COURT OF APPEALS DECISION DATED AND FILED November 24, 2010 A.
John Voelker Acting Clerk of Court of Appeals |
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NOTICE |
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This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports. A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See Wis. Stat. § 808.10 and Rule 809.62. |
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Appeal No. |
2010AP574 |
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STATE OF |
IN COURT OF APPEALS |
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DISTRICT IV |
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Plaintiff-Respondent-Cross-Appellant, v. Nelson C. Walstead,
Defendant-Third-Party Plaintiff-Appellant- Cross-Respondent, v. Gordon R. Becker, Third-Party
Defendant-Respondent-Cross-Appellant, American Family Insurance, Intervenor. |
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APPEAL
and CROSS-APPEAL from a judgment and an order of the circuit court for
Before Vergeront, P.J., Higginbotham and Blanchard, JJ.
¶1 VERGERONT, P.J. Nelson Walstead purchased
rental property from Brentwood Condo, LLC, with a loan secured in part by a
mortgage on Walstead’s personal residence. When Walstead failed to comply with certain
terms of the mortgage and note,
BACKGROUND
¶2 The following facts are undisputed. In July 2006 Nicole Evans, Walstead’s
stepdaughter, became interested in purchasing rental property owned and managed
by
¶3 Walstead signed an offer to purchase the property in August
2006. This purchase was partially
financed by a loan from
¶4 Shortly after sending the notice of default,
¶5 Brentwood and Becker filed a motion for judgment on the
pleadings, requesting that the court grant a judgment of foreclosure to
¶6 The circuit court granted summary judgment in favor of
¶7 Walstead filed a motion for reconsideration and attached additional
affidavits. In their response to this
motion,
¶8 Walstead appeals the order and judgment from the circuit
court’s original decision and the order denying his motion for
reconsideration.
DISCUSSION
Appeal
¶9 On
appeal Walstead challenges both the denial of his motion for reconsideration
and the grant of summary judgment ordering foreclosure and dismissing his
counterclaim and third-party claims. With respect to the motion for
reconsideration, he contends the circuit court erred because it refused to
consider the new affidavits he submitted with that motion and refused to
consider his argument that Becker violated his duties under Wis. Admin. Code § RL 24.07(2). With respect to the summary judgment motion, he
contends there are disputed issues of fact regarding his defenses to the
foreclosure and his claims against
I. Motion for Reconsideration
¶10 In opposition to the converted summary judgment motion, Walstead submitted an affidavit from Evans. In his motion for reconsideration, he submitted a second affidavit from Evans, his own affidavit, and affidavits from two former residents of the property and a licensed professional engineer. These addressed the condition of the basement. The circuit court declined to consider the new affidavits because they did not contain newly discovered evidence and could have been submitted before the court issued its decision on summary judgment.
¶11 To prevail on a motion for reconsideration, the movant must
present either newly discovered evidence or establish a manifest error of law
or fact. Koepsell’s Olde Popcorn Wagons,
Inc. v. Koepsell’s Festival Popcorn Wagons, Ltd., 2004 WI App 129, ¶44,
275 Wis. 2d 397, 685 N.W.2d 853 (citation omitted). “[A] motion for reconsideration is not a
vehicle for making new arguments or submitting new evidentiary materials after
the court has decided a motion for summary judgment.” Lynch v. Crossroads Counseling Ctr., Inc.,
2004 WI App 114, ¶23, 275
¶12 We review a circuit court’s decision on a motion for
reconsideration under the erroneous exercise of discretion standard. Koepsell’s, 275
¶13 Walstead concedes on appeal that the additional affidavits he submitted with his motion for reconsideration do not contain newly discovered evidence. He contends they were submitted to buttress Evans’ first affidavit, which the court had considered insufficient to entitle Walstead to a trial. This argument is inadequate to show that the court erroneously exercised its discretion in not considering the new affidavits. Accordingly, in addressing Walstead’s challenges to the summary judgment, we consider only Evans’ first affidavit.
