Purchase and Sale Agreements: Form, Formalities, and Remedies Flashcards
Johnson v Davis
Johnson v. Davis
Seller (D) v. Purchaser (P)
Fla. Sup. Ct., 480 So. 2d 625 (1985)
NATURE OF CASE: Appeal from trial court decision finding fraudulent misrepresentation and granting respondents the return of their deposit.
FACT SUMMARY: The Davises (P) agreed to purchase the Johnsons’ (D) home after the Johnsons (D) assured them that buckling around a family room window and stains on the ceiling resulted from a minor problem that had long since been fixed.
RULE OF LAW
Where the seller of a home knows of facts materially affecting the value of the property that are not readily observable and are not known to the buyer, the seller is under a duty to disclose them to the buyer.
FACTS: In May of 1982, the Davises (P) entered into a contract to buy the Johnsons’ (D) home. The contract required a $5,000 deposit payment and an additional $26,000 deposit payment within five days. Before making the additional $26,000 payment, the Davises (P) noticed ceiling stains and buckling around a family room window. The Johnsons (D) assured them that these problems resulted from a minor problem that had long since been fixed. Several days later during a heavy rain, water came gushing into the house through various parts of the family room. Two roofers hired by the Johnsons (D) concluded that the problem could be solved for under $1,000. Three roofers hired by the Davises (P) determined that the roof was inherently defective and any repairs would be temporary because the roof was slipping. The Davises (P) filed a complaint alleging breach of contract, fraud, and misrepresentation and sought recession of the contract and return of their deposit. The trial court ruled for the Davises (P), and the Johnsons (D) appealed.
ISSUE: Where the seller of a home knows of facts materially affecting the value of the property that are not readily observable and are not known to the buyer, is he under a duty to disclose them to the buyer?
HOLDING AND DECISION: (Adkins, J.) Yes. Where the seller of a home knows of facts materially affecting the value of the property that are not readily observable and are not known to the buyer, he is under a duty to disclose them to the buyer. This duty is equally applicable to all forms of real property, new and used. In the case at bar, the evidence shows that the Johnsons (D) knew of and failed to disclose that there had been problems with the roof of the house. The Davises (P) detrimentally relied on this concealment. Affirmed.
DISSENT: (Boyd, C.J.) Homeowners who attempt to sell their houses are typically in no better position to measure the quality, value, or desirability of their houses than are the prospective purchasers with whom they come into contact. This ruling will give rise to a flood of litigation and will facilitate unjust outcomes in many cases.
ANALYSIS
In the state of 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. Those opposed to this sort of regulation argue that it is unnecessary since prudent purchasers inspect property, with expert advice if necessary, before they agree to buy, and prudent lenders require inspections before agreeing to provide purchase money.
Quicknotes
FRAUDULENT MISREPRESENTATION A statement or conduct by one party to another that constitutes a false representation of fact.
Fraudulent Misrepresentation
(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
Specific performance
The buyer can obtain an injunction ordering the seller to convey the property to the buyer by transferring title in exchange for the agreed upon contract price
Damages
The buyer may seek damages at the time of the breach of contract
Recession
The buyer may seek to rescind the deal and recover the down payment or deposit
Vendee’s lien
If the seller cannot or does not convey title to the buyer as required by contract, the buyer may get a vendees lien on the property for repayment of the deposit or other monies paid
Sabo v Horwath
Sabo v. Horvath
Purchaser who recorded deed (D) v. Purchaser who did not record (P)
Alaska Sup. Ct., 559 P.2d 1038 (1976)
NATURE OF CASE: Action to determine title to real property
FACT SUMMARY: Horvath (P) recorded his deed prior to a patent being granted the seller so that the recorded deed was outside the chain of title.
RULE OF LAW
A deed outside the chain of title is not constructive notice and a subsequently recorded deed will take priority.
FACTS: Lowery filed for a federal land patent on real property he was homesteading in Alaska. Prior to the issuance of the patent, Lowery conveyed his interest in the land to Horvath (P) by quitclaim deed. Horvath (P) recorded the deed, which was then outside the chain of record title since Lowery had not yet obtained patent title to the land. After patent title was obtained, Horvath (P) did not re-record the deed. Lowery subsequently “sold” the land a second time to Sabo (D) by quitclaim deed. Sabo (D) recorded his deed. Sabo (D) had no notice of the earlier conveyance. Horvath (P) brought a quiet title action. Sabo (D) alleged that a deed recorded out of chain of title was not constructive notice and that under the state’s notice recording law he had no notice of the earlier sale and should be given preference.
ISSUE: Is a deed recorded outside the chain of title given preference to a subsequent bona fide purchaser without actual notice?
HOLDING AND DECISION: (Boochever, C.J.) No. A deed outside the chain of title is not constructive notice and a subsequently recorded deed will take priority. The purpose of our recording statute is to protect innocent purchasers without notice of an earlier unrecorded sale. Normally, a recordation gives the subsequent purchaser constructive notice of the earlier conveyance. However, we hold that a deed recorded outside the chain of title is not constructive notice to an innocent purchaser for value without actual notice. It is less burdensome for one recording outside the chain of title to re-record than to force purchasers to check all conveyances outside the chain of the title. Quitclaim deedholders are entitled to protection under the recording statutes (the majority rule). While Horvath (P) originally received Lowery’s equitable interest in the land, his failure to re-record after the patent was granted requires us to find for Sabo (D).
ANALYSIS
Sabo would be useful only where the jurisdiction does not use a tract index system. Under a tract index system, every document affecting land is recorded. Some jurisdictions hold that the grantee of a quitclaim deed is not a bona fide purchaser. In Crossly v. Campion Mining Co., 1 Alaska 391 (1901), a quitclaim grantee with knowledge of a superior unrecorded claim was held not to be in good faith.
Quicknotes
ACTION TO QUIET TITLE Equitable action to resolve conflicting claims to an interest in real property.
BONA FIDE PURCHASER A party who purchases property in good faith and for valuable consideration without notice of a defect in title.
CONSTRUCTIVE NOTICE Knowledge of a fact imputed to an individual who was under a duty to inquire and who could have learned of the fact through the exercise of reasonable prudence.
QUITCLAIM DEED A deed whereby the grantor conveys whatever interest he or she may have in the property without any warranties or covenants as to title.
