Wis. Bank & Tr. v. Jim Herman, Inc.
| Decision Date | 27 October 2022 |
| Docket Number | 2021AP1352 |
| Court | Wisconsin Court of Appeals |
| Parties | Wisconsin Bank & Trust, Plaintiff-Appellant, v. Jim Herman, Inc., Paula J. Herman and Wilkes, LLC, Defendants, James (Jim) Herman Family Partnership, Dustin Wilke, Debra Tooley, Danny L. Herman, Larry H. Stark and Darren W. Herman, Defendants-Respondents. |
Not recommended for publication in the official reports.
APPEAL from an order of the circuit court for Dane County No 2019CV3483: MARIO WHITE, Judge. Reversed and cause remanded.
Before Blanchard, P.J., Fitzpatrick, and Nashold, JJ.
¶1 Wisconsin Bank &Trust ("the Bank") appeals an order of the Dane County Circuit Court granting summary judgment to the James (Jim) Herman Family Partnership ("the Partnership") and denying the Bank's motion for summary judgment. At issue in this appeal are guaranties and mortgages (the "Guaranties and Mortgages") that were executed on behalf of the Partnership by Marjorie Herman-one of the partners. The purpose of the Guaranties and Mortgages was to secure loans from the Bank to a farming corporation which was operated by at least one partner of the Partnership and rented land from the Partnership. After a default on one of the loans, the Bank commenced an action in the circuit court against the Partnership to enforce the Guaranties and Mortgages. In response, the Partnership stated a counterclaim asserting that the Guaranties and Mortgages are not enforceable because Marjorie lacked the authority to execute those documents on behalf of the Partnership.
¶2 Both parties moved for summary judgment. The Bank argued that the Partnership's counterclaim is barred by the doctrine of laches. The Bank also argued that, even if laches does not apply to bar the counterclaim, the Guaranties and Mortgages are valid and enforceable because Marjorie had actual and apparent authority to execute the agreements on behalf of the Partnership. The Partnership argued in its motion that laches does not bar its counterclaim and also that Marjorie lacked authority to execute the Guaranties and Mortgages. The circuit court agreed with the Partnership, ruling that the Partnership's counterclaim is not barred by laches and that the Guaranties and Mortgages are void and unenforceable.
¶3 On appeal, the Bank renews its arguments made in the circuit court and contends that the circuit court erred in entering summary judgment for the Partnership and denying the Bank's motion for summary judgment. We conclude that neither party's motion for summary judgment should be granted because there are genuine issues of material fact and reasonable competing inferences from the facts concerning the application of the doctrine of laches and whether Marjorie had actual or apparent authority to execute the Guaranties and Mortgages on behalf of the Partnership. Accordingly, we reverse the circuit court's order and remand for further proceedings consistent with this opinion.
¶4 In 1982, James and Marjorie Herman executed a "Partnership Agreement" establishing the Partnership with them as the partners.[1] The next year, James and Marjorie added their four children as partners: Renee Laufenberg, Gail Leslie, and Penny Sutkay (collectively, "the Sisters"), and Edwin Herman. James generally had sole responsibility for managing the affairs of the Partnership, including the Partnership's purchase and sale of land. The business of the Partnership was in part the rental of land to the family business, Jim Herman, Inc. ("JHI"), and JHI was operated at the time by James.
¶5 James died in 1996, and his partnership interest passed to the Jim Herman Marital Trust (the "Marital Trust"), which became a partner in the Partnership. Later, the Jim Herman Family Trust (the "Family Trust") was added as a partner in the Partnership. Marjorie was, at all times until her death, the sole trustee of both the Marital Trust and the Family Trust. After James died, Marjorie managed the Partnership business and continued to purchase and sell real estate on behalf of the Partnership. Edwin assisted Marjorie in managing the Partnership, but the Sisters were generally not involved with the operation of the Partnership. In 2001, the Sisters and Edwin executed a Power of Attorney ("POA") authorizing Marjorie to act as the agent for the Sisters and Edwin "in any lawful way with respect to all real property transactions of [the Partnership]."
