Lee v. Wake County

Patterson, Dilthey, Clay Bryson, Attorneys, Raleigh, North Carolina; Ronald C. Dilthey, appearing.

Defendant: Brooks, Stevens Pope, Attorneys, Cary, North Carolina; Kathlyn C. Hobbs, appearing.

Defendant has renewed its motion to dismiss, which was denied at the hearing before the Chief Deputy Commissioner. The Full Commission denies defendant's motion to dismiss.

The Deputy Commissioner's Interlocutory Opinion and Award is appealable to the Full Commission because the failure to review the Opinion and Award would result in the prejudice of a substantial right. See, Littlev. Stogner, 140 N.C. App. 380, 536 S.E.2d 334 (2000), disc. rev. denied,353 N.C. 377, 547 S.E.2d 813 (2001); Plummer v. Kearney, 108 N.C. App. 310,423 S.E.2d 526 (1992).

2. Defendant was the duly qualified employer at the time of the incident and was self-insured. Defendant's workers' compensation benefits were administered by Compensation Claims Solutions.

3. Genesis is the excess carrier in this matter.

4. The parties are subject to the North Carolina Workers' Compensation Act.

5. The date of injury is November 10, 1996.

6. The parties entered into a Form 21 Agreement on December 3, 1996. The Form 21 was filed with the Industrial Commission on January 27, 1997. Defendant has continued to pay plaintiff disability benefits and medical expenses.

7. During the pendency of this matter, the parties have formally mediated this claim on three separate occasions, the most recent mediation conference having been on May 1, 2001. At that time, the parties signed a mediation settlement agreement. Thereafter, defendant withdrew from the agreement. Plaintiff subsequently filed an amended Form 33 stating that "the employer and insurance company have failed to pay and comply and have breached the mediation agreement."

8. The parties entered the following exhibits into evidence at the hearing before Chief Deputy Commissioner Gheen:

a. Stipulated Exhibit #1: Pre-Trial Agreement.

b. Plaintiff's Exhibit A: Mediation Settlement Agreement dated May 1, 2001.

c. Defendant's Exhibit #1: defendant's authority/plaintiff's authority.

d. Defendant's Exhibit #2: Affidavit of Camden Frazier dated January 17, 2002 and attached Budget Ordinance for Fiscal Year 2001-2002, incorporated by reference.

9. The issue to be determined by the Commission is whether the mediation settlement agreement signed by the parties on May 1, 2001 is enforceable.

2. Defendant established a self-insurance program for workers' compensation in July 1991. Defendant has a self-insured retention in the amount of $250,000.00. Defendant has excess insurance coverage above that amount with Genesis, who is not a named party in this workers' compensation action.

3. The parties attended three mediation conferences to negotiate a settlement on this claim.

4. The mediation settlement conference on May 1, 2001 was attended by the following: Twyla Casey, on behalf of plaintiff; Kate George, Risk Manager for Wake County; Larry Justice, for Compensation Claims Solutions; Kathlyn C. Hobbs, counsel of record for defendant; Robert V. Lucas, counsel of record for plaintiff; William Stevenson, consultant on behalf of plaintiff; and John Aldridge, mediator.

5. The evidence of record establishes that the excess carrier participated by telephone in the mediation settlement conference on May 1, 2001.

6. Twyla Casey, plaintiff's daughter, attended the mediation on behalf of plaintiff. Ms. Casey has power of attorney to handle her mother's affairs due to a decline in her mother's health.

7. On May 1, 2001, the parties reached an agreement that resolved all remaining issues in this claim. A mediation settlement agreement was drafted which stated:

"The parties to the above referenced claim have agreed to settlement on the following terms:

1. The Defendants [sic] will pay to the employee the sum of $750,000.

2. If temporary total benefits are being paid, the payments will continue until the Agreement is approved.

3. a. . . . The Defendants will pay all related medical expenses. . . .

b. The Defendants will pay all unpaid related medical expenses.

The employee will execute a Clincher [Compromise Settlement] Agreement releasing the Defendants from all liability arising under the provisions of the N.C. Workers' Compenation Act whether by reason of an injury by accident or an occupational disease as defined by the Act. . . .

The parties will share equally the mediator's fee. . . ."

8. The mediation settlement agreement was signed by: Twyla Casey on behalf of plaintiff; Larry Justice for Compensation Claims Solutions; Kathlyn C. Hobbs, counsel of record for defendant; Robert V. Lucas, counsel of record for plaintiff; and John Aldridge, mediator.

