text:
    Mary F. Champine, Robert L. Crymes, Patricia A. Fuchs, Brian J. Mascari, Edward J. Marchewka and Sherry A. Weber, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants,  v. Milwaukee County, a municipal corporation, Defendant-Respondent.

    Court of Appeals

      No. 04-1391.

      Oral argument February 01, 2005.

    Decided March 15, 2005.

    2005 WI App 75
    (Also reported in 696 N.W.2d 245.)

      On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of K. Scott Wagner and Jacques C. Condon oí Hale & Wagner, S.C. of Milwaukee. There was oral argument by K. Scott Wagner.

      On behalf of the defendant-respondent, the cause was submitted on the brief of and oral argument by Alan M. Levy oí Lindner & Mar sack, S.C. of Milwaukee.
    Before Wedemeyer, EJ., Fine and Kessler, JJ.

       Petition to review and petition for cross review both denied 6-1-2005.

   KESSLER, J.

¶ 1. This appeal involves claims by a class ("Class") of current and former non-union salaried and management employees of Milwaukee County who assert that the County is liable to the Class for damages related to the 2002 amendment of Milwaukee, Wis., Ordinance ("M.C.G.O.") § 17.184, governing the use of non-union employees' accrued sick allowance at the time the employees retire. The Class argues that when the County amended M.C.G.O. § 17.184 in November 2000, and created more generous benefits for non-union employees, the County bound itself to provide those benefits, at a minimum, for the years 2001 through 2004, the years referred to in the ordinance. The Class argues the County is liable for damages to the Class because: (1) the County breached a contract with members of the Class; (2) the Class's benefits became vested before the ordinance was repealed; (3) promissory estoppel prevents the County from reducing the adopted benefits during the stated period of the ordinance; and (4) the Class is entitled to relief under Wis. Stat. § 109.09, the wage claim statute. The trial court granted summary judgment in favor of the County and dismissed the Class's claims. We affirm the judgment in part, reverse in part, and remand with directions that the trial court enter judgment consistent with this opinion.

BACKGROUND

¶ 2. On November 2, 2000, the Milwaukee County Board of Supervisors adopted a resolution/ordinance ("2000 Ordinance") that amended and added certain provisions to the M.C.G.O. pertaining to wages and other benefits. The 2000 Ordinance, which the County Board staff and the Class refer to as the "2001-04 Wage & Benefit Package," applied to non-union employees. The introductory "Whereas" clauses make two references to "adjustments for non-represented employees and managers for 2001 through 2004." Some of the adjustments were more generous than previously provided; others were less generous. As pertinent to this case, M.C.G.O. § 17.184 provided a more generous benefit relating to accrued sick allowance at retirement than had previously been available. This section of the 2000 Ordinance created a new section of the M.C.G.O., which did not mention either a beginning date or an ending date.

¶ 3. Specifically, before adopting the 2000 Ordinance, the County permitted non-union employees, upon retirement, to receive a cash payment for accrued sick allowance up to a maximum of four hundred hours, plus sixteen hours for each one hundred hours or fraction thereof of accrued sick allowance in excess of four hundred hours. The 2000 Ordinance provided that the non-union employees could claim the full value of all of their accrued sick allowance at the time of retirement and it could either be credited towards the cost of health insurance for the employee after retirement, or paid to the retiree in cash, depending on the retiree's date of hire.

¶ 4. After the 2000 Ordinance, numerous labor unions entered into collective bargaining agreements with the County. Those agreements contain essentially the same provisions. Those agreements remained in effect at times covered by the agreements and are not at issue in this appeal.

¶ 5. In the months following the passage of the 2000 Ordinance, much public discussion concerning the generous nature of the benefits ensued. It was determined that the cost of the benefits was significantly more than originally described. Critics claimed the very generous benefits were excessive and had caused a serious budgetary shortfall. Ultimately, as a consequence of having supported the 2000 Ordinance, the County Executive resigned and several members of the County Board who supported the enhanced benefits were recalled. This prompted the County to explore whether it could rescind parts of the 2000 Ordinance, including the sick allowance increase and cash payout provisions.

¶ 6. On February 21, 2002, the County adopted a new resolution/ordinance ("2002 Ordinance") that again altered certain benefits. The 2002 Ordinance was effective March 15, 2002. Under the 2002 Ordinance, nonunion employees who have accrued sick allowance at the time of their retirement may claim a maximum of only fifty days (four hundred hours), plus sixteen hours for each additional one hundred hours of accrued sick allowance. See M.C.G.O. § 17.184 (effective March 15, 2002). Essentially, this reinstated the máximums in place prior to the 2000 Ordinance.

¶ 7. According to the complaint, numerous employees responded to the negative publicity and the 2002 Ordinance by retiring earlier than they had originally intended, so as not to lose the more generous accrued sick allowance benefit (and perhaps other benefits) created by the 2000 Ordinance. By retiring before March 15, 2002, employees lost the income they would have earned and the increased credit toward pensions they would have received had they waited until their normal retirement date to retire. Other employees (who may or may not have been eligible to retire) remained employed and now seek confirmation of their entitlement to the enhanced accrued sick allowance under the 2000 Ordinance provisions.

¶ 8. This action followed in March 2002. The plaintiffs were certified as representatives of a class in November 2002; the Class contains approximately 1540 people. It includes non-union employees (1) who are or were actively employed by the County on March 15, 2002; or (2) who retired from employment with the County on or after January 1, 2002, and who demonstrate that they retired on or prior to March 15, 2002, (a) because they would not receive the retirement benefits available up to March 15, 2002, under M.C.G.O § 17.184 if they did not accelerate their retirement date in that manner, and (b) the early retirement caused a compensable loss to the employee.

¶ 9. The amended complaint at issue in this appeal alleged numerous causes of action: (1) declaratory judgment; (2) violations of Wisconsin's wage claim statute, Wis. Stat. § 109.09; (3) breach of contract; (4) promissory estoppel; (5) violation of home rule law; (6) unlawful taking of property; (7) violation of 29 U.S.C. § 623(a)(1) — age discrimination; and (8) punitive damages. In ruling on cross motions for summary judgment, the tried court dismissed all causes of action. This appeal followed. On appeal, the issues of age discrimination, unlawful taking of property, punitive damages and violation of home rule law were not substantially developed on briefs or during oral argument. Thus, we decline to consider those issues. See Reiman Assocs., Inc. v. R/A Adver., Inc., 102 Wis. 2d 305, 306 n.1, 306 N.W.2d 292 (Ct. App. 1981).

