COURT OF APPEALS DECISION DATED AND RELEASED MARCH 26, 1996 |
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. 95-1304
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT III
VALLEY BANK NORTHEAST,
a Wisconsin Banking
Corporation,
Plaintiff,
v.
ANGELA L. BARTA,
Defendant-Third Party Plaintiff-Respondent,
VALLEY TRUST COMPANY,
Defendant-Third Party Plaintiff,
v.
LOUIS H. LA COUNT,
Third Party Defendant-Appellant.
APPEAL from an order and
a judgment of the circuit court for Brown County: RICHARD G. GREENWOOD, Judge.
Affirmed.
Before Cane, P.J.,
LaRocque and Myse, JJ.
PER
CURIAM. Louis LaCount appeals an order and a judgment that
awarded Angela Barta $205,838.51 for damages she suffered from his fraudulent
investment scheme. This amount included
$100,000 in principal on a promissory note Barta had given Valley Bank,
Northeast, to borrow the $100,000 she invested in LaCount's scheme. The $205,838.51 also included (1) $12,561.03
in interest at 12.5% that accrued on the $100,000 note, (2) $64,722.59 in
additional interest at 11.5% that accrued on the sum of the $100,000 note plus
the $12,561.03 of 12.5% accrued interest, and (3) $23,333.33 in attorney fees
she incurred for opposing the bank's attempt to collect a second unrelated
$65,000 promissory note she had previously given the bank. LaCount admits that he encouraged Barta to
borrow the $100,000 in order to defraud her of it in his investment
scheme.
Nonetheless, LaCount
raises several arguments on appeal seeking reduction of the damage award: (1)
the $64,722.59 ultimately compensated Barta twice for another award she had
already received concerning the unrelated $65,000 note; (2) the trial court
should have denied Barta attorney fees under the American Rule; (3) the
attorney fees were excessive; (4) LaCount's bankruptcy case extinguished his
liability for the attorney fees and other costs; (5) Barta should recover
interest at the prejudgment statutory 5% rate, not the 11.5% and 12.5% rates;
and (6) the trial court either should have required Barta to return 21,000
shares of common stock LaCount gave her to repay her investment, or should have
reduced her damage award for the stock's value. We reject these arguments and affirm the damage award.
None of LaCount's
arguments have merit. First, Barta's
$64,722.59 award did not represent a double recovery related to the $65,000
note she gave the bank. Rather, the
$64,722.59 award represented the interest Barta incurred on the $100,000 note
she gave the bank on the basis of LaCount's fraud. She invested the $100,000 she borrowed from the bank in LaCount's
fraudulent investment scheme. Viewed in
this context, such interest was a consequence of LaCount's fraud and therefore
recoverable damage. It was mere coincidence
that the amount of interest was almost identical to the $65,000 note Barta had
originally given the bank. Injured
persons may recover all damages reasonably caused by someone's fraud, including
consequential damages. See Gyldenvand
v. Schroeder, 90 Wis.2d 690, 698, 280 N.W.2d 235, 239 (1979); Luebke
v. Miller Consulting Engineers, 174 Wis.2d 66, 75-76, 496 N.W.2d 753,
757 (Ct. App. 1993); Costa v. Neimon, 123 Wis.2d 410, 417, 366
N.W.2d 896, 901 (Ct. App. 1985). We see
no reason why the interest Barta incurred on the $100,000 note was not
recoverable consequential damage.
Second, the trial court
had a sufficient basis to award Barta the attorney fees she incurred in
litigation with the bank on her $65,000 note.
Although Barta did not give the bank the $65,000 note as a result of
LaCount's fraud, such fraud depleted her financial resources and prevented her
from repaying the note. This connection
warranted the attorney fees award, despite the fact that the American Rule
normally bars such recoveries.
Wisconsin applies an exception for wrongful acts that involve someone
like Barta in litigation with others or that force her to incur expense to
protect her interests. See Weinhagen
v. Hayes, 179 Wis. 62, 65, 190 N.W. 1002, 1003 (1922); Meas v.
Young, 142 Wis.2d 95, 101-06, 417 N.W.2d 55, 57-59 (Ct. App.
1987). Moreover, the attorney fees were
independently recoverable as fraud based consequential damages, regardless of
the Weinhagen rule.
