Wisconsin Lawyer
Vol. 83, No. 12, December 2010
Arbitration
Confirmation – Timeliness
Sewart v. Silvercryst Ltd. Inc., 2010 WI App 141 (filed 15 Sept. 2010) (ordered published 27 Oct. 2010)
After the Sewarts purchased a new home from Silvercryst Limited in 2003, flooding occurred in the basement. Silvercryst did not fix the problem, and flooding continued to occur. The Sewarts invoked the arbitration clause in their home-purchase contract and, in 2006, they and Silvercryst executed a written arbitration agreement, which provided that the controversy would be decided by the Construction Arbitration Board (CAB) of the local builders’ association. In November 2006, the CAB entered an award in which it ordered Silvercryst to make the necessary repairs or face imposition of a monetary award. In July 2008, the CAB ordered further repairs and also ordered Silvercryst to extend the home’s warranty. In May 2009, the CAB found that Silvercryst was responsible for additional flooding, and it awarded damages of more than $90,000 to the Sewarts. It also rejected Silvercryst’s contention that the CAB lost jurisdiction because Silvercryst had quit the builders’ association.
The Sewarts then filed a petition in the circuit court to confirm the November 2006 arbitration award pursuant to Wis. Stat. section 788.09. The circuit court denied the petition for confirmation on the ground that section 788.09 required the Sewarts to confirm the award within one year. The circuit court also held that the Sewarts’ failure to confirm the award in the time indicated resulted in the CAB losing jurisdiction over the later proceedings.
The court of appeals reversed in an opinion written by Judge Reilly. The court briefly discussed issues touching on estoppel and arbitrator impartiality but focused on the timeliness of the petition for confirmation. “Wisconsin courts encourage arbitration. … Arbitration must, however, be final prior to it coming to the court for confirmation. … Seeking to confirm an arbitration award that is not final would lead to additional litigation, a result contrary to the purpose of arbitration. … Had the November 15, 2006 award been brought to the circuit court within a year of November 15, 2006, the court would have been faced with a matter that was not yet ready for confirmation; neither the repairs nor the dispute was final as of November 15, 2007” (¶ 19).
“Silvercryst offers no evidence of how the MBA arbitration agreement conflicts with Chapter 788 of the Wisconsin Statutes. Chapter 788 does not prohibit an arbitration agreement providing for interim decisions flowing from the continuing jurisdiction of arbitrators. The parties expressly agreed that the CAB had the power to exercise continuing jurisdiction during the ‘opportunity to make repairs’ period and to issue supplemental decisions. The November 15, 2006 decision was not a final decision but rather an interim order, whereby the parties expressly agreed that the CAB arbitration process would continue” (¶ 20).
Criminal Procedure
John Doe Investigations – Threshold Showing Required Before Judge Must Refer Complaint to District Attorney
Naseer v. Miller, 2010 WI App 142 (filed 9 Sept. 2010) (ordered published 27 Oct. 2010)
This case concerns the commencement of John Doe proceedings under Wis. Stat. section 968.26. Before the 2009 amendment of the statute, a judge was required to commence an investigation if a person complained to the judge that he or she had reason to believe that a crime had been committed within the judge’s jurisdiction. The supreme court interpreted this provision to impose a mandatory duty on the judge to commence an investigation only if the complainant also provided sufficient factual allegations to establish an objective reason to believe that a punishable crime has been committed. See State ex rel. Reimann v. Circuit Ct. for Dane County, 214 Wis. 2d 605, 571 N.W.2d 385 (1997).
“In other words, the prior statute required an initial evaluation of whether there was reason to believe a crime had been committed that was limited to the four corners of the complaint and did not include any credibility determinations or review of any extrinsic materials. Such an interpretation avoided the absurd result of requiring additional proceedings where the facts alleged could not possibly constitute a crime” (¶ 10) (citations omitted).
In 2009, the legislature substantially revised the statute governing John Doe investigations. Under the amended statute a judge must refer a John Doe complaint to the district attorney whenever a person claims to have reason to believe that a crime has been committed within the judge’s jurisdiction. In this case, the court of appeals considered whether and under what circumstances a judge has a mandatory duty to refer a John Doe complaint to the district attorney.
In a decision authored by Judge Sherman, the court of appeals concluded that “the same interpretation of the ‘reason to believe’ language relating to the prior statute’s examination duty should also apply to the amended statute’s referral duty. That is, under the amended statute, a judge has a mandatory duty to refer a John Doe complaint to the district attorney only if the four corners of the complaint provide a sufficient factual basis to establish an objective reason to believe that a crime has been committed in the judge’s jurisdiction. This interpretation also comports with the intended purpose of a John Doe proceeding to serve ‘both as an inquest into the discovery of crime and as a screen to prevent ‘reckless and ill-advised’ prosecutions’” (¶ 11) (citation omitted).
