Waste in Real Estate

Waste in Real Estate

The word waste provides rich imagery for a fertile imagination. Waste is associated with many unsavory expressions: “wasted, waste product, waste away, and go to waste.” From a legal standpoint, however, “waste” is a narrowly defined concept in property law. It means the “unreasonable conduct by the owner of a possessory estate that results in physical damage to the real estate and substantial diminution in the value of the estates in which others have an interest.” https://casetext.com/case/pleasure-time-inc-v-kuss More simply, waste is the destruction of houses or lands by a tenant or holder of a life estate.Committing waste has significant legal consequences. Wisconsin law provides that, if an interference with land constitutes waste, “the court shall give judgment for double the damages found.” Wis. Stat. § 844.19(2). In practice, this statute is rarely used despite being a powerful tool for landowners to recover for damage to their properties. Some examples from case law illustrate the law’s application:

  1. A tenant for life who neglects to pay taxes that accrue after his tenancy commences is liable to an action for waste.
  2. Damage to carpeting and subflooring by a tenant in a residential lease.

In one notable case, Melms v. Pabst Brewing Co., the Wisconsin Supreme delineated the law of waste in a lawsuit concerning a mansion that was demolished. Captain Frederick Pabst (of Pabst Blue Ribbon fame) demolished the Melms’ mansion. Pabst wrongly thought he owned the mansion, but instead had only a life estate. (An estate held only for the duration of specified person’s life, usu. the possessor’s) He was sued for committing waste in tearing down the mansion. The Melms side argued Pabst should compensate them with an amount sufficient to cover the costs of rebuilding the mansion. Pabst argued he had done the Melms side a favor by demolishing the mansion as it detracted from the value of the land. Pabst argued that the mansion had no value because it was surrounded by industry and the best use of the land was for manufacturing. Ultimately, the Wisconsin Supreme Court held that Pabst did not commit waste. The Court poetically explained that:

The evidence shows that the property became valueless for the purpose of residence property as the result of the growth and development of a great city. Business and manufacturing interests advanced and surrounded the once elegant mansion, until it stood isolated and alone, standing upon just enough ground to support it, and surrounded by factories and railway tracks, absolutely undesirable as a residence and incapable of any use as business property. Here was a complete change of conditions, not produced by the tenant, but resulting from causes which none could control. Can it be reasonably or logically said that this entire change of condition is to be completely ignored, and the ironclad rule applied that the tenant can make no change in the uses of the property because he will destroy its identity?

After the Melms’ decision, the courts now assess whether the change to the property was economically advantageous. Although the law of waste is archaic in origin, it is still relevant today. Property owners whose interests are harmed by tenants should consider bringing a claim for waste if their property is substantially damaged by the unreasonable conduct of a tenant.

If you ever find yourself in a situation like this please contact our experienced attorneys, they have the expertise and drive to help you with your case.

U.S. Supreme Court Votes Unanimously On Tax Lien Case

U.S. Supreme Court Votes Unanimously On Tax Lien Case

There are many cases decided by the U.S. Supreme Court that receive scant attention from the public. Despite ideological divisions among the justices, it is not uncommon for the Court to vote 9-0 in case. In the case of Tyler v. Hennepin County, Minnesota, the Court issued a unanimous decision concerning the constitutionality of a tax lien foreclosure.

Geraldine Tyler owed $15,000 in unpaid real estate taxes on a condominium she owned in Hennepin County, Minnesota. The County seized the condomin and sold it for $40,000, keeping the $25,000 excess over what Tyler owed in unpaid taxes. Tyler argued the windfall to the County was unconstitutional in violation of the Takings Clause of the Fifth Amendment. The Takings Clause provides that “private property [shall not] be taken for public use, without just compensation.” U. S. Const., Amdt. 5. The question the Court concerned itself with was whether the surplus funds from the sale of the condominium are protected from uncompensated appropriation by the County. The Court’s analysis provided a history lesson in our English common law roots:

Parliament gave the Crown the power to seize and sell a taxpayer’s property to recover a tax debt, but dictated that any “Overplus” from the sale “be immediately restored to the Owner.” 4 W. & M., ch. 1, §12, in 3 Eng. Stat. at Large 488–489 (1692). As Blackstone explained, the common law demanded the same: If a tax collector seized a taxpayer’s property, he was “bound by an implied contract in law to restore [the property] on payment of the debt, duty, and expenses, before the time of sale; or, when sold, to render back the overplus.” 2 Commentaries on the Laws of England 453 (1771).

