Title: Shannon Below v. Dion R. Norton

State: wisconsin

Issuer: Wisconsin Supreme Court

Document:

2008 WI 77 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2005AP2855 
COMPLETE TITLE: 
 
 
Shannon Below, 
          Plaintiff-Appellant-Petitioner, 
     v. 
Dion R. Norton and Dana Norton, 
          Defendants-Respondents. 
 
 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2007 WI App 9 
Reported at: 297 Wis. 2d 781, 728 N.W.2d 156 
(Ct. App. 2007-Published) 
 
 
OPINION FILED: 
July 1, 2008   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
February 26, 2008   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Milwaukee   
 
JUDGE: 
Michael D. Guolee   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
BRADLEY, J., dissents (opinion filed). 
ABRAHAMSON, C.J., and BUTLER, JR., J., join the 
dissent.   
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the plaintiff-appellant-petitioner there were briefs 
filed by Daniel W. Stevens, Rudolph J. Kuss, and the Law Office 
of Daniel W. Stevens, Brookfield, and oral argument by Rudolph 
J. Kuss. 
 
For the defendants-respondents there were briefs filed by 
Vicki Zick and Zick & Weber Law Offices, LLP, Johnson Creek, and 
oral argument by Vicki Zick. 
 
Amicus curiae briefs were filed by Debra P. Conrad, 
Madison, on behalf of the Wisconsin REALTORS® Association. 
 
An amicus curiae brief was filed by Stephen E. Meili, 
Madison; Mary C. Fons and Fons Law Office, Stoughton; Deborah 
Zuckerman and Michael Schuster, Washington D.C.; De Vonna Joy, 
Big Bend; Jeffrey R. Myer, Milwaukee; and Peter M. Koneazny, 
 
 
2 
Milwaukee, on behalf of the University of Wisconsin Consumer Law 
Litigation Clinic, AARP, Consumer Justice Law Center LLC, Legal 
Action of Wisconsin, and the Legal Aid Society of Milwaukee Inc. 
 
An amicus curiae brief was filed by Charles David Schmidt 
and Cannon & Dunphy, S.C., Brookfield, on behalf of the 
Wisconsin Academy of Trial Lawyers. 
 
 
 
 
2008 WI 77
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2005AP2855 
(L.C. No. 
2004CV3957) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Shannon Below, 
 
 
Plaintiff-Appellant-Petitioner, 
 
 
v. 
 
Dion R. Norton and Dana Norton, 
 
 
Defendants-Respondents. 
 
FILED 
 
JUL 1, 2008 
 
David R. Schanker 
Clerk of Supreme Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed and 
remanded. 
 
¶1 
N. PATRICK CROOKS, J.   This is a review of a 
published decision of the Court of Appeals,1 which reversed in 
part, affirmed in part, and remanded the decision of the Circuit 
Court for Milwaukee County, Judge Michael D. Guolee. 
¶2 
Petitioner, Shannon Below (Below), seeks review of the 
court of appeals' decision.  The circuit court had granted the 
motion to dismiss of the respondents, Dion R. Norton and Dana 
Norton (the Nortons). 
                                                 
1 Below v. Norton, 2007 WI App 9, 297 Wis. 2d 781, 728 
N.W.2d 156. 
No. 
2005AP2855 
 
2 
 
¶3 
There are two principal issues upon review.  The first 
issue is whether the economic loss doctrine (ELD) bars common-
law claims for intentional misrepresentation2 that occur in the 
context of residential real estate transactions.  The second 
issue is whether the ELD bars common-law claims for intentional 
misrepresentation that occur in the context of noncommercial 
real estate transactions. 
¶4 
We affirm the decision of the court of appeals.  We 
hold that the ELD bars common-law claims for intentional 
misrepresentation in real estate transactions, whether such 
claims occur in the context of residential3 or noncommercial 
sales, such as the one in the case before us.  We do not draw a 
distinction between the terms "residential" and "noncommercial" 
here, because either term fits the real estate transaction at 
issue. 
¶5 
Below is not left without a remedy.  A purchaser of a 
home, as well as real estate brokers and agents, can all be 
assured that applying the ELD still leaves statutory and 
                                                 
2 Below's common-law negligent misrepresentation and strict 
responsibility 
misrepresentation 
claims 
are 
not 
addressed 
herein, because Below conceded in her petition for review that 
the ELD barred those claims.  See, e.g., State Farm Mut. Auto. 
Ins. Co. v. Ford Motor Co., 225 Wis. 2d 305, 592 N.W.2d 201 
(1999). 
3 The court of appeals characterized the transaction here as 
a "residential real estate transaction."  Below, 297 Wis. 2d 
781, ¶17.  The petition for review and the parties' briefs 
present separate issues concerning noncommercial and residential 
real estate transactions in relation to the ELD and a common-law 
claim for intentional misrepresentation. 
No. 
2005AP2855 
 
3 
 
contractual 
remedies 
available 
where 
misrepresentation 
has 
occurred.  We note that Below's claim under Wis. Stat. § 100.18 
(2003-04)4 for false advertising was remanded by the court of 
appeals to the circuit court for a trial on its merits.  The 
court of appeals' decision on that issue was not presented for 
our review.  Section 100.18 provides a remedy for more than 
merely "false advertising," in that it covers fraudulent 
representations made to even one prospective purchaser.  See K&S 
Tool & Die Corp. v. Perfection Mach. Sales, Inc., 2007 WI 70, 
¶¶21, 23, 301 Wis. 2d 109, 732 N.W.2d 792. 
¶6 
In our K&S Tool & Die Corporation opinion, we stated 
that the legislature intended Wis. Stat. § 100.18 "'to protect 
the residents of Wisconsin from any untrue, deceptive or 
misleading representations . . . .'"  Id., ¶21 (citation 
omitted).  Furthermore, we reiterated that a statement that was 
made to only one individual could qualify for the protections 
afforded by § 100.18.  Id.  Clearly, a purchaser of residential 
or noncommercial real estate, such as Below, is protected by 
§ 100.18 from the false representations of a home seller.  If 
Below proves that claim, she shall recover her "pecuniary loss, 
together with costs, including reasonable attorney fees . . . ."  
See Wis. Stat. § 100.18(11)(b)2. 
                                                 
4 All further references to the Wisconsin Statutes are to 
the 2003-04 version unless otherwise noted. 
No. 
2005AP2855 
 
4 
 
¶7 
We note that the issue of whether the ELD bars claims 
under Wis. Stat. § 895.4465 (formerly Wis. Stat. § 895.80) for a 
violation of Wis. Stat. § 943.20(1)(d) also was presented for 
our review.  However, we decline to address that issue in this 
opinion, and we remand that issue to the circuit court.  We do 
so because the record of the proceedings before the circuit 
court 
is 
unclear 
as 
to 
why 
this 
claim 
was 
dismissed.  
Furthermore, this issue was not directly addressed and discussed 
by the court of appeals.  We cannot determine from the record 
before us on review whether the circuit court dismissed that 
claim: (1) because it was insufficient and fatally flawed, so 
that a claim upon which relief could be granted was not stated; 
or (2) because the circuit court believed that claim was barred 
by the ELD.  As a result, we remand that issue to the circuit 
court for further proceedings.  Upon remand, the circuit court 
should clearly state that court's holding on that statutory 
claim.  The circuit court should review this court's recent 
decision in Stuart v. Weisflog's Showroom Gallery, Inc., 2008 WI 
22, ¶33, ___ Wis. 2d ___, 746 N.W.2d 762.  That case addressed 
the issue of whether the statutory claim involved therein was 
barred by the ELD.  In that case, we stated, "We are satisfied 
that the ELD cannot apply to statutory claims . . . ."  Id. 
                                                 
