April 29, 2010 − A home seller who paints a wall to conceal evidence of water leaks – but makes no oral or written declarations concerning defects − has nevertheless made a “misrepresentation” that the wall is leak-free, the appeals court recently concluded.
In Novell v. Migliaccio, 2009AP1576 (April 27, 2009), Chad Novell (the buyer) inspected the home of Anthony and Andrea Migliaccio (the sellers) before offering to purchase it.
The buyer alleges that in making his offer, he relied on the “pristine appearance of the basement walls” and the sellers’ assurance that the walls had not been painted. The basement’s condition, the buyer claims, was particularly important because he wanted to build a recording studio in it. After the sellers accepted the offer, another inspection revealed “moisture” and “water” stains in the basement.
The sellers made no declarations, oral or written, concerning basement defects before accepting the offer and deny having painted the walls.
Conduct as misrepresentation?
The issue on appeal was whether painting a basement wall can be a misrepresentation under Wis. Stat. section 100.18(1), which states in relevant part: “No person … with intent to sell … real estate … shall make … [a] statement or representation … to the public … [that] contains any assertion, representation or statement of fact which is untrue, deceptive or misleading.”
In other words, does an act (such as painting) equate to a declaration that something is defect-free, when in fact it is not?
The Milwaukee County Circuit Court answered in the negative − stating that “painting of a wall cannot be deemed a representation to the public”− and granted summary judgment for the sellers. The appeals court reversed, concluding that painting amounts to a misrepresentation − if a reasonable jury could find that painting was indeed done, and it was done to hide evidence.
Finding no “analogous decisions” to light the way, the appeals court relied on the rule stated in Scandrett v. Greenhouse, 244 Wis. 108, 11 N.W.2d 510 (1943), reaffirmed in John Doe 1 v. Archdiocese of Milwaukee, 2007 WI 95, 303 Wis. 2d 34, 734 N.W.2d 827.
The Scandrett rule states that oral misrepresentations are not necessary for fraudulent conduct to exist – “such representations may be made by the acts or conduct of the party.” Scandrett, 244 Wis. at 113, 11 N.W.2d at 512.
The case was remanded to determine whether the sellers actually painted the basement and whether they did so knowing the wall leaked.