Malzewski v. Rapkin

• Decision Date: 08 August 2006
• Docket Number: No. 2005AP1007.,2005AP1007.
• Citation: 723 N.W.2d 156,2006 WI App 183
• Parties: John MALZEWSKI and Jennifer Malzewski, Plaintiffs-Appellants,<SMALL><SUP>†</SUP></SMALL> v. Sheldon RAPKIN and Mae Louise Rapkin, Defendants-Respondents,<SMALL><SUP>††</SUP></SMALL> Acuity, a Mutual Insurance Company, Intervening Defendant.
• Court: Wisconsin Court of Appeals

723 N.W.2d 156

2006 WI App 183

John MALZEWSKI and Jennifer Malzewski, Plaintiffs-Appellants,^† v. Sheldon RAPKIN and Mae Louise Rapkin, Defendants-Respondents,^†† Acuity, a Mutual Insurance Company, Intervening Defendant.

No. 2005AP1007.

Court of Appeals of Wisconsin.

Submitted on Briefs June 13, 2006.

Opinion Filed August 8, 2006.

COPYRIGHT MATERIAL OMITTED

On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of Rudolph J. Kuss and Daniel W. Stevens, of Law Office of Daniel W. Stevens, L.L.C., of Brookfield.

On behalf of the defendants-respondents, the cause was submitted on the brief of Thomas J. Donnelly of Emile Banks & Associates, L.L.C., of Milwaukee.

Before FINE, CURLEY and KESSLER, JJ.

¶ 1 FINE, J

John and Jennifer Malzewski appeal the trial court's grant of summary judgment dismissing their breach-of-contract, misrepresentation, and false-advertising claims against Sheldon and Mae Louise Rapkin.¹ The trial court granted summary judgment to the Rapkins. We affirm the trial court's dismissal of the Malzewskis' breach-of-contract and misrepresentation claims, but reverse on their fraudulent-advertising claim.

I.

¶2 In August of 2003, the Malzewskis offered to buy a house from the Rapkins. The Offer to Purchase provided:

PROPERTY CONDITION REPRESENTATIONS: Seller represents to Buyer that as of the date of acceptance Seller has no notice or knowledge of conditions affecting the Property or transaction (see below) other than those identified in Seller's Real Estate Condition Report dated 5/2/03, which was received by Buyer prior to Buyer signing this Offer and which is made a part of this Offer by reference.

See WIS. STAT. ch. 709 (disclosure requirements for residential real estate sales). The Rapkins agreed to be responsible for these representations by signing the Offer to Purchase and checking a box on the Real Estate Condition Report, which they also signed, that indicated that they were "aware of defects in the basement or foundation (including cracks, seepage and bulges)." They explained on the form that "[d]uring very heavy rainstorms, there might be a little seepage in the walls/floors. The seller has regraded to correct this when it has happened." The Real Estate Condition Report tracked the language of WIS. STAT. § 709.03 and defined a "defect" as "a condition that would have a significant adverse effect on the value of the property; that would significantly impair the health or safety of future occupants of the property; or that if not repaired, removed or replaced would significantly shorten or adversely affect the expected normal life of the premises."

¶ 3 The Malzewskis' Offer to Purchase also had an inspection contingency, which made the sale of the house contingent on the home passing inspection:

This Offer is contingent upon a Wisconsin registered home inspector performing a home inspection of the Property, and an inspection, by a qualified independent inspector, of Buyer's Choice which discloses no defects as defined below. This contingency shall be deemed satisfied unless Buyer, within 10 days of acceptance, delivers to Seller, and to listing broker if Property is listed, a copy of the inspector's written inspection report(s) and a written notice listing the defect(s) identified in the inspection report(s) to which Buyer objects.

Additionally, the Malzewskis conditioned their purchase of the Rapkins' house on their being allowed to "do a walk-through within 3 working days of acceptance." An Addendum to the Offer to Purchase, referenced the inspection contingency and recommended that the home be formally inspected: "Many factors and conditions affecting the Property, including defects, may not be apparent from a visual inspection of the accessible areas of the Property by either Buyer or Broker. Broker recommends that Buyer obtain professional advice and a professional inspection of the Property by a Wisconsin registered home inspector." (Bolding and capitalization omitted.)

¶ 4 The Malzewskis exercised their right to walk through the house, and, according to their submissions to the trial court, they did not notice any defects. They then waived their right to have the home inspected, and bought the house in September of 2003.

¶ 5 In the early summer of 2004, paint on the basement walls peeled away and some pre-existing cracks in the basement walls opened. The Malzewskis hired an engineer to evaluate the walls' condition. The engineer told them that the basement walls, which he estimated had been cracked for many years, were failing and would have to be fixed. A foundations contractor estimated that it would cost $25,600 to repair the basement walls.

