author: ROGGENSACK, J. LUNDSTEN, J.

text:
    Leo E. Borne, Trustee for the Leo E. Borne Separate Property Trust, Plaintiff-Appellant, v. Gonstead Advanced Techniques, Inc., Robert Gonstead, Phyllis Markham Richelieu, John Thatcher, Larry Troxell, Linda Rhodes, James Obert, James Campbell, Dale Applegate, Herb Wood, Gary Pfaff, Sheldon Dellman, Polly McGinley and C.S. Gonstead Chiropractic Foundation, Defendants-Respondents.
    Court of Appeals

      Nos. 01-2624, 02-0973.

      Submitted on briefs June 12, 2002.

      Decided June 19, 2003.

    2003 WI App 135
    (Also reported in 667 N.W.2d 709.)

      On behalf of the plaintiff-appellant, the cause was submitted on the briefs of Brian E. Butler, James B. Egle and Lee M. Seese of Stafford Rosenbaum LLP of Madison.
    On behalf of the defendants-respondents, the cause was submitted on the brief of Ann U. Smith and Mary C. Turke of Michael Best & Friedrich LLP of Madison.
    Before Roggensack, Deininger, and Lundsten, JJ.

       Petition to review denied 10-1-03.

   ROGGENSACK, J.

¶ 1. Leo Borne, trustee for the Leo E. Borne Separate Property Trust (the Trust), appeals the circuit court's judgment dismissing his claims against Gonstead Advanced Techniques, Inc. (GAT), Robert Gonstead, Phyllis Markham Richelieu, John Thatcher, Larry Troxell, Linda Rhodes, James Obert, James Campbell, Dale Applegate, Herb Wood, Gary Pfaff, Sheldon Dellman, Polly McGinley and C.S. Gonstead Chiropractic Foundation (hereinafter collectively, shareholders). We conclude that because the Trust was not a shareholder at the time of the challenged transactions, it cannot maintain a derivative action, nor can it assert a claim based on the failure to give notice of statutory dissenters' rights. Accordingly, we affirm the judgment of the circuit court.

BACKGROUND

¶ 2. Leo E. Borne was a creditor of Robert Gon-stead, a shareholder and director of GAT who owned the sixty-one shares of stock. When Robert and Carol Gonstead filed for bankruptcy, the bankruptcy trustee, Daniel L. Bakst, took possession of the GAT stock.

¶ 3. On May 1, 2000, the GAT board of directors approved a plan of liquidation to dissolve GAT. Under that plan each shareholder was required to surrender his or her stock for cancellation; creditors were to be paid and, on or before December 31, 2001, GAT was to donate any remaining assets to the C.S. Gonstead Chiropractic Foundation, Inc. (Foundation), a Wisconsin charitable and educational corporation. On or about May 19, 2000, GAT gave notice to all of its shareholders of the liquidation plan and of a meeting to be held on June 9, 2000, wherein a vote on the plan would be taken.

¶ 4. On June 9, 2000, 146 votes, out of a possible 154 shareholder votes were cast. Eighty-five voted in favor of the plan. The trustee in bankruptcy voted the sixty-one shares he held against the plan. On July 20, 2000, Borne offered to purchase the GAT stock held by the bankruptcy estate, and on August 10, 2000, he was informed that his offer had been accepted. On August 19, 2000, Bakst mailed the original share certificates and a bill of sale to Borne, who then transferred the stock to the Trust.

¶ 5. On February 7, 2001, the Trust sued GAT, the GAT board of directors and the shareholders who voted in favor of the plan of liquidation. The amended complaint alleges five claims for relief: (1) breach of fiduciary duty; (2) failure to give dissenters' rights notice; (3) demand for judicial dissolution; (4) fraudulent transfer; and (5) conversion.

¶ 6. The Trust complains that the GAT shares it held lost value because the plan of liquidation recommended by the board of directors on May 1, 2000, and approved by the shareholders on June 9, 2000, provided for distribution of any assets remaining in the corporation to the Foundation. The Trust asserts that the shareholders who voted in favor of the plan and the board of directors who recommended it breached their individual fiduciary duties to the Trust because their actions were against the Trust's interests. The Trust cites Wis. Stat. § 180.1405 that it contends requires a dissolving corporation to distribute any property remaining, after the payment of all corporate debts, to the shareholders.

¶ 7. In its second claim for relief, the Trust asserts that the plan of liquidation invokes statutory dissenters' rights, but that the notice for the June 9, .2000 meeting where the plan of liquidation was to be voted upon did not give notice that shareholders and beneficial shareholders may be entitled to assert statutory dissenters' rights under Wis. Stat. §§ 180.1301 to 180.1331 (1999-2000). It also asserts that the notice was not accompanied by a copy of those statutes, as is required, and that neither Bakst nor the Trust has ever received the requisite notice of dissenters' rights from GAT.

¶ 8. As a third claim, the Trust seeks judicial dissolution, based on the claimed waste of GAT's assets under the plan adopted by the shareholders. In the fourth claim, the Trust asserts that the plan's adoption was an attempt to defraud the Trust of its proportionate share of GAT's assets and that by transferring the assets into the Foundation, the defendants will remain in control of them and therefore have violated Wis. Stat. § 242.04(l)(a) that deals with transfers in defraud of creditors. As the final claim, the Trust alleges conversion through the interference with the Trust's rights to GAT's assets, which interference was done without the Trust's permission when the plan was adopted. As relief, the Trust requested "avoidance" of the transfer of GAT's assets, pursuant to Wis. Stat. § 242.07(1)(a) that provides creditors' remedies; judicial dissolution pursuant to Wis. Stat. § 180.1430; damages; punitive damages; and attorney's fees.

¶ 9. GAT moved to dismiss the amended complaint based on the Trust's lack of standing because it did not own stock on June 9, 2000, the date on which shareholders approved the plan of liquidation. The circuit court granted the motion after concluding that stock ownership was necessary because the injury complained of was one primarily to the corporation. Therefore, the Trust's claim was required to be brought as a derivative action, rather than as an individual action as the Trust has attempted to do. The circuit court did not directly address the Trust's claim based on dissenters' rights. The Trust appeals.

DISCUSSION

Standard of Review.

¶ 10. Whether the facts alleged in a complaint state a claim for relief presents a question of law subject to de novo review. See Tower Special Facilities, Inc. v. Investment Club, Inc., 104 Wis. 2d 221, 226, 311 N.W2d 225, 228 (Ct. App. 1981). Additionally, whether a complaint has stated claims for relief that are all based on an injury that is primarily to the corporation or whether some are grounded primarily in an individual injury are also questions of law that we review de novo. See Rose v. Schantz, 56 Wis. 2d 222, 228-29, 201 N.W2d 593, 597-98 (1972). And finally, questions of statutory construction or the application of a statute to undisputed facts are questions of law on which we do not defer to the circuit court. Truttschel v. Martin, 208 Wis. 2d 361, 364-65, 560 N.W.2d 315, 317 (Ct. App. 1997).

The Trust's Claims.

¶ 11. On a motion to dismiss for failure to state a claim, the legal sufficiency of the complaint is tested. Hartridge v. State Farm Mut. Auto. Ins., Co., 86 Wis. 2d 1, 4-5, 271 N.W.2d 598, 599 (1978). In so doing, the facts pleaded by the plaintiff, and all reasonable inferences therefrom, are accepted as true. Id. Dismissal, at this stage, is appropriate only if it is clear that under no circumstances can the plaintiff recover. Id. The sufficiency of a complaint is measured by the facts alleged, not by the plaintiffs theory of recovery. Shelstad v. Cook, 77 Wis. 2d 547, 553, 253 N.W2d 517, 519 (1977). Here, the circuit court's decision to dismiss was grounded in its conclusion that the injury complained of was one primarily to the corporation and because the Trust was not a shareholder at the time of the injury, it did not have standing under Wis. Stat. § 180.0741 to bring the suit.

1. The Trust's Shareholder Status.

¶ 12. All of the Trust's claims are for injuries bottomed on its assertion of shareholder status. Therefore, we begin by examining that status in light of the relevant statutes and the facts set forth in the amended complaint. Wisconsin Stat. § 180.0103(14) defines "shareholder" as follows:

"Shareholder" means the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation.

According to this unambiguous statute, to be a "shareholder" one must either be registered by name in the records of the corporation as the holder of shares or have on file with the corporation a nominee certificate showing the extent of the shareholder rights that may be exercised as a beneficial owner. The Trust contends it is the owner of sixty-one shares, but the amended complaint does not state that its name has been registered as a shareholder by GAT, or that a nominee certificate has been filed with the corporation giving it particular rights, or in any other manner imply that its interest was registered with the corporation when the acts it complains of occurred. The amended complaint, exhibit B, does show that on August 29, 2000, GAT reported the results of the vote on the plan of liquidation and dissolution to Bakst, as though the bankruptcy estate continued to hold the GAT shares.

¶ 13. Therefore, from the four corners of the amended complaint we can conclude that no allegation has been made from which a reasonable inference could be drawn that the Trust was a statutory shareholder at the time of the two acts of which it complains, the board's recommendation of the plan and the shareholders vote to approve it. However, the timing of the Trust's registering as the owner of shares in GAT is significant in evaluating all of the claims made in the amended complaint, as we explain below.