¶14 For the first time in his motion for reconsideration Walstead argued that Becker breached his duty as a realtor to disclose material adverse facts as required by Wis. Admin. Code § RL 42.07(2). The court did not address this issue and Walstead claims this was error. Walstead does not explain why the circuit court erroneously exercised its discretion in declining to consider this new argument. He provides no explanation why he could not have raised this issue before the court ruled on the summary judgment motion. We conclude the circuit court properly exercised its discretion in declining to consider this new argument, and we do not discuss it further.
II. Summary Judgment
A. Legal Standard
¶15 We
review de novo the grant of summary judgment, employing the same methodology as
the circuit court. Green Spring Farms v. Kersten,
136
¶16 We
first examine the complaint to determine whether a claim for relief has been
stated. Hoida, Inc. v. M&I Midstate
Bank, 2006 WI 69, ¶16, 291 Wis. 2d 283, 717 N.W.2d 17. If it does and if the answer is sufficient to
join issue, we examine the moving party’s affidavits and other submissions to determine
if they make a prima facie case for summary judgment.
¶17 In
deciding if there is a genuine issue of material fact, we view the evidence
most favorably to the nonmoving party and draw all reasonable inferences in
favor of that party. Metropolitan
Ventures, LLC v. GEA Assoc., 2006 WI 71, ¶20, 291
B. Estoppel: Affirmative Defense
¶18
[Walstead] shall not transfer, sell or convey any legal
or equitable interest in the Property … without the prior written
consent of [
Evans’ affidavit acknowledges that Walstead did transfer the property to 2413 LLC, of which she is a member. Walstead does not contend this was not a violation of the mortgage provision. Instead, he argues that Evans’ affidavit entitles him to a trial on his affirmative defense of estoppel.
¶19 Evans’ affidavit avers that, before the closing, she advised
Laura Morris, the manager of Brentwood, and Michael Morris, a member, that she
and Walstead intended that she would receive an ownership in the property from
Walstead. She also avers that the
Morrises did not object but proceeded with the closing. Walstead contends
¶20 The affidavits of both Laura Morris and Michael Morris deny that either Walstead or Evans informed them that Walstead intended to transfer any ownership interest to Evans and deny that either had requested permission to do so. Both aver that, had they been so informed, they would have objected because of Evans’ reportedly poor financial situation.
¶21 The circuit court, applying the elements of promissory
estoppel, concluded that Walstead did not properly plead an affirmative defense
of promissory estoppel because he did not allege a promise to approve the
transfer. The circuit court also
concluded that Walstead did not explain any exception to the general rule that
estoppel is not available when the parties have entered into a contract that
describes their rights and responsibilities. See Kramer
v. Alpine Valley Resort, Inc., 108
¶22 We will assume that the estoppel defense Walstead intended to
assert was the defense of equitable estoppel and that his pleading met any
requirement for the pleading of an affirmative defense in the context of
summary judgment methodology.[2]
We
agree with Walstead that, in order to prevail on a defense of equitable
estoppel, a promise is not required.
Rather, the party asserting the defense must prove action or non-action
by the party against whom it is asserted that induces reasonable reliance by
the party asserting estoppel to this party’s detriment. Kamps v. Wisconsin DOR, 2003 WI App
106, ¶20, 264
¶23 However, the cases on which the circuit court relied present a
problem for Walstead even if his defense is equitable estoppel, not promissory estoppel. In Goff the court referred to a
contract as being “a complete bar” not only to a claim of promissory estoppel
but also to “a defense of estoppel.” Goff,
46
¶24 In the absence of any authority or argument to support Walstead’s
legal theory, we conclude that he has not made a prima facie showing on his
affirmative defense of equitable estoppel and therefore is not entitled to a
trial on this defense. Rather, based on
the undisputed facts,
C. Misrepresentation: Affirmative Defense, Counterclaim and Third-Party Claims
¶25
¶26 The amended pleading alleges that Becker acted as an agent both
for Evans and
¶27 As we understand Walstead’s brief, the legal basis for his
misrepresentation defense and claims are common law intentional
misrepresentation and fraudulent representations under Wis. Stat. § 100.18(1). We agree with the circuit court that Evans’
affidavit is inadequate to entitle Walstead to a trial under either theory.