Applying this standard, the court found in one of the consolidated cases before it that the judge erred in considering the complainant’s history of filing unsubstantiated John Doe complaints against prison guards before declining to forward a new complaint to the district attorney (see ¶ 9). “A litigant’s history of abusing the legal process may certainly be considered at a subsequent stage of the proceeding, along with any other materials forwarded to the court by the district attorney. It cannot, however, be used to determine whether the facts alleged in a particular complaint establish reasonable cause to believe that a crime was committed” (¶ 13).
Education Law
Open-enrollment Transfers to School Districts – Limits – Financial Burden to Home District
School Dist. of Stockbridge v. Evers, 2010 WI App 144 (filed 29 Sept. 2010) (ordered published 27 Oct. 2010)
The School District of Stockbridge denied the applications of eight students who resided in the district to enroll in other school districts under the state’s open-enrollment law. The applications were filed in spring 2009, requesting open enrollment for the 2009-10 school year. At the time the applications were received, more than 10 percent of the school district’s resident school-age children were enrolled in nonresident school districts. The school district denied the applications, maintaining that a statutory cap set by the legislature under Wis. Stat. section 118.51(6) allows a resident school board to deny open-enrollment applications once 10 percent of a resident district’s student population is enrolled in nonresident districts. The school district also cited undue financial hardship; state aid money would follow students from the resident district to the nonresident district and create a hardship for the Stockbridge School District.
On administrative review, the state superintendent of public instruction overturned the school district’s denial of the open-enrollment applications. “In his decision as to each appeal, the Superintendent reasoned as follows: (1) ‘Under current law, the last year for which the limit on the percentage of a school district’s residents transferring to other school districts could be applied was 2005-06,’ and (2) ‘The authority for a resident school board to deny a pupil’s application due to undue financial burden can only be exercised if the child is a child with a disability for whom an individualized education program has been developed.’ The Superintendent determined: ‘The school board denied open enrollment for reasons not permitted in state law. The decision was arbitrary and unreasonable’” (¶ 3).
On judicial review of the superintendent’s decision, the circuit court affirmed. In a decision authored by Judge Neubauer, the court of appeals affirmed the circuit court. The court of appeals held that the clear and unambiguous language of section 118.51(6) does not provide for a percentage cap on resident transfers after the 2005–06 school year (see ¶¶ 9-10). It further held that the controlling statutes do not permit denial of an open-enrollment application on the ground of undue financial burden (except with regard to the special-education situation noted in the superintendent’s decision summarized above) (see ¶ 15).
Insurance
Contractors – Personal Property – Exclusions
Accola v. Fontana Builders Inc., 2010 WI App 143 (filed 22 Sept. 2010) (ordered published 27 Oct. 2010)
A fire destroyed the home and personal property of the Accolas as they slept. At the time, Fontana Builders owned the home, but the Accolas legally occupied it under a 30-day temporary occupancy permit. James Accola was owner and president of Fontana Builders. The Accolas sued Fontana Builders and its liability insurer, Westfield Insurance Co., for the loss of their personal property. “Westfield filed for summary judgment, claiming that the Accolas’ personal property was excluded from their policy by the ‘care, custody, or control’ exclusion. It claims that this exclusion is in place to avoid precisely this scenario, where an insured allows valuable property to be stored on its property while it is still doing work on it” (¶ 4). The circuit court granted summary judgment to Westfield, and the Accolas appealed.
The court of appeals, in an opinion authored by Chief Judge Brown, reversed the circuit court. “The question that is central to this case is whether the Accolas’ personal property is excluded by the ‘care, custody, or control’ clause of Westfield’s policy with Fontana” (¶ 6). “Property is in the care, custody, or control of the insured if it is ‘under the supervision of the insured’ and it is a necessary element of the work involved” (¶ 8). Although Accola as general contractor supervised the construction site, the Accola family’s personal property was not “necessary” to the work done by Fontana.
The court rejected Westfield’s contention that because “Accola had close supervision of his own personal property, the supervision ipso facto was necessary to the work done”; this argument “subsumes the necessity element into the supervision element of the test,” contrary to case law (¶ 13). “We can understand why Westfield feels strongly, and why the trial court agreed, that the Accolas should not be able to sue Fontana to recover for damage done to their personal property based on the negligence of construction laborers who worked for and under James Accola himself. Indeed, the issue of James Accola’s degree of supervision of the property may well be relevant to the merits of the potential negligence claim. But the odd facts of this case do not change the legal standard that must be applied” (¶ 14).