2. Claims 1, 3, 4 and 5.

¶ 14. The Trust's claims for breach of fiduciary duty, judicial dissolution, fraudulent transfer and conversion are all driven by the plan to transfer all of GAT's net assets to the Foundation, thereby devaluing each shareholder's ownership interest. In order to bring an individual claim for breach of a fiduciary duty based on directors' or shareholders' acts, the Trust must have alleged facts sufficient, if proved, to show an injury that is personal to it rather than one derivative from the corporation. Reget v. Paige, 2001 WI App 73, ¶ 12, 242 Wis. 2d 278, 626 N.W.2d 302.

¶ 15. On the other hand, a derivative claim arises when the injury complained of was not caused by acts against the plaintiff, but rather by acts against the corporation that cause harm to the corporation. Einhorn v. Culea, 2000 WI 65, ¶ 16, 235 Wis. 2d 646, 612 N.W.2d 78. Derivative claims are those a corporation could bring because the corporation's assets are affected. Rose, 56 Wis. 2d at 229, 201 N.W.2d at 597. If the injury is one primarily to the corporation, a plaintiff must allege that it was a registered shareholder at the time of the transaction of which it complains. Shelstad, 77 Wis. 2d at 554, 253 N.W2d at 520. The failure to plead that one was a registered shareholder requires the dismissal of derivative claims. See Rank v. Lease Assocs., Inc., 45 Wis. 2d 689, 695, 173 N.W.2d 713, 716 (1970).

¶ 16. Here, with the exception of the claim based on a failure to give notice of dissenters' rights, it is GAT's assets that the Trust complains of being taken from GAT under the plan of liquidation. Therefore, even though the value of all stock will be depleted by the plan, that injury is secondary to the corporation's loss of ¿ssets. Accordingly, we conclude that the Trust is attempting to bring a derivative action. However, the Trust has not alleged it was a registered shareholder at the time of the complained of acts. Accordingly, the circuit court correctly dismissed claims one, three, four and five on this basis. See id.

3. The Second Claim.

¶ 17. The Trust's second claim asserts an alleged failure to give notice of dissenters' rights pursuant to Wis. Stat. § 180.1320. The Trust claims that the liquidation and dissolution plan' is a transfer of all of GAT's assets and accordingly it has the right to dissent to the plan under Wis. Stat. § 180.1302, which right then creates obligations on GAT's part to give it notice of its statutory dissenters' rights, including its right to fair value plus interest for its shares.

¶ 18. We begin our discussion of this claim the same way as we did with our consideration of the other four claims, with the amended complaint's assertion about the Trust's shareholder status. As we have noted above, the Trust did not meet the definition of a Wis. Stat. § 180.0103(14) shareholder at the time of the acts complained of in the amended complaint. Additionally, the amended complaint does not state facts that could support a determination that the Trust was a "beneficial shareholder" at any relevant time. A "beneficial shareholder" is defined by statute as a "person who is a beneficial owner of shares held by a nominee as the shareholder," Wis. Stat. § 180.1301(1), and a "beneficial owner" must have a certificate of the nominee on file with the corporation in order to come within that statutory definition. Section § 180.0103(14). The amended complaint contains no facts from which we could reasonably imply that the Trust had filed such a certificate enabling it to qualify as a beneficial shareholder at the times relevant to its amended complaint. Shareholder or beneficial shareholder status is necessary to the Trust's assertion that it was wrongfully denied notice of dissenters' rights because the term, "dissenter," is a term defined by statute that requires shareholder status as a starting point. Section 180.1301(3) provides:

"Dissenter" means a shareholder or beneficial shareholder who is entitled to dissent from corporate action under s. 180.1302 and who exercises that right when and in the manner required by ss. 180.1320 to 180.1328.

¶ 19. Because the Trust was not a shareholder or a beneficial shareholder at the time of the complained of acts, it had no right to vote in dissent to the plan of liquidation and dissolution. It follows then that it also cannot be a "dissenter" entitled to notice of dissenters' rights, as only one who can vote in dissent is entitled to such notice, according to the statute. Wis. Stat. § 180.1320. Therefore, we conclude that any alleged failure to give notice of dissenters' rights to the Trust cannot form the basis of a claim for relief. Our decision in this regard is in accord with that of at least one other jurisdiction. See Gilman v. Davis, 67 P.3d 78, 81 (Idaho 2003) (concluding that because a current shareholder was not entitled to vote on the action complained of, he was not entitled to complain that he was not given notice of dissenters' rights). Accordingly, we conclude that the circuit court correctly dismissed the second claim as well.

CONCLUSION

¶ 20. Because the Trust was not a shareholder at the time of the challenged transactions, it cannot maintain a derivative action, nor can it assert a claim based on the failure to give notice of statutory dissenters' rights. Accordingly, we affirm the judgment of the circuit court.

By the Court. — Judgment affirmed.

LUNDSTEN, J.

¶ 21. (dissenting in part; concurring in part). The majority concludes that the injuries alleged in claims 1, 3, 4, and 5 of the complaint were primarily to the corporation and secondarily to the Borne Trust. The majority concludes that these claims were correctly dismissed because the Trust was not a registered stockholder at the time of the alleged injury-causing action. Majority at ¶¶ 14-16. I respectfully disagree. I believe the Trust sufficiently alleged a breach of fiduciary duty and that this claim is a direct action which may be brought by the Trust, even if the Trust was not a stock owner at the time of the alleged injury-causing action. In addition, with respect to dismissal of the Trust's dissenters' rights claim, I concur with the result, but write separately because I differ in how we should reach that result.

¶ 22. The rules governing the sufficiency of a civil complaint are well established. "The purpose of the complaint is to give notice of the nature of the claim; and, therefore, it is not necessary for the plaintiff to set out in the complaint all the facts which must eventually be proved to recover." Morgan v. Pennsylvania Gen. Ins. Co., 87 Wis. 2d 723, 731, 275 N.W2d 660 (1979). "[I]f any set of facts would support the allegations to make out a legally sufficient claim, these facts must also be considered admitted." Id. at 734. When reviewing a complaint, "we must liberally construe the . . . complaint" and we may sustain a "motion to dismiss only if it is clear that under no circumstances can [the plaintiff] prevail." Barry v. Maple Bluff Country Club, 221 Wis. 2d 707, 723, 586 N.W2d 182 (Ct. App. 1998).

¶ 23. The majority's recitation of the test to determine whether a claim belongs to the corporation (derivative cause of action) or the individual (direct cause of action) is incomplete. The majority states:

[A] derivative claim arises when the injury complained of was not caused by acts against the plaintiff, but rather by acts against the corporation that cause harm to the corporation. Derivative claims are those a corporation could bring because the corporation's assets are affected.

Majority at ¶ 15 (citations omitted). The majority then concludes in cursory fashion that the injury is primarily to the corporation because "it is GAT's assets that the Trust complains of being taken from GAT under the plan of liquidation." Majority at ¶ 16. Under the majority's definition of derivative actions, it is difficult to conceive of an action that would belong primarily to a shareholder. Apparently, a shareholder would have to suffer an injury without any corresponding injury to the corporation. I believe the relevant case law does not define individual causes of action so narrowly.

¶ 24. An action is a "direct action," rather than a "derivative action," when the alleged primary injury is to some subset of shareholders rather than to the corporation. See Rose v. Schantz, 56 Wis. 2d 222, 229-30, 201 N.W2d 593 (1972). In order to bring a direct action, a "complaint must allege facts sufficient, if proved, to show an injury that is personal to [the complainant], rather than an injury primarily to the corporation." Reget v. Paige, 2001 WI App 73, ¶ 12, 242 Wis. 2d 278, 626 N.W.2d 302; see also Read v. Read, 205 Wis. 2d 558, 570, 556 N.W2d 768 (Ct. App. 1996) ("[AJbsent an individual right, a shareholder may not bring suit for actions accruing to the corporation."). Shareholders are directly injured when they are affected "in a manner distinct from the effect upon other shareholders." Jorgensen v. Water Works, Inc., 2001 WI App 135, ¶ 16, 246 Wis. 2d 614, 630 N.W2d 230 (Jorgensen II). Conversely, an injury is primarily to the corporation if all shareholders are affected proportionately to the number of shares they own. See id. at ¶¶ 16-18; Jorgensen v. Water Works, Inc., 218 Wis. 2d 761, 776-77, 582 N.W2d 98 (Ct. App. 1998).

¶ 25. In this case, the Trust's amended complaint states:

43. ... Upon information and belief, the assets of GAT are being transferred to a corporation which is controlled by at least several of the individual defendants, and in which [Borne] will have no interest.
44. By transferring the assets of GAT to [the charitable foundation], the defendants will have retained possession and control of the assets of GAT to the detriment of plaintiff, whose shares in GAT are worthless if all assets of GAT have been transferred ....

¶ 26. The germane question is whether there exists a set of facts that would support the Trust's allegations sufficient to make out a legally adequate claim, that is, that the Trust suffered an injury "in a manner distinct from the effect upon other shareholders." Jorgensen II, 246 Wis. 2d 614, ¶ 16. The answer is yes.

