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| Vol. 74, No. 2, February 2001
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Court of Appeals Digest
This column summarizes
selected published opinions of the Wisconsin Court of Appeals. Full-text
decisions are available online. 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.
by Prof. Daniel D. Blinka & Prof. Thomas J. Hammer
Arbitration
Costs - Arbitration Agreement
Lane v. Williams, 2000
WI App 263 (filed 28 Nov. 2000) (ordered published 20 Dec. 2000)
The Lanes sued their insurer over a coverage dispute. The circuit court
stayed the action and referred the matter to arbitration as contemplated
by the policy, which also provided that the parties "share" the costs
equally. The arbitration panel awarded the Lanes about $64,000. When the
Lanes moved to confirm the award, as provided by Wis. Stat. section 788.09,
they also moved for costs under various theories. Pursuant to section
807.01, the court granted Mrs. Lane double costs because the insurer had
not accepted her offer of settlement. The judge awarded Mr. Lane taxable
costs and interest on his award.
The court of appeals, in a decision written by Judge Peterson, reversed.
Prior case law held that section 814.01 permits costs only after a "litigated
trial court proceeding"; thus, "no statutory costs are available after
an arbitration" (¶ 12). The court also held, based upon prior case
law, that section 814.06 "does not give the circuit court an independent
basis for awarding costs" (¶ 13). Costs must be explicitly authorized
by statute, which was not the case here. Finally, case law also rejected
the argument that language in the arbitration agreement that provided
that "local court rules governing procedure and evidence will apply" incorporated
the cost provisions in chapter 814.
The court next turned to the "double costs" imposed pursuant to section
807.01(3). It held that here too the statute is limited to a "prevailing
party" in a "litigated trial court proceeding" (¶ 18).
Attorneys
Lawyer-client Relationship - "Medical Mal" Cases - The "Fund"
Wisconsin Patients Compensation
Fund v. Physicians Ins. Co., 2000 WI App 248 (filed 3 Oct. 2000)
(ordered published 29 Nov. 2000)
One insurance company, Physicians Insurance, provides about 40 percent
of medical-malpractice coverage for the state's doctors. Under chapter
655 of the Wisconsin Statutes, the Wisconsin Patient's Compensation Fund
provides excess coverage over and above such primary coverage. A trial
court ruled that "Wis. Stat. § 655.27(5)(b) means that lawyers retained
by it and other medical-malpractice insurers in connection with an action
to which Wis. Stat. ch. 655 applies must 'assume[] an attorney-client
relationship with the Fund' and that this 'requires that the Fund be provided
with the timely transmission of all case evaluations, status reports,
strategic recommendations, and other substantive communications of defense
counsel subject to the provisions of the Code of Professional Responsibility.'"
The trial judge also invalidated restrictions imposed by Physicians Insurance
on what its hired lawyers may reveal to the Fund.
The court of appeals, in a decision written by Judge Fine, reversed.
Wis. Stat. chapter 655 requires that every health-care provider carry
primary insurance or be self-insured. The Fund provides only excess coverage.
Other statutory provisions guarantee that "the Fund may not be sandbagged
by a carrier seeking to shift to the Fund liability that is properly borne
by the carrier" (¶ 5).
The dispute in this case centered around "the attempt by Physicians
Insurance to limit the scope of representation provided to the Fund by
lawyers hired by Physicians Insurance to represent its insured." The Fund
contended that because chapter 655 mandates that the lawyer hired by the
primary carrier must also represent the Fund and provide an "adequate
defense," "it should be privy to all information gathered and strategy
formulated by those lawyers" (¶ 7). But the Fund's contention violated
"the apparent rule in this state that a lawyer/client relationship can
only be formed by the mutual consent of the lawyer and client" (¶
11). For the same reason, it would compel lawyers to violate rules concerning
client confidentiality. Finally, the Fund's position blurs the legislature's
distinction between an "adequate defense," where there is no apparent
reasonable probability that the Fund will face exposure, and an "active
defense," where the Fund's funds might be exposed (¶ 12).
Civil Procedure
Amending Pleadings - Relation-back Doctrine - Notice - Statute of
Limitations
Grothe v. Valley Coatings Inc.,
2000 WI App 240 (filed 3 Oct. 2000) (ordered published 29 Nov. 2000)
Plaintiff sued Valley Coatings for injuries she allegedly sustained
as a result of her exposure to paint and chemicals used during construction
at her workplace. Valley Coatings, which distributed the products, filed
a third-party complaint against Omni Glass & Paint, which applied the
products, and Miron Construction, the project's general contractor. The
circuit court later granted summary judgment dismissing plaintiff's claims
against Valley Coatings, and thereafter Omni and Miron moved to dismiss
because she had not filed any claim directly against them. When plaintiff
moved to amend her pleadings to allege claims against Miron and Omni,
the trial court denied it because the statute of limitations had run and
neither party had received notice within the required time.
The court of appeals, in a decision written by Judge Peterson, affirmed
the trial court's order denying plaintiff's motion to amend her pleadings
to name Omni and Miron as defendants pursuant to the relation-back doctrine,
which is governed by Wis. Stat. section 802.09(3). Valley Coatings had
impleaded Omni and Miron on June 10, 1998, just two days before the statute
of limitations expired, but neither defendant received notice of the action
until June 22, 1998, when they were served with the third-party summons
and complaint. Since this "precise issue" has not arisen in Wisconsin's
caselaw, the court looked to federal precedent construing the identical
rule. It held "that the statute requires receipt of notice of the institution
of the action within the statute of limitations" (¶ 11). Finally,
the record revealed no abuse of discretion in the trial court's denial
of the motion pursuant to its authority under Wis. Stat. section 802.09(1).
The motion to amend came "late" in the proceedings and she offered no
explanation for her failure to request such action earlier.
