author: DEININGER, J.

text:
    Robert G. Morris, Plaintiff-Appellant, v. State of Wisconsin Department of Transportation, Defendant-Respondent.
    Court of Appeals

      No. 02-0288.

      Submitted on briefs June 12, 2002.

    Decided October 31, 2002.

    2002 WI App 283
    (Also reported in 654 N.W.2d 16.)

      On behalf of the plaintiff-appellant, the cause was submitted on the briefs of James W. Hammes of Cramer, Multhauf & Hammes, LLP, Waukesha.
    On behalf of the defendant-respondent, the cause was submitted on the brief of Frank D. Remington, assistant attorney general, and James E. Doyle, attorney general.
    Before Roggensack, Deininger and Lundsten, JJ.

       Petition to review denied 2-19-03.

   DEININGER, J.

¶ 1. Robert Morris appeals an order dismissing his claim challenging the Wisconsin Department of Transportation's condemnation of a portion of his land for highway purposes. Morris claims the department lacked jurisdiction to acquire the land because the department served the jurisdictional offer and award of damages on his counsel rather than on him personally. We conclude that the instructions of Morris's counsel constitute a "special circumstance" under which the department was permitted to serve the documents on Morris by sending them by certified mail to his attorney. Accordingly, we affirm the trial court's dismissal of Morris's claim on summary judgment.

BACKGROUND

¶ 2. As part of a highway construction project, the Wisconsin Department of Transportation initiated condemnation proceedings under Wis. Stat. § 32.05 (1999-2000) to acquire land owned by Robert Morris. Subsections 32.05(2)(a) and (b) require the department to provide Morris with an appraisal of the land to be acquired, and it did so. The department informed Morris by letter in September 2000 that he could obtain an independent appraisal of the land at the department's expense. See § 32.05(2)(b). Consistent with the statute, the letter stated that "for consideration and to qualify the charges for reimbursement.. . a copy [of an independent appraisal] must he submitted to this office within 60 days of your receipt of this letter." See id. ("The owner may obtain an appraisal by a qualified appraiser of all property proposed to be acquired, and . .'. shall submit. .. [the] . . . appraisal to the condemnor within 60 days after the owner receives the condemnor's appraisal.")

¶ 3. Near the end of the sixty-day independent appraisal period, Morris asked the department to reduce the amount of land to be acquired. The department agreed and re-platted and re-appraised the land accordingly. The department provided Morris with a revised appraisal in early February 2001, which triggered an additional sixty-day period for Morris to obtain an independent appraisal of the property. See Wis. Stat. § 32.05(2)(b).

¶ 4. Morris then retained counsel, who wrote to the department as follows:

This office has been retained by Robert G. Morris with respect to the above-referenced condemnation proceeding.
It is my understanding that the Department of Transportation presented Mr. Morris with a new appraisal on January 17, 2001 [sic]. Accordingly, in accordance with the provisions of Wis. Stats. Ch. 32, Mr. Morris is exercising his right to obtain an appraisal at the Department of Transportation's expense. Upon receipt of the appraisal, a copy will be forwarded to your attention so that the Department of Transportation can pay the cost of the appraisal and then begin negotiations.
Until the appraisal has been received and forwarded to your attention, I would ask that you not contact Mr. Morris directly regarding this matter.

(Emphasis added.) Morris is shown as a copy addressee on his attorney's letter to the department.

¶ 5. Over the next two months, Morris's counsel negotiated with the department. During the negotiations, Morris's counsel requested the department to pay a higher price and to guarantee access from Morris's property to a nearby frontage road. The department increased its offering price but not to the amount Morris's counsel had requested, and it refused to guarantee the access he had requested.

¶ 6. Morris's sixty-day appraisal period expired in early April. With negotiations at impasse and no independent appraisal in hand, the department prepared a "jurisdictional offer to purchase," see Wis. Stat. § 32.05(3), a document which, among other things, sets forth the amount offered for the acquisition of the land and gives the landowner twenty days to accept or reject the offer. Although § 32.05(3) and (4) require the department to serve the jurisdictional offer on "the owner," by either personal service or certified mail, the department sent the jurisdictional offer by certified mail to Morris's counsel on April 3, 2001. Morris's counsel advised him "on or about April 10" that counsel had received the jurisdictional offer.

¶ 7. Approximately two weeks after the department mailed the jurisdictional offer to Morris's counsel, the department received Morris's independent appraisal with no accompanying cover letter. The appraisal was untimely, given that the department received it after the sixty-day independent appraisal period had expired. The department reviewed the late appraisal but concluded it provided no justification for it to increase the jurisdictional offer.

¶ 8. The twenty-day period for Morris to accept or reject the jurisdictional offer passed with no response from Morris or his counsel. Accordingly, the department prepared the "award of damages," a document which specifies the date on which the department will acquire the property and the amount of compensation to be paid the landowner, a sum that must at least equal the jurisdictional offer. See Wis. Stat. § 32.05(7)(a). Similar to the service requirements for the jurisdictional offer, § 32.05(7)(b) requires the department to serve the award of damages either personally or by certified mail on "all persons having an interest of record in the property taken." See also § 32.05(7)(a). As it did with the jurisdictional offer, however, the department sent the award of damages (along with a check for the amount of the award) to Morris's counsel by certified mail, but it did not send a copy of the award of damages to Morris.

¶ 9. The department's award of damages crossed in the mail with a letter from Morris's counsel, in which counsel requested that the department further increase the purchase price and pay for the cost of Morris's appraisal, despite the fact that the appraisal was forwarded beyond the sixty-day appraisal period. The department denied both requests.

¶ 10. Morris responded by commencing this action against the department, alleging that it lacked jurisdiction to condemn his property because it had sent the jurisdictional offer and the award of damages to his attorney, rather than serving the documents on him directly. See Wis. Stat. § 32.05(5) (entitling the landowner to commence a lawsuit regarding all issues other than the adequacy of compensation within forty days after service of the jurisdictional offer). Morris asked for an order "enjoining and restraining the [department] from going upon, occupying, or using any portion of his land.

¶ 11. On cross-motions for summary judgment, the trial court ruled for the department. The court noted that Morris's counsel "specifically requested that the [department] refrain from contacting Morris directly until after receipt of Morris's appraisal." The court concluded that because the department served the jurisdictional offer on counsel several days before it received Morris's independent appraisal, the department "was acting as directed by Morris's counsel, and should not be penalized for doing so." Concerning the award of damages, the trial court held that the department's service of the document on Morris's counsel "was not unreasonable" because: (1) Morris's counsel had been actively involved in the condemnation process for over two months prior to the service of the award of damages; (2) the department had directed all communications to Morris's counsel since he became involved in the matter; and (3) although Morris's counsel specifically requested that communications be directed to him until the completion of the independent appraisal, he did not give further instructions as to communications after receipt of the appraisal.

¶ 12. The trial court entered an order dismissing Morris's action and Morris appeals.

ANALYSIS

¶ 13. We review an order for summary judgment de novo, owing no deference to the trial court. Waters v. United States Fid. & Guar. Co., 124 Wis. 2d 275, 278, 369 N.W.2d 755 (Ct. App. 1985). In reviewing the granting or denial of a motion for summary judgment, we are to use the same methodology as the trial court. M&I First Nat'l Bank v. Episcopal Homes Mgmt., Inc., 195 Wis. 2d 485, 496-97, 536 N.W.2d 175 (Ct. App. 1995). Thus, we will affirm a summary judgment "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; see also Wis. Stat. § 802.08(2). We will reverse a decision granting summary judgment, however, if the trial court incorrectly decided legal issues or if material facts were in dispute. Coopman v. State Farm Fire & Cas. Co., 179 Wis. 2d 548, 555, 508 N.W.2d 610 (Ct. App. 1993).

¶ 14. Generally, when both parties move for summary judgment and neither argues that factual disputes bar the other's motion, the " 'practical effect is that the facts are stipulated and only issues of law are before us.'" Lucas v. Godfrey, 161 Wis. 2d 51, 57, 467 N.W.2d 180 (Ct. App. 1991) (citation omitted). That is the case here. Morris's arguments on appeal challenge only the legal sufficiency of the department's service of the jurisdictional offer and the award of damages on his counsel. Neither party asserts a dispute of material fact that would preclude awarding summary judgment to the other.

¶ 15. We agree with Morris that the department must properly serve both the jurisdictional offer and the award of damages in order for it to lawfully condemn a landowner's property. Wisconsin Stat. § 32.05(4) provides in relevant part:

(4) How NOTICE OF JURISDICTIONAL OFFER IS GIVEN. The giving of such notice is a jurisdictional requisite to a taking by condemnation. Such notice may be given by personal service in the manner of service of a circuit court summons, or it may be transmitted by certified mail.

Similarly, § 32.05(7)(b) provides that a copy of the award of damages "shall be served on or mailed by certified mail to all persons named therein," and under § 32.05(7)(c), title to the condemned property does not vest in a condemnor until after "service of the award [of damages] has been completed."

