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    Court of Appeals Digest

    This column summarizes selected published opinions of the Wisconsin Court of Appeals. Full-text decisions are linked below. Profs. Daniel D. Blinka and Thomas J. Hammer invite comments and questions about the digests. They can be reached at Marquette University Law School, 1215 W. Michigan Ave., Milwaukee, WI 53233, (414) 288-7090.

    Prof. Daniel D. Blinka & Prof. Thomas J. Hammer

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    Attorney Fees

    Contingent Fees – Discharged Lawyer – Damages – Necessary Parties

    Tesch v. Laufenberg, Stombaugh & Jassak S.C., 2013 WI App 103 (filed 3 July 2013) (ordered published 28 Aug. 2013)

    HOLDINGS: When a client signs a contingent fee agreement with one firm, signs another fee agreement with another firm, and then discharges the first firm without cause, the measure of damages is the amount of the contingent fee minus a fair allowance for the services and expenses that would necessarily have been expended by the discharged attorney in performing the balance of the contract; the court also held that in this litigation, the second firm was not a necessary party.

    SUMMARY: Tesch was injured in a car accident. While hospitalized, she entered into a contingency fee agreement with the Laufenberg firm (Laufenberg). Several days later, Tesch signed a fee agreement with the Habush firm (Habush), which was unaware of her earlier agreement with Laufenberg (see ¶ 29).

    Daniel D. Blinkaedu daniel.blinka marquette Prof. Daniel D. Blinka, U.W. 1978, is a professor of law at Marquette University Law School, Milwaukee.

    Thomas J. Hammeredu thomas.hammer marquette Prof. Thomas J. Hammer, Marquette 1975, is a law professor and Director of Clinical Education at Marquette University Law School, Milwaukee.

    Tesch later discharged Laufenberg and then brought a declaratory judgment action against Laufenberg to declare their fee agreement void. Laufenberg filed a third-party complaint against Habush on claims for an accounting and disgorgement. The circuit court ruled that Laufenberg failed to state a claim against Habush while also finding not binding Tonn v. Reuter, 6 Wis. 2d 498, 95 N.W.2d 261 (1959), in which the court held that a discharged attorney may be entitled to the contingent fee minus a “fair allowance for services and expenses” that the attorney would have expended in representing the client. Laufenberg appealed the dismissal of the cross-claim against Habush.

    The court of appeals affirmed in an opinion, authored by Judge Blanchard, that took a different approach. The court assumed that Laufenberg had been discharged without cause (see ¶ 13). It also held that Tonn applies to these facts: “the measure of damages ‘in a case like the present [one]’ is ‘the amount of the contingent fee … less a fair allowance for the services and expenses which would necessarily have been expended by the discharged attorney in performing the balance of the contract’” (¶ 17) (quoting Tonn).

    Moreover, Tonn applies regardless of whether the discharged lawyer performed substantial services, a conclusion that followed from the Tonn opinion itself, Wisconsin case law after Tonn, and persuasive federal case law. A contrary reading would compel “difficult line drawing exercises” about what constitutes “substantial services” (¶ 24).

    The court of appeals cautioned, though, that its analysis would be different if Laufenberg had been justifiably discharged before performing “significant services” (¶ 25). The court refused to distinguish Tonn on multiple bases, including the argument that Tonn applies only to disputes between attorneys, and not to ones between a client and her former attorney (see ¶ 28).

    Nonetheless, the court of appeals held that dismissal of Habush from this lawsuit was proper because it was not a necessary party under Wis. Stat. section 803.03(1). The court agreed with Habush’s contention that Tonn “rejects” a “single fee” theory (¶ 36), that is, Tonn contemplates that a client could be held liable for damages and fees that exceed what the client would have owed under one fee agreement (see ¶ 37).

    “Stated another way, although Tonn contemplates that a client may be liable for more than the amount of a single fee, this liability is not, strictly speaking, all in the form of attorney’s fees. Rather, it is in the form of contract damages to the discharged attorney and attorney’s fees to the successor attorney. While there may not be much difference from the client’s point of view, the difference matters in that, under the logic of Tonn, the client is not being required to pay more than one fee to one attorney; rather, the client is being required to pay contract damages to one attorney and attorney’s fees to the other” (¶ 39). The court of appeals also addressed public policy grounds and ventured that Tonn is “ripe for review by our supreme court” (¶ 42).

