Menard, Inc. v. Liteway Lighting Products

• Decision Date: 13 April 2004
• Docket Number: No. 03-1391.,03-1391.
• Citation: 2004 WI App 95,273 Wis.2d 439,685 NW 2d 365
• Parties: Menard, Inc., Plaintiff-Respondent, v. Liteway Lighting Products, Defendant-Appellant.
• Court: Wisconsin Court of Appeals

2004 WI App 95

685 NW 2d 365

273 Wis.2d 439

Menard, Inc., Plaintiff-Respondent, v. Liteway Lighting Products, Defendant-Appellant.

No. 03-1391.

Court of Appeals of Wisconsin.

Submitted on Briefs: December 23, 2003.

Opinion Filed: April 13, 2004

On behalf of the defendant-appellant, the cause was submitted on the briefs of Carol S. Dittmar and Teresa E. O'Halloran of Garvey, Anderson, Johnson, Geraci & Mirr, S.C.

On behalf of the plaintiff-respondent, the cause was submitted on the brief of Stephanie L. Finn and Jay E. Heit of Herrick & Hart, S.C. of Eau Claire.

Before Cane, C.J., Hoover, P.J, and Peterson, J.

¶1. HOOVER, P.J.

Liteway Lighting Products appeals a $140,000 judgment for products Menard, Inc., alleges it returned to Liteway for credit. Liteway claims that the trial court applied the wrong burden of proof, requiring Liteway to disprove Menard's allegations. Liteway also appeals an order denying its motion for summary judgment, claiming Menard's suit against it is barred by claim preclusion because of a prior suit Liteway filed against Menard for nonpayment of invoices. The trial court determined that claim preclusion only applied to issues actually litigated in a previous suit and that Menard's suit was not precluded because it had not been required to counterclaim in the earlier suit. We conclude that Menard's present suit is barred by claim preclusion and therefore reverse the judgment and order.

Background

¶2. Liteway filed suit against Menard on October 19, 2000, alleging that Liteway shipped and sold light fixtures to Menard on an open-ended credit account. Liteway alleged that Menard accepted the shipments. After shipping, Liteway sent invoices for payment, which Menard failed or refused to pay, for a total of about $355,000 in outstanding amounts, breaching a contract. The case was assigned to the Honorable Eric Wahl.

¶3. Menard's answer was due December 11, 2000. On December 12, Liteway moved for a default judgment, which the trial court granted on December 13 and Liteway docketed on December 14. Sometime in the afternoon of December 12, Menard apparently realized it was in default and filed its answer.

¶4. On December 27, the court held a hearing on Menard's motion to extend the time to file the answer and vacate the default judgment. The court concluded there was no excusable neglect. In January 2001, however, it stayed enforcement of the judgment pending additional argument, and to give Menard an opportunity to try to resolve the issue with Liteway. Eventually, on October 9, 2001, the court lifted the stay, noting Menard "is still trying to litigate the dispute ...." Menard did not appeal and satisfied the judgment on November 16, 2001.

¶5. However, on August 23, 2001, before Judge Wahl lifted the stay on the judgment, Menard filed this case, alleging it had purchased lighting equipment from Liteway. It claimed some items were damaged upon receipt and some were subsequently determined to be defective because Menard's customers returned them to the stores. Menard alleged that it returned the defective merchandise but had not been credited and that it had incurred other costs including shipping. Menard alleged that Liteway had been unjustly enriched because it had been paid and then received items back and that Liteway breached its duties under the Uniform Commercial Code. The case was assigned to the Honorable Lisa Stark.

¶6. Liteway moved for summary judgment, which the trial court denied. It noted that Judge Wahl had relied solely on the damages alleged in Liteway's first complaint and that Menard was not given an opportunity to argue the value of damages or a counterclaim or setoff. The court ordered the motion denied unless Liteway could demonstrate it had provided Judge Wahl with attachments "identifying invoices, amounts paid and returns or other documentation."

¶7. After the motion for summary judgment was denied, Menard's case was tried to the court, which ultimately concluded Menard was entitled to approximately $140,000. Liteway appeals.

Discussion

¶8. We review the decision to grant summary judgment de novo, using the same methodology as the circuit court. Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315, 401 N.W.2d 816 (1987). Whether claim preclusion¹ applies to a given set of facts is also a question of law. See A.B.C.G. Enters. v. First Bank SE, N.A., 184 Wis. 2d 465, 472, 515 N.W.2d 904 (1994).

