COURT OF APPEALS DECISION DATED AND FILED September 3, 2008 David R. Schanker Clerk of Court of Appeals |
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This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports. A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See Wis. Stat. § 808.10 and Rule 809.62. |
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Appeal No. |
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STATE OF WISCONSIN |
IN COURT OF APPEALS |
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DISTRICT II |
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Linda Espitia,
Plaintiff-Appellant, v. Gordon Fouche,
Defendant-Respondent. |
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APPEAL
from a judgment of the circuit court for
Before Brown, C.J.,
¶1 PER CURIAM. Linda Espitia appeals a money
judgment of $12,129.57 entered in her favor and against Gordon Fouche, her
former fiancé. Espitia contends that
Fouche’s admitted default on the parties’ mediated agreement entitles her to $25,000
in liquidated damages. We agree with the
trial court’s analysis and affirm.
¶2 During
their relationship, Espitia and Fouche jointly assumed debt and bought a
Harley-Davidson motorcycle. In November
2005, they entered into a Disassociation Agreement and Promissory Note. Espitia commenced this action when Fouche
allegedly breached the terms of the agreement.
In September 2006, they entered into a mediated stipulation that
replaced the earlier agreement. Two
months later, the trial court entered an Order for Dismissal, more formally
reciting the provisions of the handwritten stipulation.[1]
¶3 Under its terms, Fouche agreed to pay insurance on the Harley and to make two streams of payments: $500 a month to Espitia toward a $12,834 debt and $244 a month to Harley-Davidson toward the $10,782 remaining on the motorcycle loan until the amounts were paid in full. Espitia would keep the Harley but surrender it to Fouche upon timely payment of the insurance and both payments for seven consecutive months. For some reason, she gave him the motorcycle earlier. Espitia reclaimed it after Fouche defaulted in February 2007.
¶4 In March 2007, Espitia moved to reopen and for a default judgment
and a money judgment of $25,000 plus costs and disbursements, reduced by the
Harley payments Fouche had made. Trial
was to the court. Fouche appeared pro se. Espitia testified that she sold the
motorcycle for $10,129.83, the balance due.
At the conclusion, the trial
court found that conflicting terms in the parties’ agreement made it “difficult
to construe logically.” Using the
$25,000 as a starting point, the court determined the money judgment as
follows:
$25,000.00
- 2,000.00 (4
x $500 debt payments)
- 10,129.83 (sale
of Harley)
- 1,220.00 (5 x $244 Harley payments)[2]
- 243.48 (1 x $243.48 Harley payment)
___________________
$11,406.69 (judgment)
+ 722.88 (costs)
___________________
$12,129.57 (total
judgment)
¶5 Espitia appeals.[3]
¶6 On
appeal, Espitia contends that Fouche’s default entitled her to $25,000 in
liquidated damages because the agreement unambiguously provides a set-off only
for payments made on the Harley.[4] The construction of a written contract
is a question of law that we review de novo. Frisch v. Henrichs, 2007 WI 102, ¶30,
304
¶7 The trial court found that the agreement is ambiguous in several respects. Section 2 directs Fouche to make timely payments to Harley-Davidson “on or about the 21st of each month.” Fouche paid by checks dated before the 21st, some of which Harley-Davidson posted after the 21st but assessed no late fees. We cannot agree with Espitia that “payment … on or about the 21st” means cash or its equivalent “on or ahead of time” when, as the trial court noted, the agreement neither defines method of payment nor clarifies “on or about.”
¶8 Section
6, the damages provision, poses other problems.
It states:
6. If
[Fouche] defaults in any payment due hereunder, [Espitia] shall automatically
be entitled to a judgment in the amount of $25,000.00 plus statutory costs and
disbursements, but reduced by any payments made to [Espitia] under Section
2. This is in addition to the replevin
judgment authorized by Section 4. Upon
voluntary return of possession of Harley[-]Davidson motorcycle or upon return
of same by replevin judgment, [Fouche] agrees that [Espitia] may sell the Harley[-]Davidson
motorcycle forthwith at a price determined by her and she may apply the
proceeds against the Harley[-]Davidson loan balance. Any excess of proceeds shall be applied to
payments due under Section 2.
¶9 Facially plain, it becomes “difficult to logically construe” when read together with the other sections it references. It provides, for instance, that the $25,000 money judgment is to be “reduced by any payments made to [Espitia] under Section 2.” Section 2 addresses the Harley debt. Those payments were made directly to Harley-Davidson, however, not to Espitia. Adding to the confusion, the last two sentences permit Espitia to sell the motorcycle and then to “apply the proceeds against the Harley[-]Davidson loan balance. Any excess of proceeds shall be applied to payments due under Section 2.” This makes no sense at all. The Harley loan balance is Section 2. If the proceeds already are applied against that balance, then like the trial court we, too, are at a loss to explain why excess proceeds “shall be applied” again.
¶10 The
court reasonably concluded that the agreement meant to say that any excess
monies from the sale of the Harley would work as credits against the $12,894
loan amount addressed by Section 1. The
court further concluded that Fouche deserved credit for the Harley payments he
made and for the $10,129.83 sale amount.
We agree with the trial court’s conclusion that, since $25,000 was the
approximate sum Fouche owed on the money debt and the Harley debt, the apparent
intent of the agreement was to give credit for all payments made.
¶11 Espitia
urges us to consider the damages provision as a liquidated damages clause. The validity of a
stipulated damages clause presents a mixed question of law and fact. See
Wassenaar
v. Panos, 111
¶12 The
overall single test of validity is whether the liquidated damages clause is reasonable under the
totality of circumstances, determined by examining (1) whether the parties
intended to provide for damages or for a penalty; (2) the difficulty
of accurately estimating the damages at the time of contract; and
(3) if the amount stipulated is a reasonable forecast of the harm caused by the
breach.
