Court Opinion

ID: 9655308
Source: CourtListenerOpinion
Date Created: 2023-08-23 19:05:25.397777+00
Date Added: 2024-06-11T18:13:17.471638
License: Public Domain

DYKMAN, J.
¶ 67. (dissenting). The majority has repealed Wis. Stat. § 807.01(4) (2001-02)1 for much contract litigation. It need not have done so, because neither case law nor statutes require that result. The result is that litigants who have agreed to pay interest on their delinquent accounts will be free to use delaying tactics and refuse reasonable offers of settlement without the sanction that § 807.01(4) provides. I conclude that DeWitt Ross & Stevens., S.C. (DeWitt) may receive both § 807.01(4) interest and contractual interest. I therefore respectfully dissent.
¶ 68. There is nothing in Wis. Stat. § 807.01(4) prohibiting a litigant who has received contractual interest from attempting to settle the case by invoking the statute. The majority infers from this silence that the legislature did not intend statutory and contract interest to be stacked.2 The majority has it backwards. I see no logic in inferring from a silent statute a legislative intent to bar a litigant who has received interest on a contract from obtaining the benefits of § 807.01(4). The best that can be said from what is not included in this statute is that the legislature did not address the question we decide today. The majority's observations concerning legislative intent do not persuade me.
¶ 69. That leaves two cases upon which the majority relies, Erickson v. Gundersen, 183 Wis. 2d 106, *271515 N.W.2d 293 (Ct. App. 1994), and Upthegrove Hardware, Inc. v. Pennsylvania Lumbermans Ins. Co., 152 Wis. 2d 7, 447 N.W.2d 367 (Ct. App. 1989). Erickson first. In Erickson, we considered whether a prevailing litigant could collect both common law prejudgment interest and Wis. Stat. § 807.01(4) interest. We noted that because prejudgment interest was not statutory but was derived from the common law, whether to award it was a question for a court to decide. Erickson, 183 Wis. 2d at 123. We also noted that prejudgment interest reflects the value of the use of a liquidated obligation. Id. So far, Erickson was unremarkable. But then we wrote: "The same may be said for interest awarded under the offer-of-settlement statute, § 807.01(4), Stats. Its purpose is not punitive; it exists to encourage settlement of cases prior to trial by providing an incentive to accept reasonable settlement offers." Id. at 123-24.
¶ 70. Unfortunately, Erickson is wrong about Wis. Stat. § 807.01(4) not being a punitive statute. In Gorman v. Wausau Insurance Cos., 175 Wis. 2d 320, 329, 499 N.W.2d 245 (Ct. App. 1993), we held: "Section 807.01, Stats., however, is a punitive statute imposing costs and interest, which are distinguishable from damages." In Blank v. USAA Property & Casualty Insurance Co., 200 Wis. 2d 270, 279, 546 N.W.2d 512 (Ct. App. 1996), we held: "The purpose of imposing costs and interest under [Wis. Stat. § 807.01(4)] is punitive." We reiterated that § 807.01(4) interest is punitive in Majorowicz v. Allied Mutual Insurance Co., 212 Wis. 2d 513, 538, 569 N.W.2d 472 (Ct. App. 1997). And in Wilber v. Fuchs, 158 Wis. 2d 158, 164, 461 N.W.2d 803 (Ct. App. 1990) we said: "A defendant who spurns an offer of *272settlement should pay the sanctions of the statute when he or she errs in evaluating the claim against himself or herself — not others."
¶ 71. It is obvious that Erickson contradicts precedent published both before and after Erickson was published. Wisconsin Stat. § 807.01(4) interest, according to that precedent, most certainly does not represent the time value of money, and contrary to Erickson, its purpose is punitive. The question then arises of how to handle conflicting court of appeals opinions.
¶ 72. The majority attempts to solve this dilemma by citing Cook v. Cook, 208 Wis. 2d 166, 189-90, 560 N.W.2d 246 (1997), where the supreme court held that the court of appeals lacks the power to overrule, modify or withdraw language from its prior published opinions. The majority concludes that it will follow Erickson. Superficially, that is appealing, but upon closer inquiry it becomes apparent that citing Cook only avoids addressing the real problem. If we are searching for the focus of Wis. Stat. § 807.01(4), why choose Erickson's answer rather than Gorman's or Majorowicz's answers? Whether we conclude that a prior case or a subsequent case prevails in a conflict, Erickson, the case in the middle, comes out second best. The majority gives no explanation for choosing to rely upon Erickson, rather than later cases which accurately describe § 807.01(4) as punitive, or previous cases which also do so.
¶ 73. Contractual interest and common law interest reflect the time value of money. Wisconsin Stat. § 807.01(4) serves an entirely different purpose; to punish those who improvidently "forge ahead" rather than attempt a reasonable settlement. Oliver v. Heritage Mut. Ins. Co., 179 Wis. 2d 1, 19, 505 N.W.2d 452 (Ct. App. 1993). Erickson holds that prejudgment interest is not a penalty, but instead reflects the time value of *273money. Of course, we know that is not true, because Gorman, Majorowicz and common sense tell us differently. Prejudgment interest is recovered as an element of compensatory damages. Klug & Smith Co. v. Sommer, 83 Wis. 2d 378, 382, 265 N.W.2d 269 (1978). And Gorman, 175 Wis. 2d 320, 329, holds that "Section 807.01, Stats., however, is a punitive statute imposing costs and interest, which are distinguishable from damages." The majority does not tell us why it is appropriate to reduce DeWitt's damages because DeWitt sought to encourage Galaxy Gaming to settle this case.
