Note: We are crunching Supreme Court of Wisconsin decisions down to size. The rule for this is that no justice gets more than 10 paragraphs as written in the actual decision. The "upshot" and "background" sections do not count as part of the 10 paragraphs because of their summary and very necessary nature. We've also removed citations from the opinion for ease of reading, but have linked to important cases cited or information about them.
Note 2: BMO was represented in the Circuit Court case by Daniel Charles Warner Narvey and Andrew Oettinger, according to CCAP.
Mohns was represented by John Edward Machulak.. The full decision in Mohns Inc. v. BMO Harris Bank National Association is here.
Majority: Justice Rebecca Grassl Bradley (36 pages)
Justices Brian Hagedorn and Annette Ziegler did not participate.
We hold: (1) the circuit court did not erroneously exercise its discretion when it imposed judgment on liability as a sanction for BMO's discovery violations; (2) because the law does not permit recovery of damages for both breach of contract and unjust enrichment arising from the same conduct, the award of damages for unjust enrichment must be set aside; and (3) the punitive damages award must be overturned because it was based upon an award of damages for the contract claims, and punitive damages are recoverable only in tort.
"Lie, lie, lie, shift blame on somebody else, anybody else but themselves, and say, nope, didn't happen, when the evidence is in their computer system, in their files, it is in the minds of their employees who aren't produced for deposition, who aren't made available to speak the truth." – Waukesha County Circuit Judge Kathryn Foster
This case arises from a condominium construction venture between Paul Bouraxis, the developer; Mohns, the general contractor; and BMO (as successor-by-merger to M&I Marshall & Ilsley Bank), the bank financing the project, known as the Hickory Hills Condominiums. Bouraxis secured a commercial construction and mortgage loan (initially from M&I) to build 26 units, each housing four condominiums, on vacant land Bouraxis owned in New Berlin, Wisconsin. As Mohns completed portions of the project, it submitted paperwork to the bank's title company in order to draw payment from BMO for materials, subcontractors' work, and Mohns' own work, upon the title company's confirmation that the work had been completed....
In 2010 and 2011, Mohns had concerns about whether it would be paid for its work because Mohns' draw requests for payment were not being paid promptly....
Mohns sought reassurance from BMO banker Patrick Caine....Caine assured Mohns that it would be paid....Caine also sent a letter dated July 20, 2011 directly to Mohns' materials supplier, indicating that the supplier would be paid if it provided the materials to Mohns for the project. Based on these assurances, Mohns continued construction and submitted paperwork for two draws in July and one in August.
Unbeknownst to Mohns, during this time BMO had been working to sell the Bouraxis construction loan along with some other loans. In late July 2011, BMO sold the Bouraxis loan to MIL Acquisition Venture, LP. BMO took a loss on the sale as the purchase price was based on the value of the property, which was significantly less than the original loan amount. Mohns learned about the sale sometime in August. BMO banker Caine assured Mohns that he would forward the August draw to MIL, the new owner of the loan, for payment. Mohns continued work on the property until October 2011....
(Mohns was not paid for work it did in 2011. – WJI)
In February 2016, Mohns filed a complaint against BMO alleging three causes of action: (1) BMO breached its contract to pay Mohns for its work on the condominium project; (2) BMO was unjustly enriched by the construction work Mohns provided on the condominium project, which increased the value of the loan sold by BMO; and (3) BMO misrepresented to Mohns that funds were available to pay it for the work it performed on the project, which BMO would pay Mohns if it continued constructing the condominiums. The complaint alleged that if Mohns proved the misrepresentation "was intentional and/or in reckless disregard of Mohns' rights," Mohns should receive punitive damages....
In September 2016, Mohns served BMO with interrogatories, requests to admit, and a request for production of documents. BMO served responses in October 2016, but in lieu of producing any documents, stated that all documents had been previously produced in the 2014 MIL lawsuit. BMO's responses to the interrogatories and request for admissions contained more objections than answers. BMO also objected to producing the loan sale agreement, claiming it was subject to a confidentiality agreement between BMO and MIL.
