author: JON E WILCOX, J. ANN WALSH BRADLEY, J.

text:
    Peggy Paulson, Douglas Paulson, husband and wife, and Michelle Wagner, a minor, by her guardian ad litem, Jim Schernecker, Plaintiffs-Appellants, v. Allstate Insurance Company, Defendant-Respondent-Petitioner, Cheryl Schacht, Defendant-Respondent, Group Health Cooperative of South Central Wisconsin, Subrogated-Defendant.
    Supreme Court

      No. 01-0991.

      Oral argument February 11, 2003.

      Decided July 8, 2003.

    2003 WI 99
    (Also reported in 665 N.W.2d 744.)

      For the defendant-respondent-petitioner there were briefs by Richard G. Niess and Coyne, Niess, Schultz, Becker & Bauer, S.C., Madison, and oral argument by Richard G. Niess.

    For the plaintiffs-appellants there was a brief by Jim Schernecker and Action Law, S.C., Sun Prairie, and oral argument by James G. Schernecker.

    An amicus curiae brief was filed by Edward E. Robinson and Cannon & Dunphy, S.C., Brookfield, and Brian H. Sande and Doar, Drill & Skow, S.C., Baldwin, on behalf of the Wisconsin Academy of Trial Lawyers.

      An amicus curiae brief was filed by Michele M. Ford, Agatha K. Kresa, and Crivello, Carlson & Mentkowski, S.C., Milwaukee, on behalf of the Civil Trial Counsel of Wisconsin.
   JON E WILCOX, J.

¶ 1. Allstate Insurance Company (Allstate) petitions this court for review of a published decision of the court of appeals, Paulson v. Allstate Insurance Company, 2002 WI App 168, 256 Wis. 2d 892, 649 N.W.2d 645. The court of appeals affirmed in part, reversed in part, and remanded with directions the decision of the Columbia County Circuit Court, Daniel S. George, Judge. Only one issue addressed by the court of appeals has been raised by Allstate in its petition for review before this court and we limit our decision strictly to that issue.

¶ 2. Peggy Paulson (Paulson) was injured and her car damaged in a car accident. Paulson's insurer, Midwest Security Insurance Company (Midwest), after paying the car repair bill, settled with Allstate, the insurer for the other driver involved in the accident. Midwest and Allstate reached a settlement agreement regarding the repair bill under which Allstate paid 70 percent of the bill based upon the companies' consideration of Paulson's contributory negligence in the accident. The Paulsons have asserted that they are entitled to the difference, the 30 percent Allstate did not have to pay to Midwest. The circuit court refused to award the Paulsons the 30 percent difference. The court of appeals reversed and remanded that issue to the circuit court with instructions to enter judgment for that amount in favor of the Paulsons. We accepted Allstate's petition for review and now reverse the decision of the court of appeals on this subrogation issue.

¶ 3. We note that the material facts presented to this court are significantly different from those presented to the circuit court or the court of appeals. Most of the claims in this case have now been settled. As we interpret this case, only one issue remains for our determination. If plaintiffs insurance company pays 100 percent of the repair costs, then subsequently settles its subrogation claim with the tortfeasor's insurer for a reduced amount based on plaintiffs alleged contributory negligence, may a plaintiff collect the difference under the collateral source rule? We now reverse the court of appeals and answer the above question in the negative.

I. FACTS AND PROCEDURAL BACKGROUND

¶ 4. The facts involved in this case are somewhat complex. In August 1998, Peggy Paulson and Cheryl Schacht (Schacht) were involved in a car accident. Paulson was injured and her car damaged when the car driven by Schacht collided with the car driven by Paulson at an intersection. Paulson presented a claim to her insurer, Midwest, for the vehicle repair costs. The repair bill from Zimbrick, Inc., was $7,542.44. By October 31, 1998, Midwest, Paulson's insurer, paid $7,042.44, the total cost of the repairs less a deductible of $500.

¶ 5. On October 11, 1999, Paulson, her husband Douglas, and her daughter Michelle Wagner (collectively, the Paulsons), filed suit against Schacht and Schacht's insurer, Allstate, in Columbia County Circuit Court. The Paulsons named Group Health Cooperative, which had paid Paulson's medical bills, and Midwest, which had paid the collision loss, as subrogees. Peggy Paulson claimed property damages, medical expenses, lost wages, and pain and suffering, while her husband and daughter alleged loss of society, companionship, and loss of services and consortium. Douglas Paulson also claimed lost wages.

¶ 6. Before the Paulsons' suit was filed, Midwest negotiated a settlement agreement with Allstate relating to the original car repair bill. Under the agreement, Allstate paid Midwest $4,929.71, or 70 percent of the $7,042.44 Midwest paid for the repairs. Midwest agreed to the reduced payment based on Paulson's comparative negligence in the accident.

¶ 7. The Paulsons agreed to dismiss Midwest from the case, since Midwest's interest in the case as a subrogee for the amount it had paid was eliminated with the settlement agreement.

¶ 8. At the circuit court level, an issue arose regarding the timeliness of Allstate's answer to the complaint. Schacht's answer was timely filed. The parties later stipulated to Schacht's dismissal from the action. Months after its own answer was due, Allstate filed a motion to dismiss, asserting insufficiency of service of the summons and complaint. Soon thereafter, Allstate withdrew this motion. On January 26, 2001, the circuit court denied Allstate's motion for an enlargement of time and granted Paulsons' motion to strike Allstate's answer and enter default judgment. The Paulsons later moved for statutory sanctions against Allstate, which the circuit court denied.

¶ 9. On February 8, 2001, in preparation for the hearing on damages, the circuit court heard various motions in limine. Allstate argued that the Paulsons should not be allowed to present evidence regarding property damages of $8,105.93 or more, because Midwest had already settled any claims for property damages with Allstate. The Paulsons argued that the property damages incurred were higher than the damages originally paid by Midwest. The Paulsons argued that, in addition to the charges paid by Midwest, the car needed a new steering box which cost $559, and brake parts had to be replaced three times, costing $600. The Paulsons claimed they were entitled to the entire amount.

¶ 10. The circuit court agreed with Allstate and held the Paulsons had no claim for property damages aside from the $500 deductible, because of Midwest's subrogation interest.

¶ 11. On June 18, 2001, the circuit court entered judgment in favor of the Paulsons. Ms. Paulson was awarded a total of $9,677.13 for all her personal injury and property damage claims. Douglas Paulson was awarded $2,450.64, and Michelle Wagner was awarded $900.32. The Paulsons appealed.

¶ 12. The court of appeals addressed several issues. First, the court remanded the case to the circuit court for reconsideration of the imposition of sanctions, finding that the record strongly supported sanctions. Second, regarding the issue of excluding the evidence of property damages, the court held that the Paulsons were entitled to pursue Allstate for damages exceeding $7,542.44. The court of appeals also found that, under the court of appeals' decision in Reed v. Bradley, 2000 WI App 165, 238 Wis. 2d 439, 616 N.W.2d 916, the collateral source rule applied and entitled the Paulsons to collect the reasonable value of the damages. Here, the court found that the Paulsons would be able to collect at least the $2,112.73 difference between the amount paid by Midwest and the negotiated payment by Allstate. Finally, the court of appeals affirmed the circuit court's findings regarding costs and fees. Allstate then filed a petition for review with this court, which we accepted on September 26, 2002.

¶ 13. As we have noted, material facts of this case have changed since the court of appeals issued its opinion. It was represented to this court at oral argument that since the court of appeals' opinion was released, all other claims, including all property damages exceeding the original $7,542.44 figure, have been settled. We thus address only the issue of the plaintiffs claim to the $2,112.73 difference between the amount Midwest paid to the plaintiff and the amount Allstate paid to Midwest as part of a negotiated settlement agreement.

¶ 14. On August 2, 2002, Peggy and Douglas Paul-son and their attorney signed a "Limited Release of All Claims." This document makes clear that the only amount remaining in dispute is the amount constituting the difference between the original $7,042.44 amount Midwest paid on the repair bill and the amount of the Midwest-Allstate negotiated agreement, $4,929.71. The negotiated agreement split, 70 percent to 30 percent, the $7,042.44 amount Midwest paid on behalf of the Paulsons. The negotiated agreement did not cover the $500 deductible, which Allstate subsequently paid.

¶ 15. In exchange for a payment by Allstate of $6,500, the Paulsons agreed to release Schacht and Allstate from all claims

except the claim, for $2,112,73 and any additional amounts the Wisconsin Supreme Court may award to the undersigned, the $2,112.73 representing the claim for the difference between the $7,042.44paid by Midwest Security to Douglas and Peggy Paulson and the $4,929.71 paid by Allstate Property & Casualty Company to Midwest Security, which claim remains pending, is expressly reserved by the releasing parties, and is currently the subject of a Petition for Review with the State of Wisconsin Supreme court in Case Number 01-0991.

