Woodson v. Martin
| Decision Date | 17 November 1995 |
| Docket Number | No. 94-00002,94-00002 |
| Citation | 663 So.2d 1327 |
| Parties | 20 Fla. L. Weekly D2556 Kirk A. WOODSON, Appellant, v. Wilma MARTIN and MacLean Realty, Inc., a Florida corporation, Appellees. |
| Court | Florida District Court of Appeals |
Is a buyer of residential property (the appellant) prevented by the "economic loss rule" from recovering damages for fraud in the inducement against the real estate agent and its individual agent (the appellees) representing the sellers? The trial court held that the economic loss rule applies here and entered final summary judgment in favor of the appellees. We agree and affirm; however, we certify this question to the supreme court as a question of great public importance.
The appellant bought an expensive home which he alleged was represented to him by the appellees as almost new. The appellant asserted that the appellees were guilty of a number of misrepresentations and that he acted on those misrepresentations in deciding to buy the house. When the appellant and his wife moved into the house, they discovered numerous serious defects.
The appellant's second amended complaint contained four counts. Count I alleged fraud in the inducement against the appellees, the sellers, and another person not a party to this appeal. Count II asserted breach of implied warranty of habitability against the appellees and the sellers. Count III alleged breach of contract against the sellers. Count IV sought rescission of the Purchase and Sale Agreement entered into by the sellers and the appellant.
The appellees and the sellers filed motions for summary judgment. The trial court granted the motions with respect to Count I, fraud in the inducement, as to the sellers and the appellees. The trial court granted the appellees' motion for summary judgment with respect to Count II but denied the motion of the sellers. The trial court denied the sellers' motion for summary judgment with respect to Count IV. Thus the appellant's claims against the sellers for breach of implied warranty of habitability, breach of contract, and rescission remain pending. 1
The parties agree that the trial court's ruling on the appellant's claim against the appellees for fraud in the inducement was based on language in the Florida Supreme Court's opinion in Casa Clara Condominium Ass'n v. Charley Toppino & Sons, Inc., 620 So.2d 1244 (Fla.1993). In that case a concrete supplier (Toppino), a dissolved corporation, supplied concrete for numerous construction projects in Monroe County. Apparently, some of the concrete supplied by Toppino contained a high content of salt that caused the reinforcing steel inserted in the concrete to rust, which, in turn, caused the concrete to crack and break off. Owners of condominium units and single family homes built with, and allegedly damaged by, Toppino's concrete brought separate actions against Toppino and numerous defendants and included claims against them for breach of common law implied warranty, products liability, negligence, and violation of the building code. The trial court dismissed all counts against Toppino and the plaintiffs appealed. The Third District Court of Appeal affirmed the dismissals in favor of Toppino. Our supreme court approved the district court's decision.
The supreme court stated the issue to be whether a homeowner can recover for purely economic losses from a concrete supplier under a negligence theory. The court agreed with the district court that such a recovery cannot be had.
The supreme court adopted the definition of economic loss as being damages for inadequate value, costs of repair and replacement of the defective product, or consequent loss of profits, without any claim of personal injury or damage to other property. The court pointed out that, in other words, economic losses are "disappointed economic expectations" which are protected by contract law rather than tort law. The court said "this is the basic difference between contract law, which protects expectations, and tort law, which is determined by the duty owed to an injured party." The court said that for a recovery in tort "there must be a showing of harm above and beyond disappointed expectations." Id. at 1246.
The supreme court in Casa Clara rejected the suggestion that there should be an exception to the economic loss rule for homeowners. The court explained that if a house causes economic disappointment by not meeting a purchaser's expectations, the resulting failure to receive the benefit of the bargain is a core concern of contract, not tort law. The court mentioned that protections for home buyers include statutory warranties, the general warranty of habitability, and the duty of sellers to disclose defects.
