author: LUNDSTEN, J.

text:
    State of Wisconsin, Plaintiff-Respondent, v. Jeffery A. Keeran, Defendant-Appellant.

    Court of Appeals

      No. 01-1892-CR.

      Oral argument July 25, 2002.

      Decided December 4, 2003.

    2004 WI App 4
    (Also reported in 674 N.W.2d 570.)

      On behalf of the defendant-appellant, the cause was submitted on the briefs of and oral argument by Joseph L. Sommers, Madison.
    On behalf of the plaintiff-respondent, the cause was submitted on the brief of Sally L. Wellman, assistant attorney general, and James E. Doyle, attorney general. There was oral argument by Sally L. Wellman.

    Before Dykman, Vergeront and Lundsten, JJ.

       Petition to review denied 2-24-04.

   LUNDSTEN, J.

¶ 1. Jeffery A. Keeran was tried before a jury and convicted of one count of first-degree intentional homicide with the use of a dangerous weapon, one count of armed robbery, and one count of burglary while armed with a dangerous weapon, all as party to the crime. Keeran makes three arguments on appeal: (1) that the trial court erroneously declined to instruct the jury on the statutory defense of coercion; (2) that his trial counsel provided ineffective assistance because counsel failed to present evidence showing that Keeran participated in the crimes because he reasonably feared his co-participant; and (3) that this court should grant a new trial in the interest of justice. We reject each of these arguments and affirm.

Background

¶ 2. On June 27, 1998, Jon Barreau, a long-time companion of Jeffery Keeran, came to Keeran's home in Monroe and told Keeran he (Barreau) was going to Madison to rob someone and that Keeran was coming with him. According to Keeran, Barreau threatened Keeran when Keeran said he did not want to participate. Barreau got two bats out of a garage and the two men, along with a woman named Tiffany Kohl, drove to Madison. They stopped the car on a side street in Madison. Keeran and Barreau got out of the car and walked to the home of Robert Hansen. Barreau knew Hansen from prior contacts. Both Barreau and Keeran entered Hansen's house. They each had a bat concealed in a pants leg. While in Hansen's house, Barreau beat Hansen with a bat, knocking Hansen to the floor. When Barreau hit Hansen across the face, Barreau's bat broke. According to Keeran, Barreau told Keeran to hit Hansen and threatened "hit him or I'm hitting you." Keeran took the bat he brought into the house and, using both hands, hit Hansen twice. Keeran testified that he went outside, vomited, and waited about forty-five minutes until Barreau came out with various items taken from Hansen's house.

¶ 3. Hansen died as a result of the beating. The pathologist who examined Hansen identified ten wounds about Hansen's head, all consistent with the sort of blunt-force trauma that a bat could cause. In simple terms, Hansen was beaten to death.

Discussion

A. Denial of Coercion Defense Jury Instruction

¶ 4. Keeran asserts that he was erroneously denied coercion jury instructions with respect to all three crimes charged — first-degree intentional homicide, armed robbery, and burglary while armed. We disagree.

¶ 5. The statutory defense of coercion is a complete defense to any crime except first-degree intentional homicide. A successful coercion defense reduces first-degree intentional homicide to second-degree intentional homicide. "Coercion" occurs when a "threat by a person other than the actor's coconspirator . . . causes the actor reasonably to believe that his or her act is the only means of preventing imminent death or great bodily harm to the actor or another and which causes him or her so to act." Wis. Stat. § 939.46(1) (2001-02). The coercion defense is limited to the "most severe form of inducement." State v. Amundson, 69 Wis. 2d 554, 568, 230 N.W.2d 775 (1975). It requires a finding "under the objective-reasonable man test, with regard to the reasonableness of the actor's beliefs that he is threatened with immediate death or great bodily harm with no possible escape other than the commission of a criminal act." Id.

¶ 6. A defendant seeking a coercion defense instruction must meet the initial burden of producing evidence to support such an instruction. See State v. Stoehr, 134 Wis. 2d 66, 87, 396 N.W.2d 177 (1986). A defendant is entitled to a coercion defense instruction if "(1) the defense relates to a legal theory of a defense, as opposed to an interpretation of evidence; (2) the request is timely made; (3) the defense is not adequately covered by other instructions; and (4) the defense is supported by sufficient evidence." State v. Coleman, 206 Wis. 2d 199, 212-13, 556 N.W.2d 701 (1996) (citations omitted). Regarding the last prong of this test, evidence is sufficient if a reasonable construction of the evidence, viewed in a light most favorable to the accused, supports the defendant's theory. Id. at 213.

¶ 7. Keeran argues that he was entitled to a coercion defense instruction because a reasonable construction of the evidence supports a finding that threats made by Barreau reasonably caused Keeran to believe that participating in the crimes (including striking Robert Hansen with a bat as Hansen lay on the floor) was "the only means of preventing imminent death or great bodily harm" to Keeran. The trial court gave several reasons why Keeran was not entitled to a coercion defense instruction. We need not address all of these reasons because we agree with the trial court, and the State, that Keeran has failed to meet his initial burden of producing sufficient evidence to support a finding that he had no "means of preventing imminent death or great bodily harm" to himself, except by participating in the crimes. See Wis. Stat. § 939.46(1). In the words of the Amundson court, Keeran failed to present evidence showing that he reasonably believed there was "no possible escape other than the commission of a criminal act." Amundson, 69 Wis. 2d at 568.

¶ 8. Because Hansen died and because neither Barreau nor Tiffany Kohl testified, Keeran's testimony is the only evidence that might support a finding that he had no other means of preventing imminent harm. His testimony, however, is insufficient to require a coercion instruction because that testimony lacks details necessary to support a finding that Keeran's only means of preventing imminent death or great bodily harm at the hands of Barreau was to remain with Barreau and participate in the crimes. The following is a summary of Keeran's trial testimony viewed most favorably to his request for a coercion defense instruction.

¶ 9. In June 1998, Barreau went to Keeran's house in Monroe sometime in the afternoon; the sun was still out. Barreau talked about robbing someone in Madison. Barreau told Keeran that Keeran was going with him, even though Keeran protested that he did not want to go. Barreau told Keeran "you're going with me or whatever happens is happening to you." Keeran thought this meant Barreau "was either going to beat the shit out of me — beat me up, or he was going to do something to me." After approximately twenty minutes, Tiffany Kohl came to Keeran's house. Barreau went into the garage and grabbed two bats. With Kohl driving, all three people rode to Madison, stopping at a gasoline station near Keeran's house along the way. After they arrived in Madison, Kohl "just drove around," with Barreau telling her where to go. While in the car on the way to Madison, Keeran again told Barreau he "didn't want to go," and Barreau looked at Keeran and said "you're going." At some point, the car stopped on a Madison side street and Keeran and Barreau got out of the car. Kohl remained in the car. Barreau and Keeran then walked "for about two hours" until they came to Robert Hansen's front door sometime after dark. Keeran understood that Hansen was Barreau's intended victim.

¶ 10. Hansen's mother and a police officer described Hansen's house. The front door enters into a living room. The kitchen is in the back of the house and adjoins the living room. From the living room, you can see through the kitchen to the back door of the house. The bathroom is off the kitchen.

¶ 11. Barreau and Keeran entered Hansen's house. Both men had a bat concealed in a pant leg. Keeran said all three men were in the living room area of Hansen's house. After Barreau and Hansen talked for a time, Keeran went to the bathroom. When Keeran came out of the bathroom, he saw Barreau hitting Hansen's head with a bat. Barreau hit Hansen three or four times while Keeran "just stood there" at a distance of twenty to twenty-four feet. Hansen was standing when Keeran came out of the bathroom, but Hansen then fell to his knees. As Hansen fell to his knees, Barreau hit Hansen across the face with the bat and Barreau's bat broke. Barreau held the broken bat and told Keeran to hit Hansen. Barreau told Keeran: "hit him or I'm hitting you." Keeran held his bat with both hands and hit Hansen's head two times.

¶ 12. To gain entitlement to a coercion defense instruction, Keeran needed to provide details explaining why his only means of preventing Barreau from inflicting on Keeran "imminent" death or great bodily harm was to participate in the crimes. However, such details are lacking. There is no explanation as to why, prior to leaving Monroe for Madison, Keeran could not have gone into his home and telephoned the police or run out the back door; no explanation as to why Keeran could not have excused himself to use the bathroom at the gasoline station and then taken refuge in that station with witnesses present; no explanation as to why Keeran could not have fled the car at a busy intersection in Madison; and no explanation as to why Keeran could not have fled from Barreau while walking for two hours. Was Barreau faster or stronger than Keeran? Keeran did not assert either.

¶ 13. The lack of details similarly defeats Keeran's assertion that he had no alternative when Barreau directed him to hit Hansen. Keeran does not explain why he could not have run out the back door of Hansen's house or why he could not have used his unbroken bat to fend off Barreau while otherwise leaving the house. Was something blocking Keeran's exit? Keeran points to no such evidence. Keeran did not explain to the jury why, at the moment he stood watching at a distance of about twenty feet with an unbroken bat in his hands, he had no choice but to strike Hansen.