¶ 27. It may well be that the defendants who control the Foundation will receive some benefit as a result of the transfer of GAT assets to the Foundation. For example, members of the board of directors of a charitable corporation are often compensated monetarily for their duties. On the surface, each of these Foundation director shareholders suffers a total loss in the value of his or her GAT stock, just as does the Trust. However, the effect of the transaction may also benefit these shareholders while providing no benefit to the Trust. Therefore, it is inferable from the amended complaint that the Trust will suffer an injury distinct from several of the defendants (those who hold an interest in the charitable corporation) because these defendants may receive some benefit from the transfer of GAT's assets to the Foundation.

¶ 28. Assuming the Trust holds a direct claim against the corporation, the parties still dispute whether the Trust had to own stock at the time of the acts complained of (the board's recommendation of the plan and the shareholders' vote), as required by Wis. Stat. § 180.0741. My research reveals no Wisconsin case on point, but I conclude that a plaintiff need not be a shareholder at the times relevant to his or her claim in order to pursue an individual claim for breach of fiduciary duty.

¶ 29. The general rule is that "a shareholder who seeks to maintain a nonderivative action is not required to have owned stock at the time of happening of events upon which the complaint is based." 12B William Meade Fletcher et al., Fletcher Cyclopedia of the Law of Private Corporations § 5936.10, at 520-21 (perm, ed., rev. vol. 2000) (footnote omitted). Indeed, the logic of having a derivative action statute, such as Wis. Stat. § 180.0741, is that it is an exception to the general rule that, along with stock, a stock purchaser buys the right to sue for past wrongs. Section 180.0741 provides:

A shareholder or beneficial owner may not commence or maintain a derivative proceeding unless the shareholder or beneficial owner satisfies all of the following:
(1) Was a shareholder or beneficial owner of the corporation at the time of the act or omission complained of or became a shareholder or beneficial owner through transfer by operation of law from a person who was a shareholder or beneficial owner at that time.
(2) Fairly and adequately represents the interests of the corporation in enforcing the right of the corporation.

(Emphasis added.)

¶ 30. If a person buying stock does not usually acquire the right to bring causes of action that the seller could have brought, there would be no need for the derivative action statute. ”[T]he purpose of [the derivative action statute] is to reduce the incidence of 'strike suits' by persons who have purchased the stock with the intention of bringing derivative actions for wrongs sustained by the corporation prior to their ownership." Becker v. Becker, 56 Wis. 2d 369, 373, 202 N.W.2d 688 (1972) (construing the predecessor to Wis. Stat. § 180.0741). Therefore, because no statute directs otherwise, there is no corresponding prohibition on individual causes of action.

¶ 31. I turn my attention now to that portion of the majority decision beginning at paragraph 17, entitled "The Second Claim." Here, the majority addresses the Trust's claim asserting a failure to give notice of dissenters' rights. The majority concludes that because the Trust was not a GAT shareholder at the time of the shareholder vote on the dissolution plan, the Trust cannot complain about the failure to provide dissenters' rights notice. Majority at ¶ 19. I disagree.

¶ 32. Once more I rely on the general proposition that "a shareholder who seeks to maintain a nonderiva-tive action is not required to have owned stock at the time of happening of events upon which the complaint is based." Fletcher Cyclopedia § 5936.10, at 520-21 (footnote omitted). Thus, a stockholder, who has purchased stock from a dissenting shareholder, acquires along with the stock the right to a claim against a corporation for failure to provide dissenters' rights notice under Wis. Stat. § 180.1320. Nothing in the statutes cited by the majority requires that only the shareholder who was entitled to notice may pursue a claim based on a violation of the notice provision.

¶ 33. Nonetheless, I concur in the result reached by the majority because I would deem the issue waived. The Trust does not in any plain manner argue or develop the argument that GAT's failure to provide dissenters' rights notice affords the Trust an alternate ground on which to state a direct action. See Block v. Gomez, 201 Wis. 2d 795, 811, 549 N.W.2d 783 (Ct. App. 1996) (refusing to address amorphous and insufficiently developed arguments).

¶ 34. Accordingly, I respectfully dissent to paragraphs 14-16 of the majority and concur with the result, but not the reasoning, with respect to paragraphs 17-19.

       The background facts are taken from the amended complaint, which facts we assume to be true for purposes of this decision. Town of Eagle v. Christensen, 191 Wis. 2d 301, 316, 529 N.W.2d 245, 251 (Ct. App. 1995).

       The trustee in bankruptcy was the only participant who voted against the plan; eight shares did not vote.

       All further references to the Wisconsin Statutes are to the 1999-2000 version, unless otherwise noted.

       The amended complaint invokes the creditors' rights statutes of Wis. Stat. ch. 242; however, on appeal the Trust does not attempt to develop an argument that it is a creditor of GAT. We note that even if it had, it would be of no avail as share ownership is very different from creditor status vis-á-vis a corporation, and the amended complaint pleads no facts from which we could reasonably infer that the Trust was a creditor of GAT. See Gelatt v. DeDakis, 77 Wis. 2d 578, 606-07, 254 N.W2d 171, 187 (1977).

       The dissent attempts to create a straw man of benefits that some of the shareholders will receive from the Foundation, e.g., salaries for service as directors of the Foundation, and then proceeds to build a claim of an individual harm based upon those benefits. However, the amended complaint alleges no payment of salaries by the Foundation to anyone. Additionally, this case is a far cry from Jorgensen v. Water Works, Inc., 2001 WI App 135, 246 Wis. 2d 614, 630 N.W.2d 230, cited by the dissent. In Jorgensen, two shareholders were removed as directors of a corporation where all of the shareholders had been directors and the corporation had always distributed all of its profits as directors' fees rather than as dividends. Therefore, the Jorgensens removal as directors also prevented only the Jor-gensens from sharing in corporation profits.

       We assume that the plan invokes a right to dissent. However, we specifically do not decide this question because neither party briefed it and its resolution is not necessary to our decision.

       In its brief, the Trust attempts to modify the amended complaint by asserting that it is the actual transfer of GAT's assets to the Foundation that it maintains is wrongful. However, that is not what the amended complaint states. Additionally, if that were the case, we wonder on what basis the Trust could have sued the shareholders who simply voted in favor of the plan, but had no hand in determining when it would he implemented.

       The dissent does not address the statutes that cover the formation and exercise of dissenters' rights, but instead goes back to its theme that all claims a former shareholder might have made attach to the stock so that any future owner can bring them. See dissent at ¶¶ 9-12. The only support the dissent has for this theory is the FletcheR Cyclopedia of the Law of Private CORPORATIONS. Broad statements from a legal treatise, while providing some general thoughts for examining a claim in a given area, provide little support for the dissent. Specific claims must always be analyzed individually. For example, the contemporaneous ownership rule has been held to preclude bringing many types of shareholder claims if they arose before the litigant owned the shares. See Bank of Santa Fe v. Petty, 867 P.2d 431 (N.M. 1993). And, claims of misrepresentation generally cannot be brought by a shareholder who purchased the shares from a shareholder to whom the misrepresentation was made because of the inability to meet the element of reliance that is part of a misrepresentation claim. See Parnes v. Gnome Mfg. Co., 117 A. 148 (N.J. 1922). Additionally, courts have also held that a fiduciary duty arises only after a shareholder has become the owner of stock and does not lie for actions occurring prior to that time. See Anadarko Petroleum Corp. v. Panhandle Eastern Corp., 545 A.2d 1171, 1174-77 (Del. 1988). Furthermore, the second claim asserts rights created by statute. Those claimed rights must be analyzed under the directives set out by the legislature. See Gilman v. Davis, 67 P.3d 78, 81 (Idaho 2003).

       I note that the Trust fails to persuasively argue that it could pursue its breach of fiduciary duty claim against the defendants who are shareholders but do not own a majority stake in GAT and do not serve on GAT's hoard of directors. We find no support for the proposition that these shareholders owe a fiduciary duty to other GAT shareholders.

       The majority correctly points out that there are exceptions to this general rule, but does not demonstrate that there is no general rule or that any recognized exception applies here.


source: Caselaw Access Project

author: HOOVER, RJ.

license: Public Domain

text:
    State of Wisconsin, Plaintiff-Respondent, v. Robert C. Deilke, Defendant-Appellant.
    Court of Appeals

      Nos. 02-2897-CR, 02-2898-CR.

      Submitted on briefs June 9, 2003.

    Decided June 24, 2003.

    2003 WI App 151
    (Also reported in 667 N.W.2d 867.)

      On behalf of the defendant-appellant, the cause was submitted on the briefs of Kelly J. McKnight and Wachowski & Johnson, S.C., of Eau Claire.
    On behalf of the plaintiff-respondent, the cause was submitted on the brief of G. Richard White, district attorney, of Eau Claire.
    Before Cane, C.J., Hoover, EJ., and Peterson, J.

       Petition to review granted 10-1-03.

   HOOVER, RJ.

¶ 1. Robert Deilke appeals an order releasing the State from plea agreements in Eau Claire County cases No. 93-CT-174 and No. 00-CT-250, thereby allowing the State to reinstate charges against Deilke. He also appeals the resulting judgments of conviction for operating with a prohibited blood alcohol concentration. Deilke contends the trial court erred when it concluded he had breached the plea agreements in the two cases by collaterally attacking them in a subsequent case. We agree with Deilke and reverse the judgments and order.

