AS-IS? As if. Florida Residential Real Estate Seller’s Property Disclosure.

AS-IS? As if. Florida Residential Real Estate Seller’s Property Disclosure.

On this Throwback Thursday we will look at an oldie-but-goodie opinion issued by the Florida Supreme Court. Specifically, we will look at the landmark case of Johnson v. Davis, 480 So. 2d 625 (Fla. 1986), a case which forever changed the expectations and duties placed upon sellers of residential property in Florida.

Most of you are likely aware of “AS-IS” contracts. “As is” has been defined as “in the condition that something is in,” and “in the state that something is in at the present time.” In other words, a seller that is selling property in its “as is” condition is likely expecting the buyer to purchase and accept the property exactly as it exists, with any and all defects that may be present. From a legal standpoint, the inclusion of those two magic words in a contract for goods usually has the effect of excluding any form of implied warranty or guaranty that may exist. Used vehicles are often sold via “as is” contracts. And many homes in Florida are also sold via “as is” contracts, specifically, the FAR/BAR “AS IS” residential contract for sale and purchase. Despite this, even when using such an “as is” Florida real estate contract, sellers of residential property in Florida have an affirmative duty to provide certain disclosures to buyers, thanks to the Johnson case.

Facts of Johnson v. Davis

In May of 1982, the Johnsons and the Davises contracted for the sale/purchase of the Johnsons’ three-year-old residence. The contract required a $5,000 initial deposit and an additional $26,000 deposit within 5 days. The contract contained a clause requiring the roof to be in “watertight” condition and, should the roof not be watertight, requiring the seller to pay for repairs to be made by a licensed roofing contractor.

After the contract was entered into, but prior to making the additional deposit, the buyers noticed some buckling and peeling plaster around the corner of a window frame and stains on the ceilings of a couple of rooms in the home. Upon inquiring, the buyers were told by the sellers that the window did have a minor problem that had long since been corrected, and that the stains were wallpaper glue and the result of ceiling beams being moved. After that conversation with the sellers, the buyers paid the additional deposit and the sellers vacated the home. Several days later, following a heavy rain, the buyers entered the home and discovered water “gushing” in from around the window frame, the ceiling of the family room, the light fixtures, the glass doors, and the stove in the kitchen. Two roofers hired by the sellers’ broker concluded that certain leaks in the roof could be repaired for under $1,000 and by doing so, the roof would then be “watertight.” Three roofers hired by the buyers found that the roof was inherently defective, that any repairs would be temporary because the roof was “slipping,” and that to be “watertight,” a new roof was required.

No repairs were actually made, and the buyers sued the sellers for breach of contract, fraud and misrepresentation, and sought rescission of the contract and return of their deposit. The sellers counterclaimed, and sought the deposit as liquidated damages. The trial court entered a final judgment, which made no findings of fact, but awarded the buyers $26,000 plus interest, but also awarded the sellers $5,000 plus interest, with both parties to bear their own attorney’s fees and costs. Both parties appealed and the Third DCA found in favor of the buyers, awarding them the full $31,000.00 worth of deposits, plus their attorney’s fees and costs.

The Florida Supreme Court noted that the evidence at trial showed that after receiving the initial deposit payment, the sellers affirmatively repeated to the buyers that there were no problems with the roof, following which the buyers paid the additional $26,000 deposit payment. The court further noted that the record reflected a statement made by the seller which was a false representation of material fact, made with knowledge of its falsity, upon which the buyers relied to their detriment when they made the additional deposit. The Florida Supreme Court affirmed the decision of the Third DCA in favor of the buyers, and held as follows:

[W]here 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 equally applicable to all forms of real property, new and used.

The holding of Johnson v. Davis is curious because the facts of the case as accepted by the Florida Supreme Court were that actual misrepresentations of fact were made by the sellers, which the buyers relied upon. Existing law already treated that as fraud, which theoretically would have given the buyers the same result. Therefore, the Florida Supreme Court’s holding in Johnson (as quoted above) expanded sellers’ obligations to now be required to affirmatively disclose facts materially affecting the value of property which are not readily observable.

