author: CURLEY, J.

text:
    FH Healthcare Development, Inc., and United/Dynacare, LLC., Plaintiffs-Appellants, v. City of Wauwatosa, Defendant-Respondent.
    Court of Appeals

      No. 03-2999.

      Oral argument July 8, 2004.

    Decided August 17, 2004.

    2004 WI App 182
    (Also reported in 687 N.W.2d 532.)

      On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of David J. Edquist and Linda S. Isnard of Von Briesen & Roper, S.C., of Milwaukee, with oral argument by David J. Edquist.

    On behalf of the defendant-respondent, the cause was submitted on the brief of Alan R. Kesner, city attorney, and Beth Thorson Aldana, assistant city attorney, with oral argument by Beth Thorson Aldana.

    Before Wedemeyer, EJ., Fine and Curley, JJ.
   CURLEY, J.

¶ 1. FH Healthcare Development, Inc. (FHHD), United/Dynacare, LLC, and the City of Wauwatosa (the City) appeal from the trial court's denial of their cross-motions for summary judgment. This court granted the joint petition for interlocutory appeal, pursuant to Wis. Stat. Rule 809.50(2) (2001-02). FHHD and United/Dynacare filed a property tax exemption action, pursuant to Wis. Stat. § 74.35(3)(d), seeking to recover the full amount of taxes paid, which they allege were levied unlawfully, plus interest, from the City. Both sides moved for summary judgment, and agreed that the facts are undisputed.

¶ 2. FHHD and United/Dynacare essentially argue that the taxed laboratory space and equipment are used for the exempt purposes of Froedtert Memorial Lutheran Hospital, Inc. (Froedtert), pursuant to Wis. Stat. § 70.11(4m), and thus should not have been taxed. They contend that, at a minimum, the property is entitled to a partial exemption under Wis. Stat. §§ 70.1105 and 70.11. Finally, they argue that the FHHD building should not have been assessed for the 2000 tax year because it was still under construction and not being used for any non-exempt purposes as of that date.

¶ 3. The City insists that the laboratory space and equipment are used for commercial purposes and are thus not exempt under Wis. Stat. § 70.11 (4m), and furthermore, that the property is not subject to partial taxation under Wis. Stat. §§ 70.1105 or 70.11. The City also insists that the assessment of the FHHD building for the 2000 tax year was proper because it was based on the percentage of completion as of the date of assessment.

¶ 4. Because we conclude that, as a matter of law, the laboratory space and equipment are not exempt, and the City properly assessed the property for the relevant tax years, we reverse the trial court's denial of the City's motion for summary judgment.

I. Background.

¶ 5. In order to understand the nature of the dispute, it is necessary to first identify the relevant entities and their relationships. From 1992 to 1995, Froedtert's laboratory services were provided by United Regional Medical Services, Inc. (URMS), a non-stock, non-profit Wisconsin corporation. Until 1995, Froedtert and Milwaukee County were the sole members of URMS. URMS charged Froedtert on a cost basis, rather than a market-based standard fee-for-service. In 1995, URMS's chief financial officer submitted an affidavit to the City in support of its request for tax exemption. The affidavit indicated, inter alia, that URMS performs lab services solely for Froedtert and John L. Doyne Medical Center (formerly the Milwaukee County Medical Corn-plex), it charges for its services on a cost basis, Froed-tert employs the physicians that perform the lab services, and the City would be notified if it commenced any services outside of its relationship with the hospitals and their patients. The City thereafter advised URMS that its property was exempt pursuant to Wxs. Stat. § 70.11(4m).

¶ 6. Shortly thereafter, in December 1995, Milwaukee County transferred its interest to Froedtert, and Froedtert became the sole member of URMS. URMS continued to provide lab services to Froedtert until 1997. In 1997, URMS and Dynacare, Inc., a for-profit, NASDAQ-traded corporation based in Dallas, Texas, formed United/Dynacare LLC, a Wisconsin limited liability company, with each holding a fifty percent membership interest. United/Dynacare continued to provide Froedtert's laboratory services, but did not assume the radiological functions that URMS provided to Froedtert. URMS continued to provide those services until November 2000, when they were "consolidated back" into Froedtert's internal operations.

¶ 7. When United/Dynacare was formed, it also began performing laboratory services for clients other than Froedtert and the Medical College of Wisconsin (MCW), including other physicians, physician groups, managed care organizations, clinics, and hospitals. These services were billed on a market-based pricing structure, intending to cover costs and overhead and generate income. United/Dynacare's members realize income from the services performed for these "outside" clients. In 2000, 31.6% of United/Dynacare's revenue was attributable to services provided to "outside" clients, or, in other words, "reference lab work." In 2001 and 2002, 39.3% and 41.3% of its revenue, respectively, was attributable to reference lab work.

¶ 8. In 2000, URMS assigned its United/Dynacare interest to Froedtert Health System, Inc. (FHS), a Wisconsin, non-stock corporation, and the sole corporate member of Froedtert. URMS was subsequently dissolved, and Froedtert informed the City that United/Dynacare would continue to provide laboratory services to Froedtert and other clients, that the lab had moved into a different facility, and that it believed that its tax-exempt status remained unchanged.

¶ 9. United/Dynacare moved its laboratory equipment into the FHHD Building. FHHD, a party in this appeal, is a non-stock, not-for-profit Wisconsin corporation "formed to assist Froedtert Hospital with financing, construction, and maintenance of buildings used by Froedtert Hospital and other related organizations oh the Froedtert Hospital campus." The FHHD Building was constructed on a portion of land owned by Milwaukee County that FHHD subleased from Froedtert. It is connected to the hospital and was constructed with the proceeds of tax-exempt bond financing and a loan from Froedtert. FHHD leases space in the Building to United/Dynacare, with the initial lease term having commenced on July 1, 2000, although United/Dynacare did not move into the space until the end of that month. The relevant laboratory equipment is located in the portion of the FHHD Building leased to United/Dynacare, and operated, with limited exception, by United/Dynacare personnel.

¶ 10. FHHD also leases space in the building to MCW and Froedtert. MCW is a non-stock, not-for-profit Wisconsin corporation, and provides physician services to Froedtert patients and patients of other MCW clinics, and provides medical educational services. Furthermore, Froedtert's medical staff — the MCW Department of Pathology — directs United/Dynacare's laboratory operations.

¶ 11. As of January 1, 2000, the FHHD building was still under construction, and there was no leasehold income received by FHHD until August 2000. FHHD uses all of the proceeds of the rent paid by United/Dynacare for "maintenance of the leased property and retirement of the" construction debt.

¶ 12. In February 2001, United/Dynacare submitted a "2001 Statement of Personal Property" to the City, claiming a continuing tax-exemption for United/ Dynacare's laboratory equipment. In July, the City notified United/Dynacare that it was rejecting United/Dynacare's claim that the equipment was tax exempt and that it intended to assess the "omitted" property for 1999 and 2000. The City also advised Froedtert that it was investigating the taxability of the lab space being leased to United/Dynacare in the FHHD Building. Later that month, the City sent United/Dy-nacare a notice of assessment for the omitted 1999 and 2000 taxes, and for 2001 taxes. The City also sent a notice of assessment for omitted 2000 taxes, and for 2001 taxes, to FHHD in regard to the laboratory space.

¶ 13. The following November, the City issued property tax bills to both United/Dynacare and FHHD for the omitted personal property taxes. Both paid the bills in full, although under protest, and timely filed claims for recovery of the taxes. In December, the City issued property tax bills to both United/Dynacare and FHHD, which were also paid in full under protest. Both again filed timely claims for recovery of the taxes. In March 2002, the City rejected United/Dynacare and FHHD's claims for recovery of the taxes. In December 2002, the same basic pattern ensued, and the parties projected that the claims for recovery would be largely disallowed prior to the hearing on the summary judgment motion.

¶ 14. On May 31, 2002, United/Dynacare and FHHD filed suit against the City, pursuant to Wis. Stat. § 74.35(3)(d), seeking to recover the full amount of taxes paid for 1999 through 2002, plus interest. Agreeing that the facts are undisputed, United/Dynacare, FHHD, and the City filed cross-motions for summary judgment based on stipulated facts. The trial court denied the motions and set the case for trial. We granted the joint petition for an interlocutory appeal.

II. Analysis.

¶ 15. "When called upon to review the denial of a summary judgment motion, we must apply the standards set forth in [Wis. Stat. §] 802.08 ... in the same manner as the trial court." Germanotta v. National Indem. Co., 119 Wis. 2d 293, 296-97, 349 N.W.2d 733 (Ct. App. 1984). That methodology is well known, and need not be repeated here. See § 802.08; Grams v. Boss, 97 Wis. 2d 332, 338-39, 294 N.W.2d 473 (1980).

A. The laboratory equipment and space are not exempt under Wis. Stat. § 70.1 l(4m).

¶ 16. FHHD and United/Dynacare insist that: (1) "Wisconsin's nonprofit hospital exemption applies to space and equipment used in the operation of a hospital laboratory where the property is 'reasonably necessary' to the hospital's primary purpose of providing medical care and treatment to its patients, as well as to its secondary purpose of serving as a teaching hospital"; (2) "[t]he laboratory property need not be used by hospital personnel in order to qualify for the nonprofit hospital exemption"; and (3) "[t]he laboratory property is exempt under § 70.11(4m) regardless of whether one of United/Dynacare's members is a for-profit entity[,]" and at the very least, is entitled to a partial exemption. We are unpersuaded.

