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    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.

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    Wisconsin LawyerWisconsin Lawyer
    Vol. 80, No. 2, February 2007

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    Civil Procedure

    LLCs - Operating Agreement - Dissolution

    Decker v. Decker, 2006 WI App 247 (filed 28 Nov. 2006) (ordered published 19 Dec. 2006)

    In 1995, brothers David and Frederick Decker entered into an operating agreement that formed a limited liability company (LLC) for purposes of making real estate investments. By 2001 the brothers' disagreements led to talk of a buy out, and the discord culminated in a perceived deadlock in spring 2002. David refused to rescind a deadlock letter, and Frederick then offered to buy David's interest in the LLC for $7 million, two to three times more than the interest's appraised value. Frederick, however, never moved to close the offer and as a result, dissolution of the business was the only solution that remained under the operating agreement. The circuit court appointed a receiver and later ordered Frederick to sell his interest to David. The court also denied David's motion to enforce Frederick's 2002 offer.

    The court of appeals, in an opinion written by Judge Curley, affirmed. The court first addressed David's cross-appeal regarding the $7 million offer, which it deemed a voluntary yet unenforceable offer under terms of the operating agreement itself. "As the agreement explains, neither party was obligated to either buy or sell, and it was anticipated that an accepted offer may not be consummated. Thus, the agreement did not require the offeree to actually close on the properties, and the agreement contains no penalty provisions if an offer is made and the purchase is not closed" (¶ 8).

    The court of appeals next held that the circuit court had the authority to order the sale of Frederick's interest. "After reviewing the record, we conclude that in effect, what Frederick did, as the trial court suggested, was to sabotage the operating agreement's provisions for a buy†out by making an outrageous offer of $7,000,000 for David's interest when it was worth only approximately $2,500,000, and then making no effort to close on the offer. By doing so, he foreclosed the possibility that one of the two would buy out the other according to the terms of the operating agreement. This is so because while David was anxious to be the seller at $7,000,000, he was not inclined to be the buyer at that figure. This left dissolution as the only remedy available under the operating agreement" (¶ 13).

    The court also addressed provisions in the operating agreement relating to dissolution, which in turn created some "negative tax consequences" for David that were nonetheless compelled by the agreement's terms. Finally, the court held that dissolution was proper under the terms of Wis. Stat. section 183.0902, which states that "a court may order the dissolution of an LLC when: '(4) … one or more of the members in control of the [LLC] are acting or will act in a manner that is illegal, oppressive or fraudulent'" (¶ 17).

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    Personal Jurisdiction - Evidence

    Kavanaugh Restaurant Supply Inc. v. M.C.M. Stainless Fabricating Inc., 2006 WI 236 (filed 26 Oct. 2006) (ordered published 21 Nov. 2006)

    The plaintiff contractor sued a Michigan-based subcontractor for breach of contract for the subcontractor's failure to provide custom fabricated kitchen equipment. The defendant moved to dismiss based on lack of personal jurisdiction. The circuit court held a non-evidentiary hearing and ultimately dismissed the defendant without conducting an evidentiary hearing concerning the defendant's contacts with Wisconsin.

    The court of appeals, in an opinion written by Judge Lundsten, reversed because of the circuit court's failure to conduct an evidentiary hearing. "Although it may seem counter-intuitive, a plaintiff is normally entitled to an evidentiary hearing when a defendant challenges personal jurisdiction even if the plaintiff does not demonstrate that an evidentiary hearing is necessary. Wisconsin Stat. § 802.06(4) provides that 'the defense of lack of jurisdiction over the person … shall be conducted in accordance with s. 801.08.' In turn, Wis. Stat. § 801.08(1) provides that '[a]ll issues of fact … raised by an objection to the court's jurisdiction over the person … shall be heard by the court without a jury in advance of any issue going to the merits of the case'" (¶ 8).

    Case law establishes that "plaintiffs have a burden at the evidentiary hearing itself, but not before" (¶ 9). "In the absence of an evidentiary hearing, or agreement by plaintiff that the court could decide personal jurisdiction on a particular set of facts, the circuit court had no power to accept as true the facts asserted by the parties in either the complaint or defendant's affidavits. For example, the circuit court erred when it concluded that it was undisputed that defendant 'did not reach outside of its home state into the state of Wisconsin during the course of its contact with Plaintiff. Rather, the contacts were all initiated by the Plaintiff in soliciting the services of Defendant.' Such a finding is only possible if the court relied on one or more of the affidavits submitted by defendant, or on reasonable inferences from those affidavits, or from the parties' oral representations at the non-evidentiary hearing the circuit court did hold. Plaintiff never conceded that defendant's contacts were so limited" (¶ 11). The court of appeals encouraged lawyers to inform the circuit court when jurisdictional facts are undisputed so that unnecessary evidentiary hearings can be avoided (see ¶ 12).

    The court also held that the plaintiff did not waive its right to an evidentiary hearing but rejected the plaintiff's contention that the record as it presently stood supported a finding of personal jurisdiction.

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    Summary Judgment - Local Rules in Conflict with Wis. Stat. section 802.08(2) Regarding Deadline for Filing Opposing Affidavits

    David Christensen Trucking & Excavating Inc. v. Mehdian, 2006 WI App 254 (filed 21 Nov. 2006) (ordered published 19 Dec. 2006)

    The plaintiff rented a commercial garage to the defendant and ultimately brought an action against the defendant to recover unpaid rent and other damages. In that litigation the plaintiff filed a "Notice of Motion and Motion for Summary Judgment" together with a supporting affidavit and brief. The notice of motion indicated that the hearing date was April 4, 2005. The defendant did not file a response brief until March 29, four business days before the motion hearing. The brief was not accompanied by an affidavit or other proof. The defendant did not file any evidence opposing summary judgment until the day of the hearing, at which time he filed an affidavit and a "corrected" version of his response brief.

