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Vol. 72, No. 5, May 1999

Court of Appeals Digest

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

| Civil Procedure | Consumers| Corporation Law |
| Criminal Law | Criminal Procedure | Employee Benefits |
| Estate Planning | Medical Assistance | Medical Records |
| Torts | Zoning |

Service of Process - Timeliness - Foreign Corporations -
Hague Convention

The Conservatorship of Prom v. Sumitomo Rubber Industries Ltd., No. 98-0938 (filed 10 Feb. 1999) (ordered published 31 March 1999)

Craig Prom was horribly injured in a motorcycle accident. His conservator brought suit against the defendant, SRI, claiming that it had defectively manufactured a tire that caused the injuries. Prom bought the motorcycle in Wisconsin. SRI had manufactured the tire in Japan and sold it to Kawasaki, which placed it on the motorcycle in Japan before the bike was shipped to Wisconsin. Prom filed the first summons and complaint with the Secretary of State on May 10, 1989, pursuant to section 180.847(4) of the Wisconsin Statutes. When SRI objected on grounds of lack of personal jurisdiction, Prom filed an amended summons and complaint on June 19, 1989, and attempted service of the amended summons and complaint according to the Hague Convention. The circuit court eventually dismissed for lack of personal jurisdiction.

The court of appeals, in an opinion written by Judge Anderson, affirmed. Prom failed to achieve service of process under the Hague Convention. The court held that "art. 15 [of the convention] governs default judgments and does not confer a six-month time period for service of process on foreign defendants. Additionally, we conclude that art. 10 does not permit service of process by mail. Furthermore, without any evidence in the record that Prom accompanied the mailing of the documents with publication, we deem that service was insufficient per sec. 801.11(5)(b), Stats." Nor did service on the Secretary of State confer personal jurisdiction. The record supported the trial judge's determination that SRI did not "transact business" in Wisconsin and therefore lacked sufficient contacts to support jurisdiction according to section 180.847(4).

Home Improvement Contracts - Consumer Loans - Assignees

Jackson v. DeWitt, No. 98-0493 (filed 24 Feb. 1999) (ordered published 31 March 1999)

Jackson contracted with DeWitt to construct a lap pool. He paid DeWitt $11,400 in cash and financed the remainder through a Retail Installment Security Agreement (RISA). Associates Financial Services Co. (Associates) provided DeWitt with the RISA forms. DeWitt assigned the RISA to Associates after Jackson signed the papers. Jackson paid off the RISA before the pool was completed.

When the pool leaked, Jackson had it removed and he brought this action against Associates and DeWitt. Jackson alleged that Associates (through DeWitt) violated Wis. Admin. Code chapter ATCP 110 and that he was entitled to assert all valid claims against Associates in seeking the return of his money.

The circuit court granted summary judgment in Associates' favor. It ruled that the RISA was an "interlocking consumer loan" subject to section 422.408 of the Wisconsin Statutes and Associates was liable only for any amount still due. Since Jackson had paid the loan, Associates was not liable. Finally, the judge found that the RISA was not a negotiable instrument and thus Jackson could not state a claim under ATCP 110.06.

The court of appeals, in an opinion written by Judge Anderson, reversed. Initially, it agreed with the circuit court that the RISA was not a negotiable instrument because it contained a condition (building a pool) other than the payment of money. The RISA's nonnegotiability did not, however, dictate the result reached by the trial judge.

"First, a commonsense reading of Wis. Adm. Code Sec. ATCP 110.06 substantiates that the regulation covers home improvement contracts and is not limited to negotiable instruments. Second, public policy dictates that consumer protection statutes and administrative rules must be read in pari materia to achieve the goal of providing protection and remedies to consumers. Third, [State v. Excel Management Servs. Inc., 111 Wis. 2d 479 (1983)] teaches that an assignee of a nonnegotiable home improvement contract takes the contract 'subject to all claims and defenses of the buyer or his successor in interest.'"

In short, Jackson's full payment of the loan prior to discovering the contract breach did not impede his right to proceed against the assignee, Associates.

Direct Actions - Derivative Actions - SLCs -
Corporation's Best Interest

Einhorn v. Culea, No. 97-3592 (filed 24 Feb. 1999) (ordered published 31 March 1999)

Einhorn was a director and minority shareholder (about 22 percent) in Northern Labs. In 1992 the corporation voted that Culea, the majority shareholder and the president, should receive a hefty "retroactive compensation bonus." In 1993 Einhorn filed a direct action against Culea, alleging a willful breach of fiduciary duties and self-dealing regarding the compensation bonus, which had allegedly "diluted" Einhorn's ownership percentage. Einhorn later amended the complaint to state a derivative action at the direction of the circuit court.

After much wrangling, a special litigation committee (SLC) was appointed and voted that continuation of the suit was not in the corporation's best interest. The court held a seven-day bench trial on the SLC's independence and found that the committee was independent and had appealed the dismissal of his derivative action.