Commercial
Law
Banks - Forged Checks - Customer's Duty
Weber, Leicht, Gohr & Associates
v. Liberty Bank, 2000 WI App 249 (filed 10 Oct. 2000) (ordered
published 29 Nov. 2000)
An advertising agency suffered significant losses because of an embezzlement
that involved forged and altered company checks. The agency sued its bank
and a jury awarded it about $66,000.
The court of appeals, in a decision written by Judge Fine, reversed
on the ground that the Uniform Commercial Code (UCC) barred the judgment.
The court held that "if a customer does not timely take the reasonable
precautions to protect itself, and the bank has paid the items in good
faith, the customer is, in the word of the code, 'precluded' from holding
the bank liable for damages that the customer's vigilance would have prevented"
(¶ 11). Here the jury found that the agency had failed to comply
with the obligations imposed on customers by sections 403.406 and 404.406
(1997-98) of the UCC. Nor was the court troubled that the agency had framed
its claim as a "misrepresentation" by the bank. Claims for misrepresentation
may "supplement" the UCC but they may not "supplant them" (¶ 12).
UCC - Debt - Collateral - Article 9
Banks Bros. Corp. v. Donovan
Floors Inc., 2000 WI App 253 (filed 3 Oct. 2000) (ordered published
29 Nov. 2000)
Two related companies, Donovan Floors and Breakfall, owed Bank One of
Milwaukee nearly $250,000. When the debtors defaulted, Bank One sued James
Donovan based on a personal guarantee, foreclosed on the Donovans' home,
and moved to recover other secured collateral. The case was settled when
Bank One, the Donovans, and both companies stipulated to the entry of
a judgment foreclosing on the Donovans' home and replevin in connection
with the secured property. Bank One also agreed to give the Donovans a
chance to renew their business and accordingly executed two forbearance
agreements in which it deferred the judgment's enforcement. Later Bank
One assigned the debt and the security to BBC, which entered into a "Notice
of Assignment, etc." with the Donovans and their allied entities. Ultimately,
the deal failed to work out and BBC never received any payments as contemplated
by the Notice of Assignment. Six years later BBC scheduled a sheriff's
sale of the Donovans' home.
The Donovans brought this action seeking an order under Wis. Stat. section
806.07(1)(e) relieving them from the judgment of foreclosure and dismissing
BBC's claim for a money judgment against James Donovan on the personal
guarantee. The trial court denied their motion.
The court of appeals, in a decision written by Judge Fine, affirmed.
Although no controlling caselaw existed, the court held that under the
UCC, specifically Wis. Stat. section 409.505(2), BBC had a right to "immediate
strict foreclosure of all the pledged assets. It gave up that right in
consideration for a partial payment on the debt and the concomitant partial
satisfaction." Thus, under the UCC the Donovans had no grounds to complain;
"they agreed to that arrangement and did so in a statement signed after
default." The court well understood that the Donovans "would love to have
their cake (the chance to save their business given to them by [BBC's]
agreement to hold off on its right to claim the assets pledged for the
debt) and eat it also (keep those assets)" (¶ 11).
Criminal
Procedure
Issue Preclusion - Revocation Proceedings
State v. Terry, 2000
WI App 250 (filed 24 Oct. 2000) (ordered published 29 Nov. 2000)
The defendant was found guilty of possessing a controlled substance
with intent to deliver. On appeal he argued that the doctrine of issue
preclusion should have barred his prosecution. Specifically, at a probation
and parole revocation proceeding, an administrative law judge (ALJ) found
insufficient evidence that he possessed cocaine under a preponderance
(more likely than not) standard.
The court of appeals, in a decision written by Judge Curley, affirmed.
The court applied a five-criteria test set forth in earlier cases and
found that issue preclusion failed on three of them. It was satisfied
that "(1) the district attorney was not a party to the proceedings and
could not have obtained review of the ALJ's decision even if the district
attorney had so desired. Moreover, DOC [the Department of Corrections]
does not appeal the ALJ's decision in parole and probation revocation
proceedings; (2) there are significant differences between revocation
proceedings and criminal trials which warrant relitigation of the issue;
and (3) under the circumstances present here, public policy considerations
weigh against the application of issue preclusion" (¶ 10).
First, because the ALJ ultimately revoked defendant on three other counts,
the DOC had no valid interest in appealing the ALJ's decision on count
one. Second, revocation proceedings, unlike criminal trials, balance the
public's interest in safety with the offender's rehabilitative needs.
Finally, public policy considerations also justified the result. The revocation
decision is made by the executive branch - the DOC, and the state is represented
by a nonlawyer. If the ALJ's determination not to revoke precluded a criminal
prosecution, district attorneys would be forced to intervene in all revocation
proceedings (¶ 14).
Probation Revocation Hearings - Corpus Delecti Rule
State ex rel. Washington v.
Schwarz, 2000 WI App 235 (filed 4 Oct. 2000) (ordered published
29 Nov. 2000)
In criminal trials, the State of Wisconsin applies a confession corroboration
(corpus delecti) rule. According to Wisconsin's version of the rule, all
elements of the crime do not have to be proved independently of an accused's
confession; however, there must be some corroboration of the confession
in order to support a conviction. "If there is corroboration of any significant
fact, that is sufficient under the Wisconsin test." Holt v. State, 17
Wis. 468, 480, 117 N.W. 626 (1962).
In this case, the critical issue before the court of appeals was whether
the confession corroboration requirement applicable to a criminal proceeding
should also apply in a probation revocation proceeding. In a decision
authored by Judge Nettesheim, the court of appeals held that the confession
corroboration rule does not apply in probation revocation proceedings.
But, said the court, this does not mean that a probationer's extra-judicial
admission is per se an adequate basis for revocation. The admission must
carry sufficient indicia of reliability or credence such that the fact
finder can confidently rely upon it to support the conclusion that revocation
is appropriate and necessary.
Return of Seized Property - Money Judgment Against Municipality for
Property Mistakenly Returned to a Third Party
City of Milwaukee v. Glass,
2000 WI App 252 (filed 3 Oct. 2000) (ordered published 29 Nov. 2000)
The defendant was arrested by the Milwaukee police and charged with
receiving stolen property. In connection with the arrest, the police seized
a sizable quantity of copper wire and scrap metal from the defendant's
residence. Later, the police contacted a party who the police believed
to be the lawful owner of the scrap metal and released it to this person.