5 Wisconsin Stat. § 895.80 has been renumbered as Wis. Stat. 
§ 895.446, but the statute's text was not changed in any way 
that was material to this opinion (there were insignificant 
changes to the statute's title and also to § 895.446(4)).  This 
opinion will refer to the renumbered § 895.446. 
No. 
2005AP2855 
 
5 
 
 
I 
¶8 
This case involves a real estate transaction in which 
Below purchased a house on the south side of Milwaukee, 
Wisconsin from the Nortons in February of 2004.  Because Below's 
claims were dismissed when the circuit court granted the 
Nortons' motion to dismiss, the relevant facts are brief and 
undisputed. 
¶9 
The 
Nortons 
completed 
the 
statutorily 
required 
property condition report when they put their house on the 
market.  In their property condition report, the Nortons 
represented that they were not aware of any defects with the 
house's plumbing system, except for a problem with their 
bathtub's drain handle. 
¶10 Below reached an agreement with the Nortons to 
purchase the house, and the transaction closed.  Below and the 
Nortons did not have any personal contact during this process.  
After Below moved into the house, she learned that the sewer 
line that ran between the house and the street was broken. 
¶11 On May 4, 2004, Below filed the present action against 
the Nortons in the Circuit Court for Milwaukee County.  In 
Below's complaint, she alleged claims for: (1) intentional 
misrepresentation; (2) strict responsibility misrepresentation; 
(3) 
negligent 
misrepresentation; 
(4) 
misrepresentation 
in 
violation of Wis. Stat. § 100.18; and (5) misrepresentation in 
No. 
2005AP2855 
 
6 
 
violation of Wis. Stat. §§ 895.446 and 943.20(1)(d).6  Below's 
complaint alleged that the Nortons knew of the defect with the 
sewer line before the house's sale, and misrepresented their 
knowledge to induce Below to purchase the house.  Below alleges 
that she relied on this misrepresentation when purchasing the 
house and that this defect, which was not disclosed in the 
property condition report, caused her to suffer a pecuniary 
loss. 
¶12 Below requested, and was granted, leave to file an 
amended complaint, which contained a breach of contract claim.  
However, both the circuit court and the court of appeals did not 
consider the amended complaint because they determined that 
Below did not properly file and serve her amended complaint.  
Below did not appeal the court of appeals' determination on that 
issue to this court.  We note that the circuit court, on remand, 
has the authority to allow Below to attempt again to file and 
serve an amended complaint that contains her breach of contract 
claim.  See Wis. Stat. § 802.09(1).  The determination on 
whether to allow such an amendment is left to the discretion of 
the circuit court.  Id. 
¶13 On June 11, 2004, the Nortons filed both an answer to 
Below's complaint and a motion to dismiss her complaint on the 
                                                 
6 Below also alleged a sixth claim for rescission and 
restitution.  As the circuit court and the court of appeals both 
correctly noted, neither constitutes a claim.  Rather, both are 
remedies.  Accordingly, we will not specifically address 
rescission or restitution. 
 
No. 
2005AP2855 
 
7 
 
grounds that the complaint failed to state a claim upon which 
relief could be granted and that some of Below's claims were 
barred by the ELD.  In their accompanying memorandum in support 
of their motion to dismiss, the Nortons argued that Below's 
common-law intentional, negligent, and strict responsibility 
misrepresentation 
claims 
were 
barred 
by 
the 
ELD.7 
 
On 
September 13, 2004, the circuit court adjourned its hearing on 
the Nortons' motion to dismiss Below's complaint until this 
court rendered its decision in Kaloti Enterprises, Inc. v. 
Kellogg Sales Co., 2005 WI 111, 283 Wis. 2d 555, 699 N.W.2d 205. 
¶14 The circuit court held hearings on the Nortons' motion 
to dismiss Below's complaint on July 26, 2004, September 13, 
2004, and October 17, 2005.  On November 4, 2005, the circuit 
court formally granted the Nortons' motion to dismiss the 
complaint in its entirety.  The circuit court held that the ELD 
barred Below's common-law intentional, negligent, and strict 
responsibility misrepresentation claims.  The circuit court also 
dismissed Below's remaining claims, such as the Wis. Stat. 
§§ 100.18 and 895.446 claims, in one paragraph in the transcript 
as not being "applicable."  The circuit court also stated, "I am 
going to dismiss these claims based on this transaction and this 
Complaint[,] and . . . these are not claims that [Below] can 
claim under these facts . . . ." 
                                                 
7 As 
previously 
noted, 
Below's 
common-law 
negligent 
misrepresentation claim and her common-law strict responsibility 
misrepresentation claim are not addressed herein, because Below 
conceded in her petition for review that the ELD barred those 
claims. 
No. 
2005AP2855 
 
8 
 
¶15 Below appealed the circuit court's decision to the 
court of appeals.  Below argued that the circuit court had erred 
when it held that all of her tort claims were barred by the ELD.  
Holding that the ELD did not bar Below's Wis. Stat. § 100.18 
claim, the court of appeals reversed the circuit court's 
dismissal of Below's false advertising misrepresentation claim 
under that statute.  Accordingly, the court of appeals remanded 
that claim to the circuit court for trial. 
¶16 In explaining its holding on the Wis. Stat. § 100.18 
claim, the court of appeals stated: 
     Below claims that the trial court erred when it 
dismissed her false advertising Wis. Stat. § 100.18 
misrepresentation claim.  We agree.  In Kailin v. 
Armstrong, 2002 WI App 70, ¶43, 252 Wis. 2d 676, 643 
N.W.2d 132, we held that "the economic loss doctrine 
does not apply to claims under Wis. Stat. § 100.18" 
and 
that 
statements 
to 
a 
potential 
buyer 
may 
constitute a statement made to "the public" for the 
purposes of § 100.18, Kailin, 252 Wis. 2d 676, ¶44.  
Thus, 
statements 
made 
to 
Below 
prior 
to 
[the] 
acceptance of the offer may form the basis of a false 
advertising claim. 
Below, 297 Wis. 2d 781, ¶11 (footnote omitted).  The court of 
appeals also stated: 
Here, Below's complaint sufficiently alleged a 
cause of action under Wis. Stat. § 100.18 to survive a 
motion to dismiss.  Below alleged that the Nortons 
made an untrue representation which caused Below to 
suffer a pecuniary loss.  If Below can prove her 
allegations at trial, she may recover on the false 
advertising claim.  Accordingly, this cause of action 
should not have been dismissed.  We reverse that 
portion of the trial court's order and remand for 
further proceedings. 
Id., ¶13 (footnote omitted). 
No. 
2005AP2855 
 