    Relying exclusively on Marathon County Local Rule 4.20(1)(b), which requires parties opposing a summary judgment motion to file their brief and opposing affidavits 20 days before the hearing date, the circuit court refused to consider the defendant's brief and affidavit, and it ultimately granted the plaintiff's summary judgment motion.

    In a decision authored by Chief Judge Cane, the court of appeals held "that Marathon County local rule 4.20(1)(b) is precluded as being in conflict with the uniform rule contained in Wis. Stat. § 802.08(2) [which requires an adverse party to 'serve opposing affidavits, if any, at least 5 days before the time fixed for the hearing']. We thus hold the circuit court improperly applied the law when it relied exclusively upon the local rule to refuse to consider [the defendant's] submissions" (¶ 13). "Nevertheless, [the defendant's] submissions were untimely even under § 802.08(2) and he did not seek to enlarge time under Wis. Stat. § 801.15(2)(a) or any other rule" (¶ 1).

    In a footnote the court said that it "sympathize[d] with the circuit courts' attempts to alleviate last-minute filings, which force the court and opposing counsel to scramble to ready themselves for the hearing. In this regard, we emphasize that the Judicial Council Note from the 1992 amendment to Wis. Stat. § 802.08(2), specifically states that the circuit courts 'may require earlier filing by scheduling orders.' This is reflected in § 802.08(2), which provides: 'Unless earlier times are specified in the scheduling order ….' Here, the record does not indicate that the circuit court required earlier filings by scheduling order. Instead, the court relied entirely on its local rule when refusing to accept [the defendant's] brief and affidavit in opposition to summary judgment. Similarly, we reject [the plaintiff's] contention that local rule 4.20(1)(b) by its own language created a scheduling order"(¶ 16 n.7).

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    Consumer Law

    Wisconsin Consumer Act - Notice of Right to Cure Default

    Indianhead Motors v. Brooks, 2006 WI App 266 (filed 21 Nov. 2006) (ordered published 19 Dec. 2006)

    On Aug. 10, 2005, Brooks purchased a truck from Indianhead Motors. She financed the purchase in part with a loan from Indianhead. The first two payments on the loan were due Sept. 10 and Oct. 10, 2005. Brooks did not make either payment, apparently because she believed the truck was defective.

    On Oct. 13, 2005, Indianhead sent Brooks a notice of her right to cure the default under the Wisconsin Consumer Act. On Dec. 13, Indianhead filed a complaint for replevin. Brooks responded with a motion to dismiss. She argued, among other things, that Indianhead's notice was invalid because it was given prematurely. The circuit court denied Brooks' motion and ultimately granted Indianhead a replevin judgment. In a decision authored by Judge Peterson, the court of appeals agreed with Brooks and reversed the circuit court. The court of appeals concluded that the notice was not valid because it was not filed during the time period mandated by statute.

    Wis. Stat. section 425.105(1) provides that, with exceptions not relevant here, a merchant may commence an action on a consumer credit transaction "only upon the expiration of 15 days after a notice is given pursuant to s. 425.104." Section 425.104 states that "[a] merchant who believes that a customer is in default may give the customer written notice of the alleged default and, if applicable, of the customer's right to cure any such default." A default is defined in relevant part as follows: "If the interval between scheduled payments is 2 months or less, to have outstanding an amount exceeding one full payment which has remained unpaid for more than 10 days after the scheduled or deferred due dates …." Wis. Stat. § 425.103(2)(a).

    The appellate court concluded that "[i]n cases where payments are scheduled less than two months apart, a consumer is in default when an amount greater than one full payment remains unpaid for over ten days. Here, Brooks' payments were scheduled monthly. She missed her first payment on September 10. At that point, her unpaid balance was exactly one full payment. When she missed her second payment on October 10, her unpaid balance became greater than one full payment. She first became in default when that larger balance remained unpaid for more than a ten-day period. Because the ten-day period began October 10, the October 13 notice was given at a time when Brooks was not yet in default" (¶ 10). "The statute requires a notice that fully complies with Wis. Stat. § 425.104. Because Indianhead's notice did not meet the timing requirements of §§ 425.104(1) and 425.103(2)(a), Indianhead never gave notice 'pursuant to s. 425.104,' and it was barred from filing suit by Wis. Stat. § 425.105(1)" (¶ 14).

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    Criminal Procedure

    Truth-in-Sentencing - Ineligibility for Earned Release Program of Persons Convicted of Crimes under Chapter 940 Does Not Violate Equal Protection or Substantive Due Process

    State v. Lynch, 2006 WI App 231 (filed 5 Oct. 2006) (ordered published 21 Nov. 2006)

    The defendant was convicted of homicide by intoxicated use of a vehicle and two counts of fleeing from an officer resulting in bodily harm. At sentencing, the circuit court determined that the defendant was ineligible to participate in the earned release program because he had been convicted of a crime contained in Wis. Stat. chapter 940 ("Crimes Against Life and Bodily Security"). Under the earned release program, eligible inmates obtain early release from the confinement portion of their bifurcated sentences if the Department of Corrections (DOC) determines that they have successfully completed a substance abuse program operated by the DOC. See Wis. Stat. § 302.05(1), (3)(b)-(c).

    "An 'eligible inmate' is defined as an inmate who is incarcerated for violations other than certain specified ones and who the sentencing court determines, in the exercise of its discretion, is eligible to participate in the program. Wis. Stat. §§ 302.05(3)(a),(e) and 973.01(3g). 'Crimes under ch. 940' are included in the list of excluded crimes, meaning that an inmate convicted of a crime under that chapter may not participate in the program. Sections 302.05(3)(a)1 and 973.01(3g)" (¶ 4). In this case one of the defendant's convictions (the homicide) is a violation codified in chapter 940.

    On appeal the defendant argued, among other things, that the statutes that make him ineligible for the earned release program violate his right to equal protection and substantive due process under the federal and state constitutions. In a decision authored by Judge Vergeront, the court of appeals concluded that the statutes making persons convicted of crimes under chapter 940 ineligible for the earned release program do not violate equal protection.