Background

¶ 2. In case No. 93-CT-174, Deilke was charged with operating while intoxicated (OWI), second offense; operating with a prohibited blood alcohol concentration (PAC), second offense; and operating after revocation, first offense. Pursuant to a plea agreement, Deilke pled guilty to the OWI; the State dismissed the remaining charges. Deilke served his full sentence.

¶ 3. In No. 00-CT-250, Deilke was charged with OWI, fourth offense and PAC, fourth offense. Pursuant to a plea agreement, Deilke pled guilty to the OWI and the PAC was dismissed. He again served his full sentence.

¶ 4. In March 2001, Deilke was charged in case No. 01-CF-163 with OWI and PAC, both as fifth offenses. The 1993 and 2000 convictions formed part of the factual basis for charging the 2001 case as a fifth offense. In July 2001, Deilke filed a motion to collaterally attack all of his underlying convictions for penalty enhancement purposes, including the 1993 and 2000 convictions. In August 2001, the court granted Deilke's motion and held the convictions invalid for penalty-enhancement.

¶ 5. In September 2001, the State filed a motion to vacate the plea agreements and reinstate the charges dismissed in the 1993 and 2000 cases. It alleged that Deilke had violated the terms of the plea agreements in those cases by collaterally attacking them in the 2001 case.

¶ 6. Deilke contended, among other things, that his collateral attacks did not breach any plea agreement. The trial court disagreed, releasing the State from the plea agreement and allowing it to reinstate the dismissed PAC charges. Deilke then pled no contest to the two PAC charges. The court did not order any additional sentence, however, concluding Deilke had already been punished when he served the sentences for the OWI convictions. Deilke now appeals the order vacating the plea agreements and allowing the State to reinstate the PAC charges and the judgments of conviction.

Discussion

¶ 7. "[A] plea agreement may be vacated where a material and substantial breach of the plea agreement has been proved." State v. Rivest, 106 Wis. 2d 406, 414, 316 N.W2d 395 (1982). The party seeking to vacate the agreement has the burden of establishing both the fact of a breach and that the breach was sufficiently material to warrant releasing the party, whether prosecution or defense, from its promises. See id.

¶ 8. Terms of the plea agreement and historical facts surrounding the conduct that allegedly constitutes the breach are questions of fact that we will not disturb unless they are clearly erroneous. State v. Williams, 2002 WI 1, ¶ 5, 249 Wis. 2d 492, 637 N.W.2d 733. Whether the conduct actually constitutes a breach, however, is a question of law. Id. If there is a material or substantial breach, then the plea agreement may be vacated. Id.

¶ 9. The question before us is whether Deilke's collateral attacks on the 1993 and 2000 convictions, in the context of his 2001 case, constitute violations of the 1993 and 2000 plea agreements. For the reasons that follow, we conclude they do not.

¶ 10. The trial court concluded

Deilke in each incident received the benefit of some bargain with the District Attorney. In most instances the District Attorney, in exchange for a plea to the OWI charges, dismisses any other traffic citations which are part of the file. In other instances, lower guideline penalties are applied as an inducement for the defendant to plead to the charge. ... By collaterally attacking those convictions, Deilke has himself repudiated the agreement....

The court also found that Deilke had fulfilled all the terms of punishment in the cases and noted that he had a right to collaterally challenge the prior pleas that had been entered without the benefit of counsel.

¶ 11. Notably missing from the trial court's analysis, however, is any finding regarding what benefit the State bargained for in the plea agreements. If there is a breach, it must be material and substantial. Id. Thus, at a very minimum, when asked to vacate a plea agreement, a trial court should be able to ascertain what harm befell the nonbreaching party.

¶ 12. When arguing to reinstate the dismissed charges, the State claimed the benefit it bargained for in the original plea negotiations was the ability to establish the earlier convictions for use in penalty enhancement if there were any subsequent convictions. An explicit finding regarding the benefits the State sought, however, is absent. Even if the trial court had explicitly accepted that the State originally bargained for future use of Deilke's conviction, the State nevertheless concedes that no such expectation was ever articulated to Deilke during the plea negotiations nor, more importantly, in the plea agreement itself.

¶ 13. In an attempt to ascertain the rights of aggrieved parties, plea agreements are frequently analogized to contracts. See, e.g., Rivest, 106 Wis. 2d at 413. One fundamental, well-known principle underlying contract law is the "meeting of the minds." The State concedes it never informed Deilke it was seeking the specific benefit of using his convictions for later penalty enhancement. Thus, Deilke cannot be deemed to know that, in exchange for potentially lesser penalties, he was providing the later use of his convictions for enhancement purposes. We conclude Deilke could not have materially or substantially breached the plea agreement based on an unarticulated condition.

¶ 14. The State contends

it is utterly unreasonable to suggest anything other than that an essential purpose of the plea agreement in these cases was to obtain convictions which would be available for penalty enhancement purposes in the event that the defendant was arrested for OWI offenses in the future.

We reject this contention.

¶ 15. The State explicitly traded reduced charges and lower potential penalties for guilty pleas in order to secure convictions against Deilke and ensure his punishment. While the State contends those convictions are now useless because they cannot be used for penalty enhancement, the State cannot deny that it received the convictions. It also cannot deny that Deilke was punished, completing each sentence imposed.

¶ 16. The State, however, also receives multiple benefits as a natural consequence of a plea agreement, rather than through direct negotiation. For example, the State is relieved of its burden of proof. Here, the State contends this consideration is irrelevant because it could have proceeded to trial and had more than sufficient evidence to convict Deilke. But this argument exposes further benefits of a plea agreement — district attorneys are relieved of part of their workload. There is no need for discovery, motion hearings, witness preparation, jury selection, or the time actually spent at trial. Moreover, the State is relieved of the administrative and personnel costs associated with a trial.

¶ 17. The State nonetheless encourages us to examine State v. Robinson, 2002 WI 9, 249 Wis. 2d 553, 638 N.W.2d 564, and State v. Lange, 2003 WI App 2, 259 Wis. 2d 774, 656 N.W2d 480, to find support for its arguments. Neither case is availing.

¶ 18. In Robinson, the defendant was originally charged with aggravated battery and reckless endangerment. Robinson, 249 Wis. 2d 553, ¶ 5. Pursuant to the plea agreement, the State reduced the battery charge to a second reckless endangerment charge. Id., ¶ 6. As the parties acknowledged, this served to reduce Robinson's exposure from twenty-seven years in prison to ten. Id. Robinson pled no contest, but later challenged the plea, claiming the charges were multiplici-tous. Id., ¶¶ 7, 9. The supreme court concluded his challenge repudiated the agreement and returned the parties to the position they occupied before the plea was reached. Id., ¶ 31. That is, the battery and the singular endangerment charges were reinstated. Id., ¶ 58.

¶ 19. Based on Robinson, the State contends:

In Robinson, there was no explicit statement in the plea agreement that the defendant could not attack his multiplicitous convictions. Here, the plea agreement did not explicitly state that [Deilke] could not collaterally attack the validity of these convictions. In this case, just as in Robinson, the conclusion should be that the conduct of the appellant amounts to a repudiation of the plea agreement because it deprives the State of the benefit for which it bargained.

Robinson, however, is distinguishable.

¶ 20. In Robinson, the defendant had not served his sentence. The State expected Robinson to face ten years' imprisonment in exchange for his guilty plea. See id.,\ 10. If Robinson had succeeded in merely vacating one of the endangerment charges, he would face only five years' imprisonment — half of what the State bargained for. Id., ¶ 20. For that reason, the supreme court determined that the remedy was to restore the parties to their pre-agreement position. Id., ¶ 31.

¶ 21. In this case, the future use of Deilke's plea-based convictions was never made a condition of the agreement. Moreover, Deilke served all the time, paid all the fines, and attended all the classes he was ordered to when he was convicted.

¶ 22. Because of procedural differences, Lange is also not helpful to the State's analysis. Lange appealed the trial court's order denying his motion to withdraw his plea based on an inadequate plea colloquy. Lange, 259 Wis. 2d 774, ¶ 1. The problem with Lange's challenge was that, as part of the plea agreement, he had agreed to plead guilty to a charge in a different circuit court branch. Id., ¶ 31. That second plea resulted in a judgment of conviction that was not part of the appeal. While we ultimately concluded that the plea in the second case would have to be vacated if Lange prevailed on his motion to withdraw, we were merely providing guidance for the court on remand. Id., ¶ 37. The outcome of the case ultimately hinged on a Bangert hearing regarding the plea's validity. Lange is factually and procedurally distinct.

¶ 23. Here, Deilke served his sentences in their entirety. The State was not materially or substantially deprived of any benefits it expressly sought and acquired through its plea agreements with Deilke. Its contended harm arises from an unspoken expectation not evident or explained to Deilke during the plea process. Deilke could not breach a plea agreement by failing to comply with an unarticulated requirement.

By the Court. — Judgments and order reversed.

       This case was originally assigned as a one-judge opinion. Upon our own motion and by order dated May 19, 2003, this case was assigned to a three-judge panel.

