Legal Action Case Chronology — Wisconsin Court Cases

The following update overviews the major cases the Legal Action Program has become involved with over from late 2002 through July 2009. The Legal Action Program becomes involved in litigation, primarily as amicus curiae, with regard to issues that are of importance to the WRA membership, the Wisconsin real estate industry and private property owners in our state. The Program has weighed in on a wide range of interesting and important real estate-related issues ranging from the fundamental ability of real estate licensees to draft contract forms, to the responsibility of uphill landowners for surface water damages on downhill property, to the rules for the recusal of Wisconsin Supreme Court justices from cases involving parties who provide election campaign support.

Additional information about the Legal Action Program is available at www.wra.org/LegalAction.

1. Offer to Purchase Election of Remedies: Osborn v. Dennison, 2009 WI 72 The buyer and the seller disputed whether a seller can sue for actual damages without first directing the listing broker to return the earnest money to the buyer, per the Default section of the DRL-approved WB-11 Residential Offer to Purchase form. The circuit court ruled that the sellers were limited to collecting the $2,000 in earnest money as liquidated damages, because the sellers irrevocably elected liquidated damages (the $2,000) when they refused the buyer’s request for the return of the money. The Court of Appeals affirmed (2008 WI App 139: www.wisbar.org/res/capp/2008/2007ap001799.htm). The sellers appealed to the Wisconsin Supreme Court, which held in a 7-0 decision (2009 WI 72: www.wisbar.org/res/sup/2009/2007ap1799.htm) that according to the terms of the offer to purchase the seller's failure to direct return of the buyer's earnest money prior to or at the same time suit is filed for actual damages forecloses the seller's option to seek actual damages for the alleged breach. This 7-0 decision is good because it takes the WB-11 contract language at face value and applies it in a straightforward manner.

2. Water Intrusion: State v. Hocking v. City of Dodgeville, 2009 WI 70 Hocking alleged that the development of a subdivision uphill from his home in 1991 resulted increased water onto his property, and that a subsequent grading of a road in front of his property caused the water to be retained on site, resulting in foundation damage and mold. Hocking sued the City, the developer and the owners in the chain of title of the uphill property, who Hocking argued had an obligation to abate a nuisance condition even if they did not create it. None of the uphill property owners made any material alterations to the property. The uphill property owners argued that in the absence of any affirmative act they had no duty to prevent water on their property from flowing downhill to the Hocking property. The trial court agreed. The court of appeals passed the case to the Wisconsin Supreme Court (www.wicourts.gov/ca/cert/DisplayDocument.html?content=html&seqNo=34109), which concluded (2009 WI 70: www.wisbar.org/res/sup/2009/2007ap1754.htm) that the uphill landowners are not liable for the damages allegedly caused by surface water, i.e., storm water, running from their property to the Hockings' property because, under the circumstances, they have no duty to abate the alleged nuisance. The WRA filed an amicus brief and participated in oral argument in this case.

3. Binding Arbitration: Baldwin-Woodville Area School District v. West Central Education Association – Baldwin Woodville Unit, 2009 WI 51 Arbitration is a time-honored and effective alternative dispute resolution mechanism that saves time and money. All REALTORS® are required to resolve disputes with other REALTORS® through arbitration per Article 17 of Code of Ethics. In all but the most egregious cases, an arbitration award should withstand appeal. Otherwise, arbitration as a tool to provide fair and efficient resolution of disputes will become meaningless. In Baldwin, the Court of Appeals departed from the traditional deference granted the arbitration process. Although the parties in that case had agreed to submit their dispute to binding arbitration, the “losing” party challenged the award in state court, claiming that the arbitrator had exceeded his powers. The circuit court upheld the award as rational and within the arbitrator’s powers, but the Court of Appeals reversed (unpublished: www.wisbar.org/res/capp/2008/2008ap000519.htm).

The Wisconsin Supreme Court (2009 WI 51: www.wisbar.org/res/sup/2009/2008ap000519.htm) found that the court of appeals never considered whether the arbitrator's contract construction had a foundation in reason and instead substituted its own preferred construction, which might also be reasonable, but does not comport with the court’s limited review standards for arbitration awards. Because the arbitrator's construction had a foundation in reason, it was not a perverse misconstruction. Accordingly, the court reversed the court of appeals and held that the arbitration award should be upheld.

4. Recusal Issue: Town of West Point To avoid judicial recusals in the future, the WRA believes it is necessary for the Wisconsin Supreme Court to clearly state within its Code of Judicial Conduct that an endorsement and political support alone do not warrant judicial recusal. Without such a statement from the Court, people will be able to “game” our judicial system by endorsing judicial candidates and providing political in hopes of forcing judges to recuse themselves from cases. The WRA petitioned the Wisconsin Supreme Court to amend its Code of Judicial Conduct to specifically state that an endorsement and political support alone do not warrant judicial recusal (www.wicourts.gov/supreme/docs/0825petition.pdf). The League of Women Voters seeks rules requiring recusal when there has been a contribution of $1,000 or more (www.wicourts.gov/supreme/docs/0816petition.pdf). (Note – the Supreme Court may conduct a hearing on this request.)

