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    Wisconsin Lawyer
    April 01, 1999

    Wisconsin Lawyer April 1999: Court of Appeals Digest

    Court of Appeals Digest


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

    | Civil Procedure | Criminal Procedure | Family Law | Insurance | Sex Predator Law | Torts |


    Civil Procedure

    Summary Judgement - Issue Preclusion - Other Parties

    Precision Erecting Inc. v. M&I Marshall & Ilsley Bank, No. 97-3029 (filed 16 Dec. 1998) (ordered published 23 Feb. 1999)

    The underlying facts of this case concerned a contract dispute and the liability for the remaining payments. One party, AFW, filed a motion for summary judgment against another, Antonic. The motion requested that summary judgment be entered in accordance with the demands in the complaint and asserted that the balance due was about $85,000. Antonic submitted a letter to the court indicating he would not oppose the motion. Another party, Nambe Mills Inc., did not appear or respond to the motion.

    The court ruled that the contract between AFW and Antonic called for general contracting services, that AFW was only liable for the remaining balance ($85,000), and that the court's decision was binding on all parties, including Nambe. Nambe's share of the $85,000 was less than 20 percent of what it claimed. Nambe asserted that it should not be bound by the summary judgment disposition between the other two parties.

    The court of appeals, in an opinion written by Judge Brown, affirmed. The court's opinion begins with a summary of the holding and a caution to lawyers involved in multi-party litigation: "If a litigant who is not the subject of the motion for summary judgment nonetheless has reason to dispute the facts supporting the motion, it is that litigant's duty to appear and object to the motion. If not, and summary judgment is granted, the facts underlying that judgment are binding on all other parties to the suit as a matter of issue preclusion."

    After addressing several issues relating to long-arm jurisdiction and the propriety of granting a stay, the court reviewed Wisconsin law on issue preclusion. Although the case law had never explicitly applied the label "issue preclusion" to a ruling like this one, the court found several cases that had, in effect, done so. Judge Brown ruled that no sound reason limited the application of issue preclusion to "subsequent independent actions" as opposed to the determination of issues between other parties in the case. Applying the well-established factors set forth in earlier cases, the court held that issue preclusion had been properly applied to bar Nambe's claims against AFW. Any other approach only "encourage[d] parties in Nambe's position to sit on their hands and wait to see what happens instead of opposing summary judgment on an issue crucial to their claims."

    Frivolous Lawsuits - Attorney Fees - Duty to Investigate -
    Reliance on Client's Story

    State v. Lamontae D.M., No. 98-1700 (filed 2 Dec. 1998) (ordered published 27 Jan. 1999)

    The plaintiff sued the defendant alleging that he stole $60,000 while replacing windows in her home. The defendant moved for and received summary judgment in his favor. The court struck the plaintiff's response because it was not filed in a timely manner. The court also granted the defendant's motion for attorney fees under section 802.05 of the Wisconsin Statutes based on plaintiff's counsel's failure to make a reasonable inquiry into whether the plaintiff's "story was well-grounded in fact."

    The court of appeals, in an opinion written by Judge Anderson, affirmed. First, it ruled that summary judgment had been properly granted. Although plaintiff could rely on circumstantial evidence to prove that the defendant stole the money, the undisputed evidence did not raise any fair or reasonable inference that he had stolen the money in the first place.

    Second, the court addressed the award of attorney fees under sections 802.05 and 814.025. The defendant moved for attorney fees pursuant to the frivolous claims statute, section 814.025, but the court awarded them under section 802.05. Plaintiff's counsel alleged that he was denied a right to respond to the allegation under section 802.05. The court disagreed. The Legislature intended the two provisions "work together to deter the filing of frivolous claims." The court also possessed inherent authority to sanction a party for failing to comply with a court order or rule.

    The court was further satisfied that the record supported the finding under section 802.05. The plaintiff's counsel relied exclusively on what his client said without "performing even the most rudimentary check on his client's statements." Lawyers are obliged to determine whether their client's story "passes the smell test." Here the client failed to discover the missing money until three days after the defendant's departure and said nothing to her husband for another 30 days. "Holes" apparent to the police, who refused to pursue charges or any further investigation, should have been addressed by counsel. In short, the statute and case law "admonishes lawyers to 'read and consider' before litigating."


    Criminal Procedure

    Change of Venue - Tactical Decision to be Made by Defense Counsel

    State v. Hereford, No. 98-1270 (filed 28 Jan. 1999) (ordered published 23 Feb. 1999)

    In Wisconsin a defendant has the right under the state constitution and state statutes to be tried by an impartial jury in the county or district where the crime was committed. The Sixth Amendment of the U.S. Constitution, as applied to the states by the Fourteenth Amendment, also provides that the district where the crime is alleged to have occurred is the place where the jury should be selected and the trial should take place. A defendant may move for a change of venue if an impartial jury is not possible in the county where the crime occurred.

