Beuttler v. Marquardt Mgmt. Servs., Inc.

• Decision Date: 22 June 2022
• Docket Number: Appeal No. 2020AP1767
• Citation: 404 Wis.2d 116,978 N.W.2d 237,2022 WI App 33
• Parties: Doris BEUTTLER, Jeanne Haas, Var Krikorian, Marjorie Speckhard, Terri Steidl, Special Administrator for the Estate of Walter H. Steidl, Dolores Torphy, Elaine Zlevor, Gloria Murphy and Ralph Anderson, Plaintiffs-Appellants, Nazaly Bagdasian, Geri Baumblatt, Bernard Braun, Patricia Braun, Robert Callaway, Marshall Cushman, Marilyn Iselin, Marian Kornwolf, Irene Miller, Mary Mueller, Bob Ottum, Holly Ottum, Joyce Ottum, Lorraine Pavelcik, Joan Peterson, Marlene Weichmann and Wood Family 2003 Trust, Plaintiffs, v. MARQUARDT MANAGEMENT SERVICES, INC., Defendant-Respondent.
• Court: Wisconsin Court of Appeals

404 Wis.2d 116
978 N.W.2d 237
2022 WI App 33

Doris BEUTTLER, Jeanne Haas, Var Krikorian, Marjorie Speckhard, Terri Steidl, Special Administrator for the Estate of Walter H. Steidl, Dolores Torphy, Elaine Zlevor, Gloria Murphy and Ralph Anderson, Plaintiffs-Appellants,

Nazaly Bagdasian, Geri Baumblatt, Bernard Braun, Patricia Braun, Robert Callaway, Marshall Cushman, Marilyn Iselin, Marian Kornwolf, Irene Miller, Mary Mueller, Bob Ottum, Holly Ottum, Joyce Ottum, Lorraine Pavelcik, Joan Peterson, Marlene Weichmann and Wood Family 2003 Trust, Plaintiffs,
v.
MARQUARDT MANAGEMENT SERVICES, INC., Defendant-Respondent.

Appeal No. 2020AP1767

Court of Appeals of Wisconsin.

Submitted on Briefs: March 16, 2022
Opinion Filed: June 22, 2022

On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of Thomas Devine of Devine Hahn, S.C., Racine.

On behalf of the defendant-respondent, the cause was submitted on the brief of Monica A. Mark of Reinhard, Boerner Van Deuren, S.C., Milwaukee.

Before Gundrum, P.J., Grogan and Kornblum, JJ.

KORNBLUM, J.

404 Wis.2d 121

¶1 The appellants (collectively referred to as the Residents) are individuals who paid a 90% refundable entrance fee to reside at The Atrium, a senior living facility managed and operated by Marquardt Management Services, Inc. The Residents appeal from the circuit court's grant of summary judgment to Marquardt. They argue that the court erred when it concluded that an element of their misrepresentation claims, reliance on the alleged misrepresentation, cannot be proved using circumstantial evidence. We conclude that circumstantial evidence may be used to prove reliance and, therefore, reverse the judgment in part and remand to the circuit court to reconsider the summary judgment decision with respect to the three residents whose affidavits contain allegations or a reasonable inference of statements by the Residents to a family member. If the circuit court determines the reliance statements alleged to have been made by Residents Gloria Murphy, Walter Steidl, and Doris Beuttler to their family members constitute admissible evidence, these three affidavits raise genuine

404 Wis.2d 122

issues of material fact sufficient to defeat summary judgment. We affirm the judgment as to the remaining Residents.

I. BACKGROUND

¶2 The Atrium of Racine, Inc. was a nonprofit corporation that owned a senior housing campus located in Racine, Wisconsin, comprised of a seventy-six-unit elderly congregate housing facility known as The Atrium and a forty-unit assisted living facility known as Bay Pointe. The Atrium was marketed to individuals aged seventy-five and older. In addition to monthly rent, residents of The Atrium were required to pay an entrance fee before occupying a unit. Residents were to be refunded a portion of the entrance fee within two years of terminating occupancy at The Atrium.

¶3 Prior to March of 2015, The Atrium was operated by Lincoln Lutheran of Racine, Wisconsin, Inc., which struggled financially. Lincoln Lutheran filed for receivership at the end of 2014, and Marquardt took over management of The Atrium.

