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COURT OF APPEALS DECISION DATED AND RELEASED July 18, 1995 |
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. 94-1500
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT I
CAPITOL INDEMNITY
CORPORATION,
Plaintiff-Appellant-Cross Respondent,
v.
WILD GOOSE INN, INC.,
Defendant-Respondent-Cross Appellant.
APPEAL and CROSS-APPEAL
from a judgment of the circuit court for Milwaukee County: LOUISE M. TESMER, Judge. Affirmed.
Before Wedemeyer, P.J.,
Fine and Schudson, JJ.
PER
CURIAM. Capitol Indemnity Corporation appeals from the trial
court's denial of its claimed set-off for its mortgage payment to Norwest Bank
on behalf of the mortgagor, Wild Goose Inn, Inc. Wild Goose Inn cross-appeals from the trial court's grant of
summary judgment to Capitol Indemnity on Wild Goose Inn's claim for bad-faith
denial of coverage.
The Wild Goose Inn, a
supper club and bar in Waupun, was damaged by fire on December 31, 1991. Wild Goose Inn filed a claim with Capitol
Indemnity, its insurer, on June 25, 1992.
Capitol Indemnity denied coverage for the loss, claiming that the fire
was intentionally set by Frank Dohrwardt, co-owner of the business with his
wife Barbara, or by his agent.
Capitol Indemnity
brought this action against Wild Goose Inn and its mortgagee, Norwest Bank, for
a declaratory judgment under § 806.04, Stats.,
that Wild Goose Inn was not entitled to recover for its loss under its policy
with Capitol Indemnity. Wild Goose Inn
counterclaimed for the amount of its fire loss and for actual and punitive
damages based on Capitol Indemnity's alleged bad faith in denying the
claim. Capitol Indemnity contends that
it paid Norwest Bank $347,686 on Wild Goose Inn's mortgage debt of $390,000,
and that it took an assignment of the mortgage from the bank.[1] The trial court granted partial summary
judgment to Capitol Indemnity, dismissing Wild Goose Inn's claims for bad faith
and punitive damages. Wild Goose Inn
made a statutory offer of settlement on November 8, 1993, which was
rejected. After trial, the jury
returned a verdict for Wild Goose Inn for $828,487 on its damage claim. The verdict exceeded Wild Goose Inn's offer
of settlement.
I.
Capitol Indemnity
appeals on two grounds. First, it
argues that it is entitled to a set-off from the jury verdict of its payment to
the mortgagee. Second, it argues that
it is not obligated to pay twelve percent interest on that amount of the jury
verdict it allegedly paid to Norwest Bank.
We address these issues in turn.
The interpretation of a
contract is a question of law that we review de novo. Edwards v. Petrone, 160 Wis.2d
255, 258, 465 N.W.2d 847, 848 (Ct. App. 1990).
If the terms of the contract are plain and unambiguous, it is the
court's duty to construe the contract according to its plain meaning. Waukesha Concrete Prods. Co., Inc. v.
Capitol Indem. Corp., 127 Wis.2d 332, 339, 379 N.W.2d 333, 336 (Ct.
App. 1985). Capitol Indemnity's policy
of insurance issued to Wild Goose Inn contains the following provision:
F. ADDITIONAL CONDITIONS
The following conditions apply in addition to
the Common Policy Conditions and the Commercial Property Conditions.
....
2. Mortgage Holders
....
b.We
will pay for covered loss of or damage to buildings or structures to each
mortgage holder shown in the Declarations in their order of precedence, as
interest may appear.
c.The
mortgage holder has the right to receive loss payment even if the mortgage
holder has started foreclosure or similar action on the building or structure.
d.If we
deny your claim because of your acts or because you have failed to comply with
the terms of this Coverage Part, the mortgage holder will still have the right
to receive loss payment if the mortgage holder:
(1)Pays
any premium due under this Coverage Part at our request if you have failed to
do so;
(2)Submits
a signed, sworn statement of loss within 60 days after receiving notice from us
of your failure to do so; and
(3)Has
notified us of any change in ownership, occupancy or substantial change in risk
known to the mortgage holder.
e.If we
pay the mortgage holder for any loss or damage and deny payment to you because
of your acts or because you have failed to comply with the terms of this
Coverage Part:
(1)The
mortgage holder's rights under the mortgage will be transferred to us to the
extent of the amount we pay; and
(2)The
mortgage holder's right to recover the full amount of the mortgage holder's
claim will not be impaired.
The assignment and
release between Capitol Indemnity and Norwest Bank stated that Capitol
Indemnity was “hereby subrogated to all rights of recovery” against “any person
or organization on account of said payments and losses,” thus including the
Wild Goose Inn.
A.
Capitol Indemnity argues
that it is entitled to a set-off of the $347,686 it allegedly paid to the
mortgagee from the amount awarded by the jury to Wild Goose Inn. The assignment and release between Capitol
Indemnity and Norwest Bank provides for such a recovery in the subrogation
clause, which is not ambiguous.
Capitol Indemnity,
however, failed to plead or even raise prior to the return of the jury's
verdict in the trial court the issue of the subrogation clause. It also presented no evidence during the
trial of any payment it made to Norwest Bank.
