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COURT OF APPEALS DECISION DATED AND RELEASED OCTOBER 15, 1996 |
NOTICE |
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A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and
Rule 809.62(1), Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 96-0936
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT III
HONEYCREST FARMS,
INC.,
Plaintiff-Appellant,
v.
BRAVE HARVESTORE
SYSTEMS, INC.,
Defendant-Respondent,
A.O. SMITH HARVESTORE
PRODUCTS, INC.,
Defendant.
APPEAL from a judgment
of the circuit court for Dunn County:
ERIC J. WAHL, Judge. Affirmed.
Before Cane, P.J.,
LaRocque and Myse, JJ.
PER CURIAM. Honeycrest Farms, Inc., commenced an action
against Brave Harvestore Systems, Inc., alleging misrepresentations by Brave
about design defects in the breather system of its silos.[1] Brave moved for summary judgment because the
applicable statutes of limitation had expired, and the trial court granted the
motion. Honeycrest now appeals the
judgment.
The sole issue on appeal
is whether Honeycrest filed its complaint within the applicable statutes of
limitations periods. Honeycrest
advances the discovery rule to explain its failure to timely file suit, and
argues that the trial court erred by granting summary judgment because the date
of discovery is a question of fact for the jury. Honeycrest claims that it did not discover the nature and cause
of its injury until discussing the matter with its attorney at a social
gathering in 1991.
Brave contends that the
discovery rule did not toll the running of the statutes of limitations, and
summary judgment was appropriate. We
conclude that the discovery rule does not toll the statute of limitations for
the advertising fraud cause of action, the record fails to show a negligence or
strict liability claim on which Honeycrest can recover its economic damages,
Honeycrest did not exercise due diligence as a matter of law, and Brave is not
estopped from asserting the statute of limitations as a defense. Therefore, we affirm the judgment.
Honeycrest is a
three-farm dairy operation co-owned and operated by Victor Traynor and his
family in Pierce County. Between 1967
and 1981, Honeycrest purchased six Harvestore silos from Brave, a distributor
of Harvestore silos.[2] Honeycrest first detected an air leakage
problem in June 1967, when feed stored in its Harvestore was warm and moldy,
and the cows would not eat it. Honeycrest
reported the problem to Brave, and Brave came out to the farm and sealed the
leaks. Between 1967 and 1991, there was
a continuing series of complaints about the Harvestores by Honeycrest and
repairs by Brave. Although Honeycrest
does not deny that it knew of the shortcomings of the silos, it insists that
Brave explained the shortcomings as the result of repairable problems or
operator error.
On March 11, 1995,
Honeycrest filed suit against Brave, asserting causes of action in strict
liability, negligent misrepresentation, fraud, and advertising fraud. The basis for the complaint was that the
silos were sold to Honeycrest as essentially airtight structures that would
preserve the feed stored in them better than other silos, provide better feed for
the livestock, need no maintenance, and "pay for themselves" because
less feed would spoil and the farm operation would be more profitable. Honeycrest argued that Brave made these
representations with the knowledge that they were false.
In its decision to grant
summary judgment, the trial court noted the following: the Traynors knew as
early as 1967 that air leaked into the silos and resulted in warm and moldy
feed, the silos were not maintenance free, the Traynors had to add protein and
minerals to the stored feed, and the silos did not achieve increased milk
production.
We review summary
judgments de novo by applying the same criteria as the trial court. Universal Die & Stampings, Inc. v.
Justus, 174 Wis.2d 556, 560, 497 N.W.2d 797, 799 (Ct. App. 1993). Summary judgment is appropriate when
"the pleadings, depositions, answers to interrogatories, and admissions on
file, together with the affidavits ... show that there is no genuine issue as
to any material fact and that the moving party is entitled to a judgment as a
matter of law." Section 802.08(2),
Stats. A complaint should be dismissed as legally insufficient only if
it is clear that under no circumstances can the plaintiff recover. Green Spring Farms v. Kersten,
136 Wis.2d 304, 317, 401 N.W.2d 816, 821 (1987).
Honeycrest alleged
causes of action in strict liability, negligent misrepresentation, fraud, and
advertising fraud, all arising out of misrepresentations Brave made regarding
design defects of its Harvestore silos.
The statutes of limitations for strict liability misrepresentation,
negligent misrepresentation, and common law fraud claims are six years. Sections 893.52 and 893.93(1)(b) Stats.
The statute of limitations for advertising fraud is three years. Section 100.18(11)(b)(3), Stats.
Statutes of limitations
"ensure prompt litigation of claims and ... protect defendants from
fraudulent or stale claims brought after memories have faded or evidence has
been lost." Korkow v.
