Donna Brenner v. National Casualty Company , 374 Wis. 2d 578 ( 2017 )

2017 WI 38
SUPREME COURT OF WISCONSIN
CASE NO.: 2014AP2376
COMPLETE TITLE: Donna Brenner, as Personal Representative for
the Estate of Russell T. Brenner and Donna
Brenner, Individually,
Plaintiffs-Respondents,
v.
Amerisure Mutual Insurance Company, Garland
Brothers Joint Venture and Garland Brothers,
Inc.,
Defendants,
Charter Manufacturing Co. and Ace American
Insurance Company,
Defendants-Respondents,
National Casualty Company and Milwaukee World
Festival, Inc.,
Defendants-Appellants-Petitioners.
REVIEW OF A DECISION OF THE COURT OF APPEALS
Reported at: 365 Wis. 2d 476, 872 N.W.2d 124
(2015 WI App 85 – Published)
OPINION FILED: April 18, 2017
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: October 26, 2016
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Milwaukee
JUDGE: Richard J. Sankovitz
JUSTICES:
CONCURRED:
DISSENTED:
NOT PARTICIPATING: BRADLEY, R.G., J. did not participate.
ATTORNEYS:
For the defendants-appellants-petitioners, there were
briefs by Pamela M. Schmidt and Scopelitis, Garvin, Light,
Hanson & Feary, P.C., Milwaukee, and oral argument by Pamela M.
Schmidt.
For the plaintiffs-respondents, there was a brief by Susan
R. Tyndall, Timothy S. Trecek and Habush Habush & Rottier, S.C.,
Milwaukee, and oral argument by Susan R. Tyndall.
2
2017 WI 38
NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2014AP2376
(L.C. No. 2012CV12446)
STATE OF WISCONSIN : IN SUPREME COURT
Donna Brenner, as Personal Representative for
the Estate of Russell T. Brenner and Donna
Brenner, Individually,
Plaintiffs-Respondents,
v.
Amerisure Mutual Insurance Company, Garland
Brothers Joint Venture and Garland Brothers,
Inc.,
Defendants, FILED
Charter Manufacturing Co. and Ace American APR 18, 2017
Insurance
Diane M. Fremgen
Company, Clerk of Supreme Court
Defendants-Respondents,
National Casualty Company and Milwaukee World
Festival,
Inc.,
Defendants-Appellants-Petitioners.
REVIEW of a decision of the Court of Appeals. Affirmed.
No. 2014AP2376
¶1 DANIEL KELLY, J. The question before the court is
whether Charter Manufacturing Company ("Charter"), the former
long-term tenant of property owned by Garland Brothers Joint
Venture ("Garland Brothers"), could be liable for injuries to
Russell T. Brenner, a construction worker who labored at the
former Garland Brothers building after it had been sold to
Milwaukee World Festival, Inc. ("MWF").
I. FACTUAL BACKGROUND
¶2 For 21 1/2 years, Garland Brothers owned the property
located at 607 Polk Street in the city of Milwaukee (the
"Property"). For 20 of those years, Charter housed its wire
manufacturing business at the Property under a triple net lease.1
One of Charter's tasks in making the facilities operational was
the installation of heat treatment furnaces in a below-grade
"pit" in one of the buildings. The furnaces extended up from
the pit and through a hole cut into the metal grate floor above
it.
1
A "triple net lease" is one in which the tenant is
typically responsible for expenses such as maintenance,
insurance, real estate taxes, and utilities, in addition to its
lease payments. See, e.g., Lease, Black's Law Dictionary (10th
ed. 2014) (defining a "net-net-net lease," also referred to as a
"triple net lease," as "[a] lease in which the lessee pays all
the expenses, including mortgage interest and amortization,
leaving the lessor with an amount free of all claims."); see
also N.J. Indus. Props., Inc. v. Y.C. & V.L., Inc., 495
A.2d 1320, 1321 (N.J. 1985) (explaining that a "triple net
lease" is a lease in which "the tenant [is] responsible for
maintaining the premises and for paying all utilities, taxes,
and other charges associated with the property.").
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No. 2014AP2376
¶3 Fast forwarding 20 years, Charter notified Garland
Brothers that it would terminate its lease at the end of 2009.
The lease obligated Charter to remove its machinery (including
the heat treatment furnaces) from the Property before
surrendering possession. Additionally, Garland Brothers asked
Charter to perform several maintenance and repair tasks. One
such request was to fill in the pit where the heat treatment
furnaces had been located. Garland Brothers later revoked this
request in exchange for Charter's commitment to leave the pit in
a "clean and safe condition."
¶4 Charter hired Pieper Electric to help it remediate the
Property before the end of the lease. Pieper Electric, in turn,
subcontracted with Harrison Metals to remove the heat treatment
furnaces. Completion of that task left holes in the metal grate
floor through which the furnaces had once protruded. Because
the holes could pose a danger, Harrison Metals created short
plywood boxes to cover them. Harrison Metals did not mark the
boxes to indicate their function or tether them in place. In
late December 2009, Garland Brothers performed a final
walkthrough of the Property with its experts and Charter
representatives. Because Garland Brothers had performed
numerous inspections throughout the life of the lease, the heat
treatment furnaces would have been conspicuous by their absence
during this final walkthrough. Garland Brothers did not raise
any concerns about the pit, the holes in the floor above it, or
the method of covering them.
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No. 2014AP2376
¶5 Charter released possession of the Property to Garland
Brothers on December 31, 2009. Garland Brothers thereafter
maintained sole possession of the Property until MWF purchased
it in "as-is, where-is" condition "with all faults" and took
possession on May 3, 2011. MWF had originally slated for
demolition the building Charter had occupied but subsequently
changed its plans.
¶6 MWF was on the Property multiple times before
purchasing it. Its general counsel, for example, personally
conducted walkthroughs of the Property while Charter was still
occupying it and observed the heat treatment furnaces extending
through the metal grate floor. MWF also had a designer inspect
the building several times and had the designer specifically
consider the feasibility of creating an entryway where the heat
treatment furnaces stood. MWF's construction director was also
on the Property prior to the purchase to plan for future work.
Environmental tests performed as part of due diligence in the
sale of the Property also identified the existence of the pit.
¶7 After completing the purchase of the Property, MWF
hired Hunzinger Construction ("Hunzinger") to perform demolition
and renovation work on the Property. As part of their work,
Hunzinger employees, including Mr. Brenner, removed the plywood
boxes present in the building. Mr. Brenner did not know that
some of these boxes covered holes once occupied by the heat
treatment furnaces. Consequently, while removing one of these
boxes, he fell through a hole and sustained severe injuries.
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No. 2014AP2376
II. PROCEDURAL BACKGROUND
¶8 Mr. Brenner and his wife sued MWF, Garland Brothers,
and Charter (as well as their insurers) alleging negligence and
violation of Wisconsin's safe-place statutes. As particularly
relevant here, the Brenners said Charter was negligent because
it concealed or failed to disclose to MWF the holes in the metal
grate flooring under the plywood boxes.
