Apex Electronics Corp. v. Gee
| Decision Date | 30 April 1998 |
| Docket Number | No. 97-0353-FT,97-0353-FT |
| Citation | 577 N.W.2d 23,217 Wis.2d 378 |
| Parties | APEX ELECTRONICS CORPORATION, a domestic corporation, Plaintiff-Respondent, v. James GEE, d/b/a U.S. Cable Supply, Defendant-Appellant-Petitioner. |
| Court | Wisconsin Supreme Court |
For the defendant-appellant-petitioner there were briefs by Alice A. Nejedlo and Hanson & Gasiorkiewicz, S.C., Racine and oral argument by Alice A. Nejedlo.
For the plaintiff-respondent there was a brief by Mary F. Wyant and Wyant Law Offices, S.C., Racine and oral argument by C. Judley Wyant.
This is a review of an unpublished decision of the court of appeals, Apex Electronics Corp. v. James Gee, d/b/a/ U.S. Cable Supply, No. 97-0353-FT, unpublished slip op. (Wis.Ct.App. July 2, 1997), affirming an order of the Circuit Court for Racine County, Wayne J. Marik, Judge. The circuit court denied the motion of the defendant, James Gee, to vacate a default judgment.
¶2 This court's order granting review limited our review to two issues: Did the defendant waive his right to challenge the punitive damages award in this court when he failed to challenge the award in the circuit court? Did the circuit court err by awarding punitive damages to the plaintiff, Apex Electronics Corporation, solely on the basis of the complaint?
¶3 We answer these questions as follows: We need not determine whether the defendant waived his right to challenge the punitive damages award in this court. We exercise our discretion to decide whether the circuit court erred by awarding punitive damages solely on the basis of the complaint. Pursuant to Wis. Stat. § 806.02(2) (1995-96), 1 governing default judgments, and Wis. Stat. § 895.85, governing punitive damages, we conclude that a circuit court entering a default judgment on a punitive damages claim must make inquiry beyond the complaint to determine the merits of the punitive damages claim and the amount of punitive damages, if any, to be awarded.
¶4 Because the circuit court in this case relied solely on the complaint to determine whether to award punitive damages and in what amount, we hold that the circuit court erred in awarding the plaintiff $100,000 in punitive damages. Accordingly, we vacate the portion of the default judgment awarding the plaintiff $100,000 in punitive damages and remand the cause to the circuit court for further proceedings to determine the merits of the punitive damages claim and the amount of punitive damages, if any, to be awarded. 2
¶5 For purposes of this review the facts are not in dispute. This case arose from a partnership agreement between Apex Electronics Corp., the plaintiff, and U.S. Cable Supply. On May 31, 1996, the plaintiff filed suit against the defendant, James Gee, the sole shareholder and president of U.S. Cable Supply.
¶6 On June 23, 1996, the defendant was served with a summons and a complaint alleging five causes of action. The first and fifth causes of action relate to punitive damages and are relevant to this review. The second, third and fourth causes of action allege that the defendant breached agreements with the plaintiff. 3 These allegations are not relevant to this review.
¶7 The first cause of action alleges conversion. According to the complaint, the plaintiff had an agreement with the defendant to lend funds to a partnership for the purchase of equipment. The parties agreed that when this equipment was sold, the partners' loans would be repaid from the sale proceeds, and the parties would divide any profits. According to the complaint, after the loans were made and the equipment was bought and sold, the defendant converted all proceeds from the sale to his own use. Consequently, according to the complaint, the partnership was unable to pay the plaintiff the $150,000 due.
¶8 The fifth cause of action incorporates the allegations of the first cause of action relating to the conversion and further alleges that the defendant's conversion "was in willful disregard of the rights of Plaintiff and made knowing that it would cause injury to Plaintiff," that "Defendant's conversion [was] a breach of Defendant's fiduciary responsibility to Plaintiff," and that "Plaintiff is entitled to recover punitive damages from Defendant ... in the amount of $100,000.00." 4 In addition to the punitive damages, the complaint also demanded compensatory damages in the amount of $256,800, plus costs and disbursements, and any other remedy the court might deem just and proper.
¶9 On August 29, 1996, the plaintiff filed a motion for a default judgment after the defendant failed to file an answer to the complaint. On September 5, 1996, the circuit court entered a default judgment against the defendant in the amount of $356,800, plus costs. On October 10, 1996, the defendant filed a motion to set aside the default judgment, claiming excusable neglect and asserting a meritorious defense.
