author: VERGERONT, J.

text:
    Town of Brockway, Plaintiff-Appellant, v. City of Black River Falls and McFour Ventures, LLC, Defendants-Respondents.
    Court of Appeals

      No. 2004AP2916.

      Submitted on briefs April 20, 2005.

      Decided June 30, 2005.

    2005 WI App 174
    (Also reported in 702 N.W.2d 418.)

      On behalf of the plaintiff-appellant, the cause was submitted on the briefs of Michael L. Stoker, Johns, Flaherty & Collins, S.C., La Crosse.
    On behalf of the defendant-respondent McFour Ventures, LLC, the cause was submitted on the brief of John L. Maier, Jr., Sweet & Maier, S.C., Elkhorn.
    On behalf of the defendant-respondent Black River Falls, the cause was submitted on the brief of Thomas A. Gilligan Jr., Murnane, Conlin, White and Brandt, BA., St. Paul, MN.

      Before Dykman, Vergeront and Lundsten, JJ.

       Petition to review denied 10-14-05.

   VERGERONT, J.

¶ 1. The Town of Brockway appeals the circuit court's order granting summary judgment and dismissing its claim that the annexation of certain of the Town's territory by the City of Black River Falls was invalid. We conclude the complaint was sufficient to allow the Town to argue that an agreement between the City and the property owner was an abuse of the City's discretion and therefore a violation of the rule of reason. However, we also conclude, based on the undisputed facts, that the City did not in the agreement surrender its governmental powers and did not exert economic pressure of the type prohibited by Town of Fond du Lac v. City of Fond du Lac, 22 Wis. 2d 533, 126 N.W.2d 201 (1964). Accordingly, we conclude the agreement did not constitute an abuse of the City's discretion and the annexation did not violate the rule of reason. We therefore affirm.

FACTUAL BACKGROUND

¶ 2. On May 7, 2002, the City approved two ordinances annexing Town property owned by McFour Ventures, LLC. The Town filed this lawsuit challenging the annexation on a number of grounds, but the only one relevant to this appeal is the claim that the City violated the rule of reason. McFour Ventures intervened as a defendant by stipulation of the Town and the City.

¶ 3. All parties moved for summary judgment. The following facts are undisputed. McFour Ventures is a family-owned Wisconsin limited liability company in the business of leasing and selling land. The annexed property, consisting of approximately 395 acres, is located at the intersection of State Highway 54 and Interstate 94. Prior to its annexation, the property was contiguous to the corporate limits of the City and was zoned agricultural.

¶ 4. Before it sought annexation of its property by the City, McFour Ventures planned an industrial and commercial development for the property. McFour Ventures believed that in order for this development to occur, the revenue that would be available in a tax incremental financing (TIF) district was necessary to finance the required public infrastructure. McFour Ventures' counsel was of the opinion that the Town, as a matter of law, could not create a TIF district but that the City could. McFour Ventures therefore decided that annexation by the City was necessary to achieve the planned use of the property. Beginning in December 2001, McFour Ventures and its counsel began meeting with city officials — the mayor, the city clerk, and the city attorney — to discuss annexation and the possibility of the creation of a TIF district.

¶ 5. During the course of these discussions, Mc-Four Ventures and city officials negotiated a draft of a document titled "Pre-annexation and Development Agreement" (the agreement). McFour Ventures' counsel prepared the initial draft and there were revisions to it based on discussions between McFour Ventures and the city officials. The agreement contained the following provision:

The Property Owner has now filed a Petition for direct Annexation to join the Property to the City. The City Plan Commission has favorably reviewed the proposed annexation of the Property, and has recommended the annexation. The Property owner has requested that the City assign rural Development District Zoning to the Property. It is understood that portions of the Property will have to be re-zoned to comply with the TIF laws of the State of Wisconsin.

In other provisions, the City "represent[ed] that it intend[ed] to pursue the creation of a TIF District, which [would] include [certain of the property]"; adopt a TIF plan in substantially the same form as attached; and "install public streets, water lines, storm and sanitary sewers and other public improvements necessary to serve the TIF Property in accordance with the TIF Plan ...." McFour Ventures "agree[d] to have the Property annexed to the City, provided the City zone[d] all of the Property Rural Development District." The City "agreetd] to furnish street and utility services via the TIF Plan as set forth therein," and "to annex the Property in accordance with the terms and conditions hereof." The agreement described the public and private improvements in some detail, the allocation of responsibility for them, and the method of special assessments that might be necessary for financing the public improvements. Finally, the City agreed to "actively support and assist the Property Owner with respect to the Owner's endeavors to obtain required permits and approvals from all governmental or quasi-governmental agencies or boards, whether federal, state or local, with jurisdiction over any aspect or part of a development of a TIF Property . . .

¶ 6. With a cover letter dated April 15, 2002, McFour Ventures sent the petitions for direct annexation to the city clerk along with the final draft of the agreement. The petitions were signed by all the electors residing in the territory and the owners of all the real property in the territory. With respect to the enclosed agreement, the letter stated:

This agreement is not signed by the parties since it requires you to take it to the Plan Commission, the Finance Committee and the Common Council for their impute [sic] and approval. As you know, the main incentive for my clients requesting you to annex this property is the creation of the Tax Increment Finance ("TIF") District. This agreement sets forth the terms and conditions of the TIF and the annexation of my client's property to the City of Black River Falls.
I indicated that my clients would sign the proposed agreement in hopes that the Commission, the Committee and the Common Council will accept the fruits of our collective efforts.
I request that these Petitions be heard at the next available City Planning Commission meeting, and then scheduled at the following regular meeting or meetings of the Common Council for the City of Black River Falls. I also request that the matter of the TIF be introduced at that... meeting as well.

¶ 7. A public hearing was held on May 1, 2002, on the annexation petitions; the hearing also solicited public opinion on amending the City's zoning ordinance to add an "1-1 (Light Industrial District)." At the common council meeting on May 7, 2002, the common council first took up the two annexation ordinances, which had a favorable recommendation from the plan commission, and voted to pass both ordinances. The common council then took up the amendment to the zoning ordinance, also recommended by the plan commission, and passed the amendment. This was followed by a motion to authorize the mayor and the city clerk to execute the agreement with McFour Ventures, and the motion passed. On July 2, 2002, the common council approved a TIF district, including a portion of the annexed property.

¶ 8. In support of its motion for summary judgment, the Town argued that, based on the undisputed facts, the agreement was an unlawful surrender of the City's governmental powers and, in addition, was the type of economic pressure prohibited under Town of Fond du Lac, 22 Wis. 2d 533. Therefore, according to the Town, the City violated the rule of reason by abusing its discretion and the annexation was invalid. The City and McFour Ventures responded that the annexation was valid because there was compliance with all statutory requirements and with the rule of reason, and in all other respects the procedure was proper and lawful.

¶ 9. The circuit court concluded that the agreement was not an unlawful surrender of the City's governmental powers because it did not become binding on the City until it was approved by the common council after the council adopted the annexation ordinances, and there was not otherwise an abuse of discretion by the City. Accordingly, the court granted the motion of the City and McFour Ventures for summary judgment and dismissed the complaint.

ANALYSIS

¶ 10. On appeal, the Town renews its argument that the annexation violated the rule of reason because the agreement was an abuse of the City's discretion in that it was an unlawful surrender of the City's governmental powers and also the type of economic pressure prohibited by Town of Fond du Lac.

¶ 11. In reviewing the grant or denial of a summary judgment, we employ the same methodology as the circuit court and our review is de novo. Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315, 401 N.W.2d 816 (1987). Because in this case the material facts are not disputed, the question we address is which party is entitled to judgment as a matter of law. Wis. Stat. § 802.08(2).

¶ 12. Before discussing the parties' positions on the merits, we consider the City's argument that the Town is precluded from arguing that the unlawfulness or impropriety of the agreement invalidated the annexation because this issue was not raised in the complaint. Whether a complaint is sufficient to entitle a party to relief on a particular claim presents a question of law, which we review de novo. Wausau Tile, Inc. v. County Concrete Corp., 226 Wis. 2d 235, 245, 593 N.W.2d 445 (1999).

I. Sufficiency of Complaint

¶ 13. In the circuit court, the City contended in its responsive brief that the Town was precluded from arguing that the agreement invalidated the annexation because this issue was not raised in the complaint. The Town replied that it had not learned of the agreement until discovery and that the allegations in the complaint concerning violation of the rule of reason were broad enough to encompass its arguments on the agreement. The circuit court did not address the sufficiency of the complaint on this point, but instead decided the merits of the Town's arguments concerning the agreement.

