Vol. 79, No. 5, May
Court of Appeals Digest
This column summarizes selected
published opinions of the Wisconsin Court of Appeals. Prof. Daniel D.
and Prof. Thomas J. Hammer invite comments and questions about the
They can be reached at the Marquette University Law School, 1103 W.
Ave., Milwaukee, WI 53233, (414) 288-7090.
by Prof. Daniel D. Blinka & Prof. Thomas J. Hammer
Public Assistance - Due Process
Driver v. Housing Auth.
of Racine County, 2006 WI App 42 (filed 8 Feb. 2006) (ordered
published 22 March 2006)
The plaintiffs brought this civil rights action against the Housing
Authority of Racine County (HARC) after they received notice that their
section 8 housing assistance benefits would be terminated because of
violations of "family obligations" (¶ 1). The circuit
court granted summary judgment to HARC and dismissed the claims.
The court of appeals, in an opinion written by Judge Brown,
reversed. "HUD regulations provide that a housing authority may
terminate section 8 assistance if the family violates any family
obligations under the program. It must, however, give the family the
option of an informal hearing because a termination on these grounds is
based on the family's action or failure to act. The housing authority
must apprise the participant family of the right to a hearing in a
'prompt written notice' that also contains, among other information, 'a
brief statement of reasons for the decision'" (¶ 14)
The appellate court concluded that the written prehearing notices
were woefully deficient. The "form letters that HARC issued to [the
plaintiffs] clearly do not come within a country mile of the degree of
specificity" required by case law (¶ 16). Also, the written
decisions fell "appallingly short of the mark," because they
contained no facts giving rise to the termination decisions and recited
no evidence upon which the hearing officer relied (¶ 18).
The court of appeals said that the circuit court erroneously
concluded that "actual notice" of HARC's actions nonetheless
sufficed under the regulations. Case law, regulations, and public
policy, however, foreclose actual notice as a viable standard. "If
we recognize an 'actual notice' exception, we can foresee housing
authorities bending the rules and providing deficient written
communications whenever they satisfy themselves that the section 8
recipient must 'already know' the basis for its termination decision.
Such a self-serving conclusion, of course, improperly presupposes that
the tenant has committed some violation of which he or she must already
be aware" (¶ 24). And any viable "actual notice"
would have to be "essentially an oral replica of the
information" required in the written notices (¶ 25).
The court of appeals remanded these cases to the circuit court to
determine a remedy, which, the court said, must include an injunction
commanding HARC to obey due process and regulatory requirements.
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"Appellate Frivolity" - Trial
Court Authority - Reasonableness
Morters v. Aiken &
Scoptur S.C., 2006 WI App 46 (filed 14 Feb. 2006) (ordered
published 22 March 2006)
Morters sued a law firm for malpractice and breach of contract,
contending in essence that the firm had submitted his claims to
arbitration without his consent. The circuit court dismissed the
malpractice claims and ruled that the claims relating to the arbitration
had been litigated in other proceedings. The law firm then filed a
motion seeking attorney fees and costs based on the former frivolous
claims statute, Wis. Stat. section 814.025(3)(b) (2003-04). The circuit
court denied the motion. Morters appealed and the law firm
cross-appealed. In 2004 the court of appeals upheld the dismissal of
Morters's claims and reversed the denial of the law firm's fees and
costs motion, remanding the matter for a determination of reasonable
attorney fees and costs for Morters's frivolous action. On remand the
circuit court determined reasonable attorney fees for both the circuit
court proceedings and the ensuing appeal, "reasoning that if the
claim was frivolous from the moment it was filed, then costs and fees
should be awarded for all matters generated from that claim until the
case was complete, including any appellate matters" (¶ 6).
The court of appeals, in a decision authored by Judge Wedemeyer,
reversed in part and affirmed in part. First, the court of appeals held
that the circuit court "was without authority to order [Morters] to
pay costs and fees related to the 2004 appeal" (¶ 8).
"There was no discussion at all in the 2004 appeal in this court
that the appeal was frivolous" (¶ 11). In Howell v.
