author: LUNDSTEN, J. DYKMAN, J. ROGGENSACK, J.

text:
    HMO-W Incorporated, a Wisconsin corporation, Plaintiff-Respondent-Cross-Appellant, v. SSM Health Care System, a foreign corporation, Defendant-Appellant-Cross-Respondent, Neillsville Clinic, S.C., a Wisconsin corporation, Defendant.
    Court of Appeals

      No. 02-0042.

      Submitted on briefs September 10, 2002.

      Decided June 12, 2003.

    2003 WI App 137
    (Also reported in 667 N.W.2d 733.)

      On behalf of the defendant-appellant-cross-respondent, the cause was submitted on the briefs of Peter B. Ritz of Ritz & Caflisch, S.C., Madison, and Earl H. Munson of Boardman, Suhr, Curry & Field, LLP, Madison.
    On behalf of the plaintiff-respondent-cross-appellant, the cause was submitted on the briefs of Thomas M. Pyper and Cynthia L. Buchko of Whyte, Hirschboeck, Dudek, S.C., Madison.
    Before Dykman, Roggensack and Lundsten, JJ.
   LUNDSTEN, J.

¶ 1. SSM Health Care System successfully exercised its dissenters' rights under Wis. Stat. ch. 180 against HMO-W. SSM appeals a judgment awarding it money damages plus interest under Wis. Stat. § 180.1301(5) (1991-92). SSM contends that the circuit court should have applied, post-decision, the 12% interest rate specified in Wis. Stat. § 814.04(4), rather than interest as defined in § 180.1301(5). We disagree, and affirm the circuit court. On cross-appeal, HMO-W contends that the circuit court correctly looked to the "fair and equitable" interest rate language found in § 180.1301(5), but erroneously applied that language by failing to consider and use an interest rate based on rates paid by HMO-W's subsidiary. We agree with part of HMO-W's argument. We conclude that the circuit court misused its discretion when applying § 180.1301(5), and remand for a new interest determination under that statute.

Background

¶ 2. HMO-W is a holding corporation created to own the stock of Unity Health Plans Insurance Corporation. Prior to and on October 31, 1994, SSM was a minority shareholder of HMO-W. On October 31, 1994, HMO-W merged with UWS Acquisition Corporation, which is owned by Cobalt Corporation. HMO-W was the surviving entity after the merger, and continues as a holding corporation for Unity. HMO-W is now owned by Cobalt.

¶ 3. SSM voted against HMO-W's merger with UWS Acquisition and successfully asserted its dissenters' rights under Wis. Stat. ch. 180. Accordingly, SSM was entitled to compensation based on the value of SSM's shares at the time of the merger, October 31, 1994. On January 26, 1995, HMO-W paid SSM $1,456,348.48 ($1,427,760.00 as fair value, plus $28,588.48 in interest), an amount HMO-W contended included the fair value of SSM's stock on October 31, 1994, plus interest to January 26, 1995. SSM disputed the amount, and HMO-W initiated a "special proceeding" pursuant to Wis. Stat. § 180.1330., The dispute over the fair value of the stock has been resolved. It has been determined that HMO-W's January 26, 1995, payment was insufficient, and the parties agree that HMO-W owes SSM $601,232.94, plus interest from October 31, 1994.

¶ 4. On remand, the circuit court addressed the interest component of the amount owed by HMO-W The court applied the "fair and equitable" language from Wis. Stat. § 180.1301(5) and concluded that HMO-W should pay interest based on the prime rate. The circuit court found that the prime rate "is well accepted as an index figure in many commercial situations" and "reflects the cost of money to corporate borrowers." The circuit court ordered HMO-W to pay interest at a rate calculated by determining the average prime rate from the valuation date, October 31,1994, to the "date of final payment." Both SSM's appeal and HMO-W's cross-appeal concern the circuit court's application of the interest language in § 180.1301(5) to the fair value underpayment of $601,232.94.

Standard of Review

¶ 5. The resolution of both the appeal and the cross-appeal requires interpretation of Wis. Stat. § 180.1301(5). The construction of a statute is a question of law which we review without deference to the circuit court. DeMars v. LaPour, 123 Wis. 2d 366, 370, 366 N.W.2d 891 (1985). We first look to the language of the statute and attempt to interpret it based on "the plain meaning of its terms." State v. Williquette, 129 Wis. 2d 239, 248, 385 N.W.2d 145 (1986). Only when statutory language is ambiguous may we examine other construction aids such as legislative history, context, and subject matter. State v. Waalen, 130 Wis. 2d 18, 24, 386 N.W.2d 47 (1986). A statute is ambiguous if reasonable persons could disagree as to its meaning. Williquette, 129 Wis. 2d at 248. "When construing statutes we are to give them their common-sense meaning to avoid unreasonable and absurd results." Janssen v. State Farm Mut. Auto. Ins. Co., 2002 WI App 72, ¶ 16, 251 Wis. 2d 660, 643 N.W.2d 857.

SSMs Appeal

The Interest Rate Provision Applied to Payments Made Pursuant to a Special Proceeding

¶ 6. We begin with a brief summary of the applicable provisions of the dissenters' rights statutes. When, as here, a dissenting shareholder successfully exercises dissenters rights under Wis. Stat. ch. 180, including a demand for payment that meets the criteria in Wis. Stat. § 180.1323, the corporation must make a payment to the dissenting shareholder equal to "the amount that the corporation estimates to be the fair value of his or her shares, plus accrued interest," calculated from the date the challenged "corporate action is effectuated" or from the date of "receipt of a payment demand," whichever is later. Wis. Stat. § 180.1325(1). If, as here, the dissenting shareholder disagrees with the amount of the corporation's payment, the dissenter may notify the corporation of the dissenter's estimate of the fair value of the shares and demand payment under Wis. Stat. § 180.1328. If that demand remains unsettled, the corporation must "bring a special proceeding" in the circuit court within a specified time limit and petition the court "to determine the fair value of the shares and accrued interest." Wis. Stat. § 180.1330(1). In the case before us, HMO-W opted to bring a special proceeding in the circuit court.

- ¶ 7. If a circuit court finds that a corporation has underpaid, the dissenter is entitled to a judgment in the "amount... by which the court finds the fair value of his or her shares, plus interest, exceeds the amount paid by the corporation." Wis. Stat. § 180.1330(5)(a). As noted above, it was judicially determined that HMO-W underpaid SSM and that HMO-W should pay SSM $601,232.94, plus interest on that amount from October 31, 1994, the corporate action effectuation date.

¶ 8. The parties disagree on the application of statutory provisions governing interest and our attention is directed to the following statutory provisions. Wisconsin Stat. § 180.1301 provides definitions for terms' used in §§ 180.1301 to 180.1331. Section 180.1301(5) defines "interest":

"Interest" means interest from the effectuation date of the corporate action until the date of payment, at the average rate currently paid by the corporation on its principal bank loans or, if none, at a rate that is fair and equitable under all of the circumstances.

Section 180.1331, entitled "Court costs and counsel fees," provides:

(l)(a) Notwithstanding ss. 814.01 to 814.04, the court in a special proceeding brought under s. 180.1330 shall determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court and shall assess the costs against the corporation, except as provided in par. (b).

Wisconsin Stat. §§ 814.01 to 814.04 contain various provisions relating to costs. Of particular note here is § 814.04(4), which applies to the time period between a decision and the entry of judgment:

Except as provided in s. 807.01(4), if the judgment is for the recovery of money, interest at the rate of 12% per year from the time of verdict, decision or report until judgment is entered shall be computed by the clerk and added to the costs.

In addition, though not mentioned by either party, Wis. Stat. § 815.05(8) contains the generally applicable post-judgment interest rate on unpaid money judgments. It provides:

Except as provided in s. 807.01(4), every execution upon a judgment for the recovery of money shall direct the collection of interest at the rate of 12% per year on the amount recovered from the date of the entry thereof until paid.

¶ 9. The parties agree that the interest provision in Wis. Stat. § 180.1301(5) applies to the time between the corporate action effectuation date and the date the circuit court makes a decision regarding the fair value of the shares in a special proceeding under Wis. Stat. § 180.1330. We are asked to resolve whether the interest language in § 180.1301(5) or the 12% rate contained in Wis. Stat. § 814.04(4) applies to the time between the circuit court's decision regarding fair value and the date the corporation actually tenders payment.

