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Vol. 72, No. 6, June 1999

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Supreme Court Digest

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

| Civil Procedure | Criminal Law | Criminal Procedure |
| Evidence | Taxation | Torts |

Other Acts - Sentencing - Probation Modification

State v. Gray, No. 96-3363-CR (filed 16 April 1999)

The defendant was originally convicted of obtaining controlled substances by misrepresentation (forged prescriptions). The primary issue on appeal concerned the state's introduction of "other acts" evidence.

Affirming the conviction, the supreme court applied the three-step analysis that it formulated last term in State v. Sullivan (1998). The other acts consisted of a 1990 conviction for obtaining drugs by misrepresentation and several uncharged instances involving the use of forged prescriptions. Under the first step, the court examined whether the trial court properly admitted the other acts evidence for an "acceptable purpose" under section 904.04(2). Discussing each proffered purpose separately, the court held that the evidence was properly admitted to prove identity, plan, proof of motive, and absence of mistake. It also found that the evidence was relevant to establish each purpose. Other acts need not take the form of prior convictions. In response to the defendant's contention that the state had not offered sufficient proof that he had committed the other acts, the supreme court applied the test of conditional relevancy applied in federal court and several Wisconsin court of appeals cases: Could a jury acting reasonably find that it is more likely than not that the defendant committed the other act? On this record the state had satisfied this standard. Finally, the court held that the evidence was not so "unfairly" prejudicial under section 904.03 that it warranted exclusion. It noted that the trial judge read the standard cautionary instruction, Wis JI - Criminal 275.

The second issue concerned the trial judge's power to modify the defendant's probation sentence before the probation period actually began. Originally the defendant was convicted and sentenced on three counts. On postconviction motions the trial court overturned two of the judgments and then modified the disposition on the remaining count. The supreme court held that section 973.09(3), of the Wisconsin Statutes "allows circuit courts to modify conditions of probation at any time before the period of probation expires, even before the period of probation begins."

Property Taxes - Exemption for Benevolent Associations -
Wis. Stat. section 70.11

Deutsches Land Inc. v. City of Glendale, No. 96-2489 (filed 16 April 1999)

Deutsches Land Inc. is a nonstock, nonprofit corporation organized under Chapter 181 of the Wisconsin Statutes. It primarily serves as a holding corporation for the real estate and fixed assets of five incorporated nonstock, nonprofit benevolent associations that exist for the purpose of preserving Germanic heritage and culture.

For the benefit of the benevolent associations, Deutsches Land holds title to roughly 14 acres of property located in the City of Glendale. Though the property officially comprises a single parcel, Deutsches Land treats the property as if it were four lots. Two of the lots have buildings upon them and the remaining two lots, totaling approximately 5.5 acres, are soccer fields.

One of the two lots containing buildings is called "Old Heidelberg Park," which covers about 4.5 acres. It is the sight at which the benevolent associations conduct two major public festivals. While Deutsches Land does not officially lease the park to any entity, it allows Bavarian Waldhaus Inc. to use it on approximately 20 occasions annually. Waldhaus is a for-profit corporation created by the benevolent associations. Waldhaus uses the park to host corporate picnics at which it supplies food and beverages.

The last parcel, which is four acres in size, contains a parking area for the entire 14-acre parcel and a significant structure that houses the Bavarian Inn Restaurant, which is a full-service, for-profit bar and banquet facility open to the public. Deutsches contracts with Waldhaus to operate the Bavarian Inn Restaurant.

Deutsches Land sought a full exemption from property taxes for the soccer fields and Old Heidelberg Park and a 25 percent exemption for the Bavarian Inn building for the years 1993-95. Glendale denied the applications and Deutsches Land filed suit. The circuit court ruled that Deutsches Land was entitled to a full exemption on the soccer fields and Old Heidelberg Park, and a 25 percent exemption for the Bavarian Inn building. The court of appeals reversed the circuit court.

In a majority opinion authored by Justice Bradley, the supreme court affirmed the court of appeals. It concluded that Deutsches Land did not sufficiently show that it was entitled to an exemption from real property taxes for the years in question. Deutsches Land is a benevolent association under Wis. Stat. section 70.11(4). This was never in dispute. However, Deutsches Land did not produce sufficient evidence showing that the corporate use of Old Heidelberg Park was incidental in comparison to the benevolent use of the park. Similarly, it did not sustain its burden of proving entitlement to a real property tax exemption for the Bavarian Inn inasmuch as it failed to produce sufficient evidence to measure a comparison between for-profit and exempt use of space, time, and income. The court further concluded that because of its evidentiary failure to support an exemption for any building, Deutsches Land was not entitled to an exemption on the soccer fields either. It failed to show that the fields are "necessary for the location and convenience" of any building that is exempt under section 70.11.

Justice Prosser filed an opinion concurring in part and dissenting in part. Justice Wilcox joined Justice Prosser's opinion.

