author: LUNDSTEN, J.

text:
    James M. Kernz, Plaintiff-Respondent-Cross-Appellant, v. J. L. French Corporation, Defendant-Appellant-Cross-Respondent.

    Court of Appeals

      No. 02-1291.

      Submitted on briefs December 9, 2002.

      Decided June 12, 2003.

    2003 WI App 140
    (Also reported in 667 N.W.2d 751.)

      On behalf of the defendant-appellant-cross-respondent, the cause was submitted on the briefs of Joseph J. Voelkner and James O. Conway of Olsen, Kloet, Gunderson & Conway, Sheboygan.

      On behalf of the plaintiff-respondent-cross-appellant, the cause was submitted on the briefs of Anthony J. Resimius and William P. Te Winkle oí Rohde Dales LLP, Sheboygan.
    Before Vergeront, EJ., Roggensack and Lundsten, JJ.

       Petition to review denied 10-27-03.

   LUNDSTEN, J.

¶ 1. This appeal involves an employment contract dispute. Employee James Kernz negotiated a three-year contract with J. L. French Corporation that required the company to pay Kernz's salary and benefits for the remainder of the contract term if the company terminated Kernz without "just cause." Nine months into the contract, French Corporation terminated Kernz and Kernz sued for breach of contract, alleging he was terminated without "just cause." Kernz sought more than $260,000 under the contract damages clause. French Corporation countered that Kernz was terminated for "just cause" and argued in the alternative that, even if it terminated Kernz without just cause, the damages clause was an unenforceable "penalty clause." Following a jury trial in which French Corporation was found liable for termination without just cause, the trial court concluded that the damages clause was enforceable and entered judgment in favor of Kernz. French Corporation appeals from that judgment. Post-trial, the trial court entered an order denying Kernz's motion for pre-verdict interest, which forms the basis of Kernz's cross-appeal.

Background

¶ 2. On April 27, 2000, Kernz and French Corporation entered into a three-year employment contract. French Corporation offered language which permitted the company to terminate Kernz if he "shall be neglectful of the interest of the employer, or manage the business under his supervision badly or in a manner unsatisfactory to employer, or shall be guilty of misconduct." During negotiations, Kernz requested, and the French Corporation negotiator agreed, to replace the above provision with "just cause" language. The following shows the agreed change with the stricken language and the added language in italics:

If the Employee is terminated for''just cause," or by mutual agreement, shall be neglectful of the interest of the-employer, or manage the busmess-nnder his supervision badly or in a manner unsatisfactory-to-employer, or-shall be guilty of-misconduct, the Employer may at their option terminate this agreement and such services and compensation on thirty (30) days notice to the Employee.

¶ 3. In early 2001, Kernz was accused of committing "two safety violations of. .. plant employee safety rules." In one incident, Kernz was observed entering a secured area containing a 3,500-ton press without following the proper "lock-out" procedures. In the other incident, Kernz was observed on foot in an area where pedestrian traffic was prohibited. French Corporation terminated Kernz's employment.

¶ 4. Kernz sued, alleging that French Corporation breached the contract by terminating him without "just cause." Kernz sought a pretrial ruling declaring the phrase "just cause" ambiguous and permitting the introduction of extrinsic evidence of the phrase's meaning. The trial court concluded that the phrase "just cause" was ambiguous and ruled that extrinsic evidence would be permitted. French Corporation moved to prevent testimony of any witness's subjective uncom-municated belief regarding the meaning of "just cause." The trial court denied that motion.

¶ 5. The trial was held in two phases: the first phase was tried before a jury to determine liability, and the second phase was tried to the court to determine damages. During the liability phase, Kernz testified that, during contract negotiations, he sought inclusion of the phrase "just cause" because "I needed something where . . . [French Corporation] didn't have the option to terminate in the contract unless it was for some intentional wrongdoing." The deposition testimony of Don Porritt, the negotiator for French Corporation, was read to the jury. The French Corporation negotiator testified that "just cause to me would be if you intentionally do something." The negotiator also provided examples of intentional misbehavior that he believed constituted "just cause" for termination at French Corporation, including "fighting on company property, reporting under the influence of drugs or . . . theft,. .. those sorts of things that had already been outlined in the [employee] handbook." The French Corporation negotiator gave no further testimony about the employee handbook and there was no evidence that French Corporation employees generally understood that "just cause" has a particular meaning. Notably, neither Kernz nor the French Corporation negotiator testified that he communicated his belief about the meaning of "just cause" to the other. There was no special verdict asking the jury to make a finding on the meaning of "just cause." The jury was simply asked if French Corporation terminated Kernz for "just cause" as set forth in the contract, and the jury answered that question "No."

¶ 6. During the damages phase, the trial court considered whether the contract damages clause ("If employment is terminated for other than 'just cause' or mutual agreement, the Employer shall pay salary and benefits for [the] remainder of the contract.") was an illegal penalty clause or an enforceable stipulated damages provision. The trial court concluded that the damages clause was an enforceable stipulated damages provision and determined that Kernz was due $263,993.02 under the contract.

¶ 7. Kernz sought pre-verdict interest on the damages under the theory that the damages were liquidated. French Corporation objected to the taxation of prejudgment interest. The trial court agreed with French Corporation and denied Kernz's post-trial motion for pre-verdict interest.

Appeal

I. Whether Evidence of the Parties' Uncommunicated Subjective Interpretations of "Just Cause" Was Properly Admitted

¶ 8. French Corporation argues that "just cause" is unambiguous and, therefore, the trial court improperly admitted extrinsic evidence, including uncommu-nicated subjective interpretations of "just cause." Whether a contract is ambiguous is a question of law, which we review de novo. State v. Windom, 169 Wis. 2d 341, 349, 485 N.W2d 832 (Ct. App. 1992).

¶ 9. "The ultimate aim of all contract interpretation is to ascertain the intent of the parties." Eden Stone Co. v. Oakfield Stone Co., 166 Wis. 2d 105, 116, 479 N.W.2d 557 (Ct. App. 1991). While this ultimate aim is clear enough, confusion frequently accompanies the search for intent because subjective intent is not the be-all and end-all. For example, regardless of the parties' intentions, unambiguous contract language controls contract interpretation. "When the terms of a contract are plain and unambiguous, we will construe the contract as it stands." State v. Peppertree Resort Villas, Inc., 2002 WI App 207, ¶ 14, 257 Wis. 2d 421, 651 N.W.2d 345. We presume the parties' intent is evidenced by the words they choose, if those words are unambiguous.

¶ 10. We first determine whether a disputed contract provision is ambiguous. "Contract language is considered ambiguous if it is susceptible to more than one reasonable interpretation." Danbeck v. American Family Mut. Ins. Co., 2001 WI 91, ¶ 10, 245 Wis. 2d 186, 629 N.W.2d 150. If the contract is ambiguous, we turn to extrinsic evidence to determine the parties' intent. See Energy Complexes, Inc. v. Eau Claire County, 152 Wis. 2d 453, 468, 449 N.W2d 35 (1989) ("Once a contract is found to be ambiguous, extrinsic evidence can be considered in order to determine the parties' intent."). Admissible extrinsic evidence might include "the surrounding circumstances including factors occurring before and after the signing of an agreement." Board of Regents of Univ. of Wis. Sys. v. Mussallem, 94 Wis. 2d 657, 671, 289 N.W2d 801 (1980); see also Smith v. Osborn, 66 Wis. 2d 264, 272, 223 N.W.2d 913 (1974) ("In determining the [meaning of ambiguous contract language], this court has held that it is proper to consider the conduct of the parties and the negotiations which took place, both before and after the execution of the documents, and to consider all related documents of the parties."); Painter v. Estate of Grossman, 250 Wis. 457, 461, 27 N.W2d 365 (1947) (" 'The intention of the parties to any particular transaction may be gathered from their acts and deeds, in connection with surrounding circumstances, as well as from their words (quoting Tyler v. Burrington, 39 Wis. 376, 379 (1876))).

¶ 11. The question here is whether the contract phrase "just cause" is ambiguous and, if so, whether the parties' uncommunicated subjective beliefs regarding that phrase are admissible extrinsic evidence where the negotiating parties had substantially the same bargaining power, actually negotiated the contract term, and had substantially the same understanding of the phrase.

A. Whether the Phrase "Just Cause" is Ambiguous

¶ 12. The employment contract does not define "just cause." French Corporation argues that the phrase is unambiguous because "just cause" has a plain and ordinary meaning defined in case law. That definition, the company contends, is contained in Millar v. Joint School District, 2 Wis. 2d 303, 86 N.W.2d 455 (1957), and is "inexcusable neglect." We first observe that Millar discusses "good and sufficient cause," not "just cause." Id. at 312-14. More importantly, Millar does not involve the interpretation of a contract term, but rather addresses the implied authority of a school board to dismiss a teacher for "good and sufficient cause," as defined by common law. Id. at 312. French Corporation does not explain why this common law definition applicable to public school teachers constitutes the "plain and ordinary" meaning of "just cause." Indeed, neither Millar, nor the cases cited therein, suggest that "good and sufficient cause" has a generally known plain and ordinary meaning. And, there is no evidence that either Kernz or the French Corporation negotiator was aware of Millar. The company merely contends that "good and sufficient cause" and "just cause" have the same meaning, presumably because the phrases may be used in similar contexts. We are not persuaded.

