Sommer v. Carr

• Decision Date: 06 January 1981
• Docket Number: No. 79-832,79-832
• Citation: 299 N.W.2d 856,99 Wis.2d 789
• Parties: John SOMMER, Plaintiff, v. Patrick J. CARR, American Standard Insurance Company of Wisconsin, The AmericanInsurance Company, Defendants, Prudential Property and Casualty Insurance Company, Defendant and Third-PartyPlaintiff-Respondent-Petitioner, Sentry Insurance Company, Third-Party Defendant-Appellant.
• Court: Wisconsin Supreme Court

Page 856

299 N.W.2d 856

99 Wis.2d 789

John SOMMER, Plaintiff, v. Patrick J. CARR, American Standard Insurance Company of

Wisconsin, The AmericanInsurance Company, Defendants,

Prudential Property and Casualty Insurance Company,

Defendant and Third-PartyPlaintiff-Respondent-Petitioner,

Sentry Insurance Company, Third-Party Defendant-Appellant.

No. 79-832.

Supreme Court of Wisconsin.

Argued Nov. 25, 1980.

Decided Jan. 6, 1981.

Arthur J. Vlasak and Stuart B. Eiche, Milwaukee, argued, for petitioner; Roger H. Weede and deVries, Vlasak & Schallert, S.C., Milwaukee, on brief.

Robert F. Johnson, Milwaukee, argued, for third-party-defendant-appellant; Cooke & Franke, S.C., Milwaukee, on brief.

STEINMETZ, Justice.

Prudential Property and Casualty Insurance Company (Prudential) seeks review of the court of appeals decision. That court found Prudential's third party complaint was frivolous and remanded the case to the trial court for the allowance of costs and reasonable attorney fees from Prudential to Sentry Insurance Company (Sentry) pursuant to sec. 814.025, Stats.

Prudential was one of several defendants named in a complaint by the plaintiff. Prudential then served a third party complaint on Sentry. Sentry answered denying applicability of its policy to the accident in which plaintiff sustained injury. Sentry claimed lack of coverage, knowledge of that deficiency by Prudential and that company's attorney and that the third party action was frivolous and therefore Sentry was entitled to costs and reasonable attorney fees pursuant to sec. 814.025, Stats.

Sentry filed a motion for summary judgment which was granted dismissing Prudential's third party complaint with costs and disbursements as provided under sec. 814.04, Stats. The trial court denied relief requested pursuant to sec. 814.025 and judgment was entered on April 20, 1979.

Sec. 814.025, Stats., provides:

"814.025 Costs upon frivolous claims and counterclaims. (1) If an action or special proceeding commenced or continued by a plaintiff or a counterclaim, defense or cross complaint commenced, used or continued by a defendant is found, at any time during the proceedings or upon judgment, to be frivolous by the court, the court shall award to the successful party costs determined under s. 814.04 and reasonable attorney fees.

"(2) The costs and fees awarded under sub. (1) may be assessed fully against either the party bringing the action, special proceeding, cross complaint, defense or counterclaim or the attorney representing the party or may be assessed so that the party and the attorney each pay a portion of the costs and fees.

"(3) In order to find an action, special proceeding, counterclaim, defense or cross complaint to be frivolous under sub. (1), the court must find one or more of the following:

"(a) The action, special proceeding, counterclaim, defense or cross complaint was commenced, used or continued in bad faith, solely for purposes of harassing or maliciously injuring another.

"(b) The party or the party's attorney knew, or should have known, that the action, special proceeding, counterclaim, defense or cross complaint was without any reasonable basis in law or equity and could not be supported by a good faith argument for an extension, modification or reversal of existing law."

By not allowing costs pursuant to sec. 814.025, Stats., the court of appeals reasoned the trial court impliedly found Prudential's third party claim was not frivolous. No findings of fact were made by the trial court as a foundation for that conclusion. ¹

The court of appeals then held that findings of fact of a trial court will be upset on appeal if they are against the great weight and clear preponderance of the evidence. Bank of Sun Prairie v. Opstein, 86 Wis.2d 669, 676, 273 N.W.2d 279 (1979). See also, Guardianship & Protective Placement of Shaw, 87 Wis.2d 503, 518, 275 N.W.2d 143 (Ct.App.1979); Perrenoud v. Perrenoud, 82 Wis.2d 36, 42-43, 260 N.W.2d 658 (1978).

The court of appeals applied the proper review standard, i. e., "against the great weight and clear preponderance of the evidence" and not the standard requested by Prudential, i. e., "a finding of an abuse of discretion."

