text:
    Jane Doe, Plaintiff-Appellant, v. General Motors Acceptance Corporation, Defendant-Respondent.
    Court of Appeals

      No. 00-1564.

      Oral argument April 19, 2001. —
    Decided August 2, 2001.

    2001 WI App 199
    (Also reported in 635 N.W.2d 7.)

      On behalf of the plaintiff-appellant, the cause was submitted on the briefs of and oral argument by Ronald S. Goldser of Zimmerman Reed, RL.L.R, Minneapolis, MN.
    On behalf of the defendant-respondent, the cause was submitted on the brief of and oral argument by Ann U Smith of Michael Best & Friedrich, L.L.R, Madison.
    Before Vergeront, PJ., Dykman and Deininger, JJ.
   DEININGER, J.

¶ 1. Jane Doe appeals an order dismissing her complaint against the General Motors Acceptance Corporation (GMAC) on summary judgment. She claims the trial court erred in granting GMAC's motion for summary judgment because the question of whether GMAC received "any increase or profits" from the security deposit she paid under her automobile lease was a fact question for a jury, and thus inappropriate for disposition on summary judgment. We affirm the dismissal of her action against GMAC because we conclude that Doe's lease deposit was not subject to Wis. Stat. § 409.207(2)(c) (1995-96), on which her claim for damages is based.

BACKGROUND

¶ 2. Jane Doe leased a car from a dealer who assigned its interest in the lease to GMAC. GMAC had drafted the lease agreement and provided the lease contract to the local dealer. The lease called for a $200 "Refundable Security Deposit," to which the following language applied:

SECURITY DEPOSIT A refundable security deposit may be part of the payment you make when you sign this Lease. We will deduct from the security deposit any amounts you owe under this Lease and do not pay. After the end of this Lease, we will refund to you any part of the security deposit that is left.

¶ 3. Doe filed suit, asserting that her security deposit constituted "collateral" within the meaning of Article Nine of the Uniform Commercial Code (UCC), as enacted in Wis. Stat. ch. 409, and that GMAC had improperly failed to remit or credit to her the amount of "increase or profits" it received on her security deposit, as required by Wis. Stat. § 409.207(2)(c). GMAC placed the money from the security deposit into a non-interest bearing account and commingled it with other GMAC funds. Doe contends that GMAC obtained financial benefits from the use of the deposit in the form of reduced borrowing costs, short-term investment income, and earnings credits, and that these benefits constituted an "increase or profits" within the meaning of the statute.

¶ 4. GMAC moved for summary judgment. The trial court first concluded that "[t]he security deposit paid pursuant to the lease assigned to [GMAC] became collateral subject to a security interest under the Uniform Commercial Code as adopted in Wisconsin." The court granted GMAC's motion, however, on the grounds that "Wis. Stat. § 409.207(2) (c) does not apply in this case because [GMAC] received no 'increase' or 'profits' on [Doe]'s security deposit as those terms are used in that statutory provision." The court stated that Doe's interpretation would require the "calculation of attenuated benefits ... which are not easily defined or calculated" and that doing so would be inconsistent with the predictability and certainty contemplated when the UCC was adopted in Wisconsin.

¶ 5. The court entered an order dismissing Doe's complaint, and she appeals.

ANALYSIS

¶ 6. We review an order granting summary judgment de novo, applying the same standards as the trial court. M&I First Nat'l Bank v. Episcopal Homes, 195 Wis. 2d 485, 496, 536 N.W.2d 175 (Ct. App. 1995). "[S]ummary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law." Id. at 497. This appeal presents a question of statutory interpretation, which is also a question of law which we decide de novo. Minuteman, Inc. v. Alexander, 147 Wis. 2d 842, 853, 434 N.W.2d 773 (1989).

¶ 7. Our review is de novo, and we begin with the first issue presented by the facts before us: whether the security deposit in the Doe-GMAC lease constituted collateral within the meaning of Article Nine of the UCC, Wis. Stat. ch. 409. Doe claims that because the trial court decided this question in her favor and GMAC has not cross-appealed, we may not address it. She is incorrect. A respondent may advance on appeal, and we may consider, any basis for sustaining the trial court's order or judgment. State v. Darcy N.K., 218 Wis. 2d 640, 651, 581 N.W.2d 567 (Ct. App. 1998). That is, a respondent may argue, and we may conclude, that the trial court reached the right result, ■ but for "the wrong reason." State v. Alies, 106 Wis. 2d 368, 392, 316 N.W.2d 378 (1982).

¶ 8. Doe argues that the security deposit she paid on her automobile lease with GMAC is governed by the provisions of Wis. Stat. ch. 409. Wisconsin Stat. § 409.102(l)(a) provides that the chapter applies "[t]o any transaction (regardless of form) which is intended to create a security interest in personal property. .. ." "Personal property" includes money. Wis. Stat. § 990.01(27). A "security interest" is defined as "an interest in personal property or fixtures that secures payment or performance of an obligation." Wis. Stat. § 401.201(37)(a). According to Doe, that is precisely what her security deposit does — secures her payments and the performance of her obligations under the lease.

¶ 9. Were we writing on a clean slate, we might be receptive to Doe's argument that the security deposit provision in her lease agreement with GMAC was "intended to create a security interest" as provided in Wis. Stat. § 409.102(l)(a). The issue of UCC Article Nine's applicability to this transaction is far from one of first impression, however. Although no Wisconsin appellate court has considered the issue, courts in several other jurisdictions which have enacted the UCC have done so. We may properly look to these rulings from other jurisdictions to guide our analysis of Wis. Stat. § 409.207, so as to further the goal of uniformity of interpretation of the provisions of the UCC:

The Uniform Commercial Code is a series of related uniform laws that are intended to "simplify, clarify and modernize the law governing commercial transactions." Wis. Stat. § 401.102(2)(a). Another goal of the code is to "make uniform the law among the various jurisdictions." Wis. Stat. § 401.102(2)(c). We therefore rely on precedent from this and other jurisdictions in interpreting and applying the provisions of the U.C.C.

National Operating v. Mutual Life Ins. Co. of New York, 2001 WI 87, ¶ 30, 244 Wis. 2d 839, 630 N.W.2d 116.

¶ 10. The Supreme Court of Alabama in Yeager v. General Motors Acceptance Corp., 719 So. 2d 210 (Ala. 1998), applied a two-part test in order to determine if, as a matter of law, a security interest had been created in the context of a,security deposit under an automobile lease. The court first considered "whether the language embodied in the writing objectively indicates that the parties may have intended to create or provide for a security agreement." Id. at 213 (citation omitted). The second part of the test inquires whether the parties actually intended to create a security interest. Id. Applying the test to lease language that is identical to the security deposit provision in Doe's lease, the court determined that no security interest existed because there was "no such intent specifically expressed in the language of the lease.. . Id.

¶ 11. In another case involving nearly identical lease language, the Ohio Court of Appeals held that "a security deposit does not create a security interest ... because a conclusion to the contrary derogates from the common-law principle that a security deposit creates only a debt." Dolan v. General Motors Acceptance Corp., 739 N.E.2d 848, 850 (Ohio Ct. App. 2000). The court stated that "a security deposit paid in conjunction with an automobile lease does not constitute 'collateral' ... which would require the payment of 'increase or profits' gained by the lessor during the term of the lease." Id. The court also noted that when the Ohio legislature "has intended to impose an obligation to pay interest on security deposits, it has done so explicitly and not in the oblique manner as the plaintiff contends was done in" the Ohio UCC counterpart to Wis. Stat. § 409.207(2)(c). Id.

¶ 12. Finally, the Minnesota Court of Appeals recently reached the same result in Rosen v. PRIMUS Automotive Financial Services, 618 N.W.2d 606, 608 (Minn. Ct. App. 2000). The court noted that the Minnesota Supreme Court had ruled that a security deposit creates a debtor-creditor relationship, thereby joining Minnesota with the " 'majority of states in defining the lessor-lessee security deposit relationship as one of debtor to creditor.'" (citing State v. Larson, 605 N.W.2d 706, 712 (Minn. 2000)); see also Lawson v. Bank One Lexington, N.A., 35 F.Supp.2d 961, 964 (E.D. Ky. 1997) (concluding that the relationship was one of debtor/creditor and that UCC 9-207 "does not apply to security deposits on vehicle leases.").

¶ 137 Thus, the consistent outcome on claims such as Doe's, founded on identical or very similar security deposit provisions in automobile leases, is that these lease deposits are not security interests in collateral to be governed by UCC provisions such as Wis. Stat. § 409.207. Doe points to a single case in support of her assertion that a security interest is created in a security deposit in connection with the lease of an automobile. See Demitropoulos v. Bank One Milwaukee, N.A., 924 F. Supp. 894 (N.D. Ill. 1996) and 953 F. Supp. 974, 976 (N.D. Ill. 1997).