¶ 13. Apart from its reliance on the definition of "good and sufficient cause" found in Millar, French Corporation has not attempted to define "just cause." Our own research reveals case law defining "just cause" for purposes of terminating a tenured municipal employee. See Safransky v. Personnel Bd., 62 Wis. 2d 464, 474, 215 N.W.2d 379 (1974) ("just cause" means conduct " 'in violation of important standards of good order . . . so substantial, oft repeated, flagrant, or serious that his retention in service will undermine public confidence in the municipal service' "(quoting State ex rel. Gudlin v. Civil Service Comm'n, 27 Wis. 2d 77, 87, 133 N.W2d 799 (1965))). In addition, several statutes provide a different definition of "just cause" applicable to fire department employees and law enforcement officers. This definition of "just cause" is multi-pronged and, in part, asks whether the disciplinary action "reasonably relates to the seriousness of the alleged violation and to the [employee's] record of service with the [supervisor's] department." See Wis. Stat. §§ 59.26(8)(b)5m; 59.52(8)(b); 62.13(5)(em); 62.50(17)(b) (2001-02).

¶ 14. These definitions provide no assistance here. First, the definitions are different from each other, thereby giving lie to the notion that "just cause” has a single "plain and ordinary" meaning. Second, the definitions are geared toward public sector employment. While they may provide a meaning for the term "just cause" contained in some public employment contracts, nothing before ns suggests that either definition is generally understood to define "just cause" for purposes of private employers or employees.

¶ 15. In Yauger v. Skiing Enterprises, Inc., 196 Wis. 2d 485, 538 N.W.2d 834 (Ct. App. 1995), rev'd on other grounds, 206 Wis. 2d 76, 557 N.W.2d 60 (1996), this court determined that the phrase "certain inherent risks in skiing" was "plain and simple" because "[i]t aptly describes the risks that arise whenever one's skis are in contact with the slope." Yauger, 196 Wis. 2d at 498-99 (footnote omitted). We cannot similarly ascertain a definite meaning for "just cause." That is not to say that the phrase "just cause" in Kernz's employment contract has no base-line plain meaning. For example, under the facts in this case, the phrase certainly means that French Corporation had to have some job-related reason for terminating Kernz. However, the disputed issue is not whether French Corporation had some job-related reason to terminate Kernz. The issue is whether Kernz correctly argues that he could prevail by showing that he did not engage in intentional wrongdoing.

¶ 16. At the same time, we agree with French Corporation that a phrase is not ambiguous simply because it is general or broad. See id. at 499. A phrase need not have a single dictionary definition to avoid ambiguity. See Ruff v. Graziano, 220 Wis. 2d 513, 524, 583 N.W.2d 185 (Ct. App. 1998). But it must have, without reference to extrinsic evidence, a workable meaning and no other reasonable meaning. See Danbeck, 245 Wis. 2d 186, ¶ 10 ("Contract language is considered ambiguous if it is susceptible to more than one reasonable interpretation."). We are confronted with two competing definitions of "just cause." French Corporation contends that "just cause" means "inexcusable neglect." At trial, Kernz presented evidence that "just cause" means "intentional wrongdoing." In our view, each of these definitions is a reasonable interpretation of "just cause" and, therefore, we proceed to examine the challenged extrinsic evidence admitted at trial.

B. Whether Evidence of the Parties' Uncommunicdted Subjective Interpretations of an Ambiguous Contract Provision is Admissible When the Negotiators for Each Party Share a Substantially Similar Subjective Interpretation

¶ 17. The facts in this case are unusual. Neither the parties nor this court has uncovered a case with similar facts. Kernz alleges that both he and the French Corporation negotiator testified, in substance, that he believed at the time of the negotiations that the phrase "just cause" meant intentional wrongdoing. At trial, and now on appeal, French Corporation disclaims the subjective belief of its own negotiator. Accordingly, we are faced with the question whether a party may present evidence that the negotiators for two parties to a contract had substantially the same belief regarding the meaning of an ambiguous contract phrase when there is no evidence that those beliefs were communicated.

¶ 18. We stress that this issue arises in the context of a phrase that was actually the subject of negotiation and where the parties had substantially equal bargaining power. Kernz successfully requested that the phrase "just cause" be substituted for other language. This is not a situation in which the contract was unilaterally drafted by an employer with substantially greater bargaining power and we do not comment on whether our analysis would be different under such facts.

¶ 19. French Corporation argues that the uncom-municated subjective beliefs of parties to a negotiation are not admissible to show the meaning of an ambiguous contract phrase. In its motion in limine seeking to exclude testimony of its own negotiator and Kernz, French Corporation quoted from 17A Am. Jur 2d Contracts § 352, at 368 (1991):

It is not necessarily the real intent, but the expressed or apparent intent, which is sought. Indeed, a party's subjective, undisclosed intent is immaterial to the interpretation of a contract. The court will not attempt to ascertain the actual mental processes of the parties in entering into the particular contract; rather the law presumes that the parties understood the import of their contract and that they had the intention which its terms manifest.

¶ 20. French Corporation's general proposition, that a party's uncommunicated subjective intent is inadmissible, has support in the case law. In Hart v. Hart, 117 Wis. 639, 94 N.W. 890 (1903), the court stated: "Probably no rule is better understood than that the opinions of the parties to the contract as to what they took it to mean cannot be resorted to, either to explain or change [the terms of the contract]." Id. at 654. This and similar statements seemingly conflict with the age-old maxim that a contract is formed when parties reach a "meeting of the minds." E.g., Todorovich v. Kinnickinnic Mut. Loan & Bldg. Ass'n, 238 Wis. 39, 42, 298 N.W. 226 (1941) ("To constitute an acceptance and the creation of a contract there must be a meeting of the minds upon all essential terms thereof."). However, it is well established that an actual "meeting of the minds" is not a prerequisite to an enforceable contract. See Management Computer Servs., Inc. v. Hawkins, Ash, Baptie & Co., 206 Wis. 2d 158, 180-81, 557 N.W.2d 67 (1996) ("[P]arties do not need to agree subjectively to the same interpretation at the time of contracting in order for there to be a mutual assent, because a literal 'meeting of the minds' is not required."); Comment to Wis JI — Civil 3010 ("Parties do not need to agree subjectively to the same interpretation at the time of contracting in order for there to be a mutual assent because a literal meeting of the minds is not required."). Rather, contract terms are usually "judged by an objective standard, looking to the express words the parties used in the contract." Management Computer Servs., 206 Wis. 2d at 181.

"It must be borne in mind that the office of judicial construction is not to make contracts or to reform them, but to determine what the parties contracted to do; not necessarily what they intended to agree to, but what, in a legal sense, they did agree to, as evidenced by the language they saw fit to use."

Marion v. Orson's Camera Ctrs., Inc., 29 Wis. 2d 339, 345, 138 N.W2d 733 (1966) (quoting Wisconsin Marine & Fire Ins. Co. Bank v. Wilkin, 95 Wis. 111, 115, 69 N.W 354 (1897)).

¶ 21. Thus, the creation of an enforceable agreement is usually predicated on the language used in the contract and the expressed intentions of the parties. See Shetney v. Shetney, 49 Wis. 2d 26, 38-39, 181 N.W.2d 516 (1970) (" 'It is not enough that the parties think that they have made a contract; they must have expressed their intentions in a manner that is capable of understanding. It is not even enough that they have actually agreed, if their expressions, when interpreted in the light of accompanying factors and circumstances, are not such that the court can determine what the terms of that agreement are.'" (quoting 1 Corbin Contracts § 95, at 394)); Goossen v. Estate of Standaert, 189 Wis. 2d 237, 246, 525 N.W2d 314 (Ct. App. 1994) ("Whether the parties reached the necessary agreement as to the term depends upon the parties' expression of intention.").

¶ 22. Interpreting Wisconsin law, the Seventh Circuit Court of Appeals has stated:

Yet "intent" does not invite a tour through [a party's] cranium, with [that party] as the guide. Like most other states, Wisconsin takes an objective view of "intent." "The intent of the parties [to be bound] must necessarily be derived from a consideration of their words, written and oral, and their actions." Household Utilities, Inc. v. Andrews Co., 71 Wis. 2d 17, 28-29, 236 N.W2d 663, 669 (1976). Secret hopes and wishes count for nothing. The status of a document as a contract depends on what the parties express to each other and to the world, not on what they keep to themselves.

Skycom Corp. v. Telstar Corp., 813 F.2d 810, 814-15 (7th Cir. 1987) (citation omitted).

¶ 23. For example, in Gerruth Realty Co. v. Pire, 17 Wis. 2d 89, 115 N.W.2d 557 (1962), the parties disputed the meaning of a contract term and the court concluded that evidence of one party's unexpressed subjective intent was not admissible because such evidence merely indicated "what [one party] had in mind at the time [of contracting and] it was not communicated to the [negotiator for the other party]." Id. at 95.