    Said the court, "there is a rational basis for not allowing persons convicted of crimes under Wis. Stat. ch. 940 to participate in the earned release program. While one purpose of the earned release program is undoubtedly to encourage inmates to participate in treatment for substance abuse, it is also significant that the result of successful participation is a reduction in the time a convicted person must serve in confinement. In effect, participation in the program is an opportunity to have a lesser punishment than that originally imposed. Excluding persons who have committed more serious crimes from this opportunity for reduced confinement is rationally related to the legitimate purpose of punishing more serious crimes more severely. A classification that treats persons differently, for purposes of participation in this program, based on whether their conduct has caused death or great bodily harm, is rationally related to the legitimate purpose of punishing more severely those persons who commit more serious crimes. It is rational to treat conduct that causes death or great bodily harm differently from conduct that does not have that result and to punish the former more severely"(¶ 18).

    The appellate court also rejected the defendant's substantive due process attack on the statutes in question, "for the same reasons we have concluded the statutes do not violate his right to equal protection" (¶ 21).

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    Commitment for Failing to Pay Fees of Court-appointed Counsel - Ability of Defendant to Pay Fee

    State v. Helsper, 2006 WI App 243 (filed 17 Oct. 2006) (ordered published 21 Nov. 2006)

    The defendant was charged with several crimes. He petitioned the court for an appointed attorney, alleging that he could not afford to retain an attorney and that the State Public Defender refused to appoint counsel for him. The court then appointed a private attorney to represent the defendant. The attorney was to be paid by the county and the defendant would be liable to the county for amounts expended on his behalf. "A defendant can be indigent but still have enough resources to be statutorily ineligible for a public defender. In that case, the court appoints an attorney to represent the defendant at county expense. See State v. Dean, 163 Wis. 2d 503, 471 N.W.2d 310 (Ct. App. 1991). That is what happened here" (¶ 2 n.2).

    The defendant pleaded guilty to a reduced number of charges and was required by one of the judgments of conviction to pay $919.75 in attorney fees. The judgment specified that payment was due within 60 days and that failure to pay would result in commitment to jail. No hearing was held to determine whether the defendant was able to pay the attorney fees.

    When the attorney fees were not paid in full within the time allowed, the circuit court issued a commitment order authorizing the defendant's commitment to the county jail for 33 days. The defendant challenged the order, and the circuit court concluded that the order was valid but stayed its enforcement pending appeal. In a decision authored by Judge Peterson, the court of appeals reversed.

    The appellate court held that "Wis. Stat. § 973.07 does not allow commitment absent a finding that the defendant was able to pay an attorney fee obligation" (¶ 1). Section 973.07 provides that "[i]f the fine, plus costs, fees, and surcharges imposed under ch. 814, are not paid … the defendant may be committed to the county jail until the fine, costs, fees, and surcharges are paid or discharged … for a period fixed by the court not to exceed 6 months." "Costs, fees and surcharges" include attorney fees paid to the defendant's attorney by the county or the state. See Wis. Stat. § 973.06(1)(e).

    Said the court, "[w]e hold that, at least where no prior determination of ability to pay exists, the court must consider whether the defendant had the ability to pay the attorney fee obligation when it exercises its discretion under Wis. Stat. § 973.07. The court's consideration of this issue must be based on a finding of ability to pay made at a hearing where the defendant is given notice and an opportunity to be heard. Here, no such finding was made at sentencing, at the time [the] fees were set, or at the time the commitment order was issued" (¶ 16).

    In a footnote the court observed that "[o]ur holding is based on the constitutional requirements for attorney fee recoupment statutes under Fuller v. Oregon, 417 U.S. 40 (1974), and only the portion of the court's order authorizing commitment for [the defendant's] attorney fee obligation is before us. We offer no opinion on the proper considerations for the court in a Wis. Stat. § 973.07 commitment action based on obligations other than unpaid attorney fees" (¶ 16 n.4).

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    Confrontation - Screening Barriers

    State v. Vogelsberg, 2006 WI App 228 (filed 26 Oct. 2006) (ordered published 21 Nov. 2006)

    The defendant was convicted of the first-degree sexual assault of his 4-year-old grandson. The trial court granted the state's motion requesting that the child be permitted to testify from behind a screen in order to shield him from visual contact with the defendant (see ¶ 2).

    In a decision authored by Judge Dykman, the court of appeals affirmed the conviction. The defendant's primary contention was that the decision in Crawford v. Washington, 541 U.S. 36 (2004), in addition to overturning 20 years of case law concerning hearsay evidence, also changed the doctrine governing in-court barriers between defendants and their accusers. The court of appeals disagreed.

    The court said that Crawford and the screening cases "address distinct confrontation questions" (¶ 15). The issue in the screening cases is "not the reliability of testimony …. Rather, the issue is whether the demands of the Confrontation Clause are met when, for public policy reasons and following a case-specific determination of necessity, a barrier is placed between the witness and the accused" (id.). In sum, the federal and state case law on screening still controls.

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    Inventory of Ward's Estate - Inclusion of Ward's Unliquidated Personal Injury Claim

    Angela S. v. Jefferson County, 2006 WI App 260 (filed 5 Oct. 2006) (ordered published 19 Dec. 2006)

    In 1999, Angela S. was appointed guardian of her husband, Brad S., and of his estate. At the time of the appointment, Brad possessed a cause of action in tort. However, when Angela filed a guardianship inventory in 2000, she failed to list that cause of action as property of the estate.

    In her 2004 annual account for Brad's estate, Angela listed $3,205,817 in personal injury settlement funds as "assets and income received." Jefferson County asserted that an additional filing fee was due for assets reported on the 2004 annual report that were not listed in the guardianship inventory. Angela refused to pay the fee, challenging the right of the register in probate to impose a filing fee on the personal injury damages received after she filed the guardianship inventory.

