Vol. 83, No. 8, August 2010
Actions Involving Consumer Credit Transactions – Venue
Brunton v. Nuvell Credit Corp., 2010 WI 50 (filed 24 June 2010)
This action arose out of a consumer credit transaction. Brunton filed suit on Dec. 16, 2005, in Dane County Circuit Court alleging that Nuvell Credit Corporation violated the Wisconsin Consumer Act by engaging in prohibited debt-collection practices. Nuvell first appeared in the action and filed its answer on Feb. 2, 2006. Over the next 14 months, the parties litigated the case in Dane County. In August 2006, the plaintiff’s lawyer recognized that the action should have been venued in Rock County and raised the issue with Nuvell’s counsel, who declined to stipulate to a venue transfer. Thereafter the plaintiff did not take any further action regarding venue. On Feb. 27, 2007, Nuvell moved for summary judgment dismissing the lawsuit because it had been improperly venued in Dane County. The circuit court granted the motion.
In a published decision, the court of appeals reversed the decision of the circuit court and held that by actively defending against the plaintiff’s action for more than one year before moving to dismiss based on improper venue, Nuvell appeared and waived the improper venue within the meaning of Wis. Stat. section 421.401(2). See 2009 WI App 3.
In a majority decision authored by Justice Roggensack, the supreme court reversed the court of appeals. The court began its analysis by noting that the general venue statute, Wis. Stat. section 801.50, is applicable in civil actions “except as otherwise provided by statute,” and that challenges to improper venue on the ground of noncompliance with section 801.50 are to be made “[a]t or before the time the party serves his or her first motion or responsive pleading in the action.” Wis. Stat. § 801.51. However, this case involves a consumer credit transaction, as to which there is a more specific and thus controlling venue provision. Section 421.401(2)(b) establishes that an improperly venued action arising from a consumer credit transaction must be dismissed, unless the defendant appears and waives the objection. The court concluded that “appearance and waiver under § 421.401(2) require two actions: (1) an appearance established by conduct recognized under the law as appearance and (2) waiver established by the defendant’s knowledge of the proper venue and the intentional relinquishment of the right to proper venue” (¶ 1).
With regard to the appearance prong of this analysis, the court observed that the term appearance is generally used “to signify the overt act by which one against whom a suit has been commenced submits himself to the court’s jurisdiction and constitutes the first act of a defendant in court” (¶ 29). There are several actions by which one may appear. “A party ‘appears’ in an action either formally, by serving and filing a notice of appearance or an answer or by making a motion that serves to extend the time to answer, or informally, by actively litigating the merits of an issue without raising any jurisdictional objection” (¶ 30). In this case, there was no dispute that Nuvell “appeared.” It first appeared in the action on Feb. 2, 2006, when it filed a notice of appearance and an answer (see ¶ 48).
With respect to waiver, the court concluded that waiver under Wis. Stat. section 421.401(2) “requires the intentional relinquishment of a known right.The right being waived here is a defendant’s right to proper venue, coupled with the right of dismissal if the case is not properly venued. See Wis. Stat. § 421.401(1)(a)-(c); § 421.401(2)(b). Accordingly, to establish a valid waiver, it must be proved by the party claiming waiver that the defendant knew the place of proper venue and knew that he had the right to dismissal of the case when it was not properly venued. In addition to knowledge of the place of proper venue and the right to dismissal of an improperly venued action, a plaintiff must also prove that the rights to proper venue and dismissal of an improperly venued action were intentionally relinquished. Intentional relinquishment may be demonstrated by an express statement or by conduct. Intentional relinquishment by conduct occurs when a party’s conduct is ‘so inconsistent with a purpose to stand upon one’s rights as to leave no room for a reasonable inference to the contrary.’ Stated differently, a party intentionally relinquishes a known right by affirmative acts unambiguously demonstrating that his conduct is intentionally undertaken and meant to give up the right to proper venue” (¶¶ 37-38) (citations omitted).
In this case, the court concluded that Nuvell did not expressly waive the improper venue. “This is so because there was no written stipulation filed with the court or oral stipulation made in open court on the record stating that Nuvell intended to waive its right to proper venue. As such, any waiver could have occurred only by conduct. Brunton contends that Nuvell’s continued litigation of this action for over a year constitutes waiver. We disagree. Continued litigation of an action does not unambiguously demonstrate an intention to relinquish the right to proper venue. This is so because such conduct may also reasonably be interpreted as Nuvell defending itself against Brunton’s lawsuit. Brunton argues that Nuvell had the burden to challenge the improper venue once Nuvell knew of it.We are unpersuaded. There is no dispute that both parties knew that the action had been improperly filed in Dane County … on August 9, 2006…. When Nuvell refused to stipulate to Brunton’s transfer of the action to Rock County so Brunton could avoid dismissal of the action, it was Brunton who chose to continue to disregard the venue defect of her own making and to risk dismissal of her lawsuit.Nuvell’s refusal to stipulate to transferring venue to Rock County does not demonstrate its intention to waive the improper venue; rather, it may reasonably be interpreted as demonstrating Nuvell’s intent to stand on its right to proper venue, including the right to have an improperly venued action against it dismissed” (¶¶ 50-52).
