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    Wisconsin Lawyer
    October 07, 2010

    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.

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

    Wisconsin LawyerWisconsin Lawyer
    Vol. 83, No. 10, October 2010

    Civil Procedure

    Nonprosecution – Sanctions – Probate

    Theis v. Short, 2010 WI App 108 (filed 1 July 2010) (ordered published 25 Aug. 2010)

    Theis filed a petition for formal administration of her mother’s estate based on alleged undue influence by her mother’s husband. Little happened in the litigation between 2005 and 2008, when the circuit court dismissed the action for nonprosecution, which it deemed egregious.

    The court of appeals reversed in an opinion authored by Judge Dykman. The court agreed that egregious circumstances were present but found that Theis’s due process rights had been violated based on lack of notice. Under Wis. Stat. section 856.11, a petitioner in probate has the burden of moving the case forward. “Section 856.11 reads that after a petition is filed, the court shall set a hearing; the court did so here. The petition was then dismissed on the merits, appealed, and remitted to the circuit court. The case did not significantly progress for the next three-and-a-half years. The question, then, is not whether Theis had the burden to schedule the initial hearing on the petition. The question is whether Theis had the burden to move the case forward after the case was remitted to the circuit court. We agree with Theis that there is no clear case law on this point. We conclude, however, that in probate actions, as in civil cases generally, the burden is on the petitioner to move the case forward” (¶ 11–12). The record supported a finding that Theis’s conduct was “extreme, substantial and persistent, and therefore egregious” (¶ 13), and there was no clear and justifiable excuse (see ¶14).

    Despite these findings, however, Theis had no actual or constructive notice that her conduct might result in dismissal before Short filed his motion to dismiss. This violated Theis’s due process rights (see ¶ 23). The notice and opportunity for a hearing relating to the motion to dismiss were insufficient under the case law (see ¶ 24).

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    Commercial Law

    Security Interest – Possessory Liens – Priority

    Premier Community Bank v. Schuh, 2010 WI App 111 (filed 27 July 2010) (ordered published 25 Aug. 2010)

    Schuh keeps and pastures on his farm livestock owned by others. Starting in 2005, he pastured cattle owned by SCC, which stopped paying Schuh in 2006 and owed him about $16,000. Also in 2006, SCC used its cattle as collateral for a loan made by Premier Community Bank (Premier), which held a perfected security interest in the cattle. When SCC defaulted, Schuh asserted a possessory lien and rejected Premier’s demand that he surrender SCC’s cattle. Premier sued to enforce its security interest. The circuit court granted summary judgment in favor of Schuh.

    The court of appeals affirmed in an opinion written by Judge Brunner. Schuh held a statutory lien and Premier held a perfected security interest, so the issue was one of priority, specifically whether Schuh’s lien was a possessory lien that had priority over Premier’s. The court held that Wis. Stat. section 779.43(3) “creates a lien in favor of the possessor, and then allows the lienholder to elect between retaining or relinquishing possession. If the lienholder elects the former, the lien established by Wis. Stat. § 779.43(3) supplies legal justification for continued possession. If the lienholder elects to relinquish possession, the lien is no longer necessary to justify possession, and the lien is lost. Accordingly, we conclude a lien under § 779.43(3) is contingent on possession and is a ‘possessory lien’ as defined by Wis. Stat. § 409.333(1)” (¶10). Case law also supported this conclusion.

    In response to concerns voiced by local banks as amici, the court noted that “lenders may protect themselves by placing contractual restrictions on the movement of cattle” (¶ 13). Finally, the factual record supported the grant of summary judgment.

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    Criminal Law

    Jury Instructions – Expert Testimony – Other Acts – New Trial

    State v. Gonzalez, 2010 WI App 104 (filed 7 July 2010) (ordered published 25 Aug. 2010)

    A jury convicted Gonzalez of exposing a child to harmful material, contrary to Wis. Stat. section 948.11(2)(a). The court of appeals affirmed the conviction in an opinion written by Judge Curley that addressed a plethora of issues.

