H. JOHNSON and DANA JOHNSON, his wife, Petitioners, v. MORTON DAVIS and
EDNA DAVIS, his wife, Respondents
Supreme Court of Florida
480 So. 2d 625; 1985 Fla. LEXIS 4023; 10 Fla. L. Weekly 583
October 31, 1985
OPINION BY: ADKINS
In May of 1982, the Davises entered into a contract to buy for $310,000
the Johnsons' home, which at the time was three years old. The contract
required a $5,000 deposit payment, an additional $26,000 deposit
payment within five days and a closing by June 21, 1982. The crucial
provision of the contract, for the purposes of the case at bar, is
Paragraph F which provided:
F. Roof Inspection: Prior to closing
at Buyer's expense, Buyer shall have the right to obtain a written
report from a licensed roofer stating that the roof is in a watertight
condition. In the event repairs are required either to correct leaks or
to replace damage to facia or soffit, seller shall pay for said repairs
which shall be performed by a licensed roofing contractor.
The contract further provided for payment to the "prevailing
party" of all costs and reasonable fees in any contract litigation.
Before the Davises made the additional $26,000 deposit payment, Mrs.
Davis 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. Upon inquiring, Mrs. Davis was
told by Mr. Johnson that the window had had a minor problem that had
long since been corrected and that the stains were wallpaper glue and
the result of ceiling beams being moved. There is disagreement among
the parties as to whether Mr. Johnson also told Mrs. Davis at this time
that there had never been any problems with the roof or ceilings. The
Davises thereafter paid the remainder of their deposit and the Johnsons
vacated the home. Several days later, following a heavy rain, Mrs.
Davis entered the home and 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.
Two roofers hired by the Johnsons' broker concluded that for under
$1,000 they could "fix" certain leaks in the roof and by doing so make
the roof "watertight." Three roofers hired by the Davises found that
the roof was inherently defective, that any repairs would be temporary
because the roof was "slipping," and that only a new $15,000 roof could
The Davises filed a complaint alleging breach of contract, fraud and
misrepresentation, and sought recission of the contract and return of
their deposit. The Johnsons counterclaimed seeking the deposit as
The trial court entered its final judgment on May 27, 1983. The court
made no findings of fact, but awarded the Davises $26,000 plus interest
and awarded the Johnsons $5,000 plus interest. Each party was to bear
their own attorneys' fees.
The Johnsons appealed and the Davises cross-appealed from the final
judgment. The Third District found for the Davises affirming the trial
court's return of the majority of the deposit to the Davises ($26,000),
and reversing the award of $5,000 to the Johnsons as well as the
court's failure to award the Davises costs and fees. Accordingly, the
court remanded with directions to return to the Davises the balance of
their deposit and to award them costs and fees.
We also agree with the district court's conclusions under a theory of
fraud and find that the Johnsons' statements to the Davises regarding
the condition of the roof constituted a fraudulent misrepresentation
entitling respondents to the return of their $26,000 deposit payment.
In the state of Florida, relief for a fraudulent misrepresentation may
be granted only when the following elements are present: (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. See Huffstetler
v. Our Home Life Ins. Co., 67 Fla. 324, 65 So. 1 (1914).
The evidence adduced at trial shows that after the buyer and the seller
signed the purchase and sales agreement and after receiving the $5,000
initial deposit payment the Johnsons affirmatively repeated to the
Davises that there were no problems with the roof. The Johnsons
subsequently received the additional $26,000 deposit payment from the
Davises. The record reflects that the statement made by the Johnsons
was a false representation of material fact, made with knowledge of its
falsity, upon which the Davises relied to their detriment as evidenced
by the $26,000 paid to the Johnsons.
The doctrine of caveat emptor does not exempt a seller from
responsibility for the statements and representations which he makes to
induce the buyer to act, when under the circumstances these amount to
fraud in the legal sense. To be grounds for relief, the false
representations need not have been made at the time of the signing of
the purchase and sales agreement in order for the element of reliance
to be present. The fact that the false statements as to the quality of
the roof were made after the signing of the purchase and sales
agreement does not excuse the seller from liability when the
misrepresentations were made prior to the execution of the contract by
conveyance of the property. It would be contrary to all notions of
fairness and justice for this Court to place its stamp of approval on
an affirmative misrepresentation by a wrongdoer just because it was
made after the signing of the executory contract when all of the
necessary elements for actionable fraud are present. Furthermore, the
Davises' reliance on the truth of the Johnsons' representation was
justified and is supported by this Court's decision in Besett v.
