PUBLISHED
OPINION
Case No.: 95-1710
Complete Title
of Case:
Teacher Retirement System of Texas,
a Texas Public Pension Fund and
TRST Milwaukee, Inc.,
A Texas corporation,
Plaintiffs,
v.
Badger XVI Limited Partnership,
A Texas limited partnership,
J. Mc Donald Williams, Joel C. Peterson,
Jon D. Hammes, Francis Brzezinski,
Harlan R. Crow and Skidmore, Owings &
Merrill, a Texas partnership,
Defendants,
J. Mc Donald Williams, Joel C. Peterson,
Jon D. Hammes, Francis Brzezinski and
Harlan R. Crow,
Third Party Plaintiffs,
v.
Skidmore, Owings & Merrill,
a Texas partnership,
Third Party Defendant-Appellant,
Lawrence Shelton Doane and
S.T.S. Consultants, Ltd.,
Additional-Third Party Defendants,
Le Juene Investment Inc.,
Additional-Third Party Defendant-
Co-Appellant,
ABC Insurance Company, DEF Insurance
Company, GHI Insurance Company,
JKL Insurance Company, MNO Insurance
Company, PQR Insurance Company and
STU Insurance Company,
Additional-Third Party Defendants,
Aaron Building Corporation,
f/k/a Morse/Diesel, Inc.,
Additional-Third Party Defendant-
Respondent-Cross Respondent,
J. H. Findorff & Son, Inc., Anthony
Grignano Company and W. J. Butzen
Roofing and Sheet Metal,
Additional-Third Party Defendants-
Respondents,
WSA, Inc. Harmon Contract,
Additional-Third Party Defendant-
Respondent-Cross Appellant.
Submitted on Briefs: September
16, 1996
COURT COURT
OF APPEALS OF WISCONSIN
Opinion Released: October
22, 1996
Opinion Filed: October 22, 1996
Source of APPEAL Appeal
and Cross-Appeal from an order
Full Name JUDGE COURT: Circuit
Lower Court. COUNTY: Milwaukee
(If “Special”, JUDGE: MICHAEL P. SULLIVAN
so indicate)
JUDGES: Wedemeyer,
P.J., Fine and Schudson, JJ.
Concurred:
Dissented:
Appellant
ATTORNEYSOn behalf of
the third party defendant-appellant Skidmore, Owings & Merrill, the cause
was submitted on the briefs of Donald R. Peterson and Peter F.
Mullaney of Peterson, Johnson & Murray, S.C., of Milwaukee.
On behalf of the additional third-party
defendant-co-appellant Le Juene Investment, Inc., the cause was submitted on
the briefs of James J. Dries and Kurt R. Anderson of Nelson,
Dries & Zimmerman, S.C., of counsel, of Brookfield, Wisconsin.
Respondent
ATTORNEYSOn behalf of
the additional-third party defendant-respondent-cross respondent Aaron Building
Corporation, f/k/a Morse/Diesel, Inc., the cause was submitted on the briefs of
Randall L. Nash of O'Neil, Cannon & Hollman, S.C., of
Milwaukee; and Randall C. Allen and Peter M. D'Ambrosio of Smith,
Pachter, McWhorter & D'Ambrosio, P.L.C., of counsel, of Vienna,
Virginia.
On behalf of the additional-third party
defendants-respondents J.H. Findorff & Son, Inc., and Anthony Grignano
Company, the cause was submitted on the briefs of James R. Cole and Valerie
L. Bailey-Rihn of Quarles & Brady, of Madison; and Richard G.
Niess of Coyne, Niess, Schultz, Becker & Bauer, S.C., of Madison.
On behalf of the additional-third party
defendant-respondent W.J. Butzen Roofing and Sheet Metal, the cause was
submitted on the briefs of Rocke A. Calvelli and Dorothy H. Dey
of Quale, Feldbruegge, Calvelli, Thom & Croke, S.C., of Milwaukee.
On behalf of the additional-third party
defendant-respondent-cross appellant WSA, Inc. Harmon Contract, the cause was
submitted on the briefs of Ted A. Warpinski and Matthew W. O'Neill
of Friebert, Finerty & St. John, S.C., of Milwaukee.
|
COURT OF APPEALS DECISION DATED AND RELEASED October 22, 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. 95-1710
STATE
OF WISCONSIN IN COURT OF
APPEALS
Teacher Retirement
System of Texas,
a Texas Public Pension
Fund and
TRST Milwaukee, Inc.,
A Texas corporation,
Plaintiffs,
v.
