Michigan Court of Appeals; Docket #275584, Unpublished
Consolidated with Henry Ford Health System v Farmers Ins Exchange
Judges Zahra, O’Connell, and K.F. Kelly; 2-1 opinion (O’Connell dissenting), per curiam
Official Michigan Reporter Citation: Not applicable, Link to Opinion
Leave to Appeal to the Michigan Supreme Court was denied 5/6/11, Link to Order
Disqualification for Unlawful Taking and Use of a Vehicle [§3113(a)]
Collateral Estoppel and Res Judicata
In this unpublished 2-1 per curiam opinion with a vigorous dissent by Judge Peter O’Connell, the Court of Appeals affirmed a bench trial declaratory judgment in favor of Farmers Insurance Exchange finding that Farmers did not have an obligation to pay no-fault PIP benefits to Rufus Young because Young was disqualified from receiving benefits under the provisions of §3113(a) of the No-Fault Act. Farmers had been assigned the claim by the Michigan Assigned Claims Facility. §3113(a) disqualifies an injured person who “was using a motor vehicle or motorcycle which he or she had taken unlawfully, unless the person reasonably believed that he or she was entitled to take and use the vehicle.” The vehicle in this case was a 2001 Kia that was owned by Nicole Williams. The vehicle was uninsured. At the time of the accident, Williams was on vacation in the Bahamas and had arranged for her cousin, Linda Lee, to take care of her young son Jalen. Linda Lee had recently moved into Williams’ house and was also not insured. Rufus Young was Linda Lee’s boyfriend and the father of two of Lee’s children. According to Lee, Williams’ sister, Cynthia Hughes, drove Williams to the airport in the Kia and upon returning from the airport, gave the car keys to Lee and told her to drive Jalen back to Williams’ house in the Kia. Williams testified that Hughes did not use the Kia to drive her to the airport. Williams also testified that she had told Lee that the Kia was not insured, which Lee acknowledged by replying that she was “not going anywhere.” Williams testified that she believed if she told Lee the vehicle was uninsured, Lee would not drive it. At all times pertinent to this case, Rufus Young did not have a valid driver’s license. His driving privileges had been terminated in 1983. Therefore, it was unlawful for him to operate any motor vehicle. On the night of Rufus’ injury, Lee became intoxicated, placed Jalen in the Kia and drove the Kia to where Young was working. After arriving at Young’s place of employment, it was apparent that Lee was too intoxicated to drive herself and Jalen home. Because he did not want Lee to drive in that condition, Young agreed to drive Lee and Jalen to Williams’ home. While Young was driving the Kia to Williams’ home, another vehicle collided with the Kia, causing injuries to Young and Lee and killing Jalen. The other driver was criminally charged but Young did not receive any traffic citation. Young testified that Williams had not given him permission to drive the Kia before she left and opined that in light of his driving record, Williams would not have allowed him use it. He further testified that he did not know if Lee had permission to drive the Kia.
In light of the testimony, the trial court found that Rufus Young was disqualified from receiving PIP benefits because “Rufus Young was operating a vehicle in violation of MCL 500.3113(a) as he was unlawfully operating said vehicle and had no reasonable belief that he was entitled to use same.” Accordingly, the trial court entered declaratory judgment in favor of Farmers Insurance Exchange that it was not obligated to pay no-fault benefits to Rufus Young.
A separate lawsuit was filed by Henry Ford Health System against Farmers Insurance Exchange seeking payment of Rufus Young’s medical expenses for care he received at Henry Ford. A jury trial occurred in that case wherein the jury rendered a verdict in favor of Henry Ford and answered “no” to a special verdict question asking “did Rufus Young use a motor vehicle at the time of the accident which he had taken unlawfully and without reasonable belief that he was entitled to take and use the vehicle.” As a result of the jury’s finding, a verdict was entered in favor of Henry Ford Hospital in the approximate amount of $157,000 for medical services it had rendered to Rufus Young as a result of injuries he sustained in the subject accident. The trial court also denied Farmers’ motion for summary disposition which asserted that the doctrine of collateral estoppel barred Henry Ford’s claim because Farmers had prevailed on the disqualification issue in the declaratory judgment case.
