text:
    In re the Estate of June G. Wheeler: The Estate of June G. Wheeler, Appellant, v. Patricia Franco and Diana Scott, Objectors-Respondents.
    Court of Appeals

      No. 01-3344.

      Submitted on briefs April 26, 2002.

    Decided June 19, 2002.

    2002 WI App 190
    (Also reported in 649 N.W.2d 711.)

      On behalf of the appellant, the cause was submitted on the briefs of John E. Hotvedt of Lloyd, Phenicie, Lynch & Kelly, S.C. of Burlington.
    On behalf of the objectors-respondents, the cause was submitted on the brief of Geoffrey Dowse of Madri-grano, Zievers, Aiello, Marry & Dowse, S.C. of Kenosha.
    Before Nettesheim, RJ., Brown and Anderson, JJ.
   BROWN, J.

¶ 1. The estate of June G. Wheeler

appeals from a probate court order awarding attorney fees under Wis. Stat. § 879.37 (1999-2000) to Patricia Franco and Diana Scott, fees which they incurred in objecting to a claim filed against the estate. The estate argues that under the "equitable extraordinary circumstances" doctrine, a court may allow attorney fees only when the personal representative fails to faithfully contest the claim and the efforts of the objectors enhance the value of the estate. See First Wis. Trust Co. v. Bischoff, 22 Wis. 2d 209, 216-17, 125 N.W.2d 350 (1963). According to the estate, Franco and Scott are not entitled to attorney fees because the personal representative adequately defended the estate and Franco and Scott's efforts provided no benefit. We observe, however, that the line of cases establishing the "equitable extraordinary circumstances" doctrine predate § 879.37, which allows the court to award attorney fees to "the prevailing party in all appealable contested matters." Therefore, the older cases are not applicable. We further determine as a matter of law that Franco and Scott were prevailing parties under the statute. Finally, the probate court did not err in exercising its discretion to award attorney fees to Franco and Scott as the prevailing parties.

¶ 2. Sam and Georgette Sauceda filed a claim against the estate in the amount of $20,000 for goods and services rendered to the decedent. The personal representative of the estate filed an objection to the claim and a demand for a complaint. The personal representative also hired counsel to defend the estate against the claim. Franco and Scott also filed an objection to the Saucedas' claim and hired their own counsel to represent them in the matter. Thereafter, counsel for the estate had an opportunity to settle the claim for not more than $13,000. Franco and Scott, as objectors under Wis. Stat. § 859.31, refused to consent to the settlement.

¶ 3. The matter went to trial and in a written decision dated October 2, 2001, the trial court rejected the Saucedas' claim that they were entitled to $20,000 based on theories of contract or quantum meruit. Instead, the court awarded them $9,843.13 on a theory of unjust enrichment.

¶ 4. Franco and Scott then filed a petition for reimbursement from the estate as prevailing parties pursuant to Wis. Stat. § 879.37. The estate objected, arguing that the personal representative had adequately defended the estate and the involvement of Franco and Scott had simply drained the assets of the estate. The trial court agreed that the personal representative had "fairly and faithfully discharg[ed] his duties" but nonetheless awarded attorney fees to Franco and Scott because their representation "len[t] assistance to the Court" and "valuable services to the estate and the protection of their own interests were performed."

¶ 5. On appeal, the estate contends that the trial court erred when it awarded attorney fees to Franco and Scott as an expense to the estate. First, it argues that the statute neither contemplates nor allows costs paid to multiple parties. In this instance, the personal representative is the prevailing party because he faithfully fulfilled his obligation to defend the estate against an unjust or illegal claim. Franco and Scott, as second objectors, are not therefore "the" prevailing party under the statute. Second, relying on the judicially-created "equitable extraordinary circumstances" doctrine, the estate asserts that objectors are entitled to attorney fees only when the personal representative fails to fulfill its duty to defend the estate and when the efforts of the objectors enhance the value of the estate.

¶ 6. We begin the discussion by examining the appropriate standard of review. A court's decision whether to allow attorney fees under Wis. Stat. § 879.37 to a prevailing party has two components. First, the court must decide whether the party seeking reimbursement of attorney fees is a prevailing party. This decision involves the application of facts to a particular legal standard, which is a conclusion of law that we review independently. Nottelson v. DILHR, 94 Wis. 2d 106, 116, 287 N.W.2d 763 (1980) (whether facts fulfill a particular legal standard is a question of law). If the court concludes that the party is a prevailing party, then the court may, but need not, award attorney fees. This decision calls for an exercise of discretion. Gittel v. Abram, 2002 WI App 113, ¶ 48, No. 01-1132. We affirm a trial court's discretionary decision if the court applied the correct law to the relevant facts and reasoned its way to a reasonable conclusion. Id.

¶ 7. Our first task, then, is to determine whether Franco and Scott are prevailing parties under Wis. Stat. § 879.37. Statutory construction is a question of law. Cmty. Credit Plan, Inc. v. Johnson, 221 Wis. 2d 766, 772, 586 N.W.2d 77 (Ct. App. 1998), aff'd, 228 Wis. 2d 30, 596 N.W.2d 799 (1999). Our interpretation of § 879.37 is guided by case law interpreting the identical phrase under other fee-shifting statutes. In Footville State Bank v. Harvell, 146 Wis. 2d 524, 539-40, 432 N.W.2d 122 (Ct. App. 1988), we applied a workable definition of "prevailing party" in a Wisconsin Consumer Act case: "a party has prevailed if he or she succeeds on any significant issue in litigation which achieves some of the benefit sought by bringing suit." We employed identical language to define "prevailing party" under the statute for judicial review of an agency decision in Kitsemble v. DHSS, 143 Wis. 2d 863, 867, 422 N.W.2d 896 (Ct. App. 1988) (interpreting Wis. Stat. § 814.245(3)).

¶ 8. Applying this definition to Wis. Stat. § 879.37, an objector is a prevailing party if he or she achieves some significant benefit in litigation involving a claim against the estate. See Cmty. Credit Plan, 221 Wis. 2d at 774 (applying Harvell definition of prevailing party in a Wisconsin Consumer Act case). In this case, Franco and Scott objected to $20,000 in claims that, according to the trial court, were "highly suspect under the best of circumstances." They objected to settlement in the range of $13,000 and succeeded at trial in winnowing down the award to less than half of the original claim. Thus, they achieved a significant benefit by maintaining their objection and are prevailing parties under the statute.

¶ 9. The estate asserts that only one party can be a prevailing party under the statute based upon inclusion of the definite article "the," which, it claims, is a word of limitation when construing a statute. Other than a citation to Black's Law Dictionary, however, the estate provides no legal authority for this construction of the statute. We disagree with this extremely literal and artificial interpretation of the language in the statute. Despite the use of the word "the," we conclude that the statute on its face does not limit the prevailing party to a single party. Rather, the prevailing party can include any parties on the winning side. Thus, the statute may encompass multiple interested parties who register objections and defend jointly through their respective counsels. In this case, all the parties — the estate, Franco and Scott — were united in defeating the claim.

¶ 10. The estate also argues that Franco and Scott were not entitled to attorney fees because the personal representative aggressively challenged the claim. The estate relies upon Irving v. Sheldon, 249 Wis. 430, 24 N.W.2d 875 (1946), and Runge v. Schwann, 263 Wis. 99, 56 N.W.2d 856 (1953), to support the argument that objectors are entitled to attorney fees only if the personal representative fails to faithfully contest the claim and the estate as a whole benefits from the intervention. This proposition, known as the "equitable extraordinary circumstances" doctrine was explained in Irving:

It is the duty of the administrator to protect and conserve the estate committed to his care, and where the interest of an administrator is adverse to the estate the intervention by a legatee may be reasonably necessary and prudent, and where the result of such intervention adds to the estate or trust fund, a finding that the legatee so intervening is equitably entitled to reasonable compensation from the estate or trust fund presents no error of law.

Irving, 249 Wis. at 432-33. See First Wis. Trust Co., 22 Wis. 2d at 217 (a defending beneficiary is entitled to compensation for performing watchdog function).

¶ 11. As we understand it, the estate believes that the equitable circumstances described above must exist as a condition precedent for an objector to acquire the legal status of a prevailing party under Wis. Stat. § 879.37. According to the estate, equitable extraordinary circumstances do not exist in this case for two reasons: first, Franco and Scott did not assume the obligation of the personal representative; and second, the net result of the objectors' refusal to settle the claim was to reduce the estate by $20,672.13, a figure arrived at by adding together the amount of the award and the attorney fees expended on behalf of the estate and the objectors.

¶ 12. The estate fails to understand that the line of cases establishing the "equitable extraordinary circumstances" doctrine has no application to Wis. Stat. § 879.37. See Bethesda Church v. Menning, 72 Wis. 2d 8, 22, 239 N.W.2d 528 (1976). Those cases were decided prior to 1969 when § 879.37 was enacted. Indeed, as Franco and Scott correctly note, the Irving and First Wisconsin Trust Co. cases utilized the doctrine because there was no statute in place which would permit parties to recover attorney fees under those circumstances. Reliance upon the "extraordinary equitable circumstances" doctrine is no longer necessary under the statute. Nor would it be appropriate for this court to graft the doctrine into the statute where it does not now exist. The plain language of the statute does not limit the award of attorney fees to cases where the personal representative fails to act or where the award benefits the estate. The statute simply permits the "prevailing party" to recover fees and costs. As we previously stated, a prevailing party is one who achieves the benefit he or she sought by bringing suit. This is true regardless of whether the estate is ultimately enhanced or whether the party assumed the obligation of the personal representative. Here, Franco and Scott successfully asserted the claim was worth less than $20;000 and less than the offer of settlement at $13,000. We therefore conclude as a matter of law that Franco and Scott were prevailing parties under the statute.

