ANNETTE KINGSLAND ZIEGLER, J.
¶1 This is a review of a published decision of the court of appeals,
¶2 The Parsons are approaching a trial in their lawsuit against Associated for alleged racketeering activity and negligent hiring, training, and supervision. We are asked to decide what form that trial will take. The Parsons seek a jury trial, but Associated asserts that the Parsons contractually waived their right to a jury several years ago, before this litigation arose.
¶3 There are two basic issues on this appeal. First, we must examine whether the pre-litigation jury waiver provision in the contract between the Parsons and Associated is enforceable, either with or without proof extrinsic to the terms of the contract that the Parsons knowingly and voluntarily agreed to this waiver. Second, if we conclude that the provision is enforceable, we must examine whether Associated's motion to strike the Parsons' jury demand was untimely.
¶4 We conclude that the pre-litigation jury waiver provision in the contract between the Parsons and Associated is enforceable and that Associated does not need to offer additional proof that the Parsons knowingly and voluntarily agreed to this waiver. We further conclude that Associated's motion to strike the Parsons' jury demand was not untimely. Consequently, we reverse the decision of the court of appeals and remand the case to the circuit court for further proceedings consistent with this opinion.
I. FACTUAL AND PROCEDURAL BACKGROUND
¶5 In part because of the unusual posture of this case, the facts pertaining to this lawsuit are largely unimportant to the disposition of this appeal. On May 26, 2011, the Parsons sued Associated in Milwaukee County circuit court asserting claims pertaining to, in the words of the Parsons, "a failed construction project in inner-city Milwaukee."
¶6 More specifically, the Parsons' complaint contains the following relevant allegations. In or before 2002, Taft Parsons ("Taft") "conceived of the idea to turn the run-down houses on his block into modern affordable rowhouses." The Parsons obtained financing for this project through State Financial Bank, Associated's predecessor in interest.
¶7 On December 12, 2012, the Parsons filed an amended complaint asserting eight causes of action. Before this court, the Parsons contend that they have now "limited their case" to the following two claims presented in their amended complaint: (1) racketeering activity in violation of Wis. Stat. § 946.83(1) (2013-14);
¶8 On May 14, 2014, Associated filed a motion to strike the Parsons' jury demand. Associated provided the circuit court with a Promissory Note for several hundred thousand dollars dated May 26, 2004 and listing Taft as "Borrower" and Associated as "Lender." The note contained the following relevant language:
(Boldface omitted from first four words and last paragraph.) A few lines below this text was Taft's signature. Accordingly, Associated asked the court to strike the Parsons' jury demand "because it was contractually waived."
¶9 The Parsons offered a number of arguments in response to the motion to strike; the following ones are relevant to this appeal. First, while conceding that "the statutes do not provide a deadline for an opposing party to object to a jury demand," the Parsons argued that Associated's motion to strike was untimely and that Associated had waived its right to object to the jury demand. Second, the Parsons claimed that because of the lack of Wisconsin case law regarding contractual jury waivers, the circuit court was not required to enforce the jury waiver provided by Associated. Third, the Parsons contended that Carol Parsons ("Carol") had not signed the Promissory Note and thus had not waived her right to a jury. Finally, the Parsons asserted that Taft "had no freedom not to sign the Promissory Note for the construction loan."
¶10 With regard to this final argument, the Parsons attached an affidavit in which Taft swore to the following, among other things: Taft "never noticed any jury waiver clause in the Promissory Note . . . because [he] was not given time to review the loan documents prior to the closing"; Taft "had no counsel" at the time he signed the Promissory Note; Taft was told "that if [he] did not sign the closing documents immediately, [Associated] would withdraw its support for the construction project"; if Taft "had not gotten the construction loan," tens of thousands of dollars he had already obtained under another loan "for pre-construction costs would have been down the drain, and [he] would still have owed that money"; Taft "did not knowingly and freely waive any right to a jury trial"; and Taft signed the Promissory Note "under pressure."