Child Labor Laws - Street Trades - Employer's Knowledge - Protected Class

Beard v. Lee Enterprises Inc., No. 96-3393 (filed 9 April 1999)

Jane Beard's husband was killed in a collision with AK, a minor. Beard alleged that AK was employed by a newspaper at the time and was working in a "street trade" during prohibited hours, contrary to section 103.21(1) (1991-92). AK's father had a "bundle delivery agreement" with the newspaper to distribute the papers. The fatal collision occurred at about 4:15 a.m. on a Friday. AK had just finished delivering papers for his brother, who was a paper carrier, and had bundles of Sunday supplements in the van for his father. The circuit court dismissed the complaint and the court of appeals affirmed. It held that the plaintiffs had to show that the employer (the newspaper) exercised some control over the method or route of AK's travel home before it could be found to have violated the child labor laws.

The supreme court, in an opinion written by Justice Wilcox, reversed. First, the court held that "knowledge, actual or constructive, is implicit in the employer/employee relationship involving a publisher, or an intervening agency, and a minor involved in a street trade under sec. 103.21(1), on the part of the employer as to whom it is employing." In this case the evidence conflicted as to what the employer knew, if anything, about AK's distribution of newspapers and bundles. For this reason, summary judgment was inappropriate.

Second, the court also held that "whether there was a child labor law violation and whether that violation occurred while [AK] was acting within the scope of his employment are factual questions which should also be determined by a jury and not decided on summary judgment."

Finally, the court addressed whether the deceased victim fell within the class of persons protected by the child labor laws. It held that "if it is determined that: (1) [The employer] had actual or constructive knowledge of [AK's] employment; (2) [the employer] violated a child labor law; (3) such violation occurred at or about the time of the injury; then we conclude that the public highway could be [AK's] place of employment and [the deceased], who was driving on the public highway, could be a frequenter intended to be protected by the child labor laws to the extent that [AK] was present and may have been engaged in the distribution of newspapers - a street trade." If all these predicates are established, the employer is liable for the victim's death.

Justice Bradley, joined by Chief Justice Abrahamson, concurred but disagreed with the majority's conclusion that "absolute liability automatically results from a violation of the child labor laws regardless of who is injured."

Damages - Economic Loss Doctrine - Consumer Actions

State Farm v. Ford Motor Co., No. 97-2594 (filed 4 May 1999)

In 1994 Renberg bought a used 1990 model Ford truck along with an extended service contract. In 1996 the truck burst into flames as it sat parked at Renberg's workplace. Renberg's insurer, State Farm, paid him the value of the vehicle. Later that same year Renberg received a recall notice from Ford warning about a faulty ignition switch that could cause a fire. State Farm brought this subrogation action to recover the money it had paid to Renberg. Its claims sounded in negligence and strict liability; contract-based claims were dismissed because the truck was purchased "as is" and the extended warranty had expired. The circuit court dismissed the action because the economic loss doctrine barred recovery.

The supreme court, in an opinion written by Justice Bablitch, affirmed. The court held "that the same policies that justify applying the economic loss doctrine to commercial transactions apply with equal force to consumer transactions"; thus the economic loss doctrine barred "State Farm's tort claims for purely economic loss." "Economic loss" is defined as "the diminution in the value of the product because it is inferior in quality and does not work for the general purpose for which it was manufactured and sold." Since 1989 Wisconsin has applied the economic loss doctrine to bar tort claims in commercial transactions; put another way, persons suffering damages are left to their remedies under contract law. The majority opinion offers a lengthy policy discussion that justifies the application of the economic loss doctrine to consumer transactions as well as commercial transactions. The primary theme is the need to distinguish tort from contract claims. There is, however, a critical caveat. The majority specifically did not "reach the issue of the preclusion of a strict-liability claim when the parties are of unequal bargaining power, the product is a necessity, no alternative source for the product is readily available, and the purchaser cannot reasonably insure against consequential damages."

Chief Justice Abrahamson dissented, joined by Justice Bradley. The dissent noted that this case involved an insurer asserting it subrogation rights and that the breadth of the majority's holding is limited by the caveat quoted above.

Damages - Economic Loss Doctrine - Consumer Actions -
No "Sudden and Calamitous Event" Exception

General Casualty Co. v. Ford Motor Co., No. 97-3607 (filed 4 May 1999)

This case is a companion to State Farm v. Ford Motor Co. (see digest above). The Willards' Lincoln Town Car burst into flames while it was parked in front of their house. Their insurer, General Casualty, reimbursed them for the value of the car. The insurer then brought this subrogated action joined by the Willards, who sought recovery of their deductible. The circuit court dismissed the action because of the economic loss doctrine.

The supreme court, in an opinion written by Justice Bablitch, affirmed based on its decision in State Farm v. Ford Motor Co. In this opinion the court refused to adopt an exception to the economic loss doctrine for damages suffered in a "sudden and calamitous event." Other courts that have recognized the economic loss doctrine have rejected such an exception.

Chief Justice Abrahamson, joined by Justice Bradley, dissented for the reasons set forth in their dissent to State Farm v. Ford Motor Co.

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.