¶ 13. Having determined that the legal standard for a prevailing party has been satisfied, we now review the probate court's exercise of discretion in awarding the attorney fees. We note that when the probate court makes this discretionary determination, it is entirely appropriate for it to consider whether the personal representative was adverse to the objectors' interests and whether the efforts of the objectors ultimately enhanced the estate. In other words, the probate court may not apply these factors as prerequisites to its determination of who is a prevailing party; however, it may consider them among other relevant factors when it determines whether to award fees to the prevailing party.

¶ 14. In fact, the role of the personal representative predominated the discussion at the hearing on the request for attorney fees. The estate asserted that "[b]ecause we hired competent counsel and because that counsel aggressively defended the claim against the estate by the Saucedas, we do not believe that... Franco and Scott[] assisted or helped in any way against this claim." Franco and Scott responded that there was "serious doubt" as to whether the personal representative was truly adverse to the claimants. As evidence, they pointed to the personal representative's trial testimony where he indicated that in his opinion the claim was worth $15,000, far more than the court ultimately awarded. In addition, the personal representative was called as an expert witness for the Saucedas at trial and, according to Franco and Scott, testified in support of the Saucedas position.

¶ 15. The probate court placed great weight on this evidence in its determination to award fees. In addition, the court made clear that the claims were highly suspect under the best of circumstances, yet the personal representative believed the claims had merit and, as the probate court observed, "were these objectors not involved, he would have had it in his power to resolve the claim as he saw fit." While the court did not suspect that the personal representative was duplicitous, it did recognize the inconsistent roles the representative played as both an expert witness for the claimants and a representative of the estate.

¶ 16. In comparison to Franco and Scott, the personal representative exhibited a marked lack of hostility toward the claim. Because of this, Franco and Scott justifiably feared that the representative would not fully defend the estate against the Saucedas' claim or might compromise the claim to their detriment. As the probate court stated, "the ambivalence of the personal representative about the claim" justified Franco and Scott's action in hiring separate counsel to protect their own interests and the integrity of the estate. Based on this evidence, we discern no error in the probate court's discretionary determination to award attorney fees in this case.

By the Court. — Order affirmed.

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

       Georgette Sauceda, Patricia Franco and Diana Scott are daughters of June G. Wheeler and beneficiaries of her estate. The personal representative, Herbert E. Mueller, is the son of June and a beneficiary of the estate.

       WisConsin Stat. § 879.37 provides that:
      Reasonable attorney fees may be awarded out of the estate to the prevailing party in all appealable contested matters, to an unsuccessful proponent of a will if the unsuccessful proponent is named as an executor therein and propounded the document in good faith, and to the unsuccessful contestant of a will if the unsuccessful contestant is named as an executor in another document propounded by the unsuccessful contestant in good faith as the last will of the decedent.

       In Irving v. Sheldon, 249 Wis. 430, 431, 24 N.W.2d 875 (1946), an executor approved his own claim against the estate as a creditor. A beneficiary of the estate challenged the claim. Id. The trial court allowed the claim in a diminished amount and, on appeal, the supreme court affirmed the beneficiary's award of attorney fees from the estate. Id. at 433. In First Wisconsin Trust Co. v. Bischoff, 22 Wis. 2d 209, 214-16, 125 N.W.2d 350 (1963), an unsuccessful beneficiary of a will was entitled to attorney fees when the executor, who was also the trustee, could not affirmatively represent either side without violating a fiduciary relationship.

       The estate includes the award in the amount of $9,843.13, the attorney fees of the personal representative in the amount of $5,434.90 and the objectors' attorney fees in the amount of $5,394.10.

       We do not have a transcript of the trial in our record, but the testimony was referenced by counsel for Franco and Scott at the hearing on the request for attorney fees. The probate court agreed with counsel's assessment of the personal representative's testimony:
      And that brings me to the next point, which [concerns the personal representative's] testimony; and, indeed, he did state, and it was difficult sometimes separating what he was saying as an expert witness, and I want to preface what I say about him by suggesting I did not suspect in the slightest respect that he was duplicitous or in any way not fairly and faithfully discharging his duties as personal representative. But he was caught in an awkward position both in respect to the estate, and in respect to the fact that he was separately an expert witness on the construction field....

        [T]he last thing he said on his direct examination that I took a note on was I would say $15,000.00 — plus range would be a fair and just amount for all the work. So he certainly had some — a lot of factors tugging at him. And [the objectors' counsel] correctly states that were these objectors not involved, he would have had it in his power to resolve the claim as he saw fit. And whether he would have settled it for $13,000.00 or $15,000.00 plus or $10,000.00 or nothing would be a matter of speculation.


source: Caselaw Access Project

author: VERGERONT, PJ.

license: Public Domain

text:
    State of Wisconsin ex rel. Leslie J. Schatz, Petitioner-Appellant, v. Gary R. McCaughtry, Respondent-Respondent.

    Court of Appeals

      No. 01-0793.

      Submitted on briefs April 17, 2002.

    Decided June 20, 2002.

    2002 WI App 167
    (Also reported in 650 N.W.2d 67.)

      On behalf of the petitioner-appellant, the cause was submitted on the briefs of the pro se petitioner-appellant Leslie J. Schatz, and the supplemental briefs of T Christopher Kelly of Kelly & Habermehl, S.C., Madison.
    On behalf of the respondent-respondent, the cause was submitted on the briefs of Thomas J. Dawson, assistant attorney general, and James E. Doyle, attorney general.
    Before Vergeront, PJ., Dykman and Deininger, JJ.

       Petition to review granted 9-26-02.

   VERGERONT, PJ.

¶ 1. The dispositive issue on this appeal is whether a prisoner's right to procedural due process is violated when, without prior notice and the opportunity to be heard, a circuit court sua sponte dismisses the prisoner's petition for review by certiorari under Wis. Stat. § 802.05(3)(b)4 (1999-2000) for failure to state a claim for relief. We conclude State ex rel. Sahagian v. Young, 141 Wis. 2d 495, 500, 415 N.W.2d 568 (Ct. App. 1987), is controlling on this issue. Following Sahagian, we hold that the lack of prior notice and the opportunity to be heard before the circuit court dismissed Leslie Schatz's certiorari petition violated his right to due process. We therefore reverse and remand for further proceedings.

BACKGROUND

¶ 2. Schatz, acting pro se, filed a petition for certiorari review of three disciplinary committee decisions, each finding him guilty of disobeying orders under either Wis. Admin. Code § DOC 303.24(l)(a) or (l)(b) (Register, June 1994, No. 462) based on three different conduct reports. The petition alleged that the evidence did not support the findings of guilt; there were numerous due process violations; an improperly promulgated and inapplicable rule did not cure a deficiency in the notice; the second and third conduct reports were retaliation for his partial success in the outcome of the first conduct report; and the Inmate Complaint Examiner and the advocates are biased because they are employees of the Department of Corrections (DOC). Attached to the petition were various documents relating to the hearings before the disciplinary committee and Schatz's administrative appeals of those decisions.

¶ 3. Before ordering the respondent to file the record, the circuit court reviewed the petition under Wis. Stat. § 802.05(3). Section 802.05(3), part of the Prisoner Litigation Reform Act (PLRA), provides in part:

(3) (a) A court shall review the initial pleading as soon as practicable after the action or special proceeding is filed with the court if the action or special proceeding is commenced by a prisoner, as defined in s. 801.02(7)(a)2.
(b) The court may dismiss the action or special proceeding under par. (a) without requiring the defendant to answer the pleading if the court determines that the action or special proceeding meets any of the following conditions:
1. Is frivolous, as determined under s. 814.025(3).
2. Is used for any improper purpose, such as to harass, to cause unnecessary delay or to needlessly increase the cost of litigation.
3. Seeks monetary damages from a defendant who is immune from such relief.
4. Fails to state a claim upon which relief may be granted.

The court concluded that the petition did not state a claim for relief and dismissed the petition under § 802.05(3)(b)4. With respect to the first conduct report, the court concluded it was filed in circuit court more than forty-five days after the last administrative decision in violation of Wis. Stat. § 893.735. With respect to each of the other two conduct reports, the court concluded that the evidence was sufficient to support the finding of guilt, there were no procedural errors that were not harmless, and the petition did not allege any specific facts showing retaliation.

¶ 4. Schatz appealed the order of dismissal, contending that his rights were violated because he did not have an opportunity to be heard by the court before it dismissed the petition. The State responded that Schatz did not have a right under Wis. Stat. § 802.05(3) to notice and the opportunity to be heard prior to dismissal of his petition. We construed Schatz's first argument as challenging the constitutionality of the procedure the court utilized in acting under § 802.05(3). We appointed counsel to further address this issue on Schatz's behalf and asked for supplemental briefing from both parties.

DISCUSSION

¶ 5. Schatz contends that under the Due Process Clause of the Fourteenth Amendment to the United States Constitution, he is entitled, as a matter of procedural due process, to notice and the opportunity to be heard before his petition for certiorari review is dismissed. He relies primarily on Sahagian to support this argument. In Schatz's view, Wis. Stat. § 802.05(3) does not itself violate due process, because it merely authorizes the court to dismiss a pleading without a responsive pleading; it neither requires nor authorizes the court to do so without giving the prisoner notice and an opportunity to be heard. However; Schatz continues, if a court is considering sua sponte dismissal of a pleading under § 802.05(3), the Due Process Clause requires that the court must first give the prisoner notice of the possible grounds for dismissal and the opportunity to be heard.

¶ 6. The State responds that Sahagian is distinguishable because of the different procedural posture of that case. According to the State, due process does not entitle Schatz to an opportunity to be heard before his petition is dismissed because there are adequate procedural safeguards against erroneous dismissals, such as a motion for reconsideration in the circuit court, either with or without moving to amend the pleadings under Wis. Stat. § 802.09(1), a motion for relief from judgment under Wis. Stat. § 806.07, and the opportunity for an appeal. The State relies on Curley v. Perry, 246 F.3d 1278, 1284 (10th Cir. 2001), cert. denied, 122 S. Ct. 274 (2001), and urges us to follow this case, which it characterizes as the majority view in the federal courts.

