Title: Modjeski v. Federal Bakery of Winona, Inc.

State: minnesota

Issuer: Minnesota Supreme Court

Document:

240 N.W.2d 542 (1976) Lewyelln MODJESKI, Widow of George Modjeski, Deceased Employee, Relator, v. FEDERAL BAKERY OF WINONA, INC., et al., Respondents. No. 45562. Supreme Court of Minnesota. March 19, 1976. *543 Robins, Davis & Lyons and Arnold M. Bellis and James F. Dunn, St. Paul, for relator. Mahoney, Dougherty & Mahoney, Kenneth P. Gleason and Richard P. Mahoney, Minneapolis, for respondent. Heard before ROGOSHESKE, YETKA and AMDAHL, JJ., and considered and decided by the court en banc. DOUGLAS K. AMDAHL, Justice.[*] Writ of certiorari to review a decision of the Workers' Compensation Board granting credit to an employer for sums received by an employee's widow from settlement of a wrongful death action. On August 12, 1968, while in the course of his employment with Federal Bakery of Winona, Inc. (employer), George Modjeski (decedent) was fatally injured as the result of an elevator malfunction. Employers Mutual Liability Company of Wisconsin (insurer) was then employer's liability and compensation insurer. On October 3, 1968, decedent's widow, Lewyelln, was awarded workers' compensation benefits, payable by the insurer, and the latter commenced payment of weekly benefits. The widow was appointed trustee for the heirs of George Modjeski, and on March 10, 1969, commenced a wrongful death action against the insurer and Atwell, Vogel & Sterling, Inc. (AVS). The latter had been employed by the insurer to make inspections of the elevator and had made inspections prior to Mr. Modjeski's death. By order dated October 17, 1969, a motion of the insurer for summary judgment as to it was granted. The trustee and AVS settled and compromised the action for the sum of $9,300, and the trustee executed a release. The release recognized that the maximum amount payable under the workers' compensation dependency benefit award was $25,000 and *544 that the maximum wrongful death recovery was $35,000 and stated that the parties settled and compromised only the $10,000 of the wrongful death claim which was in excess of the workers' compensation liability limit. Although neither the insurer nor the employer was a party to the release, the trustee-widow and AVS attempted to affect the right of the employer and insurer to the credit provided by Minn.St.1967, § 176.061, subd. 5.[1] The intent of the parties to so limit the effect of the settlement is well stated in the following paragraph from the release: On April 3, 1970, the court approved the settlement and ordered a distribution of its proceeds whereby $5,401.23 was paid to the widow. The employer did not choose to exercise a subrogation claim against AVS but on November 28, 1973, filed a petition with the Workers' Compensation Board for credit against future compensation payments in the sum received by the widow from the settlement with AVS. The Workers' Compensation Board affirmed the findings and determination of the compensation judge granting the petition, and the widow sought review here. The issue is: Where neither the employer nor its insurer is a party to a settlement by and between a deceased employee's wrongful-death-action trustee and a third party of what is purported to be only a claim for an amount which is in excess of maximum workers' compensation benefits, is the employer precluded from exercising its right under Minn.St.1967, § 176.061, subd. 5, to "deduct from the compensation payable by [it] the amount actually received by" the employee's dependents? 1. It is clear that funds recovered by way of settlement or trial through a wrongful death action brought in behalf of an employee's dependents were not excluded from the operation of Minn.St.1967, § 176.061, subd. 5. The first sentence of the subdivision provided: The second sentence of subd. 5 is the basis for the employer's claim for credit: Minn.St. 1967, § 176.061, subd. 5, as applicable here, is "clear and free from all ambiguity," and the court may not disregard its language. Minn.St. 645.16. The right of the employee or his dependents to settle a claim against a third party without affecting the subrogation right of the employer is well established. In Liberty Mutual Ins. Co. v. Nutting Truck & Caster Co., 295 Minn. 211, 216, 203 N.W.2d 542, 545 (1973), this court stated: The court's primary concern in Liberty Mutual was to protect the employer's subrogation rights from being terminated by a settlement executed without its knowledge or consent. This concern is