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Parsons v. Associated Banc-Corp.

Court of Appeals of Wisconsin, District I

May 10, 2016

Taft Parsons, Jr. and Carol Parsons, Plaintiffs-Appellants,
v.
Associated Banc-Corp, Defendant-Respondent, XYZ Insurance Company, Defendant.

APPEAL from an order of the circuit court for Milwaukee County: Cir. Ct. No. 2011CV8389 JEFFREY A. CONEN, Judge.

Before Curley, P.J., Kessler and Brennan, JJ.

KESSLER, JUDGE

¶1 Taft and Carol Parsons (the Parsons)[1] appeal a non- final order of the circuit court granting Associated Banc-Corp's (the bank) motion to strike the Parsons' jury demand.[2] The circuit court concluded that Taft knowingly and voluntarily waived the Parsons' right to a jury trial because he signed several loan documents provided by the bank, one of which waived the right to have a jury resolve any claims against the bank "arising out of or in any way related to this document, any other related document, or any relationship between the borrower and the lender." (Emphasis added.) For reasons we explain below, we reverse and remand for a jury trial.

BACKGROUND

¶2 This case involves a home equity loan and a construction loan obtained by the Parsons from State Financial Bank[3] for the construction of the last half of a townhouse project in Milwaukee. The facts asserted here are taken from the complaint, an affidavit submitted by Taft Parsons, and the loan documents submitted by the bank, all of which are in the record before us. The Parsons' civil suit against the bank alleges that the bank violated Wisconsin's anti-racketeering statute, W . S . § 946.83(1) (2013-14), and that the bank negligently hired, IS TAT [4] trained, and supervised Aaron Moeser, the loan officer managing the Parsons' construction project. According to the complaint, Moeser was convicted in federal court for fraudulent activity stemming from a loan scandal that involved remarkably similar facts to those alleged here.

The Construction Project and Loan Documents

¶3 In 2002, the Parsons wanted to convert the rundown houses in their Milwaukee neighborhood into a townhouse project. The project was to consist of a row of twelve townhouses called the Stark Street Rowhouses. The Parsons' plan included razing their own home and building the first six townhouses on the adjacent lots they owned. The Parsons successfully constructed the first six townhouses.

¶4 The Parsons discussed their plan to construct the next six townhouses with an acquaintance, Joseph Bowles, the vice president of Central City Construction (CCC). The Parsons asked Bowles if CCC would be the general contractor for the project. Thereafter, Bowles introduced the Parsons to Michael Woyan, the founder and head of an organization called People's Action Redevelopment Commission.

¶5 Woyan told the Parsons that he would try to find bank funding for the Parsons' remaining six townhouses. Shortly thereafter, Woyan presented the Parsons with two loan commitment letters already signed by Moeser, on behalf of State Financial Bank. One letter was for a home equity loan in the amount of $40, 000. The other letter was for a construction loan in the amount of $774, 000. The Parsons signed these contracts. Three months later, the Parsons and CCC executed a "Standard Form of Agreements Between Owner and Design/Builder, " which divided the construction project into multiple phases and assigned a budget to each phase.

¶6 During the next six or seven months, CCC failed to complete any part of the "Owner and Design/Builder" agreement. Approximately seven months after the "Owner and Design/Builder" agreement was signed, Woyan, Moeser, and Bowles presented the Parsons with multiple loan documents to sign. The complaint alleged that the Parsons were not allowed any time to review the documents or consult with an attorney before signing, and that Moeser threatened to withdraw the construction loan if Taft did not promptly sign the documents.

¶7 The package of documents Moeser, Woyan, and Bowles demanded Taft sign consisted of nearly thirty pages of various pre-printed forms. The package included: (1) a Construction Disbursement Agreement; (2) a Promissory Note; (3) the Construction Loan Agreement; (4) the Closing Statement; and (5) the Construction Mortgage. These documents had the collective effect, among other things, of giving only State Financial Bank and Wisconsin Title Closing & Credit Services, rather than the Parsons, the authority to approve CCC's construction draw requests and the responsibility for verifying that CCC had actually done the construction and other work on the project for which CCC requested payment. The documents also allowed payments for services that were not authorized on the Project Budget and secured everything, including the construction loan, with a mortgage on the Parsons' home.

¶8 Among the nearly thirty pages of printed form documents presented to Taft was a Promissory Note containing the following jury waiver clause:

WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER (BY THEIR ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) BETWEEN OR AMONG THE BORROWER AND THE LENDER ARISING OUT OF OR IN ANY WAY RELATED TO THIS DOCUMENT, ANY OTHER RELATED DOCUMENT, OR ANY RELATIONSHIP BETWEEN THE BORROWER AND THE LENDER. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE LENDER TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN OTHER LOAN DOCUMENTS.

¶9 After Taft signed the document package, multiple draws were approved over Taft's objection, despite the fact that no actual work had even begun on the townhouse project. As a result of Taft's objections, Moeser presented a new Disbursement Agreement requiring Taft's signature to approve payments. CCC continued to submit post-closing payment requests to State Financial Bank, with no work having been performed. Bowles's signature appears in the place where Taft's signature was supposed to be, and the money was released.

ΒΆ10 Early in 2005, Taft received a notice of tax levy against CCC from the IRS, indicating that CCC owed over $300, 000 in taxes, and ordering the townhouse project to pay the IRS any money the project was obligated to pay CCC. Taft then discovered a number of unpaid judgments against CCC. Taft forwarded the IRS notice and his findings to Moeser. Moeser then ended the construction loan and stopped payments to CCC. This left the Parsons with a debt for the loan proceeds which had been paid out, which the Parsons were unable to pay. State Financial Bank commenced a foreclosure action against the Parsons' home. State Financial Bank was taken over by Associated Bank, which ...


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