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DePrince v. Starboard Cruise Services, Inc.

Florida Court of Appeals, Third District

January 17, 2018

Thomas DePrince, Appellant,
Starboard Cruise Services, Inc., Appellee.

         Not final until disposition of timely filed motion for rehearing.

         An Appeal from the Circuit Court for Miami-Dade County, Lower Tribunal No. 13-16523 Michael Hanzman, Judge.

          McDonald Hopkins, and Robert A. Cohen, Mario M. Ruiz and Joelle H. Dvir, for appellant.

          Isicoff, Ragatz & Koenigsberg, and Eric D. Isicoff and Carolina A. Latour, for appellee.

          Before LAGOA, SCALES and LUCK, JJ.


          LUCK, JUDGE

         In the 1932 movie Night After Night, a cloakroom attendant comments to Mae West on her ring, "Goodness, what a lovely diamond!" Mae West, in her first movie role, responds: "Goodness had nothing to do with it." Night After Night (Paramount Pictures, 1932). Goodness, too, had nothing to do with how Thomas DePrince bought his twenty-carat diamond. Through a comedy of errors, and an e-mail miscommunication, a cruise line jewelry shop sold the twenty-carat diamond to DePrince for one-twentieth of its retail value. DePrince knew the jewelry shop was selling the diamond for millions less than it should but said nothing. This breach of contract claim arose out of the jewelry shop reversing the charges and canceling the sale once it learned about the price. The jury, after a five day trial, found the jewelry shop made a unilateral mistake and rescinded the contract for the purchase of the diamond. Because the trial court did not follow the holdings from the first appeal, DePrince v. Starboard Cruise Servs., Inc., 163 So.3d 586 (Fla. 3d DCA 2015) (DePrince I), in instructing the jury on the elements of unilateral mistake, we reverse and remand for a new trial.


         1. The cruise. On February 11, 2013, DePrince, a passenger aboard a cruise ship, visited the ship's jewelry boutique, operated by Starboard Cruise Services, Inc., where he indicated his interest in purchasing a fifteen to twenty carat loose diamond.[1] DePrince specified he wanted an emerald cut, high quality, color D, E, or F diamond with a G.I.A. certificate.[2] Because the shipboard jewelry store did not have such a diamond, the store's manager, Mr. Rusan, electronically mailed Starboard's corporate office.

         Ms. Jimenez, at the corporate office, reached out to Starboard's diamond vendor in California, Sophia Fiori. Mr. Bachoura from Sophia Fiori, with some reservations because he did not believe a sale of this magnitude should take place aboard a ship, called a diamond broker in New York, Julius Klein, for its available inventory. Julius Klein sent Mr. Bachoura a list of diamonds available with the desired specifications. The list provided a per-carat price and a net price for each diamond. Mr. Bachoura selected two diamonds from the inventory listing, and electronically mailed the following information to Ms. Jimenez:

These prices are ship sailing prices based on the lowest tier diamond margin we have. Let me know if you have any questions.
EC 20.64 D VVS2 GIA VG G NON selling price $235, 000
EC 20.73 E VVS2 GIA EX EX FNT selling price $245, 000

         Ms. Jimenez forwarded this information to Mr. Rusan on the ship. Mr. Rusan, in turn, presented the information to DePrince and his partner, Mr. Crawford.

         Neither Ms. Jimenez nor Mr. Rusan had ever sold a large loose diamond before, and did not realize the quoted price was per carat. Mr. Crawford, who was a certified gemologist, asked the opinion of DePrince's sister, a graduate gemologist. Ms. DePrince warned that something was not right because the price for a diamond of that size should be in the millions and recommended not buying the diamond.

         Disregarding his sister's advice, DePrince contracted with Starboard to purchase the 20.64 carat diamond for the quoted $235, 000 price, paying with his American Express credit card. Shortly after the sale, Starboard discovered that the $235, 000 price was per carat. Starboard immediately notified DePrince of the error and reversed the charges to his credit card. DePrince then filed the instant action seeking to enforce the parties' contract.[3]

         2. DePrince I. The trial court initially granted summary judgment in favor of Starboard on June 20, 2014, based on Starboard's defense of unilateral mistake. This court reversed that judgment in DePrince I. There, the court reviewed the various tests for determining whether a party's agreement could be rescinded based on a unilateral mistake. Concluding that the panel and trial court were bound by the "four-prong test to establish unilateral mistake, " the court

held that in order to rescind an otherwise-valid contract based on a unilateral mistake, the party seeking to avoid the contract must show: (1) [T]he mistake was induced by the party seeking to benefit from the mistake, (2) there is no negligence or want of due care on the part of the party seeking a return to the status quo, (3) denial of release from the agreement would be inequitable, and (4) the position of the opposing party has not so changed that granting the relief would be unjust.

