MIAMI BUSINESS LITIGATION: FRAUD CLAIM AND DEFENSE OF CAVEAT EMPTOR

Florida law recognizes the doctrine of caveat emptor in commercial transactions. Florida and some other jurisdictions understand this legal doctrine to mean “buyer beware,” thereby imposing on buyers in commercial real property transactions the legal obligation to investigate what they are buying. Florida’s Fourth District Court of Appeal in Transcapital Bank v. Shadowbrook at Vero, LLC, 226 So.3d 856 (Fla. 4th DCA 2017), explained that Florida courts continue to apply the caveat emptor doctrine, which “places the duty to examine and judge the value and condition of the property solely on the buyer and protects the seller from liability for any defects.” There are, however, three exceptions to this legal doctrine: “1) where some artifice or trick has been employed to prevent the purchaser from making an independent inquiry; 2) where the other party does not have an equal opportunity to become apprised of the fact; and 3) where a party undertakes to disclose facts and fails to disclose the whole truth.” Peter Mavrick is a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

In Transcapital, the buyer of a condominium was informed that the property was worth $14.8 million and, in support, was shown two prior notes supporting this valuation. The buyer thereafter sued, and at trial the seller presented evidence that the buyer never asked for the actual appraisal and since it only purchased some of the units, some of which were in poor condition, the appraisal value was less than the orally represented amount. At the close of the buyer’s case, the seller argued the property value was an opinion which could not form the basis of a fraud claim. The jury found for the buyer. The appellate court reversed the jury verdict because of the caveat emptor doctrine. The appellate court held that “the fraud claim could not survive a motion for directed verdict” because “[n]one of the exceptions to caveat emptor appl[ied].” The buyer was able to inspect the property before the closing, could have obtained its own appraisal, and purchased the property without physically viewing the appraisal. The buyer presented no evidence showing that the seller resorted to some fraudulent means in preventing the buyer from making an examination of the property.

Similarly, in Agrobin, Inc. v. Botanica Dev. Associates, Inc., 861 So.2d 445 (Fla. 3d DCA 2003), Miami’s Third District Court of Appeal held that, in the context of the doctrine of caveat emptor, that “a sophisticated purchaser of commercial property who agreed to an ‘as is’ purchase contract, had ample opportunity to conduct inspections, and could have discovered an alleged defect through the exercise of ordinary diligence, may be disgruntled, but does not have a cause of action for fraud.”

Peter Mavrick is a Miami business litigation lawyer, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.