Wisconsin Lawyer
Vol. 79, No. 6, June 2006

Court of Appeals Digest

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

Administrative Law Civil Procedure Consumer Law Contempt Criminal Law

Criminal Procedure Family Law Real Property Torts

Administrative Law

Jay M.H. v. Winnebago County Dep't of Health & Human Servs., 2006 WI App 66 (filed 29 March 2006) (ordered published 26 April 2006)

The Winnebago County Department of Health and Human Services determined that allegations of child abuse against a doctor had been substantiated. The doctor requested an evidentiary hearing before an administrative law judge (ALJ), who issued a "final determination" pursuant to Wis. Stat. section 68.12(1). The circuit court affirmed the final determination. Several months later the doctor filed a motion to reconsider on the ground that the complainant had recanted her allegations. The circuit court denied the motion to reconsider, stating that it lacked authority to order a remand.

The court of appeals, in an opinion written by Judge Snyder, reversed. "We are satisfied that Wis. Stat. § 68.13 unambiguously provides authority for the remand of the agency final order for further proceedings necessary to insure the legislative purpose set forth in Wis. Stat. § 68.001. Accordingly, we next address whether the circuit court had authority to remand the Wis. Stat. § 68.12 final determination to the ALJ based upon a reconsideration motion that presents newly discovered recantation evidence" (¶ 7). Reconsideration based on recanted evidence is primarily a feature of criminal law, which provides standards that also should govern in Wis. Stat. chapter 68 cases: recantation "evidence [is] potentially sufficient for relief if the following criteria [are] shown by clear and convincing evidence: (1) the evidence was discovered after the conviction, (2) the defendant was not negligent in seeking evidence, (3) the evidence is material to an issue in the case, (4) the evidence is not merely cumulative, and (5) the recantation evidence is corroborated by other newly discovered evidence" (¶ 12). The court of appeals remanded the matter to the circuit court for a determination of whether the recantation evidence met these standards.

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Civil Procedure

Mohns Inc. v. TCF Nat'l Bank, 2006 WI App 65 (filed 28 March 2006) (ordered published 26 April 2006)

Mohns had a business checking account with TCF Bank. Mohns reported that various checks had been stolen, forged, and cashed without its consent, but TCF ignored Mohns' repeated requests for reimbursement. Mohns filed this lawsuit against TCF seeking reimbursement, but TCF never answered. Service was properly made. Mohns then moved for, and received, a default judgment. Three weeks after receiving Mohns' demand letter, which was based on the default judgment, TCF moved to vacate on the ground of excusable neglect. TCF claimed that the pleadings were "lost in transit" when TCF moved its legal department. The circuit court granted the motion to vacate.

The court of appeals, in a decision authored by Judge Fine, reversed. Excusable neglect, the court explained, "is not synonymous with carelessness or inattentiveness, and it is not sufficient that the failure to answer in a timely manner be unintentional and in that sense a mistake or inadvertent, `since nearly any pattern of conduct resulting in default could alternatively be cast as due to mistake or inadvertence or neglect'" (¶ 9). The record failed to disclose any proper excuse for TCF's lapse. Although TCF claimed that it had "well-established procedures" that ensured the "orderly and timely handling of legal process," it failed to "demonstrate[] either why those procedures, if as efficacious as it implies, did not alert TCF that a suit was potentially imminent (as it was told by Mohns's many letters, which TCF does not deny receiving), or why those `well-established procedures' could not accommodate what the Record reflects was a routine move of an office, albeit alleged by TCF to be `a complicated procedure involving the transfer of many documents and equipment,' not caused by some catastrophe" (¶ 12).

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Consumer Law

Meyer v. Laser Vision Inst., 2006 WI App __ (filed 1 March 2006) (ordered published 26 April 2006)

Meyer brought a class action suit against Laser Vision Institute (LVI). In the suit, Meyer alleged that LVI's newspaper advertisement that offered a Lasik procedure for $299 per eye was untrue and deceptive within the meaning of Wis. Stat. section 100.18(1) and constituted a scheme not to sell at the advertised price, contrary to Wis. Stat. section 100.18(9). The circuit court dismissed the complaint.

