Heifetz v. Johnson

• Decision Date: 12 November 1973
• Docket Number: No. 278,278
• Citation: 211 N.W.2d 834,61 Wis.2d 111
• Parties: Julius Jack HEIFETZ et al., Respondents, v. Louise A. JOHNSON et al., Appellants.
• Court: Wisconsin Supreme Court

Page 834

211 N.W.2d 834

61 Wis.2d 111

Julius Jack HEIFETZ et al., Respondents, v. Louise A. JOHNSON et al., Appellants.

No. 278.

Supreme Court of Wisconsin.

Nov. 12, 1973.

Aberg, Bell, Blake & Metzner, Madison, for appellants.

Fritschler, Pellino & Associates, Madison, for respondents.

WILKIE, Justice.

Two issues are presented on this appeal:

(1) Did the failure of the plaintiffs to join a necessary or indispensable party within the period of limitations subject the plaintiffs' cause of action to the defense of limitation of actions?

(2) If the plaintiffs' right of action is not barred, can the defendants raise the prior payment of $2,000 by the plaintiffs' insurer in mitigation of their liability?

Is Plaintiffs' Action Barred by the Statute of Limitations?

An action to recover damages for injury to the person must be brought within three years. ¹ The acceptance of payment from an insurer (Heritage here) operates as a virtual assignment of the cause of action to the insurer and a part payment operates as an assignment pro tanto. The insurance company may bring suit against the tortfeasor in its own name by virtue of this assignment. ² In Wisconsin a liability insurer so subrogated is considered an indispensable party. ³

The trial court was correct in holding that the failure to join the subrogated insurer, Heritage, could not be corrected as to Heritage, for as to Heritage the statute of limitations had run. ⁴

In Wisconsin the running of the statute of limitations extinguishes not only the right of action but also the cause of action.

"In Wisconsin the running of the statute of limitations absolutely extinguishes the cause of action for in Wisconsin limitations are not treated as statutes of repose. The limitation of actions is a right as well as a remedy, extinguishing the right on one side and creating a right on the other, which is as of high dignity as regards judicial remedies as any other right and it is a right which enjoys constitutional protection. . . ." ⁵

In Haase v. Sawicki it was held to violate a defendant's due process rights for the legislature to enact a statute attempting to extend a statute of limitations and have it apply to causes of action which were already barred by the former shorter period of limitations.

The real question in this case, however, is whether the cause of action of the plaintiff has also been extinguished. If the bringing of a suit without joining an indispensable party is so defective as not to constitute the commencement of an action at all, then the statute of limitations would not have been tolled by service of process on October 12, 1971, and the plaintiff would be barred from suing the defendant.

The appellant relies on the recent Wisconsin case of Borde v. Hake. ⁶ It is very similar on its facts and ironically involves the same insurance company, Heritage Mutual Insurance Company. In Borde, the plaintiff had collision insurance from Heritage and made a claim which was paid. He assigned his claim to Heritage to the extent of the payment to him. The plaintiff then commenced an action for personal injuries, loss of use of his car, and for damages to the automobile not compensated by the insurer. This court held that Heritage, which was not joined, was an indispensable party but only to the action for property damage. This would allow the suit for personal injuries to continue in any event. The real issue in the case was whether the suit should have been ordered dismissed and recommenced or whether the plaintiff was correctly given twenty days in which to either join his insurer or get a release of the assignment. The defendant hoped that if the suit was dismissed it would be too late to recommence within the applicable three-year limitation period. This court affirmed the lower court's suspension rather than dismissal of the lawsuit to await the joinder of all indispensable parties. However, the court also indicated that since the order to join Heritage came after the running of the limitation period, it could not now be joined. And at an earlier point in the opinion the court had this to say about the original plaintiff:

'We conclude that, until such time as Heritage Mutual was joined, the plaintiff's cause of action brought without the joinder of a necessary party was wholly ineffectual to stop the running of the statute of limitations on that claim. Moreover, the joinder of a necessary party subsequent to the running of the statute of limitations comes too late to cure the omission. Ausen v. Moriarty (1954), 268 Wis. 167, 173, 67 N.W.2d 358.