DISCUSSION

¶ 10. "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).

¶ 11. The Class claims that, as a matter of law, the County is liable for damages to the Class because: (1) the County breached a contract with members of the Class; (2) the Class's benefits became vested before the ordinance was repealed; (3) promissory estoppel prevents the County from reducing the benefits; and (4) the Class members are entitled to relief under Wis. Stat. § 109.09 because the amounts payable for accrued sick allowance are "wages" under the statute. How the damages are to be computed is not specified. We examine each of these claims in turn.

I. Breach of contract

¶ 12. To prevail on a breach of contract theory, the Class must establish that a contract existed, what the terms were, and that the County breached its duty to the Class under the contract. The Class claims that by amending M.C.G.O. § 17.184 in 2000, the County created a contract with the Class for wages and benefits for the entire period of 2001-2004. The Class asserts that its continued employment after the effective date of the 2000 Ordinance is acceptance of the contract, thereby binding both the Class and the County for the entire four-year period. Under the Class's theory, the County breached the contract by repealing the 2000 Ordinance.

¶ 13. This court recently addressed the same contract issue in a companion case involving the same November 2000 resolution/ordinance. In Dunn v. Milwaukee County, 2005 WI App 27, No. 03-3525, we concluded that the 2000 Ordinance did not constitute a contract between the non-union employees and the County, and that the employees were, therefore, not entitled to wage increases in 2003 based on the 2000 Ordinance. Id., ¶ 13. This court concluded that although it is possible to create a contract through legislation, id., ¶ 8, the County had not created such a contract with the 2000 Ordinance, id., ¶ 10. It had, however, in November 2000, created a unilateral promise as to pay and benefits. Id., ¶ 13.

¶ 14. This court has carefully examined the pleadings and arguments provided in this case and has concluded that the same reasoning and result set forth in Dunn control the outcome based on the facts here insofar as claims are made for the period after March 14, 2002. We conclude that when the County amended M.C.G.O. § 17.184 in 2000, it did not create a unilateral promise of benefits to the Class for any specific period of time beyond the time the promise remained in effect. The County, therefore, did not breach a contract or unilateral promise by prospectively amending its accrued sick allowance policy.

II. Vesting

¶ 15. The Class argues that its right to payment for all accrued sick allowance "vested" immediately. At the very least, the Class contends, its members are entitled to have all accrued sick allowance through March 14, 2002, paid out in full at retirement. The County argues that accrued sick allowance is an income protection program and is, therefore, not subject to vesting rules as if it were a pension. We conclude that those members of the Class who did not retire prior to March 15, 2002, are entitled, upon retirement, to a payout consistent with the terms of the 2000 Ordinance of their sick allowance that had accrued as of March 14, 2002, and is not used prior to retirement.

¶ 16. Although an employee does not automatically have the right to be paid for accrued sick allowance, an employer may provide a payout provision. Where that occurs, as in this case, such a benefit represents a form of deferred compensation that is earned as the work is performed. The benefit can be changed, but only as it is related to work not yet performed. Our holding today is consistent with Roth v. City of Glendale, 2000 WI 100, 237 Wis. 2d 173, 614 N.W.2d 467, where our supreme court held that retirees had a vested right to fully-paid health insurance benefits pursuant to the terms of the collective bargaining agreements in force at the time of their respective retirements. Roth concluded: "[A] vesting presumption applies under the collective bargaining agreements in the absence of contract language or extrinsic evidence indicating an intent against the vesting of retiree health benefits." Id., ¶ 40. In Roth, as here, the effect of the court ruling is to prohibit retroactive changes in benefits already earned.

¶ 17. The instant case does not involve health benefits or a collective bargaining agreement. Nonetheless, Roth is instructive. It is undisputed that from January 1, 2001, through March 14, 2002, eligible non-union County employees could choose to retire and, on retirement, receive a payout consistent with the 2000 Ordinance, M.C.G.O. § 17.184. The only issue, then, is whether the ability to be paid for all accrued sick allowance already earned is a benefit that could be taken away on March 15, 2002, after the employees had performed work while the promise was in effect, or whether that benefit attached itself to all hours accrued as of March 14, 2002. Just as the employees were entitled to, and received, pay increases for the work they performed during the time the wage increase was in effect, see Dunn, 2005 WI App 27, ¶ 3, they are also entitled to retain the benefit of an unlimited payout of sick allowance that accrued prior to the time that the new policy outlined in the 2002 Ordinance became effective. Once work is performed while a contract or unilateral promise is in effect, permitting retroactive revocation of that promise would be unjust and inequitable.

¶ 18. Courts have rejected similar attempts by government entities to change the terms of compensation or benefits after the work has been performed. In Kulins v. Malco, 459 N.E.2d 1038, 1040-42 (Ill. App. Ct. 1984), at-will employees challenged an employer's decision to modify its severance pay policy, resulting in substantially decreased severance pay benefits. The court concluded:

[T]he right to earn severance pay, a form of deferred compensation, arose and vested during the term of the 1967 policy and, consequently, survived the termination or modification of that policy. However, once the policy was modified on February 1,1975, accrual under the 1967 policy terms ended. To hold otherwise would relegate the promise of severance pay to the illusory status of an offer revocable at the pleasure of the corporation and result in a harsh forfeiture to loyal, long-term employees. While plaintiffs' continued employment ... may have manifested acceptance of the terms of the 1975 policy, it cannot reasonably be said that their continued employment manifested their agreement to relinquish benefits earned prior to the modification. In making this determination, we emphasize that our decision does not affect the right of employers at will to modify severance pay provisions. It merely confines application of such modifications to prospective use only. In our opinion, this holding is in line with both reason and justice.

Id. at 1044-45 (citations omitted). Consistent with this reasoning, we conclude that those members of the Class who did not retire prior to March 15, 2002, are entitled, upon retirement, to a payout consistent with the terms of the 2000 Ordinance of their sick allowance that had accrued as of March 14, 2002, and is not used prior to retirement. The dollar cost of this benefit can be reasonably estimated. That dollar amount is equal to the number of hours the Class member had accrued as of March 14, 2002, factoring in each employee's anticipated salary at the anticipated time of retirement and anticipated date of retirement. Any of the pre-March 15, 2002, sick allowance that is used prior to retirement will only reduce that liability.

