Court of Appeals Digest
This column summarizes selected published
opinions of the Wisconsin Court of Appeals. Full-text decisions are available online. Prof.
Daniel D. Blinka and Prof. Thomas J. Hammer invite comments and
questions about the digests. They can be reached at the Marquette
University Law School, 1103 W. Wisconsin Ave., Milwaukee, WI 53233,
(414) 288-7090.
by Prof. Daniel D. Blinka & Prof. Thomas J. Hammer
Arbitration
Costs - Arbitration Agreement
Lane v. Williams,
2000 WI App 263 (filed 28 Nov. 2000) (ordered published 20 Dec.
2000)
The Lanes sued their insurer over a coverage dispute. The circuit
court stayed the action and referred the matter to arbitration as
contemplated by the policy, which also provided that the parties "share"
the costs equally. The arbitration panel awarded the Lanes about
$64,000. When the Lanes moved to confirm the award, as provided by Wis.
Stat. section 788.09, they also moved for costs under various theories.
Pursuant to section 807.01, the court granted Mrs. Lane double costs
because the insurer had not accepted her offer of settlement. The judge
awarded Mr. Lane taxable costs and interest on his award.
The court of appeals, in a decision written by Judge Peterson,
reversed. Prior case law held that section 814.01 permits costs only
after a "litigated trial court proceeding"; thus, "no statutory costs
are available after an arbitration" (¶ 12). The court also held,
based upon prior case law, that section 814.06 "does not give the
circuit court an independent basis for awarding costs" (¶ 13).
Costs must be explicitly authorized by statute, which was not the case
here. Finally, case law also rejected the argument that language in the
arbitration agreement that provided that "local court rules governing
procedure and evidence will apply" incorporated the cost provisions in
chapter 814.
The court next turned to the "double costs" imposed pursuant to
section 807.01(3). It held that here too the statute is limited to a
"prevailing party" in a "litigated trial court proceeding" (¶
18).
Attorneys
Lawyer-client Relationship - "Medical Mal" Cases - The "Fund"
Wisconsin Patients
Compensation Fund v. Physicians Ins. Co., 2000 WI App 248
(filed 3 Oct. 2000) (ordered published 29 Nov. 2000)
One insurance company, Physicians Insurance, provides about 40
percent of medical-malpractice coverage for the state's doctors. Under
chapter 655 of the Wisconsin Statutes, the Wisconsin Patient's
Compensation Fund provides excess coverage over and above such primary
coverage. A trial court ruled that "Wis. Stat. § 655.27(5)(b) means
that lawyers retained by it and other medical-malpractice insurers in
connection with an action to which Wis. Stat. ch. 655 applies must
'assume[] an attorney-client relationship with the Fund' and that this
'requires that the Fund be provided with the timely transmission of all
case evaluations, status reports, strategic recommendations, and other
substantive communications of defense counsel subject to the provisions
of the Code of Professional Responsibility.'" The trial judge also
invalidated restrictions imposed by Physicians Insurance on what its
hired lawyers may reveal to the Fund.
The court of appeals, in a decision written by Judge Fine, reversed.
Wis. Stat. chapter 655 requires that every health-care provider carry
primary insurance or be self-insured. The Fund provides only excess
coverage. Other statutory provisions guarantee that "the Fund may not be
sandbagged by a carrier seeking to shift to the Fund liability that is
properly borne by the carrier" (¶ 5).
The dispute in this case centered around "the attempt by Physicians
Insurance to limit the scope of representation provided to the Fund by
lawyers hired by Physicians Insurance to represent its insured." The
Fund contended that because chapter 655 mandates that the lawyer hired
by the primary carrier must also represent the Fund and provide an
"adequate defense," "it should be privy to all information gathered and
strategy formulated by those lawyers" (¶ 7). But the Fund's
contention violated "the apparent rule in this state that a
lawyer/client relationship can only be formed by the mutual consent of
the lawyer and client" (¶ 11). For the same reason, it would compel
lawyers to violate rules concerning client confidentiality. Finally, the
Fund's position blurs the legislature's distinction between an "adequate
defense," where there is no apparent reasonable probability that the
Fund will face exposure, and an "active defense," where the Fund's funds
might be exposed (¶ 12).
Civil Procedure
Amending Pleadings - Relation-back Doctrine - Notice - Statute of
Limitations
Grothe v. Valley Coatings
Inc., 2000 WI App 240 (filed 3 Oct. 2000) (ordered published 29
Nov. 2000)
Plaintiff sued Valley Coatings for injuries she allegedly sustained
as a result of her exposure to paint and chemicals used during
construction at her workplace. Valley Coatings, which distributed the
products, filed a third-party complaint against Omni Glass & Paint,
which applied the products, and Miron Construction, the project's
general contractor. The circuit court later granted summary judgment
dismissing plaintiff's claims against Valley Coatings, and thereafter
Omni and Miron moved to dismiss because she had not filed any claim
directly against them. When plaintiff moved to amend her pleadings to
allege claims against Miron and Omni, the trial court denied it because
the statute of limitations had run and neither party had received notice
within the required time.
The court of appeals, in a decision written by Judge Peterson,
affirmed the trial court's order denying plaintiff's motion to amend her
pleadings to name Omni and Miron as defendants pursuant to the
relation-back doctrine, which is governed by Wis. Stat. section
802.09(3). Valley Coatings had impleaded Omni and Miron on June 10,
1998, just two days before the statute of limitations expired, but
neither defendant received notice of the action until June 22, 1998,
when they were served with the third-party summons and complaint. Since
this "precise issue" has not arisen in Wisconsin's caselaw, the court
looked to federal precedent construing the identical rule. It held "that
the statute requires receipt of notice of the institution of the action
within the statute of limitations" (¶ 11). Finally, the record
revealed no abuse of discretion in the trial court's denial of the
motion pursuant to its authority under Wis. Stat. section 802.09(1). The
motion to amend came "late" in the proceedings and she offered no
explanation for her failure to request such action earlier.
Commercial Law
Banks - Forged Checks - Customer's Duty
Weber, Leicht, Gohr &
Associates v. Liberty Bank, 2000 WI App 249 (filed 10 Oct.
