Bugg v. Fairview Farms, Inc.

189 N.W.2d 291, 385 Mich. 338, 1971 Mich. LEXIS 195

• Court: Michigan Supreme Court
• Decided: August 27, 1971
• Docket: 3 January Term 1971, Docket No. 52,425
• Status: Published

Opinions

T. G. Kavanagh, J.

This case comes to us under the appearance of a workmen’s compensation question, but what is really involved here concerns an issue which has broad implications for the whole spectrum of our practice.

The facts giving rise to the controversy are not disputed.

Orville Bugg was employed by the defendant corporation as the manager of its farm near Fairview, Michigan. On March 16, 1967, Orville Bugg and a fellow employee John D. Willson took a company truck into the village of Fairview for repairs to be' made. While waiting for repairs to be made Orville Bugg purchased an automobile from the garage owner. Due to the fact that the automobile was not operative, Orville Bugg instructed John Willson to hook a tow chain from the truck to the automobile to take it back to the farm. Willson did so and on the return trip from the garage to the farm, with Willson driving the truck and Orville Bugg riding in the towed car, an accident occurred wherein the car broke loose from the truck and collided with another truck. Orville Bugg was killed in the collision.

Olive Bugg, his widow, was appointed administratrix of his estate and on June 21, 1967 brought a wrongful death action against the employer, John Willson and Roy W. Wiltse, Jr. and Dalton W. Wiltse, the owner and operator respectively of the other vehicle involved in the collision.

In their answers all defendants denied the allegations of negligence and defendants Fairview Farms, Inc. and John Willson affirmatively pleaded that both Orville Bugg and John Willson were acting in the course of their employment at the time of the accident, and asserted that plaintiff’s exclusive remedy was under the Workmen’s Compensation Act.

On August 16, 1967, Olive Bugg as Orville Bugg’s widow, filed a claim with the Workmen’s Compensation Department and defendant Fairview Farms, Inc. and its compensation’ carrier answered, denying that Orville Bugg had received any injuries in the course of his employment.

On January 4, 1968, defendants Fairview Farms, Inc., and John Willson moved to dismiss the wrongful death action against them on the asserted exclusiveness of the workmen’s compensation remedy.

While this motion was pending Olive Bugg as the claimant widow entered into an agreement with Fairview Farms, Inc. and its compensation carrier to redeem the asserted liability for $15,000 and after a hearing an order of the commission approving the agreement was mailed on March 4, 1968.

The transcript of the compensation hearing shows that all parties agreed the settlement was a compromise based on the asserted defense that the injury did not arise in the course of employment.

On May 16,1968 the motion to dismiss the wrongful death action was granted on the trial court’s holding that the plaintiff was collaterally estopped to proceed in the negligence action of the workmen’s compensation redemption.

The pertinent parts of the transcript of the redemption proceedings reveal the discussion between the parties and the referee:

“The Referee: Reed Ranch, Fairview, Michigan, against, Fairview Farms, Incorporated, the employer, and Consolidated Underwriters, insurance carrier.

“Mrs. Bugg is represented by her attorney, Mr. Bruce 0. Wilson, and the defendants are represented by Mr. Donald J. Parthum of the firm of Ward, Plunkett, Cooney, Rutt & Peacock.

“This case is before the Workmen’s Compensation Department on an Agreement to Redeem Liability for the proposed amount of $15,000.00 in regard to an injury date of March 16, 1967.

“I have a statement of. attorney fees approved by Mrs. Bugg in the amount of $2,250.00 which would be fifteen per cent of the proposed redemption amount, and that appears to be in order.

“I have a Form 100 in the file which was filed with the Compensation Department in Lansing on April 27, 1967 showing me a date of personal injury of March 16, 1967, at which time Mr. Bugg was killed in an automobile vehicle collision. Notice of dispute was filed by the claims manager for the Consolidated Underwriters; then a petition for hearing was filed by Mr. Wilson and that was received in Lansing on August 16, 1967, and also shows a date of March 16, 1967, as injury date, shows the decedent was killed in an auto accident.

“An answer denying liability was filed by Mr. Parthum on behalf of the defendants. This case has been before the Compensation Department for pretrial hearing and then was set for trial on March 6, 1968. However, the parties have come in with redemption papers which appear to be in order, and I am ready to hear the testimony of Mrs. Bugg.