¶4 As part of its efforts to make The Atrium financially sustainable, Marquardt increased the entrance fees required for certain units and created an "aggressive marketing plan." Marquardt additionally

978 N.W.2d 241

sought to alleviate concerns over the security of entrance fee payments by changing the terms of the entrance fee refund promised to prospective residents. Previously, residents were promised a refund of their entrance fee upon terminating occupancy only if their unit was re-rented. Under Marquardt's management, "the refund [would] be payable upon The Atrium's receipt of a new entrance fee on the residence vacated,

404 Wis.2d 123

or by no later than 24-months from the date the residence was vacated, providing a 24-month cap on the liability."

¶5 The Residents all signed contracts with The Atrium under Marquardt's management. They allege that they are individuals who each paid a 90% refundable entrance fee ranging between $84,000 and $111,500 to reside at The Atrium. Prior to entering into a residency agreement with The Atrium and paying the required entrance fee, each of the Residents met with Joe Reischl, Director of Marketing for The Atrium. With the exception of Doris Beuttler, each of the Residents was accompanied by a family member when meeting with Reischl to discuss the required entrance fee. Reischl represented to each of the Residents that he or she would receive a 90% refund of the entrance fee. This representation was consistent with the marketing materials, including the brochure, which stated that the entrance fee was 90% refundable. Reischl did not disclose the financial condition of The Atrium to any of the Residents.

¶6 Despite Marquardt's efforts to turn around its financial condition, The Atrium went into receivership in May 2017. The circuit court in the receivership action entered an order declaring that all rights of the residents of The Atrium to payment of entrance fee refunds from the proceeds of the sale of the assets of The Atrium were subordinate to the rights of the Bank of New York Mellon Trust Company, trustee for bondholders of The Atrium.¹

404 Wis.2d 124

¶7 The Residents subsequently filed the underlying lawsuit against Marquardt alleging, as relevant for purposes of this appeal, that Marquardt misrepresented the financial condition of The Atrium and The Atrium's ability to repay the 90% entrance fee refund to induce them to enter into residency agreements and pay the required entrance fees. Marquardt moved

978 N.W.2d 242

for summary judgment arguing that it had no duty to disclose the financial condition of The Atrium to prospective residents. Marquardt also argued that summary judgment was warranted because the Residents, due to their diminished capacity or death, could not

404 Wis.2d 125

prove that they relied on any alleged misrepresentations because none of these Residents could testify that they relied on the representations.

¶8 The circuit court conducted a hearing on the motion for summary judgment. After oral argument, the circuit court determined that the agreements signed by the Residents and their payment of the entrance fees constituted "business transaction[s] between a legal entity and unsophisticated elderly individuals." The court additionally determined that the Residents were promised that 90% of the entrance fees would be repaid within two years, which was a substantial reduction in time from the previous promise made to prospective residents, possibly inferring that The Atrium was on firmer financial footing. The court noted that the entrance fees represented "large sums of money by anyone's standards" and that as a matter of public policy, Wisconsin has passed laws protecting the elderly from financial exploitation.

¶9 The circuit court found that the Residents did not have access to certain information that Marquardt had showing its true financial position. The court rejected Marquardt's argument that publicly available tax forms, called 990s,² would have given Residents sufficient detail that they could have gathered the information themselves. The court also found that the Residents did not have information about The Atrium's technical default on its bond obligations and "the precarious nature of the cash flow."

404 Wis.2d 126

¶10 The circuit court held that as a party to a business transaction, pursuant to Kaloti Enterprises, Inc. v. Kellogg Sales Co. , 2005 WI 111, 283 Wis. 2d 555, 699 N.W.2d 205, Marquardt had a duty "to disclose to prospective residents the precarious financial posture of The Atrium, and its plan to reverse that situation." The court further concluded that it would be up to the jury "to decide if such disclosures and information available to potential residents was sufficient to decide to enter into this business relationship."

¶11 Despite finding that Marquardt had a duty to disclose its financial position and plan to reverse this, the circuit court granted summary judgment in favor of Marquardt as to the Residents’ claims.³ The court concluded that, due to their inability to testify, the Residents were unable to prove actual reliance on Marquardt's alleged misrepresentation regarding the financial stability of The Atrium. According to the court, such reliance could not "be proven circumstantially or by any exception to Wisconsin evidence statutes."

II. DISCUSSION

A. Standard of Review

¶12 A circuit court grants summary judgment when "there is no genuine issue as to...