5. Brokerage Services with Regard to Out-of-State Property: Restaino Bunbury & Associates Inc. v. Assisted Living Concepts Inc.
A Wisconsin broker performed as a buyer’ broker and found a suitable property in an adjoining state for the client. At closing the buyer client refused to pay the buyer’s broker’s fee, so the broker sued the client for breach of contract. The client argued that the broker could not legally claim the fee because the buyer’s broker was not licensed in the state where the property was located. Substantially all of the broker’s brokerage activities took place in Wisconsin. The trial court ruled in favor of the client. The court also seemed to be concluding that the buyer’s broker’s services were provided in the state where the property was located, even though the buyer’s broker negotiated the transaction in Wisconsin. The broker appealed to the Wisconsin Court of Appeals. Many states, including Wisconsin and the other state involved in the case, are what NAR calls “Physical Location” (PL) states. That means that an Out-of-State Licensee (OSL) may not perform licensed services on a real estate transaction while physically located in the transaction state where the property is located. The OSL can, however, work on the deal and receive part of the commission from the transaction state licensee provided that all licensed services rendered by the OSL are rendered by the OSL while the OSL is physically located in the state where he or she is licensed. See www.realtor.org/letterlw.nsf/pages/LicensePortabilityChart. The WRA Legal Action Program filed an amicus brief.

6. Condo Unit Use Restrictions in Bylaws: Apple Valley Gardens Association Inc. v. MacHutta, 2009 WI 28 MacHutta developed the Apple Valley Gardens condominium complex in the late 1970s, but apparently had trouble selling some of the units. The declaration provided, in part, that “any rental or lease agreement shall not relieve an owner from his or her obligation to pay common expenses.” MacHutta asserted that this provision gives him the affirmative right to rent any of the units he owns. The condominium association (Apple Valley Gardens) contended the sentence merely states, in a negative manner, that if a lease is allowed, an owner is not relieved from all owner obligations. In 2002, the association amended the bylaws to require owner occupancy, thereby prohibiting rentals. MacHutta rented to another tenant despite the association’s objection, so the association filed a lawsuit seeking a declaratory judgment, requesting enforcement of the owner-occupancy bylaw. The circuit court ruled in favor of Apple Valley Gardens. MacHutta appealed and the Court of Appeals affirmed (2007 WI App 270: www.wisbar.org/res/capp/2007/2007ap000191.htm), concluding that although the Apple Valley declaration did not prohibit units from being rented, so the association could amend the bylaws to require owner occupancy. MacHutta appealed to the Wisconsin Supreme Court, which held (2009 WI 28: www.wisbar.org/res/sup/2009/2007ap000191.htm) that a restriction on the use of a condominium unit, such as a prohibition on renting may be contained in the owners’ association’s bylaws. The case is also discussed on pages 12-14 of www.wra.org/LU0905.

7. Listing Protection Commission Case: Burkett & Associates Inc., Century 21 v. James M. Teymer, 2009 WI App 67 The issue in this case was whether the language of the DRL-approved listing contracts fails to stop a seller who is a party to a listing contract from dealing directly with a prospective purchaser, unilaterally terminating the listing contract and then selling the property directly to the prospective purchaser without paying the listing commission, even though the broker and prospective purchaser communicated about the property. The circuit court concluded that although there had been contact between the sellers and the prospective purchaser before the sellers terminated the listing contract, no negotiation took place until after the listing contract had been terminated so the court ruled for the sellers. The broker appealed. The Court of Appeals found (2009 WI App 67: www.wisbar.org/res/capp/2009/2008ap001509.htm) that the standards for determining whether negotiation has occurred are found in Sonday v. Dave Kohel Agency, Inc., 2006 WI 92 (see a case summary and link to the Sonday decision on Page 12 of the August 2006 Legal Update, “2006 Legislative Update,” at www.wra.org/LU0608). The court noted that the listing agent provided property information and the list price to an ATC representative (buyer) on the telephone and later faxed the property data sheets, a RECR, survey maps and other information to the buyer on his request. This two-way communication was enough to constitute negotiation for the purposes of the listing contract definition, the court concluded. Although the circuit court found that the broker had not successfully protected the buyer because the sellers did not concur, the court of appeals said that under the terms of the listing contract that buyer protection is a unilateral function that does not require the consent of the seller. The sellers asserted that even if there was a cover letter it was sent too late because they did not receive it until seven days after the listing terminated. The court of appeals, however, held that the date of mailing, not receipt controlled, citing the definition of “delivery” in the 1999 WB-1. Accordingly the court of appeals reversed the circuit court and awarded attorneys fees to the broker in accordance with the 1999 WB-1 attorney fees provision. This case is also discussed on pages 1-3 of www.wra.org/LU0905.

8. Great Lakes Compact 2007 Wis. Act 227: The Great Lakes hold nearly 20 percent of the world’s fresh surface water. Though vast, the Great Lakes renew at a low rate, and are vulnerable to irreversible damage from water withdrawals. Nevertheless, outside states, countries, and corporations have attempted to withdraw water from the Great Lakes to address their own fresh water needs. In 2005, the governors of the eight states bordering the Great Lakes (Wisconsin, Illinois, Indiana, Michigan, Minnesota, New York, Ohio and Pennsylvania) and the premiers of the Canadian provinces of Ontario and Quebec signed a compact that governs how these states and provinces would manage the freshwater from the Great Lakes over the next century. The compact prohibits other states from taking water from the Great Lakes and regulates who can use water and how much can be diverted. In Wisconsin, some communities, like Waukesha, are already experiencing water shortage problems and are looking to address their fresh water needs by tapping into the water resources of the Great Lakes. See pages 3-5 of www.wra.org/LU0806 for further discussion. The Compact was successfully drafted and enacted (SB 1/2007 Wis. Act 227, April 2008 Special Session, effective June 11, 2008: www.legis.state.wi.us/2007/data/acts/07enSB0001Ap8.pdf).

