Breach of contract claim on development agreement could not be amended by trial court

by Melanie Thwing

Honeyager v. City of New Berlin
(Wisconsin Court of Appeals, March 9, 2011)

In 2005 William and Elaine Honeyager and WED Development, LLC entered into a development agreement with the City of New Berlin, WI. This contract included the Honeyagers constructing a sewage system for their eight lots. This system would also benefit seven other lots that were already developed. The City agreed to specially assess the owners of the seven developed lots and these proceeds would go to the Honeyagers.

The Honeyagers state that it was their belief the City would collect the 7/15 of the total cost which was approximately $38,000. In a signed affidavit by the Honeyager this number was understood after a neighborhood meeting that occurred prior to the contract being signed.

In the signed contract the city engineer says that the additional lots would be, “collectively assessed half of the cost of the sewer main and individually assessed for the full cost of the sewer laterals connecting their respective properties to the sewer main.” Ultimately the City chose a different method of assessment and the other property owners were only charged $19,000.

The Honeyagers then filed a civil lawsuit against the City claiming a breach of the duty of good faith and fair dealing in contract. In trial court the City moved for summary judgment which was denied. The Honeyagers choose to file a trial brief with proposed jury instructions. In the brief it was pointed out that rarely did the City choose this method of assessment and that the Honeyagers were charged close to three times as much per lot as the existing homes.  It was the Honeyagers’ argument that the City had a duty to assess each property in a way that would cause uniformity in assessments for the area.

Then the morning of the trial at the City’s request the court changed the Honeyagers’s claim from one of breach of contract to one forproperty overassessment. Following this the trial court dismissed the action claiming that they had not followed the proper procedures for filing an overassessment claim, which should have been brought under Wis. Stat. § 66.0703(12).

The Honeyagers then appealed. In Autumn Grove Joint Venture v. Rachlin the court found that trial courts could amend pleadings under Wis. Stat. § 802.09(1) and (2) so that they conformed to the evidence. This can only happen, however, if the issues are tried, and evidence presented by both parties. This cannot apply here because no issue was tried.

The Wisconsin Court of Appeals also looked at the Honeyagers’s trial brief to determine whether it effectively amended their action to an overassessment claim. The court also rejected this claim because after reading the brief it concluded that the Honeyagers merely aimed at illustrating the harm inflicted by the City’s bad faith by stating how the assessment was divided and how they were put at a disadvantage.  It did not constitute a change in the nature of the claim.  If the trial court had found the pretrial brief inappropriate it had the right to reject it, but not the authority to change the action.

The case was reversed and remanded for further proceedings.

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