¶ 10. SSM's reasoning is as follows:

(1) Under § 180.1330(1), a circuit court in a special proceeding is required to determine "the fair value of the shares and accrued interest." Pursuant to this language, a circuit court must determine both the fair value of the shares and the dollar value of the accrued interest, if any, as of the date the fair value is determined.
(2) If the circuit court, in applying § 180.1330, determines that the corporation underpaid, § 180.1330(5) directs that the dissenter is entitled to a judgment in that amount. That is, the subsequent judgment should equal the underpayment determined on the decision date, which includes the dollar value of the accrued interest as of that date.
(3) Once the circuit court has determined the "fair value of the shares and accrued interest," the definition of interest in § 180.1301(5), including the words "date of payment," no longer applies. Instead, the general statutory interest provisions apply, namely § 814.04(4), requiring 12% interest on a money judgment from the date of the circuit court's decision until final payment.

¶ 11. We begin by rejecting SSM's assertion that, pursuant to § 180.1330(1), a circuit court must determine the dollar value of the accrued interest, if any, as of the date the fair value is determined. Section 180.1330(1) does not say that a court must determine the specific amount of interest owing as of the date the court decides the fair value of the stock. It may be that the circuit court must address interest owing on the decision date, something we need not decide, but determining "accrued interest" can be done in terms of selecting an interest rate and applying it to a time period, even if the end date for the time period is not known. Thus, the circuit court's order that HMO-W pay interest at a specified rate from October 31,1994, to the "date of final payment" does not run afoul of § 180.1330(1).

¶ 12. We now turn our attention to § 180.1301(5), which states that interest, as defined in that statute, applies "from the effectuation date of the corporate action until the date of payment" (emphasis added). We agree with HMO-W that the only reasonable reading of this language is that it unambiguously refers to any date a corporation, pursuant to §§ 180.1301 to 180.1331, makes a payment for the purpose of compensating a successful dissenter for the value of the dissenter's stock.

¶ 13. Similar language was considéred in Weiland v. Department of Transportation, 62 Wis. 2d 456, 215 N.W2d 455 (1974). The Weiland court was asked to determine which interest rate applied from verdict to actual payment:

(1) the statutory interest rate applicable from verdict to judgment, Wis. Stat. § 271.04(4) (1971) (the predecessor statute to § 814.04(4)), or
(2) the interest rate contained in Wis. Stat. § 32.06(11)0») (1969).

Weiland, 62 Wis. 2d at 460-62. Section 32.05(ll)(b) (1969) provided: "If the jury verdict as approved by the court exceeds the basic award, the appellant shall have judgment for the amount of such excess plus legal interest thereon to date of payment in full from that date which is 14 days after the date of taking . . . The Weiland court concluded that the phrase "to date of payment in full" in § 32.05(ll)(b) "applies until the judgment is paid in full." Weiland, 62 Wis. 2d at 462. We find no relevant distinction between the statutory phrase "to date of payment in full," at issue in Weiland, and the statutory phrase at issue here, "until the date of payment." Both are used to apply an interest rate to a specific situation, and both plainly speak in terms of actual payment.

¶ 14. At paragraph 58, Judge Roggensack's dissent contends that our reliance on Weiland is misplaced. Her dissent apparently reasons that § 32.05(ll)(b)'s reference to the "jury verdict" as a starting point for the application of interest (something not present in § 180.1301) removes any ambiguity that § 32.05(ll)(b)'s interest rate applies after a judicial determination. However, the "jury verdict" language does not explain why the specified interest rate applies after entry of judgment. The language "to date of payment in full" is no clearer with respect to the time period after entry of judgment than is § 180.1301(5)'s "date of payment" language with respect to time periods post-decision. In both cases, the legislature has unambiguously directed interest to run until payment, even if the date of payment follows a decision or judgment.

¶ 15. As noted, the parties do not discuss the postjudgment interest rate statute, § 815.05(8), but Weiland also disposes of any claim that § 815.05(8) overrides the § 180.1301(5) interest provision. To repeat, the court in Weiland concluded that the phrase "to date of payment in full" "[b]y its terms . . . applies until the judgment is paid in full." Weiland, 62 Wis. 2d at 462. Thus, although Weiland does not mention the postjudgment interest rate statute, it unambiguously holds that the postjudgment interest rate statute does not apply in the face of a more specific interest rate statute that applies "to date of payment in full."

¶ 16. We observe that in Burlington Northern Railroad Co. v. City of Superior, 159 Wis. 2d 434, 464 N.W.2d 643 (1991), the supreme court concluded that "sec. 815.05(8) establishes the postjudgment interest rate for every judgment for which the legislature has not explicitly provided a different postjudgment interest rate." Id. at 442. Burlington Northern is arguably inconsistent with Weiland because it can be said that former § 32.05(ll)(b) does not "explicitly" say it takes precedence over the postjudgment interest rate statute. But Burlington Northern does not say the more specific statute must expressly reference and override the post-judgment interest rate statute. Rather, the decision says "sec. 815.05(8) establishes the postjudgment interest rate for every judgment for which the legislature has not explicitly provided a different postjudgment interest rate." Burlington Northern, 159 Wis. 2d at 442 (emphasis added). The Weiland court effectively concluded that the legislature had provided a different postjudgment interest rate by using the language "to date of payment in full." See Weiland, 62 Wis. 2d at 462.

¶ 17. Our conclusion that § 180.1301(5) interest applies is supported by the Maine Supreme Judicial Court's interpretation of its version of § 180.1301(5) in its dissenters' rights statutes. In In re Valuation of Common Stock of McLoon Oil Co., 565 A.2d 997 (Me. 1989), the Maine court construed the same phrase as contained in our dissenters' rights statute, "to the date of payment," and concluded it "means precisely what it says. The word 'payment' cannot be read [as] 'judgment.' " Id. at 1008.

¶ 18. Judge Roggensack's dissent characterizes the question presented as follows: "whether the § 180.1301(5) definition of interest [applicable to the judicial proceedings in this case under § 180.1330(5)] applies only to prejudgment interest or whether it also applies after a judicial determination of fair value." Roggensack Dissent at ¶ 48. However, her dissent does not go on to conclude that the definition of interest in § 180.1301(5) applies to prejudgment interest, or even that it applies up to the time there is a "judicial determination of fair value." Rather, her dissent concludes that the phrase "date of payment" in § 180.1301(5) has the same meaning as "date of payment" in § 180.1325(2)(a), that is, the date on which a corporation makes a payment of principal and interest in an effort to avoid a dispute or the involvement of the courts. Roggensack Dissent at ¶ 54. Notably, Judge Roggensack's dissent makes no attempt to construe "date of payment" in § 180.1301(5)'s definition of interest as including the date of a judicial determination of fair value, the position advanced by SSM. Thus, her analysis leaves a gap: the time between the "date of payment" under § 180.1325 and a judicial determination of fair value. In this case, HMO-W made a payment under § 180.1325 on January 26, 1995, and the circuit court reached its initial decision on fair value on October 16, 1997. Under Judge Roggensack's construction, there is no apparent reason why HMO-W is required to pay interest at all for this thirty-three-month period. It would be incongruous for the legislature to have set an interest rate reflecting the time value of money for the initial period between the corporate action and the § 180.1325 payment date, typically a short time period, and not compensate a dissenter for the time value of money during potentially protracted judicial proceedings. In fact, a gap without interest accruing would encourage litigation because it would provide an incentive for corporations to tender an insufficient payment as quickly as possible, and then have access to dissenting shareholders' money interest-free during litigation.

¶ 19. Furthermore, we do not attribute a different meaning to the phrase "date of payment" in § 180.1301(5) than to the same phrase in § 180.1325. Both refer to dates payment is actually made, the latter being one of the possible payment dates encompassed in the former.

¶ 20. In her dissent, Judge Roggensack examines legislative history. Because we find no ambiguity, we do not resort to legislative history. See Waalen, 130 Wis. 2d at 24. However, even considering the legislative history recounted in her dissent, we fail to understand how it undercuts our construction of "date of payment." We agree that this history indicates the legislature prescribed an interest rate to aid parties in calculating the fair value and interest due to dissenting shareholders. But the legislature also devised a special proceeding to settle disputes between the parties, and plainly applied the § 180.1301(5) definition of interest to judgments entered under § 180.1330. If § 180.1301(5) is an appropriate interest rate up to the date of payment under § 180.1325, why is it not an appropriate interest rate after that date? How is the application of that interest rate contrary to the legislative scheme if it is applied until the corporation actually makes final payment following a judicial proceeding? Just because the legislature specified the interest rate applicable to voluntary settlements under § 180.1325 does not indicate that the same interest rate should not be used during all proceedings to calculate the interest due dissenting shareholders.

¶ 21. Judge Roggensack's dissent says we "en-graft[] the interest definition of Wis. Stat. § 180.1301(5) onto Wis. Stat. § 814.04(4) and Wis. Stat. § 815.05(8)," even though "§ 180.1301 explicitly states that the definitions of § 180.1301 apply only to Wis. Stat. §§ 180.1301 to 180.1331." See Roggensack Dissent at ¶ 53. This criticism misses the mark. We do not engraft any definition on to §§ 814.04(4) or 815.05(8). Moreover, we do apply the interest definition in § 180.1301(5) to § 180.1330.