The court of appeals, in an opinion written by Judge Anderson, affirmed. The court of appeals said that there was no violation of section 100.18(1). The promise of providing a "free counselor" was not misleading, if only because the ad never described the counselor's role; thus, the fact that the counselor was a "commissioned sales representative" with an incentive to sell higher priced procedures did not violate the statute (see ¶¶ 9-12). The fact that many consumers would not qualify for the low-cost procedure advertised in the paper did not make the ad deceptive (see ¶ 13).

Nor did the ad constitute a "bait-and-switch" scheme in violation of Wis. Stat. section 100.18(9). Nowhere in the complaint did Meyer allege an "overt act" as required by case law and statute: "[T]he complaint fails to allege that the low-cost procedure was not made available to consumers who qualified for the procedure and who wanted it. Specifically, it fails to allege that Meyer qualified for the low-cost procedure and was wrongfully denied it. The complaint does not allege that the counselor disparaged the low-cost procedure to Meyer in an effort to discourage her from purchasing it and then switched to the higher-cost procedure" (¶ 19).

Finally, the court also rejected the plaintiff's "unjust enrichment" claims. The court held that her equitable claims were barred by the contract that she entered into (see ¶ 26). Further, the transaction did not violate Wis. Stat. section 448.30, which requires physicians to inform patients about alternative modes of treatment, because Meyer failed to allege any such omission.

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Contempt

Frisch v. Henrichs, 2006 WI App 64 (filed 1 March 2006) (ordered published 26 April 2006)

The respondent appealed from a postdivorce judgment finding him in contempt of court for fraudulently failing to timely provide copies of his income tax returns to his ex-wife as required by a 1996 stipulation and a family court order. Although the respondent had belatedly supplied the returns, the family court nonetheless found him in contempt and ordered him to pay a substantial sanction because the returns showed a level of income higher than that previously claimed by the respondent. In a decision authored by Judge Nettesheim, the court of appeals concluded that the family court's use of remedial contempt was improper.

"Contempt of court is disobedience to the very authority, process or order of a court, and includes acts such as the refusal to produce a record or document. Wis. Stat.§ 785.01(1)(b), (d)" (¶ 26). Contempt can be punished in two ways. One is with a punitive, or criminal, sanction that punishes a past contempt of court for the purpose of upholding the authority of the court. See Wis. Stat.§ 785.01(2). The other is with a remedial, or civil, sanction that is imposed to ensure compliance with court orders for the purpose of terminating a continuing contempt of court. See Wis. Stat. § 785.01(3). "[A] remedial contempt sanction must be purgeable through compliance with the original court order" (¶ 27).

In this case it was clear to the appellate court that the family court used remedial contempt against the respondent. "However, we disagree that remedial contempt was properly employed in this case. As noted, a remedial sanction is imposed to ensure compliance with court orders for the purpose of terminating a continuing contempt of court. Here, [the respondent's] contempt was his failure to furnish accurate income information by way of timely produced copies of tax returns. But the undisputed fact is that the returns were produced, albeit belatedly, prior to any pronouncement of contempt. Thus, any prior contempt was no longer ongoing .... Moreover, this contempt ... lacked one indispensable feature of remedial contempt: that it be purgeable" (¶ 30) (citations omitted).

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Criminal Law

State v. Moore, 2006 WI App 61 (filed 21 March 2006) (ordered published 26 April 2006)

The defendant was convicted of 14 counts of attempting to intimidate a witness, contrary to Wis. Stat. section 940.42. This statute provides as follows: "Except as provided in s. 940.43, whoever knowingly and maliciously prevents or dissuades, or who attempts to so prevent or dissuade any witness from attending or giving testimony at any trial, proceeding or inquiry authorized by law, is guilty of a Class A misdemeanor" (emphasis added). On appeal the defendant challenged six of the seven counts involving one victim, T.P., as being multiplicitous; he contested all seven counts involving T.P.'s daughter on the basis of insufficiency of evidence. In a decision authored by Judge Kessler, the court of appeals affirmed.