9. Defense for § 100.18 Fraudulent Representations: Novell v. Magliaccio, 2008 WI 44. This case involved a Wis. Stat. § 100.18 claim for untrue, deceptive, or misleading representations relating to the sale of real estate, products or services. In Novell v. Magliaccio, the home sellers represented no defects on their RECR but the home inspector found potential basement water leakage problems and recommended a foundation specialist. The buyer ignored this advice and sued the next year after experiencing basement leakage that the engineer he hired said had been there for ten years. The trial court found the buyer could not have reasonably relied on the seller’s RECR because he was on notice of problems with the basement before he closed. The Court of Appeals reversed in an unpublished decision (www.wisbar.org/res/capp/2006/2005ap002852.htm), holding that justifiable or reasonable reliance need not be shown under § 100.18. The sellers appealed to the Wisconsin Supreme Court which held that a demonstration of reason¬able reliance can show that the representation induced a sale, it is not a necessary element of a § 100.18 claim. The buyer’s reliance on the seller’s misrepresentations was not found to be unreasonable as a matter of law, although under different facts a court may rightfully determine, as a matter of law, that a party's reliance is so unreasonable that the claim must be dismissed (2008 WI 44: www.wisbar.org/res/sup/2008/2005ap002852.htm).

10. Unauthorized Practice of Law: In the Matter of the Definition of the Practice of Law and the Administration of a Rule Defining the Practice of Law The State Bar of Wisconsin filed a petition with the Wisconsin Supreme Court to adopt a new rule defining the practice of law and creating a system to administer and enforce the rule against those engaged in the unauthorized practice of law (UPL). For the past 15 years, the State Bar has received numerous complaints describing alleged unauthorized practice of law (UPL) by real estate licensees, title companies and others. For the past five or six years, the State Bar has intermittently submitted various petitions to the Wisconsin Supreme Court seeking the creation of a definition of the practice of law and new enforcement mechanisms to employ against those who engage in the UPL. The State Bar’s proposed rule establishes a broad definition of the practice of law that has yet to successfully exclude the practice of real estate licensees using DRL-approved real estate forms, despite repeated efforts by the WRA. In State ex rel. Reynolds v. Dinger (14 Wis. 2d 193, 109 N.W. 2d 685 (1961)), the Wisconsin Supreme Court held that Wisconsin real estate licensees have the limited right to practice law, that is, when they use state-approved forms to assist consumers in real estate transactions. The WRA Legal Action Program has been funding expert legal representation for the WRA in continuing hearings before the Wisconsin Supreme Court. The Court held hearings in December 2007, March 2008 and October 2008. The WRA is closely monitoring this process and has retained legal counsel to ensure that the proposed rule does not hinder Wisconsin real estate practice. Clearly nothing could be more fundamental to real estate practice and the WRA than the ability to lawfully negotiate and draft offers and other real estate contracts.

11. Quasi-Governmental Corporation Not Subject to Open Meetings/Records: State v. Beaver Dam Area Development Corporation, 2008 WI 90 In the State v. Beaver Dam Area Development Corporation case now awaiting the decision of the Wisconsin Supreme Court, the State contends that the Beaver Dam Area Development Corporation (BDADC), a non-profit corporation organized as a private entity to promote business development in the City of Beaver Dam, is a quasi-governmental entity subject to Wisconsin’s open records/open meetings laws. The ability of the BDADC and similar companies communicate privately with potential real estate investors and work with major business interests will be compromised if their meetings are open to the public or if they must divulge the confidence of correspondence or proposals before they are officially presented to their respective communities. The WRA partnered and shared costs in a joint amicus brief with the Wisconsin Economic Development Association, the Wisconsin Builders Association and other groups. This case was certified by the court of appeals directly from the circuit court to the Wisconsin Supreme Court. The Court found (2008 WI 90: www.wisbar.org/res/sup/2008/2006ap000662.htm) a number of factors that are important in determining whether an entity a quasi-governmental corporation and thus is subject to open meetings and public records laws. These factors include state funding, whether the entity serves a public function, wheth­er it appears to the public to be a government entity, whether the entity is subject to government control, and the degree of government access to its records. The Court concluded that an entity is a quasi-governmental corpo­ration if, based on the totality of the circumstances, on a case-by-case basis, it resembles a governmental corpo­ration in function, effect or status.