2000) (ordered published 29 Nov. 2000)
An advertising agency suffered significant losses because of an
embezzlement that involved forged and altered company checks. The agency
sued its bank and a jury awarded it about $66,000.
The court of appeals, in a decision written by Judge Fine, reversed
on the ground that the Uniform Commercial Code (UCC) barred the
judgment. The court held that "if a customer does not timely take the
reasonable precautions to protect itself, and the bank has paid the
items in good faith, the customer is, in the word of the code,
'precluded' from holding the bank liable for damages that the customer's
vigilance would have prevented" (¶ 11). Here the jury found that
the agency had failed to comply with the obligations imposed on
customers by sections 403.406 and 404.406 (1997-98) of the UCC. Nor was
the court troubled that the agency had framed its claim as a
"misrepresentation" by the bank. Claims for misrepresentation may
"supplement" the UCC but they may not "supplant them" (¶ 12).
UCC - Debt - Collateral - Article 9
Banks Bros. Corp. v.
Donovan Floors Inc., 2000 WI App 253 (filed 3 Oct. 2000)
(ordered published 29 Nov. 2000)
Two related companies, Donovan Floors and Breakfall, owed Bank One of
Milwaukee nearly $250,000. When the debtors defaulted, Bank One sued
James Donovan based on a personal guarantee, foreclosed on the Donovans'
home, and moved to recover other secured collateral. The case was
settled when Bank One, the Donovans, and both companies stipulated to
the entry of a judgment foreclosing on the Donovans' home and replevin
in connection with the secured property. Bank One also agreed to give
the Donovans a chance to renew their business and accordingly executed
two forbearance agreements in which it deferred the judgment's
enforcement. Later Bank One assigned the debt and the security to BBC,
which entered into a "Notice of Assignment, etc." with the Donovans and
their allied entities. Ultimately, the deal failed to work out and BBC
never received any payments as contemplated by the Notice of Assignment.
Six years later BBC scheduled a sheriff's sale of the Donovans'
home.
The Donovans brought this action seeking an order under Wis. Stat.
section 806.07(1)(e) relieving them from the judgment of foreclosure and
dismissing BBC's claim for a money judgment against James Donovan on the
personal guarantee. The trial court denied their motion.
The court of appeals, in a decision written by Judge Fine, affirmed.
Although no controlling caselaw existed, the court held that under the
UCC, specifically Wis. Stat. section 409.505(2), BBC had a right to
"immediate strict foreclosure of all the pledged assets. It gave up that
right in consideration for a partial payment on the debt and the
concomitant partial satisfaction." Thus, under the UCC the Donovans had
no grounds to complain; "they agreed to that arrangement and did so in a
statement signed after default." The court well understood that the
Donovans "would love to have their cake (the chance to save their
business given to them by [BBC's] agreement to hold off on its right to
claim the assets pledged for the debt) and eat it also (keep those
assets)" (¶ 11).
Criminal Procedure
Issue Preclusion - Revocation Proceedings
State v. Terry,
2000 WI App 250 (filed 24 Oct. 2000) (ordered published 29 Nov.
2000)
The defendant was found guilty of possessing a controlled substance
with intent to deliver. On appeal he argued that the doctrine of issue
preclusion should have barred his prosecution. Specifically, at a
probation and parole revocation proceeding, an administrative law judge
(ALJ) found insufficient evidence that he possessed cocaine under a
preponderance (more likely than not) standard.
The court of appeals, in a decision written by Judge Curley,
affirmed. The court applied a five-criteria test set forth in earlier
cases and found that issue preclusion failed on three of them. It was
satisfied that "(1) the district attorney was not a party to the
proceedings and could not have obtained review of the ALJ's decision
even if the district attorney had so desired. Moreover, DOC [the
Department of Corrections] does not appeal the ALJ's decision in parole
and probation revocation proceedings; (2) there are significant
differences between revocation proceedings and criminal trials which
warrant relitigation of the issue; and (3) under the circumstances
present here, public policy considerations weigh against the application
of issue preclusion" (¶ 10).
First, because the ALJ ultimately revoked defendant on three other
counts, the DOC had no valid interest in appealing the ALJ's decision on
count one. Second, revocation proceedings, unlike criminal trials,
balance the public's interest in safety with the offender's
rehabilitative needs. Finally, public policy considerations also
justified the result. The revocation decision is made by the executive
branch - the DOC, and the state is represented by a nonlawyer. If the
ALJ's determination not to revoke precluded a criminal prosecution,
district attorneys would be forced to intervene in all revocation
proceedings (¶ 14).
Probation Revocation Hearings - Corpus Delecti Rule
State ex rel. Washington v.
Schwarz, 2000 WI App 235 (filed 4 Oct. 2000) (ordered published
29 Nov. 2000)
In criminal trials, the State of Wisconsin applies a confession
corroboration (corpus delecti) rule. According to Wisconsin's version of
the rule, all elements of the crime do not have to be proved
independently of an accused's confession; however, there must be some
corroboration of the confession in order to support a conviction. "If
there is corroboration of any significant fact, that is sufficient under
the Wisconsin test." Holt v. State, 17 Wis. 468, 480, 117 N.W. 626
(1962).
In this case, the critical issue before the court of appeals was
whether the confession corroboration requirement applicable to a
criminal proceeding should also apply in a probation revocation
proceeding. In a decision authored by Judge Nettesheim, the court of
appeals held that the confession corroboration rule does not apply in
probation revocation proceedings. But, said the court, this does not
mean that a probationer's extra-judicial admission is per se an adequate
basis for revocation. The admission must carry sufficient indicia of
reliability or credence such that the fact finder can confidently rely
upon it to support the conclusion that revocation is appropriate and
necessary.
Return of Seized Property - Money Judgment Against Municipality for
Property Mistakenly Returned to a Third Party
City of Milwaukee v.
Glass, 2000 WI App 252 (filed 3 Oct. 2000) (ordered published
29 Nov. 2000)
The defendant was arrested by the Milwaukee police and charged with
receiving stolen property. In connection with the arrest, the police
seized a sizable quantity of copper wire and scrap metal from the
defendant's residence. Later, the police contacted a party who the
police believed to be the lawful owner of the scrap metal and released
it to this person.
