Donna BRENNER, as Personal Representative for the Estate of Russell T. Brenner and Donna Brenner, Individually, Plaintiffs-Respondents, v. AMERISURE MUTUAL INSURANCE COMPANY, Garland Brothers Joint Venture and Garland Brothers, Inc., Defendants, CHARTER MANUFACTURING CO. and Ace American Insurance Company, Defendants-Respondents, NATIONAL CASUALTY COMPANY and Milwaukee World Festival, Inc., Defendants-Appellants-Petitioners.
No. 2014AP2376
Supreme Court of Wisconsin
Decided April 18, 2017
2017
Oral argument October 26, 2016.
For the defendants-appellants-petitioners, there were briefs by Pamela M. Schmidt and Scopelitis, Garvin, Light, Hanson & Feary, P.C., Milwaukee, and oral argument by Pamela M. Schmidt.
For the plaintiffs-respondents, there was a brief by Susan R. Tyndall, Timothy S. Trecek and Habush Habush & Rottier, S.C., Milwaukee, and oral argument by Susan R. Tyndall.
¶ 1. DANIEL KELLY, J. The question before the court is whether Charter Manufacturing Company (“Charter“), the former long-term tenant of property owned by Garland Brothers Joint Venture (“Garland Brothers“), could be liable for injuries to Russell T. Brenner, a construction worker who labored at the former Garland Brothers building after it had been sold to Milwaukee World Festival, Inc. (“MWF“).
I. FACTUAL BACKGROUND
¶ 2. For 21 1/2 years, Garland Brothers owned the property located at 607 Polk Street in the city of Milwaukee (the “Property“). For 20 of those years, Charter housed its wire manufacturing business at the Property under a triple net lease.1
¶ 3. Fast forwarding 20 years, Charter notified Garland Brothers that it would terminate its lease at the end of 2009. The lease obligated Charter to remove its machinery (including the heat treatment furnaces) from the Property before surrendering possession. Additionally, Garland Brothers asked Charter to perform several maintenance and repair tasks. One such request was to fill in the pit where the heat treatment furnaces had been located. Garland Brothers later revoked this request in exchange for Charter‘s commitment to leave the pit in a “clean and safe condition.”
¶ 4. Charter hired Pieper Electric to help it remediate the Property before the end of the lease. Pieper Electric, in turn, subcontracted with Harrison Metals to remove the heat treatment furnaces. Completion of that task left holes in the metal grate floor through which the furnaces had once protruded. Because the holes could pose a danger, Harrison Metals created short plywood boxes to cover them. Harrison Metals did not mark the boxes to indicate their function or tether them in place. In late December 2009, Garland Brothers performed a final walkthrough of the Property with its experts and Charter representatives. Because Garland Brothers had performed numerous inspections throughout the life of the lease, the heat treatment furnaces would have been conspicuous by their absence during this final walkthrough. Garland Brothers did not raise any concerns about the pit, the holes in the floor above it, or the method of covering them.
¶ 5. Charter released possession of the Property to Garland Brothers on December 31, 2009. Garland Brothers thereafter maintained sole possession of the Property until MWF purchased it in “as-is, where-is” condition “with all faults” and took possession on May 3, 2011. MWF had originally slated for demolition the building Charter had occupied but subsequently changed its plans.
¶ 6. MWF was on the Property multiple times before purchasing it. Its general counsel, for example, personally conducted walkthroughs of the Property while Charter was still occupying it and observed the heat treatment furnaces extending through the metal grate floor. MWF also had a designer inspect the building several times and had the designer specifically consider the feasibility of creating an entryway where the heat treatment furnaces stood. MWF‘s construction director was also on the Property prior to the purchase to plan for future work. Environmental tests performed as part of due diligence in the sale of the Property also identified the existence of the pit.
¶ 7. After completing the purchase of the Property, MWF hired Hunzinger Construction (“Hunzinger“) to perform demolition and renovation work on the Property. As part of their work, Hunzinger employ-ees, including Mr. Brenner, removed the plywood boxes present in the building. Mr. Brenner did not know that some of these boxes covered holes once occupied by the heat treatment furnaces. Consequently, while removing one of these boxes, he fell through a hole and sustained severe injuries.