Under controlling precedent, Capitol Indemnity may not obtain a set-off
in this action of the amount it claims to have paid in partial satisfaction of
the mortgage debt. Jansa v.
Milwaukee Automobile Mut. Ins. Co., 18 Wis.2d 145, 149, 118 N.W.2d 149,
151 (1962), and Price v. Hart, 166 Wis.2d 182, 189–192, 480
N.W.2d 249, 252–253 (Ct. App. 1991), held that a failure to plead or prove
insurance policy limits prior to verdict precluded application of those limits
to cap the plaintiffs' recoveries. More
recently, we concluded that failure to present at trial evidence of an alleged
right to subrogation precluded consideration of that issue. Chernetski v. American Family Mut.
Ins. Co., 183 Wis.2d 68, 79–80, 515 N.W.2d 283, 288 (Ct. App. 1994)
(alternate holding). The trial court
properly declined to allow Capitol Indemnity to set-off against the jury's
verdict the amount it claims to have paid Norwest Bank.
B.
Capitol Indemnity argues
that it should not be required to pay twelve percent interest on the amount it
claims to have paid to Norwest Bank. As
noted above, however, Capitol Indemnity is not entitled to a set-off for that
amount.
II.
We turn now to the three
issues raised on the cross-appeal by Wild Goose Inn. Wild Goose Inn argues that the trial court erred in: (1) granting partial summary judgment to
Capitol Indemnity on its counterclaim for actual and punitive damages on its
bad faith claim; (2) denying Wild Goose Inn's request for attorney fees; and
(3) denying Wild Goose Inn's request for pre-verdict interest. We address these issues seriatim.
A.
First, Wild Goose Inn
argues that the trial court erred in granting partial summary judgment to
Capitol Indemnity on its counterclaim for actual and punitive damages on its
bad faith claim.
Summary judgment is used
to determine whether there are any disputed issues for trial. U.S. Oil Co., Inc. v. Midwest Auto
Care Servs., Inc., 150 Wis.2d 80, 86, 440 N.W.2d 825, 827 (Ct. App.
1989). Appellate courts and trial
courts follow the same methodology. Green
Spring Farms v. Kersten, 136 Wis.2d 304, 315, 401 N.W.2d 816, 820
(1987). First, we examine the pleadings
to determine whether the complaint states a claim for relief. Id. If the complaint states a claim and the answer joins the issue,
the court then examines the pleadings, depositions, answers to interrogatories,
admissions on file, and affidavits, if any.
Id. If the summary
judgment materials do not indicate that there is a genuine issue of material
fact and if the moving party is entitled to judgment as a matter of law,
summary judgment must be entered, § 802.08(2), Stats.
The supreme court has
set forth the test for bad faith in an insurance context:
While we have stated ... that, for proof of bad faith, there must be
an absence of a reasonable basis for denial of policy benefits and the
knowledge or reckless disregard of a reasonable basis for a denial, implicit in
that test is our conclusion that the knowledge of the lack of a reasonable
basis may be inferred and imputed to an insurance company where there is a
reckless disregard of a lack of a reasonable basis for denial or a reckless
indifference to facts or to proofs submitted by the insured.
Under these tests of the tort of bad faith, an
insurance company, however, may challenge claims which are fairly debatable and
will be found liable only where it has intentionally denied (or failed to
process or pay) a claim without a reasonable basis.
Anderson
v. Continental Ins. Co., 85 Wis.2d 675, 693, 271 N.W.2d 368, 377
(1978) (emphasis in original). For punitive
damages to be awarded for bad faith, there must be “a showing of an evil intent
deserving of punishment, or special ill-will, or wanton disregard of duty, or
gross or outrageous conduct.” State
Farm Fire & Casualty Ins. Co. v. Walker, 157 Wis.2d 459, 465, 459
N.W.2d 605, 608 (Ct. App. 1990).
The deposition testimony
of Robert Miller, Vice President in charge of Capitol Indemnity's property and
casualty claims, gives the reasons for Capitol Indemnity's denial of coverage
for the fire damage.[2] Miller testified:
[W]e found initially that
[Franklin Dohrwardt, co-owner] ended up having a tremendous amount of problems
starting his business.... He had
problems with his compressors, his refrigerators, the furnace, the health department
came in. He had problems with his
dishes, the sink and floor.
Because of all these problems, in the spring of 1991 he had to go to
more credit. He got another $25,000 in
the line of credit, and he was at the end of his credit at that time. In the meantime he was also trying to sell
his property, and that didn't work out.
He ran into problems with his taxes. He was overdue in his sales tax, his income tax, quarterly taxes,
withholding taxes, property taxes, and then the vise starts getting a little
tighter whereby the bank forecloses....
And at this time he's got $390,000 in the mortgage, and his past history
is that he missed payments in November and December of 1990, February, March,
July, August, and September of '91. And
he had also pledged his personal assets as a guarantee for the business loan
and because of his financial problems, was about to lose his personal assets
and the other business that he was running....
