Opinion
March 30, 1964 —
April 28, 1964.
APPEAL from a judgment of the circuit court for Dane county: RICHARD W. BARDWELL, Circuit Judge. Modified and, as modified, affirmed.
For the appellant there were briefs by Foley, Capwell, Foley Kolbe of Racine, and oral argument by Rex Capwell.
For the respondent there was a brief by Roberts, Boardman, Suhr Curry, attorneys, and Walter M. Bjork and Thomas G. Ragatz of counsel, all of Madison, and oral argument by Walter M. Bjork.
The plaintiff, the State Medical Society of Wisconsin, also referred to as Wisconsin Physicians Service and W.P.S. prevailed in the court below. The defendant, Associated Hospital Service, Inc., also referred to as Blue Cross, is, on this appeal, only concerned with that part of the judgment which awarded the plaintiff damages in the amount of $25,660.57 on its first cause of action.
The dispute culminating in this appeal arose out of a con: tract between the defendant and the plaintiff. The contract became effective January 1, 1954, although there had been prior contractual dealings between the parties from January 1, 1951. Under the 1954 contract, the principal duties of the defendant were selling, enrolling, billing, collecting, and the maintenance of records in connection with the health-insurance operation carried on by both parties jointly. The defendant was described in the contract as an agent, and the contract charged the defendant with the performance of such other acts as may be essential and incidental to the general duties mentioned above.
As reimbursement, W.P.S. agreed to pay to Blue Cross $.2119 per month for each individual W.P.S. "contract in effect and serviced hereunder." This amount was later adjusted upward slightly under a provision in the contract which provided for changes of the $.2119 with changes in the consumer's price index of the United States department of labor.
The termination provisions of the master contract read in part as follows:
"IV. Termination Provisions.
"The purpose of this section is to develop an automatic provision for termination, arranged in such manner as recognize the important interest of each plan in the preservation of the relationship of principal and agent and to provide a mechanism which will avoid any unnecessary abruptness, should such termination ever occur. It is recognized that even in the period of termination provided herein, the relationship of principal and agent must continue, within practical limitations and in such manner as to avoid hasty and ill-considered action on the part of one to the unjustifiable damage of the other.
"This Agreement, and the agency created hereby, may be terminated by either party at any time upon not less than six (6) months' General Notice to the other. . . .
"In the event of any such termination, it is agreed:
". . .
"4. That after said notice has been delivered, Blue Cross shall not be required to solicit the enrollment of new individuals or groups in the surgical-medical service plan of Blue Shield, but shall in all other respects continue to perform its duties as the agent hereunder, including the servicing of existing groups."
The plaintiff gave the defendant notice pursuant to the contract. The parties disagree as to when in fact the contractual relationship between the parties ended. The position of the plaintiff is that, as to "cycle 2" or small-group accounts, the obligation of the plaintiff to reimburse the defendant ended in January, 1958;the defendant contends that it should have been reimbursed for servicing such accounts through February, 1958.
As to the "cycle 1" or large-group accounts, the plaintiff contends that it had an obligation to reimburse the defendant only through December, 1957, for servicing such accounts. The position of the defendant is that it should be reimbursed through the month of January, 1958, for its services in connection with such accounts.
The practice of the defendant was to deduct each month its $.2119 per account and then remit the balance to the plaintiff. This dispute arose as to how much the defendant should properly deduct, and arose in large part because many of the groups, both in cycle 1 and cycle 2, made late payments. Customarily, a group would be billed sometime between the 1st and 10th of each month, and the due date for payment was the 20th of the month. If the billing had been made each month on or before the 10th of that month and the remittance had been received in connection with such billing by the 20th of such month, no problem would have arisen, as all of the services in connection with the account in question would have been performed in that month.
However, in practice, many of the groups delayed their payments, so that Blue Cross was in fact performing services in one month in connection with an account for which a bill may have been sent in a prior month. It was agreed by both parties that there was no fault on the part of the defendant in not being able to complete the work on each account in the month for which there was a billing on such account.
