Gene Frederickson Trucking & Excavating, Inc. v. Wagner
Docket: Appeal No. 2018AP436
Court: Court of Appeals of Wisconsin; April 23, 2019; Wisconsin; State Appellate Court
Frederickson appeals a judgment that dismissed its civil conspiracy and "prima facie tort" claims against defendants associated with Wagner 22, LLC, collectively referred to as the "Wagner Group." Frederickson argues that its complaint adequately alleged a conspiracy to facilitate a bank foreclosure, which extinguished its junior lien on a property. However, the court affirmed the dismissal, determining that Frederickson did not demonstrate any unlawful conduct by the Wagner Group and noted that Wisconsin law does not recognize "prima facie tort" as a basis for civil liability.
Background details include Frederickson's role as a contract trucking and excavation company, which was owed $242,222.92 from 22 Shawano, LLC and Northwoods Development Group, LLC for unpaid services. After securing a judgment in 2005 against these entities, Frederickson received no payment. Meanwhile, 22 Shawano had secured $3.87 million in loans from Anchor Bank, guaranteed by Howard Wagner and Daniel Decaster, but defaulted. In 2014, Anchor Bank initiated foreclosure proceedings, while Frederickson filed a collection action in 2015, which was hindered by the foreclosure.
Wagner 22, formed by Wagner and Decaster, acquired Anchor Bank's rights and purchased the property at a sheriff's sale for $2 million, extinguishing Frederickson's junior lien and leading to the dismissal of Frederickson's collection action. Frederickson's current claims allege that the Wagner Group conspired to default on the loans intentionally, leading to the foreclosure and the loss of its lien through the property sale.
The Wagner Group filed a motion to dismiss Frederickson's complaint, arguing it failed to state a valid claim for civil conspiracy. They contended that Frederickson did not identify any wrongful acts that would substantiate a conspiracy claim and that the claim of "Liability for Intended Consequences" was not recognized under Wisconsin law, particularly when actions taken were lawful. The circuit court granted the motion and dismissed the complaint, declining to create a new tort liability and stating that any claims regarding the foreclosure's inequity should have been addressed in prior proceedings. Frederickson appealed this decision.
The legal standard for a motion to dismiss assesses the complaint's legal sufficiency, with courts accepting the alleged facts as true for review. Civil conspiracy in Wisconsin requires three elements: 1) the formation of a conspiracy, 2) wrongful acts conducted under the conspiracy, and 3) damages resulting from those acts. Frederickson contends that the Wagner Group misinterpreted the civil conspiracy claim, asserting that their argument does not challenge the lawfulness of the foreclosure itself but rather criticizes the entire scheme, including deliberate default and property buyback, as wrongful. Frederickson differentiates between "unlawful" and "wrongful," suggesting that actions can be lawful yet still intended to cause harm, thus constituting wrongful conduct.
Frederickson's civil conspiracy claim was dismissed because it lacked any legal authority demonstrating that lawful actions could constitute a "wrongful" result sufficient for such a claim. Wisconsin courts typically equate "wrongful" with "unlawful" in the context of civil conspiracy, requiring that actions taken in furtherance of the conspiracy violate a recognized legal norm. Notably, an unlawful act need not be criminal; any willful violation of a civil right suffices. The court referenced several cases illustrating that actions must be shown to be illegal or wrongful to support a conspiracy claim. In this instance, Frederickson's allegations centered on lawful actions, including a deliberate mortgage default and the establishment of a new entity by former property owners, which were not deemed unlawful. Additionally, Frederickson's assertion that the Wagner Group's intent to extinguish its junior lien constituted an unlawful purpose was rejected, as extinguishing a junior lien is a common legal practice. The court concluded that the complaint did not adequately state a civil conspiracy claim based on the facts presented.
Frederickson's complaint fails to establish a claim for "liability for intended consequences" or "prima facie tort," as Wisconsin law does not recognize this cause of action. While referencing the RESTATEMENT (SECOND) OF TORTS, which allows for liability if intentional harm is caused under culpable conduct, the court notes that adopting a new form of tort liability is outside its purview and is the responsibility of the Wisconsin Supreme Court. Consequently, Frederickson's claim is insufficient as current law does not support it. The court affirmed the judgment, stating that the dismissal of claims against Wagner and Decaster was not contested in the appeal. The circuit court's rationale regarding claim preclusion was not addressed due to the legal insufficiency of the complaint. Additionally, both parties were admonished for procedural violations related to party designations and citation of unpublished opinions. Frederickson's new argument regarding unlawful acts related to loan agreements was not considered, as it was raised for the first time in a reply brief and lacked the necessary standing since he was not a party to those contracts.
