Mohns Inc. v. BMO Harris Bank National Association ( 2021 )

2021 WI 8SUPREME COURT OF WISCONSIN
CASE NO.: 2018AP71
COMPLETE TITLE: Mohns Inc.,
Plaintiff-Respondent,
v.
BMO Harris Bank National Association,
Defendant-Appellant-Petitioner.
REVIEW OF DECISION OF THE COURT OF APPEALS
Reported at 388 Wis. 2d 475,934 N.W.2d 572(2019 – unpublished)
OPINION FILED: February 2, 2021
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: October 1, 2020
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Waukesha
JUDGE: Kathryn W. Foster
JUSTICES:
REBECCA GRASSL BRADLEY, J., delivered the majority opinion for a
unanimous Court.
NOT PARTICIPATING:
ZIEGLER and HAGEDORN, JJ., did not participate.
ATTORNEYS:
For the defendant-appellant-petitioner, there were briefs
filed by Michael B. Apfeld, Andrew S. Oettinger, and Godfrey &
Kahn S.C., Milwaukke; with whom on the brief was Linda T.
Coberly, pro hac vice, and Winston & Strawn LLP, Chicago,
Illinois. There was an oral argument by Linda T. Coberly.
For the plaintiff-respondent, there was a brief filed by
John E. Machulak and Machulak, Robertson & Sodos, S.C.,
Milwaukee. There was an oral argument by John E. Machulak.
2021 WI 8NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2018AP71
(L.C. No. 2016CV307)
STATE OF WISCONSIN : IN SUPREME COURT
Mohns Inc.,
Plaintiff-Respondent, FILED
v. FEB 2, 2021
BMO Harris Bank National Association, Sheila T. Reiff
Clerk of Supreme Court
Defendant-Appellant-Petitioner.
REBECCA GRASSL BRADLEY, J., delivered the majority opinion for a
unanimous Court.
ZIEGLER and HAGEDORN, JJ., did not participate.
REVIEW of a decision of the Court of Appeals. Affirmed in
part, reversed in part, and cause remanded.
¶1 REBECCA GRASSL BRADLEY, J. BMO Harris Bank National
Association seeks review of the court of appeals decision, which
affirmed the circuit court's order for judgment in favor of
Mohns, Inc.1 The circuit court granted judgment on liability in
1Mohns Inc. v. BMO Harris Bank Nat'l Assoc., No. 2018AP71,
unpublished slip op. (Wis. Ct. App. July 24, 2019) (per curiam).
The Honorable Kathryn W. Foster of Waukesha County Circuit
Court presided.
No. 2018AP71
favor of Mohns as a sanction for BMO's discovery violations
pursuant to Wis. Stat. § 804.12(2)(a)(2017-18)2 and scheduled a
jury trial on damages. A jury awarded compensatory damages to
Mohns for breach of contract and unjust enrichment as well as
punitive damages. The circuit court entered judgment in the
amount of $831,687.00, plus costs.
¶2 BMO argues the court of appeals should have: (1)
reversed the circuit court's sanction imposing judgment on
liability because the circuit court failed to consider whether
Mohns was prejudiced by BMO's conduct; (2) set aside the damages
award for unjust enrichment because the jury had already awarded
damages for breach of contract, and the two are mutually
exclusive; and (3) overturned the punitive damages award because
it was tied to Mohns's contract claims, which cannot form the
basis for a punitive damages award.
¶3 We hold: (1) the circuit court did not erroneously
exercise its discretion when it imposed judgment on liability as
a sanction for BMO's discovery violations; (2) because the law
does not permit recovery of damages for both breach of contract
and unjust enrichment arising from the same conduct, the award
of damages for unjust enrichment must be set aside; and (3) the
punitive damages award must be overturned because it was based
upon an award of damages for the contract claims, and punitive
damages are recoverable only in tort. We affirm the decision of
2 All subsequent references to the Wisconsin Statutes are to
the 2017-18 version unless otherwise indicated.
2
No. 2018AP71
the court of appeals as to the discovery sanction; however, we
reverse the decision of the court of appeals on damages and
remand the matter to the circuit court to modify the order for
judgment and judgment consistent with this opinion.
I. BACKGROUND
¶4 This case arises from a condominium construction
venture between Paul Bouraxis, the developer; Mohns, the general
contractor; and BMO (as successor-by-merger to M&I Marshall &
Ilsley Bank), the bank financing the project, known as the
Hickory Hills Condominiums.3 Bouraxis secured a commercial
construction and mortgage loan (initially from M&I) to build 26
units, each housing four condominiums, on vacant land Bouraxis
owned in New Berlin, Wisconsin. As Mohns completed portions of
the project, it submitted paperwork to the bank's title company
in order to draw payment from BMO for materials, subcontractors'
work, and Mohns's own work, upon the title company's
confirmation that the work had been completed.
¶5 Work on the project progressed from its inception in
2005 until the economic downturn in 2008. Mohns paused work on
the project several times. In 2010 and 2011, Mohns had concerns
about whether it would be paid for its work because Mohns's draw
requests for payment were not being paid promptly.
¶6 In 2011, before doing any more work on the project,
Mohns sought reassurance from BMO banker Patrick Caine. These
3 BMO and M&I merged in 2011. For clarity, the opinion uses
BMO throughout the opinion because BMO assumed all of M&I's
obligations related to this matter as a part of the merger.
3
No. 2018AP71
conversations began in March 2011 and continued through August
2011. Although Caine indicated he could not give Mohns any
specific dollar amounts, Caine assured Mohns that it would be
paid. Caine told Bouraxis' manager that $223,000 was available
to pay Mohns, and the manager shared this information with
Mohns. Caine also sent a letter dated July 20, 2011 directly to
Mohns's materials supplier, indicating that the supplier would
be paid if it provided the materials to Mohns for the project.
Based on these assurances, Mohns continued construction and
submitted paperwork for two draws in July and one in August.
¶7 Unbeknownst to Mohns, during this time BMO had been
working to sell the Bouraxis construction loan along with some
other loans. In late July 2011, BMO sold the Bouraxis loan to
MIL Acquisition Venture, LP. BMO took a loss on the sale as the
purchase price was based on the value of the property, which was
significantly less than the original loan amount. Mohns learned
about the sale sometime in August. BMO banker Caine assured
Mohns that he would forward the August draw to MIL, the new
owner of the loan, for payment. Mohns continued work on the
property until October 2011.
