source: Caselaw Access Project

author: J. H. Gillis, J.

license: Public Domain

text:
    ASHER STUDENT FOUNDATION v CITY OF EAST LANSING
    Docket No. 77-3469.
    Submitted November 2, 1978, at Lansing.
    Decided February 20, 1979.
    Leave to appeal applied for.
    Asher Student Foundation petitioned to have certain real property, located in the City of East Lansing and owned by the foundation, declared exempt, as a charitable organization, from ad valorem real property taxation. The Michigan Tax Tribunal rendered a decision holding that the foundation’s property was not exempt for the years 1974 through 1977. The foundation appeals. Held:

    Asher Student Foundation is not a charitable institution within the meaning of the tax-exemption provisions of the general property tax law. The purpose of the foundation is to provide living quarters for certain college students of the Christian Science faith. This is not sufficiently beneficial to the general public to qualify the foundation as a charitable institution. The decision of the tribunal contains no error of law and is supported by competent, material and substantial evidence.
    Affirmed.
    1. Taxation — Exemptions — Statutory Construction.
    Tax-exemption statutes are to be strictly construed in favor of the taxing unit because exemption from taxation is the antithesis of tax equality.
    2. Taxation — Exemptions — Charity — Advancement of Religion — Statutes.
    Relief of the poor is not the sole objective of a statute which provides tax-exempt status for charitable organizations; the advancement of religion may come within the definition of "charity” (MCL 211.7; MSA 7.7).
    References for Points in Headnotes

       71 Am Jur 2d, State and Local Taxation § 326.

       71 Am Jur 2d, State and Local Taxation §§ 362, 363, 381.

       71 Am Jur 2d, State and Local Taxation § 375.

       71 Am Jur 2d, State and Local Taxation § 363.

      3. Taxation — Property Taxes — Exemptions — Charity — Nondiscrimination in Conferral of Benefits — Statutes.
    Nondiscrimination as to race, color or creed in the conferral of benefits is necessary for an organization to be considered "charitable” within the meaning of the tax-exemption provisions of the general property tax law (MCL 211.7; MSA 7.7).
    4. Taxation — Property Taxes — Exemptions — Charity — Advancement of Religion — Nondiscrimination in Conferral of Benefits — Statutes.
    An organization should offer its benefits to persons irrespective of race, color or creed, even where the advancement of religion is concerned, in order to be considered “charitable” for purposes of the tax-exemption provisions of the general property tax law (MCL 211.7; MSA 7.7).
    5. Taxation — Property Taxes — Exemptions — Charity — Religious Oriented Organization — Statutes.
    An organization is not charitable within the meaning of the tax-exemption provisions of the general property tax law merely because it is religiously oriented; to qualify as a "charity” under the general property' tax laws the organization must confer a benefit upon society in general.
    6. Statutes — Statutory Construction — Reconciling Different Statutes.
    It is the duty of the Court of Appeals, as far as practicable, to reconcile the different provisions of a statute so as to make them consistent and harmonious and to give a sensible and intelligent effect to each.
    7. Taxation — Property Taxes — Exemptions — Charity — Religious Organization — Benefits to General Public —• Statutes.
    A foundation whose purpose it is to provide living quarters for university students of the Christian Science faith is not a charitable institution within the meaning of the tax-exemption provisions of the general property tax law; it does not confer sufficient benefit to the general public (MCL 211.7; MSA 7.7).

      Dykema, Gosset, Spencer, Goodnow & Trigg (by Jack C. Radcliffe, Jr.), for plaintiff.

      McGinty, Rosewarne, Halverson, Brown & Ja

      kubiak, P.C. (by Dennis E. McGinty and Thomas M. Hitch), for defendant.
    Before: M. J. Kelly, P.J., and J. H. Gillis and M. F. Cavanagh, JJ.
   J. H. Gillis, J.

Plaintiff appeals from a decision of the Michigan Tax Tribunal entered on August 26, 1977, which held that plaintiff’s property was not exempt from ad valorem real property taxes assessed for the years 1974 through 1977.

Asher Student Foundation is a Michigan nonprofit corporation. It owns Asher House, a building located in the City of East Lansing which houses approximately 90 Michigan State University students of the Christian Science faith. The building contains living quarters for men and women, dining, kitchen and laundry facilities, lounges, administrative offices, libraries containing literature pertaining to the Christian Science religion, and two rooms set aside for the study of Christian Science and prayerful meditation. Residents are charged fees comparable to those charged by the university for dormitory rooms. These fees are the primary source of plaintiff’s funding.

Article 9, § 4 of the 1963 Michigan Constitution provides that:

"Property owned and occupied by nonprofit religious or educational organizations and used exclusively for religious or educational purposes, as defined by law, shall be exempt from real and personal property taxes.”

It has been held that this section is not self-executing. Rather, it is up to the Legislature to define what these particular institutions are. American Youth Foundation v Benona Twp, 8 Mich App 521; 154 NW2d 554 (1967).

Pursuant to its authority to grant exemptions, the Legislature has enacted MCL 211.7; MSA 7.7 which provides, in pertinent part, as follows:

"The following property shall be exempt from taxation:
"Fourth, Such real estate or personal property as shall be owned and occupied by nonprofit theater, library, benevolent, charitable, educational, or scientific institutions and memorial homes of world war veterans incorporated under the laws of this state with the buildings and other property thereon while occupied by them solely for the purposes for which they were incorporated.
"Fifth, All houses of public worship, with the land on which they stand, the furniture therein and all rights in the pews, and also any parsonage owned by any religious society of this state and occupied as such.”

Plaintiff concedes that Asher House is not a house of public worship or a parsonage. Instead, it is claimed that the purpose of Asher House is to promote the cause of Christian Science by providing a supportive living environment for certain Michigan State University students of that faith. Plaintiff argues that the advancement of religion is a charitable purpose and that Asher Student Foundation, therefore, is a charitable institution under § 7, ¶ 4, supra.

Because exemption is the antithesis of tax equality, exemption statutes are to be strictly construed in favor of the taxing unit. Michigan Baptist Homes & Development Co v Ann Arbor, 396 Mich 660; 242 NW2d 749 (1976).

Relief of the poor is not the sole charitable objective. Traditionally, the advancement of religion has also been considered "charity”.

" 'Probably the most comprehensive and carefully drawn definition of a charity that has ever been formulated is that it is a gift, to be applied consistently with existing laws, for the benefít of an indeñnite number of persons, either by bringing their hearts under the inñuence of education or religion, by relieving their bodies from disease, suffering, or constraint, by assisting them to establish themselves for life, or by erecting or maintaining public buildings or works or otherwise lessening the burdens of government.’ ” The Salvation Army v Hoehn, 354 Mo 107, 114; 188 SW2d 826 (1945). (Citations omitted.) (Emphasis supplied.) See also The Presbyterian Homes of the Synod of New Jersey v Division of Tax Appeals, 55 NJ 275; 261 A2d 143; 37 ALR3d 1181 (1970).

Michigan has recognized that the advancement of religion may come within the definition of "charity”. In Gull Lake Bible Conference Ass’n v Ross Twp, 351 Mich 269; 88 NW2d 264 (1958), the Supreme Court held that a nonprofit corporation which was organized to promote and conduct gatherings for the study of the Bible and for inspirational and evangelical addresses was a charitable corporation. The Court held that the property in question was exempt under the fourth paragraph of MCL 211.7. Gull Lake Bible Conference Ass’n v Ross Twp, supra, at 273.

In American Concrete Institute v State Tax Comm, 12 Mich App 595, 610; 163 NW2d 508 (1968), lv den, 381 Mich 782 (1968), then Judge Levin, in a concurring opinion, referred to three traditional charitable objectives, "providing relief to persons unable to care for themselves, education and religion”.

While we agree with plaintiff that the advancement of religion is a traditional charitable objective, we note Michigan has placed further limits on what constitutes a charitable institution for purposes of property tax exemptions. In Michigan Baptist Homes, supra, at 671, the Court stated: "Basically, it may be said that charity or benevolence benefit the general public without restriction.” In Auditor General v R B Smith Memorial Hospital Ass’n, 293 Mich 36, 38; 291 NW 213 (1940), the Court indicated that nondiscrimination as to race, color or creed in the conferral of benefits was necessary for an organization to be considered "charitable” within the meaning of the tax-exemption statutes. Quoting from 34 ALR 635 the Court stated the following:

"In general, it may be said that any body not organized for profit, which has for its purpose the promotion of the general welfare of the public, extending its benefits without discrimination as to race, color, or creed, is a charitable or benevolent organization within the meaning of the tax exemption statutes.” 293 Mich at 38-39.

