Court Opinion

ID: 9721091
Source: CourtListenerOpinion
Date Created: 2023-08-26 08:48:17.446613+00
Date Added: 2024-06-11T18:24:23.376706
License: Public Domain

SHIRLEY S. ABRAHAMSON, C.J.
¶ 34. {concurring in part and dissenting in part). I agree with those parts of the majority opinion that conclude that the attorney breached his fiduciary duty and that rescission is therefore warranted.
¶ 35. I dissent from those parts of the majority opinion (including Part III) that conclude that punitive damages are not available in the instant case. I conclude, as did the circuit court, that punitive damages are available in the instant case. I would therefore remand this case to the circuit court to restore the judgment originally entered for punitive damages in the amount of $38,200.
¶ 36. The present case raises two interrelated issues regarding punitive damages.
¶ 37. First, are punitive damages precluded because the plaintiff otherwise proceeded in an action in equity and sought equitable relief, specifically rescission? *277¶ 38. Second, may punitive damages be awarded when the claimant has suffered actual damages but has not sought or received a compensatory award and has not been granted even nominal nonpunitive money damages?
¶ 39. The answer to the second question is important in the context of the first question because in many equitable actions, relief is granted as was done here, without an award of compensatory damages.1
¶ 40. The majority opinion does not address the first question and answers the second question in the negative. I conclude that punitive damages are not precluded in an action in equity and that an award of nonpunitive money damages is not a prerequisite for an award of punitive damages when the claimant has suffered actual damages.
I. History and Purpose of Punitive Damages
¶ 41. My answers to the two questions are informed by the history and underlying purpose of punitive damages. As the majority opinion correctly notes, punitive damages have long been awarded and can be traced back to at least 1784. Majority op., ¶ 23. Similarly, punitive damages were recognized in Wisconsin as early as 1854.2
¶ 42. As their very name implies, the distinct policy rationale of punitive damages is one of punish*278ment rather than payment. Punitive damages are intended to " 'vindicate [a claimant's] right and protect it against future similar invasions,'" majority op., ¶ 23 (quoting Barry v. Edmunds, 116 U.S. 550, 562 (1886)), and" 'to further a state's legitimate interests in punishing unlawful conduct and deterring its repetition,'" majority op., ¶ 24. In this sense, the claimant's receipt of punitive damages is a means to an end, the means of communicating a societal message that the wrongdoer's conduct was of a kind that society will particularly punish. The punitive award is not made to compensate the specific loss but rather to deter similar unlawful future conduct, both by the wrongdoer and by others.3
II. Punitive Damages in Equitable Actions
¶ 43. A key, early Wisconsin case discussing punitive awards in an equitable action is Karns v. Allen, 135 Wis. 48, 115 N.W. 357 (1908). Writing more than 100 years ago, the Earns court noted "a great dearth of authority" on the subject of punitive damages in equitable actions.4 The Karns court concluded, however, that when the applicable statute allowed claimants to elect between a suit at law and a suit in equity and the *279claimants elected an equitable action, they thereby "brought themselves within the rules of equitable actions, and waived the right to recover exemplary [punitive] damages."5
¶ 44. The Karns case can be read narrowly to apply only to cases in which the claimant is statutorily obligated to choose between suing in equity or at law.6 Since the Karns case, the relevant law has changed considerably.7 Wisconsin procedural statutes no longer differentiate between actions at law and proceedings in equity.8 Thus, the statutory basis for Karns has largely been repealed. When Karns was decided, it remained a meaningful distinction for the court to say that claimants had brought their claim "within the rules of equitable actions" and thereby waived rights and remedies available at law, but today that distinction has ceased to have the same importance.9 I see no reason to read the Karns case more broadly than is justified by its facts and its historic and statutory context. Accordingly, Karns should not be read to state that punitive damages may never be awarded in an equitable action.
*280¶ 45. Since 1908, the Wisconsin Supreme Court has not reviewed in other contexts or under modern statutes whether punitive damages are available in equitable actions.
¶ 46. The Wisconsin court of appeals, however, addressed the issue in White v. Ruditys, 117 Wis. 2d 130, 139, 343 N.W.2d 421 (Ct. App. 1983),10 an equitable action in which the circuit court awarded punitive but not compensatory damages. The court of appeals examined authority in Wisconsin and in other states and concluded that a strong current of modern decisions allow punitive damages in equity as well as at law. The court of appeals concluded that a circuit court acting in equity has discretion to award punitive damages.11
¶ 47. The court of appeals in the present case refused to follow the precedent of White v. Ruditys, which is directly on point, even though the court of appeals has no authority to overrule one of its own decisions.12 Instead, the court of appeals reversed the circuit court's award of punitive damages in the present *281case, declaring that the court of appeals in White v. Ruditys had impermissibly declined to follow the controlling precedent of Karns. The court of appeals acknowledged that "[t]here may be good reasons to reexamine Karns," but concluded that "those reasons must be directed to the supreme court."13 White v. Ruditys was decided 75 years after Karns and was a precedential opinion in its own right for another 27 years. It seems to me that overruling White v. Ruditys should have been left to this court.
¶ 48. In my view, the "strong current" of modern law, and the reasons sustaining it, have, if anything, only gained greater strength since White v. Ruditys was decided in 1983. Many contemporary court decisions that have considered whether punitive damages may be awarded in an equitable action have answered this question in the affirmative.14 Their reasoning is persuasive: A court in an equitable action is charged with granting relief that equity and good conscience re*282quire.15 If a legally protected interest has been invaded, and the nature of the conduct warrants the award of punitive damages, why shouldn't the responsible party be penalized? Given the statutory and procedural merger of law and equity, why should a court at law, but not in equity, have the power to impose punitive damages? The award of punitive damages in Wisconsin is now governed by statute, Wis. Stat. § 895.043, which establishes a standard of conduct allowing for punitive damages and a procedure for their award, but draws no distinction between law and equity. The incongruous nature of maintaining such a distinction is even more heightened when one considers that in actions both in law and at equity, conduct causing injury to a legally protected interest has been shown.16 Does society's *283interest in punishing and deterring such harmful conduct turn on the arbitrary and generally anachronistic distinction of the nature of the action through which the injury is vindicated? I do not think that such a distinction can be maintained given the merger of law and equity and the contemporary law of punitive damages.
¶ 49. The historic rule that courts cannot award punitive damages in equitable actions has eroded over the years.17 I conclude that Wisconsin should not adopt or maintain such a blanket rule.
*284III. Actual Damages Requirement
¶ 50. Whether an award of "actual damages" is required for an award of punitive damages has generated much litigation, in large part because the words "actual damages" are subject to numerous meanings in different contexts, and courts have divided on what their proper interpretation should be.18 Actual damages may mean that the claimant was awarded a judgment to recover for actual damages, or it may mean that the claimant sustained a legally compensable injury.19 Competing meanings of "actual damages" have led courts to take a number of different positions on whether compensatory damages are a prerequisite to a punitive damages award.20
*285¶ 51. In Wisconsin, punitive damage awards are permitted when a claimant is awarded even nominal damages.21 If "actual damages" means that compensatory damages are actually recovered, it is difficult to explain why nominal damages will support a punitive damages award while their absence may defeat it. A claimant is not actually compensated for his or her injuries by an award of nominal damages.
¶ 52. From my perspective, the actual damages requirement means that the claimant must establish a cause of action, whether at law or in equity, before punitive damages can be awarded.22 Once there is a valid cause of action and thus a legally cognizable harm, no reason exists to deny punitive damages merely because the claimant's relief is not pecuniary. The question of whether punitive damages are available depends on the nature of wrongdoer's conduct, not on the type of relief sought.23 Indeed, if the wrongdoer's conduct is so harmful or egregious as to warrant the imposition of punitive damages, the very lack of com*286pensatory damages may increase the need for punishment and deterrence.24
¶ 53. I conclude that the failure to recover compensatory damages — actual, presumed, nominal, or otherwise — has no logical bearing on the propriety of a punitive award. The suitability of a punitive damage award should be determined by the usual rule, evaluating the nature of the wrongdoer's conduct. The economic magnitude of the wrongdoing may or may not be properly represented by an award of compensatory damages and the absence of such an award should not raise a categorical bar to punitive damages if the conduct otherwise warrants them 25
¶ 54. For the reasons set forth, I write separately.

