Ollerman v. O'Rourke Co., Inc., 77-305

Decision Date07 February 1980
Docket NumberNo. 77-305,77-305
PartiesRoy OLLERMAN, Plaintiff-Respondent, v. O'ROURKE CO., INC., a Wisconsin Corporation, Defendant-Appellant.
CourtWisconsin Supreme Court

Frank J. Daily and Quarles & Brady, Milwaukee, on brief for defendant-appellant.

James L. Walt, Milwaukee, atty., and Alan L. Derzon, Milwaukee, of counsel, on brief for plaintiff-respondent.

ABRAHAMSON, Justice.

This appeal is from an order overruling the motion of O'Rourke Co., Inc., the seller, brought under sec. 802.06(2)(f), Stats., 1 to dismiss Roy Ollerman's, the buyer's, amended complaint for failing to state a claim upon which relief can be granted. We conclude that the complaint states a claim, and we affirm the order of the circuit court.

Because this is an appeal from an order overruling a motion to dismiss the amended complaint, 2 the only facts of record are those in the pleadings.

In his amended complaint, filed on July 25, 1977, the buyer alleges that on or about May 15, 1974 he entered into a written offer to purchase a vacant lot in the Village of Brown Deer, Milwaukee county, Wisconsin, for an agreed price of $12,600; that on or about June 4, 1974, the seller conveyed the lot to the buyer by a warranty deed; that the buyer purchased the lot to build a house; and that in the process of excavating for the house, a well on the property was uncapped and water was released.

The complaint further alleges that the seller is a corporation engaged in the business of developing and selling real estate; that it is experienced in matters of real estate; that it had owned and subdivided the area of real estate in which the subject lot is located; that it was offering the subject lot and other lots in the same area for public sale; that it is familiar with the particular area of real estate in which the lot is located; that the area is zoned residential and that the seller knew it was zoned residential.

The complaint further states that the buyer "was a stranger to the area"; that he was inexperienced in matters of real estate transactions; that he purchased the lot to construct a house; that he did not know of the existence of a well under the land surface hidden from view; that if he had known of the well, he either would not have purchased the property or would have purchased it at a lower price; that the well constituted a defective condition of the lot; that the well made the property worth less for residential purposes than he had been led to believe; that the well made the property unsuitable for building without added expense; and that the seller's failure to disclose the existence of the well was relied upon by the buyer and he was thereby induced to buy this lot in ignorance of the well.

The buyer further alleges that he incurred additional expenses for water control and construction costs because of the well: that the sum of $2,722.04 was expended to attempt to stop the flow of water so that the subsoil would be suitable for building, and that the sum of $10,575 was "incurred with the builder due to change in plans necessitated by said condition and to correct the same."

Additional allegations applicable to what is labeled in the complaint as the "first cause of action" are that the seller, through its agents, knew of the existence of the underground well and, in order to induce buyer to buy the land, "falsely and with intent to defraud," failed to disclose this fact which it had a duty to disclose and which would have had a material bearing on the construction of a residence on the property.

Additional allegations applicable to what is labeled in the complaint as the "second cause of action" are that the seller, through its agents, knew or in the exercise of reasonable care should have known of the existence of the underground well; had the means to ascertain this fact; had a duty to ascertain and a duty to disclose this fact which would have had a material bearing on the construction of a residence on the property; and either knowingly or negligently breached its duty to the buyer in not informing the buyer of the underground well.

The buyer demands judgment on the first cause of action or in the alternative, on the second cause of action, in the sum of $20,000. 3

The circuit court, without disclosing its rationale, overruled the seller's motion to dismiss the amended complaint for failure to state a claim upon which relief can be granted.

The motion to dismiss for failure to state a claim, like the previously used demurrer, tests the legal sufficiency of the claim. The facts pleaded and all reasonable inferences from the pleadings are admitted to be true, but only for purpose of testing the legal sufficiency of the claim, not for the purpose of trial. The pleadings are to be liberally construed with a view to substantial justice to the parties. 4 The complaint is not required to state all the ultimate facts constituting each cause of action; and the complaint should be dismissed as legally insufficient only if "it is quite clear that under no conditions can the plaintiff recover." 5

This court has recognized that misrepresentation is a generic concept separable into the three familiar tort classifications: intent (sometimes called fraudulent misrepresentation, deceit or intentional deceit), negligence and strict responsibility. 6

In Whipp v. Iverson, 43 Wis.2d 166, 169-170, 168 N.W.2d 201, 203-204 (1969), we described the elements of these three torts as follows:

"The bases of responsibility in these three classifications of torts have at least three elements in common: (1) The representation must be of a fact and made by the defendant; (2) the representation of fact must be untrue; and (3) the plaintiff must believe such representation to be true and rely thereon to his damage. The classifications differ in several respects. In intentional deceit the defendant must either know the representation is untrue or the representation was made recklessly without caring whether it was true or false and with intent to deceive and induce the plaintiff to act upon it to the plaintiff's pecuniary damage. In strict responsibility, the misrepresentation must be made on the defendant's personal knowledge or under circumstances in which he necessarily ought to have known the truth or untruth of the statement and the defendant must have an economic interest in the transaction. Intent to deceive and good-faith belief in the truth of the representation are immaterial. In this classification the speaker is supposed to possess complete knowledge of the facts or could normally be expected to know them without investigation. Harper and McNeely, A Synthesis of The Law of Misrepresentation, 22 Minn.L.Rev. (1938), 939, at Note 12, p. 988. A person is therefore justified in expecting infallibility as to the representations of fact. In negligence, the defendant need only fail to exercise ordinary care in making a misrepresentation or in ascertaining the facts but like other cases of negligence, it requires a duty of care or a voluntary assumption of a duty."

