text:
    Norman S. De Ruyter, Plaintiff-Appellant, v. American Family Mutual Insurance Company, Defendant-Respondent.
    Court of Appeals

      No. 03-2580.

      Submitted on briefs June 2, 2004.

    Decided July 7, 2004.

    2004 WI App 162
    (Also reported in 686 N.W.2d 736.)

      On behalf of the plaintiff-appellant, the cause was submitted on the briefs of Thomas C. Koessl of Williams, Montgomery & John, Ltd. of Chicago, Illinois, and Patrick J. McGuire, PC. of Law Offices of Patrick J. McGuire, of Chicago, Illinois.
    On behalf of the defendant-respondent, the cause was submitted on the brief of Earl H. Munson and Catherine M. Rottier, of Boardman, Suhr, Curry & Field, LLP, of Madison.
    Before Brown, Nettesheim and Snyder, JJ.

       Petition to review denied 9-16-04.

   NETTESHEIM, J.

¶ 1. Norman S. DeRuyter appeals from an order dismissing his complaint against his insurer, American Family Mutual Insurance Company, for failure to state a claim. DeRuyter's complaint alleged breach of contract, bad faith and unjust enrichment based on American Family's proposed use of aftermarket or salvaged parts, as opposed to new, original equipment manufacturer ("OEM") parts, to repair DeRuyter's vehicle after a collision. DeRuyter alleged that American Family's policy did not contain a provision that limits its liability to the cost of non-OEM parts and that American Family intentionally conceals this limitation on benefits until after an insured has suffered a loss and a claim is made.

¶ 2. We conclude that the language of the policy as a whole is sufficient to alert a reasonable person that American Family will restore a vehicle to pre-collision condition and that non-OEM parts might be used in doing so. We therefore uphold the circuit court's order dismissing DeRuyter's complaint.

BACKGROUND

¶ 3. When a case is before us on the circuit court's order dismissing the complaint for failure to state a claim pursuant to Wis. Stat. § 802.06(2) (2001-02), we accept the facts alleged in the complaint as true for purposes of our review. Bammert v. Don's Super Valu, Inc., 2002 WI 85, ¶ 5, 254 Wis. 2d 347, 646 N.W.2d 365. Because the insurance policy was attached to the complaint, we consider the policy in addition to the allegations of the complaint. Wis. Stat. § 802.04(3).

¶ 4. At all relevant times, DeRuyter was a named insured under a policy of automobile insurance issued by American Family. The American Family policy issued to DeRuyter provides in relevant part:

PART IV - CAR DAMAGE COVERAGES
We will pay for loss under the following coverages, less the deductible, if the coverage is shown in the declarations.
2. Collision Coverage
Under this coverage we pay for loss due to the collision of your insured car with another object or upset of your insured car....
ADDITIONAL DEFINITIONS USED IN THIS PART ONLY
1. Loss means direct and accidental loss of or damage to your insured car and its equipment.
EXLUSIONS
This coverage does not apply to loss:
7. Resulting from wear and tear.... But, coverage does apply if the loss results from the total theft of your insured car.
LIMITS OF LIABILITY
Our limit of liability for loss shall not exceed the least of:
1. The actual cash value of the stolen or damaged property.
2. The amount necessary to repair or replace the property.
3. The decrease in value of the damaged property caused by the loss.

¶ 5. On January 9, 2001, DeRuyter's vehicle was involved in a collision with another vehicle insured by American Family. DeRuyter timely reported the loss and made a claim for the cost of necessary repairs to American Family under his own policy of insurance. DeRuyter's claim included the cost of having his vehicle repaired using new, OEM parts. Following the loss, American Family inspected the vehicle and wrote its own estimate of repair costs which was based, in part, on the cost of aftermarket replacement parts. It was only upon receipt of American Family's estimate of repair costs that DeRuyter learned that American Family would only pay for the cost of using certain non-OEM parts in the repairs. At the time of the estimate, American Family provided DeRuyter with a brochure entitled "Responsible Auto Care," which explained American Family's practice regarding the use of aftermarket parts and described how American Family intended to pay for the repairs to the vehicle. DeRuyter alleged that the brochure contradicted and limited American Family's policy by stating that the policyholder would be responsible for the cost of repairs using OEM parts. American Family refused to pay for the cost of repairs to DeRuyter's vehicle using only OEM parts.

¶ 6. DeRuyter responded with the instant action against American Family. DeRuyter alleged causes of action grounded in breach of contract, bad faith in handling claims and unjust enrichment. American Family filed a motion to dismiss DeRuyter's action for failure to state a claim based on its contention that DeRuyter was not entitled to demand repair with only new OEM parts. The parties submitted briefs and, following oral arguments, the circuit court issued a written order dismissing DeRuyter's complaint for failure to state a claim.

¶ 7. DeRuyter appeals.

DISCUSSION

¶ 8. The question of whether the circuit court properly dismissed the complaint for failure to state a claim is a question of law that we review de novo. Bammert, 254 Wis. 2d 347, ¶ 8. Here, the parties dispute the terms of DeRuyter's insurance policy issued by American Family. The interpretation of an insurance contract is a question of law that this court decides without deference to the trial court. Landshire v. Emp. Mut. Cas. Co., 2004 WI App 29, ¶ 9, 269 Wis. 2d 775, 676 N.W.2d 528, review denied, 2004 WI 50, 271 Wis. 2d 111, 679 N.W.2d 546 (Wis. Apr. 20, 2004) (No. 03-0896).

In Wisconsin, the construction of contracts of insurance should he made with an aim toward effecting the true intent of the parties and the extent of policy coverage. The test "is not what the insurer intended the words to mean but what a reasonable person in the position of the insured would have understood them to mean." When a policy is clear and unambiguous on its face, the terms of that policy should not be rewritten by construction to bind an insurer to a risk it never contemplated or was willing to cover, and for which it was never paid. However, when the terms of the policy are ambiguous or obscure, the policy must be strictly construed against the drafter of the policy, the insurance company. Words or phrases in a contract are ambiguous when they are "reasonably or fairly susceptible to more than one construction."

Id., ¶ 11 (citation omitted). Bearing these principles in mind, we turn to DeRuyter's challenges to American Family's policy.

