source: Caselaw Access Project

author: BROWN, J.

license: Public Domain

text:
    State of Wisconsin, Plaintiff-Respondent, v. Justin D. Gudgeon, Defendant-Appellant.

    Court of Appeals

      No. 2005AP1528.

      Oral argument April 13, 2006.

      Decided June 14, 2006.

    2006 WI App 143
    (Also reported in 720 N.W.2d 114.)

      On behalf of the defendant-appellant, the cause was submitted on the briefs of and oral argument by Jefren E. Olsen, assistant state public defender of Madison.

      On behalf of the plaintiff-respondent, the cause was submitted on the brief of Peggy A. Lautenschlager, attorney general, and James M. Freimuth, assistant attorney general. There was oral argument by James M. Freimuth.

    Before Brown, Nettesheim and Anderson, JJ.

       Petition to review denied 9-11-06.

   BROWN, J.

¶ 1. In this case, the circuit court made known in writing that it wanted Justin D. Gudgeon's probation extended before the extension hearing even took place. Gudgeon claims that the court was therefore biased in favor of a particular result before listening to the evidence. The State counters that Gudgeon's claim is a collateral attack since he never appealed the extension order and did not even appeal a subsequent probation revocation. We agree, but one exception to the prohibition on collateral attack is if the tardy petition was due to newly discovered evidence. This may be the case here, and we remand with directions that the circuit court hear whether the evidence was newly discovered. If the circuit court so holds, then we direct the circuit court to vacate the extension order on grounds of judicial bias and order a new extension hearing. We further offer to our supreme court the thought that judicial bias is the type of structural error that should afford relief by collateral attack in the same manner as claims alleging lack of counsel.

¶ 2. On August 24, 2000, Gudgeon was convicted for operating a vehicle without the owner's consent. This judgment of conviction arose from an incident in which Gudgeon took off with another individual's motorcycle and attempted to flee from police. After Gudgeon abandoned the motorcycle in a ditch, one of the officers in pursuit accidentally ran into it. The bike was destroyed. Accordingly, the judgment of conviction called for restitution of $8425 to the owner as a condition of Gudgeon's probation.

¶ 3. On May 15, 2002, Gudgeon's probation agent sent a letter to the court. The agent noted that Gudgeon's condition time was about to expire and that because of other charges, he was in custody and did not have the option of work release. She indicated that Gudgeon might not be available for supervision if convicted on pending charges from out of state and noted that he still owed $7834.53 in restitution. She proposed the following:

Rather than simply extend Mr. Gudgeon's supervision, I am respectfully asking that the court convert the court obligations to a civil judgement [sic]. Such a judgement [sic] would generate interest for the victim while simply extending supervision would not. In addition, as previously noted, Mr. Gudgeon may not be available to earn money in the community if convicted in Illinois.

In reply, Judge Michael S. Gibbs handwrote at the bottom of the letter, "No — I want his probation extended" and sent copies to the probation agent, the district attorney, and Gudgeon's last attorney of record.

¶ 4. An extension hearing took place on August 21. The State pointed out that Gudgeon had outstanding restitution, and the court, Judge Gibbs presiding, asked Gudgeon how much he had paid. Gudgeon could not remember, but his agent stated that he had paid a total of $620, after which the court inquired whether Gudgeon had been working. Gudgeon replied that he had not because he had been in custody. The court responded by asking, "And why is it that you don't think you should have to pay this restitution?" Gudgeon stated that he did think he should have to pay and that he intended to do so but that the amount was "not pocket change." The following colloquy ensued:

THE COURT: All right. That's right. It's not pocket change to the victim either. The only way I can see where we can make sure you are going to pay is to keep the hammer over your head, give you an incentive to pay it; otherwise, I don't believe you will. You said that you want to pay it. You said you intend to pay it. I'm going to make sure you pay it.
Your probation is going to be extended for two years. If you pay that off, you get off supervision. The sooner you pay it off, the sooner you get off probation.
THE DEFENDANT: What happens if I go to jail? Then I get revoked and have to go through the whole process again.
THE COURT: We'll see what happens. That's then. You got to pay your restitution. And you had a six-month stayed sentence, so you did something to get yourself locked up. You could have been working.
THE DEFENDANT: I was working at the time.
THE COURT: You could have been working, but instead you were doing something to get this alternative to revocation as an additional six months or had to do your stayed time. So I don't feel sorry for you. You have to take this real seriously. Get on it and get it done. If you want to get off probation, pay that. I'd do it fast if I were you.

¶ 5. Gudgeon did not appeal the extension. In May 2003, his probation was revoked because of violations, and the court sentenced him. He did not appeal that revocation and sentence either. Instead, he brought a motion for postconviction relief, pursuant to Wis. Stat. § 974.06 (2003-04). He alleged that his due process rights had been violated during the extension proceedings because the presiding judge was not a neutral magistrate. Gudgeon read the court's handwritten notation on the letter from his probation agent as prejudging his case with respect to whether to extend probation. He also viewed some of the court's language at the hearing as evidence that the court was actually influenced by this bias. The postconviction court denied relief, and Gudgeon appeals.

¶ 6. We first determine whether we can even reach the merits of Gudgeon's challenge. As the State points out, Gudgeon never appealed from the extension order. We recognize that courts generally disfavor collateral challenges because they disrupt the finality of prior judgments and thereby " 'tend to undermine confidence in the integrity of our procedures' and inevitably delay and impair the orderly administration of justice." See Custis v. United States, 511 U.S. 485, 497 (1994) (citation omitted) (refusing to allow collateral attack on a conviction at a sentence enhancement proceeding); State v. Hahn, 2000 WI 118, ¶¶ 26-28, 238 Wis. 2d 889, 618 N.W.2d 528 (following Custis), modified on other grounds, 2001 WI 6, 241 Wis. 2d 85, 621 N.W.2d 902; Boots v. Boots, 73 Wis. 2d 207, 216, 243 N.W.2d 225 (1976) (general rule precludes attacking a judgment in a collateral proceeding unless judgment was procured by fraud). Moreover, this disruption occurs in independent proceedings intended for different purposes. Custis, 511 U.S. at 497; Hahn, 238 Wis. 2d 889, ¶¶ 26-27.

¶ 7. Despite this general bar on collateral attacks, the law does recognize exceptions. In Hahn, our supreme court followed the United States Supreme Court's holding in Custis, which established that the federal constitution does not require the courts to permit collateral attacks on a judgment of conviction used for sentence enhancement purposes unless the defendant's challenge is based on a lack of counsel in the prior proceeding. See Custis, 511 U.S. at 496; Hahn, 238 Wis. 2d 889, ¶¶ 23-29. Custis observed that a court's failure to appoint counsel for an indigent defendant was a "unique constitutional defect," Custis, 511 U.S. at 496, reasoning that "[t]he right to be heard would be, in many cases, of little avail if it did not comprehend the right to be heard by counsel," id. at 494-95 (alteration in original; citation omitted). In limiting collateral attacks to those challenges raising the right to appointed counsel, Custis and Hahn invoked the policy of finality discussed above. See Custis, 511 U.S. at 497; Hahn, 238 Wis. 2d 889, ¶¶ 26-27. They also invoked administrative concerns relating to fact finding, noting that resolving many constitutional challenges would require the court in a pending proceeding to rely on records from other courts, which the court may not have. See Custis, 511 U.S. at 496; Hahn, 238 Wis. 2d 889, ¶¶ 24-25. Presumably, figuring out whether an individual was represented by counsel in a prior proceeding would not require extensive fact finding.

¶ 8. We cannot use Hahn to decide whether to absolve Gudgeon of his collateral attack problem for the simple reason that we are an error-correcting court and it is for our supreme court, as our judicial administration policymaking body, to make that decision. See Cook v. Cook, 208 Wis. 2d 166, 188-89, 560 N.W.2d 246 (1997). Nonetheless, in the following paragraphs, we will explain why we believe it would be a wise decision for the supreme court to expand Hahn to the situation at bar.

¶ 9. We are persuaded that the deprivation of an impartial and unbiased tribunal warrants an exception to the general prohibition of collateral attacks just as does the situation where a person allegedly was not afforded counsel. First, we examine what makes the deprivation of a right to counsel "unique." Although Custis never used the term, we note that the Court has recognized the total deprivation of counsel as a "structural error." See Neder v. United States, 527 U.S. 1, 8 (1999). A "structural error" is one so fundamental that the courts consider it per se prejudicial and do not apply a harmless error analysis. Id. They differ in magnitude from other constitutional errors because they are "defect[s] affecting the framework within which the trial proceeds, rather than simply... error[s] in the trial process itself." Id. (citation omitted). These defects "infect the entire trial process" because they "depriv[e] defendants of 'basic protections' without which 'a criminal trial cannot reliably serve its function as a vehicle for determination of guilt or innocence'" and thereby "render a trial fundamentally unfair." Id. at 8-9 (citations omitted).

¶ 10. A biased tribunal, like the lack of counsel, constitutes a "structural error." See id. at 8; Franklin v. McCaughtry, 398 F.3d 955, 961 (7th Cir. 2005); State v. Carprue, 2004 WI 111, ¶ 59, 274 Wis. 2d 656, 683 N.W.2d 31. Indeed, common sense dictates that the whole point of having counsel is to help the defendant present the facts and the law to the tribunal in the light most favorable to the defendant. Such a presentation becomes worthless when the court has already made up its mind as to the outcome. See Custis, 511 U.S. at 494-95 (discussing right to counsel in terms of "right to be heard” (emphasis added)); cf. Neder, 527 U.S. at 8 ("[I]f the defendant had counsel and was tried by an impartial adjudicator, there is a strong presumption that any other [constitutional] errors that may have occurred are subject to harmless-error analysis." (Citation omitted; alteration in original; emphasis added.)).

¶ 11. Our supreme court has also on occasion iterated the importance of an impartial tribunal. Guthrie v. WERC, 111 Wis. 2d 447, 331 N.W.2d 331 (1983), involved an appeal from an administrative decision. The former assistant attorney general had represented WERC in a 1974 appeal to the circuit court. Id. at 448-49. Three years later, during later proceedings following remand, this same individual — now a commissioner — drafted WERC's decision on the merits. Id. at 448-50. The supreme court agreed with this court and the circuit court that the commissioner should have disqualified himself. See id. at 451-54. The court stated, "It is, of course, undisputable that a minimal rudiment of due process is a fair and impartial decisionmaker." Id. at 454 (emphasis added). "[A] 'fair trial in a fair tribunal is a basic requirement of due process.'" Id. at 454 (citation omitted).

