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Hey North Carolinians! That Lifetime Warranty You Bought Just Got Shredded

Big news out of the North Carolina Court of Appeals in a case styled: Christie v. Hartley Construction, et al. 11-CVS-2147 *pdf.

Lets digest the facts quickly.  The plaintiffs in the case, Deborah and George Christie had an agreement with a custom home builder (Hartley Construction, and the GrailCo entities) to, you guessed it, build them a custom home on a plot in Chapel Hill, North Carolina.  FWIW, we represent many clients and builders in the custom home market.  It has become very popular lately and with real estate prices just starting to rebound in many locations, it is likely to be a continuing trend in North Carolina.  The Christie agreement was executed sometime in 2004.  The work went on as scheduled, and the certificate of occupancy for the Christie's new custom home in Chapel Hill, NC was signed, sealed and delivered on March 22, 2005.  Everything is looking fine right?

Turns out that the exterior finish used by Hartley (manufactured and distributed by the GrailCo folks) had a 20 year express warranty to be free from cracking, splitting, etc. but it wasn't quite so crack free.  The walls of the brand new home rotted and delaminated in a few short years because of leaks caused by the cracks in the exterior finish.  Big problems.  Expensive problems.  The types of expensive problems nobody likes to fix.

Everybody lawyers up and the Christie's head to Court.  Their claim is pretty simple: "you said 20 years and its been five and the whole place is a mess and we've had to pay out the nose, so kindly pay us back for your shoddy product that lasted one quarter of the time you promised!"  The defense by GrailCo, however, did not address the merits of the Plaintiff's case.  Instead, GrailCo said: "hey, so what if our product broke down in five years even though we said it would last twenty, we're not responsible because you didn't file your lawsuit within six years of March 22, 2005, so we owe you zilch."

Without getting into the boring specifics of North Carolina's Realty Statute of Repose (N.C.G.S. §1-50(a)(5) aka "The HomeBuilder's Get out of Jail Free Card Act"), just sort of take a second to reflect on the two competing points of view.  The defendants are saying, more or less, "just cause we said it would last for twenty years doesn't mean we meant it."  While the homeowners are saying: "you warranted it for 20 years, so make it 20 years."  In other words, the defense is relying on a technicality, not the words of it warranty, but a happy coincidence of poor timing by the plaintiffs and confusing law by the NC General Assembly.  The plaintiffs, on the other hand, are relying on the unique words of specific warranty in a specific circumstance.  The plaintiff's argument can be adopted hook, line, and sinker, and it would not effect one letter on anyone else's warranty.

The defendants, however, would have the Court rewrite every homeowner warranty in the State.  To elaborate a little, if the Court decides that §1-50(a)(5) effectively strikes out the part of the warranty that says "twenty" and reduces it to "six", then EVERY homeowner warranty in North Carolina is reduced to six years.  Whether they are lifetime warranties, 30 year warranties, or 10 year warranties, any warranty over six years in length would effectively be re-written by the Court of Appeals if it holds for the defense.  Every homeowner in North Carolina with such a warranty would effectively have the value of that paper reduced, and would receive $0 in exchange for that reduction.  Of course, if the Court finds for the Plaintiffs, it leaves undisturbed all warranties and written guarantees held by other homeowners in North Carolina, and the status quo ("a promise is a promise") remains intact.  So guess what the Court did?

It found for the defendant, and in effect it has not only rewritten every homeowner warranty in North Carolina, it has arguably rewritten every consumer product warranty in North Carolina, and it has opened up manufacturer's and retailers selling warranties to the distinct possibility of massive legal liability.  More on that later.  For now, breathe some relief in that there was a dissent by J. Hunter, it was a well written dissent, and it should provide by the NC Supremes ample opportunity to correct this obvious error.

This entry was posted in General, Product Liability.