text:
    Queen Insurance Company of America, Appellant, v. Kaiser and others, d/b/a Kaiser Building Management Company, Respondents.

      April 27

    June 1, 1965.

      For the appellant there was a brief by Kivett & Kasdorf, attorneys, and James G. Forester of counsel, all of Milwaukee, and oral argument by Mr. Forester.

    For the respondents there was a brief by Kenneth M. Kenney and Wolfe, O’Leary, Kenney & Wolfe, all of Milwaukee, and oral argument by Kenneth M. Kenney.

   Beilfuss, J.

The issue is — do the terms of the exculpatory clause of the lease exonerate the lessor from liability for damages sustained by the lessee and caused by the negligence of the lessor.

It is conceded that the plaintiff insurer cannot recover under its subrogation agreement unless its insured (tenant Bruner) had a right to recovery. Frederick v. Great Northern R. Co. (1932), 207 Wis. 234, 240 N. W. 387, 241 N. W. 363.

The legality of an exculpatory clause has not been challenged by the plaintiff.

“The basis upon which the courts have upheld the validity of exculpatory clauses in lease contracts has been the broad ground of public policy and the freedom of contract guaranteed by the federal and state constitutions. More specifically, it has been held that the landlord and tenant relationship is not a matter of public interest, but relates exclusively to the private affairs of the parties concerned and that the two parties stand upon equal terms, . . .” Anno. 175 A. L. R. 8, 86. See also, in general, Annos. 84 A. L. R. 654; 26 A. L. R. (2d) 1044, secs. 11, 13, 14, 15.

The plaintiff-appellant contends the exculpatory clause should be strictly construed against nonliability and thus construed, the terms of the lease do not exonerate the lessor from liability under the facts of the case. The argument is that the water pipes froze and burst in an area not leased by Bruner and over which Bruner had no control, and that the parties did not intend that the lessor should be relieved from liability caused by the negligent acts of the employees of the lessor.

In Johnson v. Prange-Geussenhainer Co. (1942), 240 Wis. 363, 375, 2 N. W. (2d) 723, it is stated:

"... the rule of strict construction cannot be used as an instrument for defeating the clear intention of the parties.”

It is clear that this exculpatory clause was intended to limit the liability of the lessor. Clauses of this kind are not uncommon and are a proper subject of the bargain of the parties.

As stated in Lerner v. Heicklen (1926), 89 Pa. Super. 234, 236:

“It is not unreasonable to assume that the consideration that induces a tenant to enter into such a covenant is the fixing of a lower rental for the demised property than would otherwise be demanded by the lessor. Upon this matter the parties may bargain freely and agree upon their own terms. The covenant in question contravenes no policy of the law.”

The clause may be broken down to four parts: (1) “Lessor shall not be liable for any damage occasioned by failure to keep said premises in repair;” (2) “and shall not be liable for any damage done or occasioned by or from plumbing, gas, water, steam or other pipes, or sewerage, or the bursting, leaking or running of any cistern, tank, washstand, water-closet, or waste-pipe in, above, upon or about said building or premises;” (3) “nor for damage occasioned by water, snow or ice being upon or coming through the roof, sky-light, trap door or otherwise;” (4) “or for any damage arising from the acts or neglect of co-tenants or other occupants of the same building.”

The clause read as a whole expresses a broad intention to limit the liability of the lessor. The second part contains the most-significant limitation under the facts of this case. This portion of the clause provides that the lessor shall not be liable for damage caused by or from plumbing, water, or other pipes “in, above, upon or about said building or premises.” The language “in, above, upon or about said building or premises” is very broad and inclusive. We conclude that the parties did not intend to limit exculpation from liability to damage originating within the physical limits of building 1-A. The fact that Bruner obtained insurance to protect itself against this kind of loss is evidence of the intention of the parties.

Moroder v. Fox (1914), 155 Wis. 503, 143 N. W. 1040, cited by the plaintiff, must be distinguished on its facts. In that case lessee rented the first floor. The lease provided the lessee had the affirmative to take all necessary steps to prevent damage and to pay any damages occasioned by its failure. The clause under consideration here is one to release the lessor from liability. In Moroder the court held that the lessee had no right of access to the second floor and could not be held liable for failures originating from that source. The clause before us relieves the lessor of liability; in Moroder it created affirmative duties on the part of the lessee.

The plaintiff submits that the clause does not specifically relieve the lessor from liability occasioned by the negligence of the lessor or its employees.

The trial court stated in its memorandum opinion filed herein:

“It is said in 32 Am. Jur., 616, Landlord and Tenant, sec. 739:
“ Tt is generally held that a provision exempting the landlord from liability on account of the condition of the premises does not apply where the damage sustained is the result of active negligence on the part of the landlord, although such provision may apply where the negligence charged is purely passive in its nature and is founded on the omission to correct leaks. It has been held that a covenant in a lease exempting the landlord from all liability for any and all damage caused by water, gas, etc., includes liability for acts of negligence.’
“Active and passive negligence have been defined in 65 C. J. S., 322, Negligence, sec. 1 (e), as follows:
“ ‘. . . “active negligence,” . . . , denotes some positive act or some failure in a duty of operation which is the equivalent of a positive act, and “passive negligence” the failure to do something that should have been done.’
“Under the rule adhered to in this state, passive negligence, as distinct from active or affirmative negligence, is insufficient to nullify an otherwise valid exculpatory clause in a lease. . . .”

The parties agree that the negligence of Landwehr, Kaiser’s employee, was passive and not active negligence.

We agree with the trial court that the negligence of Landwehr was only an inadvertent act of omission and, as such, passive negligence. We further agree that passive negligence, as distinguished from active negligence, will not invalidate the exculpatory clause of the lease under consideration, and that Kaiser was not liable to Bruner for damages caused by the broken pipe.

Because we have determined that the exculpatory clause relieves Kaiser from liability, we deem it unnecessary to consider Kaiser’s motion to review the negligence finding.

By the Court. — Judgment affirmed.

        Johnson v. Prange-Geussenhainer Co., supra.


source: Caselaw Access Project

author: Heffernan, J.

license: Public Domain

text:
    Caygill and another, Plaintiffs and Respondents, v. Ipsen and another, Defendants: Thompson and another, Defendants and Appellants.

      April 27

    June 1, 1965.

      For the appellants there was a brief by W. L. Jackman and Hart, Kraege, Jackman & Wightman of Madison, and oral argument by W. L. Jackman.

    For the respondents there was a brief and oral argument by Frank D. Hamilton of Dodgeville.
   Heffernan, J.

We conclude that the complaint improperly joins two separate causes of action in that they do not affect both parties who have been joined as defendants. They require different places of trial, and are not stated separately. We rely on sec. 263.04, Stats., which provides:

“Uniting causes of action. The plaintiff may unite in the same complaint several causes of action, whether they be such as were formerly denominated legal or equitable or both. But the causes of action so united must affect all the parties to the action and not require different places of trial, and must be stated separately.”

If there is but a single cause of action stated by the plaintiff, the question of misjoinder does not arise. The plaintiff alleges but one cause of action. If, however, more than one cause of action is in fact stated, the question of misjoinder of causes must be considered.

Judge Charles E. Clark has defined a cause of action as, "... a group of facts, but limited as a lay onlooker would to a single occurrence or affair, without particular reference to the resulting legal right or rights.” This definition Clark finds to be that most nearly approaching the. code ideal. Looking at the facts alleged by the plaintiff in light of this definition of a cause of action, there is little doubt that two separate “occurrences or affairs” as a lay onlooker would view them, are alleged in the plaintiff’s complaint.

Clark further defines a cause of action as, “a factual unit, whose limits are determined by the time and sequence and unity of the happenings, rather than . . . potential judicial action.”

The operative facts, not the consequences, are determinative of a cause of action. “It is the wrongful act, and not the injury, that creates liability.”

Applying these concepts, a cause of action must be viewed as a grouping of facts falling into a single unit or occurrence as a lay person would view them. This grouping of facts consists of “the defendant’s wrongful act.” It is apparent that here there are two such groupings or two distinct wrongful acts alleged, one by each defendant. There is no doubt, however artfully plaintiff’s counsel has sought to denominate it, that the plaintiffs claim against Ipsen and Thompson are two separate and distinct causes of action irrespective of how the consequences have merged in the resultant injuries. In Rogers v. Oconomowoc (1962), 16 Wis. (2d) 621, 115 N. W. (2d) 635, this court concluded that “the accident” was the subject of the controversy that constituted a single cause of action.

The plaintiff resorts to the much used and quoted “primary right” definition of Professor Pomeroy and insists that but a single such right is asserted, the right to recover damages for an indivisible injury. However, the “primary right” of the plaintiff here is to be free from the tortious invasion of her person. What the plaintiff denominates as a “primary right” is the remedy or relief itself. Professor Pomeroy makes it clear that there are separate and distinct elements giving rise to judicial relief. The elements are:

“. . . a primary right possessed by the plaintiff, and a corresponding primary duty devolving upon the defendant; a delict or wrong done by the defendant which consisted in a breach of such primary right and duty; a remedial right in favor of the plaintiff, and a remedial duty resting on the defendant springing from this delict, and finally the remedy or relief itself.”

The conduct of the defendants, Thompson and Ipsen, are two separate invasions of the right to be free from bodily harm; and, as a consequence, the accidents give rise to two separate causes of action.

Having reached this conclusion, we must now proceed to determine whether the causes are improperly joined. This court has previously determined that our statutes permit the joinder of causes when the following appears:

“The causes (1) must affect all the parties to the action; (2) must not require different places of trial; (3) must be separately stated.”

The plaintiff has violated the third requirement by not separately stating the causes of action. This, however, is not to be deemed a fatal defect subject to demurrer if the causes are in fact otherwise properly joined.

Having found that separate causes of action had been pleaded, it follows that the action against Thompson cannot be tried in Dane county since the Thompson accident occurred in Grant county and Thompson is a resident of Dodge county, but the cause of action against Ipsen is properly brought in Dane county, where the accident occurred. Hence, they require separate places of trial, and a joinder would violate the final requirement of sec. 263.04, Stats.