The charges were based on a series of seven letters that the defendant sent to T.P. in which he indicated that pending charges in other cases would be dismissed if T.P. and her daughter failed to show up in court. For example, one letter stated: "Now all I need is for you and [the daughter], to continue not to show up in any and all court dates concerning us. I will handle the rest" (¶ 2). The defendant argued that the evidence was insufficient with respect to the counts involving the daughter as a victim because, in the defendant's view, the state had to prove that the daughter was shown, or apprised of, the letters sent to her mother before he could be found guilty.

Said the court, "[u]nder the circumstances of this case, we disagree. Regardless of whether the letters were addressed to [the daughter] or whether she was aware of their contents, it is obvious that [the defendant] attempted to dissuade [the daughter] through her mother, [T.P.]. [T.P.], as the parent of the minor child, had the parental responsibility and practical authority to monitor communications by third parties with her child, and to influence whether [the daughter] cooperated with the court proceedings. We conclude that there was sufficient evidence to convict Moore of attempting to intimidate [the daughter]" (¶ 13).

The defendant conceded liability for one count of attempting to intimidate T.P., but he claimed that the other six counts involving her as a victim were multiplicitous. A similar claim was made with respect to the multiple counts involving the daughter. Charges are multiplicitous if they charge a single criminal offense in more than one count. Claims of multiplicity are analyzed using a two-prong test that requires an examination of 1) whether the charged offenses are identical in law and fact; and 2) if they are not, whether the legislature intended the multiple offenses to be brought as a single count.

The defendant conceded that the claims were not identical in fact and so the court's analysis shifted to the second prong, under which four factors are relevant to determine legislative intent: 1) statutory language, 2) legislative history and context, 3) the nature of the proscribed conduct, and 4) the appropriateness of multiple punishment. Using these factors the appellate court held that the several intimidation charges were not multiplicitous. Among other things the court concluded that "the context of Wis. Stat. § 940.42 supports charging a person with a separate count for each letter sent, and/or each other act performed, for the purpose of attempting to `dissuade' any witness from attending or giving testimony at a court proceeding or trial" (¶ 25).

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Criminal Procedure

State v. Stewart, 2006 WI App 67 (filed 15 March 2006) (ordered published 26 April 2006)

The defendant was convicted of felony bail jumping and felony fleeing. Bail jumping is a Class H felony, which is punishable by a maximum of three years of initial confinement plus three years of extended supervision for an overall maximum term of imprisonment of six years. The circuit court sentenced the defendant to eight years' probation for the bail jumping conviction. The court came up with this total by determining that the maximum term of probation equals the maximum term of imprisonment (in this case six years) and that two additional years could be added because the defendant was convicted of two felonies at the same time. (Under Wis. Stat. section 973.09(2)(b)2., "if the probationer is convicted of 2 or more crimes, including at least one felony, at the same time, the maximum original term of probation may be increased by one year for each felony conviction.")

On appeal the court of appeals agreed with the parties that the circuit court erred in imposing an eight-year term of probation for the defendant's felony bail jumping conviction. Wis. Stat. section 973.09(2)(b) expressly provides that the maximum term of probation for felonies in Classes B through H is linked to the maximum initial term of confinement - not the maximum term of imprisonment - for the crimes in those classes. Felony bail jumping is a Class H felony, and the maximum initial term of confinement for a Class H felony is three years. Because the defendant was convicted of two felonies at the same time, the maximum period of probation under section 973.09(2)(b) is five years. Accordingly, the appellate court commuted the eight-year term of probation to a five-year term (see ¶ 9).

The defendant also claimed that the circuit court erred in imposing as a condition of probation for the felony bail jumping conviction and as a condition of extended supervision for the felony fleeing conviction that he not enter the township of Richmond (in Walworth County). The appellate court concluded that this geographical limitation does not comply with the requirements that it be narrowly drawn and not unduly restrictive of the defendant's liberties. "[T]he record reveals that the majority of [the defendant's] inappropriate, criminal and threatening behavior took place in and around his home. It was directed towards his wife, children and neighbors and not the Richmond township community at large. The court could have fashioned a more narrowly drawn condition banishing [the defendant] from his residence and the immediate neighborhood surrounding it. Further, the no contact condition of his probation and supervision, a more narrowly drawn restriction on [the defendant], already offers protection to his victims and facilitates his rehabilitation" (¶¶ 16-17).

