COURT OF APPEALS DECISION DATED AND FILED December 30, 2008 David
R. Schanker Clerk of Court of Appeals |
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NOTICE |
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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 |
IN COURT OF APPEALS |
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DISTRICT IV |
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Gene Blanchar, Plaintiff-Appellant, v. Lake Land Builders, Inc., Defendant, Defendant-Respondent. |
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APPEAL
from an order of the circuit court for
Before Higginbotham, P.J., Dykman and Lundsten, JJ.
¶1 LUNDSTEN, J. Gene Blanchar appeals the circuit
court’s order dismissing his Wis. Stat. § 100.18(1)
misrepresentation claim against Lake Land Builders, Inc., and Chad Strutzel,
Lake Land’s sole stockholder.[1] Blanchar entered into a contract to purchase
a vacant lot from
¶2 Blanchar argues that the circuit court erred in granting
summary judgment to Strutzel on Blanchar’s Wis.
Stat. § 100.18 claim after concluding that Blanchar was not a
member of “the public” for purposes of the statute. Blanchar also argues that the circuit court
erred in concluding that his complaint failed to state a claim for piercing
Background
¶3 Blanchar and
¶4 Blanchar chose
¶5 Blanchar claimed that Strutzel’s misrepresentations on behalf
of
¶6 Strutzel moved for summary judgment, arguing that Blanchar was not a member of “the public” at the time of the alleged misrepresentations and, therefore, was not covered by Wis. Stat. § 100.18. Strutzel also argued that Blanchar’s complaint failed to state a claim for piercing the corporate veil. The circuit court agreed with both arguments and granted the motion. We reference additional facts as needed below.
Discussion
¶7 We review a grant of summary judgment de novo, applying the same standards as the circuit court. Thomas v. Mallett, 2005 WI 129, ¶26,
285
A. Whether Blanchar Was A Member Of “The Public”
For
Purposes
Of His Wis. Stat. § 100.18
Claim
¶8 A claim for Wis. Stat. § 100.18(1) misrepresentation 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 caused the plaintiff a pecuniary loss. K&S Tool & Die Corp. v. Perfection Mach. Sales, Inc., 2007 WI 70, ¶19, 301 Wis. 2d 109, 732 N.W.2d 792; see also Wis JI—Civil 2418. The dispute in this case concerns only the first element, namely, whether Blanchar was a member of “the public” at the time of Strutzel’s alleged misrepresentations.[3]
¶9 Wisconsin Stat. § 100.18(1)
does not define who is a member of “the public.” In State v. Automatic Merchandisers of
America, Inc., 64
¶10 According to Blanchar, there was no “particular relationship” because he was not differently situated than other members of the public who negotiate with a builder to construct a custom home. Blanchar states that it is “inconceivable [that] the legislature intended to deny an individual the protections of § 100.18 because the individual purchased a lot from a builder, the builder prepared plans for a house, and obtained bids from subcontractors.” Blanchar argues that the fact that the lot would cost him an additional $10,000 if he did not choose Lake Land as his builder did not bind him to Lake Land and should not protect Lake Land from liability under the statute.[4]
¶11 Strutzel reaches the opposite conclusion from the same facts. He does not argue that his interactions with Blanchar were unusual for a custom home builder and buyer. Rather, he asserts that the lot purchase agreement, combined with undisputed evidence showing that (1) he and Blanchar worked together over a period of months to develop a building plan specific to Blanchar’s lot, (2) Strutzel paid for drafting services, and (3) Strutzel collected subcontractor bids, demonstrates a “particular relationship” as a matter of law.
¶12 Our view is more closely aligned with Blanchar’s than Strutzel’s. Based on the undisputed facts, we conclude
that no jury could reasonably find that Blanchar and
¶13 We are not suggesting that custom home builders and buyers
never have a “particular relationship” before entering into a building
contract. The required inquiry looks to
the “peculiar facts and circumstances” of each case. See K&S
Tool & Die, 301
¶14 The fact that Blanchar would have been required to pay $10,000 more
for his lot if he did not choose
¶15 In granting summary judgment to Strutzel, the circuit court focused
solely on the fact that Blanchar agreed to purchase the lot at a price that was
contingent on entering into a building contract with
¶16 Our decision in Kailin v. Armstrong, 2002 WI App 70,
252
¶17 Here, as Blanchar points out, there are two distinct contracts. The alleged misrepresentations occurred before the parties entered into the contract
at issue, the construction contract. Blanchar
alleges that the misrepresentations induced the construction contract, not the
lot purchase agreement. The construction
contract is the relevant “offered item.”
