Vol. 78, No. 6, June
2005
Court of Appeals Digest
This column summarizes selected published opinions of the Wisconsin
Court of Appeals. 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
Civil Procedure
Amended Complaint - "Relate Back" - Statue of
Limitation
Dakin
v. Marciniak, 2005 WI App 67 (filed 8 March 2005) (ordered
published 29 April 2005)
The plaintiff, Dakin, was injured in April 2000 due to the alleged
negligence of Pease, who was operating his car in a Copp's Food Center
parking lot. Three weeks before the statute of limitation expired in
April 2003, Dakin sued Pease and others. On Nov. 24, 2003, Dakin amended
the complaint to name Roundy's, the successor in interest to Copp's, on
the ground that because Pease was employed by Roundy's at the time of
the accident, Roundy's therefore was liable under the doctrine of
respondeat superior. Roundy's made a motion to dismiss on the ground
that the statute of limitation had expired. The circuit court denied the
motion.
The court of appeals, in an opinion authored by Chief Judge Cane,
reversed. The court of appeals held that the circuit court erroneously
concluded that the amended complaint related back to the original
complaint, which had been filed before the statute of limitation
expired. "To relate back, an amended pleading must satisfy four
conditions. See Wis. Stat. §802.09. First, the new
pleading must arise out of the conduct set forth in the original
pleading. Second, the party to be added must have received notice so it
will not be prejudiced in maintaining its defense. Third, the party to
be added must know or should have known that, but for a mistake
concerning identity, the action would have been brought against it.
Finally, conditions two and three must be fulfilled within the
prescribed limitations period" (¶ 6).
This case was distinguishable from others that had permitted claims
that related back. "As Dakin indicates, an employer with the requisite
amount of control over the conduct of an employee may be held
vicariously liable for that employee's negligent actions even when the
employer had no actual knowledge of the negligent behavior. But the fact
that constructive notice can sometimes create vicarious liability does
not mean that such notice is adequate for the purposes of ameliorating
the effects of statutes of limitations. In Wisconsin, `[t]he limitation
of actions is a right as well as a remedy, extinguishing the right on
one side and creating a right on the other ... which enjoys
constitutional protection.' Statutes of limitations thus implicate vital
interests and are not designed to be easily avoided" (¶ 10).
Moreover, such constructive notice "would still have to occur before the
statute of limitations expired"(¶ 12).
The court was also unpersuaded that the discovery rule somehow spared
the claim against Roundy's. "Dakin argues that she did not know, and
could not with reasonable diligence have learned, that Roundy's was also
potentially liable as Pease's employer. Dakin admits, however, she knew
she was hurt in April 2000. There is also no dispute she knew that
Pease, Marciniak, and Langlade were responsible for her injuries. Dakin
thus had knowledge both of injury and cause in April 2000" (¶ 16).
Nor did Pease's failure to notify Roundy's of the accident change this
result: "Dakin simply did nothing that might have produced more
information and we conclude that, in this case, doing nothing was not an
exercise of reasonable diligence" (¶ 18).
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Commercial Law
Secured Consumer Credit Transactions - Arbitration
Wisconsin Auto
Title Loans Inc. v. Jones, 2005 WI App 86 (filed 24 March 2005)
(ordered published 29 April 2005)
Acting pursuant to Wis. Stat. section 425.205 (part of the Wisconsin
Consumer Act (WCA)), the plaintiff filed a replevin action against the
defendant seeking recovery of the defendant's automobile, which secured
a loan agreement, promissory note, and security agreement. The defendant
answered and counterclaimed, alleging that the plaintiff's loan and
collection practices violated his common law contract rights and various
WCA provisions. The plaintiff moved to compel arbitration of the issues
raised in the counterclaims pursuant to the loan agreement's arbitration
clause, the Federal Arbitration Act, and Wis. Stat. section 788.03. The
circuit court concluded on the basis of common law contract principles
and the WCA that the arbitration provision was unconscionable because it
was one-sided and a product of the parties' unequal bargaining
power.
