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    Wisconsin Lawyer
    May 01, 2006

    Court of Appeals Digest

    This column summarizes selected published opinions of the Wisconsin Court of Appeals.

    Wisconsin LawyerWisconsin Lawyer
    Vol. 79, No. 5, May 2006

    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

    * *

    Administrative Law

    Public Assistance - Due Process

    Driver v. Housing Auth. of Racine County, 2006 WI App 42 (filed 8 Feb. 2006) (ordered published 22 March 2006)

    The plaintiffs brought this civil rights action against the Housing Authority of Racine County (HARC) after they received notice that their section 8 housing assistance benefits would be terminated because of violations of "family obligations" (¶ 1). The circuit court granted summary judgment to HARC and dismissed the claims.

    The court of appeals, in an opinion written by Judge Brown, reversed. "HUD regulations provide that a housing authority may terminate section 8 assistance if the family violates any family obligations under the program. It must, however, give the family the option of an informal hearing because a termination on these grounds is based on the family's action or failure to act. The housing authority must apprise the participant family of the right to a hearing in a 'prompt written notice' that also contains, among other information, 'a brief statement of reasons for the decision'" (¶ 14) (citations omitted).

    The appellate court concluded that the written prehearing notices were woefully deficient. The "form letters that HARC issued to [the plaintiffs] clearly do not come within a country mile of the degree of specificity" required by case law (¶ 16). Also, the written decisions fell "appallingly short of the mark," because they contained no facts giving rise to the termination decisions and recited no evidence upon which the hearing officer relied (¶ 18).

    The court of appeals said that the circuit court erroneously concluded that "actual notice" of HARC's actions nonetheless sufficed under the regulations. Case law, regulations, and public policy, however, foreclose actual notice as a viable standard. "If we recognize an 'actual notice' exception, we can foresee housing authorities bending the rules and providing deficient written communications whenever they satisfy themselves that the section 8 recipient must 'already know' the basis for its termination decision. Such a self-serving conclusion, of course, improperly presupposes that the tenant has committed some violation of which he or she must already be aware" (¶ 24). And any viable "actual notice" would have to be "essentially an oral replica of the information" required in the written notices (¶ 25).

    The court of appeals remanded these cases to the circuit court to determine a remedy, which, the court said, must include an injunction commanding HARC to obey due process and regulatory requirements.

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    Civil Procedure

    "Appellate Frivolity" - Trial Court Authority - Reasonableness

    Morters v. Aiken & Scoptur S.C., 2006 WI App 46 (filed 14 Feb. 2006) (ordered published 22 March 2006)

    Morters sued a law firm for malpractice and breach of contract, contending in essence that the firm had submitted his claims to arbitration without his consent. The circuit court dismissed the malpractice claims and ruled that the claims relating to the arbitration had been litigated in other proceedings. The law firm then filed a motion seeking attorney fees and costs based on the former frivolous claims statute, Wis. Stat. section 814.025(3)(b) (2003-04). The circuit court denied the motion. Morters appealed and the law firm cross-appealed. In 2004 the court of appeals upheld the dismissal of Morters's claims and reversed the denial of the law firm's fees and costs motion, remanding the matter for a determination of reasonable attorney fees and costs for Morters's frivolous action. On remand the circuit court determined reasonable attorney fees for both the circuit court proceedings and the ensuing appeal, "reasoning that if the claim was frivolous from the moment it was filed, then costs and fees should be awarded for all matters generated from that claim until the case was complete, including any appellate matters" (¶ 6).

    The court of appeals, in a decision authored by Judge Wedemeyer, reversed in part and affirmed in part. First, the court of appeals held that the circuit court "was without authority to order [Morters] to pay costs and fees related to the 2004 appeal" (¶ 8). "There was no discussion at all in the 2004 appeal in this court that the appeal was frivolous" (¶ 11). In Howell v. Denomie, 2005 WI 81, 282 Wis. 2d 130, 698 N.W.2d 621, "our supreme court held that if an appellate court makes a finding that an appeal is frivolous, it is required to give the parties notice that it is considering the issue and must afford the parties 'an opportunity to respond to the issue before a determination is made.' In the instant case, that never occurred" (¶ 12). "Morters was not afforded the opportunity to respond at the appellate level during the 2004 appeal" (¶ 13). The "authority for finding an appeal to be frivolous rests with the appellate court, not the trial court" (Id.).