Accordingly, because Nuvell did not both appear and waive the improper venue, the circuit court was required to dismiss the action when Nuvell raised the venue defect (see ¶ 54).
Chief Justice Abrahamson filed a concurring opinion that was joined by Justice Bradley. Justice Gableman filed an opinion concurring in part and dissenting in part.
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Buy-sell Agreements – Enforceability – Payment of Shareholder’s Litigation Expenses by Corporation
Ehlinger v. Hauser, 2010 WI 54 (filed 25 June 2010)
This litigation involves a contractual dispute between the joint and equal shareholders of Evald Moulding Inc. The parties’ buy-sell agreement provides that if one of the shareholders becomes totally disabled, the nondisabled shareholder is entitled to purchase his shares at “book value.” Defendant Hauser invoked the disability-buyout agreement, and plaintiff Ehlinger sought a declaratory judgment that the agreement was “unenforceable for lack of essential terms,” including the definition and means of determining book value (see ¶ 16). (“Both parties agreed that ‘book value’ would be defined as ‘assets minus liabilities.’ They differed, however, on how to determine which assets and liabilities should be computed in the calculation, and what degree of verification was needed” (¶ 26).)
This litigation has lasted more than seven years. Among the issues on appeal were whether the circuit court erred when it concluded that the undefined term book value rendered the buyout agreement unenforceable, whether it erroneously exercised discretion when it denied Hauser’s midtrial request to conduct a deposition of a special magistrate who was appointed by the circuit court to determine Evald’s book value and who had already been extensively cross-examined by Hauser during the trial, and whether it erroneously exercised its discretion when it permitted the corporation to fund the litigation expenses Hauser incurred in these proceedings (see ¶¶ 46, 48).
Six justices of the supreme court heard this case; Justice Crooks did not participate. The participating justices generated four separate opinions and split in multiple ways with respect to the issues on appeal. Those issues and the manner in which the justices voted are described in the lead opinion of Justice Bradley as follows:
With regard to the enforceability of the buyout agreement, four justices (Chief Justice Abrahamson and Justices Bradley, Prosser, and Roggensack) concluded that the agreement is unenforceable, although they differed on the rationale. Two justices (Justices Ziegler and Gableman) would remand to the circuit court for a determination of whether the contract is enforceable (see ¶ 6 n.3).
With respect to the circuit court’s order denying Hauser an opportunity to depose the special magistrate in the midst of trial and further denying his midtrial request to present his own expert witness, four justices (Chief Justice Abrahamson and Justices Bradley, Prosser, and Roggensack) concluded that the circuit court did not erroneously exercise its discretion when it denied Hauser further opportunity to challenge and counter the special magistrate’s conclusions. Two justices (Justices Ziegler and Gableman) would remand to the circuit court for more development of this issue (see id.).
Finally, with regard to the payment of Hauser’s litigation expenses from corporate funds, four justices (Chief Justice Abrahamson and Justices Bradley, Roggensack, and Ziegler) concluded that the circuit court erroneously exercised its discretion. Two justices (Justices Prosser and Gableman) concluded that the circuit court did not err (see id.).
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Plea Agreements – Power of Circuit Court to Reject Negotiated Pleas – Public Interest Standard
State v. Conger, 2010 WI 56 (filed 30 June 2010)
This case involved a plea agreement that provided that a felony charge would be amended to three misdemeanors, another charge would be dismissed but considered at sentencing as a read-in charge, and the prosecutor would make a recommendation for specific sentencing terms. The circuit court refused to accept the agreement. On certification to the supreme court from the court of appeals, this appeal presented three related questions, which the supreme court summarized as follows. “First, under what circumstances may a circuit court reject a plea agreement? Second, what factors may a court consider when it reviews a plea agreement? In answering the second question, we are asked to address whether the views of law enforcement may be among the factors considered.
“Third, as a corollary to those two questions, we must determine whether a judge who has rejected a plea agreement must then automatically withdraw from further participation in the matter, and, if not, whether the circumstances of this case at this point require such a recusal” (¶¶ 2–3).
