Transamerican Freight Lines, Inc. v. Quimby, 19

• Decision Date: 25 September 1968
• Docket Number: No. 19,19
• Citation: 160 N.W.2d 865,381 Mich. 149
• Parties: TRANSAMERICAN FREIGHT LINES, INC., a corporation, Plaintiff-Appellant, v. Clayton L. QUIMBY, and George L. McCargar, Jr., jointly and severally, Defendants-Appellees.
• Court: Michigan Supreme Court

Page 865

160 N.W.2d 865

381 Mich. 149

TRANSAMERICAN FREIGHT LINES, INC., a corporation, Plaintiff-Appellant, v.Clayton L. QUIMBY, and George L. McCargar, Jr., jointly and severally, Defendants-Appellees.

No. 19.

Supreme Court of Michigan.

Sept. 25, 1968.

Bergstrom, Slykhouse & Shaw, by Richard M. Van Orden, Grand Rapids, for plaintiff-Appellant.

Scholten & Fant, by Harvey L. Scholten, Grand Haven, for defendants-Appellees.

Before the Entire Bench.

KELLY, Justice.

Defendant Quimby's claim against the third party tort-feasor was settled before judgment.The settlement agreement provided that any claims of plaintiff-employer were not included in the settlement.

Plaintiff had not intervened in defendant's action against the third party tort-feasor nor had it started its own action as provided by statute, and the statute of limitations had run against plaintiff at the time of settlement.

Plaintiff commenced action to recover the moneys Plaintiff had paid defendant under the workmen's compensation law prior to defendant's settlement with the third party tort-feasor and joined defendant Quimby's attorney, George L. McCargar, Jr., as a partydefendant.

Defendants' answer denied 'that plaintiff is entitled to any judgment against these defendants or either of them in any sum of money whatsoever.'

The trial court granted plaintiff's motion for summary judgment against both defendants.

The Court of Appeals(5 Mich.App. 174, 180, 146 N.W.2d 114, 116) reversed the trial court by holding that plaintiff'is not entitled to be reimbursed' and stated:

'The question of the attorney's personal liability in turning over the amounts recovered to his client without reimbursing the employer need not be considered in light of the above decision which does not recognize any right of the employer to the settlement made by its employee in this case.'

The question presented calls for determination of legislative intent as expressed in C.L.S.1961, § 413.15(Stat.Ann.1960 Rev. § 17.189), the pertinent part being the first 6 paragraphs as follows:

'Where the injury for which compensation is payable under this act was caused under circumstances creating a legal liability in some person other than a natural person in the same employ or the employer to pay damages in respect thereof, the acceptance of compensation benefits or the taking of proceedings to enforce compensation payments shall not act as an election of remedies, but such injured employee or his dependents or their personal representative may also proceed to enforce the liability of such third party for damages in accordance with the provisions of this section.If the injured employee or his dependents or personal representative does not commence such action within 1 year after the occurrence of the personal injury, then the employer or its compensation insurance carrier may, within the period of time for the commencement of actions prescribed by statute, enforce the liability of such other person in the name of that person.Not less than 30 days before the commencement of suit by any party under this section, such party shall notify, by registered mail at their last known address, the workmen's compensation commission, the injured employee, or in the event of his death, his known dependents, or personal representative or his known next of kin, his employer and the workmen's compensation insurance carrier.Any party in interest shall have a right to join in said suit.

'Prior to the entry of judgment, either the employer or his insurance carrier or the employee or his personal representative may settle their claims as their interest shall appear and may execute releases therefor.

'Such settlement and release by the employee shall not be a bar to action by the employer or its compensation insurance carrier to proceed against said third party for any interest or claim it might have.

'In the event the injured employee or his dependents or personal representative shall settle their claim for injury or death, or commence proceeding thereon against the third party before the payment of workmen's compensation, such recovery or commencement of proceedings shall not act as an election of remedies and any moneys so recovered shall be applied as herein provided.

'In an action to enforce the liability of a third party, the plaintiff may recover any amount which the employee or his dependents or personal representative would be entitled to recover in an action in tort.Any recovery against the third party for damages resulting from personal injuries or death only, after deducting expenses of recovery, shall first reimburse the employer or its workmen's compensation insurance carrier for any amounts paid or payable under the workmen's compensation act to date of recovery, and the balance shall forthwith be paid to the employee or his dependents or personal representative and shall be treated as an advance payment by the employer on account of any future payment of compensation benefits.