¶ 24. While the above cases can be read as providing support for French Corporation's argument that evidence of uncommunicated subjective belief of one party is generally not admissible to supply meaning to an ambiguous contract term, we need not fully explore that topic because we have a different situation. Here, there is evidence that negotiators on both sides held substantially the same uncommunicated belief regarding the ineaning of an ambiguous contract phrase. To repeat, we have not found, and the parties have not produced, a case addressing this scenario. However, for the reasons set forth below, we conclude that when a contract term is ambiguous, a circuit court may admit evidence which, if believed, shows that the two negotiating parties agreed to the ambiguous term while independently possessing substantially the same understanding of the term, even though this understanding was not communicated.

¶ 25. We are guided here by the overarching principle that guides all contract interpretation: "The ultimate aim of all contract interpretation is to ascertain the intent of the parties." Eden Stone Co., 166 Wis. 2d at 116. If two parties expressly agree to the use of an ambiguous contract phrase and subjectively agree on the meaning of that phrase, but neither communicates this subjective agreement to the other, we see no reason why their subjective agreement should not control. When the parties' uncommunicated subjective intents converge, the risks involved with delving into the minds of contracting parties with differing subjective views are not incurred. See Skycom Corp., 813 F.2d at 815 ("If unilateral or secret intents could bind, parties would become wary, and the written word would lose some of its power."). When two parties hold substantially similar subjective beliefs, neither party is held to the whims of the other. In fact, the parties obtain exactly the agreement for which they bargained.

¶ 26. Accordingly, the admissibility question for trial courts is whether the proffered evidence is sufficient to support a factual finding that the negotiating parties held substantially similar subjective beliefs regarding the ambiguous term.

¶ 27. At trial, Kernz testified that he included the phrase "just cause" in the contract because "I needed something where . . . [French Corporation] didn't have the option to terminate in the contract unless it was for some intentional wrongdoing." The French Corporation negotiator testified that "just cause to me would be if you intentionally do something." When the French Corporation negotiator was asked about his intent in agreeing to a "just cause" provision, he explained that he "was just basically following the outline of things that made just cause at [French Corporation] at that time, which would be fighting on company property, reporting under the influence of drugs or . . . theft, . . . those sorts of things that had already been outlined in the [employee] handbook." While Kernz and the French Corporation negotiator do not use identical phrasing, we conclude that a jury could find their interpretations of "just cause" to be substantially the same. Accordingly, we affirm admission of this extrinsic evidence of the meaning of "just cause."

II. Whether the Stipulated Damages Clause Was an Enforceable Liquidated Damages Clause or an Unenforceable Penalty Provision

¶ 28. The parties dispute whether the stipulated damages provision in the termination clause of the employment contract is reasonable and, thus, an enforceable liquidated damages provision, or unreasonable and, thus, an unenforceable penalty provision. Following the terminology used in the seminal case on this topic, Wassenaar v. Panos, 111 Wis. 2d 518, 521, 331 N.W2d 357 (1983), we use the term "stipulated damages" to mean the damages specified in the contract, and "liquidated damages" to mean reasonable and enforceable stipulated damages.

¶ 29. The review of a stipulated damages provision is a mixed question of law and fact. Id. at 525. Where, as here, the facts as found by the trial court are undisputed, only legal issues remain and our review is de novo. See Westhaven Assocs., Ltd. v. C.C. of Madison, Inc., 2002 WI App 230, ¶ 16, 257 Wis. 2d 789, 652 N.W.2d 819. Although the ultimate determination of reasonableness is a question of law, " 'because the trial court's legal conclusion... is so intertwined with the factual findings supporting that conclusion, the appellate court should give weight to the trial court's decision, although the trial court's decision is not controlling.' " Id. (quoting Wassenaar, 111 Wis. 2d at 525).

¶ 30. "A stipulated damages provision will be enforced if it is reasonable under the totality of the circumstances." Westhaven, 257 Wis. 2d 789, ¶ 17. The court looks at several factors to determine reasonableness: "(1) Did the parties intend to provide for damages or for a penalty? (2) Is the injury caused by the breach one that is difficult or incapable of accurate estimation at the time of contract? and (3) Are the stipulated damages a reasonable forecast of the harm caused by the breach?" Wassenaar, 111 Wis. 2d at 529-30 (footnotes omitted). Essentially, we must look at both the "harm anticipated at the time of contract formation and the actual harm at the time of breach." Id. at 532. "The factors are not meant to be mechanically applied, and courts may give some factors greater weight than others." Westhaven, 257 Wis. 2d 789, ¶ 17.

¶ 31. Courts generally assume that "bargains are enforceable and that the party asking the court to intervene to invalidate a bargain should demonstrate the justice of his or her position." Wassenaar, 111 Wis. 2d at 526 (footnote omitted).

[W]here neither party complains of inequity in bargaining power, the party seeking to avoid a stipulated damages provision bears both the "burden of proving facts which would justify the trial court's concluding that the clause should not be enforced" and the burden of persuading the court that the provision should not be enforced.

Westhaven, 257 Wis. 2d 789, ¶ 18 (quoting Wassenaar, 111 Wis. 2d at 526) (citation omitted). Here, neither party complains of inequity in bargaining power and, therefore, French Corporation, as the party seeking to avoid the application of the contract, bears the burden of persuading this court that the stipulated damages provision is unreasonable.

A. Intent of the Parties

¶ 32. The first factor we examine when determining the reasonableness of a stipulated damages provision is whether the parties intended the provision to provide liquidated damages or, instead, to provide a penalty. As explained in Koenings v. Joseph Schlitz Brewing Co., 126 Wis. 2d 349, 377 N.W2d 593 (1985), this factor is "rarely helpful" because the parties' intent has "little relevance to what is reasonable in law." Id. at 362. Nevertheless, we examine this topic because "the parties' intent may have some evidentiary value." Id.

¶ 33. On the issue of intent, the trial court made a number of findings:

Several factors forge the Court's decision in this regard. Among them are one, clearly, [Kernz] was looking for job security and advanced standing in his profession. Secondly, the parties were aware that the diecasting operation is tied to the automotive industry, an industry which business waxes and wanes and ebbs and flows. Thirdly, the parties certainly were aware that should downturns in business occur that it would be extremely difficult for [Kernz] to secure employment in the future let alone comparable employment without a formal education. Fourth, [Kernz] had recently been terminated by French about three months earlier after French acquired Nelson Metals. Fifth, [Kernz] obviously did not want to relocate.

¶ 34. Accordingly, to the extent we have factual findings regarding intent, those findings support the view that the parties intended to compensate Kernz for his reasonably anticipated but undeterminable damages rather than penalize French Corporation for breaching the agreement. However, for the reasons expressed in Koenings, we do not give this factor great weight in our consideration.

B. Whether the Damages Were Ascertainable at the Time of Contracting, and Whether the Stipulated Damages Reasonably Forecast the Actual Damages

¶ 35. In Westhaven, this court examined the second and third Wassenaar factors (whether the damages can be estimated at the time of contracting and whether the stipulated damages provisions are a reasonable forecast of the harm caused by the breach) and concluded that although both factors use a prospective-retrospective approach, "the fact remains that [these factors] require two distinct inquiries: the reasonableness of the stipulated damages provision at the time of contracting and the reasonableness of the provision when compared with actual damages after a breach." Westhaven, 257 Wis. 2d 789, ¶¶ 23-24. We will follow that same approach here.

¶ 36. Before addressing the merits of the parties' arguments, however, we detail the trial court's relevant factual findings on the second and third Wassenaar factors.

• Kernz suffered a loss of prestige in the industry.
• Kernz incurred relocation costs, including the costs of securing a new residence in Wisconsin.
• Kernz was not interested in relocating and had been "reasonably settled" in Florida.
• Kernz lost business opportunities as a result of the breach.
• "[A]t the time of the contract it's relatively easy to determine what the salary and the benefits were going to be under the agreement."
• "[A]t the time of trial looking back, it's very difficult to ascertain the damages incurred by [Kernz] where he was forced to leave his home in Florida, where he was forced to relocate and purchase a new residence."
• "[T]he Court believes that the parties did include consequential damages at the time that the contract was reached."
• "The parties contemplated more than just insured salary for 3 years."
• "[T]he parties contemplated that [Kernz] would become a member of the Corporate Business Development Team," which "objectively is viewed as an elevation in rank."
• Kernz was required to seek new employment because of the breach.

1. Reasonableness of the Clause at the Time of Contracting

¶ 37. French Corporation argues that the clause is unreasonable because it was simple to calculate the compensation due Kernz under the contract. Therefore, according to French Corporation, Kernz's potential damages were readily ascertainable at the time of contracting. French Corporation also contends that calculations of Kernz's potential damages at the time of contracting should not include consequential damages because there is no evidence that the parties ever negotiated to compensate Kernz for consequential damages. As French Corporation states:

[T]here is simply no evidence that [Kernz] and French [Corporation] contracted to provide for the protection of Kernz against any other damage besides those allowed under the black letter rule. In other words, Kernz has not shown that he and French [Corporation] agreed that the stipulated damages clause was intended to protect him against so-called consequential damages.

¶ 38. First, French Corporation misperceives its burden. It is French Corporation that seeks to avoid imposition of the stipulated damages clause and, therefore, French Corporation has the burden to persuade this court that we should not enforce the stipulated damages provision. Kernz did not have to prove that the contract was intended to compensate him for consequential damages.

¶ 39. Second, to the extent French Corporation discusses the parties' intent in relation to the second Wassenaar factor, its argument is misplaced because evidence of the parties' intent is considered under the first Wassenaar factor.