       Deilke also raised, before the trial court and on appeal, issue preclusion, statutory interpretation of Wis. Stat. § 346.63(l)(c), and the statute of limitations in 93-CT-174. We conclude that this appeal can be disposed of on the plea agreement issue alone. See State v. Castillo, 213 Wis. 2d 488, 492, 570 N.W.2d 44 (1997) (cases should be decided on the narrowest possible ground). As such, we do not address the arguments on the other issues, and certain facts relevant to those arguments are excluded from the background.
      All references to the Wisconsin Statutes are to the 2001-02 version unless otherwise noted.

       The State filed motions to reinstate charges in all the cases Deilke successfully attacked. Case No. 93-CT-174 and case No. 00-CT-250 were heard hy Judge Eric Wahl.

        State v. Bangert, 131 Wis. 2d 246, 389 N.W2d 12 (1986).

       The convictions for OWI in both cases remain intact, even though they are included in the judgments.


author: CANE, C.J.

text:
    In re the Marriage of: Kathleen Krejci, Petitioner-Respondent, v. John Krejci, Respondent-Appellant.
    Court of Appeals

      No. 02-3376-FT.

      Submitted on briefs March 31, 2003.

      Decided June 24, 2003.

    2003 WI App 160
    (Also reported in 667 N.W.2d 780.)

      On behalf of the respondent-appellant, the cause was submitted on the briefs of Timothy M. Doyle of Thrasher, Doyle, Pelish & Franti, Ltd. of Rice Lake.
    On behalf of the petitioner-respondent, the cause was submitted on the brief of Anne E. Brown of A.E. Brown Law Office of Eau Claire.
    Before Cane, C.J., Hoover, PJ., and Peterson, J.
   CANE, C.J.

¶ 1. John Krejci appeals his divorce judgment, challenging the property division. Before his marriage to Kathleen Krejci, John inherited "Krejci Kingdom," a lakeside resort consisting of six rental cabins and a residence. John argues that the trial court erroneously refused to enforce the parties' prenuptial agreement, which excluded the resort from the marital estate. John also contends that because the resort was inherited, none of its value should be included in the property division. He further claims that the trial court's decision lacks a rational basis. We conclude the record supports the trial court's discretionary determination that enforcing the prenuptial agreement would be inequitable. We further conclude the court properly awarded Kathleen a portion of the resort's appreciated value. Because the record reveals a rational basis, we affirm the judgment.

BACKGROUND

¶ 2. John and Kathleen were married in 1984 and divorced in 2002. At the time of the divorce, both parties were in their fifties and in good health. John, who has a college degree in construction management, owned and operated the resort throughout the marriage. Kathleen, a licensed practical nurse, worked as a nurse and massage therapist and also helped run the resort. The parties had no children during the marriage, although Kathleen had ten children from a prior marriage who lived with the parties and were raided as their own.

¶ 3. Before their marriage, John inherited "Krejci Kingdom" from his late wife's estate. The resort is the focus of the dispute before us on appeal. John’s late wife purchased the resort in 1979 on land contract for $115,000. Following her death, John, as personal representative of her estate, conveyed title to a trust of which he is the beneficiary. The trust continued to make the land contract payments with income derived from other sources. John later made payments with income from the resort operation and ultimately paid off the contract balance with funds he inherited from his mother.

¶ 4. In 1984, shortly before his marriage to Kathleen, John retained an attorney to draft a prenuptial agreement. According to the attorney, John and Kathleen "wanted to see to it that there was an agreement that the resort would remain his and that whatever property they each brought to the marriage would be theirs respectively." The attorney specifically 'told Kathleen that he would represent John and that she was free to retain her own counsel, but she declined. The prenuptial agreement stated that the property owned by each party as of the date of marriage shall remain that party's sole property, including any "accessions and appreciation" in said property.

¶ 5. Kathleen testified that she entered into the prenuptial agreement to foreclose any possibility that her former husband could make a claim based upon any potential interest she might obtain in the resort due to her marriage to John. The parties did not exchange written financial information when they entered into the prenuptial agreement. They each testified that the resort was the only asset John had at the time of the marriage and that Kathleen had no significant assets. In 1984, when John and Kathleen married, property tax bills showed the resort's value to be $151,000. An appraisal done at the time of the divorce indicated a value of $398,000.

¶ 6. The parties considered the resort their home. Kathleen testified that the prenuptial agreement was never mentioned or discussed throughout their marriage. She further testified that when making their joint wills, the resort was considered "ours."

¶ 7. Each May through September, the parties rented out the resort's six cabins. Kathleen testified that she worked in nursing homes from fall to spring, but in the spring and summer she and John "ran [the resort] together." She and her children cleaned cabins and boats, attended to guests, did yard work, sold bait, did laundry and in general helped run the resort. Kathleen was not paid for her work at the resort. She testified that the resort business steadily improved over the years.

¶ 8. Although John disputed the amount of work that Kathleen performed, he agreed she did the resort's laundry. He testified that he paid the children to clean. Nonetheless, John characterized their relationship as a partnership. He testified:

[I]t isn't just the cut-and-dried situation like she was an employee, because she wasn't. ... To me it was just a partnership of making a marriage work, trying to do whatever we could do. She worked, I worked when necessary to provide enough income to raise the family and make ends meet.

¶ 9. The parties built a large addition to the main house as quarters for the children, consisting of five bedrooms, a bath and a living area. John did much of the labor himself. He testified that the addition cost between "20, 25, $30,000, somewhere in there." He explained that some came from an inheritance from his mother, but "mostly it came from just the proceeds of the resort." In addition, the parties replaced roofs on all the buildings, put in two new drain fields and a new well pump. Also, a seawall and cabin furnishings were replaced over the years.

¶ 10. When asked why the resort's value is so much higher now than at the time of the marriage, John testified: "I guess its lakeshore. Value of land has gone up dramatically." No real estate appraiser testified, and no other testimony was offered on real estate market conditions.

¶ 11. Throughout their marriage, the parties did not attempt to keep their properties separate. Kathleen's inheritance went into a savings account and was used for a variety of purposes, including her massage training, forty acres of land that was later sold, and loans to the children. The land sale proceeds were used to purchase a commercial building in Chetek where Kathleen operated her massage therapy practice. It is not disputed that the parties' equity in the commercial building equals $23,000. Kathleen testified that before 1992, she used her outside income to support the children and, after 1992, when she started her massage therapy practice, all her income went into the joint "Krejci Kingdom" account.

¶ 12. John testified he brought an additional $5,0.00 to the marriage and that it was deposited into "the same account that Kathy's inheritance went into" and "I can't really tell you where all - each individual dollar was spent." John also inherited $25,000 following his mother's death. As indicated, he testified that part of the money paid for the addition and part paid off the balance due on the land contract for the resort.

¶ 13. At the conclusion of the trial, the court found that the parties had actual knowledge of one another's financial circumstances at the time of the execution of the prenuptial agreement and, consequently, their failure to submit written financial disclosure to one another did not invalidate the agreement. The court also found that John worked full time operating the resort and Kathleen's efforts were closer to part-time. Nonetheless, the court determined that during their eighteen-year marriage, the parties "worked hand in hand to run a resort."

Mrs. Krejci was involved for eighteen years in maintaining that property. She didn't get paid, she didn't get a separate check for all the work she did there. ... It wasn't written off by this Krejci trust paying her or Mr. Krejci for this work that was done .... She was treated like a partner in this operation and she put herself into it just as Mr. Krejci did.

¶ 14. The court also noted that the parties took no steps to keep their properties separate. The court found that John inherited $25,000 and Kathleen inherited $90,000 during the marriage and that it would be inequitable to separate out the resort, but hold that Kathleen's inheritance was subject to division. Consequently, the court concluded that it was inequitable to enforce the prenuptial agreement at the time of.the divorce.

¶ 15. The court recognized that as inherited property and in the absence of hardship, the resort was not subject to division under Wis. Stat. § 767.255(2)(a). Nonetheless, it concluded that Kathleen was entitled to a portion of its appreciated value. The court awarded John the resort, subject to an $80,000 offset to Kathleen. In addition, it awarded Kathleen the parties' commercial building in Chetek, subject to debt. Each party received personal property in their possession and one-half the value of life insurance policies. The total balancing payment John was ordered to pay Kathleen equaled $87,846.50. No maintenance was awarded to either party.

DISCUSSION

Prenuptial agreement

¶ 16. John argues that the trial court erroneously determined that enforcing the parties' prenuptial agreement would be inequitable. We disagree. Because of the significantly changed circumstances following the execution of the agreement and because the agreement as applied at divorce no longer comports with the parties' reasonable expectations, the court properly determined it was inequitable and therefore not binding.

¶ 17. When fashioning a property division, Wis. Stat. § 767.255(3)(L) requires the trial court to consider:

(L) Any written agreement made by the parties before or during the marriage concerning any arrangement for property distribution; such agreements shall be binding upon the court except that no such agreement shall be binding where the terms of the agreement are inequitable as to either party. The court shall presume any such agreement to be equitable as to both parties.

¶ 18. The circuit court's determination of inequity under Wis. Stat. § 767.255(3)(L), as its property division determination under § 767.255, is discretionary. See Button v. Button, 131 Wis. 2d 84, 99, 388 N.W2d 546 (1986). A discretionary determination will be upheld if the circuit court considered the relevant law and facts and set forth a process of logical reasoning. Id.