¶ 16. We thus conclude that the provisions concerning service of the two documents are among "the procedural steps in ch. 32, Stats., [that] are recognized as constituting such a valuable right of the property owner that they are deemed by the statute itself... to be jurisdictional in nature." City of Racine v. Bassinger, 163 Wis. 2d 1029, 1036, 473 N.W.2d 526 (Ct. App. 1991). We quoted with approval in Bassinger the trial court's conclusion that in order to be deemed "jurisdictional," steps in the condemnation procedure must have two features:

The first is that they are contained within the particular statute which sets forth the condemnation procedure, that is the things which must be done to have and to exercise the power to acquire property by eminent domain .... The second is that the statute expressly or impliedly denies the power of the condemnor to act unless the particular step is taken ....

Id. at 1036-37. The provisions in Wis. Stat. § 32.05 regarding service of the jurisdictional offer and the award of damages meet both requirements.

¶ 17. We must next determine, therefore, whether the department's service of the jurisdictional offer and the award of damages on Morris's counsel was sufficient to allow the department to lawfully acquire Morris's land. Morris correctly asserts that the relevant provisions of § 32.05 contemplate service of the two documents on a landowner personally, and that generally, "an attorney is not authorized by general principles of agency to accept on behalf of a client service of process commencing an action." Gangler v. Wisconsin Elec. Power Co., 110 Wis. 2d 649, 657, 329 N.W.2d 186 (1983). The department counters that in "special circumstances" an attorney may accept service of a document ordinarily required to be served on his or her client. See id. at 658 (recognizing that a "special circumstance" exists " 'when an attorney at law formally acknowledges the receipt of a document as an attorney on behalf of a client.'" (citation omitted)). Citing Dairyland Fuels, Inc. v. State, 2000 WI App 129, 237 Wis. 2d 467, 614 N.W.2d 829, the department contends this case presents a "special circumstance" under which its service of the jurisdictional offer and award of damages on Morris's counsel was sufficient to allow it to lawfully acquire Morris's property. We agree.

¶ 18. The landowner in Dairyland Fuels, unhappy with the amount awarded by a county condemnation commission, appealed the award to the circuit court. Id. at ¶¶ 3-4. Wisconsin Stat. § 32.05(10)(a) requires an appellant to give notice of a circuit court appeal "by certified mail or by personal service" to "all persons other than the appellant who were parties to the proceeding before the commissioners." The Department of Transportation, which was also the condemnor in Dairyland Fuels, claimed that the landowner failed to comply with this requirement because it had served the notice of appeal on the department's counsel (an assistant attorney general) rather than on the department itself. Dairyland Fuels, 2000 WI App 129 at ¶ 17.

¶ 19. The landowner argued that the case presented a "special circumstance" that permitted service on the attorney general's office. Id. at ¶ 27. In support, the landowner noted that the assistant attorney general had appeared on behalf of the department throughout the condemnation proceedings and had requested in a letter to the commission and to the landowner's counsel "that the [department] ... be removed from your mailing matrix, as I represent [the department] herein." Id. at ¶ 26. We concluded that because the assistant attorney general, in addition to appearing on behalf of the department throughout the condemnation proceedings, had instructed the landowner to serve documents on her without any limiting language as to when the instructions no longer applied, "it was not unreasonable for Dairyland to infer that... it could serve the attorney general rather than the [department]." Id. at ¶ 28.

¶ 20. We likewise conclude here that the instruction of Morris's counsel constitutes a "special circumstance" which excused the department from having to serve the jurisdictional offer on Morris personally. Just as the assistant attorney general in Dairyland Fuels communicated her desire to receive documents on behalf of her client, Morris's counsel instructed the department to "not contact Mr. Morris directly regarding this matter" until the department received Morris's independent appraisal. The letter containing this instruction indicates that a copy of it was sent to Morris.

¶ 21. The department had not yet received an independent appraisal from Morris at the time it prepared the jurisdictional offer, and we conclude that it was not unreasonable for the department to infer that it should serve the offer on Morris's counsel. Morris's attorney had communicated a willingness and capacity to receive documents on behalf of his client, which is a recognized "special circumstance" under which a party may be relieved of the requirement to serve a represented party personally. See Gangler, 110 Wis. 2d at 658. As the trial court aptly noted, the department was merely "acting as directed by Morris's counsel, and should not be penalized for doing so."

¶ 22. We further conclude that Morris's counsel's instruction also constitutes a "special circumstance" with regard to service of the award of damages. Although counsel instructed the department to "not contact Mr. Morris directly" "[u]ntil the appraisal has been received and forwarded," counsel gave no specific direction regarding communications after the department's receipt of the independent appraisal. This was not unlike the circumstance in Dairyland Fuels, where the assistant attorney general's letter lacked "limiting language that would put a party on notice that the attorney general's instructions no longer applied" at a particular juncture in the condemnation proceedings. Dairyland Fuels, 2000 WI App 129 at ¶ 28.

¶ 23. Moreover, we note that, even if the letter from Morris's counsel could be construed as suggesting that the department should serve documents directly on Morris following the department's receipt of the independent appraisal, the department had by then served the jurisdictional offer by certified mail on Morris's counsel. The department received no objection from Morris's counsel (or from Morris, see footnote 7) to the manner of service of the offer during the three weeks which intervened between the mailing of the offer and the mailing of the award. The only communication the department received during that time was the belated appraisal itself, unaccompanied by any request to direct future communications to Morris personally, or even by any indication of who had forwarded the appraisal to the department. In short, we see no reason why the "special circumstance" created by Morris's counsel's direction that the department not contact Morris directly should not govern the department's service of the award of damages as well as its service of the jurisdictional offer.

¶ 24. Morris advances three reasons why we should not apply the Dairyland Fuels rationale in this case. According to Morris: (1) Dairyland Fuels "involved an appeal taken from a Condemnation Commission award," as opposed to a dispute concerning documents served during the department's initial efforts to acquire the land; (2) in addition to sending a letter requesting that her client be removed from the parties' mailing list, the assistant attorney general in Dairyland Fuels also filed and served a formal Notice of Appearance requesting that "all documents hereafter filed in this action be served upon" her (id. at ¶ 29); and (3) the Dairyland Fuels decision rested in part on the supreme court's holding in DOT v. Peterson, 226 Wis. 2d 623, 594 N.W.2d 765 (1999), that the pertinent terms of Wis. Stat. § 32.05 permit landowners to serve a notice of appeal of a condemnation award on the attorney general rather than on the department.

¶ 25. We are not persuaded by Morris's efforts to distinguish Dairyland Fuels. First, we can discern no meaningful difference between our analysis in Dairy-land Fuels concerning the sufficiency of service of a notice of appeal of a condemnation commission award and the facts at hand. Like the service of a jurisdictional offer and award of damages, service of a notice of appeal is a "jurisdictional" prerequisite to the ensuing steps in the condemnation and review process. See Dairyland Fuels, 2000 WI App 129 at ¶ 8. We conclude that our reasoning and conclusions regarding the validity of serving counsel instead of a party under "special circumstances" are as valid on the present facts as on those in Dairyland Fuels.

¶ 26. Second, although we noted in Dairyland Fuels that the assistant attorney general's notice of appearance "[pjerhaps more strongly" evinced her intent to accept all documents pertaining to the condemnation action than did her letter, id. at ¶ 29, we had already determined that the letter itself had created a "special circumstance" permitting service on counsel in lieu of her client. See id. at ¶¶ 27-28. Our discussion of the notice of appearance was "[i]n addition," id. at ¶ 29, to our conclusion that the landowner could reasonably infer from counsel's letter that subsequent documents could be served on the attorney. Id. at ¶ 28.

¶ 27. Finally, we explained in Dairyland Fuels that the effect of the assistant attorney general's letter on the sufficiency of service was a second and independent ground for affirming the trial court's decision, not one that was linked to or in any way dependent on the supreme court's analysis in DOT v. Peterson. See Dairy-land Fuels, 2000 WI App 129 at ¶ 18 ("Dairyland responds that service on the attorney general was proper for two reasons .... We concur with Dairyland on both points."). In short, we are satisfied that the analysis in Dairyland Fuels on which we rely may be properly applied to the present dispute.

CONCLUSION

¶ 28. For the reasons discussed above, we affirm the appealed judgment.

By the Court. — Order affirmed.

       All references to the Wisconsin Statutes are to the 1999-2000 version unless otherwise noted. Wisconsin Stat. § 32.05 sets forth the procedures by which property may be acquired by condemnation for various public purposes, including streets and highways.

       Circuit Judge. Robert G. Mawdsley entered the dismissal order based on a prior written decision by Judge Patrick L. Snyder, who granted the department's motion for summary judgment and denied Morris's.

       Morris argued in the trial court that the department failed to negotiate for the acquisition of his land in good faith, but he does not renew the argument on appeal.