    The circuit court held that the cause of action was Brad's property when the guardianship inventory was filed, and that, when its value became known, a supplemental inventory under Wis. Stat. section 858.17 had to be filed to reflect its value. In a decision authored by Judge Dykman, the court of appeals affirmed.

    Wis. Stat. section 814.66(1) provides as follows: "The register in probate shall collect the following fees: …. (b)2. For filing a petition for guardianship of the estate under ch. 880 or an application for conservatorship under ch. 880, if the value of the property, less encumbrances, liens or charges, is $10,000 or less, a fee of $20 and, if more than $10,000, a fee of 0.2% of the value of the property, less encumbrances, liens or charges."

    The appellate court held that Brad's unliquidated tort claim was property of his estate when the inventory was filed and that it should have been listed in his guardianship inventory (see ¶ 11). "[T]he legislature intended the probate filing fee under Wis. Stat. § 814.66(1)(b)2. to be based on the total value of the estate at the time of inventory, including the value of pending personal injury actions. Thus, liquidation of those claims requires a supplemental inventory under Wis. Stat. § 858.17" (¶ 15).

    The court agreed with Jefferson County that "the fact that Brad S.'s personal injury claim existed when the inventory was filed is pivotal. If Brad S. had acquired the right to sue for personal injuries after the guardianship inventory was filed, the claim may not have been an asset of the estate at the time the estate was inventoried. In that case, the claim may be properly excluded from the inventory and the proceeds of the claim likely would not be considered in calculating the filing fee. Here, however, it is uncontested that the cause of action existed at the time the inventory was filed. The fact that the exact value of the claim was unknown does not exclude it from the value of the estate. While the value of an unliquidated claim is unknown, the subsequent liquidation of the claim determines its value. Thus, Angela S. was required to list the claim on the inventory with an unknown value, and later supplement that inventory when the claim was liquidated, pursuant to Wis. Stat. § 858.17" (¶ 14).

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    UM - Exclusion - Off-road Vehicle

    Schleusner v. IMT Ins. Co., 2006 WI App 240 (filed 17 Oct. 2006) (ordered published 21 Nov. 2006)

    The plaintiff was injured while acting as a flagman at a county fair demolition derby. He was struck and injured by a car as he assisted a driver in a disabled vehicle. The plaintiff carried uninsured motorist (UM) coverage issued by IMT. The car that struck him was modified and uninsured, and its modifications meant that it could not be operated on public roadways. In a declaratory judgment action the circuit court held that the plaintiff's UM coverage applied despite a policy exclusion for injuries caused by "vehicles or equipment designed mainly for use off public roads." The circuit court stated that the car had been originally designed for public roads and the later modifications did not change "the Newport's intended purpose" (¶ 4).

    The court of appeals, in an opinion authored by Judge Peterson, reversed. "IMT argues the only reasonable definition of 'design' is something more akin to 'a particular purpose held in view by an individual or group: a planned intention.' In other words, 'design' refers to the design of the vehicle - its intended purpose or intended use - at the time of the accident. IMT argues its definition is not an attempt to add language to the exclusion; rather, it is an attempt to define the existing policy language"

    (¶ 11). The court agreed that IMT's approach was "the only one a reasonable insured could adopt here, for three reasons. IMT's definition is the only one: (1) consistent with the language in the remainder of the UM policy; (2) consistent with the purpose of its UM policy and the purpose of the exclusion here; and (3) that produces consistent, predictable results that square with a reasonable insured's expectations of coverage" (¶ 12).

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    UIM - Reducing Clause - Ambiguity

    Gresens v. State Farm Mut. Auto. Ins. Co., 2006 WI App 233 (filed 10 Oct. 2006) (ordered published 21 Nov. 2006)

    The plaintiff, Shayna Gresens, was injured while riding in a car driven by her husband. The other driver carried $50,000 of liability insurance with American Standard. Gresens was covered by a State Farm policy with liability and underinsured motorist (UIM) limits of $250,000 and $100,000 respectively. The other driver's insurer paid the limits in exchange for a Pierringer release. A jury found the plaintiff's husband 40 percent causally negligent and the other driver 60 percent. Total damages were set at $260,000.

    "State Farm paid Gresens the $105,240 due as [her husband's] liability insurer. However, it argued no money was due under her UIM policy because both the $50,000 paid by American Standard and the $105,240 paid on behalf of [her husband] were to be deducted from her $100,000 UIM limit. Gresens argued $50,000 was still available under the UIM policy because only the American Standard payment was to be deducted from her UIM limit" (¶ 4). The circuit court found that the policy was contextually ambiguous and ruled in Gresens' favor.

    In an opinion authored by Judge Peterson, the court of appeals affirmed. "While State Farm's reducing clause, read alone, may well unambiguously lower Gresens' policy limits based on payments made on behalf of [her husband], language elsewhere in the policy supports Gresens' interpretation. We therefore conclude that the policy is contextually ambiguous and construe the ambiguity against State Farm"

    (¶ 9). "The test for contextual ambiguity is whether an inconsistency is material to the dispute and 'engender[s] an objectively reasonable alternative meaning and, thereby, disrupt[s] an insurer's otherwise clear policy language'" (¶ 11). The court said, "[m]ost importantly, [the policy's] definition of coverage conflicts with its reducing clause" (¶ 12). The court held that the policy suffered from three fatal maladies: 1) it defined coverage in a way that "granted coverage in some instances where no payment would actually be made because of the reducing clause" (¶¶ 11, 13); 2) it contained a "reducing clause with an effect made clear only in the reducing clause itself" (¶¶11, 16); and 3) the declarations page contained no indication that policy limits were subject to conditions and exceptions set forth later in the policy (see ¶¶11, 17).

