In Mohns v. BMO Harris Bank (2018AP71), the Wisconsin Supreme Court held that the circuit court was within its discretion to impose judgement on liability, including for intentional misrepresentation, as a sanction for discovery violations.
Mohns, Inc. was the general contractor for a condominium construction venture developed by Paul Bouraxis and financed by BMO Harris Bank. Several years later, BMO sold the construction loan to MIL Acquisition Venture. A few months later, Mohns ceased work on the project because it was no longer receiving payments from the loan for its work. Nearly two years later, MIL filed a foreclosure action against the developer Bouraxis, naming Mohns as a third party because of the company’s liens on the property. Mohns counterclaimed against MIL seeking to recover payment for its unpaid work. After Mohns’ claim against MIL was dismissed, Mohns sued BMO, alleging breach of contract, unjust enrichment, and misrepresentation regarding the availability of funds to pay Mohns for its work on the project.
Following months of proceedings, including discovery and depositions, the court found that BMO had disregarded its obligations under court orders to produce representatives and documents. The court granted summary judgment in favor of Mohns as a sanction for BMO’s discovery violations, citing Wis. Stat. § 804.12. The court also ordered a jury trial to determine damages for the discovery violations, after which Mohns was awarded compensatory damages for breach of contract and unjust enrichment as well as punitive damages. The court denied BMO’s motions challenging the damages, reduced the punitive damages awarded by the jury, and added attorney’s fees as an additional sanction against BMO. The appellate court ultimately affirmed the circuit court’s judgement in favor of Mohns. BMO appealed.
In its appeal to the Wisconsin Supreme Court, BMO argued that the appellate court should have reversed the sanction imposing judgement on liability because the circuit court didn’t consider that Mohns may have been prejudiced by BMO’s conduct; should have set aside the award of damages for unjust enrichment because it was mutually exclusive with damages awarded for breach of contract; and should have overturned the punitive damages award because it was tied to contract claims.
The supreme court held that the circuit court was within its discretion to sanction BMO for discovery violations by imposing judgement on liability under Wis. Stat. § 804.12. However, the court also ruled that “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.” The court also found that “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.” Accordingly, the supreme court affirmed the appellate court as to the discovery sanction, but reversed with respect to the damages and remanded the matter to the circuit court for judgement and order consistent with the high court’s opinion.
Justice Rebecca Bradley delivered the opinion for a unanimous court. Justices Annette Ziegler and Brian Hagedorn did not participate in the decision.