       We recognize that the condemnation procedures set forth in Wis. Stat. § 32.05 do not constitute "an action." We are nonetheless satisfied that, given the references in the statute to a "jurisdictional requisite" and "the manner of service of a circuit court summons," the precedents we discuss in this opinion may appropriately be applied to the statutory service requirements for the documents at issue.

       Under Wis. Stat. § 32.05(9), a landowner may appeal the amount of a condemnor's award of damages by applying for assignment of the matter to a commission of county condemnation commissioners. The landowner may in turn appeal the commission's award to the circuit court. Section 32.05(10).

       Morris contends in his reply brief that the instruction in his counsel's letter "cannot be construed as a 'requirement' to serve [his] counsel" with the documents at issue in this case. This argument, however, overlooks the plain language of the letter itself: "Until the appraisal has been ... forwarded to your attention, I would ask that you not contact Mr. Morris directly regarding this matter." (Emphasis added.) The necessary implication of this language is an instruction to the department to send subsequent communications concerning the condemnation to Morris's counsel instead of to Morris personally.

       We note further that Morris's counsel notified him both that the department had been instructed to communicate exclusively with counsel and that counsel had received the jurisdictional offer from the department. There is no indication in the record that Morris objected to either action prior to filing suit.

       We caution the department, however, that although we conclude its service of the jurisdictional offer and award of damages was sufficient under the particular facts of this case, we deem it a better practice to serve the documents on both the landowner and the landowner's counsel should similar circumstances arise in the future.


source: Caselaw Access Project

author: DYKMAN, J.

license: Public Domain

text:
    State of Wisconsin, Plaintiff-Respondent, v. Brian B. Burke, Defendant-Appellant.

    Court of Appeals

      No. 02-2161-CR.

      Submitted on briefs October 11, 2002.

      Decided October 31, 2002.

    2002 WI App 291
    (Also reported in 653 N.W.2d 922.)

      On behalf of the defendant-appellant, the cause was submitted on the petition of Robert H. Friebert of Friebert, Finerty & St. John, S.C., Milwaukee.
    On behalf of the plaintiff-respondent, the cause was submitted on the response of Jennifer E. Nashold, assistant attorney general, Barbara L. Oswald, assistant attorney general, and James E. Doyle, attorney general.
    Before Vergeront, PJ., Dykman and Deininger, JJ.

       Petition to review denied 2-19-03.

   DYKMAN, J.

¶ 1. We granted Brian Burke's petition for review of the trial court's order denying his motion for a stay of criminal proceedings until fifteen days after the end of the Wisconsin Legislature's biennial session on January 6, 2003. We conclude that the trial court correctly denied this motion, and affirm.

¶ 2. Brian Burke is a state senator who has been charged with eighteen felony counts. His motion asserted that pursuant to article iy section 15 of the Wisconsin Constitution, he was exempt from arrest, and therefore entitled to a stay until fifteen days after the end of the current legislative session. Article iy section 15 provides:

Exemption from arrest and civil process. SECTION 15. Members of the legislature shall in all cases, except treason, felony and breach of the peace, be privileged from arrest; nor shall they be subject to any civil process, during the session of the legislature, nor for fifteen days next before the commencement and after the termination of each session.

¶ 3. To begin with, we are grateful for the trial court's extensive and well-crafted opinion which examines the circumstances surrounding the drafting of this provision of our 1848 constitution and discusses authority, from before and after the enactment of the constitution, from which it reached its conclusion. The trial court's research and analysis assisted us in our consideration of the parties' arguments in this appeal.

¶ 4. First, as the trial court noted, we may not read our 1848 constitution using modern definitions and syntax. We are to examine:

(1) The [nineteenth century] plain meaning of the words in the context used;
(2) The historical analysis of the constitutional debates and of what practices were in existence in 1848, which the court may reasonably presume were also known to the framers of the 1848 constitution, and;
(3) The earliest interpretation of this section by the legislature as manifested in the first law passed following the adoption of the constitution.

State v. Beno, 116 Wis. 2d 122, 136-37, 341 N.W.2d 668 (1984) (citations omitted).

¶ 5. This case requires us to interpret language in the Wisconsin Constitution. We do so de novo. Thompson v. Craney, 199 Wis. 2d 674, 680, 546 N.W.2d 123 (1996).

¶ 6. The trial court concluded that the exception to article IV section 15, for "breach of the peace" includes the crimes with which Burke has been charged. There is nothing in the records of either the 1846 or 1848 constitutional conventions that sheds light on the meaning of article IY section 15. The provision was apparently adopted with little discussion. Whatever the meaning of that section, the members of the convention apparently had little or no disagreement as to its meaning. A contemporaneous case, Anderson v. Rountree, 1 Pin. 115 (1841), examined the nature of the legislative privilege from arrest in terms of the civil law, though it interpreted a territorial statute which provided:

[N]o member of the legislative assembly shall be liable to arrest on a service of any civil process issued by any of the courts of this Territory during any such session of the legislative assembly, or for ten days previous to the commencement or subsequent to the termination of any session; and any member in arrest during the period of such exemption shall be entitled to an immediate discharge on any application to any judge, supreme court commissioner or justice, in any county in which such an arrest may have been made.

Id. at 123. While Rountree is not dispositive, it shows a legislative belief that legislators should be privileged only from civil process.

¶ 7. Burke rests most of his argument on State ex rel. Isenring v. Polacheck, 101 Wis. 427, 77 N.W. 708 (1898). In Polacheck, a member of the Wisconsin Assembly was arrested and charged with bribing or attempting to bribe a Milwaukee alderman. The briefs in that case show that the State first argued that Po-lacheck waived his privilege by pleading not guilty. Brief for Appellant, in Cases and Briefs, Vol. 582, Case 16 at 12. The supreme court agreed, and therefore reversed the trial court's order discharging Polacheck from imprisonment. Polacheck, 101 Wis. at 432, 434.

¶ 8. Had the court stopped there, this would be an easier case. But before the court concluded that Po-lacheck had waived his claim to an article iy section 15 privilege, it considered whether bribery was a felony, and thus an exception to article IX section 15 protection. The court concluded that the word "felony" in article IX section 15 was limited to offenses that were felonies when the state constitution was adopted. Id. at 431. Based on the State's failure to assert that bribery was a felony, the court concluded that, for the purpose of article IX section 15, bribery was a misdemeanor. In doing so, the court said:

It is not claimed that there was any statute in force in the territory making bribery a felony at the time of the adoption of the constitution. The word "felony" in the provision of the constitution quoted must be limited to such offenses as were felonies at the time the constitution was adopted. We must hold that the offense charged does not come within the exception named in the constitution.

Id. (citations omitted).

¶ 9. Burke argues that the last two sentences of this quotation unequivocally hold that article IX section 15 applies to criminal prosecutions.

¶ 10. Taken out of context, the quoted passage might support Burke's argument. But placed within the context of the appeal in Polacheck, we conclude it does not. Isenring, the appellant, filed a brief which made three arguments: (1) Polacheck waived the privilege given by article IX section 15 of the Wisconsin Constitution; (2) the privilege he asserted had long expired since Polacheck was not under arrest or in actual custody until after the legislature had adjourned sine die; and (3) Polacheck was not entitled to the article IX section 15 privilege, because bribery was a felony. Cases and Briefs, supra at 11-18.

¶ 11. Though the State's first argument in Po-lacheck was dispositive, the court addressed all three arguments. The State did not argue, however, and the opinion in Polacheck did not address, the question Burke raises here. When the supreme court used the passage we have quoted, it was addressing the State's third argument. The State and the supreme court were assuming the applicability of article iy section 15 to Polacheck's case. The briefs in Polacheck do not even hint at the argument Burke now makes. It is hardly surprising, then, that the supreme court did not address it. Burke's reliance on one sentence taken out of context from Polacheck is misplaced.

¶ 12. Having concluded that Polacheck does not give Burke a privilege from prosecution, we next consider the meaning of the article iy section 15 exception from its privilege for a "breach of the peace." Again, we consider this phrase in its 1848 context. Beno, 116 Wis. 2d at 136-37.

¶ 13. The trial court examined several nineteenth century authorities to conclude that the phrase "treason, felony and breach of the peace" included all crimes. A modern reader might define "breach of the peace" as "disorderly conduct." But in the early and mid-nineteenth century, the term had a broader meaning. Justice Joseph Story, in Commentaries on the Constitution of the United States, Vol. 2 § 862 (Boston, Hilliard, Gary & Co. 1833), noted that all crimes were defined as "offenses against the peace."

¶ 14. Burke takes issue with the trial court's reliance on these authorities, and in particular, with the conclusion of the United States Supreme Court that the phrase "Treason, Felony and Breach of the Peace," found in article I, section 6 of the United States Constitution equates with the word "crime": "These reasons, alone, though others might be added, are sufficient to establish the point that the terms 'treason, felony, and breach of the peace,' as used in our constitutions, embrace all criminal cases and proceedings whatsoever." Williamson v. United States, 207 U.S. 425, 445-46 (1908).

