Doris Beuttler v. Marquardt Management Services, Inc.

2022 WI App 33COURT OF APPEALS OF WISCONSIN
PUBLISHED OPINION
Case No.: 2020AP1767
Complete Title of Case:
DORIS BEUTTLER, JEANNE HAAS, VAR KRIKORIAN, MARJORIE
SPECKHARD, TERRI STEIDL, SPECIAL ADMINISTRATOR FOR THE
ESTATE OF WALTER H. STEIDL, DOLORES TORPHY, ELAINE ZLEVOR,
GLORIA MURPHY AND RALPH ANDERSON,
PLAINTIFFS-APPELLANTS,
NAZALY BAGDASIAN, GERI BAUMBLATT, BERNARD BRAUN, PATRICIA
BRAUN, ROBERT CALLAWAY, MARSHALL CUSHMAN, MARILYN
ISELIN, MARIAN KORNWOLF, IRENE MILLER, MARY MUELLER, BOB
OTTUM, HOLLY OTTUM, JOYCE OTTUM, LORRAINE PAVELCIK, JOAN
PETERSON, MARLENE WEICHMANN AND WOOD FAMILY 2003 TRUST,
PLAINTIFFS,
V.
MARQUARDT MANAGEMENT SERVICES, INC.,
DEFENDANT-RESPONDENT.
Opinion Filed: June 22, 2022
Submitted on Briefs: March 16, 2022
Oral Argument:
JUDGES: Gundrum, P.J., Grogan and Kornblum, JJ.
Concurred:
Dissented:
Appellant
ATTORNEYS: On behalf of the plaintiffs-appellants, the cause was submitted on the
briefs of Thomas Devine of Devine Hahn, S.C., Racine.
Respondent
ATTORNEYS: On behalf of the defendant-respondent, the cause was submitted on the
brief of Monica A. Mark of Reinhard, Boerner Van Deuren, S.C.,
Milwaukee.
2
2022 WI App 33COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
June 22, 2022
A party may file with the Supreme Court a
Sheila T. Reiff petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10 and
RULE 809.62.
Appeal No. 2020AP1767 Cir. Ct. No. 2018CV1709
STATE OF WISCONSIN IN COURT OF APPEALS
DORIS BEUTTLER, JEANNE HAAS, VAR KRIKORIAN, MARJORIE
SPECKHARD, TERRI STEIDL, SPECIAL ADMINISTRATOR FOR THE
ESTATE OF WALTER H. STEIDL, DOLORES TORPHY, ELAINE ZLEVOR,
GLORIA MURPHY AND RALPH ANDERSON,
PLAINTIFFS-APPELLANTS,
NAZALY BAGDASIAN, GERI BAUMBLATT, BERNARD BRAUN, PATRICIA
BRAUN, ROBERT CALLAWAY, MARSHALL CUSHMAN, MARILYN ISELIN,
MARIAN KORNWOLF, IRENE MILLER, MARY MUELLER, BOB OTTUM,
HOLLY OTTUM, JOYCE OTTUM, LORRAINE PAVELCIK, JOAN
PETERSON, MARLENE WEICHMANN AND WOOD FAMILY 2003 TRUST,
PLAINTIFFS,
V.
MARQUARDT MANAGEMENT SERVICES, INC.,
DEFENDANT-RESPONDENT.
No. 2020AP1767
APPEAL from a judgment of the circuit court for Racine County:
EUGENE A. GASIORKIEWICZ, Judge. Affirmed in part and reversed in part;
cause remanded for further proceedings consistent with this opinion.
Before Gundrum, P.J., Grogan and Kornblum, JJ.
¶1 KORNBLUM, J. The appellants (collectively referred to as the
Residents) are individuals who paid a 90% refundable entrance fee to reside at The
Atrium, a senior living facility managed and operated by Marquardt Management
Services, Inc. The Residents appeal from the circuit court’s grant of summary
judgment to Marquardt. They argue that the court erred when it concluded that an
element of their misrepresentation claims, reliance on the alleged misrepresentation,
cannot be proved using circumstantial evidence. We conclude that circumstantial
evidence may be used to prove reliance and, therefore, reverse the judgment in part
and remand to the circuit court to reconsider the summary judgment decision with
respect to the three residents whose affidavits contain allegations or a reasonable
inference of statements by the Residents to a family member. If the circuit court
determines the reliance statements alleged to have been made by Residents Gloria
Murphy, Walter Steidl, and Doris Beuttler to their family members constitute
admissible evidence, these three affidavits raise genuine issues of material fact
sufficient to defeat summary judgment. We affirm the judgment as to the remaining
Residents.