¶ 14. The Demitropoulos court, although sitting in Illinois, endeavored to apply Wisconsin law to the dispute before it. The analysis in Demitropoulos is not unreasonable, but we decline to adopt it because it is not in accord with the decisions of the vast majority of courts that have considered the issue. Additionally, we note that Demitropoulos has been criticized or distinguished by other courts considering the issue. See, e.g., Yeager, 719 So. 2d at 212; Spina v. Toyota Motor Credit Corp., 703 N.E.2d 484, 489 (Ill. App. Ct. 1998) ("[T]he wave of other, more recent federal decisions . . . demonstrates [that] the tide appears to have turned on plaintiffs' once novel position, as adopted in. . . the Demitropoulos decisions."). Similarly, we do not find persuasive the bankruptcy cases Doe cites in support of her position that a security interest was created, not only because of their age, but also because their context and subject matter are quite far afield from the present dispute. See e.g., In re Atlanta Times, Inc., 259 F. Supp. 820, 827 (N.D. Ga. 1966), Sanders v. National Acceptance Co., 383 F.2d 606 (5th Cir. 1967).

¶ 15. Doe also points, however, to other Wisconsin statutes which, according to her, require that we reach a different result on the UCC applicability issue from that reached in other states. At the time the Doe-GMAC lease was executed, Wis. Stat. § 422.417(2) provided:

With respect to a consumer lease, except as otherwise provided in s. 429.205 with respect to a motor vehicle consumer lease, a lessor may not take a security interest in any property owned or leased by the customer other than the leased goods to secure the lessor's obligations under the lease. This subsection does not prohibit a security interest in a cash security deposit for a consumer lease of motor vehicles or agricultural equipment.

(Emphasis added.) According to Doe, this provision is indicative of the legislature's intent that a motor vehicle lease deposit be deemed to create a security interest. We disagree.

¶ 16. We conclude that the purpose of § 422.417 is to prevent a lessor from obtaining a security interest in a consumer's other property when he or she leases items of personal property. Doe's assertion that, by enacting an exception for cash security deposits in motor vehicle leases, the Wisconsin legislature intended to declare all security deposits in automobile leases security interests subject to the UCC, reads too much into the statute. Rather, we conclude that the legislature simply intended to eliminate any doubt that the commercially reasonable practice of requiring a cash deposit on leased automobiles was not affected by the prohibition against liens on other types of personal property.

¶ 17. Wisconsin Stat. ch. 429 (1999-2000) ("Motor Vehicle Consumer Leases") did not become effective until October 1, 1996, and the parties agree that the chapter does not apply to the present transaction. We note, however, that Wis. Stat. § 429.205 contains a provision similar to Wis. Stat. § 422.417(2), in that it prohibits the taking of security interests "in any real or personal property of the lessee to secure payment of any obligations assumed by the lessee under the consumer lease." Section 429.205(1) (1999-2000). As in § 422.417(2), the prohibition specifically does not apply to "[t]he taking of a security deposit, advance lease payment or other prepayment by cash, check, credit card or other device." Section 429.205(l)(a). Under Wis. Stat. § 429.203(9), however, a motor vehicle lessor or its assignee "is not required to pay interest on any security deposit under the consumer lease." Although not directly applicable to the transaction at hand, we take the cited provisions in ch. 429 as an indication that by excluding motor vehicle lease security deposits from the prohibition against taking extraneous security interests, the legislature does not intend to obligate lessors to pay lessees interest (or other "increase or profits") on the deposits under Wis. Stat. § 409.207.

¶ 18. Because we conclude that Wis. Stat. § 429.207 does not apply to the security deposit in Doe's lease with GMAC, it is unnecessary for us to decide whether the benefits accruing to GMAC by virtue of its holding the deposits constituted an "increase" or "profits" under Wis. Stat. § 409.207(2)(c). Similarly, we do not address Doe's claim that the trial court improperly disregarded her expert's affidavit and damage calculations.

CONCLUSION

¶ 19. For the reasons discussed above, we affirm the appealed order dismissing Doe's complaint on summary judgment.

By the Court. — Order affirmed.

       Doe entered into the lease in January 1995 and filed this action in 1997. All references to the Wisconsin Statutes are to the 1995-96 version unless otherwise noted.

       The plaintiff-appellant brought her action under a fictitious name "to avoid possible prejudice to her personally." She also asked that the matter be certified as a class action, but the trial court had not addressed the class certification issue prior to its dismissal order.

       WISCONSIN Stat. § 409.207(2)(c) provides as follows:
      Unless otherwise agreed, when collateral is in the secured party's possession ... [t]he secured party may hold as additional security any increase or profits (except money) received from the collateral, but money so received, unless remitted to the debtor, shall be applied in reduction of the secured obligation;

       While the plaintiff in Demitropoulos v. Bank One Milwaukee, N.A., 953 F. Supp. 974, (N.D. Ill. 1997) prevailed on the issue of the applicability of UCC 9-207, the court nonetheless awarded summary judgment to the defendant lessor. The court concluded, as the trial court did here, that it would not, "without legislative direction, place on lessors such an onerous burden to discern and calculate every possible benefit, no matter how small or tangential, gained from holding onto a security deposit." See id. at 985.


source: Caselaw Access Project

author: ROGGENSACK, J.

license: Public Domain

text:
    William Alexander, Plaintiff-Appellant, v. City of Madison, Defendant-Respondent.
    Court of Appeals

      No. 00-2692.

      Submitted on briefs May 4, 2001. —
    Decided August 2, 2001.

    2001 WI App 208
    (Also reported in 634 N.W.2d 577.)

      On behalf of the plaintiff-appellant, the cause was submitted on the briefs of Lester A. Pines and Tamara B. Packard of Cullen Weston Pines & Bach LLP of Madison.
    On behalf of the defendant-respondent, the cause was submitted on the brief of Eunice Gibson, city attorney, and Robert E. Olsen, assistant city attorney, of Madison.
    Before Vergeront, PJ., Roggensack and Deininger, JJ.
   ROGGENSACK, J.

¶ 1. William Alexander appeals the circuit court's grant of summary judgment to the City of Madison on his claim that ordinances that provide $10,000 economic development grants to successful applicants for a reserve Class B liquor license are unconstitutional. He argues that the ordinances violate the public purpose doctrine because (1) the benefits are too indirect and remote to constitute a public purpose and they lack accountability and control, and (2) they are "sham legislation." We conclude that Alexander has failed to meet his burden to demonstrate that the ordinances are unconstitutional beyond a reasonable doubt and that he has identified no Wisconsin law that supports his "sham legislation" theory. Therefore, we affirm the judgment of the circuit court.

BACKGROUND

¶ 2. The essential facts related to this appeal are undisputed. Wisconsin municipalities set the fees for issuing and renewing liquor licenses, within a range established by the legislature. By means of 1997 Wis. Act 27, § 2907dh, the legislature required municipalities to set the fee to issue a reserve Class B liquor license at not less than $10,000.

¶ 3. In response to the legislative mandate, the City of Madison enacted an ordinance that set the fee to issue a reserve Class B liquor license at $10,000. Madison Gen. Ord. § 38.09(5)(d). However, the City also enacted an ordinance to make an economic development grant of $10,000 to the holder of a new reserve Class B license who had paid the $10,000 license fee and passed its other requirements for the issuance of the license. The relevant portions of ordinance § 38.09(5)(d) are as follows:

1. The City of Madison hereby finds that it is in the interests of the public welfare to increase the property tax base, provide employment opportunities, attract tourists and generally enhance the economic and cultural climate of the community by providing additional economic incentives for new businesses with liquor licenses.
2. After the granting of any new reserve Class B license and payment of the $10,000 initial issuance fee, the applicant may file an application for an economic development grant of $10,000 with the Clerk. The Clerk shall determine whether the licensee is operating in compliance with the approved license. The Clerk may require the assistance of any other City agency in making said determination. If the Clerk determines that the licensee is so operating, the Clerk shall authorize the approval of the $10,000 economic development grant. If the Clerk determines that the licensee is not in compliance with the approved license, no economic development grant may be authorized and the Clerk shall make such finding in writing and cause to be delivered a copy of the findings to the licensee. If the licensee disagrees with the Clerk's determination, the licensee may file a written notice of appeal upon the Clerk within 10 (ten) calendar days of the delivery of the written notice of the Clerk's findings. Upon receiving such notice from the licensee, the Clerk shall relay said notice to the ALRC which shall hold a hearing thereon. The ALRC may affirm or reverse the Clerk's determination. If the Clerk's determination is upheld, appeal thereof may be taken to circuit court pursuant to Section 753.04, Wis. Stats. If the Clerk's determination is reversed, the Clerk shall authorize the payment of the economic development grant. (Cr. by Ord. 12,142, 6-1-98)

Madison Gen. Ord. § 38.09(5)(d). A companion ordinance also provided for a $10,000 economic development grant to those who paid $10,000 for a Class B license that was granted between December 1, 1997, and the effective date of the ordinance. Madison Gen. Ord. § 38.03(2)(d).

¶ 4. Alexander sued the City seeking declaratory judgment that Madison Gen. Ords. §§ 38.03.(2)(d) and 38.09(5)(d)l. and 2. are unconstitutional because they violate the public purpose doctrine and because they constitute sham legislation. The circuit court granted summary judgment to the City, and Alexander appeals.

DISCUSSION

Standard of Review.

