Louis Pagoudis v. Marcus Keidl

2023 WI 27, 988 N.W.2d 606, 406 Wis. 2d 542

• Court: Wisconsin Supreme Court
• Decided: April 4, 2023
• Docket: 2020AP000225
• Status: Published

Opinion

2023 WI 27

SUPREME 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 803 PDC 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 27 NOTICE 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.

2 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.

3 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.

4 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.

5 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 6 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

7 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)

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.

8 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.

9 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.

10 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.

11 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 12 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.

13 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.

14 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.

15 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 16 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 17 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).

18 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.

¶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.

12 No. 2020AP225.rgb

¶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, 1 No. 2020AP225.rgb

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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