In a decision authored by Judge Higginbotham, the court of appeals
affirmed. The court first addressed the plaintiff's argument that the
Federal Arbitration Act preempts the WCA because the WCA, according to
the plaintiff, prohibits arbitration in secured consumer credit
transactions. The court of appeals noted that the U.S. Supreme Court has
interpreted the Federal Arbitration Act as mandating the enforcement of
all arbitration agreements involving commerce, unless the agreement is
revocable on contractual grounds (see ¶ 9). Under 9 U.S.C.
§ 2, "a written provision in any ... contract evidencing a
transaction involving commerce to settle by arbitration a controversy
thereafter arising out of said contract. . . shall be valid,
irrevocable, and unenforceable, save upon grounds as exist at law or in
equity for the revocation of any contract."
Accordingly, in determining whether the parties have made a valid
arbitration agreement, state law may be applied if that state law
governs issues concerning the validity, revocability, and enforceability
of contracts generally; the Federal Arbitration Act preempts "state laws
applicable only to arbitration provisions." See Doctor's
Assocs. Inc. v. Casarotto, 517 U.S. 681, 687 (1996). Thus,
"the usual defenses to a contract such as fraud, unconscionability,
duress and lack of consideration may be applied to invalidate an
arbitration agreement, so long as the law under which the provision is
invalidated is not applicable solely to arbitration agreements. Where an
arbitration agreement is found to be unconscionable pursuant to general
state law principles, then it may be invalidated without offending the
Federal Arbitration Act" (¶ 10) (citations omitted).
The appellate court then considered (and quoted at length) the
arbitration clause in the loan agreement in this case. The court
ultimately concluded that the clause was both procedurally and
substantively unconscionable.
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Criminal Procedure
Sentence Modification – Defendant's Substantial
Assistance to Law Enforcement After Sentencing
State
v. Doe, 2005 WI App 68 (filed 22 March 2005) (ordered published
29 April 2005)
The critical question before the court of appeals in this case was
whether a defendant's substantial and important assistance to law
enforcement after sentencing may constitute a new factor that the trial
court can take into consideration when deciding whether modification of
the sentence is warranted. The circuit court ruled that such assistance
did not constitute a new factor permitting sentence modification
because, according to the court, "a new factor must be something
which existed at the time of sentencing but [was] not known to the trial
court" (¶ 4). In a decision authored by Judge Curley, the
court of appeals reversed.
A circuit court has discretion to modify a sentence if a defendant
presents a new factor. A "new factor" is a "fact or
set of facts highly relevant to the imposition of sentence, but not
known to the trial judge at the time of original sentencing, either
because it was not then in existence or because, even though it was then
in existence, it was unknowingly overlooked by all of the parties"
(¶ 5, quoting Rosado v. State, 70 Wis. 2d 280, 288, 234 N.W.2d 69
(1975)). Rosado thus clearly provides that a new factor may be something
that comes into existence after sentencing has taken place.
The court of appeals noted that "[r]emarkably, there are no
published cases in Wisconsin touching on whether post-sentencing
substantial assistance to law enforcement is a new factor" (¶
8). It concluded that "sentence modification should be available
to those already sentenced who possess and can provide valuable
information to law enforcement to assist in ferreting out and curtailing
crime" (¶ 10) and that a rule permitting the trial court, in
appropriate cases, to modify a sentence after substantial assistance has
been given to authorities would promote sound public policy. Permitting
trial courts to modify sentences for this reason would also address some
of the concerns about sentencing discretion that have been expressed by
the Wisconsin Supreme Court in light of Wisconsin's migration to a
truth-in-sentencing system.