    Second, the court of appeals held that the record supported the circuit court's findings that the fees and costs incurred by the law firm at the circuit court level were reasonable. Addressing Morters's contention that the law firm's frivolous-claim motion should have been filed earlier, specifically, before the firm conducted discovery and filed its summary judgment motion, the appellate court said, "[w]e are not convinced that such action would have been successful or reasonable. A party may subjectively believe that its opponent's conduct is frivolous, but hold off on filing a motion alleging such until it has objective evidence to support such a motion" (¶ 20).

    Jury Misconduct - New Trials

    Manke v. Physicians Ins. Co. of Wis., 2006 WI App 50 (filed 9 Feb. 2006) (ordered published 22 March 2006)

    In this medical malpractice case, the parties tried the issues of negligence, causation, and damages to a jury. While the jury deliberated, the parties entered into a "high-low" agreement, which, the parties stipulated, presumed that the jury would return a "legally sufficient" verdict (see ¶ 4). The jury returned a verdict against the defendants. In post-verdict proceedings it came to light that one juror had brought into the jury room during deliberations a dictionary definition of "negligence." The trial court set aside the verdict, and the plaintiffs appealed.

    The court of appeals, in an opinion written by Judge Vergeront, affirmed. First, the court held that the defendants' preliminary showing entitled them to an evidentiary hearing. The showing of "extraneous information" consisted of a paralegal's affidavit that related statements made by three jurors that one juror had read them a dictionary definition of "negligence." "We conclude that a specific dictionary definition of a word - even a common word - is not the type of general knowledge or accumulated life experiences that we expect jurors to possess. In addition, the only reasonable inference from the jurors' statements in the affidavit is that the dictionary definition the juror read was not part of the trial record but was the result of the juror's independent consultation of a dictionary. We therefore conclude that the dictionary definition of 'negligence,' which, the three jurors stated, was brought to the jury room and read aloud by another juror, was 'extraneous information'" (¶ 30). The affidavit did not have to identify the "particular definition" of "negligence" that was read to the jury (¶ 32). (Other statements ascribed to the former jurors that described their thoughts during deliberations were, however, held to be incompetent under Wis. Stat. section 906.06.)

    Second, the court of appeals held that the showing was sufficiently substantive to warrant a new trial. The court "harmonized" case law and held as follows: "where a motion for a new trial is based on prejudicial extraneous information, the circuit court may grant an evidentiary hearing upon an affidavit that shows juror statements that are competent testimony and, if believed, are clear and convincing evidence of extraneous information that is potentially prejudicial. In these circumstances a circuit court may properly hold an evidentiary hearing both to evaluate the credibility of the initial statements, and to obtain additional competent testimony bearing on prejudice such as the specific nature of the extraneous evidence and the circumstances under which it came to the jury's attention" (¶ 41).

    Third, the court of appeals said that the trial court acted contrary to Wis. Stat. section 906.06 at the evidentiary hearing by permitting the former jurors to testify about their thought processes during deliberations. Despite the error, sufficient competent evidence "amply" supported the finding that the offending juror "brought in a photocopy of a dictionary definition of 'neglect' and read it to all the jurors and showed it to at least some jurors" (¶ 48).

    Fourth, the court of appeals said that the extraneous information was prejudicial and warranted a new trial. "The definition, introduced during the discussion of [the physician's] negligence, would probably have the effect on the hypothetical average juror of deflecting attention away from the jury instruction on negligence and away from the expert testimony on standard of care and instead focusing attention on what the juror thought was proper, probably resulting in a more expansive view of negligence. Accordingly, the circuit court's conclusion that the extraneous information had a prejudicial effect on the jury's determination of negligence was correct, although it employed an incorrect standard and considered incompetent testimony" (¶ 57).

