Stev-Mar, Inc. v. Matvejs

• Citation: 678 So.2d 834
• Decision Date: 03 July 1996
• Docket Number: STEV-MA,INC,No. 95-310,95-310
• Parties: 21 Fla. L. Weekly D1548 , a Florida Corporation, Appellant, v. Donna K. MATVEJS, Carico Real Estate Company, a Florida Corporation, and Carey Singer, Appellees.
• Court: Court of Appeal of Florida (US)

Page 834

678 So.2d 834

21 Fla. L. Weekly D1548

STEV-MAR, INC., a Florida Corporation, Appellant, v. Donna K. MATVEJS, Carico Real Estate Company, a Florida Corporation, and Carey Singer, Appellees.

No. 95-310.

District Court of Appeal of Florida,

Third District.

July 3, 1996.

Alan C. Gold, South Miami, for appellant.

Miller & Woods and Steven R. Woods, West Palm Beach; Erol M. Vural, Summerland Key, for appellees.

Before SCHWARTZ, C.J., and BARKDULL ^* and COPE, JJ.

COPE, Judge.

Stev-Mar, Inc. appeals an adverse summary final judgment. We reverse.

Donna Matvejs owned a home on a large lot on Grassy Key in Monroe County, Florida. She divided her property in two and, without replatting or any governmental approval, listed the vacant half of her property for sale as a homesite. Carico Real Estate Company and Carey Singer acted as the seller's real estate agents. They placed an advertisement in the local newspaper as follows:

GRASSY KEY--Magnificent home site on Morton Street. Two deep lots totalling nearly an acre with 120' directly on the Gulf. Lots are cleared with a seawall. 175,000 neg. with 80% owner financing. Call Carey Singer.

After seeing the advertisement, Stev-Mar, Inc. ["Buyer"] contacted Singer and arranged to see the property. The principals of Stev-Mar, Steven Murphy and Marlene Logan, advised Singer that they wanted to buy a site for a retirement home. Singer told Stev-Mar that the property was buildable as a homesite and was properly zoned and platted for a single family home. At her deposition in this case, Singer admitted that she knew that the property needed to be replatted and subdivided.

Buyer entered into a contract to buy the property from seller Matvejs. The contract stated, in part, that Buyer would take title "subject to zoning, restrictions, prohibitions and other requirements imposed by governmental authority; restrictions and matters appearing on the plat or otherwise common to the subdivision...." ¹ The contract went on to specify that none of such restrictions "prevents use of Real Property for residential purposes."

Buyer hired an attorney to represent it at closing. Buyer told the attorney that the intended use of the lot was as a homesite, and that it wanted the attorney, among other things, to verify that the lot could be used for that purpose. The attorney verified that the zoning for the area would permit the building of a single family residence. The transaction closed and the seller delivered to Buyer a general warranty deed. The deed did not include a disclosure statement required for real property located in unincorporated Monroe County. The disclosure statement advises a buyer, in part, that "under the Monroe County Land Development Regulations the division of land into parcels of land [which] are not approved as platted lots under the regulations confers no right to develop a parcel of land for any purpose." ²

Thereafter Buyer learned that the property had not been properly subdivided or replatted and cannot legally be used as a homesite. Further, for present purposes Buyer's testimony is taken as true that it is highly unlikely that approval for replatting can be obtained.

Buyer brought suit against the owner, real estate agency, and real estate agent for intentional fraud and, alternatively, for negligent misrepresentation. Buyer made an alternative claim that the contract should be rescinded on the basis of mutual mistake. ³

Defendants moved for summary judgment on the fraud, misrepresentation and rescission claims. For purposes of the motion, defendants conceded that there had been affirmative misrepresentations, as well as omissions. They argued, however, that in order to prevail, Buyer must have relied on the misrepresentations and omissions. In this case, Buyer hired its own counsel and requested that counsel verify that the lot could be used as a homesite. Counsel investigated, concluded that it could be used as a homesite, and represented Buyer at closing. Defendants argued that, as a matter of law, this meant that Buyer was relying on its own attorney and was not relying on any of the defendants' misrepresentations or omissions. The trial court agreed with defendants, ruling that "subsequent to the Defendants['] alleged misrepresentations the Plaintiff retained an attorney to investigate the very matters complained of, i.e., buildability of the subject lot. Accordingly, the Court finds as a matter of law the Plaintiff did not rely upon the representations of the Defendant[s]. Sherban v. Richardson, 445 So.2d 1147 (Fla. 4th DCA 1984)." The court entered partial summary judgment in favor of defendants on the fraud, misrepresentation and rescission claims. After disposition of the remaining claims in the lawsuit, ⁴ Buyer appealed.

