PUBLISHED OPINION
Case No.: 94-0670
†Petition for
Review filed
Complete
Title
of
Case:JAMES W. FOSEID,
Plaintiff-Appellant,†
v.
STATE BANK OF CROSS PLAINS,
Defendant-Respondent.
Submitted
on Briefs: May 9, 1995
COURT COURT OF
APPEALS OF WISCONSIN
Opinion
Released: October 19, 1995
Opinion
Filed: October
19, 1995
Source
of APPEAL Appeal from a judgment
Full
Name JUDGE COURT: Circuit
Lower
Court. COUNTY: Dane
(If
"Special" JUDGE: Robert
W. Landry
so
indicate)
JUDGES: Eich,
C.J., Gartzke, P.J., and Sundby, J.
Concurred:
Dissented:
Appellant
ATTORNEYSFor the plaintiff-appellant the
cause was submitted on the briefs of Steven J. Schooler of Lawton
& Cates, S.C., of Madison and Robert J. Gingras of Gingras
Law Offices of Madison.
Respondent
ATTORNEYSFor the defendant-respondent the
cause was submitted on the brief of Thomas J. Basting Sr. and Bryan
D. Woods of Brennan, Steil, Basting & MacDougall, S.C., of
Milwaukee and Madison.
COURT OF APPEALS DECISION DATED AND RELEASED October
19, 1995 |
NOTICE |
A party may file with the Supreme Court a petition to review an
adverse decision by the Court of Appeals.
See § 808.10 and Rule 809.62,
Stats. |
This opinion is subject to further editing. If published, the official version will appear in the bound
volume of the Official Reports. |
No. 94-0670
STATE OF WISCONSIN IN
COURT OF APPEALS
JAMES
W. FOSEID,
Plaintiff-Appellant,
v.
STATE
BANK OF CROSS PLAINS,
Defendant-Respondent.
APPEAL
from a judgment of the circuit court for Dane County: ROBERT W. LANDRY, Judge. Affirmed.
Before Eich, C.J.,
Gartzke, P.J., and Sundby, J.
EICH,
C.J. James Foseid appeals from a
judgment setting aside a jury verdict in his favor and dismissing his complaint
against the State Bank of Cross Plains.
Two
issues are dispositive: whether the trial court erred when it overturned a jury
verdict determining that the bank had (1) intentionally interfered with
Foseid's prospective contract with a third party and (2) breached its duty of
good-faith dealing in its own contractual relationship with Foseid. To resolve these issues, we must examine the
scope of appellate review of a trial court's decision to overturn a jury
verdict in a civil case.
Although
we conclude that the trial court did not apply correct legal standards in
ruling on the postverdict motions, we are satisfied that the verdict was
properly overturned in both instances.
In other words, the court was right, if for the wrong reasons. We therefore affirm the judgment.
Foseid
owned a substantial amount of property in Adams County and spent several years
developing it into a fish hatchery. He
had borrowed money over the years from Bank One and M&I Bank to finance the
development, putting the land up as collateral. He eventually defaulted on the loans, and Bank One and M&I
Bank obtained judgments of foreclosure on the property.
Foseid
also owned an apartment building in Madison on which the State Bank of Cross
Plains held a second mortgage. The
property was sold pursuant to foreclosure proceedings instituted by the first
mortgagee, leaving $187,000 unpaid on the bank's second mortgage. In an attempt to protect its interest, the
bank purchased the Adams County foreclosure judgments; consequently, by early
1990, the bank held a total interest in Foseid's Adams County property of
approximately $800,000.[1]
Upon
acquiring the judgments, the bank informed Foseid that if he could find a
purchaser for the property by March 4, 1990, the bank would not pursue a
sheriff's sale of the property. In
addition, the bank would discount Foseid's debt by $82,000 if he met the
deadline.
When
Foseid was unable to find a purchaser by March 4, the bank extended the
deadline to April 6, 1990. When Foseid
failed to meet the second deadline, the bank informed him, on April 27, that it
would extend the deadline and monitor his progress in securing a purchaser on a
"week-to-week" basis.
In
late April 1990, the Nature Conservancy offered to purchase the property for
$1.2 million, and on May 1, several investors, referred to as "the LaSalle
Group," expressed an interest in setting up a corporation to purchase the
property.
On
or about May 1, 1990, Foseid informed the bank of both offers. On May 11, the bank's attorney wrote to
Foseid's attorney, stating that the bank would be willing to "continue
with the proposed discount" according to the following schedule:
1. If
a binding sale agreement is not entered into by May 30, 1990, the original
discount would be reduced by $15,000.
