Johnson v. Davis

FACTS:

            The Davises, defendants, entered into a contract to purchase the Johnsons’, plaintiffs, home for $310,000. The plaintiffs had knowledge of a roof leak, but affirmatively represented to the Davises that the home did not have any issues with the roof. One of the defendants expressly asked the plaintiffs about the water marks on the ceiling, but the plaintiffs neglected to admit that it was due to an issue with the roof. Furthermore, a few days after the defendants paid a deposit to the plaintiffs for the home, a rainstorm occurred and water apparently gushed from the ceiling. Accordingly, the defendants brought an action of suit against the Johnsons alleging breach of contract and fraudulent misrepresentation. The Davises sought a rescission from the contract and a return of their down deposit.

PROCEDURAL HISTORY:

            The trial court held that the affirmative representation that the roof did not have any issues was indeed fraudulent and, likewise, the Davises were entitled to a rescission. The Johnsons now appeal the decision.

ISSUE:

            Whether a homebuyer is entitled to a refund of the down deposit when the seller knew of, but failed to disclose significant leakage problems in the house’s roof prior to the purchase.

RULE:

            Where a seller of property knows of facts materially affecting/impairing the value or utility of the property that are not readily observable or known to the buyer, the seller has the duty to disclose them to the buyer prior to the purchase.

ANALYSIS:

            First off, the court notes that, in order to come to a decision regarding the seller’s duty or lack thereof to disclose latent material defects to a buyer, they must initially differentiate between misfeasance and nonfeasance, for which tort law generally has not awarded remedies. On one hand, the doctrine of caveat emptor imposes the sole duty to discover material defects on the buyer, yet on the other, the law increasingly restricts caveat emptor in the interests of fairness and justice. Therefore, caveat emptor cannot excuse a seller from liability for nondisclosure in all instances. The modern trend towards increasing buyer’s rights in similar cases warrants the seller to disclose all facts that could materially impair the utility, value, and resale potential of property and are not readily observable, per caveat emptor, to the buyer prior to the purchase. Likewise, the Johnsons knew of the roof leakage, but expressly misrepresented it to the Davises when asked about it. Therefore, the Johnsons should be held liable to the Davises for an equitable remedy, such as rescission and/or return of the deposit.

            In contrast, the dissenting opinion, given by Judge Boyd, dictates that any changes to the doctrine of caveat emptor should not be instituted by the judicial system, but instead by legislature. Moreover, caveat emptor prompts the buyer to inspect a home as a reasonably prudent person prior to executing the purchase. The buyer alone should be held responsible for not discovering a material defect as overtly apparent as a leak in the roof. Accordingly, the seller is not in anymore advantageous of a position to discover a similar defect that the buyer, through due diligence, failed to discover prior to purchase. Thus, the majority’s ruling opens the floodgates for litigation regarding similar situations and moves away from making sellers guarantors of the good condition of their homes.

CONCLUSION:

            The Supreme Court of Florida found that the fraudulent misrepresentation of the home by the Johnsons constituted a lawful basis for entitling the Davises to a return of their deposit on the home plus interest. In my opinion, the dissent provided solid arguments against the majority ruling. For one, the holding seemingly decreases the duty of the buyer to exercise due diligence when investigating a home prior to purchase, per caveat emptor. If the buyers in this case would have exercised their due diligence, they would have discovered the roof leak regardless of the sellers’ fraudulent misrepresentation of the home’s condition.

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