¶ 17. Statutory interpretation is a question of law, and "[t]he purpose of statutory interpretation is to give effect to the plain meaning of the words in the statute." State v. Lombard, 2004 WI 95, ¶ 18, 273 Wis. 2d 538, 684 N.W.2d 103. "Extrinsic sources are not consulted unless the language of a statute is determined to be ambiguous." Id., ¶ 19. However, "scope, context, and purpose are perfectly relevant to a plain-meaning interpretation of an unambiguous statute as long as the scope, context, and purpose are ascertainable from the text and structure of the statute itself, rather than extrinsic sources, such as legislative history." State ex rel. Kalal v. Circuit Court for Dane County, 2004 WI 58, ¶ 48, 271 Wis. 2d 633, 681 N.W.2d 110.

¶ 18. "The construction of a tax exemption statute under a particular set of facts is a question of law" that we review de novo. St. Elizabeth Hosp., Inc. v. City of Appleton, 141 Wis. 2d 787, 790, 416 N.W.2d 620 (Ct. App. 1987). "However, the burden of showing that property is exempt is on the party seeking the exemption, and doubts are to be resolved in favor of taxability [,]" id. at 791; that is, "[t]axation is the rule and exemption from taxation is the exception[,]" St. Clare Hosp. of Monroe, Wisconsin, Inc. v. City of Monroe, 209 Wis. 2d 364, 369, 563 N.W.2d 170 (Ct. App. 1997) (quoted source omitted); see also Wis. Stat. § 70.109. Indeed, as "[t]ax exemption statutes are matters of legislative grace[, they] are to be strictly construed against the granting of an exemption." St. Clare, 209 Wis. 2d at 369 (quoted source omitted). Thus, we apply a "strict but reasonable construction" in interpreting tax exemption statutes. Deutsches Land, Inc. v. City of Glendale, 225 Wis. 2d 70, 80, 591 N.W.2d 583 (1999).

¶ 19. Wisconsin Stat. § 70.11 (4m) provides, in relevant part:

Property exempted from taxation.Property exempted from general property taxes is:
NonpRofit hospitals, (a) Real property owned and used and personal property used exclusively for the purposes of any hospital of 10 beds or more devoted primarily to the diagnosis, treatment or care of the sick, injured, or disabled[.] ... This exemption does not apply to property used for commercial purposes, as a health and fitness center or as a doctor's office.

(Emphasis added.) As such, if the property, regardless of whether it is used "exclusively for the purposes of any hospital... devoted primarily to the diagnosis, treatment or care of the sick, injured, or disabled[,]" is used for commercial purposes, it does not qualify for the exemption. Thus, the essential inquiry is whether the property is used for commercial purposes; if so, the exemption does not apply, regardless of whether the property is "reasonably necessary" to the hospital's primary and secondary purposes or who uses the equipment.

¶ 20. The question thus becomes: what does "commercial purposes" mean? As it is undefined by the statute itself, it "shall be construed according to common and approved usage[.]" Wis. Stat. § 990.01(1). The common and approved usage of non-technical words can be ascertained from their dictionary definitions. See Enpro Assessment Corp. v. Enpro Plus, Inc., 171 Wis. 2d 542, 546, 492 N.W.2d 325 (Ct. App. 1992). Included in the dictionary definitions of "commercial" are "from the point of view of profit" and "having profit as the primary aim." Webster's Third New International Dictionary 456 (1993). As such, commercial purposes are those through which profits are made.

¶ 21. Here, although United/Dynacare provides laboratory services for Froedtert at cost, it also performs laboratory services for clients other than Froed-tert and MCW, and bills those clients on a market-based pricing structure, covering costs and overhead, and generating income. This "reference lab work" has generated millions of dollars in net revenues for United/Dynacare. Thus, it seems reasonable to conclude that this reference lab work constitutes a commercial purpose. The lab equipment and space, therefore, would not be exempt pursuant to Wis. Stat. § 70.11(4m).

¶ 22. As such, it matters not whether the case law recognizes that a modern hospital may have multiple purposes and that "property is considered to be used 'for' the exempt purposes of the hospital as long as the property is 'reasonably necessary' for the hospital to accomplish those purposes." Even if the property is reasonably necessary to the primary and secondary purposes of the hospital, a strict but reasonable construction of Wis. Stat. § 70.11 (4m) indicates that the property fails to qualify for the exemption because it nevertheless is used for a commercial purpose. Having concluded that the lab equipment and space fall within the commercial purpose exception to the exemption, regardless of whether the property is reasonably necessary to the hospital's primary or secondary purposes, any arguments concerning the significance of hospital possession, ownership, and use of the equipment and whether the First National Leasing Corp. v. City of Madison, 81 Wis. 2d 205, 260 N.W.2d 251 (1977), "test" is dictum, are essentially irrelevant.

¶ 23. United/Dynacare argues, however, that the commercial purpose exception does not apply because the "presence of a for-profit entity does not automatically trigger the 'commercial purpose' exception[.]" It insists that the legislature's use of the term "commercial purposes" instead of "for profit" is significant, and that the supreme court "has repeatedly stressed the need to focus on the actual use of the property in determining the eligibility for a property tax exemption, not on the 'nature of the business seeking the exemption.'" (Emphasis in brief; citation omitted.)

¶ 24. United/Dynacare is correct to assert that the "presence" of a for-profit entity does not automatically trigger the "commercial purpose" exception, and that the actual use of the property should be the focus. However, these assertions do not undermine the conclusion that the property does not qualify for the exemption. Here, the actual use included a commercial purpose. Moreover, the for-profit nature of the entity is not the basis for this conclusion. As indicated above, the property is deemed to be used for a commercial purpose because of the market-based pricing structure employed in charging the "outside" clients for the reference lab work and the millions of dollars in net revenues.

¶ 25. United/Dynacare also cites First National Leasing in support of its contention that "the key inquiry is in whether the property is used exclusively for hospital purposes, not in whether the owner of the property generates a profit[,]" quoting the following language:

[T]he legislature made no attempt to predicate taxability on whether an owner derived a profit or other benefit from property which was used exclusively for hospital purposes.
... [I]t is the physical use of the property and not the intangible benefits derived from property with which the legislature is concerned in tax exemption statutes....
It is irrelevant that an owner derives a profit or secures a benefit from the ownership.

81 Wis. 2d at 210-12. However, aside from the fact that First National Leasing is factually distinct from the instant case, the version of Wis. Stat. § 70.11 (4m) at issue in that case did not include the relevant language central to the disposition of this case — "[t]his exemption does not apply to property used for commercial purposes[.]" § 70.11(4m); see also First National Leasing, 81 Wis. 2d at 207 (quoting the language of the version of the statute applicable to the case). First National Leasing concerned the version of the statute applicable to the tax years of 1972 and 1973. Section 70.11(4m) was amended in 1977 to include the relevant language. See 1977 Wis. Act 29, § 745m. Thus, the supreme court's aforementioned conclusions regarding the statute prior to the addition of the "commercial purpose" language are inapposite.

¶ 26. In regard to the lab space, FHHD argues that, pursuant to the preamble to Wis. Stat. § 70.11, the leased lab space "remains" exempt because it satisfies both the "rent use" and "tenant identity" conditions. The preamble states, in relevant part:

Leasing a part of the property described in this section does not render it taxable if the lessor uses all of the leasehold income for maintenance of the leased property, construction debt retirement of the leased property or both and if the lessee would be exempt from taxation under this chapter if it owned the property.

§ 70.11 (emphasis added). However, aside from the potential underlying question of whether this directive even applies in this case, given the fact that there does not appear to be an ownership requirement in § 70.11(4m), this language presumes that the property is exempt in the first place. As the leased laboratory space is characterized as personal property and is used for a commercial purpose, it similarly fails to qualify for the § 70.11 (4m) exemption, and likewise would not be exempt from taxation if United/Dynacare owned it.

¶ 27. Finally, in regard to the issue of partial taxation, United/Dynacare and FHHD contend that even if we determine that the property does not qualify for the Wis. Stat. § 70.11(4m) -exemption, as we have, they are at least entitled to a partial exemption, under Wis. Stat. § 70.1105 (for the equipment) and the preamble to Wis. Stat. § 70.11 (for the laboratory space), "for any nonprofit use." United/Dynacare argues that property can be used for both exempt and non-exempt purposes, and § 70.1105 provides a means by which property can qualify for a "partial exemption." FHHD, acknowledging that the leased laboratory space falls outside the literal scope of § 70.1105, contends that it instead qualifies for the "partial preamble exemption" because the leased property satisfies the "rent use" and "tenant identity" conditions of the § 70.11 preamble, as previously argued. After a careful review of §§ 70.11(4m) and 70.1105, we are unpersuaded.

¶ 28. Wisconsin Stat. § 70.1105 provides:

Taxed in part. (1) Property that is exempt under s. 70.11 and that is used in part in a trade or business for which the owner of the property is subject to taxation under sections 511 to 515 of the internal revenue code, as defined in s. 71.22 (4m), shall be assessed for taxation at that portion of the fair market value of the property that is attributable to the part of the property that is used in the unrelated trade or business. This section does not apply to property that is leased by an exempt organization to another person or to property that is exempt under s. 70.11 (34).

