Court Opinion

ID: 9584876
Source: CourtListenerOpinion
Date Created: 2023-08-21 22:53:31.391678+00
Date Added: 2024-06-11T15:20:10.748807
License: Public Domain

N. PATRICK CROOKS, J.
¶ 104. (dissenting). I cannot join the majority opinion because Chapter 409 of the Wisconsin Statutes does not control the result of this case. The majority opinion is putting the cart before the horse, beginning its analysis with Chapter 409, before addressing the doctrine of claim preclusion. In my view, the court of appeals correctly held that National Operating is precluded from bringing its claims against MONY and Bridgeview. The March 28, *8821996, default declaratory judgment extinguished any rights guaranteed to National Operating under Chapter 409. As a result, National Operating is barred under the doctrine of claim preclusion from asserting its rights under Chapter 409 in the present case.
¶ 105. I have no substantial dispute with the majority opinion's discussion of the doctrine of claim preclusion, however, I strongly disagree with the majority's application of that doctrine to the facts of this case. I agree with the majority opinion that there is common identity among the parties. Majority op. at ¶ 71. In the declaratory judgment action, MONY, National Operating, and Bridgeview were the named parties. In the present case, MONY, National Operating, and Bridgeview are the named parties. I also agree with the majority that the previous action is a final judgment, on the merits, in a court of competent jurisdiction. Id. For the purposes of a claim preclusion analysis, a default judgment is a final judgment. See A.B.C.G. Enters., Inc. v. First Bank Southeast, 184 Wis. 2d 465, 481, 515 N.W.2d 904 (1994). In MONY's declaratory judgment action, the circuit court granted a default judgment against National Operating. Pl.Appellant-Pet’r App. at 136. The declaratory judgment in favor of MONY is a final judgment for claim preclusion purposes.
¶ 106. Where I disagree with the majority opinion is the conclusion that the substance of the present claims was not aptly pleaded by MONY and was, therefore, not fully decided by the circuit court. The analysis concerns what was actually decided in the declaratory judgment action and what material issuable facts were well pleaded in MONY's complaint. See Barbian v. Lindner Bros. Trucking Co., 106 Wis. 2d 291, 297, 316 *883N.W.2d 371 (1982); Klaus v. Vander Heyden, 106 Wis. 2d 353, 359-60, 316 N.W.2d 664 (1982).
¶ 107. I begin the analysis, therefore, by examining what was well pleaded in MONY's complaint for declaratory judgment. The majority opinion acknowledges the comprehensive nature of the information contained within MONY's complaint:
MONY meticulously details the relationships and transactions among the parties and attaches and incorporates by reference about 70 pages of exhibits, including the Underlying Note and Security Agreement, the Wrap Note and Purchase Money Mortgage along with the Security Agreement, and the Loan Modification and Extension Agreement along with the Assignment.
Majority op. at ¶ 75. In its complaint MONY asked that:
[t]he Plaintiff [MONY] seeks a Declaratory Judgment of this Court confirming its assumption of the-Notes between the Defendant, National Operating, L.P., and the Defendant, Bridgeview Plaza Partnership; extinguishing the rights of the Defendant, National Operating, L.P., as a mortgagee under said mortgage; extinguishing the rights of the Defendant, National Operating, L.P., as payee under the Note; and confirming the Plaintiffs interest as primary mortgagee and holder of the Note and Mortgage declared herein.
Compl. of MONY at 5 (emphasis added). The Assignment, which was attached to MONY's complaint for declaratory judgment, stated, in part:
NOW, THEREFORE, Assignor does hereby assign to Assignee all of its right, title and interest in those certain rights and remedies granted in the *884Wrap Note and Mortgage by Bridgeview, to Assignor.
At any time after default, under the Wrap Note and Mortgage, Assignee may exercise said rights and remedies at such time and instance Assignor would be able to exercise those rights and remedies, upon notice to and without recourse from Assignor.
Pl.-Appellant-Pet'r App. at 125-26 (emphasis added).
¶ 108. The broad language of MONY's complaint for declaratory judgment, and the extensive exhibits attached thereto, establish that MONY was seeking all rights in the Wrap Note and Mortgage. In its complaint, MONY asked the circuit court to confirm its assumption of the Wrap Note and Mortgage between National Operating and Bridgeview. Nowhere in the complaint is there a statement that this assumption is subject to National Operating's right of reconveyance or right to any surplus equity. In addition, MONY asked the circuit court to extinguish the rights of National Operating to the Wrap Note and Mortgage. In its complaint, MONY did not ask that all of National Operating's rights would be extinguished, except for the right to reconveyance and the right to any surplus equity.
