26.430(293).

2 Christy v Prestige Builders, Inc, 94 Mich App 784; 290 NW2d 395 (1980).

3 See, e.g., Graham v Thorman, 354 Mich 629; 93 NW2d 264 (1958).

4 400 Mich 437; 254 NW2d 764.

5 400 Mich 438-439; 254 NW2d 765 (footnote omitted).

6 See Prosser, Torts (4th ed), § 95, pp 639-640. It does not appear that this Court has as yet addressed this question in this context.

7 "The vendor of real property who parts with title, possession and control of it ceases to be either an owner or an occupier. Ordinarily, therefore, he is permitted to step out of the picture and shift all responsibility for the condition of the land to the purchaser. As to sales of land the ancient doctrine of caveat emptor lingered on, and is still very largely in force * * *. This was perhaps for the reason that great importance is attached to the deed of conveyance, which is taken to represent the full agreement of the parties, and to exclude all other terms; the lack of any standard marketable quality, or even standard use, of land; and the fact that the vendee normally inspects the property before purchase, and so is assumed to have accepted it as it is. Thus in the absence of express agreement or misrepresentation the purchaser is expected to make his own examination and draw his own conclusions as to the condition of the land; and the vendor is, in general, not liable for any harm resulting to him from any defects existing at the time of transfer. Still less is he liable to other persons who may come upon the land.

"* * * [T]wo exceptions to this once universal rule [have developed]. One of them, which finds support in the cases of lessors, and in the Restatement of Torts, is that the vendor is at least under a duty to disclose to the vendee any concealed conditions known to him which involve an unreasonable danger to the health or safety of those upon the premises, and which he may anticipate that the vendee will not discover. If he fails to make such disclosure, he becomes liable for injury resulting from such conditions to the vendee, or to members of his family, or others upon the land in the right of the vendee. The older view was to the contrary, and there are still courts whose latest decisions deny even this obligation; but the duty should certainly exist, if only because of the analogy to the 'something like fraud’ in permitting even a licensee to enter in the face of a concealed and undisclosed hazard, and because the risk to the vendee is clearly great in proportion to the relatively slight burden of disclosure cast upon the vendor.

"The recognition of this duty of disclosure has thus far ended the progress of any negligence liability of the vendor. * * *

"The other exception to the general rule of nonliability of the vendor is found in a number of cases where the land, when it is transferred, is in such condition that it involves an unreasonable risk of harm to those outside of the premises. In nearly all of the decided cases, this has amounted to either a public or a private nuisance, but this is clearly not essential. In such a case the vendor remains subject, at least for a reasonable time, to any liability which he would have incurred if he had remained in possession, for injuries to persons or property outside of the land, caused by such a condition. The reason usually given is the obviously fictitious one that by selling the land in such condition he has 'authorized the continuance of the nuisance.’ A more reasonable explanation would appear to be merely that the vendor’s responsibility to those outside of his land is regarded as of such social importance that he is not permitted to shift it, even by an outright sale. * * *

"As to both of these exceptions under which the vendor is held liable for injuries occurring after possession is transferred, it seems obvious that there must be some time limit upon the duration of the potential liability. A corporation, still in existence, can scarcely be required to pay for damages which occur a century after the grant. There are, however, very few cases which have considered the question. The indications are that the vendor is no longer liable once the vendee has had a reasonable time to discover and remedy the condition, unless the vendor has actively concealed it, in which case, as in other instances of fraud, his liability will continue until actual discovery, and a reasonable time thereafter to take action." Prosser, fn 6 supra, § 64, pp 412-414 (footnotes omitted, emphasis added); see also 1 Restatement Torts, 2d, §§ 352-353, pp 234-238.

8 Christy, 94 Mich App 795; 290 NW2d 400 (citing 400 Mich 443; 254 NW2d 767.)

9 See 400 Mich 437; 254 NW2d 764.

10 See 400 Mich 443; 254 NW2d 767.

11 Because we hold that the trial court should have granted Glass judgment notwithstanding the verdict on the negligence count, we need not address the appellant’s third issue on appeal: a request for a new trial which is styled as an alternative.

12 MCL 560.101-560.293; MSA 26.430(101)-26.430(293). The act imposes many affirmative obligations on subdivision platters such as Glass for the benefit of subdivision residents. It also provides express civil and criminal penalties for its violation, see MCL 560.264; MSA 26.430(264) (criminal); MCL 560.267; MSA 26.430(267) (civil), and it is arguable that implied causes of action exist for the act’s intended beneficiaries.

13 Glass did not testify. While there is testimony from officials of the Marquette County Health Department about the water problems, there is no testimony from Chocolay Township officials as to why they approved the plat despite those problems. Did the township know of the problems? Were they misled as to their nature? These and many, many other legal and factual issues lie unresolved in the record.