from an order of the circuit court for Ozaukee County: No.
2012CV259 PAUL V. MALLOY, Judge. Reversed and cause remanded.
Neubauer, C.J., Reilly, P.J., and Hagedorn, J.
Arline A. Brogli appeals from an order adopting a
referee's recommendation for the division of property
interests, asserting various procedural problems with the
court's adoption of the referee's amended report.
Because the circuit court failed to address Arline's
objection to the referee's amended report, and adopted it
without reviewing the evidence considered by the referee, the
court was unable to appropriately exercise its discretion in
determining whether the referee's challenged findings of
fact were clearly erroneous as required by statute. We
therefore reverse and remand.
This 2012 suit started as a foreclosure action against Arline
and Kathryn Brogli (Arline's former daughter-in-law), and
their husbands. The property was a residence and about
eighty-one acres of land in the Village of Fredonia.
In 2013, the parties entered into a stipulation and order by
which they would sell a portion of the land (about
seventy-six acres), use the proceeds to pay off the mortgage
and other bills, and dismiss the mortgagee bank. After those
payments, $183, 091.29 remained. Recognizing they had
"disagreements over how to divide those net proceeds
between themselves" and intending "to preserve the
net proceeds of the sale pending the resolution of their
disputes," they agreed, and the court ordered them, to
place those proceeds into trust, divided equally ($91, 545.65
each) between Arline and Kathryn, and held in their
attorneys' trust accounts unless disbursed via the
parties' written agreement or a court order. Still
pending in the action were cross-claims relating to
responsibility for the default, rights to possession, and
resulting damages. The parties agreed to mediate these
At a January 2014 hearing, the court allowed amendments to
the cross-claims and notified the parties that, if the case
did not soon settle, it was inclined to appoint a referee.
Arline and Kathryn amended their cross-claims, essentially
adding requests for a partition of the property.
Unable to settle, in July 2014, the parties were directed to
agree on a referee. The parties selected Attorney Douglas
Mann, an experienced bankruptcy trustee. The resulting
January 2015 order of reference issued pursuant to Wis. S .
§ 805.06 (2015-16) authorized Mann to regulate the
proceedings, require tat  production of evidence, examine
witnesses, and maintain the property, all with the aim of
determining the property's fair market value, its
equitable division, and the basis, if any, for its partition
or sale. The order directed Mann to "report his findings
and recommendation to the Court."
Mann reviewed documents requested from the parties and
deposed Arline and Kathryn. On July 17, 2015, he filed his
report, but without the transcript of proceedings and
evidence as required by Wis.Stat. § 805.06(5)(a). Mann
found the fair market value of the dwelling and remaining
five acres was $100, 000. Mann also found that, over the
years, Kathryn contributed to the dwelling $296, 521.50 and
Arline possibly contributed $7447.12. Based on those
contributions, Mann recommended the value of the property be
divided ninety-seven percent to Kathryn and three percent to
On July 27, Kathryn sent an e-mail to Mann without copying
Arline. The e-mail suggested changes to his report. The
report had noted that the net proceeds of $183, 091.29 from
the 2013 sale were divided equally between the parties, and
the report appeared to consider that division a closed issue.
Kathryn's e-mail indicated that "the parties did not
split" that amount, but rather the attorneys "just
held one half of the proceeds in their trust accounts."
The e-mail went on to "assume" the $183, 091.29 was
to be divided in accordance with the 97/3 recommended ratio.
Finally, the e-mail suggested other property-related charges
totaling $31, 464.91 that were Arline's responsibility
were already paid out of the proceeds, such that Kathryn
should first be paid an equal amount out of the proceeds.
On July 28, Mann forwarded Kathryn's e-mail to Arline,
asking for any response in two days, by July 30. Arline did
not respond by July 30.
On July 31, Mann amended his report, pointing out Kathryn had
advised the $183, 091.29 in sale proceeds should be subject
to his proposed division. Mann recommended that, given the lack
of response from Arline, those proceeds should be divided in
accordance with the 97/3 ratio after Kathryn was first paid
$31, 464.91. On August 4, Kathryn filed a proposed order that
would adopt the amended report.
