Louis Pagoudis v. Marcus Keidl ( 2023 )

2023 WI 27SUPREME COURT OF WISCONSIN
CASE NO.: 2020AP225
COMPLETE TITLE: Louis Pagoudis, Hanna Pagoudis, Sead Properties,
LLC and Kearns Management, LLC,
Plaintiffs-Appellants,
v.
Marcus Keidl and Russell K. Berg d/b/a Intervest
Inspections,
Defendants,
Amy Keidl a/k/a Amy Jo Weyker,
Defendant-Respondent-Petitioner.
REVIEW OF DECISION OF THE COURT OF APPEALS
Reported at 399 Wis. 2d. 75, 963 N.W.2d 803PDC No:2021 WI App 56 - Published
OPINION FILED: April 4, 2023
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: September 9, 2022
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Washington
JUDGE: Todd K. Martens
JUSTICES:
KAROFSKY, J., delivered the majority opinion of the Court, in
which ZIEGLER, C.J., ANN WALSH BRADLEY, DALLET, and HAGEDORN,
JJ., joined. ZIEGLER, C.J., filed a concurring opinion, in which
HAGEDORN, J., joined. ROGGENSACK, J., filed an opinion
concurring in part and dissenting in part. REBECCA GRASSL
BRADLEY, J., filed an opinion concurring in part and dissenting
in part.
NOT PARTICIPATING:
ATTORNEYS:
For the defendant-respondent-petitioner, there were briefs
filed by Laura Elaine O’Gorman and Schloemer Law Firm, S.C.,
West Bend. There was an oral argument by Laura Elaine O’Gorman.
For the plaintiffs-appellants, there was a brief filed by
Thomas L. Frenn, James R. Shaw, and Frenn Law Offices,
Wauwatosa, and James Shaw Law, Brookfield. There was an oral
argument by Shawn M. Govern.
An amicus curiae brief was filed by Cori Moore Lamont and
Wisconsin Realtors Association, Madison, for Wisconsin Realtors
Association.
2
2023 WI 27NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2020AP225
(L.C. No. 2019CV492)
STATE OF WISCONSIN : IN SUPREME COURT
Louis Pagoudis, Hanna Pagoudis, Sead
Properties, LLC and Kearns Management, LLC,
Plaintiffs-Appellants,
v. FILED
Marcus Keidl and Russell K. Berg d/b/a APR 4, 2023
Intervest Inspections,
Sheila T. Reiff
Defendants, Clerk of Supreme Court
Amy Keidl a/k/a Amy Jo Weyker,
Defendant-Respondent-Petitioner.
KAROFSKY, J., delivered the majority opinion of the Court, in
which ZIEGLER, C.J., ANN WALSH BRADLEY, DALLET, and HAGEDORN,
JJ., joined. ZIEGLER, C.J., filed a concurring opinion, in which
HAGEDORN, J., joined. ROGGENSACK, J., filed an opinion
concurring in part and dissenting in part. REBECCA GRASSL
BRADLEY, J., filed an opinion concurring in part and dissenting
in part.
REVIEW of a decision of the Court of Appeals. Affirmed in
part, reversed in part, and cause remanded.
¶1 JILL J. KAROFSKY, J. This case involves a
residential real estate transaction and a claim that the seller
No. 2020AP225
misrepresented the condition of the subject property, which has
given rise to confusion because three legally distinct entities—
—Elias "Louis" Pagoudis, Sead Properties, LLC (Sead LLC), and
Kearns Management, LLC (Kearns LLC)——conflated their interests
when filing their complaint. This court now endeavors to
disentangle those interests and holds that only Sead LLC has
sufficiently stated a claim upon which relief can be granted.
Pagoudis's and Kearns LLC's claims against Amy Keidl must be
dismissed.1
I. BACKGROUND
¶2 We begin by introducing the participants in this real
estate dispute. Pagoudis owns and is the sole member of two
LLCs: Sead LLC and Kearns LLC.2 Together, Pagoudis, Sead LLC,
and Kearns LLC are the plaintiffs in this action and Amy and
Marcus Keidl, the sellers of a piece of residential real estate
(the Property), are the defendants.3
The Honorable Todd K. Martens of the Washington County
1
Circuit Court dismissed the plaintiffs' claims with prejudice.
We leave it to the circuit court's discretion on remand whether
to dismiss Pagoudis's and Kearns LLC's claims with or without
prejudice in light of the analysis herein.
The complaint also lists Hanna Pagoudis, Louis Pagoudis's
2
wife, as a plaintiff with an interest in both LLCs. The
complaint treats all of Hanna Pagoudis's claims and rights as
derivative of her husband's claims through marriage, so this
opinion focuses only on Louis Pagoudis.
The plaintiffs also brought a negligence claim against the
3
home inspector, Russell Berg, but that claim was not part of Amy
Keidl's motion to dismiss and is therefore not before this court
on appeal.
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No. 2020AP225
¶3 We next take a moment to establish which documents we
are reviewing. The plaintiffs filed a first amended complaint
after Amy Keidl filed a motion to dismiss, but before the
circuit court ruled on the motion. With the first amended
complaint in play, the circuit court granted Amy Keidl's motion
to dismiss in full. The plaintiffs filed a motion for
reconsideration while simultaneously filing a second amended
complaint.4 The circuit court subsequently entered the final
order granting Amy Keidl's original motion, necessarily denying
the motion for reconsideration. The plaintiffs appealed this
final order. As such we treat the first amended complaint, the
complaint in place when the court initially granted the motion
to dismiss, as the operative complaint.
¶4 Various other documents were submitted to this court
either in the record attached to motions or in the appendix to
appellate briefing. When reviewing a motion to dismiss, we
generally limit the review to the four corners of the complaint.
See Andruss v. Divine Savior Healthcare Inc., 2022 WI 27, ¶15,
401 Wis. 2d 368, 973 N.W.2d 435. The circuit court considered
two warranty deeds attached to Keidl's motion to dismiss under
the limited "incorporated-by-reference doctrine." The court of
appeals upheld the consideration of the warranty deeds, and the
plaintiffs did not appeal that decision. Thus, we also consider
4 Amy Keidl filed another motion to dismiss relating to the
plaintiffs' second amended complaint.
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No. 2020AP225
these two warranty deeds. We do not consider or rely on any
other extraneous documents.5
¶5 Now we set out the facts of the purchase and transfer
of the Property, as alleged in the first amended complaint and
established by the warranty deeds. Pagoudis negotiated the
terms of the Property's purchase from the Keidls. During the
negotiations, he received a real estate condition report (RECR)
signed by Amy Keidl. Pagoudis then signed the offer to
purchase, which states that the contract is between the Keidls
and Pagoudis "or assigns."
¶6 Sead LLC then executed the negotiated contract for the
Property and took title to it. Less than six months later, Sead
LLC assigned the Property to Kearns LLC. At the time the
complaint was filed, Kearns LLC held title to the Property.
¶7 After purchasing the Property, the plaintiffs
discovered defects that Amy Keidl failed to disclose in the
RECR. The alleged defects range from water and mildew in the
basement, to insect infestations, to an unwanted piano.6 The
plaintiffs brought this action against the Keidls for breach of
contract, common law misrepresentation, and statutory
misrepresentation.
5We do, however, read some of the complaint's confusing or
contradictory language in light of helpful concessions made in
the plaintiffs' briefing and oral argument.
6We need not go further into the specifics of the alleged
defects. At this stage of the proceeding, we accept as true the
factual allegation that there were material defects in the
Property that were not disclosed in the RECR.
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No. 2020AP225
¶8 Amy Keidl filed a motion to dismiss for failure to
state a claim upon which relief can be granted pursuant to Wis.
