Supreme Court weighs appropriate damages in condo-loan lawsuit

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The Wisconsin Supreme Court is considering whether a plaintiff can recover damages for both unjust enrichment and breach of contract simultaneously, even in the presence of a discovery sanction of liability.

The lawsuit stems from a condominium complex called Hickory Hills. The New Berlin developer Bouraxis Properties hired Mohns Inc. as the general contractor for the project in 2005.

About three years later, in 2008, Mohns had the complex’s infrastructure and 20 condos built. However, John E. Machulak, the attorney for Mohns, said the project was  “going south” becasue of the economic downturn, so Mohns asked Bouraxis if the project was going to continue moving forward.

According to Mohns, BMO Harris, the developer’s lender, said there was about $223,000 in escrow for three of the 26 buildings in the development and that money would be paid to Mohns for its work.

But BMO then sold the multimillion-dollar loan to a different lender, and that lender rejected Mohns’ draw requests.

Mohns sued BMO for breach of contract, unjust enrichment and intentional misrepresentation. BMO filed a motion seeking summary judgment, which was denied when the court found there were factual issues that required resolution.

In January 2017, Mohns asked the Waukesha County Circuit Court to compel BMO to comply with discovery requests and impose sanctions for not providing the information and documents sought. The court granted summary judgment against BMO Harris on liability to all three of Mohns’ claims, and a jury awarded Mohns damages after that. The court reduced the jury’s punitive damage award from $1 million to $478,498 plus attorney’s fees.

BMO appealed, and the appellate court found the Waukesha County court had properly exercised its discretion in granting summary judgment to Mohns. The Court of Appeals also ruled that both the jury verdict and imposed damages were supported by credible evidence.

BMO then asked the state Supreme Court to consider the case, and the high court held oral arguments on Thursday.

Linda T. Coberly of Winston & Strawn in Chicago appeared pro hac vice for BMO Harris. She said the circuit court erred on the discovery sanction by telling the jury to calculate awards for both breach of contract and unjust enrichment, arguing the two charges can’t coexist under Wisconsin law.

“They’re fundamentally inconsistent,” Coberly said. “If we can’t understand how it affected the verdict, it has to be reversed.”

Machulak argued that there wasn’t a conflict because the trial court instructed the jury to decide the unjust enrichment amount without duplicating damages.

“It’s very easy to see what the damages are on the verdict, and this was a jury that was really paying attention,” Machulak said.

During Thursday’s arguments, the justices referred to transcripts from the circuit court and questioned why BMO wasn’t cooperating with discovery proceeedings.

“The lawsuit couldn’t go on because of the conduct of your client,” Justice Jill Karofsky said.

Coberly said Mohns and the court were frustrated because BMO’s corporate representative wasn’t personally involved with the loan, noting that the people who were had retired. Coberly argued the flaws int he response should have been taken up at trial.

“It is not for the courts in the discovery process to make a credibility determination,” Coberly said. “That’s an issue for trial. You go to the jury to resolve that.”

But Machulak said BMO had nefarious reasons for withholding the documents.

“They just plain deep-six withheld documents,” Machulak said. “Why did they do that? Because the loan officer in the case gave testimony contrary to his internal documents.”

The oral arguments lasted about an hour and 15 minutes total. At the end of the hearing, Chief Justice Patience Roggensack said she found the case interesting.

“I keep finding more questions in it than I get answers,” she said.

Justices Brian Hagedorn and Annette Ziegler did not participate. Follow @WLJReporter