Badon v. General Motors Corp.

• Decision Date: 15 April 1991
• Docket Number: 103876,Docket Nos. 103831
• Citation: 470 N.W.2d 436,188 Mich.App. 430
• Parties: Henry M. BADON, Plaintiff-Appellee, Cross-Appellant, v. GENERAL MOTORS CORPORATION, Defendant-Appellee, and GMC Chevrolet Metal Fabricating, Defendant, and Director of the Bureau of Workers' Disability Compensation, Defendant-Appellant, Cross-Appellee. Henry M. BADON and Jessie B. Badon, Plaintiffs-Appellees, Cross-Appellants, v. GENERAL MOTORS CORPORATION and GMC Chevrolet Metal Fabricating, Defendants-Appellants, Cross-Appellees, and Director of the Bureau of Workers' Disability Compensation, Defendant. 188 Mich.App. 430, 470 N.W.2d 436
• Court: Court of Appeal of Michigan — District of US

Page 436

470 N.W.2d 436

Henry M. BADON, Plaintiff-Appellee, Cross-Appellant, v. GENERAL MOTORS CORPORATION, Defendant-Appellee, and GMC Chevrolet Metal Fabricating, Defendant,

and

Director of the Bureau of Workers' Disability Compensation,

Defendant-Appellant, Cross-Appellee.

Henry M. BADON and Jessie B. Badon, Plaintiffs-Appellees, Cross-Appellants, v. GENERAL MOTORS CORPORATION and GMC Chevrolet Metal

Fabricating, Defendants-Appellants,

Cross-Appellees,

and

Director of the Bureau of Workers' Disability Compensation,

Defendant.

Docket Nos. 103831, 103876.

188 Mich.App. 430, 470 N.W.2d 436

Court of Appeals of Michigan.

Submitted July 18, 1990, at Lansing.

Decided April 15, 1991, at 9:05 a.m.

Released for Publication June 21, 1991.

[188 MICHAPP 431] David Melkus, Flint, for Henry M. Badon and Jessie B. Badon.

David M. Davis, Detroit, for General Motors Corp.

Frank J. Kelley, Atty. Gen., Gay Secor [188 MICHAPP 432] Hardy, Sol. Gen., and Sterling W. Schrock, Asst. Atty. Gen., for Director of the Bureau of Workers' Disability Compensation.

Before MARILYN KELLY, P.J., and HOOD and DOCTOROFF, JJ.

DOCTOROFF, Judge.

This is an appeal from a circuit court decision which rescinded the redemption agreement which had settled Henry Badon's workers' compensation claim. Defendants General Motors Corporation and the Director of the Bureau of Workers' Disability Compensation appeal as of right, raising several issues. Henry Badon and his wife have filed a cross appeal. We reverse.

General Motors claims that plaintiffs' action is barred by the principle of res judicata and that the Badons are not entitled to rescission. It alleges that a three-year statutory period of limitation bars the action against it. Both defendants argue that the trial court erred in finding that the redemption agreement violated public policy. The director also argues laches. Plaintiffs maintain that the trial court erred in refusing to admit into evidence the transcript of their appeal of a federal case in the United States Court of Appeals for the Sixth Circuit. We reverse.

On December 3, 1970, Henry Badon suffered a back injury in the course of his employment with General Motors. He filed a claim for benefits under the Workers' Disability Compensation Act, M.C.L. Sec. 418.101 et seq.; M.S.A. Sec. 17.237(101) et seq. On October 26, 1971, following a hearing before a referee, Badon entered into a redemption agreement with General Motors. In exchange for $13,000, he signed a release from liability for any injury and for "all claims for workmen's compensation benefits which the plaintiff may have against the General[188 MICHAPP 433] Motors Corporation." He also agreed to resign his employment voluntarily, with the understanding that neither his pension nor his insurance rights would be adversely affected.

Badon had previously filed a claim for a total and permanent disability pension. He believed the redemption agreement would not impair his application for pension benefits. On December 3, 1971, General Motors denied the application, claiming that the medical evidence was insufficient. Badon asked the union to appeal the decision pursuant to the collective bargaining agreement. However, the union failed to appeal within the thirty-day time limit. Badon could not file a new application, because he was no longer a General Motors employee.

On October 31, 1977, Badon brought an action in federal district court, alleging breach of contract by General Motors and breach of the duty of fair representation by the union. The claims were dismissed as barred by a three-year statutory period of limitation. The federal court also made a finding of no fraud or mutual mistake. It dismissed without prejudice Badon's claim alleging that the redemption agreement was contrary to public policy. The Sixth Circuit Court of Appeals affirmed. Badon v. General Motors Corp., 679 F.2d 93 (CA 6, 1982).

Before the federal appellate decision, the Badons filed an action in the Genesee Circuit Court, seeking rescission of the redemption agreement. General Motors raised several affirmative defenses, including res judicata, collateral estoppel, laches, waiver, expiration of the statute of limitations, and failure to tender the $13,000 in consideration. When General Motors brought a motion for summary disposition, the trial judge denied it outright, except with respect to the count alleging lack of [188 MICHAPP 434] consideration. That count was denied contingent on Badon tendering the $13,000 or an equivalent amount of property. Badon granted a $13,000 interest in his home to General Motors.