¶ 5. We apply the same summary judgment methodology as the circuit court. Cemetery Servs., Inc. v. Department of Regulation & Licensing, 221 Wis. 2d 817, 823, 586 N.W.2d 191, 194 (Ct. App. 1998). We first examine the complaint to determine whether it states a claim, and then we review the answer to determine whether it joins a material issue of fact or of law. Id. If we conclude that the complaint and answer are sufficient to join issue, we examine the moving party's affidavits to determine whether they establish a prima facie case for summary judgment. Id. If they do, we look to the opposing party's affidavits to determine whether there are any material facts in dispute that entitle the opposing party to a trial. Id. Whether a particular ordinance was enacted for a public purpose is a question of law. Hopper v. City of Madison, 79 Wis. 2d 120, 128, 256 N.W.2d 139, 142 (1977). However, we give the common council's determination of this question great weight. Id.

Public Purpose.

¶ 6. The public purpose doctrine applies to municipalities. Id. We can strike down a municipal ordinance as unconstitutional only if its unconstitutionality is established beyond a reasonable doubt. Id. at 129, 256 N.W.2d at 142-43. Although it is not recited in any specific clause in the Wisconsin Constitution, the public purpose doctrine is a well-established constitutional doctrine. Millers Nat'l Ins. Co. v. City of Milwaukee, 184 Wis. 2d 155, 174, 516 N.W.2d 376, 382 (1994).

¶ 7. A legislative body may appropriate public funds only for public purposes. Hopper, 79 Wis. 2d at 128, 256 N.W.2d at 142. "[T]he benefit to the public must be direct and not merely indirect or remote." Id. at 129, 256 N.W.2d at 143. However, due to our deference to the decisions of a common council, we do not look underneath the reasons it has articulated. Libertarian Party of Wisconsin v. State, 199 Wis. 2d 790, 809, 546 N.W.2d 424, 433 (1996). As the supreme court has explained:

Under the public purpose doctrine, we are not concerned with the wisdom, merits or practicability of the legislature's enactment. Rather we are to determine whether a public purpose can be conceived which might reasonably be deemed to justify or serve as a basis for the expenditure. A court can conclude that no public purpose exists only if it is clear and palpable that there can be no benefit to the public.

Jackson v. Benson, 218 Wis. 2d 835, 896, 578 N.W.2d 602, 628 (1998) (citations omitted). Encouragement of economic development and tourism and the creation of employment opportunities provide direct advantages or benefits to the public at large and therefore have been held to be public purposes. Libertarian Party, 199 Wis. 2d at 810, 546 N.W.2d at 434.

¶ 8. The public purpose doctrine also requires that a private corporation receiving public funds be "under reasonable regulations for control and accountability to secure public interests." State ex rel. Warren v. Reuter, 44 Wis. 2d 201, 216, 170 N.W.2d 790, 796 (1969). The controls required to protect the public interest in a given situation depend upon the circumstances, the purpose the legislation is intended to achieve and the parties involved. Id. However, as the supreme court has noted, "We should not bog down private agencies with unnecessary governmental control." Id. at 217, 170 N.W.2d at 797.

¶ 9. In the case before us, the Madison Common Council made the following factual findings to support its approval of the economic development grant:

The City of Madison hereby finds that it is in the interests of the public welfare to increase the property tax base, provide employment opportunities, attract tourists and generally enhance the economic and cultural climate of the community by providing additional economic incentives for new businesses with liquor licenses.

Madison Gen. Ord. § 38.09(5)(d)l. Alexander does not dispute that increasing the property tax base, providing employment opportunities and attracting tourists are legitimate public purposes. Instead, he argues that (1) the benefits to the public are too indirect and remote to support the common council's action under the public purpose doctrine because the City has not shown that the recipients of the reserve Class B licenses would not have opened facilities serving liquor anyway, and (2) the City has not created reasonable regulations for control and accountability.

¶ 10. We first address Alexander's contention that the benefits are too indirect and remote to support the common council's action. Increasing the property tax base, providing employment opportunities and attracting tourists are all legitimate public purposes, and the City may constitutionally appropriate funds to accomplish these goals. Libertarian Party, 199 Wis. 2d at 810, 546 N.W.2d at 434. Here, Alexander has the burden to demonstrate that it is "clear and palpable" that no public purpose may be derived from these ordinances. Hopper, 79 Wis. 2d at 129, 256 N.W.2d at 143. However, he offers no support for his assertion that the same people would have applied for and received the licenses even without the ordinances. Yet, it is his burden to provide such proof. A bald assertion such as is made here is insufficient to demonstrate that it is clear and palpable that no public purpose will be served. Therefore, we conclude that Alexander has not met his burden to provide proof on this facet of the public purpose doctrine.

¶ 11. Second, we address Alexander's contention that the City has violated the public purpose doctrine because the ordinances do not create reasonable regulations for control and accountability. He argues, for example, that the City's policy does not require the recipient of the grant to open the business; instead, the recipient could simply take the $10,000 check and walk away. However, Alexander's contention fails to take into account the nature of the application process. The application for the economic development grant may be submitted only at the end of a complex series of steps. The applicant must complete the application packet, appear before the Alcohol License and Review Committee and the common council and pay the $10,000 license issuance fee (as well as other fees totaling $620). He must also pass inspections by the City's health department, building inspector and fire department for the facility from which he intends to operate and pass a personal police background check. Only then will the City clerk's office begin to process the application for the economic development grant. In light of these surrounding circumstances, Alexander's contention that the grant recipient could simply pocket the grant money and walk away is far-fetched. The ordinances present sufficient controls to ensure the opening of facilities that serve liquor by the drink in the City. Therefore, we conclude that the regulations controlling the application for a reserve Class B liquor license are inextricably tied to the application for the economic development grant and provide sufficient control and accountability to ensure that the public purposes outlined in the ordinances have a reasonable probability of being met. Accordingly, we conclude that Alexander has not met his burden to prove that the ordinances are unconstitutional beyond a reasonable doubt.

Sham Legislation.

¶ 12. Alexander also argues that the ordinances are void because they are sham legislation created to evade the will of the legislature. To neutralize the effect of the legislative mandate that it collect a fee of at least $10,000 to issue a reserve Class B license, he argues, the City has found a backhanded way of returning the entire amount of the fee to the applicant and is doing so under false pretenses.

¶ 13. To support his "sham legislation" theory, Alexander cites Wisconsin Tel. Co. v. City of Milwaukee, 126 Wis. 1, 104 N.W. 1009 (1905). Wisconsin Telephone concerned the City of Milwaukee's attempt to use its police power to collect a fee for each telephone pole in the city under the theory that the fee was needed for supervision and inspection of the poles. However, the supreme court concluded that the city's intent was to charge a license fee for placement of the poles, authority reserved exclusively to the legislature. Because the city lacked this power, the court invalidated the ordinance that established the fee.

¶ 14. We conclude that Wisconsin Telephone does not prevent the City from issuing the $10,000 economic development grants at issue in this case. The statute mandating the minimum fee at issue here shows that this is an area where the legislature required municipal action, not exclusive state action. The City has complied with the legislative requirement that it collect a fee of at least $10,000 to issue a reserve Class B liquor license by passing Madison Gen. Ord. § 38.09(5)(d). However, Wis. Stat. § 125.51(3)(e)2 does not require the City to keep the money, nor does it place any conditions on how the City may choose to spend it. Therefore, we conclude that the ordinances do not conflict with the statute.

CONCLUSION

¶ 15. We conclude that Alexander has failed to meet his burden to demonstrate that the ordinances are unconstitutional beyond a reasonable doubt and that he has identified no Wisconsin law that supports his "sham legislation" theory. Therefore, we affirm the judgment of the circuit court.

By the Court. — Judgment affirmed.

       A Class B liquor license authorizes retail sale of intoxicating liquor by the glass for consumption on the premises. Wis. Stat. § 125.51(3)(a) (1999-2000). The holder also may sell wine for consumption off the premises and, in some municipalities, packaged liquor for consumption off the premises. M; § 125.51(3)(b). A reserve Class B liquor license is a license issued after January 1, 1998. Section 125.51(4)(a)4.
      All further references to the Wisconsin Statutes are to the 1999-2000 version unless otherwise noted.

       Wisconsin Stat. § 125.51(3)(e)2. provides, as it has since its enactment:

        Each municipal governing body shall establish the fee, in an amount not less than $10,000, for an initial issuance of a reserve "Class B" license, as defined in sub. (4)(a)4., except that the fee for an initial issuance of a reserve "Class B" license to a bona fide club or lodge situated and incorporated in the state for at least 6 years is the fee established under subd. 1. for such a club or lodge. The fee under this subdivision is in addition to any other fee required under this chapter. The annual fee for renewal of a reserve "Class B" license, as defined in sub. (4)(a)l., is the fee established under subd. 1.


author: VERGERONT, PJ.

text:
    Heritage Credit Union, Petitioner-Appellant, v. Office of Credit Unions, Respondent-Respondent.
    Court of Appeals

      No. 00-3162.

      Submitted on briefs June 11, 2001. —
    Decided August 2, 2001.

