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COURT OF APPEALS
DECISION
DATED AND RELEASED
MARCH 25, 1997
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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.
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This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports.
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No. 96-2187
STATE
OF WISCONSIN IN
COURT OF APPEALS
JOHN NIERENGARTEN and
BETTY NIERENGARTEN,
Plaintiffs-Appellants,
v.
LUTHERAN SOCIAL SERVICES
OF WISCONSIN and
UPPER MICHIGAN, INC., and
CHICAGO INSURANCE COMPANY,
†Defendants-Respondents.
APPEAL from a judgment
of the circuit court for Pierce County:
ROBERT W. WING, Judge. Affirmed
in part; reversed in part and cause remanded.
Before Cane, P.J.,
LaRocque and Myse, JJ.
CANE, P.J. John and Betty Nierengarten appeal a
summary judgment dismissing their complaint against Lutheran Social Services of
Wisconsin and Upper Michigan, Inc., and its insurer, Chicago Insurance Company
(collectively, LSS) claiming damages for negligent misrepresentation and
negligent placement of a child with their family for adoption. The Nierengartens argue that the trial court
erroneously ruled that (1) they have failed to demonstrate prima facie claims
for negligent misrepresentation and negligent placement; and (2) their claims
were barred by the statute of limitations.
We conclude that the
record discloses material issues of fact that preclude a summary judgment of
dismissal of the Nierengartens' claim for negligent misrepresentation. We also conclude that LSS failed to show as
a matter of law that this claim is time-barred. We reject, however, the Nierengartens' claim for negligent
placement based upon a duty to investigate.
We therefore affirm in part and remand for further proceedings.
PROCEDURAL
BACKGROUND AND FACTS
On June 20, 1995, the
Nierengartens filed a complaint claiming that on April 24, 1987, LSS placed a
child with them for adoption and that on November 3, 1987, the adoption was
finalized. Since finalization, the
child has been diagnosed with bipolar disorder, attention deficit/hyperactivity
disorder (ADHD), post-traumatic stress disorder, and mathematics disorder. The Nierengartens alleged that LSS was
negligent in the placement and, as a result, they sustained damages. They further alleged that LSS failed to provide notes from the Korean
orphanage resulting in the Nierengartens' damages, and that LSS negligently
misrepresented that the child was a healthy boy. The Nierengartens claim that they relied on LSS's representations
and proceeded with finalization, but later learned that the boy in fact
suffered from multiple disorders. The
Nierengartens claimed damages for emotional distress and extraordinary medical
expenses.
LSS moved to dismiss for
failure to state a claim upon which relief may be granted. It accompanied the motion with an affidavit
of Carol Hakala, the adoption coordinator for LSS, stating that in November
1994, LSS first received handwritten notes from the Korean orphanage where the
Nierengartens' son lived before his adoption.
LSS "did not have knowledge of these notes at the time of the
adoptee's placement with the Nierengartens." LSS attached as an exhibit the Nierengartens’ July 14, 1994,
letter to LSS indicating that their son was diagnosed with ADHD two and
one-half years after his arrival and that the University of Minnesota recently
had diagnosed bipolar disorder. The
Nierengartens stated "All of these conditions [the University of Minnesota
believes] were with him when he arrived in our home seven years ago."
LSS also attached as an
exhibit an October 27, 1994, letter from the Eastern Child Welfare Society,
Inc. It explained that the child’s
Korean grandmother cared for him from September 27, 1983, to December 25,
1986. The letter included notes from
the Korean orphanage which were translated into English. The notes, dated January 5, 1987, to April 22, 1987, described daily activities
at the orphanage.
In opposition to LSS's
motion, the Nierengartens filed an affidavit of a psychologist, stating that
the orphanage notes disclose behaviors symptomatic of ADHD. The child was not sleeping well, easily
upset, crying, had high activity and not following through on directions. Based upon orphanage notes, it was the
psychologist's opinion, to a reasonable degree of medical certainty, that the
child suffered from bipolar disorder, ADHD and mathematics disorder prior to
the 1987 adoption.
The Nierengartens also
filed an affidavit indicating that they sought to adopt a healthy child. Their adoption agreement with LSS provided
in part:
[LSS]
and Eastern Child Welfare Society will make every effort to insure that our
child is healthy, and that we have as much information about his/her
health/family history as possible. We
understand, however, that [LSS] does not guarantee the information provided by
Eastern Child Welfare Society will be absolutely accurate.