'The plaintiff's brief argues that if the action has been commenced against one party prior to the running of limitations and the plaintiff inadvertently fails to join a necessary party as plaintiff or defendant, it would be inequitable to throw out the whole cause of action merely because the defect was not cured until it was too late to sue over within the period of limitations. We do not dispute the equities of the plaintiff's assertion. We point out that in Haase v. Sawicki (1963), 20 Wis.2d 308, 121 N.W.2d 876, this court concluded that, once a defendant was freed of potential liability by the running of a statute of limitations in a civil suit, the legislature could not retroactively extend that period of limitations, and that to do so would subject a defendant to liability without due process of law in violation of the Constitution of the United States.' ⁷

Respondents correctly point out that this statement was dicta in Borde v. Hake, for the defense of statute of limitations had not been pleaded by any of the parties therein. ⁸

It is clear that an action must be commenced within the period limited by law. If the plaintiff commences his action in a court which completely lacks jurisdiction and then after the statute of limitations has run refiles in the proper court, the statute of limitations was not tolled by the first improper filing. ⁹ And if the wrong person is served, the pleadings cannot be 'amended' to name the proper party for no service was had on him within the period limited by law. ¹⁰ Nor can a court acquire jurisdiction of an action by amending a process in order to give it such jurisdiction. ¹¹ Thus the question here is whether the failure to join a subrogated insurer is a defect of the magnitude of those above, so that in effect no action was commenced within the time limited by law.

There is a split in the authorities as to whether an objection to the lack of an indispensable party goes to the jurisdiction of the court. ¹²

Typical of those cases which hold that the defect is jurisdictional is a New Mexico case, Sellman v. Haddock. ¹³ In that case the plaintiff, who had received a considerable sum from his own insurer for damage to his automobile, tried to sue the tortfeasor for the entire amount of damages. The court held that although there was considerable authority that this was permitted at common law, the statute requiring that every action be brought in the name of the real party in interest changed the common law rights of the plaintiff. The insurer was held to be an indispensable party and the court concluded: 'If the insurance carrier is an indispensable party, then the court was without jurisdiction and the situation is the same as if no attempt at a trial had been made.' Thus the plaintiff was barred from prosecuting the action further.

But a Minnesota case quite persuasively argues that 'in cases where there is error in the nonjoinder of necessary or indispensable parties courts have fallen into a common error by designating the defect as jurisdictional.' In Doerr v. Warner, ¹⁴ the Minnesota court held that it acquired jurisdiction over the subject matter of an action despite the nonjoinder of indispensable parties until after the case had been removed to federal court and the statute of limitations had run. The court explained:

'. . . As a general rule a civil action is commenced, and the court thereby acquires jurisdiction, when personal service upon the defendant is actually made as prescribed by statute or rule. Although an indispensable party to an action must be joined, and for the failure to join him the action must be dismissed since the adjudication cannot proceed to judgment without him, such defect is not jurisdictional. . . . It is well established that, although a court may not proceed to judgment in a case in which an indispensable party is absent, the reason therefor is not that the court does not have jurisdiction but for the broader reason that in the exercise of due process no court, regardless of its jurisdictional structure, may adjudicate directly upon a person's rights without such person being either actually or constructively before the court.' ¹⁵

There is a recognized exception where the statute of limitations is not suspended as against the original plaintiff, and that is where one of several joint owners brings an action and by amendment attempts to bring in the other joint owner or owners. The reason for this exception is that joint owners must sue jointly and neither can recover in an action in which he is the sole plaintiff. ¹⁶

Are an injured plaintiff and his subrogated insurer so analogous to joint owners that the above rule should be applied to them? We do not think so. The case of Patitucci v. Gerhardt ¹⁷ uses some language which might suggest to the contrary. There the court said:

'. . . By operation of law, the ownership of a part of this claim has become vested in the insurance company by reason of its payment of the loss. If this presents to the court a single controversy, it must be apparent that a complete determination of it cannot be had without the presence of all of the parties who together own the cause of action.' (Emphasis added.)

However, it can be seen that they are not really joint owners in the same sense as the joint payees of a note. Each actually owns separately a part of the liability of the...