    The court of appeals remanded for a new trial on the issue of negligence and causation. The trial court had originally ruled that damages did not have to be retried in light of the high-low agreement. The court of appeals declared that the plaintiffs could raise several issues before the trial court relating to the dismissal of a party and the applicability of the high-low agreement.

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    Criminal Procedure

    Truth-in-Sentencing - Reconfinement - No Deference Due Recommendation of Department of Corrections

    State v. Brown, 2006 WI App 44 (filed 7 Feb. 2006) (ordered published 22 March 2006)

    The defendant completed the initial confinement portion of his truth-in-sentencing bifurcated sentence and was released on extended supervision. The Department of Corrections (DOC) determined that he violated the terms of supervision and that the supervision should be revoked. The defendant waived his right to a revocation hearing, and the DOC revoked the extended supervision. The DOC recommended to the circuit court that the defendant be reconfined in prison for a term of one year, 10 months, and 30 days. At the reconfinement hearing the circuit court said that the DOC recommendation was "ludicrously low" and ordered that the defendant be reconfined for three years (¶ 4).

    Among the issues on appeal was whether the circuit court was required to give "due weight deference" to the DOC's recommendation concerning the amount of time for which the defendant should be reconfined following the revocation of his extended supervision. In a decision authored by Judge Curley, the court of appeals concluded that it could find "no support for requiring courts to give the Department's recommendations in revocation of extended supervision cases 'due weight deference.' Trial courts have been given great discretion in fashioning sentences, and requiring them to give due weight deference to the Department's recommendation would defeat this tenet"

    (¶ 12). "[W]e are satisfied that while the recommendation may be helpful and should be considered, the trial court owes no 'due weight deference' to the Department's sentencing recommendation submitted to the trial court after the revocation of an offender's extended supervision" (¶ 13).

    Cross-Examination - Confrontation

    State v. Yang, 2006 WI App 48 (filed 21 Feb. 2006) (ordered published 22 March 2006)

    A jury convicted Yang of repeatedly sexually assaulting one daughter but acquitted him of a similar charge involving another daughter. The court of appeals, in an opinion written by Judge Fine, reversed the conviction on the ground that Yang's right of cross-examination had been unduly limited. The court of appeals reviewed the constitutional issue de novo.

    At trial, Yang sought to attack the credibility of his former wife, who testified against him. The court of appeals noted that she had "fluctuating difficulty" understanding and answering questions, which were asked of her with a translator's aid (¶ 12). Case law strongly supported Yang's attempt to use circumstantial evidence to attack his former wife's credibility on the ground of bias. Moreover, defense counsel apparently had a good faith basis for questioning the former wife about her "alleged upset" over Yang's remarriage. "Yang was entitled to have the jury decide from his lawyer's questions and the nature of his former wife's responses whether she was telling the truth when she denied ever having discussed with Yang his trip to Laos or his remarriage. Thus, he was also entitled to ask about the alleged threat [against Yang]" (¶ 15).

    Sentence Credit - Time Spent in Federal Custody Serving Federal Sentence

    State v. Brown, 2006 WI App 41 (filed 14 Feb. 2006) (ordered published 22 March 2006)

    The defendant's four-year state sentence for a controlled substances conviction was stayed, and he was placed on probation. When the defendant's probation was revoked in July 1995, he was ordered to be sent to the Dodge Correctional Institution (a Wisconsin prison) to serve his sentence. However, he never arrived there, because he was turned over to federal authorities and was convicted of two federal drug dealing charges in November 1995. He was incarcerated and remained in the federal prison system until he completed his federal sentence, and he was then transferred to the custody of state authorities sometime in 2004.

    For much of the time the defendant was serving his federal sentence, he believed that he was receiving credit toward his state sentence. A Wisconsin detainer request was not filed until 2001. After the defendant was notified of the detainer, he wrote to the Wisconsin Department of Corrections (DOC) and asked for credit toward his Wisconsin sentence for the time he spent in federal custody. The DOC advised him that he would not receive any credit because the federal sentence was for "a separate offense not connected to [his] Wisconsin sentence" (see ¶ 4).