¶ 9. DeRuyter first argues that American Family's policy unambiguously provides for the repair of the vehicle with new OEM parts without limitation or exclusion. DeRuyter's argument is premised on the policy language which expressly states that American Family will pay for all loss or damage to the insured vehicle above the deductible amount listed on the policy's declaration page. DeRuyter contends that this language permits a reasonable expectation that a vehicle would be repaired following a covered loss with new OEM parts at no cost to the insured.

¶ 10. Our focus in determining whether American Family's policy is ambiguous is not dictated by whether the parties disagree about the meaning of a particular word or phrase; a word or phrase may be unambiguous if the court concludes that only one meaning applies in the context and comports with the parties' objectively reasonable expectations. See Sprangers v. Greatway Ins. Co., 182 Wis. 2d 521, 537, 514 N.W.2d 1 (1994). Here, we disagree with DeRuyter that American Family's policy unambiguously provides for repair using new, OEM parts. To the contrary, we conclude that an objective person in DeRuyter's position would have understood the policy terms to clearly and unambiguously provide exactly what it states: coverage in "[t]he amount necessary to repair or replace the property."

¶ 11. Looking at the policy as a whole, we observe that the American Family policy covers "loss due to collision." It defines "loss" as "direct and accidental damage to your insured car" and expressly excludes "loss related to wear and tear." In addition, the policy limits American Family's liability to the least of: (1) the cash value of the vehicle, (2) the amount necessary to repair or replace it, or (3) the decrease in value of the damaged vehicle caused by the loss. Here, the parties do not dispute that American Family was entitled to invoke the second of these limitations — the amount necessary to repair or replace the loss.

¶ 12. The damaged property in question in this case was the front bumper of a 1997 Buick Regal with 100,000 miles. American Family's estimate of repair provided that a "quality replacement part" would be used to repair the front bumper. DeRuyter's front bumper, at the time of the accident, was four years old. This court has previously recognized that "[t]he common and ordinary meaning of 'repair' is 'restore by replacing a part or putting together what is torn or broken'" and that "[r]epair is not ordinarily understood to mean to restore to pre-broken or pre-collision market value." Wildin v. American Fam. Mut. Ins. Co., 2001 WI App 293, ¶ 9, 249 Wis. 2d 477, 638 N.W.2d 87 (citation omitted). Significantly, DeRuyter does not allege that the use of a replacement part would not have restored his vehicle to its pre-collision or pre-loss condition. Based on the language of American Family's policy, a reasonable insured could have expected coverage for only the loss due to the collision, whether or not the repairs required the use of OEM parts. The insured could not reasonably have expected coverage for loss resulting from the wear and tear of the vehicle's use prior to the collision.

¶ 13. DeRuyter contends that the American Family policy fails to comply with Wis. Stat. § 631.45 because it does not contain clear language limiting its liability to the cost of non-OEM or aftermarket parts so that a policyholder would be on notice that he or she may have to bear a portion of the loss over and above the deductible. Section 631.45 provides in relevant part that "[a]n insurance policy indemnifying an insured against loss may by clear language limit the part of the loss to be borne by the insurer...." However, DeRuyter's argument assumes that the use of non-OEM parts is a limitation of liability above and beyond the policy's stated limitation of liability for loss to "[t]he amount necessary to repair or replace the property." The specific loss at issue here is that of a four-year-old front bumper. DeRuyter fails to demonstrate how the use of a non-OEM bumper would result in a failure to repair his vehiple as contracted under the terms of the policy. We reject DeRuyter's contention that American Family's practice of using non-OEM parts when appropriate is a limitation of liability above and beyond those stated in its policy.

¶ 14. DeRuyter contends that American Family could have avoided this dispute had its policy contained a "like kind and quality" clause. DeRuyter cites to recent cases from other jurisdictions in which the insurance policies at issue contained the clause "like kind and quality" to notify their insureds of the use of non-OEM or salvaged parts in the adjustment of claims. See Avery v. State Farm Mut. Auto. Ins. Co., 746 N.E.2d 1242, 1247-48 (Ill. App. 2001) (parts will be of "like kind and quality"); Augustus v. The Progressive Corp., 2003 WL 155267 (Ohio App. 2003). However, neither case demonstrates that the use of this particular phrase in and of itself renders a policy unambiguous or that the absence of the phrase renders a policy ambiguous. In fact, another case, Foultz v. Erie Insurance Exchange, 2002 WL 452115, at *9 n.18 (Pa. Com. Pl. 2002), suggests that the clause has not had the clarifying effect for which DeRuyter argues. And at least one other case suggests that the use of the words "like kind and quality" without an express provision for the use of non-OEM parts, provides an argument that a non-OEM part is simply not of "like kind and quality" to an OEM part. See Snell v. Geico Corp., 2001 WL 1085237 (Md. Cir. Ct. 2001) (plaintiffs arguing that non-OEM parts are necessarily and uniformly inferior to OEM parts and are not of "like kind and quality"). We reject DeRuyter's argument that American Family's failure to incorporate a "like kind and quality" clause renders the policy unclear and ambiguous, or that the use of such a clause would have rendered the policy clear and unambiguous. We therefore see no reason to confuse the issue by considering language which the American Family policy could have used but did not.

¶ 15. Finally, DeRuyter contends that the trial court erred in its determination that Wis. Stat. § 632.38 permits the use of non-OEM, aftermarket parts. Section 632.38, enacted by the legislature in 1991, governs the use of "nonoriginal manufacturer replacement parts." It provides in relevant part:

(2) Notice of intended use. An insurer or the insurer's representative may not require directly or indirectly the use of a nonoriginal manufacturer replacement part in the repair of an insured's motor vehicle, unless the insurer or the insurer's representative provides to the insured the notice described in this subsection in the manner required in sub. (3) or (4). The notice shall be in writing and shall include all of the following information:
(a) A clear identification of each nonoriginal manufacturer replacement part that is intended for use in the repair of the insured's motor vehicle.
(b) The following statement in not smaller than 10-point type: "This estimate has been prepared based on the use of one or more replacement parts supplied by a source other than the manufacturer of your motor vehicle. Warranties applicable to these replacement parts are provided by the manufacturer or distributor of the replacement parts rather than by the manufacturer of your motor vehicle."
(3) DeliveRY of notice, (a) The notice described in sub. (2) shall appear on or be attached to the estimate of the cost of repairing the insured's motor vehicle if the estimate is based on the use of one or more nonoriginal manufacturer replacement parts and is prepared by the insurer or the insurer's representative. The insurer or the insurer's representative shall deliver the estimate and notice to the insured before the motor vehicle is repaired.