¶ 19. Our holding today does not forever bind the County to pay out all sick allowance that an employee will accrue in the future, and in that respect it is responsive to the concerns of the County that, in the absence of a collective bargaining agreement or employment contract, it should not be bound to continue providing a benefit it now regrets offering. The ability to obtain payout for sick allowance accrued after March 14, 2002, may be modified prospectively by the County.

¶ 20. In addition, we agree with the County that those members of the Class who retired prior to March 15, 2002, are not entitled to additional compensation. Each Class member who chose to retire prior to March 15, 2002, received a payout of all accrued sick allowance as of the date of retirement. Having consciously elected to take the then-available higher benefits, they are not now entitled to additional compensation, such as additional accrued sick allowance, additional credit toward retirement, or other benefits, which would have been available had they not chosen to retire. The Class cites no law that permits a retiree to claim simultaneously the benefits of retirement and continued employment by the same employer.

III. Promissory estoppel

¶ 21. Promissory estoppel has three elements: (1) the promise was one for which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee; (2) the promise did induce such action or forbearance; and (3) injustice can be avoided only by enforcement of the promise. Hoffman v. Red Owl Stores, Inc., 26 Wis. 2d 683, 698, 133 N.W.2d 267 (1965). The Class relies on promissory estoppel in support of its argument that it is entitled to payout for sick allowance accrued through December 31, 2004.

¶ 22. We hold that as to the work performed while the promise of the benefit was in effect, the elements of promissory estoppel have been satisfied and the employees are entitled to enforce the promise. As we have already concluded, the Class members who continued employment with the County while the promise was in effect are entitled to retain the accrued sick allowance benefit for the period of time prior to March 15, 2002. Those who retired prior to March 15,2002, received the benefit already, and those who retired after March 14, 2002, or who will retire in the future, will receive it pursuant to the provisions of the 2000 Ordinance.

¶ 23. However, we reject the Class's argument that it is entitled to apply the sick allowance policies in effect through March 14, 2002, to the remainder of 2002, 2003 and 2004. There is no evidence to support the Class's assertion that any member of the Class chose, before February 2002, to forego specific employment elsewhere in reliance on the expectation that the sick allowance benefit would continue through 2004. Without such evidence, summary judgment dismissing this claim for post-March 14, 2002, injury was proper.

¶ 24. In addition, by remaining employed after February 2002, those Class members who had not retired accepted the modifications that became effective March 15, 2002. There is no basis to apply promissory estoppel for the period from March 15, 2002 through December 31, 2004.

IV Wage claim under Wis. Stat. § 109.03

¶ 25. The Class argues that its right to accrued sick allowance benefits is encompassed within Wisconsin's Wage Claim Act, Wis. Stat. ch. 109, and that it is entitled to the full payment of any and all accrued sick allowance under Wis. Stat. § 109.03. The Class argues that it is also entitled to a penalty of fifty percent of the unpaid "wages" because the County recklessly disregarded the Class's rights.

¶ 26. Exactly when it is, and to whom, that the accrued sick allowance should have been paid, but was not, is not explained. The Class members who have retired have received either cash or the equivalent value of health insurance. The amount of their accrued sick allowance could be calculated at the date of their retirement; it was not subject to further adjustment because of illness or continued work. That is not true of the Class members who have not retired. The value of their accrued sick allowance is an unknown factor until the date of their actual retirement because it depends on both the person's income at retirement and the remaining accrued sick allowance that person has earned and not used. All that is "owed" today is an accounting entry. No unpaid payment of cash is presently due.

¶ 27. Neither prior ordinances, the 2000 Ordinance, nor the 2002 Ordinance, gave any employee a right to current cash in exchange for any portion of accrued sick allowance while the person remained employed. Hence, the Class's rebanee on Wis. Stat. § 109.03 is curious. The Wage Claim act defines wages as follows:

"Wage" or "wages" mean remuneration payable to an employee for personal services, including salaries, commissions, holiday and vacation pay, overtime pay, severance pay or dismissal pay, supplemental unemployment benefit plan payments when required under a binding collective bargaining agreement, bonuses and any other similar advantages agreed upon between the employer and the employee or provided by the employer to the employees as an established policy.

Wis. Stat. § 109.01(3).

¶ 28. Because there do not appear to be any reported cases in Wisconsin dealing with application of this statute to relatively similar facts, the Class cites State Bar of Wisconsin, Wisconsin Employment Law § 11.51 (2004) in support of its argument that treatment of accrued sick allowance is included in Wis. Stat. § 109.01(3) as wages. However, § 11.51 specifically deals only with accrued sick allowance at termination of employment. It makes no reference to any right to current payment for accrued sick allowance. The authors note:

B. [11.50] Required Payments and Benefits After Separation of Employment
1. [§ 11.51] Wage Payments and Deductions from Wages
Wisconsin law requires that an employer pay a departing employee ... who has no written contract for a definite period, all wages due on the earlier of the date on which the employee regularly would have been paid ... or that required under section 109.03(1)....
The term wages means remuneration payable to an employee as agreed upon by the employer and employee or provided pursuant to the employer's policy. Wages include salaries, commissions, accrued vacation or sick pay....
Questions frequently arise regarding the rights of departing employees to unused vacation, personal time off (pto) benefits, or sick pay .... Resolution of these claims depends on the parties' contractual agreement .... DWD generally takes the position that unused vacation and pto benefits, but not sick pay, are presumptively vested benefits that must be paid at the time of termination, absent language in the personnel policy to the contrary.

Wisconsin Employment Law, §§ 11.50-11.51 (underlining added; italics in original).

¶ 29. The position of the County here is completely consistent with the reported position of DWD. The ordinance pays retiring employees the value of their accrued sick allowance, as determined at the time of retirement. That value is paid, in the sense that the retiring employee obtains an immediate benefit, at the time of retirement. No Class member has alleged any right to a present payment for accrued sick allowance, and the ordinances in question provide none. Having no right to current payment of accrued sick allowance, the Class states no cognizable claim for violation of Wis. Stat. § 109.03.

