Howell v. Denomie, 2003AP979-FT. L.C. No. 2002CV56

CourtUnited States State Supreme Court of Wisconsin
Citation2005 WI 81,698 NW 2d 621
Docket NumberNo. 2003AP979-FT. L.C. No. 2002CV56,2003AP979-FT. L.C. No. 2002CV56
PartiesGary J. Howell, Plaintiff-Respondent, v. Orrin Denomie and Helen Denomie, Defendants-Appellants-Petitioners.
Decision Date22 June 2005

For the defendants-appellants-petitioners there were briefs by Robert E. Haney, Alvin R. Ugent and Podell, Ugent & Haney, S.C., Milwaukee, and oral argument by Robert E. Haney.

For the plaintiff-respondent there was a brief and oral argument by Robert C. Longwell, Jr., Galesville.

An amicus curiae brief was filed by G. Michael Halfenger and Foley & Lardner, LLP, Milwaukee; and Jeffery O. Davis, and Quarles & Brady, LLP, Milwaukee, on behalf of the Appellate Practice Section, State Bar of Wisconsin, and there was oral argument by G. Michael Halfenger.

¶1 PATIENCE DRAKE ROGGENSACK, J

Orrin and Helen Denomie seek review of an unpublished court of appeals summary order1 affirming a circuit court judgment finding the Denomies' answer and counterclaim frivolous and awarding Gary Howell attorney fees. The Denomies also seek review of the court of appeals conclusion that their appeal was frivolous. We conclude that the circuit court correctly determined that the Denomies' answer and counterclaim were frivolous, but that the court of appeals should not have concluded that the appeal was frivolous without first giving the parties and counsel a chance to be heard on that issue. However, because the Denomies had an opportunity to be heard regarding the frivolousness of the appeal in their briefs and at oral argument before this court, we reach the merits of their argument. In so doing, we agree with the court of appeals conclusion that the appeal was frivolous. Accordingly, we affirm the court of appeals.

I. BACKGROUND

¶2 This dispute arises over the sale of a parcel of land and house in Trempealeau, Wisconsin. The plaintiff, Howell, and defendants, Denomies, present different versions of the facts. Howell's version is as follows: he negotiated a price of $68,000 with the owners, Gregg and Cynthia Sikora, for the home. Howell then contacted the Denomies for financing. Glenn E. Brommerich, senior vice president of Citizens State Bank, conducted the closing on April 17, 2000 with Gregg Sikora, Howell and the Denomies present. The deed filed for the sale of the property listed Howell as the purchaser, and the mortgage listed Howell as the mortgagor and the Denomies as the mortgagees. The Denomies gave a cashier's check for $67,500 to the bank, and Howell signed a promissory note and real estate mortgage to the Denomies. Howell agreed to make monthly payments on the note and the Denomies received an amortization schedule for the amount of the promissory note.

¶3 In late 2001, the Denomies heard from Howell's father that Howell was going to make $20,000 on the sale of the house. In early December 2001, the Denomies retained an attorney, Allan Ohm, who sent Howell a Notice to Quit or Pay Rent for the month of November 2001 because the Denomies had not received a payment from Howell in November. Howell gave this notice to Brommerich, who contacted Ohm and explained Howell's ownership of the property. On December 18, 2001, Howell refinanced the property with Citizens State Bank. Brommerich sent the Denomies a cashier's check for $63,291.34, the remaining amount due based on the amortization schedule, as well as a Satisfaction of Mortgage form for the Denomies to sign. Ohm contacted Brommerich and told him that the Denomies questioned the final payoff amount, and that there was still $687.40 due on the note as a result of the missed November payment. Brommerich sent the Denomies a check for the underpaid amount. The Denomies cashed both checks. On February 6, 2001, Citizens State Bank sent another letter to the Denomies urging them to sign the Satisfaction of Mortgage. The Denomies did not satisfy the mortgage, and Howell brought an action against them seeking a judgment satisfying and discharging the mortgage, penalty damages under Wis. Stat. § 706.05 (2001-02),2 actual damages, attorney fees and costs.

¶4 The Denomies presented a different view of the facts in their answer and counterclaim. They stated as follows: they agreed to purchase the house for Howell, rent it to him and sell it to him when he could afford to purchase it. Howell instead took their money, bought the property himself and fabricated the mortgage, thus fraudulently depriving them of ownership. Not knowing that this fraud had taken place, they reported the monthly payments from Howell as rent on their income tax filings. They refused to accept the final payments as satisfaction of Howell's debt because they claim they had never agreed to be a mortgage holder.