¶9 Charter and Garland Brothers moved for summary
judgment, relying primarily on the doctrine of caveat emptor as
described in the Restatement (Second) of Torts § 352 (Am. Law
Inst. 1965) (hereinafter "§ 352"). The circuit court dismissed
both parties, concluding that the caveat emptor principle
precluded judgment against them.2 The Brenners subsequently
settled with Charter and Garland Brothers, which they documented
with a settlement agreement that included a Pierringer release.3
2
The Honorable Richard J. Sankovitz, presiding.
3
Pierringer v. Hoger, 21 Wis. 2d 182, 124 N.W.2d 106
(1963). "[A] Pierringer release, in effect, limits a second
joint tort-feasor's liability to the amount reflecting its
proportion of wrongdoing. Stated differently, a Pierringer
release operates to impute to the settling plaintiff whatever
liability in contribution the settling defendant may have to
non-settling defendants and to bar subsequent contribution
actions the non-settling defendants might assert against the
settling defendants." VanCleve v. City of Marinette, 2003 WI 2,
¶39, 258 Wis. 2d 80, 655 N.W.2d 113 (footnote and internal
citation omitted).
5
No. 2014AP2376
¶10 MWF appealed Charter's dismissal.4 MWF's interest in
this question is in ensuring it is exposed to no more than the
correct quantum of liability. Notwithstanding Charter's
dismissal from the case, if the matter proceeds to trial, a jury
would need to apportion liability amongst all eligible
defendants——even those who have been dismissed through
settlements. If the law of negligence makes Charter eligible
for liability, MWF's exposure potentially decreases, resulting
in a smaller judgment against it. If Charter is not eligible
for liability, the potential judgment against MWF could
increase.
¶11 On appeal, MWF argued that Charter was not a "vendor"
under § 352, and even if it was, it would still be liable
pursuant to the exception from exemption described in
Restatement (Second) of Torts § 353 (Am. Law. Inst. 1965)
(hereinafter "§ 353"). In a published decision, the court of
appeals affirmed the circuit court's summary judgment in favor
of Charter.5 The court of appeals based its opinion on the
caveat emptor doctrine as described in § 352, concluding that
Charter was a "vendor" within the meaning of the Restatement
test. It further found that, because MWF had reason to know of
the danger posed by the wooden boxes that covered the holes,
4
MWF did not appeal the dismissal of Garland Brothers, and
as to Charter, MWF appealed only the dismissal of the Brenners'
negligence claim.
5
Brenner v. Nat'l Cas. Co., 2015 WI App 85, ¶5, 365
Wis. 2d 476, 872 N.W.2d 124.
6
No. 2014AP2376
§ 353 did not negate the immunity supplied by the caveat emptor
doctrine. We granted MWF's timely petition for review and now
affirm the court of appeals.
III. STANDARD OF REVIEW
¶12 This matter is before us on review of a grant of
summary judgment dismissing the Brenners' negligence claim
against Charter. Summary judgment is appropriate where there
are no material facts in dispute and the moving party is
entitled to judgment as a matter of law. See Wis. Stat.
§ 802.08(2) (2015-16).6 We review a grant of summary judgment de
novo, applying the same methodology as the circuit court.
Belding v. Demoulin, 2014 WI 8, ¶13, 352 Wis. 2d 359, 843
N.W.2d 373. While our review is independent from the circuit
court and court of appeals, we benefit from their analyses.
Preisler v. Gen. Cas. Ins. Co., 2014 WI 135, ¶16, 360 Wis. 2d
129, 857 N.W.2d 136. Whether a duty exists under the
circumstances, and the scope of any such duty, are questions of
law we decide de novo. Hocking v. City of Dodgeville, 2009
WI 70, ¶7, 318 Wis. 2d 681, 768 N.W.2d 552.
IV. DISCUSSION
¶13 We must determine whether the law of negligence could
make Charter liable to the Brenners. Success in that endeavor
requires establishing the following: (1) a duty of care owed by
Charter; (2) a breach of that duty; (3) a causal connection
6
All subsequent references to the Wisconsin Statutes are to
the (2015-16) version unless otherwise indicated.
7
No. 2014AP2376
between the breach and the Brenners' injury; and (4) actual loss
or damage resulting from the injury. Gritzner v. Michael R.,
2000 WI 68, ¶19, 235 Wis. 2d 781, 611 N.W.2d 906. On summary
judgment, only the first issue——whether Charter owed the
Brenners a duty of care——was at issue. It is also the only
element we address in our analysis here.
¶14 MWF asks us to find that the tort-based duty of a real
estate tenant continues even after the tenant vacates the
property. The Brenners say, and the circuit court and court of
appeals agreed, that the caveat emptor doctrine terminated
Charter's duty after it surrendered possession of the Property
to Garland Brothers. MWF tells us that caveat emptor is an
archaic proposition and that we would do well to join the
twenty-first century by abandoning this concept in favor of
principles described in the Restatement (Third) of Torts:
Physical and Emotional Harm § 51 (Am. Law Inst. 2012)
(hereinafter "§ 51"). MWF says the old ways, memorialized in
§§ 352 and 353, create dangerous dynamics, the effects of which
caused Mr. Brenner's injury. Alternatively, if we should decide
not to adopt the Restatement (Third) of Torts on this question,
MWF says caveat emptor (as described in the Restatement (Second)
of Torts) does not apply to long-term former tenants like
Charter. And if it does, MWF says, there are exceptions to this
immunity from liability that operate against Charter under the
facts of this case.
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No. 2014AP2376
A. Charter's Duty
1. General principles governing "duty"
¶15 Before analyzing the caveat emptor doctrine, we must
first describe the duty it is supposed to affect. MWF says it
is "unquestionable" that Charter would owe a duty to the
Brenners absent the doctrine of caveat emptor "because everyone
owes a duty to everyone else." (Citing Behrendt v. Gulf
Underwriters Ins. Co., 2009 WI 71, 318 Wis. 2d 622, 768
N.W.2d 568.)
¶16 This characterization of Behrendt suggests we have
concluded that every negligence claim arrives at court with the
first element already proven as a matter of law, or that we have
eliminated the first line from the negligence quatrain. We have
not. See, e.g., A.E. Inv. Corp. v. Link Builders, Inc., 62
Wis. 2d 479, 484, 214 N.W.2d 764 (1974) ("Duty is still an
important factor in determining whether an act is negligent.").
¶17 What we said in Behrendt is that "everyone owes to the
world at large the duty of refraining from those acts that may
unreasonably threaten the safety of others." Behrendt, 318
Wis. 2d 622, ¶17 (bracket and internal marks omitted) (quoting
Alvarado v. Sersch, 2003 WI 55, ¶13, 262 Wis. 2d 74, 662
N.W.2d 350).7 Immediately following this statement, however, we
explained that "[w]hat is within the duty of ordinary care
depends on the circumstances under which the claimed duty
7
This is the minority view of Palsgraf v. Long Island R.R.
