author: VERGERONT, EJ.

text:
    CenturyTel of the Midwest-Kendall, Inc. and CenturyTel, Inc., Petitioners-Appellants, v. Public Service Commission of Wisconsin, Respondent-Respondent, AT&T Communications of Wisconsin, L.P., MCI Telecommunications Corp. and WorldCom Technologies, Inc., Intervenors-Respondents.
    Court of Appeals

      No. 02-0053.

      Submitted on briefs June 12, 2002.

    Decided August 29, 2002.

    2002 WI App 236
    (Also reported in 653 N.W.2d 130.)

      On behalf of the petitioners-appellants, the cause was submitted on the briefs of Bradley D. Jackson, David A. Meisinger, and Katherine E. Lazarski of Foley & Lardner, Madison.
    On behalf of the respondent-respondent, the cause was submitted on the brief of Steven Levine of Public Service Commission of Wisconsin.

    On behalf of the intervenors-respondents MCI Telecommunications Corporation and WorldCom Technologies, Inc., the cause was submitted on the brief of Niles Berman and Janet L. Kelly of Wheeler; Van Sickle & Anderson, S.C., Madison; and on behalf of the intervenors-respondents AT&T Communications of Wisconsin, L.E, the cause was submitted on the brief of Dennis P. Birke of Dewitt Ross & Stevens, S.C., Madison.
    Before Vergeront, EJ., Dykman and Lundsten, JJ.

       Petition to review dismissed 11-12-02.

   VERGERONT, EJ.

¶ 1. The Fublic Service Commission (ESC) decided that CenturyTel of the Midwest-Kendall, Inc. (Kendall), a telecommunication utility, increased rates without a hearing and a ESC order of approval in violation of Wis. Stat. § I96.20(2m). Therefore, the PSC ruled, Kendall violated the filed-rate statute, Wis. Stat. § 196.22, and those customers who experienced a rate increase as a result were entitled to a refund. Kendall appeals the circuit court order affirming that decision. Kendall contends the changes in its rates were lawfully filed with the ESC, and it therefore did not violate the filed-rate statute. Kendall also contends that the refund order violates Wis. Stat. § 196.37(1), which prohibits retroactive ratemak-ing, and that the ESC lacks the authority to order the refund.

¶ 2. We conclude the ESC properly determined that Kendall's increase in rates violated Wis. Stat. § 196.20(2m) and the filed-rate statute, Wis. Stat. § 196.22. We also conclude that the refund order did not violate the prohibition in Wis. Stat. § 196.37(1) against retroactive ratemaking, and that the ESC had the authority to order a refund under § 196.37(2). Accordingly, we affirm the circuit court order affirming the FSC's refund order.

BACKGROUND

¶ 3. This dispute arises out of Kendall's acquisition of nineteen telephone exchanges from Wisconsin Bell, Inc., d/b/a Ameritech Wisconsin (Ameritech), effective December 1, 1998. Prior to this purchase, Kendall owned one exchange (Kendall exchange).

¶ 4. In anticipation of the acquisition, Kendall filed with the PSC on October 26, 1998, a modification of its schedules of rates to take effect on December 1, 1998. These schedules added the nineteen new exchanges and modified the levels of Kendall's various access rate elements. "Access rates" are the rates long distance carriers must pay for use of Kendall's telecommunication utilities. Kendall's letter accompanying the modified schedules did not describe the modifications as either an increase or decrease, hut, rather, stated:

Effective December 1, 1998, Kendall will discontinue its concurrence with the Wisconsin State Telecommunications Association Intrastate Charge Tariff No. 1 and concur in the rates, rules and regulations of CenturyTel access tariff. Kendall-specific switched access rates have been added to the CenturyTel access tariff in this filing. The new switched rates are the Wisconsin State benchmark rates and all other rates are existing CenturyTel rates.

¶ 5. PSC staff sent a letter to Kendall, dated November 13, 1998, confirming receipt of the modified schedules and stating:

The purpose of this filing is to remove Kendall Section 17 Access Rates and to provide for the change effective December 1,1998, in which Kendall will discontinue its concurrence with the Wisconsin State Telecommunications Association Intrastate Access Charge Tariff No. 1 and concur in the rates, rules and regulations of Cen-turyTel access tariff. This filing is made with the understanding that it does not result in an unauthorized rate increase or service restriction.

PSC staff reiterated this understanding in a letter to Kendall dated November 19, 1998, in response to some additional information Kendall provided on certain local rates:

The entire tariff included with your [initial letter] as amended by your [second] letter is being placed on file under Amendment No. 26. The purpose of this filing is to provide for the change effective December 1,1998, in which Kendall will acquire 19 exchanges from Amer-itech. This filing is made with the understanding that it does not result in an unauthorized rate increase or service restriction.

¶ 6. AT&T Communications of Wisconsin, Inc. and MCI Telecommunications Corp. and WorldCom Technologies, Inc. (MCI WorldCom), both long distance telecommunication carriers, were customers of Amer-itech in the nineteen exchanges before Kendall's acquisition and remained Kendall's customers in those exchanges after the acquisition. In March and May 1999, respectively, they complained to the PSC that Kendall had unlawfully raised access rates in the nineteen exchanges without a hearing. After reviewing AT&T's complaint, PSC staff decided on March 26, 1999, that the new access rates in the nineteen exchanges represented an increase from the rates charged by Amer-itech, and therefore they required prior PSC approval; staff decided that Kendall would have to refund the difference for the period of time between the initial application of the access rate increase and the date on which the PSC would approve the new rates. Kendall was informed of this and informed that the next step was for it to apply for a rate increase. Kendall did not apply for a rate increase, so the PSC initiated a Class 2 proceeding under Wis. Stat. § 227.01(3)(b).

¶ 7. At the hearing before the PSC, the issue was whether Kendall violated Wis. Stat. § 196.20(2m), which requires that "no change in schedules which constitutes an increase in rates to consumers may be made except by order of the commission, after an investigation and opportunity for a hearing. . . ." Kendall's position was that it did not increase access rates in the nineteen exchanges purchased from Amer-itech, and that it acted with the staffs knowledge and acquiescence.

¶ 8. The PSC issued its decision on November 30, 2000. It made the following findings, among others. In connection with the acquisition, Kendall raised rates for access customers in the nineteen exchanges above the rates Ameritech charged, but lowered its access rates in the Kendall exchange. The schedule changes Kendall filed were approved under Wis. Stat. § 196.20(2), which governs rates decreases. The changes in Kendall's schedules constituted an increase to AT&T, MCI Worldcom, and other access consumers in the. nineteen exchanges over what they were paying Ameritech for access prior to Kendall's acquisition. Kendall knew before the acquisition that its schedules would and did have the effect of increasing rates for these access customers in the nineteen exchanges. Kendall at no time made an application for an access rate increase in any of the nineteen exchanges, and the PSC did not issue an order authorizing the access rate increase.

¶ 9. The PSC concluded that Kendall had violated Wis. Stat. § 196.20(2m) by increasing access rates on December 1,1998, without a hearing and PSC approval. In its opinion, the PSC stated that it was not persuaded that Kendall misled PSC staff prior to the acquisition, and it acknowledged that the staff erred when it "attempted to place the Kendall tariff on file." Under the circumstances, the PSC concluded it would be unjust to impose a penalty on Kendall. The PSC continued:

Nevertheless Kendall did not adhere to the mandated statutory requirements even after being informed by PSC... staff on or about March of 1999 that they believed Kendall's new access changes required prior commission approval. Rather Kendall appears to have taken a calculated gamble and lost. They are now obligated to undo the rate increase for access rates in the 19 exchanges and make their affected customers whole.

The PSC ordered Kendall to reinstate the pre-acquisition access rates in the nineteen exchanges and to refund with interest to customers who had experienced the rate increase. The order stated it was not a limitation on Kendall's ability to seek approval of future rate increases as required by law, but the opinion made clear that the rate increase that had been applied to access customers in the nineteen exchanges was void as of the date of the decision and order.

¶ 10. In ordering a refund, the PSC considered the filed-rate statute, Wis. Stat. § 196.22, which provides:

Discrimination forbidden. No public utility may charge, demand, collect or receive more or less compensation for any service performed by it within the state, or for any service in connection therewith, than is specified in the schedules for the service filed under s. 196.19, including schedules of joint rates, as may at the time be in force, or demand, collect or receive any rate, toll or charge not specified in the schedule.

The PSC concluded that Kendall had violated this statute because it had charged access rates that were not properly filed under Wis. Stat. § 196.20(2m). The PSC relied on GTE North Inc. v. Public Service Commission, 176 Wis. 2d 559, 569, 500 N.W.2d 284 (1993), in deciding that it had the authority to order refunds in this situation.

¶ 11. Kendall sought judicial review of the refund order, and the circuit court affirmed the PSC's order.

DISCUSSION

¶ 12. On appeal, Kendall contends its increased access rates were lawfully filed with the PSC, and the PSC therefore erred in concluding it violated Wis. Stat. § 196.20(2m) and the filed-rate statute, Wis. Stat. § 196.22. Kendall also argues that the refund order violates Wis. Stat. § 196.37(1), the prohibition against retroactive ratemaking, and that the PSC is without authority to make such an order.