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    "Insured Car" - Automatic Insurance Clause

    American Family Mut. Ins. Co. v. Bateman, 2006 WI App 251 (filed 22 Nov. 2006) (ordered published 19 Dec. 2006)

    Bateman purchased an Oldsmobile for her minor daughter, Chelsea, in February 2003. On April 18, 2003, Bateman added Chelsea as an occasional driver to a policy covering Bateman's Mercury Villager but did not mention to the insurance agent the Oldsmobile, which apparently needed repairs that were not completed until May 9. On May 10, Chelsea drove the Oldsmobile without Bateman's permission and struck another car. Five days later, Bateman called American Family and was issued a policy covering the Oldsmobile that was retroactive to May 9, 2003; it was undisputed that she said nothing at the time about the May 10 accident. The circuit court found that neither the policy covering the Mercury nor that covering the Oldsmobile provided coverage for the May 10 accident.

    In a decision authored by Judge Vergeront, the court of appeals affirmed. "We conclude that, based on the undisputed facts, the car the named insured's daughter was driving did not meet the definition of 'your insured car' in one of the policies and the known loss doctrine precludes coverage under the other policy" (¶ 1).

    The policy on the Mercury excluded coverage for liability arising out of the use of any vehicle other than "your insured car" as defined under the policy's automatic insurance clause. "According to the definition of 'your insured car,' the Oldsmobile would be an insured car if Bateman 'acquired ownership [of it] during the policy period' and told American Family 'within 30 days of its acquisition' that she wanted American Family to insure it. If these conditions were met, then there would be coverage if an accident occurred during that thirty-day time period, even if the accident occurred before the notification . . . and even if the notification occurred after the thirty days" (¶ 15). "Because Bateman purchased and drove the Oldsmobile home on February 26, 2003, she acquired an operational vehicle on that date. Neither her intent to have it repaired, nor its inoperability while being repaired, alters the fact that she had already acquired the Oldsmobile" (¶ 22). A related argument that the sponsorship statute, Wis. Stat. section 343.15, created coverage under the Mercury policy was precluded by case law.

    As for the May 15 policy, which covered the Oldsmobile retroactive to May 9, the known loss doctrine precluded coverage for the May 10 accident. "The undisputed facts are: the accident had already occurred when Bateman contacted the American Family agent on May 15, 2003, to obtain coverage on the Oldsmobile; Bateman knew of the accident at that time; she knew that the driver of the other vehicle had contacted a lawyer, who had contacted her and asked if she had insurance; she asked to have the insurance backdated to May 9 so that it would cover the accident; and she did not mention the accident to the agent" (¶ 27). Applying a public policy analysis, the court also held that Bateman need not be aware of her daughter's causal negligence: an "essential characteristic of insurance" is that it "covers risks, not certainties" (¶ 32). Finally, the court rejected arguments that Wis. Stat. section 631.11(1)(b), relating to misrepresentations, precluded application of the known loss doctrine.

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    Juvenile Law

    Stay of Secured Detention Portion of Delinquency Disposition - Court's Reasons for Specific Portion of Disposition

    State v. Richard J.D., 2006 WI App 242 (filed 3 Oct. 2006) (ordered published 21 Nov. 2006)

    The appellant, a juvenile, was found delinquent in two cases for committing burglary and theft. At a joint disposition hearing on the two cases, the circuit court placed the juvenile at Lincoln Hills, a secure correctional facility, for one year. The court further ordered that a specified county provide aftercare services for the juvenile after his release. Finally, the court imposed and stayed a disposition of 30 days in secure detention, with the provision that the stay would be lifted if the juvenile violated any part of the dispositional order, including the aftercare provisions.

    The juvenile claimed on appeal that the court lacked the statutory authority to impose and stay the secure detention and that the court erred by failing to give any reason for that portion of the dispositional order. In a decision authored by Judge Peterson, the court of appeals disagreed.

    Under Wis. Stat. section 938.34, once a juvenile is adjudged delinquent, the court may order one or more of several dispositions. Those dispositions include counseling, supervision, secure detention, correctional placement, and aftercare. Wisconsin law allows a juvenile court to "enter an additional order staying the execution of the dispositional order contingent on the juvenile's satisfactory compliance with any conditions that are specified in the dispositional order." Wis. Stat. § 938.34(16). The court may stay the entire order or just a portion of the order (see ¶ 7).

    In this case, the court imposed 30 days' secure detention, which it was authorized to do under Wis. Stat. section 938.34(3)(f). It then stayed that disposition under section 938.34(16). "We therefore conclude that the court had the statutory authority to impose the disposition it did" (¶ 11). In reaching this conclusion the court rejected the juvenile's argument that Wis. Stat. sections 938.355 and 938.357 establish an exclusive statutory mechanism for dealing with violations of a dispositional order (see ¶ 8). (Editors' Note: These statutes provide a variety of sanctions for juveniles who have violated their dispositional orders, including a term of up to 10 days in secure detention, and they establish procedures for implementing the sanctions (see ¶ 9).)

    The juvenile also argued that the juvenile court failed to give any reason for the imposed and stayed secure detention. Again, the appellate court disagreed. The court began its analysis by looking to the exercise of sentencing discretion in the adult criminal justice system. "In adult court, the circuit court properly exercises its sentencing discretion when it makes a statement on the record detailing its reasons for 'selecting the particular sentence imposed.' State v. Gallion, 2004 WI 42, ¶ 5 n.1, 270 Wis. 2d 535, 678 N.W.2d 197; see also Wis. Stat. § 973.017(10m). However, the court need not specifically note the reasons for each component part of the sentence. See State v. Taylor, 2006 WI 22, ¶ 30, 289 Wis. 2d 34, 710 N.W.2d 466 (court need not explain why the precise number of years in a sentence was chosen). It is enough if the court puts forth a 'rational and explainable' chain of reasoning based on facts in the record. Id. While no juvenile case specifically adopts this approach to review, we see no reason to apply different standards when reviewing dispositional orders" (¶ 12).

