Ollerman v. O'Rourke Co., Inc.
1980 Wisc. LEXIS 2479, 288 N.W.2d 95, 94 Wis. 2d 17 (1980)
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Rule of Law:
A subdivider-vendor of residential real estate has a duty to disclose to a non-commercial purchaser facts which are known to the vendor, are material to the transaction, and are not readily discernible to the purchaser; failure to do so may constitute a claim for intentional misrepresentation.
Facts:
- O'Rourke Co., Inc. was a corporation engaged in the business of developing and selling real estate, and had subdivided the area where the subject lot was located.
- Roy Ollerman, who was inexperienced in real estate transactions and a stranger to the area, purchased a vacant lot from O'Rourke Co. on May 15, 1974, for the purpose of building a house.
- The lot contained a hidden, underground water well that was not visible or known to Ollerman.
- O'Rourke Co. knew of the existence of the underground well but did not disclose this fact to Ollerman.
- During excavation for the construction of his house, Ollerman uncapped the well, which released water and made the property unsuitable for building without significant added expense.
Procedural Posture:
- Roy Ollerman (plaintiff) initially sued O'Rourke Co., Inc. (defendant) in the circuit court for Milwaukee County, Wisconsin (the trial court).
- The trial court's decision on the defendant's demurrer to the original complaint was appealed, and the Wisconsin Supreme Court allowed the plaintiff to replead.
- Ollerman filed an amended complaint alleging causes of action for intentional and negligent misrepresentation.
- O'Rourke Co., Inc. filed a motion under sec. 802.06(2)(f), Stats., to dismiss the amended complaint for failure to state a claim upon which relief can be granted.
- The circuit court overruled the seller's motion to dismiss.
- O'Rourke Co., Inc., the seller-defendant, appealed the circuit court's order to the Supreme Court of Wisconsin.
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Issue:
Does a subdivider-vendor's failure to disclose a known, latent, and material condition of a residential lot to a non-commercial buyer constitute a claim for intentional misrepresentation?
Opinions:
Majority - Shirley S. Abrahamson, J.
Yes, a subdivider-vendor's failure to disclose a known, latent, and material condition can constitute a claim for intentional misrepresentation. The court holds that silence can be treated as a representation of the nonexistence of a fact if there is a duty to disclose. Departing from the traditional rule of caveat emptor, the court imposes a duty on a professional vendor of real estate to disclose facts to a non-commercial buyer when those facts are known to the vendor, are material to the transaction, and are not readily discernible to the purchaser. This duty arises from the evolving standards of justice, equity, and fair dealing in business, particularly where there is a disparity in knowledge and experience between the professional seller and the ordinary buyer. The buyer's justifiable reliance on the vendor's superior knowledge is a key factor in establishing this duty.
Concurring - Connor T. Hansen, J.
Yes, the complaint states a claim upon which relief can be granted, and the motion to dismiss was properly overruled. However, the majority's extensive dissertation on the law of misrepresentation is inappropriate and unnecessary at the pleading stage. The sole issue is the sufficiency of the complaint, and the court should not attempt to decide the law of the case before the facts have been fully developed at trial. The opinion should have been limited to affirming the lower court's order without the broad legal analysis.
Analysis:
This decision represents a significant shift away from the common law doctrine of caveat emptor in Wisconsin real estate transactions. It carves out a modern exception by establishing an affirmative duty of disclosure for professional sellers dealing with non-commercial buyers, reflecting a broader legal trend toward consumer protection. The holding enhances fairness in transactions where a significant information asymmetry exists between the parties. Future litigation will likely focus on defining the precise scope of this duty, including what constitutes a 'subdivider-vendor,' a 'material' fact, and a condition that is not 'readily discernible.'
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