¶ 15. While Burke concedes that Williamson might apply to a phrase in the United States Constitution identical to the same phrase in the Wisconsin Constitution, he contends that the reasoning of Williamson is inapplicable to the Wisconsin Constitution because Polacheck "clearly makes wholesale adoption of this interpretation impossible." But as we have explained, Polacheck did not address the question Burke presents here.

¶ 16. Burke next cites Beno, 116 Wis. 2d at 135-36, for its caution that we are not bound by the construction of article I, section 6 of the United States Constitution, and should look instead to the intent of the framers of the Wisconsin Constitution. We agree that, as Beno tells us, article I, section 6 of the United States Constitution provides no clear indication as to the meaning of the state clause. Beno, 116 Wis. 2d at 136. But it does provide insight as to what the framers of the Wisconsin Constitution assumed as to the meaning of a phrase as it was used at the time. Burke also points out that the Wisconsin Constitution differs from the United States Constitution in that the Wisconsin Constitution also gives legislators another privilege: "nor shall they be subject to any civil process." "Civil arrest," argues Burke, is a "subset of civil process."

¶ 17. While the Wisconsin Constitution gives broader protection than the United States Constitution, we do not see how this is relevant, as applied to Burke. He is not subject to civil process. He is being prosecuted under the criminal law.

¶ 18. While Burke finds fault with much of the trial court's analysis, he makes no attempt to use the analysis Beno requires to find the meaning of article IY section 15 of the Wisconsin Constitution. We have attempted to find the nineteenth century meaning of the phrase "treason, felony and breach of the peace," but, apart from foreign cases which discuss the phrase, there is little to assist us. This is not surprising. We suspect that "treason, felony and breach of the peace" was not a common subject of conversation in nineteenth century Wisconsin.

¶ 19. A historical analysis of the constitutional debates yields little more. We know that during debate, Mr. Estabrook moved to amend article I, section 15 to strike the provision which privileged members from civil actions. The motion failed. See id. at 137. While this history is interesting, it sheds little light on what the members of the Constitutional Convention meant by the phrase "treason, felony and breach of the peace."

¶ 20. Examining, as Beno requires, the earliest interpretation of this section, as manifested by the first laws passed following the adoption of the constitution, makes the answer clearer. Wisconsin Stat. ch. 8, § 2 (1849), provided: "No officer of the senate or assembly, while in actual attendance upon the duties of his office, shall be liable to arrest on civil process." We infer from this statute that legislators were not privileged from arrests for criminal acts. We also note that Wis. Stat. ch. 90, § 15 (1849), provides for the service of process in actions other than those on contract:

No personal action shall be commenced by capias ad respondendum except in actions ex delicto, when the plaintiff or some one in his behalf, shall make and attach to such writ an affidavit, stating therein that the plaintiff has a claim for damages against the defendant for the cause of action stated in the writ, and upon which he believes that the plaintiff is entitled to recover a certain sum, being more than one hundred dollars.

Id. "Capias ad respondendum" is defined as:

In practice. A judicial writ, (usually simply termed a "capias,") by which actions at law were frequently commenced; and which commands the sheriff to take the defendant, and him safely keep, so that he may have his body before the court on a certain day, to answer the plaintiff in the action. 3 Bl. Comm. 282; 1 Tidd, Pr. 128. The name of this writ is commonly abbreviated to ca. resp.

Black's Law Dictionary 168 (1st ed. 1891). Actions "ex delicto" are defined:

From a delict, tort, fault, crime or malfeasance. In both the civil and the common law, obligations and causes of action are divided into two great classes,— those arising ex contractu, (out of a contract,) and those ex delicto. The latter are such as grow out of or are founded upon a wrong or tort, e.g., trespass, trover, replevin. These terms were known in English law at a very early period. See Inst. 4, 1, pr.; Mackeld. Rom. Law, § 384; 3 Bl. Comm. 117; Bract, fol. 1016.

Black's Law Dictionary 444 (1st ed. 1891).

¶ 21. From Wis. Stat. ch. 90, §§ 15 and 16 (1849), and the definitions we have noted, it is apparent that, except for contract actions, a method of commencing a lawsuit was to arrest the defendant. And because Wis. Stat. ch. 8, § 2 (1849) provided only for the privilege from arrest on civil process, it is apparent that the earliest legislative interpretation of article IY section 15 of the Wisconsin Constitution was that the privilege applied only to civil arrest and not to criminal actions. There is no redundancy in privileging legislators from arrest and also from any civil process because in 1848, while some civil actions were commenced by arrest, actions on contract were not. Legislators were privileged from both.

¶ 22. We conclude that the members of the Wisconsin Constitutional Convention did not intend to create a legislative privilege from criminal arrest and prosecution when they included article IY section 15 in the Wisconsin Constitution. The phrase "treason, felony and breach of the peace" in that section was intended to mean "all crimes." We therefore agree with the trial court that Burke is not privileged from criminal prosecution. Accordingly, the trial court correctly denied his motion for a stay of proceedings.

By the Court. — Order affirmed.

       It is sometimes difficult to follow the three-part analysis required by State v. Beno, 116 Wis. 2d 122, 341 N.W.2d 668 (1984), and at the same time follow the admonition in Beno quoting from Attorney General ex rel. Bashford v. Barstow, 4 Wis. 567, 785, [*757] (1855), that we are to look at the words of the Wisconsin Constitution, not the "opinion of jurists of other states" or the "theories of speculators upon the science of government." Beno, 116 Wis. 2d at 135. In 1848, Wisconsin jurisprudence was not well developed. Early editions of the Wisconsin Reports contain many citations to English and other states' law. In examining the words of our constitution, in the context used, one must recognize that in 1848, Wisconsin law was not far removed from English law and that of the Eastern states.

       The State also argues that, because Burke has not been detained, the mere prosecution of the case against him does not constitute an "arrest" for purposes of the legislative privilege, and that the term "session" as used in article W section 15, refers to legislative "floor periods," not the entire two-year "session" to which the term may also refer. Because we affirm the trial court's rationale for denying Burke's motion, it is not necessary for us to address these alternative grounds for affirming its ruling.


author: CURLEY, J. WEDEMEYER, P.J.

text:
    Michael Green, Max Rasansky, The Board of Trustees of Congregation Emanu-el B'ne Jeshurun, and Congregation Emanu-el B'ne Jeshurun, Plaintiffs-Appellants, v. Heritage Mutual Insurance Company, Defendant-Respondent.
    Court of Appeals

      No. 01-2778.

      Submitted on briefs August 6, 2002.

    Decided November 5, 2002.

    2002 WI App 297
    (Also reported in 655 N.W.2d 147.)

      On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of Robert H. Friebert, S. Todd Farris, and Brian C. Randall of Friebert, Finerty & St. John, S.C., of Milwaukee.
    On behalf of the defendant-respondent, the cause was submitted on the brief of Arthur P. Simpson of Simpson & Deardorff, S.C., of Milwaukee.
    Before Wedemeyer, EJ., Curley and Deininger, JJ.

       Petition to review denied 1-21-03.

   CURLEY, J.

¶ 1. Michael Green, Max Rasansky, the Congregation Emanu-El B'ne Jeshurun (Congregation), and the Board of Trustees of the Congregation Emanu-El B'ne Jeshurun (Board) appeal from the trial court's judgment dismissing their claims against Heritage Mutual Insurance Company (Heritage) seeking reimbursement from Heritage under a "directors and officers" (D & O) liability insurance policy for costs and attorneys' fees incurred in defense of claims against Green and Rasansky, as trustees of the Board, in an underlying lawsuit. The appellants contend that because the underlying complaint alleged claims against Green and Rasansky personally for money damages, Heritage had a duty to defend under the D & O policy.

¶ 2. Based on this court's prior ruling in Liquidation of WMBIC Indem. Corp., 175 Wis. 2d 398, 499 N.W.2d 257 (Ct. App 1993), we must disagree and conclude: (1) the D & O liability policy covers only losses for which the trustees are personally liable; (2) the claims in question were not against the trustees personally; and, therefore, (3) because the trustees had no personal liability, there was no coverage under the policy. Accordingly, we affirm.

I. Background.

¶ 3/ The Congregation oversees a Jewish synagogue, which was formerly located at 2419 East Ken-wood Boulevard in the City of Milwaukee, from 1927 to 1998. The Congregation is an incorporated religious society existing under the laws of the State of Wisconsin, and consists of approximately 1,300 member families. The Congregation is governed by a twenty-one-person Board of elected volunteer members, including Green and Rasansky. Addressing a population shift of its Congregation members to the northern suburbs of Milwaukee, the Board decided to build a second facility for worship, teaching, and cultural enhancement in River Hills. The River Hills facility was dedicated on October 19, 1997.

