Wis. Pub. Serv. Corp.. v. Arby Constr. Inc.

• Decision Date: 21 April 2011
• Docket Number: No. 2010AP878.,2010AP878.
• Citation: 2011 WI App 65,798 N.W.2d 715,333 Wis.2d 184
• Parties: WISCONSIN PUBLIC SERVICE CORPORATION, Plaintiff,Associated Electric & Gas Insurance Services Limited (AEGIS), Plaintiff–Appellant,†v.ARBY CONSTRUCTION, INC., Defendant–Respondent.
• Court: Wisconsin Court of Appeals

333 Wis.2d 184

798 N.W.2d 715

2011 WI App 65

WISCONSIN PUBLIC SERVICE CORPORATION, Plaintiff,Associated Electric & Gas Insurance Services Limited (AEGIS), Plaintiff–Appellant,†

v.ARBY CONSTRUCTION, INC., Defendant–Respondent.

No. 2010AP878.

Court of Appeals of Wisconsin.

Submitted on Briefs Dec. 10, 2010.Opinion Filed April 21, 2011.

On behalf of the plaintiff-appellant, the cause was submitted on the briefs of Cassandra B. Westgate and Thomas Terwilliger of Terwilliger, Wakeen, Piehler & Conway, S.C., Wausau.On behalf of the defendant-respondent, the cause was submitted on the brief of Reince R. Priebus, Charles P. Graupner, and Aaron H. Kastens of Michael Best & Friedrich LLP, Milwaukee.Before VERGERONT, P.J., LUNDSTEN and BLANCHARD, JJ.VERGERONT, P.J.

The issue on appeal is whether the circuit court correctly concluded that Associated Electric & Gas Insurance Services Limited (AEGIS) was barred on the ground of claim preclusion from bringing this action against Arby Construction, Inc. AEGIS claims in this action that it is entitled to indemnification under an indemnification contract between Arby and AEGIS's insured, Wisconsin Public Service Corporation (WPS). The circuit court agreed with Arby that claim preclusion barred AEGIS's claim against Arby because of the stipulated judgment in a prior case in which AEGIS, Arby, and WPS were defendants.

¶ 2 We conclude that AEGIS's affirmative defense in the prior action asserting Arby's contractual obligation to indemnify AEGIS as WPS's insurer was the functional equivalent of a cross-claim for purposes of claim preclusion. For that reason and others that we explain below, we conclude that all elements for claim preclusion are met and that it is properly applied in this case. Accordingly, we affirm.

BACKGROUND

¶ 3 The prior action relevant to this appeal was a personal injury action arising out of explosions that occurred while Arby was providing excavation and boring services under a contract with WPS. Under the terms of that contract, Arby was required to defend and indemnify WPS and its insurers for certain losses. While performing services under the contract with WPS, Arby struck and damaged a portion of an underground propane gas line, causing explosions that resulted in the deaths of two people and injury to several others.

¶ 4 In the prior action, the injured persons and the estates of the deceased (collectively, Brooks) named WPS, Arby, AEGIS, and a number of other entities as defendants.¹ Brooks' amended complaint alleged, and AEGIS admitted, that it had issued an excess indemnity policy that provided coverage to WPS for the alleged negligence of WPS.

¶ 5 Three pleadings in the Brooks action raised the subject of the indemnification contract between WPS and Arby. First, before AEGIS made an appearance in the Brooks action, WPS filed a cross-claim against Arby under the indemnification contract. This cross-claim alleged that Arby and its insurers were obligated to defend and indemnify WPS and its insurers for any expenses in the action or any verdict against WPS and its insurers. Arby answered the cross-claim, denying liability.

¶ 6 Second, WPS and AEGIS filed a joint answer in response to the amended complaint in which they raised the indemnification contract as an affirmative defense. They alleged that, based upon the contract between WPS and Arby, Arby and its insurers were required to fully defend and indemnify WPS and its insurers with respect to any negligence alleged against WPS and any damages asserted against WPS or its insurers.

¶ 7 Third, AEGIS filed its own answer to the amended complaint in which it incorporated any affirmative defense raised by its insureds. Specifically, AEGIS alleged that it was liable only if one or more of its insureds were liable, that “any affirmative defense available to its insureds [was] available to it,” and that it was therefore “incorporat[ing] by reference any affirmative defense raised by any of its insureds.” WPS was identified as one of its insureds.

¶ 8 The parties eventually settled the prior Brooks action in a confidential agreement pursuant to which various defendants, including Arby, WPS, and AEGIS paid certain sums. The order for dismissal entered pursuant to the settlement agreement provides in full:

WHEREAS, upon representation of counsel, all issues in this case are resolved and all claims are settled with the exception of certain contribution and indemnification claims which will be addressed outside the confines of this lawsuit;

NOW, THEREFORE, IT IS HEREBY ORDERED:

1. The cross-claims for contribution asserted by Arby Construction and Ferrellgas against each other, and the contractual indemnification claim asserted by Wisconsin Public Service Corporation against Arby Construction and its insurers, are dismissed without prejudice and without costs.

