Shirley v. Russell, 94-3280

• Decision Date: 07 November 1995
• Docket Number: No. 94-3280,94-3280
• Citation: 69 F.3d 839
• Parties: Margaret SHIRLEY, individually and as copersonal representative of the estate of Loren M. Shirley, deceased, and C. Thomas Wagner, as copersonal representative of the estate of Loren M. Shirley, deceased, Plaintiffs-Appellees, v. Gerald R. RUSSELL and Elmer Buchta Trucking, Incorporated, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 839

69 F.3d 839

Margaret SHIRLEY, individually and as copersonal representative of the estate of Loren M. Shirley, deceased and C. Thomas Wagner, as copersonal representative of the estate of Loren M. Shirley, deceased, Plaintiffs-Appellees, v. Gerald R. RUSSELL and Elmer Buchta Trucking, Incorporated Defendants-Appellants.

No. 94-3280.

United States Court of Appeals Seventh Circuit.

Argued Sept. 7, 1995.

Decided Nov. 7, 1995.

Richard C. Rusk and G. Byron Overton (argued), Rusk & Overton, Washington, IN, for Plaintiffs-Appellees.

D. Timothy Born (argued), Lacey, Terrell, Annakin, Heldt & Baugh, Evansville, IN, for Defendants-Appellants.

Before RIPPLE, MANION, and KANNE, Circuit Judges.

KANNE, Circuit Judge.

Plaintiffs-appellees sued defendants-appellants in diversity for wrongful death and prevailed in a bench trial to the tune of $577,733.83. We are asked in this appeal to determine two issues: (1) whether a spouse's survivor benefits provided by a state pension plan are collateral source payments admissible in evidence under Indiana's collateral source evidence statute, IND.CODE Sec. 34-4-36-2 (1994); and (2) whether eyewitness testimony concerning paycheck notations offered to establish a payroll deduction is inadmissible hearsay under FED.R.EVID. 801 and 803. Lacking guidance from Indiana appellate courts on the first question, we stay this appeal and certify the question of statutory interpretation to the Indiana Supreme Court pursuant to 7 TH CIR.R. 52 and IND.R.APP.P. 15(O).

I

Loren Shirley was a retired school teacher from Ohio who died on March 3, 1992, as a result of injuries sustained in an automobile accident that day on State Highway 57 in Daviess County, Indiana. The accident was caused by a tractor-trailer operated by Elmer Buchta Trucking, Inc., and driven by Gerald R. Russell. Margaret Shirley and C. Thomas Wagner, copersonal representatives of Loren Shirley's estate, sued Buchta Trucking and Russell under Indiana's wrongful death statute, IND.CODE Sec. 34-1-1-2 (1994), in a diversity action in the United States District Court for the Southern District of Indiana.

The evidence at a three-day bench trial showed that prior to his death, Loren Shirley received a gross monthly pension of $1,503.26 from the State Teachers Retirement System of Ohio ("STRS"). This sum consisted of his pension of $1,671.43 minus a deduction of $158.17 to provide a survivor benefit ¹ of $751.63 per month for his wife should he predecease her. Both the STRS pension and the survivor benefit included a 3% annual cost-of-living adjustment.

Over hearsay objections by defense counsel, the district court admitted Margaret Shirley's testimony that she had seen notations on her husband's paychecks indicating deductions for his STRS pension. ² Following her testimony, the court denied a defense motion on the "collateral source issue" ³ and ruled that the survivor benefits qualified as an exception contained in section 34-4-36-2(1)(B). Defense counsel offered to present expert testimony that the survivor benefits reduced Margaret Shirley's economic loss by approximately $179,014. Plaintiffs' counsel stipulated to this testimony but not to its admissibility.

In its findings of fact and conclusions of law, the district court determined that Margaret Shirley, as a result of the defendants' tortious conduct, had suffered total losses of $577,733.83, of which $293,207 was attributed to the economic loss occasioned by her husband's death. ⁴ The court wrote:

The STRS payments that Margaret Shirley receives each month should not be included in determining economic loss. These payments amount to insurance benefits paid for directly by [Loren] Shirley. He elected to receive less each month in pension benefits so that his wife would be assured of some income after his death. In effect, his insurance premiums were deducted each month from his pension payment.... Consequently, the court will not include the STRS payments received by Margaret Shirley in determining economic loss.

Defendants appeal the district court's decision on two grounds. First, they contend the district court erred by failing to include Margaret Shirley's monthly survivor benefit of $751.63 in its loss calculations. They argue that the benefit does not qualify as an enumerated exception prescribed by IND.CODE Sec. 34-4-36-2(1) and should have been admitted into evidence and incorporated in determining Margaret Shirley's economic loss. Second, they contend that Margaret Shirley's testimony establishing her husband's pension contributions was hearsay not within any of the recognized exceptions and was erroneously admitted into evidence. We have jurisdiction to hear this appeal according to 28 U.S.C. Sec. 1291.