II. PROCEDURAL BACKGROUND
¶ 8. Mr. Brenner and his wife sued MWF, Garland Brothers, and Charter (as well as
¶ 9. Charter and Garland Brothers moved for summary judgment, relying primarily on the doctrine of caveat emptor as described in the
¶ 10. MWF appealed Charter‘s dismissal.4 MWF‘s interest in this question is in ensuring it is exposed to no more than the correct quantum of liability. Notwithstanding Charter‘s dismissal from the case, if the matter proceeds to trial, a jury would need to apportion liability amongst all eligible defendants—even those who have been dismissed through settlements. If the law of negligence makes Charter eligible for liability, MWF‘s exposure potentially decreases, resulting in a smaller judgment against it. If Charter is not eligible for liability, the potential judgment against MWF could increase.
¶ 11. On appeal, MWF argued that Charter was not a “vendor” under
III. STANDARD OF REVIEW
¶ 12. This matter is before us on review of a grant of summary judgment dismissing the Brenners’ negligence claim against Charter. Summary judgment is appropriate where there are no material facts in dispute and the moving party is entitled to judgment as a matter of law. See
IV. DISCUSSION
¶ 13. We must determine whether the law of negligence could make Charter liable to the Brenners. Success in that endeavor requires establishing the following: (1) a duty of care owed by Charter; (2) a breach of that duty; (3) a causal connection between the breach and the Brenners’ injury; and (4) actual loss or damage resulting from the injury. Gritzner v. Michael R., 2000 WI 68, ¶ 19, 235 Wis. 2d 781, 611 N.W.2d 906. On summary judgment, only the first issue—whether Charter owed the Brenners a duty of
care—was at issue. It is also the only element we address in our analysis here.
¶ 14. MWF asks us to find that the tort-based duty of a real estate tenant continues even after the tenant vacates the property. The Brenners say, and the circuit court and court of appeals agreed, that the caveat emptor doctrine terminated Charter‘s duty after it surrendered possession of the Property to Garland Brothers. MWF tells us that caveat emptor is an archaic proposition and that we would do well to join the twenty-first century by abandoning this concept in favor of principles described in the
A. Charter‘s Duty
1. General principles governing “duty”
¶ 15. Before analyzing the caveat emptor doctrine, we must first describe the duty it is supposed to affect. MWF says it is “unquestionable” that Charter would owe a duty to the Brenners absent the doctrine of caveat emptor “because everyone owes a duty to everyone else.” (Citing Behrendt v. Gulf Underwriters Ins. Co., 2009 WI 71, 318 Wis. 2d 622, 768 N.W.2d 568.)
¶ 16. This characterization of Behrendt suggests we have concluded that every negligence claim arrives at court with the first element already proven as a matter of law, or that we have eliminated the first line from the negligence quatrain. We have not. See, e.g., A.E. Inv. Corp. v. Link Builders, Inc., 62 Wis. 2d 479, 484, 214 N.W.2d 764 (1974) (“Duty is still an important factor in determining whether an act is negligent.“).
¶ 17. What we said in Behrendt is that “everyone owes to the world at large the duty of refraining from those acts that may unreasonably threaten the safety of others.” Behrendt, 318 Wis. 2d 622, ¶ 17 (bracket and internal marks omitted) (quoting Alvarado v. Sersch, 2003 WI 55, ¶ 13, 262 Wis. 2d 74, 662 N.W.2d 350).7 Immediately following this statement, however, we explained that “[w]hat is within the duty of ordinary care depends on the circumstances under which the claimed duty arises. For example, what is comprised within ordinary care may depend on the relationship between the parties or on whether the alleged tortfeasor assumed a special role in regard to the injured party.” Behrendt, 318 Wis. 2d 622, ¶ 18 (quoting Hoida, Inc. v. M & I Midstate Bank, 2006 WI 69, ¶ 32, 291 Wis. 2d 283, 717 N.W.2d 17).
¶ 18. One of the most significant circumstances relating to the nature of Charter‘s duty in this case is the relationship between the parties, as evidenced by the sequence in which the defendant parties possessed the Property. As relevant here, Charter was the first to possess. Garland Brothers then took possession upon expiration of Charter‘s lease. Finally, MWF gained possession of the Property through its purchase from Garland Brothers.
