Workers' Compensation--settlement agreement_lien extinguished
An order extinguishing a workers' compensation lien based on a contingent settlement
agreement was vacated and remanded. An agreement with a condition precedent does not give
the trial court jurisdiction under N.C.G.S. § 97_10.2(j).
MARTIN, Chief Judge.
The unnamed defendants appeal from an order of the superior
court extinguishing their workers' compensation lien against the
proceeds of plaintiff's third-party recovery against defendants
T.A. Loving Company (Loving), Shields, Inc. (Shields), and third-
party defendant Tarkett, Inc. (Tarkett). The unnamed defendants
include plaintiff's former employer, Columbus County Hospital
(Hospital); the employer's workers' compensation insurance carrier,
Reliance Insurance Company; and the insurance carrier's bankruptcy
receiver, Cambridge Integrated Services Group. Loving, a general
contractor remodeling part of the Hospital, and Shields, asubcontractor repairing flooring in the Hospital, are named
defendants but are not parties to this appeal. Likewise, third-
party defendants Orders Distributing Company, Inc. (Orders), a tile
and floor products distributor, and Tarkett, manufacturer of the
flooring tile used at Hospital, are not involved as parties in this
appeal.
On 20 August 1999, plaintiff injured his back and knee in a
fall during the course of his employment as a nurse anesthetist at
Hospital. Plaintiff sued Hospital, Loving and Shields to recover
for his personal injuries. Defendant Shields filed a third-party
complaint against third-party defendants Orders and Tarkett.
Plaintiff also pursued a workers' compensation claim against
Hospital, which was settled through a clincher agreement approved
by the North Carolina Industrial Commission in July 2001. In
addition to medical expenses paid on plaintiff's behalf, the
clincher required a one-time payment of $120,000, which discharged
the Hospital's liability to plaintiff. The Hospital's motion to
dismiss plaintiff's lawsuit against it was allowed by order of the
trial court on 17 July 2002, nunc pro tunc 3 June 2002. Defendants
Loving and Shields, along with plaintiff and third-party defendants
Orders and Tarkett, attempted to mediate plaintiff's claim on 16
October 2002, but reached an impasse.
On 9 January 2003, plaintiff's attorney wrote a letter to the
attorneys for defendants Loving and Shields and third-party
defendant Tarkett, stating in part:
Pursuant to our agreement, it is my
understanding that we have settled the above
matter with all Defendants for the total sumof $145,000.00 contingent upon a waiver of the
workers' compensation lien.
Plaintiff filed a motion on 24 January 2003 to extinguish the
workers' compensation subrogation lien in the amount of $206,669.93
claimed by defendant insurance carrier. The motion was heard on 3
March 2003 in Columbus County Superior Court. At the hearing,
plaintiff offered a copy of the 9 January 2003 letter as his sole
exhibit in support of his motion. The court found:
19. That in order to resolve this disputed
claim, and in order to bring about a
final resolution to all matters in
dispute, a settlement has been agreed
upon by the Plaintiff and the above-
captioned third parties in the above-
entitled action.
On 19 March 2003, the trial court ordered that the workers'
compensation lien of $206,669.93 should be waived in its entirety.
The record on appeal contains six assignments of error, which
are presented in two arguments by defendant Hospital in its brief.
Defendant Hospital argues that the trial court did not have
jurisdiction to reduce the worker's compensation lien or,
alternatively, that the trial court did not hold a hearing
sufficient to protect Hospital's rights to due process of law. We
agree with defendant's first argument and vacate the trial court's
order.
The question presented here is whether N.C. Gen. Stat. § 97-
10.2(j) provides the superior court with jurisdiction to adjust the
amount of a worker's compensation lien when the terms of thesettlement agreement are contingent upon such adjustment. The
statute provides, in pertinent part:
(j) Notwithstanding any other subsection in
this section, in the event that a judgment is
obtained by the employee in an action against
a third party, or in the event that a
settlement has been agreed upon by the
employee and the third party, either party may
apply to the resident superior court judge of
the county in which the cause of action arose,
where the injured employee resides or the
presiding judge before whom the cause of
action is pending, to determine the
subrogation amount. After notice to the
employer and the insurance carrier, after an
opportunity to be heard by all interested
parties, and with or without the consent of
the employer, the judge shall determine, in
his discretion, the amount, if any, of the
employer's lien, whether based on accrued or
prospective workers' compensation benefits,
and the amount of cost of the third-party
litigation to be shared between the employee
and the employer.
N.C. Gen. Stat. § 97-10.2(j)(2003)(Emphasis added).
We note that whether a trial court has subject matter
jurisdiction is a question of law, which is reviewable on appeal de
novo. See Harper v. City of Asheville, ___ N.C. App. ___, ___, 585
S.E.2d 240, 243 (2003) . Here, the trial court concluded that it
had jurisdiction because a settlement agreement existed between the
plaintiff and the third-party defendants. Plaintiff, as a
proponent of the settlement agreement, offered only the 9 January
2003 letter between counsel as evidence of the existence of a final
written agreement. According to the letter, the parties had
determined liability and a settlement amount, but the entire
agreement was contingent upon the trial court's decision regarding
the motion to waive the subrogation lien. A mediated settlement agreement, such as the one here, is
“governed by general principles of contract law.” Chappell v. Roth,
353 N.C. 690, 692, 548 S.E.2d 499, 500 (2001). Contract law
defines a condition precedent as “an event which must occur before
a contractual right arises . . . .” In re Foreclosure of Goforth
Properties, Inc., 334 N.C. 369, 375, 432 S.E.2d 855, 859 (1993).
Plaintiff's agreement with the third-party defendants and named
defendants was subject to a condition precedent, namely, a specific
ruling by the superior court on the motion to set the subrogation
amount. We interpret N.C. Gen. Stat. § 97-10.2(j) as permitting
the superior court to adjust the amount of a subrogation lien if
the agreement between the parties has been finalized so that only
performance of the agreement is necessary to bind the parties. An
agreement containing a condition precedent which must be fulfilled
before either party is bound to the contract terms does not give
the trial court jurisdiction under N.C. Gen. Stat. § 97-10.2(j).
Thus, the trial court's reduction of Hospital's lien was erroneous
because the court based its jurisdiction upon a contingent
settlement agreement containing an unfulfilled condition precedent.
Because we vacate the trial court's order based upon defendant's
first argument, we need not address the second argument. The trial
court's order waiving defendant-employer Hospital's workers'
compensation lien in its entirety is vacated and this cause is
remanded for such further proceedings as may be required for its
resolution.
Vacated and remanded.
Judges STEELMAN and GEER concur.
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