The above case concerned the status of a hospital, not a religious organization. However, it appears that even where the advancement of religion is concerned, to be considered "charitable” the benefits should be offered to persons irrespective of race, color or creed. Thus, in determining whether a Bible camp was a charitable institution, the Court in Gull Lake Bible Conference Ass’n v Ross Twp, supra, specifically noted that no such discrimination was practiced:

" 'The plaintiff corporation was organized as a nonprofit corporation. The proofs show conclusively that it is not operated for profit. It has no stockholders. Aside from modest salaries paid to necessary employees, no individual receives any pecuniary benefit from its operation. It practices no discrimination as to race, creed or color. Having in mind the purpose for which it was formed as set forth in article 2 of its articles of association, the conclusion is inescapable that it is a charitable organization and such is the decision of this court.’ ” 351 Mich at 274. (Emphasis supplied.)

We conclude that merely because an organization is religiously oriented does not, by that fact alone, mean it is "charitable” within the meaning of § 7, H 4. To qualify under that provision the organization must confer a benefit upon society in general. Where, as in the instant case, the purpose of the organization is to benefit only a few select members of a particular sect there is not a sufficiently widespread benefit to society to characterize this as a charitable institution under § 7, ¶ 4. While such an objective may be sufficient for purpose of income tax exemptions, the taxable status of plaintiff’s property is determined by the much more strict provisions of the Michigan general property tax law. American Concrete Institute, supra, at 606.

Furthermore, it is the duty of the Court, as far as practicable, to reconcile the different provisions of a statute so as to make them consistent and harmonious, and to give a sensible and intelligent effect to each. Rohde v Wayne Circuit Judge, 168 Mich 683; 131 NW 253 (1912), King v Director of the Midland County Dep’t of Social Services,. 73 Mich App 253; 251 NW2d 270 (1977).

If we were to hold that any religious purpose constitutes a charitable objective under § 7, ¶ 4, then § 7, ¶ 5 would be rendered superfluous, for it can certainly be said that the primary purpose of houses of public worship is to advance the cause of religion. Therefore, had the Legislature intended to include any organization whose purpose was the advancement of a particular religion within the definition of "charitable institution”, there would have been no need to add ¶ 5 to § 7. The fact that the Legislature did so evidences an intent contrary to plaintiff’s position.

In light of our discussion we conclude that Asher Student Foundation is not a charitable institution within the meaning of MCL 211.7, ¶ 4. Plaintiff’s purpose is to provide living quarters for certain Christian Science students. This is not sufficiently beneficial to the general public. See also, St Mathew Lutheran Church v Delhi Twp, 76 Mich App 597; 257 NW2d 183 (1977), where this Court held that § 7, ¶ 4, has no application to property owned by a church and occupied by church employees.

Our review of the decision of the tax tribunal indicates it contains no material error of law and is supported by competent, material and substantial evidence.

Affirmed. No costs, a public question being involved.

       Current version at 1978 West’s Michigan Legislative Service, 126.


author: Allen, J.

text:
    ZIEHM v STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
    Docket No. 77-3932.
    Submitted December 19, 1978, at Detroit.
    Decided February 20, 1979.
    Leave to appeal denied, 406 Mich 959.
    Plaintiff, Nelson Ziehm, brought an action against State Farm Mutual Automobile Insurance Company on behalf of the estate of his son, David P. Ziehm, who was killed while riding as a passenger in an automobile operated by Raymond A. Beaufait. The automobile was insured by defendant under a policy containing the standard $20,000 coverage for injury to one person in one accident or $40,000 for injury to two or more persons in one accident. At trial the parties stipulated that if the trial court found the limitations to be valid, plaintiff would accept in full settlement the $20,000 defendant had already paid him. On the other hand, if the court found that a section of the no-fault automobile insurance law required residual liability coverage to be without dollar limit, defendant agreed to pay an additional $60,000 in settlement of the lawsuit against Beaufait. Summary judgment for defendant, Wayne Circuit Court, Horace W. Gilmore, J. Plaintiff appeals by leave granted. Held:

    The standard bodily injury claim limitations under the no-fault automobile insurance law are $20,000/$40,000; $20,000 for bodily injury to or death of 1 person in any one accident and $40,000 for bodily injury or death of 2 or more persons in any one accident.
    Affirmed.
    1. Automobiles — Insurance — No Fault — Insurance Code — Property Damage Coverage — Statutes.
    The former $10,000 property damage limitation under the Insuranee Code of 1956 has been repealed by a section of the no-fault automobile insurance law which raised the limits for property damage claims to $1,000,000 (MCL 500.3121; MSA 24.13121).

      References for Points in Headnotes

       New Topic Service Am Jur 2d, No-Fault Insurance § 15.

       New Topic Service Am Jur 2d, No-Fault Insurance §§ 27, 31.

       New Topic Service Am Jur 2d, No-Fault Insurance §§ 21, 26, 27.

       New Topic Service Am Jur 2d, No-Fault Insurance § 9.

       73 Am Jur 2d, Statutes §§ 393, 395.

       73 Am Jur 2d, Statutes § 250.

       New Topic Service Am Jur 2d, No-Fault Insurance § 1.

       73 Am Jur 2d, Statutes § 168.

       73 Am Jur 2d, Statutes §§ 171,178.

      2. Automobiles — Insurance — No Fault — Death — Bodily Injury Coverage — Statutes.
    The bodily injury claim limitations under the no-fault automobile insurance law are $20,000/$40,000; $20,000 for bodily injury to or death of 1 person in any one accident and $40,000 for bodily injury to or death of 2 or more persons in any one accident (MCL 500.3009; MSA 24.13009).
    3. Automobiles — Insurance — No Fault — Medical Coverage — Death — Disfigurement — Impairment of Body Function — Statutes.
    Medical expenses are payable without limit under a section of the no-fault automobile insurance law; an injured person is protected without limit except for death, permanent serious disfigurement or serious impairment of body function (MCL 500.3107; MSA 24.13107).
    4. Automobiles — Insurance — No Fault — Torts — Damages — Recovery by Insurer.
    An insurer is entitled to reimbursement from a tort recovery by an insured under the no-fault automobile insurance law only to the extent that the tort recovery includes damages for which the insurer paid benefits.
    5. Statutes — Repeal by Implication — Legislative Intent.
    Repeal of a statute by implication is not favored by the courts and an implied repeal is found to have occurred only upon a clear showing of legislative intent.
    6. Statutes — Construction.
    All words, phrases, clauses and sections of a statute are to be considered in construing the statute.
    7. Automobiles — Insurance — No Fault — Economic and Noneconomic Losses.
    A primary concern of the no-fault automobile insurance law is the quick and full payment for certain economic losses rather than payment for all losses, economic or noneconomic.
    8. Statutes — Construction — Administrative Interpretation.
    Construction of a statute by those charged with administration thereof is given great weight and that construction is not to be overruled without the most cogent of reasons.
    9. Statutes — Construction —• Subsequent Amendments — Legislative Intent.
    A subsequent amendment may be used to make clear the legislative intent of a statute as first enacted where uncertainty of legislative intent exists in the statute.

      Lopatin, Miller, Bindes, Freedman & Bluestone (by Michael Gagleard), for plaintiff.

      Eggenberger, Eggenberger, McKinney & Weber, for defendant.
    Before: M. F. Cavanagh, P.J., and Bashara and Allen, JJ.
   Allen, J.

This case involves the construction of § 3131 of Michigan’s no-fault insurance act, MCL 500.3101 et seq.; MSA 24.13101 et seq., as that section was worded prior to its amendment October 17, 1978. Defendant insurer contends that under said section the amount of residual liability coverage is limited to $20,000—that being the amount of coverage provided in the insurance policy. Plaintiff claims that prior to the amendment of October 17, 1978, § 3131 called for residual liability coverage without any dollar limit and by implication repealed the $20,000/$40,000 limitations contained in the financial responsibility act, MCL 257.520; MSA 9.2220, and § 3009 of the Insurance Code, MCL 500.3009; MSA 24.13009. In an opinion delivered from the bench on July 22, 1977, Judge Horace Gilmore adopted defendant’s interpretation of the statute and, on August 3, 1977, granted defendant’s motion for summary judgment. It is from entry of that judgment that plaintiff appeals.

The judgment grew out of a June 23, 1975, automobile accident in which plaintiff’s son, David Paul Ziehm, a passenger in an automobile operated by Raymond Anthony Beaufait, was killed. The automobile was insured by defendant State Farm Mutual Insurance Company under a policy containing the standard limitations of $20,000 for injury to one person in one accident or $40,000 for injury to two or more persons in one accident. Said amounts are the minimum amounts of liability coverage required under Michigan’s financial responsibility act, supra, and Insurance Code, supra. At trial the parties stipulated that if the trial court found the limitation to be valid, plaintiff would accept in full settlement the $20,000 defendant had already paid him. On the other hand, if the court found that § 3131 required residual liability coverage to be without dollar limit, defendant agreed to pay an additional $60,000 in settlement of the lawsuit against Beaufait.

