Wisconsin Lawyer
Vol. 79, No. 8, August
2006
Supreme Court Digest
This column summarizes all decisions
of the Wisconsin Supreme Court (except those involving lawyer or
judicial discipline, which are digested elsewhere in the magazine).
Profs. Daniel D. Blinka and Thomas J. Hammer invite comments and
questions about the digests. They can be reached at Marquette University
Law School, 1103 W. Wisconsin Ave., Milwaukee, WI 53233, (414)
288-7090.
by Prof. Daniel D. Blinka &
Prof. Thomas J. Hammer
Alternative Dispute Resolution
Arbitration - Impartiality - Discovery
Borst v. Allstate
Ins. Co., 2006 WI 70 (filed 13 June 2006)
Following an auto accident in which the plaintiff was injured, the
plaintiff's claims were submitted to arbitration. Allstate, an insurer,
selected as its arbitrator an attorney, Hill, who regularly represents
its interests in other cases. The plaintiff vigorously challenged Hill's
partiality, but the full arbitration panel made an award that was
confirmed by the circuit court. The parties agreed that the entire panel
was to be neutral (see ¶ 25).
The court of appeals certified the following questions to the supreme
court: "(1) Is there a presumption of impartiality among all arbitrators
which may be `sidestepped' only by explicit agreement of all parties by
which they may select arbitrators who in effect are their advocates? (2)
Under Wis. Stat. § 788.10(1)(b) (2003-04), can `evident
partiality,' due to a relationship between an arbitrator and a party be
avoided by full disclosure at the outset and a declaration of
impartiality? (3) Other than the deposition procedure outlined in Wis.
Stat. § 788.07, is the nature and extent of discovery during the
arbitration process governed by contract, the arbitrators' inherent
authority, or a combination of the two?"(¶ 2)
The supreme court, in a decision authored by Justice Wilcox, reversed
the circuit court and held as follows: "(1) We adopt a presumption of
impartiality among all arbitrators, whether named by the parties or not.
This presumption may be rebutted, and an arbitrator may act as a
non-neutral when the parties contract for non-neutral arbitrators or the
arbitration rules otherwise provide for non-neutral arbitrators; (2)
Evident partiality cannot be avoided simply by a full disclosure and a
declaration of impartiality. In challenges to an arbitrator based on
evident partiality where the disputed relationship is fully disclosed,
circuit courts must remove an arbitrator prior to the arbitration, or
vacate an arbitration award under Wis. Stat. § 788.10(1)(b) when a
reasonable person would have serious doubts about the impartiality of
the arbitrator; and (3) Arbitrators have no inherent authority to
dictate the scope of discovery, and absent an express agreement, the
parties are limited to the procedure for depositions, as described in
Wis. Stat. § 788.07" (¶ 3).
In explaining its holding, the court "reiterate[d] that arbitrators
should continue to disclose relevant relationships in accordance with
our case law and [that] such disclosure puts the burden on the opposing
party to object. A failure to initially object to the selection of an
arbitrator, based on the information disclosed prior to the arbitration,
may act as a forfeiture of any subsequent post-arbitration challenge on
the disclosed information. Post-arbitration challenges, of course, are
permissible under Wis. Stat. § 788.10(1)(b) based on the
circumstances of the arbitration itself or on information discovered
post-arbitration" (¶ 36).
The record disclosed that Hill's involvement with Allstate
demonstrated "evident partiality." "We hold that there was evident
partiality on the part of Hills, such that vacation of the arbitration
award is mandated. That is, based on evidence that is clear, plain, and
apparent, a reasonable person would have serious doubts about the
impartiality of Hills, on a neutral arbitration panel. In this case, the
fact that Hills had a substantial, ongoing attorney/client relationship
with Allstate leads us to conclude, as a matter of law, that Hills
demonstrated evident partiality such that the arbitration award must be
vacated" (¶ 44; see also ¶ 49).
As to the third holding, limiting discovery in arbitration, the court
agreed with the the amicus brief submitted by the Alternative Dispute
Resolution (ADR) Section of the State Bar of Wisconsin "that parties
would be well-served to either: (1) explicitly address the scope of
discovery and the procedures to resolve disputes regarding discovery; or
(2) reference a set of established ADR provider rules that specify how
discovery should be handled" (¶ 56).
Civil Procedure
Mediation - Settlements - Equitable
Estoppel
Affordable Erecting Inc.
v. Neosho Trompler Inc., 2006 WI 67 (filed 9 June
2006)
A moving company, Affordable, contracted to move Neosho's equipment
to a new location. Neosho refused to pay Affordable's $18,000 invoice
because equipment was damaged in the move. In 2001 Affordable sued
Neosho and others. At the court-ordered mediation, Affordable was
represented only by its attorney. Attorneys for all the parties signed
an agreement resolving the dispute, although Affordable's attorney
explicitly noted that the settlement was contingent on the client's
consenting by noon the following day. Two days later the court was
notified that a settlement had been reached, and checks were issued in
accordance with the proposed settlement, although Affordable had not
signed the settlement. About three weeks after the "deadline" for the
owner's consent, Affordable's owner told the company's attorney that she
agreed to the settlement. Although this information was conveyed to the
other parties, the owner changed her mind several weeks later and
refused to settle. The judge, however, dismissed the 2001 action for
lack of prosecution.
In 2004, Affordable, acting through different counsel, filed a new
action that made the same claim. The judge dismissed the 2004 action on
the ground that both parties had entered into a valid and enforceable
settlement under Wis. Stat. section 807.05. The court of appeals
affirmed the dismissal, but it relied on equitable estoppel, not on
section 807.05.
The supreme court, in an opinion written by Justice Butler, affirmed
on the equitable estoppel theory. The court first held that there had
been no settlement for purposes of section 807.05. "In this case,
because the settlement was not made in court and on the record, Wis.
Stat. § 807.05 unambiguously requires the settlement to be
memorialized in writing and subscribed by each party or its attorney"
(¶ 23). "Neither the untimely oral assurances by Affordable's
attorney to the other parties, nor its attorney's call notifying the
court that a settlement had been reached, satisfy the contingency set
forth in the May 21, 2003, agreement. Furthermore, Affordable's
subsequent conduct fails to satisfy the statutory requirements that a
settlement must be `subscribed' by the party or the party's counsel"
(¶ 30).
The court then discussed the applicability of equitable estoppel,
which carries four elements: "(1) action or non-action; (2) on the part
of one against whom estoppel is asserted; (3) which induces reasonable
reliance thereon by the other, either in action or non-action; (4) which
is to the relying party's detriment" (¶ 33). Only the last two
elements were disputed. The court said that Affordable's "actions and
non-actions" created only one reasonable inference: it had accepted the
settlement. Affordable knew that other parties relied on this
perception, but Affordable "made no attempt to clarify its position"
(¶ 40). Moreover, Neosha relied on Affordable's apparent agreement
to its detriment, particularly by foregoing a suit for full restitution
for losses and not objecting when the court dismissed the first action
without prejudice (which permitted the filing of this action).
