PUBLISHED
OPINION
Case No.: 95-2932
Petition to review filed
Complete Title
of Case:
In the Matter of Nicholas L.
Carpenter, A Minor:
TOWER INSURANCE COMPANY, INC.,
Plaintiff-Appellant,
v.
GARY CARPENTER,
Defendant-Third Party
Plaintiff-Respondent,
v.
JEFFREY SZALACINSKI,
Third Party Defendant.
Oral Argument: July 31, 1996
COURT COURT OF APPEALS OF WISCONSIN
Opinion Released: October 2, 1996
Opinion Filed: October 2, 1996
Source of APPEAL Appeal from a judgment
Full Name JUDGE COURT: Circuit
Lower Court. COUNTY: Fond du Lac
(If "Special", JUDGE: PETER L. GRIMM
so indicate)
JUDGES: Anderson, P.J., Brown and Snyder, JJ.
Concurred:
Dissented:
Appellant
ATTORNEYS On behalf of the plaintiff-appellant, there were
briefs and oral arguments by Terry J. Booth of
Fellows, Piper & Schmidt of Milwaukee.
Respondent
ATTORNEYS On behalf of the defendant-third party plaintiff-respondent, there was a
brief by James C. Herrick,
Jr. and Michele D. Miller of Herrick Law Office,
S.C. of Fond du Lac. There were oral arguments by
Michele D. Miller.
Guardian
ad Litem
ATTORNEYS On behalf of Nicholas L. Carpenter, there was a
brief by John A. Neal and Beth D. Osowski of
Curtis, Wilde & Neal Trial Lawyers of Oshkosh.
There were oral arguments by Beth D. Osowski.
COURT OF APPEALS
DECISION
DATED AND
RELEASED
October 2, 1996
NOTICE
A party may file with the Supreme Court a
petition to review an adverse decision by the
Court of Appeals. See § 808.10 and Rule
809.62, Stats.
This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
No. 95-2932
STATE OF WISCONSIN IN COURT OF APPEALS
In the Matter of Nicholas L.
Carpenter, A Minor:
TOWER INSURANCE COMPANY, INC.,
Plaintiff-Appellant,
v.
GARY CARPENTER,
Defendant-Third Party
Plaintiff-Respondent,
v.
JEFFREY SZALACINSKI,
Third Party Defendant.
APPEAL from a judgment of the circuit court for Fond du Lac County:
PETER L. GRIMM, Judge. Affirmed.
Before Anderson, P.J., Brown and Snyder, JJ.
SNYDER, J. Tower Insurance Company, Inc., appeals from a
judgment awarding Gary Carpenter $50,000 in underinsured motorist (UIM) benefits
on the following grounds: (1) that the Tower policy does not provide UIM coverage;
(2) that Tower is entitled to the return of its $50,000 payment because it was a mistake;
and (3) that the doctrine of accord and satisfaction is not applicable. Because Tower's
payment of $50,000 was a final negotiated settlement of Carpenter's claim, we affirm
the trial court.
Carpenter's wife, Sandra, was killed in an automobile accident in January
1994. American Family Mutual Insurance Company insured the at-fault driver, and
after negotiations with Carpenter's attorney, James Herrick, American Family tendered
the $100,000 limits of the bodily injury portion of its policy in exchange for a complete
release of American Family and its insured. Prior to Carpenter's acceptance of that
payment, Herrick notified Carpenter's insurer, Tower, of American Family's offer
pursuant to Vogt v. Schroeder, 129 Wis.2d 3, 383
N.W.2d 876 (1986). That
notification consisted of a copy of a letter Herrick had sent to American Family which
memorialized their telephone conference discussing the insurance company's offer to
tender the limits of its bodily injury coverage, and included the following paragraph:
[W]e are hereby notifying [Tower] of the tentative
settlement between our client, Gary Carpenter, and
American Family Mutual Insurance Company.
The copy sent to Tower also included a blind postscript:
Our client's claims have a value in excess of $100,000.
As is apparent, Tower Insurance Company will be
required to pay its underinsured motorist coverage limits
.... Please forward a copy of the automobile policy that
was in full force and effect on the date of the subject
accident of January 27, 1994.
This letter was dated July 1, 1994.
In response to this letter, on August 19, 1994, Tower advised Herrick by
telephone that it would not substitute a payment from its UIM coverage for American
Family's payment.(1) A substitute payment
would have been necessary had Tower
chosen to protect its subrogation rights. Tower also informed Herrick that it would pay
its $50,000 UIM coverage limit to Carpenter. These decisions followed an in-house
discussion between the following Tower employees: Jeffrey Szalacinski, the claims
representative who had reviewed the file; two claims managers, one of whom directly
supervised Szalacinski; and Geraldine Garrity, a Tower vice-president and director of
claims. A check for $50,000 was mailed on August 29, 1994.
