PROASSURANCE CORPORATION V PETER M NEFCY
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STATE OF MICHIGAN
COURT OF APPEALS
PROASSURANCE CORPORATION, a/k/a
PRONATIONAL INSURANCE
CORPORATION, f/k/a PICOM, as Subrogee and
Assignee of UNIVERSAL IMAGING, INC.,
UNPUBLISHED
June 10, 2008
Plaintiff-Appellant,
v
No. 272963
Oakland Circuit Court
LC No. 2006-073299-CZ
DR. PETER NEFCY, M.D.,
Defendant-Appellee.
ON REMAND
Before: Meter, P.J., and Kelly and Fort Hood, JJ.
PER CURIAM.
This indemnification case is before us on remand by the Michigan Supreme Court “to
consider the trial court’s other grounds for denying summary disposition to the plaintiff and
granting summary disposition to the defendant.” ProAssurance Corp v Nefcy, 480 Mich 916;
739 NW2d 870 (2007). We again affirm.
I. Basic Facts and Proceedings
Sharon Smith and David Smith filed a medical malpractice action against defendant, a
radiologist, Universal Imaging, Inc. (“Universal”), and other defendants who were later
dismissed by stipulated order.1 Defendant obtained summary disposition in the underlying case
because the affidavit of merit was defective and the statute of limitations had expired, and the
Smiths’ claim against him was dismissed with prejudice. Universal did not appeal that order,
and although it obtained permission to file a third-party complaint against defendant, it failed to
do so. Universal did not seek summary disposition, and the Smiths’ case against it proceeded to
a jury trial. A special verdict form asked the jury to determine whether defendant was
Universal’s agent, whether Universal, by and through defendant, was negligent, whether Sharon
Smith had sustained injuries and damages, and whether Universal, by and through defendant,
1
Throughout this opinion, we will refer to this medical malpractice case as “the underlying
case,” the “underlying action,” or “the Smiths’ case.”
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was a proximate cause of her injuries. The jury answered each question in the affirmative and
returned a verdict against Universal, and Universal filed an appeal with this Court in Docket No.
267400. While that appeal was pending, Universal entered into settlement negotiations with the
Smiths. Although defendant was invited to participate in these negotiations, he declined to do
so. Universal reached a settlement with the Smiths, and the parties dismissed the appeal by
stipulation. Pursuant to the insurance policy issued by ProNational Insurance Corporation to
Universal, plaintiff paid the settlement amount.
As subrogee and assignee for Universal, plaintiff filed this action against defendant,
seeking indemnification and contribution and asserting that the sole basis for its liability to the
Smiths was vicarious liability for defendant’s negligence. Plaintiff moved for summary
disposition, and the trial court denied plaintiff’s motion for summary disposition. Instead, the
trial court granted defendant summary disposition regarding indemnification for the following
reasons: 1) when viewed in totality, plaintiff’s pleadings alleged both active and passive
negligence against Universal; 2) Universal failed to pursue summary disposition in the
underlying case after defendant’s dismissal, based on either its own lack of active fault or an
assertion that a derivative vicarious claim against it would be barred because the claims against
defendant, its agent, were barred; 3) Universal failed to appeal the order dismissing defendant in
the underlying case or the determination that defendant was its agent; and 4) Universal failed to
file a third-party indemnification action after the trial court granted its motion to do so. The trial
court stated:
Thus, for all of the foregoing reasons, including but not limited to the facts
that Nefcy’s liability to the underlying plaintiffs had been completely
extinguished and acceded to by the plaintiffs and Universal Imaging, that
Universal Imaging failed to pursue or obtain its own summary disposition
regarding derivative vicarious claims against it or its own active fault, and
Universal Imaging chose to settle rather than pursue its appeal challenging the
agency relationship with Defendant Nefcy, the instant Plaintiff, as
assignee/subrogee of Universal Imaging, may not seek common law
indemnification from Defendant Nefcy. Defendant Nefcy therefore is entitled to
summary disposition pursuant to MCR 2.116(I)(2).