2. If
a binding sale agreement is not entered into by June 15, 1990, there would be
an additional $15,000 reduction.
3. If a binding sale agreement is not entered into
by June 15, 1990, posting and publication for sheriff's sale would be forwarded
to the Adams County Sheriff.
Foseid's
discussions with the LaSalle Group continued and, on May 25, 1990, the LaSalle
Group sent Foseid a letter of intent outlining in detail its proposal for
purchase of the property.[2]
On
May 31, 1990, Foseid's attorney wrote to the bank's attorney, notifying him
that the sale with the LaSalle Group was scheduled to close by June 30. The bank responded that it would maintain
the graduated deadlines set out in its letter of May 11, 1990.
On
June 20, the LaSalle Group sent a draft sales agreement to Foseid's attorney,
with terms differing somewhat from those set out in the letter of intent. Foseid's attorney responded with alternative
proposals on June 27 and July 6.[3]
Foseid's
sale eventually closed on August 15, 1990, on terms less advantageous to him
than those outlined in LaSalle's original letter of intent. And because Foseid did not meet the bank's
final deadline for the discount, he lost the discount and paid the outstanding
foreclosure judgments and promissory note in full.
Foseid
sued the bank, seeking both compensatory and punitive damages for (1) the
bank's breach of its "discount" contract; (2) its breach of a
"good-faith" duty to him; and (3) its intentional interference with
his prospective contract with the LaSalle Group. After a five-day trial, the jury returned a special verdict in
Foseid's favor, concluding that while the bank had not breached its contract
with Foseid, it had breached a "duty of good faith" owed to him, and
had intentionally interfered with the prospective Foseid/LaSalle contract. And, finding that the bank's conduct with
respect to the interference and good-faith claims was "outrageous,"
the jury awarded substantial punitive damages on these claims, in addition to compensatory
damages on both causes of action.
The
bank moved for judgment notwithstanding the verdict, to change the special
verdict answers, and for a new trial.
The trial court upheld the jury's verdict with respect to the
breach-of-contract claim, but overturned the findings (and compensatory and
punitive damage awards) with respect to the good-faith and
contract-interference claims. Foseid
appeals from that decision.
I. Standard of Review
As
we have noted, the bank filed multiple (and alternative) postverdict motions:
to change the answers, for a new trial, and for judgment notwithstanding the
verdict (JNOV). The trial court ruled:
(1) that the jury's finding that the bank had intentionally and improperly
interfered with Foseid's prospective contractual relationship with the LaSalle
Group was not supported by the evidence;[4]
and (2) that Foseid's good-faith claim must fail as a matter of law.[5]
The
parties hotly dispute the appropriate standards governing appellate review of a
trial court's decision to overturn a jury's answers to special-verdict
questions. Foseid maintains that we
must uphold the jury's answers if there is any credible evidence to support
them. That is the usual and
long-established standard for testing the sufficiency of the evidence to
support a jury's verdict applicable to both trial courts considering
postverdict motions and to this court on appeal: if there is any credible
evidence which, under any reasonable view, fairly admits of an inference that
supports a jury's finding, that finding may not be overturned. Page v. American Family Mut. Ins. Co.,
42 Wis.2d 671, 681-82, 168 N.W.2d 65, 69-70 (1969); Ferraro v. Koelsch,
119 Wis.2d 407, 410-11, 350 N.W.2d 735, 737 (Ct. App. 1984), aff'd, 124
Wis.2d 154, 368 N.W.2d 666 (1985); see § 805.14(1), Stats.
The
bank argues, however, that, under Helmbrecht v. St. Paul Ins. Co.,
122 Wis.2d 94, 110, 362 N.W.2d 118, 127 (1985), the proper test to be employed
when the trial court sets aside or changes an answer in a jury verdict is
deferential to the trial court, not the jury: whether the trial court's
decision is clearly wrong. Because of
seemingly contradictory language in Helmbrecht and various other
cases bearing on the subject, we take this opportunity to address the question.
As
we have noted, there can be no dispute that when a verdict has been rendered by
the jury and the sufficiency of the evidence to support the verdict is
challenged, both trial and appellate courts apply the
"any-credible-evidence" standard.
The
"clearly-wrong" test advocated by State Bank in this case originated
in a line of cases--culminating, for our purposes, in Olfe v. Gordon,
93 Wis.2d 173, 286 N.W.2d 573 (1980)--involving preverdict motions (formerly
called motions for "nonsuit") made by the defendant at the close of
the plaintiff's case to challenge the adequacy of the evidence to go to the
jury in the first place.