Moreover, the complaint violates the provisions of sec. 263.04, Stats., in that the defendant, Thompson, is not affected by the cause against Ipsen, or Ipsen by the cause against Thompson. The cause of action for the accident of August 21, 1961, affects only the defendant, Ipsen, while the cause of action arising from the accident of January 9, 1962, affects only Thompson.

Our case law is replete with instances of judicial restatements of the simple statutory rule that each cause of action is to affect all parties to the action. In Jordan v. Koerth (1933), 212 Wis. 109, 248 N. W. 918, the plaintiff brought an action for false arrest. He subsequently amended his complaint to add an additional claim for damages against the original defendant and another person for a subsequent arrest. The court stated the rule (p. 112) :

“There was thus united upon plaintiff’s motion in one complaint a cause of action against one individual with a cause of action against that individual and another. The amendment was objected to and offends against the rule as fixed by the legislature in sec. 263.04, Stats., . . .”

This court in Kamke v. Clark (1955), 268 Wis. 465, 67 N. W. (2d) 841, 68 N. W. (2d) 727, pointed out that various defendants who had created a nuisance by the dumping of noxious refuse could not be joined in a single action at law since they were not joint tortfeasors. Unless the parties are joint tortfeasors, the cause of action against one is not a cause of action against the other, and each defendant is unaffected by the other asserted claims.

This, of course, is the gist of the plaintiff’s position — that the defendants, by virtue of their contributing to an indivisible injury, are joint tortfeasors, and the joinder of them is not violative of sec. 263.04, Stats. If they are in fact joint tortfeasors, the law has long allowed joinder, since their responsibility to the defendant would be identical. In English law, joint tortfeasors are those who act in concert, and joinder is permitted only in those cases. It is not permitted, even when the torts are concurrent, if independent. Certainly, the meaning of “joint tort” was originally the doing of a wrong through designedly concerted action. The theory was that those who share a common purpose and act together to do harm should be liable vicariously for the acts of each other. Our court, like that of most states, has ameliorated the English common-law rule that there can be joint liability only when there is concerted action by mutual or conspiratorial design. There are a number of cases where the independent acts of two defendants have concurred to produce a single and indivisible result, and in those cases joinder is permitted. Thus, where two automobiles collide and injure the plaintiff, joinder is permitted and both of the defendants can be sued in a single lawsuit.

We have also concluded that there may be an impleader of parties and a joint trial of the actions in malpractice cases when the injury sustained is a consequence of the original tort and the subsequent malpractice results in inseparable injuries and damages. It should be noted, however, that these cases are easily distinguishable from the case at bar. Where the negligence of two tortfeasors concurs as to time and place and results in a single accident or occurrence, and the acts of the wrongdoers combine in a single force to produce injury, there is but one cause of action, and in accordance with our well-established rules of pleading, the defendants can be joined in a single lawsuit.

Some jurisdictions have allowed the joinder of consecutive tortfeasors in the chain reaction accident, a type of automobile collision that arises more and more frequently on our congested highways. Here, again, there is a substantial concurrence of the time factor, the successive collisions being only seconds or minutes apart. Again, this is one event or occurrence in the eyes of the lay onlooker.

The recent cases that permit joinder of successive torts involve only an insignificant time lapse between them, not almost five months as in the case before us.

The malpractice cases and others like them present a different situation. They rest upon the theory that a tortfeasor is liable for foreseeable consequences of his act including the hazard that the injured party will be obliged to seek medical assistance and thus expose himself to the dangers of negligent medical care.

We conclude, therefore, that these cases are not joint torts giving rise to the right of joinder. In Wisconsin, where the joinder of consecutive tortfeasors has been permitted, the acts are either closely related in terms of time or else the subsequent torts were foreseeable as a consequence of the original wrongful act.

We do not, by this opinion, rule out the possibility of joinder where the acts are consecutive but are closely enough related in a time sequence to constitute one event.

This case, however, presents a situation far removed from this hypothetical situation. The acts are not substantially concurrent, the events are unrelated, and the accidents took place in different counties. It would appear to be unreasonable under these circumstances to permit the joinder of wrongdoers whose tortious acts were separated by so great a time and distance. The fact that their conduct resulted in indivisible injury to the plaintiff does not under these circumstances result in creation of any relationship between them.

This court has consistently refused to allow the joinder of separate and unrelated torts though their results do concur to cause an individual injury to the plaintiff. Thus, in Lull v. Fox & Wisconsin Improvement Co. (1865), 19 Wis. 112 (*100), the plaintiff joined two defendants who at different times and on separate channels of the river erected dams. ' The plaintiff alleged that the two dams obstructed the flow of the river and caused the flooding of his land. The court stated (p. 113) :

“Here are two distinct causes of action set out, one against the corporation defendant, the other against the other defendants. There is no allegation that all the defendants acted together in erecting or maintaining either or both of these dams; on the contrary, it is alleged they acted separately; each dam was erected and has been maintained by a part of the defendants without the aid or even approval of the others. We are at a loss to perceive how, by the well established rules of pleading, these causes of action can be united. It is argued that the result of the separate acts of the defendants in erecting and maintaining the dams is a joint result, the same as if all the defendants had been engaged in erecting and maintaining both dams. If it were so, it does not follow that the defendant or defendants who alone erected and maintained one dam, without any concert of action or connection with the defendant or defendants erecting and maintaining the other dam, should be held liable to pay the damages occasioned by erecting and maintaining both. The argument that there is difficulty in ascertaining the damage done or caused by the erection of each dam, or that it is impossible, is certainly no reason why one defendant should pay for the damages caused by another with whom he is in no way connected.”

This can be a harsh rule. The plaintiff here is presented with the possibility that, failing in a joinder and a finding of joint liability, he could in successive lawsuits fail to prove that either of the defendants is liable for his damages. The problem has been posed thus:

. . a question of social and judicial policy arises. Stated from a plaintiff’s viewpoint, the problem is said to be whether the injured plaintiff shall recover nothing because he is unable to carry the ‘impossible burden’ of proving the respective shares of harm caused by each tortfeasor, or whether a tortfeasor may be required to ‘pay more than his theoretical share of the damages accruing out of a confused situation which his wrong has helped to create.’
“Stated from a defendant’s viewpoint, the question is whether the defendant ‘will be forced to pay damages for injuries not shown to have been caused by his own wrongful act or by the act of another under such circumstances as to be attributable to him.’ ”

Wigmore has stated that to allow wrongdoers to escape because of the plaintiff’s inability to attribute specific causes and injury to each defendant is an example of the “law’s callous dullness to innocent sufferers.”

The law is not indifferent to the plaintiff’s dilemma, but the problem is not vastly different from that confronted by any plaintiff who is faced with difficulty of proving damages to a reasonable certainty even though the uncertainty may be occasioned by the conduct of the defendant.

“A classic statement of principle finds place in many opinions, as follows: ‘The damages . . . must be certain, both in their nature and in respect to the cause from which they proceed.’ ”

In any cause of action where the plaintiff cannot sustain that burden, he is doomed to failure. Damages must be proved with reasonable certainty. Maslow Cooperage Corp. v. Weeks Pickle Co. (1955), 270 Wis. 179, 70 N. W. (2d) 577. Nor does mere difficulty of proof exonerate a plaintiff from this burden. De Sombre v. Bickel (1963), 18 Wis. (2d) 390, 118 N.W. (2d) 868.

Under our present adversary system, there is always a possibility that an injured party may go uncompensated. However, the situation is not unlike the problem that arises when attempting to prove that an injury arose from a particular accident rather than from some other cause. Smee v. Checker Cab Co. (1957), 1 Wis. (2d) 202, 83 N. W. (2d) 492; O’Donnell v. Kraut (1943), 242 Wis. 268, 7 N. W. (2d) 889.

Our court has previously commented on a problem of similar difficulty:

“The contention that the jury could not distinguish the results between the negligence of the two parties is not without merit. But we apprehend it is no more difficult to separate the results of the two negligences than it often is to determine the results of defendant’s negligence alone, or how much money will compensate for a given result in a particular case. Such difficulties are inherent in the subject matter dealt with, and courts and juries must wrestle with and solve them as best they can. In most cases there can be no mathematical or demonstrable certainty arrived at. Reasonable certainty is all the law requires and is all that can usually be attained.”

While we conclude that the causes of action arising out of these separate accidents cannot be joined, this is not to say that the parties are barred from producing evidence arising out of either accident in either lawsuit that may be brought against the defendants individually as proof of, or in mitigation of, damages.

By the Court. — Order reversed with directions to dismiss the complaint against the demurring defendant with leave on the part of the plaintiff to plead over.

Wilkie, J., took no part.

       Clark, Code Pleading (2d ed.), p. 130.

       Clark also points out that the concept of single “primary right,” cherished in Wisconsin code pleading, is consonant with this rule. Ibid. page 130.

       Ibid. page 143.

        Northern Finance Corp. v. Midwest Commercial Credit Co. (1931), 59 S. D. 282, 285, 239 N. W. 242.

       “We are not bound by the form of a pleading, but may consider the substance of the allegations thereof for the purpose of determining whether more than one cause of action is alleged therein.” Usow v. Usow (1933), 213 Wis. 395, 401, 251 N. W. 458.

       Pomeroy, Code Remedies (5th ed. 1929), p. 528, sec. 347; and State v. P. Lorillard Co. (1923), 181 Wis. 347, 361, 193 N. W. 613.

        Whaling v. Stone Construction Co. (1958), 5 Wis. (2d) 113, 92 N. W. (2d) 278.

        Gunderson v. Thomas (1894), 87 Wis. 406, 58 N. W. 750. An intermixture of causes of action is, of course, subject to a motion to make more definite and certain.

       Sec, 261.01, Stats., provides as follows:
      “Place of Trial. Except as provided in section 220.12 and subject to the provisions for change of venue the proper place of trial of civil actions is as follows: . . .
      “(11) Auto Accident Actions. Of an action growing out of the negligent operation of a motor vehicle, the county in which the cause of action arose or where the defendant resides.”

       Prosser, Law of Torts (2d ed.), p. 236, sec. 46.

        Heims v. Hanke (1958), 5 Wis. (2d) 465, 93 N. W. (2d) 455; Bolick v. Gallagher (1955), 268 Wis. 421, 67 N. W. (2d) 860.