¶ 12. The court echoed these thoughts in Morris v. City of Cedarburg, 176 Wis. 2d 14, 498 N.W.2d 842 (1993). That case involved an appeal from a zoning board decision in which the chairman had made remarks indicating he had prejudged the question of whether a landowner's property had lost its legal-nonconforming-use status prior to the actual hearing. Id. at 19-20, 27-28. The court held that the hoard must rehear the matter without the chairman. Id. at 31. It explained that, "Since biases may distort judgment, impartial decision-makers are needed to ensure both sound fact-finding and rational decision-making as well as to ensure public confidence in the decision-making process." Id. at 25-26. Thus, when an individual attacks a former proceeding on the basis of judicial bias, we see as compelling a reason for overriding finality as when the challenge is based on the failure to appoint counsel.

¶ 13. We further note that this case also does not present any fact-finding difficulties. We have a complete record before us. Indeed, the communication to which Gudgeon objects is in the court's own handwriting.

¶ 14. Based on the foregoing, if it were our decision to make, we would extend Hahn to this case. As we said earlier, however, it is not in our power to break new ground in this area. First, certain language in Hahn indicates that we need bright-line rules. "Although these administrative considerations may weigh differently in different cases, we conclude that considerations of judicial administration favor a bright-line rule that applies to all cases." Hahn, 238 Wis. 2d 889, ¶ 28. Whether a judge was biased will often require more fact-finding than is present here. Thus, although we are convinced that the structural error is serious enough to justify an exception to the prohibition on collateral challenges, we cannot be positive the supreme court would endorse an expansion of Hahn for judicial bias cases. Indeed, although Neder identified roughly half a dozen types of structural error, see Neder, 527 U.S. at 8 (lack of counsel, judicial bias, racial discrimination in jury selection, denial of self-representation at trial, denial of public trial, defective reasonable-doubt instruction), Custis and Hahn only singled out absence of counsel as a basis for allowing collateral attacks.

¶ 15. Second, as we have noted already, this court is primarily an error-correcting court. See Cook, 208 Wis. 2d at 188. Making a determination about whether to expand Hahn to encompass judicial bias challenges requires a delicate balancing of public policy considerations more appropriate to the supreme court's function of defining and developing the law. See id. at 189. Accordingly, this court will not leap first.

¶ 16. But having set aside the idea of adopting a Hahn-type exception to cases alleging judicial bias, we still need to discuss this case based on the issues as they were framed to us in the briefs and during oral argument. We do so now.

¶ 17. The parties, citing State ex rel. Booker v. Schwarz, 2004 WI App 50, 270 Wis. 2d 745, 678 N.W.2d 361, agree that the law also recognizes newly discovered evidence as an exception to the general prohibition of collateral challenges. The point of dispute between the parties appears to be a factual one, namely, whether Gudgeon's claim of judicial bias stems from newly discovered evidence, most notably the letter containing the court's handwritten message. The test for newly discovered evidence contains five elements. In order to satisfy this test, the moving party must show that: (1) the party learned of the evidence after the relevant proceeding; (2) the party was not negligent in seeking to discover it; (3) the evidence must not be merely cumulative to other evidence adduced; (4) the evidence must be material to the issue before the court; and (5) it must be reasonably probable that a different result would be reached in a new proceeding. See id., ¶ 12.

¶ 18. The first three elements are completely factual; since we are not a fact-finding court, we remand to the circuit court with directions that it hear whether Gudgeon meets these elements. The court should consider not only the court's written notation but also any evidence separate and apart from the note that Gudgeon might have had about the court's apparent prejudgment of the case. For example, the limited state of the current record reveals that after the trial court penned the notation, "No — I want his probation extended," Gudgeon's probation officer wrote to the trial court advising that Gudgeon had refused to sign papers agreeing to an extension of probation. Thus, the circuit court should examine what, if anything, the probation officer communicated to Gudgeon as to the trial court's stance on the extension question.

¶ 19. We will now address the fourth and fifth elements of the newly discovered evidence test. We need not dwell on the fourth. It is obvious that evidence, such as the court's note, indicating that the judge was predisposed to a particular outcome is material to a judicial bias claim. The fifth element deals with the probability that the result would have been different, and this court is in just as good a position as the circuit court to answer that question. See State v. Pepin, 110 Wis. 2d 431, 435-36, 328 N.W.2d 898 (Ct. App. 1982) (appellate review generally justified where trial court has no advantage in addressing the question); Ronald R. Hofer, Standards of Review — Looking Beyond the Labels, 74 Marq. L. Rev. 231, 237-39 (1991) ("labels of 'fact' and 'law1" are little more than measures of deference to trial court; deference unnecessary where trial court not in a "better position" to decide the question); Estate of Schultz v. Schultz, 194 Wis. 2d 799, 807-08, 535 N.W.2d 116 (Ct. App. 1995) (citing Pepin and Hofer).

¶ 20. Simply put, if the trial court finds as a factual matter that evidence of the court's partiality was newly discovered, then the issue boils down to whether the note exhibits judicial bias. When analyzing a judicial bias claim, we always presume that the judge was fair, impartial, and capable of ignoring any biasing influences. See Franklin, 398 F.3d at 959. That presumption, however, is rebuttable. Id. at 960. The test for bias comprises two inquiries, one subjective and one objective. Id. Either sort of bias can violate a defendant's due process right to an impartial judge. Id.; State v. Walberg, 109 Wis. 2d 96, 105-06, 325 N.W.2d 687 (1982). Judges must disqualify themselves based on subjective bias whenever they have any personal doubts as to whether they can avoid partiality to one side. Id. The parties agree that this sort of bias is not at issue here.

¶ 21. The second component, the objective test, asks whether a reasonable person could question the judge's impartiality. Franklin, 398 F.3d at 960; Walberg, 109 Wis. 2d at 106-07 (looks to whether impartiality can "reasonably be questioned"). Actual bias on the part of the decision maker certainly meets this objective test. In re Murchison, 349 U.S. 133, 136 (1955); Franklin, 398 F.3d at 960-61. Sometimes, however, the appearance of partiality can also offend due process:

[O]ur system of law has always endeavored to prevent even the probability of unfairness .... "[E]very procedure which would offer a possible temptation to the average man [or woman] as a judge .. . not to hold the balance nice, clear and true between the State and the accused, denies the latter due process of law." Tumey v. Ohio, 273 U.S. 510, 532 [(1927)]. Such a stringent rule may sometimes bar trial by judges who have no actual bias and who would do their very best to weigh the scales of justice equally between contending parties. But to perform its high function in the best way "justice must satisfy the appearance of justice." Offutt v. United States, 348 U.S. 11, 14 [(1954)].

Murchison, 349 U.S. at 136.

¶ 22. We have reviewed numerous cases, both state and federal, that discuss these two aspects of objective bias. Initially, we had a difficult time discerning from them whether actual bias was necessary or merely sufficient. Several cases indicated that the former was true, that apparent bias did not suffice to establish a due process violation. See, e.g., Cartalino v. Washington, 122 F.3d 8, 11 (7th Cir. 1997); State v. O'Neill, 2003 WI App 73, ¶¶ 11-12, 261 Wis. 2d 534, 633 N.W.2d 292 (objective test asks whether objective facts reveal actual bias; "It is not sufficient to show that there is an appearance of bias or that the circumstance might lead one to speculate that the judge is biased."); State v. McBride, 187 Wis. 2d 409, 417, 523 N.W.2d 106 (Ct. App. 1994) ("While the record provides an ample basis for the judge's conclusion that there would be the appearance of partiality, it does not demonstrate that Judge Koehn was actually biased."); Harvey v. State, 751 N.E.2d 254, 259-60 (Ind. Ct. App. 2001). Other precedents stated the contrary. See e.g., Walberg, 109 Wis. 2d at 109; Murchison, 349 U.S. at 136 (see language quoted above that sometimes judge without actual bias must be recused); Aetna Life Ins. Co. v. Lavoie, 475 U.S. 813, 825 (1986); Bracy v. Schomig, 286 F.3d 406, 411 (7th Cir. 2002) ("ordinarily 'actual bias' is not required, the appearance of bias is sufficient to disqualify a judge"). On its face, the law appeared to be hopelessly contradictory.

¶ 23. Further examination, however, reveals that this divergent case law can be harmonized. Those cases that recognized appearance of partiality as sufficient seemed to do so only where the apparent bias revealed a great risk of actual bias. The Eighth Circuit's opinion in Jones v. Luebbers, 359 F.3d 1005, 1012-13 (8th Cir. 2004), cert. denied, 543 U.S. 1027 (2004), is particularly illuminating. Upon setting forth the Murchison rule that apparent bias can violate due process, the court goes on to observe how the application of Murchison has varied depending on context. Jones, 359 F.3d at 1012-13. According to Jones, for certain manifestations of judicial bias — such as taking bribes or presiding over contempt proceedings arising out of alleged misconduct that occurred in front of the presiding judge in closed chambers — Murchison will nearly always require disqualification. Jones, 359 F.3d at 1012-13. See also Cartalino, 122 F.3d at 11 (observing some temptations are so severe, one can safely presume a substantial biasing incentive, such that "a demand for further evidence would be otiose").

¶ 24. In other cases, Jones teaches that we determine whether "the potential for bias is sufficiently great" to sway the average person serving as judge away from neutrality, assessing that risk in light of a realistic consideration of "psychological tendencies and human weaknesses." Jones, 359 F.3d at 1013 (citation omitted). See also State v. Harrell, 199 Wis. 2d 654, 666, 546 N.W.2d 115 (1996) (Abrahamson, J., concurring); cf. Marris, 176 Wis. 2d at 25 (employing similar language in light of common-law due process mandates: due process violated "when there is bias or unfairness in fact [or when] the risk of bias is impermissibly high" (emphasis added; footnote omitted)). In short, the appearance of bias offends constitutional due process principles whenever a reasonable person — taking into consideration human psychological tendencies and weaknesses — concludes that the average judge could not be trusted to "hold the balance nice, clear and true" under all the circumstances.