Sec. 632.38(2), (3).

¶ 16. Here, it is undisputed that American Family complied with Wis. Stat. § 632.38 when it provided DeRuyter with its estimate of repairs accompanied by a brochure setting forth its policy regarding the use of non-OEM parts. However, DeRuyter contends that § 632.38 does not create an independent basis to allow for the use of non-OEM parts when the underlying insurance contract does not provide for their use. We agree. Section 632.38 does not govern what must be recited in an insurance policy. Rather, it requires an insurer to give the insured notice at the time the insured provides an estimate of loss. Therefore, it is the language of the policy which controls the issue at bar. As we have already concluded, the language of the policy unambiguously provides for the repair or replacement of damaged parts due to a loss which, depending on the pre-collision condition of the vehicle, could reasonably include the use of non-OEM parts.

CONCLUSION

¶ 17. We conclude that the language of the American Family policy unambiguously provides coverage for loss due to collision and limits its liability to the repair or replacement of damaged parts. A reasonable person in the position of the insured would have understood these repairs to include the potential use of non-OEM parts. We therefore affirm the trial court's order dismissing DeRuyter's action against American Family.

By the Court. — Order affirmed.

       All references to the Wisconsin Statutes are to the 2001-02 version unless otherwise noted.

       DeRuyter initially commenced this action in Kenosha county although he resides in Sheboygan county. American Family filed a motion for change of venue. The circuit court granted the motion and the case was transferred to Sheboygan county in February 2003.

       DeRuyter's complaint additionally moved for class certification pursuant to Wis. Stat. § 803.08. American Family subsequently moved to defer consideration of DeRuyter's request pending the resolution of procedural and dispositive motions. The matter was not further addressed prior to the circuit court order dismissing DeRuyter's complaint for failure to state a claim.

       Although DeRuyter's complaint additionally alleged bad faith and unjust enrichment, the parties agree that the viability of those claims hinge on DeRuyter's breach of contract claim. Because we conclude that the circuit court properly dismissed DeRuyter's breach of contract claim, we need not address his arguments as they pertain to his remaining claims.

       DeRuyter's vehicle additionally sustained damage to the grill, headlamps, fenders and hood, however, American Family's estimate did not propose the use of aftermarket parts to repair these damages.

       In Avery v. State Farm Mutual Auto. Insurance Co., 746 N.E.2d 1242, 1256, 1259 (Ill. App. 2001), although the insurance policy provision stated that it would pay for replacement parts of "like kind and quality" that would restore the vehicle to its "pre-loss condition," the court nevertheless upheld a jury's award of damages based on its finding that the insurance company had breached its promise by uniformly specifying non-OEM parts when they were available and cheaper than OEM parts. In Augustus v. The Progressive Corp., 2003 WL 155267 (Ohio App. 2003), the issue on appeal was whether the action met the requirements of a class action and did not focus on the use of the phrase "like kind and quality." Although the Augustus court did note that the use of non-OEM parts was not at issue since the policy expressly stated that "like kind and quality" may include non-OEM parts, it narrowed the issue to whether the company-wide policy of using non-OEM vehicles without considering the particular vehicle in question breached the contract which promised to restore a vehicle to its "pre-loss condition." Id., at *1, *4.

       In Foultz v. Erie Insurance Exchange, 2002 WL 452115, at *9 n.18 (Pa. Com. Pl. 2002), the court said:
      The term "like kind and quality" has been held to be ambiguous by some, but not all, courts. Compare Hyden v. Farmers Ins. Exch., 20 P.3d 1222, 1225 (Colo. Ct. App. 2000) ("[T]he phrase 'of like kind and quabty' is ambiguous because it fails to specify the protections afforded by the pohcy."), Bellefonte Ins. Ct. v. Griffn, 358 So.2d 387, 390 (Miss. 1978) (holding "like kind and quality" repair provision to be ambiguous), and Cazabat v. Metropolitan Prop. & Cas. Ins. Co., No. C.A. KC99-0544, 2000 WL 1910089, at *3 (R.I. Super. Ct. Apr. 24, 2000) ("Like kind and quabty" is "ambiguous as it is susceptible to more than one reasonable interpretation."), with Great Am. Ins. Co. v. Railroad Furniture Salvage of Mobile, Inc., 162 So.2d 488, 494 (Ala. 1964) ("Like kind and quabty" provision was "certain and free from ambiguity."), Siegle v. Progressive Consumers Ins. Co., 788 So.2d 355, 361 (Fla. Dist. Ct. App. 2001) (finding no ambiguity in "like kind and quality" provision), and Custom Controls Co. v. Ranger Ins., 652 S.W.2d 449, 452 (Tex. Ct. App. 1983) (concluding that "like kind and quabty" provision was not ambiguous).


source: Caselaw Access Project

author: ANDERSON, EJ.

license: Public Domain

text:
    In re Modern Building Materials Inc. Chapter 128 Receivership: Marine Bank and Robert K. Steuer, Receiver, Plaintiffs-Respondents, v. Taz's Trucking Incorporated, Defendant-Appellant.

    Court of Appeals

      No. 03-2827.

      Submitted on briefs June 14, 2004.

    Decided July 7, 2004.

    2004 WI App 164
    (Also reported in 688 N.W.2d 730.)

      On behalf of the defendant-appellant, the cause was submitted on the briefs of Michael D. Jackelen of Steinhafel, Smith & Rowen, S.C., Brookfield.
    On behalf of the plaintiffs-respondents, the cause was submitted on the brief of Daryl L. Diesing and Barbara J. Janaszek oí Whyte Hirschboeck Dudek S.C., Milwaukee and Robert K. Steuer, Milwaukee.
    Before Anderson, PJ., Brown and Snyder, JJ.

       Petition to review granted 11-17-04.

   ANDERSON, EJ.

¶ 1. Taz's Trucking Incorporated claims the undisputed evidence does not rebut the common-law presumption that a consignee of a shipment is liable for freight charges. We disagree with Taz's claim because we conclude that the evidence establishes a course of conduct evidencing the intent of Modern Building Materials Inc. (MBM) and Taz's that MBM would be exclusively liable for all freight charges. Therefore, we áffirm the circuit court's conclusion that Marine Bank and Robert K. Steuer are entitled to a permanent injunction barring Taz's from seeking payment of unpaid freight charges from MBM's customers-consignees.