¶ 14. Wisconsin is a notice-pleading state, see Wis. Stat. § 802.01(1), but a complaint must nonetheless contain a statement of the general factual circumstances in support of the claim presented. Town of Campbell v. City of La Crosse, 2003 WI App 247, ¶ 14, 268 Wis. 2d 253, 673 N.W.2d 696 (citations omitted). In the context of a challenge to an annexation, a complaint must allege some facts that, if true, entitle the pleader to a ruling that the annexation is invalid. Id.

¶ 15. Although the complaint does not specifically refer to the agreement, it does contain the following allegation:

[The annexation] violate the judicially created 'Rule of Reason' insofar as, among other things, the boundaries of said annexations are arbitrary and capricious, a result of gerrymandering; the territory of the annexations is better served by the Town, neither the City nor the Petitioners have a need for annexation, and the annexation[] [is] inequitable and unjust.

(Emphasis added.) We conclude this allegation is sufficient to encompass the argument that the unlawfulness or impropriety of the agreement makes the annexation inequitable or unjust, thus constituting a violation of the rule of reason.

¶ 16. We do not agree with the City that our decision in Town of Campbell requires a specific reference in the complaint to the agreement. Our ruling in that case did not require this degree of factual specificity. Rather, we held there that the allegation that the annexation was "invalid as a matter of law" was not adequate notice of a claim that the wrong procedure was followed because the annexation included property of non-consenting owners. Id., ¶ 14.

II. Rule of Reason

A. Applicable Law

¶ 17. In Wis. Stat. ch. 66, the legislature has conferred upon cities and villages broad powers to annex unincorporated territory. Town of Pleasant Prairie v. City of Kenosha, 75 Wis. 2d 322, 326, 249 N.W.2d 581 (1977). Judicial review of an annexation is limited to whether the statutory procedures for annexation have been followed and whether the annexation complies with the rule of reason. Id. On this appeal, no statutory procedures are at issue.

¶ 18. The rule of reason is a judicially created doctrine that assists courts in determining whether a municipality had abused its powers of annexation. Town of Pleasant Prairie, 75 Wis. 2d at 327. Under the rule of reason: (1) exclusions and irregularities in boundary lines must not be the result of arbitrariness; (2) there must be some present or demonstrable future need for the annexation; and (3) there must be no other factors that constitute an abuse of discretion on the part of the municipality. Town of Menasha v. City of Menasha, 170 Wis. 2d 181, 189, 488 N.W.2d 104 (Ct. App. 1992). Only the third part of the rule of reason is implicated on this appeal.

¶ 19. Annexation ordinances enjoy a presumption of validity and the challenger has the burden of showing that the annexation violates the rule of reason. Town of Pleasant Prairie, 75 Wis. 2d at 327.

The rule of reason does not authorize a court to inquire into the wisdom of the annexation before it or to determine whether the annexation is in the best interest of the parties to the proceeding or of the public. These matters are inherently legislative and not judicial in character.

Id.

¶ 20. Where, as here, the relevant facts are undisputed, the question whether the facts meet the legal requirements of the rule of reason is a question of law, which this court reviews de novo, while bearing in mind the deferential standard this court applies to the City's decision to annex. Town of Campbell, 268 Wis. 2d 253, ¶ 20.

B. Surrender of Governmental Powers

¶ 21. The Town argues that the agreement obligated the City to make zoning changes and create a TIF district and thus violated the principle that municipalities may not surrender or contract away their governmental powers. See Wausau Joint Venture v. Redevelopment Auth., 118 Wis. 2d 50, 59, 347 N.W.2d 604 (1983) (affirming and applying the proposition that a municipality may not surrender or contract away government functions or powers without statutory authorization, although it may by contract curtail its right to exercise proprietary or business functions).

¶ 22. A key component of the Town's argument on the unlawfulness of the agreement is that the city officials who negotiated the agreement bound the City to the agreement before the common council approved it. We address this issue first, before returning to the Town's argument that the agreement unlawfully contracted away the City's governmental powers.

¶ 23. The Town concedes that the agreement was not approved by the common council until its May 7 meeting and that this occurred after the common council voted to approve the annexation ordinances. However, the Town considers this a "well choreographed procession of formalities [that] does not cure the underlying abuse of authority evidenced by the various versions of the Pre-annexation Agreement." According to the Town, it was a foregone conclusion that the common council would vote to approve the agreement because it had been negotiated by powerful city officials, and the officials were somehow binding the City by their negotiations.

¶ 24. We reject the Town's position that the common council, and thus the City, was bound by the agreement before the common council voted to authorize the mayor and clerk to execute it. The Town provides no case law or statutory law to support the proposition that a mayor, city clerk, or city attorney has the authority to bind a city to a contract. The general rule of municipal law is that only a duly authorized officer, governing body, or board can act on behalf of a city, and a valid contract with the municipality cannot be created otherwise. 10 McQuillan, Municipal Corporations § 29.15 at 307 (3d ed. 1999). The powers and duties of city mayors, clerks, and attorneys are prescribed by statute and do not include this authority. See Wis. Stat. § 62.09(8), (11), and (12). On the other hand, the common council has a broad grant of authority for

the management and control of the city property, finances, highways, navigable waters, and the public service, and... power to act for the government and good order of the city, for its commercial benefit, and for the health, safety, and welfare of the public, and may carry out is powers by license, regulation ... and other necessary or convenient means.

Wis. Stat. § 62.11(5). "A city attorney cannot make a valid contract on behalf of the city unless he has prior authority to do so. Only the municipal corporation has that authority or the authority to delegate that authority." Kocinski v. Home Ins. Co., 154 Wis. 2d 56, 69, 452 N.W.2d 360 (1990). The Town points to no evidence here that shows that any of the city officials who negotiated the agreement had the authority to bind the City without common council approval.

¶ 25. The Town refers to cases holding that a written agreement need not be signed by both parties to be effective, Consolidated Papers, Inc. v. Dorr-Oliver, Inc., 153 Wis. 2d 589, 451 N.W.2d 456 (Ct. App. 1989), and that parties may be bound by the terms of a contract, even if they do not sign it, when their intention to do so is otherwise indicated. See, e.g., Albright v. Stegeman Motor Car Co., 168 Wis. 557, 170 N.W. 951 (1919). However, these cases do not involve contracts with municipalities. If a city official does not have the authority to bind the city, subjective intent is irrelevant. See Kocinski, 154 Wis. 2d at 69. Moreover, in this case there is no evidence that the city officials intended to bind the City without common council approval or suggested that they had the authority to do so. Indeed, it is undisputed that McFour Ventures understood that the common council had to approve the agreement before it was binding on the City. It may be that the city officials negotiating the agreement were confident the common council would approve it and communicated this to McFour Ventures, and undoubtedly McFour Ventures relied on the likelihood of that approval in petitioning for annexation. But those expectations did not make the agreement binding before the common council approved it.

¶ 26. Having concluded that the agreement was not binding on the City until the common council voted to authorize the mayor and clerk to sign it, we return to the Town's argument that the agreement was unlawful because it contracted away the City's governmental powers. The City responds that the lawfulness of the agreement is irrelevant to the validity of the annexation because the agreement did not become binding on the City until the common council authorized it, and that occurred after the common council passed the annexation ordinances. We will assume without deciding that the lawfulness of the agreement is relevant to the validity of the annexation and address the merits of the Town's argument.

¶ 27. The rationale for the principle that a municipality may not contract away its governmental powers is that a municipality is " 'wholly a creature of legislatively delegated power, [and therefore] cannot by ordinance or contract bargain away that portion of the state's sovereignty which has been conferred upon it.'" State ex rel Hammermill Paper Co. v. La Plante, 58 Wis. 2d 32, 80, 205 N.W.2d 784 (1973) (citing Adamczyk v. Caledonia, 52 Wis. 2d 270, 275, 190 N.W.2d 137 (1971)). One aspect of this principle is that a municipality may not make contracts that will control them in the performance of their legislative functions in the future, and that includes zoning. 10 McQuillan, Municipal CORPORATIONS § 29.07 (3d ed. 1999).