The Nierengartens stated
they received an initial social history, a health history and examination, and
a pre-flight report. These documents,
from the Eastern Child Welfare Society, advised that the child slept from 8
p.m. to 7 a.m., with a nap at 1 p.m., easily adjusted to new circumstances, was
even-tempered, had good relationships with other children and was toilet
trained. However, after placement with the Nierengartens, the
child exhibited extreme tantrums lasting for hours, constant motion, slept only
five hours per night, was not toilet trained, hated new places and people,
acted out and bit his siblings when he did not get his way. He was very stubborn and did not cooperate
with family schedules. The
Nierengartens stated that LSS advised them this was normal adjustment behavior
and that their child did not qualify for a special needs adoption subsidy.
The Nierengartens'
affidavit states:
The child, however, required an
inordinate amount of attention and conduct was, what we thought, far more
hyperactive, unfocused and uncontrolled than what we were led to believe would
be normal during the adjustment period.
....
On a number of occasions, we both wrote and
personally spoke to representatives of [LSS] about the conduct we were dealing
with. We were repeatedly told that this
was normal adjustment behavior and things were fine. We trusted the information given to us by [LSS] and continued
with the placement.
The Nierengartens state
that they continued to question LSS and "we were continually reassured by
[LSS] that this was normal adjustment behavior and [it] would go away." Based upon LSS assurances that this was
normal adjustment behavior, the Nierengartens proceeded with the adoption's
finalization in November 1987. The
child's behavior did not improve, and to contain him the Nierengartens were
required to install motion detectors in the house and keep knives, tools, money
and other things locked up, as well as closely supervise him and their three
other children. The entire family was
in counseling with the child. The child
was diagnosed with ADHD in kindergarten in March of 1990.
Behavior problems
escalated and in the summer of 1994, the child stole a jackknife, superficially
cut his forearm and threatened suicide, at which time he was hospitalized and
diagnosed with bipolar disorder. As a result,
the Nierengartens have incurred and expect to incur significant future medical
expenses. The Nierengartens' affidavit states:
As a
result of the bipolar diagnosis, to our knowledge he will require ongoing
medication management and psychotherapy, as well as medications, travel
expenses, respite care, boarding school and possibly further hospitalization or
residential treatment. These are
extraordinary expenses that even our own health insurance will not cover. Approximately $20,000.00 of our savings was
used to pay for [the child's] health care after insurance for the period of
June 1994 to December 1994.
The psychologist's
affidavit also states: "The condition that the child was suffering from
was beyond a normal adjustment period ... it is my opinion to a reasonable degree
of probability in the field of psychology, that this child's condition in
November of 1987 was not an adjustment condition, but was bipolar disorder,
ADHD, and mathematics disorder."
The Nierengartens filed
this action in June 1995. The court, on
LSS's motion, concluded that the injury was discovered when the child was
diagnosed with ADHD in March 1990.
Because the complaint was not filed until March 1995, it concluded that
a three-year statute of limitations had expired. The court further found that no false statements were made. The Nierengartens appeal the summary
judgment of dismissal.
STANDARD
OF REVIEW
Because LSS accompanied
its motion to dismiss for failure to state a claim with affidavits and other
evidentiary material, the trial court was entitled to treat the motion as one
for summary judgment. Envirologix
Corp. v. City of Waukesha, 192 Wis.2d 277, 287, 531 N.W.2d 357, 362
(Ct. App. 1995); § 802.06(2)(b), Stats. We review a summary judgment de novo,
applying the same standards as the trial court. Brownelli v. McCaughtry, 182 Wis.2d 367, 372, 514
N.W.2d 48, 49 (Ct. App. 1994).
We first examine the
complaint to determine whether it states a claim, and then the answer to
determine whether it presents a material issue of fact. Id. If they do, we then examine the moving parties' affidavits and
other supporting documents to determine whether that party has established a
prima facie case for summary judgment. Id. If it has, we then review the opposing
parties' affidavits and other supporting documents to determine whether there
are any material facts in dispute that would require a trial. Id. at 372-73, 514 N.W.2d at
49-50. All reasonable inferences are to
be drawn in favor of the party opposing summary judgment. See Williamson v. Steco Sales,
Inc., 191 Wis.2d 608, 624, 530 N.W.2d 412, 419 (Ct. App. 1995).