9 
 
¶17 However, the court of appeals affirmed the circuit 
court's dismissal of all of the other claims in Below's 
complaint.  The court of appeals held that the ELD barred the 
remainder of Below's tort claims, but it did not directly 
address and discuss the statutory claim under Wis. Stat. 
§§ 895.446 and 943.20(1)(d).  Below filed a petition for review 
of the court of appeals' decision, which we granted. 
II 
¶18 This review results from the court of appeals' action 
in its examination of the circuit court's grant of the Nortons' 
motion to dismiss Below's complaint in its entirety.  A motion 
to dismiss for failure to state a claim requires a determination 
of whether a complaint is legally sufficient to put forth a 
claim for which relief can be granted.  Watts v. Watts, 137 Wis. 
2d 506, 512, 405 N.W.2d 303 (1987).  A complaint should be 
dismissed as being legally insufficient only if there are no 
conditions under which the plaintiff can recover.  Ollerman v. 
O'Rourke Co., 94 Wis. 2d 17, 24, 288 N.W.2d 95 (1980).  As this 
court has stated, "The facts pleaded and all reasonable 
inferences from the pleadings are admitted to be true, but only 
for the purpose of testing the legal sufficiency of the claim, 
not for the purpose of trial."  Id.  We review a complaint's 
dismissal for failure to state a claim de novo.  Tietsworth v. 
Harley-Davidson, Inc., 2004 WI 32, ¶11, 270 Wis. 2d 146, 677 
N.W.2d 233. 
¶19 Whether the ELD applies to bar a claim under a given 
set of facts presents a question of law that is subject to our 
No. 
2005AP2855 
 
10 
 
de novo review.  Linden v. Cascade Stone Co., 2005 WI 113, ¶5, 
283 Wis. 2d 606, 699 N.W.2d 189. 
III 
¶20 The principal issues upon review are whether the ELD 
bars common-law claims for intentional misrepresentation that 
occur in the context of residential, or noncommercial, real 
estate transactions. 
¶21 On review, Below argues that this court should 
determine that the ELD does not bar common-law intentional 
misrepresentation 
claims 
arising 
from 
residential, 
or 
noncommercial, real estate transactions, because she claims that 
this court has not applied our Kaloti decision outside of a 
commercial context.  Alternatively, Below argues that the Kaloti 
fraud in the inducement exception to the ELD should apply to her 
case.  Kaloti Enters., Inc., 283 Wis. 2d 555, ¶42.  Below 
further asserts that consumers are in a poor position to protect 
themselves against fraud because, unlike commercial parties, 
they do not routinely purchase houses or large goods.  Below 
argues that noncommercial purchasers should not have the burden 
of allocating the risk that they will be defrauded.  Finally, 
Below contends that there are numerous attributes of such real 
estate 
transactions 
that 
render 
the 
ELD's 
rationale 
inapplicable. 
¶22 On review, the Nortons argue that the ELD should bar 
common-law intentional misrepresentation claims in residential, 
or noncommercial, real estate transactions.  They contend that 
the court of appeals correctly applied existing case law 
No. 
2005AP2855 
 
11 
 
concerning the ELD to the particular facts of the present case.  
The Nortons also assert that the ELD's rationale, that buyers 
are adequately protected by the contractual remedies that they 
negotiate, 
applies 
with 
equal 
force 
to 
residential, 
or 
noncommercial, real estate transactions.  As a result, the 
Nortons argue that buyers of such real estate should consider 
the risk of the seller committing fraud, and the Nortons further 
suggest that homebuyers are in the best position to insure 
against such a risk. 
¶23 For the reasons discussed in detail below, we hold 
that the ELD does bar common-law claims for intentional 
misrepresentation that occur in the context of residential, or 
noncommercial, real estate transactions. 
¶24 The ELD "is a judicially created doctrine that seeks 
to preserve the distinction between contract and tort."  Ins. 
Co. of N. Am. v. Cease Elec., Inc., 2004 WI 139, ¶15, 276 Wis. 
2d 361, 688 N.W.2d 462 (citation omitted).  The ELD also seeks 
to protect "'parties' freedom to allocate economic risk by 
contract . . . .'"  Kaloti Enters., Inc., 283 Wis. 2d 555, ¶28 
(citation omitted).  Furthermore, the ELD is meant to encourage 
the purchaser, who is the party best situated to assess the risk 
of his or her economic loss, to assume, allocate, or insure 
against that risk.  Id.  For the purposes of the ELD, we have 
defined an "economic loss" as being "'damages resulting from 
inadequate value because the product is inferior and does not 
work for the general purposes for which it was . . . sold.'"  
Id., ¶29 (citation omitted).  This court also has held that a 
No. 
2005AP2855 
 
12 
 
recovery for an "economic loss" refers to a recovery that 
results either from a product failing in its intended use or 
from a product "failing to live up to a contracting party's 
expectations."  Id. (citation omitted). 
¶25 In the present case, Below's alleged damage, the 
house's inadequate value, is an economic loss because the house 
is allegedly inferior.  The house is allegedly inferior because 
its broken sewer line prevents the house from fulfilling one of 
its intended uses, and also prevents the house from fulfilling 
one of the general purposes for which it was sold, basic 
sanitary needs.  The contracting party, here Below, could 
normally8 recover her economic loss, which resulted when the 
house did not live up to her expectations, through contractual 
remedies because of her home sales contract. 
¶26 The case law on the ELD leads us to the result that we 
reach in the present case, that the ELD bars common-law claims 
for intentional misrepresentation that arise in the context of 
residential real estate transactions.  This court has applied 
the ELD to bar both negligence and strict liability claims that 
arise in the context of consumer goods transactions.  See State 
                                                 
8 We note, again, that Below requested, and was granted, 
leave to file an amended complaint, which contained a breach of 
contract claim.  However, both the circuit court and the court 
of appeals did not consider the amended complaint because Below 
did not properly file and serve it.  Below did not petition for 
review of the court of appeals' determination on that issue.  
Below may, of course, pursue her Wis. Stat. § 100.18 false 
advertising misrepresentation claim, because that claim was 
remanded to the circuit court for trial by the court of appeals, 
and that decision is not before us. 
No. 
2005AP2855 
 
13 
 
Farm Mut. Auto. Ins. Co. v. Ford Motor Co., 225 Wis. 2d 305, 592 
N.W.2d 201 (1999).  Additionally, in Digicorp, Inc. v. Ameritech 
Corp., 2003 WI 54, ¶¶4, 12, 262 Wis. 2d 32, 662 N.W.2d 652, this 
court reaffirmed that the ELD barred a recovery for solely 
economic 
losses 
in 
intentional 
misrepresentation 
cases.  
Furthermore, in Van Lare v. Vogt, Inc., 2004 WI 110, ¶¶11, 21, 
274 Wis. 2d 631, 683 N.W.2d 46, though not specifically deciding 
whether the ELD covered "all real estate transactions," we held 
that the ELD can bar at least some common-law misrepresentation 
claims in such transactions.  Id., ¶21.  Indeed, in Van Lare, we 
held that the ELD "may not be discarded simply because a 
transaction involves real estate."  Id. 
¶27 In Kaloti, this court decided that the ELD bars 
misrepresentation claims that arise in a contractual setting, 
unless the misrepresentation falls under a narrow fraud in the 
inducement exception to the ELD.  Kaloti Enters., Inc., 283 Wis. 
2d 555, ¶42.  For this narrow fraud in the inducement exception 
to apply, the misrepresentation must have induced the plaintiff 
to enter into the contract and must not have been specifically 
related to the subject matter of the contract.  Id.  Put another 
way, for this narrow exception to apply, the misrepresentation 
must be "'extraneous to, rather than interwoven with, the 
contract.'"  Id. (citation omitted). 
¶28 Of particular relevance to our decision in the present 
case are this court's previous decisions in Linden, 283 Wis. 2d 
606, and Wickenhauser v. Lehtinen, 2007 WI 82, 302 Wis. 2d 41, 
No. 
2005AP2855 
 