CONCLUSION

¶ 30. Based upon the foregoing reasons, we reverse that portion of the judgment denying Class members who did not retire prior to March 15, 2002, the right to seek, upon retirement, a payout of their sick allowance, consistent with the provisions of the 2000 Ordinance, that had accrued as of March 14, 2002, and is not used prior to retirement. We affirm the remainder of the judgment and remand with directions that the trial court enter judgment consistent with this opinion. No costs on appeal.

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

       All references to the Wisconsin Statutes are to the 2003-04 version unless otherwise noted.

       The resolution and ordinance totals sixteen pages. It contains specific salary percentage adjustments each year from 2001 through 2004. The provisions dealing with retirement generally identify their effective date as January 1, 2001, and make no mention of an ending date.

       Other lawsuits have been filed with respect to changes in wages and other issues. Those issues are not before us in this appeal.

       M.C.G.O. § 17.184, created in November 2000, provided:
      Sick Allowance Balance On Retirement
      (1) In the event membership in the Employes' Retirement System began prior to January 1, 1994, the member shall receive full payment of all accrued sick allowance at the time of retirement (total hour accrued times hourly rate at the time of retirement). Such payment shall be made in a lump sum, and shall not be included in the calculation of the member's final average salary for pension calculation purposes, nor shall such payment impact the member's total pension service credit or the date that retirement benefits -will commence. If permissible under IRS provisions and requested by the member, such payment shall be transferred by the County to the Employe's Retirement System and paid to the member via a "back drop account" even though the member may not have opted for a "back drop pension benefit." In the event a member of the Employes' Retirement System who is eligible to retire dies prior to retirement, the full value of the member's accrued sick allowance shall be paid to the members spouse or the beneficiary of the member's retirement benefit.
      (2) In the event membership in the Employees Retirement System began on or after January 1, 1994, the member shall have the full value of their accrued sick allowance at the time of retirement (total hours accrued times the hourly rate at the time of retirement) credited toward the cost of health insurance after retirement. Such health insurance coverage must commence within ten years of the member's retirement. When the amount credited is exhausted, the employee or eligible beneficiary may opt to continue their membership in the County Group Health Benefit Program upon payment of the full monthly cost as noted in 17.14(7) CGO. In the event a member of the Employes' Retirement System who is eligible to retire dies prior to retirement, the full value of the member's accrued sick allowance shall be credited toward the cost of continuing health insurance coverage for the members' spouse or beneficiary of the member's retirement benefit if such spouse or beneficiary was eligible for coverage prior to the member's death.
      (3) At the time of retirement, members of the Employes' Retirement System who became members on or after January 1,1994 and are not eligible for the accrual of sick allowance shall be credited with an amount equivalent to 60% of the total number of hours the member could have acquired had sick allowance been granted, solely for the purpose of determining a benefit under the provisions of this section.

       We express no opinion as to how post-March 14, 2002, use of accrued sick allowance or accrual of additional sick allowance is to be counted.

       When the County paid out retiring class members, the payments were based on all accrued sick allowance as of the date of retirement, including sick allowance the retiree accrued in the years prior to 2001. On appeal, the County did not argue that any payout should have been limited to sick allowance accrued between January 1, 2001, and the date of retirement. Consistent with this position, and the lack of any contrary language in M.C.G.O. § 17.184 (Nov. 2000), we conclude that the payout provision was not limited to only those hours accrued from January 1, 2001, through March 14, 2002.

       Whether the payout takes the form of cash or reimbursement for health premiums depends on the employee's date of hire. See M.C.G.O. § 17.184 (Nov. 2000).

       Following this court's release of the opinion on March 15, 2005, the Class moved for reconsideration, informing this court for the first time that some members of the Class retired after this case was filed. The parties agree that those Class members who retired after March 14, 2002, should not be treated differently than those who have yet to retire. Therefore, we have amended this opinion to reflect that those Class members, like the Class members who have not yet retired, have the right to a payout, consistent with the terms of the 2000 Ordinance, of their sick allowance that had accrued as of March 14, 2002, and was not used prior to retirement.

       The Class cited the second edition of this resource. We have reviewed and print below information from the third edition, published in 2004.

       In its motion for reconsideration following this court's release of the opinion on March 15, 2005, the Class argued that its members who retired during the pendency of this action have a viable Wrs. Stat. § 109.03 claim because the County did not pay them consistent with this court's ruling. The existence of Class members who retired after March 14, 2002, was not a fact developed at the trial court or addressed in the appellate briefing or at oral argument. We decline to attempt to apply § 109.03 to undeveloped facts, and without allowing a factfinder the opportunity to consider the issue. Whether those who retired after March 14, 2002, who were not given a payout of accrued sick allowance consistent with the 2000 Ordinance have a valid § 109.03 claim is an issue that needs to be addressed by a factfinder before we will consider it.


source: Caselaw Access Project

author: CANE, C.J.

license: Public Domain

text:
    State Farm Fire & Casualty Company, Plaintiff, Steven and Gale Kagen, Intervening Plaintiffs, v. Acuity, a mutual company, Defendant-Respondent, Dr. K Excavating, LLC and David R. Krause, Defendants-Appellants, American Family Mutual Insurance Company and Allen L. Lembcke d/b/a Cliff & Al's Heating Company, Defendants, West Bend Mutual Insurance Company, Intervening Defendant.
    Court of Appeals

      No. 04-1621.

      Submitted on briefs February 7, 2005.

    Decided March 15, 2005.

    2005 WI App 77
    (Also reported in 695 N.W.2d 883.)

      On behalf of the defendants-appellants, the cause was submitted on the briefs of Mark R. Feldmann of Menu, Teetaert & Beisenstein, Ltd. of Appleton.
    On behalf of the defendant-respondent, the cause was submitted on the brief of Terri L. Weber of Nash, Spindler, Grimstad & McCracken, LLP of Manitowoc.
    Before Cane, C.J., Hoover, PJ., and Peterson, J.
   CANE, C.J.

