Court Opinion

ID: 9572043
Source: CourtListenerOpinion
Date Created: 2023-08-21 20:37:51.354345+00
Date Added: 2024-06-11T12:31:25.814355
License: Public Domain

*626DIANE S. SYKES, J.
¶ 59. (concurring). I agree with the majority's analysis of the first issue regarding whether the indemnity agreement is valid and enforceable. I also agree with much of the majority's discussion of the second issue regarding whether Image as indem-nitor is bound by the $1,475 million judgment entered by stipulation between Image's indemnitee, Arlington, and the plaintiff, Deminsky, without Image's knowledge or participation. I do not agree, however, with the majority's ultimate conclusion that the judgment may be enforceable against Image/Federated. Accordingly, I cannot subscribe to the limitations the majority has placed on the scope and nature of the remand in this case.
¶ 60. The majority has concluded that the stipulated judgment may be binding upon Image/Federated, provided there is a determination that it is reasonable and was procured without fraud or collusion. Majority op., ¶ 48. The majority remands for "a limited hearing to the court on the reasonableness of the settlement agreement." Majority op., ¶ 47. This hearing can include "evidence that the indemnitee faced no potential liability or that the settling parties were involved in fraud or cbllusion." Majority op., ¶ 47. The majority does not say whether this "reasonableness" inquiry will include the issue of damages. Also, the majority does not specify the scope of the "reasonableness" inquiry as it relates to the evaluation of the degree or extent of potential liability or recovery under comparative or contributory negligence principles. Finally, the majority does not identify the standards that should govern the circuit court's evaluation of the issues of fraud or collusion.
¶ 61. The majority adopts this limited-inquiry approach to determining the enforceability of the judg*627ment by applying several cases it explicitly acknowledges are readily distinguishable from the circumstances of this case. See majority op., ¶ 46. The majority initially concludes that this case is unlike Finch, Blaha, Newhouse, and Barrons, because the timing of the stipulated judgment is suspect and because it was entered into without Image's or Federated's knowledge. Id. I agree.
¶ 62. In N.E. Finch Co. v. R.C. McMahon Co., 370 N.E.2d 160, 162 (Ill. 1977), the settlement enforced against the indemnitor occurred after the indemnitor had refused the tender of defense and when trial on the underlying action between the injured party and the indemnitee was imminent. That is not the case here, where the settlement and entry of stipulated judgment occurred a mere three and one-half weeks after the tender was rejected, and on the day that Image/Federated was to responsively plead to Deminsky's amended complaint on the indemnity agreement, long before any trial.
¶ 63. In any event, Finch is an Illinois case. The majority has concluded, and I agree, that Wisconsin law applies, because the question presented is the enforceability of a Wisconsin judgment against a person not a party to it, which concerns Wisconsin settlement and judgment rules. Majority op., ¶ 36. Nevertheless, the majority relies most heavily on Finch in concluding that the stipulated judgment may be enforceable against Image/Federated. Majority op., ¶¶ 36, 46.
¶ 64. In Illinois Central Railroad Co. v. Blaha, 3 Wis. 2d 638, 89 N.W.2d 197 (1958), the indemnitor had full knowledge of the circumstances of the underlying claim, as well as the indemnitee's claims for indemnification long before trial, and received the formal tender of defense five days before the scheduled trial, yet did *628nothing to protect its or its indemnitee's interests. As the court of appeals here noted, "the 'settlement'... [sought to be enforced] was for a discounted sum pending the appeal of a larger judgment, which had been entered on a jury verdict, and the settlement amount was actually paid by the indemnitee." Deminsky v. Arlington Plastics Machinery, 2001 WI App 287, ¶ 41, 249 Wis. 2d 441, 638 N.W.2d 331. Under those circumstances, the court in Blaha held that the prior judgment was conclusive on liability and damages, since those issues had been fully tried, and the indemnitor would be responsible for the compromised judgment absent proof that it was unreasonable or obtained by fraud or bad faith. Blaha, 3 Wis. 2d at 648-49. Here, by contrast, no trial was held or was looming; the stipulated judgment was entered shortly after the indemnity claim against Image/Federated was alleged, and without any notice, well before any interests of the indem-nitee were at risk of being or had been adjudicated against it at trial.
¶ 65. Newhouse v. Citizens Security Mutual Insurance, 176 Wis. 2d 824, 501 N.W.2d 1 (1993), was a suit against an insurance company alleging breach of the duty to defend and bad faith denial of coverage. This is not an insurance dispute. It is a claim on an indemnity clause in a commercial transaction. The court of appeals wisely "decline[d] to inject into this case the law that has developed in Wisconsin to govern the duties owed by insurance companies to their insureds." Deminsky, 2001 WI App 287, ¶ 43. This court should follow the court of appeals' lead and not import insurance law duties into this context.
¶ 66. Finally, the majority properly notes the myriad distinctions between this case and Barrons v. J.H. Findorff & Sons, Inc., 89 Wis. 2d 444, 278 N.W.2d *629827 (1979). There, the indemnitor rejected the tender of defense, but was kept fully advised of the proceedings and settlement negotiations, and in fact was given the opportunity to approve the settlement. Id. at 447-48. Here, by contrast, the $1,475 million stipulated judgment (just shy of Federated's $1.5 million policy limits) was entered into within a few short weeks of the rejected tender, secretly, without any notice to Image/Federated.
¶ 67. Despite the distinguishing characteristics of these cases, most of which the majority notes, the majority nevertheless applies their holdings. Majority op., ¶¶ 36, 40, 45. If the cases are distinguishable, they do not apply, and we should not apply them.
¶ 68. The majority also concludes, as did the court of appeals, that issue preclusion does not apply. Majority op., ¶ 49. I agree. This was a confessed judgment and "Arlington's liability and the amount of Deminsky's damages were never 'actually litigated,' which is a prerequisite for precluding issues from being 'reliti-gated.' " Deminsky, 2001 WI App 287, ¶ 39.
¶ 69. If issue preclusion does not apply, then the stipulated judgment cannot operate to preclude Image/Federated from litigating liability and damages; that is, the stipulated judgment cannot be enforced against Image/Federated. Unless, that is, the holdings in the cases cited above are applied. Again, the majority distinguishes these cases but nevertheless applies them. I cannot join this conclusion. I would affirm the court of appeals on all issues, and remand the matter for a trial on liability and damages, not the limited hearing to the court specified by the majority.
¶ 70. I am authorized to state that Justice ANN WALSH BRADLEY joins this concurring opinion.