Shirley v. Pothast

• Citation: 508 N.W.2d 712
• Decision Date: 24 November 1993
• Docket Number: No. 92-1221,92-1221
• Parties: Jeffrey L. SHIRLEY, Kathy J. Shirley, and Kathy J. Shirley, As Natural Parent and Next Friend of Cari L. Shirley, Steffanie M. Shirley and Adam J. Shirley, Appellees, v. Kenneth H. POTHAST and Volvo/White Truck Corp., Defendants, Waterloo Chamber of Commerce/Convention Bureau and Aetna Casualty & Surety Company, Intervenors-Appellants.
• Court: United States State Supreme Court of Iowa

Page 712

508 N.W.2d 712

Jeffrey L. SHIRLEY, Kathy J. Shirley, and Kathy J. Shirley, As Natural Parent and Next Friend of Cari L. Shirley, Steffanie M. Shirley and Adam J. Shirley, Appellees, v. Kenneth H. POTHAST and Volvo/White Truck Corp., Defendants, Waterloo Chamber of Commerce/Convention Bureau and Aetna Casualty & Surety Company, Intervenors-Appellants.

No. 92-1221.

Supreme Court of Iowa.

Nov. 24, 1993.

Lorraine J. May of Finley, Alt, Smith, Scharnberg & May, P.C., Des Moines, for intervenors-appellants.

Max Kirk and David W. Stamp of Ball, Kirk, Holm & Nardini, P.C., and Curtis J. Klatt, Waterloo, for appellees Shirley.

Steven E. Ort of Bell, Hansen & Ort, P.C., New London, and Fred Haskins, Des Moines, for amicus curiae Iowa Ins. Institute.

Considered by HARRIS, P.J., and CARTER, LAVORATO, SNELL, and TERNUS, JJ.

SNELL, Justice.

This dispute concerns the indemnity rights of intervenors, Aetna Casualty & Surety Company and Waterloo Chamber of Commerce ("Aetna"), with respect to a judgment entered in favor of plaintiff, Jeff Shirley, an injured worker, on his third-party tort claim, against defendant, Kenneth Pothast ("Pothast"). Judgment was also entered in favor of plaintiffs, Kathy, Cari, Steffanie, and Adam Shirley, on their claims for lost spousal and parental consortium, against the same defendant. Aetna intervened in the Shirleys' action seeking indemnity from any recovery obtained by Jeff Shirley for workers' compensation benefits paid him by Aetna. Aetna appeals from the district court's judgment. We reverse and remand.

Three issues are raised on appeal. First, Aetna contends the district court lacked the subject matter jurisdiction to enter judgment pursuant to the terms of an offer by Pothast to confess judgment. Second, Aetna contends the district court improperly discharged its statutory lien on the condition that it be reimbursed for the amount of workers' compensation benefits paid up to the date of the district court's order. Third, Aetna contends the district court erred in its allocation of the judgment proceeds among the various plaintiffs.

I. Scope of Review.

Since this case involves a challenge to the trial court's subject matter jurisdiction, our review is at law. Tigges v. City of Ames, 356 N.W.2d 503, 512 (Iowa 1984). We are not bound by the trial court's conclusions of law or application of legal principles. Iowa Fuel & Minerals, Inc. v. Board of Regents, 471 N.W.2d 859, 862 (Iowa 1991).

II. Discussion of Facts.

On March 27, 1989, Pothast ran a stop sign and struck Jeff Shirley's vehicle causing him severe injury. The accident occurred while Shirley was in the course of his employment for the Waterloo Chamber of Commerce ("Waterloo Chamber"). Jeff Shirley is receiving workers' compensation benefits. The benefits are paid by Aetna, Waterloo Chamber's insurer. Jeff Shirley commenced a third-party tort action against Pothast. After Jeff Shirley commenced his cause of action, Kathy Shirley and the three Shirley children joined Jeff Shirley's lawsuit alleging claims for lost spousal and parental consortium. Later, Jeff Shirley amended his petition to allege a products liability action against Volvo/White Truck Corporation.

Having paid workers' compensation benefits to Jeff Shirley, Aetna filed a Notice of Lien pursuant to Iowa Code section 85.22(1) (1989).

Pothast and the Shirleys agreed on a settlement of their case for $515,000. Volvo was to contribute $15,000 to the total settlement. Pothast's insurer was to contribute the balance of $500,000. The parties structured the settlement to award Jeff Shirley $170,000 with Kathy Shirley and the children to receive the remaining $345,000. Aetna objected to the structure of the settlement noting that "[t]here seem[ed] to be a clear effort to simply avoid the workers' compensation lien to the detriment of the Employer and Insurance Carrier and in contravention of Iowa Code § 85.22."

The Shirleys then filed a Motion to Adjudicate Law Points and Discharge Lien with the district court. The motion contended Aetna was not entitled to "any payment greater than one hundred percent of the amount of lien paid to the date of disbursement of funds." The Shirleys sought an order discharging Aetna's lien on the condition Aetna be reimbursed for benefits paid to the date of the court order. They further prayed to be "entitled to the benefit of their settlement" with Pothast.