14 
 
734 N.W.2d 855.  It seems clear that we decided in Linden that 
the ELD applies to residential real estate transactions. 
¶29 In Linden, this court affirmed the circuit court's 
grant of summary judgment that dismissed, as barred by the ELD, 
James and Dianne Linden's (the Lindens) negligence claims 
against 
some 
subcontractors 
who 
had 
participated 
in 
the 
construction of their house.  Linden, 283 Wis. 2d 606, ¶1.  The 
Lindens alleged that the subcontractors were negligent in 
performing work under a written construction contract.  Id., ¶3.  
In a context that involved residential real estate, this court 
held that the circuit court was correct in holding that the ELD 
barred the Lindens' tort claims against the subcontractors.  
Id., ¶¶3, 4.  Specifically, we decided that the ELD barred 
negligence claims in the real estate setting because we were 
convinced that the written contract for the construction of the 
Lindens' house was primarily one for goods, to which the ELD 
applied, and not primarily one for services.  Id., ¶22. 
¶30 Most recently, in our decision in Wickenhauser, we 
applied the fraud in the inducement exception to the ELD in the 
context 
of 
a 
noncommercial 
real 
estate 
transaction.  
Wickenhauser, 302 Wis. 2d 41, ¶3. 
¶31 The Wickenhausers bought 300 additional acres in 1997 
for their dairy farm from Thomas Burow, and they obtained their 
financing from Jack Lehtinen (Lehtinen).  Id.  Lehtinen asked 
the Wickenhausers to sign an option contract that gave him a 
three-year right to buy the 300 acres for $300,000, purportedly 
as a security for the loans, and Lehtinen allegedly told the 
No. 
2005AP2855 
 
15 
 
Wickenhausers that he would not record the option.  Id., ¶5.  In 
contrast, Lehtinen "contended that in exchange for the $66,000 
loan, together with his promise to secure an additional loan of 
$200,000 . . ., the Wickenhausers agreed to make Lehtinen one-
half owner of the 300-acre parcel."  Id. 
¶32 Lehtinen filed a lawsuit (the first action) against 
the Wickenhausers seeking enforcement of his option, which he 
had recorded, to buy the 300 acres.  Id., ¶6.  In their answer 
to the first action, the Wickenhausers asserted an affirmative 
defense that Lehtinen had fraudulently induced them to sign the 
option.  Id., ¶7.  The Wickenhausers then filed a lawsuit (the 
second action) seeking to quiet title to the 300 acres in their 
names and also seeking "damages arising from the fraudulent 
misrepresentations Lehtinen made to induce them to sign the 
option."  Id. 
¶33 In the first action, the circuit court found for the 
Wickenhausers and held that they "did not agree to grant 
Lehtinen an ownership interest in the 300-acre parcel."  Id., 
¶9.  In that action, the circuit court also granted rescission 
of 
the 
option 
because: 
(1) 
it 
was 
void 
for 
lack 
of 
consideration; (2) Lehtinen had made material misrepresentations 
that the Wickenhausers had reasonably relied upon to their 
detriment; and (3) Lehtinen had acted as a dual agent when he 
induced the Wickenhausers into signing the option.  Id.  In the 
second action, the circuit court awarded the Wickenhausers both 
compensatory and punitive damages, and the circuit court denied 
No. 
2005AP2855 
 
16 
 
Lehtinen's 
motion 
for 
summary 
judgment 
based 
on 
claim 
preclusion.  Id., ¶1. 
¶34 This court held that the Wickenhausers had stated a 
claim for intentional misrepresentation against Lehtinen that 
was 
"'extraneous 
to, 
rather 
than 
interwoven 
with, 
the 
contract.'"  Id., ¶41.  As a result, we applied the narrow fraud 
in the inducement exception to the ELD, because "Lehtinen's 
misrepresentations were made to induce the Wickenhausers to sign 
the option."  Id.  We stated, "The misrepresentations did not 
relate to Lehtinen's performance of the contract, which was to 
obtain [financing for the land purchase].9  Therefore, this fraud 
gives rise to an independent cause of action in tort."10  Id. 
¶35 Significantly, 
in 
Wickenhauser, 
Chief 
Justice 
Abrahamson's concurrence described the majority opinion as 
extending the ELD by holding, for the first time, "that the 
economic 
loss 
doctrine 
is 
applicable 
to 
the 
present 
noncommercial real estate transaction involving at least one 
                                                 
9 Accordingly, we disagree with the dissent's statement that 
"[i]t is difficult to discern when, if ever, fraudulent 
inducement to a contract is 'extraneous to, rather than 
interwoven with, the contract.'"  Dissent, ¶73.  Contrary to the 
dissent's assertion, instead of "explaining the difficulty of 
how to apply the narrow exception" to the ELD, the pages of the 
law review article that the dissent cites simply recount this 
court's caselaw on that issue.  Id. 
10 Based on the record before us, including the residential 
offer to purchase and the real estate condition report, we are 
satisfied that the contract here included the purchase of both 
the house and the associated land.  Accordingly, any undisclosed 
defects with the house were interwoven with, and not extraneous 
to, the contract to purchase here. 
No. 
2005AP2855 
 
17 
 
unsophisticated party negotiating without counsel and without a 
fully written, bargained-for contract."  Id., ¶68 (Abrahamson, 
C.J., 
concurring). 
 
Citing 
Linden, 
the 
majority 
opinion 
disagreed with the concurring opinion's statement that the ELD 
was being applied for the first time in Wickenhauser in a case 
arising 
out 
of 
a 
transaction 
involving 
residential, 
or 
noncommercial, real estate.  Id., ¶42, n.15.  In doing so, the 
majority stated that its opinion did "not extend the economic 
loss doctrine into new contexts.  For example, in a recent case, 
Linden . . ., we concluded that a contract to construct 
residential real estate was subject to the economic loss 
doctrine . . . ."  Id. (citation omitted).  As Chief Justice 
Abrahamson's concurrence in Wickenhauser indicates, the effect 
of the majority opinion in Wickenhauser was to hold that the ELD 
applied to noncommercial real estate transactions.  Id., ¶68 
(Abrahamson, C.J., concurring).   
¶36 It 
appears 
that 
the 
majority, 
as 
well 
as 
the 
concurrence, in Wickenhauser drew no distinction between the 
terms "residential" and "noncommercial."  In the case before us, 
it seems unnecessary to draw such a distinction because either 
term fits the real estate transaction at issue here.  Based on 
the case law cited previously, and given the discussions and the 
analyses in the majority opinion and the concurrence in 
Wickenhauser, we are satisfied that the ELD bars common-law 
intentional misrepresentation claims arising out of residential, 
or noncommercial, real estate transactions, such as the one in 
the case before us. 
No. 
2005AP2855 
 
18 
 
¶37 Additionally, the facts presented in the present case 
support our conclusion that the ELD bars common-law intentional 
misrepresentation 
claims 
arising 
out 
of 
residential, 
or 
noncommercial, real estate transactions.  The record before us 
reflects that Below received a completed property condition 
report in accordance with the requirements of Wis. Stat. 
§ 709.02.  Under that statute, and also under Wis. Stat. 
§ 709.03, the required property condition report that Below 
received contained a notice that she may want to obtain either 
professional advice or an inspection of the property.  Under 
those statutes, the required property condition report also 
contained a disclaimer that the buyer, here Below, acknowledged 
that a professional inspector's technical knowledge may be 
required to detect certain defects or code violations.  There is 
nothing in the record before us that indicates whether Below 
heeded this advice and hired a professional inspector before 
closing on the home.  Regardless, if the Nortons knew about the 
defect with the sewer line and failed to disclose the defect, as 
required by these statutes, then the Nortons may very well have 
breached the contract's terms.  As a result, in addition to her 
pending Wis. Stat. § 100.18 claim, Below might normally have 
been in a position to pursue a breach of contract claim against 
the Nortons for which contractual remedies would have been 
available.11 
                                                 