        Maddux v. Donaldson (1961), 362 Mich. 425, 108 N. W. (2d) 33, 100 A. L. R. (2d) 1, N. B. time lapse between the consecutive torts of 30 seconds. California: See e.g., Eramdjian v. Interstate

        Bakery Corp. (1957), 153 Cal. App. (2d) 590, 315 Pac. (2d) 19, and Cummings v. Kendall (1940), 41 Cal. App. (2d) 549, 107 Pac. (2d) 282. Kentucky: See e.g., Murphy v. Taxicabs of Louisville, Inc. (Ky. 1959), 330 S. W. (2d) 395. Michigan: See e.g., Meier v. Holt (1956), 347 Mich. 430, 80 N. W. (2d) 207, and Watts v. Smith (Mich. 1965), 134 N. W. (2d) 194.

        Kiviniemi v. American Mut. Liability Ins. Co. (1930), 201 Wis. 619, 231 N. W. 252; Wenzel v. Werch (1949), 256 Wis. 47, 39 N. W. (2d) 721.

       100 A. L. R. (2d) 16, 32.

       Joint-Tortfeasors and Severance of Damages; Making the Innocent Party Suffer Without Redress, 17 Illinois Law Review (1922), 458.

       McCormick, Law of Damages, p. 97, sec. 25.

        Schultz v. Tasche (1918), 166 Wis. 561, 565; 165 N. W. 292.


author: Hallows, J.

text:
    Kopperud, Plaintiff and Appellant, v. Chick, Defendant and Respondent: Anchor Casualty Company, Impleaded Defendant and Appellant.

      April 28

    June 1, 1965.

      For the appellants there were briefs and oral argument by John S. Coleman and Patrick R. Doyle, both of La Crosse.
    For the respondent there was a brief by Petersen, Sutherland, Axley & Brynelson of Madison, and oral argument by Robert J. Sutherland.

       Motion for rehearing denied, with costs, on September 9, 1965.

   Hallows, J.

The sole question before us is whether the plaintiff is the real party in interest in this suit against a third party or has lost that status by reason of entering into the loan agreement with his insurer. The loan receipt and agreement detailed the claim, disclaimed liability, and recited the reasonableness of compromise settlements, the financial inability of the plaintiff, and the casualty company’s desire to make a loan for the purpose of making the settlements. The agreement provided the loan did not satisfy any obligation of the company to the plaintiff and was repayable only to the extent of recovery by the plaintiff from third parties by way of contribution, indemnity, subrogation, or other means. The plaintiff agreed to commence all actions requested by the casualty company but at its expense and under its control and not to settle or compromise any claim without the consent of the casualty company. All moneys collected by the plaintiff were to be turned over without demand to the casualty company and applied in satisfaction of the loan. The agreement was silent as to interest and provided the plaintiff waived no rights against the casualty company and the casualty company did not obtain any right to prosecute any claim in its own name against strangers to the agreement and waived any right of contribution, indemnity, or subrogation, except its right to have the loan repaid to the extent of any recovery by the plaintiff.

The casualty company does not seriously argue this loan agreement creates in fact a customary loan but it does contend the agreement constitutes a valid and legitimate means of settling claims and lawsuits in an expeditious manner and of avoiding extensive litigation. These purposes it is argued justify this court considering the plaintiff the real party in interest in fact as well as in form within the meaning of sec. 260.13, Stats., which provides every action must be prosecuted in the name of the real party in interest.

Whether or not the plaintiff is to be considered the real party in interest in this suit to be indemnified by Chick depends upon the nature of the transaction between the plaintiff and the casualty company. If the transaction was a payment although called a loan by the casualty company, the plaintiff is not the real party in interest because any rights he had against Chick belonged to the casualty company by virtue of subrogation. The form of a transaction if inconsistent with its substance is not controlling. This court on other occasions has construed the form of documents to be overridden and controlled by the substance of the transaction. Two notable examples are construing a warranty deed as a mortgage and of joint tenancies in form as not being joint tenancies or as being tenancies in common. Barr v. Granahan (1949), 255 Wis. 192, 38 N. W. (2d) 705; Maslowski v. Bitter (1961), 12 Wis. (2d) 337, 107 N. W. (2d) 197; Estate of Michaels (1965), 26 Wis. (2d) 382, 132 N. W. (2d) 557.

The loan receipt and agreement has a propér and legitimate place in the adjustment of losses under insurance policies but the device is unavailable and improper in this state to cover up a suit based on subrogation or to obtain the same results as the enforcement of subrogation rights. The court will not recognize the transaction as a loan if the insurer’s right to demand repayment of the loan is in substance its right to subrogation parading in disguise. However, to expedite prompt settlement of claims against insurance companies the loan-agreement device has been recognized when payment would be prejudicial to the insurance company under the terms of its policy.

The leading case upholding the validity of a loan-receipt agreement is Luckenbach v. McCahan Sugar Co. (1918), 248 U. S. 139, 39 Sup. Ct. 53, 63 L. Ed. 170. This case represents a class of cases in which the device has been used with approval to preserve a policy defense and thus to avoid giving carriers and others the benefit of contractual provisions stipulating that their liability shall be reduced by the amount of any payment collected by the injured party from others. In that case the plaintiff shipped a quantity of sugar from Puerto Rico to Philadelphia on the ship Julia Lucken-bach which was owned by one of the defendants and chartered by the other defendant. The cargo was severely damaged and the plaintiff shipper brought suit seeking recovery for his damages. The carrier argued it was entitled to credit for the money paid the shipper by its insurance company, but in answer it was contended this money received by the shipper was a loan and not a payment. The sugar had been shipped under a bill of lading providing the carrier defendant would receive the benefit of any insurance the shipper might have on the goods. The insurer’s policy, however, provided the insurer would not be liable for any damages in cases where the bill of lading attempted to secure the benefit of insurance for the carrier. Thus a conflict was presented between the carrier attempting to get the benefit of insurance through the contractual provisions of its bill of lading and an insurance company excluding liability in effect if the carrier was liable. If the carrier was not liable, of course, what was provided in the bill of lading would have no effect and the insurer would be liable under its policy. In this context the insurance company made a loan to its insured repayable out of recovery from the carrier. The transaction was held to be a valid loan and the carrier not to be entitled to any credit because of the provisions of its bill of lading.

Some subsequent cases citing Luckenbach have lost sight of the fact the loan agreement therein involved was in fact intended to be a loan and was justified under the circumstances that the insurer’s liability was contingent in effect upon the nonliability of the carrier. Many of these cases are cited and commented upon in Anno. — Insurance — Loan Receipts, 157 A. L. R. 1261. In Bolton v. Ziegler (D. C. Iowa 1953), 111 Fed. Supp. 516, apparently all of the cases decided up to that time and the literature by way of text and law review articles in any way relating to loan receipts and agreements are collected. The cases are grouped under various classifications without, however, any critical analysis. The case, however, holds that the loan agreement used was invalid as an attempt to secure contribution between joint tort-feasors which was not permitted in Iowa whose substantive law governed the facts.

We do not say that all policy or coverage defenses may justify the use of the loan receipt; but, where the liability under the terms of the indemnity or liability policy is contingent, loan receipts and agreements have been sustained as not being payments in fact. In another class of cases akin to Luckenbach, loan receipts and agreements have been upheld in order to avoid or eliminate any contention or possibility that a void insurance policy was valid, which might be the case if payment were made. This class of cases is illustrated by Kossmehl v. Millers National Ins. Co. (1945), 238 Mo. App. 671, 185 S. W. (2d) 293, in which two separate policies by different companies were issued covering a ring. Both policies in effect excluded liability if the other policy was in effect. A loan receipt and agreement used by one company was sustained so that the transaction under its policy would not be construed as proof that its policy was in effect and the other policy void. It is to be noted that in this type of case, as in Luckenbach, the subsequent lawsuit brought under the loan agreement determined the contingency or the liability of the insurer making the loan and was not an action to recoup money it had a liability to pay. In the valid use of a loan agreement, the money loaned did not have to be paid under the policy provisions. It must be admitted that the loan in these types of cases may be subsequently converted in effect into a payment because of the determination of a fact which makes the loan not repayable.

Another type of case in this class in which the loan agreement is justified arises when an insurer has a policy which provides only excess insurance. Young v. Drive-It-Yourself, Inc. (1961), 115 Ohio App. 307, 184 N. E. (2d) 912, is such a case. There, a payment would have been a waiver of the defense of excess coverage and, therefore, a loan agreement was justified in order that the question of primary or excess insurance could be determined in an action contemplated by the loan agreement. The insurer loaning the money had a contingent liability and would have been prejudiced by a payment under its policy. Other cases recognizing the validity of loan receipts and agreements to protect the insurer whose liability is contingent or excess as distinguished from an absolute or unconditional liability are Clow v. National Indemnity Co. (1959), 54 Wash. (2d) 198, 339 Pac. (2d) 82; Comment, 35 Washington Law Review (1960), 190; and First Nat. Bank of Ottawa v. Lloyd’s of London (7th Cir. 1940), 116 Fed. (2d) 221. Conversely, when the courts have found the insurer’s liability was absolute and unconditional and payment should have been made, the use of a loan receipt to avoid subrogation has been criticized and held an invalid use amounting to payment. Such a result was reached in Yezek v. Delaware, L. & W. R. Co. (1941), 176 Misc. 553, 28 N. Y. Supp. (2d) 35, when the court commented the “detour in the form of a loan was unnecessary to secure prompt payment or protect the insurer.” The rationale of this case was adopted in Purdy v. McGarity (1941), 262 App. Div. 623, 30 N. Y. Supp. (2d) 966.

The use of a loan receipt and agreement as a substitute for a subrogation suit was struck down in American Alliance Ins. Co. v. Capital Nat. Bank (1946), 75 Cal. App. (2d) 787, 171 Pac. (2d) 449. In this case the insurer was not entitled to subrogation. The successful use of the loan-agreement device would thus be against public policy. In Cleveland Paint & Color Co. v. Bauer Mfg. Co. (1951), 155 Ohio St. 17, 97 N. E. (2d) 545, the plaintiff, a dealer in ladders, was held not to be a real party in interest in a suit brought for indemnity against the manufacturer of a defective ladder where the dealer had been “loaned” money to pay the damages suffered by his customer. In principle, this case is similar to the instant case.