12. Distinguishing Condominium from Master Planned Community: Solowicz, et al v. Forward Geneva National LLC, 2009 WI App 9
In 1990, a group of investors created a 1600-acre development called the “Geneva National Community” (Geneva National). Geneva National was created as a master-planned community by the recording of a Declaration of Covenants, Conditions, Restrictions and Easements for the Geneva National Community (Covenants) that control the use and development of Geneva National. The Community includes 3 golf courses, several commercial buildings, and 2100 residential dwelling units, most of which were created as condominiums. Several condominium unit owners were unhappy with the management of the development and filed a lawsuit, contending that the Geneva National Covenants are ambiguous, unreasonable and usurp the protections of Wisconsin’s Condominium Law. Both the circuit court and the court of appeals (2009 WI APP 9: www.wisbar.org/res/capp/2008/2008ap000010.htm) ruled in favor Forward Geneva National, LLC, declaring that Wisconsin’s Condominium Law does not apply to the master-planned community Covenants. In both instances, the WRA Legal Action Committee authorized the filing of an amicus brief discussing the validity of, and the uniform laws applicable to, master-planned communities. The case is on appeal to the Wisconsin Supreme Court and an amicus brief has been filed on behalf of the WRA.

13. Applying Open Records Law to Property Assessment Records: WIREdata Inc. v. Village of Sussex, et al., 2008 WI 69
WIREdata, a wholly owned subsidiary of Multiple Listing Service, Inc. requested property assessment records from several communities for purposes of sharing the information with members of the MLS. Independent contractor assessors who maintained the files electronically in a computer database performed the assessments in each of these communities. The assessor indicated that WIREdata could (a) purchase the records for lump sum payment of $6,000 plus additional costs for each property identified and placed restrictions on WIREData’s use of the data, or (b) receive the records in a PDF format. WIREdata sued the communities and their assessors claiming violations of Wisconsin’s open records law. In WIREdata, Inc. v. Village of Sussex, et al., the Court of Appeals held (2007 WI App 22: www.wisbar.org/res/capp/2007/2005ap001473.htm) that the open records law allows WIREdata the opportunity to access that database in order to examine and copy the property assessment records. On appeal to the Wisconsin Supreme Court, the WRA joined with the Wisconsin Freedom of Information Council, Wisconsin Broadcasters Association and Wisconsin Newspaper Association in an amicus brief. The Court held (2008 WI 69: www.wisbar.org/res/sup/2008/2005ap001473.htm) that the record requests were sufficient and not overly broad, that a municipality's inde­pendent contractor assessor is not the proper authority to receive an open records request because the statu­tory definition of “local public office” excludes independent contractors, that the municipality is solely responsible for open records law compliance, the PDFs offered in response to the request were an adequate response, and that the fees quoted exceeded the actual costs of providing the data and would have been illegal if actually charged. A legislative clarification may be pursued.

14. Economic Loss Doctrine Applied to Residential Real Estate: Below v. Norton, 2008 WI 77 In Below v. Norton, the buyer discovered after she moved in that the sewer line between her home and the street was broken. The sellers had represented no plumbing defects on the RECR. The buyer sued for intentional misrepresentation, theft by fraud in violation of Wis. Stat. §§ 895.80 & 943.20(1)(d), misrepresentation in advertising in violation of Wis. Stat. § 100.18, strict responsibility misrepresentation and negligent misrepresentation. The trial court dismissed all claims based upon the economic loss doctrine. Application of the economic loss doctrine to residential offers to purchase would substantially limit the remedies available to most parties and may lead to more parties misrepresenting property defects, an increased need for inspections and testing, increased costs for homebuyers and increased expectations for real estate brokers, potentially increasing liability for REALTORS®. The Court of Appeals held(2007 WI App 9: www.wisbar.org/res/capp/2006/2005ap002855.htm) that the economic loss doctrine eliminated all causes of action except the § 100.18 claim. The WRA filed an amicus brief with the Wisconsin Supreme Court which held in a 4-3 decision (2008 WI 77: www.wisbar.org/res/sup/2008/2005ap002855.htm) that the economic loss doctrine applies to residential real estate transactions, thus eliminating common law misrepresentation claims by parties in all real estate transactions. Legislation restoring intentional misrepresentation claims for buyers in residential transactions was enacted (2009 Wis. Act 4: www.legis.state.wi.us/2009/data/acts/09Act4.pdf).

15. Ripeness for Declaratory Judgment: Walter Olson v. Town of Cottage Grove, 2008 WI 51 The Town of Cottage Grove enacted a zoning ordinance that establishes a community-wide transfer of development rights (TDR) program. The Town conditioned its approval of Walter Olson’s subdivision plat upon the condition that Olson purchase and transfer 10 development rights to the Town and County. This would require Olson to purchase 350 acres of farmland at a cost of approximately $750,000. Olson filed a declaratory judgment action against the Town, asking the court to invalidate the TDR ordinance on constitutional grounds. The circuit court ruled that Olson had not yet incurred any financial injury and, therefore, his case was not yet ripe for review. The Court of Appeals in an unpublished decision (www.wisbar.org/res/capp/2006/2005ap002257.htm) held a property owner can test the validity of an ordinance prior to incurring an injury. An amicus brief was filed by the WRA when the case was appealed to the Wisconsin Supreme Court. The Court found (2008 WI 51: www.wisbar.org/res/sup/2008/2005ap002257.htm) that the purpose of a declaratory judgment is “to settle and afford relief from uncertainty and insecurity with respect to rights, status and other legal relations.” Property owners may ask a court to deter­mine whether a land-use regulation is legal or constitutional without first incurring financial harm or subjecting them­selves to forfeitures or prosecution.