¶ 19. A prenuptial agreement is equitable if: (1) each spouse made fair and reasonable disclosure to the other of his or her financial status; (2) each spouse has entered into the agreement voluntarily and freely; and (3) the substantive provisions of the agreement dividing the property upon divorce are fair to each party. Brandt v. Brandt, 145 Wis. 2d 394, 414, 427 N.W.2d 126 (Ct. App. 1988). Here, the court based its determination on the third requirement and determined that the agreement was unfair, not at the inception, but at the time of the divorce.

¶ 20. The third requirement assures substantive fairness. Id. In the context of a marital agreement: Substantive fairness is an amorphous concept, the courts must determine substantive fairness on a case by case basis. Id. at 414-15. An agreement fair at execution is not unfair at divorce just because its application results in an unequal property division or one that the court might not order under Wis. Stat. 767.255. Id. at 415. If, however, there are significantly changed circumstances after the execution of an agreement and the agreement as applied at divorce no longer comports with the reasonable expectations of the parties, an agreement which is fair at execution may be unfair to the parties at divorce. Id.

¶ 21. The case of Warren v. Warren, 147 Wis. 2d 704, 708-09, 433 N.W.2d 295 (Ct. App. 1988), elaborated on the concept of changed circumstances, holding that "for a change of circumstances to be uncontemplated, the event must not have been reasonably foreseen by the parties prior to or at the time of the making of the agreement. Changed circumstances have been found to include that the marital agreement was never resurrected or discussed during the parties various estate planning activities and that the parties did not implement separate estate planning. Brandt, 145 Wis. 2d at 416.

¶ 22. In Brandt, we did not enforce the prenuptial agreement, observing that the agreement was so long forgotten or ignored by the parties and their finances managed to the satisfaction of all in the interim. Id. at 415. Also,

More importantly, the commingling of the parties assets and the resultant inability to trace makes a meaningful enforcement of the marital agreement impossible. A partys request to enforce a marital agreement carries with it, we conclude, a concomitant responsibility to trace the property such that a reliable identification and valuation of the assets governed by the agreement can be made.

Id. at 416.

¶ 23. John argues that Brandt does not apply here because the resort was kept entirely separate. We are not persuaded. In Haldemann v. Haldemann, 145 Wis. 2d 296, 301, 426 N.W2d 107 (Ct. App. 1988), we ruled that "an asset may be part separate property of one spouse and part of the martial estate subject to division."

The equitable distribution-partnership concept of marriage recognizes that a marriage possesses an important, intangible asset: the capability of both spouses to contribute to the marriage and to the acquisition of property through their labor. To the extent that either spouse is remunerated for his or her labor during the marriage, the remuneration is marital property.

Id. at 302.

¶ 24. Thus, if during the marriage, both spouses contribute to the acquisition of property through their abilities and efforts, that property is part of the marital estate. The property acquired may be the appreciation in value of an asset separately owned by one of the spouses. Id. Consequently, if it is shown that inherited property has appreciated in value during the marriage due to the efforts of both the owning and nonowning spouses, that appreciation will be included in the marital estate. Richmond v. Richmond, 2000 WI App 25, ¶ 7, 250 Wis. 2d 647, 640 N.W.2d 220.

¶ 25. Here, the record supports the courts finding that the resorts appreciation was due to a large degree to the efforts of both parties. Although they dispute the extent of Kathleen's efforts, it is undisputed that the parties operated the resort together. When the trial court found that the parties operated the resort for eighteen years as a partnership, it essentially found that Kathleen's efforts were beyond those of customary spousal obligations. See id. (The efforts of the nonown-ing spouse must be unusual and uncompensated only in the sense that something more than performance of usual and normal marital responsibilities is required.). The weight and credibility of Kathleen's testimony is a matter for the trial court, not the appellate court, to determine. See Wis. Stat. § 805.17(2). We are satisfied that the record supports the trial court's determination that Kathleen's contributions were more than merely maintaining the marital relationship and performing the customary obligations of one spouse to the other.

¶ 26. The record also supports the court's implicit finding that both parties' efforts resulted in the appreciation in the resort's value from the time of the marriage. The parties generated income through their efforts running the resort business. It is undisputed that income from the resort was used, in part, to build an addition to the marital home, make other improvements, and pay a portion of the land contract payments. As a result, marital property was invested in the inherited resort.

¶ 27. The record reveals that the improvements to the residence were significant. An improvement is "A permanent addition to or betterment of real property that enhances its capital value and that involves the expenditure of labor or money and is designed to make the property more useful or valuable as distinguished from ordinary repairs." Id. at 305 (citation omitted). The record fails to support a claim that the addition to the residence as well as the septic systems, well and seawall were routine upkeep. See Spindler v. Spindler, 207 Wis. 2d 327, 337, 340, 558 N.W.2d 645 (Ct. App. 1996). The record permits the court to infer that the parties' efforts and expenditures resulted in an unidentified portion of the resort's appreciated value.

¶ 28. John also claims that the entire appreciation was due to the increase in value of lakeshore property. Where the appreciated value of separate property is due solely to general economic conditions, such as inflation or normal appreciation of real estate values, the property remains separate. Plachta v. Plachta, 118 Wis. 2d 329, 334, 348 N.W.2d 193 (Ct. App. 1984). Here, however, John's argument lacks a factual basis. He points to no testimony to support his argument, other than his own unsubstantiated opinion. John did not establish himself as an expert who would be able to explain real estate market conditions. The record entitled the court to infer that the resort's appreciation was not caused merely by market conditions.

¶ 29. Here, the court reasonably determined that enforcement of the prenuptial agreement would be inequitable within the meaning of Wis. Stat. 767.255(3)(L). The record supports its findings that over the course of John and Kathleens eighteen-year marriage, the marital agreement was never resurrected or discussed and was not brought up during estate planning activities. See Brandt, 145 Wis. 2d at 416. Also, the parties combined their various resources, including inheritances, savings, and incomes. They operated the resort as a partnership. These facts reinforce the courts determination that the marital agreement was ignored. In addition, although the resort remained separately titled, the record supports the courts implicit determination that the parties combined efforts and labors contributed to the appreciation in the resorts value in a way that cannot be separately identified. Accordingly, under Brandt, the record supports the courts determination that enforcement of the agreement that excluded the resorts appreciated value from property division would have been inequitable. Thus, the trial court reasonably exercised its discretion by ruling that the prenuptial agreement was not binding.

Inherited Property

¶ 30. John argues that the resort's identity and character has never changed and, consequently, even if the prenuptial agreement was unenforceable, the resort is not subject to division under Wis. Stat. § 767.255. Although there is no dispute that the resort was inherited, we are satisfied the court reasonably exercised its discretion when it divided the resort's appreciated value.

¶ 31. Inherited or gifted property must retain its character and identity if its exempt status is to be preserved. Brandt, 145 Wis. 2d at 408-09. Character addresses the manner in which the parties title or treat the exempt assets. Id. at 410. Changing the character of individual property can serve to transmute it to marital property. Id. Identity addresses whether the asset has been preserved in an identifiable form so that it can be meaningfully válued and assigned. Id. at 411. Commingling of inherited and marital assets is not necessarily fatal to the exempt status. Id. at 412. The critical inquiry is whether despite the commingling, the inherited component of the asset can nonetheless be identified. Id.

¶ 32. The party seeking exclusion of inherited or gifted property must prove that it has retained its character and identity. Id. at 408-09. Once the recipient of inherited property has met these requirements, the opposing party has the opportunity to establish by sufficient countervailing evidence the property is not inherited, or has otherwise lost its exempt status because its character or identity has not been preserved. Id.

¶ 33. Here, the parties income and labors were invested in the resort, and evidence fails to demonstrate how their added investment can be specifically traced and identified. If it is shown that inherited property has appreciated in value during the marriage due to the efforts of both the owning and nonowning spouses, that appreciation will be included in the marital estate. Richmond, 250 Wis. 2d 647, 7. That is what the trial court did here.

¶ 34. John argues, nonetheless, that title has never transferred from the trust. This argument is unavailing. While a change in the title from sole to joint ownership affects the character of the property, Weiss v. Weiss, 122 Wis. 2d 688, 692, 365 N.W2d 608 (Ct. App. 1985), maintaining separate title is not dispositive. See Haldemann, 145 Wis. 2d at 301. We conclude that the trial court properly determined that the resorts appreciated value was subject to division under Wis. Stat. 767.255.

Other Errors

¶ 35. Finally, John argues that the trial courts property division lacks a rational basis. He contends that the record fails to support the courts finding that the parties did not understand the meaning of the term accession used in the prenuptial agreement. We conclude that the courts observation does not call for reversal. The courts decision not to enforce the prenuptial agreement rests upon substantive fairness at the time of the divorce, not the parties understandings at the time of their marriage.

¶ 36. John further argues that Haldemann must be distinguished because in that case, the husbands efforts actually imparted value to the real estate. Here, he contends, Kathleen Krejcis efforts at the resort consisted of no more than washing sheets, greeting customers and tending bar. This argument attacks the weight and credibility of Kathleens testimony. The trial court, as the sole arbiter of credibility, was entitled to accept Kathleens testimony to the effect that the parties operated the resort as a partnership. See Wis. Stat. 805.17(2).