    In determining a delinquency disposition, the juvenile court is to consider the seriousness of the offense, the need to protect citizens from juvenile crime, the need to prevent further delinquent acts, and the juvenile's needs for care and treatment. See Wis. Stat. §§ 938.355(1), 938.01(2), 938.34. In this case, the juvenile court noted the serious nature of the juvenile's offense, stated that he constituted a danger to the public, analyzed his juvenile history and the fact that he had not taken advantage of past opportunities, and took into consideration his need for assessment, follow-through, and direction. As to the secure detention, the juvenile court warned the juvenile that "'once you're back in the community there's absolutely no reason for you to spend additional time in secure detention unless you violate the rules'" (¶ 13).

    The court of appeals concluded that these statements show that the juvenile court used a "rational and explainable" process to determine the disposition in this case, including the imposed and stayed secure detention. Said the court, "these comments [of the court at the dispositional hearing] show [that the juvenile] court believed the thirty days imposed and stayed was necessary to give [the juvenile] an incentive to comply with the aftercare conditions of the dispositional order - a task [the juvenile] had failed to perform in the past. It is true that the [juvenile] court did not separately analyze its decision to impose and stay the thirty days, but it is not required to give its reasons with that degree of specificity" (¶ 14).

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    Open Records Law

    Documents Relating to Misconduct Allegation Against Law Enforcement Officer - Wis. Stat. section 19.36(10)(d)

    Kroeplin v. Wisconsin Dep't of Natural Resources, 2006 WI App 227 (filed 12 Oct. 2006) (ordered published 21 Nov. 2006)

    This consolidated appeal evolved from an open records request made by a newspaper for documents relating to a misconduct investigation of and subsequent disciplinary actions taken against a Department of Natural Resources (DNR) warden. The warden appealed the circuit court's order and judgment denying his request for an injunction preventing release of the records by the DNR to the newspaper. In a related appeal the DNR sought review of the circuit court's grant of a writ of mandamus requiring full disclosure of the requested records. In a decision authored by Judge Higginbotham, the court of appeals affirmed.

    The warden argued that Wis. Stat. section 19.36(10)(d) exempts from public disclosure all records relating to the investigation of the warden's violation of DNR work rules and of the subsequent disciplinary action taken. The DNR argued that section 19.36(10)(d) exempts only certain parts of those records, which it redacted. Subsection (10)(d) creates an exemption from disclosure for "information used in staff management planning, including [among other things] performance evaluations" (emphasis added).

    The appellate court concluded that section 19.36(10)(d), although ambiguous for the purpose of determining whether the misconduct investigation and disciplinary records are excepted from public disclosure (see ¶ 21), does not create a blanket exception for disciplinary and misconduct investigations. The statute does not expressly except disciplinary records from public access (see id.). Further, "while performance evaluations might make reference to disciplinary records, there is no clear indication by the text of Wis. Stat. § 19.36(10)(d) that the legislature intended to exclude access to disciplinary records simply because performance evaluations may contain information gleaned from documents of disciplinary matters. In contrast to the types of documents listed in § 19.36(10)(d) as being exempt because they relate to staff management planning, disciplinary records may contain information of great interest and value to the public. Previous case law on this topic firmly reflects the public's interest in disciplinary actions taken against public officials and employees, especially those employed in a law enforcement capacity" (¶ 22). Said the court, "[a] common sense reading of 'performance evaluations' in this context refers to evaluations management generates on a routine basis for planning purposes"(¶ 21).

    The warden also argued that "all investigative records relating to his possible misconduct are exempt under Wis. Stat. § 19.36(10)(d)" (¶ 29). The appellate court said that "[t]his contention rests on the same grounds as [the warden's] argument for excluding the disciplinary records under the subsection. Thus, we reject his argument as it relates to the investigative records for the same reasons we rejected his argument that his disciplinary records were exempt under § 19.36(10)(d)" (id.).

    Lastly, after applying the common law balancing test to the facts of this case, the court concluded that the public's strong interest in accessing the records in question was not outweighed in any way by any of the reasons offered by the DNR for preventing disclosure (see ¶ 53).

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    Foreclosure - Redemption

    Osterberg v. Lincoln State Bank, 2006 WI App 237 (filed 4 Oct. 2006) (ordered published 21 Nov. 2006)

    Lincoln State Bank foreclosed on a mortgaged property. Osterberg purchased the property at a foreclosure sale. "Due to miscommunication between the seller, Lincoln State Bank, and its lawyer, the bank had proceeded with the confirmation hearing after the sale despite having received payment from the mortgagor. When the bank realized the error, it brought the matter to the circuit court, and the circuit court found that Roomates, Ltd., the owner of the property, had redeemed the mortgage. Osterberg appeals, claiming that because Roomates failed to notify the court of its payment, the redemption was invalid and his purchase should stand" (¶ 1).

    The court of appeals, in an opinion written by Judge Brown, affirmed. Osterberg argued that Wis. Stat. section 846.13 supported his contention that Roomates was required to notify the court of its payment. "We agree that someone must certainly notify the court when a redeeming payment is made, in order to prevent more situations like the unfortunate one before us. We are not convinced, however, that Wis. Stat. § 846.13 requires that this person be the mortgagor. In this case, Lincoln State Bank obviously should have notified the court of the redemption and presumably would have done so had it not failed to communicate with its attorney. It would have been prudent for Roomates to attend the hearing, but it had no reason to believe that Lincoln State Bank would proceed with the sale of a property that it no longer had any right to sell. We agree with Roomates that the second sentence does not state a prerequisite for redemption, but rather establishes the procedure for purging the judgment and the mortgage" (¶ 11).