¶ 13. Kendall is not challenging any of the PSC's findings. We therefore are presented with issues of statutory construction, which are questions of law, subject to our de novo review. Kimberly-Clark Corp. v. Pub. Serv. Comm'n, 110 Wis. 2d 455, 466, 329 N.W.2d 143 (1983). Although we are not bound by an agency's construction of a statute, we may give it either great weight or due deference, depending on the circumstances. UFE Inc. v. LIRC, 201 Wis. 2d 274, 284, 548 N.W.2d 57 (1996). We examine whether and how much to defer to the PSC in the context of each of Kendall's challenges to the PSC's decision.

Requirements for Increasing Rates, Wis. Stat. § 196.20(2m)

¶ 14. We address first Kendall's contention that the new access rates were properly filed. Wisconsin Stat. § 196.19(1) requires that each public utility:

[F]ile with the commission schedules showing all rates, tolls and charges which it has established and which are in force at the time for any service performed by it within the state, or for any service in connection therewith or performed by any public utility controlled or operated by it. The rates, tolls and charges shown on such schedules may not be changed except as provided under this chapter.

Wisconsin Stat. § 196.20(2m) addresses rate increases and provides, with certain exceptions not applicable here: "[N]o change in schedules which constitutes an increase in rates to consumers may be made except by order of the commission, after an investigation and opportunity for hearing."

¶ 15. The procedure for a utility seeking a rate increase begins with an application filed with the PSC, followed by a hearing after notice to customers. Wis. Admin. Code § PSC 2.10. A rate increase hearing is a Class 1 contested case, Wis. Stat. § 227.01(3)(a), in which the utility, customers, and the agency are all entitled to present evidence, cross-examine witnesses and make arguments to the PSC. Wis. Stat. §§ 227.44-227.46.

¶ 16. Wisconsin Stat. § 196.20(2)(am) applies to rate decreases for telecommunication utilities:

(am) For telecommunication utilities, a proposed change which constitutes a decrease in rates shall be effective at the time specified in the tariff as filed unless the commission, either upon complaint or upon its own motion, finds after investigation and hearing that the rate reduction violates s. 196.204 [subsidizing affiliate] or 196.219 [protection of telecommunication consumers], Upon such a finding, the commission may order changes in the rates, terms and conditions.

¶ 17. Kendall acknowledges that there was no hearing on the new access rates and the PSC did not issue an order approving them. Kendall also does not appeal the PSC's finding that the new access rates were an increase over the rates Ameritech charged in the nineteen exchanges. Nevertheless, Kendall argues, the PSC approved the filing of the new rates without a hearing through its November 1998 letters, and this complies with Wis. Stat. § 196.20(2)(am) under which a hearing and the PSC order are not necessary. According to Kendall, the PSC erred in applying § 196.20(2m), which governs rate increases, rather than § 196.20(2)(am), which governs rate decreases.

¶ 18. On this issue of statutory construction and application, we conclude we should give at least due weight to the PSC's decision. Due weight is appropriate when the legislature has charged the agency with the enforcement of the statute in question. UFE Inc., 201 Wis. 2d at 286. The PSC is responsible for administering the statutes regarding rate increases and decreases. When we give due weight to an agency decision, we do not overturn a reasonable agency decision that comports with the purpose of the statute, unless we determine there is a more reasonable interpretation. Id. at 286-87. Because we conclude that the PSC's decision that Kendall violated Wis. Stat. § 196.20(2m) meets this standard, we need not decide whether that decision is entitled to great weight deference, as the respondents contend.

¶ 19. The evident purpose of the requirements of notice to customers, the opportunity for a hearing, and a PSC order of approval for a rate increase is to guarantee public participation in the ratemaking process, Wisconsin's Environmental Decade, Inc. v. Public Service Commission, 81 Wis. 2d 344, 351, 260 N.W.2d 712 (1978), and scrutiny by the PSC before a utility increases its rates. The contrasting lack of these requirements for a rate decrease reflects the assumption that a reduction in rates initiated by a utility does not pose the same risk of unreasonableness or unfairness to customers that a rate increase does.

¶ 20. The PSC's decision that the requirements in Wis. Stat. § 196.20(2m) for a rate increase apply in this case furthers the purpose of that statute by considering whether the new access rates actually are an increase, rather than simply accepting the utility's choice on how to treat the change. The PSC's decision that the November 1998 letters do not obviate the need for compliance with the requirements for a rate increase is a reasonable one. The letters do not determine that the new access rates are riot an increase; they simply express the PSC staffs understanding that they are not, apparently based on information provided by Kendall. The PSC found that Kendall knew that the new access rates were an increase to customers in the nineteen exchanges, and Kendall does not challenge that finding. It is reasonable for the PSC to decide that, when a utility proposes to make changes in rates that it knows are an increase, it must comply with the requirements of § 196.20(2m).

¶ 21. We also conclude that Kendall's construction of Wis. Stat. § 196.20(2m) and (2)(am) is not more reasonable than the PSC's construction. Under Kendall's construction, a utility may avoid the notice requirements, the hearing process, and the accompanying scrutiny of the need for and effect of an increase in rates by simply choosing to utilize the process for a decrease in rates. That construction of the two sections is inconsistent with the purposes of § 196.20(2m). We therefore conclude that the PSC correctly decided that Kendall increased its access rates in the nineteen exchanges in violation of § 196.20(2m).

Filed-Rate Statute, Wis. Stat. § 196.22

¶ 22. The filed-rate statute, Wis. Stat. § 196.22, prohibits public utilities from charging any rate other than those "specified in the schedules for the services filed under s. 196.19." Kendall argues that the PSC erred in ruling that it had violated this statute; to the contrary, Kendall argues, once it filed its new access rates for the nineteen exchanges with the PSC, it was required by § 196.22 to charge those rates beginning December 1, 1998. Kendall's contention is premised on its position that the new access rates for the nineteen exchanges were properly filed. However, we have concluded that the PSC correctly decided those rates were not properly filed because Kendall did not comply with the procedures in Wis. Stat. § 196.20(2m). Therefore, the precise question under the filed-rate statute is whether the PSC correctly decided that this statute requires a utility to charge only those rates that have been filed with the PSC in conformity with the applicable statutory requirements.

¶ 23. In reviewing the PSC's conclusion that Kendall violated Wis. Stat. § 196.22, we need not decide whether to defer to the PSC because we conclude its construction of § 196.22 is the only reasonable construction. Section 196.22 refers to rates "... specified in the schedules for the service filed under s. 196.19 ...." Wisconsin Stat. § 196.19(1) defines what must be filed with the PSC and also provides that the "rates, toll and charges shown on such schedules may not be changed except as provided under this chapter." Therefore, the "filed" rates referred to in § 196.22 are those rates that are filed in compliance with the applicable statutory requirements, and such requirements plainly include those in Wis. Stat. § 196.20(2m) for changes in schedules that increase rates.

¶ 24. Kendall relies on Prentice v. Title Insurance Co. of Minnesota, 176 Wis. 2d 714, 720 n.3, 500 N.W.2d 658 (1993), in support of its argument that the new access rates it filed with the PSC are binding on it and on its customers. The filed-rate doctrine applied in Prentice is a judicially-created doctrine that "prohibits a plaintiff from claiming a lower rate than the one filed by a regulated entity with the appropriate regulatory agency because the filed rate alone governs the relationship between the parties." Id. at 721 (citation omitted). Courts have adopted this doctrine because "allowing a state court to award damages based on a hypothetical rate lower than the filed rate would undermine the regulatory scheme because a plaintiff could obtain greater relief from the court than from the regulatory agency." Id. (citation omitted). This judicially-created doctrine does not limit the statutory authority of a regulatory agency to determine whether rates are properly filed, and it therefore has no bearing on this case.

Prohibition on Retroactive Ratemaking, Wis. Stat. § 196.37(1)

¶ 25. Kendall contends the refund order constitutes retroactive ratemaking in violation of Wis. Stat. § 196.37(1). This section provides:

(1) If, after an investigation under this chapter or ch. 197, the commission finds rates, tolls, charges, schedules or joint rates to be unjust, unreasonable, insufficient or unjustly discriminatory or preferential or otherwise unreasonable or unlawful, the commission shall determine and order reasonable rates, tolls, charges, schedules or joint rates to be imposed, observed and followed in the future.

Since Kendall frames this argument in terms of the authority of the PSC to order refunds, we will employ a de novo standard of review. See Wisconsin Power & Light Co. v. Pub. Serv. Comm'n, 181 Wis. 2d 385, 392, 511 N.W.2d 291 (1994) (applying a de novo standard of review because the issue of statutory construction concerned the PSC's authority).

¶ 26. Wisconsin Stat. § 196.37(1) specifies the "PSC's remedial authority following a determination that public utility rates are unreasonable or unjustly discriminatory." Kimberly-Clark Corp., 110 Wis. 2d 455 at 463. It "expressly limits the PSC's authority to setting rates prospectively only." Id. Because of § 196.37(1), the PSC has no power to "find reasonable value for service already rendered. Its jurisdiction is to fix rates, service, etc., to be followed in the future." City of Milwaukee v. City of West Allis, 217 Wis. 614, 620, 258 N.W. 851 (1935).

¶ 27. The threshold question is whether the PSC was "determin[ing] and ordering] reasonable rates" when it ordered the refunds. We conclude it was not for the following reasons.

