United States Court of Appeals,
Eleventh Circuit.
No. 94-3521.
GILCHRIST TIMBER CO., C.L. Brice, L.A. Brice, Andy M. Brice, Sam Brice, Plaintiffs-Appellants,
v.
ITT RAYONIER, INC., Defendant-Appellee,
NATURAL RESOURCE PLANNING SERVICES, INC. and Andrew V. Santangini, Third-Party-Defendants.
Sept. 20, 1996.
Appeal from the United States District Court for the Northern District of Florida (No. 88-10172-MMP); Maurice M. Paul, Judge.
Before EDMONDSON and DUBINA, Circuit Judges, and LOGAN*, Senior Circuit Judge.
PER CURIAM:
CERTIFICATION FROM THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT TO THE SUPREME COURT OF FLORIDA, PURSUANT TO SECTION 25.031, FLORIDA STATUTES, AND RULE 9.150, FLORIDA RULES OF APPELLATE PROCEDURE.
TO THE SUPREME COURT OF FLORIDA, AND THE HONORABLE JUSTICES THEREOF:
It appears to the United States Court of Appeals for the
Eleventh Circuit that the above-styled case involves a question of
state law that is determinative of the cause, and there appear to
be no clear, controlling precedents in the decisions of the Supreme
Court of Florida. This court therefore certifies the following
question of Florida law to the Supreme Court of Florida for
instructions concerning such question of law, based on the facts
* Honorable James K. Logan, Senior U.S. Circuit Judge for the Tenth Circuit, sitting by designation. recited herein:
Whether a party to a transaction who transmits false information which that party did not know was false, may be held liable for negligent misrepresentation when the recipient of the information relied on the information's truthfulness, despite the fact that an investigation by the recipient would have revealed the falsity of the information.
I. STYLE OF THE CASE
The style of the case in which this certification is made is
as follows: Gilchrist Timber Co., C.L. Brice, L.A. Brice, Andy M.
Brice, Sam Brice, Plaintiffs-Appellants, versus ITT Rayonier, Inc.,
Defendant-Appellee, versus Natural Resource Planning Services, Inc.
and Andrew V. Santangini, Third-Party Defendants, No. 94-3521,
United States Court of Appeals for the Eleventh Circuit, on appeal
from the United States District Court for the Northern District of
Florida.
II. FACTS
In this diversity action plaintiffs, Gilchrist Timber Company,
C.L. Brice, L.A. Brice, Andy M. Brice, and Sam Brice,1 alleged that
defendant ITT Rayonier, Inc. (ITT) made a material false
representation of the zoning of a large block of Florida timberland
that it sold to plaintiffs, causing them economic injury. After a
jury found in favor of plaintiffs the district court granted
defendant judgment notwithstanding the verdict and plaintiffs
appealed.
1 The original complaint named as plaintiff Gilchrist Timber Company. The amended complaint substituted as plaintiffs C.L. Brice, as trustee of the Carl L. Brice 1977 Irrevocable Trust, L.A. Brice, Andy M. Brice, and Sam Brice, individually and doing business as Gilchrist Timber Company, a Florida Partnership. Thereafter Carla Sutton (a/k/a Carla Brice) and David M. Miller, cotrustees of the Carl L. Brice 1977 Irrevocable Trust, joined as plaintiffs. In 1985, Jimmy Ray Mincy, a timber broker, became interested
in purchasing a tract of timberland (the timberland) from
defendant. He solicited C.L. Brice, who was involved in timber,
ranching and real estate, to join him in making the purchase.
Brice and Mincy ultimately purchased the 22,641-acre tract. They
presented evidence at trial that they planned to cut and sell the
timber and then to sell a significant portion of the land in small
tracts for farming or residential development.
Mincy and Brice met with ITT's representatives to discuss
purchasing the timberland. Brice testified that at this first
meeting Kent Smith, then ITT's Director of Forest Land Management,
gave Brice and Mincy a copy of an April 1984 appraisal that ITT had
obtained when it decided to sell various timberlands to raise cash.