Contracts
Indefinite Contracts - Illusory Contracts
Metropolitan Ventures
LLC v. GEA Assocs., 2006 WI 71 (filed 14 June 2006)
Metropolitan Ventures is a business engaged in real estate investment
and development. GEA is a limited partnership that was established to
preserve and renovate the German English Academy Building, located in
Milwaukee. Metropolitan and GEA entered into a Limited Partnership
Purchase Agreement (LPPA), whereby Metropolitan agreed to purchase all
of the general partnership interests and certain limited partnership
interests of GEA. Under the LPPA, Metropolitan was required to obtain
unconditional financing equal to 85 percent of the purchase price "on
terms satisfactory to Buyer ...." GEA was required to deliver to
Metropolitan assignments of at least 66 2/3 percent of the outstanding
units owned by the limited partners. GEA agreed to "use its reasonable
best efforts to obtain Assignment Agreements from all the limited
partners" by recommending that each limited partner participate in the
sale and requesting that the limited partners execute assignments of
their partnership interests. GEA was further obligated to use its best
efforts to ensure that the partnership did not "[s]ell or dispose of any
asset ... of the partnership" (see ¶¶ 5-6).
Metropolitan subsequently sent a letter to GEA confirming that all of
Metropolitan's contingencies had been met and indicating that it was
ready to close the transaction. It inquired regarding GEA's progress on
securing the required two-thirds assignments from GEA's limited
partners. GEA ultimately responded that the LPPA was terminated because
it had been unable to secure the required assignments. (In fact, GEA had
entered into a secondary agreement with a third party on more favorable
financial terms, which would become effective if the LPPA were
terminated. Metropolitan claimed that GEA's managing partner actively
dissuaded GEA's limited partners from agreeing to sell GEA to
Metropolitan.)
GEA filed a declaratory judgment action in which it asked the circuit
court to hold that it had properly and validly terminated the LPPA.
Metropolitan responded with a suit of its own (which was consolidated
with GEA's action) seeking damages based on the actions of GEA and its
representatives. GEA filed a motion for summary judgment, asserting that
no contract existed due to the lack of sufficient definiteness in the
financing contingency provision. The circuit court adopted GEA's "no
contract" theory, finding the contract indefinite and unenforceable, and
it dismissed Metropolitan's remaining claims against GEA. The court of
appeals reversed. See 2004 WI App 189. In a majority decision
authored by Justice Butler, the supreme court affirmed the court of
appeals.
With regard to the financing contingency, GEA argued that it was both
indefinite and illusory and therefore unenforceable. The court first
considered the indefiniteness argument. "A financing clause is
sufficiently definite if it establishes that the parties agreed to the
terms of financing. Certainty of contract terms and definiteness require
mutual assent by way of a meeting of the minds. This court has concluded
that there need not be a literal meeting of the minds because `mutual
assent is judged by an objective standard.' The question is whether
there is sufficient evidence to ascertain the intent of the parties;
this court examines both the wording of the contract as well as the
surrounding circumstances in an attempt to discern the parties'
intent.... In order to hold a contract void for indefiniteness, the
`[i]ndefiniteness must reach the point where construction becomes
futile.' Yet, even if the parties' written agreement is expressed in
`terms so vague and indefinite as to be incapable of interpretation with
a reasonable degree of certainty,' the parties' subsequent conduct and
practical interpretation can cure this defect by evincing the parties'
intent in entering the contract. Therefore, a contract that fails to
sufficiently address the financing contingency is not void for
indefiniteness if the parties' subsequent actions clarify the parties'
intent at the time they entered into the contract. However, in order for
the subsequent action to remove any indefiniteness, the action must
include `some interpretative conduct by both parties,
consisting either of the rendition of some performance by each one or by
the willing acceptance by one of them of such a performance rendered by
the other'" (¶¶ 24-26) (citations omitted).
GEA contended that the contingency is vague and indefinite because
the requirement that the financing terms be "satisfactory to the Buyer"
fails to include any information regarding the terms of the financing
that Metropolitan had in mind. Said the court, "[w]e agree that the
parties failed to specify financing terms in the written contract. The
critical question in determining the enforceability of the LPPA,
therefore, becomes whether there exists sufficient evidence of
subsequent conduct in the record upon which this court can ascertain
whether the parties mutually agreed to acceptable financing terms at the
time the LPPA was formed" (¶ 29). The court concluded that
subsequent acts of both Metropolitan and GEA provided sufficient
evidence of the parties' intent, rendering the contract enforceable.
Important in this regard was correspondence between the parties
indicating that the parties developed a cooperative relationship in
attempting to ensure that the sale came to fruition. "In short, the
correspondence among the parties and between GEA and its limited
partners clearly demonstrates that both parties at the time they entered
into the contract intended to form a binding contract for the sale and
purchase of the GEA partnership. Prior to [receiving the secondary]
offer [from a third party], both [GEA and Metropolitan] clearly treated
the LPPA as a certain, definite, and enforceable contract. Neither party
expressed any signs of confusion regarding the financing contingency.
The parties would have proceeded without any objection to the financing
contingency had GEA not received a better offer from [the third party].
The closing did not fail because of the contingency. Consequently, we
conclude that the parties' subsequent conduct evinces the parties'
intent to enter into the LPPA, rendering the contract definite and,
therefore, enforceable" (¶ 31).
GEA also argued that the financing contingency clause was illusory
for two reasons. First, the clause gave Metropolitan sole discretion to
approve the financing, allowing Metropolitan full control over
determining whether the contingency has been met. Second, the clause
gave Metropolitan exclusive authority to waive the contingency, allowing
Metropolitan to unilaterally create a binding contract in a situation in
which, according to GEA, no valid contract existed in the first
place.
The supreme court concluded that the financing clause did not render
the LPPA illusory. "A contract is illusory when the contract is
`conditional on some fact or event that is wholly under the promisor's
control and his [or her] bringing it about is left wholly to his [or
her] own will and discretion....' While the financing clause at issue
does not specify a particular term or rate of financing, it does set
forth the percentage of the purchase price to be financed along with a
practicable method in which the sale price would be determined. We agree
that because of the fluidity involved in the sale of the business,
financing terms could vary greatly over the 30 days specified in the
contract, so that inserting a particular term or rate of financing would
be speculative. Here, the subsequent actions of both parties
rendered the financing clause definite. Neither Metropolitan nor GEA had
complete control over determining whether the financing contingency had
been met: both parties came to the conclusion that Metropolitan had
obtained sufficient financing. As such, we find that the financing
contingency was not illusory" (¶ 33) (citations omitted).
Having determined that the LPPA was an enforceable contract, the
supreme court concluded that GEA and its managing partner owed
Metropolitan a duty of good faith arising out of the contractual
relationship. "The contract's requirement that GEA use its `best
efforts' explicitly imposes a duty of good faith on GEA to preserve the
business for the sale to Metropolitan and to obtain the limited
partners' consent to the sale" (¶ 37). The court concluded that
"genuine issues of material fact exist concerning GEA's good faith
dealings with Metropolitan and its `best efforts' to ensure that it did
not dispose of its assets or otherwise violate the terms and conditions
of the LPPA prior to closing" (¶ 45). Accordingly, the supreme
court remanded this matter to the circuit court to resolve these
issues.
Chief Justice Abrahamson filed an opinion concurring in part, which
was joined by Justice Roggensack. Justice Wilcox did not participate in
this case.
Criminal Law
Exposing Child to Harmful Materials - Wis.