The defendant subsequently was acquitted of the charge. Then, using
the case number of his criminal case, he filed a petition pursuant to
Wis. Stat. section 968.20 seeking the return of the copper wiring and
other scrap material seized by the police. Following hearings, the circuit
court declared that the value of the property in question was $1,600 and
awarded the defendant a judgment for that amount against the city because
the police department no longer had the defendant's property.
In a majority decision authored by Judge Curley, the court of appeals
reversed. The statute in question directs the trial court to return seized
property to its rightful owner, unless the property is a dangerous weapon
belonging to a person who committed a crime, contraband, or property needed
for evidence or further investigation. The statute's purpose is to permit
the swift return of seized property to the proper owner when the property
is no longer needed by law enforcement personnel.
The majority was satisfied that the intent of the legislature in passing
this law was to authorize the return of seized property and nothing more.
Thus, the court cannot grant a money judgment to the rightful owner under
section 968.20 when the property is missing or mistakenly returned to
another.
Judge Schudson filed a dissenting opinion.
Warrantless Dwelling Search - Emergency Doctrine
State v. Rome, 2000
WI App 243 (filed 18 Oct. 2000) (ordered published 29 Nov. 2000)
Police found a young woman crying and walking along the street in the
middle of a cold winter night, carrying a baby. The woman indicated that
she and her intoxicated husband (the defendant) had had an argument about
their children during which he had yelled, threatened her, and grabbed
her hair. The argument was sufficiently serious to drive her out into
the cold night without appropriate clothing for her or the baby.
Although the woman insisted that she did not want police involvement
and that another child (a 2-year-old) had been asleep and fine in the
house before she left, she did acknowledge that the defendant was drunk
and probably did not even know that she had left the premises. The woman
admitted that she was concerned about the 2-year-old child's welfare because
of the defendant's intoxication and asked the officers to go to her house
and check on the child, though she did not specifically give the police
permission to enter her home.
Upon arrival, the officers made a warrantless entry of the premises
after substantial but unsuccessful efforts to contact anyone within. Once
inside, they found the defendant asleep on a bed in one of the bedrooms.
An officer noticed a light flickering beneath the closet door and, believing
that the 2-year-old child might be hiding in the closet, opened the closet
door and found, instead of the child, a makeshift greenhouse and marijuana
plant. Ultimately the child was located asleep in another bedroom.
The defendant was charged with one count of manufacturing marijuana.
He moved to suppress the evidence found in his closet, arguing that the
police entries into his home and closet were not justified by emergency
circumstances. The circuit court denied the motion. In an opinion authored
by Judge Snyder, the court of appeals affirmed the decision denying the
motion.
The Wisconsin Supreme Court has approved the emergency rule as an exception
to the warrant requirement, recognizing that the Fourth Amendment does
not bar a government official from making a warrantless intrusion when
the official reasonably believes that a person is in need of immediate
aid or assistance. The searching officer must actually be motivated by
a perceived need to render aid or assistance. Secondly, even if the requisite
motivation exists, it must be found that, under the circumstances, a reasonable
person would have thought an emergency existed.
In this case the defendant argued that the objective facts did not support
a reasonable belief that the 2-year-old child was in immediate need of
assistance, thereby warranting the entry into the house and closet. The
court of appeals disagreed. In light of the circumstances as described
above, a reasonable person could believe that there was an immediate need
to provide aid or assistance to the child and that immediate entry into
both the house and the closet was necessary to provide that aid or assistance.
A situation need not necessarily involve a life or death circumstance
in order to constitute an emergency within the emergency rule. The defendant
was intoxicated and had been violent and threatening toward his wife while
arguing about their children. A reasonable person could believe that the
child could be in danger while in the defendant's care at that home. The
objective prong of the emergency rule was thus met in this case.
The defendant also argued that the officers' entry was not subjectively
motivated by a perceived need to render assistance to the child. The claim
was that because one of the officers was apparently motivated, in part,
by his duty to investigate an alleged domestic abuse incident between
the defendant and his wife, the emergency exception did not apply. The
court was not persuaded that the officers' concurrent suspicion of a domestic
abuse incident robbed them of their ability to provide aid or assistance.
Even if the officers had the investigation of alleged abuse on their minds,
this would not have neutralized the genuineness of their aid and assistance
concerns regarding the child. The safety concerns about the child were
sufficient in and of themselves to immunize the seizure; any other investigatory
motives were immaterial. The material question is whether the immediate
need to provide aid or assistance was the officers' prime motivator. In
this case the court concluded that the officers' need to provide aid or
assistance was paramount to the perceived need to investigate an alleged
domestic abuse incident.
Search Warrants - No-knock Entries
State v. Davis, 2000
WI App 270 (filed 7 Nov. 2000) (ordered published 20 Dec. 2000)
Police obtained a search warrant for heroin and related drug paraphernalia
for the lower unit of a two-story house where the defendant lived. The
warrant authorized the officers to enter the unit without first announcing
their presence. [The defendant conceded that the affidavit supported the
warrant's authorization for a no-knock entry.]
Minutes before the warrant was executed, a plainclothes police officer
went to the premises to make an undercover drug buy and to get "a lay
of the land" for the officers who were going to execute the warrant. The
defendant admitted the officer into a little hallway section in the front
of the house. The officer gave money to the defendant, who then proceeded
to walk down a hallway and turn left into an unknown room area. The officer
could hear at least three or four other people inside that room. After
the defendant brought the heroin to the officer, he left the premises
and told officers waiting to execute the warrant about his observations.
A no-knock entry was then made in execution of the warrant.
The defendant moved to suppress evidence seized as a result of the no-knock
execution of the search warrant. The circuit court denied the motion,
and the court of appeals, in a decision authored by Judge Fine, affirmed.