    For purposes of remand, the court of appeals referenced the circuit court’s supervisory authority to determine the reasonableness of successor counsel’s fees. “In deciding whether to exercise its supervisory authority over Habush’s fee agreement, the circuit court is not limited under Tonn in the same way that it is limited with respect to Laufenberg’s fee agreement. [T]he ordinary rule is that the court may exercise its authority over a contingency fee agreement by considering ‘all the circumstances’” (¶ 45).

    Consumer Law

    Wisconsin Consumer Act – Duty to Provide Notice Before Repossession of Vehicle

    Molinski v. Chase Auto Fin. Corp., 2013 WI App 101 (filed 17 July 2013) (ordered published 28 Aug. 2013)

    HOLDING: The plaintiff failed to show that the finance company violated its statutory duty to give notice before repossessing the plaintiff’s automobile, which was collateral for a loan.

    SUMMARY: Molinski purchased a new car and financed the purchase by executing a written loan agreement with Chase Auto Finance Corp. The car served as collateral for the loan. The loan agreement required Molinski to provide written notice to Chase as to where she lived and where the car was garaged and to provide Chase with 30 days’ written notice before any change in address. Molinski became delinquent in her loan payments. She subsequently moved from the address that Chase had on file without providing written notice to Chase. Chase sent Molinski a notice pursuant to Wis. Stat. section 425.205(1g) to the address that it had on file for her. The notice stated that Chase could repossess her car if she did not pay the delinquency or request a court hearing. Molinski did not pay and did not request a court hearing, and Chase repossessed her car.

    Molinski sued for violations of the Wisconsin Consumer Act (WCA). She argued that she did not receive the statutorily required notice pursuant to section 425.205(1g). Alternatively, she contended that Chase was barred from self-help repossession under the WCA by the loan’s provision for a “right to a court hearing” before repossession. The circuit court dismissed her claims.

    In a decision authored by Judge Reilly, the court of appeals affirmed. The WCA allows a creditor to repossess a car used to secure a motor vehicle loan without first going to court provided the creditor gives to the debtor notice that includes, among other basic information, that the creditor may repossess the car without going to court unless the debtor demands within 15 days after the notice that the creditor proceed to court (see ¶ 5). A debtor’s address is established by any writing signed by the debtor in connection with the transaction and is presumed to be unchanged until the creditor knows or has reason to know of a different address (id.).

    The appellate court concluded that Molinski did not meet her burden to show that Chase did not provide her with the required notice or the right to a hearing before repossession. “Given her failure to provide her new address, Molinski failed to show that Chase’s notice by registered mail to the address that it had on file for Molinski did not comply with the WCA. Additionally, Chase adhered to its requirements under the contract and statutory law at the time of the repossession in honoring Molinski’s right to have a court hearing by providing her notice that she had the right to request a court hearing prior to repossession. Molinski never requested a court hearing” (¶ 6).

    Contracts

    Home Improvements – Administrative Code – Damages – Attorney Fees

    Grand View Windows Inc. v. Brandt, 2013 WI App 95 (filed 30 July 2013) (ordered published 28 Aug. 2013)

    [Note: the full decision is not appearing on the court system's website.]

    HOLDINGS: No evidence supported a damages award for a Wisconsin Administrative Code chapter ATCP violation in a home improvement case; a commercial general liability carrier provided no coverage for its insured’s “volitional” act (although the circuit court properly declined to award the insurer its costs); and the award of attorney fees for the administrative code violation had to be vacated absent proof of pecuniary damages for such a violation.

    SUMMARY: This protracted litigation sprang from a home improvement project that went amok in 2004. Brandt signed two contracts with Grand View, one for new siding and another for new windows. Grand View started the project late, tore off the siding, and then disappeared for a week and a half, leaving the home exposed to the elements. Grand View sued Brandt for the balance of the contract price, which Brandt refused to pay, citing poor workmanship and other damages. Brandt also counterclaimed, alleging breach of contract and various infractions of the Home Improvement Practices Act, Wisconsin Administrative Code chapter ATCP 110. A 2011 jury trial resulted in the award of modest damages to Brandt, a finding that Grand View violated the administrative code, and the award of $84,000 in attorney fees to Brandt. All parties appealed.

