Michigan Mutual Ins. Co. v. Indiana Ins. Co.

• Decision Date: 12 December 2001
• Docket Number: Docket No. 215570.
• Citation: 637 N.W.2d 232,247 Mich. App. 480
• Parties: MICHIGAN MUTUAL INSURANCE COMPANY, as Subrogee of Spartan Asphalt Paving Company, and Spartan Asphalt Paving Company, Plaintiffs-Appellees, v. INDIANA INSURANCE COMPANY, Defendant-Appellant, and Keith Rospond, Defendant.
• Court: Court of Appeal of Michigan — District of US

637 N.W.2d 232

247 Mich. App. 480

MICHIGAN MUTUAL INSURANCE COMPANY, as Subrogee of Spartan Asphalt Paving Company, and Spartan Asphalt Paving Company, Plaintiffs-Appellees, v. INDIANA INSURANCE COMPANY, Defendant-Appellant, and Keith Rospond, Defendant.

Docket No. 215570.

Court of Appeals of Michigan.

Submitted March 6, 2001, at Detroit.

Decided September 14, 2001, at 9:15 a.m.

Released for Publication December 12, 2001.

Harvey Kruse, P.C. (by James Sukkar and Christopher W. Ward), Troy, for the plaintiffs.

Cardelli Hebert, P.C. (by Deborah A. Hebert), Royal Oak, for the defendant.

Before MARKEY, P.J., and JANSEN and ZAHRA, JJ.

MARKEY, Presiding Judge.

Defendant Indiana Insurance Company¹ appeals by right the trial court's order of judgment entered after a jury trial in this action to enforce a settlement agreement and the order denying its motion for judgment notwithstanding the verdict (JNOV) or a new trial.

This case has a long history that began with a 1984 automobile accident that occurred in an area of road construction. The guardian of the victim of that accident subsequently brought suit against the Michigan Department of Transportation (MDOT) and its contractor on that construction job, Spartan Asphalt Paving. Both MDOT and Spartan settled their cases with the victim's guardian.

MDOT settled its case for $825,000. MDOT's insurance carrier, Indiana Insurance Company, paid its policy limit of $500,000, and MDOT paid the additional $325,000. MDOT then brought suit against Spartan for indemnity and contribution. The lower court in the indemnity case granted summary disposition in favor of MDOT. This Court affirmed that decision,² and our Supreme Court denied leave to appeal.³

After this Court affirmed the lower court's decision, Spartan and its insurance carrier, Michigan Mutual Insurance Company, brought this suit against defendant, claiming that the two insurance companies had a settlement agreement in the amount of $450,000 and that plaintiffs' payment should be limited to that amount instead of the full $825,000 plus interest. The agreement was based on telephone conversations between adjusters from both insurance companies. Those conversations took place after summary disposition had been granted to MDOT regarding indemnity, but before this Court heard that case on appeal. During the course of the adjusters' discussions, defendant's adjuster forgot about MDOT's payment over and above the $500,000 policy limit that defendant paid. After numerous conversations discussing possible settlement amounts, the adjusters agreed on $450,000. Defendant's adjuster recorded that agreement with this notation in his activity log: "6-5-95 Settled for $450."

Following this Court's decision in the indemnity suit, plaintiffs brought this action against defendant in an effort to recover amounts paid in excess of the $450,000 settlement amount. The parties moved for summary disposition before and after discovery, and all motions were denied. The parties' motions for a directed verdict also were denied. A jury found that the adjusters' conversations formed a contract, defendant breached that contract, and plaintiffs sustained damages in the amount of $720,960. Subsequently, defendant moved for JNOV or a new trial, and the circuit court denied that motion. Defendant now appeals.

Defendant argues that this case involves an agreement to settle; therefore, it must comply with MCR 2.507(H) to be enforceable. We agree. Interpretation of a court rule is subject to review de novo on appeal. St George Greek Orthodox Church of Southgate, Michigan v. Laupmanis Associates, PC, 204 Mich.App. 278, 282, 514 N.W.2d 516 (1994).

MCR 2.507(H) provides as follows:

An agreement or consent between the parties or their attorneys respecting the proceedings in an action, subsequently denied by either party, is not binding unless it was made in open court, or unless evidence of the agreement is in writing, subscribed by the party against whom the agreement is offered or by that party's attorney.

MCR 2.507(H) has been characterized as

"essentially a court rule version of a statute of frauds governing legal proceedings." 3 Martin, Dean & Webster, Michigan Court Rules Practice (3d ed), p 125. As noted by the commentators:" Legal proceedings are of sufficient importance to require that written proofs be furnished in support of a claim by one party that the other party has entered into certain agreements, made certain concessions, etc. with respect to those proceedings." Id. Thus, just as an oral agreement for the sale of real property, for example, is unenforceable under M.C.L. § 566.108; MSA 26.908 even though that agreement may meet the technical requirements of a contract, an oral settlement agreement in a lawsuit is also unenforceable under MCR 2.507(H) unless it is reduced to a signed writing or made in open court. [Brunet v. Decorative Engineering, Inc., 215 Mich.App. 430, 435-436, 546 N.W.2d 641 (1996).]

In addition to the court rule, case law holds that "[a]n agreement to settle a pending lawsuit is a contract and is to be governed by the legal principles applicable to the construction and interpretation of contracts." Walbridge Aldinger Co. v. Walcon Corp., 207 Mich.App. 566, 571, 525 N.W.2d 489 (1994). However, this Court will not enforce a settlement agreement that fulfills the requirements of contract principles if that agreement does not also satisfy the requirements of the court rule. Metropolitan Life Ins. Co. v. Goolsby, 165 Mich.App. 126, 128-129, 418 N.W.2d 700 (1987).

In Goolsby, supra at 128, 418 N.W.2d 700, this Court had "no difficulty accepting the trial court's factual conclusion that appellees made an offer which appellant ... authorized her attorney to accept and which was accepted by her attorney." This Court concluded, however, that despite the agreement, the court rule was controlling, and the agreement was unenforceable...