Facts
- A residence was constructed in 1994 using an exterior insulation finishing system (EIFS) manufactured by Dryvit and applied as exterior wall cladding.
- Doug and Theresa Keck bought the home as second purchasers in 1996.
- The EIFS was a multilayer system applied to the exterior wooden substrate and depended on sealants to prevent water intrusion.
- The Kecks alleged the EIFS allowed water penetration that damaged the home’s structure.
- The Kecks relied on materials suggesting the manufacturer knew of design problems, that drainage designs were feasible, and that applicators sometimes misapplied the system.
- In 1999, the Kecks sued the manufacturer, distributor, and installer under theories including warranties, negligence, fraud/suppression, breach of contract, and the Alabama Extended Manufacturer’s Liability Doctrine (AEMLD).
Issues
- Whether EIFS, once applied to and integrated into a residence, is a “product” subject to the AEMLD.
- Whether EIFS, after integration into the house, remains a UCC Article 2 “good” supporting implied-warranty claims by subsequent purchasers.
- Whether caveat emptor governing sales of used residences bars second purchasers from recovering from the EIFS manufacturer, distributor, and installer for damage to the house itself.
Decision
- The Alabama Supreme Court affirmed summary judgment for the manufacturer, distributor, and installer.
- The court held that EIFS integrated into the home became part of the realty and was not a “product” for AEMLD purposes.
- The court held that, as integrated into the residence, EIFS was not a movable UCC “good” supporting implied-warranty claims in this context.
- The court applied Alabama’s caveat emptor rule for used residential real estate to bar the second purchasers’ recovery for damage to the structure itself.
Legal Principles
- Under Alabama law, materials permanently incorporated into a building may be treated as part of the realty rather than as a separate “product” for purposes of the AEMLD.
- UCC Article 2 implied warranties generally require a transaction in “goods”; materials that have become part of real property are not treated as goods in a later used-home sale.
- Alabama applies caveat emptor to sales of used residences; absent an applicable exception, subsequent purchasers cannot shift structural-quality disputes into products-liability or implied-warranty claims against upstream manufacturers or installers when the alleged harm is to the house itself.
Conclusion
The court treated EIFS cladding, once installed, as part of the real property and enforced caveat emptor for a used-home purchase, foreclosing AEMLD and UCC implied-warranty routes for second owners seeking recovery for structural damage to the residence.