Split Rock v. Lumber Liquidators

• Court: Wisconsin Supreme Court
• Citation: Split Rock v. Lumber Liquidators, 2002 WI 66, 253 Wis.2d 238, 646 N.W.2d 19 (Wis. 2002)
• Decision Date: 21 June 2002
• Docket Number: No. 00-1100.,00-1100.
• Parties: SPLIT ROCK HARDWOODS, INC., a Wisconsin Corporation, Plaintiff-Respondent, v. LUMBER LIQUIDATORS, INC., a Massachusetts Corporation, Defendant-Appellant.

253 Wis.2d 238

2002 WI 66

646 N.W.2d 19

SPLIT ROCK HARDWOODS, INC., a Wisconsin Corporation, Plaintiff-Respondent, v. LUMBER LIQUIDATORS, INC., a Massachusetts Corporation, Defendant-Appellant.

No. 00-1100.

Supreme Court of Wisconsin.

Oral argument September 13, 2001.

Decided June 21, 2002.

For the defendant-appellant there was a brief by Michael S. Kreidler and Stich, Angell, Kreidler, Brownson & Ballou, P.A., Minneapolis, Minnesota, and oral argument by Michael S. Kreidler.

For the plaintiff-respondent there was a brief by Matthew F. Anich and Dallenbach, Anich & Haukaas, S.C., Ashland, and oral argument by Matthew F. Anich.

¶ 1. DAVID T. PROSSER, J.

In Wisconsin, a civil action seeking a personal judgment is commenced when a summons and complaint naming a defendant are filed with the court, provided that service of an authenticated copy of the summons and of the complaint is made upon the defendant within 90 days after filing. Wis. Stat. § 801.02(1) (1999-2000).¹

¶ 2. After these papers have been served upon the defendant, the defendant has 45 days to serve a written answer upon the plaintiff. Wis. Stat. §§ 801.09(2)(a); 802.06(1). The defendant must also file the answer with the court "within a reasonable time after service." Wis. Stat. § 801.14(4). ¶ 3. This case presents several questions about the interpretation and enforcement of Wis. Stat. § 801.14(4). Among these questions are the following:

(1) What is "a reasonable time after service" for a defendant to file an answer with the court?

(2) May a circuit court strike a defendant's answer if the answer is not filed within a reasonable time after service?

(3) If a circuit court has discretion to strike a defendant's answer when the answer is not filed within a reasonable time after service, may the court strike the answer without finding that either the moving party or the court was prejudiced by the late filing?

(4) If a circuit court has discretion to strike a defendant's answer when the answer is not filed within a reasonable time after service, may the circuit court also enter a default judgment?

¶ 4. This case comes to this court on certification by the court of appeals, pursuant to Wis. Stat. § (Rule) 809.61. It is an appeal from a judgment of the Circuit Court for Bayfield County, Thomas J. Gallagher, Judge. The circuit court struck the defendant's answer to the plaintiff's complaint on grounds that the answer was not timely filed with the court. The court concluded that timely service of the defendant's answer without filing it "within a reasonable time after service" was not sufficient to join issue. Thus, it entered a default judgment for the plaintiff. The defendant appealed. The court of appeals certified variations of the second, third, and fourth questions listed above.

¶ 5. We conclude that a circuit court may not enter a default judgment against a defendant on grounds that the defendant failed to file an answer with the court "within a reasonable time after service" unless the court first determines that the late filing prejudiced either the plaintiff or the court. Because the circuit court in this case neither discussed prejudice nor made any finding of prejudice before entering a default judgment against the defendant, the court erroneously exercised its discretion. As a result, we reverse the judgment and remand the case for further proceedings.

BACKGROUND AND PROCEDURAL HISTORY

¶ 6. The background facts are taken from the pleadings. Split Rock Hardwoods, Inc. (Split Rock) is a Wisconsin corporation that manufactures and sells hardwood flooring. Lumber Liquidators, Inc. (Lumber Liquidators) is a Massachusetts corporation that purchases and resells hardwood flooring. In its complaint, Split Rock alleged that on September 23, 1999, the parties made an oral agreement that Lumber Liquidators would purchase a quantity of hardwood flooring from Split Rock, at a particular price per square foot, and pay Split Rock for the flooring via wire transfer.

