Blanchfield v. Dennis, 46

• Decision Date: 05 January 1982
• Docket Number: No. 46,46
• Citation: 438 A.2d 1330,292 Md. 319
• Parties: Helena E. BLANCHFIELD v. Lewis H. DENNIS.
• Court: Maryland Court of Appeals

Page 319

292 Md. 319

438 A.2d 1330

Helena E. BLANCHFIELD v. Lewis H. DENNIS.

No. 46.

Court of Appeals of Maryland.

Jan. 5, 1982.

Donald F. Oakley and Marvin Ellin, Baltimore (Jonathan Schochor and Ellin & Baker, Baltimore, on the brief), for appellant.

Robert R. Michael, Bethesda, and George W. Shadoan, Rockville, on the brief, for amicus curiae Maryland Trial Lawyers' Assn.

H. Thomas Howell and John H. Mudd, Baltimore (Semmes, Bowen & Semmes, Baltimore, on the brief), for appellee.

Argued before MURPHY, C. J., and SMITH, DIGGES, ELDRIDGE, COLE, DAVIDSON and RODOWSKY, JJ.

DIGGES, Judge.

We here decide that, upon request, jurors in a personal injury case must be instructed that any damages they may award are not subject to state and federal income taxes.

In this medical malpractice suit, instituted in the Circuit Court for Prince George's County, the jury determined respondent Dr. Lewis H. Dennis to be liable to petitioner Helena E. Blanchfield for misdiagnosing that she suffered from terminal bone cancer. Respondent, not contesting his liability, appealed to the Court of Special Appeals from the resulting judgment in favor of petitioner entered on the verdict in the amount of $400,000. ¹ The intermediate appellate court, agreeing with the doctor's contention that the jury should have been informed of the tax exempt status of the award, vacated the judgment and remanded the case for a retrial confined to the issue of damages. Dennis v. Blanchfield, 48 Md.App. 325, 428 A.2d 80 (1981). ²

Before turning to express our views concerning the legal issue here presented, we pause to relate the factual background of the case. The evidence indicates that in January 1976, Mrs. Blanchfield noticed a problem with her vision while poring over income tax papers. The following month, after consulting several physicians, she entered Doctor's Hospital of Prince George's County for further evaluation of her eyesight difficulty. At the hospital, the patient was examined by Dr. Dennis who administered numerous laboratory tests. Following a stay of thirteen days, Mrs. Blanchfield was discharged without comment as to her medical condition but was told to report to Dr. Dennis' office in one week. The petitioner testified that when she visited respondent's office, "he sat me down ... (and) told me this time that I had multiple myeloma." In response to further query by his patient, the doctor explained that she suffered from a "terminal-type" bone cancer and that "(y)ou have maybe a month, maybe as long as a year to live."

Faced with what she believed to be the shocking reality of her impending death, the petitioner, a 43-year-old divorcee with four children, testified that she went "downhill very fast" and was "just thinking death on my mind all the time." She terminated her marriage plans and curtailed social contacts. Mrs. Blanchfield described the concern that she felt for her 13-year-old daughter and explained that her elder son and daughter-in-law moved from their house to the Blanchfield home in order to care for their mother and to supervise the young daughter. Dr. Dennis, in an effort to slow the progress of petitioner's supposed cancer, started her on a program of chemotherapy beginning after the first office consultation in March, 1976. Mrs. Blanchfield testified that the drugs caused constant nausea, vomiting, diarrhea, weight gain and dryness in the eyes, nose and mouth, all of which left her in a progressively weaker condition. This creeping physical deterioration accentuated her belief that death was near. As a result of the drug side effects, petitioner was unable to work at her job as a supervisor of school bus drivers and she retired shortly after her treatments began.

Although following a month of treatment the chemotherapy had been stopped due to the severity of its side effects, Mrs. Blanchfield continued to make weekly visits to Dr. Dennis' office for laboratory tests. During the visit on August 3, 1976, the physician proposed that she undergo a liver biopsy to determine whether the phantom disease had spread to that organ. However, at the urging of her family, Mrs. Blanchfield, instead of undergoing the liver test, checked into the Sloan-Kettering Memorial Cancer Center in New York City for a second opinion. After being confined in this well known New York institution for 20 days of laboratory testing and examination, the petitioner was released and informed that, although she had experienced an apparent stress related vision problem, she did not have multiple myeloma, that she never had the disease, and that the chemotherapy should not have been administered. Claiming negligent diagnosis on the part of Dr. Dennis, Mrs. Blanchfield instituted this suit 10 months later.