State v. Owens, 2006 WI App 75 (filed 7 March 2006) (ordered published 26 April 2006)

The defendant appealed from judgments of conviction for burglary and robbery and orders denying his motion seeking participation in the earned release program (ERP). The ERP is a substance abuse program administered by the Department of Corrections. See Wis. Stat. § 302.05. An inmate serving the confinement portion of a truth-in-sentencing bifurcated sentence who successfully completes an ERP will have his or her remaining confinement period converted to extended supervision, although the total length of the sentence will not change. Wis. Stat. § 302.05(3)(c)2. When imposing a bifurcated sentence, "the court shall, as part of the exercise of its sentencing discretion, decide whether the person being sentenced is eligible or ineligible to participate in the earned release program ...." Wis. Stat. § 973.01(3g) (emphasis added). The defendant argued that the trial court failed to adequately explain why it denied his request for ERP eligibility. In a decision authored by Judge Hoover, the court of appeals affirmed.

The defendant contended that even though the trial court set forth an explanation for its sentence, it failed to separately explain its rationale for denying his ERP participation request. The appellate court disagreed. Wis. Stat. section 973.01(3g) explicitly states that the ERP eligibility decision is part of the court's exercise of sentencing discretion. "Thus, while the trial court must state whether the defendant is eligible or ineligible for the program, we do not read the statute to require completely separate findings on the reasons for the eligibility decision, so long as the overall sentencing rationale also justifies the ERP determination" (¶ 9). In a footnote the court specifically declined the defendant's invitation to "come up with factors judges might use" for ERP eligibility decisions (see ¶ 9 n.3).

The appellate court further concluded that the sentencing transcript revealed that the trial court more than adequately explained its decision. When the defendant asserted that he had a drug problem and needed assistance, the court observed that treatment had been made available to the defendant for years, but he never availed himself of those opportunities. Accordingly, to the extent that the defendant complained that the court failed to assess the likelihood of his success in the ERP, "it is evident the court inferred, from [the defendant's] past apathy and failure to seek help, that [the defendant] was neither sincere about wanting substance abuse treatment nor likely to succeed in the treatment program" (¶ 10). After assessing the defendant's criminal record and the particularly aggravated nature of the robbery, the circuit court determined that protection of the community was the paramount sentencing objective, although punishment was also important. Ultimately, the circuit court found that the defendant's participation in the ERP would be inconsistent with the protection and punishment objectives and would not provide sufficiently "close rehabilitative control." Said the appellate court, "[t]his is not an erroneous exercise of discretion" (¶ 11).

State v. Klubertanz, 2006 WI App 71 (filed 16 March 2006) (ordered published 26 April 2006)

The defendant pleaded guilty to one count of repeated sexual assault of a child on three or more occasions, in violation of Wis. Stat. section 948.025(1). The court sentenced him to three years of confinement in prison followed by 12 years of extended supervision. The defendant later asked the circuit court to modify the sentence on the basis that the sentence became unduly harsh because the defendant was sexually assaulted while in prison. The circuit court concluded there was no authority for the proposition that a defendant's subjection to a criminal act in prison could render the defendant's sentence unduly harsh and, thus, be a basis for sentence modification. In the circuit court's view, it had the authority to modify the sentence based on the sexual assault only if the assault were a "new factor" under the case law, and the circuit court concluded it was not (see ¶ 14).

In a decision authored by Judge Vergeront, the court of appeals affirmed. It held that "the circuit court's authority to review its decision to determine whether the sentence it imposed is unduly harsh does not include the authority to reduce a sentence based on events that occurred after sentencing. Rather, in deciding whether a sentence is unduly harsh, the circuit court's inquiry is confined to whether it erroneously exercised its sentencing discretion based on the information it had at the time of sentencing" (¶ 40) (emphasis added).

