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Diaz v. Kosch

Florida Court of Appeals, Third District

June 13, 2018

Richard J. Diaz, et al., Appellants,
David Kosch, et al., Appellees.

         Not final until disposition of timely filed motion for rehearing.

          Appeals from the Circuit Court for Miami-Dade County, Lower Tribunal Nos. 12-38485, 12-41460 Eric William Hendon, Judge.

          Eaton & Wolk, PL, and Douglas F. Eaton; Steven Kellough; Ramόn A. Abadin, for appellants.

          Duane Morris, LLP, and Scott D. Kravetz; Kluger Kaplan, and Alan J. Kluger; Russomanno & Borrello, and Herman J. Russomanno, III, for appellees.

          Before ROTHENBERG, C.J., and SALTER and SCALES, JJ.

          SALTER, J.

         Richard Diaz and Ana Santisteban-Diaz ("Buyers") appeal a final summary judgment regarding claims and counterclaims in a failed residential real estate transaction (Case No. 3D17-621 here), and a final judgment against them for $850, 000.00 for attorney's fees and costs incurred in the litigation by the appellees, David and Tiffany Kosch ("Sellers") (Case No. 3D17-1498). The cases were consolidated for oral argument and decision. We affirm the final judgments in each case.

         The cases turn on strict, but enforceable, provisions in a contract governing a residential real estate transaction. The application of particular terms specifying the parties' paths toward closing or termination, and controlling the legal status of claims for damages in the aftermath of termination, presented proper issues for final summary judgment.

         I. Facts and Procedural History

         A. Disclosure Agreement and "As Is" Purchase Contract

         The Sellers owned a home in Coral Gables. In March 2012, they listed the home for sale through Esslinger-Wooten-Maxwell, Inc. ("EWM"), an area real estate broker and sales company. As they did so, the Sellers also completed EWM's printed form of "Owner's Property Disclosure Statement, " signed by them March 21, 2012 (the "March 2012 Disclosure Statement"). That form prominently discloses that the information provided is "to the best of the Owner's knowledge, " that "it is not a warranty of any kind by the Owner, " and that "it is not a substitute for any inspections or warranties the parties may wish to obtain."

         The March 2012 Disclosure Statement included handwritten entries describing damage to a wall, the existence of a homeowners' association for an included backyard lot, and responses regarding a total of 16 different topics. Pertinent here, the Sellers marked "No" to any awareness of improvements constructed in violation of applicable building codes, without necessary permits, or with any open permits on the property not closed with a final inspection. They also marked "No" to any awareness of any toxic substances in the residence, including "accumulated radon." On the fourth page of disclosures, and above signature lines indicated for any prospective buyer or tenant receiving a copy of the completed form, bold-print terms include:

INSTRUCTIONS TO THE BUYER/TENANT: Buyer/Tenant is encouraged to thoroughly inspect the property personally and/or have it inspected by a third party, and to inquire about any specific areas of concern. NOTE: If Owner answers "NO" to any of the pervious [sic] questions listed above, Owner does not necessarily mean that the matter in question does not exist on the property. "NO" may mean that the Owner is unaware that the matter in question exists on the property.
RECEIPT AND ACKNOWLEDGEMENT OF BUYER/TENANT Owner is using this form to disclose Owner's knowledge of the condition of the property and improvements located on the property as of the date signed by Owner. This disclosure form is not a warranty of any kind. The information contained in the disclosure is limited to information which the Owner has knowledge. It is not intended to be a substitute for any inspection or professional advice the Buyer/Tenant may wish to obtain. An independent professional inspection is encouraged and may be helpful to verify the condition of the property and to determine the costs of repairs, if any.

         During the spring of 2012, the Buyers learned that the home was for sale and walked through it with the broker. Both of the Buyers were attorneys with substantial experience with real estate transactions and title matters. After various negotiations, the Buyers and Sellers entered into a printed form "‛As Is' Residential Contract for Sale and Purchase" (the "Contract"), 1 effective September 2, 2012, for a purchase price of $2, 850, 000.00.

         The Buyers made a $50, 000.00 deposit with the Buyer's broker serving as escrow agent. A further deposit of $235, 000.00 was payable to the escrow agent by September 12, 2012, the date at which a ten-day right of inspection and right to cancel was to expire absent Buyer termination.