Co., 162 N.E. 99 (N.Y. 1928).
9
No. 2014AP2376
arises. For example, what is comprised within ordinary care may
depend on the relationship between the parties or on whether the
alleged tortfeasor assumed a special role in regard to the
injured party." Behrendt, 318 Wis. 2d 622, ¶18 (quoting Hoida,
Inc. v. M & I Midstate Bank, 2006 WI 69, ¶32, 291 Wis. 2d 283,
717 N.W.2d 17).
¶18 One of the most significant circumstances relating to
the nature of Charter's duty in this case is the relationship
between the parties, as evidenced by the sequence in which the
defendant parties possessed the Property. As relevant here,
Charter was the first to possess. Garland Brothers then took
possession upon expiration of Charter's lease. Finally, MWF
gained possession of the Property through its purchase from
Garland Brothers.
¶19 Therefore, whether Charter is potentially liable in
negligence to the Brenners depends on whether its duty "to the
world at large . . . [to] refrain[] from those acts that may
unreasonably threaten the safety of others," Behrendt, 318
Wis. 2d 622, ¶17 (internal marks and citation omitted), extended
to telling not just Garland Brothers, but all future strangers
who may come into possession of the Property, that there were
holes in the floor under the plywood boxes.
¶20 The only support MWF identified for this proposition
was § 51, in conjunction with its over-simplification of our
holding in Behrendt. So we review § 51 to determine whether it
provides any insight on the nature of Charter's duty under these
circumstances.
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No. 2014AP2376
2. Restatement (Third) of Torts: Physical & Emotional Harm
§ 51
¶21 MWF urges us to adopt § 51 because it believes this
provision describes a superior view of what the law of premises
liability ought to be. This section states:
Subject to [Restatement (Third) of Torts:
Physical & Emotional Harm] § 52, a land possessor owes
a duty of reasonable care to entrants on the land with
regard to:
(a) conduct by the land possessor that creates
risks to entrants on the land;
(b) artificial conditions on the land that pose
risks to entrants on the land;
(c) natural conditions on the land that pose
risks to entrants on the land; and
(d) other risks to entrants on the land when any
of the affirmative duties provided in Chapter 7
is applicable.
§ 51. This provision does not define "land possessor," but we
need only flip back to Restatement (Third) of Torts: Physical &
Emotional Harm § 49 (Am. Law Inst. 2012) (hereinafter "§ 49")
for assistance:
A possessor of land is
(a) a person who occupies the land and controls
it;
(b) a person entitled to immediate occupation
and control of the land, if no other person is a
possessor of the land under Subsection (a); or
(c) a person who had occupied the land and
controlled it, if no other person subsequently
became a possessor under Subsection (a) or (b).
§ 49.
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No. 2014AP2376
¶22 If we were to adopt § 51 verbatim (incorporating the
§ 49 definition), it would not bear the weight of MWF's
proposition. It does not, ex proprio vigore, apply to companies
in Charter's position. The unadorned language applies, instead,
to a "land possessor." The only party in this case that is a
"land possessor" in relation to the Property is MWF. But the
language is not unadorned——it is festooned by eighteen pages of
comments and illustrations (not including the Reporter's Note).
¶23 MWF says we may engage comment t to § 51 to transfer
its operation to former land possessors. This comment, in
relevant part,8 explains that "[a] former possessor who creates a
risk of harm when in possession of the land continues to be
subject to the ordinary duty of reasonable care provided in § 7
for that risk, even after possession is relinquished to
another." § 51 cmt. t (emphasis added). Similarly, comment h
to § 49, entitled "Former possessors," states, in part: "A
person who has relinquished possession and control of land to
another is not subject to the duties provided in §§ 51 to 53 of
this Chapter, with one exception. See § 51, Comment t."
¶24 Thus, both §§ 49 and 51 turn our attention to
Restatement (Third) of Torts: Physical & Emotional Harm § 7 (Am.
Law Inst. 2010) (hereinafter "§ 7"), which imposes a general
duty of care: "An actor ordinarily has a duty to exercise
reasonable care when the actor's conduct creates a risk of
8
Comment t is extensive——together with its illustrations,
it encompasses nearly four pages of text.
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No. 2014AP2376
physical harm." § 7(a). But this provision does not, on its
own terms, say anything about land possessors, or the
persistency of liability once possession of the land transfers
to another. Nor does it describe a principle or methodology by
which we may derive the rule advocated by MWF.9
¶25 Instead, the actual text of these Restatement
provisions comprise a basically faithful, and unremarkable,
rendition of the law as it currently exists in Wisconsin. As
the first comment to § 51 recognized, its primary purpose has
nothing to do with this case——it is to clarify that a possessor
of land owes a unitary duty of care to anyone who enters the
land and that the land possessor's duty is not dependent upon
the entrant's status: "This Section rejects the status-based
duty rules and adopts a unitary duty of reasonable care to
entrants on the land." § 51 cmt. a. Like § 51, this court
rejected status-based duties long ago. See, e.g., Antoniewicz
v. Reszcynski, 70 Wis. 2d 836, 839, 236 N.W.2d 1 (1975)
(concluding that "the distinction between the duty heretofore
owed by a land occupie[r] to licensees and to invitees should be
abolished, and that the duty of the land occupier be that
required in any negligence action——ordinary care under the
9
MWF did not address § 7 or its applicability in this case.
Rather, it simply contends that § 51 itself imposes a duty of
care on a former possessor of land.
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No. 2014AP2376
circumstances."10 And our adoption of Palsgraf's minority view
was already distant history before the advent of § 7. See,
e.g., A.E. Inv. Corp., 62 Wis. 2d at 483 (explaining that this
court has adopted the Palsgraf minority view). Thus, adopting
the text of those sections would do little, if anything, to
alter or advance the development of law in this state with
respect to those general principles.
¶26 It is apparent from our review of the relevant
sections of the Restatement (Third) of Torts: Physical &
Emotional Harm that the life of MWF's argument is not in the
text of the various provisions, but only in the commentary.11 By
itself, the text tells us nothing about the duties of former
land possessors. Thus, to reach MWF's conclusion we would need
10
However, the Antoniewicz court "decline[d] . . . to
change the immunities which a land occupier enjoys in respect to
trespassers." Antoniewicz v. Reszcynski, 70 Wis. 2d 836, 839,
236 N.W.2d 1 (1975).
11
This is not the only instance in which the commentary
reads substantive content into § 51 without the support of
corresponding text. For example, comment t says § 51 includes
certain disclosure duties and liability time limits despite the
absence of any such declaration, or even suggestion, in § 51's
text. See id. ("[t]his Section adopts the actual discovery
aspect but not the 'should discover' portion of [Restatement
(Second) of Torts] § 352" with respect to liability time
limits).
