Mercado v. Ge Money Bank

• Decision Date: 14 April 2009
• Docket Number: No. 2008AP1992.,2008AP1992.
• Citation: 2009 WI App 73,768 N.W.2d 53
• Parties: Ada V. MERCADO and Angela Terry, Plaintiffs-Appellants,<SMALL><SUP>&#x2020;</SUP></SMALL> v. GE MONEY BANK, Kohn Law Firm, S.C. and ABC Companies, Defendants-Respondents.<SMALL><SUP>&#x2020;</SUP></SMALL>
• Court: Wisconsin Court of Appeals

768 N.W.2d 53

___ Wis.2d ___

2009 WI App 73

Ada V. MERCADO and Angela Terry, Plaintiffs-Appellants,^† v. GE MONEY BANK, Kohn Law Firm, S.C. and ABC Companies, Defendants-Respondents.^†

No. 2008AP1992.

Court of Appeals of Wisconsin.

Submitted on Briefs March 3, 2009.

Opinion Filed April 14, 2009.

On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of Gary W. Thompson of Thompson Law Offices, S.C., of Milwaukee.

On behalf of the defendants-respondents Kohn Law Firm, S.C., the cause was submitted on the brief of Paul R. Erickson and Kari H. Race of Gutglass, Erickson, Bonville and Larson, S.C., of Milwaukee.

On behalf of the defendant-respondent GE Money Bank, the cause was submitted on the brief of William H. Harbeck and John C. Schaak of Quarles & Brady, LLP, of Milwaukee.

Before CURLEY, P.J., and FINE and KESSLER, JJ.

¶ 1 CURLEY, P.J

Ada Mercado and Angela Terry appeal from a judgment dismissing their action seeking class action status and asserting violations of the Wisconsin Consumer Act (WCA) against GE Money Bank (GE) and Kohn Law Firm, S.C. (Kohn). The alleged violations arose out of pleading defects in underlying small claims actions filed against them; namely, GE's purported failure to satisfy the disclosure requirements set forth in WIS. STAT. § 425.109(1)(h) (2005-06).¹

¶ 2 Mercado and Terry argue that WCA procedural errors can form the basis for substantive claims and that judgments taken in violation of WIS. STAT. § 425.109(3) (2005-06) should be declared void. We conclude: (1) Mercado and Terry's failure to follow the statutory procedure set forth in WIS. STAT. § 799.29 precludes them from collaterally attacking the default judgments entered against them here; and (2) the default judgments are not void. As such, we affirm the trial court's order dismissing Mercado and Terry's amended complaint, albeit on other grounds.² See State v. Holt, 128 Wis.2d 110, 124-25, 382 N.W.2d 679 (Ct.App.1985) (We may affirm a trial court's decision on other grounds even if we do not agree with its reasoning.). Consequently, we do not resolve whether Mercado and Terry can assert independent claims under the WCA based on the alleged violation of § 425.109(1)(h). See Gross v. Hoffman, 227 Wis. 296, 300, 277 N.W. 663 (1938) (unnecessary to decide nondispositive issues).

I. BACKGROUND.

¶ 3 This case arises out of two underlying small claims collection actions. On August 28, 2006, Kohn, on behalf of GE, filed a small claims complaint against Mercado to recover amounts charged to a credit card financed by GE. Attached to the complaint were monthly statements for credit extended, interest charges, late payment penalties, and payment credits. Mercado failed to appear or respond and a default judgment in the amount of $1507.62 was entered against her.

¶ 4 One month later, on September 18, 2006, Kohn, on behalf of GE, filed a separate small claims complaint against Terry to recover amounts charged to a credit card financed by GE. Again, attached to the complaint were monthly statements for credit extended, interest charges, late payment penalties, and payment credits. Terry, like Mercado, failed to appear or respond and a default judgment in the amount of $4291.46 was entered against her.

¶ 5 Following the entry of the small claims judgments against them, neither Mercado nor Terry sought relief from the judgments in small claims court. GE and Kohn proceeded to pursue postjudgment enforcement activities against them.³

¶ 6 On December 18, 2007, Mercado and Terry jointly filed a complaint against GE alleging violations of the WCA. Their complaint was later amended to add Kohn as a defendant, to incorporate additional WCA and class action claims, and to request that the trial court certify Mercado and Terry as class representatives. In lieu of an answer, GE and Kohn filed motions to dismiss asserting that the plaintiffs failed to state a claim upon which relief could be granted.

