Kailin v. Armstrong

• Decision Date: 28 February 2002
• Docket Number: No. 01-1152.,01-1152.
• Citation: 643 N.W.2d 132,252 Wis.2d 676,2002 WI App 70
• Parties: Stephen M. KAILIN, and Linda S. Kailin, Plaintiffs-Appellants, v. Perry J. ARMSTRONG, Defendant-Respondent, FIRST WEBER GROUP, INC. and Robert H. Carpenter, Defendants-Third-Party Plaintiffs-Respondents, v. RESTAINO BUNBURY & ASSOCIATES and Donald J. Dantinne, Third-Party Defendants-Respondents.
• Court: Wisconsin Court of Appeals

252 Wis.2d 676

2002 WI App 70

643 N.W.2d 132

Stephen M. KAILIN, and Linda S. Kailin, Plaintiffs-Appellants, v. Perry J. ARMSTRONG, Defendant-Respondent, FIRST WEBER GROUP, INC. and Robert H. Carpenter, Defendants-Third-Party Plaintiffs-Respondents, v. RESTAINO BUNBURY & ASSOCIATES and Donald J. Dantinne, Third-Party Defendants-Respondents.

No. 01-1152.

Court of Appeals of Wisconsin.

Submitted on briefs October 5, 2001.

Decided February 28, 2002.

On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of Gregory P. Seibold of Murphy & Desmond, S.C., Madison.

On behalf of the defendant-respondent, the cause was submitted on the brief of Michael B. Van Sicklen and Marta T. Meyers of Foley & Lardner, Madison.

On behalf of the defendants-third-party plaintiffs-respondents, the cause was submitted on the brief of Craig R. Johnson of Loniello, Johnson, Simonini & Chavez, Madison.

Before Vergeront, P.J., Roggensack and Lundsten, JJ.

¶ 1. VERGERONT, P.J.

This appeal arises out of a commercial real estate transaction in which Stephen and Linda Kailin purchased from Perry Armstrong the property known as the Monona Center. The Kailins appeal the summary judgment in favor of Armstrong, First Weber Group, Inc., and salesperson Robert Carpenter, which dismissed the Kailins' claims for breach of contract, intentional misrepresentation, and violation of WIS. STAT. § 100.18 (1999-2000).¹ The complaint alleged the defendants failed to disclose that one of the tenants had a history of delinquency in rent payments and was in default both at the time the offer to purchase was accepted and at the time of closing.

¶ 2. Concerning the claims against Armstrong, we conclude: (1) the trial court erred in granting summary judgment in favor of Armstrong on the breach-of-contract claim; (2) insofar as the claim for intentional misrepresentation is based on representations or failure to disclose occurring after acceptance of the offer to purchase, it is barred by the economic loss doctrine; insofar as it is based on representations or failure to disclose occurring prior to that date, it is not barred by the economic loss doctrine and there is a genuine issue of material fact precluding summary judgment in favor of Armstrong; (3) the economic loss doctrine does not bar the Kailins' claims under WIS. STAT. § 100.18, but the statute does not apply to representations made after the acceptance of the offer to purchase because statements made to the other party to a contract are not statements made "to the public"; and (4) the Kailins need not present expert testimony to prove their claims. Accordingly, we affirm in part, reverse in part, and remand for further proceedings against Armstrong. ¶ 3. Concerning the claims against First Weber and Carpenter, for the reasons we explain below, we affirm the summary judgment dismissing all claims.

BACKGROUND

¶ 4. Most of the facts are undisputed for purposes of this appeal, and we will indicate in our summary where there is a dispute.

¶ 5. The Kailins, represented by Restaino Bunbury & Associates and Donald Dantinne, submitted an offer to purchase the Monona Center on December 7, 1998.² Armstrong submitted a counteroffer regarding price, which was rejected by the Kailins, but, on December 9, 1998, Armstrong accepted the Kailins' counteroffer regarding a price of $760,000.³

¶ 6. The accepted offer provided that:

Seller represents to Buyer that as of the date of acceptance Seller had no notice or knowledge of conditions affecting the Property or transaction (as defined in lines 159 to 178) other than those identified in Seller's disclosure report dated 01/05/98 which was received by Buyer prior to Buyer signing this Offer. . . .⁴

Included in the definition of "Conditions Affecting the Property or Transaction" is "(o) Other conditions or occurrences which would significantly reduce the value of the Property to a reasonable person with knowledge of the nature and scope of the condition or occurrence."

