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  • WisBar News
    May
    03
    2012

    Supreme Court Resolves Contract Issue Involving Delivery of Two-party Check

    Joe Forward
    Legal Writer

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    May 3, 2012 – The Wisconsin Supreme Court recently upheld a jury verdict in favor of an insurer accused of breaching a contract for payment of plumbing services, where the insurer issued a two-party check for payment but payment was never made to the plumbing contractor.

    Supreme Court Resolves Contract Issue Involving Delivery of Two-party Check

    An insurance company agreed to cover the costs of plumbing services rendered to its insured. It issued a two-party check naming the insured and the plumbing company and sent the check to the insured. The plumbing company, which never got paid, sued the insurer.

    By org jforward wisbar Joe Forward, Legal Writer, State Bar of Wisconsin

    Wisconsin Supreme Court resolves 
contract issue involving 
two-party check May 3, 2012 – The Wisconsin Supreme Court recently upheld a jury verdict in favor of an insurer accused of breaching a contract for payment of plumbing services, where the insurer issued a two-party check for payment but payment was never made to the plumbing contractor.

    Willtrim Group LLC (Willtrim) member Trevor Trimble enlisted Best Price Plumbing Inc. to fix frozen pipes at a property owned by Willtrim, which was insured by Erie Insurance (Erie).

    Erie agreed to pay the cost of repair. Best Price Plumbing (Best Price) performed the work and sent Erie’s property adjuster an invoice for nearly $9,000. Erie’s adjuster authorized payment for the full amount, and issued a two-party check payable to both Willtrim and Best Price.

    Issuing two-party checks was Erie’s practice according to industry standard in similar situations, the adjuster later testified at trial. Erie sent the check to Willtrim, and it was later deposited into Willtrim’s account with a handwritten endorsement from “Best Price Plumbing.”

    Principals at Best Price said that the endorsement was never made or authorized. Trimble later testified that he gave the check to a handyman with directions to get an endorsement from a Best Price employee, and the handyman did. No Best Price employee testified to endorsing the check, and no handyman testified at trial. Willtrim Group never paid Best Price Plumbing.

    Best Price Plumbing sued Erie, claiming Erie breached its contract of payment for services. In turn, Erie argued that there was no contract between the parties, and even if there was, Erie met its contract obligation by issuing and sending the two-party check to Willtrim.

    Jury Verdict and Post-verdict Motion

    A jury found that a contract was formed, but Erie met its obligation when it sent the two-party check, even though the check was never delivered to Best Price at its place of business.

    Best Price filed a motion after verdict under Wis. Stat. section 805.14(5)(c), asking the court to rule that Erie breached the contract because the contract was silent as to “place of payment.”

    Section 805.14(5)(c) allows a circuit court to “change an answer in the verdict on the ground of insufficiency of the evidence to sustain the answer.”

    Under State v. Kenosha Home Telephone Co., 158 Wis. 371, 148 N.W. 877 (1914), Best Price argued, when a contract is silent as to the place of payment, the law implies that payment shall be made at the residence, office, or place of business of the creditor.

    Thus, Best Price asserted, Erie breached the contract of payment as a matter of law.

    Ultimately, the circuit court overturned the jury verdict and awarded Best Price $14,650, concluding that the contract was silent as to the place of payment, and Kenosha Home applied to determine that Erie breached the contract for failure to deliver payment to Best Price.

    In an unpublished decision, the court of appeals reversed, concluding that “credible evidence” supported the jury’s verdict, which found that Erie did not breach the contract.

    Supreme Court Majority

    In Best Price Plumbing Inc. v. Erie Insurance Exchange, 2012 WI 44 (May 3, 2012), a Wisconsin Supreme Court majority (5-2) affirmed the appeals court, and concluded that Kenosha Home did not apply because Best Price forfeited the right to make that argument.

    The majority noted that Best Price did not raise the “place of payment” rule set forth in Kenosha Home until after the jury returned an unfavorable verdict.

    “A party is not permitted to save its legal arguments until after trial, only to present those arguments if the party dislikes the jury’s ultimate conclusion,” wrote Justice Ann Walsh Bradley for the majority.

    The majority also ruled that there was “credible evidence” to support the jury verdict, namely, that Best Price endorsed the check and Trimble’s testimony that he directed a handyman to obtain the endorsement from a Best Price employee. Best Price argued that such evidence was “patently incredible” and accused Trimble of converting insurance proceeds through forgery.

    “If Best Price wishes to try the issue of the authenticity of the endorsement, it should file suit against Trimble, the party that allegedly forged the endorsement and converted the insurance proceeds,” Justice Bradley wrote in a footnote.

    “Best Price introduced the endorsed check into evidence, and the jury was entitled to draw its own inferences from the signature on the check and Trimble’s testimony,” Bradley explained.

    The majority also noted that even if the jury was instructed on the Kenosha Home rule, it could have reached the same verdict based on “legitimate inferences” contrary to the rule. That is, the jury could have inferred from the evidence that the parties agreed on place of payment.

    Dissent

    Justice Annette Ziegler wrote a dissenting opinion (joined by Justice Patience Roggensack), arguing that the majority applied the wrong standard of review. The dissent noted that the circuit court treated the “motion after verdict” as a motion notwithstanding the verdict (JNOV).

    Section 805.14(5)(b) allows a circuit court to render a judgment, notwithstanding the verdict, “in the event that the verdict is proper but, for reasons evident in the record which bear upon matters not included in the verdict, the movant should have judgment.”

    Justice Ziegler argued that Best Price was entitled to judgment as a matter of law under the JNOV standard of review. In addition, the dissent argued that no jury could reasonably infer that the parties agreed on a place of payment, as the majority suggested.

    “After today, similar small businesses all over the state should be wary of a client’s mere word or handshake, lest their services will go unpaid for. In the future, they ought to get a signed contract requiring payment up-front,” Justice Ziegler wrote.

    Attorneys

    Elissa Bowlin and Brandon Robison of Jacobson Legal Group S.C., Brookfield, represented Erie Insurance Exchange. George Love of Love Law Offices LLC, Waukesha represented Best Price Plumbing Inc.