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Kaloti Enterprises7/8/2005
plaintiff believed the statement to be true and relied on it to his/her detriment.
Ramsden, 223 Wis. 2d at 718-19 (footnote omitted); accord Tietsworth, 270 Wis. 2d 146, .
An intentional misrepresentation claim may arise either from a "failure to disclose a material fact" or from a "statement of a material fact which is untrue." See Ramsden, 223 Wis. 2d at 713. Here, Kaloti's intentional misrepresentation claim is based on the failure to disclose a material fact. However, " person in a business deal must be under a duty to disclose a material fact before he can be charged with a failure to disclose." Southard v. Occidental Life Ins. Co., 31 Wis. 2d 351, 359, 142 N.W.2d 844 (1966); accord Tietsworth, 270 Wis. 2d 146, (citing Ollerman, 94 Wis. 2d at 26). 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.'" Hennig v. Ahearn, 230 Wis. 2d 149, 165, 601 N.W.2d 14 (Ct. App. 1999) (quoting Ollerman, 94 Wis. 2d at 26).
Whether Kellogg and Geraci had a duty to disclose is the only aspect of Kaloti's intentional misrepresentation claim that is at issue here. In particular, we are asked to determine whether Kellogg and Geraci had a duty to disclose a change in Kellogg's marketing strategy that largely closed the markets on which they knew Kaloti relied to sell Kellogg's products.
In Ollerman, we decided that a duty to disclose had arisen in the course of a real estate transaction. We discussed at length the circumstances under which a duty to disclose a material fact may arise in business transactions. Ollerman, 94 Wis. 2d at 24-43. The usual rule is that there is no duty to disclose in an arm's-length transaction. Id. at 29. However, courts have carved out a number of exceptions to that rule and have refused to apply the rule when to do so would work an injustice. Id. at 30.
Determining whether there is a legal duty and the scope of that duty presents questions of law that require courts to make policy determinations. Tietsworth, 270 Wis. 2d 146, -15; see also Ollerman, 94 Wis. 2d at 27. The Ollerman decision noted that, in making this determination, many factors interplay: The hand of history, our ideas of morals and justice, the convenience of administration of the rule, 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.
Ollerman, 94 Wis. 2d at 28 (quotations and quoted source omitted). As to the mores of the commercial world in particular, we further explained in Ollerman, " 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 in not being cheated." Id. at 29-30.
We note that the Restatement (Second) of Torts ยง 551 cmt. L (1977), as well as several of the illustrations provided with it, have the following elements: (1) the non-disclosing party knew that the other party was not aware of the fact; (2) the mistaken party could not discover the fact by ordinary investigation or inspection, or he or she could not otherwise reasonably be expected to discover the fact; and (3) the mistaken party would not have entered into the transaction if he or she knew the fact.
The second element, that the mistaken party could not reasonably be expected to discover the fact, is particularly important to the present analysis. As we remarked in Ollerman, parties to a business transaction must "use their faculties and exercise ordinary business sense, and not call on the l
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