PUBLISHED OPINION
Case No.: 94-2042
† Petition for Review filed
Complete Title
of Case:
GENERAL ACCIDENT INSURANCE COMPANY OF AMERICA
and QUARLES & BRADY, A PARTNERSHIP,
Plaintiffs-Appellants-Cross Respondents, †
v.
SCHOENDORF & SORGI and
NORTHWESTERN NATIONAL CASUALTY COMPANY,
Defendants-Respondents-Cross Appellants,
THOMAS J. RHODA
and FREMONT INDEMNITY COMPANY,
Defendants-Third Party Plaintiffs-Respondents-
Cross Appellants,
v.
THOMAS J. SCHOENDORF,
MICHAEL L. SORGI,
JOSEPH F. SCHOENDORF, JR.
and JOHN A. LYNCH,
Third Party Defendants-Cross Appellants.
Oral Argument: June 9, 1995
COURT COURT
OF APPEALS OF WISCONSIN
Opinion Released: July 11, 1995
Opinion Filed: July 11, 1995
Source of APPEAL Appeal
and Cross-Appeal from orders
Full Name JUDGE COURT: Circuit
Lower Court. COUNTY: Milwaukee
(If “Special”, JUDGE: ARLENE D. CONNORS
so indicate)
JUDGES: Sullivan,
Fine and Schudson, JJ.
Concurred:
Dissented:
Appellant
ATTORNEYSOn
behalf of the plaintiffs-appellants-cross respondents, the cause was
submitted on the briefs of Terry E. Johnson and Peter F. Mullaney
of Peterson, Johnson & Murray, S.C., of Milwaukee. There was oral argument by Peter F.
Mullaney.
Respondent
ATTORNEYSOn
behalf of the defendants-respondents-cross appellants and third party
defendants-cross appellants, the cause was submitted on the briefs of Jeffrey
J. Liotta and Sheila M. Gavin of Hinshaw & Culbertson of
Milwaukee. There was oral argument by Jeffrey
J. Liotta.
|
COURT OF APPEALS DECISION DATED AND RELEASED July 11, 1995 |
NOTICE |
|
A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and
Rule 809.62, Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 94-2042
STATE
OF WISCONSIN IN COURT OF
APPEALS
GENERAL ACCIDENT
INSURANCE COMPANY OF AMERICA
and QUARLES &
BRADY, A PARTNERSHIP,
Plaintiffs-Appellants-Cross Respondents,
v.
SCHOENDORF & SORGI
and
NORTHWESTERN NATIONAL
CASUALTY COMPANY,
Defendants-Respondents-Cross Appellants,
THOMAS J. RHODA
and FREMONT INDEMNITY
COMPANY,
Defendants-Third Party Plaintiffs-Respondents-
Cross Appellants,
v.
THOMAS J. SCHOENDORF,
MICHAEL L. SORGI,
JOSEPH F. SCHOENDORF,
JR.
and JOHN A. LYNCH,
Third Party Defendants-Cross Appellants.
APPEAL and CROSS-APPEAL
from orders of the circuit court for Milwaukee County: ARLENE D. CONNORS, Judge. Affirmed.
Before Sullivan, Fine
and Schudson, JJ.
FINE, J. This is an appeal and cross-appeal from
non-final orders entered by the trial court in a legal/accounting malpractice
case.[1] We affirm.
I.
In December of 1975,
Westridge Orthopedics, Ltd., hired Schoendorf & Sorgi's predecessor law
firm and Thomas J. Rhoda, an accountant, to establish a pension and
profit-sharing plan for Westridge that would qualify under the Internal Revenue
Code. In late 1980, Westridge hired
Quarles & Brady to review the plan.
Quarles & Brady determined that the plan did not comply with the
applicable law, and although Westridge asked Quarles & Brady to bring the
plan into compliance, Quarles & Brady did not do so. The Internal Revenue Service audited
Westridge's plan in 1984, and, on March 29, 1985, formally notified Westridge
that the plan had been disqualified for the period beginning January 1, 1975,
and ending December 31, 1983.
Quarles & Brady and
its malpractice carrier, General Accident Insurance Company of America, settled
any malpractice claims Westridge could have asserted against Quarles &
Brady, the Schoendorf firm, and Rhoda, and then brought this action seeking
contribution from both Rhoda and the Schoendorf firm. Quarles & Brady alleges that the Schoendorf firm and Rhoda
were negligent in drafting the plan and in not submitting it to the Internal
Revenue Service for approval. Rhoda and
the Schoendorf firm sought summary judgment dismissing Quarles & Brady's
contribution claim, arguing that Quarles & Brady was a successive tortfeasor
and thus had no right to contribution.
