Wisconsin Lawyer
Vol. 75, No. 9, September 2002

Court of Appeals Digest

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

Attorneys Civil Procedure Contracts Criminal Law Criminal Procedure

Damages Insurance Motor Vehicle Law Torts

Attorneys

Attorney Fees - Notaries - Forgery - American Rule

Bank One v. Koch, 2002 WI App 176 (ordered published 31 July 2002)

Stair and his half-brother, Koch, co-owned real estate. Koch obtained a $75,000 home equity line of credit on the property from Bank One. Koch gave the bank a mortgage that bore Stair's notarized forged signature. Koch defaulted and Bank One began foreclosure proceedings. Stair contested the foreclosure based on the forgery. A Bank One employee, who had notarized the forged signature, admitted in a deposition that he did not routinely request identification when notarizing signatures (he could not recall this incident). Stair sought attorney fees under Wis. Stat. section 137.01(8), which entitles a party to "all the damages" incurred by a notary's "neglect of duty." The circuit court refused to grant attorney fees to Stair.

The court of appeals, in a decision written by Judge Brown, affirmed. Wisconsin law forecloses courts from construing statutes to include attorney fees "absent explicit authorization" (¶7). Section 137.01(8) does not explicitly authorize attorney fees. The court presumed that the legislature acted with full knowledge of "the American rule requiring each party to shoulder its own attorney fees" (¶9). At oral argument the court explored whether it should adopt an "equitable" exception to the American rule in this instance, but precedent restricted the exception to third-party actions, not a direct action such as this (¶14). Nor was this case controlled by case law awarding attorney fees when insurers engaged in "bad faith" (¶15). Since the statute precluded Stair's request for attorney fees, the court declined to address whether the notary engaged in "neglect of duty" and, if so, whether it was attributable to Bank One.

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Civil Procedure

Medical Experts - Causation

Enea v. Linn, 2002 WI App 185 (ordered published 31 July 2002)

The plaintiffs brought a medical malpractice action because of the extensive injuries sustained by Ryan Enea during his birth. When the plaintiff's original attorney "egregiously" violated the court's scheduling order, the judge limited the plaintiffs to just one expert witness on causation. The defense later deposed the expert, an experienced obstetrician/gynecologist, who, at various points, professed uncertainty about his qualifications to assess the "timing" of various factors and their role in producing Ryan's injuries. The trial court later ruled that this expert, the plaintiffs' sole witness, was not qualified to testify on the issue of causation and granted summary judgment to the defendants.

The court of appeals, in an opinion written by Judge Fine, reversed because the trial judge had "confused" the issue of the diagnosis of Ryan's neurological injuries with the issue of causation. Judge Fine conceded that the plaintiffs' expert "was not qualified to diagnose Ryan's neurological injuries," yet found that he "was qualified to testify about the cause of what the neonatologist identified as Ryan's neurological damage" (¶14). Medical experts are permitted, said the court, to rely on the reports of other medical experts to form an opinion (¶16). It also noted that Wisconsin's threshold for expert testimony "is not stringent." Id.

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Contracts

Assignments - Settlements

J.G. Wentworth v. Callahan, 2002 WI App 183 (ordered published 31 July 2002)

Callahan was seriously injured in an accident. He later settled his lawsuit with the tortfeasor's insurer, Sentry Insurance, by purchasing an annuity that began in 1992 and guaranteed him a minimum of about $300,000. Several years later Settlement Capitol Corp. (SCC) bought Callahan's future payments under the annuity in exchange for a lump sum payment. The original settlement with Sentry, however, contained a nonassignability clause that prohibited Callahan from assigning his future payments. SCC later assigned its own interest in the annuity to Wentworth, which also was aware of the nonassignability clause. In 1997 Sentry ceased payment. Wentworth eventually began a declaratory judgment action against Callahan and Sentry. The judge ruled that the nonassignability clause was valid and refused to grant summary judgment to Wentworth.

The court of appeals, in an opinion written by Judge Curley, affirmed. Although no Wisconsin case had yet addressed this issue, "the 'modern' trend is to enforce nonassignability clauses when they appear in structured settlements" (¶14). "Magic" words are not required to make such clauses enforceable (¶15). Moreover, "the anti- assignment language ... was inextricably linked to favorable tax treatment for both parties" (¶18).