¶ 7. Split Rock delivered the flooring to Lumber Liquidators "F.O.B. at plaintiffs mill" on September 24, 1999, and the shipment arrived at a Lumber Liquidators warehouse in Illinois on September 28. Upon delivery, Split Rock issued an invoice for approximately $31,000. Lumber Liquidators disputed some aspects of the transaction, but it acknowledged that it had received the flooring. It claimed, however, that some of the flooring was water damaged. Split Rock and Lumber Liquidators discussed adjusting the purchase price to account for the water damage, but they came to no agreement and Lumber Liquidators did not transfer funds to pay for the flooring. ¶ 8. On October 12, 1999, Split Rock filed suit in the Bayfield County Circuit Court, alleging breach of contract and false representation. It served its summons and complaint upon Lumber Liquidators on October 27, 1999. Lumber Liquidators was required to answer within 45 days of receiving the complaint, but it asked Split Rock for an extension of time to answer so that it could retain Wisconsin counsel. In a letter dated December 7, 1999, Split Rock agreed to extend the deadline for Lumber Liquidators' answer until December 22, 1999. Lumber Liquidators served Split Rock with its answer on December 21, 1999.²

¶ 9. Lumber Liquidators did not, however, simultaneously file its answer with the circuit court. Consequently, on January 31, 2000, the Bayfield County Clerk of Court's office informed Split Rock that no answer had been filed as of that date. On February 2, 2000, Split Rock filed a motion pursuant to Wis. Stat. § 806.02 to strike Lumber Liquidators' answer and enter default judgment. In response, Lumber Liquidators mailed its answer to the court on February 4, 2000, 45 days after its December 21, 1999, service of answer on Split Rock. Both parties filed affidavits in support of their respective positions.

¶ 10. The circuit court held a hearing by telephone on February 10, 2000. After considering the parties' arguments, the circuit court granted Split Rock's motion to strike Lumber Liquidators' answer, and it entered default judgment. The court stated:

The filing was late in this case, there's no question about that, and I'm not going to find that 45 days was a reasonable time after service to file an answer when the general practice is that you do them at the same time. [W]hen you send the answer out to people you also send the original to the Court. The issue then really comes down to whether or not there's been joinder of issue under 806.02.... I think at the present time issue is not joined until service and filing of the answer, so I'm going to grant the plaintiff's motion to strike the defendant's answer and enter default judgment.

¶ 11. Lumber Liquidators appealed, and the court of appeals certified the case to this court. On appeal, Lumber Liquidators contends that filing the answer 45 days after service was "within a reasonable time after service," as provided in Wis. Stat. § 801.14(4), and it asserts that the circuit court erroneously exercised its discretion in granting the motion to strike the answer and enter default judgment.

¶ 12. Conversely, Split Rock claims that by failing to file an answer until 45 days after service, Lumber Liquidators failed to file "within a reasonable time after service" and the circuit court properly exercised its discretion in granting the motion to strike the answer and enter default judgment.

ANALYSIS

¶ 13. This case requires an examination of several provisions of the Wisconsin Rules of Civil Procedure. This court adopted revised rules of civil procedure in 1975, effective January 1, 1976. Wisconsin Rules of Civil Procedure, 67 Wis. 2d 585 (1975). The court and the legislature have modified the rules from time to time over the last quarter century, but the 1975 rules remain largely intact.

[1, 2]

¶ 14. Some of the Wisconsin rules are patterned after the Federal Rules of Civil Procedure. Charles D. Clausen & David P. Lowe, The New Wisconsin Rules of Civil Procedure Chapters 801-803, 59 Marq. L. Rev. 1, 2 (1976). Hence, federal rules decisions are often helpful in interpreting the Wisconsin rules. Nevertheless, there are distinctions between the federal rules and the state rules,³ and Wisconsin appellate decisions constitute the controlling interpretation of the state rules.

A. A Reasonable Time After Service

[3]

¶ 15. The first issue is, what is a "reasonable time after service" for a defendant to file an answer with the court? The answer to this question requires an interpretation of Wis. Stat. § 801.14(4)—a court-made rule. In interpreting a court rule, our objective is to discern and give effect to the intent of this court. State v. Sorenson, 2000 WI 43, ¶ 15, 234 Wis. 2d 648, 611 N.W.2d 240 (citing County of Door v. Hayes-Brook, 153 Wis. 2d 1, 21-22, 449 N.W.2d 601 (1990) (Abrahamson, J., concurring)).

¶ 16. Wisconsin Stat. § 801.14 is entitled "Service and filing of pleadings and other papers." This rule is based upon Rule 5 of the Federal Rules. Clausen & Lowe, supra, at 24. The rule emphasizes in subsection (1) that, with few exceptions, a copy of all pleadings, written motions, and other important papers must be served upon all other parties.⁴

¶ 17. The rule then provides in subsection (4) that virtually all papers that are required to be served also "shall be filed with the court within a reasonable time after service."⁵ The "papers" covered by this subsection include more than answers. ¶ 18. Under the present rule, filing an answer with the court accomplishes at least two objectives: First, filing certifies to the court that the answer has been served upon the plaintiff and thereby eliminates the need for a separate affidavit of service. Second, filing notifies the court that issue has been joined and the case is ready to proceed.⁶

¶ 19. The present rule is a departure from prior law, which permitted some papers, including answers, to be filed with the...