Stat. section 948.11 - Sufficiency of Evidence When Pornographic Video
Not Shown to Jury
State v.
Booker, 2006 WI 79 (filed 29 June 2006)
The defendant was convicted of violating a statute that prohibits
exposing a child to harmful materials. See Wis. Stat. §
948.11. At trial three girls, ages 12, 13, and 14, described an incident
in which the defendant showed them numerous segments of a videotape
containing multiple episodes of sexually explicit conduct (including
sexual intercourse and fellatio). In their testimony the girls described
the conduct on the video, as did the detective on the case. The video
was entered into evidence but was not reviewed by the jury. The
defendant appealed, and the court of appeals reversed. See 2005
WI App 182. In a majority decision authored by Justice Roggensack, the
supreme court reversed the court of appeals.
The question on appeal was whether the evidence presented at trial
sufficiently fulfills the test set out in State v. Thiel, 183
Wis. 2d 505, 515 N.W.2d 847 (1994), such that a reasonable jury could
find beyond a reasonable doubt that the video was "harmful material" as
defined in Wis. Stat. section 948.11. "Under Thiel, a jury is
required to consider contemporary community standards regarding what
appeals to the prurient interests of children and whether material is
patently offensive to the adult community's standards of what is
appropriate for children. The jury also had to consider whether the
material had some other serious value for children, in this case for 12-
to 14-year-old children" (¶ 16).
The court concluded that, when the evidence in this case is
considered most favorably to the state, a reasonable trier of fact,
acting reasonably, could have found guilt beyond a reasonable doubt,
based on the testimony presented. "First, the jury could conclude that
the video excerpts, as described, predominantly appeal to the prurient
interests of children. `Prurient' is defined as `arousing inordinate or
unusual sexual desire.' Black's Law Dictionary 1263 (8th ed.
2004). The portions of the video that [the defendant] showed to the
girls were consistently described as scene upon scene of sexual acts [as
described above]" (¶ 25).
"Second, the jury could conclude that the video is patently offensive
to prevailing standards in the adult community with regard to what is
suitable for children. Motion pictures that depict explicit sexual
material harmful to minors may not be shown at outdoor theaters if the
screen is visible from a public street, sidewalk, thoroughfare or other
public place or from private property where it can be observed by
minors. Wis. Stat. § 134.46(2). Videos with the type of content
described by the witnesses are not available for rental to minor
children in Wisconsin. Videos showing explicit sexual acts are commonly
rated and restricted so that minor children will not be exposed to them.
A jury could make a reasonable determination based on the testimony
presented at trial that the video [the defendant] showed the girls is
considered by Wisconsin adults as unsuitable for children" (¶
26).
"Third, the jury could conclude that the video excerpts lacked
serious literary, artistic, political, scientific or educational value
for 12- to 14-year-olds because nothing was shown except episodes with
men and women engaging in sexual acts. There was no evidence that the
video had merit for children of these ages, for any reason. And, for the
same reasons that the other parts of the `harmful material' element can
be met by the evidence presented, a reasonable trier of fact could
conclude from the testimony that the video was absolutely void of
serious literary, artistic, political, scientific or educational value
for children" (¶ 27).
In a footnote the court noted that although the original writings
rule (Wis. Stat. § 910.10) was mentioned in oral argument, it was
not referenced in either party's briefs, and the court was provided with
no argument or citation to authority in regard to its application.
"Therefore, we do not address § 910.02 further" (¶ 9 n.2). In
another footnote, the court indicated that its opinion "does not address
whether the video would contravene the adult obscenity statute, Wis.
Stat. § 944.21" (¶ 31 n.10).
Chief Justice Abrahamson filed a concurring opinion.
Criminal Procedure
Jurors - Bias
State v. Smith,
2006 WI 74 (filed 27 June 2006)
A jury convicted Smith of operating a motor vehicle while
intoxicated, second offense. The court of appeals affirmed the
conviction.
The supreme court, in a decision authored by Justice Wilcox, affirmed
the court of appeals. The court rejected Smith's contention that he was
denied the right to a fair and impartial jury when the trial court
refused to strike a prospective juror (the juror) for cause despite the
fact she was employed as an administrative assistant in the district
attorney's office that was prosecuting him. Smith claimed that the juror
should have been disqualified as objectively biased because of her
employment status. The court held that the trial judge reasonably
concluded that the juror was not objectively biased. More important, the
court said that such determinations are best left to the case-by-case
discretion of the circuit court and should not be controlled by rules of
per se exclusion (see ¶ 17).
"We fully recognize there may be situations where an employee of the
Milwaukee County District Attorney will be objectively biased. Indeed,
`we caution and encourage the circuit courts to strike prospective
jurors for cause when the circuit courts reasonably suspect that juror
bias exists.' However, permitting an administrative assistant to serve
on a jury who works at a different office in a different city than the
prosecuting office and who otherwise knows nothing about the case, the
defendant, and does not even recognize the prosecutor is not such an
`extreme situation' that we must conclude the circuit court erred in
refusing to strike [the juror] for cause" (¶ 28).
Chief Justice Abrahamson dissented and was joined in her dissent by
Justices Prosser and Butler. The dissenting justices found error in the
fact that the prospective juror and the prosecutor shared the "same
ultimate superior, the Milwaukee County District Attorney"(¶
49).
Postconviction Practice - Challenging a
Sentence Imposed at Resentencing Proceeding
State v.
Walker, 2006 WI 82 (filed 30 June 2006)
The defendant's probation was revoked, and he was returned to circuit
court for sentencing. The court imposed a sentence of 12 years (the
revocation sentence). The defendant then sought postconviction relief,
alleging ineffective assistance of counsel because his attorney failed
to contradict certain inaccurate sentencing information. The parties
stipulated to resentencing. The court accepted the stipulation, vacated
the sentence, and held another sentencing hearing at which it considered
the additional sentencing information. It then resentenced the defendant
to an identical 12-year term (the resentence).
The defendant appealed the resentence directly to the court of
appeals, claiming the circuit court erroneously exercised its discretion
by imposing a sentence of the same length as the revocation sentence
despite receiving new information. The court of appeals summarily
dismissed the appeal because the defendant did not, as required by Wis.
Stat. (Rule) § 809.30 (2003-04), file a postconviction motion to
give the circuit court an opportunity to reconsider the sentence imposed
at resentencing.
This case presented the question whether a defendant must file a
postconviction motion with the circuit court before appealing a sentence
imposed at resentencing, when the sentence turns out to be identical to
the court's previous sentence. In a unanimous decision authored by
Justice Prosser, the court concluded that "when a defendant seeks
modification of the sentence imposed at resentencing, Wis. Stat. (Rule)
§ 809.30(2) and Wis. Stat. § 973.19 require the defendant to
file a postconviction motion with the circuit court before taking an
appeal. These rules on sentence modification apply even though the
sentence imposed at resentencing is identical to a previous sentence.
The rules apply regardless of whether a defendant challenges the
original sentence, a sentence after revocation, or the sentence imposed
at resentencing" (¶ 37).
Given the unusual procedural history of this case and the defendant's
good faith efforts to comply with Wis. Stat. (Rule) section 809.30, the
court determined there was good cause to enlarge the time within which
the defendant can file his notice of intent to pursue postconviction
relief and his postconviction motion with the circuit court.
