April 30, 2010Client Alert

Painting Basement Walls to Hide a Leak Can Constitute a Misrepresentation Under Wisconsin’s Deceptive Trade Practices Act

On April 27, 2010, the Wisconsin Court of Appeals issued a decision that impacts the rights of all sellers and purchasers of real estate throughout Wisconsin. In Novell v. Migliaccio, No. 2009AP1576 (recommended for publication), the Court of Appeals held that painting a basement wall to hide evidence of a leak can constitute an actionable misrepresentation under Wisconsin’s Deceptive Trade Practices Act, Wis. Stat. § 100.18(1). Specifically, the Act provides that no person may, intending to sell real estate, make any assertion, representation or statement of fact that is untrue, deceptive or misleading. The Act is not limited to the residential real estate context.

Chad Novell (“Novell”) offered to purchase Anthony and Andrea Migliaccio’s (the “Migliaccios”) home in 2003. Prior to submitting an offer to purchase, Novell walked through the Migliaccios’ basement and informed them that he was planning to use the basement as a recording studio for his band. In deciding to buy the house, Novell relied upon the pristine appearance of the basement walls. Novell asserted that Anthony Migliaccio represented to Novell that he had not painted the basement walls during his ownership of the property. After purchasing the Migliaccios’ house, Novell discovered that water leaked from the basement walls that Anthony Migliaccio denied painting. Novell sued, lost his case, and then appealed.

The crux of Novell’s current appeal was whether painting basement walls can constitute an actionable “representation” under Wis. Stat. § 100.18(1). Finding that issue had not been decided before, the Court of Appeals reviewed analogous case law and concluded that non-verbal actions, such as painting walls, can constitute representations that give rise to a claim under § 100.18(1). The court reversed the circuit court’s grant of summary judgment to the Migliaccios and held that factual questions remained for trial regarding whether the Migliaccios had in fact painted the basement walls.

The practical importance of the Novell decision is to provide an added layer of protection for purchasers of real estate. Consequently, the case also serves as a caution to sellers of real estate to carefully consider what actions they have taken that might be construed as potential misrepresentations. Any person or business engaged in a real estate transaction should carefully evaluate the situation to avoid potential pitfalls and to protect their rights in light of Novell and the Deceptive Trade Practices Act.

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