Green Spring Farms v. Spring Green Farm Associates Ltd. Partnership

• Decision Date: 29 October 1992
• Docket Number: No. 91-1598,91-1598
• Citation: 492 N.W.2d 392,172 Wis.2d 28
• Parties: GREEN SPRING FARMS, a Wisconsin General Partnership Consisting of Galen C. Hartung, Donald J. Hartung, Daniel J. Hartung, James P. Noltner, Robert J. Hartung, Randy L. Hartung, Stephen J. Hartung and John Hartung, Plaintiffs-Respondents, v. SPRING GREEN FARM ASSOCIATES LIMITED PARTNERSHIP, a Wisconsin Limited Partnership, Defendant, Robert R. Lehman, General Partner, Defendant-Appellant, John G. Oliver, General Partner, Main Bank-Chicago, n/k/a Cole-Taylor Bank, an Illinois Banking Corporation, Defendants.
• Court: Wisconsin Court of Appeals

Page 392

492 N.W.2d 392

172 Wis.2d 28

GREEN SPRING FARMS, a Wisconsin General Partnership Consisting of Galen C. Hartung, Donald J. Hartung, Daniel J Hartung, James P. Noltner, Robert J. Hartung, Randy L Hartung, Stephen J. Hartung and John Hartung, Plaintiffs-Respondents, v. SPRING GREEN FARM ASSOCIATES LIMITED PARTNERSHIP, a Wisconsin Limited Partnership, Defendant Robert R. Lehman, General Partner, Defendant-Appellant John G. Oliver, General Partner, Main Bank-Chicago, n/k/a Cole-Taylor Bank, an Illinois Banking Corporation, Defendants.

No. 91-1598.

Court of Appeals of Wisconsin.

Submitted on Briefs March 26, 1992.

Opinion Released Oct. 29, 1992.

Opinion Filed Oct. 29, 1992.

For the defendant-appellant the cause was submitted on the briefs of Roger L. Gierhart and W. Scott McAndrew, of Bell, Metzner, Gierhart & Moore, S.C., Madison.

For the plaintiffs-respondents the cause was submitted on the briefs of Paul W. Schwarzenbart, Lee, Kilkelly, Paulson & Kabaker, S.C., Madison.

Before EICH, C.J., GARTZKE, P.J., and SUNDBY, J.

SUNDBY, Judge.

Robert R. Lehman appeals from a judgment entered May 22, 1991, foreclosing the interest of Spring Green Farm Associates (SGFA) in a land contract between Green Spring Farms (GSF) and SGFA. Lehman is a general partner in SGFA. The judgment struck Lehman's affirmative defenses and dismissed his counterclaims for rescission of the land contract, restitution, and money damages. Lehman stipulated to entry of the judgment, subject to his right to pursue appellate review of a circuit court order granting GSF's motion to strike his request for a jury trial on his counterclaims. The judgment provides that if Lehman prevails on this appeal, "all counterclaim issues shall be tried to a jury."

The circuit court concluded that by filing his legal counterclaims in GSF's equitable foreclosure action, Lehman waived his right to a jury trial of those counterclaims. As an alternative ground for affirming the judgment, GSF argues the circuit court should have granted its summary judgment motion dismissing Lehman's counterclaims. GSF argues that the counterclaims fail to state proper claims and that Lehman failed to rebut GSF's prima facie defense that it did not know of the alleged salmonella contamination which Lehman claims GSF intentionally concealed from SGFA.

We conclude Lehman did not waive his right to a jury trial of his legal counterclaims because he was compelled by the doctrine of collateral estoppel to assert his counterclaims in this action in order to preserve them. We further conclude that Lehman's counterclaims state claims upon which relief may be granted, and that a disputed issue of material fact exists as to whether GSF intentionally failed to disclose to SGFA at the time of sale that its property was contaminated with salmonella bacteria. We therefore reverse the judgment

and remand the cause for further proceedings consistent with this opinion.

BACKGROUND

On May 1, 1985, SGFA entered into a land contract with GSF to purchase a dairy farm near Spring Green, Wisconsin, and took possession of the farm. During the summer of 1987, SGFA experienced a salmonella ¹ outbreak among its livestock, resulting in the destruction of some animals, extensive veterinary care for others, and considerable financial losses.

In November 1988, SGFA defaulted on its land contract payments. GSF accelerated the entire balance due and brought this action against SGFA, Lehman and others for specific performance. Lehman defended, alleging affirmative defenses and making counterclaims based on GSF's alleged failure to disclose a 1982 outbreak of salmonella in its dairy herd which, Lehman claims, caused the 1987 outbreak.

In his first counterclaim, Lehman alleges that prior to the date of sale, GSF knew that its property was contaminated by salmonella bacteria, but intentionally failed to disclose the contamination with intent to deceive SGFA and induce it to enter into the land contract. He requested that the circuit court rescind the contract and restore the status quo. In his second, third and fourth counterclaims, Lehman seeks money damages resulting from GSF's intentional and negligent misrepresentations and failure to disclose the contamination.

