author: DYKMAN, J. LUNDSTEN, J.

text:
    Robert Kerl, General Guardian of Robin Kerl, The Estate of David Jones, Benjamin Jones and Donna Roberts, Plaintiffs-Appellants-Cross-Respondents, Attorney General, Wisconsin Department of Health and Family Services, and Wal-Mart Personal Choice, Involuntary-Plaintiffs, v. Dennis Rasmussen, Inc. and Continental Western Insurance, Defendants-Petitioners, Unidentified Defendant ABC (Arby's Inc.'s Insurer), Defendant, Arby's Inc. d/b/a Triarc Restaurant Group, Defendant-Respondent-Cross-Appellant.
    Court of Appeals

      No. 02-1273.

      Submitted on briefs January 10, 2003.-

      Decided October 9, 2003.

    2003 WI App 226
    (Also reported in 672 N.W.2d 71.)

      On behalf of the plaintiffs-appellant-cross respondents, the cause was submitted on the briefs of Daniel W. Hildebrand of DeWitt Ross & Stevens, S.C., Madison, and Douglas B. Keberle of Keberle & Patrykus, LLP, West Bend, and Donald J. Murphy of Murphy Vaughan & Pressentin LLC, Monona.
    On behalf of the defendant-respondent-cross appellant, the cause was submitted on the briefs of Emile H. Banks, Jr. and Vicki L. Arrowood of Emile Banks & Associates, Milwaukee.

      Before Deininger, EJ., Dykman, and Lundsten, JJ.

       Petition to review granted 12-16-03.

   DYKMAN, J.

¶ 1. Plaintiffs Robin Kerl, the estate of David Jones and David Jones's parents (plaintiffs), appeal from an order dismissing on summary judgment their vicarious liability claim against Arby's Inc, d/b/a Triare Restaurant Group (Arby's) and from the order denying their motion for reconsideration. Plaintiffs argue that issues of material fact preclude summary judgment. Arby's cross-appeals from the trial court's order denying its motion for summary judgment based upon public policy grounds. Because we conclude that there are no genuine issues of material fact and that Arby's is entitled to summary judgment on the vicarious liability claim as a matter of law, we do not reach Arby's cross-appeal but affirm the trial court's orders in all respects.

BACKGROUND

¶ 2. This action arises from a tragedy that occurred on June 11, 1999, when Harvey Pierce left his shift at Arby's and walked approximately one-half mile to a Wal-Mart store parking lot, where he shot his former girlfriend, Robin Kerl, and her fiancé, David Jones, both Wal-Mart employees. Pierce then shot himself. Pierce and Jones died. Kerl survived, but sustained serious injuries and is permanently disabled.

¶ 3. Arby's, Inc., is a national franchisor of fast-food restaurants. Dennis Rasmussen, Inc. (DRI), one of Arby's franchisees, owned the Arby's restaurant where Pierce worked. Under the terms of the October 11,1985 licensing agreement executed by Arby's and DRI, DRI must follow Arby's specifications for food service, cleanliness, signage, suppliers, building construction and remodeling, among other things. In addition, the license agreement required DRI to comply at all times with all applicable laws, ordinances and regulations, and the manager of the restaurant must have completed an Arby's Restaurant Management Training Seminar.

¶ 4. DRI hired Cathy Propp as general manager for its restaurant in 1994. Although Propp managed another Arby's at that time, she had not completed Arby's management training program. In early 1999 she decided to hire Pierce, a Dane County Jail inmate with Huber law work release privileges. At the time she hired him, Propp believed that Pierce had been convicted of some form of battery. In fact, his conviction was for second-degree sexual assault. During the five months that Pierce worked at the restaurant, he was frequently verbally abusive to other employees, and on numerous occasions acted in an offensive and hostile manner. Despite several complaints from co-workers, Propp never disciplined Pierce. Nor did she take any action when another employee informed her that he had sold Pierce a weapon.

¶ 5. On the day of the shootings, Pierce was scheduled to work from 3:00 p.m. to 10:00 p.m. At 3:51 p.m. he punched out without permission. The shift manager called Propp to tell her that Pierce had left work. Pierce then walked from Arby's to the Wal-Mart parking lot where he shot Kerl, Jones and himself.

¶ 6. The plaintiffs commenced this action against Arby's and its franchisee, DRI. The complaint alleged several causes of action against DRI: (1) negligent supervision; (2) negligent hiring; (3) negligent retention; (4) nuisance; and (5) breach of third-party beneficiary contract. The complaint requested compensatory and punitive damages. Plaintiffs alleged that Arby's was vicariously liable for DRI's negligent supervision and negligent hiring under theories of actual or constructive agency, respondeat superior and/or active negligence. Plaintiffs claim that Arby's negligently failed to train and supervise management at the Arby's franchise where Pierce was employed.

¶ 7. Arby's moved for summary judgment seeking dismissal of all claims against them. The trial court dismissed with prejudice all claims against Arby's. After plaintiffs filed their notice of appeal, the trial court, at Arby's request, denied Arby's motion for summary judgment on public policy grounds. Arby's cross-appeals from that order.

DISCUSSION

¶ 8. We review summary judgment decisions de novo, applying the same methodology as the circuit court. Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315-17, 401 N.W.2d 816 (1987). The moving party bears the burden of establishing the absence of a genuine issue of material fact. Strasser v. Transtech Mobile Fleet Serv., Inc., 2000 WI 87, ¶ 31, 236 Wis. 2d 435, 613 N.W.2d 142. We will affirm summary judgment only when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Wis. Stat. § 802.08(2) (2001-02).

Vicarious Liability

¶ 9. Plaintiffs claim that DRI was negligent with respect to restaurant management, personnel policies and practices, and compliance with Huber law rules and regulations. According to plaintiffs, there are disputes of material fact which should preclude summary judgment on the issue of whether the control Arby's exerted over its franchisee is sufficient to render Arby's vicariously liable for DRI's negligence in these areas.

¶ 10. We have not previously addressed the issue of vicarious liability in the context of a franchise relationship. With respect to vicarious liability in general, the supreme court has explained:

Vicarious liability is "[l]iability that a supervisory party (such as an employer) bears for the actionable conduct of a subordinate or associate (such as an employee) because of the relationship between the two parties." Black's Law Dictionary 927 (7th ed. 1999). There is a tension, then, between the basic principle of individual responsibility under the law on the one hand and the imposition of vicarious liability on an innocent party for a tortfeasor's acts on the other hand. Because vicarious liability is a severe exception to the basic principle that one is only responsible for his or her own acts, we proceed with caution when asked to impose vicarious liability on an innocent party, doing so only in accordance with well-settled law.

Lewis v. Physicians Ins. Co., 2001 WI 60, ¶ 11, 243 Wis. 2d 648, 627 N.W.2d 484 (emphasis added). Mindful of this instruction, we consider the parties' arguments regarding the appropriate standard for imposing vicarious liability on a franchisor. This issue presents a question of law, which we decide without deference to the trial court.

¶ 11. Plaintiffs assert that Raasch v. Dulany, 273 F. Supp. 1015 (E.D. Wis. 1967), is the appropriate standard for Wisconsin law, and under Raasch, a franchisor who has the "right to control" daily operations of a franchisee may be liable for injuries caused by the franchisee's negligence. Therefore, plaintiffs conclude that vicarious liability is not limited to those activities over which the franchisor has actual control.

¶ 12. The defendants in Raasch were Avis-Rent-A-Car System, Inc., and one of its licensees. An employee of the licensee negligently caused an automobile accident, in which he was killed and the plaintiffs were injured. Avis moved for summary judgment, arguing that there was no basis for imposing liability on it for the negligent actions of the licensee's employee. The court analyzed the issue under agency law principles and stated that the key inquiry was whether Avis had "control or a right of control" over the way its licensee does business. Id. at 1018. After reviewing the licensing contract, the court concluded that Avis did have substantial control over its licensee. The court noted that the contract required the licensee to submit monthly reports to Avis, to use only Avis rental agreements, to comply with Avis's insurance standards and to follow Avis's instructions regarding rental rates and advertising. Further, the licensee had to operate in conformance with the Avis operator's manual and all bulletins, directives and instructions therein. Avis had the right to terminate the contract if the licensee failed to meet Avis's "reasonable standards." Id. Noting the discrepancy between the contract provisions and Avis's affidavit averring that it had little control over its licensees, the court concluded that there was a genuine dispute regarding the nature of Avis's relationship with its licensee and therefore summary judgment was inappropriate. Id.

¶ 13. Based on Raasch's emphasis on the presence of a standards manual and the right to terminate the contract, plaintiffs conclude that, because Arby's required DRI to comply with its standards and could terminate the franchise agreement for noncompliance, the question of Arby's vicarious liability is for the jury to decide and should not be resolved on summary judgment. Arby's, however, contends that Raasch presents an outdated view of franchise relationships and that the proper standard for franchisor vicarious liability limits a franchisor's exposure to those activities over which it has actual control and which give rise to the negligence claim.