In the majority opinion, the Court of Appeals affirmed the declaratory judgment in favor of Farmers ruling that Rufus Young was disqualified from receiving PIP benefits under §3113(a) and reversed the verdict in favor of Henry Ford because the trial judge should have applied collateral estoppel to bar the claim of Henry Ford.
With regard to the disqualification issue, the majority opinion held:
“Lee and Young did not have consent to drive the Kia. In addition, Young was not issued a valid operator’s license and he knew it was unlawful for him to operate the Kia without a license. … Although Lee was intoxicated and unable to drive, she had money for a cab or bus. … In light of these facts, Young could not have reasonably believed that he was entitled to use the Kia. The trial court properly determined that, pursuant to MCL 500.3113(a), Young was excluded from personal protection insurance benefits.”
With regard to the issue of collateral estoppel, the Court of Appeals majority opinion concluded that Henry Ford was barred because all elements necessary to apply the collateral estoppel doctrine were satisfied in this case. First, a question of fact essential to the judgment was actually litigated in the first case where the issue was solely whether disqualification was appropriate under §3113(a). Second, the parties in the second action were either the same or in privy to the parties in the first action. In this regard, the majority concluded that although Henry Ford was not a named party in the first action, it was privy to Rufus Young under established appellate precedent which recognizes that “[a] person is in privy to a party if, after the judgment, the person has an interest in the matter affected by the judgment through one of the parties, such as by inheritance, succession, or purchase.” Rufus Young and Henry Ford shared an interest in the declaratory judgment because Young’s right to recover personal insurance protection benefits included recovering medical costs arising from the accident. The majority further noted that Henry Ford acknowledged that it knew of the related declaratory judgment lawsuit from responses to interrogatories filed in its own action. Therefore, the majority concluded,
“With this knowledge, Henry Ford could have intervened in the declaratory judgment action to protect its rights. We conclude that Henry Ford was privy to Young in the declaratory action.”
Third, the Court found that the mutuality requirement for imposition of collateral estoppel had been met in this case because the party seeking to impose collateral estoppel, Farmers Insurance Exchange, was a party in the first action and it would have been bound by judgment in that action had it gone against Farmers on this question. Therefore, mutuality existed.
Judge O’Connell wrote a lengthy dissent strongly disagreeing with the majority opinion on the disqualification issue. Judge O’Connell emphasized that the disqualification provisions of §3113(a) require that the initial taking of the vehicle be unlawful. Even if a taking is unlawful, the savings clause of this statutory provision prohibits disqualification if the injured person reasonably believed he was entitled to take and use the vehicle. The specific statutory language makes it clear that unlawful use is not sufficient to disqualify a claimant from receiving PIP benefits. The jury specifically found that the taking was not unlawful and therefore, that issue was conclusively decided. Judge O’Connell’s dissent states in pertinent part:
"In my opinion, the exclusion of PIP benefits should apply only if the injured party had the intent to steal the vehicle or, under some circumstances, the intent to joyride in the vehicle. … MCL 500.3113(a) requires that the defendant ‘had taken unlawfully’ the motor vehicle in order to forgo his entitlement to PIP benefits. I agree with the majority opinion that if defendant had unlawfully taken (i.e., stolen) this vehicle, then he would not be entitled to no-fault benefits. However, the facts of this case are clear: defendant is not the person who unlawfully took this vehicle. Defendant simply drove an intoxicated acquaintance back to her cousin’s home where she was staying at the time, taking her there in the car in which she arrived. In so doing, defendant was not using a motor vehicle that he had taken unlawfully; at most, he was using a motor vehicle that another person might have taken unlawfully. This is a far different act than stealing or even joyriding in a motor vehicle. Defendant neither had the intent to steal this vehicle nor to joyride. Since the intent element is not present, I would find that defendant is entitled to PIP benefits.”
Rufus Young filed an application for leave to appeal to the Michigan Supreme Court. Following oral argument on whether leave should be granted, the Court denied leave on May 6, 2011.