Stat. § 802.06(2)(a)6 (2019-20)7. The circuit court dismissed
the case in full, deciding that each of the parties lacked
standing to pursue their stated claims. The court reasoned that
Pagoudis and Kearns LLC have no standing because they were not
parties to the original transaction, and Sead LLC has no
standing because it transferred the Property before filing the
action and thus no longer has an interest in the Property. The
court of appeals reversed, holding that at least one of the
parties has standing and remanded to the circuit court for
further factual development to determine which party or parties
have standing under which claims. We now conclude that
Pagoudis's and Kearns LLC's claims against Amy Keidl are
dismissed without further factual development because both
parties failed to state a claim upon which relief may be
granted. Sead LLC's claims, however, survive the motion to
dismiss, and as a result we remand the case to the circuit court
for further proceedings.
II. STANDARD OF REVIEW
¶9 A motion to dismiss is reviewed de novo taking all
well-pleaded factual allegations in the complaint as true and
drawing reasonable inferences from those facts. Colectivo
Coffee Roasters, Inc. v. Soc'y Ins., 2022 WI 36, ¶7, 401 Wis. 2d
All subsequent references to the Wisconsin Statutes are to
7
the 2019-20 version unless otherwise indicated.
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No. 2020AP225
660, 974 N.W.2d 442. We do not defer to a complaint's legal
conclusions. Id. In determining whether this complaint
survives a motion to dismiss, we look to various statutes, which
we also interpret de novo. State v. Forrett, 2022 WI 37, ¶5,
401 Wis. 2d 678, 974 N.W.2d 422.
III. ANALYSIS
¶10 While the circuit court, the court of appeals, and the
parties view the issue in this case as one of standing, we
conclude that the question here is really whether each
plaintiff, based on the plaintiff's unique interest in the
Property, has sufficiently pled any claim upon which relief can
be granted pursuant to Wis. Stat. § 802.06(2)(a)6. This case
does not raise a question of judicial policy but of the
complaint's legal sufficiency. See McConkey v. Van Hollen, 2010
WI 57, ¶15, 326 Wis. 2d 1, 783 N.W.2d 855 ("standing in
Wisconsin is not a matter of jurisdiction, but of sound judicial
policy"). Although there are many reasons that a claim may not
survive a motion to dismiss, we limit our review to the narrow
issue raised and developed on appeal (though stripped of the
guise of standing). As such, we interpret the issue as whether
each plaintiff, based on their individual interests in the
Property, states a claim upon which relief can be granted.
¶11 We determine that, according to the allegations in the
complaint, only Sead LLC has properly stated a claim upon which
relief can be granted. We begin by laying out the plaintiffs'
collective claims. We then summarize some basic principles of
LLC law in order to establish that each plaintiff's claims must
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No. 2020AP225
be analyzed independently. Finally, we address each plaintiff's
claims independently and determine that only Sead LLC's claims
survive the motion to dismiss.
A. The Claims
¶12 The plaintiffs' five claims fall into two categories:
breach of contract and misrepresentation. The plaintiffs' first
cause of action alleges breach of contract (warranty). The
elements of any breach of contract claim are (1) the existence
of a contract between the plaintiff and the defendant; (2)
breach of that contract; and (3) damages. Brew City Redev.
Grp., LLC v. The Ferchill Grp., 2006 WI App 39, ¶11, 289 Wis. 2d
795, 714 N.W.2d 582. To prove the existence of a warranty, the
elements are: (1) an affirmation of fact; (2) inducement to the
buyer; and (3) reliance by the buyer. See Selzer v. Brunsell
Bros., Ltd., 2002 WI App 232, ¶13, 257 Wis. 2d 809, 652 N.W.2d
806. When a warranty is found to be part of a contract, false
representations made as part of the warranty are a breach of the
contract.
¶13 The plaintiffs' second cause of action is for common
law intentional misrepresentation. To establish intentional
misrepresentation, the plaintiffs must show: (1) that the
defendant made a representation of fact to the plaintiff; (2)
the representation was false; (3) the plaintiff believed and
relied on the misrepresentation to the plaintiff's detriment;
(4) the defendant made the misrepresentation knowingly or
recklessly, and (5) the defendant did so intending to deceive
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No. 2020AP225
and induce the plaintiff. Tietsworth v. Harley Davidson, Inc.,
2004 WI 32, ¶13, 270 Wis. 2d 146, 677 N.W.2d 233.
¶14 The plaintiffs' third cause of action is for common
law strict liability misrepresentation. To establish strict
liability misrepresentation, the plaintiffs must show: (1) the
defendant made a representation of fact to the plaintiff; (2)
the representation was false; (3) the plaintiff believed and
relied on the misrepresentation to the plaintiff's detriment;
(4) the defendant knew or ought to have known that the statement
was false; and (5) the defendant had an economic interest in the
transaction. Ollerman v. O'Rourke Co. Inc., 94 Wis. 2d 17, 25,
288 N.W.2d 95 (1980).
¶15 The plaintiffs' fourth cause of action is
misrepresentation under Wis. Stat. §§ 943.20(1)(d) and 895.446.8
The elements of this claim are: (1) that the defendant made a
false representation to the plaintiff; (2) the defendant knew
the representation was false; (3) the defendant intended to
deceive and defraud the plaintiff; (4) the plaintiff was
deceived; (5) the plaintiff was defrauded; and (6) the defendant
obtained money through the sale of property to the plaintiff.
Ferris v. Location 3 Corp., 2011 WI App 134, ¶8, 337 Wis. 2d
155, 804 N.W.2d 822 (citing Wis. JI-Civil 2419).
8Wis. Stat. § 943.20(1)(d) makes it a crime to "obtain[]
title to property of another person by intentionally deceiving
the person with a false representation which is known to be
false, made with intent to defraud, and which does defraud the
person to whom it is made." Section 895.446(1) establishes that
anyone "who suffers damage or loss by reason of intentional
conduct" prohibited by § 943.20 has a civil cause of action.
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No. 2020AP225
¶16 The plaintiffs' fifth and final cause of action is
misrepresentation under Wis. Stat. § 100.18, often referred to
as "false advertising."9 The elements of this claim are: (1) the
defendant made a representation to the public with intent to
induce an obligation; (2) the representation was untrue,
deceptive or misleading; and (3) the representation caused the
plaintiff a pecuniary loss. K & S Tool & Die Corp. v.
Perfection Machinery Sales, Inc., 2007 WI 70, ¶19, 301 Wis. 2d
109, 732 N.W.2d 792.
¶17 In their complaint, the plaintiffs allege their claims
collectively without distinguishing between Pagoudis, Sead LLC,
and Kearns LLC's differing interests and involvement in the
transaction. Importantly, however, the plaintiffs' legal
interests are not collective as each plaintiff is a separate
legal entity according to the principles of LLC law. We explain
some of those LLC principles here to make this conclusion clear.
9The relevant portion of § 100.18(1) reads that "[n]o
person . . . with intent to induce the public in any manner to
enter into any contract or obligation relating to the
purchase . . . of any real estate . . . shall make, publish,
disseminate, circulate, or place before the public . . . an
advertisement, announcement, statement or representation of any
kind to the public relating to such purchase . . . [which]
contains any assertion, representation or statement of fact
which is untrue, deceptive or misleading." Section
100.18(11)(b) establishes that "any person suffering pecuniary
loss because of a violation of this section" has a civil cause
of action.
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No. 2020AP225
B. LLCs
¶18 Limited Liability Companies are business entities
created by statute——in Wisconsin, by Wis. Stat. ch. 183.10
Although an LLC is an association of members, Chapter 183 treats
LLCs as distinct legal entities separate from their members.