Standard of Review

¶ 2. Taz's appeals from a judgment and an order which disposes of cross-motions for summary judgment. Neither Taz's nor Marine Bank and Steuer argues that there are disputed material facts that would warrant a trial. The parties have therefore effectively stipulated to the material facts. See James Cape & Sons Co. v. Mulcahy, 2003 WI App 229, ¶ 3, 268 Wis. 2d 203, 672 N.W.2d 292, review granted, 2004 WI 20, 269 Wis. 2d 197, 675 N.W.2d 804 (Wis. Jan. 23, 2004) (No. 02-2817). We review motions for summary judgment using the same methodology as the circuit court. M&I First Nat'l Bank v. Episcopal Homes Mgmt., Inc., 195 Wis. 2d 485, 496, 536 N.W.2d 175 (Ct. App. 1995). Although summary judgment presents a question of law which we review de novo, we nonetheless value a circuit court's decision on such a question. Id. at 497.

Facts

¶ 3. We derive the key events in this summary from the parties' submissions on summary judgment. MBM manufactured and distributed precast concrete building products. In early 2002, MBM entered into a relationship with Taz's to ship MBM's products to its customers. Typically, MBM would prepare a simple document it labeled a "Bill of Lading"; unlike a uniform bill of lading, it merely provided basic delivery information: customer, delivery address, shipping date, etc. (The MBM bill of lading is reproduced in Appendix A.) MBM would contact Taz's which would pick up the shipment and the MBM bill of lading and deliver the shipment to the designated MBM customer. MBM would separately invoice its customer for each shipment; the invoice would incorporate the freight charges. Taz's and MBM had a contract regarding the rates charged for shipping; the rates were based upon the mileage between MBM and the delivery point. Customarily, Taz's would bill MBM on a weekly basis for all charges incurred during the week and MBM would remit the amount due within ninety days. Taz's did not collect freight charges from the customer.

¶ 4. In 2001, MBM entered into a business loan agreement with Marine Bank. As part of the agreement, MBM was required to deposit all funds into accounts maintained with Marine Bank and seek the bank's approval of locations where assets were stored. In January 2003, Marine Bank learned that, contrary to the terms of the business loan, MBM's majority shareholders were diverting funds to unapproved bank accounts and engaging in other conduct that impaired Marine Bank's security interest in the collateral and suggested the majority shareholders intended to avoid contractual obligations to the bank. To protect its loan to MBM, Marine Bank filed a complaint on January 22, 2003, against MBM, along with a motion for appointment of a receiver pursuant to Wis. Stat. §§ 128.08 or 813.16 (2001-02) and a preliminary injunction. The circuit court conducted a hearing and appointed Steuer as the Chapter 128 Receiver with all the powers listed in § 128.08. In addition, the circuit court issued an order enjoining and restraining MBM's creditors from commencing or prosecuting any other action or proceeding.

¶ 5. Three days after the receiver was appointed, MBM's manager of operations met with the owner of Taz's, Sharon Pelicaric, and informed her about the receivership and that MBM would not be paying off any invoices it received from Taz's before the receivership. The next day, Pelicaric informed MBM that she was calling customers to tell them that they should pay old freight charges to Taz's; MBM also learned from various customers that Pelicaric had called them and told them that they would be invoiced for freight charges and Taz's would sue them if it was not paid directly.

¶ 6. To resolve the dispute, Marine Bank and Steuer filed a complaint on February 13, 2003, against Taz's seeking a declaratory judgment and injunction prohibiting Taz's from further attempts to collect unpaid freight charges from MBM's customers. After the circuit court issued a temporary restraining order, the parties filed cross-motions for summary judgment. The circuit court granted summary judgment for Marine Bank and Steuer, permanently enjoining Taz's from collecting freight charges from MBM's customers and providing that all freight charges were to be paid to MBM or its assignee. Taz's appeals.

Discussion

¶ 7. The parties agree that the general rule of liability for freight charges is correctly set forth in Schneider National Carriers, Inc. v. Rudolph Express Co., 855 F. Supp. 270, 273 (E.D. Wis. 1994):

[There is a] common-law presumption that a consignee, the party entitled to delivery under a bill of lading, becomes liable for paying the carrier's freight charges upon delivery of the goods consigned. The same liability is presumed to attach to the consignor, the party from whom the carrier receives the goods for delivery. But liability for paying freight charges is ultimately a matter of contract, so either presumption may be rebutted by evidence that the parties to the bill of lading had something else in mind. (Citations and footnotes omitted.)

This is also the law in Wisconsin:

The law is well established that the consignor of freight with whom the contract of shipment is made is liable to the carrier for the transportation charges unless there is an express agreement between the consignor and carrier exempting the consignor from such liability. The carrier may also look to the consignee to whom the goods are actually delivered for the payment of the freight charges. The consignor's liability rests upon the agreement of the parties arising out of the transactions between them.

Great N. Ry. Co. v. Hocking Valley Fire Clay Co., 166 Wis. 465, 469, 166 N.W. 41 (1918).

¶ 8. The parties disagree about the circuit court's conclusion that Marine Bank and Steuer overcame the presumption of MBM's customers' liability for freight charges by showing a course of conduct between MBM and Taz's that made MBM solely liable for all freight charges. While acknowledging that Schneider National is an accurate statement of the law, Taz's asserts that there are significant differences between that case and this appeal that dictate a different result.

¶ 9. In Schneider National, the federal district court granted the consignees' cross-motion for summary judgment, dismissing Schneider National's action seeking to recover freight charges from the consignees. Schneider Nat'l, 855 F. Supp. at 271. In the early 1980s, St. Johnsbury Trucking, an interstate trucking company operating primarily on the east coast, entered into interchange agreements with the three trucking companies — Rudolph Express Company, Inc., Northwest Transport Service, Inc., and Wren, Inc. — which were the defendants in Schneider National. Id. Under the agreements, known as the "Sunpath" service, St. Johnsbury would collect small shipments in its eastern distribution terminals, combine them into full shipments and transport them to the defendants' distribution terminals. Id. The defendants separated each shipment into the smaller components and transported the small shipments to final destinations. Id.