    The court of appeals affirmed in part and reversed in part in an opinion written by Judge Kessler. First, the court reversed the award of $250 in damages based on Grand View’s violation of the administrative code for failing to give notice that the siding work would be delayed. Although abundant evidence supported Brandt’s claim for breach-of-contract damages, the court (“regretfully”) found no evidence to support the $250 award for the administrative code violation (see ¶ 33). For the same reasons, Brandt was not entitled to a doubling of her damages under Wis. Stat. section 100.20.

    Second, Grand View’s insurer, American Family, provided no coverage under its commercial general liability policy. Current case law holds that a volitional act, such as Grand View’s failure to give timely notice under the administrative code, is not a covered occurrence (see ¶ 40). Nonetheless, the circuit court properly exercised its discretion in denying American Family its costs as a “successful party” (¶ 44).

    Third, the court of appeals vacated the award of attorney fees because Brandt failed to prove that she had sustained a pecuniary loss as a result of Grand View’s violation of Wis. Stat. section 100.20(5). Pecuniary loss is a condition precedent to recovering attorney fees (see ¶ 46). 

    Criminal Law

    Exposing Genitals to a Child – Wis. Stat. Section 948.10 – “Sexting”

    State v. Stuckey, 2013 WI App 98 (filed 17 July 2013) (ordered published 28 Aug. 2013)

    HOLDING: The defendant could not be charged with exposing his genitals to a child under Wis. Stat. section 948.10 for allegedly texting a photo of his penis to a child.

    SUMMARY: Defendant Stuckey was 18 years old when he “met” 14-year-old Jane Doe on Facebook. After he turned 19, Stuckey allegedly texted a photo of his penis from his cell phone to Doe’s cell phone. The state charged him with a violation of Wis. Stat. section 948.10(1)(a), which provides that it is a Class I felony when a person exposes his or her genitals to a child for purposes of sexual arousal or sexual gratification. The defendant moved to dismiss this charge, arguing that section 948.10 requires an in-person exposure. The circuit judge agreed and dismissed the charge.

    In a decision authored by Judge Reilly, the court of appeals affirmed. It characterized section 948.10 as a “variable obscenity statute” (¶ 13). “Variable obscenity distinguishes between obscene and non-obscene offenses based on the audience to which the content is directed and the nature of the content’s appeal or impact on the targeted audience” (¶ 11).

    In State v. Weidner, 2000 WI 52, 235 Wis. 2d 306, 611 N.W.2d 684, the supreme court concluded that the state could not constitutionally rely on a variable obscenity statute that lacked a scienter element with respect to the age of the victim. Section 948.10 lacks a scienter element as to the age of the person receiving a digital image of genitals or even a requirement that a child was the intended recipient. The appellate court accordingly concluded that, under the reasoning set forth in Weidner, “§ 948.10 cannot be applied in the context of the internet or similar situations that do not involve face-to-face contact” (¶ 15).

    Judge Gundrum filed a concurring opinion.

    Self-Defense and Defense of Others – Jury Instructions on Burden of Proof

    State v. Austin, 2013 WI App 96 (filed 30 July 2013) (ordered published 28 Aug. 2013)

    HOLDING: In cases involving self-defense to charges of recklessly endangering safety, the circuit court erred in failing to explain to the jury that, to convict the defendant, the burden was on the state to disprove self-defense and defense of others beyond a reasonable doubt.

    SUMMARY: Austin was charged with two counts of first-degree recklessly endangering safety and was convicted by a jury of two counts of second-degree recklessly endangering safety as lesser-included offenses. The circuit court determined that under the evidence it was appropriate to instruct the jury on self-defense and defense of others. Except for the defense-of-others instruction with respect to first-degree recklessly endangering safety, those instructions failed to inform the jury that the burden of persuasion was on the state to disprove self-defense and defense of others.

    The state argued that because the defendant was charged with a reckless rather than an intentional crime, the instruction on the burden of proof for self-defense was not required. In a decision authored by Judge Kessler, the court of appeals disagreed. The upshot of its decision is that the circuit court erred in failing to explain to the jury that, when self-defense or defense of others is in issue, even for crimes involving recklessness, the burden is on the state to disprove those defenses beyond a reasonable doubt. Absent that instruction the implication is that the defendant must satisfy the jury that he or she was acting in self-defense. Because the burden of proof with respect to self-defense was not explained to the jury in this case, the appellate court “was not convinced that the jury instructions … provided the jury with a proper statement of the law of self-defense” (¶ 18).