"Limited Release of All Claims" (emphasis in original). The agreement goes on to clarify:

It is understood and agreed that the claims released by the undersigned include claims for sanctions against Allstate, claims for additional statutory costs and disbursements, and claims for property damage not previously paid by Midwest Security, all as set forth in the Court of Appeals decision in Case Number 01-0991.

¶ 16. Given the above agreement, this court decides, based on the facts as they now stand, the only remaining issue: whether Paulson is entitled to the difference between the amount Midwest paid and the amount for which Midwest negotiated a settlement. Accordingly, claims related to other amounts already settled do not factor into our analysis.

II. ANALYSIS

¶ 17. This case raises arguments involving the interaction of the collateral source rule, subrogation, and the "made whole" doctrine. This court has dealt with each of these issues on prior occasions and, as those precedents make clear, the application of the principles involved depends heavily upon the facts presented. See, e.g., Koffman v. Leichfuss, 2001 WI 111, ¶. 20, 246 Wis. 2d 31, 630 N.W.2d 201. This case is no exception.

¶ 18. This court is asked to decide whether Paul-son may recover the amount of money representing the difference between the amount Paulson's insurer paid and what her insurer settled for in negotiations with the tortfeasor's insurer upon its subrogation claim. Because allowing the plaintiff to recover this sum would amount to double recovery, we find that Paulson may not recover that difference as damages. We find that Paulson has already collected the amount of property damages to which she is entitled and is not entitled to any additional recompense.

¶ 19. Whether an insurer's subrogation rights limit a plaintiffs right to recovery is a question of law that this court reviews "independently of the determination of the circuit court." See Koffman, 246 Wis. 2d 31, ¶ 20 (citing Ellsworth v. Schelbrock, 2000 WI 63, ¶ 6, 235 Wis. 2d 678, 611 N.W.2d 764; Miller v. Thomack, 210 Wis. 2d 650, 658, 563 N.W.2d 891 (1997)). Whether the collateral source rule applies in a particular case is a question of law reviewed independently, "although aided" by the analyses of the circuit court and the court of appeals. See Ellsworth, 235 Wis. 2d 678, ¶ 6.

¶ 20. Paulson's main argument to this court is that Allstate has no valid subrogation claim because Paulson was not made whole before Midwest and Allstate settled, and that under the Rimes/Garrity precedents of this court, Paulson must be made whole before a subrogation claim exists. Because Paulson was prevented from arguing damages in excess of those Midwest paid, and because there has been no Rimes hearing, there has not yet been any determination of damages or finding that Paulson has been made whole. We reject Paulson's argument and find that the made whole doctrine is inapplicable to this case.

¶ 21. Although this court's precedents in Garrity v. Rural Mutual Insurance Company, 77 Wis. 2d 537, 253 N.W.2d 512 (1977), and Rimes v. State Farm Mutual Automobile Insurance Company, 106 Wis. 2d 263, 316 N.W.2d 348 (1982), do hold that under certain circumstances, a plaintiff must be made whole before an insurer has a right to subrogation, those circumstances do not exist in this case.

¶ 22. In Garrity, 77 Wis. 2d at 539-40, the insureds suffered a fire loss and the damages from the fire were found to exceed the limits under their fire insurance. The very issue addressed in the case highlights the fundamental difference between that case and the case at hand. There, the court began stating the issue: "The question is: When an insured's loss exceeds the amount recoverable under a standard [] insurance policy..." Garrity, 77 Wis. 2d at 538 (emphasis added). The court in Garrity found that the general rule was that "where either the insurer or the insured must to some extent go unpaid, the loss should be borne by the insurer for that is a risk the insured has paid it to assume." Id. at 542 (internal citation omitted). Similarly, in Rimes, 106 Wis. 2d at 264-65, the insureds' losses far exceeded the money obtained from the tort-feasors in settlement. Citing Garrity, the court found that the insurer was not entitled to subrogation until the insured was made whole. Rimes, 106 Wis. 2d at 276.

¶ 23. Neither of these cases apply to the facts of this case. Rimes and Garrity deal with the situation of competition between an insured and his or her insurer for a limited pool of money. See Schulte v. Frazin, 176 Wis. 2d 622, 631-32, 500 N.W.2d 305 (1993) (discussing Wisconsin precedents on the made whole rule and noting that the equitable factor in Rimes and Garrity was "the prospect of an insurer competing with its own insured for funds which are insufficient to make the insured whole"); Oakley v. Fireman's Fund of Wisconsin, 162 Wis. 2d 821, 831, 470 N.W.2d 882 (1991).

¶ 24. In Vogt v. Schroeder, 129 Wis. 2d 3, 14, 383 N.W.2d 876 (1986), this court made clear that equitable principles were at work in Rimes and Garrity and that in both cases, "this court was presented with the inequitable prospect of insurance companies attempting to take the funds that should have gone to the insured." The issue in these cases, according to Vogt, is one of priority. Id. at 14-15 ("Garrity and Rimes, although involving different types of insurance, were basically the same case — who was to have priority, the insured or the insurer, where the total payments, including possible subrogation recovery, still would not make the insured whole.").

¶ 25. Other Wisconsin cases continue in this strain. In Leonard v. Dusek, 184 Wis. 2d 267, 275-76, 516 N.W.2d 453 (Ct. App. 1994), the court of appeals again noted that the circumstance where an insurer is not competing with its insured for limited funds is to be treated differently under the principles of subrogation. In Valley Forge Insurance Company v. Home Mutual Insurance Company, 133 Wis. 2d 364, 396 N.W.2d 348 (Ct. App. 1986), the court of appeals held that a victim's insurer was not entitled to subrogation where the victim recovered less than his total loss. Again, the situation was one of the insurer competing with the insured for funds. That is not the case here.

¶ 26. Couch on Insurance also supports this interpretation of the made whole rule. In a section discussing the made whole rule, Couch's very first statement raises the threshold issue of insufficient funds: "In many instances, the insurer and insured both have rights of recovery against the third party primarily liable for the loss, yet the amount recoverable from the third party is insufficient to completely satisfy the claims of both." Couch on Insurance, § 223.133, at 223-145 (3d ed. 2000).

¶ 27. The circumstances described by Couch and in these Wisconsin cases show that the made whole rule is inapplicable in this case. While Paulson argues that she had damages beyond those paid by her insurer and that Midwest and Allstate settled before there was any finding of the extent of damages, she has made no assertion that there was an insufficient pool of money. The specter of an insurer competing with the insured for a limited amount of funds is simply not raised by the facts of this case. There has been no discussion of policy limits or a limited pool of funds for which Midwest and Paulson are competing. Here, Midwest paid $7,042.44 for a car repair bill and settled with Allstate regarding that bill. At this stage of the case, all amounts aside from that particular bill have been settled. Although Midwest agreed to a lesser amount in its settlement with Allstate based on the insurers' assessment of Paulson's contributory negligence, this agreement in no way decreased Paulson's recovery. She has already received, through payment by her insurer or by Allstate, the $7,542.44 requested for the original repair bill. She cannot now recover more upon that bill.

¶ 28. We now delve into the matters related to application of subrogation and the collateral source rule. As has been noted by this court, the interaction of these principles can lead to confusion. See Koffman, 246 Wis. 2d 31, ¶ 33.

¶ 29. Wisconsin case law has clearly provided that application of subrogation is controlled by equitable principles. See Ruckel v. Gassner, 2002 WI 67, ¶ 15, 253 Wis. 2d 280, 646 N.W.2d 11; Vogt, 129 Wis. 2d at 12-13. This court has held that subrogation "deals with the right of the insurer to be put in the position of the insured in order to pursue recovery from third parties, legally responsible to the insured, for a loss paid by the insurer to the insured." Cunningham v. Metro. Life Ins. Co., 121 Wis. 2d 437, 443-44, 360 N.W.2d 33 (1985). In Vogt, 129 Wis. 2d at 17 n.6 (citations omitted), this court has noted: "The general rule is that an insurer, on paying a loss, is subrogated in a corresponding amount to the insured's right of action against any other person responsible for the loss." Ruckel, 253 Wis. 2d 280, ¶ 15, holds that one of the purposes of subro-gation law is to avoid unjust enrichment via double recovery. Its application in a particular case depends on facts. Beacon Bowl Inc., v. Wis. Elec. Power Co., 176 Wis. 2d 740, 776, 501 N.W.2d 788 (1993); Leonard, 184 Wis. 2d at 272 (quoting Vogt, 129 Wis. 2d at 15).