In December 2016, Mohns served BMO with a notice for a deposition of a corporate representative who could explain BMO's discovery responses. On January 6, 2017, BMO filed a motion for summary judgment. On January 11, 2017, BMO produced Patrick Caine for the corporate representative deposition. Caine could not explain BMO's responses to discovery. He could not answer questions related to the merger, or topics listed in the deposition notice regarding the sale of the loan. Caine testified he did not know on July 20, 2011 that the loan was being sold to MIL despite multiple June 2011 emails discussing the sale of the loan, including a June 16, 2011 email indicating Caine knew the loan would be sold.
On January 26, 2017, Mohns filed a motion to compel discovery and a request for discovery sanctions against BMO. Mohns' brief in support of the motion said its attempt to narrow the issues for trial via written discovery requests had been thwarted by BMO's "evasive responses" and by its refusal to produce a corporate representative who had any knowledge about the topics relevant to Mohns' claims or who could explain BMO's evasive responses....
In February 2017, the circuit court held a hearing on pending motions, including Mohns' motion to compel and BMO's motion for summary judgment. The circuit court found BMO in violation of discovery rules and granted Mohns' motion to compel because Mohns certainly had the right to ask for "who knew what when" and "not get the runaround...."
The circuit court expressed frustration at BMO's handling of discovery, believing BMO was "stalling" or "playing a form of a legal shell game...."
Caine testified he did not know on July 20, 2011 that the loan was being sold to MIL despite multiple June 2011 emails discussing the sale of the loan, including a June 16, 2011 email indicating Caine knew the loan would be sold.
he circuit court took Mohns' request for sanctions under advisement and postponed ruling on BMO's motion for summary judgment until discovery could be completed....
On March 2, 2017...the circuit court warned BMO that if it did not "alleviate" the discovery violation "in the next couple months," it would grant summary judgment for Mohns on liability as a sanction for BMO's discovery violation and send only damages to the jury....
The circuit court extended the discovery deadline until May 5th, indicating it wanted to give BMO "every opportunity to comply" and ordered BMO to produce a corporate representative for deposition "who can speak knowledgeably" about the matter. When BMO's lawyer protested that "the most knowledgeable people are former employees" whom "[w]e can't make . . . show up," the circuit court reminded BMO that "a subpoena works for non-employees the same as employees...."
After the hearings, BMO produced a complete copy of the loan sale agreement and a copy of the confidentiality agreement, but no other documents....
Eventually, the corporate deposition was scheduled for May 2, 2017. On Friday, April 26, 2017, BMO's lawyer notified Mohns' lawyer by email that BMO had just located "several thousand documents that are potentially responsive" to Mohns' discovery requests. The email provided a link and a password that would let Mohns' lawyer access these documents. When Mohns' lawyer tried to access the documents, however, the password did not work. Mohns' lawyer contacted BMO's lawyer, who, the next morning, provided the correct password——allowing Mohns' lawyer to review the newly-disclosed 975 pages of documents. Mohns' lawyer notified BMO's lawyer on May 1, 2017 that he would be ready to proceed with the May 2nd corporate representative deposition as scheduled. When BMO's lawyer said he found "thousands" of additional discovery documents that his corporate designee would need additional time to review, Mohns' lawyers agreed to delay the deposition until May 9, 2017.
BMO's lawyer notified Mohns' lawyer by email that BMO had just located "several thousand documents that are potentially responsive" to Mohns' discovery requests. The email provided a link and a password that would let Mohns' lawyer access these documents. When Mohns' lawyer tried to access the documents, however, the password did not work.
Shortly before 5:00 p.m. on Friday, May 5, 2017, BMO's lawyer sent Mohns' lawyer a link to access the additional documents, which contained 4,185 pages. BMO produced Natalie Johnson, a Relationship Manager on Special Assets, for the corporate representative deposition on May 9th. Johnson had not been involved in the loan sale, had not read any of the emails contained in the newly-produced documents, and could not answer many of the questions asked of her during the deposition.