The defendant subsequently was acquitted of the charge. Then, using
the case number of his criminal case, he filed a petition pursuant to
Wis. Stat. section 968.20 seeking the return of the copper wiring and
other scrap material seized by the police. Following hearings, the
circuit court declared that the value of the property in question was
$1,600 and awarded the defendant a judgment for that amount against the
city because the police department no longer had the defendant's
property.
In a majority decision authored by Judge Curley, the court of appeals
reversed. The statute in question directs the trial court to return
seized property to its rightful owner, unless the property is a
dangerous weapon belonging to a person who committed a crime,
contraband, or property needed for evidence or further investigation.
The statute's purpose is to permit the swift return of seized property
to the proper owner when the property is no longer needed by law
enforcement personnel.
The majority was satisfied that the intent of the legislature in
passing this law was to authorize the return of seized property and
nothing more. Thus, the court cannot grant a money judgment to the
rightful owner under section 968.20 when the property is missing or
mistakenly returned to another.
Judge Schudson filed a dissenting opinion.
Warrantless Dwelling Search - Emergency Doctrine
State v. Rome,
2000 WI App 243 (filed 18 Oct. 2000) (ordered published 29 Nov.
2000)
Police found a young woman crying and walking along the street in the
middle of a cold winter night, carrying a baby. The woman indicated that
she and her intoxicated husband (the defendant) had had an argument
about their children during which he had yelled, threatened her, and
grabbed her hair. The argument was sufficiently serious to drive her out
into the cold night without appropriate clothing for her or the
baby.
Although the woman insisted that she did not want police involvement
and that another child (a 2-year-old) had been asleep and fine in the
house before she left, she did acknowledge that the defendant was drunk
and probably did not even know that she had left the premises. The woman
admitted that she was concerned about the 2-year-old child's welfare
because of the defendant's intoxication and asked the officers to go to
her house and check on the child, though she did not specifically give
the police permission to enter her home.
Upon arrival, the officers made a warrantless entry of the premises
after substantial but unsuccessful efforts to contact anyone within.
Once inside, they found the defendant asleep on a bed in one of the
bedrooms. An officer noticed a light flickering beneath the closet door
and, believing that the 2-year-old child might be hiding in the closet,
opened the closet door and found, instead of the child, a makeshift
greenhouse and marijuana plant. Ultimately the child was located asleep
in another bedroom.
The defendant was charged with one count of manufacturing marijuana.
He moved to suppress the evidence found in his closet, arguing that the
police entries into his home and closet were not justified by emergency
circumstances. The circuit court denied the motion. In an opinion
authored by Judge Snyder, the court of appeals affirmed the decision
denying the motion.
The Wisconsin Supreme Court has approved the emergency rule as an
exception to the warrant requirement, recognizing that the Fourth
Amendment does not bar a government official from making a warrantless
intrusion when the official reasonably believes that a person is in need
of immediate aid or assistance. The searching officer must actually be
motivated by a perceived need to render aid or assistance. Secondly,
even if the requisite motivation exists, it must be found that, under
the circumstances, a reasonable person would have thought an emergency
existed.
In this case the defendant argued that the objective facts did not
support a reasonable belief that the 2-year-old child was in immediate
need of assistance, thereby warranting the entry into the house and
closet. The court of appeals disagreed. In light of the circumstances as
described above, a reasonable person could believe that there was an
immediate need to provide aid or assistance to the child and that
immediate entry into both the house and the closet was necessary to
provide that aid or assistance. A situation need not necessarily involve
a life or death circumstance in order to constitute an emergency within
the emergency rule. The defendant was intoxicated and had been violent
and threatening toward his wife while arguing about their children. A
reasonable person could believe that the child could be in danger while
in the defendant's care at that home. The objective prong of the
emergency rule was thus met in this case.
The defendant also argued that the officers' entry was not
subjectively motivated by a perceived need to render assistance to the
child. The claim was that because one of the officers was apparently
motivated, in part, by his duty to investigate an alleged domestic abuse
incident between the defendant and his wife, the emergency exception did
not apply. The court was not persuaded that the officers' concurrent
suspicion of a domestic abuse incident robbed them of their ability to
provide aid or assistance. Even if the officers had the investigation of
alleged abuse on their minds, this would not have neutralized the
genuineness of their aid and assistance concerns regarding the child.
The safety concerns about the child were sufficient in and of themselves
to immunize the seizure; any other investigatory motives were
immaterial. The material question is whether the immediate need to
provide aid or assistance was the officers' prime motivator. In this
case the court concluded that the officers' need to provide aid or
assistance was paramount to the perceived need to investigate an alleged
domestic abuse incident.
Search Warrants - No-knock Entries
State v. Davis,
2000 WI App 270 (filed 7 Nov. 2000) (ordered published 20 Dec. 2000)
Police obtained a search warrant for heroin and related drug
paraphernalia for the lower unit of a two-story house where the
defendant lived. The warrant authorized the officers to enter the unit
without first announcing their presence. [The defendant conceded that
the affidavit supported the warrant's authorization for a no-knock
entry.]
Minutes before the warrant was executed, a plainclothes police
officer went to the premises to make an undercover drug buy and to get
"a lay of the land" for the officers who were going to execute the
warrant. The defendant admitted the officer into a little hallway
section in the front of the house. The officer gave money to the
defendant, who then proceeded to walk down a hallway and turn left into
an unknown room area. The officer could hear at least three or four
other people inside that room. After the defendant brought the heroin to
the officer, he left the premises and told officers waiting to execute
the warrant about his observations. A no-knock entry was then made in
execution of the warrant.
The defendant moved to suppress evidence seized as a result of the
no-knock execution of the search warrant. The circuit court denied the
motion, and the court of appeals, in a decision authored by Judge Fine,
affirmed.
Irrespective of whether a search warrant authorizes a no-knock entry,
the reasonableness of such an entry is determined - not at the time the
warrant is issued - but rather when it is executed. The state must show
"particular facts" that "support an officer's reasonable suspicion that
exigent circumstances exist" to justify a no-knock entry (¶ 9). The
appellate court found that such exigent circumstances existed in this
case. First, the officers could reasonably suspect that the other
persons in the room entered by the defendant when she went to get the
heroin for the undercover officer were either involved in or familiar
with the defendant's drug dealing. Second, just days before the
execution of this warrant, the lead detective on the case had seen a
large, pitbull-type dog being brought out of and back into the house.
