COURT OF APPEALS DECISION DATED AND FILED August 4, 2009 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
from a judgment of the circuit court for
Before Curley, P.J., Fine and Brennan, JJ.
¶1 BRENNAN, J. Jamstep Properties, LLC, appeals from a judgment entered in favor of John Chowanec following the summary judgment ruling that Jamstep breached the real estate contract between the two. The court also dismissed Jamstep’s claim seeking rescission of the contract. Jamstep argues in this appeal that the trial court erred in dismissing its rescission claim, which was based on misrepresentations Chowanec made prior to the sale. The trial court correctly ruled, as a matter of law, that there could be no justifiable reliance on any verbal misrepresentations because Jamstep drafted the contract, and that contract included provisions asserting that the “BUYER ACCEPTS THE PROPERTY ‘AS-IS, WHERE-IS’ SELLER MAKES NO WARRANTIES EXPRESSED OR IMPLIED.” Accordingly, we affirm.
BACKGROUND
¶2 This case arises following the sale of real estate. Jamstep is a limited liability company
engaged in the practice of real estate sales and development. The sole member of Jamstep is James C. Stephens. Stephens is a real estate broker and a
non-practicing lawyer. Stephens was
interested in some vacant real estate along the
¶3 On August 29, 2005, Jamstep submitted a commercial offer to purchase the real estate and an addendum to the offer. Stephens drafted both the offer and the addendum. Chowanec accepted the offer on September 9, 2005. Pursuant to the addendum, which was incorporated into the offer to purchase, Jamstep made monthly, non-refundable earnest money payments to Chowanec totaling $150,000. On March 10, 2006, the parties executed an amendment to the offer to purchase increasing the purchase price, changing the closing date and requiring Jamstep to make $16,000 monthly earnest money payments from May 2006 until May 2007 or until the closing, whichever came first.
¶4 Jamstep then learned that the foundry sand on the property was contaminated and would need to be cleaned. It sent a letter to Chowanec alleging that Chowanec had made false representations in this regard. Jamstep advised Chowanec that it would make no more payments and wanted its $150,000 back. Chowanec refused to return the money.
¶5 The closing on the offer never took place. In December 2006, Jamstep filed a “MEMORANDUM OF INTEREST” with the Milwaukee County Register of Deeds indicating that it had an equitable ownership interest in the property based on the offer. Chowanec sold the property to an unrelated third party. The memorandum of interest, however, showed up as a cloud on the title and Jamstep refused to remove it. As a result, Chowanec filed this action, seeking a declaratory judgment to quiet title, and making claims of breach of the offer, piercing the corporate veil, malicious slander of title, and interference with contractual relations. Jamstep filed an answer and counterclaim seeking rescission of the contract based on misrepresentation, for unfair trade practices under Wis. Stat. § 100.18 (2005-06)[1], and property loss through fraudulent misrepresentation, contrary to Wis. Stat. §§ 895.80 (2003-04) and 943.20.
¶6 In June 2008, Chowanec filed a motion seeking summary judgment, asking for an award of contract damages and dismissal of the counterclaim. During the pendency of the motion, the parties resolved everything except Chowanec’s claim that Jamstep breached the offer contract and Jamstep’s counterclaim seeking rescission of the contract based on misrepresentation.
¶7 The matter was brought to the trial court for a hearing on the summary judgment motion on August 11, 2008. After arguments from counsel, the trial court ruled in favor of Chowanec, holding that Jamstep could not prove any justifiable reliance on the misrepresentations given the language of the contract itself:
So that when I examined the contract and what was bargained for, it does not appear to me as if this is a contract that is voidable by way of rescission even if one acknowledges that the misrepresentations were made.
I don’t think it could have been stated more clearly that the buyer accepted the property as is, and, not only that, but that the buyer reflected the reality of that by protecting himself with the modifications that are contained in Addendum A.
¶8 The counterclaim was dismissed and judgment was entered in favor of Chowanec. Jamstep now appeals.
DISCUSSION
¶9 The issue in this case is whether the contractual language, as a matter of law, operated to eliminate any justifiable reliance on warranties or promises made in conversations that took place prior to the submission of the offer. We affirm the trial court’s decision.
