Corporate officers liable for statutory misrepresentation

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Corporate agents may be held personally liable for misrepresentation, regardless of whether they acted on behalf of the corporation and regardless of the nature of the claim.

On Wednesday, the Wisconsin Court of Appeals reversed the dismissal of statutory misrepresentation claims against three individuals, even though there was no evidence they acted outside the scope of their employment with the corporation.

In 2006, Jason and Tara Ferris purchased real property in Muskego from Location 3 Corp. After discovering that a landfill adjacent to the property was a Superfund site, the Ferrises brought suit against Location 3, as well as three agents of the corporation: Thomas Sauer, James Lechner and Shan Mason.

The complaint alleged that the seller’s real estate condition report was signed in violation of secs. 895.446 and 943.20 because it failed to disclose the adjacent Superfund site. Although only Lechner singed the condition report, the complaint alleged that he did so in consultation with Sauer and Mason.

The circuit court dismissed the claims against the individual defendants, because they were acting within the scope of their duties with the corporation.

The Ferrises appealed, and the Court of Appeals reversed in an opinion by Judge Richard Brown.

The court relied on the following passage in Oxmans’ Erwin Meat Co. v. Blacketer, 86 Wis. 2d 683, 692-693, 273 N.W.2d 285 (1979): “An individual is personally responsible for his own tortious conduct. A corporate agent cannot shield himself from personal liability for a tort he personally commits or participates in by hiding behind the corporate entity; if he is shown to have been acting for the corporation, the corporation also may be liable, but the individual is not thereby relieved of his own responsibility.”

Sauer, Lechner and Mason argued that the passage was mere dicta, and that the issue in Oxmans’ was not personal liability, but personal jurisdiction.

But the court found two other cases to support imposition of personal liability. In Hammer v. DILHR, 92 Wis.2d 90, 284 N.W.2d 587 (1979), the Supreme Court said that the general rule is that the corporate shield does not protect an agent from his own tortious acts.

And in Stuart v. Weisflogís Showroom Gallery Inc., 2008 WI 22, 308 Wis.2d 103, 746 N.W.2d 762, the court said the same about the Home Improvement Practices Act.

Brown wrote for the court, “When the supreme court intentionally takes up and announces the law three times, we think it clear that the initial statement was not dicta.”

Analysis

The opinion is consistent with recent Supreme Court precedent.

If there were any doubt about whether the Supreme Court’s statement in Oxmans’ was dicta, it was resolved last month in Casper v. American International South Ins. Co., 2011 WI 81, a case not cited by the Court of Appeals.

In Casper, one of the defendants argued that Oxmans’ was limited to intentional torts, but the Court disagreed. The court said, “(W)e decline to hold that corporate officers may never be held personally liable for negligent acts committed in the scope of their corporate duties.” Casper, at par. 90.

Logically, if corporate officers can be held personally liable for negligent as well as intentional torts, they should also be held responsible for statutory causes of action that contain an intentional act as an element.

Case: Ferris v. Location 3 Corp., No. 2010AP2203

Issue: Can corporate officers be held personally liable for statutory misrepresentation committed in the scope of their duties?

Holding: Yes. Supreme Court precedent provides that there is no corporate shield for individuals’ tortious conduct.

Attorneys: For Plaintiffs: Daniel W. Stevens, Rudolph J. Kuss, Brookfield; For Defendants: Donald J. Murn, Michelle E. Martin, Joshua B. Czuta, Waukesha.

David Ziemer can be reached at [email protected].