¶9. Claim preclusion provides that a 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." Id. at 472-73 (citation omitted). Generally, application of claim preclusion does not depend on actual litigation of an issue. Parks v. City of Madison, 171 Wis. 2d 730, 735, 492 N.W.2d 365 (Ct. App. 1992).

¶10. For claim preclusion to apply, there must be (1) an identity between the parties; (2) an identity between the claims; and (3) a final judgment on the merits in the first case. Northern States Power Co. v. Bugher, 189 Wis. 2d 541, 551, 525 N.W.2d 723 (1995). Here there is no dispute of identity between the parties. Also, while the first case ended with a default judgment, this does not prevent application of claim preclusion, although there is a restriction on default judgments as noted below.

¶11. To determine whether there is an identity between claims, Wisconsin has adopted the transactional analysis approach. "Under 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., 184 Wis. 2d at 481 (citation omitted). When the judgment in the first case is a default judgment, the transactional analysis is limited to the pleadings in the prior default. Id. The conclusiveness of a default judgment is limited to "material issuable facts which are well pleaded" in the complaint and does not extend to issues not raised in the pleading. Id. (citation omitted).

¶12. Thus, to consider whether there is identity among the claims, we first consider whether the claims arise from the same transaction. Because there is a default, we limit this consideration based on facts as pled. Then, we consider whether issues raised in the second suit could have been raised and litigated in the first suit.

Identity of Causes of Action

¶13. For multiple actions or a series of actions to be a single transaction under this analysis, there must be a natural grouping or common nucleus of operative facts. Id. The transactional analysis is to be applied pragmatically, "giving weight to such considerations as whether the facts are related in time, space, origin, or motivation ... and whether their treatment as a unit conforms to the parties' expectations or business understanding or usage." Post v. Schwall, 157 Wis. 2d 652, 658-59, 460 N.W.2d 794 (Ct. App. 1990) (citation omitted).

¶14. Menard argues that its claim for credit or repayment for items it returned results from a separate transaction than that alleged by Liteway in the first complaint. We disagree. A buyer's return of a set of goods for credit or an offset is a component of the transaction that began when the seller shipped those goods.

¶15. In Post, the Schwalls purchased property under a land contract with the Posts. In addition to the terms of payment, the contract contained a requirement that the Schwalls would insure the property and make any proceeds payable directly to the Posts in the event of a loss. There was a fire, damaging one of the buildings, and the Schwalls applied the $10,000 insurance payment to the land contract rather than giving the payment to the Posts. Then they missed a payment on the contract. Id. at 655.

¶16. Shortly thereafter, the Schwalls' bank commenced a foreclosure action on the mortgage it held. The Posts cross-claimed for foreclosure of the land contract. The bank dismissed its action and the Posts prevailed. The Posts reclaimed the property at a sheriff's sale by bidding the amount of their foreclosure judgment. Six months later, they brought an action for fraud based on the Schwalls' failure to tender the insurance payment. Id. at 655-56.

¶17. The trial court concluded that claim preclusion applied, even though the Posts argued that the breach of the payment and insurance portions of the land contract constituted two separate transactions. Id. at 656. We agreed with the trial court, stating the Posts confused "breach" with transaction. Although there were two breaches, each arose from the single land contract. Id. at 659.

¶18. Similarly here, Liteway initially sued for nonpayment of certain invoices for goods shipped. Menard now tries to claim that in connection with these invoices, it returned a portion of the items. However, both the shipment and return of goods are part of a single transaction. The common "nucleus of operative facts" is the exchange of goods for payment. The transaction will be complete when Menard no longer has a balance due and owing. This will occur either when Menard pays the bill or when it returns items and receives credit. We decline to break a sales transaction into multiple components and label each a new event.² In addition, we think it is axiomatic that, in the realm of the sale of goods, shipment by the seller and acceptance or return by the buyer deserve "treatment as a unit" based on "business understanding or usage."

¶19. Liteway alleged sufficient information in its first complaint for us to conclude there was the single transaction as described above. It alleged that it sold fixtures to Menard on credit pursuant to a contract, that Menard accepted the goods, that Liteway sent invoices for payment, and that Menard refused to pay for the items. Menard's claimed return for credit of these items is part of the transaction Liteway pled.

Whether Issues in the Second Suit Could Have Been Raised in the First

¶20....