In its resistance to the Shirleys' motion, Aetna again objected to the structure of the settlement. Moreover, Aetna argued that by discharging the lien upon reimbursement of the benefits paid by them to date, Aetna would lose the "protection of that portion of the ... lien which is represented by future payments and future obligations." Aetna further challenged the subject matter jurisdiction of the district court to resolve the settlement issue.

Aetna notified the Shirleys of the industrial commissioner's willingness to mediate a settlement between the parties in an expedited manner. The Shirleys rejected this proposal, "believ[ing] that there is a way to resolve this matter yet through the District Court...."

Aetna filed an Original Notice and Petition with the industrial commissioner, formally submitting the settlement to the agency for its approval pursuant to Iowa Code section 85.22(3). The Shirleys' answer stated:

[T]he settlement offered by the third-party herein has now been withdrawn due to the continuing problems with the Section 85.22 lien. It is expected that the Claimant and the third party will proceed to judgment rather than settle the case at this time.

The Shirleys also challenged the subject matter jurisdiction of the industrial commissioner to resolve the controversy. After Pothast withdrew his settlement offer, he tendered to the Shirleys an Offer to Confess Judgment in the amount of $500,000 pursuant to Iowa Code chapter 677 (1991). Pothast offered:

to allow judgment [to] be taken against him and in favor of Plaintiffs ... in the amount of Five Hundred Thousand ($500,000.00) Dollars ... provided the following conditions are met:

1. The Plaintiffs, and each of them, have judgments entered in their respective favors setting forth which portion of the offered judgment each of the Plaintiffs is entitled to receive, all after such notice and hearing as the Court may prescribe and require in this matter.

2. Each of the Plaintiffs ... agree to satisfy his and her respective judgments upon payment by this Defendant of the amount of judgment rendered by the Court.

3. Plaintiff, Jeffrey L. Shirley, shall be responsible for payment of all liens arising out of his receipt of worker's compensation benefits out of any judgment rendered in his favor by the Court.

4. Defendant, Kenneth H. Pothast, shall have no liability for payment of any judgments rendered by the court in excess of the $500,000.00 amount offered herein.

Aetna then intervened in the Shirleys' third-party action. Aetna contended the Offer to Confess Judgment tendered by Pothast was tantamount to a settlement and if accepted by the Shirleys required the industrial commissioner's approval to be effective.

The district court in its Findings of Fact, Conclusions of Law, and Judgment on the Shirleys' Motion to Adjudicate Law Points and Discharge Lien, held it possessed subject matter jurisdiction over the proceedings. Moreover, the district court ordered that upon "satisfaction of the amounts thus paid" by Aetna in workers' compensation benefits, Aetna's lien would be discharged. The district court entered judgment in favor of the Shirleys in the amount of $515,000. Jeff Shirley would receive $345,000, Kathy Shirley, $125,000, and each of the three Shirley children, $15,000.

III. Subject Matter Jurisdiction of the District Court.

A. General Principles.

"Jurisdiction of the subject matter is the power to hear and determine cases of the general class to which the proceedings belong." Christensen v. Board of Supervisors, 251 Iowa 1259, 1265, 105 N.W.2d 102, 106 (1960) (quoting Harvey v. Prall, 250 Iowa 1111, 1116, 97 N.W.2d 306, 309 (1959)). "Jurisdiction is a statutory matter and cannot be conferred by consent, waiver, or estoppel." State v. Ryan, 351 N.W.2d 186, 187 (Iowa 1984). Challenges to the subject matter jurisdiction of the district court can be raised at any time during the course of the proceedings. Id. at 187.

Considering the effect of special jurisdiction, we said in Groves v. Donohue:

[w]here a special statute has placed a particular class of cases in the jurisdiction of the industrial commissioner unless certain conditions precedent are alleged, the district court does not have jurisdiction of the subject matter....

Groves v. Donohue, 254 Iowa 412, 422, 118 N.W.2d 65, 70 (1962). See also Jansen v. Harmon, 164 N.W.2d 323, 327 (Iowa 1969). By Chapter 85 the legislature removed from the district court's general, original jurisdiction, the power to hear claims involving the "rights and remedies of an injured employee against an employer for industrial injuries" and placed them within the exclusive jurisdictional purview of the industrial commissioner. Jansen, 164 N.W.2d at 326.

B. Settlements and Offers to Confess Judgment.

"Settlement agreements are by their very nature the voluntary resolution of uncertain claims and defenses." Wright v. Scott, 410 N.W.2d 247, 249 (Iowa 1987). Parties have incentive to settle cases in which they are unsure of the outcome of the litigation. Id. "The typical settlement resolves uncertain claims and defenses, and the settlement obviates the necessity of further legal proceedings between the settling parties." Id.

Settlement agreements are essentially contracts. Waechter v. Aluminum Co. of Am., 454 N.W.2d 565, 568 (Iowa 1990). We look to the legal principles applicable to contracts when interpreting settlement agreements. Id.

Offers to confess judgment are often equated, without much explanation, to offers of settlement. See Moore v....