¶ 25. Applying these standards, we first consider whether there was actual bias. Again, we must presume that the court acted impartially. Although a judge who has prejudged the facts or the law cannot decide a case consistent with due process, a judge who merely expresses a general opinion regarding a law at issue in the case does not offend due process. Franklin, 398 F.3d at 962. The State argues that this case more closely resembles the latter scenario, asserting that the court's note merely revealed the judge's general feeling that it would not be appropriate to outright grant the probation agent's request for a civil judgment without exploring the option of probation extension. This inference is certainly reasonable. Members of this panel have served as trial judges, and we recognize that a trial judge receives numerous requests of various sorts every day. Often, there is not enough time to carefully consider each of these administrative matters, and the court often ends up making snap judgments, accompanied by off-the-cuff, sometimes handwritten responses. These responses are frequently curt, telegraphic, and inartfully worded. We cannot conclude that the court's notation on the letter persuasively establishes actual bias in and of itself given our experience and the reputation of this particular trial judge as a fair and just administrator of the law.

¶ 26. The appearance of partiality, however, remains problematic. We must resolve this case based on what a reasonable person would conclude from reading the court's notation, id. at 960, not what a reasonable trial judge, a reasonable appellate judge, or even a reasonable legal practitioner would conclude. The court here used strong language. "I want his probation extended." (Emphasis added.) "Want" signifies a personal desire on the court's part. Of additional significance, this expressed desire refers not to an extension hearing — at which to decide the merits of extension versus a civil judgment — but to the extension itself, an ultimate outcome. Neutral and disinterested tribunals do not "want" any particular outcome. Moreover, a reasonable person familiar with human nature knows that average individuals sitting as judges would probably follow their inclination to rule consistently with rather than against their personal desires. The ordinary reasonable person would discern a great risk that the trial court in this case had already made up its mind to extend probation long before the extension hearing took place. Further, nothing in the transcript of the extension hearing would dispel these concerns. We therefore agree with Gudgeon that the extension hearing violated his due process right to an impartial tribunal.

¶ 27. Having concluded that the circuit court was not objectively impartial, we now turn to what remedy the trial court should employ on remand should it find that Gudgeon has met the first three elements for newly discovered evidence. Gudgeon essentially claims that because the extension was a legal nullity and his probation ended, the courts no longer have jurisdiction to extend his probation. Thus, he should go free. The State, on the other hand, argues that Gudgeon should merely get a new extension hearing.

¶ 28. We agree with the State. Our supreme court in Huggett v. State, 83 Wis. 2d 790, 266 N.W.2d 403 (1978), employed in a similar case the very procedure the State advocates here. Huggett had failed to make all of the restitution payments she owed while on probation, and the circuit court had extended her probation period by two years. Id. at 792-95. Following the extension, Huggett violated her probation by absconding from the state. Id. at 795. Huggett's probation was revoked, and she was incarcerated. Id. She subsequently sought postconviction relief, arguing that the extension of probation was improper because it was premised solely on her inability to pay restitution. Id. at 795, 799. According to Huggett, because the Department of Corrections had no justifiable basis for the extension, she was "not properly on probationary status at the time she left the state." Id. at 799. The court confirmed that failure to pay restitution was not "cause" for extending probation if an indigent probationer had made a good-faith effort to pay. Id. at 803. Thus, it concluded that the real controversy — whether cause existed for extension — had not been fully tried and remanded the case to the trial court to decide the cause issue. Id. at 802-04.

¶ 29. Obviously, the original term of Huggett's probation had long been over by the time the supreme court ordered the retroactive hearing to determine cause. We have the same situation here. Moreover, in both this case and Huggett, the extension hearing resulted in an invalid extension. We see no reason not to follow the same procedure as in Huggett. Indeed, we observed in State v. Sorenson, 152 Wis. 2d 471, 498, 449 N.W.2d 280 (Ct. App. 1989), that retrospective hearings have been used in a variety of cases. If the court determines on remand that cause to extend probation did exist, the sentence after revocation will stand. Otherwise, it should release Gudgeon and reduce his restitution to a civil judgment.

¶ 30. We reverse the decision of the circuit court. Although we may be convinced that the circuit court was not prejudging the extension issue, that is not the test. The risk of bias that the ordinary reasonable person would discern — which is the test — is simply too great to comport with constitutional due process. Gudgeon normally would not be entitled to a remedy, given the general prohibition on collateral challenges. That said, if he can demonstrate to the circuit court that the basis for his judicial bias claim arises from newly discovered evidence, the court must give him a new extension hearing at which it will determine whether cause existed for the extension. If so, Gudgeon has no further recourse; if not, probation ended and the court must reduce the restitution to a civil judgment.

¶ 31. Moreover, we reiterate our view that the supreme court ought to expand Hahn to recognize an additional exception to the bar on collateral attacks for challenges premised upon judicial bias. When a tribunal predetermines how it will rule, the error is structural and poisons the entire proceeding. This structural defect offends due process at least as much as the lack of counsel; unless the tribunal listens disinterestedly to what both parties have to say, defense counsel becomes little more than courtroom decor. The right to counsel presupposes a fair and impartial judge.

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

       The letter to the court was addressed to Judge James L. Carlson, but due to rotation, Judge Gibbs responded to the letter.

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

       Prior to oral argument, we did ask the parties to be prepared to discuss this issue and the subject was explored during arguments.

       In its brief the State appeared to suggest that Gudgeon did not timely raise the issue of newly discovered evidence, presumably because he never raised it in the circuit court. Our review of the record reveals, however, that the State never argued Gudgeon's challenge was an impermissible attack. Thus, Gudgeon had no reason to invoke the newly discovered evidence exception. Accordingly, we reject any suggestion that Gudgeon waived the issue.


author: FINE, J. WEDEMEYER, EJ.

text:
    Milwaukee Regional Medical Center, Inc., Plaintiff-Respondent-Cross-Appellant, v. City of Wauwatosa, Defendant-Appellant-Cross-Respondent.
    Court of Appeals

      No. 2005AP1160.

      Oral argument May 23, 2006.

      Decided June 20, 2006.

    2006 WI App 139
    (Also reported in 720 N.W.2d 161.)

      On behalf of the defendant-appellant-cross-respondent, the cause was submitted on the briefs of and oral argument by Beth Thorson Aldana, assistant city attorney, of the City of Wauwatosa.
    On behalf of the plaintiff-respondent-cross-appellant, the cause was submitted on the briefs of and oral argument by Margaret M. Derus, of Reinhart, Boerner, Van Deuren, S.C., of Milwaukee.

      Before Wedemeyer, EJ., Fine and Kessler, JJ.

       Petition to review granted 9/12/07.

   FINE, J.

¶ 1. The City of Wauwatosa appeals the trial court's order granting summary judgment to the Milwaukee Regional Medical Center, Inc., declaring that the Regional Medical Center was entitled to a property-tax exemption for the tax years 2001, 2002, and 2003, under Wis. Stat. § 70.11(2) for the Center's daycare facility on Milwaukee County land under a long-term lease, and directing that Wauwatosa refund to the Medical Center property taxes it paid under protest for those years. The Regional Medical Center cross-appeals, seeking review of the trial court's non-dispositive determination that the Center was not entitled to a property-tax exemption under § 70.11(4) for the Center's daycare facility for those years. We reverse the trial court's order.

I.

¶ 2. The facts material to this appeal are not disputed, and, where appropriate, we quote from the parties' written stipulation.

¶ 3. The Regional Medical Center is a consortium of the following members: Children's Hospital of Wisconsin, Froedtert Hospital, the Medical College of Wisconsin, Curative Care Network, Milwaukee County Behavioral Health Division, and the Blood Center of Southeastern Wisconsin. It is a charitable organization under federal law and, accordingly, is exempt from federal income taxation.

¶ 4. The Regional Medical Center leases land on the Milwaukee County Institutions Grounds in Wauwa-tosa from Milwaukee County. The County has title to the land, which is approximately one and three-quarters of an acre, and was leased to the Center by the County in 1990 for fifty years and for the specific purpose of permitting the Center to build the daycare facility, which the Center did in 1991. The Center pays Milwaukee County rent of one dollar per year for thirty years, which is also the projected "life" of the daycare building for straight-line depreciation purposes. After the thirtieth year, the parties agreed to agree on an appropriate rental for the land, and, if they could not agree, the lease sets the rental at ten-percent of the land's fair-market value, "disregarding any increment in value due to improvements made by" the Center.

¶ 5. According to the parties' stipulation, the building "is a two-story facility custom-designed for child care and includes 16 classrooms, 2 offices, kitchen, indoor play area, mechanical room, and adult and children's bathrooms." Additionally, the daycare complex includes "four fenced patios, two fenced playground areas, a garage and two parking lots with 59 surface parking stalls." The daycare facility was built with financing supplied by tax-exempt bonds, and the Regional Medical Center services the debt.

¶ 6. The daycare facility "provides year-round comprehensive programs for children age six weeks through six years, along with school age and summer programs for children through age 12." The programs have a large educational component for each age group that is appropriate to that age group. The facility is managed by a company that is not related to the Center, and is paid a flat fee by the Center (ranging, for the years material to this appeal, from $48,000 to $60,000). The teachers and staff at the daycare facility are, however, paid by the Center.

¶ 7. As of October 2001, 151 children were enrolled in the daycare program. This rose to 193 as of November 2002, and to 216 as of December 2003. The daycare facility draws children from "employees and students of the Milwaukee Regional Medical Center, its member organizations and the general public." The daycare facility does not give preference to children whose parents are connected to the Center or its members. Indeed, not only does the Center advertise the daycare facility to the general public, but a substantial percentage of the children in the facility come from that community, ranging, for the years material to this appeal, from a low of approximately thirty-three percent to a high of forty-seven percent. Children from both communities (those whose parents are connected to the Center or its members, and those who are not) pay fees to attend the daycare facility. "The revenues from the operation of the day care center are segregated in a separate account and used for the operation of the Day Care Program, including upkeep of the Building and grounds, painting, maintenance, remodeling and debt retirement."