In
Olfe, the trial court granted the defendant's motion for
dismissal or a directed verdict at the close of the plaintiff's case on grounds
that the plaintiff had not brought forth sufficient evidence to take the case
to the jury. The supreme court
reversed, evaluating the trial court's decision under a clearly-wrong standard:
When considering
the correctness of the action of the trial court, this court must view
the evidence in the light most favorable to the [party against whom the motion
is made]. However, this court has held
that it will not reverse a trial court's ruling on a motion for dismissal
(nonsuit) unless such ruling is clearly wrong.
Olfe, 93 Wis.2d at 185-86, 286 N.W.2d at 579 (emphasis added) (citation
omitted). Then, quoting from Trogun
v. Fruchtman, 58 Wis.2d 569, 585, 207 N.W.2d 297, 306 (1973), the court
explained the reason for the rule:
[W]hen the trial judge rules, either on motion for nonsuit, motion for a directed
verdict, or motion to set aside the verdict, that there is or is not
sufficient evidence upon a given question to take the case to the jury, the
trial court has such superior advantages for judging of the weight of the
testimony and its relevancy and effect that this court should not disturb the
decision merely because, on a doubtful balancing of probabilities, the mind
inclines slightly against the decision, but only when the mind is clearly
convinced that the conclusion of the trial judge is wrong.
Olfe, 93 Wis.2d at 186, 286 N.W.2d at 579 (emphasis added).
The
emphasized language in Olfe, coupled with the stated rationale
for deferring to the trial court's determination, satisfies us that the
clearly-wrong standard is applicable only where (1) the decision under
review is that of the trial judge, not the jury, and (2) the question being
decided is whether sufficient evidence has been presented to allow the case to
be submitted to the jury. Whether the
motion is designated as one for directed verdict or dismissal is unimportant:
if the challenge is to the sufficiency of the evidence to go to the jury in the
first place, the Olfe clearly-wrong standard applies. If the challenge is to the sufficiency of
the evidence to support the jury's verdict--however the motion is designated by
the parties (or the court)--the standard is the same for the trial court and
for this court on appeal: whether there is any credible evidence, or reasonable
inferences based on that evidence, to support the verdict.
In
Helmbrecht, the case State Bank primarily relies upon to support
its argument that we should apply the clearly-wrong standard to the trial
court's decision, the court appears to have blended the two standards. As in Olfe, the defendant in Helmbrecht
moved for a "directed verdict" at the close of the plaintiff's
evidence. Rather than ruling on the
motion at the time it was made, however, the court reserved its decision
pending receipt of the verdict and the defendant renewed the motion after the
jury returned a substantial verdict in the plaintiff's favor.[6] Helmbrecht, 122 Wis.2d at 101,
362 N.W.2d at 123. After the verdict,
however, the trial court did not decide the motion on the issue originally
presented--whether there was sufficient evidence to go to the jury--but
instead ruled that "the evidence was not sufficient to support the
[jury's] verdict." Id.
at 108-09, 362 N.W.2d at 126-27 (emphasis added).
On
appeal, the supreme court began its analysis by setting forth the time-honored
any-credible-evidence standard for review of the sufficiency of the evidence to
support a jury verdict. However,
continuing to refer to the trial court's decision as a "directed
verdict," the court stated, quoting Olfe: "[W]e have
also declared that this court, `will not reverse a trial court's ruling on a
motion for dismissal (nonsuit) unless such ruling is clearly wrong.'" Id. at 110, 362 N.W.2d at 127
(quoting Olfe, 93 Wis.2d at 186, 286 N.W.2d at 579). The Helmbrecht court went on
to quote in full the same language from Trogun v. Fruchtman that
the Olfe court had used to explain why appellate courts should
defer to the trial court's ruling on a motion challenging the sufficiency of
the evidence to go to the jury. And
while the Helmbrecht court appears to have applied,
appropriately, the any-credible-evidence standard to the trial court's
decision, its suggestion that the clearly-wrong test is also applicable to a
trial court's decision on the sufficiency of the evidence to support a jury
verdict[7]
has led to uncertainty in the area, as evidenced by State Bank's argument in
this case.