The statute requires the trial judge in subsec. (3) to find whether "(a) The action, special proceeding, counterclaim, defense or cross complaint was commenced, used or continued in bad faith, solely for purposes of harassing or maliciously injuring another" (or) "(b) The party or the party's attorney knew, or should have known, that the action, ... was without any reasonable basis in law or equity and could not be supported by a good faith argument for an extension, modification or reversal of existing law." The statute does not allow the trial judge to conclude frivolousness or lack of it without findings stating which statutory criteria were present, harassment or knowledge or imputed knowledge that there was not "any reasonable basis in law or equity" for the position taken.

The court of appeals was not reversing the trial court's findings. It made its own findings and stated therefore the trial court's failure to impose costs and reasonable attorney fees was in error.

Attitudes such as bad faith, harassment, maliciousness solely for injuring another do not appear in this record unless the trial judge finds them present. If he had done so or denied their presence by findings then the court of appeals would have been able to review them.

Knowledge or imputed knowledge of the lack of any reasonable basis in law or equity for the stated position or proposition must be found present or lacking by the trial judge before there is a finding to review on appeal.

If there is not enough in the record for the trial judge to make such findings leading to a conclusion of frivolousness or its absence, then the trial court must conduct a hearing for the purpose of reaching such findings and resulting conclusion.

This section of the statute is a reaction to litigants being sued when there was no reason for their legal involvement except bad faith, maliciousness or harassment by someone to injure them. Before this section was adopted there was no way the innocent party could recoup legal expenses without starting a separate action if such relief was available at all for malicious prosecution or abuse of process. ²

Also, there were people who believed they were being sued to be "blackmailed" into paying something in settlement or else face costs of litigation and they demanded protection.

This court prior to adoption of this section of the statute adopted DR 7-102 which compels an attorney to represent his client "zealously within the bounds of the law." The rules governing attorney ethics adopted by this court at 43 Wis.2d lix, lxi (1970), accepting the American Bar Association Disciplinary Rule, states at DR 7-102(A)(1) of the Code of Professional Responsibility:

"(A) In his representation of a client, a lawyer shall not:

"(1) File a suit, assert a position, conduct a defense, delay a trial, or take other action on behalf of his client when he knows or when it is obvious that such action would serve merely to harass or maliciously injure another.

"(2) Knowingly advance a claim or defense that is unwarranted under existing law, except that he may advance such claim or defense if it can be supported by good faith argument for an extension, modification, or reversal of existing law."

Also, every attorney licensed to practice law in Wisconsin has sworn that he/she "will not counsel or maintain any suit or proceeding which shall appear ... to be unjust, or any defense, except such as I (he/she) believe(s) to be honestly debatable under the law of the land." ³

There is a fear in administering sec. 814.025, Stats., that upon a trial court finding a position to be frivolous that automatically the Board of Attorneys Professional Responsibility will investigate the involved attorney for unethical conduct. In fact, there was a notice in the November 1980, Vol. 53, No. 11 issue of the Wisconsin Bar Bulletin that the board intended to conduct such investigations. ⁴

There is also a fear that the strict application of sec. 814.025, Stats., will stifle the innovative theories of law being presented in court, whether such theories be those of plaintiffs or defendants.

This court has already ruled that sec. 814.025, Stats., does not apply to city attorneys prosecuting ordinance violations in the City of Janesville v. Wiskia, 97 Wis.2d 473, 293 N.W.2d 522 (1980). The court said at page 482, 293 N.W.2d 522:

"We believe that the application of sec. 814.025, Stats., allowing defendants to recover costs for frivolous claims in quasi-criminal ordinance violations would be inconsistent with our reasoning in prior case law allowing a prosecutor to exercise his independent judgment and discretion. If we were to allow the recovery of monetary sanctions in an action subsequently found to be frivolous, we would adversely inhibit the prosecutor's free exercise of discretion and interfere with responsible and effective enforcement of the laws. Therefore, we hold that sec. 814.025, as enacted, is not applicable in quasi-criminal actions (ordinance violations) where the decision to proceed with the action is based on prosecutorial discretion."

The court of appeals analyzed the affidavits, documentation and pleadings as the trial court had done to grant the motion for summary judgment. The court of appeals held as follows:

"The great weight and clear preponderance of the evidence requires a finding that Prudential's claim was frivolous because Prudential or its attorney should have known, on the basis of the information provided by Sentry, that the cross-complaint was 'without any reasonable basis in law or equity and could not be supported by a good faith argument for an extension, modification or reversal of the existing law.' Sec. 814.025(3)(b), Stats. The policy provisions of the Sentry...