Cynthia Yarbrough Johnson et al. v. Cross Oil Refining & Marketing, Inc., et al.

ca01-405

DIVISION I

NOT DESIGNATED FOR PUBLICATION

ARKANSAS COURT OF APPEALS

OLLY NEAL, JUDGE

CA01-405

June 5, 2002

CYNTHIA YARBROUGH JOHNSON,

STEVEN YARBROUGH, and

EVERETT YARBROUGH AN APPEAL FROM UNION COUNTY

APPELLANTS CIRCUIT COURT

V. [CIV-99-166-2]

CROSS OIL REFINING & MARKETING, INC., HONORABLE DAVID F. GUTHRIE,

BILLIE YARBROUGH, and SYSTEMS CIRCUIT JUDGE

CONTRACTING CORPORATION

APPELLEES REVERSED and REMANDED

This appeal is from the Union County Circuit Court's allocation of the proceeds of a settlement in a wrongful-death action. The sole question presented in this appeal is whether the circuit judge improperly applied the collateral-source rule. We hold that he did and reverse and remand for further proceedings.

On January 13, 1999, Clay Yarbrough died in an accident at work. Clay was survived by his wife, appellee Billie Yarbrough; his son, appellant Steven Yarbrough; his father, appellant Everett Yarbrough; and his sister, appellant Cynthia Yarbrough Johnson. Billie, as administratrix of Clay's estate, brought a wrongful-death action under Ark. Code Ann. § 16-62-102 (Supp. 2001) that was settled. After the attorney's fees, court costs, and probate costs were deducted, $428,261.29 remained to be distributed to the beneficiaries and to the workers' compensation carrier, Systems Contracting Corporation, which had a lien on thesettlement proceeds by virtue of Ark. Code Ann. § 11-9-410 (Repl. 2002). Before the hearing on the apportionment of the settlement proceeds, Billie, the only dependent entitled to workers' compensation benefits, received $22,296 in benefits and was entitled to receive another $52,704. No party disputed that, under Ark. Code Ann. § 11-9-410, the workers' compensation carrier was entitled to a first lien against the proceeds that would be satisfied before any payment would be made to the beneficiaries.

The beneficiaries disagreed as to whether the $52,704 in unpaid benefits should be awarded to Billie or be subject to division among the beneficiaries. Appellants took the position that, if Billie received that amount in addition to the full amount of her economic loss, she would receive a double recovery for the same loss. Dr. Ralph Scott, an economist, testified about Billie's economic loss (past and future wages and the value of household services) from Clay's death. He prepared two evaluations, the first in October 1999 and the second in April 2000. He used the same methodology for both reports but relied on some additional data for the April 2000 report. In his October 1999 report, he evaluated Billie's economic loss at $173,366.41. In April 2000, he found her loss to be $243,629.84.

In his decision, the circuit judge found Billie's economic loss to be the average ($208,498.12) of the two figures given by Dr. Scott. He found that Systems Contracting Corporation was entitled to reimbursement for the $22,296 in benefits it had already paid, gave it a future credit of the unpaid benefits, and relieved it of further payment obligations. He designated the $52,704 of unpaid benefits as Billie's and not subject to claim by the other beneficiaries, stating; "As $52,704 of that sum would have been paid directly to BillieYarbrough as death benefits, that amount is designated as hers and not subject to claim by the other heirs." The circuit judge explained:

The other heirs argue that such an award overlaps with the worker's compensation benefits award of $75,000. That award represented only 35% of decedent's wage loss and is unique to the widow. The statutory purpose of the award is to benefit the widow with a minimum amount and is a collateral source from which the other heirs should not benefit.

