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Reimbursement Case Analysis

Even if an "inchoate, potential cause of action in equity" is not an "encumbrance," within the meaning of sec. 706.10(5), as the court found, the decision in this case is nevertheless incorrect, because it is a "lawful claim" within the meaning of the statute.

In addition to providing that a grantor warrants that a title is free from encumbrance, subsec. (5) also provides, "the grantor … will forever guarantee and defend the title and quiet possession of the land against all lawful claims whatever originating prior to the conveyance…"

It is implicit that, if a grantor warrants he will defend against any lawful claims originating prior to the conveyance, then the grantor can not bring his own claims against the buyer originating prior to the conveyance. Otherwise, a grantor would be obligated to defend against his own claim.

Even if an "inchoate potential claim in equity" is not an "encumbrance," the claim for improvements made prior to the deed is nevertheless a claim "originating prior to the conveyance."

The court’s decision thus is only defensible if, because reimbursement for disproportionately borne expenses is an equitable claim, it is not a "lawful claim." To conclude this, however, carries the law/equity distinction beyond what Wisconsin law recognizes.

The distinction between actions in law and in equity was abolished in Wisconsin in 1857; only the differences between legal and equitable remedies continues. Miller v. Joannes, 262 Wis. 425, 428, 55 N.W.2d 375, 376 (1952). Thus, a party seeking an equitable remedy has no right to a jury trial. Spensley Feeds, Inc. v. Livingston Feed & Lumber, Inc., 128 Wis.2d 279, 381 N.W.2d 601 (Ct.App.1985); Dombrowski v. Tomasino, 27 Wis.2d 378, 385, 134 N.W.2d 420, 424 (1965).

For purposes of the case at bar, the only relevance of the fact that partition lies in equity, rather than law, is that neither party in this case has a right to a jury trial on the partition claim, and Gerald and Maxine can only seek equitable remedies, but not remedies at law, i.e., damages.

Furthermore, even if the distinction between claims in law and equity hadn’t been abolished 150 years ago, there is nothing equitable in allowing this suit to proceed.

The court justifies its result by stating, "Any improvements Gerald undertook before 1994 were presumably ‘ratified’ by the other co-tenants To the extent that co-tenancy involves enjoyment of the whole by all tenants, those improvements presumably benefited all parties equally and were equally enjoyed by all parties."

However applicable this may be to the parents of David and Emmett, Jr., it is wholly inapplicable to them, for the obvious reason that, just as the parents "presumably ratified" the improvements and were "presumably benefited" by both the parents and David and Emmett, Jr., the sons presumably paid for those improvements when the purchase occurred in 1994.

It is true, as the court found, "When Emmett, Jr. and David became co-tenants of the Spider Lake property, they too enjoyed the benefit of any improvements Gerald had made. When that property was sold, the value of those improvements was added to the sale price and they equally enjoyed that benefit as well." While true, however, the observation is irrelevant, because David and Emmett, Jr. presumably paid for the value of those improvements in 1994.

The property here was sold for roughly $350,000, and Gerald claimed roughly $50,000 in disproportionately borne expenses.

Ignoring any appreciation in property values and inflation, we can suppose the property was worth the equivalent of $300,000 in 1951, when the property was bought, $25,000 of the improvements were made between 1951 and 1994, and the other $25,000 between 1994 and the filing of this suit.

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Presumably, at the time of the 1994 sale, David and Emmett, Jr., paid half of $325,000, not $300,000. There is therefore no equity in ordering them to reimburse Gerald for improvements made prior to 1994, for the 1994 purchase price can be presumed to already reflect those improvements.

If Gerald and Maxine were shorted, it is solely because Emmett and Annette were overpaid in 1994 when they sold their interest in the property based on a $325,000 sale price, rather than $300,000. But that is no reason to allow suit against Emmett, Jr. and David, who did not ratify or benefit from the pre-1994 improvements.

Admittedly, the above discussion is based upon the presumption that David and Emmett, Jr., paid fair market value in 1994. The court’s decision does not indicate how much David and Emmett Jr. paid for their interest in the property.

By its silence, the court is creating a precedential rule of law that will govern both fair market value and nominal value situations. In some cases, the result may be fair, but given the statutory language that a grantor warrants to defend against all lawful claims originating prior to the conveyance, the better rule of law would be that it is implicit that a grantor can not erect his own such claims, whether in law or equity, and barred the claims based on improvements prior to the conveyance.

– David Ziemer

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David Ziemer can be reached by email.

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