Denomie, 2005 WI 81, 282 Wis. 2d 130, 698 N.W.2d 621, "our
supreme court held that if an appellate court makes a finding that an
appeal is frivolous, it is required to give the parties notice that it
is considering the issue and must afford the parties 'an
opportunity to respond to the issue before a determination is made.' In
the instant case, that never occurred" (¶ 12). "Morters
was not afforded the opportunity to respond at the appellate level
during the 2004 appeal" (¶ 13). The "authority for
finding an appeal to be frivolous rests with the appellate court, not
the trial court" (Id.).
Second, the court of appeals held that the record supported the
circuit court's findings that the fees and costs incurred by the law
firm at the circuit court level were reasonable. Addressing Morters's
contention that the law firm's frivolous-claim motion should have been
filed earlier, specifically, before the firm conducted discovery and
filed its summary judgment motion, the appellate court said, "[w]e
are not convinced that such action would have been successful or
reasonable. A party may subjectively believe that its opponent's conduct
is frivolous, but hold off on filing a motion alleging such until it has
objective evidence to support such a motion" (¶ 20).
Jury Misconduct - New Trials
Manke v. Physicians
Ins. Co. of Wis.,
2006 WI App 50 (filed 9 Feb. 2006) (ordered published 22 March 2006)
In this medical malpractice case, the parties tried the issues of
negligence, causation, and damages to a jury. While the jury
deliberated, the parties entered into a "high-low" agreement,
which, the parties stipulated, presumed that the jury would return a
"legally sufficient" verdict (see ¶ 4). The jury
returned a verdict against the defendants. In post-verdict proceedings
it came to light that one juror had brought into the jury room during
deliberations a dictionary definition of "negligence." The
trial court set aside the verdict, and the plaintiffs appealed.
The court of appeals, in an opinion written by Judge Vergeront,
affirmed. First, the court held that the defendants' preliminary showing
entitled them to an evidentiary hearing. The showing of "extraneous
information" consisted of a paralegal's affidavit that related
statements made by three jurors that one juror had read them a
dictionary definition of "negligence." "We conclude that
a specific dictionary definition of a word - even a common word - is not
the type of general knowledge or accumulated life experiences that we
expect jurors to possess. In addition, the only reasonable inference
from the jurors' statements in the affidavit is that the dictionary
definition the juror read was not part of the trial record but was the
result of the juror's independent consultation of a dictionary. We
therefore conclude that the dictionary definition of 'negligence,'
which, the three jurors stated, was brought to the jury room and read
aloud by another juror, was 'extraneous information'" (¶ 30).
The affidavit did not have to identify the "particular
definition" of "negligence" that was read to the jury
(¶ 32). (Other statements ascribed to the former jurors that
described their thoughts during deliberations were, however, held to be
incompetent under Wis. Stat. section 906.06.)
Second, the court of appeals held that the showing was sufficiently
substantive to warrant a new trial. The court "harmonized"
case law and held as follows: "where a motion for a new trial is
based on prejudicial extraneous information, the circuit court may grant
an evidentiary hearing upon an affidavit that shows juror statements
that are competent testimony and, if believed, are clear and convincing
evidence of extraneous information that is potentially prejudicial. In
these circumstances a circuit court may properly hold an evidentiary
hearing both to evaluate the credibility of the initial statements, and
to obtain additional competent testimony bearing on prejudice such as
the specific nature of the extraneous evidence and the circumstances
under which it came to the jury's attention"
Third, the court of appeals said that the trial court acted contrary
to Wis. Stat. section 906.06 at the evidentiary hearing by permitting
the former jurors to testify about their thought processes during
deliberations. Despite the error, sufficient competent evidence
"amply" supported the finding that the offending juror
"brought in a photocopy of a dictionary definition of 'neglect' and
read it to all the jurors and showed it to at least some jurors"
Fourth, the court of appeals said that the extraneous information
was prejudicial and warranted a new trial. "The definition,
introduced during the discussion of [the physician's] negligence, would
probably have the effect on the hypothetical average juror of deflecting
attention away from the jury instruction on negligence and away from the
expert testimony on standard of care and instead focusing attention on
what the juror thought was proper, probably resulting in a more
expansive view of negligence. Accordingly, the circuit court's
conclusion that the extraneous information had a prejudicial effect on
the jury's determination of negligence was correct, although it employed
an incorrect standard and considered incompetent testimony"
The court of appeals remanded for a new trial on the issue of
negligence and causation. The trial court had originally ruled that
damages did not have to be retried in light of the high-low agreement.
