DeWitt Ross & Stevens v. Galaxy Gaming

• Citation: 670 N.W.2d 74,267 Wis.2d 233,2003 WI App 190
• Decision Date: 21 August 2003
• Docket Number: No. 02-0359.,02-0359.
• Parties: DEWITT ROSS & STEVENS, S.C., Plaintiff-Respondent-Cross-Appellant, v. GALAXY GAMING AND RACING LIMITED PARTNERSHIP, and Galaxy Casinos, Inc., Defendants-Co-Appellants-Cross-Respondents, SOUTHWEST FLORIDA ENTERPRISES, INC., Defendant-Appellant-Cross-Respondent.
• Court: Court of Appeals of Wisconsin

267 Wis.2d 233

2003 WI App 190

670 N.W.2d 74

DEWITT ROSS & STEVENS, S.C., Plaintiff-Respondent-Cross-Appellant,¹ v. GALAXY GAMING AND RACING LIMITED PARTNERSHIP, and Galaxy Casinos, Inc., Defendants-Co-Appellants-Cross-Respondents,¹ SOUTHWEST FLORIDA ENTERPRISES, INC., Defendant-Appellant-Cross-Respondent.¹

No. 02-0359.

Court of Appeals of Wisconsin.

Submitted on briefs September 10, 2002.

Decided August 21, 2003.

On behalf of the defendants-co-appellants-cross-respondents and the defendant-appellant-cross-respondent, the cause was submitted on the briefs of Robert H. Friebert, S. Todd Farris, and Jennifer L. Bolger of Friebert, Finerty & St. John, S.C., Milwaukee.

On behalf of the plaintiff-respondent-cross-appellant, the cause was submitted on the briefs of Anthony R. Varda of DeWitt Ross & Stevens, S.C., Madison.

Before Deininger, P.J., Dykman and Lundsten, JJ.

¶ 1. LUNDSTEN, J.

Galaxy Gaming and Racing Limited Partnership, Galaxy Casinos, Inc., and Southwest Florida Enterprises, Inc., appeal a judgment awarding $407,489.79 to DeWitt, Ross & Stevens, S.C., for legal services provided to Galaxy Gaming and Galaxy Casinos. Galaxy Gaming, Galaxy Casinos, and Southwest have submitted joint appellate briefs. There is no indication in those briefs that any of the three companies does not join in all of the arguments contained in the briefs. Thus, we will often refer to argument made by the "Companies," a reference to all three companies. Further, there is seldom reason to distinguish between Galaxy Gaming and Galaxy Casinos and, therefore, we will refer to these two companies as the "Galaxy Partnership."

¶ 2. The Companies argue that the circuit court erred in ruling that a guaranty executed by Southwest on Galaxy Partnership's behalf included interest. The Companies also contest the circuit court ruling that DeWitt was entitled to apply payments first to outstanding interest. They separately contend that the circuit court erred in awarding double costs under the offer of settlement statute. And, the Companies appeal the circuit court's denial of Southwest's request for substitution of judge.

¶ 3. DeWitt cross-appeals, asserting that the circuit court erred by concluding that interest under the contract did not begin to accrue until December 1, 1997, and that 12% interest under WIS. STAT. § 807.01(4) (2001-02)² was not awardable on the amount recovered. DeWitt also contends that the circuit court erred in not allowing the cost of a transcript of a videotaped deposition.

¶ 4. We agree that Southwest is liable for interest owed by Galaxy Partnership, that DeWitt could apply payments first to interest, and that it was appropriate to award double costs because of the rejection of DeWitt's settlement offer. We also agree that the circuit court properly denied Southwest's substitution request and properly denied DeWitt prejudgment interest under Wis. STAT. § 807.01(4). However, we conclude that the circuit court erroneously excluded the deposition transcript as an item of costs. Finally, we determine that interest under the contract began to accrue not on December 1, 1997, but at the beginning of that year. Accordingly, we affirm in part and reverse in part.

Background

¶ 5. This is a suit to recover legal fees incurred by Galaxy Partnership during litigation against the City of Hudson. Galaxy Partnership sought approval for an Indian casino at the St. Croix Meadows dog track in Hudson. When the federal government denied approval of the casino, Galaxy Partnership decided to sue the City of Hudson, with whom it had negotiated an agreement for governmental services. Galaxy Partnership retained DeWitt, and Fred Havenick, president of Galaxy Partnership, signed a retainer letter.³ With respect to the fees charged for legal services, the retainer letter provided:

[Y]ou will be billed for disbursements and other expenses incurred on behalf of [Galaxy] Partnership (for example, long distance telephone charges, photocopying, facsimile charges, travel expenses, court reporter fees and other similar disbursements or expenses). You will receive a statement for services rendered and expenses incurred on a monthly basis. The statements are payable upon receipt. We reserve the right to charge interest at the rate of 18% per annum (1½% per month) on all statements not paid within 20 days after their date.

