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Wisconsin Supreme Court accepts three new cases

Madison, Wisconsin - May 24, 2013

The Wisconsin Supreme Court has voted to accept three new cases. The Court also acted to deny review in a number of cases. The case numbers, issues, and counties of origin are listed below. The Court of Appeals' opinions for the newly accepted cases are hyperlinked.

2012AP183 Betz v. Diamond Jim's Auto Sales
This case arises from a lawsuit over the sale of a defective used car. The parties ultimately reached a settlement agreement that was satisfactory to each without their attorneys' knowledge. This raised questions from the plaintiff's attorney about the enforceability of that agreement and the attorney's ability to recover fees under certain fee-shifting statutes.

The Supreme Court examines several issues, including a potential conflict between the provisions of fee-shifting statutes and the established public policy right of parties to settle disputes. The Court also reviews whether the parties' settlement agreement was a valid, unambiguous, binding contract that released used car dealer Diamond Jim's Auto Sales of any further obligation in connection with plaintiff Randy L. Betz's claims, including responsibility for Atty. Vince Megna's fees.

Some background: Betz spent close to $10,000 on a 1990 Cadillac Escalade sold by Diamond Jim's. Before Betz purchased the vehicle, Diamond Jim's allegedly represented to him that the vehicle was in proper working order.

Betz discovered, among other problems, that the engine needed to be replaced. Diamond Jim's paid $1,800 toward the engine replacement and Betz was to pay $1,000 of the repair cost. Betz allowed Diamond Jim's to put a lien on the vehicle until Betz paid for the repair in full.

Betz then hired Megna to represent him in a lawsuit against Diamond Jim's. On Feb. 12, 2010, Betz executed a retention agreement with Attorney Megna that outlined how fees would be handled, depending how the case resolved.

On March 1, 2010, Megna filed on Betz's behalf a complaint against Diamond Jim's for: (1) advertising injury, alleged to violate Wis. Stat. § 100.18; (2) intentional fraudulent misrepresentation; (3) alleged violation of Wis. Stat. § 218.0116, which regulates the licensing of automobile dealers; and (4) punitive damages. Betz's complaint sought damages and, in connection with Diamond Jim's alleged violation of §§ 100.18 and 218.0116, the costs and attorney's fees permitted for a recovery under those sections. See Wis. Stat. §§ 100.18(11) & 218.0163(2).

Diamond Jim's hired a lawyer, who answered Betz's complaint and sought dismissal of all of Betz's claims. The attorneys exchanged offers to settle, but none were accepted. Eventually, Diamond Jim's management decided to reach out to Betz directly, without any lawyers involved. On April 4, 2011, and without the knowledge or participation of counsel, Diamond Jim's and Betz entered into a settlement agreement whereby Diamond Jim's agree to pay $15,000 to Betz and Betz agreed to dismiss his claims against the car dealer.

After learning of the agreement, Megna unsuccessfully moved the trial court to award him a significant amount in statutory attorney fees. Megna also moved the trial court to allow his firm to intervene in the lawsuit as a plaintiff and to assert a claim against Diamond Jim's for an intentional interference with the firm's contractual relationship with Betz.

The trial court ruled that the settlement agreement was a valid, unambiguous, binding contract that released Diamond Jim's of any further obligation in connection with Betz's claims. The trial court therefore denied Attorney Megna's fee motion and his motion to intervene. The trial court also entered an order dismissing Betz's lawsuit against Diamond Jim's.

Megna, still purporting to represent Betz, appealed. The Court of Appeals reversed the dismissal, holding that the settlement agreement between Betz and Diamond Jim's was void on public policy grounds.

2011AP2774 Attorney's Title Guaranty Fund v. Town Bank
This case involves two issues arising from competing efforts by two banks to recover assets from the same borrower – a Milwaukee landlord who failed to pay back loans, filed for bankruptcy and became entangled in a legal battle with his own lawyer.

At the request of Heartland Wisconsin Corp. (Heartland), the Supreme Court reviews a Court of Appeals' decision affirming a circuit court order granting summary judgment in favor of Town Bank.

More specifically, the Court examines:

  • Whether an enforceable creditors lien attaches to personal property acquired after a ch. 816, Stats., supplementary proceeding has been held.
  • Whether the fact that the supplemental commissioner's order and proof of service were not filed with the clerk of court rendered Town Bank's creditor's lien unenforceable.

Some background: On Feb. 13, 2006, Town Bank obtained and docketed a judgment against Timothy Brophy, Jr., for $1.6 million. Two days later Town Bank obtained a supplemental commissioner's order requiring Brophy to appear at a supplementary proceeding. Town Bank served the order on Brophy on Feb. 17, 2006. However, the order and proof of service were not filed with the clerk of court.

The supplementary proceeding was held on March 9, 2006. In July 2006, Brophy's attorney sued Brophy for unpaid legal fees. Brophy filed counterclaims and a third-party complaint against his attorney and the insurer for legal malpractice. In May or June of 2007, Heartland provided Brophy two loans totaling $222,000 which he said he was going to use to pay a settlement related to a class action lawsuit. As security for the loans, Brophy assigned to Heartland his interest in any potential proceeds that might result from the legal malpractice suit. Brophy subsequently defaulted on both loans.