The circuit judge found that Billie was entitled to 50% of the remaining sum of $138,763.17 and awarded Steven 25%, Everett 20%, and Cynthia 5%. He stated that he had arrived at the balance of $138,763.17 by making the following computation:

$428,261.29 - balance after attorney's fees, costs and advance to the estate

- 81,000.00 - worker's compensation lien

- 208,498.12 - wages and services

$138,763.17

The circuit judge set forth the total distribution of the settlement as follows:

Systems Contracting Corporation $22,296.00

Estate of Clay Yarbrough 6,000.00

Billie Yarbrough

Unpaid Workers Compensation $ 52,704.00

Wages and services 208,498.12

AMI 2216 elements

(50% x $138,763.17) 69,381.58

330,583.70

Steven Yarbrough (25% x $138,763.17) 34,690.79

Everett Yarbrough (20% x $138,763.17) 27,752.64

Cynthia Y. Johnson (5% x $138,763.17) 6,938.16

Total payments $428,261.29

On appeal, appellants' sole argument is that the trial court erred by applying the collateral-source rule. We agree and reverse and remand.

Appellants argue that the trial judge erred in allocating the $52,704 of unpaid benefits to Billie and assert that it should have been added to the $138,768.17 to be distributed among all of the beneficiaries. They contend that the trial judge should not have applied the collateral-source rule in this context, i.e., the apportionment of the proceeds of a wrongful-death settlement. They assert that the trial judge counted Billie's loss of Clay's income twice by awarding her this amount in addition to her economic loss to which Dr. Scott testified. In response, Billie admits that the collateral-source rule should not be applied in the context of the apportionment of wrongful-death settlement proceeds but argues that the trial judge did not apply the collateral-source rule. Therefore, we must first determine whether the circuit judge applied the collateral-source rule. If he did, we must then decide whether he erred in applying it.

The collateral-source rule provides that benefits received by a plaintiff from a source that is wholly independent of and collateral to the defendant does not reduce the damages recoverable from the defendant. Moore v. Pulaski County Special Sch. Dist., 73 Ark. App. 366, 43 S.W.3d 204 (2001). Generally, recoveries from collateral sources do not redound to the benefit of a tortfeasor, even though double recovery for the same damage by the injured party may result. Id. This rule preserves the rights of subrogation for those who have aided the plaintiff; it also prevents the defendant from claiming any credit for something the plaintiff has bought, such as insurance, or has bargained for, such as job benefits. Id.

In his decision designating the $52,704 to Billie, the judge compared this money to death benefits and called it "a collateral source." In his distribution, the judge specifically separated this amount from the remainder to be distributed among all of the beneficiaries. The conclusion is, therefore, inescapable that the circuit judge did apply the collateral-source rule.

The next question we must decide is whether the circuit judge committed error in applying the collateral-source rule. In Bell v. Estate of Bell, 318 Ark. 483, 885 S.W.2d 877 (1994), the supreme court held that the collateral-source rule does not apply in the apportionment of the proceeds of a wrongful-death settlement. There, the trial judge admitted evidence of the payment of life insurance proceeds paid to the widow and social security benefits paid to her and the decedent's children in apportioning the proceeds of a wrongful-death settlement. The court noted that the distribution of wrongful-death proceeds invokes the trial court's discretion in some measure and that the appellant has the burden to show that the trial court was wrong and that prejudicial error was sustained. The court also discussed the historical distinction built into the wrongful-death statute between the proceeding to determine the liability and computation of damages recoverable from the tortfeasor and the proceeding to determine the apportionment of the award.

In rejecting the appellant's argument that the trial judge should not have considered the insurance and social security payments, the court found no public policy to support the application of the collateral-source rule in this context. The supreme court also made it clearthat those payments, as bearing on the beneficiaries' financial conditions, were among the circumstances to be considered in fixing the beneficiaries' shares of the recovery:

Appellant argues the wrongful death statute clearly contemplates the collateral source rule should be applied and cites subsection 16-62-102(f) as her authority. As we have noted, however, subsection (f) merely addresses fixing the amount of the damages when the wrongful death action is tried. In this case, by contrast, the amount of damages was reached by compromise agreement and was finalized prior to the commencement of the apportionment proceeding. Therefore, the amount of damages recovered from the wrongdoer could not have been mitigated or reduced by the introduction of evidence of collateral sources of income at the apportionment proceeding. It follows then that the public policy concern which engendered the collateral source rule - recoveries by the injured party from collateral sources shall not benefit the wrongdoer by reducing the damages award for which he is liable - and which supports the rule's application in the context of the proceeding to determine the liability and the damages recoverable from the wrongdoer is simply not an authentic consideration in the context of this proceeding to apportion those damages among the various injured parties.