¶28 Intentional misrepresentation has three elements: (1) a false
representation of fact; (2) made with the intent to defraud and for the purpose
of inducing another to act on it; and (3) such person relies on the
representation to his or her detriment. Lundin
v. Shimanski, 124
¶29 There is no allegation that Becker made any representation to Walstead. Evans’ affidavit does not aver that Becker
did, and Becker’s affidavit denies that he did. Walstead advances two theories in support of his
position that Becker (and
¶30 First, Walstead contends that Evans was his agent in the
transaction and Becker knew or had reason to know of this
agency relationship.[5]
An agency relationship exists only “if
there has been a manifestation by the principal to the agent that the agent may
act on his account, and consent by the agent so to act.” State v. Timblin, 2002 WI App 304, ¶27,
259
¶31 Even if we assume for purposes of argument that the pleading is sufficient to allege that Evans was Walstead’s agent and Becker knew this when he made the alleged misrepresentations, Evans’ affidavit does not aver any facts from which one can reasonably infer Becker’s knowledge. Becker’s affidavit denies that he had any knowledge that any third party, including Walstead, was involved with Evans in the purchase of the property. Walstead argues that, because Evans avers that she “prepared personal financial information” for Becker’s use, Becker should have known that she could not afford the property, and thus must either have a partner or be an agent for a third party. We conclude it is not reasonable to infer from Becker’s receipt of Evans’ personal financial information that he knew she was acting as Walstead’s agent when Becker made the alleged misrepresentations to Evans.
¶32 Another deficiency is that the pleading does not allege that, in purchasing the property, Walstead relied on the alleged misrepresentations. Even if we overlook this pleading deficiency, there is no factual submission showing his reliance. Walstead cites to Evans’ affidavit, which states that she passed on the representations to Walstead and “intended and understood” that Walstead would rely on them. Her intent and understanding that Walstead would rely on them is not admissible at trial to show that Walstead did rely on them. See Wis. Stat. § 802.08(3) (Affidavits submitted in support of and in opposition to summary judgment “shall be made on personal knowledge and shall set forth such evidentiary facts as would be admissible in evidence.”).
¶33 Walstead’s second theory for
¶34 Evans’ affidavit avers that Becker had concealed rooms and otherwise covered over evidence of mold and repeated, longstanding water incursion in the basement. However, she provides no foundation for her personal knowledge either that these problems existed before the purchase of the property or that Becker knew of them. We agree with the circuit court that, without this foundation, these statements in her affidavit are not admissible in evidence. See Wis. Stat. § 906.02 (A non-expert witness may not testify to a matter unless evidence is introduced to support a finding that the witness has personal knowledge of the matter.).
¶35 For the same reason, Evans’ affidavit is inadequate to create a factual dispute in response to Becker’s affidavit. Becker’s affidavit avers that he supervised the remodeling work, that it was completed by professional contractors according to the building code, that the root cellar was closed off to make the basement more attractive and energy efficient and easier to clean and was not done to conceal it, and that the remodeling was done within the existing basement foundation with no modification of the foundation. He also avers that, in doing this remodeling, he saw no evidence of any foundation defects, past or present water incursion, basement seepage or mold, and he is not aware that any remodeling or other improvements to the property conceal any such thing. The statements in Evans’ affidavit that do not meet the requirements of Wis. Stat. § 802.08(3) are inadequate to create a factual dispute on the existence of the water condition in the basement before Walstead purchased the property and Becker’s knowledge of it.
¶36 We reject Walstead’s contention that, in assessing Evans’ and
Becker’s affidavits, the circuit court made impermissible credibility
determinations. The circuit court did
not make credibility determinations but properly evaluated both affidavits in
light of the requirements of Wis. Stat.