¶ 14. Moreover, Keeran did not take the most obvious step to avoid hitting Hansen: he did not tell Barreau that he did not want to hit Hansen, that he would not hit Hansen, or that it was unnecessary that he hit Hansen because Hansen was obviously already at Barreau's mercy. It might be that such an attempt would have produced yet another threat from Barreau, but the point is that Keeran did not even try. Instead, by his own testimony, Keeran simply complied with Barreau's directive.

¶ 15. Keeran testified that he was afraid of Barreau and, viewing the evidence in a light most favorable to Keeran, the evidence supports a finding that Keeran reasonably believed that Barreau would attempt to harm Keeran if Keeran did not comply with Barreau's orders. But that only suggests that Keeran's safest course was to comply with Barreau's orders; it does not mean that Keeran's only course was to comply with Barreau's orders. The coercion defense is not a license to take the safest course. Further, viewing the evidence in a light most favorable to Keeran, the evidence supports a finding that Keeran reasonably believed that if he successfully managed to separate himself from Barreau, Barreau would attempt to hunt Keeran down and harm him later. But such a finding would not support a coercion defense because the defense requires the prevention of "imminent" death or great bodily harm.

¶ 16. Therefore, the trial court properly declined to instruct Keeran's jury on coercion.

B. Ineffective Assistance of Trial Counsel

¶ 17. Keeran next argues that his trial counsel provided ineffective assistance by failing to offer available testimony supporting Keeran's two primary defense "propositions": (1) that Barreau was a violent psychopath in the Charles Manson mode, and (2) that the relationship between Barreau and Keeran was that of master and slave. Keeran does not claim that these propositions constitute a stand-alone theory of defense. Instead, he contends they support a coercion defense. More specifically, Keeran asserts that his trial counsel deficiently failed to present several witnesses who would have given testimony supporting a jury finding that Keeran had a reasonable belief that Barreau was capable of extreme violence and was willing to inflict death or great bodily harm on Keeran if Keeran did not comply with Barreau's orders. According to Keeran, his counsel's failure to present evidence of this type caused prejudice.

¶ 18. The State contends that much, if not all, of the testimony Keeran now points to is either inadmissible or cumulative. However, we need not sort through these many arguments because Keeran has failed to satisfy the prejudice prong of ineffective assistance.

¶ 19. A defendant alleging ineffective assistance of counsel has the burden of showing that his counsel's performance was deficient and that he suffered prejudice as a result. Strickland v. Washington, 466 U.S. 668, 687 (1984); State v. Johnson, 153 Wis. 2d 121, 127, 449 N.W.2d 845 (1990). Showing prejudice means showing that defense counsel's alleged errors actually had some adverse effect on the defense. Strickland, 466 U.S. at 693. The defendant cannot meet this burden by simply showing that an error had some conceivable effect on the outcome. Id. Instead, the defendant must show that there is "a reasonable probability that, but for counsel's unprofessional errors, the result of the proceeding would have been different." Id. at 694; State v. Moats, 156 Wis. 2d 74, 101, 457 N.W.2d 299 (1990).

¶ 20. Assuming, for argument sake, that much of the testimony Keeran points to would be available and admissible at a second trial (to show that Keeran reasonably believed that Barreau would attempt to kill or cause great bodily harm to Keeran if Keeran did not assist in the crimes), there is nonetheless no doubt that trial counsel's failure to present such testimony did not cause prejudice. We have already explained that Keeran was not entitled to a coercion defense instruction because the evidence was insufficient to support such an instruction. The insufficiency we have described has nothing to do with the reasonableness of Keeran's asserted belief that Barreau would, at his first opportunity, attempt to harm Keeran if Keeran did not assist Barreau in the crimes. Rather, the deficiency is that Keeran's testimony does not support a finding that compliance with Barreau's directives was the "only means of preventing imminent death or great bodily harm." Wis. Stat. § 939.46(1) (emphasis added). Our conclusion that the evidence was insufficient with respect to "only means" and "imminent" harm is unaffected by any additional evidence purporting to show Keeran's knowledge of Barreau's dangerousness.

¶ 21. Keeran needed to produce evidence showing that cooperation with Barreau's criminal endeavors was Keeran's only means of avoiding imminent death or great bodily harm. Because Keeran's testimony did not present evidence showing that he had no other means of preventing imminent harm, additional evidence showing that Keeran reasonably feared that Barreau would attempt to harm Keeran at Barreau's first opportunity would not have entitled Keeran to a coercion defense instruction. Accordingly, Keeran was not prejudiced by the failure to present this additional evidence.

C. Interest of Justice

¶ 22. Keeran requests a new trial in the interest of justice, pursuant to Wis. Stat. § 752.35. However, the arguments Keeran offers in support are no different than those we have addressed above. Accordingly, we decline to order a new trial in the interest of justice.

By the Court. — Judgment and order affirmed.

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

       Were no people present at the gasoline station? Keeran did not say.

       Keeran testified that Barreau was one year older than Keeran and that they were about the same size.

       We need not address the State's argument that the coercion defense was not available to Keeran because Barreau was Keeran's coconspirator for purposes of all of the crimes, including the homicide, and the coercion statute provides that the threat must be made by someone other than the actor's coconspirator.

       Keeran states in his brief: "The primary purpose of this evidence was to establish that on the day that the crime was hatched, that Barreau was acting in a 'Charles Manson' mode, with the motive, intent and plan to coerce and intimidate Keeran into participating in the crimes."


source: Caselaw Access Project

author: DEININGER, PJ.

license: Public Domain

text:
    Badger State Bank, Plaintiff-Appellant, v. Roger A. Taylor, Rodney J. Taylor and Economy Feed Mill, Defendants-Respondents.

    Court of Appeals

      No. 03-0750.

      Submitted on briefs June 30, 2003.

      Decided December 4, 2003.

    2004 WI App 17
    (Also reported in 674 N.W.2d 872.)

      On behalf of the plaintiff-appellant, the cause was submitted on the briefs of F. Mark Bromley, Platteville.
    On behalf of the defendants-respondents, the cause was submitted on the brief of James R Czajkowski of Czajkowski & Rider, S.C., Prairie du Chien.
    Before Deininger, PJ., Dykman and Lundsten, JJ.

       Petition for review granted 4-20-04.

   DEININGER, PJ.

¶ 1. Badger State Bank appeals an order in which the trial court granted summary judgment to Roger and Rodney Taylor, dismissing the Bank's complaint alleging that the Taylors were the recipients of a fraudulent transfer. The Bank claims the court erred in denying its motion for summary judgment and granting the Taylors'. We agree, reverse the appealed order, and remand for entry of judgment in favor of the Bank.

BACKGROUND

¶ 2. Badger State Bank made business loans to an entity known as Vogt's Ag-Tech West, Inc., whose principal shareholder was Ronald N. (Al) Vogt. The Bank held a perfected security interest in Ag-Tech's assets, specifically including the corporation's accounts receivable. The Taylors do not dispute that, at the time of the transaction at issue, Ag-Tech was "insolvent" within the meaning of the Uniform Fraudulent Transfer Act because its debts exceeded its assets. See Wis. Stat. § 242.02(2) (2001-02).

¶ 3. A1 Vogt also owned another company, A&T Livestock, LLC. Both Ag-Tech and A&T did business with the Taylors' Economy Feed Mill — the Taylors bought supplies for their feed business from Ag-Tech and sold feed to A&T Livestock. At the time of the allegedly fraudulent transfer, the Taylors owed Ag-Tech, the Bank's debtor, $12,489. At this same time, Vogt's other company, A&T, owed the Taylors almost $18,000. The Taylors and Vogt then agreed to offset these debts. Ag-Tech also paid an additional $2,350 by check toward A&T's remaining debt to the Taylors' feed business.

¶ 4. The Bank sued the Taylors and their feed business to recover the amounts Ag-Tech paid or relinquished to them in the transaction described above. The Bank alleged that the transfers were fraudulent because Ag-Tech, which was then insolvent and indebted to the Bank, did not receive reasonably equivalent value in exchange for the transfers. The Bank sought a judgment voiding the transfers and granting it a judgment and lien against the Taylors for the amounts they received from Ag-Tech. The Taylors responded that they did not do business with either Ag-Tech or A&T but with A1 Vogt personally, that the challenged transaction was solely between the Taylors and Vogt, and that the transaction did not involve the debtor corporation.

¶ 5. The Bank moved for summary judgment, as did the Taylors. The Bank claimed it was entitled to judgment under the Uniform Fraudulent Transfer Act, Wis. Stat. ch. 242, specifically under § 242.05(1). The Taylors maintained, however, that they believed Ag-Tech and A&T were sole proprietorships and they denied any knowledge of the Bank's security interest in Ag-Tech's assets. They also contended that the transfers did not violate the Uniform Fraudulent Transfer Act because they had acted in good faith and gave reasonably equivalent value.