¶ 10. Originally, the Sunpath shipments were transported by rail, but in 1987, Schneider National was the successful bidder after St. Johnsbury switched from rail to trucking. Id. Schneider National and St. Johnsbury established written rates for shipping the Sunpath shipments from St. Johnsbury's eastern terminals to the defendants' terminals and orally agreed that Schneider National would bill St. Johnsbury after each delivery. Id. at 271-72. The defendants were not a party to the contract between Schneider National and St. Johnsbury and, while not a party to the Sunpath service, Schneider National had a thorough understanding of the agreements between St. Johnsbury and the defendants. Id. at 272.

¶ 11. For each shipment, St. Johnsbury would prepare a one-page document entitled "Sunpath Bill of Lading," which listed the location of the St. Johnsbury terminal and the name of the defendant — designated as consignee — and the location of the terminal designated for delivery and a date and time of departure from the St. Johnsbury terminal. Id. When a driver for Schneider National picked up a load, he or she would sign this document; one copy would be left at the St. Johnsbury terminal and the other three copies accompanied the shipment. Id. When the shipment was delivered, one copy was left at the defendants' terminal, one copy was the Schneider National driver's receipt and one copy was returned with an invoice to St. Johnsbury. Id.

¶ 12. Approximately a week after delivery, Schneider National would submit the fourth copy of the "Sunpath Bill of Lading" and an invoice to St. Johnsbury. Id. For about six years, St. Johnsbury routinely paid the invoices submitted by Schneider National, but in March 1993, St. Johnsbury stopped making payments. Nonetheless, Schneider National continued to make Sunpath deliveries until mid-June 1993. Id. A week after St. Johnsbury filed for bankruptcy, Schneider National contacted each of the defendants demanding payments for a dozen Sunpath shipments. Id. When the defendants refused to pay, Schneider National started a collection action. See id.

¶ 13. The federal district court rejected Schneider National's argument that because it was not a party to the interchange agreements between St. Johnsbury and the defendants, the agreements could not limit its common-law right to collect freight charges from the defendants. Id. at .273. The court held that the defendants had overcome the common-law presumption of consignee liability with evidence that the parties— Schneider National and St. Johnsbury — through the "Sunpath Bill of Lading" had agreed that St. Johnsbury would be solely liable for all freight charges. Id. at 274-75. The federal court compared the "Sunpath Bill of Lading" to a traditional bill of lading and concluded that the course of dealing between Schneider National and St. Johnsbury established a course of conduct requiring Schneider National to look exclusively to St. Johnsbury for payment of the freight charges. Id.

¶ 14. Taz's attempts to distinguish this case from Schneider National on the facts. First, Taz's points out that all of the parties in Schneider National were trucking companies and the business relationship was not the traditional consignor, freight carrier and consignee; but in this case, the traditional relationship is present. We are not persuaded that the business identity of the parties is of any importance; the federal district court made no mention of a lack of a traditional business relationship between the trucking companies. In fact, the federal district court set out the general common-law rule and would have applied it but for the evidence overcoming the common-law presumption.

¶ 15. Taz's points out that the Sunpath service agreements predated the involvement of Schneider National by seven years and Schneider National shipped between St. Johnsbury and the defendants for an additional six years, whereas the relationship between Taz's and MBM lasted for less than a year. Again, we are not persuaded that this factual difference is significant because the federal district court focused on the way Schneider National and St. Johnsbury did business, not on how long they did business.

¶ 16. Taz's argues that the "MBM Bill of Lading," unlike the "Sunpath Bill of Lading," was intended to be a traditional bill of lading. Taz's acknowledges that the "MBM Bill of Lading" does not contain much of the language that is found in a traditional bill of lading, hut asserts that there are significant differences that separate it from the "Sunpath Bill of Lading." First, the "MBM Bill of Lading" has two provisions with respect to liability for damaged goods. Second, the "MBM Bill of Lading" does not indicate that Taz's is to return the document with an invoice to MBM. Third, the "MBM Bill of Lading" contained no language that advised the customers that the freight charges were the sole responsibility of MBM.

¶ 17. Contrary to Taz's argument, the "MBM Bill of Lading" is not that different from the "Sunpath Bill of Lading" and is not the equivalent of a traditional bill of lading. In Schneider National, the court described the standard bill of lading used in the trucking industry as containing two full pages of very small print to set forth the parties' obligations. Id. at 274. The court explained that the standard bill of lading serves both as a receipt and a contract of carriage and

names the contracting parties, specifies the rate or charge for transportation, and sets forth the agreement and stipulations with respect to the limitations of the carrier's common-law liability in the case of loss or injury to the goods and other obligations assumed by the parties or matters agreed upon between them.

Id. Finally, the standard bill of lading also serves as title to the goods being shipped and is forwarded separately to the consignees who must present it to the trucking company to establish the right to receive the goods. Id.

¶ 18. In contrast, the "MBM Bill of Lading" is a one-page document without a lot of fine print. It does not set forth the name of the trucking company and the freight charges. It does not limit Taz's common-law liability in case of loss or injury to the goods. Further, it is not a document of title and it is not forwarded separately to MBM's customers to use to establish a right to the goods on Taz's trucks.

¶ 19. There are two decisions which apply the common-law presumption on consignee liability for freight charges in the traditional arrangement of consignor, trucking company and consignee. First, in E.W. Wylie Corp. v. Menard, Inc., 523 N.W.2d 395, 404 (N.D. 1994), the North Dakota Supreme Court found Schneider National to be particularly helpful in resolving the issue of consignee liability. In Wylie, Menard purchased a large quantity of lumber from a lumber mill in New York and, as part of the contract, Menard was to pay all freight charges directly to the mill. Wylie, 523 N.W.2d at 397. The bill of lading did not indicate the amount of freight charges or who was liable for them. Id. Wylie was the freight carrier and billed the mill for the freight charges after delivery of seven loads; it was never paid before the mill ceased operations. Id. In holding that the conduct of the parties overcame the common-law presumption of consignee secondary liability for freight charges, the North Dakota Supreme Court reasoned:

We believe the circumstances of this case evidence an arrangement establishing IKA's [the consignor's] exclusive liability for freight charges. Although Wylie was not a party to Menard's agreement with IKA, IKA directed Wylie to bill it for transportation costs in a manner that conformed to the agreement between IKA and Menard. During their entire business relationship, Wylie looked solely to IKA for payment and billed it for freight charges after each delivery. Even though freight charges were more than 30 days past due on several of the shipments, Wylie did not contact Menard in regard to payment until IKA informed Wylie that it was unable to make any payments. The bills of lading were silent as to the liability for and the amount of freight charges, and they thus confirmed Menard's understanding that payment of freight charges was not a matter for its concern, but was a matter of contract between IKA and Wylie. These facts do not support an implied agreement that Menard would be liable to Wylie for the freight charges. Rather, we conclude that any common law presumption is satisfactorily rebutted because the circumstances evidence an intention on the part of Wylie and the other parties to the arrangement that Wylie would look exclusively to IKA for payment of the freight charges. Accordingly, we affirm the judgment denying Wylie's complaint.