In August 2017, the circuit court held an additional hearing on pending motions, during which it addressed Mohns' "motion to compel continuing" and BMO's "continuing motion for summary judgment." The circuit court, which had read Johnson's entire deposition, found that BMO failed to comply with the prior discovery order. It said:
Most significantly, the circuit court found BMO "blatant[ly] disregard[ed]" its orders both as to producing the corporate representative and otherwise complying with its discovery order. It said BMO "egregiously ignor[ed]" its obligations, and BMO had previously withheld a document that was "as close to a smoking gun as I have seen in a long time in a misrepresentation claim." Based on "the egregious behavior of the defendants in violating this [c]ourt's order in not being responsive to the plaintiff's simple direct request for discovery," the circuit court denied BMO's motion for summary judgment and, as a sanction, granted summary judgment to Mohns. The circuit court stated: "So when we have a trial in October, it is going to be on damages and punitive damages[.]" The circuit court noted that it had not "granted a summary judgment motion based on a discovery violation in the past, but [it couldn't] think of a more appropriate [case] than the one before [it]." The circuit court made its "decision with every confidence that [it] is the appropriate and legal sanction for what has been presented here," and noted that it had re-read all earlier transcripts, which confirmed the circuit court had "been more than generous to the defense to get [its] act together...."
The case proceeded to trial in October 2017 as scheduled.
(The jury awarded Mohns $106,581 in amounts owed plus interest, $132,668 to compensate for BMO's unjust enrichment, and $1 million in punitive damages. - WJI)
In November 2017, the circuit court heard BMO's postverdict motions....The circuit court denied BMO's motions and awarded Mohns attorney's fees of $113,940. The circuit court reviewed eight of Mohns' requests to admit, finding that BMO lied in its responses. The circuit court noted:
Consistent with the behavior in this case, BMO continues to thumb its nose at the rules of discovery in civil proceedings in this case. Lie, lie, lie, shift blame on somebody else, anybody else but themselves, and say, nope, didn't happen, when the evidence is in their computer system, in their files, it is in the minds of their employees who aren't produced for deposition, who aren't made available to speak the truth.
The circuit court did, however, reduce the jury's punitive damages award...awarding punitive damages in the amount of $458,484.
BMO contends the circuit court's sanction was improper because it was imposed without making an explicit finding that Mohns was prejudiced by BMO's discovery violations....
This case involves BMO's failure to comply with the circuit court's discovery orders under Wis. Stat. § 804.12(2). Wisconsin cases involving discovery sanctions require a circuit court to make a finding of "egregious conduct" or "bad faith" without a "clear and justifiable excuse" before dismissing a plaintiff's case or granting default judgment, but do not require an explicit finding of prejudice. These heightened findings are required because utilizing § 804.12(2)'s most serious sanctions of dismissal or default judgment are "drastic penalt[ies] that should be imposed only where such harsh measures are necessary...."
The circuit court did not erroneously exercise its discretion when it imposed the sanction of judgment on liability against BMO because it found that BMO's actions were egregious and without a clear and justifiable excuse, applied a sanction...and reached a reasonable determination. There is no question that the law permits this sanction....
The circuit court found BMO's actions to be egregious, disingenuous, designed to bury documents and hide a "smoking gun" email, and in violation of its discovery order. Those findings are not clearly erroneous as the record contains evidence supporting them....As demonstrated by the foregoing recitation of the facts, BMO engaged in a persistent pattern of avoidance, delay, and disregard of the circuit court's discovery order. The record demonstrates that BMO initially refused to produce any documents at all, instead claiming that all relevant documents had already been turned over in the MIL case in 2014. BMO's responses to interrogatories and requests to admit were evasive at best and contained outright lies at worst....
BMO's non-compliance infected the hearing on Mohns' motion to compel and every motion hearing thereafter....
Under Wisconsin law, a plaintiff may not recover damages for both breach of contract and unjust enrichment based on the same conduct....Because the circuit court found a contract existed and the jury awarded damages for BMO's breach of the contract, the award for damages based on unjust enrichment must be set aside....
BMO argues the punitive damages award must be set aside because it is not based upon tort liability. We agree. The jury awarded compensatory damages only for breach of contract and unjust enrichment, neither of which supports an award of punitive damages....Under Wisconsin law, punitive damages are not available as a remedy in a breach of contract action.
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