    This appeal concerns the defendant's efforts, pursued by motion under Wis. Stat. section 974.06, to obtain immediate release from custody. The circuit court denied the motion. In a decision authored by Judge Curley, the court of appeals reversed. Addressing the issue of sentencing credit, the court looked to section 973.15(5), which provides as follows: "A convicted offender who is made available to another jurisdiction under ch. 976 or in any other lawful manner shall be credited with service of his or her Wisconsin sentence or commitment under the terms of s. 973.155 for the duration of custody in the other jurisdiction."

    In this case the appellate court concluded that "there can be no argument that [the defendant] was a 'convicted offender' at the time the State made him available to the federal courts. Indeed, he had been convicted several years earlier, and when released to the federal authorities, his probation had been revoked and he was ordered to serve a four-year sentence. Little is known from the record about the procedure that led to [the defendant's] being made available to federal authorities, or why he was not returned to Wisconsin authorities to begin his earlier sentence … Therefore, § 973.15(5) dictates that [he] be given sentencing credit for the 'duration of custody in the other jurisdiction.' The statute is clear and unambiguous. Accordingly, [the defendant] is entitled to have his state sentence credited for the time he was serving the federal sentences. Because the federal sentences were longer in duration than the state sentence, [he] is entitled to be immediately released" (¶ 11).

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    Family Law

    Termination of Parental Rights - Right to Counsel at Dispositional Hearing

    State v. Shirley E., 2006 WI App 55 (filed 14 Feb. 2006) (ordered published 22 March 2006)

    Shirley E. (the appellant) was found by the circuit court to be in default for not appearing at any of the proceedings in an action to terminate her parental rights to her son, though her attorney made all court appearances. Even though the appellant was in default, the trial court was required to hold an evidentiary hearing "to determine whether there is 'clear and convincing' evidence that there are grounds to consider if termination is in the best interests of the birth-parent's child" (¶ 6). See Evelyn C.R. v. Tykila S., 2001 WI 110, 246 Wis. 2d 1, 629 N.W.2d 768. The appellant's attorney was not permitted to participate in the Evelyn C.R. hearing (apparently for reasons associated with the appellant's default as described above). The appellant's parental rights were terminated.

    On appeal the appellant argued that she was deprived of her right to an attorney during the dispositional phase of the proceedings, when the state was obligated to prove grounds supporting the termination order. In a decision authored by Judge Fine, the court of appeals agreed. In Wisconsin, as a matter of statute, a person whose parental rights are at stake must be represented by counsel, unless the person knowingly waives that right. See Wis. Stat. § 48.23(2). Thus, the appellant "was entitled to have her lawyer present and participate at the Evelyn C.R. hearing. Accordingly, we vacate the order terminating [the appellant's] parental rights to [her son], and remand for further proceedings, expressing no view whether, at this late date, [she] may seek to vacate the order of default" (¶ 8).

    Child Support - Overtime Compensation - Exercise of Judicial Discretion

    Jarman v. Welter, 2006 WI App 54 (filed 14 Feb. 2006) (ordered published 22 March 2006)

    Wisconsin law requires that child support obligations be expressed as a fixed sum unless the parties stipulate otherwise. See Wis. Stat.

    § 767.25(1)(a). In general, the amount of the obligation is based on a percentage of gross income and assets (the percentage standard). See Wis. Stat. § 767.25(1j). Gross income includes, among other things, all salary and wages. Wis. Admin. Code § DWD 40.02(13)(a)1 (Dec. 2003).

    In this case the child support order indicates that the family court commissioner relied on the court's "general policy" when it excluded overtime income when calculating the father's gross income and subsequent child support obligation. The circuit court upheld the court commissioner's decision, finding "The Court Commissioner's ... policy of not including overtime is correct" (¶ 3).

