ROBERT LORBER v. JEFFREY PASSICK, as Successor Trustee of the SYLVIA PASSICK REVOCABLE TRUST ( 2021 )

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
ROBERT LORBER,
Appellant,
v.
JEFFREY PASSICK,
as Successor Trustee of the Sylvia Passick Revocable Trust,
Appellee.
No. 4D20-393
[September 1, 2021]
Appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm
Beach County; James L. Martz, Judge; L.T. Case No. 50-2018-CA-007776-
XXXX-MB.
Adam G. Heffner of Law Offices of Adam G. Heffner, P.A., Boca Raton,
for appellant.
Robin Bresky and Jonathan Mann of Law Offices of Robin Bresky, Boca
Raton, for appellee.
FORST, J.
Appellant Robert Lorber (“Buyer”) appeals the trial court’s entry of final
summary judgment in favor of Appellee Jeffrey Passick, as Successor
Trustee of the Sylvia Passick Revocable Trust (“Seller”), in the latter’s
action stemming from a failed real estate transaction. As set forth below,
we conclude that the trial court erred in granting Seller’s motion for
summary judgment as to Buyer’s counterclaims, and that the trial court
therefore necessarily erred in later entering final summary judgment on
the underlying complaint in favor of Seller.
Background
Pursuant to an “‘As Is’ Residential Contract for Sale and Purchase”
(“Purchase Agreement”), Buyer agreed to purchase certain real property
from Seller. However, immediately before closing, Buyer’s agent informed
Seller via email that Buyer no longer consented to the Purchase
Agreement. As stated in the email:
Ever since my client first came to the home, he indicated that
there was a suspicious odor. We inquired about this and
asked if there was any reason or cause for this. 48 hours
before closing my client finds out through his insurance
company that this home had substantial water damage
throughout which is supported by these insurance docs.
My client believes that this odor is due to this water damage .
. . [and] states that when he went to the home today, that the
odor was strong and he sensed a burning feeling in his lungs.
(Emphasis added). Later, Buyer’s agent informed Seller that Buyer had
instructed him to cancel the Purchase Agreement.
A. Buyer’s Counterclaim
After Buyer failed to close on the property, Seller filed a complaint for
breach of contract. In response, Buyer filed an “Answer with Affirmative
Defenses and [Buyer’s] Counterclaim.” Buyer twice amended his
Counterclaim, with the Second Amended Counterclaim serving as his
operative pleading.
The Second Amended Counterclaim contained three counts—breach of
contract; fraud in the inducement; and negligent misrepresentation.
Buyer’s breach of contact count alleged that shortly before closing, but
“after the contract contingency periods had expired,” Buyer discovered
that the property had “suffered a significant water intrusion loss on or
about April 28, 2013,” resulting in a “significant settlement paid by The
Hartford” for resolution of the “flood claim.” Buyer therefore alleged that
Seller’s “failure to disclose the prior water intrusion and/or mold issues”
violated the Purchase Agreement’s paragraph 10(j)—which provided that
“Seller knows of no facts materially affecting the value of the [property]
which are not readily observable and which have not been disclosed to
Buyer.”
Buyer’s fraud in the inducement count alleged that Seller’s “failure to
disclose the prior water intrusion and/or mold issues[,]” combined with
Seller’s knowing misrepresentations in the “Seller’s Property Disclosure –
Residential” form (“Disclosure Form”), which stated that the property had
not been affected by any past or present water intrusion issues, or any
2
past or present drainage or flooding problems, 1 “were material and
calculated to induce [Buyer] into executing the subject real estate
contract[.]”
Buyer’s negligent misrepresentation count pled similar allegations to
those contained within the fraud in the inducement count, alleging that
Seller should have known that its representations were false and that, to
the extent that Seller had no knowledge of the representations in the
Disclosure Form, Seller presented the form to Buyer knowing that Buyer
would rely upon those representations.
B. Seller’s Motion for Summary Judgment
Seller ultimately filed a “Motion for Summary Judgment as to [Buyer’s]
Counterclaim[s].” In support of the motion, Seller attached several
deposition statements from both Buyer and Buyer’s agent, which Seller
asserts demonstrated Buyer’s awareness that something was wrong with
the property from the moment he first set foot in the house. Specifically,
Buyer testified that when he “first went into the house, there was a musty
odor” that he asked about “[p]robably . . . three times.” Although he
attested that Seller’s agent explained the smell as being attributable to the
air conditioning being turned off, he stated that he continued to smell the
“musty” or “dank” odor and noted that “nobody explained it away.” He
acknowledged thinking that the “musty” or “dank” smell might be mold
and that the smell indicated to him something was wrong.