¶ 28. Considering first the statutory language, it is true that the PSC did determine that the increased access rates were "unlawful." However, the remedy for the unlawfulness did not involve determining what access rates would have been reasonable for the period since December 1, 1998, and basing the refund on that amount. Rather, since the PSC determined the increased access rates were unlawful because they were not filed as required by statute, the PSC voided those rates, leaving in effect the rates that were previously approved by the PSC. True, the refund order was a "retroactive" remedy, in that it had the effect of restoring the previously approved access rate retroactively. But the PSC was not engaged in determining and setting reasonable rates — either retroactively or prospectively.

¶ 29. Second, a review of the cases discussing and applying the proscription against retroactive ratemak-ing persuades us that the PSC's refund order in this case does not come within that proscription.

¶ 30. One of the purposes of Wis. Stat. § 196.37(1) is to "prevent a company from recouping losses caused by errors in judgment or through company mismanagement. Without this rule, there would be no incentive for efficient management." Wisconsin's Envtl. Decade, Inc. v. Pub. Serv. Comm'n, 98 Wis. 2d 682, 699, 298 N.W.2d 205 (Ct. App. 1980). For this reason, the PSC may not take into account a company's past losses when determining a just and reasonable rate, with this exception: the PSC may base an increase in rates on a utility's operating statement that includes an amortized portion of loss caused by an extraordinary casualty loss, which had occurred through no fault of the utility and which the utility had not been allowed to insure against or set up a reserve for. Id. at 699-700.

¶ 31. Wisconsin Stat. § 196.37(1) also serves to prevent the PSC from reducing rates to take into account a utility's "past undue profits" or to make up for taxes that a utility did not incur. Madison Gas & Elec. Co. v. Pub. Serv. Comm'n, 150 Wis. 2d 186, 195-96, 441 N.W. 311 (Ct. App. 1989) (holding that the PSC's decision to use lower federal income tax expense in setting utility's future rate was not an attempt to wipe out unanticipated profits, but simply avoidance of over-collection that would otherwise occur in view of change in federal tax law). Thus, whether a rate increase or decrease is at issue, under § 196.37(1) the PSC is authorized to evaluate a just and reasonable rate only for services that will be provided in the future; the agency may not, with the exception of an extraordinary casualty loss, adjust that rate to take into account an over ór under valuation of services provided in the past.

¶ 32. The prohibition of Wis. Stat. § 196.37(1) also applies to refunds or credits to consumers that are based on a re-evaluation of the reasonableness of the rates for past services. Thus, while the PSC has the authority to allow a utility to increase its rates on an interim basis pending the final determination on permanent rates, it may not in a final order direct a refund of sums the utility collected under the interim rate order — if, for example, the increase allowed in the interim order was greater than that determined to be reasonable in the final order. Friends of the Earth v. Pub. Serv. Comm'n, 78 Wis. 2d 388, 412-13, 254 N.W.2d 299 (1977). Ordering a refund of rates previously authorized by the PSC, whether on an interim or permanent basis, violates the rule against retroactive rate-making. Id. On the other hand, if the interim order is conditioned on the possibility that a refund might be required, the PSC does have the authority to order a refund in the final order because in this situation "the PSC has not fully exercised its ratemaking ppwer until such interim rates are re-evaluated in the final order." Id. at 412.

¶ 33. A credit to customers rather than a refund was involved in Wisconsin Power & Light Co., 181 Wis. 2d 385. When that utility applied for a rate increase, the PSC discovered that the utility had been grossly overcharged for coal and determined the utility had been imprudent in administering its contract for coal. The PSC therefore ordered the utility to pay a penalty, based on a portion of the overcharges, in the form of credits to customers. Id. at 390-91. The PSC acknowledged this order constituted retroactive ratemaking. However, it argued that the court should recognize an exception for "management imprudence," allowing the PSC the authority to order a utility to refund any "imprudently incurred costs, even though the costs were collected pursuant to the utility's PSC-approved rates." Id. at 395 The court declined to create such an exception, reasoning that this exception would "swallow the rule" against retroactive ratemaking. Id.

¶ 34. Kendall argues that Friends of the Earth and Wisconsin Power & Light support its position that the refund order in this case is retroactive ratemaking, but we do not agree. In both cases the PSC had determined that a particular rate was reasonable (in the former, on an interim basis), and Wis. Stat. § 196.37(1) prevented the PSC from re-evaluating the reasonableness of that rate for services already provided. Kendall has provided us with no case, and we have discovered none, where § 196.37(1) was applied when the PSC was not evaluating the reasonableness of rates for services already provided.

¶ 35. Third, GTE North, on which the PSC relies, supports the conclusion that Wis. Stat. § 196.37(1) is not implicated when a refund is ordered for reasons other than the PSC's determination that rates for services already provided were not reasonable. In GTE North, the court concluded that the PSC had the authority to order a refund when a utility charged a customer for a service in violation of the filed-rate statute, Wis. Stat. § 196.22. 176 Wis. 2d at 570. For purposes of its decision, the court assumed that the utility had filed no tariff for the service. Id. at 563. The court concluded that the PSC had the authority under Wis. Stat. § 196.37(2) to order a refund of the charges. This section provides:

(2) If the commission finds that any measurement, regulation, practice, act or service is unjust, unreasonable, insufficient, preferential, unjustly discriminatory or otherwise unreasonable or unlawful, or that any service is inadequate, or that any service which reasonably can be demanded cannot be obtained, the commission shall determine and make any just and reasonable order relating to a measurement, regulation, practice, act or service to be furnished, imposed, observed and followed in the future.

¶ 36. The court in GTE North rejected the utility's argument that the phrase "in the future" allowed the PSC to formulate only future remedies and future changes in utility charges, practices, acts or services, but not refunds for past charges, practices, acts or services that are now determined to have been unlawful. The court observed that the prior version of Wis. Stat. § 196.37(2) had contained a broad authorizing clause that was not modified by the phrase "in the future": "and [the PSC] shall make such other order respecting such measurement, regulation, act, practice or service as shall be just and reasonable." Id. at 566-67. Although the legislature deleted this clause, the Act in which it did so expressly stated that "the legislature did not intend to make any substantive change in the law treated by this act." Id. Therefore, the court reasoned, the phrase "in the future" remaining in subsec. (2) could not be construed as a limitation on the PSC's authority. The court concluded that the PSC had the authority under the revised version of subsec. (2) to order a refund because it is a "just and reasonable order regarding a 'measurement, regulation, act, practice, or service.'" Id. at 567. The court also decided that public policy supported this result.

In addition to the language and history of the statute, the public policy behind chapter 196, Stats., further convinces us that the legislature intended that the PSC have the authority to order a refund of compensation collected by a utility in violation of its filed tariffs. We must presume a legislative intent that advances the purposes of the statute. .. . The primary purpose of the public utility laws in this state is the protection of the consuming public.... Placing authority in the PSC to order refunds in cases where a utility is in violation of its filed tariffs furthers this public policy.

Id. at 567-68.

Allowing the PSC to order refunds in cases where utilities have provided untariffed services or charged a rate higher than its tariffed rates furthers this goal [of remedying utility price discrimination] by allowing the PSC to control price discrimination through strict application of the filed rate doctrine. Section 196.22, Stats., is a statutory expression of the filed rate doctrine. The doctrine generally forbids a regulated utility to charge rates for its services other than those properly filed with the appropriate regulatory authority.

Id. at 569.

¶ 37. The court in GTE North did not mention Wis. Stat. § 196.37(1). In Kendall's view, § 196.37(2), rather than § 196.37(1), was applicable in GTE North because the utility there had filed no schedule for the services. However, the facts regarding what the utility's tariffs encompassed were disputed. The court of appeals had concluded that the PSC "did not sufficiently explain why it concluded that GTE's contracts ... [for time and temperature announcement services] were not authorized under GTE's 'Special Equipment of Special Assemblies of Equipment' tariff' and had remanded on that issue. Id. at 563. However, the supreme court said, for purposes of resolving the issue before it — "whether the PSC has the statutory authority to order a refund of compensation collected by a utility in violation of its filed tariffs" — it would "assume that GTE's contracts . . . were not authorized by tariffs." Id. In other words, the utility may have believed that the services at issue were included in schedules already filed, but the PSC may have properly decided they were not.

¶ 38. Although the court in GTE North did not explain why Wis. Stat. § 196.37(2) rather than § 196.37(1) was applicable, our reading of the case is that § 196.37(1) did not apply because the refund order was not based on a determination that the contract rates were unreasonable; that is, the utility was not ordered to refund the difference between the rates it charged and reasonable rates. Rather, the refund order was based on a determination that the utility had violated the filed-rate doctrine by charging for a service when a rate for that service had not been approved by the PSC. Therefore, the remedy was not a refund of the difference between a reasonable rate and the rate actually charged, but a refund of the difference between the filed rate (and, under the facts assumed by the supreme court, no rate for the services in question had been filed and approved by the PSC) and the actual charges. Similarly, in this case the refund is not based on a determination that the new access rates were not reasonable: the PSC expressly made clear that issue was still to be decided if Kendall filed an application for an increase. Rather, the refund is based on the difference between the properly filed access rates and the rates actually charged.