    2001 WI App 213
    (Also reported in 634 N.W.2d 593.)

      On behalf of the petitioner-appellant, the cause was submitted on the briefs of Jerard J. Jensen, Thomas M. Typer, and Jeanne M. Armstrong of Whyte Hirschboeck Dudek S.C. of Madison.
    On behalf of the respondent-respondent, the cause was submitted on the brief of James E. Doyle, Attorney General, and Stephen J. Nicks, Asst. Attorney General.

    Before Vergeront, PJ., Roggensack and Lundsten, JJ.

       Petition to review denied 10-23-01.

   VERGERONT, PJ.

¶ 1. This appeal concerns the applications of Heritage Credit Union, chartered by the State of Illinois, to operate four branch offices in Wisconsin. The Office of Credit Unions (OCU) for the State of Wisconsin denied the applications. It applied its general reciprocity policy for credit unions incorporated under the laws of other states (foreign states) and decided that, since Wis. Stat. § 186.113(1) (1999-2000) limits branch offices for Wisconsin credit unions to twenty-five miles outside of Wisconsin, Heritage could not operate branch offices in Wisconsin more than twenty-five miles from the Wisconsin border. The Credit Union Review Board affirmed the denial and the circuit court affirmed the board. Heritage appeals, contending: (1) because Heritage was formerly a federal credit union, federal law preempts any restrictions on Heritage's ability to operate branch offices in Wisconsin; (2) OCU does not have the statutory authority under Wisconsin law to regulate foreign state credit unions, and even if OCU does have that authority, it does not have the authority to restrict whether or where they may operate branch offices; (3) OCU's decision is based on a policy that is invalid because it was not promulgated as a rule under Wis. Stat. ch. 227; and (4) OCU's decision is an unreasonable application of OCU's reciprocity policy.

¶ 2. We conclude: (1) OCU's decision does not conflict with federal law and therefore does not violate the supremacy clause; (2) OCU has the statutory authority to regulate foreign state credit unions operating in Wisconsin, including the authority to regulate whether and where they may operate branch offices; (3) Heritage may not obtain judicial review of its rule-making argument because it did not raise this before the board as required by Wis. Stat. § 227.40(2)(e); and (4) the board acted reasonably and within its discretion in deciding that OCU's decision was a reasonable application of its reciprocity policy. We therefore affirm.

BACKGROUND

¶ 3. The' pertinent facts are not disputed. Heritage operated in Wisconsin as a federally chartered credit union until December 4, 1998, when it converted to an Illinois-chartered credit union. Heritage asked the Illinois regulatory agency to include the Wisconsin communities of Dane, Columbia, Rusk, Barron, and Chippewa counties in its "field of membership." Accordingly, the Illinois Credit Union Division supervisor wrote the OCU asking about the requirements Heritage must satisfy in order to add those counties to its "field of membership." OCU responded that Heritage would not be permitted to expand to include those counties. It explained that, because Heritage had an Illinois charter, its principal office could not be located in Wisconsin, and community expansions were based on a "well-defined neighborhood, community or rural district in relation to a credit union's principal office." OCU also explained that the Wisconsin Credit Union Review Board policy guidelines require that a credit union chartered and operating under the laws of another state must obtain a certificate of authority for a branch office to operate in Wisconsin, and it enclosed an "Application to Establish a Subsidiary Office."

¶ 4. Heritage submitted an application for each of the four locations — two in Madison, one in Chetek, and one in Ladysmith. Heritage had operated offices at these locations as a federal credit union. OCU denied the applications in a letter that stated:

Chapter 186, Wis. Stats., does not address reciprocal branching authority for out of state, state-chartered credit unions. Because of reciprocity requirements of other states, it has been the position of this office to issue a statement of reciprocity or approve requests from out of state credit unions as long as the authority requested meets the criteria for powers established by statute for Wisconsin credit unions.
Wisconsin credit unions are allowed to establish branch offices 25 miles outside this state. They are also allowed to establish limited services offices outside this state if the common bond among the members of the credit union establishing the limited services office is employment by a corporation, limited liability company, partnership or association which maintains an office or other facility in this state.
Per the application information you submitted, the above parameters are not met.

¶ 5. Heritage filed a petition with the board for review of OCU's decision. It contended: (1) OCU's denial of its applications conflicts with the Federal Credit Union Act and is therefore invalid under the supremacy clause; (2) OCU does not have the statutory authority under Wisconsin law to regulate foreign state credit unions generally and, even if it does, it does not have the authority to restrict whether or where in Wisconsin Heritage may operate branch offices; and (3) OCU's decision is unreasonable because, since Wisconsin credit unions may operate anywhere in Illinois, true reciprocity means that an Illinois credit union may operate anywhere in Wisconsin.

¶ 6. Heritage and OCU stipulated there were no factual issues in dispute and submitted briefs to the hearing examiner. The examiner issued a proposed decision and order affirming the denial of the applications, and the board adopted that decision and order after considering Heritage's objections. The board concluded that: (1) OCU's denial of the applications did not conflict with federal law; (2) OCU has the authority under Wis. Stat. ch. 186 to regulate foreign state credit unions operating in Wisconsin, and that includes the authority to regulate their operation of branch offices in Wisconsin; and (3) OCU's application of its reciprocity policy to branch offices is reasonable.

¶ 7. Heritage sought review of the board's decision in the circuit court, advancing essentially the same three challenges. The circuit court affirmed the board's decision on each point.

DISCUSSION

¶ 8. On appeal, Heritage renews the arguments it made in the circuit court and, in addition, argues that OCU's decision is based on a policy that is invalid because it is not promulgated as a rule as required by Wis. Stat. ch. 227. We address first Heritage's contention that OCU's denial of the applications violates the supremacy clause because it conflicts with 12 U.S.C. § 1771(a) (1994)

¶ 9. 12 U.S.C. § 1771(a)(4) permits a federal credit union to convert to a credit union incorporated under the laws of any state and provides that the successor state credit union "shall be vested with all of the assets and shall continue [to be] responsible for all of the obligations of the Federal credit union to the same extent as though conversion had not taken place." According to Heritage, this statute means that since Heritage had offices in Wisconsin and operated there while a federal credit union, it has the right to continue to operate those offices in Wisconsin in the same manner it did before it converted to an Illinois credit union. OCU responds that this statute means only that Heritage retains ownership of the assets it owned while a federal credit union after it converts to a state credit union, and the statute does not address the regulation of Heritage's operation of its business after conversion.

¶ 10. When an administrative agency's decision is challenged, this court reviews the agency's decision and applies the same standard of review as that which should be applied by the circuit court. Citizens' Util. Bd. v. Public Serv. Comm'n, 211 Wis. 2d 537, 543-44, 565 N.W.2d 554 (Ct. App. 1997). The proper interpretation of 12 U.S.C. § 1771(a)(4) presents an issue of statutory construction — a question of law which we generally review de novo. See Harnischfeger Corp. v. LIRC, 196 Wis. 2d 650, 659, 539 N.W.2d 98 (1995). While we may give deference to a state administrative agency's interpretation of a statute that it is authorized to administer, we are concerned here with a federal statute. Neither party addresses whether it is appropriate to defer to the board's interpretation of this federal statute, and the circuit court's discussion of this statute suggests that it undertook a de novo review. Since OCU does not present any reason why we should defer to the board's interpretation of this federal statute, we will analyze the statute without deferring to the board's interpretation.

¶ 11. In construing statutes, our aim is to discern the intent of the legislative body. Pritchard v. Madison Metro. Sch. Dist., 2001 WI App 62, ¶ 8, 242 Wis. 2d 301, 625 N.W.2d 613, review denied, 2001 WI 88, 246 Wis. 2d 166, 630 N.W.2d 220. To that end, we begin with the language of the statute, and, if that is plain, we apply the language to the facts at hand. Id. We conclude the plain language of 12 U.S.C. § 1771(a)(4) addresses the impact of conversion on a credit union's ownership of its assets and its responsibility for its obligations, but does not address whether a former federal credit union may continue to operate in one state when it has chosen to be chartered under the laws of another state. The subsection makes clear that converting from a federal credit union to a state credit union does not affect the assets that Heritage owns or the obligations for which it is responsible; but the subsection says nothing suggesting that Heritage may continue to operate in a state in which it chooses not to be chartered regardless of the laws or regulations of that state. We therefore agree with the circuit court and the board that OCU's denial of Heritage's applications is not in conflict with 12 U.S.C. § 1771(a)(4), and there is, therefore, no violation of the supremacy clause.

¶ 12. We next consider Heritage's argument that OCU lacks the authority under Wis. Stat. ch. 186 to regulate foreign state credit unions and the related argument that even if it has that authority, it does not have the authority to restrict whether or where those credit unions may operate branch offices in Wisconsin. Since administrative agencies have only those powers that are expressly granted to them by the legislature or are necessarily implied from the applicable statutes, DOR v. Hogan, 198 Wis. 2d 792, 816, 543 N.W.2d 825 (Ct. App. 1995), resolution of this issue presents questions of statutory construction.

¶ 13. The parties debate the standard of review we should employ on this issue. Relying on Loomis v. Wisconsin Pers. Comm'n, 179 Wis. 2d 25, 30, 505 N.W.2d 462 (Ct. App. 1993), Heritage argues we should employ a de novo standard of review because the issue concerns the scope of OCU's powers and we review agency decisions de novo on the scope of its own powers. OCU counters that we should give great weight to the board's decision, and it discusses the requirements for this standard of review both in terms of itself and the board. However, OCU does not address Heritage's argument that we are concerned with the scope of OCU's powers and this determines the proper standard of review.