(Emphasis added.) A close reading of § 70.1105, and a review of the relevant Wis. Stat. § 70.11 exemptions, appears to indicate that perhaps the partial taxation statute was not intended to apply to the personal property portion of § 70.11 (4m) at all, or, at the very least, that it does not apply here. There is a distinct difference in the specific language used in the personal property portion of § 7Ó.ll(4m). and many, but by no means all, of the other § 70.11 exemptions that lends support for this conclusion — there is no "ownership" requirement for the personal property exemption under § 70.11(4m). That is, property qualifies for the exemption under § 70.11(4m) solely on the basis of how the property is used, and not by virtue of who owns it and how it is used or by whom.

¶ 29. Compare, for example, the relevant language in Wis. Stat. § 70.11(4), (5), (6), (7), (13), and (28), respectively: "Property owned and used exclusively by educational institutions ... or by churches or religious, educational or benevolent associations . . . "Property owned and used exclusively by any state or county agricultural society, or by any other domestic corporation formed to encourage agricultural and industrial fairs and exhibitions and necessary for fairgrounds or for exhibition and sale of agricultural and dairy property . . . "Property of any fire company used exclusively for its purposes."; "Land owned by military organizations and used for armories, public parks or monument grounds but not used for private gain."; "Land owned by cemetery authorities ... and used exclusively as public burial grounds and tombs and monuments therein, and privately owned burial lots; land adjoining such burial grounds, owned and occupied exclusively by the cemetery authority for cemetery purpose ...."; "Property owned and operated by a humane society organized primarily for the care and shelter of homeless, stray or abused animals, on a nonprofit basis, no part of the net income of which inures to the benefit of any member, officer or shareholder, if the property is used exclusively for the primary purpose of the humane society." As we have seen, § 70.11(4m), on the other hand, states: "Real property owned and used and personal property used exclusively for the purposes of any hospital. . . ." There is no ownership qualification in the personal property clause.

¶ 30. Now, turning back to Wis. Stat. § 70.1105, "[p]roperty that is exempt under s. 70.11 and that is used in part in a trade or business for which the owner of the property is subject to taxation" under certain provisions of the internal revenue code is subject to partial taxation. It would be counterintuitive, for a number of reasons, to interpret that provision to mean that property must be completely exempt under some subsection of § 70.11 in order for § 70.1105 to apply. On the other hand, it would make sense for § 70.1105 to apply to property that qualifies for exemption by virtue of the identity of the owner and the use of the property, when a separate unrelated use may render the property partially amenable to taxation.

¶ 31. Indeed, in Deutsches Land, the case United/Dynacare cites in support of its proposition that Wis. Stat. § 70.1105 provides a means by which property can qualify for a "partial exemption," the supreme court indicated the following when considering the interrelation of the taxed-in-part statute and Wis. Stat. § 70.11(4) (the exemption applicable to benevolent institutions):

We note that [§ 70.1105] begins with "Property that is exempt under this section...." Read literally, this phrase may require property to be totally exempt under the statute in order for subsection (8) to apply. This would mean that the property needs to be "used exclusively" by the exempt organization for exempt purposes. However, such an interpretation would render [§ 70.1105] meaningless. The reason an exempt organization seeks a partial exemption is precisely because it does not exclusively use its property for exempt purposes. Our interpretation of[§ 70.1105] must give effect to the [section's] overall purpose of allowing an exempt organization to claim partial exemptions.

Deutsches Land, 225 Wis. 2d at 89 n.9 (footnotes and emphasis added.) Deutsches Land is distinct from the instant case in a number of ways, but the essence of this explanation lends support to the conclusion that, perhaps, § 70.1105 was never meant to apply to § 70.11(4m) at all, since the identity of the owner of the property is irrelevant for the § 70.11(4m) personal property exemption. Or, if not, at the very least, § 70.1105 does not apply here, because the owner of the laboratory equipment, United/Dynacare, is not an exempt entity.

¶ 32. Moreover, as FHHD has conceded that the laboratory space does not fall within the literal scope of Wis. Stat. § 70.1105 — "[t]his section does not apply to property that is leased by an exempt organization to another person" — we need only address its partial taxation argument in regard to the "partial preamble exemption." As a similar argument, based upon the "rent use" and "tenant identity" conditions, was rejected above, this argument fails as well.

B. The City properly assessed the property for the 2000 tax year.

¶ 33. FHHD insists that the FHHD Building "should not have been assessed for the tax year 2000 since it was still under construction and was not being used for any non-exempt activities as of that date." FHHD argues that as of January 1, 2000, "the entire FHHD building, including the laboratory space, was being prepared for use in furtherance of the tax-exempt purposes of Froedtert Hospital." As such, FHHD maintains that newly constructed properties, while being readied for exempt purposes, qualify for exemption. Furthermore, FHHD insists that even if it is determined that the space is used for a commercial purpose, and thus is not exempt under Wis. Stat. § 70.11(4m), the space could not have been used for any commercial purpose until United/Dynacare actually occupied the space — July 2000 — seven months after it was assessed for the 2000 tax year.

¶ 34. The City insists that it properly assessed the FHHD Building on the basis that it was vacant and partially constructed. The City also challenges FHHD's assertion that it was being readied for an exempt purpose, and indeed contends that "it was not destined for any exempt purpose at all." Thus, it argues that it properly assessed the property according to the relevant assessment manual.

¶ 35. In Family Hospital Nursing Home, Inc. v. City of Milwaukee, 78 Wis. 2d 312, 254 N.W.2d 268 (1977), overruled on other grounds by Burlington Northern Railroad Co. v. City of Superior, 159 Wis. 2d 434, 464 N.W.2d 643 (1991), the supreme court concluded that an unoccupied, but constructed nursing home "equipped and in the process of readying itself for the receipt of its first patient[,]" i.e., acquiring a staff of personnel, "was not used for any other purpose during th[is] period[,]" and "should not be taxable during the period in which it was readying itself for its benevolent purpose." Id. at 323. On the other hand, in Dominican Nuns v. City of La Crosse, 142 Wis. 2d 577, 419 N.W.2d 270 (Ct. App. 1987), this court concluded that "[a] fully constructed and equipped nursing home awaiting its patients is a far different thing from vacant land and buildings in the process of disposal by an entity already occupying new premises elsewhere." Id. at 580. In Dominican Nuns, the order had already relocated to a new facility during the relevant tax period, but continued to heat the vacant building, keep it in repair, list it for sale, and maintain a mortgage. We concluded that "[t]he property was not being 'used' for any of the order's regular activities or benevolent purposes." Id. at 581. The former convent was vacant and unoccupied, except for a "locally-retained maintenance person," and as such, did not qualify for exemption under Wis. Stat. § 70.11(4). Id.

¶ 36. Here, there is no indication that, as in Family Hospital, the FHHD building was fully constructed and equipped, and in the final stages of readying itself for an exempt purpose. While FHHD contends that the entire building "was being prepared for use in furtherance of the tax-exempt purposes of Froedtert Hospital[,]" it has failed to establish that. Such a self-serving, conclusory statement regarding the partially constructed building hardly equates the FHHD Building with the nursing home in Family Hospital. Furthermore, regarding FHHD's contention that the space could not possibly have been used for a commercial purpose until it was completed and occupied by United/Dynacare, we note that the relevant case law appears to be concerned with the use of the property at the time of assessment, and again, FHHD has failed to provide us with enough to establish that it was being readied for an exempt purpose. Indeed, "the burden of showing that property is exempt is on the party seeking the exemption, and doubts are to be resolved in favor of taxability[,]" St. Elizabeth Hosp., 141 Wis. 2d at 791; taxation is the rule, and exemption is the exception, Wis. Stat. § 70.109.

¶ 37. As there are no disputed issues of material fact, by virtue of the stipulations of the parties, the only remaining issue is a question of law — does the property qualify for the exemption? We conclude that, as a matter of law, it does not. As such, the City is entitled to summary judgment.

By the Court. — Order reversed.

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

       Dynacare, Inc. was a for-profit, NASDAQ-traded corporation through January 1, 2002.

       According to the stipulated facts, "URMS provided laboratory services to [MCW] prior to the formation of United/Dynacare[, and] United/Dynacare continues to provide laboratory services to [MCW]." Further, "[l]aboratory specimens at United/Dynacare are made available for research and educational purposes for Froedtert Hospital's medical staff at [MCW], medical residents, interns and fellows in Froedtert Hospital's residency program, and the Medical College students."

       United/Dynacare began paying rent to FHHD in August 2000.

       What they expected to be allowed, however, was the claim for recovery concerning FHHD's bill in regard to the tax for "other personal property." The property tax bill issued to FHHD in December 2002 included taxes of $228,767 for the laboratory space and $210,094 for other personal property.

       In Columbia Hospital Association v. City of Milwaukee, 35 Wis. 2d 660, 668, 151 N.W.2d 750 (1967), the supreme court recognized that Wis. Stat. § 70.11(4m)
      has carefully expressed the exemption in terms of a hospital whose primary purpose is diagnosis, treatment and care and this contemplates that a hospital may have other functions and objects, whether they he directly or indirectly associated with the care of the sick. The language of the section refers to property used exclusively for the purposes of the hospital. This means any and all purposes, not just for the primary purpose of care, diagnosis or treatment.
      It accordingly acknowledged an exemption, under the language of § 70.11(4m), for property reasonably necessary for the secondary purpose of serving as a teaching hospital. See Columbia Hosp., 35 Wis.2d at 674.

