An Indiana court has considered whether a homeowner's lawsuit against company who marketed a home as having four bedrooms but which had a septic system designed to comply with the requirements for a three bedroom home.
McKibben Construction, Inc. and McKibben REALTORS® & Development (collectively, "Developer") constructed and marketed a home in 1990-91. As part of the construction process, the Developer built a septic field for the home. In the septic field permit application, the Developer stated that the home would have three bedrooms and built a septic field in conformance with a county ordinance ("Ordinance"). The Ordinance proscribed certain sizes for septic fields in accordance with the number of bedrooms in a home. A building inspector for the local county visited the construction site and confirmed that the septic field construction complied with the permit application.
Following the completion of the home, the Developer marketed the home for sale as a four bedroom home. Robert Longshore ("Buyer") purchased the home in 1992. In the purchase agreement, the Buyer waived his right to an inspection and also released the Developer from liability for any defects on the property, although the release failed to conform with statutory release form for the waiver of the implied warranty of habitability.
In 1998, the Buyer began having problems with the septic system, as it began overflowing into his backyard. The local health department determined that the septic system had failed because it was too small for a four bedroom home. In 1999, the Buyer filed a lawsuit against the Developer, alleging misrepresentation and fraud. The Developer filed a motion with the trial court seeking judgment in its favor, and the trial court ruled in favor of the Buyer. The Developer appealed.
The Court of Appeals of Indiana affirmed the trial court and allowed the Buyer's lawsuit to move forward. The Developer made a number of challenges to the Buyer's lawsuit, most of which were procedural. First, the Developer made two constitutional challenges to the Ordinance. He argued that the Ordinance was unconstitutionally vague because it failed to define "bedroom" and also that the Ordinance violated the Due Process clause because the Ordinance failed to establish a connection between bedroom sizes and septic field sizes to justify the regulation. The court rejected both challenges, finding that a reasonable person would understand the meaning of "bedroom" within the Ordinance. The court also found that the Ordinance's use of bedrooms as the basis for septic field size was rationally related to the Ordinance's goal of protecting public health from sewage, as bedrooms were a common method for regulating septic field sites. Thus, the court rejected the Developer's constitutional challenges to the Ordinance.
Next, the Developer argued that the Ordinance did not provide for a private right of action and thus violations of the Ordinance could not serve as the basis of a lawsuit brought by the Buyer. The court rejected this argument, finding that the Buyer had alleged fraud, misrepresentation, and breach of warranty in his lawsuit, and thus was not basing his lawsuit on any sort of duty established by the Ordinance.
Another challenge brought by the Developer was that the statute of limitations barred the Buyer's lawsuit. The applicable statute of limitations required that the Buyer's claims must be made within six years. The Developer argued that the Buyer's future wife, in the process of building a swimming pool, had obtained a copy of the septic permit showing that the septic field was only built for a three bedroom house more than six years before the filing of the Buyer's lawsuit. The court found that the statute of limitations began running when the Buyer became aware of his possible claims. Here, the court found that the Buyer testified that he never saw the permit, as his future wife was in charge of building the pool. The court also determined that Indiana law does not allow a defendant in a lawsuit to use imputed knowledge as a shield from liability, and so the Developer could not impute the knowledge of the Buyer's future wife to the Buyer about the permit. The court ruled that there was a fact question which needed to be resolved about the Buyer's knowledge of the permit, and so the court sent the case back to the trial court for further proceedings.
Finally, the Developer argued that the Buyer had released the Developer from liability for defects in the home and also had waived his right to inspection. The court found that an Indiana statute specifically described the format a waiver of the implied warranty of habitability must take. The waiver prepared by the Developer failed to follow the statute, and thus was legally ineffective. Thus, the court ruled that the waiver had no effect on the Buyer's lawsuit. Therefore, the court affirmed all of the trial court's rulings and allowed the case to proceed.
McKibben Constr., Inc., v. Longshore, 788 N.E.2d 452 (Ind. Ct. App. 2003).