The court of appeals declared that the plaintiffs could raise several
issues before the trial court relating to the dismissal of a party and
the applicability of the high-low agreement.
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Truth-in-Sentencing - Reconfinement - No
Deference Due Recommendation of Department of Corrections
Brown, 2006 WI App 44 (filed 7 Feb. 2006) (ordered published 22
The defendant completed the initial confinement portion of his
truth-in-sentencing bifurcated sentence and was released on extended
supervision. The Department of Corrections (DOC) determined that he
violated the terms of supervision and that the supervision should be
revoked. The defendant waived his right to a revocation hearing, and the
DOC revoked the extended supervision. The DOC recommended to the circuit
court that the defendant be reconfined in prison for a term of one year,
10 months, and 30 days. At the reconfinement hearing the circuit court
said that the DOC recommendation was "ludicrously low" and
ordered that the defendant be reconfined for three years (¶ 4).
Among the issues on appeal was whether the circuit court was
required to give "due weight deference" to the DOC's
recommendation concerning the amount of time for which the defendant
should be reconfined following the revocation of his extended
supervision. In a decision authored by Judge Curley, the court of
appeals concluded that it could find "no support for requiring
courts to give the Department's recommendations in revocation of
extended supervision cases 'due weight deference.' Trial courts have
been given great discretion in fashioning sentences, and requiring them
to give due weight deference to the Department's recommendation would
defeat this tenet"
(¶ 12). "[W]e are satisfied that while the recommendation
may be helpful and should be considered, the trial court owes no 'due
weight deference' to the Department's sentencing recommendation
submitted to the trial court after the revocation of an offender's
extended supervision" (¶ 13).
State v. Yang,
2006 WI App 48 (filed 21 Feb. 2006) (ordered published 22 March 2006)
A jury convicted Yang of repeatedly sexually assaulting one daughter
but acquitted him of a similar charge involving another daughter. The
court of appeals, in an opinion written by Judge Fine, reversed the
conviction on the ground that Yang's right of cross-examination had been
unduly limited. The court of appeals reviewed the constitutional issue
At trial, Yang sought to attack the credibility of his former wife,
who testified against him. The court of appeals noted that she had
"fluctuating difficulty" understanding and answering
questions, which were asked of her with a translator's aid (¶ 12).
Case law strongly supported Yang's attempt to use circumstantial
evidence to attack his former wife's credibility on the ground of bias.
Moreover, defense counsel apparently had a good faith basis for
questioning the former wife about her "alleged upset" over
Yang's remarriage. "Yang was entitled to have the jury decide from
his lawyer's questions and the nature of his former wife's responses
whether she was telling the truth when she denied ever having discussed
with Yang his trip to Laos or his remarriage. Thus, he was also entitled
to ask about the alleged threat [against Yang]"
Sentence Credit - Time Spent in Federal
Custody Serving Federal Sentence
Brown, 2006 WI App 41 (filed 14 Feb. 2006) (ordered published
22 March 2006)
The defendant's four-year state sentence for a controlled substances
conviction was stayed, and he was placed on probation. When the
defendant's probation was revoked in July 1995, he was ordered to be
sent to the Dodge Correctional Institution (a Wisconsin prison) to serve
his sentence. However, he never arrived there, because he was turned
over to federal authorities and was convicted of two federal drug
dealing charges in November 1995. He was incarcerated and remained in
the federal prison system until he completed his federal sentence, and
he was then transferred to the custody of state authorities sometime in
For much of the time the defendant was serving his federal sentence,
he believed that he was receiving credit toward his state sentence. A
Wisconsin detainer request was not filed until 2001. After the defendant
was notified of the detainer, he wrote to the Wisconsin Department of
Corrections (DOC) and asked for credit toward his Wisconsin sentence for
the time he spent in federal custody. The DOC advised him that he would
not receive any credit because the federal sentence was for "a
separate offense not connected to [his] Wisconsin sentence"
(see ¶ 4).