¶ 28. With respect to zoning, the agreement here does not state that the City will amend the zoning ordinance. In section 1.03 of the agreement, the City acknowledges that McFour Ventures has requested Rural Development District Zoning and that this is necessary to create a TIF district. The obvious implication, from the standpoint of the time during which the agreement was being negotiated, is that the zoning process had been or would be set in motion; but the terms of the agreement do not obligate the common council to approve McFour Venture's zoning request. As already noted, the common council did approve the zoning ordinance before it authorized the agreement. The agreement also states that McFour Ventures "agrees to have the Property annexed to the City, provided the City zones all of the Property Rural Development District...This does not obligate the City to zone the property in that way but instead suggests that McFour Ventures will not proceed with the annexation unless the City first does so. In any case, McFour Ventures did proceed with the annexation petitions even though the common council did not first pass the zoning ordinance.

¶ 29. With respect to the creation of a TIF district, the agreement affirms the City's intent to pursue the creation of a TIF district. In essence, when the City voted to approve this agreement, it was exercising its governmental power to decide that it would pursue the creation of a TIF district and would provide certain public improvements on certain conditions to the property in the district. Under Wis. Stat. § 66.1105(3)(a) and (b), the City has the power to create TIF districts, define its boundaries, cause project plans to he prepared and approved, and implement the plans; under para, (e) the City has the power to enter into agreements "determined by the local legislative body to be necessary or convenient to implement the provisions and effectuate the purposes of project plans." As we have explained above, the City was not bound until the common council voted to approve the agreement. Thus, no prior act of a city official had restricted or limited the governmental power of the City by obligating the common council to approve the pursuit of the creation of a TIF district.

¶ 30. This conclusion is supported by Town of Pleasant Prairie, 75 Wis. 2d 322. There the property owners' motive for annexation by the city was development of their property as industrial property; neither the necessary zoning nor municipal services was then available in the town. Id. at 328. The property owners met with the city officials several times to discuss annexation. Id. A day after they filed the annexation petition, they petitioned the common council to have most of the land rezoned for heavy industrial use and asked that the annexation and zoning petitions be considered together because the purpose of both was to permit the development of the property for industrial purposes. Id. at 329. At the same common council meeting, the common council adopted the annexation ordinance and voted to refer the zoning matter to the city plan commission for consideration. The court considered and rejected the town's argument that the city promised rezoning as a bribe to induce annexation and thereby delegated its zoning power to the property owners, stating:

It may be that the City Planner informed the Ganglers that he personally felt industrial zoning would be appropriate for the annexed area or that he thought the Common Council would probably approve such zoning. However, there is no evidence to show that anyone acting on behalf of the City promised any type of rezoning or otherwise purported to commit the City in this regard. Moreover, as we have noted, the Common Council has already partially refused Mr. Gangler's rezoning petition, which requested that the property be rezoned for heavy industrial use. Speculative characterizations such as the Town has advanced cannot serve to overcome the presumed validity of the annexation ordinance here.

Id. at 332.

¶ 31. Although the court in Town of Pleasant Prairie did not go into depth on the issue of delegation — or surrender — of the city's zoning power, the case does instruct that a delegation or surrender does not occur when the common council remains free to approve or reject the requested rezoning. That is the case here. Town of Pleasant Prairie also firmly cautions against assumptions that the city officials acted improperly to hind the City when the evidence does not show that occurred.

¶ 32. The Town cites cases from other jurisdictions to support its position, most prominently City of Louisville v. Fiscal Court of Jefferson County, 623 S.W.2d 219 (1981). The Town's discussion of this case is based on the Town's premise, which we have already rejected, that the agreement was binding on the City before the common council voted to approve it. Nonetheless, we consider the case to determine whether it provides support for the proposition that the agreement approved by the common council constituted an unlawful surrender of governmental authority. We conclude it does not.

¶ 33. In City of Louisville, the court invalidated a settlement agreement between a municipality and the property owners in an area that the municipality sought to annex. The agreement provided that the property would be annexed and the municipality would place it in a special taxing and service district with a reduced ad valorem tax for a number of years. The court held that the provision setting tax rates for twenty years was void because the municipality could not by contract limit its future legislative power. Id. at 224. The court also held void a provision obligating the municipality to "cooperate fully and in good faith" with the property owners in an application for "reasonable zoning changes, building and other permits ... and any and all other changes for which municipal, environmental or any other governmental approval is requested," and another provision that obligated the municipality not to "take any action of any nature whatsoever that will diminish or adversely affect the agricultural or forestry use of the part of the area presently so used." Id. at 225. The court concluded that these two provisions might create conflicts of interest and would also obligate the municipality to take particular legislative action in the future. Id. It is the ruling on these last two cooperation provisions on which the Town relies.

¶ 34. As the City points out, in Save Elkhart Lake, Inc. v. Village of Elkhart Lake, 181 Wis. 2d 778, 788 n. 6, 512 N.W.2d 202 (Ct. App. 1993), we declined to consider City of Louisville in support of an argument that the cooperation provisions in that agreement between a village and a developer were void as a delegation of the village's police powers. The two challenged cooperation provisions in Elkhart Lake stated that (1) the parties agreed to "work cooperatively to accomplish the object of an economically viable Project that will promote the construction of significant public improvements in the Village and reduce the property tax burden of Village residents," and (2) the Village would assist the developer in "processing as expeditiously as possible all applications for permits, approvals, variance, licenses, certificates, rezonings, inspections, and consents that may be necessary or desirable to enable [the developer] to commence and carry out the development of the Project within the time frames set forth herein." Id at 783, 786 n.4. The plaintiff in Elkhart Lake argued that Wisconsin law requires that "the police power decisions"— meaning the decisions involving road relocation, rezoning, and the creation of a TIF district — had to be made before the municipality promised to cooperate toward making a project successful and that the village's "promise to cooperate" in essence "approved the entire project before making important police power decisions." Id. at 784 n.l, 787.

¶ 35. We rejected this argument. We observed in Elkhart Lake that the plaintiff had cited no Wisconsin authority for this position, stating in a footnote: "We are unpersuaded that the lone case cited by [the plaintiff], City of Louisville v. Fiscal Court of Jefferson County, 623 S.W.2d 219 (Ky. 1981), provides any authority or insight into Wisconsin law. Therefore, we decline to further address it." Elkhart Lake, 181 Wis. 2d 778, 788 n.6. We also stated that cooperative agreements between municipalities and developers were within the grant of powers conferred on the Village by Wis. Stat. § 61.34, and there were provisions in the agreement indicating that everything was to be done in accordance with all applicable procedures and within the limits of the law. Because there was nothing in the agreement that "guarantees the success of the project or allows the parties to circumvent the law," we concluded that the cooperation provisions did not constitute an invalid delegation of the municipality's police powers. Id. at 788.

¶ 36. Under Elkart Lake the City here may lawfully agree to cooperate with McFour Ventures in the effort to create a TIF district, as long as it is clear from the agreement that all applicable laws and procedures are to be followed. To the extent that City of Louisville holds otherwise, it is inconsistent with the law in Wisconsin. There is nothing in the agreement between the City and McFour Ventures that suggests the applicable laws and procedures are not to be followed. Indeed, the agreement is plainly drafted with the statutory requirements for creating TIF districts in mind. We also observe that the specific cooperation provision in this agreement — that the City will "actively support and assist" McFour Ventures in its efforts "to obtain required permits and approvals from all governmental and quasi-governmental agencies or boards" for the development of the TIF property — appears to apply to permits and approvals from other governmental units. However, even if the provision is intended to encompass permits and approvals from the City, we are satisfied that, under Elkart Lake, this provision does not constitute an unlawful delegation of the City's governmental powers.

¶ 37. We conclude the agreement did not surrender or contract away the City's governmental powers.

C. Impermissible Economic Pressure

¶ 38. The Town also argues that the agreement was the type of "quid pro quo" held invalid in Town of Fond du Lac, 22 Wis. 2d 533. In that case, the municipality was one of the two property-owning petitioners for annexation. Id. at 536. The municipality obtained in writing the agreement of two electors to sign the petition in exchange for permitting them to remain rent free for one year in the home the municipality had just purchased from them. Id. The municipality notified two other electors, its tenants, that they would be evicted from their residence if they did not sign the petition. Id. at 536-37. The court analogized an annexation proceeding to voting because both involved a political right that must be the individual act of the elector. Id. at 540. While recognizing that annexation proceedings legitimately involve political pressures of conflicting interests, the court stated that "the use of economic pressure by the defendant-city interested in the outcome of the annexation to obtain favorable signatures of the necessary electors in this case is a shocking disregard of the political process of government." Id. at 539-40. The court viewed the City's conduct as the equivalent of buying votes and declared the annexation void on that basis. Id. at 540.