The issue raised is of first impression and of considerable significance to the insurance industry and the practicing bar. Therefore, plaintiff’s excellently presented argument will be responded to in detail. Until its amendment in October, 1978, § 3131 read as follows:

"Residual liability insurance shall cover bodily injury and property damage which occurs within the United States, its territories and possessions or in Canada. This insurance shall afford coverage equivalent to that required as evidence of automobile liability insurance under the financial responsibility laws of the place in which the injury or damage occurs. In this state this insurance shall afford coverage for automobile liability retained by section 3135.” MCL 500.3131; MSA 24.13131.

Section 3135 reads in part:

"A person remains subject to tort liability for noneconomic loss caused by his ownership, maintenance or use of a motor vehicle only if the injured person has suffered death, serious impairment of body function or permanent serious disfigurement.” MCL 500.3135; MSA 24.13135.

Plaintiff begins his argument by noting that in Advisory Opinion re Constitutionality of 1972 PA 294, 389 Mich 441, 476; 208 NW2d 469 (1973), the Supreme Court itself stated that certain portions of the Insurance Code were repealed by implication by passage of Michigan’s no-fault law. An obvious example is the repeal of the $10,000 property limitation contained in § 3009 of the Insurance Code by reason of the new property damage limitations set forth in the no-fault act, MCL 500.3121; MSA 24.13121. Ergo, says plaintiff, it is equally logical to conclude that no-fault also repealed the $20,000/$40,000 personal injury limitations contained in § 3009. We disagree. The $10,-000 property limitation was in effect repealed by the contradictory property limitation provisions set forth in § 3121 of the no-fault legislation whereas no section of the no-fault statute contains similar provisions contradictory to the $20,000/ $40,000 bodily injury limitations. In our opinion, legislative silence, viz.—the failure of the Legislature to state any contradictory or new bodily limitations—leads us to conclude that the Legislature intended the existing limitations to continue for the residual personal injury tort liability remaining under no-fault.

Next, plaintiff argues that it makes no sense for the Legislature to raise the old $10,000 property damage limitation to $1,000,000, and still continue the $20,000/$40,000 limitation on people. This, argues plaintiff, is incongruous in a state whose Legislature has traditionally been more concerned with giving adequate protection to people as opposed to property. The argument is flawed because it implies that personal protection benefits are in no way expanded under no-fault. The reverse is true. Under § 3107 of the no-fault statute, medical expenses are payable without limit. The injured person is protected without limit except for death, permanent serious disfigurement or serious impairment of body function. Consequently, under no-fault insurance an injured person enjoys greater protection than before.

Next, plaintiff contends that § 3116 of the no-fault statute is indicative of a legislative intent to remove all dollar limits on residual tort liability of the insurer. Plaintiff construes that section as providing that when an injured party effects a recovery from the tortfeasor, the injured party must repay his own insurer for any sums the injured party has received from his own insurer. Under this interpretation of the statute, if the pot at the end of the rainbow is limited to $20,000 and, if during the period of the lawsuit, the injured party has received $20,000 from his own insurance carrier, then the injured party would receive nothing. An alternative construction was given § 3116 by the trial court in Shavers, supra. There, the trial court construed the section as requiring reimbursement only if the recovery from the tortfeasor included the specific losses which were actually paid by the injured party’s own insurer. For example, if recovery from the tortfeasor was entirely for noneconomic losses, the injured party would not have to reimburse his own insurer for sums received for economic losses such as medical expenses and lost wages. The Court of Appeals and the Supreme Court found it unnecessary to decide which was the proper interpretation. However, subsequent to oral argument of the instant case, the Supreme Court decided Workman v Detroit Automobile Inter-Insurance Exchange, 404 Mich 477; 274 NW2d 373 (1979). That opinion concluded that an insurer is entitled to reimbursement from a tort recovery only to the extent that the tort recovery includes damages for which the insurer paid benefits. Hence, the Supreme Court adopted the alternative construction and rejected plaintiff’s interpretation.

After the no-fault act was successfully passed, Senator Derenzinski sought to add a new section, § 3131a, which would remove the possibility that § 3131 could be interpreted as requiring unlimited coverage of residual liability. The bill did not emerge from the committee to which it was reported in the House of Representatives and plaintiff argues that the refusal to report indicates a legislative intent that the residual coverage be unlimited. Again we disagree. Given the fact that the House staff expressly reported that the bill would only clarify legislative intent to retain the $20,000/$40,000 limitations in the Insurance Code, a more logical explanation for the failure of the bill to emerge from committee would be a legislative belief that such language was not necessary.

Having raised and rejected the principal arguments offered by plaintiff—a process in which we have spoken negatively—we now turn to affirmatively set forth the sound reasons in support of our decision.

First, the imposition of unlimited coverage for residual liability would be a dramatic change from the status quo. Yet, nowhere is § 520 of the financial responsibility act or § 3009 of the Insurance Code repealed, nor as in the case of the former $10,000 property damage limitations is there a § 3121-type section setting forth contradictory or new limitations. Had the Legislature intended so sweeping a change from well-established limitations it would, in our opinion, have done so in precise language. So major a change requires more than inferences. To succeed, plaintiff must establish a repeal by implication of § 520 and § 3009. Repeal by implication is not favored by the courts and is found to have occurred only upon a clear showing of legislative intent. Yarger v City of Hastings, 375 Mich 413; 134 NW2d 726 (1965), Covert Twp Assessor v State Tax Commission, 53 Mich App 300; 218 NW2d 807 (1974).

Second, to conclude that the Legislature intended unlimited residual coverage ignores the second sentence of § 3131. We read that sentence as covering all of the United States including Michigan. Plaintiffs proposed interpretation of § 3131 zeroes in on the third sentence of § 3131 and excludes the second sentence by erroneously construing it to exclude Michigan. However, in construing a statute, all of its sections are to be considered. Sanchick v State Board of Optometry, 342 Mich 555, 559; 70 NW2d 757 (1955). No phrase, clause or word of a statute should be ignored in construing it. Melia v Employment Security Commission, 346 Mich 544, 562; 78 NW2d 273 (1956).

Third, to conclude that in enacting the no-fault statute the Legislature intended to provide full compensation for noneconomic losses is contrary to the legislative intent as found by the Supreme Court in Shavers v Attorney General, supra at 578-579. There, the Court stated:

"The goal of the no-fault insurance system was to provide victims of motor vehicle accidents assured, adequate, and prompt reparation for certain economic losses.” (Emphasis supplied.)

Quick and full payment for "certain economic losses” rather than payment for all losses, economic or noneconomic, was the primary concern of the no-fault statute. Another frequently stated purpose of the act was the reduction of insurance costs. Clearly, removal of the $20,000/$40,000 limits contained in the Insurance Code and financial responsibility act, would tend to increase rather than decrease costs.

Fourth, plaintiffs interpretation of the statute is contrary to that of the insurance commissioner. Between the date no-fault was enacted on October 31, 1972, and its effective date October 1, 1973, the insurance commissioner appointed a law committee to respond to certain questions posed by the insurance industry. That committee submitted an opinion that under § 3131 residual coverage was without dollar limits. In response to that opinion the insurance commissioner issued a bulletin dated April 6, 1973, that residual insurance would be limited to the amounts specified in § 3009 of the Insurance Code. Such has been the consistent interpretation by the insurance commissioner from that date forward. Construction of a statute by those charged with administration thereof is given great weight and is not to be overruled without the most cogent of reasons. Lane v Dep’t of Corrections, Parole Board, 383 Mich 50, 56; 173 NW2d 209 (1970), Borden, Inc v Dep’t of Treasury, 391 Mich 495, 516; 218 NW2d 667 (1974).

Fifth, following enactment of no-fault the Legislature repealed §§ 3010 and 3011 of the Insurance Code but declined to make changes in § 3009 of the Insurance Code or change the provisions of § 520 of the financial responsibility act.

Sixth, our interpretation of § 3131 as not repealing § 3009 of the Insurance Code or § 520 of the financial responsibility act gains credence from the legislative intent expressed upon amendment of that section of 1978 PA 460 effective October 17, 1978. That amendment was introduced on the House side by Representative McNeely. Accompanying the bill was a House legislative analysis clearly stating that any sections of the no-fault legislation as first enacted which seemingly implied repeal of the statutory $20,000/$40,000 limitations "were not intended to convey that implication and this should be made clear”. Where, as here, it is acknowledged that uncertainty exists in a statute, a subsequent amendment may be deemed to have intended to make clear the legislative intent of the statute as first enacted. Michigan Consolidated Gas Co v Dep’t of Treasury, 72 Mich App 426, 437; 250 NW2d 85 (1976).

For the foregoing reasons we conclude that the trial court did not err in determining that § 3131 of the no-fault statute did not repeal by implication § 3009 of the Insurance Code or § 520 of the financial responsibility act.

Affirmed, no costs, a public question being involved.

