South Down Liquors, Inc. v. Hayes

• Decision Date: 01 September 1989
• Docket Number: No. 153,153
• Citation: 590 A.2d 161,323 Md. 4
• Parties: SOUTH DOWN LIQUORS, INC. v. Roy D. HAYES, Jr. ,
• Court: Maryland Court of Appeals

Page 4

323 Md. 4

590 A.2d 161

SOUTH DOWN LIQUORS, INC. v. Roy D. HAYES, Jr.

No. 153, Sept. Term, 1989.

Court of Appeals of Maryland.

May 29, 1991.

T. Michael Preston (Anderson, Coe & King, both on brief), Baltimore, for petitioner.

H. Robert Scherr (Scherr, Cole & Murphy, all on brief), Pikesville, for respondent.

Argued before MURPHY, C.J., and ELDRIDGE, ^* COLE, RODOWSKY, McAULIFFE, ^** ADKINS and CHASANOW, JJ.

McAULIFFE, Judge.

Respondent suffered an accidental injury arising out of and in the course of his employment. More than two months after receiving an award of compensation, and after receiving workers' compensation benefits of $37,323 from his employer's compensation insurer, respondent filed an action against petitioner in the Circuit Court for Anne Arundel County, contending that petitioner's negligence caused his injury. Petitioner, relying on the provisions of Maryland Rules 2-201 and 2-211, filed a motion asking the court to order the joinder of the workers' compensation insurer as an additional party plaintiff. Judge H. Chester Goudy denied the motion, holding that "Maryland Rule 2-211 does not require that [the insurer] be joined as a party to this action." The Court of Special Appeals affirmed. South Down Liquors v. Hayes, 80 Md.App. 464, 564 A.2d 119 (1989). We granted certiorari and we affirm.

The rights of a workers' compensation insurer to bring a third-party action, and to voluntarily intervene in a third-party action brought by an injured employee are firmly established by statute, Maryland Code (1957, 1985 Repl.Vol., 1990 Cum.Supp.) Art. 101, § 58, and by case law, Collins v. United Pacific Ins. Co., 315 Md. 141, 148 n. 5, 553 A.2d 707 (1989). This case involves a different joinder question--whether a defendant in a third-party action may require the involuntary joinder of the compensation insurer.

Petitioner's principal argument is that Rule 2-201 requires joinder. This Rule provides:

Every action shall be prosecuted in the name of the real party in interest, except that an executor, administrator, personal representative, guardian, bailee, trustee of an express trust, person with whom or in whose name a contract has been made by the benefit of another, receiver, trustee of a bankrupt, assignee for the benefit of creditors, or a person authorized by statute or rule may bring an action without joining the persons for whom the action is brought. When a statute so provides, an action for the use or benefit of another shall be brought in the name of the State of Maryland. No action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for joinder or substitution of the real party in interest. The joinder or substitution shall have the same effect as if the action had been commenced in the name of the real party in interest.

Rule 2-201 largely tracks FRCP 17(a), and federal precedent is therefore helpful in determining the procedural requirements of the Rule.

Apart from stylistic changes, Maryland Rule 2-201 differs from FRCP 17(a) in two respects. First, the Maryland Rule follows the pre-1966 style of FRCP 17(a) by placing the word "except" at the beginning of a representative list of parties who may bring actions as real parties in interest even though they are not the ultimate beneficiaries of the action. The 1966 amendment to Rule 17(a) removed the word "except" in order to "make it clear that the specific instances enumerated are not exceptions to, but illustrations of, the rule." Notes of Advisory Committee on Rules, 1966 amendment. This Court did not make the same style change when adopting Rule 2-201, but that fact is not substantively significant. The non-exclusive enumeration found in Rule 2-201 is not a list of exceptions. Rather, it provides illustrations of specific instances of real parties in interest who are permitted by substantive law to bring an action for the benefit of another, and is intended only to illustrate the application of the Rule in contexts that might otherwise cause confusion.

