Court Opinion

ID: 2764825
Source: CourtListenerOpinion
Date Created: 2014-12-25 08:10:19.363474+00
Date Added: 2024-06-11T11:26:20.302976
License: Public Domain

STATE OF MICHIGAN

                             COURT OF APPEALS

A&D DEVELOPMENT, POWELL                                               UNPUBLISHED
CONSTRUCTION SERVICES, L.L.C., DICK                                   December 23, 2014
BEUTER d/b/a BEUTER BUILDING &
CONTRACTING, JIM’S PLUMBING &
HEATING L.L.C., f/k/a JIM’S PLUMBING &
HEATING, JEREL KONWINSKI BUILDER, and
KONWINSKI CONSTRUCTION, INC.,

                 Plaintiffs-Appellants,

v                                                                     No. 317024
                                                                      Ingham Circuit Court
MICHIGAN COMMERCIAL INSURANCE                                         LC No. 10-000879-NI
MUTUAL and ELEANOR POWELL-YODER,

                 Defendants-Appellees.

Before: K. F. KELLY, P.J., and SAWYER and METER, JJ.

PER CURIAM.

       Plaintiffs appeal as of right from an order of the trial court granting summary disposition
to defendants according to MCR 2.116(C)(8) (failure to state a claim). We affirm.

       Plaintiffs are construction industry entities that participated in the Michigan Construction
Industry Self-Insured Fund (MCISIF), a self-insured worker’s compensation fund. See MCL
418.611(1)(b)(2).1 After a vote of its membership, the MCISIF was converted to a mutual
insurance company, defendant Michigan Commercial Insurance Mutual (MCIM), and the
MCISIF Trust was created for continuing MCISIF worker’s compensation obligations.
Defendant Eleanor Powell-Yoder was the administrator of MCISIF and became President and
Chief Executive Officer of MCIM. Plaintiffs alleged conversion, negligence, breach of fiduciary

1
    MCL 418.611(2) provides, in relevant part:
                Under procedures and conditions specifically determined by the director, 2
         or more employers in the same industry with combined assets of $1,000,000.00 or
         more, or 2 or more public employers of the same type of unit, may be permitted
         by the director to enter into agreements to pool their liabilities under this act for
         the purpose of qualifying as self-insurers.

                                                 -1-
duty, violation of MCL 500.2016,2 and fraud/misrepresentation during the conversion to MCIM.
Plaintiffs asserted that they owned premiums paid to MCISIF that were in excess of the
obligations of the fund, and the surplus should have been returned to them in the form of a
dividend. Instead, plaintiffs alleged, defendants misappropriated the surplus to fund MCIM and
the MCISIF Trust.

       Plaintiffs argue on appeal that the trial court erred in granting summary disposition to
defendants. A trial court’s determination of a motion for summary disposition is reviewed de
novo. Kuznar v Raksha Co, 481 Mich 169, 175; 750 NW2d 121 (2008). Summary disposition is
appropriate under MCR 2.116(C)(8) where the nonmoving party has “failed to state a claim on
which relief can be granted.” When reviewing a motion brought under MCR 2.116(C)(8), the
court considers the pleadings alone, accepts the factual allegations in the complaint as true, and
construes them in a light most favorable to the nonmoving party. Id. at 176.

        A self-insurance fund is administered by an elected board of directors for the purpose of
providing “workers’ compensation coverage for a group of private employers in the same
industry.” 1999 AC, R 408.43d. The board of trustees is responsible for all operations of the
fund, including taking “all necessary precautions to safeguard the assets of the fund.” 1999 AC,
R 408.43i. The duties of the fund administrator include providing the board with advice
regarding the premiums charged and investing the surplus of monies. 1999 AC, R 408.43i(a).3
The administrative rules provide guidelines for investing surplus premiums. 1999 AC, R
408.43i(f), (g).