¶ 14. We are reviewing the board's decision, not that of OCU. See Wis. Stat. §§ 186.015(6) and 227.52(4). Since Heritage appears to be challenging the scope of OCU's authority, not the scope of the board's authority, we.are not persuaded that Loomis is applicable. On the other hand, from OCU's argument we cannot discern to what extent the board has expertise or a policy regarding OCU's authority to regulate foreign state credit unions in general, and their branch offices in particular, because the board's decision expresses uncertainty on this point and appears to defer to OCU's interpretation of its own statutory powers. We will therefore assume without deciding that de novo review is appropriate.

¶ 15. In support of its argument that the legislature did not intend that OCU regulate foreign state credit unions, Heritage first points to the definition of credit union in Wis. Stat. § 186.01(2):

"Credit union" means a cooperative, nonprofit corporation, incorporated under this chapter to encourage thrift among its members, create a source of credit at a fair and reasonable cost and provide an opportunity for its members to improve their economic and social conditions. (Underline added.)

¶ 16. Heritage also points to Wis. Stat. § 186.02(1), which provides that "[s]even or more residents of this state" may organize a credit union by filing with OCU articles of incorporation and proposed bylaws that meet certain requirements. In addition, § 186.02(3) requires that OCU approve of the articles and bylaws in order for a credit union to be organized, and Wis. Stat. § 186.235(9) requires that OCU report to the Department of Justice any credit union that conducts its business in violation of ch. 186 and the Department of Justice may then bring an action to revoke the credit union's articles of incorporation.

¶ 17. We agree with Heritage that the above-cited provisions apply only to credit unions incorporated under Wis. Stat. ch. 186. However, Wis. Stat. § 186.235, which prescribes the duties and powers of OCU, provides:

(19) Supervision; reports. All credit unions formed under this or other similar law, or authorized to transact in this state a business similar to that authorized to be done by this chapter, shall be under the control and supervision of the office of credit unions. Every such corporation shall make a full and detailed report of its business as of December 31 for that year, and of its condition on such date, in such form and containing such information as the office of credit unions may prescribe ....

Heritage acknowledges that this subsection "arguably refers to credit unions not incorporated in Wisconsin." But, Heritage asserts, even if it does, it does not expressly grant OCU the authority to determine whether or where foreign state credit unions may operate branch offices in Wisconsin, and no other provision does. Therefore, according to Heritage the legislature did not intend OCU to have that authority.

¶ 18. . We conclude Wis. Stat. § 186.235(19) plainly authorizes OCU to control and supervise credit unions incorporated under the laws of other states. That is the only reasonable interpretation of the phrase "or other similar law." When construing statutes we are to give them their common sense meaning to avoid unreasonable and absurd results. City of Milwaukee v. Kilgore, 185 Wis. 2d 499, 516, 517 N.W.2d 689 (Ct. App. 1994). The only reasonable interpretation of "other similar law" is the law of another state that, like Wis. Stat. ch. 186, authorizes the incorporation of credit unions. Giving "all credit unions" in this subsection the definition of Wis. Stat. § 186.01(2) — a credit union incorporated under ch. 186 — produces a nonsensical result: If "all credit unions" in subsec. (19) are only credit unions incorporated under ch. 186, then the entire phrase "formed under this or other similar laws, or authorized to transact in this state a business similar to that authorized to be done by this chapter" is meaningless.

¶ 19. We also conclude OCU has the authority under Wis. Stat. § 186.235(19) to regulate whether and where a foreign state credit union may operate branch offices in Wisconsin. The authority given OCU in this subsection is not limited in any particular way, and we see no basis for reading in a limitation. The legislature need not expressly grant OCU the authority to determine whether and where a foreign state credit union may operate branch offices in this state because the authority it expressly gives OCU to "control and supervise" foreign state credit unions is broad and necessarily implies the authority to control and supervise their operation of branch offices in Wisconsin.

¶ 20. We disagree with Heritage's contention that Wis. Stat. § 186.41, which addresses interstate acquisition and mergers of credit unions, is an indication that the legislature intended to give OCU authority to regulate foreign state credit unions only as provided in that section. It does not logically follow from the legislature expressly allowing "regional credit unions" to acquire interests and merge with credit unions having their principal place of business in Wisconsin, under certain conditions and with OCU approval, that the legislature intended that foreign state credit unions could otherwise operate in Wisconsin free of OCU control and supervision. This proposed construction ignores the broad authority OCU has under Wis. Stat. § 186.235(19) to "control and supervis[e]" credit unions that are incorporated under the laws of other states.

¶ 21. Heritage next argues that, even if OCU has the statutory authority to regulate foreign state credit unions and to restrict their operation of branch offices in Wisconsin, OCU's decision to deny its applications is based on a policy that is a rule within the meaning of Wis. Stat. § 227.01(13), and therefore it must be promulgated as required by Wis. Stat. § 227.10. In the absence of a validly promulgated rule, Heritage continues, there is nothing in Wis. Stat. ch. 186 to prevent it from operating branch offices anywhere in Wisconsin. In response, OCU asserts that Heritage did not challenge OCU's decision on this ground before the board or the circuit court and therefore we should not address it. Heritage replies that it has challenged OCU's legal authority for its decision from the outset, and the challenge based on a lack of rule-making is simply another argument relating to the broader issue of whether OCU acted outside its authority. Heritage also asserts that it was not until the circuit court's decision that "OCU's informal policy position" was determined to be the "authoritative basis in law" for the denial of Heritage's applications.

¶ 22. It is true, as Heritage contends, that we have the discretion to review issues not raised in the circuit court when only questions of law are presented, the parties have thoroughly briefed the issues, and there are no factual disputes. See Wirth v. Ehly, 93 Wis. 2d 433, 443-44, 287 N.W.2d 140 (1980) (superseded by Wis. Stat. § 895.52 on other grounds, Wilson v. Waukesha County, 157 Wis. 2d 790, 797, 460 N.W.2d 830 (Ct. App. 1990)). However, this case involves a challenge to the decision of an administrative agency on the ground that the decision is based on a policy that is a "rule" within the meaning of Wis. Stat. § 227.01(13). Therefore, we must consider the specific statutes that apply to such a challenge.

¶ 23. Wisconsin Stat. § 227.10(1) provides in part:

Each agency shall promulgate as a rule each statement of general policy and each interpretation of a statute which it specifically adopts to govern its enforcement or administration of that statute.. ..

Wisconsin Stat. §§ 227.11-227.25 then specify the procedure for promulgating rules. Wisconsin Stat. § 227.40(1) and (2) set forth the exclusive means of obtaining judicial review of the validity of a rule. Under § 227.40(2)(e), one of the ways is judicial review of an agency decision under Wis. Stat. §§ 227.52-227.58, the procedure Heritage has invoked for review of the board's decision. However, review of the validity of a rule is available under § 227.40(2)(e) only "if the validity of the rule involved was duly challenged in the proceeding before the agency in which the order or decision sought to be reviewed was made or entered."

¶ 24. We have considered whether Heritage's challenge is a challenge to "the validity of a rule" within the meaning of Wis. Stat. § 227.40 since no rule-making procedures of any kind has occurred. We conclude that it is. Section 227.40(4)(a) specifies the appropriate relief and provides:

In any proceeding pursuant to this section for judicial review of a rule, the court shall declare the rule invalid if it finds that it violates constitutional provisions or exceeds the statutory authority of the agency or was promulgated without compliance with statutory rule-making procedures. (Emphasis added.)

Since "promulgat[ion] without compliance with statutory rule-making procedures" is one ground for declaring a rule invalid under § 227.40, § 227.40 logically encompass policies or other statements, standards, or orders that meet the definition of "rule" under Wis. Stat. § 227.01(13) but have not been promulgated as required by Wis. Stat. § 227.10.

¶ 25. We have also considered the argument that "promulgated without compliance with statutory rule-making procedures" means that promulgation as a rule has been undertaken but has been improper in some way. Under this interpretation of the phrase, it would not include a situation where no rule-making whatsoever had occurred. However, we conclude this interpretation is not viable in light of County of Dane v. DHSS, 79 Wis. 2d 323, 255 N.W.2d 539 (1977). In that case, the court held that the county had standing to challenge the validity of a rule that was not adopted in conformity with Wis. Stat. §§ 227.02, 227.023 and 227.025 (1973) (now numbered Wis. Stat. §§ 227.16, 227.20 and 227.21). County of Dane, 79 Wis. 2d at 331-32. The subject of that dispute was a DHSS program manual that had not been the subject of any rule-making. The court stated that Wis. Stat. § 227.05(2)(e) (1973) (now Wis. Stat. § 227.40(2)(e)) allowed the county's challenge. It noted that, "[ajlthough this issue was not raised in the proceedings before the agency, there was no indication at that time DHSS was relying on the program manuals ultimately cited by it in its order to the county." County of Dane, 79 Wis. 2d at 332-33. We read County of Dane to instruct that the requirement in § 227.40(2)(e) of first challenging the validity of a rule before the agency applies to an assertion that a policy that has not been the subject of any rule-making is invalid because it was not promulgated as a rule as required by Wis. Stat. § 227.10(1). County of Dane also instructs that failure to raise that assertion before the agency is not a bar to judicial review in circumstances when the challenger could not be expected to know the policy was the basis for the agency's decision.

