Construction Liens

Lien Waiver – Limiting the Waiver – Wis. Stat. Section 779.05(1)

Great Lakes Excavating Inc. v. Dollar Tree Stores Inc., 2021 WI App 23 (filed 30 March 2021) (ordered published 28 April 2021)

HOLDING: The lien-waiver document executed in this case constituted a full waiver of the plaintiff’s lien rights because the plaintiff failed to properly limit its lien pursuant to Wis. Stat. section 779.05(1).

SUMMARY: Riverworks City Center LLC contracted with AMCON Design and Construction Co. to build a commercial building with a parking lot. AMCON then subcontracted with Great Lakes Excavating Inc. for work relating to the parking lot. The amount of the original contract with Great Lakes was $37,165. However, after several change orders were signed by AMCON and after work on the parking lot was completed, Great Lakes sent AMCON an invoice for $222,238.

After failing to receive payment, the owner of Great Lakes (Bruckner) went to AMCON’s office. Great Lakes alleged that AMCON stated that all it could pay was $33,448 and provided Bruckner with a lien-waiver document titled “Waiver of Lien to Date.” Great Lakes claimed that Bruckner agreed to a partial waiver of the lien and crossed out the words “to date” on the waiver form and handwrote in the word “Partial.” AMCON then provided Great Lakes with a check in the amount of $33,448. No additional payments were made, and Great Lakes filed a subcontractor claim for lien on Riverworks in the amount of $188,790 (which represented the $222,238 bill minus the $33,448 already paid).

In the lien-foreclosure action that followed, Riverworks moved for partial summary judgment on the grounds that Great Lakes had waived all its lien rights, because it did not expressly limit the lien waiver to a particular portion of work as required by Wis. Stat. section 779.05(1). The circuit court agreed with Riverworks and granted partial summary judgment as requested.

In an opinion authored by Judge Donald, the court of appeals affirmed. Lien waivers are governed by Wis. Stat. section 779.05. Subsection (1) provides that a lien-waiver document “shall be deemed to waive all lien rights of the signer” unless “the document specifically and expressly limits the waiver to apply to a particular portion of such labor, services, materials, plans, or specifications.” Additionally, subsection (1) states that “[a]ny ambiguity … shall be construed against the person signing it.”

For purposes of this opinion, the appellate court assumed that the parties intended to limit the lien waiver to a portion of the work. “However, to accomplish this purpose, Great Lakes was required to comply with the plain language of Wis. Stat. § 779.05(1), which it failed to do”
(¶ 20). “[U]nder the plain language of the statute, in order to limit a lien waiver, a document must ‘specifically and expressly limit[] the waiver to apply to a particular portion of such labor, services, materials, plans, or specifications.’ Simply crossing off ‘to Date’ and writing in ‘Partial’ in the title of the document did not specifically and expressly limit the waiver to a particular portion of the work” (¶ 21).

The reference in the document to the waiver of liens for a consideration in the amount of $33,448 failed to expressly limit the waiver. The document did not state that the $33,448 related to a particular portion of the work, such as the labor in the original contract, which totaled $37,165. “On the contrary, the lien waiver broadly states that ‘[t]he undersigned, for and in consideration of $33,488 Dollars … does hereby waive and release any and all lien … on account of labor, services, material, fixtures, apparatus or machinery furnished to this date’ by Great Lakes for the Riverworks property” (¶ 22).

Accordingly, the court of appeals held that the lien-waiver document in this case constituted a full waiver of Great Lakes’ lien rights because Great Lakes failed to properly limit its lien pursuant to Wis. Stat. section 779.05(1) (see ¶ 23).

Criminal Procedure

Evidence – Expert Testimony – Human Trafficking

State v. Hogan, 2021 WI App 24 (filed 24 March 2021) (ordered published 28 April 2021)

HOLDING: The circuit court properly admitted a police officer’s expert testimony on human trafficking.

SUMMARY: A jury convicted the defendant of “human trafficking,” essentially a crime of exploitation and violence usually involving commercial sex. A police officer, testifying as an expert based on her training and experiences in such cases, educated the jury about human trafficking.

The court of appeals affirmed the conviction in an opinion authored by Judge Davis that upheld the expert’s testimony. The expert’s specialized knowledge was the product of her training and her work with dozens of victims (see ¶ 12). The opinion summarized the testimony in some detail. It does not appear that the witness offered any opinions about the facts of the case (see ¶ 16).

The court of appeals relied on the guidance provided by the supreme court in several earlier cases, including State v. Dobbs, 2020 WI 64, 392 Wis. 2d 505, 945 N.W.2d 609. The principal points are that an expert witness’s specialized knowledge may be a product of the witness’s experience and that Wis. Stat. section 907.02 permits such experts to testify in expository form, namely, they may lecture the jury about their area of (relevant) expertise.

