Revitz v. Terrell
Decision Date | 26 December 1990 |
Docket Number | 89-293,Nos. 88-3097,s. 88-3097 |
Citation | 572 So.2d 996,16 Fla. L. Weekly 81 |
Parties | 16 Fla. L. Weekly 81 Robert REVITZ, Appellant, v. Roy A. TERRELL, Jr., Charlyne S. Terrell, A.F. "Jerry" Egan, Inc., and Faye Buchanan, jointly and severally, Appellees. |
Court | Florida District Court of Appeals |
Michael Tarre, Beckmeyer and Mulick, Tavernier, Robin Greene, Miami, for appellant.
Grossman & Roth and Paul J. Levine, Miami, for appellees.
Before BARKDULL, NESBITT and FERGUSON, JJ.
ON MOTION FOR CLARIFICATION
Revitz appeals from a final judgment for the defendants on his complaint for rescission of a real estate contract and damages. The complaint alleged fraudulent misrepresentations and nondisclosure, or, mutual mistake concerning building code violations and the availability of low-price flood insurance.
Revitz purchased a house in the Florida Keys in 1986. The house was built in 1979. It is undisputed that the original owner, who was also the builder, fraudulently obtained a building permit for the house by stating that the ground floor was to be used for only parking and storage. Local flood zone ordinances required the habitable areas of the home to be at least fifteen feet above sea level. In violation of the building permit, the original owner had constructed a finished bedroom, fireplace, and bathroom on the ground floor which is only four feet above sea level. The original owner also falsified the application for the federal flood insurance program, FEMA, which, as a condition for insurance, required the first habitable level of the house to be at least eleven feet above sea level. The falsified application represented that the elevation level of the first habitable floor was over fourteen feet. Based on that information, flood insurance was issued for a premium rate of $350 per year.
The original owner later sold the house to the Terrells who assumed the existing policy of flood insurance. When they assumed the policy, the Terrells continued the fraud, as the trial court found, by falsely informing the insurance agent that the ground floor was used only for storage and parking. The policy was therefore continued at the existing policy premium rate of $350 per year.
In 1985, the Terrells listed their home for sale with Faye Buchanan and her company, Egan Realty. Buchanan lived only a few houses away from the Terrells and testified at trial that she was familiar with local building ordinances and knew that the property was located in a flood zone. Revitz testified that when Buchanan first showed him the house, he asked her why all the other houses on the street were on stilts, that Buchanan misinformed him, intentionally or negligently, that the house was built prior to the regulations controlling elevation, and that she also told him that the flood insurance premium on the house was approximately $350 per year. Buchanan, allegedly, never advised Revitz that the home was in a special flood hazard area or that the enclosed first floor violated local ordinances. Buchanan disputed most of Revitz's key testimony.
Revitz purchased the property and renewed the existing policy of flood insurance. After he moved in, at the request of the bank which held his mortgage, Revitz obtained a floor elevation certificate. The certificate showed the first habitable living area elevation level as slightly over four feet. When neighbors suggested that the elevation of the house was "improper" for flood insurance purposes, Revitz called his insurance agent and provided him with the true base-floor elevation level. The insurance agent informed Revitz that someone had lied about the elevation in order to obtain flood insurance and that due to the low elevation level of the first-floor enclosure, any flood loss would not be covered under the policy. 1 The agent further advised Revitz to inform the insurance carrier about the first-floor enclosure since concealment of the true facts could cause a voidance of the policy. 2 Revitz requested a quote for flood insurance based on the true information and was told that the premium would be $36,000 a year. He then brought this action against the Terrells and the real estate broker. The federal flood insurance policy was allowed to lapse.
At trial, a principal defense raised was that there was no fraud because neither the Terrells nor their agent was obligated to disclose the facts concerning the building code violations, illegal elevation, or flood insurance, because any such representations were not material. After reviewing the exhaustive findings in the final judgment, we reverse on grounds that the trial court misconstrued Florida law regarding fraudulent nondisclosure in the sale of real property.
The leading Florida case on rescission of real estate contracts based on fraud or nondisclosure is Johnson v. Davis, 480 So.2d 625 (Fla.1985). The supreme court held in that case that "where the seller of a home knows of facts materially affecting the value of a 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." Id. at 629.
In this case the court found that the building code violations resulting in an illegal elevation and prohibitively expensive flood insurance were not material, as a matter of law, because the contract of sale did not address that subject. That is not the test for materiality in transactions of this nature. Johnson provides that any fact which substantially affects the value of the property is material. The undisputed and material facts presented at the nonjury trial are that the house is located in a flood zone, that it was built in violation of local ordinances regarding elevation, and that flood insurance would cost $36,000 per year because living quarters have been constructed on the ground floor. It follows that the house is actually worth less than a house identically constructed outside a flood zone, which...
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