At the conclusion of a nine day trial in January, 1980, the court instructed the jury concerning the appropriate burden of proof, the legal definition of negligence, the proper measure of damages and the like. Certain aspects of these instructions form the basis of the controversy we are now asked to consider. Among them is the contention that the trial judge erroneously declined to inform the jury, as requested by respondent, that "(a)ny damages awarded to plaintiff are not income to her within the meaning of federal and state income tax laws, and no income tax will be owed or paid thereon." ³

We turn now to examine the requested tax instruction and observe, preliminarily, that it was plainly a correct statement of the current tax law. 26 U.S.C. § 104(a)(2); Md.Code (1957, 1980 Repl.Vol.), Art. 81, § 280(a). ⁴ The issue thus presented in this appeal is whether the failure to give the tax instruction constitutes reversible error. ⁵ In support of his contention that the trial court erred in this regard, Dr. Dennis relies primarily upon the recent United States Supreme Court decision of Norfolk & W. Ry. Co. v. Liepelt, 444 U.S. 490, 100 S.Ct. 755, 62 L.Ed.2d 689 (1980). In Liepelt, the Supreme Court, in an action tried in a state court pursuant to the Federal Employees Liability Act (FELA), held that it was error to refuse to give a tax instruction similar to that requested by Dr. Dennis in the case now before us. In concluding that juries in federally created actions must be informed that any sums awarded will not be taxed as income, the Supreme Court in Liepelt expressed the following view:

"We take judicial notice of the 'tax consciousness' of the American public. Yet, we also recognize, as did the court in Dempsey v. Thompson, 363 Mo. 339, 251 S.W.2d 42 (1952), that few members of the general public are aware of the special statutory exception for personal injury awards contained in the Internal Revenue Code.

'(T)here is always danger that today's tax-conscious juries may assume (mistakenly of course) that the judgment will be taxable and therefore make their verdict big enough so that plaintiff would get what they think he deserves after the imaginery tax is taken out of it.' " (444 U.S. at 497, 100 S.Ct. at 759, 62 L.Ed.2d at 695-96 (quoting Domeracki v. Humble Oil & Refining Co., 443 F.2d 1245, 1251 (3rd Cir. 1971), cert. denied, 404 U.S. 883, 92 S.Ct. 212, 30 L.Ed.2d 165 (1971), and II Harper & James, The Law of Torts § 25.12, at 1327-1328 (1956)).)

Whether or not the assumption of jury tax consciousness is accurate in every case, the Liepelt Court concluded that:

"(t)o put the matter simply, giving the instruction can do no harm, and it can certainly help by preventing the jury from inflating the award and thus over-compensating the plaintiff on the basis of an erroneous assumption that the judgment will be taxable." (444 U.S. at 498, 100 S.Ct. at 759 (quoting Burlington Northern, Inc. v. Boxberger, 529 F.2d 284, 297 (9th Cir. 1975)).)

The Liepelt ruling was recently clarified by the Supreme Court in Gulf Offshore Co. v. Mobil Oil Corp., --- U.S. ----, 101 S.Ct. 2870, 2879-80 n. 17, 69 L.Ed.2d 784 (1981), where the Court indicated that since "(n)one of the Court's reasoning (in Liepelt ) was directed particularly at FELA," the holding "articulated a federal common law rule" of "general applicability." Although it represents the minority view, we are in general agreement with the position expressed by the United States Supreme Court in Liepelt, for undoubtedly taxes are such an indelible part of most citizens' experience that it is reasonable to assume that the average juror approaches his deliberative task with taxes in mind. ⁶

Those opposed to an instruction on the tax exempt nature of damage awards note that because the jury has already been fully directed as to how to calculate its verdict, further instruction is unnecessary since it must be assumed that the jury will strictly follow the law as it is explained to them. It is true that the jury in the usual negligence action is in effect directed neither to reward the plaintiff nor to punish the defendant, but rather to replace the plaintiff's losses. However, to the extent that erroneous tax considerations are allowed to creep into the deliberative process, this purpose of a damage award is frustrated: Can there be any sound reason for not so instructing the jury? We can think of none. ⁷ Surely, the plaintiff has no right to receive an enhanced award due to a possible and, we think, probable misconception on the part of the jury that the amount allowed by it will be reduced by income taxes. Such an instruction would at once and for all purposes take the subject of income taxes out of the case. (Dempsey v. Thompson, supra, 251 S.W.2d at 45.)

The effect of a brief cautionary instruction as requested in this case is simply to dissuade juries from improperly inflating an award because of a misconception that the taxing arm of the government will extract a portion of the verdict. Such an instruction, in our view, will neither complicate the case, confuse the jury, nor introduce irrelevant matters at trial. The instruction is brief and easily understood. It...