¶ 6 The Malzewskis sued the Rapkins for failing to disclose the cracks in the basement walls under the following theories: (1) breach of contract and breach of warranty; (2) intentional misrepresentation; (3) misrepresentation in violation of WIS. STAT. § 895.80 (renumbered as WIS. STAT. § 895.446 effective April 5, 2006), which provides a civil remedy for the violation of WIS. STAT. § 943.20(1)(d) (theft-by-fraud); (4) misrepresentation in violation of WIS. STAT. § 100.18 (false advertising); (5) strict-responsibility misrepresentation; and (6) negligent misrepresentation. The Malzewskis sought money damages, or alternatively, rescission and restitution.

¶ 7 During discovery, the Rapkins admitted in answers to interrogatories that when they owned the house, the basement walls had twelve-foot long, three-eighths-inch wide cracks, which they filled-in ten to twenty times "using masonry cement in a calking tube." According to the Rapkins, they painted the walls approximately five times and also touched them up after they had filled-in the cracks. The Rapkins claimed in their interrogatory answers that they never had anyone look at the house's basement or foundation to get a repair estimate.

¶ 8 The Rapkins moved for summary judgment, claiming that they had fully disclosed the condition of the house on the Real Estate Condition Report, and that there was no evidence that they knew the cracks were a "defect" as defined by the Real Estate Condition Report and WIS. STAT. § 709.03:

In essence, our position is that the Court should not allow this claim to continue where the plaintiffs in opting to save $300 for [a] home inspection which is mentioned and recommended twice in the sale documents in the standard real estate purchase forms for something that they opted to originally have and waive that home inspection contingency for a condition, cracks in the basement wall, which there has been no showing that the Rapkins had any knowledge as to the significance.

In an affidavit attached to the motion, Sheldon Rapkin averred that he had lived in the house for thirty years and that during that time there were no signs of any "structural defects." He also claimed that he "never had any verbal [sic oral] conversations with the [Malzewskis] and did not meet the [Malzewskis] until after the real estate closing." Mae Louise Rapkin admitted that while she met John Malzewski once, she "did not speak to John Malzewski at any time about the condition of the house."

¶ 9 The Malzewskis contended that there were questions of fact both as to whether the Rapkins intended to deceive them when the Rapkins represented that the only problem in the basement was "a little seepage," and, also, as to whether the Malzewskis were justified in relying on that representation. See, e.g., Ramsden v. Farm Credit Servs. of N. Cent. Wis. ACA, 223 Wis.2d 704, 718-719, 590 N.W.2d 1, 7 (Ct.App.1998) (elements of intentional misrepresentation include intent to deceive and justifiable reliance). John Malzewski averred in his affidavit submitted in opposition to the Rapkins' motion for summary judgment that he was "aware of the minor seepage problems and that [they were] not a concern to" him. He also claimed that "[h]ad the sellers informed me that the walls had repeatedly cracked and they repeatedly filled the cracks in with caulk and painted over them, I would not have purchased the house."

¶ 10 As we have seen, the trial court granted the Rapkins' motion for summary judgment. The trial court concluded as a matter of law that the Rapkins did not know there was a defect in the house: "that fact which is essential to the plaintiffs' claim of showing the defendants knew there was a defect in the house has not been met; and since that essential element has not been met, the motion for summary judgment should be granted."

II.

¶ 11 We review de novo a trial court's decision to grant or deny summary judgment, and use the same methodology as the trial court. Green Spring Farms v. Kersten, 136 Wis.2d 304, 315-317, 401 N.W.2d 816, 820-821 (1987). A court must grant summary judgment when there is no genuine issue of material fact and a party is entitled to judgment as a matter of law. WIS. STAT. RULE 802.08(2).

¶ 12 The Malzewskis contend that the trial court should not have granted summary judgment because whether the Rapkins believed that the cracks in the basement wall were a "defect" that should have been disclosed in the Real Estate Condition Report is a disputed question of material fact that cannot be decided on summary judgment. As we discuss below, for all but one of the Malzewskis' claims, however, the Malzewskis must show that they reasonably relied on the Rapkins' Real Estate Condition Report and its alleged failure to disclose the true nature of the problems with the basement. See Aon Risk Servs., Inc. v. Liebenstein, 2006 WI App 4, ¶ 7, 289 Wis.2d 127, 143, 710 N.W.2d 175, 182 ("In order to survive summary judgment, the party with the burden of proof on an element in the case must establish that there is at least a genuine issue of fact on that element by submitting evidentiary material `set[ting] forth specific facts,' WIS. STAT. RULE 802.08(3), pertinent to that element."), language relying on court of appeals decision in Burbank...