Irrespective of whether a search warrant authorizes a no-knock entry,
the reasonableness of such an entry is determined - not at the time the
warrant is issued - but rather when it is executed. The state must show
"particular facts" that "support an officer's reasonable suspicion that
exigent circumstances exist" to justify a no-knock entry (¶ 9). The
appellate court found that such exigent circumstances existed in this
case. First, the officers could reasonably suspect that the other persons
in the room entered by the defendant when she went to get the heroin for
the undercover officer were either involved in or familiar with the defendant's
drug dealing. Second, just days before the execution of this warrant,
the lead detective on the case had seen a large, pitbull-type dog being
brought out of and back into the house. Given that the defendant had just
sold heroin to the undercover officer, it was not unreasonable for the
detective to reasonably suspect that the dog was in the house, guarding
the cache. Third, the detective explained how easily and quickly heroin
could be destroyed. Said the court, "none of these circumstances were
negated by the undercover officer's observations from the front part of
the hallway minutes before the officers executed the warrant; all made
the officer's no-knock entry constitutionally valid" (¶ 11).
Employment
Law
Wisconsin Fair Employment Law - Discriminatory Termination Based on
Disability - Requirement of Expert Testimony
Wal-Mart Stores Inc. v. Labor
and Industry Review Commission, 2000 WI App 272 (filed 22 Nov.
2000) (ordered published 20 Dec. 2000)
The employee in this case worked for Wal-Mart as a tire and lubrication
technician. His principal duties consisted of draining oil and changing
oil filters on automobiles. He suffers from a form of mental illness known
as obsessive-compulsive disorder (OCD). The employee was receiving treatment
for his OCD in the form of medications and psychotherapy. About three
months before he was fired, Wal-Mart granted him an extended leave to
allow him to undergo a change in his medications. He then returned to
work, at first part-time, progressing to full-time over a four-week period.
Soon after his return to work, a supervisor announced to the automobile
service technicians that another employee was being promoted to the position
of "bay manager." The employee in this case allegedly reacted angrily
and vociferously to this news and thereafter committed an act of insubordination
for which he was fired.
The Labor and Industry Review Commission (LIRC) determined that Wal-Mart
had discriminated against the employee by terminating his employment because
of his disability. The circuit court affirmed the LIRC.
In a majority opinion authored by Judge Deininger, the court of appeals
reversed. It concluded that because there was no expert testimony establishing
that the behavior for which the employee was fired was caused by his mental
illness, the LIRC erred in finding that Wal-Mart terminated his employment
because of his disability.
Wal-Mart conceded that the employee had a disability within the meaning
of Wisconsin's Fair Employment Law. However, in order to prevail on the
discrimination claim, the employee also had to show that Wal-Mart terminated
his employment because of his disability. With regard to the latter, the
appellate court concluded that expert testimony was a prerequisite for
an LIRC finding that the employee's vociferous and insubordinate conduct
was caused by his disorder.
There was nothing in the record from which the appellate court might
conclude that the symptoms and manifestations of OCD are within the realm
of the ordinary experience of mankind. It thus concluded that the question
of whether the OCD caused the employee to react angrily and vociferously
to the news that he had been passed over for promotion and thereby to
engage in allegedly insubordinate conduct is sufficiently complex and
technical that a lay factfinder without the assistance of expert testimony
would be speculating on the matter (¶ 17).
The court observed in footnote that expert testimony may not be a necessity
in every case involving a claim that certain behavior or misconduct is
caused by a disability. The causal linkage between certain behaviors and
some disabilities may well be within the realm of the ordinary experience
of mankind, such as the consumption of alcoholic beverages by one who
suffers from alcoholism.
Judge Vergeront filed a dissenting opinion.
Family Law
Divorce - Equitable Estoppel - One-sided Indefinite Maintenance Modification
Provision of Divorce Judgment
Patrickus v. Patrickus,
2000 WI App 255 (filed 19 Sept. 2000) (ordered published 29 Nov. 2000)
The parties were divorced after 34 years of marriage. During the marriage
the wife worked as a homemaker and the husband was employed as a certified
public accountant. At the time of their divorce, they entered into a comprehensive
marital settlement agreement that was approved by the trial court and
incorporated into the divorce judgment. It provided the wife a maintenance
payment for an indefinite period modifiable annually, provided the amount
would not be less than the greater of one-half of the net profit of the
husband's accounting practice or $4,375 per month, unless the husband
became permanently disabled or the wife cohabited or remarried.
Three years later the husband moved to modify maintenance based upon
a reduction in his income. His ex-wife argued that he was equitably estopped
from seeking a maintenance modification. The trial court concluded that
the marital settlement agreement was unfair because it permitted the wife
to seek increases in maintenance for an indefinite period of time while
providing no mechanism for the husband to seek a reduction. The court
concluded that, for reasons of public policy, equitable estoppel raised
no bar to the husband's motion for maintenance modification.
The court of appeals, in a decision authored by Chief Judge Cane, affirmed.
A party may be equitably estopped from seeking modification of the terms
of a maintenance stipulation incorporated into a divorce judgment if both
parties entered into the stipulation freely and knowingly, the overall
settlement is fair and equitable and not illegal or against public policy,
and one party subsequently seeks to be released from the terms of the
court order on the grounds that the court could not have entered the order
it did without the parties' agreement. See Nichols v. Nichols, 162 Wis.
2d 96, 469 N.W.2d 619 (1991).
Applying these principles, the court of appeals concluded that the circuit
court did not err in deciding that equitable estoppel did not bar the
husband's motion for modification. The parties entered into a comprehensive
marital settlement freely and knowingly that was approved by the trial
court and incorporated into the divorce judgment and the court would not
have had the power to enter the settlement absent the parties' agreement.
Thus, the only remaining issue was whether the stipulation, at the time
it was entered into, violated public policy because it burdened only one
party with the entire risk of financial hardship indefinitely.