Buyer’s agent, in turn, testified that “the odor was similar to other
properties [he had] seen that . . . had water intrusion” and that he informed
Buyer that “when we have a musty odor, there is the possibility that there
is mold somewhere.” However, Buyer’s agent stated he did not inform
Buyer that water intrusion was possible, and that mold did not always
arise out of a water intrusion event.
Based on this deposition testimony, Seller argued that the “water
intrusion and/or mold issue” was readily observable and that a claim for
breach of contract, fraud, and negligent misrepresentation could not lie
under such circumstances.
C. Buyer’s Opposition to Seller’s Motion for Summary Judgment
1The Disclosure Form was signed approximately six months before the Purchase
Agreement by the trust’s settlor (Sylvia Passick) rather than Seller.
3
Buyer filed a memorandum of law in opposition to the motion for
summary judgment. Although Buyer conceded a “dank or stale” odor was
present within the property, he proclaimed that the smell was dismissed
convincingly by Seller’s listing agent. He further proclaimed no
discernable evidence at that time showed that the odor “had any
connection whatsoever to the undisputed fact that the house had suffered
a prior flood, [which] was specifically not disclosed[.]” Buyer asserted that,
accepting the allegations in the light most favorable to him, genuine issues
of material fact remained. 2
In support of his memorandum in opposition, Buyer attached two
affidavits—one from himself and one from his agent. Within Buyer’s
affidavit, he attested: (1) Seller’s agent had represented the smell was
attributable to “the property being unoccupied and the air conditioning
calling for a higher temperature”; (2) Seller’s agent presented him with the
Disclosure Form (stating that the property had not been affected by any
past or present water intrusion issues); (3) although he continued to notice
a “dank/stale odor” during the inspection period, he accepted Seller’s
agent’s explanation of the smell because the Disclosure Form indicated
that the property had suffered no water intrusion or flood damage; (4) in
the days before closing, he met with his insurance agent to obtain
insurance on the property, and that the agent, “[a]s a result of nothing less
than serendipity, . . . was aware that the . . . property had suffered a
substantial flood a few years prior”; and (5) he would have canceled the
Purchase Agreement or demanded a reduction in price had he been aware
of the water intrusion and/or flooding issues.
Buyer’s affidavit further attested that his claim was “not based upon
the existence or non-existence of mold or of an odor” and that he was “not
aware of any affirmative actions [he] could have taken to investigate a flood
that [he] did not know existed” and was never informed about. Moreover,
Buyer claimed he had no knowledge that the mold’s existence was in any
way related to the flood and/or water intrusion, and that the property was
“worth less than a comparable property that did not sustain” such an
event.
Buyer’s agent’s affidavit largely duplicated Buyer’s. However, Buyer’s
agent also attested that he had no direct knowledge that the mold’s
existence was in any way related to the “flood and/or water intrusion event
that was resolved by the Hartford[,]” and that, in his opinion, the property
2Buyer also argued that discovery had yet to be completed, as Buyer and his
agent’s depositions were not complete. Buyer briefly addresses this on appeal.
However, we decline to reach the issue, as it is unnecessary for our decision.
4
was worth less “having been the subject of a substantial flood and/or
water intrusion event[.]”
D. Trial Court’s Disposition of Seller’s Motion for Summary Judgment
The trial court conducted a hearing on the motion and entered an
“Order Granting [Seller’s] Motion for Summary Judgment as to [Buyer’s]
Counterclaim[s].” In the order, the court stated that summary judgment
was proper because Buyer’s counterclaims were premised on an obvious
defect. Specifically, the court cited Buyer’s testimony that he observed an
odor which he thought might be mold before he executed the Purchase
Agreement, as well as Buyer’s agent’s statement that the odor was like that
detected in other properties with water intrusion issues. Based on these
statements, the court found “no genuine issue of material fact that water
intrusion and/or mold issues” were both readily observable and obvious
to Buyer, and that Buyer’s claims failed as a matter of law.
Seller then filed a motion for final summary judgment, asserting all that
remained was its breach of contract claim, and Buyer’s two affirmative
defenses, which “raise[d] the same issues already addressed” by the
previous summary judgment order. The trial court (a successor judge)
conducted a hearing on the motion and granted Seller’s motion for final
summary judgment “as to all remaining claims.” The court based its
decision upon the predecessor judge’s determination “that the alleged
defect in the property was obvious to [Buyer].” The court stated it was “not
deciding that issue again here (nor stating that it agrees or disagrees with
the predecessor Judge on that issue)” and was “unwilling to reconsider the
predecessor Judge’s ruling on such issue.” Buyer timely appealed.
