Real Estate – Commissions – “Substantial Variance”
McNally v. Capital Cartage Inc., 2018 WI 46 (filed 10 May 2018)
HOLDING: A real estate broker was not entitled to a commission because the offer to purchase contained a substantial variance from the seller’s terms in the listing contract.
SUMMARY: Seeking to retire and sell their moving and storage business, the Hermansons listed their property with a broker (McNally) using a WB-6 Business Listing Contract. A prospective buyer made an offer to purchase that included various conditions; the Hermansons rejected the offer as unacceptable. The broker later sued them for his commission of more than $70,000, contending that the offer complied with the listing contract. A jury found in the broker’s favor and, in an unpublished decision, the court of appeals affirmed.
The supreme court reversed in a majority opinion authored by Justice A.W. Bradley. The court examined the evolution of case law regarding the “substantial variance” between a listing contract and an offer to purchase (¶ 28). It underscored that Kleven v. Cities Service Oil Co., 22 Wis. 2d 437, 126 N.W.2d 64 (1964), remains good law. Although terms in “direct conflict” are substantial variances, this is not the sole manner in which substantial variances may be shown (¶ 41).
Applying this standard to the facts, the court held that the condition that Hermanson work “without pay for an undetermined period” after the sale was a substantial variance as a matter of law (¶ 51). Thus, the circuit court erred in denying the sellers’ motion for judgment on the pleadings.
Justice Ziegler dissented on grounds that the court’s opinion usurps the role of the jury as factfinder.
Search and Seizure – Homes – Arrest Warrant
State v. Delap, 2018 WI 64 (filed 6 June 2018)
HOLDING: Police officers lawfully entered the defendant’s residence based on an arrest warrant.
edu daniel.blinka marquette Prof. Daniel D. Blinka, U.W. 1978, is a professor of law at Marquette University Law School, Milwaukee.
edu thomas.hammer marquette Prof. Thomas J. Hammer, Marquette 1975, is a law professor and Director of Clinical Education at Marquette University Law School, Milwaukee.
SUMMARY: Based on two arrest warrants, police officers entered the defendant’s residence and arrested him. A search in the home revealed drug paraphernalia, for which he was also charged. The circuit court denied the defendant’s motion to suppress in which he claimed that the entry and search were unlawful. In an unpublished decision, the court of appeals affirmed on grounds that the entry was in “hot pursuit” of a fleeing suspect.
The supreme court affirmed the court of appeals in a majority opinion authored by Justice Abrahamson that eschewed a hot-pursuit analysis and relied instead on the rule in Payton v. New York, 445 U.S. 573 (1980). Payton allows police officers to enter a residence to effectuate an arrest provided they have a reasonable belief that the subject of the warrant resides in the home and that the subject is present at the time of the entry (see ¶ 32).
Because the officers had probable cause for both prongs, the court did not reach the issue of whether a “reasonable belief” was a less stringent standard than probable cause (¶ 34). Although the defendant contended that the officers lacked a factual basis to believe he resided in the home, the record revealed abundant evidence that they did (see ¶ 37).
Concurring, Justice Gableman, joined by Justice Kelly, wrote separately to demonstrate that the entry was also justified by the hot-pursuit doctrine.
Ineffective Assistance of Counsel – Reversal on Some But Not All Counts
State v. Sholar, 2018 WI 53 (filed 18 May 2018)
HOLDING: Circuit courts reviewing claims of ineffective assistance of counsel following multiple-count trials may conclude that counsel’s deficient performance prejudiced some but not all of the multiple convictions.
SUMMARY: The state charged the defendant with five counts involving sex trafficking and pimping two victims; a sixth count alleged that he sexually assaulted one of the victims. The jury convicted on all counts. In a postconviction challenge the defendant contended that his trial attorney rendered ineffective assistance by failing to object to the court’s provision of an exhibit to the jury during its deliberations. He contended that this should result in the vacatur of all six convictions.
The circuit court ruled that, though counsel performed deficiently (see ¶ 31 n.8), the defendant failed to prove that the exhibit prejudiced his defense of the five counts involving sex trafficking and pimping; however, it concluded that the exhibit did prejudice his defense of the sexual assault count and it vacated that particular conviction (but not the others).
In an unpublished decision, the court of appeals affirmed. In a majority opinion authored by Justice R.G. Bradley, the supreme court affirmed the court of appeals.
