Jason Allen v. Charlevoix Abstract & Engineering Company

929 N.W.2d 804, 326 Mich. App. 658

• Court: Michigan Court of Appeals
• Decided: January 3, 2019
• Docket: 339162
• Status: Published

Opinion

Ronayne Krause, J.

In this workers' compensation matter, defendants appeal by leave granted the decision of the Michigan Compensation Appellate Commission (MCAC) that, in relevant part, declined to reform a "voluntary payment agreement" (VPA) between the parties. There is no dispute that the VPA constitutes a contract or that it contains a mathematical error. The MCAC concluded that the magistrate lacked the equitable authority to reform the parties' contract. We hold that the MCAC's determination was correct, but we choose to exercise our own equitable authority to reform the VPA. We therefore affirm, but we order the parties' VPA reformed and the matter remanded to the MCAC for entry of the corrected VPA.

I. FACTUAL BACKGROUND

On June 4, 2007, plaintiff was injured in a work-related automobile accident. Plaintiff was then employed by defendant Charlevoix Abstract & Engineering Company (Charlevoix). Defendant Accident Fund Insurance Company of America (Accident Fund) was Charlevoix's workers' compensation insurance carrier. Nonparty Harleysville Insurance Company (Harleysville) was Charlevoix's automobile insurance carrier.

Initially, Accident Fund voluntarily paid benefits to plaintiff, but it eventually ceased payments, whereupon plaintiff commenced a workers' disability compensation claim. Accident Fund promptly reinstated payment of plaintiff's weekly benefits. Shortly thereafter, plaintiff obtained a $450,000 judgment in a civil action against the driver of the other vehicle involved in the accident. Plaintiff only received $100,000 from the other driver, reflecting the limits of the other driver's insurance policy. Consequently, plaintiff collected the remaining $350,000 from Harleysville. Eventually, Accident Fund again discontinued plaintiff's disability payments, and plaintiff sought to reinstate those benefits.

The parties entered into negotiations, and they ultimately agreed that Accident Fund could set off $100,000 from plaintiff's future benefits pursuant to MCL 418.827. However, the parties were unable to agree whether Charlevoix or Accident Fund could set off the $350,000 recovery. Plaintiff and Accident Fund entered into the VPA on April 3, 2012. Under the VPA, Accident Fund would pay plaintiff $494.50 a week, but that amount would be "redeuced [sic] to $264.53 for 54.23 [weeks] beginning 3/29/12 based on Franges of $100,000.00 3rd party settlement." The parties also agreed to litigate the consequences of the $350,000 recovery. The word "Franges" in the VPA is a reference to Franges v. Gen. Motors Corp. , 404 Mich. 590 , 274 N.W.2d 392 (1979). Franges set forth how to apportion credit to a workers' compensation insurer when an employee receiving benefits also receives a money judgment against a third-party tortfeasor.

However, Accident Fund then discovered that the VPA contained a mathematical error. Stated briefly, Accident Fund argued that the VPA's " Franges worksheet" had made improper use of the benefits it had thus far paid to plaintiff. As a consequence, the remaining calculations derived from that amount were also wrong, culminating in an impossible result of negative 54.2328 weeks before full resumption of weekly workers' compensation benefits. Accident Fund provided a corrected Franges worksheet, which showed that plaintiff's temporary reduction of benefits should have been for 131.7464 weeks, instead of 54.23 weeks. Defendants filed a motion to modify or correct the VPA.

The magistrate resolved the matter of the $350,000 recovery, which is not at issue in this appeal. The magistrate also determined that the VPA did in fact contain a mathematical error but that he lacked equitable jurisdiction and therefore could not modify the parties' agreement. However, the magistrate also stated that he would have modified the agreement if he had the power to do so and that "the correct Franges numbers to be applied ... would be a future weekly rate of $264.53 for 131.7464 weeks into the future before resumption of full weekly benefits." On appeal, the MCAC affirmed the magistrate's ruling that he lacked equitable power or authority to modify the VPA. The MCAC declined to address the magistrate's "dicta" detailing how he would have modified the VPA given the power to do so. Nevertheless, the MCAC did observe that the facts in the matter were essentially undisputed.

