Lundin v. Shimanski
| Decision Date | 05 June 1985 |
| Docket Number | No. 83-620,83-620 |
| Citation | 124 Wis.2d 175,368 N.W.2d 676 |
| Parties | William H. LUNDIN, Kathleen R. Lundin and Steven J. Lundin, Plaintiffs- Respondents and Cross-Appellants, v. Gregg T. SHIMANSKI, Defendant and Third-Party Plaintiff-Appellant and Cross- Respondent-Petitioner, Stauter Realty Service, Inc. and Gail Rosenvold, Defendants and Third-Party Defendants. |
| Court | Wisconsin Supreme Court |
Ann Ustad Smith, Madison (argued), for defendant and third-party-plaintiff-appellant and cross-respondent-petitioner; Michael, Best & Friedrich, Madison, on brief.
Russell W. Devitt, Whitewater (argued), for plaintiffs-respondents and cross-appellants; Soffa & Devitt, Whitewater, on brief.
This is a review of an unpublished decision of the court of appeals, 120 Wis.2d 680, 357 N.W.2d 564, filed on September 11, 1984, affirming a judgment of the circuit court for Dane county, W.L. Jackman, reserve judge, presiding. The court of appeals held that credible evidence supports the jury's findings of intentional misrepresentations on the part of Gregg T. Shimanski (defendant) and the award for benefit of the bargain damages and punitive damages. We agree and, therefore, affirm the court of appeals decision.
This action arises out of a real estate transaction between the Lundins (plaintiffs) and Shimanski. William and Kathleen Lundin were interested in purchasing rental property which, besides producing income, would provide a place for their son, Steven, to live in while attending the University of Wisconsin in Madison. The Lundins contacted Stauter Realty, a real estate agency, for assistance in locating suitable property. Gail Rosenvold, sales agent for Stauter Realty, discovered a classified advertisement for a house which appeared to satisfy the needs of the plaintiffs. The advertisement publicized a three- to four-bedroom house with a "possible rental unit in lower level." Rosenvold contacted the owner of the house, Shimanski, and arranged to show it to the Lundins. Shimanski is by occupation a real estate broker and personally owns various properties for investment purposes. Shimanski informed Rosenvold that the property was zoned R4A, that five female college students were renting the house for $450 a month, and that a conditional use permit would have to be obtained from the city of Madison if the Lundins were interested in having Steven occupy the basement. These assertions are all true.
On Saturday, November 26, 1977, Rosenvold met with Dr. and Mrs. Lundin to show them Shimanski's property. Shimanski was not present. The information that had been provided by the defendant to Rosenvold was at that time relayed to the Lundins by Rosenvold. The house appeared to fit the two conditions set by the plaintiffs. They examined the basement, which apparently had been lived in at one time. They determined that the basement unit would be suitable for Steven. Additionally, there were three bedrooms upstairs that were available as rental units.
Immediately following this inspection, the Lundins went to Stauter Realty, where Rosenvold prepared an offer to purchase. The buyers were listed on the offer as William, Kathleen, and Steven Lundin. On Monday, November 28, 1977, the offer was conveyed to the defendant and accepted by him. The offer to purchase provided that "[p]hysical occupancy of basement shall be given to Buyer on Jan. 15, 1978." Additionally, the offer indicated that the premises were occupied by tenants under a written lease effective through August, 1978.
The real estate closing took place on December 16, 1977, at the offices of Stauter Realty. Present were Dr. and Mrs. Lundin and their attorney; Shimanski and his attorney; Gail Rosenvold; and Ron Stauter, president of Stauter Realty. Shimanski told the plaintiffs that they would have to obtain a conditional use permit in order for Steven to use the basement as a dwelling unit. The closing statement, which was prepared by the plaintiffs' attorney from his notes at the closing, states, "Can live in basement--is acceptable to city--just apply for conditional use." Shimanski prepared the Wisconsin real estate transfer return form, which indicates that the property had more than one unit. Additionally, Shimanski asserted that the property was zoned R4 and assigned the lease covering the property to the plaintiffs.