       Section 3131 was amended by 1978 PA 460 effective October 17, 1978. As amended, the statute makes clear that for accidents occurring in Michigan, liability coverage need not exceed the minimum coverages required by § 3009 of the Insurance Code. Thus, for practical purposes, our decision in this case only affects liability coverage for accidents occurring during the approximate five-year period between the date the no-fault act took effect, October 1, 1973, and the date of the amendment, October 17, 1978.

       In Shavers v Attorney General, 402 Mich 554, 630; 267 NW2d 72 (1978), it is clear that the § 3009 Insurance Code provisions relating to property were changed by no-fault.

       "Property protection insurance benefits consist of the lesser of reasonable repair costs or replacement costs less depreciation and, where applicable, the value of loss of use. However, property protection insurance benefits paid under 1 policy for damage to all tangible property arising from 1 accident shall not exceed $1,000,000.” MCL 500.3121(5); MSA 24.13121(5).

         Shavers v Attorney General, 65 Mich App 355, 361; 237 NW2d 325 (1975), Shavers v Attorney General, 402 Mich 554, 592; 267 NW2d 72 (1978).

       The bill was introduced in the Senate on January 22, 1976, and was passed in the Senate by an overwhelming vote on October 7, 1976, and sent to the House where it was referred to the House Insurance Committee. The House Legislative Analysis Section submitted a bill analysis on November 16, 1976, which, after referring to the $20,000/$40,000 bodily injury limitations in the Insurance Code, concluded by stating "The bill would clarify the no-fault statute by incorporating these minimum dollar amounts of liability coverage into the statute.” The bill was never reported out by the committee.

       See footnote 1.

       "The statutory mínimums of $20,000 for the death or injury of 1 person and $40,000 for the death or injury to 2 or more persons are meant to limit an insurance company’s liability. While a company may choose to sell coverage with higher dollar amounts the fact remains that it is the intent of the law that there be limitations on the amount of residual coverage provided. Those sections of the law which in combination seem to imply otherwise were not intended to convey that implication and this should be made clear.” (Emphasis supplied.) Analysis—H.B. 5924 (2-13-78).


author: R. B. Burns, P. J. J. H. Gillis, J.

text:
    PETTENGILL v BOOTH NEWSPAPERS, INC.
    Docket No. 77-3962.
    Submitted December 13, 1978, at Lansing.
    Decided February 20, 1979.
    Leave to appeal applied for.
    An unknown employee of defendant, Booth Newspapers, Inc., caused an item libelous to plaintiff, Robert A. Pettengill, to be published in one of defendant’s newspapers. Plaintiff sued defendant for libel, asking for such actual and exemplary damages as were deemed just and alleging out-of-pocket medical expenses of $265. The Genesee Circuit Court, Ollie B. Bivins, J., granted judgment in favor of plaintiff on his out-of-pocket damages and dismissed plaintiff’s claim for exemplary damages. Plaintiff appeals. Held:

    Damages for injury to reputation, mental suffering, embarrassment and humiliation are compensatory in Michigan and are recoverable in a suit against a newspaper alleging negligent failure to proofread the paper resulting in publication of libelous matter causing the injuries; failure to list these damages as actual damages and asking only for such actual and exemplary damages as are found to be just and reasonable is not fatal to recovery therefor.
    Reversed and remanded.
    J. H. Gillis, J., dissented. He would hold that plaintiff’s theory of recovery was respondeat superior and that exemplary damages are recoverable from an employer for the tortious acts of an employee only where there was wilful or malicious conduct on the part of the employer, and such conduct on the part of an employee cannot be imputed to the employer. He would affirm.

      References for Points in Headnotes

       22 Am Jur 2d, Damages §§ 236-242.
    50 Am Jur 2d, Libel and Slander §§ 351, 352.
    Power of equity court to award exemplary or primitive damages. 48 ALR2d 947.
    Actual damages as a necessary predicate of punitive or exemplary damages. 17 ALR2d 527.

       22 Am Jur 2d, Damages §§ 257-259.
    50 Am Jur 2d, Libel and Slander §§ 327, 328, 354.
    Liability of insurance company for libel or slander by its agents or employees. 55 ALR2d 828.

       50 Am Jur 2d, Libel and Slander §§ 353, 354.
    Liability of insurance company for libel or slander by its agents or employees. 53 ALR2d 828.

      Opinion op the Court
    1. Libel and Slander — Damages — Exemplary Damages — Compensatory Nature op Certain Damages.
    Damages for injury to reputation, mental suffering, embarrassment and humiliation are compensatory in Michigan and are recoverable in a suit against a newspaper alleging negligent failure to proofread the paper resulting in publication of libelous matter causing the injuries; failure to list these damages as actual damages and asking only for such actual and exemplary damages as are found to be just and reasonable is not fatal to recovery therefor.
    Dissent by J. H. Gillis, J.
    2. Torts — Master and Servant — Damages — Exemplary Damages — Imputed Conduct.

      Exemplary damages are recoverable from an employer for the tortious acts of an employee only where there was wilful or malicious conduct on the part of the employer, and such conduct on the part of an employee cannot be imputed to the employer.

    3. Libel and Slander — Wilful or Malicious Publication.

      Wilful or malicious publication of a libel is possible only where the defamatory statement is disseminated with knowledge of its falsity or with reckless disregard for the truth.

      Barkey & Barkey; P.C., for plaintiff.

      Bodman, Longley & Dahling (by Kenneth R. Lango and Andrew J. Broder), for defendant.
    Before: R. B. Burns, P.J., and J. H. Gillis and V. J. Brennan, JJ.
   R. B. Burns, P. J.

Plaintiff instituted a libel action against defendant and one John Doe, who was never served, asking for actual and exemplary damages that he allegedly suffered when an item inserted in the classified advertisement section of the Flint Journal, one of defendant’s publications, referred to him by name in a scurrilous and insulting manner. It is undisputed that the item could only have been inserted by one of the employees in the Journal’s composing department, but defendant’s investigation was unable to discover the person responsible.

Plaintiff claims that John Doe acted in a wilful, intentional and malicious manner and that defendant Booth Newspapers, Inc. negligently permitted the publication of the material.

During the pendency of the action, defendant filed two motions for summary judgment, each of which was partially granted. These rulings prevented plaintiff from recovering exemplary damages for the defamatory act of defendant’s unknown employee, but allowed plaintiff’s claim for out-of-pocket damages of $265.

Plaintiff appeals the court ruling denying exemplary damages and we reverse.

Both parties rely on Gertz v Robert Welch, Inc, 418 US 323; 94 S Ct 2997; 41 L Ed 2d 789 (1974). The Supreme Court declined to extend the rule stated in New York Times Co v Sullivan, 376 US 254; 84 S Ct 710; 11 L Ed 2d 686 (1964), which required public officials to prove that the defamatory falsehood was made with actual malice before a party could recover for such a statement. Gertz held that, when a private person was involved, as long as liability without fault was not imposed, states may define their own standards for compensation for actual injury. However, a state may not permit recovery for punitive damages unless the plaintiff proves knowledge of the falsity or reckless disregard for the truth. The Court stated:

"We need not define 'actual injury,’ as trial courts have wide experience in framing appropriate jury instructions in tort actions. Suffice it to say that actual injury is not limited to out-of-pocket loss. Indeed, the more customary types of actual harm inflicted by defamatory falsehood include impairment of reputation and standing in the community, personal humiliation, and mental anguish and suffering.” 418 US 323, 349-350.

Prior to the New York Times case, supra, our Supreme Court in Long v Tribune Printing Co, 107 Mich 207, 215-216; 65 NW 108, 111 (1895) stated:

"Damages for injury to feelings, shame, mortification, mental anxiety, insulted honor, and indignation have always, in this State at least, been regarded as actual damages, and not as exemplary, punitory, or vindictive damages. Scripps v. Reilly, 38 Mich 10. One who has been defamed is entitled to compensation in damages to the extent of his injury, and only to that extent. Confusion arises from the use of terms in this class of cases, and it would be well if the terms 'exemplary damages,’ 'punitory damages,’ and 'vindictive damages’ were omitted from the judicial vocabulary, in this class of cases, at least. The term 'malice,’ in the statement that malice is presumed from the publication of libelous matter, is liable to be misunderstood. Malice, in its ordinary acceptance, means ill will, but in its legal sense it means a wrongful act done voluntarily, without just cause or excuse; and in the use of the term this distinction should be pointed out. The sting of an injury sustained by reason of an act wilfully, recklessly, or negligently done is much greater than if the result of accident or mistake. A publication of defamatory matter, made when the means of ascertaining the truth are easily accessible, and in the absence of extenuating circumstances, or those which tend to excuse the wrong, always aggravates the injury. And in my own view, the very accessibility of the facts tending to show the falsity of the publication gives added force to the accusation. But, however this may be, if it be true that a publisher is liable for the damages actually occasioned, that the injury to feelings is a proper element of damage, and that the sense of injury may be aggravated by the circumstances under which the libel is published, the injury to feelings is not diminished by the fact that the fault or recklessness or negligence is that of a reporter, and not that of the manager. Those circumstances which are calculated to reduce the injury are always allowed to be shown to limit the recovery.”

