Vol. 84, No. 4, April 2011
Wis. Stat. section 806.07 – Relief from Judgments and Orders
Werner v. Hendree, 2011 WI 10 (filed 16 Feb. 2011)
Three individuals attacked 84-year-old Evelyn Werner in her home and stole her safe. One of the assailants, Hendree, had visited Werner’s home several times while employed as an insurance examiner by the state Office of the Commissioner of Insurance (OCI). (Werner had filed a complaint with the OCI regarding her annuities.) Werner filed suit against both Hendree and Michael Honeck, Hendree’s supervisor. “The State was not named as a defendant, and the State chose not to intervene in the lawsuit. Werner alleged several causes of action against Hendree, including trespass, aiding and abetting assault and battery, theft, and intentional infliction of emotional distress. As to Honeck, Werner alleged negligent supervision of an employee” (¶ 26).
The circuit court dismissed Werner’s complaint against Honeck on the ground of governmental immunity. At a subsequent hearing, the circuit court ruled that Hendree was ineligible for indemnification from the state under Wis. Stat. section 895.46; it found that Hendree clearly failed to cooperate in the defense of this litigation and there was nothing in the record to support a finding that Hendree committed a trespass of Werner’s home during the course of his employment with the OCI (see ¶ 37).
For purposes of combining the matters for later appeal, Werner’s counsel requested that the circuit court not sign and file the above two orders until a trial was held and judgment was entered as to Hendree’s liability and Werner’s damages. The attorney general (Honeck’s counsel) did not object. The circuit court then assured Werner’s counsel, on the record and multiple times, that it would not sign and file the order dismissing Honeck and the order ruling that Hendree was ineligible for indemnification until the case was entirely resolved as to Hendree. However, contrary to those assurances and unbeknownst to the parties, the circuit court prematurely signed the two orders on Dec. 3, 2007, several months before the trial was conducted and judgment was entered against Hendree (see ¶ 3). The orders were ultimately entered on April 2, 2008.
On June 24, 2008, the circuit court held a bench trial and determined Hendree’s liability and Werner’s damages. On July 11, 2008, the circuit court signed the judgment against Hendree. Werner filed her notice of appeal on Aug. 18, 2008. Werner appealed from 1) the order dismissing Honeck on the ground of governmental immunity, 2) the order ruling that Hendree was ineligible for indemnification, and 3) the July 11, 2008, judgment against Hendree. Werner timely appealed from the July 11, 2008, final judgment entered after trial. However, because the circuit court did not adhere to its assurances to hold the earlier orders for signature and filing until after trial, Werner’s notice of appeal was filed more than 90 days after the date on which the order dismissing Honeck and the order ruling that Hendree was ineligible for indemnification were filed. Accordingly, as to those orders, the court of appeals dismissed Werner’s appeal for lack of jurisdiction.
The supreme court granted Werner’s petition for review of the court of appeals’ decision. After the court of appeals’ decision was released but before the supreme court granted review, Werner moved the circuit court to vacate and reenter the orders dismissing Honeck and ruling Hendree ineligible for indemnification. She made the motion pursuant to Wis. Stat. section 806.07(1)(a), which authorizes the court to relieve a party from a judgment or order on the basis of mistake, inadvertence, surprise, or excusable neglect. The circuit court denied Werner’s motion, concluding that it was without power to vacate and reenter the orders because Werner failed to bring the motion within one year after the orders were made as is required under section 806.07(1)(a). Werner then appealed the circuit court’s denial of her motion to vacate and reenter the orders. The court of appeals stayed Werner’s second appeal pending the supreme court’s decision in the first appeal. On its own motion, the supreme court then removed Werner’s second appeal from the court of appeals in the interests of judicial economy so that the supreme court could resolve in a single decision all the issues raised by Werner’s appeals.
In a majority decision authored by Justice Ziegler, the supreme court first held that “the court of appeals improperly dismissed as untimely Werner’s appeal of the order ruling that Hendree was ineligible for indemnification, irrespective of the date on which the order was filed. This is so because the order was not final under Wis. Stat. § 808.03(1). The order did not dispose of the entire matter in litigation as to either Werner or Hendree, and accordingly, was not appealable until July 11, 2008, when the circuit court entered judgment on Hendree’s liability and Werner’s damages” (¶ 11).
