John Teske v. Wilson Mutual Insurance Company

2019 WI 62
SUPREME COURT OF WISCONSIN
CASE NO.: 2017AP1269
COMPLETE TITLE: John Teske, Julie A. Teske, Katherine Teske and
Elle Teske,
Plaintiffs-Appellants,
United HealthCare Insurance Company,
Subrogated Party-Plaintiff,
v.
Wilson Mutual Insurance Company,
Defendant-Respondent-Petitioner.
REVIEW OF DECISION OF THE COURT OF APPEALS
Reported at 382 Wis. 2d 832,917 N.W.2d 233
(2018 – unpublished)
OPINION FILED: June 4, 2019
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: March 18, 2019
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Fond du Lac
JUDGE: Peter L. Grimm
JUSTICES:
CONCURRED:
DISSENTED:
NOT PARTICIPATING: ABRAHAMSON, J. did not participate.
ATTORNEYS:
For the defendant-respondent-petitioner, there were briefs
filed by Corrado Cirillo and Olsen, Kloet, Gunderson & Conway,
Sheboygan. There was an oral argument by Corrado Cirillo.
For the plaintiffs-appellants, there was a brief filed by
Keith E. Trower and Warshafsky, Rotter, Tarnoff & Bloch, S.C.,
Milwaukee. There was an oral argument by Keith E. Trower.
2019 WI 62
NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2017AP1269
(L.C. No. 2016CV500)
STATE OF WISCONSIN : IN SUPREME COURT
John Teske, Julie A. Teske, Katherine Teske and
Elle Teske,
Plaintiffs-Appellants,
United HealthCare Insurance Company,
FILED
Subrogated Party-Plaintiff, JUN 4, 2019
v. Sheila T. Reiff
Clerk of Supreme Court
Wilson Mutual Insurance Company,
Defendant-Respondent-Petitioner.
REVIEW of a decision of the Court of Appeals. Affirmed in
part, reversed in part.
¶1 ANN WALSH BRADLEY, J. The petitioner, Wilson Mutual
Insurance Company (Wilson), seeks review of an unpublished
decision of the court of appeals reversing the circuit court's
order that determined the Teskes' claims were barred by the
No. 2017AP1269
doctrine of claim preclusion.1 Wilson contends that the circuit
court correctly dismissed the Teskes' claims because the claims
could have been brought in a prior action between the same
parties.
¶2 Specifically, Wilson asserts that claim preclusion
applies to bar all of the plaintiffs' claims because all three
elements of claim preclusion are established. It contends that
the parties to the first and second actions were the same, or
were in privity. Wilson argues next that identity of causes of
action is present because the claims in this lawsuit and the
previous lawsuit arose from the same common nucleus of operative
facts. Finally, it advances that there was a final judgment on
the merits in the first action.
¶3 We conclude that claim preclusion bars the claims
brought by Julie, Katherine, and Elle Teske in this second
action. Accordingly, we reverse that part of the decision of
the court of appeals that allowed their claims to proceed.
However, we are evenly divided as to whether claim preclusion
bars the claims brought by John Teske. As a result, we affirm
1Teske v. Wilson Mut. Ins. Co., No. 2017AP1269, unpublished
slip op. (Wis. Ct. App. May 9, 2018) (reversing order of the
circuit court for Fond du Lac County, Peter L. Grimm, Judge).
2
No. 2017AP1269
the court of appeals' decision that allowed John's claims to
proceed.2
I
¶4 This case arises from a car accident in Fond du Lac
County on November 24, 2013. The underlying facts of the
accident are undisputed.
¶5 Emily Teske was driving a vehicle in which her mother,
Julie, and two sisters, Katherine and Elle, were passengers.
John Teske, Julie's husband and Emily, Katherine and Elle's
father, was not in the car. Julie, Emily, Katherine, and Elle
were all seriously injured after their vehicle was rear-ended by
a car driven by Sabrina Srock. The force of the collision
propelled the Teskes' car into the oncoming lane, where it
struck a vehicle driven by Patrice Rog, who was also injured.