Family Law
Modification of Physical Placement -
"Maximizing" Amount of Time Child Spends with Each Parent
Landwehr v.
Landwehr, 2006 WI 64 (filed 6 June 2006)
This case involved a father's request to substantially modify an
existing placement order, which awarded primary physical placement of
the parties' children to the mother, that had been in effect for at
least two years. For any such placement order to be substantially
modified, "the moving party must show that there has been `a substantial
change of circumstances since the entry of the last order affecting
legal custody or the last order substantially affecting physical
placement,' and the circuit court must take into account whether the
current or future custodial conditions and physical placement are in the
child's best interest. Wis. Stat. § 767.325(1)(b)1.a and b."
(¶ 12). "In this analysis there exists a rebuttable presumption
that the status quo is in the best interest of the child. Wis. Stat.
§ 767.325(1)(b)2." (id.).
"When the initial order granted greater placement with one parent as
compared to the other - as the circuit court ordered in this case -
continuing the current allocation of decision-making authority under a
legal custody order and continuing the child's physical placement with
the parent with whom the child resides for the greater period of time is
therefore presumed to be in the best interest of the child"
(id.) (citations omitted). "If the circuit court determines
that a change in placement may be appropriate, Wis. Stat. §
767.325(5m) further directs the circuit court to `make its
[modification] determination in a manner consistent with s. 767.24,'
specifically taking into account the 16 factors considered during the
court's initial placement determination. Wis. Stat. § 767.325(5m)"
(¶ 13).
In this case the father petitioned to have the original placement
order modified to award equal placement of the children. He relied on
the provisions of section 767.24(4)(a)2., which instructs courts to
"maximize" the amount of time a child may spend with each parent. The
father argued that when both parents are available, willing, and able to
accommodate equal placement and when the parents live near each other,
this statute mandates equal placement, because a child's time with his
or her parents cannot otherwise be "maximized."
In several published decisions the court of appeals has concluded
that this statute does not require equal placement. In a majority
opinion authored by Justice Butler, the supreme court agreed with these
decisions. "Our analysis of the plain meaning of Wis. Stat. §§
767.325 and 767.24(4)(a)2., supported by the statute's legislative
history, reveals that the legislature did not intend the term
`maximizing' to mean equal placement or equal time" (¶ 11).
The court held that "Wis. Stat. § 767.24(4)(a)2. does not
require a court to grant each parent equal placement if the court
determines that the placement should be modified. We conclude,
therefore, that in making modification determinations, the Wisconsin
Statutes direct the circuit court to maximize the amount of time a child
spends with his or her parents within an overall placement schedule,
taking into account the best interests of the child, the presumption of
the status quo under Wis. Stat. § 767.325(1) and (2), the general
factors listed in Wis. Stat. § 767.24, and the particular factors
listed under § 767.24(5)(am) when relevant to the child" (¶
3).
Chief Justice Abrahamson and Justice Bradley filed separate
concurring opinions.
Guardianship
Minors - Parental Objection
Robin K. v. Lamanda
M., 2006 WI 68
(filed 13 June 2006)
Robin filed a petition requesting guardianship, under Wis. Stat.
chapter 880, of a 3-year-old boy. She alleged that the boy had lived
with her for more than two years and that his parents, who had little
contact with him, were unable to provide for his care. She alleged that
the guardianship was necessary to obtain essential services, including
medical treatment, for the boy. "At issue in this case is the proper
standard a circuit court must impose in considering a guardianship
petition involving a minor when a parent objects" (¶ 2). The
circuit court denied the petition, and the court of appeals affirmed the
circuit court.
In a decision authored by Justice Butler, the supreme court affirmed
the court of appeals. "[W]e conclude that in evaluating a petition for a
permanent guardianship on behalf of a minor filed by a nonparent when a
parent objects, a court must first determine whether the party bringing
the guardianship petition has shown that the child is in need of a
guardian because there exist extraordinary circumstances requiring
medical aid or the prevention of harm. Absent a showing of such
extraordinary circumstances or need for a guardian, the court cannot
appoint a guardian" (¶ 21). The party seeking a guardianship must
establish the requisite extraordinary circumstances by clear and
convincing evidence (see ¶ 17). Although the circuit court
had found some evidence of neglect, the record fell far short of
demonstrating the extraordinary circumstances required by statute.
Justice Prosser concurred but wrote a separate opinion in which he
stated that the majority opinion advances a "one-size-fits-all standard"
that is ill-suited to the "complex realities that demand the appointment
of a guardian" (¶ 24).
Insurance
UIM - Reducing Clause
Welin v. American Family
Ins. Co., 2006 WI
81 (filed 30 June 2006)
The plaintiff and a passenger in her car were injured in a car
accident. The tortfeasor had $300,000 in liability coverage, from which
his insurer paid $250,000 to the plaintiff and the remaining $50,000 to
the passenger. The plaintiff had $300,000 in underinsured motorist (UIM)
coverage with American Family, which denied her claim for $50,000. Even
though the UIM policy did not cover the passenger, the circuit court
denied the plaintiff's claim for the UIM balance. The circuit court held
that the plaintiff was not an underinsured within the meaning of the
policy, because her UIM coverage equaled the tortfeasor's liability
coverage ($300,000). The court of appeals affirmed.
The supreme court, in an opinion written by Chief Justice Abrahamson,
reversed. "The issue presented is whether a UIM insurance policy's
definition of an underinsured motor vehicle as a motor vehicle that is
insured with bodily injury liability limits less than the limits of
liability of the UIM policy without regard for the amount the injured
person actually receives from the tortfeasor's insurer is a reducing
clause prohibited by Wis. Stat. § 632.32(4m) and (5)(i)" (¶
5). "The tortfeasor's vehicle in the present case became underinsured
because the tortfeasor's insurer made payments to injured persons other
than the plaintiff. The tortfeasor's insurance company's payment to the
plaintiff was less than the plaintiff's UIM limits. To put the plaintiff
in the same position she would have been in had the tortfeasor's
liability limits as to her been the same as the UIM limits she
purchased, she must receive $50,000 from American Family to bring her
recovery to $300,000" (¶ 34).
The court has "explained numerous times that the insured's purpose in
purchasing a UIM policy is to purchase a predetermined, fixed level of
UIM recovery that is arrived at by combining payment from all sources"
(¶ 49). "We conclude that when a tortfeasor injures more than one
person in a single occurrence and the injured persons are not insured
under the same UIM policy, a definition of an underinsured motor vehicle
that compares the injured person's UIM limits to the limits of a
tortfeasor's liability policy without regard to the amount the injured
person actually receives from the tortfeasor's insurer is invalid under
Wis. Stat. § 632.32(4m) and (5)(i). The definition contravenes the
purpose of UIM coverage under Wis. Stat. § 632.32(4m) and functions
as an impermissible reducing clause when a tortfeasor injures more than
one person in a single occurrence and the injured persons are not
insured under the same UIM policy" (¶ 61). The court explicitly
distinguished cases "that involved only one injured person and [in
which] the injured person was paid the full amount of the tortfeasor's
liability policy" (¶ 62).