In Airport Rent-A-Car, Inc. v. Prevost Car, Inc., 660 So.2d 628 (Fla.1995), the supreme court answered three questions certified to it by the United States Court of Appeals for the Eleventh Circuit.
Airport Rent-A-Car owned several buses manufactured by Prevost but not purchased by Airport Rent-A-Car from Prevost or any distributor. Two of the buses caught fire and were destroyed while in transport. Airport Rent-A-Car brought tort claims against Prevost, the manufacturer and seller of the buses, alleging the buses when sold were defective and unreasonably dangerous.
The first certified question was whether, under Florida law, the economic loss rule applies to negligence claims for the manufacture of a defective product where the only damages claimed are to the product itself and where the plaintiff claims to have no alternative theory of recovery. The court answered this question in the affirmative. As to the other two questions, the court rejected the suggestion that a cause of action otherwise precluded by the economic loss rule may be maintained if the damage to the product is caused by a sudden calamitous event and the suggestion that a cause of action may exist outside the bar of the economic loss rule where the plaintiffs allege a duty to warn which arose from facts which came to the knowledge of the company after the manufacturing process.
The supreme court in Airport Rent-A-Car stated that its decision in Casa Clara was of particular importance in answering the first certified question. The court strongly reaffirmed its holding in Casa Clara, emphasizing that in Casa Clara the court recognized that the law of contracts protects one's economic losses, whereas the law of torts protects society's interest in being free from harm. The court cited language from a previous case that "without some conduct resulting in personal injury or property damage, there can be no independent tort flowing from a contractual breach which would justify a tort claim solely for economic losses." Airport Rent-A-Car at 632 (quoting AFM Corp. v. Southern Bell Tel. & Tel. Co., 515 So.2d 180, 181-82 (Fla.1987) (emphasis supplied)).
The United States Court of Appeals for the Eleventh Circuit has issued two other opinions in which the Florida economic loss rule was pivotal. In the first of these, Hoseline, Inc. v. U.S.A. Diversified Products, Inc., 40 F.3d 1198 (11th Cir.1994), a supplier had entered into a contract with a manufacturer to ship wire harness loom to the manufacturer for use in the manufacture of automobile parts. Believing that it had been shortchanged by the supplier, the manufacturer asserted claims for fraud and civil theft against the supplier's owner, the supplier itself having declared bankruptcy. The court held that the economic loss rule barred the manufacturer's claims for common law fraud and theft based upon the breach of contract.
The second opinion was issued in a case in which a home builder sought damages from a manufacturer of chemicals that were applied to plywood which the builder used in constructing the roofs of a number of townhouses. The purpose of applying the chemicals was to meet requirements that the plywood be fire-retardant treated. The purchasing agents of the builder did not specify that the chemical manufacturer's product be applied to the plywood which the builder purchased; they only required that the plywood bear the required stamps to indicate that the plywood was fire-retardant treated. After the townhouses were sold, the chemicals caused the plywood to deteriorate, requiring the builder to replace the plywood at a cost exceeding $3,650,000. The builder sued the chemical manufacturer. The United States District Court concluded that the economic loss rule barred the builder's negligence claim as well as its fraud claim.
The appellate court rendered its decision in Pulte Home Corp. v. Osmose Wood Preserving, Inc., 60 F.3d 734 (11th Cir.1995). The court agreed with the district court that the economic loss rule barred the builder's negligence claim, but disagreed that the rule precluded the builder's claim for fraud in the inducement. The court ruled, however, that the builder failed to prove its claim.
We believe that the nature of the damages suffered determines whether the economic loss rule bars recovery based on tort theories. If the damages sought are economic losses only, the party seeking recovery for those damages must proceed on contract theories of liability. Economic losses are property damage which results in loss of the benefit bargained for. The only damages suffered by the appellant were damages to the house. Thus, this situation comes squarely within the economic loss rule as stated by the Florida Supreme Court in Casa Clara and in Airport Rent-A-Car.
For the foregoing reasons, we affirm. Question certified.
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