¶ 6. The trial court determined that it was undisputed that Vogt dealt with the Taylors "without reference to those legal entities [Ag-Tech and A&T]." The court then concluded that the $12,489 the Taylors owed "was not an asset of the corporation [Ag-Tech]. It was an asset of A1 Vogt personally." Accordingly, the trial court denied the Bank's summary judgment motion, granted the Taylors' motion and dismissed the Bank's complaint.

ANALYSIS

¶ 7. We review the granting and denial of motions for summary judgment de novo, applying the same methodology and standards as the trial court. See Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315, 401 N.W.2d 816 (1987). Summary judgment is proper when the pleadings, answers, admissions and affidavits show no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. See Maynard v. Port Publ'ns, Inc. 98 Wis. 2d 555, 558, 297 N.W.2d 500 (1980). We will reverse a decision granting summary judgment if the trial court incorrectly decided legal issues or if material facts are in dispute. Coopman v. State Farm Fire & Cas. Co., 179 Wis. 2d 548, 555, 508 N.W.2d 610 (Ct. App. 1993). When both parties move for summary judgment and neither argues that factual disputes bar the other's motion, the " 'practical effect is that the facts are stipulated and only issues of law are before us.'" See Lucas v. Godfrey, 161 Wis. 2d 51, 57, 467 N.W.2d 180 (Ct. App. 1991) (quoted source omitted).

¶ 8. Statutory interpretation also presents a question of law which we decide de novo. City of Milwaukee v. Dyson, 141 Wis. 2d 108, 110, 413 N.W.2d 660 (Ct. App. 1987). When interpreting a statute, we first look to the language of the statute itself. Id. If the statutory language is plain and unambiguous, we do not resort to extrinsic aids for assistance in statutory construction. Id.

¶ 9. The Bank claims that the cancellation of the amount owed by the Taylors to Ag-Tech constituted a fraudulent transfer under Wis. Stat. § 242.05(1), which provides in relevant part as follows:

A transfer made ... by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made ... if the debtor made the transfer ... without receiving a reasonably equivalent value in exchange for the transfer ... and the debtor was insolvent at that time....

Id. As applied here, the Bank maintains that: (1) it is a creditor of Ag-Tech whose claim against Ag:Tech arose before the cancellation of the Taylors' debt; (2) Ag-Tech made a transfer to the Taylors by canceling their indebtedness to the corporation and did not receive "reasonably equivalent value in exchange for the transfer"; and (3) Ag-Tech was insolvent at the time.

¶ 10. The Taylors do not dispute that the Bank was a creditor of Ag-Tech whose claim against Ag-Tech arose before the transaction at issue. The Taylors also do not assert that Ag-Tech was not insolvent within the meaning of the Uniform Fraudulent Transfer Act at the time in question or that a factual dispute exists in this regard. Rather, their defense to the Bank's action centers on the second element noted above. The Taylors contend that Ag-Tech made no transfer in their favor because they believed they were dealing with A1 Vogt personally, not the corporation. Moreover, the Taylors claim to have parted with "reasonably equivalent value" by offsetting the $12,489 they owed against the higher sum owed them by Vogt's livestock business.

¶ 11. We agree with the Bank, however, that the plain language of Wis. Stat. § 242.05(1) requires us to view the transaction exclusively from the perspective of the debtor corporation, Ag-Tech. What the Taylors may have believed regarding with whom they were dealing is irrelevant to the analysis under § 242.05(1). Our reading of the statutory language, and our review of the record on summary judgment, satisfies us that the Bank has established its entitlement to the relief it seeks from the Taylors. Specifically, the "debtor," Ag-Tech, at a time when it was "insolvent," made a "transfer" by writing off an account receivable from the Taylors "without receiving a reasonably equivalent value in exchange for the transfer." See id.

¶ 12. We acknowledge that this result may seem harsh. The Taylors are ostensibly innocent of any wrongdoing but will be required to pay the Bank some $12,500 or more. The trial court essentially concluded that the record provided no indication that the Taylors were guilty of any fraud because of their belief that they had given fair value for the cancellation of their indebtedness by doing likewise for the benefit of another of Vogt's businesses. Wisconsin Stat. § 242.05(1), however, does not require a showing that a transferee possessed fraudulent intent. See Wirtz v. Jensen, 238 Wis. 334, 341, 298 N.W. 172 (1941). The statute reaches not only "fraud in fact" but "fraud in law" or "constructive fraud." See Scholes v. Lehmann, 56 F.3d 750, 756-57 (7th Cir. 1995). As we have noted, under the plain language of § 242.05(1) the Bank is required to show only that its debtor, Ag-Tech, while insolvent, made a transfer "without receiving a reasonably equivalent value in exchange," regardless of the intent or motives of any of the parties to the transaction.

¶ 13. The trial court in this case is by no means alone in being tempted to "balance the equities" and deny a creditor a recovery from an innocent transferee. In affirming a $500,000 judgment against five religious corporations who were the recipients of gifts deemed fraudulent conveyances, the Seventh Circuit said this:

The arguments for mitigating the full rigor of the fraudulent conveyance statute with respect to religious associations may he appealing but they are addressed to the wrong body. The statute makes no distinction among different kinds of recipient of fraudulent conveyances. Every kind is potentially liable.... The carving of exceptions is a task better left to the legislature. Statutory draftsmen might for example want to make distinctions based on the degree of negligence of the ultimate beneficiaries of the suit to set aside the fraudulent conveyance. They can do it better than a court can. They could of course authorize courts to engage in an ad hoc balancing of equities, as courts do for example in deciding whether a claim is barred by the equitable defense of laches; and perhaps in this case the balance would incline in favor of the charities. But nothing in the text or history of the Illinois statute or its counterparts in other states provides any purchase for this "interpretation," which would in fact be a radical rewriting of the statute.

Scholes, 56 F.3d at 761. We conclude that we are similarly bound to apply Wis. Stat. § 242.05(1) as written, regardless of the equities of the case before us.

¶ 14. The Taylors make two other arguments, both of which are similarly unavailing. First, they assert that the instant transaction was not a fraudulent transfer under Wis. Stat. § 242.04 (pertaining to transfers that are "fraudulent as to present and future creditors") because there is no showing of either an "actual intent to hinder, delay or defraud" the Bank, or that the Taylor-Vogt transaction materially affected Ag-Tech's financial condition. The Bank does not base its claim on § 242.04, however, but on Wis. Stat. § 242.05(1). The fact that the Taylors might have a successful defense on this record under the former section has no bearing on whether they have one under the latter.

¶ 15. Finally, the Taylors assert that, under Wis. Stat. § 242.08(1), their good faith in entering into the transaction with Vogt provides them a complete defense to the Bank's claim. Again, however, they are mistaken because the good-faith defense under § 242.08(1) applies only to claims made under Wis. Stat. § 242.04(1)(a).

CONCLUSION

¶ 16. For the reasons discussed above, we reverse the appealed order and remand to the circuit court for further proceedings consistent with this opinion. Specifically, we direct that judgment be entered in favor of the Bank after the circuit court determines the amount of the judgment and the nature of any other remedies to which the bank may be entitled.

By the Court. — Order reversed and cause remanded with directions.

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

       The Bank's complaint and its argument on summary judgment appear to seek the recovery of both the $12,489 account owed by the Taylors to Ag-Tech and the $2,350 check on Ag-Tech's account paid to the Taylors. We note, however, that in its opening brief to this court, the Bank requests us to direct judgment in its favor for only $12,489. (See footnote 5.)

       Wisconsin Stat. § 242.05(1) is quoted in the analysis at ¶ 9.

       See Wis. Stat. §242.07(1) (providing that a prevailing creditor may "avoid[ ]... the transfer" and attach or obtain other remedies "against the asset transferred or other property of the transferee").

       As we have noted (see footnote 2), it is not entirely clear whether the Bank seeks to recoup only the $12,489 account receivable, or additionally, the $2,350 check from Ag-Tech to the Taylors. On remand, the trial court should determine the amount of the Bank's damages and the specific remedies to be ordered in the judgment.

       The supreme court rejected in Wirtz v. Jensen, 238 Wis. 334, 341, 298 N.W. 172 (1941), an argument by transferees that an existing creditor of the transferor could not avoid transfers where they "did not participate in [the transferor]'s fraudulent purpose." The court concluded that" '[i]n the case of a voluntary conveyance the participation of the grantee or transferee in the fraudulent intent is not essential. This rule has not been modified by the Uniform Fraudulent Conveyance Act. Id. (quoted source omitted).
      The statutes at issue in Wirtz were a part of the earlier "Uniform Fraudulent Conveyance Act" as enacted in Wisconsin. The legislature repealed and recreated Wis. Stat. ch. 242 effective April 8, 1988. See 1987 Wis. Act 192. The parties have not called to our attention, nor have we discovered, any Wisconsin case law interpreting the present Wis. Stat. § 242.05.

       In its oral decision the trial court expressed its belief that "it would be an [Unequitable decision to make [the Taylors] responsible under these circumstances."


author: CURLEY, J.

text:
    Tri City National Bank, Plaintiff-Appellant, v. Federal Insurance Company, Defendant-Respondent.
    Court of Appeals

      No. 03-0305.

