Wisconsin Lawyer
Vol. 81, No. 11, November 2008

Court of Appeals Digest

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

• Attorneys
• Contracts
• Criminal Procedure
• Insurance
• Real Property
• Torts
• Trials

Attorneys

Lorge v. Rabl, 2008 WI App 141 (filed 14 Aug. 2008) (ordered published 24 Sept. 2008)

Rabl retained attorney Lorge to represent her in a slip-and-fall case. The contingent fee agreement set Lorge’s fee at one-third of the amount recovered and also created a lien. When little occurred over the next four years, Rabl terminated Lorge and hired attorney Riley, and Lorge sent Rabl’s case file to Riley. Riley settled the case for $100,000 and disbursed the settlement proceeds but paid Lorge nothing. Lorge sued Rabl and Riley. The circuit court granted summary judgment in favor of Rabl and Riley on Lorge’s claims for breach of trust (which was based on SCR 20:1.15(d)), conversion, and treble damages. At trial, the court found that Lorge had been discharged for cause but nonetheless was entitled to $5,000 for the value of his services. Lorge appealed.

The court of appeals affirmed in an opinion written by Judge Dykman. Lorge was not entitled to summary judgment on his claims for breach of trust and conversion. Key to Lorge’s claims was his allegation that he had a lien on the settlement funds in Riley’s trust account. Applying case law, the court held that “Lorge breached his contingency fee agreement with Rabl, and therefore cannot seek to enforce the contract. Because Lorge breached his contract with Rabl, he did not have an enforceable lien at the time Riley collected and disbursed the settlement proceeds for Rabl’s claim” (¶ 15). From this it followed that Lorge’s claims for conversion and breach of trust failed. “[A]n attorney who fails to retain in trust money claimed by another will be subject to liability only if an independent cause of action, such as conversion, arises from the conduct. Because Lorge did not have a valid property interest in the settlement amount giving rise to an independent cause of action, any misconduct by Riley in failing to hold funds in trust for Lorge is not a basis for a civil action” (¶ 18). Because Lorge lacked any ownership interest in the trust funds, his claim for treble damages under Wis. Stat. section 895.44 also failed (see ¶ 19). Finally, the circuit court properly exercised its discretion in awarding Lorge $5,000 on a quantum meruit theory (see ¶ 23).

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Contracts

McLellan v. Charly, 2008 WI App 126 (filed 17 July 2008) (ordered published 27 Aug. 2008)

This case involved an option to purchase a certain parcel of real estate. A crucial question of law before the court was whether the consideration required to make an option to purchase binding and irrevocable must be separate from the consideration for the sale of the property. No reported Wisconsin cases expressly answer this question. However, cases from other jurisdictions “show a consistent adherence to the rule that there must be some consideration for the option that is separate from the consideration for the sale of the property, in order for the option to be a binding contract” (¶ 24).

In a decision authored by Judge Vergeront, the court of appeals said it was persuaded that “the rule applied in other jurisdictions – requiring consideration for an option contract that is separate from the consideration for the sale – is the proper rule, and we adopt it” (¶ 26). “The reasoning underlying the rule that there must be separate consideration for an option contract is that an option contract and a contract of sale are two separate contracts: the former is a contract that vests the optionee with the unilateral right to accept the continuing offer during a stated period of time, while the sale contract comes into being only if and when the optionee exercises the option” (¶ 25).

The court concluded that in this case there was no consideration for the option. It rejected the plaintiff’s argument that leaseback and repurchase provisions in the option contract constituted consideration separate from the consideration for the sale (see ¶ 2). It similarly rejected the plaintiff’s contentions that, among other things, the seller’s intent to be bound by the option and the efforts of a third party to obtain financing for the sale constituted the requisite consideration for the option (see ¶ 60).

Accordingly, because there was no separate consideration for the option contract, the option was not binding and the defendant seller was free to revoke it.

Osborn v. Dennison, 2008 WI App 139 (filed 6 Aug. 2008) (ordered published 24 Sept. 2008)

The Osborns entered into a WB-11 residential offer-to-purchase contract to sell their house to Dennison, who deposited $2,000 in earnest money. Dennison decided not to close on the property, and the Osborns sued him for damages. When they filed suit, the Osborns still retained the earnest money despite Dennison’s demand for its return. Dennison filed a motion to dismiss the suit on the ground of the Osborns’ failure to return the earnest money before suing him. Three weeks later the Osborns indicated they would return the earnest money, but the circuit court ruled this was too late: The Osborns had elected to take liquidated damages by keeping the earnest money.