A circuit court's authority to modify a sentence based on events that occur after sentencing is defined by "new factor" jurisprudence" (see id.). A "new factor" is "a fact or set of facts highly relevant to the imposition of sentence, but not known to the trial judge at the time of original sentencing, either because it was not then in existence or ... was unknowingly overlooked by all of the parties." Rosado v. State, 70 Wis. 2d 280, 288, 234 N.W.2d 69 (1975). The definition has been refined to add that a new factor is "an event or development which frustrates the purpose of the original sentence." State v. Crochiere, 2004 WI 78, ¶14, 273 Wis. 2d 57, 681 N.W.2d 524.

In this case the defendant did not argue that the sexual assault that occurred in prison was a new factor as defined in Crochiere. "This implicit concession is appropriate because there is no basis in the record for arguing the sexual assault in prison was highly relevant to the circuit court's sentencing decision or an event or development that frustrates the purpose of the sentence the court imposed" (¶ 41). "Because the sexual assault in prison is not a new factor under the case law, the circuit court correctly decided that it did not have the authority to modify the sentence based on the assault" (¶ 1).

When a defendant claims that the conditions of confinement have rendered a sentence unduly harsh, the remedy is not modification of the sentence, but, if the requisite standards are met, a change in the confinement conditions. See State v. Krieger, 163 Wis. 2d 241, 471 N.W.2d 599 (Ct. App. 1991). "Although it is not critical to our analysis, we observe that in this case, [the defendant's] own testimony showed that the prison officials took steps to protect [him] from another assault by his cellmate" (¶ 43).

State v. Mikulance, 2006 WI App 69 (filed 15 March 2006) (ordered published 26 April 2006)

Writing for the court of appeals, Judge Anderson stated the issue, holding, and reasoning with admirable clarity in the opinion's opening paragraph: "In this appeal from orders dismissing his most recent postconviction motion, Thomas A. Mikulance wrongly attempts to use Wis. Stat. § 973.13 (2003-04) as a vehicle to make an end-run around the procedural bar to successive postconviction motions articulated in Wis. Stat. § 974.06(4) and State v. Escalona-Naranjo, 185 Wis. 2d 168, 185, 517 N.W.2d 157 (1994). Section 973.13, as it pertains to sentencing a repeat offender, applies only where the defendant files a motion alleging that the State has failed to prove the prior conviction necessary to sustain the habitual criminal status (by proof or by admission) or when the penalty imposed is longer than permitted by law for a repeater. Mikulance, however, advances neither of the above arguments and therefore § 973.13 and its attendant exception to the procedural bar do not apply. Mikulance instead raises constitutional questions concerning the circuit court's procedure in accepting his no contest pleas that could have been raised in his previous postconviction motion. Section 974.06 and Escalona-Naranjoprohibit his present claim for relief" (¶ 1).

State v. Missouri, 2006 WI App 74 (filed 14 March 2006) (ordered published 26 April 2006)

The defendant was convicted of possessing cocaine and resisting arrest. He appealed, arguing that the circuit court erred by not allowing him to present certain evidence. The court of appeals, in an opinion authored by Judge Wedemeyer, reversed the circuit court and remanded this matter with directions.

The defendant sought to have admitted at trial "other acts" evidence that one of the arresting officers had mistreated another suspect on two occasions. The trial court excluded the evidence on the ground that its probative value was outweighed by other considerations. During a postconviction hearing, the defendant offered evidence that the same officer had mistreated four other individuals. The court ruled that this other acts proof was also inadmissible because its probative value was also outweighed by other considerations, and therefore the proof failed to meet the fifth standard governing newly discovered evidence, namely, a showing of a reasonable probability of a different outcome.

The court of appeals applied the Sullivan test, which governs the admissibility of other acts proof. See State v. Sullivan, 216 Wis. 2d 768, 576 N.W.2d 30 (1998). The court of appeals first addressed the evidence that the defendant sought to have admitted at trial. Because the defense offered this evidence to show the officer's racial prejudice toward blacks and his motive to falsify evidence, beat blacks, etc., it clearly satisfied the "other purpose" element of Wis. Stat. section 904.04(2). The proof was also relevant and carried sufficient probative value to satisfy section 904.03.

