Man can sue former owners for leaky basement, rules Wisconsin Supreme Court.

Byline: David Ziemer

A man who bought a house with a flood-prone basement will be able to sue the people who sold him the home. The couple that sold the home to him allegedly tried to cover up the water problems.

Reasonable reliance is not an element of a false advertising claim under sec. 100.18.

However, it might as well be, inasmuch as a May 28 opinion by the Wisconsin Supreme Court effectively holds that reasonable reliance is relevant to the element of causation.

Red Flags

In the case, Chad Novell bought a house from Anthony and Andrea Migliaccio.

He did so, despite numerous red flags that the house may have problems with the foundation and water in the basement.

His home inspector advised him to hire a foundation specialist, but he did not.

For their part, the Migliaccios' real estate condition report denied any water issues or cracking in the foundation, and they personally denied that they had painted over any cracks in the foundation walls, or had ever had flooding.

Novell and the Migliaccios were also family friends.

Novell bought the house, and after it flooded seven times the next spring, hired a professional engineer and a foundation specialist. The experts determined that cracks had been recently painted over, and that the basement had been experiencing flooding for years.

Novell brought suit against the Migliaccios, alleging a number of claims, including false advertising under sec. 100.18.

The circuit court granted summary judgment on all claims, concluding that Novell was not justified in relying on the Migliaccios' misrepresentations.

In an unpublished opinion, the court of appeals affirmed on all claims except the sec. 100.18 claim, concluding that reasonable reliance is not an element of the claim.

Reliance

The Wisconsin Supreme Court granted review, and affirmed, in an opinion by Justice Ann Walsh Bradley.

The court agreed with Novell that the plain language of the statute contains no element of reasonable reliance, and that the purpose of the statute -- deterring fraud -- would not be furthered by including it.

However, it found that reasonable reliance is a proper consideration of causation in light of the statutory language.

Section 100.18(11)(b)2 provides, Any person suffering pecuniary loss because of a violation of this section by any other person may sue in any court of competent jurisdiction and shall recover such pecuniary loss, together with costs, including reasonable attorney fees... (emphasis added).

The...