¶ 40. Third, it is obvious that the parties contemplated Kernz's potential damages, including consequential damages, at the time of contracting, otherwise the contract would have followed "black letter law" and required Kernz to mitigate his damages and compensate him only for his out-of-pocket expenses. As in Wassenaar, the parties foresaw that Kernz might incur consequential damages, and contracted to compensate Kernz accordingly. See Wassenaar, 111 Wis. 2d at 536 ("The usual arguments against allowing recovery for consequential damages — that they are not foreseeable and that no dollar value can be set by a court — fail when the parties foresee the possibility of such harm and agree on an estimated amount.").

¶ 41. Assessing the reasonableness of this particular contract clause at the time of contracting is difficult. At the time of contracting, it was not known if or when French Corporation might terminate Kernz without just cause, whether Kernz might secure new employment at a higher or lower salary, or what other damages Kernz might incur. Thus, the reasonableness of the clause seemingly depends on an unknown: the circumstances under which it would be invoked. To the extent the contract contemplates that if Kernz is terminated three weeks into the contract and promptly secures comparable new employment at a higher salary, the damages clause seems to be an unreasonable penalty clause. In contrast, termination after a longer time period, combined with a failure to find comparable employment, makes application of the clause much more reasonable. We conclude it makes little sense to void a damages clause because there are some possible scenarios that would produce punitive results while, at the same time, many other scenarios producing fair results. Accordingly, we give little weight to the reasonableness of this particular damages clause at the time of contracting.

2. Reasonableness of the Clause After the Breach

¶ 42. Next we address the reasonableness of the stipulated damages provision when compared with actual damages after the breach. See Westhaven, 257 Wis. 2d 789, ¶ 24.

¶ 43. French Corporation argues that Kernz will receive a "windfall" as a result of the stipulated damages provision. French Corporation alleges that Kernz "suffered [compensatory] damages of approximately $30,000.00 while the stipulated damage clause rewards Kernz $263,993.02," or "10 times [Kernz's] actual damage [s]," an amount that is "grossly disproportionate to [the compensatory] damage sustained." We disagree.

¶ 44. First, French Corporation's calculations are imprecise. Kernz was terminated on January 19, 2001. He was unemployed for two months before he obtained a job that paid him $89,000 for eight months and then switched to another job that paid him $90,000. Under the French Corporation contract, Kernz was entitled to a $110,000 salary. According to French Corporation's brief, Kernz lost $30,000 in lost wages and benefits during the two months he did not work. However, over the next twenty-five months until the end of the contract, Kernz will likely suffer approximately $42,333.33 in lost wages, producing a total of approximately $72,333.33 in compensatory damages, rather than the $30,000 figure quoted by French Corporation. $263,993.02 is 3.65 times greater than $72,333.33; a significant disparity, but far short of the "10 times" disparity alleged by French Corporation.

¶ 45. Second, the $72,333.33 figure does not include consequential damages suffered by Kernz. These damages are difficult to ascertain, see Wassenaar, 111 Wis. 2d at 537, and we will not attempt to put a dollar figure on Kernz's damages. However, the trial court found that Kernz suffered a loss of prestige in the industry; was required to seek new employment; incurred relocation costs, including the costs of securing a new residence; was "reasonably settled" in Florida; and lost business opportunities in Florida, all as a result of the breach. It is enough that Kernz's consequential damages, when added to his compensatory damages, could approximate the damages owed under the contract. Put another way, French Corporation presented no evidence that these consequential damages, when added to Kernz's compensatory damages, did not approximate the amount awarded under the contract.

¶ 46. In this case, French Corporation has the burden to demonstrate that the stipulated damages clause is unreasonable. Based upon the totality of the circumstances, we conclude that French Corporation has not met its burden.

Cross-Appeal

¶ 47. Kernz argues that the trial court erroneously denied his request for pre-verdict interest because the amount awarded was determinable as of the date of the breach. "Whether preverdict interest may be awarded is a question of law. Preverdict interest is available when damages are fixed and determinable or may be measured according to a reasonably certain standard." Loehrke v. Wanta Builders, Inc., 151 Wis. 2d 695, 706, 445 N.W.2d 717 (Ct. App. 1989) (citations omitted). "However, prejudgment interest will not be granted where the damages are determinable but 'some other factor' prevents the party from determining the amount that should be tendered." City of Merrill v. Wenzel Bros., Inc., 88 Wis. 2d 676, 697, 277 N.W2d 799 (1979). "A mere denial of liability is not a sufficient 'other factor.'" Id. We agree with Kernz that he is entitled to pre-verdict interest.

¶ 48. French Corporation argues that the damages in this case were undeterminable because it did not know whether it would succeed on its legal argument that the stipulated damages provision was an unenforceable penalty provision and, therefore, it could not calculate Kernz's potential damages. A similar argument was addressed and rejected in Wenzel Brothers, 88 Wis. 2d at 697. In Wenzel Brothers, the defendants disputed whether a statutorily mandated liquidated damages provision applied. Id. at 694. After concluding that the statute did apply, the court awarded prejudgment interest over the defendants' objection because the defendants disputed only their liability under the statutory liquidated damages provision; there was no dispute over the computation of damages. Id. at 698. As in Wenzel Brothers, French Corporation merely disputes its liability under the stipulated damages clause. The amount the company owed under the contract was easily calculable: salary and benefits for the remainder of the contract term.

¶ 49. French Corporation attempts to distinguish Wenzel Brothers from the instant case by arguing that Wenzel Brothers involved the applicability of a statutory liquidated damages provision rather than a dispute over the reasonableness of a stipulated damages clause. We think this is a distinction without a difference, and French Corporation does not persuade us otherwise.

Conclusion

¶ 50. We affirm the judgment entered against French Corporation. We reverse the trial court's order denying Kernz's request for pre-verdict interest. Kernz contends that he is owed pre-verdict interest from January 19, 2001, the day French Corporation breached the contract, to November 19, 2001, the day he was tendered a settlement offer under Wis. Stat. § 807.01(4). French Corporation does not dispute this assessment and, therefore, we remand the cause to the trial court to enter an order consistent with this decision.

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

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

       French Corporation points to testimony which seemingly conflicts with some of the circuit court's findings, but the company does not argue that the circuit court's findings are clearly erroneous. We decline to develop this argument for French and then resolve the issue. See State v. Pettit, 171 Wis. 2d 627, 646-47, 492 N.W2d 633 (Ct. App. 1992) (stating that we may decline to review an issue inadequately briefed).

       For purposes of this decision, we will assume Kernz will maintain the job paying $90,000 for the duration of the three-year term.


source: Caselaw Access Project

author: DYKMAN, J.

license: Public Domain

text:
    In the Matter of Assessment of Jury Fees Against Patricia O'Neil and Office of State Public Defender in, State of Wisconsin v. Christopher J. Murphy: Patricia O'Neil and Office of State Public Defender, Appellants, v. Monroe County Circuit Court, Respondent.
    Court of Appeals

      No. 02-2866.

      Submitted on briefs March 10, 2003.—

      Decided June 12, 2003.

    2003 WI App 149
    (Also reported in 667 N.W.2d 774.)

      On behalf of the appellants, the cause was submitted on the briefs of Tracey J. Lencioni, ássistant state public defender of Madison.
    On behalf of the respondents, the cause was submitted on the brief of David C. Rice, assistant attorney general, and Peggy A. Lautenschlager, attorney general.
    Before Vergeront, PJ., Dykman and Roggensack, JJ.
   DYKMAN, J.

¶ 1. Assistant Public Defender Patricia O'Neil and the Office of the State Public Defender appeal from an order assessing the cost of impaneling a jury against O'Neil. The trial court imposed the fees on O'Neil when she requested an adjournment on the first day of trial rather than proceed without her expert witness. Because we conclude that the trial court erroneously exercised its discretion when it ordered O'Neil to pay the jury costs, we reverse.

BACKGROUND

¶ 2. O'Neil represented Christopher Murphy, who was charged with one count of first-degree sexual assault of a child. In response to Murphy's motion for a speedy trial, the trial court scheduled a jury trial for January 3, 2002. The pretrial discovery order required the defense to provide its witness list to the State "within a reasonable time prior to jury trial." Similarly, in accordance with the defense's Wis. Stat. § 971.23 (2001-02) discovery demand, the State was to provide the defense with the names of all its witnesses "within a reasonable time before trial."

¶ 3. On December 27, 2001, Assistant District Attorney Brian Ekern sent the State's witness list to O'Neil's office. The witness list was addressed to Assistant Public Defender Allan Beatty, not O'Neil. O'Neil was on vacation that week, a fact of which the assistant district attorney was aware. As a result of her vacation and the New Year's holiday, the first working day that O'Neil was able to address the witness list was January 2, the day before Murphy's trial. At that time O'Neil had not yet submitted her witness list to the State, as the general practice in Monroe County was for the defense to wait until it received the State's witness list before responding with its own list.