Following the closing, the Lundins spent approximately $3,000 in improvements in the basement. They did not apply for a conditional use permit. On February 9, 1978, the Madison building inspector posted a notice on the premises, prohibiting Steven's occupancy of the basement, because the unit was being illegally used. The Lundins received an official notice from the building inspector on February 14, 1978, informing them of two code violations. The first item concerned the occupancy of the five unrelated tenants. Due to the fact that the property was located in an R4A district and not owner occupied, 1 occupancy was restricted by code to a maximum of two unrelated persons (a family plus one roomer).
The second violation involved the use of the basement as a dwelling unit. Steven was ordered to immediately discontinue his occupancy of the basement, because the plaintiffs had not obtained a conditional use permit which was required to convert the property into a two-unit building. The plaintiffs were advised that they would have to apply for a zoning variance before they could obtain a permit; however, the variance was denied.
The Lundins commenced this case on August 22, 1979, alleging that the defendants falsely and fraudulently represented that the premises were capable of being rented for income production and that the basement was capable of being occupied. The plaintiffs contend that they relied on these misrepresentations and, in doing so, were induced to purchase the property.
Trial to a six-person jury commenced on November 29, 1982. The jury returned a special verdict on December 6, 1982, finding:
(1) On or before November 28, 1977, 2 and on December 16, 1977, 3 Shimanski made untrue representations of fact to the plaintiffs, or to Gail Rosenvold, with respect to the property in question, knowing that they were untrue or recklessly without caring if they were untrue, and with intent to deceive and induce the plaintiffs to act on them.
(2) Plaintiffs believed such untrue representations and justifiably relied on them to their pecuniary damage.
(3) Gail Rosenvold did not make untrue representations of fact to the plaintiffs with respect to the property in question.
(4) As of December 16, 1977, the difference between the market value of the property as it actually existed and as it was represented was $3,800.
(5) The sum of $3,780 would fairly and reasonably compensate the plaintiffs for their inability to use the property as they intended when they purchased the property.
(6) The representations by Shimanski were made in a malicious or wanton, willful or reckless disregard of the plaintiffs' rights, and the sum of $5,000 would be proper under the circumstances for punitive damages.
(7) The plaintiffs were not justified in remodeling the basement when they did.
On motions after verdict, the trial court affirmed the jury's finding of Shimanski's liability, but reversed the jury's award for lost use damages. The trial court was of the opinion that the jury had grounds for its finding of misrepresentations of fact made by the defendant, given that Shimanski was fully aware at the time of the sale that the occupancy of the five unrelated tenants was in violation of the city code. Although Shimanski had given the proper zoning classification to Rosenvold (R4A), he misstated the classification at the closing (R4). Shimanski never disclosed to the plaintiffs that prior to the sale the city had raised objections to the occupancy of the five tenants. Additionally, with respect to the lost use damages, the trial court concluded that the plaintiffs made no effort to mitigate their damages for lost rents. The court stated, "[T]he evidence shows that plaintiffs made no effort to maximize the rental return of the house, but on the contrary did minimize the return by accepting minimal rentals." Judgment against Shimanski was entered in the sum of $8,800 plus costs and disbursements.
Shimanski then appealed the judgment against him, and the plaintiffs cross-appealed the portion of the judgment striking the jury's award for lost use damages. The court of appeals affirmed the trial court but, in doing so, voiced disagreement with the trial court's finding of liability with respect to the illegal occupancy of the five tenants. The court of appeals determined that at the time of the sale Rosenvold knew that the upstairs occupancy did not conform to the zoning requirements. The court concluded that Rosenvold was the agent of the Lundins and, consequently, imputed her knowledge to the plaintiffs. Given this knowledge, the Lundins could not justifiably rely on any contrary misrepresentation made by Shimanski. In any regard, the court of appeals did determine that the Lundins were misled about the conditional use permit with respect to the basement unit. Shimanski did inform Rosenvold and the Lundins that a conditional use permit was necessary, but he misrepresented the ease in obtaining the permit. The court concluded that there is evidence that Shimanski indicated that there was no problem in obtaining the permit and that it was a mere formality. The Lundins and Rosenvold had no knowledge to the contrary. In so finding, the court of appeals held that Shimanski intentionally misrepresented that the property was easily convertible into two units, when he knew this to be false.
Shimanski now appeals the court of appeals decision. Since the plaintiffs have not pursued their cross-appeal, the remaining issues before this court are as follows:
(1) Whether there is any credible evidence to support the jury's...
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