¶5 The matter was tried before the circuit court for Trempealeau County, Judge John A. Damon presiding. The court heard testimony from Brommerich, Howell and the Denomies. The court found the testimony of Brommerich and Howell relating Howell's version of the facts to be "entirely credible" and the testimony of Orrin Denomie to "be confused and not credible." The court also found that the unambiguous written documents showed that Howell had purchased the property and his agreement with the Denomies was a mortgage agreement. The court concluded that there was no basis for the counterclaim or the Denomies' assertion that they owned the property, as the deed indicated Howell was the purchaser and the credible testimony backed Howell's position. The court also found that the mortgage had not been satisfied by the Denomies, as was required by Wis. Stat. § 706.05. The court concluded that as a result of the Denomies' failure to satisfy the mortgage, Howell was entitled to statutory penalties3 totaling $2,000 and consequential damages totaling $2,267. The court also concluded that the Denomies' answer and counterclaim were frivolous under Wis. Stat. § 814.025, as they were "used and continued in bad faith and defendants and their attorney knew, or should have known, t[h]at the Counterclaim and defense were without any reasonable basis in law or equity and could not be supported by a good faith argument for extension, modification or reversal of existing law." The court entered judgment of $4,744.60 in attorney fees and taxable costs of $601.14.

¶6 The Denomies appealed the circuit court's judgment, arguing that they never agreed to the mortgage and that their defense was not frivolous. In a summary disposition, the court of appeals affirmed the circuit court's judgment and also concluded that the Denomies' appeal was frivolous, stating "we conclude that the Denomies' attorney should have known that his appellate argument is without any reasonable basis in law or in equity and cannot be supported by good faith argument for an extension, modification or reversal of existing law." The court awarded appellate attorney fees to Howell against Alvin Ugent, the Denomies' appellate attorney, and remanded to the circuit court for a determination of the amount of those fees.

¶7 The Denomies petitioned for review, which we granted. We specifically directed the parties to "address the procedure by which the court of appeals may determine an appeal is frivolous pursuant to Wis. Stat. § (Rule) 809.25(3)(c)."

II. DISCUSSION
A. Standard of Review

¶8 "A claim is frivolous under [Wis. Stat. § 814.025(3)(b)]4 if the party or attorney 'knew or should have known' that the claim was `without any reasonable basis in law or equity.'" Stern v. Thompson & Coates, Ltd., 185 Wis. 2d 220, 240-41, 517 N.W.2d 658 (1994). The standard is objective: "whether the [party or] attorney knew or should have known that the position taken was frivolous as determined by what a reasonable [party or] attorney would have known or should have known under the same or similar circumstances." Id. at 241 (quoting Sommer v. Carr, 99 Wis. 2d 789, 799, 299 N.W.2d 856 (1981)). This inquiry involves a mixed question of law and fact. Stern, 185 Wis. 2d at 241. "Determining what was known or should have been known involves questions of fact. Such findings of fact will not be upset unless they are against the great weight and clear preponderance of the evidence." Id.; Sommer, 99 Wis. 2d at 792. "However, . . . the ultimate conclusion about whether what was known or should have been known supports a [determination] of frivolousness under [Section 814.025(3)(b)] is a question of law we review independently of the . . . circuit and appellate courts." Stern, 185 Wis. 2d at 241. "All doubts on this issue are resolved in favor of the party or attorney" whom it is claimed commenced or continued a frivolous action. Rabideau v. City of Racine, 2001 WI 57, ¶46, 243 Wis. 2d 486, 627 N.W.2d 795.

¶9 In regard to whether an appeal is frivolous, the standard is somewhat different because an appellate court decides whether an appeal is frivolous solely as a question of law. See J.J. Andrews, Inc. v. Midland, 164 Wis. 2d 215, 225, 474 N.W.2d 756 (Ct. App. 1991); Vierck v. Richardson, 119 Wis. 2d 394, 399, 351 N.W.2d 169 (Ct. App. 1984). To award costs and attorney fees, an appellate court must conclude that the entire appeal is frivolous. State ex rel. Robinson v. Town of Bristol, 2003 WI App 97, ¶54, 264 Wis. 2d 318, 667 N.W.2d 14. Sanctions for a frivolous appeal will be imposed if the court concludes that the "party or party's attorney knew, or should have known, that the appeal . . . [had no] reasonable basis in law or equity and could not be supported by a good faith argument for an extension, modification or reversal of existing law." Wis. Stat. § (Rule) 809.25(3)(c)2.5 Since the standard is objective, an appellate court looks to what a reasonable party or attorney knew or should have known under the same or similar circumstances. See J.J. Andrews, 164 Wis. 2d at 226.

B. Frivolous Answer and Counterclaim

¶10 The Denomies first challenge the circuit court judgment concluding that their answer and...

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