Opinion
No. 04-1322.
Opinion Filed: October 14, 2004. Order Withdrawn: November 2, 2004.
APPEAL from an order of the circuit court for Wood County: EDWARD F. ZAPPEN, JR., Judge. Reversed and cause remanded with directions.
Before Deininger, P.J., Dykman and Higginbotham, JJ.
.
Glenn Busche, d/b/a Bee-Line Auto Parts Service, appeals a summary judgment in favor of Heritage Bank, formerly Spencer Bank. Busche claims the circuit court erred by concluding that Heritage's holder in due course affirmative defense applied to the undisputed facts of this case; Busche argues the holder in due course defense is not available to Heritage in his causes of action against the bank. We agree and reverse the circuit court's summary judgment.
FACTS
¶ 2 This action was originally filed by Associated Bank against Busche, primarily seeking replevin of a truck scale. Busche in turn filed a third-party complaint against Heritage, alleging negligent misrepresentation and unjust enrichment. The following facts led to these causes of action.
¶ 3 Busche owns and operates a small auto parts, recycling and scrap metal business named Bee-Line Auto Parts Service. Christopher Burt, not a party to this action, owned an interest in a number of different limited liability companies (LLCs). Associated Bank held a mortgage on real estate owned by one of Burt's LLCs. Heritage holds a mortgage on other real estate owned by another of Burt's LLCs and has a security interest in certain machinery and equipment owned by one of Burt's corporations.
¶ 4 In December 2001, Busche bought a heavy-duty Mettler Toledo truck scale from Burt's corporation for $15,000. Burt advised Busche that Heritage held a security interest in this scale. Both Burt and Heritage believed the scale was included among personal property pledged to secure Burt's loan from Heritage. Busche, in an attempt to ensure he was acquiring the scale free and clear of liens, contacted Heritage's president, Randy Malueg, to determine the existence of any other liens on the scale. Busche testified at his deposition that Malueg informed him there were no other liens on the scale; Malueg denies he made this representation.
¶ 5 After Busche's discussion with Malueg about the existence of other liens, Busche had two checks delivered to Burt's corporation, one for $14,000 and one for $1,000. Burt endorsed the $14,000 check over to Heritage. Heritage provided Burt with a written release of its lien on the scale to be given to Busche. Burt and Busche then entered into a written agreement whereby the scale remained on Burt's real estate to be used for the benefit of both businesses.
¶ 6 In 2001, Associated Bank began a foreclosure on the real estate where the scale was kept. In summer 2002, Busche made arrangements to have the scale removed shortly before the sheriff's sale. When Associated Bank became aware of Busche's intent to remove the scale, it claimed the scale was a fixture on the real estate and not personal property. This dispute was not resolved and Busche removed the scale before the sheriff's sale. Heritage was not involved in the dispute over the scale between Busche and Associated Bank.
¶ 7 Associated Bank filed this replevin action against Busche seeking return of the scale. Associated Bank moved for summary judgment, seeking a declaration that the scale was a real estate fixture and not personal property. The circuit court agreed with Associated Bank and granted partial summary judgment, declaring the scale to be a fixture of the real estate. In May 2003, Busche filed a third-party complaint against Heritage, alleging that Heritage negligently misrepresented a fact to Busche that induced him to pay $15,000 for the scale and that Heritage had been unjustly enriched by receiving $14,000 of the $15,000; Busche sought recovery of the $14,000. Heritage's amended answer raised a "holder in due course" affirmative defense.
¶ 8 Heritage moved for summary judgment on November 26, 2003. After oral arguments, the circuit court denied Heritage's motion. Heritage moved for reconsideration. Upon reconsideration, the circuit court reversed itself and granted summary judgment to Heritage. Busche appeals the summary judgment dismissing his claims against Heritage.
DISCUSSION
¶ 9 We review summary judgments independently, employing the same methodology as the circuit court. Mid Wisconsin Bank v. Forsgard Trading, Inc. , 2003 WI App 186, ¶ 8, 266 Wis. 2d 685, 668 N.W.2d 830. We will affirm the circuit court's order granting summary judgment only if the record demonstrates that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Id. ; also WIS. STAT. § 802.08(2) (2001-02). We conclude that Heritage is not entitled to judgment as a matter of law.
All references to the Wisconsin Statutes are to the 2001-02 version unless otherwise noted.
¶ 10 The material facts necessary to resolve the specific issue before us are not in dispute. Busche alleged in his third-party complaint that Heritage Bank negligently misrepresented "to Busche that [Heritage] had the only security interest on the scale and that [Heritage] would release its interest in the scale upon receipt of $14,000." Busche also alleged that Heritage was unjustly enriched because of the misrepresentation. Heritage's defense to Busche's allegations is that it is a holder in due course of the $14,000 check that Busche gave to Burt in partial payment for the scale.