Municipal Law
Special Assessments - Police Power -
Reasonableness Test
Steinbach v. Green Lake
Sanitary Dist., 2006 WI 63 (filed 6 June 2006)
The petitioners in this case are the owners of residential
condominiums in the Sunrise Point Resort and Yacht Club Condominium, an
18-unit development on a single lot on Big Green Lake. The respondent,
the Green Lake Sanitary District, adopted a resolution to extend
sanitary sewer service to additional lands in the district, including
the land on which the petitioners' condominiums are located, through the
exercise of its special assessment powers under Wis. Stat. section
60.77(5)(f). The district levied against each affected property an
assessment that had two components: an "availability assessment" of
$4,730 to cover the costs of making the sewer available to each lot in
the expansion plan (which costs included installation of a four-inch
lateral pipe stubbed from the sewer main to the property line), and a
"connection assessment" of $5,930 to cover the costs of the
infrastructure necessary for transportation of sewage to the treatment
plant.
The petitioners requested circuit court review of the special
assessments, contending inter alia that they were unfair,
arbitrary, and capricious and in violation of Wis. Stat. section
66.0703. The circuit court left the connection assessment intact (a
holding that was not appealed). The court determined, however, that the
availability assessment was erroneous because, among other things, the
district assessed each of the 18 condominium owners the full $4,730
assessment amount even though it installed only one stub to the
petitioners' property for purposes of connecting all 18 units to the
sewer main. The court ordered the district to reduce the availability
charge against each condominium unit to 1/18th of the $4,730, thus
distributing the charge among the 18 petitioners whose single lot had
been provided one four-inch stub. The district appealed, and the court
of appeals reversed. In a majority decision authored by Justice
Roggensack, the supreme court reversed the court of appeals.
The court began its analysis by observing that special assessments
may be based on the taxing power or on the police power. If an
assessment is made under the taxing power, the municipality must show
that the amount charged to the property does not exceed the value of the
benefits received. An assessment made under the police power, in
contrast, is not limited to the value of the benefits received by the
property owner. When the police power is used, the assessment must be
made on a reasonable basis (see ¶ 13). In this situation,
the district employed the police power. Thus, the issue before the court
was whether the special assessment levied against the petitioners was
reasonable.
The supreme court concluded that the sewer system benefited the
petitioners' property. However, it found that the availability charge
levied by the district lacked a reasonable basis for three reasons.
"First, there is no nexus between the charge to an owner of a parcel of
record who shares access to the sewer main through one four-inch stub
and the District's cost to provide that access. Second, other lots that
have multiple habitable units and were provided access to the sewer main
through one four-inch stub to the lot were charged only one availability
charge. Yet the Petitioners' lot was assessed an availability charge 18
times higher for the same, single four-inch stub. Third, there is no
showing that each condominium owner received a greater benefit than was
provided to other properties that were affected by the sewer extension"
(¶ 26).
"An assessment is unreasonable if it has an `entirely
disproportionate distribution' on a group of property owners that can be
avoided by the municipality's use of another assessment methodology. We
conclude that is what occurred here. This assessment was unreasonable
because the assessment charge required the Petitioners to bear a
disproportionate amount of the costs of the sewer as compared with the
benefit they received" (¶ 30) (citation omitted).
Chief Justice Abrahamson filed a concurring opinion that was joined
by Justice Bradley.
Property
Title Insurance - Encroachments Onto Adjacent Land
First Am. Title Ins. Co.
v. Dahlmann, 2006 WI 65 (filed 7 June 2006)
In 1999 Dahlmann purchased a hotel that abuts Frances Street in
Madison. The hotel and its underground parking garage were built in
1960. From the time of its initial construction, the parking garage
encroached on the land, owned by the city of Madison, beneath Frances
Street. Although the encroachment is not recorded in any record
maintained by the city, the original building plans depict the
encroachment. The city discovered the encroachment in March 2002 when it
was repairing a sidewalk adjacent to the hotel. The city then sought to
collect a $3,980 annual fee from Dahlmann, pursuant to a city ordinance,
for the privilege of encroaching under Frances Street. The city
suggested that it would require Dahlmann to remove the encroachment if
he did not pay the fee.
Dahlmann requested that First American Title Insurance, from which he
had purchased a title insurance policy, provide a defense and
indemnification. First American filed suit, seeking a declaratory
judgment that its policy did not afford Dahlmann coverage for the
encroachment. The circuit court granted the declaratory judgment motion.
The court said that the policy (which made no reference to the
encroachment) did not afford coverage because it only covered the land
specified in the legal description that was included in the policy. The
court of appeals affirmed this decision. In a unanimous decision
authored by Justice Crooks, the supreme court reversed the court of
appeals.
The issue before the supreme court was whether the encroachment of
the hotel's parking garage onto property owned by the city is covered
under First American's policy as an "encumbrance on the title." The
parties disputed the correct interpretation of the policy, and in
particular, the significance of the deletion of the survey and
encroachment exceptions from the standard form title commitment. This
deletion occurred as a result of negotiations that occurred before the
title policy was issued. In issuing the title policy, First American
relied on a 1994 survey, which did not depict the encroachment under
Frances Street, and on an affidavit from the landowner who sold the
hotel to Dahlmann. The affidavit stated that no changes had been made to
the hotel to affect the structure's size or location since the 1994
survey was conducted. First American agreed to omit two exceptions,
which were included in the standard form title commitment: 1) "Any
discrepancies or conflicts in boundary lines, any shortages in area, or
any encroachment or overlapping of improvements" (the encroachment
exception); and 2) "Any facts, rights, interests or claims which are not
shown by the public record but which could be ascertained by an accurate
survey of the land" (the survey exception). As a result of the policy
amendments, Dahlmann paid an additional premium.
Dahlmann argued that coverage for the hotel's encroachment onto city
land under Frances Street exists under the title insurance policy,
because the encroachment constitutes an encumbrance on the title. He
argued that it does not matter whether a structure encroaches on the
insured property or a structure on the insured property encroaches on
adjacent land - if the encroachment is substantial, the result is an
encumbrance on the title of the insured property, and the title
insurance policy insures him against any damage or loss caused by such
an encumbrance on his title. Dahlmann further contended that deletion of
the survey and encroachment exceptions demonstrates the parties' intent
to insure against an encroachment such as the one at issue in this case.
First American claimed that the loss for which Dahlmann seeks
compensation does not fall within the policy's coverage because the
encroachment is beyond the boundary of the property as described in the
policy.
The supreme court held that "a substantial encroachment, created by
an improvement onto adjacent land, constitutes an encumbrance on the
title of the insured property for the purpose of the title insurance
contract at issue in this case. We further hold that such a substantial
encroachment, and thus an encumbrance, is covered under the terms of the
title insurance policy at issue. However, the issue of whether the
encroachment here is `substantial,' so as to constitute an encumbrance
on the title of the insured property, for purposes of the title
insurance contract, presents a question for the trier of fact to
resolve. We, therefore, remand the case to the circuit court for such a
determination" (¶ 42).
The supreme court said that the circuit court, when making the
determination of whether the encroachment is substantial and thus an
encumbrance on title, should consider four factors articulated in In
re Meehan, 30 Wis. 2d 428, 141 N.W.2d 218 (1966) (a suit in which
the buyer sued the seller for breach of warranty against encumbrances).