We
do not consider the Helmbrecht court's discussion of the Olfe/Trogun
clearly-wrong standard, and its concluding reference to that standard, to be
precedential. First, because the
court's analysis of the issue was confined to the sufficiency of the evidence
to support the verdict and did not attempt to establish that the trial court's
decision to overturn the verdict was clearly wrong for any reason other than
that the evidence was insufficient, we consider the references to the Olfe/Trogun
test to be no more than surplusage or dicta. Second, as we have noted above, Olfe and Trogun
plainly limit application of the clearly-wrong standard to preverdict motions
testing the sufficiency of the evidence to go to the jury. It has no place in the situation where the
jury has spoken and the challenge is to the sufficiency of the evidence to
support the verdict.
We
recently commented on the subject in Platz v. United States Fidelity
& Guar. Co., 195 Wis.2d 775, 781-82 n.1, 537 N.W.2d 397, 399 (Ct.
App. 1995), where we stressed the importance of the distinction between
a trial court's determination of whether there is
"credible evidence" to submit to a jury (where, as Helmbrecht
perhaps implied, we defer to the trial court's "superior advantages for
judging of the weight of the testimony and its relevancy and effect"), and
a trial court's decision on whether to overrule a jury's decision (where
we, like the trial court, must defer to the jury's evaluation of credibility of
witnesses and weight of evidence).
(Citations omitted.)
It is a distinction too valuable to be lost, and it leads us to two
conclusions: (1) when the court changes an answer in the jury's special
verdict, or otherwise overturns a jury finding, we defer to the verdict by
applying the traditional any-credible-evidence standard; and (2) it is only
where the trial court grants (or denies) a motion for dismissal or directed
verdict--whether at the close of the plaintiff's case or, if the decision is
reserved and the motion is renewed after verdict, at that time[8]--based
on its determination that the evidence was insufficient to go to the jury, that
the clearly-wrong standard of Olfe and its predecessors is
properly applied.
In
this case, as may be seen below, the trial court's decision (although
mislabeled as a judgment notwithstanding the verdict) was one based on its determination
that the evidence was insufficient to support the jury's verdict. We thus apply the any-credible-evidence
standard to the court's rulings.
II. Intentional Contract Interference
We discussed the legal requirements for a
claim of tortious interference with a prospective contract in Cudd v.
Crownhart, 122 Wis.2d 656, 364 N.W.2d 158 (Ct. App. 1985). An individual improperly interferes with a
prospective contract by "(a) inducing or otherwise causing a third person
not to enter into or continue [a] prospective relation or (b) preventing the
other from acquiring or continuing [a] prospective relation." Id. at 659-60, 364 N.W.2d at
160 (adopting the provisions of Restatement
(Second) of Torts § 766B (1979)).
Such interference is actionable, however, only if it is both
"intentional" and improper. Cudd,
122 Wis.2d at 660, 364 N.W.2d at 160-61.
"[T]o have the requisite intent, the defendant must act with a
purpose to interfere with the [prospective] contract." Id.
at 660, 364 N.W.2d at 160. If an actor
lacks the "purpose to interfere" then his or her "conduct does
not subject [him or her] to liability even if it has the unintended effect of
deterring [a third party] from dealing with the [plaintiff]." Id.
Citing
Cudd, Foseid argues that the following evidence should be held
sufficient for the jury to reasonably conclude that the bank intentionally
caused a final sales agreement on less favorable terms than those contained in
the letter of intent: (1) the bank, which had extended Foseid's
"discount" contract several times after its initial expiration,
imposed "strict" deadlines for his performance of the agreement after
learning of the LaSalle Group's proposal;[9]
(2) representatives of the bank and the LaSalle Group discussed possibly
assigning the bank's interest in the property to the LaSalle Group while
Foseid's negotiations with the LaSalle Group were ongoing; (3) at some point
after its discussion with the bank, in which it presumably learned of the
extent of Foseid's debts, LaSalle modified some of the terms of its earlier
letter of intent; and (4) the bank "knew" that it would be paid in
full regardless of which offer Foseid accepted, the LaSalle Group's or the
Nature Conservancy's.[10] We agree with the trial court that the
evidence is insufficient.
In
Cudd, the plaintiff claimed that the defendant interfered with a
prospective sale of his property. While
the plaintiff was showing the property to a potential buyer, the defendant
approached, made disparaging remarks about the property, disputed the placement
of the boundary line between his land and the plaintiff's, and even threw a
punch at the potential buyer. The sale
fell through and the potential buyer testified that he would have made an offer
on the property but for the boundary-line dispute. Cudd, 122 Wis.2d at 658, 364 N.W.2d at 159-60. The jury found the defendant liable for
intentional interference with the potential sale. We reversed, holding that, even viewing the evidence in the light
most favorable to the verdict, it was "insufficient for the jury to
reasonably conclude that [the defendant] intentionally acted with the purpose
to induce or otherwise cause [the purchaser] to not enter into the prospective
contract." Id. at
662, 364 N.W.2d at 161.