Analysis
“The standard of review of the entry of summary judgment is de novo.”
Craven v. TRG-Boynton Beach, Ltd., 925 So. 2d 476, 479 (Fla. 4th DCA
2006). Under the summary judgment standard in force when Seller’s
motion was heard, 3 “[s]ummary judgment is proper if there is no genuine
3 After the trial court issued its final summary judgment that is the subject of the
instant appeal, the Florida Supreme Court amended Florida Rule of Civil
Procedure 1.510(c) to adopt a new summary judgment standard. See In re
Amendments to Fla. Rule of Civ. Proc. 1.510, 309 So. 3d 192, 194–95 (Fla. 2020)
(adopting the federal summary judgment standard). The amendment, which
became effective on May 1, 2021, does not apply here as the final judgment
predates the amendment. See Wilsonart, LLC v. Lopez, 308 So. 3d 961, 964 (Fla.
2020) (stating that the amendment to rule 1.510(c) applies prospectively); Tank
5
issue of material fact and if the moving party is entitled to a judgment as
a matter of law.” Volusia Cnty. v. Aberdeen at Ormond Beach, L.P., 760 So.
2d 126, 130 (Fla. 2000). “If the record reflects even the possibility of a
material issue of fact, or if different inferences can reasonably be drawn
from the facts, the doubt must be resolved against the moving party.”
McCabe v. Fla. Power & Light Co., 68 So. 3d 995, 997 (Fla. 4th DCA 2011)
(emphasis added) (quoting Fla. Atl. Univ. Bd. of Trs. v. Lindsey, 50 So. 3d
1205, 1206 (Fla. 4th DCA 2010)).
On appeal, Buyer argues that genuine issues of material fact remained
as to whether the “dank” or “stale” smell was sufficient to alert him to the
existence of a prior flood and/or water intrusion event and that Seller’s
overt misrepresentations and failure to disclose the prior flood presented
issues that were inappropriate for summary judgment disposition. In
response, Seller contends that “there was no disputed issue of material
fact that . . . the alleged defect about which [Buyer] complained was readily
observable” under any of Buyer’s stated causes of action. Accordingly, we
must consider whether the prior flood’s existence was a readily observable
defect justifying summary judgment.
A. Buyer’s Breach of Contract Counterclaim
Under Florida law, “where the seller of a home knows of facts materially
affecting the value of the property which are not readily observable and
are not known to the buyer, the seller is under a duty to disclose them to
the buyer.” Johnson v. Davis, 480 So. 2d 625, 629 (Fla. 1985). As to what
is “readily observable,” the Florida Supreme Court provided no definition.
See id. at 629. However, our sister court’s opinion in Nelson v. Wiggs, 699
So. 2d 258 (Fla. 3d DCA 1997) provides some guidance.
In Nelson, the buyers purchased real property during the dry season,
unaware of the existence of seasonal flooding. Id. at 259–60. After
learning of the property’s flood-prone nature, the buyers filed suit for
rescission, arguing that under Johnson, the seller “had the duty to advise
them of the seasonal flooding.” Id. at 260. The trial court disagreed,
finding that Johnson was inapplicable and denying the buyers’ claim. Id.On appeal, the Third District discussed the meaning behind “readily
observable,” concluding that the phrase encompassed a broader meaning
than mere visual observation. Id. Instead, the court defined “readily
observable” as “information [that] is within the diligent attention of any
Tech, Inc. v. Valley Tank Testing, L.L.C., 46 Fla. L. Weekly D1264 (Fla. 2d DCA
June 2, 2021).
6
buyer.” See id. at 260–61. To exercise diligent attention, the court noted
that “a buyer would be required to investigate any information furnished
by the seller that a reasonable person in the buyer’s position would
investigate” and to “take reasonable steps to ascertain the material facts
relating to the property and to discover them—if, of course, they are
reasonably ascertainable.” Id.; In re Parker, 378 B.R. 365, 369 (Bankr.
M.D. Fla. 2007) (applying Florida law).