The factors are 1) the character or extent of the encroachment, 2) the
cost or possibility of its removal, 3) the length of time the
encroachments had continued, and 4) municipal acquiescence, or the like
(see ¶ 17). The supreme court noted that Meehan
is silent on whether each of the factors deserves equal weight, or if
the factors are to be applied in an equitable manner, weighing the
totality of circumstances. It concluded that a court should apply the
Meehan factors using a totality of the circumstances approach
(see ¶ 19).
Condemnation Proceedings - Failure of Condemnor
to Negotiate in Good Faith - Award of Litigation Expenses
The Warehouse II LLC v.
Wisconsin Dep't of Transp., 2006 WI 62 (filed 6 June 2006)
The question before the supreme court in this case was whether Wis.
Stat. section 32.28(3)(b) entitles a successful condemnee to litigation
expenses when the basis for the circuit court ruling in its favor is
that the condemnor failed to negotiate in good faith before issuing the
jurisdictional offer.
The Wisconsin Department of Transportation (DOT) commenced
condemnation proceedings against property owned by Warehouse. After the
DOT issued its jurisdictional offer to purchase, Warehouse challenged
the condemnation under Wis. Stat. section 32.05(5), asserting that
because the DOT had failed to negotiate in good faith before issuing the
jurisdictional offer, it lacked the right to condemn Warehouse's
property. The circuit court held an evidentiary hearing, ruled that the
DOT had not negotiated in good faith, and concluded that the DOT's
jurisdictional offer to purchase was invalid and all subsequent DOT
actions were null and void. It awarded Warehouse litigation expenses
pursuant to Wis. Stat. section 32.28(3)(b). However, in subsequent
circuit court proceedings, the court accepted the DOT's contention that
the circumstances of the case did not fall under section 32.28(3)(b) and
held that no litigation expenses were due. Warehouse appealed, and the
court of appeals affirmed. In a majority opinion authored by Justice
Roggensack, the supreme court reversed the court of appeals.
Wis. Stat. section 32.05(2a) requires that a condemnor negotiate with
the property owner in good faith before issuing a jurisdictional offer
to purchase (see ¶ 5). It was not contested for purposes
of this appeal that the DOT did not do so. In earlier cases the supreme
court had concluded that a party's failure to negotiate before issuing
the jurisdictional offer is "a jurisdictional defect." See, e.g.,
Herro v. Natural Resources Bd., 53 Wis. 2d 157, 192 N.W.2d 104
(1971).
Wis. Stat. section 32.28(3)(b) provides that litigation expenses
shall be awarded to the condemnee when a property owner prevails in
proving either that the condemnor does not have "the right to condemn"
or that "there is no necessity for its taking." Whether Warehouse had
proven that the DOT did not have the "right to condemn" was at issue in
this case. The supreme court held that "Wis. Stat. § 32.28(3)(b)
applies when the condemnor's jurisdictional offer to purchase was not
made after good faith negotiations, thereby causing a jurisdictional
defect in the jurisdictional offer to purchase. This jurisdictional
defect causes the condemnor to lack the statutory right to condemn"
(¶ 34).
"[W]e conclude that good faith negotiation prior to issuing a
jurisdictional offer to purchase is not merely a technical obligation,
but rather, it is a fundamental, statutory requirement necessary to
validly commence condemnation and confer jurisdiction on the
condemnation commission and the courts. Therefore, because it is
uncontested that the DOT did not negotiate in good faith prior to
issuing the jurisdictional offer, the DOT did not commence a statutorily
sufficient condemnation. As condemnation is purely a statutory
procedure, the DOT lacked the right under the statutes to condemn
Warehouse's property. Accordingly, Warehouse is entitled to litigation
expenses pursuant to Wis. Stat. § 32.28(3)(b), as set out in §
32.28(1). Therefore, we reverse the decision of the court of appeals and
remand to the circuit court to determine reasonable litigation expenses"
(¶ 35).
Chief Justice Abrahamson filed a dissenting opinion that was joined
by Justice Bradley.
Partial Takings - Valuation
Spiegelberg v.
State, 2006 WI 75 (filed 27 June 2006)
Spiegelberg owned 150 acres of property (five contiguous tax
parcels), most of which she used as a farm. The Department of
Transportation (DOT) condemned about 11 acres from three of the five
parcels. In determining the property's value, the DOT valued the farm as
a single entity, subtracting the "after" value from the "before" value.
In this manner the DOT set the damages at about $19,000. Spiegelberg's
appraiser used a comparable sales method by which he valued each
separate parcel and determined the value to be $84,000. The circuit
court accepted Spiegelberg's approach.
The DOT appealed, and the court of appeals certified to the supreme
court the following question: "when a partial taking affects multiple
contiguous tax parcels that have common ownership, [is] the property ...
to be valued based on: (1) the fair market value of the combined acreage
as a single property or (2) the sum of the fair market values of each
individual tax parcel[?]" The supreme court, in an opinion authored by
Justice Roggensack, concluded that "Wis. Stat. § 32.09(6)
(2003-04), which determines the method by which just compensation is to
be determined for a partial taking, permits a flexible approach such
that the individual characteristics of each property may be considered,
according to each property's highest and best use, in order that the
property owner receives just compensation for the taking. Because
valuing the tax parcels separately produced a value consistent with the
most advantageous use of this property, the circuit court correctly
chose the method of appraisal employed by Bernice Spiegelberg's
appraiser. Therefore, we affirm the judgment and order of the circuit
court that awarded $84,200 to the property owner" (¶ 1).
The court construed the pertinent statutes and concluded the
following: "(1) `fair market value' relates to the price a willing buyer
would pay to a willing seller; (2) the requirement to consider the
`whole property' does not require that an individual assessment always
treat contiguous, commonly owned tax parcels separately or as a single
unit, but requires that no portion of the property be left out of an
assessment; (3) the requirement of Wis. Stat. § 32.09(2) that a
property's `most advantageous use but only such use as actually affects
the present market value' be considered as a part of a valuation is
linked to the determination of the `fair market value' required by
§ 32.09(6); and (4) how to apply the language of § 32.09(6) to
arrive at just compensation depends upon considerations related to each
property's individual characteristics" (¶ 30).
"Because Wis. Stat. § 32.09(6) does not specify whether
contiguous, commonly-owned tax parcels should be separately appraised or
appraised as a collective unit, we conclude that when the property's
`highest and best' use that affects its present market value is most
appropriately appraised by considering the contiguous tax parcels
separately, that is the appropriate appraisal method. Conversely, when,
according to the above-addressed rules, the `highest and best use' is
more adequately represented through an appraisal of the property as a
single unit, that approach is the one that is appropriate. Which method
is required by § 32.09(6) will depend on the unique qualities of
the specific property affected by the taking and its `fair market
value.' The ascertainment of the property's `fair market value' depends
upon the common law definition of `highest and best use,' which we have
determined is synonymous with the `most advantageous use' set out in
§ 32.09(2)" (¶ 31).
Justice Bradley, joined by Chief Justice Abrahamson, dissented.
Although the dissenting justices agreed with the majority's "flexible
approach" to valuation, they said that the record was too sparse to
permit its application in this case.
