Johnson v. Davis
480 So.2d 625 (1985)
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Rule of Law:
Where a 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 has an affirmative duty to disclose these facts to the buyer. This holding replaces the doctrine of caveat emptor in Florida for residential real estate transactions.
Facts:
- In May 1982, Morton and Edna Davis entered into a contract to purchase a home from Clarence and Dana Johnson for $310,000, paying an initial $5,000 deposit.
- The contract required an additional $26,000 deposit within five days.
- Before paying the second deposit, Mrs. Davis noticed some buckling plaster and ceiling stains.
- When Mrs. Davis inquired about the issues, Mr. Johnson stated that a window had a minor, corrected problem and that the stains were from wallpaper glue.
- The Davises then paid the additional $26,000 deposit and the Johnsons vacated the home.
- Several days later, following a heavy rain, Mrs. Davis discovered water 'gushing' in from around the window frame, the ceiling, light fixtures, and glass doors.
- Roofers hired by the Davises determined the roof was inherently defective and required a complete replacement costing $15,000.
- Mr. Johnson later admitted during testimony that he had been aware of problems with the roof prior to entering into the sales contract.
Procedural Posture:
- The Davises (buyers) filed a complaint against the Johnsons (sellers) in Florida trial court seeking rescission of the contract and return of their deposit.
- The Johnsons counterclaimed to retain the deposit as liquidated damages.
- The trial court entered a final judgment awarding the Davises $26,000 and the Johnsons $5,000.
- The Johnsons, as appellants, appealed to the Third District Court of Appeal of Florida, and the Davises, as appellees/cross-appellants, cross-appealed.
- The Third District Court of Appeal affirmed the return of the deposit to the Davises and reversed the award to the Johnsons, remanding for a return of the full deposit plus costs and fees to the Davises.
- The Johnsons, as petitioners, sought review from the Supreme Court of Florida, which granted review due to an express and direct conflict with decisions from other Florida appellate districts.
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Issue:
Does a seller of a residential home have a duty to disclose known latent defects that materially affect the value of the property to the buyer?
Opinions:
Majority - Justice Adkins
Yes. A seller of a home has a duty to disclose known, latent defects that materially affect the property's value to the buyer. The court departs from the common law doctrine of caveat emptor ('let the buyer beware'), finding it out of step with modern concepts of justice and fair dealing. First, the court found that Mr. Johnson's affirmative statements about the roof's condition constituted fraudulent misrepresentation, entitling the Davises to rescission. More broadly, the court held that even without an affirmative statement, a seller's failure to disclose known material defects that are not readily observable is a form of fraudulent concealment. Adopting the reasoning from other jurisdictions, the court concluded that full disclosure of all material facts is required when elementary fair conduct demands it. This duty applies to all forms of real property, new and used.
Dissenting - Chief Justice Boyd
No. The long-standing rule of caveat emptor should not be replaced by a judicially created duty to disclose; such a policy change should be made by the legislature. This new rule will instigate a 'flood of litigation' and is unnecessary, as prudent buyers can and should have property inspected before purchase. The evidence in this case was insufficient to prove fraudulent misrepresentation, as there was no clear proof that Mr. Johnson knew the roof was defective at the time of his statements, only that it had past leaks that were repaired. Imposing liability for non-disclosure is the first step toward making sellers guarantors of a property's condition, which will significantly burden the alienability of property. The contract itself provided a remedy for a leaky roof, which the buyers chose not to pursue.
Analysis:
This landmark decision fundamentally altered Florida property law by abrogating the common law doctrine of caveat emptor in the context of residential real estate sales. It established an affirmative duty for sellers to disclose known, latent, material defects, shifting a significant portion of the risk for such defects from the buyer to the seller. The ruling aligned Florida with a modern trend in American jurisprudence favoring consumer protection and fair dealing over rigid, archaic legal doctrines. The case created a new cause of action for homebuyers and set a precedent that would be widely cited in disputes over undisclosed property defects, influencing disclosure standards and real estate practices throughout the state.
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