Van Lare v. Vogt, Inc.

• Decision Date: 09 July 2004
• Docket Number: No. 01-3051.,01-3051.
• Citation: 683 N.W.2d 46,2004 WI 110,274 Wis.2d 631
• Parties: Terry D. VAN LARE and Norman J. Wachtl, Plaintiffs-Appellants, v. VOGT, INC., Defendant-Respondent.
• Court: Wisconsin Supreme Court

274 Wis.2d 631

2004 WI 110

683 N.W.2d 46

Terry D. VAN LARE and Norman J. Wachtl, Plaintiffs-Appellants, v. VOGT, INC., Defendant-Respondent.

No. 01-3051.

Supreme Court of Wisconsin.

Oral Argument March 10, 2004.

Decided July 9, 2004.

For the plaintiffs-appellants there were briefs by James W. Hammes and Cramer, Multhauf & Hammes, LLP, Waukesha, and oral argument by James W. Hammes.

For the defendant-respondent there was a brief by Terence P. Cahill and Brewer & Cahill, LLP, Oconomowoc, and oral argument by Terence P. Cahill.

¶ 1. DAVID T. PROSSER, J.

This case is before the court on certification by the court of appeals. The issue certified is whether the economic loss doctrine bars a claim for strict responsibility misrepresentation in a real estate transaction where the alleged misrepresentations are contained in a contract between the parties and the claimed damages are solely for pecuniary loss.

¶ 2. Consistent with our precedent and the policies underlying the economic loss doctrine, we narrow the certified question to cover commercial real estate transactions. We conclude that application of the economic loss doctrine bars Van Lare's claim of strict responsibility misrepresentation in a commercial real estate contract. Van Lare did not ask the jury to decide whether Vogt was guilty of intentional misrepresentation; he asked for a verdict on strict responsibility misrepresentation. Thus, Van Lare sought liability under a theory in which Vogt could have been one of two innocent parties to a transaction that went awry. The fact that the contract involved real estate instead of a manufacturer's "product" does not alter the outcome in this commercial case. ¶ 3. We decline Van Lare's request to order a new trial "in the interest of justice." Van Lare could have sought a remedy under alternative legal theories, but he failed to file a timely breach of contract claim and withdrew every misrepresentation claim except his claim for strict responsibility misrepresentation. Consequently, we affirm the decision of the circuit court.

FACTUAL BACKGROUND

¶ 4. On June 22, 1993, Terry D. Van Lare and Norman J. Wachtl (Van Lare)¹ entered into a written contract with Vogt, Inc. (Vogt) to purchase a 55-acre parcel of real property in Waukesha County. The property in question was the site of a gravel pit owned and operated by Vogt. The Option to Purchase contained a clause in which Vogt warranted and represented to Van Lare that Vogt had no notice or knowledge of any:

Underground storage tanks or any structural, mechanical, or other defect(s) of material significance affecting the property, including but not limited to inadequacy for normal use of mechanical systems, waste disposal systems and well/unsafe well water according to State standards, or the presence of any dangerous or toxic materials or conditions affecting the property. Excepting one Ready-Mix drum (filled with concrete) which may be buried on north-west corner of property to be conveyed herein.

¶ 5. The Option to Purchase also contained an "as is" provision which stated: "Upon closing, Buyer accepts this property in `as is' condition and represents to Seller that their purchase of the property is made on the basis of their own investigation and testing." Both parties to the contract were represented by counsel.

¶ 6. In September 1993 the parties amended the Option to Purchase when the parties became aware that "a certain parcel of said property . . . had previously been conveyed by Seller to another party." This discovery required a $20,000 reduction in the purchase price.

¶ 7. By November 1993 Van Lare purchased the property in accordance with the Option. The purchase price at closing was $213,000. Prior to purchasing the property, Van Lare was aware that illegal dumping of refuse had occurred on a regular basis near the entrance of the gravel pit. Despite this knowledge, the only tests Van Lare conducted prior to the closing were tests to determine if there was mineable bank-run material in the gravel pit.

¶ 8. From 1993 to 1999 Van Lare operated a landscaping business on the site and continued to excavate gravel from the pit in accordance with a conditional use permit issued by Waukesha County. In time, Van Lare submitted an application for residential development of the property. During public hearings to consider the proposed residential development, Van Lare learned that construction debris, including concrete, asphalt, fencing materials, PVC piping, pails, ropes, barrels, wood, and other types of materials had been buried on the site.

¶ 9. On April 19, 1999, before the 6-year period of limitation had run on a potential breach of contract claim, Van Lare's attorney notified Vogt of the claimed contractual breach. See Wis. Stat. § 893.43.² The letter stated in part:

It has now come to my clients' attention that numerous building materials and other items, including possibly oil and paints, were dumped at the site during the years of ownership by Vogt, Inc. . . .