Given that the defendant had just sold heroin to the undercover officer,
it was not unreasonable for the detective to reasonably suspect that the
dog was in the house, guarding the cache. Third, the detective explained
how easily and quickly heroin could be destroyed. Said the court, "none
of these circumstances were negated by the undercover officer's
observations from the front part of the hallway minutes before the
officers executed the warrant; all made the officer's no-knock entry
constitutionally valid" (¶ 11).
Employment Law
Wisconsin Fair Employment Law - Discriminatory Termination Based on
Disability - Requirement of Expert Testimony
Wal-Mart Stores Inc. v.
Labor and Industry Review Commission, 2000 WI App 272 (filed 22
Nov. 2000) (ordered published 20 Dec. 2000)
The employee in this case worked for Wal-Mart as a tire and
lubrication technician. His principal duties consisted of draining oil
and changing oil filters on automobiles. He suffers from a form of
mental illness known as obsessive-compulsive disorder (OCD). The
employee was receiving treatment for his OCD in the form of medications
and psychotherapy. About three months before he was fired, Wal-Mart
granted him an extended leave to allow him to undergo a change in his
medications. He then returned to work, at first part-time, progressing
to full-time over a four-week period. Soon after his return to work, a
supervisor announced to the automobile service technicians that another
employee was being promoted to the position of "bay manager." The
employee in this case allegedly reacted angrily and vociferously to this
news and thereafter committed an act of insubordination for which he was
fired.
The Labor and Industry Review Commission (LIRC) determined that
Wal-Mart had discriminated against the employee by terminating his
employment because of his disability. The circuit court affirmed the
LIRC.
In a majority opinion authored by Judge Deininger, the court of
appeals reversed. It concluded that because there was no expert
testimony establishing that the behavior for which the employee was
fired was caused by his mental illness, the LIRC erred in finding that
Wal-Mart terminated his employment because of his disability.
Wal-Mart conceded that the employee had a disability within the
meaning of Wisconsin's Fair Employment Law. However, in order to prevail
on the discrimination claim, the employee also had to show that Wal-Mart
terminated his employment because of his disability. With regard to the
latter, the appellate court concluded that expert testimony was a
prerequisite for an LIRC finding that the employee's vociferous and
insubordinate conduct was caused by his disorder.
There was nothing in the record from which the appellate court might
conclude that the symptoms and manifestations of OCD are within the
realm of the ordinary experience of mankind. It thus concluded that the
question of whether the OCD caused the employee to react angrily and
vociferously to the news that he had been passed over for promotion and
thereby to engage in allegedly insubordinate conduct is sufficiently
complex and technical that a lay factfinder without the assistance of
expert testimony would be speculating on the matter (¶ 17).
The court observed in footnote that expert testimony may not be a
necessity in every case involving a claim that certain behavior or
misconduct is caused by a disability. The causal linkage between certain
behaviors and some disabilities may well be within the realm of the
ordinary experience of mankind, such as the consumption of alcoholic
beverages by one who suffers from alcoholism.
Judge Vergeront filed a dissenting opinion.
Family Law
Divorce - Equitable Estoppel - One-sided Indefinite Maintenance
Modification Provision of Divorce Judgment
Patrickus v.
Patrickus, 2000 WI App 255 (filed 19 Sept. 2000) (ordered
published 29 Nov. 2000)
The parties were divorced after 34 years of marriage. During the
marriage the wife worked as a homemaker and the husband was employed as
a certified public accountant. At the time of their divorce, they
entered into a comprehensive marital settlement agreement that was
approved by the trial court and incorporated into the divorce judgment.
It provided the wife a maintenance payment for an indefinite period
modifiable annually, provided the amount would not be less than the
greater of one-half of the net profit of the husband's accounting
practice or $4,375 per month, unless the husband became permanently
disabled or the wife cohabited or remarried.
Three years later the husband moved to modify maintenance based upon
a reduction in his income. His ex-wife argued that he was equitably
estopped from seeking a maintenance modification. The trial court
concluded that the marital settlement agreement was unfair because it
permitted the wife to seek increases in maintenance for an indefinite
period of time while providing no mechanism for the husband to seek a
reduction. The court concluded that, for reasons of public policy,
equitable estoppel raised no bar to the husband's motion for maintenance
modification.
The court of appeals, in a decision authored by Chief Judge Cane,
affirmed. A party may be equitably estopped from seeking modification of
the terms of a maintenance stipulation incorporated into a divorce
judgment if both parties entered into the stipulation freely and
knowingly, the overall settlement is fair and equitable and not illegal
or against public policy, and one party subsequently seeks to be
released from the terms of the court order on the grounds that the court
could not have entered the order it did without the parties' agreement.
See Nichols v. Nichols, 162 Wis. 2d 96, 469 N.W.2d 619 (1991).
Applying these principles, the court of appeals concluded that the
circuit court did not err in deciding that equitable estoppel did not
bar the husband's motion for modification. The parties entered into a
comprehensive marital settlement freely and knowingly that was approved
by the trial court and incorporated into the divorce judgment and the
court would not have had the power to enter the settlement absent the
parties' agreement. Thus, the only remaining issue was whether the
stipulation, at the time it was entered into, violated public policy
because it burdened only one party with the entire risk of financial
hardship indefinitely.
The appellate court concluded that the one-sided indefinite
maintenance modification stipulation must be voided on public policy
grounds. It violates basic fairness for the wife to be entitled to the
perpetual benefit of increases in her ex-husband's income, without
sharing in the risk occasioned by a reversal of his good fortune. And,
unlike an order that specifies a nonmodifiable fixed amount or term of
maintenance, the present one-sided maintenance modification provision
invites inevitable litigation. The court agreed with the trial judge
that the one-sided indefinite modification provision in this case fails
to accomplish goals of fairness and finality and must be voided on
public policy grounds.
GAL - Fees - Indigents
Olmsted v. Circuit
Court, 2000 WI App 261 (filed 16 Nov. 2000) (ordered published
20 Dec. 2000)
Olmsted moved to modify the terms of her children's placement and the
court reappointed the guardian ad litem (GAL) who had represented them
at the divorce proceedings. Although the order directed the county to
pay the GAL at the "SCR rate," both the GAL and the county asked the
judge to review the compensation issue. The judge concluded that Olmsted
was indigent but that the children's father was not. The judge ordered
both parties to pay $50 per month for GAL fees.
