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COURT OF APPEALS DECISION DATED AND RELEASED January 14, 1997 |
NOTICE |
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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. 96-1529-FT
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT I
FEDERATED MUTUAL
INSURANCE COMPANY,
Plaintiff-Appellant,
v.
PARTS DISTRIBUTING,
INC.,
Defendant-Respondent.
APPEAL from an order of
the circuit court for Milwaukee County:
FRANK T. CRIVELLO, Judge.[1] Reversed and cause remanded with
directions.
CURLEY,
J. Federated Mutual Insurance Company appeals from an order
dismissing its small claims action against Parts Distributing, Inc. In its suit, Federated Mutual sought $3,140
in insurance premiums from Parts Distributing.
On appeal, Federated Mutual asks this court to determine whether Parts
Distributing was liable “for insurance coverage it provided at the request” of
Parts Distributing; and thus, whether the trial court erred in dismissing the
action. Because the analysis and basis
for the trial court's ruling is unclear from the appellate record, this court
must reverse and remand the matter for clarification. On remand, the trial court shall make specific factual findings
and clarify the legal basis for dismissing the action.[2]
I. Background.
The parties agree on the
following facts. Ronald Haidinger
acquired Parts Distributing, Inc., on January 1, 1994. At that time, the previous owners had
business, commercial, and umbrella insurance policies for Parts Distributing
purchased from Federated Mutual, for which the previous owners paid the
premiums through May 1, 1994. Federated
Mutual notified Haidinger sometime during the first week in March 1994 that
they had cancelled the original policies effective January 1, 1994. Haidinger then received a letter dated
January 17, 1994, noting his receipt of refund checks effective March 9, 1994,
for premiums paid to the old policy for the months of January, February and
March. Gary Reynolds, Federated
Mutual’s agent, then presented new policies around the end of March with
premiums approximately $4,000 higher than the previous policies. Haidinger refused to pay, and this dispute
followed.
At this point the
parties' facts diverge. Federated
Mutual claims it is customary to cancel old policies and issue new ones when a
business entity changes hands. Reynolds
gave conflicting testimony at the small claims hearing on whether he had
informed Haidinger in early January that Federated Mutual was going to cancel
the old policies and issue new ones.
Further, Reynolds confirmed that Haidinger received invoices processed
March 3, 1994, noting that Federated Mutual cancelled the old polices
retroactively effective January 1, 1994.
It appears that Federated Mutual sent no new policy information at that
time. Federated Mutual claims this
event occurred during the processing of the new policies for Parts
Distributing. Federated Mutual claims
that the increase in premiums was justified based on a risk analysis performed
in all situations where an ownership of a company changes.
Parts Distributing
presents a different picture. Haidinger
claims he spoke with Reynolds twice in January of 1994, on the phone and in
person, and that Reynolds never mentioned the cancellation of the old
policies. Once he received the
cancellation notices the first week of March, Haidinger testified that he
believed from the invoice that he no longer had insurance for Parts
Distributing, and in fact had not since January 1, 1994. About a week later, Reynolds came with the
new policy covering the months of January, February and March, and Haidinger
testified he expressed his dissatisfaction with it. Further, Parts Distributing argued that Federated Mutual did not
follow the procedures for cancellations set forth in § 631.36, Stats.
Additionally, the record
contains a document dated July 7, 1994, which notes the new policy
issuance. The process date on this
document is March 2, 1994, and the effective date is January 1, 1994. This seemingly indicates that Federated
Mutual issued Parts Distributing’s new policy retroactively as well. After a hearing on the issue, the trial
court issued the following oral decision:
I will find that Mr. Haidinger bought
Parts Distributors--Distributing, Inc., on January 1, 1994. He bought it from another person with the
understanding that the business had a paid insurance policy that included the
months of January, February, and March of 1994. A new policy was brought to him in March that indicated it had
commenced in January. The old policy
had been cancelled in January. Mr.
Haidinger was not told of the new premium, of the new increase, until
March. I think it would be unjust to
ask Mr. Haidinger to pay that increase in premium; and, therefore, I will grant
judgment for the defendant.
A
written order was entered dismissing Federated Mutual's complaint and granting
judgment in favor of Parts Distributing.
This appeal follows.
II. Analysis.
“A discretionary
determination, to be sustained, must demonstrably be made and based upon the facts
appearing in the record and in reliance on the appropriate and applicable
law.” Hartung v. Hartung,
102 Wis.2d 58, 66, 306 N.W.2d 16, 20 (1981).
Additionally, a discretionary determination must be the product of a
rational mental process by which the facts of record and law relied upon are
stated and are considered together for the purpose of achieving a reasoned and
reasonable determination. Id. Further, because the exercise of discretion
is not the equivalent of unfettered decision-making, the record must reflect
the trial court’s “reasoned application of the appropriate legal standard to
the relevant facts in the case.” Hedtcke
v. Sentry Ins., 109 Wis.2d 461, 471, 326 N.W.2d 727, 732 (1982).
This court acknowledges
that a trial court sitting in a small claims action is not expected to explain
every detail of its decision-making process.
This case, however, requires a more detailed explanation than is
currently available in the record.
Here, the record is unclear as to what the trial court intended in
relation to the parties when it issued its decision. From our interpretation, there may be one of three
possibilities.
First, the trial court,
in error, may have believed that Federated Mutual never refunded the premiums
to the old policies and was applying them to the new owner's premium
payments. This interpretation arises
from the trial court's statement that “it would be unjust to ask Mr. Haidinger
to pay that increase in premium.”
(Emphasis added.) It follows
that if this was the trial court's belief, Parts Distributing had insurance for
January, February and March, and would owe premium payments for the amount
refunded, as the record clearly shows that refunds were made. Therefore, under the trial court's erroneous
conclusion, Parts Distributing would not owe Federated Mutual anything for the
increase in premiums.
Second, the trial court
may have considered the refund of the premiums in its analysis and believed
that Federated Mutual issued Parts Distributing no new insurance after cancelling
the previous policies. Therefore, it
may have opined, Haidinger did not have to pay anything because there was no
insurance to pay premiums on.
Third, the trial court
may have noted the premium refund, and acknowledged that Federated Mutual issued
new policies, but chose not to enforce Haidinger’s premium payment because
Federated Mutual did not follow the rule set out in § 631.36, Stats.
The trial court could have concluded under equitable principles that
because Federated Mutual did not send the cancellation notice ten days before
cancellation, but two and a half months after, Parts Distributing was then no
longer liable for any insurance it may have had during that time.
Because this court
cannot properly review the trial court's reasoning until the trial court
clarifies the basis for its decision, this court must reverse and remand for
further clarification.
On remand, the trial
court shall make specific findings of fact with respect to Parts Distributing's
alleged liability for any insurance premiums.
Based on these factors, the trial court shall then provide a reasoned
legal conclusion on which any future appeal in this case could be reviewed.
By the Court.—Order
reversed and cause remanded with directions.
This opinion will not be
published. See Rule 809.23(1)(b)4, Stats.