The position of the plaintiff in this litigation is that delays in payment were immaterial since the contractual arrangement had been to pay for certain services in connection with each account no matter when such services were performed. Under this theory, which the trial court as the trier of fact accepted, the defendant had been properly reimbursed through the period of termination as contended by the plaintiff. The controlling dates, according to W.P.S., were December, 1957, for the large-group accounts, and January. 1958, for the small-group accounts.
The defendant, on the other hand, takes the position that because of the late payments, there were necessary services on the two groups of accounts which had to be performed by the defendant through January, 1958, and February, 1958, respectively. The defendant thus claims it is entitled to reimbursement through such dates because it continued to render services with respect to the two types of accounts.
The record reveals that the parties engaged in considerable discussion and correspondence in connection with the termination of their agreement. Numerous other aspects of the termination of the agreement were settled amicably by the parties.
The trial court was of the view that the conduct of the parties to the contract was helpful in clarifying those portions of the agreement which were ambiguous. A meeting was held by representatives of both sides in connection with terminating the agreement. Such meeting took place at Oconomowoc on January 28, 1958. The matter of reimbursement for the defendant in connection with the two groups of accounts was discussed, and several alternatives were proposed and recorded in the minutes of such meeting.
Thereafter, in a letter dated February 3, 1958, from Voyer, an official of the defendant, to Mr. Koenig and Flowers, officials of the plaintiff, Mr. Voyer stated as follows:
"We will continue to charge. . . on the basis of the month in which the group was billed and payment due."
From this the trial court drew the inference that the defendant had in effect accepted the version of the plaintiff as to how reimbursement should be made to the defendant.
Mr. Voyer wrote another letter to the same two individuals on February 5, 1958, and the letter reads in part:
"Accordingly, we will deduct one month's reimbursable expenses due Blue Cross from all remittances for contracts having a January 20th subscription fee due date, irrespective of the date of reconciliation?'
From this the trial court drew the inference that the defendant had again accepted the theory of the plaintiff as to how reimbursement should be made with respect to the small-group (cycle 2) accounts.
Mr. Flowers, on behalf of the plaintiff, wrote a letter to Mr. Voyer on February 11, 1958, and the letter closes with the statement:
"There will be no Agency service charge due Blue Cross for the month of February, 1958 or any month thereafter. "Will you write a note of concurrence if you agree that the above outline is consistent with your intentions so that this additional clarification can be provided those responsible for management of W.P.S."
In a letter dated February 27, 1958, from Mr. Voyer to Mr. Flowers, Mr. Voyer stated as follows;
"In the report for January, we will give W.P.S. credit for the number of first cycle direct pay contracts, for the second cycle of direct pay contracts shipped 12/31 and for the first cycle of groups (groups of 100 or more subscribers) having a due date of 12/20.
"Regardless of when the reporting is done and the agent's reimbursement is actually collected by Blue Cross, under the Agency Contract we are entitled to receive $.2269 per month per contract in the first half of 1958 for each W.P.S. group contract that is in effect and serviced by us, starting with the first month that the subscriber's contract is in effect and through the month in which occurs the normal due date of the last billing issued by Blue Cross for the W.P.S. subscriber's contract. This procedure applies only to group contracts. The procedure for Direct Pay contracts is shown in the reports heretofore furnished you." (Emphasis added.)
The trial court agreed with the interpretation of the plaintiff that by February 27, 1958, both parties had agreed that the monthly charge per account should continue only through the normal due date of the last billing issued by Blue Cross.
The trial court concluded that there was no basis for the defendant's claim on the theory of quantum recruit since any extra work the defendant might have done at the end of the termination period was more than balanced by having to do less work for the same compensation during the last six months of the life of the master contract. This is because the defendant's duties pertaining to selling, enrolling, and promotional activities were excused during the last six months.