The appellate court concluded that the one-sided indefinite maintenance
modification stipulation must be voided on public policy grounds. It violates
basic fairness for the wife to be entitled to the perpetual benefit of
increases in her ex-husband's income, without sharing in the risk occasioned
by a reversal of his good fortune. And, unlike an order that specifies
a nonmodifiable fixed amount or term of maintenance, the present one-sided
maintenance modification provision invites inevitable litigation. The
court agreed with the trial judge that the one-sided indefinite modification
provision in this case fails to accomplish goals of fairness and finality
and must be voided on public policy grounds.
GAL - Fees - Indigents
Olmsted v. Circuit Court,
2000 WI App 261 (filed 16 Nov. 2000) (ordered published 20 Dec. 2000)
Olmsted moved to modify the terms of her children's placement and the
court reappointed the guardian ad litem (GAL) who had represented them
at the divorce proceedings. Although the order directed the county to
pay the GAL at the "SCR rate," both the GAL and the county asked the judge
to review the compensation issue. The judge concluded that Olmsted was
indigent but that the children's father was not. The judge ordered both
parties to pay $50 per month for GAL fees.
The court of appeals, in an opinion written by Judge Deininger, reversed.
The court held that the "only reasonable interpretation of Wis. Stat.
section 767.045(6) (1997-98) is that an indigent party may not be ordered
to pay guardian ad litem fees" (¶ 5). It also held that under the
present statute, "when one party is indigent and the other is not, a court's
only option is to order the nonindigent party to pay the guardian ad litem's
fees" (¶ 8). Put differently, a judge cannot allocate part of the
payment to the county and part to the nonindigent party. Finally, the
court declined to address the proper hourly rate for compensating GALs.
Insurance
UIM - Exclusions - Umbrella Coverage
Jaderborg v. American Family
Mut. Ins. Co., 2000 WI App 246 (filed 24 Oct. 2000) (ordered published
29 Nov. 2000)
After their son was injured in an automobile accident, the Jaderborgs
obtained the $50,000 limits from the tortfeasor's insurer, which did not
cover the boy's damages. The Jaderborgs carried automobile insurance,
which included underinsured motorist (UIM) coverage and a personal liability
umbrella policy issued by American Family. American Family paid the limits
of the UIM coverage provided by the automobile policy. The Jaderborgs
also claimed that the personal liability umbrella policy provided another
source of UIM coverage. American Family denied that claim, but the trial
court declared that the umbrella policy did afford such coverage.
The court of appeals, in a decision written by Judge Peterson, reversed.
The umbrella policy expressly excluded UIM coverage. The court held that
neither the "other insurance" nor the "intra-insured" provisions created
any ambiguity. The "other insurance" provision served only to "prioritize
the insurance coverage afforded by the policy through other applicable
insurance" (¶ 10). It did not grant coverage. The "intra-insured"
clause also was inapplicable because it simply "allows one insured to
sue another in situations such as guest-passenger accidents" (¶ 14).
In short, "[c]overage cannot be established by an exception to an exclusion"
(¶ 17).
School Districts - Independent Contractors - Statutory Limits
Reuter v. Murphy, 2000
WI App 276 (filed 9 Nov. 2000) (ordered published 20 Dec. 2000)
Reuter was badly injured in an accident while riding in a car that was
taking him home from school. The car's driver, Murphy, was paid to take
children to and from school, in her own vehicle, by the school district.
The agreement also obligated Murphy to carry insurance on her car and
the district paid for necessary additional coverage. Reuter sued Murphy
and the district's insurer, Wausau Insurance. He alleged that Murphy was
an "independent contractor" and hence recovery was not limited by Wis.
Stat. section 893.80(3) (1997-98).
The court of appeals, in an opinion written by Judge Eich, affirmed.
First, the court rejected Reuter's contention that the doctrine of issue
preclusion barred Wausau from litigating its "no-coverage" claim. It conceded
that Wausau raised identical "issues" in Kettner v. Wausau Ins. Cos. (Ct.
App. 1995), but this case fell within "the well-recognized 'issue-of-law'
exception" to the issue preclusion rule because the "claims" were not
identical (¶ 11). Second, the omnibus statute, Wis. Stat. section
632.32, required Wausau's coverage because Murphy's car was a "hired"
vehicle within the meaning of the policy and the "owner/driver" exclusion
otherwise would forestall coverage. "[U]nder the omnibus statute, the
coverage enjoyed by the named insured (e.g., the district) must apply
in the same manner to anyone using the described vehicle for a purpose
and in a manner permitted by the policy (e.g., transporting children to
and from a district school), [thus] we hold that the statute extends coverage
to Murphy" (¶ 15).
Finally, the record clearly supported the judge's finding that Murphy
was an "independent contract" against whom the statutory damage limitations
did not apply. The district had never taken any steps to "control the
details of the driver's work." Rather, the district gave Murphy "full
discretion to set her own procedures and her own rules for transporting
the students to and from school" (¶ 20). From this it followed that
Kettner precluded Wausau's arguments that the caps contained in Wis. Stat.
section 345.05 and section 893.80(3) limit Reuter's damage recovery.
UIM - Reducing Clauses - Notice - Constitutionality - Ambiguity -
Illusory Coverage
Sukala v. Heritage Mutual Ins.
Co., 2000 WI App 266 (filed 9 Nov. 2000) (ordered published 20
Dec. 2000)
Sukala was seriously injured while driving a truck for his employer.
His employer carried a policy issued by Heritage that included underinsured
motorist (UIM) coverage of $1 million, and Sukala himself had UIM coverage
of $250,000 per person, $500,000 per accident, through a policy issued
by Western National. Both policies contained reducing clauses for any
amount "(1) paid for bodily injury under another insured liability insurance,
and (2) paid or payable as worker's compensation benefits" (¶ 2).
The other driver's liability insurer (also Heritage) paid Sukala $100,000.
Sukala also received about $600,000 in worker's compensation benefits.