¶11 On October 24, 2014, the circuit court granted Associated's motion to strike the Parsons' jury demand. Citing as "particularly relevant considerations" "the parties' sophistication, whether the contract was procured fraudulently, and whether the jury waiver clause is conspicuous," the circuit court concluded that the waiver was enforceable. The circuit court explained in part:
¶12 The circuit court rejected the Parsons' timeliness argument in part because the Parsons had not provided any law establishing that Associated's putative delay in objecting to the jury demand waived Associated's right to object to the demand. With regard to the Parsons' claim that Carol was not bound by the jury waiver, the court concluded:
The circuit court ordered that the Parsons' cause would be heard by court trial.
¶13 On November 25, 2014, the Parsons petitioned the court of appeals for leave to appeal a non-final order. On December 12, 2014, the court of appeals granted the petition. On May 20, 2016, in a published opinion, the court of appeals reversed the decision of the circuit court and remanded the case for a jury trial.
¶14 The court of appeals began with the broad proposition that a person may waive his or her right to a jury trial under Article I, section 5 of the Wisconsin Constitution. Id., ¶16. However, the court of appeals concluded that Associated bore the burden of demonstrating that the Parsons "understood the scope of and the specific nature of the rights given up by the waiver."
¶15 The court of appeals then explained that because "the additional question of whether the waiver clause is invalid because it is unconscionable may well arise during trial, as it did at oral argument, [it would] consider whether the clause, on the record before [it], survives an unconscionability analysis."
¶16 The court of appeals also considered whether the circuit court erred in allowing Associated to object to the Parsons' jury demand and concluded it had erred for three reasons. First, Associated had forfeited its right to object because its objection was not timely.
¶17 On June 9, 2016, Associated filed a petition for review in this court. On September 13, 2016, we granted the petition.
II. STANDARD OF REVIEW
¶18 In this case we interpret Article I, section 5 of the Wisconsin Constitution. We review state constitutional questions de novo.
¶19 We also interpret and apply Wis. Stat. § 805.01 ("Jury trial of right."). "`Statutory interpretation and application present questions of law that we review de novo while benefiting from the analyses of the court of appeals and circuit court.'"
¶20 We first address whether the pre-litigation jury waiver provision in the contract between the Parsons and Associated is enforceable. We then address whether Associated's motion to strike the Parsons' jury demand is untimely.
A. Whether the Pre-litigation Jury Waiver Provision in the Contract between the Parsons and Associated is Enforceable
¶21 That a person may waive his or her right to a civil jury trial in Wisconsin is already settled law. Under Article I, section 5 of the Wisconsin Constitution:
Wis. Const. art. I, § 5 (emphasis added).
¶22 The Wisconsin Statutes set forth a number of ways in which a civil jury trial may be waived. For example, under Wis. Stat. § 805.01(2), "Any party entitled to a trial by jury or by the court may demand a trial in the mode to which entitled at or before the scheduling conference or pretrial conference, whichever is held first. The demand may be made either in writing or orally on the record." § 805.01(2). However,
§ 805.01(3). Further, under Wis. Stat. § 814.61(4), "If the jury fee is not paid, no jury may be called in the action, and the action may be tried to the court without a jury." § 814.61(4).
¶23 The central question in this case, therefore, is not whether a civil jury trial may be waived, but instead whether a pre-litigation jury waiver provision in a contract constitutes waiver "in the manner prescribed by law." Wis. Const. art. I, § 5.
¶24 We observe that the parties have not presented us with a statute governing contractual jury waivers. However, as we will now explain, that is not dispositive of the issue. It is true that in another context—interpretation of the "powers, duties and compensation" of the attorney general pursuant to Article VI, section 3 of the Wisconsin Constitution—this court has interpreted the word "law" in the phrase "prescribed by law" to mean statutory law.
¶25 As a preliminary matter, we note the obvious proposition that the phrase "prescribed by law" is susceptible to a broader definition than simply "prescribed by statute." The word "law" can denote "[t]he aggregate of legislation, judicial precedents, and accepted legal principles," not just legislation.
¶26 Next, we must acknowledge a second, related interpretative presumption, namely the intuitive presumption that "different words have different meanings."
¶27 We turn now to a significant factor in our analysis: this is not the first time this court has addressed the question of whether the manner of jury waiver under Article I, section 5 of the Wisconsin Constitution must find prior authorization in a statute. In interpreting the meaning of "prescribed by law" in the attorney general section of our constitution in
¶28 Thus this court announced in
¶29 It makes sense to interpret Article I, section 5 in this fashion given the often broad definition of the term "waiver."