In defendant’s motion for summary judgment and affidavit it excuses the publication on the basis that the procedure for processing classified advertisements is highly automated and that the libelous matter was inserted by an unknown employee. Defendant did not answer plaintiffs complaint that defendant negligently failed to proofread the newspaper.

We do not think that defendant can hide behind the theory that a "phantom writer” is responsible for its negligence.

In the present case plaintiff alleged that he suffered injury to his reputation, mental suffering, embarrassment and humiliation. He asked for both actual and exemplary damages found to be just and equitable.

His specification of damages listed psychiatric care, $265, and exemplary damage, $499,735. As stated in the Long case, supra, damages for injury to reputation, mental suffering, embarrassment and humiliation should have been listed under actual damages. However, defendant was not misled and the trial judge by proper instructions can protect defendant from "punishment” or "punitive” damages.

Reversed and remanded for trial. Costs to plaintiff.

V. J. Brennan, J., concurred.

J. H. Gillis, J.

(dissenting). Plaintiff filed this libel action against defendant, seeking judgment for actual and exemplary damages that he allegedly suffered when an item inserted in the classified advertising section of the July 21, 1974, Flint Journal, one of defendant’s publications, referred to him by name in a scurrilous and insulting manner. It is undisputed that the item could only have been inserted by one of the employees in the Journal’s composing department, but defendant’s subsequent investigation was unable to identify the person responsible. During the pendency of the action, defendant filed two motions for summary judgment, each of which was partially granted by the trial court. These rulings blocked plaintiff’s efforts to recover exemplary damages from defendant and to hold defendant liable for the defamatory act of its unknown employee under the principle of respondeat superior, but left intact plaintiff’s claim for $265 in out-of-pocket actual damages. That claim was settled without trial. Plaintiff now appeals from the trial court’s grant of partial summary judgment, placing particular emphasis upon its ruling with respect to exemplary damages.

The parties have devoted much attention to the rule laid down in Gertz v Robert Welch, Inc, 418 US 323; 94 S Ct 2997; 41 L Ed 2d 789 (1974). In that case, the United States Supreme Court held that "the States may not permit recovery of presumed or punitive damages, at least when liability is not based on a showing of knowledge of falsity or reckless disregard for the truth”. 418 US 323, 349. Because plaintiffs complaint merely accused defendant of negligently publishing the defamatory item, defendant asserts that the Gertz rule limits plaintiff to recovery of actual damages, and that the trial court correctly found that exemplary damages were not permitted. Plaintiff claims that while Gertz barred "punitive” damages, the purpose of exemplary damages under Michigan law is compensatory. I agree with plaintiff’s characterization of exemplary damages. However, I would affirm the trial court’s decision because the plaintiff has simply failed to allege a sufficient basis for awarding exemplary damages under Michigan law.

As was said in Ray v Detroit, 67 Mich App 702, 704, 705; 242 NW2d 494 (1976),

"[I]n Michigan only exemplary damages which are compensatory in nature are allowable. They are recoverable for injury to feelings and for the sense of indignity and humiliation resulting from injury maliciously and wantonly inflicted.
"They are recoverable only for injury actually sustained by a party although that injury is to the feelings rather than physical in nature.” (Emphasis in original.)

Exemplary damages for emotional injury have been allowed in libel actions where the injury was "maliciously and wantonly inflicted”. The cases have employed a variety of adverbs and adjectives in setting out the standard, but the prevailing idea is that defendant’s conduct must somehow have been reprehensible or egregious. While a few cases, e.g., Long v Tribune Printing Co, 107 Mich 207, 215; 65 NW 108 (1895), and Scripps v Reilly, 38 Mich 10, 23-24 (1878), included negligence as a basis for allowing exemplary damages, it appears that those references contemplated only gross negligence. In my judgment, the modern approach follows the general rule stated at 9 Michigan Law & Practice, Damages, § 92, p 89:

"Exemplary damages may be awarded where the elements of fraud and malice or wanton and reckless disregard of a person’s rights are involved, or where the act complained of arises from willful or malicious conduct.” (Footnotes omitted.)

While plaintiffs complaint alleged that the unknown employee who had caused the defamatory item to be published had acted "wilfully, intentionally [and] maliciously” for the purposes of exposing plaintiff to public contempt and ridicule and injuring his reputation, plaintiff claimed only that defendant had "negligently permitted the publication of this statement” or had suffered it to be published without legal justification or excuse. Defendant’s second motion for summary judgment specifically called this discrepancy to the trial court’s attention. Instead of amending his complaint, plaintiff filed a brief in opposition to the motion. Indeed, plaintiff could hardly have alleged in good faith that defendant published the defamatory statement wilfully or maliciously, for there was no indication that the Journal’s supervisory or editorial personnel had any inkling that the item would be published or even that it existed.

In granting summary judgment against plaintiff’s claim for exemplary damages, the trial judge termed them "punitive damages” which were barred by the Gertz rule. I disagree with his reasoning but affirm his conclusion. Because they serve to compensate plaintiffs for actual injury, rather than to punish defendants for their conduct, exemplary damages, so long as they are not presumed, are expressly permitted by Gertz. As the Court’s opinion recognized,

"[AJctual injury is not limited to out-of-pocket loss. Indeed, the more customary types of actual harm inflicted by defamatory falsehood include impairment of reputation and standing in the community, personal humiliation, and mental anguish and suffering.” 418 US 323, 350.

Exemplary damages were unavailable in this case not because they are punitive in nature, but because the facts prevented plaintiff from characterizing defendant’s conduct as sufficiently offensive to warrant exemplary damages. In the absence of the necessary allegation of wilful or malicious conduct on the part of the newspaper, summary judgment under GCR 1963, 117.2(1) was appropriate.

Moreover, it is my view that wilful or malicious publication of a libel is possible only where the defamatory statement is disseminated with knowledge of its falsity or reckless disregard for the truth. Thus, I would adopt that constitutional articulation of "actual malice” announced in New York Times Co v Sullivan, 376 US 254, 279-280; 84 S Ct 710; 11 L Ed 2d 686 (1964), and carried forward in Gertz, as the threshold requirement for liability for exemplary damages in a libel action. Because exemplary damages are compensatory, Gertz does not necessitate this conclusion. However, rephrasing the present criterion in the language of a similar and widely known formula would forestall confusion as to when exemplary damages for libel are appropriate.

Plaintiff attempts to salvage the situation, as well as to resuscitate a theory rejected in the trial court’s first ruling, by claiming that the unquestioned malice of the unknown employee responsible for the defamatory item can be imputed to defendant to hold defendant liable for exemplary damages under the principle of respondeat superior. Plaintiff relies upon the rule stated in Poledna v Bendix Aviation Corp, 360 Mich 129, 139-140; 103 NW2d 789 (1960), and Grist v The Upjohn Co, 368 Mich 578, 583; 118 NW2d 985 (1962):

"A corporation may be held liable for slander uttered by an agent while in the discharge of his duty as agent and in relation to the matter about which his duty as agent permits or requires him to act in the same way and to the same extent as an individual could be held liable for the same slander.” (Emphasis supplied.)

No doubt the same rule is equally applicable to libel, but plaintiff has failed to recognize the import of the qualifying language emphasized above. In Poledna and Grist, the employees whose defamatory statements plaintiffs sought to attribute to the corporate defendants were personnel officers or supervisors who had made unfavorable comments about plaintiffs while evaluating or discharging them, or responding to inquiries from other potential employers about them. Thus, the nexus between the defamatory statements and the employees’ duties was far clearer than the connection presented by these facts.

The gist of the Poledna-Grist rule has been more elegantly stated by the Restatement Agency, 2d, § 247, p 544:

"A master is subject to liability for defamatory statements made by a servant acting within the scope of his employment, or, as to those hearing or reading the statement, within his apparent authority.”

Sections 228 through 237 of the Restatement 2d delineate the boundaries of the concept of scope of employment. Section 228 states the overall scheme:

"(1) Conduct of a servant is within the scope of employment if, but only if:
"(a) it is of the kind he is employed to perform;
"(b) it occurs substantially within the authorized time and space limits;
"(c) it is actuated, at least in part, by a purpose to serve the master, and
"(d) if force is intentionally used by the servant against another, the use of force is not unexpectable by the master.
"(2) Conduct of a servant is not within the scope of employment if it is different in kind from that authorized far beyond the authorized time or space limits, or too little actuated by a purpose to serve the master.” (Emphasis supplied.) Restatement Agency 2d, §228, p 504.