 2 John J. Kircher & Christine M. Wiseman, Punitive Damages Law and Practice, § 20.04 at 20-13 (2d ed. 2000) ("Equitable relief does not often include the award of money damages since the results achieved through remedies such as rescission, injunction and reformation usually supply complete relief.").

 McWilliams v. Bragg, 3 Wis. 377 (*424), 382-83 (*430-31), 1854 WL 3450 (1854).

 Trinity Evangelical Lutheran Church v. Tower Ins. Co., 2003 WI 46, ¶ 50, 261 Wis. 2d 333, 661 N.W.2d 789; Mgmt. Comp. Servs., Inc. v. Hawkins, Ash, Baptie, & Co., 206 Wis. 2d 158, 193, 557 N.W.2d 67 (1996); Tucker v. Marcus, 142 Wis. 2d 425, 463, 418 N.W.2d 818 (1988) (Heffernan, C.J., dissenting) ("There is no doubt that the plaintiff is enriched, but this is a byproduct of the plaintiffs role as society's representative. The main goal of punitive damages is to deter outrageous behavior by showing the wrongdoer and other potential wrongdoers that a penalty will have to be paid for such actions."); I The Law of Damages in Wisconsin § 2.6, at 3-4 (Russell M. Ware ed., 5th ed. 2010).