Brophy filed for bankruptcy in August of 2007. In April of 2008, Town Bank filed a claim in the bankruptcy asserting its rights to the unpaid docketed judgment and its related creditor's lien against Brophy's personal property based on its February 2006 service of the supplemental commissioner's order for Brophy to appear at the supplemental proceeding.

Heartland first became aware of Town Bank's interest in Brophy's property from the claim Town Bank filed in the bankruptcy action. Brophy's bankruptcy action was dismissed in January 2009. In September 2009, Brophy's legal malpractice case settled. Heartland and Town Bank each claimed priority to the settlement funds Brophy received. Brophy's proceeds from the settlement were held in escrow by Attorney's Title Guaranty Fund, Inc. Attorney's Title commenced an interpleader action, and Heartland and Town Bank cross claimed against each other.

Heartland and Town Bank subsequently both moved for summary judgment. Town Bank claimed it had priority over the escrowed funds because it had an enforceable lien against Brophy's personal property and the lien attached to Brophy's proceeds from the legal malpractice suit.

Heartland argued that Town Bank's lien was an unenforceable "secret lien" and that any lien Town Bank might have had did not attach to property Brophy acquired after the 2006 supplementary proceeding. The circuit court granted summary judgment in favor of Town Bank and denied Heartland's motion. Heartland appealed, and the Court of Appeals affirmed.

The Court of Appeals said once Town Bank served Brophy with the order to appear at the supplementary proceeding, it had done all it was legally obligated to do to perfect its lien and at that point Town Bank's lien was valid and enforceable and became superior to any security interest Heartland would subsequently acquire related to the loans it made to Brophy in 2007.

The court reasoned since Town Bank's judgment remained unsatisfied at the time Brophy received the funds that are now in escrow, under § 816.08, Town Bank is entitled to those funds. Heartland argues both that Town Bank's lien is not valid because Town Bank did not ensure that the supplemental commissioner's order and proof of service thereof were filed with the clerk of court and that Town Bank is not entitled to a lien on any of Brophy's property that was acquired after the date of the supplementary proceeding.

2012AP829 Belding v. Demoulin
This insurance "stacking" case stems from an auto accident involving an uninsured drunken driver. A decision could resolve apparent tension between statutes regulating insurance coverage and affect more than a dozen pending cases and other cases still being filed.

The Supreme Court examines three issues:

  • May Wis. Stat. § 632.32(5)(e) be used to prohibit an insurance provision expressly authorized by another subsection of Wis. Stat. § 632.32(5)?
  • May a statute, unambiguous on its face, be rewritten by the court based upon a perceived conflict with another statute?
  • Should Wis. Stat. § 632.32(6)(d) be construed to prohibit the "drive other car" exclusion expressly authorized by Wis. Stat. § 632.32(5)(j)?

Some background: "Stacking" is defined as the process of obtaining benefits from a second or subsequent policy on the same claim when recovery from the first policy alone would be inadequate.

In 2009, Ronald and Antoinette Belding renewed their auto insurance policies with State Farm Mutual Automobile Insurance Co. (State Farm). Each policy insured one of the Belding's vehicles, a Ford Ranger and a Mercury Villager, against liability for accidents that occurred in the six months after renewal. Each policy premium included a separate amount for uninsured motorist (UM) coverage.

In January of 2010, Ronald Belding was driving the Ford Ranger when he was struck by an uninsured vehicle driven by a drunk driver. Ronald suffered serious, permanent injuries. State Farm paid out $100,000, the per person limit for UM coverage under the Ranger policy. Because the Beldings suffered more than $100,000 in losses, they invoked the UM coverage under the Villager policy, seeking to stack it on top of the Ranger policy coverage.

State Farm denied coverage under the Villager policy based on its UM "drive other car" exclusion, which says there is no coverage. The Beldings argued the "drive other car" exclusion was invalidated by § 632.32(6)(d), which became effective Nov. 1, 2009. State Farm argued that the "drive other car" exclusion was expressly validated by the retention of § 632.32(5)(j) in the final enactment of the 2009 legislation.

The circuit court granted summary judgment in favor of State Farm, concluding that the "drive other car" exclusion in the Villager policy was authorized by § 632.32(5)(j) and precluded UM coverage for the accident. The circuit court reasoned that the legislature knew § 632.32(5)(j) was on the books when it enacted § 632.32(6)(d). The circuit court concluded sub. (5)(j) authorizes an exclusion that precludes coverage, while sub. (6)(d) prohibits anti-stacking clauses that limit the number of policies that do provide UM coverage to less than three. The circuit court also concluded that sub. (5)(j) is more specific to the validity of the policy's "drive other car" exclusion than is sub. (6)(d) and the more specific statute controls if the two statutes cannot be reconciled.

