Kovaleski v. Tallahassee Title Co.

• Decision Date: 06 November 1978
• Docket Number: No. II-214,II-214
• Citation: 363 So.2d 1156
• Parties: Charles O. KOVALESKI, Appellant, v. TALLAHASSEE TITLE COMPANY and Fred F. Womble, as Tax Collector, Appellees.
• Court: Florida District Court of Appeals

Page 1156

363 So.2d 1156

Charles O. KOVALESKI, Appellant, v. TALLAHASSEE TITLE COMPANY and Fred F. Womble, as Tax Collector, Appellees.

No. II-214.

District Court of Appeal of Florida, First District.

Nov. 6, 1978.

Charles Friend, Tallahassee, for appellant.

Peter Guarisco; Harry H. Mitchell of Mitchell & Mitchell, Tallahassee, for appellees.

ERVIN, Judge.

Kovaleski appeals the dismissal of his complaint seeking damages from the Leon County Tax Collector and the Tallahassee Title Company due to their failure to set forth in an abstract an interest held by third persons in the property bought by him at a tax sale. Prior to the final order of dismissal, Kovaleski's complaint was twice dismissed, with leave to amend, for its failure to state a cause of action. In the court's second order of dismissal, it was stated that plaintiff must allege ultimate facts showing a right of reliance by him on the title search as well as his reliance. A third amended complaint was filed, ¹ in turn attacked by additional motions to dismiss. Following a hearing on the motions, the court entered an order dismissing the amended complaint as amended, stating it had considered plaintiff's motion to amend the complaint ore tenus to allege that prior to the purchase of the tax deed by him, he was furnished an abstract by the tax collector or by the clerk of the circuit court and, having received such abstract prior to bidding on the property, he relied on the information shown within it when submitting the bid. The court's order concluded, "(T)he plaintiff had no right to rely on any act of the tax collector in furnishing the clerk of the circuit court with an abstract or a list of names of persons who had or might have an interest in the property involved, and being of such opinion the court concludes that there was no right to reliance which would create a cause of action in favor of the plaintiff and against either defendant."

We affirm the court's decision as to the tax collector but reverse as to Tallahassee Title. As to the former, there are no allegations in the complaint that the tax collector's negligence proximately caused the injury plaintiff suffered. It is clear that but for the negligent omission in the search prepared by the abstracter, the injury could not have occurred. Additionally, we think the rule stated in Slavin v. Kay, 108 So.2d 462 (Fla.1958), applies. In Slavin, the court was faced with the question whether both an owner and a contractor were liable for injuries suffered by a third person resulting from their alleged negligence in the construction of a wash basin in the plaintiff's motel room. The court held that if the offending defect was latent and unknown to the owner, the contractor remained liable, even after the project was completed and accepted by the owner. However, the owner could not be held liable where the condition was one which was not discoverable by inspection. The holding in Slavin has been followed by a number of more recent decisions, e. g., Mai Kai, Inc. v. Colucci, 205 So.2d 291 (Fla.1967); Forte Towers South, Inc. v. Hill York Sales Corp., 312 So.2d 512 (Fla. 3d DCA 1975); Roman Spa, Inc. v. Lubell, 334 So.2d 298 (Fla. 1st DCA 1976); El Shorafa v. Ruprecht, 345 So.2d 763 (Fla. 4th DCA 1977). Here the offending omission from the abstract was no more discoverable by the tax collector than was the defective basin by the motel owner in Slavin. The injury which plaintiff alleges could not have been proximately caused by the actions of the tax collector in merely furnishing to him an abstract previously negligently prepared by the abstracter.

The allegations pertaining to the abstracter's liability, however, are altogether different. As we have observed, the allegations, both written and verbal, were that the plaintiff relied upon an abstract prepared by Tallahassee Title Company prior to his successful bid at a tax sale of the property, and that the abstracter had omitted a preexisting interest in the title to the property which caused injury to plaintiff.