We
reach a similar conclusion here. Our
review of the testimony satisfies us that there is no credible evidence which
under any reasonable view fairly admits of an inference that the bank's actions
caused the result Foseid complains of--a final sale agreement with LaSalle that
was somewhat more disadvantageous to him than the proposal outlined in the
initial negotiations. Indeed, Foseid's
own witnesses could do no more than speculate that the bank's actions may have
caused some modifications in the LaSalle negotiations.[11] And while, as we have noted above, a jury
verdict will be upheld if there is any credible evidence to support it, we have
also recognized that "[a] jury cannot base its findings on conjecture and
speculation." Herbst v.
Wuennenberg, 83 Wis.2d 768, 774, 266 N.W.2d 391, 394 (1978).
As
we noted in Cudd, "[A] party has a right to protect what he
believes to be his legal interest." Cudd, 122 Wis.2d at 662, 364 N.W.2d at 161. The only reasonable conclusion to be drawn
from the evidence in this case is that the bank, by setting deadlines and
discussing a possible assignment of its interest in the property, was acting to
protect those interests: to motivate Foseid to close a sale as soon as possible
and to try to secure its own position should his negotiations fail. Considering the testimony in the light most
favorable to Foseid, there is no evidence from which it may reasonably be
inferred that the bank had formed the intent to interfere with his sale of the
property (indeed, the history of the bank's dealings with Foseid reflect its
interest in having him sell the property and satisfy the bank's judgments), or
that the bank acted improperly in this respect. The trial court properly overturned the jury's finding on the
contract-interference claim.
III. Breach of the Duty of Good Faith
As noted above, the
trial court overturned the jury's answer to the duty of good faith questions,
reasoning that because Wisconsin courts have limited tort liability for breach
of the duty of good faith to cases involving insurance companies and their
insureds, Foseid was not entitled to recover on this claim.
We
noted in Hauer v. Union State Bank, 192 Wis.2d 576, 594, 532
N.W.2d 456, 463 (Ct. App. 1995), that Wisconsin's recognition of a tort of bad
faith or lack of good faith in certain insurance cases, and its concomitant
adherence to the rule implying a duty of good-faith dealing in all contracts,
can lead to confusion--as this case also shows.
The
bank argues, for example, that Foseid tried his bad-faith claim as one sounding
in tort and that it was properly dismissed by the trial court, while Foseid
maintains that the case was tried and submitted to the jury as a contract
bad-faith claim and should be judged on that basis. The jury's verdict and the trial court's postverdict decision
perpetuate the confusion for, while the court's instructions to the jury on the
issue were limited to contract bad faith, it treated the verdict
question (and the jury's answer) as if the claim was one for the tort of
bad faith, and overturned the finding on that basis.[12]
We
emphasized in Hauer that the "tort of `lack of good faith'
or `bad faith'" does not exist in Wisconsin other than in certain cases
involving insurance companies and their insureds.[13] Id. at 595, 532 N.W.2d at
463. Because, however, we were able to
ascertain that the plaintiff's bad-faith claim in Hauer "was
ultimately tried and presented to the jury under contract theories, not a tort
of bad faith," we evaluated it as a contract claim on appeal. Id.
In
this case, while the parties hold differing views as to precisely how the
bad-faith issue was raised and tried, there is no question that it was
submitted to the jury as a "contract" bad-faith claim, for their only
instruction on the subject was the contract instruction: that "[e]very
contract implies good faith and fair dealing between the parties" and
"a promise against arbitrary or unreasonable conduct." Wis
J I--Civil 3044.[14]
We
conclude, therefore, that the trial court improperly overturned the jury's
affirmative answer to the bad-faith question on the "legal" ground
that it was a tort rather than a contract inquiry. As a result of that ruling, the court never considered the bank's
arguments that there was insufficient evidence in the record to support the
jury's affirmative answer to the question.
We think that is immaterial, however, for, as we have noted above, we
review the sufficiency of the evidence to support a verdict under the same
any-credible-evidence standard as the trial court.[15]
It is thus appropriate for
consideration on this appeal.