¶ 30. The collateral source rule is also grounded in equitable policies. In Koffman, 246 Wis. 2d 31, ¶ 29, this court reiterated the explanation of the policy behind the rule given in Ellsworth, 235 Wis. 2d 678, ¶ 7, stating:

The tortfeasor who is legally responsible for causing injury is not relieved of his obligation to the victim simply because the victim had the foresight to arrange, or the good fortune to receive, benefits from a collateral source for injuries and expenses.

As such, if any windfall arises in a case, the benefit is to inure to the plaintiff, not the tortfeasor. Koffman, 246 Wis. 2d 31, ¶ 30. Thus, as in both Ellsworth and Koffman, where the plaintiffs insurer receives discounts for medical expenses, the tortfeasor is still held responsible for the reasonable value of the services provided.

¶ 31. Paulson correctly acknowledges that, under Lambert v. Wrensch, 135 Wis. 2d 105, 121, 399 N.W.2d 369 (1987), if subrogation exists, the collateral source rule is inapplicable. See also Gurney v. Heritage Mut. Ins. Co., 183 Wis. 2d 270, 280-81, 515 N.W.2d 526 (Ct. App. 1994). This court in Koffman limited the applicability of Lambert, noting that the case should not be read to mean that wherever an insurer has a subro-gated interest, the collateral source rule does not apply. Koffman, 246 Wis. 2d 31, ¶¶ 38-39.

¶ 32. In the context of a case such as this, the Lambert rule makes sense. Here, Midwest has divested itself of its subrogation interest by settling with Allstate. This was recognized by the circuit court in this case, and Paulson agreed to Midwest's dismissal from the case. As noted in Koffman, the effect of the Lambert rule is to reduce recovery by the amounts paid on his or her behalf in order to prevent double recovery. See id., ¶ 41. We find that the subrogation trumps the collateral source rule under the facts of this case.

¶ 33. Paulson's case does not raise the issue of whether a plaintiff is entitled to the reasonable value of the expenses or services. The reasonable value rule has been established in Koffman and Ellsworth. Under the facts presented here, the plaintiff-insured has received the $7,542.44 amount constituting the original repair bill. All issues other than the $7,542.44 repair bill have already been settled by the parties. Allstate has paid the $500 deductible portion of the $7,542.44 repair bill, and Paulson has received the additional $7,042.44 to cover the repair bill. The fact that Midwest and Allstate agreed to a settlement wherein Allstate paid 70 percent rather than 100 percent does not affect Paulson's recovery.

¶ 34. In Ellsworth, 235 Wis. 2d 678, ¶ 17, this court noted that the collateral source rule is to "place upon the tortfeasor the full responsibility for the loss he has caused." In this case, though, additional equitable considerations come into play. This court has strongly encouraged and favored settlement agreements between parties. See Schulte, 176 Wis. 2d at 634-35. Allowing the plaintiff to collect the difference between the reasonable value of the car repairs and the amount Midwest settled for would discourage settlement of subrogation claims. Allstate would have no incentive to settle with Midwest. Litigation of the subrogation claims would be the only alternative.

¶ 35. Also, the freedom to contract must be considered. There is no reason to disturb the contract between Midwest and Allstate, because Paulson has already recovered $7,542.44, the value of the original car repair bill. Paulson submitted a bill of $7,542.44 to Midwest. Midwest paid the Paulsons $7,042.44 for that bill. Allstate paid the $500 deductible and settled with Midwest on the remainder of that original repair bill. Allstate also settled the claim for additional property damages with the Paulsons. As noted in Koffman, 246 Wis. 2d 31, ¶ 43, an insured's right to recover amounts beyond those paid by the insurer is not extinguished by subrogation. As the court of appeals found in this case, even if other bills remained besides the $7,042.44, the plaintiff could seek recovery of those bills from the defendant. Thus, Paulson's recovery is not affected by the settlement agreement between Midwest and Allstate.

¶ 36. Finally, the court of appeals determined that the Paulsons were entitled to recovery on the basis of Reed, 238 Wis. 2d 439. This argument, too, relies upon a balance of equities.

¶ 37. In the case at hand, the court of appeals stated that there is no valid distinction between the Reed and Paulson cases and, as such, the Paulsons are entitled to application of the collateral source rule and recovery of the 30 percent difference between the amount paid by Midwest and the amount Midwest took in settling its subrogation interest with Allstate.

¶ 38. In Reed, 238 Wis. 2d 439, ¶ 1, the plaintiffs were injured in a car accident. The plaintiffs' insurer paid for their medical expenses. Before trial, the plaintiffs' insurer and the other driver's insurer negotiated a settlement under which the plaintiffs' insurer accepted payment of 75 percent of the stipulated medical expenses in exchange for assignment of the subrogation claim. Id. Liability in the case was stipulated. Id., ¶ 2. The court of appeals, analogizing the situation to others where the collateral source rule applies, held that the plaintiffs were entitled to the benefit of the insurers' bargain, the difference between the reasonable value of the services and the negotiated settlement, because a tortfeasor should not receive the "advantage of 'gratuities from third parties.'" Id., ¶¶ 2-3.

¶ 39. We agree with the court of appeals that the Reed case is indistinguishable from this case. Because of the default judgment placing liability on the defendant in this case, the facts are essentially the same. In both cases, the plaintiffs' insurer reached a settlement agreement with the tortfeasor before trial on the plaintiffs' claims. In Reed, as here, the defendants argued that the plaintiffs were "made whole," even without collecting the difference between the reasonable value of medical services and the settlement amount. In both cases, the plaintiffs' recovery of the amount not taken by the subrogated insurer would allow the plaintiff to collect over 100 percent of the damages suffered.

¶ 40. We believe the court of appeals' decision in Reed was in error and should now be overruled. In Koffman, 246 Wis. 2d 31, ¶ 56, this court held that a plaintiff is entitled to collect the reasonable value of the medical services he or she received, regardless of what an insurer actually paid for the services. The court of appeals recognized that rule in Reed, 238 Wis. 2d 439, ¶ 4. The court there then went on to state:

In our view, State Farm's agreement to settle its limited subrogation claim for less than its face value is analogous to the situation where a health care provider sets an injured plaintiffs broken bone for less than the reasonable cost. While some may view a verdict for the plaintiff for the reasonable cost of such a procedure as a double recovery, under the collateral source rule it does not amount to unjust enrichment.

Id. The court of appeals then held that the plaintiffs were entitled to the "benefit of the insurers' bargain by virtue of having paid premiums for health care coverage over time." Id. at 5.

¶ 41. We disagree with the analysis of the court of appeals in Reed and find that the balance of equities lies somewhat differently in cases such as Reed and Paul-son. Koffman lays out the policies followed by this court. First, quoting Ellsworth, we noted that the tortfeasor is not relieved of liability simply because the victim had "the foresight to arrange, or the good fortune to receive, benefits from a collateral source for injuries and expenses." Koffman, 246 Wis. 2d 31, ¶ 29. Second, "[s]ubrogation exists to ensure that the loss is ultimately placed upon the wrongdoer and to prevent the subrogor from being unjustly enriched through a double recovery, i.e., a recovery from the subrogated party and the liable third party." Id., ¶ 33. Our refusal to award the plaintiffs the amount not accepted by their insurer does not do harm to either of these policies.

¶ 42. In the present case, as in Reed, the negotiated settlement related to the limited subrogation interest of the plaintiffs' insurer and in no way affected the plaintiffs' recovery. Agreements like the one between Midwest and Allstate do not reduce the recovery of the plaintiffs. Under the limited circumstances such as those presented here, the plaintiffs receive the reasonable value of their expenses and maintain the right of action over any other damages. Unlike the situation where a health care provider agrees to set a broken bone for less than the reasonable cost, under the facts here and in Reed, there is no "volunteer" offering the plaintiff the benefit of reduced costs and there is no danger to the plaintiffs recovery of the reasonable value of expenses. There is no allegation of a limited pool of money here or that the insurer is competing with the plaintiffs for the same funds. Here, the Paul-sons submitted a repair bill to Midwest for $7,542.44. Midwest paid the Paulsons $7,042.44, the total repair bill less a $500 deductible. Midwest negotiated a settlement with Allstate relating to the $7,042.44, agreeing to take 70 percent ($4,929.71) of the total based on its assessment of its insureds' contributory negligence. Allstate paid the Paulsons the $500 deductible and paid Midwest the agreed upon amount. The Paulsons have recovered the $7,542.44 they initially requested for the $7,542.44 repair bill. As we have noted, the only amount at issue here is the difference between the amount Midwest paid on the $7,542.44 bill and the amount it settled for with Allstate, because all other claims have been settled. Refusing to recognize the agreement between Midwest and Allstate would inform insurers that there is no point to settlement negotiations, because if the subrogated insurer agrees to take less than the face value of its claim, the plaintiffs will simply get the rest from the tortfeasor's insurer.