If you recently bought or sold a home and are experiencing issues with, or allegations of, non-disclosure, you should contact a real estate attorney to review your matter, and counsel you through the process.

You Didn’t Get Served – Mattress One v. Sunshop Properties

You Didn’t Get Served – Mattress One v. Sunshop Properties

I’m sure you all remember the 2004 smash hit and box office success, You Got Served. The film’s depth of plot is rivaled only by its extravagant choreography and magnificent soundtrack. Aside from its Oscar-worthy qualities, this film will stand, for eternity, as a cautionary tale of why one should never work for a drug lord that goes by the name of Emerald. Essentially, if you study the film closely, you will learn valuable life lessons on how not to get served.

Now let’s fast forward to November of 2019 when we find ourselves fortunate enough for another lesson on not getting served. This time our lesson is served delivered within the context of not being served with a non-residential eviction lawsuit. The underlying facts were that Mattress One, Inc. was a tenant under a commercial lease agreement with Sunshop Properties, LLC. Sunshop filed for eviction against Mattress One and served the summons and complaint at Mattress One’s designated principal place of business, which was also the same address designated for its registered agent for service of process.

Florida Statutes Section 48.091(2) requires registered agents for corporations to be present for service of process between 10 a.m. and 12 noon each day, except for Saturdays, Sundays, and legal holidays. In this case, although the service of process was made at 10:59 a.m., which was within the statutorily-required window, Mattress One’s registered agent was not present. The return of service reflects that the process server gave the summons and complaint to an unknown employee of Mattress One, identified only as “Drew Doe (refused to provide full name).” Mr. Doe apparently did not notify any of his bedfellows up Matress One’s chain of command, and default judgments were eventually entered against Mattress One for the breach of lease and eviction counts. Mattress One finally became aware of the proceedings when its funds were seized pursuant to a writ of garnishment.

Not one to take it lying down, Mattress One, Inc. filed an emergency motion to set aside the default judgments and to quash (not squash) the writ of garnishment. The trial court denied Mattress One’s motion and Mattress One appealed. In its analysis, the Third DCA observed that Florida law requires strict compliance with all the statutory requirements for service of process. To perfect service on a corporation, Florida Statutes Section 48.081(1) requires process be served on specified officers of the corporation, or, in their absence, on any officer or business agent. Specifically, the DCA observed,

[t]o bind a corporation for jurisdictional purposes, a return of service must show the absence of all officers of a superior class designated in the statute before service can be obtained by serving an officer or agent of an inferior class. If this requirement is not met, a court’s jurisdiction is not perfected, and any judgment entered is void. As an alternative to any of these, service may be perfected on the registered agent designated by the corporation to accept service of process.

In this case, service was not made on Mattress One’s officers, and the return of service did not reflect the absence of all officers prior to resorting to service on an officer or agent of an inferior class. The return of service also failed to reflect service upon Mattress One’s registered agent. Finally, the Third DCA observed that “although the registered agent was not present on the corporate premises when he or she was required to be under section 48.091, the return of service does not indicate that service of process was proper based on the absence of the registered agent. Instead, the attempted service was made on an unidentified, random employee.”

Florida’s Third District Court of Appeals reversed the trial court’s order, remanding the matter with instructions to quash the service of process as void, to set aside the default judgments, and to quash the writ of garnishment.

The appellate decision referenced in this blog post is Mattress One, Inc. v. Sunshop Properties, LLC, Case No. 3D19-0307 (Fla. 3d DCA 2019).

And for those of you wondering, yes, the long-awaited sequel to You Got Served is finally on the way.