      Submitted on briefs October 7, 2003.

      Decided December 9, 2003.

    2004 WI App 12
    (Also reported in 674 N.W.2d 617.)

      On behalf of the plaintiff-appellant, the cause was submitted on the briefs of Dennis L. Fisher, Steven F. Stanaszak, and Joseph M. Engl of Meissner, Tierney, Fisher & Nichols, S.C., of Milwaukee.

      On behalf of the defendant-respondent, the cause was submitted on the brief of Donald L. Mrozek, pro hac vice, Stephen R. Swofford, pro hac vice, and Randal N. Arnold of Hinshaw & Culbertson, of Milwaukee.
    A nonparty brief was filed by Thomas N. Klug of Borgelt, Powell, Peterson & Frauen, S.C., of Milwaukee, on behalf of the Surety Association of America.
    A nonparty brief was filed by John E. Knight and Kirsten E. Spira of Boardman, Suhr, Curry & Field, LLP, of Madison, on behalf of the Wisconsin Bankers Association.
    Before Fine, Schudson and Curley, JJ.
   CURLEY, J.

¶ 1. Tri City National Bank (Tri City) appeals from the trial court judgment and order dismissing its suit against Federal Insurance Company (Federal). Tri City sued Federal, seeking reimbursement under a fidelity bond issued to Tri City by Federal, for monies paid to two mortgage companies in the form of settlements as the result of the fraudulent acts of two Tri City employees. We determine that because the standard fidelity bond issued to Tri City contained language limiting losses to those "resulting directly" from an employee's dishonest or fraudulent acts and the fraudulent acts here did not result in any direct losses to the bank, no coverage existed for Tri City's claimed losses. Consequently, we affirm the trial court.

I. Background.

¶ 2. Tri City is a national bank with various branches in the greater- Milwaukee area. As a national bank, it is required to have "adequate fidelity coverage" pursuant to federal law. 12 C.F.R. § 7.2013 (2003). To comply, it purchased a Financial Institution Bond— Standard Form No. 24 revised to January 1986 — from Federal. During the term of the bond, two employees of a Tri City branch bank participated in a scheme with an outsider to fraudulently obtain mortgage loans for insufficiently funded borrowers who did not otherwise qualify for the loans. The scheme operated by having the outsider recruit a buyer for property owned by him or one of his businesses and having the buyer apply for a mortgage loan with one of two mortgage companies. The conspiring bank employees would then send a phony verification to the mortgage company indicating that the buyer had an account at Tri City with sufficient sums to cover the down payment. Once the mortgage was approved, one of the two conspiring bank employees would issue bank cashier's checks for the recruited borrower to use at the closing, despite the lack of sufficient funds in a Tri City account, giving the false impression that the borrower was using personal funds for the down payment. Once the closing took place, the outside co-conspirator took the loan proceeds to the bank, paid for the cashiers check, and paid off the bank employees. At least seventy-four loans were procured in this fashion. Neither the mortgage lenders nor other bank personnel were aware of the scheme. It was only discovered after multiple defaults in the loans brought the scheme to light.

¶ 3. Following the detection of the fraudulent scheme, the mortgage companies sued Tri City to recover their losses. In their pleadings, the lenders alleged that the actions of Tri City's employees were material misrepresentations made by agents of Tri City, and consequently, the bank was responsible. They also claimed that the loan defaults, and thus the companies' losses, were a "direct and proximate result" of the false representations made by Tri City's employees.

¶ 4. After receiving notice of the suit, Tri City promptly notified Federal and requested confirmation that the bond covered the bank for either judgments or settlements paid to the mortgage companies resulting from the fraud. Federal denied coverage on the ground that the bond's language only covered losses "resulting directly from dishonest or fraudulent acts" of Tri City employees. Federal asserted that the losses were not the direct result of the dishonest and fraudulent acts of Tri City's employees.

¶ 5. Tri City proceeded to settle the actions brought by the mortgage companies for $4,250,000. Afterwards, Tri City demanded reimbursement from Federal for the settlement amounts, but Federal continued to deny coverage. As a result, Tri City commenced a declaratory judgment action against Federal alleging that, by virtue of the fidelity bond, Federal was obligated to indemnify Tri City for the settlement amounts. Federal moved to dismiss for failure to state a claim upon which relief can be granted, pursuant to Wis. Stat. § 802.06(2)6 (2001-02). After briefing and oral argument, the trial court entered an extensive memorandum order granting the motion to dismiss. The trial court reasoned that while Tri City experienced losses because of the bank employees' dishonest and criminal actions, those actions — the basis of the claims asserted by the mortgage companies — did not "give rise to a [l]oss directly resulting from dishonest or fraudulent acts" of the employees.

II. Analysis.

¶ 6. When an appellate court reviews a motion to dismiss for failure to state a claim, its review is de novo. Kohlbeck v. Reliance Constr. Co., 2002 WI App 142, ¶ 9, 256 Wis. 2d 235, 647 N.W.2d 277. "In determining whether a party has stated a claim, we are concerned only with the legal sufficiency of the complaint." Id. We accept all alleged facts and reasonable inferences as true, but draw all legal conclusions independently. Town of Eagle v. Christensen, 191 Wis. 2d 301, 311-12, 529 N.W.2d 245 (Ct. App. 1995).

¶ 7. The resolution of this matter also requires us to interpret the fidelity bond Federal issued to Tri City. Fidelity bonds insure an employer against employee infidelity. See Lee R. Russ & Thomas F. Segalla, 11 Couch on Insurance § 160:1 (3d ed. 1998). Thus, such bonds are a form of insurance. When insuring a bank, this type of policy is often referred to as a "Bankers' Blanket Bond," see id., § 167:52, with "blanket" meaning it covers all employees, see Lee R. Russ & Thomas F. Segalla, 7 Couch on Insurance § 100:1 (3d ed. 1998). The fidelity bond purchased here is an example of a "Bankers' Blanket Bond."

¶ 8. When reviewing an insurance policy, "[a] construction of an insurance policy that gives reasonable meaning to every provision of the policy is preferable to one leaving part of the language useless or meaningless." Frost v. Whitbeck, 2002 WI 129, ¶ 21, 257 Wis. 2d 80, 654 N.W.2d 225. "[P]olicies should be given a reasonable interpretation and not one [that] leads to absurd results." Nichols v. American Employers Ins. Co., 140 Wis. 2d 743, 751, 412 N.W.2d 547 (Ct. App. 1987). Additionally,

[t]he intended role of the coverage should be kept in mind when construing policy language; the nature and purpose of the policy as a whole have an obvious bearing on the insured's reasonable expectations as to the scope of coverage and on whether the risk involved was, or should have been, contemplated by the insurer in computing its rates.

Shelley v. Moir, 138 Wis. 2d 218, 222, 405 N.W.2d 737 (Ct. App. 1987). Finally, "a policy may not be construed to bind the insurer to a risk which it did not contemplate and for which it received no premium." Id.

¶ 9. Initially, the parties disagree as to the rules of construction that apply to what Tri City asserts is ambiguous language in the contract. Tri City asserts that all ambiguous language must be strictly construed against the drafter. Federal disagrees. It contends that there is no ambiguous language in the bond; and, even if there were, because of the unique history of the bond language, the general rule of construing ambiguous language against the drafter is not followed. We agree with Federal that the general rules of construction do not apply.

¶ 10. In Aetna Casualty & Surety Co. v. Kidder, Peabody & Co., 676 N.Y.S.2d 559 (App. Div. 1998), appeal denied, 93 N.Y.2d 805, 711 N.E.2d 643 (1999), a New York appellate court delved into the history of fidelity bonds. The court concluded that the earliest versions of the standard-form bonds were drafted over thirty years ago by a joint committee of the stock exchange and the insurance communities whose mission was "to refine the exact meaning of [the term] employee dishonesty" in order to stem the tide of judicial decisions that broadened the policies beyond what was contemplated by the parties while ensuring that employers would have coverage for the acts of employee-thieves. Id. at 565.

Memoranda generated by the insurance industry and stock exchanges in connection with the industry-wide drafting of the standard blanket fidelity policies over the last 30 years, demonstrating the significant discussion of standard coverage provisions by organized groups of underwriters as well as insureds, also reflect these meanings. The standard-form bonds that provided the basic language of the present bonds were drafted during the 1970's. At that time, a joint committee of the stock exchange and insurance-industry communities reviewed fidelity bonding concerns in light of claims by underwriters that the increasing loss ratio of the bonds was reducing the attractiveness of fidelity coverage. The expressed intent of the underwriters was to refine the exact meaning of employee dishonesty under the bonds as a means of addressing judicial decisions expanding coverage beyond that originally contemplated, while ensuring that employers who had the misfortune of hiring potential embezzlers (although not necessarily limited to embezzlement) could purchase such protection.

Id. (citation omitted).