¶8 In July 2013, MIL filed a foreclosure action against
Bouraxis, with Mohns named as a third-party defendant because of
Mohns's liens on the property. See MIL Acquisitions Venture, LP
v. Bouraxis Properties, No. 2014AP1982, unpublished slip op.
(Wis. Ct. App. May 28, 2015) (per curiam). Mohns counterclaimed
against MIL for unjust enrichment and equitable subrogation,
seeking to recover payment for the work it did in 2011 for which
4
No. 2018AP71
it had not been paid. The circuit court granted summary
judgment to MIL and the court of appeals affirmed, explaining:
"While it appears there may be evidence that Mohns continued
work in reliance on BMO's assurances of payment, Mohns fails to
direct our attention to evidence supporting a finding that Mohns
continued work in reliance on any MIL assurances." Id., ¶23
(emphasis in original).
¶9 In February 2016, Mohns filed a complaint against BMO
alleging three causes of action: (1) BMO breached its contract
to pay Mohns for its work on the condominium project; (2) BMO
was unjustly enriched by the construction work Mohns provided on
the condominium project, which increased the value of the loan
sold by BMO; and (3) BMO misrepresented to Mohns that funds were
available to pay it for the work it performed on the project,
which BMO would pay Mohns if it continued constructing the
condominiums. The complaint alleged that if Mohns proved the
misrepresentation "was intentional and/or in reckless disregard
of Mohns's rights," Mohns should receive punitive damages.
¶10 BMO filed a motion to dismiss, which the circuit court
denied. In September 2016, Mohns served BMO with
interrogatories, requests to admit, and a request for production
of documents. BMO served responses in October 2016, but in lieu
of producing any documents, stated that all documents had been
previously produced in the 2014 MIL lawsuit. BMO's responses to
the interrogatories and request for admissions contained more
objections than answers. BMO also objected to producing the
5
No. 2018AP71
loan sale agreement, claiming it was subject to a
confidentiality agreement between BMO and MIL.
¶11 In December 2016, Mohns served BMO with a notice for a
deposition of a corporate representative who could explain BMO's
discovery responses. On January 6, 2017, BMO filed a motion for
summary judgment. On January 11, 2017, BMO produced Patrick
Caine for the corporate representative deposition. Caine could
not explain BMO's responses to discovery. He could not answer
questions related to the merger, or topics listed in the
deposition notice regarding the sale of the loan. Caine
testified he did not know on July 20, 2011 that the loan was
being sold to MIL despite multiple June 2011 emails discussing
the sale of the loan, including a June 16, 2011 email indicating
Caine knew the loan would be sold.
¶12 On January 26, 2017, Mohns filed a motion to compel
discovery and a request for discovery sanctions against BMO.
Mohns's brief in support of the motion said its attempt to
narrow the issues for trial via written discovery requests had
been thwarted by BMO's "evasive responses" and by its refusal to
produce a corporate representative who had any knowledge about
the topics relevant to Mohns's claims or who could explain BMO's
evasive responses. Mohns argued: "BMO should not be entitled
to interpose defenses to Mohns's action and then frustrate
discovery calculated to examine those defenses." Mohns asserted
that BMO should not be able to seek summary judgment when it
refused to produce discovery that would defeat the motion for
summary judgment.
6
No. 2018AP71
¶13 In February 2017, the circuit court held a hearing on
pending motions, including Mohns's motion to compel and BMO's
motion for summary judgment. The circuit court found BMO in
violation of discovery rules and granted Mohns's motion to
compel because Mohns certainly had the right to ask for "who
knew what when" and "not get the runaround." The circuit court
ordered:
 Another corporate deposition of someone to be produced by
BMO with firsthand knowledge of all the things Mohns
requested or who could obtain that knowledge in
preparation;
 BMO to provide specificity as to what was being denied in
its responses to Mohns's request to admit that were
"admitted in part and denied in part";
 The two attorneys to "work out" "what documents will be
exchanged";
 BMO to provide to Mohns an unredacted copy of the loan
sale agreement and all of its addenda in their entirety.
¶14 The circuit court found redaction would be unnecessary
with a protective order, particularly since the confidentiality
of the loan sale agreement runs exclusively in favor of BMO as
the seller. The circuit court expressed frustration at BMO's
handling of discovery, believing BMO was "stalling" or "playing
a form of a legal shell game." For example, in the request to
admit that "BMO is the successor-by-merger to M&I Marshall &
Ilsley Bank," BMO responded: "Admitted in part, denied in part.
BMO is the successor-by-merger to M&I Bank as expressly provided
7
No. 2018AP71
in the applicable merger documents and agreements and applicable
law, and BMO denies it otherwise assumed any obligations of M&I
Bank." After much discussion, BMO ultimately stipulated during
the hearing that: "BMO assumes responsibility for the alleged
conduct of M&I" asserted in Mohns's Complaint.
¶15 The circuit court took Mohns's request for sanctions
under advisement and postponed ruling on BMO's motion for
summary judgment until discovery could be completed. The
circuit court expected the additional discovery would "occur by
April 7th, if not sooner" and gave the parties deadlines to file
supplemental briefs, with the intent of recalling the matter by
May 12th.
¶16 On March 2, 2017, the parties appeared in court on the
summary judgment motion of Bouraxis, who had been impleaded by
BMO as a third-party defendant. After the circuit court granted
summary judgment to Bouraxis, the circuit court asked BMO and
Mohns whether they wanted it to address BMO's motion for summary
judgment then or wait until after discovery was completed. Both
sides agreed to have the circuit court decide BMO's motion for
summary judgment immediately. The circuit court denied the
motion, specifically noting "that the shortcomings of the
plaintiff's case related to intentional misrepresentation are a
result of [BMO's] violation of the discovery rule." After
denying BMO's motion for summary judgment, the circuit court
warned BMO that if it did not "alleviate[]" the discovery
violation "in the next couple months," it would grant summary
8
No. 2018AP71
judgment for Mohns on liability as a sanction for BMO's
discovery violation and send only damages to the jury.