¶ 22. Before leaving this topic, we will respond directly to the statutory arguments made by SSM. SSM approaches the topic from a different direction. SSM defines "date of payment" in § 180.1301(5) as referring to two dates: first, a payment date under § 180.1325(1), and, second, the day a circuit court determines the fair value of stock, pursuant to a special proceeding under § 180.1330. The second part of that definition is not a plausible reading of "date of payment" because, as SSM's own discussion of the mechanics of §§ 180.1301 to 180.1331 shows, there is seldom, if ever, a payment on the day a court decides fair value. And, more to the point, nothing in the statutes requires that a decision on fair value and a resulting payment occur on the same day.

¶ 23. In a closely related argument, SSM ásserts that § 180.1331(l)(a) leads to § 814.04(4)'s 12% interest rate. Section 180.1331(l)(a) provides: "Notwithstanding §§. 814.01 to 814.04, the court in a special proceeding brought under s. 180.1330 shall determine all costs of the proceeding, including. . .." According to SSM, the term "notwithstanding" means all costs under §§ 814.01 to 814.04 are assessed against the corporation, plus, in SSM's words, "two additional requirements: (1) the compensation and expense of court-appointed appraisers are to be included as part of 'all costs' even though Chapter 814 does not so provide; and (2) 'all costs' are normally to be assessed against the corporation, not just to the prevailing party." It follows, according to SSM, that "all costs" in § 180.1331(l)(a) necessarily includes 12% post-decision interest under § 814.04(4). We disagree.

¶ 24. The general reference to §§ 814.01 to 814.04 contained in § 180.1331(l)(a) does not override the specific definition of interest in § 180.1301(5). We agree with HMO-W that a more specific provision is present here, namely the interest provision in § 180.1301(5). Furthermore, the term "[notwithstanding" in § 180.1331(l)(a) means that, despite any contrary provision in §§ 814.01 to 814.04, certain costs are available in a special proceeding. See Kohler Co. v. Sogen Int'l Fund, Inc., 2000 WI App 60, ¶ 14, 233 Wis. 2d 592, 608 N.W2d 746 ("The procedures and practices explained in Wis. Stat. chs. 801 to 847 govern special proceedings as well as civil actions unless the special procedure statute indicates to the contrary.").

¶ 25. We conclude that there is no statutory support for SSM's assertion that the interest language contained in § 180.1301(5) should be applied up to, but not after, the date the circuit court determines the fair value of stock in a special proceeding.

¶ 26. Finally, SSM argues that the legislature could not have intended to apply the interest definition of § 180.1301(5) to the uncertain time period following a decision under § 180.1330. When faced with plain language, as we are here, we apply that language unless such application would lead to absurd or unreasonable results. See Gasper v. Parbs, 2001 WI App 259, ¶ 8, 249 Wis. 2d 106, 637 N.W2d 399. Thus, we will consider this argument, but only in the context of determining whether SSM has identified an absurd result. SSM points out that judgments are often entered long after circuit courts render decisions. According to SSM, this means courts will unreasonably be called upon to predict an equitable interest rate for an unknown time period. SSM, however, has not explained why predicting an equitable interest rate is inherently inferior to applying the fixed 12% statutory rate found in § 814.04(4).

¶ 27. For all of the reasons above, we conclude that "date of payment" in § 180.1301(5) refers to the actual payment date by a corporation following a special proceeding, even if such payment occurs after a "verdict, decision or report," within the meaning of § 814.04(4), or after "judgment," within the meaning of § 815.05(8). Consequently, the circuit court correctly applied the definition of interest contained in § 180.1301(5) to the time period following its decision on fair value and until final payment is made by HMO-W.

HMO-Ws Cross-Appeal

¶ 28. On cross-appeal, HMO-W contends that the circuit court misused its discretion when it rejected use of a low interest rate available to HMO-W's major asset, Unity, and instead used the higher prime rate. HMO-W argues that the circuit court misused its discretion because the court erroneously assumed there was something wrong with using an interest rate that is only available by virtue of a parent corporation's borrowing power. We agree this was an erroneous assumption and remand for a redetermination of the interest rate to be applied.

¶ 29. The starting point for this discussion is the definition of interest in § 180.1301(5), which reads, in pertinent part:

"Interest" means interest... at the average rate currently paid by the corporation on its principal bank loans or, if none, at a rate that is fair and equitable under all of the circumstances.

(Emphasis added.) The "corporation" here, HMO-W, had no bank loans during the relevant period and, consequently, the circuit court needed to determine a rate that was "fair and equitable under all of the circumstances." At the same time, it is undisputed that, because of the borrowing power of a corporate parent, HMO-W's major asset, Unity, first could have and later did borrow at a lower interest rate than the prime rate during the relevant time period. This lower interest rate is called the LIBO Rate.

¶ 30. HMO-W argues that the "under all of the circumstances" language of § 180.1301(5) means the circuit court was required to look at the particular circumstances of this case, which include the rate at which Unity could and did borrow money. HMO-W contends it effectively had the power to borrow money at the LIBO Rate because its primary asset, Unity, had that power and, therefore, the circuit court should have considered this fact as favoring use of the LIBO Rate for purposes of § 180.1301(5).

¶ 31. The circuit court rejected HMO-W's argument. It reasoned:

The fact that HMO-W could have borrowed under its parent corporation is not controlling. If there are no loans, the court must look to fairness and equity. Transactions between related parties may not be indicative of market factors. Consequently, the court believes that the most acceptable rate for consideration would be the prime rate. This rate is well accepted as an index figure in many commercial situations. It reflects the cost of money to corporate borrowers. It is appropriate to apply it here. Its use removes any questions raised by the relationship between HMO-W and its parent.

(Emphasis added.)

¶ 32. SSM contends that the circuit court used sound reasoning and that the approach suggested by HMO-W would open "a pandora's box of issues." SSM asks: If a court could look to Unity's borrowing rate in this case, what would happen if a holding corporation like HMO-W had five or ten subsidiaries? In that event, SSM queries, "which one [of the subsidiaries] counts?" For that matter, SSM points out that in this very case HMO-W has one other asset, a relatively small insurance agency called Hometown Insurance Services, Inc. SSM asks: Why not factor in the borrowing power of that asset? SSM concludes: "The statutory definition [of interest] does not authorize the court to look beyond HMO-W to its parent corporation or to its subsidiary corporation."

¶ 33. Accordingly, we are asked to review a discretionary decision of the circuit court. We review discretionary decisions under the erroneous exercise of discretion standard. "Discretionary acts are sustained if the trial court 'examined the relevant facts, applied a proper standard of law, and, using a demonstrated rational process, reached a conclusion that a reasonable judge could reach.' "Richards v. Land Star Group, Inc., 224 Wis. 2d 829, 848, 593 N.W2d 103 (Ct. App. 1999) (quoting Loy v. Bunderson, 107 Wis. 2d 400, 415, 320 N.W.2d 175 (1982)). "We will generally look for reasons to sustain a trial court's discretionary decision." Murray v. Murray, 231 Wis. 2d 71, 78, 604 N.W.2d 912 (Ct. App. 1999) (citation omitted). "Where the trial court fails to adequately explain the reasons for its decision, we will independently review the record to determine whether it provides a reasonable basis for the trial court's discretionary ruling." State v. Clark, 179 Wis. 2d 484, 490, 507 N.W2d 172 (Ct. App. 1993). Still, we generally remand cases to the trial court when the court has exercised its discretion based on a misunderstanding of law or undisputed fact. See State v. Anderson, 230 Wis. 2d 121, 144, 600 N.W2d 913 (Ct. App. 1999).

¶ 34. We agree with HMO-W that the circuit court misused its discretion. If viewed in isolation, the phrase "fair and equitable" in § 180.1301(5) certainly supports the circuit court's use of the prime rate, which all parties agree is a generally used rate among creditworthy business borrowers in the marketplace. "However, when examining a particular phrase in a statute, we must look at it in light of the entire statute" and we must "construe [the] statute in a manner which gives effect to the legislative intent." Elliott v. Employers Mut. Cas. Co., 176 Wis. 2d 410, 414, 500 N.W.2d 397 (Ct. App. 1993). Therefore, we must consider what the legislature intended by the phrase "fair and equitable under all of the circumstances."

¶ 35. We agree with HMO-W that the phrase "under all of the circumstances" directs the circuit court to consider the circumstances of the particular case. The circumstances here include the fact that HMO-W itself did not borrow funds, but its main asset, Unity, could and did borrow at the LIBO Rate. Rather than consider this a circumstance favoring HMO-W, the circuit court dismissed the LIBO Rate as unreliable because " [transactions between related parties may not be indicative of market factors," and use of the higher prime rate "removes any questions raised by the relationship between HMO-W and its parent." The circuit court was plainly saying that there is something suspect about a low interest rate that is the product of the borrowing power of a parent corporation. This reasoning was erroneous because, under some circumstances, our legislature directs that favorable rates of exactly this type be used.

