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Monday, May 7, 2012

Wisconsin Supreme Court Addresses Two-Party Checks from Insurers

Wisconsin_welcome_signOn May 3, 2012, Wisconin's Supreme Court affirmed a jury verdict in favor of the insurer in Best Price Plumbing Inc. v. Erie Insurance Exchange.  Unfortunately, the judgment turned on a procedural matter -- Best Price apparently did not raise its winning argument until after trial, when it sought a judgment notwithstanding the verdict and thus in the eyes of the majority forfeited the argument.  A full run-down of the case is available from the wonderful State of Wisconsin Bar site. We provide a shorter synopsis.

Best Price did some plumbing work and was entitled to $9000 for its efforts.  Erie Insurance (Erie) issue a two-party check, which was endorsed over to the insured and deposited in the insured's account.  How it got there remains unclear, but in any case Best Price was never paid.  According to the only testimony available, the check was delivered to a mysterious "handyman" who was directed to give it to Best Price for endorsement, but Best Price claims that the endorsement never occurred and was never authorized.

A jury found that the two-party check satisfied Erie's obligations under the contract.  In its post-verdict motion, Best Price relied on Kenosha Home Telephone Co., 158 Wis. 371, 148 N.W. 877 (1914),  in which the Court held that 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.  As that did not occur here, Erie had breached.  The trial court bought the argument, but the intermediate appellate court reinstated the jury's verdict.

The Supreme Court affirmed.  Refusing to speculate about how the jury would have ruled had it been instructed about the rule from Kenosha Home Telephone, the court ruled that any objection to the jury instructions had been forfeited.

Two Justices dissented pointing out that the motion at issue was for a judgment notwithstanding the verdict and that such motions do not challenge the sufficiency of the evidence but contends that judment should be awarded to the moving party on grounds other than those decided by the jury.

The dissenters also noted the real-world consequences of the decision: 

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.

[JT}

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