“Examination by Mr. Wilson [attorney for plaintiff] :

“Q. Mrs. Bugg, I have discussed with you the legal questions involved in this case as to whether or not your husband was within the scope of his employment at the time that he was killed and, as you know, it is the position of Fairview Farms, Incorporated, and their Workmen’s Compensation insurance carrier that he was not working at the time that he was killed. You understand that?

“A. Yes.

“Q. And you understand that you are entitled to a trial in this matter. You don’t have to accept this settlement. We can go to trial before this Referee or some other Referee duly appointed by the Workmen’s Compensation Commission and, in the event that we go to trial, we might get more money than we’re being offered today, we might get the same thing, we might get less and might conceivably get nothing at all. You understand that?

“A. Yes.”

(After examination by the Referee.)

“Mr. Wilson: May I ask: Did you receive some other benefits that you’ve got, some money in the bank? How much money do you have in the bank right now?

“A. $4,000.00 in savings certificates.

“Mr. Wilson: You have $4,000.00 left in a savings account, which she is going to add this money to. Thank you.

“I would just like to add this, your Honor, too, that there is a third party action in this case in which the employer has taken what we feel is an inconsistent position. In the Circuit Court of Oscoda County, they have filed an affirmative claim that Mr. Bugg died within the scope of his employment. Of course, it is not binding. I understand the true party is the Workmen’s Compensation carrier. The Workmen’s Compensation carrier has agreed to waive all rights of subrogation in this third party case so that in the event that we are successful in obtaining further sums for Mrs. Bugg in the third party action, there will be no moneys due and owing to the Workmen’s Compensation carrier.

“The Referee: I understand.

“Mr. Parthum [attorney for defendants]: Your Honor, I would only like to add for clarification: As you know, we have discussed the matter in great lengths. We have filed a notice of dispute alleging that the death of Mr. Bugg did not arise out of and in the course of the employment. There are serious legal questions involved in the compensation case. I think it would be safe to assume that Mr. Wilson and I have both taken the position that had the case been tried, regardless of the outcome, I’m sure it would have been appealed to the Appeal Board, the Court of Appeals and on up to the Supreme Court. It’s not an open and shut type thing for one side or the other, frankly. So, consequently, it is a settlement based upon our defense that the injury of Mr. Bugg and his resulting death did not arise out of and in the course of the employment.

“Mr. Wilson: That’s correct, your Honor.

“Mr. Parthum: And if there are any recovery or recoveries under the third party case, the Consolidated Underwriters as insurance carrier, Fairview Farms, Incorporated, waives any and all rights of subrogation under the third party statute.

“The Referee: Mrs. Bugg, do you understand what we’re talking about, that you might — if you are fortunate, yon might receive some more money from this other case?

“A. Yes, sir.

“The Referee: Not against the employer or insurance carrier but against this other party; and if you do receive any more money from this other case, yon won’t have to give any part of it back to the insurance company in this case, this insurance company.

“Mr. Wilson: The other case, too, your Honor, is also against the employer.

“The Referee: Oh, it is also against the employer?

“Mr. Wilson: Yes.

“Mr. Parthum: As one of the defendants.

“Mr. Wilson: As one of the defendants, the question being if he was not within the scope of his employment we are entitled to sue the employer.

“The Referee: I see. In any event, I think you understand, do you not, Mrs. Bugg?

“A. I believe so.

“The Referee: That by this settlement, you receive $12,750.00 clear to you; $2,250.00 goes to your attorney for his services. That’s satisfactory to you, is it not?

“A. Yes.

“The Referee: If you are so fortunate as to receive any money out of any other settlement from any other case later on, you will not have to give any of this money back that you are receiving now.

“Am I right now, gentlemen? Is that the understanding?

“Mr. Wilson: Yes.

“Mr. Parthum: Yes.

“The Referee: I just wanted Mrs. Bugg to understand. Do you understand that?

“A. Yes, I do.

“The Referee: In this way, you’re making what we might consider a compromise settlement of the case, your compensation case. You are getting a fairly substantial sum of money whereas, if you had a trial and if you lost it, you could end up with nothing or, if you had a favorable decision before a Referee such as myself, it might be appealed and it would take some time before you would have a final decision and it could go to other courts. It could go on for a long time. Do you understand me?

“A. Yes, sir.

