Esser Distributing Co., Inc. v. Steidl
| Decision Date | 12 April 1989 |
| Docket Number | No. 87-1214,87-1214 |
| Citation | 149 Wis.2d 64,437 N.W.2d 884 |
| Parties | , Blue Sky L. Rep. P 72,966, 57 USLW 2644 ESSER DISTRIBUTING CO., INC., Roderick C. Patterson, Joseph F. Madrigrano, Blanche Truss, Joan M. Cline, Vauruska Distributing, Inc., Benedict Drewek, Gladys Drewek, Richard F. Heiden, Philip J. Olson, John Jankowski, Dorothy Jankowski, Arnold Vogel, Beverly Vogel, Jack Suworoff, Laura Suworoff, Richard Knapp, Judith Knapp, Dr. Ronald J. Holzhauer, Guido Gentile, Grace Gentile, Marino Pisani, Mary Pisani, Edward Blohm, Lena Blohm, Robert Heise, Rochelle Heise, Alfred Dobner, Johanna Dobner, Allied Industries, Inc., Donald Dergin, Joan Dergin, Robert E. Smith, Edward Grudnowski, Janice Grudnowski, Basil Zaferos, Kenneth Fix, Audrey Fix, Ray's Wauwatosa, Inc., Ronald J. Dietz, Schellgell Food Service, Inc., and Schmitt Bros. Mdse, Inc., Plaintiffs-Appellants, v. E.R. Thomas STEIDL, Defendant-Third Party Plaintiff-Respondent-Petitioner, v. Thomas KILEY, Robert S. Hammerschlag, Robert M. Weiss, Joseph F. Madrigrano, Carl Farah, B. Carl Froemming, and Thomas O. Johnson, Third Party Defendants. |
| Court | Wisconsin Supreme Court |
Louis D. Kaiser, Hartland, for defendant-third party plaintiff-respondent-petitioner.
Eugene J. Brookhouse (argued), and Brookhouse & Brookhouse, on brief, Kenosha, for plaintiffs-appellants.
This is a review of a decision of the court of appeals, Esser Distributing Co. v. Steidl, 145 Wis.2d 160, 426 N.W.2d 62 (1988), affirming in part and reversing in part an order of the Waukesha County Circuit Court, Judge Clair Voss, dismissing the complaint of Esser Distributing Co., Inc., et al. (Esser), because it was barred by the statute of limitations. The court of appeals affirmed the circuit court's dismissal of Esser's statutory claim. It reversed the circuit court's dismissal of Esser's common-law claim.
The issue before this court is whether sec. 551.59(1), Stats., 1 provides the exclusive remedy for the fraudulent sale of securities in Wisconsin, thus mandating that Esser's entire action be governed by the three-year statute of limitations set forth in sec. 551.59(5). 2 We conclude that sec. 551.59(1) is not Esser's exclusive remedy in this case and that he may bring a claim based on common-law fraud. We also conclude that Esser's common-law claim is governed by the six-year statute of limitations set forth in sec. 893.93(1)(b), 3 not by the statute of limitations set forth in sec. 551.59(5).
On May 30, 1986, Esser filed a complaint against E.R. Thomas Steidl (Steidl) in the Waukesha County Circuit Court. The complaint contains three claims. The first claim alleges that between January 1 and December 1, 1980 Steidl induced Esser to buy shares of Canada Dry/Graf's Bottling of Wisconsin, Inc. while Steidl was its "president, principal executive officer, director and controlling person," by making false representations and by failing to disclose material facts. Esser alleged that Steidl thereby violated sec. 551.59(1), Stats., a provision of the Wisconsin Uniform Securities Law (Securities Law). In the second claim, Esser incorporates by reference all of the allegations in the first claim and contends that such actions by Steidl constitute common-law fraud. In the third claim Esser alleges that Steidl "acted maliciously and/or in wanton, willful or reckless disregard of plaintiffs' rights," and demands punitive damages.
Steidl answered the complaint, counter-claimed and filed a third-party complaint seeking contribution from the third-party defendants, who are not parties to this appeal, in the event Esser obtained a judgment against him. On March 5, 1987, Steidl moved to dismiss Esser's complaint contending that it was barred by the three-year statute of limitations set forth in sec. 551.59(5), Stats. On May 13, 1987, the Waukesha County Circuit Court, Judge Clair Voss, granted Steidl's motion 4 and issued an order dismissing the suit.