We likewise observe that nothing in plaintiff's brief submitted to this Court appears to challenge the magistrate's finding that the VPA contained a mathematical error and acceptance of Accident Fund's calculations as correct. To the contrary, in his brief submitted to the MCAC, plaintiff affirmatively conceded that "if the MCAC reverses the magistrate's ruling on the jurisdictional issue," the correct calculation would be a reduction of weekly benefits to $264.53 for 131.7464 weeks. We therefore treat as an established and undisputed fact that the VPA did contain a mathematical error, and Accident Fund's recomputation is objectively correct.

II. STANDARD OF REVIEW

In the context of an MCAC appeal, inquiries "into the nature, scope, and elements of a remedy," including an equitable remedy, are questions of law reviewed de novo, as are questions regarding the proper construction of the Worker's Disability Compensation Act (WDCA), MCL 418.101 et seq. Auto-Owners Ins. Co. v. Amoco Prod. Co. , 468 Mich. 53 , 57, 658 N.W.2d 460 (2003). We begin by reviewing the MCAC's decision, not the magistrate's decision. Omian v. Chrysler Group LLC , 309 Mich. App. 297 , 306, 869 N.W.2d 625 (2015). "[A] decision of the [M]CAC is subject to reversal if it is based on erroneous legal reasoning or the wrong legal framework." DiBenedetto v. West Shore Hosp. , 461 Mich. 394 , 401-402; 605 N.W.2d 300 (2000). Because defendants specifically asked the MCAC to review the issues raised on appeal, those issues are properly preserved. See Auto-Owners , 468 Mich. at 65-66 , 658 N.W.2d 460 .

III. EQUITABLE POWERS OF WORKERS' COMPENSATION MAGISTRATES

The primary issue presented on appeal is whether the MCAC correctly determined that the magistrate lacked the equitable power necessary to modify the VPA. A contract is legally enforceable even if procured by fraud or mistake, and thus "plenary relief traditionally rests exclusively in equity...." Solo v. Chrysler Corp. (On Rehearing) , 408 Mich. 345 , 352, 292 N.W.2d 438 (1980). We conclude that the MCAC correctly determined that the magistrate lacked equitable jurisdiction and therefore lacked the power to modify the VPA.

"Long ago, we recognized that the right to have equity controversies dealt with by equitable methods is as sacred as the right of trial by jury." Madugula v. Taub , 496 Mich. 685 , 705, 853 N.W.2d 75 (2014) (quotation marks, citation, and brackets omitted). "That is, '[t]he cognizance of equitable questions belongs to the judiciary as a part of the judicial power, and under our Constitution must remain vested where it always has been vested heretofore.' " Id ., quoting Brown v. Buck , 75 Mich. 274 , 285, 42 N.W. 827 (1889). Thus, an administrative agency possesses the jurisdiction to address any questions within its remit, but "it must be borne in mind that it is an administrative tribunal only and not a court possessing general equitable and legal powers."

Mich. Mut. Liability Co. v. Baker , 295 Mich. 237 , 242, 294 N.W. 168 (1940) (quotation marks and citation omitted). "In the absence of an express legislative conferral of authority, an administrative agency generally lacks the powers of a court of equity." Delke v. Scheuren , 185 Mich. App. 326 , 332, 460 N.W.2d 324 (1990).