Photographs, which were taken on or about April 30, 1990 and which are contained in the files of the Waukesha County Park and Planning Commission office, reflect the nature and extent of the building materials and other items which were dumped on the property. In addition, interviews with former employees indicate conclusively that the company was aware of these activities even though they were not disclosed at the time the Offer to Purchase was executed.

¶ 10. The letter further stated that it was putting Vogt on notice that Vogt was liable for any costs and expenses that might be incurred in cleaning up the property and invited Vogt to undertake excavation or be present to observe excavation activities. Thereafter, on November 29, 1999, Van Lare commenced this action, seeking to recover costs involved in removing the buried building materials and debris from the site.

¶ 11. The Van Lare complaint asserted three causes of action: intentional misrepresentation, negligent misrepresentation, and strict liability misrepresentation. The strict liability (or strict responsibility) claim incorporated a statutory claim for fraudulent misrepresentation under Wis. Stat. § 100.18. Van Lare's complaint did not allege breach of contract, presumably because such a claim was now barred by Wis. Stat. § 893.43, a six-year period of limitation.

¶ 12. Prior to trial, Vogt filed a motion in limine requesting the court to allow Van Lare to submit evidence on only the intentional misrepresentation claim because, Vogt asserted, the economic loss doctrine barred recovery under the other claims. The court denied the motion but, in Van Lare's view, the court intimated that it would not submit both the intentional misrepresentation and strict liability claims to the jury.

¶ 13. At the conclusion of the trial testimony, Vogt again moved for dismissal of the strict liability claim, asserting that the economic loss doctrine barred recovery under that claim. The court denied the motion. Following that ruling, Van Lare withdrew the intentional misrepresentation claim, the negligent misrepresentation claim, and, to the extent it was a separate claim, the Wis. Stat. § 100.18 claim. Instead, Van Lare opted to submit only the strict liability claim. Acting on that theory, the jury returned a verdict in favor of Van Lare and awarded $375,000 in damages.

¶ 14. Following the verdict, Vogt moved for judgment notwithstanding the verdict on the ground that the economic loss doctrine barred Van Lare from recovering purely economic damages under a strict liability misrepresentation claim. Although the court concluded that the evidence presented was sufficient to sustain the jury's verdict, the court nonetheless granted Vogt's motion because it concluded, contrary to its earlier rulings, that Van Lare's strict liability misrepresentation claim was barred by the economic loss doctrine.

¶ 15. Van Lare appealed, and the court of appeals certified the case to this court pursuant to Wis. Stat. § (Rule) 809.61.

ANALYSIS

A. Applicability of the Economic Loss Doctrine to Commercial Real Estate Contracts

¶ 16. The threshold issue in this case is whether the economic loss doctrine applies to commercial real estate contracts such as the Option to Purchase and resulting purchase agreement in this case.

¶ 17. The economic loss doctrine, first adopted by this court in Sunnyslope Grading, Inc. v. Miller, Bradford & Risberg, Inc., 148 Wis. 2d 910, 437 N.W.2d 213 (1989), is a judicially created doctrine that seeks "(1) to maintain the fundamental distinction between tort law and contract law; (2) to protect commercial parties' freedom to allocate economic risk by contract; and (3) to encourage the party best situated to assess the risk [of] economic loss, the commercial purchaser, to assume, allocate, or insure against that risk." Daanen & Janssen, Inc. v. Cedarapids, Inc., 216 Wis. 2d 395, 403, 573 N.W.2d 842 (1998).

¶ 18. The doctrine holds that a commercial purchaser of a product cannot recover solely economic losses from the manufacturer under negligence or strict liability theories, particularly where the warranty given by the manufacturer specifically precludes the recovery of such damages. Sunnyslope, 148 Wis. 2d at 921. We have repeated this principle on numerous occasions. Digicorp, Inc. v. Ameritech Corp., 2003 WI 54, ¶ 33, 262 Wis. 2d 32, 662 N.W.2d 652; Wausau Tile, Inc. v. County Concrete Corp., 226 Wis. 2d 235, 245-46, 593 N.W.2d 445 (1999); State Farm Mut. Auto. Ins. Co. v. Ford Motor Co., 225 Wis. 2d 305, 315, 592 N.W.2d 201 (1999); Daanen, 216 Wis. 2d at 402. ¶ 19. Wisconsin courts have gradually enlarged the economic loss doctrine from its root in Sunnyslope. Although we defined the economic loss doctrine narrowly in Sunnyslope, the narrowness of the definition corresponded to the facts in that case—application of the economic loss doctrine to a product. Daanen, 216 Wis. 2d at 403. Earlier this term, we...