Basnett, 389 So.2d 995 (1980), where we 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
In determining whether a seller of a home has a duty to disclose latent
material defects to a buyer, the established tort law distinction
between misfeasance and nonfeasance, action and inaction must carefully
be analyzed. The highly individualistic philosophy of the earlier
common law consistently imposed liability upon the commission of
affirmative acts of harm, but shrank from converting the courts into an
institution for forcing men to help one another. This distinction is
deeply rooted in our case law. Liability for nonfeasance has therefore
been slow to receive recognition in the evolution of tort law.
In theory, the difference between misfeasance and nonfeasance, action
and inaction is quite simple and obvious; however, in practice it is
not always easy to draw the line and determine whether conduct is
active or passive. That is, where failure to disclose a material fact
is calculated to induce a false belief, the distinction between
concealment and affirmative representations is tenuous. Both proceed
from the same motives and are attended with the same consequences; both
are violative of the principles of fair dealing and good faith; both
are calculated to produce the same result; and, in fact, both
essentially have the same effect.
Still there exists in much of our case law the old tort notion that
there can be no liability for nonfeasance. The courts in some
jurisdictions, including Florida, hold that where the parties are
dealing at arm's length and the facts lie equally open to both parties,
with equal opportunity of examination, mere nondisclosure does not
constitute a fraudulent concealment. See Ramel v. Chasebrook
Construction Co., 135 So.2d 876 (Fla. 2d DCA 1961). The Fourth District
affirmed that rule of law in Banks v. Salina, 413 So.2d 851 (Fla. 4th
DCA 1982), and found that although the sellers had sold a home without
disclosing the presence of a defective roof and swimming pool of which
the sellers had knowledge, "in Florida, there is no duty to disclose
when parties are dealing at arms length." Id. at 852.
These unappetizing cases are not in tune with the times and do not
conform with current notions of justice, equity and fair dealing. One
should not be able to stand behind the impervious shield of caveat
emptor and take advantage of another's ignorance. Our courts have taken
great strides since the days when the judicial emphasis was on rigid
rules and ancient precedents. Modern concepts of justice and fair
dealing have given our courts the opportunity and latitude to change
legal precepts in order to conform to society's needs. Thus, the
tendency of the more recent cases has been to restrict rather than
extend the doctrine of caveat emptor. The law appears to be working
toward the ultimate conclusion that full disclosure of all material
facts must be made whenever elementary fair conduct demands it.
The harness placed on the doctrine of caveat emptor in a number of
other jurisdictions has resulted in the seller of a home being liable
for failing to disclose material defects of which he is aware. This
philosophy was succinctly expressed in Lingsch v. Savage, 213 Cal. App.
2d 729, 29 Cal. Rptr. 201 (1963):
It is now settled in California that
where the seller knows of facts materially affecting the value or
desirability of the property which are known or accessible only to him
and also knows that such facts are not known to or within the reach of
the diligent attention and observation of the buyer, the seller is
under a duty to disclose them to the buyer.
In Posner v. Davis, 76 Ill. App. 3d 638, 395 N.E. 2d 133, 32 Ill. Dec.
186 (1979), buyers brought an action alleging that the sellers of a
home fraudulently concealed the defects in the home which included a
leaking roof and basement flooding. Relying on Lingsch, the court
concluded that the sellers knew of and failed to disclose latent
material defects and thus were liable for fraudulent concealment. Id.
at 137. Numerous other jurisdictions have followed this view in
formulating law involving the sale of homes. See Flakus v. Schug, 213
Neb. 491, 329 N.W.2d 859 (1983) (basement flooding); Thacker v. Tyree,
297 S.E.2d 885 (W.Va. 1982) (cracked walls and foundation problems);
Maguire v. Masino, 325 So.2d 844 (La.Ct.App. 1975) (termite
infestation); Weintraub v. Krobatsch, 64 N.J. 445, 317 A.2d 68 (1974)
(roach infestation); Cohen v. Vivian, 141 Colo. 443, 349 P.2d 366
(1960) (soil defect).