Joseph W. Boucher et al., LLCs and LLPs: A Wisconsin Handbook
§ 4.4. This legal distinction between the interests of LLCs and
their members is evident in how the chapter governs LLC and
member property interests (subchapter VII) and the relationships
between LLCs and their members (subchapter III).
¶19 First, chapter 183 clearly distinguishes the property
interests of LLC members from the property interests of the LLC.
See Wis. Stat. § 183.0701(1) ("All property originally
transferred to or subsequently acquired by or on account of a
limited liability company is property of the limited liability
company and not of the members individually."); Wis. Stat.
§ 183.0701(3) ("Any interest in real property may be acquired in
the name of a limited liability company and title to any
interest so acquired shall vest in the limited liability company
rather than in the members individually."). LLC members have a
personal property interest in the LLC itself, but do not have an
We note that since the appeal of this action, Wis. Stat.
10
ch. 183 has been completely repealed and recreated in 2021 WI
Act 258. Wisconsin Stat. § 183.0110(d)(1)(2021-22) states that
the 2019 version of chapter 183 shall remain applicable "with
respect to obligations incurred by the limited liability company
prior to" the date of applicability of the new chapter, January
1, 2023. As the obligations in this case were incurred prior to
January 1, 2023, the 2019 version of chapter 183 applies.
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No. 2020AP225
interest in any specific property owned by the LLC. Wis. Stat.
§ 183.0703; Wis. Stat. § 183.0701(1). This is true even if a
member contributed that specific property to the LLC. Wis.
Stat. § 183.0701(1).
¶20 Second, Chapter 183 defines the relationship between
an LLC and its members such that a member may act as an agent of
the LLC, but a member does not share the LLC's liabilities
solely by virtue of membership. Section 183.0301(1) provides
that each member of a member-managed LLC11 is an agent of the LLC
and the acts of members made in the ordinary course of LLC
business bind the LLC. Additionally, the "debts, obligations,
and liabilities" of an LLC "shall be solely the debts,
obligations and liabilities of the [LLC]," and an LLC's member
"is not personally liable for any debt, obligation or liability"
of the LLC (subject to a few exceptions that are inapplicable in
this case). Wis. Stat. § 183.0304(1). This is the "limited
liability" referenced in the LLC designation.
¶21 Taken together, these statutes establish that LLCs are
individual entities that are legally separate from their members
and from other LLCs, regardless of common ownership. Neither
LLCs may be either member-managed or manager-managed and
11
different statutory rules apply to each designation. The
default rule is that LLCs are member-managed. Wis. Stat.
§ 183.0401(1). Since Pagoudis has not alleged otherwise, and
because he has at times claimed to be acting on behalf of Sead
LLC, we assume that the default rule applies and Sead LLC is a
member-managed LLC.
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No. 2020AP225
assets nor liability flow freely between the LLC and its members
simply by virtue of LLC membership.
¶22 Based on these principles, and absent any allegations
that would otherwise tie their interests together, we must treat
Pagoudis as distinct under the law from his LLCs. We also must
treat Sead LLC's interests as distinct from Kearns LLC's
interests. Pagoudis may have taken some actions on behalf of
his LLCs as an agent, but that does not mean he can combine his
interests as an individual with his interests as an agent of an
LLC. We now turn to the claims at issue with these distinctions
in mind.
C. The Plaintiffs
¶23 We first explain that, under the allegations in the
complaint, each of Pagoudis's claims must be dismissed because
he was not a party to the final contract and did not purchase
the Property. Then we demonstrate that Sead LLC survives the
motion to dismiss because, as alleged, it was a party to the
contract, received representations from the Keidls, and
purchased the Property. Finally, we establish that Kearns LLC's
claims must be dismissed because, as alleged, Kearns was not a
party to the contract and the Keidls made no representations to
Kearns LLC.
1. Pagoudis
¶24 Although the complaint alleges that Pagoudis
negotiated and signed the offer to purchase, it does not allege
that he took title to the Property, and we know from the
warranty deed and concessions at oral argument that Sead LLC
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No. 2020AP225
purchased and took title from the Keidls. The complaint does
not specify how this transpired, but it could have happened in
one of two ways, neither of which would allow Pagoudis to
establish a claim in his individual capacity. Either: (1)
Pagoudis negotiated and signed the offer to purchase as an agent
of Sead LLC; or (2) Pagoudis assigned his rights as an
individual in the contract to Sead LLC before the purchase was
completed.
¶25 Under the first scenario, if Pagoudis acted as Sead
LLC's agent, then his actions were on behalf of Sead LLC alone
and he was never a party to the transaction in his individual
capacity.12
¶26 Under the second scenario, if Pagoudis were acting in
his individual capacity when he negotiated the contract, then he
necessarily must have assigned his relevant contract rights to
Sead LLC before the contract was executed because Sead LLC
purchased and took title to the Property. If Pagoudis assigned
his rights in this way, then Pagoudis's rights as an individual
were extinguished. When one assigns particular rights in a
contract to another party, their own claims under those assigned
rights are generally extinguished. Tullgren v. Sch. Dist. No. 1
of Vill. of Whitefish Bay, 16 Wis. 2d 135, 142, 113 N.W.2d 540(1962) (quoting 6 C.J.S. Assignments § 82). Otherwise, any
The plaintiffs presented this scenario during oral
12
arguments, claiming that Pagoudis was acting as an agent of Sead
LLC when signing the offer to purchase and that no assignment
was made.
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No. 2020AP225
assignment of contract rights would expand and duplicate
liability. Thus, whether Pagoudis acted as an agent or assigned
his contract rights to Sead LLC, Pagoudis did not purchase the
Property.
¶27 As such, under either scenario, Pagoudis failed to
state a claim for breach of contract. Pagoudis cannot satisfy
the first element of a breach of contract claim——the existence
of a contract between the Keidls and Pagoudis.
¶28 Also, Pagoudis cannot satisfy the third element of a
breach of contract claim or any of his misrepresentation claims
because he did not purchase the property——the complaint's only
alleged source of damages. As to his common law intentional and
strict liability misrepresentation claims, Pagoudis cannot show
that he believed and relied upon the misrepresentation to his
own detriment, and thus he cannot satisfy the third element of
either claim. Even if Pagoudis alleged reliance, it was to Sead
LLC's detriment, not Pagoudis's. Pagoudis's statutory
misrepresentation claim must likewise fail under its sixth
element——that the defendant obtained money through the sale of
property to the plaintiff——because the Keidls sold the property
to Sead LLC and not to Pagoudis. Finally, Pagoudis's statutory
false advertising claim fails under its third element——that the
representation caused the plaintiff a pecuniary loss. Again,
the only source of damages or pecuniary loss alleged in the
complaint stems from the purchase of the property, and Pagoudis
did not purchase the property.
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No. 2020AP225
¶29 Pagoudis argues that because he used personal funds in
the purchase of the Property, he was in fact the purchaser under
the contract despite not taking title to the Property. This
argument is rebutted by Wis. Stat. § 183.0701 which establishes
that the property acquired by an LLC, including title to real
property, belongs solely to the LLC and not to the LLC's
members. The source of the funds is immaterial. In sum,
Pagoudis has not stated any claim for breach of contract or any
form of misrepresentation and thus his claims must be dismissed.
2. Sead LLC
¶30 In contrast, Sead LLC's allegations satisfy the
elements of its breach of contract claim and its
misrepresentation claims. Sead LLC satisfies the elements of its
breach of contract claim by alleging: (1) the Keidls entered
into a contract with Sead LLC which included a warranty or
representation related to the RECR;13 (2) the Keidls breached
that contract because those affirmations were false; and (3)
Sead LLC suffered damages as a result.