In a majority decision authored by Justice Crooks, the supreme court concluded that a circuit court has the discretion to reject a plea agreement. Wisconsin Statutes section 971.29(1) allows the prosecutor to amend a complaint or information at any time before arraignment without leave of the court. The parties in this case agreed that postarraignment amendments require leave of the court (see ¶ 17). The supreme court concluded that it is an appropriate exercise of discretion for a circuit court to reject a plea agreement that it deems not to be in the public interest (see ¶ 27).
In making the public interest assessment, the supreme court indicated that it would be impossible to set forth an exhaustive list that would apply to the variety of facts and charges that face circuit courts every day. However, it did identify some of the factors that could apply depending on the circumstances. “To begin, Kenyon [State v. Kenyon, 85 Wis. 2d 36, 270 N.W.2d 160 (1978)] sketched the broad outlines of the appropriate inquiry into whether a plea is in the public interest. In that case, we noted that the circuit court should take into account ‘the public’s right to have the crimes actually committed fairly prosecuted and to the protection of the rights of third persons,’ as well as ‘the public interest in proper enforcement of its laws and the public interest in allowing the prosecutor sufficient freedom to exercise his legitimate discretion, to employ to the best effect his experience and training, and to make the subjective judgment implicit in the broad grant of authority under sec. 59.47, Stats.” (¶ 30) (citations omitted).
“Given those contours, a sensible – and important – starting point for a circuit court evaluating a plea is to consider the reasons stated by the prosecutor and defense counsel for recommending the plea agreement. Giving weight to the prosecutor’s recommendation and supporting reasoning reflects the court’s interest in honoring the public interest in providing a prosecutor freedom to exercise the discretion that his or her position authorizes. Likewise, the court’s evaluation of the defense attorney’s reasoning and recommendations reflects a balancing consideration of the public interest in a fair prosecution” (¶ 31). The court went on to list other factors relevant in the public interest analysis, which it drew from a variety of sources.
One specific factor was the focus of one of the questions certified to the supreme court by the court of appeals: “whether a trial court may take into account the view of law enforcement when considering the public’s interest in a plea agreement” (¶ 37). This raised the question of whether considering the view of law enforcement, as the circuit court did here, runs afoul of State v. Matson,2003 WI App 253, 268 Wis. 2d 725, 674 N.W.2d 51, which held that a plea agreement between the state and a defendant that included a joint sentencing recommendation was breached by a letter written by a law enforcement officer asking the court to disregard the joint recommendation and instead impose the maximum sentence. The court distinguished Matson from the present case. “[C]onsidering law enforcement representatives’ views as a factor in determining whether to reject the proposed plea agreement [as occurred in the present case] is quite a different matter from allowing law enforcement to slip a harsher sentencing recommendation to a court while the prosecutor uses a lesser sentencing recommendation to procure a plea from the defendant. Here, the consideration of law enforcement’s views was only one factor, of several noted in the record, in the circuit court’s decision, and it was not obtained after the prosecution had secured the defendant’s plea. Matson is good law, but it has no application here” (¶ 41).
The supreme court further concluded that the circuit court did not err in denying the defendant’s motion to recuse, because rejecting a plea agreement on the ground that it is not in the public interest does not fall under any of the rules that automatically require a court’s recusal from further participation in a case. Said the court, “We see nothing in a court’s rejection of a plea in general, and nothing in this particular record, that persuades us that in rejecting the plea agreement the court relinquished its ability to be the impartial and detached magistrate to which [defendant] Conger is constitutionally and statutorily entitled. Therefore, the circuit court did not err when it denied Conger’s motion to recuse; that denial was entirely proper” (¶ 45).
The court did note, however, that a “twist” in this case gave it some concern. When this appeal was first initiated, the court of appeals decided that input from the circuit court would be beneficial. It directed the circuit judge (the Hon. Peter L. Grimm) to arrange representation through the director of state courts and file a response. The court of appeals then designated Judge Grimm as an “intervenor-respondent” for this appeal. Said the supreme court, “This designation has raised the potential for a new motion for recusal to be made on remand on the grounds that Judge Grimm has, in the course of the appeal, become a party. If Judge Grimm has become a party to this action, then his recusal would appear to be governed by Wis. Stat. § 757.19(2)(b) (requiring disqualification from any civil or criminal action or proceeding when a judge is a party). On the record before us, we are unable to dispose of the question of Judge Grimm’s status as a party in this matter” (¶ 47). Accordingly, the supreme court remanded to the court of appeals the issue of whether Judge Grimm has now become a party or amicus, which, the court said, it expects will be followed by a remand to the circuit court for a decision under section 757.19(2) in regard to recusal (see ¶ 51).