¶6 Srock carried an automobile insurance policy with
State Farm that provided a policy limit of $100,000 per person
and $300,000 per accident. The Teskes carried a policy with
Wilson, which as relevant here contained underinsured motorist
(UIM) coverage with a policy limit of $500,000 per person, per
accident. Importantly, the Wilson policy also incorporated a
"reducing clause" which "permits a setoff from the insured's UIM
2
See Wingra Redi-Mix, Inc. v. Burial Sites Preservation
Bd., 2018 WI 54, ¶1, 381 Wis. 2d 601, 912 N.W.2d 392 ("The
decision of the court of appeals is affirmed by an equally
divided court."); Gruhl Sash & Door Co. v. Chicago, M. & St. P.
Ry. Co., 173 Wis. 215, 180 N.W. 845 (1921) (explaining that when
the court is equally divided, the order appealed from is
affirmed).
3
No. 2017AP1269
coverage [in] the amount paid to the insured by the underinsured
tortfeasor."3
¶7 The accident resulted in two separate lawsuits. In
the first action, Julie Teske brought a negligence claim against
Srock and her insurer, State Farm, in Milwaukee County circuit
court.4 Katherine and Elle were also named as plaintiffs,
although as minors they were represented by a guardian ad litem.
¶8 Pursuant to a minor settlement agreement,5 the parties
settled the lawsuit and agreed how the money from the various
insurers would be split. State Farm tendered its $300,000
policy limit, but the amount was insufficient to cover the full
medical expenses incurred by Rog and the Teskes. The amount was
ultimately split between the Teskes and Rog, with the Teskes
receiving $255,000 and Rog receiving $45,000.
¶9 Applying the policy's reducing clause, Wilson agreed
to pay the Teskes $245,000. It arrived at this amount by
3Dowhower ex rel. Rosenberg v. West Bend Mut. Ins. Co.,
2000 WI 73, ¶1, 236 Wis. 2d 113, 613 N.W.2d 557.
4 The Honorable David Hansher presided.
5 Pursuant to Wis. Stat. § 807.10(1) (2013-14),
A compromise or settlement of an action or proceeding
to which a minor or individual adjudicated incompetent
is a party may be made by the guardian, if the
guardian is represented by an attorney, or the
guardian ad litem with the approval of the court in
which such action or proceeding is pending.
All subsequent references to the Wisconsin Statutes are to the
2013-14 version unless otherwise indicated.
4
No. 2017AP1269
beginning with its $500,000 UIM policy limit and subtracting the
$255,000 the Teskes received from State Farm.
¶10 Each member of the Teske family received proceeds from
the insurance settlement as set forth in the minor settlement
agreement. Specifically, Julie received $264,000, Katherine
received $40,000, Elle and Emily received $35,000 each, and John
received $20,000.
¶11 Also incorporated into the minor settlement agreement
was a "Pierringer Release."6 Pursuant to the Pierringer Release,
the Teskes released all of their claims against Srock and State
Farm. The Teskes partially released Wilson to the extent of the
$245,000 it paid. However, they explicitly "reserved the right
to pursue further claims for UIM benefits against [Wilson] and
[Wilson] has not waived any defenses to such future claims."
The minor settlement agreement was signed by each member of the
Teske family,7 as well as a representative of Wilson, and
approved by the circuit court.
6 "A Pierringer release operates as a satisfaction of that
portion of the plaintiff's cause of action for which the
settling joint tortfeasor is responsible, while at the same time
reserving the balance of the plaintiff's cause of action against
a nonsettling joint tortfeasor." Imark Indus., Inc. v. Arthur
Young & Co., 148 Wis. 2d 605, 621, 436 N.W.2d 311 (1989); see
Pierringer v. Hoger, 21 Wis. 2d 182, 184-85, 124 N.W.2d 106
(1963). It provides that the plaintiff "will assume or satisfy
that portion of the liability that is determined to be the
responsibility of the settling joint tortfeasor." Imark Indus.,
148 Wis. 2d at 621.
7 Although they were not named parties in the lawsuit, Emily
and John each signed the minor settlement agreement, under which
each received the stated proceeds. See supra, ¶10.
