Opinion
Docket No. 43340.
Decided November 6, 1980. Leave to appeal applied for.
Joseph H. Delaney, for plaintiff.
Christine D. Oldani and Charles T. McGorisk, for defendant Shaheen.
Norman N. Gottlieb, for defendant Daher.
On June 22, 1973, defendant Kassab Daher was a passenger in an automobile insured by plaintiff, Michigan Mutual Insurance Company. The car was involved in an accident with another vehicle, the driver of which was uninsured. Daher filed a claim with the insurance company for payment of $20,000 under the uninsured motorist provision of the policy. In return for payment, Daher, in the presence of his attorney, defendant Shaheen, signed a release and a trust agreement wherein he agreed to be a trustee in consideration of payment on his claim and to hold, for the benefit of plaintiff, all rights and claims which he had against any other parties involved in the action.
Defendants instituted suit against other parties involved in the action, including a bar. Defendant Daher received a net sum of $40,000 in settlement. Plaintiff made a demand for the $20,000 pursuant to the trust agreement but was informed that it could only be paid $2,500.
Plaintiff brought suit against defendants Shaheen and Daher. Daher moved for summary judgment based on GCR 1963, 117.2(1) and (3). Shaheen moved for summary judgment based on GCR 117.2(1). The motions were granted by the trial judge. Plaintiff appeals as of right.
Defendant Shaheen's motion for summary judgment was based on GCR 1963, 117.2(1), which is concerned with the legal sufficiency of a claim. Such a motion is tested on the pleadings alone. Todd v Biglow, 51 Mich. App. 346; 214 N.W.2d 733 (1974). In examining the pleadings, the trial court is obliged to accept every well-pled allegation as true. The court must also accept as true all conclusions that can reasonably be drawn from the factual allegations. The applicable standard is whether the plaintiff's claim, on the pleadings, is so clearly unenforceable as a matter of law that no factual development can possibly justify a right to recover. Crowther v Ross Chemical Manufacturing Co, 42 Mich. App. 426; 202 N.W.2d 577 (1972).
The trial court relied upon Rogers v Horvath, 65 Mich. App. 644; 237 N.W.2d 595 (1975), in granting Shaheen's motion for summary judgment based on GCR 1963, 117.2(1). In Rogers, this Court held that a plaintiff has no cause of action for medical malpractice against a physician who examined her on behalf of her employer in preparation for testifying before a workmen's compensation referee and not for plaintiff's benefit to diagnose or treat an ailment.
We agree with the trial court's ruling in the instant case that plaintiff's complaint does not state a claim against Shaheen upon which relief can be granted. The complaint does not allege that Shaheen was contractually committed to the plaintiff either by the written release and trust agreement or by a separate contract, express or implied. Plaintiff contends that it set forth a cause of action for breach of implied contract. To have an implied contract, however, the defendant must have received a benefit from the plaintiff, one that is inequitable for defendant to retain. Moll v Wayne County, 332 Mich. 274; 50 N.W.2d 881 (1952). Plaintiff has not indicated what benefit Shaheen received from the plaintiff. The benefit of the insurance settlement paid by plaintiff went to Daher, who was the party to the release and trust agreement.
Further, the complaint does not allege that there existed a professional attorney-client relationship between plaintiff and the defendant. In fact, the contrary is clearly implied by the fact that, throughout the complaint, Shaheen is referred to as Daher's attorney.
Thus, at most, plaintiff's complaint alleged that, although Shaheen was aware of Daher's obligations under the release and trust agreement, he assisted Daher in retaining the money. The allegation is insufficient to allege a breach of contract claim.
Defendant Daher's motion for summary judgment under GCR 1963, 117.2(1) and (3) was based on two separate grounds. Daher first alleged that the release and trust agreement relied upon by the plaintiff were executed without good and valuable consideration, rendering these agreements unenforceable. Daher admits that he signed the release and trust agreement and that the plaintiff paid Daher's claim under the plaintiff's insurance policy in consideration for Daher's signing the release and trust agreement.
In Matson v State Farm Mutual Automobile Ins Co, 65 Mich. App. 713; 238 N.W.2d 380 (1975), this Court held that an insurance contract may limit the liability of the insurer to an insured under uninsured motorist coverage by reducing the amount payable under the coverage by other sums paid to the insured by any other person or organization liable for the injury. A trust agreement was signed by the insured similar to that signed by Daher here. This Court found the agreement was supported by consideration and enforceable against the estate of the insured. No question arose in Matson as to whether the amount of payment represented by the uninsured motorist insurance coverage compensated the insured for damages suffered. The Court, in fact, was concerned that recovery on the uninsured motorist coverage and additional recovery under the dramshop act would result in a redundancy of damages.
The insured here argues that there is no consideration for the execution of the release and trust agreement because even receipt of the uninsured motorist insurance proceeds and the dramshop payment do not fully compensate him for his losses. This Court has held that the purpose of uninsured motorist coverage is to place the victim of the uninsured motorist in the same position he would have occupied had the tortfeasor been insured. Reliance Ins Co v Haney, 54 Mich. App. 237; 220 N.W.2d 728 (1974), Saari v State Farm Mutual Automobile Ins Co, 72 Mich. App. 278; 249 N.W.2d 390 (1976). We therefore agree that, unless the insured was made whole, there was not consideration for his promise to reimburse the plaintiff.