    The court based its holding on the plain language of the statute. "[T]he first sentence of the statute states plainly that the mortgagor 'may redeem the mortgaged premises at any time before the sale by paying to the clerk of the court in which the judgment was rendered, or to the plaintiff, or any assignee thereof, the amount of such judgment, interest thereon, and costs.' Wis. Stat. § 846.13. By the plain language of this sentence, redemption occurs upon payment. The second sentence, upon which Osterberg relies, does not mention redemption. It also does not give any suggestion that the receipt must be filed within any particular time limit. It certainly does not state plainly that filing the receipt is a necessary prerequisite for redemption to occur, or that redemption is void if a receipt is not filed. Osterberg finds these requirements in the statute by implication, but we do not find this reading convincing" (¶ 12). The court distinguished several cases cited by Osterberg and addressed public policy concerns regarding the risks borne by foreclosure purchasers.

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    Condemnation - Value - Experts

    Hoekstra v. Guardian Pipeline LLC, 2006 WI App 245 (filed 30 Nov. 2006) (ordered published 19 Dec. 2006)

    This appeal consolidated three cases arising from condemnation proceedings in which Guardian Pipeline LLC condemned parts of the owners' property to obtain easements for a natural gas transmission line. The court of appeals, in a decision authored by Judge Higginbotham, affirmed in part and reversed in part.

    First, the court of appeals held that the circuit court erred when it excluded expert testimony regarding the after-takings value of each property. The circuit court excluded the testimony because the experts relied on factors other than comparable sales data. Case law established that "while comparable sales may be the 'best evidence' of the fair market value of property immediately after a taking, it is by no means the only admissible evidence of fair market value" (¶ 16). Thus, the owners' experts properly relied on other admissible evidence (e.g., potential uses, fears and stigma attached to pipelines) in arriving at their opinions, which the court described in some detail.

    Second, the court of appeals held that the circuit court properly excluded testimony relating "to the duty to disclose certain real estate transactions, as required by Wis. Stat. ch. 709" (¶ 27). "Under ch. 709, sellers of residential property are required to disclose certain defects on their property within ten days of receipt of an offer to purchase. Wis. Stat. § 709.02(1). The Landowners contend that Wis. Stat. § 709.02(1) requires them to disclose to potential buyers the presence of the gas pipelines and all hazards associated with the pipelines…. We decline to read the requirements of ch. 709 on disclosure responsibilities this broadly" (id.).

    "Sellers of real estate are required to disclose general descriptions of potential defects in the property…. There is nothing in the text of these statutes that requires a seller to provide details of specific safety and health hazards associated with any property defect…. While the form does not contain language specific to natural gas transmission pipeline disclosures, by following the model language of the form, we conclude that the required disclosure in this case does not need to be more specific than 'I am aware of an underground natural gas transmission pipeline on the property'" (¶ 29). Nor did the common law mandate additional, extensive disclosures (see ¶ 30).

    Third, the court of appeals held that the circuit court properly excluded other expert testimony based on telephone surveys on relevance grounds. The survey failed to "sufficiently connect the survey data to the particular condemned properties or consider certain relevant aspects of the specific properties affected by the pipeline" (¶ 34). Other expert testimony also failed the test of relevancy because it did not connect information (e.g., safety and health issues) "with the potential or actual impact on the fair market value of the specific properties at issue in this case. Under Wis. Stat. § 907.03 [bases of expert testimony] the Landowners may have been able to admit this evidence had a real estate appraisal expert or other similar type of expert offered an opinion of the fair market value of their particular properties based, in part, on this information. However, since that is not the case here, the trial court properly excluded this evidence" (¶ 38).

    Fourth, the court of appeals considered whether the exclusion of still other expert testimony comported with "the unit rule," a rule that "prohibits valuing individual property interests or aspects (in this case, the Landowners' trees) separately from the properly as a whole" (¶ 43). The court of appeals ruled "that the valuation of a property's components [e.g., the trees] separately from fair market value is precisely what the unit rule prohibits" (¶ 44).

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    Immunity - Known Danger

    Voss v. Elkhorn Area Sch. Dist., 2006 WI App 234 (filed 18 Oct. 2006) (ordered published 21 Nov. 2006)

    A high school student was injured in a health class exercise during which she wore "fatal vision goggles," which replicated the effects of a blood alcohol concentration of 0.10. The school district argued that it was immune from the student's claim, but the circuit court permitted the claim to proceed under the known and present danger exception.

    The court of appeals, in an opinion written by Judge Anderson, affirmed. Case law provides "examples of conditions that are nearly certain to cause injury if not corrected, or in other words, are 'accidents waiting to happen.' We have those conditions here as well. The teacher knew of the perils of conducting the exercise. The fatal vision goggles distort vision and impair depth perception and sense of balance. The teacher testified that students using the goggles would lose their balance and slip or stumble while doing the simple tasks he had them perform. In fact, that was the entire purpose of the exercise - to show students how difficult a simple task becomes when alcohol is consumed. The teacher, however, chose to conduct the exercise within the confines of a classroom with a hard tile floor and in between aisles of desks made of steel or aluminum and wood. Despite these obvious hazards, the teacher took no precautions to minimize the risk of injury" (¶ 19). The circumstances here presented the teacher with but one "response," namely, "stop the activity the way it was presently conceived." The court said that it should have been "self-evident" that the activity needed to stop, in light of earlier stumbles by other students and the configuration of the desks (see ¶ 20).

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    Baseball Rule - Participants

    Shain v. Racine Raiders Football Club Inc., 2006 WI App 257 (filed 22 Nov. 2006) (ordered published 19 Dec. 2006)

    Shain, a youth football coach, was injured during a halftime scrimmage in which six teams simultaneously played crosswise on the field. Several players crashed into Shain as he stood watching his own team play. Shain sued the sponsor and its insurer on various claims. The circuit court granted summary judgment in favor of the defendants.

    The court of appeals, in an opinion written by Judge Nettesheim, affirmed. Shain claimed that the defendants were liable under the safe place statute, Wis. Stat. section 101.11, because the halftime activities had been negligently organized. A major point of dispute was whether Shain's claim was precluded by the Baseball Rule, which prohibits spectators injured by baseballs from making claims because they have knowingly exposed themselves to such risks. Also, a sports injury provision, Wis. Stat. section 895.525(4m), shields participants in recreational activities from claims unless they acted recklessly or with intent to injure.