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No. 2017AP1269
¶12 After releasing Srock and State Farm, Julie,
Katherine, and Elle amended their complaint and added Wilson as
a defendant. At issue in this amended declaratory action was
whether the reducing clause in the Wilson policy was properly
applied. Venue was transferred to Sheboygan County, and the
Sheboygan County circuit court8 determined that the reducing
clause was unambiguous, valid, and applicable. Julie,
Katherine, and Elle appealed and the court of appeals affirmed.
Teske ex rel. Harding v. Wilson Mut. Ins. Co. (Teske I), No.
2015AP208, unpublished slip op. (Wis. Ct. App. Aug. 19, 2015).
The same three Teskes petitioned for review, which this court
denied, thus ending the first action.
¶13 Following the resolution of the first action, John,
Julie, Katherine, and Elle brought this second lawsuit. They
alleged that Emily, as the driver at the time of the accident,
was negligent in the operation of the Teske vehicle. However,
they sued Wilson directly as Emily's insurer pursuant to
Wisconsin's direct action statute.9
8 The Honorable Angela W. Sutkiewicz presided.
9
Wisconsin Stat. § 632.24, the "direct action" statute,
"provides that any liability policy covering negligence makes
the insurance company liable to the person entitled to recover
against the insured up to policy limits. Under the direct
action statute, the complaining party may allege the insured's
conduct, and the insurer's liability therefor, directly against
the insurer." Estate of Otto v. Physicians Ins. Co. of Wis.,
Inc., 2008 WI 78, ¶32, 311 Wis. 2d 84, 751 N.W.2d 805. The
statute provides:
Any bond or policy of insurance covering liability to
others for negligence makes the insurer liable, up to
(continued)
6
No. 2017AP1269
¶14 Moving for summary judgment, Wilson argued that the
Teskes' negligence action was barred by the doctrine of claim
preclusion. Focusing on the first two elements of claim
preclusion, identity of parties and identity of causes of
action, it asserted that there was identity between the parties
in both lawsuits. It based this argument on the observation
that Wilson, Julie, Katherine and Elle were all named plaintiffs
in the first action. Wilson also observed that although John
was not formally named a party in the first action, he
participated and received proceeds from the minor settlement
agreement.
¶15 Wilson also contended that there was identity between
the causes of action in both lawsuits. Specifically, it argued
that the actions arose from a single event——the November 24,
2013 accident.10
the amounts stated in the bond or policy, to the
persons entitled to recover against the insured for
the death of any person or for injury to persons or
property, irrespective of whether the liability is
presently established or is contingent and to become
fixed or certain by final judgment against the
insured.
§ 632.24.
10
Wilson did not make a specific argument regarding the
third element of claim preclusion, a final judgment on the
merits, other than to assert that "[t]here is no dispute that
the Sheboygan County Circuit Court entered a final judgment on
the merits dismissing the Teskes' prior lawsuit."
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No. 2017AP1269
¶16 The circuit court agreed with Wilson and granted the
motion for summary judgment. It determined that "there is no
dispute as to the technical identity between the parties given
the captions and pleadings of the suits and the involvement of
the parties in the litigation and the minor settlement and
executing documents and such."
¶17 Additionally, the circuit court concluded that there
was an identity of the causes of action in the first and second
lawsuits, explaining: "The methodology or the phraseology
refers to a concept of a transaction which has a natural
grouping of a common nucleus of operative facts, and here the
facts are all consistent about the horrific accident on November
24th, 2013, on Highway 23 near Mount Calvary." Finally, it
determined that a final judgment on the merits had been reached.
Accordingly, the circuit court concluded that claim preclusion
barred the second action.
¶18 The Teskes appealed, and the court of appeals
reversed. Teske v. Wilson Mut. Ins. Co. (Teske II), No.
2017AP1269, unpublished slip op. (Wis. Ct. App. May 9, 2018).
Contrary to the circuit court, the court of appeals determined
that claim preclusion did not bar the second action. It
reasoned that "[t]he current tort action involves litigation of
different facts and legal theories, specifically the facts of
the accident versus the interpretation of whether the reducing
clause in Wilson's policy applied." Id., ¶9. As opposed to the
first action, which "was a contract action . . . requir[ing] the
court to interpret Wilson's UIM policy provisions[,]" the second
8
No. 2017AP1269
action "will examine Emily's alleged negligence and, if any,
whether her negligence was a cause of the Teskes' injuries."
