Citation. 131 S. Ct. 95; 178 L. Ed. 2d 60; 2010 U.S.79 U.S.L.W. 3197
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When buying a house, a couple was told that problems in the house had been corrected, but after they bought it, heavy water leaks occurred after a rainstorm.
Synopsis of Rule of Law.
When the seller of a home knows of facts materially affecting the value of the 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. This duty is applicable to both new and used real property.
Facts.
The Davises (Plaintiffs) entered into a contract with the Johnsons (Defendants) to buy Defendants’ home. Before the final deposit was made, Plaintiffs noticed small damage around a window frame and stains on the ceiling. Defendants told Plaintiff that there had been a minor problem but had been fixed long ago, which were glue stains, and were the result of ceiling beams being moved. Plaintiffs paid the final deposit and Defendants moved out. A heavy rain occurred, and water leaked from around the window frame, the ceiling of the family room, the light fixtures, the glass doors, and the kitchen stove. A new roof would be very expensive. Plaintiffs filed suit, alleging breach of contract, fraud, and misrepresentation, and sought rescission of the contract and return of their deposit. Defendants sought liquidated damages.
Issue.
If a seller knows material defects exist in the property being sold, must he disclose this knowledge to a potential buyer?
Held.
Yes.
In Florida, relief for a fraudulent misrepresentation may be granted only when the following elements are present: (1) a false statement concerning a material fact; (2) the representor’s knowledge that the representation is false; (3) an intention that the representation induce another to act on it; and (4) consequent injury by the party acting in reliance on the representation.
Evidence shows that Defendants affirmatively repeated to Plaintiffs that there were no roof problems while knowing the statements were a lie.
The false statements do not need to have been made at the time of the signing of the purchase and sales agreement in order for the element of reliance to be present. The misrepresentations were made before the execution of the contract by conveyance of the home. It would be contrary to all notions of fairness and justice for a court to approve an affirmative misrepresentation just because it was made after the signing of the executory contract when all of the necessary elements for actionable fraud are present.
Also, a buyer may rely on the truth of a seller’s statement, even if its falsity could be discovered had the buyer conducted an investigation, unless the buyer knows the representation to be false or its falsity is obvious to him.
Failure to disclose a material fact is calculated to induce a false belief and violates of the principles of fair dealing and good faith. Full disclosure of all material facts must be made whenever elementary fair conduct demands it.
When the seller of a home knows of facts materially affecting the value of 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. This duty is applicable to both new and used real property.
Dissent.
This ruling will give rise to a flood of litigation. If change is to come, it should come from the legislature. Sellers of homes usually do not know better than a buyer the quality of their house. A buyer has an equal opportunity to learn of all material information if he is not prevented by the seller from doing so. A prudent purchaser will inspect property before agreeing to buy.
Discussion.
Had the buyers known of the rook leaks, that knowledge might have induced them to not go through with the deal. Buyers have the right to know about conditions that might affect the terms of the transaction.