¶17 The circuit court extended the discovery deadline
until May 5th, indicating it wanted to give BMO "every
opportunity to comply" and ordered BMO to produce a corporate
representative for deposition "who can speak knowledgeably"
about the matter. When BMO's lawyer protested that "the most
knowledgeable people are former employees" whom "[w]e can't
make . . . show up," the circuit court reminded BMO that "a
subpoena works for non-employees the same as employees." The
circuit court's written order denied BMO's motion for summary
judgment and found BMO in violation of Wis. Stat.
§ 804.05(2)(e); the order directed BMO "to produce a corporate
representative in compliance with § 804.05(2)(e)" or "be
sanctioned by the [c]ourt as stated on the record."
¶18 After the hearings, BMO produced a complete copy of
the loan sale agreement and a copy of the confidentiality
agreement, but no other documents. On March 17, 2017, Mohns's
lawyer sent a letter to BMO's lawyer acknowledging receipt of
the loan sale and confidentiality agreements, pointing out that
the confidentiality agreement does not apply, and requesting to
schedule the corporate representative for deposition on March
29th, April 4th, or April 5th. Mohns's lawyer specifically
requested BMO to "actively review" its "document production,"
identifying several examples of documents mentioned but not
produced. BMO's lawyer responded on March 23, 2017, disputing
several points from the March 17th letter, asserting he is
9
No. 2018AP71
"working with BMO to review the efforts that have been
undertaken to search for responsive documents" which will be
produced "promptly" if located, and advising that he would "be
in touch about scheduling the deposition as soon as possible."
¶19 On March 29, 2017, Mohns's lawyer wrote back to BMO's
lawyer and refuted BMO's position set forth in its March 23rd
letter, asserting:
 BMO had still "not identified, let alone produced, [an]
appropriate corporate representative" as ordered by the
court;
 BMO failed to produce any documents, instead relying on
documents it produced in the 2014 case involving MIL,
many of which were redacted;
 An appraisal and other documents were missing; and
 BMO misrepresented to the circuit court that it needed a
waiver from MIL on the confidentiality agreement, even
though the language of the confidentiality agreement
proved otherwise.
Mohns's lawyer closed the letter by asking again for dates for
the corporate representative deposition.
¶20 Eventually, the corporate deposition was scheduled for
May 2, 2017. On Friday, April 26, 2017, BMO's lawyer notified
Mohns's lawyer by email that BMO had just located "several
thousand documents that are potentially responsive" to Mohns's
discovery requests. The email provided a link and a password
that would let Mohns's lawyer access these documents. When
Mohns's lawyer tried to access the documents, however, the
10
No. 2018AP71
password did not work. Mohns's lawyer contacted BMO's lawyer,
who, the next morning, provided the correct password——allowing
Mohns's lawyer to review the newly-disclosed 975 pages of
documents. Mohns's lawyer notified BMO's lawyer on May 1, 2017
that he would be ready to proceed with the May 2nd corporate
representative deposition as scheduled. When BMO's lawyer said
he found "thousands" of additional discovery documents that his
corporate designee would need additional time to review, Mohns's
lawyers agreed to delay the deposition until May 9, 2017.
¶21 Shortly before 5:00 p.m. on Friday, May 5, 2017,
BMO's lawyer sent Mohns's lawyer a link to access the additional
documents, which contained 4,185 pages. BMO produced Natalie
Johnson, a Relationship Manager on Special Assets, for the
corporate representative deposition on May 9th. Johnson had not
been involved in the loan sale, had not read any of the emails
contained in the newly-produced documents, and could not answer
many of the questions asked of her during the deposition.
¶22 In August 2017, the circuit court held an additional
hearing on pending motions, during which it addressed Mohns's
"motion to compel continuing" and BMO's "continuing motion for
summary judgment." The circuit court, which had read Johnson's
entire deposition, found that BMO failed to comply with the
prior discovery order. It said:
 Johnson did not have the knowledge the circuit court had
required, finding "so many questions in [Johnson's
deposition] transcript . . . [to be] nonresponsive."
11
No. 2018AP71
 "I have had root canals that were less painful than
reading Ms. Johnson's transcript."
 Johnson reviewed only 20 documents in preparation and
what she had not reviewed "seemed to be very, very
germane."
 "Ms. Johnson was in as much of the dark as a lot of other
people."
The circuit court found that based on the recently produced
documents, Patrick Caine lied during his deposition, which the
circuit court characterized as "a pretty significant
misrepresentation to the [c]ourt and to plaintiff's counsel."
The circuit court found BMO's discovery response
"disingenuous[]" and "egregious[]" and that BMO had given Mohns,
its lawyer, and the circuit court "the runaround." The circuit
court found Mohns made straightforward discovery requests to
which BMO had not provided proper responses——suggesting BMO
withheld the documents because they revealed BMO's "guilt."
¶23 Most significantly, the circuit court found BMO
"blatant[ly] disregard[ed]" its orders both as to producing the
corporate representative and otherwise complying with its
discovery order. It said BMO "egregiously ignor[ed]" its
obligations, and BMO had previously withheld a document that was
"as close to a smoking gun as I have seen in a long time in a
misrepresentation claim." Based on "the egregious behavior of
the defendants in violating this [c]ourt's order in not being
responsive to the plaintiff's simple direct request for
discovery," the circuit court denied BMO's motion for summary
12
No. 2018AP71
judgment and, as a sanction, granted summary judgment to Mohns.
The circuit court stated: "So when we have a trial in October,
it is going to be on damages and punitive damages[.]" The
circuit court noted that it had not "granted a summary judgment
motion based on a discovery violation in the past, but [it
couldn't] think of a more appropriate [case] than the one before
[it]." The circuit court made its "decision with every
confidence that [it] is the appropriate and legal sanction for
what has been presented here," and noted that it had re-read all
earlier transcripts, which confirmed the circuit court had "been
more than generous to the defense to get [its] act together."
¶24 In its August 29, 2017 written order, the circuit
court:
 Reaffirmed its earlier ruling denying BMO's summary
judgment motion;
 Granted Mohns's requests for discovery sanctions;
 "[G]rant[ed] judgment to the plaintiff Mohns, Inc., as to
the liability of the defendant BMO Harris Bank National
Association, including the defendant's liability for
intentional misrepresentation";
 "[B]ecause of BMO['s] conduct regarding discovery and
disregard of the [c]ourt's orders . . . , grant[ed]
judgment to the plaintiff Mohns[] for its attorneys' fees
in an amount to be determined by the [c]ourt."