11 We note again that Below requested, and was granted, 
leave to file an amended complaint, which contained a breach of 
contract claim.  However, Below did not properly file and serve 
her amended complaint. 
No. 
2005AP2855 
 
19 
 
¶38 Under 
the 
protections 
afforded 
to 
real 
estate 
purchasers by Wis. Stat. § 709.02, purchasers are protected by 
contract and, thus, by contractual remedies.  Accordingly, the 
ELD 
should 
bar 
common-law 
claims 
for 
intentional 
misrepresentation that arise in the context of residential, or 
noncommercial, real estate transactions when, as here, the 
damages sought are purely economic.  Clearly, purchasers have 
adequate contractual and statutory remedies, if needed. 
¶39 Furthermore, we do not agree with Below that the 
Kaloti fraud in the inducement exception to the ELD applies to 
the facts of the present case.  As discussed, the Kaloti fraud 
in the inducement exception to the ELD only applies when the 
misrepresentation in question induced the plaintiff to enter 
into 
the 
contract, 
and 
that 
misrepresentation 
must 
be 
"'extraneous to, rather than interwoven with, the contract.'"  
Kaloti Enters., Inc., 283 Wis. 2d 555, ¶42 (citations omitted).  
This is so because only where the alleged misrepresentation did 
not specifically relate to the subject matter of the contract 
would the plaintiff be unable to protect himself or herself 
through contract negotiations.  See Digicorp, 262 Wis. 2d 32, 
¶48.  In the present case, if the Nortons were aware of the 
broken sewer line, they would have been obligated under Wis. 
Stat. § 709.02 to disclose that fact to Below.  As a result, the 
broken sewer line does not meet the requirement for the Kaloti 
exception of being a matter that is "'extraneous'" to the 
contract's subject matter, and the Kaloti exception does not 
No. 
2005AP2855 
 
20 
 
apply in the present case.  Kaloti Enters., Inc., 283 Wis. 2d 
555, ¶42 (citation omitted). 
¶40 In summary, for the reasons stated herein, we are 
satisfied that the ELD bars common-law claims for intentional 
misrepresentation in real estate transactions that occur in the 
context of residential, or noncommercial, sales. 
IV 
¶41 We affirm the decision of the court of appeals.  We 
hold that the ELD bars common-law claims for intentional 
misrepresentation in real estate transactions, whether such 
claims occur in the context of residential, or noncommercial, 
sales, such as the one in the case before us.  We do not draw a 
distinction between the terms "residential" and "noncommercial" 
here, because either term fits the real estate transaction at 
issue. 
¶42 Below is not left without a remedy.  A purchaser of a 
home, as well as real estate brokers and agents, can all be 
assured that applying the ELD still leaves statutory and 
contractual 
remedies 
available 
where 
misrepresentation 
has 
occurred.  We note that Below's claim under Wis. Stat. § 100.18 
for false advertising was remanded by the court of appeals to 
the circuit court for a trial on its merits.  The court of 
appeals' decision on that issue was not presented for our 
review.  Section 100.18 provides a remedy for more than merely 
"false 
advertising," 
in 
that 
it 
covers 
fraudulent 
representations made to even one prospective purchaser.  See K&S 
Tool & Die Corp., 301 Wis. 2d 109, ¶¶21, 23. 
No. 
2005AP2855 
 
21 
 
¶43 In our K&S Tool & Die Corporation opinion, we stated 
that the legislature intended Wis. Stat. § 100.18 "'to protect 
the residents of Wisconsin from any untrue, deceptive, or 
misleading representations . . . .'"  Id., ¶21 (citation 
omitted).  Furthermore, we reiterated that a statement that was 
made to only one individual could qualify for the protections 
afforded by § 100.18.  Id.  Clearly, a purchaser of residential 
or noncommercial real estate, such as Below, is protected by 
§ 100.18 from the false representations of a home seller.  If 
Below proves that claim, she shall recover her "pecuniary loss, 
together with costs, including reasonable attorney fees . . . ."  
See Wis. Stat. § 100.18(11)(b)2. 
¶44 The issue of whether the ELD bars claims under Wis. 
Stat. § 895.446 for a violation of Wis. Stat. § 943.20(1)(d) 
also was presented for our review.  However, we decline to 
address that issue in this opinion, and we remand that issue to 
the circuit court.  We do so because the record of the 
proceedings before the circuit court is unclear as to why this 
claim was dismissed.  Furthermore, the issue was not directly 
addressed and discussed by the court of appeals.  We cannot 
determine from the record before us on review whether the 
circuit 
court 
dismissed 
that 
claim: 
(1) 
because 
it 
was 
insufficient and fatally flawed, so that a claim upon which 
relief could be granted was not stated; or (2) because the 
circuit court believed that claim was barred by the ELD.  As a 
result, we remand that issue to the circuit court for further 
proceedings.  Upon remand, the circuit court should clearly 
No. 
2005AP2855 
 
22 
 
state that court's holding on that statutory claim.  The circuit 
court should review this court's recent decision in Stuart, ___ 
Wis. 2d ___, ¶33.  That case addressed the issue of whether the 
statutory claim involved therein was barred by the ELD.  In that 
case, we stated, "We are satisfied that the ELD cannot apply to 
statutory claims . . . ."  Id. 
By the Court.——The decision of the court of appeals is 
affirmed, and this matter is remanded to the circuit court for 
actions consistent with this opinion. 
 
No.  2005AP2855.awb 
 
1 
 
¶45 ANN WALSH BRADLEY, J.   (dissenting).  This is a case 
that can affect every single person who purchases a home in 
Wisconsin. For many citizens of this state, buying a home will 
be one of the most important purchases that they will make in 
their lifetime.  
¶46 According to the majority, a person selling a home can 
look the buyer in the eye, lie about the condition of the home, 
and escape legal consequences in tort for the lie because of the 
economic loss doctrine. 
¶47 Wisconsin has the dubious distinction of being the 
only state in the entire country to have expanded this 
judicially created doctrine in such a fashion. The majority has 
taken a doctrine that originally applied in a very narrow 
context——commercial transactions for products under warranty——
and has now used it to prevent homebuyers from recovering 
damages in tort caused by the misrepresentations of fraudulent 
sellers.  
¶48 Contrary to its protestation, the majority is not 
compelled to reach this unfortunate result. No legislature 
enacted a law compelling this conclusion.  The majority is 
applying its own judge-made doctrine. 
¶49 Likewise, Wisconsin case law does not compel such an 
outcome. The justifications for expanding the reach of the 
economic loss doctrine do not apply here. Rather, the case law 
shows that the economic loss doctrine ought not apply to the 
purchase of homes by private individuals.  
No.  2005AP2855.awb 
 