Chapter 7 Bankruptcy Means Test Median Family Income Levels By State as of November 1, 2019

Below you will find the median family income levels utilized by the United States Trustee Program for means testing individuals who have filed for bankruptcy relief. As of November 1, 2019, the median family income levels for Florida have risen, which generally benefits individuals who are in need of debt relief. The median income information is used by the bankruptcy court when determining whether or not an individual qualifies for relief under chapter 7 of the Bankruptcy Code, and also is used in determining the applicable commitment period for payment plans filed under chapter 13. If you are experiencing difficulty in paying your bills each month, or if you have been sued for any obligation, you should immediately consult with a knowledgeable bankruptcy attorney such as Joseph Battaglia for an evaluation of your situation.

This data comes from the United States Census Bureau and is updated regularly based upon the Consumer Price Index for All Urban Consumers. Note that being either above or below the applicable median income figure for your household size can be a good indicator of whether or not you should file a chapter 7 bankruptcy case, though it is far from the only factor to be considered. Therefore, your entire situation should be reviewed by an experienced bankruptcy attorney for such a determination.

Continue reading “Chapter 7 Bankruptcy Means Test Median Family Income Levels By State as of November 1, 2019”
I surrender. Take my house. Actually, on second thought…

I surrender. Take my house. Actually, on second thought…

The Second District Court of Appeal issued an October 2019 opinion which bolsters creditors’ rights in the recently-developing interplay of federal bankruptcy law and Florida state foreclosure laws. Specifically, the opinion addressed the effect that a bankruptcy debtor’s surrender of collateral real property has on the debtor’s ability to defend a foreclosure.

Continue reading “I surrender. Take my house. Actually, on second thought…”
Florida Realtors / Florida Bar Residential Contract and “As Is” Residential Contract Revised as of June 14, 2019

Florida Realtors / Florida Bar Residential Contract and “As Is” Residential Contract Revised as of June 14, 2019

The Florida Realtors / Florida Bar (“FARBAR”) Residential Contract for Sale and Purchase (5x), and the “AS IS” Residential Contract for Sale and Purchase have been updated as of June 14, 2019. The new revised versions are identifiable by “5x” and “6/19” notations, which can be found in the lower left-hand corner of each contract. The changes to both are minimal and result from revisions to Miami-Dade County’s county code as it pertains to seller disclosure of special taxing districts. Additionally, a new rider has been created for use when certain properties located in Miami-Dade are being sold. Paragraph 19 of each of the contracts has been revised to include a reference to the newly-created Rider, “CC. Miami-Dade County Special Taxing District Disclosure.”

Continue reading “Florida Realtors / Florida Bar Residential Contract and “As Is” Residential Contract Revised as of June 14, 2019″
2d DCA: Florida Statutes Section 732.507 Inapplicable Following Divorce When the Will was Executed Prior to Marriage

2d DCA: Florida Statutes Section 732.507 Inapplicable Following Divorce When the Will was Executed Prior to Marriage

Here’s the Story

Here’s the story, of a man named Priever, who, in 2005, executed a will devising real property in Florida to a woman named Gordon. This marked the beginning of a fact pattern which culminated in a 2018 opinion out of the Florida Second District Court of Appeal. Priever and Gordon were unmarried at the time the will was executed. The will provided that, if Gordon died before Priever (spoiler alert, he does), then the real property would be devised to Gordon’s two children. Then, two years after the will was executed, Gordon and Priever marry one another. But, as all good things come to an end, the two divorced from one another about 5 to 6 years later. Two years later, Priever passed away (told you). At the time of his death, Gordon was alive, and Priever had no children and no spouse. He did, however, have a father.

Enter Fishman

Robert Fishman, as guardian of Priever’s father, petitioned for administration of Priever’s estate as an intestate (without a will) estate, apparently unaware of the existence of the 2005 will. Fishman was appointed as personal representative of the estate. Following that, Gordon (the person named in the will as the beneficiary of the real property) filed the original 2005 will with the probate court.