¶ 37. Next, John argues that the court provided no explanation why it awarded Kathleen approximately 32% of the resort's appreciated value. He further claims that the court erroneously ordered that Kathleen was entitled to the $23,000 equity in the parties' jointly owned commercial building without explanation. We disagree.

¶ 38. The court stated that rather than divide the resort's appreciation in half, it would award Kathleen the commercial building and the equivalent of $80,000. The court noted that this division would be fair because it took into account Kathleen's inheritance invested in part into the commercial building. Also, it would give John "more than half of the appreciation of the [resort] property, taking into account his probably full-time effort at that as opposed to her part-time effort in it."

¶ 39. Wisconsin Stat. § 767.255 identifies the factors the court may consider when altering the presumptive equal division of marital assets and liabilities. The weight and effect to be given each of these considerations is for the trial court to determine. Fuerst v. Fuerst, 93 Wis. 2d 121, 131, 286 N.W.2d 861 (Ct. App. 1979). Here, the court weighed the parties' respective contributions, see Wis. Stat. § 767.255(3)(b) and (d), and appropriately awarded Kathleen's share based upon its findings. Because the court considered appropriate factors and reached a reasonable decision, we do not overturn it on appeal.

By the Court. — Judgment affirmed.

       This is an expedited appeal under Wis. Stat. Rule 809.17. All references to the Wisconsin Statutes are to the 2001-02 version unless otherwise noted.

       John's late wife also owned a warehouse. After her death, the rent payments from the warehouse were used to pay the land contract payments on the resort until the warehouse was sold in the late 1980s and its proceeds divided between the deceased wife's minor children.

       In his reply brief, John states that he "made the monthly payments with income from the resort operation." He does not cite to the record, see Wis. Stat. Rule 809.19(l)(e), but this fact is not disputed.

       Title to the resort was never conveyed and remains in the trust. The parties stipulated that an appraisal showing the $398,000 value may be entered into evidence.

       Their wills referred to the resort as one that "we own."

       The trial court found that Kathleen inherited approximately $90,000. Although John testified that he believed Kathleen's inheritance was closer to $65,000, the court's decision indicates a precise figure is not critical to its analysis. In any event, John does not develop an argument challenging the court's finding of fact.

       Although the parties addressed the first and second requirements, we limit our discussion to the third dispositive element.

       John contends that "from the entire transcript, it appears that such improvements were funded with income from the resort business, as managed by John." He implies that this contention supports his claim the resort was kept separate. John cites no authority for the proposition that his resort income was nonmarital. Also, his argument ignores that "to the extent that either spouse is remunerated for his or her labor during the marriage, the remuneration is marital property." Haldemann v. Haldemann, 145 Wis. 2d 296, 302, 426 N.W2d 107 (Ct. App. 1988). Consequently, we reject his argument.

       Under Wis. Stat. § 767.255, any property shown to have been inherited is not subject to division except if it would create a hardship. Here, there is no claim of hardship. It is, however, unnecessary to show hardship if the appreciation in value of separate property resulted "from the efforts and abilities of the nonowning spouse." Haldemann, 145 Wis. 2d at 301.


author: NETTESHEIM, PJ.

text:
    State of Wisconsin, Plaintiff-Appellant, v. Anthony M. Cotton, Defendant-Respondent.
    Court of Appeals

      No. 02-2923-CR.

      Submitted on briefs May 8, 2003.

      Decided June 25, 2003.

    2003 WI App 154
    (Also reported in 668 N.W.2d 346.)

      On behalf of the plaintiff-appellant, the cause was submitted on the briefs of Paul E. Bucher, district attorney, and Susan L. Opper, assistant district attorney, of Waukesha.
    On behalf of the defendant-respondent, the cause was submitted on the brief of Timothy T. Kay, of Kay & Kay Law Firm of Brookfield.
    Before Nettesheim, PJ., Brown and Snyder, JJ.
   NETTESHEIM, PJ.

¶ 1. The State filed a complaint against Anthony M. Cotton alleging one count of intimidation of a witness pursuant to Wis. Stat. § 940.43(3) (2001-02). Following a preliminary hearing, Cotton was bound over for trial. However, the State did not repeat this charge in the information. Instead, the State submitted two new charges of felony battery and threat to a witness and a witness's family contrary to Wis. Stat. § 940.201(2)(a) and (b). Cotton challenged the information on grounds that the two new felony counts were not supported by evidence adduced at the preliminary hearing. The circuit court agreed and dismissed the charges.

¶ 2. The State appeals. Because the record reflects that there was insufficient evidence at the preliminary hearing to support the new charges, we affirm the trial court order dismissing the felony charges.

FACTS

¶ 3. The criminal complaint alleged that Cotton was transported to the City of Waukesha Police Department following his arrest for underage drinking on June 14, 2002. While at the police department, Cotton was instructed to remove everything from his pockets, which included a baggie containing marijuana.

¶ 4. While Cotton was in the booking room, Detective Paul J. Paikowski recognized Cotton as a potential witness in a homicide investigation in which Cotton's cousin was the primary suspect. Cotton complained that the subpoenas that had been served on him and his family in Oklahoma were not valid. Cotton was visibly upset about the situation. Paikowski spoke to Cotton and informed him that he was one of the detectives who had traveled to Oklahoma to serve the subpoenas. Cotton told Paikowski that he did not recognize him, that Paikowski had not been in Oklahoma and that Paikowski was lying. Paikowski again informed Cotton that he had been in Oklahoma and had been involved in serving subpoenas for a John Doe investigation. Cotton began yelling about the John Doe investigation and referred to it as a "bunch of 'bullshit.'"

¶ 5. Cotton continued yelling, stating that he did not like Paikowski, that there was something about Paikowski that he did not like and that Paikowski had ruined his family and had slandered him in Oklahoma. According to Paikowski, Cotton yelled louder, rose up and stated that if he were not handcuffed to the wall he would kill Paikowski. Cotton became more agitated and stated repeatedly and with raised fists or a pointed finger that he would find out where Paikowski lived and that he would kill him and his children.

¶ 6. Based on these facts, the State filed a criminal complaint against Cotton alleging intimidation of a witness pursuant to Wis. Stat. § 940.43(3). A preliminary hearing was held before Court Commissioner Martin Binn on June 27, 2002. Paikowski testified as to the events that occurred on June 14, 2002. Following testimony and arguments, Commissioner Binn found probable cause to believe that Cotton had committed a felony, emphasizing that he was not making a finding of probable cause as to any specific felony. See State v. Williams, 198 Wis. 2d 479, 490, 544 N.W.2d 400 (1996).

¶ 7. However, the ensuing information filed by the State did not repeat the offense of intimidation of a witness pursuant to Wis. Stat. § 940.43(3) as stated in the complaint. Instead, the information alleged two new charges: one count of battery or threat to a witness pursuant to Wis. Stat. § 940.201(2)(a) and one count of battery or threat to a person who is a family member of a witness pursuant to § 940.201(2)(b).

¶ 8. On August 16, 2002, Cotton filed a motion to dismiss the felony charges alleged in the information. Cotton argued that the evidence adduced at the preliminary hearing did not support the charges. Specifically, Cotton contended that there was no evidence showing that Paikowski had attended, or was scheduled to attend, any proceeding in the homicide case as a witness. As such, Cotton argued that he did not know, nor had any reason to know, that Paikowski was a witness or potential witness.

¶ 9. Following a motion hearing on September 3, 2002, the trial court granted Cotton's motion and entered a written order dismissing the two felony counts. The State appeals.

DISCUSSION

¶ 10. The State argues that the evidence at the preliminary hearing supported the charges in the information. Additionally, the State argues that it was a proper exercise of the district attorney's discretion to issue the new charges because they were not "wholly unrelated" to the evidence received at the preliminary examination. See State v. Hooper, 101 Wis. 2d 517, 536-37, 305 N.W.2d 110 (1981).

¶ 11. As a threshold issue, we address the proper test for a challenge to new charges filed in an information following a bindover when the original charge stated in the complaint is not repeated in the information. Our choices are: (1) the conventional sufficiency of evidence test where the charges stated in the complaint are the same; or (2) the "wholly unrelated" test, generally applied to charges added in an information when the original charge in the complaint is restated.

¶ 12. The conventional test for evaluating a challenge to a charge in an information following a preliminary hearing is the sufficiency of the evidence test. Pursuant to Wis. Stat. § 970.03(7), which governs preliminary examinations, the trial court shall bind the defendant over for trial if it finds probable cause to believe that a felony has been committed by the defendant. A defendant may be bound over for trial when the evidence presented at the preliminary hearing is sufficient to support a reasonable inference that the defendant probably committed a felony. State v. Dunn, 121 Wis. 2d 389, 393, 359 N.W2d 151 (1984). All that is needed is a believable or plausible account of the defendant's commission of a felony. Id. at 398.

¶ 13. In earlier times, Wisconsin courts applied the sufficiency of evidence test for added charges. This test inquired "whether any added charges find support within the confines of the evidence adduced at the preliminary hearing." State v. Richer, 174 Wis. 2d 231, 243, 496 N.W.2d 66 (1993). However, that test was later broadened to include those charges that were not "wholly unrelated" to charges having a factual basis in the record. Id. at 244.

