Rule one: Iowa law should follow the modern trend allowing a subsequent purchaser to recover against a builder-vendor for a breach of the implied warranty of workmanlike construction. The Iowa Supreme Court has eliminated the privity requirement in products liability cases raising a breach-of-implied-warranty claim. The privity requirement has been eliminated in other jurisdictions to ameliorate the harsh doctrine of caveat emptor, and because the implied warranty obligations on the part of the seller are imposed by operation of law, and do not depend for their existence upon express agreement of the parties, privity is not necessary. The same is true in a case in which a home buyer raises an implied-warranty claim. Further, the implied warranty of workmanlike construction is a judicial creation and does not, in itself, arise from the language of any contract between the builder-vendor and the original purchaser. Thus, it is not extinguished upon the original purchaser's sale of the home to a subsequent purchaser. The builder-vendor warrants that the home was constructed in a workmanlike manner, not that it is fit for any particular purpose the original owner intended. As such, there is no contractual justification for limiting recovery to the original purchaser.
Rule two: Under the discovery rule, a cause of action does not accrue until the injured party has actual or imputed knowledge of the facts that would support a cause of action. Knowledge is imputed to a claimant when he gains information sufficient to alert a reasonable person of the need to investigate. As of that date he is on inquiry notice of all facts that would have been disclosed by a reasonably diligent investigation.
After purchasing the home from other owners, appellant subsequent purchasers noticed water damage and mold. A building inspector determined that the damages were the result of a defectively constructed roof and defective rain gutters. Appellant then filed an action against the appellee builder. The district court entered a summary judgment in favour of appellee, and the appellate court affirmed. The state supreme court vacated the appellate court’s decision and remanded the case for further proceedings.
Issue one: Could appellant subsequent purchasers recover against appellee builder under the doctrine of implied warranty?
Issue two: Was the action for breach of the implied warranty of workmanlike construction against the appellee builder time-barred?
Answer one: Yes.
Answer two: No.
Conclusion one: The doctrine of implied warranty of workmanlike construction to subsequent, as well as initial, purchasers was adopted and applied. However, appellee builder was not liable for such a claim after the statute of repose in Iowa Code § 614.1(11) had expired. Furthermore, Iowa Code § 554.2725(2) did not apply because the transaction did not involve the sale of goods.
Conclusion two: Appellant subsequent purchasers could not have gained actual or imputed knowledge of the defect in their home more than five years prior to commencing this action. Therefore, their suit was therefore not time-barred under Iowa Code § 614.1(4) (2005).