Chief Justice Abrahamson filed a concurring opinion. Justice Prosser filed a dissent.
Guilty Pleas – Misinformation Regarding Range of Punishment Faced by Defendant – Remedy
State v. Cross, 2010 WI 70 (filed 8 July 2010)
The defendant pleaded guilty to a charge of second-degree sexual assault of a child and was informed by the state, the circuit court, and his own attorney that this offense was punishable by 40 years’ imprisonment with a maximum initial term of confinement of 25 years. These are the penalties for the offense as established by 2001 Wisconsin Act 109 (the second stage of truth-in-sentencing legislation (TIS-II), which took effect in 2003). The circuit court imposed the maximum sentence. The defendant later discovered that he should have been subject to a maximum of only 30 years’ imprisonment with 20 years’ initial confinement (the maximum penalties for the crime under the original truth-in-sentencing law (TIS-I), which was in effect at the time of the defendant’s conduct). Because he had been erroneously advised of the maximum penalty for the crime to which he pleaded guilty, the defendant filed a postconviction motion requesting plea withdrawal. The circuit court denied the motion and instead vacated the sentence and ordered resentencing. At the resentencing hearing the court imposed a term of 20 years’ confinement followed by 10 years’ extended supervision. The defendant appealed, and the state petitioned the supreme court for bypass of the court of appeals, which the court granted.
In a majority decision authored by Justice Gableman, the supreme court affirmed the circuit court’s decision. It held that “where a defendant is told that he faces a maximum possible sentence that is higher, but not substantially higher, than that authorized by law, the circuit court has not violated the plea colloquy requirements outlined in Wis. Stat. § 971.08 and our Bangert line of cases. [See State v. Bangert, 131 Wis. 2d 246, 389 N.W.2d 12 (1986).] In other words, where a defendant pleads guilty with the understanding that he faces a higher, but not substantially higher, sentence than the law allows, the circuit court has still fulfilled its duty to inform the defendant of the range of punishments. Therefore, the defendant is not entitled to an evidentiary hearing, and plea withdrawal remains in the discretion of the circuit court and will not be disturbed unless the defendant shows that it is necessary to correct a manifest injustice” (¶ 45).
In this case, the defendant was told he faced a maximum exposure of 25 years’ initial confinement with 15 years’ extended supervision, when the actual maximum was 20 years’ initial confinement with 10 years’ extended supervision. Said the court, “We conclude that Cross pled guilty under the belief that he faced a higher, but not substantially higher, maximum penalty. We hold that as a matter of law, Cross’s plea was therefore made knowingly, voluntarily, and intelligently. Moreover, Cross has not demonstrated that withdrawal of his plea is necessary to correct a manifest injustice” (¶ 46).
The majority noted, however, that when the actual penalty faced by the defendant is significantly different than that as to which he or she was advised, or when the defendant is told that the sentence is lower than the amount allowed by law, a defendant’s due process rights are at greater risk and a Bangert violation may be established. If a Bangert violation is established, the burden falls on the state to prove at an evidentiary hearing that the plea was knowing, voluntary, and intelligent (see ¶ 39).
Chief Justice Abrahamson filed a concurring opinion that was joined by Justice Bradley.
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Termination of Parental Rights – Procedures
Sheboygan County Dep’t of Health & Human Servs. v. Tanya M.B., 2010 WI 55 (filed 29 June 2010)
A circuit court terminated the parental rights of Tanya and William to their three children based on the parents’ lengthy history of drug and alcohol abuse. The court of appeals reversed on the ground that the dispositional orders underlying the termination of parental rights (TPR) petitions failed to set forth any court-ordered services as required by statute.
The supreme court reversed in an opinion authored by Justice Roggensack. The court assumed without deciding that the parents had not forfeited their objection to the sufficiency of the dispositional orders; thus, it addressed the merits of the appeal. First, it was unnecessary to determine whether this case was controlled by the 2003-04 or the 2007-08 version of Wis. Stat. section 48.355(2)(b)1. because the dispositional orders at issue satisfied either version (see ¶ 32). Second, the dispositional orders contained the “specific services” required by section 48.355(2)(b)1. The court provided considerable detail from the record on this point, also noting that “for almost four years all parties had been interpreting the dispositional orders as requiring the Department to arrange the services necessary to assist Tanya and William in meeting the court ordered conditions for the return of their children” (¶ 39). The CHIPS dispositional orders were fully consistent with the goal of serving the children’s best interest. Finally, the record was “replete” (¶ 58) with credible evidence supporting both the jury’s findings that the parents were unfit and the court’s order terminating their parental rights. This discussion is necessarily fact intensive.