¶ 43. Finding recovery appropriate in these circumstances would allow plaintiffs double recovery and discourage settlement negotiations. Where the plaintiff has recovered the reasonable value of his or her expenses and makes no allegation that the agreement prevents such recovery, there is no reason to award the plaintiff the difference.

¶ 44. Such a decision is particularly appropriate where, as here, the insurers have agreed that the insured plaintiff was contributorily negligent. In the context of contributory negligence, the tortfeasor has paid the full amount of the damage caused and the plaintiff, by fully recovering for the repair costs, has received whatever "windfall" is created by the settlement.

III. CONCLUSION

¶ 45. For the foregoing reasons, we find that, under the limited circumstances presented by this case, Paulson is not entitled to the 30 percent difference between the amount Midwest paid for Paulson's car repairs and the amount it ultimately settled for in its agreement with Allstate. Paulson has already received $7,542.44 to cover the original repair bill and, under the circumstances here, equity demands that she receive no more.

By the Court — The decision of the court of appeals is reversed.

ANN WALSH BRADLEY, J.

¶ 46. (concurring). Given the odd procedural posture of this case, I write separately to underscore what the majority repeatedly notes: the holding of this case is limited to the facts of this case. See, e.g., Majority op., ¶¶ 32, 42, 45. I also write separately to discuss the intersection between the collateral source rule and subrogation, which is critical to the outcome of this case.

¶ 47. Under the collateral source rule, a plaintiffs recovery from a tortfeasor cannot be reduced by payments or benefits that the plaintiff receives from other sources. Koffman v. Leichtfuss, 2001 WI 111, ¶ 29, 246 Wis. 2d 31, 630 N.W.2d 201. The collateral source rule was developed not to provide the injured party with a windfall, but instead to prevent tortfeasors from escaping their obligations to compensate an injured party merely because a collateral source also compensated the injured party. Id., ¶ 29 (citing Ellsworth v. Schelbrock, 2000 WI 63, ¶ 7, 235 Wis. 2d 678, 611 N.W.2d 764).

¶ 48. The collateral source rule is grounded in the policy that "should a windfall arise as a consequence of an outside payment, the party to profit from that collateral source is 'the person who has been injured, not the one whose wrongful acts caused the injury.'" Koffman, 246 Wis. 2d 31, ¶ 29 (citations omitted).

¶ 49. Under principles of subrogation, a' subro-gated party, by virtue and to the extent of payments made on behalf of another, obtains a right of recovery in an action against a third-party tortfeasor and is a necessary party in an action against such a tortfeasor. Id., ¶ 33. Subrogation affects the extent to which the collateral source rule applies. Lambert v. Wrensch, 135 Wis. 2d 105, 113-121, 399 N.W.2d 369 (1987).

¶ 50. In Lambert, the subrogated insurer had paid the entirety of the medical expenses that the plaintiff sought from the defendant. The insurer was unable to exercise its subrogation rights because the statute of limitations had expired. Id. at 118-119.

¶ 51. Relying upon Heifetz v. Johnson, 61 Wis. 2d 111, 124-25, 211 N.W.2d 834 (1973), the Lambert court concluded that the plaintiff could not recover the amount that was subject to the subrogation claim. Lambert, 135 Wis. 2d at 118-119. In doing so, it stated: "[W]here subrogation is present, as here, the collateral source rule is inapplicable." Id. at 121.

¶ 52. As noted by the majority, this court had the opportunity to discuss and clarify Lambert in Koffman. Majority op., ¶ 31. Citing Voge v. Anderson, 181 Wis. 2d 726, 732, 512 N.W.2d 749 (1994), the Koffman court recognized that Lambert is "properly characterized . . . as holding that 'where the insurer is barred from pursuing a claim [of subrogation], the tortfeasor is entitled to a reduction in judgment for the amount of that claim." Koffman, 246 Wis. 2d 31, ¶ 39.

¶ 53. Consistent with that narrow reading of Lambert, the Koffman court clarified that where "the risk for double recovery on the part of the plaintiff-insured does not exist because the insurer is not barred from pursuing its subrogation rights, there is no justification for nullifying the collateral source rule." Id., ¶ 40. We emphasized that in the ordinary case, the "collateral source rule and the principles of subrogation work in tandem to further the goals of both parties." Id.

¶ 54. As the majority notes, the interaction of the principles of subrogation and the collateral source rule is dependent on the specific facts of this case. Here, the parties altered the facts of this case which were presented in the circuit court and the court of appeals, when they entered into a settlement agreement after the petition for review had been filed in this court. Based on the facts now before us, I agree with the analysis and conclusion of the majority opinion. Accordingly, I respectfully concur.

       At oral argument, counsel for Allstate conceded that this decision by the circuit court was erroneous and agrees with Paulson that, under Koffman, the Paulsons are entitled to seek recovery from Allstate for property damages not paid for by Midwest. We agree. See Koffman v. Leichtfuss, 2001 WI 111, ¶ 43, 246 Wis. 2d 31, 630 N.W.2d 201. However, these claims have now been settled.

       This court allowed Allstate to supplement the record with the "Limited Release of All Claims" in an order dated November 20, 2002.

       In discussing the rule, we note that Couch cites, in a footnote, a particularly aptly named article in the University of Chicago Law Review, entitled: Comment: Insurance and Subrogation: When the Pie Isn't Big Enough, Who Eats Last? Couch on Insurance, § 223.133, at 223-145 n.80 (3d ed. 2000); see also JA Greenblatt, When the Pie Isn't Big Enough, Who Eats Last?, 640 U. Chi. L. Rev. 1337 (1997). This title illustrates the exact situation in which we find that the Rimes/Garrity cases apply; if there is no doubt that the "pie!1 is big enough, we find that the Rimes/Garrity issue does not arise.

       It is true that Allstate initially argued that it was excused from all property damages other than the deductible on the basis of its settlement agreement with Midwest, but Allstate has since paid the $500 deductible and paid $6,500 for a settlement on all other claims, including property damage which exceeded the $7,042.44 repair bill paid by Midwest.

       We note that there has been some disagreement on the equity of the measure provided in Koffman and Ellsworth. Dissents in both cases asserted that the plaintiff should only be entitled to the amount actually paid for the services. See Koffman v. Leichtfuss, 246 Wis. 2d 31 (J. Sykes, dissenting); Ellsworth v. Schelbrock, 2000 WI 63, 235 Wis. 2d 678, 611 N.W.2d 764 (J. Sykes, dissenting);. Nevertheless, today the rule in Wisconsin is that a plaintiff is entitled to the reasonable value of the expenses paid, regardless of the actual payment. Koffman, 246 Wis. 2d 31, ¶¶ 2, 25.

        See Reed Def.-Appellant's Br. at 2 (stating that "there is no dispute that they [the plaintiffs] were made whole" (emphasis omitted)).


source: Caselaw Access Project

author: DIANE S. SYKES, J. N. PATRICK CROOKS, J.

license: Public Domain

text:
    Mount Horeb Community Alert, Judy Patenaude, Laura Wenman, Audrey Yapp and Wayne Yapp, Plaintiffs-Appellants, v. Village Board of Mt. Horeb, Defendant-Respondent-Petitioner.
    Supreme Court

      No. 01-2217.

      Oral argument November 6, 2002.

      Decided July 8, 2003.

    2003 WI 100
    (Also reported in 665 N.W.2d 229.)

      For the defendant-respondent-petitioner there were briefs by Richard C. Yde, Angela A. James, and Stafford Rosenbaum LLP, Madison, and oral argument by Richard C. Yde.

    For plaintiffs-appellants there was a brief by Christopher J. Blythe and Lawton & Cates, S.C., Madison, and oral argument by Christopher J. Blythe.

    An amicus curiae brief was filed by Daniel M. Olson, Madison, on behalf of the League of Wisconsin Municipalities.
   DIANE S. SYKES, J.

¶ 1. This is a mandamus action to compel a village board to act on an initiative petition pursuant to the direct legislation statute, Wis. Stat. § 9.20 (1999-2000).

¶ 2. The direct legislation statute permits local electors to submit a petition requesting that an attached proposed ordinance either be adopted by the municipality's governing body without alteration or be referred to a vote in the next election. See Wis. Stat. § 9.20(1), (4). The proposed ordinance at issue here, initiated by a group of Mount Horeb citizens, would require the Village of Mount Horeb to hold a binding referendum prior to the start of construction on any new village building project requiring a capital expenditure of $1 million or more.