¶ 8. The lease required that the projected daycare facility have "a minimum construction cost of $400,000," and that construction not start until the County approved the facility's "plans and specifications." The County also had to approve any "material changes" in those plans and specifications, as well as any "[ajdditions, additional buildings and alterations to the facility costing in excess of $50,000." No County approval is required, however, "[f]or projects not exceeding a cost of $50,000," unless those projects involved adding to the facility or constructing "additional buildings" on the land.

¶ 9. The lease permitted the Center to finance construction any way the Center saw fit, and allowed the Center to mortgage its leasehold interest in the land. Further, to facilitate financing, the County agreed that it would consider modifications to the lease if requested by one or more sources of financing for the project, and that these modifications could include "the subordination of [Milwaukee Countyj's fee interest in the [land] to any leasehold mortgage."

¶ 10. The lease required the Regional Medical Center to "minimize any interruption of full and corn-píete public usage as per site plan during all phases of construction," and required the Center to "restore all roadways to the same or similar condition as existed prior to the commencement of construction." The Center had to pay Milwaukee County for its water and sewer charges, and, initially, also had to buy electricity from Milwaukee County, although this requirement was later rescinded. The Center also had to "provide needed security for the interior of' the facility, and pay its pro rata share "of exterior common area security."

¶ 11. As we have seen, Milwaukee County leased the land to the Regional Medical Center for the specific purpose of building a daycare facility. Thus, the lease essentially restricts use of the land to that purpose:

The [land] and Facility shall be used as a child care center to serve employees and students of the Milwaukee Regional Medical Center, its member organizations and the general public and for no other purpose, without the prior written consent of [Milwaukee County]. [The Center] shall not lease space in its Facility to any person or entity without the prior written consent of [Milwaukee County] which consent shall not be unreasonably withheld. Failure to comply with this requirement shall be deemed a breach of this lease.

The lease also required the Center, at its "sole cost and expense" to get "fire insurance with an extended coverage endorsement against loss or damage to the Facility in an amount equal to at least eighty percent (80%) of the full insurable value of the Facility, which shall be determined on a replacement cost basis, less physical depreciation of the Facility." (Parenthetical in original.) Milwaukee County had to be named "as a co-insured." The Regional Medical Center also had to get "a public liability insurance policy," with the County on the policy as "an additional insured."

¶ 12. If the land on which the daycare facility was built was taken in whole or in part by condemnation or its equivalent, so that, "in the sole opinion" of the Regional Medical Center, the Center could not effectively run its daycare facility, the lease would end, and Milwaukee County would receive that part of the award that was attributable to the land, without considering value added to the land by the daycare facility. The balance of the award would go to the Center. If, however, the Center, in its "sole opinion," determined that it could still run the daycare facility on the land not taken, the lease would not end and the Center could use all of the condemnation award to reconfigure the facility. In reconfiguring the facility, the Center was not required to adhere to the original plans and specifications, as long as the quality of the facility was not impaired. Any money left over after the reconfiguration would be split between the County and the Center, with the County getting the part attributable to the land's value (again, not affected by any value added by the facility), and the Center getting the rest.

¶ 13. The lease also included various provisions affecting the Center's use of the property. Thus, the Center was allowed to place appropriate signage on the property, and had to keep the land and the facility in a "good, clean, safe, secure and sanitary condition," performing whatever maintenance was reasonably required. The Center also had to properly fence the facility so as to reduce the risk of injury to the children using it. Further, Milwaukee County has the right, upon proper notice to the Center, to enter the land "at reasonable times for the purpose of examining and inspecting whether [the Center] has or is performing [the Center]'s covenants" under the lease, and also to examine, maintain, repair, or replace the County's "utility lines." The Center also has to pay its pro rata share of the County's cost of a Wauwatosa fire station on the Milwaukee County Institutions Grounds.

¶ 14. Although the Center has title to the daycare facility for the duration of the lease, once the lease runs out, title to the facility (excluding the Center's movable property) would, "at the option of Milwaukee County, vest in Milwaukee County . . . free and clear of mortgages, liens or encumbrances." During the lease term, the Center could not, without the prior written approval of the County, sublet either the land or the building. Significantly, under the lease, if the Center makes "substantial capital expenditures" within ten years of the lease's termination, the County must reimburse the Center for "the unamortized value of their replacement cost."

¶ 15. As we have seen, this appeal concerns Wauwatosa's assessment of the Regional Medical Center's daycare facility, both the land and the building, for property taxes for the years 2001, 2002, and 2003. The Regional Medical Center paid the taxes under protest and then brought this action seeking a refund, which the trial court ordered.

II.

¶ 16. The issue presented by both the appeal and by the cross-appeal is whether the Regional Medical Center is exempt from taxes levied by Wauwatosa for 2001, 2002, and 2003. As we have seen, the Center contends that it is exempt either under Wis. Stat. §70.11(2), as the trial court determined, or, alternatively, under § 70.11(4). Our review is de novo. See Trustees of Ind. Univ. v. Town of Rhine, 170 Wis. 2d 293, 298-299, 488 N.W.2d 128, 130 (Ct. App. 1992) ("Statutory construction is a question of law. Likewise, the application of a statute to an undisputed set of facts presents a question of law.") (citation omitted). In deciding this case, we must heed the legislature's declaration: "Exemptions under this chapter shall be strictly construed in every instance with a presumption that the property in question is taxable, and the burden of proof is on the person who claims the exemption." Wis. Stat. § 70.109.

Taxation is the rule and exemption from taxation is the exception. Tax exemption statutes are matters of legislative grace and are to be strictly construed against the granting of an exemption. A strict construction does not mean the narrowest possible reading, however. Rather, the statute should be construed in a "strict but reasonable" manner. The party claiming the exemption must show the property is clearly within the terms of the exception and any doubts are resolved in favor of taxability.

Trustees of Ind. Univ., 170 Wis. 2d at 299, 488 N.W.2d at 130 (citations omitted). We now turn to the appeal and cross-appeal.

A. Appeal by the City of Wauwatosa.

1. Introduction.

¶ 17. As material here, Wis. Stat. § 70.11(2) declares that "[p]roperty owned by any county" "is exempted from general property taxes." Section 70.11(2) also provides: "Leasing the property exempt under this subsection, regardless of the lessee and the use of the leasehold income, does not render that property taxable." The initial inquiry is whether the property is "owned" by the tax-exempt entity even though the tax-exempt entity has transferred some of its interests in that property to someone else. See City of Franklin v. Crystal Ridge, Inc., 180 Wis. 2d 561, 567-568, 509 N.W.2d 730, 732-733 (1994) (taxation of buildings on land). If, following the transfer of those interests, the governmental entity is still the "owner" under § 70.11(2), then leasing the property does not make the property taxable; if, however, the governmental entity transfers sufficient interests in the property so the governmental entity is no longer the "owner" under §70.11(2), the property is taxable for so long as the transferee retains those interests. Crystal Ridge, 180 Wis. 2d at 567-568, 509 N.W.2d at 732-733.

¶ 18. There are three decisions that set the rules for our analysis: Mitchell Aero, Inc. v. City of Milwaukee, 42 Wis. 2d 656, 168 N.W.2d 183 (1969); Gebhardt v. City of West Allis, 89 Wis. 2d 103, 278 N.W.2d 465 (1979); and Crystal Ridge. We discuss these decisions in turn, and then apply the facts of this case to their teachings.

2. The Governing Case Law.

a. Mitchell Aero.

¶ 19. Although not the first decision to deal with what is "ownership" under the tax-exemption statutes, Mitchell Aero put into play the rule that "legal title" was not necessarily determinative as to whether property could be taxed. Id., 42 Wis. 2d at 659-662, 168 N.W.2d at 184-186.

We think the ownership of property by a municipality to qualify for exemption under s. 70.11(2), Stats., means real or true ownership and not paper title only. Ownership is often referred to in legal philosophy as a bundle of sticks or rights and one or more of the sticks may be separated from the bundle and the bundle will still be considered ownership. What combination of rights less than the whole bundle will constitute ownership is a question which must be determined in each case in the context of the purpose of the determination. In this case for exemption one needs more than the title stick to constitute ownership.

Id., 42 Wis. 2d at 662, 168 N.W.2d at 185-186.

¶ 20. In Mitchell Aero, Mitchell Aero had a "noncommercial aviation business" at what was then known as "General Mitchell Field." Id., 42 Wis. 2d at 658, 168 N.W.2d at 183. Mitchell Aero leased land from Milwaukee County for twenty years, with an option to renew for five more years. Id., 42 Wis. 2d at 663, 168 N.W.2d at 186. Mitchell Aero built two hangars On the land at its own expense. Id., 42 Wis. 2d at 658, 168 N.W.2d at 183. Title to the hangars, however, was transferred to Milwaukee County for no consideration other than the County's permission to build the hangars. Id., 42 Wis. 2d at 658, 663, 168 N.W.2d at 183, 186. Although Mitchell Aero concluded that it did not "view this arrangement as a bona fide conveyance of the buildings, the cost of which is to be treated as prepaid rent," id., 42 Wis. 2d at 665, 168 N.W.2d at 187, Mitchell Aero was not obligated to pay rent for either hangar for the initial twenty-year term, but would have to pay rent for one of the hangars during the five-year renewal period, id., 42 Wis. 2d at 663, 168 N.W.2d at 186.

¶ 21. Under its lease with the County, Mitchell Aero could make "alterations" to one of the hangars with the County's consent, and those alterations would become, like the hangars, Milwaukee County property. Ibid. Further, under its land-lease with Milwaukee County, Mitchell Aero had to insure that hangar against fire, and if it collected on the policy Mitchell Aero had to use the money for the "immediate repair of any damage to the hangar." Id., 42 Wis. 2d at 663-664, 168 N.W.2d at 186. Mitchell Aero assumed that because insurance could not exceed the insured's insurable interest in property, Mitchell Aero had "a substantial insurable interest in the hangars since it was required to insure up to 80 percent of the insurable value." Id., 42 Wis. 2d at 664, 168 N.W.2d at 186. If the County either condemned Mitchell Aero's leasehold interest in the land before the end of the lease term, or abandoned the airport as "an air terminal," or if the County breached a lease provision so as to "terminate" the lease, Mitchell Aero was entitled to payment of its "unamor-tized investment" in the hangars, less a five-percent reduction for each year Mitchell Aero was able to use the hangars. Ibid. ("This provision of the lease assures to the lessee under these conditions its investment cost of the hangars on an amortized basis if it does not enjoy the possession and use of the buildings for the full term of the lease.").