§ 802.08(3) that they be “made on personal knowledge and … set
forth such evidentiary facts as would be admissible in evidence.”
¶37 Walstead’s
reference to another affidavit of Evans submitted in the context of his motion
to disqualify counsel does not cure the problems with the one she submitted in
opposition to summary judgment. The
other affidavit avers: “I became aware of the defects in the property.” Even if it were proper to consider an
affidavit filed on another motion and not brought to the attention of the
circuit court and the other party in the context of the summary judgment
motion, this averment does not cure the deficiency in her summary judgment
affidavit. Evans’ awareness of the
defects in the property does not show first hand knowledge of their origin or
of Becker’s knowledge of them before the sale.[6]
¶38 We next address Wis.
Stat. § 100.18 as a basis for the misrepresentation defense and
claims. A claim under this statute has
three elements: “(1) the defendant made a representation to the public with the
intent to induce an obligation; (2) the representation was ‘untrue, deceptive
or misleading’; and (3) the representation materially induced (caused) a
pecuniary loss to the plaintiff.” Goudy
v. Yamaha Motor Corp., 2010 WI App 55, ¶23, 324
¶39 Walstead asserts that Becker’s construction work allegedly concealing the rooms in the basement is a representation that the basement did not contain mold or past water damage, and that Becker made this representation to the “purchasing public, including Walstead.” It is true, as Walstead contends, that acts can be representations under Wis. Stat. § 100.18(1). See Novell v. Migliaccio, 2010 WI App 67, ¶11, 325 Wis. 2d 230, 783 N.W.2d 897 (concluding that a reasonable jury could find that painting over evidence of a leaky basement was a “representation” that the basement did not leak). Walstead contends that the concealed rooms should be considered a representation “to all who view the basement while considering purchase.”
¶40 However, there is no allegation that Walstead viewed the basement prior to purchasing the property and no affidavit to that effect. Walstead does not present a developed argument explaining why he has a cause of action under Wis. Stat. § 100.18(1) for an act-as-representation that he did not observe.[8]
¶41 We conclude Walstead has not made a prima facie showing on his
unclean hands/misrepresentation defense and has not shown disputed factual
issues on the misrepresentation counterclaim and third-party claim. Therefore,
D. Breach of Fiduciary Duty: Third-Party Claim
¶42 Walstead’s pleading alleges that “[i]n drafting the Offer to
Purchase and amendments to the Offer to Purchase between Laura B. Morris and
Nicole Evans, Third-Party Defendant Gordon R. Becker served as agent for the
buyer and in that agency breached his fiduciary duty to Third-Party Plaintiff
Walstead and 2413 Brentwood, LLC.” We
agree with the circuit court that this does not state a claim for relief by Walstead
against Becker.
¶43 “A claim for a breach of fiduciary duty exists if: ‘(1) the defendant owed the plaintiff a fiduciary duty; (2) the defendant breached that duty; and (3) the breach of duty caused the plaintiff’s damage.’” Yates v. Holt-Smith, 2009 WI App 79, ¶20, 319 Wis. 2d 756, 768 N.W.2d 213 (quoting Berner Cheese Corp. v. Krug, 2008 WI 95, ¶40, 312 Wis. 2d 251, 752 N.W.2d 800).
¶44 There is no allegation in Walstead’s amended pleading of any relationship between him and Becker. Walstead argues that the agency relationship between Evans, as agent, and Walstead, as principal, makes Becker’s breach of fiduciary duty to Evans a breach as to Walstead. This is not a developed argument with legal authority and we decline to address it further.
¶45 To the extent that Walstead advances any theory of breach of fiduciary duty based on Becker’s alleged misrepresentations, our analysis in paragraphs 34 to 37 explains why such a theory would not prevent summary judgment in Becker’s favor.