Id. at 405-06 (citations omitted).

¶ 20. The second case is LTV Steel Co., Inc. v. David Graham Co., 78 B.R. 713, 715 (Bankr. S.D.N.Y. 1987); it involves a freight carrier that attempted to bill consignees for previously delivered "prepaid" shipments after the consignor filed for bankruptcy. While much of the decision in LTV Steel dealt with the Interstate Commerce Act, id. at 717-22, the bankruptcy court also addressed the common-law right to collect freight charges from a consignee. Id. at 722-25. The bankruptcy court stated the general rule — that a freight carrier could seek payment of freight charges from either the consignor or consignee — did "not apply if the parties agree to reallocate liability" and that such an agreement can be evidenced, by the conduct of the parties. See id. at 723.

¶ 21. The bankruptcy court provided ten factors that a court could look to in deciding whether "the parties had agreed that the consignor would be exclusively liable for the shipping charges." Id. at 723-24 (emphasis omitted). Those factors and their application to undisputed facts in this appeal are:

1. "The carrier historically looked solely to the consignor for payment." See id. at 723. Until MBM went into Wis. Stat. ch. 128 receivership, Taz's billed MBM weekly for all freight charges incurred. Even though freight charges were not paid for ninety days, Taz's never contacted consignees for payment.
2. "This was the understanding of the parties as evidenced by every facet of their business relationship." See id. at 723-24. There is no evidence that Taz's and MBM contemplated any other method of payment for freight charges.
3. "The consignor alone contracted with the carrier for shipping services." See id. at 724. When MBM had a shipment ready for delivery, it would contact Taz's or another trucking company to arrange delivery.
4. "Direct billing was effected from carrier to consignor, and direct billing took place after delivery." See id. Taz's billed MBM directly every week for all freight charges incurred that week. The freight charges were based upon a mileage rate the parties had negotiated at the beginning of their relationship.
5. "The consignor paid freight charges from its general funds." See id. There is no evidence of this factor.
6. "Customer-consignees were billed by the consignors on a unitary basis (i.e. one net amount for delivered materials inclusive of freight) and they paid this single amount directly to the consignor." See id. MBM had separate contracts with its customers and would bill them directly. The invoiced amount incorporated all of MBM's costs of doing business, including freight charges, and the customers would pay the invoiced amount directly to MBM.
7. "The consignor deposited the sum received from the customer-consignees into its general accounts." See id. There is no evidence of this factor.
8. "There was no request by, or agreement with, the carrier to segregate any portion of the funds received from customer-consignees, and none took place." See id. There is no evidence of this factor.
9. "The two billing processes [i.e. (freight company) to (consignor) and (consignor) to consignee] were not synchronized so as to give an impression that the [consignor was a] mere conduit between carrier and consignee." See id. Taz's billed MBM weekly for all shipments made during the week and not on a per-shipment basis and there is no evidence on the cycle MBM used to bill its customers. Taz' weekly billing of MBM does not support a conclusion that MBM was collecting freight charges on Taz's behalf.
10. "Bills of lading and delivery tickets were marked 'prepaid' to indicate consignor's liability, and were signed by the carrier's agents without objection." See id. The "MBM Bills of Lading" were not marked "prepaid." Similarly, the "MBM Bills of Lading" did not contain the freight charges'; consequently, a consignee had no way of knowing if it would be hable for freight charges.

¶ 22. While there is no law in Wisconsin directly on point, we are satisfied that LTV Steel and Schneider National are correct statements of the law and we choose to apply them to the facts in this case. Streff v. Town of Delafield, 190 Wis. 2d 348, 356-57, 526 N.W.2d 822 (Ct. App. 1994) (We may adopt federal court decisions we find persuasive.). Under these two cases, the evidence proves a course of conduct between MBM and Taz's establishing MBM's exclusive liability for freight charges, which overcomes the common-law presumption of consignee liability.

¶ 23. Taz's raises a second issue on appeal. It asserts that MBM made false representations to its owner, Pelicaric, before seeking receivership protection and asks us to apply the doctrine of equitable estoppel to bar Marine Bank and Steuer from arguing that the course of conduct between Taz's and MBM rebutted the common-law presumption. Taz's concedes that it did not specifically raise the equitable estoppel legal argument in the circuit court, but entreats us to address equitable estoppel because it is an issue of law.

¶ 24. "It is the often-repeated rule in this State that issues not raised or considered in the trial court will not be considered for the first time on appeal." Wirth v. Ehly, 93 Wis. 2d 433, 443, 287 N.W.2d 140 (1980), superseded on other grounds by Wis. Stat. § 895.52. Marine Bank and Steuer point out that if this issue had been raised in the court below, they would have presented affidavits to refute the evidence Taz's believes supports its arguments. As the Wisconsin Supreme Court has noted, to address the issue under such circumstances would work an injustice because Marine Bank and Steuer have not had a chance to meet Taz's evidence. Cappon v. O'Day, 165 Wis. 486, 490-91, 162 N.W 655 (1917). Therefore, we decline to address the second issue presented by Taz's.

Conclusion

¶ 25. The common-law presumption that a trucking company can look to a consignee of a shipment for payment of freight charges has been rebutted in this case by undisputed evidence that MBM and Taz's had agreed MBM would be solely liable for all freight charges. Therefore, we affirm the circuit court's issuance of a permanent injunction barring Taz's from seeking payment of freight charges from any customer-consignee of MBM.

By the Court. — Judgment and order affirmed.

APPENDIX A

       A uniform bill of lading is a contract between a shipper and a trucker that spells out the trucker's obligation to deliver goods to people or places.
      A bill of lading is an instrument by which goods may be transferred from seller to buyer when a direct transfer is impossible and the goods must be shipped by a carrier. It describes the goods shipped, sets forth the identity of the shipper (or consignor) and the buyer (or consignee), and directs the carrier to deliver the freight to a certain location or person. A negotiable bill of lading calls for the freight to be delivered to the bearer of the bill; one who has possession of a negotiable bill of lading is deemed to have title to the shipped goods. A nonnegotiable bill of lading, in which a consignee is specified, may be considered evidence of title, but the transfer of a nonnegotiable bill of lading does not, in and of itself, transfer title to the goods under the bill.