¶ 19. Therefore, whether Charter is potentially liable in negligence to the Brenners depends on whether its duty “to the world at large... [to] refrain[] from those acts that may unreasonably threaten the safety of others,” Behrendt, 318 Wis. 2d 622, ¶ 17 (internal marks and citation omitted), extended to telling not just Garland Brothers, but all future strangers who may come into possession of the Property, that there were holes in the floor under the plywood boxes.
¶ 20. The only support MWF identified for this proposition was
2. Restatement (Third) of Torts: Physical & Emotional Harm § 51
¶ 21. MWF urges us to adopt
Subject to [Restatement (Third) of Torts: Physical & Emotional Harm] § 52, a land possessor owes a duty of reasonable care to entrants on the land with regard to:
(a) conduct by the land possessor that creates risks to entrants on the land;
(b) artificial conditions on the land that pose risks to entrants on the land;
(c) natural conditions on the land that pose risks to entrants on the land; and
(d) other risks to entrants on the land when any of the affirmative duties provided in Chapter 7 is applicable.
A possessor of land is
(a) a person who occupies the land and controls it;
(b) a person entitled to immediate occupation and control of the land, if no other person is a possessor of the land under Subsection (a); or
(c) a person who had occupied the land and controlled it, if no other person subsequently
became a possessor under Subsection (a) or (b).
¶ 22. If we were to adopt
¶ 23. MWF says we may engage comment t to
possession of the land continues to be subject to the ordinary duty of reasonable care provided in
¶ 24. Thus, both
¶ 25. Instead, the actual text of these Restatement provisions comprise a basically faithful, and unremarkable, rendition of the law as it currently exists in Wisconsin. As the first comment to
iewicz v. Reszcynski, 70 Wis. 2d 836, 839, 236 N.W.2d 1 (1975) (concluding that “the distinction between the duty heretofore owed by a land occupie[r] to licensees and to invitees should be abolished, and that the duty of the land occupier be that required in any negligence action—ordinary care under the circumstances.”10 And our adoption of Palsgraf‘s minority view was already distant history before the advent of
¶ 26. It is apparent from our review of the relevant sections of the Restatement (Third) of Torts: Physical & Emotional Harm that the life of MWF‘s argument is not in the text of the various provisions, but only in the commentary.11 By itself, the text tells us nothing about the duties of former land possessors. Thus, to reach MWF‘s conclusion we would need to adopt not
B. Caveat Emptor
¶ 27. “Caveat emptor” operates as a limited exception to the rule that “everyone owes to the world at large the duty of refraining from those acts that may unreasonably threaten the safety of others.” Behrendt, 318 Wis. 2d 622, ¶ 17 (bracket, internal marks, and citation omitted). In Ollerman v. O‘Rourke Co., Inc., 94 Wis. 2d 17, 288 N.W.2d 95 (1980), we explained that “[t]he traditional legal rule that there is no duty to disclose in an arm‘s-length transaction is part of the common law doctrine of caveat emptor which is traced to the attitude of rugged individualism reflected in the business economy and the law of the 19th century.” Id. at 29.
¶ 28. Caveat emptor—or “buyer beware“—finds expression in
Except as stated in [Restatement (Second) of Torts] § 353, a vendor of land is not subject to liability for physical harm caused to his vendee or others while upon the land after the vendee has taken possession by any dangerous condition, whether natural or artificial, which existed at the time that the vendee took possession.
[S]ecs. 352, 353 [of the Restatement (Second) of Torts], sets forth the broad principle that a vendor is not
just the few spare lines of the text into our law, but the 18 pages of copious comments and illustrations as well. It would be imprudent to import so much material without closely examining it first, especially when the comments say so much that the text simply does not.
liable for bodily harm caused to his vendee, or others, after the vendee has taken possession except where the vendor has concealed or failed to disclose a dangerous condition known to him, but not to the vendee, and the vendor has reason to believe that the vendee will not discover it.