¶ 39. In analyzing what was wrong with the municipality's conduct, the court in Town of Fond du Lac stated:

No property owner, city or individual, possesses any right to induce by contract or threat an elector to vote a particular way or to sign an annexation petition because of special economic consideration unrelated to the political issue involved. This is not to say one cannot persuade an elector to vote in favor of his general interest in the outcome of a political issue. In the former case the extraneous outside factor defiles the integrity of the political act and destroys its validity.

Id. (emphasis added).

¶ 40. Town of Fond du Lac does not support the Town's position. It is undisputed that McFour Ventures approached the City because it had decided it wanted to have its property annexed by the City. McFour Ventures had to be annexed to the City in order to have its property in a TIF district; it wanted the TIF district and therefore it wanted annexation. It is true that McFour Ventures would not have pursued annexation had the city officials not been willing to negotiate an agreement on pursuing a TIF district and to present it to the common council for approval. However, the city officials' willingness to do that is not the equivalent of what the municipality did in Town of Fond du Lac: use the power it had as an owner of the property on which the electors resided to coerce unwilling or undecided electors through economic pressure that was unrelated to the benefits of annexation.

¶ 41. The distinction between the impermissible economic pressure in Town of Fond du Lac and permissible inducements for annexation was addressed in Town of Pleasant Prairie, 75 Wis. 2d 322. The court there first rejected the argument that the annexation was improper because the sole purpose was to effect rezoning. The court reasoned that the underlying purpose was development of the property for industrial use, zoning was necessary for that, and the desire of property owners to develop their property was a legitimate purpose for annexation. Id. at 328. The court therefore concluded that a "direct annexation not otherwise in conflict with the rule of reason is not invalidated because the petitioners are motivated by a desire to obtain a change in the zoning of their land." Id. at 329-30. The court next rejected the argument that the city used the economic benefits of rezoning as an improper inducement of the type prohibited by Town of Fond du Lae. The court stated that it was undisputed that the property owners desired annexation because of their own self-interest and that the property owners, not the city, made the decision to initiate the annexation process and seek rezoning. There was no evidence of coercion, the court said, or of the "special economic considerations of the type involved in Town of Fond du Lac." Id. at 331.

¶ 42. Like the court in Town of Pleasant Prairie, we conclude there is no evidence here that the municipality coerced the property owner into the annexation or imposed the type of economic pressure found impermissible in Town of Fond du Lac.

By the Court. — Order affirmed.

       The property annexed consisted of more than one parcel and McFour Ventures elected to file two separate petitions. The fact that there were two petitions and two ordinances, instead of one of each, is not significant on this appeal.

       In addition to this annexation action, the Town, Brockway Sanitary District No. 1, and four residents initiated an action against the City challenging the tax incremental financing (TIF) district that we refer to in this opinion.

       WISCONSIN STAT. § 66.1105 authorizes Wisconsin cities to establish tax incremental financing districts to assist them in financing public improvement projects in areas that are blighted, needing rehabilitation or suitable for industrial development. Town of Baraboo v. Village of West Baraboo, 2005 WI App 96, ¶ 32, 283 Wis. 2d 479, 699 N.W.2d 610. This goal is accomplished by permitting the city to divert property tax revenues generated as a result of increased property values in a designated TIF district to pay for municipal improvements or development assistance provided within the district. Id.

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

       The minutes of the meeting describe the motion to authorize the execution of the agreement and the second, but there is no "motion carried," as there is for other motions introduced at the meeting. However, all parties, including the Town, state in their briefs that the common council approved the agreement at the meeting. Therefore, we consider it undisputed that the motion carried.

       The City had argued in its first brief in support of its motion for summary judgment that the agreement was evidence of one of the "rule of reason" factors — a present or demonstrable future need for the annexed property.

       We recognize that the Town presents its arguments under a number of separate headings, not all of them expressly tied to the rule of reason. However, the essence of all the arguments is that the unlawfulness or impropriety of the agreement is an abuse of the City's discretion, which violates the rule of reason. We therefore organize our discussion in this way, rather than by the headings in the Town's main brief.

       We also observe that, even if the complaint were not adequate notice, as the City asserts, the circuit court had the discretion to permit an amendment to the complaint after six months from the filing of the summons and complaint and leave is to be freely granted in the interests of justice. Wis. Stat. § 802.09(1). The record here contains ample grounds to support permission for an amendment to include an allegation that the annexation was invalid because of the invalidity of the agreement: there is no dispute that the City knew of the agreement; there was extensive discovery concerning it; the various drafts were included in the documents that all parties agreed to submit to the circuit court along with a stipulation of facts; the City argued in its first brief that the agreement supported the rule of reason, see footnote 5; and the City had the opportunity to respond to the Town's arguments concerning the agreement and did so.

       A municipality acts in its governmental capacity when its primary objective is health, safety, and the public good. It acts in its proprietary capacity when engaged in business with primarily private concerns, even if some elements are governmental. Save Elkhart Lake, Inc. v. Village of Elkhart Lake, 181 Wis. 2d 778, 789, 512 N.W.2d 202 (Ct. App. 1993).

       The Town cites several other cases from other jurisdictions that apply the principle that a municipality may not contract away its governmental powers, but the facts in all the cases are significantly different from those in this case. We therefore list the holdings without further discussion. Brownsboro Road Area Defense, Inc. v. McClure, No. 2002CA2559-MR, 2004 WL1909337, at *4 (Ky. Ct. App. Aug. 27, 2004) (settlement agreement lawful because it did not obligate the municipality to approve the application for a zoning change); Vermont Dept. of Pub. Serv. v. Massachusetts Municipal Wholesale Elec. Co., 558 A.2d 215, 222-23 (Vt. 1988) (contract void because it impermis-sibly delegated to a state agency the municipality's spending power and restricted the municipality's ability to incur debt); and Mount Juneau Enterprises, Inc. v. City & Burrough of Juneau, 923 P.2d 768, 776 (Alaska 1996) (provision in agreement that in the future municipality would treat property owner's claim as valuable and transfer land in exchange for an agreement to abandon land is likely unenforceable because it requires assembly in advance to agree to future legislative action); Kaiser Development Co. v. City & County of Honolulu, 649 F. Supp. 926, 937-38 (D. Ha. 1986) (property owners' claim that they had a vested right to assurances they could develop their property had no merit for a number of reasons, including that municipalities may not bind themselves to future zoning or other legislative decisions).

       The circuit court in Elkhart Lake had declared two provisions invalid, and the village did not appeal those rulings. 181 Wis. 2d at 787. One provision stated that any future ordinance passed by the village to limit or reduce lake access would not apply to this property. Id. The circuit court held that to be invalid because it contractually surrendered the village's right to rezone the property in the future. Id. The second provision, the circuit court held, improperly delegated management and control of the village's finances to a citizen's committee. Id.

       WISCONSIN Stat. § 61.34(1) gives village boards powers that are essentially the same as those given cities under Wis. Stat. § 62.11(5).

       Because we conclude that the agreement was not an unlawful surrender of the City's governmental powers, we do not address the parties' arguments on the severability clause in the agreement.

       We recognize that in Town of Fond du Lac v. City of Fond du Lac, 22 Wis. 2d 533, 538-39, 541, 126 N.W.2d 201 (1964), the court addressed the impermissible economic pressure issue separately from the rule of reason. It is not clear to us from Town of Pleasant Prairie v. City of Kenosha, 75 Wis. 2d 322, 330-31, 249 N.W.2d 581 (1977), whether the court there considered this issue to be part of the rule of reason or a separate ground for invalidating an annexation. In Town of Campbell v. City of La Crosse, 2003 WI App 247, ¶¶ 36, 40, 268 Wis. 2d 253, 673 N.W.2d 696, we considered the issue in our analysis of the third component of the rule of reason. Whether the issue of impermissible economic pressure under Town of Fond du Lac is encompassed in the third part of the rule of reason or is a separate ground for invalidating an annexation does not affect the substance of the analysis.


source: Caselaw Access Project

author: WEDEMEYER, EJ. FINE, J.

license: Public Domain

text:
    Madison Teachers, Inc., Petitioner-Appellant, v. Wisconsin Education Association Council, Respondent-Respondent.
    Court of Appeals

      No. 2004AP1053.

      Submitted on briefs April 5, 2005.

      Decided July 6, 2005.

