Polymer Fabricating, Inc. v. Tewca

• Decision Date: 24 November 1998
• Docket Number: No. 89,585.,89,585.
• Citation: 69 OBJ 4068,980 P.2d 109,1998 OK 113
• Parties: POLYMER FABRICATING, INC., an Oklahoma corporation, Plaintiff/Appellee, v. THE EMPLOYERS WORKERS' COMPENSATION ASSOCIATION, an Unincorporated Group Self-Insurance Association, Defendant/Appellant.
• Court: Oklahoma Supreme Court

980 P.2d 109

1998 OK 113

POLYMER FABRICATING, INC., an Oklahoma corporation, Plaintiff/Appellee, v. THE EMPLOYERS WORKERS' COMPENSATION ASSOCIATION, an Unincorporated Group Self-Insurance Association, Defendant/Appellant.

No. 89,585.

Supreme Court of Oklahoma.

November 24, 1998.

Rehearing Denied July 8, 1999.

On Appeal from the District Court, Oklahoma County; James B. Blevins, Trial Judge.

¶ 0 A former member of a workers' compensation group self-insurance association pressed for a judicial declaration that its membership agreement was unenforceable as void. The association counterclaimed for damages from breach of contract and for the balance due on "an open account." The trial court gave summary judgment to the plaintiff. The association appealed. The cause stands retained for this court's consideration and disposition.

THE TRIAL COURT'S SUMMARY JUDGMENT IS REVERSED AND THE CAUSE REMANDED FOR FURTHER PROCEEDINGS TO BE CONSISTENT WITH TODAY'S PRONOUNCEMENT

Richard A. Shallcross, Brewster, Shallcross & De Angelis, Tulsa, for Appellant

Bradley Brickell, Ted Ross, Mahaffey & Gore, Oklahoma City, for Appellee

OPALA, J.

¶ 1 The dispositive issue tendered is whether summary judgment for the plaintiff was erroneously entered. That judgment rests on the trial court's view that the agreement in contest is an unregistered security. We answer in the affirmative.

I THE ANATOMY OF LITIGATION

¶ 2 The appellant, The Employers Workers' Compensation Association [TEWCA], is an unincorporated self-insurance association organized under §§ 61 and 149.1 of the Oklahoma Workers' Compensation Act,¹ and in accordance with Rule 3 of the Rules of the Administrator of the Oklahoma Workers' Compensation Court [WCC administrator rules or the Rules].² TEWCA, formed in 1986, is comprised of employers who have united to pool their workers' compensation liability. The appellee, Polymer Fabricating, Inc. [Polymer], an Oklahoma corporation, was a member of TEWCA beginning 3 April 1987 and ending 9 April 1993. As a condition of membership in TEWCA and as required by Rule 3 § 13 of the Rules³, Polymer signed an "Application and Agreement for Membership in TEWCA" [the Agreement]. Paragraph 3 of the Agreement states that:

Each and every Member jointly and severally agrees to assume, pay and discharge all liabilities under the Act of any and all Members of the Association, except for those liabilities that are specifically excluded by this Agreement, and each Member agrees to pay any assessments as may be required by the Board.

¶ 3 The totality of premiums collected from TEWCA members was less than the amount of liabilities for the period from 1989 until Polymer's membership ended in 1993. In 1992, 1994 and 1995, TEWCA made deficit assessments for the time running from 1989 through 1994. Polymer's pro rata share of these assessments is alleged to be $35,943.07.

¶ 4 Polymer, who declined to pay any of the deficit assessments, brought this action for declaratory relief. It urges the Agreement is unenforceable as void. According to Polymer, (a) TEWCA had failed to follow the TEWCA Bylaws and to maintain a "common membership" in accordance with the Rules and (b) the Agreement constitutes an unregistered security.

¶ 5 TEWCA, which urges the deficit assessments are collectible under paragraph 3 of the Agreement, counterclaimed (a) for damages from the contract's breach by nonpayment, (b) for the balance due on "an open account" and in the alternative (c) for damages arising from breach of a quasicontractual obligation. Both parties moved for summary judgment.

¶ 6 The trial court granted Polymer's and overruled TEWCA's quest for summary relief. We retain this appeal for disposition and now reverse the trial court's judgment.

II STANDARD OF REVIEW FOR SUMMARY ADJUDICATION PROCESS

¶ 7 The focus in summary process is not on the facts which might be proven at trial (i.e., the legal sufficiency of evidence that could be adduced), but rather on whether the tendered material in the record reveals only undisputed material facts supporting but a single inference that favors the movant's quest for relief.⁴ Summary process—a special pretrial procedural track to be conducted with the aid of acceptable probative substitutes⁵—is a search for undisputed material facts that, sans forensic combat, may be applied in the judicial decision-making process. It is a method for identifying and isolating non-triable fact issues, not a device for defeating the opponent's right to trial by jury. Only those evidentiary materials which eliminate from trial some or all fact issues may afford legitimate support for nisi prius resort to summary process.