Chief Justice Abrahamson, joined by Justice Bradley, concurred. They would have decided against the parents on the narrow ground of forfeiture, which accords “with sound appellate practice” (¶ 89). The concurring justices also believe that the majority opinion “rewrites” the statute.
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Excess Insurers – Drop Downs – Duty to Defend
Johnson Controls Inc. v. London Market, 2010 WI 52 (filed 24 June 2010)
This case is a rivulet in a litigation stream that has flowed for more than 21 years, involving insurance coverage for pollution claims. The precise questions involve whether an excess insurer, London Market, has a duty to defend its insured, Johnson Controls, and if so, when that duty to defend was triggered under 1970s-vintage policies. London Market sought a declaration that its policy was an indemnity-only excess umbrella policy that contained no promise of defense (see ¶ 18). The circuit court ruled that London Market’s “follow-form procedure” incorporated the duty to defend found in an underlying indemnity policy issued by Travelers. It also ruled that London Market’s duty to defend was not predicated on exhaustion of the underlying Travelers policy. The court of appeals certified the appeal to the supreme court.
The supreme court affirmed in a majority opinion written by Justice Bradley. First, London Market’s follow-form policy incorporated the duty to defend found in the underlying policy. The absence of a duty-to-defend provision did not fall within the policy’s “except as otherwise provided” clause (see ¶ 41). The court declined to “rewrite insurance contracts by filling in gaps left in the draftsmanship” (¶ 42). Nor was it persuaded by changes made in later contracts or by speculation about the amount of the premium charged.
Second, the court held that London Market’s duty to defend was triggered irrespective of the “exhaustion” of the Traveler’s policy. The court stressed the distinction between indemnity coverage and the duty to defend when construing the term liability. “We conclude that although London Market’s duty to indemnify is conditioned upon exhaustion of the underlying Travelers policies, its duty to defend is not so conditioned. Rather, under the ‘other insurance’ provision, London Market was required to ‘respond under [its] policy as though such other insurance were not available’ because Travelers ‘denie[d] primary liability under its policy.’ Thus, London Market was required to assume the defense” (¶ 75). This conclusion falls well within the mainstream of the case law.
Justice Ziegler dissented, joined by Justice Roggensack and Justice Gableman. They criticized the majority’s construction of the policy as one that “transforms the excess insurer into a primary insurer by imposing a duty to defend on the excess insurer, in contravention of the London Market insurance policy” (¶ 89).
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Improvements to Real Property – Statute of Repose
Hocking v. City of Dodgeville, 2010 WI 59 (filed 2 July 2010)
Plaintiffs Glen and Louann Hocking filed a lawsuit against the city of Dodgeville for damage to their property. They claimed that the city was negligent in the design, plotting, approval, and development of a subdivision adjacent to their property and that the negligence caused significant water damage to their property. Before construction of the subdivision, the plaintiffs experienced no flooding problems in their yard or basement; after the adjacent land was developed, they experienced serious water damage from storm water run-off from the subdivision.
The city asserted that the suit was barred under Wis. Stat. section 893.89 (2007-08), which imposes a 10-year statute of repose on actions for injury resulting from improvements to real property. A statute of repose limits the time in which an action may be brought (see ¶ 19) and in this case began to run immediately following the date of substantial completion of the improvement to real property (see ¶ 21). The circuit court and court of appeals (see 2009 WI App 108) agreed with the city that the statute of repose bars this action. In a unanimous decision authored by Justice Gableman, the supreme court affirmed the court of appeals.
The specific issue before the supreme court was whether either of two exceptions contained in the statute of repose applies and therefore allows the Hockings’ suit to proceed.The first exception is in section 893.89(4)(b), which provides that an action normally precluded by the 10-year statute of repose may nonetheless be brought against “[a] person who expressly warrants or guarantees the improvement to real property, for the period of that warranty or guarantee.” Because the Hockings sued the city of Dodgeville, the city is the “person” here.The improvement to real property in this instance was the design and installation of roads, curbs, and street gutters during the early development of the subdivision. Thus, the question is whether the city expressly warranted or guaranteed its installation of the roads, curbs, and street gutters in the subdivision.