¶ 26. We have carefully reviewed Heritage's appeal of OCU's decision to the board, its briefs to the examiner, and its objection to the examiner's proposed decision. We see no assertion by Heritage that OCU's decision was based on a policy that is a "rule" within the meaning of Wis. Stat. § 227.01(13) and therefore invalid because it was not promulgated as required by Wis. Stat. § 227.10(1). We cannot agree with Heritage that it was not until the circuit court's opinion that Heritage understood the basis for OCU's decision. OCU's denial letter to Heritage plainly stated that OCU had a "position" on reciprocity whereby it approved requests from foreign state credit unions as long as "the authority requested meets the criteria for powers established by statute for Wisconsin credit unions." The letter also explained how OCU was applying reciprocity to branch office requests. OCU elaborated on its reasons for applying reciprocity in this way in its brief to the board and to the circuit court, but the basis for its denial never changed. We see no reason why Heritage could not have asserted before the board that OCU's general policy on reciprocity, its particular application to branch office requests, or both, were invalid because not promulgated as required by § 227.10(1).

¶ 27. It is true that Heritage challenged OCU's decision on a variety of grounds that might loosely be characterized as "lacking legal authority"; and we agree that a challenge because the decision was based on a policy that should have been promulgated as a rule would come within that broad characterization. However, to accept this as a fulfillment of the requirement in Wis. Stat. § 227.40(2)(e) would, we conclude, be inconsistent with the purpose of the requirement. The purpose of the requirement is to provide an opportunity for the agency to address a challenge to the validity of a rule before the challenger may seek judicial review of the challenge. That purpose is thwarted if any challenge to a decision that can be characterized as a "lack of legal authority" permits judicial review of a rule's invalidity on grounds not raised in the administrative proceedings.

¶ 28. We conclude that under Wis. Stat. § 227.40(2)(e), Heritage was required to present to the board its argument that OCU's decision was based on a policy that was invalid because it was not promulgated as required by Wis. Stat. § 227.10. Since Heritage did not, we conclude it may not obtain a judicial ruling on this issue.

¶ 29. Finally, Heritage challenges the board's decision that OCU's denial of its applications was reasonable. Heritage contends that if the principle of reciprocity is the basis of OCU's decision, as OCU asserts, then OCU must permit Heritage to have branch offices anywhere in Wisconsin because Illinois statutes allow foreign state credit unions to conduct business anywhere in Illinois if the laws of the other state permit that.

¶ 30. We are to review the board's decision to determine whether the board acted within the range of discretion delegated to it by law and without violating any statute. Wis. Stat. § 227.57(8). In doing so, we may not "substitute our judgment for that of the agency." Id. In addition, we must give "due weight. . . [to] the experience, technical competence, and specialized knowledge of the [board], as well as the discretionary authority conferred upon it." Section 227.57(10).

¶ 31. Heritage does not point to any particular provision of Wis. Stat. ch. 186 or any other statutory provision that is inconsistent with the board's decision upholding OCU's decision to deny the applications, other than the arguments on OCU's statutory authority that we have already addressed. We therefore consider only whether the board's decision upholding OCU's denial of the applications was a reasonable exercise of the board's discretion.

¶ 32. The board correctly recognized that OCU was not obligated to allow foreign state credit unions to establish branch offices in Wisconsin. The board next considered the basis on which OCU had chosen to allow branch offices for foreign state credit unions — using the analogous geographic limitations Wis. Stat. § 186.113(1) imposes for branch offices for Wisconsin credit unions. The board decided that using this as a basis for determining where to allow foreign state credit unions to operate branch offices in Wisconsin was reasonable because it applied the same limitation to foreign state credit unions that the legislature had imposed on Wisconsin credit unions. The board rejected Heritage's argument that reciprocity necessarily means granting it the rights that Illinois law grants to Wisconsin credit unions and decided that it was rational to view reciprocity as granting Heritage the rights with respect to branch offices that Wisconsin law gave Wisconsin credit unions.

¶ 33. We conclude the board's decision was reasonable and within the discretion granted it by law. While the reciprocity Heritage desires may also be a reasonable basis on which to grant foreign state credit unions the right to operate branch offices in Wisconsin, it does not follow that the board acted unreasonably in affirming a narrower principle of reciprocity. Accordingly, the circuit court correctly affirmed the board's decision.

By the Court. — Judgment affirmed.

       WisConsin Stat. § 186.113(1) provides:
      Branch offices. If the need and necessity exist and with the approval of the office of credit unions, establish branch offices inside this state or no more than 25 miles outside of this state. Permanent records may be maintained at branch offices established under this subsection. In this subsection, the term "branch office" does not include a remote terminal, a limited services office or a service center.

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

       The "Wisconsin Credit Union Review Board Policy Guidelines — Community Field of Membership and Related Issues" provide guidelines to the OCU for ruling on requests by Wisconsin credit unions to expand their fields of membership. One of the "general policy guidelines" provides in part, "The Director [of the OCU] is encouraged to allow reciprocity in considering requests of foreign state credit unions wishing to define portions of Wisconsin in their fields of membership."

       WisConsin Stat. § 186.015(5) provides:
      Reviews. Any interested person aggrieved by any act, order or determination of the office of credit unions that relates to credit unions may, within 60 days after the date of the act, order or determination, apply for review by the review board. The review board shall determine if the office of credit unions acted within the scope of the office's authority, has not acted in an arbitrary or capricious manner and has based the act, order or determination on evidence supported by the record. The review board shall dispose of a review application within 60 days after the date on which it is received, unless the review board designates a hearing examiner, in which case the review board shall dispose of the review application within 180 days after the date on which it is received.

       Heritage also argued that Wis. Stat. § 186.113(1) permitted it to establish branch offices in Wisconsin. The board decided that section did not apply to Heritage since it is an Illinois-chartered credit union, and Heritage has not pursued that argument in this court.

       This procedure is provided for in Wis. Stat. § 227.46(1) and (2).

       Under Wis. Stat. § 186.015(6)(b), any final order of the board is subject to review in the manner provided in Wis. Stat. ch. 227.

       The supremacy clause, U.S. Const. art. VI, cl. 2, provides in part:
      This Constitution, and the Laws of the United States which shall be made in Pursuance thereof... shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.
      Congressional enactments override those state laws with which they conflict. Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 300 (1988).

       We give great weight to the agency's interpretation when:
      (1) the agency was charged hy the legislature with the duty of administering the statute; (2) . . . the interpretation of the agency is one of long-standing; (3) . .. the agency employed its expertise or specialized knowledge in forming the interpretation; and (4) . .. the agency's interpretation will provide uniformity and consistency in the application of the statute.

        UFE Inc. v. LIRC, 201 Wis. 2d 274, 284, 548 N.W.2d 57 (1996). We give a lesser amount of deference — due weight — when the agency has some experience in the area, but has not developed the expertise that necessarily places it in a better position than the court to make judgments regarding the interpretation of the statute. Id. at 286.
      Under the great weight standard, we uphold an agency's reasonable interpretation of the statute if it is not contrary to the clear meaning of the statute, even if we conclude another interpretation is more reasonable. Id. at 287. Under the due weight standard, we uphold the agency's reasonable interpretation if it comports with the purpose of the statue and we conclude there is not a more reasonable interpretation. Id. We give no deference to the agency, and review the issue de novo when the issue before the agency is one of first impression or the agency's position has been so inconsistent as to provide no real guidance. Id. at 285.

       We have given due weight to a state agency's interpretation of a federal statute when the agency's responsibilities under state law include interpreting and applying the federal statute, but we have employed de novo review when that is not the case. Gould v. DHSS, 216 Wis. 2d 356, 372-75, 576 N.W.2d 292 (Ct. App. 1998); American Family Mut. Ins. Co. v. DOR, 214 Wis. 2d 577, 584 & n.6, 571 N.W.2d 710 (Ct. App. 1997), overruled on other grounds, 222 Wis. 2d 650, 586 N.W.2d 872 (1998).

        See note 6.

       WISCONSIN Stat. § 227.52 provides in part:
      Judicial review; decisions reviewable. Administrative decisions which adversely affect the substantial interests of any person, whether by action or inaction, whether affirmative or negative in form, are subject to review as provided in this chapter, except as otherwise provided by law and except for the following:
      (4) Decisions of the office of credit unions.

       The question of the proper standard of review on the issue of OCU's authority is complicated. First, the statute governing the board's review under Wis. Stat. § 186.015(5) directs that it is to determine if the OCU acted within the scope of its authority, did not act arbitrarily or capriciously, and acted based on evidence in the record. The parties do not address how this statute affects our standard of review of the board's decision. Second, the board has a number of roles with respect to the OCU besides hearing credit union appeals under § 186.015(5): conferring with OCU on matters affecting credit unions and the office under § 186.015(1); responding to questions by the OCU, § 186.015(2)(c); and approving OCU's official actions, § 186.015(3). In this case, in denying Heritage's applications, OCU relied on the board's general policy guidelines encouraging reciprocity and decided how to apply it in this case to branch office applications. The parties do not distinguish between the board's authority to adopt a general policy encouraging reciprocity and OCU's authority to apply that policy to branch offices as it did in this case.