The court of appeals affirmed in an opinion authored by Judge Anderson. “The plain language of the buyer-default provision forecloses the Osborns’ interpretation, i.e., that directing the return of the earnest money is a condition precedent to recovering on a claim for breach of contract and not a condition precedent to sue for actual damages. The language of the buyer-default provision provides the seller options: the seller may elect one option ‘or’ may elect another. Under this provision, the seller needs to first direct the broker to return the earnest money to the buyer in order to have the option to sue for actual damages. Contrary to the Osborns’ interpretation, the buyer-default provision of the contract does not have any bearing on whether the seller may recover on a claim; rather, the purpose of the provision is to set forth the separate and distinct remedies that are available to a seller in the event of a buyer default” (¶ 11). “We therefore agree with the trial court that when the Osborns brought the suit for actual damages, without first directing a return of the earnest money, they not only elected the remedy of liquidated damages, they limited themselves to it” (¶ 18).

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Criminal Procedure

State v. Fox, 2008 WI App 136 (filed 7 Aug. 2008) (ordered published 24 Sept. 2008)

On Aug. 24, 2004, McCoy, Underwood, and Fox arrived at a mobile home that was located in Juneau County and owned by McCoy’s mother. Later that day, all three men returned to Illinois and spent the night at the home of McCoy’s mother. The next morning, Fox and Underwood returned to the trailer without McCoy. McCoy’s mother was unaware that Fox and Underwood had returned to the trailer.

The following day, the Juneau County Sheriff’s Department received a report that a person traveling in a vehicle owned by Fox had purchased ammonia nitrate fertilizer from a local fertilizer plant. A detective learned that Fox and Underwood were using the McCoy trailer and went there to investigate. The officer observed that the rear door of the trailer was tied to the door frame but left ajar about six inches, and the windows were open but darkened with linens. He smelled a strong odor of gas or chemicals coming from the trailer. The officer then contacted McCoy’s mother, who informed him that Fox and Underwood had her consent to be at the trailer (though she was unaware that the pair had returned to the trailer after driving her son home to Illinois). The officer obtained her consent to enter the trailer by offering to check on the place and lock it for her.

Upon returning to the trailer, the officer entered, observed a cooler sitting on the floor, and heard water bubbling in it. He opened the cooler and identified it as a working methamphetamine lab. He left the premises but later returned with other officers to conduct additional warrantless searches to collect, secure, and photograph evidence.

Fox (the defendant) was subsequently charged with multiple drug offenses. He moved to suppress the evidence seized from the trailer on the ground that it was the fruit of an illegal search. Following an initial hearing on the motion, the circuit court determined that the defendant had permission to be at the trailer and had a legitimate expectation of privacy in the trailer and that he therefore had standing to challenge the search. At a follow-up hearing, the court granted the motion to suppress, ruling that the officers’ warrantless search exceeded the consent they had obtained from the owner and was not permissible under either the exigent circumstances exception or the plain view exception to the Fourth Amendment. The state appealed. In a decision authored by Judge Higginbotham, the court of appeals reversed, concluding that the defendant lacked standing to challenge the search of the trailer.

Courts apply a two-part test when determining whether an individual has a reasonable expectation of privacy in an area and thus standing to challenge a search thereof. The first part of this test asks whether the individual has demonstrated an actual, subjective expectation of privacy in the area searched and in the item seized. The second part addresses whether society is willing to recognize such an expectation of privacy as reasonable (see ¶ 16).

With regard to the first part of the test, the court of appeals concluded that there was sufficient evidence to support the circuit court’s conclusion that the defendant had a subjective expectation of privacy in the trailer. The record showed that the windows to the trailer were darkened with linens to prevent the public from looking inside, and the door, while ajar, was tied loosely to the door frame by a rope (see ¶ 17). 

Turning to the second (objective) part of the test, the court used an analysis appropriate for cases in which the person challenging the search claims status as a guest on the property. This analysis “examines the evidence in light of the following considerations: (1) whether the guest’s use of the premises was for a purely commercial purpose; (2) the duration of the guest’s stay; and, perhaps most significantly, (3) the nature of the guest’s relationship to the host” (¶ 19).

Applying these factors the court concluded that the defendant’s privacy expectation was not reasonable. The defendant’s use of the premises on his return was for a largely commercial purpose. His stay was only episodic over the course of three to four days. His relationship to his host was modest; he was merely a friend of the trailer owner’s son. Finally, the defendant lacked the more-firmly rooted relationship to the premises that is characteristic of an overnight guest or a frequent visitor (see ¶¶ 21-22).

Accordingly, the appellate court concluded that the defendant did not have an expectation of privacy in the trailer that society would recognize as reasonable and thus lacked standing to challenge the warrantless search of the trailer.