The supreme court concluded that “circuit courts reviewing claims of ineffective assistance of counsel following multiple-count trials may conclude that deficient performance prejudiced only one of the multiple convictions. Strickland v. Washington, 466 U.S. 668, 695-96 (1984), clearly contemplates such a result and does not require reversal on all counts when the prejudice proven affected only a single count” (¶ 2).
“Strickland specifically recognizes that some errors will have a pervasive effect and others will have an ‘isolated, trivial effect’” (¶ 37). In this case the state presented “overwhelming evidence to support the trafficking/pimping counts” (¶ 41), and there is no reasonable probability that, absent the provision of the exhibit to the jury during its deliberations, the jury would have had a reasonable doubt as to the defendant’s guilt on the five sex trafficking and pimping counts (see ¶ 43).
Justice Abrahamson filed a dissenting opinion.
Guilty Pleas – Advising Defendant of Direct Consequences of Plea – Lifetime GPS Tracking Not a Direct Consequence
State v. Muldrow, 2018 WI 52 (filed 18 May 2018)
HOLDING: The defendant is not entitled to withdraw his guilty plea because the circuit court was not required to inform him that pleading guilty to the crime of second-degree sexual assault of a child would subject him to lifetime GPS tracking.
SUMMARY: Defendant Muldrow pleaded guilty to second-degree sexual assault of a child contrary to Wis. Stat. section 948.02(2). This conviction subjects Muldrow to lifetime GPS tracking pursuant to Wis. Stat. section 301.48. He moved to withdraw his guilty plea on the ground that his plea was not knowingly entered because he was never informed that lifetime GPS tracking is a consequence of a conviction for second-degree sexual assault. The circuit court denied the motion.
In a published decision, the court of appeals affirmed. See 2017 WI App 47. In a unanimous decision authored by Justice Gableman, the supreme court affirmed the court of appeals.
The issue before the supreme court was whether lifetime GPS tracking is a “punishment” such that due process requires a defendant be informed of it before entering a guilty plea. In answering this question, the court set forth the proper test for determining whether a sanction is “punishment” for this purpose. It concluded that “the intent-effects test is the proper test used to determine whether a sanction is punishment such that due process requires a defendant be informed of it before entering a plea of guilty” (¶ 6). Applying the intent-effects test, the court held that “neither the intent nor effect of lifetime GPS tracking is punitive and, consequently, the circuit court was not required to inform Muldrow of it” (¶ 27).
With respect to the “intent” prong of the test, determining whether the legislature intended a statute to be punitive is primarily a matter of statutory construction (¶ 37). The Wisconsin Legislature has set forth the purpose of Wis. Stat. chapters 301-304, wherein the GPS tracking statute is located, as including the provision of “a just, humane, and efficient program of rehabilitation of offenders.” Wis. Stat. § 301.001. Said the court, “[t]hese purposes are indisputably non-punitive in nature, and are reflective of an intent to rehabilitate offenders and protect the public rather than to punish offenders” (¶ 41).
As for the “effects” prong of the intent-effects test, the court concluded that the effect of lifetime GPS tracking is not punitive. It reached this conclusion by applying seven factors articulated by the U.S. Supreme Court in Kennedy v. Mendoza-Martinez, 372 U.S. 144 (1963). “The existence of an alternative non-punitive purpose for a sanction is considered ‘the most significant factor’ in determining whether the effect of a sanction is punitive” (¶ 57) (citations omitted). “The non-punitive purpose of lifetime GPS tracking is protecting the public from future sex offenses” (id.).
Accordingly, defendant Muldrow is not entitled to withdraw his guilty plea because the circuit court was not required to inform him that his guilty plea would subject him to lifetime GPS tracking.
DNA Surcharge – Ex Post Facto Challenge Rejected
State v. Williams, 2018 WI 59 (filed 30 May 2018)
HOLDINGS: 1) Wisconsin’s new mandatory DNA surcharge statute is not an ex post facto law because the surcharge is not punishment under the intent-effects test. 2) The circuit court did not rely on an improper factor in sentencing the defendant.
SUMMARY: The principal issue on this appeal was whether Wisconsin’s mandatory DNA surcharge that defendant Williams was ordered to pay after his conviction for attempted armed robbery violates the Ex Post Facto Clauses of the U.S. and Wisconsin constitutions. He committed this crime when imposition of the DNA surcharge was a matter of judicial discretion. However, when he was sentenced, a new mandatory surcharge statute (enacted in 2013 Wis. Act 20) was in effect; the new statute requires courts sentencing defendants after Jan. 1, 2014 to impose a $250 surcharge for each felony conviction and a $200 surcharge for each misdemeanor conviction. The judge imposed the mandatory surcharge on Williams.