This appeal concerns the defendant's efforts, pursued by motion
under Wis. Stat. section 974.06, to obtain immediate release from
custody. The circuit court denied the motion. In a decision authored by
Judge Curley, the court of appeals reversed. Addressing the issue of
sentencing credit, the court looked to section 973.15(5), which provides
as follows: "A convicted offender who is made available to another
jurisdiction under ch. 976 or in any other lawful manner shall be
credited with service of his or her Wisconsin sentence or commitment
under the terms of s. 973.155 for the duration of custody in the other
In this case the appellate court concluded that "there can be
no argument that [the defendant] was a 'convicted offender' at the time
the State made him available to the federal courts. Indeed, he had been
convicted several years earlier, and when released to the federal
authorities, his probation had been revoked and he was ordered to serve
a four-year sentence. Little is known from the record about the
procedure that led to [the defendant's] being made available to federal
authorities, or why he was not returned to Wisconsin authorities to
begin his earlier sentence
Therefore, § 973.15(5) dictates
that [he] be given sentencing credit for the 'duration of custody in the
other jurisdiction.' The statute is clear and unambiguous. Accordingly,
[the defendant] is entitled to have his state sentence credited for the
time he was serving the federal sentences. Because the federal sentences
were longer in duration than the state sentence, [he] is entitled to be
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Termination of Parental Rights - Right to
Counsel at Dispositional Hearing
State v. Shirley
E., 2006 WI App
55 (filed 14 Feb. 2006) (ordered published 22 March 2006)
Shirley E. (the appellant) was found by the circuit court to be in
default for not appearing at any of the proceedings in an action to
terminate her parental rights to her son, though her attorney made all
court appearances. Even though the appellant was in default, the trial
court was required to hold an evidentiary hearing "to determine
whether there is 'clear and convincing' evidence that there are grounds
to consider if termination is in the best interests of the
birth-parent's child" (¶ 6). See Evelyn C.R. v. Tykila
S., 2001 WI 110, 246 Wis. 2d 1, 629 N.W.2d 768. The appellant's
attorney was not permitted to participate in the Evelyn C.R.
hearing (apparently for reasons associated with the appellant's
default as described above). The appellant's parental rights were
On appeal the appellant argued that she was deprived of her right to
an attorney during the dispositional phase of the proceedings, when the
state was obligated to prove grounds supporting the termination order.
In a decision authored by Judge Fine, the court of appeals agreed. In
Wisconsin, as a matter of statute, a person whose parental rights are at
stake must be represented by counsel, unless the person knowingly waives
that right. See Wis. Stat. § 48.23(2). Thus, the appellant
"was entitled to have her lawyer present and participate at the
Evelyn C.R. hearing. Accordingly, we vacate the order
terminating [the appellant's] parental rights to [her son], and remand
for further proceedings, expressing no view whether, at this late date,
[she] may seek to vacate the order of default"
Child Support - Overtime Compensation -
Exercise of Judicial Discretion
Welter, 2006 WI App 54 (filed 14 Feb. 2006) (ordered published
22 March 2006)
Wisconsin law requires that child support obligations be expressed
as a fixed sum unless the parties stipulate otherwise. See Wis.
§ 767.25(1)(a). In general, the amount of the obligation is
based on a percentage of gross income and assets (the percentage
standard). See Wis. Stat. § 767.25(1j). Gross income
includes, among other things, all salary and wages. Wis. Admin. Code
§ DWD 40.02(13)(a)1 (Dec. 2003).
In this case the child support order indicates that the family court
commissioner relied on the court's "general policy" when it
excluded overtime income when calculating the father's gross income and
subsequent child support obligation. The circuit court upheld the court
commissioner's decision, finding "The Court Commissioner's ...
policy of not including overtime is correct" (¶ 3).
In a decision authored by Chief Judge Cane, the court of appeals
reversed. "[T]he circuit court erred when it upheld the court
commissioner's decision to exclude overtime pay as a general policy
without exception when applying the percentage standard. Overtime income
clearly constitutes a portion of salary and wages, and Wisconsin law
does not exclude overtime income in the application of the percentage
standard. See Wis. Admin. Code § DWD 40.03(1) (Dec. 2003).