On the other hand there are cases supporting the position of the appellant that the use of the loan-agreement device is justified in cases to avoid subrogation in form. The justification in this class of cases is to protect the insurers by nondisclosure from the prejudice of juries against insurance companies especially in subrogation cases. Merrimack Mfg. Co. v. Lowell Trucking Corp. (1944), 182 Misc. 947, 46 N. Y. Supp. (2d) 736, is typical of this reasoning. For a discussion of the New York cases prior to 1950, see Van Orman, The Loan Receipt in New York, 1950 Insurance Law Journal, No. 328, 313; Notes, 24 New York University Law Quarterly Review (1949), 171. Effective September 1, 1950, the real-party-in-interest statute in New York (Sec. 210, Civil Practice Act) was amended to provide an exception that an insured person who has executed to his insurer either a loan agreement or subrogation receipt may sue without joining with him the person for whose benefit the action is prosecuted.

Wisconsin has no such statute and the reasoning of the Merrimack Case has no justification here at least in regard to automobile accident cases because in such cases insurers may be sued directly by the injured party. Secs. 260.11 and 204.30 (4), Stats. In fact if an insurer could use the loan-receipt device to avoid subrogation in Wisconsin it would receive an advantage because while its identity could thus be hidden it could expose the identity of the insurer of the third party.

The appellants in their reply brief attempt to argue the casualty company’s liability was contingent and not absolute. The argument fails to convince us that the loan transaction was entered into because of any contingent liability under the terms of the policy nor does the record disclose any such reason. Perhaps the liability was undetermined but that is not identical with being contingent. Nowhere in the loan agreement, which elaborately states the reasons for making it, is there any claim the loan receipt was used for any other purpose than to reimburse the casualty company for the money it claimed it loaned. On the facts presented, we cannot find the parties intended this to be a loan and not a payment, but assuming the insurer can intend and make this type of loan, it is not a valid device for the indirect enforcement of subrogation rights so that the insurer receives back money by way of recoupment.

The two Wisconsin cases cited by the casualty company are not to the contrary. In Liner v. Mittelstadt (1950), 257 Wis. 70, 42 N. W. (2d) 504, the loan agreement was treated by the court as payment. The insurer made an assignment of its subrogation rights to its insured which assignment was held to be sufficient to constitute the insured assignee the real party in interest. In Homeland Ins. Co. v. Carolina Ins. Co. (1952), 261 Wis. 378, 52 N. W. (2d) 782, the dispute was between two insurance companies over their liability. Both had made partial payments to their common insured under an agreement in which they reserved their rights to determine their liability as against each other. A loan agreement was referred to incidentally. Neither case is authority for the casualty company’s contention the plaintiff is the real party in interest in this case.

By the Court. — Judgment affirmed.


author: Wilkie, J.

text:
    Peerless Insurance Company, Appellant, v. Manson, Commissioner of Insurance, Respondent.

      April 28

    June 1, 1965.

      For the appellant there were briefs by Petersen, Sutherland, Axley & Brynelson, and oral argument by Eugene O. Gehl, all of Madison.
    For the respondent there was a brief by Charne & Tehan of Milwaukee, and oral argument by Irvin B. Charne.

   Wilkie, J.

The sole issue presented on this appeal is whether a foreign stock insurance company, by reinsuring a portion of its risks with a Wisconsin mutual insurance company, becomes a policyholder-member so as to be liable for assessment.

It is conceded that the reinsurance treaties were silent on whether Peerless was a “policyholder” or “member” and on the entire subject of what liability, if any, Peerless had for an assessment by Federal. Any liability of Peerless for the instant assessment did not arise by contract but must be imposed by the provisions of ch. 201, Stats. 1957, which deal with insurance companies in general. In Pella Farmers Mut. Ins. Co. v. Hartland Richmond Town Ins. Co. this court very recently held that one town mutual company which had reinsured another was required to assess the reinsured company. Respondent contends that the rationale of Pella controls here and thus the crucial question is whether or not Pella is distinguishable.

In Pella, the court found liability for an assessment on the part of the reinsured town mutual impliedly imposed under the provisions of ch. 202, Stats., dealing with town mutual companies. The court stated:
“Nowhere does the statute expressly make a reinsured company a member of a reinsurer town mutual, nor provide that a reinsured company shall be subject to assessment. If that be the law, it is reached only by construction.
“Ch. 202, Stats., deals with three types of situations where one is insured by another: (1) A town mutual agrees to indemnify a property owner for loss of property; (2) a town mutual agrees to indemnify another company for losses on risks of the latter; (3) a reinsurance corporation agrees to indemnify one of its member town mutuals for losses on risks of the latter. In situation (1), the statute explicitly provides that the insured property owner Is a member of the town mutual and is subject to assessment. In situation (3), the statute explicitly provides that the reinsured town mutual is a member of the reinsurance corporation, and quite clearly makes it subject to assessment. In situation (2), however, a conclusion that a reinsured company is a member of a reinsurer town mutual, and subject to assessment by it can only be reached by according great importance to keeping the insurance contract relationship between the parties in situation (2) consistent with the relationship in situations (1) and (3).”

In finding authority for the assessment in ch. 202, Stats., the court stated :

“Thus the premiums received by a town mutual for insurance are only the primary resource out of which losses are paid. The ultimate reservoir consists of the resources of its members. If the premiums charged do not produce sufficient funds to pay losses of one or more members, then all the members are obligated to provide additional funds sufficient to do so. But if the town mutual has reinsured risks of another company, and losses outrun the collection of premiums, is the entire deficiency to be made up by property-owner members, or is the reinsured company to share the burden? Are the property-owner members of the re-insurer town mutual to be the insurers of the risks of the reinsured company without the mutuality which applies among all insureds with respect to the ordinary risks?
“It seems to us most logical and most in accord with the framework of ch. 202, Stats., that each reinsurance contract should be treated as an additional policy of insurance issued by the reinsurer town mutual, and the reinsured company as a member of the reinsurer, subject to assessment.”

And the court concluded:

“We are persuaded that a construction that the reinsureds are members and subject to assessment is more consonant with the statutory pattern of unlimited mutuality which was fundamental to the town mutuals as originally authorized.”

In Pella, the statutory requirement that each town mutual policyholder-member subjects himself to unlimited liability for assessment by his company, and the statutory requirement that each town mutual becomes a policyholder and a member of a town mutual reinsurance company with which it reinsures, prescribed a pattern which lead logically to construing ch. 202, Stats., so as to make a town mutual company a policyholder and member of another when it becomes reinsured for part of its risks, and thus to make it subject to an assessment by the reinsuring town mutual.

But in the case at bar, although ch. 201 provides that each policyholder “shall be liable for a pro rata share of losses and expenses incurred during the time the member has been a policyholder” if the liability of all members is not limited by law, the chapter permits a limitation which must be expressed in the articles of a mutual insurance company (and in every policy), limiting the liability of members in terms of “a specified number of times the annual premium.” Both the articles of incorporation and bylaws of Federal limit the liability of any member to an assessment equal to an additional annual premium. Where liability is limited “the limitation must be expressed in every policy,” and nowhere in ch. 201 are the terms “policyholder” or “member” defined. Although the term “policy” is defined as including “every kind and form of contract of insurance” there is no express provision identifying a reinsurance treaty as a form of insurance contract. Ch. 201 authorizes a commercial mutual insurance company to write a reinsurance treaty under which it assumes part of the risks of a stock insurance company on nonassessable policies which that company issues. The chapter does not specifically subject such a reinsured stock company to assessment by the rein-suring commercial mutual insurance company; neither does it specifically make such a company a policyholder-member of the reinsurer; nor does it equate reinsurance with insurance.

Peerless urges that there is a great difference between “reinsurance” and “insurance.” It argues that in ch. 201, in at least 13 sections, the legislature alludes to “reinsurance” (in one form or another), indicating a legislative intention to treat reinsurance differently from insurance. Moreover, Peerless cites authorities in which reinsurance is recognized as differing from insurance, e.g., insurance is a contract of direct, original insurance, insuring the original applicant, whereas reinsurance is a contract insuring the insurer of the original applicant; a reinsurance contract is always a contract of indemnity, while an insurance contract may or may not be a contract of indemnity; reinsurance contracts are a practical method whereby the original insuring company takes another company into partnership on a particular- risk. Peerless also contends that another purpose of reinsurance is to relieve strains on surplus. There are also fundamental distinctions in operations. An individual purchases any of the types of ordinary insurance issued by a mutual by filling out a policy application and paying a set premium. With reinsurance, the terms of and the premiums to be paid for the contract result from arm’s-length negotiations between the parties. Furthermore, the reinsured, rather than the reinsurer, investigates, settles, and litigates claims.

On the other hand, respondent argues that reinsurance falls within the definition of insurance as “a contract whereby one party agrees to wholly or partially indemnify another for loss or damage” as set forth in Shakman v. United States Credit System Co. Respondent also contends that reinsurance is insurance in the very nature of mutual insurance where each member of a mutual assumes the dual role of insurer and insured, contributing by means of premiums and assessments to a fund from which losses and liabilities are paid.

It is unnecessary for the decision in this case for us to rule on these opposing contentions as to the similarity or differences of “reinsurance” and “insurance.” We need only conclude that as far as ch. 201 is concerned, the legislature treated reinsurance differently from insurance. As further evidence that the legislature intended a difference in treatment it is not unreasonable to conclude, under the expressio unius est exclusio alterius rule, that in view of the repeated references to “reinsurance” in the chapter in conjunction with the clear requirement of sec. 201.02 (3) (d), Stats. 1957 (that an individual who holds a policy in a mutual company is liable for assessment), the legislature did not intend a reinsured stock company to be a policyholder-member and assessable.

Peerless was not regarded as a policyholder-member, received no statements, reports or notices of any kind from Federal; Peerless was unrepresented on any meetings, never received proxy authorizations, never cast a vote, and never received any distribution or dividend from Federal. In each instance the facts regarding Peerless with respect to Federal were like those of Hartland with respect to Pella, and these facts did not prevent the court from holding that Hartland was a policyholder-member of Pella. But in Pella, these facts were all in the presence of a pattern of unlimited mutuality reflected in the statute and underlying the operation of town mutuals. No such pattern is present here.