In postconviction motions and on appeal, Williams argued that the application of the mandatory surcharge violated the Ex Post Facto Clauses and that the circuit court should have applied the discretionary DNA surcharge statute in effect at the time of the attempted armed robbery. The court of appeals agreed with Williams. See 2017 WI App 46.
In a majority opinion authored by Justice R.G. Bradley, the supreme court reversed the court of appeals on Williams’ ex post facto challenge. “We hold the mandatory DNA surcharge statute is not an ex post facto law because the surcharge is not punishment under the intent-effects test. [See discussion of the intent-effects test in the synopsis of State v. Muldrow, supra.] The legislature intended the surcharges to offset the costs associated with its broad expansion of the statewide DNA databank, and the effect of the surcharges do not override the legislature’s non-punitive intent” (¶ 54). In so holding, the court overruled State v. Elward, 2015 WI App 51, 363 Wis. 2d 628, 866 N.W.2d 756, and State v. Radaj, 2015 WI App 50, 363 Wis. 2d 633, 866 N.W.2d 758.
Williams also argued that the sentencing court relied on an improper factor. The attempted armed robbery of which the defendant was convicted occurred during a drug deal in which the defendant’s brother fired a weapon into the drug dealer’s car, killing another person in the vehicle. At the defendant’s sentencing the state asked the circuit court to order Williams to pay restitution for the deceased’s burial costs. The position of the defense was that Williams should not be held accountable for the burial costs because the shooting was not a foreseeable consequence of the drug deal. The trial judge said the circuit court did not have authority to order restitution under these circumstances (a position questioned by the supreme court at paragraph 12 note 5). Nonetheless, the sentencing court stated that Williams’ unwillingness to participate in restitution reflected his lack of remorse.
The court of appeals upheld Williams’ sentence, concluding that the sentencing judge relied on a proper sentencing factor – lack of remorse – and not on the defendant’s failure to stipulate to restitution (see ¶ 16). The supreme court agreed. “We hold the circuit court may refer to a defendant’s failure to voluntarily pay restitution when the reference is directly linked to a proper sentencing factor. Because the circuit court’s reference to restitution at Williams’ sentencing was directly linked to a proper sentencing consideration – Williams’ lack of remorse – the sentencing court did not erroneously exercise its discretion” (¶ 44).
Justice Abrahamson filed a concurring opinion. Chief Justice Roggensack and Justice A.W. Bradley did not participate in this case.
DNA Surcharge – Imposition of Surcharge Now Mandatory
State v. Cox, 2018 WI 67 (filed 15 June 2018)
HOLDING: Imposition of the DNA surcharge, as provided for in Wis. Stat. section 973.046(1r), is mandatory; courts do not have the discretion to waive it.
SUMMARY: This case involves Wisconsin’s current DNA surcharge statute, Wis. Stat. section 973.046(1r), and it was before the supreme court on certification from the court of appeals. Before the legislature adopted 2013 Wis. Act 20, the DNA surcharge statute provided that, with limited exceptions, the court “may” impose that surcharge. The current statute, however, says that the court “shall” impose a surcharge of $250 for each felony conviction and $200 for each misdemeanor conviction.
The certified question from the court of appeals was whether the substitution of “shall” for “may” in the surcharge statutes means that circuit courts no longer have the discretion to waive the surcharge (see ¶ 1). In a unanimous decision authored by Justice Kelly, the supreme court concluded that 2013 Wis. Act 20 eliminated that discretion (id.).
The defendant urged the court to construe the word “shall” to be directory rather than mandatory. He argued that circuit courts generally have broad sentencing discretion and that this must mean that the legislature’s use of “shall” in this context reflects a policy of presumptively imposing the DNA surcharge while leaving courts discretion to waive it. The state, on the other hand, argued that when the legislature changed “may” to “shall,” it meant “must.”
The court agreed with the state (see ¶ 12). “We presume that when the legislature uses ‘shall’ it does so because it is describing a mandate, not a directive. Nothing in the text, context, or history of the DNA Surcharge statute indicates we should depart from that presumption here…. Therefore, the plain meaning of Wis. Stat. § 973.046(1r) is that, with respect to crimes committed after January 1, 2014, courts must impose the indicated surcharge; there is no discretion to waive it” (¶ 24).
