Nm Residential v. Prospect Park Dev.

Nm Residential v. Prospect Park Dev.

Opinion

ATKINSON, Judge.

NM Residential, LLC, and 949 Cleveland Street, LLC (collectively NM Residential), appeal the dismissal with prejudice of their fraud claims against Prospect Park Development, LLC (Prospect Park), arising from a purchase and sale agreement (the Purchase Agreement) that included a provision that disclaimed the making of and reliance upon any representations or warranties regarding the property. We reverse because Florida Supreme Court precedent requires that to foreclose liability for fraud the parties must expressly stipulate that any fraud that might have been committed cannot form the basis of a claim.

During the contractual due diligence period, a construction company hired by NM Residential inspected a recently [*2]  constructed development consisting of 250 residential apartments as well as commercial space (the Property). The inspection revealed several defects, which were memorialized in a punch list, including issues with gates, balconies, and windows. Prospect Park agreed to remedy the punch list items prior to closing.

After the due diligence period expired, at least one of Prospect Park's agents represented that it had "addressed every item on the original punch list." Prospect Park's attorney also represented to NM Residential that the balconies and gates were repaired, and its property manager told NM Residential that the window leaks had been fixed.

After closing, NM Residential discovered that there were defects with the balconies and gates and that many windows were leaking. Destructive testing postclosing revealed that water was infiltrating numerous windows. As a result, NM Residential filed suit alleging that agents of Prospect Park knowingly misrepresented that the punch list items were corrected and actively concealed certain unresolved issues by, among other things, caulking windows to conceal leaks that had not been repaired. NM Residential sought damages or alternatively rescission [*3]  for fraud. The trial court dismissed the amended complaint with prejudice, concluding that NM Residential had waived its fraud claims pursuant to provisions in the parties' agreement.

] In order to "make [a] contract incontestable because of fraud," the parties must "stipulate that the [contract] may not be rescinded for fraud." Oceanic Villas, Inc. v. Godson, 148 Fla. 454, 4 So. 2d 689, 691 (Fla. 1941). To do so, the contract must do more than merely agree "that no fraud had been committed"—i.e., disclaim the making of fraudulent statements upon which the other party has relied—but must rather "recognize[] that fraud may have been committed and stipulate[] that such fraud, if found to have been committed, should not vitiate the contract." Id. In other words, while "an express waiver of the right to maintain a fraud claim is all that is required to avoid liability for fraud," more than a mere disclaiming of the making of fraudulent representations or a reliance thereon is required to effectuate such a waiver; rather, the parties must agree that "even if a fraud 'may have been committed,' such a claim may not be asserted." See Billington v. Ginn-La Pine Island, Ltd., 192 So. 3d 77, 84 (Fla. 5th DCA 2016) (quoting Oceanic Villas, 4 So. 2d at 691).

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