Top of page
Sexually Violent Persons
State v. Mark,
2006 WI 78 (filed 29 June 2006)
Mark was committed as a sexually violent person pursuant to Wis.
Stat. chapter 980. On appeal, Mark challenged the admission at the
commitment hearing of four statements he made to his parole officer as
well as the circuit court's exclusion of evidence regarding his
probation conditions. The court of appeals held that only two of the
four statements were compelled, incriminating, and testimonial. It also
affirmed the exclusion of evidence concerning Mark's probation
conditions.
The supreme court, in an opinion written by Justice Crooks, affirmed
the court of appeals and remanded the case for further proceedings. It
held that "in order for a statement to be properly excluded under the
Fifth Amendment privilege against self-incrimination, as applied to the
states through the Fourteenth Amendment's due process clause, it must be
testimonial, compelled, and incriminating. We further determine that
while an individual has a prepetition or prearrest right against
self-incrimination, that right is ordinarily not self-executing and must
be invoked. Therefore, we withdraw any language to the contrary in
State v. Zanelli (Zanelli I), 212 Wis. 2d 358, 569
N.W.2d 301 (Ct. App. 1997). Finally, we conclude that the conditions of
Mark's probation are irrelevant to the determination of whether or not
he is a sexually violent person pursuant to Wis. Stat. § 980.01(7)
and were therefore properly excluded by the circuit court" (¶ 2).
The case was remanded for a determination of whether several of Mark's
statements to his agent were unconstitutionally compelled.
Justice Roggensack, joined by Justice Bradley, concurred on the
ground that only one of the statements at issue was incriminating. They
said that the written statement on Mark's parole form was subject to
limited immunity and therefore was not incriminating.
Justice Butler concurred in part and dissented in part. He
"conclude[d] that statements made to a parole agent would be admissible
in a civil ch. 980 proceeding, and that a proper application of the
Fifth Amendment privilege in such a proceeding would result in the
exclusion of testimonial, compelled, incriminating statements at a
subsequent criminal proceeding only. I would thus admit all four
statements in the ch. 980 proceeding against Mark, but bar their
admission in subsequent criminal proceedings. I would also adhere to the
definition of `incriminating' set forth previously by the United States
Supreme Court" (¶ 52).
Top of page
Torts
Negligence - Lender's Liability to Third
Parties Who Suffer Losses
Hoida Inc. v. M&I
Midstate Bank, 2006 WI 69 (filed 13 June 2006)
Hoida is a subcontractor that incurred losses on a building project
gone awry when the general contractor and the owner of the property
fraudulently misappropriated approximately $650,000 of the project's
construction loan proceeds. Defendants M&I Midstate Bank and
McDonald Title Co. were the lending bank and the disbursing agent,
respectively, on the project. Hoida claimed that it was a third-party
beneficiary of the owner's loan agreement with M&I. Hoida also
claimed that the defendants were negligent because they did not identify
the subcontractors and materialmen who worked on the project, did not
verify that the progress on the work was sufficient to justify the
release of loan funds, and did not secure lien waivers from Hoida, which
Hoida alleges would have prevented its losses. The defendants denied
Hoida's claims. They also made a prima facie showing that they did not
breach the duty of ordinary care under the circumstances by not
undertaking the tasks Hoida identified, and that the lack of lien
waivers was not a cause-in-fact of Hoida's damage. The defendants also
contended that public policy precludes Hoida's claim (see
¶ 1).
The circuit court granted summary judgment dismissing the plaintiff's
claims. The court of appeals affirmed. See 2004 WI App 191. In
a majority decision authored by Justice Roggensack, the supreme court
affirmed the court of appeals.
The supreme court quickly dealt with the breach of contract claim
that was brought by the plaintiff as a third-party beneficiary. "In
order to state a claim based on third-party beneficiary status, the
complaint must allege facts sufficient to show that the agreement that
was breached was entered into primarily and directly for plaintiff's
benefit or the complaint must have attached a copy of the agreement that
demonstrates that purpose. Hoida did neither. Therefore, its attempted
breach of contract claim fails to state a claim for relief" (¶ 19)
(citation omitted).
With respect to the negligence claim, the court noted that "[t]he
specific question of a lender's liability to a third party who suffers
losses, where the lender and the third party are not in privity of
contract and the lender has no fiduciary duty to the third party, is a
question of first impression in Wisconsin" (¶ 21). The court
analyzed the traditional elements of negligence and first considered the
"duty" element, noting that it involves two aspects: the existence of a
duty of ordinary care and an assessment of what ordinary care requires
under the circumstances (see ¶ 27). Accordingly, the court
examined what a reasonable lender and its agent who were in the position
of the defendants would be obligated to do in similar circumstances.
The court concluded that "M&I and McDonald Title's duty of
ordinary care under the circumstances with regard to Hoida did not
require either of them to identify Hoida as a subcontractor on the
project, to verify that progress on the project was sufficient to
justify the release of the amount of funds that the general contractor
and the owner requested, or to secure lien waivers from Hoida. We
further conclude that M&I exercised ordinary care under the
circumstances this case presents when it retained McDonald Title to act
as its disbursing agent and instructed it to secure completed
Application and Certification for Payment forms for all disbursements.
These forms contained the signature of Villager, who was the
owner/borrower in regard to the project, the signature of the architect
and the signature of the general contractor" (¶¶ 44-45).
Once a court has established what is required by the duty of ordinary
care under the circumstances, the court can then ascertain the second
element of actionable negligence, whether a breach of that duty has
occurred. "Hoida's claim of a breach is based entirely on the theory
that the defendants' duty of ordinary care under the circumstances
required them to undertake certain tasks that we have concluded ordinary
care under the circumstances did not require. It then follows that no
breach occurred and therefore the defendants were not negligent, as a
matter of law. In the future, when attempting to plead lender liability
based on negligently failing to undertake certain tasks, a plaintiff
must allege why the duty of ordinary care of the lender or disbursing
agent includes the obligation to affirmatively undertake the tasks that
plaintiff claims the lender or disbursing agent reasonably failed to
perform under the circumstances" (¶ 46).
The court also concluded that "the negligence claim Hoida seeks to
establish against M&I is barred by the legislative determination of
priority as between a lender and a subcontractor set out in Wis. Stat.
§ 779.01(4) and Wis. Stat. § 706.11" (¶ 51). "We agree
with the court of appeals that if this court were to develop a new
lender liability claim by imposing affirmative obligations on a lender
that it has not undertaken by contract or voluntarily assumed, the
result would be to give subcontractors and material suppliers payment
priority over construction lenders when a third party acts in a way that
could cause loss for both. However, the legislature has enacted statutes
that evince the public policy of Wisconsin to pay construction lenders
first. Wis. Stat. § 779.01(4) and Wis. Stat. § 706.11. We
cannot establish a common law claim that would contravene that
legislative choice. If a new claim is to be established for those in
Hoida's position, it is for the legislature to do so, not this court"
(¶ 48).
Finally, the court noted that even if McDonald Title were negligent
in its distribution of the loan proceeds, the court would conclude that
Hoida's claim against McDonald Title was precluded by judicial public
policy (see ¶ 41). "[P]ermitting recovery would place too
unreasonable a burden on McDonald Title, who acted solely at the
direction of M&I" (¶ 43).