¶ 3. Upon presentation and clerical certification of the direct legislation petition, the Mount Horeb Village Board neither adopted the proposed ordinance nor referred it for a vote. The citizens' group sought a writ of mandamus to compel action on the petition under Wis. Stat. § 9.20. The circuit court denied the writ, concluding that the proposed ordinance was not a proper subject of direct legislation. The court of appeals reversed.

¶ 4. Direct legislation in cities and villages pursuant to Wis. Stat. § 9.20 is qualified only by four narrow limitations which this court has declared are implicit in the statute. Direct legislation under Wis. Stat. § 9.20 must be legislative in nature, cannot repeal an existing ordinance, cannot exceed the powers of the municipal governing body itself, and cannot modify statutorily prescribed procedures. Because the proposed ordinance at isstie here is legislative in nature, does not repeal any existing ordinance, falls within the powers of the village board, and does not modify statutory procedures, it is fully consistent with the direct legislation statute, and the Village Board was therefore required to act upon it under Wis. Stat. § 9.20(4). We affirm the court of appeals and remand for issuance of the writ of mandamus.

I. FACTS & PROCEDURAL HISTORY

¶ 5. On December 11, 2000, a group of Mount Horeb citizens, Judy Patenaude, Laura Wenman, and Audrey and Wayne Yapp, on behalf of a citizens' organization known as Mount Horeb Community Alert ("Community Alert"), filed a petition for direct legislation with the Mount Horeb village clerk pursuant to Wis. Stat. § 9.20. Community Alert's petition sought adoption of a proposed ordinance that would require any construction project costing $1 million or more to be submitted to a binding referendum. The proposed ordinance is as follows:

Prior to the start of any physical construction of any municipally financed (in whole or in part) project requiring a Village capital expenditure of $1 million or more, the Village Board shall submit to the electorate a binding referendum for approval of the project. Failure of the binding referendum shall preclude the Village from proceeding with the project. The wording of any referendum shall provide the specific purpose, location and cost of the project. Nothing in this provision shall be construed to preclude the Village from exercising its role in the planning or design of such publicly financed projects.
This ordinance shall be in full force and effect upon passage and publication as provided by law.

¶ 6. After correcting some technical errors in the form of the petition, the village clerk certified and forwarded the petition to the Village Board. The Village Board took up the matter on January 16, 2001, and determined that the proposed ordinance was not an appropriate subject for direct legislation. Accordingly, the Village Board neither adopted the proposed ordinance nor placed it on the ballot in the spring election.

¶ 7. Rebuffed by the Village Board, Community Alert petitioned the Dane County Circuit Court for a writ of mandamus to compel action on the direct legislation petition. The circuit court, the Honorable Richard J. Calloway, denied the writ, concluding that the proposed ordinance would impermissibly modify the statutorily prescribed procedures for borrowing funds for municipal expenditures. Community Alert appealed, and the court of appeals reversed. Mount Horeb Community Alert v. Village Board of Mount Horeb, 2002 WI App 80, ¶ 26, 252 Wis. 2d 713, 643 N.W.2d 186.

¶ 8. The court of appeals rejected the Village Board's claims that the proposed ordinance would modify statutory borrowing procedures. Id., ¶¶ 10-16. The court also concluded that Community Alert's proposal was legislative in nature, did not repeal any existing ordinance, and did not exceed the village's municipal powers. Id., ¶¶ 17-22. Accordingly, the court of appeals concluded that the proposed ordinance was a proper subject of direct legislation under Wis. Stat. § 9.20, and remanded for issuance of the writ of mandamus. Id., ¶ 26. We accepted the Village Board's petition for review, and now affirm.

II. STANDARD OF REVIEW

¶ 9. Mandamus is an extraordinary writ issued in the discretion of the circuit court to compel compliance with a plain legal duty. State ex. rel. Althouse v. City of Madison, 79 Wis. 2d 97, 105-06, 255 N.W.2d 449 (1977). A writ of mandamus is equitable in nature and will issue when the plaintiff demonstrates: 1) a clear legal right to relief; 2) a positive and plain legal duty on the part of the official or body to whom the writ is directed; 3) substantial damage due to the nonperformance of the duty; and 4) no adequate remedy at law. Law Enforcement Standards Bd. v. Lyndon Station, 101 Wis. 2d 472, 493, 305 N.W.2d 89 (1981). Mandamus is the proper means to challenge a municipality's failure to comply with the requirements of the direct legislation statute, Wis. Stat. § 9.20. Althouse, 79 Wis. 2d at 102; Thompson v. Village of Whitefish Bay, 257 Wis. 151, 153-54, 42 N.W.2d 462 (1950).

¶ 10. Because the material facts are not in dispute, we are presented with a question of the proper application of Wis. Stat. § 9.20. This is a question of law that we review independently of the circuit court and court of appeals. Althouse, 79 Wis. 2d at 106-07; Heitman v. City of Mauston Common Council, 226 Wis. 2d 542, 546, 595 N.W.2d 450 (Ct. App. 1999); Schaefer v. Potosi Village Bd., 177 Wis. 2d 287, 289, 501 N.W.2d 901 (Ct. App. 1993).

III. ANALYSIS

¶ 11. We begin with James Madison's articulation of the justification for government, the necessity of limitations on governmental power, and the superiority of the republican form of government as a check against faction and the potential excesses of the majority:

But what is government itself but the greatest of all reflections on human nature? If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the greatest difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself. A dependence on the people is, no doubt, the primary control on the government; but experience has taught mankind the necessity of auxiliary precautions.

The Federalist, No. 51 (James Madison).

¶ 12. Direct legislation is a potentially powerful limitation on governmental authority, a remedy available to the people when their representative government has become unresponsive or misrepresentative. As a form of pure democracy, however, it also stands in contradiction of the principles of republican government, which is designed to guard against the oppression of the minority by the majority.

¶ 13. Direct legislation — procedures by which the voters themselves adopt legislation — comes in two forms, initiative and referendum. Initiative involves the initiation and enactment of new legislation directly by the electorate; referendum involves direct review by the electorate of legislation which the governing body has adopted or provisionally adopted pending voter approval. Landt v. City of Wisconsin Dells, 30 Wis. 2d 470, 475, 141 N.W.2d 245 (1966); Heitman, 226 Wis. 2d at 546-47.

¶ 14. Since 1911, Wisconsin has had a statutory form of direct democracy at the local level. See Wis. Stat. § 9.20, the direct legislation statute; ch. 513, Laws of 1911. The direct legislation statute provides an initiative procedure by which citizens of a city or village may compel their common council or village board to pass a proposed ordinance directly or put the proposed ordinance before the local electors for a popular vote.

¶ 15. Direct local legislation by initiative "is a creature of statute and its use must comport with the requirements established by the legislature." Heitman, 226 Wis. 2d at 547 (citing Landt, 30 Wis. 2d at 478-79). A petition for direct legislation must be signed by "[a] number of electors equal to at least 15% of the votes cast for governor at the last general election in their city or village." Wis. Stat. § 9.20(1). Upon certification as to sufficiency and form by the city or village clerk, "[t]he common council or village board shall, without alteration, either pass the ordinance or resolution within 30 days following the date of the clerk's final certificate, or submit it to the electors at the next spring or general election." Wis. Stat. § 9.20(4). If adopted by the council or board or by the voters in the election, the ordinance cannot be vetoed, nor can it be repealed or amended for a period of two years, except by a vote of the electors. Wis. Stat. § 9.20.

¶ 16. We have previously held that the procedure for direct local legislation established in Wis. Stat. § 9.20 "implements the legislative powers that have been reserved to the people" by their elected representatives in the legislature. Althouse, 79 Wis. 2d at 118-19. As such, the statute cannot be interpreted so as to unduly restrict those reserved local legislative powers, which "are exercised with particular appropriateness under circumstances where the people are of the opinion that their elected representatives are not acting in response to the public will." Id. at 119.

¶ 17. Direct legislation initiated pursuant to Wis. Stat. § 9.20 is subject to four limitations that we have held are implicit in the statute. See Althouse, 79 Wis. 2d at 105. An ordinance initiated under Wis. Stat. § 9.20: 1) must be legislative as opposed to administrative or executive in nature; 2) cannot repeal an existing ordinance; 3) may not exceed the legislative powers conferred upon the governing municipal body; and 4) may not modify statutorily prescribed procedures or standards. Heitman, 226 Wis. 2d at 548-49 (citing Althouse, 79 Wis. 2d at 107-08).

¶ 18. These limitations preserve municipal control over executive and administrative functions and protect the integrity of the statutory framework governing municipalities, while at the same time permit the proper invocation by electors of the direct legislation procedure provided by the statute. The limitations, implicit in the statute itself, are narrowly construed and carefully applied so as to avoid judicial dilution of the statutory initiative right. See Althouse, 79 Wis. 2d at 118-19. If the statutory requirements for a direct legislation petition have been met, and none of the limitations applies, the statute provides that "[t]he common council or village board shall, without alteration, either pass the ordinance or resolution within 30 days ... or submit it to the electors at the next spring or general election." Wis. Stat. § 9.20(4) (emphasis added); Althouse, 79 Wis. 2d at 118.