Justice A.W. Bradley did not participate in this decision.
Circuit Court Competency – Adult Defendant Charged for Conduct Committed Before Defendant’s 10th Birthday
State v. Sanders, 2018 WI 51 (filed 18 May 2018)
HOLDING: Circuit courts possess statutory competency to proceed in criminal matters when an adult defendant is charged for conduct committed before the defendant’s 10th birthday.
SUMMARY: Defendant Sanders was charged in adult court with numerous sex-related crimes involving conduct committed against his younger sister. The misconduct began when the defendant was eight or nine years old and his sister was six or seven years old. It continued over a period of years ending when the defendant was 18 years old. These matters were later reported to school officials, who notified the local police department.
Charges against Sanders were filed in adult court when he was 19 years old. A jury convicted him on most of the charges but acquitted on the count (Count One) relating to the defendant’s conduct when he was 9-12 years of age. In a postconviction motion and on appeal he contended that his trial counsel was ineffective for failing to bring a pretrial motion to dismiss Count One and, though acquitted on that count, he was prejudiced by its inclusion in the trial. The circuit court denied the motion and, in a published decision, the court of appeals affirmed. See 2017 WI App 22. In a majority decision authored by Justice Gableman, the supreme court affirmed the court of appeals.
As described by the court, this case presented a single issue: Do circuit courts possess statutory competency to proceed in criminal matters when the adult defendant was charged for conduct committed before the defendant’s 10th birthday (see ¶ 2). The court held that “circuit courts possess statutory competency to proceed in criminal matters when the adult defendant was charged for conduct he committed before his tenth birthday. The defendant’s age at the time he was charged, not his age at the time he committed the underlying conduct, determines whether the circuit court has statutory competency to hear his case as a criminal, juvenile delinquency, or JIPS [Juvenile in Need of Protection or Services] matter. Consequently, the circuit court in this case possessed statutory competency to hear Sanders’ case as a criminal matter because he was an adult at the time he was charged” (¶ 3).
“Statutory competency” defines a circuit court’s ability to undertake a consideration of the specific case or issue before it (¶ 20). It is established by the legislature, and challenges to competency may be forfeited or waived. In this case the defendant technically forfeited his competency challenge when he failed to raise it in the circuit court. However, the supreme court reached the issue through the framework of ineffective assistance of counsel (see ¶ 24). Because the circuit court in this case had statutory competency to hear Sanders’ case, his counsel did not perform deficiently by not raising a meritless motion (see ¶ 55).
The supreme court noted the decision in State v. Becker, 74 Wis. 2d 675, 247 N.W.2d 495 (1976), wherein it recognized that the state violates a defendant’s right to due process when it delays charging as part of a “deliberate effort to avoid juvenile court jurisdiction” (¶ 40). “If a defendant alleges, with particularity, that the State intentionally delayed filing charges to avoid a juvenile delinquency proceeding and raises genuine issues of fact, then the defendant is entitled to a hearing at which the State must prove that any delay ‘was not for the purpose of manipulating the system to avoid’ a juvenile delinquency proceeding” (¶ 40) (citation omitted). This situation was not present in Sanders’ case.
Justice A.W. Bradley filed a concurring opinion that was joined in by Justice Abrahamson.
Wisconsin Fair Dealership Law – Wine Distributors
Winebow Inc. v. Capitol-Husting Co., 2018 WI 60 (filed 5 June 2018)
HOLDING: A wine grantor-dealer relationship is not included within the definition of a dealership as provided for in Wis. Stat. section 135.02(3)(b), part of the Wisconsin Fair Dealership Law.
SUMMARY: Winebow Inc. is engaged in the business of importing and distributing wine to “downstream” wholesalers. Since 2004, Winebow has used defendant Capitol-Husting as a distributor of its wines, and in 2009 it commenced a similar relationship with defendant L’Eft Bank. After becoming dissatisfied with the distributors, Winebow abruptly terminated its relationship with them in February 2015. The parties did not have any express written agreement that would prevent Winebow from unilaterally terminating their relationships.
The distributors responded to Winebow’s termination by letter, indicating their belief that they are entitled to the protections of the Wisconsin Fair Dealership Law (WFDL), Wis. Stat. chapter 135. Such protections would prevent Winebow from terminating their relationships absent “good cause.” Winebow countered by filing a declaratory judgment action in the U.S. District Court for the Eastern District of Wisconsin seeking a declaration that it has no continuing obligations to the distributors. The district court ruled in Winebow’s favor.