There
is a preliminary matter, however. As we
have noted above, the first series of questions in the special verdict asked
whether the bank had breached its "discount" contract with Foseid,
and the jury responded in the negative. The trial court upheld that portion of
the verdict on postverdict motions, and its decision on the issue is not
challenged on this appeal. The question
arises, then, whether an alleged breach of the implied duty of good-faith
dealing is subsumed under the general question inquiring into breach of the
contract. Stated differently, is a
breach of the implied duty of good-faith dealing something separate from breach
of the terms of the contract? We think
it is.
The
bank disagrees, asserting that because the duty of good faith and fair dealing
"is an element of contract performance," it must be considered as
included in the first breach-of-contract question. To give the good-faith inquiry independent life, argues the bank,
would result in a "duplicitous" verdict.
The
bank correctly points out that we noted in Schaller v. Marine Nat'l Bank,
131 Wis.2d 389, 402-03, 388 N.W.2d 645, 651 (Ct. App. 1986), that at least one
law review article has characterized "good faith" as "`decency,
fairness or reasonableness in performance or enforcement' of a contract"
(emphasis added), but we do not consider that reference as a holding that
violation of the implied promise of good-faith dealing may not be considered
independent of any breach (or lack of breach) of the underlying contract. Indeed, such a holding would run contrary to
the supreme court's decision in Estate of Chayka, 47 Wis.2d 102,
176 N.W.2d 561 (1970).
In
Chayka, a husband and wife contracted to execute joint and
reciprocal wills, which, upon one party's death, would leave all property to
the other and, upon the survivor's death, would leave all property owned by the
survivor to another relative. Id.
at 103-04, 176 N.W.2d at 562. After the
husband's death, the wife remarried and, shortly thereafter, conveyed virtually
all of her property to her new husband (or, in some instances, to herself and
her husband in joint tenancy). On the
wife's death, her estate sought to overturn the conveyances. Resisting the challenge, the second husband
argued that the will contract had been fully performed because a will with all
of the agreed-upon terms had been executed (and fully performed, in that the
wife did leave the property that remained to the relative). Id. at 107, 176 N.W.2d at
564. The supreme court rejected the
argument, concluding that while the contract had been fully complied with
"in form," the wife's action "breaches the covenant of good
faith that accompanies every contract, by accomplishing exactly what the
agreement of the parties sought to prevent." Id. at 107, 176 N.W.2d at 564 (footnote omitted).
We
think Chayka may be read in only one way: that a party may be
liable for breach of the implied contractual covenant of good faith even though
all the terms of the written agreement may have been fulfilled. We thus consider whether there is any
credible evidence in the record to support the jury's affirmative answer to the
good-faith question.
Foseid
argues that the jury's answer is supported by the same evidence he advanced in
support of the answer to the contract-interference question: (1) the bank,
having notice of Foseid's discussions with the LaSalle Group, imposed the
"final" deadlines for his performance; and (2) at some point the bank
discussed assigning its interest to LaSalle.
As
we noted in our discussion of the good-faith jury instruction, the rule
implying a covenant of good-faith conduct in all contracts is intended as a
guarantee against "arbitrary or unreasonable conduct" by a
party. See Wis J I--Civil 3044. "Good faith" is a term frequently
defined in the negative, such as "the absence of bad faith." In the Restatement
(Second) of Contracts § 205 cmt. a, it is stated that the concept of
good faith "excludes a variety of types of conduct characterized as
involving `bad faith' because they violate community standards of decency,
fairness or reasonableness."
Discussing "good faith performance," the text continues:
Subterfuges and
evasions violate the obligation of good faith in performance even though the
actor believes his conduct to be justified.
But the obligation goes further: bad faith may be overt or may consist
of inaction, and fair dealing may require more than honesty. A complete catalogue of types of bad faith
is impossible, but the following types are among those which have been
recognized in judicial decisions: evasion of the spirit of the bargain, lack of
diligence and slacking off, willful rendering of imperfect performance, abuse
of a power to specify terms, and interference with or failure to cooperate in
the other party's performance.
Id. at cmt. d.
In
Chayka, as we have indicated, a breach of the good-faith covenant
was found where the surviving spouse's actions, while not breaching any
specific provision of the written contract, "stripped near all of the
flesh from the bones" of the agreement by divesting herself of most of the
property prior to her death and thus "accomplishing exactly what the
agreement ... sought to prevent." Chayka,
47 Wis.2d at 107, 176 N.W.2d at 564.
That
is not the situation here. Even viewing
the evidence in the light most favorable to the verdict, we do not believe a
jury could reasonably conclude that the bank's conduct was
"unreasonable" or a "subterfuge," or that it amounted to an
evasion of the spirit of the agreement, an abuse of power or an interference
with Foseid's performance.