I. BACKGROUND
¶2 The Atrium of Racine, Inc. was a nonprofit corporation that owned a
senior housing campus located in Racine, Wisconsin, comprised of a seventy-six-
unit elderly congregate housing facility known as The Atrium and a forty-unit
assisted living facility known as Bay Pointe. The Atrium was marketed to
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No. 2020AP1767
individuals aged seventy-five and older. In addition to monthly rent, residents of
The Atrium were required to pay an entrance fee before occupying a unit. Residents
were to be refunded a portion of the entrance fee within two years of terminating
occupancy at The Atrium.
¶3 Prior to March of 2015, The Atrium was operated by Lincoln
Lutheran of Racine, Wisconsin, Inc., which struggled financially. Lincoln Lutheran
filed for receivership at the end of 2014, and Marquardt took over management of
The Atrium.
¶4 As part of its efforts to make The Atrium financially sustainable,
Marquardt increased the entrance fees required for certain units and created an
“aggressive marketing plan.” Marquardt additionally sought to alleviate concerns
over the security of entrance fee payments by changing the terms of the entrance fee
refund promised to prospective residents. Previously, residents were promised a
refund of their entrance fee upon terminating occupancy only if their unit was re-
rented. Under Marquardt’s management, “the refund [would] be payable upon The
Atrium’s receipt of a new entrance fee on the residence vacated, or by no later than
24-months from the date the residence was vacated, providing a 24-month cap on
the liability.”
¶5 The Residents all signed contracts with The Atrium under
Marquardt’s management. They allege that they are individuals who each paid a
90% refundable entrance fee ranging between $84,000 and $111,500 to reside at
The Atrium. Prior to entering into a residency agreement with The Atrium and
paying the required entrance fee, each of the Residents met with Joe Reischl,
Director of Marketing for The Atrium. With the exception of Doris Beuttler, each
of the Residents was accompanied by a family member when meeting with Reischl
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No. 2020AP1767
to discuss the required entrance fee. Reischl represented to each of the Residents
that he or she would receive a 90% refund of the entrance fee. This representation
was consistent with the marketing materials, including the brochure, which stated
that the entrance fee was 90% refundable. Reischl did not disclose the financial
condition of The Atrium to any of the Residents.
¶6 Despite Marquardt’s efforts to turn around its financial condition, The
Atrium went into receivership in May 2017. The circuit court in the receivership
action entered an order declaring that all rights of the residents of The Atrium to
payment of entrance fee refunds from the proceeds of the sale of the assets of The
Atrium were subordinate to the rights of the Bank of New York Mellon Trust
Company, trustee for bondholders of The Atrium.1
¶7 The Residents subsequently filed the underlying lawsuit against
Marquardt alleging, as relevant for purposes of this appeal, that Marquardt
1
We note that a separate appeal was taken in the receivership action. In that action, this
court reversed and remanded, concluding that “the Residents’ entrance fees and security deposits
have priority over the interests of the Bondholders.” Casanova v. Polsky, Nos. 2019AP1728 and
2019AP2063, unpublished slip op. ¶1 (WI App July 30, 2021). On October 18, 2021, our supreme
court granted Michael S. Polsky, Esq., Receiver and The Bank of New York Mellon Trust
Company, N.A.’s petition for review. That case remains pending.
In their joint petition for review in Casanova, the Bank of New York Mellon Trust
Company and the court-appointed receiver requested that our supreme court take judicial notice of
the underlying action in this case and in Larson v. Marquardt Management Services, Inc., Racine
County case No. 2020CV1386. The petitioners contend: “In the La[r]son case, The Reverend
Doctor Ross Larson asserts an intentional misrepresentation claim against Marquardt and seeks
compensatory and punitive damages.” Information found on the Wisconsin Consolidated Court
Automation Program’s website, commonly referred to as “CCAP,” reflects that Marquardt’s
motion for summary judgment in that case was denied and its subsequently filed motion to stay
was granted. See Kirk v. Credit Acceptance Corp., 2013 WI App 32, ¶5 n.1, 346 Wis. 2d 635, 829
N.W.2d 522 (explaining that CCAP is an online website that contains information entered by court
staff of which this court may take judicial notice).