Employing this definition, the court affirmed the trial court’s entry of
final judgment, holding that “the flood-prone nature of the area was within
the diligent attention of the [buyers.]” Nelson, 699 So. 2d at 261. As the
court stated, “[t]here [was] nothing concealed about South Florida’s rainy
season(s), nothing concealed about the fact that low-lying areas of the
county flood during the rainy seasons, and nothing concealed about Dade
County’s regulations requiring that homes in such areas be built on
elevations to avoid interior flooding.” 4 Id.In the instant case, Buyer’s breach of contract counterclaim is, in
essence, a non-disclosure claim. And, as that claim is not premised upon
any misrepresentation, the failure of Buyer to exercise adequate diligent
attention would be fatal to his claim. See id.To demonstrate diligent attention, Buyer testified at his deposition that:
(1) he had observed a “musty” odor from the moment he first set foot on
the property; (2) the smell indicated that something was wrong; and (3)
nobody ever adequately explained away the “musty” or “dank” odor. Under
Seller’s cited case of Pressman v. Wolf, 732 So. 2d 356 (Fla. 3d DCA 1999),5
Buyer “had the opportunity to discover all that [he] complained about[.]”
4 To the extent that Nelson can be read as precluding recovery for the buyer in all
causes of action in which material facts relating to the property can be discovered
through a public record search as part of a buyer’s exercise of diligent attention,
we note that the Florida Supreme Court has expressly disapproved of such an
assertion in the context of fraudulent misrepresentation. M/I Schottenstein
Homes, Inc. v. Azam, 813 So. 2d 91, 96 (Fla. 2002) (“[W]hether a cause of action
for fraudulent misrepresentation exists regarding information contained in a
public record presents a question of fact.”). The court has also disapproved of
such an assertion in the context of negligent misrepresentation. See id. at 94(“[W]hen given the opportunity, this Court refused to preclude an action for
negligent misrepresentation based exclusively upon the presence of the
information allegedly misrepresented in the public record.”).
5 Disapproved of on other grounds by M/I Schottenstein Homes, Inc., 813 So. 2d
91 (Fla. 2002). The Azam court disapproved of Pressman’s assertion that
“[s]tatements concerning public record cannot form the basis for a claim of
actionable fraud.” Id. at 94.
7
Id. at 361. Indeed, if Buyer’s claim had been premised entirely upon the
presence of mold, his failure to discover the “musty” smell’s source and
lack of due diligence would undoubtedly be fatal.
However, Buyer specifically stated in his affidavit that his claim was
“not based upon the existence or non-existence of mold or of an odor.”
Though we think it unlikely Buyer could not have discovered the damage
or that the “musty” smell was attributable to some other source, Buyer
testified he was unaware of any steps he could have taken to investigate a
prior flood about which he was never informed, and he had no knowledge
that the mold’s existence was in any way related to a prior water intrusion
event. Cf. Pressman, 732 So. 2d at 358, 360–61 (during pre-closing
inspections, several inspection companies uncovered “possible serious
problems with numerous aspects of the home”; the trial court therefore
noted that the home was the “functional equivalent of a one eyed [sic]
horse” and that the buyer “had the opportunity to discover all that she
complained about[.]”). 6
Here, Seller did not provide any evidence linking the “musty” smell to
the April 28, 2013 “significant water intrusion loss” or dispute these
statements. Thus, although Buyer apparently understood (as evidenced
by his agent’s email) that the smell was attributable to the significant water
intrusion loss, a possible issue of material fact exists as to whether the
prior flood event was readily observable and discoverable through the
exercise of diligent attention. See McCabe, 68 So. 3d at 997.
Moreover, Buyer testified that the home was worth comparably less
having suffered a prior flood. Even assuming the damage was fully
repaired and not discoverable, an issue of material fact exists as to
whether such event affected the property’s value. See Dorton v. Jensen,
676 So. 2d 437, 439 (Fla. 2d DCA 1996). Consequently, applying the
summary judgment standard applicable to motions heard before May 1,
2021, we hold that the trial court erred in granting Seller’s motion for
summary judgment as to Buyer’s breach of contract counterclaim.
B. Buyer’s Fraud in the Inducement and Negligent Misrepresentation
Counterclaims
As Nelson acknowledged, some cases involve misrepresentations while
others do not. 699 So. 2d at 261. The Florida Supreme Court’s 1985
6Further distinguishing Pressman is the fact that the Pressman ruling arose out
of a jury trial, whereas the instant case was decided on summary judgment. 732
So. 2d at 357.
8
Johnson v. Davis opinion is instructive as it relates to the requisite level of
diligent attention in an action involving fraudulent misrepresentation
(and, therefore, fraud in the inducement). See Moriber v. Dreiling, 194 So.
