COURT OF APPEALS DECISION DATED AND FILED May 11, 2011 A. John Voelker Acting 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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APPEALS
from a judgment of the circuit court for
Before Brown, C.J., Anderson and Reilly, JJ.
¶1 PER CURIAM. Caroline Apartments Joint Venture (CAJV) appeals from a judgment dismissing its claims against M&I Marshall & Ilsley Bank for breach of contract, fraud, and breach of fiduciary duties relating to a municipal bond financing transaction. CAJV argues that material factual disputes exist which preclude summary judgment in M&I’s favor, that M&I was not entitled to an award of attorney fees, and that the circuit court erroneously exercised its discretion in determining the attorney fees award. Because parole evidence cannot be introduced to challenge or vary the terms of the parties’ integrated contract, we affirm the judgment. With respect to M&I’s motion for reasonable attorney fees and costs incurred postjudgment and in this appeal, we remand for a hearing before the circuit court to determine what, if any, attorney fees and costs should be awarded.
¶2 CAJV is a partnership that owns an apartment community in
¶3 The interest rate on the bonds is tied to the strength of the bank issuing the underlying LOC and investors’ consequential perception of the quality of the bonds. In early 2009, M&I reported huge losses for 2008. As a result, its Standard and Poor’s counterparty credit rating was downgraded from A to A- and its financial strength rating from Moody’s was downgraded from B to C+. The downgrading of M&I’s creditworthiness caused Stern Brothers to raise the interest rate on the bonds. In April 2009, the sole bondholder, Evergreen Investment, tendered the bonds for payment.[1] Stern Brothers was unable to remarket the bonds and the full amount of bond redemption was drawn against the LOC. CAJV defaulted on the amended reimbursement agreement with M&I. CAJV eventually found a replacement LOC to support the remarketing of the bonds but at higher costs.
¶4 CAJV commenced this action against M&I, alleging five
causes of action: breach of contract,
breach of the implied covenant of good faith, fraud in the inducement,[2]
unjust enrichment, and equitable estoppel.
CAJV alleged that by representations of M&I principals regarding its
financial strength and conservative lending practices, the bank had a
contractual duty and duty of good faith to maintain the creditworthiness of the
LOC so that the bonds could trade at the lowest possible interest rate. It claimed that M&I breached the contract
and duty of good faith by making risky loans in
¶5 Prior to answering the complaint, M&I moved for summary
judgment.[3] M&I asserted that the written agreements
were fully integrated and did not permit variance of terms or duties by proof
of oral representations or agreements.
CAJV’s opposing affidavit explained that CAJV’s interest in the
creditworthiness of the LOC so that the bonds would carry a low interest rate
was known to M&I and that M&I represented it was “the oldest and
largest bank in Wisconsin,” that it “was conservative, and only made
diversified and well secured loans,” that it “did not make risky loans or engage
in aggressive lending activity,” and that it “expected to maintain its strong
credit rating for years to come.” The
circuit court granted summary judgment, concluding that the LOC stated that it
is a full representation of the parties’ undertaking and it contains no promise
that potential bond investors will accept the LOC as a strong indicator of bond
value. The court determined that parole
evidence of oral promises could not be considered because the agreements
expressly exclude any additional understandings. See Dairyland Equip. Leasing, Inc. v.
Bohen, 94
¶6 We review decisions on summary judgment de novo, applying the
same methodology as the circuit court. M
& I First Nat’l Bank v. Episcopal Homes Mgmt., Inc., 195
¶7 CAJV relies on a prior oral agreement which is not embodied
in the written contracts. The parole
evidence rule bars proof of oral agreements that vary or contradict written terms
when the parties to a contract embody their agreement in writing and intend the
writing to be the final expression of their agreement. Dairyland Equip., 94
¶8 M&I points to the merger clause in the LOC.[5] “Absent claims of duress, fraud, or mutual
mistake, a written provision which expressly negatives collateral or antecedent
understandings makes the document a complete integration.”
¶9 The “independence principle” embodied in Wis.
Stat. § 405.103(4) confirms that the obligation of the issuer of a
letter of credit to pay the beneficiary “is an obligation independent of any
other claim that may exist among the parties to the letter of credit contract.” Admanco, Inc. v. 700 Stanton Drive, LLC,
2010 WI 76, ¶22, 326
¶10 The merger clause in the LOC renders the LOC and amended
reimbursement agreement fully integrated contracts. See Dairyland
Equip., 94
¶11 CAJV argues that its claim that M&I breached the implied
covenant of good faith attendant to every contract survives any determination
that there was no specific contractual obligation to maintain creditworthiness
and support the strength of the LOC. Foseid
v. State Bank of Cross Plains, 197
a guarantee by each party that he or she “will not intentionally and purposely do anything to prevent the other party from carrying out his or her part of the agreement, or do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.”
Tang v. C.A.R.S. Prot. Plus, Inc., 2007 WI App 134, ¶41, 301 Wis. 2d 752, 734 N.W.2d 169 (citation omitted). Even accepting as undisputed fact that M&I undertook risky loan practices and incurred substantial financial losses that lowered its creditworthiness, the behavior of which CAJV complains was not intentionally directed at CAJV or intended to prevent CAJV’s performance.[8] Summary judgment dismissing the claim for the breach of the implied duty of good faith was also appropriate.