    In this case the court of appeals was presented with a question involving a change of venue: whether the right to venue in the county where the crime was committed is a fundamental right requiring a personal waiver by the defendant before venue can be changed, or whether moving to change venue is a tactical decision delegated to defense counsel.

    In a unanimous decision authored by Judge Roggensack, the court concluded that decisions impacting venue are tactical decisions that are delegated to counsel when a defendant in a criminal trial appears by counsel. The court also concluded that the defendant's presence at the hearing on the motion was not required because he delegated the right to make tactical decisions to trial counsel when he decided to be represented by counsel at trial.

    Guilty Plea Hearings - Advice to Defendant Regarding
    Sex Predator Law and Sex Offender Registration Law

    State v. Bollig, No. 98-2196-CR (filed 28 Jan. 1999) (ordered published 23 Feb. 1999)

    The defendant entered a plea of no contest to a charge of attempted sexual contact with a child under the age of 13. Prior to sentencing he moved to withdraw that plea because the trial court did not advise him at the plea colloquy that as a result of his conviction: 1) he might be determined in the future to be a sexual predator under Wis. Stat. chapter 980; and 2) he would be required to register as a convicted sex offender and, if he failed to do so, he could be fined or imprisoned. The circuit court denied the motion and sentenced the defendant to prison. In a decision authored by Judge Dykman, the court of appeals affirmed.

    The motion to withdraw the plea of no contest in this case occurred prior to sentencing. When the motion is made in that time frame, a defendant should be allowed to withdraw his or her plea if there is a "fair and just" reason for doing so. Any fair and just reason, including a genuine misunderstanding of the consequences of a plea, may justify withdrawal prior to sentencing, so long as the prosecution has not been substantially prejudiced by relying on the plea.

    When the trial court informs the defendant of his or her rights at a guilty plea proceeding, it is required to notify him or her of the "direct consequences" of the plea. The court is not, however, required to notify defendants of "collateral consequences" of the plea. The distinction between direct and collateral consequences turns on whether the result represents a definite, immediate, and largely automatic effect on the range of the defendant's punishment.

    The court of appeals previously has held that a commitment under the sex predator law is not a direct consequence of a guilty plea because it does not automatically flow from a sex-related conviction. Rather, a commitment will depend upon the defendant's condition at the time of the sex predator proceeding and the evidence the state will then present about that condition. With regard to the sex offender registration law, the court likewise concluded that, because the registration requirement operates as a safeguard to protect past victims and the public in general, it is not punishment and that a trial court is not required to notify a defendant of this registration requirement in order for the plea to be valid.

    The court admitted that its conclusion that sex predator commitments and sex offender registration law requirements are not direct consequences of a guilty or no contest plea did not resolve the ultimate question in this case: whether the defendant offered a "fair and just" reason for withdrawing his plea. The circuit court held that even if the defendant's proffered reason was fair and just, it was outweighed by the prejudice to the state and the victim. To withdraw a plea, the defendant must offer a fair and just reason and prove that the state would not be substantially prejudiced by its reliance on the plea. The court of appeals concluded that the circuit judge did not erroneously exercise discretion in denying defendant's motion to withdraw his plea. The trial court articulated concerns with the ability of the victim, who was 4 at the time of the alleged assault, to accurately recollect the events at a trial that would occur two years after the assault if the motion to withdraw the plea was granted.


    Family Law

    Marital Property - Separate Civil Action Involving Marital Property

    Knafelc v. Dain Bosworth Inc., No. 98-0067 (filed 12 Jan. 1999) (ordered published 23 Feb. 1999)

    Dale Knafelc appealed an order dismissing her complaint against Greg Knafelc, her husband/stockbroker, and Dain Bosworth, Greg's employer. The complaint, which was filed during the course of divorce proceedings between Dale and Greg, alleged securities fraud violations by Greg and vicarious liability and negligent supervision by Dain Bosworth.

    During the course of their marriage, Greg was employed as a stockbroker with Dain Bosworth. His wife Dale set up an individual account with Dain Bosworth and Greg directly handled the trades on the account. The source of funds in Dale's individual account was marital property. After the petition for divorce was filed and while the divorce was still pending, Dale filed a separate civil action alleging securities fraud violations against Greg and the aforementioned claims against Dain Bosworth. A marital settlement agreement was entered into and approved which resolved the divorce action, and the securities fraud case was continued for trial. On the eve of trial, Greg filed a motion to dismiss the complaint. The trial court granted the motion for lack of subject matter jurisdiction concluding that Wisconsin's divorce laws provide the sole remedy for spouses to litigate claims involving marital property. The trial court further concluded that the claims against Dain Bosworth also were subject to dismissal as they were derivative of the claims against Greg. In a decision authored by Judge Myse, the court of appeals reversed.