See K&S Tool & Die, 301
¶18 Strutzel argues that Blanchar was not “the public” for purposes
of the alleged misrepresentations because any statements Strutzel made to
Blanchar in connection with the construction contract were directed only at
Blanchar with Blanchar’s particular situation in mind. The case law states, however, that “the
public” under Wis. Stat. § 100.18(1)
may refer to only one individual and may even include statements made “in
private.”
¶19 In sum, we conclude as a matter of law, based on the undisputed
facts, that Blanchar was still a member of “the public” with respect to
B. Whether Blanchar’s Complaint Failed To State
A
Claim For Piercing Lake
Land’s Corporate Veil
¶20 Blanchar argues that the circuit court erred when it concluded
that he failed to state a claim for piercing
¶21
¶22 Even notice pleading, however, has certain basic
requirements. A complaint must contain “[a]
short and plain statement of the claim, identifying the transaction or
occurrence or series of transactions or occurrences out of which the claim
arises.” Wis. Stat. § 802.02(1)(a). The complaint must “‘contain a statement of
the general factual circumstances in support of the claim presented.’” Ziemann v. Village of North Hudson,
102
¶23 With these standards in mind, we turn to the elements required
to pierce the corporate veil and we assess the sufficiency of Blanchar’s
complaint in light of those elements. The
parties agree that the elements are set forth in Consumer’s Co-op of Walworth
County v. Olsen, 142
(1) Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own; and
(2) Such control must have been used by the defendant to commit fraud or wrong, to perpetrate the violation of a statutory or other positive legal duty, or [a] dishonest and unjust act in contravention of plaintiff’s legal rights; and
(3) The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.
¶24 Additionally, the court in Consumer’s Co-op listed several factors that inform the first element. Those factors include a failure to hold corporate board meetings, a failure to maintain records, inadequate capitalization at the inception of the corporation, intermingling of personal and corporate funds, shareholders’ treating the corporate assets as their own, withdrawal of capital from the corporation at will, shareholders holding themselves out as being personally liable for the debts of the corporation, failure to issue stock, and managing the corporation without regard to its independent existence. See id. at 490 n.10.
¶25 Blanchar’s complaint begins with general factual allegations followed by three labeled claims: (1) violation of Wis. Stat. § 100.18, (2) common law “fraud/misrepresentation,” and (3) breach of contract. Each of the three labeled claims includes additional factual allegations. The complaint also includes a fourth, unlabeled claim, which consists in its entirety of the following three allegations:
44. Realleges the allegations contained in paragraphs 1-16 [general factual allegations], and paragraphs 28-43 [breach of contract allegations].
45. On information and belief alleges that Lake Land Builders, Inc. is not a bona fide, legal corporation because Chad Strutzel has failed to properly treat the corporate entity separate from his personal business, and as a result the law requires that Lake Land Builders’ corporate veil be pierced.
46. Alternatively, Lake Land Builders is a non-corporate entity owned and operated by Chad Strutzel, and as a result Chad Strutzel is personally and individually liable to the plaintiff for damages arising from the breaches of contract.
¶26 Blanchar focuses on paragraph 45. He argues that paragraph 45 is an allegation of an “ultimate fact” sufficient to support his claim for piercing the corporate veil and that no further elaboration is necessary. We disagree, and conclude that Blanchar’s allegations are insufficient.
¶27 First, paragraph 45 contains no discernible factual allegations. Whether Strutzel failed to “properly treat
the corporate entity separate from his personal business” appears more akin to
a legal conclusion that cannot be answered without at least some additional factual
allegations describing what Strutzel actually did. Without more, paragraph 45 is insufficient for
Blanchar to plead the first required element, whether
¶28 Second, even if we assume that paragraph 45 is sufficient to
plead the first element, Blanchar’s complaint lacks allegations pertaining to
the third element.[7] The complaint contains neither specific
allegations nor a general statement from which we could reasonably infer that
¶29 Accordingly, we agree with the circuit court that Blanchar’s complaint fails to state a claim for piercing Lake Land’s corporate veil.
¶30 Blanchar argues that he presented evidence in his summary
judgment materials that, when viewed in a light most favorable to him,
demonstrates that he was entitled to pierce
¶31 As for our first interpretation of Blanchar’s argument, we know
of no authority—and Blanchar supplies none—that would allow us to consider matters
outside the pleadings in deciding whether his complaint states a claim. Cf.