9. It was stipulated that all parties and their representatives agreed to the terms of the written agreement at the mediation settlement conference. Mr. Aldridge, as mediator, verified the agreed intent of the parties through his signature on the agreement.

10. Defendant was informed by Genesis on or before August 9, 2001 that Genesis was not willing to pay plaintiff under the terms of the mediation settlement agreement. Based upon this information, defendant withdrew its consent and informed plaintiff it would not implement the terms of the agreement.

11. On August 9, 2001, defendant's counsel informed plaintiff's counsel that defendant's excess carrier had changed its position subsequent to the mediation settlement conference. Based on this fact, defendant repudiated the agreement on or about August 9, 2001. No evidence was presented at the hearings before the Commission concerning the reasons for the excess carrier's change of position.

12. Defendant, having repudiated the agreement, did not prepare a compromise settlement agreement for plaintiff's execution.

13. Wake County adopted a Budget Ordinance on June 18, 2001, which authorized its County Manager, or designee, to make payments in an amount not to exceed $100,000.00 in "settlement of any liability claims against the County or against any of its officers or employees as provided by Resolution of May 20, 1995." Although the Resolution of May 20, 1995 was not introduced into evidence at the hearing before the Deputy Commissioner, it can reasonably be inferred from the evidence that the $100,000.00 limitation of authority to settle has existed in Wake County since 1995.

14. Camden Frazier, Finance Director of Wake County, prepared an Affidavit on January 17, 2002 stating that the Wake County Board of Commissioners must approve settlement of liability claims over $100,000.00 under certain procedures. Mr. Frazier stated that in "a claim that is expected to settle for an amount over $100,000.00, the parties are informed that any agreement reached during the mediation is subject to the approval by the Board of County Commissioners."

15. William H. Stephenson was employed by plaintiff as a consultant and was present at the mediation conference at which the agreement was executed. Mr. Stephenson testified and the Commission finds that defendant's process for approval of claims in excess of $100,000.00 was not raised or discussed at the mediation settlement conference. The necessity of Board approval also was not shown as a condition on the mediation settlement agreement. Mr. Stephenson stated that all persons attending the mediation settlement conference appeared fully authorized to act.

16. At all relevant times, plaintiff was, and remains, ready and willing to comply with the terms of the agreement reached on May 1, 2001.

17. Defendant has continued to pay plaintiff compensation for total disability benefits and medical expenses as approved by the Commission pursuant to the Form 21 filed on January 27, 1997.

18. The Wake County Board of Commissioners enacted Resolution R-02-33,Rejecting Workers' Compensation Settlement Agreement-Melva D. Lee on June 17, 2002, over one year after the mediation settlement agreement was executed. The resolution stated that the Board declined to approve the tentative settlement agreement with plaintiff because it was in excess of the authority to settle a claim granted by the Board to an employee or official. The Resolution further stated that County staff were directed not to prepare or execute any document in excess of granted authority unless approval of the Board was obtained first.

19. The issues presented in this case involve significant disputed questions of law. The prosecution and defense of this action have not been unfounded or litigious.

2. Therefore, under Lemly v. Colvard Oil Company, supra, the mediation settlement agreement entered into in the case at bar was an enforceable agreement. However, the legal analysis in this case differs from Lemly because defendant is a county government. The Deputy Commissioner held that the mediation settlement agreement was enforceable notwithstanding the lack of approval of the Wake County Board of Commissioners based upon the fact that all proper parties were present at the mediation conference and that the agreement did not specify that it was in any way contingent upon subsequent approval of the County Commissioners.

3. However, counties are creatures of the General Assembly and have only such powers as are prescribed by statute and those implied by law, and their powers can only be exercised by the board of commissioners.Insurance Co. v. Guilford County, 225 N.C. 293, 34 S.E.2d 430 (1945). Therefore, in order the enter into a valid and binding contract, a board of commissioners must act in its corporate capacity at a public meeting.Id.