The distributors appealed to the U.S. Court of Appeals for the Seventh Circuit, contending that wine dealerships are “intoxicating liquor” dealerships entitled to the protections of the WFDL. The Seventh Circuit then certified the following question to the Wisconsin Supreme Court: “Does the definition of dealership contained in Wis. Stat. § 135.02(3)(b) include wine grantor-dealer relationships?” (¶ 1).
In a majority decision authored by Justice A.W. Bradley, the supreme court concluded that “a wine grantor-dealer relationship is not included within the definition of a dealership in Wis. Stat. § 135.02(3)(b). Wisconsin Stat. § 135.066(2) provides the operative definition of ‘intoxicating liquor’ for purposes of Wis. Stat. ch. 135, and such definition explicitly excludes wine. Accordingly, we answer the certified question in the negative and remand the cause to the United States Court of Appeals for the Seventh Circuit” (¶ 38).
Justice R.G. Bradley filed a dissenting opinion that was joined in by Justice Abrahamson and Justice Kelly.
Intentional Acts – Negligent Supervision
Talley v. Mustafa, 2018 WI 47 (filed 11 May 2018)
HOLDING: A business-owners liability policy did not cover injuries inflicted by an alleged employee who punched a customer in the face.
SUMMARY: Mustafa owned a store insured under a business-owners liability policy. This dispute arose when Mustafa’s security guard, Scott, punched a customer twice in the face, breaking the customer’s jaw. The customer sued Mustafa and his insurer. The circuit court ruled that the insurance policy did not cover the intentional act of punching the customer even under a “negligent supervision” claim, as pleaded. In a published decision, the court of appeals reversed on the negligent supervision claim, remanding the matter for trial on the “relationship” between Mustafa and the security guard. See 2017 WI App 31.
The supreme court reversed in a majority opinion authored by Justice R.G. Bradley that, for “the first time,” considered “whether coverage exists based on an allegation that the employer should have trained the employee not to punch a customer in the face” (¶ 15). The court held that there was no covered “occurrence” under the policy (¶ 16). In reviewing case law, the court explicitly overruled a number of “incorrect statements” that stemmed from Doyle v. Engelke, 219 Wis. 2d 277, 580 N.W.2d 245 (1998).
The court cautioned that under different facts a negligent supervision claim could “trigger insurance coverage” (¶ 30). On this record, however, there were “no factual allegations that Mustafa knew or should have known that Scott was likely to punch customers in the face” or was negligent in some other way (¶ 29). The court admonished against “creative pleading” by which intentional acts are morphed into negligent conduct for purposes of coverage (see ¶ 33). Finally, although in this case the insurer and the insured (Mustafa) agreed that there was no coverage, this scenario did not itself forestall the allegation of coverage.
Justice A.W. Bradley dissented, joined by Justice Abrahamson and Justice Kelly, on grounds that the majority “misunderstands” the nature of coverage trials and failed to analyze the “accident” from the perspective of the insured (¶ 41).
Justice Kelly also dissented, joined by Justice A.W. Bradley and Justice Abrahamson, on grounds that the majority improperly assessed the pleadings, merits, and coverage “phases” of the proceedings.
Mortgages – Foreclosure
Federal Nat’l Mortg. Ass’n v. Thompson, 2018 WI 57 (filed 24 May 2018)
HOLDING: Claim preclusion did not bar the lender from bringing a later foreclosure action based on the borrower’s continuing default on the same note.
SUMMARY: In 2012 a circuit court dismissed with prejudice a foreclosure action against Thompson on a home loan. That case had been filed in 2010. Several years later, a different entity sent Thompson a notice of intent to accelerate payment and demanded payment; Thompson did not cure the default and the entity commenced this foreclosure action in 2014. The circuit court later ruled that claim preclusion did not bar the second foreclosure action based on defaults occurring after the trial date in the 2010 action. The court of appeals certified the case to the supreme court.
The supreme court affirmed in a unanimous opinion authored by Justice Abrahamson. Applying claim preclusion analysis, the sole issue was the “identity between causes of action in the two lawsuits” (¶ 32). “The 2010 lawsuit and the instant case do not share ‘a common nucleus of operative facts’” (¶ 38). The key difference was that “no valid acceleration of the debt occurred in the 2010 lawsuit” (¶ 44). Put differently, Thompson was not found in default in the 2010 lawsuit and the balance of the note was never validly accelerated. Thompson was obligated to make payments after the dismissal of the 2010 lawsuit, which he failed to do, entitling the lender to commence this lawsuit.