II

The district court applied its interpretation of the Indiana collateral source evidence statute to the facts. We review for clear error a district court's application of law to fact. Brooks v. Buscher, 62 F.3d 176, 179 (7th Cir.1995). But this case demonstrates the sometimes murky distinction between interpretation of law and application of law to fact. The district court could apply only its understanding of the Indiana statute. Its construction of the statute therefore preceded its application of that construction, illustrating how application of law to fact may first require interpretation of law. This appeal thus concerns a district court's interpretation of state law, to which we apply a de novo standard of review. Lawshe v Simpson, 16 F.3d 1475, 1478 (7th Cir.1994), rather than the district court's application of that interpretation to fact, which we would review for clear error.

III

A

Prior to 1986, Indiana courts employed the common law collateral source rule, which prohibited defendants from introducing evidence of compensation received by plaintiffs from collateral sources to reduce damage awards:

[C]ompensation for the loss received by plaintiff from a collateral source, independent of the wrongdoer, as from insurance, cannot be set up by the wrongdoer in mitigation of damages.

Aldridge v. Abram & Hawkins Excavating Co., 474 N.E.2d 107, 108 (Ind.Ct.App.1985). This rule held tortfeasors fully accountable for the consequences of their conduct regardless of any aid or compensation acquired by plaintiffs through first-party insurance, employment agreements, or gratuitous assistance. Herrick v. Sayler, 160 F.Supp. 25 (N.D.Ind.1958), aff'd, 245 F.2d 171 (7th Cir.1957).

The Indiana legislature had two goals when it passed the collateral source evidence statute in 1986, modifying the common law rule:

(1) to enable the trier of fact in a personal injury or wrongful death action to determine the actual amount of the prevailing party's pecuniary loss; and

(2) to provide that a prevailing party not recover more than once from all applicable sources for each item of loss sustained.

IND.CODE Sec. 34-4-36-1. The legislature sought to prevent plaintiffs' multiple recoveries or windfall awards while preserving the accountability element of the common law rule. The pertinent section reads:

In a personal injury or wrongful death action the court shall allow the admission into evidence of:

(1) proof of collateral source payments, other than:

(A) payments of life insurance or other death benefits;

(B) insurance benefits for which the plaintiff or members of the plaintiff's family have paid for directly; or

(C) payments made by the state or the United States, or any agency, instrumentality, or subdivision thereof, that have been made before trial to a plaintiff as compensation for the loss or injury for which the action is brought;

(2) proof of the amount of money that the plaintiff is required to repay, including worker's compensation benefits, as a result of the collateral benefits received; and

(3) proof of the cost to the plaintiff or to members of the plaintiff's family of collateral benefits received by the plaintiff or the plaintiff's family.

IND.CODE Sec. 34-4-36-2. The trier of fact is required to consider evidence admitted under section 34-4-36-2 in determining any award. IND.CODE Sec. 34-4-36-3.

Contrary to appellants' assertion, the statute is not, an abrogation of the common law. It upholds the common law principle that a decision to protect one's self against certain risks cannot inure to the benefit of a tortfeasor whose conduct may realize the envisioned risk. The statute does modify the common law by creating a general rule of admissibility; the inadmissible exceptions define the contours of this general rule. These exceptions are specifically enumerated, but the structure of the statute does not aid us in interpreting the purview of its specific terms.

B

A collateral source payment originates from a source wholly independent of the tortfeasor. See 9 I.L.E. Damages Sec. 86 (Supp.1994). STRS paid the survivor benefits to Margaret Shirley upon her husband's death. The benefit is not contingent upon the manner in which he died, nor is it designed to compensate Margaret Shirley for whatever tortious conduct may have contributed to her husband's death. STRS's obligation to pay the benefit flows from its contract with Loren Shirley and is not affected by the circumstances of his death. It is thus a collateral source payment and admissible into evidence unless it falls within one of the recognized exceptions in section 34-4-36-2.

There is a colorable argument that the survivor benefit is a species of insurance coverage for which both Loren and Margaret Shirley paid on a monthly basis. Loren Shirley elected to forego almost 10% of his gross monthly pension in consideration for the survivor benefit, and Margaret Shirley also paid for the benefit to the extent that she depended upon the STRS pension for financial support. The monthly withholding of $158.17 (the premium) was consideration for STRS's promise to pay Margaret Shirley $751.63 per month (the coverage), including a 3% annual cost-of-living adjustment, upon Loren...