¶ 4. When O'Neil saw the alleged victim's father on the State's witness list, she realized that the State was likely to raise as an issue the fact that the father had seen blood in his daughter's underwear while doing the laundry. The criminal complaint alleged that Murphy had inserted his fingers in the victim's vagina, and the day of the alleged assault was the only day that the victim observed blood in her underwear. For these reasons O'Neil concluded that expert testimony regarding the onset of menstruation was necessary to refute any argument by the State that Murphy's criminal conduct must be the cause of the blood. That same day, January 2, 2002, O'Neil obtained Dr. Laurie Logan as an expert witness to testify about menstruation. O'Neil called and informed opposing counsel that Dr. Logan would appear as an expert witness for the defense.

¶ 5. On January 3, 2002, the day of trial, the State objected to the defense naming Dr. Logan as an expert witness, arguing that O'Neil had not provided the name of the defense's expert "within a reasonable time before trial" because the State had received the defense witness list only the day before. The State asked the trial court to preclude Dr. Logan from testifying under Wis. Stat. § 971.23(7m). In response, O'Neil explained that she did not see the State's witness list until she returned to her office after her vacation. She added that if the trial court did not allow Dr. Logan to testify, she would have to ask for an adjournment to ensure that Murphy received a fair trial.

¶ 6. The trial court observed that it didn't think either witness list had been provided within a reasonable time of trial. It then stated that its options were either to grant the State's motion and preclude Dr. Logan from testifying or to adjourn the proceedings and reset the trial for a later date. After consulting with her client, O'Neil requested an adjournment. The trial court granted the request and excused the jury panel. It then held a brief hearing to address assessing the jury costs. When neither O'Neil or Assistant District Attorney Ekern offered any comments on the issue, the trial court made the following statement:

Here there's no question that the inclusion of an expert witness is one that necessitated the delay. Had it been know earlier, we would not have had this and it is not fair to the citizens of Monroe County that they pay these expenses.
I respect the right that the defense has to ask for an adjournment and that's really why — the reason why I gave an alternative. I expect that as far as the defense is concerned there was really no alternative, that in order to defend the case that the doctor was needed, but in order to have the doctor testify, clearly it would have been appropriate to giye the State more notice. So the defense will be required to pay the panel costs. You jokingly asked about a payment plan earlier. What I'd like you to do is—
• — discuss — well, discuss with your office payment, I believe that your office will pay it, but I'm sure it is well over $1,000.00 based on the conversation that I've had with our clerk.

The trial court then ordered the State Public Defender's Office to pay the cost of impaneling the jury. A written order to that effect followed on January 14, 2002, setting the amount at $1,111.95.

¶ 7. The SPD appealed. On April 29, 2002, we set aside the trial court's order pursuant to a stipulation between the trial court and the SPD. This order was without prejudice so that on remand the trial court could assess the cost of impaneling the jury against the individual trial attorneys.

¶ 8. At the hearing following remand O'Neil objected to proceeding without the assistant district attorney because she understood the issue to be whether the jury costs could be assessed against the individual attorneys. The trial court explained:

Now, the reason that there were no fees assessed against the District Attorney's office was there was no objection from the defense, there was no motion from the defense asserting that the time period in which the State notified you of their witnesses would have prevented you from going to trial; and the comment that I made was that I didn't believe that either of you had given one another notice within a reasonable period of time. The State felt that it was not able to proceed under the circumstances and I can understand that, that was not the same assertion from the defense.

O'Neil responded that on January 3, 2002, she had been "quite stunned" by the turn of events, and she had not thought that the court was going to assess the jury costs only against the defense and not the State. At this point the hearing was adjourned until May 31, 2002.

¶ 9. When the hearing reconvened O'Neil testified that "[t]here was no formal practice for exchanging witness lists any particular amount of time in advance of trial... ." She said that she did not in any way act in bad faith with respect to providing the witness list and had been prepared to go to trial on January 3, 2002. She acknowledged that the practice of exchanging witness lists "was basically invisible to the court."

¶ 10. Expressing its concern that it was unfair for the county taxpayers to pay for the jury in this situation, the trial court assessed the jury costs against O'Neil. It decided to impose the costs only on the defense because, "number one, when we had the hearing the defense did not raise any issue, raise any objection about the State not filing their witness list within a reasonable time prior to trial and had that happened, I surely would have taken that into consideration as well."

¶ 11. The trial court expanded on its reasoning in a written decision. After noting that, as a result of the postponement of his trial, Murphy (who was ultimately acquitted following a jury trial at which Dr. Logan testified) spent an additional sixty-four days in jail awaiting trial, the trial court wrote that "[disclosing the name of an expert witness one intends to call within less than twenty-four hours prior to the commencement of trial is not reasonable. As the State pointed out, it gave them no opportunity to prepare for the testimony of the named expert." However, the trial court also found that the State had not complied with its obligation under Wis. Stat. § 971.23(l)(d) to provide its witness list within a reasonable time of trial:

The defense ought not be placed in the position of selecting the state's possible witnesses from discovery materials no matter how early in the proceedings provided .... [T]he state's only witness subpoena was dated December 21, 2001. I believe the defense should have been informed of the names of the intended witnesses when the subpoena was prepared. Under all of the circumstances the state's disclosure was not within a reasonable time before trial.

¶ 12. Nevertheless, the trial court repeated its earlier conclusion that it was appropriate to impose the cost of impaneling the jury solely on the defense because O'Neil had failed to object to the State's tardy submission of its witness list. According to the trial court, "[t]he time to complain, if indeed the defense believed the state's disclosure was untimely, was prior to the trial date.... If the defense considered the state's disclosure not to have been within a reasonable time before trial, the defense should have objected." Rejecting the suggestion that imposing jury costs should be limited to cases where an attorney had acted in bad faith, the trial court assessed the cost of impaneling the jury on January 3, 2002, a sum of $1,111.95, against O'Neil.

DISCUSSION

¶ 13. The trial court has inherent authority to assess the cost of impaneling a jury against a party. State v. Foster, 100 Wis. 2d 103, 109, 301 N.W.2d 192 (1981). "The purpose of imposing jury costs is to deter disruptive practices that contribute to inefficiency in the court system." House v. Circuit Ct. for Marinette County, 112 Wis. 2d 14, 17, 331 N.W2d 859 (Ct. App. 1983). The trial court is not limited to imposing costs on parties, but may sanction an attorney whose conduct "negligently disrupts the court's orderly administration of justice." Id. We review the trial court's order assessing costs for an erroneous exercise of discretion. Anderson v. Circuit Ct. for Milwaukee County, 219 Wis. 2d 1, 9, 578 N.W2d 633 (1998). The trial court properly exercises its discretion when it examines the relevant facts, applies a proper standard of law and, using a demonstrated rational process, reaches a conclusion that a reasonable court could reach. Id.

¶ 14. O'Neil contends that her actions in response to the State's witness list were not negligent and therefore it was inappropriate for the trial court to assess the jury costs against her. The trial court concluded that O'Neil should have objected when she received the State's witness list so close to trial. O'Neil asserts that she had no reason to object because, despite the late notice, she managed to find an expert witness and she promptly informed the State that Dr. Logan would testify for the defense. She claims that it is unfair for the trial court to penalize her when it was the State's conduct that precipitated her inability to provide the defense witness list until the day before trial. Further, O'Neil submits that the trial court's main concern was not to deter dilatory practices by the Monroe County criminal bar but to ensure that the county recouped the cost of impaneling the jury. She argues that the trial court's order will have no deterrent effect because the last-minute, informal practice for exchanging witness lists in Monroe County no longer exists. Under a new procedure, witness lists must be provided to opposing counsel no later than ten days before trial.

¶ 15. The trial court argues that despite the State's late notice of its witnesses, O'Neil's filing was still contrary to the written discovery order. Given the nature of the allegations against Murphy, the court contends, O'Neil could be expected to have anticipated that expert testimony would be necessary. Finally, the court asserts that the imposition of jury costs is still a valid deterrent because the new ten-day deadline does not eliminate the possibility that an attorney will fail to provide a witness list within the allotted time, and the unnecessary expense to the county is a proper factor to consider under House, 112 Wis. 2d at 18.

¶ 16. The trial court correctly concluded that bad faith on the part of an attorney was not a prerequisite to imposing jury costs, because the order and efficiency of the court system is as easily disrupted by negligent conduct as by bad faith conduct. Id. at 16-17. However, it is also important that each case be considered "in the light of the particular facts and circumstances." Jacobson v. Avestruz, 81 Wis. 2d 240, 247, 260 N.W2d 267 (1977).

¶ 17. O'Neil testified without contradiction that the practice in Monroe County was for the defense to wait until the State provided its witness list before responding with its own list of witnesses. It was not unusual for witness lists to be exchanged "at the very last moment" in Monroe County. The State's witness list was not prepared until December 27, 2001. Assistant District Attorney Ekern knew that O'Neil was on vacation that week. As a result of the New Year's holiday and her vacation, the first working day that O'Neil could deal with the State's witness list was January 2, the day before trial. When O'Neil saw the victim's father on the list, she quickly obtained Dr. Logan' as an expert to testify and provided her list of witnesses to the State that same day.

¶ 18. The trial court did not express any doubts regarding the accuracy of O'Neil's testimony or her credibility. It did not question that, although formerly "invisible to the court," the custom was to provide witness lists shortly before trial, often orally. Nor did it single out O'Neil's actions for criticism. The trial court found that by waiting until December 27, the State had also failed to provide its witness list "within a reasonable time before trial." This is where the problem lies. O'Neil cannot be criticized for following a local custom, which was to respond to the State's list of witnesses. While O'Neil knew the nature of her case, she had no way to know that the assistant district attorney would call as a witness the father of the alleged victim.