¶ 19. The first of these limitations pertains to the basic nature of the ordinance that is the subject of the initiative. "Implicit in the direct legislation .. . statute is the requirement that the ordinance or statute sought to be passed is legislative in character." Id. at 107. A proposed ordinance that is administrative or executive rather than legislative in character is not a proper subject of initiative procedure. Id. at 107-08.

¶ 20. For example, in Heider v. Common Council of City of Wauwatosa, 37 Wis. 2d 466, 477-78, 155 N.W.2d 17 (1967), voters in the City of Wauwatosa had authorized the city to issue bonds in an amount not to exceed $7.5 million to acquire school sites and to erect and improve school buildings, including a high school. Id. at 470. A subsequent proposal for direct legislation sought to restrict the common council's approval of capital expenditures for an addition to the high school until a master plan for the buildings and grounds had been prepared under the direction of a city planning commission, with the guidance of a non-resident professional city planner. Id. at 469-470.

¶ 21. Because the subject of the initiative in Heider was not affirmative legislation upon a new subject, but instead sought to impose conditions on the previously enacted bonding authority for construction of the high school, we held that it was not a proper subject of direct legislation. Id. at 475-76. We used the following standard to distinguish between legislative and administrative or executive matters:

The test of what is a legislative and what is an administrative proposition, with respect to the initiative or referendum, has further been said to be whether the proposition is one to make new law or to execute law already in existence. Again, it has been said: "The power to be exercised is legislative in its nature if it prescribes a new policy or plan; whereas, it is administrative in its nature if it merely pursues a plan already adopted by the legislative body itself, or some power superior to it."

Id. at 475 (quoting 5 E. McQuillin, The Law of Municipal Corporations § 16.55 (3rd ed.)).

¶ 22. We also noted in Heider that "action relating to subjects of permanent and general character are usually regarded as legislative, and those providing for subjects of temporary and special character are regarded as administrative." Id. Relying on these principles, we held in Heider that the proposed direct legislation was administrative rather than legislative in nature, because it was "clearly a prescription of a procedure to be followed in execution of the ordinance [already] passed. It does not prescribe a 'new policy or plan1 but 'merely pursues a plan already adopted.'" Id. at 475-76.

¶ 23. In State ex rel. Becker v. Common Council of City of Milwaukee, 101 Wis. 2d 680, 305 N.W.2d 178 (Ct. App. 1981), the court of appeals relied upon Heider in concluding that a proposal for direct legislation which sought to remove the Milwaukee police chief was administrative rather than legislative in character. Because the proposal was specific in application to the current chief, would have only a temporary effect, did not set forth a general and permanent rule of conduct, and did not create a new policy or a new plan, the court of appeals concluded that the proposed direct legislation to remove the chief was administrative in character, and therefore not a proper subject of direct legislation. Id. at 687.

¶ 24. Some years after Heider, in Althouse, we determined that a proposed ordinance which sought to impose rent controls was a legislative rather than administrative measure, because the common council could have enacted the ordinance as an original matter. Althouse, 79 Wis. 2d at 102, 118. We held that the direct legislation statute could be used "to compel a common council to enact or to place on the ballot any proposed ordinance which the common council in its legislative capacity could enact." Id. at 118. Although the common council had refused to enact or place the rent control initiative on the ballot because of concerns about its constitutionality, we held that:

[U]nder the peremptory statutory provisions of sec. 9.20, Stats., the common council has no authority whatsoever, in respect to direct legislation, to make an initial judgment of the constitutionality or validity of the proposed legislation.... In general, of course, where a city council itself initiates an ordinance, it may refuse to adopt it because of its doubtful constitutionality. That is quite different, however, from the situation where its duties are peremptorily mandated by the direct legislation statute.

Id. at 110.

¶ 25. While the initiative process of Wis. Stat. § 9.20 can be used to compel the adoption or popular vote on any local matter legislative in character, it cannot be used to directly or indirectly repeal an existing ordinance. This second limitation on direct legislation was implicated in Landt, 30 Wis. 2d at 473. There, the proposed ordinance would have prohibited the fluoridation of the public water supply, after the common council had adopted an increase in the water supply's fluoride content. Id. Because the proposed fluoridation prohibition was solely an attempt to repeal an existing ordinance, we affirmed the circuit court's judgment quashing the petition for a writ of mandamus. Id. at 473-74.

¶ 26. The third limitation on direct legislation stipulates that a proposed ordinance may not exceed the legislative powers of the local governing body itself. Heitman, 226 Wis. 2d at 549. Electors cannot do through direct legislation what the municipal governing body cannot do in its own right. That is, direct legislation cannot exceed or enlarge the powers conferred upon the municipal governing body by state law.

¶ 27. In Heitman, the court of appeals concluded that a proposed ordinance restricting the location of a treatment facility for sexually violent persons was essentially a zoning measure, required by state law to be submitted to the local planning commission. Id. at 550-52. As such, the court of appeals concluded that the proponent of the proposed ordinance in the direct legislation petition was "attempting to do by initiative what the Common Council, itself, cannot do; i.e., avoid the substantive and procedural safeguards" of state law regarding zoning. Id. at 554. Accordingly, the court of appeals concluded that "[b]ecause initiatives may be used for only those legislative acts which a municipality, itself, could do, Heitman's proposal is not one that can be accomplished by initiative." Id.

¶ 28. Finally, and as a corollary to the third limitation, a proposed ordinance under Wis. Stat. § 9.20 may not modify statutorily-prescribed procedures or standards that would bind the common council or village board if it attempted to legislate in the same area. Flottum v. City of Cumberland, 234 Wis. 654, 291 N.W. 777 (1940); Henderson v. Hoesley, 225 Wis. 596, 275 N.W 443 (1937). Electors may not initiate legislation under the direct legislation statute if the proposed legislation would modify or conflict with statutorily-prescribed procedures that are binding on the municipality itself. Althouse, 79 Wis. 2d at 108; Heider, 37 Wis. 2d at 476-77.

¶ 29. In Flottum, the City of Cumberland was embarked upon a project to upgrade its electric generating plant, and was required to submit the financing of the project to a referendum in accordance with certain statutory procedures. Flottum, 234 Wis. at 666-67. A direct legislation petition sought a separate, conflicting referendum on the project. This court concluded that "[w]hat the electors demanded was submission of a question which would have modified a statutory provision." Id. We held that because the legislature had "prescribed the referendum which shall be submitted in [power plant] acquisition proceedings, it seems clear that the common council would have no authority to modify the express provisions of the statute and adopt a different procedure." Id.; see also Henderson, 225 Wis. at 603-04 (proposed ordinance was an improper subject of direct legislation because it would have modified the "complete procedure" and "special and exclusive means" established by the legislature for acquisition of electric utility plant).

¶ 30. Similarly, in State ex rel. Becker, 101 Wis. 2d at 687 n.6, the court of appeals held that the initiative for the removal of the Milwaukee police chief was an improper subject of direct legislation because it conflicted with the state statute that vests "the exclusive authority over the hiring, removal and disciplining of police and fire department personnel... in the Board of Fire and Police Commissioners." Id. at 688.

¶ 31. Applying these principles here, we agree with the court of appeals that Community Alert's proposed ordinance is a proper subject of direct legislation under Wis. Stat. § 9.20. The proposed ordinance would require future capital projects costing $1 million or more to be submitted to a binding referendum. As such, the proposed ordinance is general in application (it applies to all new million dollar construction projects), sets forth a permanent rule until repealed, and creates new policy. It does not condition or direct the execution of existing law, but, rather, makes new law. See Heider, 37 Wis. 2d at 475; State ex rel. Becker, 101 Wis. 2d at 685-86. Accordingly, the proposed ordinance is legislative rather than administrative in nature.

¶ 32. A village board is statutorily responsible for "the management and control of the village ... finances" and may "carry its powers into effect by. . . appropriation." Wis. Stat. § 61.34(1). The Village Board contends that the proposed ordinance is not "fully legislative" because many administrative decisions enter into municipal construction projects. The proposed ordinance, however, does not restrict administrative decisionmaking in connection with municipal construction projects; rather, it requires a referendum prior to the commencement of municipally-financed construction projects expected to cost $1 million or more. The appropriation of funds for municipal construction projects is a central legislative function.