Id. at 592 (quotation omitted; footnote omitted). The court explained that "this panel - along with the trial court - is of course bound by" the four-prong test. Id. at 591. Later in the opinion, the court "reiterate[d] our position" that we "currently adhere[] to the four-prong test." Id. at 594. The court then went on to apply the four-prong test to the facts in the record at the summary judgment hearing.

         The court concluded that there was a genuine issue of material fact on the inducement prong because "knowledge of an error is markedly different than inducement of that error." Id. As an example of inducement, the court quoted the test for fraudulent inducement, and explained in a footnote:

We do not hold that the burden to establish inducement for purposes of the first prong of a unilateral mistake defense is the same as proving the elements for a fraudulent inducement defense, but merely use fraudulent inducement by way of example to demonstrate that inducement requires some type of action, not mere knowledge. In fact, the burden of proof cannot be the same because such a requirement would render the unilateral mistake of fact defense completely obsolete by requiring a party seeking to avoid a contract on that basis to prove fraudulent inducement, which is itself sufficient to render a contract voidable by the aggrieved party.

Id. at 592 n.6 (emphasis added).

         The court also concluded that there was a genuine issue of material fact on the negligence prong. "[W]hether Starboard made a reasonable and understandable mistake or acted negligently in its handling of the sale is a disputed issue of fact, " the court explained. Id. at 593. Based on this, the court reversed the summary judgment for Starboard and remanded for further proceedings because "[t]here remain genuine issues of material fact to be resolved." Id. at 598.

         3. The trial. The case went to trial on April 4, 2016 on DePrince's claim of breach of contract, and Starboard's defenses of unilateral mistake and fraudulent inducement. By the end of the case the issues had been whittled down. The parties did not dispute that they entered into an agreement; the only issues were whether Starboard was excused from that agreement because it made a unilateral mistake or had been fraudulently induced into entering into it. Here are the instructions the trial court gave on the affirmative defenses:

Now, Starboard's first affirmative defense is that it made a unilateral mistake of fact and it should be able to set aside the contract because of its mistake in quoting the price of the diamond to Mr. DePrince based upon the price quote it obtained from its vendor.
To establish this defense Starboard must prove the following: One, that the mistake was induced by the party, here Mr. DePrince, seeking to benefit from the mistake. Inducement may occur through misrepresentations, statements, or omissions which cause the contracting party to enter into a transaction. While there may be some degree of negligence on the part of Starboard, Starboard m[u]st show that there was no inexcusable lack of due care under the circumstance on its part, the party seeking return to the status quo.
Starboard must also show that denial of release from the agreement would be inequitable. In other words, it would be inequitable to hold it to the contract. And it must show that Mr. DePrince did not change his position in any way and that granting relief would not be unjust.
Starboard has also asserted the affirmative defense of fraud in the inducement through nondisclosure. The Court instructs you that [in the] absence of fiduciary relationship between parties, which the Court has found as a matter of law does not exist in this case[, ] [t]here is generally no duty to disclosure any facts when parties are dealing at arm's length.
However, where a party undertakes to disclose certain facts and information, that party must then disclose the entire truth then known to him regarding the disclosures he made.
In other words, I am going to try to simplify this by telling you that the law does not allow people to speak half truths. So if you decide to speak on a matter you have an obligation to disclose the whole truth regarding that particular matter.

         The jury found that Starboard should be excused from performing under the contract because it committed a unilateral mistake and was fraudulently induced by DePrince. The trial court denied DePrince's motion for directed verdict on the affirmative defenses, leading to this appeal.


         Because DePrince appeals the trial court's rulings regarding directed verdict, jury instructions, and the admission of evidence, we have multiple standards of review. "The standard of review of a trial court's ruling on a motion for directed verdict is de novo. In considering a motion for directed verdict, the trial court is required to give the benefit of all reasonable inferences to the nonmoving party and in favor of submitting the question to the jury." Diaz v. Impex of Doral, Inc., 7 So.3d 591, 593 (Fla. 3d DCA 2009) (citation omitted). "The standard of review regarding jury instructions is an abuse of discretion." Smith v. Orhama Inc., 907 So.2d 594, 596 (Fla. 3d DCA 2005). Likewise, "appellate courts review a trial court's ruling on the admissibility of evidence under an abuse of discretion standard." Bank of Am., N.A. v. Delgado, 166 So.3d 857, 860 (Fla. 3d DCA 2015).


         DePrince contends on appeal that the trial court erred by: (1) denying his motion for directed verdict on Starboard's fraudulent inducement affirmative defense; and (2) improperly instructing the jury on the elements of Starboard's unilateral mistake affirmative defense. DePrince also contends that the trial court made evidentiary errors by: (a) excluding as irrelevant the contract's provision that all special mail orders are non-refundable; (b) excluding evidence of a $2 million mark up price on the diamond; and (c) permitting Starboard to question DePrince as to whether he had an obligation to tell Starboard it was making a mistake on the price of the diamond.[4] We address each of these contentions below.

