Contractors Beware – Theft by Contractor is Easier Than You Think

Most contractors represent a shining example of the all-American hardworking small business owner. Unfortunately, a few bad apples have a tendency to poison the public’s perception of the whole bunch. Thus, the Wisconsin Legislature has codified its “Theft by Contractor” statute under Wis. Stat. 779.02 setting forth very draconian rules about the use of customer funds, and very severe penalties for the violation thereof. If you are a contractor, tread lightly, as it is easier than you think to commit a theft by contractor. Read more

Do I have a claim for Adverse Possession?

When property disputes come up, one issue that is always raised is whether or not there is a claim for adverse possession.

The concept of adverse possession comes from the common law concept that if someone utilizes, cares for, and treats property as his/her own for a long enough period of time, then they own that land. The point of this rule is not to allow sneaky neighbors to steal a little land, but rather is a practical solution to sometimes uncertain property lines.

The rule has been codified in Wis. Stat. § 893.25 and sets forth the following:

(1) An action for the recovery or the possession of real estate and a defense or counterclaim based on title to real estate are barred by uninterrupted adverse possession of 20 years, except as provided by s. 893.14 and 893.29. A person who, in connection with his or her predecessors in interest, is in uninterrupted adverse possession of real estate for 20 years, except as provided by s. 893.29, may commence an action to establish title under ch. 841.

(2) Real estate is possessed adversely under this section:
(a) Only if the person possessing it, in connection with his or her predecessors in interest, is in actual continued occupation under claim of title, exclusive of any other right; and

(b) Only to the extent that it is actually occupied and:

1. Protected by a substantial enclosure; or

2. Usually cultivated or improved.

The Wisconsin Court of appeals recently explained how strict the requirement for exclusive use (not just continuous use) is to establishing an adverse possession claim when looking at Wis. Stat. § 893.25 (adverse possession of government land). When the Plaintiff argued that he had the right because he had maintained the property, the Court disregarded that argument,

We conclude that this argument fails because, regardless of maintenance and improvement, Vaneman must establish exclusive use, which he has failed to do.

Vanemen v. Reed, No. 2011AP1465. Nov. 1, 2012.

Like any complex legal concept, the facts of each case will vary significantly. If you believe that you may have a claim for adverse possession you need to talk with an attorney, but remember that you need to possess the property openly and exclusively for the statute to apply.

What lien rights do I have as a commercial sub-contractor?

The short answer is potentially a fair amount of rights, though as with many things it depends. In general residential work, the main mechanism for enforcing payment for both general contractors and sub-contractors is through the use of construction liens. This may not always be the case in commercial projects as it makes a difference as to what type of project it is to determine what lien rights, if any, exist for sub-contractors and what notice is required to be given.

According to the Wisconsin Courts,

A subcontractor is a person whose relation to the prime contractor is substantially the same for a part of the work as the prime contractor’s is to the owner for the entire job.

Farmer v. St. Croix Power Co. 117Wis. 76, 93 N.W. 830 (1903).

 The Wisconsin Statutes, 779.01(3), sets out the extent of who has lien rights:

Any person who performs, furnishes, or procures any work, labor, service, materials, plans, or specifications, used or consumed for the improvement of land, and who complies with s. 779.02 shall have a lien therefore on all interests in the land belonging to its owners.

It is noteworthy that the statute defines it as “any person,” not limiting those rights just to General Contractors. Therefore, within the scope of the rest of the Wisconsin statutes, sub-contractors may have certain lien rights.

What those lien rights are and what notice requirements there are depends on the type of project. A “public works” project, defined as any improvement or work undertaken by a unit of government, will potentially have different lien rights and notice requirements  for sub-contractors than a “large private” project (which may have notice requirements as short as 5 months from the date the work is performed). “Privately bonded” cases may eliminate all lien rights and instead require any claims to be made pursuant to the bonding contract.

