Summary
In Capitol Indemnity Corp. v. Morris, 46 Wis.2d 527, 531, 175 N.W.2d 479 (1970), the court stated that the only question involved under sec. 260.205, Stats., is whether the trial court abused its discretion by denying a motion to intervene; there is no right to intervention.
Summary of this case from Kornitz v. Commonwealth Land Title Ins. Co.Opinion
No. 32.
Argued March 2, 1970. —
Decided April 3, 1970.
APPEAL from an order of the circuit court for Waukesha county: WILLIAM E. GRAMLING, Circuit Judge. Affirmed.
For the appellant there were briefs by Wickham, Borgelt, Skogstad Powell, attorneys, and Phillip E. Crump of counsel, all of Milwaukee, and oral argument by Mr. Crump.
For the respondent there was a brief by Bruce Gillman and Arthur, Tomlinson Gillman, all of Madison, and oral argument by Bruce Gillman.
The underlying action here was brought by the plaintiff, Capitol Indemnity Corporation, against several named defendants for accounting malpractice. St. Paul Fire Marine Insurance Company, appellant, was originally named one of the defendants and was served with a summons.
This action arose from reliance by Capitol on allegedly misleading financial statements prepared by defendant Joseph M. Roblee Company, a sole proprietorship. These statements were prepared and all damage incurred as a result of them prior to August, 1963.
In August of 1963, Joseph M. Roblee Company formed a partnership with Earl Johnson Company, the new partnership doing business as Roblee-Johnson Company.
In December, 1963, St. Paul issued its policy insuring the partnership known as Roblee-Johnson Company against liability for damages resulting from accounting malpractice. By this policy, St. Paul agreed:
"To pay on behalf of the Insured [Roblee-Johnson Co.] all sums which the Insured shall become legally obligated to pay for damages on account of professional services rendered or which should have been rendered by the Insured, their predecessors in business, or any other person for whose acts the Insured is legally liable in the performance of professional services for others in the Insured's professional capacity as accountants." (Emphasis added.)
The policy also contained the usual "no-action" clause providing that no action could be maintained against St. Paul without first obtaining a judgment against the insured.
St. Paul entered an appearance only for itself. Prior to the service of the complaint and prior to the trial of the malpractice action, by stipulation based upon the no-action clause of the policy, St. Paul was dismissed as a party defendant.
Nevertheless, by its attorneys, St. Paul attended the pretrial hearing of the case (the action was started in Dane county circuit court but transferred to the circuit court for Waukesha county), attended the trial of the action as an observer, and was invited by the trial court to submit a brief for consideration in its decision in the malpractice action.
The defendant, Joseph M. Roblee, doing business as Joseph M. Roblee Company, the earlier accounting firm, a sole proprietorship, interposed a defense to Capitol's cause of action. However, the other named defendant, Roblee-Johnson Company, the later accounting partnership, filed no responsive pleadings to Capitol's complaint and was not represented at the trial.
The trial commenced on May 7, 1968, and on August 29, 1968, judgment was entered against the earlier firm, defendant Joseph M. Roblee, doing business as Joseph Roblee Company, in the amount of $119,368.21.
On September 18, 1968, Capitol submitted its "petition to amend judgment" to the trial court. This petition was granted and on September 23, 1968, an amended judgment was entered naming the later accounting partnership, Roblee-Johnson Company, as a judgment debtor along with Joseph M. Roblee Company, and also declaring that the liabilities of the judgment debtors were joint and several.
Subsequently, Capitol commenced an action in the United States district court for the Western district of Wisconsin, in which St. Paul was a named party defendant. In that litigation Capitol claims that the amended judgment entered on September 23, 1968, entitled it to summary judgment against St. Paul Fire Marine Insurance Company.
Thereafter, on December 16, 1968, St. Paul brought its petition in the Waukesha circuit court to intervene, seeking an order from the trial court permitting it to intervene as a party defendant in the action in state court for the stated purpose of "moving the court to set aside the judgment entered in this action on the 23rd day of September, 1968, and, in the alternative, for the purpose of appealing to the Wisconsin Supreme Court any judgment entered against any defendant in this action; . . ."
The trial court, by order dated December 20, 1968, denied this petition.
Petitioner appeals.
But one issue is presented which is dispositive of this appeal: Did the trial court abuse its discretion in denying St. Paul's petition to intervene in the state action?