¶6 Between 2007 and 2010, Marjorie executed a series of four Guaranties and five Mortgages on behalf of the Partnership. These contracts guaranteed a loan to JHI-which was by then operated by Edwin-and secured payment of that debt by placing liens on substantially all of the Partnership's real estate holdings. As proof of her authority to execute the Guaranties and Mortgages, Marjorie provided to Ronald Markham (a senior vice president of the Bank) the Partnership Agreement, a list of the current partners, the POA, and a document requested by the Bank entitled Partnership Authorization ("Authorization"). The Sisters were not aware of the Guaranties, Mortgages, or Authorization at the time any of those documents were executed by Marjorie.
¶7 In 2013, the Sisters asked an attorney to investigate the use of Partnership property as collateral for the Bank's loans to JHI.[2] The attorney sent a letter to the Bank requesting, among other things, copies of any mortgages in favor of the Bank secured by the Partnership's property. Markham provided copies of the Mortgages as requested.
¶8 In June 2017, four years after receiving the copies of the Mortgages, the Sisters met with Markham to discuss the Mortgages. At this meeting Markham informed the Sisters that his understanding was that the POA authorized Marjorie to act on the Sisters' behalf. The Sisters have testified in this action that, after June 2017, they waited to further discuss issues regarding the Mortgages with Markham because they were busy with their personal lives and did not think at the time that it was appropriate to question Marjorie and Edwin's management of the Partnership.
¶9 Edwin died shortly after the Sisters' meeting with Markham in June 2017, and one of the Sisters asked Markham whether the proceeds of Edwin's life insurance policy would cover the Partnership's obligations to the Bank. Markham did not respond, and the Sisters sought advice from another attorney. Over several months, the new attorney communicated with Markham on the following topics: the Guaranties, the Mortgages, and whether the proceeds of Edwin's life insurance policy would cover the Partnership's obligations to the Bank.
¶10 In July 2018, Marjorie died. Two days after Marjorie's death, the Sisters' attorney sent a letter to Markham stating that the Bank had received Edwin's life insurance proceeds and demanding that the Bank release the Partnership's Mortgages. That letter stated that "[a] genuine legal question exists as to whether [Marjorie] had the legal authority to sign these mortgages." The Bank contends that this is the earliest date on which the Bank could be deemed to have received notice from the Sisters that the validity of the Guaranties and Mortgage was in dispute.
¶11 The Bank did not release the Guaranties or Mortgages. In 2019, JHI defaulted on one of its loans, and the Bank filed a lawsuit in the circuit court against the Partnership to enforce the Guaranties and Mortgages. The Partnership[3]filed an answer to the Bank's complaint and asserted, among other things, a counterclaim that the Guaranties and Mortgages are void and unenforceable because, according to the Partnership, Marjorie lacked the authority to execute those documents on behalf of the Partnership.[4]
¶12 The Bank and the Partnership both moved for summary judgment. The Bank contended that the Partnership's counterclaim was barred by laches. The Bank also argued that it was entitled as a matter of law to the entry of a money judgment and a foreclosure judgment against the Partnership because the Guaranties and Mortgages are valid and enforceable. The Partnership argued that the circuit court should dismiss the Bank's claims against the Partnership and release the Partnership from its obligations because the Guaranties and Mortgages are void and unenforceable.
¶13 The circuit court issued a written order denying the Bank's motion for summary judgment and granting the Partnerships' motion.[5] The Bank appeals the circuit court's order.
¶14 Additional material facts will be mentioned in the following discussion.
¶15 The Bank argues that the circuit court erred in granting summary judgment to the Partnership and denying the Bank's motion for summary judgment because the Partnership's counterclaim is barred by the doctrine of laches. In addition, according to the Bank, if laches does not bar the Partnership's counterclaim, the Bank is entitled to summary judgment because Marjorie had actual and apparent authority to execute the Guaranties and Mortgages on behalf of the Partnership. In the alternative, the Bank contends that neither party is entitled to summary judgment because there are genuine disputes of material facts concerning each of those issues. We begin by setting forth governing principles and our standard of review regarding summary judgment.
¶16 We review a circuit court's decision granting or denying summary judgment independently, but we apply the same methodology as the circuit court. Mrozek v. Intra Fin. Corp., 2005 WI 73, ¶14, 281 Wis.2d 448, 699 N.W.2d 54. On summary judgment, the moving party is entitled to judgment as a matter of law "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the...
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