Fisher v. Simon, 15 Wis. 2d 207, 214, 112 N.W.2d 705 (1961). See also Pines v. Perssion, 14 Wis. 2d 590, 594-95, 111 N.W.2d 409 (1961) (“A tenant is a purchaser of an estate in land, and is subject to the doctrine of caveat emptor.“)
¶ 29. But we do not apply the rule to all real estate transactions. In Fisher itself we found the rule inapplicable with respect
¶ 30. These exceptions, however, are narrow and do not detract from the continuing health of the doctrine. Indeed, the caveat emptor doctrine, as described in
parties to a business transaction must “use their faculties and exercise ordinary business sense, and not [] call on the law to stand in loco parentis to protect them in their ordinary dealings with other business people.” Further, “in a free market the diligent should not be deprived of the fruits of superior skill and knowledge lawfully acquired.”
2005 WI 111 ¶ 18, 283 Wis. 2d 555, 699 N.W.2d 205 (bracket in Kaloti; internal citation omitted) (quoting Ollerman, 94 Wis. 2d at 30).14
quishing possession of real estate. The logic of caveat emptor does not apply with quite as much force to
¶ 31. Our court of appeals has not had any difficulty identifying the circumstances in which this doctrine applies, or in applying it. For example, in Bagnowski v. Preway, Inc., a homeowner filed suit against the former owner, arguing that the former owner had negligently installed a chimney that caused a fire. 138 Wis. 2d 241, 244, 405 N.W.2d 746 (Ct. App. 1987). On appeal, the court of appeals considered, inter alia, the instructions and special verdict form given to the jury, noting that they were based on
¶ 32. In McCarty v. Covelli, 182 Wis. 2d 342, 514 N.W.2d 45 (Ct. App. 1994), the court of appeals had to assign liability for an injury in a relational context similar to that in this case. Mr. McCarty sustained an injury on a rental property while assisting an evicted tenant vacate the premises. Id. at 345. He sued both the current and prior owners of the property. Id. The court had no difficulty identifying caveat emptor principles (as expressed in
¶ 33. MWF‘s argument, of course, is not so much that caveat emptor has fallen into desuetude in Wisconsin, but that the time has come for its demise: “The Court should reject the outdated rule of caveat emptor
implicit in [Bagnowski and McCarty] and embedded in theC. Comment t versus Caveat Emptor
¶ 34. This is no small change that MWF asks of us. The real estate transactions that created the question we are addressing here are entirely unremarkable—a commercial tenant vacated a commercial property and the owner (a commercial entity) subsequently sold the property to another commercial entity. These types of transactions are the daily fare of the commercial real estate world. With respect to the structural elements of such transactions, there is nothing immediately apparent to distinguish them from those we are examining. Consequently, whatever decision we make here will affect not just Charter, but an untold (and certainly large) number of vendors who once owned Wisconsin real estate.
¶ 35. Adopting comment t would dramatically unsettle property interests that thrive on stability. Divorcing liability for injuries caused by a dangerous condition from the ability to control for it would be just the first (but most obvious) upset attendant on adopting comment t. For example, a land possessor could choose to mitigate, or even eliminate, the risk of injury through management practices rather than by repairing the dangerous condition. It could accomplish this through the simple expedient of restricting access todangerous areas entirely, or allowing access only to those who had been trained to safely engage the condition, or who had been warned of its existence. A subsequent possessor, however, may simply leave the dangerous condition open to anyone who comes upon it. Thus, the former possessor‘s risk of exposure could be greatly expanded, or even created ab initio, by the acts of successors. The present rule accounts for this reality by logically and justifiably pairing potential liability with the opportunity to reduce, eliminate, or manage around it. Allowing persistent exposure to liability without the concomitant ability to control for it is a rule with little to recommend to us.
¶ 36. Second, comment t creates an entirely unforeseeable quantum of risk exposure. A former possessor, for example, cannot anticipate how subsequent owners might use the property. The original possessor may allow only a very few people to enter the premises, but an owner at the second remove (or even more distant) may unforeseeably open the property to the public at large. Because we establish negligence in relation to the act in question, rather than in relation to the person harmed, the former possessor might find itself liable to an immense population it had never expected.
