## Facts

- Roy Ollerman purchased a vacant residential lot from O’Rourke Company, a real-estate developer and subdivider, for $12,600 under a written offer; O’Rourke conveyed the lot by warranty deed.
- Ollerman intended to build a house and alleged he was inexperienced in real estate matters and unfamiliar with the area.
- During excavation, an underground well on the property was uncapped, releasing water and causing added expense and construction problems.
- Ollerman alleged the well was hidden from view, reduced the lot’s value and suitability for residential construction, and would have affected his decision or the price he would pay.
- The complaint alleged O’Rourke knew of the well or acted with reckless disregard of its existence, and failed to disclose it despite marketing the lot for residential use.
- Ollerman asserted claims for intentional misrepresentation and negligent misrepresentation based on nondisclosure.

## Issues

1. Whether the complaint stated a claim for intentional misrepresentation based on nondisclosure where a subdivider-vendor allegedly failed to disclose a known, material defect not readily discernible to a noncommercial purchaser of a residential lot.
2. Whether, in this context, the seller owed a duty to disclose such facts notwithstanding traditional caveat emptor principles.

## Decision

- The Wisconsin Supreme Court affirmed the circuit court’s order denying O’Rourke’s motion to dismiss for failure to state a claim.
- Accepting the pleaded allegations as true and construing the complaint liberally, the court held it was not clear that Ollerman could recover under no conditions.
- The court recognized that a subdivider-vendor selling a residential lot to a noncommercial purchaser may have a duty to disclose certain material, non-obvious conditions.
- The pleaded facts (seller’s superior knowledge and experience; hidden, material condition; alleged knowledge or reckless disregard; reliance and harm) were sufficient at the pleading stage to support an intentional misrepresentation theory premised on nondisclosure.

## Legal Principles

- On a motion to dismiss, a complaint is liberally construed, factual allegations are taken as true, and dismissal is proper only when it is clear the plaintiff cannot recover under any set of facts consistent with the pleading.
- A subdivider-vendor of a residential lot has a duty to a noncommercial purchaser to disclose facts that (1) are known to the vendor, (2) are material to the transaction, and (3) are not readily discernible to the purchaser.
- For this duty, a fact is “known” if the vendor has actual knowledge or acts with reckless disregard as to the fact’s existence.
- A fact is “material” if a reasonable purchaser would attach importance to it in deciding how to proceed, or if the vendor knows or has reason to know the purchaser is likely to regard it as important.
- Where such a duty exists, silence concerning a material, non-obvious condition may constitute intentional misrepresentation by nondisclosure despite traditional caveat emptor assumptions.

## Conclusion

The court allowed the buyer’s misrepresentation claim to proceed, holding that a developer-subdivider selling a residential lot to a noncommercial buyer may be liable for nondisclosure of a known (or recklessly disregarded), material condition that the buyer could not readily discover.


Ollerman v. O'Rourke Co., 288 N.W.2d 95 (Wis. 1980)