¶ 19. We agree with the trial court that "[c]ounsel cannot seek discovery orders and thereafter ignore them." But the time period in the discovery order was uncertain, leaving it open to debate what constitutes "a reasonable time before trial." In light of the ambiguous discovery order and the informal manner in which counsel generally exchanged witness lists, O'Neil had no notice that instead of scrambling to obtain an expert witness and being prepared to go to trial on January 3, she was required to object to the State's list to avoid sanctions.

¶ 20. O'Neil had no problem with the contents of the State's witness list. She was able to respond to that list by obtaining a rebuttal witness. We see nothing to which O'Neil was required to object. She was prepared and willing to go to trial despite the State's tardy witness list.

¶ 21. A trial court's proper exercise of discretion ensures public and attorney confidence that all will receive equitable treatment. Anderson, 219 Wis. 2d at 10. But the trial court's order does not reflect the reason O'Neil replied when she did, the assistant district attorney's role in the ensuing problem and the fact that the scheduling order was ambiguous. The question at the court's hearing was whether O'Neil was negligent. That required an inquiry into all that had occurred. Whether O'Neil objected to the assistant district attorney's tardy notice was irrelevant. Given the facts and circumstances of this case, we conclude that O'Neil's conduct does not rise to a level of negligence that warrants imposing jury costs under House. Accordingly, we conclude that the trial court erroneously exercised its discretion when it ordered O'Neil to pay for the cost of impaneling the jury.

By the Court. — Order reversed.

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

       Wisconsin Stat. § 971.23(7m) provides in pertinent part: "(a) The court shall exclude any witness not listed or evidence not presented for inspection or copying required by this section, unless good cause is shown for failure to comply. The court may in appropriate cases grant the opposing party a recess or a continuance."

       There was a third option. Wisoonsin Stat. § 971.23(7m) provides for witness exclusion "unless good cause is shown for failure to comply." The trial court did not consider whether the State's unreasonably short notice was good cause to permit Dr. Logan to testify.

       Our order uses the plural term "attorneys."

       This would have required O'Neil to hire an expert witness, at State of Wisconsin expense, when she was not sure the witness would be necessary.


author: WEDEMEYER, PJ. FINE, J.

text:
    State of Wisconsin, Plaintiff-Respondent, v. Johnnie Carprue, Defendant-Appellant.
    Court of Appeals

      No. 02-2781-CR.

      Submitted on briefs April 1, 2003.

      Decided June 17, 2003.

    2003 WI App 148
    (Also reported in 667 N.W.2d 800.)

      On behalf of the defendant-appellant, the cause was submitted on the brief oí Stephanie G. Rapkin, Mequon.
    On behalf of the plaintiff-respondent, the cause was submitted on the brief of Peggy A. Lautenschlager, attorney general, and Alan Lee, assistant attorney general.
    Before Wedemeyer, PJ., Fine and Curley, JJ.

       Petition to review granted 10-1-03.

   WEDEMEYER, PJ.

¶ 1. Johnnie Carprue appeals from a judgment entered after a jury found him guilty of one count of second-degree sexual assault, use of force, contrary to Wis. Stat. § 940.225(2)(a) (2001-02). He also appeals from an order denying his postconviction motion. Carprue claims: (1) the trial court erred when it conducted its own investigation, which included questioning a witness, questioning the defendant, and using a file from another pending criminal case; and (2) trial counsel provided ineffective assistance by failing to object to the trial court's actions. Because the trial court's actions reflected an adversarial process and did not constitute harmless error, we reverse and remand for a new trial.

BACKGROUND

¶ 2. In May 2001, Carprue was charged with second-degree sexual assault. The case was tried to a jury. During the trial, the State presented evidence that when the police came to arrest Carprue, he fled and tried to hide. Carprue testified that he fled from police because he was violating rules of In-House Correctional Services related to a different matter, and that he feared the police would arrest him for those violations if they caught him. He indicated he did not flee from the police for fear of being apprehended for a sexual assault. It was Carprue's theory that the sexual intercourse with the victim was consensual.

¶ 3. After his testimony, but before the close of evidence, the trial court excused the jury and conducted its own investigation. The trial court called Kenneth Morrow, who was the operations manager of In-House Correctional Services. Morrow was present in the courtroom as he had been named by the defense as a "custodian of records." He brought Carprue's "in-house" file with him. The court questioned Morrow about "in-house" procedures relative to rules violations. Morrow testified that if an individual violates the telephonic monitoring system, "in-house" notifies the court, a bench warrant is issued, and the warrant is sent to the sheriffs department. Morrow stated that this procedure is explained to inmates and, once released, the individual would have no reason to believe that a rules violation would result in direct notification to the police.

¶ 4. After this questioning, the court then questioned Carprue about a letter he wrote to a different trial court in a separate matter, wherein he pleaded for leniency and referred to his fiancée. Following this exchange, the jury was brought back and the trial court asked the State whether they would be calling any rebuttal witnesses.

¶ 5. The State called two rebuttal witnesses. The first was Kenneth Morrow. The second witness called has no relevance to this appeal. Morrow testified as to the procedures taken when an individual violates "in-house" monitoring. Morrow stated that he would notify the court, the court would issue a bench warrant and send it to the sheriffs department. He indicated that all inmates are informed, both verbally and in writing, that this is the procedure. Morrow advised that an inmate would have no reason to think that a rules violation would result in direct contact with the police.

¶ 6. After instructions and closing arguments, the case was sent to the jury. The jury found Carprue guilty. The trial court sentenced him to twenty-five years; fifteen years of initial confinement, followed by ten years of extended supervision. Judgment was entered. Subsequently, Carprue filed a postconviction motion alleging that the trial court's conduct of calling its own witness, and questioning Carprue with respect to a letter in a separate matter, improperly prejudiced his case. The postconviction court noted that the procedure engaged in by the trial court was "out of the ordinary," but found that because it was done outside the presence of the jury, it was not prejudicial. Carprue now appeals.

DISCUSSION

¶ 7. Carprue asserts two claims of error: (1) the trial court's sua sponte investigation and questioning of witnesses resulted in improper adversarial conduct and exceeded judicial authority; and (2) defense counsel's failure to object to the trial court's actions constituted ineffective assistance of counsel. Carprue claims that the trial court's actions constituted a violation of due process and prevented him from receiving a fair trial. Our review is de novo. State v. Littrup, 164 Wis. 2d 120, 473 N.W.2d 164 (Ct. App. 1991). We conclude that because the trial court's actions resulted in improper partisanship and advocacy, we must reverse the judgment and order and remand for a new trial.

¶ 8. "Due process of law guarantees a criminal defendant a fair trial before an impartial judge and jury in a neutral atmosphere." State v. Brown, 741 A.2d 321, 323 (Conn. App. Ct. 1999); see U.S. Const. amend. Xiy § 1. There is no dispute that a trial court is permitted to question witnesses in order to clarify testimony. State v. Asfoor, 75 Wis. 2d 411, 437, 249 N.W.2d 529 (1977); Wis. Stat. § 906.14. "Clarification questions" do not interfere with a defendant's constitutional right to an impartial judge. Clarification is permitted because "[a] judge does have some obligation to see to it that justice is done." Asfoor, 75 Wis. 2d at 437. It is expected that a trial court will exercise its statutory authority to intervene in the trial by calling or questioning witnesses "only in the exceptional case." Wis. Stat. Ann. § 906.14, Judicial Council Committee Note 1974. The trial court should never "take an active role in trying the case." State v. Garner, 54 Wis. 2d 100, 104, 194 N.W.2d 649 (1972). "The judge who acts as an advocate skates on thin ice in any judicial hearing and runs the risk of turning the adversary system into an inquest wherein the trier of the fact calls and questions the witnesses." Id.; see also C.S. Wheatley, Jr., Annotation, Propriety of Trial Judge in Propounding Questions to Witnesses in Criminal Case, 84 A.L.R. 1172 (1933).

¶ 9. Accordingly, "potential prejudice lurks behind every intrusion a presiding judge makes into a trial." United States v. Slone, 833 F.2d 595, 597 (6th Cir. 1987) (citation omitted). In that vein, the Sixth Circuit identified three instances suggesting when a trial court has good reason to interject questions into a trial: (1) when a trial is lengthy and complex, calling for judicial intervention for clarification; (2) when counsel are unprepared or obstreperous and meddling with the facts, suggesting that judicial intervention is necessary for clarification; and (3) when a witness is difficult, confused and providing unbelievable information, that is not properly addressed. United States v. Hickman, 592 F.2d 931, 933 (6th Cir. 1979). Reviewing these factors can assist us in determining whether the trial court intervention was appropriate or prejudicial.

¶ 10. Neither the first nor second factor apply here. The dissent apparently argues that the third factor is present — that the trial court believed Carprue provided unbelievable information and that additional evidence was required to refute his claims. In addressing this factor, it is important to acknowledge that it is a far better policy "to allow counsel the opportunity to develop facts in the first instance" because counsel is in a better position to do so. See Auger v. Auger, 546 A.2d 1373, 1375 (Vt. 1988). The trial court here did not heed that advice; rather, the trial court interjected itself into the evidentiary proceedings before the State had an opportunity to present its rebuttal case.