¶ 7. We consider first the proper construction of Wis. Stat. § 802.05(3), which presents a question of law, which we review de novo. State v. Setagord, 211 Wis. 2d 397, 405-06, 565 N.W.2d 506 (1997). As with all questions of statutory construction, we start with the language of the statute itself, and if it is free from ambiguity, we apply that language to the facts at hand. Id. at 406. The plain language of the statute does two things: (1) requires the court to review the initial pleading "as soon as practicable," § 802.05(3)(a); and (2) authorizes the court to dismiss the action or special proceeding without requiring the defendant to answer if it determines the action or special proceeding meets one of certain specified conditions, § 802.05(3)(b). We agree with Schatz — and the State does not argue otherwise — that the statute simply does not address whether the court must provide the prisoner with notice and the opportunity to be heard before it dismisses an action or special proceeding on one of the specified grounds. We agree with the State that the evident purpose of authorizing a court to dismiss a prisoner's initial pleading on certain specified grounds before the defendant answers is to reduce the number of actions in which defendants must answer a pleading that does not meet certain criteria. However, that purpose does not indicate the legislature's intent with respect to the procedure the court is to follow vis-a-vis the prisoner.

¶ 8. Since the statute neither requires nor authorizes a court to dismiss an initial pleading under Wis. Stat. § 802.05(3) without first giving the prisoner notice and an opportunity to be heard, we next consider whether the Due Process Clause requires this procedure. In Sahagian, we addressed this issue at a somewhat different stage of the proceeding on a petition for certiorari review of a prison disciplinary decision. In Sahagian, decided well before the enactment of § 802.05(3), the circuit court had apparently ordered the respondent to file the record of the disciplinary proceedings with the court, and the respondent filed the record. Sahagian, 141 Wis. 2d at 497. The circuit court then issued a decision affirming the disciplinary committee's decision after concluding that the procedural regulations had been followed and there was substantial, evidence to support the finding of guilt. Id. In response to the prisoner's argument that he should have had the opportunity to "present his case" before the court made its decision, we stated:

We ... address the merits of Sahagian's argument because the error of the trial court is one which could easily be repeated when an inmate seeks review by certiorari of the decision of a disciplinary or program review committee. "[Wlhen the rights or interests of a person are sought to be affected by judicial or quasi-judicial decree, due process requires that the individual be given notice reasonably calculated to inform the person of the pending proceeding and to afford him or her an opportunity to object and defend his or her rights." In Matter of Estate of Fessler, 100 Wis. 2d 437, 447, 302 N.W.2d 414, 419 (1981). " 'The fundamental requisite of due process of law is the opportunity to be heard.' The hearing must be 'at a meaningful time and in a meaningful manner.'" Goldberg v. Kelly, 397 U.S. 254, 267 (1970) (citations omitted).
Confusion may have arisen in this case because Sahagian's petition for the writ of certiorari set forth comprehensively what he viewed to be the facts and his position with respect to those facts and the action taken by the disciplinary committee and Young. However, since a writ of certiorari is not a writ of right but rather is one which is discretionary with the court, State ex rel. Damerow v. Behrens, 11 Wis. 2d 426, 429, 105 N.W.2d 866, 868 (1960), a petitioner must make it appear to the court that (1) there has been some error committed, (2) the error has caused substantial harm, and (3) the petitioner has not been guilty of laches in seeking a remedy. The petition for the writ is not, however, the full development of the petitioner's position. If an inmate petitioner is limited to his or her petition for certiorari, the inmate has not been given an opportunity to be heard at a meaningful time in a meaningful manner. Because Sahagian was denied the right to be heard at a meaningful time in a meaningful manner we reverse and remand the case to the trial court to afford him that opportunity. The trial court need not accord Sahagian oral argument in order to satisfy his due process right to be heard in a meaningful manner.

Sahagian, 141 Wis. 2d at 500-01 (footnote added).

¶ 9. The State argues that our ruling in Sahagian is inapplicable in this case because in Sahagian "[i]t was presumed . .. that the petition stated a claim" and the circuit court was ruling on the merits of the case after the record had been filed. We see no indication that our due process analysis in Sahagian depended upon the assumption that the petition stated a claim for relief; moreover, we see no logical reason why such an assumption or the fact of the record return makes a meaningful difference in the correct analysis. In both this case and Sahagian, the petitioners filed petitions for review by certiorari challenging disciplinary decisions, and the circuit courts, in the absence of a responsive pleading and without first providing the petitioners with the opportunity to be heard, decided the petitioner was not entitled to any relief. The State does not explain why the opportunity to be heard is constitutionally required before a decision on the merits of the petition after considering the record, but not required before a decision on whether the petition states a claim for relief. In both cases the petitioners have had their court actions terminated without the opportunity to fully develop their positions. The difference seems particularly meaningless since Schatz has attached to his petition copies of all the essential documents related to the disciplinary hearings and the administrative reviews, and the circuit court here considered these documents in making its decision that the petition did not state a claim for relief. In short, we can see no meaningful distinction between the relevant facts in Sahagian and the relevant facts in this case, and no principled reason why our analysis in Sahagian does not apply here.

¶ 10. The State also argues that under a line of Wisconsin cases based on the United States decision in Link v. Wabash Railroad Co., 370 U.S. 626, 632 (1962), constructive notice, rather than actual notice, prior to dismissal of an action may be adequate for due process purposes. According to the State, Wis. Stat. § 802.05(3) provides constructive notice of the consequences of filing a pleading that does not state a claim for relief. We do not agree that this line of cases is applicable.

¶ 11. In Link, the Court affirmed the dismissal of an action based on the district court's determination that neither the party nor counsel had appeared at a pretrial conference, there was no reasonable excuse, and the record showed a failure to prosecute extending over five years. Link, 370 U.S. at 633. The district court dismissed the action sua sponte and without prior notice to the party or counsel. The Court first determined that district courts have inherent authority to dismiss cases for failure to prosecute in the absence of a motion. Id. at 630-31. It then stated:

It is true, of course, that "the fundamental requirement of due process is an opportunity to be heard upon such notice and proceedings as are adequate to safeguard the right for which the constitutional protection is invoked." But this does not mean that every order entered without notice and a preliminary adversary hearing offends due process. The adequacy of notice and hearing respecting proceedings that may affect a party's rights turns, to a considerable extent, on the knowledge which the circumstances show such party may be taken to have of the consequences of his own conduct.

Id. at 632 (citation omitted). The Court concluded that, given the long history of failure to prosecute, the party was not entitled to notice and the opportunity to be heard before dismissal. Id. at 633-35.

¶ 12. The Wisconsin Supreme Court applied Link in Neylan v. Vorwald, 124 Wis. 2d 85, 90, 368 N.W.2d 648 (1985), the Wisconsin case on which the State primarily relies. In this case the circuit court dismissed an action sua sponte and without notice for failure to prosecute. The supreme court concluded that because the current statute on dismissal for failure to prosecute did not supply constructive notice of the consequences of failure to prosecute, actual notice was required. Id. at 90. However, it observed that a previous version of the statute had provided constructive notice sufficient for due process protection because it authorized the court to dismiss an action without notice if the case had not been brought to trial within five years of commencement. Id. at 92.

¶ 13. We do not agree with the State that the statute providing constructive notice in Neylan is an apt analogy to Wis. Stat. § 802.05(3). There is no question when five years from the filing of an action occurs. Thus, under the earlier statute referenced in Neylan, there was no question of what conduct would result in dismissal without notice. However, the determination of whether a pleading states a claim for relief depends upon a consideration of various legal authorities and principles of law, and reasonable people who are knowledgeable in the law do not always arrive at the same determination. More importantly for our purposes, the conclusion of whether a pleading states a claim for relief may depend upon the particular arguments made and authorities cited, but the litigant does not know what those will be when the court undertakes a sua sponte analysis without giving notice of that. As we stated in Sahagian, a petition for certiorari does not need to contain a full development of the petitioner's claim. Sahagian, 141 Wis. 2d at 500-01; see also State ex rel. Adell v. Smith, 2001 WI App 168, ¶¶ 5-7, 247 Wis. 2d 260, 633 N.W.2d 231 (civil pleading, including petition for certiorari review, need not define issues or state detailed facts). Section 802.05(3)(b)4 simply does not provide notice of the type of "conduct" that will result in dismissal with sufficient specificity to make it an adequate substitute for the opportunity to argue to the court that the pleading states a claim for relief.

¶ 14. We conclude that Sahagian is controlling and that due process requires that Schatz have a meaningful opportunity to be heard prior to dismissal of his petition for certiorari review for failure to state a claim. As in Sahagian, we clarify that the opportunity to be heard does not require oral argument.

By the Court. — Order reversed and cause remanded.

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

       The PLRA was enacted by 1997 Wis. Act 133.

       Schatz also contends on appeal that the circuit court erred in dismissing the petition because the petition adequately alleged due process violations, failure to follow DOC rules, insufficient evidence, and retaliation, but he does not develop these arguments; his focus is the challenge to the procedure the court employed in dismissing the petition.

       Schatz proceeded pro se in the circuit court and initially on appeal. We decided to appoint counsel to present supplemental briefing and T. Christopher Kelly graciously agreed to accept this appointment on a pro bono basis. Our order asked the parties to address whether the statute violated Schatz's right to due process or equal protection. We do not address the equal protection issue.

       The Due Process Clause in article I, section 1 of the Wisconsin Constitution is "substantially the equivalent" to the Due Process Clause of the United States Constitution, Martin v. Richards, 192 Wis. 2d 156, 198 n.6, 531 N.W.2d 70 (1995); therefore the analysis is the same under the Wisconsin Constitution.