State v. Applewhite, 2008 WI App 138 (filed 20 Aug. 2008) (ordered published 24 Sept. 2008)

Police officers were dispatched to a residence to investigate a possible burglary in progress. Applewhite (the defendant) was observed getting into a taxicab at the scene and was detained. An officer observed that the defendant “kept putting his hands in his pants” (¶ 2), and the officer repeatedly asked him whether he had any weapons. The defendant eventually responded that he did in fact have weapons on his person and voluntarily produced from his pocket two knives: a retractable box-cutter and a switchblade knife.

The officer then performed a pat-down frisk because he thought the defendant might have another weapon. During the pat-down, the officer (who had worked as a narcotics officer) felt in the defendant’s pants pockets something that he thought was a package of narcotics. He then seized 13 individually wrapped baggies of marijuana from the defendant’s pockets and placed him under arrest.

In the subsequent prosecution the circuit court granted the defendant’s motion to suppress all evidence obtained during the pat-down search, holding that the state did not meet its burden of establishing a proper search and seizure. The state appealed. In a decision authored by Judge Snyder, the court of appeals reversed the circuit court.

The appellate court first examined the lawfulness of the officer’s decision to conduct a frisk of the defendant. A frisk for weapons must be based on reasonable suspicion that the suspect is armed. “Wisconsin case law has consistently emphasized that the totality of all circumstances present and known to the officer must be taken into account to assess the legality of the procedure. Of course, some factors will be of greater import than others in the reasonable suspicion calculus in a particular case. We begin by identifying each primary factor present and then conclude by viewing these primary factors in the totality of circumstances. Here, we ascertain three primary factors demonstrating reasonable suspicion for the pat-down search: the type of crime under investigation, [the defendant’s] possession of and initial reluctance to produce the two knives, and [the defendant’s] repeatedly reaching into his pants pockets” (¶ 7) (citations omitted).

Analyzing the primary factors, the court concluded that the crime under investigation (burglary) is a type of crime that commonly involves a weapon (see ¶ 8), that it was reasonable for the officer to suspect that the defendant may have had additional weapons (given that two had already been revealed and that the defendant surrendered them only after he was repeatedly questioned about the presence of weapons) (see ¶ 9), and that the defendant’s repeatedly putting his hands in his pockets was an important factor in the overall assessment of dangerousness (see ¶ 10). The court held that the totality of the circumstances, including the three primary factors and all other circumstances known to the officer at the time of the pat-down search, indicated that the officer had reasonable suspicion that the defendant remained armed even after he voluntarily produced two knives (see ¶ 11).

The next question before the court was whether the officer’s discovery of contraband in the defendant’s pockets was lawful under the “plain touch” doctrine. When the pat-down itself is based on reasonable suspicion, the “plain feel” or plain touch exception to the warrant requirement may apply, and “when an officer touches or feels an object during a pat-down which his or her training and experience lead the officer to believe may be contraband, the officer is justified in retrieving the item” (¶ 12). The plain touch exception does not demand that the officer be absolutely certain of what specific contraband is present, only that the object is incriminating in nature (see ¶ 16).

In this case the officer testified that he had been with the police department for two years, had previously worked as a police officer in Atlanta, where he was a street level narcotics and beat officer, and had been trained in the handling of controlled substances and their packaging at the City of Atlanta Police Academy. Said the court, “We are satisfied that [the officer] had the knowledge and experience to immediately recognize that the objects in [the defendant’s] pocket were likely packaged narcotics” (¶ 19).

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Insurance

Young v. West Bend Mut. Ins. Co., 2008 WI App 147 (filed 21 Aug. 2008) (ordered published 24 Sept. 2008)

Young was injured while riding as a passenger on a motorcycle driven by her boyfriend, Ramczyk. Young admitted that she bought the motorcycle for Ramczyk but retained title (for reasons that were disputed). The circuit court dismissed Young’s claim against her insurer, West Bend, for underinsured motorist (UIM) coverage under her own policy because she was an “owner” and thus fell within the drive-other-car exclusion. The case was decided on motions for summary judgment.

The court of appeals reversed in a decision written by Judge Higginbotham. The term owner was undefined in the policy. Case law offers several different approaches to ownership. The court elected to consider the parties’ “intent and conduct” in determining ownership in this context (¶ 16). The record presented a disputed issue of fact as to whether Young or Ramczyk owned the motorcycle. Under one view, Ramczyk was the owner. “Young avers that she purchased the motorcycle for Ramczyk, and was holding title to it only until his divorce was finalized. Ramczyk testified that the reason for this arrangement was to prevent the cycle from becoming marital property. Young also avers that she never drove the motorcycle, and does not have a motorcycle operator’s license.... Young testified in deposition that Ramczyk paid for all gas and had total control of the motorcycle.... Ramczyk kept the motorcycle in his own garage. Cumulatively, we conclude that this conduct is sufficient to support a reasonable inference that Ramczyk was the owner of the motorcycle for purposes of the ‘drive other car’ exclusion” (¶ 17).