3d 369, 373 (Fla. 3d DCA 2016) (providing the same legal elements for a
claim of fraudulent misrepresentation and fraudulent inducement). As to
the level of diligent attention required in a case involving negligent
misrepresentation, Gilchrist Timber Co. v. ITT Rayonier, Inc., 696 So. 2d
334 (Fla. 1997), is instructive. The following sections will examine and
apply Johnson and Gilchrist in turn.
1. Fraudulent Misrepresentation and Johnson v. Davis
The elements of a cause of action for fraudulent misrepresentation (as
well as a cause of action for fraudulent inducement) are: “(1) a false
statement concerning a material fact; (2) the representor’s knowledge that
the representation is false; (3) an intention that the representation induce
another to act on it; and (4) consequent injury by the party acting in
reliance on the representation.” Moriber, 194 So. 3d at 373.
In Johnson, the buyers contracted to purchase a home that was just
three years old. Johnson, 480 So. 2d at 626. After paying the initial
deposit—but before an additional deposit was due—the buyers “noticed
some buckling and peeling plaster around the corner of a window frame
in the family room and stains on the ceilings in the family room and
kitchen of the home.” Id. Upon inquiring about these issues, the sellers
informed the buyers that “the window . . . had a minor problem that had
long since been corrected and that the stains were wallpaper glue and the
result of the ceiling beams being moved.” Id. The sellers also allegedly
told the buyers that no roof or ceiling issues ever existed. See id. Based
on these representations, the buyers paid the additional deposit, but,
several days later, “discovered water ‘gushing’ in from around the window
frame, the ceiling of the family room, the light fixtures, the glass doors,
and the stove in the kitchen.” Id. The buyers filed suit, alleging breach of
contract and “fraud and misrepresentation.” Id.On appeal, as to the buyers’ “fraud and misrepresentation” claim, the
court applied the elements of a fraudulent misrepresentation action. Id.
at 627. The court found the sellers’ statement that no roof problems ever
existed “was a false representation of material fact, made with knowledge
of its falsity, upon which the [buyers] relied to their detriment[.]” Id.Accordingly, the court held that the sellers were liable for fraudulent
9
misrepresentation, and that the buyers were entitled to recover their
additional deposit. Id. 7
In so holding, the court specifically stated that the buyers’ reliance
upon the sellers’ representation was justified and supported by the
proposition that a recipient may rely upon a representation’s truth unless
the representation’s falsity is obvious. Id. at 628. Thus, even though the
buyer did not investigate a clearly observable defect beyond inquiring of
the seller, the seller’s mere representation that nothing was wrong with
the home entitled the buyer to recover his additional deposit. See id. at
627; see also Revitz v. Terrell, 572 So. 2d 996, 996–98 (Fla. 3d DCA 1990)
(holding that, in an action concerning fraudulent misrepresentation and
nondisclosure, even if property being built in contravention of local flood
zone ordinances was readily observable, a buyer’s “duty to exercise
reasonable diligence was satisfied when he specifically inquired why other
homes on the street were built on stilts”).
2. Buyer’s Fraud in the Inducement Counterclaim
As to Buyer’s counterclaim for fraud in the inducement, the trial court
failed to examine the claim in its proper context. Genuine issues of
material fact remained as to whether Seller knew that the representations
concerning the property were false, and whether Seller intended that such
representations induce Buyer to enter into the Purchase Agreement. See
Grimes v. Lottes, 241 So. 3d 892, 897 (Fla. 2d DCA 2018); Moriber, 194 So.
3d at 373; Cont’l Concrete, Inc. v. Lakes at La Paz III Ltd. P’ship, 758 So.
2d 1214, 1217 (Fla. 4th DCA 2000) (“A material fact, for summary
judgment purposes, is a fact that is essential to the resolution of the legal
questions raised in the case.”). While Seller argues that any
misrepresentation’s falsity would have been discovered through the
exercise of diligent attention and that the defect was therefore readily
observable, Seller ignores the body of case law establishing that the
requisite level of diligent attention is much more lenient in cases
concerning fraud.
Here, the duty to disclose under Johnson “extends to a seller’s real
estate broker.” Goodman v. Rose Realty W., Inc., 193 So. 3d 86, 87 (Fla.
4th DCA 2016). Thus, because Seller’s agent had a specific duty to
disclose any facts materially affecting the property’s value, a genuine issue
of material fact exists as to whether Buyer exercised due diligence, based
7The court also held that the buyers were entitled to the initial deposit amount
based upon the sellers’ fraudulent concealment of issues they had known about
before entering the sale contract. Johnson, 480 So. 2d at 629.