General Cas. Co., 117 Wis.2d 187, 198, 344 N.W.2d 108, 114 (1984). As stated by our supreme court,
It is well settled that a cause of action
accrues when there exists a claim capable of enforcement, a suitable party
against whom it may be enforced, and a party with a present right to enforce
it. A party has a present right to
enforce a claim when the plaintiff has suffered actual damage, defined as harm
that has occurred or is reasonably certain to occur in the future.
Pritzlaff
v. Archdiocese of Milwaukee, 194 Wis.2d 302, 315, 533
N.W.2d 780, 785 (1995) (citations omitted).
In some cases, the
discovery rule allows for the tolling of an otherwise applicable statute of
limitations. Hansen v. A.H.
Robins, Inc., 113 Wis.2d 550, 560, 335 N.W.2d 578, 583 (1983). Wisconsin adopted the discovery rule "for
all tort actions other than those already governed by a legislatively created
discovery rule." Id. The discovery rule provides that a cause of
action will not accrue "until the plaintiff discovers, or in the exercise
of reasonable diligence should have discovered, not only the fact of the injury
but also that the injury was probably caused by the defendant's conduct or
product." Borello v. United
States Oil Co., 130 Wis.2d 397, 411, 388 N.W.2d 140, 146 (1986) (citing
Hansen, 113 Wis.2d at 560, 335 N.W.2d at 583).
The reasonable diligence
requirement means that the plaintiff must exercise "such diligence as the
great majority of persons would use in the same or similar circumstances"
to discover their injuries. Spitler
v. Dean, 148 Wis.2d 630, 638, 436 N.W.2d 308, 311 (1989). "Plaintiffs may not close their eyes to
means of information reasonably accessible to them and must in good faith apply
their attention to those particulars which may be inferred to be within their
reach." Id.
Brave argues that
because the alleged misrepresentations forming the basis for Honeycrest's cause
of action for deceptive advertising occurred more than three years before the
lawsuit was filed, Honeycrest's claim was beyond the statute of limitations. We agree.
The discovery rule does not apply to Honeycrest's claim of advertising
fraud, pursuant to § 100.18, Stats.[3] See Skrupky v. Elbert, 189
Wis.2d 31, 56, 526 N.W.2d 264, 274 (Ct. App. 1994).
As to the remaining
claims, we consider Honeycrest's argument that because it did not discover the
"causal link" between its problems and the structural defects of the
silos until 1991, Brave is liable for damages.
However, Honeycrest cannot recover its asserted damages through its
strict liability and negligence causes of action. See D'Huyvetter v. A.O. Smith Harvestore Prods.,
164 Wis.2d 306, 325-26, 475 N.W.2d 587, 594 (Ct. App. 1991).
The facts of D'Huyvetter
are strikingly similar to this case. In
D'Huyvetter, plaintiff farmers who purchased an allegedly
defective Harvestore sued the distributor and manufacturer, alleging claims of
strict responsibility for misrepresentation, negligent and intentional
misrepresentation, breach of express and implied warranties, breach of
contract, strict liability, negligence and advertising fraud. Id. at 318, 475 N.W.2d at
591. The D'Huyvetter
plaintiffs appealed the trial court's grant of summary judgment on the
negligence and strict liability claims.
Id. at 325, 475 N.W.2d at 594.
As did Honeycrest in its
complaint, the D'Huyvetter plaintiffs sought recovery for the
following:
[T]he
expense of purchasing the Harvestore; interest expenses; the expense of
converting their farm operation for use of the Harvestore; the costs of
numerous repairs on the Harvestore; reduced milk production; reduced production
of young stock; costs of purchasing additional protein to supplement their
cattle's diet; loss of profit associated with sale of calves and cattle; death
and illness of their livestock; costs of purchasing additional equipment; and
electrical costs ....
Id. at
326, 475 N.W.2d at 594. Based on these
asserted damages, the court decided that the plaintiffs had suffered a purely
economic loss, not compensable under negligence or strict liability theories,
and upheld summary judgment. Id.
(citing Sunnyslope Grading, Inc. v. Miller, Bradford & Risberg, Inc.,
148 Wis.2d 910, 921, 437 N.W.2d 213, 217-18 (1989)). The court then confined the plaintiffs' recovery to the
warranties in the sales contract and stated, "[W]e agree ... that the
legislative protections granted by the Uniform Commercial Code are not to be
buttressed by tort principles and recovery." Id. at 326-27, 475 N.W.2d at 594 (citations
omitted). Because Honeycrest alleged
only tort claims against Brave, purely economic damages are not available.