¶30 For all of these reasons, we conclude that the text of Article I, section 5 of the Wisconsin Constitution does not limit the manner of jury trial waiver to those set forth by statute. Consequently, we may look to other sources of law to determine whether the Parsons' putative waiver of their right to a jury trial was valid. This particular case may be resolved by turning to common law—specifically, to longstanding principles of contract law in Wisconsin.
¶31 "Wisconsin public policy favors freedom of contract."
¶32 There is no reason why waiver of a person's Article I, section 5 right to a jury trial should constitute an exception to our general presumption in favor of freedom of contract. "It is well settled that constitutional rights . . . may be waived."
¶33 In fact, the legislature has indicated agreement with this conclusion. Wisconsin Stat. ch. 218 ("Finance Companies, Auto Dealers, Adjustment Companies and Collection Agencies") contains a provision which states that "[e]xcept as provided [elsewhere], provisions of an agreement which do any of the following are void and prohibited: . . . waive the dealer's or distributor's right to a jury trial." Wis. Stat. § 218.0114(9)(a)2. The chapter defines "agreement" to mean "a contract that describes the franchise relationship between manufacturers, distributors, importers and dealers." Wis. Stat. § 218.0101(1) (emphasis added). In other words, the legislature has, in a very narrow context, prohibited contractual jury waivers. It would be strange for the legislature to foreclose such waivers under these limited circumstances if it thought contractual jury waivers were prohibited
¶34 Accordingly, we conclude that, consistent with longstanding principles of contract law in Wisconsin, the pre-litigation jury waiver provision in the contract between the Parsons and Associated is enforceable.
¶35 As explained, the court of appeals concluded that Associated bore the additional burden of demonstrating that the Parsons "understood the scope of and the specific nature of the rights given up by the waiver."
¶36 Second, in Wisconsin, "[w]here the terms of a contract are clear and unambiguous, we construe the contract according to its literal terms. `We presume the parties' intent is evidenced by the words they [choose], if those words are unambiguous.'"
¶37 The words of the Parsons' contract are unambiguous. By those words, both Associated and the Parsons waived any right to a jury trial. Further, the contract provides, in boldface, that "PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE." "It is not the function of the court to relieve a party to a freely negotiated contract of the burdens of a provision which becomes more onerous than had originally been anticipated."
¶38 Before proceeding, we address Taft's affidavit. Relying on the affidavit, the court of appeals suggested that Associated had obtained the jury waiver provision fraudulently. However, "a party seeking to invalidate a provision in a contract . . . has the burden of proving facts that justify a court's reaching the legal conclusion that the provision is invalid."
¶39 The court of appeals did not stop there, additionally concluding that the clause was substantively and procedurally unconscionable.
B. Whether Associated's Motion is Untimely
¶40 We have concluded that that the pre-litigation jury waiver provision in the contract between the Parsons and Associated is enforceable. But the Parsons counter Associated's waiver claim with a "waiver" claim of their own: they claim that Associated waited too long to object to the Parsons' jury demand and thus may not now do so. The circuit court below rejected this claim in part because the Parsons had not provided law supporting it. The court of appeals reversed this conclusion, stating that Associated had forfeited the right to strike the Parsons' jury demand, had waived the right under Wis. Stat. § 805.01(3), and were equitably estopped from asserting the right.
¶41 The only statutory authority provided in this case is Wis. Stat. § 805.01, which states in relevant part:
§ 805.01(1)-(3) (emphases added). The court of appeals concluded Associated was bound by the emphasized text because Associated viewed itself as "entitled to a trial . . . by the court."
¶42 The parties devote a significant amount of briefing to establishing with precision the timeline below and whether Associated's putative delay was reasonable in light of various events that occurred as litigation proceeded. In the absence of a statutory directive, we cannot conclude that the circuit court—the entity with the best grasp of the unfolding of the proceedings below and of the relative equities of the situation—erroneously exercised its discretion in allowing Associated to rely on its otherwise-enforceable agreement with the Parsons not to try this case before a jury.
¶43 In sum, Associated's motion to strike the Parsons' jury demand was not untimely.