 Kept the case "scheduled for trial beginning on October
3, 2017," but stated that "the issues to be tried will be
13
No. 2018AP71
the damages and punitive damages to be assessed against
the defendant BMO[]."
¶25 BMO filed a motion asking the circuit court to
reconsider its discovery sanction decision. The circuit court
denied the motion in a written order, explaining:
 BMO failed to produce pertinent documents until days
before the second corporate representative deposition and
then produced over 4,000 pages of documents, including a
particularly relevant email from Patrick Caine;
 The circuit court warned BMO about the possibility of a
sanction in the form of summary judgment but despite that
warning, BMO failed to produce a representative who could
provide meaningful testimony;
 Wisconsin Stat. § 804.12(2) authorizes the sanction
imposed by the circuit court, which is "commensurate with
BMO's misconduct" and supported by the record.
¶26 The case proceeded to trial in October 2017 as
scheduled. The special verdict form contained seven questions.
Because of the circuit court's sanction, the special verdict
form submitted to the jury already had the first three questions
on liability answered "YES," leaving questions 4-7 to be
answered by the jury. The special verdict questions sent to the
jury appeared as follows:
14
No. 2018AP71
1. Did BMO Harris Bank National Association breach an
agreement to pay Mohns Inc. for labor and materials
which Mohns Inc. furnished for the Hickory Hills
Condominiums project?
Answer: YES
Yes or No
2. Was BMO Harris National Association unjustly
enriched by labor and materials which Mohns Inc.
furnished the Hickory Hills Condominiums project?
Answer: YES
Yes or No
3. Did BMO Harris National Association make an untrue
representation of fact, knowing it was untrue, or
recklessly without caring whether it was untrue, and
with the intent to deceive and induce Mohns Inc. to
act upon it?
Answer: YES
Yes or No
4. What sum of money, if any, will fairly and
reasonably compensate Mohns Inc. for its damages in
the following regards:
(a) Draw 1 $_____________
(b) Draw 2 $_____________
(c) Draw 3 $_____________
(d) Interest on Draws $_____________
(e) For Lost Profits and Work Completed
After the Draw Applications $_____________
Regardless of how you answered question 4 and without
duplicating amounts from question 4, answer this
question:
15
No. 2018AP71
5. What sum of money, if any, will fairly and
reasonably compensate Mohns Inc. for the unjust
enrichment experienced by BMO Harris National
Association?
$______________
If you awarded damages to any component of question 4
or question 5, then answer this question:
6. Did BMO Harris Bank National Association act
maliciously toward Mohns Inc. or in an intentional
disregard of the rights of Mohns Inc.?
Answer:_________
Yes or No
If you answered "yes" to question 6, answer this
question:
7. What sum, if any, do you award against BMO Harris
Bank National Association as punitive damages?
¶27 The jury answered question 6 "Yes" and inserted total
dollar amounts on questions 4, 5, and 7 as follows:
question 4: $106,581;
question 5: $132,668;
question 7: $1,000,000.
¶28 In November 2017, the circuit court heard BMO's post-
verdict motions seeking judgment notwithstanding the verdict or
a new trial based in part on law that precludes an unjust
enrichment award when a plaintiff receives damages for breach of
contract. BMO also challenged the jury's punitive damages
award, both because it was not based on a tort and because the
award violated the statutory cap in Wis. Stat. § 895.043. At
the hearing, Mohns opposed BMO's motions and requested an award
16
No. 2018AP71
of attorney's fees the circuit court previously indicated it
would impose as a sanction for BMO's discovery violations.
¶29 The circuit court denied BMO's motions and awarded
Mohns attorney's fees of $113,940 as part of the discovery
sanctions. The circuit court reviewed eight of Mohns's requests
to admit, finding that BMO lied in its responses. The circuit
court noted:
Consistent with the behavior in this case, BMO
continues to thumb its nose at the rules of discovery
in civil proceedings in this case. Lie, lie, lie,
shift blame on somebody else, anybody else but
themselves, and say, nope, didn't happen, when the
evidence is in their computer system, in their files,
it is in the minds of their employees who aren't
produced for deposition, who aren't made available to
speak the truth.
¶30 The circuit court did, however, reduce the jury's
punitive damages award to two times the amounts listed in
questions 4 and 5, awarding punitive damages in the amount of
$458,484. Shortly after the hearing, the circuit court entered
a final written order for judgment.
¶31 BMO appealed the circuit court's order to the court of
appeals, which affirmed the circuit court. The court of appeals
ruled the circuit court properly exercised its discretion in
imposing judgment on liability against BMO as a discovery
sanction based on BMO's egregious conduct, but the court of
appeals did not address the merits of BMO's arguments on
contract and unjust enrichment claims being mutually exclusive
or the punitive damages awarded resting entirely on contract.
In its view, BMO failed to adequately raise or brief these
17
No. 2018AP71
issues. Mohns Inc. v. BMO Harris Bank Nat'l Assoc., No.
2018AP71, unpublished slip op., ¶¶21, 28, 30 (Wis. Ct. App. July
24, 2019) (per curiam). BMO petitioned this court for review,
which we granted.
II. DISCUSSION
¶32 BMO believes the court of appeals erred in affirming
the circuit court, and seeks reversal on three grounds: (1) the
circuit court erroneously exercised its discretion in imposing
discovery sanctions; (2) Wisconsin law does not permit a
plaintiff to recover damages for both breach of contract and
unjust enrichment; and (3) the punitive damages award must be
overturned because it was based on contract rather than tort.