By August 11 letter, Arline objected to Kathryn's
proposed order and to the referee's amended report. She
copied the circuit court on the letter. Arline complained
about Kathryn's failure to copy her in on the July 27
e-mail to Mann, which Arline alleges prevented her from
timely responding. She asserted that, "[a]s a result,
the basis for [Mann's] amended conclusions do not square
with the facts." Specifically, she stated that neither
attorney was holding $91, 545.65 in trust and the only
remaining asset was the residence (and surrounding land),
which Mann valued at $100, 000. Arline indicated that a
"formal response has and will be delivered" to
Mann, along with a request that Mann reconsider his
recommendation or, alternatively, reinstate his original
report. No such "formal" response, however, is
identified in the record. We see no other written objections
to the report by Arline to the circuit court.
On August 17, Arline advised she was seeking relief under
Chapter 13 of the United States Bankruptcy Code, which
automatically stayed the circuit court proceedings.
See 11 U.S.C. § 362 (2015). Because of the
stay, Arline sought dismissal of the action without
prejudice. Kathryn opposed the dismissal, noting she was
seeking relief from the stay and also expressed concern
Arline had not reported her share of the 2013 sale proceeds
in the bankruptcy action. Kathryn subsequently moved for
confirmation that those proceeds were being held in trust and
for adoption by the court of the amended report.
In December 2015, the court requested a status report from
the parties. Kathryn advised that the bankruptcy court
granted the motion to lift the stay on December 10. She would
file the related order once signed. The circuit court set a
status hearing for January 20, 2016. On January 4, Kathryn
filed the bankruptcy court order lifting the
On January 20 the court held a status hearing. The parties
advised the court the remaining property (the dwelling and
land) had been sold, subject to bankruptcy court approval
(which was subsequently given). The court was also informed,
much to its consternation, the $183, 091.29 sale proceeds had
been disbursed from the attorney trust accounts to Arline and
Kathryn. The court pointed to the order requiring
counsel to hold those proceeds in trust unless they were
disbursed via written agreement or another court order.
Kathryn asserted she had a written agreement to receive the
funds. Entitled "Interim Agreement" on the
mediator's letterhead, it itemized various points about
selling the property and stated Kathryn's counsel was
"to release funds in her trust account to" Kathryn.
Arline countered that the "Interim Agreement" was a
memorandum from a mediation that was not completed, was
missing items, was not signed, and its terms were not
followed by the parties. As for why Arline received the funds
she held in trust, she indicated she took them because
Kathryn received her share.
The court instructed Arline to submit evidence in five days,
by January 25 (later adjourned to January 27), that she was
authorized to receive the 2013 sale proceeds of $91, 545.65.
The court acknowledged Arline's objection to the
referee's amendment of the report in response to
Kathryn's request that the money held in trust be divided
on a 97/3 basis. The court granted Arline thirty days
thereafter, by February 26, to submit whatever documents she
deemed appropriate to the referee, so that he could consider
whether to again amend his report and recommendation.
At the January 27 hearing, the court heard testimony
addressing the disbursement of the funds held in trust, but
did not hear testimony or argument on the proper division of
those funds .
The court heard testimony from Attorney Larry Kahn, the
mediator, regarding whether the parties had agreed to
disburse the 2013 sale proceeds. According to Kahn, Kathryn
requested the written "Interim Agreement," which he
provided based off of his notes. Kahn later held a telephone
conference, during which Arline asked for release of her
share because she was in desperate financial need and it was
otherwise unfair that Kathryn had received her share. Kahn
recalled the parties agreed Arline could receive funds, but
he could not recall the amount, nor was the agreement put in
writing. Kathryn denied that she agreed to any such
The circuit court expressed frustration the proceeds placed
in trust were disbursed without proper authorization. Based
on Kahn's testimony, the court believed there was some
understanding to disburse at least some proceeds to Arline,
but this did not comply with the requirement that an
agreement be in writing. The court acknowledged Kathryn had
an agreement to receive the proceeds, but indicated her
"Interim Agreement" was more in the nature of a
"summary" and was not signed by the parties.
The court began to say that it was "standing by my order
that any additional … submittals to" the referee,
Mann, should be made by Arline, but then stopped and reversed
course, stating, "I'm just going to adopt Mr.
Mann's report as the equitable" outcome. The court
indicated the 97/3 split was "consistent with [its]
recollection" of handling the divorce action between
Kathryn and her husband, in that Arline was not helpful with
maintaining the property, and Kathryn worked to keep
"the place afloat."
Additional hearings were held in March and April 2016 for the
drafting of a final order. On June 1, the court entered the
final order, which found the $183, 091.29 sale proceeds to be
"joint assets of the parties subject to division by this
court," and Arline received a share of those proceeds
"without the court's consent." The order
adopted Mann's amended report recommendation ...