¶10 On December 16, 1996, the circuit court denied the defendant's motion to set aside the default judgment. The court of appeals affirmed the circuit court order but declined to address the defendant's challenge to the punitive damages award, holding that the defendant had waived his right to raise the issue by failing to challenge the award in the circuit court.
¶11 The first issue is whether the defendant waived his right to challenge the punitive damages award in this court when he failed to challenge the award in his motion to vacate the default judgment in the circuit court.
¶12 The oft-repeated rule of Wisconsin appellate practice is that issues not raised in the circuit court will not be considered for the first time on appeal. See Wirth v. Ehly, 93 Wis.2d 433, 443, 287 N.W.2d 140 (1980). This rule does not relate to the jurisdiction of the court and is not absolute. See Wirth, 93 Wis.2d at 444, 287 N.W.2d 140. When an issue involves a question of law rather than of fact, when the question of law has been briefed by both parties and when the question of law is of sufficient public interest to merit a decision, this court may exercise its discretion to address the issue. See id.
¶13 The issue upon which this court accepted review, whether the circuit court erred by awarding the plaintiff punitive damages solely on the basis of the complaint, is a question of law involving statutory interpretation. The issue was, by order of this court, briefed by both parties. Finally, because questions about punitive damages awarded in default judgments will likely arise in other cases, this question of law is of sufficient public interest to merit our addressing it in this case. Accordingly, we exercise our discretion and address the merits of the legal issue presented without deciding the waiver issue.
¶14 We turn to the issue whether the circuit court in this case erred by failing to make inquiry beyond the complaint before it awarded punitive damages in the default judgment. Our order granting the petition for review limited our review of the decision of the court of appeals to this issue of law, which neither the circuit court nor the court of appeals addressed.
¶15 To determine whether the circuit court erred in awarding punitive damages solely on the basis of the complaint, we examine the law relating to default judgments and punitive damages. Three statutes come into play in this case: Wis. Stat. § 802.02(1m) governing complaints seeking damages in tort claims, Wis. Stat. § 806.02 governing default judgments and Wis. Stat. § 895.85 governing punitive damages.
¶16 Under Wis. Stat. § 802.02(1m)(a) a complaint may not specify the amount of money sought when alleging a tort claim seeking money damages. Section 802.02(1m)(a) provides that "[w]ith respect to a tort claim seeking recovery of money, the demand for judgment may not specify the amount of money the pleader seeks." 5
¶17 In this case the plaintiff is seeking punitive damages on a tort claim of conversion. The complaint is, therefore, subject to the requirements of Wis. Stat. § 802.02(1m)(a). Despite the proscription of § 802.02(1m)(a), the complaint demanded $100,000 in punitive damages. Accordingly, the $100,000 specified in the complaint must be viewed as a nullity, and the complaint must be read as if no dollar amount had been demanded for punitive damages. Unless § 802.02(1m)(a) is interpreted in this way, a complainant would have no incentive to comply with the statute. Therefore, the circuit court erred as a matter of law in awarding punitive damages based on the amount of money specified in the complaint.
¶18 This reading of Wis. Stat. § 802.02(1m)(a) is reinforced byWis. Stat. § 806.02(2) governing default judgments. Section 806.02(2) provides that if the amount of money sought is required to be excluded from the demand for judgment under § 802.02(1m)(a), then in order to obtain a default judgment a complainant must specify the amount claimed and provide that information to the court and the other parties. 6 See Stein v. Illinois State Assistance Comm'n, 194 Wis.2d 775, 782, 535 N.W.2d 101 (Ct.App.1995) ().
¶19 In this case the complaint did not comply with Wis. Stat. § 806.02(2). Before the circuit court granted the motion for a default judgment, the plaintiff did not specify to the circuit court and the defendant the amount of punitive damages being sought. The plaintiff argues, however, that the complaint put the defendant and the circuit court on notice of the amount of punitive damages sought, even though the complaint violated Wis. Stat. § 802.02(1m) by demanding judgment for punitive damages in the amount of $100,000. Thus, the plaintiff argues, it complied with the substance, if not the form, of the default judgment statute.
¶20 Even if we were to adopt the plaintiff's position that its complaint satisfied the notice requirement...
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