We hold: (1) Wis. Stat. § 804.12 permits the discovery
sanctions imposed in this case and the record demonstrates the
circuit court acted within its discretion; (2) when a contract
exists and the jury awards damages for its breach, the plaintiff
cannot also collect damages for unjust enrichment based on the
same underlying conduct or subject matter; and (3) because
compensatory damages were awarded for the breach of contract
claims but not the tort claim, the punitive damages award must
be set aside. Accordingly, we affirm the decision of the court
of appeals permitting the circuit court's imposition of
discovery sanctions, but we reverse the decision of the court of
appeals on damages and remand the matter to the circuit court to
amend the order for judgment and judgment consistent with this
opinion. Mohns may recover the amount the jury awarded for
18
No. 2018AP71
breach of contract, but cannot recover for unjust enrichment or
receive punitive damages.4
A. Standard of Review
¶33 A discovery sanction represents a discretionary
determination of the circuit court and is examined under the
erroneous exercise of discretion standard of review. See
Industrial Roofing Serv. v. Marquardt, 2007 WI 19, ¶41, 299
Wis. 2d 81, 726 N.W.2d 898. If the circuit court "examined the
relevant facts, applied a proper standard of law, and, using a
demonstrated rational process, reached a conclusion that a
reasonable judge could reach," we uphold the circuit court's
decision. Id. We affirm a circuit court's factual findings
unless they are clearly erroneous. Wis. Stat. § 805.17(2). Our
review of whether a party may recover damages for both breach of
contract and unjust enrichment and whether the punitive damages
award is permitted in this case present questions of law we
review de novo. Miller v. Wal-Mart Stores, Inc., 219
Wis. 2d 250, 259, 580 N.W.2d 233 (1998); Brown v. Maxey, 124
Wis. 2d 426, 431, 369 N.W.2d 677 (1985); Jacque v. Steenberg
Homes, Inc., 209 Wis. 2d 605, 614, 563 N.W.2d 154 (1997).
B. Discovery Sanctions
¶34 BMO believes the circuit court erred in imposing the
sanction of judgment as to liability both because of the
4 BMO does not challenge the attorney's fees award, which
the circuit court ordered as part of the sanction for BMO's
discovery violations; therefore, the attorney's fees award
stands and is not affected by the decision of this court.
19
No. 2018AP71
severity of the sanction as well as the absence of a specific
finding that Mohns was prejudiced by BMO's violations. We
disagree.
1. Prejudice to Mohns is Not Required
¶35 BMO contends the circuit court's sanction was improper
because it was imposed without making an explicit finding that
Mohns was prejudiced by BMO's discovery violations. Relying on
Split Rock Hardwoods, Inc. v. Lumber Liquidators, Inc., 2002 WI
66, 253 Wis. 2d 238, 646 N.W.2d 19, BMO asserts a circuit court
must explicitly assess prejudice before imposing the extreme
sanction of default judgment. Split Rock, however, does not
apply. That case addressed prejudice in the context of a
defendant timely serving the plaintiff with its answer to the
plaintiff's complaint, but not simultaneously filing the answer
with the circuit court. Id., ¶¶8-9. When the clerk of courts
notified Split Rock that the circuit court had not received an
answer to Split Rock's Complaint, Split Rock filed a motion
under Wis. Stat. § 806.02 to strike the defendant's answer and
enter default judgment. Id., ¶9. The Split Rock circuit court
granted the motion on the basis that there had been no "joinder
of issue under 806.02." Id., ¶10. This court reversed,
concluding that when considering "default judgment as a sanction
for failure to file [an answer] promptly," prejudice should be
considered. Id., ¶33.
¶36 In contrast, this case involves BMO's failure to
comply with the circuit court's discovery orders under Wis.
Stat. § 804.12(2). Wisconsin cases involving discovery
20
No. 2018AP71
sanctions require a circuit court to make a finding of
"egregious conduct" or "bad faith" without a "clear and
justifiable excuse" before dismissing a plaintiff's case or
granting default judgment, but do not require an explicit
finding of prejudice. See Brandon Apparel Grp. Inc. v. Pearson
Prop., Ltd., 2001 WI App 205, ¶11, 247 Wis. 2d 521, 634
N.W.2d 544; Garfoot v. Fireman's Fund Ins. Co., 228 Wis. 2d 707,
731, 599 N.W.2d 411 (Ct. App. 1999); Smith v. Gold, 224
Wis. 2d 518, 526, 592 N.W.2d 287 (Ct. App. 1999). These
heightened findings are required because utilizing § 804.12(2)'s
most serious sanctions of dismissal or default judgment are
"drastic penalt[ies] that should be imposed only where such
harsh measures are necessary." Hudson Diesel, Inc. v. Kenall,
194 Wis. 2d 531, 542, 535 N.W.2d 65 (Ct. App. 1995).
¶37 We have specifically declined to require prejudice to
the offended party when default judgment is imposed as a
discovery sanction. See Industrial Roofing Serv., 299
Wis. 2d 81, ¶43; Johnson v. Allis Chalmers Corp., 162
Wis. 2d 261, 282, 470 N.W.2d 859 (1991) (overruled in part on
other grounds by Industrial Roofing Serv.). As a result of
their behavior, parties acting egregiously or in bad faith
"significant[ly] prejudice" "the circuit court's ability to
efficiently and effectively administer judicial business."
Johnson, 162 Wis. 2d at 282. Each time a court's order is
ignored, "the administration of justice suffers because the
court's time is misused to accommodate the noncomplying party's
dilatoriness at the expense of the other party and all other
21
No. 2018AP71
litigants awaiting the court's attention." Id. "[I]n some
cases the need to punish and deter the flagrant disobedience of
court orders requires the circuit court to impose greater
sanctions than monetary ones." Id. at 286. As a prerequisite
to imposing default judgment as a discovery sanction, a circuit
court must find the sanctioned party engaged in egregious or bad
faith conduct, without a clear and justifiable excuse, but need
not determine the opposing party was prejudiced thereby.
2. Exercise of Discretion Analysis
¶38 The circuit court did not erroneously exercise its
discretion when it imposed the sanction of judgment on liability
against BMO because it found that BMO's actions were egregious
and without a clear and justifiable excuse, applied a sanction
authorized under Wis. Stat. § 804.12(2), and reached a
reasonable determination. There is no question that the law
permits this sanction. Wisconsin Stat. § 804.12(2) provides
that "the court in which the action is pending may make such
orders in regard to the failure as are just," and authorizes:
1. An order that the matters regarding which the
order was made or any other designated facts shall be
taken to be established for the purposes of the action
in accordance with the claim of the party obtaining
the order;
2.
An order refusing to allow the disobedient
party to support or oppose designated claims or
defenses, or prohibiting the disobedient party from
introducing designated matters in evidence;
3. An order striking out pleadings or parts
thereof, or staying further proceedings until the
order is obeyed, or dismissing the action or
22
No. 2018AP71
proceeding or any part thereof, or rendering a
judgment by default against the disobedient party;
4. In lieu of any of the foregoing orders or in
addition thereto, an order treating as a contempt of
court the failure to obey any orders except an order
to submit to a physical, mental or vocational
examination.