In any case, if you are a sub-contractor and you believe you might have lien rights on a project, it is important to contact an attorney right away as the specifics of your project will bear on whether you have lien rights and what you have to do to preserve them.

 

 

 

Can you cover up defects in your house before sale?

As a seller of residential (or commercial) real estate be very careful as to what you attempt to conceal or fail to disclose. The Wisconsin Appellate Court recently held that misrepresentations are not limited to oral or written declarations but also could include efforts to conceal defects, such as painting a basement wall to conceal whether it leaked.

In the Novell v. Migliaccio (2009AP1576) decision, the Appellate Court stated:

The only issue on this appeal is whether painting a basement wall can be a misrepresentation under § 100.18(1) if a jury believes that the painting was done to hide evidence that the basement leaked. We hold that it can and that there are genuine issues of material fact whether the Migliaccios painted their basement and, if so, thus misrepresented the basement’s condition. Accordingly, we reverse and remand for trial.

Wisconsin Statute § 100.18(1) states in relevant part:

No person … with intent to sell … real estate … shall make … [a] statement or representation of any kind to the public relating to such … sale … of such real estate … or to the terms or conditions thereof, which … statement or representation contains any assertion, representation or statement of fact which is untrue, deceptive or misleading.

While the case was dismissed (presumably due to settlement) after remand to the Circuit Court, the Appellate Court’s holding that actions taken to conceal defects can constitute misrepresentations under Wisconsin Statute § 100.18 (which carries with it severe penalties such as attorneys’ fees and in some situations, double damages) still remains.

As a seller, be very careful as to what you try and conceal about the nature of your house and the disclosures that you make.

What happens if my company is served with a non-earnings garnishment action?

If you are in business long enough, chances are at some point you will be served with a summons and complaint for a garnishee action, an attempt to collect money from your business for a debt that someone else owes. While earnings garnishments are relatively common, non-earnings garnishments are less so and carry with them a stiff penalty for the garnishee if an answer is not filed.

For collection purposes, if a person (or company) has a judgment against them, they are known as the “debtor”. The “creditor” is the person or company owed the money. One tool that an attorney attempting to collect a debt on behalf of a creditor has is a non-earnings garnishment. In a non-earnings garnishment, the creditor files a summons and complaint naming the creditor, the debtor, and a garnishee.

If your company is named as the garnishee, you must file an answer which indicates whether or not your company has control or possession of property belonging to the debtor and the gross value of said property. This includes any money that your company may owe to the debtor.

With that action comes an order to hold all funds (or property) your company may owe to the debtor until instructed by the courts otherwise. If you, as the garnishee, fail to answer the Non-earnings Garnishment summons and complaint within 20 days of being served with the action, your company will have a judgment entered against it for the full amount of the judgment that the creditor has against the debtor.

For example, if you are served with a non-earnings garnishment which states that ABC Bank has a judgment against XYZ company for $200,000 and you are named as the garnishee; if you fail to answer (even if that answer would be that you do not have any property or money belonging to XYZ company) then ABC Bank will be entitled to a judgment against your company for the entire $200,000.

So, if you are served with a garnishment summons and complaint be sure to contact an attorney right away, as the penalty for ignoring such a request can be dire.

What do I do if I have been sued with a frivolous claim?

The dreaded “frivolous claim” is always a difficult situation. First, you have to show that it is actually “frivolous”, and second, you may still end up spending a fair amount on attorneys’ fees getting even a frivolous claim dismissed.

It is sometimes difficult to define what exactly is frivolous. In most lawsuits the Defendant feels that the Plaintiff’s claims are unfounded, but that does not necessarily make the claims frivolous. The Wisconsin Supreme Court in Stern v. Thompson & Coates, Ltd, explained:

A claim is not frivolous simply because there is failure of proof, a claim is later shown to be incorrect, or a claim is lost on the merits; however, a claim cannot be made reasonably or in good faith, even though possible in law, if there is no set of facts which could satisfy elements of a claim, or if party or attorney knows or should know that needed facts do not exist or cannot be developed.
Stern v. Thompson & Coates, Ltd., 185 Wis. 2d 220, 517 N.W.2d 658 (1994)

If it seems that the claim against you or your business is one in which there is no set of facts which could satisfy the elements of the claim, there are a number of tools your attorney can employ to try and resolve the matter and perhaps even entitle the Defendant to costs for defending the action.

