COURT OF APPEALS DECISION DATED AND RELEASED August 21, 1996 |
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. 95-1428
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT II
A.B. SCHMITZ AGENCY,
INC.,
Plaintiff-Respondent,
v.
EDWARD WENDEL, d/b/a
BEAR INSURANCE AGENCY,
Defendant-Appellant.
APPEAL from a judgment
of the circuit court for Kenosha County:
BRUCE E. SCHROEDER, Judge. Affirmed
in part and reversed in part.
Before Anderson, P.J.,
Brown and Snyder, JJ.
PER
CURIAM. Edward Wendel appeals from a judgment in favor of A.B.
Schmitz Agency, Inc. (hereinafter, Schmitz) for rent due under a contract and
prejudgment interest. He argues that
the trial court misapplied the parol evidence rule, that the trial court
erroneously exercised its discretion in limiting his redirect testimony, that
prejudgment interest should not have been awarded, and that he was entitled to
funds put into trust while the action was pending. Except for the award of prejudgment interest, we affirm the
judgment.
Wendel and Schmitz, both
insurance agents, entered into an office-sharing arrangement whereby Schmitz
would provide Wendel with office space and support staff services. The parties agreed to
"cross-licensing," which permitted each party to sell insurance
policies for carriers represented by the other party. Wendel was to pay rent "based on Four (4%) of the Annual
Gross written Property and Casualty Premium as registered as of December 31,
1984, and subsequent years, Written by ED WENDEL and BEAR INSURANCE AGENCY
only, per the year end reports of FIREMEN's FUND, BADGER STATE MUTUAL,
MIDWESTERN NATIONAL INSURANCE, CRUM & FORESTER PERSONAL INSURANCE, CRUM
& FORESTER INSURANCE, and REPUBLIC-VANGUARD INSURANCE COMPANIE[S]."
During the term of the
contract, Wendel made monthly payments equal to one-twelfth of the applicable
percentage of the annual gross written property and casualty premiums he wrote
for the calendar year ending December 31, 1984. Wendel failed to provide Schmitz with an updated accounting of
gross premiums. Schmitz brought this
action for an accounting and determination of the amount of underpaid
rent. Wendel counterclaimed for sums
Schmitz owed him for unpaid commissions Schmitz collected on business Wendel
brokered through carriers represented by Schmitz (direct-billed
commissions). The matter was tried to
the court. Judgment was entered for
$46,510.19, including prejudgment interest of $4472.60.
The issue is whether
Wendel's rent formula was to be applied to the gross premiums from only the six
companies enumerated in the rental clause or to the gross premiums on all
property and casualty policies sold by Wendel.
The trial court found that the contract was ambiguous and that rent was
not limited to the six companies.
Wendel argues that the trial court erred in considering parol evidence.
The parol evidence rule
is that when the parties to a contract embody their agreement in writing and
intend the writing to be the final expression of their agreement, the terms of
the writing may not be contradicted or varied by proof of prior written or oral
agreements. Federal Deposit Ins.
Corp. v. First Mortgage Investors, 76 Wis.2d 151, 156, 250 N.W.2d 362,
365 (1977). It is a rule of substantive
law and not a rule of evidence. Id.
The trial court found
that the contract was not the final and complete expression of the parties'
agreement. The trial court's finding
that the contract is not integrated is not clearly erroneous. Section 805.17(2), Stats. The contract
did not have a clause indicating that it was the final and only agreement of
the parties or that all other agreements had been "merged" into the
contract. The contract provided that it
could be changed or added to by mutual agreement. The parties acknowledged their understanding that the accounting
services to be provided under the contract was a future event. Wendel acknowledged that he agreed to
utilize office systems used by Schmitz and that his agreement to do so was not
included in the contract. Moreover,
Wendel acknowledged that the parties intended to "add to the list" in
the rental clause any company he added or replaced. Thus, the requisite finding—that the parties intended the
contract to be a final expression—does not exist so as to bar evidence of prior
written or oral agreements between the parties. See Kramer v. Alpine Valley Resort, 108
Wis.2d 417, 425, 321 N.W.2d 293, 297 (1982).
Parol evidence was also
permissible because of the contract's ambiguity. The trial court focused on the cross-licensing clause to conclude
that the contract was ambiguous. That
clause provides:
ED
WENDEL and BEAR INSURANCE AGENCY will be licensed with ALL Companies
represented by A.B. SCHMITZ AGENCY, INC.