(Emphasis added.) The circuit court acted under this statute
and thus applied the correct law. Our focus then turns to
whether the circuit court considered the pertinent facts, made
the required findings, and rendered a reasonable determination.
¶39 The circuit court found BMO's actions to be egregious,
disingenuous, designed to bury documents and hide a "smoking
gun" email, and in violation of its discovery order. Those
findings are not clearly erroneous as the record contains
evidence supporting them. "[F]ailure to comply with circuit
court scheduling and discovery orders without clear and
justifiable excuse is egregious conduct." Industrial Roofing
Serv., 299 Wis. 2d 81, ¶43 (quoted source omitted). Conduct,
even if unintentional, that is "extreme, substantial and
persistent" fits the definition of egregiousness. Hudson
Diesel, Inc., 194 Wis. 2d at 543.
¶40 As demonstrated by the foregoing recitation of the
facts, BMO engaged in a persistent pattern of avoidance, delay,
and disregard of the circuit court's discovery order. The
record demonstrates that BMO initially refused to produce any
documents at all, instead claiming that all relevant documents
had already been turned over in the MIL case in 2014. BMO's
responses to interrogatories and requests to admit were evasive
23
No. 2018AP71
at best and contained outright lies at worst. BMO produced for
deposition two corporate representatives who had little-to-no
relevant knowledge of the topics identified for discovery,
despite the circuit court's direct order to produce an
individual with the requisite knowledge.
¶41 After insisting that all relevant documents had been
turned over in 2014, BMO "discovered" thousands of documents——
over 4,000 pages——at the last hour, days before the second
corporate deposition. BMO delayed further in making those
documents available to Mohns's lawyer by giving him a password
that did not work. Within that batch of thousands of documents
was the "smoking gun" email.
¶42 BMO's non-compliance infected the hearing on Mohns's
motion to compel and every motion hearing thereafter. The
circuit court warned BMO, both orally and in its written order,
that it would impose sanctions if BMO did not alter its conduct.
It specifically threatened default judgment as a sanction. BMO
continued to stall, disregarded the circuit court's explicit
warnings, and as the circuit court described: "thumb[ed] its
nose at the rules of discovery" from the beginning to the very
end.
¶43 The circuit court found BMO's acts to be egregious and
disingenuous. It described BMO's actions as "stonewalling,"
"playing a legal shell game," and giving Mohns and the circuit
court the "runaround." The circuit court's comments suggest BMO
was intentionally withholding documents and witnesses to avoid
liability. The circuit court said BMO had "no excuse" and
24
No. 2018AP71
expressed its belief that BMO tried to get the case dismissed
quickly on summary judgment without turning over the very
documents which would have precluded the motion from being
granted.
¶44 The circuit court found BMO "blatantly disregarded"
its order and "egregiously ignored" its discovery obligations.
It gave BMO every opportunity to comply, even extending the
deadline imposed for discovery. When BMO still refused to
comply with the circuit court's order, the circuit court imposed
the sanction about which it had previously cautioned BMO——it
entered judgment on liability.
¶45 The circuit court expressed that it had never before
granted judgment "based on a discovery violation" but it could
not "think of a more appropriate one than the one before [it]
today." The circuit court explained that its decision to grant
default judgment against BMO was being made "with every
confidence that that is the appropriate and legal sanction for
what has been presented here."
¶46 Based on the circuit court's warnings, its findings of
egregiousness, BMO's refusal to obey the order, and the
availability of this sanction under Wis. Stat. § 804.12(2), the
circuit court's decision to impose the sanction of default
judgment was a reasoned determination that a reasonable circuit
court could make. Accordingly, the circuit court did not
erroneously exercise its discretion, and we affirm the court of
appeals decision regarding the discovery sanctions.
A. Contract and Unjust Enrichment
25
No. 2018AP71
¶47 BMO argues the court of appeals erred in upholding the
jury's verdict, which awarded damages to Mohns for both breach
of contract and unjust enrichment. BMO cites cases barring
recovery under the equitable doctrine of unjust enrichment when
the parties entered into a contract. Mohns contends that
because BMO failed to object on this basis in the circuit court,
Schwigel v. Kohlmann, 2002 WI App 121, 254 Wis. 2d 830, 647
N.W.2d 362, permits the multiple awards, particularly because
liability in this case is based upon a discovery sanction. The
law supports BMO's position.
¶48 Under Wisconsin law, a plaintiff may not recover
damages for both breach of contract and unjust enrichment based
on the same conduct. See Meyer v. The Laser Vision Inst., LLC,
2006 WI App 70, ¶26, 290 Wis. 2d 764, 714 N.W.2d 223. Unjust
enrichment is an equitable claim that cannot coexist with a
breach of contract claim. Id., ¶28. If the parties entered
into a valid, enforceable contract, then unjust enrichment does
not apply. Continental Cas. Co. v. Wisconsin Patients Comp.
Fund, 164 Wis.2d 110, 118, 473 N.W.2d 584 (Ct. App. 1991). The
availability of damages for unjust enrichment presupposes that a
contract does not exist, necessitating an equitable remedy. See
Meyer, 290 Wis. 2d 764, ¶¶26, 28; Watts v. Watts, 137
Wis. 2d 506, 530, 405 N.W.2d 303 (1987). Because the circuit
court found a contract existed and the jury awarded damages for
BMO's breach of the contract, the award for damages based on
unjust enrichment must be set aside. Allowing both to stand
would create the legal equivalent of the Schrödinger's cat
26
No. 2018AP71
paradox.5 Just as a cat cannot be both dead and alive at the
same time, a contract cannot both exist and not exist
simultaneously. A contract either exists, or it doesn't. If a
contract exists, a plaintiff can recover damages for its breach.
Only if a contract does not exist may a party recover damages in
equity.
¶49 The circuit court recognized this longstanding legal
principle during the jury instruction conference:
I believe that in the end damages cannot be awarded
for both a breach [of contract] and unjust enrichment.
There can't be a double reward.
. . . .