Requests to admit, interrogatories, and even depositions are all strong tools that can be utilized to flush out what factual basis existed for the filing of the Plaintiff’s claims. If, after this discovery is completed, your attorney feels there was no basis for the Plaintiff’s claims, under Wisconsin Law the Defendant is required to give the Plaintiff what is known as a 21 day safe harbor to dismiss their claims before the Defendant can file a motion for sanctions. This can be a powerful motivator to resolve merit-less claims before either side incurs further costs.

Regardless of whether you believe the claim is valid or not, if you or your business has been served with a lawsuit you need to be sure to contact an attorney and be sure an answer is entered to preserve your right to defend the claims.

Can I just close my doors if my business is sued?

Unfortunately, as is the case with many legal questions, the answer is maybe. There are a number of factors to look at before that question can be answered, and most likely you would need to see a lawyer to evaluate each individual case.

Generally speaking a party suing your business, if they obtain a judgment against your business, is going to be able to collect against the assets (or at least the unsecured assets) of your business.

This can vary from getting a receiver appointed to force the liquidation of company assets, to freezing business bank accounts, or even having the Sheriff go in and collect cash directly from the cash register to help satisfy the judgment. Thus, if your business has more value in assets than the potential judgment amount, it may be worth contesting the lawsuit or trying to reach a settlement. If not, then you can explore whether you can simply close up shop and move on.

Under Wisconsin law you are not allowed to simply close up shop and raid all of the assets of the business just to avoid a creditor. Neither are you allowed to sell all of the assets to a friend or relative (or anyone for that matter) for a severe discount just to avoid creditors. For example, if your business was Bob’s cleaning Company Inc. and your business were sued, you cannot simply sell all of your business assets to your brother for $1 and open up Joe’s Cleaning Company Inc. This would be known as a “fraudulent transfer” and is covered by Wis. Stat. Section 242.04

242.04 Transfers fraudulent as to present and future creditors.

(1) A transfer made or obligations incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:

(a) With actual intent to hinder, delay or defraud any creditor of the debtor; or

The statute provides some guidelines for determining “intent to hinder, delay or defraud any creditor of the debtor.” Some of those include:

  • The transfer or obligation was to an insider;
  • The debtor retained possession or control of the property transferred after the transfer;
  • Before the transfer was made or the obligation was incurred, the debtor had been sued or threatened with suit;
  • The transfer occurred shortly before or shortly after a substantial debt was incurred; and
  • The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.

Additionally, it is considered to be a fraudulent transfer if the transfer is made:

242.04(1)(b) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:
1. Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or
2. Intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due.

Not only does this statute prevent you from intentionally disposing of assets to avoid creditors, it also raises issues if you are intending to legitimately sell your business’s assets and you have been sued or you have outstanding creditors. You need to ensure that the transfer cannot be categorized as a fraudulent one.

In any event, if you or your business is sued it is best to immediately see a lawyer who can explore your options with you. If you play your cards right though, one of those options may be to simply close your doors and move on to your next, hopefully more successful, venture.

What happens if I get sued? – Part 5 Trial

After all of the discovery, motions, and attempts at settlement are completed it is time to go to trial, where the case will be decided.

I have seen numerous reports making varied estimate, but the general consensus seems to be that only 2-5% of cases actually go to trial, the other 95-98% are resolved in some fashion before trial.

However, for those cases that get there, the trial is the opportunity for the “facts” of the case to be determined. Either the Judge or a jury will be the fact finder, but in either case, both parties, through their attorneys will present evidence to the fact finder. This will be in the form of testimony and exhibits. This part of the litigation process is what everyone imagines court to be like, jurors sitting in the jury box, witnesses in the witness stand, and the attorneys questioning and cross-examining each witness.

