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04/26/83 KENWOOD GAUERKE AND ELISABETH GAUERKE v.

April 26, 1983

KENWOOD GAUERKE AND ELISABETH GAUERKE, HIS WIFE, PLAINTIFFS-RESPONDENTS AND CROSS-APPELLANTS-PETITIONERS,
v.
ROBERT W. ROZGA AND ANN C. ROZGA, HIS WIFE, DEFENDANTS AND SECOND-THIRD PARTY PLAINTIFFS, UNITED STATES FIDELITY & GUARANTEE COMPANY, AND GUDIM REALTY, INC., DEFENDANTS, ROBERT FROST REALTY, INC., AND ST. PAUL FIRE & MARINE INSURANCE COMPANY, DEFENDANTS AND THIRD-PARTY PLAINTIFFS-APPELLANTS, CROSS-RESPONDENTS AND CROSS-PETITIONERS, MARVIN SCHULZ, DEFENDANT AND THIRD-PARTY DEFENDANT-APPELLANT, CROSS-RESPONDENT AND CROSS-PETITIONER, JOSEPH CAZ AND GERALDINE CAZ, SECOND-THIRD PARTY DEFENDANTS



Review of an unpublished decision of the Court of Appeals. Affirming Louis J. Ceci, J.

The opinion of the court was delivered by: Ceci

A jury found the defendants-appellants, Robert Frost Realty, Inc., and Gudim Realty, Inc., liable on a theory of strict responsibility for the misrepresentations of Frost's agent, Marvin Schulz, regarding the acreage and the amount of road and river frontage of resort property purchased by Kenwood and Elisabeth Gauerke. Robert Frost Realty, Inc., its insurer, and Schulz appealed from the judgment awarding damages to the Gauerkes. On appeal, Frost asserted that the trial court erred in (1) giving a strict responsibility instruction on a broker's liability, (2) refusing to add "without an investigation" to the pattern instruction, as requested, (3) refusing to submit special verdict questions comparing the negligence of the Gauerkes with the strict responsibility of Gudim and Frost, (4) refusing to submit special verdict questions comparing the negligence of the co-defendants with the strict liability of Gudim and Frost, and (5) refusing to submit special verdict questions on the third-party defendants' liability to indemnify Frost. The court of appeals reversed the trial court on the fifth issue, but otherwise affirmed the trial court's Disposition of the case, *fn1 including the trial court's refusal to submit the issue of punitive damages to the jury, which was raised as an issue on cross-appeal by the Gauerkes. We affirm the court of appeals decision.

In 1976, Robert and Ann Rozga listed their resort hotel for sale with Gudim Realty, Inc. The Rozgas advised Gudim that they had five and one-half acres of land with approximately six hundred feet of frontage on the Eagle River and about the same amount of frontage on Highway 70. When the Rozgas advised Gudim as to the amount of frontage and total acreage they had, they apparently told Gudim that their knowledge concerning the amount of land was based upon what the former owners, Joseph and Geraldine Caz, had told them when they (the Rozgas) purchased the property. The Rozgas gave the same explanation to Schulz, a Robert Frost agent. Gudim prepared a specification sheet and mailed it to the Rozgas, requesting that they check the accuracy of the information. Mr. Gudim had viewed the land, but had not verified the acreage and frontage figures. The Rozgas returned the sheet with their approval, without changing the frontage and acreage information.

The Gauerkes, who were looking for hotel-resort property, contacted Robert Frost Realty, Inc. and were referred to Marvin Schulz. Schulz, who was aware that the Rozgas were attempting to sell their resort, contacted Gudim Realty. Gudim mailed the specification sheet to Schulz, who gave it to the Gauerkes. Schulz had removed the Gudim logo from the top of the sheet and substituted a Robert Frost Realty card. The Gauerkes then went to northern Wisconsin and viewed the property, unaccompanied by Schulz. During this viewing, the Rozgas advised the Gauerkes that they had approximately five and one-half acres of land and six hundred feet of river frontage.

The Gauerkes then contacted Schulz and signed an offer to purchase, reserving the right of further inspection. On October 10, 1976, the Gauerkes again inspected the property, this time accompanied by Schulz. At that time, Schulz asked for and obtained from the Rozgas a warranty which stated that "sellers warrant above figures to be true and accurate." Both Schulz and the Rozgas testified that Schulz advised the Rozgas that to warrant something meant to say that it was true to the best of one's knowledge. The heading on this warranty sheet read "Motels by Gudim." Kenwood Gauerke testified that this was the first time they (the Gauerkes) had heard of Gudim Realty.

The Gauerkes purchased the property for $125,000. The closing took place on December 27, 1976. Two years later, when they were in the process of selling the property, the Gauerkes discovered that the property actually contained only two and seven-tenths acres and had only four hundred fifteen feet of river frontage and two hundred seventy-eight feet of highway frontage.

On June 22, 1979, the Gauerkes commenced this action for damages for the misrepresentations allegedly made by the defendants. Prior to trial, the Rozgas, the Cazes, and United States Fidelity and Guarantee Company (Gudim's insurer) had obtained Pierringer releases from the Gauerkes. Thus, only the three Frost parties (Frost, its insurer, and Schulz, hereinafter "Frost") and Gudim were defendants when the trial began on November 3, 1980. However, the three parties who had obtained Pierringer releases were third-party defendants to Frost's cross-claim for indemnity.

The jury was instructed on theories of both negligent misrepresentation and strict responsibility for misrepresentation. The special verdict included a series of questions pertaining to each theory. It instructed the jurors to go on to the negligence questions only if they had not found strict responsibility. The jury found liability based on strict responsibility on the part of Gudim and Frost; accordingly, the special verdict questions concerning the negligence of the parties remained unanswered. The jury apportioned negligence (based on a strict responsibility theory) forty percent to Frost, sixty percent to Gudim Realty, and zero percent to the Rozgas. The damages were found to be $10,000.

Gudim Realty then settled with the plaintiffs and was ordered dismissed from the case on December 1, 1980, but remained a defendant to Frost's cross-claim. Thus, when judgment was entered on December 30, 1980, Frost was held liable to pay $4,000.

Frost appealed, and the Gauerkes cross-appealed, contending that it was error for the trial court to refuse to submit the question of punitive damages to the jury. The court of appeals decided that the jury instructions and special verdicts were insufficient to allow the jury to determine Frost's right to indemnity and it, therefore, remanded the case to the trial court on this issue. It otherwise affirmed the circuit court.

The court of appeals rejected Frost's argument that the doctrine of strict responsibility was not applicable and should not have been submitted to the jury because Schulz could not have known the dimensions of the property without an investigation. The court held that "trict liability applies where a party implies that he has complete knowledge of the fact represented when he is in a position to know."

Frost also asserted that the pattern jury instruction, Wis. J.I. -- Civil No. 2402 (1969) *fn2 did not correctly state the law. Frost had requested that the words "without investigation" be added to the instruction. The court of appeals agreed with the trial court that this was unnecessary, stating, "The liability of one who makes a representation of fact does not depend upon the actual source of his information."

The court also rejected Frost's argument that the jury should have been required to ascertain the negligence of the plaintiffs in failing to independently verify the dimensions of the property and that such negligence should have been compared to the defendants' strict responsibility. The court of appeals reasoned that "in strict liability the loss is to fall on the innocent defendant rather than the innocent plaintiff. . . ."

However, the court of appeals agreed with Frost that the jury should have been required to determine the liability of Gudim and the Rozgas for misrepresenting the acreage and frontage to Frost's agent, Schulz. It held that any damages due Frost from the Cazes, the Rozgas, and Gudim should be removed from the judgment due the ...


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