Hauer v. Union State Bank of Wautoma, 93-3033.
| Decision Date | 15 March 1995 |
| Docket Number | No. 93-3033.,93-3033. |
| Citation | 532 N.W.2d 456,192 Wis.2d 576 |
| Parties | Kathy HAUER, Plaintiff-Respondent-Cross Appellant, v. UNION STATE BANK OF WAUTOMA, Defendant-Appellant-Cross Respondent. |
| Court | Wisconsin Court of Appeals |
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
On behalf of the defendant-appellant cross respondent, there were briefs by David E. Leichtfuss and Joshua L. Gimbel of Michael, Best & Friedrich of Milwaukee. There were oral arguments by David E. Leichtfuss.
On behalf of the plaintiff-respondent cross appellant, there was a brief and oral arguments by Thomas E. Hughes, of Hughes, Mathewson, Carns & Slattery of Oshkosh.
Before Anderson, P.J., Brown and Snyder, JJ.
The issues in this case arise out of a loan made by Union State Bank of Wautoma to Kathy Hauer. The Bank appeals from a judgment which (1) voided the loan on the grounds that Hauer lacked the mental capacity to enter into the loan, (2) required the Bank to return Hauer's collateral and (3) dismissed the Bank's counterclaim which sought to recover the proceeds of the loan from Hauer. Because we conclude that there is evidence in the record to support the jury's findings that Hauer was mentally incompetent at the time of the loan and that the Bank failed to act in good faith in granting the loan, we affirm.
In order to place the loan in context, we must first set forth the relevant events giving rise to the loan. The following facts are taken from court documents and undisputed testimony at trial.
In 1987, Hauer suffered a brain injury in a motorcycle accident. She was subsequently adjudicated to be incompetent, resulting in a guardian being appointed by the court. On September 20, 1988, Hauer's guardianship was terminated based upon a letter from her treating physician, Kenneth Viste. Viste opined that Hauer had recovered to the point where she had ongoing memory, showed good judgment, was reasonable in her goals and plans and could manage her own affairs. Her monthly income after the accident was $900, which consisted of social security disability and interest income from a mutual fund worth approximately $80,000.
On October 18, 1988, the Bank loaned Ben Eilbes $7600 to start a small business. In December, Eilbes requested but was denied an additional $2000 loan from the Bank. By June of 1989, Eilbes was in default on the loan. Around this time, Eilbes met Hauer through her daughter, who told Eilbes about the existence of Hauer's mutual fund. Eilbes subsequently discussed his business with Hauer on several occasions and Hauer expressed an interest in becoming an investor in the business. Because Hauer could only sell her stocks at certain times, Eilbes suggested that she take out a short-term loan using the stocks as collateral. Eilbes told Hauer that if she loaned him money, he would give her a job, pay her interest on the loan and pay the loan when it came due. Hauer agreed.
Eilbes then contacted Richard Schroeder, assistant vice president of the Bank, and told Schroeder that Hauer wanted to invest in his business but that she needed short-term financing and could provide adequate collateral. Eilbes told Schroeder that he would use the money invested by Hauer in part to either bring the payments current on his defaulted loan or pay the loan off in full. Schroeder then called Hauer's stockbroker and financial consultant, Stephen Landolt, in an effort to verify the existence of Hauer's fund. Landolt told Schroeder that Hauer needed the interest income to live on and that he wished the Bank would not use it as collateral for a loan. Schroeder also conceded that it was possible that Landolt told him that Hauer was suffering from brain damage, but did not specifically recall that part of their conversation.
At some later date Eilbes met personally with Schroeder in order to further discuss the potential loan to Hauer, after which Schroeder indicated that the Bank would be willing to loan Hauer $30,000. Schroeder gave Eilbes a loan application to give to Hauer to fill out. On October 26, 1989, Hauer and Eilbes went to the Bank to meet with Schroeder and sign the necessary paperwork. Prior to this date, Schroeder had not spoken to or met with Hauer. During this meeting Schroeder explained the terms of the loan to Hauer—that she would sign a consumer single-payment note due in six months and give the Bank a security interest in her mutual fund as collateral. Schroeder did not notice anything that would cause him to believe that Hauer did not understand the loan transaction.
On April 26, 1990, the date the loan matured, Hauer filed suit against the Bank and Eilbes. Hauer subsequently amended her complaint three times. The Bank filed a counterclaim for judgment on the defaulted loan after Hauer's first amended complaint. In Hauer's third amended complaint, she alleged the following specific causes of action: (1) the Bank knew or should have known that she lacked the mental capacity to understand the loan, (2) the Bank intentionally misrepresented, negligently misrepresented, or misrepresented the circumstances surrounding the loan on which she relied, and (3) the Bank breached a fiduciary duty owed to her.
On January 7, 1992, the Bank moved for summary judgment on the grounds that Hauer failed to state any claim for which relief could be granted. The trial court granted summary judgment in part by dismissing Hauer's misrepresentation claims. However, the court held that the pleadings stated the following causes of action which required factual determinations: (1) Hauer lacked the mental capacity to enter into the loan agreement and the Bank knew or should have known about her condition, (2) the Bank breached its duty of good faith and fair dealing under § 401.203, STATS., and (3) the Bank had a fiduciary duty to Hauer and breached that duty.
