Wilson v. Tuxen

• Decision Date: 20 May 2008
• Docket Number: No. 2007AP1964.,2007AP1964.
• Citation: 754 N.W.2d 220,2008 WI App 94
• Parties: Michael WILSON and Marcia Wilson, Plaintiffs-Appellants, v. Robert TUXEN and American Family Mutual Insurance Company, Defendants-Respondents, Shelly Tuxen, Defendant.
• Court: Wisconsin Court of Appeals

754 N.W.2d 220

2008 WI App 94

Michael WILSON and Marcia Wilson, Plaintiffs-Appellants, v. Robert TUXEN and American Family Mutual Insurance Company, Defendants-Respondents Shelly Tuxen, Defendant.

No. 2007AP1964.

Court of Appeals of Wisconsin.

Submitted on Briefs April 8, 2008.

Opinion Filed May 20, 2008.

On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of Donald Chance Mark, Jr., and Edward E. Beckmann of Fafinski Mark & Johnson, P.A., Eden Prairie, Minnesota.

On behalf of the defendants-respondents, the cause was submitted on the brief of Bruce J. Brovold and Justin H. Silcox of Kostner, Koslo & Brovold, Arcadia.

Before HOOVER, P.J., PETERSON and BRUNNER, JJ.

¶ 1 PETERSON, J

This action arises out of Michael and Marcia Wilson's purchase of a herd of dairy cattle from Robert Tuxen.¹ The Wilsons allege the cattle were infected with Johne's disease, an infectious, ultimately fatal disease they claim caused the demise of their farm. The circuit court granted Tuxen summary judgment, dismissing the suit in its entirety.

¶ 2 Despite these relatively straightforward facts, this appeal involves seventeen different claims and a number of thorny legal issues. The issues include the scope of the "other property" exception to the economic loss doctrine, the meaning of WIS. STAT. §§ 95.19 and 95.195, two statutes regulating the sale of diseased animals, and how long a buyer may wait before giving notice of breach under the Uniform Commercial Code.² For the reasons given below, we reinstate nine of the seventeen claims: the six tort claims and three statutory claims based on WIS. STAT. § 95.19(2)(c)-(e). We therefore affirm in part, reverse in part, and remand for further proceedings.

BACKGROUND

¶ 3 The Wilsons purchased fifty adult dairy cows from Tuxen in August 2001. According to the Wilsons, some of the cows began exhibiting health problems within several months of the sale. In June 2002, two of the cows tested positive for Johne's disease, and several more tested positive after that. The Wilsons' veterinarian testified Johne's disease is a fatal, contagious disease that is typically acquired during the first six months of a cow's life. However, a cow may not exhibit clinical symptoms for many years after it contracts the disease. These clinical symptoms include serious weight loss, diarrhea, and dramatically reduced milk production. A cow that exhibits clinical symptoms is slaughtered.

¶ 4 The Wilsons filed suit in September 2004. Their original complaint included twelve claims. Six were tort claims, including misrepresentation and negligence.³ Five were contract claims, including breach of express and implied warranties and promissory estoppel. The final claim alleged Tuxen had breached an implied warranty created by WIS. STAT. § 95.195.

¶ 5 Tuxen moved for partial summary judgment in April 2007. He argued all the contract claims and the WIS. STAT. § 95.195 implied warranty claim were barred because the Wilsons had not given notice of breach within a reasonable time as required under WIS. STAT. § 402.607. Tuxen submitted an affidavit stating he first received notice of a problem with the cows in April 2003, approximately ten months after the first cows tested positive for Johne's. The court granted Tuxen's motion and dismissed the contract claims and claim for breach of the WIS. STAT. § 95.195 implied warranty.

¶ 6 On the same day Tuxen's motion was decided, the Wilsons moved to amend their complaint to add five statutory claims corresponding to WIS. STAT. § 95.19(2)(a) through (e):

(2) PROHIBITIONS. No person may do any of the following:

(a) Import, sell, transport or exhibit an animal that is exposed to a contagious or infectious disease [without a permit].

(b) Import, sell, transport or exhibit an animal that is infected with a contagious or infectious disease, [without a permit].

(c) Knowingly conceal that an animal that is imported, sold, transported or exhibited has been exposed to or infected with a contagious or infectious disease.

(d) Knowingly misrepresent that an animal has not been exposed to or infected with a contagious or infectious disease.

(e) Knowingly permit an animal that has been exposed to or infected with a contagious or infectious disease to commingle with other animals under conditions that may cause the disease to spread to an animal owned by another person.

....

(4) DAMAGES. A person who violates this section is liable to any person injured for damages sustained as a result of the violation.

The court allowed the Wilsons to add claims based on paragraphs (a) and (b). The court did not allow the Wilsons to add claims based on paragraphs (c) through (e), stating that "on the basis of what's been filed today there's no evidence [Tuxen] knowingly concealed and knowingly misrepresented" the cows' diseased status.