Badger XVI Limited
Partnership,
A Texas limited
partnership,
J. Mc Donald Williams,
Joel C. Peterson,
Jon D. Hammes, Francis
Brzezinski,
Harlan R. Crow and
Skidmore, Owings &
Merrill, a Texas
partnership,
Defendants,
J. Mc Donald Williams,
Joel C. Peterson,
Jon D. Hammes, Francis
Brzezinski and
Harlan R. Crow,
Third Party Plaintiffs,
v.
Skidmore, Owings &
Merrill,
a Texas partnership,
Third Party Defendant-Appellant,
Lawrence Shelton Doane
and
S.T.S. Consultants,
Ltd.,
Additional-Third Party Defendants,
Le Juene Investment
Inc.,
Additional-Third Party Defendant-
Co-Appellant,
ABC Insurance Company,
DEF Insurance
Company, GHI Insurance
Company,
JKL Insurance Company,
MNO Insurance
Company, PQR Insurance
Company and
STU Insurance Company,
Additional-Third Party Defendants,
Aaron Building
Corporation,
f/k/a Morse/Diesel,
Inc.,
Additional-Third Party Defendant-
Respondent-Cross Respondent,
J. H. Findorff &
Son, Inc., Anthony
Grignano Company and
W. J. Butzen
Roofing and Sheet
Metal,
Additional-Third Party Defendants-
Respondents,
WSA, Inc. Harmon
Contract,
Additional-Third Party Defendant-
Respondent-Cross Appellant.
APPEAL and CROSS-APPEAL
from an order of the circuit court for Milwaukee County: MICHAEL P. SULLIVAN, Judge. Affirmed in part; reversed in part and
cause remanded.
Before Wedemeyer, P.J.,
Fine and Schudson, JJ.
FINE,
J. These appeals and cross-appeals involve disputes between
the current owner of an office complex in Milwaukee known as the Milwaukee Center
Office Tower, the general contractor and some of the subcontractors on the
project, and the project's architect.
The disputes concern claims that the tower was improperly constructed
and not water-tight. The issues on this
appeal imbricate one another and this matter has generated twelve main,
response, and reply briefs as well as three large boxes containing the
appellate record. A brief overview of the parties and the disputes is necessary
to provide moorings for our analysis.
I.
Teacher Retirement
System of Texas was the mortgagee of the office complex. As the result of foreclosure proceedings,
Teacher Retirement System, through its wholly owned subsidiary, TRST Milwaukee,
Inc., is now the owner.[1]
Badger XVI Limited Partnership was the owner and mortgagor.[2]
J. McDonald Williams,
Joel C. Peterson, Jon D. Hammes, Francis Brzezinski, and Harlan R. Crow are
both partners in Badger XVI and tenants at the office complex under a master
lease. When it still owned the
building, Badger XVI assigned Badger XVI's lessor's interests in the office
complex's master lease to Teacher Retirement System.
This case was started when
Teacher Retirement System sued Williams, Peterson, Hammes, Brzezinski, and
Crow, claiming that they did not make the required payments under the assigned
master lease. Later, Teacher Retirement
System filed an amended complaint against these defendants, claiming that they
breached guarantees that the office complex “would be completed in accordance
with the plans and specifications,” and, with the exception of Crow, breached
an agreement to hold Teacher Retirement System harmless for any liability resulting
from construction liens on the property.
Williams, Peterson,
Hammes, Brzezinski, and Crow impleaded Skidmore, Owings & Merrill, the
architectural firm that designed the office complex, claiming that if the
defendants were liable to Teacher Retirement System because the building was
not properly constructed, they should be reimbursed by Skidmore, which, they
alleged, was ultimately responsible.
Williams, Peterson, Hammes, Brzezinski, and Crow also sought damages
from Skidmore for lost or reduced rental income as a result of alleged
construction defects.
Subsequently, Teacher
Retirement System asserted claims against Skidmore for damages it purportedly
suffered as the result of the architect's alleged negligence. Skidmore impleaded Morse/Diesel, the
project's general contractor, Anthony Grignano Company, the subcontractor
responsible for the tower's exterior brick, W.J. Butzen Roofing and Sheet
Metal, the subcontractor responsible for the flashing, L.L. Le Juene Steel, Le
Juene Investment's predecessor, which was the subcontractor that provided steel
shelf angles for the project, J.H. Findorff & Son, Inc., the concrete
subcontractor that installed the steel shelf angles, and WSA, Inc. d/b/a Harmon
Contract, the subcontractor that installed the windows. Skidmore contended that it was entitled to
contribution from the contractors and that it was a third-party beneficiary of
Morse/Diesel's agreement to indemnify the tower's owners for any
construction-defect damages.
Prior to the
commencement of this action, Harmon sued Morse/Diesel, and Badger XVI seeking
funds that it claimed were improperly withheld from it. Badger XVI, in turn,
asserted that Harmon was responsible for the water leakage.[3]
Skidmore was not a party to that lawsuit.