Notwithstanding the fact that the will named Gordon as the beneficiary to receive the real property, Fishman asserted that the will should be construed as if Gordon had predeceased Priever. Fishman’s position was based on Florida Statutes § 732.507(2), which reads:

Any provision of a will executed by a married person that affects the spouse of that person shall become void upon the divorce of that person or upon the dissolution or annulment of the marriage. After the dissolution, divorce, or annulment, the will shall be administered and construed as if the former spouse had died at the time of the dissolution, divorce, or annulment of the marriage, unless the will or the dissolution or divorce judgment expressly provides otherwise.

Following Fishman’s urging, the trial court would have deemed Gordon to have predeceased Priever, the practical effect of which would leave her two children as inheriting the home. Gordon objected to this, arguing that section 732.507(2) did not apply because she was not married to Priever when he executed the will. The trial court rejected Gordon’s argument, finding,

that as a matter of law, [the statute] provides that upon the dissolution of their marriage, the will is to be construed as if the former spouse, Silvia Gordon, had died and she is not entitled to any share of the estate.”

Accordingly, the trial court ruled in Fishman’s favor, finding that Gordon was not entitled to take under Priever’s will. Gordon appealed.

Something Seems Fishy

On appeal to the Second District Court of Appeal, Gordon argued that the trial court erred in applying Florida Statutes § 732.507(2) as, by its own plain language, applies only when a “married person” executes a will. Here, Priever was not married when he executed his will in 2005.

Fishman, on the other hand, urged the 2d DCA to ignore the plain and ordinary meaning of the statute, and to look to the legislative intent behind the statute. That, regardless of the fact that Priever was not married when he executed the will, the statute should operate to protect Priever from his “inattention to estate planning details,” and prevent Gordon from taking under the will.

The 2d DCA sided with Gordon, stating:

Reading the statute as urged by Mr. Fishman would extend the reach of section 732.507(2) beyond its express language. We would have to ignore the term “married” and interpret section 732.507(2) to revoke provisions of a will “executed by a person” or provisions “executed by a person before or after marriage.” To construe the statute in a way that would extend or modify its express terms would be an inappropriate abrogation of legislative power.

It’s possible that nobody will ever know Priever’s true intention as to Gordon’s status as a beneficiary following their divorce. With that said, even if the 2d DCA’s decision was exactly what Priever had in mind (a doubtful proposition), the time and money spent by all parties involved getting to this point are wasted resources. Had Priever executed a new will or even just a codicil addressing these matters after he and Gordon divorced, this litigation likely could have been avoided.

Therefore, this case is an excellent reminder of why it is critical to review your estate planning documents with your attorney every few years, or after the occurrence of significant life events such as marriage, divorce, birth of a child, retirement, inter-state relocation, or major career change, etc., to ensure that your estate plan documents match your intentions.

The case referenced in this blog post is Gordon v. Fishman, 253 So. 3d 1218 (Fla. 2d DCA 2018).

Short selling your home? Here’s a tip: start the process well in advance of a scheduled foreclosure sale

Short selling your home? Here’s a tip: start the process well in advance of a scheduled foreclosure sale

A September, 2018 opinion[note]Ocean Bank v. Gato, 2018 WL 4761845, ___ So.3d ___ (Fla. 3d DCA 2018).[/note] from Florida’s Third District Court of Appeals provides guidance on what is not a “lawful, cognizable basis” for cancelling, rescheduling, or continuing a judicial foreclosure sale date, in the absence of an agreement from the plaintiff (lender). In the case below, thirteen days before a foreclosure sale[note]This was the second foreclosure sale to be scheduled, with the first having been canceled due to the homeowner filing bankruptcy. The bankruptcy case was dismissed not long after it was filed, resulting in the foreclosure sale being reset.[/note] was set to occur, the plaintiff/homeowner filed an “emergency” motion to cancel the foreclosure sale, citing as the basis a contemplated short sale, and attaching a short sale contract dated twelve dates prior to the “emergency” motion.

