Opinion
April 12, 1967. —
May 9, 1967.
APPEAL from an order of the circuit court for Dane county: RICHARD W. BARDWELL, Circuit Judge. Reversed.
For the appellants there were briefs by Kaftan, Kaftan Kaftan of Green Bay, and oral argument by J. Robert Kaftan.
For the respondent there was a brief by Lloyd A. Schneider of McFarland, and Frederick F. Hillyer of Madison, and oral argument by Mr. Hillyer.
Action by plaintiff Darrell I. Kramer against defendants Norman Bohlman, Capitol Insurance Service, Inc. (hereinafter "Service"), and Capitol Insurance Associates, Inc. (hereinafter "Associates"), for an accounting under a settlement stipulation entered into in court. Plaintiff's complaint was later amended to seek reformation of the settlement stipulation.
For a period of time prior to entering into the settlement stipulation the shares of capital stock of both Service and Associates were owned in equal amounts by Kramer and Bohlman. On October 1, 1956, Wisconsin Mutual Insurance Company (hereinafter "Wisconsin Mutual") entered into an agency agreement with Service whereby Service was to act as the former's general agent to promote the sale of health and accident insurance. Service was to receive commissions on all policies sold by it and its sub-agents. Pursuant to the terms of the agreement, Wisconsin Mutual was to pay certain commissions to Service which it was required to pay for two years following termination of the agreement "as long as there [were] at least fifty active disability policies in force with the Company . . . ." After two years Wisconsin Mutual could continue to pay such commissions but it had the right to "rewrite" the policies and if the policies were so rewritten Wisconsin Mutual could cease paying commissions to Service thereafter. The right to receive commissions from Wisconsin Mutual pursuant to the terminated agency agreement was the principal asset and source of revenue to Service and is the subject matter of the controversy involved on this appeal.
Beginning July 1, 1964, Kramer commenced a series of six actions against the defendants Bohlman, Service, and Associates. The first four actions sought to enforce an alleged verbal agreement to purchase Kramer's stock in the two corporations. The last two actions by Kramer alleged that he and Bohlman were deadlocked in voting power and had failed for a period of at least two consecutive annual meeting dates to elect directors. The demand was for a decree "liquidating the defendant corporation and for the appointment of a receiver pendente lite to carry on the business and preserve the assets of the corporation."
On January 13, 1965, plaintiff with counsel and defendants with their counsel met with Circuit Judge EDWIN M. WILKIE, in chambers, and the settlement stipulation which is the subject of the instant action was dictated on the record. Under the stipulation, $4,379.16 which had been tied up in garnishment actions was ordered paid to, and was actually paid to, plaintiff; defendant Associates paid Kramer an additional $750; and Kramer transferred his stock in Associates to Associates.
As to Service, it agreed to pay Kramer a share of commissions received by it from Wisconsin Mutual as follows: 50 percent of a sum computed by deducting from gross commissions received from Wisconsin Mutual, 10 percent of such gross commissions, and commissions paid to subagents and state income tax. There was no guaranteed amount or price fixed, the intent being to distribute only whatever Service was to receive from Wisconsin Mutual and thus distribute Service's principal asset.
All of the Service stock, Bohlman's as well as Kramer's, was to be put in escrow, and in default of payments the stock was to be delivered to Kramer. Bohlman was to have the voting rights unless the stock were so delivered to Kramer. There were no provisions by which title to Kramer's stock in Service was to be transferred, since the settlement was only a distribution of assets and not a sale of stock.
Kramer retained all items of personal property of the corporation then in his possession, and relinquished "any and all rights and claims that he might have to any property that he may now have in either of the corporations." There were also provisions relating to income taxes and accountings.
Nowhere in the stipulation was there a provision entitling Kramer to share renewal commissions paid by any company other than Wisconsin Mutual.
On February 3, 1965, pursuant to the stipulation, judgments (denominated orders) were signed by Judge WILKIE and entered dismissing all pending actions between the parties without costs.
Following the settlement agreement Service made monthly payments to Kramer and paid to him his proportionate share of all commissions received by it from Wisconsin Mutual. However, on July 15, 1965, Wisconsin Mutual, by letter informed Service that it was withdrawing from the disability insurance business and that it had arranged for Liberty Life Accident Company of Muskegon, Michigan (hereinafter "Liberty Life") to reinsure its policies. Effective July 1, 1965, Kramer received no further payments on renewal premiums for disability policies previously issued by Wisconsin Mutual. Thereafter Liberty Life paid commissions due on the renewal premiums to the defendant Associates which premiums were not credited or paid to Kramer.
On October 11, 1965, the instant action was commenced. Liberty Life was added as a defendant. The initial complaint alleged that plaintiff, Kramer, was entitled to share in commissions "regardless of by whom said renewal commissions were paid," and that Liberty Life and other defendants "wrongfully . . . conspired to deprive plaintiff of his rights in said renewal commissions by diverting the payment of said renewal commissions from the defendant, Service, Inc., to the defendant, Associates, Inc."
Subsequent thereto plaintiff obtained leave of the court to amend his complaint to ask for reformation of the settlement stipulation on the grounds of mutual mistake and/or fraud. The complaint was so amended. Liberty Life was thereafter dropped as a party defendant.