¶ 7 Tuxen moved for summary judgment on the Wilsons' tort claims and the two new claims alleged in the amended complaint, arguing they were all barred by the economic loss doctrine. The court granted summary judgment. The court concluded the economic loss doctrine barred the Wilsons' tort claims. The court dismissed the WIS. STAT. § 95.19 claims as well, holding § 95.19 was a safety statute that did not create a claim apart from the underlying tort.

DISCUSSION

¶ 8 Whether summary judgment is appropriate is a question of law reviewed without deference to the circuit court, using the same methodology. Green Spring Farms v. Kersten, 136 Wis.2d 304, 315, 401 N.W.2d 816 (1987). Summary judgment is appropriate where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. WIS. STAT. § 802.08(2); Green Spring Farms, 136 Wis.2d at 315, 401 N.W.2d 816. We view the facts in the light most favorable to the party opposing the motion. State Bank of La Crosse v. Elsen, 128 Wis.2d 508, 511-12, 383 N.W.2d 916 (Ct.App.1986).

I. Common law tort claims

¶ 9 The first issue in this appeal is whether the Wilsons' tort claims are barred by the economic loss doctrine. Specifically, the parties disagree on whether the "other property" exception to the economic loss doctrine applies.⁴ Whether the economic loss doctrine applies to a given set of facts is a question of law reviewed without deference. Linden v. Cascade Stone Co., 2005 WI 113, ¶ 5, 283 Wis.2d 606, 699 N.W.2d 189.

¶ 10 As a general rule, the economic loss doctrine precludes tort remedies when a purchaser suffers only economic losses resulting from a defective product. Wausau Tile, Inc. v. County Concrete Corp., 226 Wis.2d 235, 245, 593 N.W.2d 445 (1999). Economic losses include loss of value of the product and consequential economic losses to the purchaser caused by the defect, such as lost profits. Id. at 246, 593 N.W.2d 445. Economic losses do not include "damage to property other than the product itself." Id. at 247, 593 N.W.2d 445.

¶ 11 "Other property" is a legal term of art, not a literal description. Grams v. Milk Prods., Inc., 2005 WI 112, ¶ 27, 283 Wis.2d 511, 699 N.W.2d 167. When a defective product is part of an "integrated system," the other components of the system are not considered "other property." Wausau Tile, 226 Wis.2d at 249, 593 N.W.2d 445. For example, in Wausau Tile the defective product was concrete that was combined with other ingredients to form paving blocks. Id. at 251, 593 N.W.2d 445. Because the concrete was an "indistinguishable, integral part" of the paving blocks and could not be identified separately from them, the paving blocks were not "other property." Id.

¶ 12 In addition, "other property" does not include property damaged as a result of the purchaser's disappointed performance expectations about the product. Grams, 283 Wis.2d 511, ¶ 3, 699 N.W.2d 167. For example, Grams involved a milk replacer that was intended to provide sustenance for calves during the first few weeks after they were born. Id., ¶ 6. The replacer allegedly caused malnutrition and increased calf mortality. Id., ¶ 8. The supreme court stated that it "is difficult to think of a better example of disappointed expectations than a product that is expected to nourish animals but leaves them malnourished." Id., ¶ 51.

¶ 13 In this case, the Wilsons argue the cows they purchased from Tuxen are "other property" because they are not part of an integrated system and the Johne's disease is not a result of disappointed performance expectations. They also argue "other property" was damaged because Tuxen's cows infected a calf the Wilsons purchased after they acquired Tuxen's herd.

¶ 14 The cows purchased from Tuxen are the defective product in this case. They are not "property other than the product itself." See Wausau Tile, 226 Wis.2d at 247, 593 N.W.2d 445. Wausau Tile and Grams, among other cases, narrow the legal definition of "other property" to exclude some property that, literally speaking, is "property other than the product itself." Grams, 283 Wis.2d 511, ¶ 27, 699 N.W.2d 167. However, nothing in those cases suggested the reverse is true — that "other property" could include the defective product itself. Indeed, "physical damage to the product itself" is the classic example of an economic loss. Id., ¶ 23; see also Daanen & Janssen, Inc. v. Cedarapids, Inc., 216 Wis.2d 395, 401 573 N.W.2d 842 (1998). The Wilsons' loss here is therefore a direct economic loss — the "loss in value of the product" the Wilsons purchased — not damage to other property. See Wausau Tile, 226 Wis.2d at 246, 593 N.W.2d 445 (citation omitted).

¶ 15 Even if the cows purchased from Tuxen could be "property other than the product itself," their loss in value due to Johne's is a disappointed performance expectation. See Wausau Tile, 226 Wis.2d at 247, 593 N.W.2d 445. In this case, the Wilsons purchased cows intending to use them in their dairy operation. Because the herd was infected with Johne's disease, the cows produced less milk, and some of them died. The...