The supreme court further concluded that “the circuit court erroneously exercised its discretion when it denied Werner’s motion to vacate and reenter (1) the order dismissing Honeck and (2) the other order ruling that Hendree was ineligible for indemnification. The circuit court erroneously concluded that it was without the power to vacate and reenter the orders given Werner’s failure to bring the motion within one year after the orders were filed” (¶ 12). Although motions under section 806.07(1)(a) must be brought within one year, a court also has the power to grant relief under the broader provisions of section 806.07(1)(h), which authorizes relief from a judgment or order for “any other reasons justifying relief from the operation of the judgment.” The section 806.06(1)(h) motion must be brought “within a reasonable time.” Said the supreme court, “the proper test under Wis. Stat. § 806.07(1)(h) for a motion that in part sounds in subsection (1)(a) but is brought outside the one-year time limit is ‘whether there are extraordinary circumstances justifying relief in the interest of justice’” (¶ 72) (citation omitted).
In this case the court concluded that extraordinary circumstances justified granting relief under section 806.07(1)(h). “Specifically, despite the circuit court both orally and in writing stating that it would hold the orders so that one appeal could later be taken after trial, it did not so hold the orders. Here, Werner’s counsel’s reliance on the court’s representation to hold the orders provides a basis for extending Werner’s time to appeal under § 806.07. Werner’s counsel had no reason to be on guard that the court would sign and file the orders before trial” (¶ 73).
Accordingly, the supreme court “reverse[d] both the court of appeals decision dismissing Werner’s first appeal and the circuit court’s order denying Werner’s motion to vacate and reenter the orders. We remand to the circuit court with instructions to vacate and reenter the order dismissing Honeck and the order ruling that Hendree was ineligible for indemnification” (¶ 85).
Justice Bradley, joined by Chief Justice Abrahamson, filed an opinion dissenting in part.
Other Acts – Child Abuse
State v. Marinez, 2011 WI 12 (filed 23 Feb. 2011)
Marinez was convicted of sexually assaulting his young stepdaughter. The key evidence against him consisted of the victim’s videotaped statement in which she described the assault while also referring to another incident in which the defendant severely burned her hand. In this case, the trial judge admitted the entire recorded statement, finding that the victim’s mention of the burn incident was relevant to the defendant’s identity as the person who sexually assaulted her, helped establish the victim’s credibility, and provided background for the sexual assault. Marinez contended that the evidence concerning the burn incident was impermissible character evidence but the judge allowed introduction of the videotaped statement. A jury convicted Marinez of sexual assault. The court of appeals reversed, finding that the trial judge should have redacted the references to the burn incident, a crime for which Marinez was convicted in a separate proceeding.
The Wisconsin Supreme Court reversed the court of appeals in an opinion written by Justice Crooks. The key issues concerned the proper application of the Sullivan test for other-act evidence (see State v. Sullivan, 216 Wis. 2d 768, 576 N.W.2d 30 (1998)) in light of the “greater latitude rule” in child sexual assault cases (see ¶¶ 18-20). The court worked through the Sullivan test, which consists of three steps. First, the evidence was properly offered for factual propositions other than the forbidden bad-character/propensity inference. Specifically, the victim’s reference to the defendant’s burning her hand helped establish her credibility and his identity as her sexual assailant and provided necessary context in the recorded statement. Second, her reference to the defendant’s burning her hand was relevant to all three propositions, particularly the victim’s credibility (see ¶ 34). The discussion is necessarily fact intensive, turning on the need for such evidence in child abuse cases, as permitted by the greater-latitude rule.
Third, the probative value of the evidence for these purposes was not substantially outweighed by unfair prejudice or other factors under Wis. Stat. section 904.03. Case law places the burden on the opponent for this last step. Critical here was the context in which the burn evidence was used. The victim described the defendant burning her hand in the same recorded statement in which she described how he sexually assaulted her. In a sense, the evidence was needed more to “complete the story” she was telling in that recorded statement than it was to somehow make sense of the sexual assault itself. That recorded statement was the heart of the state’s case; hence, the victim’s credibility while making that statement was critical (see ¶ 43).
Finally, the court rejected Marinez’s contention that the prosecutor misused the evidence at trial. It assessed this apart from the Sullivan issue, looking at it instead as a potential prosecutorial-misconduct issue. The record showed that the circuit court placed strict limitations on the burn evidence (for example, no photos, no details, no medical records) (see ¶ 50). The supreme court found no palpable misuse of the evidence, even in the face of the state’s concession that the prosecutor had made improper comments during closing argument (see ¶ 55).