       A "regional credit union" is defined as "a state or federal credit union that has its principal office located in ... Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, and Ohio." Wis. Stat. § 186.41(l)(c) and (d).

       WISCONSIN Stat. § 227.01(13) defines a "rule" as:
      [A] regulation, standard, statement of policy or general order of general application which has the effect of law and which is issued by an agency to implement, interpret or make specific legislation enforced or administered by the agency or to govern the organization or procedure of the agency.

       OCU also asserts that, even if we were to address this issue and decide OCU's decision is based on a policy that is invalid because it was not promulgated as a rule, the result would not be that Heritage could operate branch offices anywhere in Wisconsin; rather, the result would be that Heritage could not operate branch offices anywhere in Wisconsin. We need not address this argument.

       Heritage presents this issue as a subset of its argument that OCU does not have the statutory authority to preclude it from operating branch offices wherever it chooses in Wisconsin. However, since we have already concluded that OCU does have the statutory authority to determine whether and where Heritage may operate branch offices in Wisconsin, the only remaining issue is whether OCU's decision was a reasonable exercise of its statutory authority. And, since we are reviewing the board's decision, not that of the OCU, we frame the issue accordingly.

       WISCONSIN Stat. § 227.57(8) provides in full:
      The court shall reverse or remand the case to the agency if it finds that the agency's exercise of discretion is outside the range of discretion delegated to the agency by law; is inconsistent with an agency rule, an officially stated agency policy or a prior agency practice, if deviation therefrom is not explained to the satisfaction of the court by the agency; or is otherwise in violation of a constitutional or statutory provision; but the court shall not substitute its judgment for that of the agency on an issue of discretion.
      Since Heritage does not assert that the board's decision is inconsistent with an agency rule, policy, practice, or constitutional provision, we consider only the two grounds referred to in the text above.


author: FINE, J. SCHUDSON, J.

text:
    In re the Commitment of Ronald Ransdell: State of Wisconsin, Petitioner-Respondent, v. Ronald Ransdell, Respondent-Appellants.

    Court of Appeals

      No. 00-2224.

      Submitted on briefs July 3, 2001. —
    Decided August 7, 2001.

    2001 WI App 202
    (Also reported in 634 N.W.2d 871.)

      On behalf of the respondent-appellant, the cause was submitted on the briefs of Ellen Henak, assistant state public defender of Milwaukee.
    On behalf of the petitioner-respondent, the cause was submitted on the brief of James E. Doyle, attorney general, and Warren D. Weinstein, assistant attorney general.
    Before Wedemeyer, EJ., Fine and Schudson, JJ.

       Petition to review filed.

   FINE, J.

¶ 1. Ronald Ransdell appeals from a judgment and an order finding him to be a sexually violent person under Wis. Stat. ch. 980, and committing him to institutional care pursuant to Wis. Stat. § 980.06 (1999-2000). His sole claim on appeal is that § 980.06 deprives him of substantive due process because it, unlike its predecessor provision, requires an automatic initial commitment to "institutional care." We affirm.

¶ 2. Wisconsin Stat. § 980.06 provides:

If a court or jury determines that the person who is the subject of a petition under s. 980.02 is a sexually violent person, the court shall order the person to be committed to the custody of the department for control, care and treatment until such time as the person is no longer a sexually violent person. A commitment order under this section shall specify that the person be placed in institutional care.

This section was amended into its present form by 1999 Wis. Act § 3223h. It applies to commitment orders under Wis. Stat. ch. 980 entered on or after October 29, 1999. 1999 Wis. Act 9, § 9323(2)(ag). Placement "in institutional care" is at a "secure mental health unit or facility." Wis. Stat. § 980.065(lm). The trial court's judgment and order from which this appeal is taken was entered on June 8, 2000.

¶ 3. Before the 1999 amendment of Wis. Stat. § 980.06, the circuit court was directed to determine whether a person found to be a sexually violent person should either be placed in a secure facility or be permitted supervised release. Wis. Stat. § 980.06(2)(b) (1997-1998) ("An order for commitment under this section shall specify either institutional care or supervised release."). Although someone found to be a sexually violent person must first be "placed in institutional care," § 980.06, that placement and the underlying commitment are subject to review:

• A person committed under Wis. Stat. § 980.06 "may petition the committing court for discharge at any time, but if a person has previously filed a petition for discharge without the secretary's approval and the court determined, either upon review of the petition or following a hearing, that the person's petition was frivolous or that the person was still a sexually violent person, then the court shall deny any subsequent petition under this section without a hearing unless the petition contains facts upon which a court could find that the condition of the person had so changed that a hearing was warranted." Wis. Stat. § 980.10. (Emphasis added.) The hearing on the petition is held pursuant to Wis. Stat. § 980.09(2)(b). Section 980.09(2)(a) also permits a person committed under § 980.06 to "petition the committing court for discharge from custody or supervision without the secretary's approval."
"The director of the facility at which [a person found to be a sexually violent person] is placed may file a petition [to modify an order of commitment by authorizing supervised release] on the person's behalf at any time." Wis. Stat. § 980.08(1). (Emphasis added.)
A court committing a person under Wis. Stat. § 980.06 has the discretion to "order a reexamination of the person at any time during the period in which the person is subject to the commitment order." Wis. Stat. § 980.07(3). (Emphasis added.)
"If a person has been committed under s. 980.06 and has not been discharged under s. 980.09, the department shall conduct an examination of his or her mental condition within 6 months after an initial commitment under s. 980.06 and again thereafter at least once each 12 months for the purpose of determining whether the person has made sufficient progress for the court to consider whether the person should be placed on supervised release or discharged." Wis. Stat. § 980.07(1).
• A person committed under Wis. Stat. § 980.06 may file a petition for discharge "[i]f the secretary determines at any time" that the person "is no longer a sexually violent person." Wis. Stat. § 980.09(1). (Emphasis added.) •
• A person committed pursuant to § 980.06 "may petition the committing court to modify its order by authorizing supervised release if at least 18 months have elapsed since the initial commitment order was entered or at least 6 months have elapsed since the most recent release petition was denied or the most recent order for supervised release was revoked." Wis. Stat. § 980.08(1).

¶ 4. We examine Ransdell's contention that § 980.06 deprives him of his right to due- process against the background of these provisions and the applicable law.

¶ 5. A person contending that a statute is unconstitutional has a heavy burden; he or she must establish beyond a reasonable doubt that the statute is constitutionally infirm, and we are required to give to the statute every reasonable presumption in favor of its validity. State v. Carpenter, 197 Wis. 2d 252, 263-264, 541 N.W.2d 105, 109 (1995), cert. denied sub nom. Schmidt v. Wisconsin, 521 U.S. 1118. Our review is de novo. State v. Post, 197 Wis. 2d 279, 301, 541 N.W.2d 115, 121 (1995), cert. denied, 521 U.S. 1118. In assessing whether a statute that restricts a person's liberty interests, as does Wis. Stat. ch. 980, passes due-process muster we apply a strict-scrutiny test — that is, we have to determine whether the statute "further[s] a compelling state interest and [is] narrowly tailored to serve that interest." Id., 197 Wis. 2d at 302, 541 N.W.2d at 122. Additionally, " 'due process requires that the nature and duration of commitment bear some reasonable relation to the purpose for which the individual is committed.'" Post, 197 Wis. 2d at 313, 541 N.W.2d at 126 (quoting Jackson v. Indiana, 406 U.S. 715, 738 (1972)).

¶ 6. The government may confine a person if it shows " 'by clear and convincing evidence that the individual is mentally ill and dangerous.'" Foucha v. Louisiana, 504 U.S. 71, 80 (1992) (quoted source omitted). The mental illness, however, need only rise to the level of "mental abnormality," Kansas v. Hendricks, 521 U.S. 346, 356 (1997), or, as denominated in Wis. Stat. ch. 980, "mental disorder," Post, 197 Wis. 2d at 303-307, 541 N.W.2d at 122-124. "The key to the constitutionality of the definition of mental disorder in chapter 980 is that it requires a nexus — persons will not fall within chapter 980's reach unless they are diagnosed with a disorder that has the specific effect of predisposing them to engage in acts of sexual violence." Id., 197 Wis. 2d at 306, 541 N.W.2d at 124. As Hendricks recognized, "under the appropriate circumstances and when accompanied by proper procedures, incapacitation may be a legitimate end of the civil law." 521 U.S. at 365-366. See also id., 521 U.S. at 357 ("It thus cannot be said that the involuntary civil commitment of a limited subclass of dangerous persons is contrary to our understanding of ordered liberty."). A person may not be committed under Wis. Stat. § 980.06, however, unless it is proved beyond a reasonable doubt that, among other things, the person "is dangerous to others because the person's mental disorder creates a substantial probability that he or she will engage in acts of sexual violence." Wis. Stat. §§ 980.02(2)(c), 980.05(3)(a).