On appeal, we affirmed the trial court’s decision denying plaintiff summary disposition
and granting defendant summary disposition. ProAssurance Corp v Nefcy, unpublished opinion
per curiam of the Court of Appeals, issued April 26, 2007 (Docket No. 272963). Because we did
not believe there was a dispute that the Smiths’ complaint against Universal alleged both active
and passive negligence, we concluded that plaintiff had failed to demonstrate that Universal had
obtained a determination that it was free of active negligence. Id., slip op at 3-4. We therefore
affirmed the trial court’s ruling. Id. at 4. Our Supreme Court reversed, concluding that we erred
in determining that the underlying complaint had alleged both active and passive negligence.
ProAssurance Corp v Nefcy, 480 Mich 916; 739 NW2d 870 (2007). Accordingly, our Supreme
Court remanded to us “to consider the trial court’s other grounds for denying summary
disposition to the plaintiff and granting summary disposition to the defendant.” Id.
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II. Analysis
We review de novo a trial court’s decision on a motion for summary disposition. Zsigo v
Hurley Medical Ctr, 475 Mich 215, 220; 716 NW2d 220 (2006). When reviewing a decision on
a motion for summary disposition pursuant to MCR 2.116(C)(10), this Court considers the
affidavits, pleadings, depositions, admissions, and other evidence in the light most favorable to
the party opposing the motion. Id. Summary disposition is appropriately granted if, except for
the amount of damages, there is no genuine issue regarding any material fact and the moving
party is entitled to judgment as a matter of law. Id.
Plaintiff seeks indemnification from defendant for its payment of the settlement amount
in the underlying case. “Generally, indemnification is an equitable doctrine that shifts the entire
burden of judgment from one tortfeasor who has been compelled to pay it, to another whose
active negligence is the primary cause of the harm.” St Luke’s Hosp v Giertz, 458 Mich 448,
453; 581 NW2d 665 (1998). “[T]he right to common-law indemnification is based on the
equitable theory that where the wrongful act of one party results in another party’s being held
liable, the latter party is entitled to restitution for any losses.” Lakeside Oakland Dev, LC v H &
J Beef Co, 249 Mich App 517, 531; 644 NW2d 765 (2002). Our Supreme Court concluded that
the Smiths had alleged only passive, i.e., vicarious, negligence against Universal. ProAssurance
Corp v Nefcy, 480 Mich 916; 739 NW2d 870 (2007). If an appellate court decides a legal issue
and remands for further proceedings, the law of the case doctrine provides that the issue will not
be decided differently in a subsequent appeal. Hill v City of Warren, 276 Mich App 299, 307308; 740 NW2d 706 (2007). Thus, Universal’s liability in the underlying case was based on
vicarious liability for defendant’s negligence.
Defendant asserts that the doctrine of res judicata bars this action because Universal
could have resolved the issues in the underlying case. Res judicata “bars a second, subsequent
action when (1) the prior action was decided on the merits, (2) both actions involve the same
parties or their privies, and (3) the matter in the second case was, or could have been, resolved in
the first.” Washington v Sinai Hosp of Greater Detroit, 478 Mich 412, 418; 733 NW2d 755
(2007). In the underlying action, defendant obtained summary disposition because the affidavit
of merit was defective and the statute of limitations had expired, and the claims against him were
dismissed with prejudice.2 In Al-Shimmari v Detroit Medical Ctr, 477 Mich 280, 284, 295; 731
NW2d 29 (2007), our Supreme Court recently held that the dismissal of a claim based on the
expiration of a limitations period constituted an adjudication on the merits pursuant to MCR
2.504(B)(3). MCR 2.504(B)(3) provides that, “Unless the court otherwise specifies in its order
2
Defendant was dismissed with prejudice from the underlying case in 2003. In 2007, our
Supreme Court decided Kirkaldy v Rim, 478 Mich 581, 586; 734 NW2d 201 (2007), holding that
a complaint and affidavit of merit toll the limitations period until the affidavit is determined to be
invalid in a subsequent proceeding. If the affidavit is successfully challenged, the appropriate
remedy is dismissal without prejudice, and the plaintiff would have the remainder of the
limitations period to file a complaint with a valid affidavit of merit. Id. In the underlying case,
the dismissal of defendant was not appealed, and the Smiths never filed another affidavit of merit
regarding defendant.