4. The conduct of defendant and its representatives in this case in failing to notify plaintiff of the limited settlement authority delegated by the Board of County Commissioners was reprehensible and clearly misleading and therefore the equities undoubtedly reside with plaintiff, who relied on the promises of defendant's representatives. However, "[p]ersons dealing with a [county government] are charged with notice of all limitations upon the authority of its officers representing them."Moody v. Transylvania County, 271 N.C. 384, 389, 156 S.E.2d 716, 720 (1967), quoting 38 Am.Jur., 202, Municipal Corporations § 522. The scope of defendant's authority is a matter of public record. Rowe v.Franklin County, 318 N.C. 344, 351 n. 1, 349 S.E.2d 65, 69 (1986); L S Leasing, Inc. v. City of Winston-Salem, 122 N.C. App. 619,471 S.E.2d 118 (1996). Therefore, plaintiff may not recover under an equitable theory and cannot rely on defendant's apparent authority to invoke a defense of equitable estoppel. Data Gen. Corp. v. Cty. ofDurham, 143 N.C. App. 97, 545 S.E.2d 243 (2001).

5. The North Carolina Industrial Commission Rules for Mediated Settlement and Neutral Evaluation Conferences also put a plaintiff on notice of the possibility of board approval of a settlement. The Rules specifically contemplate that settlement of claims with a government entity may require approval by a board upon the conclusion of mediation. Rule 4(a)(1)(d) states that if any party is a governmental entity and if that entity proposes settlement terms that can only be approved by a board, the representative shall have authority to negotiate on behalf of the party and to make a recommendation to that board.

6. It appears from the evidence of record that since 1995 the Wake County manager or his designee was authorized to enter into settlement agreements up to $100,000.00 without first obtaining the approval of the Board of County Commissioners. Here, the settlement amount exceeded $100,000.00 and required Board approval. Because defendant's counsel and defendant's representative lacked the authority to legally bind defendant into an enforceable contract with plaintiff, no binding contract could result from the agreement. Guilford County Bd. of Comrs v. Trogdon,124 N.C. App. 741, 478 S.E.2d 643 (1996). If a contract entered into by a governmental entity is ultra vires due to the absence of authority to contract, the governmental entity may not be bound, even in an implied contract. Rockingham Square Shopping Center, Inc. v. Town of Madison,45 N.C. App. 249, 262 S.E. 705 (1980). An ultra vires contract is not voidable, but wholly void and of no legal effect because it could not be made. Id.

7. Even if defendant's representative did have the necessary authority to bind the County, the alleged contract would be invalid and unenforceable under N.C. Gen. Stat. § 159-28 without the required certificate of compliance. The Local Government Budget and Fiscal Control Act requires under N.C. Gen. Stat. § 159-28 that if an obligation is evidenced by a contract or agreement requiring the payment of money, the contract shall include on its face a certificate which complies with the requirements of N.C. Gen. Stat. § 159-28. The statute further states that an obligation incurred in violation of this subsection is invalid and may not be enforced. See Myers v. Town of Plymouth, 135 N.C. App. 707,522 S.E.2d 122 (1999) (citations omitted).

8. The Full Commission concludes as a matter of law that defendant's representative did not have the authority to bind defendant in an enforceable contract, and that the mediation settlement agreement signed by the parties was void and of no legal effect and therefore unenforceable. See, Data Gen. Corp. v. Cty. of Durham, supra; L SLeasing, Inc. v. City of Winston-Salem, supra.

9. This action was not brought or defended upon unreasonable grounds, and actions of the parties were not based upon stubborn, unfounded litigiousness. Therefore, neither party is entitled to the payment of attorney's fees under N.C. Gen. Stat. § 97-88.1. Sparks v. MountainBreeze Restaurant, 55 N.C. App. 663, 296 S.E.2d 575 (1982).

S/______________________ LAURA KRANIFELD MAVRETIC COMMISSIONER

CONCURRING:

S/_____________ THOMAS J. BOLCH COMMISSIONER

DISSENTING:

S/____________ BUCK LATTIMORE CHAIRMAN

I dissent from the holding of the majority and would vote to AFFIRM the Interlocutory Opinion and Award filed by the Chief Deputy Commissioner.

I concur fully with the majority that Lemly is controlling law. Lemly holds that the Industrial Commission may review and approve a written "settlement agreement" reached between the parties where one party, either the plaintiff or the defendants, purports to withdraw its approval of the settlement agreement subsequent to its execution. In this case, the Mediation Settlement Agreement dated May 1, 2001 meets all of theLemly requirements to constitute a "settlement agreement" that may be approved by the Industrial Commission.

I dissent as to the majority's holding that the County Manager and his designees were not fully authorized to negotiate and bind Wake County to the settlement between the parties as their authority to bind Wake County was limited to claims not in excess of $100,000.00.