¶ 22. Mitchell Aero determined that although under Mitchell Aero's lease with the County "some of the rights usually associated with ownership are in Aero and others in the county" Mitchell Aero's "arrangement" with Milwaukee County did "not pass sufficient incidents of ownership [of the hangars] with the paper title [to the hangars] to constitute the county as the true owner of the hangars within the meaning of 'owned' in s. 70.11(2), Stats." Mitchell Aero, 42 Wis. 2d at 665, 168 N.W.2d at 187. Stated another way, the County's "control" over, and title-ownership in, the hangars did not override Mitchell Aero's ability to use the hangars in its business to the exclusion of the County for the lease term, but rather "concem[ed] the operation of the airport" and was thus "not indicative of true ownership" of the hangars by the County to make them exempt from taxation. Ibid.

b. Gebhardt.

¶ 23. Gebhardt, like Mitchell Aero, concerned a municipality's attempt to tax buildings built on land leased from a tax-exempt entity. Richard Gebhardt and his partner built an ice-skating facility on land they leased from the State of Wisconsin in the Wisconsin State Fair Park in West Allis. Gebhardt, 89 Wis. 2d at 104, 278 N.W.2d at 465. The lease was for an initial term of ten years, which Gebhardt and his partner could renew for ten more years. Ibid. Gebhardt and his partner spent "nearly $500,000" building the ice-rink facility. Ibid. West Allis sought to tax the facility. Id., 89 Wis. 2d at 104, 278 N.W.2d at 466. Gebhardt concluded that although Gebhardt and his partner retained title to the facility for the lease term, the State was the facility's beneficial owner, and the facility was thus exempt from taxation. Id., 89 Wis. 2d at 106-115, 278 N.W.2d at 466-471. Gebhardt's analysis focused on two main areas: receipt of benefit from the building, and control over the building's construction and use. We look at these aspects of the decision in turn.

¶ 24. As counsel for Wauwatosa expressed it at oral argument, operation of the ice-rink building at State Fair Park was, in essence, a joint venture between the State and Gebhardt and his partner, with the State receiving substantial benefits from that joint undertaking. Under the lease, Gebhardt and his partner could use the rink for ten months out of the year, and the State had exclusive use of the facility for the remaining two months. Id., 89 Wis. 2d at 109, 111, 278 N.W.2d at 468, 469. The State also had the exclusive right to sell concession-type items and refreshments in the ice-rink facility. Id., 89 Wis. 2d at 111, 278 N.W.2d at 469. Additionally, the State not only received rent from Gebhardt and his partner, but also was paid "a percentage of the gross receipts from the operation" of their ice-rink business. Id., 89 Wis. 2d at 110, 278 N.W.2d at 468. The State's benefit was substantial: "In 1975, [Gebhardt and his partner's income from the property was $81,000 for the ten-month period; while the state received $62,695 in rental proceeds during the two-month period it enjoyed exclusive use of the building and netted $4,896 in profit from operating the concession stand throughout the year." Id., 89 Wis. 2d at 115, 278 N.W.2d at 471. Moreover, the State was able to make Gebhardt and his partner pay $15,000 to modify the building to better accommodate the State's needs during the two months it had exclusive use of the building. Id., 89 Wis. 2d at 111, 278 N.W.2d at 469. Further, the State got "a full and complete possessory interest in the" building once the lease expired, id., 89 Wis. 2d at 115, 278 N.W.2d at 470, and the obligations by Gebhardt and his partner to keep the building maintained, insured and to bear the risk of loss protected the State's ripening "possessory interest" as the lease-term ticked away, id., 89 Wis. 2d at 109, 278 N.W.2d at 468.

¶ 25. As we have seen, the State had significant control over the design, construction, and use of the ice-rink facility, most of which concerned the State's ability to profit from the ice-rink building. Id., 89 Wis. 2d at 110-112, 278 N.W.2d at 468-469. But there were other aspects of State control over the operation run by Gebhardt and his partner as well: The State had keys to the ice-rink facility and free access, id., 89 Wis. 2d at 111, 278 N.W.2d at 469; under the lease, Gebhardt and his partner had "to specifically post their hours and fees and cater to special groups in the neighborhood," id., 89 Wis. 2d at 112, 278 N.W.2d at 469; ice-rink customers could not "enter the Fair Park when the state is sponsoring a special event such as automobile races, snowmobile races or concerts," ibid.-, and Gebhardt and his partner could not sell, convey, lease, or sublet the ice-rink building unless the State gave its prior written consent, ibid.

c. Crystal Ridge.

¶ 26. Crystal Ridge, like the other two cases, concerned a municipality's attempt to tax buildings on land leased by a tax-exempt entity. Id., 180 Wis. 2d at 563-564, 509 N.W.2d at 730-731. If Gebhardt was a joint venture in essence, Crystal Ridge was a joint venture in fact.

The county originally planned to develop a ski hill and recreational facility on a 100 acre parcel of land located in the cities of Franklin and Greendale. However, objections from the Wisconsin Department of Natural Resources prevented the county from carrying out its plan.
Midwest [Development Corp.] proposed construction of a ski hill, ski chalet and other improvements on the same land at no cost to taxpayers. The county accepted this proposal and embarked on a joint venture with Midwest to develop, construct and operate "a down hill facility with restaurant/chalet and parking lot and other sports activities for all seasons ...."

Id., 180 Wis. 2d at 564, 509 N.W.2d at 731 (ellipses in original). The joint venture was to be on county land, under an initial ten-year lease, with three five-year-extension options. Ibid. Although "Crystal Ridge physically occupie[d] and manage[d] the ski hill," Midwest was "the sole lessee and legal occupant" of the property. Id., 180 Wis. 2d at 565 n.3, 509 N.W.2d at 732 n.3. The lease required that Midwest build and pay for a "75 foot high ski hill along with buildings and other improvements to the land costing ’in excess of $500,000.'" Id., 180 Wis. 2d at 565, 509 N.W.2d at 731. Under the lease, Midwest had to pay Milwaukee County "the greater of three percent of gross profits or $10,000 per year." Ibid. The County controlled where the ski hill was to be built and its slope. Ibid. The lease also required that the County "approve the design, specifications, construction and placement of all buildings and other improvements" consistent with schedules approved by the County. Ibid. Fees paid to Midwest to dump landfill on the site, from which the ski hill was to be fashioned, were split between Midwest and the County, with Midwest required to use its share of the fees to " 'improve the facility.'" Ibid. Further, the County had significant control over not only Midwest's accounting, record-keeping, and cash-management equipment, but also the ski hill's "hours of operation," prices charged for ski-hill lift tickets, ski rentals, and food and concessions sold at the facility, as well as even "some control over the restaurant menu." Id., 180 Wis. 2d at 565-566, 509 N.W.2d at 732.

¶ 27. Midwest had to insure the facility against potential liability, with the County as a named insured. Id., 180 Wis. 2d at 566, 509 N.W.2d at 732. Midwest also had to get fire insurance, although the County was not a named insured under this policy. Ibid. Crystal Ridge also mentioned that Midwest's bank did not regard the ski-hill facility as Midwest's property and "has refused to consider these buildings as mortgageable property or as collateral for loans." Id., 180 Wis. 2d at 567, 509 N.W.2d at 732.

¶ 28. After reviewing the lease and the relationships between Midwest and Milwaukee County in connection with the ski-hill facility, and "balancing the county's indicia of ownership against Midwest's indicia of ownership," Crystal Ridge determined that Milwaukee County was "the beneficial owner of the" facility and that, accordingly, the property was "exempt from the general property tax pursuant to sec. 70.11(2), Stats." Crystal Ridge, 180 Wis. 2d at 571, 509 N.W.2d at 734.

¶ 29. The rule we derive from Mitchell Aero, Ge-bhardt, and Crystal Ridge, which all concerned buildings put on land leased from a tax-exempt entity, is that the tax-exempt entity is the beneficial owner of the property if it: (1) gets not-inconsequential benefits from the property, and (2) has substantial control focused on preserving or enhancing those benefits. Where both aspects are present, as they are in Gebhardt and Crystal Ridge, the property is exempt from taxation. Where, on the other hand, the benefit to the tax-exempt entity is more illusory than real, or where the control only advances the tax-exempt entity's institutional interest as distinct from enhancing or preserving the benefits from the lease, the property will not be exempt from taxation, as in Mitchell Aero, where although the County received title to the hangars that Mitchell Aero built, it got no benefit from Mitchell Aero's use of the hangars during the initial term of the lease (it got no rent and could not use the hangars), id., 42 Wis. 2d at 663, 168 N.W.2d at 186, and the control it exercised advanced only the County's institutional interests in connection with the overall running of the airport, rather than any direct benefit it got from the hangers during the lease term, see id., 42 Wis. 2d at 665, 168 N.W.2d at 187.

3. Regional Medical Center's Daycare Facility.

¶ 30. As we have seen, unlike Mitchell Aero, Geb-hardt, and Crystal Ridge, which all involved a determination of whether the tax-exempt-entity lessor of land was the beneficial owner of structures built on that land by the lessee, this case involves both the County land and the building that the Regional Medical Center put on that land. Neither party asks that we consider the beneficial-ownership issue except as it pertains to both the land and the building as a unit.

¶ 31. As Wauwatosa argues, a significant indi-cium of "beneficial ownership" is receipt of a benefit. Unlike the situations in both Gebhardt and Crystal Ridge, where the tax-exempt entity got substantial financial benefits from what were essentially joint ventures with the businesses to which the tax-exempt entities leased their land, for the first thirty years of its lease with the Regional Medical Center, Milwaukee County not only gets no financial benefit from the arrangement but also has lost the use of, and the potential income stream from, the one and three-quarters acres it leased to the Center at an annual rental of one dollar. Although during the last twenty years of the lease the County will be able to charge the Center a rental based on the land's fair-market value, this partial and future recoupment of an income stream is not a significant present benefit from the land to make it the beneficial owner of the land now so as to make the land and the building on that land tax exempt for the years for which the Center seeks a refund of the taxes it paid under protest. Similarly, that the County can, if it wishes, have title to the Center's daycare building after the lease either expires or is terminated is also not a sufficient benefit now so as to make the County the building's beneficial owner for the tax years underlying this appeal. Further, unlike the situation in Crystal Ridge, where the lessee could not, apparently, mortgage its leasehold interest, id., 180 Wis. 2d at 567, 509 N.W.2d at 732 (lessee's bank "refused to consider these buildings as mortgageable property or as collateral for loans"), the County's arrangement with the Regional Medical Center specifically permits the Center to do precisely that, thereby adding a significant entry on the beneficial-ownership side of the Center's bundle-of-ownership-rights ledger.