The court of appeals underscored that such testimony must meet the reliability standards of Wis. Stat. section 907.02 and must not constitute ipse dixit (“he himself said it”). Neither requirement is overly demanding. An expert must “detail how her training and experiences led to her conclusions,” but “[n]othing in the statute or case law mandates the unwieldly necessity of an expert’s explaining precisely which portions of his or her background generated each individual conclusion” (¶ 33).

Hearsay – Confrontation

State v. Keller, 2021 WI App 22 (filed 3 March 2021) (ordered published 28 April 2021)

HOLDING: The circuit court judge properly received into evidence statements about child abuse.

SUMMARY: A jury convicted the defendant of emotionally abusing a minor. On appeal, the defendant challenged the admissibility of statements made by various “confidential reporters” to child protective services workers.

The court of appeals affirmed in an opinion authored by Judge Gundrum. The confrontation-right challenge “centered on the oral statements the confidential reporters made to the access workers, which statements the access workers then included in their respective reports.” The reporters informed child protective service workers, “assumedly hoping for some type of action by these government employees” (¶ 22).

The court of appeals applied the multifactor test set forth in State v. Mattox, 2017 WI 9, 373 Wis. 2d 122, 890 N.W.2d 256, which assesses such matters as 1) the statement’s formality, 2) to whom it was made (e.g., law enforcement officers), 3) the declarant’s age, and 4) the “context” in which the statement was made (¶ 20). The court concluded that the statements in question were nontestimonial and thus not subject to the confrontation right, because the declarants’ primary purpose was to improve the child’s treatment and condition – not to generate evidence against the defendant.

Education Law

Charter Schools – Authority of Governance Board to Sue the School District – Claims That Charter School Defaulted on Its Obligations

Friends of Maple Grove Inc. v. Merrill Area Common Pub. Sch. Dist., 2021 WI App 26 (filed 9 March 2021) (ordered published 28 April 2021)

HOLDINGS: 1) A charter school governance board has the authority to sue its authorizing school district. 2) The circuit court correctly determined that the governance board did not default on its contractual obligations with respect to the students’ academic performance and the charter school’s use of an innovative educational program. 3) The circuit court applied the wrong legal standard when determining whether the governance board defaulted under the contract provisions regarding enrollment.

SUMMARY: Maple Grove Charter School [hereinafter Maple Grove] is a public charter school in the Merrill Area Common Public School District. In January 2020, the district sent a notice of default to the Maple Grove Governance Board, asserting that the governance board had defaulted on various obligations set forth in its contract with the district. Friends of Maple Grove Inc., a Wisconsin nonstock corporation whose board of directors is comprised of the same individuals who are the members of the governance board, then sued the district, seeking a declaration that the events of default alleged in the district’s notice were not sufficient to permit the district to terminate the contract. The plaintiffs also sought injunctive relief. The circuit court granted the plaintiffs’ requested relief.

On appeal, the district argued that the governance board lacked authority to sue the district. It also contended that the circuit court erred by determining that the governance board had not defaulted on its contractual obligations. In a decision authored by Judge Stark, the court of appeals affirmed in part, reversed in part, and remanded the matter to the circuit court for further proceedings.

The court of appeals first concluded that Wis. Stat. section 118.40(4)(d)8. grants charter school governing boards authority to sue their authorizing school districts. It also held that nothing in the contract at issue in this case limited the governance board’s ability to sue the district (see ¶ 37) and that on the facts of this case, the circuit court correctly determined that the governance board did not default on its contractual obligations with respect to the academic performance of Maple Grove’s students and the charter school’s use of an innovative educational program (see ¶ 2).

However, the court of appeals concluded the circuit court applied the wrong legal standard when determining whether the governance board defaulted under the contract provisions regarding enrollment. The contract provided that an event of default occurred if Maple Grove had “insufficient enrollment to successfully operate the Charter School as determined by the District” (¶ 3) (emphasis added). “This provision granted the District sole discretion to determine what level of enrollment was insufficient for Maple Grove to operate successfully. The only limitation on the District’s exercise of discretion was that it was required to act reasonably and with a proper motive” (id.). The circuit court therefore erred by substituting its discretion for that of the district when it determined that Maple Grove’s enrollment was sufficient for successful operation.

Accordingly, the court of appeals reversed the circuit court’s order in part, to the extent the latter concluded the governance board did not default with respect to enrollment. “We remand for the court to reassess that issue using the proper legal standard – i.e., whether the District acted reasonably and with a proper motive when it determined that Maple Grove’s enrollment was insufficient” (¶ 4).

Insurance

Agents – Negligent Investigation – Liability

Cincinnati Ins. Co. v. Ropicky, 2021 WI App 25 (filed 24 March 2021) (ordered published 28 April 2021)

HOLDING: An investigator hired by a homeowner’s insurance company was not exempt from liability under Wis. Stat. section 895.475.