Trial in the Genesee Circuit Court took place on June 1 and 5, July 31, and September 1, 1987. The judge heard testimony from Joseph Mullaney, the hearing referee, from Theodore Rosenberg, Badon's attorney at the redemption hearing, and from the plaintiffs.

Mullaney testified that, in 1971, whether a redemption should be approved was left to the discretion of the hearing referee. Mullaney's first concern was to review the medical records to determine the plaintiff's future treatment needs. He would then determine whether the proposed redemption was in the plaintiff's best interests from a financial standpoint. In the instant case, Mullaney was satisfied that plaintiff was employed at the time of the hearing and that the redemption was in plaintiff's best interests.

Rosenberg testified that plaintiff was anxious to settle his workers' compensation claim. Rosenberg felt that plaintiff should have waited to see if his pension was approved before agreeing to redeem his workers' compensation claim. Plaintiff was informed that he would lose his medical insurance coverage as a result of the redemption. Rosenberg contacted plaintiff's union and was told that, if the pension application was denied, plaintiff had thirty days to appeal the denial. Plaintiff rejected Rosenberg's recommendation and insisted that he wanted to settle. Plaintiff told Rosenberg that he needed the money to buy a truck. Plaintiff did not tell Rosenberg that he was scheduled for back surgery.

Plaintiff testified that he was not employed at the time of the redemption hearing, that he was [188 MICHAPP 435] not told whether the redemption would affect his medical insurance coverage, and that he informed the referee of his scheduled back surgery. Plaintiff agreed that he was informed that he could appeal the denial of his pension application.

The trial judge held that the redemption and the course of the redemption proceedings were violative of Michigan public policy. He ordered the redemption agreement rescinded.

General Motors claims that this cause of action is barred by the three-year statutory period of limitation applicable to wrongful discharge suits.

Initially, we note that the affirmative defense of the statute of limitations is not clearly available to defendants in this case. An action seeking rescission of a redemption agreement is equitable in nature. Solo v. Chrysler Corp. (On Rehearing), 408 Mich. 345, 351-353, 292 N.W.2d 438 (1980). In equitable proceedings, timeliness is determined by applying the doctrine of laches rather than the statute of limitations. However, in determining laches, courts will look to the analogous statutory period of limitation. Romulus City Treasurer v. Wayne Co. Drain Comm'r, 413 Mich. 728, 748, 322 N.W.2d 152 (1982).

Even if we were to apply a statute of limitations in this case, the correct period would be six years, not the three years appropriate for wrongful discharge claims. M.C.L. Sec. 600.5805(8); M.S.A. Sec. 27A.5805(8). Plaintiffs are not seeking damages for wrongful discharge. Rather, their allegations are in the nature of fraud, mistake, or injury to financial expectations--causes of action which are subject to a six-year limitation period. M.C.L. Sec. 600.5813; M.S.A. Sec. 27A.5813; Blue Cross & Blue Shield of Michigan v. Folkema, 174 Mich.App. 476, 481, 436 N.W.2d 670 (1988).

Plaintiffs' cause of action accrued no earlier [188 MICHAPP 436] than November 10, 1971, because the redemption order did not become final for fifteen days after execution. M.C.L. Sec. 418.837(2); M.S.A. Sec. 17.237(837)(2). Thus, plaintiffs' original complaint in federal court was timely filed on October 31, 1977. The statutory period of limitation was then tolled until the federal action was no longer pending. M.C.L. Sec. 600.5856; M.S.A. Sec. 27A.5856; Sherrell v. Bugaski, 169 Mich.App. 10, 17, 425 N.W.2d 707 (1988). A dismissal without prejudice is not an adjudication on the merits. King v. Michigan Consolidated Gas Co., 177 Mich.App. 531, 535, 442 N.W.2d 714 (1989). The complaint in state court was filed before the appeal to the Sixth Circuit, while the federal action was still pending. Therefore, the statutory period of limitation had not expired when this action was commenced.

The director argues that plaintiffs' cause of action is barred by the doctrine of laches. He claims that, because plaintiffs waited nine years before presenting their claim, they failed to exercise due diligence.

In order to assert a laches defense successfully, a defendant must show that the passage of time combined with intervening circumstances render it inequitable to grant relief to the plaintiff. City of Holland v. Manish Enterprises, 174 Mich.App. 509, 512, 436 N.W.2d 398 (1988). The defendant must prove a lack of due diligence on the part of the plaintiff resulting in some prejudice to the defendant. Id.; Eberhard v. Harper-Grace Hospitals, 179 Mich.App. 24, 38, 445 N.W.2d 469 (1989). Laches is an affirmative defense which is waived if not raised in the party's responsive pleading or by motion. GCR 1963, 111.3; MCR 2.111(F)(2) and (3).

The director first mentioned this defense in his appellate brief on April 19, 1988. That was 7 1/2 years after plaintiffs filed this action. Thus, we find [188 MICHAPP 437] that the affirmative defense of laches has been waived.

Next, General Motors contends that...