Rhoda and the Schoendorf firm also argued that any claim that Quarles
& Brady might have had for equitable subrogation against them was barred by
the six-year statute of limitations.[2] The trial court granted summary judgment to
Rhoda and the Schoendorf firm on the contribution matter, but denied the motion
on the statute of limitations issue.
Rhoda and the Schoendorf firm then sought an order in limine to
exclude from the trial any evidence relating to tax assessments against
Westridge for the years 1980 through 1983.
The trial court granted the motion in part, ruling that Quarles &
Brady was solely responsible for the assessments for the years 1981 through
1983, but that the evidence was unclear as to who was responsible for the
assessments in connection with 1980.
II.
Summary judgment is used
to determine whether there are any disputed issues for trial. U.S. Oil Co. v. Midwest Auto Care
Servs., Inc., 150 Wis.2d 80, 86, 440 N.W.2d 825, 827 (Ct. App.
1989). Our review of a trial court's
grant of summary judgment is de novo.
Green Spring Farms v. Kersten, 136 Wis.2d 304, 315, 401
N.W.2d 816, 820 (1987).
A. Claim
for contribution.
As noted, Quarles &
Brady seeks contribution from Rhoda and the Schoendorf firm for the payments
Quarles & Brady made to settle Westridge's possible claims for professional
malpractice. There are three
prerequisites to a claim for contribution in negligence cases: “1. Both parties must be joint
negligent wrongdoers; 2. they must have common liability because of
such negligence to the same person; 3. one such party must have
borne an unequal proportion of the common burden.” Farmers Mut. Automobile Ins. Co. v. Milwaukee Automobile
Ins. Co., 8 Wis.2d 512, 515, 99 N.W.2d 746, 748 (1959). Whether there is “common liability” among
tortfeasors is determined at the time of the event causing injury. Id., 8 Wis.2d at 519, 99
N.W.2d at 750 (“[T]o recover on the basis of contribution, nonintentional
negligent tort-feasors must have a common liability to a third person at the
time of the accident created by their concurring negligence.”). Thus, successive tortfeasors—those whose
negligent acts produce discrete, albeit overlapping or otherwise related,
injuries—may not assert claims of contribution against one another. Fisher v. Milwaukee Elec. Ry. &
Light Co., 173 Wis. 57, 60, 180 N.W. 269, 270–271 (1920) (physician's
aggravation of injuries to passenger thrown from Milwaukee Electric streetcar);
see also Rusch v. Korth, 2 Wis.2d 321, 326, 86 N.W.2d 464,
467 (1957) (contribution permitted where “independent but concurring negligence
of two persons has contributed to an indivisible injury”) (emphasis
added), overruled on other grounds, Farmers Mut. Automobile Ins.
Co., 8 Wis.2d at 519, 99 N.W.2d at 750.
The Internal Revenue
Service's assessments in connection with the Westridge plan were distinct for
each year that the plan did not comply with the law. Thus, assuming that Rhoda and the Schoendorf firm were negligent
in connection with Westridge's pension and profit-sharing plan, the evidence is
undisputed that there would have been no damage resulting from that negligence
for the years starting with 1981 if Quarles & Brady had not also been
negligent.[3] By the same token, it is undisputed that
Quarles & Brady's negligence did not cause any damages for the years
preceding its involvement, and Quarles & Brady is thus not liable for that
damage. See Restatement (Second) of Torts § 879
comment b (1977). Accordingly, although
Rhoda and the Schoendorf firm, if negligent, would be liable to Westridge for
each of the years for which assessments were levied, see Butzow v.
Wausau Mem. Hosp., 51 Wis.2d 281, 285–286, 187 N.W.2d 349, 351–352
(1971); Restatement (Second) of Torts
§ 879 comment b (1977), Quarles & Brady is only liable for the consequences
of its own negligence and is neither a joint tortfeasor with Rhoda and the
Schoendorf firm nor does it have common liability with Rhoda and the Schoendorf
firm for the years before Quarles & Brady was retained. Thus, contribution between the parties is
not the proper remedy for any alleged overpayment by one of them. See Butzow, 51 Wis.2d
at 287, 187 N.W.2d at 352 (although tortfeasors “may have a joint liability in
part[,] such joint liability does not give rise to any right of contribution”).[4] Further, Quarles & Brady may not recoup
its settlement of the assessments levied for the years 1981 through 1983
because it could have prevented the assessments for those years. See id., 51 Wis.2d at
287, 187 N.W.2d at 352 (physician whose negligence aggravated plaintiff's first
injury could seek contribution for damages arising out of that aggravation from
tortfeasor responsible for first injury).
