*1 Plaintiff-Appellant-Petitioner, Shannon Below,
v. Dana Norton, R. Norton Dion Defendants-Respondents. Court
Supreme February argument Oral No. 2005AP2855. July
Decided
An amicus curiae Mary Law Office, and Fons Meili, Madison; C. Fons Schuster, Stoughton; Michael Zuckerman and Deborah Jeffrey Joy, Big Washington Bend; R. D.C.; De Vonna Koneazny, Milwaukee, Myer, M. Milwaukee; and Peter University Law Consumer of Wisconsin on behalf of Litigation Law Center Justice Consumer Clinic, AARR Legal Legal Aid Wisconsin, Action of LLC, Society Inc. of Milwaukee David filed Charles brief was
An curiae amicus Dunphy, Brookfield, on S.C., Cannon & Schmidt and Lawyers. Academy Trial of the Wisconsin behalf a review of CROOKS, J. This is ¶ 1. N. PATRICK Appeals,1 which published of the Court decision Norton, App 297 Wis. 2007 WI Below v. N.W.2d *5 part, part, in
reversed affirmed in and remanded the County, decision Circuit Court for Milwaukee Judge Michael D. Guolee. (Below),
¶ 2. Petitioner, Shannon Below seeks re- appeals' view of the court of decision. The circuit court granted respondents, had the motion to dismiss of the (the Nortons). Dion R. Norton and Dana Norton principal upon 3. There are two issues review. The first issue is whether the economic loss doctrine (ELD) misrep- bars common-law claims for intentional resentation2 that in occur the context of residential real estate transactions. The second issue is whether the misrepre- ELD bars common-law claims for intentional sentation that occur the context of noncommercial real estate transactions. appeals. 4. We affirm the decision of the court of
We hold that the ELD bars common-law claims for misrepresentation intentional in real estate transac- tions, whether such claims occur the context of residential3 or noncommercial sales, such as the one in the case before us. We do not draw distinction between the terms "residential" and "noncommercial" here, because either term fits the real estate transac- tion at issue.
2 Below's
negligent misrepresentation
common-law
strict responsibility misrepresentation claims are not addressed
herein, because Below conceded in her petition for review that
See,
the ELD barred those
e.g.,
claims.
Farm
State
Mut. Auto. Ins.
Co.,
(1999).
Co. v. Ford Motor
we stated " any § protect of Wisconsin from the residents 100.18 'to misleading representations....'" deceptive untrue, or omitted). (citation Furthermore, reiterated we Id., only one individual was made to a statement that that §by protections qualify 100.18.Id. afforded for the could purchaser real Clearly, residential or noncommercial of §by protected 100.18 from Below, is estate, such as proves representations If Below a home seller. false together "pecuniary loss, her claim, she shall recover that attorney including See fees ...." reasonable costs, with 100.18(ll)(b)2. § Wis. Stat. ELD of whether that the issue 7. We note (formerly § Wis. 895.4465 under Wis. Stat.
bars claims are Statutes references to Wisconsin All further noted. otherwise version unless 2003-04 renumbered as Wis. § has been Stat. 895.80 Wisconsin changed any not 895.446, text was § but the statute's Stat. (there insignificant were opinion to this way was material 895.80) § Stat. violation Wis. Stat. 943.20(1)(d) § presented also was for our review. How opinion, ever, we decline to address that issue this and we remand that issue to the circuit court. We do so proceedings because the record of the before the circuit why court is unclear as to this claim was dismissed. directly Furthermore, this issue was not addressed and by appeals. discussed the court of We cannot determine from record before us on review whether the circuit (1) court dismissed that claim: because it was insuffi fatally upon cient flawed, so that a claim which (2) granted relief could be stated; was not or because the circuit court believed that claim was barred result, ELD. As a we remand that issue to the circuit *7 proceedings. Upon court for further remand, the circuit clearly holding court should state that court's on that statutory claim. The circuit court should this review Weisflog's court's recent decision in Stuart v. Showroom Gallery, Inc., ¶22, 2008 WI 2dWis. N.W.2d 762. That case addressed the issue of whether statutory the claim involved therein was barred the ELD. In case, stated, that we "Weare satisfied that the apply statutory ELD cannot to claims . ..." Id.
HH ¶ 8. This case involves real estate transaction purchased which Below a house on the south side of February Milwaukee, Wisconsin from the Nortons in 2004. Because Below's claims were dismissed when the granted circuit court dismiss, Nortons' motion to undisputed. the relevant facts are brief and completed statutorily ¶ 9. The Nortons re- quired property report they put condition when their 895.446(4)). changes to § the statute's title and also to This opinion will refer to § the renumbered 895.446. property In their condition re- on the market.
house port, they represented not were aware the Nortons system, except any plumbing defects with the house's problem their bathtub's drain handle. for a with agreement reached an with the 10. Below purchase house, and the to transaction Nortons any per- the Nortons did not have closed. Below and during process. After sonal contact this Below moved house, learned that the sewer line that ran into the she broken. the house and street was between May present 4, 2004, Below filed the On against Circuit Court for action the Nortons alleged County. complaint, In Below's she Milwaukee (2) (1) misrepresentation; intentional strict claims for: (3) negligent misrep- misrepresentation; responsibility (4) misrepresentation in of Wis. resentation; violation (5) misrepresentation § 100.18; violation of Stat. and 943.20(1)(d).6 §§ com- 895.446 and Below's Wis. Stat. alleged plaint that the Nortons knew of defect with misrepre- sale, the house's the sewer line before purchase knowledge sented their to induce Below misrepre- alleges this that she relied on house. Below purchasing house and that this when sentation property in the condi- defect, not disclosed which was pecuniary report, loss. tion caused her suffer granted, requested, leave to and was Below *8 complaint, a breach of file an amended which contained the circuit court and the However, claim. both contract appeals com- not consider the amended court of did they plaint that Below did not determined because rescission and resti alleged Below a sixth claim for also appeals both court and the court tution. As the circuit Rather, noted, claim. both are correctly neither constitutes a rescission Accordingly, specifically we will not address remedies. or restitution.