16. Abandoned Railroad Rights of Way: Samuel Johnson 1988 Trust v. Bayfield County This case involves a multitude of complex federal statutes and arguments which all address one central question: does abandoned railroad corridor property belong to the persons who were deeded this property almost thirty years ago or can the Bayfield County now claim that somehow there remains a reversionary interest in this property that can be claimed for snowmobile and other recreational trails? The property owners successfully defended this land grab in the federal district court, and requested that the WRA participate in the federal Seventh Circuit Court of Appeals case in a joint amicus brief with the Wisconsin Land Title Association. The Seventh Circuit (www.caselaw.lp.findlaw.com/data2/circs/7th/071348p.pdf) refused to affirm Judge Shabaz's federal district court decision (see opinion below) based on the disclaimer signed by the United States after the lawsuit was filed. This only begged the question of whether or not the U.S. had any rights to disclaim after the Surface Transportation Board or the Interstate Commerce Commission (ICC) issued its order permitting the railroad to abandon the line, and a waiver or release after the fact was not enough to divest the county of any reversion rights that might have devolved to it. The question on remand federal District Court of the Western District of Wisconsin will be whether or not the actions of the ICC are sufficient to establish “abandonment” under section 912 of the federal law. This decision will have national impact.

17. Constitutionality of Zoning Ordinance with No Permitted Uses: Town of Rhine v. Bizzell, 2008 WI 76 Judge Richard S. Brown from the Wisconsin Court of Appeals (District II) called and asked the WRA to write an amicus brief for the Town of Rhine v. Bizzell case. The property owners, an off-road motor vehicle club, purchased an abandoned quarry to ride motorcycles, snowmobiles, and all-terrain vehicles. As a result of the neighbors’ complaints, the Town filed a lawsuit against the property owners, citing several zoning code violations including that the property owners did not obtain a conditional use permit (CUP), which the zoning ordinance requires for any use of the property. The Town also sued the club members for maintaining a public nuisance. The trial court found the zoning ordinance unconstitutional. The court of appeals sent the case to the Wisconsin Supreme Court without issuing an opinion (www.wicourts.gov/ca/cert/DisplayDocument.pdf?content=pdf&seqNo=29433). The primary issue was whether a zoning ordinance without any permitted uses is constitutional. The Court held (2008 WI 51: www.wisbar.org/res/sup/2008/2006ap000450.htm) that the Town of Rhine’s B-2 District zoning ordi­nance is unconstitutional on its face because it does not permit any use of property, as a matter of right, without first obtaining a CUP. In other words, property owners in this zoning classification could not use their property for any purpose (even recre­ation, hunting, etc.) unless they first applied for and obtained a CUP.

18. Equal Government Services for Condominiums: Pheasant Run Condominium Homes Association, et al, v. City of Brookfield, 2008 U.S. Dist. LEXIS 75897 This case was filed in the federal District Court for the Eastern District of Wisconsin by four Condominium associations in Brookfield, Wisconsin, which claimed that the City of Brookfield requires that condominium roads be constructed according to standard city specifications, the City uses the fact that the roads are private as justification for not maintaining them. The condominium owners also receive other public services on a reduced basis when compared to services received by other similarly situated properties not held in the condominium form of ownership. The condominium unit owners pay property taxes, but they do not receive the same level of services -- in essence, they pay taxes for services that other property owners receive. The case attracted much attention, including an article in the Milwaukee Journal Sentinel (www.jsonline.com/story/index.aspx?id=561697). The WRA filed an amicus brief. The court found for the municipality, holding that the city had a rational basis for not maintaining private streets and had no legal obligation to do so.

19. Bisecting Creek Does Not Create 2 Parcels: FAS LLC v. Town of Bass Lake, 2007 WI 73 The Town of Bass Lake rejected a lakeshore condominium plat because the Town concluded that a creek which bisected the land also legally divided the parcel into two substandard lots, relying on a 1977 attorney general opinion. The circuit court overruled the Town’s decision and declared that the creek did not legally divide the parcel into two lots, citing long-standing legal authority that landowners abutting a navigable stream hold qualified title to the creek bed to the center of the creek. The court of appeals agreed in an unpublished opinion (www.wisbar.org/res/capp/2006/2005ap001689.htm) with no precedential value, allowing the DNR to maintain that the attorney general opinion is still “good law.” On appeal the Wisconsin Supreme Court held that a navigable stream meandering over a parcel does not divide the parcel into two parcels when the same riparian owner holds qualified title to the property on both shores of the stream (2007 WI 73: www.wisbar.org/res/sup/2007/2005ap001689.htm).

20. Economic Loss Doctrine and Liability of LLC Members: BrewCity, 2006 WI 128 The Brew City Redevelopment Group, LLC v. The Ferchill Group case arises out of a commercial assignment agreement between two real estate development companies for the right to purchase the Pabst Brewery property. Brew City claims that Wispark (one of the defendants) and/or a successor LLC breached the agreement and also alleged tortuous interference, conversion, conspiracy, and “malicious injury to business” under Wis. Stat. § 134.01 and sought to hold individual LLC members or officers personally liable. One issue was whether the economic loss doctrine precludes these various claims. In addition, the case involved core questions concerning the extent to which individuals acting on behalf of an LLC or other corporate entity can be held personally liable for acts taken consistent with the company’s interests. The WRA filed an amicus brief with the Wisconsin Supreme Court. The Court held (2006 WI 128: www.wisbar.org/res/sup/2006/2004ap003238.htm) that the economic loss doctrine does not bar Brew City's claims under § 134.01 because malicious injury to reputation and business claims do not require the existence of a contract, and the LLC did not shield the individuals from their egregious behavior because they were acting individually and not as LLC member or manager at the time.

