Perry v. Hartford Acc. and Indem. Co.

• Court: Supreme Judicial Court of Maine (US)
• Writing for the Court: Before McKUSICK; McKUSICK
• Citation: 481 A.2d 133
• Decision Date: 13 August 1984
• Parties: Robert PERRY v. HARTFORD ACCIDENT AND INDEMNITY CO.

Page 133

481 A.2d 133 Robert PERRY
v.
HARTFORD ACCIDENT AND INDEMNITY CO. Supreme Judicial Court of Maine. Argued May 1, 1984.
Decided Aug. 13, 1984.

Page 134

Reagan & Adams, P.A., David P. Cullenberg (orally), Kennebunk, for plaintiff.

Norman & Hanson, John H. King, Jr. (orally) Stephen Hessert, Portland, for defendant.

Before McKUSICK, C.J., and NICHOLS, ROBERTS, WATHEN, GLASSMAN and SCOLNIK, JJ.

McKUSICK, Chief Justice.

In his action in Superior Court (Cumberland County) against his employer's compensation carrier, plaintiff Robert Perry sought a declaration that the lien provided to his employer by section 68 of the Workers' Compensation Act ¹ does not extend to the amounts plaintiff had recovered from a third party tortfeasor for pain and suffering and other damages not compensable under the Act. The Superior Court granted summary judgment in favor of defendant Hartford Accident and Indemnity Company (Hartford) on the basis of its finding that plaintiff's claim did not present the "real controversy" that is necessary for adjudication under the Declaratory Judgments Act. On appeal, we hold that the Superior Court erred in not reaching the merits of the question raised by plaintiff's complaint. We nevertheless order summary judgment in favor of defendant Hartford because, as a matter of law, the section 68 lien does extend to the entire amount that plaintiff recovered from the

Page 135

third party tortfeasor for bodily injury, including that part recovered for pain and suffering and other damages not compensable under the Workers' Compensation Act.

On December 11, 1980, plaintiff sustained a back injury as a result of an automobile accident caused by the negligence of another driver. At the time of the accident plaintiff was an employee of NASCO, Inc., and was acting within the scope of his employment. NASCO was covered by a workers' compensation insurance policy issued by Hartford.

In his complaint and his subsequently filed affidavit, plaintiff Perry alleged that on February 20, 1981, he underwent back surgery for injuries sustained in the automobile accident. He was readmitted to the hospital on March 4, 1981, with massive gastro-intestinal bleeding, caused by medications administered for the back injury, and subsequently underwent a near total gastrectomy. As the result of his injuries Perry was totally disabled from December 11, 1980, until July 6, 1981. During that period Hartford paid Perry benefits of $284.38 per week and also paid medical bills on Perry's behalf totalling $43,176.85. On July 6, 1981, Perry agreed to a discontinuance of benefits. Then, on July 8, 1981, he entered into a settlement agreement with the driver of the other car involved in the accident that awarded plaintiff $100,000, apparently the limit of the other driver's insurance coverage. Of the $100,000 settlement, $51,555.64 was paid directly to Hartford in satisfaction of its section 68 lien for benefits and medical expenses previously paid to Perry or on his behalf, and $48,444.36 was paid to Perry himself.

Plaintiff's affidavit averred that following the discontinuation of benefits and the settlement of his third party claim, he continued to suffer "dumping syndrome" ² and reactive hypoglycemia, a result of the gastrectomy. However, he returned to work and continued working until June 25, 1982, when he was disabled for a period of six weeks by hypoglycemia secondary to the dumping syndrome. The affidavit further stated that since returning to work following the second period of disability he has continued to suffer from intestinal problems culminating in additional surgery in 1983. Despite plaintiff's petitions for payment of further compensation and medical expenses and for recovery for permanent impairment, Hartford made no payments after July 6, 1981, claiming a credit against plaintiff's third party recovery not already paid to it, in the amount of $48,444.36. Plaintiff claimed that as of August 1, 1983, the date of his affidavit, he was owed benefits under the Workers' Compensation Act in excess of $20,000.

Following commencement of this action, plaintiff filed a motion for partial summary judgment on his claim that a section 68 lien does not extend to portions of a third party recovery allocable to pain and suffering and other damages not compensable under the Workers' Compensation Act. Defendant filed a motion to dismiss based on lack of subject matter jurisdiction and failure to state a claim upon which relief can be granted. Finding that plaintiff's claim failed to present a "real controversy," the Superior Court granted defendant's motion to dismiss for failure to state a claim upon which relief could be granted, treating the motion as one for summary judgment.

I.

By statute, 14 M.R.S.A. § 5953 (1980), and rule, M.R.Civ.P. 57, the Superior Court is authorized to grant declaratory relief in appropriate circumstances. See Randlett v. Randlett, 401 A.2d 1008, 1010 (Me.1979). The Superior Court's exercise of discretion in granting or denying that relief is accorded deference on appeal. See Eastern Fine Paper, Inc. v. Garriga Trading Co., 457 A.2d 1111, 1113 n. 2 (Me.1983); Cape Elizabeth School Board v. Cape

Page 136

Elizabeth Teachers Association, 435 A.2d 1381, 1383 (Me.1981); Liberty Mutual Insurance Co. v. Weeks, 404 A.2d 1006, 1008 n. 4 (Me.1979). However, the degree of deference is less than that accorded many other rulings made by a court of first instance, such as findings of historical fact based on testimony or discretionary rulings on the admissibility of evidence. Eastern Fine Paper, Inc. v. Garriga Trading Co., 457 A.2d at 1113 n. 2. The exercise of discretion must be "based on good reason." Id. at 1113. See Hanes Corp. v. Millard, 531 F.2d 585, 591 (D.C.Cir.1976). Furthermore, in exercising his discretion the trial judge must take cognizance that

[a]s a remedial statute the Declaratory Judgments Act is entitled to a liberal construction to effectuate its salutary purpose. This in turn will occasion liberality in the exercise of the court's discretion.

King Resources Co. v. Environmental Improvement Commission, 270 A.2d 863, 867 (Me.1970).

The initial inquiry facing a court confronted by an action seeking declaratory relief is whether the controversy between the parties is sufficiently "real" to avoid the constitutional prohibition against rendering advisory opinions except as required by Me. Const. art. VI, § 3. Liberty Mutual Insurance Co. v. Weeks, 404 A.2d at 1008 n. 4; Shapiro Brothers Shoe Co. v. Lewiston-Auburn Shoeworkers Protective Association, 320 A.2d 247, 251 n. 7 (Me.1974). A real controversy is present where the plaintiff

set[s] forth a claim of right or obligation buttressed by a sufficiently substantial interest to warrant judicial protection and assert[s] it against a defendant having an adverse interest in contesting it.

Allstate Insurance Co. v. Lyons, 400 A.2d 349, 351 (Me.1979). See King Resources Co. v. Environmental Improvement Commission, 270 A.2d at 867; Maine Sugar Industries, Inc. v. Maine Industrial Building Authority, 264 A.2d 1, 4-5 (Me.1970). In determining whether to entertain an action for declaratory relief, the trial court additionally should consider whether the adjudication will serve some useful purpose, Eastern Fine Paper, Inc. v. Garriga Trading Co., 457 A.2d at 1113; Cape Elizabeth School Board v. Cape Elizabeth Teachers Association, 435 A.2d at 1383; or whether the controversy presents an issue of...