    "Although we have given the question much thought and debate, we ultimately conclude that it is unnecessary to peg Shain as a spectator under the 'Baseball Rule' or as a participant under Wis. Stat. § 895.525(4m). The most accurate characterization, we think, is that which emerged at oral argument: that Shain's role as a youth football coach is something of a hybrid between spectator and participant. Shain was something of a spectator because he observed the game, albeit with the critical eye of a coach. But he was also something of a participant because, although not fully immersed as a player, he was an integral part of the larger workings of his team, and he was on the field of action with his players" (¶ 14).

    Moreover, "the sidelines, while not on the actual field of play, fall within the zone of danger during a football game. An atypical field layout does not alter the existence of this risk and such a layout does not represent the only risk of coaching the sport" (¶ 16). The court noted in its opinion that Shain had made the "right choice" as a coach by placing himself on the field of play near his players (see ¶ 17).

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    Intoxicated Minor - Common Scheme - Procurer

    Richards v. Badger Mut. Ins. Co., 2006 WI App 255 (filed 14 Nov. 2006) (ordered published 19 Dec. 2006)

    The plaintiff's husband was killed in a collision involving an intoxicated 19-year-old driver, Zimmerlee, who had been given alcohol by Pratchet. The trial court found "that 'procuring' alcohol for an underage person, who later causes an injury while intoxicated, can constitute a 'concerted action' that makes the provider jointly and severally liable for the injury under § 895.045(2)" (¶ 1).

    In a decision authored by Judge Curley, the court of appeals affirmed in part and reversed in part. This was an issue of "first impression" (¶ 13), for decision of which the court looked to analogous cases as well as newly drafted Wis. J.I. - Civil 1740 and its commentary. "Consistent with [case law], we therefore hold that in order for concerted action liability to attach under Wis. Stat. § 895.045(2), the persons held liable must have acted in accordance with 'a common scheme or plan to accomplish the result that injures the plaintiff,' Wis. J.I. - Civil 1740 (emphasis added), and there must have been an agreement - tacit or express - about that common scheme or plan. The focus ought to be on the conduct of the persons alleged to have engaged in the 'common scheme or plan' and the inquiry should concentrate on whether that conduct caused the injury. In other words, concerted action liability attaches when two or more persons commit a tortious act in concert. Hence, even if an agreement exists, if that agreement does not directly relate to the tortious conduct that caused the injury, that agreement is insufficient to satisfy the agreement required for concerted action. The clearest, and to date only, example of a situation involving liability for concerted action is the drag racing scenario … where both drivers engaged in the tortious conduct but where only one of them ultimately caused the fatal crash" (¶ 25) (citations omitted).

    "Zimmerlee, Schrimpf and Pratchet had an agreement to purchase alcohol. This agreement had nothing to do with Zimmerlee driving while intoxicated some twelve hours later. Because the act that caused the injury was Zimmerlee driving while intoxicated, and because Pratchet did not engage in a 'common scheme or plan' to drive while intoxicated, Zimmerlee, Schrimpf and Pratchet cannot be subject to concerted action liability under § 895.045(2) for the injury that resulted from Zimmerlee driving while intoxicated. Stated differently, conceded liability for procuring alcohol for an underage drinker who later causes injury when he or she drives while intoxicated cannot constitute a 'concerted action' under § 895.045(2), when the common plan to purchase alcohol is not also a 'common scheme or plan' to engage in the conduct that caused the injury"(¶ 27).

    The last part of the majority's opinion (see ¶¶ 29-31) dealt with Judge Fine's dissent, which concluded that the "unambiguous language" of section 895.045(2) supports a finding of a common scheme or plan (see¶¶ 32-36).

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    Economic Loss Doctrine - "Other Property"

    Foremost Farms USA Coop. v. Performance Process Inc., 2006 WI App 246 (filed 16 Nov. 2006) (ordered published 19 Dec. 2006)

    Foremost Farms sued the producer (Performance Corp.) and distributor of an allegedly defective defoamer product. The circuit court granted summary judgment in favor of the defendants, dismissing the tort claims under the economic loss doctrine.

    The court of appeals, in an opinion written by Judge Lundsten, reversed. "The economic loss doctrine is multifaceted; but, in this appeal, we need only address the 'other property' exception. The dispositive question is whether Foremost's recon [reconstituted milk] and end dairy products [e.g., ice cream and cheese] are 'other property' with respect to Performance Corp.'s defoamer. If they are 'other property,' as that term is used in economic loss doctrine parlance, Foremost's tort claims based on damage allegedly caused by the defoamer were improperly dismissed" (¶ 13).

    Two different legal tests for "other property" have evolved in the case law. The court set forth the following doctrinal pathway: "When a defendant seeks dismissal of tort claims arguing that the economic loss doctrine applies because the damaged property is 'other property' with respect to the allegedly defective product, courts should normally first apply the 'integrated system' test to determine whether the damaged property is 'other property.' If the damaged property is not 'other property' under the 'integrated system' test, the economic loss doctrine applies and tort claims are barred. The 'other property' inquiry ends. However, if the damaged property appears to be 'other property' under the 'integrated system' test, then the 'disappointed expectations' test is applied" (¶ 25).

    The court then applied the analysis in the context of summary judgment methodology. As for the integrated system test, factual disputes about "whether the defoamer or the phenol were components of the recon or end dairy products" precluded summary judgment (¶ 29). The court next applied the disappointed expectations test, which "focuses on the expected function of the product and whether, from the purchaser's perspective, it was reasonably foreseeable that the product could cause the damage at issue" (¶ 35). Here, too, summary judgment was not appropriate because there was "no evidence, much less undisputed evidence, showing whether a purchaser in Foremost's position should reasonably have anticipated that the defoamer would contain a contaminant such as phenol that would render Foremost's dairy products unfit for human consumption" (¶ 36).

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