properly complaint. file and serve her amended Below appeal appeals' did not the court of determination on that issue to court. court, this We note that the circuit authority attempt remand, on again has the to allow Below to complaint to file and serve an amended contains her breach of contract claim. See Wis. Stat. 802.09(1). § The determination on whether to allow such an amendment is left to the discretion of the circuit court. Id. 11, 2004, 13. On June filed an Nortons both complaint
answer to Below's and a motion to dismiss complaint grounds complaint her on the that the failed upon granted to state a claim which relief could be by that some of Below's claims were barred the ELD. In accompanying support their memorandum in of their argued dismiss, motion to the Nortons that Below's negligent, respon- intentional, common-law and strict sibility misrepresentation claims were barred September 13, 2004, ELD.7 On the circuit court ad- journed hearing its on the Nortons' motion to dismiss complaint until Below's this court rendered its decision Enterprises, Kellogg in Kaloti Co., Inc. v. Sales 2005 WI 111, 555, 699 N.W.2d205. hearings
¶ 14. The circuit court held on the complaint July Nortons' motion to dismiss Below's on September 26, 2004, 2004, and October 2005. On formally granted 4, November the circuit court complaint the Nortons' motion to dismiss the in its entirety. The circuit court held that the ELD barred negligent, intentional, Below's common-law and strict previously noted, As negligent Below's common-law mis representation claim and her common-law responsibility strict misrepresentation herein, claim are not addressed because Below conceded in petition her for review that the ELD barred those claims.
responsibility misrepresentation claims. The circuit remaining as claims, dismissed Below's such court also §§ claims, in one Stat. 100.18 and 895.446 the Wis. transcript being "applicable." paragraph in as not going stated, court also "I am to The circuit dismiss and Com- these claims based on this transaction plaint[,] this [Below] these are not claims that can and . .. . . ." claim under these facts . appealed circuit court's decision 15. Below argued appeals. that the circuit the court of Below
to it held that all of her tort claims court had erred when Holding that the ELD did not barred the ELD. were § claim, 100.18 the court of bar Below's Wis. Stat. appeals circuit court's dismissal of Below's reversed the advertising misrepresentation claim under false Accordingly, appeals the court of remanded statute. that claim to the circuit court for trial. holding explaining In on the Stat. its Wis.
§ appeals stated: claim, 100.18 the court of erred when it
Below claims that the trial court advertising § Stat. 100.18 dismissed her false Wis. agree. In Kailin v. Arm misrepresentation claim. We 676, strong, 70, 43, 2d App 2002 WI 252 Wis. doctrine we held that "the economic loss
N.W.2d § apply to claims under Wis. Stat. 100.18" does not potential buyer may constitute a that statements purposes of public" made to "the for the statement Kailin, Thus, 100.18, state § prior acceptance of the [the] ments made to Below advertising may the basis of a false claim. offer form (footnote omitted). ¶ 11 The Below, 297 Wis. appeals court of also stated: sufficiently alleged a cause
Here, complaint Below's § survive a motion under Stat. 100.18 to of action Wis. *10 alleged to dismiss. Below that the Nortons made an representation which Below to untrue caused suffer pecuniary prove allegations loss. If can her Below at trial, may advertising on the she recover false claim. Accordingly, this cause of action should not have been portion reverse that of the trial court's dismissed. We proceedings. order and remand for further (footnote omitted). ¶ Id., 13 appeals However, the court of affirmed the circuit court's dismissal of all of the other claims in complaint. appeals The court Below's of held that the claims, ELD barred the remainder of tort it Below's but directly statutory did not address and discuss claim 943.20(l)(d). §§ under Wis. Stat. 895.446 and Below petition appeals' filed a for review of the court of granted. decision, which we
HH I—I appeals' ¶ 18. This review results from the court of grant action in its examination of the circuit court's complaint the Nortons' motion to dismiss Below's in its entirety. A motion to dismiss for failure to state a claim requires complaint a determination of whether a is legally put sufficient to forth a claim for which relief can granted. Watts, 506, 512, be Watts v. 137 2dWis. 405 (1987). complaint A N.W.2d should be dismissed as being legally only insufficient if there are no conditions plaintiff under which can recover. Ollerman v. (1980). Co., 17, 24, O'Rourke 2dWis. 288 N.W.2d95 pleaded As stated, this court has "The facts and all pleadings reasonable inferences from the are admitted only purpose testing legal true, to be but sufficiency purpose claim, of the not for the of trial." complaint's Id. We review a dismissal for failure to Harley-Davidson, de novo. Tietsworth v. state a claim Inc., 32, 11, 146, 2004 WI 270 Wis. 677 N.W.2d applies ELD 19. Whether the to bar a claim given presents question set of facts of law that under a subject our de novo Linden v. Cascade is review. Co., Stone 2005 WI
N.W.2d 189.