After all parties have presented their evidence the fact finder will render their findings on a number of issues that have been submitted by the parties prior to the trial. Thus, the fact finder does not come out and declare a winner and loser, but rather indicates how they have decided the specific jury questions that have been submitted for them to answer.

Depending on the outcome of the trial, and the in-trial rulings of the Judge during the case, each party has to decide whether or not it wants to appeal the outcome.

Part 4 of 5, “Mediation”

What happens if I get sued? – Part 4 Mediation

While mediation is voluntary, in most counties in Wisconsin, including Milwaukee and Waukesha County, the Court will order the parties to attend mediation. This does not mean that the parties must settle at mediation, only that they will attend.

What Happens at Mediation?

Mediation usually takes place after most of the discovery has been completed in the case, but before final pre-trial hearings or preparations have been done. The idea is that when you go to mediation, both parties know about the other parties case, but still have not made the final investment for their attorneys to get ready for trial.

Each party to the litigation, along with their attorneys, and the agreed upon mediator meet at a location they all agree on (usually one of the attorney’s offices or the mediators office) to discuss settling their case.

Each party usually submits a mediation report to the mediator, setting out the key high points of their case and the low points of the opposing party’s case. The mediator is not there to render a decision, but rather to encourage the parties to settle their dispute. This does not mean that the mediator will not express his/her opinion, or indicate how s/he thinks s/he would have decided the case. Most mediators are lawyers, and many are ex-judges.

By the end of the mediation session, the parties have either reached a voluntary agreement to settle the case, or they continue with the litigation and most likely begin preparing for trial. There are varying statistics, but various reports indicate that mediation is successful more often than not. From an attorneys standpoint mediation is always worthwhile, it either results in a settlement of the case or at the very least you get to learn something about the other side, and their position in the case.

Part 3 of 5, “Motions”

What happens if I get sued? -Part 3 Motions

While there are a number of motions that may be filed during and after the discovery process, such as motions to compel discovery, or motions for protective orders, what I want to talk about are motions which directly effect the outcome of the case. So even though the title of this section is titled “Motions” it should probably be titled “Dispositive Motions”.

The most common question that I am asked by my clients during litigation is a variation on “can’t the judge just decide this case?” This is especially true when one side feels the other side’s case is completely without merit (as opposed to those cases where there is merely a dispute about how much one party owes another, not “if” one party owes something to the other.) Like many things in the law, the answer is that it depends; there are times when the Judge may make dispositive decisions regarding the case, and times when he/she may not. (This explanation is regarding Judges making decision prior to trial in the case of a Court trial case)

The rule of thumb is that for any dispositive motions, the Judge cannot decide issues of fact, but rather can decide issues of law. Therefore, the only time that dispositive motions, such as a motion for summary judgment is appropriate, is when your attorney believes that through the pleadings or discovery process they can show to the Judge that there are no material issues of fact relating to the claim at issue.

A simple example of a claim for summary judgment would be in an instance where there are two claims and three defendants. The claims are Breach of Contract and Intentional Misrepresentation/Fraud against all three defendants. The Defendants are ABC, LLC, Mr. X and Mr. Y both co-owners of the company. A claim of Fraud can be pled directly against an individual, because it is an intentional tort, and therefore Mr. X and Mr. Y cannot hide behind the liability protection of the LLC. However, through the Discovery process it turns out that the Plaintiff only alleges that there was conduct on the part of Mr. X that would constitute Fraud. This may mean that there are no facts alleged against Mr. Y to meet the elements of the claim for Fraud, and therefore it may be appropriate to bring a motion for Summary Judgment in which the Judge could rule that the Fraud claim against Mr. Y is dismissed.

