Court Opinion

ID: 9675800
Source: CourtListenerOpinion
Date Created: 2023-08-24 05:06:14.573002+00
Date Added: 2024-06-11T18:16:39.417018
License: Public Domain

SHIRLEY S. ABRAHAMSON, C.J.
¶ 45. {concurring). I agree with the majority opinion that the Wickenhausers have a claim for intentional misrepresentation and are not barred by the election of remedies in pursuing it. I cannot, however, join the majority opinion's discussion of the economic loss doctrine for two reasons:
I. The majority opinion's discussion of the economic loss doctrine ignores the parties' arguments and decides the application of the economic loss doctrine to the present case — an issue that the parties did not raise or brief.
II. Without briefs or argument by the parties and without analysis, the majority opinion extends the economic loss doctrine to the present case, beyond any ease this court has decided.
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¶ 46. The parties agree that the economic loss doctrine does not apply in the present case.
*72¶ 47. The Lehtinens contend that "the economic loss doctrine is completely irrelevant to this case. ... Lehtinens have never raised the economic loss doctrine as a defense.. . . The issue in this case is not whether Wickenhausers can bring a claim for fraud, or seek consequential damages, but whether they can choose remedies which are legally inconsistent."1
¶ 48. The Wickenhausers argue that if this court holds that they have made an election of remedies and chosen contract remedies, then the court should adopt a fraud-in-the-inducement-like exception to the election of remedies doctrine, like the Kaloti2 fraud-in-the-inducement exception to the economic loss doctrine.3
¶ 49. Because the majority opinion holds that the election of remedies doctrine does not apply to the present case, no discussion of a fraud-in-the-inducement-like exception to the election of remedies is needed.
¶ 50. Because the majority opinion ignores the parties' arguments and needlessly reaches the application of the economic loss doctrine to the facts of the present case, I do not join the majority opinion's discussion of the economic loss doctrine.
*73II
¶ 51. Furthermore, without briefs or argument by the parties and without any analysis, the majority opinion extends the economic loss doctrine to the present case beyond any case this court has decided.
¶ 52. An unstated premise underlying the majority opinion's discussion of the economic loss doctrine is that the economic loss doctrine applies to the present case, that is, it applies to a noncommercial real estate transaction in which a party claims intentional misrepresentation and in which at least one party was not sophisticated and was not represented by counsel during negotiations. The majority opinion cites no case supporting its unstated premise.
¶ 53. This court has not decided whether the economic loss doctrine covers all real estate transactions.
¶ 54. A short history of the economic loss doctrine demonstrates the point. The economic loss doctrine is a judicially created doctrine that, in theory, seeks to preserve the distinction between contract law and tort law because "contract law and the law of warranty, in particular, is better suited than tort law for dealing with purely economic loss in the commercial arena."4
¶ 55. In prior cases, the court has broadened the economic loss doctrine from addressing "damages resulting from inadequate value because the product is inferior and does not work for the general purposes for which it was manufactured and sold" in a commercial transaction5 to addressing those damages in a con*74sumer transaction as well.6 In these circumstances, claims of negligent and strict liability misrepresentations were barred by the economic loss doctrine.7
¶ 56. In Mose v. Tedco Equities-Potter Road Ltd. Partnership, 228 Wis. 2d 848, 598 N.W.2d 594 (Ct. App. 1999), the court of appeals applied the economic loss doctrine to a commercial real estate transaction involving land that both the seller and buyer knew was contaminated. The contract provided for clean-up of the contamination. The court of appeals simply stated that it did not "discern any reason to forego application of the economic loss doctrine simply because the 'product' is real estate." Id. at 859.
¶ 57. Kailin v. Armstrong, 2002 WI App 70, ¶ 27, 252 Wis. 2d 676, 643 N.W.2d 132, also involved a commercial real estate transaction. The complaint alleged that the defendants had intentionally failed to disclose that one of the tenants had a history of delinquency in rent payments and was in default at the time of the offer and the closing. In a single sentence citing only to the Mose case, the court of appeals stated that the economic loss doctrine "applies when real estate is the subject of the contract." Id., ¶ 27.
¶ 58. Although the court of appeals seemed to be on its way to extend the economic loss doctrine to all *75real estate contracts, this court in Van Lare v. Vogt, Inc., 2004 WI 110, ¶ 21, 274 Wis. 2d 631, 683 N.W.2d 46, constricted the applicability of the Mose and Kailin cases.
¶ 59. Referring to the Mose and Kailin cases as addressing whether the economic loss doctrine applies to commercial real estate contracts, this court in Van Lare refused to decide whether the economic loss doctrine applies to all real estate transactions. Specifically, the Van Lare court announced that "we do not decide today whether the broader conceptualization of the economic loss doctrine in Tietsworth covers all real estate transactions . . .." Van Lare, 274 Wis. 2d 631, ¶ 21.