¶ 14. Arby's submits that the prevailing view of franchise relationships is illustrated by Hoffnagle v. McDonald's Corp., 522 N.W.2d 808, 815 (Iowa 1994), in which the Iowa Supreme Court determined that McDonald's was not liable when a franchisee's employee was assaulted by third parties. McDonald's argued that the franchisee, as Hoffnagle's employer, had the duty to provide a safe and secure work environment. Id. at 811. The court agreed, reasoning that the liability of the franchisor was a product of "the extent of the franchisor's control of the daily operation of the business." Id. at 814. Because it was a component of the duty issue, the question of the franchisor's retained control over the franchisee was a matter of law. Id. As in Raasch, the franchisee had to follow McDonald's business manuals, guidelines and product and service specifications. However, the court concluded that McDonald's did not retain sufficient control to owe a duty of security to the franchisee's employee. Id. at 812-14. Although McDonald's required its franchisee to follow the "McDonald's system," it was the franchisee that had the power to "hire, fire, supervise and discipline the franchisee's employees." Id. at 814. Consequently, McDonald's authority over "the uniformity and standardization of products and services offered by the [franchisor's] restaurant" was not sufficient control of day-to-day operations to establish vicarious liability. Id. (quoting Little v. Howard Johnson Co., 455 N.W.2d 390 (Mich. Ct. App. 1990)).

¶ 15. The holding in Hoffnagle is consistent with the majority of other jurisdictions that have considered franchisor liability for the negligence of a franchisee. "Courts . . . require franchisors to exercise more than the right to control uniformity of appearance, products and administration in order to find a duty" owed to a party injured by a franchisee's negligence. Helmchen v. White Hen Pantry, Inc., 685 N.E.2d 180, 182 (Ind. Ct. App. 1997). Indeed, such standards enable a franchisor to protect its franchise and trade name. Schlotzsky's, Inc. v. Hyde, 538 S.E.2d 561, 563 (Ga. Ct. App. 2000). Thus courts have declined to find a franchisor vicariously liable where the franchise agreement retained the right to inspect and enforce standards. See, e.g., Wu v. Dunkin' Donuts, Inc., 105 F. Supp. 2d 83, 88 (E.D.N.Y. 2000), aff'd, No. 00-7923, 2001 WL 170639 (2nd Cir. Feb. 20, 2001). Nor is a general right to terminate the franchise agreement for noncompliance sufficient to create liability. See Little, 455 N.W.2d at 394 (no vicarious liability where franchisor had right of inspection but actual control was limited to holding franchisee in breach of agreement for failure to meet standards); Pizza K, Inc. v. Santagata, 547 S.E.2d 405, 407 (Ga. Ct. App. 2001) (franchise agreement retaining right to inspect franchisee's establishment and to terminate for noncompliance with franchise standards not sufficient control of day-to-day activities to create agency relationship); Viches v. MLT, Inc., 127 F. Supp. 2d 828, 832 (E.D. Mich. 2000) (imposition of uniform practices, right to inspect franchisee's premises and right to terminate the agreement does not render franchisor liable for franchisee's negligence).

¶ 16. The prevailing standard focuses on whether the franchisor controls the "specific 'instrumentality' which allegedly caused the harm." Helmchen, 685 N.E.2d at 182. This is illustrated by a number of cases where a franchisee's employee has been injured by third parties and has claimed the franchisor was responsible for inadequate security; courts have declined to impose liability when there was no showing of the franchisor's control over security measures. In Helmchen, the franchisor was not liable for the employee's injuries because the security procedures were not mandatory and mere suggestions or recommendations regarding security were insufficient to create a duty. In Chelkova v. The Southland Corp., 771 N.E.2d 1100 (Ill. App. Ct. 2002), the court concluded that the franchisor was not liable for the franchisee's negligent security measures because, although the franchisor distributed a "robbery-prevention kit" and paid for a security system, implementing the security measures was not mandatory but was left to the franchisee's discretion. Similarly, in Folsom v. Burger King, 958 P.2d 301, 309 (Wash. 1998), the Washington Supreme Court adopted Hoffnagle's approach, and held that there was no duty of care owed to a franchisee's employee when the injured employee could not show that Burger King controlled security at the franchise restaurant.

¶ 17. Plaintiffs maintain that Wisconsin should not follow the more restrictive test for franchisor vicarious liability used in other jurisdictions. Plaintiffs urge us to adopt the view of Wisconsin law espoused in Raasch. Under Raasch, the right to control the franchisee is sufficient to trigger liability on the part of the franchisor. But as a decision by a federal district court, Raasch's view of Wisconsin law is not binding on this court. Leverence v. U.S. Fid. & Guar., 158 Wis. 2d 64, 91, 462 N.W.2d 218 (Ct. App. 1990). And, the four cases the plaintiffs cite in addition to Raasch are contrary to the majority of more recent cases addressing franchise relationships.

¶ 18. The most current case cited by plaintiffs, Miller v. McDonald's Corp., 945 P.2d 1107 (Or. Ct. App. 1997), does not persuade us that the requirement that a franchisee follow a detailed standards manual warrants finding a duty on the part of the franchisor because of its general right to control the daily operations of the franchisee. In Miller, the plaintiff sued after biting into a sapphire stone in her Big Mac. She had gone to the restaurant on the assumption that it was owned, controlled and managed by McDonalds. The court held that there was sufficient evidence to raise a jury issue on both actual agency and apparent agency theories. But Miller is distinguishable on its facts; the injury bore a direct relationship to how McDonald's instructed its franchisee to prepare food, and McDonald's regularly inspected the restaurant to ensure compliance with its product standards. Vicarious liability did not result from a general right of control but because "there is evidence that [McDonald's] had the right to control [its franchisee] in the precise part of its business that allegedly resulted in plaintiffs injuries." Id. at 1111.

¶ 19. In sum, the majority of cases decided since Raasch apply a narrower approach to whether a franchisor controls the daily operations of its franchisee to an extent sufficient to impose vicarious liability. Under the prevailing view "the most significant factor to consider is the degree of control that the franchisor maintains over the daily operations of the franchisee or more specifically, the "manner of performing the very work in the course of which the accident occurred." Hart v. Marriott Int'l, Inc., 758 N.Y.S.2d 435, 438 (2003) (quoting Andreula v. Steinway Baraga Food Corp., 668 N.Y.S.2d 891 (1997)). We agree with the analysis in these cases and conclude that, contrary to Raasch, in an action seeking to impose vicarious liability on a franchisor for the negligent actions of a franchisee, a franchisor's general right to control several aspects of a franchisee's operations is not enough. Rather, the decisive factor is whether the franchisor controls the daily operations of the franchisee such that it "exercises a considerable degree of control over the instrumentality at issue." Wu, 105 F. Supp. 2d at 87.

Arby's control of DRI

¶ 20. We now consider whether the facts of this case warrant imposing vicarious liability on Arby's for the alleged negligence of its franchisee, DRI. In this case, because plaintiffs' negligence claim is premised on Propp's failure to properly supervise Pierce, the issue of Arby's vicarious liability turns on whether it had the right to control DRI's personnel practices.

¶ 21. To ascertain the extent of control that Arby's exercised over DRI's day-to-day operations, we look first to the provisions of the license agreement. A license agreement is a contract, and as with all contracts, our task is to determine and give effect to the parties' intent. Farm Credit Servs. v. Wysocki, 2001 WI 51, ¶ 12, 243 Wis. 2d 305, 627 N.W.2d 444. If the language of the contract is unambiguous, we apply its plain meaning. Id. Only if we conclude that a contract provision is ambiguous do we resort to extrinsic evidence to determine its meaning. Id.

¶ 22. According to Section 11.1 of the agreement, DRI is an "independent businessman" and not Arby's employee, agent, joint venturer, partner or representative, and "[DRI] shall have the sole obligation and responsibility for the operation of the Licensed Business and the success thereof." In Section 4:1:1, DRI, as Arby's licensee, agrees to operate its restaurant "strictly in conformance with the Manual" provided by Arby's. DRI must also "[a]t all times comply with all federal, state, county, township and city laws and ordinances, including without limitation, workman's compensation laws, and all rules and regulations of any duly constituted authority, affecting or respecting the Licensed Business or the Licensed Premises." With respect to personnel and management, the agreement states:

During the term of this License, LICENSEE shall hire, train, maintain and properly supervise sufficient, qualified and courteous personnel for the efficient operation of the Licensed Business.
. . . [A]t least one full-time manager of the Licensed Business at any given time must have satisfactorily completed [Arby's Restaurant Management Training Seminar] program prior to exercising management authority in the Licensed Business, unless such manager shall have satisfactorily completed a comparable training program previously approved by ARBYS.