The Sukulas brought this action against the insurers to recover additional
compensation. They moved the court to find: 1) the UIM reducing clause
in the employer's policy was invalid because it failed to comply with
the notice requirements in Wis. Stat. section 631.36(5) (1997-98); and
2) the reducing clauses in both policies were invalid because Wis. Stat.
section 632.32(5)(i) was unconstitutional. The trial judge denied both
motions.
The court of appeals affirmed in a decision by Judge Dykman. Regarding
the first motion, case law clearly held that no notice is required where
coverage changes result from changes in statutes, and not a "change initiated
by the insurance company." Nonetheless, the Sukalas argued that these
cases were distinguishable because Heritage had given them "some notice"
that UIM coverage had changed. The court held that section 631.36(5) does
not apply to changes related to insurance policy reducing clauses that
are not initiated by the insurance company but instead comes into effect
by a statutory change, even where the insurance company gratuitously sends
a renewal notice discussing altered UIM terms" (¶ 7).
The court next addressed a range of issues relating to the validity
of the reducing clauses. The supreme court's recent decision in Dowhower
v. West Bend Mut. Ins. Co., 2000 WI 73, ¶ 36, "disposed" of the Sukalas'
claim that section 632.32(5)(i) was unconstitutional. The statute and
policy language were identical. The court of appeals addressed several
further issues. First, the policy language was unambiguous. Although "it
may be somewhat cumbersome for an insured to cross-reference the limiting
provisions and the declarations page ..., this does not make the policy
language ambiguous, nor are the provisions ambiguous because the calculation
of actual benefits under some circumstances could become complex" (¶
14). Second, the UIM coverage was not illusory. The court held that Dowhower
extends to all three subdivisions in section 632.32(5)(i), which thus
permits reducing UIM coverage by worker compensation benefits (¶
18).
Lemon Law
Component Parts - Manufacturer
Harger v. Caterpillar Inc.,
2000 WI App 241 (filed 25 Oct. 2000) (ordered published 29 Nov. 2000)
The issue in this case was "whether a manufacturer of component parts
of a motor vehicle is subject to the Lemon Law." The court of appeals,
in a decision written by Judge Brown, held that "a manufacturer of component
parts who ships the completed part to the automobile manufacturer is not
liable" under the statute (¶ 1). The defendant, Caterpillar Inc.,
manufactured the engine that was in plaintiff's 1992 Peterbilt tractor.
The holding turned on Wis. Stat. section 218.01(1)(L), which describes
two classes of manufacturers. "Class 1" consists of those who manufacture
or assemble motor vehicles and was not an issue in this case. "Class 2"
manufacturers are defined by four prerequisites. Specifically, "Caterpillar
must have manufactured or installed special bodies or equipment on a previously
assembled truck chassis," which, "when installed must have formed an integral
part of the motor vehicle," and which "when installed must have constituted
a major manufacturing alteration." Finally, Caterpillar must have owned
the completed unit. (¶ 5)
Plaintiff failed to establish the first element: Caterpillar only made
and sold the engine to Peterbilt, which installed it on the chassis. Plaintiff
also fell short on the fourth element. The "completed unit" consisted
of the assembled chassis plus the special bodies or equipment. The engine
cannot be both the "special bodies or equipment" and the "completed unit."
Peterbilt, not Caterpillar, owned the "completed unit." Finally, the legislature
obviously did not intend such a result because Lemon Law damages include
replacing the vehicle or refunding the purchase price. Component part
manufacturers are not in the business of providing "vehicles," nor would
it make sense to require a party like Caterpillar to pay the entire purchase
price.
Motor Vehicle
Law
Implied Consent - Technical Error in Notice of Intent to Revoke the
Operating Privilege
State v. Gautschi, 2000
WI App 274 (filed 9 Nov. 2000) (ordered published 20 Dec. 2000)
The defendant appealed an order revoking his motor vehicle operating
privilege based on his refusal to submit to an implied consent blood alcohol
test after being arrested for OWI. He argued that a form known as the
Notice of Intent to Revoke the Operating Privilege failed to provide him
with the information required by Wis. Stat. section 343.305(9)(a)5, thereby
depriving the trial court of personal jurisdiction to revoke his operating
privilege. In a decision authored by Judge Deininger, the court of appeals
concluded that, although the notice contained a technical error, it did
not prejudice the defendant.
Under the statute, the notice must advise the driver that one of the
issues at an implied consent refusal hearing is "whether the officer had
probable cause to believe the person was driving or operating a motor
vehicle while under the influence of alcohol ... and whether the person
was lawfully placed under arrest" for OWI or a local ordinance in conformity
therewith. The notice that was used in this case described that issue
as being whether the officer "was entitled to request that [the defendant]
submit to the test."
The court of appeals concluded that whether the officer was entitled
to request a test is not substantially the same as whether the officer
had probable cause to believe the person was driving or operating while
under the influence of alcohol and whether the person was lawfully placed
under arrest for OWI. Even though the notice was deficient, however, did
not mean that the defendant is entitled to reversal of the revocation
order and dismissal of the proceedings. The court concluded that the insufficient
description in the notice of the issues that may be contested at a refusal
hearing constitutes a technical error.
The court next had to consider whether the state had established that
the defendant was not prejudiced by the deficiency in the notice he received.
The court concluded that he was not prejudiced by the technical error.
Even though the notice did not precisely communicate all of the possible
issues that could be raised at a refusal hearing, the record did not reveal
any prejudice to the defendant resulting from this defect. He filed a
timely request for a hearing and was given the opportunity to have one.
He was not precluded from challenging the existence of probable cause
or the lawfulness of his arrest for OWI.
The court observed in footnote that it did not conclude that the state
could always demonstrate the lack of prejudice stemming from a notice
with the wording at issue in this case. For example, the recipient of
a similarly worded notice, who believes that the officer lacked grounds
to stop and arrest him or her for OWI, may suffer prejudice if the person
fails to file a timely request for a hearing because he or she did not
understand that this issue could be raised at a refusal hearing.