Since 1963, intervention in Wisconsin has been governed by sec. 260.205, Stats., which provides:
"If in an action for the recovery of property, a person not a party has an interest in the property, or if in any other action, a person not a party has such an interest in the subject matter of the controversy as requires him to be a party for his own protection, and such person applies to the court to be made a party, the court may order him brought in. The motion shall be accompanied by a complaint or answer stating the cause of action or defense desired to be interposed. If the motion is granted the court shall indicate in its order the existing parties on whom the pleading should be served, and the time within which it should be served. If answer or reply is proper, the party served shall have 20 days in which to answer or reply." (Emphasis added.)
It is clear that the language of this section is couched in discretionary terms. Prior to this section, intervention was ordered either as a matter of right, or in the discretion of the court. When intervention was not a matter of right, the trial court was given wide discretion. The intervenor needed to show, as still provided by the above section, such interest in the controversy as requires him to be a party in order to protect this interest.
See Note, 41 Marq. L. Rev. (1957-1958), 337.
See Schatzman v. Greenfield (1956), 273 Wis. 277, 281, 77 N.W.2d 511; Fish Creek Park Co. v. Bayside (1956), 273 Wis. 89, 93, 76 N.W.2d 557; Muscoda Bridge Co. v. Worden-Allen Co. (1928), 196 Wis. 76, 98, 219 N.W. 428.
In describing this interest this court has said:
". . . The interest which entitles one to intervene in a suit between other parties must be an interest of such direct and immediate character that the intervenor will either gain or lose by the direct operation of the judgment. One whose interest is indirect cannot intervene as a matter of right."
Lodge 78, I. A. of Machinists v. Nickel (1963), 20 Wis.2d 42, 46, 121 N.W.2d 297.
Of course, here, we are not dealing with a question of intervention as a matter of right, thus the critical inquiry becomes whether the trial court abused its discretion in denying petitioner permission to intervene.
We are satisfied that the trial court did not abuse its discretion in denying St. Paul's intervention petition.
If permitted to intervene, St. Paul asserted at oral argument in this court that it would attempt to have the amended judgment set aside and in the alternative attempt to appeal any judgment entered. St. Paul argues that the amended judgment should not have been entered naming Roblee-Johnson Company, its named insured, a judgment debtor of Capitol. St. Paul further argues that contrary to Capitol's assertion, St. Paul, as a third party, was prejudiced by the entry of this amended judgment.
On the other hand, Capitol asserts that the amended judgment was actually a default judgment, inasmuch as Roblee-Johnson Company was one of the originally named defendants, and it did not respond to the pleadings entered by plaintiff.
Regardless of whether this was an amended judgment or a default judgment, St. Paul's motion to intervene was properly denied.
The statute governing intervention does not specifically set forth a time by which such motion must be made. However, in Hunt v. McDonald, this court held that it was not an abuse of discretion to deny intervention to a proper party after judgment had been entered. The situation presented here is similar.
(1905), 124 Wis. 82, 102 N.W. 318. See also State ex rel. Wisconsin Power Light Co. v. Zimmerman (1927), 194 Wis. 193, 215 N.W. 887. See generally Annot. (1940), 127 A.L.R. 668.
Then too, intervention was properly denied here where St. Paul was once in the case, was successful in being dismissed by asserting the efficacy of its no-action clause, and had elected to do nothing to raise defenses for its insured despite the several opportunities it had to come forward and raise those defenses.
From the outset of this trial, St. Paul knew a claim had been made against its insured, yet it did nothing. It would not be unreasonable to expect the insurance company to do any of the following:
1. Waive its no-action clause and remain a party to the action.
2. Defend its insured with or without a reservation-of-rights agreement to later deny coverage; and/or
3. Immediately start an action for declaratory relief as to coverage and its duty to defend.
By doing nothing, St. Paul took the gamble that its insured would not be held liable. It lost this gamble.
St. Paul alleges that if what was done here is affirmed it will be a judicial determination that it was liable for the malpractice of its named insured's predecessor without litigating the question of whether its named insured, Roblee-Johnson Company, ever became legally obligated to assume these liabilities.
We do not consider whether, as a matter of defense, this can now be interposed in the pending action in federal court. We only decide here that as far as the state action is concerned, St. Paul was properly denied intervention in the precise litigation where it was once in the suit as a party and elected to get out, although it could have defended its insured Roblee-Johnson Company, and presented its arguments against placing any portion of the liability for the malpractice on that firm.
By the Court. — Order affirmed.