Because of differences between the two chapters, the construction of ch. 202 in Pella, preserving the concept of mutuality in connection with reinsurance by a town mutual, does not govern the construction of ch. 201, nor require a similar result in the case at bar.

We conclude that a stock company that reinsures part of its risks with a commercial mutual as Peerless did here with Federal does not become a policyholder-member of Federal subject to assessment by Federal.

By the Court. — Judgment reversed.

       All references to provisions of ch. 201 herein are to the Revised Statutes of 1957, the year when the contracts of reinsurance were made.

       (1965), 26 Wis. (2d) 29, 132 N. W. (2d) 225.

       Id. at page 33.

       Id. at page 35.

       Id. at page 40.

       Secs. 202.09-202.11, Stats.

       Secs. 202.15, 202.18, Stats. See also Wisconsin Town Mut. Reinsurance Co. v. Calumet County Mut. Fire Ins. Co. (1937), 224 Wis. 109, 271 N. W. 51.

       Sec. 201.02 (3) (d), Stats. 1957.

       Sec. 201.02 (5) (c), Stats. 1957.

       Sec. 1, art. Ill, Amended Articles of Incorporation of Federal Mutual Casualty Company: “This Company shall be a Mutual Insurance Company without capital stock, in which the contingent mutual liability of the members is limited to one additional annual premium.”
      Sec. 1, art. I, Amended By-Laws of Federal Mutual Casualty Company: “Every person, corporation, association or partnership insured by this Company shall be a member thereof and have one vote. The contingent liability of each member is limited to one additional annual premium.”
      See also sec. 201.22, Stats. 1957, and Oscar Mayer & Co. v. Manson (1963), 19 Wis. (2d) 521, 120 N. W. (2d) 683.

       Sec. 201.02 (5), Stats. 1957.

       Sec. 201.01 (3), Stats. 1957.

       Secs. 201.16 and 201.27, Stats. 1957.

       Secs. 201.03 (8), 201.03 (8) (a), 201.03 (8) (b), 201.05 (2m), 201.16 (1), 201.16 (2), 201.18 (1), 201.18 (2), 201.18 (3), 201.185 (2), 201.27, 201.31, 201.39 (12), Stats. 1957.

        Aetna Casualty & Surety Co. v. International Re-Ins. Corp. (1934), 117 N. J. Eq. 190, 175 Atl. 114. Other cases which recognize differences are: Cunningham v. Republic Ins. Co. (1936), 127 Tex. 499, 94 S. W. (2d) 140; Stradley v. Southwestern Life Ins. Co. (Tex. Civ. App. 1960), 341 S. W. (2d) 195; Bayonne D. C.-Vera Democrazia Society v. Bankers Nat. Life Ins. Co. (1932), 10 N. J. Misc. 632, 160 Atl. 767; Royal Ins. Co. v. Vanderbilt Ins. Co. (1899), 102 Tenn. 264, 52 S. W. 168.

       The insurance commissioner has not adopted any rules in regard to reinsurance, while, on the other hand, insurance — ■ particularly in regard to rates — is highly regulated.

       (1896), 92 Wis. 366, 374, 66 N. W. 528. Reaffirmed in Sims v. Manson (1964), 25 Wis. (2d) 110, 114, 130 N. W. (2d) 200.

        Seamans v. Millers’ Mut. Ins. Co. (1895), 90 Wis. 490, 63 N. W. 1059; Kennan v. Rundle (1892), 81 Wis. 212, 51 N. W. 426; 2 Couch, Insurance (2d ed.), p. 166, sec. 19.14; 29 Am. Jur., Insurance, p. 504, sec. 89; 44 C. J. S., Insurance, p. 644, sec. 104.

       Sec. 201.02 (3) (d), Stats. 1957, which gives to each member the right to vote.

       It should be pointed out that the trial court relied on the following paragraph in the treaty to conclude that Peerless was a member because able to share in profits. “If, at any time under this treaty, the sum of the loss reserves, plus the unearned premium reserve, as required by any governmental authority, exceeds the amount of funds held by Peerless then the Reinsurer agrees to place the Peerless in funds to the extent of such excess." Both parties agree that this was error, and that this provision related only to the retention of sufficient funds to meet losses and unearned premium reserves.


author: Goedon, J.

text:
    Manson, Commissioner of Insurance, Appellant, v. Union Trust Life Insurance Company, Respondent.

      April 28

    June 1, 1965.

      For the appellant there were briefs by Charne & Tehan of Milwaukee, and oral argument by Irvin B. Charne.

    For the respondent there was a brief by John D. Cahill, and oral argument by William Fitshugh Fox, both of Milwaukee.
   Goedon, J.

We consider that the issue presented in this case is fully and squarely governed by the analysis of the court in Peerless Ins. Co. v. Manson, decided today. Upon the reasoning of such case, the judgment of the trial court in the instant case was correct.

By the Court. — Judgment affirmed.


author: Fairchild, J. GORDON, J.

text:
    Kraus, Appellant, v. Wisconsin Life Insurance Company, Respondent.

      April 28

    June 1, 1965.

      For the appellant there were briefs by Beaudry & Ker-shek and Eugene A. Kershek and Richard D. Kaestner, all of Milwaukee, and oral argument by Mr. Eugene A. Ker-shek and Mr. Kaestner.

    For the respondent there was a brief by Petersen, Sutherland, Axley & Brynelson, and oral argument by James C. Herrick, all of Madison.
   Fairchild, J.

The grace period for payment of the September 14th premium ran out less than three months after the disability of insured began. The company takes the position that the disability rider, by its terms, calls for waiver of premium after total and presumably permanent disability has continued for three months and proofs thereof have been filed with and approved by the company. It contends that because the disability in this case had not continued for three months before expiration of the grace period, the September 14th premium was not waived, and since it had not been paid, the policy was not in force when the insured died. The company relies, as a second line of defense, on the fact that no notice or proof of disability was ever filed.

The portions of the disability rider material to the question are as follows:

“In the event of the Insured becoming totally and permanently disabled as the result of bodily injury or disease originating after the date upon which these provisions take effect, and having been so disabled for at least three months, the Company hereby agrees, upon receipt and approval, at the Company’s Home Office, of due proofs of such facts, to waive the payment of each and every premium of this Policy as it becomes due after date of said approval, subject, however, to the restrictions and provisions herein contained.
“The Insured shall be deemed totally and permanently disabled when he has become totally, continuously and permanently disabled, by bodily injury or disease, so that he is, and presumably will be, for life, unable to perform any work, mental or manual, or to conduct any business for remuneration or profit, except that, independently of all other causes and without prejudice to any other cause, the entire and irrecoverable loss of sight of both eyes, or the severance of both hands at or above the wrists, or of both feet at or above the ankles, or of one entire hand and one entire foot, shall be deemed total and permanent disability. Hereafter the words ‘disability’ and ‘disabled’ shall be used to mean ‘Total and Permanent Disability’ or ‘Totally and Permanently Disabled,’ respectively, as herein defined. Disability which has been continuous for a period of six months immediately preceding receipt of the due proofs aforesaid shall be presumed permanent, but only for the purpose of determining the commencement of liability hereunder.
“The Insured shall give written notice to the Company at its Home Office of his claim that he is disabled and is entitled to disability benefits. Said notice shall be given both during the lifetime and the disability of the Insured and before the expiration of one year after the date when the Insured became disabled. Proof of disability shall be upon forms furnished by the Company. Failure to give notice within said one year shall not invalidate any claim if it shall be shown not to have been reasonably possible to give such notice and that notice was given as soon as was reasonably possible.
“Any premium of the Policy which became due and was paid during the disability and during the period of six months immediately preceding the date of approval of due proofs of disability shall be waived by the Company and the payment refunded to the Insured.”

The rider further provides that the company may, after initial approval and waiver of premiums, require proof of continuance of disability from time to time, and that if the insured should recover sufficiently so as no longer to be totally disabled, waiver shall cease as to future premiums.

We conclude that the dominant purpose of the disability rider, reading it as a whole, is to relieve an insured who buys this additional protection from the burden of premiums falling due while he is unable to perform work or conduct business under such circumstances that the condition of inability will presumably continue for the rest of his life.

There are, of course, obvious problems for the insurer in dealing with mental or physical impairment which may be serious but not total, or which may be total but will not in fact remain so until the end of life. The rider clearly contemplates, for example, that total disability may occur, and appear very likely to continue until death, but that there may be, in time, sufficient recovery from it so that disability is no longer total, and in case of such recovery, premiums falling due thereafter are not to be waived.

A number of the provisions of the rider have been inserted to protect the company from fraudulent or ill-founded claims of total and permanent disability, to provide it with a reasonable opportunity to evaluate whether recovery from total disability is likely to occur, and to require in all cases a test period of at least three months to determine whether there is in fact recovery from a condition of total disability. If all such provisions are strictly and literally applied to the case before us, plaintiff must fail. The real question as to each provision is whether it must be deemed to go to the substance of the risk the company assumed, and applicable to all cases, or whether in a class of situation where it destroys the protection which the rider was intended to provide, it must be held inapplicable.

The following provisions, if strictly and literally applied, would defeat plaintiff’s recovery in this case:

(1) The company’s obligation to waive premiums depends upon total and permanent (of course “permanent” means only “presumably” permanent) disability having continued for at least three months. In this case three months did not expire between the beginning of disability and the close of the grace period for the first premium which was not paid. Even if the waiver be retroactive, as indicated under (4), below, three months did not elapse from the beginning of the disability to the date of death.

(2) The obligation to waive premiums also depends upon receipt and approval by the company of due proof of disability. In this case no proof was ever tendered, nor was notice of such claim given to the company.

(3) The insured is to give written notice to the company of his claim of disability. The notice is to be given while the insured is alive. In this case no notice of the claim of disability was given by anyone, during the lifetime of the insured or thereafter, and twenty months elapsed after the death before this action was brought.

(4) Once the obligation to waive is established, there is a retroactive waiver of all premiums which become due and were paid within six months immediately preceding the date of approval of due proofs of disability. The September 14th premium was not paid. Twenty-two months elapsed between the due date of the premium and the commencement of this action, and no proofs were tendered nor approved.

In order to grant recovery to this plaintiff, it would be necessary to determine that each of the foregoing requirements was inapplicable, or that compliance was properly excused under the circumstances.