       Indeed, Wis. Stat. § 70.11(4m) states: "Real property owned and used and personal property used exclusively for the purposes of any hospital...." There is no ownership qualification in the personal property clause.

       WISCONSIN Stat. §70.11(4) provides, in relevant part: "Property owned and used exclusively by ... churches or religious, educational or benevolent associations ...." (Emphasis added.)

       In 1997, Wis. Stat. § 70.11(8) was repealed and recreated as Wis. Stat. § 70.1105. Deutsches Land, Inc. v. City of Glendale,
        225 Wis. 2d 70, 88 n.8, 591 N.W.2d 583 (1999). "That legislative action only altered the placement of the statutory provision and did not alter its substance in any way." Id. Since Deutsches Land concerned the years of 1993-95, the supreme court referred to the statute as § 70.11(8) throughout its opinion. We have altered the quote to include the current designation of § 70.1105, as the statute has merely been renumbered, to avoid any confusion for the purposes of this opinion.


source: Caselaw Access Project

author: PETERSON, J.

license: Public Domain

text:
    James B. Linden and Dianne C. Linden, Plaintiffs-Appellants, v. Cascade Stone Company, Inc., West Bend Mutual Insurance Company and Rich Fern d/b/a Allied Construction, Defendants-Respondents, American Family Mutual Insurance Company, Intervening Defendant-Respondent.
    Court of Appeals

      No. 04-0004.

      Submitted on briefs June 28, 2004.

    Decided August 17, 2004.

    2004 WI App 184
    (Also reported in 687 N.W.2d 823.)

      On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of Mark A. Seidl of Seidl & Stingl, S.C., Wausau.
    On behalf of the defendant-respondent, West Bend Mutual Insurance Company, the cause was submitted on the brief of R. Michael Waterman of Mudge Porter Lundeen & Seguin, S.C., Hudson.
    On behalf of the defendant-respondent, Rich Fern d/b/a Allied Construction, the cause was submitted on the brief of Mark S. Henkel of First Law Group, SC, Stevens Point.
    On behalf of the intervening defendant-respondent, the cause was submitted on the brief of Paul E. David of Wendorff Ellison & David, LLP, Wausau.
    Before Cane, C.J., Hoover, EJ., and Peterson, J.

       Petition to review granted 12-15-2004.

   PETERSON, J.

¶ 1. James and Dianne Linden appeal a summary judgment dismissing their negligence and contract claims against Cascade Stone Company, Inc., Rich Fern d/b/a Allied Construction, and their insurers for alleged faulty workmanship in the construction of the Lindens' home. The Lindens contend that: (1) the economic loss doctrine does not bar their negligence claims; (2) the trial court erred in dismissing Cascade's insurer, West Bend Mutual Insurance Company, since its policy covers their contract claim against Cascade; and (3) the trial court erred in denying leave to amend their complaint against Fern. Because we determine the predominant purpose of the underlying transaction was for a product, we conclude that the economic loss doctrine bars the Lindens' tort claims. We decline to review the trial court's ruling dismissing West Bend since any error was invited. Finally, we conclude that the trial court properly exercised its discretion in refusing to allow the Lindens to amend their complaint to add a contract claim against Fern.

BACKGROUND

¶ 2. In March 1999, James and Dianne Linden contracted with Groveland Craftsman, Inc., a general contractor, to construct a new home in Houlton. Grove-land retained a number of subcontractors to complete the construction of the Linden home. The subcontractor Cascade Stone Company, Inc., was retained to install the exterior stucco siding. Richard Fern, d/b/a Allied Construction, was retained to install the roof.

¶ 3. The Lindens took occupancy of the home in November 1999. They experienced a variety of moisture intrusion problems by way of the windows, roof and exterior walls, resulting in deterioration and mold.

¶ 4. In June 2000, the Lindens commenced this action. The Lindens asserted contract and tort claims against the stucco subcontractor, Cascade, and coverage of those claims by Cascade's insurer, West Bend Mutual Insurance Company. They also claimed negligence by Fern, the roofing subcontractor, and liability for Fern's negligence by Fern's insurer, American Family Mutual Insurance Company.

¶ 5. On October 1, 2003, the trial court granted summary judgment in favor of the defendants. The court found that the economic loss doctrine barred the Lindens' tort claims against all parties. The court also held that there was no coverage under the West Bend policy for the contract claim against Cascade and dismissed that claim. Finally, the court denied the Lindens' motion to amend the complaint to add a contract claim against Fern.

DISCUSSION

¶ 6. When reviewing a summary judgment, we perform the same function as the trial court and our review is independent of the trial court's decision. Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315, 401 N.W.2d 816 (1987). On summary judgment, a court must view the facts in the light most favorable to the non-moving party. State Bank of La Crosse v. Elsen, 128 Wis. 2d 508, 512, 383 N.W.2d 916 (Ct. App. 1986). We will reverse a summary judgment if the trial court incorrectly decided a legal issue or if material facts are in dispute. Coopman v. State Farm Fire & Cas. Co., 179 Wis. 2d 548, 555, 508 N.W.2d 610 (Ct. App. 1993).

I. ECONOMIC LOSS DOCTRINE

¶ 7. "The economic loss doctrine is a judicially created doctrine under which a purchaser of a product cannot recover from a manufacturer on a tort theory for damages that are solely economic." Bay Breeze Condo. Ass'n v. Norco Windows, Inc., 2002 WI App 205, ¶ 9, 257 Wis. 2d 511, 651 N.W.2d 738. Economic damages are those arising because the product does not perform as expected, including damage to the product itself or monetary losses caused by the product. Biese v. Parker Coatings, Inc., 223 Wis. 2d 18, 23, 588 N.W.2d 312 (Ct. App. 1998). Economic damages do not include losses due to personal injury or damage to other property. Id.

¶ 8. The economic loss doctrine preserves the distinction between contract and tort law. Daanen & Janssen, Inc. v. Cedarapids, Inc., 216 Wis. 2d 395, 403-04, 573 N.W.2d 842 (1998); see also East River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 866 (1986) (economic loss doctrine seeks to avoid drowning contract law in "a sea of tort"). The premise of the economic loss doctrine is that contract law, and particularly the law of warranty, is better suited than tort law for dealing with purely economic loss. Daanen, 216 Wis. 2d at 403-04. Allowing buyers and sellers to allocate the risk of economic losses by contract promotes an efficient, predictable marketplace. Id. at 410-12. On the other hand, claims concerning personal injury or damage to property other than the product itself are best governed by tort law, an area of law intended to protect people from misfortunes that are unexpected and overwhelming. Id. at 405; see also Wausau Tile, Inc. v. County Concrete Corp., 226 Wis. 2d 235, 248, 593 N.W.2d 445 (1999). In operation, "the economic loss doctrine requires transacting parties in Wisconsin to pursue only their contractual remedies when asserting an economic loss claim . . . ." Digicorp, Inc. v. Ameritech Corp., 2003 WI 54, ¶ 34, 262 Wis. 2d 32, 662 N.W.2d 652.

¶ 9. When a contract involves both products and services, i.e., a "mixed contract," this court looks to the predominant purpose test to determine whether the economic loss doctrine applies. Biese, 223 Wis. 2d at 24-25. The predominant purpose test for mixed contracts is "whether their predominant factor, their thrust, their purpose, reasonably stated, is the rendition of a service, with goods incidentally involved (e.g., contract with an artist for a painting) or is a transaction of sale, with labor incidentally involved (e.g., installation of a water heater in a bathroom)." Id. at 25 (citations omitted). If the predominant purpose of the contract is for a product, the economic loss doctrine applies.

¶ 10. Before we can determine the predominant purpose of the transaction, however, we must determine the relevant transaction to be examined. The subcontractors and their insurers argue that the underlying transaction here is the general contract and its predominant purpose is for the sale of a product — a house. The Lindens, relying on Biese, contend we must look to the subcontracts of Fern and Cascade, which they claim are predominately for services.

¶ 11. In Biese, the plaintiff contracted with A to Z Epoxy Coatings to install an epoxy floor. Biese, 223 Wis. 2d at 20. Parker provided the flooring materials and Epoxy installed the floor. Id. Biese sued Parker in tort for negligent provision of defective flooring materials "and/or" faulty installation instructions. Id. at 21. We applied the predominant purpose test and held that the transaction was for a product, with any service being incidental. Id. at 20. Since the predominant purpose was for a product, the economic loss doctrine applied and barred the tort-based claims against Parker. Id. Although our analysis focused on what Parker, a subcontractor, contributed to the transaction, we were ultimately concerned with the predominant purpose of "the entire underlying transaction." Id. at 26. Since Parker provided primarily flooring materials, the transaction was predominately for a product and the economic loss doctrine applied. Id. at 28-29.

¶ 12. The Lindens contend Biese holds that we should look to the subcontract in applying the predominant purpose test. Biese should not be read so broadly. The relevant transaction was never disputed by the parties in Biese. Indeed, whether we analyzed the general contract (purchase of a floor) or the subcontract (purchase of flooring materials), our holding would have been the same: the transaction was for the sale of a product and the economic loss doctrine barred the negligence claims.