2 
 
¶50 The majority downplays the reach of its decision by 
noting that Below may still have a remedy under Wis. Stat. 
§ 100.18. Although Below may still have a remedy here, the 
majority opinion ignores cases in which victims of fraud will be 
remediless.  
¶51 Rather than apply this judicially created doctrine 
that allows defrauding sellers to escape liability in tort, I 
would instead heed the advice of amicus Wisconsin Realtors 
Association (Realtors). They warn that the application of the 
economic loss doctrine here is bad for the Wisconsin real estate 
market and bad for Wisconsin consumers. 
¶52 Because the majority's application of the economic 
loss doctrine, which protects sellers who lie about the 
condition of the home, is neither compelled by the law nor 
supported by good public policy, I respectfully dissent.  
I 
¶53 Boiled down, the majority's argument is that it is 
compelled to reach this result: "the case law on the [economic 
loss doctrine] leads us to the result" that the doctrine applies 
to home purchases by private individuals. Majority op., ¶26. It 
maintains that under this court's decision in Wickenhauser v. 
Lehtinen, 2007 WI 82, 302 Wis. 2d 41, 734 N.W.2d 855, the 
economic 
loss 
doctrine 
applies 
to 
transactions 
for 
all 
"noncommercial" real estate, including residential real estate. 
Majority op., ¶36. The majority further determines that the 
misrepresentation here does not fall within the narrow fraud in 
the inducement exception to the economic loss doctrine adopted 
No.  2005AP2855.awb 
 
3 
 
by this court in Kaloti Enters., Inc. v. Kellogg Sales Co., 2005 
WI 111, 283 Wis. 2d 555, 699 N.W.2d 205.  Majority op., ¶39. 
¶54 However, the cases do not lead to the majority's 
result. The justifications that this court has proffered for the 
application of the economic loss doctrine do not apply in the 
context of private home buying.  
¶55 The economic loss doctrine was first recognized by 
this court in Sunnyslope Grading, Inc. v. Miller, Bradford & 
Risberg, Inc., 148 Wis. 2d 910, 437 N.W.2d 213 (1989). That case 
involved a commercial purchaser of a product, construction 
equipment, that carried a manufacturer's warranty. The purchaser 
sued the manufacturer in tort for lost profits and repair costs 
when the equipment failed. Id. The warranty "specifically 
preclude[d] the recovery of such damages," and this court 
determined that the economic loss doctrine precluded recovery in 
tort. Id. at 921.  
¶56 In Daanen & Janssen v. Cedarapids, Inc. we applied the 
doctrine in an action between commercial parties to bar recovery 
in tort for economic losses resulting from failure of a product.  
216 Wis. 2d 395, 397-98, 573 N.W.2d 842 (1998). We explained 
that applying the economic loss doctrine to tort actions between 
commercial parties was based on three policies: to maintain the 
distinction 
between 
tort 
and 
contract 
law, 
"to 
protect 
commercial parties' freedom to allocate economic risk by 
contract," and "to encourage the party best situated to assess 
the risk [of] economic loss, the commercial purchaser, to 
No.  2005AP2855.awb 
 
4 
 
assume, allocate, or insure against that risk." Id. at 403 
(emphasis added). 
¶57 This court declined to extend the doctrine to cases 
involving contracts for services in Ins. Co. of N. Am. v. Cease 
Elec. Inc., 2004 WI 139, 276 Wis. 2d 361, 688 N.W.2d 462. We 
explained that a key rationale for applying the economic loss 
doctrine involving contracts for products is the protection 
afforded 
under 
the 
Uniform 
Commercial 
Code 
(U.C.C.)1 
to 
manufacturers and purchasers of products. Id., ¶¶29-36. 
¶58 The current case, of course, involves neither a 
contract between commercial parties, a contract to purchase a 
product, a warranty, nor the protections of the U.C.C. It 
involves a private individual's purchase of a home. The policies 
underwriting the doctrine in other contexts do not support 
applying it to home purchases. Private individuals buying a home 
are not as well suited to assess and allocate the risks as 
commercial parties or the purchasers of products. That is 
especially true with respect to the risks associated with the 
possibility of being defrauded, a point more fully discussed 
below. 
                                                 
1 The Uniform Commercial Code, Wis. Stat. chs. 401-411 
(2005-06) sets forth the rights and remedies that govern 
transactions between commercial parties of relatively equal 
bargaining power. Sunnyslope Grading, Inc. v. Miller, Bradford & 
Risberg, Inc., 148 Wis. 2d 910, 916, 437 N.W.2d 213 (1989).   It 
provides a "comprehensive system for compensating consumers for 
economic loss arising from the purchase of defective products." 
State Farm Mut. Auto. Ins. Co. v. Ford Motor Co., 225 Wis. 2d 
305, 342, 592 N.W.2d 201 (1999). 
No.  2005AP2855.awb 
 
5 
 
¶59 Nonetheless, the majority maintains that the economic 
loss doctrine applies to the residential real estate transaction 
here based upon this court's decisions in Van Lare v. Vogt, 
Inc., 2004 WI 110, 274 Wis. 2d 631, 683 N.W.2d 46, Linden v. 
Cascade Stone Co., 2005 WI 113, 283 Wis. 2d 606, 699 N.W.2d 189, 
and Wickenhauser, 302 Wis. 2d 41. All three cases are inapt.  
¶60 In Van Lare we applied the economic loss doctrine to 
bar recovery for strict liability misrepresentation in the 
context of a transaction for commercial real estate——a gravel 
pit. 274 Wis. 2d 631, ¶2. Our decision was premised on the fact 
that the case involved a "bargained-for contract for the sale of 
commercial-use 
land 
between 
two 
sophisticated 
parties 
represented by counsel during the negotiation process." Id., 
¶21. We emphasized that a foundational premise of the economic 
loss doctrine is that contract law is better suited than tort 
law "to deal with purely economic loss in the commercial arena." 
Id., ¶25 (emphasis added). Accordingly, we concluded that there 
was 
no 
exception 
to 
the 
doctrine 
for 
strict 
liability 
misrepresentation "in a purely commercial setting." Id., ¶28.  
¶61 Van Lare, however, tells us nothing about whether the 
economic loss doctrine should apply in the current case. This 
case does not involve the sale of commercial-use land like a 
gravel pit; rather, it involves the purchase of a home. It does 
not 
involve negotiation between two sophisticated parties 
represented by counsel during negotiations. The transaction did 
not take place in a "purely commercial setting." The cause of 
No.  2005AP2855.awb 
 
6 
 
action is fraud, not strict liability misrepresentation. In 
other words, this case is nothing like Van Lare.  
¶62 Linden is 
similarly inapplicable. It involved a 
contract for the construction of a house. 283 Wis. 2d 606, ¶1. 
This court determined that a contract for the construction of a 
house was a contract for a product, and that the economic loss 
doctrine applied on that basis. Id., ¶25. The current case does 
not involve a contract for the purchase of a product, it is a 
contract for real estate.  
¶63 From the majority's discussion here, one would think 
that this court considered the contract in Linden to be a real 
estate transaction. It describes Linden as occurring "[i]n a 
context that involved residential real estate," and states that 
"we decided that the [economic loss doctrine] barred negligence 
claims in the real estate setting." Majority op., ¶29.  
¶64 The implication of the majority's careful phrasing is 
that this court actually viewed the case as a real estate case. 
The language of the opinion tells a different story: Linden was 
decided on the ground that the construction contract was a 
contract for a product. The concept of real estate never entered 
the equation. The words "real estate" do not even occur in the 
Linden opinion. 
¶65 The primary case on which the majority relies for its 
decision to apply the economic loss doctrine to home buying is 
Wickenhauser. The relevance of Wickenhauser to this case is 
dubious, as neither party contended that the doctrine applied to 
No.  2005AP2855.awb 
 