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for dismissal, a dismissal under this subrule or a dismissal not provided for in this rule, other
than a dismissal for lack of jurisdiction or for failure to join a party under MCR 2.205, operates
as an adjudication on the merits.” The order for dismissal in the underlying case does not
indicate that it was not an adjudication on the merits, and defendant was not dismissed for lack of
jurisdiction or failure to join a party. Therefore, if Al-Shimmari applies retroactively,
defendant’s dismissal in the underlying case constitutes an adjudication on the merits.
Plaintiff contends that Al-Shimmari should not be applied retroactively. Judicial
decisions generally apply retroactively, and prospective application is reserved only for exigent
circumstances, Trentadue v Buckler Lawn Sprinkler, 479 Mich 378, 400; 738 NW2d 664 (2007),
but a more flexible approach is necessary where “injustice might result from full retroactivity”,
Gladych v New Family Homes, Inc, 468 Mich 594, 606; 664 NW2d 705 (2003). When
determining whether a decision should have a full retroactive effect, the threshold question is
whether the decision “clearly establishes a new principle of law,” Trentadue, supra at 400-401;
Rowland v Washtenaw Co Rd Comm, 477 Mich 197, 220; 731 NW2d 41 (2007), or whether it
merely clarifies, extends, or interprets existing law, Bolt v Lansing, 238 Mich App 37, 44-45;
604 NW2d 745 (1999). Generally, prospective application is only appropriate where the
decision overrules “clear and uncontradicted case law”, Rowland, supra at 221, quoting Devillers
v Auto Club Ins Ass’n, 473 Mich 562, 587; 702 NW2d 539 (2005) (internal quotation marks
omitted), or “decides an issue of first impression whose resolution was not clearly
foreshadowed”, Lindsey v Harper Hosp, 455 Mich 56, 68; 564 NW2d 861 (1997). If so, then we
must consider “(1) the purpose to be served by the new rule, (2) the extent of reliance on the old
rule, and (3) the effect of retroactivity on the administration of justice.” Trentadue, supra at 400401 (internal quotation marks and citation omitted).
In Al-Shimmari, supra at 296-297, the Court overruled its decision in Rogers v Colonial
Fed S&L Ass’n, 405 Mich 607, 619 n 5; 275 NW2d 499 (1979), which stated that “An
accelerated judgment based on the 3-year statute of limitations is not an adjudication on the
merits of a cause of action.” The Rogers Court relied on Nordman v Earle Equip Co, 352 Mich
342; 89 NW2d 594 (1958), which was decided before the General Court Rules of 1963 were
adopted. Al-Shimmari, supra at 296. Further, the Rogers Court failed to address GCR 1963,
504.2, which, like MCR 2.504(B)(3), provided that dismissals pursuant to that subrule and those
not provided for in that rule operated as adjudications on the merits. Al-Shimmari, supra at 296297. Therefore, the Rogers decision was inconsistent with MCR 2.504(B)(3), and the Court AlShimmari Court overruled it, holding:
there is no reasonable reliance interest on plaintiff’s part, or on the part of
similarly situated plaintiffs, that would be undermined by the overruling of
Rogers. We do not believe that any plaintiff would have risked late service of
process, and hence lack of compliance with the statute of limitations, on the basis
that such lack of compliance, although it might result in the dismissal of a lawsuit
against an agent, would not constitute an adjudication on the merits against the
agent and therefore would not require the dismissal of a lawsuit against a
principal based on vicarious liability. [Al-Shimmari, supra at 297 n 10.]