Foseid
had been in serious default on several bank loans for many years and his
failure to make any payments on the obligations served only to increase them
over time. Even so--and even in the
face of Foseid's continuing inability to find a buyer for the property--the
bank granted him several extensions of its promised "discount" in the
face of his continuing inability to sell the property. After a long period of waiting in vain for
any sign that the obligations were going to be paid, the bank set a final
deadline as an incentive to motivate Foseid to close a sale and pay off the
obligations. Indeed, Foseid's own
expert, John Schwegel, acknowledged that the bank was justified in setting
deadlines for payment, that Foseid had never met any of the deadlines, and that
it was appropriate for the bank to withdraw its offer of a discount after the
deadlines had passed.
Evidence
that the bank, under those circumstances, eventually set final deadlines for its
discount offer, and that at some point it discussed assigning the loans to the
LaSalle Group, cannot under any reasonable view support an inference that it
was acting in bad faith or in derogation of its discount agreement with Foseid.
We
conclude, therefore, that the trial court properly, if for the wrong reasons,
overturned the jury's findings with respect to Foseid's claims for contract
interference and breach of the implied contractual covenant of good-faith
dealing.
By
the Court.—Judgment affirmed.
[1] According to testimony at trial, the Adams
County property was appraised at $1.2 to $1.5 million in April 1990.
[2] The letter proposed the formation of a
corporation that would own the property and continue the fish hatchery
operation. The LaSalle Group would pay
approximately $1.1 million for a 20 to 25 percent interest in the corporation
and retain an option to purchase the remainder of the interest from Foseid for
$900,000. Foseid and the LaSalle Group
would share in the profits from operation of the fish hatchery.
[3] During this time, the bank and the LaSalle
Group discussed the possibility of the bank's assigning its foreclosure
judgments to the LaSalle Group for the full amount of Foseid's debt. Such a transaction never materialized, however.
[4] The trial court's order for judgment states
that it was granting the bank's motion "for judgment notwithstanding the
verdict" on the interference claim, the good-faith claim and punitive
damages. It is apparent from the
record, however, that with respect to the contractual interference and
good-faith questions the court was not granting JNOV but rather was concluding
that the evidence was insufficient to sustain the jury's answers. In addition, the parties' arguments on
appeal concentrate on the sufficiency of the evidence to sustain the jury's
verdict.
A motion for judgment notwithstanding
the verdict does not challenge the sufficiency of the evidence; rather, it
"`"admits the facts found [in the verdict] but contends that as a
matter of law those facts are insufficient, though admitted, to constitute
a cause of action."'" Merrill
Lynch, Pierce, Fenner & Smith, Inc. v. Boeck, 120 Wis.2d 591, 600,
357 N.W.2d 287, 292 (Ct. App. 1984), rev'd on other grounds, 127 Wis.2d
127, 377 N.W.2d 605 (1985) (quoting Wozniak v. Local 1111 of the United
Elec., Radio & Mach. Workers, 57 Wis.2d 725, 733, 205 N.W.2d 369,
373-74 (1973)) (internal quoted source omitted) (emphasis added); see
§ 805.14(5)(b), Stats.
(judgment notwithstanding the verdict to be used "in the event that the
verdict is proper but, for reasons evident in the record which bear upon
matters not included in the verdict, the movant should have judgment"). Indeed, where "the sufficiency of the
evidence to support the jury's verdict" has been challenged,
"judgment notwithstanding the verdict [is] improper." Kolpin v. Pioneer Power & Light
Co., 162 Wis.2d 1, 29, 469 N.W.2d 595, 606 (1991).
[5] The court also ruled that there was
insufficient evidence to support the jury's determination that the bank's
conduct with respect to the interference and good-faith charges was
"outrageous," entitling Foseid to punitive damages. Because we uphold the trial court's decision
overturning the jury's findings on those two causes of action, we need not
separately address the court's ruling on the punitive damages issue.
Additionally,
as may be seen below, while we agree with the trial court's legal conclusion
that Wisconsin law limits the cause of action for tortious bad faith to
insurance cases, Foseid's good-faith claim was submitted to the jury not on
that basis but on the bank's liability for breach of its implied contractual
duty of good-faith dealing. As a
result, the scope of our review of the trial court's decision to overturn the
jury's answer to the bad-faith question is the same as that applicable to its
decision on the interference claim.