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No. 2014AP2376
to adopt not § 51, but comment t.12 We next turn to the law MWF
would have us replace with this comment.
B. Caveat Emptor
¶27 "Caveat emptor" operates as a limited exception to the
rule that "everyone owes to the world at large the duty of
refraining from those acts that may unreasonably threaten the
safety of others." Behrendt, 318 Wis. 2d 622, ¶17 (bracket,
internal marks, and citation omitted). In Ollerman v. O'Rourke
Co., Inc., 94 Wis. 2d 17, 288 N.W.2d 95 (1980), we explained
that "[t]he traditional legal rule that there is no duty to
disclose in an arm's-length transaction is part of the common
law doctrine of caveat emptor which is traced to the attitude of
rugged individualism reflected in the business economy and the
law of the 19th century." Id. at 29.
¶28 Caveat emptor——or "buyer beware"——finds expression in
§ 352, which states:
Except as stated in [Restatement (Second) of Torts]
§ 353, a vendor of land is not subject to liability
for physical harm caused to his vendee or others while
upon the land after the vendee has taken possession by
any dangerous condition, whether natural or
12
We recognize that the ALI adopts the comments as well as
the actual text of § 51, and that the comments express how the
ALI would like courts to understand the text. Thus, were we to
adopt § 51 (as MWF requests), we would be inserting not just the
few spare lines of the text into our law, but the 18 pages of
copious comments and illustrations as well. It would be
imprudent to import so much material without closely examining
it first, especially when the comments say so much that the text
simply does not.
15
No. 2014AP2376
artificial, which existed at the time that the vendee
took possession.
§ 352. We have recognized that the caveat emptor principle
broadly applies to the transfer of real estate interests:
[S]ecs. 352, 353 [of the Restatement (Second) of
Torts], sets forth the broad principle that a vendor
is not liable for bodily harm caused to his vendee, or
others, after the vendee has taken possession except
where the vendor has concealed or failed to disclose a
dangerous condition known to him, but not to the
vendee, and the vendor has reason to believe that the
vendee will not discover it.
Fisher v. Simon, 15 Wis. 2d 207, 214, 112 N.W.2d 705 (1961). See
also Pines v. Perssion, 14 Wis. 2d 590, 594-95, 111 N.W.2d 409
(1961) ("A tenant is a purchaser of an estate in land, and is
subject to the doctrine of caveat emptor.")
¶29 But we do not apply the rule to all real estate
transactions. In Fisher itself we found the rule inapplicable
with respect to the owner of real estate who built a house
thereon for the express purpose of selling it. 15 Wis. 2d at
216, 219. We analogized the transaction to the sale of chattels
and borrowed from product liability principles in finding that
the vendor owed a duty to his vendee. Id. In Pines, we found
an implied warranty of habitability in a residential lease after
surveying the legislative imposition of various health and
safety requirements related to residential properties. 14
Wis. 2d at 594-96. And in Ollerman, we held that a real estate
subdivider-vendor had "a duty to a 'non-commercial' purchaser"
16
No. 2014AP2376
to disclose material facts known to the vendor but that the
purchaser would not readily discern. 94 Wis. 2d at 42.13
¶30 These exceptions, however, are narrow and do not
detract from the continuing health of the doctrine. Indeed, the
caveat emptor doctrine, as described in § 352, has retained its
vitality in the years since Ollerman. We remarked in Kaloti
Enterprises, Inc. v. Kellogg Sales Co., hearkening back to
Ollerman, that
parties to a business transaction must "use their
faculties and exercise ordinary business sense, and
not [] call on the law to stand in loco parentis to
protect them in their ordinary dealings with other
business people." Further, "in a free market the
diligent should not be deprived of the fruits of
superior skill and knowledge lawfully acquired."
2005 WI 111, ¶18, 283 Wis. 2d 555, 699 N.W.2d 205 (bracket in
Kaloti; internal citation omitted) (quoting Ollerman, 94
Wis. 2d at 30).14
13
We said in Ollerman v. O'Rourke Co., Inc., 94 Wis. 2d 17,
288 N.W.2d 95 (1980), that "[t]his court has moved away from the
rule of caveat emptor in real estate transactions, as have
courts in other states." Id. at 38 (emphasis added). But this
was in the context of discussing Restatement (Second) of Torts
§ 551, which generally addresses "benefit of the bargain"
considerations, not liability for physical injury after
relinquishing possession of real estate. The logic of caveat
emptor does not apply with quite as much force to § 551 cases,
and such cases certainly do not present the harmful dynamics we
address in Section IV.C, infra. Thus, we do not believe this
statement gives us guidance in resolving this case.
14
At one point, we did suggest we had abandoned this
doctrine. In a case involving the sale of real property we said
"[t]he common law doctrine of caveat emptor has been abrogated
in this state and elsewhere . . . ." State v. Alles, 106
Wis. 2d 368, 378, 316 N.W.2d 378 (1982). We made that comment
(continued)
17
No. 2014AP2376
¶31 Our court of appeals has not had any difficulty
identifying the circumstances in which this doctrine applies, or
in applying it. For example, in Bagnowski v. Preway, Inc., a
homeowner filed suit against the former owner, arguing that the
former owner had negligently installed a chimney that caused a
fire. 138 Wis. 2d 241, 244, 405 N.W.2d 746 (Ct. App. 1987). On
appeal, the court of appeals considered, inter alia, the
instructions and special verdict form given to the jury, noting
that they were based on §§ 352 and 353. Bagnowski, 138
Wis. 2d at 246-47. Having concluded that the former homeowner
was not a "builder-vendor" (as in Fisher) but rather a "private
homeowner-vendor," the court of appeals found no error in the
caveat emptor-based instructions and verdict form the circuit
court had given the jury. Bagnowski, 138 Wis. 2d at 248-49.
¶32 In McCarty v. Covelli, 182 Wis. 2d 342, 514 N.W.2d 45
(Ct. App. 1994), the court of appeals had to assign liability
for an injury in a relational context similar to that in this
case. Mr. McCarty sustained an injury on a rental property
while assisting an evicted tenant vacate the premises. Id. at
345. He sued both the current and prior owners of the property.
in the context of a statute criminalizing the failure to
disclose encumbrances in a real estate transaction, which
removed from the ambit of the caveat emptor doctrine only the
conduct proscribed by the statute. However, we cited no
authority to support such a broadly stark proposition beyond
that specific circumstance. We find that this orphan comment
is not an accurate reflection of the law, either then or now,
beyond the statute under consideration in that case.