Heinritz
v. Lawrence University, 194
¶32 As for our second interpretation of Blanchar’s argument, it
incorrectly assumes that we may ignore or skip the first step in summary
judgment methodology even when that step is disputed. Because the first step is disputed here, we must
begin with that step and ask whether Blanchar has stated a claim. We have already concluded that he has not,
and that ends our summary judgment analysis.
“[A]s we have consistently held, the first inquiry in any summary
judgment motion filed by a defendant is whether the complaint states a claim
upon which relief can be granted. If it
does not, the analysis goes no further and the motion is granted.” Bauer v. Murphy, 191
¶33 Finally, Blanchar makes a waiver argument. Blanchar points out that Strutzel in his answer did not raise the affirmative defense of failure to state a claim and did not separately move to dismiss on that basis. Rather, Strutzel raised his failure-to-state-a-claim argument in his summary judgment motion, filed ten days after his answer.
¶34 We conclude, however, that Blanchar’s waiver argument is itself waived. We do not find this issue raised anywhere in Blanchar’s circuit court arguments. Even now, on appeal, the first time that Blanchar makes this argument with any clarity is in his reply brief. Consequently, we do not address the merits of Blanchar’s waiver argument. See Village of Trempealeau v. Mikrut, 2004 WI 79, ¶15, 273 Wis. 2d 76, 681 N.W.2d 190 (issues not preserved in the circuit court will generally not be considered on appeal); Bilda v. County of Milwaukee, 2006 WI App 57, ¶20 n.7, 292 Wis. 2d 212, 713 N.W.2d 661 (we need not consider arguments raised for the first time in a reply brief).
By the Court.—Order affirmed in part; reversed in part and cause remanded for further proceedings.
Not recommended for publication in the official reports.
[1] All references to the Wisconsin Statutes are to the 2005-06 version unless otherwise noted.
[2] We
note that Blanchar’s claim for breach of contract against
[3] Wisconsin Stat. § 100.18(1) reads, in full, as follows:
No person, firm, corporation or association, or agent or employee thereof, with intent to sell, distribute, increase the consumption of or in any wise dispose of any real estate, merchandise, securities, employment, service, or anything offered by such person, firm, corporation or association, or agent or employee thereof, directly or indirectly, to the public for sale, hire, use or other distribution, or with intent to induce the public in any manner to enter into any contract or obligation relating to the purchase, sale, hire, use or lease of any real estate, merchandise, securities, employment or service, shall make, publish, disseminate, circulate, or place before the public, or cause, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in this state, in a newspaper, magazine or other publication, or in the form of a book, notice, handbill, poster, bill, circular, pamphlet, letter, sign, placard, card, label, or over any radio or television station, or in any other way similar or dissimilar to the foregoing, an advertisement, announcement, statement or representation of any kind to the public relating to such purchase, sale, hire, use or lease of such real estate, merchandise, securities, service or employment or to the terms or conditions thereof, which advertisement, announcement, statement or representation contains any assertion, representation or statement of fact which is untrue, deceptive or misleading.
[4] Although
Blanchar argues that there is a factual dispute that prevents summary judgment,
he has not identified any material dispute of fact. So far as we can discern, he relies solely on
undisputed evidence. For example, he
contends that it is undisputed that he was not bound to choose
[5] Strutzel
asserts that Blanchar “admits that by [entering into the lot purchase
agreement], [Blanchar] obligated himself to buy the building services from Lake
Land Builders, Inc.” The only record
citation Strutzel provides to support this assertion is to a portion of one of
Blanchar’s affidavits, and it does not support the assertion. We find nothing in the evidence Strutzel
cites from which a fact finder could reasonably infer that Blanchar was bound
by the lot purchase agreement to enter into a construction contract with
[6] The
court in Consumer’s Co-op of Walworth County v. Olsen, 142 Wis. 2d 465,
419 N.W.2d 211 (1988), also said that “[a] test which is essentially identical
has been articulated as a two-prong test requiring: ‘(1) that there be such unity of interest and
ownership that the separate personalities of the corporation and the individual
[shareholders] no longer exist; and (2) that, if the acts are treated as those
of the corporation alone, an inequitable result will follow.’”
[7] Because we conclude that the complaint lacks allegations pertaining to the third element, we need not decide whether the complaint also lacks allegations pertaining to the second element.