¶ 13. Like the Lindens, the plaintiff in Biese attempted to avoid application of the economic loss doctrine by pointing to a specific aspect of the transaction and claiming it was a service. Biese argued that Parker's obligation to reinstall the floor was not incidental to the contract. Id. at 28, n.8. We looked at the entire transaction, however, and concluded that the services were incidental. Id.

¶ 14. Additionally, looking at the general contract supports the three policies underlying the economic loss doctrine: (1) preserving separation between tort and contract; (2) protecting freedom to contract; and (3) encouraging purchasers to assume, allocate or insure against risk of economic loss. Wausau Tile, 226 Wis. 2d at 247. First, looking at the entire underlying transaction maintains the fundamental distinction between tort and contract law. At its core, the Lindens' complaint is that the house they received is not the house for which they contracted. Groveland's decision to subcontract portions of the house construction to subcontractors should not permit the Lindens to make an "end around" their contract and the economic loss doctrine. See Biese, 223 Wis. 2d at 30. Allowing the Lindens to circumvent their contract by pursuing claims against the subcontractors blurs the line between contract and tort, a result the economic loss doctrine seeks to avoid.

¶ 15. Second, examining the general contract here protects the parties' freedom of contract. The Lindens and Groveland negotiated a contract for a house. That contract included warranties and provided remedies in the event of warranty breach. Groveland then negotiated contracts with the subcontractors to complete portions of the house. Allowing the Lindens to recover their economic losses from the subcontractors in tort frustrates the freedom to contract of all the parties. A tort recovery by the Lindens essentially rewrites their contract to include a more expansive warranty than they negotiated and paid for. See Wausau Tile, 226 Wis. 2d at 258.

¶ 16. Third, using the general contract and applying the economic loss doctrine encourages the home buyer to assume, allocate or insure against the risk of loss caused by a defective house. Barring the negligence claims neither leaves the Lindens without a remedy nor leaves subcontractors free to perform shoddy work. All of these concerns are adequately addressed by contract law.

¶ 17. Since the relevant underlying transaction is the general contract for the construction of a home, we conclude that the predominant purpose was to provide a product. The Lindens negotiated with Groveland for the construction of a house on their property. That contract provided for various remedies if the Lindens experienced problems with the house. Although the Lindens' complaint is framed in negligence, their claim is that they did not get what they bargained for: a fully functional home without water infiltration problems. All damages are economic losses as the result of a failed product.

¶ 18. The Lindens seem to believe that the predominant purpose test involves weighing numerical amounts of materials and labor involved in a transaction to determine whether the transaction involved "more products" or "more services." Thus, they produced summary judgment affidavits stating that Cascade and Fern had each provided 85% labor and 15% materials to the project. They also contend that the trial court, having examined the general contract, did not have an adequate factual basis to determine that the predominant purpose was for a product, since no evidence had been submitted breaking down how much of the contract was for labor and how much was for materials.

¶ 19. However, the predominant purpose test is not a fixed mathematic calculation weighing dollars or percentages. Rather, we examine contracts for "their thrust, their purpose." Biese, 223 Wis. 2d at 25. We have analyzed the amount and type of billing as a relevant factor to determine the predominant purpose of a contract. Micro-Managers, Inc. v. Gregory, 147 Wis. 2d 500, 508, 434 N.W.2d 97 (Ct. App. 1988); Van Sistine v. Tollard, 95 Wis. 2d 678, 685, 291 N.W.2d 636 (Ct. App. 1980). We also have analyzed the actual language of the contract to determine whether the language is typical of a service contract or of a contract for the sale of a product. Van Sistine, 95 Wis. 2d at 685; Micro-Managers, 147 Wis. 2d at 508-09. So, while in Van Sistine we noted amounts attributable to materials and labor, we also were persuaded by the language of the contract, framed in terms like: "install," "reposition," "move" and "finishing." Van Sistine, 95 Wis. 2d at 685. Likewise in Micro-Managers, while we noted that approximately $56,000 of the $60,000 contract was for labor, the contract was again framed in terms of services: "man-days," "development," "time" and "design." Micro-Managers, 147 Wis. 2d at 508-09.

¶ 20. We also examine the contract as a whole to determine whether the parties' purpose was to enter into a contract for a product or for services. For example, in Micro-Managers, we concluded that a contract for the development of specially designed computer software was predominately for services. We were persuaded by the reasoning in Data Processing v. L. H. Smith Oil Corp., 492 N.E.2d 314 (Ind. App. 1986). Micro-Managers, 147 Wis. 2d at 507. The court there noted that while a product, computer software, was generated, the contract was predominately for services. Data Processing, 492 N.E.2d at 318-19. The purchaser of the software had bargained for the "specific knowledge, skill and ability" of the software developer. Id. Such reliance on the particular skills of a person is typical in service contracts; thus a contract with an artist for a painting is one predominately for services. Biese, 223 Wis. 2d at 25.

¶ 21. The Lindens' contract with Groveland does not delineate separate amounts for the labor and materials involved. However, the type of billing is clear. The contract price was not dependent on the actual number of hours spent on construction, but was "a fixed price contract." The price was only subject to change if the specifications for the house changed:

Any change to specifications that lower cost of project, will be a reduction in cost to client, and any change in specifications that result in a higher cost, will be charged to client.

The type of billing used here is for a product.

¶ 22. The actual language of the contract also is typical of a custom-built product with many specifications. The contract begins, "Here are the specifications for the project as we understand it." The contract contains an itemized list of specifications for the various portions of the house (e.g. foundation, roof) and the price, including labor and materials, for each. The contract delineates the size and type of the components of the house, even including name brands of items such as the windows and shingles. The language of the contract is typical of a product contract.

¶ 23. Finally, the contract as a whole reveals that the parties' purpose was not a service contract. The contract does not include the names of Cascade or Fern, despite the fact that subcontractors would be used was apparent on the face of the contract. The Lindens had not bargained for the specific "knowledge, skill and ability" of Cascade or Fern. In fact, the Lindens did not even know that Fern had worked on their house until he arrived at their house to inquire about this lawsuit. The contract here was predominately for a product and the economic loss doctrine is applicable.

¶ 24. Alternatively, the Lindens argue that they have suffered damage to "other property," making the economic loss doctrine, which bars tort actions for solely economic damages, inapplicable. They allege that the problems with the stucco siding and roof have caused damage to other portions of their house, constituting damage to "other property" and removing this dispute from the economic loss doctrine. However, since the roof and siding were incorporated in an integrated system — the house — and the Lindens have not claimed damages to any property other than the house, there has been no "other property" damage and the economic loss doctrine is applicable.

¶ 25. The integrated system rule holds that once a part becomes integrated into a completed product or system, the entire product or system ceased to be "other property" for purposes of the economic loss doctrine. See Wausau Tile, 226 Wis. 2d at 251-52 (cement is an integral part of concrete paving blocks); Bay Breeze, 257 Wis. 2d 511, ¶ 27 (windows are an integral part of a house); Selzer v. Brunsell Bros., 2002 WI App 232, ¶ 39, 257 Wis. 2d 809, 652 N.W.2d 806 (same). As in determining the relevant transaction above, to determine whether "other property" has been damaged, "one must look to the product purchased by the plaintiff, not the product sold by the defendant." Bay Breeze, 257 Wis. 2d 205, ¶ 25 (quoting Casa Clara Condo. Ass'n Inc. v. Charley Toppino & Sons, Inc., 620 So.2d 1244, 1247 (Fla. 1993)).

Generally, house buyers have little or no interest in how or where the individual components of a house are obtained. They are content to let the builder produce the finished product, i.e., a house. These homeowners bought finished products — dwellings—not the individual components of those dwellings. They bargained for the finished products, not their various components.

Id.

¶ 26. We conclude that the "integrated systems exception" applies here. The stucco siding and roof serve no independent purpose other than as part of the house. Accordingly, they are component parts of the integrated system — the house. Any damage to other portions of the house does not constitute damage to "other property."

II. WEST BEND'S COVERAGE OF CONTRACT CLAIM

¶ 27. The Lindens next contend that Cascade's insurer, West Bend, should not have been dismissed. They argue that West Bend's policy provides coverage for the contract claim against Cascade. Accordingly, they contend that West Bend should remain a party despite the dismissal of the negligence claims under the economic loss doctrine. However, we conclude that the Lindens invited any error by the trial court.

¶ 28. The Lindens have consistently asserted that West Bend's commercial general liability policy provides coverage for the tort, not contract, claims against Cascade. In their third amended complaint, the Lindens brought claims against West Bend under its policy insuring against Cascade's negligence. In both their initial and revised summary judgment briefs, the Lindens expressly conceded that the West Bend policy did not provide coverage for their contract claims:

The West Bend Brief pages 22-23 claim that the a [sic] breach of contract or breach of warranty claim brought by the Lindens against Cascade Stone are excluded from coverage under the West Bend policies. We agree. The Lindens never claimed that West Bend policies insured Cascade against the breaches of contract or warranty.

The Lindens reiterated their concession that there was no coverage of the contract claims under the West Bend policy at the October 27, 2003, motion hearing.