Real Estate
Damages - Earnest Money - Actual Damages - Election of Remedies
Galatowitsch v. Wanat,
2000 WI App 236 (filed 26 Oct. 2000) (ordered published 29 Nov. 2000)
Working through a realtor, buyers offered to purchase sellers' home
on a WB-11 Residential Offer to Purchase form. Buyers deposited $2,000
as earnest money with the sellers' broker. Buyers failed to obtain financing
and further omitted to notify sellers of this fact by the date specified
in the contract. Sellers notified buyers in writing that they had breached
the contract and demanded the earnest money as liquidated damages. When
they did not receive the earnest money, sellers sued buyers and the real
estate broker who held the funds and demanded $2,000 plus interest. One
month later the sellers sold their home to another party but for a lesser
price. Sellers then amended their complaint to allege actual damages based
on the differences between the two sales prices and also directed the
broker to return the earnest money to buyers. Following a bench trial,
the court awarded sellers about $10,600 in damages.
The court of appeals, in a decision written by Judge Vergeront, affirmed.
The issue was whether "the sellers in a failed residential real estate
transaction are precluded, either by the terms of the purchase agreement
or the doctrine of election of remedies, from recovering actual damages
for the buyers' breach solely because the sellers requested the earnest
money as liquidated damages and, in their initial complaint, requested
the earnest money as a remedy."
Construing the purchase agreement, the court held that a seller's request
for the earnest money as liquidated damages does not foreclose a lawsuit
for actual damages provided the seller does not receive the earnest money
(¶ 19). This approach, the court said, balanced the impact on both
parties and was more likely to promote settlements. "The seller may request
the earnest money as liquidated damages without the risk of having to
file a suit in which the seller cannot recover all damages even if the
seller proves a breach. Upon the seller's request, the buyer has the opportunity
to evaluate the strength of the seller's claim of breach, the likely amount
of damages, and their susceptibility of proof, and to either agree or
disagree to the disbursement of the earnest money as liquidated damages.
If the buyer agrees, the dispute is resolved. If the buyer disagrees,
the buyer understands he or she may have to defend a suit for breach of
the agreement and may have to pay actual damages; however, the seller
must direct the return of the earnest money to the buyer before seeking
actual damages." (¶ 18.)
Finally, the court considered buyers' argument that the doctrine of
election of remedies precluded the actual damages claim. As determined
by case law, "a party who has requested but not received the earnest money
as liquidated damages and sues to recover is not precluded thereby from
amending the complaint to request the alternative remedy of actual damages"
(¶ 22). In short, this case concerned alternate remedies for a breach
of contract, not inconsistent claims such as one for rescission of a contract
and another for breach.
Torts
Group Homes - Vulnerable Residents - "Special Relationship"
Stauss v. Oconomowoc Residential
Programs Inc., 2000 WI App 269 (filed 29 Nov. 2000) (ordered published
20 Dec. 2000)
Stauss, a developmentally disabled 39-year-old woman, sued the group
home where she resided after a counselor repeatedly sexually assaulted
her. Based on a jury verdict, the court entered judgment against the defendant
group home. The court of appeals, in an opinion written by Judge Anderson,
declined to address the defendant's rationale for appeal and instead remanded
for a new trial because the real controversy was not fully tried.
Although the jury had heard argument and evidence about the group home's
failure to supervise its counselor, the claim that it had negligently
supervised Stauss, the plaintiff, was manifestly different and was not
sufficiently tried (¶ 7). The court recognized "that a group home
has a duty to protect its residents from the harm against which they are
least able to protect themselves - abuse at the hands of staff." It adopted
the reasoning of a Washington case and held that : "(1) the special relationship
between the group home and its vulnerable residents gives rise to a duty
of reasonable care, owed by the group home to its residents, to protect
the residents from all foreseeable harm, and (2) sexual assault by a staff
member is not a legally unforeseeable harm" (¶ 15).
Trusts
Trustees - Removal - Cause
Weinberger v. Bowen,
2000 WI App 264 (filed 8 Nov. 2000) (ordered published 20 Dec. 2000)
Catherine Bowen established a charitable trust and named her son John
as one cotrustee and Weinberger, who was married to her granddaughter
Jennifer, as the other cotrustee. The trust was irrevocable. After the
trust was created, Jennifer began a divorce action against Weinberger,
who later refused John's request to resign as cotrustee. Catherine and
all trust beneficiaries filed a petition asking the circuit court to substitute
a new cotrustee in Weinberger's place. Relying on Wis. Stat. section 701.12(1),
the trial judge granted the petition because the settlor, Catherine, and
all beneficiaries had consented in writing to the trust's modification.
The court of appeals, in an opinion written by Judge Nettesheim, affirmed.
Wis. Stat. section 701.12(1) "clearly and unambiguously allows for the
revocation, modification or termination of a trust upon the written consent
of the settlor and all the trust beneficiaries" (¶ 11). No showing
of "cause" was necessary. The court could not "discern any sound reason
why the settlor and all of the beneficiaries should be precluded from
modifying the terms of a trust if all are in agreement that such action
is appropriate" (¶ 12). Another statutory provision, Wis. Stat. section
701.18(2), provides that trustees also may be removed for cause, but applies
"where the settlor and all of the trust beneficiaries are not in agreement
that removal is appropriate, or where the settlor is no longer living
and therefore unable to provide written consent to the removal" (¶
14).
Worker's
Compensation
Exclusive Remedies - Suits Against Agents and Representatives of the
Worker's Compensation Carrier
Walstrom v. Gallagher Basset
Services Inc., 2000 WI App 247 (filed 10 Oct. 2000) (ordered published
29 Nov. 2000)
The plaintiff was injured on the job while working as a pipe fitter.
An MRI revealed a herniated disc in his neck and a physician recommended
that surgery be performed immediately. The plaintiff reported his medical
condition to his employer and to American Zurich, the employer's worker's
compensation insurer. American Zurich had contracted with an adjuster,
Gallagher Basset Services Inc., to administer claims under the worker's
compensation policy. Gallagher required the plaintiff to undergo an independent
medical examination. The independent medical examiner agreed with the
earlier recommendation for surgery and the operation was thereafter performed.