At the hearing on the homeowner’s motion to cancel, the plaintiff/bank explicitly objected, stating, “The bank has declined the short sale which would leave us tens of thousands of dollars short. We have filed our objection in writing and the law says that under those circumstances the motion to cancel the sale should not be granted.” The court’s response? “So what I’m going to do is give it a 90-day resale date with no further continuances.”

The bank appealed this decision to the Third DCA. The appeals court, in citing to Florida Statutes § 45.031(1)(a)[note]Florida Statutes § 45.031(1)(a) states that “the court shall direct the clerk to sell the property at public sale on a specified day that shall be not less than 20 days or more than 35 days after the date thereof.” The statute continues, “[a] sale may be held more than 35 days after the date of final judgment or order if the plaintiff or plaintiff’s attorney consents to such time.” (Emphasis added).[/note], said that the court’s rescheduling of the sale was improper as the homeowner’s basis for wanting the sale canceled was not a “lawful, cognizable basis,” in light of the bank’s objection. However, in an odd twist that only an attorney could find interesting, the appeals court, in its enlightened wisdom, affirmed the lower court’s ruling, despite the ruling being wrong, because reversing the decision may have resulted in further delay to the bank’s foreclosure sale.

A corporation by any other name…

“A rose lender by any other a slightly different name would smell as sweet still be able to foreclose.”

Shakespeare 4th DCA (more or less)

Florida’s 4th District Court of Appeals has held that the omission of the word “corporation” from a corporation’s name as it appears on various mortgage loan documents, did not render the loan invalid as a matter of law.

The September 20, 2018 appellate decision[note]Avant Capital, LLC v. Gomez, 2018 WL 4519981, ___ So.3d ___ (Fla. 4th DCA 2018) (not final until the time for rehearing has expired).[/note] was rendered upon a foreclosure plaintiff’s appeal from a trial court’s order granting summary judgment in favor of the homeowner. The foreclosure plaintiff alleged that it was the holder of the note and mortgage that were in default, entitling it to foreclose. The plaintiff was not the original lender, having received an assignment of the loan from another party, as is common in the industry. The issue here was that the the promissory note, the mortgage, and also the allonge that assigned the loan out from the initial lender, all omitted the word “corporation” from the initial lender’s name. The homeowner defended the foreclosure, claiming that this omission meant that the lender as shown on the documentation was a nonexistent entity and, thus, the promissory note and mortgage were void, and the endorsement from the (alleged to be) nonexistent entity was a nullity. The trial court agreed, granting summary judgment in favor of the homeowner.

The 4th DCA reversed the trial court’s ruling, and the DCA did not have to go far to find support for its reasoning. Florida Statutes § 694.12 states that all mortgages “made and received bona fide and upon good consideration […] in which the name of said corporation shall be incorrectly set out in such [mortgage] by omitting a word from the corporate name, or by adding a word thereto, or by misspelling any part of the name of said corporation, and the identify of said corporation shall plainly appear from the contents of said instrument, or otherwise, such [mortgage], shall be taken and deemed valid and effectual as though the name of said corporation were correctly set out in said [mortgage], and the same shall, notwithstanding such irregularity or defect, be deemed and taken as properly executed.” Despite the unambiguous plain language of the statute, the 4th DCA also cited to a 1998 concurring opinion[note]Presley v. Ponce Plaza Assocs., 723 So. 2d 328, 330 (Fla. 3d DCA 1998) (Cope, J., specially concurring).[/note] out of the 3rd DCA, which stated, “slight departures from the name used by the corporation, such as the omission of a part of its name or the inclusion of additional words, generally will not affect the validity of contracts or other business transactions as long as the identity of the corporation can be reasonably established from the evidence.”

Note that the practical result of this is not an automatic win for the plaintiff, meaning that the foreclosure will now proceed and the plaintiff will still have the burden of proof on its claims. Perhaps the homeowner has other defenses to the claims, perhaps not. However, the issue of whether or not the initial lender was a nonexistent entity has been determined.