       The federal statute at issue in Curley v. Perry, 246 F.3d 1278, 1284 (10th Cir. 2001), cert. denied, 122 S. Ct. 274 (2001), is 28 U.S.C. § 1915(e)(2), which provides that once a district court has allowed a plaintiff to proceed in forma pauperis, "the court shall dismiss the case at any time if the court determines that... (B) the action ... (ii) fails to state a claim on which relief may be granted." Curley, 246 F.3d at 1283 n.1. The court held that "sua sponte dismissal of a meritless complaint that cannot be salvaged by amendment comports with due process and does not infringe the right of access to the courts" because the plaintiff "has not been prevented from bringing a meritorious claim" and there are "adequate procedural safeguards to avoid erroneous dismissals." Id. at 1284. The court in Curley also appears to rely on a harmless error analysis:
      The lack of prior notice of a sua sponte dismissal with prejudice for failure to state a claim is harmless when, as here, the plaintiff has a reasonable post-judgment opportunity to present his arguments to the district court and the appellate court, including the opportunity to suggest amendments that would cure the complaint's deficiencies.

        Id. The court upheld the dismissal because it agreed with the district court that the complaint did not state a claim and amendment would be futile. Id.

       In State ex rel. Luedtke v. Bertrand, 220 Wis. 2d 574, 580-81, 583 N.W.2d 858 (Ct. App. 1998), aff'd by an equally divided court, 226 Wis. 2d 271, 594 N.W.2d 370 (1999), we clarified that we used "discretionary" in Sahagian to refer to the circuit court's ultimate decision on certiorari, and it did not mean that the court was to employ a discretionary standard in determining whether a certiorari petition states a claim for relief.

       Under Wis. Stat. § 801.02(7)(c), also part of the PLRA, a prisoner must include as part of the initial pleading documentation showing that the prisoner has exhausted all available administrative remedies. This documentation must include copies of all written materials that the prisoner has provided to the administrative agency, and all written materials the agency has provided to the prisoner related to the administrative proceeding, § 801.02(7)(c). The practical effect is that when a prisoner files a petition for certiorari review of a disciplinary or other agency decision, copies of most, if not all, of the essential documents of the record of the administrative proceeding will be attached to the petition. As a result, the materials that are now considered when analyzing a prisoner's petition for certio-rari review to determine whether it states a claim would seem in many cases to be the same as those considered when analyzing the merits of the action after a review of the record.

       In an earlier Wisconsin case discussing Link, the court in Latham v. Casey & King Corp., 23 Wis. 2d 311, 315-16, 127 N.W.2d 225 (1964), held the circuit court had erred in dismissing sua sponte an action for failure to appear at a pretrial conference without notice and a hearing. The court reasoned that, while the local rule required attendance at pretrial conferences and the notice stated that no adjournment would be allowed without consent of the court, neither advised of the consequences of failure to attend. Id. at 313-14, 316. In the absence of such a warning, the court concluded, a hearing should have been held on the imposition of a penalty. Id. at 316.

        The court rejected the argument that no notice was necessary because counsel should have had notice of his conduct. Id.

      In a later Wisconsin case, the court held that the litigant had been provided actual advance notice by the court that it would consider dismissing the case for particular reasons at the next hearing and the party had the opportunity to argue against dismissal at the hearing. B&B Invs. v. Mirro Corp., 147 Wis. 2d 675, 683-84, 434 N.W.2d 104 (Ct. App. 1988).

       Since we conclude that Sahagian controls and requires that Schatz be provided notice and an opportunity to be heard before his petition for certiorari review is dismissed, we are not at liberty to follow Curley, as the State urges us to do. However, we observe that although the State characterizes Curley as representing the majority view among the federal courts, the six cases cited in Curley as representing a majority view, see 246 F.3d at 1283-84, do not fully support that contention. Only one of those six actually decides that sua sponte dismissal without prior notice and the opportunity to be heard does not violate due process: Constant v. United States, 929 F.2d 654, 657 (Fed. Cir. 1991) (sua sponte dismissal of a complaint without notice and the opportunity to be heard does not violate due process, where complaint had previously been decided to be untenable as a matter of law and without prospect that additional proceedings would entitle the claimant to prevail). In three of the cases cited, a due process argument is made, but the courts do not address it: Christiansen v. Clarke, 147 F.3d 655, 657-58 (8th Cir. 1998) (deciding that 28 U.S.C. § 1915(e)(2)(B)(ii) survives equal protection rational basis scrutiny, but not taking up due process challenge); Bilal v. Kaplan, 956 F.2d 856, 857 (8th Cir. 1992) (affirming district court's denial of motion for relief from judgment under Fed. R. Civ. E 60(b) on grounds that plaintiffs due process challenge to sua sponte dismissal of complaint after identical complaint had been dismissed did not come within any of the provisions of the rule); and Hanley v. Stewart, 21 F. Supp. 2d 1088, 1090, 1093 (D. Ariz. 1998) (holding that dismissal under 28 U.S.C. § 1915A of complaint that is frivolous does not violate equal protection under rational basis scrutiny). In Baker v. Director, U.S. Parole Commission, 916 F.2d 725, 726 (D.C. Cir. 1990), the court holds that district courts have the authority to dismiss a complaint sua sponte under Fed. R. Civ. E 12(b)(6) (the counterpart to Wis. Stat. § 802.06(2)(a)6) without notice where the claimant cannot possibly win relief, but the court does not discuss the requirements of due process. Finally, Martin v. Scott, 156 F.3d 578, 580 n.2 (5th Cir. 1998), addresses the right of access to courts under 28 U.S.C. § 1915A.
      Thus, we think a more accurate summary of the cases cited in Curley is that the two circuits that actually decide a due process challenge to the dismissal of a complaint without prior notice and the opportunity to be heard come to opposing conclusions: Constant, 929 F.2d at 657, and Jefferson Fourteenth Assocs. v. Wometco de Puerto Rico, Inc., 695 F.2d 524, 526 (11th Cir. 1983) (cited in Curley, 246 F.3d at 1284, as representing the minority view; holding that even if a claim ultimately has no merit, a party who brings a claim in good faith has a due process right to litigate the claim, and reversing because the district court dismissed the action sua sponte without providing the opportunity to respond, present argument, and amend the complaint). See also the more recent Eleventh Circuit case, Vanderberg v. Donaldson, 259 F.3d 1321, 1324-25 (11th Cir. 2001), cert. denied, 122 S. Ct. 1449 (2002), in which the court reviewed a dismissal under 28 U.S.C. § 1915(e) (2)(B)(ii), which allows the district court to sua sponte dismiss, before service of process, the complaint of a plaintiff proceeding in forma paup-

        eris if it fails to state a claim for relief. The court held that plaintiffs right to due process was not violated by a magistrate's report recommending dismissal without first giving him the opportunity to be heard because he was given the opportunity to object to the report before the district court entered its final order. Id. at 1324-25.
      Our own research discloses no other federal court of appeals cases analyzing and deciding whether due process requires notice and the opportunity to be heard before a court sua sponte dismisses a complaint for failure to state a claim for relief. However, there are many federal cases, like Baker, that decide whether the district court has either statutory or inherent authority to dismiss a complaint sua sponte without prior notice and the opportunity to be heard. On this issue, most circuits hold that district courts should not dismiss without the opportunity to be heard, but also hold it is not reversible error if the complaint is patently meritless and amendments clearly could not cure the deficiency. Gonzalez-Gonzalez v. United States, 257 F.3d 31, 36-37 (1st Cir. 2001); Giano v. Goord, 250 F.3d 146, 151 (2nd Cir. 2001) (dismissal under 28 U.S.C. § 1915(e)(2)(B)(ii)); Razzoli v. Fed. Bureau of Prisons, 230 F.3d 371, 377 (D.C. Cir. 2000) (applying its ruling in Baker to 28 U.S.C. § 1915A(b)(1), the federal counterpart to Wis. Stat. § 802.05(3); explaining that "the claimant cannot possibly win relief' means that "the facts alleged affirmatively preclude relief' or, if the claimant has facts to add to the complaint, the claimant still "would not have a claim upon which relief could be granted even with those facts"; and concluding that, although the complaint failed to state a claim, the district court erred in dismissing it without leave to amend); Smith v. Boyd, 945 F.2d 1041, 1043 (8th Cir. 1991); Shockley v. Jones, 823 F.2d 1068, 1073 (7th Cir. 1987); Omar v. Sea-Land Serv., Inc., 813 F.2d 986, 991 (9th Cir. 1987); and Tyler v. Mmes. Pasqua & Toloso, 748 F.2d 283, 287 (5th Cir. 1984), overruled on other grounds, Victorian v. Miller, 813 F.2d 718, 719 (5th Cir. 1987). In contrast, the Sixth Circuit has required, under its supervisory powers, that district courts give notice, to the parties of its sua sponte intent to dismiss a complaint and the opportunity to either amend or respond to the court's stated reasons for dismissing; and the court has reversed solely on the basis of the district court's failure to give notice of the proposed dismissal. See Tingler v. Marshall, 716 F.2d 1109, 1112 (6th Cir. 1983) (discussing dismissal of case on the merits); Morrison v. Tomano, 755 F.2d 515, 517 (6th Cir. 1985) (per curium) (discussing Tingler and its application to a dismissal for failure to state a claim). However, the Sixth Circuit has decided that 28 U.S.C. § 1915(e)(2) of the federal PLRA removes from the courts the discretion to permit a plaintiff to amend a complaint to avoid sua sponte dismissal where the plaintiff is proceeding in forma pauperis. Benson v. O'Brian, 179 F.3d 1014, 1016 (6th Cir. 1999).
      The court in Curley does not appear to distinguish between cases analyzing whether due process requires notice and the opportunity to be heard before a sua sponte dismissal, on the one hand, and, on the other hand, cases analyzing whether district courts have the authority to dismiss sua sponte without notice and the opportunity to be heard, and the conditions under which the circuit courts in their supervisory capacity allow the district courts to do so.


author: ROGGENSACK, J.

text:
    State of Wisconsin ex rel. Al Curtis, Paul Price, Danny Davis, Eric Hune, Antwan Townsend, Danny Webb, and Nathaniel Dukes, Plaintiffs-Respondents, v. Jon E. Litscher, Secretary, Wisconsin Department of Corrections, Defendant-Appellant.
    Court of Appeals

      No. 01-1804.