The court of appeals, in an opinion written by Judge Deininger,
reversed. The court held that the "only reasonable interpretation of
Wis. Stat. section 767.045(6) (1997-98) is that an indigent party may
not be ordered to pay guardian ad litem fees" (¶ 5). It also held
that under the present statute, "when one party is indigent and the
other is not, a court's only option is to order the nonindigent party to
pay the guardian ad litem's fees" (¶ 8). Put differently, a judge
cannot allocate part of the payment to the county and part to the
nonindigent party. Finally, the court declined to address the proper
hourly rate for compensating GALs.
Insurance
UIM - Exclusions - Umbrella Coverage
Jaderborg v. American
Family Mut. Ins. Co., 2000 WI App 246 (filed 24 Oct. 2000)
(ordered published 29 Nov. 2000)
After their son was injured in an automobile accident, the Jaderborgs
obtained the $50,000 limits from the tortfeasor's insurer, which did not
cover the boy's damages. The Jaderborgs carried automobile insurance,
which included underinsured motorist (UIM) coverage and a personal
liability umbrella policy issued by American Family. American Family
paid the limits of the UIM coverage provided by the automobile policy.
The Jaderborgs also claimed that the personal liability umbrella policy
provided another source of UIM coverage. American Family denied that
claim, but the trial court declared that the umbrella policy did afford
such coverage.
The court of appeals, in a decision written by Judge Peterson,
reversed. The umbrella policy expressly excluded UIM coverage. The court
held that neither the "other insurance" nor the "intra-insured"
provisions created any ambiguity. The "other insurance" provision served
only to "prioritize the insurance coverage afforded by the policy
through other applicable insurance" (¶ 10). It did not grant
coverage. The "intra-insured" clause also was inapplicable because it
simply "allows one insured to sue another in situations such as
guest-passenger accidents" (¶ 14). In short, "[c]overage cannot be
established by an exception to an exclusion" (¶ 17).
School Districts - Independent Contractors - Statutory Limits
Reuter v. Murphy,
2000 WI App 276 (filed 9 Nov. 2000) (ordered published 20 Dec. 2000)
Reuter was badly injured in an accident while riding in a car that
was taking him home from school. The car's driver, Murphy, was paid to
take children to and from school, in her own vehicle, by the school
district. The agreement also obligated Murphy to carry insurance on her
car and the district paid for necessary additional coverage. Reuter sued
Murphy and the district's insurer, Wausau Insurance. He alleged that
Murphy was an "independent contractor" and hence recovery was not
limited by Wis. Stat. section 893.80(3) (1997-98).
The court of appeals, in an opinion written by Judge Eich, affirmed.
First, the court rejected Reuter's contention that the doctrine of issue
preclusion barred Wausau from litigating its "no-coverage" claim. It
conceded that Wausau raised identical "issues" in Kettner v. Wausau Ins.
Cos. (Ct. App. 1995), but this case fell within "the well-recognized
'issue-of-law' exception" to the issue preclusion rule because the
"claims" were not identical (¶ 11). Second, the omnibus statute,
Wis. Stat. section 632.32, required Wausau's coverage because Murphy's
car was a "hired" vehicle within the meaning of the policy and the
"owner/driver" exclusion otherwise would forestall coverage. "[U]nder
the omnibus statute, the coverage enjoyed by the named insured (e.g.,
the district) must apply in the same manner to anyone using the
described vehicle for a purpose and in a manner permitted by the policy
(e.g., transporting children to and from a district school), [thus] we
hold that the statute extends coverage to Murphy" (¶ 15).
Finally, the record clearly supported the judge's finding that Murphy
was an "independent contract" against whom the statutory damage
limitations did not apply. The district had never taken any steps to
"control the details of the driver's work." Rather, the district gave
Murphy "full discretion to set her own procedures and her own rules for
transporting the students to and from school" (¶ 20). From this it
followed that Kettner precluded Wausau's arguments that the caps
contained in Wis. Stat. section 345.05 and section 893.80(3) limit
Reuter's damage recovery.
UIM - Reducing Clauses - Notice - Constitutionality - Ambiguity -
Illusory Coverage
Sukala v. Heritage Mutual
Ins. Co., 2000 WI App 266 (filed 9 Nov. 2000) (ordered
published 20 Dec. 2000)
Sukala was seriously injured while driving a truck for his employer.
His employer carried a policy issued by Heritage that included
underinsured motorist (UIM) coverage of $1 million, and Sukala himself
had UIM coverage of $250,000 per person, $500,000 per accident, through
a policy issued by Western National. Both policies contained reducing
clauses for any amount "(1) paid for bodily injury under another insured
liability insurance, and (2) paid or payable as worker's compensation
benefits" (¶ 2). The other driver's liability insurer (also
Heritage) paid Sukala $100,000. Sukala also received about $600,000 in
worker's compensation benefits. The Sukulas brought this action against
the insurers to recover additional compensation. They moved the court to
find: 1) the UIM reducing clause in the employer's policy was invalid
because it failed to comply with the notice requirements in Wis. Stat.
section 631.36(5) (1997-98); and 2) the reducing clauses in both
policies were invalid because Wis. Stat. section 632.32(5)(i) was
unconstitutional. The trial judge denied both motions.
The court of appeals affirmed in a decision by Judge Dykman.
Regarding the first motion, case law clearly held that no notice is
required where coverage changes result from changes in statutes, and not
a "change initiated by the insurance company." Nonetheless, the Sukalas
argued that these cases were distinguishable because Heritage had given
them "some notice" that UIM coverage had changed. The court held that
section 631.36(5) does not apply to changes related to insurance policy
reducing clauses that are not initiated by the insurance company but
instead comes into effect by a statutory change, even where the
insurance company gratuitously sends a renewal notice discussing altered
UIM terms" (¶ 7).