¶ 14. Under the "wholly unrelated" test, a prosecutor may bring additional charges in the information so long as the charges are not wholly unrelated to the transactions or facts considered or testified to at the preliminary examination, irrespective of whether direct evidence concerning the charges had been produced at the preliminary examination. State v. Burke, 153 Wis. 2d 445, 457, 451 N.W.2d 739 (1990). The charges must be "related in terms of parties involved, witnesses involved, geographical proximity, time, physical evidence, motive and intent." Id. (citation omitted). In order to clear the "wholly unrelated" hurdle, "counts contained in the information must flow from the same transaction for which evidence has been introduced at the preliminary hearing." State v. Bury, 2001 WI App 37, ¶ 8, 241 Wis. 2d 261, 266-67, 624 N.W.2d 395 (citation omitted; emphasis omitted).

¶ 15. An analysis of the case law persuades us that the "wholly unrelated" test is intended to apply to charges in the information which have been added to the original charge following a bindover at the preliminary hearing. In Burke, our supreme court held that "in a multiple-offense transaction case, once the defendant has been bound over for trial on at least one count relating to the transaction, the prosecutor may in the information charge additional counts not wholly unrelated." Burke, 153 Wis. 2d at 453 (citation omitted; emphasis added). We construe the supreme court's phrase "once the defendant has been bound over for trial" to assume a bindover that is supported by the evidence adduced at the preliminary hearing. This construction is confirmed by the supreme court's later decision in Richer where the court said:

Today's holding that all charges included in the information must at a minimum be transactionally related to charges which are themselves supported by evidence adduced at the preliminary hearing, clarifies well-established and long-standing court procedure.

Richer, 174 Wis. 2d at 247 (emphasis added).

¶ 16. Because this case involves a challenge to counts charged in an information that does not contain charges added to the original charge, but rather two completely new felony charges — neither of which was tested at the preliminary hearing — we conclude that the appropriate test for review of the new charges is the sufficiency of evidence test. As our ensuing discussion will reveal, were we to apply the "wholly unrelated" test, we would allow for the absurd result that the State could file new charges even where the evidence at the preliminary hearing failed to demonstrate probable cause that the defendant had committed any felony.

¶ 17. Our holding is consistent with the purpose of a preliminary hearing. While the express statutory purpose of the preliminary hearing is to determine whether probable cause exists that the defendant has committed a felony which warrants binding the defendant over for trial, our supreme court has repeatedly stated that

the object or purpose of the preliminary investigation is to prevent hasty, malicious, improvident, and oppressive prosecutions, to protect the person charged from open and public accusations of crime, to avoid both for the defendant and the public the expense of a public trial, and to save the defendant from the humiliation and anxiety involved in public prosecution, and to discover whether or not there are substantial grounds upon which a prosecution may be based.

Richer, 174 Wis. 2d at 240-41, 241 n.4 (citing Thies v. State, 178 Wis. 98, 103, 189 N.W. 539 (1922)). Therefore, the preliminary hearing serves the interests of both the defendant and the state. Richer, 174 Wis. 2d at 241. The need to protect defendants from harassing and oppressive prosecution goes directly to the specific charges on which they are tried, not those charges for which they are originally bound over. Id. at 242. This goal cannot be served without some mechanism for assuring that the evidence at the preliminary hearing supports a probable cause finding as to some felony. The sufficiency of evidence test provides that mechanism. The "wholly unrelated" test does not.

¶ 18. Here, Cotton was initially charged with felony intimidation of a witness contrary to Wis. Stat. § 940.43(3), which requires the State to prove that: (1) the victim was a witness (any person who has been called to testify or who is expected to be called to testify), (2) the defendant prevented or dissuaded or attempted to prevent or dissuade the victim, from attending or giving testimony at a proceeding authorized by law, and (3) the defendant acted knowingly and maliciously which requires that the defendant knew the victim was a witness and that the defendant acted with the purpose to prevent the victim from attending or testifying. Wis JI — Criminal 1292. In order to apply the felony penalty factor under § 940.43, the State must also prove that the defendant's act was accompanied by express or implied threat of harm. Wis JI — Criminal 1292. Following the preliminary hearing, Commissioner Binn determined that there was probable cause to believe that Cotton committed a felony and bound him over for trial.

¶ 19. Following the preliminary hearing and bin-dover, the State filed an information containing new charges pertaining to Cotton's encounter with Paikowski — one count of battery or threat of battery to Paikowski and a further similar count regarding Paikowski's family pursuant to Wis. Stat. § 940.201(2)(a) and (b). These charges require the State to prove beyond a reasonable doubt that (1) the defendant caused or threatened to cause bodily harm to the victim or victim's family, (2) the victim was likely to testify as a witness (whether or not any proceedings had been commenced at the time of the alleged offense), (3) the defendant knew or had reason to know that the victim was a witness, (4) the defendant caused or threatened to cause bodily harm to the victim or victim's family because the person was likely to testify as a witness, (5) the defendant caused or threatened bodily harm without the consent of the victim, and (6) the defendant acted intentionally. Wis JI — Criminal 1239 & cmt. Cotton challenged the charges as not supported by evidence at the preliminary hearing.

¶ • 20. The trial court dismissed the charges in the information based on its determination that there was no evidence at the preliminary hearing that Paikowski was likely to be a witness or that Cotton knew Paikowski was likely to be a witness. The State first contends that there was evidence at the preliminary hearing that Paikowski was a witness — someone who has been called to testify or is expected to be called to testify at a proceeding. See Wis JI — Criminal 1238. The State points to Paikowski's testimony that he believed, based on his experience, that he would be called to testify in the John Doe hearing for which he was attempting to serve Cotton a subpoena. We will assume arguendo that Paikowski was likely to be called as a witness. We therefore turn to whether there was evidence that Cotton knew that Paikowski was likely to be called as a witness at proceedings in the homicide investigation involving his cousin.

¶ 21. The State concedes that there is no direct evidence that Cotton knew that Paikowski was likely to be called as a witness at his cousin's proceedings. However, the State argues that Cotton's knowledge can be inferred from Cotton's anger, his questioning of Paikowski regarding the service of the subpoenas and "[his] verbal tirade of threats directed at Detective Paikowski and his family." The State points to Paikowski's descriptions regarding Cotton's words and actions that "escalated rapidly to the point that Cotton's conduct was such that it was like nothing Paikowski had seen in almost twenty years." The State argues that under those circumstances, Cotton's words and actions establish his knowledge.

¶ 22. The facts adduced at the preliminary hearing in this case are undisputed. In that situation, the question of probable cause sufficient for a bindover presents a question of law. Dunn, 121 Wis. 2d at 398-99. There is nothing in the evidence identified by the State or in the record of the preliminary hearing that establishes Cotton's knowledge that Paikowski was likely to be a witness in an action or proceeding. Paikowski testified that Cotton expressed his anger with the service of the subpoenas on his family, claiming that the service had been invalid and that it had ruined his family. However, there is no indication that Cotton believed Paikowski might be a potential witness either in any case against him or in the homicide case pending against his cousin. Nowhere in the exchange between Paikowski and Cotton did Cotton make any reference that could be construed as evidence that he knew Paikowski was likely to be a witness. Evidence limited to the mere fact that Cotton was angry with Paikowski, without more, does not establish that he threatened Paikowski and Paikowski's family because he knew that Paikowski was likely to be a witness for the State.

¶ 23. Because there was no evidence at the preliminary hearing that Cotton knew or had reason to know that Paikowski was likely to be a witness in any proceeding, we conclude that the evidence did not demonstrate a believable or plausible account of Cotton's commission of a felony. See id. at 393. As such, the evidence was insufficient to support a reasonable inference that Cotton committed a felony. See id. (a defendant may be bound over for trial when the evidence presented at the preliminary hearing is sufficient to support a reasonable inference that the defendant probably committed a felony).

CONCLUSION

¶ 24. Following a bindover at a preliminary hearing, we hold that the proper test for reviewing a challenge to an information that alleges wholly new charges not accompanied by the original charge is the sufficiency of evidence test. Under that test, we conclude that the evidence failed to demonstrate probable cause that Cotton committed the felony offense alleged in the complaint, the felony offenses alleged in the information or any other felony. We affirm the trial court order dismissing the felony charges.

By the Court. — Order affirmed.

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

       The information also alleged a misdemeanor charge of possession of marijuana. That charge is not before us on this appeal.

       As with the complaint, the information also alleged the misdemeanor charge of possession of marijuana. Cotton pled guilty to that charge. As noted, that conviction is not challenged on appeal.

       In State v. Burke, 153 Wis. 2d 445, 452, 451 N.W2d 739 (1990), the supreme court recognized that early decisions which involved primarily single-offense transactions had held that a prosecutor was not bound in the information to charging the same offense charged in the complaint. See, e.g., Mark v. State, 228 Wis. 377, 384, 280 N.W 299 (1938). However, the court went on to observe that later cases held that in a multiple-offense transaction case, charges may be added to an original charge if not wholly unrelated. Burke, 153 Wis. 2d at 453.