¶ 39. Our reading of GTE North is consistent with Wisconsin Power & Light's reference to it.

Under the filed rate doctrine, codified in sec. 196.22, Stats, a utility must charge the rate that it files with the commission and that the commission approves. If a utility charges its customers a higher rate, the PSC may order the utility to refund its excess revenue. See GTE North, 176 Wis. 2d at 570.

Wisconsin Power & Light Co. at 396.

¶ 40. In summary, we are persuaded that the prohibition in Wis. Stat. § 196.37(1) against retroactive ratemaking does not apply in this case because the PSC was not exercising its ratemaking authority. It was not deciding whether the increased access rates were reasonable, but was deciding whether Kendall had complied with the statutory procedural requirements for increasing rates. Its refund order was a remedy for the failure to comply with those statutory requirements, not a remedy for charging unreasonable rates for services already provided. However, this does not end our inquiry, because the PSC may not order the refund it did without statutory authority. See GTE North Inc., 176 Wis. 2d at 564. Therefore, the final question is whether the PSC had the authority to order the refund, even though it does not constitute prohibited retroactive ratemaking.

PSC's Authority Under Wis. Stat. § 196.37(2)

¶ 41. The PSC contends it has the authority to order the refund under GTE North, whereas Kendall contends that GTE North is inapposite. As we have described above, the court in GTE North concluded that the utility had violated the filed-rate statute, that Wis. Stat. § 196.37(2) authorized a refund order of the charges that were not properly filed, and that public policy was served by allowing a refund order to strictly enforce the filed-rate statute. Kendall argues that GTE North is factually distinguishable because in GTE North the utility did not file any schedule for the service in question, whereas Kendall did file its new rates with the PSC. As we have pointed out above, the utility apparently contended that it had filed a schedule for the service in question, but the PSC did not agree. Moreover, we have affirmed the PSC's conclusion that Kendall violated the filed-rate statute, Wis. Stat. § 196.22. We therefore move on to the question whether § 196.37(2) authorizes the PSC to order a refund based on the violation of Wis. Stat. §§ 196.20(2m) and 196.22 in this case.

¶ 42. We conclude the plain language of Wis. Stat. § 196.37(2) is broad enough to authorize the refund order in this case. The PSC determined Kendall's "act" of increasing rates was "unlawful" — a violation of Wis. Stat. §§ 196.20(2m) and 196.22. The court in GTE North concluded that the "in the future" language in § 196.37(2) was not a limitation on the PSC's authority to order a refund in that case, and that the refund order was authorized because it was "a just and reasonable order regarding a 'measurement, regulation, act, practice, or service.'" GTE North Inc., 176 Wis. 2d at 567. We see no basis on which to conclude that the refund order in this case is not also authorized by § 196.37(2). Given the desirability of strict enforcement of the filed-rate statute, which the court in GTE North recognized, we see no significant difference between charging a rate that the utility believes is included in a tariff but the PSC concludes is not, as in GTE North, and charging a rate that the utility believes was properly filed with the PSC but the PSC concludes was not. In both cases a refund furthers the purposes of the filed-rate statute; it also furthers the purposes of public participation and PSC scrutiny before rate increases as expressed in § 196.20(2m).

¶ 43. Kendall may also be arguing that, even if it did violate the filed-rate statute, and even if the PSC does have the authority to order a refund without violating Wis. Stat. § 196.37(1), it was unjust for the PSC to do so in this case because the agency had accepted Kendall's new access rates for filing. However, given the findings of the PSC, we conclude the refund order here was just and reasonable. See GTE North Inc., 176 Wis. 2d at 567. The PSC found that Kendall knew its schedules would and did have the effect of increasing rates for the access customers in the nineteen exchanges. In addition, even after being informed by PSC staff in March of 1999 that they believed Kendall's access rate changes required prior PSC approval, Kendall did not initiate that process, but instead insisted the changes were not an increase and therefore it did not need to comply with Wis. Stat. § 196.20(2m). The PSC's order that Kendall should make the affected customers whole is just and reasonable and within the authority conferred by § 196.37(2).

By the Court. — Order affirmed.

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

       The schedules a utility must file under Wis. Stat. § 196.19(1) and the rules and regulations that affect its services, products, and rates, which it must file with the PSC under § 196.19(2), are known as "tariffs." GTE North Inc. v. Pub. Serv. Comm'n, 176 Wis. 2d 559, 562 n.1, 500 N.W.2d 284 (1993).

       We review the decision of the PSC, not that of the circuit court. See Richland Sch. Dist. v. DILHR, 166 Wis. 2d 262, 273, 479 N.W.2d 579 (Ct. App. 1991). The lower court affirmed the PSC's refund order on the ground that the PSC approved the new rates only conditionally. Kendall contends the circuit court erred in doing so, but, because we review the PSC's decision, we do not address the circuit court's rationale for affirming the PSC.

       "Public utility" includes "a telecommunication's utility." Wis. Stat. § 196.01(5)(a)2.

       Kendall argues that we should review the PSC's decision de novo, but it does not separately analyze each of the issues it raises on appeal in light of the appropriate standard of review.

       The judicially-created filed rate doctrine has its origins in Keogh v. Chicago & N.W. Railway Co., 260 U.S. 156 (1922), and has been applied in the context of many industries where rates are regulated. Most recently, we applied the doctrine in an antitrust suit seeking damages on the ground that milk prices established by a federal agency were invalid because they were the result of manipulation by certain corporations. Servais v. KraftFoods, Inc., 2001 WI App 165, 246 Wis. 2d 920, 631 N.W.2d 629, aff'd 2002 WI 42, 252 Wis. 2d 145, 643 N.W.2d 92.

       We recognize that the supreme court has also chosen to defer to the PSC even when the issue of statutory construction concerned the scope of the PSC's authority. Kimberly-Clark Corp. v. Pub. Serv. Comm'n, 110 Wis. 2d 455, 464-66, 329 N.W.2d 143 (1977). However, we need not resolve this apparent conflict because the standard of review does not affect the outcome of our analysis of Wis. Stat. § 196.37.

       The complete version of Wis. Stat. § 196.37(2), before amended by 1983 Wis. Act 53 at 747-48, provided:
      Whenever the commission shall find any regulations, measurements, practices, acts or service to be unjust, unreasonable, insufficient, preferential, unjustly discriminatory or otherwise unreasonable or unlawful, or shall find that any service is inadequate, or that any service which can be reasonably demanded cannot be obtained, the commission shall determine and by order fix reasonable measurements, regulations, acts, practices or service to be furnished, imposed, observed and followed in the future in lieu of those found to be unreasonable, inadequate or otherwise unlawful, and shall make such other order respecting such measure, regulation, act, practice or service as shall he just and reasonable. (Emphasis added.)


source: Caselaw Access Project

license: Public Domain

text:
    Kenneth A. Folkman, Sr., Debra J. Folkman and Kenneth A. Folkman, Jr., Plaintiffs-Appellants, v. Sheri A. Quamme, State Farm Mutual Automobile Insurance Company and Keith A. Folkman, Defendants, Society Insurance, Defendant-Respondent.

    Court of Appeals

      No. 02-0261.

      Submitted on briefs June 12, 2002.

    Decided August 29, 2002.

    2002 WI App 237
    (Also reported in 652 N.W.2d 406.)

      On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of George Burnett of Liebmann, Conway, Olejniczak & Jerry, S.C., Green Bay.

      On behalf of the defendant-respondent, the cause was submitted on the brief of James W. Mohr,; Jr. of Mohr & Anderson, S.C., Hartford.
    Before Vergeront, EJ., Dykman and Lundsten, JJ.

       Petition to review granted 11-12-02.

   VERGERONT, EJ.

¶ 1. This appeal concerns the construction of insurance policy provisions relating to the insurer's limit of liability when there is more than one insured liable in an automobile accident. The circuit court construed Society Insurance's policy to limit its liability to $50,000 per accident regardless of the number of insureds who are liable in the accident. We agree with the insureds that the policy is ambiguous and is reasonably interpreted to provide that the per person and per accident limits for bodily injury apply to each insured liable in one accident. We therefore conclude that this is the proper construction of the policy. Accordingly, we reverse the circuit court's order denying the insureds' request for a declaratory ruling in their favor and its order dismissing Society from this action upon deposit of $50,000 to the clerk of court. We remand for further proceedings consistent with this opinion.

BACKGROUND

¶ 2. Keith Folkman was seventeen years old at the time of the accident and was operating a car owned by his parents, Debra and Kenneth Folkman, Sr., when it collided with another vehicle. Debra and another son, Kenneth Jr., were passengers in the car Keith was driving, and both Debra and Kenneth Jr. were seriously injured. Both Keith's parents had sponsored Keith's driver license.

¶ 3. Keith's parents' car was insured, under a Society policy issued to Debra, as the named insured. The declaration page provided that there was a "split limit" of liability for bodily injury — $25,000 for each person and $50,000 for each occurrence. Keith and Kenneth Sr., as well as Debra, were each insureds under the policy.