¶ 32. As for aspects of control by Milwaukee County over the daycare facility, none of them gives to the County the type of day-to-day oversight that was the hallmark of control in both Gebhardt and Crystal Ridge. Rather, they are mostly generic safety, health, and aesthetic requirements that serve the County's institutional interests because the daycare facility is on the County Institutions Grounds. See Mitchell Aero, 42 Wis. 2d at 665, 168 N.W.2d at 187 ("Such control the county keeps over these hangars is not indicative of true ownership but concerns the operation of the airport."). Similarly, the insurance requirements serve the dual function of protecting the Center and its property, and, also, the County from either having a damaged building on the County Institutions Grounds that the County would have to repair, replace, or raze with its own funds, or, with respect to the liability insurance, run the risk of potential liability for activities on the daycare property over which the County has no day-today control. These, too, are institutional concerns not designed to enhance any current financial benefit the County receives from the lease arrangement with the Center. See ibid. As such, they do not make the County the "beneficial owner" of the property (land and building) for the tax years underlying this appeal.

B. Cross-Appeal by the Milwaukee Regional Medical Center.

¶ 33. As an alternative argument, the Regional Medical Center contends that if it is deemed to be the "owner" of the daycare property (land and building) for the tax years underlying this appeal, it is exempt from taxation under Wis. Stat. § 70.11(4), which, as material here, declares non-taxable "[p]roperty owned and used exclusively by educational institutions offering regular courses 6 months in the year; or by educational associations." The Center does not claim that it is an "educational institution," but rests on its claim that it is an "educational association."

¶ 34. The statute does not define "educational association." Janesville Cmty. Day Care Ctr., Inc. v. Spoden, 126 Wis. 2d 231, 234 n.2, 376 N.W.2d 78, 80 n.2 (Ct. App. 1985). The case law, however, is clear: the association must pass two hurdles. First, "an organization must be a nonprofit organization substantially and primarily devoted to educational purposes. If the educational function is merely incidental to nonexempt activities ... an exemption will not be granted." Trustees of Ind. Univ., 170 Wis. 2d at 302, 488 N.W.2d at 131 (citation omitted). Second, "the organization must be devoted to 'traditional' educational activities." Ibid. (quoted source omitted). Although the Regional Medical Center's daycare facility involves " 'traditional' educational activities," and the Center is a "nonprofit organization," the Record demonstrates unequivocally that the Regional Medical Center is not "substantially and primarily devoted to educational purposes."

¶ 35. The parties' stipulation describes the Regional Medical Center's purposes as set out in the Center's bylaws: " '(1) to aid and support the development and provision of health services in the Milwaukee region by assisting its members to develop and operate, high-quality, efficient and effective programs of education, research and patient care; (2) to facilitate the efficient development and functioning of the Medical Center Campus.'" Additionally, a financing prospectus for bonds issued on behalf of the Regional Medical Center recites: "The primary business activities of the [Regional Medical Center] include the operation of the 'Flight for Life' air ambulance service, the operation of a child care center and the ownership of a warehouse facility leased to certain Members." According to the Regional Medical Center's financial statements in the Record, the Center received more than five million dollars in "transport revenues" for each of the years 2000 and 2001, more than six million dollars for 2002, and some seven million dollars for 2003. Child-care fees were $767,663 for 2000, $1,051,015 for 2001, $1,218,943 for 2002, and $1,374,780 for 2003. Further, although, as set out in its bylaws, "assisting its members to develop and operate, high-quality, efficient and effective programs of education," may facilitate and advance a member's "educational association" activities, it does not make the Regional Medical Center, which is a coordinating body for its constituent members, an "educational association." (Emphasis added.)

¶ 36. The Regional Medical Center has not satisfied its burden to prove that its daycare facility "is clearly within the terms of the exception," see Trustees of Ind. Univ., 170 Wis. 2d at 299, 488 N.W.2d at 130, which requires that an "educational association" for the purposes of Wis. Stat. § 70.11(4) be an "organization substantially and primarily devoted to educational purposes," see Trustees of Ind. Univ., 170 Wis. 2d at 302, 488 N.W.2d at 131 (emphasis added). As Wauwatosa reflects in its brief, "[i]t cannot credibly be argued that [the Regional Medical Center]'s primary purpose is to educate pre-school children." (Emphasis in original.) Indeed, at oral argument, counsel for the Center was asked whether the daycare facility was the "dog or the tail." She replied that it would be more accurate to say that it was a "leg."

III.

¶ 37. The Regional Medical Center has not shown that its daycare facility was, for the years at issue on this appeal, 2001, 2002, and 2003, exempt from taxation by Wauwatosa. Accordingly, we reverse.

By the Court. — Order reversed.

WEDEMEYER, EJ.

¶ 38. (concurring in part; dissenting in part). I write separately because I would affirm the trial court's order on both the beneficial owner issue and the educational association issue.

A. Beneficial Owner Issue.

¶ 39. The majority concludes that the Milwaukee Regional Medical Center, rather than Milwaukee County, is the beneficial owner of the day care facility involved here, and therefore does not qualify for property tax exemption under Wis. Stat. § 70.11(2). Although the issue of beneficial ownership is, in my view, a close question, I would affirm the trial court's determination that the County maintained ownership of the property.

¶ 40. The question of whether the County, as lessor, maintained "beneficial ownership" of the property at issue here, or whether beneficial ownership became vested in the Milwaukee Regional Medical Center, as lessee, is reviewed on a case-by-case basis. See Mitchell Aero, Inc. v. City of Milwaukee, 42 Wis. 2d at 662; Gebhardt, 89 Wis. 2d at 109-10; Crystal Ridge, Inc., 180 Wis. 2d at 568. The fact-specific analysis is based on an examination of all factors relating to ownership. The key question is whether the tax-exempt entity, here the County, maintained significant control over the property.

¶ 41. The trial court, here, addressed the factors that favored concluding that the County was the beneficial owner:

Under the test or factors that would weigh in favor of County ownership, I think the following list, perhaps not exhaustive, but: [1] MRMC is required to obtain County approval of construction plans, [2] the lease would terminate and lessor would have right of possession if all construction was not completed in time. [3] The use of the property is limited to running a day care.
[4] I think it is important that this facility also, I think from, at least without having gone out there and looked at it, but my sense is that it has more possible alternative uses than some of the other buildings.
[5] The lessor has the right to enter the premises. [6] The lessee cannot sell, convey or sublet without written permission from the County. [7] The lessor [i]s required to be included as an additional insured. [8] The lessor is required to restore complete possessory interest upon termination of the lease. [9] The lessee can remove personal property on termination of the lease. However, is required to indemnify for any damages.
[10] The County is not required to purchase back the property from the MRMC. [11] MRMC is required to obtain consent before constructing a parking lot. [12] They are required to pay the County for exterior security. [13] MRMC is required to obtain fire insurance equal to 80 percent of value naming the County as co-insured. [14] They are required to obtain liability insurance naming [the] County as additional insured. [15] They have to get permission before making substantial improvements during the last ten years of the lease. [16] They are required to keep the day care in good state of clean condition, [17] plus service at least 140 children. [18] They have to purchase their electricity and water from the County and [19] any additional or alterations to the facility costing over $150,000 require consent of the County. Many of those things I read are similar to the various conditions set forth in the Gebhardt and Crystal Ridge decisions.

Next, the trial court addressed the factors which suggested that the Milwaukee Regional Medical Center was the beneficial owner:

On the list showing, or tending to show MRMC ownership, [1] MRMC can mortgage their leasehold interests, [2] they are responsible for preparing construction site and building property. [3] They only pay a dollar's rent for first 30 years. [4] They do not pay the County any revenues from the activities on the property. [5] They have title to the facility and any fixtures, equipment or other property upon the premises. [6] The County does not reserve any right for its use of the property for its own purposes. [7] They have - the length of the lease is 50 years. [8] They have no involvement in the operation of the day care. [9] County does not set the prices or hours of operation, and [10] County's approval with respect to any alterations cannot be unreasonably withheld.

After balancing the factors favoring County ownership versus Milwaukee Regional Medical Center ownership, the trial court determined:

I believe that the County does have significant control over the property as set forth in the Gebhardt and Crystal Ridge cases.
They have to, MRMC has to gain permission from the County before it engages in many activities related to their leasehold interest, such as subleasing, building any additions, constructing a parking lot, etc. and while the County cannot unreasonably withhold consent, they still have and retain the right to say no if they don't agree with some change in use of the property that they, MRMC wants to engage in and therefore, comparing the cases, I think that the County exercises enough control.... They are the owners.
So, I'm finding that based on this record, that the County is the beneficial owner of the property. I find comparisons in this case much closer to Gebhardt and Crystal Ridge than Mitchell Aero.

¶ 42. I agree with the trial court's assessment. These tax exemption cases require a balancing of factors. The reason these cases must be assessed on a case-by-case basis is because there is no bright-line rule. All cases will have factors leaning both ways. Here, the trial court, after assessing all of the factors, concluded that the circumstances in the instant case are closer to the rulings that the County maintained beneficial ownership and therefore the day care property should be exempt from paying taxes to the City of Wauwatosa. I agree with the trial court's assessment. In balancing all the "ownership" factors here, and applying the three pertinent cases, the scale tips in favor of the County maintaining beneficial ownership. Therefore, Wis. Stat. § 70.11(2), which grants tax exemption to all County-owned property applies, and the day care center is exempt from general property taxes for the tax years in question.