Daher's motion for summary judgment was also based on the contention that plaintiff's action is barred because it is contrary to and in violation of public policy. Daher argues that public policy requires that the trust agreement be interpreted to entitle the insurer to be subrogated to the proceeds of any settlement only if the injured party has been fully compensated for his losses. Plaintiff contends that the sole interpretation of the trust agreement imposes no conditions on the right of the insurance company to be subrogated to the proceeds of any settlement or judgment from any person legally responsible up to the amount actually paid to the insured.
We find that the trust agreement should be interpreted to compel defendant Daher to reimburse the plaintiff uninsured motorist carrier for that amount of defendant's recovery which exceeds damages defendant has suffered, including costs and attorney fees. Plaintiff is liable for the amount of damages suffered, reduced by the settlement amount, the liability not to exceed $20,000. Michigan Mutual Liability Co v Karsten, 13 Mich. App. 46; 163 N.W.2d 670 (1968), Michigan Mutual Liability Co v Mesner, 2 Mich. App. 350; 139 N.W.2d 913 (1966). Thus, Daher is entitled to be compensated for his injuries, but only to the extent of his actual loss, including costs and attorney fees; double recovery is not permitted.
The issue of whether the insured has been fully compensated or whether there has been duplicate recovery has not been determined. Therefore, summary judgment was improper.
Affirmed as to defendant Shaheen; reversed and remanded as to defendant Daher for a determination of the amount of his damages.
I agree with the majority that defendant Shaheen bears no liability to the plaintiff, having never formed an attorney-client relationship with it. I also agree that the insurer's recovery of the $20,000 in uninsured motorist benefits that it paid to defendant Daher must be conditioned on Daher's full recovery for his injury. However, I cannot accept the reasoning that has led the majority to their conclusion on this point.
The priorities in Daher's recovery set by the majority are those that would result under the equitable principles of subrogation, also called in the cases "common law subrogation" or "legal subrogation". This device imposes the equivalent of an equitable trust upon the recovery of an injured person in favor of an insurer who has paid the loss in part or in full; the limit of the insurer's right is the amount by which the insurance payment and the insured's recovery from third parties exceeds his actual loss. No contract is required to give rise to an equitable subrogation. See Washtenaw Mutual Fire Ins Co v Budd, 208 Mich. 483; 175 N.W. 231 (1919), and Union Ins Society of Canton v Consolidated Ice Co, 261 Mich. 35; 245 N.W. 563 (1932).
However, when an insured contracts for benefits from an insurer and makes "subrogation" promises that are inconsistent with the ordinary rules of equitable subrogation, the contract controls their relationship, which is sometimes described as "conventional" subrogation. This precedence of contract over the unaided operation of law was recognized in Consolidated Ice, supra, and discussed briefly in Hoosier Condensed Milk Co v Doner, 96 Ohio App. 84; 121 N.E.2d 100 (1951), and Hardware Mutual Ins Co v Dunwoody, 194 F.2d 666 (CA 9, 1952). It was applied to the detriment of insureds in Travelers Indemnity Co v Ingebretsen, 38 Cal.App.3d 858; 113 Cal.Rptr. 679 (1974), and Pettengill v New Hampshire Ins Co, 129 Vt. 23; 270 A.2d 883 (1970). In the former case, the insured claimed that the conventional subrogation to which he had agreed would prevent full recovery for his loss. Cf., Detroit v Bridgeport Brass Co, 28 Mich. App. 54; 184 N.W.2d 278 (1970), lv den 384 Mich. 828 (1971).
In Matson v State Farm Mutual Automobile Ins Co, 65 Mich. App. 713; 238 N.W.2d 380 (1975), this Court enforced a conventional subrogation arising from a "Trust Agreement" written into the policy obligating an insurer to pay uninsured motorist benefits, upholding the trial court's judgment that the insurer was entitled to pro tanto recovery of its payment from whatever recovery the decedent-insured's representative might have against third parties. In my opinion, Matson's enforcement of a contractually created "subrogation" right should control here, if it is shown that the plaintiff and the defendant formed a binding contract to that effect, for this "trust agreement" explicitly grants the insurer priority in the plaintiff's recovery from third parties.
Michigan Mutual Liability Co v Karsten, 13 Mich. App. 46; 163 N.W.2d 670 (1968), lv den 381 Mich. 792 (1968), cited by my colleagues, is not to the contrary, for that case did not consider the effect of a policy "trust agreement" on the insurer's right to participate in the insured's recovery from third party tortfeasors.
In Matson, the "trust agreement" was binding because it was shown to be a part of the agreement that gave rise to the insurer's obligation to pay uninsured motorist benefits in the first instance. On the other hand, the plaintiff in this action has relied solely on the "trust agreement" signed by defendant Daher after the loss occurred. the insurer's pleadings do not claim that the policy under which it paid the defendant bound the policyholder or persons claiming payment under the policy to hold those proceeds for the company. Thus, so far as is shown in this case, the payment to Daher was the preexisting unconditional duty of the insurer and so is not legally sufficient consideration to support his asserted obligation under the "trust agreement".
I therefore concur in the result reached by the majority.