The Trusted Adviser March 2011 | Volume 4 • Number 2




Groshek v Trewin, Wis 2d 250, 784 NW2d 163, 2008 AP 787 (Wis, 2010).

Facts:Francis and Karen Groshek (the Grosheks) filed for Chapter 13 bankruptcy in March 2004. In July 2004, the Grosheks fell behind on the payments due to their bank under the bankruptcy plan. Meanwhile, Michael Trewin (Trewin) served as the Groshek's attorney in those proceedings. During the time span, Trewin engaged in other attorney misconduct that led to his license to practice being suspended by a July order of the Wisconsin Supreme Court, effective August 31, 2004. In August 2004, Trewin proposed to buy a property owned by the Groshek and then lease it back to them with the eventual possibility of a buy-back, as a means of acquiring the money to pay the bank under the bankruptcy plan. The Grosheks agreed, without a clear understanding of how their contract with Trewin would operate.

Trewin pressured the Grosheks to close on August 30, 2004, before the looming suspension of his license. He advised them in writing on that day of his conflicts of interest and suggested hiring another lawyer, but the Grosheks had no opportunity to do so before Trewin's August 31 deadline. Ultimately, they signed the documents and agreed to sell their property to Trewin. The actual sale occurred in November 2004, and Trewin paid $94,500 for the 34 acre property, which included the Groshek home.

As initially agreed, the Grosheks leased the property back from Trewin. However, they eventually came to be unable to make the rent payments and Trewin canceled the lease. The Grosheks subsequently sued Trewin for breach of fiduciary duty and requested rescission of the sales contract, alleging that Trewin had improperly used his knowledge of the Groshek's financial affairs as well as misused his position in order to induce them into an unfavorable arrangement. The trial court ordered rescission and determined that punitive damages to be appropriate. Trewin appealed, arguing that the facts did not support rescission and that punitive damages could not be granted on an equitable claim. The court of appeals affirmed the rescission in favor of the Grosheks but reversed the grant of punitive damages as requested by Trewin. Both parties appealed to the Wisconsin Supreme Court.

Holding:Affirmed in part, reversed in part. The Wisconsin Supreme Court concluded that the trial court had properly determined that a breach of fiduciary duty had taken place. Trewin contended that he did nothing that was in breach of his duty and that, further, his duty had ended on August 31, 2004, when his ability to practice as a lawyer was suspended and that he had not yet evicted the Grosheks at that time. The Supreme Court, however, found that Trewin did commit a breach of fiduciary duty by improperly using information about the Grosheks for profit against them, for tricking the Grosheks into an undesirable transaction they did not understand, and for not giving them proper opportunity to seek outside counsel.

Furthermore, the Supreme Court determined that these events had occurred on August 30, 2004, when Trewin and the Grosheks signed the contract and that, therefore, it was unnecessary to consider whether Trewin continued to have a duty to the Grosheks past his suspension. As such, the Supreme Court affirmed both lower courts on this issue.






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[Last update: 3-4-11]