¶ 109. MONY supplemented its requests in the complaint with all of the details and documents regarding the Wrap Note and Mortgage, including the Assignment. It stated that all of the attached documents were incorporated by reference. The majority opinion concludes that MONY did not aptly plead all of the provisions of the attached documents, including the Assignment, for claim preclusion purposes. Majority op. at ¶¶ 91-93. The problem is that the majority opinion provides no legal support for this conclusion. Perhaps, this is because this conclusion is contrary to *885well-established law. Any document attached to a pleading, if adopted by reference, becomes part of that pleading for all purposes. Wis. Stat. § 802.04(3); See also Sedgwick v. Blanchard, 164 Wis. 421, 423, 160 N.W. 267 (1916) (holding that a contract attached to a complaint is part of that complaint for the purpose of testing the sufficiency of the complaint); Continental Bank & Trust Co. v. Akwa, 58 Wis. 2d 376, 387, n.11, 206 N.W.2d 174 (1973) (holding that papers attached to a complaint and incorporated by reference are considered a part of the complaint).
¶ 110. Important among the documents attached to MONY's complaint is the Assignment between MONY and National Operating. In paragraph 1 of the Agreement section of the Assignment, National Operating specifically gave MONY all rights, title, and interest in the Wrap Note and Mortgage. In paragraph 2 of the Agreement section of the Assignment, National Operating permitted MONY, in the event of a default by National Operating on the Underlying Note and Mortgage, to exercise all the rights to the Wrap Note and Mortgage, leaving National Operating without recourse. The only reservation of rights in the Assignment is located in paragraph 3 of the Agreement Section, where MONY promised to reconvey the Wrap Note and Mortgage if National Operating paid the Underlying Note and Mortgage to MONY. Paragraphs 2 and 3 are mutually exclusive alternatives. Paragraph 2 sets forth the consequences of a default, while Paragraph 3 sets forth the consequences of payment.
¶ 111. Because National Operating defaulted on the Underlying Note and Mortgage, as the majority opinion concedes (majority op. at ¶ 13), paragraph 2 of the Agreement section of the Assignment becomes effective. As a result of this default and the provisions *886of paragraph 2, MONY gained permission to exercise all of the rights to the Wrap Note and Mortgage, leaving National Operating without recourse. Paragraph 3 is immaterial, because National Operating had defaulted before offering payment of the Underlying Note and Mortgage to MONY.
¶ 112. I, therefore, conclude that, for the purposes of determining what material issuable facts were well pleaded in MONY's complaint for declaratory judgment, MONY was seeking all rights in the Wrap Note and Mortgage. Nowhere in its claim for all rights in the Wrap Note and Mortgage does MONY exclude National Operating's right to reconveyance, nor does MONY exclude National Operating's right to any surplus equity. It is important to note, again, that MONY asked in its complaint for the extinguishing of the rights of National Operating.
¶ 113. Having determined what was well pleaded in MONY's complaint for declaratory judgment, I now consider what was actually decided by the default declaratory judgment. After presenting its findings of fact and conclusions of law,' the circuit court stated:
IT IS ORDERED, ADJUDGED AND DECREED:
1. That the plaintiff [MONY] is entitled to a Declaratory Judgment pursuant to Section 806.04, Wis. Stats., as prayed for in plaintiffs Complaint and First Amended Complaint, and in accordance with the Findings of Fact, confirming the assignment and assumption of the Notes between the Defendant, National Operating, L.P., and the Defendant, Bridgeview Plaza Partnership, in LaSalle National Bank, as Indenture Trustee under an Indenture dated September 28,1995; extinguishing the rights of the Defendant, National Operating,
*887L.P., as a mortgagee under said Mortgage; extinguishing the rights of National Operating, L.P., as payee under the Note; and confirming LaSalle National Bank, as Indenture Trustee under an Indenture dated September 28, 1995, as the primary mortgagee and holder of the Note and Mortgage declared herein.
Pl.-Appellant-Pet'r App. at 142-43 (emphasis added). I conclude that this judgment extinguished all of National Operating's rights under the Wrap Note and Mortgage, including the right to reconveyance and the right to any surplus equity. The judgment confirmed the relevant terms of the Assignment from National Operating to MONY, paragraphs 1 and 2. As stated above, the Assignment gave MONY all rights in the Wrap Note and Mortgage and permitted MONY to exercise those rights, leaving National Operating without recourse. Accordingly, the judgment confirmed that MONY had all rights on the Wrap Note and Mortgage, and that MONY could exercise those rights without recourse from National Operating.