¶12 CAJV contends that M&I is not entitled to recover its attorney fees incurred in this litigation because CAJV’s claims were not based on written provisions in the amended reimbursement agreement. We summarily reject this nonsensical characterization of the litigation. CAJV sought to expand M&I’s contractual obligations. At a minimum, CAJV sought to recover default interest and fees paid under the amended reimbursement agreement. M&I incurred attorney fees related to “enforcing, protecting or preserving its rights” under the amended reimbursement agreement. The provision in the agreement for the payment of attorney fees was triggered.[9]
¶13 In support of its motion for an award of attorney fees, M&I submitted affidavits from its lead attorneys to which all invoices for services rendered in relation to this action were attached. An affidavit indicated the billing rate for the two lead attorneys and that the rate was set within the context of the local competitive market for legal services from law firms of comparable size. M&I sought a total award of $134,035.65 for costs and attorney fees.
¶14 CAJV argues that M&I failed to meet its burden of
demonstrating the reasonableness of the fees which rendered the circuit court’s
award an erroneous exercise of discretion.
See
Bettendorf
v. Microsoft Corp., 2010 WI App 13, ¶16, 323 Wis. 2d 137, 779 N.W.2d 34
(the amount of the attorney fees award
is left to the discretion of the circuit court; the party seeking the award bears the burden of demonstrating the
reasonableness of the requested fees).
At the outset, we reject CAJV’s suggestion that the circuit court
improperly shifted the burden of proof to CAJV.
The court’s discussion of CAJV’s challenge to the reasonableness of the
fees, including its comment that M&I “cast the gauntlet,” was merely a
warning to CAJV to be specific in its objection.
¶15 The
circuit court did not question the adequacy of the proof offered by M&I. M&I’s supporting affidavit was adequate to
demonstrate to the circuit court the billing rates, the hours worked, and
nature of work performed. It was a
sufficient basis for the circuit court to exercise its discretion and its
particular familiarity with the local
billing norms and the quality of the service rendered by counsel. See id. (the circuit court’s
determination is afforded deference because the circuit court is familiar with
local billing norms and will likely have witnessed firsthand the quality of the
services rendered).
¶16 The factors to be considered in determining the reasonableness of
attorney fees include the time and labor required and the skill requisite to
perform the legal service properly, the fee customarily charged in the locality
for similar legal services, the amount involved and the results obtained, the
time limitations imposed by the client or by the circumstances, the nature and
length of the professional relationship with the client, and the experience,
reputation, and ability of the lawyer or lawyers performing the services. Kolupar v. Wilde Pontiac Cadillac, Inc.,
2004 WI 112, ¶25, 275
¶17 Based on the cost and attorney fees provisions in the amended
reimbursement agreement, M&I moves for an award of $37,975.08, as costs and
attorney fees incurred postjudgment and on appeal. CAJV does not address M&I’s motion. Consequently, we remand for a hearing before
the circuit court to determine what, if any, additional attorney fees or costs
should be awarded under the agreement. See
Shands
v. Castrovinci, 115
By the Court.—Judgment affirmed and cause remanded with directions.
This opinion will not be published. See Wis. Stat. Rule 809.23(1)(b)5.
[1] CAJV’s complaint explains how the bonds were caught up in the 2008 financial crisis and perceived weaknesses of banks. Evergreen Investments was a division of Wachovia Corporation, which financially collapsed in the fall of 2008.
[2] This cause of action was dismissed for failure to be stated with particularity and is not the subject of this appeal.
[3] Because the motion for summary judgment was pending when the answer was due, the parties stipulated that the time for M&I to answer the complaint was extended to April 5, 2010. The circuit court granted summary judgment on March 22, 2010, thus alleviating the need for M&I to answer. We reject CAJV’s position that the allegations in the complaint are deemed admitted for summary judgment purposes because M&I failed to answer the complaint. The time to answer was extended and M&I was not in default with respect to the answer. Daughtry v. MPC Systems, Inc., 2004 WI App 70, ¶30, 272 Wis. 2d 260, 679 N.W.2d 808, on which CAJV relies, is factually different and has no application.
[4] All references to the Wisconsin Statutes are to the 2009-10 version unless otherwise noted.
[5] The LOC provides:
This Letter of Credit sets forth in full our undertaking, and such undertaking shall not in any way be modified, amended, amplified or limited by reference to any document, instrument or agreement referred to herein (including, without limitation, the Bonds), except only certificates required herein and the Uniform Customs referred to herein; and any such reference shall not be deemed to incorporate herein by reference any document, instrument or agreement except such certificates.
[6] For this reason, CAJV’s claims for unjust enrichment and equitable estoppel fail. Those claims are dependent on an obligation of M&I to guarantee the tradability of the bonds and prevent a default under the amended reimbursement agreement. No such obligation existed.
[7] We need not address the alternative arguments that the alleged agreement to maintain creditworthiness to insure that the bonds would trade with a low interest rate does not in fact conflict with the contracts and that the postdefault amendment to the contracts operated as an accord and satisfaction of CAJV’s contract claim.
[8] It is not for the courts to save CAJV from the unforeseen cascading effect of the financial crisis that reduced the profitability of its financing arrangement.
[9] We also summarily reject CAJV’s contention that the attorney fee provision is ambiguous because it did not specifically reference an entitlement to attorney fees in a direct action with CAJV. We need not be concerned with CAJV’s assertion that the simple application of the attorney fees provision would permit M&I to recover its attorney fees even if M&I was not the prevailing party. Those are not the facts of this case.