It is evident that the conduct of the unknown employee who inserted the defamatory item into the Journal’s classified section was in no way actuated by a purpose to serve his employer. Indeed, the employee almost certainly foresaw that his prank would embarrass defendant as well as plaintiff. The anonymous prankster’s behavior is aptly described by Restatement Agency, 2d, § 235, Conduct Not for Purpose of Serving Master, Comment (c), p 521:

"The fact that an act is done in an outrageous or abnormal manner has value in indicating that the servant is not actuated by an intent to perform the employer’s business. See Comment (b) on § 229 and § 245. In such cases, the facts may indicate that the servant is merely using the opportunity afforded by the circumstances to do the harm.”

On the undisputed facts, the employee who arranged the publication of the defamatory item acted beyond the scope of his employment in doing so. Nor could the insertion of such an item be regarded as within his apparent authority. The correct legal standard permits no other conclusion, nor would plaintiff have been able to remedy this deficiency at trial. Again, the trial court’s grant of summary judgment was correct. On these facts, plaintiff could recover only for his actual, identifiable damages occasioned by defendant’s ordinary negligence. He has already been compensated for those.

For the reasons stated above, I would affirm.

       Although summary judgment is not in order if the missing element may be supplied by amendment, the present facts rendered the necessary remedial action impossible.

        Peisner v Detroit Free Press, Inc, 68 Mich App 360; 242 NW2d 775 (1976), implied in footnote 4, p 372, that Gertz v Robert Welch, Inc, 418 US 323; 94 S Ct 2997; 41 L Ed 2d 789 (1974), had precluded punitive damages where publication of the libel was merely negligent. The trial court in this case reached the same conclusion. That statement, while generally correct, overlooks the fact that Michigan’s terminology is somewhat paradoxical. In this jurisdiction, punitive damages are synonymous with exemplary damages; however labeled, their purpose is not to punish but "to fully compensate the plaintiffs for the injury suffered by them because of the defendants’ actions”. 68 Mich App 360, 371.

      I am aware that Ray v Detroit, 67 Mich App 702; 242 NW2d 494 (1976), held a municipal corporation liable for exemplary damages awarded for injuries that plaintiff had sustained as the result of the intentional tortious conduct of the corporation’s employee. However, the finding that the municipal corporation was liable either decided or assumed that the employee was acting within the scope of his employment when he injured plaintiff; the Ray opinion did not discuss the issue although it quoted a passage from Lucas v Michigan Central R Co, 98 Mich 1, 5-6; 56 NW 1039 (1893), which recognized that limitation.


author: D. F. Walsh, J.

text:
    FOREMOST LIFE INSURANCE COMPANY v WATERS
    Docket No. 77-4423.
    Submitted December 5, 1978, at Grand Rapids.
    Decided February 20, 1979.
    Dorothy V. Blodgett was injured in an automobile accident and received $26,714.77 from Foremost Life Insurance Company pursuant to Foremost’s group disability insurance policy with her employer. Marie Waters, as the guardian of Dorothy Blodgett, filed suit against the tortfeasor in the accident and entered into a consent judgment in that action in the amount of $120,000. Thereafter, plaintiff Foremost Life Insurance Company filed a complaint against Marie Waters, guardian of Dorothy V. Blodgett, for declaratory relief seeking a determination that it was entitled to reimbursement from defendant in the amount of $26,714.77 under the subrogation provision of the group disability insurance policy covering Dorothy V. Blodgett. The Kent Circuit Court, George V. Boucher, J., held for the plaintiff and ordered defendant to reimburse plaintiff in the amount of $26,714.77. Defendant appeals claiming that the plaintiff is not entitled to subrogation. Held:

    1. Plaintiff’s right of subrogation is conventional arising solely by virtue of the subrogation clause in the insurance contract.
    2. The subrogation clause in the insurance contract is internally inconsistent, therefore, since insurance contracts are to be strictly construed against the insurer and ambiguities liberally construed in favor of the insured the Court of Appeals’ duty is to ascertain the meaning which the insured would reasonably expect.
    3. The defendant reasonably expected the subrogation clause to be inapplicable to the factual situation presented in this case.
    4. The intent of the policy to make the insured whole would be directly thwarted if plaintiff were allowed, after paying defendant for economic losses, to be subrogated to defendant’s rights as against the tortfeasor for noneconomic losses.

      References for Points in Headnotes

       73 Am Jur 2d, Subrogation §§ 1-3, 9, 33.

       73 Am Jur 2d, Subrogation § 106.

       73 Am Jur 2d, Subrogation §§ 1-10.

       42 Am Jur 2d, Insurance §§ 271-279.

       44 Am Jur 2d, Insurance § 1820 et seq.

      5. The subrogation clause did not confer upon plaintiff the right to be reimbursed out of defendant’s recovery from third-party tortfeasors whose obligations are entirely distinct from those of plaintiff.
    Reversed.
    1. Subrogation — Legal Subrogation — Conventional Subrogation.
    There are two kinds of subrogation: legal subrogation which arises by operation of law and conventional subrogation which arises by contract.
    2. Subrogation — Subrogee’s Rights.
    A subrogee acquires no greater rights than those possessed by his subrogor whether the subrogation is conventional or arises by operation of law.
    3. Subrogation — Words and Phrases — Equity — Volunteers — Primary Liability.
    Subrogation is an equitable doctrine which is applied when someone, not a volunteer, discharges an obligation for which another person is primarily liable.
    4. Insurance — Contracts — Construction — Strict Construction — Ambiguities — Liberal Construction — Court’s Duty.
    Insurance contracts are to be strictly construed against the insurer; any ambiguities are to be liberally construed in favor of the insured; the court’s duty is to ascertain the meaning which the insured would reasonably expect.
    5. Insurance — Subrogation — Insurance Contracts — Economic Damages — Medical Expenses.
    Language contained in an insurance policy’s subrogation clause, that if the insurer pays for any services provided an insured under the insurance program and in the further event the insured has a right to recover damages from any person or organization the insurer shall be subrogated in the amount of any sums paid by the insured to the rights or recovery of the insured against any such person or organization, did not confer upon the insurer the right to reimbursement from the insured’s recovery of noneconomic damages from a third-party tortfeasor where the tortfeasor’s obligations were entirely distinct from the insurer’s obligation for medical expenses and the insurer had not discharged the obligation of the tortfeasor, where the insured reasonably expected the subrogation clause to be inapplicable to such a fact situation, where the intent of the policy to make the insured whole and minimize the instances of double recovery by the insured would be thwarted by allowing the insurer to be subrogated to the insured’s rights against the tortfeasor for noneconomic losses after paying the insured for his economic losses, and where no intent of the parties is shown to extend the insurer’s subrogation rights so as to defect the indemnity feature of the contract.

      Varnum, Riddering, Wierengo & Christenson (by Dennis C. Kolenda), for plaintiff.

      Rhoades, McKee & Boer, (by William F. Mills), for defendant.
    Before: T. M. Burns, P.J., and M. J. Kelly and D. F. Walsh, JJ.
   D. F. Walsh, J.

Dorothy Vivian Blodgett was seriously injured in an automobile accident and received $26,714.77 from plaintiff Foremost Life Insurance Company pursuant to plaintiffs group disability insurance policy with her employer. She also filed suit against the tortfeasor in the accident and entered into a consent judgment in that action in the amount of $120,000. Plaintiff filed a complaint for declaratory relief, seeking a determination that it was entitled to reimbursement from defendant in the amount of $26,714.77 under the subrogation provision of its group policy. The trial judge entered judgment for plaintiff and ordered defendant to reimburse plaintiff in the amount of $26,714.77. Our resolution of defendant’s main issue on appeal renders treatment of the remaining issues unnecessary.

Defendant argues that plaintiff is not entitled to subrogation. The insurance policy upon which plaintiff bases its claim contains the following language:

"In the event this plan pays for any services provided a claimant under this program and in the further event the claimant has a right to recover damages from any person or organization, this plan shall be subrogated in the amount of any sums paid by this plan to the rights or recovery of the claimant against any such person or organization. Upon request of this plan, the claimant will execute and deliver to this plan an assignment and other instruments that may be required and do whatever else is necessary to secure such rights for this plan.”

It is defendant’s argument that subrogation was improperly ordered because, pursuant to Michigan’s no-fault law, the money received from the tortfeasor represented noneconomic damages. MCL 500.3135; MSA 24.13135. Benefits paid to defendant by plaintiff, on the other hand, were for medical expenses. The trial court disagreed, finding no reason to refuse to enforce plaintiff’s "contractual right of subrogation”. On appeal plaintiff stresses the contractual nature of its right to be subrogated to defendant’s recovery from the tortfeasor.

Subrogation is of two kinds: legal subrogation which arises by operation of law and conventional subrogation which arises by contract. Tel-Twelve Shopping Center v Sterling Garrett Construction Co, 34 Mich App 434; 19 NW2d 484 (1971), Michigan Medical Service v Sharpe, 339 Mich 574; 64 NW2d 713 (1954). The two types of subrogation are discussed at length in Kimball & Davis, The Extension of Insurance Subrogation, 60 Mich L Rev 841 (1962).