We are of the opinion, in view of the reasoning and results in Lingsch,
Posner and the aforementioned cases decided in other jurisdictions,
that the same philosophy regarding the sale of homes should also be the
law in the state of Florida. Accordingly, we hold that 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. This duty is
equally applicable to all forms of real property, new and used.
In the case at bar, the evidence shows that the Johnsons knew of and
failed to disclose that there had been problems with the roof of the
house. Mr. Johnson admitted during his testimony that the Johnsons were
aware of roof problems prior to entering into the contract of sale and
receiving the $5,000 deposit payment. Thus, we agree with the district
court and find that the Johnsons' fraudulent concealment also entitles
the Davises to the return of the $5,000 deposit payment plus interest.
We further find that the Davises should be awarded costs and fees.
The decision of the Third District Court of Appeals is hereby approved.
DISSENT: BOYD, C.J., dissenting.
I respectfully but strongly dissent to the Court's expansion of the
duties of sellers of real property. This ruling will give rise to a
flood of litigation and will facilitate unjust outcomes in many cases.
If, as a matter of public policy, the well settled law of this state on
this question should be changed, the change should come from the
legislature. Moreover, I do not find sufficient evidence in the record
to justify rescission or a finding of fraud even under present law. I
would quash the decision of the district court of appeal.
Homeowners who attempt to sell their houses are typically in no better
position to measure the quality, value, or desirability of their houses
than are the prospective purchasers with whom such owners come into
contact. Based on this and related considerations, the law of Florida
has long been that a seller of real property with improvements is under
no duty to disclose all material facts, in the absence of a fiduciary
relationship, to a buyer who has an equal opportunity to learn all
material information and is not prevented by the seller from doing so.
See, e.g., Ramel v. Chasebrook Construction Co., 135 So.2d 876 (Fla. 2d
DCA 1961). This rule provides sufficient protection against
overreaching by sellers, as the wise and progressive ruling in the
Ramel case shows. The Ramel decision is not the least bit
The majority opinion sets forth the elements of actionable fraud as
they are stated in Huffstetler v. Our Home Life Ins. Co., 67 Fla. 324,
65 So.1 (1914). Those elements were not established by sufficient
evidence in this case. There was no competent, substantial evidence to
show that Mr. Johnson made a false statement knowing it to be false.
There was absolutely no evidence that the statement was made with the
intention of causing Mrs. Davis to do anything; she had already
contracted to purchase the house. There was no competent evidence that
Mrs. Davis in fact relied on Mr. Johnson's statement or was influenced
by it to do anything. And the only detriment or injury that can be
found is that, when the Davises subsequently decided not to complete
the transaction, they stood to forfeit the additional $26,000 deposit
paid in addition to the original $5,000. The Davises had already agreed
to pay the additional deposit at the time of the conversation. They had
to pay the additional deposit if they wanted to preserve their rights
under the contract. They chose to do so. Mr. Johnson's statements, even
if we believe Mrs. Davis' version of them rather than Mr. Johnson's,
did not constitute the kind of representation upon which a buyer's
reliance is justified.
I do not agree with the Court's belief that the distinction between
nondisclosure and affirmative statement is weak or nonexistent. It is a
distinction that we should take special care to emphasize and preserve.
Imposition of liability for seller's nondisclosure of the condition of
improvements to real property is the first step toward making the
seller a guarantor of the good condition of the property. Ultimately
this trend will significantly burden the alienability of property
because sellers will have to worry about the possibility of
catastrophic post-sale judgments for damages sought to pay for repairs.
The trend will proceed somewhat as follows. At first, the cause of
action will require proof of actual knowledge of the undisclosed defect
on the part of the seller. But in many cases the courts will allow it
to be shown by circumstantial evidence. Then a rule of constructive
knowledge will develop based on the reasoning that if the seller did
not know of the defect, he should have known about it before attempting
to sell the property. Thus the burden of inspection will shift from the
buyer to the seller. Ultimately the courts will be in the position of
imposing implied warranties and guaranties on all sellers of real
Although as described in the majority opinion this change in the law
sounds progressive, high-minded, and idealistic, it is in reality
completely unnecessary. Prudent purchasers inspect property, with
expert advice if necessary, before they agree to buy. Prudent lenders
require inspections before agreeing to provide purchase money.
Initial deposits of earnest money can be made with the agreement to
purchase being conditional upon the favorable results of expert