    In a decision authored by Chief Judge Cane, the court of appeals reversed. "[T]he circuit court erred when it upheld the court commissioner's decision to exclude overtime pay as a general policy without exception when applying the percentage standard. Overtime income clearly constitutes a portion of salary and wages, and Wisconsin law does not exclude overtime income in the application of the percentage standard. See Wis. Admin. Code § DWD 40.03(1) (Dec. 2003). Further, the court and the court commissioner could have deviated from the percentage standard if they considered the [statutory factors catalogued in Wis. Stat. § 767.25(1)(a)] and articulated their reasoning regarding why its normal application would be unfair to the child or the parties" (¶ 6).

    The court recognized that there may be circumstances when overtime income may be excluded from a parent's gross pay if inclusion of the income would be unfair to the parties or if other factors supported exclusion. "However, here the circuit court and the court commissioner simply applied a general policy against including overtime income in the application of the percentage standard. It is erroneous for a court commissioner or a court to set forth a general policy regarding the calculation of a child support obligation when the law calls for an exercise of discretion" (¶ 7).

    The court of appeals also "remind[ed] the trial court and the court commissioner that when Wisconsin law calls for the exercise of discretion, there can be no general policy without exceptions" (¶ 1).

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    Worker's Compensation - Premiums - Independent Contractors

    Acuity Mut. Ins. Co. v. Olivas, 2006 WI App 45 (filed 1 Feb. 2006) (ordered published 22 March 2006)

    Olivas (the defendant) is a drywaller who works as a subcontractor. Acuity Mutual Insurance Co. increased the defendant's worker's compensation insurance premiums after it concluded that various workers who accompanied the defendant to his jobs "were actually his employees" (¶ 1). Acuity's concern was that this arrangement exposed it to liability (see ¶ 3). When the defendant failed to pay the higher premiums, Acuity filed suit for the unpaid premiums plus interest. Following a bench trial, the judge ruled that the defendant's workers were independent contractors and dismissed the complaint.

    The court of appeals, in an opinion authored by Judge Brown, affirmed. Acuity's prime contention on appeal was that the trial court misapplied Wis. Stat. section 102.07(8), which ostensibly placed the burden on the defendant to show the workers' independent contractor status. The court rejected the argument. "We see this case as a garden-variety breach-of-contract claim. In a breach-of-contract action, the plaintiff bears the burden of proving that the defendant violated the terms of the contract. Thus, the burden is not on Olivas to prove that his fellow workers were independent contractors. Instead, Acuity must prove that they were employees" (¶ 14).

    "[T]he trial testimony supports the existence of an independent contractor relationship between Olivas and the other workers based on the dominant 'control' test. The unimpeached testimony of the defense witnesses established that Olivas does not control the time or method of the other workers' performance and has no right to discharge them. The auditor's opinion that he must have been overseeing the other workers was based predominantly on speculation. Her observations that Olivas obtained the jobs and received the money and that the workers all worked together at the same jobs were no more probative of an employer-employee relationship than an independent contractor relationship. The fact that the others lacked their own insurance policies, though indicative, was not conclusive" (¶ 17).

    Bad Faith - Worker's Compensation - Exclusive Remedy

    Aslakson v. Gallagher Bassett Servs. Inc., 2006 WI App 35 (filed 2 Feb. 2006) (ordered published 22 March 2006)

    The plaintiff, a carpenter, was badly injured in a fall at a work site. He sued the Wisconsin Worker's Compensation Uninsured Employers Fund (the fund), which provides worker's compensation coverage when, as here, the employer carries no such coverage. Initially, the fund denied the claim, but it was eventually ordered to make compensation payments. The plaintiff then sued the fund and its administrator for bad faith. The circuit court refused to dismiss the claim against the fund administrator despite the administrator's contention that the Worker's Compensation Act provides an exclusive remedy.

    In an opinion authored by Judge Dykman, the court of appeals reversed. "The Fund is a 'non-lapsible trust fund' created in 1989 by the legislature to pay benefits on valid worker's compensation claims of employees of uninsured employers. See Wis. Stat. § 102.80(1). The Fund is subject to the provisions of the Worker's Compensation Act, including Wis. Stat. §102.03(2), which states that the act provides the exclusive remedy for all claims recognized by the act. Furthermore, when the legislature enacts a comprehensive statutory remedy such as the Worker's Compensation Act, that remedy is presumed to be exclusive absent evidence of legislative intent to the contrary" (¶ 8).