¶ 37. Third, comment t would make a former possessor the insurer of all its successors. A formerland possessor who created a risk of harm would remain subject to liability even after he disclosed the risk to the subsequent purchaser. See
¶ 38. Fourth, MWF would have us make former possessors stand as insurers to all successive possessors without indicating whether there is an insurance market in which former possessors could purchase coverage. The Supreme Court of California recognized this potentially profound economic dislocation over three decades ago in Preston v. Goldman, 720 P.2d 476 (Cal. 1986). The court recognized that “[t]he ascription of liability in this context to a party with control is . . . reflected in the usually applicable insurance coverage.” Id. at 483. So the court rejected the invitation to visit those uninsurable risks on former possessors, concluding that it would “continue[] to treat ownership and control as a fundamental requirement for ascribing liability.” Id.16 Imposing liability on unwitting former possessors who would have no apparent means of insuring their exposure is injudicious.
¶ 39. Finally, adopting comment t carries the very real risk that we would be effectively renegotiating, retroactively and as a matter of law, an unknowable number of Wisconsin real estate transactions, including the ones before us. Contracts, including those for the lease or sale of real estate, incorporate the law extant at the time of execution. See, e.g., Dairyland Greyhound Park, Inc. v. Doyle, 2006 WI 107, ¶ 60, 295 Wis. 2d 1, 719 N.W.2d 408. Thus, when a vendee purchases Wisconsin real estate as-is, without warranty, its contract incorporates the caveat emptor doctrine.17 So too with leases.18 Presumably, commercial entities like
¶ 40. We decline MWF‘s invitation to adopt comment t because it would introduce dramatic changes to the duty a former land possessor owes under Wisconsin law, and would negatively impact settled expectations, and settled rights, between real estate vendors and vendees. Further, MWF has identified no compelling reason to abandon the current state of our law, and certainly nothing important enough to justify the market dislocations comment t would likely cause. We next consider whether Charter could be liable to the Brenners under existing Wisconsin law as reflected in
D. Charter‘s liability to the Brenners
¶ 41. To determine whether Charter could be liable to the Brenners under current Wisconsin law, we must answer two questions. The first is whether caveat emptor governs the relationship between Charter and successive possessors of the Property. The second is whether, if caveat emptor applies, any of the exceptions to the doctrine apply.
1. Charter and the caveat emptor doctrine
¶ 42. MWF argues that our caveat emptor cases apply only to vendors of land and that Charter cannot be a vendor of land because it was merely a former tenant that did not sell the Property to anyone. Thus, according to MWF, when the circuit court and court of appeals denominated Charter a “vendor” within the meaning of § 352, they expanded the meaning of that term without warrant or justification.
¶ 43. MWF‘s argument has some initial appeal. By its own terms, § 352 applies only to vendors:
Except as stated in [Restatement (Second) of Torts] § 353, a vendor of land is not subject to liability for physical harm
caused to his vendee or others while upon the land after the vendee has taken possession by any dangerous condition, whether natural or artificial, which existed at the time that the vendee took possession.
¶ 44. We have not previously determined whether a former commercial tenant such as Charter is a vendor within the meaning of § 352. See Brenner I, 365 Wis. 2d 476, ¶ 24 (recognizing that prior to its decision in this matter, no published Wisconsin case had considered whether a former tenant qualifies as a vendor under § 352). So in determining whether commercial tenants occupy the same legal position as vendors for caveat emptor purposes, we will consider the logic behind the doctrine before deciding whether § 352 appropriately excludes commercial tenants from its terms.
¶ 45. Freedom of contract and the right of inspection provide the primary justifications for the caveat emptor doctrine. As the United States Supreme Court observed when our country was considerably younger,
[n]o principle of the common law has been better established, or more often affirmed, both in this country and in England, than that in sales of personal property, in the absence of express warranty, where the buyer has an opportunity to inspect the commodity, and the seller is guilty of no fraud, and is neither the manufacturer nor grower of the article he sells, the maxim of caveat emptor applies.