The Residents involved in this appeal do not appear to overlap with the parties in the other
actions, and the parties before us have not requested a stay pending the outcome of the other
matters.
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No. 2020AP1767
misrepresented the financial condition of The Atrium and The Atrium’s ability to
repay the 90% entrance fee refund to induce them to enter into residency agreements
and pay the required entrance fees. Marquardt moved for summary judgment
arguing that it had no duty to disclose the financial condition of The Atrium to
prospective residents. Marquardt also argued that summary judgment was
warranted because the Residents, due to their diminished capacity or death, could
not prove that they relied on any alleged misrepresentations because none of these
Residents could testify that they relied on the representations.
¶8 The circuit court conducted a hearing on the motion for summary
judgment. After oral argument, the circuit court determined that the agreements
signed by the Residents and their payment of the entrance fees constituted “business
transaction[s] between a legal entity and unsophisticated elderly individuals.” The
court additionally determined that the Residents were promised that 90% of the
entrance fees would be repaid within two years, which was a substantial reduction
in time from the previous promise made to prospective residents, possibly inferring
that The Atrium was on firmer financial footing. The court noted that the entrance
fees represented “large sums of money by anyone’s standards” and that as a matter
of public policy, Wisconsin has passed laws protecting the elderly from financial
exploitation.
¶9 The circuit court found that the Residents did not have access to
certain information that Marquardt had showing its true financial position. The
court rejected Marquardt’s argument that publicly available tax forms, called 990s,2
would have given Residents sufficient detail that they could have gathered the
2
The Atrium, as a nonprofit organization, was statutorily required to file public tax returns,
called Form 990s. These forms are publicly available to anyone who requests them. See 26 U.S.C.
§ 6104(d)(1).
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No. 2020AP1767
information themselves. The court also found that the Residents did not have
information about The Atrium’s technical default on its bond obligations and “the
precarious nature of the cash flow.”
¶10 The circuit court held that as a party to a business transaction, pursuant
to Kaloti Enterprises, Inc. v. Kellogg Sales Co., 2005 WI 111, 283
Wis. 2d 555, 699 N.W.2d 205, Marquardt had a duty “to disclose to prospective
residents the precarious financial posture of The Atrium, and its plan to reverse that
situation.” The court further concluded that it would be up to the jury “to decide if
such disclosures and information available to potential residents was sufficient to
decide to enter into this business relationship.”
¶11 Despite finding that Marquardt had a duty to disclose its financial
position and plan to reverse this, the circuit court granted summary judgment in
favor of Marquardt as to the Residents’ claims.3 The court concluded that, due to
their inability to testify, the Residents were unable to prove actual reliance on
Marquardt’s alleged misrepresentation regarding the financial stability of The
Atrium. According to the court, such reliance could not “be proven circumstantially
or by any exception to Wisconsin evidence statutes.”
3
There were more than twenty plaintiffs when this case was initiated. Only the nine
Residents in this appeal had their claims dismissed on summary judgment. The other plaintiffs
settled their claims.
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No. 2020AP1767
II. DISCUSSION
A. Standard of Review
¶12 A circuit court grants summary judgment when “there is no genuine
issue as to any material fact” and “the moving party is entitled to a judgment as a
matter of law.” WIS. STAT. § 802.08(2) (2019-20).4 We review de novo the circuit
court’s summary judgment decision, and apply the governing standards “just as the
[circuit] court applied those standards.” Green Spring Farms v. Kersten, 136 Wis.
2d 304, 315, 401 N.W.2d 816 (1987). In so doing, we may benefit from the circuit
court’s reasoning and analysis. AccuWeb, Inc. v. Foley & Lardner, 2008 WI 24,
¶16, 308 Wis. 2d 258, 746 N.W.2d 447. “Because this case is here on summary
judgment, we recite the facts in the light most favorable to [the Residents], the
part[ies] opposing summary judgment, and accept as true [the Residents’]
allegations.” See United Concrete & Constr., Inc. v. Red-D-Mix Concrete, Inc.,
2013 WI 72, ¶4, 349 Wis. 2d 587, 836 N.W.2d 807.
B. Duty to Disclose
¶13 To facilitate our analysis, we have reordered the issues presented in
the briefs to first determine whether Marquardt had a duty to disclose its precarious
financial position. Whether a duty exists is a question of law subject to our
independent review. See Kaloti, 283 Wis. 2d 555, ¶10.