Real Property
Condemnation Proceedings – Evidence of Contamination and Remediation
260 N. 12th St. LLC v. Wisconsin Dep’t of Transp., 2010 WI App 138 (filed 14 Sept. 2010) (ordered published 27 Oct. 2010)
In this condemnation case, a jury made an award for property that was taken pursuant to eminent domain as part of a highway construction project. Among the issues on appeal was whether the circuit court erroneously admitted evidence concerning environmental contamination and remediation. The plaintiff argued that the effects of contamination and related remediation costs should not be considered in determining just compensation in an eminent-domain taking (see ¶ 19). The parties agreed that this issue is one of first impression in Wisconsin.
When a total taking occurs, the “just compensation” that must be paid is “the fair market value of the property taken.” Wis. Stat. § 32.09(5)(a). “The ‘[f]air market value is the sum a willing purchaser would pay to a willing seller for the property, taking into consideration the uses of the land’” (¶ 21) (citation omitted). “Wisconsin case law makes clear that ‘any factor affecting the value of property that could influence a prospective buyer in his or her purchasing decision should be considered in the valuation of property in a condemnation proceeding’” (¶ 22) (citation omitted). Thus, the trier of fact must consider every element that would be considered by the buyer and the seller in the marketplace in setting the price for the subject property on the date of taking (see id.).
In a decision authored by Judge Kessler, the court of appeals utilized the foregoing principles plus the relevant jury instruction (WIS JI – Civil 8100) to conclude that evidence of contamination and related remediation costs is admissible in eminent-domain cases in Wisconsin (see ¶ 23). “Environmental contamination and the need to remediate the contamination is relevant to fair market value and, therefore, it is relevant to a determination of just compensation pursuant to Wis. Stat. § 32.09(5)(a)” (id.). The court noted that its conclusion in this case is consistent with the majority rule in the United States (see ¶ 24).
Condemnation Proceedings – Types of Challenges Available
Kauer v. Wisconsin Dep’t of Transp., 2010 WI App 139 (filed 8 Sept. 2010) (ordered published 27 Oct. 2010)
The Wisconsin Department of Transportation (DOT) plans to construct a roundabout with a curved entrance that encroaches on part of the Kauers’ property, and it therefore condemned the affected portion of the land. In an effort to prevent the condemnation, the Kauers brought suit under Wis. Stat. section 32.05(5), which allows owners to contest the right of the condemnor to condemn property “for any reason other than that the amount of compensation offered is inadequate.” The Kauers challenged the necessity of the condemnation. Although section 32.05(5) allows owners to bring a wide range of cases, case law has made it clear that the necessity of a condemnation will be upheld absent a showing of fraud, bad faith, or a gross abuse of discretion. Wisconsin courts have further clarified that a reviewing court may find a gross abuse of discretion in situations in which there is “utter disregard for the necessity of the use of land” or “the land is taken for an illegal purpose” (¶ 3). The Kauers argued that the DOT’s use of an allegedly unsafe road design constitutes utter disregard for the necessity of use of their land and is therefore a gross abuse of discretion (see ¶ 4).
In a decision authored by Chief Judge Brown, the court of appeals concluded that there are appropriate forums for debating the safety of a DOT-approved road design, “but a condemnation action is not one of them” (¶ 12). The court noted that “there are other means by which landowners, or indeed, any citizen may be able to challenge the safety of the DOT’s road design. In its brief, the DOT suggests two ways this could be done: through a contested hearing on the safety or human health aspects of a proposed government action, see Wis. Stat. § 227.42, or by establishing standing to challenge the government action judicially under Wis. Stat. § 227.52. According to case law, judicial review under § 227.52 includes ‘health and safety interests’ that are caused by a change in the physical environment” (id.).
The court specified that it was not holding that safety can never be an issue in a section 32.05(2) proceeding. “We find it important that in this case, the DOT claimed that its design was created with safety in mind and supported its claim with an expert’s affidavit. We can imagine scenarios where safety could be relevant to the issue of necessity. For example, if the DOT’s road design was obviously unsafe, that might be evidence that there was utter disregard for the necessity of the use of land. In such a case, however, the problem would be that the DOT had committed a gross abuse of discretion” (¶ 11) (footnote omitted).
Foreclosure – Confirmation of Sale
Wells Fargo Bank v. Biba, 2010 WI App 140 (filed 16 Sept. 2010) (ordered published 27 Oct. 2010)
In December 2007, Wells Fargo filed a complaint seeking foreclosure on homestead property owned by Biba and Clason. Neither Biba nor Clason filed an answer or otherwise appeared. The circuit court granted a default judgment of foreclosure. At the public auction, Wells Fargo was the winning bidder. “The circuit court received a ‘sheriff’s report of sale on foreclosure’ indicating that this sale had occurred. An attorney for Wells Fargo submitted a letter to the court, requesting that it sign an order confirming the sale. No party had appeared, and Wells Fargo did not give notice to any party” (¶ 3). In May 2009, without a hearing, the circuit court issued an order confirming the sale. When Biba moved the circuit court to vacate the order several weeks later, it denied the motion.