    2005 WI App 180
    (Also reported in 703 N.W.2d 711.)

      On behalf of the petitioner-appellant, the cause was submitted on the briefs of Lester A. Pines and Tamara B. Packard of Cullen Weston Pines & Bach LLP, Madison.
    On behalf of the respondent-respondent, the cause was submitted on the brief of Steven A. Heinzen and Brady C. Williamson of La Follette Godfrey & Kahn, Madison.
    Before Wedemeyer, PJ., Fine and Kessler, JJ.
   WEDEMEYER, EJ.

¶ 1. Madison Teachers, Inc. ("Teachers") appeals from an order dismissing its petition filed under Wis. Stat. § 788.03 (2003-04) seeking to compel the Wisconsin Education Association Council ("State Council") to arbitrate a dispute arising from a 1978 Agreement, which governed the relationship between the two organizations and the National Education Association ("National Association"). The Teachers contend the trial court erred in ruling that "the named arbitrator was essential to the arbitration agreement and because he was unable to serve, the court could not fill the vacancy and the parties' dispute could not be arbitrated." Because we conclude that the trial court erred in ruling that the inability of the named arbitrator to participate, in essence, voided the dispute resolution provision of the Agreement, we reverse and remand for further proceedings consistent with this opinion.

BACKGROUND

¶ 2. In September 1978, the Teachers, the State Council, and the National Association entered into an affiliation Agreement. The Agreement set forth the expectations of each party with regard to the Teachers' affiliation with the State Council and the National Association. The Agreement did not specify a termination date, but rather indicated that the Agreement "shall continue in full force and effect and be binding upon the parties hereto ... unless either party enters into organizational activity which is injurious to the well being of the other."

¶ 3. On or about February 18, 2001, the State Council purported to terminate the Agreement, claiming that the Teachers had engaged in "organizational activity that was injurious" to the State Council. The Teachers responded that this dispute would have to be resolved pursuant to the Agreement's dispute resolution provision. That provision provided:

D) Dispute Resolution
As a demonstration of their will to make the relationship work well and effectively, the parties hereto agree to the following expedited method of resolving all disputes which arise over the interpretation or application of the Agreement.
a. Professor Ronald W Haughton is hereby mutually agreed upon by the parties to have final and binding authority to decide any disputes between the parties over the interpretation or application of this Agreement.
b. Professor Haughton will meet the parties at an agreed upon location and time whenever there are pending disputes upon which he is requested to rule.
c. After hearing the positions of the parties, with witnesses if they so opt, Professor Haughton will issue a prompt decision in writing to the parties. The effort will be to issue the decision on the day the grievance is heard. Such decision will be postmarked not later than seven days following the hearing at which the grievance is presented.
d. Professor Haughton's expenses in actions stemming from the above, will be paid in full by [the National Association], In actions relative to the "UniServ"....

¶ 4. The State Council refused to participate in the dispute resolution process based on its belief that it had terminated the Agreement and that such action was not subject to the Agreement's dispute resolution provisions. As a result, the Teachers filed a petition in the circuit court pursuant to Wis. Stat. §§ 788.03 and 788.04, requesting that the court order the State Council to arbitrate the dispute. The petition also asked the court to appoint a new arbitrator because the arbitrator named in the Agreement, Professor Haughton, was not available due to age and/or infirmity. The State Council responded to the Teachers' petition, claiming that the unavailability of Professor Haughton essentially voided the dispute resolution provision of the Agreement, that the Agreement was void because the requirements contained therein were too vague to lead to any enforceable duties, that it had successfully terminated the Agreement, and that such termination action was not subject to arbitration under the Agreement. The trial court ruled that the State Council's latter three arguments each involved a dispute over "whether the agreement itself is enforceable in any of its terms." Citing the language in the Agreement that the parties had agreed to arbitrate "all disputes which arise over the interpretation or application of the Agreement," the trial court concluded that the latter three issues should be subject to arbitration under the Agreement. That decision has not been appealed.

¶ 5. The trial court, however, further concluded that the specifically named arbitrator, Professor Haughton, was "central to the agreement" and that utilizing him as the arbitrator was a condition precedent to arbitrating disputes between the parties. In other words, without Professor Haughton's participation as arbitrator, there can be no arbitration. Based on this decision, the trial court entered an order dismissing the petition. The Teachers appeal from that order.

DISCUSSION

¶ 6. The issue in this case is whether the trial court erred in ruling that the unavailability of the arbitrator, identified by name in the Agreement, resulted in a dissolution of the arbitration provision of the Agreement. We conclude that the primary purpose of the dispute resolution provision in the Agreement was to arbitrate disputes that arose between the parties; thus, the unavailability of the named arbitrator does not nullify the arbitration provision.

¶ 7. This case arises following the trial court's dismissal of the Teachers' petition on the pleadings. A motion for judgment on the pleadings is essentially a motion for summary judgment without affidavits. See Jares v. Ullrich, 2003 WI App 156, ¶ 8, 266 Wis. 2d 322, 667 N.W.2d 843; Wis. Stat. § 802.08(2). Our review in this case involves a variety of legal issues, which are reviewed independently from the trial court. See Strassman v. Muranyi, 225 Wis. 2d 784, 787, 594 N.W.2d 398 (Ct. App. 1999).

¶ 8. It is undisputed that Professor Haughton was identified as the permanent arbitrator in the Agreement. It is also undisputed that since 1978 until the time that the current dispute arose, Professor Haugh-ton arbitrated all disputes that arose between the parties. It is further undisputed that Professor Haugh-ton, due to age or infirmity, was unavailable to act as arbitrator between the parties to resolve their current dispute. When the current dispute arose, the Teachers requested that the State Council submit to arbitration and suggested that because of Professor Haughton's unavailability, the parties select another mutually agreed-to arbitrator. The State Council refused to do either.

¶ 9. The role then for this court is to analyze the facts and the law in this case to determine whether the arbitration clause is enforceable in light of Professor Haughton's absence. In doing so, we note that the policy in this state is to "promote arbitration as a viable and valuable form of alternative dispute resolution." Maryland Cas. Co. v. Seidenspinner, 181 Wis. 2d 950, 955, 512 N.W.2d 186 (Ct. App. 1994). There is, in fact, a presumption in favor of arbitrability. Meshel v. Ohev Sholom Talmud Torah, 869 A.2d 343, 362 (D.C. 2005); City of Madison v. Wisconsin Employment Relations Comm'n, 2003 WI 52, ¶ 20, 261 Wis. 2d 423, 662 N.W.2d 318.

¶ 10. The general rule under the Federal Arbitration Act, 9 U.S.C. § 1 et seq. and, therefore, also under the Wisconsin Arbitration Act, Wis. Stat. § 788.01 et seq., which is patterned after the federal act, indicates that: ”[W]here the arbitrator named in the arbitration agreement cannot or will not arbitrate the dispute, a court does not void the agreement but instead appoints a different arbitrator." McGuire, Cornwell & Blakey v. Grider, 771 F. Supp. 319, 320 (D. Colo. 1991). This rule is qualified, however, when it appears that the named arbitrator is central to the arbitration agreement. Zechman v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 742 F. Supp. 1359, 1364 (N.D. Ill. 1990). In other words, if the agreement makes clear that arbitration was only acceptable to the parties on the specific condition that a particular individual arbitrator is utilized, then the unavailability of that person results in nullification of the entire arbitration provision. Id. The question here, then, is whether having Professor Haughton arbitrate this dispute was "as important a consideration as the agreement to arbitrate itself." See id.

¶ 11. Clearly, the arbitration provision under the Agreement specifically names Professor Haughton. The Agreement, however, does not state that if he is unavailable, the parties will not arbitrate disputes. It does not indicate that using Professor Haughton is a condition precedent that must be satisfied in order to engage in arbitration. In fact, the Agreement does not indicate any expectation as to what will happen if Professor Haughton is not available to serve as arbitrator. It appears that the parties either overlooked this eventuality or simply chose to ignore it. "Where parties to a contract fail to foresee a situation that later arises and thus have no expectations with respect to that situation, the court may determine the parties' respective rights and duties under the contract." Stahl v. Sentry Ins., 180 Wis. 2d 299, 306, 509 N.W.2d 320 (Ct. App. 1993).