        In situations where the self-insurance fund contains “surplus monies for a fund year in
excess of the amount necessary to fulfill all obligations,” the surplus “may be declared to be
refundable by the trustees.” 1999 AC, R 408.43j(2). For example, investment income from a
self-insurance fund in a calendar year may be “returned to the fund membership.” 1999 AC, R
408.43j(4).4 Thus, the plain language of the administrative rules indicates that plaintiffs had
some interest in the surplus of the self-insurance fund as members of the fund.

        In a previous appeal, this Court concluded that “[t]he WCA’s administrative rules have
no bearing on the claims plaintiffs raise in this case.” A&D Dev v Mich Commercial Ins Mut,
unpublished opinion per curiam of the Court of Appeals, issued February 28, 2012 (Docket No.
301296), p 5. The Court reasoned that the administrative rules address only the discretionary
return of surplus funds to fund members and are concerned primarily that self-insured funds are
adequately funded. Id.

2
  MCL 500.2016 identifies practices of worker’s compensation self-insurer groups that “are
defined as unfair methods of competition and unfair and deceptive acts or practices in the
business of insurance.”
3
 The fund administrator may be a designated individual or trustee, or an individual hired by the
board of trustees. 1999 AC, R 408.43i(a).
4
  The MCISIF bylaws contain a similar provision authorizing the board of trustees to return
surplus accumulations of premiums to fund members.

                                               -2-
        Plaintiffs argue that the Court’s conclusion that WCA rules do not apply to plaintiffs’
claims was mere dicta and inapplicable to the current question. Defendants argue that the trial
court was correct in declaring the Court’s finding that WCA rules were inapplicable to the
instant question was the law of the case. The law of the case doctrine provides that “an appellate
court’s determination of an issue in a case binds lower tribunals on remand and the appellate
court in subsequent appeals.” Grievance Administrator v Lopatin, 462 Mich 235, 260; 612
NW2d 120 (2000).

        Issues that are assumed by a court while in the course of issuing an opinion, rather than
arrived at with deliberation or analysis, are not binding precedent. City of Riverview v Michigan,
292 Mich App 516, 523; 808 NW2d 532 (2011). In the first appeal, the Court was focused on
whether the WCA had special knowledge of plaintiffs’ claims and not analyzing ownership
rights over the fund. However, the Court did analyze the WCA rules as they related to plaintiffs’
claims. The claims revolve around the alleged misappropriation of self-insurance funds that
plaintiffs claim ownership of. Thus on remand, the trial court properly deferred to this Court’s
determination that the WCA rules did not address plaintiffs’ claims.

        Plaintiffs also argue that deposition testimony of John Schrock from a 2001 case
supported the claim that they owned any MCISIF surplus. The decision whether to admit or
exclude evidence is reviewed for an abuse of discretion. Elezovic v Ford Motor Co, 472 Mich
408, 419; 697 NW2d 851 (2005). The trial court does not abuse its discretion when it chooses an
outcome within the range of reasonable and principled outcomes. In re Temple Marital Trust
(After Remand), 278 Mich App 122, 128; 748 NW2d 265 (2008).

        Schrock’s testimony cited by plaintiffs—that money belonged to members who had left
and members would receive distributions after proceeds were in escrow for 10 years, even if no
longer a member—was ambiguous. Assuming Schrock was describing the surplus premiums of
a self-insured fund, it is impossible to ascertain whether his testimony at a deposition 13 years
ago in a different case would be applicable to the instant facts and circumstances.

        Plaintiffs assert that the trial court erred in finding Schrock’s deposition testimony to be
inadmissible hearsay.5 Evidence regarding a motion for summary disposition may only be
considered by the trial court “to the extent that the content or substance would be admissible as
evidence to establish or deny the grounds stated in the motion.” MCR 2.116(G)(6).
Inadmissible hearsay does not satisfy the court rule and genuine issues of material fact must be
established by admissible evidence. SSC Assoc Ltd Partnership v Gen Retirement Sys of Detroit,
192 Mich App 360, 364; 480 NW2d 275 (1991). Plaintiffs argue that the deposition was
admissible as the prior statement of a witness.