    First, the pattern jury instruction properly described the crime’s elements. Gonzalez unsuccessfully argued that the jury must be told that he knowingly exhibited the harmful material to the child. The court held that the pattern instruction effectively conveyed this element in other language and that Gonzalez’s other suggested changes were “unnecessary and confusing” (¶ 12). The judge did not err by not reading a special theory-of-defense instruction; Gonzalez’s theory of defense was “adequately explained through the pattern instruction” (¶ 18).

    Second, the trial judge properly handled questions from the jury despite waiting more than two hours to tell the lawyers about these questions. No legal authority was cited to support the assertion that a court must immediately alert counsel. The trial judge here properly exercised her discretion.

    Third, the trial judge properly rejected the defendant’s proffer of Richard A.P. evidence, that is, expert testimony that Gonzalez had no sexual disorder. Such testimony became irrelevant when the prosecution dismissed a sexual assault charge (see ¶ 33).

    Fourth, the judge also properly excluded other-act evidence in the form of expert testimony that police had “planted images of child pornography on his laptop computer” (¶ 34). Critical factors were that the witness did not examine Gonzalez’s computer itself and had “neither experience in forensic analysis nor training in the forensic examination of computers” (¶ 40).

    Fifth, Gonzalez’s confession was adequately corroborated by the pornographic video that police seized and that had been viewed by the child. The video “gave confidence that Gonzalez exposed A.G. to harmful material” (¶ 46). It was unnecessary to corroborate all elements of the crime, such as the victim’s viewing of the video.

    Sixth, the court of appeals refused to grant a new trial in the interests of justice. The court considered Gonzalez’s specific arguments relating to the exclusion of character evidence and his offer to take a polygraph as well as the showing of the pornographic video to the jury. All three of these evidentiary issues are closely discussed in the opinion.

    Lastly, the trial judge properly denied the defense’s motion to suppress Gonzalez’s statements. The record supported a finding that Gonzalez had properly waived his Miranda rights and the statement was voluntary. In particular, the trial judge properly found that Gonzalez’s version of the interrogation was not credible (see ¶ 71).

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    Criminal Procedure

    Guilty/No-contest Pleas – Deportation Warning Required at Plea Hearing

    State v. Vang, 2010 WI App 118 (filed 7 July 2010) (ordered published 25 Aug. 2010)

    Vang was admitted to the United States as a refugee in 1987 and later was granted permanent resident status. On Feb. 21, 2005, he was arraigned on sexual assault and bail jumping charges in Brown County. At the arraignment, the circuit court provided Vang the deportation warning specified in Wis. Stat. section 971.08(1)(c). Approximately six months later, on Aug. 15, 2005, the court accepted Vang’s no-contest pleas to the charges without re-advising Vang of the potential deportation consequences. In 2009, the Department of Homeland Security initiated removal proceedings against Vang based on his sexual assault conviction. Vang then moved the circuit court to withdraw his pleas pursuant to section 971.08(2), because the court did not give the deportation warning at his plea hearing. The circuit court denied Vang’s motion.

    In a decision authored by Judge Hoover, the court of appeals reversed. Section 971.08(1)(c) specifically provides that “[b]efore a court accepts a plea of guilty or no contest,” it shall address the defendant personally and provide the deportation warning specified in the statute. The appellate court concluded that this warning must be given at the plea hearing (see ¶ 7). It rejected the state’s position that the warning can be given at any time before acceptance of the plea.

    Lastly, the court of appeals cautioned circuit courts “to recite with precision the statutory [deportation] admonition” as specifically articulated in section 971.08(1)(c) (¶ 15).

    Not Guilty By Reason of Mental Disease or Defect – Institutionalized Care – Commitment Based on Significant Risk of “Serious Property Damage”

    State v. Brown, 2010 WI App 113 (filed 7 July 2010) (ordered published 25 Aug. 2010)

    Brown was found not guilty by reason of mental disease or defect (NGI) of one charge of identity theft. The circuit court committed her to three years’ institutional care, concluding conditional release would pose a significant risk of serious property damage because of her extensive history of financial and property crimes. The court rejected Brown’s argument that “serious property damage” only includes physical injury to, or destruction of, an object. Brown renewed her argument in a postcommitment motion, which the circuit court denied. In a decision authored by Judge Hoover, the court of appeals affirmed.

