Novell v. Migliaccio

• Decision Date: 28 May 2008
• Docket Number: No. 2005AP2852.,2005AP2852.
• Citation: 749 N.W.2d 544,2008 WI 44
• Parties: Chad NOVELL, Plaintiff-Appellant, v. Anthony MIGLIACCIO and Andrea Migliaccio, Defendants-Respondents-Petitioners.
• Court: Wisconsin Supreme Court

749 N.W.2d 544

2008 WI 44

Chad NOVELL, Plaintiff-Appellant, v. Anthony MIGLIACCIO and Andrea Migliaccio, Defendants-Respondents-Petitioners.

No. 2005AP2852.

Supreme Court of Wisconsin.

Argued February 29, 2008.

Decided May 28, 2008.

For the defendants-respondents-petitioners there were briefs by Joseph J. Welcenbach, Jeffrey K. Welcenbach, and Welcenbach Law Offices, S.C., Milwaukee, and oral argument by Joseph J. Welcenbach.

For the plaintiff-appellant there was a brief by Daniel W. Stevens, Rudolph J. Kuss, and the Law Office of Daniel W. Stevens, Brookfield, and oral argument by Rudolph J. Kuss.

An amicus curiae brief was filed by O. Thomas Armstrong and von Briesen & Roper, S.C., Milwaukee, on behalf of Wisconsin Manufacturers & Commerce.

An amicus curiae brief was filed by Jennifer M. Krueger and Murphy Desmond, S.C., Madison, on behalf of the Wisconsin Merchants Federation, Inc.

An amicus curiae brief was filed by Debra P. Conrad, Madison, on behalf of the Wisconsin REALTORS® Association.

¶ 1 ANN WALSH BRADLEY, J

The petitioners, Anthony and Andrea Migliaccio, seek review of an unpublished court of appeals decision reversing a circuit court order that had granted summary judgment in favor of the Migliaccios and dismissed the Wis. Stat. § 100.18¹ statutory misrepresentation claim of Chad Novell, the respondent.² They contend that the court of appeals erred when it concluded that reasonable reliance is not an element of the statutory misrepresentation claim.

¶ 2 Rather, the Migliaccios assert that in pursuing a § 100.18 cause of action, a plaintiff is required to prove reasonable reliance as an element of the statutory misrepresentation claim. Additionally they advance that even if the plaintiff does not have the burden to prove reasonable reliance as an element of the statutory claim, the circuit court nevertheless correctly granted summary judgment because there existed no genuine issue of material fact that the reliance here was unreasonable.

¶ 3 Based on an examination of the words of the statute, its purpose, and our case law interpreting the statute, we conclude that a plaintiff is not required to prove reasonable reliance as an element of a § 100.18 misrepresentation claim. However, the reasonableness of a plaintiff's reliance may be relevant in considering whether the representation materially induced (caused) the plaintiff to sustain a loss. We further conclude that the circuit court erred in granting summary judgment because there remained genuine issues of material fact as to whether the reliance on the representation was unreasonable, that is whether the representation here was a material inducement causing the plaintiff's loss. Accordingly, we affirm the decision of the court of appeals.

I

¶ 4 This dispute arises from the sale of a house with a leaky basement. In the fall of 2002, Chad Novell ("Novell") was living with his parents and was in the market to purchase a home. A woman who was a long-time friend of Novell's mother and the family's former cleaning lady was aware of Novell's search. She informed the Novells that her sister and brother-in-law, Andrea and Anthony Migliaccio, were thinking of selling their home.

¶ 5 After hearing this information, the Novells contacted the Migliaccios regarding the sale of their home. In October 2002, after the Novells viewed the home, Novell's father e-mailed the Migliaccios stating that they had prepared an offer to purchase. The Migliaccios replied that they were not yet ready to sell.

¶ 6 In January 2003, the Novells again contacted the Migliaccios asking if they were ready to entertain an offer to purchase. In response, the Migliaccios informed the Novells that they would be willing to discuss the sale after they had secured financing for their new home. The Novells replied, asking for a timeline. In April, Andrea Migliaccio contacted Novell and advised that they were willing to sell their home. Novell viewed the home for a second time in June 2003 and made an offer to purchase the home for $172,500. The Migliaccios accepted the offer.