NEGLIGENT
MISREPRESENTATION CLAIM
The Nierengartens argue
that the trial court erroneously ruled that the pleadings, affidavits and other
proofs of record fail to demonstrate negligent misrepresentation. We agree.
To demonstrate a claim for negligent misrepresentation, the
Nierengartens must show that (1) LSS made a representation of fact; (2) the representation
was untrue; (3) LSS was negligent in making the representation and (4) the
Nierengartens relied on the representation to their damage. See Wis
J I—Civil 2403.
In Meracle v.
Children's Serv. Soc., 149 Wis.2d 19, 437 N.W.2d 532 (1989), our
supreme court recognized a cause of action based upon an affirmative
misrepresentation of a child's health and family history. Meracle involved a misrepresentation regarding a fatal genetic
disorder. Meracle points
out, however: "To avoid liability, agencies simply must refrain from
making affirmative representations about a child's health." Id. at 32, 437 N.W.2d at 537.
Meracle
discussed the nature of an injury to support a cause of action for negligent
misrepresentation by an adoption agency.
It concluded that the ordinary expenses of child raising are not
recoverable. Id. at 26,
437 N.W.2d at 534-35. "It is only
the extraordinary expenses, the unexpected expenses resulting from [the
child's] special needs, which are actionable." Id. at 26,
437 N.W.2d at 535.
The Nierengartens'
affidavit raises issues of material fact with respect to their negligent
misrepresentation claim. The
Nierengartens' claims go beyond assertions of misrepresentation concerning the
child's health history. They state that
after the child was placed, the child exhibited behavior that was far more uncontrolled
and unfocused than expected. Despite
their repeated questioning about the child's behavior, LSS assured them that it
was normal adjustment behavior. Based
upon these assurances, the Nierengartens continued with the placement and
proceeded with finalizing the adoption.
The behavior problems did not go away, but escalated until the child was
ultimately hospitalized after a suicide threat and diagnosed with bipolar
disorder.
Reasonable inferences
could be drawn from the Nierengartens' affidavit to support the elements of
negligent misrepresentation on the part of LSS after the child was placed. LSS's representation that the child
exhibited normal adjustment could be found to be a representation of fact. The psychologist's affidavit could imply
that the fact represented was untrue. A
reasonable inference may be drawn that LSS was negligent in making the
representation regarding the child's adjustment behavior and the Nierengartens
relied upon it to their damage, incurring extraordinary medical expenses and
severe emotional distress. Reasonable
inferences must be drawn in favor of the party opposing summary judgment. Williamson, 191 Wis.2d at 624,
530 N.W.2d at 419.
We reject the
Nierengartens' contention, however, that LSS made misrepresentations regarding
the child's health history before placement that would form a basis for a claim
of negligent misrepresentation. It is
undisputed that LSS received information from the Eastern Child Welfare Society
that the child was healthy. LSS relayed
this information to the Nierengartens, with the provision that it did not
guarantee the information received from the Eastern Child Welfare Society was
accurate. The record fails to disclose that LSS made any affirmative
representation about the child's health before the child was placed. Instead, LSS only transmitted information
that it received from the Eastern Child Welfare Society without guaranteeing
its accuracy. Nonetheless, the record
demonstrates that after the child was placed with the Nierengartens, LSS made
the affirmative representation that the child's conduct was normal adjustment
behavior. Such representation forms the
basis of the Nierengartens' claim for negligent misrepresentation.
STATUTE OF
LIMITATIONS DEFENSE
Next, the Nierengartens
claim that the trial court erroneously concluded that their claims are barred
by a three-year statute of limitations. We conclude that LSS has not met its burden
as the moving party to show that the Nierengartens' claims are time barred as a
matter of law. A cause of action
accrues when the plaintiff discovers, or should have discovered, the fact of
injury and that the injury was probably caused by the defendant. Borello v. U.S. Oil Co., 130
Wis.2d 397, 411, 388 N.W.2d 140, 146 (1986).