Upon learning of the payment, Carpenter's insurance agent inquired of
Tower whether the payment had been properly made, based on the fact that American
Family's liability limit was greater than the Tower policy UIM coverage limit. On
September 20, 1994, after reviewing its policy, Tower requested that the check be
returned.
Carpenter declined to return the check and Tower commenced this action.
Both sides brought motions for summary judgment. The trial court ruled that Tower
was not entitled to a return of the $50,000 payment, finding that the check represented
a settlement, and awarded the check to Carpenter pursuant to the doctrine of accord and
satisfaction. Tower now appeals.
We review decisions on summary judgment de novo, applying the same
methodology as the trial court. Armstrong v. Milwaukee Mut. Ins.
Co., 191 Wis.2d
562, 568, 530 N.W.2d 12, 15 (Ct. App. 1995), aff'd, 202 Wis.2d 258, 549
N.W.2d
723 (1996). That methodology, set forth in § 802.08(2), Stats., has been recited
often
and we need not repeat it here. See
Armstrong, 191 Wis.2d at 568, 530 N.W.2d at 15.
This court is not bound by a trial court's conclusions of law and decides such matters
de novo. See First Nat'l Leasing Corp. v. City of
Madison, 81 Wis.2d 205, 208, 260
N.W.2d 251, 253 (1977).
Tower first claims that Carpenter should be required to return the
payment because its policy does not provide UIM coverage under these facts. Tower's
policy defined an "underinsured motor vehicle" as "a land motor vehicle ... to which a
bodily injury liability bond or policy applies at the time of the accident, but its limit
for
bodily injury liability is less than the limit of liability for this coverage." The
at-fault
driver carried an American Family bodily injury policy with limits of $100,000. Under
the terms of Tower's policy, the other driver was not driving an underinsured motor
vehicle. While we agree with Tower's belated assessment of its own policy's coverage,
we conclude that this factor is not dispositive of the issue presented.
Tower next argues that the $50,000 payment was a mistake of fact and
therefore should be returned. Tower claims that the check was tendered "because
Tower did not read and know the applicable provisions of its insurance policy."
Carpenter counters this with his claim that the payment was a settlement of a disputed
amount, and as such, Tower should be held to its bargain under the doctrine of accord
and satisfaction. Tower submits that the doctrine of accord and satisfaction is not
applicable to the instant case. In support of this, Tower quotes the following language
from Erickson v. Gundersen, 183 Wis.2d 106, 116,
515 N.W.2d 293, 298 (Ct. App.
1994): "While the Clinic based its cross-claim on accord and satisfaction, the rule does
not normally give rise to an affirmative claim or a cause of action."
While the more common usage of accord and satisfaction is as an
affirmative defense to a creditor's claim that money paid did not satisfy a debt, we see
no reason why the contract principles of accord and satisfaction would not be applicable
to the issue presented in the instant case. Furthermore, the statement quoted from
Erickson is dicta. The court in the
Erickson case subsequently determined that the
doctrine was inapplicable because the parties did not have a disputed claim.
Id. at 116-17, 515 N.W.2d at 298. Thus, the
Erickson court did not make a determination as to
whether accord and satisfaction was applicable to the affirmative claim brought in that
case.
Resolution of the issue presented requires consideration of the legal bases
for the conflicting claims, as well as the undisputed facts leading up to the issuance of
the check.(2) The law in Wisconsin is well
settled that a payment in full settlement of a
claim which is disputed as to amount discharges the entire claim.
Flambeau Prods.
Corp. v. Honeywell Info. Sys., Inc., 116 Wis.2d 95, 113, 341 N.W.2d
655, 664
(1984). Resolution of a controversy involving something of monetary value and of
interest to the parties is sufficient consideration for such a claim.
Id. The common law
rule of accord and satisfaction rests not only on principles of contract law but also on
principles of sound public policy. Id. at 110-11, 341
N.W.2d at 663. Such a rule
promotes the public interest in resolving disputes informally and without litigation.
Id.
at 111, 341 N.W.2d at 663.
The trial court considered the undisputed facts and determined that
Carpenter entered into a settlement agreement with Tower. The trial court stated that
it
place[d] great weight on the nature of the parties and their
position to each other .... On the one hand, you had Gary
Carpenter aided by skilled counsel well versed in the law,
and on the other hand you had an insurance company
whose sole business, at least in this context, is to review
claims, make decisions, and make payments on claims
under their policies ....
The trial court also determined that the affidavits and record of correspondence
indicated that Herrick made a demand that Tower pay its UIM coverage limits. In
response to that demand, Tower looked at the nature of the claim, reviewed its options
and then decided to pay $50,000. In accepting Tower's offer, Carpenter made a
decision to forego a possible $100,000 claim. This provided consideration for the
agreement. On Tower's part, the fact that this agreement resolved a claim operated as
consideration.