    Wisconsin Statute section 971.17(3)(a) provides in part that the court shall order institutional care following an NGI verdict if it finds by clear and convincing evidence “that conditional release of the person would pose a significant risk of bodily harm to himself or herself or to others or of serious property damage.” The defendant argued that the phrase serious property damage as used in this statute requires physical injury or destruction of a significant nature (see ¶ 9).

    The appellate court concluded that this interpretation of the statute was unreasonable. “We discern no reason why the statute would seek to protect the public from physical injury or destruction of property, while subjecting it to the risk of the complete loss of goods, cash, or other assets. The injury suffered by a loss of property may be equal to or greater than that incurred from physical property damage, which may not completely devalue an item” (¶ 15). Accordingly, the court concluded that “‘property damage’ in § 971.17(3)(a) includes not only physical harm or destruction, but also loss of goods or money” (¶ 16).

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    Family Law

    Divorce – Property Division – Salable Professional Good Will

    McReath v. McReath, 2010 WI App 101 (filed 29 July 2010) (ordered published 25 Aug. 2010)

    Tim and Tracy McReath divorced in 2008 following a 20-year marriage. Tim purchased an orthodontic practice early in the marriage; he alleged during the divorce that he could now sell the practice for more than $1 million. Within this amount is a goodwill component worth more than $800,000 (calculated by subtracting the value of tangible assets from the full valuation of the practice). Although there was no evidence identifying some specific portion of this total goodwill as professional goodwill (as distinguished from corporate goodwill), the circuit court assumed that a significant portion was professional goodwill. It was also undisputed that a purchaser paying the $1,058,000 price would insist that Tim agree, via a noncompetition agreement, not to compete with the purchaser. (For purposes of this decision, the court of appeals adopted Tim’s assumption that a noncompetition agreement would be a means of transferring some portion of Tim’s professional goodwill (see ¶ 6).)

    When addressing property division, the circuit court included the full $1,058,000 valuation as divisible property. As a result, Tracy received half that amount. Turning to the question of maintenance and child support, the court examined the income available to the parties. The court calculated Tim’s earnings from his orthodontic practice by looking at his average net cash flow over the five years preceding the divorce and making some adjustments to that average. Relying primarily on this earnings number, the court ordered Tim to pay maintenance to Tracy of $16,000 per month for 20 years.

    On appeal, Tim argued that the circuit court erred as a matter of law by treating the value of his salable professional goodwill as divisible property. “Tim argues that, under controlling case law, professional goodwill is not a divisible asset, even if it is salable. Tim reasons that professional goodwill should never be divisible because it is inextricably linked to earnings. According to Tim, it follows that it is unfair to divide the value of his professional goodwill and then also base maintenance payments, in part, on the earnings that flow from that same professional goodwill, something referred to in the case law as ‘double counting’” (¶ 10). Tracy urged that all of the goodwill at issue in this case is salable and thus divisible property (see ¶ 11).

    In a majority decision authored by Judge Lundsten, the court of appeals affirmed the circuit court decision. After an extended analysis of Tim’s position, the majority concluded that there is no existing rule that requires the exclusion of salable professional goodwill from divisible property, and it declined to adopt a blanket rule to that effect (see ¶ 1). Said the majority, “Tim’s entire argument hinges on there being a blanket rule prohibiting the inclusion of salable professional goodwill from divisible property. He does not argue in the alternative that, if it is permissible to include salable professional goodwill in divisible assets, the circuit court nonetheless erroneously exercised its discretion in this case. Accordingly, we affirm the circuit court” (¶ 50).

    Judge Dykman filed a dissenting opinion.

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    Future Personal Services – Death

    Ryan v. Estate of Sheppard, 2010 WI App 105 (filed 14 July 2010) (ordered published 25 Aug. 2010)

    In April 2007, Sheppard and Ryan entered into a two-year agreement for Ryan to provide flight instruction to Sheppard. Before any services were rendered, Sheppard died. Ryan sued Sheppard’s estate for more than $100,000 under the contract. The circuit court granted summary judgment in favor of the estate.