¶ 74. The majority correctly notes that Gorman and Blank do not arise in the context of stacking interest on Wis. Stat. § 807.01(4) interest. But that does not invalidate those cases' description of this statute as "punitive." And just as Gorman and Blank do not arise in the context of stacking interest on § 807.01(4) interest, Erickson and Upthegrove do not arise in the context of stacking contract interest on § 807.01(4) interest. It is not enough to conclude that stacking interest on interest is prohibited. That is a conclusion without a reason. To properly determine the effect of Erickson and Upthegrove on future cases requires not just that conclusion, but an inquiry into why Erickson and Upthegrove were decided the way they were. Once that inquiry is made, Erickson and Upthegrove lose their persuasive effect for the case we decide today. Noting this concern, the majority concludes that if there is a problem with these cases, the supreme court can solve it. While that is of course true, we have already done so. State v. Bolden, 2003 WI App 155, ¶ 10, 265 Wis. 2d 853, 667 N.W.2d 364, review denied, 2003 WI 126, 265 Wis. 2d 419, 668 N.W.2d 559, holds that where there is a conflict between two published court of appeals cases, *274the first in time controls. Thus, the majority should follow Gorman rather than Erickson.
¶ 75. That leaves Upthegrove, which considered whether Wis. Stat. § 807.01(4) interest and Wis. Stat. § 628.46 interest could be stacked. The latter statute requires insurers to pay claims timely. Insurers who do not do so are required to pay twelve percent interest on overdue payments. The Upthegrove court reasoned that under the terms of §§ 628.46 and 807.01(4), a judgment is "paid" when an offer of settlement is made. Upthegrove, 152 Wis. 2d at 13-14. Thus, § 628.46, which awards interest only until an untimely claim is paid, is tolled when an offer of settlement is made. Id.
¶ 76. While one ordinarily thinks of a claim being "paid" when a check or cash is received, once one accepts that a claim is paid when an offer of settlement is made, it is apparent that Wis. Stat. § 628.46 interest runs from the time a claim becomes delinquent until an offer of settlement is made. The claim is then "paid," and Wis. Stat. § 807.01 interest begins.
¶ 77. The reasoning of Upthegrove shows why it is inapplicable here. Whether two statutes interact to prevent stacking interest is a conceptually different analysis than determining whether contractual interest is voided by Wis. Stat. § 807.01(4), or vice-versa. Equating an insurance statute with a contract between two corporations makes no sense. The two have nothing in common with each other.
¶ 78. Contracts enjoy constitutional protection, though that protection is not absolute. Wisconsin Const., art. I, sec. 12. The majority has not impaired DeWitt's contract with the Companies, though it considers that possibility. But it has repealed Wis. Stat. § 807.01(4) when the litigation arises out of a contract with a provision for interest on delinquent payments. *275This is a significant repeal, as "Delinquent payments will accrue interest at 18% interest" is a common sentence found on contracts and invoices.
¶ 79. There is another interesting artifact in Erickson and Upthegrove. The majority feels bound by their analyses, and attempts to follow them. But when the logic of those cases leads to the result of DeWitt receiving eighteen percent interest until it made its offer of settlement, and twelve percent interest thereafter, the majority balks. Instead of questioning the analysis requiring this result, the majority enacts a third rule that accepts Erickson's and Upthegrove's analyses for one purpose and rejects them for another. And when a contract calling for ten percent interest on a delinquent account arrives at this court, a third analysis will have to be invented. Interpreting the statute and contract according to their plain meanings would have been much easier.
¶ 80. This need not have been. Upthegrove and Erickson do not involve stacking contract interest on Wis. Stat. § 807.01(4) interest. The analysis used in those cases must differ from today's analysis because there, the conflict was between two statutes (Upthe-grove) and a statute and the common law {Erickson). Cases in which we analyze the interaction of two statutes are common, and we often determine the legislative intent behind those statutes. Likewise, the interaction between a statute and various common law principles constitutes a significant part of our jurisprudence.
¶ 81. Here, the question is whether an admittedly valid contract provision and an admittedly valid statute can both serve their proper purposes. There is no reason why a creditor cannot require a debtor to pay interest on a delinquent account and still avoid trial *276delay by using Wis. Stat. § 807.01(4), a statute designed for that purpose. There is no reason why a debtor faced with paying interest on a delinquent account should be immunized from paying a penalty for delay. There is no reason why pretrial settlements in these cases should be discouraged. Were I writing for a majority, I would permit Dewitt to receive the interest that its contract contemplated and the penalty that § 807.01(4) extracts for delay and unreasonable refusal to settle a case before trial. That is why I respectfully dissent.

 All references to the Wisconsin Statutes are to the 2001-02 version unless otherwise noted.

 The majority writes: "The statute, however, is silent regarding its proper application when the prevailing party is already receiving interest, either under a separate statute or, as here, under the terms of the parties' contract." Majority at ¶ 58.