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No. 2014AP2376
Id. The court had no difficulty identifying caveat emptor
principles (as expressed in §§ 352 and 353) as the controlling
decisional standards. McCarty, 182 Wis. 2d at 345-46. Thus, as
the court of appeals aptly noted in the decision we are
reviewing, this doctrine still applies in Wisconsin. See
Brenner v. Nat'l Cas. Co., 2015 WI App 85, ¶28, 365 Wis. 2d 476,
872 N.W.2d 124 (hereinafter "Brenner I").
¶33 MWF's argument, of course, is not so much that caveat
emptor has fallen into desuetude in Wisconsin, but that the time
has come for its demise: "The Court should reject the outdated
rule of caveat emptor implicit in [Bagnowski and McCarty] and
embedded in the Restatement (Second) of Torts §§ 352 and 353 to
bring Wisconsin premises liability law and the duties of land
possessors into the 21st century by adopting the Restatement
(Third) of Torts § 51." Thus, we now consider whether it would
be appropriate for us to adopt comment t to § 51.
C. Comment t versus Caveat Emptor
¶34 This is no small change that MWF asks of us. The real
estate transactions that created the question we are addressing
here are entirely unremarkable——a commercial tenant vacated a
commercial property and the owner (a commercial entity)
subsequently sold the property to another commercial entity.
These types of transactions are the daily fare of the commercial
real estate world. With respect to the structural elements of
such transactions, there is nothing immediately apparent to
distinguish them from those we are examining. Consequently,
whatever decision we make here will affect not just Charter, but
19
No. 2014AP2376
an untold (and certainly large) number of vendors who once owned
Wisconsin real estate.
¶35 Adopting comment t would dramatically unsettle
property interests that thrive on stability. Divorcing
liability for injuries caused by a dangerous condition from the
ability to control for it would be just the first (but most
obvious) upset attendant on adopting comment t. For example, a
land possessor could choose to mitigate, or even eliminate, the
risk of injury through management practices rather than by
repairing the dangerous condition. It could accomplish this
through the simple expedient of restricting access to dangerous
areas entirely, or allowing access only to those who had been
trained to safely engage the condition, or who had been warned
of its existence. A subsequent possessor, however, may simply
leave the dangerous condition open to anyone who comes upon it.
Thus, the former possessor's risk of exposure could be greatly
expanded, or even created ab initio, by the acts of successors.
The present rule accounts for this reality by logically and
justifiably pairing potential liability with the opportunity to
reduce, eliminate, or manage around it. Allowing persistent
exposure to liability without the concomitant ability to control
for it is a rule with little to recommend to us.15
15
We are not the first to see the connection between caveat
emptor and these circumstances:
[T]he rationale underlying the general rule of nonliability
. . . [of] one who has transferred ownership and control
is no longer held liable because (1) he no longer has
(continued)
20
No. 2014AP2376
¶36 Second, comment t creates an entirely unforeseeable
quantum of risk exposure. A former possessor, for example,
cannot anticipate how subsequent owners might use the property.
The original possessor may allow only a very few people to enter
the premises, but an owner at the second remove (or even more
distant) may unforeseeably open the property to the public at
large. Because we establish negligence in relation to the act
in question, rather than in relation to the person harmed, the
former possessor might find itself liable to an immense
population it had never expected.
¶37 Third, comment t would make a former possessor the
insurer of all its successors. A former land possessor who
created a risk of harm would remain subject to liability even
after he disclosed the risk to the subsequent purchaser. See
§ 51 cmt. t, Illustration 11 (explaining that a former land
possessor who created a risk of harm retains a duty of care
under § 7 even after notifying the current land possessor of the
risk and where the current land possessor chooses not to reduce,
manage, or eliminate the risk of harm). Because comment t would
make the former possessor stand as the insurer of all subsequent
possessors, this rule would perversely dampen the successors'
incentive to manage the risk or repair the dangerous condition.
control and thus may not enter the property to cure any
deficiency, and (2) he cannot control the entry of persons
onto the property or provide safeguards for them.
Preston v. Goldman, 720 P.2d 476, 479 (Cal. 1986).
21
No. 2014AP2376
¶38 Fourth, MWF would have us make former possessors stand
as insurers to all successive possessors without indicating
whether there is an insurance market in which former possessors
could purchase coverage. The Supreme Court of California
recognized this potentially profound economic dislocation over
three decades ago in Preston v. Goldman, 720 P.2d 476 (Cal.
1986). The court recognized that "[t]he ascription of liability
in this context to a party with control is . . . reflected in
the usually applicable insurance coverage." Id. at 483. So the
court rejected the invitation to visit those uninsurable risks
on former possessors, concluding that it would "continue[] to
treat ownership and control as a fundamental requirement for
ascribing liability." Id.16 Imposing liability on unwitting
former possessors who would have no apparent means of insuring
their exposure is injudicious.
¶39 Finally, adopting comment t carries the very real risk
that we would be effectively renegotiating, retroactively and as
a matter of law, an unknowable number of Wisconsin real estate
transactions, including the ones before us. Contracts,
including those for the lease or sale of real estate,
incorporate the law extant at the time of execution. See, e.g.,
Dairyland Greyhound Park, Inc. v. Doyle, 2006 WI 107, ¶60, 295
16
That Preston predates the Restatement (Third) of Torts is
of no consequence on this point, as the parties provide no
indication that the insurance industry currently offers coverage
to former real estate possessors for the risk of liability
comment t would create.
22
No. 2014AP2376
Wis. 2d 1, 719 N.W.2d 408. Thus, when a vendee purchases
Wisconsin real estate as-is, without warranty, its contract
incorporates the caveat emptor doctrine.17 So too with leases.18
Presumably, commercial entities like Charter, Garland Brothers,
and MWF account for undisclosed and unknown risks when they
negotiate the terms of their transactions. As relevant here, a
purchasing party that assumes those risks can, because of that
assumption, negotiate a lower purchase price. MWF, having
reaped the financial benefit of a lower price in exchange for
assuming those risks, would now enlist us in shifting some or
all of those risks to Charter. If we accepted that invitation,
we would necessarily reallocate not just the benefit of the
bargains in this case, but the benefits of all similar Wisconsin
real estate transactions younger than the applicable statute of
limitations. Further, the disruption would not be limited to
those transactions that have already occurred. Prospectively,
adopting comment t would likely distort the commercial real
estate market, at least in the short term, as vendors inflate
sales prices to reserve an actuarially-rational amount of funds
17
Barnard v. Kellogg, 77 U.S. 383, 394 (1870) ("The parties
negotiated on the basis of caveat emptor, and contracted
accordingly.").
18
"[N]o action lies by a tenant against a landlord on
account of the condition of the premises hired, in the absence
of an express warranty or of active deceit. This is a general
rule of caveat emptor." Doyle v. Union Pac. R. Co., 147
U.S. 413, 425 (1893) (internal marks and citation omitted).