1—I HH M principal upon ¶ 20. The issues review are *11 ELD claims for inten- whether the bars common-law misrepresentation that occur in the context of tional noncommercial, real estate transactions. residential, or argues ¶ review, On Below that this court ELD should determine that the does not bar common- misrepresentation arising claims from law intentional noncommercial, transactions, real residential, or estate applied not our because she claims that this court has Alter- decision outside of a commercial context. Kaloti natively, argues that the Kaloti fraud Below exception apply to her to the ELD should inducement Inc., ¶ Enters., 555, 42. Below case. Kaloti 283 Wis. poor position that consumers are in a further asserts protect against because, fraud com- themselves unlike routinely purchase they parties, houses do not mercial pur- large goods. argues that noncommercial or Below allocating should not have the burden of chasers they Finally, Below con- risk that will be defrauded. attributes of such real tends that there are numerous rationale that render the ELD's estate transactions inapplicable. argue the ELD review, the Nortons that 22. On misrepresentation intentional
should bar common-law noncommercial, residential, claims in or real estate They appeals contend that the court of transactions. correctly applied existing concerning ELD case law particular present facts of the case. The Nortons buyers rationale, that the that are also assert ELD's adequately protected by the contractual remedies that they negotiate, applies equal residential, with force to result, noncommercial, or real estate transactions. As a argue buyers the Nortons that of such real estate committing fraud, should consider the risk of the seller suggest homebuyers and the further that are Nortons against position the best to insure such risk. below, 23. For the in detail reasons discussed we ELD hold that does bar common-law claims for misrepresentation intentional that occur in the context residential, noncommercial, or real estate transac- tions. judicially
¶ 24. The ELD "is a
created doctrine
preserve
seeks to
distinction between contract
Elec., Inc.,
tort."
Am.
Ins. Co.
v. Cease
2004 WI
of N.
(citation
15,
276 Wis. 2d
the house's anis economic loss be- allegedly cause the house is allegedly inferior. The house is pre- inferior because its broken sewer line fulfilling vents the house from uses, one of its intended prevents fulfilling and also the house from one of the general purposes sanitary it sold, for which was basic contracting party, Below, needs. The here could nor- mally8 loss, recover her economic which resulted when up expectations, through the house did not live to her contractual remedies because of her home con- sales tract.
¶ 26. The case on the ELD law leads us to the present case, result that we reach that ELD misrepresenta- bars claims common-law for intentional in the tion arise context of residential real estate applied transactions. This court has the ELD to bar negligence liability both and strict claims that arise in goods the context of consumer transactions. See State Co., Farm Mut. Auto. Ins. Co. v. Ford Motor note, again, requested, granted, We that Below and was complaint, leave to file an amended which contained a breach of However, claim. contract both the circuit court and the court of appeals did complaint not consider the amended because Below properly did not petition file and serve it. Below did not appeals' review of the court of determination on that issue. course, may, pursue § Below her Wis. Stat. 100.18 false claim, advertising misrepresentation claim because that was appeals, remanded to the circuit court for trial the court of and that decision is not before us. *13 (1999). Additionally, Digicorp,
305, 592 N.W.2d Corp., ¶¶ 12, 262 54, 4, Ameritech 2003 WI Inc. v. reaffirmed that 32, 652, this court Wis. 2d N.W.2d solely recovery losses in economic the ELD barred misrepresentation Furthermore, cases. intentional Vogt, ¶¶ Inc., 110, 11, 21, 274 2004 WI Van Lare v. though specifically 46, not 631, 683 N.W.2d Wis. deciding "all real the ELD covered estate whether the ELD can at least transactions," we held that bar misrepresentation in such claims some common-law ¶ Lare, Indeed, in we held Id., transactions. 21. Van "may simply ELD not be discarded because that the involves real estate." Id. transaction Kaloti, that the ELD In this court decided misrepresentation claims that arise in a contrac- bars setting, misrepresentation falls under a tual unless exception in the inducement to the ELD. narrow fraud Enters., Inc., 555, Wis. 2d 42. For this Kaloti exception apply, fraud in the inducement to narrow plaintiff misrepresentation must have induced the to specifi- the contract and must not have been enter into subject cally matter of the contract. Id. related to the way, exception apply, Put another for this narrow misrepresentation to, rather than must be" 'extraneous omitted). (citation with, the contract.'" Id. interwoven particular to our decision in 28. Of relevance previous present are this court's decisions case Lehtinen, Linden, v. 283 Wis. 2d and Wickenhauser It 734 N.W.2d855. seems 2007 WI applies in Linden that the ELD clear that we decided residential real estate transactions. Linden, In this court affirmed the circuit summary judgment grant dismissed, as
court's *14 (the ELD, barred the James and Dianne Linden's Lindens) negligence against claims some subcontrac- participated tors who had in the construction of their ¶ Linden, house. 1. The Lindens alleged negligent per- that the subcontractors were in forming work under a written construction contract. ¶ Id., 3. In a context that involved residential real estate, this court held that the circuit court was correct holding in ELD barred the Lindens' tort claims against Specifically, ¶¶ the subcontractors. Id., 3, 4. we negligence decided that the ELD barred claims in the setting real estate because we were convinced that the written contract for the construction of the Lindens' primarily goods, house was one for to which ELD applied, primarily and ¶ not one for Id., services. 22. recently,
¶ 30. Most in our in decision Wicken- applied hauser, excep- we fraud the inducement ELD tion to the in the context of a noncommercial real Wickenhauser, estate transaction. ¶ Wis. 2d 3. bought ¶ 31. The Wickenhausers 300 additional dairy acres in 1997 for their farm from Burow, Thomas they financing obtained their from Jack Lehtinen (Lehtinen). Id. Lehtinen asked the Wickenhausers to sign option gave three-year right an contract that him a buy purportedly to $300,000, 300 acres for as a security allegedly for loans, and Lehtinen told the option. Wickenhausers that he would not record the Id., ¶ exchange contrast, 5. In Lehtinen "contended that together promise $66,000 for the loan, with his to secure an additional loan $200,000 ., . . the Wicken- agreed hausers to make Lehtinen one-half owner of the parcel." 300-acre Id. (the action)
¶ 32. Lehtinen filed a first lawsuit against seeking the Wickenhausers enforcement of his option, buy which he recorded, Id., had to the 300 acres. action, the Wicken- first to the In their answer 6. Lehtinen defense that affirmative an
