Laub v. SOUTH CENTRAL UTAH TELEPHONE ASS'N

657 P.2d 1304, 1982 Utah LEXIS 1147

• Court: Utah Supreme Court
• Decided: December 29, 1982
• Docket: 17925, 17926
• Status: Published

Opinions

STEWART, Justice:

Plaintiffs Clark and Maude Laub obtained a judgment against the tortfeasor’s employer South Central Utah Telephone Association (South Central) for injuries suffered in an automobile accident. On a subsequent motion by South Central, the trial court reduced the judgment by the amount of plaintiffs’ economic losses previously compensated by their no-fault insurer, State Farm Mutual Insurance Company. A separate action by plaintiffs seeking contribution from State Farm for costs and attorney’s fees incurred in the suit against South Central was dismissed. Plaintiffs appeal, claiming error in the court’s modification of the final judgment and error in the dismissal of their contribution action. We reverse the modification of final judgment and affirm the denial of contribution for costs and attorney’s fees.

Plaintiffs sustained personal injury and property damage in an accident that occurred in Mojave County, Arizona, September 4, 1978. Pursuant to their no-fault insurance policy with State Farm, plaintiffs received $4,847.71 in personal injury protection (PIP) benefits from State Farm. Since plaintiffs’ damages exceeded the threshold limitations controlling tort actions against a tortfeasor, see U.C.A., 1953, § 31-41-9(l)(e), they filed suit against the tortfeasor and his employer South Central. State Farm subsequently filed notice of its claim to subrogation for the PIP benefits already paid to plaintiffs.

In December 1980, plaintiffs obtained a judgment against South Central that included amounts for damages previously compensated by the PIP benefits. To satisfy the judgment, South Central’s liability insurer, Employers of Wausau, tendered to plaintiffs two checks, one in the amount of $4,347.71, payable to plaintiffs, their attorney, and State Farm, and a second check for the balance of the judgment in the amount of $31,505.39, payable to plaintiffs and their attorney. Plaintiffs filed a Satisfaction of Judgment in January of 1981.

Wausau apparently intended the check for $4,347.71 to be reimbursement to State Farm for the PIP benefits previously paid by State Farm to plaintiffs. Plaintiffs conceded State Farm’s right to reimbursement, but withheld the check while filing a separate action to establish their right to retain a portion of the check as a contribution from State Farm for costs and attorney’s fees incurred in obtaining that check for State Farm.

State Farm, meanwhile, relying on this Court’s ruling in Allstate Insurance Co. v. Ivie, Utah, 606 P.2d 1197 (1980), realized that it had no subrogation rights with respect to the judgment obtained by their no-fault insured against South Central. Therefore, State Farm claimed no right to the $4,347.71 check held by plaintiffs and denied any liability for plaintiffs’ costs or attorney’s fees. State Farm, rather, pursued its statutory remedy, see U.C.A., 1953, § 31-41-11, by seeking reimbursement directly from Wausau in an arbitration proceeding. On June 10, 1981, the Salt Lake Arbitration Committee entered a decision in favor of State Farm, requiring Wausau to reimburse State Farm for the $4,347.71 paid to plaintiffs pursuant to the no-fault coverage.

Because plaintiffs had retained the $4,347.71 check intended for State Farm, South Central filed, on July 2, 1981, a motion under rule 60(b), Utah R.Civ.P., to reduce the judgment against them by that amount and thereby prevent a double recovery by plaintiffs and a double payment by Wausau. The trial court subsequently granted that motion and simultaneously dismissed plaintiffs’ separate action against State Farm for costs and attorney’s fees.

I. Modification of Final Judgment

Defendant South Central moved to modify a final judgment that, six months earlier, it had approved as to form and content and fully satisfied through payment by its liability insurer. To accomplish this end, South Central relies on rule 60(b), alleging not fraud, mistake, newly discovered evidence, or that the judgment was void (all but the last of which must be raised within three months of the judgment), but that the judgment should no longer have prospective application, and any other reason the Court might think of justifying relief. In relevant part the rule reads:

On motion and upon such terms as are just, the court may in the furtherance of justice relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons: ... (6) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (7) any other reason justifying relief from the operation of the judgment. The motion shall be made within a reasonable time ....

This rule brings into conflict competing interests in the finality of judgments and relief from inequitable judgments. A motion to modify a final judgment is addressed to the discretion of the trial court, the exercise of which must be based on sound legal principles in light of all relevant circumstances. The court’s determination may be reversed only upon a showing that this discretion was abused. In addition to the concerns that final judgments should not be lightly disturbed and that unjust judgments should not be allowed to stand, other factors the court should consider are whether rule 60(b) is being used as a substitute for appeal, whether the movant had a fair opportunity to make his objection at trial, and whether the motion was made within a reasonable time after entry of judgment. 7 J. Moore & J. Lucas, Moore’s Federal Practice ¶ 60.19 (2d ed. 1982).