¶ 36. For example, what if Unity, rather than HMO-W, had been the surviving corporation of the challenged corporate action? In that event, § 180.1301(5) would have unambiguously directed that Unity's borrowing rate, the LIBO Rate, be used. This would be true even if the favorable LIBO Rate was only available to Unity because of a parent corporation's borrowing power. SSM does not argue otherwise. If use of a low rate, available only by virtue of a surviving corporation's relationship with other entities, is required by the legislature to be used under some circumstances, it does not follow that the circuit court in this case could logically deem the LIBO Rate to be unreliable or questionable because it flows from the borrowing power of HMO-W's related entities. Simply stated, the circuit court's skepticism of an interest rate influenced by a parent company is not shared by the legislature.

¶ 37. We emphasize the limited nature of the dispute and, correspondingly, the limited nature of our holding. Our attention is directed at a particular circumstance and we hold that the circuit court misused its discretion by failing to consider that particular circumstance as a factor favorable to HMO-W. At the same time, we reject HMO-W's contention that the circuit court was required to use the LIBO Rate as the "fair and equitable" rate under § 180.1301(5). On remand, the circuit court might determine that HMO-W effectively had access to the LIBO Rate because of Unity's access to that rate and that this circumstance favors use of the LIBO Rate. On the other hand, the circuit court might give weight to competing considerations, such as SSM's argument that Unity was not HMO-W's only asset, and determine that a different rate is appropriate. Indeed, we see nothing inherently unfair about the application of the prime rate in this case. However, the imposition of the prime rate or any other interest rate is a matter of discretion delegated to the circuit court, not this court. Our direction to the circuit court is only that it once more consider the matter in light of all the relevant circumstances, giving the weight it deems appropriate to the borrowing interest rates available to and borrowing history of HMO-W's major asset, Unity.

Conclusion

¶ 38. For the foregoing reasons, we affirm the circuit court's application of the definition of interest contained in § 180.1301(5) to the time period ending when final payment is made by HMO-W following entry of judgment. We reverse and remand on the issue of the "fair and equitable" interest rate. On remand, the circuit court must consider "all of the circumstances," including the LIBO Rate available to Unity, in setting a "fair and equitable" interest rate.

By the Court. — Judgment affirmed in part; reversed in part and cause remanded with directions.

DYKMAN, J.

¶ 39. (dissenting in part). I disagree with the majority's conclusion in the cross-appeal that the trial court erroneously exercised its discretion by adopting the prime rate as a rate that was "fair and equitable under all of the circumstances." Wis. Stat. § 180.1301(5) (2001-02). One can hardly think of a more discretionary standard than "fair and equitable." But the majority looks, not for reasons to affirm the trial court, but for reasons to reverse, though it recognizes that it is to do the opposite. Murray v. Murray, 231 Wis. 2d 71, 78, 604 N.W2d 912 (Ct. App. 1999). It does this by interpreting the trial court's opinion as "plainly saying that there is something suspect about a low interest rate that is the product of the borrowing power of a parent corporation." Majority at ¶ 35. That is not what the trial court said.

¶ 40. The trial court's opinion reads:

Transactions between related parties may not be indicative of market factors. Consequently, the court believes that the most acceptable rate for consideration would be the prime rate. This rate is well accepted as an index figure in many commercial situations. It reflects the cost of money to corporate borrowers. It is appropriate to apply it here. Its use removes any questions raised by the relationship between HMO-W and its parent.

¶ 41. The trial court was looking to market factors to determine what rate would be fair and equitable. It decided not to use a rate influenced by the relationship between a parent and a subsidiary corporation, and not by market factors. It found that the prime rate was used in many commercial transactions and that the prime rate reflects corporate borrowing reality. I find nothing unreasonable or irrational about this reasoning.

¶ 42. What the majority has done is to amend the statute. Wisconsin Stat. § 180.1301(5) requires that the court first determine whether the corporation pays interest on its bank loans. If it does, no inquiry, is made into whether the rate of interest paid is "fair and equitable." The rate paid is the rate to be paid. But if the corporation does not pay interest, the rate it might have paid, or the rate its parent corporation, sibling corporation, subsidiary or office-sharing corporation pays or might pay or once paid is not relevant. The only question then is what rate is "fair and equitable under the circumstances."

¶ 43. What the majority has done is to somehow link the rate a parent corporation pays with a fair and equitable rate. While I can see a trial court doing that to determine the fair and equitable rate, the statute does not require the trial court to do so. Under the majority's analysis, Wis. Stat. § 180.1301(5) reads something like: "[I]f none, at a rate that the corporation's parent or subsidiary corporation pays." The result is that discretion has been squeezed out of the statute and replaced by a rule of law.

¶ 44. Would the majority have reached the same result if Unity borrowed money at prime plus two percent? Would it have reversed the trial court's discretionary decision to use the prime rate then? That result seems preordained under Wis. Stat. § 180.1301(5), which, under the majority's decision, now effectively requires adoption of related corporations' borrowing rates. Could the trial court consider that most corporate borrowing is done at the prime rate making that a fair and equitable rate, omitting the reason the majority has found objectionable? The majority doesn't tell us, but it is evident that the LIBO rate plays a significant part in the majority's analysis of the issue here.

¶ 45. These questions are obviated by interpreting Wis. Stat. § 180.1301(5) as it was written, resulting in an affirmance of this cross-appeal. Because that is not the-result the majority reaches, I respectfully dissent.

ROGGENSACK, J.

¶ 46. (dissenting in part). Because I conclude that the majority opinion erroneously interprets the dissenters' rights subchapter of Wis. Stat. ch. 180 (2001-02) in regard to postjudgment interest, I respectfully dissent from that part of the decision. However, I do agree with the majority opinion in regard to the cross-appeal.

Standard of Review.

¶ 47. The resolution of the appeal turns on questions of statutory interpretation that we resolve de novo. Thielman v. Leean, 2003 WI App 33, ¶ 6, 260 Wis. 2d 253, 659 N.W2d 73. Additionally, whether a statute is ambiguous is a question of law that we review without deference to the circuit court. Id.

Dissenters' Rights Statutes.

¶ 48. At issue in the appeal are the interpretations of several sections of ch. 180 that relate to a shareholder, SSM, exercising statutory dissenters' rights in its shares of HMO-W because of a merger between HMO-W and UWS Acquisition. The interpretations of all sections at issue are driven by the definition of "interest" found in Wis. Stat. § 180.1301(5). The question presented in the appeal is whether the § 180.1301(5) definition of interest applies only to prejudgment interest or whether it also applies after a judicial determination of fair value.

¶ 49. When we are asked to apply a statute whose meaning is in dispute our goal is to give effect to the intent of the legislature. Truttschel v. Martin, 208 Wis. 2d 361, 365, 560 N.W.2d 315, 317 (Ct. App. 1997). We begin with the plain meaning of the language used in the statute. Id. If that language is capable of being understood by two well informed persons in two or more ways, it is ambiguous. D.S. v. Racine County, 142 Wis. 2d 129, 134, 416 N.W.2d 292, 294 (1987). We also consider the interaction of the statute under consideration with other statutory provisions and case law interpreting those provisions because a statute that appears unambiguous on its face may become ambiguous as it interacts with other statutes. See State v. White, 97 Wis. 2d 193, 198, 295 N.W.2d 346, 348 (1980).

¶ 50. Even though I disagree with the majority opinion, for the reasons set forth below, I conclude that Wis. Stat. § 180.1301(5) is not ambiguous. However, in order to understand why that is so, it is helpful to understand the extensive changes in corporate law that were made to ch. 180 in 1990 and the model upon which those changes were based. In 1990, Wisconsin enacted 1989 Wis. Act 303, Wis. Stat. §§ 180.1301-180.1331, as part of a complete revision of Wisconsin's Business Corporation Law. The statutory reorganization of sub-chapter XIII addressing dissenters' rights that is at issue here was taken in large part from the Revised Model Business Corporation Act (Revised Model Act). See Clay R. Williams & Christopher S. Berry, Wisconsin's Business Corporation Law, 63 Wisconsin Lawyer 10, 10 (June 1990).