In the summer of 1982, GSF's veterinarians identified salmonellosis as the cause of death of several of GSF's calves. However, GSF contends that at the time of sale on May 1, 1985, it had no knowledge that its property continued to be contaminated by salmonella bacteria. It further claims that if it had such knowledge, it had no duty to disclose that knowledge to SGFA prior to sale.

The circuit court denied GSF's summary judgment motion because it concluded that Lehman raised a disputed issue of material fact as to whether the property was contaminated by salmonella bacteria at the time of sale. On May 22, 1991, the circuit court entered the stipulated judgment from which Lehman appeals.

RIGHT TO JURY TRIAL

Article I, section 5 of the Wisconsin Constitution provides that "[t]he right of trial by jury shall remain inviolate, and shall extend to all cases at law without regard to the amount in controversy...." ² Article I, section 5 secures the right of trial by jury only where it could have been claimed as a matter of right at the time the constitution was adopted. Mead v. Walker, 17 Wis. 195, [*189], 197, [*190-91] (1863). It is well settled that the right to a trial by jury does not extend to equitable actions. Neff v. Barber, 165 Wis. 503, 506, 162 N.W. 667, 668 (1917).

"[A] legal counterclaim in an equitable action does not necessarily entitle the counterclaimant to a jury trial...." Tri-State Home Improvement Co. v. Mansavage, 77 Wis.2d 648, 660, 253 N.W.2d 474, 479 (1977) (citing Mortgage Assocs. v. Monona Shores, 47 Wis.2d 171, 176-78, 177 N.W.2d 340, 345-46 (1970)). In Monona Shores, the court limited the holding in Neas v. Siemens, 10 Wis.2d 47, 102 N.W.2d 259 (1960), where the court held the defendants were entitled to a jury trial on their fraud counterclaim in a foreclosure action on a land contract for the sale of a farm. The court said:

We are not here concerned with a legal counterclaim but we point out that Neas probably states too broadly a principle in respect to a legal counterclaim in an equity action. There is considerable logic and merit in the view that when a defendant pleads a legal counterclaim in an equitable action which he is not compelled to do he waives any right to a jury trial he would have if he had brought the action separately.

Monona Shores, 47 Wis.2d at 177, 177 N.W.2d at 345 (emphasis added).

The court discussed cases construing Rule 13(a) of the Federal Rules of Civil Procedure, holding that where a defendant is required under the rule to assert a counterclaim, he or she is entitled to a jury trial if the counterclaim asserts a legal right in an equitable suit. Id., 177 N.W.2d at 346. The court said: "If, however, the defendant is under no such compulsion and asserts the legal right in a counterclaim in an equity suit, he thereby waives his right to a jury trial on that issue." Id.

We conclude that where a counterclaimant is compelled to raise his or her claims by the doctrine of collateral estoppel, ³ that compulsion does not result in the waiver of the counterclaimant's right to a jury trial. In the 1976 revision of the Wisconsin Rules of Civil Procedure, 67 Wis.2d 587 (1976), the Wisconsin Supreme Court did not adopt the federal compulsory counterclaim rule. See sec. 802.07(1), Stats. The Judicial Council Civil Rules Committee declined to recommend the compulsory counterclaim rule because the committee felt that the purpose of compulsory counterclaims--disposing of all aspects of a single litigable transaction or occurrence in a single action--"is promoted in Wisconsin law by the rules of collateral estoppel." Charles D. Clausen and David P. Lowe, The New Wisconsin Rules of Civil Procedure: Chapters 801-803, 59 MARQ.L.REV. 1, 58 (1976) (citing J. CONWAY, WISCONSIN AND FEDERAL CIVIL PROCEDURE, ch. 85, at 85-1--85-6 (1966)).

Wisconsin's collateral estoppel rules conform to what the RESTATEMENT (SECOND) OF JUDGMENT'S Reporters term "a common-law compulsory counterclaim rule." Section 22(2) of the RESTATEMENT proposes that:

A defendant who may interpose a claim as a counterclaim in an action but fails to do so is precluded, after the rendition of judgment in that action, from maintaining an action on the claim if: ... (b) The relationship between the counterclaim and the plaintiff's claim is such that successful prosecution of the second action would nullify the initial judgment and would impair rights established in the initial action.

RESTATEMENT (SECOND) OF JUDGMENTS § 22(2) (1982). Comment f explains that:

The counterclaim must be such that its successful prosecution in a subsequent action would nullify the judgment, for example, by allowing the defendant to enjoin enforcement of the judgment, or to recover on a restitution theory the amount paid pursuant to the judgment ... or by depriving the plaintiff in the first action of property rights vested in him under the first judgment....

Id. at § 22 comment f. The Reporters' Note states that § 22(2)(b) "represent[s] an effort to articulate the bases in precedent and policy for what might be termed a 'common-law compulsory counterclaim rule.' " Id.

We conclude that § 22(2)(b) of the RESTATEMENT describes the situation present in this case. If Lehman is allowed in a later action to attack GSF's foreclosure judgment on grounds of fraud in inducement of the land contract, his successful prosecution of that action would nullify the judgment and deprive GSF of property rights vested in it under the judgment. He must, therefore, assert his claim in this action or lose it.

Requiring Lehman to plead his fraudulent misrepresentation claims in this action accomplishes the objectives of compulsory counterclaim rules of procedure. "The...