Family Farm Protected by Wisconsin Supreme Court Decision

A dairy farm included a 300-acre parcel desirable for residential and commercial development. The farmers obtained financing for their dairy operation from a private individual. He persuaded them to sign an Option to Purchase, which gave him the right to purchase the entire 300-acre parcel for $300,000, an amount well below market value. The financier later asserted that, due to his financial assistance, he owned a one-half interest in the land. He demanded the farmers sign a deed transferring that interest. The farmers refused.

The financier sued the farmers, seeking to enforce the Option. The farmers sought Bakke Norman’s assistance to present their claim that the financier used fraud to get them to sign the Option. We commenced a second lawsuit against the financier stating the farmers were the sole owners of the 300-acre parcel and requesting damages for the fraudulent misrepresentations the financier made to persuade them to sign the Option.

The financier’s lawsuit went to trial first. After about two weeks of testimony, the judge ruled the farmers were the sole owners of the land and that the Option was of no effect. Later, the farmers’ case was tried. The financier raised a number of defenses, including that by electing to rescind the Option contract in the first case, the farmers could not receive money damages in the second case.

The jury found in the farmers’ favor and awarded them $774,000 in total damages. The financier appealed to the Wisconsin Court of Appeals, which reversed the damage award. We asked for review by the Wisconsin Supreme Court. The Supreme Court accepted the case and found in the farmers’ favor. The Supreme Court’s decision clarified important legal standards in Wisconsin in three areas: (1) whether a person can obtain both rescission of a contract and damages (“election of remedies”); (2) whether a person can bring a separate lawsuit on the same facts on which they have already been sued (“permissive vs. mandatory counterclaims”); and (3) whether damages beyond those called for in a contract can be awarded where fraud led to the signing of the contract (“the fraud in the inducement exception to the economic loss doctrine”). More importantly, the farmers’ damage verdict was reinstated, and they were able to keep their family farm.

The Wisconsin Supreme Court’s decision can be read here.