Royal Ins. Co. v. Roadarmel

• Decision Date: 28 September 2000
• Docket Number: No. 99-552.,99-552.
• Citation: 301 Mont. 508,11 P.3d 105,2000 MT 259
• Parties: ROYAL INSURANCE COMPANY, Petitioner and Respondent, v. Earl W. ROADARMEL and Donald E. White, Respondents and Appellants.
• Court: Montana Supreme Court

11 P.3d 105

2000 MT 259

301 Mont. 508

ROYAL INSURANCE COMPANY, Petitioner and Respondent, v. Earl W. ROADARMEL and Donald E. White, Respondents and Appellants.

No. 99-552.

Supreme Court of Montana.

Submitted on Briefs March 16, 2000.

Decided September 28, 2000.

Karl P. Seel, Bozeman, Montana (White); Earl W. Roadarmel, Townsend, Montana (pro se), For Appellant.

James G. Edmiston, Edmiston & Schernerhorn, Billings, Montana, For Respondent.

Justice WILLIAM E. HUNT, Sr. delivered the Opinion of the Court.

¶ 1 The Royal Insurance Company ("Royal") initiated this subrogation action against Earl W. Roadarmel ("Roadarmel"), who had been injured in a workers' compensation accident in 1986, and the attorney who prosecuted his claim, Donald E. White ("White"). The Workers' Compensation Court, State of Montana ("the WCC"), granted summary judgment to Royal under the subrogation statute of the Workers' Compensation Act, § 39-71-414, MCA (1985), finding Roadarmel and White (collectively "Appellants") personally liable for Royal's share of third-party proceeds received as a result of litigation against two third parties, the Exxon Corporation and the Great Western Chemical Company. Roadarmel and White appeal the WCC's grant of summary judgment to Royal. We reverse and remand.

¶ 2 Appellants contend that the WCC erred in granting summary judgment to Royal. They raise two issues in that regard:

¶ 3 I. Whether the WCC erred in concluding that Royal's subrogation action against Roadarmel is not barred by the two-year statute of limitations of § 27-2-211(1)(c), MCA, governing actions based upon a liability created by statute.

¶ 4 II. Whether the WCC erred in concluding that the action by Royal against the attorney White is not barred by the three-year statute of limitations of § 72-34-511(1)(a), MCA, governing actions based upon an alleged breach of trust.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 5 Roadarmel suffered an industrial injury stemming from chemical exposure in September of 1986 while working as a heavy equipment operator on a highway project in Butte, Montana. Roadarmel filed a workers' compensation claim against his employer, Acme Concrete, which was defended by its insurance carrier, Royal. White represented Roadarmel and the case was tried before the WCC, resulting in a judgment for Roadarmel. The judgment was upheld by this Court in Roadarmel v. Acme Concrete Co. (1989), 237 Mont. 163, 772 P.2d 1259.

¶ 6 Roadarmel, represented by White, also filed a third-party action against the Exxon Corporation and the Great Western Chemical Company, alleging strict liability in tort for failure to warn of possible effects of the chemical agent which caused Roadarmel's injuries. Roadarmel, through White, provided notice to Royal, as required by the subrogation standard of § 39-71-414, MCA (1985), that a third-party action was being commenced. Pursuant to the subrogation statute, Roadarmel requested that Royal pay a portion of the costs of the third-party action. Royal agreed to participate in the costs rather than waive 50% of its subrogation rights under § 39-71-414, MCA (1985), and tendered a check for $5,000 towards the costs of the third-party action.

¶ 7 On March 10, 1992, at the conclusion of the jury trial in federal district court, White sent notice to Royal advising it of Roadarmel's successful third-party action and of the fact that the third parties had filed an appeal with the Ninth Circuit Court of Appeals. The Ninth Circuit subsequently upheld the verdict. On February 18, 1994, White sent another letter to Royal advising it of the resolution of the third-party appeal. This letter attached copies of the check received from Great Western Chemical and the jury verdict forms; provided a break-down of the actual costs of the third-party action; and requested that Royal determine its subrogation interest in a portion of the third-party proceeds.

¶ 8 Royal then independently computed the amount it contended it was owed, and by letters dated April 7 and October 3 of 1994, advised Roadarmel that it was going to file an action to determine its subrogation interest in the proceeds from the third-party action. White, acting on behalf of Roadarmel, did not respond to either of Royal's aforementioned letters. However, after receiving Roadarmel's February 18, 1994 notice of the successful third-party action, a period of 3½ years passed before Royal filed, on October 29, 1997, a petition for hearing to determine its subrogation rights in the third-party proceeds.