¶44 Before we conclude, we stress that the Parsons are not being denied their day in court. We simply decide today that any trial that occurs on remand will be a bench trial. We add that the circuit court may determine, as this litigation proceeds, whether the Parsons may bring additional arguments related to the validity of any agreements into which they entered with Associated.
¶45 We conclude that the pre-litigation jury waiver provision in the contract between the Parsons and Associated is enforceable and that Associated does not need to offer additional proof that the Parsons knowingly and voluntarily agreed to this waiver. We further conclude that Associated's motion to strike the Parsons' jury demand was not untimely. Consequently, we reverse the decision of the court of appeals and remand the case to the circuit court for further proceedings consistent with this opinion.
By the Court.—The decision of the court of appeals is reversed, and the cause is remanded to the circuit court for further proceedings consistent with this opinion.
¶46 DANIEL KELLY, J., did not participate.
ANN WALSH BRADLEY, J. (dissenting).
¶47 The right to a jury trial is a bedrock principle upon which this state is founded. Article I, section 5 of the Wisconsin Constitution guarantees that the "right of trial by jury shall remain inviolate . . . but . . . may be waived by the parties in all cases in the manner prescribed by law. . . ." This case requires us to examine the prescribed manner by which a party may contractually waive this guaranteed right.
¶48 Specifically we address whether Taft and Carol Parsons ("the Parsons") waived the right to a jury trial when Taft Parsons signed several loan documents, including one that contained a provision waiving the right to a have a jury resolve any claims against the lending institution.
¶49 The majority concludes that the pre-litigation jury waiver provision in the contract between the Parsons and Associated Bank-Corp ("Associated") is enforceable. Majority op., ¶45. In reaching its conclusion, the majority opinion ignores both significant precedent and the facts of this case.
¶50 Following a clear United States Supreme Court directive, numerous federal circuits have determined that a party must voluntarily and knowingly agree to a jury waiver. Rather than examining the totality of the circumstances, the majority instead rests on an ipse dixit analysis—if the jury waiver clause states that the waiver is knowingly and voluntarily made, then it must be so.
¶51 The damaging effect of the majority's departure from this well-established rule is demonstrated by the egregious facts of this case, which the majority to a large extent also ignores. Indeed, the facts here are so egregious that the court of appeals determined that the jury waiver clause was unenforceable because it "is both procedurally and substantively unconscionable."
¶52 According to the amended complaint, an affidavit, and the documents of record, the Parsons planned a townhouse development to refurbish their neighborhood, but their plans went awry during the course of dealing with the bank. Instead of a townhouse development they were faced with bankruptcy, foreclosure and loan repayment demands for work that was never done. The loan officer involved was convicted of bank fraud in federal court related to a different townhouse project, with remarkably similar facts to those presented here.
¶53 Among the many documents he presented for their signature was a promissory note that contained a jury waiver clause. The Parsons were not allowed any time to review the documents or consult with an attorney before signing them. The loan officer threatened them by stating that he would withdraw the construction loan if they did not promptly sign the documents. Faced with the option of losing it all or promptly signing the documents, Taft Parsons signed. In their complaint the Parsons allege multiple acts of fraud, extortion and threats that occurred under the bank's watch.
¶54 Additionally, Associated waited years to object after the Parsons demanded a jury trial in compliance with Wisconsin's civil procedure statutes. The majority pays no heed to this delay, however, concluding that Associated's motion to strike the Parsons' jury demand was timely. Majority op., ¶4.
¶55 Contrary to the majority, I conclude that Associated Bank has not met its burden of proving that the Parsons knowingly and voluntarily waived their right to trial by jury. I further determine that Associated's motion to strike the Parsons' jury demand was untimely. Accordingly, I respectfully dissent.
¶56 In the span of only three paragraphs, the majority opinion dispenses with the question of whether Associated must demonstrate that the Parsons knowingly and voluntarily waived their right to a jury trial.
¶57 Relying instead on this court's decision in
¶58 Despite its proffered rationales, the majority opinion finds little support in the law. First, its reliance on Rao is misplaced. In
¶59 Taking language out of context, the majority quotes
¶60 Second, the majority superficially addresses the issue of a contractual waiver by citing the basic principle that where the terms of a contract are unambiguous, we presume the parties intent is reflected in those words. Majority op., ¶36 (quoting
¶61 Reliance on general principles regarding freedom of contract is insufficient when a contract waives a constitutional right.
