Kelly v. Tworoger
| Decision Date | 28 January 1998 |
| Docket Number | No. 96-4241,96-4241 |
| Citation | 705 So.2d 670 |
| Parties | 23 Fla. L. Weekly D333 Ines Collia KELLY, Appellant/Cross-Appellee, v. Kenneth F. TWOROGER and Thomas M. Tworoger, as individuals jointly and severally, Appellees/Cross-Appellants, and Leisure Towers Association, Inc., Appellees. |
| Court | Florida District Court of Appeals |
Kenneth J. Schwartz of Osherow & Schwartz, P.A., Boca Raton, for Appellant/cross-appellee.
Kenneth F. Tworoger of Tworoger & Associates, P.A., Fort Lauderdale, for Appellees/Cross-Appellants-Kenneth F. Tworoger and Thomas M. Tworoger, as individuals jointly and severally.
Appellant/cross-appellee, Ines Kelly, purchased a condominium unit from appellee/cross-appellants, Kenneth and Thomas Tworoger in October, 1993. Two years later, she sued the Tworogers for damages under Johnson v. Davis, 480 So.2d 625 (Fla.1985), alleging that at the time of the sale they had knowledge "that latent defects in the condition of the roofs caused interior leaks to the Unit" and that they had failed to disclose them. Prior to the closing, the Tworogers' attorney sent Kelly's attorney a letter which contained the following sentence
We also wish to bring to your attention the fact that Mr. Tworoger received a phone call from the condominium association Sunday wherein a new officer stated that he felt that the roof underneath the deck which belongs to this unit may be leaking.
Kelly voluntarily dismissed her case against the Tworogers on September 24, 1996.
This appeal concerns the trial court's various awards of attorney's fees, costs, and sanctions against Ines and Dennis Kelly and their attorney, Kenneth Schwartz. We have certiorari jurisdiction to review the orders. See Sholkoff v. Boca Raton Community Hosp. Inc., 693 So.2d 1114 (Fla. 4th DCA 1997).
Kelly's suit under Johnson "arises out" of the contract within the meaning of paragraph W. Under Johnson
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. The seller's "duty to disclose" emanates from the contractual relationship between the parties. The Johnson duty to disclose is similar to any other obligation that the law implies under the contract. If the sellers had breached the implied duty of good faith in the performance of another provision of the contract, there would be no question that litigation over such a breach would fall within paragraph W of the contract.
This case is distinguishable from Location 100, Inc. v. Gould S.E.L. Computer Systems, Inc., 517 So.2d 700, 706 (Fla. 4th DCA 1987), where this court held that attorney's fees incurred in defense of a fraudulent inducement claim could not be awarded under an attorney's fee provision in the contract that was supposedly induced by fraud. Location 100 relied on Dickson v. Dunn, 399 So.2d 447 (Fla. 5th DCA 1981), which reasoned that a cause of action for fraudulent misrepresentation "arose out of the alleged misrepresentation inducing [one party] to enter into the sales contract and not out of the contract itself." See also Fleischer v. Hi-Rise Homes, Inc., 536 So.2d 1105 (Fla. 4th DCA 1988); Hopps v. Smith, 520 So.2d 673 (Fla. 5th DCA 1988).
Unlike Location 100 and Dickson, this case involves not fraudulent misrepresentation, but non-disclosure under Johnson. Whether seeking rescission or damages, a Johnson action arises from a breach of a duty imposed by the law on the parties to the contract. Johnson was a departure from traditional fraud law, reflecting a philosophy that the law should encourage parties to a residential home sale contract to conduct themselves ethically. In Johnson, the supreme court observed that "[t]he 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." 480 So.2d at 628. The language of the contractual provision should be construed to include lawsuits arising out of the violation of disclosure obligations which the law imposes on a party to the contract. We therefore affirm the award of attorney's fees against Ines Kelly under the contract.
Even though we have distinguished Location 100, we question whether that case remains good law in light of Katz v. Van Der Noord, 546 So.2d 1047 (Fla.1989). Katz quoted with approval a portion of a third district case
Likewise, the enforcement of a contract may be prevented by equitable considerations, such as that the contract was fraudulently induced. In such a case, since a contract exists, even though later declared to be void or voidable, certain of its provisions may be operative.
Id. at 1049 (quoting Leitman v. Boone, 439 So.2d 318 (Fla. 3d DCA 1983)). Katz went on to hold
that when parties enter into a contract and litigation later ensues over that contract, attorney's fees may be recovered under a prevailing-party attorney's fee provision contained therein even though the contract is rescinded or held to be unenforceable. The legal fictions which accompany a judgment of rescission do not change the fact that a contract did exist. It would be unjust to preclude the prevailing party to the dispute over the contract which led to its rescission from recovering the very attorney's fees which were contemplated by that contract.
546 So.2d at 1049 (emphasis supplied).
Although Katz spoke of an attorney's fee provision in the context of a rescission action, its rationale is equally applicable to an action at law for fraudulent misrepresentation. The same deceptive conduct might justify relief under either cause of action. If the attorney's fee provision of a contract is to be construed objectively, it would seem that "litigation arising out of this Contract" should include, in addition to breaches and nonperformance of the contract, those situations where the party was fraudulently induced into entering the contract, because such conduct is morally more repugnant than a...
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