Yost v. Rieve Enterprises, Inc.
Decision Date | 11 December 1984 |
Docket Number | Nos. AR-490,AS-411,s. AR-490 |
Citation | 461 So.2d 178 |
Parties | W.F. YOST, Appellant/Cross-Appellee, v. RIEVE ENTERPRISES, INC., et al., Appellees/Cross-Appellants. STIRRETT ENTERPRISES, INC., d/b/a V.R. Business Brokers, Appellants, v. W.F. YOST, Appellee. |
Court | Florida District Court of Appeals |
William G. Cooper of Kent, Watts, Durden, Kent, Nichols & Mickler, Jacksonville, for W.F. Yost.
John F. Callender of Turner, Ford & Callender, P.A., Jacksonville, for Stirrett Enterprises, Inc., d/b/a V.R. Business Brokers.
M.W. Goldstein of Goldstein & Goldstein, Jacksonville, for appellees.
These consolidated appeals and cross-appeal arise from a final judgment of the trial court in an action involving the purchase and sale of a restaurant. We affirm in part and reverse in part.
An action was instituted by Rieve Enterprises, Inc. (Rieve), against Yost for rescission and cancellation of an agreement and related documents executed between the parties to purchase the Red Barn Barbecue Restaurant (Red Barn), and for damages, based on false and fraudulent statements by Yost representing that the restaurant premises complied with all laws necessary to conduct the business and that all equipment was in working order and would pass inspections required for the operation of the restaurant. Yost later brought an action against Rieve for damages stemming from its default on the promissory note and breach of the security agreement. Meanwhile, Stirrett Enterprises, Inc. (Stirrett), Yost's real estate agent, also filed a complaint against Yost for the unpaid balance owing on a broker's commission. The cases were consolidated by the trial court and a jury was assigned to determine the issues of fraud by Yost and breach of the contracts by Rieve, while the issues of rescission and cancellation, and Stirrett's entitlement to the broker's commission were to be decided only by the trial judge.
Interested in buying a restaurant, Richard Ramano, his wife Evelyn Glenn, and her brother Richard Jason, of Rieve Enterprises, contacted Stirrett who had the exclusive listing agreement with Yost for the sale of the Red Barn. 1 After visiting and conducting a visual inspection of the premises, Rieve entered into an agreement on January 11, 1982 to purchase the assets and equipment of the Red Barn, as well as a five-year lease of, and option to buy, the land and building. The Rieve group agreed to assume $10,000 in purveyors' bills, and executed a promissory note to Yost for the amount of $95,000, also granting to Yost a security interest in the restaurant's assets, as described in the security agreement, and agreed to pay $10,000 to Stirrett on February 1, 1982. Rieve paid an initial deposit of $10,000, and the additional amount of $10,005.82 on January 13, 1982, the date of the closing, against the total purchase price of $135,005.82.
Before the sale, the Rieve group did not make inquiries to Yost or Stirrett, or check the public records concerning previous health inspections, neither did Yost or Stirrett or Rieve's own visual inspection reveal any defects in the restaurant premises. Although the group's primary concern in acquiring the restaurant was directed to the volume of business rather than the physical characteristics of the premises, they nevertheless relied upon the following clause in the purchase and sale agreement provided by Stirrett: "Seller warrants that at the time physical possession is delivered to buyer, all equipment will be in working order and that the premises will pass all inspections necessary to conduct such business." Rieve took possession immediately after the sale of January 13, continuing the business until January 27, when the Board of Health conducted a routine inspection, citing fifty-two health code violations, and thereupon closed the restaurant. 2 The violations related to problems with electrical wiring, plumbing and sanitation, improper drainage, poor ventilation, and an improperly installed oven which consequently had to be condemned.
After shutting down the business, Ramano requested Yost to return to him the $20,005.82 paid, but did not ask him to make any repairs, although the lease on the building and land contained a provision whereby Yost, as landlord, was responsible for maintenance of such areas of the building as the roof, downspouts, and walls. On January 28, Yost, Ramano, Cristine Duris, the mortgagee of the restaurant premises, and Duris' attorney, met to discuss whether a plan could be devised to continue the operation of the business by the Rieve group in order to avoid foreclosure. Yost agreed to give a drainage and sewage easement across his property, and to make whatever repairs were necessary to open the restaurant. Ramano was unwilling to continue the business and, instead, abandoned the Red Barn and failed to make the $10,000 payment due on February the first, or any other payments connected with the transaction.
The jury returned a verdict, finding that fraud and deceit were practiced upon Rieve by Yost, awarding compensatory damages in favor of Rieve and against Yost in the sum of $10,000, while also finding that Rieve breached the contracts relating to the purchase of the Red Barn, although no damages were awarded to Yost. The trial court entered a final judgment in accordance with the verdict, and, by bench judgment, declared the promissory note, security agreement and lease to be null and void, and ruled that Stirrett was not entitled to recover the balance of the brokerage commission from Yost.
Yost argues that rescission of the contracts was improper since no evidence was presented to demonstrate that he made any false or fraudulent representations to the Rieve group, and, although the contract warranted that the building would pass all inspections and the equipment would be in working order at the time possession was delivered to the buyer, he could not foresee that at some time thereafter the building and equipment would not fulfill those requirements. Rieve's counter-argument is that Yost's failure to reveal the material defects of which he had knowledge amounted to fraud, and that the contractual representation as to the condition of the premises and equipment was false.
The essential elements of a fraudulent representation upon which relief can be granted are (1) a false statement of fact by the defendant, (2) knowledge by the defendant that the statement was false at the time it was made, 3 (3) intent that the statement induce another to act in reliance thereon, and (4) actual reliance on the statement resulting in damage to the plaintiff. See Held v. Trafford Realty Company, 414 So.2d 631 (Fla. 5th DCA 1982). Misrepresentation of material facts, even though innocently made, acted upon by the other party to his detriment, will constitute a sufficient ground for rescission and cancellation in equity. The proper inquiry is not whether the party making the representation knew it to be false, but whether the other party believed it to be true and was misled by it in entering into the contract, so that whether the misrepresentation was innocently or knowingly made, the legal effect is the same. Langley v. Irons Land & Development Co., 94 Fla. 1010, 114 So. 769 (1927). Held at 632-33; Lynch v. Fanning, 440 So.2d 79, 80 (Fla. 1st DCA 1983). Additionally, the party guilty of the fraudulent misrepresentation may not be shielded by the doctrine of caveat emptor. Thus, the purchaser of business property is entitled to rely on the truth of the seller's representations even though the falsity could have been ascertained had the buyer made an investigation--unless the latter knew the representations to be false, or the falsity was obvious to him--if the seller, as owner of the property, had superior knowledge of its size, condition and income. Besett v. Basnett, 389 So.2d 995, 998 (Fla.1980).
Based on the foregoing authorities, we find that the evidence below amply supports the trial court's rescission of the contracts on grounds of misrepresentations by Yost, in that the premises of the Barn did not pass the inspections necessary for conducting the business and some of the equipment was not in good working order, as...
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