The court of appeals affirmed in an opinion written by Judge Lundsten. Essentially, Biba contended that regardless of whether any party has appeared, the confirmation of a foreclosure sale requires notice, a motion for confirmation, and a confirmation hearing pursuant to Wis. Stat. section 846.165(1). The court disagreed. “The only statutory notice requirement … is that notice must be given to a party that has appeared. The omission of any public notice requirement is telling because it stands in contrast to related statutes, such as Wis. Stat. § 846.10(2) that sets forth the general procedure for foreclosure sales and expressly provides for public notice. Similarly, Wis. Stat. § 846.101(2), the more specific foreclosure sale statute used by Wells Fargo here, also contains an express public notice requirement” (¶ 10).
Nor is there a general hearing requirement. “Homeowners subject to foreclosure, like Biba, and other interested parties can protect their interests in a fair value sale by making an appearance” (¶ 15). Finally, a formal motion is unnecessary when seeking a confirmation order. “Biba does not explain why a formal motion, rather than, for example, the letter sent to the court in this case, would further any goal of the statute. We acknowledge that a motion might serve some other purpose, such as notifying the court that the time is ripe to confirm a sale. But it does not follow that a motion is the only means of accomplishing that purpose, much less that the statute requires a motion in all instances”
(¶ 19).
Torts
Medical Malpractice – Informed Consent – Costs
Jandre v. Physicians Ins. Co., 2010 WI App 136 (filed 28 Sept. 2010) (ordered published 27 Oct. 2010)
Jandre was erroneously diagnosed with Bell’s palsy when he had in fact suffered a stroke. The doctor’s earlier differential diagnosis had included a stroke as a possibility but the final diagnosis did not. In this medical malpractice action, a jury found that the doctor had not negligently diagnosed the Bell’s palsy but was negligent with respect to her duty of informed consent under Wis. Stat. section 448.30. The trial judge entered judgment against the doctor’s insurers, Physicians Insurance Company of Wisconsin (PIC) and the Wisconsin Injured Patients and Families Compensation Fund (the Fund). The court also ordered PIC alone to pay the judgment interest and costs.
The court of appeals affirmed in an opinion authored by Judge Brennan. “First, PIC and the Fund jointly appeal the trial court’s judgment, contending that the informed consent obligation of Wis. Stat. § 448.30 is limited to information about the physician’s final diagnosis only and that the trial court erred when it applied the doctrine to Dr. Bullis’ differential diagnosis” (¶ 2). The court rejected this contention, emphasizing that the scope of information that must be disclosed turns on the particular circumstances of the case. “Here, Dr. Bullis first diagnosed Jandre as either having some kind of stroke or Bell’s palsy and later formed a final diagnosis of Bell’s palsy. As treatment, she recommended Jandre go home and wait for the Bell’s palsy to resolve because Bell’s palsy generally resolves on its own. A stroke, on the other hand, can kill or seriously injure a patient. There is no test for Bell’s palsy, but there is a test, a carotid ultrasound, which can detect a mini-stroke or full-blown ischemic stroke. We conclude that under these circumstances, Jandre, in order ‘to make an intelligent decision with respect to the choices of treatment or diagnosis’ would want to know if he was having a stroke”
(¶ 3).
The court pointedly emphasized that it was “not holding that Dr. Bullis had to provide information about any possible condition or that she had to provide information about conditions Jandre might suffer at some point in the future. Rather, we conclude that Dr. Bullis was required to inform Jandre about a test to rule out a condition she thought he was possibly suffering from, and which she did not rule out” (¶ 35).
Second, the court of appeals held that PIC waived any objection to the order that it pay all judgment costs and interest. PIC failed to raise any objection to the order that it pay costs (see ¶ 40). As to the judgment interest, pertinent statutes and administrative rules imposed the duty to pay interest on the primary insurer, here PIC, not the Fund. “Based on § 655.24(2)(a)3. and § INS 17.35, the Fund’s obligation to cover that amount of the judgment in excess of the policy or statutory limit is not triggered until the primary insurer’s policy limits and supplemental payments, including interest, have been exhausted, which they were not here” (¶ 43).
Judge Fine concurred. He said that the majority’s opinion properly applied precedent governing informed consent law, but he wrote separately “to suggest that controlling case law has gone way beyond the governing statute and the decision from which that statute sprang, and has made physicians essentially strictly liable for bad results even though they were not negligent in the care and treatment of their patients” (¶ 44).
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