Filed 8 December 1988
Attorneys at Law 3.1; Hospitals 1; Physicians, Surgeons and Allied Professions 10 — medical services — assignment of personal injury settlement — disbursement of funds — attorney's failure to honor assignment An attorney who follows the disbursement provisions of N.C.G.S. 44-50 when disbursing a client's funds from a personal injury settlement cannot be held liable for the client's unpaid debt to a medical service provider who the attorney knew had obtained the client's assignment of all such funds up to the full amount of the client's debt for medical services. In order to ensure that injured parties will retain the incentive to pursue their claims, the legislature intended to provide in N.C.G.S. 44-50 that the injured party receive some part of the amount recovered for his injury by requiring third parties receiving funds for a personal injury claim to pay no more than 50 percent of the amount recovered, exclusive of attorneys' fees, to service providers.
ON discretionary review of the decision of the Court of Appeals, 88 N.C. App. 263, 362 S.E.2d 841 (1987), which affirmed judgment dismissing the plaintiff's action entered by Harrill, J., on 16 January 1987, in District Court, FORSYTH County. Heard in the Supreme Court on 13 October 1988.
Turner, Enochs, Sparrow, Boone Falk, P.A., by Wendell H. Ott and Thomas E. Cone, for the plaintiff appellant.
Henson, Henson, Bayliss Coates, by Paul D. Coates and Perry C. Henson, for the defendant appellee.
Lacy H. Thornburg, Attorney General, by John R. Corne, Henry T. Rosser, and J. Charles Waldrup, Assistant Attorneys General, for The Division of Vocational Rehabilitation Services and Division of Medical Assistance of the North Carolina Department of Human Resources and The North Carolina Memorial Hospital, amici curiae.
Justice MEYER dissenting.
Justices WEBB and WHICHARD join in this dissenting opinion.
Justice WHICHARD dissenting.
Justices MEYER and WEBB join in this dissenting opinion.
The facts are essentially undisputed in this case. The record reveals that Henry L. Clark was treated at North Carolina Baptist Hospitals, Inc. (hereinafter "the hospital") for injuries he sustained in an automobile accident. Total charges for the medical services he received from the hospital amounted to $27,579.69. Clark executed an assignment to the hospital of all amounts he had "received or shall receive as a result of" his injuries, up to the amount necessary to satisfy his indebtedness to the hospital.
The assignment read as follows: In consideration of services `rendered and/or services to be rendered by North Carolina Baptist Hospitals, Inc. ("Hospital") to Henry Clark ("Patient"), the undersigned hereby assign to the Hospital all right, title and interest in and to any compensation or payment in any form that (I, -we-) have received or shall receive as a result of or arising out of the injuries sustained by the Patient resulting in (his, -her-) hospitalization, up to the amount necessary to discharge all indebtedness to the Hospital for medical services rendered to the Patient, whenever and wherever rendered. (I, -We-) agree that this Assignment shall not relieve (me, -Us-) of any such indebtedness until actually paid. This Assignment is irrevocable and made without prejudice to any rights that (I, -we-) might have to compensation for injuries incurred by the Patient, but (I, -we-) hereby authorize and direct any person or corporation having notice of this Assignment to pay to the Hospital directly the amount of the indebtedness owed to the Hospital in connection with services rendered to the Patient. (I, -We-) further authorize and direct any person or corporation making such payments to the Hospital to accept and rely upon a written statement from the Hospital as to the amount of such indebtedness.
Clark retained the defendant, Beverly R. Mitchell, Esq., as counsel to represent him in his personal injury claim against the driver of the other automobile involved in the accident which caused his injury. The defendant Mitchell received copies of Clark's assignment in favor of the hospital. Thereafter, she settled Clark's claim for $25,000.00, the limit of the other driver's liability insurance policy.
Pursuant to N.C.G.S. 44-50, Mitchell caused the funds she had received to be distributed as follows: $6,250.00 to herself for legal fees, $5,812.50 to the hospital for medical bills, $3,562.50 for other medical bills, $45.00 to David Martin for investigative work, and the balance of $9,330.00 to Clark. The hospital later obtained a default judgment against Clark for the entire amount of its medical charges plus costs and interest. The hospital received the $5,812.50 paid to it from the funds the defendant had received on behalf of her client Clark, but the balance of the judgment against Clark remained unsatisfied. Consequently, the plaintiff hospital brought this action against the defendant Mitchell seeking damages for her failure to honor the assignment executed by Clark.
N.C.G.S. 44-50 states: Such a lien as provided for in G.S. 44-49 shall also attach upon all funds paid to any person in compensation for or settlement of the said injuries, whether in litigation or otherwise: and it shall be the duty of any person receiving the same before disbursement thereof to retain out of any recovery or any compensation so received a sufficient amount to pay the just and bona fide claims for such drugs, medical supplies, ambulance service and medical attention and/or hospital service, after having received and accepted notice thereof: Provided, that evidence as to the amount of such charges shall be competent in the trial of any such action: Provided, further, that nothing herein contained shall be construed so as to interfere with any amount due for attorney's services: Provided further, that the lien hereinbefore provided for shall in no case, exclusive of attorneys' fees, exceed fifty percent (50%) of the amount of damages recovered.
Upon timely motion by the defendant pursuant to N.C.G.S. 1A-1, Rule 41 (b), the trial court entered judgment dismissing the plaintiff's action. The plaintiff appealed to the Court of Appeals which affirmed the judgment of the trial court. We allowed discretionary review by order entered on 6 April 1988.