       MRE 801(d)(1) provides that a statement is not inadmissible hearsay in the following
circumstances:

5
 Hearsay is “a statement, other than one made by the declarant while testifying at the trial or
hearing, offered in evidence to prove the truth of the matter asserted.” MRE 801(c). Hearsay is
not admissible except as provided by the rules of evidence. MRE 802.

                                                -3-
               The declarant testifies at the trial or hearing and is subject to cross-
       examination concerning the statement, and the statement is (A) inconsistent with
       the declarant’s testimony, and was given under oath subject to the penalty of
       perjury at a trial, hearing, or other proceeding, or in a deposition, or (B) consistent
       with the declarant’s testimony and is offered to rebut an express or implied charge
       against the declarant of recent fabrication or improper influence or motive, or (C)
       one of identification of a person made after perceiving the person.

Here, none of the contingencies are applicable to Schrock’s statement because he did not testify
in the instant case and the statement was not offered to impeach or bolster his testimony.

         Plaintiffs also argue the testimony was admissible under MRE 803(24) because it
involved a material fact. However, if Schrock’s statement was that self-insurance fund
participants own excess premiums of the fund, then it is a statement of law and not fact. Further,
according to MRE 803(24), a statement not admissible under enumerated hearsay exceptions,
“‘but having equivalent circumstantial guarantees of trustworthiness,’” may be admitted where
the trial court determines that “‘(A) the statement is offered as evidence of a material fact, (B)
the statement is more probative on the point for which it is offered than any other evidence that
the proponent can procure through reasonable efforts, and (C) the general purpose of these rules
and the interests of justice will best be served by admission of the statement into evidence.’”
People v Yost, 278 Mich App 341, 391; 749 NW2d 753 (2008), quoting MRE 803(24). Plaintiffs
fail to show how the 2001 deposition testimony is material to the present circumstances.

       Plaintiffs also argue that Schrock’s deposition should have been admitted under MRE
804(b)(5) (deposition testimony from another proceeding) and MRE 804(b)(7) (catch-all).
However, the hearsay exceptions enumerated in MRE 804(b) are only available where the
witness in unavailable. There was no demonstration that Schrock was unavailable as a witness.

        Further, plaintiffs argue that the trial court erred in not affording the WCA’s
interpretation of the statutory scheme, evidenced through the administrative rules and Schrock’s
testimony, respectful consideration. An administrative agency’s interpretation of a statute “is
always entitled to the most respectful consideration and ought not to be overruled without cogent
reasons.” In re Complaint of Rovas Against SBC Michigan, 482 Mich 90, 103; 754 NW2d 259
(2008). However, as discussed and noted in this Court’s previous opinion, the WCA rules do not
address the issue of ownership of a self-insurance fund’s premiums in excess of its obligations.
Further, the trial court considered the cited portion of Schrock’s deposition and properly
determined that it was not relevant to the instant case. That the trial court disagreed with
plaintiff’s position does not mean it did not afford these sources respectful consideration.

        Plaintiffs argue that caselaw also supports their standing in the case as owners of the
premium surplus. In Churella v Pioneer State Mut Ins Co, 258 Mich App 260, 267; 671 NW2d
125 (2003), the Court found that “policyholders are owners of mutual insurance companies” and
are “both insureds and insurers.” Plaintiffs claim that Churella is partially analogous to the
instant circumstance because mutual insurance companies and self-insurance funds both involve
policyholders sharing in profits and losses. However, there is no showing that mutual insurance
companies and self-insurance funds were identical in organization, administration, or operation.