The Beldings appealed, successfully arguing that the 2009 law prohibiting anti-stacking provisions and UM coverage, prevented the "drive other car" exclusion in the Villager policy from barring stacking. The Court of Appeals reasoned that neither the "drive other car" exclusion nor any other exclusion could stop the Beldings from stacking separate UM coverages they had purchased for their own vehicles.

State Farm asserts until the Court of Appeals' decision here, sub. (5)(e) was never used to prohibit an exclusion authorized by another subsection but rather consistently was applied to authorized exclusions not prohibited by some other statute.

The Wisconsin Insurance Alliance (the Alliance) joined by the Property Casualty Insurers Association of America filed a brief, contending that rather than performing the judicial function of interpreting and applying the law as written, the Court of Appeals "put on a legislative hat, added a provision to an unambiguous statute, and obliterated an important provision of the automobile insurance code."

Review denied: The Supreme Court denied review in the following cases. As the state's law-developing court, the Supreme Court exercises its discretion to select for review only those cases that fit certain statutory criteria (see Wis. Stat. § 809.62). Except where indicated, these cases came to the Court via petition for review by the party who lost in the lower court:

2011AP889-CRNM State v. Pardo - Chief Justice Shirley S. Abrahamson dissents.

2012AP229-CR State v. Felton
2012AP647-CRNM State v. Compton
2012AP800-CRNM State v. Tillier

2011AP2703 O'Brien v. Germantown Mutual Ins. Co.
2012AP113 State v. Poirier
2012AP1247-FT Kott v. Amer. Family

2010AP2297 DSG Evergreen F.L.P. v. Town of Perry
2011AP492 DSG Evergreen Fam. Ltd Ptship v. Town of Perry
2011AP1159-62-CR State v. Moore
2011AP1285-CR State v. Scott
2011AP1386 Evans v. Schwarz
2011AP1602-CRNM State v. O'Malley
2011AP2481 State v. Whiteman
2012AP75-NM State v. Dotson
2012AP934 Goodavage v. Fiduciary Real Est. Dev.
2012AP966-CR State v. Hogan
2012AP1888-CR State v. Stites
2013AP234-W Moore v. COA
2013AP459-W Grant v. DOC

Eau Claire
2011AP2452-CR State v. Polzin - Chief Justice Shirley S. Abrahamson dissents.
2012AP305 Engedal v. Menard

Fond du Lac
2011AP2684-CR State v. Zink

2011AP2803 Lacy v. Gerber

2011AP2635-CR State v. Kerner

2011AP517-CR State v. Fries

2012AP1732-W Yates v. Tegels

La Crosse
2011AP2705 State v. Williams

2011AP2855 EA Restoration, LLC v. Diehm - Justice Patience Drake Roggensack dissents.
2011AP2948-CR State v. Wetzel - Chief Justice Shirley S. Abrahamson dissents.

2010AP2012-CR State v. Pringle
2011AP1426-CR State v. Heard
2011AP1491-93-CR State v. Walker
2011AP1705-CR State v. Moreland
2011AP1769 Habush v. Cannon - Chief Justice Shirley S. Abrahamson and Justice Ann Walsh Bradley dissent.
2011AP2020 State v. Gatlin
2011AP2366-CR State v. Hills
2011AP2565 State v. Schulpuis
2011AP2845 State v. Truss
2012AP96-CRNM State v. Flowers
2012AP180 Rogers v. State
2012AP197 Veronica K. v. Michael K. - Chief Justice Shirley S. Abrahamson dissents.
2012AP236-37-CR State v. Brown
2012AP258-CR State v. Jones
2012AP491-CR State v. Thompson
2012AP515-CR State v. Curry
2012AP525-CR State v. Bland
2012AP585 State v. Buckner
2012AP1439-CR State v. Madlock
2012AP1693-94 State v. Gloria C.
2012AP2027 State v. Ricky B.
2012AP2240 State v. Angie A. - Chief Justice Shirley S. Abrahamson dissents.

2011AP2064 Midwest Oil of Shawano v. Garrow Oil Corp.
2012AP1200-04-CR State v. Strong

2011AP789 State v. McGee
2011AP1825-CR State v. Shannon
2012AP396 State v. Kaprelian
2012AP940-41-W Paul v. Pollard
2012AP1974 Racine Co. DHS v. Renee D.

2011AP894-CR State v. Freeman
2013AP860-OA Verizon North Inc. v. Gay

2012AP318-CR State v. Peaine
2012AP974 City of Sheboygan v. Binkowsky - Justice Patience Drake Roggensack did not participate.

2011AP1625 State v. Schmidt
2012AP568 Gennrich v. Zurich Amer. Ins. Co.
2012AP2653-W Bufford v. Dittmann

2011AP2860 Strickland v. AMCO Ins.

2012AP225-CR State v. Lalicata

2011AP1619-CR State v. Laboy
2011AP2325 TWP Architecture v. Patch
2011AP2372-CR State v. Hemmingway
2011AP2436-CR State v. Foshey

Tom Sheehan
Court Information Officer
(608) 261-6640

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