hausers asserted sign option. fraudulently Id., to them induced had (the sec- then filed a lawsuit The Wickenhausers action) seeking quiet the 300 acres title to ond "damages arising seeking from also names and their in- misrepresentations made to Lehtinen fraudulent sign option." Id. them to duce circuit court found action, the In the first agree they "did not and held that the Wickenhausers ownership in the 300-acre grant interest an Lehtinen court also parcel." action, the circuit *15 In that Id., 9. (1) option granted it was void because: of the rescission (2) had made material consideration; Lehtinen for lack of misrepresentations reason- had that the Wickenhausers (3) upon had ably detriment; and Lehtinen to their relied agent the Wickenhaus- he induced a dual when acted as option. signing action, the Id. In the second the into ers compen- both the court awarded Wickenhausers circuit satory damages, punitive circuit court and the summary judgment based for Lehtinen's motion denied preclusion. ¶ Id., 1. claim on had ¶ held that Wickenhausers 34. This court against misrepresentation intentional a claim for stated " inter- to, rather than 'extraneous that was Lehtinen ¶ result, Id., As a we with, the contract.'" woven exception applied inducement fraud in the the narrow misrepresentations "Lehtinen's ELD, because to sign to to induce Wickenhausers made were misrepresentations option." did not stated, "The Id. We performance contract, of the which relate to Lehtinen's purchase].9 [financing the land to obtain was statement that disagree with the dissent's Accordingly, we when, ever, inducement if fraudulent to discern is difficult ”[i]t with, the to, than interwoven rather a contract is 'extraneous gives independent Therefore, this fraud rise to an cause in of action tort."10Id. Significantly, Wickenhauser, in Chief Justice majority opin-
Abrahamson's concurrence described the extending by holding, ion as ELD time, for the first applicable "that economic loss doctrine is to the present real noncommercial estate transaction involv- ing unsophisticated party negotiating at least one with- fully bargained-for counsel written, out and without a (Abrahamson, concurring). Id., C.J., contract." Citing majority opinion disagreed Linden, the with the concurring opinion's being statement that ELD was applied for the time in first Wickenhauser a case arising involving out of a transaction residential, or doing noncommercial, Id., estate. In so, real n.15. majority opinion stated that its "not did extend the example, economic loss doctrine into new contexts. For case, ., recent Linden.. we concluded that a subject contract to construct residential real estate was (citation the economic loss doctrine . . .." Id. omit- ted). As Chief Justice concurrence in Abrahamson's majority opin- indicates, Wickenhauser the effect of the applied was ion Wickenhauser to hold that the ELD Id., to noncommercial real estate transactions. (Abrahamson, concurring). C.J., *16 Dissent, Contrary assertion, contract.'" dissent's 73. to the of "explaining difficulty apply instead the of the how to narrow ELD, exception" pages to the review the the law article that simply the dissent cites recount caselaw on this court's that Id. issue. us, including Based on the before the record residential purchase report, real offer and the estate condition we are purchase that the here satisfied contract included the of both any Accordingly, the house and the associated land. undisclosed with, with defects the house were interwoven and not extrane to, purchase ous the contract to here. majority, appears as that the as well the It be- in drew no distinction
concurrence, Wickenhauser In the "residential" and "noncommercial." tween terms unnecessary such a us, it seems to draw the case before fits real either term the estate distinction because issue Based on the case law cited transaction at here. analyses previously, given the and discussions and majority opinion in in the and the concurrence Wicken- hauser, ELD that the bars common-law we are satisfied misrepresentation arising of resi- intentional claims out dential, transactions, noncommercial, or real estate in the us. such as the one case before Additionally, presented facts support present ELD our conclusion that the bars case misrepresentation claims aris- common-law intentional ing residential, noncommercial, out of or real estate The record us reflects that transactions. before Below completed report property a condition ac- received § requirements 709.02. cordance with Wis. Stat. § and statute, 709.03, Under that also under Wis. Stat. report required property condition that Below may to obtain received contained a notice that she want professional inspection prop- an of the either advice or erty. property required statutes, Under those report condition also contained a disclaimer buyer, acknowledged professional Below, that a here knowledge may required inspector's technical be or There is noth- detect certain defects code violations. ingin the record before that indicates whether Below us professional inspector heeded this advice hired closing Regardless, before on the home. if the Nortons knew the defect the sewer line and failed to about with required statutes, as then defect, disclose the these may very the Nortons well have breached contract's pending result, terms. As addition to her Wis. Stat. *17 might normally § claim, 100.18 Below been in have position pursue against to a breach of contract claim the Nortons which contractual remedies would have been available.11 protections
¶ 38. Under the afforded to real estate § purchasers by purchasers pro- 709.02, Stat. Wis. are by and, thus, tected contract contractual remedies. Accordingly, ELD bar should common-law claims misrepresentation for intentional that arise residential, context of or real noncommercial, estate sought damages when, here, transactions as are purely Clearly, purchasers adequate economic. have statutory remedies, contractual and if needed. agree Furthermore, not with we do Below exception fraud in
that Kaloti the inducement applies present ELD to the facts case. As exception discussed, the Kaloti fraud in the inducement applies only misrepresentation ELD to the when the question plaintiff induced the to enter the contract, into " misrepresentation to, and must be 'extraneous with, than interwoven rather the contract.'" Kaloti (citations omitted). Enters., Inc., ¶ 42 only alleged misrepresen- This is so because where specifically subject did tation not relate to the matter of plaintiff protect the contract be would unable through negotiations. himself or herself contract See Digicorp, present ¶32, case, 48. In the if Wis. they line, the Nortons were aware of the broken sewer again requested, granted, We note that Below was complaint, leave to file an amended which a breach of contained However, properly contract claim. Below did not file and serve complaint. her amended *18 § obligated under Wis. Stat. 709.02 to have been
would result, As a the broken sewer that fact to Below. disclose requirement for the Kaloti not meet the line does exception being is "extraneous" to the of a matter that subject exception matter, and the Kaloti does contract's present apply Inc., Enters., case. Kaloti not (citation omitted). ¶ Wis. summary,
¶ herein, In for the reasons stated ELD common-law claims are satisfied that the bars we misrepresentation in real for intentional estate trans- residential, in the context of or actions that occur noncommercial, sales.
