COURT OF APPEALS DECISION DATED AND FILED August 13, 2008 David R. Schanker Clerk of Court of Appeals |
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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. A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See Wis. Stat. § 808.10 and Rule 809.62. |
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Appeal No. |
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STATE OF WISCONSIN |
IN COURT OF APPEALS |
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DISTRICT II |
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Michael Armstrong,
Plaintiff-Appellant, v. Steve Zima and Ellie Zima,
Defendants-Respondents. |
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APPEAL
from a judgment of the circuit court for
Before
¶1 PER CURIAM. Michael Armstrong appeals from a summary judgment dismissing his claims against Steve and Ellie Zima for an alleged misrepresentation in the real estate condition report (RECR) the Zimas provided Armstrong when he purchased their home. We conclude that factual issues exist on all of Armstrong’s claims which preclude summary judgment. We reverse the judgment and remand the action for further proceedings.
¶2 Armstrong purchased the Zima home in September 2004. As required by law, the Zimas completed a RECR. It indicated that they were unaware of “defects in the basement or foundation (including cracks, seepage and bulges).” A home inspection was done by Tom Dempsey. He noted typical foundation wall cracks, typical foundation seepage or dampness in the basement, and water stains and efflorescence as a sign of leakage. He also noted signs of leakage that required correction of grading and exterior drainage. The report did not make any recommendation for repair of the foundation or any testing of drain tiles. It included the caveat that “it is impossible to predict the severity or frequency of moisture penetration on one inspection visit.” It further indicated that “People who live in a house for a period of time are in the best position to provide information about the basement. They have seen the basement under various circumstances over a length of time. Buyers should be concerned with evidence of recent paint, repairs or remodeling in the basement.”
¶3 In the spring and September of 2005 Armstrong experienced
water seepage in the northwest corner of the basement. Armstrong had repairs done to stop the
seepage at the cost of approximately $14,000.
With the belief that the water seepage was a preexisting condition which
the Zimas failed to disclose, he commenced this action against the Zimas
alleging breach of the contract warranty, intentional misrepresentation,
misrepresentation in violation of Wis.
Stat. §§ 895.446 and 943.20(1)(d) (2005-06),[1]
and false advertising in violation of
Wis. Stat. § 100.18.[2]
¶4 The Zimas moved for summary judgment on the ground that Armstrong had knowledge of the condition of the basement and therefore, had no right to maintain any of his claims.[3] The circuit court concluded that there was no genuine issue of material fact that Armstrong waived or released the Zimas from any and all adverse conditions noted in the home inspection report completed before closing the sale and that Armstrong could not have reasonably relied on the RECR because of the disclosure of water stains in the basement during the home inspection. On reconsideration the circuit court acknowledged that reasonable reliance was not an element of a Wis. Stat. § 100.18 claim but concluded that as a matter of law the RECR was not a material inducement or significant factor contributing to Armstrong’s purchase of the property since the adverse condition had been disclosed to him during the home inspection. All of Armstrong’s claims were dismissed.
¶5 When
reviewing a grant of summary judgment, we apply the same methodology as the circuit
court and decide de novo whether summary judgment was appropriate. Novell v. Migliaccio, 2008 WI 44,
¶23, ___
¶6 We first address Armstrong’s Wis. Stat. § 100.18 claim, which has three
elements: “(1) the defendant made a
representation to the public with the intent to induce an obligation, (2) the
representation was ‘untrue, deceptive or misleading,’ and (3) the representation
materially induced (caused) a pecuniary loss to the plaintiff.” Novell, 2008 WI 44, ¶49 (quoted
source omitted). The reasonableness of a
person’s reliance on a misrepresentation is not an element of the claim but is
a consideration in determining whether there had been a material inducement.
¶7 In opposition to the motion for summary judgment Armstrong’s affidavit states that he relied on the representation in the RECR that there were no known defects in the basement or foundation. He was not concerned about the water stains on the basement walls because the Zimas had told him that they never had water in the basement.[4] The inspection report characterized the stains as “typical,” indicated that signs of moisture may have been caused by a condition that no longer exists, and did not make any recommendation for repair of the foundation or further testing of the drain tiles. The report indicated that the best information about the basement would come from people who lived in the house for a period of time and observed it under various circumstances. The very report the circuit court found to have given Armstrong notice of the potential adverse condition simultaneously urged Armstrong to rely on the information from the sellers regarding the condition of the basement. The report is ambiguous as to the condition of the basement and creates factual issues as to whether Armstrong should have relied on the information from the Zimas. See Novell, 2008 WI 44, ¶55 (evidence is equivocal as to whether buyer’s reliance on sellers’ representation was unreasonable). It cannot be determined as a matter of law that Armstrong’s reliance was unreasonable and therefore the allegedly false representation was not a material inducement for the purchase and pecuniary loss. The circuit court erred in granting summary judgment dismissing Armstrong’s Wis. Stat. § 100.18 claim.