¶ 43. Moreover, I reject the City's contention that the trial court erred because it simply listed the factors without actually balancing the weight of each factor. The case law in this area does not require a balancing of the weight of each individual factor. Rather, the cases dictate a listing of all the indicia demonstrating ownership by the County and a listing of all the indicia demonstrating ownership by the Milwaukee Regional Medical Center. Once the indicia have been identified, the trial court's balancing involves determining whether the indicia results in the County maintaining sufficient control so as to justify tax exemption. This is exactly what the trial court did in this case. It concluded, based on the indicia, that the County executed a lease, which retained sufficient control over the property for purposes of tax exemption.

¶ 44. I also respectfully disagree with the majority's conclusion that the County does not receive a sufficiently significant financial benefit to retain beneficial ownership. In reviewing Mitchell Aero, Gebhardt, and Crystal Ridge, I am not convinced that those cases require proof of an immediate financial benefit in order to find that the County retained beneficial ownership. Rather, my review of those cases suggests that financial benefit was one among many "indicia" of ownership to be considered. These cases present a difficult determination because no two cases involve the same ownership indicia. Thus, we look at all the factors to determine whether the tax-exempt status should apply.

¶ 45. Here, in addition to the control the County retained, the County also receives a not-insignificant financial benefit. Milwaukee Regional Medical Center is required to purchase its electricity, water, sewer and security from the County. It is required to maintain hazard and liability insurance, naming the County as a co-insured and/or an additional insured. The Milwaukee Regional Medical Center agreed to share in the County's legal obligation for payment of fire protection services. These are significant financial benefits to the County. In addition, there is a public benefit which inures to County residents by having the day care facility located on the County grounds. In addition, the County receives the financial benefit of future rent and the deferred capital value of the building. When the lease expires, the leasehold returns to the County without requiring the County to pay any money to the former tenant. Thus, in my opinion, the County retains a sufficiently significant financial benefit to maintain beneficial ownership. As our supreme court pointed out in Gebhardt: "We note that public policy favors this type of tax-exempt treatment for conveyance-leaseback arrangements between private enterprise and governmental bodies." Id., 89 Wis. 2d at 115.

¶ 46. Although the facts in this conveyance-leaseback arrangement are slightly different than all three of the cases discussed herein, I agree with the trial court that that indicia of ownership tips in favor of the County retaining beneficial ownership and, therefore, the property should be tax exempt.

B. Educational Association Issue.

¶ 47. The trial court ruled that Wis. Stat. § 70.11(4) did not apply to this case because the Milwaukee Regional Medical Center does not qualify as an educational association. The majority opinion agrees with the trial court's ruling on this issue. I concur in that part of the majority's opinion.

¶ 48. Based on the foregoing, I respectfully concur in part and dissent in part with the majority opinion in this case. I would affirm in toto the trial court's order.

       The Milwaukee Regional Medical Center's cross-appeal seeks affirmance of the trial court's grant of summary judgment to it, albeit on a different ground. Although a cross-appeal is necessary when the cross-appellant seeks to modify either the judgment or order from which the appellant appeals, a cross-appeal is not necessary when the cross-appellant seeks an affirmance of the judgment or order, but on a different ground than that given by the trial court. See Wis. Stat. Rule 809.10(2)(b) ("A respondent who seeks a modification of the judgment or order appealed from or of another judgment or order entered in the same action or proceeding shall file a notice of cross-appeal."); Wisconsin Bell, Inc. v. Wisconsin Dep't of Revenue, 164 Wis. 2d 138, 141 n.2, 473 N.W.2d 587, 588 n.2 (Ct. App. 1991) (cross-appeal not necessary to review errors that, if corrected, would sustain the judgment); State v. Holt, 128 Wis. 2d 110, 124, 382 N.W.2d 679, 687 (Ct. App. 1985) ("It is well-established that if a trial court reaches the proper result for the wrong reason, it will be affirmed.").

       The parties' stipulation names one of its members as the "Blood Center of Southwestern Wisconsin," but this appears to be a typographical error because the Center's financial statements in the Record designate the member as the "Blood Center of Southeastern Wisconsin." (Emphasis added.)

       Other than the children enrolled in the daycare facility, it is not clear from the Record that the Regional Medical Center has any "students" as such.

       Wauwatosa did not tax the Regional Medical Center facility in the 1990s because, as counsel for the City indicated at oral argument, the taxability of the property apparently was then below the City's radar. The Center does not claim that the City's inaction during the 1990s affects its liability for the assessed years.

       As material to this part of the opinion, Wis. Stat. § 70.11(2) reads in full:
      Property exempted from taxation. The property described in this section is exempted from general property taxes if the property is exempt under sub. (1), (2), (18), (21), (2V) or (30); if it was exempt for the previous year and its use, occupancy or ownership did not change in a way that makes it taxable; if the property was taxable for the previous year, the use, occupancy or ownership of the property changed in a way that makes it exempt and its owner, on or before March 1, files with the assessor of the taxation district where the property is located a form that the department of revenue prescribes or if the property did not exist in the previous year and its owner, on or before March 1, files with the assessor of the taxation district where the property is located a form that the department of revenue prescribes. Leasing a part of the property described in this section does not render it taxable if the lessor uses all of the leasehold income for maintenance of the leased property or construction debt retirement of the leased property, or both, and, except for residential housing, if the lessee would be exempt from taxation under this chapter if it owned the property. Any lessor who claims that leased property is exempt from taxation under this chapter shall, upon request by the tax assessor, provide records relating to the lessor's use of the income from the leased property. Property exempted from general property taxes is:
      (2) Municipal property and property of certain districts, exception. Property owned by any county, city, village, town, school district, technical college district, public inland lake protection and rehabilitation district, metropolitan sewerage district, municipal water district created under s. 198.22, joint local water authority created under s. 66.0823, family care district under s. 46.2895 or town sanitary district; lands belonging to cities of any other state used for public parks; land tax-deeded to any county or city before January 2; but any residence located upon property owned by the county for park purposes that is rented out by the county for a nonpark purpose shall not be exempt from taxation. Except as to land acquired under s. 59.84 (2) (d), this exemption shall not apply to land conveyed after August 17, 1961, to any such governmental unit or for its benefit while the grantor or others for his or her benefit are permitted to occupy the land or part thereof in consideration for the conveyance. Leasing the property exempt under this subsection, regardless of the lessee and the use of the leasehold income, does not render that property taxable.

         Mitchell Aero, Inc. v. City of Milwaukee, 42 Wis. 2d 656, 168 N.W.2d 183 (1969), refers to insurance on one hangar, and then without explanation assumes that both hangars had to be insured by Mitchell Aero "up to 80 percent of the insurable value." Id., 42 Wis. 2d at 663-664, 168 N.W.2d at 186. Resolution of this puzzling aspect of Mitchell Aero, however, is not necessary for our analysis.

       We express no opinion on what would happen if only one aspect were satisfied because, as we discuss below, neither aspect is present here.

       It is undisputed that the County owns legal title to the property. The issue in this case is whether by leasing the property to the Milwaukee Regional Medical Center, the latter became the beneficial owner, and therefore rendered the property subject to taxation.

       Before the lease was executed, the County agreed to pay to the City of Wauwatosa 85% of the construction costs for a new fire station (up to a maximum of $800,000), and be responsible for approximately 74% of the cost for the fifteen additional firefighter positions resulting from the construction. Pursuant to the lease with the County, the Milwaukee Regional Medical Center agreed to pay a pro rata share of those costs, thereby relieving the County of a portion of its obligation under its agreement with the City of Wauwatosa. The financial benefit to the County of this provision during the years at issue here was $6645.30.

       Beginning in year 31 of the lease, the Milwaukee Regional Medical Center will pay fair market value rent to the County, which is estimated to be approximately $5900 annually. At the conclusion of the leasehold, the County will receive, free of any encumbrances, the day care facility, which was constructed at a cost of at least $400,000.


author: SNYDER, PJ.

text:
    In re the Estate of Steven M. Anderson: Estate of Steven M. Anderson, by its Personal Representative, Margaret Schink, Plaintiff-Appellant, v. Abraham J. Pellett and Guaranty National Insurance Company, Defendants, Badger Mutual Insurance Company, Defendant-Respondent.
    Court of Appeals

      No. 2005AP2364.

      Submitted on briefs April 20, 2006.

      Decided June 21, 2006.

    2006 WI App 151
    (Also reported in 720 N.W.2d 124.)

      On behalf of the plaintiff-appellant, the cause was submitted on the briefs of David J. Van Lieshout of Van Lieshout Law Office, Little Chute.
    On behalf of the defendant-respondent, the cause was submitted on the brief of David G. Dudas of McCanna, Dudas & Kewley, S.C., Appleton.
    Before Snyder, PJ., Nettesheim and Anderson, JJ.
   SNYDER, PJ.

¶ 1. The Estate of Steven M. Anderson, by the personal representative, Margaret Schink, appeals from an order for summary judgment in favor of Badger Mutual Insurance Company. The Estate contends that the circuit court erred when it concluded that the Badger Mutual policy excluded underinsured motorist (UIM) coverage for Anderson. The policy excludes UIM coverage for injuries sustained while occupying a vehicle with fewer than four wheels. The court determined that the exclusion applied to Anderson, who was approximately fifty feet away from his motorcycle when he was hit and killed by another vehicle. The Estate argues that the exclusion clause should be interpreted narrowly, in contrast to coverage provisions which are interpreted broadly. It also argues that, when properly interpreted, the provision will not exclude coverage under the circumstances presented here. We agree and reverse the order for summary judgment in favor of Badger Mutual.

FACTS AND PROCEDURAL BACKGROUND

¶ 2. In the early morning hours of a rainy April 19, 2004, Anderson and a passenger, Dorothy Callaway, were on Anderson's motorcycle traveling west on U.S. Highway 10/State Highway 441. According to the complaint, Anderson "lost control or voluntarily laid the motorcycle down on the side of the roadway due to weather conditions." Callaway was thrown about four car lengths, or approximately fifty feet, ahead of where the motorcycle went down.