The court next addressed a range of issues relating to the validity
of the reducing clauses. The supreme court's recent decision in Dowhower
v. West Bend Mut. Ins. Co., 2000 WI 73, ¶ 36, "disposed" of the
Sukalas' claim that section 632.32(5)(i) was unconstitutional. The
statute and policy language were identical. The court of appeals
addressed several further issues. First, the policy language was
unambiguous. Although "it may be somewhat cumbersome for an insured to
cross-reference the limiting provisions and the declarations page ...,
this does not make the policy language ambiguous, nor are the provisions
ambiguous because the calculation of actual benefits under some
circumstances could become complex" (¶ 14). Second, the UIM
coverage was not illusory. The court held that Dowhower extends to all
three subdivisions in section 632.32(5)(i), which thus permits reducing
UIM coverage by worker compensation benefits (¶ 18).
Lemon Law
Component Parts - Manufacturer
Harger v. Caterpillar
Inc., 2000 WI App 241 (filed 25 Oct. 2000) (ordered published
29 Nov. 2000)
The issue in this case was "whether a manufacturer of component parts
of a motor vehicle is subject to the Lemon Law." The court of appeals,
in a decision written by Judge Brown, held that "a manufacturer of
component parts who ships the completed part to the automobile
manufacturer is not liable" under the statute (¶ 1). The defendant,
Caterpillar Inc., manufactured the engine that was in plaintiff's 1992
Peterbilt tractor.
The holding turned on Wis. Stat. section 218.01(1)(L), which
describes two classes of manufacturers. "Class 1" consists of those who
manufacture or assemble motor vehicles and was not an issue in this
case. "Class 2" manufacturers are defined by four prerequisites.
Specifically, "Caterpillar must have manufactured or installed special
bodies or equipment on a previously assembled truck chassis," which,
"when installed must have formed an integral part of the motor vehicle,"
and which "when installed must have constituted a major manufacturing
alteration." Finally, Caterpillar must have owned the completed unit.
(¶ 5)
Plaintiff failed to establish the first element: Caterpillar only
made and sold the engine to Peterbilt, which installed it on the
chassis. Plaintiff also fell short on the fourth element. The "completed
unit" consisted of the assembled chassis plus the special bodies or
equipment. The engine cannot be both the "special bodies or equipment"
and the "completed unit." Peterbilt, not Caterpillar, owned the
"completed unit." Finally, the legislature obviously did not intend such
a result because Lemon Law damages include replacing the vehicle or
refunding the purchase price. Component part manufacturers are not in
the business of providing "vehicles," nor would it make sense to require
a party like Caterpillar to pay the entire purchase price.
Motor Vehicle Law
Implied Consent - Technical Error in Notice of Intent to Revoke the
Operating Privilege
State v. Gautschi,
2000 WI App 274 (filed 9 Nov. 2000) (ordered published 20 Dec. 2000)
The defendant appealed an order revoking his motor vehicle operating
privilege based on his refusal to submit to an implied consent blood
alcohol test after being arrested for OWI. He argued that a form known
as the Notice of Intent to Revoke the Operating Privilege failed to
provide him with the information required by Wis. Stat. section
343.305(9)(a)5, thereby depriving the trial court of personal
jurisdiction to revoke his operating privilege. In a decision authored
by Judge Deininger, the court of appeals concluded that, although the
notice contained a technical error, it did not prejudice the
defendant.
Under the statute, the notice must advise the driver that one of the
issues at an implied consent refusal hearing is "whether the officer had
probable cause to believe the person was driving or operating a motor
vehicle while under the influence of alcohol ... and whether the person
was lawfully placed under arrest" for OWI or a local ordinance in
conformity therewith. The notice that was used in this case described
that issue as being whether the officer "was entitled to request that
[the defendant] submit to the test."
The court of appeals concluded that whether the officer was entitled
to request a test is not substantially the same as whether the officer
had probable cause to believe the person was driving or operating while
under the influence of alcohol and whether the person was lawfully
placed under arrest for OWI. Even though the notice was deficient,
however, did not mean that the defendant is entitled to reversal of the
revocation order and dismissal of the proceedings. The court concluded
that the insufficient description in the notice of the issues that may
be contested at a refusal hearing constitutes a technical error.
The court next had to consider whether the state had established that
the defendant was not prejudiced by the deficiency in the notice he
received. The court concluded that he was not prejudiced by the
technical error. Even though the notice did not precisely communicate
all of the possible issues that could be raised at a refusal hearing,
the record did not reveal any prejudice to the defendant resulting from
this defect. He filed a timely request for a hearing and was given the
opportunity to have one. He was not precluded from challenging the
existence of probable cause or the lawfulness of his arrest for OWI.
The court observed in footnote that it did not conclude that the
state could always demonstrate the lack of prejudice stemming from a
notice with the wording at issue in this case. For example, the
recipient of a similarly worded notice, who believes that the officer
lacked grounds to stop and arrest him or her for OWI, may suffer
prejudice if the person fails to file a timely request for a hearing
because he or she did not understand that this issue could be raised at
a refusal hearing.
Real Estate
Damages - Earnest Money - Actual Damages - Election of Remedies
Galatowitsch v.
Wanat, 2000 WI App 236 (filed 26 Oct. 2000) (ordered published
29 Nov. 2000)
Working through a realtor, buyers offered to purchase sellers' home
on a WB-11 Residential Offer to Purchase form. Buyers deposited $2,000
as earnest money with the sellers' broker. Buyers failed to obtain
financing and further omitted to notify sellers of this fact by the date
specified in the contract. Sellers notified buyers in writing that they
had breached the contract and demanded the earnest money as liquidated
damages. When they did not receive the earnest money, sellers sued
buyers and the real estate broker who held the funds and demanded $2,000
plus interest. One month later the sellers sold their home to another
party but for a lesser price. Sellers then amended their complaint to
allege actual damages based on the differences between the two sales
prices and also directed the broker to return the earnest money to
buyers. Following a bench trial, the court awarded sellers about $10,600
in damages.
The court of appeals, in a decision written by Judge Vergeront,
affirmed. The issue was whether "the sellers in a failed residential
real estate transaction are precluded, either by the terms of the
purchase agreement or the doctrine of election of remedies, from
recovering actual damages for the buyers' breach solely because the
sellers requested the earnest money as liquidated damages and, in their
initial complaint, requested the earnest money as a remedy."