We agree with plaintiff and the trial court that plaintiff’s right of subrogation is conventional, as it arises solely by virtue of the subrogation clause in the insurance contract. Our inquiry, however, does not end here.

Subrogation is defined as follows:

"The substitution of one person in the place of another with reference to a lawful claim, demand or right, Whyel v Smith, 101 Fla. 971, 134 So. 552, 554; so that he who is substituted succeeds to the rights of the other in relation to the debt or claim, and its rights, remedies, or securities. Home Owners’ Loan Corporation v Baker, 299 Mass. 158, 12 N.E.2d 199, 201; Gerken v Davidson Grocery Co., 57 Idaho 670, 69 P.2d 122, 126. A legal fiction through which a person who, not as a volunteer or in his own wrong, and in absence of outstanding and superior equities, pays debt of another, is substituted to all rights and remedies of the other, and the debt is treated in equity as still existing for his benefit, and the doctrine is broad enough to include every instance in which one party pays the debt for which another is primarily answerable, and which in equity and good conscience should have been discharged by such other. Home Owners’ Loan Corporation v Sears, Roebuck & Co., 123 Conn. 232, 193 A. 769, 772.” Black’s Law Dictionary (4th ed) p 1595.

It is well established that a subrogee (e.g., the instant plaintiff) acquires no greater rights than those possessed by his subrogor (e.g., the instant defendant). This principle is true whether subrogation is conventional or arises by operation of law. Northwestern Mutual Ins Co v Jackson Vibrators, Inc, 402 F2d 37, 40 (CA 6, 1968). Subrogation is an equitable doctrine which is applied when someone, not a volunteer, discharges an obligation for which another person is primarily liable. 83 CJS, Subrogation, § 8, p 600.

In Michigan Medical Service v Sharpe, supra, the issue was whether, in the absence of legal subrogation, the parties had provided for subrogation by contract. The Supreme Court ruled in favor of subrogation due to the express provision therefor in the parties’ contract. The case represents a successful attempt by parties to an insurance contract to contractually agree that the injured insured’s medical insurer would not be "primarily liable” for payment of the insured’s medical expenses.

The "subrogation clause” of the instant parties’ insurance contract is internally inconsistent. Although it . speaks of subrogation, it also appears to grant plaintiff the right to be reimbursed from any sums received by defendant from third-party tortfeasors, regardless of the nature of those sums. That is, it appears to grant plaintiff the right to be reimbursed from sums which cover losses not insured by plaintiff. If this were the parties’ intent, it would not represent traditional subrogation. The clause would not constitute a contractual determination of primary liability for a separate and distinct obligation but instead would absolutely negate plaintiff’s primary liability for defendant’s medical expenses by depriving defendant of the right to benefit from the tortfeasor’s discharge of his primary liability for noneconomic losses.

Insurance contracts are to be strictly construed against the insurer. Nickerson v Citizens Mutual Ins Co, 393 Mich 324, 330; 224 NW2d 896 (1975). Any ambiguities are liberally construed in favor of the insured. Kalamazoo Aviation, Inc v Royal Globe Ins Co, 70 Mich App 267; 245 NW2d 754 (1976), lv den 399 Mich 871 (1977). The court’s duty is to ascertain the meaning which the insured would reasonably expect. Zurich Ins Co v Rombough, 384 Mich 228, 233; 180 NW2d 775 (1970).

Careful examination of the entire insurance contract leaves us with the firm conviction that defendant reasonably expected the "subrogation clause” to be inapplicable to the factual situation presented in this case. The provisions of the "Coordination of Benefits” section of the policy clearly indicate that the intent of the policy is to make the insured whole and to minimize the instances of double recovery by the insured. This apparent intent to make the insured whole would be directly thwarted if plaintiff were allowed, after paying defendant for economic losses, to be subrogated to defendant’s rights as against the tortfeasor for noneconomic losses.

In a different context, various panels of this Court have dealt with an analogous issue. In Reliance Ins Co v Messina Trucking, Inc, 83 Mich App 159; 268 NW2d 328 (1978), a worker’s compensation carrier sought reimbursement of benefits paid to an insured employee for economic losses from the third-party tortfeasor sued by the employee for noneconomic damages in excess of the employee’s own no-fault insurance coverage. The employee’s injuries arose out of an automobile accident with the tortfeasor. The Court emphasized the significance of the no-fault law’s limitation on tort recovery and the objective in tort law to make the injured person whole. MCL 418.827(5); MSA 17.237(827X5), upon which the worker’s compensation carrier based its claim, was declared unconstitutional as applied to employees injured in automobile accidents where tort recovery was limited by MCL 500.3135. The Reliance decision was followed in Great American Ins Co v Queen, 86 Mich App 362; 272 NW2d 659 (1978). The Great American Court noted that it made no sense "to reimburse [a worker’s compensation carrier] for monies paid out for economic loss out of a later recovery for noneconomic loss. The two recoveries represent compensation for distinct losses, without providing any double recovery for the injured employee”. 86 Mich App at 364. And in Flower v Gensterblum, 86 Mich App 561; 272 NW2d 726 (1978), the Court, while not finding it necessary to question the constitutionality of MCL 418.827(5), focused on the subrogation nature of the worker’s compensation carrier’s right to reimbursement and noted that, since the enactment of no-fault, it can no longer be said that the carrier, in paying benefits to the employee for economic damages, was "discharging the obligation of another”. The debt of the tortfeasor is now distinct from that of an insurance company liable only for economic losses.

So too in the instant case, plaintiff has not discharged the obligation of the tortfeasor. Although the parties to the insurance contract have provided for otherwise unavailable subrogation rights for plaintiff, they have not plainly indicated an intent to extend plaintiff’s subrogation right so as to defeat the indemnity feature of the contract. We hold that the "subrogation clause” of the parties’ contract did not confer upon plaintiff the right to be reimbursed out of defendant’s recovery from third-party tortfeasors whose obligations are entirely distinct from those of plaintiff.

Entry of judgment for plaintiff is reversed.


author: J. T. Letts, J.

text:
    PIERSANTE v AMERICAN FIDELITY INSURANCE COMPANY
    Docket No. 77-4878.
    Submitted January 9, 1979, at Detroit.
    Decided February 20, 1979.
    Plaintiff Frank Piersante, while riding his motorcycle, was involved in a collision with an automobile driven by defendant Gerald Green. Plaintiff suffered substantial injuries. At the time of the accident the plaintiff owned an automobile which was insured by defendant American Fidelity Fire Insurance Company. The plaintiff presented a claim to American Fidelity under his policy. Wage loss and medical care benefits were paid until October 24, 1975, at which time the insurance company terminated the payment of benefits. The plaintiff commenced an action in Wayne Circuit Court against the insurance company and Gerald Green alleging that the insurance company had wrongfully terminated the wage loss and medical expense benefits. Andrew DiMaggio, J., entered summary judgment for the defendant insurance company. The plaintiff appeals, raising the question of whether a motorcyclist injured in a collision with an automobile can collect personal protection benefits under a policy of no-fault automobile insurance from the insurer of an automobile owned by the motorcyclist. Held:

    The plaintiff’s injury arose out of the operation of the motor vehicle with which plaintiff collided and which was required to be and was insured under the no-fault automobile insurance act. As a result, the policy issued by the defendant insurer to the plaintiff was required to provide personal protection coverage in this case. Thus the plaintiff is entitled to proceed against his automobile insurer for the collection of personal protection insurance benefits.
    Reversed and remanded.
    1. Automobiles — Insurance — No-Fault Insurance — Motor Vehicle — Words and Phrases — Motorcycles — Statutes.
    The no-fault automobile insurance act defines the term "motor vehicle” in such a way as to exclude motorcycles (MCL 500.3101[2]; MSA 24.13101[2]).

      References for Points in Headnotes

       New Topic Service, No-Fault Insurance § 17.

       New Topic Service, No-Fault Insurance §§ 14, 15.

       New Topic Service, No-Fault Insurance § 18.

      2. Automobiles — Insurance — No-Fault Insurance — Motorcycles — Statutes.
    The fact that a motorcyclist need not provide security for personal protection insurance under the no-fault insurance act does not necessarily mean that a motorcyclist is not covered under some other no-fault insurance policy (MCL 500.3101[1]; MSA 24.13101[1]).
    3. Automobiles — Insurance — No-Fault Insurance — Personal Protection Insurance — Operation of Motor Vehicle — Statutes.
    All that is required under the no-fault automobile insurance act for an insurer to be liable to pay personal protection insurance benefits to an insured for bodily injury is that the injury arise out of the ownership, operation, maintenance or use of a motor vehicle; it is not required that the insured be the driver of a motor vehicle involved in the accident (MCL 500.3105[1]; MSA 24.13105[1]).
    4. Automobiles — Insurance — Motorcycles — No-Fault Insurance — Personal Protection Benefits — Operation of Motor Vehicle — Statutes.
    A motorcyclist who owns an automobile which is covered by a no-fault automobile insurance policy is entitled to proceed against the no-fault insurer of the automobile for the collection of personal protection insurance benefits for personal injuries where the injuries arose out of the operation of a motor vehicle with which the motorcyclist collided, and where the motor vehicle involved was required to be and was insured under the provisions of the no-fault automobile insurance act (MCL 500.3101, 500.3105, 500.3114, 500.3115; MSA 24.13101, 24,13105, 24.13114, 24.13115).