    The court of appeals affirmed in an opinion written by Judge Anderson. “There are no Wisconsin cases directly on point with respect to frustration of purpose for a personal services contract in which the person – who is to receive instruction for pay – dies before that instruction occurs and the person – who was to provide the instruction – seeks to uphold the agreement” (¶ 7). The contract specified not only the services that must be rendered, “but also for whom they are provided. As Sheppard’s death prohibited him from obtaining personal flight instruction, it follows that Ryan can no longer instruct Sheppard or serve as his pilot. The services Ryan promised to provide are now impossible to perform” (¶ 11). Case law established that “[w]hen there is nothing an obligor can do to fulfill his or her contractual duties, the obligee’s duty to compensate is excused” (¶ 14).

    “In essence, the April 11, 2007 agreement is unenforceable due to a failure of consideration: Ryan can no longer instruct Sheppard, so the consideration Ryan promised cannot be provided. While the Estate can still step into Sheppard’s shoes and pay Ryan, the duty to pay ‘is nevertheless discharged because its condition precedent – the rendition of the servant’s work – has become impossible’” (¶ 16).

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    Real Property

    Easements – Modifications – Statute of Limitation

    Mnuk v. Harmony Homes Inc., 2010 WI App 102 (filed 29 July 2010) (ordered published 25 Aug. 2010)

    Two adjoining landowners, the Mnuks and Harmony Homes, entered into two access easements that each landowner granted the other for the purpose of a joint driveway. The easements were created in 1995 but the driveway was not built then. In 2002, the parties learned that wetlands were now present, which thwarted the original plan. The parties could not agree on a new location. The Mnuks then filed this declaratory judgment action seeking modification of the access-easement agreements. Harmony Homes opposed the action on the grounds that 1) it was barred by the statute of limitation and 2) the court lacked authority to modify the easement. The circuit court ruled in favor of the Mnuks.

    The court of appeals affirmed in an opinion written by Judge Vergeront. First, the action was timely because it was governed by the 40-year statute of limitation. “It is clear the Mnuks are alleging that the driveway cannot now be built on the easements described in the access easement agreements because of the more recent wetland delineation and they are seeking a modification of the easements. This claim for relief is an action to enforce the recorded easements, albeit a modified version, and is therefore governed by the forty-year statute of limitations in Wis. Stat. § 893.33(6)” (¶ 17).

    “Even if we assume the construction provisions are distinct from the easements, arise under contract, and are therefore subject to the six-year statute of limitations – as Harmony Homes contends – the undisputed facts show that a breach did not occur in July 1998. We agree with the Mnuks that the plain language of the construction provisions in the access easement agreements does not obligate Harmony Homes to build the driveway within three years of the agreements. Indeed, it does not obligate Harmony Homes to build the driveway at all. What Harmony Homes must do, if it does not itself build the driveway, is reimburse the Mnuks if they build it. It is undisputed that the Mnuks have not built the driveway and, thus, Harmony Homes’ obligation to reimburse them has not yet been triggered. Accordingly, no cause of action for a breach has accrued” (¶ 18).

    Second, the circuit court had the authority to modify the easement under prevailing case law. “Because modification is a less drastic remedy than termination, we see no reason why that should not be the remedy the court first considers, as it is under Restatement (Third) of Property: Servitudes § 7.10(1). To be sure, it is a change in the common law; but it is a change that protects, where practicable, the property rights of the easement holder” (¶ 36).

    “We find the flexibility given a circuit court in [Restatement section 7.10(1)] to be particularly appropriate in this case because of the nature of the access easement agreements. Harmony Homes is the landowner under the Lot 120 Agreement and the easement holder under the Lot 121 Agreement, and the Mnuks’ position under each agreement is reversed. The Mnuks seek a modification, rather than termination, of the easement granted them under the Lot 120 Agreement and a modification, rather than termination, of the easement it has granted under the Lot 121 Agreement. Harmony Homes’ position is that it wants both easements terminated. However, Harmony Homes would thereby be released from its obligation to pay for the driveway and its maintenance, a benefit for which the Mnuks presumably bargained. In these circumstances, there is a sound basis for affording the circuit court the authority to examine the practicality and fairness of modifying rather than terminating the easements” (¶ 38). The court of appeals remanded the case for this purpose.