On appeal, the seller argues that the complaint fails to state a claim upon which relief can be granted for three reasons: First, the complaint does not state a claim for actionable intentional misrepresentation because, as a matter of law, the seller had no duty to disclose the existence of the well. Secondly, the complaint does not state a claim for actionable negligent misrepresentation because, as a matter of law, the seller had no duty of care to the buyer. Third, the complaint does not allege any damages caused to the buyer by the purchase of the lot. We shall discuss each of these issues in turn.

II.

We discuss first whether the complaint states a claim for intentional misrepresentation. Initially we observe, as did the seller, that the complaint does not allege the first two elements of the tort of intentional misrepresentation, namely that the seller made a representation of fact and that the representation was untrue. The gravamen of the wrong is the nature of the false words used and the reliance which they may reasonably induce. In lieu of these allegations of false words, the complaint recites that the seller failed to disclose a fact, the existence of the well. The general rule is that silence, a failure to disclose a fact, is not an intentional misrepresentation unless the seller has a duty to disclose. 7 If there is a duty to disclose a fact, failure to disclose that fact is treated in the law as equivalent to a representation of the non existence of the fact. In Southard v. Occidental Life Ins. Co., 31 Wis.2d 351, 359, 142 N.W.2d 844, 848 (1966), we said:

"A person in a business deal must be under a duty to disclose a material fact before he can be charged with a failure to disclose. (Restatement, 3) Torts, p. 117, sec. 551(1), states the rule as follows: 'One who fails to disclose to another a thing which he knows may justifiably induce the other to act or refrain from acting in a business transaction is subject to the same liability to the other as though he had represented the nonexistence of the matter which he has failed to disclose, if, but only if, he is under a duty to the other to exercise reasonable care to disclose the matter in question.' " 8

The question thus presented in the case at bar is whether the seller had a duty to disclose to the buyer the existence of the well. If there is a duty to disclose, the seller incurs tort liability for intentional misrepresentation (I. e. the representation of the non-existence of the fact), if the elements of the tort of intentional misrepresentation are proved. See Whipp v. Iverson, supra, 43 Wis.2d at 169, 168 N.W.2d 201.

The question of legal duty presents an issue of law, and Justice Currie, writing for this court, has pointed out that when a court resolves a question of legal duty the court is making a policy...

To continue reading

Request your trial
244 cases
  • Wangen v. Ford Motor Co.
    • United States
    • Wisconsin Supreme Court
    • 27 Junio 1980
    ...dismissed as legally insufficient only if it is clear that the plaintiff cannot recover under any condition. Ollerman v. O'Rourke Co., Inc., 94 Wis.2d 17, 24, 288 N.W.2d 95 (1980). On the basis of the facts pleaded and reasonable inferences therefrom the complaint alleges that Ford knew of ......
  • Green Spring Farms v. Kersten
    • United States
    • Wisconsin Supreme Court
    • 9 Marzo 1987
    ...(3) a causal connection between the conduct and the injury; and (4) an actual loss or damage as a result of the injury. Ollerman, 94 Wis.2d at 46, 288 N.W.2d 95. Although the complaint does not specifically allege each of these elements, plaintiffs contend in their brief that inferences may......
  • Lundin v. Shimanski
    • United States
    • Wisconsin Supreme Court
    • 5 Junio 1985
    ...whether it was true or false...." Whipp v. Iverson, 43 Wis.2d 166, 169, 168 N.W.2d 201 (1969), quoted in Ollerman v. O'Rourke Co., Inc., 94 Wis.2d 17, 25, 288 N.W.2d 95 (1980). The party alleging the fraud has the burden of proving the elements by clear and convincing evidence. Williams, 44......
  • Kranzush v. Badger State Mut. Cas. Co.
    • United States
    • Wisconsin Supreme Court
    • 30 Junio 1981
    ...review must be taken as admitted. Scarpaci v. Milwaukee County, 96 Wis.2d 663, 669, 292 N.W.2d 816 (1980); Ollerman v. O'Rourke Co., Inc., 94 Wis.2d 17, 24, 288 N.W.2d 95 (1980); General Split Corp. v. P & V Atlas Corp., 91 Wis.2d 119, 122-23, 280 N.W.2d 765 (1979); Morgan v. Pennsylvania G......
  • Request a trial to view additional results
1 books & journal articles
  • Half-truths: protecting mistaken inferences by investors and others.
    • United States
    • Stanford Law Review Vol. 52 No. 1, November 1999
    • 1 Noviembre 1999
    ...(holding a real estate vendor liable for failing to disclose material facts regarding off-site conditions); Ollerman v. O'Rourke Co., 288 N.W.2d 95, 107 (Wis. 1980) (holding that vendor of residential lot has a duty to a "noncommercial" purchaser to disclose facts that are known to vendor).......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT