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Maple Grove Country Club Inc. v. Maple Grove Estates Sanitary District

Supreme Court of Wisconsin

April 23, 2019

Maple Grove Country Club Incorporated, Plaintiff-Appellant-Petitioner, County of La Crosse, Involuntary-Plaintiff,
v.
Maple Grove Estates Sanitary District, Defendant-Respondent.

          SUBMITTED ON BRIEFS: ORAL ARGUMENT February 21, 2019

         REVIEW OF DECISION OF THE COURT OF APPEALS Reported at 382 Wis.2d 270, 915 N.W.2d 729

          Circuit Court La Crosse county No. 2014CV389 Elliott M. Levine Judge

          For the plaintiff-appellant-petitioner, there were briefs filed by Mark J. Steichen and Boardman & Clark LLP, Madison; with whom on the brief is Patrick J. Houlihan and Lawyers At Work, LLC, LaCrosse. There was an oral argument by Mark J. Steichen.

          For the defendant-respondent, there was a brief filed by Kraig A. Byron and Von Briesen & Roper, S.C., Madison. There was an oral argument by Kraig A. Byron.

          ANN WALSH BRADLEY, J.

         ¶l The petitioner, Maple Grove Country Club, Inc., seeks review of an unpublished, per curiam decision of the court of appeals affirming the circuit court's order that dismissed the Country Club's inverse condemnation claim against Maple Grove Estates Sanitary District.[1] The Country Club asserts that the court of appeals erred in upholding the dismissal based on its noncompliance with Wis.Stat. § 893.80(Id.) (2013-14), [2] the notice of claim statute, despite the fact that the Sanitary District did not raise noncompliance with the statute in a responsive pleading.

         ¶2 Specifically, the Country Club contends that noncompliance with the notice of claim statute is an affirmative defense that must be set forth in a responsive pleading lest it be waived and that it cannot instead be initially raised by motion. Conversely, the Sanitary District argues that noncompliance with the notice of claim statute is a jurisdictional prerequisite to filing suit and is not waived by the failure to plead it as an affirmative defense in a responsive pleading.

         ¶3 We conclude that noncompliance with the notice of claim statute is an affirmative defense that must be set forth in a responsive pleading. Because the Sanitary District failed to set forth the defense in its answer and it has not amended its answer to include it, such a defense is deemed waived.

         ¶4 Accordingly, we reverse the decision of the court of appeals and remand to the circuit court for further proceedings. I

         ¶5 In 1978, the Town of Hamilton formed the Sanitary District. Approximately twelve years later, Tony Ceresa, the Country Club's predecessor in title, [3] constructed a sewage treatment plant along with related collection and outflow facilities for the purpose of serving the Country Club property[4]along with a residential development.

         ¶6 The sewer system was initially operated by the Country Club. However, the Town provided for the election of Sanitary District commissioners in 1997 and took over operation of the system in 1998. At that time, the Sanitary District adopted a "Sewer Use and User Charge Ordinance," which obligated the Sanitary District to either lease or purchase the sewer system from the Country Club.

         ¶7 Consequently, the Sanitary District and the Country Club entered a five-year lease, ending on December 31, 2004. Prior to the expiration of the initial lease, the parties negotiated a second five-year lease, extending the term to December 31, 2009.

         ¶8 As the second lease neared its end, the Country Club informed the Sanitary District that it did not wish to renew the lease. Instead, the Country Club determined that it was in its "best interest to sell the Sanitary District facility and collection system."

         ¶9 Likewise, the Sanitary District determined that it would not be renewing the lease, and informed the Country Club of this position by letter. It explained that "[t]he Board of Commissioners is not in a position to enter into any kind of long term agreement until we have an examination of the collection system and broader understanding as to what will be required by the DNR in regard to upgrades to the wastewater treatment plant" and that money would need to be set aside for improvements.

         ¶10 The Country Club responded to the Sanitary District with a letter of its own. It indicated that it was willing to either sell or continue leasing the sewer system to the Sanitary District, but that payment of some kind would be necessary:

Given the fact that I am relatively certain that the Town/District is not going to build a new sanitary facility, that means that the District will continue to use Maple Grove's sanitary facility. Obviously, they have to pay a lease payment for that. If their intent is to operate it without paying any rent, then essentially the Town/Sanitary District is condemning, i.e. taking for a public purpose, the private property of Maple Grove Country Club. The law requires that the District would pay Maple Grove Country Club a fair market value for the facility.

         ¶11 Despite further communications and offers between the parties, no agreement was reached before the lease expired. The Sanitary District continued to physically occupy and operate the sewer system, and has not paid any rent to the Country Club since 2010.[5]

         ¶12 On July 19, 2011, the Country Club served the Sanitary District with a document entitled "Notice of Circumstances of Claim Pursuant to Wis.Stat. § 893.80(1) (a)."[6] The notice stated that "the Sanitary District refuses to negotiate a fair and equitable purchase price, Lease Agreement, and/or User Agreement with respect to said Wastewater Treatment facility . . . ." It further asserted that the Sanitary District "continues to occupy and use said property belonging to Claimant contrary to Section 32.10, Wis. Stats., [7] and Article I, Section 13 of the Wisconsin Constitution" without paying any rent or just compensation.[8] The notice specified that no claim for damages was made "at this time." The Sanitary District did not respond to the Notice of Circumstances of Claim.