Esser appealed from this order on June 26, 1987. The court of appeals affirmed the circuit court's dismissal of the statutory claim holding that it was barred by the statute of limitations in sec. 551.59(5), Stats. However, it reversed the dismissal of the claim for common-law fraud. It held that the common-law fraud claim is governed by the six-year statute of limitations set forth in sec. 893.93(1)(b), and it remanded that claim to the circuit court.
We agree with the court of appeals and reject Steidl's contention that the Securities Law, Chapter 551, Stats., is the exclusive remedy for securities fraud. The Securities Law does not preempt common-law remedies for fraud involving securities. There is a rule of construction which provides: "where there exists a common law doctrine relevant to the issue presented by the parties and the statute would change the common law, the legislative intent to change the common law must be clearly expressed." LePoidevin v. Wilson, 111 Wis.2d 116, 129-30, 330 N.W.2d 555 (1983). Thus, if the legislature attempts to statutorily preempt common-law rights, it must clearly express its intentions to do so.
Nowhere in Chapter 551 does the legislature clearly express its intention that common-law rights be preempted by the Securities Law. Indeed, the express language in sec. 551.59(9), Stats., preserves non-statutory causes of action. Section 551.59(9) states: "[t]he rights and remedies under this chapter are in addition to any other rights or remedies that may exist at law or in equity" (emphasis added). Thus, the Securities Law supplements rather than supplants the common law.
We find no significant reason to conclude the Securities Law should be held to preempt common-law remedies or that its statute of limitations should be applied to fraud actions brought under the common law. Common-law fraud and statutory fraud are not identical actions, differing in several important ways. First, they differ in the elements which make up each offense. For example, to state a claim for common-law fraud the plaintiff must show that he or she relied on a misrepresentation of the defendant. Ollerman v. O'Rourke Co., Inc., 94 Wis.2d 17, 25, 288 N.W.2d 95 (1980). There is no similar reliance requirement in Chapter 551, Stats. Second, the two causes of action differ in the type of damages which may be recovered. The Securities Law provides that a plaintiff may recover reasonable attorney fees. Sec. 551.59(1)(a), Stats. Attorney fees are not generally recoverable at common law. Cedarburg Light & Water Commission v. Glens Falls Insurance Co., 42 Wis.2d 120, 124-25, 166 N.W.2d 165 (1969). The common law allows recovery of punitive damages in certain circumstances. Lundin v. Shimanski, 124 Wis.2d 175, 196, 368 N.W.2d 676 (1985). Punitive damages are not recoverable under the statute.
Finally, the Securities Law cause of action has a defense which is not found at common law. A buyer of securities may not sue under the Securities Law if the seller has offered to repurchase the security which he or she sold to the purchaser in violation of the statute. Sec. 551.59(6)(a), Stats. An offer to repurchase is not a defense under the common law.
Thus, both the express language of the statute and the nature of the two causes of action lead us to conclude that common-law and statutory fraud causes of action can co-exist. We hold that Esser may proceed with his common-law claim. It is governed by the six-year statute of limitations set forth in sec. 893.93(1)(b), Stats., not by the three-year statute of limitations of sec. 551.59(5), which by its terms only applies to actions "maintained under this section."
We note that other courts have reached similar conclusions. For example, the Washington Court of Appeals in Kittilson v. Ford, 23 Wash.App. 402, 595 P.2d 944 (1979), aff'd, 93 Wash.2d 223, 608 P.2d 264 (1980), held that claims based on securities fraud brought under the common law and the Washington Securities Act could co-exist. In Kittilson, a woman bought real estate contracts (considered unregistered securities) in reliance upon misrepresentations. She lost substantially all of her investment. Id. 595 P.2d at 945. She sued under the Washington Securities Act, an act almost identical to Wisconsin's Securities Law, the Washington Consumer Protection Act and the common law based on fraud and misrepresentation. The defendant contended that the Washington Securities Act preempted all other rights and remedies based on securities fraud and that the Securities Act statute of limitations, which had expired, applied to both the statutory and common-law causes of action. The Washington Court of Appeals disagreed. It held that the Washington Securities Act was intended to provide additional protections to those found in the common law. Id. 595 P.2d at 946. It concluded that the plaintiff could bring her cause of action under the common law and that the common-law statute of limitations applied. Id. at 595 P.2d 947.
The Nebraska Supreme Court held likewise in Knoell v. Huff, 224 Neb. 90, 395 N.W.2d 749 (1986). In Knoell, purchasers of stock that later became worthless brought an action under both the Nebraska Securities Act and the common law. The defendants contended that the common-law cause of action was preempted by the passage of the Nebraska Securities Act. Id. at 395 N.W.2d 753. The Nebraska Supreme Court concluded that the Securities...
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