¶14 The Kaloti court explained that before a defendant can be liable for
misrepresentation based on the failure to disclose a material fact, the defendant must
have a duty to disclose. Id., ¶13. In its summary judgment briefing, Marquardt
4
All references to the Wisconsin Statutes are to the 2019-20 version unless otherwise
noted.
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No. 2020AP1767
agreed with this statement of the law, stating: “A failure to disclose a material fact
can, under some circumstances, support a claim for misrepresentation.” “When
there is a duty to disclose a fact, the law has treated the failure to disclose that fact
‘as equivalent to a representation of the nonexistence of the fact.’” Id. (citations
omitted).
¶15 The alleged misrepresentation at issue here falls squarely within
Kaloti. The misrepresentation consists of a failure to disclose The Atrium’s
precarious financial position. Marquardt contends that it had no duty to disclose in
this case and that, on this basis, we should affirm the circuit court’s dismissal of the
Residents’ claims.5 The Residents, however, assert that Marquardt’s failure to
disclose The Atrium’s precarious financial condition before they entered into the
business transactions and paid the required entrance fees amounts to an affirmative
misrepresentation that The Atrium’s financial issues did not exist.
¶16 In determining whether there is a legal duty and the scope of that duty,
many factors come into play, including “our ideas of morals and justice ... and our
social ideas as to where the loss should fall. In the end the court will decide whether
there is a duty on the basis of the mores of the community.” Id., ¶16 (citation
omitted). Regarding the mores in the commercial world, “[t]he type of interest
protected by the law of misrepresentation in business transactions is the interest in
formulating business judgments without being misled by others—that is, an interest
5
While briefing in this matter was underway, the Residents moved to strike Marquardt’s
argument in this regard. The Residents asserted that if Marquardt wanted to challenge the circuit
court’s ruling that it had a duty to disclose, it should have filed a cross-appeal. See WIS. STAT.
RULE 809.10(2)(b). We denied the motion and concluded that the argument was being advanced
by Marquardt as a permissible alternative basis for affirming the circuit court and did not require a
cross-appeal. See Doe v. General Motors Acceptance Corp., 2001 WI App 199, ¶7, 247 Wis. 2d
564, 635 N.W.2d 7 (“A respondent may advance on appeal, and we may consider, any basis for
sustaining the [circuit] court’s order or judgment.”).
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No. 2020AP1767
in not being cheated.” Id. (citation omitted). The specific factors that a court must
consider when determining whether a party to a business transaction has a duty to
disclose a fact are as follows:
(1) the fact is material to the transaction; (2) the party with
knowledge of that fact knows that the other party is about to
enter into the transaction under a mistake as to the fact; (3)
the fact is peculiarly and exclusively within the knowledge
of one party, and the mistaken party could not reasonably be
expected to discover it; and (4) on account of the objective
circumstances, the mistaken party would reasonably expect
disclosure of the fact.
Id., ¶20.
¶17 Marquardt argues that “Kaloti does not support imposing a duty to
disclose in this case.” Marquardt concedes the first factor of the analysis, i.e., that
the fact of its precarious financial position is material. However, it challenges the
remaining three. According to Marquardt: (1) it “had no reason to know that [the
Residents] were about to enter into their [agreements] under the mistaken
impression that [T]he Atrium was in better financial condition than it actually was,
or under a mistaken impression as to whether [The Atrium] had a plan to remedy
that status”; (2) “[T]he Atrium’s financial condition was not ‘peculiarly and
exclusively’ within [its] knowledge” given that The Atrium’s “990s were available
to the public online”; and (3) it was “not reasonable for [the Residents] to have
expected a sweeping, preemptive disclosure of all of [T]he Atrium’s financial
information and its plans to improve its finances.”