¶ 4. The "Insuring Agreement"' section of "Part A — Liability Coverage" provided:

INSURING AGREEMENT
A. We will pay damages for "bodily injury" or "property damage" for which any "insured" becomes legally responsible because of an auto accident. Damages include prejudgment interest awarded against the "insured." We will settle or defend, as we consider appropriate, any claim or suit asking for these damages. In addition to our limit of liability, we will pay all defense costs we incur. Our duty to settle or defend ends when our limit of liability for this coverage has been exhausted. We have no duty to defend any suit or settle any claim for "bodily injury" or "property damage" not covered under this policy.

¶ 5. The endorsement titled "Split Liability Limits" replaced the first paragraph of the "Limit of Liability" provision in Part A and provided as follows. (The layout here is substantially the same to that of the endorsement itself.)

SPLIT LIBILITY LIMITS

SCHEDULE

Bodily Injury Liability

Property Damage Liability

The first paragraph of the Limit of Liability provision in Part A is replaced by the following:

LIMIT OF LIABILITY

The limit of liability shown in the Schedule or in the Declarations for each person for Bodily Injury Liability is our maximum limit of liability for all damages, including damages for care, loss of services or death, arising out of "bodily injury" sustained by any one person in any one auto accident. Subject to this limit for each person, the limit of liability shown in the Schedule or in the Declarations for each accident for Bodily Injury Liability is our maximum limit of liability for all damages for "bodily injury" resulting from any one auto accident.

$_each person

$_each accident

$_each accident

The limit of liability shown in the Schedule or in the Declarations for each accident for Property Damage Liability is our maximum limit of liability for all "property damage" resulting from any one auto accident. This is the most we will pay regardless of the number of:

1. "Insureds;"

2. Claims made;

3. Vehicles or premiums shown in the Declarations; or

4. Vehicles involved in the auto accident.

This endorsement must be attached to the Change Endorsement when issued after the policy is written.

¶ 6. The Folkmans initiated this action against Keith, Society, the driver of the other vehicle, and that driver's insurer. Society acknowledged Keith's responsibility for the" accident, but disagreed with the Folkmans over the limit of the liability coverage. Society contended that its liability limit was $50,000 for the accident, and it filed a motion seeking to deposit this amount with the court and to be dismissed from the action. The Folkmans opposed the motion. They contended that, since Debra was liable to Kenneth Jr. as Keith's sponsor and Kenneth Sr. was liable to Debra and Kenneth Jr. as Keith's sponsor, and since Debra, Kenneth Sr., and Keith were each separately insured under the policy, Society owed $125,000: $50,000 for Keith's liability to Debra, $25,000 for Debra's sponsor liability to Kenneth Jr., and $50,000 for Kenneth Sr.'s sponsor liability. The Folkmans sought a declaratory ruling that this was the correct amount of Society's obligation for liability coverage.

¶ 7. The circuit court concluded that, although the policy provisions quoted above "may appear ambiguous . .., the policy is unambiguous when applying the existing case law," and it decided the policy limit for bodily injury liability was $50,000. The court therefore denied the Folkmans' motion for a declaratory ruling in their favor and ordered that Society be dismissed upon deposit of $50,000 with the court.

DISCUSSION

¶ 8. On appeal, the Folkmans contend the court erred in construing the policy to limit Society's liability to $50,000. As they did in the circuit court, they assert that the proper construction takes into account that there is more than one insured liable in this accident and results in coverage of $125,000.

¶ 9. The proper construction of an insurance policy is a question of law, which we review de novo. Danbeck v. American Family Mut. Ins. Co., 2001 WI 91, ¶ 10, 245 Wis. 2d 186, 629 N.W.2d 150. An insurance policy is construed to give effect to the intent of the parties as expressed in the language of the policy itself. Id. If the language of the policy is unambiguous, we enforce it as written, without resort to rules of construction or principles of case law. Id. Policy language is ambiguous if it is susceptible to more than one reasonable interpretation. Id. If the language is ambiguous, we construe it in favor of the insured. Id. When examining language in an insurance policy, we do not view it in isolation, but in the context of the policy as a whole. Badger Mut. Ins. Co. v. Schmitz, 2002 WI 98, ¶ 61, 255 Wis. 2d 61, 647 N.W.2d 223.

¶ 10. As noted above, the declaration page under "Limits of Liability" provides split limits for liability for bodily injury, meaning one limit for each person— $25,000 — and another limit for each occurrence— $50,000. However, this page does not indicate how these limits are to apply when there is more than one insured liable for bodily injury in one accident. We therefore turn to "Part A Liability Coverage," which begins with the broad language in Paragraph A of "Insuring Agreement" that the insurer will pay damages for bodily injury "for which any insured becomes legally responsible because of an auto accident." There is no dispute between the parties that Debra and Kenneth Sr., as Keith's sponsors, have liability, along with Keith, for his negligence in this accident. The broad opening sentence is limited later in the paragraph by reference to the language, "In addition to our limit of liability." It is plain from a reading of this entire section, in conjunction with the declaration page, that Society is not agreeing to pay for all damages for which "any 'insured' becomes legally responsible," but only for those damages within the "limit of liability." However, it is still not clear how the "limit of liability" on the declaration page is to apply when more than one insured is liable for bodily injury caused by an accident.

¶ 11. We next turn to the "Split Liability Limits" endorsement, which replaces the first paragraph of the "Limit of Liability" section in Part A. The first paragraph of the endorsement addresses damages for bodily injury, and the second addresses property damage; in both the reader is referred to the declaration page for the liability limits, since no figure is written in the schedules in the endorsement. With respect to bodily injury, the first sentence of the first paragraph explains that the per person limit on the declaration page is the "maximum limit for all damages ... sustained by any one person in any one auto accident," and elaborates on this by itemizing the types of damages included in this limit. The second sentence explains that the per accident (or, on the declaration page, per "occurrence") limit is the "maximum limit of liability for all damages ... resulting from any one auto accident." The two sentences read together explain the relationship between the split liability limits: the lower of the two controls. If the per person limits exceed $50,000 when they applied to the number of persons injured in one accident, then the per accident limit controls; on the other hand, even if one person's damages for bodily injury exceeds $25,000, if the total damages for personal injury are less than $50,000, the per person limit controls.

¶ 12. Society argues that this first paragraph in the endorsement does more than explain the relationship of the split liability limits to one another. According to Society, this paragraph unambiguously tells the insured that regardless of the number of insureds who are liable in each accident, the maximum the insurer will pay for all insureds combined is $25,000 for each person injured and $50,000 for the entire accident. We conclude that it is reasonable to read the phrase "maximum limit of liability" to mean the maximum limit of liability for all insureds, rather than for each insured. However, we do not agree with Society that this is the only reasonable interpretation for the following reasons.

¶ 13. The endorsement is entitled "Split Liability Limits," and the first paragraph is most obviously aimed at explaining how the two levels of bodily injury liability limits interact with each other. Nothing in this paragraph draws the insured's attention to the effect of the number of insureds on these limits. However, in the property damages paragraph, which is placed on the endorsement right next to the bodily injury paragraph, after the sentence explaining that the limit of liability on the declaration page for property damage is the "maximum limit of liability for all 'property damage' for any one accident," this sentence follows:

This is the most we will pay regardless of the number of:

1. "Insureds;"
2. Claims made;
3. Vehicles or premiums shown in the Declarations; or
4. Vehicles involved in the auto accident.

Given the placement of this sentence on the page and the use of "This" beginning the sentence — suggesting reference to the one liability limit for property damage referred to in the preceding sentence — it does not appear that this "regardless of the number of insureds" sentence applies to the bodily injury liability limits in the preceding paragraph. Indeed, Society does not argue that it does. Therefore, it is reasonable to read the per person and per accident limits for bodily injury as applying to each insured liable in an accident in contrast to the property damage limit. We also observe that if Society is correct that the use of "maximum limit of liability" plainly tells an insured that the limit applies regardless of the number of insureds liable in one accident, then the sentence expressly so stating regarding the property damage limit would not be necessary. Its use reasonably suggests that the sentence is needed to make clear that the property damage limit referred to applies regardless of the number of insureds; and its omission from the paragraph on bodily injury, at a minimum, makes it unclear whether those limits apply regardless of the number of insureds liable in one accident.

¶ 14. Society argues that this court in Danielson v. Gaspar, 2001 WI App 12, 240 Wis. 2d 633, 623 N.W.2d 182, construed a "per occurrence" or "per accident" limit to apply regardless of the number of insureds, and the circuit court relied on that case in construing the policy in Society's favor. We do not agree that Danielson supports Society's position.

¶ 15. In Danielson, the injured person argued that the insured's negligent entrustment of a vehicle to the driver constituted a separate occurrence from the accident itself, thus providing $100,000 for each occurrence. That policy provided that the bodily injury liability limit for each person — $100,000—was the maximum for bodily injury sustained by one person in any occurrence. Id. at ¶ 13. We concluded that the policy definition of "accident" or "occurrence" was plain, and under that definition both those terms meant the same thing: "a sudden event resulting in bodily injury." Id. We therefore concluded that there was only one occurrence — the collision of the vehicles — and the acts and omissions prior to that collision did not affect the maximum amount payable. Id. We also stated that "the number of insureds whose negligence cause the accident does not determine the amount payable under the policy," id. at ¶ 14, and this is the language Society relies on. However, Society omits the preceding sentence and the accompanying footnote, which make clear that the reason we made the quoted statement was that the policy in that case expressly provided that the per person and per accident limits were the maximum the insurer would pay "regardless of the number of 'insured persons' or claims made." Id. at n.8.