Simply put, “[t]he right of contribution is founded upon principles of
equity and natural justice,” Wait v. Pierce, 191 Wis. 202, 225,
210 N.W. 822, 823 (1926), and it does not comport with those principles to
permit a tortfeasor whose negligence either caused or failed to prevent further
injury to get contribution from a prior tortfeasor for damages resulting from
that further injury. The trial court's
grant of summary judgment to Rhoda and the Schoendorf firm is affirmed.[5]
B. Subrogation
and the assessments for the years 1981 through 1983.
A trial court's decision
to admit or exclude evidence is a discretionary determination that will not be
upset on appeal if it has “a reasonable basis” and was made “`in accordance
with accepted legal standards and in accordance with the facts of record.'” State v. Pharr, 115 Wis.2d
334, 342, 340 N.W.2d 498, 501 (1983) (citation omitted). As noted, a tortfeasor who pays more than
its share of a plaintiff's damages may recover against a co-tortfeasor for the
portion attributable to that co-tortfeasor.
Fisher, 173 Wis. at 62, 180 N.W. at 271. This recoupment, whether called
indemnification, see Brown v. LaChance, 165 Wis.2d 52, 64,
477 N.W.2d 296, 302 (Ct. App. 1991), or subrogation, see Fisher,
173 Wis. at 62, 180 N.W. at 271, as with contribution discussed in Part A,
above, is a remedy founded in equity. See
Interstate Fire & Casualty Co. v. City of Milwaukee, 45
Wis.2d 331, 334, 173 N.W.2d 187, 189 (1970).
It permits those who pay a claim that “in equity should have been
satisfied by another” to recover that payment from the person or entity
primarily liable. Ibid.; Fisher,
173 Wis. at 60, 180 N.W. at 270–271 (tortfeasor who aggravates plaintiff's
injuries is liable to first tortfeasor for damages paid by the first tortfeasor
that “are primarily due” to the second tortfeasor's negligence). The trial court ruled that Quarles &
Brady could not introduce evidence of its settlement payments for the years
1981 through 1983 because, in essence, Quarles & Brady could not recover
from Rhoda or the Schoendorf firm for the assessments levied for those
years. Given the undisputed evidence
before the trial court that assessments for the years 1981 through 1983 would
not have been levied if Quarles & Brady had timely fixed the defects in the
Westridge plan, we agree that Quarles & Brady may not recover from either
Rhoda or the Schoendorf firm the portion of its settlement that is attributable
to those assessments. Accordingly,
evidence of those assessments was not relevant to Quarles & Brady's claim
against Rhoda and the Schoendorf firm.
The trial court's order in limine is affirmed.[6]
C. Statute
of limitations.
Rhoda and the Schoendorf
firm cross-appeal from the trial court's denial of their summary judgment
motion seeking dismissal of Quarles & Brady's claim, which, they argue, is
barred by the six-year statute of limitations applicable to legal malpractice
actions. See Acharya v.
Carroll, 152 Wis.2d 330, 334–338, 448 N.W.2d 275, 277–279 (Ct. App.
1989) (holding that § 893.53, Stats.,
governs legal malpractice actions).
Rhoda and the Schoendorf firm argue that Quarles & Brady's
recoupment rights against them are barred because Westridge knew by December,
1980, that the pension and profit sharing plan was defective, and Quarles &
Brady's action was commenced in January of 1991, more than six years
later. Quarles & Brady, on the
other hand, argues that the statute of limitations did not start to run at
least until Westridge was notified, in March of 1985, that the plan had been
disqualified. Thus, Quarles & Brady
contends that the January, 1991, commencement of this action was timely.
Although not briefed by
the parties, and only tangentially discussed at oral argument, an action for
contribution and, by implication, indemnity or any equity-based right of
recoupment, accrues when payment is made, not, as the trial court and the
parties assumed, when the underlying tort accrued, because it is then that the
“inchoate claim” for recoupment “ripened into maturity, and whatever the
applicable period of limitations, the time then started running.” State Farm Mut. Automobile Ins. Co. v.