The court of appeals looked to the federal sentencing guidelines,
which allow sentence reductions for substantial assistance given to
authorities before sentencing, and found that the considerations
enumerated therein are helpful in determining whether post-sentencing
assistance constitutes a new factor for purposes of sentence
modification as well. U.S. Sentencing Guidelines Manual § 5K1.1
provides that the appropriate sentence reduction shall be determined by
the court for reasons that may include, but are not limited to,
consideration of the following: 1) the court's evaluation of the
significance and usefulness of the defendant's assistance, taking
into consideration the government's evaluation of the assistance
rendered; 2) the truthfulness, completeness, and reliability of any
information or testimony provided by the defendant; 3) the nature and
extent of the defendant's assistance; 4) any injury suffered by or
any danger or risk of injury to the defendant or his or her family
resulting from his or her assistance; and 5) the timeliness of the
defendant's assistance (see ¶ 9).
The court of appeals adopted these factors from the federal
sentencing guidelines for use in assessing whether post-sentencing
assistance constitutes a new factor for sentence modification
purposes.
Restitution Determinations Made Outside Statutory Time Limits -
Standards for Reviewing Lawfulness of Such Orders
State
v. Ziegler, 2005 WI App 69 (filed 30 March 2005) (ordered
published 29 April 2005)
The defendant was convicted in 1989 of being a party to an arson. The
trial court imposed and stayed a prison sentence and imposed a term of
eight years' probation to be served consecutive to a prison sentence in
another case. The court ordered restitution as a condition of probation
in an amount "to be determined."
More than nine years later, in February 1999, the Department of
Corrections filed a request for restitution determination. The circuit
court amended the judgment to require the defendant to pay the victim
restitution of more than $100,000. In 2000 the defendant filed a motion
to vacate the portion of the amended judgment ordering restitution; the
court granted the motion. However, in July 2003, when the defendant was
about to be released from prison, the state requested that the circuit
court conduct additional restitution hearings. The court did so and,
despite a dispute about the amount of the victim's loss, set restitution
at $95,000 and amended the judgment of conviction to reflect that
amount.
In a decision authored by Judge Anderson, the court of appeals
reversed. Wis. Stat. section 973.20 requires courts to order full or
partial restitution to any victim of a crime unless the court finds
substantial reason not to do so and states the reason on the record. A
sentence that fails to provide for restitution is unlawful and subject
to amendment. When, as in this case, a trial court orders restitution
but does not determine the amount of restitution at sentencing, the
court may use one of four alternative procedures set forth in section
973.20(13)(c) to finalize the amount due. Each of the options includes a
time frame for finalizing the restitution order. In this case the
parties agreed that the trial court failed to comply with any of the
four alternative procedures and that restitution was not established
during the period provided for in the statute.
In State v. Perry, 181 Wis.2d 43, 510 N.W.2d 722 (Ct. App.
1993), the court held that the statute establishing restitution
determination periods is directory (i.e., not mandatory) and that a
court may impose restitution after the statutory deadline has expired as
long as 1) valid reasons exist for the delay and 2) the defendant has
not been prejudiced by the delay. In this case the court held "that the
two-pronged Perry test is akin to a balancing test; in each
case the court must balance the length and reasons for the delay against
the injury, harm or prejudice to the defendant resulting from the delay"
(¶ 18).
Applying this test to the facts before it, the court concluded that
there were no demonstrable valid reasons for delaying the restitution
determination hearing for 14 years and that such delay inherently
prejudiced the defendant. With respect to prejudice, the court noted
that, by the time the judge held the restitution hearing, much of the
documentation concerning the victim's damages had been lost or destroyed
and that the passage of so many years made it far more difficult for the
defendant to dispute any of the claimed damages. Further, as time
passed, the defendant acquired a legitimate expectation in the finality
of the judgment against him: He had served his prison sentence, he was
out on parole, and the court had determined in 2000 that it no longer
had authority to impose restitution. For these reasons the appellate
court vacated the restitution portion of the amended judgment of
conviction.