21. Town of West Point Moratorium: Wisconsin REALTORS® Association. v. Town of West Point, 2007 WI 139 & 2008 WI App 40 On September 20, 2005, the Town of West Point in Columbia County placed an 18-month moratorium on new land divisions and subdivisions. No grandfathering of owners from before the land use plan was adopted was allowed. The town apparently used Smart Growth to prevent growth and their approach could provide a dangerous model for other communities if allowed to stand. The town has a history of being “anti-growth” and has indicated that the moratorium is necessary in order for the town to complete its comprehensive plan. The WRA, together with the Wisconsin Builders Association, filed suit to challenge whether towns have the legal authority to enact moratoria and whether a town may enact a moratorium by resolution. The circuit court ruled in favor of the town, declaring that it had the necessary statutory authority to enact the moratorium. On appeal, the Wisconsin Court of Appeals certified the case to the Wisconsin Supreme Court on the basis that current precedent was insufficient to decide the case (see www.wicourts.gov/ca/cert/DisplayDocument.pdf?content=pdf&seqNo=29597). The Wisconsin Supreme Court split 3-3 on whether to reverse or affirm the circuit court’s decision. Justice Ziegler recused herself in this case because the WRA had endorsed her and had given money to her campaign (2007 WI 139: www.wicourts.gov/sc/opinion/DisplayDocument.pdf?content=pdf&seqNo=31188). The case was then remanded back to the court of appeals, which held that towns have the authority under Wisconsin’s subdivision law to enact a moratorium while preparing a comprehensive plan (2008 WI App 40: www.wicourts.gov/ca/opinion/DisplayDocument.pdf?content=pdf&seqNo=31950). The decision is summarized on NAR's website at www.realtor.org/letterlw.nsf/pages/0408war. The WRA petitioned the Wisconsin Supreme Court to review the decision of the Court of Appeals, but the court declined to hear the case again.

22. Commission Earned upon Condemnation: Sonday v. Dave Kohel Agency Inc., 2006 WI 98 This case will addressed a broker’s entitlement to commission upon the Village’s acquisition of the owner’s property based upon the clause in the WB-5 Commercial Listing Contract that says, “A transaction occurs which causes an effective change in ownership or control of all or any part of the Property.” The Wisconsin Supreme Court accepted the court of appeal’s certification to bypass court of appeals consideration and moved this case of first impression straight from the circuit court to the Wisconsin Supreme Court. The circuit court found for the broker on summary judgment. The WRA filed an amicus brief. The Wisconsin Supreme Court concluded that the transfer of property by a condemnation action constitutes a sale under the terms of the WB-5 Commercial Listing Contract, and that the real estate broker is entitled to commission based on the jurisdictional award, a result not precluded by public policy (2006 WI 98: www.wisbar.org/res/sup/2006/2004ap002322.htm).

23. Political Defamation and First Amendment Rights: Lassa v. Rongstad Lassa v. Rongstad is about a public official bringing a defamation lawsuit against a group who criticized her during elections, ostensibly for the purpose of discovering who was involved in the group working against her. The issue is whether a public official may compel disclosure of anonymous speakers and political contributors in a defamation case where no baseline decision had yet been made on the merits. A bipartisan coalition representing a broad spectrum of political interests was formed to file an amicus brief taking a strong position on the First Amendment issues involved. The Wisconsin Supreme Court found in Lassa v. Rongstad that when faced with an assertion of constitutional privilege against disclosure of information identifying otherwise-anonymous organization members, the circuit court should decide a pending motion to dismiss for failure to state a claim before sanctioning the party for refusing to disclose that information. Having determined that, prospectively, this is the procedure that circuit courts should ordinarily follow, the Wisconsin Supreme Court nonetheless agree with Lassa that the circuit court did not erroneously exercise its discretion when it imposed some discovery sanctions before addressing Rongstad's motion to dismiss. 2006 WI 105: www.wisbar.org/res/sup/2006/2004ap000377.htm.

24. Illegal Pier Case: State v. Baer, 2006 WI App 225 The DNR challenged two 15-year old piers in Manitowish Waters, one because it extends to a depth of four instead of three feet, and one because it is wider than six feet, applying its “Pier Planner” standards. These standards were developed by the DNR without any public hearings, public notice or approval of elected officials. The WRA filed an amicus brief. The Wisconsin Court of Appeals held (2006 WI App 225: www.wisbar.org/res/capp/2006/2005ap000668.htm) that the DNR had the authority to apply its Pier Planner standards to countless existing piers in Wisconsin that do not meet these 1990 standards and enforce the Standards, but that the ALJ's pier orders was set aside because the ALJ wrongly relied in part on Wis. Admin. Code ch. NR 326 in ordering the removal of the piers.

25. Town of Randall Moratorium The Town of Randall has had a series of moratoria in effect for four years prohibiting new residential subdivisions; commercial and industrial development that is inconsistent with the protection of farmland, woodland and open spaces; development that is inconsistent with the community’s natural and rural character and development that is not aesthetically pleasing. A lawsuit was filed on August 3, 2005, but was subsequently dismissed because the moratoria were withdrawn.

