Ivancevic v. Reagan (WI)

Summary: Buyers failed to set forth a mutual-mistake claim regarding a home purchase because they lacked evidence that the sales contract guaranteed them a defect-free home.


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Ivancevic v. Reagan, 2013 WI App 121, 351 Wis. 2d 138, 839 N.W.2d 416 (Wis. App. 2013).



Facts: On March 11, 2009 Niksa and Kelly Ivancevic entered into a residential lease with the Reagans, which included an Option to Purchase the residence. In the lease, the Reagans warranted that the residence would be, “delivered in clean condition and good repair, free of mold and toxic substances [and] suitable for habitation in compliance with all laws.” While leasing, the Ivancevics commissioned a few inspections of the home which reported no issues. The Ivancevics exercised their option to purchase, and closed on July 23, 2009. In the Option to Purchase contract, the Reagans did not provide the same warranty contained within the lease. Rather, the contract indicated the Reagans had no notice or knowledge of conditions affecting the property or transaction other than those identified in their property condition report. Further, absent an independent inspection by the Ivancevics, the buyer agreed to purchase the residence “as-is.”

In January 2010, the Ivancevics noticed water leakage through a door trim and a window casing, and immediately contacted the Regans and the company that constructed the home. Both parties disclaimed liability. The Ivancevics then hired a licensed architect to inspect the residence, with the inspection uncovering issues related to incorrect design and construction of the attic ventilation system. The Ivancevics subsequently commenced an action against the Reagans, asserting mutual-mistake and breach of contract claims.

Regarding their mutual-mistake claim, the Ivancevics alleged that (1) the Residence’s roof and attic ventilation systems were defective; (2) neither they nor the Reagans were aware of the defects at time of purchase; and (3) had the Ivancevics known of the defects, they would not have purchased the Residence. Under their breach-of-contract claim, the Ivancevics claimed that the Reagans represented that (1) the Residence was free of defects; (2) the Residence did contain defects; and (3) the Reagans’ misrepresentations were a breach of the parties’ contract.

The Reagans filed a motion for summary judgment regarding both claims and moved for imposing sanctions. The court granted the motion for summary judgment, but denied the motion for sanctions. The Ivancevics appealed and the Reagans cross-appealed.


Holding: Affirmed. On appeal, the Ivancevics contended the circuit court erred when it dismissed their mutual-mistake claim. They argued that the evidence demonstrated the parties bargained for a defect-free house that complied with relevant laws, and the circuit court erred in ruling that the doctrine of mutual mistake was unavailable because the Ivancevics knew of the possibility of moisture problems in the house and purchased the Residence regardless. The Reagans, conversely, argued that the circuit court erred when it denied their motion for sanctions.

The court began by holding that the Ivancevics failed set forth a valid mutual-mistake claim because they failed to produce evidence indicating the Option to Purchase contract guaranteed a defect-free home. In particular, the court cited the plain language of the Option to Purchase, which did not guarantee the residence was defect-free. While the Ivancevics attempted to argue that the warranty provided in the lease carried over to the Option to Purchase, which was attached to and referenced by the lease, the court indicated that the Option precluded the inclusion of prior agreements. Specifically, the court cited (1) a provision in the contract explicitly stating the Option contained the entire agreement between buyer and seller, and (2) the Option contained another provision concerning “BUYER DUE DILIGENCE.” The court concluded that these provisions alerted the Ivancevics that they were accepting the property “as-is.”

The Reagan’s motion for sanctions was also summarily denied. The court held that there was too little caselaw concerning the application of the mutual-mistake doctrine to sales contracts. Because the parameters of the doctrine were not well-defined, the substance of the Ivancevics mutual-mistake was not necessarily meritless. The court also cited the circuit court’s depth of discussion regarding the claim, and held that the depth indicated the argument held at least some merit.


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By: ATG Underwriting Department | Posted on: Fri, 01/16/2015 - 2:05pm