    In response to prior case law, "the 1979-80 Wisconsin Legislature adopted Wis. Stat. § 102.18(1)(bp), which provides that the department may assess a penalty for bad faith in the handling of a worker's compensation claim and states that this penalty 'is the exclusive remedy against an employer or insurance carrier for malice or bad faith'" (¶ 10). The plaintiff argued that the statute applies only if the uninsured employer is liable for the misconduct and, in general, applies only to "employers" and "insurance carriers," not the fund or its agents (see ¶ 12). The court of appeals disagreed and said that the fund administrator's argument gave reasonable effect to all parts of the statutes and also comported with provisions of the administrative code (see ¶ 13).

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    Motor Vehicle Law

    OWI - Repeat Offenders - Collateral Attack on Prior Implied Consent Revocation Used to Enhance Penalty for Current Offense

    State v. Krause, 2006 WI App 43 (filed 1 Feb. 2006) (ordered published 22 March 2006)

    The defendant appealed from a judgment of conviction for operating a motor vehicle while intoxicated (OWI), fifth offense, and from an order denying his request for postconviction relief. He argued that the circuit court erred when it denied him the opportunity to collaterally attack a prior offense used to enhance his sentence. He contended that the prior offense, which was a refusal revocation under the implied consent law, should not be available for penalty enhancement purposes because he was not afforded his constitutional right to counsel during the refusal proceeding, and that the current OWI conviction therefore should have been treated as a fourth offense rather than a fifth.

    In a decision authored by Judge Snyder, the court of appeals affirmed. "In an enhanced-penalty situation, a collateral attack on a prior conviction used for enhancement must be founded on a claim of actual or constructive denial of the constitutional right to counsel" (¶ 12). However, the defendant had no right to counsel at the refusal hearing "because such a hearing is civil, not criminal, in nature" (¶ 11). Because the defendant did not have a constitutional right to counsel, his collateral attack on the prior conviction could not be based on denial of such right.

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    Municipal Law

    Construction Projects - "Lowest Possible Bidder" - Remedies for Disappointed Bidders

    D.M.K. Inc. v. Town of Pittsfield, 2006 WI App 40 (filed 28 Feb. 2006) (ordered published 22 March 2006)

    D.M.K. Inc. (the plaintiff) placed bids to perform municipal road construction projects for the town of Pittsfield. The plaintiff was the lowest bidder for each project, but another bidder was awarded the contracts. The plaintiff filed a notice of claim against the town for lost profits. The town disallowed the claim. The plaintiff then filed suit against the town.

    The statute under which the town awarded the disputed contracts provides that "[t]he town board shall let a public contract for which advertising is required under sub. (2)(b) to the lowest responsible bidder." Wis. Stat. § 60.47(3). A "responsible bidder" is "a person who, in the judgment of the town board, is financially responsible and has the capacity and competence to faithfully and responsibly comply with the terms of the public contract." Wis. Stat. § 60.47(1)(b). The court of appeals noted that "[d]etermination of the lowest responsible bidder implies the exercise of discretion" (¶ 13). The breadth of that discretion was at issue in this case.

    In an opinion authored by Chief Judge Cane, the court said "[o]n its face, the statute only imparts the Town with one discretionary determination when determining who should be awarded a contract - whether a given bidder is responsible" (¶ 17). The court rejected the argument that the statute implies a broad range of discretion beyond determining whether a bidder is responsible. "Interpreting bidding statutes to imply the opennended discretion suggested by the [amicus curiae Wisconsin Towns] Association would facilitate the precise problems that competitive bidding statutes are designed to prevent" (¶ 18).

    The court did, however, uphold the town's ultimate finding that the plaintiff was not a responsible bidder. "This finding is supported by numerous legitimate concerns about [the plaintiff's] performance of prior contracts. Therefore, we cannot conclude that the finding was without a rational basis, nor can we conclude that it was the result of an unconsidered, willful, or irrational choice of conduct. As such, the finding was not arbitrary or unreasonable" (¶ 19).