¶ 11. As a result, as explained in Eric Mills Holmes & Mark S. Rhodes, 1 Holmes's Appleman on Insurance, § 4.23 (2d ed. 1996), the normal rules of construction of insurance policies do not apply: "The Bankers Blanket Bond was created by the banking industry in conjunction with insurers providing surety coverage. Accordingly, the rules of construction strictly against the insurer where ambiguities are found are not applicable since the terms of the standard bond were negotiated between parties with relatively equal bargaining power." This has been recognized in State Bank of Viroqua v. Capitol Indemnity Corp., 61 Wis. 2d 699, 702 n.1, 214 N.W.2d 42 (1974) ("These bonds are not the usual contracts of adhesion and the familiar rule of interpreting a contract strictly against the insurer and liberally in favor of the insured should not apply."); Sharp v. Federal Savings and Loan Insurance Corp., 858 F.2d 1042, 1046 (5th Cir. 1988) (regarding Standard Form No. 22, the principle that insurance contracts are to be construed against the underwriter does not apply when "the contract was in fact a joint effort of both insurers and the insureds," that is, of both the banking and surety industries); and Calcasieu-Marine National Bank of Lake Charles v. American Employers' Insurance Co., 533 F.2d 290, 295 n.6 (5th Cir. 1976) (noting that "the banker's blanket bond being construed was drafted by a joint effort of the American Bankers' Association and the American Surety Association[,]" and accordingly, the rationale that "it would be unjust to construe an ambiguous provision in favor of the party that drafted it[, the insurer,] may not be applicable"). Thus, should there be any ambiguity, the wording of fidelity bonds is not construed strictly against the drafter because the justification behind the rule— unequal bargaining power — has been eliminated.

¶ 12. Tri City asserts that its fidelity bond with Federal covers its losses paid to the mortgage companies for the fraudulent acts of its employees because the losses "resulted directly from" the employees' dishonesty. Tri City contends: (1) a reasonable banker would expect coverage because the bond language "loss resulting directly from" is ambiguous; (2) "direct" has been defined as meaning "proximate cause," and the employee acts here were the "proximate cause" of the losses; (3) case law interpreting the phrase supports its position; (4) Wis. Stat. § 224.06 (2001-02) requires banks to obtain coverage for employee fraud or dishonesty, and thus, statutory authority supports its position that coverage exists under the bond; (5) public policy considerations are advanced by extending coverage for such losses; and finally, (6) whether the losses "resulted] directly" from its employees' falsifications is a jury question, making a dismissal of the action inappropriate. For the reasons that follow, we disagree with all of Tri City's arguments.

¶ 13. However, before discussing Tri City's arguments, we pause to explain the differences between fidelity bonds and liability insurance policies. As noted, a fidelity bond is a form of insurance. See First Nat'l Bank of Crandon v. United States Fid. & Guar. Co., 150 Wis. 601, 607, 137 N.W. 742 (1912). But, a fidelity bond is not a liability insurance policy. A fidelity bond differs from a liability policy of insurance because of the risk being insured. Aetna, 676 N.Y.S.2d at 565; see Foster v. National Union Fire Ins. Co., 902 F.2d 1316, 1318 (8th Cir. 1990) ("A fidelity bond is not ordinarily liability insurance which covers third parties."). A fidelity bond is an indemnity contract that "guaranteed reimbursement for losses sustained by the insured resulting from the dishonesty of the insured's employees." Continental Corp. v. Aetna Cas. & Sur. Co., 892 F.2d 540, 543 (7th Cir. 1989). Noting the distinction between fidelity bonds and liability insurance policies, the court opined: "Insurance covers the liability of the insureds to a third-party, while fidelity bonding covers the loss of property owned by the insureds or held by the insureds, as a consequence of employee dishonesty." Aetna, 676 N.Y.S.2d at 565.

A. The fidelity bond's wording is not ambiguous and a reasonable banker reading the bond would not expect coverage.

¶ 14. Tri City contends that the bond is ambiguous, and in construing the wording of the bond under the usual rules of construction for an insurance policy, a reasonable banker would expect coverage for the acts that occurred here.

¶ 15. The fidelity bond at issue is an SAA Standard Form No. 24, revised to January 1986. The pertinent language states that the bond covers:

(A) Loss resulting directly from dishonest or fraudulent acts committed by an Employee acting alone or in collusion with others.
Such dishonest or fraudulent acts must be committed by the Employee with the manifest intent:
(a) to cause the Insured to sustain such loss; and
(b) to obtain financial benefit for the Employee or another person or entity.

¶ 16. Tri City observes that nowhere in the bond are the words "loss," "resulting," or "directly" defined. It submits that the ordinary dictionary meaning of those words would encompass the losses resulting from their employees' fraudulent acts. It looks to definitions found in Webster's Third New International Dictionary 1338 (Merriam Webster, Inc. 1993), where a common meaning for the noun "loss" is: "the amount of an insured's financial detriment due to the occurrence of a stipulated contingent event (as death, injury, destruction or damage) in such a manner as to charge the insurer with a liability under the terms of the policy[.]" Also, the same dictionary states that "result" is a verb meaning "to proceed, spring, or arise as a consequence, effect, or conclusion[,]" id. at 1937, and that the adverb "directly" means, among other things, "straight on along a definite course of action without deflection" or "in close relational proximity[,]" id. at 641. Consequently, given the definitions, Tri City concludes that the language was ambiguous because the "reasonable expectation of a banker considering the ordinary meaning of that language would be that if an employee's dishonest conduct proceeds by a straightforward chain of events to some form of financial loss to the bank, there will be coverage." We are not persuaded.

¶ 17. In interpreting a contract, this court must look for the intent of the parties in the plain language of the contract. Dieter v. Chrysler Corp., 2000 WI 45, ¶ 15, 234 Wis. 2d 670, 610 N.W.2d 832; see also Shelley, 138 Wis. 2d at 222 (noting that "[i]n interpreting and construing an insurance contract; the object is to ascertain the true intention of the parties[, and] objective rather than subjective intent is the test"). Ambiguity exists in a contract if the contractual language is "reasonably and fairly susceptible to more than one construction." Dieter, 234 Wis. 2d 670, ¶ 15 (citation omitted). As noted, should there be any ambiguous language, the ordinary rule of construing any ambiguity against the drafter does not apply here.

¶ 18. Our reading of the bond satisfies us that the bond is not ambiguous. First, the bond clearly restricts indemnification to those losses that occur as a direct result of an employee's dishonest acts. This language is not susceptible to more than one meaning. Here, the loss was not direct. It was only after the mortgage defaults occurred, some three years after the employees' deceitful actions, that Tri City's liability to the mortgage companies came into being. The losses did not "result[ ] directly from dishonest or fraudulent acts committed by employe[es,]" as the losses did not exist until the unsuitable mortgage holders defaulted on their loans and the mortgage companies sued Tri City.

¶ 19. Further, given the history of fidelity bonds and the reasons behind the revisions, a reasonable banker would not expect coverage for these losses. The Bankers' Blanket Bond was revised in 1980, and again in 1986, and is known as Financial Institution Bond--Standard Form 24. Karen Wildau, Evolving Law of Third-Party Claims Under Fidelity Bonds: When Is Third Party Recovery Allowed?, 25 Tort & Ins. L.J. 92, 92-93 (1989). The previous, pre-1980 version of the bond insured a bank for "[l]oss through any dishonest or fraudulent act[.]" Id. at 93 (citation omitted). The 1980 revision further restricted the bond by insuring a bank only for "[l]oss resulting directly from dishonest or fraudulent acts" of its employees. Id. at 94 (citation omitted). As noted above, "[t]he expressed intent of the underwriters was to refine the exact meaning of employee dishonesty under the bonds as a means of addressing judicial decisions expanding coverage beyond that originally contemplated, while ensuring that employers .. . could purchase . . . protection" against dishonest employees. Aetna, 676 N.Y.S.2d at 565. Consequently, given the extensive history of fidelity bonds in the banking business, a reasonable banker would be charged with the knowledge of the fidelity bond restrictions and not expect coverage for indirect losses. In determining coverage, one looks to "what a reasonable person in the position of the insured would have understood the words of the policy to mean." Badger Mut. Ins. Co. v. Schmitz, 2002 WI 98, ¶ 51, 255 Wis. 2d 61, 647 N.W.2d 223 (citation omitted) (emphasis added).

¶ 20. Additionally, in Aetna, a case that received considerable media attention, the court considered whether fidelity bonds covered liabilities to third parties and ultimately concluded:

Nothing in the history of these particular bonds, which comports with an historical understanding of what fidelity coverage is, indicates that the employee infidelity being covered as a risk could reach the employee's dishonesty toward third parties, absent an intent to cause a loss to the employer.

676 N.Y.S.2d at 565. Thus, the history of fidelity bonds supports the interpretation, advocated by Federal, that the losses experienced here were outside the employee dishonesty coverage.

B. Tri City wrongly proposes that the word "direct" . found in the bond is synonymous with "proximately" and "proximate cause."