'Expenses of recovery shall be the reasonable expenditures, including attorney fees, incurred in effecting such recovery.Attorney fees, unless otherwise agreed upon, shall be divided among the attorneys for the plaintiff as directed by the court.The expenses of recovery above mentioned shall be apportioned by the court between the parties as their interests appear at the time of said recovery.'

Construing this statute, the trial court in its opinions stated:

'The workmen's compensation law, taken as a whole would seem to recognize the right of the compensation insurance carrier to participate in any recovery by the employe from a third party tort-feasor.* * *

'This statute expressly provided that and 'recovery' for 'personal injuries or death only' shall 'first reimburse the employer or its workmen's compensation insurance carrier for any amounts paid or payable' After deduction of expenses of recovery.Any settlement for any items of damage for personal injuries would be expressly covered by this act.And this would be true whether or not the employer or its insurance carrier were parties to the suit.

'The fact that the employer may have secured releases from the third party tort-feasor does not in any way alter the position of the employer in respect to his rights under the act.Defendants have omitted this claim from their brief and the court considers it abandoned.'(Emphasis added.)

In contrast to the trial court, we quote the following from the opinion of the Court of Appeals:

'The employer contends that the act requires reimbursement to be made from 'any recovery against the third party for damages resulting from personal injuries.'* * *

'The interpretation given to the statute by the appellee in the instant case would nullify the section providing for separate settlements and releases of employer or employee claims or interests. * * *

'Transamerican Freight Lines, Inc., is not entitled to be reimbursed for the sums paid out of an agreement which was a settlement of its employee's Individual claims against a third party and which specifically excludes claims of Transamerican.This settlement and release does not bar an action by the employer or its insurance carrier to recover amounts paid under the workmen's compensation act from the third party.'

From the first workmen's compensation legislation in Michigan this Court has recognized the employer-insurer's right to reimbursement as a form of statutory subrogation.

Prior to 1952, when the amendment to part 3, § 15, with which this Court is here concerned, was enacted, the statute provided that:

'Where the injury for which compensation is payable under this act was caused under circumstances creating a legal liability in some person other than the employer to pay damages in respect thereof, the employe may at his option proceed either at law against that person to recover damages, or against the employer for compensation under this act, but not against both, and if compensation be paid under this act the employer may enforce for his benefit or for that of the insurance company carrying such risk, or the Commissioner of Insurance as the case may be, the liability of such other person.'¹

This Court in Michigan Employers' Casualty Co. v. Doucette(1922), 218 Mich. 363, 188 N.W. 507, considered the above quoted statutory language, and defining the employer's right to recovery said:

'No assignment is necessary.The statute confers the right by way of subrogation.'

This decision of employer's rights was subsequently approved in Utley v. Taylor and Gaskin, Inc.(1943), 305 Mich. 561, 575, 9 N.W.2d 842, andBay State Milling Co. etc. v. Izak(1945), 310 Mich. 601, 604, 17 N.W.2d 769.

The 1952amendment of part 3, § 15, among other things provides for the deduction of reasonable expenses of recovery Before the employer-insurer's right to reimbursement from the employee.See our 1954 decision in Rookledge v. Garwood, 340 Mich. 444, p. 458, 65 N.W.2d 785, p. 792, holding the employer-insurer's right to reimbursement without discussion of attorney fees as an expense of recovery, and where this Court said:

"The former statute required an employee to elect whether to pursue his remedy against the employer for compensation or to seek his common law remedy against the third party causing the injury.Under the present statute the employee may receive compensation or take proceedings to enforce compensation payments and also sue the third party.The statute provides in substance, that in Case of recovery against the third party, after deducting expenses of recovery, the amount of the judgment is to be used first to reimburse the employer or the workmen's compensation insurance carrier for amounts paid or payable under the compensation act to date of recovery and the balance is paid to the insured employee or his dependents.This statute pertains to the remedy and hence applies to the present action.Judd v. Judd, 125 Mich. 228, 84 N.W....