¶ 6. Because Galaxy Partnership had no assets or means of earning income until the casino project became a reality, the retainer letter required that a guaranty of payment be provided. The guaranty was executed by Southwest, which wholly owned Galaxy Casinos, the general partner of Galaxy Gaming. Fred Havenick is also president of Southwest and signed the guaranty in his Southwest capacity. The guaranty reads:

The undersigned, for valuable consideration and the willingness of . . . DeWitt, Ross & Stevens, S.C. to represent [Galaxy] Partnership, all of which inures to my benefit, hereby personally guaranties the timely and full payment of all statements for services rendered and disbursements/expenses incurred on behalf of [Galaxy] Partnership. In the event of a failure of [Galaxy] Partnership to pay the monthly statements as they fall due, the undersigned agrees that the law firms may, in the first instance, look to the undersigned for payment without having to exercise or exhaust any remedies against [Galaxy] Partnership.

¶ 7. In the fall of 1996, as activity in the suit against the city increased and the monthly statements were for larger amounts, Galaxy Partnership began to fall behind in its payments to DeWitt. On November 24, 1997, when the outstanding balance was over $129,000, Attorney Anthony Varda, the DeWitt partner handling the case, wrote Havenick and demanded that the amount owed be paid in full by December 1, 1997, or DeWitt would charge interest at 18% on the balance. Shortly thereafter, the Companies made a payment of $50,000. Although the monthly statements did not include an interest charge, Attorney Varda sent Havenick a separate letter with an attached invoice showing an interest charge of $7,863.40 for 1997. ¶ 8. Over the next two years, Attorney Varda repeatedly asked Havenick to pay the balance, and sporadic payments were made. When payments were made, DeWitt first applied the payments to the accrued interest and then applied any remaining amount to the outstanding principal.

¶ 9. At the conclusion of the City of Hudson litigation, DeWitt sent Havenick a final bill showing a total balance of $352,172.59 as of July 31, 2000, including $69,209.44 in interest. No payment was made, and DeWitt sued the Companies to enforce the retainer letter and guaranty. The amount claimed was $396,847.86, including interest through April 1, 2001. Initially, only Galaxy Partnership was served with DeWitt's complaint. In its answer to the complaint, Galaxy Partnership admitted "there are monies due and owing to [DeWitt]," but alleged that the amount sought included "interest and other charges and expenses" that Galaxy Partnership did not owe. Subsequently, after being served, Southwest filed an answer substantially identical to Galaxy Partnership's, but in addition stated that it was not liable under the guaranty for interest owed by Galaxy Partnership.

¶ 10. Galaxy Partnership moved for a protective order, requesting that depositions be delayed until it had the opportunity to review discovery materials. In response, DeWitt moved to compel discovery. The circuit court denied Galaxy Partnership's motion, granted DeWitt's motion to compel discovery, and imposed costs of $100.00 on Galaxy Partnership. Subsequently, Southwest, which was served with DeWitt's complaint after the circuit court decided the discovery motions, moved for substitution of judge. The circuit court denied this motion as untimely. Southwest requested review by the Fifth Judicial District chief judge of the denial of substitution, and the chief judge affirmed the circuit court.

¶ 11. On July 9, 2001, DeWitt offered to settle its claims, provided that the Companies pay $370,000 within fifteen days of the Companies' acceptance of the offer, which the Companies declined. DeWitt then moved for summary judgment on the question of Southwest's liability under the guaranty for principal and interest due. The circuit court concluded that DeWitt could apply payments first against accrued interest if it chose to do so, and that Southwest's obligation under the guaranty included liability for interest payments. However, the circuit court ruled that DeWitt could not recover interest on the unpaid balance prior to November 24, 1997, the date DeWitt informed the Companies that it would begin assessing interest. Accordingly, the circuit court denied that part of DeWitt's summary judgment motion seeking interest retroactive to January 1, 1997.

¶ 12. The circuit court entered judgment against the Companies in the amount of $407,498.79, plus postjudgment interest of 12% pursuant to Wis. STAT. § 815.05(8) commencing on January 1, 2002. Because the judgment obtained by DeWitt exceeded the offer of settlement, the circuit court awarded DeWitt double costs pursuant to Wis. STAT. § 807.01(3). However, the circuit court declined to award § 807.01(4) interest in addition to the 18% contractual interest that DeWitt was already entitled to during the same time period, and declined to award costs for a transcript of Havenick's videotaped deposition.

Appeal

¶ 13. The Companies assert that summary judgment was erroneously granted with respect to four issues. The Companies argue that: (1) Southwest is not liable under the guaranty for interest owed by Galaxy Partnership; (2) DeWitt is not entitled to apply payments to interest before applying them to principal; (3) DeWitt is not entitled to double costs under Wis. STAT. § 807.01(3) because DeWitt did not make a valid settlement offer; and (4) the circuit court erroneously denied Southwest's motion for substitution of...