¶ 1. Dr. K Excavating, LLC and David Krause appeal a judgment declaring that Acuity has no duty under its business liability policy with Krause to defend or indemnify Krause for damages to Gayle and Steven Kagen's home. Those damages occurred when Krause was attempting to remove two fuel oil tanks and the oil they contained. During the removal, oil escaped onto the Kagens' property. Krause argues that Acuity has a duty to defend because (1) the residual smell of fuel oil in the Kagens' home caused "property damage" covered by Krause's policy with Acuity; (2) the policy's pollution exclusion does not unambiguously exclude property damage arising from smells or odors; and (3) the pollution exclusion does not allow Acuity to avoid coverage for damage caused by the non-toxic properties of a known contaminant. Because Acuity's pollution exclusion unambiguously excludes damages "arising from" the escape, dispersal, discharge, or release of fuel oil, we affirm the judgment.

Background

¶ 2. Sometime in 2001, the Kagens contacted Allen Lembcke of Cliff & Al's Heating Company about removing two fuel oil tanks from their property. Lem-bcke in turn arranged for Krause to siphon out any fuel oil remaining in the tanks and take them away. On September 26, while Krause was removing the oil, one of the tanks ruptured or was otherwise damaged and fuel oil began escaping from the tank onto the Kagens' property. The Kagens had a homeowner's policy with State Farm Insurance Company and State Farm eventually paid them $351,390 for damages to their house caused by the escaping oil.

¶ 3. In April 2003, State Farm sued Krause, Lem-bcke, and their respective insurers, Acuity and American Family Mutual Insurance Company, to recover all sums it paid to the Kagens as well as costs, disbursements, and attorney fees. State Farm argued that Krause's negligence caused the oil spill and that Lem-bcke was liable, under respondeat superior, for that negligence. In February 2004, State Farm amended its complaint to allege that a portion of its settlement with the Kagens went to pay living expenses incurred when the family had to leave its home because of an overwhelming smell or odor of fuel oil in the living areas.

¶ 4. Acuity responded by requesting a declaratory judgment that its policy with Krause did not cover the kinds of damages sought and, therefore, it had no duty to defend. Krause cross-claimed for contribution or indemnification against Lembcke. West Bend Mutual Insurance Company, which had a homeowner's policy with Krause and his wife, moved to intervene and to bifurcate the proceedings.

¶ 5. After a hearing on Acuity's motion for summary judgment, the circuit court issued an oral decision that Acuity's business liability policy with Krause did not provide coverage for the Kagens' claims. The circuit court concluded that Acuity therefore had no duty to defend or indemnify and dismissed the claims against Acuity with prejudice, granting costs and disbursements. A written judgment and order to that effect were filed on May 10, 2004. Krause now appeals.

Discussion

Standard of Review

¶ 6. Whether to grant a declaratory judgment is addressed to the circuit court's discretion. Bellile v. American Fam. Mut. Ins. Co., 2004 WI App 72, ¶ 6, 272 Wis. 2d 324, 679 N.W.2d 827. But when the exercise of that discretion turns on the interpretation of an insurance policy, a question of law, we review the question without deference, applying the same rules of construction we apply to contracts generally. See id.; see also Wisconsin Label Corp. v. Northbrook Prop. & Cas. Ins. Co., 2000 WI 26, ¶¶ 22-23, 233 Wis. 2d 314, 607 N.W.2d 276.

¶ 7. In this declaratory judgment action, the question is whether Acuity has a duty to defend or indemnify Krause for damages allegedly caused by his negligent draining and removal of the fuel oil tanks. To determine whether there is a duty to defend, we compare the allegations in the complaint to the relevant portions of the insurance policy. School Dist. of Shorewood v. Wausau Ins. Cos., 170 Wis. 2d 347, 364-65, 488 N.W.2d 82 (1992). The insurer has a duty to defend whenever the allegations in the complaint would, if proven, create a "possibility of recovery that falls under the terms and conditions of the insurance policy." Id. at 364. If there is any doubt as to the existence of a duty to defend, we resolve that doubt in favor of the insured. Peace v. Northwestern Nat'l Ins. Co., 228 Wis. 2d 106, 153, 596 N.W.2d 429 (1999) (citing Wausau Tile, Inc. v. County Concrete Corp., 226 Wis. 2d 235, 266, 593 N.W.2d 445 (1999)).

¶ 8. A complaint may contain many theories of liability not covered by an insurance policy. See Shorewood, 170 Wis. 2d at 366. But if just one theory appears to fall within the policy's coverage, the insurer is obligated to defend the entire action. See id. To determine whether coverage exists under a particular policy, we first examine the facts of the insured's claim to ascertain whether the insuring agreement makes an initial grant of coverage. See American Fam. Mut. Ins. Co. v. American Girl, Inc., 2004 WI 2, ¶ 24, 268 Wis. 2d 16, 673 N.W.2d 65. If an initial grant is triggered, we look to see if any exclusions apply. See Smith v. Atlantic Mut. Ins. Co., 155 Wis. 2d 808, 811, 456 N.W.2d 597 (1990). Exclusions are narrowly or strictly construed against the insurer and any ambiguities are resolved in favor of coverage. See id.

Acuity's Basic Liability Agreement

¶ 9. Krause's business liability policy, section la, begins with the basic liability agreement: "We will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury, property damage, personal injury or advertising injury to which this insurance applies." The policy later defines "property damage" as either "physical injury to tangible property" or "loss of use of tangible property that is not physically injured." Based on that agreement and the second definition of property damage, Krause claims Acuity has a duty to defend because State Farm's amended complaint alleges loss of use of tangible property — the family home — which was not physically injured. Although we agree the language Krause cites triggers an initial grant of coverage, that initial grant does not create a duty to defend unless coverage survives application of the policy exclusions. See, e.g., Smith, 155 Wis. 2d at 811.

The Pollution Exclusion

¶ 10. Krause contends coverage survives because Acuity's pollution exclusion does not unambiguously exclude smells or odors as pollutants. Alternatively, he argues the exclusion does not negate the initial grant of coverage because some of the property damage the Kagens alleged was caused by a non-toxic quality of spilled fuel oil, its smell. We disagree that coverage survives application of the pollution exclusion, but do not reach the merits of the first argument because the pollution exclusion operates to deny coverage more directly.

¶ 11. Under l.f.(l)(a), (l)(d) and (l)(d)(ii) of the Exclusions section of the Acuity business liability policy, neither bodily injury nor property damage are covered if they "ariseD out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants" at any premises on which the insured is "working directly" when the operation involved is testing, monitoring, cleaning up, removing or otherwise treating or responding to the effects of pollutants.