¶62 Third, in its fervor to genuflect at the altar of freedom of contract, the majority ignores the significant precedent that has addressed the means by which a party may contractually waive its right to a jury trial. As the United States Supreme Court explains, courts should "indulge every reasonable presumption" against waiver of a jury trial due to the right's fundamental nature.
¶63 The United States Supreme Court has directed, "for a waiver to be effective it must be clearly established that there was an intentional relinquishment or abandonment of a known right or privilege."
¶64 Additionally, the predominant federal rule comports with analogous Wisconsin case law, such as the contractual waiver-of-venue cases.
¶65 Whether a waiver of a constitutional right was knowing and voluntary is a fact-specific inquiry that is "separate and distinct from the operation of rules of substantive contract law. . . ."
¶66 This inquiry emphasizes the relative bargaining power of the parties, as well as other factors including the respective roles of the parties in determining the terms of the waiver, the amount of time the waiving party had to consider the waiver and whether the waiving party was represented by counsel.
¶67 Although the question of whether a party knowingly and voluntarily waived the right to a jury is a fact-specific inquiry, the majority opinion asserts that "[i]n part because of the unusual posture of this case, the facts pertaining to this lawsuit are largely unimportant to the disposition of this appeal." Majority op., ¶5. The majority fails to explain how the procedural posture of this case is so unusual. This case is before the court because the Parsons appeal a non-final order of the circuit court granting Associated's motion to strike the Parsons' jury demand.
¶68 Based on this slight justification, the majority opinion neglects to set forth or analyze the facts of the case beyond a brief summary of the allegations in the Parsons' complaint. Because the majority fails to do so, I set forth the necessary facts that inform the totality of the circumstances analysis. Like the court of appeals, I consider the allegations in the complaint, the loan documents, and the Parsons' affidavit.
¶69 The events that gave rise to this appeal began when the Parsons obtained a home equity loan in the amount of $40,000 and a construction loan in the amount of $774,000 from State Financial Bank.
¶70 The loan documents were signed by Aaron Moeser, a bank employee who was later convicted in federal court for fraudulent activity stemming from a loan scandal involving a similar townhouse construction project. Before any work was done on the Parson's townhouse project, the Parsons were instructed to sign five additional loan documents consisting of thirty pages of pre-printed forms, one of which contained the jury waiver clause at issue here.
¶71 According to Taft Parsons' affidavit, his objections to the new loan documents were met with threats from Moeser to pull the construction loan. This would have left the Parsons with debt even when no construction had been completed. Taft received no explanation of any terms in the documents except oral instructions to insert a specific interest rate. The bank refused to allow him the time and opportunity to read the documents or consult an attorney.
¶72 Additionally, the loan documents gave State Financial Bank and Wisconsin Title Closing & Credit Services the authority to approve the contractor's construction draw requests. State Financial Bank and the title company were also given sole responsibility for verifying that the contractor had performed the construction and other work on the project for which it requested payment. The documents also allowed payments for services that were not authorized on the project budget and secured all of the debt, including the construction loan, with a mortgage on the Parsons' home.
¶73 After the loan documents were signed, multiple draws were approved over the Parsons' objections, despite the fact that no actual work had begun on the townhouse project. The Parsons later received a notice of tax levy against the contractor from the IRS, indicating that it owed over $300,000 in taxes. It ordered the townhouse project to pay the IRS any money the project was obligated to pay the contractor. The Parsons then discovered a number of unpaid judgments against the contractor and forwarded the IRS notice and their findings to Moeser.
¶74 Moeser ended the construction loan and stopped payments to the contractor. This left the Parsons with a debt for the loan proceeds that had already been paid. The Parsons were unable to pay and State Financial Bank commenced a foreclosure action against the Parsons' home. State Financial Bank was taken over by Associated Bank, which continued the foreclosure action. The Parsons filed for bankruptcy, but made payments to the bank on the home equity loan, which resulted in dismissal of the foreclosure action.