      Peter R. Barbara & Associates, P.C. (by Peter R. Barbara and Frank G. Becker), for plaintiff.

      Simon & Fried, for defendants.
    Before: Bronson, P.J., and R. M. Maher and J. T. Letts, JJ.

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

   J. T. Letts, J.

Plaintiff appeals as of right from a summary judgment of no cause of action entered against him on November 9,1977.

On July 13, 1976, plaintiff filed an action against American Fidelity Fire Insurance Company (hereinafter defendant) in Wayne County Circuit Court. He alleged that defendant had wrongfully terminated wage loss and medical expense benefits which plaintiff claimed were payable under the terms of his automobile insurance policy with defendant. Defendant claimed that the policy excluded coverage in this instance.

This lawsuit arose as a result of a May 5, 1975, motorcycle accident. On this date plaintiff, while riding his motorcycle, collided with an automobile. As a result of this accident plaintiff suffered substantial injuries. At this time plaintiff owned an automobile which was insured by defendant. Accordingly, he presented a claim under his policy to defendant. Wage loss and medical care benefits were subsequently paid until October 24, 1975, at which time they were terminated by defendant.

This case presents a single issue for our resolution. Can a motorcyclist injured in a collision with an automobile collect personal protection benefits under no-fault from the insurer of an automobile also owned by the motorcyclist? We answer this question in the affirmative and reverse the decision of the circuit court.

Plaintiff’s insurance policy with defendant indicates that it is subject to and governed by the Michigan no-fault act, MCL 500.3101 et seq.; MSA 24.13101 et seq. MCL 500.3101(1); MSA 24.13101(1) requires the owner of a motor vehicle registered in this state to maintain security for the payment of personal protection insurance benefits. MCL 500.3101(2); MSA 24.13101(2) defines "motor vehicle” in such a way as to exclude motorcycles. This distinction between motorcycles and automobiles was upheld in Shavers v Attorney General, 402 Mich 554, 633-634; 267 NW2d 72 (1978).

Defendant relies upon this feature of the no-fault act to argue that its policy does not cover plaintiffs injuries incurred while motorcycling. However, the fact that a motorcyclist need not provide security for personal protection insurance under no-fault does not necessarily mean that he is not covered under some other policy. In two previous cases, panels of this Court have permitted a motorcyclist to collect benefits under no-fault.

In Underhill v Safeco Insurance Co, 76 Mich App 13; 255 NW2d 349 (1976), the Court concluded that a person injured while driving a motorcycle could recover personal protection benefits under the policy of the owner of the car with which he collided. The Court applied the priority provision of MCL 500.3115(1); MSA 24.13115(1) in reaching its conclusion. That section reads:

"(1) Except as provided in subsection (1) of section 3114, a person suffering accidental bodily injury while not an occupant of a motor vehicle shall claim personal protection insurance benefits from insurers in the following order of priority:
"(a) Insurers of owners or registrants of motor vehicles involved in the accident.
"(b) Insurers of operators of motor vehicles involved in the accident.”

Since a motorcyclist is not an "occupant of a motor vehicle”, reasoned the Court, this section permitted recovery from the insurer of the motor vehicle involved in the accident.

In Porter v Michigan Mutual Liability Co, 80 Mich App 145; 263 NW2d 318 (1977), a case virtually identical to the present case, the Court held that a motorcyclist injured in a collision with an automobile could collect personal protection benefits from the insurer of his automobile. The Court noted the exception to the priorities of MCL 500.3115; MSA 24.13115 contained at that statute’s outset and applied MCL 500.3114(1); MSA 24.13114(1) to reach this conclusion. That section reads:

"(1) Except as provided in subsections (2) and (3), a personal protection insurance policy applies to accidental bodily injury to the person named in the policy, his spouse, and a relative of either domiciled in the same household. When personal protection insurance benefits are payable to or for the benefit of an injured person under his own policy and would also be payable under the policy of his spouse, relative, or relative’s spouse, the injured person’s insurer shall pay all of the benefits and shall not be entitled to recoupment from the other insurer.”

The Court interpreted the statutory interplay between the two statutes as follows:

"Section 3115(1) is qualified by § 3114(1). Section 3114(1) indicates that when PIP benefits are payable to an insured under his own policy, his insurer must pay all of these benefits even though the insured is also covered under another policy. Michigan Mutual, the company which issued the policy under which plaintiff was insured, is therefore liable to plaintiff for PIP benefits. Even though injured on a motorcycle, plaintiff may recover PIP benefits from his own insurer.” Porter, supra, 150.

The Court in Porter v Michigan Mutual Liability Co, supra, thus interprets the statutory scheme as requiring a motorcyclist injured in an automobile collision to proceed against his own automobile insurer for personal protection benefits. By virtue of the reference to MCL 500.3114; MSA 24.13114 at the outset of MCL 500.3115; MSA 24.13115, the Court placed the motorcyclist’s own automobile insurer at the top of the priority list of MCL 500.3115; MSA 24.13115.

As applied to the present case, Porter v Michigan Mutual Liability Co, supra, would appear to permit the plaintiff to recover personal protection benefits from defendant. Defendant argues, however, that the policy involved in Porter v Michigan Mutual Liability Co, supra, contained "optional coverage” for accidents where no motor vehicle is involved. Defendant thus contends that the exception to the priorities of MCL 500.3115; MSA 24.13115 is not applicable in this case because its policy with plaintiff did not cover this accident.

We do not agree with defendant’s analysis. MCL 500.3105(1); MSA 24.13105(1) states:

"Under personal protection insurance an insurer is liable to pay benefits for accidental bodily injury arising out of the ownership, operation, maintenance or use of a motor vehicle as a motor vehicle, subject to the provisions of this chapter.”

This provision does not require that the insured be the driver of the motor vehicle involved in the accident. It only requires that the injury arise out of the operation of a motor vehicle. As noted in Shoemaker v National Ben Franklin Insurance Co of Michigan, 78 Mich App 175, 179; 259 NW2d 414 (1977):

"For an insurer to incur liability under MCL 500.3105; MSA 24.13105, there must at a minimum be an accident involving a vehicle intended to be covered by MCL 500.3101(1); MSA 24.13101(1).”

In the present case, plaintiffs injury arose out of the operation of the motor vehicle with which he collided. Unlike the situation in Shoemaker, supra, the vehicle with which he collided was required to be and was insured under MCL 500.3101; MSA 24.13101. As a result of these circumstances, MCL 500.3105; MSA 24.13105 requires defendant’s policy to provide personal protection coverage in this case. Therefore, this situation is indistinguishable from that of Porter v Michigan Mutual Liability Co, supra. Reading MCL 500.3114; MSA 24.13114 and MCL 500.3115; MSA 24.13115 together, plaintiff is entitled to proceed against his automobile insurer for the collection of personal protection insurance benefits for injuries resulting from this accident.

Reversed and remanded. No costs, interpretation of statutes being involved.

       These subsections relate to persons injured while an occupant of an employer’s car or the occupant or operator of a vehicle operated in the business of transporting passengers. These subsections were inapplicable in Porter v Michigan Mutual Liability Co, supra, and are equally inapplicable in the present case.

       In Davidson v Johnson, 76 Mich App 497, 502-503; 257 NW2d 139 (1977), the Court adopted a different analysis of these statutory provisions which failed to give effect to the cross reference to MCL 500.3114; MSA 24.13114 in MCL 500.3115; MSA 24.13115. However, this opinion was reversed in part and vacated in Davidson v Johnson (On Rehearing), 79 Mich App 660, 665; 262 NW2d 887 (1977). There the Court concluded that "each plaintiff will recover personal protection insurance benefits from his own insurer.” Although limited in its analysis this opinion reaches the same result as reached in Porter v Michigan Mutual Liability Co, supra.

      In Hill v Aetna Life & Casualty Co, 79 Mich App 725; 263 NW2d 27 (1977), the Court also concluded that a motorcyclist cannot recover from his own automobile insurer when injured in a collision with a car. However, we decline to follow this case, as the Court cites as authority for its proposition Underhill v Safeco Insurance Co, supra, which did not address that particular question.

       In this case a motorcyclist was denied benefits under his automobile insurance policy after he was injured in a collision with a tractor, which is not required to maintain security for the payment of personal protection benefits under MCL 500.3101; MSA 24.13101.