The complaint alleges that as part of the contract for
13
the purchase of the Property, the Keidls "warranted and
represented that they had no notice or knowledge of conditions
affecting the Property other than those identified in the
[RECR]." Although the required language of an RECR as set out
in Wis. Stat. § 709.03 clearly states that it "is not a warranty
of any kind," the complaint alleges plausibly that the Keidls
separately offered a warranty as part of the purchase contract,
which document is not before this court. Furthermore, Amy Keidl
did not develop any argument that the plaintiffs failed to
sufficiently allege the existence of a warranty. As such, we do
not decide whether the disclaimer of a warranty in § 709.03
could eventually defeat Sead LLC's breach of contract (warranty)
claim.
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No. 2020AP225
¶31 Sead LLC's allegations satisfy all of the elements of
the four misrepresentation claims. Under the intentional
misrepresentation claim, Sead LLC has alleged: (1) that Amy
Keidl made a representation of fact to Sead LLC (either through
its agent, Pagoudis, or through the assigned contract rights)
that the Keidls did not know of any material property defects
beyond those disclosed; (2) that such representation was false
because the Keidls knew of additional material defects; (3) that
Sead LLC believed and relied on the representations in the RECR;
(4) that the Keidls knowingly made the false representation; and
(5) that the Keidls did so intending to deceive and induce Sead
LLC into purchasing the Property. For the purposes of the
complaint, the strict liability misrepresentation claim's first
four elements are the same as the intentional misrepresentation
claim. In addition to properly alleging those elements, the
complaint sufficiently alleges that the Keidls had an economic
interest in the sale of the Property.
¶32 Under the statutory misrepresentation claim, the
complaint sufficiently alleges that: (1) the Keidls made a false
representation to Sead LLC that all known material defects were
reported in the RECR; (2) the Keidls knew the representation was
false; (3) the Keidls intended to deceive and defraud Sead LLC;
(4) Sead LLC was deceived; (5) Sead LLC was defrauded; and (6)
the Keidls obtained money through the sale of property to Sead
LLC.
¶33 Finally, under the false advertising claim, the
complaint sufficiently alleges that: (1) the Keidls made a
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No. 2020AP225
representation to "the public" by making representations in the
RECR to a potential buyer, Sead LLC; (2) the representations
were untrue; and (3) the representation caused Sead LLC a
pecuniary loss because it purchased property with more material
defects than disclosed that will cost money to repair.
¶34 The circuit court in this case erroneously dismissed
Sead LLC as lacking standing because Sead LLC no longer held
title to the Property. Current or continuing possession of
property is not an element of any of the alleged claims and is
not a requirement under general standing principles. The
question is whether Sead LLC suffered damages before
transferring the Property. Sead LLC has alleged that it
suffered damages because it paid more for the Property than the
Property was actually worth. It incurred these alleged damages
at the point of sale, prior to transferring the Property.
Furthermore, Sead LLC alleges plausibly that it incurred costs
in preparing to repair the Property prior to transferring the
property to Kearns LLC.
¶35 In light of the LLC principles set out above, it is
important to note that Sead LLC's damages are limited to only
the damages Sead LLC itself suffered. The court of appeals
discussed, without deciding, that Kearns LLC and Sead LLC's
damages might flow between them as a "related party." See
Pagoudis v. Keidl, 2021 WI App 56, ¶33, 399 Wis. 2d 75, 963
N.W.2d 803. However, LLCs do not become "related" parties
merely due to common membership or ownership. LLCs are
individual entities whose benefits and protections stem from
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No. 2020AP225
their legally separate nature. These lines of separation cannot
be crossed at the whim of the LLC's members only when beneficial
to them. Sead LLC is its own entity, separate from Kearns LLC
and separate from its member, Pagoudis. Sead LLC must establish
its own damages.
3. Kearns LLC
¶36 Finally, we turn to Kearns LLC, the current owner of
the Property. Kearns LLC's breach of contract (warranty) claim
must be dismissed. It was not a party to the contract with the
Keidls. The complaint does not allege that Kearns LLC signed
the offer to purchase the Property or that Kearns LLC was
assigned any rights under that offer to purchase, nor does it
allege any other facts that would put Kearns LLC in privity of
contract with the Keidls.14 As such, it cannot satisfy the first
element of a breach of contract claim: that a contract existed
between the Keidls and Kearns LLC.
¶37 Similarly, Kearns LLC's misrepresentation claims must
be dismissed because the complaint does not allege that the
Keidls made any representations to Kearns LLC. Therefore,
Kearns LLC does not meet the first element of its first three
misrepresentation claims——that the defendant made a
representation of fact to the plaintiff. Furthermore, the
complaint does not allege that the Keidls made a representation
Privity of contract is defined as the "relationship
14
between the parties to a contract, allowing them to sue each
other but preventing a third party from doing so." Privity,
Black's Law Dictionary 1453 (11th ed. 2019).
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No. 2020AP225
of fact to Kearns LLC as a member of "the public" under the
first element of a false advertising claim.15
¶38 Stated another way, under the facts alleged in the
complaint, Sead LLC——not the Keidls——is the only party that
could have made representations regarding the current status of
the Property to Kearns LLC before Kearns LLC took title to the
property. Therefore, any claim for misrepresentation Kearns LLC
may hold would have to be brought against Sead LLC.
¶39 The plaintiffs argue that Kearns LLC can nevertheless
satisfy the elements of their misrepresentation claims under a
theory of third-person misrepresentation as set out in the
Restatement (Second) of Torts § 533. The Restatement (Second)
of Torts § 533 states:
The maker of a fraudulent misrepresentation is subject
to liability for pecuniary loss to another who acts in
justifiable reliance upon it if the misrepresentation,
although not made directly to the other, is made to a
third person and the maker intends or has reason to
expect that its terms will be repeated or its
substance communicated to the other, and that it will
influence his conduct in the transaction or type of
transaction involved.
This section cannot apply under the facts of this case because
the Keidls did not have a reason to expect that their
Although representations to a potential real estate
15
purchaser have been considered representations to "the public"
in Below v. Norton, under these facts, only the purchaser
received those representations from the Keidls. See Below v.
Norton, 2008 WI 77, ¶¶5-6, 310 Wis. 2d 713, 751 N.W.2d 351.
19
No. 2020AP225
representations in the RECR would be repeated and relied upon by
Kearns LLC.16
¶40 A decision that the Keidls had reason to expect the
representations in the RECR would reach and be relied on by a
subsequent buyer would run contrary to Wisconsin's RECR
statutes. Wisconsin Stat. § 709.02(1) requires that sellers of
residential real estate furnish a completed RECR under Wis.
Stat. § 709.03 to "the prospective buyer." The statutorily
provided form states that "[t]he owner discloses the following
information with the knowledge that, even though this is not a
warranty, prospective buyers may rely on this information in
deciding whether and on what terms to purchase the property."
Wis. Stat. § 709.03 A6. These statutes clearly set out the
reasonable expectation regarding who may rely on an RECR.
¶41 Only a "prospective buyer" may be expected to rely on
the RECR. Sections 709.02 and 709.03 are closely related
statutes with direct cross references between them and thus a
plain reading of the statutes assigns a consistent meaning to
the term "prospective buyer" in both sections. See United Am.,
LLC v. Wis. Dep't of Transp., 2021 WI 44, ¶6, 397 Wis. 2d 42,
959 N.W.2d 317 ("Common meaning is derived in part from the
statutory context in which the terms are used. That includes
the terms' usage in relation to the language of closely related
statutes[.]" (internal citations omitted)). In Wis. Stat.