[6] Such a practice is not uncommon; indeed,
§ 805.14(5)(d), Stats.,
recognizes that a party who has earlier made "a motion for directed
verdict or dismissal on which the court has not ruled pending return of the
verdict may renew the motion after verdict."
[7] The Helmbrecht court concluded
its discussion of the issue--a discussion confined to the sufficiency of the
evidence to support the verdict--with the following statement:
We hold that there
was substantiated credible evidence to support the jury's finding .... The
trial court was clearly wrong in granting the defendants' motion to dismiss
after the verdict was returned.
Helmbrecht v. St. Paul Ins. Co., 122 Wis.2d 94, 118, 362 N.W.2d 118, 131 (1985).
[8] As we have noted above, a trial court facing
a motion for directed verdict at either the close of the plaintiff's case or
the close of all the evidence may decide to reserve its ruling on the motion
and submit the case to the jury--and then, after the jury returns its verdict,
decide whether the earlier motion should have been granted.
As we
also have indicated, when the court makes the ruling so reserved, and is not
overturning the jury's verdict but ruling on the earlier directed verdict and
has concluded that the evidence was insufficient to go to the jury in the first
place, the clearly-wrong standard would still be appropriate. It is only when the court is overturning a
jury's finding or determination that we apply the any-credible-evidence
standard.
[9] We note in this regard that while the bank
did cease its "direct" communication with Foseid, it continued to
communicate with Foseid's counsel regarding his debts.
[10] Foseid also argues that the trial court erred
by holding that he was required to show "malicious intent" or "ill
will" in order to sustain his claim.
Foseid is correct that he need not show malicious intent to sustain a
claim of intentional interference. See
Restatement (Second) of Torts §
766B cmt. f (1979). Our reading of the
trial court's decision, however, indicates that the court, in its references to
Cudd and the Restatement,
identified and ultimately applied the correct legal standard. Further, because we also conclude that the
trial court properly overturned the jury's verdict on the tortious interference
claim, if there was error it was harmless.
[11] Foseid correctly
points out that interference may also be found where the actor "knows that
the interference is certain or substantially certain to occur as a result of
his [or her] action." See Restatement
(Second) of Torts § 766 cmt. j (1979).
The supreme court has held, however, that this section applies only
where "it is apparent at the outset that the alleged tortfeasor
acted with the intention to interfere with the [prospective contract] or acted
in such a fashion and for such purpose that he knew that the interference was
`certain, or substantially certain, to occur.'" Augustine v. Anti-Defamation League of B'nai B'rith,
75 Wis.2d 207, 221, 249 N.W.2d 547, 554 (1977) (emphasis added). Foseid has not referred us to any evidence
suggesting that State Bank, in its contacts with the LaSalle Group, acted in
anticipation of disadvantaging Foseid in his negotiations with LaSalle.
[12] The confusion was exacerbated by the fact
that a punitive-damages question--an issue limited to tortious conduct--was
submitted to the jury along with the good-faith question. As indicated elsewhere in this opinion, the
punitive-damages issue is moot in light of our decision herein.
[13] Because tort and contract actions are, to a
large degree, apples and oranges, where a tort claim is made and a contract is
involved, the case may proceed in tort only if there is a duty owed by the
defendant to the plaintiff that is independent of the duty to perform under the
contract, such as a fiduciary relationship.
Hauer v. Union State Bank, 192 Wis.2d 576, 594, 532 N.W.2d
456, 463 (Ct. App. 1995). And although
the insurer/insured relationship is a creature of contract--the insurance
policy--we recognize a bad-faith cause of action by insureds not because the
challenged acts involve a "tortious breach of a contract" but because
the independent fiduciary duty an insurer owes to its insured has been
breached. Ford Motor Co. v. Lyons,
137 Wis.2d 397, 423-24, 405 N.W.2d 354, 365 (Ct. App. 1987).
[14] The instruction defines "good
faith" as "honesty in fact in the conduct or transaction concerned,
that is, an honest intention to abstain from taking unfair advantage of another,
through technicalities of law, by failure to provide information or to give
notice, or by other activities which render the transaction unfair." And it hold the parties to "those
reasonable standards of fair dealing which the parties, taking into account the
circumstances in which they are dong business, have a right to
expect."
We
assume that the trial court gave the instruction because it was warranted by
the evidence. See D.L. v.
Huebner, 110 Wis.2d 581, 624, 329 N.W.2d 890, 910 (1983) (instructions
must be framed in light of the evidence, and it is error to instruct on an
issue not supported by the evidence).