In a motion for review, the plaintiff asks this court to review the determination of the trial court that the plaintiff was not entitled to interest from September 1, 1958 (the date of the demand), on the amount of $25,660.57, which was recovered in the first cause of action. The trial judge applied equitable considerations in determining that the plaintiff should not receive the interest.
The plaintiff also seeks a review on this appeal of a preliminary order of the trial court which granted an extension of time to the defendant to settle the bill of exceptions. Judgment was entered on January 28, 1963, and on February 7, 1963, notice of entry of judgment was served on counsel for the defendant. The last day to settle the bill of exceptions, pursuant to sec. 270.47, Stats., was May 8, 1963. Defendant's counsel realized on or about June 24, 1963, that the time for settling the bill of exceptions had passed and that there had been no extension of time granted by the trial court. Accordingly, defendant's counsel brought an order to show cause on July 10, 1963, for an order extending the time for settling the bill of exceptions. The trial court ruled that there was cause and excusable neglect on the part of the defendant and further that there had been no showing that the plaintiff would be prejudiced by an extension of the time to settle the bill of exceptions.
On this appeal, the plaintiff contends that the trial court abused its discretion in permitting the enlargement of time through September 30, 1963, for settling the bill of exceptions. The cause shown in support of the enlargement of time was that two chief executive officers of the defendant Blue Cross had recently died, and both of these two individuals were closely involved in the instant litigation. However, defendant's counsel admitted that he was not aware of sec. 270.47, Stats., requiring the service of a proposed bill of exceptions within ninety days after service of notice of entry of judgment.
The trial court interpreted this contract dispute in favor of the State Medical Society. The appellant, Blue Cross, disagrees with that interpretation and also urges that it is entitled to recover either on the theory of novation or under an approach of quantum recruit. We find nothing in the record to suggest that there has been a novation. A novation contemplates a substitution of a new contract for a previous one, and this is simply not consistent with the facts of the instant case. Spycher v. Werner (1889), 74 Wis. 456, 458, 43 N.W. 161.
There is no basis for an allowance in favor of Blue Cross on the grounds of quantum meruit. It is undeniably true that continued services were rendered by Blue Cross, but these are services which were required under the contract. They were neither extra services nor were they services which were beyond the contract of the parties. In our opinion, the right of Blue Cross to be reimbursed for its activities under the contract depends solely on the construction to be given to the contract. Accordingly, we now address ourselves to what we regard as the crucial question of the case, namely, the proper interpretation of the parties' agreement.
The controversy arises because of the fact that payments by customers, due on the 10th day of the month. were delayed. The presence of this problem did not come as a surprise to either party. It was a circumstance with which both parties were undoubtedly familiar. Indeed, there was never any question but that after the terminal dates Blue Cross would continue to perform the administrative duties which were necessitated by the late payments.
The contract itself is a comprehensive one reflecting care in its preparation and execution. Although the "termination provisions" are set forth in detail in section IV, the parties did not expressly cover the late-pay problem in their formal agreement. Accordingly, there is an interpretation problem as to what was meant by that portion of section III which provides for reimbursable expenses:
"Blue Shield shall pay to Blue Cross, as reimbursement for its expenses hereunder:
"a. $.2119 per month for each Blue Shield contract in effect and serviced hereunder."
The position of Blue Cross is that it was obliged to continue various services as to those accounts upon which there had been late payment, and each of such accounts remained "in effect." The State Medical Society, on the other hand, contends that the delayed services rendered by Blue Cross were already compensated under the terms of the formal agreement.
A reading of section III and its specific requirement of reimbursement to Blue Cross for each "contract in effect and serviced hereunder" does not furnish an unequivocal answer to the issue in dispute — even though these are the words which must ultimately be interpreted. There is applicable thereto the following statement of Judge LEARNED HAND in Helvering v. Gregory (2d Cir. 1934), 69 F.2d 809, 810:
". . . the meaning of a sentence may be more than that of the separate words, as a melody is more than the notes, and no degree of particularity can ever obviate recourse to the setting in which all appear, and which all collectively create."