¶ 4. In November 1997, Green, acting as the president of the Board, approached the University of Wisconsin-Milwaukee Fine Arts Department (UWMF) and asked if it had any interest in purchasing the Congregation's Kenwood facility. UWMF expressed interest, and the Board ultimately approved the sale of the Kenwood facility to UWMF for $4.5 million. The Board later learned, however, that the title insurance company would not ensure clear title if the sale was not approved by the Congregation. As a result, a special meeting of the Congregation was held on February 1, 1999, to vote on the sale. The sale was approved by a two-to-one majority vote with over 600 members voting.

¶ 5. However, a number of disgruntled members complained that the vote was unreasonable because members' names appeared on the ballot and members had to travel to the River Hills facility to cast the vote. On July 29, 1999, these disgruntled members (Friends of Kenwood) filed a complaint against the Board, the Congregation, Green and Rasansky, in an attempt to block the sale. The complaint alleged that the defendants engaged in deceit, misrepresentation, a breach of fiduciary duty, and that the defendants violated the by-laws of the Congregation. Essentially, the complaint contended that the Friends of Kenwood were deceived into accepting the River Hills construction project because of assurances that the original facility would not be abandoned.

¶ 6. The defendants filed a motion to dismiss, alleging that the complaint failed to state a claim for relief. On November 8, 1999, the trial court granted the motion to dismiss for failure to state a claim and granted leave to amend the complaint. On November 29, 1999, the Friends of Kenwood filed an amended complaint. Again, the defendants moved to dismiss. The trial court granted their motion as to the Board and the Congregation on the basis that the allegations lacked particularity as to which Board members and Congregation members made the misrepresentations and to which Kenwood members such misrepresentations were made. However, the motion to dismiss was denied as to Green and Rasansky.

¶ 7. The Friends of Kenwood then appealed the trial court's dismissal of the Board and the Congregation from the lawsuit. This court affirmed. See Friends of Kenwood v. Green, 2000 WI App 217, 239 Wis. 2d 78, 619 N.W.2d 271. The Friends of Kenwood then moved to dismiss their claims against Green and Rasansky. On March 1, 2001, the trial court dismissed the final claims from the underlying lawsuit.

¶ 8. Shortly after the initial complaint had been filed, the Congregation gave notice to Heritage on behalf of all of the defendants requesting that Heritage provide a defense. Throughout the course of the underlying litigation, Heritage received numerous requests for defense coverage, but continually denied coverage. On March 29, 2001, the Congregation, the Board, Green and Rasansky filed a complaint against Heritage seeking recovery under the Congregation's D & O insurance policy for all costs and attorneys' fees expended in defending the underlying lawsuit. Heritage moved to dismiss. The trial court granted this motion and entered final judgment dismissing all claims against Heritage.

II. Analysis.

¶ 9. The trial court resolved this case by granting Heritage's motion to .dismiss, concluding: (1) Green and Rasansky had no personal liability for damages as required by Liquidation of WMBIC Indem. Corp., 175 Wis. 2d 398, 499 N.W.2d 257 (Ct. App 1993); and, therefore, (2) they failed to satisfy a prerequisite for coverage under the Congregation's D & O liability policy. Thus, this appeal requires us to construe the amended complaint filed against Green and Rasansky in light of the D & O liability policy as interpreted in WMBIC.

¶ 10. A motion to dismiss for failure to state a claim tests whether the complaint is legally sufficient to state a claim for which relief may be granted. Doe v. Archdiocese of Milwaukee, 211 Wis. 2d 312, 331, 565 N.W.2d 94 (1997). The legal sufficiency of the complaint is a question of law that this court reviews de novo. Wausau Tile, Inc. v. County Concrete Corp., 226 Wis. 2d 235, 245, 593 N.W.2d 445 (1999). In examining the legal sufficiency of the complaint, we assume that the facts alleged in the complaint are true, see id., and we are concerned only with the legal sufficiency of the complaint, see Lane v. Sharp Packaging Sys., Inc., 2001 WI App 250, ¶ 15, 248 Wis. 2d 380, 635 N.W.2d 896. Thus, we will affirm an order dismissing a complaint for failure to state a claim if it appears to a certainty that no relief can be granted under any set of facts that the plaintiffs could prove in support of their allegations. See Quesenberry v. Milwaukee County, 106 Wis. 2d 685, 690, 317 N.W.2d 468 (1982).

¶ 11. "To determine whether a duty to defend exists, the complaint claiming damages must be compared to the insurance policy and a determination made as to whether, if the allegations are proved, the insurer would be required to pay the resulting judgment." School Dist. of Shorewood v. Wausau Ins. Cos., 170 Wis. 2d 347, 364-65, 488 N.W.2d 82 (1992). Assuming the allegations are proved true, if the insurer would be obligated to pay the resulting judgment under the terms of the policy, then the insurer has a duty to defend the insured. Atlantic Mut. Ins. Co. v. Badger Med. Supply Co., 191 Wis. 2d 229, 236, 528 N.W.2d 486 (Ct. App. 1995). The interpretation of an insurance policy is a question of law, and we determine an insurer's duty to defend solely from the allegations contained in the complaint without consideration of extrinsic facts. Id.

¶ 12. The amended complaint, filed on November 29, 1999 against the Board, the Congregation, and Green and Rasansky, as trustees of the Board, states, in relevant part:

FIRST CAUSE OF ACTION
36.The actions of the defendants, Michael Green, Max Rasansky, and the Board of Trustees as set forth in ¶¶ 8 through 31 hereinabove violated the bylaws of the Congregation, specifically Article V - § 3, Article VII - § H, Article X - § 2, and Article XI - § 2.
SECOND CAUSE OF ACTION
37.The actions of the defendants, Michael Green, Max Rasansky, and the Board of Trustees as set forth in ¶¶ 8 through 31 hereinabove constitute deceit and misrepresentation, and breach of their fiduciary duty to the plaintiffs.
THIRD CAUSE OF ACTION
38.The misrepresentation of the defendants as set forth in ¶¶ 8 through 35 above create a promissory estoppel which unjustly enriched the defendant, Congregation Emanu-El B'ne Jeshurun.
WHEREFORE, the plaintiffs demand judgment against the defendants as follows:
(1) Injunctive and declaratory relief voiding the contract of sale of the Kenwood temple property, between Congregation Emanu-El B'ne Jeshurun and the UWM foundation.
(2) An order removing the Board of Trustees of Congregation Emanu-El B'ne Jeshurun, including the defendants, Michael Green and Max Rasansky.
(3) An order directing reimbursement of contributions and cancellation of pledges to the campaign to build the River Hills campus, to all members of Congregation Emanu-El B'ne Je-shurun who had made those contributions and pledges based upon assurances that the Congregation's principal house of worship would remain at the Kenwood temple and would not be replaced by the River Hills facility. And
(4) An order for the Plaintiffs' costs, disbursements, reasonable attorney's fees, and such other relief as may be appropriate.

¶ 13. In order to determine whether Heritage had a duty to defend Green and Rasansky in the underlying lawsuit, we must examine the Congregation's insurance policy. The policy provisions read as follows:

We agree to pay on behalf of the named insured [Congregation] or an insured person [trustee] all loss which they, individually or collectively, shall become legally obligated to pay. The claim for such a loss must:
a. First be made against them during the policy period; and
b. Arise by reason of a wrongful act.

(Emphasis in original.) The policy continues by defining "loss" and "wrongful acts" in the following manner:

"Loss" means any amount which an insured person [trustee] is legally obligated to pay or which the named insured [Congregation] may be required or permitted by law to pay as indemnity to an insured person [trustee] for a claim or claims made against an insured person [trustee] for wrongful acts.
"Wrongful act" means any actual or alleged error or misstatement or misleading statement or act or omission or neglect or breach of duty by an insured person [trustee] in the discharge of their duties, individually or collectively. It also includes any matter claimed against them solely by their being insured persons [trustee].

(Emphasis in original.)

¶ 14. Like the insurance policy at issue in WMBIC, this is a D & O policy, which protects the individual trustees from personal liability for their "wrongful acts" in two situations: (1) the first clause of the definition of "loss" provides that the trustees are directly insured when claims are made against them which are not indemnified by the Congregation; and (2) the second clause of the definition of "loss" provides that the Congregation will be reimbursed for amounts paid to indemnify the trustees for any covered losses. See also WMBIC, 175 Wis. 2d at 404.

¶ 15. Because the Congregation is statutorily mandated to reimburse the trustees, see Wis. Stat. § 181.0872(1) (1999-2000), only the second situation is applicable. Thus, under the D & O policy, coverage exists if four factors coalesce: "(1) a claim is made against the directors or officers, individually or collectively, (2) for a wrongful act, (3) resulting in a loss, (4) for which the [Congregation] has indemnified the directors or officers as required or permitted by law." Id. at 404-05 (footnote omitted). Therefore, because the fourth factor is satisfied by Wis. Stat. § 181.0872(1) (1999-2000), we must only determine, whether the amended Friends of Kenwood complaint made a claim against the trustees, individually or collectively, for a "wrongful act" resulting in a "loss." However, "[i]f any of these elements is absent, there is no coverage." WMBIC, 175 Wis. 2d at 405.