Barnard v. Kellogg, 77 U.S. 383, 388 (1870). A vendee wishing to ensure he does not take on more liability exposure than desired must inform himself of what he can about what he buys. Bostwick v. Mut. Life Ins. Co. of N.Y., 116 Wis. 392, 400, 89 N.W. 538 (1902), on reh‘g, 116 Wis. 392, 92 N.W. 246 (“[T]he doctrine that one must observe what he has reasonable opportunity for knowing in matters of contract is within the rule of caveat emptor . . . .“). He may, of course, choose to negotiate an express warranty as a substitute for his inspection to cover the risk he takes for himself: “And there is no hardship in it [caveat emptor], because if the purchaser distrusts his judgment he can
¶ 46. This rule grew out of the natural business dynamic that the person in the best position to adjudge potential risk is the one affected by it: “[T]he law requires men, in their dealings with each other, to exercise proper vigilance, and apply their attention to those particulars which may be supposed to be within reach of their observation and judgment, and not close their eyes to the means of information which are accessible to them.” Bostwick, 116 Wis. at 400 (quoting Mamlock v. Fairbanks, 46 Wis. 415, 418, 1 N.W. 167 (1879)); see also Barnard, 77 U.S. at 388 (“Such a rule, requiring the purchaser to take care of his own interests, has been found best adapted to the wants of trade in the business transactions of life.“).
¶ 47. These principles instruct that caveat emptor should apply in the commercial tenancy context just as it does in the vendor-vendee relationship described in § 352. The one difference is that a tenant will, when commencing the tenancy, occupy the position of a vendee with respect to the landlord, while at the end of the tenancy he will occupy the position of the vendor. We will address the relationship from both perspectives.
¶ 48. When a lessor enters a lease, he is purchasing an interest in the estate. See, e.g., Pines, 14 Wis. 2d at 594-95. Functionally, the tenant‘s purpose for entering that relationship is largely the same as that of a vendee—to obtain possession of the property and toput it to whatever use may be desirable, so long as it conforms to the terms of the tenancy. With respect to the condition of the property, therefore, they operate under similar risks. The property either will or will not be suitable for their purposes, and it either will or will not contain dangerous conditions that could cause injury to them or others.
¶ 49. The methods of controlling for that risk are the same for both the tenant and the vendee. Both may inspect the premises prior to the transaction to discover defects or other dangerous conditions. If not satisfied with their inspections, or if the inspection raises concerns about undiscoverable latent defects, both can negotiate warranties to cover the risk. Consequently, we have previously recognized that caveat emptor applies when a tenant executes a lease. Id. (“A tenant is a purchaser of an estate in land, and is subject to the doctrine of caveat emptor.“)
¶ 50. At the termination of the tenancy, the lessee occupies the position of the vendor as he transfers possession of the property back to the landlord. Just as the interests of a vendee and a tenant (to the extent they are relevant to this analysis) coincided at the beginning of the tenancy, so too do the relevant interests of a vendee and a landlord coincide at the end. The
¶ 51. The similarities between the commercial tenancy and vendor-vendee relationships extend to the intolerable consequences of not applying caveat emptor. The former tenant, like the vendor, would suffer continuing exposure to liability even after he can no longer reduce, eliminate, or manage around the dangerous condition. The quantum of his exposure also slips beyond his control as the landlord or other successive possessors expose the property‘s dangerous condition in a way that may exacerbate, or even create, the potential for injury. He would also, like the vendor, stand as liability insurer to all subsequent possessors, and would similarly have no access to the insurance market (at least until the industry adapted).
¶ 52. As did the circuit court and court of appeals, we find Brock v. Rogers & Babler, Inc., 536 P.2d 778 (Alaska 1975) and Great Atlantic & Pacific Tea Company, Inc. v. Wilson, 408 N.E.2d 144 (Ind. Ct. App. 1980), instructive on this question. Brock addressed whether a gravel excavation company that had remediated the property it leased into an artificial lake could be liable to a child who almost drowned approximately three years after the company relinquished possession of the property. 536 P.2d at 779. The Supreme Court of Alaska applied § 352 and explained that although that section refers to vendors of land, its principle was nevertheless “broad enough to cover a former lessee who had relinquished his possessory interest in the premises.” Brock, 536 P.2d at 782. It explained that liability is generally limited to those who are in possession and control of the property, and that those not in possession should not suffer liability because they have no authority or ability to prevent the injury from occurring. Id.