Further, the court and the court commissioner could have deviated from
the percentage standard if they considered the [statutory factors
catalogued in Wis. Stat. § 767.25(1)(a)] and articulated their
reasoning regarding why its normal application would be unfair to the
child or the parties" (¶ 6).
The court recognized that there may be circumstances when overtime
income may be excluded from a parent's gross pay if inclusion of the
income would be unfair to the parties or if other factors supported
exclusion. "However, here the circuit court and the court
commissioner simply applied a general policy against including overtime
income in the application of the percentage standard. It is erroneous
for a court commissioner or a court to set forth a general policy
regarding the calculation of a child support obligation when the law
calls for an exercise of discretion" (¶ 7).
The court of appeals also "remind[ed] the trial court and the
court commissioner that when Wisconsin law calls for the exercise of
discretion, there can be no general policy without exceptions"
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Worker's Compensation - Premiums -
Acuity Mut. Ins. Co. v.
Olivas, 2006 WI App 45 (filed 1 Feb. 2006) (ordered published
22 March 2006)
Olivas (the defendant) is a drywaller who works as a subcontractor.
Acuity Mutual Insurance Co. increased the defendant's worker's
compensation insurance premiums after it concluded that various workers
who accompanied the defendant to his jobs "were actually his
employees" (¶ 1). Acuity's concern was that this arrangement
exposed it to liability (see ¶ 3). When the defendant
failed to pay the higher premiums, Acuity filed suit for the unpaid
premiums plus interest. Following a bench trial, the judge ruled that
the defendant's workers were independent contractors and dismissed the
The court of appeals, in an opinion authored by Judge Brown,
affirmed. Acuity's prime contention on appeal was that the trial court
misapplied Wis. Stat. section 102.07(8), which ostensibly placed the
burden on the defendant to show the workers' independent contractor
status. The court rejected the argument. "We see this case as a
garden-variety breach-of-contract claim. In a breach-of-contract action,
the plaintiff bears the burden of proving that the defendant violated
the terms of the contract. Thus, the burden is not on Olivas to prove
that his fellow workers were independent contractors. Instead, Acuity
must prove that they were employees" (¶ 14).
"[T]he trial testimony supports the existence of an independent
contractor relationship between Olivas and the other workers based on
the dominant 'control' test. The unimpeached testimony of the defense
witnesses established that Olivas does not control the time or method of
the other workers' performance and has no right to discharge them. The
auditor's opinion that he must have been overseeing the other workers
was based predominantly on speculation. Her observations that Olivas
obtained the jobs and received the money and that the workers all worked
together at the same jobs were no more probative of an employer-employee
relationship than an independent contractor relationship. The fact that
the others lacked their own insurance policies, though indicative, was
not conclusive" (¶ 17).
Bad Faith - Worker's Compensation -
Aslakson v. Gallagher
Bassett Servs. Inc., 2006 WI App 35 (filed 2
Feb. 2006) (ordered published 22 March 2006)
The plaintiff, a carpenter, was badly injured in a fall at a work
site. He sued the Wisconsin Worker's Compensation Uninsured Employers
Fund (the fund), which provides worker's compensation coverage when, as
here, the employer carries no such coverage. Initially, the fund denied
the claim, but it was eventually ordered to make compensation payments.
The plaintiff then sued the fund and its administrator for bad faith.
The circuit court refused to dismiss the claim against the fund
administrator despite the administrator's contention that the Worker's
Compensation Act provides an exclusive remedy.
In an opinion authored by Judge Dykman, the court of appeals
reversed. "The Fund is a 'non-lapsible trust fund' created in 1989
by the legislature to pay benefits on valid worker's compensation claims
of employees of uninsured employers. See Wis. Stat. §
102.80(1). The Fund is subject to the provisions of the Worker's
Compensation Act, including Wis. Stat. §102.03(2), which states
that the act provides the exclusive remedy for all claims recognized by
the act. Furthermore, when the legislature enacts a comprehensive
statutory remedy such as the Worker's Compensation Act, that remedy is
presumed to be exclusive absent evidence of legislative intent to the
contrary" (¶ 8).