With respect to (1), above, the courts are not in agreement whether, when the insurer is obligated to waive premiums retroactively after disability has existed for a specified period, and when the insured dies after a period of disability of shorter duration, during which there has been failure to pay a premium, such unpaid premium is deemed waived.

“There is a divergence of judicial opinion on the question whether death constitutes a total and permanent disability within the terms of a policy waiving premiums by reason of such disability. In some jurisdictions death is held to be included within the terms, but in other jurisdictions it is held that disability presupposes life and therefore death is not disability within the terms of the policy. In accordance with these divergent viewpoints, where the policy provides for waiver of premiums after continuation of disability for a certain period of time and insured dies from the disability before the expiration of the period, there is authority that the premiums will be deemed waived, even though the policy further requires that proof be made in the lifetime of insured, but there is also authority that insured must live until the end of the period, at least where proof in the lifetime of insured is required by the policy. Where the policy requires proof during the continuance of disability it has been held that proof after the death of insured is not within the terms of the policy.”

“A clause in a life policy providing for a waiver of premium in case of disability may require that such disability continue for a period designated in the policy, as a condition precedent to waiver. In such event, both conditions, that of total disability and continuance for the specified period, must be shown. An insurer would not be required to waive premiums falling due during the three months’ period after total disability commenced, where the disability was not in fact permanent and was under the policy not presumed permanent until such three months’ period expired. A very few cases, following this logic literally, have held that if the insured dies before the expiration of the test period, a waiver will not result. The great majority of cases have considered that death is as permanent a disability as one can suffer, and that if the disability continued to be total from its inception until death, the fact that the running of the period was so interrupted would not prevent a waiver of premium clause from operating-^the presumption of permanency so charted out by the policy yielding to the stark reality of permanency created by death. Continuance over such an arbitrary period is not, therefore, essential in all cases.”

Although the courts have usually resolved the question by deciding whether or not death is total and permanent disability, so that the minimum test period does or does not continue to run after death, we would find a different semantic approach m.ore realistic.

Surely one of the principal purposes for the test period is to eliminate claims of disability in all cases where there is in fact a recovery from disability during the test period. In the light of that purpose, it seems to us that it can well be argued that where death occurs before the expiration of the specified minimum period of disability, it is conclusively established that the disability continued to the end of life, and the running of the balance of the test period becomes immaterial.

We need not, however, decide the point in this case because of our conclusion that plaintiff is precluded from recovery for other reasons.

The requirement in (3) above is that the insured is to give notice of his claim of disability. Perhaps with the thought that it might be given by someone else, the rider also specifies that the notice shall be given during his lifetime. If it were decided, under (1), that where death occurs less than three months after the beginning of total and permanent disability, there can be retroactive waiver of a premium which fell due during disability, it would necessarily follow that the requirement of (3) that notice be given by the insured and within his lifetime cannot be strictly applied to this type of situation. We conclude, however, that such provision should be relaxed only enough to permit notice by the personal representative of the insured, or by the beneficiary, within a reasonable time.

In Schlintz v. Equitable Life Assur. Society this court held, under a disability policy, that mental incapacity could excuse the failure of the insured to give notice on the grounds that insured’s incapacity made it impossible for him to give notice, the giving of notice by the insured was not a material part of the consideration to be paid, and the failure would operate as a forfeiture if not excused. The court said, however, at page 268: “Under those circumstances, all the insurer could require was that it be given notice of Crowell’s disability by him within a reasonable time after his recovery of sanity, or by his guardian within a reasonable time after the latter’s appointment and knowledge of the policy.”

The requirement in (2) above is that the obligation to waive premiums depends upon receipt and approval by the company of proof of disability, upon forms furnished by it. The company could not defeat the rights of the insured or beneficiary by refusing to furnish forms nor by withholding approval of proper proof, but in this case there was no notice of claim of disability nor tender of proof at any time.

The policy before us does not provide for retroactive waiver, upon filing proof, of all premiums which have become due after the commencement of disability, but, under (4), above, retroactive waiver is limited to those premiums which became due and were paid within six months immediately preceding the date of approval of due proofs of disability. It is true that the rider contemplates payment and refund of such past premium, whereas in this instance there was no payment, but because of the physical and mental incapacity of the insured, we would consider the difference between refund of a premium already paid and retroactive waiver of an unpaid premium as being a matter which would be excused by impossibility, under the reasoning of the Schlintz Case with respect to notice. There is also language in the rider which, although providing that the disability rider shall automatically terminate if any premium be not paid within the month of grace, states that the lapse is without prejudice to claim for disability which commenced prior to such termination. Our problem, however, with (4) is that no proof was ever tendered and far more than six months have elapsed since the premium became due. Thus retroactive waiver, under the terms of the rider, can no longer reach back to that premium in any event.

This is a “hard case” because it appears that the facts of insured’s disability were so readily ascertainable that the company cannot have been prejudiced in determining them when it was finally presented with a claim of liability on the policy. The complaint alleges that the automobile accident in a city in another state rendered insured totally unconscious and he remained so until his death. Probably there are hospital and other records which establish the facts beyond all doubt.

The company, indeed, stipulated to the facts without trial. We cannot, however, construe such stipulation as a waiver of the failure to give notice and present proof, since there was also a stipulation that no notice of disability or proof was given. It was agreed that notice of death was timely received by the company. The record does not show when such notice was given, what it contained nor any circumstances which placed the company in a position where it could be said to have waived notice and proof.

We deem the requirement of notice of claim of disability and proof thereof and the limitation of retroactivity of waiver to six months before the date of proof as matters of substance which the company placed in the contract for its protection, and the fact that it may appear by hindsight that in this case the company was not prejudiced by failure to comply does not justify our holding these requirements insignificant or inapplicable.

Thus the company must prevail, upon the record which is before us.

By the Court. — Judgment affirmed.

GORDON, J.

(concurring). I agree that the judgment should be affirmed. However, I would do so for a reason different from that relied upon in the court’s opinion.

The contract requires three months of total disability as a condition for triggering the waiver of premium. This condition was not met, and, as a result, the policy expired for nonpayment of the premium.

I think the trial judge was correct when he concluded as follows:

“The contract by its terms is free from ambiguity; by its language the instrument must be understood to mean what it clearly expresses. Therefore the Court believes the benefit of the rider cannot be invoked until the condition precedent has occurred: The insured must become totally and permanently disabled and remain so disabled for at least three months.”

Does death during the three months’ period satisfy the requirement? Death is simply not the same as disability. Because of the comprehensiveness and finality of death, it may be tempting to regard it as encompassing total disability. Nevertheless, these words have separate meanings which, in my view, do not permit treating death as a form of disability under the insurance policy. The Illinois court phrased the matter in these terms: “Disability presupposes life. Death is the antithesis of life.” Ferguson v. Penn Mut. Life Ins. Co. (1940), 305 Ill. App. 537, 542, 27 N. E. (2d) 548. See Hinkley v. Penn Mut. Life Ins. Co. (D. C. Wash. 1941), 37 Fed. Supp. 1018, 1023.

I am authorized to state that Mr. Chief Justice CuRRiE joins in this concurring opinion.

       45 C. J. S., Insurance, p. 472, sec. 621 (11).

       15 Appleman, Insurance Law and Practice, p. 103, sec. 8307. And see Commonwealth, Life Ins. Co. v. Francis (1939), 278 Ky. 343, 128 S. W. (2d) 742; Kampf v. Franklin Life Ins. Co. (1960), 33 N. J. 36, 161 Atl. (2d) 717. But see Himelbloom v. Metropolitan Life Ins. Co. (1934), 128 Neb. 52, 257 N. W. 525; Avery v. New York Life Ins. Co. (5th Cir. 1933), 67 Fed. (2d) 442; Winkelmann v. Central States Life Ins. Co. (1936), 231 Mo. App. 501, 101 S. W. (2d) 736; Hinkley v. Penn Mut. Life Ins. Co. (D. C. Wash. 1941), 37 Fed. Supp. 1018.

       (1937), 226 Wis. 255, 276 N. W. 336.

       See Kampf v. Franklin Life Ins. Co. (1962), 37 N. J. 593, 182 Atl. (2d) 855, 856, 857.


author: CurRie, C. J.

text:
    State, Respondent, v. Strickland, Appellant.

      April 29

    June 1, 1965.

      For the appellant there were briefs by La Follette, Siny-kin, Doyle & Anderson, attorneys, and Shirley S. Abraham-son and Robert H. Friebert of counsel, all of Madison, and oral argument by Mrs. Abrahamson.

    For the respondent the cause was argued by Betty R. Brown, assistant attorney general, with whom on the brief were Bronson C. La Follette, attorney general, and William A. PlatZj assistant attorney general.

       Motion for rehearing denied, without costs, on September 10, 1965.

   CurRie, C. J.

Defendant’s motion for new trial did not state that he desired to change his pleas of guilty. Both defendant and the state, however, treat his motion as one to withdraw his pleas in view of Pulaski v. State (1964), 23 Wis. (2d) 138, 141, 126 N. W. (2d) 625. Although an application for leave to withdraw a plea is ordinarily addressed to the discretion of the court such withdrawal would be a matter of right if the applicant established a denial of a relevant constitutional right. Van Voorhis v. State (1965), 26 Wis. (2d) 217, 223, 131 N. W. (2d) 833.

Defendant here contends that his motion to withdraw his pleas of guilty should have been granted as a matter of right on these grounds:

(1) Defendant did not intelligently waive counsel and intelligently enter his plea of guilty at his arraignment on the .charge of operating a motor vehicle without the owner’s consent.

(2) Defendant’s convictions of armed robbery and theft were based on pleas of guilty not intelligently and understandingly made.

(3) The armed-robbery count of the information was void because it is alleged it failed to charge an essential element.

(4) Defendant was improperly denied a preliminary hearing.

(5) All three sentences were void because defendant was not represented by counsel at time of sentence.

(6) The trial court should have appointed counsel to represent defendant on his motion to withdraw his pleas.

Defendant has abandoned on this appeal the ground raised in his motion that his constitutional rights were denied because of the failure to indict him by grand jury.

Arraignment on Charge of Operating a Motor Vehicle Without Owner’s Consent.