The document included a land appraisal by Andrew Santangini and a
timber appraisal by Natural Resource Planning's Tom Mastin. The
appraisal stated that the timberland was zoned for agriculture,
which allows residential usage. Mincy and Brice testified they
decided to buy the timberland only because the zoning allowed
residential development. Uncontroverted evidence at trial
indicated that the parties never discussed zoning, although the
information contained in the timber appraisal—such as the quantity
and quality of timber—was discussed at length.
Immediately after the closing, Brice and Mincy conveyed the
land and timber to their partnership, Gilchrist Timber Company.
More than a year after the purchase, when Gilchrist Timber had
removed some timber and attempted to sell some acreage, plaintiffs
learned that the vast majority of the timberland was actually zoned "preservation," a classification permitting no residential use.2
Brice and Mincy attempted unsuccessfully to change the zoning.
Plaintiffs asserted that they could not sell the land as planned
and lost the benefit of their bargain. They brought this suit,
alleging defendant misrepresented that the land was zoned
agricultural. 3 The jury found in favor of plaintiffs and awarded
damages of $1,676,500, but the district court granted defendant
ITT's motion for judgment notwithstanding the verdict. As relevant
to the question we submit the district court found that ITT was
itself unaware that the zoning classification stated in the
appraisal report was inaccurate, a finding the record supports.
Thus this case involved negligent misrepresentation.
III. DISCUSSION
Plaintiffs argue that under Florida law ITT had a duty to
discover the error in the appraisal but plaintiffs had no
corresponding duty to determine whether the facts in the appraisal
on which they relied were true. Plaintiffs rely on Besett v.
Basnett, 389 So.2d 995 (Fla.1980). In Besett, the buyers of a
lodge and property alleged that the sellers knowingly
misrepresented the lodge's business history, condition, and
acreage. The buyers did not investigate these representations, and
2 The record contains conflicting testimony on exactly how and when plaintiffs discovered the zoning problem. 3 Defendant ITT brought in as third party defendants Andrew Santangini and Natural Resource Planning, who performed the land and timber appraisals, respectively, asserting a right of indemnity in the event ITT were held liable. Plaintiffs made no direct claims against the third party defendants. The jury found no liability against the third party defendants, and that determination is not part of the appeal to the Eleventh Circuit. relied on them in deciding to buy the lodge and land. The Besett
court concluded the buyers had no duty to investigate, although it
noted that a purchaser would not be justified in relying on an
obviously false representation. Plaintiffs also cite Lynch v.
Fanning, 440 So.2d 79 (Fla. 1st D.C.A.1983), in which a buyer
failed to exercise his contractual right to secure a survey and
thus did not discover that the seller's property description was
false. That decision held such failure did not eliminate the
plaintiff's cause of action. Id. at 80 (citing Held v. Trafford
Realty Co., 414 So.2d 631 (Fla.
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United States Court of Appeals,
Eleventh Circuit.
No. 94-3521.
GILCHRIST TIMBER CO., C.L. Brice, L.A. Brice, Andy M. Brice, Sam Brice, Plaintiffs-Appellants,
v.
ITT RAYONIER, INC., Defendant-Appellee,
NATURAL RESOURCE PLANNING SERVICES, INC. and Andrew V. Santangini, Third-Party-Defendants.
Sept. 20, 1996.
Appeal from the United States District Court for the Northern District of Florida (No. 88-10172-MMP); Maurice M. Paul, Judge.
Before EDMONDSON and DUBINA, Circuit Judges, and LOGAN*, Senior Circuit Judge.
PER CURIAM:
CERTIFICATION FROM THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT TO THE SUPREME COURT OF FLORIDA, PURSUANT TO SECTION 25.031, FLORIDA STATUTES, AND RULE 9.150, FLORIDA RULES OF APPELLATE PROCEDURE.