¶ 9 Through discovery in the subrogation action, Royal learned that White had disbursed the third-party proceeds to Roadarmel on February 18, 1994, the same date that White had requested a computation of Royal's subrogation interest. White, upon disbursing the money, allegedly instructed Roadarmel to hold the funds pending a subrogation determination. Royal amended its petition, on November 17, 1997, to include a separate count against White for an alleged breach of the duty of trust owed Royal as a third-party beneficiary of the trust imposed on the third-party proceeds.

¶ 10 The WCC decided this case on cross-motions for summary judgment. The court determined that a "subrogation agreement" had been formed in the exchange of letters between White and Royal's attorney, James G. Edmiston (Edmiston), and that the statute of limitations on the contract had not expired. Therefore, the WCC issued judgment in the amount of $63,864.79 jointly and severally against Roadarmel and White for breaching the subrogation contract and failing to honor Royal's "first lien" on the judgment.

DISCUSSION

¶ 11 This Court's standard of review of a grant or denial of summary judgment by the WCC is the same as that used by the court in ruling upon the motion for summary judgment. Heath v. Montana Mun. Ins. Authority, 1998 MT 111, ¶ 9, 288 Mont. 463, ¶ 19, 959 P.2d 480, ¶ 9 (citing Heisler v. Hines Motor Co. (1997), 282 Mont. 270, 274, 937 P.2d 45, 47). That is, we review whether there is an absence of genuine issues of material fact and whether the moving party is entitled to judgment as a matter of law. Heath, ¶ 9.

¶ 12 Our review of the WCC's conclusions of law is plenary; we simply determine whether the court's legal conclusions are correct. Heath, ¶ 9 (citing Loss v. Lumbermens Mut. Cas. Co. (1997), 282 Mont. 80, 81, 936 P.2d 313, 314). Here, since the material facts are undisputed, only questions of law remain. Thus, we must determine whether the WCC correctly concluded, as a matter of law, that Royal's claims against Roadarmel and White are not barred by the relevant statutes of limitations. We hold that Royal's claims are time-barred and, therefore, we direct entry of summary judgment in favor of Roadarmel and White.

I.

¶ 13 Did the WCC err in concluding that Royal's subrogation action against Roadarmel is not barred by the two-year statute of limitations of § 27-2-211(1)(c), MCA, governing actions based upon a liability created by statute?

¶ 14 Roadarmel and White contend that Royal's action to collect a portion of the third-party proceeds under the subrogation statute of the Workers' Compensation Act, § 39-71-414(1), MCA (1985), is time-barred by the two-year statute of limitations which governs actions based upon "a liability created by statute," § 27-2-211(1)(c), MCA. The basis for the position of Appellants is that the subrogation right of Royal constitutes a "statutory liability" which is entirely dependent upon § 39-71-414, MCA (1985). There is no common law right involved here, asserts Appellants, and without the statute there would be no liability as to the third party proceeds received by Roadarmel. Therefore, they argue that the two-year statute of limitations of § 27-2-211(1)(c), MCA, governs Royal's claim for reimbursement against Roadarmel. We agree with the position of Appellants.

¶ 15 Section 27-2-211, MCA, provides in pertinent part that "[w]ithin 2 years is the period prescribed for the commencement of an action upon ... a liability created by statute other than ... a penalty or forfeiture; or ... a statutory debt created by the payment of public assistance." Section 27-2-211(1)(c)(i)-(ii), MCA. It is not contended here that Royal's entitlement to a portion of the third-party proceeds pursuant to § 39-71-414(1), MCA (1985), is in the nature of a "penalty or forfeiture" or a "statutory debt created by the payment of public assistance." Thus, the question becomes whether Roadarmel's obligation to Royal amounts to a "liability created by statute" within the meaning of § 27-2-211(1)(c), MCA.

¶ 16 To begin with, there is no doubt that the insurer's "right of subrogation" provided for in § 39-71-414, MCA (1985), creates a statutory liability as to any recovery by the injured employee against a third party:

If a [third-party] action is prosecuted [by the injured employee] as provided for in XX-XX-XXX [liability of third party other than employer or fellow employee] or XX-XX-XXX [liability of fellow employee for intentional and malicious acts or omissions] and except as otherwise provided in this section, the insurer is entitled to subrogation for all compensation and benefits paid or to be paid under the Workers' Compensation Act. The insurer's right of subrogation is a first lien on the claim, judgment, or recovery. [Emphasis added.]

Section 39-71-414(1), MCA (1985).

¶ 17 However, that does not end our inquiry. As Appellants correctly contend, the phrase "liability created by statute" has a settled meaning in the law of Montana as well as other states. This Court has construed the phrase to mean "`a liability which would not exist but for the statute ....'" Abell v. Bishop (1930), 86 Mont. 478, 486, 284 P. 525, 528 (quoting 37 C.J. Limitations of Actions § 123). Put differently, the test is whether liability would exist absent the statute in question. State ex rel. Fallon County v. District Court (1972), 161 Mont. 79, 81, 505 P.2d 120, 121....