¶ 114. Despite the broad language of MONY's complaint and of the default declaratory judgment, the majority opinion concludes that National Operating retained its right to reconveyance of the Wrap Note and Mortgage, and its right to any surplus equity. Majority op. at ¶¶ 96-98. In reaching this determination, the majority opinion relies on the fact that neither MONY's declaratory judgment complaint, nor the declaratory judgment itself specifically mentioned the right to reconveyance or any rights under Chapter 409. Majority op. at ¶¶ 80-81. However, as stated above, the broad language of the complaint, including the Assignment attached thereto, established what MONY was seeking, and the broad language of the declaratory *888judgment established that it was granted all of the rights of National Operating to the Wrap Note and Mortgage. Consequently, there was no need for MONY to include a specific reference to National Operating's right to reconveyance or the right to any surplus equity.
¶ 115. In addition to the majority's misreading of MONY's complaint and the declaratory judgment, the majority opinion fails to take into account the common-law compulsory counterclaim rule as it relates indirectly to the present case. This rule provides that there are circumstances where the failure to raise a counterclaim in a prior action prevents related claims from being brought in a subsequent action. A.B.C.G. Enters., Inc., 184 Wis. 2d at 476. These circumstances are when "a favorable judgment in the second action would nullify the judgment in the original action or impair rights established in the initial action." Id. at 476-77.
¶ 116. At issue in A.B.C.G. was the effect of six prior foreclosure actions on A.B.C.G.'s instant action for fraud and other claims. 184 Wis. 2d at 472. A.B.C.G. had defaulted in each of the prior actions. Id. at 471. A.B.C.G. contended that if claim preclusion barred the instant action, Wisconsin's permissive counterclaim doctrine would be transformed into a compulsory one. Id. at 473-74. The court concluded that the common-law compulsory counterclaim rule applied; that is, where a successful counterclaim would nullify a prior judgment or impair rights established in the initial action, that counterclaim is barred by claim preclusion. Id. at 480. The court found a common identity of parties and claims or causes of action. Id. at 481-82. The court also found that if A.B.C.G. was successful in the instant action, First Bank would have to return the property it recovered via foreclosure. Id. at 483. Corre*889spondingly, the court held that claim preclusion barred the subsequent fraud action. Id.
¶ 117. In a case where a party seeks to bar a claim based on the doctrine of claim preclusion, once it has been established that there is a common identity of parties and of claims or causes of action, there must be a determination of whether a judgment in favor of the party seeking to avoid claim preclusion would either nullify the previous judgment or impair rights established by the previous judgment. Id. at 476-77. If so, then that party's claims are barred by the doctrine of claim preclüsion. Id. at 480.
¶ 118. In this case, a favorable judgment for National Operating would both nullify the default declaratory judgment granted in favor of MONY, and also would impair MONY's rights that were established by the default declaratory judgment. The default declaratory judgment gave MONY all rights to the Wrap Note and Mortgage. In its complaint, National Operating sought an injunction preventing MONY from disposing of the Wrap Note and Mortgage in an unreasonable manner, from selling the Wrap Note and Mortgage to Bridgeview, and from retaining any surplus equity. National Operating's First Am. Compl. at 12. In addition, National Operating sought a declaratory judgment holding that the Assignment required MONY to reconvey the Wrap Note and Mortgage to National Operating, upon satisfaction of the Underlying Note and Mortgage. Id. If the circuit court granted the injunctions and the declaratory judgment requested by National Operating, MONY would no longer possess all rights to the Wrap Note and Mortgage, nullifying the previous judgment and impairing MONY's rights established by the previous judgment.
*890¶ 119. I am not concluding that National Operating did not possess certain rights under Chapter 409. However, the time to raise those rights has passed. National Operating should have asserted these rights in an answer to MONY's complaint for declaratory judgment. When National Operating failed to do so, the circuit court granted a default declaratory judgment. The purpose of the doctrine of claim preclusion is to respect the finality of judgments and to prevent repetitive litigation. DePratt v. West Bend Mut. Ins. Co., 113 Wis. 2d 306, 311, 334 N.W.2d 883 (1983). Based on the doctrine of claim preclusion, the default declaratory judgment must be appropriately applied here, so that National Operating is precluded from claiming its Chapter 409 rights in the present case.
¶ 120. In summary, I conclude that National Operating is barred from bringing its complaint by the doctrine of claim preclusion. Accordingly, I would affirm the decision of the court of appeals, that affirmed the judgment of the circuit court, which granted MONY's and Bridgeview's motion to dismiss, and denied National Operating's motion for partial summary judgment.
¶ 121. For the foregoing reasons, I respectfully dissent.
¶ 122. I am authorized to state that Justice JON P. WILCOX joins this opinion.