This Court has specifically observed that the MCAC's predecessor, the former Bureau of Workmen's Compensation, "lack[ed] the requisite jurisdiction of a court of equity to undertake the task of reformation of [an] insurance policy." Auto-Owners Ins. Co. v. Elchuk , 103 Mich. App. 542 , 546, 303 N.W.2d 35 (1981), relying on Baker and its progeny. Elchuk was also consistent with Scott v. Grow , 301 Mich. 226 , 3 N.W.2d 254 (1942), in which our Supreme Court observed that " 'jurisdiction to reform written agreements' " " 'is exclusively vested in courts of equity' " and not in courts of law. Scott , 301 Mich. at 238-239 , 3 N.W.2d 254 , quoting Bush v. Merriman , 87 Mich. 260 , 268, 49 N.W. 567 (1891). "Equity has exclusive jurisdiction to rescind an agreement on the ground of mutual mistake." Solo , 408 Mich. at 353 , 292 N.W.2d 438 . Consequently, it is well established that the relief sought in this matter, modification of a contract, is strictly equitable in nature, and the magistrate, as a member of an administrative tribunal, had no equitable jurisdiction.

Nevertheless, some confusion may have resulted from this Court's observation that "[w]hile the [MCAC] has no equitable jurisdiction , it is well established that it may apply equitable principles in appropriate instances to further the purposes of the [WDCA]." Lulgjuraj v. Chrysler Corp. , 185 Mich. App. 539 , 544-545, 463 N.W.2d 152 (1990) (emphasis added). To the extent Lulgjuraj can be understood to suggest that the MCAC may exercise equitable powers, such as the power to reform a contract, Lulgjuraj unambiguously conflicts with well-established and thoroughly settled caselaw from our Supreme Court to the contrary. Our Supreme Court has explained that equitable jurisdiction is not precisely the same as equitable relief and that parties sometimes conflate "equity jurisdiction with equity jurisprudence." Solo , 408 Mich. at 353 , 292 N.W.2d 438 . Nevertheless, "[e]quity has exclusive jurisdiction to rescind an agreement on the ground of mutual mistake." Id . Because Lulgjuraj was decided before November 1, 1990, it is not strictly binding pursuant to MCR 7.215(J)(1), and even if it were, we would be required to ignore it in favor of any conflicting Supreme Court precedent. See Paige v. City of Sterling Hts. , 476 Mich. 495 , 524, 720 N.W.2d 219 (2006).

In summary, the MCAC correctly determined that the magistrate lacked equitable jurisdiction and therefore lacked the power to reform or modify the VPA.

IV. THIS COURT'S POWER TO MODIFY THE VPA

Defendants argue in the alternative that we may exercise our own equitable powers to reform the VPA, and they urge us to do so. We agree that we have the power to grant the requested relief, and because both the existence and nature of the mistake is undisputed, we exercise our jurisdiction to do so.

We unambiguously have the power to grant the requested relief. Our Supreme Court "has repeatedly invoked its equitable powers to relieve a claimant from a settlement procured by fraud," and it found no reason why it should not do the same in the case of a contract founded on a mutual mistake of fact. Solo , 408 Mich. at 352-353 , 292 N.W.2d 438 . We have the discretionary power to "enter any judgment or order or grant further or different relief as the case may require" in the interest of justice. MCR 7.216(A)(7). Furthermore, "the policy against double recovery by the employee" is "repugnant to the very principles of workers' compensation." Maner v. Ford Motor Co. , 196 Mich. App. 470 , 479, 493 N.W.2d 909 (1992) (quotation marks and citation omitted), aff'd and fully adopted by the Supreme Court 442 Mich. 620 , 502 N.W.2d 197 (1993). Because there is no dispute that the VPA contains a mistake, and there is no dispute about the correct calculation, we order that the parties' VPA be reformed to reflect the correct calculation.

V. CONCLUSION AND RELIEF

We affirm the MCAC's conclusions that modifying the VPA is equitable in nature and that the magistrate lacked the equitable power to do so. We order the parties' VPA reformed to reflect the undisputed correct mathematical calculation, and we remand to the MCAC for entry of a corrected VPA. We do not retain jurisdiction. In light of the relief we hereby grant, we deem no party to have prevailed in full, and therefore direct that the parties shall bear their own costs of appeal. MCR 7.219(A).

Swartzle, P.J., and Sawyer, J., concurred with Ronayne Krause, J.