. ¶ 51. The dissenters' rights subchapter of the Revised Model Act attempted to address the tension between corporate management's efforts to move a corporation into new enterprises that at times could rearrange investors' rights and the desire of investors to continue in the corporate form and enterprise style of the company in which they initially invested. Revised Model Business Corporation Act ch. 13, introductory cmt. (1984). The Revised Model Act resolved this tension by giving management of corporations, who have the support of the majority of the shareholders, an almost unlimited power to change the shape of the corporate enterprise, while also giving those shareholders who dissented from the changes the right to withdraw their investments at a fair value. Id. The Revised Model Act sought to motivate corporate management and dissenting shareholders to settle their disputes in private negotiations by a voluntary payment, encompassing fair value and accrued interest, accompanied by documentation sufficient to evaluate the corporation's determination of fair value, as well as how interest was calculated. Judicial resolution of the payment due for the dissenters' shares was to be used only as a last resort. Henry F. Johnson & Paul Bartlett, Jr., Is a Fistful of Dollars the Answer? A Critical Look at Dissenters' Rights Under the Revised Model Business Corporation Act, 12 J.L. & Com. 211, 220 (Spring 1993).

¶ 52. Like the Revised Model Act, Wisconsin's subchapter on dissenters' rights was devised to operate without a judicial determination of fair value, in most cases. As part of that scheme, it contains definitions that are applicable only to that subchapter of ch. 180. Wis. Stat. § 180.1301. The terms defined, and the definitions used, are almost identical to those used in § 13.01 of the Revised Model Act. The definition for "interest," found in § 180.1301(5), is at the heart of this appeal. It states in relevant part:

"Interest" means interest from the effectuation date of the corporate action until the date of payment, at the average rate currently paid by the corporation on its principal bank loans or, if none, at a rate that is fair and equitable under all of the circumstances.

Section 180.1301(5).

¶ 53. The majority focuses on the terms, "date of payment," and concludes that the phrase means payment before and after judgment. In so doing, it engrafts the interest definition of Wis. Stat. § 180.1301(5) onto Wis. Stat. § 814.04(4) and Wis. Stat. § 815.05(8), which establish rates of interest after a judicial determination of the principal amount due. However, § 180.1301 explicitly states that the definitions of § 180.1301 apply only to Wis. Stat. §§ 180.1301 to 180.1331. The majority opinion also overlooks the importance of Wis. Stat. § 180.1325, entitled "Payment" which is a major component of the anticipated extra-judicial operation of revised subchapter XIII of ch. 180, as well as the numerous other sections that address "payment" for a dissenter's interest. See Wis. Stat. §§ 180.1321, 180.1323, 180.1328 and 180.1330.

¶ 54. Wisconsin Stat. § 180.1325 speaks solely to voluntary payment by a corporation to those dissenting shareholders or beneficial shareholders who held shares before the effective date specified in the dissenters' notice. Wis. Stat. § 180.1323(1). Section 180.1325 requires current financial information sufficient to permit the shareholders to evaluate the payment of fair value and the calculation of the interest included in the payment the corporation has made. For example, § 180.1325 requires that the balance sheet provided be from the "fiscal year ending not more than 16 months before the date of payment . . . Section 180.1325(2)(a) (emphasis added). In my view, the "date of payment" used in Wis. Stat. § 180.1301(5)'s definition of interest is the same "date of payment" spoken to in § 180.1325(2)(a) and referred to as "amount paid" in § 180.1330(5)(a).

¶ 55. Many subsequent dissenters' rights procedures are triggered by the Wis. Stat. § 180.1325 "payment." For example, a dissenter who does not agree with the "payment made" must notify the corporation in a timely fashion of what she/he believes are the fair value and correct calculation of interest, Wis. Stat. § 180.1328(1), or she/he waives the right to contest the payment made. Section 180.1328(2). Furthermore, throughout subchapter XIII the term, "payment," always includes both fair value and interest, whether it is the payment made to a shareholder under § 180.1325, or notice given under Wis. Stat. § 180.1322, or duty to demand payment under Wis. Stat. § 180.1323, or the withholding of payment under Wis. Stat. § 180.1327, or the procedure to follow if dissatisfied with payment under § 180.1328 or the payment a court is to order under Wis. Stat. § 180.1330. However, a statute directing that a court is to impose judgment for an amount by which the fair value plus interest exceeds what the corporation has paid or offered, as is done in § 180.1330(5), does not explicitly provide that the resultant judgment will run at a rate of interest different from that already set in Wis. Stat. § 814.04(4) and Wis. Stat. § 815.05(8).

¶ 56. Additionally, although we have not directly addressed the question presented by this appeal, we have previously held that the "payment date" for a payment of fair value and interest made under Wis. Stat. § 180.1325 is the date the shareholder receives the check, even when the shareholder objects to the amount of the payment and seeks additional remuneration. Kohler Co. v. Sogen Int'l Fund, Inc., 2000 WI App 60, ¶ 20, 233 Wis. 2d 592, 608 N.W2d 746. Our decision in Kohler is consistent with my view that the terms, "date of payment" and "payment," used in the dissenters' rights subchapter refer to the same payment of fair value and interest described in the many other sections of that subchapter that address dissenters' rights. It does not refer to payments made after judicial decision.

¶ 57. Furthermore, I read Burlington Northern Railroad Co. v. City of Superior, 159 Wis. 2d 434, 464 N.W2d 643 (1991), as consistent with the premise that the interest provisions in Wis. Stat. § 815.05(8) control every judgment, unless a statute or a contractual provision explicitly states that another rate of interest is to be used after a judicial determination. As the supreme court explained:

[W]e conclude that sec. 815.05(8) establishes the post-judgment interest rate for every judgment for which the legislature has not explicitly provided a different postjudgment interest rate.

Burlington Northern, 159 Wis. 2d at 442, 464 N.W2d at 646 (emphasis added). Wisconsin Stat. § 180.1301(5) does not "explicitly" provide for postjudgment or post verdict interest. Rather, it provides for interest to the "date of payment," a term repeated in subchapter XIII to which we accorded a specific meaning in Koehler. That § 815.05(8) controls interest after judgment is also consistent with the doctrine of merger, which provides that when a litigant obtains a judgment, his original claim is extinguished and the rights flowing from the judgment are substituted for the claim. See Production Credit Ass'n v. Laufenberg, 143 Wis. 2d 200, 204-05, 420 N.W.2d 778, 779 (Ct. App. 1988).

¶ 58. There is also a difference in regard to when an explicit legislative directive is set out in ch. 180's terms and Weiland v. DOT, 62 Wis. 2d 456, 215 N.W2d 455 (1974), on which the majority relies for most of its reasoning. Weiland arises out of a Wis. Stat. ch. 32 condemnation proceeding, and it turns on the meaning of Wis. Stat. § 32.05(ll)(b) (1969), that states in relevant part:

If the jury verdict as approved by the court exceeds the basic award, the appellant shall have judgment for the amount of such excess plus legal interest thereon to date of payment in full....

Weiland, 62 Wis. 2d at 461, 215 N.W.2d at 457 (emphasis added). By its very terms, § 32.05(ll)(b) applies to interest after a judicial determination until payment. Therefore, § 32.05(ll)(b) took the interest provisions of Wis. Stat. §§ 814.04(4) and 815.05(8) out of play. Stated another way, § 32.05(ll)(b) "explicitly provided a different postjudgment interest rate," just as Burlington Northern explains. See Burlington Northern, 159 Wis. 2d at 442, 464 N.W.2d at 646. Additionally, Calaway v. Brown County, 202 Wis. 2d 736, 553 N.W.2d 809 (Ct. App. 1996), a later case that also interpreted § 32.05, but under subsec. 10(b), confirms that § 32.05(ll)(b) is a statute that explicitly provides for postjudgment interest.

¶ 59. In Calaway, we were asked to decide whether postjudgment interest of twelve percent was due for a condemnation judgment under Wis. Stat. § 32.05(10)(b) that states in relevant part:

The court shall enter judgment for the amount found to be due after giving effect to any amount paid by reason of a prior award. The judgment shall include legal interest on the amount so found due from the date of taking if judgment is for the condemnor, and from 14 days after the date of taking if judgment is for the condemnee.

Calaway, 202 Wis. 2d at 755, 553 N.W.2d at 817. We interpreted this provision as an entitlement to prejudgment interest, but not having any bearing on the rate of postjudgment interest. Id. at 755-56, 553 N.W.2d at 817. We cited Burlington Northern and concluded that Wis. Stat. § 815.05(8) continued to control postjudgment interest. Id. Therefore, the judgment ran at twelve percent interest until paid. We concluded that it was only under § 32.05(ll)(b) that the legislature had explicitly stated that the legal rate of interest found in Wis. Stat. § 138.04 applied after judgment. Id.

¶ 60. Just as in our analysis in Calaway, I conclude that because Wis. Stat. § 180.1301(5) does not explicitly provide that its definition of "interest" applies after judgment, it does not so apply and Wis. Stat. § 814.04(4) and Wis. Stat. § 815.05(8) continue to control where applicable. Accordingly, for the reasons set out above, I would reverse the decision of the circuit court on the appeal and I respectfully dissent from the majority opinion.

