Constitutions,
Statutes, Regulations and Rules: Montana Code: section 27-2-202. WCC
held this statute established the limitations period for an action to
enforce an insurer's subrogation interest in a third-party recovery
had by a claimant Note: The WCC was reversed on this conclusion in Royal
Ins. Co. v. Earl W. Roadarmel and Donald E. White,
2000 MT 259, 301 Mont. 508, 11 P.3d 105.
¶1 The present action is
brought by Royal Insurance Company (Royal) to recover $63,864.79 in
payment of its subrogation interest in a $300,000.00 third-party judgment
recovered by respondent Earl Roadarmel (Earl). Earl's attorney, Mr.
Donald E. White (White), is named as a co-respondent to the claim.
¶2 Both Royal and the
respondents have moved for summary judgment. The motions have been
fully briefed and none of the parties has asked for oral argument.
The cross-motions are therefore deemed submitted for decision.(1)
Facts
¶3 The facts are not in dispute.
They are set out in the briefs and in the attachments to the parties'
briefs.(2)
¶4 The salient facts are as
follows:
1. Earl suffered an industrial
injury as a result of a work-related exposure to the chemical toluene.
The exposure occurred between September 18, 1986 and December 1987.
Roadarmel v. Acme Concrete Co., 237 Mont. 163, 772 P.2d 1259
(1989).
2. Earl filed a claim for
compensation. The claim was denied. He then petitioned the Workers'
Compensation Court (WCC), which held that he had in fact suffered an
industrial injury. On April 25, 1989, the Supreme Court affirmed that
determination. Id.
3. In June 1989 the parties
entered into a full and final compromise settlement. (Exs. C and H to
petitioner's motion.) The settlement was approved by the Department
of Labor and Industry on July 24, 1989. (Ex. J to petitioner's motion;
Ex. 2 to respondent's motion.) It provided that Royal pay claimant $74,750,
but "fully reserved" Royal's subrogation interest in any third-party
claim. (Id., Ex. C to petitioner's motion.)
4. In conjunction with the
negotiation of the full and final compromise settlement, the parties
also reached an agreement concerning Royal's participation in a third-party
action against the manufacturer and distributor of the toluene. Through
written correspondence of their attorneys, they confirmed their agreement.
5. On June 2, 1989, Mr. White
wrote to Royal's attorney, Mr. James G. Edmiston (Edmiston), to confirm
the terms of the full and final compromise settlement. In his letter,
White also addressed subrogation, writing:
We would also agree to
your client, Royal Insurance Company's participation in the action
against Exxon and Great Western Chemical with the $5,000 cost advancement.
(Ex. E to Petitioner's Motion.)
6. On June 6, 1989, Edmiston
replied, writing in relevant part:
The insurer accepts your
offer to fully participate in the third party action against Exxon
and Great Western Chemical by paying a $5,000.00 cost advancement.
No other cost advancements will be required of Royal Insurance in
order to fully participate. Royal's subrogation interest will then
be calculated pursuant to the formula set forth by the Montana Supreme
Court in Tuttle v. Argonaut Ins. Co., 580 P.2d 1379 (Mont.
1978). I have enclosed a copy of this excerpted from Norm Grosfield's
"Red Book" on Montana Workers' Compensation law.
Royal Insurance is sending
me a check for $5,000.00 payable to Earl Roadarmel and yourself, which
I will forward onto you when I receive it.
(Ex. F to Petitioner's Motion.)
7. Thereafter, Edmiston forwarded
Royal's check for $5,000 to White. On July 6, 1989, White wrote to Edmiston
to acknowledge receipt of the check and confirm the subrogation agreement.
(Ex. M to Petitioner's Motion.) The check was cashed.
8. The third-party action
against Exxon was settled for $7,500. (Petitioner's Motion at 2).
9. The third-party action
against Great Western was tried to a jury in July 1991 and on July 16,
1991, the jury awarded Earl the sum of $250,000 and his wife the sum
of $50,000. (Ex. 4 to Petitioner's Motion.)
10. The judgment against
Great Western was finally paid and satisfied on January 26, 1994. (Id.)
The total amount paid to Earl and his wife, with costs and accumulated
interest, was $332,450. (Id.) The check for that amount was
payable jointly to Earl, his wife, and White. (Id.)
11. On February 18, 1994,
White wrote to Edmiston to inform him of the payment of the judgment.
(Id.) In the letter, White informed Edmiston that total costs
for the action were $29,967 and that his attorney fee was 40%. (Id.)