He had creditors breathing down his neck. He owed approximately $20,000 to different people that he had
incurred debts to. He, at the -- right
before the fire, was changing his insurance coverages whereby he was going from
$925,000 worth of coverage to $575,000 worth of coverage....
....
And then we get into where we put him under an
examination under oath, and he gave conflicting testimony to the point where he
said that he and his wife had gone to bed immediately after they closed [their
other restaurant], and his wife testified that that was not true. He was the last one to leave the premises at
the Wild Goose Inn. He and only a few
trusted employees were the ones that had keys.
The Oakfield Fire Department found no evidence of forcible entry. He knew of no one else that could have or
would have had motive to start the fire.
This deposition
testimony is corroborated in the record by several other affidavits and
depositions. This evidence supports
Capitol Indemnity's contention that its liability was “fairly debatable.”[3] See Anderson, 85 Wis.2d
at 693, 271 N.W.2d at 377. Wild Goose
Inn has submitted no evidentiary material in opposition to summary judgment
showing that the claim was not “fairly debatable.” Accordingly, the trial court appropriately granted summary
judgment to Capitol Indemnity. See
Transportation Ins. Co., Inc. v. Hunzinger Constr. Co., 179
Wis.2d 281, 291–292, 507 N.W.2d 136, 140 (Ct. App. 1993) (after discovery, to
avoid summary judgment, party asserting the claim must make a showing
sufficient to establish the essential elements of that party's case).
B.
Second, Wild Goose Inn
argues that the trial court erred in denying its request for attorney fees
under § 806.04, Stats., when
Capitol Indemnity was held liable on Wild Goose Inn's claim. The facts central to this issue are
undisputed and, therefore, we review de novo the trial court's
determination. Doerr v. Doerr,
189 Wis.2d 112, 121–122 n.8, 525 N.W.2d 745, 749 n.8 (Ct. App. 1994) (whether
facts fulfill a legal standard is a question of law that is reviewed de novo).
Wild Goose Inn relies on
Elliott v. Donahue, 169 Wis.2d 310, 485 N.W.2d 403 (1992), in
support of its claim for attorney fees.
In that case, the supreme court held that “sec. 806.04(8), Stats., which recognizes the principles
of equity, permits the recovery of reasonable attorney fees incurred by the
insured” in a declaratory-judgment action to establish coverage. Elliott, 169 Wis.2d at
314–315, 485 N.W.2d at 404. Wild Goose
Inn seeks to extend this principle to all declaratory-judgment suits for
coverage. Elliott,
however, based the award of fees on the insurer's breach of its contractual
obligation to provide a defense to third-party liability claims; in contrast,
this case involves first-party property-damage insurance. Id., 169 Wis.2d at 314–316,
485 N.W.2d at 404–405.
Wisconsin follows the
“American Rule,” under which parties are generally responsible for their own
attorney fees. Kremers-Urban Co.
v. American Employers Ins. Co., 119 Wis.2d 722, 744, 351 N.W.2d 156,
167–168 (1984). Under this rule,
attorney fees cannot be awarded to the prevailing party in the absence of a
statute or enforceable contract proving for attorney fees. Id., 119 Wis.2d at 744, 351
N.W.2d at 167. Neither a statute nor an
enforceable contract providing for attorney fees is present here, and we affirm
the trial court's denial of attorney fees.
C.
Finally, Wild Goose Inn
contends that the trial court erred in denying its request for pre-verdict
interest in two respects. First, Wild
Goose Inn argues that the trial court should have awarded it five percent
pre-verdict interest running from the date of the fire on December 31, 1992,
under Benke v. Mukwonago-Vernon Mut. Ins. Co., 110 Wis.2d 356,
366–367, 329 N.W.2d 243, 249 (Ct. App. 1982) (pre-verdict interest recoverable
only in cases involving liquidated damages or damages susceptible of reliable
and reasonably accurate calculation). In
its brief, however, Wild Goose Inn provides only a conclusory allegation that
the damages were susceptible of such calculation, without citation to the
record. It is not the duty of an
appellate court to “sift and glean the record ... to find facts to support an
alleged error.” Zintek v. Perchik,
163 Wis.2d 439, 482–483, 471 N.W.2d 522, 539 (Ct. App. 1991). We decline to address this issue.
Second, Wild Goose Inn
contends that it is entitled to twelve percent pre-verdict interest on its
entire jury verdict under § 628.46(1), Stats.,
running from thirty days after Capitol Indemnity received Wild Goose Inn's
written proof of loss. The trial court
assessed interest from the date of service of the statutory offer of settlement
under § 807.01(4), Stats. As noted above, § 628.46(1), Stats., provides that “payment [under
the policy] shall not be deemed overdue when the insurer has reasonable proof
to establish that the insurer is not responsible for the payment.” As noted, the trial court correctly ruled on
summary judgment that there was no genuine issue of material fact but that the
claim was fairly debatable. Thus,
Capitol Indemnity had a good faith basis to deny the claim when it was
presented and § 628.46(1)'s authorization of twelve percent interest
dating from presentation of the claim is not applicable. We affirm on all issues.
By the Court.—Judgment
affirmed.
This opinion will not be
published. See Rule 809.23(1)(b)5, Stats.