10
on his multiple inquiries regarding the smell to Seller’s listing agent. See
Revitz, 572 So. 2d at 998 n.6 (genuine issue of material fact remained as
to the real estate agent’s knowledge in an action for fraudulent
misrepresentation and nondisclosure, which affected whether the buyer
exercised reasonable diligence). Indeed, in Johnson, the court held that
the buyers justifiably relied on the sellers’ assertion that nothing was
wrong with the ceiling, despite physically observable evidence to the
contrary. 480 So. 2d at 628. In the instant case, as already noted, the
substantial flood damage’s alleged connection to the “musty” smell was far
more attenuated.
We note the body of case law holding that “a party cannot recover in
fraud for alleged oral misrepresentations that are adequately covered or
expressly contradicted in a later written contract” and its application to
the sale of real property. Fla. Holding 4800, LLC v. Lauderhill Mall Inv.,
LLC, 317 So. 3d 121, 124 (Fla. 4th DCA 2021) (citing Mac-Gray Servs., Inc.
v. DeGeorge, 913 So. 2d 630, 634 (Fla. 4th DCA 2005)). However, such
case law is distinguishable here.
In Florida Holding 4800, the parties entered into a purchase and sale
agreement for commercial property. Id. at 122. The agreement included
an “as is” clause, which expressly stated that the seller made no
representations concerning the property “or the condition or quality
thereof[,]” that the buyer was purchasing the property in “as is” condition,
and that neither the seller nor its agent made any representation which
induced the buyer to enter the contract. Id. at 124. Relying on the
previously stated body of law and the agreement’s “as is” clause, we held
that, “even if [the s]eller made oral representations to [the b]uyer regarding
the property’s physical condition, the [agreement] contradicted those
representations[,]” thereby negating the buyer’s claims for damages,
including his fraud claim. Id. at 124.
Here, as in Florida Holding 4800, Buyer entered into an “as is” contract
after the alleged misrepresentations. However, the instant case involved
the sale of residential property. “The inclusion of an ‘as is’ clause in a
contract for the sale of residential real property does not waive the duty
imposed upon a seller under Johnson.” Solorzano v. First Union Mortg.
Corp., 896 So. 2d 847, 849 (Fla. 4th DCA 2005) (emphasis added); see also
Syvrud v. Today Real Est., Inc., 858 So. 2d 1125, 1130 (Fla. 2d DCA 2003)
(“An ‘as is’ clause in a contract for the sale of residential real property does
not waive the duty imposed by Johnson v. Davis to disclose hidden defects
in the property.”); Levy v. Creative Constr. Servs. of Broward, Inc., 566 So.
2d 347, 347 (Fla. 3d DCA 1990) (noting the same as to an “as is” contract
as a whole); Rayner v. Wise Realty Co. of Tallahassee, 504 So. 2d 1361,
11
1363–64 (Fla. 1st DCA 1987) (“[W]e note that generally, an ‘as is’ clause in
a contract for sale of real property cannot be relied upon to bar a claim for
fraudulent misrepresentation or fraudulent nondisclosure.”). We find the
difference between commercial and residential property sufficient to
distinguish Florida Holding, 4800 and its progeny from the instant case.
In Johnson, the supreme court discussed the caveat emptor doctrine
before arriving at its holding concerning the duty to disclose. 480 So. 2d
at 627–29. In doing so, the court recognized the “tendency of the more
recent cases . . . to restrict rather than extend the doctrine of caveat
emptor[,]” noting that this so-called “harness placed on the doctrine . . .
has resulted in the seller of a home being liable for failing to disclose
material defects of which he is aware” in other jurisdictions. Id. at 628.
Finding that this “same philosophy regarding the sale of homes should
also be the law in Florida[,]” the court held that a seller has a duty to
disclose facts materially affecting a property’s value which are not readily
observable and not known to the buyer. Id. at 629.
Thus, Johnson’s duty to disclose delineated a clear distinction between
residential and commercial property. After Johnson, the caveat emptor
doctrine was no longer applicable to the sale of residential real property.
Green Acres, Inc. v. First Union Nat’l Bank of Fla., 637 So. 2d 363, 365 (Fla.
4th DCA 1994); Haskell Co. v. Lane Co., Ltd., 612 So. 2d 669, 674 (Fla. 1st
DCA 1993). However, the caveat emptor doctrine remained applicable (and
continues to apply today) in cases involving commercial property. See Fla.