¶ 7 The trial court granted GE and Kohn's motions to dismiss the amended complaint, finding that pleading deficiencies under WIS. STAT. § 425.109(1)(h) were the basis for all of Mercado and Terry's claims, and that pursuant to Rsidue, L.L.C. v. Michaud, 2006 WI App 164, ¶ 19, 295 Wis.2d 585, 721 N.W.2d 718, a pleading deficiency cannot form the basis for a substantive claim. The trial court further concluded that Mercado and Terry's claims were barred due to their failure to take action under WIS. STAT. § 806.07 in the underlying small claims actions.⁴

II. ANALYSIS.

¶ 8 "`A motion to dismiss a complaint for failure to state a claim tests the legal sufficiency of the complaint,'" a matter we review de novo. Wausau Tile, Inc. v. County Concrete Corp., 226 Wis.2d 235, 245, 593 N.W.2d 445 (1999) (citation omitted). "A complaint should not be dismissed as legally insufficient unless it appears certain that a plaintiff cannot recover under any circumstances." Beloit Liquidating Trust v. Grade, 2004 WI 39, ¶ 17, 270 Wis.2d 356, 677 N.W.2d 298.

A. Mercado and Terry cannot collaterally attack the default judgments entered against them.

¶ 9 At the outset, we agree with GE that "[t]his appeal is simple and straightforward. In its essence, this case is nothing more than an attempt by plaintiffs Mercado and Terry to do an end run around default judgments previously entered against them in two separate underlying small claims collection actions." (Parenthetical in brief omitted.) In their amended complaint, Mercado and Terry assert six separate claims against GE and Kohn—all of which are based, in one way or another, on the purported failure of GE and Kohn to comply with the pleading requirements set forth in WIS. STAT. § 425.109(1) in the underlying small claims actions.

¶ 10 The trial court based its decision to grant GE and Kohn's motions to dismiss, in part, on its conclusion that Mercado and Terry's claims were barred due to their failure to take action under WIS. STAT. § 806.07 in the underlying small claims actions. Section 806.07 does not apply to small claims cases. The applicable statute is WIS. STAT. § 799.29. See King v. Moore, 95 Wis.2d 686, 689-90, 291 N.W.2d 304 (Ct.App.1980) (The time set by the small claims statute within which a small claims defendant must make a motion to reopen a default judgment takes precedence over the time limit in § 806.07.).

¶ 11 Although WIS. STAT. § 799.29(1)(a) permits a trial court to reopen default judgments, such motions (other than a default judgment entered in an ordinance violation matter) must be brought "within 12 months after entry of judgment unless venue was improper." Sec. 799.29(1)(c).⁵ As GE points out, if Mercado and Terry wanted to challenge the small claims judgments against them, "their sole remedy was to move the small claims courts to reopen them," in accordance with § 799.29(1)(a). See id. ("There shall be no appeal from default judgments, but the trial court may, by order, reopen default judgments upon notice and motion or petition duly made and good cause shown.").

¶ 12 As noted, after the trial court dismissed their amended complaint in this action, Mercado and Terry then moved the small claims court to reopen the default judgments against them and for leave to file counterclaims. See supra ¶ 7 n. 4. Those motions were denied in part because they were not made within the one-year time period set forth in WIS. STAT. § 799.29. An appeal regarding whether the trial court properly exercised its discretion in denying their motions to reopen is not presently before us, and Mercado and Terry's roundabout efforts to circumvent that decision here is the essence of a collateral attack.

¶ 13 "A collateral attack on a judgment is `an attempt to avoid, evade, or deny the force and effect of a judgment in an indirect manner and not in a direct proceeding prescribed by law and instituted for the purpose of vacating, reviewing or annulling it.'" Oneida County DSS v. Nicole W., 2007 WI 30, ¶ 27, 299 Wis.2d 637, 728 N.W.2d 652 (citation omitted). "Wisconsin courts have recognized the general disfavor of allowing collateral challenges on the basis that `they disrupt the finality of prior judgments and thereby tend to undermine confidence in the integrity of our procedures and inevitably delay and impair the orderly administration of justice.'" Id., ¶ 28 (citation omitted).

¶ 14 If Mercado and Terry wanted to challenge the validity of the default judgments entered against them, they were obligated to do so, within the time frame set forth in WIS. STAT. § 799.29, by filing motions to reopen in the actions that resulted in the default judgments, as opposed to commencing a separate lawsuit as they did here. Had Mercado and Terry timely filed a motion to reopen based on an alleged pleading deficiency, assuming a deficiency did in fact exist, in all likelihood, GE would have been able to cure the deficiency by amending its complaint or refiling. See Rsidue, 295 Wis.2d 585, ¶ 19, 721 N.W.2d 718 ("[A]lthough a failure to comply with the pleading requirements under [WIS. STAT.] § 425.109(1) might hinder a creditor's ability to obtain a judgment against a consumer, see § 425.109(3), the creditor could typically cure such a pleading deficiency by amending the complaint or re-filing the action."). Their failure to follow the statutory procedure set forth in § 799.29 precludes them from indirectly attacking the judgments now.

¶ 15 In their reply brief, responding to the argument that their sole remedy was to file motions with the small claims court under WIS. STAT. § 799.29, Mercado and Terry assert that WIS. STAT. § 425.307(1) supports their position that they can maintain a separate cause of action for alleged WCA violations.⁶ In a footnote, they concede: "[Section] 425.307(1) . . . was not specifically argued before the trial court, however, appellants generally asserted relief under chs. 421 to 427 in their complaint and their brief and specifically the remedies in ch. 425."...