Sukala v. Heritage Mut. Ins. Co., 03-0173.

• Citation: 2004 WI App 128,275 Wis.2d 469,685 N.W.2d 809
• Decision Date: 17 June 2004
• Docket Number: No. 03-0173.,03-0173.
• Parties: Dawn SUKALA and John Sukala, Plaintiffs-Appellants, v. HERITAGE MUTUAL INSURANCE COMPANY and Western National Mutual Insurance Company, Defendants-Respondents.
• Court: Court of Appeals of Wisconsin

275 Wis.2d 469

2004 WI App 128

685 N.W.2d 809

Dawn SUKALA and John Sukala, Plaintiffs-Appellants, v. HERITAGE MUTUAL INSURANCE COMPANY and Western National Mutual Insurance Company, Defendants-Respondents.¹

No. 03-0173.

Court of Appeals of Wisconsin.

Oral argument January 9, 2004.

Decided June 17, 2004.

On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of D. James Weis of Habush Habush & Rottier, S.C., Rhinelander, and Virginia M. Antoine of Habush Habush & Rottier, S.C., Milwaukee. There was oral argument by D. James Weis.

On behalf of the defendant-respondent, Heritage Mutual Insurance Company, the cause was submitted on the brief of Mark A. Klinner and Michael J. Roman of Zalewski, Klinner & Kramer, LLP, Wausau. There was oral argument by Michael J. Roman.

On behalf of the defendant-respondent, Western National Mutual Insurance Company, the cause was submitted on the brief of Nadine I. Davy of Anderson, O'Brien, Bertz, Skrenes & Golla, Stevens Point. There was oral argument by Nadine I. Davy.

Before Deininger, P.J., Dykman and Higginbotham, JJ.

¶ 1. DYKMAN, J.

Dawn and John Sukala (the Sukalas) appeal from an order denying them relief under WIS. STAT. § 806.07(1)(h) (2001-02).² They assert that the trial court erroneously exercised its discretion when it found that a change in case law did not justify opening the judgment. We agree and reverse.

FACTS

¶ 2. Because our review is limited to the trial court's denial of relief under WIS. STAT. § 806.07(1)(h), we need not consider the merits of the underlying insurance claims in this case. We set forth only those facts relevant to the § 806.07(1)(h) motion, which focuses primarily on the procedural history of this case and supreme court decisions rendered after the trial court entered judgment. For an explanation of the facts of the underlying insurance claims see Sukala v. Heritage Mutual Insurance Co., 2000 WI App 266, 240 Wis. 2d 65, 622 N.W.2d 457 (Sukala I).

¶ 3. The Sukalas sued respondents to recover under automobile insurance policies with underinsured motorist (UIM) coverage. The UIM coverage contained reducing clauses. On April 14, 1999, the trial court entered an order and judgment in favor of the insurers. The Sukalas appealed, raising two issues: (1) whether Heritage Mutual Insurance Company (Heritage) complied with the notification requirements in WIS. STAT. § 631.36(5); and (2) whether the statute permitting reducing clauses, WIS. STAT. § 632.32(5)(i), was constitutional. After the parties filed their briefs, the supreme court decided Dowhower v. West Bend Mutual Insurance Co., 2000 WI 73, 236 Wis. 2d 113, 613 N.W.2d 557. There, the supreme court held that § 632.32(5)(i) was constitutional and that:

an insurer may reduce payments made pursuant to a UIM policy by amounts received from other legally responsible persons or organizations, provided that the policy clearly sets forth that the insured is purchasing a fixed level of UIM recovery that will be arrived at by combining payments made from all sources.

Id., ¶ 33. We allowed the parties in Sukala I to address the issue of policy ambiguity at oral argument. We concluded that Dowhower disposed of the Sukalas' constitutionality claims. We held that the policy was unambiguous. Accordingly, we affirmed the trial court's decision. The supreme court denied the Sukalas' petition for review on April 5, 2001.

¶ 4. While we were considering Sukala I, Badger Mutual Insurance Co. v. Schmitz was also being litigated. Badger Mut. Ins. Co. v. Schmitz, 2002 WI 98, 255 Wis. 2d 61, 647 N.W.2d 223. Schmitz raised the issue of whether a UIM reducing clause was unenforceable because it rendered UIM coverage ambiguous or illusory. The trial court held that the reducing clauses were unenforceable because the policy language did not clearly set forth the insurer's right to reduce liability. On appeal, we relied on our decision in Sukala I and held that the policy was enforceable because the reducing clause was unambiguous. Accordingly, we reversed the trial court's order.