The trial court stayed the Harmon action to permit the dispute to be
arbitrated, in conjunction with a then-ongoing arbitration between Badger XVI,
Morse/Diesel and other subcontractors. See
§ 788.02, Stats. Skidmore was neither a party to that
arbitration nor did it sign the subcontract between Morse/Diesel and Harmon
that provided for arbitration. Indeed,
under the arbitration clause, Skidmore could not have become a party to the
arbitration.[4]
Ultimately, the
arbitration was settled and, as relevant to this action, the settlement
agreement provided that Badger XVI (and all related entities, see
footnote 1, supra), denominated by the release as “Owner,” “hereby
and forever release and discharge” entities listed on an attachment to the
release, which, as relevant to this action, included: Morse/Diesel, Grignano, Harmon, and Findorff (but not Butzen or
Le Juene). The release encompassed:
any
and all liabilities obligations, rights, claims and demands of every kind,
present, conditional or contingent, whether known or unknown, arising out of
any matters relating to the construction [of the Milwaukee Center Office Tower]
including without limitation those matters raised [in the arbitration as well
as] in the various lawsuits filed in the Circuit Court, Milwaukee County,
Wisconsin (Case No's. 90‑CV‑011496 [the Milwaukee Marble
action], 90‑CV‑010864 [the Harmon action],
91-CV-000996 [the Teacher Retirement System foreclosure action] and 91‑CV-004247
[the First Bank foreclosure action][)].
The
operative portion of the release reads:
By
this release, Owner, its agents, successors and assigns, intends [sic]
only to release those parties listed on the attachment hereto, reserving all
other claims, and specifically reserving claims against Butzen Roofing Co.,
Inc., and/or Skidmore and/or [an entity not party to this lawsuit.]
The Butzen dispute went
to arbitration, and the panel found that Butzen was not responsible for the
claimed damage. The trial court (not
the trial court from which this appeal is taken) confirmed the award. See § 788.09, Stats. Skidmore was
neither a party to the arbitration proceedings nor could it be; the subcontract
between Morse/Diesel and Butzen had an arbitration clause identical to the one
in the subcontract between Morse/Diesel and Harmon, quoted in footnote 4:
Except
by written consent of the person or entity sought to be joined, no arbitration
arising out of or relating to the Contract Documents shall include, by consolidation,
joinder or in any other manner, any person or entity not a party to this
Agreement under which such obligation arises, unless it is shown at the time
the demand for arbitration is filed that ... (4) such person or entity is not
the Architect, his employee or his consultant.
Moreover,
Skidmore was not given notice of the application to confirm the award.
The trial court granted
summary judgment to Morse/Diesel, Findorff, Grignano, Butzen, and Harmon,
dismissing Skidmore's claims against them.
It dismissed the architect's claims against Butzen because Butzen had
prevailed at the arbitration, where it was found not responsible for the water
leakage, and the trial court found that Butzen's “equitable arguments”
justified application of “claim preclusion” to bar Skidmore's attempt to hold
Butzen liable for Butzen's alleged negligence.[5] The trial court dismissed Skidmore's claims
against Morse/Diesel, Findorff, Grignano, and Harmon based on the release given
to them by Badger XVI, which, the trial court ruled, was binding on Teacher
Retirement System. The trial court
concluded that “common liability” was a necessary element of a claim for
contribution, and held that the contractors and Skidmore could not, therefore,
have a “common liability” to Teacher Retirement System because the release
relieved the contractors of any liability to Teacher Retirement System. Skidmore appeals from these rulings. The trial court also concluded that any
third-party beneficiary rights Skidmore had against the contractors were also
“extinguished by the release.” Skidmore
does not contest this latter determination.
As we have seen,
Skidmore impleaded Le Juene. Le Juene
cross-claimed against Morse/Diesel, Butzen, Findorff, Harmon, and Grignano,
seeking contribution and indemnity. The
trial court dismissed these cross-claims in conjunction with its grant of
summary judgment to the contractors dismissing Skidmore's claims against
them. Le Juene appeals, arguing that it
did not have proper notice of the summary judgment proceedings, and that the
contractors' prevailing summary-judgment motions did not seek dismissal of Le
Juene's cross-claims. Le Juene was
neither a party to the arbitration nor a signatory to the release.
Following the release
given by Badger XVI to Morse/Diesel and various subcontractors (as relevant to
this appeal: Morse/Diesel, Grignano, Harmon, and Findorff), Harmon and
Morse/Diesel executed a separate settlement agreement under which Morse/Diesel
agreed to “defend, indemnify and hold [Harmon] harmless for any and all
liability to Owner, other subcontractors, any party to the Arbitration
proceeding or tenant in the Project, related to any claim resulting from or
related to performance by [Harmon] of work in the project.” When Harmon was named as a third-party
defendant by Skidmore, Harmon tendered its defense to Morse/Diesel.