In response to prior case law, "the 1979-80 Wisconsin
Legislature adopted Wis. Stat. § 102.18(1)(bp), which provides that
the department may assess a penalty for bad faith in the handling of a
worker's compensation claim and states that this penalty 'is the
exclusive remedy against an employer or insurance carrier for malice or
bad faith'" (¶ 10). The plaintiff argued that the statute
applies only if the uninsured employer is liable for the
misconduct and, in general, applies only to "employers" and
"insurance carriers," not the fund or its agents (see
¶ 12). The court of appeals disagreed and said that the fund
administrator's argument gave reasonable effect to all parts of the
statutes and also comported with provisions of the administrative code
(see ¶ 13).
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Motor Vehicle Law
OWI - Repeat Offenders - Collateral
Attack on Prior Implied Consent Revocation Used to Enhance Penalty for
Krause, 2006 WI App 43 (filed 1 Feb. 2006) (ordered published
22 March 2006)
The defendant appealed from a judgment of conviction for operating a
motor vehicle while intoxicated (OWI), fifth offense, and from an order
denying his request for postconviction relief. He argued that the
circuit court erred when it denied him the opportunity to collaterally
attack a prior offense used to enhance his sentence. He contended that
the prior offense, which was a refusal revocation under the implied
consent law, should not be available for penalty enhancement purposes
because he was not afforded his constitutional right to counsel during
the refusal proceeding, and that the current OWI conviction therefore
should have been treated as a fourth offense rather than a fifth.
In a decision authored by Judge Snyder, the court of appeals
affirmed. "In an enhanced-penalty situation, a collateral attack on
a prior conviction used for enhancement must be founded on a claim of
actual or constructive denial of the constitutional right to
counsel" (¶ 12). However, the defendant had no right to
counsel at the refusal hearing "because such a hearing is civil,
not criminal, in nature" (¶ 11). Because the defendant did not
have a constitutional right to counsel, his collateral attack on the
prior conviction could not be based on denial of such right.
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Construction Projects - "Lowest
Possible Bidder" - Remedies for Disappointed Bidders
D.M.K. Inc. v. Town of
Pittsfield, 2006 WI App 40 (filed 28 Feb. 2006) (ordered
published 22 March 2006)
D.M.K. Inc. (the plaintiff) placed bids to perform municipal road
construction projects for the town of Pittsfield. The plaintiff was the
lowest bidder for each project, but another bidder was awarded the
contracts. The plaintiff filed a notice of claim against the town for
lost profits. The town disallowed the claim. The plaintiff then filed
suit against the town.
The statute under which the town awarded the disputed contracts
provides that "[t]he town board shall let a public contract for
which advertising is required under sub. (2)(b) to the lowest
responsible bidder." Wis. Stat. § 60.47(3). A
"responsible bidder" is "a person who, in the judgment of
the town board, is financially responsible and has the capacity and
competence to faithfully and responsibly comply with the terms of the
public contract." Wis. Stat. § 60.47(1)(b). The court of
appeals noted that "[d]etermination of the lowest responsible
bidder implies the exercise of discretion" (¶ 13). The breadth
of that discretion was at issue in this case.
In an opinion authored by Chief Judge Cane, the court
said "[o]n its face, the statute only imparts the Town
with one discretionary determination when determining who should be
awarded a contract - whether a given bidder is responsible" (¶
17). The court rejected the argument that the statute implies a broad
range of discretion beyond determining whether a bidder is responsible.
"Interpreting bidding statutes to imply the opennended discretion
suggested by the [amicus curiae Wisconsin Towns] Association would
facilitate the precise problems that competitive bidding statutes are
designed to prevent" (¶ 18).
The court did, however, uphold the town's ultimate finding that the
plaintiff was not a responsible bidder. "This finding is supported
by numerous legitimate concerns about [the plaintiff's] performance of
prior contracts. Therefore, we cannot conclude that the finding was
without a rational basis, nor can we conclude that it was the result of
an unconsidered, willful, or irrational choice of conduct. As such, the
finding was not arbitrary or unreasonable" (¶ 19).