All Licensed Producers with A.B. SCHMITZ AGENCY, INC. will be licensed
with those Companies represented by ED WENDEL and BEAR INSURANCE AGENCY.
... Except for LIFE and HEALTH
Commission Business, All Property and Casualty Commissions will NOT be split as
the Writing Agency/or Agent will earn Full Commission.
Whether ambiguity exists
in a contract is a question of law which we decide independent of the trial
court. Spencer v. Spencer,
140 Wis.2d 447, 450, 410 N.W.2d 629, 630 (Ct. App. 1987). "A document is ambiguous when its words
and phrases are reasonably susceptible to more than one
construction." Id. We conclude that the phrase "Writing
Agency/or Agent" is susceptible to more than one interpretation. We reject Wendel's contention that because
the parties agreed that the phrase referred to the agent who sold the policies,
no ambiguity exists. Extrinsic evidence
of the parties' intent or that it is not misunderstood between them may be
considered only after ambiguity is found.
We look at the contract itself to determine ambiguity.
In respect to both
ambiguity and integration, Wendel argues severability. He contends that because the ambiguous
cross-licensing clause has nothing to do with the rental clause, the ambiguity
does infect the entire contract.
He also asserts that the lack of integration in the rental clause
due to his acknowledgement that the list of carriers changes as he drops or
adds other carriers should not have been used to permit parol evidence on
portions of the contract which were integrated.
We conclude that the
contract cannot be cut up into little pieces.
First, the contract did not include a clause that its provisions are
severable. In the absence of such a clause,
we are not persuaded that each provision of the contract is to be applied in
isolation. Second, accounting for the
commissions earned under the cross-licensing arrangement may ultimately affect
the rental formula. That formula is
based on property and casualty premiums generated by Wendel. Because the cross-licensing clause
determines the scope of Wendel's business, the provisions are not
severable. Wendel fails to accept that
the one-page poorly drafted contract does not provide him the escape hatch he
seeks.
We conclude that the
trial court properly looked to extrinsic evidence of the parties' intent under
the contract. Wendel does not challenge
the trial court's finding that the parties intended the rental formula to be
applied to all gross premiums for property and casualty sales regardless of
whether the company is listed in the contract.
Wendel's next claim
pertains to the damages determination.
After the close of Schmitz's case, Wendel took the witness stand in
support of his counterclaim for direct-billed commissions. Wendel testified that he did not have access
to ledger cards Schmitz used to calculate off-sets for cancellations or
refunded premiums on direct-billed business sold by Wendel. He admitted that he could neither confirm
nor deny the testimony Schmitz presented on adjustments to claimed direct-billed
commissions. On cross-examination,
Wendel indicated that the only documents he had to determine if adjustments
were necessary due to cancellations or modifications to insurance coverage were
the ledger sheets he maintained.
Wendel's redirect examination
started on the next day of trial, which was really seven days later. In the intervening period, Wendel had
reviewed the exhibits presented by Schmitz regarding commissions due. Over objection, the trial court permitted
Wendel to testify to discrepancies he discovered between his records and the
exhibits produced by Schmitz relating to adjustments for cancellations and
refunded premiums. Wendel indicated
that he had compared the Schmitz exhibits with the individual declaration and
endorsements sheets he received contemporaneously with each change in coverage
for policies he sold. When Wendel was
asked what was his "recalculated" figure for commissions due, Schmitz
objected on the ground that Wendel was offering new evidence that went beyond
the scope of cross-examination. The
trial court prevented Wendel from testifying to a recalculation of his
claim. It reasoned that Wendel was
attempting to offer new evidence.
The
trial court has broad discretion with respect to the scope of redirect
examination. State v. Cydzik,
60 Wis.2d 683, 690, 211 N.W.2d 421, 426 (1973).
The court, in the exercise of its
discretion ... may permit the reexamination to go beyond the scope of the
cross-examination, even though the testimony should have been brought out on
direct examination. It is not an abuse
of discretion to allow a party, on redirect examination, to supply testimony
omitted by oversight, or to clarify testimony given on direct examination, or,
where the facts thus developed are not inconsistent with his previous answers,
to ask a witness to expand his testimony.
Id. n.10
(quoted source omitted).