¶ 7. Before Dantinne submitted the Kailins' offer to purchase, Carpenter provided him with lease information on a document that listed the eight commercial tenants of Monona Center, the lease expiration dates, and the monthly and annual rent under each lease ("Lease Information").⁵ Before the offer to purchase, Carpenter also provided Dantinne with a document entitled "Estimated Income and Expense" for the Monona Center, which stated "Income: Current Leases $146,700," itemized a number of expenses, and stated "Estimated Net Operating Income $82,400."⁶ ¶ 8. One of the eight leases was with Ring's All-American Karate (Ring Karate), which rented 6,500 square feet of the 20,501 rentable square feet.⁷ Under Ring Karate's five-year lease, its monthly rent began at $3,012 on November 1, 1995, and increased annually; at the time of the Kailins' offer to purchase, Ring Karate's monthly rent was $4,410. In February 1997, Armstrong and Ring Karate signed an amended rent schedule because of financial difficulties Ring Karate was having; this permitted Ring Karate to pay a total of $1,200 less in rent for the months February through October 1997. Armstrong did not provide the amended rent schedule to the Kailins at any time prior to or at the closing.

¶ 9. In October 1998, Ring Karate again had problems in paying rent and fell behind. At the time of the Kailins' offer to purchase, Ring Karate owed $9,520 for October, November, and December.⁸ There is evidence that on December 11, 1998, Armstrong sent via fax to Carpenter a rent roll updated to December 9, 1998, that showed Ring Karate's rent arrears at that time, but the evidence whether Carpenter provided this to Dantinne is conflicting. There is also evidence that Armstrong asked Carpenter sometime in December 1998 or January 1999 whether he had an obligation to disclose Ring Karate's rent delinquency to the Kailins, and Carpenter answered that he did not know of any.⁹

¶ 10. The closing took place on February 1, 1999. On that date, Armstrong assigned his title and interest in the eight leases to the Kailins and warranted that there were no defaults under the leases on that date. Since Ring Karate did not pay any rent in January 1999, at the time of the closing on February 1, 1999, Ring Karate owed $13,910, not counting February. At no time did the Kailins ask for information on the status of the tenants' rent payments.

¶ 11. Ring Karate continued to fail to pay rent after the closing and eventually vacated the Monona Center.¹⁰

¶ 12. The Kailins' complaint asserted claims for breach of contract, misrepresentation in violation of WIS. STAT. § 100.18, and intentional, negligent, and strict liability misrepresentation. Armstrong moved for summary judgment on all claims, contending there was no dispute that Armstrong provided full and accurate information. In support of this contention, Armstrong asserted that there was no evidence that the Kailins requested information on the status of rental payments prior to closing, or that any of the information he provided the Kailins prior to closing was inaccurate. Alternatively, Armstrong argued with respect to the contract claim that the contract did not obligate him to provide the information on Ring Karate's rent arrearages and, with respect to the tort and statutory claims, that the economic loss doctrine precluded recovery as a matter of law.

¶ 13. The trial court agreed with Armstrong that the contract did not require him to disclose Ring Karate's failure to pay rent as required by the lease during October 1 through December 1, 1998, because the court decided that type of information was not included within the definition of "conditions affecting the property or transaction." The court also decided that recovery on the tort claims for any representations after December 9, 1998, the date the offer was accepted, was barred by the economic loss doctrine. With respect to any representations made on or before that date, the court acknowledged that the economic loss doctrine might not bar all claims for fraudulent inducement to enter into a contract; however, the court concluded that in this case such a claim was barred by the doctrine.¹¹ The court dismissed the claim for a violation of WIS. STAT. § 100.18 because it concluded that statute merely added a remedy for the common law misrepresentation claims and did not create an independent claim for relief. The factual dispute concerning the December 9, 1998 rent roll was not relevant to the trial court's analysis on any of the claims.

¶ 14. First Weber and Carpenter also moved for summary judgment on the ground that they did not breach any duty imposed on them by WIS. STAT. ch. 452.¹² The trial court agreed, concluding that it was undisputed that they did not discover the fact of Ring Karate's rent delinquency until after December 9, 1998, when the Kailins and Armstrong had entered into a binding contract.

DISCUSSION

[1, 2]

¶ 15. We review a decision granting summary judgment de novo, applying the same methodology as the trial court. Brownelli v. McCaughtry, 182 Wis. 2d 367, 372, 514 N.W.2d 48 (Ct. App. 1994). Summary judgment is appropriate if there are no genuine issues of material fact and one party is entitled to judgment as a matter of law. See id. at 372-73.

A. Claims Against Armstrong

Breach of Contract

[3]

¶ 16. The Kailins claim that the trial court erred in its interpretation of the "Property Condition Representations" and that Armstrong breached this provision, specifically subparagraph (o), by not disclosing Ring Karate's rent delinquency. They contend that Ring Karate's failure to pay rent as required by the lease is a "condition[] or occurrence[] which would significantly reduce the value of the [p]roperty to a reasonable person with knowledge of the nature and scope of the condition or occurrence." They point out that a reasonable person acquiring a commercial property such as the Monona Center does so for the...