        Met-Al, Inc. v. Hansen Storage Co., 828 F. Supp. 1369, 1375 (E.D. Wis. 1993).

       All references to the Wisconsin Statutes are to the 2001-02 version unless otherwise noted.

       On April 10, 2003, the circuit court approved the sale of MBM's inventory, equipment and personal property to a third party.

       Originally, Marine Bank and Steuer included a cause of action for tortious interference with a contract, but dismissed that cause of action as part of a stipulation with Taz's.


author: CANE, C.J.

text:
    Roy F. Bartels, The Estate of Roy F. Bartels by Debra Bartels, Personal Representative, and Debra Bartels, Plaintiffs-Appellants, v. Rural Mutual Insurance Company, Defendant-Respondent.
    Court of Appeals

      No. 03-3393.

      Submitted on briefs June 2, 2004.

    Decided July 7, 2004.

    2004 WI App 166
    (Also reported in 687 N.W.2d 84.)

      On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of Nathaniel Cade, Jr. and Timothy M. Hansen of Michael, Best & Friedrich, LLP of Milwaukee.
    On behalf of the defendant-respondent, the cause was submitted on the brief of Erik J. Pless of Everson, Whitney, Everson & Brehm, S.C. of Green Bay.
    Before Cane, C.J., Hoover, EJ., and Peterson, J.

       Petition for review denied 9-16-04.

   CANE, C.J.

¶ 1. Roy E Bartels, Debra Bartels, and the estate of Roy E Bartels appeal a judgment dismissing their amended complaint against Rural Mutual Insurance Company as time-barred. The Bartelses argue that because they timely amended their complaint and because the amended complaint relates back to the original complaint's filing, the trial court erred by concluding their claim against Rural was barred by the statute of limitations. We disagree and affirm the judgment.

Background

¶ 2. For purposes of this appeal, the following facts alleged in the complaint are not in dispute. Roy was killed on February 1, 1999, while attempting to aid motorists involved in a multiple car accident on U.S. Highway 41 in Outagamie County. While Roy was at the scene, Marvin Fox stopped at the scene and parked his vehicle on the highway's shoulder to render aid. After Fox parked his vehicle, Stephan Ziehms lost control of his vehicle and struck Fox's parked vehicle. The collision caused Fox's vehicle to lurch forward and strike Roy. Roy was killed instantly and discovered under Fox's vehicle several hours later.

¶ 3. The Bartelses filed the original summons and complaint with the circuit court on January 31, 2002. The original complaint named four parties: Ziehms, American Family Mutual Insurance Company (Ziehms automobile liability insurer), Economy Preferred Insurance Company (the Bartelses' underinsured motorist coverage insurer), and Rural (Fox's liability and under-insured motorist coverage insurer). The original complaint alleged three claims: (1) a negligence claim against Ziehms for losing control of his vehicle, (2) a UIM claim against Economy Preferred, and (3) a UIM claim against Rural. The Bartelses did not allege Fox was negligent and did not pursue a direct action negligence claim against Rural for Fox's negligence.

¶ 4. It is undisputed that the statute of limitations expired on February 1, 2002, the day after the original summons and complaint were filed. See Wis. Stat. § 893.54. It is also undisputed that the Bartelses did not serve Rural with the original summons and complaint within ninety days of their filing. See Wis. Stat. § 801.02(1). In fact, the Bartelses never served Rural with the original summons and complaint.

¶ 5. Almost three months after the statute of limitations expired, on May 17, 2002, the Bartelses amended their complaint, which for the first time included an allegation of negligence against Rural's insured, Fox. On that date, they also filed a notice of voluntary dismissal of Ziehms, American Family, and Economy. Thus, because the Bartelses were suing Rural under the direct action statute, see Wis. Stat. § 632.24, Rural was the sole defendant. On July 17, 2002, the Bartelses filed an amended summons and timely served Rural with the amended summons and complaint on August 8, 2002.

¶ 6. Rural moved to dismiss the amended complaint on statute of limitations grounds. See Wis. Stat. § 802.06(2)(a)9. The trial court granted the motion, concluding that the amended complaint filed after the statute of limitations expired could not relate-back to the date of the original action's filing because the Bartleses' failed to properly commence the original action against Rural. The Bartelses appeal.

Discussion

¶ 7. A motion to dismiss based on a statute of limitations is treated as a motion for summary judgment. See Wis. Stat. § 802.06(2) (b). When reviewing a summary judgment, we perform the same function as the trial court, making our review de novo. Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315, 401 N.W.2d 816 (1987).

¶ 8. The Bartelses argue the trial court erred by concluding an amended complaint cannot resurrect an original complaint that was not properly commenced. To combat this conclusion, the Bartelses advance a twofold argument around Wis. Stat. § 802.09(1) and (3).

¶ 9. The Bartelses first resort to Wis. Stat. § 802.09(1), which gives a party the ability to amend its pleading "once as a matter of course at any time within 6 months after the summons and complaint are filed." The Bartelses note this statute refers to the original summons and complaint's filing date, not commencement date. Because they filed their original summons and complaint on January 31, 2002, and filed their amended summons and complaint on May 17, 2002, the amended complaint fell well within the six-month window provided in § 802.09(1). And because they served Rural within ninety days of filing the amended summons and complaint, the Bartelses contend the amended complaint was properly commenced. Thus, given § 802.09(l)'s focus on the date of filing, the Bartelses essentially argue their failure to commence the original lawsuit against Rural was insignificant.

¶ 10. The second step in the Bartelses' argument involves Wis. Stat. § 802.09(3), the "relation back" statute. The Bartelses concede the statute of limitations expired on February 1, 2002, while their amended complaint was not filed until May 17, 2002. Thus, they state, "the only thing that could save [their amended complaint] is if it 'relates' back to the original complaint." Using § 802.09(3), the Bartelses contend that because the claim in their amended complaint arose out of the same "transaction, occurrence, or event set forth or attempted to be set forth in the original pleading, the amendment relates back to the date of the filing of the original pleading." See id. Therefore, the Bartelses argue, because the amended claim relates back to the date the original action was filed, the amended claim is not time barred.