¶ 33. The proposed ordinance carefully specifies that it does not restrict the village's administrative decisionmaking regarding planning and design of construction projects: "[njothing in this provision shall be construed to preclude the Village from exercising its role in the planning or design of such publicly financed projects." The Village Board's contention that the proposed ordinance is more administrative than legislative is unpersuasive. The decision to build a new million-dollar project is clearly a legislative one.

¶ 34. The Village Board does not identify any existing ordinances that would be repealed by the proposed ordinance; the second limitation on direct legislation, therefore, is not implicated here. The Village Board does argue, however, that the proposed ordinance exceeds the authority of the Board itself. This argument is based upon the hypothetical application of

the proposed ordinance to a library construction project, which, under Wis. Stat. § 43.58(1), is subject to the independent control of a separate library board.

¶ 35. This argument is misplaced. Local library boards have "exclusive control of the expenditure of all moneys collected, donated or appropriated for the library fund, and of the purchase of a site and the erection of a library building whenever authorized." Wis. Stat. § 43.58(1). The library board's exercise of control over the expenditure of library funds only comes into play after library funding is "appropriated" or "authorized." While the proposed ordinance implicates the initial municipal decision to appropriate funds for a library construction project of $1 million or more, it does not dictate the manner in which those funds are expended once appropriated or authorized. We are satisfied that the proposed ordinance does not exceed the powers conferred upon the Village Board.

¶ 36. Finally, the Village Board argues that the proposed ordinance would modify various statutory procedures that govern public contracting and financing of municipal construction projects. The Board contends that the proposed ordinance would conflict with the public bidding and contracting provisions of Wis. Stat. §§ 61.54, 61.55, 61.56 and 62.15, insofar as those statutes authorize the Village Board to let contracts for public improvements pursuant to bidding, and provide an exception to the bidding requirement for emergencies when the public health and welfare are endangered. We agree with the court of appeals that the proposed ordinance does not modify or conflict with the Village Board's statutory authority to enter into construction contracts pursuant to public bidding or without public bidding in an emergency.

¶ 37. The Board contends that the referendum required by the proposed ordinance could not be held until after the bidding process is complete and contracts are entered into, because only then will the specific cost of the project be known. We share the court of appeals' skepticism of this argument: "[e]arly in the decision-making process, the cost of a project is a political issue for all municipalities. It is unrealistic to assume that the Village would have no idea whether a proposed project would cost $25,000, $750,000 or $1,250,000." Mount Horeb Community Alert, 252 Wis. 2d 713, ¶ 15. While there may indeed be some practical difficulties associated with accurately costing a construction project in advance of bidding, these are political or policy arguments better addressed to the electorate; these potential practical difficulties do not operate to preclude the initiative from ever reaching the ballot in the first place. We see no conflict between the proposed ordinance and the statutes relating to public bidding and contracting sufficient to preclude action on Community Alert's petition.

¶ 38. The Village Board also contends that the proposed ordinance conflicts with the statutory provisions governing municipal bonding under Wis. Stat. § 66.0621 and, generally, Chapter 67. The Board describes these statutes as setting forth "comprehensive procedures for accomplishing municipal borrowing," but does not identify how the proposed ordinance would modify or conflict with these comprehensive procedures. The proposed ordinance does not reference bonding or municipal borrowing. Even assuming that most municipal construction projects that are expected to cost $1 million or more would be financed through bonding, the requirement of prior voter approval via a binding referendum does not interfere with the statutory procedures governing bond issues. The Village Board states that a referendum pursuant to the proposed ordinance "would be in addition to the referenda allowed in ch. 67," but concedes that there is nothing in Chapter 67 that "specifically prohibit[s] a referendum of the sort required by the proposed ordinance."

¶ 39. Accordingly, we conclude that Community Alert's proposed ordinance fully complies with Wis. Stat. § 9.20 and is therefore an appropriate subject of direct legislation under the statute. It is legislative rather than administrative in nature; it does not repeal any existing ordinance; it falls within the authority of the Village Board itself; and it does not modify or conflict with state statutes that would bind the Board if it tried to legislate in the same area. Because all of the requirements of Wis. Stat. § 9.20 have been met and none of the statute's implicit limitations applies, the Village Board was required to act on Community Alert's petition pursuant to Wis. Stat. § 9.20(4). Because the Village Board took no action on the petition, mandamus to compel compliance with Wis. Stat. § 9.20(4) is proper. See Althouse, 79 Wis. 2d at 102. We affirm the decision of the court of appeals which remands the cause to the circuit court for issuance of the writ of mandamus.

By the Court. — The decision of the court of appeals is affirmed.

N. PATRICK CROOKS, J.

¶ 40. (dissenting). For the reasons set forth below, I must dissent.

¶ 41. The proposed ordinance here compromises the principles of representative government and thereby raises constitutional concerns. Additionally, while the majority correctly notes that direct legislation initiated pursuant to Wis. Stat. § 9.20 is subject to four implicit limitations, I believe that this ordinance violates at least two of those limitations, in that it applies to administrative not solely legislative actions, and it attempts to modify statutorily prescribed procedures. As a result, the proposed ordinance conflicts with the direct legislation statute, since, in essence, it tries to replace the village board with the village electors as the decision maker. In doing so, it impairs powers delegated to the Mount Horeb Village Board by the legislature.

Representative Government Principles/Constitutional Issues

Analysis

¶ 42. I begin, like the majority, with recognition of the concept of our republican form of government, as provided for in the guarantee clause of section 4, Article IV of the United States Constitution. As the majority itself recognizes, direct legislation is contrary to the principles of our representative system, in that it fails to protect against the possibility of tyranny by the majority.

It is of great importance in a republic not only to guard the society against the oppression of its rulers, but to guard one part of the society against the injustice of the other part. Different interests necessarily exist in different classes of citizens. If a majority be united by a common interest, the rights of the minority will be insecure.

The Federalist, No. 51 (James Madison)

¶ 43. The key word in the above quote is "republic". Our founding fathers chose a representative form of government over a direct democracy. In developing the republican form of government that exists today, a three-branch government was carefully crafted, to include separate powers and authority for each branch, so that there are checks and balances to protect against fear of tyranny by the majority.

¶ 44. Because our founding fathers rejected a direct democracy and instead adopted a representative democracy, direct legislation, in the form of initiative and referendum, is appropriately limited. In Wisconsin, direct legislation is a statutory right, rather than a constitutional right. Meade v. Dane County, 155 Wis. 632, 145 N.W. 239 (1914). As such, we have narrowly interpreted statutory provisions concerning direct legislation. See Landt v. City of Wisconsin Dells, 30 Wis. 2d 470, 478-79, 141 N.W.2d 245, 249-50 (1966).

¶ 45. The Wisconsin Constitution does not reserve to the people either a general right of initiative or referendum. Instead, the people of Wisconsin delegated all lawmaking powers to the legislature with the adoption of the state constitution. Wis. Const. Art. IV § 1.

Administrative Analysis

¶ 46. As noted previously, initiative involves legislative acts and cannot extend to administrative actions. Heider v. Common Council of City of Wauwatosa, 37 Wis. 2d 466, 474, 155 N.W.2d 17, 21 (1967). "Where [an ordinance] is administrative in character, it is outside the scope of initiative action and ... it becomes a matter of judicial disposition to determine whether or not the actions of the electorate under [Section 9.20] are proper ...." Id. at 474.

¶ 47. The more a direct legislation proposal intrudes on city and village functions, the more likely that it will be held to be administrative in character. When a direct legislation proposal affects or controls governmental decisions, this court has looked to the nature of the governmental entity involved in the decision. In Heider, we held that a proposed resolution that would limit the actions of a plan commission was invalid, in that "city planning is an administrative function" performed by "the city plan commission — an administrative body." Id. at 476.

¶ 48. Here, the ordinance requires the Mount Horeb Village Board to identify in the wording of a capital expenditure referendum the "specific purpose, location and cost of the [capital improvement] project." Thus, the ordinance seeks to control more than just spending decisions. The location, and the purpose, of the proposed capital project are also at issue. Location decisions are generally functions controlled by an administrative body. For example, as noted in the amicus brief of the League of Wisconsin Municipalities, the location of a water tower is regulated by the Wisconsin Department of Natural Resources (DNR). Wis. Admin. Code § NR 811.57. Similarly, the location of public buildings and location of parks, streets, airports and other such items, is a shared function of a plan commission — an administrative body — with a city council or a village board. Wis. Stat. § 62.23(5). The provisions of Wis. Stat. § 62.23 are applicable to villages, such as the Village of Mount Horeb. Wis. Stat. §61.35. Community Alert's proposed ordinance certainly seems more administrative than legislative in nature. The authority for direct legislation is not applicable to administrative decisions. See State ex rel. Althouse v. City of Madison, 79 Wis. 2d 97, 255 N.W.2d 449 (1977).