So, while the Judge may be able to address the claims alleged against Mr. Y, he/she is not allowed to determine the sufficiency or the validity of the claims against Mr. X. If the plaintiff through Discovery has alleged that Mr. X has made specific fraudulent representations, it will be up to the trier of fact to determine at trial whether or not those allegations are true, not the Judge at Summary Judgment.

For obvious reasons motions for Summary Judgment can be a powerful tool. The more you are able to narrow your opponents claims or get a decision on your own claims, the more leverage you may have to try and settle the case in mediation

Part 2 of 5, “Discovery”

Part 4 of 5, “Mediation”

What happens if I get sued? – Part 2- Discovery

After the initial pleadings are entered, there will generally be a scheduling conference between the Attorneys and the Judge to set the schedule for the case. Part of that schedule will include a date in which all discovery must be completed.

Litigation has been described as playing poker with everyone’s cards face up. While this is a decent analogy, I would say its more appropriate to say you get to see the other person’s cards only if you ask the right questions. Discovery is the opportunity for each party to ask questions and demand documents from the other side. In this way it is up to the attorneys to ensure that they ask the right questions and in the right way to ensure that they get everything they want. Conversely, it is the responding attorney’s job to comply with the requests in a way that reveals what is required, but does not give away more than what was requested.

This creates a back and forth situation where each attorney is trying to get as much information from the other side as possible while at the same time trying their best not to reveal more than the other side actually asked for.

The Discovery process includes interrogatories, requests to admit, requests for production of documents, depositions, and various other means of finding out information. While all of these methods of obtaining information are used by attorneys with varying frequency, if you, or your business, is a party to a litigation, at some point you will almost certainly be deposed.

In a deposition the other party’s attorney gets to ask you whatever questions they like (within reason, but they are given a lot of leeway) about yourself, your business, and the events surrounding the dispute. Unlike in trial where there are rules regarding hearsay or relevance of questions, in a deposition, even if your attorney objects to the question, you generally are still required to answer. You are put under oath and there is a court reporter there to take down in writing everything that is said.

After depositions there may be additional interrogatories (written questions) or document production requests, but at some point each party will be satisfied that they will have obtained all of the information they can reasonably get about the case. As the discovery process winds down either party may choose to amend their pleadings and add allegations, or file a cross or counterclaim, but once the pleadings and discovery process winds up, it is time for any motions to be filed.

Part 1 of 5, “Pleadings”

Part 3 of 5, “Motions”

What Happens if I get Sued? Part 1- Pleadings

The pleadings stage is the initial stage of any litigation. The Plaintiff (or the person bringing the action) will file a summons and a complaint. The summons will indicate that the Defendant(s) have either 20 or 45 days (depending on the allegations made) to answer the complaint.

The complaint will contain all of the allegations that the Plaintiff says the defendant(s) did or did not do. For example you may see a complaint containing several counts, one may be breach of contract and another may be Fraud or Misrepresentation although they may all be referring to the same facts.

As a defendant you have the obligation to file an answer either 20 or 45 days (depending on what is plead) of being served with the summons and complaint. If you do not answer, a default judgment may be entered against you. (Plaintiff automatically wins). If you are a corporation or an LLC, you have to get a lawyer to enter an appearance and file an answer for you.

Your answer to the complaint is not the time for you to make your case as to why you are right and they are wrong, but rather is simply a format for admitting or denying each allegation made by the Plaintiff. Additionally the defendant(s) will take this opportunity to indicate any affirmative defenses and put forward any counterclaims or cross claims that they may have.

Once all of the pleadings have been filed, and any necessary amendments have been made, the discovery phase of litigation begins.

Part 2 of 5, “Discovery”

What happens if I get sued? An overview of Litigation in Wisconsin

If you run a business, sooner or later you will have a disagreement with a customer, contractor, or vendor that may lead to litigation. For many business owners litigation, and what is entailed, is clouded in mystery. The next few articles are going to attempt to illuminate some of those mysteries and explain the process, in general terms, for litigation with a bend towards the local rules and practices of Milwaukee County.