"The defense here argued that [the officer] had a bias or prejudice against black people who were not immediately compliant with his orders. Thus, that bias/prejudice can be explored through extrinsic evidence to attack [the officer's] character. As long as this evidence is direct and positive and not remote and uncertain, it may be received to discredit the testimony of the witness. Here, we are convinced that the ... testimony satisfies these requisites. Thus, we conclude that the trial court erroneously exercised its discretion in refusing to allow the defense to present its witnesses who would have attacked the credibility of [the officer]" (¶ 22). The court applied the same analysis and holding to the other acts evidence raised at the postconviction stage.

State v. Medina, 2006 WI App 76 (filed 30 March 2006) (ordered published 26 April 2006)

The court of appeals, in an opinion written by Judge Vergeront, affirmed the defendant's conviction on several burglary counts. The principal issue on appeal concerned the motion made by the defendant on the morning of jury selection to disqualify the prosecutor on the ground that he had represented the defendant in a criminal matter about three years earlier. The prosecutor testified that he had not remembered the defendant until the matter was raised, and he asserted that he had acquired no confidences that were relevant to this case. The trial court denied the motion.

Wisconsin courts have set forth a "substantial relationship" standard, based on SCR 20:1.9, for determining when a prosecutor should be disqualified because he or she had previously represented a criminal defendant (see ¶ 15). Such claims may be deemed waived if they are raised too late (see ¶ 18).

"We conclude the circuit court may, in the proper exercise of its discretion, deny a motion to disqualify a prosecutor under the substantial relationship standard if the motion is untimely. The circuit court properly exercises its discretion when it applies the correct legal standard to the relevant facts of record and reaches a reasonable result using a rational process .... In the context of a motion to disqualify a prosecutor under the substantial relationship standard, a non-exclusive list of factors to consider in deciding if the motion is timely brought include: when the defendant knew who the prosecutor was and that the prosecutor had previously represented the defendant; whether and when the prosecutor realized he or she had previously represented the defendant; applicable time periods established in scheduling orders; at what stage in the proceeding the motion is brought; reasons why the motion was not brought sooner; prejudice to the State because of the timing of the motion if the motion is granted; and prejudice to the defendant if the motion is denied" (¶ 24).

The court of appeals said that the record supported the trial judge's ruling. "Although defense counsel had just learned of the prior representation a few days earlier, the court could reasonably infer that [the defendant] knew much earlier in this case who the district attorney was and knew he was the same person who represented [the defendant] at a sentencing three years earlier. In the absence of any explanation why [the defendant] did not bring this to the attention of his attorney earlier, the court could reasonably infer that [the defendant] was raising it just before jury selection for purposes of delay. The court implicitly credited the district attorney's statement that he had not remembered the prior representation before defense counsel told him, which the court could properly do. The court also properly considered the scheduling orders it had entered and that the jury panel had been called. Finally, nothing presented to the circuit court indicated that there would be any prejudice to [the defendant] in denying the motion: the district attorney could not remember anything from the prior representation and [the defendant] presented little detail about the prior case. We recognize that ... the substantial relationship standard inquires into the relationship between the two cases, and not into whether confidential information was actually given to the attorney and whether the attorney remembers that information. Nonetheless, the likelihood of an actual conflict of interest is an appropriate factor to take into account in deciding whether to deny as untimely a disqualification motion against a prosecutor based on the substantial relationship standard" (¶ 25).

Finally, addressing the defendant's postconviction motion, the court of appeals held that when a disqualification motion is denied as untimely, the proper standard is whether an "actual conflict" occurred during the trial. Put differently, it is inappropriate to apply the standard governing "potential conflicts" in such a setting. "[The defendant] is correct that under this standard a substantial relationship may exist even if there is no evidence that confidential information relevant to the later case was communicated to the attorney" (¶ 37). Nonetheless, on this record the defendant failed to meet his burden of proof.