      Submitted on briefs January 11, 2002.

    Decided June 20, 2002.

    2002 WI App 172
    (Also reported in 650 N.W.2d 43.)

      On behalf of the defendant-appellant, the cause was submitted on the briefs of James E. Doyle, attorney general, and Stan Davis, assistant attorney general.
    On behalf of the plaintiffs-respondents, the cause was submitted on the brief of Howard B. Eisenberg of Howard B. Eisenberg Law Office of Milwaukee.
    Before Vergeront, EJ., Dykman and Roggensack, JJ.

       Petition to review denied 9-26-02.

   ROGGENSACK, J.

¶ 1. The seven inmate-petitioners (inmates) in this certiorari action were accused of participating in a riot/hostage situation at a private, contract prison facility located in Whiteville, Tennessee. The inmates claim, and the circuit court found, that a disciplinary hearing held at the Whiteville facility on December 9,1999 was procedurally defective and that the Wisconsin Department of Corrections (DOC) improperly relied on the findings from that hearing in subsequent proceedings. We conclude that we have authority to review the December 9, 1999 disciplinary hearing by certiorari and that, even under DOC's version of events, the Whiteville facility violated its, and DOC's, procedures by selecting a hearing examiner who witnessed the relevant events. Therefore, we invalidate the December 9, 1999 disciplinary hearing and any subsequent hearings or changes in status that relied on the hearing examiner's findings as a basis for the decision. However, we also conclude that DOC may hold administrative confinement hearings and consider the inmates' alleged conduct to the extent that conduct is proved without relying on the findings of the hearing examiner at the December 9,1999 hearing. Accordingly, we affirm in part and reverse in part the order of the circuit court.

BACKGROUND

¶ 2. The seven inmates were confined in a private correctional facility in Whiteville, Tennessee when they were charged with violations of facility rules, classified as major offenses, for allegedly participating in a riot/hostage situation that took place on November 30, 1999. An employee of the Whiteville facility conducted a disciplinary hearing on the charges on December 9, 1999. The staff member who served as the hearing examiner found all seven inmates guilty and penalized them with varying periods of disciplinary segregation.

¶ 3. Before the inmates could serve their time in disciplinary segregation at Whiteville, DOC approved a Program Review Committee (PRC) recommendation that the inmates should be transferred to Supermax Correctional Institution in Boscobel, Wisconsin. The inmates' involvement in the Whiteville uprising was a primary factor in the transfer decisions. After being transferred to Supermax, each of the inmates was placed in administrative confinement as a result of decisions by an Administrative Confinement Review Committee (ACRC). The ACRC decisions were premised, at least in part, on the findings from the December 9, 1999 hearing in Whiteville.

¶ 4. The Whiteville facility's internal disciplinary procedures provide that an inmate subjected to a disciplinary penalty may appeal the hearing examiner's decision to the warden of the facility. All seven inmates pursued this avenue of appeal, raising various claims of procedural error. The warden denied all appeals.

¶ 5. At the same time that the inmates were pursuing their appeals to Whiteville's warden, they were simultaneously seeking review of the Whiteville disciplinary decisions through the Inmate Complaint Review System (ICRS) in Wisconsin and by challenging the PRC and ACRC decisions that relied on the findings of the Whiteville disciplinary proceeding. DOC consistently took the position that the inmates could not obtain review of the Whiteville disciplinary decision by filing an inmate complaint in a Wisconsin prison. Similarly, DOC repeatedly asserted that the inmates could not collaterally challenge the Whiteville proceedings by raising the issues in PRC or ACRC proceedings.

¶ 6. Following the Whiteville warden's unfavorable decisions and the inmates' unsuccessful attempts to obtain administrative review of the Whiteville proceedings through DOC in Wisconsin, two of the seven inmates attempted to obtain review of the Whiteville disciplinary decisions by initiating actions in the Tennessee courts. See Wis. Stat. §§ 301.21(2m)(b) and 302.02(3t) (1999-2000). Those filings were dismissed with the following explanation: "Please be advised that since you are now a resident of the State of Wisconsin you will need to make your filings in the State of Wisconsin."

¶ 7. Apparently lacking any access to the Tennessee courts, the seven inmates jointly filed a petition for a writ of certiorari on June 13, 2000 in the circuit court for Dane County. The petition states that the inmates "are hereby asking the Court to review the disciplinary decisions and actions of the [Secretary of DOC] and disciplinary officer." The prayer for relief in the petition provides:

Wherefore, the petitioners respectfully request that a writ of certiorari be granted to bring up for review and determination the proceedings in the matters set forth in this petition, and that upon review and return of that writ, the decision and actions of the [Secretary], the disciplinary committee and the administrative confinement review committee be reversed and adjudged to be null and void.

¶ 8. DOC argued that the circuit court's authority on certiorari does not extend to review of disciplinary decisions made by officials at an out-of-state, private prison. The circuit court disagreed, concluding that because the inmates were sentenced by Wisconsin courts, they had the right to seek certiorari review of major disciplinary proceedings in Wisconsin courts when no other avenue of judicial review was available.

¶ 9. On the merits, the circuit court held that the record established that the Whiteville hearing violated the inmates' rights because (1) the hearing examiner was directly involved in the events that gave rise to the charges, and (2) the hearing examiner's report failed to state adequate reasons for the decision. The court invalidated the disciplinary decisions and ordered DOC to conduct new PRC and ACRC hearings for each of the inmates at which DOC would not be permitted to consider the disciplinary charges that were adjudicated on December 9,1999 or any information relating to the November 30, 1999 uprising at Whiteville.

DISCUSSION

Standard of Review.

¶ 10. We review the decision of the administrative agency, not the decision of the circuit court. State ex rel. Sprewell v. McCaughtry, 226 Wis. 2d 389, 393, 595 N.W.2d 39, 41 (Ct. App. 1999). Whether the scope of our review reaches the issues raised in a certiorari petition presents a question of law, and if we have authority to reach the issues, we decide de novo whether the administrative body acted within its jurisdiction, whether it acted according to applicable law, whether its action was arbitrary and unreasonable, and whether the evidence supported the determination in question. Id.) see also State ex rel. Kaczkowski v. Fire & Police Comm'rs, 33 Wis. 2d 488, 501-02, 148 N.W.2d 44, 51 (1967) (determining the scope of the court's authority on certiorari review in an appeal that followed statutory judicial review of the decision of a board of police and fire commissioners).

Availability of Certiorari Review.

¶ 11. DOC first argues that Wisconsin courts do not have authority to review prison disciplinary decisions made at an out-of-state, private prison. Under the circumstances presented in this case, we disagree.

¶ 12. A decision may be reviewed by common law certiorari when no legislative provision establishes how review may be had. State ex rel. Smits v. City of De Pere, 104 Wis. 2d 26, 31, 310 N.W.2d 607, 609 (1981). Certio-rari is the well-established mode of judicial review for inmates of Wisconsin prisons who seek to challenge prison disciplinary decisions. See State ex rel. Shimkus v. Sondalle, 2000 WT App 238, ¶¶ 1, 14, 239 Wis. 2d 327, 620 N.W.2d 409; State ex rel. Meeks v. Gagnon, 95 Wis. 2d 115, 119, 289 N.W.2d 357, 361 (Ct. App. 1980). And, although the legislature has provided that judicial review of disciplinary proceedings conducted by an out-of-state, contract prison may proceed in the county of the state where the prison is located, see Wis. Stat. § 302.02(3t), unique circumstances in this case precluded this provision from affording the inmates judicial review in Tennessee.

¶ 13. Here, DOC transferred the inmates to a Wisconsin prison immediately after the disciplinary hearing. Once the inmates were returned to Wisconsin, the Tennessee court refused to review their cases. Because no statutory provision for judicial review of a prison disciplinary decision applied to the inmates in this case, we conclude that Wisconsin courts may review the Whiteville disciplinary decision by certiorari.

¶ 14. DOC contends that, regardless of the availability or unavailability of judicial review in the Tennessee courts, our authority does not extend to a review of the disciplinary decisions of a private, out-of-state prison that houses Wisconsin inmates by contract. Again, we disagree. Although DOC has the statutory power to delegate some of its administrative functions to private prison facilities by contract, the contract facility performs those functions as agents of DOC and the State. See Wis. Stat. § 301.03(2) (mandating that DOC shall "[s]upervise the custody and discipline of all prisoners"). DOC's contract with the private facility in Whiteville neither absolves DOC from ultimate responsibility for the performance of its assigned administrative functions nor precludes Wisconsin courts from conducting certiorari review of the disciplinary hearings in this case. Accordingly, we conclude that we have authority to review the issues raised by the inmates' petition for a writ of certiorari.

Hearing Procedures.

¶ 15. A determination on certiorari review of whether a prison disciplinary hearing was conducted according to law includes a review of whether the hearing comported with the constitutional requirements of due process. State ex rel. Meeks, 95 Wis. 2d at 119, 289 N.W.2d at 361. However, even in the absence of a claim of constitutional dimension, an agency is required to follow its own procedural rules, and our certiorari inquiry encompasses the question of whether the agency has done so. See id. An agency acts beyond its authority when it abandons its own rules. State ex rel. Riley v. DHSS, 151 Wis. 2d 618, 625, 445 N.W.2d 693, 695 (Ct. App. 1989).

¶ 16. The inmates' petition alleges that the disciplinary hearing conducted by the hearing examiner at the Whiteville facility failed to conform to DOC's and Whiteville's procedures and also violated the inmates' due process rights. One of the inmates' primary contentions is that their December 9, 1999 disciplinary hearing was conducted by a hearing examiner who was directly involved in the riot/hostage situation that gave rise to the various charges. The inmates assert that under both DOC regulations and the internal disciplinary procedures of the Whiteville facility, the inmates have a basic procedural right to a hearing that is conducted by an impartial examiner.