23
No. 2014AP2376
against potential liability until the insurance market creates
and prices appropriate policies or riders.19
¶40 We decline MWF's invitation to adopt comment t because
it would introduce dramatic changes to the duty a former land
possessor owes under Wisconsin law, and would negatively impact
settled expectations, and settled rights, between real estate
vendors and vendees. Further, MWF has identified no compelling
reason to abandon the current state of our law, and certainly
nothing important enough to justify the market dislocations
comment t would likely cause. We next consider whether Charter
could be liable to the Brenners under existing Wisconsin law as
reflected in §§ 352 and 353.
D. Charter's liability to the Brenners
¶41 To determine whether Charter could be liable to the
Brenners under current Wisconsin law, we must answer two
questions. The first is whether caveat emptor governs the
relationship between Charter and successive possessors of the
19
We could control for at least the retroactive
consequences of adopting comment t by "sunbursting" the change
so that it would apply only prospectively. See Jacque v.
Steenberg Homes, Inc., 209 Wis. 2d 605, 623-24, 563 N.W.2d 154
(1997) (explaining that where the announcement of a new rule
will result in an inequity if given retroactive effect, the
court may instead apply the newly announced rule prospectively
if there is a compelling judicial reason to do so). We decline
to consider this option because the nature and extent of the
relationships and expectations we would be changing suggest
that, on the record before us, we simply have insufficient
information to determine whether the downstream consequences
would actually represent a net improvement over the status quo.
24
No. 2014AP2376
Property. The second is whether, if caveat emptor applies, any
of the exceptions to the doctrine apply.
1. Charter and the caveat emptor doctrine
¶42 MWF argues that our caveat emptor cases apply only to
vendors of land and that Charter cannot be a vendor of land
because it was merely a former tenant that did not sell the
Property to anyone. Thus, according to MWF, when the circuit
court and court of appeals denominated Charter a "vendor" within
the meaning of § 352, they expanded the meaning of that term
without warrant or justification.
¶43 MWF's argument has some initial appeal. By its own
terms, § 352 applies only to vendors:
Except as stated in [Restatement (Second) of Torts]
§ 353, a vendor of land is not subject to liability
for physical harm caused to his vendee or others while
upon the land after the vendee has taken possession by
any dangerous condition, whether natural or
artificial, which existed at the time that the vendee
took possession.
§ 352. However, because of the nature of Restatements, this
provision describes the beginning of our inquiry, not the end.
As significant and important as a Restatement is, it is not a
code of laws. Instead, Restatements "aim at clear formulations
of common law and its statutory elements or variations . . . ."
American Law Institute, Frequently Asked Questions,
https://www.ali.org/publications/frequently-asked-questions/
(last visited Mar. 6, 2017). They also attempt to "reflect the
law as it presently stands or might appropriately be stated by a
court." Id. Because the common law can vary across the States,
25
No. 2014AP2376
sometimes significantly, these goals can often be more
aspirational than descriptive.20 Thus, because the Restatements
are not, in themselves, authoritative, MWF's task goes beyond
demonstrating that the text of § 352 excludes Charter from its
operation. It must also demonstrate that this exclusion either
reflects the current state of the law in Wisconsin, or that this
is a question of first impression, the answer to which should be
guided by the logic of § 352's focus on vendors.
¶44 We have not previously determined whether a former
commercial tenant such as Charter is a vendor within the meaning
of § 352. See Brenner I, 365 Wis. 2d 476, ¶24 (recognizing that
prior to its decision in this matter, no published Wisconsin
case had considered whether a former tenant qualifies as a
vendor under § 352). So in determining whether commercial
tenants occupy the same legal position as vendors for caveat
emptor purposes, we will consider the logic behind the doctrine
before deciding whether § 352 appropriately excludes commercial
tenants from its terms.
¶45 Freedom of contract and the right of inspection
provide the primary justifications for the caveat emptor
20
The Restatements themselves recognize this. For example,
the Reporter's Note regarding comment t to § 51 frankly admitted
the proposed rule was not a statement of the law all across the
country: "Courts are split on whether a former possessor who
created a risk on the land remains subject to liability or
whether transfer of the land absolves the possessor of
liability, as provided in the Second Restatement." § 51
Reporter's Note cmt. t.
26
No. 2014AP2376
doctrine. As the United States Supreme Court observed when our
country was considerably younger,
[n]o principle of the common law has been better
established, or more often affirmed, both in this
country and in England, than that in sales of personal
property, in the absence of express warranty, where
the buyer has an opportunity to inspect the commodity,
and the seller is guilty of no fraud, and is neither
the manufacturer nor grower of the article he sells,
the maxim of caveat emptor applies.
Barnard v. Kellogg, 77 U.S 383, 388 (1870). A vendee wishing to
ensure he does not take on more liability exposure than desired
must inform himself of what he can about what he buys. Bostwick
v. Mut. Life Ins. Co. of N.Y., 116 Wis. 392, 400, 89 N.W. 538
(1902), on reh'g, 116 Wis. 392, 92 N.W. 246 ("[T]he doctrine
that one must observe what he has reasonable opportunity for
knowing in matters of contract is within the rule of caveat
emptor . . . ."). He may, of course, choose to negotiate an
express warranty as a substitute for his inspection to cover the
risk he takes for himself: "And there is no hardship in it
[caveat emptor], because if the purchaser distrusts his judgment
he can require of the seller a warranty . . . ." Barnard, 77
U.S. at 388. But if he chooses to purchase with neither an
inspection nor a warranty, the caveat emptor doctrine holds him
responsible for his decision. Id. ("If he is satisfied without
a warranty, and can inspect and declines to do it, he takes upon
himself the risk that the article is merchantable."); Doyle v.
Union Pac. R. Co., 147 U.S. 413, 425 (1893) ("This is a general
rule of caveat emptor. In the absence of any warranty, express
27
No. 2014AP2376
or implied, the buyer takes the risk of quality upon himself.");
McBurney v. Young, 133 S. Ct. 1709, 1776 (2013) ("'Caveat emptor
being the rule with us in the absence of a special agreement, it
is just and essential to the protection of persons intending to
purchase or take incumbrances that they be allowed the right of
inspection.'" (quoting State v. Grimes, 84 P. 1061, 1073 (Nev.
1906))).
¶46 This rule grew out of the natural business dynamic
that the person in the best position to adjudge potential risk
is the one affected by it: "[T]he law requires men, in their
dealings with each other, to exercise proper vigilance, and
apply their attention to those particulars which may be supposed
to be within reach of their observation and judgment, and not
close their eyes to the means of information which are
accessible to them." Bostwick, 116 Wis. at 400 (quoting Mamlock
v. Fairbanks, 46 Wis. 415, 418, 1 N.W. 167 (1879)); see also
Barnard, 77 U.S. at 388 ("Such a rule, requiring the purchaser
to take care of his own interests, has been found best adapted
to the wants of trade in the business transactions of life.").
¶47 These principles instruct that caveat emptor should
apply in the commercial tenancy context just as it does in the
vendor-vendee relationship described in § 352. The one
difference is that a tenant will, when commencing the tenancy,
occupy the position of a vendee with respect to the landlord,
while at the end of the tenancy he will occupy the position of
the vendor. We will address the relationship from both
perspectives.