He requested Edmiston to inform him of the amount due Royal on account
of its subrogation interest and the manner in which the amount was calculated.
(Id.)
12. On April 7, 1994, Edmiston
sent White his calculations of Royal's subrogation interest. (Ex. R
to Petitioner's Motion.) The worksheet showed $66,631.46 owing and provided
that $61,631.46 of that amount be paid from the amounts recovered in
the third-party action and the remaining amount be recovered by a reduction
in future biweekly benefits still due Earl under the full and final
compromise settlement. (Id.)
13. White did not reply and
Edmiston wrote him again on October 3, 1994:
Would you please write
informing me as to the status of Royal Insurance's subrogation interest.
If I do not hear something soon, the insurer has instructed me to
file for a determination of their subrogation interest with the Department
of Labor and Industry.
(Ex. S to Petitioner's Motion.)
14. Meanwhile, as of February
18, 1994, the same day he wrote Edmiston requesting the amount of Royal's
subrogation interest, White disbursed the entire proceeds received from
Great Western and Exxon to Earl and his wife, except for the attorney
fees and costs. Exhibit Q to respondent's motion shows the total amount
received from Exxon and Great Western as $345,950.64, including the
$300,000.00 judgment, interest, and previous payments of $7,500.00 by
Exxon and $6,000.00 by Great Western. Respondents' Response to Petitioner's
First Discovery Requests, which are attached to Respondent's Motion,
reflect the following disbursements to Earl and his wife:
01/26/94 $ 30,000 To Kathleen
Roadarmel
01/26/94 $110,000 To Earl
02/18/94 $ 57,800 To Earl
TOTAL $197,800
That left $148,150.64 in
White's hands. Costs advanced by White were $29,967.00 and his attorney
fee was $125,400.00 (40% x $313,500.00 received from the judgment and
prior payments). Thus, the amount due White was $155,367.00, which is
more than his retainage. Unless White intended to waive part of his
fees and/or costs, nothing was left over for payment of Royal's subrogation
interest.
15. According to paragraph
12 of Royal's statement of uncontroverted facts, on March11, 1997, Royal
filed a petition with the Department of Labor and Industry seeking a
determination of its subrogation interest, however, the petition was
later dismissed and mediation sought. (Petitioner's Motion at 2.)
16. The present petition
was filed October 14, 1997.
17. Royal now calculates the
amount due for its subrogation interest as $63,864.79, which it says is
somewhat less than the original calculation because medical payments are
less than originally calculated. (Petitioner's Motion at 2.) Royal's motion
for summary judgment asks for judgment in that amount. (Id. at
4.)
18. In their reply brief,
the respondents do not contest the amount due; their sole defense is
that the claim is barred by statutes of limitations. Respondent's [Sic]
Reply Brief to Petitioner's Motion for Summary Judgement.
Discussion
¶5 The amount sought by Royal
in satisfaction of its subrogation interest is not disputed by respondents.
The sole defenses offered up by them in response to Royal's summary judgment
motion, and in support of their own summary judgment motion, are the three
year statute of limitations prescribed by section 27-2-211(1)(c), MCA,
which governs actions for liabilities created by statute, and the three
year limitations prescribed by section 72-34-511, MCA, for breaches of
trust.
¶6 Section 39-71-414, MCA,
provides for subrogation in cases where a claimant obtains damages against
a third-party tortfeasor in connection with his or her work-related injury.
Since the right of subrogation is governed by statute, respondents argue
that the applicable statute of limitations is section 27-2-211(1)(c),
MCA, which provides that an action based on "liability created by statute,"
other than one for a penalty or forfeiture, or relating to public assistance,
must be commenced within two years.(3)
Royal does not disagree that
the two year statute of limitations applies to the subrogation actions
commenced under section 39-71-414,(4)
rather it argues that the
two year period of limitations is inapplicable since the parties entered
into a contract regarding subrogation. Therefore, Royal argues, the longer
five or eight year statute of limitations for commencing an action based
on a contract, § 27-2-202, MCA, applies in this case.(5)
¶7 As evidenced by the exchange
of letters between the parties' attorneys, the parties in this case entered
into an agreement regarding subrogation. That agreement provided for "full"
subrogation in return for Royal's advancement of $5,000 for costs which
might be incurred in the third-party litigation.
¶8 There was consideration
for the agreement. Section 39-71-414, MCA (1985), which was effective
at the time of Earl's injury, provided in relevant part:
39-71-414. Subrogation.
(1) If an action is prosecuted as provided for in 39-71-412
or 39-71-413 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.