“The Referee: And I believe with certain substantial legal issues in the case which I understand exist in this case, I believe the settlement is fair and in your best interests. Are you satisfied with it?

“A. Yes, I am.

“The Referee: And in a sense in settling this case, you are also perhaps acting for your son, too, if he’s going to school and he is being supported by you. Do you understand that?

“A. Yes.

“The Referee: Right, gentlemen?

“Mr. Wilson: Yes, sir.

“Mr. Parthum: Yes.

“The Referee: I think the case has been covered properly and Mrs. Bugg understands her rights. I am satisfied that the settlement is in her best interests.

“Mr. Wilson I know is a competent attorney in this field of law, and it is also evident that he was a friend of the deceased and is a personal friend of the widow and I’m sure he has done everything he can in the best interests of his client. I will approve the redemption.”

On appeal we are asked to assay the correctness of the trial court’s dismissal of the action as to defendants Fairview Farms, Incorporated and John D. Willson.

The trial judge’s reasoning whereby he arrived at the conclusion that defendants’ motion should be granted is contained in the following excerpts from the transcript of the hearing thereon:

“The Court: This Section 17.144,¹ what does that say, again?

“Mr. Thomas [attorney for plaintiff]: ‘Where the conditions of liability under this act exist, the right to the recovery of compensation benefits, as herein provided, shall be the exclusive remedy against the employer.’

“Mr. Janes [attorney for defendants]: Section 17.212² is more restrictive that 17.144. It says: merely filing a claim, period.

“The Court: I realize that. On this Section 17.212 we could rely strictly on the opinion, but it seems to me that to explain what the Supreme Court meant³ we would have to say they are finding that the representative’s action is the action of the dependents. Therefore, acting as their representative, it becomes res judicata. Even though they are different entities, one entity is acting in behalf of the other.

“To hold that it is not res judicata would be a strained finding of the scope of res judicata and collateral estoppel. Whereas under Section 17.144 we need only say that the parties agreed through their representatives that liability existed and paid money on that, and that they are not in a position to claim otherwise, without getting into the question of identity of the parties. * * *

“The Court: It appears to the Court that the decedent was an employee of the defendant Fair-view Farms, and John D. Willson was a co-servant; and that decedent’s employment status existed at the time of the accident as a general manager. By description, his services would be pretty much on a 24-hour basis, and when the accident happened he was in the community returning to the Reed Ranch in the car that he had purchased. While this might have been somewhat extra-curricular, it would nevertheless seem to be in the interest of going and coming from his place of employment during working hours. * * *

“In any event, the parties here entered into a settlement resolving the issue through their representative, as shown by Defendant’s Exhibit 1. While the identity of the parties is not exact, they certainly are such as to be bound under the principle of collateral estoppel.

“Within the meaning of the majority opinion in Jordan v. Roberts [(1967), 379 Mich 235], this case should be dismissed insofar as these two defendants are concerned. As to defendants Fairview Farms, Inc. and John D. Willson, the case is dismissed and the motion for accelerated judgment is granted as prayed.

“Mr. Janes: Thank you, Your Honor.

“Mr. Thomas: Could I ask a question. Your Honor? You are not making any decision as to the inter-relationship of Section 17.212 and 17.144?

“The Court: All I said on that point is that I believe that the facts alleged and the uncontroverted statements indicate that there is a condition of liability. Therefore Section 17.144 would apply if there were nothing more. But there is more, and that is that there has been a claim filed and money paid under the circumstances where both parties have agreed, and therefore they are estopped to deny these facts. I can see where it might be harsh to call the mere filing an irrevocable act, but once they have gone further and entered into not just a unilateral payment, but a payment that requires consent of both sides, certainly it is not harsh to apply this section 17.212 literally.”

Thus it can be seen that the trial court correctly regarded Jordan, supra, as authority for the rule that under the doctrine of res judicata, the final determination of the compensation commission is binding on that parties to the proceeding and their privies. We think he unduly extended Jordan, however.

The Jordan opinions characterized the dispute over whether John Jordan was an employee or not as a question of fact. This is misleading. John Jordan’s status as an employee was actually a conclusion of law based on a given state of facts. If such conclusion of law be actually made by a tribunal of competent jurisdiction such determination would be an adjudication by that body and under the doctrine of res judicata would be binding on the parties and those in privity with them. The Jordan Court, however, did not advert to the question of whether approval of a redemption- agreement is a determination or adjudication for the purpose of applying the doctrine of res judicata.