¶ 23. As is usual in franchise relationships, DRI must comply with Arby's uniformity and product quality standards, using only products and supplies that meet Arby's specifications. In order to monitor DRI's performance, Arby's reserves a right of inspection:

ARBY'S or its authorized representatives, at all reasonable times, shall have the right to inspect the Licensed Business, the equipment and operations therein, and to test all Licensed Products offered for sale and supplies used by LICENSEE, for the purpose of determining the quality and standards of such products and supplies, and shall have access to the Licensed Premises for this purpose.

¶ 24. Causes for termination of the agreement are set forth in Article 13:3:

At any time during the term of this License, the License shall terminate:
Upon LICENSEE'S failure to commence to cure within ten (10) days after notice by ARBY'S and to complete such cure to ARBY'S satisfaction within thirty (30) days after such notice: (a) if LICENSEE fails at any time to fully comply with any clause of this License or fails to operate the Licensed Business strictly in accordance with the then-current Manual; (b) if LICENSEE fails to submit any information when requested to do so or submits false or misleading information (this applies without limitation to the license application and monthly sales reports); (c) if LICENSEE duplicates all or portions of the ARBY'S system or know-how in any food service outlet not licensed hy ARBY'S; (d) if LICENSEE acts in any way that damages or reflects unfavorably upon LICENSEE'S business, the business of other ARBY'S licenses, or the ARBY'S system generally; (e) if LICENSEE fails to pay promptly any undisputed bills from suppliers; (f) if LICENSEE assigns or transfers or attempts to assign or transfer any interest in the Licensed Business without prior approval from ARBY'S ....

¶ 25. We conclude that the terms of the license agreement are clear and unambiguous. While the language describing DRI as "an independent businessman" does not shield Arby's from vicarious liability, Pamperin v. Trinity Memorial Hospital, 144 Wis. 2d 188, 423 N.W.2d 848 (1988) (independent contractor clause in contract not dispositive of parties' relationship), we do not read the agreement as giving Arby's authority to hire, fire, supervise or direct the supervision of DRI's employees.

¶ 26. The agreement expressly assigns responsibility for employees to DRI, who "shall hire, train, maintain and properly supervise sufficient, qualified and courteous personnel." Plaintiffs contend that this provision gives Arby's "the right to control personnel issues when those issues caused a problem with the operation of the restaurant or the quality of the product." But under Article 13, Arby's remedy for DRI's failure to comply with the agreement and/or OSM standards is limited to giving DRI thirty days to cure the problem and then terminating the franchise agreement if DRI does not rectify the situation within the deadline. Nothing in the agreement gives Arby's the right to supervise directly how DRI handles personnel issues.

¶ 27. Nor does the OSM indicate that Arby's retained the right to intervene in employee management. The OSM contains "helpful hints" and "guidelines" and "words of advice" for addressing problems and disciplining employees. "In order for a duty to arise, the control must consist of more than the mere making of suggestions or recommendations." Helmchen, 685 N.E.2d at 183. While some sections of the OSM, such as safety management, do not use conditional language, the fact remains that DRI, and not Arby's, had the discretion to set the terms and conditions of employment. Therefore, the operational standards in the OSM are not a sufficient basis for imposing vicarious liability on Arby's for DRI's negligence.

¶ 28. Further, we are not persuaded that Arby's right to inspect DRI's operations demonstrates either a right of control or actual control over DRI's supervision of its employees. In franchise relationships, a general right of inspection is insufficient to create vicarious liability. See Hayman v. Ramada Inn, Inc., 357 S.E.2d 394, 397 (N.C. Ct. App. 1987); Little, 455 N.W.2d at 392. Under the plain language of the licensing agreement, Arby's will inspect the premises "for the purpose of determining the quality and standards of. . . products and supplies." The inspection reports used by Arby's demonstrate that Arby's key areas of concern during inspections were product quality and customer service. The reports did not require Arby's to inquire into whether DRI's employees had criminal tendencies. The reference to employee and management training under the "Brand Management" section of Arby's inspection report cannot reasonably be read as conferring authority for Arby's to hire, fire or supervise DRI's employees.

¶ 29. Finally, with respect to whether Arby's exerted actual control over DRI in employment matters, we conclude that plaintiffs have not shown the existence of a genuine issue of material fact to preclude summary judgment on vicarious liability. Rasmussen testified that he did not personally work in the restaurant but hired managers to operate it. He also stated that Arby's required franchise managers to complete Arby's training. Propp testified that she managed the restaurant for DRI and created management procedures for hiring and supervising employees. A jury could not reasonably infer from these facts that Arby's controlled personnel management at DRI's franchise restaurant.

CONCLUSION

¶ 30. We conclude that the standard for imposing vicarious liability on a franchisor for the negligent acts of a franchisee requires that the franchisor have a right of control or actual control over the alleged negligent activity. Plaintiffs have failed to rebut Arby's prima facie case for summary judgment by showing a dispute of material fact regarding whether Arby's had the right to control or actually controlled personnel matters. Therefore Arby's is entitled to summary judgment on plaintiffs’ negligence claim based on vicarious liability claims. The vicarious liability issue is dispositive of plaintiffs1 claims against Arby's, and therefore we do not reach Arby's cross-appeal.

By the Court. — Orders affirmed.

LUNDSTEN, J.

¶ 31 (concurring). I agree with much of the analysis in the majority opinion, but write separately to address what I see as a problematic area of law.

¶ 32. In this case, Arby's did not even arguably have control over the DRI acts or omissions which plaintiffs contend were negligent. Arby's did not specify whether its franchisee, DRI, could hire work-release prisoners or specify how a threatening or possibly dangerous employee should be handled. As the majority states, "[n]othing in the agreement gives Arby's the right to directly supervise how DRI handles personnel issues." Majority at ¶ 26. And, plaintiffs proffered no evidence that Arby's in fact had or exercised such authority. Accordingly, I think it is a simple matter to conclude that Arby's had no liability in this case.

¶ 33. What I find troubling is the majority's unnecessary adoption of a test that purports to provide guidance as to when a franchisor may be held liable for the acts of a franchisee. The majority states: "[T]he decisive factor is whether the franchisor controls the daily operations of the franchisee such that it 'exercises a considerable degree of control over the instrumentality at issue.'" Majority at ¶ 19 (quoting Wendy Hong Wu v. Dunkin' Donuts, Inc., 105 F. Supp. 2d 83, 87 (E.D.N.Y. 2000)). Later, the majority states: "We con-elude that the standard for imposing vicarious liability on a franchisor for the negligent acts of a franchisee requires that the franchisor have a right of control or actual control over the alleged negligent activity." Majority at ¶ 30. But what does this mean?

¶ 34. If a franchisor exerts actual control over alleged negligent activity, it hardly seems necessary to apply a vicarious theory of liability. That leaves "a right of control. . . over the alleged negligent activity." Majority at ¶ 30. How does this apply in practice? For example, is a franchisor vicariously liable for a death resulting from food poisoning caused by a franchisee's failure to follow detailed cleanliness criteria imposed by the franchisor where the franchisor has the right to inspect to determine compliance and, if the criteria are not met, terminate the contract? Perhaps not, because the majority cites with approval cases that have declined to impose liability on a franchisor based on the franchisor's right to inspect, enforce standards, and terminate for noncompliance. Majority at ¶ 15. So what does that leave?

¶ 35. Apart from "apparent agency" cases (a theory that has no application here), when would a franchisor be vicariously liable for the negligent acts of a franchisee? This is not a question we need answer because this case can be decided on narrower grounds. What I find perplexing is that the majority does not rest its decision on narrower grounds and leave for another day an attempt at articulating a workable standard by which franchisors may be held vicariously liable for the acts of franchisees.

¶ 36. Accordingly, I do not join the majority decision, but I concur in the result.

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

       The court also concluded that the facts might support Avis's liability under a joint enterprise theory. Raasch v. Dulany, 27 F. Supp. 1015, 1019 (E.D. Wis. 1967).

        Drexel v. Union Prescription Ctr., Inc., 582 F.2d 781 (3rd Cir. 1978), Singleton v. Int'l Dairy Queen, Inc., 332 A.2d 160 (Del. Super. Ct. 1975), Billopszv. Magness Constr. Co., 391 A.2d 196 (Del. 1978), and Miller v. McDonald's Corp., 945 P.2d 1107 (Or. Ct. App. 1997). At least one other case, Perry v. Burger King Corp., 924 F. Supp. 548, 554 n.4 (S.D.N.Y. 1996), has distinguished Singleton on the ground that the injury caused when a young girl fell through a glass door to a restaurant was directly connected to the physical structure of the franchise building, an element controlled by the franchisor.

       Because we conclude that the licensing agreement is unambiguous, we do not address plaintiffs' arguments concerning evidence outside the four corners of the document. See Sambs v. City of Brookfield, 66 Wis. 2d 296, 317, 224 N.W.2d 582 (1975).


source: Caselaw Access Project

author: DYKMAN, J.

license: Public Domain

text:
    G & G Trucking, Inc., Petitioner-Appellant, v. Wisconsin Department of Revenue, Respondent-Respondent.
    Court of Appeals

      No. 02-2648.