Well it occurs to me that we have instructions in
there for contract right now, not for unjust
enrichment . . . I think the Plaintiff can elect, and
that is usually the way I have seen it and I have
imposed on Plaintiffs to pick one or the other once we
get to the jury. If you want to elect unjust
enrichment and forego basic contract damages, you can
do that. And if that is the amount you want to argue
for, I guess that is your election.
. . . .
But I think then we have to go back, if we are
going to do unjust enrichment then that is the
instruction I am going to give the jury and not the
two on contract.
Then the circuit court asked Mohns: "You want to just go with
the conventional contract damages and not the unjust
https://whatis.techtarget.com/definition/Schrodingers-cat
5
(explaining Nobel Prize-winning Austrian physicist Erwin
Schrödinger's thought experiment presenting the paradox of a cat
being both dead and alive at the same time, as a critique of a
particular interpretation of quantum mechanics).
27
No. 2018AP71
enrichment[?]" The circuit court, however, confused the
principle of election of remedies with pleading in the
alternative.
¶50 "The election of remedies doctrine is an equitable
principle barring one from maintaining inconsistent theories or
forms of relief." Head & Seemann, Inc. v. Gregg, 104
Wis. 2d 156, 159, 311 N.W.2d 667 (Ct. App. 1981) (emphasis
added). "[In] [t]he classic application of the election of
remedies doctrine . . . a defrauded party has the election of
either rescission or affirming the contract and seeking
damages." Id. (citation omitted). "[This] choice is
forced . . . because of inconsistency of both rescinding and
affirming the contract." Id. (citation omitted). Rescission is
an equitable remedy allowing the defrauded party to cancel the
contract, while affirming the contract allows the defrauded
party to seek damages. "The election of remedies doctrine
requires a litigant to choose a remedy, where the remedies
sought are inconsistent with one another." Wickenhauser v.
Lehtinen, 2007 WI 82, ¶16, 302 Wis. 2d 417, 34 N.W.2d 855(citation omitted).
¶51 As this court has previously explained, the election
of remedies doctrine applies only to remedies, not claims for
relief. For example, "[a] claim for relief in tort and a claim
for relief in contract are not 'remedies' to which the election
of remedies doctrine applies. A remedy is the relief that is
applied to a successful claim." Id., ¶16 n.2 (citation
omitted). Accordingly, the election of remedies doctrine does
28
No. 2018AP71
not apply to a claim for relief in equity, such as unjust
enrichment, or a claim for relief in contract because claims are
not remedies.
¶52 A party may plead claims for relief in the
alternative, as Mohns did in this case. Wis. Stat.
§ 802.02(5)(b).6 Specifically, Mohns claimed the existence of a
contract that was breached by BMO, for which Mohns sought
damages. Mohns also sought damages under the equitable doctrine
of unjust enrichment, a claim for relief available only if a
contract was never formed or was legally invalid. Both of
Mohns's claims were based on the labor and materials Mohns
supplied for the Hickory Hills Condominium construction project.
Claims for breach of contract and unjust enrichment arising out
of the same conduct or subject matter are inconsistent with each
other, one being premised on the existence of a contract and the
other available only in the absence of a contract. Under
§ 802.02(5)(b), however, "claims pleaded in the alternative need
not be consistent with one another." Read v. Read, 205 Wis. 2d
558, 575, 556 N.W.2d 768 (Ct. App. 1996) (Fine, J., dissenting).
6Wisconsin Stat. § 802.02(5)(b) provides: "A party may set
forth 2 or more statements of a claim or defense alternatively
or hypothetically, either in one claim or defense or in separate
claims or defenses. When 2 or more statements are made in the
alternative and one of them if made independently would be
sufficient, the pleading is not made insufficient by the
insufficiency of one or more of the alternative statements. A
party may also state as many separate claims or defenses as the
party has regardless of consistency and whether based on legal
or equitable grounds. All statements shall be made subject to
the obligations set forth in s. 802.05."
29
No. 2018AP71
Nevertheless, the plaintiff may recover under only one of the
claims. If there is a contract between the parties, the
plaintiff may recover in contract but not in equity. In this
case, the circuit court expressly found the existence of a
contract between Mohns and BMO, answering the following question
on the special verdict in the affirmative: "Did BMO Harris Bank
National Association breach an agreement to pay Mohns Inc. for
labor and materials which Mohns Inc. furnished for the Hickory
Hills Condominium project?"
¶53 Ultimately, and over the objection of BMO,7 the circuit
court opted to let the jury award damages on both contract and
unjust enrichment by attempting to frame the verdict questions
to prevent overlapping damages. This was error, as the law does
not permit an award for both legal and equitable damages based
on the same conduct. Meyer, 290 Wis. 2d 764, ¶¶26, 28;
Continental Cas. Co., 164 Wis. 2d at 118.
¶54 While a verdict form could include jury questions
related to both breach of contract and unjust enrichment, if the
jury finds a contract existed, unjust enrichment will not apply.
Only if the jury finds that no contract existed may it award
damages for unjust enrichment. The circuit court departed from
7 Mohns argues BMO's objections to this issue were deficient
in the circuit court. We disagree. The record shows BMO's
lawyer strongly objected, asserting: "[I]t is inconsistent in a
case to have both a breach of contract and unjust
enrichment . . . as a matter of law you either have a contract,
in which case you are entitled to damages, or you have – flowing
from that breach, or if you don't have a contract you can have
unjust enrichment to measure those damages."
30
No. 2018AP71
black letter law governing breach of contract and unjust
enrichment when the circuit court, as a matter of law, found
that BMO "breached an agreement to pay Mohns Inc. for labor and
materials Mohns Inc. furnished for the Hickory Hills Condominium
project" and that BMO was "unjustly enriched by labor and
materials which Mohns Inc. furnished the Hickory Hills
Condominium project." The circuit court erred in granting
judgment on liability for both breach of contract and unjust
enrichment, and in awarding both legal and equitable damages
based on the same conduct. The two are mutually exclusive. See
Continental Cas. Co., 164 Wis. 2d at 118.
