THE STATE OF SOUTH CAROLINA
In The Supreme Court

Theodore H. Kirkman and Karen K. Kirkman, Petitioners,

v.

Parex, Inc., Francis Coaxum, d/b/a Coaxum Stucco, R. E. Miller, Miller Housing, Inc., Miller Development Group, and First Union National Bank of South Carolina, Defendants,

of which First Union National Bank of South Carolina is Respondent.

ON WRIT OF CERTIORARI TO THE COURT OF APPEALS

Appeal From Charleston County
A. Victor Rawl, Circuit Court Judge

Opinion No. 26180
Heard February 2, 2006 - Filed July 3, 2006

REVERSED AND REMANDED

John D. Kassel, Theile Branham McVey, and William D. Robertson, III, all of Columbia, for Petitioners.

Thomas E. Lydon, of McAngus Goudelock & Courie, LLC, of Columbia, for Respondent.

JUSTICE PLEICONES: We granted a writ of certiorari to review Kirkman v. Parex, Inc., 356 S.C. 525, 590 S.E.2d 36 (Ct. App. 2003), in which the Court of Appeals affirmed the circuit courts grant of summary judgment to Respondent First Union National Bank of South Carolina (First Union). The Court of Appeals held that, as a matter of law, First Union did not impliedly warrant the habitability of the house that it sold to Petitioners Theodore and Karen Kirkman (the Kirkmans), and therefore could not be liable for breach of warranty. We reverse the Court of Appeals decision and remand the case to the circuit court.

FACTS

The Kirkmans and Miller Housing Corporation (Miller Housing) executed a contract for the sale and purchase of a house. First Union, which financed Miller Housings construction of the house,[1] was listed in the contract as principal lien holder.

When the contract was executed, Miller Housing was experiencing financial problems, and First Union was contemplating foreclosure. The parties agreed that First Union would not foreclose on the property and that Miller Housings debt would be satisfied by the Kirkmans payment at closing. It later became apparent that foreclosure was necessary because of junior liens on the property, which would not have been satisfied by the Kirkmans payment. Consequently, the parties amended the sales contract by omitting the provision barring foreclosure. First Union then foreclosed and took title to the property.

The contract also included a clause requiring Miller Housing to complete the house prior to closing. Unfortunately, Miller Housings financial troubles caused it to go out of business, and it never completed the house.

First Union, then the owner of the house, hired another contractor to finish the project. There is evidence in the record that First Unions contractor finished the heating and air systems and all of the hardwood floors; sub-contracted out some plumbing work; installed light fixtures and appliances; fixed the sheetrock walls; and painted at least some of the interior of the house. It is undisputed, however, that First Unions contractor did not install the artificial stucco which the Kirkmans claim was defective and rendered the house unhabitable. Miller Housing had already performed that task.

Neither party has been able to locate any records showing the amount of money that First Union paid to the new contractor. The only evidence comes from an employee of the contractor, who testified in his deposition that the work described above was performed and that it took a month and a half to two months to do it. His best guess was that his company charged First Union between forty and fifty thousand dollars. The First Union employee who was involved in the project testified in his deposition that he would not be able to deny that First Union spent that much money to complete the house.

After its contractor completed the house, First Union deeded the property to the Kirkmans. In addition to the usual conveyance language and description of the property, the deed provided that First Union disclaimed the implied warranty of habitability and that the property was sold as-is. According to the Kirkmans, they were unaware that the deed included the disclaimer and did not believe they were purchasing the house as-is.

When the Kirkmans tried to sell the property years later, they spent approximately forty-five thousand dollars to repair the artificial stucco on the exterior of the house. They then brought this action, alleging that First Union, as the seller of the property, breached the implied warranty of habitability.

Both parties moved for summary judgment, and the circuit court granted it to First Union, finding as a matter of law that First Union was a mere lender and therefore did not impliedly warrant the habitability of the house. The Court of Appeals affirmed.

ISSUES

I.	Whether the Court of Appeals erred in affirming the grant of summary judgment on the ground that First Union was a mere lender.
II.	Whether the record contains an additional sustaining ground: that First Union effectively disclaimed the implied warranty of habitability.

STANDARD OF REVIEW

In reviewing a grant of summary judgment, an appellate court applies the same standard as the circuit court: summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Rule 56(c), SCRCP; Osborne v. Adams, 346 S.C. 4, 7, 550 S.E.2d 319, 321 (2001). In determining whether any triable issues of fact exist, the evidence and all reasonable inferences therefrom must be viewed in the light most favorable to the non-moving party. Osborne, 346 S.C. at 7, 550 S.E.2d at 321.

ANALYSIS

Under the doctrine of caveat venditor, the seller of a new house impliedly warrants the habitability of the house. Arvai v. Shaw, 289 S.C. 161, 345 S.E.2d 715 (1986) (holding that the warranty is implied only in the initial sale, not in a resale); Lane v. Trenholm Bldg. Co., 267 S.C. 497, 503, 229 S.E.2d 728, 730-31 (1976) (holding that, generally, the warranty is made by the seller even if he did not build the house); Rutledge v. Dodenhoff, 254 S.C. 407, 413-15, 175 S.E.2d 792, 795 (1970) (first recognizing the warranty). The sellers liability is not founded upon fault, but because it has profited by receiving a fair price and, as between it and an innocent purchaser, the innocent purchaser should be protected from latent defects. Lane, 267 S.C. at 503, 229 S.E.2d at 731. [T]he warranty springs from the sale. The determining factor is not whether the defendant actually builds the defective house, but that he places it, by the initial sale, into the stream of commerce. Arvai, 289 S.C. at 164, 345 S.E.2d at 717.

[A] mere lender, however, even if a party to the sale, is ordinarily not liable under an implied warranty of habitability theory. Kennedy v. Columbia Lumber and Mfg. Co., 299 S.C. 335, 340, 384 S.E.2d 730, 734 (1989).

This is not to say that a lender will never incur implied warranty liability when it makes a sale after default. Obviously, a lender can be held liable if it is also a developer. ... Liability may also attach when the lender becomes highly involved with construction in a manner that isnot normal commercial practice for a lender. In such a situation, the lender might be said to be a joint venturer.  The lender may be liable if it is so amalgamated with the developer or builder so as to blur its legal distinction. A lender may also be liable where it forecloses on a developer in the midst of construction, takes title, has substantial involvement in completing the construction and sells homes.[2]