¶18 We start by analyzing whether Marquardt knew the Residents were
about to enter into their business transactions under a mistake as to the fact of The
Atrium’s precarious financial position. See id. The record includes affidavits and
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No. 2020AP1767
other evidence suggesting that Marquardt knew that The Atrium’s financial position
was precarious but the Residents themselves did not.
¶19 The CEO of Marquardt, Matthew Mauthe, acknowledged during his
deposition that he had received information showing that The Atrium was in a bad
financial situation when Marquardt undertook management of it around 2015.
Mauthe testified that he received a 2015 audit report for the 2014 fiscal year, which
was prepared by an independent auditor. That report had an item called “Emphasis
of Matter,” which stated that The Atrium “has incurred losses and has a net deficit
that raise substantial doubt about its ability to continue as a going concern.”6
Subsequent audits contained the same Emphasis of Matter.
¶20 In an effort to alleviate concerns over the security of entrance fee
payments, Mauthe stated that the terms of the agreement that the Residents signed
were changed to guarantee repayment of the entrance fee within two years of
termination of occupancy to instill a sense of certainty in prospective purchasers
that the money would be repaid. Rather than converting from an entrance fee model
to a rental model, per the consultant H2 Healthcare, LLC’s recommendation,
Marquardt increased entrance fees charged for various units. Marquardt also put
into place an “aggressive marketing plan” to “test[] the market to determine whether
or not an entrance fee model will work.”
¶21 Marquardt did not disclose its financial position to the Residents and
did not disclose that it had changed its marketing plan to attempt to address its
precarious financial position. The Residents knew only that they were promised a
6
Marquardt’s counsel explained to the circuit court that “substantial doubt about [an
entity’s] ability to continue as a going concern” exists “when conditions and events, considered in
the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as
they become due within one year after the date that the financial statements are issued.”
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No. 2020AP1767
90% refund of their entrance fees within two years of vacating their units.
Marquardt agreed that it had made a promise to the Residents that they would
receive a 90% refund. During the motion hearing, the circuit court expressed
concern that “from every analysis,” Marquardt was making the promise to the
Residents that they would get their money back while simultaneously “sitting on a
failing institution.” The second factor supports imposing a duty to disclose.
¶22 We additionally conclude that the fact of The Atrium’s precarious
financial position and the plan to remedy that status was peculiarly and exclusively
within Marquardt’s knowledge. Marquardt conceded that it did not provide all of
the information available as to its precarious financial position. Marquardt
nevertheless contends that disclosure was unnecessary because the 990s were
available to prospective Residents, which according to Marquardt had all of the
information necessary to understand The Atrium’s financial condition. We
disagree.
¶23 As the circuit court explained, the 990s lacked the details that were
available in the financial statements of The Atrium and were insufficient to reveal
the precarious financial situation. For instance, the circuit court noted that the 990s
did not reveal The Atrium’s technical default on bond payment requirements or the
precarious nature of The Atrium’s cash flow. We have independently reviewed the
990s that are in the record and agree with the circuit court’s assessment. Contrary
to Marquardt’s assertion that the H2 report and the audit reports were cumulative to
the financial information that was publicly available to the Residents, we conclude
that The Atrium’s precarious financial position and the plan to remedy that status
were peculiarly and exclusively within Marquardt’s knowledge. The third factor
supports imposing a duty to disclose. See id., ¶19 (noting that courts tend to
conclude that a duty to disclose exists “where the defendant has special knowledge
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No. 2020AP1767
or means of knowledge not open to the plaintiff and is aware that the plaintiff is
acting under a misapprehension as to facts which could be of importance to him,
and would probably affect his decision”) (citation omitted).