Id.
¶19 Accordingly, the court of appeals concluded that
"[t]he two actions involve neither a common 'nucleus of facts'
nor legal question." Id. Thus in the court of appeals' view,
"there is no requirement in law or equity requiring these
distinctly separate claims to be litigated together." Id.
II
¶20 We are asked to review the court of appeals' decision
concluding that claim preclusion does not bar the Teskes' second
action. Whether claim preclusion applies under a given factual
scenario is a question of law we review independently of the
determinations rendered by the circuit court and court of
appeals. Federal Nat'l Mortg. Ass'n v. Thompson, 2018 WI 57,
¶28, 381 Wis. 2d 609, 912 N.W.2d 364.
¶21 This question arises in the context of a motion for
summary judgment. We similarly review a summary judgment
determination independently, without deference to the circuit
court or court of appeals. Shugarts v. Mohr, 2018 WI 27, ¶17,
380 Wis. 2d 512, 909 N.W.2d 402. Summary judgment is
appropriate where there is no genuine issue as to any material
fact and the moving party is entitled to judgment as a matter of
law. Id.
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No. 2017AP1269
III
¶22 To determine whether claim preclusion bars this second
action, we address each of the three elements of claim
preclusion with respect to the facts of this case.
¶23 "The doctrine of claim preclusion provides that a
final judgment on the merits in one action bars parties from
relitigating any claim that arises out of the same relevant
facts, transactions or occurrences." Kruckenberg v. Harvey,
2005 WI 43, ¶19, 279 Wis. 2d 520, 694 N.W.2d 879 (citations
omitted). Pursuant to claim preclusion, "a final judgment is
conclusive in all subsequent actions between the same parties as
to all matters which were litigated or which might have been
litigated in the former proceedings." Lindas v. Cady, 183
Wis. 2d 547, 558, 515 N.W.2d 458 (1994) (quoting DePratt v. West
Bend Mut. Ins. Co., 113 Wis. 2d 306, 310, 334 N.W.2d 883
(1983)).
¶24 Claim preclusion is "designed to draw a line between
the meritorious claim on the one hand and the vexatious,
repetitious and needless claim on the other hand." N. States
Power Co. v. Bugher, 189 Wis. 2d 541, 550, 525 N.W.2d 723 (1995)
(quoting Purter v. Heckler, 771 F.2d 682, 689-90 (3d Cir.
1985)). The doctrine "provides an effective and useful means to
establish and fix the rights of individuals, to relieve parties
of the cost and vexation of multiple lawsuits, to conserve
judicial resources, to prevent inconsistent decisions, and to
encourage reliance on adjudication." Kruckenberg, 279
Wis. 2d 520, ¶20 (citations omitted). It further recognizes
10
No. 2017AP1269
that "endless litigation leads to chaos; that certainty in legal
relations must be maintained; that after a party has had his day
in court, justice, expediency, and the preservation of the
public tranquility requires that the matter be at an end." Id.
(citations omitted).
¶25 Three elements are required to establish the
application of claim preclusion to bar an action: (1) an
identity between the parties or their privies in the prior and
present lawsuits; (2) an identity of the causes of action in the
two lawsuits; and (3) a final judgment on the merits in a court
of competent jurisdiction. N. States Power Co., 189 Wis. 2d at
551. We address each in turn.
A
¶26 We begin our claim preclusion analysis by addressing
the first element, identity between the parties or their privies
in the prior and present lawsuits. Id.
¶27 This court has previously stated that there is an
identity of parties when the parties are "for the most part,
identical." Wickenhauser v. Lehtinen, 2007 WI 82, ¶28, 302
Wis. 2d 41, 734 N.W.2d 855 (citing Sopha v. Owens-Corning
Fiberglas Corp., 230 Wis. 2d 212, ¶48 n.28, 601 N.W.2d 627
(1999)). For example, case law provides that this element is
met when the two actions involve a closely-held corporation in
one case and its principal shareholder in the other.