¶ 21. Tri City next submits that because Wisconsin and foreign case law have interpreted the word "direct" to mean "proximately" and "proximate cause," the wording of the policy can be read with these synonyms, transforming the policy language to provide coverage for losses proximately caused by the employees' dishonesty. We disagree.

¶ 22. As Federal advocates in its brief, "proximate cause cases involving casualty policies are not really relevant." We agree. Casualty policies are written with a different intent and they rarely contain the limiting language found in fidelity bonds. "As a general rule, 'casualty insurance' covers accidental injury both to person and to property and has, in fact, been defined as insurance against loss through accidents or casualties resulting in bodily injury or death." Couch on Insurance 3d § 1:28. As to the cases Tri City cites in support of this proposition, Federal advances that in regard to seven of the eight cases:

[t]he . . . decisions focused on causation, but only in the context of a direct loss (that is, losses of the insured's own property, or property for which it was legally responsible).... In each case, the insured sustained a direct loss of its property or property for which it was legally responsible, and the proximate cause issue was whether some intervening event broke the causal connection between the dishonest conduct of an employee and the insured's loss.

Again, our review of the cases supports Federal's position. Finally, in the eighth case, First National Bank of Fulda, Minnesota v. Bancinsure, Inc., No. Civ. 00-2002DDA/FLN, 2001 WL 1663872 (D. Minn. Dec. 21, 2001), we note that the support for Tri City's position is dicta and unpersuasive.

C. The majority of courts that have actually interpreted the bond's language have done so in a manner consistent with the trial court's determination.

¶ 23. Tri City cites numerous cases claiming they support its position. Our research reveals that the majority of courts actually interpreting the phrase "loss resulting directly from dishonest or fraudulent acts" of employees have concluded that the phrase is not ambiguous and have interpreted the bond language narrowly.

¶ 24. Aetna has a similar fact situation to that found here. There, a securities brokerage firm found itself liable to stockholders of various companies for millions of dollars as a result of its employees' illegal insider trading. The firm was covered by fidelity bonds that included "direct loss" language similar to* that of the bond issued by Federal in this case. The court found that the fidelity bond did not cover third-party claims such as those sought by the stockholders. In finding no coverage existed, the court essentially opined that to decide otherwise would effectively read the word "direct" out of the bond. Aetna, 676 N.Y.S.2d at 564. The court reasoned:

Finally, in this regard, the putative loss to [the brokerage firm] arises in part from a settlement with third parties, but the settlement was not the direct result of the employee's dishonest conduct; the employee's dishonesty only caused pricing irregularities in the stock, which, themselves, caused losses to the customers, which then led to litigation concluding in settlement. In this sense, the settlement would not constitute a covered loss.

Id. (citation omitted). The same reasoning applies here. Tri City's losses — the settlements with the mortgage companies — are not the direct result of the employees' dishonesty; the employees were dishonest by permitting financially inappropriate people to obtain mortgages from other entities, not the employer bank. Thus, the bank initially lost nothing as a result of their dishonesty. It was only after the unsuitable mortgagees defaulted on their loans and the mortgage companies sued Tri City that "losses" resulted.

¶ 25. In Vons Cos. v. Federal Insurance Co., 212 F.3d 489 (9th Cir. 2000), the Court of Appeals for the Ninth Circuit, interpreting California law, came to the identical conclusion. There, an employee of Vons was part of a fraudulent scheme in which he received secret payments from another company and confirmed fictitious transactions to the funding sources of that company. The funding sources eventually sued the company, and joined Vons as a defendant because it employed the dishonest employee, claiming around $300 million in damages. The employer settled the claims for $10 million, and then requested reimbursement under its fidelity bond. The insurance company refused. In agreeing with the insurance company, the court said: "Under the insuring clauses, [the employer] is covered only for direct losses to [it] caused by its employees' dishonesty, not for vicarious liability for losses suffered by others arising from its employees' tortious conduct." Id. at 491. Other cases coming to the same conclusion are: City of Burlington v. Western Surety Co., 599 N.W.2d 469 (Iowa 1999); Central National Insurance Co. of Omaha v. Insurance Co. of North America, 522 N.W.2d 39 (Iowa 1994); and Auto Lenders Acceptance Corp. v. Gentilini Ford, Inc., 816 A.2d 1068 (N.J. Super. Ct. App. Div. 2003). Indeed, the only case on point that has come to what appears to be the opposite conclusion is the case much-touted by Tri City, First American State Bank v. Continental Insurance Co., 897 F.2d 319 (8th Cir. 1990). We do not, however, find this case instructive because the federal court's prediction of how the Iowa Supreme Court would interpret the phrase turned out to be wrong, and the facts are distinguishable.

¶ 26. First American concerned the dishonest acts of a bank president who engaged in an elaborate scheme with two bank customers. The bank president convinced two customers to take out loans at the bank and then give him the loan proceeds in exchange for his promissory notes. Id. at 322. He proceeded to lose most of the money in bad investments and, when the customers demanded their money in order to pay off their bank loans, he was unable to repay the notes. Id. The customers sued the bank and the bank president. Ultimately, the bank settled with the customers. Id. at 323.

¶ 27. In affirming the federal district judge's decision that the monies paid out in settlement of the bank loans were covered losses, the court looked to an Iowa law mandating a bond for state-chartered banks' officers and employees, and concluded the bond in question was a statutory bond. Id. at 325. It then extrapolated from other Iowa case law not on point, and found that the settlements were covered losses because they were a direct result of the bank president's dishonest and fraudulent acts.

The funds expended to settle such liability directly resulted from [the bank president's] acts as a matter of law and therefore constituted covered losses under the Bond.
First Bank incurred potential third party liability as a result of [the bank president's] conduct. Therefore, it also incurred a loss when it expended funds to effect settlement, hereinafter referred to as settlement costs.
A settlement precipitated by claims of fraud or dishonesty and paid to a third party by the insured is a covered loss.

Id. at 326. The court also cited a case interpreting a bond with pre-1980 language.

¶ 28. At the time, no case interpreting the "directly resulting" language had been decided by the Iowa Supreme Court. However, since that time, the Iowa Supreme Court has rejected the interpretation of the phrase "directly resulting from one or more fraudulent or dishonest acts committed by an employee" embraced by First American. In Central National Ins., the Iowa Supreme Court stated that a bankers' blanket bond "neither insures against an insured's liability to third parties nor indemnifies an insured for payments the insured makes to third parties." 522 N.W.2d at 44. Thus, the federal court wrongly predicted how the Iowa Supreme Court would decide this issue.

¶ 29. Further, the facts in First American are unlike those here. In First American, the customers were not the only victims of the fraudulent scheme; the bank was a victim as well — loan proceeds were lost when the president fraudulently obtained the bank's money by using bank customers as a conduit. Thus, while the logic of the case is flawed, the final result may be correct as the bank did appear to suffer some direct loss as a result of the bank president's dishonest acts. Unlike the circumstances in First American, Tri City did not lose any money directly from the scheme. Consequently we do not find First American instructive.

D. Wisconsin Stat. § 224.06 does not apply.

¶ 30. Tri City next contends that because Wis. Stat. § 224.06 requires fidelity bonds for bank employees, Federal is statutorily obligated to cover the losses incurred by Tri City. We disagree. Section 224.06 reads, in pertinent part:

Fidelity bonds for bank officers and employees. (1) As a condition precedent to qualification or entry upon the discharge of his or her duties, every person appointed or elected to any position requiring the receipt, payment or custody of money or other personal property owned by a bank or in its custody or control as collateral or otherwise, shall give a bond from an insurer qualified under s. 610.11 to do business in this state, in such adequate sum as the directors shall require and approve. In lieu of individual bonds the division may accept a schedule or blanket bond which covers all of the officers and employees of any bank whose duties include the receipt, payment or custody of money or other personal property for or on behalf of the bank. All such bonds shall be in the form prescribed by the division.
(3) Such bond shall be sufficient in amount to protect the bank from loss by reason of acts of fraud or dishonesty including forgery, theft, embezzlement, wrongful abstraction or misapplication on the part of the person, directly or through connivance with others. At any time the division may require additional bond or security, when in the division's opinion, the bonds then executed and approved are insufficient.

¶ 31. As Tri City concedes, it is not a state-chartered bank; it is a federally-chartered bank. We will leave for another day the interplay between state-chartered banks, the statute mandating insurance coverage, and fidelity bonds. Regardless of whether the statute covers federally-chartered banks, the statute cannot expand the bond's coverage.

E. Public policy is not advanced by expanding coverage.

¶ 32. Tri City argues that the fidelity bond should be read to cover its losses because to do so furthers public policy. It submits:

Tri City and other banks in Wisconsin will be without protection from one of the most devastating and undetectable risks - that of losses caused by conspiratorial criminal conduct of employees leading directly to vicarious liability for the bank in a setting which is not only difficult to discover, but difficult to defend.

¶ 33. While we agree that broad coverage would be helpful to the banks, we are satisfied that it is better public policy to strive for uniform interpretation of insurance policies, particularly of those policies issued nationwide. Our interpretation is consistent with that of most courts, with the possible exception of First American, that have interpreted the phrase.