¶ 12. Although the parties disagree whether the pollution exclusion unambiguously excludes smells or odors as pollutants, they agree that fuel oil is a pollutant as defined by the policy. It is also clear that the oil "escaped" or "seeped" or was "discharged" or "dispersed" from the Kagens' tanks while Krause was attempting to remove the oil tanks. Acuity thus contends that because all the property damage alleged by the Kagens "arises out of' the escape, discharge, dispersal, etc., of the oil, those damages are clearly excluded by Krause's business liability policy.

¶ 13. In response, Krause argues that it was not the fuel oil, but rather a non-toxic property of the fuel, its smell, that caused the Kagens to suffer property damage in the form of loss of use. To support that claim, Krause points to Guenther v. City of Onalaska, 223 Wis. 2d 206, 588 N.W.2d 375 (Ct. App. 1998), and Beahm v. Pautsch, 180 Wis. 2d 574, 510 N.W.2d 702 (Ct. App. 1993), which he claims stand for the proposition that insurers cannot "use the pollution exclusion to avoid damages that are caused by the non-toxic property." We are not persuaded that Guenther and Beahm stand for that precise proposition, however; nor are we persuaded by Krause's argument.

¶ 14. The phrase "arising out of' is broad, general, and comprehensive. See Lawver v. Boling, 71 Wis. 2d 408, 415, 238 N.W.2d 514 (1976). It means something more than direct or immediate cause such as originating from, growing out of, or flowing from. See id. Here, the lingering odor or smell was the manifestation of the fuel oil's escape that drove the Kagens out of their house, but that smell flowed from an attempt to remove a substance unambiguously excluded from coverage.

¶ 15. Krause's argument suggests that the policy's apparently clear exclusion for damages "arising out of' a fuel oil spill or escape conflicts with our decisions in Guenther and Beahm. But Guenther and Beahm are both legally and factually distinguishable. In those cases, we found the pollution exclusions ambiguous, and therefore looked outside the four corners of the policies to the history of the pollution exclusion. Based on that history, and the link between pollution exclusions and damages relating to the contamination of the environment, Guenther concluded that a basement drain backing up was such an ordinary event that a reasonable person would not have expected the exclusion to apply. Guenther, 223 Wis. 2d at 217. In Beahm, we considered an arson fire that burned out of control, sending smoke into the road, obstructing passing motorists' vision, and contributing to a multi-car accident. Beahm, 180 Wis. 2d at 579. There, too, we found ambiguity, and looked to the history of the pollution exclusion and the linkage between escaping pollutants and contamination damages. Id. at 584-85.

¶ 16. In Guenther, the pollution involved was sewage, characterized by the court as water and various forms of waste, including fecal matter, in combination. The exclusion defined waste as a pollutant but explicitly did not apply to potable water. Guenther, 223 Wis. 2d at 212. We thus concluded that when the basement drain backed up at least some of the damages were caused by water, the liquid aspect of the sewage, and not by the toxicity of fecal matter and other waste. Id. at 215. Beahm similarly concluded that a reasonable insured would understand a pollution exclusion to exclude coverage only for smoke's character as an "irritant" or "contaminant" as opposed to its capacity to obscure sight.

¶ 17. Both Beahm and Guenther involved compounds or agents that were composed of pollutant and non-pollutant elements and escapes or dispersals different enough from what a reasonable person might associate with pollution and contamination that we found the pollution exclusions ambiguous. Here, where the pollutant is fuel oil, an unambiguous pollutant, the substance's toxicity and pollutant character would not he separated by a reasonable person from its smell. Similarly, a fuel oil escape that occurs while an insured is attempting to remove tanks containing the oil is not like the ordinary event of the drain backing up or the extraordinary event of an arson fire because it falls squarely within the activities a reasonable person would associate with contamination and pollution. Guenther and Beahm are thus not controlling in this case.

¶ 18. An insured cannot have a reasonable expectation of coverage where an unambiguous policy excludes coverage, and we conclude that a reasonable person in the position of the insured would understand the Acuity business liability policy not to cover damages "arising out of' the dispersal or escape of an unambiguous pollutant such as fuel oil.

By the Court. — Judgment affirmed.

       Dr. K Excavating is a limited liability company wholly owned by Krause. We thus refer to appellants collectively as "Krause."

       Lembcke and Krause dispute the nature of this agreement. Lembcke contends he merely agreed to help the Kagens find a way to get rid of the tanks and, for that purpose, provided the Kagens with Krause's name.

       In September 2003, the circuit court agreed to bifurcate coverage issues. At that time, the Kagens intervened to recover uninsured damages allegedly caused by the fuel oil spill.

       The Kagens alleged the smell was so bad in areas of the house not directly touched by the oil that they had to move out while it was being cleaned up.

       Krause does not argue that this section of the exclusion, f(1)(d)(ii) is ambiguous.

       What these words have in common, as the supreme court has noted, is that all connote a movement from a confined condition to an uncontained condition. Peace v. Northwestern Nat'l Ins. Co., 228 Wis. 2d 106, 126-27, 596 N.W.2d 429 (1999).

       The test for contract construction is not what the insurer intended the words to mean, but what a reasonable person in the position of the insured would have understood them to mean. See Richland Valley Prods., Inc. v. St. Paul Fire & Cas. Co., 201 Wis. 2d 161, 167-68, 548 N.W.2d 127 (Ct. App. 1996).

       The supreme court used similar logic in a "sick building" case when it determined that pollution exclusion did not unambiguously exclude damages arising from exhaled carbon dioxide. Donaldson v. Urban Land Interests, Inc., 211 Wis. 2d 224, 231-32, 564 N.W.2d 728 (1997). Though carbon dioxide was a gas, a listed pollutant in the exclusion, the court found that "the pollution exclusion clause does not plainly and clearly alert a reasonable insured that coverage is denied for ... claims that have their genesis in activities as fundamental as human respiration." Id. at 232.