The trial court, at the time of defendant’s arraignment on the charge of operating a motor vehicle without the owner’s consent, did advise defendant of his right to counsel. The court, however, did not explain that if defendant was indigent he was entitled to have counsel appointed for him at public expense. This court has held that a perfunctory statement made to an accused that he is entitled to be represented by counsel, without advising that counsel would be appointed at public expense, is not sufficient compliance with sec. 957.26 (2), Stats. Van Voorhis v. State, supra, at page 221; State ex rel. Casper v. Burke (1959), 7 Wis. (2d) 673, 677, 97 N. W. (2d) 703; State v. Greco (1955), 271 Wis. 54, 57, 72 N. W. (2d) 661.

Furthermore, if an accused is not represented by counsel, it is the duty of the trial court before accepting a plea of guilty to make sure that the accused understands the nature of the crime with which he is charged and the range of punishments. State ex rel. Burnett v. Burke (1964), 22 Wis. (2d) 486, 494, 126 N. W. (2d) 91. See also Ailport v. State (1960), 9 Wis. (2d) 409, 417, 100 N. W. (2d) 812. The record does not disclose that this was done.

After defendant’s arraignment he did appear with Mr. Lent as his counsel before the trial court on June 25, 1963. The proceeding opened by the court stating that defendant “is before the Court this morning for sentencing on a charge of operating a motor vehicle without the owner’s consent.” Mr. Lent made a plea to the court for leniency during the course of which he stated:

“I think the record before the Court speaks for itself; that he [defendant] came before the Court and faced up to his guilt and admitted it and chose not to put the state and the Court to the time and trouble of a trial. I think this is an indication of the fact now that he has reached eighteen years of age and starting to mature, he will be able to fulfill any promise of good faith that the Court might see fit to extend him.”

Thus defendant’s counsel took advantage of defendant’s plea of guilty previously made without benefit of counsel as a ground for the court extending leniency. This strategy paid off because the trial court placed defendant on probation for one year and withheld sentence. The United States supreme court held in Henry v. Mississippi (1965), 379 U. S. 443, 451, 85 Sup. Ct. 564, 13 L. Ed. (2d) 408, that a constitutional right may be waived by “counsel’s deliberate choice of strategy” and that this would be binding upon the accused client. In State ex rel. Goodchild v. Burke, ante, p. 244, 133 N. W. (2d) 753, the rule of the Henry Case was applied in a situation where counsel for defendant for strategy made no objection to the introduction of defendant’s confessions and admissions into evidence. It was held that this constituted a waiver of the right to later contend that these confessions and admissions had been involuntarily obtained in violation of defendant’s constitutional rights. Mr. Lent, counsel for the instant defendant, is a former assistant district attorney of Dane county, experienced in the field of criminal law. When he was retained to represent defendant after the latter’s arraignment a choice of two alternative courses was open to him. One was to move to withdraw or change the plea of guilty because of any defects, constitutional or otherwise, in the arraignment proceedings. The other was to utilize the existing guilty plea and urge it as a reason for leniency. Counsel chose the latter and we conclude this was an effective waiver of the right to now raise the objections here made that defendant did not intelligently waive counsel and understanding^ enter his plea of guilty.

Counsel for defendant rely on Hamilton v. Alabama (1961), 368 U. S. 52, 82 Sup. Ct. 157, 7 L. Ed. (2d) 114, as authority that any defect with respect to intelligent waiver of counsel at time of arraignment cannot be cured by later appointment of counsel. The facts in the Hamilton Case are readily distinguishable. It was a capital case in which the defendant received a death sentence in an Alabama court on a charge of breaking and entering with intent to ravish. He was not represented by his appointed counsel at time of arraignment and pleaded “not guilty.” Thereafter he was tried with counsel present and convicted. In reversing a judgment of the Alabama supreme court denying relief by way of coram nobis, the United States supreme court stressed that under Alabama law a plea of not guilty by reason of insanity or a plea in abatement had to be made at time of arraignment, or the opportunity to do so was lost. This feature of the Hamilton Case was pointed out in Sparkman v. State, ante, at page 101, 133 N. W. (2d) 776.

Guilty Pleas Entered to Charges of Armed Robbery and Theft.

Defendant contends his plea of guilty entered through counsel to the charges of armed robbery and theft were not intelligently and understanding^ made. This is largely predicated upon the fact that the trial court addressed no inquiries to defendant to ascertain whether he had intelligently and understanding^ entered these pleas. This court has not held that such inquiries are necessary where defendant is represented by counsel at time of arraignment. Courts have the right to assume in such a situation that counsel has fulfilled his duty of proper representation by fully explaining to the accused the nature of the offense charged, the range of penalties, and possible defenses thereto, and satisfying himself that the accused understands such explanations, before permitting the accused to authorize the entry of a plea of guilty. There is no allegation in defendant’s motion that this was not done.

We deem it inadvisable to lay down a rule that trial courts must, in every case, where an accused is represented by counsel at time of entering a plea, before accepting the plea interrogate defendant to make sure that the defendant has understandingly and intelligently entered the plea. However, we recommend that such practice be adopted.

Defendant relies on a colloquy which occurred between him and the court at time of sentencing to establish that defendant did not understandingly and intelligently enter the plea of guilty to the armed-robbery count. Defendant stated to the court that he thought the crime committed was “a strong arm robbery” and not an armed robbery and that he had no intention of hurting anyone. The court reminded defendant that the woman he had robbed was a sixty-three-year-old woman and that the brick [rock] with which he threatened her was a dangerous weapon within the meaning of the statute. We do not deem that this colloquy demonstrates that defendant did not understandingly and intelligently enter his plea. At no time has defendant claimed that he did not commit the robbery or that at the time he did not have the rock in his hand.

Defendant also complains of the fact that at the time of entry of the plea the information had not as yet been drafted and filed. This fact was made known to defendant and his counsel by the assistant district attorney. The information was drafted and filed that same day and later amended to correct a mistake in date. Knowing this defendant’s counsel expressly waived the reading of the information and entered the plea of guilty to both counts, one charging armed robbery and the other theft. We determine that this waiver is binding upon defendant and precludes him from now raising this issue.

Alleged Deject in Information.

For the first time on this appeal the issue is raised that the count of the information is defective which charges armed robbery. It is alleged that this count omits the essential element of alleging the taking of property from the owner. This issue was not raised in defendant’s motion to withdraw his plea and for that reason this court declines to pass upon it on this appeal. Furthermore, we are of the opinion that defendant, by waiving the reading of the information before it was drafted and filed, also waived the defect now complained of.

Alleged Denial of a Preliminary Hearing.

It is contended that all three convictions are void because of a failure to inform defendant of his right to a preliminary hearing. The right to a preliminary hearing rests upon statute and is not a constitutional requirement. Therefore, this court will not set aside a judgment of conviction and permit a withdrawal of a plea of guilty because of a claimed denial of a preliminary hearing absent some showing of prejudice. This is not the type of error which gives rise to a presumption of prejudice. Even some cases of denial of constitutional rights give rise to the application of the harmless-error rule. Sparkman v. State, supra, at page 101; Pulaski v. State (1964), 24 Wis. (2d) 450, 456, 129 N. W. (2d) 204.

Where a defendant appears by counsel, as did defendant with respect to the charges of armed robbery and theft, and enters a plea of guilty without requesting a preliminary hearing, a trial court has the right to assume that the preliminary hearing has been intelligently waived. Cf. Hawkins v. State (1965), 26 Wis. (2d) 443, 132 N. W. (2d) 545. However, where a defendant charged with felony appears without counsel and waives counsel, as did defendant with respect to the charge of operating a motor vehicle without the owner’s consent, it is the duty of the court to advise defendant of his right to a preliminary hearing before proceeding further. Right to complain of such error, however, was waived at time of sentencing when he did appear with counsel who won leniency for him.

Failure to be Represented by Counsel at Time of Sentence.

Although defendant had been represented by counsel at time of arraignment on the charges of armed robbery and theft he thereafter appeared without counsel when sentenced on those charges and also the prior charge of operating a motor vehicle without the owner’s consent. The record is silent as to why Mr. Lent was not present or whether he still represented defendant. The trial court made no inquiry as to this and did not advise defendant of his right, if an indigent, to have counsel appointed at public expense. Defendant asserts that he was never properly advised of his right to counsel at time of sentencing and that he did not intelligently waive this right. On this record we cannot assume that there was any intelligent waiver by defendant of his right to be represented by counsel at time of sentencing.

There is a conflict of authorities on the question of whether the presence of counsel for an accused at time of sentencing is necessary to the validity of the proceedings. See Annotation, Absence of counsel for accused at time of sentence as requiring vacation thereof or other relief, 20 A. L. R. (2d) 1240. As pointed out by the brief of the attorney general, a number of cases have held that no constitutional right of an accused is violated by sentencing without counsel being present when there has been no showing that unfairness or harm resulted. Cases so holding are Kent v. Sanford (5th Cir. 1941), 121 Fed. (2d) 216, certiorari denied 315 U. S. 799, 62 Sup. Ct. 622, 86 L. Ed. 1200; Janney v. United States (4th Cir. 1955), 227 Fed. (2d) 105; Willis v. Hunter (10th Cir. 1948), 166 Fed. (2d) 721, certiorari denied 334 U. S. 848, 68 Sup. Ct. 1499, 92 L. Ed. 1772; State v. Farnsworth (1962), 13 Utah (2d) 103, 368 Pac. (2d) 914.

On the other hand, the United States supreme court has now adopted the rule that an accused has a constitutional right to be represented by counsel at any “critical” stage of the criminal proceeding against him. White v. Maryland (1963), 373 U. S. 59, 83 Sup. Ct. 1050, 10 L. Ed. (2d) 193; Hamilton v. Alabama, supra. We consider that sentencing is a critical stage of a criminal prosecution. In James v. State (1964), 24 Wis. (2d) 467, 473, 129 N. W. (2d) 227, we stated:

“However, we cannot look upon sentencing as some insignificant and collateral part of the criminal process. The determination of the sentence, whether it be long or short, is part of the judicial process and is perhaps the most vital part and certainly the end result of the criminal process so far as the accused is concerned.”

See also Meyer v. State (1964), 25 Wis. (2d) 418, 423, 130 N. W. (2d) 848.

