B. Frank Joy Co. v. Isaacs

GARRITY, Judge. In this matter we shall be concerned with the question whether the employer/insurer in a workers’ compensation proceeding may unilaterally rescind an Agreement of Settlement and Compromise signed by the parties and submitted to the Workers’ Compensation Commission for approval pursuant to Article 101, Section 52, of the Annotated Code of Maryland. BACKGROUND On April 4, 1984 Benjamin Isaacs, appellee, suffered injuries in the course of his employment with appellant, the B. Frank Joy Company. Appellee thereafter filed a claim with the Workers’ Compensation Commission to recover disability benefits.

After several hearings before the Commission on matters unrelated to this appeal, the parties entered into settlement negotiations. On July 1, 1990, the parties signed a document entitled “Agreement to Compromise and Settlement” (hereinafter “the Agreement”), which the parties then submitted to the Commission for approval pursuant to Article 101, § 52 of the Annotated Code of Maryland. The Commission thereafter set a hearing for September 10, 1990 to consider the agreement. On September 2, 1990, eight days prior to the Commission’s hearing on the Agreement, the claimant unexpectedly died of causes unrelated to the injury underlying his workers’ compensation claim.

At the hearing on the efficacy of the Agreement, appellants 1 unilaterally sought to rescind it. After a full hearing on the issue, the Commission ⁴⁴² determined that the appellants could not withdraw from the Agreement, found the Agreement to be proper and ordered it approved. The Commission thereafter denied appellants’ Motion for Rehearing. Appellants then appealed the Commission’s ruling to the Circuit Court for Montgomery County.

The parties filed motions for summary judgment and, after hearing arguments, the court (Ferretti, J.) granted appellee’s motion and affirmed the Commission’s decision approving the agreement and ordering its enforcement. In so holding, the court made the following findings: I looked at the agreement. This is an agreement of compromise and settlement, and I look at it as an agreement with a condition subsequent. The condition is that it is not going to be effective unless they [Commission] approve.

Once they approve, then it is a done deal. QUESTION PRESENTEE) The question before us is whether an employer/insurer may, without cause or justification, rescind an Agreement of Compromise and Settlement that the employer/insurer and the claimant have signed and jointly submitted to the Workers’ Compensation Commission for approval pursuant to Article 101, § 52, of the Annotated Code of Maryland. 2 ANALYSIS The issue presently before us is a question of law rather than one of fact. As the appellants have appealed from the trial court’s ruling upon motions for summary judgment based upon non-disputed facts, we may substitute our conclusions of law for those of the trial court. Sica v. Retail Credit Company, 245 Md. 606 , 227 A.2d 33 (1967). ‡ 4* s}s ⁴⁴³ Under Maryland law, an Agreement of Settlement and Compromise arrived at between the insurer/employer and a claimant must be submitted for approval by the Workers’ Compensation Commission.

The relevant statute provides: At any time after a claim for compensation has been filed with the Workmen’s Compensation Commission by any claimant, the said claimant and/or his or her dependents may, with the approval of the Commission, enter into an agreement with the employer or insurer of such employer, with the Subsequent Injury Fund, or the Uninsured Employers Fund providing for a final compromise and settlement of any and all claims which the said employee or his or her dependents might then or thereafter have under the provisions of this article, upon such terms and conditions as the Commission shall, in its discretion, deem proper. Any such settlement when approved by the Commission shall be binding on all parties thereto, and no such settlement shall be effective unless approved by the Commission. Md.Ann.Code art. 101, § 52 (Workers’ Compensation Law of Maryland, 1987 edition). On July 1, 1990, the parties executed an Agreement of Compromise and Settlement.

The preamble of the agreement stated that the parties “have reached an agreement providing, subject to the approval of the Commission, for a compromise and settlement of this claim.” Paragraph 5 of the agreement stated in part: 5. This Agreement is made subject to approval of the Commission, and when so approved shall immediately become effective and binding upon all of the parties hereto. Appellants argue that they may withdraw from the settlement agreement with or without cause prior to the Commission approval on several different grounds. Citing Hanley v. Mulleneaux, 192 Md. 592 , 65 A.2d 325 (1949), Safeway Stores v. Altman, 296 Md. 486 , 463 A.2d 829 (1983) and numerous decisions in other jurisdictions, appellants contend that signed settlement agreements submitted to the Commission for approval are merely “proposed settlement ⁴⁴⁴ agreements” from which either party may withdraw at any time prior to Commission approval.

Specifically, appellants argue that Commission approval is a condition precedent to the existence of a contract. Appellants also contend that the purported contract in this case was void for lack of consideration because, appellants maintain, appellee (as claimant) had the right to withdraw from the contract. Appellee, on the other hand, argues that there is no authority in Maryland that authorizes an employer/insurer arbitrarily to rescind, without cause or justification, a signed agreement submitted to the Commission for approval, and that such an action is contrary to the purpose and intent of Maryland workers’ compensation law and contrary to accepted principles of contract law. The circuit court determined that Commission approval of the agreement was a condition subsequent to the agreement between the parties and on that basis ruled that the appellants had no right to rescind the agreement.

The court rejected appellants’ contention that a claimant can rescind an agreement and an employer/insurer should have the same power of recision by noting that the workers’ compensation statute exists to protect the claimant, not the company. The settlement of litigation has long been a favored method of resolving disputes in Maryland. In McClellan v. Kennedy, 8 Md. 230, 248 (1855), quoting from 1 Story’s Eq. secs. 131, 132, the Court said: If compromises are otherwise unobjectionable they will be binding, and the rights will not prevail against the agreement of the parties, for the right must always be on one side or the other, and there would be an end of compromises if they might be overthrown upon any subsequent ascertainment of right contrary thereto. The doctrine of compromises rests on this foundation.

The importance and enforceability .of settlement agreements was more recently addressed by the Court of Ap ⁴⁴⁵ peals in Clark v. Elza, 286 Md. 208 , 406 A.2d 922 (1979), where Judge Eldridge observed: Moreover, it is logical to hold that executory accords are enforceable. An executory accord is simply a type of bilateral contract. As long as the basic requirements to form a contract are present, there is no reason to treat such a settlement agreement differently than other contracts which are binding. This is consistent with the public policy dictating that courts should “look with favor upon the compromise or settlement of law suits in the interest of efficient and economical administration of justice and the lessening of friction and acrimony.” Chertkof v. Harry C. Weiskittel Co., 251 Md. 544 [ 248 A.2d 373 ] (1968), cert, denied 394 U.S. 974 [ 89 S.Ct. 1467 , 22 L.Ed.2d 754 ] (1969).

Id. 286 Md. at 219 , 406 A.2d 922 . In keeping with this longstanding public policy favoring settlement agreements, it is well established under Maryland law that when a consent judgment is reduced to a writing, signed, and submitted to the court for approval, the court may sign the consent judgment even if prior thereto one party tries to rescind the agreement. Chernick v. Chernick, 327 Md. 470 , 610 A.2d 770 (1992). In Chernick , Judge Chasanow, writing for the Court of Appeals, observed: While the parties do not have the ability to independently modify an existing court decree, they do have the power to make a valid agreement to modify the decree subject to the court’s approval.

An agreement made subject to the court’s approval is analogous to a contract subject to a condition. “A condition is an event, not certain to occur, which must occur, unless its nonoccurrence is excused, before performance under a contract becomes due.” Restatement (Second) Contracts § 224 (1981). Even when a condition must occur before performance is due, the contract is no less binding than one made without a condition. Consequently, if parties stipulate to terms embodied in a proposed consent order, the