Following surgery, the plaintiff continued to experience pain. He brought
an action against Gallagher alleging that it was negligent in delaying
authorization for surgery. The plaintiff claimed that the delay resulted
in permanent nerve damage. Gallagher brought a motion to dismiss and the
circuit court granted the motion, finding that Gallagher was an agent
of American Zurich and was immune based on the exclusive remedy provision
of the worker's compensation law. See Wis. Stat. § 102.03(2).
In a decision authored by Judge Peterson, the court of appeals affirmed.
Under the Worker's Compensation Act, recovery of compensation is not only
the exclusive remedy against the employer but it also is the exclusive
remedy against the worker's compensation insurance carrier. The exclusive
remedy doctrine applies to agents and representatives of the employer
and the court concluded that, to be consistent, it also must apply to
agents and representatives of the compensation carrier. Because defendant
Gallagher was a representative of the worker's compensation insurer American
Zurich, the exclusive remedy doctrine protected Gallagher from liability.
Permanent Total Disability Benefits - Combination of Scheduled and
Unscheduled Injuries
Secura Insurance v. Labor and
Industry Review Commission, 2000 WI App 237 (filed 13 Sept. 2000)
(ordered published 29 Nov. 2000)
The employee was injured while working as a room installer. The injury
occurred when concrete leaked into his work boots, causing chemical burns
to both of his feet. While the burns themselves eventually healed, they
caused persistent, disabling pain in the employee's left foot. As a result
of this disability, the employee developed difficulties with his gait,
which produced musculoskeletal complications in his lower back. These
complications have been diagnosed alternatively as reflex sympathetic
dystrophy and/or complex regional pain syndrome. He continues to suffer
from pain in his lower left extremity, low back and right shoulder, and
experiences severe headaches.
The Labor and Industry Review Commission awarded the employee permanent
total disability worker's compensation benefits pursuant to Wis. Stat.
section 102.44(2). The employee's claim for lifetime benefits included
both a scheduled injury to his left foot and a nonscheduled injury to
his lower back. [Note: Permanent disability benefits are divided into
two separate categories: compensation for scheduled injuries and compensation
for unscheduled injuries. The former are set forth in Wis. Stat. section
102.52 and require the payment of benefits for a specific number of weeks
as outlined in the statute. Numerous injuries are not included in the
statutory schedules. Permanent total disability because of an unscheduled
injury or injuries results in lifetime benefits.]
The worker's compensation carrier contended that only the employee's
nonscheduled injury could support lifetime benefits under section 102.44(2)
and that the employee failed to adequately separate his scheduled and
unscheduled injuries. Accordingly, argued the insurer, the employee failed
to establish that his permanent total disability was caused by his unscheduled
injury.
In an opinion authored by Judge Snyder, the court of appeals concluded
that section 102.44(2) lifetime benefits are warranted with a combination
of scheduled and unscheduled injuries where the applicant establishes
that a clear, ascertainable portion of the total disability is attributable
to the unscheduled injury or injuries. Accordingly, the court affirmed
the decision of the Labor and Industry Review Commission.
Personal Comfort Doctrine - Injury Sustained Off-premises
Fry v. Labor and Industry Review
Commission, 2000 WI App 239 (filed 31 Oct. 2000) (ordered published
29 Nov. 2000)
Fry, a stockbroker paid solely on commission, had arrived at his employer's
office at the usual time in the morning but left the office mid-day after
informing office personnel that he had a scheduled appointment to have
radiological testing for kidney stones at a local hospital. He had a history
of kidney stone problems and earlier that day experienced kidney pain
symptoms. He told the office receptionist that he expected to return to
the office after the medical testing was completed. Fry was killed in
a car accident while enroute to the hospital.
Fry's estate sought benefits under the Worker's Compensation Act (WCA).
It claimed that at the time Fry was killed, he was performing services
growing out of and incidental to his employment. Specifically, the estate
contended that when Fry left his work place mid-day to drive to an appointment
at a nearby hospital to seek treatment for his recurring kidney stone
problem, he was ministering to his personal comfort, and thus his actions
were incidental to his employment pursuant to the "personal comfort doctrine."
The Labor and Industry Review Commission (LIRC) dismissed the claim for
benefits, a decision that was later affirmed by the circuit court.
In an opinion authored by Chief Judge Cane, the court of appeals affirmed.
Applying the great weight deference standard, it upheld as reasonable
the LIRC's legal conclusion that Fry's attempted visit to the hospital
fell outside the personal comfort doctrine.
An employer may be held liable under the WCA only for injuries that
occur while an employee is "performing service growing out of and incidental
to his or her employment." See Wis. Stat. § 102.03(1)(c)1. In limited
circumstances, an employee may be performing services growing out of and
incidental to employment even when the employee is engaged in activities
related to the employee's own personal comfort under the personal comfort
doctrine. This doctrine was developed to cover the situation where an
employee is injured while taking a brief pause from his or her labors
to minister to the various necessities of life. The personal comfort doctrine
does not apply, and an employee is not within the course of employment,
if the extent of the departure is so great that an intent to abandon the
job temporarily may be inferred, or the method chosen is so unusual and
unreasonable that the conduct cannot be considered as an incident of the
employment.
In most of the Wisconsin cases where the personal comfort doctrine has
been applied, the injuries for which compensation is sought have occurred
within the time (that is, during specific paid working hours) and space
(that is, on the employer's premises) limitations of the person's employment.
In limited fact situations, recovery has been allowed for off-premises
injuries. See Marmolejo v. DILHR, 92 Wis. 2d 674, 285 N.W.2d 650 (1979).
In this case, the appellate court concluded that it was reasonable for
LIRC to hold that an employee who makes an appointment to seek medical
attention for an immediate medical need not related to his employment
and leaves the work place to do so, even if he intends to return to the
work place the same day
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