The court also “briefly” discussed two issues relating to the admission into evidence of a copy of the note and whether the lender proved it had possession of the “original wet-ink note.” The court ruled in the lender’s favor on both issues, relying on its recent opinion in Deutsche Bank National Trust Co. v. Wuensch, 2018 WI 35.
Zoning – Building Permit Rule – Land
Golden Sands Dairy LLC v. Town of Saratoga, 2018 WI 61 (filed 5 June 2018)
HOLDING: The building permit rule extends to land identified in the building permit application as part of the project.
SUMMARY: Golden Sands Dairy obtained a building permit to build seven “farm structures” for a dairy operation on 6,300 acres. The town of Saratoga, however, later enacted a zoning ordinance that prohibited that type of agricultural use. The circuit court granted a declaratory judgment in favor of Golden Sands under Wisconsin’s building permit rule. In an unpublished decision, the court of appeals reversed, ruling that the building permit rule extended only to the right to build structures, not to the land’s use.
The supreme court reversed the court of appeals in a majority opinion authored by Justice Gableman that addressed an issue of first impression, namely, “does the Building Permit Rule extend to land identified in the building permit application as part of the project upon which no actual construction was planned?”(¶ 3). The court held that the rule “extends to all land specifically identified in a building permit application” (¶ 4).
The opinion discusses the rule, which is a minority position, comparing it with the majority approach that the court found wanting (see ¶ 18). “The bright-line Building Permit Rule is simple for parties to interpret and courts to apply. Conversely, the majority rule requires fact-intensive litigation and ‘create[s] uncertainty at various stages of the development process’” (¶ 24). The rule’s hallmark, then, is its predictability and ease of application (see ¶ 27). Golden Sands’ situation demonstrated the rule’s virtues (see ¶ 32).
Justice Abrahamson dissented, joined by Justice A.W. Bradley, on grounds that the majority engages in an “ill-advised expansion” of the rule that sacrifices important “public policies” (¶ 36).
Restrictive Covenants – Commercial Activity
Forshee v. Neuschwander, 2018 WI 62 (filed 5 June 2018)
HOLDING: A restrictive covenant precluding use of lake lots for “commercial activity” was ambiguous and did not preclude the owners from renting out the property.
SUMMARY: Lee and Mary Jo Neuschwander bought property on a lake, renovated a large house, and rented it to vacationers on short-term and long-term bases. Their neighbors objected to this business activity and sued them on grounds that the rentals violated a restrictive covenant barring “commercial activity” on the property. The circuit court ruled in the neighbors’ favor but, in a published decision, the court of appeals reversed. See 2017 WI App 43.
The supreme court affirmed the court of appeals in a lead opinion authored by Chief Justice Roggensack, which concluded that the phrase “commercial activity” was ambiguous. Interpreted narrowly, the covenant did not preclude short- or long-term rentals (see ¶ 28).
Concurring, Justice Abrahamson disagreed with the lead opinion’s analysis. She said that the phrase commercial activity is not ambiguous (see ¶ 34) even though it is “breathtaking[ly]” broad (¶ 38). Properly interpreted, however, it applies to what occupants (not owners) are doing on the property itself, namely, “residential” activity (¶¶ 43, 49).
Justice Kelly, joined by Justice R.G. Bradley, also concurred, approaching the construction of the statute as a “grammatical exercise” (¶ 67) that limits what the renters may do on the property (see ¶ 71).
Justice A.W. Bradley filed a dissenting opinion.
Tax Assessments on Real Estate – Classification Determined by Use of the Property
Thoma v. Village of Slinger, 2018 WI 45 (filed 10 May 2018)
HOLDING: The taxpayer failed to provide evidence demonstrating that the assessment of his property as residential was erroneous.
SUMMARY: Petitioner Thoma purchased land in the village of Slinger in 2004 with the intent to develop it into a residential subdivision. Before Thoma purchased the land, it was operated as a farm and received an agricultural classification for tax assessment purposes. Thoma worked with the village to rezone the area to a residential classification and the parties entered into a developer’s agreement that contained a restrictive covenant prohibiting Thoma from using the land for agriculture – its use had to be residential. Only two lots were actually sold, and the property remains mostly vacant land covered with ground cover maintained by mowing.