Judge Lundsten concurred but wrote separately to emphasize that the defendant's conviction could have been affirmed without deciding the propriety of the pretrial ruling.

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Family Law

Borreson v. Yunto, 2006 WI App 63 (filed 23 March 2006) (ordered published 26 April 2006)

In an action to enforce a physical placement order, the circuit court found that the child's mother had unreasonably denied to the father periods of placement. The court, however, denied the father's request for attorney fees.

The court of appeals, in an opinion written by Judge Dykman, reversed. Under Wis. Stat. section 767.242(5)(b), a court must award attorney fees "to a petitioner seeking enforcement of a placement order when the court finds the respondent `intentionally and unreasonably denied the petitioner' physical placement" (¶ 9). In short, the statute is mandatory. The court of appeals held that the circuit court's award of guardian ad litem fees instead of attorney fees to the petitioner's lawyer was not sufficient (see ¶ 13).

The court next addressed when and how the petitioner's attorney fees must be proved. It held that the proof need not be introduced at the hearing itself; rather, the petitioner may offer the evidence "at some point after the conclusion of the hearing" (¶ 15). The record here revealed that the father's lawyer "diligently," but unsuccessfully, tried on several occasions to introduce proof of attorney fees at the hearing, but the circuit court rejected the offers for various reasons (see ¶ 17).

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Real Property

Ott v. Peppertree Resort Villas Inc., 2006 WI App 77 (filed 23 March 2006) (ordered published 26 April 2006)

Peppertree Resort Villas appealed an order granting relief to Richard and Judy Ott for Peppertree's violations of the Time-Share Ownership Act (Wis. Stat. ch. 707) and the Consumer Credit Transaction Act (Wis. Stat. ch. 422). In a majority decision authored by Judge Deininger, the court of appeals affirmed in part and reversed in part.

Peppertree owns and operates a resort near Wisconsin Dells, and it sells time-share ownership interests in resort units to the public. The Otts attended a sales presentation at Peppertree's resort in 1994 and purchased a time-share interest in a unit. The Otts signed a time-share contract that was prepared by Peppertree on a preprinted form approved by the Wisconsin Department of Regulation and Licensing. They also signed a document entitled "Interval Ownership Condominium Land Contract," which also was a preprinted form prepared by Peppertree. No Peppertree representative ever signed either of these documents.

The circuit court found that the Otts used the time-share unit for about five years "without any substantial complaint." During that time, they made monthly payments of principal and interest on their land contract and paid annual maintenance fees to Peppertree. In 1999, however, the Otts planned a move to Florida, and they attempted, without success, to sell their time-share unit. They then filed a complaint with the Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP) and ultimately filed this action alleging numerous violations of Wis. Stat. chapters 422 and 707 and certain other consumer protection statutes and regulations. A year after commencing suit, the Otts notified Peppertree by letter that they wished to cancel their time-share purchase contract. The circuit court entered an order rescinding the contract and awarding damages.

Peppertree claimed that the circuit court should not have ordered the Otts' time-share purchase contract rescinded, because their statutory right to cancel it expired years before they notified Peppertree of their desire to cancel. The appellate court upheld the circuit court. "Because Peppertree never signed the time-share purchase contract, and it was thus not a valid and enforceable contract, we conclude the circuit court was empowered to order it rescinded" (¶ 2). "[A]lthough Peppertree's failure to sign the time-share contract may not have served to indefinitely extend the Otts' statutory five-day right to `cancel' it, Peppertree's failure to sign resulted in there being no valid time-share purchase contract between the parties. A contract to purchase a time-share creates an interest in real estate, see Wis. Stat. § 707.03(2), which, under Wis. Stat.§ 706.02(1), must be `signed by or on behalf of' the grantor in order to be valid" (¶ 14). "[I]rrespective of any statutory right to `cancel' a valid contract, a party to an invalid contract may, under the common law, have it rescinded and be restored to the status quo ante" (¶ 15). Accordingly, the court of appeals held, the circuit court did not err as a matter of law in ordering rescission and directing Peppertree to refund the Otts' payments (see ¶ 16).