Wickenhauser, 302 Wis. 2d 41, ¶29 n.12 (citing Manu-Tronics,
Inc. v. Effective Mgnt. Sys., Inc., 163 Wis. 2d 304, 315, 471
N.W.2d 263 (Ct. App. 1991)). Similarly, an owner of property
11
No. 2017AP1269
and a successor in interest to that property are in privity for
purposes of claim preclusion. Kruckenberg, 279 Wis. 2d 520,
¶23.
¶28 With regard to the claims made by Julie, Katherine,
and Elle, we need not reach a privity analysis because identity
of parties is distinctly present. Julie, Katherine, and Elle
were named parties in both the first action and the present
action. Likewise, Wilson was a named party in both actions.
Thus, because Julie, Katherine, Elle, and Wilson were all named
parties in the two actions, identity of parties exists with
respect to those named parties.
¶29 However, we are equally divided as to whether the
identity of parties element is met with regard to John. Thus,
we affirm the court of appeals' decision that allowed John's
claims to proceed.
B
¶30 We turn next to address the second element of claim
preclusion, identity of the causes of action in the two
lawsuits. See N. States Power Co., 189 Wis. 2d at 551. Because
we are equally divided as to whether the first element of claim
preclusion is met with regard to John, we need only address the
second element with respect to the claims made by Julie,
Katherine, and Elle.
¶31 For purposes of determining whether there is an
identity of causes of action in two lawsuits, Wisconsin has
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No. 2017AP1269
adopted the "transactional approach" set forth in the
Restatement (Second) of Judgments § 24 (1982).11 Menard, Inc. v.
Liteway Lighting Prods., 2005 WI 98, ¶30, 282 Wis. 2d 582, 698
N.W.2d 738. The transactional approach "reflects the
expectation that parties who are given the capacity to present
their entire controversies shall in fact do so." Kruckenberg,
279 Wis. 2d 520, ¶27 (internal quotation and citation omitted).
Pursuant to this analysis, "all claims arising out of one
transaction or factual situation are treated as being part of a
single cause of action and they are required to be litigated
together." A.B.C.G. Enters., Inc. v. First Bank Se., N.A., 184
Wis. 2d 465, 480-81, 515 N.W.2d 904 (1994) (quoting Parks v.
City of Madison, 171 Wis. 2d 730, 735, 492 N.W.2d 365 (Ct. App.
1992)).
11 Restatement (Second) of Judgments § 24 (1982) provides:
(1) When a valid and final judgment rendered in an
action extinguishes the plaintiff's claim pursuant to
the rules of merger or bar (see §§ 18, 19), the claim
extinguished includes all rights of the plaintiff to
remedies against the defendant with respect to all or
any part of the transaction, or series of connected
transactions, out of which the action arose.
(2) What factual grouping constitutes a "transaction",
and what groupings constitute a "series", are to be
determined pragmatically, giving weight to such
considerations as whether the facts are related in
time, space, origin, or motivation, whether they form
a convenient trial unit, and whether their treatment
as a unit conforms to the parties' expectations or
business understanding or usage.
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No. 2017AP1269
¶32 The concept of a "transaction" connotes a natural
grouping or common nucleus of operative facts. Menard, Inc.,
282 Wis. 2d 582, ¶30 (citations omitted). "In determining if
the claims of an action arise from a single transaction, we may
consider whether the facts are related in time, space, origin,
or motivation." Id.
¶33 Relying on this second element of the claim preclusion
analysis, the court of appeals determined that claim preclusion
does not bar the Teskes' second lawsuit. It concluded that
despite the fact that the claims in both lawsuits arose from the
November 24, 2013 car accident, the requirement of identity of
causes of action was not fulfilled.
¶34 The court of appeals' reasoned that "[t]he current
tort action involves litigation of different facts and legal
theories, specifically the facts of the accident versus the
interpretation of whether the reducing clause in Wilson's policy
applied." Teske II, No. 2017AP1269, unpublished slip op., ¶9.
"The current action will examine Emily's alleged negligence and,
if any, whether her negligence was a cause of the Teskes'
injuries." Id. In contrast, "[t]he prior action was a contract
action, which required the court to interpret Wilson's UIM
policy provisions." Id.
