Sommer v. Carr, 79-832

• Decision Date: 21 March 1980
• Docket Number: No. 79-832,79-832
• Citation: 291 N.W.2d 301,95 Wis.2d 651
• 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. Sentry Insurance Company, Third-Party Defendant-Appellant. *
• Court: Wisconsin Court of Appeals

Page 301

291 N.W.2d 301

95 Wis.2d 651

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 Sentry Insurance Company, Third-Party Defendant-Appellant.^*

No. 79-832.

Court of Appeals of Wisconsin.

Submitted on Briefs Feb. 13, 1980.

Opinion Released March 21, 1980.

Opinion Filed March 21, 1980.

Cook & Franke, S. C. and Robert F. Johnson, Milwaukee, of counsel, for third-party defendant-appellant.

deVries, Vlasak & Schallert, S. C. and Arthur J. Vlasak and Victor C. Harding, Milwaukee, for defendant and third-party plaintiff-respondent.

Before DECKER, C. J., MOSER, P. J., and CANNON, J.

DECKER, Chief Judge.

Sentry Insurance Company seeks costs and reasonably attorney fees from Prudential Property and Casualty Insurance Company, pursuant to sec. 814.025, Stats., because Prudential pursued a third-party action against Sentry after Sentry provided Prudential with all the materials necessary to demonstrate that the action was frivolous. Sentry subsequently defeated the action, using those same materials. We find that Prudential's action was frivolous and reverse the trial court's denial of costs and reasonable attorneys fees.

On February 8, 1976, an Oldsmobile driven by Patrick Carr collided with a Triumph driven by Bernadine Schaffer. John Sommer was a passenger in the Triumph. The Triumph was owned by Sommer and was being driven at the time of the accident by Schaffer with Sommer's permission.

Sommer commenced an action against Prudential, among others, on the basis of a policy of liability insurance issued by Prudential to one Edward Reski in which Prudential agreed to indemnify Bernadine Schaffer against liability arising out of her negligence in the operation of automobiles. On November 9, 1978, Prudential commenced a third-party action against Sentry on the basis of Sentry's policy of automobile liability insurance, in effect at the time of the accident, issued to Bernadine Schaffer, d/b/a Bernie's, Ltd.

Sentry answered on December 20, 1978, and on February 16, 1979, filed motions for summary judgment (sec. 802.08, Stats.) and for its costs, disbursements, and reasonable attorneys fees (sec. 814.025). By order dated April 2, 1979, Sentry's motion for summary judgment dismissing Prudential's third-party complaint was granted with costs and disbursements as provided under sec. 814.04. The court denied the relief requested pursuant to sec. 814.025 and judgment was entered on April 20, 1979.

Secs. 814.025(1) and (3) provide:

(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 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.

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

(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 trial court impliedly found that the respondent's third-party claim was not frivolous. Findings of fact by the trial court will be upset on appeal only if they are against the great weight and clear preponderance of the evidence. ¹

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 existing law." Sec. 814.025(3)(b), Stats. The policy provisions of the Sentry policy are clear and unambiguous, and as applied to the undisputed facts of the case, do not support a reasonable basis for recovery.

Relevant portions of the basic coverage and endorsement provisions ² clearly and unambiguously do not provide coverage for Schaffer with respect to the car she was driving at the time of the accident. It is undisputed that the car Schaffer was operating at the time of the accident was owned by John Sommer, and that Sommer and Schaffer were using the car on a social occasion at the time of the accident. Copies of the basic coverage portion of the policy and the endorsement were supplied to counsel for respondent by a branch claims manager of Sentry in late June of 1978. Respondent does not deny knowledge of the facts of ownership of the car or its use for the social occasion prior to its filing of the third-party complaint on November 9, 1978.

Sommer's vehicle clearly was not an "owned automobile" within the meaning of sec. V of the basic policy because Schaffer did not own it; was not a "temporary substitute automobile" within sec. V of the basic policy because Schaffer and Sommer were using the car for a social occasion and not as a substitute for a broken-down vehicle; and was not a "non-owned automobile" within sec. 2 of the endorsement because it was not being used in the business of the insured.

The respondent contends that "Sentry must cover the liability of Bernadine Schaffer (its named insured) while operating the Sommer's vehicle" because Sommer's vehicle is "a non-owned automobile for the purpose of 'this insurance,' which term includes the coverage provided by the basic policy," as well as the non-ownership endorsement and other endorsements forming a part of the policy. The respondent continues that because the definition of "non-owned automobile" does not state a limitation as to business use, the basic policy may be interpreted to provide that Schaffer is covered when using a non-owned vehicle for personal pleasure.

The clear language of the endorsement does not support such a construction. Section 1 of the endorsement, labelled "Application of Insurance" clearly restricts insurance afforded by the endorsement to non-owned automobiles only as to "use . . . in the business of the named insured." The definition section of the endorsement cannot be read to expand coverage of the basic policy to all non-owned vehicles in the face of the clear meaning of the section. In addition, the endorsement clearly states that the insurance with respect to owned vehicles applies to non-owned automobiles "subject to" the provisions which follow. Both the language and context of secs. 1 and 2 make the expansive construction urged by the respondent untenable.

We remand to the trial court to determine the amount of reasonable attorneys fees.

Judgment and order reversed and cause remanded.

* S.Ct. petition to review pending.

1 Bank of Sun Prairie v. Opstein, 86 Wis.2d 669, 676, 273 N.W.2d 279, 282 (1979). See also Guardianship & Protective Placement of Shaw, 87 Wis.2d 503, 518, 275 N.W.2d 143, 151 (1979); Perrenoud v. Perrenoud, 82 Wis.2d 36, 42-43, 260 N.W.2d 658, 661 (1978).

The respondent contends that this court must find an abuse of discretion before reversing the trial court. We disagree. Sec. 814.025(1), Stats., declares that if an action is frivolous, the court "shall award" costs and fees. Use of the word "shall" creates a presumption that the statute is mandatory. Karow v. Milwaukee County Civil Service Commission, 82 Wis.2d 565, 570, 263 N.W.2d 214, 217 (1978). The presumption is strengthened where the legislature uses "may" in the same or related statutory sections. Such use demonstrates recognition of the differences in the meanings of the two words and implies purposeful use of each. Id. at 571, 263 N.W.2d at 217. In sec. 814.025(2), the legislature provides that costs and fees "may" be assessed to either the party or attorney, thereby recognizing the...