In 2011, the village filed suit against Thoma to enforce the restrictive covenant and, in 2012, successfully obtained an injunction prohibiting Thoma from using the land for agricultural purposes.
The village tax assessor reclassified Thoma’s property from agricultural to residential in the 2014 tax assessment. Thoma contested that assessment before the Slinger Board of Review. He urged the board to apply the agricultural classification because nothing had changed on the property from the previous year, he maintained ground cover on the vacant land, and he was having trouble selling the lots. However, he offered no evidence that the property was being used for an agricultural use as defined by statutes and the tax code.
In property tax assessment challenges, the taxpayer bears the burden of proving the assessment is wrong. If the taxpayer fails to meet that burden, then the board’s only option is to accept the assessor’s assessment (see ¶ 19). That is what occurred here, and the board ultimately upheld the assessor’s assessment. The circuit court upheld the board’s decision on certiorari review and, in an unpublished decision, the court of appeals affirmed.
In a majority decision authored by Justice R.G. Bradley, the supreme court affirmed. Said the court: “Thoma’s erroneous belief that growing ground cover qualified the property for agricultural classification has no impact on the analysis, nor does his contention that he and
Assessor Grote privately agreed that ground cover constitutes agricultural use. We must apply the law as it exists, not how a party or an assessor mistakes it to be. The law does not permit agricultural classification for the use Thoma told the Board existed at the time of the Board hearing. Because Thoma admitted he was using the property only for maintaining ground cover, and ground cover does not fall within the statutory definition of agricultural use, the Board had no choice but to uphold the assessment. In so doing, it acted within its jurisdiction, according to law, in a reasonable manner, and with evidentiary support” (¶ 22).
This was true even though the assessor incorrectly believed that the injunction described above required him to assess Thoma’s property as residential. Thoma’s property qualified as residential according to the statutory definition of residential use (see ¶ 25).
Thoma also argued that the circuit court should have vacated its original order affirming the board’s decision to uphold the assessor’s assessment of his property. He claimed the circuit court should have granted his request for a new board hearing because of the assessor’s “false” testimony at the hearing that the injunction controlled the tax classification. The supreme court responded that “[b]ecause the circuit court did not erroneously exercise its discretion when it denied Thoma’s motion to vacate, we reject Thoma’s claim and affirm the circuit court’s order” (¶ 26).
Chief Justice Roggensack filed a dissenting opinion that was joined in by Justice Ziegler. Justice Kelly did not participate in this case.
Successor Liability – Fraudulent Conveyances
Springer v. Nohl Elec. Prods. Corp., 2018 WI 48 (filed 15 May 2018)
HOLDING: A claim arising from a mesothelioma death could not be properly brought against a successor corporation under a fraudulent-conveyance theory.
SUMMARY: Springer’s husband died of mesothelioma, which she attributed to workplace exposure to asbestos between 1963 and 1969. She sued various companies, including Powers Holding Inc., which asserted a successor liability defense and moved to be dismissed. The circuit court granted the motion. In an unpublished decision, the court of appeals reversed.
The supreme court reversed the court of appeals in an opinion authored by Justice Kelly. Addressing the “narrow” issue before it, the court held that the Wisconsin Uniform Transfer Act (WUFTA) does not apply to these facts (see ¶ 13).
The majority opinion reviewed the “basics” of “successor non-liability” while focusing on the common law of fraudulent conveyances. It reviewed the wide variety of circumstances that suggest fraud: the inquiry’s purpose “is to discover the actual intent of those who engineered the transfer of assets from the old company to the new – this is not a question of negligence or strict liability”; rather, was the transfer done “for the fraudulent purpose of escaping liability for the transferor’s obligations” (¶ 26).
WUFTA is a “limited tool” and inapplicable on these facts: it is “designed to assist creditors in collecting on claims that may be frustrated by recent asset transfers” (¶ 27). The court held that Powers was properly dismissed based on a fact-intensive analysis of the record.
Justice Abrahamson, joined by Justice A.W. Bradley, dissented on grounds that the “majority confusingly muddles what does and does not constitute indicia of fraud” (¶ 44) and that the plaintiff’s complaint against the companies should not have been dismissed absent an opportunity to amend her complaint or to address the issue on appeal, which the majority had raised sua sponte (see ¶ 46).