¶ 16. Thus, Society's citation to and discussion of Danielson is inaccurate in two respects: First, the policy language we construed in Danielson was the definition of "accident or occurrence," not the "limit of liability" clause. Second, the limit of liability clause there contained the express language — "regardless of the number of insureds" — that is lacking in the paragraph on bodily injury limits in the endorsement here.

¶ 17. We conclude that, when read together, Paragraph A of "Insuring Agreement" and the "Split Liability Limits" endorsement are ambiguous. They can be reasonably read to provide that the per person and per accident limits for bodily injury on the declaration page apply to each insured liable in one accident, as the Folkmans contend; or they can be reasonably read to apply regardless of the number of insureds, as Society contends. Since the former construction is more favorable to the insured, that is the one we adopt. See Danbeck, 2001 WI 91 at ¶ 10. Accordingly, we reverse the circuit court's order denying the Folkmans' motion for a declaratory ruling in their favor, and its order dismissing Society upon deposit of $50,000 with the clerk of court, and we remand for further proceedings consistent with this opinion.

By the Court. — Order reversed and cause remanded.

       Under Wis. Stat. § 343.15(1), when a person under eighteen applies for a license, the application must be signed and verified by an adult sponsor. Under § 343.15(2)(b), any negligence of a person under eighteen in operating a motor vehicle is imputed to the person's parents, where both have custody and either signed as a sponsor.

       Keith was listed on the declaration page as a driver, along with Kenneth Sr., Debra, and another family member.

       Kenneth Sr., Debra, and their son, Kenneth Jr., are the plaintiffs. -We will refer to them as "the Folkmans" unless it is necessary to identify them as individuals.

       The Folkmans made a number of other arguments in the circuit court based on various statutes and on sponsorship status, which the circuit court also rejected. The Folkmans renew these on appeal, but we need not address them.

       The definition of insured is contained in Section B of "Insuring Agreement." The parties agree that Kenneth Sr., Debra, and Keith are each "insureds" within the meaning of the policy definition.


author: PETERSON, J.

text:
    State of Wisconsin, Plaintiff-Appellant, v. Mark S. Mielke, Defendant-Respondent.

    Court of Appeals

      No. 01-3116-CR.

      Submitted on briefs August 12, 2002.

      Decided September 4, 2002.

    2002 WI App 251
    (Also reported in 653 N.W.2d 316.)

      On behalf of the plaintiff-appellant, the cause was submitted on the briefs of James E. Doyle, attorney general, and Jennifer E. Hashold, assistant attorney general.
    On behalf of the defendant-respondent, the cause was submitted on the brief of David J. Van Lieshout of Menn, Teetaert & Beisenstein, Ltd., Little Chute.
    Before Cane, C.J., Hoover, PJ., and Peterson, J.

       Petition to review denied 11-12-02.

   PETERSON, J.

¶ 1. The State appeals an order suppressing evidence obtained by a law enforcement officer who entered a private residence without a warrant after a domestic violence report. The State argues that the officer's entry was permitted by exigent circumstances. We agree and reverse the order.

BACKGROUND

¶ 2. On March 10, 2001, Outagamie County Sherriffs deputies Rachael Miller and John Hoffman responded to a report that Mark Mielke had struck Ruth Byrne at their home, and that Byrne was spitting blood. Miller had eleven years of law enforcement experience and had responded to domestic violence reports before. Additionally, Hoffman had been to Mielke's house several times for domestic abuse calls.

¶ 3. Upon the officers' arrival, Byrne came onto the front porch and told Miller that there was nothing wrong. Byrne did not appear to have any injuries. Although the scene was calm, Miller observed that Byrne was crying, shaking and cowering in a corner. Byrne then turned to go back into the house, telling Miller not to follow her. As Byrne tried to close the door behind her, Miller used her hand, and possibly her foot, to prevent the door from being closed. Believing Byrne to be in danger, Miller continued to talk with Byrne for thirty seconds to two minutes. Then, through the open door, Miller saw Mielke inside the house. She asked Mielke's permission to enter the house, which Mielke granted.

¶ 4. Mielke ultimately was charged with recklessly endangering another's safety, being armed while under the influence of alcohol, battery and felony bail jumping. Upon a motion by Mielke, the trial court suppressed evidence found inside the house stating that although there was probable cause, there were not sufficient exigent circumstances to justify entering the home. The State appeals the suppression order.

STANDARD OF REVIEW

¶ 5. In reviewing a circuit court's order granting or denying a motion to suppress evidence, the court's findings of evidentiary or historical fact will be upheld unless they are clearly erroneous. State v. Matejka, 2001 WI 5, ¶ 16, 241 Wis. 2d 52, 621 N.W.2d 891. However, whether the court's findings of fact pass statutory or constitutional muster is a question of law that this court reviews independently. Id.

DISCUSSION

¶ 6. "A warrantless search of a home is presumptively unreasonable under the Fourth Amendment." State v. Richter, 2000 WI 58, ¶ 28, 235 Wis. 2d 524, 612 N.W.2d 29. An exception to the warrant requirement arises when the State can demonstrate "both probable cause and exigent circumstances that overcome the individual's right to be free from government interference." State v. Hughes, 2000 WI 24, ¶ 17, 233 Wis. 2d 280, 607 N.W.2d 621.

¶ 7. In this case, Mielke does not dispute the trial court's ruling that probable cause existed. Instead, he contends that there were no exigent circumstances justifying the warrantless entry. Our analysis of whether the officers acted reasonably in entering the house without a warrant is measured against the "totality of the circumstances." State v. Garrett, 2001 WI App 240, ¶ 16, 248 Wis. 2d 61, 635 N.W.2d 615. The test is objective: what a reasonable police officer would reasonably believe under the circumstances. See Richter, 2000 WI 58 at ¶ 30.

There are four well-recognized categories of exigent circumstances that have been held to authorize a law enforcement officer's warrantless entry into a home: 1) hot pursuit of a suspect, 2) a threat to the safety of a suspect or others, 3) a risk that evidence will be destroyed, and 4) a likelihood that the suspect will flee.

Id. at ¶ 29.

¶ 8. Here, Miller believed Byrne's safety was threatened. The issue is whether a reasonably prudent person in the circumstances would he warranted in the belief that Byrne was in danger. Due weight must be given to the specific reasonable inferences that the officer was entitled to draw from the facts in light of her experience. State v. Guy, 172 Wis. 2d 86, 94, 492 N.W.2d 311 (1992) (citation omitted). When a police officer is confronted with two reasonable competing inferences, one that would justify the search and another that would not, the officer is entitled to rely on the reasonable inference justifying the search. See State v. Tompkins, 144 Wis. 2d 116, 124-25, 423 N.W.2d 823 (1988).

¶ 9. The trial court stated that the scene was calm, there was no sign of injury and Byrne denied injury, concluding that there was "no indication at that particular time that a domestic incident was occurring." This is one inference that may be drawn from the facts.

¶ 10. However, another inference, at least as reasonable, is that domestic violence was in fact occurring. There was a report that Byrne had been hit in the stomach and was spitting blood. Hoffman had previously responded to reports of domestic violence at Mielke's home. Byrne was crying, shaking and cowering on the front porch. Byrne's denials were inconsistent with her demeanor, and it is well accepted that domestic violence victims often refuse to report the abuse. See State v. Jacobs, 2 P.3d 974, 976 (Wash. Ct. App. 2000). Under all of these circumstances, Miller, with her eleven years of experience, could reasonably believe that Byrne's safety was threatened. Consequently, we conclude that under the totality of circumstances test, Miller was entitled to infer that exigent circumstances existed. Therefore, her entry was permitted.

By the Court-Order reversed.

       The State also argues that the entry was permissible under the emergency doctrine and was based on the owner's consent. However, because we hold that there are sufficient exigent circumstances justifying the entry, we do not need to address these additional arguments.

        See also State v. Grant, 920 P.2d 609, 613 n.5 (Wash. Ct. App. 1996) (citing A. GaNley, Ph.D., Domestic Violence: The What, Why and Who, As Relevant to Civil Court Domestic Violence Cases, contained in Domestic Violence Cases in the Civil Court: A National Model for Judicial Education, 20, the Family Violence Prevention Fund (1992)).


author: CANE, C.J.

text:
    Bloomer Housing Limited Partnership, Plaintiff-Respondent, v. City of Bloomer, Defendant-Appellant.
    Court of Appeals

      No. 01-3495.

      Submitted on briefs August 12, 2002.

    Decided September 4, 2002.

    2002 WI App 252;
    (Also reported in 653 N.W.2d 309.)

      On behalf of the defendant-appellant, the cause was submitted on the briefs of William G. Thiel of Weld, Riley, Prenn & Ricci, S.C. of Eau Claire.
    On behalf of the defendant-respondent, the cause was submitted on the brief of Lawrence E. Bechler of Murphy & Desmond, S. C. of Madison.
    Before Cane, C.J., Hoover, PJ., and Peterson, J.
   CANE, C.J.