         The Contract included a handful of terms that governed the subsequent actions of the Buyers and Sellers. First, time was specified to be "of the essence." Second, the Contract included an integration and modification provision:

INTEGRATION; MODIFICATION: This Contract contains the full and complete understanding and agreement of Buyer and Seller with respect to the transaction contemplated by this Contract and no prior agreements or representations shall be binding upon Buyer or Seller unless included in this Contract. No modification to or change in this Contract shall be valid or binding upon Buyer or Seller unless in writing and executed by the parties intended to be bound by it. Third, regarding disclosures, the Contract provisions included these terms:
RADON GAS: Radon is a naturally occurring radioactive gas that, when it is accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county health department.
PERMITS DISCLOSURE: Except as may have been disclosed by Seller to Buyer in a written disclosure, Seller does not know of any improvements made to the Property which were made without required permits or made pursuant to permits which have not been properly closed.
. . .
SELLER DISCLOSURE: Seller knows of no facts materially affecting the value of the Real Property which are not readily observable and have not been disclosed to Buyer. Except as stated in the preceding sentence or otherwise disclosed in writing; (1) Seller has received no written or verbal notice from any governmental entity or agency as to a currently uncorrected building, environmental or safety code violation; and (2) Seller extends and intends no warranty and makes no representation of any type, either express or implied, as to the physical condition or history of the Property.

         Fourth, and of particular importance here, the pertinent provisions regarding inspections of the property and the Buyers' right to cancel the transaction and terminate the Contract, in Paragraph 12, were:

(a) PROPERTY INSPECTIONS AND RIGHT TO CANCEL: Buyer shall have [10] days from Effective Date ("Inspection Period") within which to have such Inspections of the Property performed as Buyer shall desire during the Inspection Period. If Buyer determines, in Buyer's sole discretion, that the Property is not acceptable to Buyer, Buyer may terminate this Contract by delivering written notice of such election to Seller prior to expiration of Inspection Period. If Buyer timely terminates this Contract, the Deposit paid shall be immediately returned to Buyer, thereupon, Buyer and Seller shall be released of all further obligations under this Contract . . . Unless Buyer exercises the right to terminate granted herein, Buyer accepts the physical condition of the Property and any violation of governmental, building, environmental, and safety codes, restrictions, or requirements, but subject to Seller's continuing AS IS Maintenance Requirement, and Buyer shall be responsible for any and all repairs and improvements required by Buyer's lender.
(b)WALK-THROUGH INSPECTION/RE-INSPECTION: On the day prior to Closing Date, or on Closing Date prior to time of Closing, as specified by Buyer, Buyer or Buyer's representative may perform a walk-through (and follow-up walk-through, if necessary) inspection of the Property solely to confirm that all items of Personal Property are on the Property and to verify that Seller has maintained the Property as required by the AS IS Maintenance Requirement and has met all other contractual obligations.
(c) SELLER ASSISTANCE AND COOPERATION IN CLOSE-OUT OF BUILDING PERMITS: If Buyer's Inspection of the Property identifies open or needed building permits, then Seller shall promptly deliver to Buyer all plans, written documentation or other information in Seller's possession, knowledge, or control relating to improvements to the Property which are the subject of such open or needed Permits, and shall promptly cooperate in good faith with Buyer's efforts to obtain estimates of repairs or other work necessary to resolve such Permit issues. Seller's obligation to cooperate shall include Seller's execution of necessary authorizations, consents, or other documents necessary for Buyer to conduct inspections and have estimates of such repairs or work prepared, but in fulfilling such obligation, Seller shall not be required to expend, or become obligated to expend, any money.
(d) ASSIGNMENT OF REPAIR AND TREATMENT CONTRACTS AND WARRANTIES: At Buyer's option and cost, Seller will, at Closing, assign all assignable repair, treatment and maintenance contracts and warranties to Buyer.

         B. The Inspection Period

         During the ten-day inspection period, the Buyers learned that there were open building permits and that unpermitted work might have been performed as part of the Sellers' extensive renovations in 2009 and 2010.[2] The Buyers did not obtain independent legal advice at that point, but instead relied upon their own real estate and litigation experience.

         The day before the inspection period was to expire, the Buyers notified their broker by email that they had reviewed the permit history for the home and were very concerned that their visual inspection of the property "does not coincide with the permit history." They advised that they were obtaining copies of the plans filed in the City and were conferring with a builder and an architect. They also reported that they might need to come back to the property with a City inspector. This communication neither requested an extension of the inspection period nor served as a termination of the Contract.

         The following day, the Buyers emailed these concerns to the Sellers and their broker. In the late afternoon of the last day of the inspection period, September 12, 2012, the Buyers emailed to the Sellers a signed message with a legend, "This communication is sent for settlement purposes only, " accusing the Sellers of affirmative misrepresentations "actionable under Florida law" and claiming that the property "has a significant diminished value than what we offered to pay for it." The email also contended (presciently, as it turned out) that "Legal fees in litigation with the facts presented here could easily be in the hundreds of thousands of dollars and of course during litigation, the property will not be marketable."[3]

         The email also accused the Sellers of a total lack of good faith and asserted that "we also have independent tort remedies against you for the fraudulent concealment in not disclosing to us everything you know, and did, regarding the condition of the property which could lead to several years of litigation including a claim for punitive damages and of course a lis pendens on the property as well." The email closed with the statement that "If we do not ...

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