Defendants on February 24, 1966, moved for summary judgment contending primarily that the action for reformation constituted a collateral attack on the stipulation and judgments entered in six other actions and that the action was commenced within one year of the date of the stipulation and judgments in such other actions. Defendants claimed plaintiff had ample opportunity pursuant to sec. 269.46, Stats., to demand relief from the stipulation and judgments based thereon in the actions in which they were entered. Defendants also stated in an affidavit by their counsel that plaintiff accepted all the benefits of the settlement stipulation and that defendants as a result of the stipulation gave up substantial defenses they could have raised in the actions that were settled.
Plaintiffs relied on an affidavit by Judge WILKIE opposing the motion for summary judgment. This affidavit averred:
". . . it was recognized by all parties, . . . that Wisconsin Mutual was not legally obligated to renew the insurance policies so written by Capitol Insurance Inc., for Wisconsin Mutual, . . .
". . . this affiant asked Mr. Fred Kaftan [attorney for defendants] and Mr. Bohlman whether they had any knowledge or information or held any belief that Wisconsin Mutual or any of its officers had any intention of discontinuing the writing of this business and that Mr. Fred Kaftan stated that they were not aware of any such present intention on the part of Wisconsin Mutual . . . all parties assumed that it was unlikely that Wisconsin Mutual would discontinue its practice of renewing such insurance policies at any time in the foreseeable future although it had the legal right to do so, . . ."
Judge BARDWELL in his memorandum decision on the motion determined on the basis of Judge WILKIE'S affidavit that the respective parties had assumed at the time of entering into the settlement stipulation that "Wisconsin Mutual would not discontinue its practice of renewing the subject disability policies at any time in the foreseeable future." The decision further held that such an assumption could be a mutual mistake of fact and thus plaintiff had made out a prima facie case for reformation. An order dated November 16, 1966, was entered denying the motion for summary judgment. Defendants have appealed.
A review of the decisions of this court reveals that it has never been squarely determined whether a party seeking modification of a stipulation upon which a judgment or judgments are based may initiate an independent action in equity to obtain such relief. The case is therefore one of first impression.
Sec. 269.46 (1), Stats., insofar as it is relevant to the case at bar provides:
"(1) The court may, upon notice and just terms, at any time within one year after notice thereof, relieve a party from a judgment, order, stipulation or other proceeding . . . ." (Italics supplied.)
We have no hesitancy in holding that an attempt to reform a settlement stipulation upon which a judgment has been entered is embraced within the statutory word "relieve." Thus the crucial question is whether the statutory remedy afforded plaintiff by sec. 269.46 (1), Stats., is plaintiff's exclusive remedy to accomplish a reformation of the stipulation. We determine that it is.
That reformation is relief, see Baldwin v. National Hedge Wire-Fence Co. (3d Cir. 1896), 73 Fed. Rep. 574, 19 CCA 575, 39 U.S. App. 162; 3 Pomeroy, Equity Jurisprudence (5th ed.), p. 420, sec. 872; 19 Am. Jur., Equity, pp. 124, 125, sec. 124.
From the record it appears that plaintiff had complete knowledge of the facts upon which he now relies approximately six months after the stipulation and judgments were entered. Nevertheless, by commencing the instant action approximately nine months after entry of the same he chose not to avail himself of his legal remedy, which was to proceed in the original actions pursuant to sec. 269.46 (1), Stats.
In Ada Enterprises, Inc., v. Thompson this court indicated that the proper procedure to follow to modify a judgment is to proceed in the original action in which the judgment was entered and that an independent action for such purpose should be dismissed by the trial court. The opinion stated:
(1965), 26 Wis.2d 269, 132 N.W.2d 244.
"It is the general rule in this state that a court should decline to exercise jurisdiction of an independent action to restrain enforcement of a judgment, rendered in another action in the same or a different court, where it is claimed that the manner of contemplated enforcement is improper or that enforcement will be inequitable because of circumstances arising after the judgment. The appropriate remedy in such case is an application after judgment in the action in which the judgment was rendered. . . .
Id. at page 273.
". . . if circumstances arising after judgment require what is, in effect, a modification of the judgment, the proceeding should be a continuation of the action in which the judgment was rendered."
Id. at page 274.
The same rule should apply with equal force to the modification of a stipulation upon which a judgment or judgments are based.
Reformation, which plaintiff seeks, is an equitable action. One of the firmly established rules of equity is that where a court of law can do as full justice to the parties as can be done in equity, a court of equity will not interfere. This rule is directed not to the want of power of a court of equity but to the inexcusable use thereof. Sec. 269.46 (1), Stats., supra, clearly provided plaintiff with an adequate remedy at law. The statute obviously was drafted to effectuate "the policy of the law [which] is to put an end to litigation." By the Court. — Order reversed, and cause remanded with directions to enter summary judgment dismissing the action.
Krause v. Hartwig (1961), 14 Wis.2d 281, 284, 111 N.W.2d 138; Becker v. First Wisconsin Trust Co. (1957), 274 Wis. 404, 411, 80 N.W.2d 440; Langer v. Stegerwald Lumber Co. (1952), 262 Wis. 383, 391, 55 N.W.2d 389, 56 N.W.2d 512.
1 Pomeroy, Equity Jurisprudence (5th ed.), p. 367, sec. 217; 27 Am.Jur.2d, Equity, pp. 607, 608, sec. 86.
Laun v. Kipp (1914), 155 Wis. 347, 145 N.W. 183, 5 A.L.R. 655.
Crowns v. Forest Land Co. (1899), 102 Wis. 97, 100, 78 N.W. 433.
WILKIE, J., took no part.