Justice Bradley filed a dissenting opinion that was joined by Justice
Butler. Chief Justice Abrahamson did not participate in this case.
Statute of Repose - Safe Place
Mair v. Trollhaugen Ski
Resort, 2006 WI 61 (filed 6 June 2006)
Mair was injured when she slipped and fell while walking in a shower
room while wearing ski boots. The bathroom was constructed in 1976. The
circuit court ruled that the 10-year statute of repose in Wis. Stat.
section 893.89 (2003-04) barred the plaintiff's claim under the safe
place statute, Wis. Stat. section 101.11, and therefore granted summary
judgment in favor of the defendant. The court of appeals affirmed.
In an opinion authored by Justice Wilcox, the supreme court affirmed
the court of appeals. The court held that Mair's safe place claim was
barred by section 893.89, the builder's statute of repose, because she
proved only that a structural defect, not an unsafe condition, caused
her injury.
First, the court delineated the distinction between structural
defects and unsafe conditions for purposes of the safe place statute.
"Because the design and placement of the floor drain and the condition
of the surrounding floor have nothing to do with a failure to repair or
maintain the property, they can be classified only as structural defects
rather than unsafe conditions associated with the structure" (¶
25). Although Mair alleged that such factors as the bathroom lighting
also contributed to her fall, she did not present sufficient evidence to
"escape summary judgment" (¶ 26).
Second, the court analyzed the interplay of the safe place statute,
section 101.11, and the builder's statute of repose, section 893.89,
which "begins to run when the improvement is substantially completed and
prohibits a cause of action from accruing after the ten-year exposure
period ends.... It is a statute of repose rather than a statute of
limitation because it `provides that a cause of action must be commenced
within a specified amount of time after the defendant's action which
allegedly led to injury, regardless of whether the plaintiff has
discovered the injury or wrongdoing.' Causes of action within the scope
of the statute include `any deficiency or defect in the design,
land surveying, planning, supervision or observation of construction of,
the construction of, or the furnishing of materials for, the
improvement to real property'" (¶ 27) (emphasis added).
Unsafe conditions brought about by lapses in maintenance are,
however, excepted. "Under the safe place statute, a failure to
`maintain' correlates to an unsafe condition associated with the
structure, and thus allegations of such defects do not fall under the
purview of the builder's statute of repose. Thus, from a plain reading
of the statute, we can conclude that § 893.89 bars safe place
claims resulting from injuries caused by structural defects, but not by
unsafe conditions associated with the structure, beginning ten years
after a structure is substantially completed"(¶ 29).
"Application of Wis. Stat. § 893.89 to safe place claims based
on a structural defect is consistent with the intent of the legislature
in passing revised versions of the statute of repose. The previous
versions of the statute were declared unconstitutional, in large part,
because they did not include protection for owners and occupiers. After
the first two versions of the statute were struck down, the legislature
was forced to choose between forgoing the statute of repose altogether
or including owners and occupiers within its scope. By asking this court
to apply the statute of repose as if the revisions had not been made,
Mair is asking the court to ignore its own previous decisions regarding
the statute's constitutionality and the decision of the legislature that
it was preferable as a matter of public policy to limit causes of action
against owners and occupiers than to discard the statute of repose for
members of the construction industry" (¶ 34).
Fiduciaries - Breach - Statute of
Limitation
Zastrow v. Journal
Communications Inc., 2006 WI 72 (filed 20 June
2006)
The plaintiff shareholders sued the defendant trustees for breach of
fiduciary duty. The suit had its origins in a corporate restructuring
that occurred when the plaintiffs' employer, Perry Printing, was
essentially sold by its owner, Journal Communications. At the time of
closing in 1995, all employees were terminated by Perry and rehired by
the buyer. The former employees held stock in the Journal's employee
stock trust, which was governed by an agreement (the JESTA). Under the
JESTA the former employees had to offer to sell back their trust-units
immediately, unless they retired, in which case they had 10 years to
accomplish the sale. None of the former employees retired, even though
some were eligible. The trustees accorded them periods ranging in length
from one year to five years to sell back the trust units, depending on
the employees' years of service.
In 2000 the former employees who sold at the time of the
restructuring brought this suit, in which they claimed that they should
have been given 10 years to sell back the units. The defendants claimed
that the suit was barred by the two-year statute of limitation for
intentional torts. The circuit court instead applied a six-year statute
of limitation. The court of appeals reversed, concluding that the
complaint alleged intentional torts governed by the two-year statute of
limitation.
The supreme court, in an opinion written by Justice Roggensack,
affirmed the court of appeals. "Plaintiffs argue that the defendants'
conduct contravened their duties as fiduciaries because they acted in
their own self-interest due to their ability to purchase some of the
Trust-units plaintiffs sold. They assert, and the circuit court found,
that telling the plaintiffs they had to sell back their Trust-units over
a one to five year period, while not telling them that the JESTA
provided for a ten-year sell-back opportunity if they retired, was not
done in good faith. At the same time, plaintiffs assert that these
actions constitute negligent breaches of fiduciary duty, are not
intentional acts, and therefore their claims come under the six-year
statute of limitations in either Wis. Stat. §§ 893.52 or
893.53" (¶ 17).
The majority examined the nature of the fiduciary duty, and concluded
that "we are persuaded that there is a distinct difference between a
claim for the breach of the fiduciary duty of loyalty and a claim for
the breach of the duty of ordinary care, i.e., a negligence claim. That
difference arises from the conscious assumption of the role of
fiduciary, on which the law imposes an obligation of absolute loyalty in
all matters relating to the object of the duty, e.g., the beneficiaries
of a trust. A fiduciary agrees to assume a position of authority in
regard to the affairs of another in which position the fiduciary may
have access to confidential information or to property of the object of
the fiduciary's obligation. Therefore, if a trustee does not make a full
disclosure of material facts to a beneficiary, that conduct is a breach
of the trustee's duty of loyalty. The law concludes this breach is
intentional. Beloit Liquidating, 270 Wis. 2d 356, ¶ 40.
Similarly, if a trustee personally profits from his role as a trustee,
that conduct is a breach of the trustee's duty of loyalty, and the law
concludes it is intentional" (¶ 35).
"Good faith," said the court, "is encompassed within what we have
more succinctly referred to as the duty of loyalty that arises when a
fiduciary role is accepted" (¶ 36). A breach of a fiduciary duty of
loyalty is an intentional tort "because the fiduciary consciously agreed
to be committed to the interests of those to whom the fiduciary assumed
that special role" (¶ 37). The record here clearly disclosed an
intentional tort that was subject to the two-year statute of limitation
(see ¶¶ 41-42).
Chief Justice Abrahamson concurred and was joined by Justice Bradley
and, in part, by Justice Crooks. The issue, according to the Chief
Justice, was "only what statute of limitations applies to the claim for
breach of fiduciary duty presented in the instant case" (¶ 47). The
concurring justices concluded that "in the interest of stare decisis
..., Beloit Liquidating controls the outcome of the instant
case and creates a uniform, predictable rule that the statute of
limitations applicable in all claims of any breach of fiduciary duty is
the two-year statute" (¶ 54). The concurring justices also objected
to the majority's creation of "a new body of fiduciary law for trustees
that is inconsistent with prior case law" and established authority
(¶ 58).
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