Peppertree also contended that the circuit court erred in concluding that Peppertree's failure to comply with the Time-Share Ownership Act "adversely affected" the Otts despite finding that the Otts' purchase decision was not influenced by Peppertree's failure to comply with the Act. Wis. Stat. section 707.57(1)(a) provides that "any person ... adversely affected by the failure to comply [with this chapter] has a claim for appropriate relief ..." (emphasis added).

The appellate court agreed with the circuit court that Peppertree's violations of the Time-Share Act "adversely affected" the Otts within the meaning of Wis. Stat. section 707.57(1) because the violations were contrary to the Otts' interests (see ¶ 3). "We thus conclude that any violations by a time-share seller of the purchaser protections enacted in Wis. Stat. ch. 707 `act upon' the prospective purchaser and are `opposed' or `contrary' to the prospective purchaser's 'interests,' even when the violations cannot be shown to have specifically influenced a purchase decision" (¶ 21). "In sum, the Otts were `adversely affected' by Peppertree's violations of Wis. Stat. ch. 707 because the Otts entered into a transaction with Peppertree to purchase a time-share, and, in the course of the parties' dealings, Peppertree did not provide the Otts with all of the purchaser protections to which they were statutorily entitled. The violations thus acted upon the Otts in a manner that was contrary to their interests, and no further showing was required" (¶ 26).

The court of appeals also concluded that in order to restore the parties to the positions they were in before entering the contract, the circuit court should have allowed Peppertree an offset for the reasonable charges for the Otts' occupancy of the time-share unit before rescission of the contract (see ¶ 4). It further held that the circuit court erred in awarding damages for a violation of Wis. Stat. chapter 422 because the transaction at issue was a "first lien real estate mortgage loan," and was thus governed by Wis. Stat. chapter 428 (First Lien Real Estate and Other Mortgage Loans) and excluded from the applicability of chapter 422 (see ¶ 5).

Judge Lundsten filed a dissenting opinion.

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Torts

Kessel v. Stansfield Vending Inc., 2006 WI App 68 (filed 16 March 2006) (ordered published 26 April 2006)

A 15-month-old child was burned by hot water from a dispenser provided by a vendor at a medical center. The plaintiffs alleged that the defendants, the vendor and the medical center, were negligent for failing to warn of the danger and for not providing lids for cups supplied for hot drinks. The circuit court granted summary judgment in favor of the defendants.

The court of appeals, in an opinion written by Judge Vergeront, affirmed, although its analysis differed from that of the circuit court. The court of appeals noted that the failure to warn claim was governed by Restatement (Second) of Torts § 388 (1965), and that both the medical center and the vendor were "suppliers" of the hot water dispenser within the meaning of § 388 (see ¶ 22). Thus, the issue was whether the defendants had "no reason to believe that those for whose use the hot water dispenser was supplied would realize its dangerous condition" (¶ 23).

"The dangerous condition in this case is the steaming hot water: it is dangerous because water that is steaming hot can cause injury when it comes into contact with skin. This danger is common knowledge. Because the user of the dispenser will see that the water is steaming hot, the supplier has every reason to believe that the user will realize the danger that the hot water can injure skin; the supplier has no reason to believe that the user will not understand this. Because the user can see the dangerous condition by a casual inspection, the user is able to take the measures necessary to protect against the dangerous condition. The degree of the injury that may result from the dangerous condition will vary - based on how much is spilled, the length of contact with the skin, whether over clothing or on bare skin, etc. However, the supplier has no reason to know the degree of injury that may result in particular cases. We do not read § 388(b) and cmt. k to require that the supplier warn of the most severe injuries that may result from a dangerous condition that is readily apparent to the user. Rather, under the exception in [§ 388] cmt. k `a warning is not necessary to satisfy the standard of ordinary care when the condition at issue is known to the user'" (¶ 31).

The court of appeals also held that the defendants were not negligent for failing to provide lids for the hot cups. The court predicated this conclusion on public policy grounds that are fact-intensive. In particular, the child's injury was remote from the negligence; the injury occurred when the father "misjudged how quickly his child could get to the place he put the cup while he turned his back to get ice" (¶ 38).

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