Honeycrest's only
remaining claim is for fraud, which we interpret as a claim for fraudulent
misrepresentation. In its complaint,
Honeycrest alleged that Brave made numerous oral and written misrepresentations
about the performance and capabilities of the Harvestores. In Miles v. A.O. Smith Harvestore
Products, Inc., 992 F.2d 813 (8th Cir. 1993), the federal court of
appeals affirmed summary judgment on a farmer's fraud claims against the
Harvestore manufacturer because the applicable statute of limitations had
expired. The court found no dispute of
material fact, and concluded that the limitations period began to run when the
appellant knew, from the time she put the Harvestores into service, that they
did not operate as represented. Id.
at 817.
We recognize that the
general concept of misrepresentation can be separated into three torts: fraudulent or intentional misrepresentation,
negligent misrepresentation, and strict liability. Ollerman v. O'Rourke Co., 94 Wis.2d 17, 24-25, 288
N.W.2d 95, 99 (1980). A cause of action
for intentional misrepresentation requires proof of the following: (1) the defendant made a representation of
fact, (2) the representation was untrue, (3) the plaintiff believed the
representation to be true and relied on it to his or her detriment, and (4) the
defendant either knew the representation was untrue or made the representation
recklessly without caring whether it was true and with intent to induce the
plaintiff to act upon it to the plaintiff's pecuniary detriment. Id.
As we stated earlier,
the discovery rule provides that a cause of action will not accrue "until
the plaintiff discovers, or in the exercise of reasonable diligence should
have discovered, not only the fact of the injury but also that the injury
was probably caused by the defendant's conduct or product." Borello, 130 Wis.2d at 411,
388 N.W.2d at 146 (citing Hansen, 113 Wis.2d at 560, 335 N.W.2d
at 583) (emphasis added).
When the "material
facts are undisputed, and only one inference can reasonably be drawn from them,
whether a plaintiff exercised reasonable diligence in discovering her injury is
a question of law," which the court may decide. Groom v. Professionals Ins. Co., 179 Wis.2d 241,
249, 507 N.W.2d 121, 124 (Ct. App. 1993).
Here, because the underlying facts are undisputed and only one
reasonable inference can be drawn, a question of law is presented.
Although Brave's
representations to Honeycrest turned out to be untrue shortly after
Honeycrest's first Harvestore was installed, Honeycrest accepted for nearly
three decades Brave's explanation that the shortcomings of the Harvestores were
the result of repairable problems or operator error. In fact, Victor Traynor testified that Honeycrest thought as
early as the mid-1970s that there might be a structural problem with the
Harvestores. Nevertheless, Honeycrest
did not file suit against Brave until 1995.
We conclude as a matter of law that Honeycrest cannot benefit from the
discovery rule because Honeycrest should have realized by the exercise of
reasonable diligence that Brave had misrepresented the qualities of its
Harvestores. See id.
Finally, Honeycrest
contends that Brave should be estopped from asserting the statute of
limitations defense because it relied to its detriment on Brave's statements
that the defects were repairable, Honeycrest mismanaged the silos, and the
moldy feed was expected and beneficial.
Honeycrest, therefore, reasons that it is a question of fact for the
jury to determine whether Brave's actions should estop it from asserting the
statute of limitations defense. We are
not persuaded.
The test of whether a
party should be estopped from asserting the statute of limitations is
"whether the conduct and representations of the defendant were so unfair
and misleading as to out-balance the public's interest in setting a limitation
on bringing actions." Hester
v. Williams, 117 Wis.2d 634, 645, 345 N.W.2d 426, 431 (1984) (citation
omitted). Equitable estoppel is
appropriate only when a party's reliance on another party's conduct is
reasonable. Id. (citation
omitted). Whether, under the undisputed
facts of this case, Brave should be estopped from asserting the statute of
limitations is a question of law. See
id. at 644-45, 345 N.W.2d at 431-32. Although Honeycrest was aware of its silo problems and did not
believe Brave's explanations for the problems as early as the mid-1970s, it
waited until 1995 to file its complaint.
Therefore, we conclude that Honeycrest did not reasonably rely to its
detriment on Brave's representations and equitable estoppel does not apply.
Because no issue of
material fact remained and the applicable statutes of limitations had expired,
the court properly granted summary judgment.
By the Court.—Judgment
affirmed.
This opinion will not be
published. Rule 809.23(1)(b)5, Stats.
[1] Because Honeycrest's claims against A.O. Smith Harvestore Products, Inc., were resolved by settlement, this case proceeds against Brave alone.
[2] The first two purchases were made from a company called Shrank Sealed Storage, which was taken over by Brave in 1970. The remaining four silos were purchased from Brave. Although the issue of which silos were sold by whom was raised at summary judgment, we determine that the resolution of that issue is unnecessary because the sole issue on appeal is the statutes of limitations.