IV ap- 41. We affirm the decision of court peals. ELD hold that the bars common-law claims We misrepresentation in real estate trans- for intentional actions, such claims the context of whether occur noncommercial, residential, sales, or such as the one in before We do not draw a distinction the case us. and "noncommercial" between the terms "residential" here, fits the real estate transac- because either term tion at issue. remedy. pur- left a A 42. Below is not without home,
chaser as well as real estate brokers and agents, applying all be that the ELD still can assured statutory leaves and contractual remedies available misrepresentation has where occurred. We note that § Below's claim under tising Stat. 100.18 false adver- Wis. appeals the court of to the was remanded circuit for a trial on merits. The court of court its appeals' presented decision on that issue was not for our remedy provides than review. Section 100.18 merely for more advertising," in it fraudulent "false covers representations prospective pur- made to even one Corp., chaser. See K&S Tool & Die 301 Wis. 2d ¶¶ 21, 23. Corporation opinion, In our K&S Tool & Die legislature
we stated that intended Wis. Stat. " § protect 100.18 'to the residents of Wisconsin from any deceptive, misleading representa- untrue, or (citation omitted). tions Id., ....'" Furthermore, only we reiterated that a statement that was made to *19 qualify protections one individual could for the afforded §by Clearly, purchaser 100.18. Id. a of residential or protected noncommercial real estate, such Below, as is §by representations 100.18 from the false of a home proves seller. If Below that claim, she shall recover her "pecuniary together including loss, costs, with reason- 100.18(ll)(b)2. attorney § able . fees . . ." See Wis. Stat. ¶ 44. The issue of whether the ELD bars claims § under Wis. Stat. 895.446 for a violation of Wis. Stat. 943.20(l)(d)
§ presented also was for our review. How- ever, opinion, we decline to address that issue in this and we remand that issue to the circuit court. We do so proceedings because the record of the before the circuit why court is unclear as to this claim was dismissed. directly Furthermore, the issue was not addressed and by appeals. discussed the court of We cannot determine from the record before us on review whether the circuit (1) court dismissed that claim: because it was insuffi- fatally upon cient and flawed, so that a claim which (2) granted relief could be was stated; not or because by the circuit court believed that claim was barred ELD. a result, to, As we remand that issue the circuit proceedings. Upon court for further remand, the circuit clearly holding court should state that court's on that statutory review this claim. The circuit court should Stuart, in recent decision 308 Wis. court's statutory That case addressed the issue whether ELD. In barred that claim involved therein was ELD stated, cannot case, apply are satisfied that we "We statutory Id. ...." claims appeals By court of the Court.—The decision the circuit affirmed, and matter is remanded to is this opinion. actions with this court for consistent (dissen- BRADLEY, ANN J. WALSH single person every ting). is a can affect This case that many purchases a home Wisconsin. For who citizens buying state, a home will be one of most of this purchases they important in their will make life- time. According majority, person selling
¶ 46. to the buyer eye, lie can look the about the home escape consequences legal home, of the condition the lie of the loss doctrine. tort for because economic has the dubious distinction of 47. Wisconsin only country being in the state entire have judicially expanded in such a this created doctrine *20 majority origi- that The has taken a doctrine fashion. nally very applied in a narrow context—commercial warranty products for under has transactions —and homebuyers recovering prevent it to from now used damages by misrepresentations in tort caused fraudulent sellers. majority Contrary protestation,
¶ 48. to its is compelled result. this unfortunate No not to reach compelling legislature law this conclusion. enacted a majority judge-made applying is own doctrine. The its not Likewise, case law does com- Wisconsin justifications expanding pel The such an outcome. apply the economic loss doctrine do the reach of not Rather, here. the case law shows that the economic loss ought apply purchase by doctrine not to the of homes private individuals. majority downplays The the reach of its by noting may remedy that Below still have a
decision § Although may Stat. 100.18. still under Wis. Below remedy majority opinion ignores here, have a cases victims of fraud will remediless. which be apply judicially ¶ 51. Rather than this created defrauding escape doctrine that allows ity sellers to liabil- tort, I would instead heed the advice of amicus (Realtors). They Wisconsin Realtors Association warn application that the of the economic loss doctrine here is bad for the Wisconsin real estate market and bad for Wisconsin consumers. majority's application 52. Because protects doctrine, lie compelled by
economic loss which sellers who home, of the is neither about condition by good public policy, respect- supported I the law nor fully dissent.