Criminal Law

Persistent Repeaters - Prior Out-of-state "Serious Felonies"

State v. Collins, 2002 WI App 177 (ordered published 31 July 2002)

The defendant was convicted in Wisconsin of attempted first-degree intentional homicide. The state alleged that he had previous convictions in Missouri for "murder second degree" and in Illinois for "second degree murder" and thus was subject to life in prison without the possibility of parole as a persistent repeater. See Wis. Stat. § 939.62(2m)(c). This statute applies to a person who has been convicted of a "serious felony" and who has a statutorily described record of "serious felony" convictions in the past. If one or more of the prior convictions occurred under the laws of another jurisdiction, the statute requires that the prior offense be "comparable" to offenses categorized as "serious felonies" under Wisconsin law.

In a decision authored by Judge Dykman, the court of appeals concluded that the statute requires the circuit court to independently determine whether an out-of-state crime is comparable to a Wisconsin "serious felony" within the meaning of the persistent repeater statute. This is true even if the defendant admits that he or she is a persistent repeater.

Determining whether a crime in another state is "comparable" to a "serious felony" under Wisconsin law is not always easy. Because the underlying question is whether the defendant's conduct in the other state would be a serious felony if performed in Wisconsin, one way to determine that an out-of-state crime is comparable may be to seek an admission from the defendant of the facts upon which the out-of-state conviction was based. That way, the circuit court will not have to consider all of the possible ways that the out-of-state crime may differ from the Wisconsin crime. If the defendant's conduct would have been a "serious felony" in Wisconsin, then the court need not even consider the elements of the crime in the other state.

But the appellate court recognized that, in many instances, the defendant will not admit to the past conviction or the conduct upon which it was based. "In those cases, if the out-of-state conviction was entered after a guilty or no contest plea, the circuit court may consider as admitted the facts that were alleged in the charging instrument, assuming that the State has sufficiently proven the conviction itself and has obtained the necessary documents from the record in the out-of-state case. If the underlying facts of the previous conviction are unknown, however, the circuit court must carefully determine whether the out-of-state crime is comparable by comparing the out-of-state crime's elements and that state judiciary's interpretation of those elements with those of the Wisconsin crime. If this examination demonstrates that, by being convicted of the out-of-state crime, the defendant necessarily engaged in conduct that would be a 'serious felony' if committed in Wisconsin, the defendant may be sentenced as a persistent repeater" (¶ 24).

In this case, the court concluded as a matter of law that the second-degree murder conviction in Illinois would be a "serious felony" under the Wisconsin persistent repeater statute. The defendant did not challenge the use of his Missouri conviction for repeater purposes.

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Criminal Procedure

Discovery - State's Rebuttal Witnesses

State v. Konkol, 2002 WI App 174 (ordered published 31 July 2002)

In this OWI case the state anticipated before trial what the defense theory would be and planned to rebut the theory by use of expert witness testimony. The question on appeal, a matter of first impression in Wisconsin, was whether the state was required to disclose a known and anticipated rebuttal witness. Wis. Stat. section 971.23(1)(d) provides that the duty to disclose witnesses "does not apply to rebuttal witnesses or those called for impeachment only."

In a decision authored by Judge Brown, the court of appeals held that the discovery statute places no duty on a prosecutor to list a rebuttal witness even if he or she knows before trial that the witness will be called. "To put it bluntly, the defense takes its chances when offering a theory of defense and the State can keep knowledge of its legitimate rebuttal witnesses from the defendant without violating § 971.23(1)(d)" (¶ 1). The state has no duty to disclose a legitimate rebuttal witness, even when the state knows the defense strategy in advance and anticipates using the witness at trial.

See ¶ 15.

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Damages

Economic Loss - Contracts - "Lost Profits"

Magestro v. North Star Envtl. Constr., 2002 WI App 182 (ordered published 31 July 2002)

The plaintiff sued the defendant contractor after a building's foundation cracked within weeks after its completion. A jury awarded the plaintiff, who ran an engine repair business, about $30,000 for building repairs, $0 for lost profits, and $44,000 for revenue losses.

On appeal, the contractor argued that the award for revenue losses could not be made in an action for breach of a construction contract. The court of appeals, in an opinion written by Judge Snyder, affirmed in part and reversed in part. The court distinguished "economic loss" from the "economic loss doctrine" that polices the border between tort and contract law. In this case, the judge had dismissed the negligence claims; thus, "the economic loss doctrine [had] no further applicability to the remaining breach of contract claims" (¶8).

In a contract action, the plaintiff is entitled to consequential as well as compensatory damages. Compensatory damages may include "lost profits," but case law firmly established that they do not embrace "lost revenue" (¶13). In this case, the jury was not provided definitions of "profit" or "revenue," thus creating real potential for "jury confusion" (¶18). For this reason the court of appeals ordered a new trial on the issue of lost profits.