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    Sexually Violent Persons Law

    Summary Judgment – Hearings

    State v. Allison, 2010 WI App 103 (filed 27 July 2010) (ordered published 25 Aug. 2010)

    Allison was committed as a sexually violent person under Wis. Stat. chapter 980 in 1994. In 2009, he filed a petition for discharge. Two experts recommended that Allison could be released to the community. Based on these reports, Allison moved for summary judgment pursuant to Wis. Stat. section 802.08. Apparently the state had no contradicting expert testimony. The circuit court granted summary judgment in Allison’s favor, discharging him from the chapter 980 commitment.

    The court of appeals reversed in an opinion authored by Judge Curley. In a few words, the court held that summary judgment methodology is unavailable in chapter 980 proceedings (see ¶ 17). This conclusion, said the court, was consistent with the recent decision by the supreme court in State v. Arends, 2010 WI 46. The court of appeals set forth the various procedural alternatives contemplated by chapter 980, including hearings, none of which contemplate a summary judgment determination.

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    Property Taxes – Exemption from Future Taxes Not Permitted by Wis. Stat. Section 74.35

    Northwest Wis. Community Servs. Agency Inc. v. City of Montreal, 2010 WI App 119 (filed 20 July 2010) (ordered published 25 Aug. 2010)

    In 2007, Northwest Wisconsin Community Services Agency Inc. (Northwest), a benevolent association, requested a property tax exemption from the city of Montreal for a property it rents to low-income individuals. It claimed that under Wis. Stat. section 70.11(4), it is entitled to a tax exemption for property it operates for benevolent purposes. The city denied the request. Northwest paid the first installment of the taxes due for 2008 and served the city with a notice of claim that it disputed the taxes. The city denied the claim.

    Northwest then sued the city under section 74.35, alleging the taxes the city imposed after denying Northwest’s exemption request were unlawful because Northwest is entitled to tax-exempt status by statute. Northwest requested a judgment ordering the city to refund Northwest’s 2008 property taxes and declaring Northwest “is exempt from property taxes ....” The city did not timely respond to the complaint, so Northwest moved for default judgment. The circuit court granted the motion. Northwest then submitted a proposed judgment, which granted Northwest a refund of the taxes it paid on the property for 2008 plus interest and costs. The proposed judgment also declared Northwest “is exempt from future property taxes for [the] property ...” (¶ 2). The city objected to the proposed judgment, arguing the circuit court had no authority to prospectively exempt Northwest from paying property taxes. The circuit judge denied the city’s objection and signed the judgment.

    On appeal the city conceded that Northwest is entitled to a refund of the taxes it paid but argued that the circuit court did not have the authority to exempt it from future taxes. In a decision authored by Judge Peterson, the court of appeals agreed with the city. Said the court, “section 74.35 only authorizes courts to determine whether a taxpayer is exempt from taxes already paid, not taxes that might be assessed in the future” (¶ 8).

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    Negligence – Unborn Child

    Tesar v. Anderson, 2010 WI App 116 (filed 29 July 2010) (ordered published 25 Aug. 2010)

    Tesar was the father of an unborn child who was killed in a traffic accident. The child’s mother and the other driver were both allegedly negligent. Tesar sued the other driver and American Family, which insured both cars. The circuit court granted summary judgment to American Family and dismissed the complaint. The judge concluded that the mother owed no duty to her unborn child and, even if she had been negligent, public policy precluded liability.

    The court of appeals reversed in an opinion written by Judge Dykman. First, the mother owed the unborn child a duty of care, because Wisconsin follows the dissent in the celebrated Palsgraf case. “The correct question is whether Vander Meulen [the mother] had a duty to the world at large to use ordinary care in operating her motor vehicle. With the correct question posed, the answer is easy: She did. The rest of the elements of a negligence claim follow without difficulty. Tesar has alleged that Vander Meulen breached her duty to use ordinary care in operating her motor vehicle, causing him damages (the wrongful death of a fetus which, had it been born alive, would have been his child). Thus, Tesar has alleged a claim of negligence. So far, there was no reason to dismiss Tesar’s complaint against Vander Meulen’s insurer, American Family” (¶ 8).