“In the context of § 893.89(4)(b), the express warranty or guarantee is clearly referring to an assurance of quality by the one designing or constructing the improvement, likely for a defined period of time. Hence, the statute allows an express warranty or guarantee to outlive the statute of repose ‘for the period of that warranty or guarantee.’ § 893.89(4)(b). Such an express warranty or guarantee [was] not present here” (¶ 33). A second problem with the Hockings’ argument was that none of the statements allegedly made by various individuals associated with the city regarding resolution of the water problem came from someone authorized to bind the city. “Accordingly, even if we assume these statements constituted an express warranty or guarantee, the Hockings simply cannot show that the express warranties or guarantees were binding upon the City of Dodgeville” (¶ 34).
A second exception to the statute of repose is codified in Wis. Stat. section 893.89(4)(c), which provides that the 10-year statute of repose does not apply to actions for damages “resulting from negligence in the maintenance, operation or inspection of an improvement to real property” by the “owner or occupier of real property.” Here, the “owner or occupier of real property” is the city and the “improvement to real property” was the building of the roads, curbs, and street gutters in the subdivision. For this exception to apply, the city would need to be negligent “in the maintenance, operation or inspection” of the roads, curbs, and street gutters (¶ 45). The text of the statute distinguishes between suits arising from “design” or “planning” defects, which explicitly fall within the statute of repose, and suits arising from negligent maintenance of the property under section 893.89(4)(c) (see ¶ 47). In this case the supreme court concluded that “the alleged negligence was in the planning and design of the roadways. There is no evidence that the City has been negligent in maintaining the roadways following their construction. In short, the facts alleged by the Hockings do not place their suit within the exception contained in § 893.89(4)(c)” (¶ 50).
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Sexually Violent Persons
Discharge Hearing – Procedure
State v. Arends, 2010 WI 46 (filed 15 June 2010)
Arends was committed as a sexually violent person in 2005. The circuit court denied his 2007 petition for discharge. The court of appeals reversed because the trial judge applied the wrong standard. See 2008 WI App 184.
The supreme court modified and affirmed the court of appeals in a majority opinion written by Justice Gableman that discusses the procedures for determining whether a discharge hearing need be held. The legislature substantially modified the discharge procedures in 2006 by replacing a mandatory probable-cause hearing with “a two-step process similarly aimed at weeding out meritless and unsupported petitions, while still protecting a petitioner’s access to a discharge hearing” (¶ 22). The first step is governed by Wis. Stats. section 980.09(1). “Review under § 980.09(1) is a paper review by the court only of the petition and its attachments.Additional supporting evidence or reports may not be considered at this stage. The statute further specifies that the petition must allege facts, not just legal conclusions. A petition which merely states ‘I am no longer a sexually violent person’ without any supporting facts must fail. Conclusory allegations alone are not enough” (¶ 25). “The standard under § 980.09(1), then, provides for a very limited review aimed at ensuring the petition is sufficient – that is, whether relief for the petitioner is possible based on the factual allegations in the petition. The clear purpose of such a review is to weed out meritless and unsupported petitions, which is especially important in light of the statute’s proviso that petitions for discharge may be filed at any time” (¶ 28).
The second step is governed by Wis. Stat. section 980.09(2), which requires the circuit court to examine a wider range of information, including “(1) any current and past re-examination reports or treatment progress reports filed under Wis. Stat. § 980.07; (2) relevant facts in the petition and in the State’s written response; (3) arguments of counsel; and (4) any supporting documentation provided by the person or the State” (¶ 32). The “central dispute” in this case concerned the proper standard of proof under section 980.09(2). “We take the standard delineated in the statute at face value. It contains neither the phrase ‘probable cause’ nor the phrase ‘preponderance of the evidence,’ both of which are common terms of art that the legislature could have employed. The circuit court’s task, according to the statute, is to determine whether the documents and arguments before the court contain ‘facts from which the court or jury may conclude that the person does not meet the criteria for commitment as a sexually violent person’” (¶ 37).
Although the court need not take every document at “face value,” it is also not to “weigh” evidence favoring and disfavoring the petitioner (¶¶ 39-40). “The standard prescribed by § 980.09(2) is similar to that used in a civil action to decide a motion to dismiss at the close of evidence under Wis. Stat. § 805.14(4). The § 805.14 standard likewise tests whether the record contains any evidence that would support relief for the plaintiff” (¶ 42).
The case was remanded for an application of these procedures.
Justice Prosser dissented. “[I]n my view, a facially sufficient petition requires a discharge hearing under Wis. Stat. § 980.09(3) unless the state shows that the ‘facts’ alleged in the petition cannot be substantiated or the allegations in the petition are deficient as a matter of law” (¶ 66).