TO THE SUPREME COURT OF FLORIDA, AND THE HONORABLE JUSTICES THEREOF:
It appears to the United States Court of Appeals for the
Eleventh Circuit that the above-styled case involves a question of
state law that is determinative of the cause, and there appear to
be no clear, controlling precedents in the decisions of the Supreme
Court of Florida. This court therefore certifies the following
question of Florida law to the Supreme Court of Florida for
instructions concerning such question of law, based on the facts
* Honorable James K. Logan, Senior U.S. Circuit Judge for the Tenth Circuit, sitting by designation. recited herein:
Whether a party to a transaction who transmits false information which that party did not know was false, may be held liable for negligent misrepresentation when the recipient of the information relied on the information's truthfulness, despite the fact that an investigation by the recipient would have revealed the falsity of the information.
I. STYLE OF THE CASE
The style of the case in which this certification is made is
as follows: Gilchrist Timber Co., C.L. Brice, L.A. Brice, Andy M.
Brice, Sam Brice, Plaintiffs-Appellants, versus ITT Rayonier, Inc.,
Defendant-Appellee, versus Natural Resource Planning Services, Inc.
and Andrew V. Santangini, Third-Party Defendants, No. 94-3521,
United States Court of Appeals for the Eleventh Circuit, on appeal
from the United States District Court for the Northern District of
Florida.
II. FACTS
In this diversity action plaintiffs, Gilchrist Timber Company,
C.L. Brice, L.A. Brice, Andy M. Brice, and Sam Brice,1 alleged that
defendant ITT Rayonier, Inc. (ITT) made a material false
representation of the zoning of a large block of Florida timberland
that it sold to plaintiffs, causing them economic injury. After a
jury found in favor of plaintiffs the district court granted
defendant judgment notwithstanding the verdict and plaintiffs
appealed.
1 The original complaint named as plaintiff Gilchrist Timber Company. The amended complaint substituted as plaintiffs C.L. Brice, as trustee of the Carl L. Brice 1977 Irrevocable Trust, L.A. Brice, Andy M. Brice, and Sam Brice, individually and doing business as Gilchrist Timber Company, a Florida Partnership. Thereafter Carla Sutton (a/k/a Carla Brice) and David M. Miller, cotrustees of the Carl L. Brice 1977 Irrevocable Trust, joined as plaintiffs. In 1985, Jimmy Ray Mincy, a timber broker, became interested
in purchasing a tract of timberland (the timberland) from
defendant. He solicited C.L. Brice, who was involved in timber,
ranching and real estate, to join him in making the purchase.
Brice and Mincy ultimately purchased the 22,641-acre tract. They
presented evidence at trial that they planned to cut and sell the
timber and then to sell a significant portion of the land in small
tracts for farming or residential development.
Mincy and Brice met with ITT's representatives to discuss
purchasing the timberland. Brice testified that at this first
meeting Kent Smith, then ITT's Director of Forest Land Management,
gave Brice and Mincy a copy of an April 1984 appraisal that ITT had
obtained when it decided to sell various timberlands to raise cash.
The document included a land appraisal by Andrew Santangini and a
timber appraisal by Natural Resource Planning's Tom Mastin. The
appraisal stated that the timberland was zoned for agriculture,
which allows residential usage. Mincy and Brice testified they
decided to buy the timberland only because the zoning allowed
residential development. Uncontroverted evidence at trial
indicated that the parties never discussed zoning, although the
information contained in the timber appraisal—such as the quantity
and quality of timber—was discussed at length.
Immediately after the closing, Brice and Mincy conveyed the
land and timber to their partnership, Gilchrist Timber Company.
More than a year after the purchase, when Gilchrist Timber had
removed some timber and attempted to sell some acreage, plaintiffs
learned that the vast majority of the timberland was actually zoned "preservation," a classification permitting no residential use.2
Brice and Mincy attempted unsuccessfully to change the zoning.
Plaintiffs asserted that they could not sell the land as planned
and lost the benefit of their bargain. They brought this suit,
alleging defendant misrepresented that the land was zoned
agricultural. 3 The jury found in favor of plaintiffs and awarded
damages of $1,676,500, but the district court granted defendant
ITT's motion for judgment notwithstanding the verdict. As relevant
to the question we submit the district court found that ITT was
itself unaware that the zoning classification stated in the
appraisal report was inaccurate, a finding the record supports.