Please realize that each individual case is going to have its own intricacies and variables, and I certainly would not recommend using these articles as a road map to represent yourself, as this outline will be very broad and may be missing key elements that are essential for your case.

The basic steps of any litigation are the following:

– Pleadings
– Discovery
– Motions
– Mediation
– Trial

While most cases never make it all the way to trial, you can expect anywhere from 18-24 months to go from initial filing to Jury trial.

The next five articles will review each of the above steps and try and give you an overview of what is involved.

Part 1 of 5, “Pleadings”

What are the damages for a breach of a building contract?

In an ideal world we would always get what we pay for, and people would always live up to their obligations. Unfortunately in both residential and commercial buildings, the contractor does not always provide the quality of work that was contracted for. Often litigation arises to resolve the dispute. The focus of the litigation is going to be whether or not the contractor breached his or her contract, but underlying the entire case is the question of what the damages are if the contract was breached.
Do you tear down the building and build a new one? Do you simply get the money it would cost to repair it? Do you get the difference in value of what the building would be worth if was built correctly?

In every case the facts will vary as to what the proper solution is, but Wisconsin Jury Insturction 3700 gives us a clue. Jury Instruction 3700 suggests dealing with damages in the case of a breach of a building contract in the following way:

1. Can the building be repaired? If it can, what is the reasonable cost of repairs?

2. If the building cannot be repaired, what would the value of the building have been if it had been built correctly? What is the current value of the building having been built incorrectly? (The difference would be the damages)

These remedies may not be wholly adequate in every case, and these jury instructions are mandatory, though Wisconsin Courts do prefer to use the model jury instructions, but it can be helpful to know what ultimate question the jury may be facing at the beginning of your dispute as it may help inform the decisions you make in trying to resolve the matter prior to litigation.

Be Careful When Granting the Power to Terminate a Contract Early

It seems quite often you see contracts that contain provisions similar to the following:

Either party may cancel this contract at any time by giving the other party 60 days written notice.

This always sounds like a good idea when you discuss it. Basically it is the back-out provision, if things are going badly, you can get out before it gets worse. While this may be appropriate in some cases, in many cases it ends up destroying the entire reason for the contract.

The point of most contracts is to set a series of provisions out defining what each party is responsible for. Most of the value comes from the fact that both parties know they are tied to each other for a certain amount of time as long as both parties live up to their end. If you provide a get out of jail free card, with one of these provisions, then you do not have a 1, 2 or 3 year contract, all you really have is a self renewing 60 day contract.

There is nothing wrong with 60 day self renewing contracts, if that is what both parties want, but more often then not, when these provisions are used it is not the case.

Always be sure that what you contract for is what you intend. As my father always said to me “Say what you mean, and mean what you say.”

Do I need a DirecTV Commercial License for my bar?

The short answer: YES. DirecTV is cracking down on Commercial Misuse over the last year and a half, particularly misuse of NFL Sunday Ticket, resulting in huge fines. Previously DirecTV had limited its focus to just those who were using “Pirate” boxes or illegal access cards to get at its content. Now, DirecTV is unleashing its “Office of Signal Integrity” on commercial businesses large and small, especially sports bars, showing its content without paying for a commercial subscription. It even maintains an anti-piracy website www.hackhu.com listing all of its recent settlements and judgments against those both violating the piracy rules and what they have dubbed “Commercial Misuse” ranging from $50,000 to $100,000 settlement awards.

DirecTV has two different types of subscriptions, residential or commercial. The residential rates range from $30 per month to about $90 per month. In contrast, the minimum commercial package starts at $151.99 per month and maxes out at $361.99 depending on the size of your establishment. Add in the fact that commercial NFL Sunday Ticket prices range from $869 per season all the way to $45,799 based on your establishments fire code occupancy, you can see why business are trying to avoid paying for commercial licenses.