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Condominiums – Real Estate Tax Liability for Declared but Unbuilt Units
Saddle Ridge Corp. v. Board of Review, 2010 WI 47 (filed 18 June 2010)
Saddle Ridge Corporation is a condominium developer. This case concerns its liability for property taxes for condominium units that are declared and platted in the condominium instruments but that were not constructed at the time they were assessed by the municipality. The circuit court granted Saddle Ridge’s petition for a writ of certiorari and vacated the board of review’s determination affirming the property tax assessment against Saddle Ridge. In an unpublished decision, a divided court of appeals affirmed the decision of the circuit court. In a unanimous decision authored by Chief Justice Abrahamson, the supreme court reversed the court of appeals.
The supreme court began its analysis by noting that the condominium form of ownership is strictly a “creature of statute” and in Wisconsin is governed by Wis. Stat. chapter 703. “To create a condominium, a condominium declaration and a plat must be filed with the register of deeds.The condominium is defined as the property that has been subject to a condominium declaration under the statutes. Wis. Stat. § 703.02(4). Once the declaration and plat are properly recorded, the condominium exists regardless of whether any units have been constructed” (¶ 6). “The declaration must contain a description of each unit and the condominium plat must designate every unit within the condominium at the time it is filed. Wis. Stat. § 703.11(3). Designating units creates tax parcels. Wis. Stat. § 703.21(1)” (¶ 10).
Saddle Ridge contended that the parcels for which it was taxed were not “units” because there was no building and only built “units” could be taxed under the terms of the Condominium Ownership Act and the declarations for these condominiums. It argued that without buildings, the tax parcels here are only vacant land and that all the land within the condominiums is part of the common elements, properly taxed to the owners of the built units (see ¶ 47). The supreme court disagreed. It held that Saddle Ridge was lawfully assessed for the property tax due on the tax parcels at issue here (see ¶ 43). Said the court, “We conclude that the Board [of Review] ‘acted according to law’ in assessing Saddle Ridge for the unbuilt units. Saddle Ridge owns the declared but unbuilt condominium units and these unbuilt units are tax parcels, the assessment value of which is assessed to Saddle Ridge” (¶ 76).
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Insurance – Bad Faith – Deductibles
Roehl Trans. Inc. v. Liberty Mut. Ins. Co., 2010 WI 49 (filed 22 June 2010)
This case involves a bad-faith claim against a liability insurer that settled a case within policy limits but in excess of the insured’s large deductible. A trucking company, Roehl Transport, carried a liability policy issued by Liberty Mutual with limits of $2 million and a $500,000 deductible. One of Roehl Transport’s trucks rear-ended a car and injured its driver, Groth. The case went to trial, and a jury awarded Groth damages of more than $800,000, which was within the policy limits but also gobbled up the entire deductible. Roehl Transport sued Liberty Mutual for bad faith, alleging that the case should have been settled for about $100,000, which would have saved $400,000 of the insured’s deductible. A jury found that Liberty Mutual had acted in bad faith and awarded damages. In postverdict motions, the circuit court denied Roehl Transport’s motion for attorney fees.
On certification from the court of appeals, the supreme court affirmed in part and reversed in part in an opinion authored by Chief Justice Abrahamson. The primary issue was whether “a cognizable bad faith claim exists in Wisconsin when a verdict against the insured in the underlying third-party liability claim is less than policy limits but costs the insured its deductible” (¶ 25). The court applied the “traditional methods and principles of common-law analysis” in a careful, thorough review of the bad-faith doctrine (¶ 34).
Although case law had recognized three types of bad-faith claims, nothing in those cases delimited the doctrine to just those categories. Rather, the court examined the varying interests of insurers and of insureds subject to large deductibles. “Under the circumstances of the present case in which the insured has a significant deductible, the insurance company’s and the insured’s interests might diverge, and the insurance company could make decisions in settling claims that favor its own interests over those of the insured. The insurance company might offer an unnecessarily high settlement within the deductible to avoid the expense of diligent investigation and adjustment. Or it might expend insufficient effort to investigate a claim unless or until the insurance company’s own money is at risk when the value of the claim approaches or exceeds the deductible. The insurance company’s apparent interest in settling claims below the deductible is to minimize its own costs, not necessarily to minimize the total payment to the claimant. Just as in traditional third-party excess judgment cases, the insured with a high deductible needs the protection of a bad faith cause of action to guard against the risk that an insurance company’s exercise of control over a claim might favor its own financial interests over those of the insured. This possibility gives rise to a cause of action for bad faith” (¶¶ 53-54; see also ¶ 77).