Schara, 56 Wis.2d 262, 266, 201 N.W.2d 758, 759–760 (1972); see also
Milwaukee Mut. Ins. Co. v. Priewe, 118 Wis.2d 318, 321, 348
N.W.2d 585, 586 (Ct. App. 1984).[7] Absent a more specific statute setting the
time within which such actions must be brought, the six-year statute of
limitations applicable to implied contracts, § 893.43, Stats., governs. Schara,
56 Wis.2d at 267–268, 201 N.W.2d at 760–761 (cause of action for contribution
is “based on a contract implied at law to rectify the inequity resulting when
one tortfeasor pays more than his share of a common liability”). Section 893.92, Stats., however, has established a one-year statute of
limitations for actions for “contribution.”[8] In selecting an appropriate statute of
limitations, we must look at the “nature of the transaction” involved. See Schara, 56 Wis.2d
at 267, 201 N.W.2d at 760. Equity-based
recoupment, whether called “indemnity,” “equitable subrogation,” or
“contribution,” arises from the payment to the plaintiff by one tortfeasor of
more than that tortfeasor's fair share—whether the tortfeasors are joint
tortfeasors and share a common liability for all of the plaintiff's damages, or
whether they are successive tortfeasors, as here. Section 893.92 is thus applicable to Quarles & Brady's claims
against Rhoda and the Schoendorf firm.
Quarles & Brady commenced this action within one year of its payment
of the settlement for which it seeks recoupment. Accordingly, the action is timely.[9]
By the Court.—Orders
affirmed.
[2] Quarles & Brady's complaint sought contribution. The trial court and the parties have also treated Quarles & Brady's claim as one founded in “equitable subrogation.” In essence, this is a claim for indemnification. Indemnification is an alternate route by which a party who has paid more than his or her share of another's damages may recoup that excess from a person who is also responsible for the damages. See Brown v. LaChance, 165 Wis.2d 52, 64, 477 N.W.2d 296, 302 (Ct. App. 1991) (“Unlike contribution where liability is shared, indemnity is a principle that `shift[s] the loss from one person who has been compelled to pay to another who on the basis of equitable principles should bear the loss.'”) (citation omitted, brackets by Brown).
[3] Both Rhoda and the Schoendorf firm deny that they were negligent. In a letter dated March 21, 1985, to its malpractice-insurance agent, Quarles & Brady admitted that it was “responsible” for the damages resulting from the Internal Revenue Service assessments against Westridge for the years 1981 through 1983.
[4] If one tortfeasor pays to the plaintiff compensation for damages caused by the other tortfeasor, it may recover in subrogation those damages from the other tortfeasor even though the contribution route is barred. Fisher v. Milwaukee Elec. Ry. & Light Co., 173 Wis. 57, 62, 180 N.W. 269, 271 (1920) (physician's aggravation of injuries to passenger thrown from Milwaukee Electric streetcar).
[5] In urging reversal, Quarles & Brady relies on two cases that are inapposite in this context: Brown v. LaChance, 165 Wis.2d 52, 477 N.W.2d 296 (Ct. App. 1991), and Grosskopf Oil, Inc. v. Winter, 156 Wis.2d 575, 457 N.W.2d 514 (Ct. App. 1990). Brown concerned the alleged combined negligence of attorneys in connection with a single transaction, which, unlike the situation here, did not result in discrete year-by-year damages that could have been prevented if the subsequent tortfeasor were not negligent. See id., 165 Wis.2d at 58–59, 477 N.W.2d at 299–300. Although Grosskopf concerned alleged successive tortfeasors in the context of a legal-malpractice case, id., 156 Wis.2d at 579–581, 457 N.W.2d at 516–517, it neither discussed nor decided whether contribution was an appropriate remedy, id., 156 Wis.2d at 586, 457 N.W.2d at 519.
[6] This issue may be moot. In their brief before this court, Quarles & Brady and its insurance carrier represents that at the time the brief was written, they “cannot present any evidence of the $260,000 they paid” to settle the tax assessments for 1981 through 1983, “and therefore cannot recover any portion of that money.” We address the issue nevertheless because it may ripen following remand. Cf. State ex rel. Jackson v. Coffey, 18 Wis.2d 529, 533, 118 N.W.2d 939, 942 (1963) (issues briefed may be considered if they are likely to recur on remand even though other issues are dispositive of appeal).
[7] The basis for our decision “is not circumscribed by the parties' legal analyses.” See Watts v. Watts, 152 Wis.2d 370, 384, 448 N.W.2d 292, 298 (Ct. App. 1989).
[8] Section 893.92, Stats., provides:
Action for contribution. An action for contribution based on tort, if the right of contribution does not arise out of a prior judgment allocating the comparative negligence between the parties, shall be commenced within one year after the cause of action accrues or be barred.
[9] The result here is
the same under the parties' analysis, which, as noted, mistakenly ties the
statute of limitation for recoupment under these circumstances to the statute
of limitation applicable to the underlying tort.