HH majority's argument down, 53. Boiled is that compelled "the case on the it is to reach this result: law doctrine] [economic to the result" that the loss leads us applies purchases private doctrine to home individu- Majority op., ¶ 26. It maintains that under this als. Lehtinen, v. 2007 WI court's decision Wickenhauser 734 N.W.2d the economic loss applies for all "noncommercial" doctrine to transactions including Majority estate. estate, real residential real majority op., ¶ 36. The further determines misrepresentation here does not fall within the narrow
737 exception in to the economic loss fraud the inducement adopted by Enters., Inc. v. doctrine this court Kaloti Kellogg 555, Co., Sales 2005 WI 283 Wis. Majority op., ¶ 205. 39. N.W.2d However, the cases do not lead to the justifications majority's that this has result. The court proffered application for the of the economic loss doc- apply private trine do not in the context of home buying. recog
¶ 55. The economic loss doctrine was first by Sunnyslope Grading, nized this court Inc. v. Risberg, Inc., Miller, & 148 Wis. 2d Bradford (1989). That N.W.2d purchaser case involved commercial product, equipment, construction warranty. that of a purchaser carried manufacturer's The sued profits repair the manufacturer in tort for lost and costs equipment warranty "specifi when the failed. Id. The cally recovery damages," preclude[d] the of such and this court determined that the economic loss doctrine precluded recovery in Id. at 921. tort. Cedarapids, In Daanen & Janssen v. Inc. we
applied in an
doctrine
action between commercial
recovery
parties
bar
tort for economic losses
resulting
product.
from failure of a
(1998).
explained
397-98,
¶ case, course, of neither 58. The current involves parties, to commercial a contract a contract between warranty, protections purchase product, of a a nor purchase private the U.C.C.It involves a individual's underwriting policies in the doctrine other a home. The purchases. support applying it home contexts do not buying a home are not as well suited Private individuals parties risks commercial or to assess and allocate the as products. especially purchasers of That is true with possibility respect to the risks associated with fully being point defrauded, a more discussed below. majority maintains that Nonetheless, applies real doctrine residential the economic loss upon this court's deci transaction here based estate Vogt,Inc., 110, 274 Wis. 2d Lare v. 2004 WI sions Van Co., v. Cascade Stone 2005 631, 46, 683 N.W.2d Linden 606, 189, 699 N.W.2d Wicken 113, WI inapt. hauser, 2d 41. All three cases are 302 Wis. applied economic loss In Lare we Van liability recovery misrepresen- to bar for strict doctrine 1 Code, 401-411 Wis. Stat. chs. The Uniform Commercial (2005-06) govern rights forth the and remedies sets relatively equal parties of between commercial transactions Miller, Sunnyslope Grading, Inc. v. bargaining power. Bradford (1989). Inc., 213 It Risberg, & 2d 437 N.W.2d 148 Wis. system compensating consumers "comprehensive provides a purchase prod of defective arising from the for economic loss Co., Motor Farm Mut. Auto. Ins. Co. v. Ford ucts." State (1999). 305, 342, 2d 592 N.W.2d Wis.
tation the context of transaction for commercial gravel pit. real estate —a 2. Our Wis. premised decision was on the fact that the case involved "bargained-for contract for the sale of commercial-use sophisticated parties represented by land two between during negotiation process." Id., counsel emphasized 21. We premise
that a foundational of the eco- nomic loss doctrine is that contract law is better suited purely than tort law "to deal economic with loss *23 added). (emphasis ¶ Id., commercial arena." Accord- ingly, exception concluded that we there was no to the liability misrepresentation doctrine for strict "in a purely setting." ¶ Id., commercial nothing
¶ Lare, however, 61. Van tells us about apply whether the economic loss doctrine should current case. This case does not involve the sale of gravel pit; rather, commercial-use land like a it involves purchase negotiation of a home. It does not involve sophisticated parties represented by between two coun- during negotiations. sel The transaction did not take place "purely setting." in a commercial The cause of liability misrepresentation. fraud, action not is strict In nothing words, other this case is like Van Lare. similarly inapplicable. ¶ I,t 62. Linden is involved a contract for the construction of a house. 283 Wis. 2d ¶ 1. This court a determined that contract for the product, construction of a house was a contract a for applied and that the economic loss doctrine on that ¶ Id., basis. 25. The current case does not involve a purchase product, contract for the of a it is a contract for real estate. majority's
¶ here, 63. From the discussion one think would that this court considered the contract Linden to be a real estate It transaction. describes occurring "[i]n Linden as a context that involved resi- and states that "we decided that the estate," real dential doctrine] negligence [economic in the loss barred claims Majority setting." op., ¶ 29. estate real majority's implication of the careful 64. The actually phrasing as a is that this court viewed case opinion language The of the tells real estate case. ground story: was decided on the different Linden product. was a contract the construction contract equation. concept entered the The of real estate never do not even occur the Linden The words "real estate" opinion. majority primary case on which the 65. The apply for its the economic loss doctrine relies decision buying The of to home is Wickenhauser. relevance party dubious, this case is as neither Wickenhauser to applied to bar that the doctrine a cause contended The case instead action. 302 was Wis. Id., election remedies. 1-2. about .%% pur- did 66. Wickenhauser not even involve purchase real of a or the of residential chase home option involved an to sell farmland. Rather, estate. it majority why ¶¶ Id., 1, 7. It is unclear concludes *24 involving a case a transaction farmland that about involving of a case a contract dictates outcome purchase of a home.2 major- importantly, ¶ the Wickenhauser 67. More ity it did that not extend economic adamant was already beyond estab- contexts those loss doctrine into 2 majority nor the majority