SUMMARY: Homeowners made a claim for coverage with their insurance company. The insurer hired Infratek Engineering Investigations LLC to investigate the claim and later denied a large part of the claim. The homeowners filed a third-party action against Infratek, alleging it had negligently investigated the claim. The circuit court granted summary judgment in favor of Infratek on grounds that it was exempt from liability under Wis. Stat. section 895.475.

The court of appeals reversed in an opinion authored by Chief Judge Neubauer. “We conclude that Wis. Stat. § 895.475 does not provide immunity from liability for this post-loss claim investigation performed by or on behalf of an insurance company pursuant to the insurance contract” (¶ 10). Section 895.475 is “unambiguously forward-looking,” exempting insurers and their agents from loss occurring as a result of their “advisory services” (¶ 12). “The loss sought to be reduced by the ‘advisory services’ is necessarily in the future – and results from the ‘advisory services’” (id.).

Infratek admitted that the sole purpose of its investigation was to assess the property-damage claim, “not to reduce the likelihood of future loss to the homeowners” (¶ 14). “Infratek has failed to provide a single case, from Wisconsin or elsewhere, wherein a statute like Wisconsin’s was applied to provide immunity for an insurer or its agent in the context of a post-loss claim evaluation under a property insurance policy” (¶ 16).

“The statutory language and case law make clear that this exemption from civil liability applies when an insurer voluntarily inspects an insured’s property to ensure that it is safe and up-to-code, not when it arrives on the scene after the fact to adjust the insured’s post-loss insurance claim based on its contractual obligations to do so” (¶ 17).

Torts

Claims Against Governmental Subdivisions – Notice of Injury

Clark v. League of Wis. Muns. Mut. Ins. Co., 2021 WI App 21 (filed 31 March 2021) (ordered published 28 April 2021)

HOLDING: The circuit court erroneously granted summary judgment on the plaintiff’s claim against the city of Oshkosh because there were genuine issues of material fact as to whether the city was prejudiced by the plaintiff’s failure to timely serve a formal notice of injury on the city.

SUMMARY: Clark brought this personal-injury action against the city of Oshkosh as a result of injuries she sustained at the Oshkosh Senior Center, where she taught classes as part of her job as a sewing instructor with Fox Valley Technical College. A door at the center closed behind her faster than usual, knocking her off balance and causing her to fall. The circuit court granted the city’s motion for summary judgment on the grounds that Clark neither had timely served a notice of injury on the city nor demonstrated that the failure to provide such notice was not prejudicial. In an opinion authored by Judge Davis, the court of appeals reversed.

This case concerns Wis. Stat. section 893.80(1d)(a), often referred to as the “notice of injury” statute. It provides that within 120 days after the event giving rise to the claim, the plaintiff must serve on the defendant, pursuant to Wis. Stat. section 801.11, “written notice of the circumstances of the claim,” signed by the plaintiff or by the plaintiff’s agent or attorney. This notice alerts the defendant that an incident occurred that might thereafter ripen into a claim (see ¶ 13).

The statute further provides for substantial compliance, “excusing the plaintiff’s failure to provide formal notice where: (1) the defendant ‘had actual notice of the claim,’ and (2) the plaintiff ‘shows to the satisfaction of the court that the delay or failure to give the requisite [formal] notice has not been prejudicial’” (¶ 14).

It was undisputed in this case that the plaintiff failed to serve the defendant with a formal notice of injury. At issue was whether the city had notice of the claim and whether Clark showed that the city was not prejudiced by her failure to satisfy the statutory requirements of formal notice. The city had actual notice of the claim when, two and one-half years after she sustained her injuries, the plaintiff submitted a notice-of-claim form under Wis. Stat. section 893.80(1d)(b). (This notice is distinct from the notice of injury provided for in Wis. Stat. section 893.80(1d)(b) and serves the primary purpose of giving the defendant an opportunity to compromise and settle a claim, thereby avoiding costly and time-consuming litigation (see ¶ 15).)

The primary issue was whether there was a genuine issue of material fact as to whether Clark could show that the city was not prejudiced by the lack of a formal notice of injury. “Prejudice in this context has been defined as the inability of a party to adequately defend a claim because the party lacked sufficient opportunity to conduct a prompt investigation” (¶ 23) (internal quotations omitted).

In this case the city learned about Clark’s injuries almost immediately after her fall when she filed the Wisconsin Department of Workforce Development’s worker’s compensation form used to report work-related injuries. There is evidence to suggest that “this knowledge enabled the City to perform (and that it did perform) the very type of investigation that formal notice of injury was designed to afford” (¶ 27). The city’s safety and risk management officer investigated the cause of the accident within a week after it occurred and determined that the door was not broken but that an electronic mechanism had been turned off, which caused the door to close more quickly than expected.

The court of appeals concluded that the evidence was sufficient to raise a genuine issue of material fact on the prejudice issue. This precluded granting summary judgment in favor of the city (see id.).