                                                -4-
        In In re Certified Question, 447 Mich 765, 669-670; 527 NW2d 468 (1994), the plaintiffs
were policyholders that claimed ownership of the fund’s surplus and were entitled to a
distribution “of any surplus or profit of a potential sale of the fund by the state.” These plaintiffs
also argued that the principals of mutual insurance companies and the state administered accident
fund were analogous because both are “subject to assessment if premiums are insufficient to pay
claims.” Id. at 791. The Court concluded that the accident fund was not a mutual insurance
company and claims that analogized the accident fund policyholder’s rights to those of members
of a mutual insurance company were inapposite. Id. The Court contrasted the accident fund
from a mutual insurance company, stating that accident fund policyholders had “no effective
voice in the operation or management of the enterprise,” other than selecting an advisory board,
whereas mutual insurance company policyholders had a property interest in the surplus of the
company.” In re Certified Question, 447 Mich at 669-670. The Court also concluded that the
insurance policies included no language indicating ownership or rights to a surplus and the only
statutory mention of ownership or surplus distributions was the fund’s executive director had the
discretion to pay dividends to policyholders. Id. at 788-789.

        In Health Care Ass’n Workers Comp Fund v Bureau of Workers’ Compensation Dir, 265
Mich App 236, 242-245; 694 NW2d 761 (2005), the Court relied on certain statutory provisions
and contract language in determining whether a statute that conditioned receipt of a dividend of
surplus from self-insurance funds on continued participation with the fund was constitutional.
Plaintiffs here argue that Health Care Ass’n Workers Comp Fund provided that members of the
self-insurance fund were considered owners of the surplus premiums because members’ right to
a dividend was protected. However, ownership of the surplus was not discussed in the case, and
the rights to dividends were derived from the members’ contracts with the fund and from statute.
Id. at 243-245.

        Plaintiffs argue that a 1999 disclosure statement said that the rights of MCISIF members
would not change with regard to surplus premiums and the MCISIF Trust would be set up to
benefit and protect MCISIF members. However, an issue of law regarding ownership of surplus
premiums of a self-insured fund is not to be determined by information provided in the
disclosure statement.

       Additionally, plaintiffs argue that summary disposition was premature as the discovery
period had not lapsed. The purpose of discovery is to simplify and clarify the contested issues.
Hamed v Wayne Co, 271 Mich App 106, 109; 719 NW2d 612 (2006). Generally, a motion for
summary disposition is premature when discovery on a disputed issue has not been completed.
Colista v Thomas, 241 Mich App 529, 537; 616 NW2d 249 (2000).

       Defendants were free to make a motion for summary disposition at any time. MCR
2.116(B)(2).6 Summary disposition prior to the close of discovery is appropriate if there is no
reasonable chance that further discovery will produce factual support for the nonmoving party.
Colista, 241 Mich App at 538. Plaintiffs argue that disputed material facts that were not
6
  “A motion under this rule may be filed at any time consistent with subrule (D) and subrule
(G)(1), but the hearing on a motion brought by a party asserting a claim shall not take place until
at least 28 days after the opposing party was served with the pleading stating the claim.” MCR
2.116(B)(2).

                                                 -5-
developed through depositions included the WCA and MCIM opinions regarding who owned the
surplus premiums as well as what information was shared with the WCA prior to the vote to
convert the MCISIF to MCIM. However, the trial court concluded as a matter of law that
plaintiffs could not demonstrate ownership of surplus premiums of the MCISIF. No fact
development could change this determination, and even the WCA director’s opinion on a matter
of law would not be applicable as this Court determined that WCA rules do not pertain to the
claims raised in the present dispute. No witness could provide a statute, rule, policy, or
contractual provision that provided for plaintiffs’ ownership of the surplus.

       Plaintiffs further argue that many issues of fact were disputed. This involves the
substance of plaintiffs’ claims that misrepresentations and irregularities in the conversion of the
MCISIF to MCIM resulted in the misappropriation of plaintiffs’ monies. However, these factual
disputes are not reached because plaintiff could not demonstrate an ownership interest in the
monies at issue. Because of this “insurmountable deficiency,” it was impossible for plaintiffs to
support their claims at trial and summary disposition was not premature. Bayn v Dep’t of
Natural Resources, 202 Mich App 66, 70-71; 507 NW2d 746 (1993).

       Affirmed.

                                                            /s/ David H. Sawyer
                                                            /s/ Patrick M. Meter

                                                -6-