Opinion ID: 1291934
Heading Depth: 2
Heading Rank: 2

Heading: Frivolous Answer and Counterclaim

Text: ¶10 The Denomies first challenge the circuit court judgment concluding that their answer and counterclaim were frivolous. They argue that while the circuit court based its determination of frivolousness on the lack of evidence tending to show that the Denomies were the owners of the property, they were not arguing that they were the owners. Rather, their position was that there was evidence in the record found by the circuit court to be entirely credible or stipulated to by counsel that supports their contention that there was no meeting of the minds between Howell and the Denomies to create a mortgage. The Denomies point to several pieces of evidence: (1) the stipulation that the Denomies did not sign the note, mortgage or amortization schedule at the closing; (2) Brommerich's testimony that he did not believe the Denomies received any paperwork following Howell's closing on the property; (3) the circuit court's finding that the Denomies had reported the payments they received from Howell as rent on their income tax returns; and (4) the finding that Orrin Denomie's testimony was confused, rather than finding that either defendant was intentionally making misrepresentations. The Denomies argue that because this evidence supports their position, their answer and counterclaim cannot be found to be frivolous. ¶11 We reject the Denomies' argument. While they cite to language by the circuit court that it found there's no basis. . . that [the Denomies] had any ownership in this house for the proposition that the circuit court erroneously focused on the idea that the Denomies did not own the property rather than the theory put forth by the Denomies that there was no meeting of the minds regarding a mortgage agreement, examination of the circuit court's statements at trial and its final judgment show that the circuit court explicitly found there was indeed a mortgage agreement between Howell and the Denomies. In its oral ruling, the circuit court stated, It appears from Mr. Brommerich's credible testimony that a check was given, a mortgage note and mortgage was filed, indicating what the agreement was. . . . [Orrin Denomie was] present at everything. . . [s]o he knew exactly what was going on. The findings of fact stated, Defendants, jointly and severally, made a mortgage loan to plaintiff for the purchase of the residence. Further support for the frivolous nature of the Denomies' argument is apparent when one asks the question: If the Denomies claim not to be owners and they claim not to be mortgagees, what did they get for the money they paid at closing? Additionally, if they were not claiming that they owned the property, how could they claim that what Howell paid them was rent? ¶12 Next, we address the Denomies' argument that there was evidence in the record found by the circuit court to be entirely credible or stipulated to by counsel that supports their argument that there was no meeting of the minds, therefore making it impossible as a matter of law for the answer and counterclaim to be frivolous. They rely on Stern for the proposition that a determination of frivolousness cannot be based on a failure of proof, which they argue is the case here, but rather requires that there be no set of facts which could satisfy the elements of the claim, Stern, 185 Wis. 2d at 243-44. ¶13 The Denomies misconstrue the language in Stern. While we agree with Stern that one way a claim could be frivolous is if a party knows or should reasonably know that the facts necessary to meet the required elements of an allegation are not present and cannot be produced, id. at 244, that does not mean that presenting some evidence that is wholly insufficient to support a claim causes the claim to become nonfrivolous. As we have previously stated, a claim is frivolous if the party or attorney knew or should have known that the claim was without any reasonable basis in law or equity and could not be supported by a good faith argument for an extension, modification or reversal of existing law. ¶14 Our de novo evaluation of the facts found by the circuit court show that there is a mountain of evidence demonstrating that Howell was the owner of the property, that he and the Denomies entered into a mortgage agreement, and that the Denomies were aware of this, yet proceeded with their answer and counterclaim. Given what the circuit court found the Denomies knew or should have known regarding the transaction, the Denomies' initial position that Howell defrauded them out of ownership in the property and fabricated the mortgage was without any reasonable basis in law or equity. ¶15 The record overwhelmingly shows that the Denomies were aware of the transactions taking place. They were present at the closing and Brommerich testified that they witnessed the documents being signed. The Denomies incorrectly cite Brommerich's testimony to state that the Denomies never received any paperwork from the closing, as he stated that while he could not positively say whether the Denomies received a copy of the promissory note, it was the bank's policy to give copies, and in any case, Orrin Denomie testified that Howell gave them the documents a day or two after the closing. Howell testified that he paid the real estate taxes, flood insurance and property insurance on the property, and that even though he made numerous improvements to the property that the Denomies were aware of, including the addition of a deck, he never sought approval to make these improvements. The Denomies accepted the payments of $63,291.34 and $687.40 that were inconsistent with the rental relationship that the Denomies claimed existed. Given all of this evidence that was known to the Denomies, we agree with the circuit court and the court of appeals that the Denomies' answer and counterclaim were frivolous. [6]