Vol. 76, No. 5, May
Supreme Court Digest
This column summarizes all decisions of the
Wisconsin Supreme Court (except those involving lawyer or judicial
discipline, which are digested elsewhere in the magazine). Profs. Daniel
D. Blinka and Thomas J. Hammer invite comments and questions about the
digests. They can be reached at Marquette University Law School, 1103 W.
Wisconsin Ave., Milwaukee, WI 53233, (414) 288-7090.
by Prof. Daniel D. Blinka &
Prof. Thomas J. Hammer
Appellate Procedure/Prisoner Litigation
Petitions for Review to the Supreme Court - 30-day Time Limit for
Filing Petition for Review - Limited Retroactivity of State ex rel.
Nichols v. Litscher
State ex rel. Brown v.
Bradley, 2003 WI 14 (filed 6 March 2003)
Wis. Stat. section 808.10 provides that a petition for review of a
decision of the court of appeals shall be filed in the supreme court
within 30 days of the date of the decision of the court of appeals. In
State ex rel. Nichols v. Litscher, 2001 WI 119, the supreme
court concluded that the 30-day deadline for receipt of a petition for
review is tolled on the date that a pro se prisoner delivers a correctly
addressed petition to the proper prison authorities for mailing.
The question before the supreme court in this case was whether the
tolling rule adopted in Nichols should be applied
retroactively. In a majority decision authored by Justice Bradley, the
supreme court held that the tolling rule adopted in Nichols is
a civil procedural rule with limited retroactive application. "It
applies retroactively to cases on direct review or not yet final when
Nichols was decided and to pro se prisoners who had raised the
issue in habeas petitions that were still pending before this court"
The supreme court had denied a petition for review in this case
before it decided Nichols, and therefore the petitioner is not
entitled to relief under the tolling rule. However, the supreme court
determined that denying relief to the petitioner would be unjust,
because the court denied his habeas corpus petition while nearly
simultaneously granting Nichols' petition that raised virtually the same
Justice Sykes filed a dissenting opinion.
Top of page
Banks - Forged Endorsements - Power of Attorney
Schmitz v. Firstar Bank
Milwaukee, 2003 WI 21 (filed 25 March 2003)
This case involves a bank's liability for claims of negligence or
conversion arising from a situation in which forged checks were
deposited in an account and the monies were later withdrawn. In 1992
Schmitz opened an investment account with Georgetown Financial, a
company solely owned and mostly operated by O'Hearn. Schmitz also
executed two limited powers of attorney (described in more detail
below). In 1994 the state revoked O'Hearn's securities license. Unaware
of O'Hearn's troubles, Schmitz opened an investment account with Putnam
Investments through Georgetown Financial in 1995.
Mutual funds were sold from the Putnam account in 1996 and 1998. On
both occasions, Putnam sent checks payable to Schmitz "c/o Georgetown
Financial," which O'Hearn deposited in a Firstar Bank account. One check
bore no endorsement by Schmitz whatsoever and the other included a
"forged" signature. The money disappeared, and O'Hearn was convicted of
fraud. Schmitz sued Firstar Bank because it accepted deposit of both
improperly endorsed checks that named him as the payee. The circuit
court granted summary judgment in favor of Firstar Bank, on the ground
that the two 1992 powers of attorney authorized O'Hearn to deposit the
checks. The court of appeals affirmed.
The supreme court, in a decision authored by Chief Justice
Abrahamson, reversed. "The only issue properly before this court," she
wrote, was "whether the two limited powers of attorney authorize
Georgetown Financial to endorse the two Putnam checks on behalf of the
After carefully reviewing the language of both 1992 power of attorney
documents, the supreme court summarized its conclusion: "In short, the
clear implication is that both of these limited powers of attorney grant
Georgetown Financial authority over only those insurance policies and
other investments (stocks, bonds, CDs, annuities, savings accounts, and
other securities) specifically listed on the limited powers of attorney.
