Grant Const. Co. v. McRae, COA00-1183.

• Decision Date: 02 October 2001
• Docket Number: No. COA00-1183.,COA00-1183.
• Citation: 146 NC App. 370,553 S.E.2d 89
• Parties: GRANT CONSTRUCTION COMPANY, Plaintiff, v. W. Philip McRAE, Lawyers Mutual Liability Insurance Company of North Carolina, and Dennis M. Ward, Defendants.
• Court: North Carolina Court of Appeals

553 S.E.2d 89

146 NC App. 370

GRANT CONSTRUCTION COMPANY, Plaintiff, v. W. Philip McRAE, Lawyers Mutual Liability Insurance Company of North Carolina, and Dennis M. Ward, Defendants.

No. COA00-1183.

Court of Appeals of North Carolina.

October 2, 2001.

Morris York Williams Surles & Barringer, L.L.P., by John F. Morris and Christa C. Pratt, Charlotte, for plaintiff appellant.

Williamson, Dean, Williamson, Purcell & Sojka, L.L.P., by Nickolas J. Sojka, Jr., and Andrew G. Williamson, Jr., Laurinburg, for Dennis M. Ward, defendant appellee.

Dean & Gibson, L.L.P., by Rodney Dean and Susan L. Hofer, Charlotte, for W. Philip McRae and Lawyers Mutual Insurance Company of North Carolina, defendant appellees.

McCULLOUGH, Judge.

Defendant Dennis Ward was employed as a construction worker at Grant Construction Company (Grant) in Scotland County, North Carolina. Grant hired subcontractors to complete work on various parts of its construction jobs. One such subcontractor was Formco Concrete Forming (Formco), which was responsible for erecting, maintaining, and disassembling scaffolding it used at Grant's construction site. On 22 March 1993, Ward stepped onto Formco's scaffolding and was seriously injured when the plywood walkway he stood on collapsed. Prior to Ward's injury, Formco had removed the shoring from the scaffolding, but left the wooden walkway in place.

Ward suffered serious and permanent injuries from his fall, and brought a valid workers' compensation claim against Grant for medical expenses, permanent injuries, and lost wages, pursuant to the North Carolina Workers' Compensation Act, N.C. Gen.Stat. § 97-1, et. seq. Ward hired Attorney W. Philip McRae to represent him in the workers' compensation suit against Grant. Grant ultimately paid Ward over $10,000.00 in workers' compensation benefits. On 23 February 1994, Ward signed an Agreement of Final Settlement and Release, which ended his relationship with Grant and gave Grant a lien on any settlement or recovery Ward could win in a civil lawsuit against Formco. The Agreement was approved by the North Carolina Industrial Commission on 4 March 1994.

McRae continued to represent Ward during Ward's personal injury claim against Formco. However, McRae failed to file a civil action against Formco within the three-year statute of limitations prescribed by N.C. Gen.Stat. § 1-52 (1999). After Ward learned that McRae negligently failed to file suit, he sued McRae for legal malpractice. The malpractice lawsuit was settled on behalf of McRae by Lawyer's Mutual Insurance Company (Lawyer's Mutual) for the sum of $26,000.00.

On 8 March 1999, Grant filed suit against McRae, Lawyer's Mutual, and Ward for negligence and breach of contract, arguing that Grant's subrogation lien on any proceeds from a lawsuit between Ward and Formco should extend to the proceeds that arose from the legal malpractice settlement between Ward and Lawyer's Mutual. On 2 June 2000, the trial court found that Grant's complaint failed to state a claim upon which relief could be granted, and therefore allowed defendants' motion to dismiss pursuant to N.C. Gen.Stat. § 1A-1, Rule 12(b)(6) (1999). Grant appealed.

On appeal, Grant brings forth six assignments of error, all of which revolve around Grant's contention that the trial court erred in finding that its complaint failed to state a claim upon which relief could be granted. For the reasons set forth, we disagree with Grant's arguments and affirm the trial court's dismissal of Grant's complaint.

When a party files a motion to dismiss pursuant to N.C. Gen.Stat. § 1A-1, Rule 12(b)(6),

[t]he question for the court is whether, as a matter of law, the allegations of the complaint, treated as true, are sufficient to state a claim upon which relief may be granted under some legal theory, whether properly labeled or not. Stanback v. Stanback, 297 N.C. 181, 254 S.E.2d 611 (1979). In general, "a complaint should not be dismissed for insufficiency unless it appears to a certainty that plaintiff is entitled to no relief under any state of facts which could be proved in support of the claim." Id. at 185, 254 S.E.2d at 615, quoting 2A Moore's Federal Practice, § 12.08, pp. 2271-74 (2d ed.1975) (emphasis original).