¶24 We turn to the fourth factor, which is whether, on account of the
objective circumstances, the Residents would reasonably expect disclosure of The
Atrium’s precarious financial position and the plan to remedy that status. During
the summary judgment motion hearing, the Residents asserted that as investors to a
business transaction, they would have expected disclosure before investing their life
savings. Specifically, the Residents argued they would have reasonably expected
to know that Marquardt had “substantial doubt” as to The Atrium’s ability to
continue as a going concern. We agree, particularly in light of this State’s strong
public policy interest in protecting older adults, which is reflected in legislation. See
generally WIS. STAT. § 46.90 (pertaining to Wisconsin’s elder abuse mandatory
reporting and investigation system). We conclude that it was reasonable for the
Residents to expect disclosure of the risks associated with the underlying business
transactions. Kaloti supports the imposition of a duty to disclose, and we agree with
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No. 2020AP1767
the circuit court’s ruling that Marquardt had a duty to disclose that it was in a
precarious financial state.7
C. Availability of Circumstantial Evidence to Prove Reliance
¶25 Our conclusion that Marquardt had a duty to disclose the information
relating to its precarious financial position does not end our inquiry. See Ollerman
v. O’Rourke Co. Inc., 94 Wis. 2d 17, 26-27, 288 N.W.2d 95 (1980) (explaining that
if there is a duty to disclose, the defendant incurs tort liability for misrepresentation,
i.e., the representation of the nonexistence of the fact, if the elements of the tort of
misrepresentation are proved). A claim for misrepresentation requires proof of
reliance on the misrepresentation. Id. at 43. The circuit court granted summary
judgment to Marquardt after concluding that due to their inability to testify, the
Residents were unable to prove actual reliance on Marquardt’s alleged
misrepresentation regarding the financial stability of The Atrium.
7
Marquardt argued that Bellon v. Ripon College, 2005 WI App 29, 278 Wis. 2d 790, 693
N.W.2d 330, applies. In that case, we concluded that all of the information that Ripon College
relayed to an associate professor was true at the time of her interview when the alleged
misrepresentations occurred. Id., ¶9. To the extent the professor argued that Ripon had a duty to
say more, we held that she sought “to impose a duty on Ripon to supply predictions, not facts.” Id.,
¶10. The record in that case demonstrated that the professor’s “teaching position, along with others,
was eliminated due to unforeseen economic circumstances.” Id. We concluded that “Ripon had
no duty to predict future economic realities.” Id. Bellon does not apply here because it is
distinguishable. Despite Marquardt’s efforts to frame the argument as its failure to predict the
future, the Residents are not seeking to hold Marquardt to an “amorphous, unbounded duty” to
disclose endless financial context. They sought actual information as to The Atrium’s financial
condition and its plan to remedy that status as of the times they signed their agreements—
information that was readily available to Marquardt. The promise to refund 90% of the entry fee
was not an amorphous hope, but a specific promise with a time limit—within two years after the
Resident vacated.
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¶26 Both parties agree that the Residents’ misrepresentation claims
require proof of actual reliance.8 See Malzewski v. Rapkin, 2006 WI App 183,
¶¶17-20, 296 Wis. 2d 98, 723 N.W.2d 156 (providing that all common law
misrepresentation claims include as an element that the plaintiff believed the
defendant’s misrepresentation was true and actually relied on it); see also WIS JI—
CIVIL 2401, 2402, & 2403. The jury instructions explain:
In determining whether [plaintiff] actually relied upon the
representation, the test is whether [(he) (she)] would have
acted in the absence of the representation. It is not necessary
that you find that such reliance was the sole and only motive
inducing [(him) (her)] to enter into the transaction. If the
representation was relied upon and constitute[s] a material
inducement, that is sufficient.
WIS JI—CIVIL 2401, 2402, & 2403 (underlining and footnotes omitted).9
¶27 Because the Residents have the burden of proof in connection with
their misrepresentation claims, to overcome summary judgment, the Residents must
show that there is a genuine issue of material fact as to their actual reliance on
Marquardt’s misrepresentation regarding The Atrium’s financial condition. See
Techworks, LLC v. Wille, 2009 WI App 101, ¶2, 318 Wis. 2d 488, 770 N.W.2d
8Throughout their briefing, the Residents refer to their claims as common law
misrepresentation claims. Common law misrepresentation encompasses three categories of claims:
(1) intentional; (2) negligent; and (3) strict liability misrepresentation. Kaloti Enters., Inc. v.
Kellogg Sales Co., 2005 WI 111, ¶12, 283 Wis. 2d 555, 699 N.W.2d 205. The Residents avoid
committing to one category. They argue that whether a claim for strict liability misrepresentation
or negligent misrepresentation can arise from a failure to disclose remains an open question. See
id., ¶13 n.3.