 Karns v. Allen, 135 Wis. 48, 57, 115 N.W. 357 (1908).

 Id. at 59.

 Kircher and Wiseman conclude that there is no suitable explanation or justification for the waiver theory. 2 Kircher & Wiseman, supra note 1, § 20.04, at 20-16.

 Karns v. Allen, 135 Wis. 48, 115 N.W. 357 (1908), was predicated on Wis. Stat. § 3180 (1898), which explicitly distinguished between equitable actions and actions at law. The modern revision of the statute, codified as Wis. Stat. § 823.01 (2007-08) (governing Jurisdiction Over Nuisances) has been substantially changed. The language of Wis. Stat. § 823.01 no longer draws any distinction between law and equity.

 See, e.g., Wis. Stat. § 801.01(2) (2007-08).

 The majority acknowledges, at ¶ 30 & n.28, that the historical distinctions between law and equity "have faded over time.”

 White v. Ruditys, 117 Wis. 2d 130, 343 N.W.2d 421 (Ct. App. 1983), also briefly concluded that "a court of equity has a great deal of flexibility in fashioning its remedy.. .. [T]his includes the awarding of attorney fees." Id. at 142. This statement was overruled by an unpublished decision of the court of appeals. See Nourse v. Marchetta, No. 89-0493, unpublished slip op. (Wis. Ct. App. Dec. 07, 1989).

 The court of appeals cited numerous cases from other jurisdictions, and closely reviewed I.H.P. Corp. v. 210 Central Park South Corp., 228 N.Y.S.2d 883 (App. Div. 1962), aff'd, 189 N.E.2d 812 (N.Y. 1963), the "seminal case adopting the modern view," and cited Dan B. Dobbs, Handbook on the Law of Remedies, § 3.9, at 2.11 (1973), among other authorities supporting its holding.

 Cook v. Cook, 208 Wis. 2d 166, 186-90, 560 N.W.2d 246 (1997).

 Groshek v. Trewin, 2009 WI App 56, ¶ 40, 317 Wis. 2d 730, 768 N.W.2d 62.

 Commonwealth of Ky. Dep't of Ag. v. Vinson, 30 S.W.3d 162, 166 (Ky. 2000) ("The trend throughout this nation is to allow recovery for punitive damages in an equitable action").
Professor Dobbs reports that contemporary decisions allow punitive damages in equitable actions:
The traditional rule was that equity would not award punitive damages, either because equity's sole province was to provide "complete relief," and compensatory damages marked the limit of that relief, or because punishment or vengeance seemed vaguely inappropriate to a "benignant" equity. Though this rule is rejected by contemporary decisions that have addressed it as a serious issue, there are cases that still repeat it.
Dan B. Dobbs, Dobbs Law of Remedies § 3.11(1), at 460 (2d ed. 1993).
*282For a discussion of reasons that equity courts do not award punitive damages, see 2 Kircher & Wiseman, supra note 1, § 20.04.

 "The overall goal of equity [is] to achieve justice between the parties who are subject to its jurisdiction." 2 Kircher & Wiseman, supra note 1, § 20.04, at 20-13.