¶ 17. Wisconsin Admin. Code § DOC 303.82 (1999) provides that due process disciplinary hearings shall be conducted by an adjustment committee and that "[n]o person who has personally observed or been a part of an incident which is the subject of a hearing may serve on the committee for that hearing." We note that the Whiteville facility's internal disciplinary procedures contain a similar provision:

SELECTION OF THE BOARD OR HEARING OFFICER
a. The Disciplinary Board or Hearing Officer will be designated by the Warden/Administrator and will be impartial and fair.
d. Any staff will be disqualified in every case in which they have filed the complaint, participated or witnessed the incident; investigated the incident; is the person in charge of any subsequent review of the decision; or has any personal interest in the outcome.

¶ 18. DOC asserts that because there is no evidence in the certiorari record concerning the status of the hearing examiner, the inmates cannot obtain cer-tiorari review of this issue. Had the inmates not raised the issue of the hearing examiner's bias in their attempts to seek review of the disciplinary decision, we might agree with DOC. However, we have previously held that if a prisoner wishes to preserve for judicial review an issue that is "seldom reflected in the administrative record," the inmate bears the burden of clearly presenting the issue for the record by raising the issue during the hearing or during the administrative appeal. See State ex rel. Ortega v. McCaughtry, 221 Wis. 2d 376, 394-96, 585 N.W.2d 640, 649-50 (Ct. App. 1998). The purpose of this requirement is to direct administrative attention to and provide a more specific record of the grounds for the prisoner's complaint. Id. at 396, 585 N.W.2d at 650.

¶ 19. The issue of the hearing examiner's bias was raised in at least some appeals to the warden. The warden's response to the appeals was to affirm the hearing examiner by circling a line on the appeal forms that reads: "Concur with findings and Penalty." The warden did not expressly address the issue of the hearing examiner's alleged bias, and although the record is not a model of clarity, DOC admits that the hearing examiner was a witness to the alleged conduct of some inmates. DOC explained to the circuit court that:

[The hearing examiner] was involved at the beginning of the case, he tried to get into the room to assist, but was told by inmates that if he came in, people would be killed because they didn't want him in there or people would be injured because they didn't want him in there.
He then left.

Permitting a person with this level of personal involvement to act as a hearing examiner violated both DOC's and Whiteville's rules.

¶ 20. The inmates'allegation of hearing examiner bias and DOC's admission that the hearing examiner was a witness raise significant concerns. First, neither Whiteville nor DOC has authority to conduct a disciplinary hearing that fails to comply with its own duly promulgated procedures. And, because the hearing examiner was a witness to the riot/hostage situation at the Whiteville facility, he should have been disqualified under both Wis. Admin. Code § DOC 303.82 and the Whiteville facility's internal disciplinary procedures. Second, the presence of a biased hearing examiner at a disciplinary hearing concerning a major rule violation raises due process concerns comparable to those addressed by the Wisconsin Supreme Court in State ex rel. Anderson-El v. Cooke, 2000 WI 40, ¶¶ 16, 24-25, 234 Wis. 2d 626, 610 N.W.2d 821 (holding that DOC's failure to provide a prisoner with a notice of hearing both violated DOC's procedures and denied the prisoner a fundamental procedural right). Prison hearing procedures that touch on basic procedural rights are enacted for the protection of prisoners, and as the supreme court instructed in Anderson-El, failure to follow those types of procedures cannot be considered harmless error. Id. at ¶¶ 24-25; see also State ex rel. Riley, 151 Wis. 2d at 625-26, 445 N.W.2d at 696. Accordingly, under the facts presented in this case, we decline to conclude that the inmates waived their claims by failing to clearly raise the issue of hearing examiner bias at the hearing itself.

Remedy.

¶ 21. In some past cases involving procedural issues, we have remanded disciplinary decisions and allowed prison officials to supplement a deficient certio-rari record, provided that the remand did not involve the taking of new substantive evidence against the prisoner. See, e.g., State ex rel. Meeks, 95 Wis. 2d at 128-29, 289 N.W.2d at 365. However, as a matter of judicial economy, and considering the already lengthy history of these proceedings, we can see no benefit to be obtained from remanding this case for another round of disciplinary hearings. Accordingly, we affirm the circuit court's remedial order to the extent that it invalidated (1) the inmates' December 9, 1999 disciplinary hearing and (2) any subsequent hearing or change in status that relied on the findings from that hearing. DOC shall expunge any reference to such proceedings from the inmates' records.

¶ 22. However, a significant dispute remains as to whether DOC may consider evidence of the inmates' conduct on November 30,1999 in future administrative confinement hearings. DOC argues that although invalidating the December 9, 1999 disciplinary proceedings would foreclose DOC from relying on the findings of the Whiteville hearing examiner at any future administrative confinement proceeding, DOC should be permitted to consider other information related to the Whiteville riot/hostage situation to the extent it proves conduct that meets the standard for administrative confinement. We agree.

¶ 23. The purpose of administrative confinement "is to provide for an involuntary nonpunitive status for the segregated confinement of an inmate whose continued presence in general population poses a serious threat to life, property, self, staff, or other inmates, or to the security of the institution." Wis. Admin. Code § DOC 308.01. An inmate may be placed in administrative confinement for any of the following reasons:

(a) The inmate presents a substantial risk to another person, self, or institution security as evidenced by a behavior or a history of homicidal, assaultive or other violent behavior or by an attempt or threat to cause that harm.
(b) The inmate's presence in the general population poses a substantial risk to another person, self or institution security.
(c) The inmate's activity gives a staff member reason to believe that the inmate's continued presence in general population will result in a riot or a disturbance.
(d) The inmate has been identified as having an active affiliation with an inmate gang or street gang or there are reasonable grounds to believe that the inmate has an active affiliation with an inmate gang or street gang; and there is reason to believe that the inmate's continued presence in the general population will result in a riot or a disturbance.

Wis. Admin. Code § DOC 308.04(2).

¶ 24. While DOC regulations require that inmate misconduct "shall be handled through the disciplinary procedures," Wis. Admin. Code § DOC 308.04(1), we do not construe this language to require a disciplinary hearing on alleged conduct that may violate a prison rule prior to any consideration of the conduct for purposes of administrative confinement. Rather, the requirement that misconduct be handled through disciplinary procedures simply indicates the different purposes of inmate discipline and administrative confinement and the different standards that apply in each type of proceeding. Our interpretation of § DOC 308.04(1) is aided by the notes to ch. 308, which state that administrative confinement "cannot be a penalty for misconduct, but may result either prior to or subsequent to a disciplinary proceeding or independent of any such proceeding." (Emphasis added.) Accordingly, the same inmate conduct may be relevant for purposes of both disciplinary proceedings and administrative confinement proceedings if the conduct both violates a statute or administrative rule and satisfies the standard for initiating administrative confinement. However, as the notes to ch. 308 suggest, those standards are independent.

¶ 25. The consequence of holding an administrative confinement hearing after a prior disciplinary hearing on the same conduct has been invalidated is that the relevant conduct must be proven de novo with evidence presented at the administrative confinement hearing and without any reference to the factual findings of the disciplinary committee or hearing examiner. Significantly, the inmate is free to challenge the allegations and the evidence at the administrative confinement hearing, as provided in Wis. Admin. Code § DOC 308.04.

¶ 26. Because we conclude that DOC may consider evidence of the inmates' conduct at the Whiteville facility on November 30, 1999 in future administrative confinement hearings, we reverse the decision of the circuit court to the extent it precluded DOC from considering such evidence. DOC may hold administrative confinement hearings to determine whether there is a current need to place one or more of the inmates in that nonpunitive status. At any such hearing, DOC must prove the inmate's November 30, 1999 conduct without reference to the findings from the invalidated disciplinary hearing. The inmates shall have all the rights afforded to prisoners under Wis. Admin. Code § DOC 308.04, including the right to present and question witnesses. If a witness possessing relevant, non-cumulative evidence is requested by an inmate and the requested witness is not now available, and if the inmate shows that no other witness can provide the relevant testimony and DOC is unable to secure a statement from the requested witness, then the inmate has been prejudiced through no fault of his own and we expect DOC to abandon any attempt to prove that inmate's November 30, 1999 conduct. See State ex rel. Meeks, 95 Wis. 2d at 129, 289 N.W.2d at 365. Finally, because DOC should assess the current need for administrative confinement, events subsequent to November 30, 1999 will be relevant to any hearings.

¶ 27. DOC asks this court to vacate the circuit court's finding that DOC retaliated against some of the inmates by placing them in temporary lock up after a court-ordered transfer from Supermax to other correctional institutions. As the circuit court's finding of retaliation was intertwined with the remedial orders of that court and because we have substantially departed from those remedial orders, we conclude that the issue is moot. However, as a means of transitioning from the circuit court's remedial orders to those that we have set forth above, we further order that the inmates' security classification and confinement status shall not be affected by any allegations related to their conduct on November 30, 1999 until such time as DOC holds an administrative confinement hearing in accordance with this decision.

CONCLUSION

¶ 28. We conclude that we have authority to review the December 9, 1999 disciplinary hearings by certiorari and that, even under DOC's version of events, the Whiteville facility violated its, and DOC's, disciplinary procedures by selecting a hearing examiner who witnessed the relevant events. Therefore, we invalidate the December 9, 1999 disciplinary hearing and any subsequent hearing or change in status that relied on the findings from that hearing as a basis for the decision. However, we also conclude that DOC may hold administrative confinement hearings and consider the inmates' alleged conduct to the extent that conduct is proved without relying on the findings from the December 9, 1999 hearing. Accordingly, we affirm in part and reverse in part the order of the circuit court.

By the Court. — Order affirmed in part and reversed in part.

       A1 Curtis, Paul Price, Danny Davis, Eric Hune, Antwan Townsend, Danny Webb, and Nathaniel Dukes.

       According to the Whiteville facility's internal procedures, whether a charged offense is classified as a "minor" offense or a "major" offense determines both the procedures that are to be used at the disciplinary hearing and the potential penalty that may be imposed if the inmate is found guilty.