Construing the purchase agreement, the court held that a seller's
request for the earnest money as liquidated damages does not foreclose a
lawsuit for actual damages provided the seller does not receive the
earnest money (¶ 19). This approach, the court said, balanced the
impact on both parties and was more likely to promote settlements. "The
seller may request the earnest money as liquidated damages without the
risk of having to file a suit in which the seller cannot recover all
damages even if the seller proves a breach. Upon the seller's request,
the buyer has the opportunity to evaluate the strength of the seller's
claim of breach, the likely amount of damages, and their susceptibility
of proof, and to either agree or disagree to the disbursement of the
earnest money as liquidated damages. If the buyer agrees, the dispute is
resolved. If the buyer disagrees, the buyer understands he or she may
have to defend a suit for breach of the agreement and may have to pay
actual damages; however, the seller must direct the return of the
earnest money to the buyer before seeking actual damages." (¶
18.)
Finally, the court considered buyers' argument that the doctrine of
election of remedies precluded the actual damages claim. As determined
by case law, "a party who has requested but not received the earnest
money as liquidated damages and sues to recover is not precluded thereby
from amending the complaint to request the alternative remedy of actual
damages" (¶ 22). In short, this case concerned alternate remedies
for a breach of contract, not inconsistent claims such as one for
rescission of a contract and another for breach.
Torts
Group Homes - Vulnerable Residents - "Special Relationship"
Stauss v. Oconomowoc
Residential Programs Inc., 2000 WI App 269 (filed 29 Nov. 2000)
(ordered published 20 Dec. 2000)
Stauss, a developmentally disabled 39-year-old woman, sued the group
home where she resided after a counselor repeatedly sexually assaulted
her. Based on a jury verdict, the court entered judgment against the
defendant group home. The court of appeals, in an opinion written by
Judge Anderson, declined to address the defendant's rationale for appeal
and instead remanded for a new trial because the real controversy was
not fully tried.
Although the jury had heard argument and evidence about the group
home's failure to supervise its counselor, the claim that it had
negligently supervised Stauss, the plaintiff, was manifestly different
and was not sufficiently tried (¶ 7). The court recognized "that a
group home has a duty to protect its residents from the harm against
which they are least able to protect themselves - abuse at the hands of
staff." It adopted the reasoning of a Washington case and held that :
"(1) the special relationship between the group home and its vulnerable
residents gives rise to a duty of reasonable care, owed by the group
home to its residents, to protect the residents from all foreseeable
harm, and (2) sexual assault by a staff member is not a legally
unforeseeable harm" (¶ 15).
Trusts
Trustees - Removal - Cause
Weinberger v.
Bowen, 2000 WI App 264 (filed 8 Nov. 2000) (ordered published
20 Dec. 2000)
Catherine Bowen established a charitable trust and named her son John
as one cotrustee and Weinberger, who was married to her granddaughter
Jennifer, as the other cotrustee. The trust was irrevocable. After the
trust was created, Jennifer began a divorce action against Weinberger,
who later refused John's request to resign as cotrustee. Catherine and
all trust beneficiaries filed a petition asking the circuit court to
substitute a new cotrustee in Weinberger's place. Relying on Wis. Stat.
section 701.12(1), the trial judge granted the petition because the
settlor, Catherine, and all beneficiaries had consented in writing to
the trust's modification.
The court of appeals, in an opinion written by Judge Nettesheim,
affirmed. Wis. Stat. section 701.12(1) "clearly and unambiguously allows
for the revocation, modification or termination of a trust upon the
written consent of the settlor and all the trust beneficiaries" (¶
11). No showing of "cause" was necessary. The court could not "discern
any sound reason why the settlor and all of the beneficiaries should be
precluded from modifying the terms of a trust if all are in agreement
that such action is appropriate" (¶ 12). Another statutory
provision, Wis. Stat. section 701.18(2), provides that trustees also may
be removed for cause, but applies "where the settlor and all of the
trust beneficiaries are not in agreement that removal is appropriate, or
where the settlor is no longer living and therefore unable to provide
written consent to the removal" (¶ 14).
Worker's Compensation
Exclusive Remedies - Suits Against Agents and Representatives of the
Worker's Compensation Carrier
Walstrom v. Gallagher
Basset Services Inc., 2000 WI App 247 (filed 10 Oct. 2000)
(ordered published 29 Nov. 2000)
The plaintiff was injured on the job while working as a pipe fitter.
An MRI revealed a herniated disc in his neck and a physician recommended
that surgery be performed immediately. The plaintiff reported his
medical condition to his employer and to American Zurich, the employer's
worker's compensation insurer. American Zurich had contracted with an
adjuster, Gallagher Basset Services Inc., to administer claims under the
worker's compensation policy. Gallagher required the plaintiff to
undergo an independent medical examination. The independent medical
examiner agreed with the earlier recommendation for surgery and the
operation was thereafter performed.
Following surgery, the plaintiff continued to experience pain. He
brought an action against Gallagher alleging that it was negligent in
delaying authorization for surgery. The plaintiff claimed that the delay
resulted in permanent nerve damage. Gallagher brought a motion to
dismiss and the circuit court granted the motion, finding that Gallagher
was an agent of American Zurich and was immune based on the exclusive
remedy provision of the worker's compensation law. See Wis. Stat. §
102.03(2).
In a decision authored by Judge Peterson, the court of appeals
affirmed. Under the Worker's Compensation Act, recovery of compensation
is not only the exclusive remedy against the employer but it also is the
exclusive remedy against the worker's compensation insurance carrier.
The exclusive remedy doctrine applies to agents and representatives of
the employer and the court concluded that, to be consistent, it also
must apply to agents and representatives of the compensation carrier.
Because defendant Gallagher was a representative of the worker's
compensation insurer American Zurich, the exclusive remedy doctrine
protected Gallagher from liability.
Permanent Total Disability Benefits - Combination of
Scheduled and Unscheduled Injuries
Secura Insurance v. Labor
and Industry Review Commission, 2000 WI App 237 (filed 13 Sept.
2000) (ordered published 29 Nov. 2000)
The employee was injured while working as a room installer. The
injury occurred when concrete leaked into his work boots, causing
chemical burns to both of his feet. While the burns themselves
eventually healed, they caused persistent, disabling pain in the
employee's left foot. As a result of this disability, the employee
developed difficulties with his gait, which produced musculoskeletal
complications in his lower back. These complications have been diagnosed
alternatively as reflex sympathetic dystrophy and/or complex regional
pain syndrome. He continues to suffer from pain in his lower left
extremity, low back and right shoulder, and experiences severe
headaches.