 For cases adhering to this reasoning and allowing punitive damages in an equitable action, see, e.g., Charles v. Epperson & Co., 137 N.W.2d 605, 618-19 (Iowa 1965); Kennedy v. Thomsen, 320 N.W.2d 657, 659, (Iowa Ct. App. 1982); Tideway Oil Programs, Inc. v. Serio, 431 So. 2d 454, 463-64 (Miss. 1983); Forster v. Boss, 97 F.3d 1127, 1130 (8th Cir. Mo. 1996) (applying Missouri law) ("[A] court of equity may award injunctive relief and actual and punitive damages as an adjunct to its equity jurisdiction."); Madrid v. Marquez, 33 P.3d 683 (N.M. App. 2001); I.H.P Corp. v. 210 Cent. Park S. Corp., 228 N.Y.S.2d 883 (1962); Jones v. Morrison, 458 S.W.2d 434, 438 (Tenn. App. 1970); see also McPeak v. McPeak, 593 N.W.2d 180, 184 (Mich. App. 1999) ("[E]xemplary damages are permissible in both legal and equitable actions where the plaintiff pleads malicious and wilful conduct.").
*283For cases awarding punitive damages in equitable rescission, see, e.g., Medasys Acquisition Corp. v. SDMS, P.C., 55 P.3d 763, 767 (Ariz. 2002) (concluding punitive damages allowable in rescission action to punish the wrongdoer for his conduct); Ind. & Mich. Elec. Co. v. Harlan, 504 N.E.2d 301, 307 (Ind. App. 1987) (stating that "the granting of affirmative equitable relief will support an award of punitive damages"); Capitol Fed. Sav. & Loan Ass'n v. Hohman, 682 P.2d 1309, 1310-11 (Kan. 1984) (allowing punitive damages incidental to equitable relief of rescission); Z.D. Howard Co. v. Cartwright, 537 P.2d 345, 348 (Okla. 1975) (holding that the Uniform Commercial Code's permissive recovery of damages in rescission actions includes punitive damages where breach of contract "is accompanied by fraudulent acts which are wanton, malicious and intentional").
For a collection of cases on the power of an equity court to award punitive damages, see Jay M. Zitter, Punitive Damages: Power of Equity Court to Award, 58 A.L.R. 4th 844 (2010); 2 Kircher & Wiseman, supra note 1, §§ 20.05, 20.06.

 2 Kircher & Wiseman, supra note 1, § 20.06, at 20-25; see also Linda L. Schlueter, Punitive Damages § 4.1(A)(3)(a), at 135-36 (5th ed. 2005):
Although the traditions of equity remain, the practice of denying punitive damages is changing. Thus, the recent trend of court decisions indicates that punitive damages will be allowed in equity as well as at law. The rationale for this modern view is that to do otherwise would subvert the very purpose of the merger of law and *284equity.... Practically speaking, there is no reason to forbid punitive damages in equity actions.
For cases allowing punitive damages in equity actions, see, e.g., Charles v. Epperson & Co., 137 N.W.2d 605, 618-19 (Iowa 1965); Tideway Oil Programs, Inc. v. Serio, 431 So. 2d 454, 463-64 (Miss. 1983); Kennedy v. Thomsen, 320 N.W.2d 657, 659 (Iowa Ct. App. 1982).
For a discussion of punitive damages in equitable actions in Australia, New Zealand, Canada, England, and some American states, see Anthony Duggan, Exemplary Damages in Equity: A Law and Economics Perspective, 26 Oxford J. Legal Stud. 303 (2006).

 For a discussion of actual damages as a prerequisite to a punitive damages award, see 1 Kircher & Wiseman, supra note 1, § 5.21.

 Tucker v. Marcus, 142 Wis. 2d 425, 455-56, 418 N.W.2d 818 (1988) (Heffernan, C.J., dissenting); Dobbs, supra note 14, § 3.11(10), at 512-16.

 For a collection of cases, see Richard C. Tinney, Annotation, Sufficiency of Showing of Actual Damages to Support Award of Punitive Damages—Modern Cases, 40 A.L.R. 4th 11 (1985).

 Jacque v. Steenberg Homes, Inc., 209 Wis. 2d 605, 621, 563 N.W.2d 154 (1997) (action for intentional trespass to land; $1 nominal damages). See also Robison v. Lescrenier, 721 F.2d 1101, 1102 (7th Cir. 1983) (applying Wisconsin law; awarding $10,000 punitive damages with six cents nominal damages).

 "The reason for [a requirement of actual damages] is that it first insures that some legally protected interest has been invaded. It prevents the assessment of punitive damages against one who may have caused damage without legal injury." Village of Peck v. Denison, 450 P.2d 310, 314-15 (Idaho 1969).

 Wis. Stat. § 895.043(3) ("The plaintiff may receive punitive damages if evidence is submitted showing that the defendant acted maliciously toward the plaintiff or in an intentional disregard of the rights of the plaintiff.").

 See Dobbs, supra note 14, § 3.11(10), at 512-16.

 Numerous courts have concluded that an award of compensatory damages is not a prerequisite for an award of punitive damages. See, e.g., Beard v. Flying J., Inc., 116 F. Supp. 2d 1077, 1081 (S.D. Iowa 2000) (applying Iowa law), aff'd in relevant part, 266 F.3d 792, 804 (8th Cir. 2001); Platté v. Whitney Realty Co., Inc., 538 So. 2d 1358, 1360 (Fla. Ct. App. 1989); Nash v. Craigco, Inc., 585 P.2d 775, 778 (Utah 1978); Haskins v. Shelden, 558 P.2d 487, 493 (Alaska 1976); Kennedy v. Thomsen, 320 N.W.2d 657, 659-60 (Iowa 1960).