¶ 8 The issues stand before us for de novo examination.⁶ In reviewing any order of summary adjudication, the court may consider, in addition to the pleadings, such items as depositions, affidavits, admissions, answers to interrogatories, and other evidentiary materials submitted by the parties, which are in an acceptable form. All facts and inferences must be viewed in the light most favorable to the non-movant. Only if the court should conclude that there is no substantial controversy over any material facts is the movant entitled to summary judgment to be rested on the applicable law.⁷

III POLYMER'S ARGUMENTS

¶ 9 Polymer argues that (a) the terms of 85 O.S.Supp.1996 § 149.1(C)⁸ were not in effect when this cause of action commenced, (b) legislation is presumed to apply prospectively only⁹ and (c) the Legislature intended subsection C to apply only to associations that were formed (and to members of existing associations who joined) after the amendment's effective date. The amendment is unconstitutional, Polymer argues, if it may be applied retroactively to agreements like that entered between Polymer and TEWCA.

¶ 10 Polymer also claims the Agreement is void because TEWCA failed to notify it of annual membership meetings and of Board elections. Because TEWCA breached the Agreement, Polymer urges that it should be able to sue for its losses ex contractu.

¶ 11 Polymer suggests that TEWCA members impermissibly engaged in dissimilar business activities which range from healthcare management to car dealerships. The divergent enterprises did not represent insurance risks similar to those of Polymer's business of manufacturing cooling tower components. It is argued that (a) the statutory phrase "common purpose" requires that employers in a self-insured association all be engaged in business activities with similar coverage risks and (b) the TEWCA-formed unit of diverse enterprises does not qualify as a statutorily-sanctioned risk grouping.

IV TEWCA'S ARGUMENTS

¶ 12 TEWCA urges that the 1996 amendment¹⁰ did not substantively change pre-existing law but rather clarified it. According to TEWCA, subsection C explains that a membership in self-insurance associations is not and never has been deemed a "security" subject to registration under Oklahoma Securities Act.¹¹

¶ 13 TEWCA admits that during Polymer's membership period the Board did not regularly conduct formal meetings. Its failure to have membership meetings, TEWCA maintains, is merely a technical departure but not a material breach of its contract with Polymer.

¶ 14 According to TEWCA, its membership grouping, although diverse, did indeed have a "recognizable common purpose" for associating—one to lower the individual member's workers' compensation coverage expense through a group self-insurance association.

V THE PROVISIONS OF THE 1996 AMENDMENT ARE RETROACTIVE IN FORCE

¶ 15 Subsection C,¹² which was added to § 149.1 of the Workers' Compensation Act¹³ in 1996, provides that group self-insurers are not subject to the Oklahoma Securities Act.¹⁴ Both Self Insurers' Management Group v. YWCA of Oklahoma City,¹⁵ and its companion case, Oklahoma Employers Safety Group, S.I.A. v. Colbert Nursing Home, Inc.,¹⁶ teach that because the original text of § 149.1 was ambiguous, its 1996 amendment constitutes a clarifying enactment which has retrospective effect. In these cases the court reasoned that (a) by enacting § 149.1 the Legislature intended to authorize security for workers' compensation benefits to be provided for employees who are engaged by members of group self-insurance associations and (b) that this declared public policy underwent clarification in subsection C (the added subsection that excludes the authorized associations from the purview of the Oklahoma Securities Act).¹⁷ Where an earlier legislative enactment is unclear in some respect and a later enactment attempts to remove the ambiguity, the amendatory statute constitutes a clarifying enactment¹⁸ that is to be given retrospective force.¹⁹

¶ 16 Following, as we must, the teachings of Self Insurers'²⁰ and of Oklahoma Employers,²¹ we hold today that the Oklahoma Securities Act²² does not govern the Agreement between TEWCA and Polymer. The Legislature's after-enacted subsection C takes group self-insurance contracts out of the purview of that act.

VI BY FAILING TO FOLLOW ITS BY-LAWS, TEWCA DID NOT MATERIALLY BREACH THE AGREEMENT

¶ 17 TEWCA By-laws stipulate that TEWCA will hold annual membership meetings at which, on any matter presented, each member is entitled to one vote.²³ During the annual meeting, the members are to elect the Members' Supervisory Board [the Board].²⁴ The Board supervises the business and manages the property of TEWCA. During Polymer's six years of membership, TEWCA sent it notice of only one "special meeting". There is no proof in the record that TEWCA ever notified Polymer of any annual meetings.

¶ 18 The authorities invoked by Polymer to escape liability are factually distinguishable.²⁵ In the cited cases the plaintiff had materially breached the agreement upon which it sued. According to some of these decisions,²⁶ a breach may be the basis for a contract's rescission when it (a) defeats the object of the contract or (b) concerns a matter of such importance that the contract...