    Criminal Procedure

    Preliminary Examinations – Hearsay – Defense Witnesses

    State v. O’Brien, 2013 WI App 97 (filed 17 July 2013) (ordered published 28 Aug. 2013)

    HOLDING: The statute permitting the state to use hearsay at a preliminary examination is constitutional.

    SUMMARY: The court of appeals upheld the constitutionality of Wis. Stat. section 970.038, which provides that hearsay evidence is admissible in preliminary examinations irrespective of the hearsay rules in evidence law. The court’s opinion addressed several consolidated interlocutory appeals, including one in which a police officer testified to multiple layers of hearsay (for example, a report filed by another police officer who spoke with a victim).

    Writing for the court, Chief Judge Brown first put to rest any confrontation right and due process issues. The confrontation right applies at trial, not preliminary hearings (see ¶ 11). And “nothing in the Sixth Amendment or any other provision of the Constitution mandates a preliminary examination like the one at issue in these appeals” (¶ 12). These proceedings are purely “a creature of statute” that address only the plausibility (believability) of the allegations against the defendant, not the credibility of witnesses (see ¶¶ 15-16). Federal case law recognizes that grand jury indictments may be based on hearsay (see ¶ 18). “In short, in view of the actual purpose of preliminary examinations in Wisconsin, we hold that [section 970.038] is facially consistent with the constitutional rights to confrontation and due process” (¶ 20).

    Second, the defense continues to have the right to cross-examine the state’s witnesses and call witnesses on its behalf. Nothing in section 970.038 affected these rights (see ¶ 21). Nonetheless, “the scope of these rights is limited by the scope and purpose of the preliminary examination, i.e., the facts relevant to establishing plausibility of the charges, which are ‘essential facts as to probability’ that the alleged offense occurred’” (¶ 22). Put differently, defense witnesses and cross-examination must undercut the plausibility of the charges, such as by showing a key witness/declarant had no personal knowledge (id.). Circuit courts will not “ignore blatant credibility problems” (¶ 24).

    Third, section 970.038 does not deprive the defendant of the assistance of counsel. “To demand that counsel must be permitted to challenge the competency or reliability of the underlying evidence is a fundamental misunderstanding of the purpose of the preliminary hearing” (¶ 25).

    Family Law

    TPR – Jury Waiver – Stipulations – Remands

    Walworth Cnty. Dep’t of Health & Human Servs. v. Roberta J.W., 2013 WI App 102 (filed 24 July 2013) (ordered published 28 Aug. 2013)

    HOLDING: When a case is remanded for a new trial or fact finding, a previous jury waiver or stipulation of fact is no longer binding in the new trial.

    SUMMARY: This is the third appeal of a third termination of Roberta’s parental rights to her children. Before the second fact-finding hearing, Roberta had waived her right to a jury trial and stipulated to several elements relating to her parental fitness. For reasons not pertinent here, the court of appeals reversed and remanded that second determination for a third fact-finding hearing. When Roberta asserted her right to a jury trial and sought to withdraw the stipulation before the third hearing, the circuit court denied both requests. The judge found Roberta unfit.

    The court of appeals reversed in an opinion authored by Judge Gundrum. Case law supports a “broader rule,” holding that “‘a party to a lawsuit is entitled as a matter of right to a jury trial on a question of fact if that issue is retried’” (¶ 10) (citation omitted). Put differently and more precisely, “[w]e conclude that, absent an unambiguous declaration that a party intends to bind itself for future fact-finding hearings or trials, a jury waiver applies only to the fact-finding hearing or trial pending at the time it is made” (¶ 11).

    Aside from legal authority, the court also pointed to the “dynamic” of the proof process, which permits the fact finder to consider all evidence bearing on parental fitness “up to and during the time of the fact-finding hearing” (¶ 15). “Simply put, at the time of her jury waiver and elements stipulation, Roberta could not have anticipated what the evidence related to this element might be two and one-half years later” (id.). Nor did it make any difference that her jury right was statutory, not constitutional.

    Although much of the focus was on the jury right issue, the court also held that the remand wiped the slate clean on the stipulations as well. “The elements stipulation, like the jury waiver, was procedural and was effective only for the fact-finding hearing pending at the time” (¶ 17). 

    Insurance

    Underinsured Motorist Coverage – Stacking

    Botsdorf v. Krebsbach, 2013 WI App 99 (filed 30 July 2013) (ordered published 28 Aug. 2013)

    HOLDING: A vehicle “endorsement” is a new “policy” for purposes of the 2009 antistacking statute.