Morse/Diesel refused the tender, and Harmon cross-claimed against Morse/Diesel.
The trial court dismissed Harmon's cross-claim. Harmon contends that this was error, and seeks reinstitution of
its cross-claim against Morse/Diesel if we reinstate Skidmore's claims against
it.
II.
The issues relevant to
this appeal were decided on summary judgment.
Summary judgment is used to determine whether there are any disputed
issues for trial, and, if not, whether a party is entitled to judgment as a
matter of law. Rule 802.08(2), Stats.;
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).
Our review of a trial court's grant of summary judgment is de novo. See Green Spring Farms v.
Kersten, 136 Wis.2d 304, 315, 401 N.W.2d 816, 820 (1987). The core issues presented by this appeal are
whether the release given by Badger XVI to Morse/Diesel, Grignano, Harmon, and
Findorff bars Skidmore's claims against them, and whether Skidmore's claims
against Butzen are barred by Butzen's vindication at the arbitration
proceeding, to which Skidmore was not a party.
We discuss these issues in turn, and then discuss the ancillary issues
presented by Le Juene and by Harmon.
A. Skidmore.
1. Claims
against Morse/Diesel, Findorff, Grignano, and Harmon.
Skidmore alleges that it
is being subjected to potential liability as the result of what Morse/Diesel,
Findorff, Grignano, and Harmon (as well as Butzen, as discussed below) either
did or failed to do, and has pleaded breach of contract and negligence claims
against Morse/Diesel, and negligence claims against the others. As noted, the
trial court dismissed Skidmore's contribution claims against Morse/Diesel,
Findorff, Grignano, and Harmon because, in the trial court's view, the
contractors were relieved of any liability to Teacher Retirement System by the
Badger XVI release, and thus the contractors and Skidmore did not have a
“common liability” to Teacher Retirement System for the latter's claimed
damages.
Although common
liability to an injured plaintiff is a prerequisite for contribution between
those responsible for the plaintiff's damages, General Accident Ins. Co.
v. Schoendorf & Sorgi, 202 Wis.2d 98, 103, 549 N.W.2d 429, 431 (1996),
whether “common liability” exists is determined at the time the damages were
sustained and cannot be extinguished by one or more of those allegedly
responsible for the plaintiff's damages subsequently settling with the
plaintiff, State Farm Mut. Auto. Ins. Co. v. Continental Casualty Co.,
264 Wis. 493, 502–504, 59 N.W.2d 425, 429–430 (1953). If the rule were otherwise, the equitable doctrine of
contribution could be made a dead letter by a settlement between some of the
parties. See id.,
264 Wis. at 501, 59 N.W.2d at 429 (“`Contribution is based on the simple demand of justice, often
expressed in the maxim that "equality is equity."'”) (citation
omitted).[6] Whether there is sufficient common liability
in this complicated action to support claims for contribution is a question of
fact to be resolved at trial. See
State Farm, 264 Wis. at 497, 59 N.W.2d at 427. This does not, however, end our
analysis. Skidmore also asserted
indemnification claims against the contractors, and both roads lead to the same
result.
“[I]ndemnity 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.'” Brown v. LaChance,