¶ 11. The reason for the policy is premised on two grounds. First, the line is thin between judging and advocacy; a defendant's right to a fundamentally fair trial before a neutral bench is essential to the administration of justice. Second, as one judge noted:

The judge views the case from a peak of Olympian ignorance. His intrusions will in too many cases result from partial or skewed insights. He may expose the secrets one side chooses to keep while never becoming aware of the other's. He runs a good chance of pursuing inspirations that better informed counsel have considered, explored, and abandoned after fuller study. He risks at a minimum the supplying of more confusion than guidance by his sporadic intrusions.

Marvin E. Frankel, The Search for Truth: An Umpireal View, 123 U. Pa. L. Rev. 1031, 1042 (1975). The dissent suggests that the trial court here was fulfilling its obligation "to see to it that justice is done" and to "negate a portion of the defendant's testimony that did not ring true." Dissent op. at ¶ 10. This is an issue that repeatedly arises in cases across the nation. Although some courts and commentators agree with the philosophy espoused by the dissent, many others abide by the reasoning contained in the majority:

[JJudicial interrogation to search for the whole truth or to complete the evidence presupposes that the judge knows the truth better than the parties or their counsel.... There is something unseemly about a judge . . . who seeks to elicit testimony in aid of those answers.

Stephen A. Saltzburg, The Unnecessarily Expanding Role of the American Trial Judge, 64 Va. L. Rev. 1, 57-58 (1978). Here, the trial court's questioning demonstrated its belief that Carprue was not being forthright with respect to why he fled from police. We hold that when a trial court's questioning reveals its disbelief of the defendant's testimony, the court has crossed over the .line of impartiality. The trial court's conduct suggested favoritism toward the State and against the defendant and violated Carprue's due process rights.

¶ 12. The trial court is entrusted with the responsibility to conduct the trial in an "atmosphere of perfect impartiality," Glasser v. United States, 315 U.S. 60, 82 (1942), superseded on other grounds by Fed. R. Evid. 104(a), and must "never assume a position of advocacy, real or apparent," State v. Delarosa, 547 A.2d 47, 51 (Conn. App. Ct. 1988) (emphasis added).

¶ 13. Here, the trial court's conduct was not limited to "clarification," but resulted in the discovery of new information, challenged the credibility of the defendant, and threatened the fairness of the trial. In calling Morrow to testify, the trial court elicited information about "in-house" placement procedures as well as the information provided to inmates. The trial court questioned Morrow as to exactly what happens if the inmate violates the "in-house" rules associated with monitoring. As noted, Morrow testified that if a contact violation occurs, "in-house" notifies the court, not the police. This testimony was elicited from the court in direct response to Carprue's testimony that he was hiding from police not because he feared he would be arrested for sexual assault, but rather, because he knew he violated the "in-house" contact rules. The purpose of the trial court's independent questioning was to establish the procedures used by "in-house" when a violation occurs, and to demonstrate that Carprue should have known that the "in-house" violation would not result in sending the police to arrest him. The questioning by the trial court was adversarial because it was not simply done to clarify a matter that was confusing to the jury. Rather, the questioning by the court demonstrated the trial court's belief that Carprue was not being credible when he offered an explanation for fleeing from police.

¶ 14. By "target[ing Carprue's] credibility and challeng[ing] his story" the trial court acted "more in the manner of a prosecutor than an impartial judge." United States v. Filani, 74 F.3d 378, 385 (2d Cir. 1996). In Carprue's case, his credibility was a key issue. There were two versions of events presented in this case. One was Carprue's version, that no sexual assault occurred and he fled from the police only because he was violating "in-house" rules. The other was the State's and victim's version, that this was a forced sexual assault, evidenced by Carprue's fleeing from police because he did not want to be arrested for sexual assault.

¶ 15. The State responds that Carprue was not prejudiced as a result of the trial court's questioning because the interrogation was done outside the presence of the jury. We cannot agree. "Even without the presence of a jury to be influenced, the trial court has the duty to conduct proceedings in an impartial, decorous manner, so as not to intimidate either party in presenting matters to the court or to demean the public image of judicial integrity." Bruce v. State, 375 N.E.2d 1042, 1056 (Ind. 1978) (citation omitted). Directly following the trial court's interrogation, the State called Morrow as a rebuttal witness. The State's questioning of Morrow mirrored that of the trial court. The State elicited testimony from Morrow as to the procedures utilized by "in-house" in the event an inmate violates the monitoring rules. Morrow provided the same testimony, this time in front of the jury, that "in-house" does not contact the police, but rather it notifies the court of a violation. Morrow also testified that each inmate is advised of these procedures, both verbally and in writing.

¶ 16. By sua sponte calling Morrow and questioning him on this subject, the trial court acted as a "hinting advocate" for the State. In other words, the trial court provided the prosecutor with information it believed the jury needed to hear in order to rebut Carprue's claims that he hid from police solely because he knew he had violated "in-house" rules, and not because he had just committed a sexual assault. Even the postconviction court determined that the "[trial court]'s active involvement in the trial was out of the ordinary. It was so active that it raised an unfortunate appearance that she was partial to the State, or at least partial against Mr. Ca[r]prue." The State suggests that the prosecutor would have called Morrow to offer the same rebuttal testimony even absent the involvement of the trial court. The record, however, reveals nothing to suggest that eventuality. Morrow was not listed as a witness by the State, and did not offer any testimony during the State's case-in-chief. Moreover, the State did not make any reference during the opening statement to suggest that it intended to call Morrow for such a purpose.

¶ 17. Because of the nature of this indiscretion, we cannot say with absolute certainty whether Morrow's testimony affected the jury's ultimate decision. It could be that Carprue's flight did not influence their decision at all. It could be that the victim's testimony was entirely more credible than Carprue's claim that the sexual act was consensual. Under the circumstances, however, we must apply the harmless error test to determine whether the trial court's conduct resulted in "a reasonable possibility that the error contributed to the conviction." See State v. Dyess, 124 Wis. 2d 525, 543, 370 N.W2d 222 (1985). The trial court's elicitation of Morrow's testimony inevitably suggested that Carprue's veracity was questionable. Although this was done outside the presence of the jury, the trial court's conduct communicated partisan information to the prosecutor, who immediately thereafter presented the substance of the trial court's actions to the jury during the rebuttal case. As a result, the jury was presented with evidence to doubt Carprue's credibility, which it otherwise may not have heard. When "such doubt is injected by the court in a case where credibility of a defendant-witness is a key issue, there has been a deprivation of a fair jury trial." United States v. Victoria, 837 F.2d 50, 55 (2d Cir. 1988). Due process and the right to an impartial tribunal are critically important to maintain the integrity of our justice system. The trial courts operate as a buffer between the adversarial conduct of the state, the protection of the rights of the accused, and the assurance to the community that justice will be served. A trial court must "exercise self-restraint and preserve an atmosphere of impartiality and detachment." Pariser v. City of New York, 146 F.2d 431, 433 (2d Cir. 1945). Our system requires that judges refrain from advocacy and advocates refrain from judging.

¶ 18. Thus, although we cannot say with absolute certainty that Carprue would have been acquitted absent the -trial court's intervention, we are compelled to the conclusion that a reasonable possibility of that outcome existed. It is evident that the trial court's conduct exceeded the parameters of acceptability, and rendered the trial fundamentally unfair. Under these facts and circumstances, we conclude that the trial court's actions steered the State toward evidence it otherwise might not have presented. This resulted in the appearance of advocacy and partisanship on the part of the trial court. The trial court's conduct exceeded the scope of authority intended by Wis. Stat. § 906.14 and crossed the "fine line" a trial court confronts when exercising its limited discretion to interrogate witnesses. See Garner, 54 Wis. 2d at 104. As a result, we have no choice but to conclude that Carprue's due process rights were violated. When the trial court engaged in partisanship and advocacy, it could no longer maintain impartiality and objectivity.

¶ 19. Although the dissent attempts to place blame with this court for reversing a conviction, which necessarily will result in implications for the victim, the issue in this case is not about assigning fault. It is often said that tough cases make bad law. It is our duty to avoid that cliché. Certainly, this court draws no pleasure from reversing a conviction in a sexual assault case, and we can empathize with what our decision means for the victim. However, our decision cannot be based on sympathy, but must be grounded in the constitutional principles upon which our system of justice was developed. Here, the requirements of proper process are not being proposed as a preventative to achieving justice. To the contrary, protestations by the dissent notwithstanding, proper process is quintessential to ensuring that ultimate justice is achieved. To the judiciary belongs this important and continuing obligation. Furthermore, because of the sensitive nature of sexual assault cases, it is incumbent upon the trial court to be vigilant in its duty and refrain from engaging in any conduct that suggests the court is partial to the State, or at least biased against the defendant. By failing to exercise such vigilance, the trial court runs the risk that the case may have to be retried. Based on the foregoing, the judgment and order in this case are reversed and the case is remanded for a new trial.

By the Court. — Judgment and order reversed and cause remanded.

FINE, J.