Thus this case involved negligent misrepresentation.
III. DISCUSSION
Plaintiffs argue that under Florida law ITT had a duty to
discover the error in the appraisal but plaintiffs had no
corresponding duty to determine whether the facts in the appraisal
on which they relied were true. Plaintiffs rely on Besett v.
Basnett, 389 So.2d 995 (Fla.1980). In Besett, the buyers of a
lodge and property alleged that the sellers knowingly
misrepresented the lodge's business history, condition, and
acreage. The buyers did not investigate these representations, and
2 The record contains conflicting testimony on exactly how and when plaintiffs discovered the zoning problem. 3 Defendant ITT brought in as third party defendants Andrew Santangini and Natural Resource Planning, who performed the land and timber appraisals, respectively, asserting a right of indemnity in the event ITT were held liable. Plaintiffs made no direct claims against the third party defendants. The jury found no liability against the third party defendants, and that determination is not part of the appeal to the Eleventh Circuit. relied on them in deciding to buy the lodge and land. The Besett
court concluded the buyers had no duty to investigate, although it
noted that a purchaser would not be justified in relying on an
obviously false representation. Plaintiffs also cite Lynch v.
Fanning, 440 So.2d 79 (Fla. 1st D.C.A.1983), in which a buyer
failed to exercise his contractual right to secure a survey and
thus did not discover that the seller's property description was
false. That decision held such failure did not eliminate the
plaintiff's cause of action. Id. at 80 (citing Held v. Trafford
Realty Co., 414 So.2d 631 (Fla. 5th D.C.A.1982)).
Defendant contends that other Florida cases limit the holdings
of Besett and Lynch. For example, in Wasser v. Sasoni, 652 So.2d
411 (Fla. 3d D.C.A.1995), after closing on an "as is" contract for
a commercial apartment building, the buyers found the building
needed structural repairs and sued based on both affirmative
misrepresentations and failure of the sellers to disclose alleged
defects. On buyers' appeal from a grant of summary judgment, the
court of appeals held that "an intentional nondisclosure of known
facts materially affecting the value of commercial property[ ] is
not actionable under Florida law." Id. at 412. The court also
stated that "[a]ssuming arguendo that false representations had
been made, a misrepresentation is not actionable where its truth
might have been discovered by the exercise of ordinary diligence."
Id. (citing Steinberg v. Bay Terrace Apartment Hotel, 375 So.2d
1089 (Fla. 3d D.C.A.1979)). The Wasser court characterized Besett
as an exception—a circumstance in which specific misrepresentations
regarding a latent defect were made to a negligent purchaser. It stated "there is no exception where the parties are equally
sophisticated, and have an equal opportunity to discover a defect."
Id. at 413. See also David v. Davenport, 656 So.2d 952, 953 (Fla.
3d D.C.A.1995) (misrepresentation in car sale not actionable if
truth could be discovered by ordinary diligence, citing Wasser)
(dicta); Adams v. Prestressed Sys., Inc., 625 So.2d 895, 897 (Fla.
1st D.C.A.1993) ("[i]n the civil context, a party who relies on a
misrepresentation must show that it exercised some diligence in
investigating the misrepresentation, unless it is shown that the
fraudulent party had exclusive or superior knowledge, or prevented
further investigation") (workers' compensation). But see Sheen v.