In conclusion, we find, consonant with reason and the principles of sound justice, that the probate court committed no error in considering all the circumstances of the case, including the challenged third-party payments, in fixing the shares of the statutory beneficiaries before it, and hold that the collateral source rule was not applicable to this proceeding. In so holding, we do not modify the application of the collateral source rule in the context of the proceeding to determine the liability and damages recoverable from the wrongdoer. We note that to avoid any perceived prejudice, the trial court may bifurcate the issues of determining liability and fixing the damages under subsection 16-62-102(f), from the issue of fixing the shares of the statutory beneficiaries in those damages under subsection 16-62-102(g). ARCP Rule 42(b).

318 Ark. at 493, 885 S.W.2d at 882.

We find no meaningful distinction between this case and the supreme court's holding in Bell v. Estate of Bell, supra, and conclude that the circuit judge erred in applying the collateral-source rule in allocating the settlement proceeds. Accordingly, we reverse his decision.

Billie argues that, even if the trial judge improperly applied the collateral-source rule, we should affirm his decision as correct for another reason, i.e., she was the only person who sustained a significant economic loss from Clay's death. We decline to do so, however, because the trial judge should reconsider the beneficiaries' relative shares of the proceeds in light of our decision. As the court made clear in Bell v. Estate of Bell, supra, Billie's workers' compensation benefits should be considered in determining the beneficiaries' shares.

Arkansas Code Annotated section 16-62-102(f) provides that the finder of fact may fix the beneficiaries' damages for pecuniary injuries, including a spouse's loss of the deceased's services and companionship, and mental anguish resulting from the death. These factors also guide the court's determination of the apportionment of the settlement proceeds when the damages issue is not tried. Bell v. Estate of Bell, supra.

The term "pecuniary injuries" in a wrongful death action refers to the present value of benefits, including money, goods, and services that the deceased would have contributed to the claimed beneficiaries had he lived. See Lowe v. United States, 662 F. Supp. 1089 (W.D. Ark. 1987). The following factors are among those to be considered in determining pecuniary injuries:

(1) What he customarily contributed in the past and what he might reasonably have been expected to contribute had he lived;

(2) The period during which any beneficiary might reasonably expect to have received contributions from the deceased;

(3) What the deceased earned and what he might reasonably have been expected to earn in the future;

(4) What he spent for customary personal expenses and other deductions;

(5) What instruction, moral training, and supervision of education he might reasonably have given the children had he lived;

(6) His health;

(7) His habits of industry, sobriety, and thrift;

(8) His occupation;

(9) The life expectancy of the deceased and of the spouse; and

(10) The time that will elapse before each child reaches majority.

See id. at 1095.

The relationship between the deceased and the survivors is the most significant factor in determining the recovery for mental anguish. See Martin v. Rieger, 289 Ark. 292, 296, 711 S.W.2d 776, 778 (1986), where the Arkansas Supreme Court listed the following factors to be considered in evaluating that relationship:

(1) The duration and intimacy of the relationship and the ties of affection between decedent and survivor.

(2) Frequency of association and communication between an adult decedent and an adult survivor.

(3) The attitude of the decedent toward the survivor, and of the survivor toward the decedent.

(4) The duration and intensity of the sorrow and grief.

(5) Maturity or immaturity of survivor.

(6) The violence and suddenness of the death.

(7) Sleeplessness or troubled sleep over an extended period.

(8) Obvious extreme or unusual nervous reaction to the death.

(9) Crying spells over an extended period of time.

(10) Adverse effect on survivor's work or school.

(11) Change of personality of the survivor.

(12) Loss of weight by survivor and other physical symptoms.

(13) Age and life expectancy of the decedent.

We reverse and remand so that the trial judge can reconsider the beneficiaries' shares of the settlement proceeds in light of all of the relevant factors, including Billie's workers' compensation benefits.

Reversed and remanded.

Hart and Bird, JJ., agree.