The second difference between Rule 2-201 and FRCP 17(a) is the absence in the Maryland Rule of the concept of "ratification" by a real party in interest of an action brought by one not a real party in interest. This concept, which traces its origin to admiralty law, has rarely been used in the federal courts, see 3A Moore's Federal Practice § 17.15-1 at 17-184 (2d. ed. 1984), and was intentionally omitted from Rule 2-201, see Minutes of the Standing Committee on Rules, May 11 & 12, 1979, at 16.

Both Rule 2-201 and FRCP 17(a) require that "[e]very action shall be prosecuted in the name of the real party in interest." With the exception of a few illustrations, neither rule attempts to define who is, or is not, a real party in interest in any specific context. In a recent article, Professor June Entman suggests it is "well settled ... that a 'real party in interest' is one who, under the substantive law, has the right to bring and control the action, and that this person is not necessarily the beneficially interested party." Entman, More Reasons for Abolishing Federal Rule of Civil Procedure 17(a): The Problem of the Proper Plaintiff and Insurance Subrogation, Y68 N.C.L.Rev. 893, 900 (1990), citing, inter alia, 6A C. Wright, A. Miller, & M. Kane, Federal Practice and Procedure § 1543 at 334 (2d. ed. 1990) (the real party in interest is "the person who, according to the governing substantive law, is entitled to enforce the right"); Kennedy, Federal Rule 17(a): Will the Real Party in Interest Please Stand?, 51 Minn.L.Rev. 675, 678 (1967) ("Thus the real party is the one with legal power to control the lawsuit and may be different from the person who will ultimately be benefited if the suit is successful."); Simes, The Real Party in Interest, 10 Ky.L.J. 60, 61 (1921) ("The real party in interest is the one to whom the substantive law of the case gives the right to bring and control the action.").

As Judge Wilner cogently pointed out for the Court of Special Appeals, the command that an action be brought by the real party in interest traces its origin to statutes and rules which were permissive in nature, authorizing plaintiffs such as assignees to bring actions at law in their own names rather than in the names of the assignors. South Down Liquors v. Hayes, supra, 80 Md.App. at 475-78, 564 A.2d 119. See also Atkinson, The Real Party In Interest Rule: A Plea For Its Abolition, 32 N.Y.U.L.Rev. 926 (1957). Notwithstanding its permissive origins, Rule 2-201 does have a mandatory component. If the party bringing an action is not the real party in interest, the action may be dismissed, provided a reasonable time is allowed after objection "for joinder or substitution of the real party in interest."

In the context of the case before us, we must consider the proper application of Rule 2-201 in the situation where there are two real parties in interest, each of whom has the right to bring an action for the entire claim, and only one brings the action. As the Court of Special Appeals pointed out, under the substantive law of this State, the employee (respondent) and the insurer each have the right to bring this action.

With the gloss of case law, [Art. 101] § 58, in effect, affords an employer/insurer three "rights" to proceed against the third party, and it affords the employee two such "rights." During the first two months following passage of the award, the employer/insurer has the sole, exclusive right to sue the third party, thereafter, it has a concurrent right with the employee to bring the action; and, during that period of concurrency, it has a right under Md.Rule 2-212 (Permissive Joinder of Parties) to intervene in any action brought initially by the employee. See Collins v. United Pacific Ins. Co., 315 Md. 141, 148 n. 5, 553 A.2d 707 (1989), and cases cited therein. The employee has no exclusive right comparable to that of the employer/insurer. He does, however, have the concurrent right to sue after the expiration of the two-month period and, if an action is brought by the employer/insurer, he would have the right under Rule 2-212 to intervene in it.

South Down Liquors v. Hayes, supra, 80 Md.App. at 467-68, 564 A.2d 119. This action was brought more than two months after the compensation award was passed. Thus, each party is a real party in interest as to the entire claim. In this instance of statutory subrogation, each party fits the illustration of Rule 2-201 of "a person authorized by statute ... [to] bring an action without joining...