    The court also addressed the matter of the plaintiff's remedies. The plaintiff sought money damages for lost profits. The circuit court concluded that the plaintiff could not bring suit for lost profits. The court of appeals held that the plaintiff "should have sought to enjoin the Town from awarding, or the successful bidder from performing, the disputed contracts. If successful, [the plaintiff] could force the Town to award it the contracts, or alternatively, to relet them. [The plaintiff] could also recover its costs of preparing the first bid and obtaining the required bond. However, because [the plaintiff] would have an opportunity to recoup its otherwise lost profits by either being awarded the contracts or by rebidding on them, it would not be entitled to lost profits as damages. [The plaintiff's] interest in obtaining the benefit of the contracts would be protected, while the public would be protected insofar as it would only have to compensate one bidder for a given contract - the bidder that actually performed the contract" (¶ 27) (citations omitted).

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    Escrow Agents - Fiduciary

    Black v. Metro-Title Inc., 2006 WI App 52 (filed 15 Feb. 2006) (ordered published 22 March 2006)

    The plaintiff and her former husband jointly owned a house. Under the terms of a marital settlement agreement, the plaintiff agreed to sell her interest in the house. The former husband refinanced the house, "presumably to obtain liquidity in the equity" (¶ 1). An escrow agent, Metro, conducted the closing and paid the former husband the full amount of the equity. He then "squandered" the money without paying the plaintiff her rightful share (id.). The plaintiff sued Metro on the ground of negligence. The circuit court granted summary judgment in Metro's favor.

    The court of appeals, in an opinion written by Judge Brown, affirmed. The court said that Metro successfully argued that as escrow agent it had no duty toward incidental beneficiaries, such as the plaintiff. Reviewing the case law, the court held that "in general, the plaintiff must be a party to the contract. The law does recognize exceptions to this general rule. For example, an escrow agent may be held accountable where a third party is the victim of fraud on the part of the escrow agent. An escrow agent may also be held responsible if he or she engages in self-dealing or shows a conflict of interest. The problem here for [the plaintiff] is that she has in no way shown that she is a party to the contract or that any exception applies to her. Absent those facts, we must fall back on the general rule that an escrow holder's obligations are limited to compliance with the parties' instructions" (¶ 9). Metro's affidavit was undisputed on these points. Although the plaintiff was present for part of the closing, "being present at the transaction in contemplation of a payout does not make her a party to the agency agreement, and that is the key ingredient missing from her summary judgment papers" (¶ 13). The court suspected that the plaintiff was "snookered" but the lack of discovery and her failure to appeal other claims sounding in fraud precluded further review (see ¶ 15).

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    Economic Loss Doctrine - No Contract - Experts

    Walker v. Ranger Ins. Co., 2006 WI App 47 (filed 14 Feb. 2006) (ordered published 22 March 2006)

    The plaintiffs' mobile home was severely damaged when its water pipes froze and burst. The plaintiffs filed suit against their propane gas provider and its insurer, alleging that the provider had negligently turned off the propane gas supply after the plaintiffs' tenant, without their knowledge, failed to pay the bills. The circuit court granted summary judgment in favor of the defendants on the ground that the economic loss doctrine precluded this negligence action.

    The court of appeals, in an opinion authored by Chief Judge Cane, reversed. First, the court held that the economic loss doctrine did not apply because the case did not involve real estate and the damages were not caused by a defective product (see ¶ 9). Moreover, the plaintiffs had no contract with the defendants, so it was not possible for them to pursue contract damages instead of tort damages (see ¶ 10). Second, the court held that the record raised sufficient facts to present a jury question on negligence. The provider conceded that it had the plaintiffs' telephone number, and the plaintiffs claimed that the company's own protocols required that it obtain contact information for landlords from tenants.

    Third, the court held that the defendants' expert witness should not be permitted to testify about "industry standards" in this case. "The issue in this case is whether Master Gas acted negligently when it disconnected the propane system to their mobile home without notifying the property owners. Analysis of this issue does not require that the trier of fact have an understanding of the inner workings of the propane industry" (¶ 14).

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