(2) (a) If the injured employee
intends to institute the third party action, he shall give the insurer
reasonable notice of his intention to institute the action.
(b) The injured employee
may request that the insurer pay a proportionate share of the reasonable
cost of the action, including attorney fees.
(c) The insurer may elect
not to participate in the cost of the action. If this election is made,
the insurer waives 50% of its subrogation rights granted by this section.
. . . .
The section provides for full
subrogation where the insurer agrees to "pay a proportionate share of
the reasonable costs of the action." It does not specify any particular
share. Here the insurer and claimant entered into an agreement, memorialized
in writing, for the insurer to advance $5,000 in exchange for full subrogation.
In doing so, they agreed that $5,000 was "a proportionate share of the
reasonable costs of the action."
¶9 Where the parties enter
into an agreement settling a legal claim, and the agreement is supported
by consideration, that agreement constitutes a contract and is enforceable
as such. Heatherington v. Ford Motor Co., 257 Mont. 395, 849
P.2d 1039 (1993). I conclude and that the subrogation agreement between
Royal and White (acting as Earl's agent) is an enforceable contract.
¶10 Thus, the applicable statute
of limitations is the five or eight year period specified by section 27-2-202
for actions on contracts. Since the present petition was brought within
five years after Earl's judgment against Great Western was paid, it is
timely and Royal is entitled to enforce its subrogation interest.(6)
Since the amount due is not in dispute, Earl is liable to Royal in the
sum of $63,864.79.
II.
¶11 Royal also seeks judgment
against White.
¶12 Initially, the Court must
determine whether it has jurisdiction over the claim against White. While
White has not questioned this Court's jurisdiction, lack of subject matter
jurisdiction is never waived, may be raised at any time, and may be raised
by the Court sua sponte (on its own motion). "It is a well-settled
principle of law . . . that lack of subject matter jurisdiction cannot
be waived, and may be raised at any stage of a judicial proceeding by
a party or sua sponte by the Court." Sage v. Gamble,
279 Mont. 459, 463, 929 P.2d 822, 824 (1996).
¶13 Royal argues that White
is personally liable for its subrogation interest since he was a "constructive
trustee" of the third-party funds recovered by Earl. The Court need not
address whether it has jurisdiction to impose a constructive trust since
the Workers' Compensation Act, section 39-71-414, MCA (1985), creates
a lien on the funds. The section provides in relevant part:
39-71-414. Subrogation.
(1) If an action is prosecuted as provided for in 39-71-412
or 39-71-413 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.]
While the Workers' Compensation
Court is a Court of limited jurisdiction generally extending to disputes
involving benefits payable to claimants, § 39-71-2905, MCA, and to appeals
from workers' compensation and occupational disease determinations of
the Department of Labor and Industry, e.g., §§ 39-71-204(3) and -2401,
39-72-612, MCA, decisions of the Montana Supreme Court hold that the jurisdiction
of the WCC extends to issues interwoven with its express jurisdiction.
¶14 Thus, in State ex rel.
Uninsured Employers' Fund v. Hunt, 191 Mont. 514, 625 P.2d 539 (1981),
the Supreme Court held that a petition for declaratory judgment filed
by a putative employer which the Uninsured Employers' Fund (UEF) believed
was responsible for benefits it paid to a putative employee was within
the jurisdiction of the WCC. The UEF contended that the matter was one
for the district court to determine since the dispute was a collection
matter against the putative employer. The Supreme Court disagreed, holding:
Although the Workers' Compensation
Court is not vested with the full powers of a District Court, it nevertheless
has been given broad powers concerning benefits due and payable to claimants
under the Act. It has the power to determine which of several parties
is liable to pay the Workers' Compensation benefits, or if subrogation
is allowable, what apportionment of liability may be made between insurers,
and other matters that go beyond the minimum determination of the benefits
payable to an employee.
191 Mont. 519, 625 P.2d at
542.
¶15 In a subsequent case, the
Supreme Court held that this Court's jurisdiction extends to the enforcement
of an attorney lien for fees due on benefits secured by the attorney.
Kelleher Law Office v. State Compensation Ins. Fund, 213 Mont.
412, 691 P.2d 823 (1984). Referring to its prior decision in Hunt,
the Court noted:
[T]he jurisdiction of the
Workers' Compensation Court goes beyond merely providing a forum for
adjudicating workers' claims.
213 Mont. 415, 691 P.2d at
824. The issue in that case involved the enforcement of an attorney fee
lien specified in section 37-61-420, MCA. The lien applied to all actions
brought by an attorney, not to just workers' compensation actions. The
Supreme Court held that the lien applied to workers' compensation benefits
recovered through an attorney's efforts and that the WCC has jurisdiction
to enforce the lien.