¶55 Mohns's reliance on Schwigel, 254 Wis. 2d 830, is
inapposite. In that case, the court of appeals concluded that
"the verdict improperly asked a single damage question on
Schwigel's breach of contract, negligent misrepresentation and
unjust enrichment claims" but the availability of recovery under
claims for both breach of contract and unjust enrichment was not
an issue before the court. Id., ¶2. Regardless, Schwigel is
distinguishable from Mohns's case because Schwigel involved
multiple acts arising from a course of conduct, including the
sharing of production space, storage of equipment, purchase of a
machine, production of motor shafts, defendant's alleged
conversion of equipment, and the loss of the plaintiff's
customers and, ultimately, his business. Id., ¶¶3-8. While the
facts of a particular case could support both causes of action
if certain conduct was governed by contract and other conduct
was independent of the contractual relationship, in this case,
31
No. 2018AP71
the contract and unjust enrichment claims asserted against BMO
were both based on the same underlying conduct——Mohns's
provision of labor and materials on a construction project, for
which it was not paid. Under Wisconsin law, if there was a
contract, Mohns could recover contract damages for its breach.
Only if there was no contract could Mohns receive the value of
the benefit conferred on BMO as a result of the labor and
materials Mohns supplied.
¶56 Black letter law precludes Mohns from collecting
unjust enrichment damages based on the same conduct for which he
received contractual damages, irrespective of the court's
liability determination arising in the form of a sanction.
Because the circuit court explicitly found that BMO breached an
agreement to pay Mohns for its labor and materials, the damages
awarded for unjust enrichment must be set aside.
B. Punitive Damages
¶57 BMO argues the punitive damages award must be set
aside because it is not based upon tort liability. We agree.
The jury awarded compensatory damages only for breach of
contract and unjust enrichment, neither of which supports an
award of punitive damages.
¶58 Under Wisconsin law, punitive damages are not
available as a remedy in a breach of contract action.
Entzminger v. Ford Motor Co., 47 Wis. 2d 751, 757, 177 N.W.2d
899 (1970) ("Punitive damages are not allowed for a mere breach
of contract[.]"); Hansen v. Texas Roadhouse, Inc., 2013 WI App
2, ¶29, 345 Wis. 2d 669, 827 N.W.2d 99 ("[P]unitive damages are
32
No. 2018AP71
not available as a remedy for breach of contract[.]"); Autumn
Grove Joint Venture v. Rachlin, 138 Wis. 2d 273, 279, 405 N.W.2d
759 (Ct. App. 1987). A jury's award of punitive damages must be
based upon a finding of tort liability. Hansen, 345
Wis. 2d 669, ¶29. The punitive damages awarded in this case
were not based on tort liability, but rather on breach of
contract and quasi-contract and therefore must be set aside.
¶59 The tort liability involved in this case stemmed from
BMO's misrepresentation, for which the circuit court granted
judgment in favor of Mohns. The only question on the special
verdict regarding misrepresentation was question 3, which asked
whether BMO made "an untrue representation of fact, knowing it
was untrue, or recklessly without caring whether it was untrue,
and with the intent to deceive and induce Mohns Inc. to act upon
it" to which the circuit court itself answered "YES" as part of
the discovery sanctions. The special verdict did not contain
any question asking the jury to determine a damage award for
misrepresentation.
¶60 Although the circuit court entered judgment against
BMO for misrepresentation as a discovery sanction, the jury was
asked to award damages (if any) only under the contract claims.
While discussing the jury instructions with counsel for each
party, the circuit court decided to omit any damages question
with respect to the misrepresentation claim: "As far as the
misrepresentation I think that goes to attorney fees, and so we
are not going to muddy the waters because the damages aren't
33
No. 2018AP71
going to be any different on any of those." Mohns did not
object.
¶61 The punitive damages questions did not reference tort
liability whatsoever. Instead, the punitive damages questions
were explicitly dependent upon the jury's responses to question
4, which asked the jury what sum would compensate Mohns for
damages arising from breach of contract, and question 5, which
asked the jury what sum would compensate Mohns for damages
arising from the quasi-contract claim of unjust enrichment.8 The
special verdict form instructed the jury: "If you awarded
damages to any component of question 4 or question 5, then
answer this question" with question 6 immediately after: "Did
BMO Harris Bank National Association act maliciously toward
Mohns Inc. or in an intentional disregard of the rights of Mohns
Inc.?" The special verdict form then instructed the jury to
answer the following question 7 only if it answered "yes" to
question 6: "What sum, if any, do you award against BMO Harris
Bank National Association as punitive damages?" The punitive
damages awarded by the jury were based on the amounts it
inserted on the special verdict form for BMO's breach of
contract and for the quasi-contractual unjust enrichment claim——
neither of which support an award for punitive damages.
8"Because no express or implied in fact agreement exists
between the parties, recovery based upon unjust enrichment is
sometimes referred to as 'quasi contract,' or contract 'implied
in law' rather than 'implied in fact.' Quasi contracts are
obligations created by law to prevent injustice." Watts v.
Watts, 137 Wis. 2d 506, 530, 405 N.W.2d 303 (1987).
34
No. 2018AP71
Accordingly, the punitive damages award must be overturned and
we reverse the decision of the court of appeals on this issue.
III. CONCLUSION
¶62 Wisconsin Stat. § 804.12 permits the discovery
sanction imposed by the circuit court and the record
demonstrates the circuit court did not erroneously exercise its
discretion when it granted judgment against BMO on liability.
We affirm the court of appeals decision on the discovery
sanction. However, Wisconsin law does not permit a plaintiff to
recover simultaneously for breach of contract and unjust
enrichment based on the same conduct or subject matter. Because
the circuit court determined that BMO breached an agreement to
pay Mohns for its labor and materials, for which the jury
awarded Mohns damages, the jury's award of damages for unjust
enrichment based upon the labor and materials supplied by Mohns
must be set aside. Additionally, Wisconsin law only permits a
punitive damages award to be based upon a tort, not a contract.
Because the special verdict form based the punitive damages on
contract, not tort——for which no compensatory damages were
sought or awarded——the punitive damages award must also be set
aside. We reverse the decision of the court of appeals on
damages and remand the matter to the circuit court to amend the
order for judgment and judgment consistent with our opinion.
By the Court.—The decision of the court of appeals is
affirmed in part, reversed in part, and the cause remanded to
the circuit court for further proceedings consistent with this
opinion.
35
No. 2018AP71
¶63 ANNETTE KINGSLAND ZIEGLER and BRIAN HAGEDORN, JJ., did
not participate.
36
No. 2018AP71
1