We do not decide whether Restatement § 533 may be adopted
16
by a future court under different factual allegations.
20
No. 2020AP225
§ 709.02(1), "prospective buyer" refers specifically to a buyer
already in contract with the seller. Wis. Stat. § 709.02(1)
("[T]he owner of the property shall furnish, not later than 10
days after acceptance of a contract of sale or option contract,
to the prospective buyer of the property a completed copy of the
report under s. 709.03 . . . ."). Thus, although the term
"prospective" could indicate simply any "future" buyer,17 the
term "prospective buyer" in the context of the statute must be
limited to a future buyer within the specific transaction at
issue. To extend liability to any future buyer in a different
transaction with a different seller would be contrary to the
plain language of the statute and would create endless potential
liability for home sellers. It is evident that the statutes
establish that a seller must reasonably expect reliance by only
the prospective buyer in the current transaction.
¶42 As there can be no reasonable expectation of third-
party reliance stemming from an RECR, and the Keidls made no
direct representations to Kearns LLC, Kearns LLC cannot maintain
any of its misrepresentation claims. In sum, all claims by
Kearns LLC must be dismissed.
IV. CONCLUSION
¶43 Sead LLC's claims survive this Wis. Stat.
§ 802.06(2)(a)6. motion to dismiss, which we interpret as
challenging the sufficiency of the complaint based on the
17 Prospective is defined as "effective or operative in the
future." Prospective, Black's Law Dictionary 1477 (11th ed.
2019).
21
No. 2020AP225
identity of the plaintiff. Amy Keidl's motion to dismiss must
be granted as to Pagoudis and Kearns LLC as they have not stated
any claim upon which relief can be granted.
By the Court.—The decision of the court of appeals is
affirmed in part, reversed in part, and the cause is remanded to
the circuit court for further proceedings consistent with this
opinion.
22
No. 2020AP225.akz
¶44 ANNETTE KINGSLAND ZIEGLER, C.J. (concurring). I
agree that both Pagoudis and Kearns must be dismissed, and I
reiterate both that I would not adopt the Restatement (Second)
of Torts § 533 and that an LLC is indeed a separate and distinct
entity from its members. Furthermore, based upon the Amended
Complaint, concessions at oral argument by Pagoudis's counsel,
and warranty deeds undisputedly incorporated into the Amended
Complaint, dismissal of Pagoudis is appropriate. I write
separately to emphasize the limited scope of our review at the
motion to dismiss stage with regard to Pagoudis's claims brought
in his personal capacity and the unique facts of this case that
bear upon that question.
¶45 "When we review a motion to dismiss, factual
allegations in the complaint are accepted as true for purposes
of our review." Data Key Partners v. Permira Advisers LLC, 2014
WI 86, ¶18, 356 Wis. 2d 665, 849 N.W.2d 693. We "derive all
reasonable inferences from those facts" and "construe those
facts and inferences in the light most favorable to the
plaintiff." Preston v. Meriter Hosp., Inc., 2005 WI 122, ¶13,
284 Wis. 2d 264, 700 N.W.2d 158. Though "a court cannot add
facts in the process of construing a complaint," Data Key
Partners, 356 Wis. 2d 665, ¶19, a court may, in limited
circumstances, consider facts outside the four corners of the
complaint under the "incorporation-by-reference" doctrine. "The
incorporation-by-reference doctrine 'prevents a plaintiff from
"evad[ing] dismissal . . . simply by failing to attach to his
complaint a document that prove[s] his claim has no merit."'"
1
No. 2020AP225.akz
Soderlund v. Zibolski, 2016 WI App 6, ¶38, 366 Wis. 2d 579, 874
N.W.2d 561 (quoting Brownmark Films, LLC v. Comedy Partners, 682
F.3d 687, 690 (7th Cir. 2012)) (alterations in original).
¶46 The plaintiffs' Amended Complaint alleges, "SEAD
PROPERTIES, LLC . . . purchased the Property from the
DEFENDANTS."1 The Amended Complaint also alleges the "[P]roperty
was purchased with mar[it]al funds" and that "Pagoudis entered
into a contract with [the Keidls] for the purchase of the
Property, which was intended to be their permanent residence
with their children." As the court of appeals put it, these
pleadings are "hardly a model of clarity." Pagoudis v. Keidl,
2021 WI App 56, ¶36, 399 Wis. 2d 75, 963 N.W.2d 803. Without
more, one might read the Amended Complaint as not clearly
establishing whether it was Pagoudis, in his personal capacity,
or Sead that received representations about the property causing
the purchase.
¶47 Ordinarily, in a motion to dismiss, we would construe
the pleading in a light most favorable to the nonmoving party
without resort to any extrinsic sources. One might be able to
conclude that Pagoudis cannot yet be dismissed because the
pleadings sufficiently allege that Pagoudis individually was the
initial purchaser to whom misrepresentations were made and that
those misrepresentations caused him to decide to purchase
property and assign it before closing. However, that
interpretation was directly repudiated by his counsel at oral
The plaintiffs also filed a second amended complaint. We
1
review only the first amended complaint because the plaintiffs
appealed from the order dismissing that complaint.
2
No. 2020AP225.akz
argument. Perhaps this is because Sead is reflected as the
owner on the warranty deed.
¶48 Typically we would not consider anything other than
the complaint in our analysis. However, Keidl actually attached
two warranty deeds to the motion to dismiss. The circuit court
considered both of these documents. The court of appeals upheld
that consideration as proper under the incorporation-by-
reference doctrine, and neither party appealed this
determination or argues that this was improper. The first
document was the deed from the initial purchase transfer from
the Keidls to Sead, and the second was the deed transferring the
Property from Sead to Kearns. Relevant to our determination,
however, is the first warranty deed, as it concerns the initial
purchase of the Property. The deed from the initial transfer
states, "This Deed[ is] made between Marcus J. Keidl and Amy J.
Keidl . . . and Sead Properties LLC." It conveyed the Property
directly from the Keidls to Sead, "[t]ogether with all and
singular the hereditaments and appurtenances thereunto
belonging."
¶49 Pagoudis's counsel conceded at oral argument that
Pagoudis was not acting as an individual but instead acted only
as an agent for his LLC in the transaction and that any
misrepresentations were made to those LLCs through Pagoudis.2
We may accept such concessions for purposes of resolving a
2
motion to dismiss. See Wis. Mfrs. & Com. v. Evers, 2022 WI 38,
¶17 n.10, __ Wis. 2d __, 977 N.W.2d 374 (accepting a concession
at the motion to dismiss stage); DeBruin v. St. Patrick
Congregation, 2012 WI 94, ¶4 n.5, 343 Wis. 2d 83, 816 N.W.2d 878(same); Penterman v. Wis. Elec. Power Co., 211 Wis. 2d 458, 480-
81, 565 N.W.2d 521 (1997) (same).
3
No. 2020AP225.akz
Responding to questions about whether the complaint states a
claim for Pagoudis individually or Pagoudis as a member of Sead,
counsel stated,
The fact of the matter is Louis Pagoudis was on the
contract. Louis Pagoudis is the managing sole member
of both of the LLCs. He's an agent by definition
under [§] 183 because the LLC acts through its members
and its managing members are authorized. And so, at
the end of the day, I believe these LLCs are the
recipients of the misrepresentation.[3]
¶50 Counsel was next questioned about how Pagoudis
"personally could suffer damages simply because [he is a] member
of an organization that purchased a property." Counsel
responded, "[T]here are losses that are related to diminution of
value . . . . The sole members, their value in the LLC is tied
to the profits and losses in the values of the assets." Counsel
admitted that the only damage Pagoudis suffered was through his
interest in the LLC. There is no allegation that Pagoudis
personally suffered damages unrelated to his LLC interest.4
3 Counsel also later conceded that Pagoudis "took title
through an LLC."