      Submitted on briefs March 10, 2003.—

      Decided October 9, 2003.

    2003 WI App 228
    (Also reported in 672 N.W.2d 80.)

      On behalf of the petitioner-appellant, the cause was submitted on the briefs of Robert A. Schnur and Douglas A. Pessefall of Michael Best & Friedrich LLP of Milwaukee.
    On behalf of the respondent-respondent, the cause was submitted on the brief of F. Thomas Creeron, III, and Peggy A. Lautenschlager, attorney general.
    Before Deininger, PJ, Dykman, and Lundsten, JJ.

       Petition to review denied 2-24-04.

   DYKMAN, J.

¶ 1. G&G Trucking, Inc. (G&G) appeals from a judgment affirming a Wisconsin Tax Appeals Commission decision that G&G's aircraft were subject to use tax under Wis. Stat. § 77.53(1) (2001-02). G&G argues that because it leased the aircraft to two charter companies, it did not "use" the aircraft within the meaning of § 77.53(1). The commission concluded that G&G exerted sufficient right and power over the aircraft to constitute "use" under the statute. We agree and affirm.

BACKGROUND

¶ 2. 'The material facts are undisputed. G&G Trucking is a Wisconsin corporation, engaged in interstate trucking and delivery of metal products, machinery and other cargo. During the relevant time period, 1990 to 1997, G&G owned a total of four aircraft, but not more than two aircraft at the same time. G&G did not pay sales or use tax (or provide an exemption certificate) when it acquired the aircraft or when it purchased related maintenance services and supplies. Because it lacked both the facilities to store the aircraft and the employees to fly them, as well as the licenses and certifications required by law, G&G leased the aircraft to two charter companies, Wisconsin Aviation and Milwaukee General Aviation, Inc. Over time, Wisconsin Aviation leased all four aircraft; Milwaukee General leased one aircraft beginning in September 1996.

¶ 3. By leasing out its aircraft, G&G accomplished at least two objectives. First, it made a profit on the transaction. Second, G&G decreased its transportation costs when chartering aircraft.

¶ 4. G&G entered into oral leases with Wisconsin Aviation and Milwaukee General. Under the terms of the agreements, the charter companies had possession of the aircraft and were responsible for all insurance, registration, licensing, cleaning and maintenance, although Wisconsin Aviation could bill certain costs, such as maintenance, to G&G. In addition, the charter companies provided and paid the pilots, and were required to keep the aircraft in a safe and secure location. They had the sole responsibility for scheduling the use of the aircraft. In return, G&G received payments from Wisconsin Aviation and Milwaukee General based on the number of hours each aircraft was chartered. Any of the parties could terminate a lease agreement upon providing thirty-days' notice.

¶ 5. In general, a party who chartered an aircraft from Wisconsin Aviation paid an initial charter fee, a pilot fee and a per-hour fee, the latter including gasoline for the aircraft. In contrast, when G&G chartered aircraft, it paid no initial charter fee and paid Wisconsin Aviation a lower hourly rate. However, G&G did pay a pilot fee and the cost of the fuel for the flight. If one of its own aircraft was not available, G&G did not have "bumping rights" under the lease agreement; G&G had to either find alternative transportation or cancel the trip. Alternative transportation could include "trading hours" with the owner of other aircraft leased to Wisconsin Aviation. When trading hours, G&G paid the same lower hourly rate the owner of the aircraft paid when chartering its aircraft from Wisconsin Aviation. Wisconsin Aviation did not separately charge G&G for chartering aircraft but offset that amount against the monthly rental fee Wisconsin Aviation paid to G&G. During the period at issue, 1990 to 1997, G&G chartered its own aircraft for 10.8 percent to 20.5 percent of the total hours those aircraft were chartered each year.

¶ 6. The Wisconsin Department of Revenue issued a Notice of Field Audit Action on February 15, 1999, assessing G&G sales and use tax, plus interest, penalties and late fees of $404,017, for the period 1990 through 1997. G&G objected to the assessment and filed a petition for redetermination. When that was denied, G&G filed a petition for review with the commission.

¶ 7. The commission affirmed the assessment, concluding that G&G's purchase of the aircraft and related supplies and services was "more than 'solely for lease or rental,'" and therefore subject to the use tax. The commission's decision includes two opinions, one by Commissioner Don Millis and one by Commissioner Thomas Boykoff. The opinions use different reasoning, but both conclude that the use tax applied to G&G's aircraft.

¶ 8. The Millis opinion described the issue as not involving any tax exemption statutes but solely concerning whether "use," as defined by Wis. Stat. § 77.51(22)(a), included G&G's leasing of aircraft to the charter companies. Noting that "use" includes the exertion of right or power over tangible personal property, the Millis opinion concluded, based on the undisputed facts, that: "G&G had the right to use the aircraft at issue and, in fact, used them.... For G&G to be treated like any other charter user, the charter company would have to possess the absolute right to deny G&G access to G&G's aircraft for any reason whatsoever."

¶ 9. The Boykoff opinion similarly concluded that G&G's aircraft were subject to use tax, but first analyzed the issue in terms of whether G&G met the "solely for resale" exemption from use tax provided by Wis. Stat. § 77.51(14). The term "resale" also encompasses lease and rental. Section 77.51(14)0’); Wis. Admin. Code § Tax 11.29(2)(a). Because G&G's reason for purchasing the aircraft was twofold (to lease them to Wisconsin Aviation and to save money on transportation expenses), the Boykoff opinion rejected G&G's contention that the purchases were "solely for lease or rental." Then, considering whether G&G had "used" its aircraft in a manner that triggered the use tax, the Boykoff opinion concluded that the facts demonstrated that G&G received preferential treatment in the chartering of its aircraft from Wisconsin Aviation. Therefore, while incidental or de minimus use would not subject a purchase to the use tax, in this case, G&G's chartering of its own aircraft, under advantageous terms, "exceeded any reasonable incidental or de minimus use standard," and constituted "use" of the aircraft for purposes of Wis. Stat. § 77.53(1).

¶ 10. G&G petitioned the circuit court for review of the commission's decision upholding the tax assessment, and the circuit court affirmed the commission. G&G appeals.

DISCUSSION

¶ 11. On appeal, we review the commission's decision and not the circuit court's. Hafner v. DOR, 2000 WI App 216, ¶ 3, 239 Wis. 2d 218, 619 N.W.2d 300. The commission's findings of fact are not in dispute. The application of a statute to undisputed facts presents a question of law and we are not bound by an administrative agency's legal conclusions. Anderson v. DOR, 169 Wis. 2d 255, 262, 484 N.W.2d 914 (1992). However, we generally accord one of three levels of deference to an agency's legal conclusions: great weight, due weight, or de novo review. UFE, Inc. v. LIRC, 201 Wis. 2d 274, 284, 548 N.W.2d 57 (1996).

¶ 12. The parties disagree regarding the level of review to apply to the commission's interpretation of Wis. Stat. §§ 77.53 and 77.51(22)(a). Because we would affirm the commission's decision under any standard of review, we need not decide the appropriate level of deference.

¶ 13. We now consider whether G&G's aircraft and purchase of related services and supplies are subject to use tax. Wisconsin Stat. § 77.53(1) provides in part:

[A]n excise tax is levied and imposed ... on the storage, use or other consumption in this state of tangible personal property purchased from any retailer, at the rate of 5% of the sales price of that property; and on the storage, use or other consumption of tangible personal property manufactured, processed or otherwise altered, in or outside this state, by the person who stores, uses or consumes it, from material purchased from any retailer, at the rate of 5% of the sales price of that material.

As defined in Wis. Stat. § 77.51(22)(a):

"Use" includes the exercise of any right or power over tangible personal property. . . incident to the ownership, possession or enjoyment of the property ... including installation or affixation to real property and including the possession of, or the exercise of any right or power over tangible personal property by a lessee under a lease....

¶ 14. Pursuant to Wis. Stat. § 77.51(14) and Wis. Admin. Code § Tax 11.29(2), property used "solely for lease and rental" is exempt from the use tax. However, G&G states that it is not relying on any statutory exemption in its challenge of the tax assessment. Accordingly, we confine our discussion to whether, as defined by § 77.51(22)(a), G&G "used" its aircraft in such a manner that it is liable for use tax under Wis. Stat. § 77.53(1). Were this a question of whether G&G's use fell under one of the exemptions to the use tax, we would resolve any ambiguity against the exemption. La Crosse Queen, Inc. v. DOR, 208 Wis. 2d 439, 446, 561 N.W.2d 686 (1997) (tax exemption statutes are to be strictly construed). However, because this issue involves the imposition of a tax, any ambiguity in the statute is to be construed in favor of the taxpayer. DOR v. Horne Directory, Inc., 105 Wis. 2d 52, 57, 312 N.W.2d 820 (1981).