¶10 The challenged ruling in this case arises following the trial
court’s decision on a summary judgment motion.
Our review in cases on appeal from summary judgment is well-known. We
review orders for summary judgments independently, employing the same
methodology as the trial court. See Green Spring Farms v. Kersten, 136
¶11 The language in the contract pertinent to this case appears at lines 293-94 of the offer to purchase. Stephens, in drafting Jamstep’s offer, added the following language to the standard WB-15 Commercial Offer to Purchase form: “BUYER ACCEPTS THE PROPERTY ‘AS-IS, WHERE-IS’ SELLER MAKES NO WARRANTIES EXPRESS OR IMPLIED.” In the addendum to the offer, at paragraph 5, Stephens included the following language: “‘AS IS’ Transaction. Buyer takes the Property in ‘AS IS’ condition, with no warrants or representations from the Seller regarding the physical condition of the Property or any personal property included in the sale.”
¶12 Jamstep asserts that despite this language, it is entitled to rescission because false representations were made during discussions prior to the time the offer was executed and whether it could justifiably rely on those misrepresentations presents a question of fact. We cannot agree.
¶13 To assert a valid rescission claim, Jamstep must demonstrate
that: (1) a fraudulent or material
misrepresentation was made; (2) reliance on the misrepresentation induced
it to submit the offer and enter into the contract; and (3) that it was
justified in relying on the representation.
See Restatement (Second) Of Contracts § 164 (1981). Here,
the trial court assumed, as do we, that the false misrepresentations were in
fact made and that reliance on them induced Jamstep to make the offer to
purchase the property. We conclude, as
did the trial court, that the language in the contract, as a matter of law,
prevents any reasonable possibility that Jamstep was justified in relying on
the verbal representations.
¶14 The contractual language clearly shouts out that the property is being sold “as-is” and the buyer is not making any warranties or representations. This language is clearly set forth in all caps. Stephens who is a non-practicing attorney and real estate agent drafted the contract specifically adding this language to the standard contract. He is a sophisticated party, who was in the business of buying and developing commercial real estate. This is not a contract of adhesion. Further, the contract includes language giving Jamstep the responsibility of “obtaining from an engineering or consulting firm acceptable to Buyer … written geotechnical and environmental assessments (including soil borings or other intrusive investigation) showing” that the property was sufficient for Jamstep’s purposes. The addendum also included language providing Jamstep with the responsibility to get a survey completed. Finally, the contract contains an integration clause which provided: “THIS OFFER, INCLUDING ANY AMENDMENTS TO IT, CONTAINS THE ENTIRE AGREEMENT OF THE BUYER AND SELLER REGARDING THE TRANSACTION. ALL PRIOR NEGOTIATIONS AND DISCUSSIONS HAVE BEEN MERGED INTO THIS OFFER.” This clause incorporated all prior oral negotiations into the written agreement. Based on all of these circumstances, we concur with the trial court’s conclusions:
So that when I examined the contract and what was bargained for, it does not appear to me as if this is a contract that is voidable by way of rescission even if one acknowledges that the misrepresentations were made.
I don’t think it could have been stated more clearly that the buyer accepted the property as is, and, not only that, but that the buyer reflected the reality of that by protecting himself with the modifications that are contained in Addendum A.
¶15 Although Jamstep cites several cases in support of its claim for rescission, Whipp v. Iverson, 43 Wis. 2d 166, 168 N.W.2d 201 (1969), First National Bank & Trust Co. v. Notte, 97 Wis. 2d 207, 293 N.W.2d 530 (1980), and Schnuth v. Harrison, 44 Wis. 2d 326, 171 N.W.2d 370 (1969), none of these cases involved contracts containing an “as-is” clause, which disclaimed all warranties and representations by the seller.
¶16 The claim in this appeal arises from a contract where an
“as-is” clause plus a disclaimer of
all warranties/representations was added to the contract. The “as-is” clause put the burden on Jamstep
to determine the condition of the property.
See Omernik v. Bushman, 151
¶17 Moreover, Stephens declined to file a reply brief to refute
Chowanec’s arguments. Accordingly, the
failure to reply results in a concession to Chowanec’s position. See Schlieper v. DNR, 188
By the Court.—Judgment affirmed.
Not recommended for publication in the official reports.