7 
 
bar a cause of action. 302 Wis. 2d 41, ¶39. The case was instead 
about election of remedies. Id., ¶¶1-2.  
¶66 Wickenhauser did not even involve the purchase of a 
home or the purchase of residential real estate. Rather, it 
involved an option to sell farmland. Id., ¶¶1, 7. It is unclear 
why the majority concludes that a case about a transaction 
involving farmland dictates the outcome of a case involving a 
contract for the purchase of a home.2 
¶67 More 
importantly, 
the 
Wickenhauser 
majority 
was 
adamant that it did not extend the economic loss doctrine into 
contexts beyond those already established in this state by 
Linden. Id., ¶42 n.15. As explained above, the application of 
the 
economic 
loss 
doctrine in Linden was based on the 
determination that the contract for the construction of a house 
was a contract for a product. 283 Wis. 2d 606, ¶25.  
¶68 We should take the Wickenhauser majority at its word 
that it did not extend the application of the economic loss 
doctrine any further than Linden. In other words, the doctrine 
should apply to contracts for products that occur "in the real 
estate 
setting." 
Majority 
op., 
¶29; 
Wickenhauser, 
302 
Wis. 2d 41, ¶42 n. 15; Linden, 283 Wis. 2d 606, ¶25. We were 
explicit in Van Lare that a contract for real estate is not a 
                                                 
2 The majority notes that neither the majority nor the 
dissent in Wickenhauser distinguished between "residential" and 
"noncommercial" real estate. Majority op., ¶36. But why would 
they have? Wickenhauser did not involve residential real estate! 
Why 
does 
the 
failure 
to 
distinguish 
residential 
and 
noncommercial real estate in one case prevent this court from 
distinguishing residential real estate——a home to live in——and 
farmland?  
No.  2005AP2855.awb 
 
8 
 
contract for a product. 274 Wis. 2d 631, ¶2. Because this case 
involves a contract for real estate, and not a contract for a 
product, Linden and Wickenhauser do not require that the 
economic loss doctrine bar recovery in tort here.  
¶69 None of the rationales set forth in our cases applying 
the economic loss doctrine extends to home purchases by private 
individuals. Such purchases are not made between commercial 
parties, a residential real estate transaction is not a contract 
for a product, and residential real estate transactions are 
protected by neither manufacturer warranties nor the U.C.C. The 
real estate contexts in which the doctrine has been applied have 
involved 
transactions for commercial-use land between two 
sophisticated 
parties 
represented 
by 
counsel 
during 
the 
negotiation process (as in Van Lare), a contract for a product 
(as in Linden), or a transaction involving farmland in which the 
majority adamantly denied that it extended the doctrine beyond 
Linden (as in Wickenhauser).  
¶70 Thus, the majority has extended the application of 
this judge-made doctrine even though the cases do not compel 
this extension.  
II 
¶71 The problems with the majority opinion go beyond its 
execution of the economic loss doctrine to include the purchase 
of homes by private individuals. The expansion of this doctrine 
is exacerbated by the majority's application of the narrow——
rather than the broad——fraud in the inducement exception to the 
economic loss doctrine. Under the narrow exception a homebuyer's 
No.  2005AP2855.awb 
 
9 
 
claim can be barred even when the purchase was made based on the 
lies of the seller. 
¶72 As the majority observes, in Kaloti this court adopted 
a narrow exception to the application of the economic loss 
doctrine for fraudulent misrepresentation claims. Under this 
exception an action for fraudulent inducement of a contract is 
precluded by the economic loss doctrine if the misrepresentation 
is "interwoven with the quality or character of the goods for 
which the parties contracted or otherwise involved performance 
of the contract." Kaloti, 283 Wis. 2d 555, ¶31.  
¶73 It is difficult to discern when, if ever, fraudulent 
inducement to a contract is "extraneous to, rather than 
interwoven with, the contract." Majority op., ¶39 (quoting 
Kaloti, 283 Wis. 2d 555, ¶42); see Ralph C. Anzivino, The Fraud 
in the Inducement Exception to the Economic Loss Doctrine, 90 
Marq. L. Rev. 921, 935-36 (2007) (explaining the difficulty of 
how 
to 
apply 
the 
narrow 
exception). 
Beyond 
the 
obvious 
difficulty in the application of this test, it is simply bad 
public policy to bar fraudulent inducement claims. Most states 
recognize this. 
¶74 The majority of states addressing the question have 
adopted a broad fraud exception: the economic loss doctrine does 
not bar claims based on fraud.3  Wisconsin is one of only three 
states that have adopted the narrow exception to the economic 
loss doctrine. The courts of the other two states have either 
                                                 
3 Ralph C. Anzivino, The Fraud in the Inducement Exception 
to the Economic Loss Doctrine, 90 Marq. L. Rev. 921, 932-33 
(2007).  
No.  2005AP2855.awb 
 
10 
 
not deployed or have declined to use this narrow exception to 
bar claims for fraudulently inducing the purchase of residential 
real estate. 
¶75 The Michigan court of appeals adopted the narrow 
approach in Huron Tool & Eng'g Co. v. Precision Consulting 
Servs., Inc., 532 N.W.2d 541 (Mich. Ct. App. 1995). The supreme 
court of Michigan has not yet addressed the issue, and Michigan 
courts have not deployed the narrow exception to bar fraudulent 
inducement claims in the context of residential real estate 
transactions.   
¶76 The only other state supreme court nominally adopting 
the narrow exception to the economic loss doctrine is Florida. 
HTP, Ltd. v. Lineas Aereas Costarricenses, 685 So. 2d 1238, 
1239-40 (Fla. 1996). Even so, the court in HTP held that a claim 
for fraudulent inducement constituted a tort independent from 
the underlying contract and, therefore, was not barred by the 
economic loss rule. Id. at 1240.  
¶77 Additionally, Florida courts have not applied the 
exception as narrowly as the majority does in the present case. 
Relying on the reasoning of HTP, the Florida court of appeals 
has determined that in a contract for residential real estate a 
"fraudulent inducement claim is not barred by the economic loss 
[doctrine]." Swope v. Dimarco, 886 So. 2d 270, 272 (Fla. Dist. 
No.  2005AP2855.awb 
 
11 
 
Ct. 
App. 
2004)(emphasis 
added).4 
With 
the 
present 
case, 
therefore, Wisconsin obtains the dubious distinction of being 
the only state in the country that bars recovery in tort for 
fraudulently 
inducing 
the 
purchase 
of 
homes 
by 
private 
individuals.  
¶78 Barring the tort claims of defrauded homebuyers is bad 
public policy. It is anathema to the public's interest in truth 
telling in matters of commerce. As the Florida supreme court 
aptly stated in HTP, the interest protected by fraud claims is 
the need for truth in human relationships generally, and in 
business relationships specifically.  
[T]he interest protected by fraud is society's need 
for 
true 
factual 
statements 
in 
important 
human 
relationships, 
primarily 
commercial 
or 
business 
relationships. 
More 
specifically, 
the 
interest 
protected 
by 
fraud 
is 
a 
plaintiff's 
right 
to 
justifiably rely on the truth of a defendant's factual 
representation in a situation where an intentional lie 
would result in loss to the plaintiff. 
                                                 
4 The defendants in Swope represented to a home buyer that 
the home was free of defects. However, the buyer discovered 
defects after moving in, and brought a lawsuit alleging that the 
failure to disclose defects constituted fraudulent inducement. 
Applying HTP, the court determined that the economic loss 
doctrine did not bar the claim. Swope v. Dimarco, 886 So. 2d 
270, 272 (Fla. Dist. Ct. App. 2004); HTP, Ltd. v. Lineas Aereas 
Costarricenses, 685 So. 2d 1238 (Fla. 1996). 
No.  2005AP2855.awb 
 