26. MLS Class Action: Reifert v. S. Central Wis. MLS Corp., 450 F.3d 312 (7th Cir. 2006). Jay Reifert, a REALTOR® member of the REALTORS® Association of South Central Wisconsin (RASCW) and a participant in the South Central Wisconsin MLS Corporation (South Central MLS) brought an anti-trust class action in federal district court against RASCW, the South Central MLS and the individual REALTORS® who were on the South Central MLS Board of Directors in 2004. Reifert alleged that the South Central MLS ties the sale of MLS services to membership in the RASCW in violation of the Sherman Act. Reifert also alleged that there was a group boycott and that the REALTOR® Code of Ethics has anti-competitive effects on REALTORS®. The complaint sought treble damages of up to $15 million, three times the amount of all national, state and local dues paid for the last four years by a projected class of approximately 3,000 agents. The Federal District Court for the Western District of Wisconsin on August 25, 2005 ruled in favor of the RASCW and the SCWMLS. The Honorable Judge John Shabaz held that the membership rule does not foreclose competition and satisfies the requirements of antitrust law (see the REALTOR® Magazine article at www.realtor.org/rmomag.nsf/pages/lawJudgejan06). This decision was upheld by the United States Court of Appeals for the Seventh Circuit, 450 F.3d 312 (7th Cir. 2006), on June 12, 2006. This opinion may be read at www.openjurist.org/450/f3d/312/reifert-v-south-central-wisconsin-mls-corporation-l-w  

27. Pier Abatement Case: Hilton v. DNR, 2006 WI 84 The DNR brought an abatement action to require the removal of 11 boat slips form an existing pier, applying its Pier Planner standards to determine whether an existing pier is “reasonable.” The Pier Planner is a set of policy guidelines developed by the DNR in 1990 without public hearings, notice or approval by elected officials. The DNR apparently has free reign to change or add standards to the Pier Planner so more piers may become affected with prior warning. The WRA filed an amicus brief. The Wisconsin Supreme Court held (2006 WI 84: www.wisbar.org/res/sup/2006/2003ap003353.htm) that the DNR could apply new standards retroac­tively to existing piers. The court gave the ALJ decision great weight deference, since it is a decision within the DNR’s area of expertise, was supported by substantial evidence and consistent with applicable law.

28. Condominium Sewer Assessments: Steinbach v. Green Lake Sanitary District, 2006 WI 63 T the sanitary district (District) levied a base availability assessment of $4,730 on each buildable lot to which a lateral was extended. A connection assessment based upon the projected volume of wastewater flow ($5,930 for single-family residences) was also imposed. The special assessment levied on each condominium unit was $10,660 -- each unit owner was charged for the single lateral plus their unit’s projected usage as a single-family residence. The District justified this assessment because each unit had a separate tax parcel identification number. The circuit court found that the District’s assessments were incorrect, but the court of appeals reversed, holding that the District had exercised police power according to an accepted method that was not clearly unreasonable and did not warrant judicial interference. The WRA filed an amicus brief when the case was appealed. The Wisconsin Supreme Court held (2006 WI 63: www.wisbar.org/res/sup/2006/2003ap002245.htm) that the sewer system benefited the condominium property, but the availability charge, lacked a reasonable basis because: (1) there is no nexus between the availability charge assessed against the unit owners and the District's recovery of “the capital cost to [it] to provide sanitary sewer service to individual lots, including the installation of a lateral stub from the sewer main to each lot;” (2) other lots with multiple habitable units were provided the same sewer service as the unit owners, but were assessed only one availability charge; and (3) there is no showing that the unit owners received a greater benefit from the sewer extension than other lots.

29. DRL Interpretation of § RL 24.05(4) Profits to Licensee/Principals: REB Enforcement & Circuit Court Case DRL filed a complaint against W, contending that the broker’s payment to W was without prior seller consent in violation of Wis. Admin. Code § RL 24.05(4): “A licensee acting as a principal in a real estate or business opportunity transaction shall not accept any commission, rebate, or profit on expenditures made by any other party to the transaction without the written consent of the party. The written consent shall be provided no later than the party's execution of the offer to purchase.” The DRL interpretation means that real estate licensees/buyers could not receive referral fees, commission splits or incentive payments from other licensees in a transaction without the prior written consent of the other party no later than the execution of the offer. W was the buyer in an offer to purchase drafted by cooperating real estate broker (B). The offer says the buyers are W and his partner and/or assigns, but is signed only by W. An amendment was later accepted that waived the buyer’s remaining contingencies and provided that, “Buyer requires and Seller agrees the broker B shall be paid a commission by seller in the amount of 5 percent of the selling price. W, as a licensed real estate broker, discloses that W shall receive a portion of that commission (50%).” The buyer formed an LLC (W and another were members) and the seller deeded the property to the LLC at closing. The seller paid broker B a commission and broker B later paid W one-half (buyer’s incentive). The WRA provided expert testimony and filed an amicus brief to the Real Estate Board (REB); the REB heard oral argument and decided against W on December 1, 2005. W appealed to the circuit court. WRA filed an amicus brief in circuit court; the court affirmed the DRL.