F. Tri City contends that whether the losses are covered is a jury question.

¶ 34. Finally, Tri City suggests that the trial court erred in granting the motion because whether the losses are covered is a jury question. We have determined as a matter of law that the fidelity bond does not provide coverage for the acts that both parties agree occurred. In granting the motion to dismiss, the trial court was, in essence, entering judgment on the pleadings. When a court grants judgment on the pleadings, it does so because there is no genuine issue of material fact to be resolved and one party is entitled to judgment as a matter of law. Schuster v. Altenberg, 144 Wis. 2d 223, 228, 424 N.W.2d 159 (1988). Juries resolve factual disputes. No jury is needed here because no factual dispute exists. Accordingly, we affirm.

By the Court. — Order and judgment affirmed.

       Besides the excellent briefs of the parties, amicus curiae briefs were filed on behalf of the Wisconsin Bankers Association and the Surety Association of America. All of these briefs were invaluable in assisting the court in refining the questions and determining the answers.

       12 C.F.R. § 7.2013(a) provides, in relevant part:" Adequate coverage. All officers and employees of a national bank must have adequate fidelity coverage."

       The three co-conspirators were prosecuted by the U.S. Attorney and convicted.

       There are other restrictions as well, but they are not at issue here.

       Other changes were made during this revision. The "Ownership" section was added, as was an exclusion for "indirect or consequential loss of any nature." See Karen Wildau, Evolving Law of Third-Party Claims Under Fidelity Bonds: When Is Third Party Recovery Allowed?, 25 Tort & Ins. L.J. 92, 94, 117-18 (1989). Arguably, the losses experienced by Tri City may also fall within this new exclusion.

       The seven cases are: Resolution Trust Corp. v. Fidelity and Deposit Co. of Maryland, 205 F.3d 615 (3d Cir. 2000); Jefferson Bank v. Progressive Casualty Insurance Co., 965 F.2d 1274 (3d Cir. 1992); Bidwell & Co., National Union Fire Insurance Co., No. CV-00-89-HU, 2001 WL 204843 (D. Or. Jan. 18, 2001); Omnisource Corp. v. CAN/Transcontinental Insur

        ance Co., 949 F. Supp. 681 (N.D. Ind. 1996); Mid-America Bank of Chaska v. American Casualty Co. of Reading, Pennsylvania, 745 F. Supp. 1480 (D. Minn. 1990); Federal Deposit Insurance Corp. v. Reliance Insurance Corp., 716 F. Supp. 1001 (E.D. Ky. 1989); and Hanson PLC v. National Union Fire Insurance Co., 794 P.2d 66 (Wash. Ct. App. 1990).

       It did note, however, that "[t]he bonds' other coverage terms compensate the insureds for third-party losses in connection with the insureds' loss of their property, such as securities and records or precious metals, but those are distinct provisions not triggering fidelity coverage under provision [A], and the insureds' claims do not arise under those other provisions." Aetna Cas. & Sur. Co. v. Kidder, Peabody & Co., 676 N.Y.S.2d 559, 564 (App. Div. 1998) (citations omitted), appeal denied, 93 N.Y.2d 805, 711 N.E.2d 643 (1999). The provision in question here is similar to that of provision [A] of the bond in Aetna.

       Indeed, the pleadings establish that the scheming employees had no "manifest intent... to cause the Insured to sustain" any loss at all, as would have been required for coverage under Section (A) of the bond.

       We note Tri City cites numerous cases for support of its argument that fidelity bonds can cover losses of third parties. We agree that there are instances when third party losses may be covered under fidelity bonds, but that is not the issue here. See Lynch Props., Inc. v. Potomac Ins. Co. of Ill., 140 F.3d 622, 629 (5th Cir. 1998) ("Although employee dishonesty policies may cover the loss of third-party property in the possession of the insured, these policies do not serve as liability insurance to protect employers against tortious acts committed against third-parties by their employees.") (citation omitted). The issue presented in this case is whether those third-party losses are losses that "result[ed] directly from dishonest or fraudulent acts committed by an Employee." We have concluded they are not.

       The employee held several positions during the course of the scheme, including chief agricultural loan officer, vice president, executive vice president, and president. For clarity, we will refer to him only as the "bank president."


author: HOOVER, PJ.

text:
    State of Wisconsin, Plaintiff-Respondent, v. Rex E. Wollenberg, Defendant-Appellant.
    Court of Appeals

      No. 03-1706-CR.

      Submitted on briefs November 24, 2003.

      Decided December 9, 2003.

    2004 WI App 20
    (Also reported in 674 N.W.2d 916.)

      On behalf of the defendant-appellant, the cause was submitted on the briefs of Susan E. Alesia, assistant state public defender, of Madison.

      On behalf of the plaintiff-respondent, the cause was submitted on the brief of Peggy A. Lautenschlager, attorney general, and Jeffrey J. Kassel, assistant attorney general, of Madison.
    Before Cane, C.J., Hoover, RJ., and Peterson, J.

       Petition to review denied 2-24-04.

   HOOVER, PJ.

¶ 1. Rex Wollenberg appeals a judgment of conviction entered on his no contest plea to four counts of burglary as party to a crime and four counts of theft as party to a crime, as well as an order denying his postconviction motion to withdraw his plea. Wollenberg argues that he pled pursuant to a deferred prosecution agreement (DPA) that was defective because it failed to conform to the statutory requirements of Wis. Stat. § 971.39. However, Wollenberg actually entered his plea pursuant to a plea agreement containing a condition of deferred entry of judgment on the burglary counts. A DPA and deferred entry of judgment are different procedures and therefore the statutory DPA mandates were immaterial. We therefore affirm the judgment and order.

Background

¶ 2. In 1999, Wollenberg was originally charged with four counts of burglary, one count of felony theft, and one count of misdemeanor theft. Pursuant to a plea agreement, Wollenberg pled no contest to the four burglary counts and four misdemeanor theft counts, all as party to a crime, plus two unrelated counts in another case. Under the agreement, Wollenberg's sentence on the theft counts was withheld and he was placed on four years' probation for each count, running concurrently, and with 180 days' total jail time as a condition of probation. Entry of judgment on the burglary counts was to be deferred for six years, provided Wollenberg committed no additional crimes and abided by the terms of his probation.

¶ 3. When Wollenberg's probation was revoked, the State moved for entry of the deferred judgments. The court granted the motion, entering judgments of conviction on the four burglary charges and sentencing Wollenberg to concurrent eight-year prison terms on each count. Wollenberg filed a postconviction motion to withdraw his plea, claiming that he pled to a DPA that was void because it was not in writing. The court denied the motion by letter without a hearing stating there was no DPA, only a plea agreement. Wollenberg appeals.

Discussion

¶ 4. To withdraw a plea after sentencing, a defendant must establish by clear and convincing evidence that failure to allow the withdrawal would result in manifest injustice. See State v. Trochinski, 2002 WI 56, ¶ 15, 253 Wis. 2d 38, 644 N.W.2d 891. To withdraw a plea, the defendant must first establish a prima facie case that the court violated Wis. Stat. § 971.08, the plea procedure statute, and allege that he or she did not understand the information the court should have provided at the plea hearing. Id., ¶ 17.

¶ 5. Wollenberg alleges none of those errors and even if he did, the record reveals an extensive plea colloquy. Wollenberg's argument is instead premised on two concepts: first, that he had a DPA with the State and, second, that the DPA was invalid because it was not in writing. Thus, he claims, the invalid DPA voids his judgment of conviction. Implicitly, therefore, he claims if his conviction is allowed to stand, it leads to a manifest injustice.

I. There Was No DPA, Only a Plea Agreement.

¶ 6. Wollenberg presents no evidence, other than his own arguments, that there was a DPA under Wis. Stat. § 971.39. Rather, the record establishes that he entered a plea agreement with the State that contemplated a deferred entry of judgment on the more serious burglary charges.

¶ 7. At the plea hearing, the court conducted a plea colloquy. Of particular import here, the court informed Wollenberg that it was not bound by the district attorney's recommendation. Specifically, the court informed Wollenberg: "In other words, I don't have to defer the entry of judgment. I could sentence you today . . . ."

¶ 8. Additionally, the court asked whether Wollenberg agreed to the proposed order for deferred entry of judgment. Wollenberg indicated he had reviewed the order the State prepared and approved its terms. The order states "that judgment of conviction be deferred for six (6) years" subject to certain conditions.

¶ 9. In short, the court as well as the State always spoke in terms of deferred entry of judgment, not deferred prosecution. At no point did Wollenberg object or claim the agreement was for deferred prosecution. Wollenberg agreed to the order for deferred entry of judgment. Moreover, the court informed Wollenberg that it did not have to accept the deferral but could instead sentence Wollenberg immediately on the burglaries — something not contemplated as part of a DPA. A successful DPA results in dismissal of charges, not sentencing. See Wis. Stat. § 971.39(l)(f).

