MIAMI BUSINESS LITIGATION: CLAIMS OF FRAUD AND RELIANCE ON SELLER’S MISREPRESENTATION

Miami’s Third District Court of Appeal in Moriber v. Dreiling, 194 So.3d 369 (Fla. 3d DCA 2016), explained that the elements for a cause of action for fraudulent misrepresentation and fraudulent inducement are the same, namely “(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.” When claims of fraud have been asserted in Florida courts concerning certain sales of real property, defendants have at times defended on the grounds that the plaintiff-buyer should have been more diligent in investigating the veracity of what the seller said prior to making the sale. However, the Supreme Court of Florida’s precedent in Johnson v. Davis, 480 So.2d 625 (Fla. 1985), addressed this issue. Johnson held that a buyer is justified in relying on a seller’s representation unless the representation’s falsity is obvious. 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 Johnson, the buyers contracted to purchase a home that was just three years old. After remitting the initial deposit, but prior to any additional deposit would be 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.” After the buyers asked the sellers about these issues, the sellers responded 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.” The sellers allegedly told the buyers that no roof or ceiling issues ever existed. 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 in the family room, the light fixtures, the glass doors, and the stove in the kitchen.” The buyers filed suit, alleging breach of contract and “fraud and misrepresentation.” On appeal, the court found the sellers’ statement that no roof problems existed “was a false representation of material fact, made with knowledge of its falsity, upon which the [buyers] relied to their detriment.” The court therefore held that the sellers were liable for fraudulent misrepresentation. The buyers were justified in their reliance on the sellers’ misrepresentation. 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. Similarly, Revitz v. Terrell, 572 So.2d 996 (Fla. 3d DCA 1990), held, in an action concerning fraudulent misrepresentation and nondisclosure, that even if the property 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.”

Florida case law adds additional layers of depth, including scenarios where sellers have included contractual provisions that contradict pre-sale representations and application of the legal doctrine of “caveat emptor,” also known as the “buyer beware” doctrine. Florida law addresses and distinguishes these issues in residential and commercial contexts, among other nuances. These issues will be addressed in future articles.

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.