30. Supreme Court Re-Examines Area Variance Standards: Ziervogel v. Washington Cty Bd. of Adjustment, 2004 WI 23, & State v. Waushara Cty Bd. of Adjustment, 2004 WI 56 The Wisconsin Supreme Court unanimously rejected the “no reasonable use” standard for measuring unnecessary hardship in “area” zoning variance cases in the Ziervogel case (2004 WI 23: www.wisbar.org/res/sup/2004/02-1618.htm). In doing so, the Wisconsin Supreme Court reversed the State v. Kenosha County Bd. of Adjustment case and restored the more flexible “unnecessarily burdensome” standard that had been previously applied to area variances for over 70 years. Of equal significance, the court declared that local units of government are prohibited from applying the “no reasonable use” standard to area variances. In the Waushara case (2004 WI 56: www.wisbar.org/res/sup/2004/02-2400.htm), the supreme court ruled that a board of adjustment should focus on the purpose of the zoning law at issue when determining whether an unnecessary hardship exists sufficient to justify an area variance. The court stated that the zoning boards of adjustment must be afforded flexibility so that they can properly exercise the discretion the legislature has granted them and that a zoning board of adjustment decision to issue a variance must be presumed valid. The WRA filed amicus briefs and joined forces with the Wisconsin Builders Association for oral argument.

31. Challenge to DATCP Telephone Solicitation Rules DATCP had expanded the scope of telephone solicitation rules beyond the application authorized by the legislature in Wis. Stat. § 100.52, sweeping REALTORS® into the telemarketing category and wrongfully treating transactional follow-up calls, closing preparation calls and cold calls as telephone solicitations that require brokers to register with DATCP as a telephone solicitor. A coalition of interested groups, including the WRA, mounted a comprehensive challenge to DATCP’s regulations. The Dane County Circuit Court ruled on June 29, 2004 in favor of the WRA and the other plaintiffs by striking down the private cause of action created by DATCP, including the enhanced damage provisions (double damages and attorney fees) which threatened REALTORS® with potential class action lawsuits for violations. The court also struck down the rules which increased the statutory fine of $100 per violation to $10,000. The fine reduction assures REALTORS® that they will not be subject to overly aggressive enforcement actions for inadvertent rule violations.

32. Trans 233 Litigation: Wisconsin Builders Association v. DOT, 2005 WI App 160 The Wisconsin Department of Transportation (DOT) significantly extended its authority in Wis. Admin. Code Ch. Trans 233 to apply to all land divisions adjacent to state highways including certified survey maps (CSMs) and condominium plats, regardless of whether property has any direct access to the highway. Trans. 233 rules also prohibited all improvements (structures, septic systems, parking lots, driveways, etc.) within 75 feet of the highway right-of-way. The Wisconsin Builders filed a lawsuit challenging these aspects of Trans 233 and the WRA and other trade associations joined in as additional parties. On January 28, 2004, JCRAR voted to suspend major sections of Trans 233, thereby restoring Trans 233 to the form it was in prior to the 1999 amendments. Trans 233 was again limited to subdivisions and land directly touching a state highway, and only buildings are prohibited in the highway setback area. On June 9, 2004, the Dane County Circuit Court found that the DOT exceeded its statutory authority when it expanded the scope of Wis. Admin. Code Ch. Trans 233 and that the provisions relating to setback areas and special exceptions were invalid takings without just compensation. The Wisconsin Court of Appeals (2005 WI App 160: www.wisbar.org/res/capp/2005/2004ap002388.htm) affirmed the circuit court decision that the Trans 233 rules must be confined to subdivisions and that DOT had no authority to expand the rules to also include CSMs, condominium plats and other land divisions on June 16, 2005. This case was remanded back to the circuit court for consideration of the arguments not addressed in the court’s initial decision such as whether DOT can use Trans. 233 to regulate subdivisions that do not abut or adjoin a state highway, to regulate a subdivision of land that is separated from the state highway by another piece of land (not being subdivided) owned by the same entity and to regulate subdivisions abutting service roads. On December 9, 2008, the circuit court found that the 1999 and the 2001 Trans 233 amendments were invalid for non-compliance with the statutory rule-making procedure and held that DOT does not have the statutory authority to regulate subdivisions not abutting a state trunk or connecting highway. The WRA has been sharing costs in these activities with the Wisconsin Builders and other contributors.

33. Plat Approval Power to Control Property Use: Wood v. City of Madison, 2003 WI 24 In this 4-3 decision (2003 WI 24: www.wisbar.org/res/sup/2003/01-1206.htm) the Court overturned Gordie Boucher v. City of Madison, a 1993 case that held that the City of Madison could not use its extraterritorial plat approval jurisdiction to regulate land uses to the extent that the City rezoned the property. By overturning Gordie Boucher, the Court has substantially enhanced the cities’ ability to use their plat approval authority to effectively control or prohibit development within the extraterritorial area within 3 miles of their borders (1.5 miles for small cities and villages). A developer proposing a new subdivision within the 3-mile extraterritorial zone that complies with local and county zoning may be rejected by the city based upon city subdivision ordinances that have conflicting use/zoning standards.

Additional information about the Legal Action Program is available on the WRA website at www.wra.org/LegalAction

Copyright 1998 - 2014 Wisconsin REALTORS® Association. All rights reserved.

Privacy Policy   |   Terms of Use