## Facts

- Property owners obtained a $12,000 construction loan from a savings and loan association and executed a promissory note and mortgage to secure repayment.
- The lender deducted 1% of the loan proceeds as a fee labeled “inspection and supervision.”
- The lender’s agent made periodic visits to the construction site during the build.
- After completion, the building developed serious defects, including extensive wall cracking and resulting damage.
- The borrowers defaulted on the note; the lender filed a mortgage foreclosure action.
- The borrowers admitted default but counterclaimed for damages, alleging the lender (a) negligently performed inspections and (b) impliedly contracted to inspect for the borrowers’ benefit in exchange for the fee.
- The trial court entered foreclosure for the lender and rejected the counterclaim, finding no contractual duty to inspect for the borrowers’ benefit.
- The borrowers appealed only the ruling rejecting the counterclaim.

## Issues

1. Whether a construction lender that charges an “inspection and supervision” fee and conducts site inspections impliedly contracts to inspect for the borrowers’ benefit, creating liability for defects not detected.

## Decision

- The appellate court affirmed the foreclosure judgment and the rejection of the counterclaim.
- The court held that no implied-in-fact contract arose obligating the lender to inspect for the borrowers’ benefit.
- The inspection fee and inspections were treated as measures taken for the lender’s own protection of its security interest, not as a borrower-protective undertaking.

## Legal Principles

- An implied-in-fact contract exists only when the parties’ conduct and surrounding circumstances show that reasonable persons in their position would have intended the alleged obligation had it been expressly addressed.
- A construction lender’s collection of an inspection fee and performance of construction inspections, without additional facts showing an undertaking for the borrower, does not imply a contractual duty to protect the borrower from construction defects.
- Lender inspections during construction are ordinarily attributable to the lender’s interest in preserving the value of its collateral securing the loan.

## Conclusion

The court affirmed foreclosure and rejected the borrowers’ counterclaim because the lender’s inspection fee and site inspections did not, without more, establish an implied contractual promise to inspect for the borrowers’ benefit or to ensure defect-free construction.


Rice v. First Fed. Sav. & Loan Ass’n of Lake Cnty., 207 So. 2d 22 (Fla. Dist. Ct. App. 1968)