¶ 15. Two criteria determine whether a taxpayer "uses" tangible personal property for tax purposes. First, the taxpayer must "own, possess or enjoy the property in Wisconsin." Horne, 105 Wis. 2d at 61. Second, the taxpayer must "exercise some right or power over the tangible personal property in Wisconsin. " Id.-, Wis. Stat. § 77.51(22)(a). G&G's ownership of the aircraft leased to the charter companies is undisputed. Thus, imposition of the use tax turns on whether, given the terms of the lease and G&G's chartering of its own aircraft, the commission properly concluded that G&G exerted a "right or power" over the aircraft, thereby meeting the second prong of the "use" definition.

¶ 16. The department argues that by retaining rights associated with ownership, G&G "used" the aircraft it leased to Wisconsin Aviation. Specifically, the department points to the lease provisions under which G&G paid no initial charter fee, paid an hourly rate at or near cost, as opposed to what Wisconsin Aviation would charge a third party, and had the right to trade hours with owners of other leased aircraft, thereby paying a discounted hourly rate even when its own aircraft were not available. Given these circumstances, the department asserts that G&G exercised the requisite right or power over the aircraft and is liable for use tax.

¶ 17. G&G denies that the terms of the leases allowed it a right or power over the aircraft, contending that its use of the aircraft is comparable to that of a business person flying on a commercial airline, and thus the frequency of the charters is not relevant. G&G also notes that it did not have an "unfettered" right to charter aircraft from Wisconsin Aviation because the company could have refused to charter to G&G. Finally, G&G argues that the second criteria for use, the exercise of a right or power over the property, is not present when it receives an economic benefit, in the form of its favorable lease/charter arrangement with Wisconsin Aviation, but does not physically control or possess the aircraft. These arguments are unavailing.

¶ 18. G&G is correct that, by itself, leasing its aircraft to the charter companies, does not expose it to use tax liability. The purchase of property "solely for lease or rental" is exempted from the use tax. Wis. Admin. Code § Tax 11.29(2). Further, we agree that a taxpayer's purpose in entering into a transaction, viewed in isolation from other factors, is not dispositive of whether the property is subject to use tax. As stated in DOR v. Sterling Custom Homes, 91 Wis. 2d 675, 679, 283 N.W.2d 573 (1979), "it is the substance and realities of a taxpayer's activities that are determinative of the Department's power to tax." Thus, whether or not Wisconsin Aviation profited on the charters to G&G is not relevant because the focus of our inquiry is G&G's right or control over the aircraft. Here, the substance and realities of the lease agreements contradict G&G's claims that chartering its aircraft from Wisconsin Aviation is comparable to a business person purchasing a flight on a commercial airliner. While in both cases the passenger receives a transportation service, G&G receives benefits, in the form of a special hourly rate and the right to trade hours, that are a direct product of its ownership of the aircraft. In contrast, the ordinary passenger on a commercial flight has no such leverage to obtain a reduced fare.

¶ 19. Second, although the lease agreements did not provide G&G with an absolute right to charter its own aircraft at a reduced rate, the agreement allowed G&G to trade hours with another owner and still pay a lower hourly rate and no initial charter fee. G&G chartered aircraft from Wisconsin Aviation for a substantial number of flight hours over the years. While the lease did not require Wisconsin Aviation to charter aircraft to G&G, and did not confer "bumping rights" that would ensure G&G's access to its aircraft, as discussed below, G&G regularly availed itself of its chartering rights under the lease.

¶ 20. Nor do we accept G&G's contention that, under Horne, 105 Wis. 2d 52, exerting a right or control over property requires that the taxpayer physically possess or control the property for there to be a taxable use as defined by Wis. Stat. § 77.51(22)(a). In Horne, the taxpayer, Horne, produced telephone directories that were printed out-of-state and then mailed or shipped by the printer directly to Wisconsin telephone subscribers. Id. at 53-54. Apart from a few directories the printer sent to Horne, the latter never had physical possession of the directories in Wisconsin. Id. The supreme court concluded that Horne could not be assessed use tax on the directories. Id. at 62. Applying the two-part statutory definition of use, the court first considered whether Horne owned, possessed, or enjoyed the directories. Id. at 61. It concluded that neither ownership nor constructive possession transferred to Horne because by law, the shippers were deemed the printer's agents and thus ownership remained with the printer until delivery of the directories to the telephone subscribers. Id. at 58-59. The court then defined "enjoyment" as requiring the realization of something beyond the economic benefit of completing the transaction such that Horne had "the benefit of applying the tangible property to its normal use," which in the case of telephone directories, was to obtain names, addresses and phone numbers. Id. at 60. In light of the function of telephone directories, the court concluded that without actual or constructive possession, Horne could not "enjoy" the directories. Id. at 62. Although the directories Were not taxable because Horne did not own, possess or enjoy them, the court also addressed the second component of "use," whether Horne exercised a right or power over the tangible personal property. Id. at 61. The court determined that Horne's actions did not meet that standard: "The only 'right or power' exercised over the directories in this state was exercised by the printer, who had possession and control over them at all times through its delivering agents, and by their ultimate recipients, the subscribers." Id. at 60.

¶ 21. To support its argument that there is no taxable use without physical possession and control, G&G points to the courts statement in Horne that use and enjoyment were not shown when "[t]he only benefit which inured to Horne was an economic one which flowed from the fulfillment of its contractual obligations with the telephone companies," as well as the court's conclusion that the printer was the only party to exercise a right or power over the directories because it had possession and control over them until possession transferred to the subscribers. Id. at 61. Based on these statements, G&G reads Horne as mandating physical possession and hands-on control of property in Wisconsin in order to satisfy the "right and power" element of the statutory definition of use.

¶ 22. We do not read Horne as holding that, for use tax purposes, a taxpayer does not assert "any right or power" over tangible personal property when the taxpayer's benefit from the property is solely economic in nature. Whether a taxpayer uses property is a two-part inquiry. In Horne, the court rejected the department's argument that an economic benefit was sufficient to establish the "ownership, possession or enjoyment" prong of the statutory definition. Id. Although the court stated that "it is the subscriber, not Horne, who has the use and enjoyment of the directories," this sentence is not part of the court's discussion of the power and control requirement, and cannot be read as describing the boundaries of power and control. Id. Here, G&G's ownership of the aircraft is not at issue and we are concerned only with whether G&G exercised a right or power over its property after leasing it to the charter companies. Thus we are presented with an issue not discussed in Horne: whether the broad language in the use tax statute, "the exercise oí any right or power," encompasses financial or economic control as well as physical control. We conclude that it does.

¶ 23. First, as noted, the plain language of Wis. Stat. § 77.51(22)(a) does not require that a party's right or power over the property be physical in nature. Once it is determined that a taxpayer owns, possesses or enjoys the property, if the taxpayer also asserts any significant right or power over it, he or she has then "used" the property for tax purposes. And, although Horne discusses the "right or power" prong of "use" in terms of whether the printer or Horne had possession and control of the telephone directories, that case is factually distinguishable. Horne's economic benefit was the completion of its contract to produce directories for the telephone companies. G&G, however, under its lease agreements, could charter its own aircraft at rates not available to third parties (or trade hours with another aircraft owner for the same net effect), thereby obtaining favorable treatment in addition to the benefit of leasing its aircraft to Wisconsin Aviation. Because G&G's ownership of the aircraft was the sole factor that allowed it to receive preferential charter rates, it exerted power or control over the aircraft every time it chartered them from Wisconsin Aviation or traded hours.

¶ 24. In sum, G&G's interpretation of Wis. Stat. § 77.51(22)(a) as precluding a taxable use unless there is physical control or possession of the property is neither reasonable nor a valid extension of the court's holding in Horne. Accordingly, we conclude that G&G's charters from Wisconsin Aviation constituted a taxable "use" for purposes of Wis. Stat. § 77.53(1), and that this use was not incidental or de minimus, as G&G chartered its own aircraft at preferential rates for as much as twenty percent of the annual charter hours recorded by those aircraft. Whether we defer to the commissioner or not, we conclude that the commission properly upheld the departments assessment of use tax against G&G.

By the Court. — Judgment affirmed.

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

       G&G never chartered its aircraft from Milwaukee General Aviation.

       Wisconsin Admin. Code § Tax 11.29(2)(a) provides: "A lessor's purchase of tangible personal property to be used solely for lease or rental shall be exempt as a purchase for resale."

       In his opinion, Commissioner Boykoff discussed whether G&G's use of its aircraft qualified for this exemption, and concluded that it did not because, by purchasing the aircraft in part to reduce its transportation expenses, G&G's acquisition was not "solely for lease or rental." In contrast, Commissioner Millis concluded that "[t]he issue in this case is whether G&G used the aircraft at issue. There is no exemption statute involved."