Ultimately, the Court held that “Tyler has plausibly alleged a taking under the Fifth Amendment,” reasoning that a “taxpayer who loses her $40,000 house to the State to fulfill a $15,000 tax debt has made a far greater contribution to the public fisc [treasury] than she owed.” Wisconsin’s law on foreclosure of tax liens, Wis. Stat. § 75.521, is similar to the law that was challenged in Tyler. While the Wisconsin law is still on the books, a challenge to its constitutionality seems inevitable.

If you have any questions about tax liens or foreclosures, please discuss it with one of our experienced real estate or tax attorneys.

The Catch With An Account Stated

The Catch With An Account Stated

“An account stated is an agreement between a debtor and a creditor that the items of a transaction between them are correctly stated in a statement rendered, that the balance shown is owed by one party to the other and that the party has promised to pay that balance to the other.”[1] Put simply, this means that if a party claiming to be owed money sends a statement showing a balance owed and the other party does not object, that party may be responsible for the amount stated. Even more simply, this means that if there is a dispute over the amount claimed to be owed in a statement, the party receiving the statement should immediately object. The objection should be in writing and specific. Silence in the face of an account stated is not golden.

Wisconsin law informs us that in an action on an account stated, “the retention of a statement of an account by a party without making an objection within a reasonable time is evidence of acquiescence in or assent to the correctness of the account.”[1]  Said differently, an implied agreement to pay may be presumed from such retention. In addition, an account stated may arise where a debtor makes a partial payment on an account or accompanies partial payment with an agreement to pay the balance.[2]

To illustrate the legal theory of account stated in action, let’s briefly examine the Wisconsin case of Stan’s Lumber v. Fleming. Naturally, Stan’s Lumber sells lumber. Mr. Fleming inquired whether Stan’s Lumber would provide building supplies for a home he was intending to build. Stan’s Lumber provided Fleming with a credit application which he completed and was approved by Stan’s Lumber. Shortly thereafter, Fleming began purchasing the materials from Stan’s Lumber. Stan’s Lumber regularly billed him for the materials. Fleming made some payments, but then stopped. At that time, Stan’s Lumber claimed an account balance of $33,200.99. Stan’s Lumber then continued to bill him for this balance plus the accrued financing charges. Importantly, after payments stopped, Fleming told Stan’s Lumber to be patient regarding payment, but failed to object to the account balance.

The court concluded that the evidence demonstrated a classic account stated scenario. In ruling for Stan’s Lumber, the court reasoned:

(1) Stan’s and Fleming formed an initial agreement for an “open account:”

(2) Fleming ordered materials on the account:

(3) Stan’s delivered the materials:

(4) Stan’s billed for the materials: and

(5) Fleming made payments on the account without objection. This evidence afforded a solid basis for the jury’s answer that, an account stated existed between Stan’s and Fleming.

In conclusion, the essence of an account stated claim is not the presence of a dispute between the parties as to a stated balance, but rather the failure of the debtor to object to the account, disputed or not, within a reasonable time. Ultimately, Fleming’s failure to object to the account balance resulted in his loss at trial. The takeaway is that a timely objection to an account statement with a disputed balance will go a long way to defeat a claim based on the theory of account stated.

[1] Onalaska Elec. Heating, Inc. v. Schaller, 94 Wis. 2d 493, 288 N.W.2d 829 (1980).

[2] Lepp v. Tamer, 1 Wis. 2d 193, 83 N.W.2d 664 (1957).

 

 

Going It Alone In Court

Going It Alone In Court

Individuals have a right to self-representation in Wisconsin courts and in federal court.[1]  Pro se is Latin for “on one’s own behalf.” When a litigant proceeds without legal counsel, they are said to be proceeding “pro se.” See, e.g. Rivera v. Florida Department of Corrections, 526 U.S. 135 (1999). Although proceeding pro se is allowable, that does not mean it’s advisable.

The proliferation of legal self-help books such as Law for Dummies and Free Legal Help Made E-Z create the perception that anyone can successfully self-represent no matter how complicated the case. This, in turn, plays into the overconfidence effect, which biases our judgment in three ways: “(1) overestimation of one’s actual performance; (2) over placement of one’s performance relative to others; and (3) over precision in expressing unwarranted certainty in the accuracy of one’s beliefs.”[2]   Overconfidence can be dangerous.  No self-help book would convince a logical person to perform an invasive surgery on themselves. Although the risks of self-representation are less drastic, the likelihood of failure is equally high.