In any event, in this case, we need not determine the abstract question of whether an approval of a redemption agreement is a determination of the conditions of liability under the act by the compensation commission. Here, contrary to the trial judge’s ruling, the parties by agreement did not resolve that issue nor did they submit it to the referee for decision. They reserved the question for determination in this lawsuit and expressly represented to the referee that the matter was still disputed.

We do not regard this practice as impermissible under our act. We are provided no reason why the parties could not do so nor does one occur to us. “There is no good reason why parties may not settle any part of a controversy upon which they may reach agreement and leave the controverted part for litigation.” Wolverine Insurance Co. v. Klomparens (1935), 273 Mich 493 at 497.

In order to he a bar, the adjudication must be taken and rendered upon the merits. Tucker v. Rohrback (1864), 13 Mich 73. Parol evidence is admissible to ascertain whether a given question in issue was litigated, submitted and decided where the record is not conclusive and the issue of res judicata is raised. Christian v. Porter (1954), 340 Mich 300.

The conditions of liability under the act are necessarily determined by the compensation department for the purpose only of approving a redemption agreement. But this does not necessarily adjudicate the issue for all purposes.

The language of Mr. Justice Field in Cromwell v. County of Sac (1876), 94 US 351, 356 (24 L Ed 195) is in point:

“On principal, a point not in litigation in one action cannot be received as conclusively settled in any subsequent action upon a different cause, because it might have been determined in the first action.

“Various considerations, other than the actual merits, may govern a party in bringing forward grounds of recovery or defense in one action, which may not exist in another action upon a different demand, such as the smallness of the amount or the value of the property in controversy, the difficulty of obtaining the necessary evidence, the expense of the litigation, and his own situation at the time. A party acting upon considerations like these ought not to be precluded from contesting in a subsequent action, other demands arising out of the same transaction. A judgment by default only admits for the purpose of the action the legality of the demand or claim in suit: it does not make the allegations of the declaration or complaint evidence in an action upon a different claim.”

Just as a judgment by default admits the legality of the demand only for the purpose of the suit, so does an agreement of redemption admit the jurisdiction of the commission only for the purpose of approving the agreed payment.

See generally Jacobson v. Miller (1879), 41 Mich 90, 96 and Bond v. Markstrum (1894), 102 Mich 11, 17.

We hold that in light of the agreement of the parties to the compensation case that the disputed conditions of liability under the act would be reserved for determination in this law action, these defendants are estopped to raise the claim of release under MCLA § 416.1 (Stat Ann 1968 Rev § 17.212).⁴ We regard the payment by the employer pursuant to the redemption agreement under the circumstances of this case as tantamount to a voluntary payment as in Holcomb v. Bullock (1958), 353 Mich 514 and hold that it may not he pleaded in bar in the instant lawsuit.

We conclude, therefore, that the order of dismis- , sal of defendants Fairview Farms, Incorporated and John D. Willson was entered in error.

Reversed. Appellant may tax costs.

T. M. Kavanagh, C. J., and T. E. Brennan, Swainson, and Williams, JJ., concurred with T. G. Kavanagh, J.

1 “Where the conditions of liability under this act exist, the right to the recovery of compensation benefits, as herein provided, shall be the exclusive remedy against the employer.” MCLA § 411.4 (Stat Ann 1968 Rev § 17.144).

2 “If the employee, or his dependents, in case of his death, of any employer subject to the provisions of this act files any claim with, or accepts any payment from such employer, or any insurance company carrying such risks, or from the commissioner of insurance on account of personal injury, or makes any agreement, or submits any question to arbitration under this act, such action shall constitute a release to such employer of all claims or demands at law, if any, arising from such injury.” MCLA § 416.1 (Stat Ann 1968 Rev §17.212).

3 The court is referring to the opinion in Jordan v. C. A. Roberts Company (1967), 379 Mich 235.

4 PA 1969, No 317 has since repealed this section. The current comparable provision is MCLA § 418.831 (Stat Ann 1971 Cum Supp § 17.237[831]) which reads: "See. 831. Neither the payment of compensation or the accepting of the same by the employee or his dependants shall be considered as a determination of the rights of the parties under this act.”