    The court next turned to public policy grounds, concluding that they also did not foreclose liability. “We first need the facts which drive our public policy analysis. This is an automobile accident case. Tesar is not suing Vander Meulen. The only relevant defendants are Anderson, the driver of one car involved in the collision, and American Family, in both its capacity as Anderson’s insurer and its capacity as Vander Meulen’s insurer. Tesar has alleged that both drivers were causally negligent, resulting in the death of the fetus that Vander Meulen was carrying which, had it been born alive, would have been his child. We will consider the most frequently cited public policy grounds American Family claims delimit its liability with respect to its status as Vander Meulen’s insurer” (¶ 14).

    The court separately addressed a variety of public policy grounds, including 1) “remoteness” of the injury from the negligence, 2) whether recovery was out of proportion to the culpability, 3) whether the harm was “extraordinary,” 4) whether recovery would unreasonably burden the tortfeasor, 5) the fear of fraud, and 6) whether recovery opens the way into a field with no sensible or just stopping point.

    As to the last factor, the court pushed aside the insurer’s contention that husbands might sue wives for not taking vitamins while pregnant. “The field we are in is a well-known field in the law, the field of holding insurance companies liable for the negligent acts of insured drivers, even when a driver’s negligence injures or kills a family member. Under current law and practice, it is relatively common for a child injured in an automobile accident to be a plaintiff in a negligence action against a mother. So far as we can discern, permitting children to sue parents for negligence in this context has not opened the door to suits alleging the sort of negligent acts that concerned the circuit court and American Family, such as negligently feeding a child too much junk food or negligently failing to prompt a child to get enough exercise. American Family provides no reason to believe that the slope is more slippery in the fetus context than in the live-born-child context when the starting point of the ‘slope’ is negligent driving” (¶ 22). “We emphasize that no reader of this opinion should surmise that we are weighing in on whether women should be held liable for other negligent acts that harm fetuses” (¶ 23). Finally, the wrongful death statute did not block this claim (see ¶ 34).

    Judge Lundsten filed a concurring opinion in which he joined all parts of the majority opinion except for three footnotes, which, he thought, went somewhat “too far afield” or were not helpful.

    Golf Course – Safe Place – Notice

    Gennrich v. Zurich Am. Ins. Co., 2010 WI App 117 (filed 21 July 2010) (ordered published 25 Aug. 2010)

    In 2004, Gennrich was playing golf with friends when he leaned against the top rail of a fence on an elevated tee box. The fence gave way and Gennrich fell to an asphalt cart path. Despite the fall, he declined treatment and finished his round. In 2007, he sued the golf course after a back injury manifested itself. The circuit court granted summary judgment in favor of the golf course. As to the safe-place statute, the circuit court ruled that the golf course did not have constructive notice of any defect in the fence. The judge also ruled that absent a safe-place claim, Gennrich’s negligence claim failed as well.

    The court of appeals reversed in an opinion written by Judge Brown. First, construing the safe-place statue in light of the summary judgment record, the court held that the golf course was an employer under the statute (see ¶ 11). The statute “places a duty on Grand Geneva to make the golf course safe for frequenters such as Gennrich. See Wis. Stat. § 101.11(1). And as part of keeping the golf course safe, the statute commands Grand Geneva to ‘adopt and use methods and processes reasonably adequate to render such place[] of employment safe,’ to ‘do every other thing reasonably necessary to protect the life, health, safety, and welfare of such frequenters,’ and to ‘construct, repair or maintain’ the golf course to render it safe” (¶ 12).

    “[W]e note that if, as Gennrich alleges, Grand Geneva inadequately inspected the fence, then Grand Geneva’s faulty inspection may suffice as its constructive notice. If there is a duty to inspect and an adequate inspection would have required an inspection method different from what the employer used and would have alerted the employer to the defect which injured the frequenter, then the jury may infer constructive notice of the defect” (id.). The court rejected a distinction based on whether the place is “primarily built for employees (where a frequenter may sometimes appear), not one primarily built for the public” (¶ 15). Under case law, Grand Geneva had a duty to inspect its premises, as employer and owner (see ¶ 18). The adequacy of the inspection and other matters were issues for trial.

    The court also reinstated Gennrich’s common law negligence claim for much the same reasons. The court expressly rejected the trial judge’s erroneous statement of law that, to maintain a negligence action, it is necessary to establish a safe-place violation (see ¶ 23).  

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