Considering the agreement as a whole, as well as the interpretation placed upon the agreement by the parties themselves, we are persuaded that the trial court correctly interpreted the agreement. We consider that the contract obligated Blue Cross to continue to service those accounts wherein late payment occurred without additional compensation. If Blue Cross had contemplated that it was to be paid for services rendered to insured persons who were late in their payments, such entitlement to compensation is not adequately recited in the basic contract.
A further consideration which supports the foregoing conclusion is what the trial court referred to as "the interpretation placed on the reimbursement provisions by the parties themselves." On three different occasions, a responsible officer of Blue Cross set forth in writings, which were received in evidence, statements which constituted recognition that Blue Cross would make charges "on the basis of the month in which the group was billed and payment due." These letters strongly suggest that reimbursement was not to be made on the basis of the month in which actual payment was received by Blue Cross.
The defendant takes the position that the aforesaid statements were not properly admissible since they constituted offers of compromise and settlement. This court subscribes to the proposition that proposed settlements and offers of compromise are to be encouraged and that it would contravene desirable public policy to permit such salutary proposals to be utilized in a hostile manner at trial. See Connor v. Michigan Wisconsin Pipe Line Co. (1962), 15 Wis.2d 614, 113 N.W.2d 121.
As noted in the Connor Case, at page 622, the rule excluding from evidence offers of compromise does not apply to "'admissions of independent facts occurring during negotiations.'" See McCormick, Evidence (hornbook series), p. 540, sec. 251. In our opinion, the record in the instant case supports the view that the communications in question were written at a period when the controversy arose and not when the parties were attempting to settle it. In other words, they were not offers of compromise but, on the other hand, were admissions made against interest.
It may often be difficult to determine whether a given statement is made as part of the negotiations in which the controversy is recognized or is made as part of an offer of compromise. We believe that each case will have to stand on its own facts and that in the instant case the trial judge properly overruled the objection to the admissibility of the defendant's admissions. However, under different circumstances, if a trial court is persuaded that a declaration by a disputant has been made for the purpose of attempting to resolve or compromise a dispute, we would encourage the trial court's sustaining of an objection to its admissibility.
The trial court denied interest to the plaintiff, explaining that this was "because of certain equitable considerations." If this were a matter in equity, there might be merit to this view on the part of the trial court. As Francis Bacon once explained, "Chancery was designed to mitigate the rigors of law by the conscience of a good man." However, we regard the instant dispute as a contractual disagreement. It is in law and not in equity. Interest is required as a matter of right. In Necedah Mfg. Corp. v. Juneau County (1932), 206 Wis. 316, 334, 237 N.W. 277, this court said that interest is a "part of his compensatory damages, measured according to a rule of law which courts are bound to apply. It is not in the nature of a penalty which it is discretionary with a jury or judge to impose or to disregard." The plaintiff acquiesced in the delay but demanded interest on September 1, 1958, and it was entitled to such interest.
On this appeal, the respondent has moved that an order entered by the trial court enlarging the time for settling the bill of exceptions be reversed. The time for settling the bill of exceptions pursuant to sec. 270.47, Stats., had passed when appellant's counsel brought an order to show cause for an extension of the time for settling the bill of exceptions. The trial court found that there was excusable neglect on the part of the appellant and exercised its discretion to extend the time to settle the bill of exceptions pursuant to sec. 269.45. We conclude that there was no abuse of discretion in this regard by the trial court in light of the case of Hernke v. Northern Ins. Co. (1963), 19 Wis.2d 189, 194, 120 N.W.2d 123.
By the Court. — Judgment modified to award interest to respondent from September 1, 1958, on the sum recovered under the respondent's first cause of action and, as so modified, affirmed.