A cause of action accrues at the time the diagnosis is made because at
this point the plaintiffs can demonstrate with reasonable medical certainty
that the child will need future medical care and incur future medical expenses. Meracle, 149 Wis.2d at 29-30,
437 N.W.2d at 536.
LSS argues that the
Nierengartens knew as of March 1990 that their son had ADHD. As a result, LSS argues, the Nierengartens'
certainty of incurring future expenses for the child's mental disorders began
five and one-half years before they filed their suit. We disagree. Only
"extraordinary expenses" are actionable under Meracle. Id. at 26, 437 N.W.2d at
535. The record does not suggest that
expenses associated with treating ADHD in an adopted child would be unexpected
or extraordinary. There is no showing
of any reasonable medical certainty in 1990 that the Nierengartens would incur
any extraordinary medical expenses. Thus,
there is no showing that the Nierengartens suffered a pecuniary injury before
1994 that would support a cause of action.
See id. at 28, 437 N.W.2d at 535.
On summary judgment
review, we must draw all favorable inferences in favor of the
Nierengartens. See Williamson,
191 Wis.2d at 624, 530 N.W.2d at 419.
The record raises issues of material fact whether the Nierengartens
should have been aware of any extraordinary expenses associated with treating
their child's disorders before 1994.
Consequently, we overturn the summary judgment that the statute of
limitations had expired.
LSS relies on Pritzlaff
v. Archdiocese of Milwaukee, 194 Wis.2d 302, 320-21, 533 N.W.2d 780,
787 (1995), for the proposition that the plaintiff could have alleged a
complete cause of action for civil battery by the time the tortious acts ended,
and the fact that she was unaware of additional harm only created uncertainty
as to the amount of damages. It did not
toll the statute of limitations. Id.
at 317, 533 N.W.2d at 786. On the
record before us, Pritzlaff can be easily distinguished. Under Meracle, only
extraordinary expenses are actionable.
The record fails to establish as a matter of law that in 1990, when the
child was diagnosed with ADHD, the Nierengartens could have alleged a complete
cause of action for negligent misrepresentation involving extraordinary medical
expenses. The record does not suggest
that the Nierengartens knew, or should have known that the 1990 ADHD diagnosis
of their adopted child would result in unexpected and extraordinary medical
expenses. To the contrary, the record
indicates that the extraordinary expenses were not incurred or foreseen until
the bipolar diagnosis in 1994.
LSS makes several public
policy arguments to the effect that the Nierengartens' liability theory is
unfair and unjust, requiring agencies to be potentially "liable
forever" as "guarantors of the health of the children whom they
placed." Similar arguments have
been addressed in Meracle, which held that its decision to
recognize a claim for negligent misrepresentation "will not inhibit
adoption. Indeed, it will give
potential parents more confidence in the adoption process and in the accuracy
of the information they receive. Such
confidence would be eroded if we were to immunize agencies from liability for
false statements made during the adoption process." Id. at 32-33, 437 N.W.2d at
537. "We also emphasize that we do
not create liability which is remote from or out of proportion to the
negligence because, as we discussed above, we only allow recovery for the extraordinary
medical expenses which will be incurred by the Meracles as a result of the
negligent misrepresentation." Id.
at 32-33, 437 N.W.2d at 537. As a
result, we reverse the summary judgment of dismissal based upon the statute of
limitations.
NEGLIGENT PLACEMENT BASED UPON A DUTY TO
INVESTIGATE
HEALTH
HISTORY
Next, we conclude that
the Nierengartens failed to demonstrate a breach of an assumed duty to
investigate. The Nierengartens rely on
their agreement with LSS that states in part: "[LSS] and Eastern Child
Welfare Society will make every effort to insure that our child is healthy, and
that we have as much information about his/her health/family history as
possible."
The Nierengartens argue
that through this agreement, LSS assumed a duty of informing the Nierengartens
about as much of the child’s health history as possible. They contend that although LSS provided the
pre-flight report, a health history and physical examination, and initial
social history, it did not provide them with the orphanage notes prior to
placement. They contend that because
the orphanage notes contradict the information in the documents provided, the
failure to provide them is actionable.