The only issue before us is whether an attorney who follows the disbursement provisions of N.C.G.S. 44-50 when disbursing a client's funds from a personal injury settlement can be held liable for the client's unpaid debt to a medical service provider whom the attorney knew had obtained the client's assignment of all such funds up to the full amount of the client's debt for medical services. Although the dissenters discuss other interesting questions, we consider that issue only and conclude that an attorney cannot be held liable for following the statute in such situations. Accordingly, we affirm the decision of the Court of Appeals.
Noting that a purported assignment of a claim for relief for personal injury is invalid as contrary to public policy, the Court of Appeals focused on the question of whether there is a difference between the assignment of such a claim and the assignment of proceeds resulting from the claim. That court concluded that any distinction drawn between the assignment of a claim and the assignment of the proceeds of the claim is a mere fiction; therefore, such an assignment of proceeds is a violation of public policy and invalid. After concluding that the assignment was invalid, the Court of Appeals went on to hold that the defendant had complied with the provisions of N.C.G.S. 44-50 in disbursing the funds she received in settlement of her client's personal injury claim and could not be held liable to the plaintiff hospital. We affirm the decision of the Court of Appeals, but for different reasons.
The plaintiff contends that the Court of Appeals erred in concluding that Clark's assignment of the proceeds of his personal injury claim was invalid. The plaintiff maintains that neither N.C.G.S. 44-50 nor its companion, N.C.G.S. 44-49, contains any language which suggests that they provide the exclusive means of recovery of medical expenses where a personal injury claim is involved. Furthermore, argues the plaintiff, these statutes do not contain any language which suggests the invalidity of an assignment made independently of the statutes.
The defendant concedes that a hospital may be able to recover from its own patient for the cost of medical services, independent of the lien statutes. The defendant argues, however, that while the lien statutes may not provide the exclusive method for recovery of medical expenses from an injured party where a personal injury claim or the proceeds of such a claim are involved, N.C.G.S. 44-50 provides the only mechanism by which to obtain funds from an attorney who has received them for a client in satisfaction of a personal injury claim. We agree.
We conclude that in this case Clark's attorney cannot be held liable to the hospital for failing to honor the assignment. The intent of the legislature controls the interpretation of a statute. State v. Hart, 287 N.C. 76, 213 S.E.2d 291 (1975). When the language of a statute is clear and unambiguous, the courts must give the statute its plain and definite meaning; but where a statute is ambiguous or unclear in its meaning, the courts must interpret the language to give effect to the legislative intent. In Re Banks, 295 N.C. 236, 239, 244 S.E.2d 386, 388-89 (1978). A construction of a statute which operates to defeat or impair the object of the statute must be avoided if that can reasonably be done without doing violence to the legislative language. State v. Hart, 287 N.C. at 80, 213 S.E.2d at 295.
A pertinent part of N.C.G.S. 44-50 reads as follows:
[I]t shall be the duty of any person receiving . . . [funds paid for another as satisfaction of a claim for personal injuries before disbursement thereof to retain out of any recovery or any compensation so received a sufficient amount to pay the just and bona fide claims for such drugs, medical supplies, ambulance service and medical attention and/or hospital service, after having received and accepted notice thereof . . . Provided, further, that the lien hereinbefore provided for shall in no case, exclusive of attorneys' fees, exceed fifty percent (50%) of the amount of damages recovered.
(Emphasis added.) This portion of the statute defines the duty of "any person receiving" the funds paid in settlement or compensation of a personal injury claim of another. Although the statute does not make it clear, we conclude that by directing third parties as to how to disburse funds received for personal injury claims and limiting the percentage of the balance of the recovery — after deducting attorneys' fees — to be paid to those benefitted by the statute, the legislature intended that such third parties pay no more than fifty percent of any such balance to service providers.
Our interpretation of the statute comports with the well established public policy of this state favoring settlements of claims. See Fisher v. Lumber Co., 183 N.C. 485 [ 183 N.C. 486], 111 S.E. 857 (1922); Carding Specialists v. Gunter and Cooke, 25 N.C. App. 491, 214 S.E.2d 233 (1975). An injured party's right to actually take a share of settlement proceeds from a third party who receives them on his behalf provides at least some incentive for him to settle his claim. If an injured party knows that he will never receive any money in compensation, however, he very well may refuse to settle or simply lose interest and fail to exert any effort to do so. In such a situation the hospital and other health care providers will often find themselves left without any compensation for their services. We believe that our interpretation of N.C.G.S. 44-50 increases the likelihood that such health care providers will receive at least some compensation as a result of their patient having prevailed in an action for the personal injury for which the care was provided.
The plaintiff's argument that the plain language of N.C.G.S. 44-50 does not prevent an assignment of proceeds of a personal injury claim received by a third party is not unreasonable. When read quite literally, the statute may be so construed. However, where a literal interpretation of the language of a statute would contravene the manifest purpose of the statute, the reason and purpose of the law will be given effect and the strict letter of the statute disregarded. In Re Banks, 295 N.C. at 240, 244 S.E.2d at 389. Here, a strictly literal interpretation would contravene the intent of the legislature which we believe was, in part, to provide that the injured party receive some part of the amount recovered for his injury by requiring third parties receiving funds paid for a personal injury claim to pay no more than fifty percent of the amount recovered, exclusive of attorneys' fees, to service providers.
The defendant in this case received the funds from the settlement on behalf of her client Clark and disbursed them according to the statute. Therefore, she is not liable to the plaintiff hospital for failing to pay the hospital in accord with the terms of her client's assignment, because her obligation was to follow the statutory formula for distribution of such funds.
For the foregoing reasons, which differ from those given by the Court of Appeals, we conclude that the Court of Appeals was correct in affirming the trial court's judgment dismissing the plaintiff's claim. The decision of the Court of Appeals is, therefore, affirmed.