¶13 As
to the first factor, she contends there is no basis to conclude that the amount
was intended to punish either party. She
also insists, however, that built into the agreement was a strong incentive for
Fouche to make full, timely payments:
“[It] means just what it says—pay and pay on time, because if you don’t
keep your word this time, you are going to pay more than your incentive amount
under the agreement if you keep it.” Although
not conclusive, we can infer that at least Espitia intended the $25,000 to be
punitive. See Equity Enters., Inc. v. Milosch, 2001 WI App 186, ¶22, 247 Wis.
2d 172, 633 N.W.2d 662.
¶14 On
the second factor, the greater the difficulty of estimating or proving
damages, the more likely the stipulated damages will seem reasonable. Wassenaar, 111
¶15 The
third factor, the reasonableness of the parties’ forecast of damages, takes
into consideration facts available at trial.
See id. at 531-32. If the damages provided for in the contract
are grossly disproportionate to the actual harm sustained, courts usually
conclude that the parties’ original expectations were unreasonable.
¶16 Finally,
Espitia contends that the trial court wrongly reformed the agreement when the
equities favor enforcing it. We disagree
that the court reformed it. Rather, as
we have said, the court construed the ambiguities that hampered
enforcement. Had the court granted
equitable relief, however, it would have been within its sound discretion. See
Hall
v. Liebovich Living Trust, 2007 WI App 112, ¶10, 300
¶17 For violating Wis. Stat. Rule 809.23(3), Espitia’s counsel shall pay the $100 penalty to the clerk of this court within thirty days of the release of this opinion.
By the Court.—Judgment affirmed.
This opinion will not be published. See Wis. Stat. Rule 809.23(1)(b)5.
[1] The November 2006 Order for Dismissal, reciting the parties’ agreement, provides:
1. [Fouche] shall pay to [Espitia] $12,834.00 by making payments of $500.00 per [month] which shall commence on October 21, 2006 and continue thereafter on the 21st day of each month until this total is paid in full.
2. [Fouche] shall timely make the monthly payment on the subject Harley[-]Davidson Motorcycle which is due on or about the 21st of each month commencing on October 21, 2006, and [Fouche] shall continue making the monthly payments thereafter on the 21st day of each month until the Harley[-]Davidson loan balance is paid in full.
3. [Fouche] shall pay [Espitia] by April 21, 2007 the Harley[-]Davidson motorcycle insurance premium to become due for the annual period commencing on or about May 19, 2007. [Fouche] is to sign a release allowing Harley[-]Davidson or any of its sub-parts to provide payment information directly to [Espitia], and if Harley[-]Davidson refuses to honor such a release, then [Fouche] shall provide proof of payment to [Espitia] within 5 days of the date of payment. [Fouche] agrees to keep Harley[-]Davidson registration current at all times and he agrees to be liable for all parking or other violations.
4. [Espitia] shall retain possession of the Harley[-]Davidson motorcycle. If [Fouche] makes the payments due under Sections 1 and 2 above for seven consecutive months commencing with the October 21, 2006 payment and pays the insurance premium of Section 3 above by April 21, 2007, [Espitia] shall allow [Fouche] to pick up motorcycle forthwith. If [Fouche] defaults in either payment to [Espitia] any time thereafter by 10 days, [Fouche] shall deliver possession of motorcycle to [Espitia] forthwith. If [Fouche] fails to deliver possession, [Espitia] may obtain a replevin judgment from the court without notice and [Fouche] shall be liable for all costs of the replevin and pickup, including reasonable attorney fees.
5. Upon completion of all payments due hereunder, [Fouche] shall receive possession of the ring and the Weber grill[] and shall sign over title for the Harley[-]Davidson motorcycle to [Fouche].
6. If [Fouche] defaults in any payment due hereunder, [Espitia] shall automatically be entitled to a judgment in the amount of $25,000.00 plus statutory costs and disbursements, but reduced by any payments made to [Espitia] under Section 2. This is in addition to the replevin judgment authorized by Section 4. Upon voluntary return of possession of Harley[-]Davidson motorcycle or upon return of same by replevin judgment, [Fouche] agrees that [Espitia] may sell the Harley[-]Davidson motorcycle forthwith at a price determined by her and she may apply the proceeds against the Harley[-]Davidson loan balance. Any excess of proceeds shall be applied to payments due under Section 2.
[2] The parties dispute whether Fouche made five or six payments to Harley-Davidson. Fouche proved five at trial. In the body of its written decision, the court states that he deserves credit for six payments, but its calculation factors in a credit for five. On appeal, Espitia concedes six. We will leave it at five, the number proved.
[3]
Fouche, again pro se, did not file a brief.
Although we may summarily dismiss the appeal if we conclude his failure
to file a brief means he has abandoned the appeal or is acting egregiously or
in bad faith, we opt not to. See Daniels v.
[4] Espitia’s “strict construction” argument is intriguing given that the parties themselves deviated from the agreement when Espitia gave Fouche the Harley without his having made both streams of payments for seven consecutive months. Therefore, we hesitate to say it was error for the trial court to look at the equities and determine the actual damages.
[5] Counsel
for Espitia cites to an unpublished case assertedly upholding a stipulated
damages clause due to the difficulty of ascertaining “the exact amount of
income certain vending machines would produce.”
The cite provided is “Buellesbach v. Roob, 2005 AP 160 (