The Nierengartens again
rely on Meracle that concluded the agency “voluntarily assumed
the duty” of informing the prospective parents about the child’s chances of
developing Huntington’s disease. Meracle
observed, however: "This is not a case in which an adoption agency placed
a child without discovering and informing the prospective parents about the
child’s health problems. Therefore we
need not and do not address the question of whether adoption agencies have a
duty to discover and disclose health information about children they place for
adoption." Id. at
32, 437 N.W.2d at 537. Meracle
therefore does not address the precise issues here, whether an adoption agency
has the duty to discover health information.
Meracle accepts the proposition, however, that an adoption
agency may voluntarily assume a duty of disclosure. Id. at 32-33, 437 N.W.2d at 537.
We conclude, in view of
the record before us, that the Nierengartens fail to demonstrate LSS breached
an assumed duty to obtain the orphanage notes prior to placement. The orphanage notes do not contain a medical
history or diagnosis, but record daily events at the orphanage. LSS obtained and provided the Nierengartens
a social history, a health history and physical examination, and a pre-flight
report. While not extensive, these
reports indicated that the child was healthy.
For example, the
pre-flight report, dated April 25, 1987, and signed by a social worker,
states: "He understands what [is]
said to him and follows direction. He
spreads out 3 fingers if asked about his age.
He hums some words of a song. He
likes toy cars best and plays with them actively. He goes up and down stairs freely. If getting angry, he runs to the corner, cries lying on the
stomach or lying on the back, showing his temper, but bounces right back if
soothed and loved. He is affable,
attractive, cheerful and active."
The physical examination report, signed by a physician, is
unremarkable. The initial social history
states that the child "is in good
health and is normal in his general development. He is even-tempered and easily adjusts himself to new
circumstances. He has a good
relationship with other children."
At best, the
Nierengartens' agreement implies that LSS must make a good faith effort to
obtain a medical and social history.
This was done. All reports
indicated that the child was healthy.
There was nothing in the reports to alert LSS that it needed to obtain
more information, perform more extensive investigation or testing, or obtain
the daily notes from the orphanage prior to placement. A duty does not exist if the defendant could
not reasonably foresee any injury as a result of his acts or if his conduct was
reasonable in light of what could be anticipated. Cf. Schuster v. Altenberg, 144 Wis.2d 223,
236-38, 424 N.W.2d 159, 165 (1988) ("[t]he concept of duty in Wisconsin,
as it relates to negligence cases, is inexorably interwoven with
foreseeability.") (citation omitted).
Here, there is no showing that LSS should have doubted the information
it was provided prior to placement.
The Nierengartens argue
a related issue that, apart from the agreement, they have demonstrated a claim
for negligent placement, based upon LSS’s failure to discover and disclose
information about the child before he was placed for adoption. They argue that Meracle does
not preclude a claim based upon negligent placement. While Meracle does not preclude a claim based upon
negligent placement, it does not recognize a claim other than
misrepresentation. The Nierengartens
cite no statutory or case law that recognizes a negligent placement claim based
upon a breach of a duty to investigate health history.
In Gibbs v. Ernst,
647 A.2d 882 (Pa. 1994), the Pennsylvania Supreme Court, citing Meracle,
among other decisions, held that traditional common law causes of action
grounded in fraud and negligence apply to adoption settings. Id. at 886. However, it held further that agencies did
not have a common law or statutory duty to perform comprehensive investigations
of a child’s mental and physical
health. It concluded that, absent a
statutory directive, judicial imposition of such a duty would not be
unreasonable. Id. at
892. We similarly find no directive in
Wisconsin’s statutory or common law for a comprehensive investigation of the
child's health history and conclude the record does not support any claim for
breach of a duty to investigate.
In conclusion, we
determine that genuine issues of material fact exist whether LSS' statements,
that the child was exhibiting normal adjustment behavior during its
pre-adoption placement, support a claim of negligent misrepresentation. We further conclude that LSS failed to
demonstrate, as a matter of law, that prior to the 1994 bipolar diagnosis, the
Nierengartens discovered, or should have discovered, a reasonable medical
certainty that they would incur extraordinary medical expenses as a result of
the child's disorders. Finally, we
conclude that the record fails to demonstrate any basis for a negligent placement
claim based upon LSS's alleged failure to investigate health history prior to
placement.
By the Court.—Judgment
affirmed in part; reversed in part and cause remanded.