Prior to trial and over the Bank's objection, Hauer dismissed Eilbes because he appeared to be judgment proof and was filing bankruptcy. A twelve-person jury subsequently found that Hauer lacked the mental capacity to enter into the loan and that the Bank failed to act in good faith toward Hauer in the loan transaction. The trial court denied the Bank's motions after verdict and entered judgment voiding the loan contract, dismissing the Bank's counterclaim and ordering the Bank to return Hauer's collateral. The Bank appeals.
In addition to voiding the contract, Hauer also sought damages arising out of the Bank's conduct for punitive damages and actual attorney's fees. The trial court refused to submit questions to the jury regarding punitive damages. Further, the trial court ruled postverdict that Hauer was not entitled to actual attorney's fees. Hauer cross-appeals from these adverse rulings. We will discuss further facts as we discuss the appellate issues.
Over the Bank's objection, the jury was presented with the following special verdict question: Did the plaintiff, Kathy Hauer, lack the mental capacity to enter into the loan transaction at the time of that transaction? The jury answered this question, "Yes." In denying the Bank's motions after verdict, the trial court held that based on this finding, the note and security agreement were "void or voidable." Further, the court ruled that Hauer was not liable for repayment of the $30,000 loan because she no longer possessed the funds.
The Bank in its motions after verdict and on appeal argues that the jury's verdict as to mental incompetency is invalid. The Bank contends that Hauer failed to state a claim upon which relief can be granted or, in the alternative, that the evidence does not support the jury's verdict.
We first address the Bank's argument that Hauer's claim of mental incompetence fails to state a claim for which relief can be granted. This presents a question of law which we review independently. Peterman v. Midwestern Nat'l Ins. Co., 177 Wis. 2d 682, 697, 503 N.W.2d 312, 318 (Ct. App. 1993). The Bank contends that a claim of mental incompetence is an affirmative defense to an action to enforce a contract only and that Hauer cannot avail herself of such a defense because she failed to plead any affirmative defenses. We disagree.
We have previously recognized that the vast majority of courts have held that an incompetent person's transactions are voidable—the incompetent has the power to avoid the contract entirely. See Production Credit Ass'n v. Kehl, 148 Wis. 2d 225, 229-30, 434 N.W.2d 816, 818 (Ct. App. 1988); see also 5 SAMUEL WILLISTON, WILLISTON ON CONTRACTS § 10:3 (4th ed. 1993). Further, Wisconsin has long recognized a cause of action to rescind a contract or conveyance based upon the lack of mental competency at the time of the transaction. See, e.g., First Nat'l Bank v. Nennig, 92 Wis. 2d 518, 521, 285 N.W.2d 614, 616 (1979).1 Accordingly, we conclude that Hauer properly stated a cause of action to void the loan contract.
The Bank argues that even if Hauer has a cause of action to void the contract based upon the lack of mental capacity, the record is devoid of credible evidence to sustain the jury's verdict. In reviewing a jury's verdict, we will sustain the verdict if there is any credible evidence to support it. Fehring v. Republic Ins. Co., 118 Wis. 2d 299, 305, 347 N.W.2d 595, 598 (1984). The weight and credibility of the evidence are left to the province of the jury. Id. When the evidence permits more than one inference, this court must accept the inference that favors the jury's verdict. Id. at 305-06, 347 N.W.2d at 598.
The law presumes that every adult person is fully competent until satisfactory proof to the contrary is presented. First Nat'l Bank, 92 Wis. 2d at 529-30, 285 N.W.2d at 620. The burden of proof is on...
To continue reading
Request your trial
-
Reetz v. Advocate Aurora Health, Inc.
...breach of contract,’ " but instead recognizes the breach of good faith under a contract action. Hauer v. Union State Bank of Wautoma , 192 Wis. 2d 576, 595, 532 N.W.2d 456 (Ct. App. 1995). However, we do not address this issue further because we conclude that there was no contract provision......
-
In re Conservatorship of Groves
...165 Misc.2d 776, 630 N.Y.S.2d 228, 231 (1995); Hall v. Hall, 352 S.W.2d 765, 767 (Tex.Civ.App.-Houston 1962); Hauer v. Union State Bank, 192 Wis.2d 576, 532 N.W.2d 456, 461 (1995); see also Mark Fowler, Note, Appointing An Agent To Make Medical Treatment Choices, 84 Colum. L.Rev. 985, 988 n......
-
Anderson v. City of Milwaukee
...Air Wisconsin, Inc. v. North Central Airlines, Inc., 98 Wis.2d 301, 311, 296 N.W.2d 749 (1980)); accord Hauer v. Union State Bank, 192 Wis.2d 576, 600-01, 532 N.W.2d 456 (Ct.App.1995). ¶29 In this case, counsel for the City stated: "The only objection I have to [the special verdict] is the ......
-
Metropolitan Ventures v. Gea Associates
...contractual gaps. As a method to fill gaps, it has little to do with the formation of contracts." Hauer v. Union State Bank of Wautoma, 192 Wis.2d 576, 597, 532 N.W.2d 456 (Ct.App.1995) (citing Continental Bank, N.A. v. Everett, 964 F.2d 701, 705 (7th Therefore, Metropolitan was under no go......