We concur with the reasoning of the trial court. Correspondence between
Herrick and Carpenter which predates Herrick's demand that Tower tender the UIM
coverage limits outlines pertinent legal considerations relating to Carpenter's claim
against American Family and possible claims against his own UIM insurer. As early
as May 11, 1994, Herrick advised Carpenter that "based upon the present status of the
law you have at least a 50% opportunity to pursue a claim successfully against
[Tower]."
Herrick's August 31 letter which followed Tower's offer of a $50,000
settlement clearly outlined the relevant case law and analyzed Carpenter's claim against
Tower in relation to it. Herrick noted that while Carpenter could pursue a potential
claim of $100,000 from Tower,(3) rejection of
Tower's offer of $50,000 would result in
arbitration. The Herrick analysis then considered the fact that the outcome of such a
hearing could result in the loss of the $50,000 if the arbiters were to adopt the reasoning
of the Smith and
Link cases. See
Smith v. Atlantic Mut. Ins. Co., 151 Wis.2d 542,
444 N.W.2d 465 (Ct. App. 1989); aff'd, 155 Wis.2d 808, 456 N.W.2d 597
(1990); see
also Link v. General Casualty Co., 185
Wis.2d 394, 518 N.W.2d 261 (Ct. App.
1994).
Additionally, the record is clear that Tower held a meeting to discuss
Herrick's July 1 letter which contained the demand for the tender of the UIM policy
limits. That meeting included Szalacinski, two claims managers and Garrity. While
their affidavits disavowed any discussion of whether the UIM coverage should be
tendered, Szalacinski admitted that when the decision was made to pay the $50,000, "It
was my opinion that a settlement was reached." Furthermore, notes made by Patricia
Lamon, another Tower employee, during a telephone conference with Szalacinski on
September 6, suggest that there had been some consideration of a possible "stacking"
claim.
Based on our independent review of the undisputed facts, we conclude,
as did the trial court, that Tower's payment of $50,000 was a settlement of a disputed
claim. As the trial court stated, "Even though both parties don't verbally, aggressively
bargain down each other, there is a conscious process of sophisticated parties." The
affidavits support the conclusion that Tower made the payment as a final settlement.(4)
Tower argues that even with our conclusion that its payment was an
accord and satisfaction of a disputed claim, mistake is an exception to that doctrine.
Wisconsin follows the general rule that "[a] party who has expended money by mistake
of fact may ordinarily recover such sum in an action for money had and received."
Amalgamated Ass'n of St. Elec. Ry. & Motor Coach Employees v.
Danielson, 24
Wis.2d 33, 36, 128 N.W.2d 9, 10-11 (1964). A mistake of fact has been defined as
"[a]n unconscious ignorance or forgetfulness of the existence or nonexistence of a fact,
past or present, material to the contract." Grand Trunk West. R.R. Co.
v. Lahiff, 218
Wis. 457, 461, 261 N.W. 11, 13 (1935). Tower contends that the assumption it made
regarding its liability under the UIM portion of Carpenter's policy was a mistake of
fact, and as such operates to bar the application of the doctrine of accord and
satisfaction. We are unpersuaded.
We conclude that the doctrine of accord and satisfaction is not defeated
by Tower's argument of mistake. Tower cites the following section of 66 Am. Jur.2d
Restitution and Implied Contracts § 119 (1973), in support of
this contention:
It is a firmly established general rule that money paid to
another under the influence of a mistake of fact, that is, on
the mistaken supposition of the existence of a specific fact
which would entitle the other to the money, which would
not have been paid if it had been known to the payor that
the fact was otherwise, may be recovered ....
Tower, however, fails to cite to the next section, § 120, which reads:
The rule above set forth, that money paid under a mistake
of fact is recoverable, is subject to certain well-defined
exceptions. Thus, a payment induced by mistake cannot
be recovered if ... the money is received in good faith in
satisfaction of an equitable claim .... [Emphasis added.]
Based on our previous conclusion that the payment was made as a settlement of a
disputed claim, Tower cannot now rescind that settlement on a theory of mistake. All
relevant information was available to both parties when the agreement was reached. We
cannot say that Carpenter lacked good faith in receiving the settlement proceeds. Tower
cannot now recover the $50,000 because it determined that it made a bad bargain.
By the Court.--Judgment affirmed.
1. Jeffrey Szalacinski, the claims representative,
stated in his affidavit that before the
decision was made not to substitute payment for American Family, he hired a firm "to
conduct
a financial investigation of the driver which had collided with [Sandra Carpenter's] car."
2. Tower states in its brief-in-chief that several of the
trial court's recitations of fact are
inaccurate or incorrect when compared to the information provided in the affidavits.
However,
Tower does not specifically identify those factual statements which it believes to be
inaccurate.
We have conducted an independent review of the facts, and we have not found any material
inaccuracies in the trial court's recitations of fact.
3. Carpenter had two cars insured with Tower, each
of which provided $50,000 of UIM
coverage.
4. The letter from Szalacinski to Herrick which
included the settlement check stated, "I
would ask that you please have your client sign and return the enclosed General Release.
This
should then conclude this claim."
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