        See American States Ins. Co. v. Skrobis Painting & Decorating, Inc., 182 Wis. 2d 445, 451, 513 N.W.2d 695 (Ct. App. 1994). Skrobis is also informative in another context. Skrobis argued that damages caused by an oil spill did not "arise" from the escape of the pollutants, but rather from the negligent acts of the company's employees. Id. at 452-53. We concluded that there is a difference between theories of liability for an occurrence and an occurrence that caused the injury. Id. at 453. In an argument analogous to that made by Skrobis, Rrause argues that the Kagens' loss of use damages did not "arise" from the spill, but were caused by something separate from the pollutant, the smell of the pollutant. But neither the smell nor the damages alleged are separate from, or could have arisen without, the fuel oil spill.


author: HOOVER, P.J.

text:
    State of Wisconsin, Plaintiff-Respondent, v. Richard Allen Hassel, Defendant-Appellant.

    Court of Appeals

      No. 04-1824-CR.

      Submitted on briefs February 14, 2005.

      Decided March 15, 2005.

    2005 WI App 80
    (Also reported in 696 N.W.2d 270.)

      On behalf of the defendant-appellant, the cause was submitted on the briefs of Charles Bennett Vetzner, assistant state public defender.
    On behalf of the plaintiff-respondent, the cause was submitted on the brief of James M. Freimuth, assistant attorney general, and Peggy A. Lautenschlager, attorney general.
    Before Cane, C.J., Hoover, EJ., and Peterson, J.

       Petition to review denied 9-8-2005.

   HOOVER, P.J.

¶ 1. Richard Hassel appeals a judgment of conviction for arson and an order denying his postconviction motion for reconsideration of the court's earlier decision to deny his motion to suppress. Hassel had filed the suppression motion claiming that police had obtained his inculpatory statements in violation of his Miranda right to remain silent. See Miranda v. Arizona, 384 U.S. 436 (1966). We conclude there was no Miranda violation, so the court properly denied the motions. Accordingly, we affirm the judgment and order.

Background

¶ 2. On May 7, 2002, around 7:30 p.m., sheriffs investigator David Hake and New Richmond police chief Mark Samelstad spoke to Hassel at his home about recent fires. Several times, Hassel told the officers "I can't talk to you." Hake testified that he did not consider this an invocation of Hassel's Miranda rights, since the parties mutually continued conversing. "He asked us questions and we asked him." Hake further testified that he did not read Hassel his Miranda rights since Hassel was not in custody at that time. At the conclusion of the conversation, Hake and Samelstad arrested Hassel, taking him to jail. Hake told him that they would be back to talk to him the next morning.

¶ 3. At 9 a.m. on May 8, Hake and Samelstad returned with special agent Michael Van Keuren from the Wisconsin Department of Justice to interview Has-sel. The officers indicated they wanted to speak to Hassel about his chemical dependencies and his problem of starting fires. At 9:20 a.m., Hake read Hassel his Miranda rights, and Hassel signed an acknowledgement and waiver form. He also stated something to the effect of "I don't know if I should talk to you," but during the subsequent three-hour interview, he never asked to stop the questioning. During the interview, he made incriminating statements.

¶ 4. Hassel was charged with ten felonies: five counts of arson to a building, contrary to Wis. Stat. § 943.02(l)(a); one count of arson to property other than a building, contrary to Wis. Stat. § 943.03; and four counts of setting fire to land, contrary to Wis. Stat. § 26.14(8).

¶ 5. Hassel filed a motion to suppress his incriminating statements, contending he had invoked his right to silence on May 7 and that this right was violated by the continued questioning on May 8. The trial court denied the motion. Hassel then entered a plea pursuant to an agreement with the State. In exchange for his no contest plea to the first count of arson to a building, the State dismissed and read in the remaining nine counts, along with two pending charges from Polk County, for purposes of sentencing and restitution. Hassel was convicted and sentenced to twenty years' initial confinement and thirty years' extended supervision.

¶ 6. Hassel filed a motion for reconsideration, asking the court to revisit his sentence and the suppression motion. The court adjusted the sentence to reflect Hassel's eligibility for the Challenge Incarceration Program but otherwise denied the motion. Hassel appeals the portion of the order denying reconsideration of the suppression motion.

Discussion

¶ 7. Whether Hassel's right to remain silent has been violated presents a question of constitutional fact, which presents a mixed question of fact and law. State v. Ross, 203 Wis. 2d 66, 79, 552 N.W.2d 428 (Ct. App. 1996). Findings of historical fact will be upheld unless clearly erroneous, and determinations of law will be reviewed independently. See State v. Phillips, 218 Wis. 2d 180, 189-90, 577 N.W.2d 794 (1998).

Whether Hassel Invoked His Rights on May 7

¶ 8. Hassel contends he invoked his Miranda rights by saying "I can't talk to you" when police interrogated him at his home on May 7. We disagree.

¶ 9. It is true that police must cease questioning when Miranda's right to remain silent — or right to counsel — is invoked. See Ross, 203 Wis. 2d at 74. However, "Miranda and its progeny are aimed at dispelling the compulsion inherent in custodial surroundings. . .. Thus, the Miranda safeguards apply only to custodial interrogations." State v. Pheil, 152 Wis. 2d 523, 530-31, 449 N.W.2d 858 (Ct. App. 1989); see also State v. Armstrong, 223 Wis. 2d 331, 344-45, 588 N.W.2d 606 (1999), and State v. Mitchell, 167 Wis. 2d 672, 686, 482 N.W.2d 364 (1992). The United States Supreme Court has previously noted that it has "in fact never held that a person can invoke his Miranda rights anticipatorily, in a context other than 'custodial interrogation' ..." McNeil v. Wisconsin, 501 U.S. 171, 182 n.3 (1991). Therefore, Hassel was not entitled to invoke Miranda during the May 7 interview.

¶ 10. Indeed, Hassel has never argued he was in custody on May 7. Instead, he suggests we must apply the holding in State v. Fencl, 109 Wis. 2d 224, 325 N.W.2d 703 (1982). That case stated in part: "The Fifth Amendment protects a person from compelled self-incrimination at all times, not just upon arrest or during a custodial interrogation." Id. at 237. We determine, however, that Fencl does not apply as broadly as Hassel suggests.