¶35 We disagree with the court of appeals. Contrary to
the court of appeals' conclusion, we determine that the causes
of action in both lawsuits arise from a common nucleus of
operative facts——namely, the November 24, 2013 car accident.
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No. 2017AP1269
¶36 The court of appeals' error originates in its approach
of examining the legal theories presented in the two actions
rather than the underlying facts. Following a transactional
analysis, "it is irrelevant that 'the legal theories, remedies
sought, and evidence used may be different between the first and
second actions.'" Menard, Inc., 282 Wis. 2d 582, ¶32 (quoting
Kruckenberg, 279 Wis. 2d 520, ¶26). Rather, "[t]he goal in the
transactional approach is to see a claim in factual terms and to
make a claim coterminous with the transaction, regardless of the
claimant's substantive theories or forms of relief, regardless
of the primary rights invaded, and regardless of the evidence
needed to support the theories or rights." Kruckenberg, 279
Wis. 2d 520, ¶26.
¶37 With our lens properly focused on the facts instead of
the legal theories, it is apparent that the claims made in both
the first and second actions arise from the same factual
circumstances surrounding the November 24, 2013 car accident.
Although the court of appeals viewed the UIM issue in the first
action as separate and distinct from the tort claim in the
second action, without an underlying tort there can be no UIM
claim.
¶38 This court's decision in State Farm Mut. Auto. Ins.
Co. v. Gillette, 2002 WI 31, ¶31, 251 Wis. 2d 561, 641
N.W.2d 662, sheds light on the connection between a UIM claim
based on contract and the tort claim that necessarily underlies
a UIM claim. It explained: "A claim against the insurance
company for underinsured motorist coverage is 'an action on the
15
No. 2017AP1269
policy and sounds in contract,' although an underlying tortious
injury is also involved." Id., ¶25 (citing Sahloff v. W. Cas. &
Sur. Co., 45 Wis. 2d 60, 70, 171 Wis. 2d 914 (1969)).
¶39 As the Gillette court highlighted, "[w]hen an insured
sues an insurance company for underinsured motorist coverage,
contract law and tort law converge. Contract law applies to
interpret the insurance policy, but an insured's right to
underinsured motorist benefits hinges on the existence of a tort
cause of action against the underinsured motorist." Id., ¶31.
¶40 Although the tort cause of action here is against
Emily Teske, and the tort underlying the UIM case was that
committed by Srock, the two alleged torts arose as part of the
same car accident, i.e. the same common nucleus of operative
facts. Thus, the negligence claim against Emily could have been
litigated in the first action. See Menard, 282 Wis. 2d 582,
¶55. We therefore conclude that the second element of claim
preclusion, identity of causes of action, is fulfilled.
C
¶41 Finally, we address the third element of claim
preclusion, a final judgment on the merits in a court of
competent jurisdiction. See N. States Power Co., 189 Wis. 2d at
551.
¶42 The parties exhaustively litigated the issue of
whether the reducing clause in the Wilson policy applies.
Initially, the Sheboygan County circuit court made a
determination that the clause applies. This conclusion was
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No. 2017AP1269
affirmed by the court of appeals. After Julie, Katherine, and
Elle petitioned for review, this court denied the petition.
¶43 A final judgment was accordingly reached on the issue
of whether the reducing clause in the Wilson policy applies.
Such a final judgment has preclusive effect on all matters
"which were litigated or which might have been litigated in the
former proceedings." Kruckenberg, 279 Wis. 2d 520, ¶19. We
thus conclude that the third element of claim preclusion is
fulfilled.
¶44 In sum, all three elements of claim preclusion are met
with regard to Julie, Katherine, and Elle's claims against
Wilson. We therefore conclude that claim preclusion bars the
claims brought by Julie, Katherine, and Elle in this second
action. Accordingly, we reverse that part of the decision of
the court of appeals that allowed their claims to proceed.
¶45 However, we are evenly divided as to whether claim
preclusion bars the claims brought by John. As a result, we
affirm the court of appeals' decision that allowed John's claims
to proceed.
By the Court.—The decision of the court of appeals is
affirmed in part and reversed in part.
¶46 SHIRLEY S. ABRAHAMSON, J., withdrew from
participation.
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No. 2017AP1269
1