II. majority go opinion problems ¶ The with the 71. beyond the loss to its of economic doctrine execution purchase by private the of individuals. include homes expansion the of this doctrine is exacerbated The majority's application of the narrow-rather than the exception broad-fraud in the inducement to the eco- exception a loss Under the narrow nomic homebuyer's doctrine. pur- be even when the claim can barred on the of the seller. chase was made based lies majority ¶ observes, in court As the Kaloti this 72. application exception adopted the the of to narrow misrepresentation loss for economic doctrine fraudulent exception for Under an action fraudulent claims. this precluded by is the economic of a contract inducement misrepresentation is if "interwoven loss doctrine goods quality or character of which with parties performance of contracted or otherwise involved Kaloti, the contract." when, if fraudu- ever, It is to discern difficult to, contract "extraneous rather
lent inducement to a is Majority op., ¶ 39 with, interwoven contract." than 42); Ralph (quoting C. Kaloti, see 283 Wis. Exception to the Anzivino, The in the Inducement Fraud Marq. Doctrine, L. Rev. 935-36 Loss Economic (2007) difficulty apply (explaining of how difficulty exception). Beyond in the the obvious narrow public policy simply application it is test, bad this recognize claims. Most states bar fraudulent inducement this. majority addressing ques- 74. The states exception: adopted the eco- a broad fraud
tion have fraud.3 not claims based on loss doctrine does bar nomic Exception the Inducement The Fraud in Anzivino, Ralph C. *26 only adopted Wisconsin one is of three states that have exception the narrow to the economic loss doctrine. The deployed courts of the other two states have either not exception or have declined to use this narrow to bar fraudulently inducing purchase claims for the of resi- dential real estate. Michigan appeals adopted 75. The court of approach Eng'g
narrow in Huron Tool & Co. v. Preci (Mich. Consulting Servs., Inc., sion 532 N.W.2d541 Ct. 1995). App. supreme Michigan yet The court of has not Michigan issue, addressed the deployed courts have not exception the narrow to bar fraudulent in ducement claims in the context of residential real estate transactions. only supreme 76. The other state court nomi-
nally adopting exception the narrow to the economic loss HTP, doctrine is Florida. Ltd. v. Lineas Aereas (Fla. 1996). Costarricenses, 685 So. 2d 1239-40 so, Even the court in HTP held that a claim for independent fraudulent inducement constituted a tort underlying from the and, contract therefore, was not by barred the economic loss rule. Id. at 1240. Additionally, applied Florida courts have not exception narrowly majority as as does in the present Relying reasoning case. on the HTP, of appeals Florida court of has determined that in a con- tract for residential real estate a "fraudulent inducement by [doctrine]." claim is not barred the economic loss (Fla. Swope Dimarco, v. 886 So. 2d Dist. Ct. 2004) added).4 App. (emphasis present With the case, therefore, Wisconsin obtains the dubious distinc- Doctrine, to the Economic Loss Marq. L. Rev. 932-33 (2007). 4 The defendants in Swope represented buyer to a home that the home was free However, buyer defects. discov- country in the that bars only state being tion fraudulently inducing purchase recovery tort individuals. of homes private the tort claims of defrauded home- Barring is to the public's is It anathema buyers public policy. bad telling in matters of commerce. As interest truth HTP, the interest court stated in supreme Florida aptly *27 for truth in fraud claims is the need protected by and in business rela- relationships generally human specifically. tionships society's by fraud is need for protected interest
[T]he important human relation- true factual statements relationships. or ships, primarily commercial business by specifically, protected the fraud is a More interest justifiably rely the truth of a right to on plaintiffs representation in a situation where defendant's factual plaintiff. the lie would result loss to an intentional HTP, (internal 1240 and citation quotation 685 2d at So. omitted).5 alleging that moving in, brought a lawsuit defects after and
ered
fraudulent
induce-
defects constituted
the failure to disclose
HTP,
the economic
the court determined that
Applying
ment.
Dimarco,
Swope
2d
v.
886 So.
doctrine did not bar the claim.
loss
(Fla.
2004); HTP, Ltd. v. Lineas Aereas
270,
App.
Dist. Ct.
272
(Fla. 1996).
Costarricenses,
685 So.
1238
5
example of a state
supreme court is an
The Florida
expansion
upon an
once embarked
supreme court which
original
beyond
purpose,
the doctrine's
economic loss doctrine
lamenting
In
for a retreat.
signaling
now is
need
but
subsequent
"[u]nfortunately...
hold
our
it
expansion
stated
beyond
principled
its
the rule
expand
to
ings
appeared
have
...
to
applications of the rule
to
origins and have contributed
v.Heath
original
our
intent." Moransais
beyond
well
situations
(Fla. 1999).
v.
man,
Indem. Ins. Co.
See also
744 So. 2d
980
2004)
(Fla.
(recognizing
Aviation, Inc.,
891 So. 2d
Am.