       All references to the Wisconsin Statutes are to the 1991-92 version unless otherwise noted.

       At the time of its creation, HMO-W owned HMO of Wisconsin Insurance Corporation which later came to be known as Unity Health Plans Insurance Corporation. Although the parties dispute whether Unity is a successor entity to HMO of Wisconsin Insurance Corporation, they have failed to persuade us that this dispute is relevant to the issues before us. Accordingly, there will be no further reference to HMO of Wisconsin Insurance Corporation in this opinion.

       When HMO-W and SSM disputed the value of the SSM shares as of October 31, 1994, the circuit court determined a value. At that point in the case, Neillsville Clinic was also a dissenting shareholder. SSM, but not Neillsville Clinic, appealed and the supreme court eventually resolved the value issue and the matter was returned to the circuit court. HMO-W, Inc. v. SSM Health Care Sys., 2000 WI 46, 234 Wis. 2d 707, 611 N.W2d 250, aff'g 228 Wis. 2d 815, 598 N.W2d 577 (Ct. App. 1999). After remand, HMO-W made an $829,167.51 payment to SSM, and the circuit court judgment gives HMO-W credit for that payment.

       The circuit court's order provides an exception for time periods during which HMO-W had outstanding bank loans, but this exception is a nullity because the parties agree that HMO-W did not borrow money during the relevant time period.

       Section 180.1330(1) provides:
      If a demand for payment under s. 180.1328 remains unsettled, the corporation shall bring a special proceeding within 60 days after receiving the payment demand under s. 180.1328 and petition the court to determine the fair value of the shares and accrued interest. If the corporation does not bring the special proceeding within the 60-day period, it shall pay each dissenter whose demand remains unsettled the amount demanded.
      Section 180.1330(5) provides, in part:
      Each dissenter made a party to the special proceeding is entitled to judgment for any of the following:
      (a) The amount, if any, by which the court finds the fair value of his or her shares, plus interest, exceeds the amount paid by the corporation.

       Due to the volume of statutory references in this opinion, in the remainder of this opinion we dispense with this court's usual practice of adding "Wis. Stat." each time a statute is cited in a new paragraph.

       Wisconsin Stat. § 271.04(4) (1971) was at issue in Weiland. It read: "INTEREST ON VERDICT. When the judgment is for the recovery of money, interest at the rate of 7% per annum from the time of verdict, decision or report until judgment is entered shall be computed by the clerk and added to the costs." Chapter 271 was renumbered chapter 814. See In re Rules of Civil Procedure, 67 Wis. 2d 585, 761 (1975).

       Notably, a -post-Burlington Northern case, Calaway v. Brown County, 202 Wis. 2d 736, 553 N.W2d 809 (Ct. App. 1996), confirms that § 32.05(ll)(b) is a statute that "explicitly" addresses postjudgment interest within the meaning of the Burlington Northern test. See Calaway, 202 Wis. 2d at 758.

       We note that when the issue is whether contract language trumps statutory postjudgment interest, the analysis may be different. That is, a contract may need to be more explicit to override statutory postjudgment interest. See Production Credit Ass'n v. Laufenberg, 143 Wis. 2d 200, 204, 420 N.W2d 778 (Ct. App. 1988) (when the question is whether statutory postjudgment interest overrides contract interest, the "merger doctrine" provides that statutory interest controls over contract interest in "the absence of an express agreement otherwise"). We do not, however, weigh in on that topic.

       It may be that under Judge Roggensack's reading of the statute, a dissenting shareholder would be eligible for common law pre-verdict interest following a § 180.1325 payment and until a judicial decision is rendered. See Loehrke v. Wanta Builders, Inc., 151 Wis. 2d 695, 706-07, 445 N.W2d 717 (Ct. App. 1989). But neither the parties nor the dissent discusses this possibility.

       The definition of "corporation" is found in § 180.1301(2):
      "Corporation" means the issuer corporation or, if the corporate action giving rise to dissenters' rights under s. 180.1302 is a merger or share exchange that has been effectuated, the surviving domestic corporation or foreign corporation of the merger or the acquiring domestic corporation or foreign corporation of the share exchange.
      It is undisputed that HMO-W is a corporate entity distinct from Unity, and HMO-W makes no argument that Unity fits any of the definitions found in § 180.1301(2).

       We will refer to this favorable rate as the LIBO Rate, but acknowledge that the record indicates the rate is an adjusted LIBO Rate.

       HMO-W owns 80% of the stock in Hometown Insurance Services, Inc. Apart from SSM's characterization of this asset as "relatively small," the parties do not tell us the size of Hometown relative to Unity.

       Judge Dykman's dissent asserts that, under the majority's analysis, Wis. Stat. § 180.1301(5) "reads something like: '[I]f none, at a rate that the corporation's parent or subsidiary corporation pays.'" Dykman Dissent at ¶ 43. This mischaracterizes our decision. We do not suggest that if the circuit court had considered the LIBO Rate as a favorable factor for HMO-W, yet still decided in its broad discretion to use the prime rate, such a decision would have been an erroneous exercise of discretion.
      Similarly, the remainder of Judge Dykman's dissent is based on mischaracterizations of the majority opinion or the record. To take one more example, Judge Dykman disputes our conclusion that the circuit court considered the LIBO Rate as a negative. Dykman Dissent at ¶ 39. However, the circuit court language he quotes clearly demonstrates that the court disregarded the LIBO Rate because it believed the rate was unreliable. Dykman Dissent at ¶ 40. Since we disagree with Judge Dykman's assertions about the circuit court's comments, it follows that we disagree with his criticism of our decision in that regard.

       All references to the Wisconsin Statutes are to the 2001-02 version unless otherwise noted.

       All further references to the Wisconsin Statutes are to the 2001-02 version unless otherwise noted.

       1 also disagree with the majority's conclusion that the interest spoken to in Wis. Stat. § 180.1330(1) can be expressed as a rate of interest rather than as the amount of accrued interest that is due. Majority at ¶ 11. To me, such an interpretation is contrary to what the legislature hoped would be a self-help statute for corporations and shareholders where a dollar amount payment would be made to those dissenters who have complied with their obligations under the statutes and they could take it or respond with a dollar amount for fair value and accrued interest the shareholder believed was appropriate. See Wis. Stat. §§ 180.1325 and 180.1328.


source: Caselaw Access Project

author: ROGGENSACK, J.

license: Public Domain

text:
    In the Matter of the Incorporation as a Village of Certain Territory in the Town of Campbell: Town of Campbell, Petitioner-Appellant, v. City of La Crosse, Respondent-Respondent.
    Court of Appeals

      No. 02-1150.

      Submitted on briefs October 11, 2002.

      Decided June 12, 2003.

    2003 WI App 139
    (Also reported in 667 N.W.2d 356.)

      On behalf of the petitioner-appellant, the cause was submitted on the briefs of Roger W. Clark of Herrling, Clark, Hartzheim & Siddall, Ltd. of Appleton.

      On behalf of the respondent-respondent, the cause was submitted on the brief of Mark J. Steichen, Lawrie J. Kobza and Sarah A. Zylstra of Boardman, Suhr, Curry & Field LLP of Madison.
    Before Vergeront, EJ., Roggensack and Lundsten, JJ.
   ROGGENSACK, J.

¶ 1. The Town of Campbell appeals the circuit court's order dismissing a petition to incorporate territory in the Town of Campbell, to be known as the Village of French Island. Because the petition includes territory subject to annexation proceedings that commenced prior to the incorporation proceeding, the annexation takes, precedence over the property subject to both the annexation ordinances and the petition to incorporate. Additionally, because we conclude that the use of a contingent narrative description for the territory to be incorporated is insufficient to satisfy the statutory requirements for incorporation set out in Wis. Stat. § 66.0203 (2001-02), we affirm the circuit court's order dismissing the petition.

BACKGROUND

¶ 2. This case involves a lengthy struggle between the City of La Crosse and the Town of Campbell over competing annexation ordinances and incorporation petitions that lay claim to territory in the town. The material facts are not in dispute. Prior to March 1997, residents of certain properties in the town petitioned for direct annexation to the City of La Crosse. On March 5,1997, a petition to incorporate territory in the town as the Village of French Island was filed with the La Crosse County Circuit Court (1997 Petition). The 1997 petition included territory that was already subject to annexation proceedings. The circuit court determined that the petition met the minimum area and formal signature requirements, under Wis. Stat. §§ 66.0203 and 66.0205, and referred the petition to the Department of Administration to determine whether the territory met the standards for incorporation under Wis. Stat. § 66.0207.