4 Although LLC members may be monetarily affected by the
successes and failures of the distinct legal entity, the LLC,
the treatment of the LLC remains the same regardless of the
composition of its members. To say otherwise would blur the
line between an LLC and its members. The protections afforded
do not fluctuate depending on advantages given a particular
situation. Cf. Notz v. Everett Smith Grp., Ltd., 2009 WI 30,
¶20, 316 Wis. 2d 640, 764 N.W.2d 904 (footnote omitted)
(citation omitted) ("[A] right of action that belongs to the
corporation cannot be pursued as a direct claim by an individual
stockholder. . . . [E]ven where the injury to the corporation
results in harm to a shareholder, it won't transform an action
from a derivative to a direct one . . . ."); 54 C.J.S. Limited
Liability Companies § 64 (2023) ("The principles of derivative
lawsuits applicable to corporations likewise apply to limited
liability companies.").
4
No. 2020AP225.akz
Counsel's admissions demonstrate that Pagoudis only ever acted
through his LLC, never in his personal capacity.
¶51 Based on counsel's admissions at oral argument and the
warranty deed, Sead was the initial purchaser and took title
directly from the Keidls. Pagoudis, in his personal capacity,
never individually purchased or owned the Property and therefore
had no claims to assign. For these reasons, the claims brought
in Pagoudis's personal capacity are properly dismissed.
¶52 For the foregoing reasons, I respectfully concur.
¶53 I am authorized to state that Justice BRIAN HAGEDORN
joins this concurrence.
5
No. 2020AP225.pdr
¶54 PATIENCE DRAKE ROGGENSACK, J. (concurring in part,
dissenting in part). Louis Pagoudis, Sead, LLC (Sead) and
Kearns Management, LLC (Kearns) assert claims against Marcus and
Amy Keidl (the Keidls) based on their sale of "the Property."
The majority improperly dismisses Pagoudis's and Kearns's claims
based on its conclusion that in regard to those two plaintiffs,
the Amended Complaint fails to state a claim upon which relief
can be granted.1
¶55 Because the Amended Complaint alleges facts that, if
proved true, state tort claims for intentional
misrepresentation, strict liability for misrepresentation,
violations of Wis. Stat. §§ 895.446 and 943.20 and false
advertising pursuant to Wis. Stat. § 100.18, by the Keidls,
Pagoudis and Kearns should be permitted to proceed further in
developing facts relevant to those tort claims.2
¶56 Furthermore, as I explain below, such claims generally
are assignable. However, the Amended Complaint does not allege
that they were assigned to either Sead or Kearns and therefore,
they likely remain with Pagoudis. And finally, if Sead or
Kearns are worth less than the dollar amount that Pagoudis
placed into them due to actions of the Keidls, the value of his
personal property interests in those entities may have been
injured. We simply can't determine where the ultimate injury
1 Majority op., ¶8.
Essentially, Pagoudis's claim is
2 for fraud in the
inducement based on those alleged torts.
1
No. 2020AP225.pdr
may lie based solely on the Amended Complaint. Accordingly,
because the possibilities in regard to injury and valuation are
myriad, I would affirm the court of appeals, and I respectfully
dissent from the majority opinion's dismissal of claims made by
Pagoudis and Kearns.
I. BACKGROUND
¶57 The Amended Complaint alleges that Pagoudis contracted
with the Keidls to purchase the Property.3 Although Pagoudis,
Sead and Kearns are listed as "Plaintiffs" in the Amended
Complaint, with few exceptions, the paragraphs of the Amended
Complaint refer to "plaintiff" in the singular form, allege
facts occurring before the closing on the sale of the Property
when Pagoudis was the only actor and allege financial outlays
that Pagoudis made subsequent to closing. In sum, the
allegations in the Amended Complaint are written as though from
Pagoudis's perspective.4
¶58 In making his decision to purchase, Pagoudis relied on
the "Real Estate Condition Report" (RECR) that was prepared by
Amy Keidl and dated February 1, 2017.5 The RECR shows that
Pagoudis acknowledged its receipt on March 11 or 17, 2017.6
Although the accepted offer to purchase is not part of the
record before us, the parties seem to agree that Pagoudis signed
3 Amended Complaint, ¶5.
4 E.g., id., ¶¶5, 6, 8, 10-12, 18, 31-36, 40.
5 Id., ¶1, referencing the attached RECR, ¶6.
Id., RECR attached to the Amended Complaint has an unclear
6
date of receipt by Pagoudis.
2
No. 2020AP225.pdr
it with some indication on the document that he could assign the
interest he was obtaining.7
¶59 Prior to closing, the Keidls represented that they had
no knowledge of defects, including, but not limited to basement
water leaks or mold or fungus being present in the Property.8
Pagoudis found those and other defects subsequent to closing,
and he contacted experts who informed him that those defects
existed while the Keidls owned the property.9 Therefore,
Pagoudis contends that the Keidls knew of the defects.10
¶60 Pagoudis asserts that the Keidls failed to disclose
material facts with the intent to deceive and to induce him to
act in reliance on their deception.11 He asserts the Keidls made
representations about the condition of the Property that were
untrue, with the intent to sell the Property.12 Because of the
Keidls' failure to disclose defects in the Property, Plaintiffs
suffered economic damage.13
¶61 Sead Properties, LLC is a Wisconsin limited liability
company.14 As Pagoudis's likely assign, Sead took title to the
7 The accepted offer to purchase was not submitted at the
circuit court. It was improperly attached to Plaintiffs'
appendix at the court of appeals.
8 Amended Complaint, ¶9.
9 Id., ¶11.
10 Id., ¶13.
11 Id., ¶22.
12 Id., ¶38.
13 Id., ¶29.
14 Id., ¶2.
3
No. 2020AP225.pdr
Property from the Keidls.15 Pagoudis is the sole member of
Sead.16 Kearns is a Wisconsin limited liability company that is
solely owned by Pagoudis.17 Sead assigned its interest in the
Property to Kearns.18 The Amended Complaint says nothing about
Pagoudis assigning his tort claims to Sead or Kearns.
¶62 The circuit court dismissed the Amended Complaint as
to all parties. It concluded that the Amended Complaint did not
state a claim for Pagoudis, Sead, or Kearns. The court of
appeals reversed and reinstated the Amended Complaint in regard
to Pagoudis, Sead, and Kearns.19 It concluded that the Amended
Complaint could not be dismissed without further factual
development.20
15Id., ¶2. It is agreed that Sead took title to the
Property, even though that fact is not alleged in the Amended
Complaint.
16 Id., ¶2.
17 Id., ¶3.
18 Id., ¶3.
19Pagoudis v. Keidl, 2021 WI App. 56, ¶2, 399 Wis. 2d 75,
963 N.W.2d 803.
20 Id.4
No. 2020AP225.pdr
II. DISCUSSION
A. Standard of Review
¶63 Upon review of this motion to dismiss, we begin by
accepting all well-pleaded facts and their reasonable inferences
in the Amended Complaint. Data Key Partners v. Permira Advisers
LLC, 2014 WI 86, ¶19, 356 Wis. 2d 665, 849 N.W.2d 693. "[L]egal
conclusions asserted in a complaint are not accepted, and legal
conclusions are insufficient to withstand a motion to dismiss."