       An example reveals the results that would follow if we adopted G&G's argument that only physical control of the taxpayer's property can trigger the use tax. Under G&G's reasoning, it could have chartered its aircraft from Wisconsin Aviation at a rate of $1.00 per hour, and still not have exercised any power or control over the property because the benefit was solely economic.


author: FINE, J.

text:
    Julie L. Weber and Joshua Weber, Plaintiffs-Respondents, WEA Insurance Corporation, Carefirst of Maryland, Inc., d/b/a Carefirst Blue Cross Blue Shield, and Wisconsin Physicians Insurance Corporation, Involuntary-Plaintiffs, v. Angelene White and Farmers Insurance Exchange, Defendants-Appellants.
    Court of Appeals

      No. 03-0471.

      Submitted on briefs September 2, 2003.—

      Decided October 14, 2003.

    2003 WI App 240
    (Also reported in 672 N.W.2d 151.)

      On behalf of the defendants-appellants, the cause was submitted on the briefs of Michael R. Vescio of O'Hagan, Smith & Amundsen, LLC, Greenfield.
    On behalf of the plaintiff-respondent, Julie L. Weber, the cause was submitted on the brief of Thomas W. Kyle and Jonathan R Groth of Pitman, Kyle & Sicula, S.C., Milwaukee.
    Before Wedemeyer, PJ, Fine and Schudson, JJ.

       Petition to review granted 12-16-03.

   FINE, J.

¶ 1. Angelene White and her insurance company, Farmers Insurance Exchange, appeal from a judgment entered on a jury verdict awarding Julie L. and Joshua Weber $43,242.34. White and Farmers Insurance argue that the trial court erred when it denied their motion to vacate the jury's verdict of $5,000 for future health-care expenses because it was not supported by credible evidence. We agree and reverse in part.

I — I

¶ 2. This case began when Angelene White hit the back of Julie L. Weber's car at the intersection of West Brown Deer Road and North 76th Street in the City of Milwaukee. Weber was taken to Elmbrook Memorial Hospital, where she was diagnosed with a whiplash injury. To treat her injury, Weber underwent physical therapy. When she did not make a full recovery, she began to see George J. Hanacik, Jr., D.C., for chiropractic treatment.

¶ 3. Weber and her husband sued White and Farmers Insurance Exchange. They alleged that White negligently hit Mrs. Weber's car and that, as a result, Mrs. Weber suffered permanent injuries.

¶ 4. The Webers offered to settle the case for $35,000, pursuant to Wis. Stat. Rule 807.01. White and Farmers Insurance countered with an offer of judgment for $20,000 under the rule. The Webers rejected White's and Farmers Insurance's offer and took the case to trial. On the morning of the trial, the parties stipulated that White was "100% negligent in causing the accident" and that Mrs. Weber was not "causally negligent to any degree."

¶ 5. At trial, Dr. Hanacik testified about Mrs. Weber's health-care expenses. According to Dr. Ha-nacik, Mrs. Weber had a permanent "shoulder impingement" as a result of the accident. He testified that he treated her shoulder on an "as-needed basis" and that she would need future health care to treat the injury:

Future care for her I would probably say would probably be around 20 to 25 visits a year, probably, on an average. I mean, if it's better, it's better. If it's worse, it's worse, but when I do it on an as-needed basis, I mean, she comes in when she's got a problem.

On cross-examination, however, Dr. Hanacik admitted that he could not give an opinion to a reasonable degree of chiropractic certainty on the amount of future therapy that Mrs. Weber would need to treat her shoulder injury:

Q. So you are not saying to a reasonable degree of chiropractic certainty she is going to be in 20 to 25 times a year for the next 35 years?
A. No, I'm not. I'm just saying that she is going to be there if she's got pain.
You can't really give us any ballpark figure as to how many times you'll need to see her next year? «Q
A. No, I can't.

Dr. Hanacik was the only expert witness to testify on the issue of future health-care expenses.

¶ 6. A jury awarded the Webers $5,000 for future health-care expenses. The parties stipulated that the Webers were owed a set amount for past health-care expenses. The jury also awarded the Webers damages for: past health-care expenses that were in dispute; past pain, suffering, and disability; and future pain, suffering, and disability. The total verdict was $36,278.50.

¶ 7. White and Farmers Insurance filed a motion after the verdict to vacate the jury's award of future health-care expenses. Citing Ianni v. Grain Dealers Mutual Insurance Co., 42 Wis. 2d 354, 166 N.W.2d 148 (1969), they claimed that the jury could not rely on Dr. Hanacik's testimony to determine an amount of future health-care expenses because his testimony on cross-examination "directly and completely contradicted" his testimony on direct-examination.

¶ 8. The Webers argued that Dr. Hanacik's testimony on cross-examination was not contradictory because defense counsel elicited from Dr. Hanacik denials regarding treatment at specific times, while Dr. Hanacik's testimony on direct-examination addressed the average amount of treatment Mrs. Weber would need. They also contended that if the testimony was contradictory, the verdict should stand because the fact-finder resolves conflicts in the evidence.

¶ 9. The trial court denied the defendants' motion to vacate the future-health-care-costs portion of the verdict:

I take a broader view in the sense that the jury — it is a credibility and weight issue .... [I]t is not just the cross-examination but it is the totality of the testimony given by the doctor as to her condition.
I think there is sufficient information for which the jury to make their decision.

It entered judgment in the amount of $36,278.50 and awarded the Webers double costs and interest pursuant to Wis. Stat. Rule 807.01. The Webers' total recovery was $43,242.34.

¶ 10. We will sustain a jury verdict "if there is any credible evidence, under any reasonable view, that leads to an inference supporting the jury's finding." Morden v. Continental AG, 2000 WI 51, ¶ 38, 235 Wis. 2d 325, 351, 611 N.W.2d 659, 672. When the evidence gives rise to more than one reasonable inference, we must accept the inference reached by the jury, " 'even though [the evidence] be contradicted and the contradictory evidence be stronger and more convincing.'" Id., 2000 WI 51, ¶ 39, 235 Wis. 2d at 352, 611 N.W.2d at 672 (quoted source omitted, alteration in original).

¶ 11. In this case, the standard of review is even more stringent because the trial court approved the jury's award of future health-care expenses when it denied the motion after the verdict. See Kuklinski v. Rodriguez, 203 Wis. 2d 324, 331, 552 N.W.2d 869, 872 (Ct. App. 1996). Thus, we will not disturb the jury's verdict unless "there is such a complete failure of proof that the verdict must be based on speculation." Coryell v. Conn, 88 Wis. 2d 310, 315, 276 N.W.2d 723, 726 (1979).

¶ 12. On appeal, White and Farmers Insurance renew their argument that the jury's verdict on future health-care expenses was not supported by any credible evidence because Dr. Hanacik's testimony was fatally contradictory. They point out that: (1) on cross-examination Dr. Hanacik retracted his statement that Mrs. Weber would need twenty to twenty-five visits per year; and (2) Dr. Hanacik admitted on cross-examination that he could not give any "ballpark figures" on the amount of treatment Mrs. Weber would need at specific times in the future. Thus, they claim that the jury's verdict on future health-care expenses was based on speculation. We agree.

¶ 13. Wisconsin uses a two-part test to analyze a jury's award of future health-care expenses: (1) there must be expert testimony of a permanent injury that will require treatment; and (2) an expert must establish the cost of the treatment. Bleyer v. Gross, 19 Wis. 2d 305, 311, 120 N.W.2d 156, 159-160 (1963). The plaintiff must demonstrate that the anticipated costs are reasonably certain to occur. See Brantner v. Jenson, 121 Wis. 2d 658, 663-664, 360 N.W.2d 529, 532 (1985) ("[R]ecovery may be had for reasonably certain injurious consequences of the tortfeasor's negligent conduct, not for merely possible injurious consequences.").

"Where a party relies on the testimony of a single witness to prove a given issue, and the testimony of such witness is contradictory and conflicting with no explanation of the contradiction, and no other fact or circumstance in the case tends to show which version of the evidence is true, no case is made."

Ianni, 42 Wis. 2d at 360, 166 N.W.2d at 151 (quoted source omitted).

¶ 14. In this case, there was no evidence from which the jury could infer that Mrs. Weber's future health-care expenses were reasonably certain to occur because Dr. Hanacik's testimony was fatally contradictory. As we have seen, he testified on direct examination that "on average" Mrs. Weber would need twenty to twenty-five visits per year:

Q. Can you give us any idea of future care figures?
A. Future care for her I would probably say would probably be around 20 to 25 visits a year, probably, on an average. I mean, if it's better, it's better. If it's worse, it's worse, but when I do it on an as-needed basis, I mean, she comes in when she's got a problem.
Q. You actually hope she doesn't come in to see you?
A. Exactly. We try to get the patient better, try to do the best we can for the patient.
Q. Typical visit is $70?
A. Typical visit is $60.
Q. $60, I'm sorry. Doctor, did you render all the opinions you gave today to a reasonable degree of chiropractic certainty?
A. Yes, I have.