Other evidence, however, supported the conclusion that Young owned the cycle. “It is undisputed that Young held title to the motorcycle – a relevant, though not determinative, factor in ascertaining ownership in this context. She purchased the motorcycle and secured financing for it. Significantly, Young once threatened to report Ramczyk for theft if he drove it, suggesting that she may have believed herself to be the owner of the motorcycle” (¶ 18).

Accordingly, the court of appeals concluded that a disputed issue of material fact exists concerning whether Young was the motorcycle owner for purposes of determining whether her policy’s drive-other-car exclusion applies. Therefore, it reversed the circuit court’s order dismissing West Bend from the action, and it remanded the matter to the circuit court for further proceedings (see ¶ 20).

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Real Property

Vande Zande v. Town of Marquette, 2008 WI App 144 (filed 13 Aug. 2008) (ordered published 24 Sept. 2008)

This case involves a dispute over public access to a lake. At issue was a parcel of land that was designated as “public access” in the original plat, which was approved and filed in 1974. The same developer, though, conveyed various parcels of surrounding land and included in those deeds a purported interest in the public access parcel as well. The plaintiff landowners were the holders of the purported interests; they claimed that the public access was never properly created or, alternatively, that the town, by inaction, had abandoned it or is estopped from asserting the public’s right to access (see ¶ 1). The circuit court rejected the landowners’ claims.

The court of appeals affirmed in an opinion authored by Chief Judge Brown. The court held that the developer’s filing and the town’s approval of the plat “constituted a statutory dedication of the disputed parcel as public access to the lake in accord with Wis. Stat. §§ 236.16(3) and 236.29(2)” (¶ 20). The court discussed the sufficiency of the language used in the plat in creating the public access.

Next the court rejected the argument that the town had “discontinued” or abandoned the public access. It held that Wis. Stat. section 80.32, which governs the discontinuance of highways, was inapplicable “to discontinue a public lake or stream access, regardless of when that access was created” (¶ 26). Finally, the court rejected the contention that the town was equitably estopped from claiming public access. Although the plaintiff landowners “may have suffered as a result” of the developer selling them an interest in land that was not his to sell, the court refused to “remedy this harm by taking away what rightfully belongs to the public” (¶ 30). 

Berkos v. Shipwreck Bay Condominium Ass’n, 2008 WI App 122 (filed 17 July 2008) (ordered published 27 Aug. 2008)

This riparian rights case involved the application of Wis. Stat. section 30.133(1) (2005-06), which provided in pertinent part that “[beginning] on April 9, 1994, no owner of riparian land that abuts a navigable water may convey, by easement or by a similar conveyance, any riparian right in the land to another person, except for the right to cross the land in order to have access to the navigable water. This right to cross the land may not include the right to place any structure or material in the navigable water.” (The relevant portion of this statute was modified slightly by 2007 Wis. Act 20, § 717g; the word “convey” was replaced by the word “grant.” The court of appeals noted, however that these terms have similar meanings, and “this change sheds little light on the issues presented in this case” (¶ 1 n.1).)

The question on appeal was whether section 30.133 prohibits the reservation of riparian rights by easement or similar conveyance upon the transfer of title to riparian land. In a decision authored by Judge Higginbotham, the court concluded that it does. Said the court, “We read Wis. Stat. § 30.133 to prohibit the severing by easement or by a similar conveyance of riparian rights from the riparian lands to which they are attached. Section 30.133 represents a policy decision by the legislature to reject the ‘majority rule’ expressed in Stoesser [v. Shore Drive Partnership, 172 Wis. 2d 660, 665, 494 N.W.2d 204 (1993)] that riparian rights may be granted or reserved to a non-riparian owner by an easement. By enacting § 30.133, the legislature decided instead that riparian rights would not be severable from riparian lands. To permit the reservation by easement of riparian rights upon transfer of title to riparian lands would be contrary to the legislature’s policy choice indicated by its rejection of Stoesser” (¶ 15).

The appellate court acknowledged that the statute does not explicitly refer to the reservation of riparian rights by easement. “Regardless, ABKA [Limited Partnership v. Department of Natural Resources, 2002 WI 106, 255 Wis. 2d 486, 648 N.W.2d 854] and Stoesser make clear that the legislature enacted § 30.133 to prohibit the reservation of riparian rights by easement upon the transfer of title of riparian land. Thus, we read language providing that ‘no owner of riparian land that abuts a navigable water may convey, by easement or by a similar conveyance, any riparian right in the land to another person’ to preclude the reservation of riparian rights apart from riparian land by an easement, as well as the granting of riparian rights to a non-riparian” (¶ 16).