Chief Justice Abrahamson dissented, joined by Justice Bradley. The dissent found that the hand-burning evidence was impermissible bad-character evidence and should have been excluded. The majority here, they said, has “offered a new explanation” of both “context” and “completing the story” as theories of admissibility (¶ 71). “The majority opinion has taken another step toward a judicially created exception to Wis. Stat. § 904.04(2), allowing virtually unrestricted use of propensity evidence in child sexual assault cases. The greater latitude rule for admission of other crime evidence in child sexual offense cases cannot overcome the total lack of a proper purpose for the burning incident evidence in the present case” (¶ 79).
Property Taxes – Valuation – Highest and Best Use
Nestlé USA Inc. v. Wisconsin Dep’t of Revenue, 2011 WI 4 (filed 2 Feb. 2011)
Nestlé USA built the Gateway Plant in 2001 as a satellite facility to its main plant, both of which are located in Eau Claire. The Gateway Plant is a special-purpose facility designed to produce whole-protein powdered infant formula and was specifically designed to meet Food and Drug Administration regulations in this field. After construction of the plant was completed, the Wisconsin Department of Revenue (DOR) sent an assessor to the plant to assess the facility for property tax purposes. “In order to assess the property, [the DOR assessor] had to complete two preliminary steps: 1) determine the ‘highest and best use’ of the facility and 2) select and apply the appropriate assessment method to be used in determining its value” (¶ 2).
The Wisconsin Property Assessment Manual requires that all property must be assessed at its “highest and best use.” The subject property’s highest and best use is “defined as that use which over a period of time produces the greatest net return to the property owner” (¶ 27) (citation omitted). The DOR assessor concluded that the Gateway Plant’s highest and best use was as a powdered-infant-formula-production facility. The assessor noted that “the plant had a number of expensive features which made it specially suited to produce powdered infant formula; Nestlé’s greatest net return would come from the plant’s continued use as a powdered infant formula production facility; and a likely purchaser of the Gateway Plant would be one of Nestlé’s competitors in the powdered infant formula industry” (¶ 3).
The DOR assessor then considered which of two assessment methods to use in determining the Gateway Plant’s value: the comparable-sales approach or the cost approach. He first attempted to assess the Gateway Plant under the comparable-sales approach. This approach uses market sales of properties that are reasonably comparable to the subject property’s highest and best use to predict the probable market price of the subject property. The DOR assessor could not find any powdered-infant-formula-production facility in the United States that had been sold for continued use as a powdered-infant-formula-production facility. Because there were no comparable sales, the DOR assessor concluded that he could not use the comparable-sales assessment method, and he instead used the cost-assessment method. This method considers the cost of building an exact replica of the structure to be assessed, minus depreciation and tax-exempt components. Under the cost-assessment method, the assessor deducts depreciation for functional obsolescence from the replication cost. This deduction occurs when a property contains an unmarketable feature called a “super adequacy.” The DOR assessor decided that all of the Gateway Plant’s specialized features could be marketed and sold for use in a powdered-infant-formula-production facility. Because of this, he concluded that the specialized features were not super adequate. In the end, he assessed the property at $10,915,000.
Nestlé disagreed with the DOR assessment and hired its own assessor to appraise the property. The Nestlé assessor concluded that the highest and best use of the Gateway Plant was not as a powdered-infant-formula-production facility but as a food-processing plant. Using the comparable-sales approach, he appraised the Gateway Plant at $3,590,000. He also made an alternative appraisal under the cost method but made a substantial deduction for functional obsolescence. After other deductions, his cost-method appraisal totaled $3,430,000.
The Tax Appeals Commission upheld the DOR’s assessment. On certiorari review, the circuit court agreed with the DOR that “Nestlé failed to present sufficient contrary evidence to overcome the presumption of correctness that the Gateway Plant’s ‘highest and best use’ was as a powdered infant formula production facility” (¶ 19). In a published decision, the court of appeals affirmed. See 2009 WI App 159.
In a unanimous decision authored by Justice Gableman, the supreme court affirmed the court of appeals. It concluded that “that Nestlé did not advance sufficient evidence to overcome the presumption of correctness afforded to the DOR’s assessment. Nestlé failed to introduce significant evidence that no market existed for the Gateway Plant’s sale as a powdered infant formula production facility. Also, we conclude that the Tax Appeals Commission’s acceptance of the DOR’s determination that the Gateway Plant’s ‘highest and best use’ was as a powdered infant formula production facility is supported by substantial evidence. We therefore hold that the DOR properly used the cost method and appropriately denied Nestlé a deduction for functional obsolescence”(¶ 59).