¶ 60. The Van Lare court applied the economic loss doctrine only to commercial real estate transactions negotiated at arms' length between two sophisticated parties represented by counsel during a negotiation process that resulted in a written bargained-for contract, when the complainant alleged strict liability misrepresentation. The Van Lare court concluded that applying the economic loss doctrine in such a case furthers the policies that justify the doctrine's existence. Van Lare, 274 Wis. 2d 631, ¶ 24.
¶ 61. Thus, the Van Lare court left open the question of the extension of the economic loss doctrine in real estate transactions to noncommercial transactions, to claims of intentional misrepresentation, to transactions between unsophisticated parties negotiating without counsel, and to transactions with an oral agreement or with a not-fully-bargained-for agreement.8
*76¶ 62. After Van Lare, this court adopted, in a product case, a fraud-in-the-inducement exception to the economic loss doctrine when intentional misrepresentation is alleged.9 The applicability of the fraud-in-inducement exception in a real estate case was not decided.
¶ 63. The next case of interest is Linden v. Cascade Stone Co., Inc., 2005 WI 113, 283 Wis. 2d 606, 699 N.W.2d 189, cited by the majority opinion at ¶ 42 n.15. At issue in Linden was the applicability of the economic loss doctrine to a contract to construct a residence.10 A contract for the construction of a house, a dwelling, or any other architectural structure is significantly — and *77legally — different from a contract to purchase real estate (whether it be land or land with existing structures). Recognizing this distinction, the Linden court examined the applicability of the economic loss doctrine to a contract for the construction of a house as a contract for goods (or products) and services, and not as a contract for a real estate transaction.
¶ 64. In deciding whether the economic loss doctrine applied to the contract for construction of a house, the Linden court described how "[s]ome contracts encompass both products and services. We use the predominant purpose test to determine whether a mixed contract for products and services is predominantly a sale of a product and therefore subject to the economic loss doctrine, or predominantly a contract for services and therefore not subject to the economic loss doctrine . . . ." Linden, 283 Wis. 2d 606, ¶ 8 (citations omitted).
¶ 65. The Linden court concluded "that under the totality of circumstances, the predominant purpose of the contract was for a product, a new house, rather than one for services." Linden, 283 Wis. 2d 606, ¶ 25. The Linden court also announced, "We conclude that when one contracts with a general contractor to build a house and the general contractor subcontracts with others to provide various services, the general contract controls whether the economic loss doctrine is available as a defense. ... In the present case, we conclude that the general contract between the Lindens and Grove-land was primarily for a product. ..." Id., ¶ 32.
*78¶ 66. Nowhere in Linden is a reference, even in passing, to the Mose, Kailin, or Van Lare cases or to a contract or transaction relating to real estate.11 It is abundantly clear that Linden addressed only the application of the economic loss doctrine in the context of a contract to build a house, a contract for goods and services. The Linden court made clear that the predominant purpose test specifically related to contracts for goods (a house), explaining that
[t]he predominant purpose test was developed in the Uniform Commercial Code (UCC) context when contracts that were alleged to be sales (Wis. Stat. ch. 402) occurred. Because the sales chapter of the UCC applies to transactions in goods, Wis. Stat. § 402.102, and many contracts involved both goods and services, it was necessary to determine which component was predominant.
Linden, 283 Wis. 2d 606, ¶ 9.
¶ 67. Linden applies to a construction contract, a contract involving goods and services, not to a contract for a real estate transaction as the phrase "real estate transaction" is used in Mose, Kailin, Van Lare, and the present case.
¶ 68. Without briefs from the parties on the issue of whether the economic loss doctrine should be extended beyond Van Lare to the type of real estate transaction at issue in the instant case or the claim of intentional misrepresentation, the majority opinion holds that the economic loss doctrine is applicable to the present noncommercial real estate transaction in*79volving at least one unsophisticated party negotiating without counsel and without a fully written, bargained-for contract. The majority's expansion of the economic loss doctrine beyond Van Lare to the present case is unsupported and unwarranted.
¶ 69. Irrespective of the fraud-in-the-inducement exception to the economic loss doctrine that the majority opinion applies, I conclude that the Wickenhausers have a claim for intentional misrepresentation. Wisconsin law has recognized that one who intentionally deceives another with the intent and effect of inducing reliance to the other's detriment will be liable in tort.
¶ 70. For the reason set forth, I write separately.
¶ 71. I am authorized to state that Justices ANN WALSH BRADLEY and LOUIS B. BUTLER, JR. join this opinion.