¶ 5. The supreme court granted a petition for review in Schmitz on October 23, 2001. It reversed on July 10, 2002, concluding that a reviewing court must examine "an unambiguous reducing clause in the context of the entire policy to determine whether the coverage provided is understandable and clear. If the coverage provided is misleading and unclear, the policy is ambiguous, or worse, and the clause reducing UIM coverage is not enforceable." Schmitz, 255 Wis. 2d 61, ¶ 49. In reaching this conclusion, the supreme court addressed Sukala I, where we concluded:

[T]hat under Dowhower and the declared public policy of the legislature in WIS. STAT. § 632.32(5)(i), UIM reducing clauses complying with § 632.32(5)(i) cannot render UIM coverage "illusory." Once we have concluded that the UIM provisions of a policy are unambiguous, as we have here, then our inquiry is at an end.

Sukala I, 240 Wis. 2d 65, ¶ 20. The supreme court considered this reasoning ambiguous because

the Sukala court shifted terms, moving from the reducing clause to "the UIM provisions" of the policy, although the two could easily be read as one and the same. A policy in which all "the UIM provisions" are unambiguous is different from a policy in which only the reducing clause is unambiguous. In any event, the concluding sentence implies that once the reducing clause is found to be unambiguous, the inquiry is at an end. That is incorrect because Dowhower contemplates consideration of the entire policy.

Schmitz, 255 Wis. 2d 61, ¶ 42 (citations omitted).

¶ 6. In this case, Sukala II, the trial court held a hearing concerning the developments in case law since it entered a judgment validating the reducing clauses in the Sukalas' policies. In its oral decision, the court compared the facts here to those in Mullen v. Coolong, 153 Wis. 2d 401, 406, 451 N.W.2d 412 (1990) (Mullen II) and reasoned that the inequity in Mullen II derived from contrary constructions of the same policy. It also recognized that the Sukalas had signed a release for Western National Mutual Insurance Company (Western) and a stipulated dismissal for Heritage. It noted that seven months passed between the time the supreme court denied review in Sukala I and granted review in Schmitz. Finally, the trial court reasoned that the supreme court would have explicitly overruled Sukala I if its result was incorrect. The court explained,

[I]t becomes very difficult for me to say that the judgment ought to be reopened and find some extraordinary circumstance, other than the fact that there's a new precedent in the Court of Appeals. And I think that for me to reopen simply on the ground that there's a new precedent ... or new language interpreting the precedent is inappropriate.

The trial court concluded that no extraordinary circumstances justified relief and denied the Sukalas' WIS. STAT. § 806.07(1)(h) motion. The Sukalas appeal.

STANDARD OF REVIEW

¶ 7. Whether to grant relief from a judgment under WIS. STAT. § 806.07(1)(h) lies within the discretion of the trial court. Mullen, 153 Wis. 2d at 406. We will reverse only if the trial court erroneously exercised its discretion. Id. "The term `discretion' contemplates a process of reasoning which depends on facts that are in the record or reasonably derived by inference from the record and yields a conclusion based on logic and founded on proper legal standards." Id. A trial court erroneously exercises its discretion when it bases a decision on an error of law. State v. Brunton, 203 Wis. 2d 195, 202, 552 N.W.2d 452 (Ct. App. 1996).

DISCUSSION

¶ 8. WISCONSIN STAT. § 806.07 authorizes the court to relieve a party from a judgment, order, or stipulation in certain circumstances. Paragraph 806.07(1)(h) is a catch-all provision that permits relief for any "reasons justifying relief from the operation of the judgment." It "gives the trial court broad discretionary authority and invokes the pure equity power of the court." Mullen II, 153 Wis. 2d at 407. Courts construe this statute "to achieve a balance between the competing values of finality and fairness in the resolution of disputes." Id.

¶ 9. "There is no simple rule to guide the court in deciding whether or not to sunburst or how to sunburst a decision."³Harmann v. Hadley, 128 Wis. 2d 371, 379, 382 N.W.2d 673 (1986). To start, we turn to Mullen II for some guidance on when relief under WIS. STAT. § 806.07(1)(h) is appropriate. In Mullen II, the supreme court denied Mullen's petition for review and then "accepted certification of [Nicholson v. Home Ins. Co.] which posed the identical question of law raised by Mullen in her petition for review." Mullin II at 404. In Nicholson, the court specifically overruled Mullen I. Id. Mullen, apparently unaware that Nicholson was pending, settled her claim and stipulated to dismissing the action. Id. After Nicholson was released, Mullen moved for relief from the stipulated dismissal order and reentry of judgment pursuant to § 806.07. Id. The supreme court affirmed the trial court's decision to grant relief because Mullen was "a victim of circumstance." Id. at 408. It reasoned that it "reached the precise result [in Nicholson that] Mullen advocated in her petition for review in Mullen I." Id. It concluded that "[u]nder these unique facts, the result reached by the trial court [was] not an abuse of discretion." Id.

¶ 10. Since then, the court has clarified its ruling in Mullen II:

[T]his court did not promulgate a two-part test under which a plaintiff must show that this court denied review of an issue at the same time an identical issue was before this court in another case. Mullen II merely set forth one example of an appropriate exercise of discretion and did not, in any way, limit the circuit court's authority to grant relief pursuant to sec. 806.07, Stats.

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