In court, the self-represented are bound by the same rules that apply to attorneys. The right to self-representation is “[not] a license not to comply with relevant rules of procedural and substantive law.”[3] While some leniency may be allowed to pro se litigants, “neither a trial court nor a reviewing court has a duty to walk pro se litigants through the procedural requirements or to point them to the proper substantive law.”[4]   A court’s patience will run thin quickly if a pro se litigant fails to follow the rules. As one commentary states: “Although the court may make special concessions in certain pro se appeals, it cannot be said that pro se appellants have any advantage over appellants who are represented by counsel. Whatever minor procedural deviations are allowed, a pro se appellant cannot compensate for the lack of legal training and therefore has a greatly reduced likelihood of success on appeal.”[5]

Based on the “greatly reduced likelihood of success,” most lawyers would never recommend that someone proceed without assistance of counsel. However, there are certain situations where it is a viable option. For instance, given the lower stakes in small claims action and the fact that small claims courts routinely deal with unrepresented parties, small claims court can be an acceptable arena for proceeding pro se. The Wisconsin courts’ website publishes free legal forms for small claims. [6]  

In short, there are a lot of factors that influence the decision of whether to retain an attorney or go it alone. If you have any self doubt  about self-representation then you should seek professional legal advice.

[1] A “corporation must be represented by a licensed lawyer in a legal proceeding other than in small claims court. See Wis. Stat. § 799.06.” Jadair Inc. v. United States Fire Ins. Co., 209 Wis. 2d 187, 198, 562 N.W.2d 401, 405 (1997). The right to appear pro se in a civil case in federal court is defined by statute 28 U.S.C. § 1654.

[2] https://en.wikipedia.org/wiki/Overconfidence_effect

[3] Farretta v. California, 422 U.S. 806, 834 n.46 (1975).

[4] Waushara County v. Graf, 166 Wis. 2d 442, 451, 480 N.W.2d 16 (1997).

[5] D. Walther, P. Grove, M. Heffernan, Appellate Practice and Procedure in Wisconsin, Ch. 11, sec. 11.9 (1986).

[6] https://www.wicourts.gov/forms1/circuit/ccform.jsp?page=3&FormName=&FormNumber=&beg_date=&end_date=&StatuteCite=&Category=51; https://www.wicourts.gov/services/public/selfhelp/docs/countylegalresources.pdf

Spoliation of Evidence

Spoliation of Evidence

Spoliation is the “intentional destruction, mutilation, alteration, or concealment of evidence.”[1] The legal maxim In odium spoliatoris omnia praesumuntur means “all things are presumed to the prejudice of the despoiler.” If a potential litigant or party destroys, alters, or loses evidence in a manner that constitutes spoliation, a court may impose sanctions for the spoliation of that evidence.

To decide whether spoliation has occurred, a court will consider three factors: 1) the relationship of the evidence to the case; 2) the extent to which it is lost/damaged and 3) whether the party accused of spoliation knew or should have known that the evidence could be used in potential litigation. The case of Cody v. Target Corp.[2] is instructive as to what sanction should be meted out when a party spoliates evidence. In this case, a customer purchased what was thought to be an inflatable mattress from Target. Upon opening the box, the customer did not find an inflatable mattress, but instead some type of noxious gas container/device. Cody immediately returned the box to Target, but her family members began getting ill. Soon thereafter, Target disposed of the items. Following their lawsuit, the customers moved for spoliation sanctions. The circuit court imposed sanctions on Target finding liability and denying Target a causation defense.

It is important that parties involved in the spoliation of evidence are held accountable. As one court aptly put it: “Aside perhaps from perjury, no act serves to threaten the integrity of the judicial process more than the spoliation of evidence. Our adversarial process is designed to tolerate human failings — erring judges can be reversed, uncooperative counsel can be shepherded, and recalcitrant witnesses compelled to testify. But, when critical documents go missing, judges and litigants alike descend into a world of ad hocery and half measures — and our civil justice system suffers.”[3]

Understanding your duties regarding the preservation of evidence is critical. As soon as a legal dispute arises, it is paramount that you take steps to preserve evidence and that you take steps to hold others accountable for preserving evidence. For this reason, it is important that you seek the advice of one of our experienced attorneys who has previously dealt with issues of spoliation.

[1] Black’s Law Dictionary 1409 (7th ed. 1999).
[2] 2013 WI App 94, 349 Wis. 2d 525, 825 N.W.2d 290 – an unpublished decision (citable for persuasive value).
[3] Keithley v. The Home Store.com, Inc., 2008 U.S. Dist. LEXIS 61741 (N.D. Cal. Aug. 12, 2008), quoting United Medical Supply Co. v. United States, 77 Fed. Cl. 257, 258-59 (Fed. Cl. 2007).