Billian v. Mobil Corp.

• Decision Date: 18 February 1998
• Docket Number: No. 95-3837,95-3837
• Citation: 710 So.2d 984
• Court: Florida District Court of Appeals
• Parties: 23 Fla. L. Weekly D502 Douglas C. BILLIAN and Louise L. Billian, Appellants/Cross-Appellees, v. MOBIL CORPORATION, a Nevada corporation, Mobil Land Developmental Corp., a Delaware corporation, Sailfish Point, Inc., a Delaware corporation, Dune Realty Corporation n/k/a Sailfish Point Realty Corporation, a Delaware corporation, Appellees/Cross-Appellants, and Donald Miller, Appellee.

Page 984

710 So.2d 984

23 Fla. L. Weekly D502

Douglas C. BILLIAN and Louise L. Billian, Appellants/Cross-Appellees, v. MOBIL CORPORATION, a Nevada corporation, Mobil Land Developmental Corp., a Delaware corporation, Sailfish Point, Inc., a Delaware corporation, Dune Realty Corporation n/k/a Sailfish Point Realty Corporation, a Delaware corporation, Appellees/Cross-Appellants and Donald Miller, Appellee.

No. 95-3837.

District Court of Appeal of Florida Fourth District.

Feb. 18, 1998.

Rehearing, Rehearing En Banc,

Clarification and Certification

Denied April 24, 1998.

Thomas E. Warner of Warner, Fox, Seeley, Dungey & Sweet, Attorneys, P.A., Stuart, and Jane Kreusler-Walsh of Jane Kreusler-Walsh, P.A., West Palm Beach for appellants/cross-appellees.

Steven E. Stark, Michael B. Buckley and Uri Litvak of Fowler, White, Burnett, Hurley, Banick & Strickroot, P.A., Miami, for Appellees/Cross-Appellants-Mobil Corporation, a Nevada corporation, Mobil Land Developmental Corp., a Delaware corporation, Sailfish Point, Inc., a Delaware corporation, Dune Realty Corporation n/k/a Sailfish Point Realty Corporation, a Delaware corporation.

GROSS, Judge.

The heart of this case involves the developer's purported failure to disclose to the buyers certain facts and defects concerning a condominium unit. The purchasers, Douglas and Louise Billian, sued the developer, Sailfish Point, Inc., and related entities for damages due to non-disclosure under Johnson v. Davis, 480 So.2d 625 (Fla.1985) and, alternatively, for the equitable remedy of rescission. They appeal a final judgment based on the jury's finding of no liability and on the trial court's denial of the rescission remedy. The appellees cross-appeal the denial of a directed verdict and other purported errors in the trial. We reverse because of an erroneous jury instruction under Johnson.

The Billians claimed that the developer concealed material defects in the condominium property regarding differential settling, exterior stucco delamination, erosion, and sound transmission problems. They argued that these defects greatly depreciated the value of the property and should have been disclosed to them before they contracted to buy the unit. At trial, there was conflicting evidence over the extent of the problems, whether any of the problems had materially affected the value of the property, and whether the developer knew or should have known about them. The jury found that no "fraudulent concealment" had occurred. After the verdict, the court held that because it was "bound" by the jury's verdict, it had no choice but to deny the rescission claim. ¹

Jury Instruction Under Johnson v. Davis

The Billians challenge two portions of the trial court's charge to the jury on the Johnson non-disclosure claim. In the jury instructions, the court characterized the issue as being "whether the Defendant[s] fraudulently concealed certain material facts." Generally, the court instructed the jury that to prevail, the Billians had to prove that the defendants intentionally failed to disclose facts materially affecting the value of the condominium. The court denied the Billians' request for an instruction defining a "material fact" as "one that is of such importance that Mr. and Mrs. Billian either would not have entered into the transaction or would not have paid the same price for the unit."

The Billians argue that the court erred in denying their proposed jury instruction on a "material fact" under Johnson. The source of the proposed instruction was Standard Jury Instruction MI-8(d), the instruction for fraudulent misrepresentation, which defines a material fact as "one that is of such importance that [claimant] would not have [entered into the transaction][acted] but for the false statement."

The Billians' proffered instruction confuses the traditional action for fraudulent misrepresentation with a claim for non-disclosure under Johnson. That case narrowly tailors the definition of a "material fact" to limit the cause of action to non-disclosure of a more narrow class of facts than would be actionable in a case for fraudulent misrepresentation. The express holding of Johnson is

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.