Jenkins, 629 So.2d 1033, 1035 (Fla. 4th D.C.A.1993) (jury may find
plaintiff justifiably relied upon misrepresentation even if she
could have ascertained truth by making an investigation, unless she
knows of falsity or falsity is obvious to her) (investment fraud);
Eastern Cement v. Halliburton Co., 600 So.2d 469, 471 (Fla. 4th
D.C.A.) (in fraudulent misrepresentation claim, buyer under no duty
to investigate truth or falsity of statements unless had reason to
know of falsity, citing Besett ), review denied, 613 So.2d 4
(Fla.1992) (sale of cement pumping equipment); Revitz v. Terrell,
572 So.2d 996, 998-99 (Fla. 3d D.C.A.1990) (real estate recision
action for fraudulent misrepresentation concerning flood insurance
and building code violations; recipient may rely on truth of
representation even if could have ascertained falsity with an
investigation, citing Besett ); Gold v. Perry, 456 So.2d 1197,
1201 (Fla. 4th D.C.A.1984) (rejecting idea, in intentional fraud
case, that a party's business experience and success may be considered in determining whether reliance justifiable); cf.
Johnson v. Davis, 480 So.2d 625, 627-28 (Fla.1985) (where seller of
home knows of latent defects, duty to disclose if not readily
observable or known to buyer).
Obviously Besett, as a Florida Supreme Court case, would
control if applicable. But we are uncertain whether the court
would apply the rule of Besett in a negligent misrepresentation
case. In Besett, the court adopted the Restatement (Second) of
Torts § 540 (1976), which applied to fraudulent misrepresentations,
and which says, "[t]he recipient of a fraudulent misrepresentation
of fact is justified in relying upon its truth, although he might
have ascertained the falsity of the representation had he made an
investigation." Besett, 389 So.2d at 997 (emphasis added). The
reason for this rule is that "[a] person guilty of fraudulent
misrepresentation should not be permitted to hide behind the
doctrine of caveat emptor." Id.; see also Cruise v. Graham, 622
So.2d 37, 40 (Fla. 4th D.C.A.1993) (fraudulent misrepresentation is
an intentional tort, making comparative negligence no defense).
The elements of fraudulent misrepresentation and negligent
misrepresentation appear to be the same under Florida law. See
Baggett v. Electrician's Local 915 Credit Union, 620 So.2d 784, 785
(Fla. 2d D.C.A.1993); Thor Bear, Inc. v. Crocker Mizner Park,
Inc., 648 So.2d 168, 172 (Fla. 4th D.C.A.1994). But it may be that
what constitutes "justifiable reliance" for the two claims is
different. According to the Florida Supreme Court's standard jury
instructions, "[i]t appears that Florida recognizes two separate
theories of recovery for damage occurring as a result of misrepresentation. One basis ... is for fraud and the other is for
negligent misrepresentation." See Standard Jury Instructions—Civil
Cases, 613 So.2d 1316, 1319 (Fla.1993). The standard instructions
suggest that only when there is a fraudulent misrepresentation is
the recipient "justified in relying upon its truth, even where an
investigation might have revealed its falsity." Id. (citing Besett
).
Also, if Besett can be seen as Florida's adoption of the
Restatement (Second) approach to the law of misrepresentation, it
might be important that under the Restatement (Second) of Torts §
552A, "[t]he recipient of a negligent misrepresentation is barred
from recovery ... suffered in reliance upon it if he is negligent
in so relying." This view is consistent with the idea that
contributory negligence is a defense to unintentional torts, but
not to intentional torts. See Cruise, 622 So.2d at 40. On the
other hand, Lynch v. Fanning, 440 So.2d 79 (Fla. 1st D.C.A.1983),
appears to have applied Besett 's logic to negligence claims.
Without further guidance from the Florida Supreme Court on the
question certified, this court cannot resolve the appeal before us
with confidence. Thus, we certify the question stated at the
outset of this opinion.
The phrasing employed in the certified question is intended as
a guide and is not meant to restrict the Florida Supreme Court's
consideration of the issues in its analysis of the record certified
in this case. This extends to the Supreme Court's restatement of
the issue and the manner in which the answer is given. See
Martinez v. Rodriquez, 394 F.2d 156, 159 n. 6 (5th Cir.1968). The clerk of this court is directed to transmit this
certificate, as well as the briefs and record filed with the court,
to the Supreme Court of Florida and simultaneously to transmit
copies of the certificate to the attorneys for the parties.