Here, the trial court
determined that the testimony Wendel sought to give on redirect
examination contradicted his previous testimony and that it constituted new
evidence. Wendel's recalculated figure
was based on his review of declaration and endorsements sheets for the policies
identified in the Schmitz exhibits. His
reliance on the additional documents was contrary to his testimony on
cross-examination that he only had his ledger sheets to determine sums due
him.
Wendel claims that the
trial court felt constrained to limit redirect examination because through
pretrial discovery Wendel could have had access to the documents from which the
Schmitz exhibits were created. However,
we do not read the trial court's determination to be driven by discovery
concerns as much as it was based on fairness.
The trial court noted that the redirect examination was being used for
"offensive" purposes. It
noted that Wendel had a week to work with the data presented by Schmitz. It remarked:
When
you're using it [redirect examination] as he did a little bit ago in order to
show the inaccuracy of the document that they brought in, okay, he had no
advance warning of that. He has a right
to rebut it and I have permitted that.
Now you're saying that something he [Wendel] could have prepared before
the trial he should be allowed to bring in now, which is contrary to what he
submitted the last time he was here.
This information was all available to him before the trial. This is no surprise. Every bit of the information that he now
seeks to offer as a compilation was in existence before the trial began. He could have accumulated this evidence and
could have presented it last time. And
the problem is if I allow him to produce it now on the last day of trial, how
do I know that these people aren't being cut off from their right to respond to
what may turn out to be inaccuracies in what he has presented today?
In essence, the trial
court's decision was that Schmitz was surprised by Wendel's retraction of his
testimony on direct examination about the sums allegedly due. The trial court acted within its discretion
in limiting the scope of Wendel's redirect examination. See Lease Am. Corp. v.
Insurance Co. of N. Am., 88 Wis.2d 395, 400, 276 N.W.2d 767, 769 (1979)
(testimony which results in surprise may be excluded if the surprise would
require a continuance causing undue delay or if it is coupled with danger of
prejudice).
We next address the
award of prejudgment interest.
Prejudgment interest may be awarded only where there is a reasonably
certain standard of measurement from which one can ascertain the amount owed. D'Huyvetter v. A.O. Smith Harvestore,
164 Wis.2d 306, 324, 475 N.W.2d 587, 593-94 (Ct. App. 1991). The cross-licensing clause was found to be
ambiguous with respect to which party would be entitled to commissions. In addition, the rental clause itself was
not integrated as to the commissions to which the percentage would be
applied. There was no clear standard of
measurement of the amount owed. Schmitz
was not entitled to recover prejudgment interest and we reverse that part of
the judgment.
The final issue is
whether Wendel was entitled to the $1791 paid into trust by Schmitz during the
pendency of this action. The sum
represents direct-billed commissions on policies sold by Wendel which Schmitz
collected after the termination of the parties' relationship. The trial court ruled that Wendel failed to
produce any evidence of entitlement to the money.
Wendel argues that
because the contract was silent on how posttermination commissions would be
split, it was not his burden of proof to show an entitlement to the trust
money. Wendel made a counterclaim for
an accounting of all direct-billed insurance premiums resulting from work he
wrote from January 1, 1985 through August 7, 1992. He then sought judgment for the underpayment of commissions due
"pursuant to said accounting and the terms and conditions of the agreement
between the parties." Wendel had
the burden of proof on his counterclaim.
If Wendel feels he was entitled to the money that came in after the
termination of the contract when the contract was silent on that point, it was
his burden to prove that the subsequent renewals would be credited to him.
Wendel suggests that the
trial court was obligated to fashion a remedy where the contract was otherwise
silent. He cites Stahl v. Sentry
Ins., 180 Wis.2d 299, 306, 509 N.W.2d 320, 322-23 (Ct. App. 1993),
"[w]here parties to a contract fail to foresee a situation that later
arises and thus have no expectations with respect to that situation, the court
may determine the parties' respective rights and duties under the
contract." Nothing here suggests
that termination of the contract was an unforeseen occurrence or that the
parties were completely devoid of any idea how posttermination commissions
would be handled. In the absence of
such proof, the trial court was not compelled to fashion a remedy. Moreover, if the trial court should have so
acted, it was reasonable to deny Wendel the posttermination commissions in
accordance with the rule that a contract is to be construed against the
drafter. Wendel, as the drafter of the
contract, should bear the consequences of the failure to account for
posttermination commissions.
No costs to either
party.
By the Court.—Judgment
affirmed in part and reversed in part.
This opinion will not be
published. See Rule 809.23(1)(b)5, Stats.