The Trusted Adviser October 2010 | Volume 3 • Number 9



Contracts; Vendors and Purchasers

Griswold v Rogich, 2009 AP 1405 (Wis Ct App, 2010).

Facts:Dean Rogich (Rogich) and Kim Johnsen (Johnsen) inherited a building from their father, which he had owned from 1955 through 2006 and resided in from 1964 until his death in 2006. Rogich temporarily lived in the building following his father's death. John Griswold (Griswold) purchased this property from Rogich and Johnsen in 2007.

On January 7, 2007, Rogich filled out the real estate condition report. On this report, he claimed to have lived in the property for one and a half years. He would later claim this was a mistake and was intended to read one and a half months. In this condition report, Rogich denied any awareness of defects in the basement or foundation, and he further denied any awareness of other defects affecting the property. On September 16, 2007, Rogich and Johnsen provided Griswold with another condition report and again denied knowledge of any basement defects.

Griswold then hired Terry Dunsworth (Dunsworth) to inspect the building. Dunsworth reported some damage to the walls in the basement, including bowing and cracking of the wall. He also noted the presence of mineral salt deposits that indicated to him that there had once been water and moisture penetration in the basement. However, it was impossible for Dunsworth to determine whether and how much the basement leaked. Rogich claimed that Dunsworth informed him that several of these defects were common and not necessarily worth worrying about, but that he recommended to bring in additional experts to examine the basement.

Griswold negotiated a $5000 price reduction from Rogich and Johnsen as a result of the inspection. The price reduction was described as covering all defects. Griswold proceeded to purchase the property. The basement leaked, and Griswold sued for breach of contract, claiming misrepresentation under Wisconsin Statutes Section 943.20 because Rogich and Johnsen lied on the real estate condition report.

Rogich and Johnsen filed for summary judgment. The trial court granted this motion, finding that Griswold's reliance on Rogich and Johnsen's condition report was unreasonable in light of the report by Dunsworth. Griswold appealed.

Holding:Reversed and remanded. The court of appeals concluded that reliance was the primary issue, as had the lower court. For Griswold's claim to move forward, he had to prove that he reasonably relied on Rogich and Johnsen's claims that there was no leaking in the basement. However, the court concluded that a buyer has the right to know of the true nature of the defects in a home.

While Dunsworth's inspection could reasonably put him on notice of several defects, the inspection report did not specifically indicate that there was a leak. As such, Griswold did not have notice of a leak in the basement from the report, and therefore could have reasonably believed Rogich and Johnsen when they told him no such leak existed.

As a result of the lack of notice specifically on the issue of a leak, the court concluded that Griswold could have reasonably relied on the disclosure report. As such, an issue of material fact still existed, and remand was necessary.






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[Last update: 10-11-10]