¶75 I proceed next to apply those facts to the law. As set forth above, the federal circuits addressing this issue emphasize the relative bargaining power of the parties in considering whether a party knowingly and voluntarily agreed to waive the right to a jury trial. This case is analogous to
¶76 Examining the circumstances of the jury waiver, the
¶77 Similarly, the facts in the record here demonstrate that the Parsons did not voluntarily assent to the jury waiver clause. The complaint and Taft Parsons' affidavit contain facts sufficient to show that the promissory note was presented to him as a "take-it-or-leave-it" deal. He was told to sign it immediately or risk having Moeser cancel the $774,000 construction loan. This would have left the Parsons with $40,000 in debt on the home equity loan, with no work having been completed on the townhouse project.
¶78 A number of other factors may be considered in a totality of circumstances analysis.
¶79 A number of factors that do not support a determination that a waiver was knowing and voluntary are present in this case. The Parsons had no role in determining the terms of the waiver, which was included among five pre-printed loan documents totaling nearly thirty pages. Additionally, Taft Parsons was given no time to sign the waiver and was not permitted the opportunity to consult with counsel.
¶80 Finally, under this court's decision in
¶81 Accordingly, I conclude that Associated Bank has not met its burden of proving that the pre-litigation jury waiver provision in the contract between the Parsons and Associated Bank was made knowingly and voluntarily.
¶82 Finally, I turn to the majority's conclusion that Associated's motion to strike the Parsons' jury demand was timely. Majority op., ¶43.
¶83 Pursuant to Wis. Stat. § 805.01, a party may demand a trial in the mode to which it is entitled at or before the scheduling conference or pretrial conference, whichever is held first:
¶84 The Parsons' complaint and amended complaint made a demand for a jury trial and the jury fee was timely paid. Associated filed multiple pleadings with no objection to the jury demand. However, three years into litigation, at the third pretrial conference, the bank raised an off-the-record objection to the Parsons' jury demand. It then filed a motion to strike the Parsons' jury demand, arguing that when Taft Parsons signed the promissory note with the waiver clause ten years earlier, the Parsons waived any right to a jury trial involving the bank.
¶85 Nevertheless, the majority reasons that Associated was not demanding a trial in the mode to which it was entitled. Majority op., ¶41. Instead, the majority contends that it was moving to strike the Parsons' jury demand because the Parsons were not themselves entitled to a jury trial.
¶86 The majority further refuses to apply equitable estoppel because "having contracted away their right, any reliance that the Parsons might have had on Associated's initial acquiescence in their unfounded demand for a jury trial was not reasonable." Majority op., ¶42. Thus, the majority concludes that "[b]ecause reasonable reliance is a requirement of equitable estoppel, Associated is not equitably estopped from striking the Parsons' demand."
¶87 Contrary to the majority, I conclude that even if the bank's objection were timely as the majority claims, the bank is equitably estopped from raising this objection three years into litigation. Equitable estoppel generally bars one party from taking a position upon which another party relies and then subsequently changing that position to the detriment of the relying party.
¶88 The bank's failure to challenge the Parsons' jury demand led the Parsons to spend three years preparing for a jury trial. A review of the record reveals numerous motions, hearings, and other activity demonstrating that the parties were moving toward trial.
¶89 It was reasonable for the Parsons to prepare for a jury trial because not only did they timely demand one, the bank actively participated in pre-trial litigation. As the court of appeals explained, participation by the bank without objection to the mode of trial "is both action (actually participating) and inaction (not objecting to the mode of trial) upon which the Parsons reasonably relied."
¶90 I agree with the court of appeals that changing the mode of trial three years into the case is detrimental to both the Parsons and to reasonable and efficient court administration. Thus, I conclude that even if the bank's objection were timely, it is equitably estopped from making its much belated claim for a court trial.
¶91 Contrary to the majority, I conclude that Associated Bank has not met its burden of proving that the Parsons knowingly and voluntarily waived their right to trial by jury. I further determine that Associated's motion to strike the Parsons' jury demand was untimely. Accordingly, I respectfully dissent.
¶92 I am authorized to state that Justice SHIRLEY S.
ABRAHAMSON joins this dissent.
Henry James Holthouse,
Additionally, the parties do not develop arguments that we should analyze waiver of any statutory right to a jury trial the Parsons possess differently from how we analyze waiver of their constitutional right to a jury trial, so we do not do so.