The majority opinion contends that the affidavit of Camden Frazier dated January 17, 2002 proves by "inference" the existence and the terms of Wake County's Budget Ordinances purportedly limiting the Wake County manager or his designee to enter into settlement agreements up to $100,000.00 without first obtaining approval of the Wake County Board of Commissioners. This finding of fact is not supported by any competent evidence.

There are two budget ordinances that would appear applicable to the facts of this case. The first ordinance is the Wake County Budget Ordinance for the Fiscal Year 2001-2002. Section 15 (emphasis added) of this Ordinance provides:

The County Manager, or his designee, may authorize payment in an amount not to exceed $100,000 in settlement of any liability claims against the County or against any of its officers or employees as provided by Resolution of May 20, 1995. The County Manager shall make quarterly reports to the Board of Commissioners of any such payments.

Section 15 addresses "liability claims" and does not mention "workers' compensation claims."

The second Ordinance is that of May 20, 1995 that is referenced in the Fiscal Year 2001-2002 Ordinance. The 1995 Ordinance is not in evidence. The majority opinion recognizes the applicable law that the Industrial Commission can take judicial notice of a public act upon request and when provided with the necessary information, N.C. Gen. Stat. § 8C-1, Rule 201(d), the Industrial Commission may not take judicial notice of county ordinances. State v. Atlas, 283 N.C. 165, 195 S.E.2d 496 (1973); Fulghumv. Selma, 238 N.C. 100, 76 S.E.2d 368 (1953).

N.C. Gen. Stat. § 153A-50 controls proof of the 1995 Wake County Budget Ordinance and specifically provides:

County ordinances shall be pleaded and proved under the rules and procedures of G.S. 160A-79. References to G.S. 160A-77 and G.S. 160A-78 appearing in G.S. 160A-79 are deemed, for purposes of this section, to refer to G.S. 153A-49 and G.S. 153A-48, respectively.

In turn, N.C. Gen. Stat. § 160A-79 provides in pertinent part:

b) Any of the following shall be admitted in evidence in all actions or proceedings before courts or administrative bodies and shall have the same force and effect as would an original ordinance:

(1) A city code adopted and issued in compliance with G.S. 160A-77, containing a statement that the code is published by order of the council.

. . .

(3) A copy of an ordinance as set out in the minutes, code, or ordinance book of the council, certified under seal by the city clerk as a true copy (the clerk's certificate need not be authenticated).

(4) Copies of any official lists or schedules maintained in accordance with G.S. 160A-77 and certified under seal by the city clerk as having been adopted by the council and maintained in accordance with its directions (the clerk's certificate need not be authenticated).

The affidavit of Camden Frazier meets none of these requirements as to the Ordinance of May 20, 1995. The 1995 Ordinance may or may not clarify that the County Manager or his designee was limited to $100,000 in a workers' compensation action as opposed to a "liability claim." On the record in this case, there is simply no competent evidence to establish the true state of the facts. As the Wake County 1995 Ordinance is not before the Industrial Commission, the majority errs in permitting "inferences."

Equally compelling is the fact that during the hearing of this action before the Full Commission, Wake County was informed that the record could be reopened to permit the taking of additional evidence. Wake County did not petition the Full Commission to reopen the record to introduce the 1995 Budget Ordinance.

The majority also cites Rule 4(a)(1)(d) of the North Carolina Industrial Commission Rules for Mediated Settlement and Neutral Evaluation Conferences for the proposition that plaintiff was on notice that the Wake County Board of Commissioners had to approve the settlement agreement. The Rule provides:

Any party that is a governmental entity shall be represented at the conference by an employee or agent who is not such party's outside counsel or Attorney General's Office counsel responsible for the case and who has authority to decide on behalf of such party whether and on what terms to settle the action; provided, if under law, proposed settlement terms can be approved only by a board, the representative shall have authority to negotiate on behalf of the party and to make a recommendation to that board.

The Rule simply recognizes that representatives of a board of county commissioners may or may not be authorized to reach binding agreements. Boards of county commissioners may fully authorize designees to negotiate binding settlements. Based on the facts of this case it appeared that Wake County's representative at the multiple mediation settlement conferences was fully authorized to enter into a binding settlement. In addition, there is nothing in the actual mediated settlement agreement denoting that Wake County's representative was limited in authority. This entire controversy could have easily been avoided if Wake County's representatives had simply denoted their limited authority in the written settlement agreement. Not having done so, Wake County should not be permitted to escape their legal obligations, particularly since Wake County's conduct was misleading and "reprehensible" as found by the majority.