Dr. Hanacik directly contradicted this testimony on cross-examination when he admitted that he could not "say[ ] to a reasonable degree of chiropractic certainty [that Mrs. Weber] is going to be in 20 to 25 times a year for the next 35 years":

Q. My understanding is you've rendered the opinion to a reasonable degree of chiropractic certainty that she is going to come in 20 to 25 times a year for at least the next 35 years?
A. That is an example of what we've seen this year. That does not mean — I mean, next year I may see her only three times. It depends on what is happening with her.
Q. So you are not saying to a reasonable degree of chiropractic certainty she is going to be in 20 to 25 times a year for the next 35 years?
A. No, I'm not. I'm just saying that she is going to be there if she's got pain.
Q. You can't really give us any ballpark figure as to how many times you'll need to see her next year?
A. No, I can't.
Q. Or the year after that?
A. No, I can't.
Q. Or 35 years from now?
A. No.

¶ 15. Dr. Hanacik's express concession that he could not give an opinion to a reasonable degree of chiropractic certainty on Mrs. Weber's future healthcare expenses negated his earlier testimony where he purported to give such an estimate. See Casimere v. Herman, 28 Wis. 2d 437, 445-446, 137 N.W.2d 73, 77 (1965) (expert must testify to a reasonable degree of professional certainty). The jury's verdict attempting to divine the costs of future therapy was thus based on nothing but speculation, and the $5,000 award must be vacated. See Merco Distrib. Corp. v. Commercial Police Alarm Co., 84 Wis. 2d 455, 461, 267 N.W.2d 652, 655 (1978) ("it is impossible to base a judgment on 'conjecture, unproved assumptions, or mere possibilities'") (quoted source omitted).

¶ 16. We reverse the portion of the verdict awarding the plaintiffs $5,000 for future health-care expenses as well as that portion of the judgment awarding to the plaintiffs double costs and interest under Wis. Stat. Rule 807.01, and remand the matter to the trial court with instructions to enter a judgment in accordance with this decision.

By the Court. — Judgment reversed in part and cause remanded with directions.

       Wisconsin Stat. Rule 807.01 provides, as relevant:
      Settlement offers. (1) After issue is joined but at least 20 days before the trial, the defendant may serve upon the plaintiff a written offer to allow judgment to be taken against the defendant for the sum, or property, or to the effect therein specified, with costs. If the plaintiff accepts the offer and serves notice thereof in writing, before the trial and within 10 days after receipt of the offer, the plaintiff may file the offer, with proof of service of the notice of acceptance, and the clerk must thereupon enter judgment accordingly. If notice of acceptance is not given, the offer cannot be given as evidence nor mentioned on the trial. If the offer of judgment is not accepted and the plaintiff fails to recover a more favorable judgment, the plaintiff shall not recover costs but defendant shall recover costs to be computed on the demand of the complaint.
      (3) After the issue is joined but at least 20 days before trial, the plaintiff may serve upon the defendant a written offer of settlement for the sum, or property, or to the effect therein specified, with costs. If the defendant accepts the offer and serves notice thereof in writing, before trial and within 10 days after receipt of the offer, the defendant may file the offer, with proof of service of the notice of acceptance, with the clerk of court. If notice of acceptance is not given, the offer cannot be given as evidence nor mentioned on the trial. If the offer of settlement is not accepted and the plaintiff recovers a more favorable judgment, the plaintiff shall recover double the amount of the taxable costs.
      (4) If there is an offer of settlement by a party under this section which is not accepted and the party recovers a judgment which is greater than or equal to the amount specified in the offer of settlement, the party is entitled to interest at the annual rate of 12% on the amount recovered from the date of the offer of settlement until the amount is paid. Interest under this section is in lieu of interest computed under ss. 814.04 (4) and 815.05 (8).

       The parties do not attempt to draw a distinction between a reasonable degree of professional certainty on the one hand, and a reasonable degree of professional probability on the other — Casimere v. Herman, 28 Wis. 2d 437, 445-446, 137 N.W.2d 73, 77 (1965), uses the phrases as apparent synonyms. See also Hennekens v. Hoerl, 160 Wis. 2d 144, 166, 465 N.W.2d 812, 821 (1991) (recognizing that the phrases can be used interchangeably).


author: SCHUDSON, J.

text:
    William J. Steele, Jr., Plaintiff-Appellant, v. Pacesetter Motor Cars, Inc., Defendant-Respondent.
    Court of Appeals

      No. 03-0640.

      Submitted on briefs September 2, 2003. —

      Decided October 14, 2003.

    2003 WI App 242
    (Also reported in 672 N.W.2d 141.)

      On behalf of the plaintiff-appellant, the cause was submitted on the briefs of Debra A. Slater of Weiss Berzowski Brady, LLP, of Milwaukee.

      On behalf of the defendant-respondent, the cause was submitted on the brief of Kathryn A. Keppel of Gimbel, Reilly, Guerin & Brown, of Milwaukee.
    Before Fine, Schudson and Curley, JJ.
   SCHUDSON, J.

¶ 1. William J. Steele, Jr., appeals from the judgment, following a two-day bench trial, awarding him damages of $1972 for Pacesetter Motor Cars, Inc.'s breach of a service contract to repair, restore and refurbish Steele's car. He argues that the trial court made several errors leading it to deny him the $14,281.98 he claimed. We conclude that the trial court erred, as a matter of law, in ruling: (1) that Steele, who had repeatedly taken his car back to Pacesetter for it to complete the restoration and repair work for which he and Pacesetter had contracted, was precluded from recovering amounts he paid for repair services rendered by Uptown Motorcars, Inc., to which he subsequently brought his car, because he had not first given Pacesetter one more opportunity to fix it; and (2) that Allis Machine, the subcontractor to which Uptown sent Steele's engine (and to which Pacesetter, coincidentally, had subcontracted some of its work on the car), not Pacesetter, was the party potentially liable for Steele's additional repair costs. Accordingly, we reverse and remand for the trial court's consideration of the evidence under the correct legal standards.

I. BACKGROUND

¶ 2. In 1989, Steele bought a 1963 Chevrolet Impala with the intention of restoring it to its original condition. After doing much of the disassembling work himself, Steele, in 1996, met Patrick Murray, an instructor in the automotive program at Waukesha County Technical College, who had employment experience with General Motors and at a local Chevrolet dealership. Murray expressed interest in restoring the engine; he and Steele contracted for Murray's company, Pacesetter, to do the work, initially estimated at $3,343.84.

¶ 3. From July 1996 through May 1999, Pacesetter worked on the engine and other aspects of the car's restoration. Pacesetter charged Steele more than $21,000 for the work, almost all of which he paid. Although Steele felt some frustration as the costs mounted and more and more time passed, he concluded that it would be best to allow Pacesetter to complete the work. Upon "completion," however, the troubles began.

¶ 4. When Steele picked up the car from Pacesetter in May 1999, the engine backfired each time it was turned off. Steele complained, and Murray instructed him on how to turn off the engine to prevent backfiring. While deeming such special instructions "ridiculous," Steele, anxious to finally drive the car home, left without insisting on further repair. As Steele and his son drove home, however, they noticed that the car was not operating well and that the engine was unusually loud. And when they parked at home, they soon saw oil on the driveway, apparently leaking from the engine. They immediately returned the car to Pacesetter.

¶ 5. Pacesetter took the car back and continued working on it for two weeks, solving some problems, charging for some additional services and not charging for others. Steele remained dissatisfied, however, particularly with what Murray explained would be some unavoidable oil leakage. And, when Steele then attempted to drive the car, the engine would not start. Murray opened the hood, took off the air cleaners, and attempted to start the car, only to see flames shooting from the carburetor and singeing the hood insulation. Steele refused to accept the car.

¶ 6. Murray then sent the car to a carburetor shop and, a few weeks later, advised Steele that it was ready. On delivery, however, Steele still was not pleased with its condition and performance. So when he took the car to Uptown Motorcars for realignment, he also asked that Uptown take "a quick look at the engine because it still seemed to be running very rough." Steele paid Uptown $993.55 for its services, almost all of which related to alleged adjustments to and corrections of Pacesetter's work.

¶ 7. But Steele, still not satisfied with the way the car was running, took it to another Uptown dealership for additional mechanical and body work. From July 1999 through February or March 2000, Uptown then performed extensive work, charging Steele $4,710.82 for body work to "redo previous work done by another shop best as possible," and $8,577.61 to fix the engine. To accomplish that engine work, Uptown sent the engine to Allis Machine, a company that routinely performed engine work on a subcontract basis, and coincidentally, the very company to which Pacesetter had sent the engine for some of the earlier engine restoration.

¶ 8. Having been informed by Uptown's mechanic and body shop manager that Pacesetter's work was deficient, and that it led to the need for most of the subsequent services, Steele sued Pacesetter alleging violation of Wis. Admin. Code § ATCP 132, governing automobile repair practices, and breach of contract. Denying Steele's allegations, Pacesetter asserted that Allis Machine was responsible for the engine problems. Moreover, Pacesetter maintained that Steele should have given it another chance to address the problems so that it could have returned the engine to Allis Machine for repairs. Pacesetter also contended that Steele's son's secret driving of the car had caused some of the problems.