Plea Negotiations - Agreement Silent on Issue of Consecutive
versus Concurrent Sentences
State
v. Bowers, 2005 WI App 72 (filed 9 March 2005) (ordered
published 29 April 2005)
The defendant was charged with operating a motor vehicle while
intoxicated (OWI) (sixth offense) and other offenses. The parties struck
a plea agreement whereby the defendant would plead no contest to the OWI
charge and the other charges would be dismissed. The state agreed to
recommend a disposition of two years' initial confinement followed by
three years of extended supervision. The agreement was silent as to
whether the sentence would be concurrent with or consecutive to another
sentence the defendant was serving.
At the sentencing hearing the state recommended that the sentence in
the present case run consecutively to the sentence that the defendant
was serving in another case. In a post-conviction motion the defendant
argued, among other things, that the state breached the plea agreement
by recommending a consecutive sentence. The circuit court denied the
motion.
In a majority decision authored by Judge Anderson, the court of
appeals affirmed. It agreed with the state that the state was free to
recommend consecutive sentences, because the plea agreement contained no
provision requiring the state to either remain silent on the issue or
recommend concurrent sentences. The state honored its commitments as
recited in the plea agreement and "should be held only to those promises
it actually made to the defendant" (¶ 16). In this case the
agreement was silent regarding the issue of concurrent versus
consecutive sentences, and the record does not reflect that the
defendant bargained for a promise from the state to refrain from asking
for consecutive sentences. Therefore, when the state made its
recommendation, it did not violate the plea agreement.
Judge Brown filed an opinion concurring in part and dissenting in
part. In Judge Brown's view the recommendation for consecutive sentences
was a breach of the plea agreement. "If it were up to me, the state
would not be able to recommend consecutive terms unless bargained for"
(¶ 27).
Family Law
Divorce - Maintenance - Impact of Financial Benefit Derived From
Cohabitation With Third Party
Woodard
v. Woodard, 2005 WI App 65 (filed 31 March 2005) (ordered
published 29 April 2005)
The parties were married in 1994, and the husband filed for divorce
in 2003. At trial the parties contested maintenance and child support.
With regard to the wife's financial situation, the circuit court heard
testimony from her about financial benefits she was receiving from her
companion. The wife and her companion, a member of the military, lived
together, apparently while the divorce was pending, before he began a
tour of duty in Afghanistan. At the time of trial, the companion was
still in Afghanistan and his military pay was being deposited into a
joint bank account he shared with the wife. She used money from the
account to pay rent and other bills. The circuit court disregarded
evidence of the benefit the wife received from her companion's income
and awarded maintenance to her.
The husband appealed the award of maintenance. The question before
the court of appeals was whether the circuit court, in making its
maintenance decision, was justified in disregarding evidence of
financial benefit the wife was receiving from a recently commenced
cohabitation relationship. In a decision authored by Judge Lundsten, the
court of appeals reversed.
The court of appeals said that the general rule is that a court
should consider the parties' financial circumstances as they exist at
the time the court makes or modifies a maintenance award (see
¶ 6). In this case the wife's testimony showed that during at least
part of the pendency of the divorce and up to and including the time of
trial, she benefited from her companion's income. The circuit court
disregarded this benefit because, in the court's view, the relationship
was a recently commenced, nonmarital relationship that could terminate
at any time. The court of appeals said that the circuit court's
reasoning was subject to two interpretations: either the court made a
legal conclusion about recently commenced cohabitation relationships in
general or it made a factual finding regarding the wife's particular
relationship. In either event, said the court of appeals, the circuit
court erred.
The court of appeals said that if the circuit court made a legal
conclusion about recently commenced cohabitation relationships in
general, it erred for two reasons (see ¶ 8). First, the
general rule is that maintenance decisions should be based on the
parties' financial circumstances at the time the maintenance
determination is made and, in this case, the wife was receiving a
financial benefit from her cohabitation relationship at the time of the
divorce trial (see ¶ 9). (The court of appeals noted that
if, on remand, maintenance is ordered at a lower level or held open and
the situation with the companion changes, the change may provide a basis
for the wife to seek a modification.) Second, a financial benefit
flowing from cohabitation is an appro-priate maintenance consideration
(see ¶ 10).