Because the 1995 Budget Ordinance purportedly limiting the Wake County manager's authority to enter into binding settlements is not before the Full Commission, the greater weight of the evidence compels the conclusion that the parties signing the Mediation Settlement Agreement on May 1, 2001 were fully authorized to do so.

The majority further holds that because a preaudit certificate was not attached to the Mediated Settlement Agreement as required by N.C. Gen. Stat § 159-28 there was no valid contract and therefore plaintiff cannot recover under equitable estoppel. The evidence of record does not support this conclusion of law.

First, it is not entirely clear that the preaudit certificate is required in this case. The Industrial Commission routinely approves hundreds of Settlement Agreements every year in which counties are party defendants. There is not one case known to this Commissioner in which a preaudit certificate has been appended to a Settlement Agreement. The conclusion of law reached by the majority opinion would produce the untoward result that any settlement agreement submitted by the county and approved by the Industrial Commission is unenforceable.

Second, assuming that N.C. Gen. Stat. § 159-28 does apply it does not follow that the preaudit certificate could not be issued in this case. The preaudit certificate process is required by the General Assembly to ensure only that a county may incur no obligation unless "the budget ordinance includes an appropriation authorizing the obligation and an unencumbered balance remains in the appropriation sufficient to pay the current fiscal year the sums obligation by the transaction for the current fiscal year." N.C. Gen. Stat. § 159-28. The objective of the statute is twofold; prohibit expenditures that have not been budgeted by the county and, additionally, prohibit a county from deficit expenditures under any circumstances.

There is no evidence in the record before the Full Commission that the obligation to the plaintiff in this case had not been properly included in an appropriation or that payment of the obligation to the plaintiff in this case would have resulted in deficit financing. At the hearing before the Deputy Commissioner and the Full Commission, Wake County relied largely on the defense that a Mediated Settlement Agreement could not constitute an enforceable settlement agreement under any circumstances. The decision in Lemly is contrary to Wake County's position as held by the majority.

The majority cites Data Gen. Corp. v. Cty. of Durham in support of its holding that equitable estoppel cannot be applied in the case before the Full Commission. The Data court's holding that relied on the fact that the county in that case "has not expressly entered a valid contract."Data, 143 N.C. App. at 104, ___ S.E.2d at ___. Finding that a valid contract in the present action distinguishes Data from the facts before the Full Commission.

Our appellate courts have held that equitable estoppel may apply to governmental entities.

We recognize that counties are not subject to an estoppel to the same extent as a private individual or a private corporation. See Henderson v. Gill, Comr. of Revenue, 229 N.C. 313, 49 S.E.2d 754 (1948). Otherwise a county could be estopped from exercising a governmental right. Id. However, a governmental entity may be estopped if it is necessary to prevent loss to another and the estoppel will not impair the exercise of governmental powers. Washington v. McLawhorn, 237 N.C. 449, 454, 75 S.E.2d 402, 406 (1953).

Land-of-Sky Regional Council v. Henderson County, 78 N.C. App. 85, 91,336 S.E.2d 653, 657 (1985) (hereinafter "Land-of-Sky"). While "Land-of-Sky" is distinguishable from the facts of the case before the Full Commission, it does suggest that county governments may not entirely elude equity.

The equities in this case lie squarely with the plaintiff. As the majority finds:

The conduct of defendant's representative in this case in failing to notify plaintiff of the limited settlement authority delegated by the Board of County Commissioner was reprehensible and clearly misleading and the equities undoubtedly reside with the plaintiff, who relied on the promises of defendant's representatives.

It should be noted that the parties engaged in several mediations over an extended period before an agreement was reached. Additionally, the Wake County officials never indicated an intention not to honor its agreements until its excess insurance carrier, who was present at the mediation and indisputably consented to the settlement agreement, repudiated the agreement. The Wake County Board of Commissioners did not adopt a resolution specifically disapproving the settlement agreement until after the Chief Deputy Commissioner issued the Interlocutory Opinion and Award on June 3, 2002.

I would add to the finding of the majority the observation of an American political sage:

The moral test of government is how it treats those who are in the dawn of life, the children; those who are in the twilight of life, the aged; and those who are in the shadows of life, the sick, the needy, and the handicapped.

Wake County has obviously failed the "moral test" in its treatment of Melva Lee.

Believing that both the law and equity of this case support the conclusion that representatives of Wake County entered into a valid contract, I vote to AFFIRM the decision of the Chief Deputy Commissioner.

This the 16th day of June 2003.

S/____________ BUCK LATTIMORE CHAIRMAN