         1. Fraudulent Inducement Affirmative Defense: Directed Verdict Motion

         DePrince, first, argues that the trial court should have granted his directed verdict motion on Starboard's fraudulent inducement affirmative defense because Starboard did not present evidence that DePrince induced it to offer the diamond for millions less than it was worth. Starboard responds that DePrince made a single representation to have the diamond shipped to the GIA in New York. Once he made this partial misrepresentation, Starboard continues, DePrince had a duty to tell the manager everything, including that the diamond was worth much more.

         Starboard has the law right. In a general commercial transaction like this one, "there is no duty imposed on either party to act for the benefit or protection of the other party, or to disclose facts that the other party could, by its own diligence have discovered." Watkins v. NCNB Nat'l Bank of Fla., N.A., 622 So.2d 1063, 1065 (Fla. 3d DCA 1993) (quotation omitted). However, "even though a party to a transaction owes no duty to disclose facts within his knowledge, or to answer inquiries respecting such facts, if he undertakes to do so he must disclose the whole truth." Ramel v. Chasebrook Const. Co., 135 So.2d 876, 882 (Fla. 2d DCA 1961); see also Gutter v. Wunker, 631 So.2d 1117, 1118-19 (Fla. 4th DCA 1994) ("[W]here a party in an arm's length transaction undertakes to disclose information, all material facts must be disclosed."); Nicholson v. Kellin, 481 So.2d 931, 936 (Fla. 5th DCA 1985) ("[E]ven assuming that a party to a transaction owes no duty to disclose facts within his knowledge or to answer inquiries respecting such facts, if he undertakes to do so he must disclose the whole truth."). Once a party dips her toe into the material representation waters, in other words, she is required to jump all the way in head first.

         Starboard is wrong, however, that DePrince's shipping instructions were a half-truth compelling him to disclose what he knew about the diamond. We need only compare what DePrince said with those partial representations that the Florida courts have declared to create a duty to disclose the whole truth. In Ramel, for example, the sellers represented to the homebuyers that the house "was well constructed and well built" even though the sellers knew during construction that the foundation was settling, the pool was sinking and pulling the patio with it, and the home had cracks that had been sealed. Ramel, 135 So.2d at 878-79. In Vokes v. Arthur Murray, Inc., 212 So.2d 906 (Fla. 2d DCA 1968), the dancing school instructor told his student that she had grace, excellent potential, and was developing into a beautiful dancer even though the instructor knew this was not true. Id. at 908. And in Nicholson, the conspirators represented to the investors that the business opportunity had "guaranteed returns and profits" even though the conspirators knew the business was being run as a Ponzi scheme. Nicholson, 481 So.2d at 934-35.

         In each case, that is, the seller made a partial representation about the quality or quantity of the product being sold: the quality of the home in Ramel; the quality of the student's dancing in Vokes; and the quantity of money to be gained in the business opportunity in Nicholson. Here, DePrince did not make a factual representation about the quality or quantity of the diamond. His statement to the jewelry store manager was an instruction on where he wanted the diamond to be shipped after the purchase, no different than if he asked to have the diamond wrapped in tissue paper with a bow on top or to have a copy of his credit card receipt mailed to his home. These statements do not communicate anything about the diamond or the transaction; they are not material facts about the quality and quantity of the diamond that would affect the seller and buyer's decisions to enter into the transaction. On the other hand, if DePrince told the jewelry store manager that the store was getting such a good deal on the diamond that it was like Starboard was picking his pocket; or if DePrince said that the deal was worth it only because the quality of the diamond was so poor; these statements would create the duty to tell all he knew about the transaction.

         Without this kind of material representation, the general rule applies that DePrince and Starboard owed no duty to each other to disclose facts that they could have discovered through due diligence. Because the one fact Starboard relies on was not a half-truth that would trigger a duty to tell the whole-truth, DePrince did not owe a duty to disclose what he knew about the true value of the diamond and he did not fraudulently induce Starboard into entering the sales agreement. The trial court should have directed a verdict on Starboard's fraudulent inducement affirmative defense, and erred by not doing so.

          2. Unilateral Mistake Affirmative Defense: Jury Instruction

         Even though we conclude that a verdict should have been directed for DePrince on the fraudulent inducement affirmative defense, we must also address his other arguments because the jury alternatively found that Starboard was excused from performing under the contract as a result of Starboard's unilateral mistake. As to unilateral mistake, DePrince contends the trial court erred when it instructed the jury on the elements of the defense. Specifically, DePrince claims it was error to instruct the jury on the first prong that Starboard could be induced by omissions ...

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