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Wisconsin

Disclosure; Fraud

Kosek v Hanauska, 2010 WL 1222790 (Wis Ct App, 2010).

Facts:The Koseks purchased a home from the Hanauskas in June 2005. Subsequently, the Koseks experienced basement flooding. The Koseks brought suit, asserting that the Hanauskas violated Wisconsin Statutes Section 100.18(1) by misrepresenting the condition of the basement prior to the home sale. The Hanauskas moved for summary judgment, arguing that the statute only protects individuals who reasonably relied on a real estate condition report. The trial court denied that motion and the Koseks prevailed in a jury trial. The Hanauskas appealed.

Holding:Affirmed. The Hanauskas made two assertions on appeal: (1) that the trial court erred in denying their motion for summary judgment, and (2) the special verdict instruction to the jury should have included the question of whether the Koseks materially relied on the Hanauskas&€™ representations in deciding to buy the home.

The trial court first explained the import of a similar case, Novell v Migliaccio, 309 Wis 2d 132, 749 NW2d 544. In that leaky basement case, the court explained that reasonable reliance is not an element of a misrepresentation claim under Section 100.18(1). Instead, reasonable reliance is considered by the jury in determining the claimant&€™s loss after the misrepresentation claim is proven. Therefore, in some cases a court may determine as a matter of law that a claimant&€™s reliance on a misrepresentation was so unreasonable that the claimant was not actually induced by it to act. Thus, the claimant will be unable to recover damages.

In this case, the Hanauskas asserted that the Koseks could not have reasonably relied on a misrepresentation because the Koseks had the benefit of three inspection reports that disclosed past leaks. However, the court found that there were equivocal factual issues that could show reasonable reliance by the Koseks. For example, the inspection reports did not describe any danger of the extensive flooding that the Koseks later experienced. Furthermore, certain aspects of the reports may have led the Koseks to believe that repairs were made to the basement that were not actually completed.

On the second issue, the court ruled that special verdict instructions are within the discretion of the trial court. In this case, the instruction requested by the Hanauskas would have been inappropriate because reasonable reliance is not an element of a violation under the statute.

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[Last update: 11-17-10]