In our view, the decision in Besett v. Basnett, 389 So.2d 995 (Fla.1980), compels reversal. There the buyer relied on the representations of the seller regarding the size of the property, the condition of the roof, and the income derived from real property. After purchase, the buyers learned that the representations were untrue. Upholding the buyers' right to bring suit, the Florida Supreme Court said, "A person guilty of fraudulent misrepresentation should not be permitted to hide behind the doctrine of caveat emptor." Id. at 997. The Court adopted Sections 540 and 541 of the Restatement (Second) of Torts (1976) as follows:

§ 540. Duty to Investigate.

The recipient of a fraudulent misrepresentation of fact is justified in relying upon its truth, although he might have ascertained the falsity of the representation had he made an investigation.

....

§ 541. Representation Known to Be or Obviously False.

The recipient of a fraudulent misrepresentation is not justified in relying upon its truth if he knows that it is false or its falsity is obvious to him.

....

A person guilty of fraud should not be permitted to use the law as his shield. Nor should the law encourage negligence. However, when the choice is between the two--fraud and negligence--negligence is less objectionable than fraud. Though one should not be inattentive to one's business affairs, the law should not permit an inattentive person to suffer loss at the hands of a misrepresenter. As the Michigan Supreme Court said many years ago:

There may be good, prudential reasons why, when I am selling you a piece of land, or a mortgage, you should not rely upon my statement of the facts of the title, but if I have made that statement for the fraudulent purpose of inducing you to purchase, and you have in good faith made the purchase in reliance upon its truth, instead of making the examination for yourself, it does not lie with me to say to you, "It is true that I lied to you, and for the purpose of defrauding you, but you were guilty of negligence, of want of ordinary care, in believing that I told the truth; and because you trusted to my word, when you ought to have suspected me of falsehood, I am entitled to the fruits of my falsehood and cunning, and you are without a remedy."

Bristol v. Braidwood, 28 Mich. 191, 196 (1873).

We hold that a recipient may rely on the truth of a representation, even though its falsity could have been ascertained had he made an investigation, unless he knows the representation to be false or its falsity is obvious to him.

Id. at 997-98.

Under the principles outlined in Besett, the judgment must be reversed. There is no question in this case but that this property was specifically represented as being a "magnificent homesite," for which the seller charged $175,000.00. Reading the record in the light most favorable to Buyer, as the nonmoving party on summary judgment, the real estate agent represented that the lot was properly platted for residential purposes, when that was not true. On those representations, Buyer entered into the contract for purchase and sale.

Although Buyer hired an attorney for purposes of the real estate closing and requested that the attorney verify that the lot could be used as a homesite, Buyer's attorney merely checked the zoning on the property and found that it had the proper zoning. Based on the present record, however, it appears that Buyer's attorney did not investigate further and did not discover that the property had not been replatted. For present purposes, it must be deemed that Buyer's attorney made a negligent investigation.

Under the views expressed in Besett, the seller and real estate agent cannot extricate themselves from their intentional fraud on the theory that if only Buyer's attorney had done more work, Buyer's attorney would have discovered the fraud. As stated in Besett, "negligence is less objectionable than fraud. Though one should not be inattentive to one's business affairs, the law should not permit an inattentive person to suffer loss at the hands of a misrepresenter." 389 So.2d at 998. Section 541 of the Restatement recognizes an exception where the recipient of a fraudulent misrepresentation knows that the representation is false "or its falsity is obvious to him." Id. at 997. There is no evidence whatsoever that Buyer knew the true state of affairs, nor is this a situation in which the falsity was obvious.

We reach the same result upon consideration of Sections 546 and 547 of the Restatement (Second) of Torts. Those sections provide:

§ 546. Causation in Fact

The maker of a fraudulent misrepresentation is subject to liability for pecuniary loss suffered by one who justifiably relies upon the truth of the matter misrepresented, if his reliance is a substantial factor in determining the course of conduct that results in his loss.

Comment:

....

b. For a misrepresentation to be a cause in fact of the pecuniary loss that results from the plaintiff's action or inaction, the plaintiff must have relied upon the misrepresentation in incurring the loss. It is not, however, necessary that his reliance upon the truth of the fraudulent misrepresentation be the sole or even the...