¶16 I conclude that this Court
has jurisdiction to enforce the lien created by section 39-71-414(1),
MCA.
III.
¶17 Section 39-71-414, MCA,
provided White with clear notice of the lien. His disbursement of amounts
claimed by Royal -- even while acknowledging Royal's interest in those
amounts -- is perplexing. His failure to acknowledge either of Edmiston's
letters regarding the amount due Royal was discourteous and unprofessional.
In any event, White is subject to the Court's jurisdiction and its power
to enforce the lien. Unless Royal's claim against him is barred by a statute
of limitations, he is liable for the $63,864.79 due Royal.
¶18 Section 71-3-122, MCA,
specifies the time within which an action to enforce a lien may be brought,
providing:
71-3-122. Lien extinguished
by statute of limitations. A lien is extinguished by the lapse
of the time within which, under the provisions of Title 27, an action
can be brought upon the principal obligation.
In this case, I have determined
that the principal obligation has not been extinguished, thus the lien
is not barred and Royal is entitled to enforce it against White.
JUDGMENT
¶19 1. The Workers' Compensation
Court has jurisdiction in this matter.
¶20 2. Respondents, Mr. Earl
W. Roadarmel and Mr. Donald E. White shall pay petitioner, Royal Insurance
Company, the sum of $63,864.79. They are jointly and severally liable
to pay that amount.
¶21 3. This JUDGMENT is certified
as final for purposes of appeal pursuant to ARM 24.5.348.
¶22 4. Any party to this dispute
may have 20 days in which to request an amendment reconsideration from
this Order Granting Summary Judgment.
DATED in Helena, Montana,
this 17th day of March, 1999.
(SEAL)
/s/ Mike
McCarter
JUDGE
c: Mr. James G. Edmiston, III
Mr. Earl W. Roadarmel - Certified Mail
Mr. Donald E. White
Submitted: July 27, 1998
1. Failure
to request oral argument constitutes a waiver of oral argument. Court
Rule ARM 24.5.329(5) provides:
(5) If either party desires
a hearing on the motion, a request must be made in writing no later
than the time specified for the filing of the last brief. The court
will thereupon set a time and place for hearing. If no request for hearing
is made, any right to hearing afforded by these rules will be deemed
waived. The court may order a hearing on its own motion.
2. ARM 24.5.329(3)
provides that a party who contests an uncontested statement of fact set
forth by the other party must state that the fact is contested and set
forth the specific factual basis for the contest. The rule provides:
(3) Any party filing a motion
under this rule shall include in its brief a statement of uncontroverted
facts, which shall set forth in full the specific facts on which the
party relies in support of the motion. The specific facts shall be set
forth in serial fashion and not in narrative form. As to each fact,
the statement shall refer to a specific pleading, affidavit, or other
document where the fact may be found. Any party opposing a motion filed
under this rule shall include in their opposition a brief statement
of genuine issues, setting forth the specific facts which the opposing
party asserts establish a genuine issue of material fact precluding
summary judgment in favor of the moving party.
The parties did not contest
facts set forth by the other, therefore they are deemed admitted.
3. Section
27-2-211, MCA, provides in relevant part:
27-2-211. Actions
to enforce penalty or forfeiture or other statutory liability.
(1) Within 2 years is the
period prescribed for the commencement of an action upon:
. . .
(c) a liability created
by statute other than:
(i) a penalty or forfeiture;
or
(ii) a statutory debt created
by the payment of public assistance.
4. See
Abell v. Bishop, 86 Mont. 478, 284 P. 525 (1930) ("Liability
created by statute" means liability which would not exist but for the
statute). Royal, however, has not urged that subrogation existed in absence
of section 39-71-414, therefore the Court need not consider whether some
other limitation applies.
5. Section
27-2-202, MCA, provides:
27-2-202. Actions
based on contract or other obligation. (1) The period prescribed
for the commencement of an action upon any contract, obligation, or
liability founded upon an instrument in writing is within 8 years.
(2) The period prescribed
for the commencement of an action upon a contract, account, or promise
not founded on an instrument in writing is within 5 years.
(3) The period prescribed
for the commencement of an action upon an obligation or liability, other
than a contract, account, or promise, not founded upon an instrument
in writing is within 3 years.
6. While
it is apparent that the exchange of letters gives rise to a written contract,
the Court need not analyze the elements required for finding that a written
contract exists since the shorter, five year statute of limitations is
satisfied.