165 Wis.2d 52, 64, 477 N.W.2d 296, 302 (Ct. App. 1991) (citation omitted). The parties need not be joint
tortfeasors. Fuller v. Riedel,
159 Wis.2d 323, 330, 464 N.W.2d 97, 100 (Ct. App. 1990); see General
Accident Ins. Co. v. Schoendorf & Sorgi, 195 Wis.2d 784, 798, 537
N.W.2d 33, 38 (Ct. App. 1995) (common liability not necessary for “[e]quity
based recoupment”), modified on other grounds, 202 Wis.2d 98, 549 N.W.2d
429 (1996). Although as a result of the
Badger XVI-release Skidmore may not have contractual or third-party-beneficiary
indemnification rights based on Morse/Diesel's agreement to indemnify the
building's owner for defects in the construction, an issue that we do not have
to decide, indemnification is an equitable doctrine that can apply even in
absence of contract. See Brown,
165 Wis.2d at 64, 477 N.W.2d at 302.
Thus, there is a “`right of indemnity ... where one person is exposed to
liability by the wrongful act of another in which he does not join.'” Ibid. (Citation omitted.) Even though not specifically denominated as
such in its third-party complaint, Skidmore states indemnification claims under
Brown's formulation of equitable indemnification. See Strid v. Converse,
111 Wis.2d 418, 422–423, 331 N.W.2d 350, 353 (1983) (complaint states claim for
relief if the “`operative facts'” alleged in the complaint show an “`invasion
of a protected right'” “even though the theory was not explicitly argued in the
trial court”) (citation omitted).[7]
Although an element of
both equitable indemnity and contribution is payment beyond the payor's fair
share, Brown, 165 Wis.2d at 64, 477 N.W.2d at 302 (indemnity); General
Accident Ins. Co., 202 Wis.2d at 103, 549 N.W.2d at 431–432
(contribution), there is no reason to compel two trials: the first trial in which Skidmore's
liability, if any, to Teacher Retirement System would be determined, and the second
trial, following Skidmore's payment of any judgment, to determine which, if
any, of the contractors were responsible for a portion of that judgment. This would be an unnecessary imposition of
fees and costs on the parties as well as being a waste of legal resources. See Rule
803.05, Stats. (“a defending
party, as a third-party plaintiff, may cause a summons and complaint to be
served upon a person not a party to the action who is or may be liable
to the defending party for all or part of the plaintiff's claim against the
defending party”) (emphasis added); Rule
802.07(3), Stats. (cross-claim
“may include a claim that the party against whom it is asserted is or may be
liable to the cross claimant for all or part of a claim asserted in the action
against the cross claimant”) (emphasis added); Wait v. Pierce,
191 Wis. 202, 226–232, 210 N.W. 822, 823–825 (1926) (contingent claim for
contribution can be heard at same proceeding that determines underlying
action). Moreover, there is a
consideration here that requires resolution of these issues prior to Skidmore's
payment of any judgment or settlement—the Janus-faced spectre of double
recovery and double liability.
Teacher Retirement
System is bound by the Badger XVI release; there is no dispute about that. Teacher Retirement System thus relinquished
any entitlement to recover from the released contractors for any damages
sustained by Teacher Retirement System that are attributable to those
contractors. This precludes not only
Teacher Retirement System's direct recovery against Morse/Diesel, Findorff,
Grignano, and Harmon for damages caused by them, but its indirect recovery as
well. If Skidmore were to be held responsible for damages caused in whole or in
part by the released contractors, the following inequities would occur: On the one hand, if Skidmore were not
permitted equitable recoupment against the responsible contractors, Skidmore
would bear more than its fair burden.
On the other hand, if Skidmore were permitted recovery against the
released contractors, not only would Teacher Retirement System recover twice
(the monies received pursuant to the settlement that were, undoubtedly,
factored into Teacher Retirement System's cost for the property, plus that
portion of the judgment paid by Skidmore that was attributable to the released
contractors) but the released contractors would pay twice (their payments in
settlement as well as their recoupment liabilities to Skidmore). Thus, the order entered by the trial court
dismissing Skidmore's third-party claims against Morse/Diesel, Findorff, Grignano,
and Harmon must be modified to provide that Skidmore's liability to Teacher
Retirement System, if any, is to be determined after excluding that percentage
of damage-causation attributable to these contractors. This effectuates the trial court's intent,
as stated in its memorandum opinion, that “Skidmore is responsible only for its
contractual duties, and the effect its breach, if any, damaged” Teacher
Retirement System.
2. Claims
against Butzen.
As we have pointed out
in footnote 3, unlike “claim preclusion,” “issue preclusion” does not require
an “identity of parties” to foreclose relitigation of an issue that has “been
litigated and decided in a prior action.”
Northern States Power Co. v. Bugher, 189 Wis.2d 541,
550–551, 525 N.W.2d 723, 727 (1995). We
review de novo whether issue preclusion applies. Mayonia M.M. v. Keith N., 202
Wis.2d 461, 465, 551 N.W.2d 31, 33 (Ct. App. 1996). There are two aspects of our analysis: due process and fundamental fairness. We discuss both.
“It is a violation of
due process for a judgment to be binding on a litigant who was not a party or a
privy and therefore has never had an opportunity to be heard.” Parklane Hosiery Co., Inc. v. Shore,
439 U.S. 322, 327 n.7 (1979). Thus, the
use of issue preclusion to bind a non-party to the earlier action must, per
force, be limited to those situations where there is a “sufficient identity
of interest” between the party to be bound and the unsuccessful litigant in the
prior action so that the former's interests in the matter “are deemed to have
been litigated.” Mayonia M.M.,
202 Wis.2d at 469, 551 N.W.2d at 35.
“[O]ffensive issue preclusion occurs when the plaintiff seeks to foreclose
a defendant from litigating an issue the defendant has previously litigated
unsuccessfully in an action with another party,” and “[d]efensive use occurs
when a defendant seeks to prevent a plaintiff from asserting a claim that the
plaintiff has previously litigated and lost against another defendant.” Id., 202 Wis.2d at 469, 551
N.W.2d at 34. Neither situation attends
here. Rather, Butzen seeks to bind
Skidmore to the results of an arbitration to which Skidmore was never a party;
Butzen is attempting to use defensive issue preclusion to prevent Skidmore from
asserting claims that Skidmore has not “previously litigated and lost.”