¶ 3. La Crosse moved to dismiss the 1997 petition, contending that it violated the rule of prior precedence by including territory already subject to annexation proceedings. The circuit court denied the motion. Subsequently, the circuit court held that some of the annexation ordinances were invalid because the territories were not contiguous to La Crosse. La Crosse moved to stay the court's decision; however, the court denied stay and the territory previously annexed reverted back to the town. La Crosse appealed.

¶ 4. Following the circuit court's decision invalidating the annexations, Campbell moved to include the territory subject to the earlier annexations in the incorporation petition, or alternatively, to dismiss the petition so that a new petition could be filed. Before the circuit court acted on the motion, on January 3, 2001, a notice of intent to circulate an incorporation petition was published and on February 12, a second incorporation petition (2001 petition), the subject of this appeal, was filed with the La Crosse County Circuit Court. In a decision and order filed June 19, 2001, the circuit court dismissed the 1997 petition.

¶ 5. The 2001 incorporation petition purported to incorporate the entire town and therefore necessarily included within the description territory that had been annexed to La Crosse, but returned to the town by a decision of the circuit court. However, the legal description also contained a contingency clause providing that "should the Court of Appeals overturn the Circuit Court," regarding the annexations, "said parcels shall be considered to be deleted from this description as to give rise to no conflict between the annexations and the incorporation." The clause also provided that certain territories, subject to annexation by La Crosse, were not included in the description but in the event the annexations were defeated and territory returned to the town, "that said annexations ... be included within the proposed Village."

¶ 6. La Crosse moved to dismiss the 2001 incorporation petition, contending that it violated the rule of prior precedence just as the 1997 petition had, and that it contained an invalid contingent narrative description. The parties stipulated, however, that the 2001 petition met the formal signature and minimum area requirements. The circuit court denied La Crosse's motion and referred the petition to the department for proceedings pursuant to Wis. Stat. § 66.0207. The court reasoned that the incorporation petition did not conflict with the annexation proceedings because Campbell conceded priority to the annexations. The court did not reach the issue of the validity of the contingent narrative description.

¶ 7. On August 30, 2001, we reversed the circuit court regarding the annexations and returned the annexed territories to La Crosse. Town of Campbell v. City of La Crosse, 2001 WI App 201, 247 Wis. 2d 946, 634 N.W2d 840. La Crosse renewed its motion to dismiss the 2001 incorporation petition. The circuit court agreed and ordered the petition dismissed, reasoning that it violated the rule of prior precedence and that the contingent narrative description was contrary to statutory requirements of Wis. Stat. § 66.0203. Campbell appeals.

DISCUSSION

Standard of Review.

¶ 8. The resolution of this case requires us to determine whether the 2001 petition violates the rule of prior precedence, a question of law that we review de novo. Town of Delavan v. City of Delavan, 176 Wis. 2d 516, 527, 500 N.W2d 268, 272 (1993). Additionally, we must determine whether a contingent narrative description is contrary to statutory procedures for incorporation. The construction of a statute and its application to undisputed facts also present questions of law that we review without deference to the circuit court. Truttschel v. Martin, 208 Wis. 2d 361, 364-65, 560 N.W.2d 315, 317 (Ct. App. 1997).

Rule of Prior Precedence.

¶ 9. The rule of prior precedence is a common law rule "created to ensure that the proceedings first instituted have precedence." Town of Delavan, 176 Wis. 2d at 532, 500 N.W2d at 273 (citation omitted). The rule provides that "in case of conflict between competing annexations, or between an annexation and a proceeding for the incorporation of a city or village, the proceeding first instituted has precedence, and the later one must yield." Village of Brown Deer v. City of Milwaukee, 274 Wis. 50, 58, 79 N.W.2d 340, 344-45 (1956). The purpose of the rule is "to ensure the smooth dovetailing of multiple proceedings." Delavan, 176 Wis. 2d at 534, 500 N.W.2d at 274.

¶ 10. Campbell does not dispute that the annexation proceedings originated prior to the 2001 petition. Rather, Campbell argues that the petition does not violate the rule of prior precedence because the annexation proceedings lost "priority status" when the ordinances were deemed invalid and dismissed by the circuit court. Campbell cites no legal authority for this position. It builds its case on: (1) the rules regarding the finality of circuit court decisions for purposes of appeals as of right under Wis. Stat. §§ 808.03 and 808.04 and (2) the annexation statutes that are silent with regard to the continued "effectiveness" of annexations during appeal. Accordingly, Campbell contends that because the circuit court's decision was a "final judgment," it terminated the priority status of the annexations, clearing the "legal field" for the 2001 petition. We disagree.

¶ 11. The underlying purpose of the rule of prior precedence is plain: "to protect the integrity of the prior proceeding." Delavan, 176 Wis. 2d at 535, 500 N.W2d at 274-75; Popenfus v. City of Milwaukee, 208 Wis. 431, 243 N.W 315 (1932). Accordingly, in Town of Delavan v. City of Delavan, 168 Wis. 2d 566, 484 N.W.2d 343 (Ct. App. 1992), we held that the rule of prior precedent barred competing annexation or incorporation proceedings during the review and appeal process of the prior proceeding. Town of Delavan, 168 Wis. 2d at 574, 484 N.W.2d at 346. In Delavan, annexation proceedings were commenced before the circuit court formally dismissed the incorporation proceedings, but after the department determined that the territory did not meet the standards for incorporation under Wis. Stat. § 66.0207. Id. at 573, 484 N.W2d at 346.

¶ 12. The supreme court disagreed with our "literal application" of the rule of prior precedence and held that in determining whether an incorporation proceeding's priority status terminated, a functional interpretation of the rule was warranted. Town of Delavan, 176 Wis. 2d at 534-35, 500 N.W2d at 274-75. The court reasoned that our rule of "complete finality" unnecessarily restricted a flexible application of the rule and had the potential to "paralyze the legal process so as to delay subsequent actions years into the future." Id. at 535, 500 N.W.2d at 275. The court then articulated certain factors to be considered to determine whether a proceeding's priority status terminated, "no longer warrant[ing] judicial protection against competing proceedings." Id. at 537, 500 N.W2d at 275. The factors include: (1) ultimate likelihood of success of the prior proceeding, (2) the level of deference due the prior determination, and (3) the strong presumption of validity that is accorded a petition for direct annexation. Id. at 535, 500 N.W2d at 275. Based on these factors, the supreme court held that the annexations could proceed because the likelihood that a court would reverse the department's dismissal of the incorporation petition was slim. However, the court cautioned: "although reversal of the dismissal is unlikely it is legally possible. Annexation petitions filed prior to the final resolution of the prior incorporation proceeding are undertaken solely at the petitioner's risk." Id. at 538, 500 N.W.2d at 276.

¶ 13. The Delavan standard controls our application of the rule of prior precedence, and contrary to Campbell's assertion, it does not turn on the finality of the judgment or on the continued effectiveness of the annexation ordinance. Delavan instructs that competing petitions may not proceed simultaneously where the prior proceeding has a reasonable likelihood of success. Campbell's reliance on the rules regarding the finality of circuit court decisions is therefore misplaced, as it disregards the supreme court's functional interpretation of the rule of prior precedence.

¶ 14. Applying the Delavan standard to the facts here, we conclude that the rule of prior precedence bars the 2001 petition from proceeding with the annexed territories remaining within the boundaries of the proposed village. It is true that at the time the 2001 petition was filed, the circuit court had rendered an adverse decision regarding the validity of the annexations. However, because of the strong presumption of validity accorded direct annexations, the de novo level of review applied to the circuit court's determination and the ultimate likelihood that the validity of the annexations would be vindicated on appeal, judicial protection against competing proceedings continued to be warranted. Indeed, we reversed the circuit court and upheld the validity of the annexations, returning the territory to La Crosse. See Town of Campbell, 247 Wis. 2d 946, ¶ 19.

¶ 15. Accordingly, we agree with the circuit court that the annexation proceedings continued to retain their priority over the incorporation proceedings. However, because the 2001 petition contains a contingent narrative description of territory to be incorporated that excises the annexed territory in the event that the annexations are held valid on appeal, we next consider whether the contingent description is sufficient to satisfy Wis. Stat. § 66.0203.

Incorporation Proceedings.

¶ 16. Incorporation procedures are set out in Wis. Stat. ch. 66 and require two descriptions: one narrative (at issue here) and one visual (a map). The resolution of whether a contingent narrative description is legally sufficient turns on whether that description satisfies the statutory requirement to "describe the territory to be incorporated with sufficient accuracy to determine its location" as set out in Wis. Stat. § 66.0203(2)(c).