Our consideration of these factors and the express language of rule 60(b) compel us to conclude that the trial court abused its discretion in reducing the judgment against defendant South Central. Subdivision (6) of rule 60(b) does not apply to the circumstances of this case. The third clause of subdivision (6), particularly relied on by South Central, is inapplicable because the judgment ceased to have prospective application between the parties when it was satisfied by South Central. That clause is most commonly invoked to terminate injunctions.¹

Subdivision (7) is the residuary clause of rule 60(b); it embodies three requirements: First, that the reason be one other than those listed in subdivisions (1) through (6); second, that the reason justify relief; and third, that the motion be made within a reasonable time. The reason offered by South Central as justification to reduce the judgment is that failure to reduce it will result in a partial double recovery for plaintiffs and a partial double payment by the liability insurer, Wausau. As South Central accurately states, prevention of double recovery is one of the purposes of the Utah Automobile No-Fault Insurance Act. And in keeping with that purpose, we recently upheld a trial court’s reducing the special damages of a judgment by the amount of damages previously compensated by PIP benefits. Dupuis v. Nielson, Utah, 624 P.2d 685 (1981). Dupuis followed naturally from our holding in Allstate Insurance Co. v. Ivie, Utah, 606 P.2d 1197 (1980), that a tortfeasor is not personally liable to the injured insured for special damages previously compensated by PIP benefits from the no-fault insurer, and that the injured party should therefore not be allowed even to plead for those damages. However, if a plaintiff does improperly plead for previously compensated damages and they are allowed to be included in the judgment, the court should, at the conclusion of the trial, either on its own initiative or on motion of a party, reduce the judgment by the amount of those previously compensated damages, and thereby prevent double recovery.

Assuming that the reason offered by South Central to justify relief is a reason other than those listed in subdivisions (1) through (6), does it justify relief on the facts of the instant case? We hold that it does not. Dupuis, in which relief was granted, is distinguishable from the instant case because there the judgment was modified at the conclusion of trial and before it was accepted and satisfied. In the instant case the judgment was modified long after the time for amending the judgment (pursuant to rule 59(e)) or filing an appeal had passed and long after South Central had approved and satisfied the judgment. Clearly, under Ivie, plaintiffs were not entitled to previously compensated damages. When the excessive judgment was rendered, South Central should have moved that it be reduced, as was done in Dupuis. Instead, South Central approved the judgment and paid it in full without objection, until six months later when it finally realized that plaintiffs were getting a partial double recovery.

Furthermore, both the six-month delay and the fact of prior satisfaction show that the motion was not made within a reasonable time. While we decline plaintiffs’ invitation to go so far as to say that a judgment once knowingly and voluntarily satisfied becomes extinguished and is therefore never subject to modification, see Mitchell v. Lindly, Okl., 351 P.2d 1063 (1960), we do consider the fact of prior satisfaction an important consideration in determining whether the motion to modify was made within a reasonable time. The possibility of prejudice to the nonmoving party increases significantly when the judgment has already been paid.

Federal courts construing the identical residuary clause of rule 60(b), Fed.R.Civ.P., also deny modification on similar facts. E.g., Hughes v. Sanders, 287 F.Supp. 332 (E.D.Okl.1968). In Hughes the plaintiff was injured in an automobile accident, and because he was a member of the military, the Government paid his medical expenses under an agreement that he would reimburse the Government out of any recovery obtained from the tortfeasor. Analogously, then, the Government was in the position of a no-fault insurer. Plaintiff subsequently obtained a judgment that included the value of the medical expenses already paid by the Government. Thereafter, the Government released the needy plaintiff from his reimbursement obligation, and as a result, defendant moved, prior to satisfaction, that the judgment be reduced by the sum of the compensated medical expenses pursuant to the residuary clause of rule 60(b). The court denied the motion, reasoning:

The power given to the Court by that clause, however, “should be very cautiously and sparingly invoked by the Court only in unusual and exceptional instances.” [Citation omitted.] The Court does not believe that this is such a case.

Hughes at 334. That reasoning and result are even more applicable in the instant case since plaintiffs were under no obligation to pay the $4,347.71 check over to their no-fault insurer and defendant South Central made its motion long after satisfaction.

George Thatcher Corp. v. Bullen, 108 Utah 562, 162 P.2d 421 (1945), cited by South Central in support of its motion to modify the judgment, is inapplicable because it deals with a plaintiff’s right to set aside a filed Satisfaction of Judgment when the judgment has not in fact been satisfied. Here we deal not with a motion to set aside a Satisfaction of Judgment, but with defendant’s motion to reduce a judgment previously satisfied.