       Wisconsin Stat. § 301.21(2m)(b) provides:
      While in an institution in another state covered by a contract under this subsection, Wisconsin prisoners are subject to all provisions of law and regulation concerning the confinement of persons in that institution under the laws of that state.

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

       Wisconsin Stat. § 302.02(3t) provides:
      Institutions located in other states. For all purposes of discipline and for judicial proceedings, each institution that is located in another state and authorized for use under s. 301.21 and the precincts of the institution shall be deemed to be in a county in which the institution is physically located, and the courts of that county shall have jurisdiction of any activity, wherever located, conducted by the institution.

       As the facts of this case demonstrate, disciplinary decisions made at and by an out-of-state, private facility become part of the prisoner's record, and DOC relies on those decisions in later proceedings involving the prisoner. We note that DOC has disclaimed any authority to collaterally review the procedural and substantive validity of the private facility's disciplinary decisions in later proceedings (e.g., PRC and ACRC proceedings). Accordingly, DOC itself has a need for assurances that the disciplinary decisions are valid. One function of judicial review is to examine the validity of such proceedings. Additionally, the existence of Wis. Stat. § 302.02(3t) demonstrates that the legislature intended inmates of contract facilities to have access to judicial review.

       DOC does not raise an issue concerning the inmates' exhaustion of administrative remedies in regard to their attempts to obtain review of the disciplinary decision.

       DOC contends that the inmates in this case have no claims of constitutional dimension because they did not lose good time credits or suffer an extension of their mandatory release date. As far as the nature of the penalties the inmates faced and the penalties actually imposed by the hearing examiner, we conclude that this case is factually indistinguishable from State ex rel. Anderson-El v. Cooke, 2000 WI 40, 234 Wis. 2d 626, 610 N.W.2d 821. The supreme court was clear in Anderson-El that an agency's violation of disciplinary regulations that touch on basic procedural rights is an issue that raises constitutional concerns. We conclude that disciplinary procedures that provide for a neutral and unbiased hearing examiner reach basic procedural rights. Cf. State v. Horn, 226 Wis. 2d 637, 653, 594 N.W.2d 772, 780 (1999) (holding in the context of probation revocation proceedings that due process requires that a person appear before a neutral and detached hearing officer).

       DOC disclaims any interest in conducting new disciplinary hearings.

       In a disciplinary proceeding, the relevant question is whether the prisoner's conduct violated one or more statutes or administrative rules of the department that define an offense.


author: CURLEY, J.

text:
    J.G. Wentworth S.S.C. Limited Partnership, Plaintiff-Appellant,  v. Sean Edward Callahan, Sentry Insurance, a mutual company, and Sentry Life Insurance Company, Defendants-Respondents.
    Court of Appeals

      No. 01-2756.

      Submitted on briefs March 28, 2002.

    Decided June 25, 2002.

    2002 WI App 183
    (Also reported in 649 N.W.2d 694.)

      On behalf of the plaintiff-appellant, the cause was submitted on the briefs of David E Muth of Quarles & Brady LLP, of Milwaukee.
    On behalf of the defendants-respondents, the cause was submitted on the brief of James M. Fredericks of Bor gelt, Powell, Peterson & Frauen, S.C., of Milwaukee.
    Before Fine, Schudson and Curley, JJ.

       Petition to review denied 10-21-02.

   CURLEY, J.

¶ 1. J.G. Wentworth, S.S.C., Limited Partnership (Wentworth) appeals the trial court's denial of its summary judgment motion in its declaratory judgment action seeking a ruling that the anti-assignment clause in the annuity agreement between Sean Edward Callahan and Sentry Insurance A Mutual Company (Sentry) is unenforceable. The dispute arose after Callahan assigned his future payments, obtained in a structured settlement of a products liability suit, to Settlement Capitol Corporation (Settlement), which, in turn, assigned them to Wentworth. For two reasons, we agree with the trial court's determination that the assignments were void, and affirm the denial of summary judgment. First, the clear and unambiguous language found in the structured settlement agreement prohibited Callahan from assigning the future payments. Second, the non-assignability language was necessary to take advantage of certain tax benefits.

I. Background.

¶ 2. In June-1992, Callahan settled a products liability accident case with Sentry, the tortfeasors' insurance company, for injuries he received in a rotary mower accident. Callahan and Sentry entered into a settlement agreement and release that obligated Sentry to purchase an annuity from Sentry Life Insurance Company (Sentry Life), providing Callahan with monthly payments of $1225 starting July 1, 1992, for the remainder of his life, with a guaranteed minimum of 240 monthly payments. This guaranteed Callahan a minimum of $294,000.

¶ 3. Several years later, Callahan and Settlement entered into a series of purchase agreements in which Settlement purchased all of Callahan's future payments in an exchange for a lump sum. Because Callahan's original agreement with Sentry contained a non-assignability clause prohibiting him from assigning his future payments, Callahan, to facilitate the purchase agreement, gave Settlement a notarized instruction letter which ordered Sentry Life to send the annuity checks to Settlement's address. Callahan also represented that he would not make any changes to the instructions to Sentry Life as to where the payments should be directed. Finally, Callahan agreed that he would never interfere with Settlement's right to receive and collect the payments.

¶ 4. Shortly thereafter, Settlement assigned its interest in Callahan's future payments from Sentry Life to Wentworth. Wentworth was aware of the non-assignability clause in the settlement agreement. This arrangement continued until August 1,1997, when the payments to Wentworth stopped. Consequently, Went-worth sued Callahan in Pennsylvania and obtained a default judgment against him. Wentworth then docketed the Pennsylvania judgment in the Milwaukee County Circuit Court and attempted to garnish Callahan's payments. Sentry Life resisted the garnishment on several different grounds, including its contention that the annuity contract contained a prohibition against any assignments and that the payments were not subject to a garnishment action. Ultimately, the garnishment action was dismissed. Wentworth then commenced a declaratory judgment suit against Callahan, Sentry, and Sentry Life seeking to enforce Callahan's agreement. The trial court found that the purchase agreements assigning the rights to Callahan's future payments were void due to the non-assignability clause in the annuity contract, and refused to grant Wentworth's summary judgment motion.

II. Analysis.

¶ 5. Wentworth contends that the trial court erred. First, Wentworth acknowledges that language in the settlement agreement does purport to prohibit Callahan's ability to assign his rights to future payments. However, Wentworth, noting that contracts are generally assignable, submits that the "modern" trend in the law is to find that the existence of non-assignability language in a contract does not void an assignment; rather, such language merely gives the obligor a cause of action for damages resulting from the assignment. Wentworth asserts that the position of the Restatement (Second) of Contracts on the issue, as well as foreign law, supports its contention. Second, Went-worth argues that public policy favors the assignment of contracts. We disagree with Wentworth's first contention and, because it is dispositive, we decline to address the second argument. See Gross v. Hoffman, 227 Wis. 296, 300, 277 N.W. 663 (1938) (stating that if a decision on one point disposes of the appeal, the appellate court need not decide other issues).

¶ 6. The interpretation of a contract presents a question of law, which is reviewed by this court de novo. See Northern States Power Co. v. Nat'l Gas Co., 232 Wis. 2d 541, 545, 606 N.W.2d 613 (Ct. App. 1999).

¶ 7. The disputed provisions in the settlement agreement and release entered into by Callahan and Sentry read:

The future periodic payments cannot be accelerated, deferred, increased or decreased by Sean E. Callahan or any beneficiary designated and no part of the payments called for herein or any specific assets of the insurer are to be subject to execution of any legal process for any obligation in any manner, nor shall Sean E. Callahan or any beneficiary have the power to sell or mortgage or encumber same, or any part thereof, nor anticipate the same, or any part thereof by assignment or otherwise.

(Emphasis added.)

¶ 8. Wentworth argues that, inasmuch as the "modern" trend in the law is not to invalidate an assignment when contract language purports to prohibit assigning it to another, but instead, permits the obligor to sue for damages arising out of the assignment, the trial court erred in finding that the Callahan/Sentry settlement language rendered the assignments void.

¶ 9. Wentworth looks to the Restatement (Second) of Contracts § 317(2), which lists the exceptions to the general rule that contracts are assignable:

Assignment of a right.
(2) A contractual right can be assigned unless
(a) the substitution of a right of the assignee for the right of the assignor would materially change the duty of the obligor, or materially increase the burden or risk imposed on him by his contract, or materially impair his chance of obtaining return performance, or materially reduce its value to him, or
(b) the assignment is forbidden by statute or is otherwise inoperative on grounds of public policy, or
(c) assignment is validly precluded by contract.

Restatement (Second) of Contracts § 317(2). Wentworth contends that although sub. (c) is potentially relevant, that exception does not render the assignment void. Wentworth posits that sub. (c) is subject to the Restatement (Second) of Contracts § 322(2) (b), which gives an obligor a right to damages for the breach of the anti-assignment clause, but does not make the assignment void. Section 322(2)(b) reads: "A contract term prohibiting assignment of rights under the contract, unless a different intention is manifested ... gives the obligor a right to damages for breach of the terms forbidding assignment but does not render the assignment ineffective." Therefore, Wentworth concludes that although the contract term prohibiting Callahan from assigning his future payments gives Sentry a right to damages, it does not render Callahan's assignments unenforceable.

¶ 10. While Wentworth concedes that the Restatement (Second) of Contracts § 317(2)(c) explicitly states that a contract can contain language that absolutely prohibits assignments altogether, and, in such a case, the assignment is unenforceable, it submits that absent clear, definite, and appropriate contract language stating that an assignment is void or invalid, an assignment is enforceable. See generally Pro Cardiaco Pronto Socorro Cardiologica, S.A. v. Trussell, 863 F. Supp. 135, 138 (S.D.N.Y. 1994) ("[Assignments are enforceable unless expressly made void."); Garden State Bldgs., L.P. v. First Fid. Bank, N.A., 702 A.2d 1315, 1321 (N.J. Super. Ct. App. Div. 1997) (" '[T]o reveal the intent necessary to preclude the power to assign, or cause an assignment violative of contractual provisions to be wholly void, such clause must contain express provisions that any assignment shall be void or invalid if not made in a certain specified way.'"). Wentworth posits that because no such language is contained in the settlement agreement between Callahan and Sentry, the assignment is valid and enforceable. We are not persuaded.