¶ 11. The Bartelses' attempt to rectify their failure to properly commence the original action by timely serving Rural is novel. However, it is fundamentally fláwed for either of two reasons.

I. Added Party, Relation-Back, and Statute of Limitations

¶ 12. First, the Bartelses' amended complaint did more than simply add a claim; it also added a new party, namely, Rural. However, this addition contravenes the relation-back statute, Wis. Stat. § §02.09(3), and therefore vitiates Rural's statute of limitations protections.

¶ 13. Although the original complaint named and included a UIM claim against Rural, it is undisputed that the Bartelses did not serve Rural with the original complaint within ninety days. See Wis. Stat. § 802.01(1). "A person does not become a party to an action by the mere naming of him or her in the title of the action." See 59 Am. Jur 2d Parties § 6 (2002). "It is widely accepted that an individual named as a co-defendant is not a party unless he [or she] has been served." Rae v. All Am. Life & Cas. Co., 605 P.2d 196, 197 (Nev. 1979). Thus, despite being named in the original action, because Rural was never served in the original action, Rural could not have been a party to the original action. Therefore, by including Rural in the amended complaint, the Bartelses have added a new party.

¶ 14. This addition, however, runs afoul of Wis. Stat. § 802.09(3). Section 802.09(3) "ameliorate[s] the effect of the statute of limitations in situations where the original pleadings provided fair notice to the opposing party of the claim or defense raised." Korkow v. General Cas. Co., 117 Wis. 2d 187, 196, 344 N.W.2d 108 (1984). Thus, "If a party is given fair notice within the statutory time limit of the facts out of which the claim arises ... it is not deprived of any protections the statute of limitations was designed to afford." Id. at 199. More specifically, § 802.09(3) requires four conditions be met in order to have a claim against a new party relate back to the original pleadings:

(1) the basic claim must have arisen out of conduct set forth in the original pleadings; (2) the party to be brought in must have received notice so that it will not be prejudiced in maintaining its defense; (3) the party knew or should have known that, but for a mistake concerning identity, the action would have been brought against it; and (4) most significantly, the second and third requirements must have been fulfilled within the prescribed limitations period.

Grothe v. Valley Coatings, Inc., 2000 WI App 240, ¶ 9, 239 Wis. 2d 406, 620 N.W.2d 463.

¶ 15. At a minimum, the Bartelses cannot satisfy the second and fourth conditions. Again, Rural was never served with the original summons and complaint. Thus, it did not have notice of the suit within the prescribed limitations period. Because Rural did not have timely notice of the original action, to allow the amended suit to proceed would deprive Rural of the statute of limitations protections. Therefore, without considering the other conditions, because the Bartelses cannot satisfy the second and fourth conditions of Wis. Stat. § 802.09(3), the amended complaint does not relate back to the original pleading and the amended pleading is consequently time barred.

II. Fundamental Defect

¶ 16. The second, broader reason the Bartelses' argument is flawed is because it disregards the legal effect of their failure to serve Rural with the original summons and complaint within ninety days of their filing. As the supreme court held in American Family Mutual Insurance Co. v. Royal Insurance Co., 167 Wis. 2d 524, 534-35, 481 N.W.2d 629 (1992), this failure constituted a fundamental defect. A fundamental defect deprives the circuit court of personal jurisdiction over the defendant, id., and renders the original pleading a legal nullity. See Estate of Kitzman, 163 Wis. 2d 399, 403, 471 N.W.2d 293 (Ct. App. 1991) (pleadings containing defects that affect the substantial rights of the defendant — which, by definition, includes fundamental defects — are legal nullities). A fundamental defect is "fatal to the action," Hagen v. MERS, 2003 WI 56, ¶ 13, 262 Wis. 2d 113, 663 N.W.2d 268, warrants dismissal of the action, Gaddis v. La Crosse Prod., Inc., 198 Wis. 2d 396, 407-08, 542 N.W.2d 454 (1996), and may "prevent [the plaintiff] from having his [or her] day in court." Id. at 408.

¶ 17. Given the nature and consequences of a fundamental defect, we conclude a fundamental defect cannot be remedied with an amended pleading. To conclude otherwise would furnish a complainant with a loophole in which the consequences of failing to follow the strictures for commencing an action are removed. In those circumstances, fundamental defects become less significant than even technical defects; they simply become incidental defects, defects that are rendered inconsequential by merely following the procedure for amending a pleading. Furnishing a complainant with an escape of this sort is not only inimical to the idea of fundamental defects, it would contravene their consequences.

By the Court. — Judgment affirmed.

       All references to the Wisconsin Statutes are to the 2001-02 version unless otherwise noted.

       Although the record does not reflect that the amended summons and complaint were served on Rural, the Bartelses argue in their brief that they served Rural on August 8, 2002. Rural notes the record does not reflect the date of service, but it acknowledges in its brief that it was served with the amended summons and complaint on August 8. Further, Rural's brief in support of their motion to dismiss acknowledged as undjsputed that they were served with the amended summons and complaint on August 8.

       In Korkow, the supreme court observed:
      The purpose of statutes of limitations is to ensure prompt litigation of claims and to protect defendants from fraudulent or stale claims brought after memories have faded or evidence has been lost. This purpose is accomplished by requiring that parties be given formal and seasonable notice that a claim is being asserted against them.

        Korkow v. General Cas. Co., 117 Wis. 2d 187, 198-99, 344 N.W.2d 108 (1984) (emphasis added).

       As noted above, the statute of limitations expired on February 1, 2002, the day after the original summons and complaint were filed.

       Fundamental defects stand in contrast to technical defects: "[W]here the defect is technical, the court has personal jurisdiction only if the complainant can show the defendant was not prejudiced, and, where the defect is fundamental, no personal jurisdiction attaches regardless of prejudice or lack thereof." American Fam. Mut. Ins. Co. v. Royal Ins. Co., 167 Wis. 2d 524, 533, 481 N.W.2d 629 (1992).

       As this court held in Bendimez v. Neidermire, 222 Wis. 2d 356, 361, 588 N.W.2d 55 (Ct. App. 1998), strict compliance with the rules of service are required, "even though the consequences may appear to be harsh."

       After all, technical defects may not defeat a complainant's action if the defect has not prejudiced the defendant. American Fam., 167 Wis. 2d at 534.