Id., ¶18. Furthermore, "a court cannot add facts in the process
of construing a complaint." Id., ¶19. Whether the alleged
facts state a claim for relief is a question of law that is
subject to our independent review. Id., ¶17.
¶64 The pending dispute requires us to interpret and apply
statutes, which also present questions of law that we
independently decide. Townsend v. ChartSwap, LLC, 2021 WI 86,
¶11, 399 Wis. 2d 599, 967 N.W.2d 21.
B. Claim Ownership
¶65 In order to answer the questions presented by the
motion to dismiss, it is helpful to understand the relationships
between Pagoudis and the two limited liability companies, Sead
and Kearns. See Marx v. Morris, 2019 WI 34, 386 Wis. 2d 122,
925 N.W.2d 112.
1. General LLC Principles
¶66 Wisconsin limited liability companies are entities
that were created by Wis. Stat. ch. 183.21 They commonly are
21 Wisconsin Stat. ch. 183 recently was repealed and
recreated, with revisions effective January 1, 2023 unless the
obligation at issue occurred prior to that date. Wis. Stat.
5
No. 2020AP225.pdr
used in Wisconsin because of their flexibility and the personal
liability shield they provide for members who conduct business
by the use of an LLC.
¶67 LLCs are formed by filing articles of organization
with the Department of Financial Institutions to give notice of
their existence. Wis. Stat. § 183.0201; Joseph W. Boucher et
al, LLCs and LLPs: A Wisconsin Handbook, § 1.6 (6th ed. 2018).
Generally, members create a contract, the operating agreement,
which sets out an LLC's mode of operation. Id., §§ 1.6, 3.60.
¶68 Due to the desire for flexibility of operation, many
provisions in Wis. Stat. ch. 183 furnish default rather than
mandatory rules for an LLC. "However, all the default rules
apply unless an operating agreement unambiguously states
otherwise." Marx, 386 Wis. 2d 122, ¶27.
¶69 Members make contributions to the capital of the LLC
in exchange for their ownership interest in it. LLCs and
LLPs: A Wisconsin Handbook, supra, at § 4.8. Contributions
traditionally consist of property or cash or services, and the
operating agreement states the value of each member's
contribution. Wis. Stat. § 183.0501.
¶70 A member's ownership interest in an LLC is personal
property. Wis. Stat. § 183.0703. Therefore, even if a member
obtains his or her interest in the LLC by contributing real
estate to the LLC, once contributed, that individual's interest
in the real estate ends. Wis. Stat. § 183.0701(1); LLCs and
LLPs: A Wisconsin Handbook, supra, at § 4.4. In exchange, the
§ 183.0110(d)(1) (2021-22).
6
No. 2020AP225.pdr
member obtains a personal property interest in the LLC.
§ 183.0703; LLCs and LLPs: A Wisconsin Handbook, supra, § 4.4.
2. Pagoudis, Sead, and Kearns
¶71 The operating agreement for neither Sead nor Kearns is
in the record. Therefore, at this point in the litigation, we
proceed based solely on the factual allegations contained in the
Amended Complaint, which we accept as true for purposes of Amy
Keidl's motion to dismiss. Data Key Partners, 356 Wis. 2d 665,
¶19.
¶72 The assignment of the contractual right to take title
to the Property, which apparently was executed in favor of Sead,
also is not in the record.22 Therefore, we cannot tell whether
Pagoudis assigned simply the right to take title to the Property
or also assigned his tort claims. However, the Amended
Complaint does not allege tort claim assignment.
¶73 We addressed a similar concern in Chimekas v. Marvin,
25 Wis. 2d 630, 131 N.W.2d 297 (1964), which was relied on in
part by the court of appeals.23 There, Chimekas contracted with
The parties seem to agree that Pagoudis contracted to
22
purchase the property for himself "or assigns." However, the
accepted offer to purchase was not submitted while this matter
was before the circuit court and no document actually making an
assignment from Pagoudis to Sead is in the record. However,
paragraph 2 of the Amended Complaint says, Sead "purchased the
property from the DEFENDANTS." This may be a conclusion of law
to which we owe no deference if Pagoudis paid for the property
to which Sead took title. See Davis v. Buchanan Cnty., Mo.,
5 F.4th 907, 911 (8th Cir. 2021). At this point in the
litigation, we simply don't have complete factual development.
23 Pagoudis, 399 Wis. 2d 75, ¶36.
7
No. 2020AP225.pdr
Marvin to purchase residential property. As "an inducement for
the Chimekas entering into the contract the defendants knowingly
falsely represented and warranted that the basement was dry and
waterproof; in fact it was not dry or waterproof." Id. at 631.
Chimekas assigned all of their contractual rights to Chaloupkas
by gift and both sued Marvin for damages for fraud. Id.
¶74 The trial court dismissed the action, concluding that
once Chimekas transferred their interest to Chaloupkas they had
no damages, and Chaloupkas had no damages because a cause of
action for fraud is not assignable. Id. at 631-32. We
explained, as we reversed the trial court, that Chimekas'
assignment to Chaloupkas of the contractual right to purchase
the property "is not an allegation that the former assigned
their tort cause of action for fraud to the latter." Id. at
632. In concluding that Chaloupkas was not an assignee of the
fraud claim, we further explained that the "accepted test of
assignability of a cause of action is whether it survives the
death of a party." Id. at 632-33 (citing P.C. Monday Tea Co. v.
Milwaukee Cnty. Expressway Comm'n, 24 Wis. 2d 107, 111, 128
N.W.2d 631 (1964) (further citations omitted)). Furthermore, "a
cause of action for deceit in inducing a conveyance of real
estate survives the defrauded party's death. Such a cause of
action, therefore, is assignable." Chimekas, 25 Wis. 2d at 633.
However, Chimekas making a gift of their right to own the
property does not affect the issue of whether Chimekas sustained
The majority opinion never mentions Chimekas v. Marvin, 25
Wis. 2d 630, 131 N.W.2d 297 (1964), even though the court of
appeals and I have used it in our opinions.
8
No. 2020AP225.pdr
damages because of defendants' alleged false representations.
Id. Therefore, we concluded that the complaint stated facts
that were sufficient to constitute a tort cause of action in
fraud for Chimekas. Id.¶75 Here, as in Chimekas, Pagoudis's tort claims against
the Keidls could have been assigned to Sead because they
generally are assignable claims. Id. at 633. However, there is
no allegation in the Amended Complaint that Pagoudis did assign
them. Therefore, at this point in the litigation, Pagoudis may
well hold those claims.
¶76 The majority analysis is confused because it does not
recognize that Pagoudis's claims are tort claims against the
Keidls. Although breach of contract is alleged, cut to the
quick, the Amended Complaint alleges fraud in the inducement to
purchase real estate. The majority opinion also does not
recognize that the Amended Complaint controls our analysis.
¶77 Pagoudis did not allege in the Amended Complaint that
he assigned his tort claims to anyone. The majority opinion
says that if Pagoudis negotiated the purchase of the Property as
an individual and assigned his contract rights to Sead,
"Pagoudis's rights as an individual were extinguished."24 The
majority goes on to opine that "When one assigns particular
rights in a contract to another party, their own claims under
those assigned rights are generally extinguished."25 It cites
24 Majority op., ¶26.
25 Id.
9
No. 2020AP225.pdr
Tullgren v. Sch. Dist. No. 1 of Vill. of Whitefish Bay, 16
Wis. 2d 135, 142, 113 N.W.2d 540 (1962), for that assertion.
¶78 Tullgren says it is based on an "unqualified"
assignment of contract rights. Id. at 141-42. Here, an
"assignment" from Pagoudis is not in the record so we do not
know if there is a document that sets the terms of the
assignment. Perhaps it was unqualified; perhaps not. The
record is silent.