Insurance

Limits - "Each Person" - Emotional Distress

Kosieradzki v. Mathys, 2002 WI App 191 (ordered published 31 July 2002)

Kyle's mother and twin brother watched as he was struck by a car as he crossed a road. His father and sister also witnessed the immediate aftermath of Kyle's horrendous injuries. In a suit against the driver's liability carrier, the trial court ruled that the policy's "each accident" limit applies to the claims for emotional distress brought by Kyle's relatives. The policy contained limits of $50,000 for "each person" and $100,000 for "each accident."

The court of appeals, in an opinion written by Judge Hoover, reversed based on Estate of Gocha v. Shimon, 215 Wis. 2d 586 (Ct. App. 1997), in which similar policy language was at issue. "Although the [policy] language here refers to all damages arising out of injury to one person and does not specifically mention damage sustained by others, claims for 'loss of services or death' necessarily include claims brought by persons other than the one injured in the accident. The policy here limits the recovery for all claims arising out of the injury of one person. Although those claims, such as emotional distress, may be independent and non-derivative and constitute 'bodily injury,' they arise out of the injury one person sustained." (¶13)

Limits - "Each Person" - Emotional Distress

Hause v. Bresina, 2002 WI App 188 (ordered published 31 July 2002)

This case raised issues identical to those addressed in Kosieradzki v. Mathys, 2002 WI App 191 (see above): whether family members' claims for emotional distress arising out of the death or injury of a loved one are limited by a policy's "each person" coverage, or instead by the "each occurrence" coverage. Here a woman's family watched her airplane burn after it crashed and she was killed. The trial court ruled that the claims were covered by the "each person" limitations on coverage.

The court of appeals, in an opinion written by Judge Cane, affirmed. Following the same line of reasoning employed in Kosieradzki v. Mathys, the court also rebuffed arguments that the policy was ambiguous, absurdly interpreted, or controlled by Tenth Circuit precedent. Of critical importance was the policy's treatment of derivative claims, such as emotional distress, which were clearly governed by its "each person" limits for all damages that occurred because of bodily injury to the passenger (the deceased).

Motor Vehicle Law

Fleeing an Officer - Elements of the Offense

State v. Sterzinger, 2002 WI App 171 (ordered published 31 July 2002)

This case concerns the elements of the fleeing an officer offense. As it pertains to the allegations in this case, Wis. Stat. section 346.04(3) provides that "no operator of a vehicle, after having received a visual or audible signal from a traffic officer, or marked police vehicle, shall knowingly flee or attempt to elude any traffic officer by wilful or wanton disregard of such signal so as to interfere with or endanger the operation of the police vehicle, or the traffic officer or other vehicles or pedestrians."

The court first considered the mental state for this offense. The defendant claimed that the state must show that the driver knowingly disobeyed an officer's signal by fleeing or attempting to elude the officer and, further, that he or she knowingly interfered with or endangered another vehicle or person. In a decision authored by Judge Deininger, the appellate court concluded that "knowingly" applies only to the "flee or attempt to elude" element and not to the "interfere with or endanger" element.

The court also addressed whether the statute requires actual interference with or endangerment of the police vehicle or other identified vehicles or pedestrians, as opposed to simply creating a risk of such interference or endangerment. It held that the statute does not require the operator of a fleeing vehicle to actually interfere with or endanger identifiable vehicles or pedestrians. He or she need only drive in a manner that creates a risk or likelihood of that occurring.

In a footnote, the court observed that, as an alternative to proving that a driver attempted to elude a traffic officer "by wilful or wanton disregard of such signal so as to interfere with or endanger" other vehicles or persons, the state may show that the driver either increased the speed of his or her vehicle or extinguished its lights "in an attempt to elude or flee." The state did not rely on either alternative element at the trial in this case and the parties did not discuss them on appeal.

Torts

Known and Present Danger - Government Immunity

Caraher v. City of Menomonie, 2002 WI App 184 (ordered published 31 July 2002)

While walking to a friend's home, Michael decided to cross a creek by walking on a cement-encased sewer pipe rather than by using a public sidewalk. He slipped, fell, struck his head, and drowned in the creek. The plaintiffs alleged that the city was liable for maintaining a known and present danger, in part because it failed to replace a fence that had been torn down by trespassers. The circuit court denied the city's motion for summary judgment.

The court of appeals, in an opinion written by Judge Hoover, reversed. Under Wis. Stat. section 893.80(4), the city had immunity for its discretionary acts, such as designing and constructing its sewer system. When a known and present danger exists, government officials must act to protect the public. This exception to immunity, however, did not apply in this case. The pipe was not designed or intended as a footbridge. Indeed, a public walkway had been provided. "[U]sing the sewer pipe for an unintended purpose presents an obvious danger" (¶15). Finally, the city's decision not to replace the fence also was a discretionary act against which it was immunized.

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