¶ 17. The purpose of statutory construction is to ascertain the intent of the legislature, and our first resort is to the language of the statute itself. State v. Setagord, 211 Wis. 2d 397, 406, 565 N.W.2d 506, 509 (1997). If the words of the statute convey legislative intent, that ends our inquiry. Kelley Co., Inc. v. Marquardt, 172 Wis. 2d 234, 247, 493 N.W.2d 68, 74 (1992). However, if the language used is capable of more than one meaning, we determine legislative intent from the words of the statute in relation to its context, subject matter, scope, history and the object which the legislature intended to accomplish. Truttschel, 208 Wis. 2d at 365-66, 560 N.W.2d at 317.

¶ 18. Campbell argues that a contingent description of the territory satisfies the Wis. Stat. § 66.0203 requirements because absolute accuracy is not required. By contrast, La Crosse contends that one must be able to determine the location of the territory subject to incorporation from the face of the petition and a contingent petition's location is a moving target whose accuracy cannot be determined, contrary to statutory directive.

¶ 19. There is no Wisconsin case that examines the requirements of the narrative description of Wis. Stat. § 66.0203. Campbell relies on Schatzman v. Town of Greenfield, 273 Wis. 277, 77 N.W2d 511 (1956) and Village of Brown Deer, 274 Wis. 2d at 65-66, 79 N.W.2d at 349, to argue that "the law is flexible" toward the use of contingent descriptions as a means of dealing with competing proceedings and the rule of prior precedence. Campbell asserts that a contingent description provides a practical method for an incorporation petition to proceed in tandem with annexations without interfering with the annexations.

¶ 20. Our reviews of Schatzman and the Village of Brown Deer cause us to conclude that neither case decides whether a contingent narrative description is sufficient under the statute. The Schatzman court addressed whether a neighboring municipality had a sufficient stake in certain incorporation proceedings to intervene as a matter of right. The decision specifically "express [es] no opinion concerning the efficacy of such a contingent description in an incorporation proceeding." Schatzman, 273 Wis. 2d at 279, 77 N.W2d at 512. Similarly, in Village of Brown Deer, the supreme court declined to "pass upon the validity" of a consolidation ordinance that contained a severability provision, similar in effect to the contingent description at issue here. The court arrived at its decision that the annexations had priority over the consolidation, "assuming the validity of the consolidation." Village of Brown Deer, 274 Wis. at 66, 79 N.W2d at 349.

¶ 21. As an initial matter, we note that a contingent narrative description on its face presents more than one potential location of the territory to be incorporated. In order to identify the actual location, one must make reference to information not present in the narrative description. For example, in order to determine which part of the narrative description was operative here, one would have had to have consulted the latest decision on the pending annexation ordinances.

¶ 22. We conclude that there are significant conflicts between a contingent narrative description that provides for more than one location and the controlling statute's requirements. First, the circuit court must determine whether the petition meets the formal and signature requirements and the additional requirements provided in Wis. Stat. § 66.0205. Wis. Stat. § 66.0203(8). If the standards are met, the petition is referred to the department for a review of the merits under Wis. Stat. § 66.0207. The findings of both the court and the department are based on the facts as they existed at the time of the filing of the petition. Section 66.0203(9)(g). A change in location is a change in facts material to the petition.

¶ 23. Second, a person signing a petition can do so only if he/she is an elector and a freeholder of property within the territory subject to incorporation. Wis. Stat. § 66.0203(2)(a). When the location of the territory changes due to a contingency in the description having been met, an elector/freeholder may have signed a petition that will not apply to him/her when the incorporation is effected. Therefore, such a signature will violate § 66.0203(2)(a). Because the statutes do not permit withdrawals of signatures to a petition for incorporation, § 66.0203(2)(e), the error cannot be corrected by the signatory. Third, when the department reviews a petition, if it determines that the territory sought to be incorporated is problematic for one reason or another and it dismisses the petition, it can do so with the, recommendation that a "new petition be submitted to include more or less territory." Section 66.0203(9)(e)3. That the statutory scheme directs the department to recommend the filing of a new petition, rather than amending the narrative description of the location of the territory in a pending petition, suggests to us that the narrative description on its face must be sufficient to identify the territory at the time the incorporation petition is filed. Accordingly, we conclude that an accurate location of the territory proposed to be incorporated must be apparent from the face of the petition. Therefore, use of a contingent description is insufficient to satisfy the statutes.

¶ 24. In concluding that the use of a contingent description is contrary to statute, we recognize Campbell's concern regarding the potential for "town remainders" in the event the incorporation proceedings succeed and the annexations fail. However, there exist statutory procedures that Campbell may use to remedy the impact of an incomplete incorporation on the remainder of the town, for example, by annexation, consolidation or boundary agreement. See Wis. Stat. §§ 66.0217, 66.0229 and 66.0307.

CONCLUSION

¶ 25. Because the petition includes territory subject to annexation proceedings that commenced prior to the incorporation proceeding, the annexation takes precedence over the property subject to both the annexation ordinances and the petition to incorporate. Additionally, because we conclude that the use of a contingent narrative description for the territory to be incorporated is insufficient to satisfy the statutory requirements for incorporation set out in Wis. Stat. § 66.0203, we affirm the circuit court's order dismissing the petition.

By the Court. — Order affirmed.

       Helen Vitale and Robert Wolfert are the designated representatives for the Town of Campbell in the incorporation proceeding. However, we will refer to the incorporation petitioners collectively as Campbell for purposes of this appeal.

       All further references to the Wisconsin Statutes are to the 2001-02 version unless otherwise noted. WISCONSIN Stat. ch. 66 was recodified and reorganized by 1999 Wis. Act 150, that renumbered Wis. Stat. § 66.014 (1997-98) as Wis. Stat. § 66.0203.

       The notice of intent to circulate an incorporation petition described the territory to be incorporated as "the entire land and water of the Town of Campbell, La Crosse County, Wisconsin."

       The narrative description states in relevant part:
      A. Certain annexations have been made by the City of La Crosse which have been challenged by the Town. The Judgment of the Circuit Court of La Crosse County has declared said annexations void and the property which was subject to the annexation returned to the jurisdiction of the Town. All such annexations are intended to be included in this description so as to leave no remainder of the Town. The City of La Crosse has appealed to the Court of Appeals for the State of Wisconsin and should the Court of Appeals overturn the Circuit Court, said annexations could possibly be determined to be legally preceding this Petition containing this legal description which includes said lands. In the event of such legal contingency, said parcels shall be considered to be deleted from this description as to give rise to no conflict between the annexations and the incorporation. In the event that the Town's continuing legal challenge is sustained by final judgment declaring any or all annexations void, such void annexations shall be reinstated to he included within this legal description so as to leave no remainder of the Town.
      B. Certain annexations have been passed by the City of La Crosse that continue to he contested by the Town of Campbell. These annexations are not included in the description of the proposed Village because of said existing presumption that they are within the jurisdiction of the City of La Crosse. The excluded annexations cover Lots 4 through 13 of Terpstra Addition to Hiawatha Islands Addition. Should the Town successfully defeat any of such annexations thereby returning the property to the Town of Campbell then it is intended that said annexations be a part of the description of the entire Town and be included within the proposed Village.

       Because the 2001 petition expressly includes the annexed territories within the boundaries of the proposed village, we address first whether the petition violates the rule of prior precedence with said territories included in the description.

       WISCONSIN Stat. § 66.0203 refers to the narrative description in several places. It provides in relevant part:
      (1) Notice op Intention. At least 10 days and not more than 20 days before the circulation of an incorporation petition, a notice setting forth that the petition is to be circulated and including an accurate description of the territory involved shall be published within the county in which the territory is located as a class 1 notice, under ch. 985.
      (2) (a) The petition for incorporation of a village or city shall be in writing signed by 50 or more persons ... in the territory to be incorporated....
      (c) The petition shall. . . describe the territory to be incorporated with sufficient accuracy to determine its location and have attached to the petition a scale map reasonably showing the boundaries of the territory.
      (4) Notice. . . .

        (b) The notice shall contain:
      1. A description of the territory sufficiently accurate to determine its location and a statement that a scale map reasonably showing the boundaries of the territory is on file with the circuit court.
      (Emphasis added). We have used the words of § 66.0203(2)(c) for a petition, but we do not ascribe any significance to the legislature's various statements of the narrative description.

       Here, Campbell presents two alternatives. However, if a contingent description were permissible, one could argue that having two alternative locations is only the beginning of what could be included in an incorporation petition's narration.

       In Wirth v. City of Port Washington, 2001 WI App 277, 248 Wis. 2d 893, 637 N.W.2d 442, we permitted some flexibility in the accuracy of the map that showed the boundaries of the territory. Id., ¶ 11. However, the map is a visual representation that "reasonably shows the boundaries" of the territory. We did not examine the statutory requirements of the narrative description that must "describe the territory to be incorporated with sufficient accuracy to determine its location." See Wis. Stat. § 66.0203(2)(c).