Modification of Statutory Procedures

¶ 49. We disagree with the majority in regard to its conclusion that the proposed ordinance does not modify the statutory municipal borrowing procedures.

¶ 50. "(W)here a statute has conferred a procedure upon a [municipal] body, electors may not demand the submission of a question which [under the direct legislation statute] would modify the statutory authority." Heider, 37 Wis. 2d at 477 (citations omitted).

¶ 51. Based on the constitutionally delegated authority discussed previously, it seems clear that Wisconsin law does not favor a broad reading of the initiative power. In Heitman v. City of Mauston, 226 Wis. 2d 542, 595 N.W.2d 450 (1999), the court of appeals concluded that an ordinance proposal under Wis. Stat. § 9.20, which attempted to prohibit the City of Mauston from approving the building of a ch. 980 facility on city land, was in essence a zoning ordinance. The court of appeals held that the proposed prohibition was "pervasive," and was an attempt "to do by initiative what the Common Council itself, cannot do, i.e., avoid the substantive and procedural safeguards" of the state zoning statutes. Id. at 554. The proposed ordinance was the type of ordinance electors cannot implement under Section 9.20. Id. at 553. Likewise, here, the Community Alert initiative conflicts with the municipal borrowing statutes, Wis. Stat. ch. 67, and with the procedures set forth in Wis. Stat. § 66.0621 relating to construction projects and the revenue obligations involved. See Denning v. City of Green Bay, 271 Wis. 230, 234-35, 72 N.W.2d 730, 732-33 (1955). The direct legislation proposal attempts to modify comprehensive procedures adopted by the legislature.

¶ 52. Here, the proposed ordinance would alter the legislatively created structure of village government,- and undermine the statutory authority granted to the Mount Horeb Village Board. If adopted, the proposed ordinance would make the village electors, not the village board, the final decision maker, as to whether the village should proceed on any project involving a capital expenditure of one million dollars or more.

¶ 53. The legislature granted the village board authority to acquire property or manage village finances. It did not provide a general right for village electors to review the exercise of these powers by referendum, whether they involve a capital expenditure or not. Rather, the right of village electors to require a referendum, in response to an exercise of those powers, is limited to specific circumstances, such as bond issues. See Wis. Stat. § 67.05.

¶ 54. The majority correctly assumes that the ordinance would implicate municipal borrowing, because most projects which cost one million dollars or more require borrowing. Wisconsin Stat. ch. 67 provides a comprehensive scheme for municipalities desiring to borrow. Prior to a bond issue, the village board must pass a resolution authorizing borrowing. Wis. Stat. § 67.05(1). For the majority, if not all, of large capital projects (such as those involving libraries), a referendum must then be submitted to the electors for approval of the bond issue. Wis. Stat. § 67.05(5)(b).

¶ 55. Assuming that the proposed ordinance operates prior to the passage of the initial resolution authorizing borrowing, the village electorate first would vote to approve the capital project. If the voters allowed the project to go forward, the village board could then pass a resolution authorizing borrowing. It must then resubmit the question of whether to permit the issuance of bonds. In effect, under the ordinance proposed here, the electorate must approve the proposed project twice, because without bonding, the project would more than likely fail. The resulting cumbersome procedure represents a modification of the statutory requirements for borrowing.

¶ 56. Wisconsin law does not appear to permit such a modification. In Flottum v. City of Cumberland, 234 Wis. 654, 666-67, 291 N.W. 777,782 (1940), this court held that a direct legislation petition, requesting a referendum on the municipal purchase of a power plant, improperly modified statutory procedures. We found that Section 66.06 (now 66.0621) provided the mechanism for this type of purchase. Section 66.06 granted the common council the authority to pass a resolution authorizing the purchase, and allowed the submission of the question for referendum. Flottum, 234 Wis. at 666. Thus, we held that the electorate could not request submission of the question by direct legislation under Section 10.43 (now 9.20), when a separate procedure was already in place. See also Henderson v. Hoesley, 225 Wis. 596, 601, 275 N.W 443, 445 (1937) (holding direct legislation not appropriate where "the resolution, if it had been adopted. .. would in effect have provided that the proposed action... be again submitted to the voters of the city for their approval or disapproval").

¶ 57. It could be argued that this case is distinguishable, because the proposed ordinance could conceivably operate prior to the second referendum, whéreas in Flottum and Henderson the ordinance would have resulted in a second referendum. This distinction is not dispositive, however, because the cumulative effect is the same: multiple referenda, modifying statutory procedures.

¶ 58. The ordinance here directly affects the financing of capital projects, an area governed by Wis. Stat. ch. 67. Thus, for that reason, Flottum and Henderson appropriately control the outcome of this case.

¶ 59. Based on Heider, Flottum, Henderson, Denning, Heitman, and the strong commitment to a representative democracy present in Wisconsin law, the court of appeals' decision should be reversed.

¶ 60. Unfortunately, there are some who wish to disrupt the wheels of government solely for the purpose of disruption. The majority opinion provides them with a blueprint and an imprimatur. Although the majority certainly does not intend this result, the law of unintended consequences may well prevail.

¶ 61. For the reasons discussed, I respectfully dissent.

¶ 62. I am authorized to state that Justices WILLIAM A. BABLITCH and JON E WILCOX join this dissent.

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

       "The United States shall guarantee to every State in this Union a Republican Form of government...." United States Const, art. IV( § 4.

       Theodore Roosevelt was a prominent proponent of the initiative and the referendum during the Progressive movement. In a speech to the Ohio Constitutional Convention, Roosevelt explained his position: "I believe in the initiative and the referendum, which should be used not to destroy representative government, but to correct it when ever it becomes misrepresentative." Theodore Roosevelt, Address Before the Ohio Constitutional Convention, Columbus, Ohio (February 12, 1912).

       In his speech to the Ohio Constitutional Convention, Theodore Roosevelt commended the Wisconsin method of direct democracy to the convention delegates. See supra, Roosevelt, ¶ 13 n.3.

       The source of the present direct legislation statute was ch. 513, Laws of 1911, creating "sections 39 i to 391, inclusive, of the statutes, relating to the initiative and referendum on acts of municipal councils and of boards of county supervisors." Section 39 i "created an initiative procedure, the filing of a petition to compel a city council or county board to adopt an ordinance, or, in default of such adoption, to submit it to popular vote. Sec. 39 j created a procedure of the referendum type, the filing of a petition to compel a city council or county board either to repeal an ordinance or resolution already adopted, or, in default of such repeal, to submit it to popular vote." Landt v. City of Wisconsin Dells, 30 Wis. 2d 470, 475-76, 141 N.W.2d 245 (1966). Section 39 j was later repealed and has not since been reenacted. See § 27, ch. 383, Laws of 1915. The remaining sections were revised and renumbered to Wis. Stat. § 10.43. See § 14, ch. 385, Laws of 1915. Wisconsin Statute § 10.43 eventually became Wis. Stat. § 9.20. See § 1, ch. 666, Laws of 1965.

       "Every United States citizen age 18 or older who is a resident of an election district in this state is a qualified elector of that district." Wis. Const, art. Ill, § 1.

       We also held that the resolution would have modified the statutory authority granted to the city planning commission, an administrative body that was charged with carrying the initial proposal into effect, and for this additional reason was.not a proper subject for direct legislation. See Heider v. Common Council of City of Wauwatosa, 37 Wis. 2d 466, 477-78, 155 N.W.2d 17 (1967).

       The court of appeals also concluded that the proposal would "usurp" the "exclusive authority over the hiring, removal and disciplining of police and fire department personnel [] vested in the Board of Fire and Police Commissioners." State ex rel. Becker v. Common Council of City of Milwaukee, 101 Wis. 2d 680, 688-89, 305 N.W.2d 178 (Ct. App. 1981).

       We emphasized in Althouse that the although "the intervention of the common council at this juncture of the direct legislation process ... flies in the face of the mandatory provisions of sec. 9.20, Stats, [and] also would almost totally vitiate the policy behind the direct legislation statute[]," mandamus to compel compliance with Wis. Stat. § 9.20 would be improper if the measure's unconstitutionality is "clear" from prior adjudications on the same subject matter, if the measure is "beyond the pale of the authority of the council itself," or if the measure seeks to repeal an existing ordinance. State ex rel. Althouse v. City of Madison, 79 Wis. 2d 97, 110, 118, 255 N.W.2d 449 (1977).

       Wisconsin Statute §62.15 is applicable to the Mount Horeb Village Board through Wis. Stat. § 61.56 and section 8.01 of the Mt. Horeb Village Code of Ordinances.

       "The United States shall guarantee to every state in this union a republican form of government. .. ." U.S. Const. art. IV §4.