¶ 11 Busche first argues that "[t]he holder-in-due-course doctrine does not bar all causes of action against a bank when such causes are based upon alleged tortious conduct by the bank or when the result of dismissal would be entirely inequitable." In the alternative, Busche argues "[e]ven if holder-in-duecourse were applicable to this case summary judgment was inappropriate because material issues of fact existed as to whether Heritage's direct dealings with Busche constitute a violation of the good faith requirement of the holder-in-due-course doctrine." We conclude that based on the undisputed facts of record that the holder in due course affirmative defense is not available to Heritage on claims of negligent misrepresentation and unjust enrichment.
Because we agree with Busche's first contention, that the holder in due course defense is not applicable under the current set of circumstances, we need not address his second contention, as cases should be decided on the narrowest grounds possible. State v. Blalock , 150 Wis. 2d 688, 703, 442 N.W.2d 514 (Ct.App. 1989). If a decision on one point disposes of the appeal, we will not decide the other issues raised. Gross v. Hoffman , 227 Wis. 296, 300, 277 N.W. 663 (1938).
¶ 12 Wisconsin adopted the Uniform Commercial Code (U.C.C.) in 1963 and is now codified at WIS. STAT. chs. 401-411. United Catholic Parish Sch. v. Card Servs. Ctr. , 2001 WI App 229, ¶ 8, 248 Wis. 2d 463, 636 N.W.2d 206. WISCONSIN STAT. § 403.305 provides that a holder in due course takes a negotiable instrument free from any claims and defenses of persons with whom the holder has not dealt. Also Jackson v. DeWitt , 224 Wis. 2d 877, 890, 592 N.W.2d 262 (Ct.App. 1999).
¶ 13 WISCONSIN STAT. § 403.302 "sets forth how holder in due course status is achieved and the results which flow from that status." United Catholic Parish Sch. , 248 Wis. 2d 463, ¶ 9. "In order to encourage the use of negotiable instruments in commercial transactions, a holder in due course is insulated from nearly all claims of any party." Id. WISCONSIN STAT. § 403.302 establishes strict criteria for determining whether one is a holder in due course. A holder in due course is a holder who takes an instrument for value, in good faith and without notice that the instrument is overdue or has been dishonored or of any defense against or claim to it on the part of any person. WIS. STAT. § 403.302(1); also Vesely v. Security First Nat'l Bank of Sheboygan Trust Dep't , 128 Wis. 2d 246, 252, 381 N.W.2d 593 (Ct.App. 1985); United Catholic Parish Sch. , 248 Wis. 2d 463, ¶ 11. However, a holder in due course does not take an instrument free from the defenses of any party to the instrument with whom the holder has dealt. Vesely , 128 Wis. 2d at 254.
¶ 14 Applying these principles we conclude as a matter of law that the holder in due course affirmative defense is not available to Heritage in this case. According to Busche, he talked with Malueg of Heritage in an effort to confirm Burt's claim that Heritage possessed a lien on the truck scale. Busche alleges that Malueg informed him there were no other liens on the scale. Heritage denies Malueg made this representation to Busche. However, Heritage does not dispute that Busche spoke directly with Malueg regarding Heritage's lien on the scales. Consequently, because Busche alleges Heritage dealt with him prior to negotiating the check from Busche to Burt, the holder in due course defense is not available to Heritage. See Vesely , 128 Wis. 2d at 254.
¶ 15 In addition, Busche's complaint against Heritage does not challenge the issuance or seek enforcement of a negotiable instrument. Busche alleges negligent misrepresentation on the part of Heritage and the resulting gain by Heritage at Busche's expense. These claims have nothing to do with the instrument that passed from Busche to Burt to Heritage. What is at issue is the representation made by Malueg which Busche claims he relied on in deciding to complete the transaction with Burt for the truck scale. Busche's claims do not relate at all to any defect relating to the instrument.
WISCONSIN STAT. § 401.103 provides as follows:
Unless displaced by the particular provisions of chs. 401 to 411 the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its provision.
(Emphasis added.)
CONCLUSION
¶ 16 We conclude the circuit court erred by granting Heritage's summary judgment motion. The holder in due course defense does not apply because Busche dealt directly with Heritage and also does not apply to the claims alleged by Busche which arise from Heritage's dealings with Busche. We therefore reverse the summary judgment and remand for further proceedings consistent with this opinion.
By the Court. — Order reversed and cause remanded with directions.