¶ 29. The Lindens now claim that, under American Family Mutual Insurance Co. v. American Girl, Inc., 2004 WI 2, 268 Wis. 2d 16, 673 N.W.2d 65, the trial court erred by finding that the West Bend policy did not cover their contract claims against Cascade. However, the Lindens conceded the issue of coverage of their contract claims in the trial court based on their understanding of the coverage of commercial general liability policies. Thus, if this was error, they invited it. "If a party makes an express concession, the party invites the trial court to rule regarding that concession . .. ." Richards v. Land Star Group, Inc., 224 Wis. 2d 829, 842-43, 593 N.W.2d 103 (1999). We normally will not review invited error and we decline to do so here. Atkinson v. Mentzel, 211 Wis. 2d 628, 642-43, 566 N.W.2d 158 (Ct. App. 1997).

III. MOTION TO AMEND COMPLAINT AGAINST FERN

¶ 30. Finally, the Lindens argue that the circuit court erroneously exercised its discretion when it denied their motion to amend the pleadings pursuant to Wis. Stat. § 802.09(1) (2001-02) to add a contract claim against Fern. "A trial court's decision to grant leave to amend a complaint is discretionary." Finley v. Culligan, 201 Wis. 2d 611, 626, 548 N.W.2d 854 (Ct. App. 1996). We will not reverse a court's discretionary decision unless the record discloses that the court failed to exercise its discretion, that the facts do not support the trial court's decision, or that the court applied the wrong legal standard. See id. at 626-27. The circuit court "in exercising its discretion must balance the interests of the party benefiting by the amendment and those of the party objecting to the amendment." State v. Peterson, 104 Wis. 2d 616, 634, 312 N.W.2d 784 (1981).

¶ 31. A review of the record reveals that the trial court properly exercised its discretion in denying the amendment. The court considered the facts that the complaint had been pending for three years and that three prior amendments had been made. The court also weighed the possible prejudice to the Lindens in denying the motion to add a contract claim in light of its dismissal of the tort claims.

¶ 32. The Lindens contend the trial court's reasons are factually flawed. They point out that the claim against Fern was only pending for a year and two months, against Fern's insurer for a mere eight months and that neither of those claims have been themselves amended. The Lindens also contend that the interests of justice favor allowing the amendment. They claim the trial court's last minute dismissal of their negligence claims results in prejudice that justifies the need for the late amendment. On the other hand, they assert, Fern would not be prejudiced by the amendment. The Lindens allege that Fern has sufficient time to prepare to defend the contract claim both because the trial was postponed and because no additional preparation is necessary since the substance of the underlying claim remains unchanged.

¶ 33. However, the Lindens did not take any steps to amend the pleadings to add a contract claim against Fern until the trial court dismissed their tort claims, even though: (1) the Lindens made both contract and tort claims against the other subcontractor, Cascade; (2) the applicability of the economic loss doctrine had been contested for eight months; and (3) the Lindens voluntarily abandoned their personal injury claims a month earlier, which made their tort claims vulnerable under the economic loss doctrine. Under these circumstances, the trial court properly exercised its discretion by denying the Lindens' motion to amend the pleadings.

By the Court. — Judgment affirmed.

       Groveland (the general contractor) and Vetter Windows (the window manufacturer) were also defendants in this action. The claims against them were subsequently settled. The complaint was amended three times and additional parties joined. We only address the claims of the remaining parties.

       Western National Mutual Insurance Company also insured Cascade. The Lindens' claims against Western were dismissed and Western is not a party to this appeal.

       The Wisconsin Supreme Court is reviewing the issue of whether the economic loss doctrine applies to a service contract. See Insurance Co. of N.A. v. Cease Elec. Inc., 2004 WI App 15, 269 Wis. 2d 286, 674 N.W.2d 886, cert. granted, 2004 WI 20 (Feb. 24, 2004) (No. 03-0689). In that case, we held that the doctrine does not apply to services. Id. at ¶ 23. Since we conclude that the contract here is for a product, we need not address the application of the doctrine to services.

       The Lindens had initially alleged personal injuries to Dianne Linden, which would have removed this entire dispute from the economic loss doctrine. The economic loss doctrine does not apply to defective product disputes that involve personal injury; economic losses are recoverable in tort in conjunction with non-economic losses. Wausau Tile, 226 Wis. 2d at 247. However, the Lindens voluntarily abandoned those personal injury claims.

       The Lindens again allege that the "component parts" are services and no Wisconsin courts have used the integrated systems exception when the defects claimed are services, not products. Because we conclude that the relevant transaction is for a product, we need not address whether the integrated systems exception could be used for services.

       The Lindens also argue that they have a contract claim against Cascade. However, from what we can tell from the record, Cascade was not served with notice of this appeal, nor has it appeared in the appeal. Therefore, we do not address the argument.

       The Lindens had the opportunity to make the same contract coverage argument that the American Girl majority acknowledged. We will not "blindside" the trial court for, essentially, failing to make a ruling it was not requested to make.

       Wisconsin Stat. § 802.09(1) reads as follows:
      Amendments. A party may amend the party's pleading once as a matter of course at any time within 6 months after the summons and complaint are filed or within the time set in a scheduling order under s. 802.10. Otherwise a party may amend the pleading only by leave of court or by written consent of the adverse party; and leave shall he freely given at any stage of the action when justice so requires. A party shall plead in response to an amended pleading within 45 days after service of the amended pleading, or within 20 days after the service if the proceeding is to foreclose or otherwise enforce a hen or security interest, unless (a) the court otherwise orders or (b) no responsive pleading is required or permitted under s. 802.01 (1).

       Summary judgment was granted at the pretrial hearing.


author: LUNDSTEN, J. DYKMAN, J.

text:
    In re the Marriage of: Lynn E. Steiner, Petitioner-Respondent, v. Van F. Steiner, Respondent-Appellant.
    Court of Appeals

      No. 03-0931.

      Submitted on briefs November 7, 2003.

    Decided August 19, 2004.

    2004 WI App 169
    (Also reported in 687 N.W.2d 740.)

      On behalf of the respondent-appellant, the cause was submitted on the briefs of Mark F. Borns of Relies, Borns & Long, LLP, Madison.
    On behalf of the petitioner-respondent, the cause was submitted on the brief of Daphne Webh and J. Alberto Quiroga of Stafford Rosenbaum LLP, Madison.
    Before Deininger, EJ., Dykman and Lundsten, JJ.
   LUNDSTEN, J.

¶ 1. Van Steiner appeals a divorce judgment of the circuit court. Van challenges the property division and maintenance provisions of that judgment. He argues that the court erred when it treated his sick leave account as a consideration under Wis. Stat. § 767.255(3) (2001-02) when awarding Lynn Steiner more than half of the divisible property. Van also argues that the court erred when it denied his request for maintenance. We disagree with Van and affirm the circuit court.

Background

¶ 2. Van and Lynn were married on April 11, 1964. They were divorced on January 6, 2003, when Van was sixty-one years old and retired and Lynn was fifty-nine years old and working thirty hours per week as a nurse.

¶ 3. After a contested divorce hearing, the circuit court determined that an unequal distribution of Lynn and Van's divisible property was warranted. The court awarded Lynn property valued at approximately $107,198, and Van property valued at approximately $30,909. The court deviated from the statutory presumption of equal property division after considering Van's non-divisible property, including a sick leave account valued at approximately $89,000. In its decision, the court noted that although Van's sick leave account was not property subject to division, it could be considered under Wis. Stat. § 767.255(3) as background information.

¶ 4. The circuit court also denied Van’s request that Lynn pay him maintenance and Van's alternative request that maintenance be held open. The court denied these requests based partly on evidence that Van could support himself with income from social security, his Wisconsin retirement, and his inheritance and by earning about $15,000 per year working part time.

Discussion

Sick Leave Account

¶ 5. Van contends that the circuit court erred when it relied on the value of his sick leave account to deviate from an equal property division. He contends that consideration of his sick leave account runs afoul of our decision in Preiss v. Preiss, 2000 WI App 185, 238 Wis. 2d 368, 617 N.W.2d 514. We disagree, and begin our discussion by summarizing Preiss.

¶ 6. In Preiss, we reviewed a decision to place a value on a party's sick leave account and treat the account as divisible property. It is undisputed that Van's sick leave account is the same type of government sick leave account that was at issue in Preiss. In both, accumulated sick leave account hours are valued at the employee's hourly rate of pay at the time of retirement and then converted to credits that may only be used to pay the employee's health insurance premiums. Id., ¶ 13. The account cannot be given away or transferred. Id., ¶ 14.

¶ 7. We concluded in Preiss that the circuit court erroneously treated the sick leave account as divisible property. We explained:

[The husband] cannot convey his interest in the account; he cannot gift it; he cannot transfer it. Because the account has no cash value and cannot be sold or transferred, it also does not have a fair market value. "Property to be divided at divorce is to be valued at its fair market value. Fair market value assumes sale by one who desires but is not obligated to sell and purchase by one willing but not obligated to buy." A transaction that would determine the property's fair market value cannot be made. If property has no fair market value, the court cannot place an independent value upon it, and it should thus not be included as an asset in the marital estate.
The account does indeed have an intrinsic value. It has value to [the husband], but this value is not accessible to anyone else.

Id., ¶¶ 14-15 (citation omitted).