28
No. 2014AP2376
¶48 When a lessor enters a lease, he is purchasing an
interest in the estate. See, e.g., Pines, 14 Wis. 2d at 594-95.
Functionally, the tenant's purpose for entering that
relationship is largely the same as that of a vendee——to obtain
possession of the property and to put it to whatever use may be
desirable, so long as it conforms to the terms of the tenancy.
With respect to the condition of the property, therefore, they
operate under similar risks. The property either will or will
not be suitable for their purposes, and it either will or will
not contain dangerous conditions that could cause injury to them
or others.
¶49 The methods of controlling for that risk are the same
for both the tenant and the vendee. Both may inspect the
premises prior to the transaction to discover defects or other
dangerous conditions. If not satisfied with their inspections,
or if the inspection raises concerns about undiscoverable latent
defects, both can negotiate warranties to cover the risk.
Consequently, we have previously recognized that caveat emptor
applies when a tenant executes a lease. Id. ("A tenant is a
purchaser of an estate in land, and is subject to the doctrine
of caveat emptor.")
¶50 At the termination of the tenancy, the lessee occupies
the position of the vendor as he transfers possession of the
property back to the landlord. Just as the interests of a
vendee and a tenant (to the extent they are relevant to this
analysis) coincided at the beginning of the tenancy, so too do
the relevant interests of a vendee and a landlord coincide at
29
No. 2014AP2376
the end. The landlord, cognizant that the tenant has had
exclusive possession of the property, must ensure he is
receiving the property from the tenant in the condition required
by the contract. The landlord has the same opportunity as the
vendee to control for the risk that it might be otherwise,
either by requiring a warranty from the tenant (in the initial
lease negotiation), or in a thorough inspection to ensure the
property meets the condition required by the lease when the
tenant vacates.
¶51 The similarities between the commercial tenancy and
vendor-vendee relationships extend to the intolerable
consequences of not applying caveat emptor. The former tenant,
like the vendor, would suffer continuing exposure to liability
even after he can no longer reduce, eliminate, or manage around
the dangerous condition. The quantum of his exposure also slips
beyond his control as the landlord or other successive
possessors expose the property's dangerous condition in a way
that may exacerbate, or even create, the potential for injury.
He would also, like the vendor, stand as liability insurer to
all subsequent possessors, and would similarly have no access to
the insurance market (at least until the industry adapted).
¶52 As did the circuit court and court of appeals, we find
Brock v. Rogers & Babler, Inc., 536 P.2d 778 (Alaska 1975) and
Great Atlantic & Pacific Tea Company, Inc., 408 N.E.2d 144 (Ind.
Ct. App. 1980), instructive on this question. Brock addressed
whether a gravel excavation company that had remediated the
property it leased into an artificial lake could be liable to a
30
No. 2014AP2376
child who almost drowned approximately three years after the
company relinquished possession of the property. 536 P.2d at
779. The Supreme Court of Alaska applied § 352 and explained
that although that section refers to vendors of land, its
principle was nevertheless "broad enough to cover a former
lessee who had relinquished his possessory interest in the
premises." Brock, 356 P.2d at 782. It explained that liability
is generally limited to those who are in possession and control
of the property, and that those not in possession should not
suffer liability because they have no authority or ability to
prevent the injury from occurring. Id.
¶53 The Indiana Court of Appeals reached the same
conclusion in Great Atlantic. There, Great Atlantic leased a
building in which an opening in the floor had been created for a
conveyor belt to move stock from storage in the basement to the
sales floor. 408 N.E.2d at 146. When the lease terminated,
Great Atlantic released possession to the landlord, which then
offered the property for sale. Id. A prospective buyer fell
into the conveyer-belt opening in the floor and sustained
injuries. Id. The Indiana Court of Appeals took its cue from
Brock, concluding that "[t]he new owner, upon assuming control
and possession, becomes responsible for the safety of structures
erected by his predecessors" and that "liability for injury
ordinarily depends upon the power to prevent injury and,
therefore, rests upon the person who has control and possession
through ownership, lease, or otherwise." See Great Atl., 408
N.E.2d at 147-48.
31
No. 2014AP2376
¶54 Here, Charter leased the Garland Brothers' building
for approximately 20 years under a triple net lease, meaning
that——for purposes of the condition of the property——Charter had
the type of exclusive possession and control that a fee owner
would have. At the end of the tenancy, Garland Brothers
exercised its contractual right to thoroughly inspect the
Property before Charter relinquished possession on December 31,
2009. Thereafter, Charter no longer had the right to access or
control the Property, just like property vendors. Consequently,
when Mr. Brenner suffered his injuries in November 2011, Charter
had exactly the same relationship to the Property as if it had
been its fee owner, to wit, none.
¶55 Because Charter, as a former tenant, stands in the
same position as a vendor (for purposes of the caveat emptor
doctrine described in § 352) and because MWF——not Charter——was
in possession of the Property at the time of Mr. Brenner's
injuries, Charter is immune from liability unless a recognized
exception lifts the immunity and restores the potential for
liability.
2. Caveat emptor and its exceptions
¶56 MWF argues that, under the facts of this case, § 353
pushes Charter out from under the protective umbrella of the
caveat emptor doctrine. This section provides that:
(1) A vendor of land who conceals or fails to
disclose to his vendee any condition, whether
natural or artificial, which involves
unreasonable risk to persons on the land, is
subject to liability to the vendee and others
32
No. 2014AP2376
upon the land with the consent of the vendee or
his subvendee for physical harm caused by the
condition after the vendee has taken possession,
if
(a) the vendee does not know or have reason to
know of the condition or the risk involved, and
(b) the vendor knows or has reason to know of
the condition, and realizes or should realize the
risk involved, and has reason to believe that the
vendee will not discover the condition or realize
the risk.
(2) If the vendor actively conceals the
condition, the liability stated in Subsection (1)
continues until the vendee discovers it and has
reasonable opportunity to take effective
precautions against it. Otherwise, the liability
continues only until the vendee has had
reasonable opportunity to discover the condition
and to take such precautions.
§ 353. We have previously recognized the essence of the
exception contained in § 353(1). Fisher, 15 Wis. 2d at 214
(caveat emptor does not apply "where the vendor has concealed or
failed to disclose a dangerous condition known to him, but not
to the vendee, and the vendor has reason to believe that the
vendee will not discover it."). We will apply the language of
§ 353 (as MWF requested) to evaluate this part of its argument,
but without opining on whether its text is an exacting statement
of Wisconsin law. Only if we conclude that MWF's argument would
succeed under the language of § 353 will we determine whether it
comports with Wisconsin law, or describes a standard we should
adopt.