2. This lawsuit, together with any and all claims set forth in the pleadings other than those referenced in paragraph one, above, is dismissed on the merits, with prejudice, but without costs. [Emphasis added.]

¶ 9 After the Brooks action settled, WPS and AEGIS filed this action seeking indemnification from Arby under the indemnification agreement for the amounts each had paid in settlement in the Brooks action and for WPS's legal fees and expenses in defending that action. Arby moved to dismiss AEGIS's claim on the ground that the order of dismissal in the Brooks action bars AEGIS under the doctrine of claim preclusion from pursuing the contractual indemnification claim against Arby. Specifically, Arby argued that the dismissal was “with prejudice” except as to the specifically identified cross-claims, and, since these identified cross-claims did not include AEGIS's claim against Arby, that claim was dismissed with prejudice. Both parties submitted documents from the Brooks action and the court considered them in its decision.

¶ 10 The circuit court agreed with Arby and granted its motion to dismiss AEGIS's claim on the ground of claim preclusion.

DISCUSSION

¶ 11 AEGIS contends on appeal that the dismissal of its current claim against Arby was error because AEGIS did not in the prior Brooks action file a cross-claim against Arby for indemnification under the contract between WPS and Arby. According to AEGIS, without this cross- claim—which, AEGIS points out, it was not compelled to file—the requirements for claim preclusion are not met.

¶ 12 Arby responds that the affirmative defense AEGIS asserted in its joint answer with WPS and incorporated by reference in its own answer in the Brooks action was the functional equivalent of a cross-claim for contract indemnification against Arby in that action. This is so, asserts Arby, because in that affirmative defense AEGIS plainly sought recovery from Arby under the contract if AEGIS had any liability because of WPS. According to Arby, the requirements for claim preclusion are met and the dismissal with prejudice in the stipulated order in the Brooks action included AEGIS's claim for contractual indemnification from Arby.²

I. Standard of Review and Background Law

¶ 13 We review the circuit court's order of dismissal as we would a decision granting a motion for summary judgment. Summary judgment procedure applies when a circuit court considers matters outside the pleadings on a motion to dismiss based on claim preclusion. Wis. Stat. § 802.06(2)(a) 8. & (2)(b) (2009–2010).³ A party is entitled to summary judgment if there are no genuine issues of material fact and that party is entitled to summary judgment as a matter of law. § 802.08(2). In reviewing the grant or denial of a summary judgment, we apply the same methodology as the circuit court, and our review is de novo. Green Spring Farms v. Kersten, 136 Wis.2d 304, 314–16, 401 N.W.2d 816 (1987). In this case neither party suggests there are factual disputes. Thus, the question whether claim preclusion applies given the undisputed facts presents a question of law, which we review de novo. Wickenhauser v. Lehtinen, 2007 WI 82, ¶ 15, 302 Wis.2d 41, 734 N.W.2d 855.

¶ 14 Generally, under the doctrine of claim preclusion, previously called res judicata, “a final judgment is conclusive in all subsequent actions between the same parties [or their privies] as to all matters which were litigated or which might have been litigated in the former proceedings.” Id., ¶ 22 (citations omitted). The purpose of the doctrine is to prevent repetitive litigation. DePratt v. West Bend Mut. Ins. Co., 113 Wis.2d 306, 311, 334 N.W.2d 883 (1983). To this end, the doctrine of claim preclusion seeks “to promote judicial economy and to ‘conserve the resources the parties would expend in repeated and needless litigation of issues that were, or that might have been resolved in a single prior action.’ ” Mrozek v. Intra Fin. Corp., 2005 WI 73, ¶ 28, 281 Wis.2d 448, 699 N.W.2d 54 (quoting Hanlon v. Town of Milton, 2000 WI 61, ¶ 20, 235 Wis.2d 597, 612 N.W.2d 44).

¶ 15 The elements of claim preclusion are: “(1) an identity between the parties or their privies in the prior and present suits; (2) an identity between the causes of action in the two suits; and (3) a final judgment on the merits in a court of competent jurisdiction.” Wickenhauser, 302 Wis.2d 41, ¶ 22, 734 N.W.2d 855. The final judgment on the merits need not be the result of actual litigation. Great Lakes Trucking Co. v. Black, 165 Wis.2d 162, 168–69, 477 N.W.2d 65 (Ct.App.1991).⁴ Rather, a final judgment may have preclusive effect even if it is a stipulated judgment, as long as it is a judgment on the merits. Id.

II. Cross–Claims and Claim Preclusion

¶ 16 As a threshold matter we address AEGIS's contention that a cross-claim is permissive and therefore it was not required to file a cross-claim against Arby in the prior Brooks action. Arby does not appear to dispute this proposition and we agree it is correct. We explain why we agree in order to provide a more complete picture of the doctrine of claim...