    SUMMARY: In 2009, the legislature enacted a statute that, among other things, prohibited insurance companies from using reducing clauses to block payment of underinsured motorist (UIM) coverage. The law became effective on Nov. 1, 2009. On Nov. 11, 2009, the Botsdorfs added their Ford Econoline vehicle to their existing policy through a policy endorsement, effective that day. On Nov. 28, 2009, Tim was seriously injured in an accident. Their insurer, Allstate, denied the Botsdorfs’ claim for UIM coverage on the Econoline because the other driver’s insurer had paid amounts that exceeded the UIM coverage. The circuit court granted summary judgment in favor of Allstate, ruling that the 2009 antireducing statute applied only to new policies, not endorsements.

    The court of appeals reversed in an opinion authored by Judge Brennan. “[T]he only issue before this court is whether the Allstate insurance ‘polic[y]’ covering the Botsdorfs’ Ford Econoline was ‘issued or renewed’ after November 1, 2009, such that the reducing clause in the policy would be invalid under the law” (¶ 10). The court relied on the plain meaning of the statute. “Wisconsin Stat. § 600.03(35) defines ‘[p]olicy,’ in relevant part, as ‘any document … used to prescribe in writing the terms of an insurance contract, including endorsements….’ (Emphasis added.) The plain language of the statute includes an endorsement as policy and here the endorsement was issued after November 1, 2009” (¶ 12).

    “Certainly, by prohibiting insurance companies from including reducing clauses in their policies, the legislature, in passing 2009 Wisconsin Act 28, § 3171, meant to expand that coverage, and when reasonable, we should broadly construe the statutes to ensure that purpose is achieved. That is the case here” (¶ 13).

    Real Property

    Joint Tenancies – Grantors and Grantees – Survivorship Marital Property

    Marchel v. Estate of Marchel, 2013 WI App 100 (filed 25 July 2013) (ordered published 28 Aug. 2013)

    HOLDING: The common law rule that a grantor cannot also be a grantee in a deed creating a joint tenancy is no longer the law in Wisconsin.

    SUMMARY: The principal legal issue that was argued in the circuit court and litigated in this appeal was whether the common law rule that a grantor could not be a grantee in a deed creating a joint tenancy retains vitality. Before 1947, this rule was part of Wisconsin’s common law. The rationale for it was derived from the common law principle that four “unities” were necessary to create a joint tenancy: “the unities of (1) time (the interest must be created at one and the same time); (2) title (the interest must be created in a single conveyance); (3) person (the interest must be created by one and the same person); and (4) possession (the possession by the joint tenants must be the same)” (¶ 10).

    A grantor could not also be a grantee in a deed creating a joint tenancy because the unities of time and title were absent. “A grantor, by definition, must have received his or her interest in the property previously and therefore he or she cannot receive his or her interest as a grantee in the same deed or at the same time as the other grantee” (id.).

    In 1947, the legislature amended the relevant statute using language that expressly eliminated this impediment and thereby allowed a grantor to be a grantee in a deed creating a joint tenancy. The statutory language was changed yet again in 1969. In the 1969 legislation, the legislature omitted the 1947 language that authorized a grantor to be a grantee in a deed creating a joint tenancy. Thus, the question presented in this case was whether, as a result of the 1969 amendment, the common law rule described above was reinstated. The circuit court held that it was.

    In a decision authored by Judge Sherman, the court of appeals reversed. It concluded that the legislature did not intend to reinstate the common law rule through the enactment of the 1969 amendment (see ¶ 14). Said the court, “[w]e conclude that the common law requirement that a grantor cannot also be a grantee in a deed creating a joint tenancy was not reinstated by the 1969 amendment, and is no longer the law in Wisconsin” (¶ 20).

    In this case, the grantor did not actually use a deed to create a joint tenancy between himself and another (his wife). Rather, the deed conveyed the property from the grantor to the grantor and his wife “as Survivorship Marital Property.” Survivorship marital property was created as part of the comprehensive marital property legislation passed by the legislature in 1983 Wisconsin Act 186. This form of ownership was unknown to the common law. The unities of time and title “have never applied to survivorship marital property and do not now” (¶ 23).

    The court concluded that the deed from the grantor to the grantor and his wife was effective to create survivorship marital property between him and his wife (see ¶ 25). It was also effective to sever the joint tenancy in the property that had previously existed between the grantor and his brother (id.).




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