In summary, then, neither subdivision (6) nor subdivision (7) of rule 60(b) affords South Central relief from the judgment against it. In view of the fact that plaintiffs’ judgment should never have included the previously compensated damages, defendant South Central’s own mistake or neglect is the cause of plaintiffs’ partial double recovery. As discussed above, South Central could have prevented this undesirable result by timely motion to strike the improper portion of the prayer for relief or to amend the judgment. This failure to act seasonably falls more accurately under subdivision (1) of rule 60(b), allowing relief from a judgment rendered by “mistake, inadvertence, surprise, or excusable neglect.” However, even if subdivision (1) had been relied on, relief would still be denied for failure to make the motion within three months of the judgment. In Richards v. Siddoway, 24 Utah 2d 314, 471 P.2d 143 (1970), we reversed the granting of a motion to correct a nonclerical error in a judgment pursuant to subdivision (1) of rule 60(b) because, as here, the motion was made too late. The time strictures of rule 60(b) are wholesome and necessary, for there must be an end to the time when judgments can be questioned. See also Ackermann v. United States, 340 U.S. 193, 198, 71 S.Ct. 209, 211, 95 L.Ed. 207 (1950) (denied relief under rule 60(b): “There must be an end to litigation someday, and free, calculated, deliberate choices are not to be relieved from.”). Furthermore, since subdivision (1) is applicable to the instant ease, subdivision (7) cannot apply and may not be used to circumvent the three-month filing period. Calder Brothers v. Anderson Signs, Inc., Utah, 652 P.2d 922 (1982). See also Pitts v. McLachlan, Utah, 567 P.2d 171 (1977).

II. Attorney’s Fees

Prior to passage of the Utah Automobile No-Fault Insurance Act in 1973, standard practice was for the insurer to compensate the insured for his economic losses and then seek reimbursement out of the insured’s subsequent judgment or settlement. To facilitate this reimbursement process, the liability insurer would typically make one check payable to both the insured and the insurer in the amount of the compensation previously paid. Another check would be made payable to the insured alone for the balance of the judgment. Because the reimbursement fund was procured by the insured, the insurer typically contributed a fair share of the costs and attorney’s fees incurred in obtaining the fund. See Transamerica Insurance Co. v. Barnes, 29 Utah 2d 101, 505 P.2d 783 (1972).

The No-Fault Act and cases construing it have significantly altered this practice. To begin with, a tortfeasor who has the required security is liable neither to the injured party nor to the no-fault insurer for reimbursement of PIP payments; therefore, the plaintiff’s prayer should not include the damages compensated by the PIP payments. Since the no-fault insured should receive no funds on behalf of the no-fault insurer, the insurer has no right of subrogation as to funds obtained by the insured through either settlement with or judgment against the tortfeasor. The no-fault insurer’s only right of reimbursement through subrogation is against the liability insurer in an arbitration proceeding. Allstate Insurance Co. v. Ivie, Utah, 606 P.2d 1197 (1980). Since the no-fault insurer ideally will not receive its reimbursement from the no-fault insured, the practice of the insurer paying to the insured a fair share of the costs and attorney’s fees is now obsolete. However, if, as in Street v. Farmers Insurance Exchange, Utah, 609 P.2d 1343 (1980), and Guaranty National Insurance Co. v. Morris, Utah, 611 P.2d 725 (1980), the parties deviate from the above-outlined practice and allow the no-fault insured to recover funds on behalf of the no-fault insurer and the no-fault insurer does in fact receive reimbursement from those funds, then the insurer must contribute to the payment of costs and attorney’s fees incurred by the insured in obtaining those funds.

The parties in the instant case deviated from proper procedure in that plaintiffs were allowed to plead for and recover previously compensated damages. Liability insurer Wausau was mistaken in its belief that reimbursement to State Farm should pass through the plaintiffs, and plaintiffs were mistaken in their belief that they could not retain the whole of it. No-fault insurer State Farm was not entitled to the reimbursement fund held by plaintiffs, made no claim to it, and received no part of it. Therefore, State Farm need not contribute to payment of plaintiffs’ costs and attorney’s fees. Plaintiffs urge that State Farm is benefitted indirectly through application of collateral estoppel in the arbitration proceeding as to issues decided at trial and should therefore bear some of the costs and attorney’s fees of trial. However, any such benefit is too remote to require a sharing of costs and fees. To require contribution under such circumstances would only multiply the disputes and litigation and thus yield a result the No-Fault Act was designed to eliminate.

Affirmed in part and reversed in part.

OAKS and DURHAM, JJ., concur.

1 . In response to Justice Howe’s dissent, the satisfied judgment clause of subdivision (6) is inapplicable because first, South Central does not rely on it, and second, the judgment South Central seeks reduced is not satisfied through payment of a different judgment (in arbitration) by a third party (Wausau).