If the circuit court's conclusion was based on a factual finding
regarding the wife's particular relationship, the appellate court
concluded that such a finding was clearly erroneous. The circuit judge's
decision might reflect an implicit factual finding that the relationship
was likely to end in the near future. The court of appeals said that if
this factual finding were supported by evidence in the record, it might
be an appropriate basis for exercising discretion to disregard the
financial benefit of the relationship if the expected duration was so
short that the financial benefit to the wife would be insignificant. The
problem in this case was that the record did not support such a finding
and the finding was therefore clearly erroneous (see ¶
12).
Finally, the wife argued that the circuit court could properly
disregard any financial benefit she derived from her companion because
he was overseas and therefore she was not actually cohabiting with him
at the time of trial. "This argument misses the gist of cohabitation
cases. Although `cohabitation' is useful shorthand because it is a
common situation in which a maintenance recipient obtains an ongoing
financial benefit from another person, the real issue in such cases is
not the physical presence of the other person, but the ongoing financial
benefit, if any, derived from the relationship" (¶ 15).
Insurance
Fuel Oil - "Property Damage" - Pollution Exclusion
State
Farm Fire & Casualty Co. v. Acuity, 2005 WI App 77 (filed
15 March 2005) (ordered published 29 April 2005)
While attempting to remove two oil tanks and the oil they contained,
an excavator, Krause, caused oil to spill onto property belonging to the
Kagens (the homeowners). Krause's insurer, Acuity, filed this
declaratory judgment action, the goal of which was to determine if
Krause's policy covered this kind of damage. The circuit court ruled
that Acuity's business liability policy did not cover the homeowners'
claims against Krause.
The court of appeals, in an opinion written by Chief Judge Cane,
affirmed. The court agreed with Krause that "loss of use" of the family
home, which was not physically damaged, fell within the policy's
definition of property damage. Nonetheless, the policy's pollution
exclusion precluded coverage. Under the pertinent clauses, "neither
bodily injury nor property damage are covered if they `arise[] out of
the actual, alleged or threatened discharge, dispersal, seepage,
migration, release or escape of pollutants' at any premises on which the
insured is `working directly' when the operation involved is testing,
monitoring, cleaning up, removing or otherwise treating or responding to
the effects of pollutants. Although the parties disagree whether the
pollution exclusion unambiguously excludes smells or odors as
pollutants, they agree that fuel oil is a pollutant as defined by the
policy. It is also clear that the oil `escaped' or `seeped' or was
`discharged' or `dispersed' from the [Kagens'] tanks while Krause was
attempting to remove the oil tanks" (¶¶ 11-12).
The court distinguished cases cited by Krause, concluding: "Here,
where the pollutant is fuel oil, an unambiguous pollutant, the
substance's toxicity and pollutant character would not be separated by a
reasonable person from its smell. Similarly, a fuel oil escape that
occurs while an insured is attempting to remove tanks containing the oil
is not like the ordinary event of the drain backing up or the
extraordinary event of an arson fire because it falls squarely within
the activities a reasonable person would associate with contamination
and pollution" (¶ 17).
Notice of Cancellation - Timeliness
Schmitz
v. Balboa, 2005 WI App 76 (filed 9 March 2005) (ordered
published 29 April 2005)
Fire Insurance Exchange (FIE) sent notice of cancellation of an
insurance policy to the insured on Dec. 4, 2001. The insured's home was
destroyed by fire on Dec. 17, 2001. After the insured was informed that
he did not have a valid policy with FIE, he filed suit alleging breach
of contract and other claims. The circuit court granted summary judgment
to FIE, finding that the policy was no longer in effect at the time of
the fire. The homeowner appealed.