¶ 11. No Wisconsin case has addressed this issue. Thus, we first look to the contract language to ascertain the parties' intent, as our goal in scrutinizing a contract is to determine and give effect to the parties' intentions. See Wisconsin Label Corp. v. Northbrook Prop. & Cas. Ins. Co., 2000 WI 26, ¶ 23, 233 Wis. 2d 314, 607 N.W.2d 276; Eden Stone Co. v. Oakfield Stone Co., 166 Wis. 2d 105,116, 479 N.W.2d 557 (Ct. App. 1991). If the terms of a contract are plain and unambiguous, we construe the contract as it stands and apply its literal meaning. Wisconsin Label, 2000 WI 26 at ¶ 24. However, if we determine that a contract provision is ambiguous, we will look to extrinsic evidence to discern the contract's meaning. See Management Computer Servs., Inc. v. Hawkins, Ash, Baptie & Co., 206 Wis. 2d 158, 177, 557 N.W.2d 67 (1996). A contract is ambiguous where its terms are reasonably susceptible to more than one interpretation. Id.

¶ 12. Here, the language is not ambiguous. The clause prohibits Callahan from accelerating, deferring, increasing or decreasing the payments and forbids him from selling or mortgaging or encumbering same, or assigning any part thereof. Clearly, the parties' intent was to prohibit Callahan from modifying the flow and timing of the payments or from assigning the future periodic payments. Nothing in the contract language can be reasonably read to exempt Callahan from the prohibited assignment. Having determined that the parties bargained for a contract restricting Callahan's assignment of his future payments, we next determine whether this prohibition voids the assignments.

¶ 13. As noted, Wentworth, relying principally on the Restatement (Second) of Contracts § 322 and the cases that follow, claims that the assignments here are not void, they simply "give[] the obligor [Sentry] a right to damages for breach of the terms forbidding assignment but does not render the assignment ineffective." Although the Settlement Agreement does not contain the-words "void" or "invalid," we are satisfied that, under the circumstances presented here, the assignments are unenforceable.

¶ 14. First, contrary to Wentworth's assertion, our review of case law compels us to conclude that the "modern" trend is to enforce non-assignability clauses when they appear in structured settlements. See, e.g., CGU Life Ins. Co. v. Singer Asset Fin. Co., 553 S.E.2d 8 (Ga. Ct. App. 2001); In re Kaufman, 37 P.3d 845 (Okla. 2001); Shaffer v. Liberty Life Assurance Co. of Boston, 746 N.E.2d 285 (Ill. App. Ct. 2001); Wentworth v. Jones, 28 S.W.3d 309 (Ky. Ct. App. 2000); Green v. Safeco Life Ins. Co., 727 N.E.2d 393 (Ill. App. Ct. 2000); In re Nitz, 739 N.E.2d 93 (Ill. App. Ct. 2000). Ironically, one such case, Wentworth v. Jones, 28 S.W.3d 309 (Ky. Ct. App. 2000), involves the same corporation, Wentworth. There, the court, in refusing to uphold the assignment, opined:

However, we find the annuity contracts involved in this case to be of a unique character and, therefore, distinguishable from all other species of contracts— especially with respect to the issue of assignability. We are persuaded that the attempt by Wentworth to enforce its putative assignments from these tort victims must fail based on our analysis of pertinent provisions of the Internal Revenue Code, Kentucky garnishment statutes, the Kentucky Insurance Code, and public policy considerations.

Id. at 313. Ultimately, the Kentucky court concluded: "The interest obtained by Wentworth by its attempted assignment agreements with these payees was wholly illusory." Id. at 314.

¶ 15. Despite Wentworth's arguments to the contrary, we are disinclined to require "magic" words in order to enforce a non-assignability clause. When the language is clear on its face, we see no reason to require a specific word or clause in order to enforce the parties' clear intention. Words should be given their ordinary meaning and unsuspecting parties should not have to resort to a secret code in order to write enforceable contracts. Here, the parties bargained for an agreement that prohibited Callahan from assigning his future periodic payments to another: "[N]or shall Callahan . .. have the power to sell or mortgage or encumber same, or any part thereof, nor anticipate the same, or part thereof by assignment or otherwise." Despite the lack of the words "void" or "invalid," this language does not suggest that the parties intended to allow Callahan to assign his future interests in exchange for Sentry's being given the right to sue for damages.

¶ 16. Apparently, the anti-assignment language was incorporated into agreements of this type to protect tort victims from going on spending sprees. As explained by the Kentucky Court of Appeals, the Internal Revenue Code recognizes and accommodates this policy interest:

In order that the payments not be treated as taxable income, the payees' only possessory interest in the proceeds had to consist ofperiodic payments as opposed to any other form of receipt — thus assuring a continuing cushion of income to prevent "binging away" of an asset that would effectively render tort victims indigent. In consideration for the ability to guarantee adequate income for this protected class of beneficiaries, the Internal Revenue Code provided for one qualified assignment of liability for making the periodic payments to a qualified assignee.

Id. at 313. This observation was amplified in Nitz: "Under this language, in order to receive the favorable tax treatment accorded structured settlement agreements, the structured settlement recipient can receive the settlement payments only when they are due and cannot accelerate the payments or otherwise derive present economic benefit from payments due in the future." Nitz, 739 N.E.2d at 99 (citations omitted).

¶ 17. The dispute in Nitz is identical to that here. Nitz entered into an agreement with an insurance company in order to settle a negligence action. The . settlement agreement gave Nitz a life annuity. The agreement contains language similar to that found in the Sentry/Callahan agreement:

Said payments to Plaintiff required herein cannot be accelerated, deferred, increased or decreased by the Plaintiff and no part of the payments called for herein or any assets of the Defendant and/or the Insurer is to be subject to execution or any legal process for any obligation in any manner, nor shall the Plaintiff have the power to sell or mortgage or encumber same or any part thereof, not anticipate the same, or any part thereof, by assignment or otherwise.

Id. at 96. Nitz commenced an action seeking court approval because of the existence of an Illinois statute requiring the court's permission in order to assign the future payments in an annuity agreement. In overturning the trial court's decision approving the assignment, the court found that such anti-assignment provisions were enforceable and the petitioner's attempted assignment of future payments was invalid. The court first observed that an "antiassignment provision was a bargained-for provision that was intended to benefit all parties and, therefore, was enforceable against [the assignor]." Id. at 100. Further, in addressing an argument similar to that presented by Wentworth in the instant case, that Wisconsin favors free assignments because it has adopted U.C.C. § 9-318 (1992), the court commented that the court's ruling did not fly in the face of Article 9 of the Uniform Commercial Code because annuity policies fall outside the U.C.C.:

[T]he Commercial Code expressly excludes from article 9 'a transfer of an interest or claim in or under any policy of insurance, except as provided with respect to proceeds . .. and priorities in proceeds.' An 'annuity policy' is an 'insurance policy providing for monthly or periodic payments to the insured.' Accordingly, article 9 does not apply to annuity policies, such as the one here.

Id. at 101-02 (citation omitted). Further, we note that a contract settling a tort action is not an ordinary commercial transaction regulated by the U.C.C., such as one might find in a contract between two businesses. Although we note that several cases have interpreted anti-assignment clauses differently, and some have determined that the obligor was entitled to sue for damages, we find the analysis of Nitz to be the better reasoned. Thus, we adopt it.

¶ 18. Additionally, like Wentworth's Kentucky case that addressed similar anti-assignment language, the anti-assignment language in the instant case was inextricably linked to favorable tax treatment for both parties. Similar to the Kentucky contract, here, the sentence preceding the prohibitions on the future payments references the same provision of the Internal Revenue Code: "All sums set forth herein constitute damages on account of personal injuries and sickness, within the meaning of Section 104(a)(2) of the Internal Revenue Code of 1986, as amended." Thus, we conclude that the language limiting the payments in a number of ways, including prohibiting their assignment, was included to preserve their tax-preferred status. This is an additional reason for finding the assignments void. Consequently, we are satisfied that not only the language, standing by itself, makes the assignments unenforceable, but also, here, the parties needed to assure any assignment would be void in order to continue the future payments' tax code eligibility.

¶ 19. Thus, we are satisfied that the anti-assignment language was intended to retain a favorable tax provision and, as such, the clear and unambiguous language prohibiting any assignments was enforceable. Accordingly, we affirm.

By the Court. — Judgment affirmed.

       Originally, Settlement purchased $650 of Callahan's future monthly $1225 payment for payments due from July 1, 1996, through June 1, 2008. An amendment to the agreement was executed entitling Settlement to receive an additional $275 of the $1225 payment for the same time period as the initial agreement. Finally, another amendment was entered into by Callahan and Settlement in which Settlement purchased the remaining $300 of the $1225 monthly payment. This amendment extended the $300 monthly payments assignment until July 1, 2011. Altogether, Settlement paid Callahan approximately $57,000 for his future monthly payments.

       Wentworth argues that any concern that an assignment jeopardized the intended preferential tax treatment is put to bed by the passage of the Victims of Terrorism Tax Relief Act of 2001. We remain unpersuaded by this argument, and, in any event, the parties' intent and the existing law at the time the contract was entered controls our analysis.

       While we decline to address the public policy issue raised by Wentworth, we find the comments of the Illinois court discussing the legislature's decision to protect structured settlement recipients bear repeating. "The legislature was concerned that such persons were accepting offers of ready, but deeply discounted, cash from companies in exchange for their settlement annuity payments and then ending up penniless and without resources in the future." In re Nitz, 739 N.E.2d 93, 97 (Ill. App. Ct. 2000).