    Wisconsin statutes create a cause of action predicated on a breach of the duty of good faith, between spouses, on matters concerning marital property. See Wis. Stat. §766.70(1). They also require that once a divorce action is filed, a claim made encompassing such cause of action must be resolved in divorce court. See Wis. Stat. § 767.05(7). Cases interpreting this statutory scheme have analyzed the nature of the claims asserted to determine whether they are the type of claim that section 767.05(7) requires to be resolved as part of the divorce action. Accordingly, the court had to focus upon the nature of Dale's claim to determine whether it could properly be pursued as a separate civil action.

    None of the allegations in the securities fraud complaint referred to Greg as Dale's husband or alleged that Greg's actions were conducted pursuant to his status as her husband, nor could the court draw such inferences from the complaint. In fact, the allegations identify Greg as a Dain Bosworth employee and focus on his actions as the stockbroker who handled the trades in Dale's account. Accordingly, Dale's claim was based upon conduct that arose out of a relationship other than the marital relationship. The allegations in the complaint identify a broker/dealer relationship between Dale and her brokerage firm and its agent Greg. The account was accessible to Greg only by virtue of his employment with Dain Bosworth and his position as agent directly handling trades on the account. The marital relationship did not provide Greg with the authority to act on the account since the funds, though marital property, were vested in an individual account in Dale's name.

    The court concluded that a section 766.70(1) cause of action requires that the conduct complained of must arise as a result of the marital relationship, because it depends upon a duty of good faith based on that relationship. Inasmuch as the conduct complained of in this case arose out of a relationship other than the marital relationship, the claim did not assert a breach of good faith duty between spouses and is not precluded by the statutes from being raised as a separate civil action.


    Insurance


    Auto Coverage - Notice of Policy Changes - Stacking

     Hanson v. Prudential Property & Casualty Ins. Co., No. 98-0692 (filed 12 Jan. 1999) (ordered published 23 Feb. 1999)

    Hanson was involved in a serious car accident. He settled with the tortfeasor for $150,000 and then filed claims with his own insurer, Prudential, for uncompensated injuries. Prudential denied coverage. Prudential filed this appeal from a judge's determination that Hanson was an "underinsured motorist" according to a "'damages basis' definition" set forth in a "prior coverage period automobile liability policy" and that Hanson could "stack" his underinsured (UIM) coverage. The court of appeals, in an opinion written by Judge Myse, affirmed in part and reversed in part.

    As to the first issue, Prudential argued that Hanson failed to meet the "limits basis" definition of "underinsured motorist" contained in a renewal policy. The court held, however, that Prudential failed to comply with the statutory notification procedures required by section 631.36(5), of the Wisconsin Statutes and thus could not assert the new definition. The statute "requires that when an insurer offers to renew a policy on new, less favorable terms within sixty days of the renewal date, the insurer must inform the insured that the new terms do not become effective until sixty days after the renewal is sent or delivered and that the insured has a corresponding sixty days within which to elect to renew or cancel the policy. Because Prudential's right to cancel notice did not provide this information, it is insufficient under the statute."

    On the second issue, the trial judge erred by ruling that Prudential failed to notify Hanson of statutory changes that affected the anti-stacking clause in the policy. Case law requires statutory notification of only those changes initiated by the insurer.


    Sexual Predator Law


    Discovery - Court-appointed Experts - Reports

    State v. Rachel, No. 98-2074 (filed 27 Jan. 1999) (ordered published 23 Feb. 1999)

    Rachel was committed as a sexually violent person under chapter 980 of the Wisconsin Statutes. Because of his indigency, Rachel asked the court to appoint an expert to examine him under section 980.03(4). The issue is whether chapter 980 commitment proceedings are subject to the discovery mechanisms in the rules of civil procedure. In particular, Rachel opposed the state's efforts to depose his expert and discover the expert's notes, recordings, or reports. Although chapter 980 specifically provides that the so-called "rules of criminal evidence" govern sexual predator commitment trials, the court held that the "rules of civil procedure" govern discovery and related matters (emphasis added). On the record, however, it was not clear that Rachel intended to call this expert as a witness. Absent such a showing, Rachel could shield the expert's opinions through the work product doctrine.