¶ 8. Van asserts that if a sick leave account may not be directly treated as divisible property, it may not be considered for purposes of property division. He reasons that because Preiss prohibits sick leave accounts from coming in the front door as divisible property, the circuit court should not be permitted to bring his account in the back door as a "consideration" and achieve the same result. Lynn responds that Preiss only prohibits treating sick leave accounts as divisible property and that, under Wis. Stat. § 767.255(3)(j), a sick leave account is exactly the type of asset courts are permitted to consider as background information when deciding whether to deviate from an equal property division. We think Lynn has the better argument.

¶ 9. "The division of a marital estate is governed by Wis. Stat. § 767.255, which creates a presumption that the property will be divided equally." Preiss, 238 Wis. 2d 368, ¶ 10. Wisconsin Stat. § 767.255(3) provides, in relevant part:

The court shall presume that all property not described in sub. (2) (a) is to be divided equally between the parties, but may alter this distribution without regard to marital misconduct after considering all of the following:
(j) Other economic circumstances of each party, including pension benefits, vested or unvested, and future interests.

We agree with Lynn that Van's sick leave account is an "other economic circumstance" akin to unvested pension benefits. Neither is owned and, thus, neither can be transferred or sold. Still, both have readily apparent value, even though that value is contingent on future events. In Preiss, we acknowledged that sick leave accounts have value: "The account does indeed have an intrinsic value. It has value to [the husband], but this value is not accessible to anyone else." Preiss, 238 Wis. 2d 368, ¶ 15.

¶ 10. Contrary to Van's argument, we did not hold in Preiss that a sick leave account has no identifiable value. We more specifically held that it does not have a "fair market" value as that term was explained in Sommerfield v. Sommerfield, 154 Wis. 2d 840, 853, 454 N.W.2d 55 (Ct. App. 1990). Preiss, 238 Wis. 2d 368, ¶ 14. To repeat, we acknowledged in Preiss that a sick leave account does have value. Id., ¶ 15. In fact, when we went on to suggest that the value of a sick leave account may be considered if the topic is maintenance or child support, we implicitly said that such accounts have an identifiable value. We stated: "If maintenance or child support were at issue, then the fact that [one party] receives his health insurance premiums through the sick leave account would likely be considered in determining his living expenses and his ability to pay maintenance or child support." Id., ¶ 16. If an asset can be valued with sufficient accuracy for purposes of determining appropriate maintenance and child support, we discern no reason why it cannot be a consideration under Wis. Stat. § 767.255(3)(j) for property division purposes.

¶ 11. We pause here to briefly compare Preiss with Chen v. Chen, 142 Wis. 2d 7, 416 N.W.2d 661 (Ct. App. 1987), and to point out that Chen supports our decision. In Preiss, we held that sick leave accounts are non-divisible property because they cannot be sold or transferred and, therefore, have no "fair market value." Preiss, 238 Wis. 2d 368, ¶ 14. In Chen, we concluded that unvested stock options — options that are "unas-signable and unsalable" with no currently determinable value — may be treated as divisible property. Chen, 142 Wis. 2d at 10-12. We stated in Chen: "The mere fact that the interest in the asset is contingent does not mean that it may be ignored." Id. at 12. Thus, the types of assets at issue in both Preiss and Chen appear to share similar characteristics when viewed at the time of the property division decision. Still, these two types of assets do have different characteristics and it may be possible to reconcile Preiss and Chen. That specific question is not before us.

¶ 12. We mention Chen here because its reasoning affirmatively supports using an asset like a sick leave account as a consideration under Wis. Stat. § 767.255(3). Both sick leave accounts and unvested stock options have uncertain value because their value is contingent on future events. If unvested stock options may be treated as divisible property, courts should be permitted, at a minimum, to use sick leave accounts as a background consideration for purposes of determining an equitable property division.

¶ 13. We affirm the circuit court's consideration of Van's sick leave account and, therefore, also affirm the circuit court's property division award.

Maintenance

¶ 14. The circuit court declined to order maintenance or to hold open the topic, explaining that its decision was "[b]ased upon projections [that] future income of the parties will be relatively equal varying with their hours of employment." In essence, the court found that both Van and Lynn were employable and each could attain approximately the same total income if they both chose to continue working. The court provided the following reasons for denying Van maintenance:

(a) [Van] is 61 years of age, has an associate degree in electronics, and worked in various capacities for the University in radio electronics, for the most part with public radio. He is now retired and self-employed in his area of specialty.
(b) The court finds the evidence insufficient to make a determination in support of [Van's] claim to be disabled from a motorcycle accident. There was no expert medical testimony or documents to substantiate such claim.
(c) Two vocational specialists testified for the respective parties and both opined that at a minimum [Van] could work part time.
(d) The records support [Van] earning between $20 and $40 per hour when working in his area.
(e) In addition, [Van] is eligible for Social Security on his next birthday, has his Wisconsin Retirement (one-half thereof), and has his inheritance which, if properly managed, will produce additional income.
(f) The court also took into consideration that when [Van] draws Social Security, the amount of income he can earn monthly without affecting his benefit is limited to $970 per month until the age of 65.
(g) The court finds [Van] able to support himself.

¶ 15. Van challenges the denial of maintenance. He begins his argument by reciting some of the trial evidence regarding his ability to find employment. Van acknowledges that one expert testified that Van could earn $10,000 to $15,000 per year, and that another expert believed Van could find "part-time" work at $20 to $22 per hour. Van then asserts that it is difficult to know how the circuit court arrived at the conclusion that the future incomes of Van and Lynn would be relatively equal. Van complains that the court did not make a finding as to when Van would find a job or for how long he would be employed.

¶ 16. We are not sure just what Van is arguing. If he is arguing that the record does not support factual findings that he is able to earn about $15,000 per year working part time and that he is able to do so for approximately the same length of time Lynn is able to work, he is wrong. Van retired in March of 2002, at age sixty. The divorce trial was held in January of 2003. At that time, Van was sixty-one and Lynn was fifty-nine. Lynn, a nurse, had a gross monthly income of $3,075, working thirty hours per week. Van had worked in a temporary part-time position as recently as two months prior to trial at a rate of $40 per hour. That part-time job lasted about six months. A reasonable inference from the evidence is that Van voluntarily left that job when he decided not to pursue continued employment when the employer reduced the hourly rate to $19. Expert witness Kevin Schütz testified that Van could "most probably" secure part-time work, and also "probably" full-time work, at $20 to $22 per hour. Schütz pointed to a specific job opening to support that opinion. Lynn testified that Van had always been able to find consulting work in the past. Lynn testified that, at Van's retirement party, she was told Van could return to work at the University as a limited-term employee. This summary of trial evidence shows that the record easily supports a factual finding that Van could find work that would produce approximately $15,000 a year in income. Since Van and Lynn are just two years apart in age, it is reasonable to infer that they both could work for approximately the same number of years into the future.

¶ 17. If Van is arguing that his income will not be "relatively equal" to Lynn's even if he makes about $15,000 per year, he does not develop that argument. At any rate, this argument is amply rebutted in Lynn's responsive brief. Lynn explains that an accountant testified and gave detailed testimony factoring in other income sources and what might happen at various points in time in the near future when Van and Lynn become eligible for other benefits such as social security. Taking these other factors into account, Lynn shows how the testimony supports a finding that Van's income will be relatively equal to Lynn's so long as Van pursues part-time work. Van does not respond in his reply brief to Lynn's analysis, and we deem this omission a concession. See Schlieper v. DNR, 188 Wis. 2d 318, 322, 525 N.W.2d 99 (Ct. App. 1994) (arguments not refuted may be deemed conceded).

¶ 18. Finally, if Van is simply arguing that the circuit court failed to adequately explain its decision, Van's argument is incomplete. Nowhere in his brief does he attempt to demonstrate that the full record fails to support the court's maintenance decision. It is not enough for a challenging party to assert or even to demonstrate that a circuit court has failed to adequately explain a maintenance decision. "When the circuit court does not explain its reason for a discretionary decision, we may search the record to determine whether it supports [the] circuit court's decision." Finley v. Finley, 2002 WI App 144, ¶ 19, 256 Wis. 2d 508, 648 N.W.2d 536. Because Van has not attempted to show that the record does not support the circuit court's decision, we need address this topic no further.

¶ 19. Accordingly, we conclude that Van has provided no reason to reverse the circuit court with respect to maintenance.

By the Court. — Judgment affirmed.

DYKMAN, J.

¶ 20. (dissenting). The supreme court's decision in Cook v. Cook, 208 Wis. 2d 166, 560 N.W.2d 246 (1997), has presented occasional dilemmas for some court of appeals panels. Cook held that the court of appeals lacked the power to overrule, modify, or withdraw language from its published opinions. Id. at 189-90. Faced with this inability to modify its published opinions, panels sometimes distinguished a problematic case on exceedingly fine points, or on assumed facts.

¶ 21. An example of this is LaCount v. Salkowski, 2002 WI App 287, 258 Wis. 2d 635, 654 N.W.2d 295. In LaCount, the court distinguished Beerbohm v. State Farm Mutual Insurance Co., 2000 WI App 105, 235 Wis. 2d 182, 612 N.W.2d 338. The court said:

Contrary to what Langer and certain legal digests say about Beerhohm, there is no statement by the court that the parents were divorced, only that they were living apart. Absent some indication the parents had anything but the natural parental custodial relationship to their child, we decline to apply Beerbohm to this case, and we limit Beerbohm's application of Wis. Stat. § 343.15(2)(b) to its facts.