An action accrues for
statute-of-limitations purposes when a plaintiff knows or should know that he
or she has “`a claim capable of present enforcement, a suable party against
whom it may be enforced, and a party who has a present right to enforce
it.'” Hennekens v. Hoerl,
160 Wis.2d 144, 152, 160 & n.14, 465 N.W.2d 812, 815, 819 & n.14 (1991)
(citation omitted).
A tort claim is not “capable of
present enforcement” until the plaintiff has suffered actual damage. Actual damage is harm that has already
occurred or is reasonably certain to occur in the future. Actual damage is not the mere possibility of
future harm. Meracle v. Children's
Serv. Soc., 149 Wis.2d 19, 26–27, 437 N.W.2d 532, [536] (1989).
Hennekens, 160 Wis.2d at 152–153, 465 N.W.2d at 816 (footnotes
omitted). “Actual damage” can occur
even though there is not “a contemporaneous monetary loss” if the plaintiff has
sustained “injury to a legal interest or loss of a legal right.” Id., 160 Wis.2d at 153–154,
465 N.W.2d at 816. Rhoda and the
Schoendorf firm argue that Westridge suffered actual damage in 1975, when it
received “a defective plan in 1975, even though Westridge had not yet suffered
any monetary loss.” We disagree.
In Hennekens,
a legal malpractice case, the plaintiff suffered actual damage when he lost the
legal right to rescind a promissory note that he had given in conjunction with
his purchase of real property on a land contract when the land-contract
agreement became void because the plaintiff failed to fulfill conditions to the
closing. Id., 160 Wis.2d
at 147–160, 465 N.W.2d at 813–819. The
fact that suit to collect on the note was not started until four years later
did not alter Hennekens' conclusion that the plaintiff suffered
actual damage—the loss of a legal interest—when his rights vis a vis the
note and the void land-contract agreement were fixed. Ibid.
Unlike the situation in Hennekens, where the plaintiff was
irretrievably liable on the promissory note and suffered injury to his legal
interest once the land-contract agreement became void, the rights of Westridge
in connection with its pension and profit sharing plan were not fixed until
after the plan was disqualified and attempts failed to persuade the Internal
Revenue Service not to, in effect, apply that disqualification
retroactively. See Mann v.
The Ætna Ins. Co., 38 Wis. 114, 118–119 (1875) (action by surety to
recoup money paid on a judgment did not accrue until after judgment reversed by
United States Supreme Court). In
essence, although there was the potential for damage in 1975 when an allegedly
defective plan was given to Westridge, and Westridge knew of that potential in
December of 1980, the damage was inchoate until the plan could no longer be
brought into compliance for the assessment years. This case is thus similar to Meracle, upon which Hennekens
relied.
In Meracle, a couple adopted a child who was at risk for developing Huntington's disease despite the couple's instructions to the adoption agency that they wanted only a healthy child. Id., 149 Wis.2d at 22–23, 437 N.W.2d at 533. The couple sued the adoption agency one year after the child developed Huntington's disease, but four years after they knew of the risk. Id., 149 Wis.2d at 23–24, 437 N.W.2d at 533. Meracle reversed the trial court's determination that the suit was barred by the applicable three-year statute of limitations, holding that until the Huntington's disease was diagnosed the couple had not suffered actionable damage. 149 Wis.2d at 26–30, 437 N.W.2d at 535–536. By the same token here, although Westridge knew in 1980 that it was at risk because of a defective plan, that risk did not mature into an irretrievable liability until its rights were fixed by Internal Revenue Service action less than six years prior to the commencement of this action by Quarles & Brady. Thus, Denzer v. Rouse, 48 Wis.2d 528, 180 N.W.2d 521 (1970), and Boehm v. Wheeler, 65 Wis.2d 668, 223 N.W.2d 536 (1974), upon which Rhoda and the Schoendorf firm rely are not germane. Boehm, a legal malpractice action alleging a failure to timely file a patent application, held that the cause of action accrued when the plaintiffs lost their right to get the patent. Boehm, 65 Wis.2d at 678, 223 N.W.2d at 541. Denzer, a legal malpractice action alleging negligence in the drafting of a clause in a deed describing the property, held that the cause of action accrued when the real estate transaction was consummated, because it was then that the rights of the parties were fixed, even though the clause was not judicially interpreted until twenty years later. Denzer, 48 Wis.2d at 530, 533, 180 N.W.2d at 522–523, 524. The rule that Rhoda and the Schoendorf firm seek is not only contrary to the line of precedent running through Hennekens, but would have the unfortunate result of compelling the premature filing of lawsuits at the first faint scent of potential injury.