¶ 12. We start with the presumption that the primary purpose of this Agreement was to arbitrate any and all disputes, which arose between the parties that were covered under the Agreement. See Meshel, 869 A.2d at 362, City of Madison, 261 Wis. 2d 423, ¶ 20. When one particular term of an arbitration agreement has failed, we look to the intent of the parties at the time the agreement was entered to determine whether a substituted term should be inserted or whether the agreement wdll fail altogether. See National Iranian Oil Co. v. Ashland Oil, Inc., 817 F.2d 326, 333 (5th Cir. 1987); Chattanooga Mailers Union v. Chattanooga News-Free Press Co., 524 F.2d 1305, 1315 (6th Cir. 1975) ("Even though the arbitration procedures ... are no longer in existence, the obvious intent of the parties was to arbitrate their difference and that intent should not be frustrated."), overruled on other grounds, Bacashihua v. U.S. Postal Serv., 859 F.2d 402 (6th Cir. 1988).

¶ 13. In order to ascertain that intent, we look to the language of the Agreement and the surrounding circumstances. See Chattanooga, 524 F.2d at 1315. The language of the Agreement identifies Professor Haugh-ton by name, which does support the State Council's argument that the professor was an important part of the Agreement. The language also indicates, however, that the parties wanted prompt resolution of their disputes — with a decision made "not later than seven days following the hearing." Quick resolution is one of the advantages to arbitration, yet rarely available from litigation. In addition, there is no language specifically stating that if Professor Haughton is not available, then the parties prefer to take their disputes to the courthouse.

¶ 14. The surrounding circumstances also suggest that arbitration by a neutral party was the central factor to these parties. This is evidenced by the history they shared, including that every dispute up until the current one, was submitted to arbitration for resolution. Moreover, one year after this Agreement was signed, the parties were informed that Professor Haughton could not serve as permanent arbitrator any longer because of a federal appointment. Despite Haughton's unavailability due to this appointment, neither party sought dissolution of the dispute resolution provision. When a dispute arose between the parties, they sought the assistance of the National Association. The National Association began a search for a third party. It happened to be that Professor Haughton again became available. Although the parties were not aware at that time whether Professor Haugh-ton was available, each was still committed to resolving the dispute through the use of a neutral third person pursuant to the 1978 Agreement. The history between these parties demonstrates that arbitration was the overriding consideration, rather than the existence of a specifically named arbitrator. There is nothing in the Agreement or the parties' conduct over the last twenty-five years to suggest that Professor Haughton personally was more important than the arbitration process itself. The circumstances clearly demonstrate that the parties' chosen preference was resolution of disputes by a neutral party without having to engage in litigation.

¶ 15. Based on the foregoing, we conclude that the trial court erred in ruling that Professor Haughton's ability to act as arbitrator was central to the Agreement and that without him no arbitration could take place. We hold that the essence of the dispute resolution provision was to arbitrate all disputes before a neutral and objective third party without having to rush to the courthouse. Accordingly, we reverse the order of the trial court and remand with directions that the trial court enter an order compelling the State Council to participate in arbitration. We also direct the trial court to afford the parties an opportunity to select a mutually agreed-to arbitrator within a reasonable period of time. If no agreement can be reached, then the trial court is directed to appoint an arbitrator pursuant to Wis. Stat. § 788.04(1).

By the Court. — Order reversed and cause remanded.

FINE, J.

¶ 16. (dissenting).

As I was going up the stair
I met a man who wasn't there.
He wasn't there again today,
I wish, I wish he'd stay away.

John Bartlett, Familiar Quotations 756 (15th ed. 1980), attributes the verse to Hughes Mearns. Perhaps the Wisconsin Education Association Council feels the same way about "arbitration." The Majority uses the word "arbitration" forty-three times, "arbitrator" thirty-one times, "arbitrate" twelve times, and "arbitrating" once. Yet, none of these words appears in the Agreement it purports to interpret and apply. To reframe Mearns's verse from the Council's point of view:

. As we were going into court
We met a word of last resort.
It was a word we did not use.
And now it seems that we will lose.

I respectfully submit that the Majority reads into the 1978 Agreement between the Council and Madison Teachers, Inc. (the National Education Association was the third party to the Agreement) something that is not there, even though they may have used the word "arbitration" as a layperson's shorthand reference to dispute resolution.

"The language of a contract must be understood to mean what it clearly expresses. A court may not depart from the plain meaning of a contract where it is free from ambiguity, [citation omitted.] In construing the terms of a contract, where the terms are plain and unambiguous, it is the duty of the court to construe it as it stands, even though the parties may have placed a different construction on it. [citation omitted.] It seems to us that when parties to a contract adopt a provision which does not contravene a principle of public policy, and which contains no element of ambiguity, the court has no right, by a process of interpretation, to relieve one of them from any disadvantageous terms which he has actually made."

Dykstra v. Arthur G. McKee & Co., 92 Wis. 2d 17, 38, 284 N.W.2d 692, 702-703 (Ct. App. 1979) (brackets by Dykstra), aff'd, 100 Wis. 2d 120, 301 N.W.2d 201 (1981). In my view, the Agreement here is not ambiguous: it is not an "arbitration agreement"; rather, it is an agreement to have Ronald W. Haughton, and only Haughton, resolve disputes under that Agreement.

¶ 17. The only language of the Agreement as it relates to the resolution of disputes arising under the contract is:

As a demonstration of their will to make the relationship work well and effectively, the parties hereto agree to the following expedited method of resolving all disputes which arise over the interpretation or application of the Agreement.
a. Professor Ronald W Haughton is hereby mutually agreed upon by the parties to have final and binding authority to decide any disputes between the parties over the interpretation or application of this Agreement.
b. Professor Haughton will meet the parties at an agreed upon location and time whenever there are pending disputes upon which he is requested to rule.
c. After hearing the positions of the parties, with witnesses if they so opt, Professor Haughton will issue a prompt decision in writing to the parties. The effort will be to issue a decision on the day the grievance is heard. Such decision will be postmarked not later than seven days following the hearing at which the grievance is presented.
d. Professor Haughton's expenses in actions stemming from the above, will be paid [a payment mechanism is then set out].

Unlike a traditional agreement to arbitrate, the Agreement here neither designates Haughton as an "arbitrator" nor provides for his replacement in case he is no longer available.

¶ 18. Significantly, the Agreement does provide for replacement of others involved in the resolution of possible disputes under it. Thus, a "United Staff Services Program," referred to in the Agreement by its acronym "UniServ," is designated as a facilitator between Madison Teachers on one hand, and the Council and the Association on the other. The Agreement provides that "[s]hould a UniServ position become vacant, [Madison Teachers] shall select the person to fill the aforesaid position." Further,

If, during the term of this Agreement, the position of Uniserv Representative becomes vacant, [Madison Teachers] shall, within ten (10) days after such vacancy occurs, either employ a successor UniServ Representative, in accordance with the procedure set forth [earlier in the Agreement], or the parties hereto shall agree on an otherwise mutually acceptable procedure to be followed pending employment of a successor.
If the parties are unable to employ a successor or agree on an otherwise mutually acceptable procedure within the time limit set forth [] above, any party may, upon ten (10) days written notice to the other parties, terminate that portion of this agreement relating to the position or positions which have become vacant.

It is inconceivable to me that such careful drafting to cover a possible vacancy in the facilitating organization would not have been replicated in connection with Haughton, the person invested with the authority of "resolving all disputes which arise over the interpretation or application of the Agreement." That the parties did not provide for a similar mechanism if Haughton could no longer resolve disputes under the Agreement; that he was never designated as an "arbitrator"; and that the Agreement refers to him by name every time it discusses resolution of disputes is unassailable plain-language evidence that the Agreement was not an agreement to "arbitrate," and that Haughton was not designated to "arbitrate" disputes thereunder. Rather, he, and he alone, was chosen to resolve disputes under the Agreement because, apparently, the parties trusted him personally. That the parties may have agreed to permit someone to stand in for Haughton when they believed he was temporarily unavailable does not transmute the resolution-of-dispute agreement into a formal "arbitration agreement" governed by Wis. Stat. ch. 788.

¶ 19. In sum, the Agreement was executed in September of 1978, and Haughton was the very essence of its dispute-resolution system. With him no longer available, that essence is gone. In my view, it trumps the parties' intent in 1978 by saying that someone other than Haughton can now be his surrogate. Accordingly, I respectfully dissent.