illuminated by the decision in Lang v. William Bros. Boiler & Mfg. Co., 250 Minn. 521, 85 N.W.2d 412 (1957). There, the court rejected the rule prevailing in some jurisdictions that the employee could not settle without the knowledge or consent of the employer, stating: The court in Lang concluded: Thus, the Lang decision specifically recognized that the settlement amount would remain subject to credit. Liberty Mutual, while discussing the insurer's subrogation rights, is silent with respect to the credit issue. It should not be given the significance of implicitly changing Lang or the statute. Relator argues that the "right" of the employee to settle separately may be negated if the insurer is permitted to forego subrogation and instead claim credit. This is so, but the statute gives the option.[3] The relator cites Enghusen v. H. Christiansen & Sons, Inc., 259 Minn. 442, 107 N.W.2d 843 (1961), as authority for the statement: "* * * [I]f there is a recovery of funds * * * which exceed amounts payable under the Workmen's Compensation Act, the compensation insurer may not use such recovery as an offset against compensation liability." In Enghusen, the insurer tried to get something for nothing since it had been reimbursed for all compensation benefits paid and payable to an employee's widow who had remarried. The court there summarized the employer's right in this manner: *546 Mr. Justice Knutson, writing for the court in Lang v. William Bros Boiler & Mfg. Co., supra, after analyzing cases involving the employer's right where the employee had settled with a third party, succinctly observed: So it must be here, and we hold that the employer's right to credit under Minn.St. 1967, § 176.061, subd. 5, was not affected by the release to which it was not a party and, therefore, was unaffected by the assertion in such release that the settlement was only of that part of the wrongful death claim which was in excess of the workers' compensation liability limit. 2. Relator, in her brief filed with this court, contends that "the insurer's so-called election of remedies to take against the widow is barred by the defense of laches." That contention is based on the fact that the insurer was provided with a copy of the petition and the order for distribution of the settlement proceeds about May 18, 1970, and the petition for credit was not filed until November 28, 1973. Thus, for more than 3½ years before it instituted the proceedings to stop the monthly compensation payments to the widow until it had received credit against compensation for the amount received by her from the settlement with AVS, the insurer had had full knowledge of the settlement, of the distribution of the settlement proceeds, and of the assertion in the settlement documents that the proceeds were not subject to a claim for credit. Unless facts exist justifying the insurer's conduct, the delay in filing for credit is inexcusable and is a defense to the claim for credit. The Workers' Compensation Board has invoked the doctrine of laches in its own proceedings. Bourdeaux v. Gilbert Motor Co., 13 Minn. W.C.D. 276 (1944); Schmillen v. Dave Schroeder Grocery, 19 Minn. W.C.D. 81 (1956). It should have done so under the circumstances of this proceeding. The problem is primarily one of factual, not legal, determination. Laches consists of more than a mere failure to act. It requires that prejudice result from the failure to act. The determination of prejudice must be based upon factual considerations and we therefore remand this matter to the Workers' Compensation Board for a hearing on, and determination of, the issue of laches. Relator is allowed $400 attorneys fees. Remanded. [*] Acting as Justice of the Supreme Court by appointment pursuant to Minn. Const. art. 6, § 2, and Minn.St. 2.724, subd. 2. [1] The designation "employer" is used in the cited subdivision and the designation "insurer" does not appear. However, the substantial identity of the two for the purposes of the subdivision has caused the courts and counsel to use the designations interchangeably in discussing the subdivision. [2] Read "and" as "or" here. Lang v. William Bros Boiler & Mfg. Co., 250 Minn. 521, 530, 85 N.W.2d 412, 419 (1957). [3] The legislature recognized the inherent problem and, in L.1969, c. 199, § 2, amended Minn. St.1967, § 176.061, subd. 6, and there provided that after deducting attorneys fees and costs from the settlement amount, one-third of the remainder should be paid to the employee or his dependents free of any claim for subrogation or credit.