Holding 4800, 317 So. 3d at 125. The body of case law discussed in Florida
Holding 4800 is thus inapplicable to misrepresentations regarding
residential properties based primarily upon Johnson’s duty to disclose.
Accordingly, we hold that the trial court erred in granting Seller’s motion
for summary judgment as to Buyer’s fraud in the inducement
counterclaim.
3. Negligent Misrepresentation and Gilchrist
In a negligent misrepresentation claim, a party is required to prove: “(1)
a misrepresentation of material fact that the defendant believed to be true
but which was in fact false; (2) that defendant should have known the
representation was false; (3) the defendant intended to induce the plaintiff
to rely on the misrepresentation; and (4) the plaintiff acted in justifiable
reliance upon the misrepresentation, resulting in injury.” Arlington Pebble
Creek, LLC v. Campus Edge Condo. Ass’n, 232 So. 3d 502, 505 (Fla. 1st
DCA 2017).
12
In Gilchrist, a buyer purchased a very large tract of land, relying on a
year-old appraisal listing the property under a residential zoning
classification. 696 So. 2d at 336. But the property was in fact not zoned
for residential usage. Id. The buyer therefore sued the appraisal company
for negligent misrepresentation, with the case eventually making its way
to the Florida Supreme Court. Id. at 335–36. There, the court was tasked
with examining whether a party who unknowingly transmits false
information may be liable for negligent misrepresentation, even though an
investigation would have revealed the information’s falsity. Id. at 335.
The court cited Johnson, stating that, regarding the full disclosure of
material facts, “the recipient of an erroneous representation can[not] hide
behind the unintentional negligence of the misrepresenter when the
recipient is likewise negligent in failing to discover the error.” Id. at 339.
Notwithstanding this assertion, the court held that the failure to exercise
diligent attention did not preclude recovery and instead presented a
situation in which comparative negligence applied. See id. at 335, 339.
This was because questions concerning whether: (1) the appraiser knew
or should have known of the falsity of its appraisal; (2) the appraiser
intended to induce the buyer to rely on the misrepresentation; and (3) the
buyer acted in justifiable reliance thereon, all presented issues of material
fact, for which it was incumbent upon the jury to determine the degree of
negligence attributable to each party. See id. at 339; see also Grimes, 241
So. 3d at 897; Cont’l Concrete, Inc., 758 So. 2d at 1217; Revitz, 572 So. 2d
at 998 n.6 (although this case involved an action for fraudulent
misrepresentation and nondisclosure, the court determined a material fact
issue existed as to whether a real estate agent “knew, or should have
known” of an incorrect flood insurance premium).
A lesson to be drawn from both Johnson and Gilchrist is that, even when
a defect can probably be discovered through the exercise of diligent
attention, the requisite level of diligent attention is of less importance in
claims involving misrepresentations—especially those involving fraud. As
discussed above, in Nelson—a case involving no misrepresentation—
despite no physically observable defect at the time of the purchase, the
court held that “the flood-prone nature of the area was within the diligent
attention of the [buyers].” 699 So. 2d at 261. In stark contrast, in
Gilchrist, despite the defect also being discoverable through diligent
attention, the Florida Supreme Court held that the issue was one of
comparative negligence. 696 So. 2d at 339. And in Johnson, despite
physically observable defects, the Florida Supreme Court still held that the
buyers were entitled to rely on the sellers’ representations. 480 So. 2d at628–29.
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4. Buyer’s Negligent Misrepresentation Counterclaim
With respect to Buyer’s negligent misrepresentation counterclaim, as
stated in Gilchrist, the issue was one of comparative negligence. 696 So.
2d at 339. Genuine issues of material fact remained as to whether Seller
knew or should have known about the Disclosure Form’s falsity, whether
Seller intended to induce Buyer to rely on the Disclosure Form, and
whether Buyer acted in justifiable reliance upon the Disclosure Form, in
conjunction with Seller’s agent’s statement that the smell was attributable
solely to the air conditioning being off. 8 See Grimes, 241 So. 3d at 897;
Revitz, 572 So. 2d at 998 n.6. Thus, the trial court erred in granting
Seller’s motion for summary judgment as to Buyer’s negligent
misrepresentation counterclaim.