¶ 9. Following a two-day bench trial, the court concluded that Pacesetter had not violated the administrative code, and had "performed all of its services . . . relative to the engine, clutch, power train ... in a good and workmanlike manner to the extent allowed by Steele." The trial court also found, however, that some of Pacesetter's work "with respect to the reassembling the vehicle, specifically aligning parts and the trim and carpet on the interior were not performed in a proper and workmanlike manner." For that, the court awarded Steele $1972. On appeal, Steele does not challenge the court's conclusion under the administrative code. He does, however, challenge the trial court's findings and conclusion under his breach-of-contract claim.

II. DISCUSSION

¶ 10. We will not reverse factual findings made by a trial court unless they are clearly erroneous. See Wis. Stat. § 805.17(2) (2001-02); Benn v. Benn, 230 Wis. 2d 301, 307, 602 N.W.2d 65 (Ct. App. 1999). However, whether the facts found by the trial court constitute a breach of contract is a legal issue we review de novo. See Edwards v. Petrone, 160 Wis. 2d 255, 258, 465 N.W.2d 847 (Ct. App. 1990). In evaluating a breach of contract claim, a court must determine whether a valid contract exists, whether a party has violated its terms, and whether any such violation is material such that it has resulted in damages. See Management Computer Servs., Inc. v. Hawkins, Ash, Baptie Co., 206 Wis. 2d 158, 178-83, 557 N.W.2d 67 (1996).

¶ 11. "A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty. Restatement (Second) of Contracts 1 (1981). Moreover, and of particular relevance to this case:

Non-performance is not a breach unless performance is due .... When performance is due, however, anything short of full performance is a breach, even if the party who does not fully perform was not at fault and even if the defect in his [or her] performance was not substantial .... Non-performance includes defective performance as well as an absence of performance.

Id. at § 235 cmt. b.

A. Was Steele Required to Return the Car to Pacesetter Again?

¶ 12. Steele first argues that the trial court erred in concluding that his failure to afford Pacesetter one more chance to fix the car precluded any additional recovery. Steele is correct.

¶ 13. At trial, Murray testified, "I believe it was Mr. Steele's responsibility to come back to me if he felt that I did something wrong with that engine and the engine needed attention," and in closing argument, Pacesetter's counsel emphasized this theory. The trial court agreed. While expressing some sympathy for Steele's circumstances, the court concluded:

Seems to me that if Mr. Steele had brought the vehicle back to Mr. Murray and given him an opportunity to figure out why the engine wasn't running properly, . . . [i]t would have gone back to Allis [Motors] or some other engine rebuilder to discover what Uptown was ultimately able to force Allis to discover ....
Well, Mr. Murray didn't get the benefit of making Allis do it over. But now he is supposed to pay the penalty for Allis doing the job right they [sic] should have done right the very first time Mr. Murray sent the vehicle there. I don't see how that can be Mr. Murray's fault, when he isn't given an opportunity to send it back.
Do I fault Mr. Steele for that? Not entirely. Because I guess at that point, given how long Mr. Murray had had the car, ... it's certainly understandable [that] Mr. Steele is frustrated and wants his car .... But I don't think it means Mr. Murray doesn't get the benefit of trying to fix what Allis did wrong. And Mr. Murray was not given that opportunity.

¶ 14. Whether the contract required Steele to return to Pacesetter one more time in order to recover the costs of subsequent repairs under his breach-of-contract claim is a legal issue we review de novo. See Management Computer Servs., Inc., 206 Wis. 2d at 178-83. Under the facts and circumstances of this case, we conclude that Steele had no obligation to go back to Pacesetter one more time.

¶ 15. The trial court found that a contract existed between Pacesetter and Steele. Specifically, with respect to the engine, the court found that, in October 1996, the parties entered into an agreement "whereby for an estimated price, Pacesetter would construct a 409 cubic inch engine for the Impala from parts supplied by Steele and additional parts to be purchased by Steele, at his cost, for Pacesetter." The estimate was reduced to writing in a document specifying that "[t]he engine would be fully blueprinted as part of the assembly process to ensure [Steele] of many trouble free miles." (Emphasis added.) Neither that document nor any trial testimony suggested that Steele was required to give Pacesetter an opportunity to cure any defect in its workmanship. Consequently, the trial court erred by implicitly reading such a requirement into the contract.

¶ 16. On appeal, the parties debate whether, regardless of their contract, Steele, in order to preserve his potential claim, had a duty to notify Pacesetter of his dissatisfaction. They have not, however, provided any authority addressing that exact issue and we have found none. The parties, citing Dittman v. Nagel, 43 Wis. 2d 155, 161, 168 N.W.2d 190 (1969) (Uniform-Commercial-Code principles regarding express warranties of quality involved in the sale of goods may be used to analyze warranties involved in sale of realty), have directed our attention to notice principles under the Uniform Commercial Code, from which we do gain guidance.

¶ 17. Under the UCC, the supreme court concluded, notice "need merely be sufficient to let the seller know that the transaction is still troublesome and must be watched." Paulson v. Olson Implement Co., 107 Wis. 2d 510, 523, 319 N.W.2d 855 (1982) (internal quotation marks and quoted source omitted). Moreover, the notice must be sufficient to enable the seller to attempt to repair the defect. Id. at 525-26. Without defining exactly where the line would be drawn under other circumstances, here, unquestionably, Pacesetter received notice that the car's engine was "still troublesome" and was given ample opportunity to attempt to repair the defect. See id.

¶ 18. Pacesetter argues, however, that "Steele's complaints . .. about the oil leak, engine backfiring, noise and carburetor problems — all of which Pacesetter either repaired at no cost or explained to Steele — did not constitute sufficient notice that he experienced additional engine problems after Steele picked up the vehicle the last time." We disagree. Under the undisputed facts of this case, Steele and Pacesetter entered into an agreement to rebuild the engine "to ensure . . . many trouble free miles." When the engine failed to perform, Steele could have chosen to return to Pacesetter, but he was not required to do so. To preserve a potential claim and ultimately recover damages, a consumer, in the absence of a contractual requirement to do so, need not keep carrying the bucket to the well after reasonably concluding that the well is dry.

B. Was Steele Required to Bring His Action Against Allis Machine?

¶ 19. The trial court found that "the. major portion of the work done by Uptown" may have been caused by Allis Machine's "mistreatment of the engine block." The court also concluded, however, that Steele, to recover the costs resulting from Allis' "mistreatment," would have had to have joined Allis as a defendant in his action against Pacesetter. The court was incorrect.

¶ 20. Whether, in order to recover damages from a contractor, a consumer must join the subcontractor who performed the work is a legal issue subject to our de novo review. See Dairyland Greyhound Park, Inc. v. McCollum, 2002 WI App 259, 10, 258 Wis. 2d 210, 655 N.W.2d 474, review denied, 2003 WI 1, 258 Wis. 2d 110, 655 N.W.2d 129 (Wis. Nov. 12, 2002) (No. 02-1204) (whether a party is indispensable presents a question of law). "The hornbook principle of contract law is that the delegation of the performance of a contract does not, unless the obligee agrees otherwise, discharge the liability of the delegating obligor to the obligee for breach of contract." Brooks v. Hayes, 133 Wis. 2d 228, 236, 395 N.W.2d 167 (1986).

¶ 21. Here, there is no hint of any agreement to "discharge the liability of the delegating obligor to the obligee for breach of contract." See id. In fact, Steele apparently did not even know Pacesetter had sent the engine to Allis Machine. Pacesetter remained responsible to Steele for its decision to send the engine to Allis and for the work Allis performed. As the supreme court explained:

The rule for delegation of responsibility is that if the obligor delegates the performance of an obligation, the obligor is not relieved of responsibility for fulfilling that obligation or of liability in the event of a breach. The obligor under the contract is treated as having rendered the performance even when an independent contractor has rendered it, and the obligor remains the party liable for that performance if the performance proves to be in breach of the contract.

Id. at 244 (emphasis added). In its brief to this court, Pacesetter writes that it "does not dispute Steele's general premise: delegation of the performance of a contract does not discharge the delegating party from responsibility for performing the contract." Pacesetter simply argues, however, that "this principle does not defeat the notice requirement" — a requirement that, as Pacesetter has attempted to apply it here, we have rejected. Clearly, therefore, Steele could sue Pacesetter and Pacesetter would remain liable for Allis Machine's "mistreatment" of the engine.

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

       We do not address Steele's third appellate challenge — to the trial court's appraisal of the evidence related to what Steele terms "the defendant's affirmative defenses," and to its assessment of the significance of Steele's son's testimony. These matters may factor into the trial court's reconsideration of the evidence.

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