Jensen v. Milwaukee
Mutual Ins. Co., ___ Wis.2d ___, 554 N.W.2d 232 (Ct. App. 1996), notes
that prior to that decision “the defensive use of issue preclusion against a
nonparty in the former action has never been successfully used in any reported
appellate decision,” although “its potential use has been recognized.” Id., ___ Wis.2d at ___, 554
N.W.2d at 234. Jensen
applied issue preclusion to foreclose a passenger injured when the car driven
by her husband collided with a truck operated by Milwaukee Mutual's insured
from relitigating the case when an earlier lawsuit brought by the husband
against Milwaukee Mutual and its insured resulted in defense verdicts, because
there was sufficient identity of interest between the interests of the
husband/driver and the wife/passenger. Id.,
___ Wis.2d at ___, 554 N.W.2d at 234-236.
On the other hand, there was insufficient identity of interest in Mayonia
M.M. to permit a paternity defendant to foreclose relitigation of his
paternity in an action brought by his alleged daughter even though he had
prevailed in an earlier paternity action brought by the district attorney,
because neither the child's mother nor the child could commence such an action
when the district attorney's action was filed.
Mayonia M.M., 202 Wis.2d at 464, 469–470, 551 N.W.2d at
33, 35.
If due-process concerns
are met, application of issue preclusion requires a “fundamental fairness”
analysis, which may overlap due-process considerations. See Northern States Power Co.,
189 Wis.2d at 551, 525 N.W.2d at 727.
Among the factors to be considered that are relevant here are: whether “the party against whom preclusion
is sought” could have, “as a matter of law, obtained review of the judgment”;
whether there are “significant differences in the quality or extensiveness of
proceedings between the two courts” that “warrant relitigation”; whether the
“party seeking preclusion had a lower burden of persuasion in the first trial
than in the second”; whether there “are matters of public policy and individual
circumstances involved that would render the application of collateral estoppel
[now “issue preclusion”] to be fundamentally unfair, including inadequate
opportunity or incentive to obtain a full and fair adjudication in the initial
action.” Michelle T. v. Crozier,
173 Wis.2d 681, 689, 495 N.W.2d 327, 330–331 (1993).[8]
The Crozier
factors militate against application of issue preclusion against Skidmore
here. First, Skidmore could not have
sought judicial review of the arbitration determination. See § 788.09, Stats. (application to confirm arbitration award may be made
by “any party to the arbitration”).
Second, arbitration proceedings are less formal than trials and are
subject to exceedingly deferential review by the courts. See §§ 788.10(1) and 788.11(1), Stats.; Employers Ins. of Wausau
v. Jackson, 190 Wis.2d 597, 613, 527 N.W.2d 681, 687 (1995).[9] Third, as we have seen, the agreement to
arbitrate in Butzen's subcontract specifically precluded Skidmore's joining the
arbitration. In light of this and in
light of no evidence in the record to which we have been pointed that shows a
sufficient identity of interest between Skidmore and Morse/Diesel, which was
Butzen's adverse party in the arbitration, application of issue preclusion
against Skidmore would violate both Skidmore's due-process rights and the
concepts of fundamental fairness. We
reverse the trial court's dismissal of Skidmore's claims against Butzen. We do not decide, however, whether, in light
of the arbitration award vindicating Butzen, Skidmore may be held liable to
Teacher Retirement System for the percentage of damage-causation that is
attributable to Butzen; the issue has not been briefed and may require
fact-finding to determine whether Teacher Retirement System is bound by the
arbitration award vindicating Butzen.
B. Le
Juene.
Le Juene claims that it
did not receive proper notice of the summary judgment proceedings that resulted
in the trial court's dismissal of not only Skidmore's claims against
Morse/Diesel and the subcontractors but also of its cross-claims. In light of our determination that the trial
court's grant of summary judgment to Morse/Diesel and the subcontractors in
connection with the claims asserted by Skidmore must be reversed, we do not
analyze or decide Le Juene's argument that it did not receive requisite notice.[10] As with Skidmore, Le Juene was neither a party
to the arbitration nor to the settlement.