¶8 The circuit court also dismissed Armstrong’s claims on the ground that he “waived and/or released the Zimas from any and all adverse conditions identified in the inspection report.”[5] The conclusion is based on the undisputed fact that after the home inspection report, Armstrong negotiated a $3,900 reduction in the purchase price of the home and signed an amendment to the offer to purchase indicating “If seller agrees w[ith] the above [price reduction] buyer removes inspection contingency.” The circuit court concluded, “It’s undisputed in this case that Mr. Armstrong sought a reduction in this purchase price by means of this amendment because of the conditions that he saw in the inspection report….”
¶9 There are two problems with the circuit court’s conclusion
that a waiver of potential defects in the basement occurred. The first is the notion that the inspection
report and Armstrong’s own observations of water stains put Armstrong on notice
that the Zimas’s representation in the RECR was false. As we have noted the inspection report
indicated the water stains and dampness were typical. Although seepage reparable by grading was
noted, the report did not disclose a known defect that directly contradicted
the RECR. In this regard this is not a
case like Lambert v. Hein, 218
¶10 The second problem with concluding that Armstrong waived the potential defect with the basement is that a dispute exists as to the purpose of the price reduction and the meaning of the waiver of the inspection contingency. Armstrong’s deposition testimony was that the price was reduced because the inspection report’s summary suggested that front and back sidewalks be mud jacked to improve exterior drainage.[6] The Zimas’s joint affidavit states that they were not told that the price reduction related solely to mud jacking at any location. A question of fact exists whether the price reduction was to compensate for the suggested mud jacking or, as the circuit court found as an undisputed fact, for a waiver of all adverse conditions noted in the report. The inspection report did not relate the mud jacking of front and back sidewalks to the basement water stains. If Armstrong’s testimony is believed, the price reduction was not directly related to water problems in the basement. The credibility of Armstrong’s testimony is not to be resolved on summary judgment. See Independence Bank v. Equity Livestock, 141 Wis. 2d 776, 784, 417 N.W.2d 32 (Ct. App. 1987) (on summary judgment the circuit court is not entitled to weigh conflicting evidence as it would at a trial).
¶11 Further, waiver of the inspection contingency is ambiguous in
light of the fact that the inspection had already been completed. The meaning of a waiver depends on the
parties’ intent and is a question of fact. Royster-Clark, Inc. v. Olsen’s Mill, Inc.,
2006 WI 46, ¶21, 290
¶12 As a final matter, we are offended by the tone utilized by
Armstrong’s appellate attorneys, Attorneys Daniel W. Stevens and Rudolph J.
Kuss, in the appellant’s brief. In the
statement of the case, the brief accuses the circuit court judge of putting an
“imprimatur on residential real estate fraud,” by allowing sellers to lie on
the statutorily mandated RECR. The
statement of the case and fact section of an appellate brief should objectively
recite the history of the case; “it is no place for argument or ‘spin.’” Dawson v. Goldammer, 2006
WI App 158, ¶1 n.3, 295
By the Court.—Judgment reversed and cause remanded.
This opinion will not be published. See Wis. Stat. Rule 809.23(1)(b)5.
[1] All references to the Wisconsin Statutes are to the 2005-06 version unless otherwise noted.
[2] An action for rescission was also stated but not pursued.
[3] The Zimas also moved for dismissal based on spoliation of evidence and to exclude an expert witness not properly identified. The circuit court denied the motion to dismiss based on spoliation and refused to allow Armstrong to redesignate an expert witness. Those rulings are not challenged on appeal.
[4] Although it is not clear whether the Zimas made representations to Armstrong other than that in the RECR, Armstrong’s assertion that the Zimas told him they never had water in the basement is not disputed. We need only acknowledge but not address the existence of disputed facts concerning the preexisting nature of water seepage in the basement and whether the Zimas’s representation was in fact false. Those factual disputes did not preclude summary judgment on the grounds the circuit court relied on.
[5] Since
we have concluded that neither causation/material inducement nor reasonable
reliance can be determined as a matter of law in this case, to the extent
Armstrong’s other claims were dismissed on the ground that there was no
justifiable reliance, it was error. See
Malzewski
v. Rapkin, 2006 WI App 183, ¶¶12, 14, 18, 22, 296 Wis. 2d 98, 723
N.W.2d 156 (for claims of breach of warranty, intentional misrepresentation and
theft by fraud under Wis. Stat. §§ 895.446,
943.20(1)(d), the buyer must show reasonable reliance on the seller’s warranty
or representation) review denied,
2007 WI 16, 298
[6] Armstrong’s
affidavit in opposition to the motion for summary judgment indicated that
because the home inspector noted the end of the driveway would need to be mud
jacked, he negotiated the price reduction.
An affidavit that directly contradicts prior deposition testimony of the
same witness is insufficient to create a genuine issue of fact for trial,
unless the contradiction is adequately explained. See Yahnke
v. Carson, 2000 WI 74, ¶21, 236