¶ 1. The City of Bloomer appeals a judgment refunding excess property tax payments to Bloomer Housing Limited Partnership. Bloomer Housing contested the method the City assessor used to calculate its 1999 property tax on North Lakeview Apartments, arguing the assessment failed to account for several use restrictions on the federally subsidized property. The board of review affirmed the assessment. Bloomer Housing paid the taxes under protest and then filed a claim for repayment of excess taxes pursuant to Wis. Stat. § 74.37. After a bench trial, the circuit court determined the City's assessment was excessive because it treated the use restrictions as if they did not affect the property's value. The court reduced the assessment and ordered the City to refund a portion of the taxes to Bloomer Housing. On appeal, the City raises numerous points of error, all of which contend the court improperly valued the restrictions on the property. Because we determine the trial court's decision properly accounts for effect of the restrictions on the value of the property, we affirm the judgment.

BACKGROUND

¶ 2. This appeal is the most recent proceeding in a ten-year dispute between the City and Bloomer Housing regarding the property tax assessment of North Lakeview Apartments. The apartments are federally subsidized under § 515 of the 1949 Housing Act. Bloomer Housing received permission to participate in the § 515 program by the Farmers Home Administration (FmHA), now the Rural Development Agency. FmHA built the apartments in 1990. Upon completion, Bloomer Housing gave a note and mortgage to the federal government. The note required a down payment of 3% of the total $1,012,000 in construction costs. Under the program, Bloomer Housing was also required to place 2% of the construction costs into a reserve account to cover initial operating costs and rent shortfalls. The note's term is fifty years and the annual interest rate is 8.75%.

¶ 3. As part of the § 515 program, Bloomer Housing and FmHA executed an Interest Credit and Rental Assistance Agreement. This agreement is a subsidy through which the federal government agrees to credit the monthly interest payments on the note in excess of 1%. In effect, this makes the note's annual interest rate 1%, although the government can revoke the subsidy if it is "no, longer needed for the benefit of tenants."

¶ 4. In exchange for the low initial investment and interest credit, the apartments are subject to a number of conditions and restrictions. Tenants are limited to persons making less than 80% of Chippewa County's average monthly income, and they may not pay more than 30% of their income for rent. If the apartments generate a profit, Bloomer Housing is limited to a maximum 8% annual return on its initial investment. Any excess is used to reduce the subsidy. Bloomer Housing is required to put 1% of the rental income into a reserve fund for maintenance costs until the fund's balance equals 10% of the loan value. It may not prepay the note. If Bloomer Housing wants to sell the apartments, it must sell to a nonprofit organization and, if one is unavailable, it must obtain government approval of any other buyer. In addition, all restrictions pass to any subsequent owners for the term of the note and mortgage.

¶ 5. In 1991, the City assessed the apartments at $1,000,500. The federal government requires owners of § 515 projects to challenge any assessment the owners consider excessive. Considering the assessment excessive, Bloomer Housing appealed. The City's board of review affirmed the assessment, but the circuit court later invalidated it on certiorari review. On remand, the City again assessed the apartments at $1,000,500, and the board upheld the assessment. The circuit court remanded the assessment in light of new case law regarding the assessment of subsidized housing. Using a new method, the City again assessed the property at $1,000,500. Eventually, the 1991 assessment came before the circuit court on certiorari review two more times.

¶ 6. Before the trial court could issue a decision on the fourth review, the parties stipulated to resolve the dispute by agreeing to abide by the assessment of Keith Munson, an assessor for several communities in southeastern Wisconsin. Munson prepared assessments for the apartments from 1991-1996, which valued the property at less than $500,000. The City attempted to back out of the stipulation and discredit Munson's assessment, but the circuit court refused to allow it to do so. The City filed an appeal, but later withdrew it, and Bloomer Housing paid its taxes for 1991-1996 based on Munson's assessments.

¶ 7. In 1999, the City had a new assessor, Robert Irwin. Irwin valued the apartments at $1,024,100. Bloomer Housing appealed and the board of review affirmed. Bloomer Housing paid the taxes under protest. It then served the City with a claim for excessive assessment pursuant to Wis. Stat. § 74.37(2). The City denied the claim, and Bloomer Housing then filed the excess claim in circuit court pursuant to § 74.37(3)(d).

¶ 8. At trial, Bloomer Housing argued, as it had before the board of review, that the City improperly assessed the property by using the mortgage interest subsidy (1%) in calculating the property's capitalization rate. Instead, Bloomer Housing argued, the stated mortgage rate of 8.75% should have been used. Bloomer Housing offered the testimony of Munson and Albert Gay, an appraiser. They both testified using the stated rate, or a value close to it, was consistent with Wisconsin law governing the assessment of subsidized housing because it resulted in an amount that properly considered the effect of the restrictions on the property's current value. Specifically, Munson said he valued the property at $449,300 using an 8.65% rate to account for equity buildup over the life of the mortgage. In addition, he testified the interest subsidy benefited the building's tenants rather than the property itself.

¶ 9. The City offered Irwin's testimony and an appraiser, Kyle Zastrow. Both men testified using the 1% interest rate most accurately reflected the effects the restrictions had on the property, which they said were minimal. Zastrow valued the property at $1,075,000, while Irwin reasserted his assessment of $1,024,100. They suggested the interest subsidy, low initial payment and lengthy mortgage term compensated for the depreciative effects of the equity return limits and the rent and sales restrictions. Zastrow testified the interest subsidy benefited both the tenants and the building while Irwin said only the building itself benefited.

¶ 10. After the trial, the court determined the assessment was excessive. Finding Munson's testimony accurately reflected the value of the property as affected by the restrictions, the court set the property's 1999 value at $455,600, as requested by Bloomer Housing, and ordered the City to refund $12,992.10 in excessive taxes. The City appeals.

STANDARD OF REVIEW

¶ 11. At the outset, we note we are reviewing an action under Wis. Stat. § 74.37(3)(d). This is not a certiorari review. The differences between these types of actions are considerable. Nankin v. Village of Shorewood, 2001 WI 92, ¶ 25, 245 Wis. 2d 86, 630 N.W.2d 141. While certiorari review of a property assessment is limited to the review of the board of assessment's record, § 74.37(3)(d) allows the court to proceed "without regard to any determination made at an earlier proceeding." Nankin, 2001 WI 92 at ¶ 25. The court is only required to give presumptive weight to the City's assessment. Wis. Stat. § 70.49(2); Nankin, 2001 WI 92 at ¶ 25. This only means that the assessor's assessment is presumed correct if the challenging party does not present significant contrary evidence. See generally City of Superior v. DILHR, 84 Wis. 2d 663, 669, 267 N.W.2d 637 (1978); Conradt v. Mt. Carmel Sch., 197 Wis. 2d 60, 69, 539 N.W.2d 713 (Ct. App. 1995). The court may hear new evidence and can enter a judgment if it is in the best interest of the parties under Wis. Stat. § 73.39(3). Nankin, 2001 WI 92 at ¶ 25.

¶ 12. Resolution of this dispute involves the application of law to the facts of the case. It therefore presents a question of law that we review de novo. Ball v. District No. 4, Area Bd., 117 Wis. 2d 529, 537, 345 N.W.2d 389 (1984). Despite our de novo review, we benefit from the trial court's analysis. State v. Isaac J.R., 220 Wis. 2d 251, 255, 582 N.W.2d 476 (Ct. App. 1998). We will not overturn the trial court's findings of fact unless they are clearly erroneous. Micro-Managers, Inc. v. Gregory, 147 Wis. 2d 500, 511, 434 N.W.2d 97 (Ct. App. 1988). Where, as here, there is conflicting testimony, the fact finder is the ultimate arbiter of credibility and when more than one reasonable inference can be drawn, "the reviewing court must accept the inference drawn by the trier of fact." Bank of Sun Prairie v. Opstein, 86 Wis. 2d 669, 676, 273 N.W.2d 279 (1979). The weight and credibility to be given to the opinions of expert witnesses is "uniquely within the province of the fact finder." Schorer v. Schorer, 177 Wis. 2d 387, 396, 501 N.W.2d 916 (Ct. App. 1993).

DISCUSSION

¶ 13. While the City raises numerous issues, its arguments all relate to the court's use of the higher mortgage rate in making its decision. Specifically, the City argues: (1) the court erred as a matter of law by not taking the interest rate subsidy into consideration when it valued the property; (2) the court improperly concluded the detriments to § 515 housing outweigh its benefits; (3) the court improperly concluded the interest subsidy flows in favor of the tenants; (4) the court improperly considered the public benefits of subsidized housing in valuing the property; (5) the City assessor considered all relevant factors in valuing the property; and (6) the court improperly held the City assessor's use of the interest subsidy in valuing the property violated the law.

¶ 14. The law governing property valuation for tax purposes is found in Wis. Stat. ch. 70. Wisconsin Stat. § 70.32(1) provides that real property be valued at the "full value" which could ordinarily be obtained at a private sale. "Full value" means the fair market value, that is, the amount the property would sell for in an arms-length transaction between a willing buyer not obligated to buy and a willing seller not obligated to sell. Metropolitan Holding Co. v. Milwaukee Review Bd., 173 Wis. 2d 626, 631, 495 N.W.2d 314 (1993). The statute also provides that property be valued according to the Wisconsin Property Assessment Manual, although use of the manual is improper when its provisions would not arrive at the "full value" of the assessed property. Id. at 632-33.