¶ 11. Fencl was suspected of first-degree murder and the police had several meetings with him. At the first meeting, he denied knowing anything about the victim. Id. at 225-26. During the second meeting, Fencl said he wanted to talk to his attorney but would get back to the detective. Id. at 226. Half an hour after that meeting, Fencl went to the police station and spoke very briefly with the investigator, who was called away. Id. Later that same day, Fencl again returned to the police station, this time with his attorney. Only the attorney, not Fencl, spoke to the investigators. Id. Fencl was given his Miranda rights, but was allowed to leave. He was arrested the next day. Id.

¶ 12. During the trial, the State referred several times to Fencl's silence both before and after he had been given his Miranda rights. Id. Prior jurisprudence prohibited the State from affirmatively using at trial a defendant's silence during a custodial interrogation, id. at 233-34, but the court had never previously been called upon to consider whether the State could use prearrest, pre-Miranda silence. Id. at 237. Ultimately, the court concluded in part:

The state contends that, unless silence is compelled by arrest or a custodial interrogation, it is not protected by the Fifth Amendment. We disagree. The Fifth Amendment protects a person from compelled self-incrimination at all times, not just upon arrest or during a custodial interrogation. Any time an individual is questioned by the police, that individual is compelled to do one of two things — either speak or remain silent. If both a person's prearrest speech and silence may be used against that person, as the state suggests, that person has no choice that will prevent self-incrimination. This is a veritable "Catch-22." Thus the state's theory places an impermissible burden on the exercise of Fifth Amendment rights. We hold that a person is entitled to the protection of the Fifth Amendment even prior to arrest or a custodial interrogation.

Id. at 237-38.

¶ 13. Hassel now argues that the officers' disregard of his purported invocation of Miranda during his precustodial, prearrest discussion offends the Fifth Amendment in the same way as the State's affirmative use of the defendant's prearrest silence in Fencl. We disagree.

¶ 14. At the heart of the Fifth Amendment is the idea that no individual "shall be compelled in any criminal case to be a witness against himself." U.S. Const. amend. V. As Fencl explains, when both silence and statements can be used against a defendant as evidence of guilt, the right against self-incrimination becomes impossible to invoke because anything the accused does is evidence for the State. Fencl, 109 Wis. 2d at 237. The State was therefore precluded from relying on Fencl's silence as prima facie proof of his guilt. Id. at 236-37.

¶ 15. What Fencl emphasizes, however, is the protection from compelled self-incrimination. Id. at 237. Hassel has not suggested the State used his recalcitrance as evidence of his guilt — the sort of compelled self-incrimination present in Fencl. Indeed, our jurisprudence tells us that a noncustodial interrogation normally fails to create circumstances that compel self-incrimination which is why Miranda does not apply in those situations. See Pheil, 152 Wis. 2d at 530-31. Ultimately, Fencl does not protect anticipatory invocation of the right to remain silent from further investigative inquiry. It simply prevents the State from using someone's prearrest, precustodial silence as proof of guilt. Therefore, Fencl does not inform on the immediate issue.

Whether Hassel Invoked His Rights on May 8

¶ 16. Hassel made his inculpatory statements on May 8. He contends that either he invoked his right to remain silent after he was arrested or, alternatively, the police knew on May 7 he intended to invoke the right, so they failed to "scrupulously honor" this prior invocation on May 8. We disagree with both arguments.

¶ 17. Hassel first contends that he invoked his right to remain silent when, after he was advised of his Miranda rights, he told the officers "I don't know if I should speak to you." We disagree.

¶ 18. In Davis v. United States, 512 U.S. 452 (1994), the suspect had said, "Maybe I should talk to a lawyer." Id. at 455. In that case, the Court held such a statement was insufficient to require police to stop the interrogation. Id. at 462. Our court extended the Davis "clear articulation rule" to the right to remain silent in Ross, 203 Wis. 2d at 70. Ross holds that when a request to remain silent is ambiguous, police need not endeavor to clarify the suspect's request. Id. at 78.

¶ 19. We conclude that Hassel's statement, "I don't know if I should speak to you," is ambiguous — and Hassel actually concedes as much — and not a clear invocation of the right. It does not indicate Hassel's desire to remain silent, only his uncertainty as to whether he should.

¶ 20. Alternatively, Hassel contends that the police failed to "scrupulously honor" his prior May 7 invocation of his right to remain silent. We have already held, however, that Hassel could not preemptively invoke that right because he was not subject to custodial interrogation. Therefore, there is no prior invocation with which the police should have been concerned.

¶ 21. Hassel was not entitled to anticipatorily invoke the right to remain silent on May 7 because he was not in custody. Hassel also failed to unambiguously articulate his invocation of the right to remain silent on May 8 — his statement was ambiguous. The trial court therefore correctly denied the suppression and reconsideration motions.

By the Court. — Judgment and order affirmed.

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

       Even if Hassel could and did invoke his right to remain silent on May 7, the police honored that invocation. Once a defendant invokes the right to remain silent, the State may again interrogate him after the invocation if the right is "scrupulously honored." State v. Hartwig, 123 Wis. 2d 278, 284, 366 N.W.2d 866 (1985) (citing Michigan v. Mosley, 423 U.S. 96, 104 (1975)). The following factors apply: whether (1) the original interrogation was promptly terminated; (2) the interrogation resumed after the passage of significant time; (3) the suspect was given his complete Miranda warnings at the outset of the second interview; (4) different officers resumed the interrogation; and (5) the second interrogation was limited to a crime not the subject of earlier interrogation. See Mosley, 423 U.S. at 106-07. "The absence or presence, however, of the Mosley factors is not exclusively controlling and these factors do not establish a test which can be 'woodenly' applied." Hartwig, 123 Wis. 2d at 284-85 (citation omitted).

        Assuming without deciding that "I can't talk to you" was sufficiently clear to invoke the right to remain silent, police did not promptly terminate the May 7 interview. However, the inculpatory statements the State utilized did not arise in that conversation. In light of the remaining Mosley factors and their flexibility, this failure is not fatal. More than twelve hours passed between Hassel's arrest and the resumption of the interrogation. In Mosley, just two hours was sufficient. Mosley, 423 U.S. at 107. Hassel was advised of his Miranda rights within twenty minutes of the start of the May 8 interview. While Hake and Samelstad were not new officers, Van Keuren was a different agent than Hassel had met on May 7. Under Mosley, the police scrupulously honored Hassel's May 7 invocation of his right to remain silent, assuming Hassel could make that invocation at all.