¶ 16. Therefore, we must examine the amended Friends of Kenwood complaint to determine whether the trustees suffered a "loss," as that term is defined in the insurance policy and in light of the holding in WMBIC. The D & O policy in question was issued to protect the Board members, individually and collectively, from third-party claims made against them in their capacity as trustees. See WMBIC, 175 Wis. 2d at 405-06. As such, "a 'loss' under D & O policies, by definition, encompasses only those amounts that insureds [- trustees-] are legally obligated to pay." Id. at 406. "Such a definition prevents insurers from being required to pay claims for which the insured officers and directors are not personally liable." Id. at 406-07. "Thus, a prerequisite for coverage is the insured's — [the trustee's] — legal obligation to pay for the claim made against him or her." Id. at 407. In other words, despite the Congregation's belief that D & O insurance protects trustees in every situation in which they are sued in their capacity as trustees, not all claims made against a trustee fall within the policy definition of "loss." Only those claims which result in the trustees' personally being held liable are insured.

¶ 17. Consequently, based on the WMBIC court's analysis, we conclude that while the amended Friends of Kenwood complaint states a number of claims against the Congregation through the acts of its agents, Green and Rasansky, the complaint fails to allege any claims for which Green and Rasansky could be held personally liable. First, the claims in question include only breach of contract, promissory estoppel, deceit, misrepresentation, and breach of fiduciary duty. "This court has long adhered to the general rule that, where an agent merely contracts on behalf of a disclosed principal, the agent does not become personally liable to the other contracting party." See Benjamin Plumbing, Inc. v. Barnes, 162 Wis. 2d 837, 848, 470 N.W.2d 888 (1991). Furthermore, if a party contracting with a business entity knows that the agent for that entity is contracting on behalf of a corporation, the agent would not be personally liable unless he or she expressly assumed such liability. See id. at 850. Thus, because (1) our review of the record indicates that Green and Rasansky operated solely on behalf of the Congregation, and “(2) the record is bereft of any evidence of an express assumption of liability on behalf of Green or Rasansky, we conclude that Green and Rasansky acted merely as agents on behalf of the Congregation.

¶ 18. Additionally, the only relief sought under the complaint was injunctive relief — the amended Friends of Kenwood complaint demanded: (1) injunc-tive and declaratory relief voiding the contract of sale of the Kenwood facility; (2) an order removing the Board; and (3) an order directing reimbursement of contributions and cancellation of pledges to build the River Hills facility. None of these requests seek damages personally from Green, Rasansky or any other Board member. Thus, the amended Friends of Kenwood complaint failed to allege claims for which the trustees would have been "legally obligated to pay" as required for coverage under a D & O policy as interpreted in WMBIC. See WMBIC, 175 Wis. 2d at 406.

¶ 19. Although the complaint in question, on its face, fails to clear the WMBIC hurdle, the appellants contend that the trial court in the underlying action actually held that the amended Friends of Kenwood complaint "stated personal claims for money damages against Green and Rasansky." In support of their conclusion, the appellants cite the trial court's following statement:

[Biased upon a reading of the plaintiffs first amended complaint, and applying the law that says that the plaintiffs, if he states or she states any cause of action at all for any form of relief, and that it be liberally construed, that the complaint stands, and that the remaining defendants in the plaintiffs complaint are Michael Green and Max Rasansky, all the other defendants are dismissed out....

We do not interpret this or any other part of the court's decision, which dismissed the Board and the Congregation from the underlying lawsuit, as actually holding that personal claims for money damages were asserted against Green or Rasansky, nor could we. The trial court's release of the Congregation and Board, but not the two individually-named trustees, from the underlying lawsuit, is inexplicable. In effect, the trial court left in the suit the Congregation's agents, from whom the plaintiffs could not obtain the relief they sought, but dismissed the Congregation and the Board of trustees, the two entities that could have given the plaintiffs the relief they requested. The trial court appeared to recognize this anomaly when it stated:

[B]ased upon what I have before me at this point in time, and with the Board of Trustees [and the Congregation] being out, there is no way that I've been able to reach the conclusion yet that Mr. Sutton's clients would be entitled to the relief they're asking for as set forth in paragraphs 1 and 2 of the prayer for relief.

In any event, nothing in the pleadings states or infers that money damages were being sought from Green or Rasansky. Moreover, "Wisconsin adheres to a 'notice-pleading' philosophy." Midway Motor Lodge v. Hartford Ins. Group, 226 Wis. 2d 23, 34, 593 N.W.2d 852 (Ct. App. 1999). "[I]f'notice pleading' is to have any efficacy at all, the complaint must give the defendant fair notice of not only the plaintiffs claim but [also] 'the grounds upon which it rests' as well." Id. at 35. "[I]t is not enough to indicate merely that the plaintiff has a grievance, but sufficient detail must be given so that the defendant, and the court, can obtain a fair idea of what the plaintiff is complaining about, and can see that there is some basis for recovery." Id. (citations omitted). Thus, because courts are to make conclusions on coverage issues based solely on the allegations within the four corners of the complaint, see Doyle v. Engelke, 219 Wis. 2d 277, 284, 580 N.W.2d 245 (1998), the fact that two of the initial defendants were dismissed from the underlying lawsuit does not alter the effect of the amended complaint.

¶ 20. Accordingly, we conclude that the Congregation has failed to establish a prerequisite for coverage under the D & O policy — that is, that the trustees were legally obligated to pay for the claims made against them. Therefore, because Green and Rasansky, as agents of the Congregation, were not personally liable, Heritage was not obligated to pay the resulting judgment under the terms of the policy, and thus, had no duty to defend Green or Rasansky in the underlying lawsuit. Accordingly, we affirm.

By the Court. — Judgment affirmed.

WEDEMEYER, P.J.

¶ 21. (dissenting). I disagree with the majority's decision in this case and therefore respectfully dissent for the reasons that follow.

¶ 22. This was an unusual case in that the insurer did not proceed with the ordinary and common practice procedures utilized in insurance dispute cases. Moreover, the case was complicated by the early dismissal of the Congregation, but not individually named Board members, Green and Rasansky. As a result, this case became one viewed with hindsight, rather than focusing solely on the allegations in the complaint.

¶ 23. In order to determine whether or not Green and Rasansky were entitled to insurance coverage, we must limit our initial review to the allegations set forth in the complaint. The duty to defend is "predicated on allegations in a complaint which, if proved, would give rise to recovery under the terms and conditions of the insurance policy." Elliott v. Donahue, 169 Wis. 2d 310, 320-21, 485 N.W.2d 403 (1992). The nature, and not the merit, of the claims in the complaint determines the duty to defend. Id. at 321. Where the issue of coverage is "fairly debatable," the insurer must provide a defense until coverage is conclusively determined. Id. at 317.

¶ 24. The complaint here, in my opinion, clearly alleged covered causes of action — misrepresentation and breach of fiduciary duty. The claims against Green and Rasansky alleged misrepresentations and breaches, which caused some of the "Friends of Kenwood" to make contributions in reliance on the alleged misrepresentations.

¶ 25. The fact that, ultimately, the allegations were dismissed is not pertinent to our analysis. Looking solely at the allegations in the complaint, I conclude that Heritage had a duty to defend the action, even though, in the end, it turned out that no liability was incurred. The duty to defend is broader than the duty to indemnify. General Cas. Co. v. Hills, 209 Wis. 2d 167, 176 n.11, 561 N.W.2d 718 (1997). If the complaint alleges a claim that is potentially covered — "no matter how attenuated, frivolous, or illogical [the] allegations may be," Sheets v. Brethren Mut. Ins. Co., 679 A.2d 540, 544 (Md. 1996), the insurance company has a duty to defend. Heritage failed to do that here. If Heritage had accepted its duty to defend, based on the allegations in the complaint, Green and Rasansky would not have incurred costs associated with retention of separate counsel.

¶ 26. The majority dismisses Green's and Rasansky's contentions under an agency theory — i.e., Green and Rasansky are agents of the principal and, therefore, could not incur any personal liability. Although I don't disagree with that general statement, I conclude that that determination was premature. We do not know whether Green's and Rasansky's conduct brought them outside the protection of the agent-principal relationship. Moreover, in this case, the trial court dismissed the Congregation and the Board, and left Green and Rasansky as individual defendants, who had the potential of being personally liable if the "Friends" had been able to prove the misrepresentation allegations set forth in the complaint, and if it was determined that Green and Rasansky were not protected by the agency-principal indemnification arrangement.