Marquardt, however, contends that the only claim at issue is the Residents’ claim for
intentional misrepresentation arising from the failure to disclose. We need not resolve this question
to resolve this appeal. See Water Well Sols. Serv. Grp. Inc. v. Consolidated Ins. Co., 2016 WI 54,
¶33 n.18, 369 Wis. 2d 607, 881 N.W.2d 285 (“We decide cases on the narrowest grounds
possible.”).
9
WIS JI—CIVIL 2401 uses (plaintiff) throughout rather than (he)(she) and (him)(her). WIS
JI—CIVIL 2402 and 2403 use (he)(she) and (him)(her).
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No. 2020AP1767
727. The circuit court determined that the Residents could not meet this burden
because none of the Residents could provide direct testimony because they were
either incapacitated or deceased. The court based its conclusion on its mistaken
legal conclusion that only direct testimony, not circumstantial evidence, could prove
reliance.
¶28 Wisconsin law does not require direct evidence to prove elements of
every cause of action. “It is not necessary that every fact be proved directly by a
witness or an exhibit. A fact may be proved indirectly by circumstantial evidence.
Circumstantial evidence is evidence from which a jury may logically find other facts
according to common knowledge and experience.” WIS JI—CIVIL 230; see also
Lambrecht v. Estate of Kaczmarczyk, 2001 WI 25, ¶3, 241 Wis. 2d 804, 623
N.W.2d 751 (explaining that circumstantial evidence “is evidence of one fact from
which the existence of the fact to be determined may reasonably be inferred”). The
circuit court has considerable latitude to admit circumstantial evidence. Oseman v.
State, 32 Wis. 2d 523, 527, 145 N.W.2d 766 (1966). Wisconsin law also is well
established that circumstantial evidence is available to meet the burden of proof
even on summary judgment. “That burden can be met by reasonable inferences
drawn from circumstantial evidence.” Techworks, 318 Wis. 2d 488, ¶2.
¶29 Nothing in the case law prohibits using circumstantial evidence to
prove misrepresentation, contrary to the circuit court’s conclusion. Wisconsin cases
dating back to 1891 show that the courts have admitted circumstantial evidence to
prove fraud without excepting the reliance element. See, e.g., Weadock v. Kennedy,
80 Wis. 449, 451, 50 N.W. 393 (1891); Goodell v. Poller, 204 Wis. 127, 130, 235
N.W. 542 (1931). We conclude that the circuit court erred as a matter of law in
determining that the Residents could not use circumstantial evidence to prove
reliance.
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¶30 When the circuit court determined reliance could not be proven
through circumstantial evidence, it granted Marquardt’s motion for summary
judgment because the Residents failed to submit any direct evidence opposing the
motion. Because the law permits the Residents to establish the reliance element
with circumstantial evidence, we reviewed the materials filed in opposition to
summary judgment to see whether the Residents’ submissions contain any such
evidence that raises a genuine issue of material fact as to reliance. We conclude that
three of the affidavits—Beuttler, Steidl, and Murphy—contain allegations or a
reasonable inference of conversations the affiant had with the Resident that, if
admissible, would constitute sufficient circumstantial evidence to defeat summary
judgment.
¶31 Although all of the Residents except Beuttler had a family member
accompanying them to the meetings with Reischl in which they discussed the
entrance fee required to reside at The Atrium and the right to a refund within two
years of terminating occupancy, attendance at the meeting is not sufficient to raise
a material issue of fact. As the Residents note in their brief, the family members
would need to be able to testify both about the “representations made … regarding
The Atrium’s financial condition, and each [Resident’s] reliance thereon when
deciding to enter into the transaction and pay the ‘refundable’ entrance fee.”
¶32 Marquardt correctly contends that the affidavits must show that the
Residents relied on the omission that forms the core of the Residents’
misrepresentation claims; namely, Reischl’s silence as to The Atrium’s financial
condition. Additionally, Marquardt contends that the affidavits are inadmissible
because the family members do not have personal knowledge of the Residents’
thoughts and motivations. See WIS. STAT. § 802.08(3) (Affidavits in support of and
opposition to a motion for summary judgment must “be made on personal
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No. 2020AP1767
knowledge” and “set forth such evidentiary facts as would be admissible in
evidence.”).