Similarly,
principles underlying
79.
the eco-
by barring
nomic loss doctrine are thwarted
claims of
purpose
victims
fraud. The
of the economic loss
preserve parties'
doctrine is to
"freedom to allocate
encourage
party
contract,"
economic risk
and "to
[of]
best situated to
the risk
assess
economic loss ...
against
assume, allocate,
Daanen,
or insure
that risk."
cate risks based on induced contracts. entering "agree upon Parties a contract the rules and regulations govern relationship; which will their agreement risks inherent in the and the likelihood of its [E]ach willingness keep breach. .. . trusts the other's his his word honor commitments . . .". Robinson Helicopter Corp., Co., v. Inc. Dana P.3d (Cal. 2004). scope Fraud falls outside of the of risks assumed and for in allocated a contract. Placing party on burden the defrauded *28 counterproductive. party
to the assess risk is The best party situated to assess the risk of fraud is commit- ting party fraud, not the that is the victim of fraud. particularly
¶ 82. This is true the context of the purchase by private of homes As individuals. amicus recognizes people purchasing brief, Realtors in its sophisticated negotiation homes are often neither represented by nor counsel. The seller a of home has greater buyer information, and the relies on the seller to be truthful.
that economic loss doctrine in recovery Florida does not bar misrepresentation fraudulent claims). inducement and negligent I—I 1—I H—I majority consequences downplays The 83. may by noting still its that Below have a decision op., § Majority remedy ¶ 5. In under Stat. 100.18. Wis. doing ignores there be no so it the cases which will remedy. underlying ap- a court of The facts recent 84. problem.
peals See Aslani v. decision illustrate unpub- Country Inc., Homes, 2007AP503, Creek No. 2008) (Wis. January slip op. App. (petition 29, Ct. lished pending).6 Country Creek built 52 new for review Creek, Milwaukee, in 1996 in Oak a suburb of homes August been to homes had and 1997. Prior plaintiffs in the 52 the case. sold to inspector In a home hired October penetrated that water had one of the owners discovered degree inspector's that the and rotted the roof such through problem then the roof. The same was foot went The roofs in each of the other residences. discovered paper, properly felt constructed because had not been shingles, required placed had not been under the be misrepre- alleged plaintiffs fraudulent installed. The asserting brought April suit in sentation and § action. The contract, tort, 100.18 causes of majority's position remediless. here the victims leaves six-year Contract have statute claims § accrue at the Stat. 893.43. Claims limitations. Wis. regardless is breach, of when breach time of P'ship Ltd. v. Arrowhead Pac. discovered. CLL Assocs. any precedential discussed not for The Aslani case is. remedy example may exist where no purposes but as a recent 809.23(3). (Rule) § As homebuyers. Wis. Stat. for defrauded See *29 on above, pending this court a currently is before noted it petition for review. (1993).
Corp., 604, 609, 497 N.W.2d expired by Thus, the contract statute of limitations had the time of the lawsuit. subject
¶ 87. Section 100.18 claims are to three- year repose, statute of which accrues at the time of the 100.18(ll)(b)3. § violation. Wis. Stat. This too had expired at time of the lawsuit. subject six-year
¶ 88. Tort claims are
ato
statute
§
of limitations, but in contrast to contract and 100.18
(or
they
injury
claims,
accrue when the
is
should have
been)
§ 893.52;
discovered. Wis. Stat.
Hansen v. A.H.
(1983).
Robins, Inc., 113
Wis. 2d
¶ 89. The asserts that Below "at- tempt again complaint" to file and serve an amended containing Majority op., breach of contract claims. opine ¶ 12.1 do not on the likelihood success of such "attempt" given procedural history an of this case. history previ- That reveals that the circuit court has granted ously complaint a motion to amend the to add claim, contract then months later dismissed the complaint amended for failure to file and serve. The appeals already court of has affirmed the dismissal of the contract claim and Below declined to seek review of that dismissal here. Despite majority's hypothesis
¶ 90. that Be- might attempts again low recover if he to file a contract only claim, there remain fraud cases where tort is remedy. majority The bars those homeowners from recovering for latent defects hidden sellers' deceit. appeals recognized
¶ 91. The court of in Aslani that the outcome was "harsh" felt but that its hands *30 proper suggested fix was the that The court tied. were change contract legislature law to allow to the discovery upon Because of breach. to accrue claims judge-made however, no law, is doctrine loss economic legislative necessary. may and court, here This be fix leaves victims "harsh" result that such a now, could curb refusing apply by loss doc- the economic to remediless by involving purchases of homes trine cases homebuyers. defrauded
IV majority's approach problems ¶ highlighted The with by Realtors. filed in the amicus brief are They argue should not doctrine the economic loss apply purchase that the doctrine home, and to the involving fraudu- particularly in cases unwarranted is express about concern Realtors inducement. The lent impact market the real estate decision on of this consumers: and Wisconsin complete and homebuyers with accurate
Providing of trust an environment promoting and information informed real for fair and honesty are essential transaction real estate The residential contracts. estate industry and the the real estate fundamental is seeking homeowner- consumers welfare Wisconsin ship. They're right.
¶ 93. application doc- loss of the economic ¶ 94. The homebuyers recovery barring are victims who trine market and real estate is bad for both of fraud compelled the law neither It is of consumers. welfare Accordingly, public policy. I by good supported nor respectfully dissent.
¶ 95.
I am authorized to state that Chief Justice
SHIRLEY S. ABRAHAMSON and Justice LOUIS B.
join
BUTLER, JR.
this dissent.
The
notes
neither
distinguished
between "residential"
dissent Wickenhauser
why
Majority op.,
real estate.
36. But
¶
and "noncommercial"
real
they have?
did not involve residential
would
Wickenhauser
Why
distinguish
failure to
residential and
estate!
does the
in one
this
from
prevent
noncommercial
real estate
case
court
real estate —a home
live in—and
distinguishing residential
farmland?
¶
lished in this state
Linden. Id.,
42 n.15. As
explained
application
above, the
of the economic loss
doctrine in Linden was based on the determination that
the contract for the construction of a house was a
product.
¶
contract for a