         ¶13 Almost three years after filing the Notice of Circumstances of Claim, the Country Club initiated this action in the circuit court. It brought two causes of action against the Sanitary District, one for inverse condemnation[9] and the other for unlawful sanitary sewer charges and levy of taxation. In its complaint, the Country Club asserted that it had "provided the requisite notice under Section 893.80, Wis. Stats[, ]" specifically referencing the July 19, 2011, Notice of Circumstances of Claim.

         ¶14 The Sanitary District filed an answer to the complaint, as well as a counterclaim. In its answer, it raised six affirmative defenses: (1) the Country Club failed to state a claim for which relief can be granted; (2) the Country Club's claims are barred by the doctrine of laches; (3) the applicable statute of limitations bars the claims; (4) sovereign immunity bars the Country Club's claims; (5) the claims are barred by the doctrine of res judicata; and (6) the Country Club lacks standing. It denied the Country Club's allegation that the notice of claim statute had been complied with, but did not affirmatively plead that the Country Club had failed to comply with the statute.

         ¶15 Both parties filed summary judgment motions. The Sanitary District sought summary judgment on its counterclaim that it was entitled to recover delinquent sanitary sewer charges from the Country Club. Conversely, the Country Club argued that it was entitled to partial summary judgment declaring that the Sanitary District had acquired the Country Club's property via inverse condemnation.

         ¶16 In its brief opposing the Country Club's motion for partial summary judgment, the Sanitary District raised an assertion that the Country Club had failed to comply with the notice of claim procedures set forth in Wis.Stat. § 893.80. The Sanitary District argued that the Notice of Circumstances of Claim filed by the Country Club suffered from two defects: that it was not timely filed and that it did not contain an itemized statement of the relief sought as is required by § 893.80(1d) (b) .[10] In response, the Country Club contended that the Sanitary District had waived the defense of noncompliance with the notice of claim statute by failing to plead the defense in its answer.

         ¶17 After holding an evidentiary hearing, the circuit court dismissed the Country Club's inverse condemnation claim. It concluded that the Country Club had failed to comply with the notice of claim statute. Specifically, it determined that the notice was "untimely and incomplete." In the circuit court's view, the notice was untimely because it was received over 120 days after the event giving rise to the claim and it was incomplete because it did not include an itemized statement of the relief sought. The circuit court did not address the Country Club's argument that the Sanitary District had waived the defense.

         ¶18 The Country Club sought leave to file an interlocutory appeal, and the court of appeals granted its petition.[11] On appeal, the court of appeals limited the issues to "whether the Sanitary District waived its notice of claim defense by failing to plead it, and whether the District's answer should be considered as amended to present that defense so as to conform to the evidence, under Wis.Stat. § 802.09(2)."

         ¶19 Ultimately, the court of appeals affirmed the circuit court's dismissal of the inverse condemnation claim. It determined that the "Sanitary District did not waive its notice of claim defense by failing to plead it." Maple Grove Country Club Inc. v. Maple Grove Estates Sanitary Dist., No. 2 016AP22 96, unpublished slip op., ¶l (Wis. Ct. App. Apr. 19, 2018) (per curiam).

         ¶20 The court of appeals reached this conclusion with significant reservations. Specifically, it determined that it was bound to follow Lentz v. Young, 195 Wis.2d 457, 536 N.W.2d 451 (Ct. App. 1995), even though it "questioned" the correctness of the Lentz decision. Maple Grove Country Club, No. 2016AP2296, unpublished slip op., ¶l.

         ¶21 In reviewing relevant case law, the court of appeals observed Lentz's broad and unqualified holding that "a defendant may raise an affirmative defense by motion." Id., ¶5 (quoting Lentz, 195 Wis.2d at 467) . Following Lentz, it concluded that "the District preserved its notice of claim affirmative defense by raising it on summary judgment." Maple Grove Country Club, No. 2016AP2296, unpublished slip op., ¶6.

         ¶22 However, the court of appeals opined that "Lentz almost certainly misinterpreted prior case law in a way that is not consistent with relevant statutes." Id., ¶7. Namely, it stated that "[t]he statutes do not appear to contemplate that affirmative defenses will be asserted for the first time in a motion for summary judgment that follows the pleadings." Id., ¶8.

         ¶23 In conclusion, the court of appeals summarized its concern that Lentz upends the statutory scheme:

In summary, the seemingly unqualified rule that was applied in Lentz obliterates the statutory scheme. Lentz replaces that scheme with a simple rule that affirmative defenses need not be pled, but instead need only be raised by motion before trial. But Lentz does not cite any statute or case law that supports such a rule. Nonetheless, we are bound by our own prior decision and may not overrule, modify, or withdraw its language. Cook v. Cook, 208 Wis.2d 166, 189-90, 560 N.W.2d 246 (1997) . We are permitted to "signal" our "disfavor," but may not overrule the prior decision. Id. at 190.

Maple Grove Country Club, No. 2016AP2296, unpublished slip op., ...


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