¶ 27. Although it is true that the general rule of agency law is that an agent will not incur personal liability for conduct on behalf of the principal, the protection is not absolute. When the agency relationship is disclosed, a plaintiff is entitled to recover from the principal, but not the agent. Hooper v. O.M. Corwin Co., 199 Wis. 139, 146, 225 N.W. 822 (1929) (citation omitted). Agency law, however, does not insulate an agent from liability for its torts. Ford v. Wisconsin Real Estate Exam. Bd., 48 Wis. 2d 91, 102, 179 N.W.2d 786, 792 (1970) (citing Restatement (Second) of Agency § 343), which states:

An agent who does an act otherwise a tort is not relieved from liability by the fact that he acted at the command of the principal or on account of the principal, except where he is exercising a privilege of the principal, or a privilege held by him for the protection of the principal's interests, or where the principal owes no duty or less than the normal duty of care to the person harmed.

¶ 28. Comment d states in part that "[a]n agent who assists another agent or the principal to commit a tort is normally himself liable as a joint tortfeasor for the entire damage." Thus, under some circumstances, the agent may become personally liable. Here, it was too early to answer that question. The case did not proceed to discovery stages where those issues would have been explored. Thus, I cannot agree with the majority's conclusion that the principal-agency relationship insulates Green and Rasansky from any personal liability.

¶ 29. Finally, after reviewing WMBIC, I agree with Green and Rasansky that this case is distinguishable. Unlike WMBIC, the underlying complaint here did allege personal claims against Green and Rasansky. The trial court acknowledged this fact on the record when it dismissed the Congregation but, at the same time, allowed the case to continue against Green and Rasansky. Moreover, the record reflects that subsequent to the proceedings generated following the unsuccessful appeal of the dismissal of the Congregation, the "Friends" made a monetary demand on Green and Rasansky.

¶ 30. Finally, the insurance principle stating that if there is any doubt about the duty to defend, it must be resolved in favor of the insured provides additional support for my conclusion. Elliott, 169 Wis. 2d at 321. Any doubt about the duty to defend should have been resolved in favor of Green and Rasansky. Board members, in general, are charged with certain decision-making authority for the organizations they represent. As was the case here, the Board found it had made a controversial decision that angered some of its members. The members filed a lawsuit because they disagreed with the Board's decision. In that lawsuit, the "Friends" named two members of the Board, individually — Green and Rasansky. The lawsuit alleged that Green and Rasansky breached their fiduciary duty, and misrepresented facts to members to secure donations. The lawsuit sought return-of those donations. When the defendants notified Heritage of the lawsuit, Heritage refused to provide a defense. Heritage also failed to intervene in the action to seek a determination on coverage.

¶ 31. As a result of Heritage's actions, Green and Rasansky had to retain counsel to defend against the misrepresentation and breach of fiduciary duty claims. They remained in the action following an initial motion to dismiss, which dismissed the Congregation and the Board. Individuals who volunteer to serve as members of a Board, such as the one involved here, should not have to expend personal finances for conduct taken on behalf of the organization. The risk of this exposure, including associated defense costs, is why a board obtains D & O coverage. See 2 Rowland H. Long, The Law of Liability Insurance § 12A.01[1] (1992) (D & O policies generally are issued to protect directors and officers from claims made against them in their official capacities.) In my opinion, the Board members here, like many religious organizations, purchased the D & O policy to provide protection — including a defense, for when they are sued as a result of a board decision. The Board members should not have to reach into their own pockets when a disgruntled member files a lawsuit, whether the suit has merit or not, if the complaint alleges a potentially covered claim. The insurer must also defend the entire action even if some of the allegations in the underlying complaint fall outside of the policy. Grube v. Daun, 173 Wis. 2d 30, 73, 496 N.W.2d 106 (Ct. App. 1992). The defense must be provided until coverage is conclusively determined. Elliott, 169 Wis. 2d at 321.

¶ 32. That did not happen here. As a result, Green and Rasansky incurred legal fees that should have been paid by Heritage. In my opinion, Heritage breached its duty to defend and should be responsible for reimbursing Green and Rasansky directly for the defense costs associated with the underlying "Friends" action and the instant matter.

       A number of the facts surrounding the underlying lawsuit are taken from Friends of Kenwood v. Green, 2000 WI App 217, ¶¶ 3-9, 239 Wis. 2d 78, 619 N.W.2d 271.

       The relevant policy provisions at issue in Liquidation of WMBIC Indent. Corp., 175 Wis. 2d 398, 499 N.W.2d 257 (Ct. App 1993) are nearly identical to those at issue in the present case and read as follows:
      [T]he insurer agrees: (A) With the Directors and Officers of the Bank that if.. . any claim or claims are made against the Directors and Officers ... for a Wrongful Act, the Insurer will pay, in accordance with the terms of this policy, on behalf of the Directors and Officers ... all Loss which the Directors and Officers ... shall become legally obligated to pay.
      (B) With the Bank that if.. . any claim or claims are made against the Directors and Officers ... for a Wrongful Act, the Insurer will pay, in accordance with the terms of this policy, on behalf of the Bank, all Loss for which the Bank is required to indemnify or for which the Bank has . .. indemnified the Directors and Officers.

        Id. at 404 n.4. The policy continued by defining "loss" as:
      [A]ny amount which the Directors and Officers are legally obligated to pay or for which the Bank is required to indemnify the Directors or Officers, or for which the Bank has, to the extent permitted by law, indemnified the Directors and Officers, for a claim or claims made against the Directors and Officers for Wrongful Acts ....
      Id. at 406. Finally, the policy in WMBIC defined "wrongful act" as:
      [A]ny actual or alleged error, misstatement, misleading statement, act or omission, or neglect or breach of duty by the Directors or Officers in the discharge of their duties solely in their capacity as Directors or Officers of the Bank individually or collectively, or any matter claimed against them solely by reason of their being Directors or Officers of the Bank.

        Id. at 404-05 n.5.

       The Congregation was statutorily mandated to indemnify Green and Rasansky as trustees of an incorporated religious society. The mandatory indemnification provision provides:
      A corporation shall indemnify a director or officer, to the extent that he or she has been successful on the merits or otherwise in the defense of a proceeding, for all reasonable expenses incurred in the proceeding if the director or officer was a party because he or she is a director or officer of the corporation.
      Wis. Stat. § 181.0872(1) (1999-2000).

       The four-part analysis makes it clear that the mere existence of the mandatory indemnification statute does not automatically create coverage.

       Although the prayer for relief is not a substantive part of a complaint, and therefore, not necessary to our analysis, see Midway Motor Lodge v. Hartford Ins. Group, 226 Wis. 2d 23, 35-36, 593 N.W.2d 852 (Ct. App. 1999), we find it persuasive that even the ad damnum clause failed to request any damages personally from either Green or Rasansky.

       Judge Dominic Amato presided over the initial action brought by the Friends of Kenwood.

       We find troubling the absence of coverage for the Congregation's indemnification of its trustees' defense costs in the underlying lawsuit simply because the trustees were sued for acts taken in performance of their duties as officers of the Congregation for which they were not alleged to be personally liable. We observe that the policy, as written and interpreted under WMBIC, provides only limited coverage. However, the law set forth in WMBIC is clear and we are obligated to follow it. See Cook v. Cook, 208 Wis. 2d 166, 190, 560 N.W.2d 246 (1997) (stating that "we may not overrule, modify, or withdraw language from a previously published decision of the court of appeals").


author: SNYDER, J.

text:
    M&I Marshall & Ilsley Bank f/k/a M&I Bank of Menomonee Falls, Plaintiff-Appellant, v. Richard W Schlueter and Linda J. Schlueter, Defendants-Respondents.

    Court of Appeals

      No. 02-0884.

      Submitted on briefs October 10, 2002.

    Decided November 6, 2002.

    2002 WI App 313
    (Also reported in 655 N.W.2d 521.)

      On behalf of the plaintiff-appellant, the cause was submitted on the briefs of Thomas M. Bartell, Jr. and JoAnne L. Krabbe of Stupar, Schuster & Cooper, S.C., Milwaukee.
    On behalf of the defendants-respondents, the cause was submitted on the brief of Frank M. Cappozzo of Cappozzo Law Office, Waukesha.
    Before Nettesheim, PJ., Brown and Snyder, JJ.

       Petition to review denied 1-21-03.

   SNYDER, J.

¶ 1. M&I Marshall & Ilsley Bank f/k/a M&I Bank of Menomonee Falls (M&I) appeals from a judgment of the circuit court granting summary judgment to Richard W Schlueter and Linda J. Schlueter (Schlueters). M&I argues that the circuit court erred when it held that the Schlueters, as guarantors on a real estate note, were entitled to notice of default for failure of the original obligors to carry property insurance on the real estate. M&I further contends that it did not as a matter of law breach its continuous duty of good faith and fair dealing by failing to provide the Schlueters with notice of said default. Finally, M&I claims that the circuit court improperly granted summary judgment where there was a disputed fact pertaining to its receipt of notice of insurance cancellation from the original obligors' insurance company. We agree that the circuit court erred in awarding the Schlueters summary judgment. We therefore reverse the judgment of the circuit court and remand this matter for the circuit court to enter summary judgment in favor of M&I.