¶33 Our careful review of all of the affidavits and interrogatories shows
that if the circuit court determines on remand that the statements in the affidavits
would be admissible at trial pursuant to the rules of evidence, averments in support
of the claims of Murphy, Beuttler, and Steidl create a genuine issue of material fact
as to the Residents’ actual reliance. The affidavits submitted on behalf of these
residents indicate that the affiants had personal knowledge based on conversations
with the Resident and could testify about the source of their personal knowledge
that the Resident relied on the promise of the entrance fee being 90% refundable.
Gloria Murphy’s daughter, Lauren Payne, attested that her parents10 were concerned
about paying the entrance fee and that her mother stated to her that “she believed,
based upon [Reischl’s] representations, that she was making a good investment by
paying the Entrance Fee required to reside at The Atrium.” Doris Beuttler’s son,
Fred Beuttler, attested that “Doris E. Beuttler stated to me that she decided to pay
the Entrance Fee required to reside at The Atrium because Joe Reischl represented
that she would receive a refund of 90%.” Walter Steidl’s daughter, Terri Steidl,
attested to both the representations made by Reischl to Walter Steidl as to The
Atrium’s financial stability and her father choosing The Atrium over another
residence because of the promised 90% refund of the entrance fee, specifically
averring that her father “liked that he would be able to leave the refunded portion of
the Entrance Fee to his family when he passed away, rather than spending the money
on increased rent at Primrose.”
10
Both of Lauren Payne’s parents were signatories to the contract. According to the
Affidavit, her father is now deceased and only Gloria Murphy is listed as a plaintiff.
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No. 2020AP1767
¶34 The affidavits on behalf of the other residents make more general
statements about reliance but do not lay a sufficient foundation as to show a genuine
issue of material fact. Key on this point is that the affiants do not indicate that they
had a conversation with the Resident in which they discussed reliance or even heard
the Resident specifically discuss the refundability question. Some of the affiants
merely attest that they would have advised their loved one not to pay the entrance
fee had they known about The Atrium’s precarious financial position or otherwise
speculate about why the Resident might have paid the entrance fee.11 Others
expressed an opinion about why the Resident paid the entrance fee but did not give
a foundation for their knowledge.12 We are not looking for magic words, but for a
foundation for admissible evidence based on the affiants’ personal knowledge. No
doubt if the affiants possessed personal knowledge of the Residents’ intentions the
affidavits would have clearly reflected that knowledge. Because the
affidavits/interrogatories with respect to the remaining six Residents did not contain
any assertions or reasonable inferences that the affiant possesses personal
knowledge about which they can testify about the Resident’s reliance, the circuit
court correctly granted summary judgment on the claims of Residents Jeanne Haas,
Delores Torphy, Elaine Zlevor, Ralph Anderson, Var Krikorian, and Marjorie
Speckhard. We affirm the judgment as to these six Residents.
11
Affidavit of David Haluska on behalf of Resident Jeanne Haas; Affidavit of Kathleen
McMahon on behalf of Resident Delores Torphy; Interrogatories of Estate of Elaine Zlevor;
Interrogatories of Estate of Ralph Anderson.
12
Affidavit of Dan Bagdasarian on behalf of Resident Var Krikorian; Affidavit of Sandy
Gage on behalf of Resident Marjorie Speckhard.
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No. 2020AP1767
III. CONCLUSION
¶35 In conclusion, while the Residents’ evidence submitted was
circumstantial, if deemed admissible under the rules of evidence, the submissions
on behalf of Murphy, Steidl, and Beuttler are sufficient to defeat Marquardt’s
motion for summary judgment on the issue of reliance. For these three Residents,
the signing of residency agreements and payment of entrance fees, together with the
affidavits of their family members regarding representations made by The Atrium
and indications given by Murphy, Steidl, and Beuttler as to their reliance on those
representations, if determined upon remand to be admissible, create a genuine issue
of material fact for trial. Accordingly, we reverse the circuit court’s judgment as to
Murphy, Beuttler and Steidl, and remand for further proceedings consistent with
this opinion, including the circuit court reconsidering the summary judgment
decision with respect to these three Residents in light of this decision. We affirm
the circuit court’s judgment as to the remainder of the Residents, as their affidavits
and interrogatories are insufficient to defeat Marquardt’s motion for summary
judgment as to reliance.
By the Court.—Judgment affirmed in part and reversed in part; cause
remanded for further proceedings consistent with this opinion.
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