Given that the Al-Shimmari Court applied MCR 2.504(B)(3) in overruling Rogers, and MCR
2.504(B)(3) has been in effect since 1985, Al-Shimmari does not establish a new principle of law.
Rather, it merely interprets an existing law. See Bolt, supra at 44. Further, our Supreme Court
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recently applied Al-Shimmari retroactively in Washington, supra at 418-419. Therefore, the
decision applies retroactively, and the dismissal of the Smiths’ claims against defendant in the
underlying case pursuant to MCR 2.116(C)(7) and (C)(10) constitutes an adjudication on the
merits.
We must next determine whether plaintiff and Universal are in privity. “To be in privity
is to be so identified in interest with another party that the first litigant represents the same legal
right that the later litigant is trying to assert.” Adair v Michigan, 470 Mich 105, 122; 680 NW2d
386 (2004). For privity, “a perfect identity of the parties is not required, only a substantial
identity of interests that are adequately presented and protected by the first litigant.” Id. (internal
quotations and citation omitted). Plaintiff is the assignee and subrogee of Universal. An
assignee acquires the assignor’s rights and stands in the assignor’s shoes, Professional
Rehabilitation Assoc v State Farm Mut Automobile Ins Co, 228 Mich App 167, 177; 577 NW2d
909 (1998), and a subrogee, upon satisfying an obligation to the subrogor, stands in the place of
the subrogor, attaining the same rights to recover against the third party, Citizens Ins Co of
America v American Community Mut Ins Co, 197 Mich App 707, 709; 495 NW2d 798 (1992).
Therefore, Universal represented the same legal right that plaintiff is now trying to assert, and
they are in privity. See Adair, supra at 122.
Res judicata is broadly applied, and it bars “every claim arising from the same transaction
that the parties, exercising reasonable diligence, could have raised but did not.” ANR Pipeline
Co v Dep’t of Treasury, 266 Mich App 190, 213; 699 NW2d 707 (2005). Universal’s liability in
the underlying case was based on vicarious liability for the alleged negligence of defendant, who
was dismissed with prejudice in the underlying action. Defendant’s dismissal constituted an
adjudication on the merits of the claims against him, Washington, supra at 416-417; AlShimmari, supra at 295, but Universal did not appeal that decision, even though “a summary
disposition ruling is the procedural equivalent of a trial on the merits that bars relitigation on
principles of res judicata”, Mable Cleary Trust v Edward-Marlah Muzyl Trust, 262 Mich App
485, 510; 686 NW2d 770 (2004). Nor did Universal pursue its appeal of the verdict. Similarly,
although Universal obtained permission to file a third-party complaint against defendant, it failed
to do so. Therefore, the contested matter in the instant case, whether Universal was entitled to
indemnification from defendant, could have been resolved in the underlying action, and
Universal failed to exercise reasonable diligence to raise the issue. Accordingly, we hold that res
judicata bars the instant action. The trial court properly denied plaintiff summary disposition and
granted defendant summary disposition, albeit for a different reason, and its decision will be
upheld on appeal. Spiek v Dep’t of Transportation, 456 Mich 331, 337; 572 NW2d 201 (1998);
Gleason v Dep’t of Transportation, 256 Mich App 1, 3; 662 NW2d 822 (2003).
Plaintiff argues that it only needs to show that Universal was potentially, rather than
actually, liable to the Smiths in order to pursue common-law indemnification from defendant.
See St Luke’s Hosp, supra at 454-455. However, defendant’s dismissal with prejudice from the
underlying case left no basis on which Universal could be found liable in that case. Universal’s
failure to seek relief in the underlying action—by appealing the dismissal of defendant, by
moving for summary disposition, or by pursuing its appeal—precludes it from obtaining
indemnification from defendant in the instant case.
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Affirmed.
/s/ Patrick M. Meter
/s/ Kirsten Frank Kelly
/s/ Karen Fort Hood
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