480 So.2d at 629 (emphasis added). As crafted by the supreme court, the materiality of a fact is to be determined objectively by focusing on the relationship between the undisclosed fact and the value of the property. To be actionable, an undisclosed fact must materially affect the value of the property. Under the Billians' approach, the materiality of a non-disclosure would, in part, be determined subjectively, by measuring how disclosure would have affected their personal decision to purchase. Imposition of this standard would represent a departure from the express holding of Johnson.

The Billians rely on a portion of Dorton v. Jensen, 676 So.2d 437 (Fla. 2d DCA 1996), to support their position. However, they read that case too broadly. In Dorton, sellers of a home failed to disclose known high water problems to the buyers. When the buyers questioned the sellers about the need for flood insurance, one of them replied that "such coverage was unnecessary because she and her husband had never experienced high water at their home." Id. at 438. After closing, the buyers experienced severe flooding during heavy rains. They stopped making mortgage payments and filed suit, seeking rescission of the real estate transaction under Johnson. ²

At trial, the sellers prevailed. The second district reversed, holding that the trial court had misapplied Johnson. After stating the rule of that case, the second district, at first blush, appeared to expand the rule of Johnson in its characterization of the holding, which relocates the term "material" and turns it from an adverb into an adjective:

It is clear, therefore, that a seller's liability under Johnson is measured against whether the seller possessed knowledge of material facts affecting the value of property which were not disclosed to an unsuspecting buyer.

Dorton, 676 So.2d at 439. However, the next sentence of the opinion makes it clear that the second district was not broadening the holding of Johnson:

The test for determining the materiality of a fact in transactions of this nature is whether that fact "substantially affects the value of the property."

Id. (quoting Revitz v. Terrell, 572 So.2d 996, 998 (Fla. 3d DCA 1990)). The reference in Dorton to the effect of the undisclosed facts on the buyers' decision to purchase is dicta, unnecessary to the holding under Johnson. For this reason, the Billians' reading of Dorton is incorrect. There is no conflict between that case and the result we reach here.

The Billians also contend that the trial court incorrectly charged the jury on a defendant's requisite state of mind in a cause of action for non-disclosure under Johnson. We agree.

On the Johnson non-disclosure claim, the trial court charged the jury as follows In order to find for Plaintiffs on this claim, the Plaintiffs must prove by the greater weight of the evidence that the Defendant ... intentionally failed to disclose facts regarding the condominium property of which it was aware and which would materially affect the value of the property, which were not observable or otherwise known by the Plaintiffs.

The Billians argue that the italicized portion of the instruction went beyond the requirements of Johnson and improperly directed the jury to focus on the defendants' state of mind. Appellees assert that the instruction properly educated the jury "on the intentional scienter aspect of the tort."

The insertion of the word "intentionally" into the jury charge was significant, since a primary thrust of the defense--- that the defendants lacked that evil state of mind indicative of fraud--- was based on the language of the instruction given by the court. For example, during closing argument, defense counsel framed the issue for the jury as

a fraud case. In this case you must find that, with regard to that nondisclosure, it was fraudulent. Remember, what I was telling you, it was intentional.... [The plaintiffs] have a burden of proof to show that this company ... fraudulently concealed, intentionally did not disclose facts which materially affected the value.

In discussing the facts, defense counsel emphasized the defendants' absence of bad intent with regard to any non-disclosure, by arguing that there was

nothing to suggest that Jharry Breed [general manager of Florida operations for one of the defendants] intentionally did anything wrong. There wasn't any fraud here. You may think that he was negligent in not disclosing it, but that is not the issue here.

Near the conclusion of his argument, defense counsel honed in on the state of mind issue by stating that

the Plaintiffs cannot meet their burden of proof, on the fraud case. Remember, this is not a negligence case. This is not a negligence case. This is standard fraud--- intentional fraudulent concealment.

Counsel tailored his argument to the wording of a general interrogatory on the verdict form which asked whether the defendants had committed "fraudulent concealment."

Other than requiring that the seller of a home have knowledge of facts materially affecting the value of property at the time the contract is formed, Johnson does not specify any state of mind element with regard to the act of non-disclosure for the cause of action it identifies. As we noted earlier, the express holding of Johnson is

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.

480 So.2d at 629. Significantly, Johnson casts the cause of action...