The court also addressed the matter of the plaintiff's remedies. The
plaintiff sought money damages for lost profits. The circuit court
concluded that the plaintiff could not bring suit for lost profits. The
court of appeals held that the plaintiff "should have sought to
enjoin the Town from awarding, or the successful bidder from performing,
the disputed contracts. If successful, [the plaintiff] could force the
Town to award it the contracts, or alternatively, to relet them. [The
plaintiff] could also recover its costs of preparing the first bid and
obtaining the required bond. However, because [the plaintiff] would have
an opportunity to recoup its otherwise lost profits by either being
awarded the contracts or by rebidding on them, it would not be entitled
to lost profits as damages. [The plaintiff's] interest in obtaining the
benefit of the contracts would be protected, while the public would be
protected insofar as it would only have to compensate one bidder for a
given contract - the bidder that actually performed the contract"
(¶ 27) (citations omitted).
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Escrow Agents - Fiduciary
Black v. Metro-Title
Inc., 2006 WI App
52 (filed 15 Feb. 2006) (ordered published 22 March 2006)
The plaintiff and her former husband jointly owned a house. Under
the terms of a marital settlement agreement, the plaintiff agreed to
sell her interest in the house. The former husband refinanced the house,
"presumably to obtain liquidity in the equity" (¶ 1). An
escrow agent, Metro, conducted the closing and paid the former husband
the full amount of the equity. He then "squandered" the money
without paying the plaintiff her rightful share (id.). The
plaintiff sued Metro on the ground of negligence. The circuit court
granted summary judgment in Metro's favor.
The court of appeals, in an opinion written by Judge Brown,
affirmed. The court said that Metro successfully argued that as escrow
agent it had no duty toward incidental beneficiaries, such as the
plaintiff. Reviewing the case law, the court held that "in general,
the plaintiff must be a party to the contract. The law does recognize
exceptions to this general rule. For example, an escrow agent may be
held accountable where a third party is the victim of fraud on the part
of the escrow agent. An escrow agent may also be held responsible if he
or she engages in self-dealing or shows a conflict of interest. The
problem here for [the plaintiff] is that she has in no way shown that
she is a party to the contract or that any exception applies to her.
Absent those facts, we must fall back on the general rule that an escrow
holder's obligations are limited to compliance with the parties'
instructions" (¶ 9). Metro's affidavit was undisputed on these
points. Although the plaintiff was present for part of the closing,
"being present at the transaction in contemplation of a payout does
not make her a party to the agency agreement, and that is the key
ingredient missing from her summary judgment papers" (¶ 13).
The court suspected that the plaintiff was "snookered" but the
lack of discovery and her failure to appeal other claims sounding in
fraud precluded further review (see ¶ 15).
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Economic Loss Doctrine - No Contract -
Walker v. Ranger Ins.
Co., 2006 WI App
47 (filed 14 Feb. 2006) (ordered published 22 March 2006)
The plaintiffs' mobile home was severely damaged when its water
pipes froze and burst. The plaintiffs filed suit against their propane
gas provider and its insurer, alleging that the provider had negligently
turned off the propane gas supply after the plaintiffs' tenant, without
their knowledge, failed to pay the bills. The circuit court granted
summary judgment in favor of the defendants on the ground that the
economic loss doctrine precluded this negligence action.
The court of appeals, in an opinion authored by Chief Judge Cane,
reversed. First, the court held that the economic loss doctrine did not
apply because the case did not involve real estate and the damages were
not caused by a defective product (see ¶ 9). Moreover, the
plaintiffs had no contract with the defendants, so it was not possible
for them to pursue contract damages instead of tort damages
(see ¶ 10). Second, the court held that the record raised
sufficient facts to present a jury question on negligence. The provider
conceded that it had the plaintiffs' telephone number, and the
plaintiffs claimed that the company's own protocols required that it
obtain contact information for landlords from tenants.
Third, the court held that the defendants' expert witness should not
be permitted to testify about "industry standards" in this
case. "The issue in this case is whether Master Gas acted
negligently when it disconnected the propane system to their mobile home
without notifying the property owners. Analysis of this issue does not
require that the trier of fact have an understanding of the inner
workings of the propane industry" (¶ 14).
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