Ritchie v. Clappier

• Decision Date: 26 October 1982
• Docket Number: No. 81-2047,81-2047
• Citation: 326 N.W.2d 131,109 Wis.2d 399
• Parties: Rex RITCHIE, Plaintiff-Respondent, v. John W. CLAPPIER and Jim E. Adamson, Defendants-Appellants.
• Court: Wisconsin Court of Appeals

Page 131

326 N.W.2d 131

109 Wis.2d 399

Rex RITCHIE, Plaintiff-Respondent, v. John W. CLAPPIER and Jim E. Adamson, Defendants-Appellants.

No. 81-2047.

Court of Appeals of Wisconsin.

Submitted on Briefs June 2, 1982.

Opinion Released Oct. 26, 1982.

Opinion Filed Oct. 26, 1982.

Review Denied.

Robert W. Burg and Johns, Flaherty & Gillette, S.C., La Crosse, for defendants-appellants.

Daniel E. Dunn and Smyth, Sauer, Becker, Lynch & Smyth, Ltd., La Crosse, for plaintiff-respondent.

Before GARTZKE, P.J., and BABLITCH, and DYKMAN, JJ.

GARTZKE, Presiding Judge.

Defendants appeal from the judgment canceling the plaintiff's quitclaim deed to them on grounds of fraud. The trial court predicated fraud on two grounds: first, defendants' failure to disclose to plaintiff a legal effect of his deed to them, and, second, a misrepresentation by defendants to plaintiff that the document he signed was only an agreement regarding a rental security deposit. The dispositive issues are whether defendants had a duty to make the disclosure and whether plaintiff negligently failed to ascertain that the document was a deed. We conclude that defendants had no duty to make the disclosure and that plaintiff was negligent as a matter of law. We therefore reverse.

The trial court found that June 1, 1978, defendants subleased part of a La Crosse building to the plaintiff tavernkeeper for two years. Plaintiff had the option to renew the sublease for ten years. In August 1979 the City of La Crosse notified the parties that it intended to acquire the property and demolish the building. In February and March 1980 plaintiff sought a new location for his tavern. He anticipated he might relocate before the building was demolished. Plaintiff was concerned, however, with defendants' ability or willingness to return his $2,500 security deposit if he relocated before ordered to vacate.

The trial court found that March 6, 1980 the parties met at plaintiff's bar. Plaintiff asked defendants to agree to return the security deposit if he relocated before the city required him to vacate. Defendants said they were willing to return the security deposit when plaintiff vacated and that they were willing to put the agreement in writing. Plaintiff repeatedly insisted that there need be nothing in writing but was finally prevailed on to agree to a writing.

The trial court found that later the same day defendants returned to plaintiff's bar with a writing which they represented as the document containing the promise to return the deposit. It is undisputed that one defendant asked plaintiff whether he wanted to consult his attorney before signing the document, and that plaintiff read it, said he would sign without consulting his attorney, and signed it.

The document was a quitclaim deed which provided:

This deed given for the following consideration given by grantees to grantor:

1. When grantees receive payment for the above-described real estate from the City of La Crosse, grantees will immediately give grantor the sum of $2,558.00, which is that portion of the Jurisdictional Offer of January 11, 1980 of the City of La Crosse which said City attributed to the loss of fixtures and improvements belonging to grantor;

2. Grantees will return to grantor all of grantor's security deposit of $2,500.00 for the rental of the above-described property when grantor vacates said premises.

Plaintiff later discovered that the deed had terminated his leasehold interest in the property which might have entitled him to share in the condemnation proceeds. He then brought this action to cancel the deed.

1. Duty To Disclose

Relying on Ollerman v. O'Rourke Co., 94 Wis.2d 17, 288 N.W.2d 95 (1980), the trial court held that defendants had a duty to disclose to plaintiff that the quitclaim deed would terminate his leasehold interest in the building and his possible interest in the condemnation award. Because that disclosure was not made, the court found that the deed was procured through fraud. We reject the conclusion that the duty exists.

Misrepresentations of law are generally not actionable as fraud. Bentley v. Fayas, 260 Wis. 177, 184, 50 N.W.2d 404, 408 (1951). The exception to this general rule was stated in Rusch v. Wald, 202 Wis. 462, 464, 232 N.W. 875, 876 (1930) (quoting 1 Bigelow, Fraud at 488):

"It is not ... universally true that a misrepresentation of the law is not binding upon the party who made it .... Where one who has had superior means of information professes a knowledge of the law, and thereby obtains an unconscionable advantage of another who is ignorant and has not been in a situation to become informed, the injured party is entitled to relief as well as if the misrepresentation had been concerning matter of fact."

Here, however, rather than misrepresent the legal consequences of plaintiff's quitclaim deed, defendants failed to disclose those consequences.

Failure to disclose a fact is not fraud in the absence of a duty to disclose. Ollerman, 94 Wis.2d at 26, 288 N.W.2d at 99-100 (1980). Whether a duty exists is a question of law. Ollerman, 94 Wis.2d at 27, 288 N.W.2d at 100. We are not bound by the trial court's conclusions on questions of law. First National Leasing Corp. v. Madison, 81 Wis.2d 205, 208, 260 N.W.2d 251, 253 (1977).

The Ollerman court imposed a duty on a seller of real estate to make a disclosure to a buyer in certain instances:

[T]he presence of the following elements is significant to persuade a court of the fairness and equity of imposing a duty on a vendor of real estate to disclose known facts: the condition is "latent" and not readily observable by the purchaser; the purchaser acts upon the reasonable assumption that the condition does (or does not) exist; the vendor has special knowledge or means of knowledge not available to the purchaser; and the existence of the condition is material to the transaction, that is, it influences whether the transaction is concluded at all or at the same price.

Ollerman, 94 Wis.2d at 39-40, 288 N.W.2d at 106 (footnote omitted).

The Ollerman decision is not controlling. Ollerman dealt with a seller's duty to disclose the existence of a hidden physical characteristic of land offered to a buyer--that a well was under the surface and could not be seen. Ollerman does not impose a duty to disclose the legal consequences of a conveyance.

The Ollerman court recognized that when it imposed a duty on a real estate seller to reveal a physical fact to the buyer, the court was "making a policy determination." 94 Wis.2d at 27, 288 N.W.2d at 100. We are called on to make a similar policy determination: whether to extend the duty created in Ollerman. We decline to extend that duty to require a buyer to disclose to the seller the legal consequences of his conveyance. That would be tantamount to making the buyer the seller's lawyer. If a duty to disclose is imposed on the buyer, the same duty should be imposed on the seller. Requiring all parties to a conveyance to disclose the legal consequences to each other is impossible.

Accordingly, we reverse the trial court's finding of fraud based on defendants' failure to disclose the deed's legal effect.

2. Plaintiff's Negligence

The trial court also found that defendants fraudulently misrepresented that the quitclaim deed embodied only the parties' agreement regarding the security deposit and that plaintiff was not negligent when he relied on the misrepresentation. Assuming that evidence supports the factual finding of a misrepresentation, we hold plaintiff was not justified in relying on the misrepresentation.

The elements of fraud are a false representation made with...