Third, LaCount did not challenge the amount of attorney fees in the
trial court and has therefore waived the issue on appeal. Wirth v. Ehly, 93 Wis.2d 433,
443-44, 287 N.W.2d 140, 145-46 (1980).
Fourth, LaCount did not raise his bankruptcy discharge or statutory
interest issues until his reply brief.
We therefore do not address them.
Estate of Bilsie, 100 Wis.2d 342, 346 n.2, 302 N.W.2d 508,
512 n.2 (Ct. App. 1981).
Finally, LaCount has not
shown that the 21,000 shares of Nutech Engineering International, Inc., common
stock he provided Barta mitigated her damages and compelled a reduction of the
damage award. LaCount never demonstrated
that the Nutech stock had any value, at either the time of the hearing or of
its transfer to Barta. The Nutech stock
had no active market. The corporation
was privately held. Its president
testified that the stock had registered a book value of $0.21 per share at some
unspecified time in the past. He did
not express an opinion on the stock's fair market value, although he believed
that the stock's book value might now be higher than $0.21 per share. This testimony was insufficient to establish
the fair market value of the stock, either at the time of the hearing or its
transfer to Barta. LaCount did not show
that the book value had any connection to fair market value.
The information LaCount
provided was equally inconclusive. By
affidavit and brief commentary at the end of the hearing, LaCount claimed that
the Nutech stock was worth $52,000 to $52,500 in November 1990, or $2.50 per
share, when Nutech issued him the stock in exchange for real estate and in
order to avoid a potential lawsuit.
LaCount alleged that Nutech furnished him an IRS Form 1099 for tax year
1990, declaring the stock's value as $52,000 to $52,500 at the time of the
exchange, and that the IRS accepted this valuation. He also claimed that he transferred stock ownership to Barta in
November 1990, while retaining possession of the stock certificate
himself. Although the stock certificate
contains a nominal endorsement date of November 26, 1990, LaCount provided no
other evidence confirming the transfer's alleged transaction date. For unknown reasons, LaCount did not forward
the stock certificate to Nutech to change registration until January 28,
1992. Nutech changed registration and
issued Barta a new stock certificate on February 18, 1992.
This evidence did not
establish that the stock was worth $52,000 to $52,500, either at the date of
the hearing or at whatever time Barta may have acquired ownership. LaCount's claims about Nutech's IRS Form
1099 were hearsay, and he made no attempt to elicit corroborative proof from
Nutech's president. Although the
president alluded to the fact that Nutech and LaCount may have mutually set the
stock's value at $52,000 to $52,500 when they consummated the real estate
transaction, the president then equivocated and testified in terms of book
value, without specifically equating book value with fair market value. In addition, whatever value LaCount and
Nutech may have accorded privately held stock in November 1990 carried little
evidentiary weight. LaCount made no
attempt to show how he and Nutech arrived at the $52,000 to $52,500 figure, and
without such information, the trial court could not judge the figure's
accuracy. Further, the November 1990
value had little practical significance to Barta, in light of the fact that
LaCount retained possession of the old stock certificate until February
1992. She could not sell the stock and
realize its value until Nutech issued her the new stock certificate in February
1992. By then, its value may have
changed.
Last, we will not order
Barta to return the stock to LaCount.
LaCount never asked the trial court for the stock's return and therefore
waived the matter. Wirth,
93 Wis.2d at 443-44, 287 N.W.2d at 145-46.
Moreover, until LaCount pays what he owes Barta as a result of his
fraud, his request for the stock's restitution may well be premature. Restitution is mutual. Ordinarily, someone has no obligation to
make restitution unless the other party restores the status quo. See Chris-Craft Industries,
Inc. v. Piper Aircraft Corp., 480 F.2d 341, 391 (2d Cir. 1973); Lummus
Co. v. Commonwealth Oil Refining Co., 280 F.2d 915, 928 (1st Cir.
1960); Restatement of Restitution §
65, comment a, at 255-56, and § 66, comment a, at 265 (1937). LaCount has not compensated Barta for the
damages she incurred as a result of his fraud, and apparently made no attempt
to restore the status quo. Under these
circumstances, the trial court had no obligation to make any allowance for the
Nutech stock.
By the Court.—Order
and judgment affirmed.
This opinion will not be
published. See Rule 809.23(1)(b)5, Stats.