Act can be a misrepresentation

Listen to this article

A homebuyer can sue the seller for misrepresentation because the seller painted the basement wall if the buyer can show that it was done to hide evidence the basement leaked.

The Wisconsin Court of Appeals held on April 27 that it is common sense that the term “misrepresentations” can include acts and is not limited to statements.

The opinion is the latest in a long-running saga that has already been to the Supreme Court once. Novell v. Migliaccio, 2008 WI 44, 309 Wis.2d 132, 749 N.W.2d 544.

Chad Novell bought a house from Anthony and Andrea Migliaccio in 2003. Although the Migliaccios signed a property condition report stating that they were not aware of any defects in the basement, they did not do so until after they had already accepted Novell’s offer to purchase. Thus, this statement cannot be the basis for a misrepresentation claim under sec. 100.18(1).

After Novell moved in, he experienced leaking in the basement and brought suit under a number of theories. The circuit court granted summary judgment in favor of the Migliaccios on all claims, but the Court of Appeals reversed on the sec. 100.18(1) claim.

The Supreme Court affirmed, holding that reasonable reliance is not an element of statutory misrepresentation.

On remand, Milwaukee County Circuit Court Judge David A. Hansher granted summary judgment to the Migliaccios, concluding “painting of a wall cannot be deemed a representation to the public.”

The Court of Appeals reversed, in an opinion by Judge Ralph Adam Fine.

The court noted that, in a 1943 opinion, the Supreme Court held that a misrepresentation can be made via acts or conduct. Scandrett v. Greenhouse, 244 Wis. 108, 11 N.W.2d 510 (1943). Scandrett involved a lawyer’s payment of funds to his client in a personal injury action, which the court interpreted as a representation that he had already paid an insurer with a subrogated interest.

In 1945, sec. 100.18 was expanded from covering only a misleading “advertisement” to include “advertisement, announcement, statement or representation.”

Presuming the Legislature is aware of existing case law, the Court of Appeals concluded that the Legislature was aware that “representation” would be interpreted to include non-verbal acts.

It further concluded that, if “representation” meant nothing more than “statement,” it would be superfluous.

Because Novell averred that he found a half-full gallon can of waterproofing paint in the basement, sold no earlier than 2000, the court concluded that a jury could reasonably find that the Migliaccios painted the basement to hide evidence it leaked.

Joseph J. Welcenbach, who represents the sellers, said in an interview that the opinion could open up a can of worms in that buyers could argue that anything an owner does to make a house look better for sale could be a misrepresentation.

“Should an owner not fix the house up?” he asked. “Doing anything could be considered a representation, just as a written or spoken word. Where do you draw the line between making the house look nice and making a misrepresentation?”

In another respect, however, Welcenbach said he thought the impact of the opinion may be limited, because here, the condition report was prepared after the offer to purchase had been accepted. In most sales, that will not be the case, and a buyer claiming misrepresentation will be able to proceed based on statements in the report rather than actions.

However, Rudy Kuss, who represented the buyer, said in an interview that is true only when the seller has a broker. When the seller does not, however, Kuss said it is not uncommon for buyers to make offers without first getting a property condition report.

As a result, Kuss said, “The opinion closes a gap in the law. Even if the report is provided after the offer, the buyer may still have a claim.” It is common, Kuss said, for sellers to hide evidence of water damage with paint or paneling.

David Ziemer can be reached at [email protected]