    Torts


    Economic Loss Doctrine - Used Equipment -
    Damage to "Other Property"

    Cincinnati Insurance Co. v. AM International Inc., No. 98-0006 (filed 13 Jan. 1999) (ordered published 23 Feb. 1999)

    Harris-Intertype Corporation was a manufacturer of printing presses. In 1975 Harris ceased manufacturing presses but continued to manufacture and sell replacement parts for those presses. Harris later was purchased by another company which in turn was purchased by defendant AM International in 1986. AM continued to operate the replacement parts business until 1995.

    Burton & Meyer Inc. is a commercial printing company in Milwaukee. In 1991 it purchased a 1973 Harris printing press in an "as is/where is" condition. Sometime between 1986 when AM International acquired Harris's replacement parts business and 1991 when the press was purchased by Burton & Meyer, a gear in the press was removed and replaced by a gear manufactured and sold by AM International. In 1994 one or more of the teeth on the gear broke off and caused damage to the press, bringing production to a halt. Burton & Meyer suffered more than $130,000 in property damage, repair costs, and loss of business income. It was compensated for its loss by its insurer, Cincinnati Insurance Company. Cincinnati then brought this subrogation action against AM International for negligence and strict liability. AM filed a motion for summary judgment, arguing that Cincinnati's claims were barred by the economic loss doctrine. The circuit court denied the motion.

    The sole issue on appeal was whether the economic loss doctrine applies where a commercial purchaser buys used equipment containing a defective replacement part that later causes damage to the equipment and results in repair costs and loss of business income. According to the economic loss doctrine, a commercial purchaser of a product cannot recover from a manufacturer under tort theories of negligence or strict products liability damages that are solely "economic" in nature. Generally, economic loss refers to a decrease in the value of a product because it is inferior in quality and does not work for the general purposes for which it was manufactured and sold. The economic loss doctrine does not bar a commercial purchaser's claims based upon personal injury or damage to property other than the product, or economic loss claims that are alleged in combination with noneconomic losses. "In short, economic loss is damage to a product itself or monetary loss caused by the defective product, which does not cause personal injury or damage to other property." See Daanen & Janssen Inc. v. Cedarapids Inc., 216 Wis. 2d 394, 573 N.W.2d 842 (1998).

    In a decision authored by Judge Snyder, the court of appeals was persuaded that AM International's gear was a component part of the Harris press and that the rest of the press that was damaged cannot be considered "other property" for purposes of the economic loss doctrine. The replacement gear was specifically designed by AM to replace gears in the press. As such, it has no function apart from the machine for which it was manufactured. The court's conclusion was not altered by the fact that the replacement gear was manufactured at a different time and by a different company than the press itself. Considering the age of the press, it should have been no surprise to Burton & Meyer that the press contained replacement parts. The court concluded that it was immaterial that defective parts of a machine are replacements for purposes of the economic loss doctrine.

    The court noted that contract law and warranty law are better suited than tort law for dealing with purely economic loss in the commercial arena. In this case Burton & Meyer's losses were solely economic. Because Cincinnati's claims were for negligence and strict liability, it was attempting to recover in tort what are essentially contract damages. For these reasons, the court of appeals reversed the trial court's judgment and remanded with directions that the trial court enter summary judgment in favor of AM International.

    Superseding Causes - Arson

    Giebel v. Richards, No. 97-2085 (filed 19 Jan. 1999) (ordered published 23 Feb. 1999)

    An arsonist started a fire at an apartment building which spread and destroyed an adjacent garage and attached building owned by the Giebelses. The Giebelses sued the apartment building owners under a variety of theories. A jury allocated causal negligence at 55 percent for the apartment owners, 30 percent for the tenants who placed the garbage that the arsonist ignited, and 15 percent to the Giebelses.

    The court of appeals, in an opinion written by Judge Schudson, reversed. The court agreed that the doctrine of "superseding cause" relieved the apartment owners of liability. Even assuming that the owners bore some responsibility for the garbage that accumulated behind the apartment building, it was "highly unlikely" that an arsonist would ignite it.

    Medical Malpractice - Chiropractors - Statute of Limitations

    Arenz v. Bronston, No. 98-1357 (filed 21 Jan. 1999) (ordered published 23 Feb. 1999)

    The sole issue in this case concerned whether the plaintiff's malpractice action against a chiropractor was governed by the general personal injury statute of limitations, section 893.54 of the Wisconsin Statutes, or the medical malpractice statute of limitations, section 893.55 of the Wisconsin Statutes. The former permits actions to be filed within three years of the discovery of an injury while the latter restricts such actions to within one year of the discovery. The court held that a chiropractor is a "health care provider" within the meaning of section 893.55; thus, the one-year statute applies. Chiropractors diagnose, treat, and care for their patients and are licensed by the state examining board. The plaintiff's failure to file the action within one year of the injury's discovery rendered her complaint time-barred.

    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.

    Wisconsin Lawyer


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