33
No. 2014AP2376
¶57 For purposes of our discussion here, § 353(1) requires
the proponent of the rule to establish, inter alia, each of the
following four elements:
(1) The vendor concealed or failed to disclose to his
vendee any condition, whether natural or
artificial, that involves unreasonable risk to
persons on the land;
(2) The vendor knew or had reason to know of the
condition, and realized or should have realized
the risk involved;
(3) The vendee did not know, or have reason to know,
of the condition or the risk involved; and
(4) The vendor had reason to believe that the vendee
would not discover the condition or realize the
risk.
§ 353(1).
¶58 MWF spent nearly its entire argument discussing these
elements as between it and Charter. But that is the wrong
relationship to consider. With respect to Charter, it is
Garland Brothers, not MWF, that is the vendee. So MWF's task is
to demonstrate that the facts satisfy the elements of § 353(1)
as between Charter and Garland Brothers. If they do, only then
would Charter's liability persist until (a) the vendee (or
successors) has had a reasonable opportunity to discover the
condition and to take effective precautions, or (b) the vendee
discovers the dangerous condition and has reasonable opportunity
to take effective precautions if the vendor has actively
concealed the condition. § 353(2).
34
No. 2014AP2376
¶59 For the sake of our analysis, we will assume MWF can
establish the first two elements of the § 353(1) test, and
proceed directly to the third element, which requires MWF to
establish that Garland Brothers did not know, or have reason to
know, of the danger presented by the holes in the floor under
the plywood boxes. The circuit court found that there was
insufficient evidence to hold that Garland Brothers had actual
knowledge of the dangerous condition but was silent as to
whether it had reason to know of that condition. For the
following reasons, we believe the record unequivocally
demonstrates that Garland Brothers had reason to know of the
holes under the plywood boxes.
¶60 First, the record establishes that Garland Brothers,
through its agent, conducted an annual inspection of the
Property over the course of Charter's 20-year tenancy. During
those annual inspections, there is no question that Garland
Brothers would have seen the heat treatment furnaces extending
upward through the holes in the metal grate floor. Next, after
Charter gave notice it was terminating the lease, Garland
Brothers identified several requirements Charter was required to
satisfy prior to vacating the Property. Among them was that,
after removing the heat treatment furnaces (as required pursuant
to the lease's terms), Charter was to fill in the pit where the
furnaces had been. When Charter objected to that requirement,
Garland Brothers agreed to substitute a requirement that Charter
leave the pit in a "clean and safe condition."
35
No. 2014AP2376
¶61 Garland Brothers necessarily knew that removing the
heat treatment furnaces would leave holes in the floor. And it
undoubtedly had an interest in knowing whether doing so would
leave the Property in a dangerous condition. Further, it had a
reasonable motivation for determining whether Charter left
behind dangerous conditions, and ample opportunity to discover
whether it did.
¶62 Garland Brothers' actions demonstrate it was satisfied
Charter had left the Property in a safe condition. When Garland
Brothers completed its final walkthrough and inspection of the
Property with Charter in late 2009, Garland Brothers did not
raise any concerns about the condition in which Charter had left
the pit or the corresponding holes in the metal grate floor.21
It then executed a "Release Agreement" with Charter, in which it
agreed that Charter had surrendered the Property "in the
physical condition required under the Lease and [Garland
Brothers] hereby releases Charter from any further liability or
claims in connection with such obligation or in any way relating
21
The precise date on which Charter's contractor placed the
plywood boxes over the holes in the metal grate floor is not
clear. The parties' briefs generally refer to them as having
been in place no later than December 31, 2009, when Charter
surrendered the Property to Garland Brothers. However, one of
the briefs filed on behalf of Charter suggests the contractor
may not have put the boxes in place until after Charter vacated
the Property. MWF's argument presupposes that Charter knew,
while it was yet in possession of the Property, that the boxes
concealed holes in the floor. Consequently, our analysis
operates on that presupposition.
36
No. 2014AP2376
to the physical condition of the Property or Charter's
performance of its obligations under the Lease."
¶63 We are convinced by this that Garland Brothers had
reason to know of the holes in the floor underneath the plywood
boxes. We are not the only ones to arrive at that conclusion——
MWF argued the same thing itself while opposing Charter's motion
for summary judgment, and for much the same reasons:
Together, GBI[22] and GBJV,[23] failed to disclose
not only the existence of the pit but, more
importantly, that Charter had created holes in the
floor above the pit. . . .
GBI and GBJV should have known that the holes
existed as the pit was the subject of negotiations
when Charter terminated its lease and GBI conducted an
inspection of the premises before accepting the
premises from Charter on behalf of GBJV. Further, GBI
and GBJV are (or were) in the business of owning,
managing and leasing industrial properties. GBJV had
leased the property to Charter for more than twenty
years and GBI had, apparently, managed the lease for a
lengthy time——conducting annual inspections.
Yes, just so.
¶64 Finally, as the circuit court ably described, MWF
argued itself into a box canyon on this point. By asserting
that Garland Brothers is chargeable with constructive knowledge
of the covered holes by virtue of its possession and control of
the Property, it implicitly (but necessarily) argued that it
should also be charged with that knowledge. MWF had
22
GBI was Garland Brothers' agent.
23
GBJV is Garland Brothers.
37
No. 2014AP2376
approximately as much time, opportunity, and motivation to
discover defects in the Property before Mr. Brenner's injury as
did Garland Brothers. Thus, if possession and control are
enough to charge Garland Brothers with constructive knowledge of
the covered holes, it must necessarily do the same for MWF. So
even if this analysis required us to examine the relationship
between MWF and Charter, it would be impossible for MWF, because
of its own argument, to establish the third element of § 353(1).
¶65 As it is, however, the proper relationship to examine
is the one that obtained between Charter and Garland Brothers.
And because we find that Garland Brothers had reason to know of
the holes covered by the plywood boxes, MWF cannot establish the
third element of the § 353(1) analysis. Inasmuch as this
provision requires MWF to demonstrate all four elements, we
conclude that § 353 does not remove the exemption from liability
provided by the caveat emptor doctrine.
V. CONCLUSION
¶66 The doctrine of caveat emptor——"buyer beware"——has
long been a part of the common law of this state. Although we
have recognized some narrow exceptions as it applies to real
estate transfers, the doctrine still describes a vital and
important restriction on liability when real property passes
from one possessor to the next. Accordingly, we decline to
adopt comment t to § 51.
¶67 We find that the caveat emptor doctrine applies to
Charter just as it would have if Charter had been the fee simple
owner when it transferred possession of the Property back to
38
No. 2014AP2376
Garland Brothers. Because MWF did not establish any exception
to the doctrine in this case, Charter's duty to subsequent
possessors expired when it surrendered possession of the
Property. Consequently, Charter cannot be liable in negligence
for Mr. Brenner's mishap.
By the Court.—The decision of the court of appeals is
affirmed.
¶68 REBECCA GRASSL BRADLEY, J., did not participate.
39
No. 2014AP2376
1