¶ 10. While Wollenberg argues that there is no legal difference between a deferred prosecution and a deferred entry of judgment, we disagree. The only statutorily mandated parties to a DPA are the State, the defendant, and the Department of Corrections. See Wis. Stat. § 971.39(l)(a). The department monitors compliance with the DPA, and in this case Wollenberg would be placed on probation for four years for the theft charges. That means, however, that because the entry of judgment on the burglaries would be deferred for six years, Wollenberg would be "on his own" for two years. This lack of supervision is also something not contemplated by the DPA rules.

¶ 11. Moreover, as the State observes, unlike a plea agreement that requires the court's acceptance, Wis. Stat. § 971.39 does not require court approval of the DPA. The statute does not require the DPA be filed with the court or placed in the record, and does not even require that the court be notified that there is a DPA. Nothing in this record indicates the existence of any DPA, and Wollenberg's mere insistence that there was one does not make it true.

II. Even if There is a DPA, Any Error Was Invited.

¶ 12. Second, assuming this was a DPA, Wollenberg claims the judgment is void because the agreement was never in writing. Wollenberg, however, invited the error he alleges, and we normally will not review invited error. See Atkinson v. Mentzel, 211 Wis. 2d 628, 642-43, 566 N.W.2d 158 (Ct. App. 1997).

¶ 13. As noted, Wollenberg failed to timely raise this issue in the trial court. That alone fails to preserve the issue for review. See In re Eugene W., 2002 WI App 54, ¶ 13, 251 Wis. 2d 259, 641 N.W.2d 467. Instead, he expressly urged the court to adopt the terms of the plea agreement as recited by the prosecutor. He also agreed to the order deferring entry of judgment. The court followed the parties' joint recommendations, and under such circumstances we do not allow a defendant to cry foul on appeal. See In re Shawn B.N., 173 Wis. 2d 343, 372, 497 N.W.2d 141 (Ct. App. 1992) (if error occurred, defense counsel invited it); Zindell v. Central Mut. Ins. Co., 222 Wis. 575, 582, 269 N.W. 327 (1936) (appellant cannot complain of errors induced by appellant).

¶ 14. Wollenberg cites State v. Jankowski, 173 Wis. 2d 522, 528, 496 N.W.2d 215 (Ct. App. 1992), to support his claim that he cannot be convicted on the basis of a legal nullity. Jankowski, however, dealt with a different scenario. Jankowski was convicted of violating an injunction. However, the court had extended the injunction beyond the time period allowed by statute and the injunction was therefore invalid. Because the injunction was void, it could not serve as a basis for a criminal conviction and we reversed.

¶ 15. Wollenberg fails to explain why the DPA, if there was one, should be declared void. His only justification is that the DPA was not in writing. This argument, however, focuses merely on a procedural deficit. Wollenberg makes no argument that he was unaware of any of the contemplated terms of his plea, and he makes no claim that he has been prejudiced by the failure to put the DPA in writing. Thus, there can be no manifest injustice. See Trochinski, 253 Wis. 2d 38, ¶ 15. His challenge is to form, not to substance, and there is no parallel to Jankowski in this situation. Unlike Jankowski's conviction, Wollenberg's burglary and theft charges are not invalid by operation of any statute of limitations.

III. If the Trial Court Erred, the Error was Remedied

¶ 16. Finally, Wollenberg claims the court has no authority to defer an entry of judgment of conviction because (1) Wis. Stat. § 972.13(1) states that a "judgment of conviction shall be entered" upon a defendant's no contest plea; (2) Wis. Stat. § 961.47, the Uniform Controlled Substances Act, authorizes a trial court to defer a judgment and this explicit grant of power is unnecessary if the trial court has inherent authority to defer the entry of judgment; and (3) Wis. Stat. § 973.15(8) only allows the court to stay a sentence in three instances. We disagree with Wollenberg's statutory interpretations.

¶ 17. Statutory interpretation presents a question of law that we review de novo. J.L. Phillips & Assoc. v. E & H Plastic Corp., 217 Wis. 2d 348, 354, 577 N.W.2d 13 (1998). The goal of statutory interpretation is to discern and give effect to the intent of the legislature. County of Jefferson v. Renz, 231 Wis. 2d 293, 301, 603 N.W.2d 541 (1999). We first look for that intent in the plain language of the statute. Id. If the meaning of the statute is plain and unambiguous, we cannot look beyond the language of the statute to determine its meaning. City of Muskego v. Godec, 167 Wis. 2d 536, 545, 482 N.W.2d 79 (1992). If the statute is ambiguous or unclear, this court may look to the legislative history and other extrinsic evidence to discern legislative intent. Renz, 231 Wis. 2d at 302.

¶ 18. Wisconsin Stat. § 972.13(1) reads: "A judgment of conviction shall be entered upon a verdict of guilty by the jury, a finding of guilty by the court in cases where a jury is waived, or a plea of guilty or no contest." While it is possible to read this statute as mandating entry of judgment immediately following the verdict, finding, or plea, it is also possible to read it as saying the verdict, finding, or plea are conditions precedent to an entry of judgment of conviction. In other words, a judgment of conviction shall not be entered if there is no guilty verdict, guilty finding, or guilty or no contest plea. Thus, the statute is ambiguous and we therefore resort to resources outside the statute's language to determine its meaning. Renz, 231 Wis. 2d at 302.

¶ 19. The legislative history suggests the second interpretation is correct. The predecessor statute, Wis. Stat. § 959.01(1) (1967), stated that a person "may be convicted only upon a verdict of guilty by the jury, a finding of guilty by the court... or a plea of guilty or nolo contendere." (Emphasis added.) Moreover, Wis. Stat. § 972.13(3) requires the judgment of conviction recite the sentence, but Wis. Stat. § 972.13(2) allows the court to adjourn proceedings before pronouncing sentence. In many cases, this gap is when a presentence investigation is conducted, often disclosing mitigating or aggravating factors that the court considers in determining the severity of punishment. As the State points out, this case effectively involved an adjournment of the case prior to sentencing. Without the sentence, judgment could not be entered, and it would not have been had Wollenberg complied with the terms of the plea agreement.

¶ 20. Wisconsin Stat. § 961.47 states in relevant part, "Whenever any person who has not previously been convicted of any offense under this chapter. .. pleads guilty to or is found guilty of possession or attempted possession of a controlled substance . .. the court, without entering a judgment of guilt and with the consent of the accused, may defer further proceedings and place him or her on probation upon terms and conditions." Wollenberg contends this statutory authority is unnecessary if the trial court has the inherent authority to defer entry of judgment. As the State points out, however, § 961.47 is unique because it authorizes the deferral regardless whether the State consents. The statute makes no mention of a plea agreement between the State and the accused, which is the situation here.

¶ 21. Finally, Wollenberg refers to Wis. Stat. § 973.15(8), which says "The sentencing court may stay execution of a sentence of imprisonment or to the intensive sanctions program only" for legal cause, to impose probation, or for no more than sixty days. However, this statute is irrelevant because there had been no sentence until after Wollenberg violated the plea terms and the State asked for entry of judgment.

¶ 22. In any event, even if there was error when the court failed to enter the judgment immediately following Wollenberg's plea, the defect was remedied when it revoked the deferment and entered the judgment on the burglary charges.

By the Court. — Judgment and order affirmed.

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

       In his reply brief, Wollenberg argues that pleading to a legally void agreement renders his plea unknowing. However, this is premised on the belief that there was a DPA and that it was faulty. Because we conclude there was no DPA, this argument lacks merit.

       Wisconsin Stat. § 971.39 reads:
      (1) Except as provided in s. 967.055 (3), in counties having a population of less than 100,000, if a defendant is charged with a crime, the district attorney, the department and a defendant may all enter into a deferred prosecution agreement which includes, but is not limited to, the following conditions:
      (a) The agreement shall be in writing, signed by the district attorney or his or her designee, a representative of the department and the defendant.
      (b) The defendant admits, in writing, all of the elements of the crime charged.
      (c) The defendant agrees to participate in therapy or in community programs and to abide by any conditions imposed under the therapy or programs.
      (d) The department monitors compliance with the deferred prosecution agreement.
      (e) The district attorney may resume prosecution upon the defendant's failure to meet or comply with any condition of a deferred prosecution agreement.

        (f) The circuit court shall dismiss, with prejudice, any charge which is subject to the agreement upon the completion of the period of the agreement, unless prosecution has been resumed under par. (e).
      (2) Any written admission under sub. (l)(b) and any statement relating to the crime under sub. (1) (intro.), made by the person in connection with any discussions concerning deferred prosecution or to any person involved in a program in which the person must participate as a condition of the agreement, are not admissible in a trial for the crime.

       For example, the district attorney informed the court at the plea hearing that Wollenberg
      would be pleading no contest to each of the eight counts in the Information....
      Our agreement with regard to sentencing is that on each of the ... burglary counts we would ask that... entry of a judgment of conviction be deferred for a period of six years. I have an order deferring the entry of judgment of conviction.

       We note that in practice, however, the court is sometimes asked to approve the agreement. The key, however, is that such involvement is not required.