The court of appeals, in an opinion written by Judge Nettesheim,
affirmed. "Wisconsin Stat. §631.36 governs the termination of an
insurance policy by an insurer. At issue in this case is subsec. (2)(c),
which addresses the midterm cancellation of new policies that have been
in effect less than sixty days at the time the notice of cancellation is
mailed or delivered. Subsection (2)(c) provides that `[n]o cancellation
under this paragraph is effective until at least 10 days after the 1st
class mailing or delivery of a written notice to the policyholder.' The
purpose of the notice provisions in §631.36 is to protect insureds
from unwittingly being left without coverage" (¶ 11).
The court held that section 631.36(2)(c) "clearly contemplates two
separate and distinct forms of notifying an insured of cancellation -
either by postal mailing or by a form of personal delivery other than
mailing" (¶ 3). Schmitz unsuccessfully argued that "his receipt of
the mailing is the controlling date from which to measure the statutory
ten days" (¶ 13). To accept this construction, however, would mean
that "`delivery' equates with receipt of a mailed cancellation notice"
and thereby renders the "term `mailing' meaningless" (¶ 16). On
this record, FIE established that it had timely informed Schmitz of its
cancellation by mail.
Exclusions - "Professional Services"
Eddy v.
B.S.T.V. Inc., 2005 WI
App 78 (filed 8 March 2005) (ordered published 29 April 2005)
The Eddys purchased a house using the services of Realty Executives.
When the Eddys learned that the house was contaminated by mold, they
sued Realty Executives. Two insurers asked for a declaratory judgment
that, pursuant to a professional services exclusion clause, they owed no
coverage to Realty Executives in connection with the Eddys' lawsuit.
The circuit court granted summary judgment in favor of the insurers,
and the court of appeals, in an opinion written by Judge Fine, affirmed.
"The core of the Eddys' complaint against Realty Executives and Kirchoff
is that they sold the Eddys a home that they knew or should have known
was infested with mold contamination. Both Realty Executives and
Kirchoff are in the home-selling business. They are `real estate agents'
as that phrase is used in all the policies. Thus, their sale to the
Eddys of the contaminated home was in the course of their `rendering ...
professional services" as real estate agents'" (¶ 8).
Nor did the claims that were pleaded somehow remove Realty Executives
from the scope of the professional services exclusion by "posit[ing] a
duty that extends beyond their rendering professional services as real
estate agents" (¶ 9). Case law concededly holds that the term
"professional services" does not embrace "all forms of a professional's
conduct simply because a person is a professional. ... `there must
be a causal relationship between the alleged harm and the complained-of
professional act of service.' This case presents the obverse: Realty
Executives and Kirchoff are being sued precisely because of what they
did or did not do qua real-estate professionals. Accordingly,
the policy exclusions apply" (¶ 14).
Juvenile Law
Delinquency Proceedings - Judicial Substitution
State
ex. rel. Mateo D.O. v. Winnebago County Circuit Court, 2005 WI
App 85 (filed 9 March 2005) (ordered published 29 April 2005)
The underlying action in this case was a juvenile delinquency
proceeding under Wis. Stat. section 938.12. The juvenile's attorney
filed a timely request for judicial substitution, which the circuit
judge denied because the request was signed only by counsel. The
juvenile then moved the chief judge of the judicial district to review
the denial of the substitution request. The chief judge refused to act
on the motion, on the ground that he lacked authority to review a
request for substitution in a juvenile matter.
In a decision authored by Judge Brown, the court of appeals concluded
that a substitution request in a juvenile proceeding is adequate if it
is signed by the juvenile's attorney. Said the court, "When a juvenile
chooses to be represented by counsel, he or she delegates the exercise
of certain tactical decisions to counsel and a personal affirmation of
the exercise of the right to judicial substitution is not necessary"
(¶ 14).
The court further concluded that under Wis. Stat. section 801.01(2),
the chief judge of the judicial district has authority to review and
rule on substitution requests in juvenile proceedings.
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