¶ 15. In terms of subsidized housing, the assessment manual suggests three approaches to valuation: (1) the sales comparison approach, reflected in Wis. Stat. § 70.32(1), based on a recent arms-length sale of the property or a reasonably comparable one; (2) the cost approach, based on the expenses involved with creating the housing; and (3) the income approach, which values the property based on the income it generates. 1 Wisconsin Property Assessment Manual 9-27 (hereinafter Manual). A recent arms-length sale of the property or a reasonably comparable one is the preferred method of valuation. Rosen v. City of Milwaukee, 72 Wis. 2d 653, 665, 242 N.W.2d 681 (1976). North Lakeview Apartments have not been recently sold, and the parties agree there are few, if any, comparable sales of subsidized housing. Instead, both parties agree the income approach is the proper method to value North Lakeview Apartments.

¶ 16. The income approach converts the future benefits likely to be derived from the property into an estimate of present value. Waste Mgmt. v. Kenosha County Review Bd., 184 Wis. 2d 541, 561, 516 N.W.2d 695 (1994). Under this method, the property's annual net income is divided by a capitalization rate, which the manual says an assessor should construct considering the mortgage terms and conditions, rents, expenses of the project, and expected yield rates. 1 Manual, supra, at 9-28.

¶ 17. In addition, when valuing subsidized housing, assessors are required to consider the effects the property's restrictions have on value. Metropolitan, 173 Wis. 2d at 631. In Metropolitan, the owners of a federally subsidized housing project in Milwaukee challenged their income-based assessment because it was calculated using market rents rather than the actual rents the owners were allowed to charge. Id. at 628. The supreme court said the actual rents must be used, even though the assessment manual said assessors should use market rents. See id. at 630-31. The court said the use of market rents would not reflect the property's full value under Wis. Stat. § 70.32(1), and determined the manual was in conflict with the statute. Id. at 632-33. By not considering actual income and expenses, the court said, the assessor "essentially pretended" the property was not hindered by the rent restrictions. Id. at 631.

¶ 18. The parties generally agree on the project's income. They only differ on the mortgage rate to be included in the capitalization rate. The City contends it should be based on the 1% figure because that is what Bloomer Housing actually pays on its mortgage and the subsidy benefits the property, not the tenants. Bloomer Housing suggests it should be closer to the stated rate of 8.75% because it more accurately accounts for the effects of the restrictions and the subsidy benefits the tenants only. The trial court based its valuation on Munson's 8.65% figure, saying it found his testimony in line with its understanding of the law.

¶ 19. Specifically, the court agreed with Bloomer Housing that the City's assessment "essentially pretended" the property was not hindered by the governmental restrictions. The City, however, also relies on Metropolitan, arguing its requirement that assessors use actual income and expenses when valuing subsidized housing means the actual mortgage rate of 1% must be used in calculating the capitalization rate. It argues Bloomer Housing's suggested valuation uses actual figures on the income side of the equation, but then unfairly uses an artificially inflated figure on the other. Thus, the City suggests the trial court erred as a matter of law by not taking the interest subsidy into account.

¶ 20. We do not agree with the City's interpretation of Metropolitan. As we understand it, Metropolitan only addresses the income half of the income approach equation. It does not address the capitalization rate half, and we do not read the case as requiring the use of the subsidized mortgage rate. See id. at 630-31. The assessor's responsibility is to determine the "full value" of the property in accordance with the manual. Wis. Stat. § 70.32. The 1999 manual required assessors to consider the mortgage terms and conditions, the rents, expenses, and expected yield rate. See 1 Manual, supra, at 9-28. The assessor's job is to examine all these factors and determine how they affect the value of the property. In this case, these factors were all subject to various governmental restrictions. By establishing the capitalization rate based on the 1% "actual" mortgage rate, the court determined the City's assessment failed to accurately account for these restrictions.

¶ 21. Contrary to the City's contentions, the court's decision does take the subsidy into account. The court then examined the subsidy with the property's restrictions, as Metropolitan requires. See Wallworth Affordable Housing v. Village of Walworth, 229 Wis. 2d 797, 801-02, 601 N.W.2d 325 (Ct. App. 1999). The City would have the court consider only the subsidy agreement but, as the trial court noted, this would ignore the other conditions and limitations on the property.

¶ 22. Here, the parties presented the court with two competing valuations. One said the restrictions did not lower the property's value, while the other said they did. After weighing the evidence, the court determined Munson's valuation accurately accounted for the effect of the restrictions on the apartments' value. We defer to the trial court's resolution of conflicting testimony. Bank of Sun Prairie, 86 Wis. 2d at 676.

¶ 23. The City also argues the 1% rate is appropriate because the interest subsidy flows to the property, not the tenants. The trial court determined the subsidy flows to the tenants in the form of reduced rents. Although the witnesses offered conflicting testimony on the subsidy's beneficiary, we determine the court's finding is consistent with the assessment manual. In its description of § 515 housing, the manual says "After construction of the project, FmHA may provide a limited distribution owner with mortgage interest subsidies. Tenants receive lower rents as a benefit." 1 Manual, supra, at 9-26. The beneficiaries of the subsidy, according to the manual, are the tenants. Nonetheless, the subsidy affects the property's value. Any potential buyer would reasonably consider the subsidy's value when determining the appropriate price. The subsidy, however, is not determinative. It must be weighed with all the other factors influencing value. Our examination of the record suggests this is exactly what the court did.

¶ 24. Next, the City claims the trial court erred by determining the project's restrictions outweigh its benefits. Although the court did not explicitly make this determination, we understand the City to be criticizing the court's conclusion that the project's restrictions decreased its fair market value. The City suggests the restrictions do not hinder the property value and that the benefits must outweigh the restrictions because the apartments would not have been built had it not been for the low initial investment, lengthy mortgage rate, and interest subsidy. While we agree it is unlikely the project would have been built without these benefits, this does not mean the other restrictions and conditions on the property do not adversely affect the apartments' value.

¶ 25. The City also cites a Michigan case, Meadowlanes Ltd. Dividend Housing Ass'n v. City of Holland, 473 N.W.2d 636 (Mich. 1991), for the proposition the lower rate must be used in calculating the value of subsidized housing. In Meadowlanes, the Michigan Supreme Court determined it was improper for an assessor not to consider the subsidy when valuing subsidized property. Id. at 647-48. The court noted the subsidy added value to property by reducing operating costs, making lower rents feasible, and allowing for the possibility of an, increased debt load. Id. The subsidy, the court said, is "a value-influencing factor" whose value, if any, "should be reflected in the assessment process." Id. at 647.

¶ 26. We read Meadowlanes to require assessors to consider the subsidy in their valuation. This is consistent with the assessment manual, Metropolitan and, we conclude, the trial court's decision. An assessor is required to consider all of the factors influencing the value of property, and this includes the interest subsidy. See Wis. Stat. § 70.32. It also includes limits on income, rent, and sales. See Metropolitan, 173 Wis. 2d at 631. We have already determined the trial court properly concluded the City's assessment did not properly consider the effects of all these factors.

¶ 27. The City next contends the court improperly considered the public benefits of subsidized housing in making its decision. It points to a section of the court's decision where it addresses the effects of subsidized housing on communities. The court said the project's lower rents resulted in lower property taxes and, consequently, less income for municipalities. However, the court then added there is some benefit for communities in terms of the increased retail spending by residents of subsidized housing. The City argues by considering the public benefits, the court overstepped the laws governing property evaluation.

¶ 28. Even if the public benefits of a subsidized housing project are an improper consideration in determining its property taxes, here we cannot say this analysis was the basis of the court's ruling. The crux of the court's decision is the City's failure to give the proper weight to the effects of the restrictions on the property's value. The City correctly points out the appropriate legal standard is Wis. Stat. § 70.32. We have already determined the court's ruling complies with the law.

¶ 29. The City next argues its assessor properly considered all the factors impacting the value of the property and, therefore his assessment was done according to the law. In its brief, the City recounts the number of steps Irwin took before assessing the project, including talking with assessors who had assessed § 515 projects, reviewing other assessments of similar projects and academic research. The City argues because of these steps and because the trial court must grant presumptive weight to this assessment, we must reverse the court's decision.

¶ 30. We agree the trial court must grant presumptive weight to Irwin's assessment. See Nankin, 2001 WI 92 at ¶ 25. The challenging party, however, may overcome this presumption with contrary evidence. See generally City of Superior, 84 Wis. 2d at 669; Conradt, 197 Wis. 2d at 69. Here, the court determined Bloomer Housing had presented sufficient evidence, through Munson, showing the City's assessment incorrectly valued the property.

¶ 31. Finally, the City argues the trial court improperly determined the assessor's consideration of the interest credit and rental subsidy violated assessment law. The City contends the court determined it was error for the City to use the interest subsidy agreement instead of the mortgage itself in determining the capitalization rate. This argument mischaracterizes the court's decision. The court did not rule the City's use of the subsidy agreement violated the law. Instead, the court determined that by using just the agreement, the City ignored the effects of other restrictions on the property's value. An assessor must consider the effects of the restrictions on subsidized housing. The trial court properly determined the City failed to do so when it assessed North Lakeview Apartments.

By the Court. — Judgment affirmed.

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

       All references to the manual are to the 1999 version. That version's section on subsidized housing, pages 9-25 to 9-28, was effective from December 1994 to December 2000.