North Community Healthcare, Inc v. Telford

556 N.W.2d 180 (1996) 219 Mich. App. 225

NORTH COMMUNITY HEALTHCARE, INC., Cross-Plaintiff/Appellant,
v.
John G. TELFORD, M.D., Cross-Defendant/Appellee, and
Spectrum Emergency Care, Inc., Cross-Defendants.
Loretta M. HAMILTON, Plaintiff,
v.
John G. TELFORD, M.D., Spectrum Emergency Care, Inc., North Community Healthcare, Inc., Defendants.

Docket No. 183819.

Court of Appeals of Michigan.

Submitted May 14, 1996, at Marquette. Decided October 1, 1996, at 9:00 a.m. Released for Publication December 9, 1996.

Andrews, Fosmire, Solka & Stenton, P.C. by M. Sean Fosmire and Cheryl L. Hill, Negaunee, for North Community Healthcare, Inc.

Schellinger & Doyle, S.C. by Donald P. Schneider, Brookfield, for John G. Telford, M.D., and Spectrum Emergency Care, Inc.

Before HOOD, P.J., and MARKMAN and A.T. DAVIS,^[*] JJ.

MARKMAN, Judge.

Cross-plaintiff, North Community Healthcare, Inc. (NCH), appeals as of right an order denying its motion for summary disposition and granting a motion for summary disposition in favor of cross-defendant Dr. John Telford pursuant to MCR 2.116(C)(10). We affirm.

This action arises out of a medical malpractice claim by Loretta M. Hamilton. In her complaint, Hamilton alleged that she suffered a stroke associated with her use of oral contraceptives because of Dr. Telford's failure, during two visits by her to NCH's emergency room, to properly diagnose her symptoms or to refer her to a neurologist. Dr. Telford was not an employee of NCH. Rather, NCH had a contract with Spectrum Emergency Care, Inc., under which the professional services of Dr. Telford were provided. Hamilton's claim against NCH alleged both direct liability and vicarious liability under a theory of ostensible agency.^[1] This was not a case in which NCH assumed the defense of the doctor. The contract between NCH and Spectrum did not provide for contractual indemnity. NCH demanded that Spectrum assume its defense, but Spectrum refused. NCH then filed cross-complaints against Dr. Telford and Spectrum, alleging common-law indemnity. The underlying Hamilton action was resolved pursuant to a settlement agreement under which NCH paid no portion of the settlement amount and Dr. Telford admitted no fault. NCH and Dr. Telford both moved for summary disposition of NCH's cross-complaint for common-law indemnification. The trial court denied NCH's motion and granted summary disposition for Dr. Telford.

This Court reviews de novo decisions regarding motions for summary disposition to determine if the moving party was entitled to judgment as a matter of law. Stehlik v. Johnson (On Rehearing), 206 Mich.App. 83, 85, 520 N.W.2d 633 (1994). "The right to common-law indemnification is based on the equitable principle that where the wrongful act of one party results in another being held liable, the latter party is entitled to restitution." Cameron v. Monroe Co. Probate Court, 214 Mich.App. 681, 689, 543 N.W.2d 71 (1995). In Hartman v. Century Truss Co., 132 Mich.App. 661, 665-666, 347 N.W.2d 777 (1984), this Court held that no right to common-law indemnification had been established where a jury found that the alleged indemnitor was not liable for any wrongdoing. We understand Hartman to mean that where there is a specific finding of no negligence, there can be no common-law indemnification. The Hartman Court stated that common-law indemnification "is proper only where the alleged indemnitor is found to have engaged in some wrongdoing." Id. at 665, 347 N.W.2d 777. This statement of its own holding went beyond the facts before this Court and is susceptible to an inference that a prior judicial finding that an alleged indemnitor engaged in wrongdoing is a prerequisite to common-law indemnification. That was not the issue in Hartman and need not be resolved in the instant case either. Here, the trial court cited Hartman and held:

[I]t's only a small step beyond that to reach the conclusion that, therefore, before indemnification can ultimately be determined, the liability of the active tortfeasor must be likewise determined. A settlement of a case is not such a determination.

While we agree that the settlement agreement did not constitute a finding that Dr. Telford was liable for wrongdoing, neither was it finding that he was not liable for any wrongdoing. A settlement agreement generally does not establish liability for wrongdoing, unlike a jury verdict that generally does. We accordingly find Hartman inapplicable to cases involving settlement agreements.

To determine the applicability of common-law indemnification to cases resolved by settlement agreement, we reiterate that "[t]he right to common-law indemnification is based on the equitable principle that where the wrongful act of one party results in another being held liable, the latter party is entitled to restitution." Cameron, supra at 689, 543 N.W.2d 71 (emphasis added). This Court has repeatedly defined common-law indemnification as the equitable right to restitution of a party held liable for another's wrongdoing. Paul v. Bogle, 193 Mich.App. 479, 497, 484 N.W.2d 728 (1992); Skinner v. D-M-E Corp., 124 Mich.App. 580, 584, 335 N.W.2d 90 (1983); Peeples v. Detroit, 99 Mich.App. 285, 292, 297 N.W.2d 839 (1980). We believe that payment of a portion of a settlement agreement may, under the proper circumstances, constitute being "held liable" for the "wrongful act" of another. Cameron, supra. However, this issue is not presented by the case at bar. Here, the underlying case was resolved pursuant to a settlement agreement under which NCH paid no portion of the settlement amount and Dr. Telford did not admit fault. Thus, NCH was not held vicariously liable for Dr. Telford's acts. We understand that NCH nonetheless incurred expenses in defending the underlying action. However, there is no equitable right to common-law indemnification unless the alleged indemnitee is "held liable" for another's wrongful acts. Other equitable doctrines may be available to a party who incurs attorney fees solely to defend a vicarious liability claim caused by another's wrongful acts. Here, however, NCH's attorney fees were presumably incurred to defend against Hamilton's allegations of direct liability. As the trial court noted, NCH could have avoided this situation by negotiating a contract with Spectrum that included an indemnification clause. Because NCH was not held liable for another's wrongful acts, NCH failed to state a common-law indemnification claim for which relief could be granted.^[2]

For these reasons, the trial court appropriately denied NCH's motion for summary disposition and granted summary disposition for Dr. Telford.

Affirmed.

NOTES

[*] Circuit judge, sitting on the Court of Appeals by assignment.

[1] The trial court noted that Hamilton only denied NCH's request to admit that her claim against NCH was solely for vicarious liability in case she later discovered some active negligence on NCH's part. At the time her case settled, Hamilton had not discovered any such negligence by NCH.

[2] Although summary disposition should have been granted pursuant to MCR 2.116(C)(8) rather than (C)(10), a trial court's decision will not be reversed on appeal for this reason alone. See Gray v. Pann, 203 Mich.App. 461, 464, 513 N.W.2d 154 (1994).