We reverse the trial court's dismissal of Le Juene's cross-claims,
which will be subject to the same formula to prevent double recovery and double
liability as applicable to those asserted by Skidmore. Le Juene's cross-claim against Butzen is
subject to the same caveat we noted above—namely, if Teacher Retirement System
is bound by the arbitration award in Butzen's favor, then Skidmore is not
liable to Teacher Retirement System for the percentage of damage-causation
attributable to Butzen, and, in that case, Le Juene would not be liable to
Skidmore for that percentage, and Le Juene's cross-claim against Butzen should
be dismissed following remand and whatever fact-finding is necessary.
C. Harmon's
tender to Morse/Diesel.
Harmon claims that the
indemnity provision in its settlement agreement with Morse/Diesel required
Morse/Diesel to defend and indemnify it in connection with Skidmore's
claims. As noted, the trial court
dismissed Harmon's cross-claim against Morse/Diesel.
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).
Unambiguous language in a contract must be enforced as it is written. Cernohorsky
v. Northern Liquid Gas Co., 268 Wis. 586, 593, 68 N.W.2d 429, 433
(1955). Language in a contract is
ambiguous only when it is “reasonably or fairly susceptible of more than one
construction.” Borchardt v. Wilk,
156 Wis.2d 420, 427, 456 N.W.2d 653, 656 (Ct. App. 1990). Here, the language is clear.
As we have seen earlier,
Morse/Diesel agreed to “defend, indemnify and hold [Harmon] harmless for any
and all liability to Owner, other subcontractors, any party to the Arbitration
proceeding or tenant in the Project, related to any claim resulting from or
related to performance by [Harmon] of work in the project.” Skidmore is neither
an “Owner,” an “other subcontractor,” a “party to the Arbitration proceeding,”
nor a “tenant in the Project.”
Skidmore's claims against Harmon are not within the scope of the
settlement agreement's promise by Morse/Diesel to defend and indemnify
Harmon. Although Harmon argues that the
agreement is broad enough to encompass Skidmore's liability to the “Owner,” for
which Harmon may be partially responsible, we disagree; the clear language of
the agreement does not so provide.[11] We reject Harmon's attempt to rewrite the indemnification
agreement, and affirm the trial court's dismissal of Harmon's cross-claim
against Morse/Diesel.
III.
In summary, we decide
this appeal as follows:
1. The trial
court's grant of summary judgment dismissing Skidmore's claims against Morse/Diesel,
Findorff, Grignano, and Harmon is reversed and remanded with directions that
the order be modified to provide that Skidmore's liability to Teacher
Retirement System, if any, is to be determined after excluding that percentage
of damage-causation that is attributable to Morse/Diesel, Findorff, Grignano,
and Harmon.
2. The trial
court's grant of summary judgment dismissing Skidmore's claims against Butzen
is reversed. We do not decide whether,
in light of the arbitration award vindicating Butzen, Skidmore may be held
liable to Teacher Retirement System for the percentage of damage-causation that
is attributable to Butzen. If Skidmore
is not so liable, its claims against Butzen should be dismissed.
3. The trial
court's grant of summary judgment dismissing Le Juene's cross-claims against
Morse/Diesel, Butzen, Findorff, Grignano, and Harmon is reversed and remanded
with directions that the order be modified to provide that Le Juene's
liability, if any, to Skidmore based on whatever liability Skidmore may have to
Teacher Retirement System is to be determined after excluding that percentage
of damage-causation that is attributable to Morse/Diesel, Findorff, Grignano,
and Harmon. We do not decide, however,
whether, in light of the arbitration award vindicating Butzen, Skidmore may be
held liable to Teacher Retirement System for the percentage of damage-causation
that is attributable to Butzen; if Skidmore is not liable to Teacher Retirement
System for the percentage of damage-causation that is attributable to Butzen,
Le Juene would also not be so liable for that percentage, and Le Juene's
cross-claim against Butzen should be dismissed.
4. The trial
court's dismissal of Harmon's cross-claim against Morse/Diesel is affirmed.
By the Court.—Order
affirmed in part; reversed in part and cause remanded.
[1] For ease of reference, the building's owner will be referred to as Teacher Retirement System throughout this opinion.
[2] Milwaukee Center Office Tower was built by a group of entities and individuals connected with the Texas real-estate developer Trammel Crow. For ease of reference, the building's owner prior to Teacher Retirement System will be referred to as Badger XVI.
[3] Files of the Circuit Court for Milwaukee County, of which we may take judicial notice, see Rule 902.01(6), Stats. (“Judicial notice may be taken at any stage of the proceeding.”); S.E. v. Waukesha County, 159 Wis.2d 709, 712 n.1, 465 N.W.2d 231, 232 n.1 (Ct. App. 1990) (appellate court takes notice of circuit court file), reveal that similar actions were also brought by two subcontractors that are not parties to this action: Milwaukee Marble and Granite Company (Milwaukee County Circuit Court case number 90-CV-11496) and Supersky Products, Inc. (Milwaukee County Circuit Court case number 91-CV-010253). These two actions were consolidated. Additionally, First Bank (N.A.) brought an action to foreclose its mortgage (Milwaukee County Circuit Court case number 91-CV-004247).
