On appeal from Superior Court, Chancery Division, Ocean County.
Conford, Pressler and King. The opinion of the court was delivered by Conford, P.J.A.D. (retired and temporarily assigned).
[168 NJSuper Page 550] In the recent case of McDonald v. Mianecki , 79 N.J. 275 (1979), our Supreme Court held that the builder-vendor of a new home is subject to an implied warranty that the house which he constructs will be of reasonable workmanship and habitability. Id. at 293. The court affirmed a holding of this court to the same effect. 159 N.J. Super. 1 (1978). The issue in this appeal is whether that implied warranty extends to commercial premises, here a building consisting of two small stores on the first floor and two apartments on the second floor. The trial judge, relying on the principles set forth in Totten v. Gruzen , 52 N.J. 202 (1968), and Schipper v. Levitt & Sons, Inc. , 44 N.J. 70 (1965), held that the vendor was subject to an implied warranty that the
building would be reasonably fit for the purpose for which it was constructed.*fn1
Plaintiffs brought this action to foreclose on a second mortgage which defendants refused to pay because the building had serious structural defects. By way of counterclaim against plaintiffs and third-party complaint against Francis Hodgson's brother and his wife, who were also developers of the property, defendants contended that the developers breached express and implied warranties that the building was structurally sound. The case was heard by a judge without a jury and decided in favor of defendants on the counterclaim. Judgment was entered in their favor for $14,826. Payments on the second (purchase-money) mortgage given the plaintiffs were stayed until the money judgment was satisfied.
Around 1973 the Hodgsons subdivided a tract of land they owned in Brant Beach, Long Beach Island, into 18 lots and constructed 16 residences and two commercial buildings thereon. Each commercial building comprised two stores on the first floor and two apartments on the second floor.
In November 1973 the defendants-buyers approached Francis Hodgson offering to purchase one of the commercial buildings. They were looking for investment property in order to relocate their business, a Chinese take-out restaurant and gift store. Negotiations culminated in a contract of sale of the property for $86,500 on February 23, 1974. The contract provided for a total downpayment of $17,300, with the remaining $69,200 to be financed under a purchase money mortgage held by sellers. The contract as initially proposed stated that the property would be sold "as is." However, buyers rejected those terms, and the final contract contained
a one-year guarantee of the roof, plumbing and heating systems. It also required sellers to install certain items. Mortgage payments were deferred until June 1, 1974.
At the time of closing several stipulated items had not been installed, and buyers could not test the electrical or plumbing systems because the utilities had not been turned on.
Although the sales agreement called for sellers to take a purchase money mortgage for the full purchase price, in fact Citizens State Bank held the first mortgage on the property, and sellers took a second mortgage in the amount of approximately $20,000. Buyers made payments to the bank on the first mortgage, but paid nothing on the second mortgage because they discovered a number of construction defects when they began to use the premises in the summer of 1974. They asked the sellers to remedy these defects but the sellers did not do so.
Defendants at trial adduced the testimony of an expert witness -- a carpenter and mason who specializes in residential and light commercial construction. His inspection of and report concerning the ...