¶ 53. The Indiana Court of Appeals reached the same conclusion in Great Atlantic. There, Great Atlantic leased a building in which an opening in the floor had been created for a conveyor belt to move stock from storage in the basement to the sales floor. 408 N.E.2d at 146. When the lease terminated, Great Atlantic released possession to the landlord, which then offered the property for sale. Id. A prospective buyer fell into the conveyer-belt opening in the floor and sustained injuries. Id. The Indiana Court of Appeals took its cue from Brock, concluding that “[t]he new owner, upon assuming control and possession, becomes responsible for the safety of structures erected by his predecessors” and that “liability for injury ordinarily depends upon the power to prevent injury and, therefore, rests upon the person who has control and possession through ownership, lease, or otherwise.” See Great Atl., 408 N.E.2d at 147-48.
¶ 54. Here, Charter leased the Garland Brothers’ building for approximately 20 years under a triple net lease, meaning that—for purposes of the condition of the property—Charter had the type of exclusive possession and control that a fee owner would have. At the end of the tenancy, Garland Brothers exercised its contractual right to thoroughly inspect the Property before Charter relinquished possession on December 31, 2009. Thereafter, Charter no longer had the right to access or control the Property, just like property vendors. Consequently, when Mr. Brenner suffered
¶ 55. Because Charter, as a former tenant, stands in the same position as a vendor (for purposes ofthe caveat emptor doctrine described in § 352) and because MWF—not Charter—was in possession of the Property at the time of Mr. Brenner‘s injuries, Charter is immune from liability unless a recognized exception lifts the immunity and restores the potential for liability.
2. Caveat emptor and its exceptions
¶ 56. MWF argues that, under the facts of this case, § 353 pushes Charter out from under the protective umbrella of the caveat emptor doctrine. This section provides that:
(1) A vendor of land who conceals or fails to disclose to his vendee any condition, whether natural or artificial, which involves unreasonable risk to persons on the land, is subject to liability to the vendee and others upon the land with the consent of the vendee or his subvendee for physical harm caused by the condition after the vendee has taken possession, if
(a) the vendee does not know or have reason to know of the condition or the risk involved, and
(b) the vendor knows or has reason to know of the condition, and realizes or should realize the risk involved, and has reason to believe that the vendee will not discover the condition or realize the risk.
(2) If the vendor actively conceals the condition, the liability stated in Subsection (1) continues until the vendee discovers it and has reasonable opportunity to take effective precautions against it. Otherwise, the liability continues only until the vendee has had reasonable opportunity to discover the condition and to take such precautions.
¶ 57. For purposes of our discussion here, § 353(1) requires the proponent of the rule to establish, inter alia, each of the following four elements:
- The vendor concealed or failed to disclose to his vendee any condition, whether natural or artificial, that involves unreasonable risk to persons on the land;
- The vendor knew or had reason to know of the condition, and realized or should have realized the risk involved;
- The vendee did not know, or have reason to know, of the condition or the risk involved; and
- The vendor had reason to believe that the vendee would not discover the condition or realize the risk.
¶ 58. MWF spent nearly its entire argument discussing these elements as between it and Charter. But that is the wrong relationship to consider. With respect to Charter, it is Garland Brothers,
¶ 59. For the sake of our analysis, we will assume MWF can establish the first two elements of the § 353(1) test, and proceed directly to the third element, which requires MWF to establish that Garland Brothers did not know, or have reason to know, of the danger presented by the holes in the floor under the plywood boxes. The circuit court found that there was insufficient evidence to hold that Garland Brothers had actual knowledge of the dangerous condition but was silent as to whether it had reason to know of that condition. For the following reasons, we believe the record unequivocally demonstrates that Garland Brothers had reason to know of the holes under the plywood boxes.
¶ 60. First, the record establishes that Garland Brothers, through its agent, conducted an annual inspection of the Property over the course of Charter‘s 20-year tenancy. During those annual inspections, there is no question that Garland Brothers would have seen the heat treatment furnaces extending upward through the holes in the metal grate floor. Next, after Charter gave notice it was terminating the lease, Garland Brothers identified several requirements Charter was required to satisfy prior to vacating theProperty. Among them was that, after removing the heat treatment furnaces (as required pursuant to the lease‘s terms), Charter was to fill in the pit where the furnaces had been. When Charter objected to that requirement, Garland Brothers agreed to substitute a requirement that Charter leave the pit in a “clean and safe condition.”