The court of appeals, in an opinion written by Judge Nettesheim, affirmed. First, Einhorn's claim could be maintained only as a derivative action, not a direct action. Einhorn's alleged damages were "derivative of Culea's conduct against the corporation," namely, Culea's alleged wrongful misappropriation of corporate assets for personal use.

Second, the SLC's determination was lawful. The SLC's creation was not "tainted" because its use was recommended by the corporation's counsel. Although its creation "could have been better documented," the totality of circumstances showed that only "independent" directors voted on its creation. The court next assessed the independence of the SLC itself. Einhorn complained that the SLC consisted of Culea's "friends or close business associates." Mere status alone, however, did not demonstrate that the trial judge had abused his discretion in finding that the committee, despite its affinity to Culea, acted in good faith and independently of Culea. The court also addressed the role of the corporation's attorney in the SLC's creation and conduct, finding no impropriety.

Interference With Child Custody - State Jurisdiction When Concealment of Child Takes Place Out of State

State v. Inglin, No. 97-3091-CR (filed 16 February 1999) (ordered published 31 March 1999)

Pursuant to a divorce judgment, the defendant and his ex-wife had joint custody of their son. The son's "primary physical placement" was with his mother and his "extensive physical placement" was with the defendant. In 1995, when the boy was 4 years old, the defendant and his ex-wife agreed that the boy would go with his father for what was to have been a 10-day camping trip to Colorado. Instead of taking the child to Colorado, the defendant took him to Canada. In fact, as the defendant conceded at the trial, soon after picking up the boy for the camping trip, he decided to keep him permanently.

The evidence established that the defendant had made extensive arrangements to accomplish that goal even before picking up his son. Approximately two months later, Canadian law enforcement authorities found the defendant and his son living in British Columbia. The defendant was thereafter convicted, following a jury trial, of violating two subsections of section 948.31 of the Wisconsin Statutes, which is the Interference With Child Custody statute.

Section 948.31(1)(b) makes it a felony to intentionally cause a child to leave, take a child away, or withhold a child for more than 12 hours beyond the court-approved period of physical placement or visitation period from a legal custodian with intent to deprive the custodian of his or her custody rights without the consent of the custodian. The defendant was charged with the "withholding" violation, but through inadvertence (as to which there was no objection by the parties), the court instructed the jury on the "taking a child away" theory. Thus, on appeal the court focused on whether the evidence was sufficient to support the verdict on the "take away" charge.

The defendant argued that the taking of the child was with the mother's consent and therefore not a violation of the statute. The state countered that, because the defendant deceived his ex-wife about his intentions, and because the mother consented only to the defendant taking the boy for a vacation, the deceit prompted the mother's permission and thus the evidence was sufficient to support the jury's "take away" verdict.

In a decision authored by Judge Schudson, the court of appeals agreed. It reached this conclusion based upon the definition of nonconsent found in section 939.22(48) of the Wisconsin Statutes, which provides among other things that the term "without consent" includes a consent given because the victim does not understand the nature of the thing to which the victim consents, either by reason of ignorance or a mistake of fact or of law other than criminal law, or by reason of youth or defective mental condition, whether permanent or temporary. In this case the mother consented to the defendant taking away the boy only because of her understanding that the boy was being taken on a brief camping trip to Colorado after which he would be returned to her. The mother remained in ignorance of the defendant's true intentions only because of his deceit, and thus her agreement allowing the defendant to take the boy away was "without consent."

The court cautioned that its opinion should not be read to suggest that, in a dispute between two custodial parents, any and every deviation from an agreed-upon visitation or vacation plan would constitute a nonconsensual "taking away" under the statute. After all, the statute provides that, to be guilty of a violation, an offender must act "with intent to deprive the other custodian of his or her custody rights." Inevitably, countless occasions arise where one custodial parent, responding to unanticipated circumstances, reasonably deviates from agreed-upon plans without violating the criminal law. Here, however, from the moment of his "taking away" the boy, the defendant never intended to do what he had agreed to do: He never intended to return the boy to his mother. Therefore, although an offense like this one would more logically be prosecuted on a "withholding" rather than a "taking away" theory, the evidence was sufficient to support the conviction.

The statute also provides that it is a felony to "intentionally conceal a child from the child's other parent." The information charged that during the two-month period when the boy was away, the defendant intentionally concealed the child from his mother and identifies the location of the offense as being Milwaukee County, Wisconsin. The defendant argued that because it was uncontroverted that he and the boy were outside the state of Wisconsin during the entire time charged in this count, the concealment occurred wholly outside the state and therefore Wisconsin lacked territorial jurisdiction over that offense.

The appellate court disagreed. Section 939.03(1)(c) of the Wisconsin Statutes provides that a person is subject to prosecution and punishment under the law of Wisconsin if while out of this state, the person does an act with intent that it cause in this state a consequence set forth in a section defining a crime. Every day the defendant kept the boy in Canada, he prevented the boy's lawful return to his mother, and he made more difficult the discovery of the boy by his mother. Therefore, for purposes of jurisdictional analysis, the defendant's concealment of the boy in Canada was inseparable from the consequences of that concealment in Wisconsin. Therefore, as to this count, the state had jurisdiction.