[4] Paragraph 13.2 of the
subcontract between Morse/Diesel and Harmon provides:
Except by written consent of the person or entity sought to be joined, no arbitration arising out of or relating to the Contract Documents shall include, by consolidation, joinder or in any other manner, any person or entity not a party to this Agreement under which such obligation arises, unless it is shown at the time the demand for arbitration is filed that ... (4) such person or entity is not the Architect, his employee or his consultant.
[5] The Wisconsin Supreme Court has adopted the term “claim preclusion” as a replacement for “res judicata,” and “issue preclusion” as a replacement for “collateral estoppel.” Northern States Power Co. v. Bugher, 189 Wis.2d 541, 550, 525 N.W.2d 723, 727 (1995). “[U]nder claim preclusion `a final judgment is conclusive in all subsequent actions between the same parties [or their privies] as to all matters which were litigated or which might have been litigated in the former proceedings.'” Ibid. (citations and one set of quotation marks omitted; brackets by Northern States Power). “Issue preclusion refers to the effect of a judgment in foreclosing relitigation in a subsequent action of an issue of law or fact that has been actually litigated and decided in a prior action. Unlike claim preclusion, an identity of parties is not required in issue preclusion.” Id., 189 Wis.2d at 550–551, 525 N.W.2d at 727. We discuss and apply these concepts below.
[6] Contrary to Morse/Diesel's contention, the rule that measures common liability at the time the plaintiff has been damaged is not limited to automobile-accident cases, even though State Farm arose in that context, and applies whether the underlying action resulting in one defendant bearing more than its fair share of the plaintiff's loss is in tort or in contract. See State Farm Mut. Auto. Ins. Co. v. Schara, 56 Wis.2d 262, 264, 201 N.W.2d 758, 759 (1972) (“[A] cause of action for contribution is separate and distinct from the underlying cause of action whether that underlying cause sounds in contract or in tort.”) (applied and approved in Kafka v. Pope, 194 Wis.2d 234, 240–241, 533 N.W.2d 491, 493–494 (1995)); see also General Accident Ins. Co. v. Schoendorf & Sorgi, 195 Wis.2d 784, 792, 537 N.W.2d 33, 36 (Ct. App. 1995), modified on other grounds, 202 Wis.2d 98, 549 N.W.2d 429 (1996).
[7] Although we need not discuss this in any detail, we also note that “legal subrogation” similarly “`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.'” General Accident Ins. Co. v. Schoendorf & Sorgi, 202 Wis.2d 98, 107, 549 N.W.2d 429, 433 (1996) (quoting from General Accident Ins. Co. v. Schoendorf & Sorgi, 195 Wis.2d 784, 795, 537 N.W.2d 33, 37 (Ct. App. 1995)) (internal quotation marks omitted).
[8] There is an additional factor mentioned by Michelle T.: whether “the question is one of law that involves two distinct claims or intervening contextual shifts in the law.” Michelle T. v. Crozier, 173 Wis.2d 681, 689, 495 N.W.2d 327, 330 (1993).
[9] Section 788.10(1), Stats., provides:
Vacation of award, rehearing by
arbitrators. (1)
In either of the following cases the court in and for the county wherein the
award was made must make an order vacating the award upon the application of
any party to the arbitration:
(a) Where
the award was procured by corruption, fraud or undue means;
(b) Where
there was evident partiality or corruption on the part of the arbitrators, or
either of them;
(c) Where
the arbitrators were guilty of misconduct in refusing to postpone the hearing,
upon sufficient cause shown, or in refusing to hear evidence pertinent and
material to the controversy; or of any other misbehavior by which the rights of
any party have been prejudiced;
(d) Where
the arbitrators exceeded their powers, or so imperfectly executed them that a
mutual, final and definite award upon the subject matter submitted was not
made.
Section 788.11(1), Stats., provides:
Modification of award. (1) In either of the following cases
the court in and for the county wherein the award was made must make an order
modifying or correcting the award upon the application of any party to the
arbitration:
(a) Where
there was an evident material miscalculation of figures or an evident material
mistake in the description of any person, thing or property referred to in the
award;
(b) Where
the arbitrators have awarded upon a matter not submitted to them unless it is a
matter not affecting the merits of the decision upon the matters submitted;
(c) Where the award is imperfect in matter of form not affecting the merits of the controversy.