       All references to the Wisconsin Statutes are to the 2003-04 version unless otherwise noted. Wisconsin Stat. § 788.03 provides:
      The party aggrieved by the alleged failure, neglect or refusal of another to perform under a written agreement for arbitration may petition any court of record having jurisdiction of the parties or of the property for an order directing that such arbitration proceed as provided for in such agreement. Five days notice in writing of such application shall be served upon the party in default. Service thereof shall be made as provided by law for the service of a summons. The court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. If the making of the arbitration agreement or the failure, neglect or refusal to perform the same is in issue, the court shall proceed summarily to the trial thereof. If no jury trial is demanded, the court shall hear and determine such issue. Where such an issue is raised, either party may, on or before the return day of the notice of application, demand a jury trial of such issue, and upon such demand the court shall make an order referring the issue to a jury summoned and selected under s. 756.06. If the jury finds that no agreement in writing for arbitration was made or that there is no default in proceeding thereunder, the proceeding shall be dismissed. If the jury finds that an agreement for arbitration was made in writing and that there is a default in proceeding thereunder, the court shall make an order summarily directing the parties to proceed with the arbitration in accordance with the terms thereof.

       Madison Teachers is the local union, which represents five bargaining units and some 5,000 employees of the Madison Metropolitan School District. The State Council constitutes the state-wide teacher's union, which assists the local unions that are affiliated with it. The National Association constitutes the national teacher's union, which assists the local and state unions that are affiliated with it.

       Sometimes this date is referred to as 2000, but it appears from our review that 2001 is the correct date.

       Thus, the only issue before this court is whether the arbitration provision should be enforced pursuant to chapter 788 of the Wisconsin Statutes.

       The dissent raises some question about the choice of law provision contained within the Agreement. The Agreement states that it "shall be governed by, and all of its provisions construed in accordance with, the laws of the District of Columbia." This issue was raised and briefed in the court below, although not directly addressed in the ultimate decision. It can be inferred from the trial court's citations within its written decision that it followed the parties' apparent agreement that the procedural law of the place of enforcement applies, even though the contract exercises its choice to have the substantive law of another state applied. See Marten Transp., Ltd. v. Rural Mut. Ins. Co., 198 Wis. 2d 738, 746, 543 N.W.2d 541 (Ct. App. 1995); Olivarius v. Stanley J. Sarnoff Endowment for Cardiovascular Sci., Inc., 858 A.2d 457, 463 (D.C. 2004). Thus, we apply Wisconsin law to the procedural questions, and District of Columbia law to the substantive issues.

       Professor Haughton, who helped the parties reach the 1978 Agreement, submitted an affidavit in support of the Teachers' position. Professor Haughton attested that the essence of the dispute resolution provision of the 1978 Agreement was a commitment by the Teachers and the State Council to resolve their disputes through arbitration and that Professor Haughton was not a condition precedent required for the arbitration.

       The record also demonstrates that Professor Haughton captioned his decision resolving the parties' 1993 dispute as "In the Matter of the Arbitration between ...." He also referred to himself within this written decision as the "undersigned arbitrator." These references refute the dissent's suggestion that the Agreement did not constitute an "arbitration agreement." See also, McDonnell Douglas Fin. Corp. v. Pennsylvania Power & Light Co., 858 F.2d 825, 830 (2d Cir. 1988) (stating that the absence of the word "arbitration" in a contract is "irrelevant" under the federal arbitration act where the parties clearly intended to submit disputes to a neutral third party for definitive resolution).

       This court also finds significant the fact that the State Council admitted in its response to the Teachers' petition, that "on or about February 18, 200[1], Wisconsin Education Association Council.. . terminated the [Agreement]." If, in fact, Professor Haughton was a condition precedent to the validity of the Agreement, then the Agreement should have become null and void in 1979, when he notified the parties that he had received a federal appointment. At that time, the State Council took no action to terminate the Agreement. Rather, it continued to act as though the 1979 Agreement was in full force and effect. Thus, its admission that it did not terminate the Agreement until 2001 is significant.

       This purpose is further evidenced by the petition filed in this case. The Teachers have come to the courts to attempt to compel arbitration. Arbitration is the central focus of this lawsuit. They have not alleged breach of contract or sought damages resulting from any alleged breaches. Likewise, the State Council did not seek relief from the court system when disputes arose during the past twenty-five years. Rather, it chose to resolve all disputes by arbitration.

       Wisconsin Stat. § 788.04(1) provides:
      If, in the agreement, provision is made for a method of naming or appointing an arbitrator or arbitrators or an umpire that method shall be followed. If no method is provided in the agreement, or if a method is provided and any party thereto fails to make use of the method, or if for any other reason there is a lapse in the naming of an arbitrator or arbitrators or an umpire, or in filling a vacancy, then upon the application of either party to the controversy, the court specified in s. 788.02 or the circuit court for the county in which the arbitration is to be held shall designate and appoint an arbitrator, arbitrators or umpire, as the case or sub. (2) may require, who shall act under the agreement with the same force and effect as if specifically named in the agreement; and, except as provided in sub. (2) or unless otherwise provided in the agreement, the arbitration shall be by a single arbitrator.

       The Majority applies Wisconsin law. Yet, as the Majority recognizes, the Agreement itself provides: "This Agreement shall be governed by, and all of its provisions construed in accordance with, the law of the District of Columbia." The law of the District Columbia as to how to interpret contracts is essentially as it is in Wisconsin. Thus, contracts that are not ambiguous are applied as they are written — using "ordinary speech" as the touchstone of interpretation. Stevens v. United Gen. Title Ins. Co., 801 A.2d 61, 66 (D.C. 2002). Further, a contract is not "ambiguous" merely because the parties executing it do not agree on what it means. Holland v. Hannan, 456 A.2d 807, 815 (D.C. 1983). The District of Columbia statute governing arbitrations is at DC Code §§ 16-4301 to 16-4319. The parties' choice-of-law agreement governs how the contract will be construed. See Madison Beauty Supply, Ltd. v. Helene Curtis, Inc., 167 Wis. 2d 237, 245, 481 N.W.2d 644, 648 (Ct. App. 1992). In Madison Beauty Supply, the parties acquiesced in the application of Wis. Stat. ch. 788 to interpret what both parties in that case agreed was an agreement to arbitrate. Thus, Madison Beauty Supply observed:
      We conclude that the parties have chosen ch. 788, Stats., as the procedure for enforcing their agreement to arbitrate. We recognize that sec. 24 of the Distribution Agreement provides that the agreement "shall be construed in accordance with the law of the State of Illinois." However, we conclude that by this clause, the parties did not intend to adopt the Illinois statutory procedures for enforcement of their agreement to arbitrate. The choice-of-law clause controls only the construction of the Agreement. We consider that by proceeding in a Wisconsin circuit court under ch. 788, the parties have elected that the procedures of that chapter shall govern the enforcement of the arbitration clause in their agreement.

        Ibid, (emphasis added). Here, of course, only one party contends that the Agreement is an "arbitration agreement." Thus, the parties here, unlike the parties in Madison Beauty Supply, have not used a Wisconsin court to apply chapter 788, but, rather, one party, the Council, argues that chapter 788 has nothing to do with this case. That presents a substantive issue of contract interpretation, what Madison Beauty Supply called "construction of the Agreement," id., 167 Wis. 2d at 245, 481 N.W2d at 648, and we should be using the law of the District of Columbia, because the parties agreed that law would govern the construction of their contract.


author: WEDEMEYER, EJ.

text:
    State of Wisconsin, Plaintiff-Respondent, v. Shaun E. Kelley, Defendant-Appellant.

    Court of Appeals

      No. 2004AP1880-CR.

      Submitted on briefs June 3, 2005.

      Decided July 6, 2005.

    2005 WI App 199
    (Also reported in 704 N.W.2d 377.)

      On behalf of the defendant-appellant, the cause was submitted on the briefs of Gregory Bates of Kenosha.

      On behalf of the plaintiff-respondent, the cause was submitted on the brief of Peggy A. Lautenschlager, attorney general and Stephen W. Kleinmaier, assistant attorney general.
    Before Wedemeyer, EJ., Fine and Curley, JJ.

       Petition to review denied.

   WEDEMEYER, EJ.

¶ 1. Shaun E. Kelley appeals from a judgment entered after he pled guilty to three counts of possession of child pornography, contrary to Wis. Stat. § 948.12 (2003-04). Kelley claims the trial court erred in denying his suppression motion, based on an illegal search of his apartment. Because the trial court did not err in denying the motion, we affirm.

BACKGROUND

¶ 2. On July 25, 2002, Milwaukee Police Detectives Matthew Quist and Rickey Burems were investigating the murder of Maureen Malloy at an apartment building located at 1521 North Franklin Place in the City of Milwaukee. Malloy had lived in the apartment building. Two days earlier, she had been strangled and set on fire. The police were looking for an accelerant related to the murder and the handset part of a cordless telephone, which the murderer had taken from Malloy's apartment. During the course of the investigation, Kelley's sister, Jennifer, who also lived in the apartment building, advised police that Kelley had given the officers a false name and that he had child pornography in his apartment.

