Modjeski v. Federal Bakery of Winona, Inc.

• Citation: 307 Minn. 432,240 N.W.2d 542
• Decision Date: 19 March 1976
• Docket Number: No. 45562,45562
• Parties: Lewyelln MODJESKI, Widow of George Modjeski, Deceased Employee, Relator, v. FEDERAL BAKERY OF WINONA, INC., et al., Respondents.
• Court: Minnesota Supreme Court

Page 542

240 N.W.2d 542

307 Minn. 432

Lewyelln MODJESKI, Widow of George Modjeski, Deceased Employee, Relator, v. FEDERAL BAKERY OF WINONA, INC., et al., Respondents.

No. 45562.

Supreme Court of Minnesota.

March 19, 1976.

Syllabus by the Court

1. Where the employer is not a party to the settlement of a wrongful death action brought on behalf of deceased employee's next of kin against a third party, attempt by deceased employee's trustee, by terms of the settlement to preclude the employer from receiving credit against workers' compensation dependency benefits for the sum received by the dependents from such settlement, as provided by Minn.St.1967, § 176.061, subd. 5, is ineffective despite the fact that the statutory limit on the wrongful death action was $35,000 and the statutory limit on dependency benefits was $25,000 and the settlement purported to settle only the $10,000 excess of the wrongful death claim over the compensation claim.

2. Laches is a defense to an employer's claim for credit under Minn.St.1967, § 176.061, subd. 5.

Robins, Davis & Lyons and Arnold M. Bellis and James F. Dunn, St. Paul, for relator.

Mahoney, Dougherty & Mahoney, Kenneth P. Gleason and Richard P. Mahoney, Minneapolis, for respondent.

Heard before ROGOSHESKE, YETKA and AMDAHL, JJ., and considered and decided by the court en banc.

DOUGLAS K. AMDAHL, Justice. ^*

Writ of certiorari to review a decision of the Workers' Compensation Board granting credit to an employer for sums received by an employee's widow from settlement of a wrongful death action.

On August 12, 1968, while in the course of his employment with Federal Bakery of Winona, Inc. (employer), George Modjeski (decedent) was fatally injured as the result of an elevator malfunction. Employers Mutual Liability Company of Wisconsin (insurer) was then employer's liability and compensation insurer.

On October 3, 1968, decedent's widow, Lewyelln, was awarded workers' compensation benefits, payable by the insurer, and the latter commenced payment of weekly benefits.

The widow was appointed trustee for the heirs of George Modjeski, and on March 10, 1969, commenced a wrongful death action against the insurer and Atwell, Vogel & Sterling, Inc. (AVS). The latter had been employed by the insurer to make inspections of the elevator and had made inspections prior to Mr. Modjeski's death. By order dated October 17, 1969, a motion of the insurer for summary judgment as to it was granted.

The trustee and AVS settled and compromised the action for the sum of $9,300, and the trustee executed a release. The release recognized that the maximum amount payable under the workers' compensation dependency benefit award was $25,000 and that the maximum wrongful death recovery was $35,000 and stated that the parties settled and compromised only the $10,000 of the wrongful death claim which was in excess of the workers' compensation liability limit.

Although neither the insurer nor the employer was a party to the release, the trustee-widow and AVS attempted to affect the right of the employer and insurer to the credit provided by Minn.St.1967, § 176.061, subd. 5. ¹ The intent of the parties to so limit the effect of the settlement is well stated in the following paragraph from the release:

'Both parties recognize and agree that the Modjeski dependents further reserve all rights they have or may have by reason of the Workmen's Compensation Laws of the State of Minnesota. It is expressly understood and agreed by and between the parties hereto that the plaintiff herein shall not be required to give credit to the Employers of Wausau or Federal Baking Company because the consideration paid herein is not intended to affect their rights in any manner and is intended only as a payment towards the rights accruing to the plaintiff over and above the workmen's compensation law and does not represent reimbursement of any amounts received by her under the workmen's compensation law.'

On April 3, 1970, the court approved the settlement and ordered a distribution of its proceeds whereby $5,401.23 was paid to the widow.

The employer did not choose to exercise a subrogation claim against AVS but on November 28, 1973, filed a petition with the Workers' Compensation Board for credit against future compensation payments in the sum received by the widow from the settlement with AVS. The Workers' Compensation Board affirmed the findings and determination of the compensation judge granting the petition, and the widow sought review here.

The issue is: Where neither the employer nor its insurer is a party to a settlement by and between a deceased employee's wrongful-death-action trustee and a third party of what is purported to be only a claim for an amount which is in excess of maximum workers' compensation benefits, is the employer precluded from exercising its right under Minn.St.1967, § 176.061, subd. 5, to 'deduct from the compensation payable by (it) the amount actually received by' the employee's dependents?

1. It is clear that funds recovered by way of settlement or trial through a wrongful death action brought in behalf of an employee's dependents were not excluded from the operation of Minn.St.1967, § 176.061, subd. 5. The first sentence of the subdivision provided:

'Where an injury Or death for which compensation is payable is caused under circumstances which created a legal liability for damages on the part of a party other than the employer, * * * legal proceedings may be taken by the employee Or his dependents against the other party to recover damages, notwithstanding the payment by the employer or his liability to pay compensation.' (Italics supplied.)

The second sentence of subd. 5 is the basis for the employer's claim for credit:

'* * * If the action against such other party is brought by the injured employee or his dependents and a judgment is obtained and paid and ² settlement is made with the other party, the employer may deduct from the compensation payable by him the amount actually received by the employee or dependents after deducting costs, reasonable attorney's fees, and reasonable expenses incurred by the employee or dependents in making collections or enforcing liability.'

Minn.St.1967, § 176.061, subd. 5, as applicable here, is 'clear and free from all ambiguity,' and the court may not disregard its language. Minn.St. 645.16.

The right of the employee or his dependents to settle a claim against a third party without affecting the subrogation right of the employer is well established. In Liberty Mutual Ins. Co. v. Nutting Truck & Caster Co., 295 Minn. 211, 216, 203 N.W.2d 542, 545 (1973), this court stated:

'In addition, when an employee has received workmen's compensation and then commences an action against a third party, the employee has a right to dispose of his claim for bodily injuries against the third party by excluding from the settlement any amounts due his employer and insurer by way of subrogation. The employee can make this type of separate settlement, but such a settlement does not affect the rights of the employer or the workmen's compensation carrier to continue its statutory subrogation action against the third-party tortfeasor for the amount the employer or insurance carrier has paid the employee under the compensation act.'

The court's primary...