¶ 7 As a part of the sale, the Migliaccios prepared a Real Estate Condition Report. The Real Estate Condition Report is a standard report required under Wisconsin law that obliges the sellers of a home to attest to any known defects in the property. Wis. Stat. § 709.02. A "defect" is defined in the report as "a condition that would have a significant adverse effect on the value of the property...." Wis. Stat. § 709.03. Consistent with § 709.03, the form advises sellers that while it is not a warranty, prospective buyers may rely on their statements in deciding whether to purchase the property and under what terms.

¶ 8 The form specifically inquires regarding conditions of the home. Relevant here, it asks if the seller is "aware of defects in the basement or foundation (including cracks, seepage, and bulges)." It further defines basement defects as including "flooding, extreme dampness or wet walls, unsafe concentrations of mold, or defects in drain tiling or sump pumps." The Migliaccios' response on the form denied any knowledge of such defects.

¶ 9 At the end of the Real Estate Condition Report is a separate inquiry regarding the Migliaccios' knowledge of water or moisture problems. Again, they denied any "aware[ness] of the presence of ... water or moisture intrusions or conditions that might indicate the growth of unsafe levels of mold." Both Andrea and Anthony Migliaccio signed and dated the form under the "Owner's Certification," thereby attesting to the accuracy of their statements.

¶ 10 Before closing, Novell hired a home inspector to inspect the home. The home inspection report categorized and evaluated areas of the Migliaccios' home. Under each area, the inspector evaluated items in the area as either "Acceptable," "Not Present," "Not Inspected," "Marginal," or "Defective." The inspector listed the foundation as "Marginal" and noted displacement and stair step cracks in the basement walls. He recommended that Novell hire a foundation specialist to provide further evaluation and suggested that the wall cracks should be monitored.

¶ 11 On a separate page, in the "Basement" section of the report, the inspector described the sump pump and moisture readings in the southwest corner of the basement as "Marginal." He stated that the sump pump was operative but submerged and that the drain line was not properly connected or not draining away from the foundation.

¶ 12 The inspector also noted water stains in the southwest corner of the basement and high moisture readings. To remedy the problem, he recommended "extending exterior downspouts[,] proper grading [and] extend[ing] the sump pump piping to divert water away from foundation." The Migliaccios agreed to make these improvements as a condition of the sale.

¶ 13 After examining the house and preparing the inspection report, the inspector went through the house with Novell, Novell's father, and Anthony Migliaccio. During this visit, the inspector had concerns regarding bowing and cracking in the basement walls and the presence of water in the basement. In order to ascertain whether he should remove wood paneling that covered much of the basement walls, the inspector pointed out the bowing and cracking to Anthony Migliaccio and expressed his concern about whether the wall or the cracks had been moving and if there had been water in the basement before. Migliaccio responded that "[t]here had never been water in the basement ... [that] the bow had not moved, and [that] the cracks had not moved since the time that they had occupied the house." At the time the Migliaccios sold their home, they had been living there for approximately nine years.

¶ 14 The inspector also asked if the walls had been painted by the Migliaccios or whether they had been painted by the previous owner. Migliaccio responded that he had not painted the walls, but that they had been painted by the previous owner. Novell considered Migliaccio's representation that the walls had not been painted in the nine years the Migliaccios had lived in the house as an indication that the walls and cracks were not moving. Further, Novell later testified that he did not consider it necessary to hire an additional specialist "[b]ased on Mr. Migliaccio's word that he had never had water in his basement, and that he not painted his walls, and had not had any previous problems or noticed any movement ... as a friend of the family."

¶ 15 Novell purchased the home in September 2003. He moved in on November 15, 2003.

¶ 16 In early 2004 Novell smelled a foul odor in the basement. He noticed standing water in the northwest area of the basement. The water covered about one-third of the area of the finished basement. The basement flooded in that area at least five to seven times that season, generally when the snow melted or when it rained.

¶ 17 Novell contacted the home inspector who had performed the initial assessment of the house. In a June 2, 2004, letter to Novell, the inspector recounted his original assessment of the home. He recalled that the walls at the southwest corner of the basement near the sump pump had cracks and displacement, that the walls were wet to the touch, and that there were elevated moisture readings. In addition, he remembered telling Novell and his father to hire a basement foundation specialist to fully determine the "cause and effect" of the present wall cracks and displacement in the southwest corner of the basement. As to the wetness, the inspector recalled attributing wetness to "a combination of poor grading and improper sump pump use." He indicated that he also remembered saying that a foundation specialist "could also perform a test on the drain tile to see if the system is working properly."

¶ 18 After communicating with the home inspector, Novell hired a professional engineer. In contrast to the findings of the home inspector who noted cracks,...