Cross-Appeal
¶46
¶47 Whether to impose sanctions is within a circuit court’s
discretion. Industrial Roofing Servs., Inc.
v. Marquardt, 2007 WI 19, ¶41, 299
¶48 The circuit court here explained its ruling, applied the correct legal standard, and its reasoning has a basis in the record. The fact that the court properly exercised its discretion in not allowing Walstead to add to the record or to his legal arguments does not mean that it was an erroneous exercise of discretion to deny the motion for attorney fees.
CONCLUSION
¶49 We conclude the circuit court properly granted summary judgment
to
By the Court.—Judgment and order affirmed.
Not recommended for publication in the official reports.
[1] All references to the Wisconsin Statutes are to the 2007-08 version unless otherwise noted.
[2] The estoppel affirmative defense alleged as follows:
[Walstead] affirmatively alleges that the members of the [Brentwood] limited liability company were aware of the intention of [Walstead] to transfer the title of the property to include ownership by Nicole Evans at the time of closing, that this transfer was to be in the form of a limited liability company, that said transfer did occur, caused no risk to [Brentwood], that [Brentwood] did not object and is now estopped from raising said transfer as a default.
The circuit court’s analysis of the estoppel defense focused as a first step on the adequacy of this pleading to assert the elements of the defense. Apparently the court was analogizing an affirmative defense to a claim for relief in a complaint, counterclaim or third-party claim. See Hoida, Inc. v. M&I Midstate Bank, 2006 WI 69, ¶16, 291 Wis. 2d 283, 717 N.W.2d 17 (under summary judgment methodology, we first examine the complaint to determine whether a claim for relief has been stated). We do not decide whether analyzing the adequacy of the pleading of an affirmative defense is the first step when a defendant, in opposition to summary judgment, submits factual materials in order to make a prima facie showing of that defense. Neither party addresses this issue.
[3] With respect to the affirmative defense of unclean hands, the alleged connection between the misrepresentations of the condition of the property and Walstead’s default is that, as a result of alleged damage from seepage and flooding, he received lower rent and this caused him to be unable to pay the property taxes. We assume without deciding that this is a viable legal theory on which to defend against the foreclosure action.
The summary judgment methodology operates differently
on Walstead’s affirmative defense based on misrepresentation than it does on
the misrepresentation counterclaim and third-party claim. Given that
[4] This
affidavit is the only affidavit Walstead filed in opposition to summary
judgment before the court ruled on that motion.
We reject Walstead’s argument that we should consider in addition
allegations in his amended pleadings.
Specifically, he argues that the circuit court erroneously failed to
treat the unanswered allegations in his amended pleading as admitted by
[5] Walstead also contends that he acted as Evans’ agent when he purchased the property. In support of this claim, Walstead points to Evans’ averment that she induced him to purchase the property on her behalf after she was unable to obtain adequate financing. The only reasonable inference from this statement is that, if Walstead was Evans’ agent, the agency relationship began after the alleged misrepresentations were made.
[6] Walstead also argues that paragraph 24 of Evans’ summary judgment affidavit “adopts and incorporates as her sworn statement the allegations of the Amended [Answer],” particularly paragraphs 20-26. This paragraph avers that she “spent many hours … cleaning up and repairing the flooding damages as described in the Answer and Cross-Complaint in this matter.” While the referenced paragraphs in the pleading provide somewhat more detail on the alleged water damage, they do not allege any facts that show a basis for Evans’ first-hand knowledge of the origin of the damage or of Becker’s knowledge of them before the sale.
[7] Wisconsin Stat. § 100.18 provides:
No person … with intent to sell … real estate … shall make … [a] statement or representation of any kind to the public relating to such … sale … of such real estate … or to the terms or conditions thereof, which … statement or representation contains any assertion, representation or statement of fact which is untrue, deceptive or misleading.
[8] “The
public” to whom the representation is made under Wis. Stat. § 100.18 may consist of a single person. See State v. Automatic Merchandisers of Am.,
Inc., 64