¶ 20 (dissenting). It is an oft-repeated cliché that a trial is a search for the truth. Consistent with that ideal paradigm, the rules of evidence permit trial judges to call and interrogate witnesses. See Wis. Stat. Rule 906.14. This is because, as Judge Learned Hand recognized almost sixty years ago, "[a] judge is more than a moderator; he is charged to see that the law is properly administered, and it is a duty which he cannot discharge by remaining inert." United States v. Marzano, 149 F.2d 923, 925 (2d Cir. 1945). This is also the law in Wisconsin:

[T]he trial judge is more than a mere referee. The judge does have a right to clarify questions and answers and make inquiries where obvious important evidentiary matters are ignored or inadequately covered on behalf of the defendant and the state. A judge does have some obligation to see to it that justice is done but must do so carefully and in an impartial manner.

State v. Asfoor, 75 Wis. 2d 411, 437, 249 N.W2d 529, 540-541 (1977) (emphasis added).

¶ 21. A trial judge in Wisconsin is given broad berth by the rules. As we have seen, Wis. Stat. Rule 906.14 is quite plain: "The judge may, on the judge's own motion. . ., call witnesses." Wis. Stat. Rule 906.14(1) (emphasis added). Further, "[t]he judge may interrogate witnesses, whether called by the judge or by a party." Wis. Stat. Rule 906.14(2) (emphasis added). Indeed, this power includes the discovery and development of new information. Thus, the trial judge has the authority to appoint expert witnesses — even on the "judge's own motion." Wis. Stat. Rule 907.06(1).

¶ 22. Of course, the trial" 'judge should not take an active role in trying the case for either the state or the defense.'" Asfoor, 75 Wis. 2d at 437, 249 N.W2d at 540 (quoting State v. Garner, 54 Wis. 2d 100, 104, 194 N.W.2d 649, 651 (1972)). Nevertheless, Asfoor affirmed the conviction in that case even though the judge "took a somewhat active role in questioning witnesses" in front of the jury. Asfoor, 75 Wis. 2d at 437, 249 N.W.2d at 540.

¶ 23. Garner, relied on by both Asfoor and the Majority here, is also instructive. There, the Wisconsin Supreme Court found no prejudice even though the trial judge in that case "served, in effect, as prosecuting attorney," during the probation-revocation hearing. Garner, 54 Wis. 2d at 104, 194 N.W.2d at 651. Indeed, the trial judge in that case "called and examined all the state witnesses himself." Ibid. Of course, Garner recognized:

A trial judge while exercising his limited discretion to call and examine a witness should not function as a partisan, as this could very well mislead the jury. But even where there is no jury, the judge should not take an active role in trying the case for either the state or the defense. The judge who acts as an advocate skates on thin ice in any judicial hearing and runs the risk of turning the adversary system into an inquest wherein the trier of the fact calls and questions the witnesses.

Ibid, (internal citation omitted). Nevertheless, even though the trial judge in Garner, as noted, "called and examined all the state witnesses himself," the supreme court found "no reversible error on these facts." Ibid.

¶ 24. An example where a trial judge falls through the "thin ice" of partisanship is Marzano. There, the trial judge not only called and interrogated witnesses who were awaiting sentence before him, but also, by his conduct of the questioning in front of the jury, made the jury believe that there was evidence beyond what they heard in open court that indicated that the defendant was guilty.

[I]t must have appeared to the jury extremely probable that, not only was he satisfied that [the witnesses he called and questioned] were accomplices [of the defendant], but that he was relying upon more than the testimony of the [other witnesses who were alleged to have been drug "decoys"]; that he had other grounds for his belief which had not come out upon the trial; for he would scarcely have gone the lengths which he did, merely upon such testimony.

Marzano, 149 F.2d at 926.

¶ 25. There are two matters that, in my view, are critical to this appeal. First, the jury neither saw nor knew that the trial court called and interrogated Kenneth Morrow. Thus, this case is different than all but one of the foreign cases the Majority marshals in support of reversal. Only Auger v. Auger, 546 A.2d 1373 (Vt. 1988), was a non-jury trial. Moreover, of all the jury-trial cases cited by the Majority, only United States v. Victoria, 837 F.2d 50 (2d Cir. 1988); United States v. Hickman, 592 F.2d 931 (6th Cir. 1979); and State v. Delarosa, 547 A.2d 47 (Conn. App. Ct. 1988), reversed convictions because of the trial judges' alleged lack of impartiality.

¶ 26. Second, Johnnie Carprue's trial lawyer never objected. See Wis. Stat. Rule 906.14(3) (specifying when a party may object "to the calling of witnesses by the judge"). Thus, this case must be evaluated in the context of whether Carprue was deprived of his right to effective assistance of counsel. Kimmelman v. Morrison, 477 U.S. 365, 374-375 (1986); State v. Damaske, 212 Wis. 2d 169, 200, 567 N.W.2d 905, 919 (Ct. App. 1997). The Majority glissades over the first and it ignores the second, which, in my view, is dispositive.

¶ 27. To prevail here, Carprue must show both that his trial lawyer's performance was deficient, and that "the deficient performance prejudiced the defense." Strickland v. Washington, 466 U.S. 668, 687 (1984); see also State v. Sanchez, 201 Wis. 2d 219, 236, 548 N.W.2d 69, 76 (1996). Again, this is the test that we must apply, see Kimmelman, 477 U.S. at 374-375, not "harmless error." Assuming that Carprue's lawyer's failure to object to the trial court's calling Kenneth Morrow out of the presence of the jury was less-than "reasonably effective representation," State v. McMahon, 186 Wis. 2d 68, 80, 519 N.W.2d 621, 626 (Ct. App. 1994), Carprue has, in my view, utterly failed to show prejudice — that is, he has not even come close to demonstrating that " 'but for counsel's unprofessional errors, the result of the proceeding would have been different.'" Sanchez, 201 Wis. 2d at 236, 548 N.W2d at 76 (quoting Strickland, 466 U.S. at 694).

¶ 28. The evidence here was strong; the Majority does not opine that it was not. Further, the Majority recognizes that proof of "prejudice" in the Strickland sense has not been shown — the Majority concedes: "[W]e cannot say with absolute certainty whether Morrow's testimony affected the jury's ultimate decision. It could be that Carprue's flight did not influence their decision at all. It could be that the victim's testimony was entirely more credible than Carprue's claim that the sexual act was ■ consensual." Majority op. at ¶ 14. A defendant loses an ineffective-assistance-of-counsel claim when the prejudice/no-prejudice equation is so balanced.

¶ 29. Clearly, the Majority does not like what the trial court did in "hinting" to the State that it should call a witness, who was already in the courtroom, to negate a portion of the defendant's testimony that did not ring true. See Majority op. at ¶ 13. I disagree. In my view, silence by the trial judge in the face of something that she knew was wrong would háve been an abdication of her obligation "to see to it that justice is done" by making "inquiries where obvious important evidentiary matters are ignored or inadequately covered." Asfoor, 75 Wis. 2d at 437, 249 N.W.2d at 540-541. In my view, the "search for the truth" should not be a sporting event, where possible miscues can let the guilty go free:

Over 75 years ago, Roscoe Pound condemned American courts for ignoring "substantive law and justice," and treating trials as sporting contests in which the "inquiry is, Have the rules of the game been carried out strictly?" Pound, The Causes of Popular Dissatisfaction With the Administration of Justice, 29 ABA Ann. Rep. 395, 406 (1906). A criminal trial is not a "game."

Morris v. Slappy, 461 U.S. 1, 15 (1983). I agree. Wisconsin law, Asfoor and Garner, amply support what the trial court did here. It is that law, and not foreign law upon which the Majority relies, that governs this case. State v. Lossman, 118 Wis. 2d 526, 533, 348 N.W.2d 159, 163 (1984) (court of appeals bound by supreme court precedent).

¶ 30. The victim in this case claimed that she was raped. A jury believed her. The Majority now makes her endure either another trial or seeing the man who raped her get a plea-bargained deal. A victim's trauma on any retrial is an appropriate consideration in deciding whether marginal errors warrant a new trial. Morris, 461 U.S. at 14-15. In my view, however, there were no errors, and I would affirm.

¶ 31. I respectfully dissent.

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

       We agree with the State that Carprue was not prejudiced by the fact that the trial court questioned him with regard to a letter to another trial court discussing his fiancée and child and requesting a lenient sentence. Although we conclude that this interrogation also exceeded the type of questioning permitted under Wis. Stat. § 906.14, this exchange occurred outside the presence of the jury and was not used in rebuttal by the State. As a result, the trial court's questioning of Carprue did not provide a source for the State to use in rebuttal; therefore, the jury was not influenced by the trial court's interrogation of Carprue.

       Because we have disposed of this case on the first issue, it is not necessary for us to address Carprue's second issue— whether his trial counsel was ineffective for failing to object to the actions of the trial court. See Gross v. Hoffman, 227 Wis. 296, 300, 277 N.W 663 (1938) (only dispositive issues need be addressed).

       Wisconsin Stat. Rule 906.14 provides:
      Calling and interrogation of witnesses by judge. (1) Calling by judge. The judge may, on the judge's own motion or at the suggestion of a party, call witnesses, and all parties are entitled to cross-examine witnesses thus called.
      (2) Interrogation by judge. The judge may interrogate witnesses, whether called by the judge or by a party.
      (3) Objections. Objections to the calling of witnesses by the judge or to interrogation by the judge may he made at the time or at the next available opportunity when the jury is not present.