The most-recent case which has come to our attention on this issue is Commonwealth ex rel. Remeriez v. Maroney (1964), 415 Pa. 534, 204 Atl. (2d) 450. In that case petitioner was sentenced to imprisonment after revocation of a prior suspended sentence and probation. The record disclosed that the trial court made no inquiry concerning counsel and there was no waiver of counsel by petitioner. The Pennsylvania supreme court held that sentencing is a critical stage in the proceeding against an accused, and stated (p.536):

“For the sentencing to be constitutionally acceptable the accused is entitled to be represented by counsel.”

The New York appellate division reached the same conclusion in People v. Callahan (1963), 19 App. Div. (2d) 585, 240 N. Y. Supp. (2d) 460, resting its decision upon Gideon v. Wainwright (1963), 372 U. S. 335, 83 Sup. Ct. 792, 9 L. Ed. (2d) 799.

The failure of the trial court to advise defendant of his right to counsel at time of sentencing, together with the failure of the record to show any waiver of this right, requires reversal of the order appealed from with directions to the county court to set aside the three sentences and order the defendant returned from the state prison for sentencing.

Failure of Trial Court to Appoint Counsel to Prosecute Motion.

As a further ground for reversing the order denying defendant’s motion he claims denial of constitutional rights because the trial court failed to appoint counsel to represent him in prosecuting the motion. In support of this contention defendant cites Douglas v. California (1963), 372 U. S. 353, 83 Sup. Ct. 814, 9 L. Ed. (2d) 811, and Draper v. Washington (1963), 372 U. S. 487, 83 Sup. Ct. 774, 9 L. Ed. (2d) 899.

Because of these decisions this court as a matter of course appoints counsel for all indigent defendants convicted of crime who within the one-year statutory period appeal to this court or request a writ of error, or who timely seek review here of any order denying a new trial or writ of error coram nobis. However, in cases of applications for writs of habeas corpus made by convicted defendants after the time for appeal or obtaining a writ of error has expired, we appoint counsel only when we find the application arguably meritorious.

After careful consideration of the problem we hold that a trial court is not required to appoint counsel for every defendant convicted of crime who files a post-conviction motion, but only in those cases where the motion is arguably meritorious. Under this rule the test on review by this court will be whether the trial court abused its discretion in not appointing counsel to prosecute the motion.

Applying that test to the instant appeal we find that defendant’s motion was arguably meritorious with respect to the claimed denial of counsel at time of sentencing. However, the abuse of discretion on the part of the trial court in not appointing counsel to represent defendant in prosecuting his motion will be fully rectified by the provisions of our mandate. Because no constitutional right was denied defendant by the trial court in failing to appoint counsel to prosecute the motion, we hold that this failure does not afford the basis for relief with respect to the other grounds advanced by defendant in his motion which we have found to be without merit.

By the Court. — Order reversed, and cause remanded with directions to set aside the three sentences of defendant and to order defendant’s return from prison for resentencing.

       In Ailport v. State (1960), 9 Wis. (2d) 409, 417, 100 N. W. (2d) 812, we held that such a perfunctory statement also contravened the spirit of sec. 7, art. I, Wisconsin constitution.

       Defendant’s brief asserts that federal courts, in accordance with Rule 11 of the Federal Rules of Criminal Procedure, interrogate the accused at time of arraignment even though represented by counsel.


author: Gordon, J.

text:
    Nelson, Respondent, v. Boulay Brothers Company, Appellant.

      April 29

    June 1, 1965.

      For the appellant there was a brief by McLeodDonohue & Colwin of Fond du Lac, and oral argument by Joseph D. Donohue.

    For the respondent there was a brief by Lucas & Plaisted of New Holstein, and oral argument by Thomas H. Lucas.

   Gordon, J.

The appellant has challenged both the liability and the damage phases of this case.

Liability.

The jury found that the plaintiff’s examination of the yeast which was delivered either did reveal or ought to have revealed the presence of the defect. It follows that there could be no liability for the breach of an implied warranty of fitness under sec. 121.15 (3), Stats., or, in the absence of timely notice, for breach of warranty under sec. 121.49.

The record clearly establishes that Mr. Nelson knew by sight, taste, and smell that the yeast in the bags was different from that which he had previously used. This not only precluded his claim under the Sales Act, argues the appellant, but also it barred his recovery under a negligence count. The appellant advances a number of theories, including intervening cause and the claim that the plaintiffs negligence exceeded that of the defendant.

The jury found that the plaintiff was 25 percent negligent; the judgment in this case was entered based on common-law negligence, with the damages being reduced by the amount of the plaintiff’s comparative negligence. Even though Mr. Nelson’s inspection and his failure to give seasonable notice under sec. 121.49, Stats., defeated his contract claim, it did not foreclose the action in negligence. We do not believe that the loss of one’s right to relief under the Sales Act automatically precludes recovery in an action based on negligence. No specific ruling to this effect has come to our attention, but this conclusion is implicit in Tews v. Marg (1944), 246 Wis. 245, 249, 16 N. W. (2d) 795, and Zingale v. Mills Novelty Co. (1943), 244 Wis. 144, 149, 11 N. W. (2d) 644. See also Greenman v. Yuba Power Products, Inc. (1962), 27 Cal. Rptr. 697, 377 Pac. (2d) 897, 899.

A number of cases have been presented to this court in which a plaintiff has alleged breach of warranty and, alternatively, negligence. E.g., Strahlendorf v. Walgreen Co. (1962), 16 Wis. (2d) 421, 114 N. W. (2d) 823; Betehia v. Cape Cod Corp. (1960), 10 Wis. (2d) 323, 103 N. W. (2d) 64.

The instant action arose before the effective date of the Uniform Commercial Code. We note, however, that there is broad language in the new sec. 402.607 (3) (a), Stats., which would suggest that a buyer who fails to give notice is “barred from any remedy.” We are not called upon to determine whether a different conclusion would result from the new legislation.

The plaintiff claimed that he did not anticipate any danger in using the irradiated yeast,’ and this position is not inherently incredible. The jury, however, charged 25 percent of the negligence to Mr. Nelson for using the yeast which he knew to be different from that which he had used in the past. We see no reason for upsetting that assessment.

We conclude that there is no error in connection with the findings of the jury as to liability and as to the comparison of negligence. The judgment, insofar as it reflects such findings, must be affirmed.

Damages.

If one takes the testimony which was most favorable to the plaintiff, there was a gross loss suffered by him in the sum of $41,203.60. The plaintiff has acknowledged that there are various deductions which would have to be taken from such gross loss, leaving a maximum net loss of $29,966.80. The jury fixed the damages of the plaintiff at $28,000, and we hold that the judgment based on such finding as to damages cannot stand. The reason for this conclusion is that the jury’s assessment erroneously included all or almost all of the sum of $21,875 which the plaintiff claimed for damage to his future herd.

The jury accepted the plaintiff’s contention that his next year’s mink crop was reduced by approximately 500 kits. The plaintiff’s claim as to the loss of his future herd was as follows:

125 breeders at $100 apiece $12,500
375 pelters at $25 apiece 9,375
Total $21,875

The allowance of an award for loss of future production is based on Mr. Nelson’s contention that the death of some of his breeding herd in turn caused a diminution in the next year’s total crop.

There are two flaws in connection with this award for a future loss. The first is that upon this record the amount is speculative, and the second is that there may be a duplication of damages, since the market value of an animal would ordinarily include an amount attributable to its ability to reproduce.

The speculative nature of the damages in this regard is apparent from Mr. Nelson’s testimony. When asked to state the amount of his loss to his breeding herd, he replied, “The fact is, it is impossible to figure.” Except for the figures recited above, there is no further explanation in the record as to how the plaintiff arrived at the figures of $12,500 and $9,375.

Upon the present record, the damages for loss of future births were not established with reasonable certainty. Smith v. Atco Co. (1959), 6 Wis. (2d) 371, 94 N. W. (2d) 697, 74 A. L. R. (2d) 1095. However, even if the speculative aspect could be removed by further evidence, we nevertheless view this as an improper item of damages. The basic measure of damages for the destruction of livestock is the animal’s market value, with an appropriate reduction for any salvage value. Bell v. Gray-Robinson Construction Co. (1954), 265 Wis. 652, 62 N. W. (2d) 390; Gould v. Merrill Railway & Lighting Co. (1909), 139 Wis. 433, 447, 121 N. W. 161; Anno. 79 A. L. R. (2d) 677, 687.

If a mink has increased value at a certain period of the year because of its breeding capacity, this should find expression in an appraisal of its market value. To allow recovery for both market value and also for the loss of future litters would open the door to a duplication of damages. If Mr. Nelson had to pay a high price for replacements at breeding periods, that would be but another factor in determining their market value. In the Gould Case, supra, the court said, at page 448:

"But where the full value at the time the horse was injured is recovered, there can be no additional recovery for loss of use of the horse.”

In our opinion, Mr. Nelson was entitled to recover the market value of those mink which died because of the defendant’s negligence less their salvage value. In addition, a deduction would have to be made for those mink which would have died in the normal course of operations. The market value would be demonstrated by the reasonable cost of replacing the mink with comparable animals. Mr. Nelson testified that he replaced only two of the dead mink, but the reason for such limited replacement was not fully explored. The record does not establish that these mink were unique.

A case which considered a problem comparable to that in the case at bar is Covey v. Western Tank Lines (1950), 36 Wash. (2d) 381, 218 Pac. (2d) 322. The Washington supreme court held there could be no recovery for unborn mink.

Since the verdict included in the answer to the damage question an item which was legally erroneous, we conclude that there must be a new trial on the question of damages. While this court in Spleas v. Milwaukee & Suburban Trans port Corp. (1963), 21 Wis. (2d) 635, 124 N. W. (2d) 593, has extended the rule of Powers v. Allstate Ins. Co. (1960), 10 Wis. (2d) 78, 102 N. W. (2d) 393, to permit its use in cases in which the prejudicial error was confined to damages, we believe that in the instant case the wiser course is to order a retrial of the damage issue.

In conclusion, the judgment must be affirmed in all respects except as to damages, and as to damages the judgment is to be reversed for a new trial limited to that issue. Costs are to be awarded to the appellant.

By the Court. — Judgment affirmed in part and reversed in part. Cause remanded for further proceedings consistent with this opinion.