The general rule is that an abstracter is liable in damages to his employer for injury resulting from his wrongful or negligent errors in preparing an abstract of title and from defects or omissions in the abstract which he prepared and furnished. Sickler v. Indian River Abstract and Guaranty Co., 142 Fla. 528, 195 So. 195 (1940). He is, however, only liable for losses incurred by a plaintiff who relies on the abstract. 1 Am.Jur.2d, Abstracts of Title, § 19 (1962). Moreover, the duty to his employer is to use such care and skill as are exercised by persons engaged in similar occupations and under like circumstances. 1 Fla.Jur.2d, Abstracts, § 4 (1977). The Sickler court also held that an abstracter does not render himself liable to every person who may be injured by reason of his negligence, rather liability exists only in favor of the person employing him or those in privity with him, hence there could be no remedy in tort against the abstracter, only in contract. 195 So. at 197.

While the rule as to an abstracter's liability in the absence of privity has not been expressly overruled by any subsequent decisions of the Florida Supreme Court, courts in many other states have held that where the abstracter knew at the time of the abstract's preparation that it was to be used by a third person who would depend upon it in a pecuniary transaction, the rule of liability will be extended to those who act in reliance upon the title shown by the abstract. 1 Am.Jur.2d, Abstracts of Title, § 16, p. 241 (1962). See cases collected under 34 A.L.R.3d 1122, 1132-1136 (1970). This exception is recognized in Restatement (Second) of Torts, § 552 (1977), which provides in part:

(1) One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.

(2) Except as stated in Subsection (3), (which pertains to the liability of one who is under a public duty to furnish such information) the liability stated in Subsection (1) is limited to loss suffered

(a) by the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and

(b) through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction.

The comment to subsection (2), pertaining to persons for whose guidance the information is supplied, states:

Under this Section, . . ., it is not necessary that the maker should have any particular person in mind as the intended, or even the probable, recipient of the information. In other words, it is not required that the person who is to become the plaintiff be identified or known to the defendant as an individual when the information is supplied. It is enough that the maker of the representation intends it to reach and influence either a particular person or persons, known to him, or a group or class of persons, distinct from the much larger class or might reasonably be expected sooner or later to have access to the information and foreseeably to take some action in reliance upon it. It is enough, likewise, that the maker of the representation knows that his recipient intends to transmit the information to a similar person, persons or group. It is sufficient, in other words, insofar as the plaintiff's identity is concerned, that the maker supplies the information for repetition to a certain group or class of persons and that the plaintiff proves to be one of them, even though the maker never had heard of him by name when the information was given. Restatement (Second) of Torts, § 552, Comment h (1977).

In what is perhaps the most comprehensive opinion of any in the country on the subject of an abstracter's liability in the absence of privity, the Michigan Supreme Court, in Williams v. Polgar, 391 Mich. 6, 215 N.W.2d 149 (1974), observed that six general court-created exceptions ² have been grafted upon the common law requirement of strict contractual privity. Those exceptions are: (1) The abstracter's fraud or collusion. (2) The theory of third party beneficiary contracts. (3) The theory of foreseeability of use by a third party. (4) The actual knowledge or notice of the third party. (5) The agent for disclosed or undisclosed principals contracting with an abstracter. (6) The reissuance or recertification of an abstract. 215 N.W.2d at 152-153. The opinion noted that of 36 jurisdictions which have addressed the question of the abstracter's liability, only seven retain a rule of strict contractual privity. Those seven states are Arizona, California, Florida, Illinois, Ohio, Texas and Wisconsin. After analyzing the opinions of the various jurisdictions, the court concluded that the plaintiff had presented a valid tort cause of action in the nature of negligent representation arising from contract for an abstracter's services in favor of a non-contracting damaged third party whose reliance on the abstract could be foreseen. 215 N.W.2d at 158.

Notwithstanding the impressive list of out-of-state authorities recognizing one or more exceptions to the rule of privity, were it not for the Supreme Court's decision in A. R. Moyer, Inc. v. Graham, 285 So.2d 397 (Fla.1973), we would be compelled to follow the Sickler holding and affirm the order of the trial court dismissing the complaint against the abstracter. In Moyer, the court was asked by the Fifth Circuit Court of Appeals whether a general contractor could maintain an action against the supervising architect for damages proximately caused by the...