Next, the court held that the jury was properly instructed on bad faith and that credible evidence supported its findings. It rejected Liberty Mutual’s contention “that the instructions required a specific finding of deceit or dishonesty” (¶ 125). The “extensive record” of the eight-day trial amply supported the jury’s bad-faith determination. The court also rejected Liberty Mutual’s contention that Roehl Transport’s failure to call the injured driver or its own president to testify about settlement postures was somehow fatal to the verdict (see ¶ 130).
Public policy considerations did not preclude Roehl Transport’s bad-faith claim based on expert testimony regarding what Groth’s claim “could have settled for” (¶ 140). “We need not determine in the present case whether some or all of the traditional judicial public policy considerations might ever be applied to preclude recovery in a bad faith action. Even if we were to apply judicial public policy considerations to a bad faith claim, the facts in the present case would not preclude recovery on that basis” (¶ 152).
The supreme court reversed the circuit court’s determination that Roehl Transport was not entitled to attorney fees because it had not presented evidence on that point at trial. “We conclude that Roehl Transport was entitled to attorney fees as a matter of law as a result of the jury’s finding of bad faith and that the determination of the amount of attorney fees as compensatory damages is a matter of law for the circuit court to determine. Accordingly, the circuit court erred in denying Roehl Transport’s request for attorney fees and in failing to determine the amount of fees to be awarded to Roehl Transport” (¶ 161). The court thoroughly reviewed bad-faith cases in which attorney fees were awarded in other contexts. The court seemed particularly troubled by the peculiar proof problems involved in proving up attorney fees in a bad-faith case, concluding that it presented “unworkable challenges to the orderly conduct of the trial process” (¶ 178).
Finally, the supreme court held that the circuit court properly dismissed Roehl Transport’s claim for punitive damages. Although Liberty Mutual engaged in bad faith, its conduct was not “sufficiently aggravated” to warrant punitive damages (see ¶ 192).
Attorneys – Fiduciary Duty – Punitive Damages
Groshek v. Trewin, 2010 WI 51 (filed 24 June 2010)
The plaintiffs sued their former lawyer, Trewin, who had purchased their financially distressed property. The plaintiffs sought rescission of the contract and punitive damages. Following a bench trial, the circuit court rescinded the contract and found punitive damages were appropriate because of the attorney’s misconduct in this and other cases in which he had “similar transactions with other clients” (¶ 8). The court of appeals affirmed the contract’s rescission but reversed the grant of punitive damages on the ground that the plaintiffs had sought only equitable relief.
The supreme court affirmed in a majority opinion authored by Justice Crooks. As to the rescission claim, the circuit court properly found that Trewin, by his own admission, was still acting in his capacity as the plaintiffs’ attorney when this transaction occurred, which happened to be on the eve of his law license’s suspension. Thus, he owed the plaintiffs, who were then his clients, a fiduciary duty. He also breached that duty as shown by the evidence, particularly the plaintiffs’ confusion about the transaction (for example, their “shock” when a “For Sale” sign went up). “We agree that Trewin’s conduct here fits the example given in Zastrow – entering into a contract with a client ‘without full disclosure that the contract will benefit the lawyer and potentially disadvantage the client’ – and therefore constitutes a breach of fiduciary duty, including specifically the fiduciary duty of loyalty” (¶ 18). Finally, Trewin’s breach caused the damage that justified the contract’s rescission. “The circuit court made repeated references to the advantage Trewin had, as a result of knowing the particulars of the Grosheks’ financial situation, in setting the purchase price. The inference drawn by the circuit court, based on evidence of the value of the land and the purchase price, was that Trewin paid less for the land than another buyer would have paid” (¶ 20).
Punitive damages, however, were inappropriate in this case. Tucker v. Marcus, 142 Wis. 2d 425, 418 N.W.2d 818 (1988), establishes that punitive damages are foreclosed “in a case where there is no award of compensatory damages” (¶ 29). For this reason the court declined to reach the following question: “whether, in an equitable action where a court awards compensatory damages,the fact that the action is an equitable action would then bar recovery of punitive damages” (¶ 30).
Chief Justice Abrahamson dissented only from those parts of the majority opinion regarding punitive damages. She noted that the “historic rule that courts cannot award punitive damages in equitable actions has eroded over the years” (¶ 49). The Chief Justice “conclude[d] that the failure to recover compensatory damages – actual, presumed, nominal, or otherwise – has no logical bearing on the propriety of a punitive award. The suitability of a punitive damage award should be determined by the usual rule, evaluating the nature of the wrongdoer’s conduct. The economic magnitude of the wrongdoing may or may not be properly represented by an award of compensatory damages and the absence of such an award should not raise a categorical bar to punitive damages if the conduct otherwise warrants them” (¶ 53).