Delayed Charging of Juvenile Offenders - Adult Court Jurisdiction - Becker Hearings - Waiver by Guilty Plea

State v. Schroeder, No. 98-1420 (filed 4 Feb. 1999) (ordered published 31 March 1999)

The defendant appealed from an order that denied his post-conviction motion challenging his conviction and sentence on two charges of sexual assault. The charges involved incidences occurring before his 18th birthday, but the criminal complaint was not filed until after he turned 18. [This case arose prior to changes in the Juvenile Justice Code which, among other things, lowered the pertinent ages for children subject to the code and to waiver petitions.] The defendant pleaded guilty to both counts. He never requested a hearing under State v. Becker, 74 Wis. 675, 247 N.W.2d 495 (1976), prior to entering his guilty pleas. At a Becker hearing the state would have had to establish that it did not intentionally delay the filing of the criminal complaint until after the defendant's 18th birthday.

On appeal the defendant argued that the failure to hold a Becker hearing affected the adult court's subject matter jurisdiction and that this jurisdictional defect was not waived even though he never requested such a hearing before entering his pleas. In a decision authored by Judge Vergeront, the court of appeals concluded that a Becker hearing addresses a potential constitutional violation, not the court's subject matter jurisdiction, and that the defendant waived the right to request a Becker hearing when he entered his guilty pleas.

Restitution - Accident Victims - Releases - Setoffs

State v. Walters, No. 98-0828-CR (filed 25 Feb. 1999) (ordered published 31 March 1999)

When driving her car while intoxicated, Walters rear-ended a vehicle driven by Olivas. Walters was charged with causing injury by intoxicated user and related offenses. Her liability insurer paid Olivas the $25,000 limit in exchange for a release of all claims and damages. Walters was later convicted for causing injury while intoxicated. At her sentencing hearing, the judge determined that Olivas's release did not preclude restitution in the criminal proceedings. The court found more than $40,000 in special damages, including medical expenses and lost wages. The court also found that Walters had the ability to pay $24,000 in restitution and refused to set off this amount against the release.

The court of appeals affirmed in an opinion written by Judge Roggensack that interprets the restitution statutes in light of the extant case law. First, the court held that on this record the defense of "accord and satisfaction" did not preclude the restitution order. A crime victim has no "independent claim" for restitution that he or she can release. The remedy, rather, belongs to the state.

The court also considered a second defense, "setoff." Under the statutes a criminal court cannot order restitution for "general damages"; rather, it is limited to special damages proved in the record. Clearly, amounts paid as criminal restitution can be set off against a later civil judgment, but no appellate case has ever addressed the opposite scenario: the setting off of civil damages against the criminal restitution order. The court of appeals held that the "legislative objectives will be best served by applying any setoff which a circuit court determines is appropriate to the total amount of special damages which the victim has sustained."

Moreover, the court imposed on the defendant the burden of proving what part, if any, of the civil damages (here $25,000) was made in payment for special damages and thus was entitled to setoff in the criminal case. On this record the trial judge refused to make a setoff because the testimony revealed "general damages of an indeterminate amount," rendering it "unfair to make a setoff of the $25,000 settlement entirely against Olivas's special damages."

Search and Seizure - Warrantless Entry - Consent - Exigent
Circumstances - Attenuation

State v. Richter, No. 98-1332-CR (filed 23 Feb. 1999) (ordered published 31 March 1999)

The state appealed a pretrial order suppressing evidence collected during the warrantless search of a trailer home. Police went to the trailer park when a caller claimed that an intruder was breaking into a trailer. The intruder was then observed running toward the defendant's trailer. An officer awakened two men who had been sleeping in the defendant's trailer. He then entered the trailer and awoke the defendant who was sleeping on a sofa. The defendant gave the officer permission to search for the intruder. They later found the intruder as well as drugs and drug paraphernalia linked to the defendant.

The court of appeals, in an opinion written by Judge Myse, affirmed the suppression order. First, the entry was illegal. Police had no warrant to enter the trailer and the prosecution failed to meet its burden showing exigent circumstances or a "hot pursuit" justifying a warrantless entry. Upon arriving at the scene, the officer learned that the suspected "burglary" was no more than an "unlawful entry" and involved no threat of harm. In short, the officer lacked any reasonable belief that "a grave threat to the safety of others existed." Moreover, the record failed to support any tenable theory of "hot pursuit," the application of the "emergency doctrine," or the "community caretaker doctrine," the latter rule requiring a "total divorce" from any pretense of criminal investigation.

The court next addressed whether the defendant's consent was sufficiently attenuated from the illegal entry. The temporal break between the illegal entry and the consent was virtually nonexistent; the one immediately followed the other. Nor did the intervening circumstances sufficiently "diminish the unlawful nature" of the entry. The court observed that the defendant was never told that the officer lacked a warrant or that he did not have to consent to the search. Finally, although this was hardly the most extreme example of official misconduct, there being no force, tricks, or cajolery, it was nevertheless "sufficiently purposeful" and thus failed to break the link between the illegality and the seizure.

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