Conclusion
The trial court erred in granting summary judgment as to Buyer’s
counterclaims, as the trial court failed to consider whether the “prior flood”
was a defect that was “readily observable” in context of Buyer’s specific
counterclaims. Because we hold that the trial court erred in granting
summary judgment as to Buyer’s counterclaims, we also necessarily hold
that the trial court erred in granting final summary judgment. 9 We
therefore reverse and remand for reinstatement of all three of Buyer’s
counterclaims, and for reinstatement of his two affirmative defenses.
Should Seller again seek summary judgment, Seller may do so under the
new summary judgment standard. 10
8 Seller contends that its agent’s alleged misrepresentations are immaterial, as
Buyer expressly deleted allegations concerning such in his Second Amended
Counterclaim, and because Buyer testified at his deposition that the Disclosure
Form was the “only” thing upon which he relied. However, Buyer’s memorandum
in opposition to Seller’s motion for summary judgment and his affidavit continued
to maintain that Seller’s agent misinformed him and that the misrepresentation
played a role in his entering into the contract. We think this sufficient for
consideration. See Beckerman v. Greenbaum, 347 So. 2d 141, 142 (Fla. 2d DCA
1977) (“The fact that the appellant’s affidavit rather than his complaint did more
to raise the principal issues is not fatal. Where affidavits . . . show that there
exist genuine issues of material fact, the court may and should look beyond the
issues presented in the pleadings.”).
9 Though Buyer argues on appeal that the successor judge erred in merely
“rubber-stamping” the predecessor judge’s findings, we do not reach that issue,
and find error in granting the summary judgment based upon granting summary
judgment as to Buyer’s counterclaims.
10 See Wilsonart, LLC v. Lopez, 308 So. 3d 961, 964 (Fla. 2020).
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Reversed and remanded.
DAMOORGIAN, J., concurs.
WARNER, J., concurs specially with opinion.
WARNER, J., concurring specially.
I concur in the result of the majority opinion but disagree with some of
its reasoning. As to the breach of contract claim, I do not think we should
rely on Nelson v. Wiggs, 699 So. 2d 258 (Fla. 3d DCA 1997). I do not agree
with Nelson’s “diligent attention” definition nor that definition’s application
in a breach of contract claim. I think this definition is not in accordance
with Johnson v. Davis, 480 So. 2d 625 (Fla. 1985), as noted in Judge
Sorondo’s dissent in Nelson.
Moreover, in Johnson, the supreme court actually rejected the buyer’s
breach of contract claim, because the contract between the parties
contemplated that the roof of the residence might not be “watertight.” 480
So. 2d at 627. The contract imposed no duty on the seller other than to
make some repairs and the record did not indicate that the seller refused.
Thus, the court found that the buyer failed to prove a breach of contract.
Contrasting Johnson with the allegations of breach of contract in this
case, here Seller affirmatively stated in the disclosures that there were no
water intrusion events. Because there was a water intrusion event in
2013, and Seller failed to disclose it, Buyer countersued for breach of
contractual provision 10(j) which provides:
(j) SELLER DISCLOSURE: Seller knows of no facts materially
affecting the value of the Real Property which are not readily
observable and which have not been disclosed to Buyer.
Except as provided for in the preceding sentence, Seller
extends and intends no warranty and makes no
representation of any type, either express or implied, as to the
physical condition or history of the Property[.]
The water intrusion event of 2013 was clearly “not readily observable.” I
would not apply any type of “diligent attention” to the failure of Seller to
affirmatively disclose the event which occurred four years earlier and
which Seller was contractually obligated to disclose. To require a buyer to
investigate public records or other avenues of information in order to
confirm the representations made in a contract and add duties not
contained within its provisions would inject more uncertainty in real estate
contracts of residential property.
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Even as to fraud and negligent misrepresentation claims, I do not think
that Nelson adheres to either Johnson or Gilchrist Timber Co. v. ITT
Rayonier, Inc., 696 So. 2d 334 (Fla. 1997). Johnson relied on the court’s
prior decision in Besett v. Basnett, 389 So. 2d 995 (1980), which held “that
a recipient may rely on the truth of a representation, even though its falsity
could have been ascertained had he made an investigation, unless he
knows the representation to be false or its falsity is obvious to him.” Id. at
998. By relying on Besett, the court did not apply any consideration of
“diligent attention” to an affirmative misrepresentation. And in Gilchrist,
the court simply applied standard negligence principles and comparative
negligence rather that holding as a matter of law that a buyer’s failure to
investigate would preclude recovery.
For all of the causes of action asserted by Buyer, I agree with the
majority that the court erred in granting summary judgment, even though
I disagree with its reliance on Nelson.
* * *
Not final until disposition of timely filed motion for rehearing.
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