12 
 
HTP, 685 So. 2d at 1240 (internal quotation and citation 
omitted).5  
¶79 Similarly, the principles underlying the economic loss 
doctrine are thwarted by barring claims of the victims of fraud. 
The purpose of the economic loss doctrine is to preserve 
parties' "freedom to allocate economic risk by contract," and 
"to encourage the party best situated to assess the risk [of] 
economic loss . . . to assume, allocate, or insure against that 
risk." Daanen, 216 Wis. 2d at 403.  
¶80 However, it is impossible for parties to allocate 
risks based on fraudulently induced contracts. Parties entering 
a contract "agree upon the rules and regulations which will 
govern their relationship; the risks inherent in the agreement 
and the likelihood of its breach. . . .  [E]ach trusts the 
other's 
willingness 
to 
keep 
his 
word 
and 
honor 
his 
commitments . . . ." Robinson Helicopter Co., Inc. v. Dana 
Corp., 102 P.3d 268, 275 (Cal. 2004). Fraud falls outside of the 
scope of risks assumed and allocated for in a contract.  
                                                 
5 The Florida supreme court is an example of a state supreme 
court which once embarked upon an expansion of the economic loss 
doctrine beyond the doctrine's original purpose, but now is 
signaling the need for a retreat. In lamenting the expansion it 
stated 
"[u]nfortunately . . . our 
subsequent 
holdings 
have 
appeared to expand the rule beyond its principled origins and 
have contributed to applications of the rule . . . to situations 
well beyond our original intent." Moransais v. Heathman, 744 
So. 2d 973, 980 (Fla. 1999). See also Indem. Ins. Co. v. Am. 
Aviation, Inc., 891 So. 2d 532, 542 (Fla. 2004) (recognizing 
that economic loss doctrine in Florida does not bar recovery for 
fraudulent inducement and negligent misrepresentation claims). 
No.  2005AP2855.awb 
 
13 
 
¶81 Placing the burden on the defrauded party to assess 
the risk is counterproductive. The party best situated to assess 
the risk of fraud is the party committing the fraud, not the 
party that is the victim of the fraud.  
¶82 This is particularly true in the context of the 
purchase of homes by private individuals. As amicus Realtors 
recognizes in its brief, people purchasing homes are often  
neither sophisticated in negotiation nor represented by counsel. 
The seller of a home has greater information, and the buyer 
relies on the seller to be truthful.  
III 
¶83 The 
majority 
downplays 
the 
consequences 
of 
its 
decision by noting that Below may still have a remedy under Wis. 
Stat. § 100.18. Majority op., ¶5. In doing so it ignores the 
cases in which there will be no remedy.  
¶84 The facts underlying a recent court of appeals 
decision illustrate the problem. See Aslani v. Country Creek 
Homes, Inc., No. 2007AP503, unpublished slip op. (Wis. Ct. App. 
January 29, 2008) (petition for review pending).6 Country Creek 
built 52 new homes in Oak Creek, a suburb of Milwaukee, in 1996 
and 1997. Prior to August 1997, the homes had been sold to the 
52 plaintiffs in the case.  
                                                 
6 The Aslani case is discussed not for any precedential 
purposes but as a recent example where no remedy may exist for 
defrauded homebuyers. See Wis. Stat. (Rule) § 809.23(3). As 
noted above, it is currently pending before this court on a 
petition for review. 
No.  2005AP2855.awb 
 
14 
 
¶85 In October 2005, a home inspector hired by one of the 
owners discovered that water had penetrated and rotted the roof 
to such a degree that the inspector's foot went through the 
roof. The same problem was then discovered in each of the other 
residences. The roofs had not been properly constructed because 
felt paper, required to be placed under the shingles, had not 
been 
installed. 
The 
plaintiffs 
alleged 
fraudulent 
misrepresentation and brought suit in April 2007, asserting 
contract, tort, and § 100.18 causes of action. The majority's 
position here leaves the victims remediless.  
¶86 Contract 
claims 
have 
a 
six-year 
statute 
of 
limitations. Wis. Stat. § 893.43. Claims accrue at the time of 
the breach, regardless of when the breach is discovered. CLL 
Assocs. Ltd. P’ship v. Arrowhead Pac. Corp., 174 Wis. 2d 604, 
609, 497 N.W.2d 115 (1993). Thus, the contract statute of 
limitations had expired by the time of the lawsuit. 
¶87 Section 100.18 claims are subject to a three-year 
statute of repose, which accrues at the time of the violation. 
Wis. Stat. § 100.18(11)(b)3. This too had expired at the time of 
the lawsuit.  
¶88 Tort claims are subject to a six-year statute of 
limitations, but in contrast to contract and § 100.18 claims, 
they accrue when the injury is (or should have been) discovered. 
Wis. 
Stat. 
§ 893.52; 
Hansen 
v. 
A.H. 
Robins, 
Inc., 
113 
Wis. 2d 550, 335 N.W.2d 578 (1983). The plaintiffs' tort claims 
would not have expired. Nonetheless, the majority's view of the 
No.  2005AP2855.awb 
 
15 
 
economic loss doctrine bars the claims, even if their purchases 
were fraudulently induced.  
¶89 The majority asserts that Below may "attempt again to 
file and serve an amended complaint" containing breach of 
contract claims. Majority op., ¶12. I do not opine on the 
likelihood of success of such an "attempt" given the procedural 
history of this case. That history reveals that the circuit 
court has previously granted a motion to amend the complaint to 
add a contract claim, then months later dismissed the amended 
complaint for failure to file and serve. The court of appeals 
has already affirmed the dismissal of the contract claim and 
Below declined to seek review of that dismissal here. 
¶90 Despite the majority's hypothesis that Below might 
recover if he attempts again to file a contract claim, there 
remain fraud cases where tort is the only remedy. The majority 
bars those homeowners from recovering for latent defects hidden 
by sellers' deceit.  
¶91 The court of appeals in Aslani recognized that the 
outcome was "harsh" but felt that its hands were tied. The court 
suggested that the proper fix was for the legislature to change 
the law to allow contract claims to accrue upon discovery of 
breach. Because the economic loss doctrine is judge-made law, 
however, no legislative fix may be necessary. This court, here 
and now, could curb such a "harsh" result that leaves victims 
remediless by refusing to apply the economic loss doctrine in 
cases involving the purchases of homes by defrauded homebuyers. 
No.  2005AP2855.awb 
 
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IV 
¶92 The 
problems 
with 
the 
majority's 
approach 
are 
highlighted in the amicus brief filed by the Realtors. They 
argue that the economic loss doctrine should not apply to the 
purchase of a home, and that the doctrine is particularly 
unwarranted in 
cases involving fraudulent inducement. The 
Realtors express concern about the impact of this decision on 
the real estate market and Wisconsin consumers: 
Providing 
homebuyers 
with 
accurate 
and 
complete 
information and promoting an environment of trust and 
honesty are essential for fair and informed real 
estate 
contracts. 
The 
residential 
real 
estate 
transaction is fundamental to the real estate industry 
and 
the 
welfare 
of 
Wisconsin 
consumers 
seeking 
homeownership.  
¶93 They're right. 
¶94 The application of the economic loss doctrine barring 
recovery to homebuyers who are victims of fraud is bad for both 
the real estate market and the welfare of consumers. It is 
neither compelled by the law nor supported by good public 
policy. Accordingly, I respectfully dissent.  
¶95 I am authorized to state that Chief Justice SHIRLEY S. 
ABRAHAMSON and Justice LOUIS B. BUTLER, JR. join this dissent.   
 
 
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