¶ 7. Chapter 980 advances two "legitimate and compelling" state interests: "to protect the community from the dangerously mentally disordered and to provide care and treatment to those with mental disorders that predispose them to sexual violence." Post, 197 Wis. 2d at 302-303, 541 N.W.2d at 122. Post held that chapter 980 was a civil statute that did not violate the due-process rights of those committed under its procedures. Id., 197 Wis. 2d at 301-317, 541 N.W.2d at 121-128. As we have seen, Ransdell argues that the legislation that now requires an initial placement "in institutional care," Wis. Stat. § 980.06, is an incremental deprivation that crosses the due-process line. Significantly, however, he does not contend that his special circumstances make § 980.06 infirm as applied to him; rather, Rans-dell argues that § 980.06 is infirm on its face. Cf. Seling v. Young, 121 S. Ct. 727, 735, (2001) (an "as-applied analysis" is unworkable in determining whether commitment scheme is civil or criminal for double-jeopardy and ex post facto purposes).

¶ 8. Although Post was decided before the 1999 amendment of § 980.06 challenged here, it recognized that "Commitment in a secure setting that provides specialized treatment for sexual offenders serves both to protect society and to treat the individual." Id., 197 Wis. 2d at 314, 541 N.W.2d at 127. As with the legislature's constitutional policy determination that the safety of innocent persons in society warrants the finely tuned procedures in Wis. Stat. ch. 980 that permit the incapacitation of sexually violent persons, we see nothing that prevents the legislature from requiring that the person first undergo initial evaluation and initial treatment in an institutional setting before any decisions are made as to whether that person is suitable for supervised release. This is a reasonable policy determination that the legislature has the constitutional authority to make — the initial inpatient evaluation and treatment has a" 'reasonable relation to the purpose for which the individual is committed'" to the Department as a sexually violent person. See Post, 197 Wis. 2d at 313, 541 N.W.2d at 126 (quoted source omitted). Thus, State v. Field, 118 Wis. 2d 269, 279-282, 347 N.W.2d 365, 370-371 (1984), upheld the automatic-commitment procedure in Wis. Stat. § 971.17(1) (1981-82) against a due-process challenge, noting that a finding beyond a reasonable doubt that the person committed a crime "is indicative of dangerousness," and that an automatic commitment not only permits the person to "receive a thorough and accurate evaluation of his or her present mental condition," but also protects society. By the same token here, Ransdell has been found beyond a reasonable doubt to be a currently dangerous sexually violent person, and the dual interests of protecting the public and ensuring accurate assessment and effective treatment are at least as important here (if not more important, given the current finding of dangerousness) as they were in Field.

¶ 9. Moreover, as we have seen, there are many safeguards against arbitrary confinement: the director of the facility where the person is placed can petition the court to authorize a supervised release "at any time," Wis. Stat. § 980.08(1); the person may seek discharge at any time the secretary of the Department of Health and Family Services determines that the person "is no longer a sexually violent person," Wis. Stat. § 980.09(1); the person may file an initial petition for discharge "at any time," Wis. Stat. § 980.10; the committing court may order a reexamination of the person "at any time," Wis. Stat. § 980.07(3); there is a mandatory examination of the person's "mental condition within 6 months after an initial commitment" and at least every twelve months thereafter "for the purpose of determining whether the person has made sufficient progress for the court to consider whether the person should be placed on supervised release or discharged," Wis. Stat. § 980.07(1); and, finally, after the expiration of eighteen months of the initial commitment order, the person may file a petition seeking supervised release, Wis. Stat. § 980.08(1).

¶ 10. Applying the strict-scrutiny analysis to the incremental infringement by Wis. Stat. § 980.06 on the liberty interests of those who have a sexually violent, predatory past and who are currently suffering from a mental disorder that makes them dangerous sexual predators, we cannot say that Ransdell has carried his burden of proving beyond a reasonable doubt that amended § 980.06 violates due process.

By the Court. — Judgment and order affirmed.

SCHUDSON, J.

¶ 11. (dissenting). Although I believe the majority opinion is reasonable in many respects, I am unable to determine whether, under State v. Post, 197 Wis.2d 279, 541 N.W.2d 115 (1995), it is correct.

¶ 12. In Post, the supreme court, concluding that the predecessor statute to the one challenged in this appeal was constitutional, explained:

The purposes of commitment under chapter 980 have already been identified as the protection of the community and the treatment of persons suffering from disorders that predispose them to commit sexually violent acts. The nature of the commitment (to the custody of DHSS with potential confinement in a secure mental health facility) is consistent with both purposes.
The language of the statute provides the best evidence of this reasonable relationship. Individuals found to be sexually violent persons are committed to the custody of DHSS "for control, care and treatment" in "the least restrictive manner consistent with the requirements of the person and in accordance with the court's commitment order."

Id. at 313 (emphases added; citations omitted).

¶ 13. Thus, the supreme court connected its approval of the predecessor statute to three conditions absent from the revised statute:

(1) Commitment to the custody of DHSS would not result in automatic confinement. Rather, the statute was constitutional in part because it allowed only for "potential" confinement among other options. See id.

(2) Confinement would not automatically be deemed the appropriate initial placement. Rather, the statute was constitutional in part because initial confinement would only come about if it was " 'the least restrictive'" option satisfying the statutory purposes. See id.

(3) Confinement could not come about automatically by legislative or administrative mandate. Rather, the statute was constitutional in part because any confinement had to be ordered by the court. See id.

¶ 14. The current statute, failing to provide these three safeguards to protect individuals from inappropriate confinement, may not satisfy the constitutional standards the supreme court considered so essential in Post. Therefore, I would have certified this appeal to the supreme court and, accordingly, I respectfully dissent.

       Unless otherwise noted, all references to Wis. Stat. § 980.06 and the other provisions of Chapter 980 are to the 1999-2000 edition of the Wisconsin Statutes.

       The "department" is the Department of Health and Family Services. Wis. Stat. § 980.01(1).

       Wisconsin Stat. § 980.06(2)(b) (1997-1998) provided in full:

        An order for commitment under this section shall specify either institutional care or supervised release. In determining whether commitment shall be for institutional care or for supervised release, the court may consider, without limitation because of enumeration, the nature and circumstances of the behavior that was the basis of the allegation in the petition under s. 980.02(2)(a), the person's mental history and present mental condition, where the person will live, how the person will support himself or herself, and what arrangements are available to ensure that the person has access to and will participate in necessary treatment, including pharmacological treatment using an antiandrogen or the chemical equivalent of an antiandrogen if the person is a serious child sex offender. In deciding whether to order supervised release of person who is a serious child sex offender, the court may not consider, as a factor in making its decision, that the person is a proper subject for pharmacological treatment using an antiandrogen or the chemical equivalent of an antiandrogen or that the person is willing to participate in pharmacological treatment using an antiandrogen or the chemical equivalent of an antiandrogen. The department shall arrange for control, care and treatment of the person in the least restrictive manner consistent with the requirements of the person and in accordance with the court's commitment order.
      The criteria that were set out in Wis. Stat. § 980.06(2)(b) (1997-1998) are now in Wis. Stat. § 980.08(4), which provides that the circuit court "shall grant the petition [for supervised release] unless the state proves by clear and convincing evidence that the person is still a sexually violent person and that it is still substantially probable that the person will engage in acts of sexual violence if the person is not continued in institutional care."

       The "secretary" is the secretary of the Department of Health and Family Services. Wis. Stat. § 980.01(4).

       In connection with the reexamination required by Wis. Stat. § 980.07(1), "the person who has been committed may retain or seek to have the court appoint an examiner as provided under s. 980.03(4)," § 980.07(1), and an indigent person has an absolute right to the appointment of an expert, Wis. Stat. § 980.03(4) ("If the person is indigent, the court shall, upon the person's request, appoint a qualified and available expert or professional person to perform an examination and participate in the trial or other proceeding on the person's behalf.").

       We have previously examined the history of the longstanding rule that statutes are presumed to be constitutional and that a party claiming that a statute is constitutionally infirm prove that infirmity beyond a reasonable doubt. Guzman v. St. Francis Hospital, Inc., 2001 WI App. 21 ¶ 4 n.3, 240 Wis. 2d 559, 568 n.3, 623 N.W.2d 776, 781 n.3 (Ct. App. 2000).

       Chapter 980 defines a "sexually violent person" as:

        [A] person who has been convicted of a sexually violent offense, has been adjudicated delinquent for a sexually violent offense, or has been found not guilty of or not responsible for a sexually violent offense by reason of insanity or mental disease, defect or illness, and who is dangerous because he or she suffers from a mental disorder that makes it substantially probable that the person will engage in acts of sexual violence.
      Wis. Stat. § 980.01(7). "Mental disorder" is defined as "a congenital or acquired condition affecting the emotional or volitional capacity that predisposes a person to engage in acts of sexual violence." Wis. Stat. § 980.01(2).

       And indeed, confinement was not automatic. In its brief to this court, the State advises that during the six-year period of the operation of the predecessor statute, courts ordered "initial placements in the community" for approximately fourteen individuals.