FACTS

¶ 2. On October 28, 1997, David S. Schlueter and Dawn M. Schlueter, son and daughter-in-law of the Schlueters, entered into a mortgage note with M&I. Under the terms of this mortgage note, David and Dawn were allowed to borrow the principal sum of $72,800 and repay the same in monthly installments over the course of sixty months. As security for this mortgage note, David and Dawn executed a real estate mortgage in favor of M&I on property located in Hartford, Wisconsin.

¶ 3. David and Dawn did not qualify for a mortgage on their own. In addition to the real estate mortgage, M&I required additional assurance that the mortgage note would be paid. The Schlueters signed a Guaranty of Specific Transaction on October 28, 1997. The language of this Guaranty obligates the Schlueters to make payments under the mortgage note should David and Dawn fail to pay. In addition, the Guaranty includes a paragraph entitled "Waiver" in which the Schlueters specifically waive notice of default by David and Dawn. The Schlueters received and signed an Explanation of Personal Obligation which explains that as guarantors, they are obligated to repay the principal sum of $72,800, plus finance charges, in the event of default by David and Dawn.

¶ 4. On August 15, 1999, the insurance policy covering the Hartford real estate lapsed, as evidenced by a letter dated September 8, 1999, from American Family Insurance to David and Dawn. While American Family claims to have sent this lapse notification to M&I, M&I claims that it does not recall receiving any notification nor does it have a copy of said notification. There is no evidence that David and Dawn renewed their American Family policy or that they obtained alternative insurance coverage. On July 17, 2000, the Hartford real estate securing the mortgage note burned.

¶ 5. Following the fire, David and Dawn failed to make any further payments on the mortgage note. On August 28, 2000, M&I notified the Schlueters of David and Dawn's default on the July and August 2000 payments. M&I sent the Schlueters an additional notice of David and Dawn's default on the September, October and November 2000 payments.

¶ 6. M&I then filed this lawsuit against the Schlueters as the guarantors to recover the principal balance plus interest and costs under the terms of the mortgage note and the Guaranty. The Schlueters responded by arguing that as guarantors, they were entitled to receive notice of the default resulting from the lapse of insurance coverage. M&I filed a motion for summary judgment.

¶ 7. In their response brief, the Schlueters produced a termination notice from American Family Insurance to M&I, dated September 7, 1999, informing M&I of the termination of insurance coverage. M&I disputed receipt of that notice. An affidavit from M&I's retail collection manager specifically states that he did not recall receiving such a notification and his collection file did not contain any such notification.

¶ 8. The circuit court denied M&I's motion for summary judgment and instead granted summary judgment to the Schlueters. The circuit court stated, in relevant part:

For purposes of this motion, both parties assert that there are no material disputes of fact. The court interprets this as a concession that the presumption of mailing obtains, and therefor the plaintiff will be charged with knowledge of the fact of cancellation of the insurance.

M&I appeals not only to challenge the grant of summary judgment to the Schlueters but also "the authority of the [circuit] court to rule on summary judgment at all when a genuine issue of material fact is in dispute as identified in the brief of the parties."

DISCUSSION

¶ 9. We review a circuit court's grant or denial of summary judgment de novo, owing no deference to the trial court's decision. Waters v. U.S. Fid. & Guar. Co., 124 Wis. 2d 275, 278, 369 N.W.2d 755 (Ct. App. 1985). "[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." M&I First Nat'l Bank v. Episcopal Homes Mgmt., Inc., 195 Wis. 2d 485, 496-97, 536 N.W.2d 175 (Ct. App. 1995); see also Wis. Stat. § 802.08(2) (1999-2000). We will reverse a decision granting summary judgment if either (1) the trial court incorrectly decided legal issues, or (2) material facts are in dispute. Coopman v. State Farm Fire & Cas. Co., 179 Wis. 2d 548, 555, 508 N.W.2d 610 (Ct. App. 1993). In our review, we, like the trial court, are prohibited from deciding issues of fact; our inquiry is limited to a determination of whether a factual issue exists. Id.

¶ 10. M&I argues that the Schlueters, as guarantors on a real estate note and mortgage, were not entitled to notice of default for failure of the original obligors to carry property insurance on the subject real estate. We agree.

¶ 11. The Wisconsin Supreme Court has ruled on the issue of notice of default to guarantors in Bank of Sun Prairie v. Opstein, 86 Wis. 2d 669, 273 N.W.2d 279 (1979).

"Guaranties of payment 'are absolute, not collateral promises .... Unlike the contract of an indorser, there is no condition as to demand and notice of default annexed to a contract of guaranty of payment or of performance.'" Nor is it any defense for a guarantor of payment as distinguished from a guarantor of collection that the creditor "through negligence, or lack of due diligence, lost or dissipated the collateral furnished by the debtor."
With an absolute guarantee of payment, the law imposes no duty upon the creditor to notify the guarantor of the nonpayment of the note by the principal maker.

Id. at 678 (citations omitted; emphasis added). "[N]o notice of the default of an original promisor is required to be given a guarantor of absolute payment or performance to render him liable on the guaranty." Farmers State Bank of Waupaca v. Hansen, 174 Wis. 100, 103, 182 N.W. 944 (1921) (citation omitted). A lender is not obligated to alert a guarantor of the original obligor's default or the occurrence of an event of default. See id. at 103-04.

¶ 12. In addition, by virtue of the terms of the Guaranty, the Schlueters waived any right to notice they may or may not have had. The Guaranty of Specific Transaction states the following, in relevant part:

[T]he undersigned jointly and severally guarantee payment of the Obligations defined below when due or, to the extent not prohibited by law, at the time any Debtor becomes the subject of bankruptcy or other insolvency proceedings. "Obligations" mean indebtedness evidenced by a note or agreement payable to Lender ....
WAIVER. To the extent not prohibited by law the undersigned expressly waive notice of the acceptance of this Guaranty, the creation of any present or future Obligation, default under any Obligation, proceedings to collect from Debtor or anyone else, and all diligence of collection and presentment, demand, notice and protest and any right to disclosures from Lender regarding the financial condition of any Debtor or guarantor of the Obligations or the enforceability of the Obligations.

The language of the Guaranty is clear; the Schlueters specifically waived any right to notice of default by David and Dawn and by virtue of the terms of the contract were not entitled to notice.

¶ 13. The Schlueters agree that Opstein sets forth the general rule in Wisconsin regarding guaranties but they contend that this general rule does not "fully dispose of the duties between the lender and guarantor"; the Schlueters contend that good faith and fair dealing are implied conditions of every contract and, citing to First National Bank & Trust Co. of Racine v. Notte, 97 Wis. 2d 207, 293 N.W.2d 530 (1980), in support, argue that good faith and fair dealing include a duty to disclose David and Dawn's default in failing to maintain property insurance.

¶ 14. First of all, this is not a Notte case. Notte involved a material misrepresentation or nondisclosure of a creditor during negotiations, before the guarantors entered into the transaction. Id. at 208. Here, there has been no showing of any breach of good faith and fair dealing during the negotiations prior to the transaction; consequently Notte does not apply.

¶ 15. Furthermore, we agree with the Schlueters that Wisconsin law recognizes that every contract implies good faith and fair dealing between the parties to it. See Super Valu Stores, Inc. v. D-Mart Food Stores, Inc., 146 Wis. 2d 568, 577, 431 N.W.2d 721 (Ct. App. 1988). But Opstein makes clear that notice of default to a guarantor is not required for good faith and fair dealing. See Opstein, 86 Wis. 2d at 678. In addition, where the contracting party complains of acts of the other party that are specifically authorized in their agreement, we cannot see how there can be any breach of good faith and fair dealing. Super Valu Stores, 146 Wis. 2d at 577. "Indeed, it would be a contradiction in terms to characterize an act contemplated by the plain language of the parties' contract as a 'bad faith' breach of that contract." Id.

¶ 16. Because Opstein holds that there is no duty to provide notice of default to a guarantor and because the Schlueters specifically waived any right to notice they may or may not have had by the terms of the Guaranty, the circuit court erred in granting the Schlueters summary judgment instead of M&I. M&I is entitled to summary judgment against the Schlueters.

CONCLUSION

¶ 17. We conclude that the circuit court erred when it held that the Schlueters were entitled to notice of default for failure of the original obligors to carry property insurance on the real estate and that M&I did not breach its duty of good faith and fair dealing by failing to provide the Schlueters with notice of said default. We therefore reverse the judgment of the circuit court and remand this matter for the circuit court to enter summary judgment in favor of M&I.

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

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

       Because we conclude that M&I had no duty to disclose the insurance lapse default, whether or not M&I received notice of the insurance lapse is not a material fact and is irrelevant in a summary judgment analysis.