¶ 3. Callaway recalls lying on the ground for a brief time and then starting to stand up. She testified that she felt stunned and it "took a little bit to sort my head." She saw Anderson walking toward her, asking her if she was okay. Callaway described her location as "off to the side of the road," and "up against the concrete." She recalls looking backwards at Anderson and the motorcycle because Anderson was talking to her as he approached. After Anderson asked about her condition, Callaway said that she wanted to "get back on the bike, and get out of [there]." However, Callaway described Anderson's overriding concern at the time as her well being rather than the need to get back on the motorcycle and leave.

¶ 4. About that time, a vehicle hit Anderson's motorcycle. Both Anderson and Callaway saw the motorcycle go flying past them. The same vehicle that had hit the motorcycle then hit Anderson. Callaway estimated that five minutes passed from the time she flew off the motorcycle to the time the car hit Anderson. Anderson died as a result of the impact.

¶ 5. Anderson's Estate brought a negligence claim and a wrongful death claim against the driver of the vehicle, Abraham J. Pellett, and his insurer, Guaranty National Insurance Company. The Estate also made a claim under the UIM endorsement to Anderson's automobile insurance policy with Badger Mutual. Badger Mutual moved for summary judgment, which the circuit court granted on grounds that coverage was excluded. The Estate appeals.

DISCUSSION

¶ 6. We review summary judgment de novo, applying the same method as the trial court. Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315, 401 N.W.2d 816 (1987). Summary judgment is appropriate when there is no material factual dispute and the moving party is entitled to judgment as a matter of law. Germanotta v. National Indem. Co., 119 Wis. 2d 293, 296, 349 N.W.2d 733 (Ct. App. 1984). Summary judgment methodology is well established and need not be repeated here. See, e.g., Lambrecht v. Estate of Kaczmarczyk, 2001 WI 25, ¶¶ 20-24, 241 Wis. 2d 804, 623 N.W.2d 751. Furthermore, the resolution of this case requires interpretation of a policy exclusion to determine whether coverage exists. "The construction and interpretation of a written insurance policy is a question of law that we review de novo." Westphal v. Farmers Ins. Exch., 2003 WI App 170, ¶ 10, 266 Wis. 2d 569, 669 N.W.2d 166.

¶ 7. We turn first to the Badger Mutual policy language. The UIM policy endorsement and policy definitions read in relevant part:

EXCLUSIONS
B. We do not provide Underinsured Motorists Coverage for "bodily injury" sustained by any "insured":
3. While "occupying" any motorized vehicle having fewer than four wheels.
DEFINITIONS
G. "Occupying" means in, upon, getting in, on, out or off.

This case turns on whether Anderson was occupying the motorcycle, as defined in the policy, at the time he was struck by Pellett. If he was, the exclusion applies.

¶ 8. We construe the words and phrases in insurance policies using the same rules we apply to all contracts. Kremers-Urban Co. v. American Employers Ins. Co., 119 Wis. 2d 722, 735, 351 N.W.2d 156 (1984). Our objective in interpreting and construing the insurance policy is to carry out the intent of the parties. Id. The test used in construing an insurance policy is what a reasonable person in the position of the insured would have understood the words to mean. Id. Ambiguity arises in an insurance policy when words or phrases are fairly susceptible to more than one construction. Id.

¶ 9. Our supreme court has previously addressed the definition of "occupying" in the context of an automobile insurance policy. In Moherek v. Tucker, 69 Wis. 2d 41, 45, 230 N.W.2d 148 (1975), the court held that the word "upon" in relation to "occupying" was ambiguous. The Moherek court cited Allstate Insurance Co. v. Flaumenbaum, 308 N.Y.S.2d 447 (1970), for the proposition that one need not have physical contact with the vehicle in order to occupy it: "[A] person has not ceased 'occupying' a vehicle until he has severed his connection with it - i.e., when he is on his own without any reference to it. If he is still vehicle-oriented, as opposed to highway-oriented, he continues to 'occupy' the vehicle." Moherek, 69 Wis. 2d at 47 (citation omitted). The Moherek court interpreted the term "occupying" broadly, to afford coverage to the insured.

¶ 10. In Kreuser v. Heritage Mutual Insurance Co., 158 Wis. 2d 166, 170, 173, 461 N.W.2d 806 (Ct. App. 1990), we interpreted the term "occupying" in a coverage provision where the policy defined it as "in, on, getting into or out of' using the vehicle-orientation test and adding an additional consideration: whether the claimant was within a reasonable geographic perimeter of the vehicle. There, the injured party was approximately ten feet from the insured vehicle and was preparing to enter it. Id. at 173-74. We were satisfied that an ordinary insured would expect that "people preparing to board an automobile come within the definition of occupying and would be afforded coverage if injured during the boarding process." Id. at 174. Thus, we did not interpret the term narrowly because it would "unduly restrict coverage." See id.

¶ 11. The Estate asserts that Moherek and Kreuser are distinguishable and we agree. Though the previous cases involved the interpretation of a definition similar to that in the Badger Mutual policy, Mo-herek and Kreuser addressed coverage provisions; here we must construe an exclusion clause. Where an insurance policy term is ambiguous, we resolve the ambiguities against the insurer. Leatherman v. American Family Mut. Ins. Co., 52 Wis. 2d 644, 649, 190 N.W.2d 904 (1971), superseded by statute on other grounds, see Wrs. Stat. § 632.32(4)(a) (uninsured motorist coverage). The principle that guides our analysis is that "[ajmbiguities in terms affording coverage are to be resolved in favor of coverage; ambiguities in exclusion clauses are construed narrowly, against the insurer." Westphal, 266 Wis. 2d 569, ¶ 21. With that in mind, we turn to the vehicle-orientation test.

¶ 12. The vehicle-orientation test considers whether the party was vehicle-oriented or highway-oriented at the time of the injury. Kreuser, 158 Wis. 2d at 173. It considers the nature of the act engaged in at the time of the injury and the intent of the person injured. Id. It also asks whether the injured person was within the reasonable geographical perimeter of the vehicle. Id.

¶ 13. Applying the vehicle-orientation test to the facts and construing the definition narrowly, we conclude that Anderson was not vehicle-oriented at the time he was hit. Anderson had left the motorcycle behind and was approximately fifty feet away from it when the accident occurred. He was talking to Calla-way, who had been thrown from the vehicle and was standing off to the side of the road. His "overriding concern" was Callaway's condition rather than the motorcycle. Anderson was neither walking toward the motorcycle nor turning toward the cycle when he was hit. Callaway estimated that approximately five minutes passed from the time she was thrown off the motorcycle to the time Anderson was hit by Pellett's car. By the time he was hit, Anderson had severed his relationship with the motorcycle and turned his focus to Callaway and her health and safety. Cf. Moherek, 69 Wis. 2d at 48 (claimant was vehicle-oriented and therefore occupying the vehicle where every action after getting out of the vehicle had to do with trying to start the vehicle so that he and his companions could continue on their way).

¶ 14. Badger Mutual emphasizes Anderson's activities in the hours preceding the accident. It argues that Anderson had never intended to stop on the highway but was mid-journey when he laid down the motorcycle. His intent, the argument goes, must have been to get back on the motorcycle. However, it is the facts immediately surrounding the accident that are relevant here. At the time he was hit, Anderson was not demonstrating any intent to get back on the motorcycle, nor was he making any physical attempt to return to the cycle. Badger also points to Callaway's statement that she told Anderson she wanted to get back on the motorcycle and leave. It is not Callaway's intent that is dispositive; rather, we look to Anderson's actions and intent at the time he was hit, as well as his location in relation to the motorcycle. See Kreuser, 158 Wis. 2d at 173.

¶ 15. Badger Mutual also suggests that we will find guidance in the line of cases applying the "use of an automobile" test instead of the vehicle-orientation test. The use of a vehicle is analyzed to determine whether the vehicle's connection with the activities that gave rise to the injury is sufficient to bring those activities within the risk contemplated by the insurance policy. See Garcia v. Regent Ins. Co., 167 Wis. 2d 287, 295, 481 N.W.2d 660 (Ct. App. 1992). Badger Mutual reasons that "Wisconsin courts have consistently found 'use' and 'occupancy' in those factual situations where an accident occurs within a reasonable geographical proximity and time orientation to the vehicle. Applying that reasoning . . . Anderson was 'occupying' a motor vehicle having fewer than four wheels."

¶ 16. We are not persuaded. The Garcia case was construing policy language much different from the language at issue here. We are not concerned with whether Anderson was using his motorcycle but rather whether he was occupying it at the time he was struck and killed. The proper test to determine whether he was occupying the motorcycle is the vehicle-orientation test. See Kreuser, 158 Wis. 2d at 173.

¶ 17. Finally, Badger Mutual argues that some of Callaway's testimony is suspect. For example, Badger challenges Callaway's alleged statement that "about a minute" passed between the time the motorcycle went flying past and the time Anderson was hit. Badger contends that this testimony "defies physics, logic and reality." We fail to see the relevance of this assertion, particularly in light of other record facts demonstrating Anderson's orientation immediately preceding and at the time of impact. Therefore, because we have already resolved the issue of coverage through our vehicle-orientation analysis, we need not address this argument.

CONCLUSION

¶ 18. We conclude that Anderson was not occupying the motorcycle at the time of the accident. Our conclusion is founded on the principle that exclusion clauses in insurance contracts are to be interpreted narrowly. See Westphal, 266 Wis. 2d 569, ¶ 21. That interpretive principle distinguishes this case from Mo-herek and Kreuser, which construed the term "occupying" broadly, in favor of coverage. We further conclude that, because of the nature of his actions, his intent to check on his passenger, and his distance from the motorcycle, Anderson was not vehicle-oriented at the time of the impact. See Kreuser, 158 Wis. 2d at 173. Thus, summary judgment should not have been granted to Badger Mutual.

By the Court. — Order reversed and cause reminded.

       In Garcia v. Regent Insurance Co., 167 Wis. 2d 287, 294, 481 N.W.2d 660 (Ct. App. 1992), the coverage phrases at issue arose from the terms "arising out of' and "use." There, one party argued the vehicle-oriented analysis on appeal. Id. at 295 n.6. We held that the party had waived the argument, but noted that the vehicle-oriented analysis was "premised upon the 'occupancy' provisions of an insurance policy." Id.

       Badger Mutual somewhat mischaracterizes Callaway's testimony. She actually stated, "[j]ust less than a minute, if that" passed from when Pellett's vehicle hit the motorcycle until it hit Anderson.