The Labor and Industry Review Commission awarded the employee
permanent total disability worker's compensation benefits pursuant to
Wis. Stat. section 102.44(2). The employee's claim for lifetime benefits
included both a scheduled injury to his left foot and a nonscheduled
injury to his lower back. [Note: Permanent disability benefits are
divided into two separate categories: compensation for scheduled
injuries and compensation for unscheduled injuries. The former are set
forth in Wis. Stat. section 102.52 and require the payment of benefits
for a specific number of weeks as outlined in the statute. Numerous
injuries are not included in the statutory schedules. Permanent total
disability because of an unscheduled injury or injuries results in
lifetime benefits.]
The worker's compensation carrier contended that only the employee's
nonscheduled injury could support lifetime benefits under section
102.44(2) and that the employee failed to adequately separate his
scheduled and unscheduled injuries. Accordingly, argued the insurer, the
employee failed to establish that his permanent total disability was
caused by his unscheduled injury.
In an opinion authored by Judge Snyder, the court of appeals
concluded that section 102.44(2) lifetime benefits are warranted with a
combination of scheduled and unscheduled injuries where the applicant
establishes that a clear, ascertainable portion of the total disability
is attributable to the unscheduled injury or injuries. Accordingly, the
court affirmed the decision of the Labor and Industry Review
Commission.
Personal Comfort Doctrine - Injury Sustained
Off-premises
Fry v. Labor and Industry
Review Commission, 2000 WI App 239 (filed 31 Oct. 2000)
(ordered published 29 Nov. 2000)
Fry, a stockbroker paid solely on commission, had arrived at his
employer's office at the usual time in the morning but left the office
mid-day after informing office personnel that he had a scheduled
appointment to have radiological testing for kidney stones at a local
hospital. He had a history of kidney stone problems and earlier that day
experienced kidney pain symptoms. He told the office receptionist that
he expected to return to the office after the medical testing was
completed. Fry was killed in a car accident while enroute to the
hospital.
Fry's estate sought benefits under the Worker's Compensation Act
(WCA). It claimed that at the time Fry was killed, he was performing
services growing out of and incidental to his employment. Specifically,
the estate contended that when Fry left his work place mid-day to drive
to an appointment at a nearby hospital to seek treatment for his
recurring kidney stone problem, he was ministering to his personal
comfort, and thus his actions were incidental to his employment pursuant
to the "personal comfort doctrine." The Labor and Industry Review
Commission (LIRC) dismissed the claim for benefits, a decision that was
later affirmed by the circuit court.
In an opinion authored by Chief Judge Cane, the court of appeals
affirmed. Applying the great weight deference standard, it upheld as
reasonable the LIRC's legal conclusion that Fry's attempted visit to the
hospital fell outside the personal comfort doctrine.
An employer may be held liable under the WCA only for injuries that
occur while an employee is "performing service growing out of and
incidental to his or her employment." See Wis. Stat. §
102.03(1)(c)1. In limited circumstances, an employee may be performing
services growing out of and incidental to employment even when the
employee is engaged in activities related to the employee's own personal
comfort under the personal comfort doctrine. This doctrine was developed
to cover the situation where an employee is injured while taking a brief
pause from his or her labors to minister to the various necessities of
life. The personal comfort doctrine does not apply, and an employee is
not within the course of employment, if the extent of the departure is
so great that an intent to abandon the job temporarily may be inferred,
or the method chosen is so unusual and unreasonable that the conduct
cannot be considered as an incident of the employment.
In most of the Wisconsin cases where the personal comfort doctrine
has been applied, the injuries for which compensation is sought have
occurred within the time (that is, during specific paid working hours)
and space (that is, on the employer's premises) limitations of the
person's employment. In limited fact situations, recovery has been
allowed for off-premises injuries. See Marmolejo v. DILHR, 92 Wis. 2d
674, 285 N.W.2d 650 (1979).
In this case, the appellate court concluded that it was reasonable
for LIRC to hold that an employee who makes an appointment to seek
medical attention for an immediate medical need not related to his
employment and leaves the work place to do so, even if he intends to
return to the work place the same day, has temporarily abandoned his job
and is no longer "performing service growing out of and incidental to
his or her employment" within the meaning of the WCA.
Compensation When Patient "Over-diagnosed and Over-treated" - Good
Faith Reliance on Medical Opinion
Honthaners Restaurants Inc.
v. Labor and Industry Review Commission, 2000 WI App 273 (filed
28 Nov. 2000) (ordered published 20 Dec. 2000)
Honthaners Restaurants Inc. and its worker's compensation carrier
appealed
the Labor and Industry Review Commission's award of additional temporary
total disability payments and additional medical expenses to a
Honthaners
employee. They argued that the LIRC exceeded its authority under Wis.
Stat. section 102.42(1) because the law permits the employee to be
awarded
benefits only if her medical treatment and expenses were necessary and
reasonable. They contended that LIRC's finding that the employee in this
case had been medically "over-diagnosed and over-treated" was tantamount
to a finding that her treatment and medical expenses were unreasonable
and unnecessary.
In a majority decision authored by Judge Curley, the court of
appeals
affirmed the decision of the LIRC. The employee suffered an undisputed
compensable injury that generated a conflict between the medical experts
as to the degree of her injury and its duration. The court concluded
that
she was entitled to be compensated for her additional medical treatment
and her expenses because she accepted the additional treatment in good
faith.
Wis. Stat. section 102.42(1) permits compensation only when medical
treatment and expenses are reasonably required and necessary. However,
the case of Spencer v. DIHLR, 55 Wis. 2d 525, 200 N.W.2d 611 (1972),
created
an exception to the general rule. In Spencer, the Wisconsin Supreme
Court
allowed recovery for medical treatment and expenses that were incurred
when the injured employee followed what, in hindsight, appeared to be
erroneous medical advice. Spencer teaches that as long as the claimant
engaged in the unnecessary and unreasonable treatment in good faith, the
employer is responsible for payment. The court of appeals was satisfied
that Spencer controls the outcome of this case.
Judge Fine filed a dissenting opinion.