LaCount, 258 Wis. 2d 635, ¶ 15.

¶ 22. But the parents to whom the court referred in Beerbohm were divorced. The indication of that is found in the state law library's copy of the Beerbohm briefs and appendices and contains the following from the appellant's brief: "Matthew Jordan's parents are divorced. His father and mother share joint custody." Appellant's brief at 6; Beerbohm, 235 Wis. 2d 182. The respondent agreed, referring to Matthew's mother as his father's ex-wife. Respondent's brief at 6; Beerbohm, 235 Wis. 2d 182.

¶ 23. We have previously examined briefs and appendices of published decisions to determine facts of which we were uncertain. See County of Eau Claire v. AFSCME Local 2223, 190 Wis. 2d 298, 304, 526 N.W.2d 802 (Ct. App. 1994). Without the factual distinction we have described, shown now to be false, Beerbohm and LaCount are indistinguishable.

¶ 24. A similar sort of problem infects the majority's conclusion here. In both Preiss v. Preiss, 2000 WI App 185, 238 Wis. 2d 368, 617 N.W.2d 514, and here, the item in dispute was a State of Wisconsin sick leave account. There are no factual differences between the sick leave accounts in the two cases. One would reasonably conclude that the two accounts would be treated equally, considering the edict of Cook.

¶ 25. In Preiss, we held:

We determine that Alfred's sick leave account was erroneously considered an asset of the marital estate. Alfred cannot convey his interest in the account; he cannot gift it; he cannot transfer it. Because the account has no cash value and cannot be sold or transferred, it also does not have a fair market value .... A transaction that would determine the property's fair market value cannot be made. If property has no fair market value, the court cannot place an independent value upon it, and it should thus not be included as an asset in the marital estate.
The account does indeed have an intrinsic value. It has value to Alfred, but this value is not accessible to anyone else.

Preiss, 238 Wis. 2d 368, ¶¶ 14-15.

¶ 26. Preiss also considered Wall v. Wall, 215 Wis. 2d 595, 573 N.W.2d 862 (Ct. App. 1997). Wall concluded that an employer's gift of two vacations should not be considered income for purposes of child support. Id.

¶ 27. How does the majority avoid the holding in Preiss? First, by noting that Preiss concluded that a sick leave account does have value. That, of course, is true. Preiss holds that a sick leave account has an intrinsic value. But the fact that a sick leave account has an intrinsic value is irrelevant — Preiss reversed a trial court's valuation of a sick leave account even though the account had an intrinsic value.

¶ 28. The majority finds it relevant that Preiss also noted that a sick leave account could be considered in determining ability to pay maintenance or child support. Another truism; but so far, there is no difference between Preiss and the case we decide today. This is not a maintenance or child support case, but a property division case. So was Preiss. There is no reason why child support, maintenance, and property division must be treated alike or differently. The fact remains that whether it is a good or bad idea to treat them the same or differently, Preiss treats them differently, and Cook does not permit the majority to "overrule, modify or withdraw language from a published opinion of the court of appeals." Cook, 208 Wis. 2d at 189-90. To say that the case we decide today does not modify Preiss because Preiss acknowledges that a sick leave account has intrinsic value is not even a distinction without a difference. It is no distinction at all.

¶ 29. "If an asset can be valued with sufficient accuracy for purposes of determining appropriate maintenance and child support, we discern no reason why it cannot be a consideration under Wis. Stat. § 767.255(3)(j) for property division purposes." Majority at ¶ 10. A more accurate way to put this would be: "We therefore overrule the conclusion in Preiss that sick leave accounts cannot be valued with sufficient accuracy to permit them to he valued for property division purposes."

¶ 30. Finally, the majority compares the facts in Chen v. Chen, 142 Wis. 2d 7, 416 N.W.2d 661 (Ct. App. 1987), with the facts here, and asserts that if we concluded in Chen that unvested and unsalable stock options are divisible property, sick leave accounts should be treated similarly. That is an argument a party might make in a brief, or a factor we might use in a certification to the supreme court. But the only significance Chen has here is that it was not a sick leave account case and it was not followed by analogy in Preiss. The argument that Preiss should have followed Chen by analogy is just another way of saying "We prefer to analogize from a similar situation in Chen, and therefore overrule our ruling in Preiss."

¶ 31. There is no principled way to evade the supreme court's ruling in Cook that we are not to overrule or modify our prior published cases. Trial courts and the bar have been following Preiss, and using it to structure their stipulations and settlements. The majority's opinion will cause consternation for some, and provoke Wis. Stat. § 806.07 (2001-02) motions from others. Cook provides the appropriate answer to the majority's dislike of Preiss:

The court of appeals, however, is not powerless if it concludes that a prior decision of the court of appeals or the supreme court is erroneous. It may signal its disfavor to litigants, lawyers and this court by certifying the appeal to this court, explaining that it believes a prior case was wrongly decided. Alternatively, the court of appeals may decide the appeal, adhering to a prior case but stating its belief that the prior case was wrongly decided.

Cook, 208 Wis. 2d at 190.

¶ 32. Either way is acceptable to me. I would either reverse the trial court's division of Van's sick leave account and note that Preiss, Wall, and Chen might be reviewed by the supreme court, or I would certify the issue to the supreme court. I would not overrule Preiss by pretending to distinguish it. For these reasons, I respectfully dissent.

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

       These numbers, taken from Van's brief, do not appear to coincide with the equalizing payment the court discusses in its final judgment. Still, the record is unclear in this respect, and Lynn does not dispute these figures. In any event, different numbers would not affect our conclusions in this opinion.

       Van also argues that the circuit court failed to adequately explain its decision to deviate from an equal property division. He disputes several factors listed by the circuit court in support of unequal division. However, our review of the record reveals that the court plainly explained that it was deviating from an equal property division because of Van's sick leave account, which was valued at $89,000. Van admits as much when he says in his brief: "While acknowledging that the sick leave account is not an asset subject to division, the trial court nevertheless awarded Lynn $76,289 more of [the divisible assets]. Clearly, this decision was based upon the [court's] perceived value of the sick leave account." Van then points to comments of the circuit court which, we agree, support his assertion that the sick leave account was the key issue. We conclude that if consideration of Van's sick leave account was proper, it cannot he seriously argued that the circuit court in this case misused its discretion. Conversely, if such consideration was improper, the court misused its discretion and remand is necessary on the topic. Accordingly, we only address the propriety of the circuit court's rebanee on the sick leave account. We also note that Van does not argue that the court could not consider his non-divisible inherited assets, valued at approximately $175,000. Because we conclude that consideration of the sick leave account was proper, we need not address Lynn's alternative argument that Van's non-divisible inherited assets alone justify the unequal property division.

       As an alternative argument, Van contends the circuit court should not have considered his sick leave account because Lynn's current job provides health care coverage, because Lynn will only start paying a substantial amount toward health insurance when she retires, and because Lynn has no current plan to retire. It follows, Van contends, that there is no basis for a finding that Van has an asset with significant value as compared with Lynn's situation. We are not persuaded. Lynn is nearly as old as Van. Van retired a few years before trial. Lynn was never asked when she expected to retire. It would have been reasonable for the circuit court to assume that Lynn was near retirement and that she would soon have to start paying for health care insurance. In any event, Van makes this argument for the first time on appeal and, therefore, has waived the issue. See Gruber v. Village of North Fond du Lac, 2003 WI App 217, ¶ 27, 267 Wis. 2d 368, 671 N.W.2d 692.

       Because we conclude that consideration of Van's sick leave account may be considered under Wis. Stat. § 767.255(3)(j), we need not address Lynn's assertion that the account may also be considered under § 767.255(3)(c) and (m).

         See Noll v. Dimiceli's, Inc., 115 Wis. 2d 641, 643-44, 340 N.W.2d 575 (Ct. App. 1983) (a finding is not clearly erroneous merely because there is evidence in the record to support a contrary finding; evidence supporting a contrary finding must constitute the great weight and clear preponderance of the evidence).

       The power of a court to hear and decide a particular case or controversy is described as its subject matter jurisdiction. In Interest of A.E.H., 161 Wis. 2d 277, 297, 468 N.W.2d 190 (1991).

       The court of appeals has solved this problem, in part, by holding that if a conflict exists between two published court of appeals cases, the first in time governs because Cook v. Cook, 208 Wis. 2d 166, 560 N.W.2d 246 (1997), holds that we do not have the power to overrule or modify our prior published opinions. See State v. Bolden, 2003 WI App 155, ¶¶ 9-11, 265 Wis. 2d 853, 667 N.W.2d 364 (holding that a court of appeals' subsequent published decision cannot overrule or modify a prior published decision). The result is that the LaCount v. Salkowski, 2002 WI App 287, 258 Wis. 2d 635, 654 N.W.2d 295, court lacked power to overrule Beerbohm v. State Farm Mutual Insurance Co., 2000 WI App 105, 235 Wis. 2d 182, 612 N.W.2d 338.

      I recognize that another part of the majority opinion, with which I agree, pertains to maintenance. This dissent is only to the majority's treatment of the parties' property division.