¶ 3. The detectives went to Kelley's apartment, which was also in the same building, and asked for permission to search the apartment to look for evidence related to the murder. The police had reason to suspect Kelley may have been involved because of his failure to disclose his real name and because he had some caretaker role in the building, which gave him access to keys for other tenants' apartments. Kelley consented to the search. Detective Quist recorded the consent in his notebook and had Kelley sign his name in the book to acknowledge his consent. Kelley signed the name Derrick Schroeder, which was the false name he had previously given to police. At some point during the search, Quist told Kelley that they believed he was not Schroeder, but rather Kelley. Kelley admitted that he lied about his name and birth date.

¶ 4. Detective Quist then proceeded to search the apartment. In searching the bedroom, Quist looked under the bed and pulled out some loose pictures. Quist looked at the pictures and immediately recognized them to be child pornography. Quist then left the apartment to call his supervisor for instructions on how to proceed. Quist was instructed to arrest Kelley for obstruction because he provided a false name and was told that an officer experienced in child pornography cases would be sent to assist. Shortly thereafter, uniformed officers arrived and arrested Kelley. Detective Jason Smith also arrived to continue the search. Smith found additional items of child pornography in the bedroom and recovered Kelley's computer.

¶ 5. Later that evening, at the police station, Kelley signed a form consenting to the search of his residence and storage locker. He refused, however, to consent to a search of his computer. The police later obtained a search warrant for Kelley's computer.

¶ 6. Kelley was charged with three counts of possession of child pornography and one count of obstruction. He filed a motion seeking to suppress the items recovered, claiming that the warrantless search of his apartment violated his Fourth Amendment rights. He argued that the police coerced him into consenting to the search by failing to disclose that they would be looking for child pornography. He claimed his consent was involuntary. The trial court conducted a hearing and heard testimony from both Kelley and Detective Quist. The trial court found Kelley's testimony to be wholly incredible. The trial court found Detective Quist's testimony to be reliable. After the hearing, the trial court ruled that Kelley's consent was voluntary and was not affected by the detectives' failure to identify all of their suspicions. The trial court ruled that Kelley consented to a general search of his apartment and did not limit that search. As a result, the trial court denied the motion. Kelley then pled guilty to the three counts of possession of child pornography. Judgment was entered. He now appeals.

DISCUSSION

¶ 7. Kelley contends that the trial court should have granted his motion seeking suppression of the evidence obtained during the warrantless search of his apartment. He claims both that the police coerced him into consenting to the search by disclosing only that they were looking for evidence related to the Malloy murder and that the police exceeded the scope of the consent by looking under the bed for child pornography. The State responds that Kelley's consent was valid and that the police did not exceed the scope of the consent. The trial court agreed with the State. We conclude that the trial court did not err in denying the motion to suppress.

¶ 8. In reviewing a trial court's decision on a suppression motion, we apply a mixed standard of review. We will uphold the trial court's factual findings unless they are clearly erroneous, but will independently evaluate those facts under the constitutional standard to determine whether the search violated the Fourth Amendment. State v. Matejka, 2001 WI 5, ¶ 16, 241 Wis. 2d 52, 621 N.W.2d 891. Searches inside a person's home without a warrant are presumptively unreasonable. State v. Phillips, 218 Wis. 2d 180, 196, 577 N.W.2d 794 (1998). There are several exceptions to that dictate, one of which is presented in this casea warrantless search is constitutionally permissible where consent to search has been granted. Id.

¶ 9. There is no dispute here that Kelley consented to the search of his apartment. He acknowledged his consent by signing Detective Quist's book. The question is whether his consent was voluntarily given. He argues it was not because of the information presented to him by the detectives when they requested permission to search. Kelley argues he was coerced because the officers stated only that they were looking for evidence in the murder investigation and failed to disclose that they suspected he may have had child pornography in his apartment.

¶ 10. The State has the burden of proving by clear and convincing evidence that Kelley's consent was voluntary. See id. at 197. "The test for voluntariness is whether consent to search was given in the absence of duress or coercion, either express or implied." Id. In making this determination, we look to the totality of the circumstances. Id. at 198.

¶ 11. Here, the detectives identified the principal purpose for the investigation, namely looking for evidence related to the murder. Kelley consented to a general search of his apartment based on this information. He did not limit the search in any way. He was present during the time that Quist was searching the bedroom. He could have limited or withdrawn his consent when he observed Quist searching under the bed. See Florida v. Jimeno, 500 U.S. 248, 252 (1991). He did not.

¶ 12. Kelley contends that the police should have disclosed that they had reason to believe he had child pornography in his apartment. We are not persuaded that the detectives' failure to disclose all their suspicions invalidated an otherwise validly obtained consent. This was not a case of deception or false pretext. The detectives went to search Kelley's apartment because they were investigating a murder. They had legitimate suspicions based on the circumstances present that he may have been involved in the murder. They disclosed the purpose of this investigation. This was not a case where the officers fabricated a story about a nonexistent murder to sneak their way into Kelley's apartment in order to look for child pornography. They had valid reasons to believe a search of his apartment was pertinent to the actual murder investigation. Thus, the failure of the officers to disclose secondary suspicions did not result in coercion or an involuntary consent.

¶ 13. Kelley also argues that the search violated the scope of consent. He contends that an accelerant and phone handset could not have been found under his bed and therefore that place should not have been searched. We disagree. The detectives provided Kelley with a definition for the scope of the search — they told him the purpose of the investigation and what they were looking for. "The standard for measuring the scope of a suspect's consent under the Fourth Amendment is that of 'objective' reasonableness — what would the typical reasonable person have understood by the exchange between the officer and the suspect?" Id., 500 U.S. at 251. "The scope of a search is generally defined by its expressed object." Id. The police are permitted to search where the objects sought can be found. See Matejka, 241 Wis. 2d 52, ¶ 41.

¶ 14. Here, the police were searching for a telephone handset and an accelerant. Certainly, either object could be easily hidden beneath a bed. Moreover, Kelley did not limit the scope of his consent — rather, he authorized a general consent to search the entire apartment. He could have limited the scope of the consent immediately or at any time thereafter. He could have said, you can look everywhere except under the bed. The consent to search here was unqualified. Kelley was present when Quist was searching in the bedroom and discovered the photos under the bed. He made no objection. The failure to object further supports our conclusion that the detective did not exceed the scope of the consent when he searched under the bed.

¶ 15. An officer has the right to access objects in plain view while searching within the scope of the consent. See State v. Johnson, 187 Wis. 2d 237, 242, 522 N.W.2d 588 (Ct. App. 1994). In order for the plain view doctrine to apply, three requirements must be met:

First, the evidence must be in plain view. Second, the police officer must have a lawful right of access to the object. Third, the incriminating character of the object must be immediately apparent, meaning the police must show they had probable cause to believe the object was evidence or contraband.

State v. Ragsdale, 2004 WI App 178, ¶ 17, 276 Wis. 2d 52, 687 N.W.2d 785. Here, all three elements were satisfied. The officer searched under the bed, where a phone handset could have been hidden. He discovered several photos, which he recognized immediately to be child pornography. Thus, the pictures were lawfully seized.

¶ 16. The trial court made many findings of fact relating to the search and consent. Kelley has not challenged any of those findings in this appeal. Some of those facts further support our conclusion that Kelley's consent was not invalidated by the detective's failure to disclose suspicions about child pornography and that the detective did not exceed the scope of the search. For example, the trial court found, based on its observations of Kelley, that he was not the type of person who would have sat idly by while a very limited search suddenly blossomed into a much more detailed search. Yet, the record demonstrates that Kelley stood by for a considerable period of time when it was obvious that a thorough search of his bedroom was being conducted and he stood by without raising an objection or indicating that there was some confusion about the scope of the search. In fact, even after Kelley was arrested and taken to the station, he signed another consent to search his apartment and storage locker. He signed this consent even after being advised that the police had discovered child pornography during their search. Kelley's only limitation on consent at that point was refusing to allow the police to search his computer.

¶ 17. Based on the foregoing, we conclude that the detectives did not exceed the scope of the search to which Kelley consented. Accordingly, the trial court did not err in denying his motion to suppress.

By the Court. — Judgment affirmed.