However, DirecTV has been making these business pay, and in a big way. Its anti-hacking website lists dozens of examples of $50,000+ settlements for violations of showing DirecTV programming without paying its commercial license rates. DirecTV also has not limited its blitzkrieg to large commercial bars, small mom and pop establishments are getting slapped down with four and five digit fines. Its main cause of action is based on 47 U.S.C. §605 “Unauthorized Publication or Use of Communications” which sets out damages of $1,000 to $100,000.

DirecTV has been smart about gathering its evidence and making sure that it can prove its case, but never actually has to. By forcing violators to settle regardless of how “innocent” or “grievous” their violation is out of fear of exorbitant legal fees, DirecTV manages to keep its claim of action intact and unchallenged by an actual fact finding hearing. DirecTV knows that it will be successful in summary judgment, be awarded the statutory fees as well as attorney’s fees. So, all of you small businesses, especially bars, that think that you are saving a few bucks a month by not paying for the commercial license, you are playing with fire, and one day soon may end up with a demand for a $50,000+ settlement to avoid a protracted law suit. If you get one of these demand letters make sure to contact an attorney and see if at the very least the damage can be minimized.

Can I just keep the earnest money if a buyer backs out? (A recent Wisconsin Appellate Court decision gives us pause)

In an opinion that was issued last week the Wisconsin Appellate Court upheld a circuit court decision in which the plaintiff’s were not able to sue for actual damages in a failed residential real estate transaction because they did not return the earnest money to the buyer. The court ruled that they irrevocably elected liquidated damages as their remedy and forfeited their right to sue for actual damages when they refused to direct the return of the earnest money to the buyer.

What does this mean? The Wisconsin courts are saying to sellers that you need to make a choice as to whether to sue for actual damages or simply accept the earnest money, you cannot go after both when a buyer backs out of a deal. Earnest money is intended to be a form of insurance against buyers backing out of the offer. If you decide to keep the earnest money, then that is the extent of the damages that you can receive.

It seems that this decision will impact sellers in a couple of ways. One, there is now some incentive to require a higher earnest money amount from buyers. While this would not have been a problem a couple of years ago, sellers are no longer in the position to be especially picky about the offers that they will consider. The other is that we may see a chilling effect on the number of lawsuits for actual damages. This number is usually low anyway, but now that the earnest money must be returned prior to seeking actual damages many more people may choose to simply take the bird in the hand versus the two in the bush and accept the earnest money as liquidated damages and move on.

You can read the Appellate Court’s as yet unpublished decision at http://www.wisbar.org/res/capp/2008/2007ap001799.htm

What Happens when one Partner Leaves a Partnership?

In a January 2007 decision, Estate of James H. Matteson v. Robert R. Matteson et al. , the Wisconsin Appellate court takes the time to further clarify its decision from Lange v. Bartlett , 121 Wis. 2d 599, 602 which stated

[W]hen one partner leaves a partnership and allows the other to continue the business, the departing partner is entitled to receive, in addition to a share of the value of the business, a share of the profits until the business is wound up. We also held that the continuing partner is entitled to be compensated for work done during this time.

In this case, Robert and James had a partnership in a radio sales and service business. In 2001, James left the partnership, but Robert continued the business as an LLC. They never agreed how James should be compensated for his half of the partnership, and unfortunately soon thereafter James died. His estate filed suit and 3 years of litigation ensued. Read more

Dangers of Businesses taking the Law into their own hands

To the unsuspecting business, there are a surprising amount of consumer protection laws in Wisconsin, especially relating to penalties from a business. Businesses regularly get themselves into hot water by imposing sanctions on consumers without taking those laws into account, the consequences can be dire and expensive. A recent Wisconsin Appellate case James Cook et al v. Public Storage, Inc. reminds us of the consequences of not taking proper legal action when owed money by a consumer.

The basics of the case were the following: Cook rented a storage facility from Public Storage Inc. He fell behind on his payments and then defaulted. Public Storage then proceeded to auction off his goods for $600 to pay for the $200 that was owed to the Storage unit. It turned out that the items were worth $19,000 Read more