 Defendant's-Appellants' (Lehtinens1) Response Brief and Appendix at 26.

 Kaloti Enters., Inc. v. Kellogg Sales Co., 2005 WI 111, ¶ 29, 283 Wis. 2d 555, 699 N.W.2d 205.

 Reply Brief of Wickenhausers at 13-14 ('Wickenhausers acknowledged that cases involving the economic loss doctrine arise from a contract for the sale of goods. That did not occur here. However, the principle [of fraud in the inducement] is what is important: when deliberate misrepresentation induces another into a transaction with a false sense of the risks, duties or obligations involved, the party so induced is able to pursue damages.").

 Daanen & Janssen, Inc. v. Cedarapids, Inc., 216 Wis. 2d 395, 404, 573 N.W.2d 842 (1998).

 Id. at 400-01 (internal quotation marks omitted) (remote commercial purchaser); Sunnyslope Grading, Inc. v. Miller, *74Bradford & Risberg, Inc., 148 Wis. 2d 910, 437 N.W.2d 213 (1989) (commercial transaction).

 State Farm Mut. Auto. Ins. Co. v. Ford Motor Co., 225 Wis. 2d 305, 311, 324, 592 N.W.2d 201 (1999).

 Other cases have addressed the application of the economic loss doctrine in contracts for services and in mixed contracts for services and products. See Ins. Co. of N. Am. v. Cease Elec. Inc., 2004 WI 139, 276 Wis. 2d 361, 688 N.W.2d 462 (holding that economic loss doctrine does not apply to contracts for service).

 The Van Lare court cited, but without comment, the court of appeals certification memorandum suggesting that "strict *76liability misrepresentation may well apply in situations where the parties are not in equal bargaining positions or the purchaser may not be in the best position to assess the risk of economic loss — two assumptions upon which the economic loss doctrine rests." Van Lare, 274 Wis. 2d 631, ¶ 32.

 Kaloti, 283 Wis. 2d 555, ¶ 29. The adoption of this rule followed discussion and disagreement by the court in whether such an exception should be recognized in Digicorp, Inc. v. Ameritech Corp., 2003 WI 54, 262 Wis. 2d 32, 662 N.W.2d 652, and Tietsworth v. Harley-Davidson, Inc., 2004 WI 32, 270 Wis. 2d 146, 677 N.W.2d 233.

 Specifically, the three questions before the Linden court were:
(1) whether a general contract to complete a described project, whereunder the general contractor subcontracts with others to assist in completing the project and a claim is made for negligent services provided by the subcontractors, controls the analysis of whether the contract is primarily for goods or primarily for services; (2) whether an objective test should be used by Wisconsin courts to determine if the predominant purpose of a mixed contract was for the sale of a product or to provide services; and (3) whether the "integrated system limitation" of the "other property exception" to the economic loss doctrine applies to bar a negligence claim against a subcontractor who provided services in the construction of a house.
*77Linden v. Cascade Stone Co., Inc., 2005 WI 113, ¶ 4, 283 Wis. 2d 606, 699 N.W.2d 189. The plaintiffs claimed "faulty workmanship in the construction of their house," and alleged "breach of contract and warranty stemming from alleged defects in the house and delay in completion of the project." Id., ¶¶ 1, 3.

 The Linden court examined Van Sistine v. Tollard, 95 Wis. 2d 678, 291 N.W.2d 636 (Ct. App. 1980), which applied the predominant purpose test to a contract to install windows, install stucco siding, reposition appliances, and perform finishing.