¶79 Also, Tullgren is based on a contract claim. And,
although the Plaintiffs made a breach of contract claim, the
central dispute in regard to Pagoudis is based on fraud in the
inducement, which is a tort claim. Tullgren provides no support
for the conclusion that Pagoudis's tort claims are
extinguished.26
¶80 Chimekas is on all fours with the dispute before us.
It is grounded in the principle that transferring ownership in a
property does not transfer tort claims unless the owner of the
tort claim so alleges. Chimekas, 25 Wis. 2d at 633. In the
dispute before us, the Amended Complaint does not allege that
Pagoudis assigned his tort claims against the Keidls.
¶81 Kearns now has title to the property.27 However, there
is nothing in the Amended Complaint that alleges that Pagoudis
assigned his tort claims to Sead, who then assigned them to
Without the assignment from Pagoudis to Sead, it is also
26
not possible to determine whether it was "unqualified" in regard
to contract rights.
27 Amended Complaint, ¶3.
10
No. 2020AP225.pdr
Kearns when Sead assigned its ownership rights in the Property.
It simply alleges Kearns is a Wisconsin LLC to which Sead
assigned the Property.28
¶82 Under Wisconsin law, LLCs operate under the entity
theory such that each LLC is an individual entity. Gottsacker
v. Monnier, 2005 WI 69, ¶14, 281 Wis. 2d 361, 697 N.W.2d 436.
Therefore, their interests may not be conflated into one entity
even though Pagoudis solely owns both Sead and Kearns.
¶83 As we also do not have the operating agreements for
Sead or Kearns, we do not know exactly what Pagoudis contributed
to either one. Therefore, we cannot ascertain with certainty
whether either suffered injury due to the Keidls' interactions
with Pagoudis. And finally, if Pagoudis transferred only his
contractual interest in the Property to Sead based on the sale
contract's stated value and if that value, while held by Sead,
diminished, Pagoudis's personal property interest in Sead also
may have diminished.29 LLCs and LLPs: A Wisconsin Handbook,
§ 4.8. None of these questions can be answered based solely on
the Amended Complaint. However, our process when faced with a
motion to dismiss for failure to state a claim begins and ends
with the Amended Complaint.
III. CONCLUSION
28 Id.
The type of injury alleged would not produce duplicative
29
damages, because only one set of damages for the Keidls'
interaction with Pagoudis is possible. See Jones v. Secura Ins.
Co., 2002 WI 11, ¶3, 249 Wis. 2d 623, 638 N.W.2d 575. However,
at this point in the litigation, I cannot determine where the
ultimate injury occurred.
11
No. 2020AP225.pdr
¶84 Because the Amended Complaint alleges facts that, if
proved true, state claims for intentional misrepresentation,
strict liability for misrepresentation, violations of Wis. Stat.
§§ 895.446 and 943.20 and false advertising pursuant to Wis.
Stat. § 100.18 by the Keidls, Pagoudis should be permitted to
proceed further in developing facts relevant to those claims.
¶85 Furthermore, as I explained above, such claims
generally are assignable, but the Amended Complaint does not
allege that they were assigned to either Sead or Kearns and
therefore, they likely remain with Pagoudis. And finally, if
Sead or Kearns are worth less than the dollar amount that
Pagoudis placed into them due to actions of the Keidls, the
value of his personal property interests in those entities may
have been injured. Accordingly, because the possibilities in
regard to injury and valuation are myriad, I would affirm the
court of appeals, and I respectfully dissent from the majority
opinion's dismissal of claims made by Pagoudis and Kearns.
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¶86 REBECCA GRASSL BRADLEY, J. (concurring in part,
dissenting in part). In the mid-1500s, the Pope commissioned
Michelangelo to paint a depiction of The Last Judgment in the
Sistine Chapel. As was customary at the time, Michelangelo
included nudity in his work. Because the sensibilities of a
prominent cardinal were offended, the Pope ordered Michelangelo
to cover the nudity of religious figures. He did, marking the
beginning of the infamous "Fig Leaf Campaign." The Council of
Trent scoured Rome in search of nude sculptures, ordering metal
fig leaves placed over many depictions of genitalia. Recently,
efforts have been made to restore some of the art to its
original form.
¶87 On occasion, this court has taken a chisel to statutes
that have offended some justices' sensibilities. While we may
employ "tools" of construction, a chisel is not a legitimate
tool for judges. The legislature writes law and the judiciary
interprets and applies it. A statute, like a statue, is
supposed to be viewed in its original form.
¶88 One statute subjected to judicial reshaping is Wis.
Stat. § 100.18(1) (2019–20). It states, in relevant part:
No person . . . with intent to sell . . . or in any
wise dispose of any real estate . . . to the
public . . . or with intent to induce the public in
any manner to enter into any contract or obligation
relating to the purchase . . . of any real
estate, . . . shall make, publish, disseminate,
circulate, or place before the public, or cause,
directly or indirectly, to be made, published,
disseminated, circulated, or placed before the public,
in this state, in a newspaper, magazine or other
publication, or in the form of a book, notice,
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handbill, poster, bill, circular, pamphlet, letter,
sign, placard, card, label, or over any radio or
television station, or in any other way similar or
dissimilar to the foregoing, an advertisement,
announcement, statement or representation of any kind
to the public relating to such purchase . . . of such
real estate . . . or to the terms or conditions
thereof, which advertisement, announcement, statement
or representation contains any assertion,
representation or statement of fact which is untrue,
deceptive or misleading.
§ 100.18(1) (emphasis added). In a series of cases, this court
has castrated the plain meaning of this statute by taking a
chisel to the phrase "the public." See generally Hinrichs v.
DOW Chem. Co., 2020 WI 2, 389 Wis. 2d 669, 937 N.W.2d 37. This
court has previously held, "a statement that was made to only
one individual could qualify for the protections afforded by
§ 100.18," equating a statement directed to "the public" with a
statement directed solely to a single person who is, as people
tend to be, a member of "the public[.]" See Below v. Norton,
2008 WI 77, ¶6, 310 Wis. 2d 713, 751 N.W.2d 351 (citation
omitted). As I have previously explained in a more thorough
analysis, a "particularized statement[]" to a single person
"within the context of . . . [an] ongoing business relationship"
is not a statement made to "the public." Hinrichs, 389
Wis. 2d 669, ¶94 (Rebecca Grassl Bradley, J.,
concurring/dissenting). This court's objectively wrong
precedent should be overturned. See Manitowoc Co. v. Lanning,
2018 WI 6, ¶81 n.5, 379 Wis. 2d 189, 906 N.W.2d 130 (Rebecca
Grassl Bradley, J., concurring) ("Reflexively cloaking every
judicial opinion with the adornment of stare decisis threatens
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the rule of law, particularly when applied to interpretations
wholly unsupported by the statute's text.").
¶89 The majority opinion accords with the law except for
its conclusion that Sead LLC's claim under Wis. Stat.
§ 100.18(1) survives. See majority op., ¶33. The majority errs
in holding "the Keidls made a representation to 'the public' by
making representations in the . . . [Real Estate Conditions
Report] to a potential buyer, Sead[.]" Id. The plain statutory
language does not extend to representations made solely to the
buyer during a private real estate transaction.1 Accordingly, I
respectfully concur in part and dissent in part.
1The economic loss doctrine may bar recovery for certain
misrepresentation claims in this case, but the issue has not
been argued to this court. See generally Wis. Civil——JI 2400,
at 4 (2023) (explaining the doctrine "requires transacting
parties in Wisconsin to pursue only their contractual remedies
when asserting an economic loss claim").
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