Harris v. NCNB, 85 N.C.App. 669, 670-71, 355 S.E.2d 838, 840 (1987). See also N.C. Gen.Stat. § 1A-1, Rule 12(b)(6). The sole purpose of a motion to dismiss is to test the legal sufficiency of the complaint, and the trial court should not allow a motion to dismiss unless it is clear that a plaintiff cannot present any set of facts which would entitle him to relief. Sinning v. Clark, 119 N.C.App. 515, 517, 459 S.E.2d 71, 73, disc. review denied, 342 N.C. 194, 463 S.E.2d 242 (1995). With this standard of review firmly in mind, we turn to Grant's complaint.

Grant maintains that it possessed a subrogation lien which extended to any proceeds Ward recovered from his attorney malpractice lawsuit against McRae. Grant's right to assert a subrogation lien originates in N.C. Gen.Stat. § 97-10.2 (1999), part of the North Carolina Workers' Compensation Act. Our determination of whether Grant may pursue recovery on a subrogation lien theory turns on the language of the statute itself; we will therefore examine several of its key provisions in turn.

Generally speaking, an employer must pay workers' compensation benefits to an employee if that employee suffers a compensable work injury and notifies the employer of his workers' compensation claim. See N.C. Gen.Stat. § 97-22 (1999). If the employee is injured by a third party, the non-negligent employer must still pay workers' compensation benefits, but can claim a subrogation lien on any proceeds the employee wins in a subsequent lawsuit against the third party. See N.C. Gen.Stat. § 97-10.2(f)(1). The employer's right to a lien on a recovery from the third-party tortfeasor is "mandatory in nature." Radzisz v. Harley Davidson of Metrolina, 346 N.C. 84, 89, 484 S.E.2d 566, 569 (1997).

To understand workers' compensation law, one must be familiar with the relevant parties and their interactions. Beyond the basic employer-employee relationship, there are other parties who may share liability or owe money to each other. Though an employer is initially responsible for paying workers' compensation benefits to an injured employee, it may recover some or all of the money it pays from a third party who was at fault for the employee's accident. N.C. Gen.Stat. § 97-10.2(a) explains the relationships of the parties, and defines a "third party" as follows:

The right to compensation and other benefits under this Article for disability, disfigurement, or death shall not be affected by the fact that the injury or death was caused under circumstances creating a liability in some person other than the employer to pay damages therefor, such person hereinafter being referred to as the "third party." The respective rights and interests of the employee-beneficiary under this Article, the employer, and the employer's insurance carrier, if any, in respect of the common-law cause of action against such third party and the damages recovered shall be as set forth in this section.

Id. (emphasis added).

N.C. Gen.Stat. § 97-10.2(h) describes the nature of a party's lien in the context of a workers' compensation case. The statute states, in pertinent part:

In any proceeding against or settlement with the third party, every party to the claim for compensation shall have a lien to the extent of his interest under (f) hereof upon any payment made by the third party by reason of such injury or death, whether paid in settlement, in satisfaction of judgment, as consideration for covenant not to sue, or otherwise and such lien may be enforced against any person receiving such funds. Neither the employee or his personal representative nor the employer shall make any settlement with or accept any payment from the third party without the written consent of the other and no release to or agreement with the third party shall be valid or enforceable for any purpose unless both employer and employee or his personal representative join therein; provided, that this sentence shall not apply:

(1) If the employer is made whole for all benefits paid or to be paid by him under this Chapter less attorney's fees as provided by (f)(1) and (2) hereof and the release to or agreement with the third party is executed by the employee; or

(2) If either party follows the provisions of subsection (j) of this section.

Id. (emphasis added).

Once a party shows that it is entitled to a lien, that amount must still be calculated. N.C. Gen.Stat. § 97-10.2(j) explains that

[n]otwithstanding any other subsection in this section, in the event that a judgment is obtained by the employee in an action against a third party, or in the event that a settlement has been agreed upon by the employee and the third party, either party may apply to the resident superior court judge of the county in which the cause of action arose, where the injured employee resides or the presiding judge before whom the cause of action is pending, to determine the subrogation amount. After notice to the employer and the insurance carrier, after an opportunity to be heard by all interested parties, and with or without the consent of the employer, the judge shall determine, in his discretion, the amount, if any, of the employer's lien, whether based on accrued or prospective workers' compensation benefits, and the amount of cost of the third-party litigation to be shared between the employee and employer. The judge shall consider the anticipated amount of prospective compensation the employer or workers' compensation carrier is likely to pay to the employee in the future, the net recovery to plaintiff, the likelihood of the plaintiff prevailing at trial or on appeal, the need for finality in the litigation, and any other factors the court deems just and reasonable, in determining the appropriate amount of

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