Since neither limited power of attorney in the record lists a Putnam
account, it is equally clear that Georgetown Financial did not have the
authority to endorse either of the checks at issue in this case on
behalf of the plaintiff-payee" (¶30).
The remaining issues in the lawsuit thus involved Firstar's liability
to Schmitz for the converted funds, but the parties' failure to
adequately brief or argue these issues precluded the court from deciding
them. "While it appears clear that accepting a check when the payee's
endorsement is missing is not in accordance with the reasonable
commercial standards of banking and that the acceptance by a depository
bank of such a check for deposit is commercially unreasonable
as a matter of law, there is far less case law addressing who
constitutes the payee when a check is made out to an individual in the
care of an investment company" (¶35).
As to the forged endorsement, Schmitz conceded that whether the bank
was negligent was a question of fact that precluded summary judgment.
(The bank apparently built its defense entirely on the defunct powers of
Top of page
Indemnity Agreements - Settlements
Deminsky v. Arlington
Plastics Mach., 2003 WI 15 (filed 6 March 2003)
Deminsky was severely injured while working on a grinding machine
owned by his employer, Image Plastics Inc. Deminsky later learned that
Image had purchased the machine from Arlington Plastics Machinery Inc.,
and that the terms of the sale included a provision under which Image
agreed to indemnify Arlington. Deminsky later settled his claim against
Arlington for about $1.4 million. In turn, Arlington assigned its
indemnification rights to Deminsky, who then sued Image.
On motions for summary judgment, the trial court ordered Image to pay
Deminsky the full amount of the stipulated judgment entered against
Arlington. The court of appeals upheld the validity of the
indemnification agreement but reversed on the ground that Image could
not be bound by the stipulation between Deminsky and Arlington.
The supreme court, in an opinion written by Justice Wilcox, modified
and affirmed the court of appeals' decision. Since the parties agreed as
to the terms of the sales contract, the first issue before the court was
whether the provision was valid and enforceable (¶16). The court
rejected Image's argument that the agreement impermissibly shifted
Arlington's nondelegable duty to produce a safe product. "The agreement
here expressly obligates Image to indemnify Arlington, even for
by Arlington's own negligence or defects with the machine. Indemnity
provisions merely shift the financial burden of potential liability.
Arlington did not attempt to substitute Image as the party responsible
for producing a safe product" (¶22). Obviously the indemnification
agreement would have been worthless to Arlington if Image had been
unable to pay damages (¶23).
Nor was the indemnity provision "unconscionable" on the ground that
Image lacked notice of its terms. Closely examining the form and its
provisions, the court observed that the document consisted of one page,
front and back: "This was not an onerous form" (¶29). Image's
contention that the provision constituted an impermissible adhesion
contract also failed. Image admitted that it bought the machine from
Arlington because the seller was "closer and cheaper than others"
The second issue was "the extent to which the settlement agreement
reached by Deminsky and Arlington may be binding upon Image" (¶33).
Since Image had rejected Arlington's tender of defense, Image was not
entitled to "a full trial on liability and damages" (¶47). Image
was, however, entitled to a limited hearing on the reasonableness of the
settlement agreement, because "Image had no opportunity to dispute or
approve the settlement agreement reached and was unaware negotiations
were even proceeding" (¶47). "Reasonableness" embraces issues such
as whether the indemnitee faced any potential liability or whether "the
settling parties were involved in fraud or collusion" (¶47).
Finally, the court held that issue preclusion was not applicable because
the action had not been "actually litigated" (¶49).
Chief Justice Abrahamson concurred, agreeing with both the majority's
legal analysis and its remedy, yet also concluding that the circuit
court had been provided insufficient guidance for conducting the
reasonableness hearing. She especially addressed the higher burden of
proof regarding fraud and collusion.
Justices Sykes and Bradley also concurred, but disagreed with the
conclusion that the judgment may be enforceable against Image and with
the limitations placed on the scope and nature of the reasonableness