¶ 61. Garland Brothers necessarily knew that removing the heat treatment furnaces would leave holes in the floor. And it undoubtedly had an interest in knowing whether doing so would leave the Property in a dangerous condition. Further, it had a reasonable motivation for determining whether Charter left behind dangerous conditions, and ample opportunity to discover whether it did.
¶ 62. Garland Brothers’ actions demonstrate it was satisfied Charter had left the Property in a safe condition. When Garland Brothers completed its final walkthrough and inspection of the Property with Charter in late 2009, Garland Brothers did not raise any concerns about the condition in which Charter had left the pit or the corresponding holes in the metal grate floor.21 It then executed a “Release Agreement” with Charter, in which it agreed that Charter had surrendered the Property “in the physical condition requiredunder the Lease and [Garland Brothers] hereby releases Charter from any further
¶ 63. We are convinced by this that Garland Brothers had reason to know of the holes in the floor underneath the plywood boxes. We are not the only ones to arrive at that conclusion—MWF argued the same thing itself while opposing Charter‘s motion for summary judgment, and for much the same reasons:
Together, GBI22 and GBJV,23 failed to disclose not only the existence of the pit but, more importantly, that Charter had created holes in the floor above the pit. . . .
GBI and GBJV should have known that the holes existed as the pit was the subject of negotiations when Charter terminated its lease and GBI conducted an inspection of the premises before accepting the premises from Charter on behalf of GBJV. Further, GBI and GBJV are (or were) in the business of owning, managing and leasing industrial properties. GBJV had leased the property to Charter for more than twenty years and GBI had, apparently, managed the lease for a lengthy time—conducting annual inspections.
Yes, just so.
¶ 64. Finally, as the circuit court ably described, MWF argued itself into a box canyon on this point. By asserting that Garland Brothers is chargeable with constructive knowledge of the covered holes by virtue of its possession and control of the Property, it implicitly (but necessarily) argued that it should also becharged with that knowledge. MWF had approximately as much time, opportunity, and motivation to discover defects in the Property before Mr. Brenner‘s injury as did Garland Brothers. Thus, if possession and control are enough to charge Garland Brothers with constructive knowledge of the covered holes, it must necessarily do the same for MWF. So even if this analysis required us to examine the relationship between MWF and Charter, it would be impossible for MWF, because of its own argument, to establish the third element of § 353(1).
¶ 65. As it is, however, the proper relationship to examine is the one that obtained between Charter and Garland Brothers. And because we find that Garland Brothers had reason to know of the holes covered by the plywood boxes, MWF cannot establish the third element of the § 353(1) analysis. Inasmuch as this provision requires MWF to demonstrate all four elements, we conclude that § 353 does not remove the exemption from liability provided by the caveat emptor doctrine.
V. CONCLUSION
¶ 66. The doctrine of caveat emptor—“buyer beware“—has long been a part of the common law of this state. Although we have recognized some narrow exceptions as it applies to real estate transfers, the doctrine still describes a vital and important restriction on liability when real property passes from one possessor to the next. Accordingly, we decline to adopt comment t to § 51.
¶ 67. We find that the caveat emptor doctrine applies to Charter just as it would have if Charter had been the fee simple owner when it transferred possession of the Property back to Garland Brothers. Because MWF did not establish any exception to the doctrine in this case, Charter‘s duty to subsequent possessors expired when it surrendered possession of the
By the Court.—The decision of the court of appeals is affirmed.
¶ 68. REBECCA GRASSL BRADLEY, J., did not participate.
Notes
Preston v. Goldman, 720 P.2d 476, 479 (Cal. 1986).... [T]he rationale underlying the general rule of nonliability ... [of] one who has transferred ownership and control is no longer held liable because (1) he no longer has control and thus may not enter the property to cure any deficiency, and (2) he cannot control the entry of persons onto the property or provide safeguards for them.