HAROLD DODDS, Appellant, v. ROBERT WOODLEY STELLAR et al., Defendants; LIBERTY MUTUAL INSURANCE COMPANY (a Corporation), Respondent.
L. A. No. 20067
In Bank
July 31, 1947
Shenk, J., Edmonds, J., Carter, J., Traynor, J., Schauer, J., and Spence, J., concurred.
Lyndol L. Young for Respondent.
Leonard, Hanna & Brophy as Amicus Curiae, on behalf of Respondent.
SPENCE, J.----Plaintiff appeals from certain orders made in ancillary proceedings in his malpractice action and affecting the distribution of the proceeds of recovery by (1) granting the claimant “expenditures for compensation” and (2) denying plaintiff an allowance for attorney fees. Plaintiff argues: (1) the improper scope of the lien award and (2) the inequity of the disallowance of the attorney fee. His position is well taken as to the first point but not as to the second.
While employed as a workman in the yards of the California Shipbuilding Corporation, plaintiff “suffered a bruise and laceration of his middle, left finger . . . when a steel beam fell upon it.” In the course of medical treatment for the injury, plaintiff sustained X-ray burns through the negligence of the attending physicians, and the ultimate result was amputation of the finger. Plaintiff brought an action against
On June 12, 1945, Liberty Mutual Insurance Company served and filed its notice of motion for an order “allowing a lien against the judgment of the plaintiff . . . in the sum” theretofore claimed, to wit, “$4,494.81 duly paid out by [it] as insurance carrier for [plaintiff‘s] employer . . . by reason of the injuries sustained by . . . plaintiff arising out of his . . . employment, and pursuant to the award of the Industrial Accident Commission . . . dated November 28, 1944, and the provisions of the Labor Code.” On June 18, 1945, plaintiff served and filed his notice of motion for an order allowing counsel fees to his attorneys “on that part of the judgment heretofore entered . . . upon which the Liberty Mutual Insurance Company is granted a lien . . . on the ground that the . . . action was a representative suit brought by the plaintiff on his own behalf and on behalf of the . . . Company . . . and for the benefit of [both] to obtain a common fund.” Supporting and opposing affidavits were served and filed; and on June 28, 1945, after both motions had been argued and submitted, the court made its order granting the insurance carrier‘s lien in the sum of $4,494.81 and denying plaintiff‘s application for attorney fees. On July 3, 1945, plaintiff served and filed two notices of motion: (1) for reconsidera-
Plaintiff does not now challenge the propriety of the insurance carrier‘s assertion of a lien in the malpractice action (Heaton v. Kerlan, 27 Cal.2d 716, 721 [166 P.2d 857]), but he contends that the trial court made an excessive allowance. Thus, he maintains that it was error to include in such lien “(a) any sums of money expended by the [insurance carrier] which were not recovered by” plaintiff in the malpractice action; “(b) payment of medical expenditures in the treatment of ailments wholly disconnected with the injury sustained by plaintiff as the result of the acts of the” negligent physicians; and “(c) payment of medical expended by the lien claimant . . . for [its] sole benefit . . . to aid [it] in determining the extent of [its] liability . . . for future medical or disability payments.” Upon this basis plaintiff urges that the lien should be limited to the sum of $3,668.80, representing $1,525 for compensation payments and $2,143.80 for hospitalization and medical services allegedly allowed in the computation of the special damages in the malpractice action. The insurance carrier takes the position that “no evidence which developed during the trial of the [malpractice] action . . . could have any effect whatever on the amount of the lien covering actual expenditures made by the insurance carrier under the award of the Industrial Accident Commission to the plaintiff,” and therefore its lien claim of $4,494.81, representing $1,525 for compensation payments and $2,969.81 for medical payments must be sustained. Thus, the point of dispute between the parties concerns only the discrepancy as to the item of hospital and medical expense properly entering into the lien allowance.
In opposing any deductions from its lien on plaintiff‘s judgment, the insurance carrier argues that plaintiff is concluded by his stipulation in the trial court “that the Liberty Mutual Insurance Company did spend the sum of $1,525.00
The insurance carrier for the employer, seeking reimbursement for expenditures in compensating the employee for an industrial injury which has been aggravated by the negligent treatment of a doctor, may bring an action against such third party tort feasor (
“It has been settled by decisions in tort actions that the aggravation of injuries by the negligence of a doctor is within the scope of the risk created by the original tortious act. (Citing cases.) The same rule applies in this state in workmen‘s compensation cases. ’ . . . “under the great weight of authority the employer is liable for all legitimate consequences following an accident, including unskilfulness or error of judgment of the physician furnished as required, and the employee is entitled to recover under the schedule of compensation for the extent of his disability based on the ultimate result of the accident, regardless of the fact that the disability has been aggravated and increased by the intervening negligence or carelessness of the employer‘s selected physician.” The reasonableness of this principle is patent.’ (Citing cases.)” And continuing on pages 722-723: “In the present case the commission determined the amount of the disability benefits to which [the employee] was entitled under the act, but it did not determine what part thereof was attributable to the aggravation of [the employee‘s] injury caused by the doctor‘s malpractice. Since [the employee] was entitled to compensation for the injury including such aggravation, the commission had no reason to determine to what extent [the employee‘s] disability was caused by the malpractice, or the amount of compensation payable for disability so caused. Awards for disability are based on the ultimate result of the accident; . . . . Whether or not there was malpractice had to be determined in the action against the doctor. Given this determination, it remains to be determined what aggravation of the original injury resulted from the malpractice. The amount of [the insurance carrier‘s] lien is equal to the amount of compensation paid or payable, including medical expenditures not covered by the award, that was attributable to the malpractice. In other words, the amount of the [insurance carrier‘s] lien is limited to the amount that he is required to pay because of the malpractice.”
In line with these authorities, plaintiff objects to the insurance carrier‘s lien allowance as including these items: (1) moneys paid to a medical examiner appointed by the Industrial Accident Commission to determine the extent of plaintiff‘s continued disability; (2) moneys paid for medical treatment of a low back pain, an independent disabling injury suffered by plaintiff; (3) moneys paid for telephone calls and guest trays as shown by the hospital records; (4) moneys
Turning now to the second point of dispute on this appeal, plaintiff protests the disallowance of attorney fees for his counsel from that amount of the judgment payable to the insurance carrier in satisfaction of its lien. It is plaintiff‘s position that the malpractice action was “a representative suit,” brought by him on his own behalf and on behalf of the insurance carrier, for the benefit of both, and to obtain a common fund. Upon this basis he cites “a well-established doctrine of equity jurisprudence” that “where a lawyer has rendered . . . service” of such value “as to make available a fund for a class, even though he appeared for only one claimant, it is equitable that his compensation and expenses should come from the entire fund saved for all classes concerned before it is distributed.” (Winslow v. Harold G. Ferguson Corp., 25 Cal.2d 274, 284 [153 P.2d 714]; see, also, Estate of Marre, 18 Cal.2d 191, 192 [114 P.2d 591].) Here plaintiff urges that the insurance carrier failed to bring an independent action to recover from the negligent doctors its “expenditures for compensation” by reason of the malpractice but simply filed notice of its claim of lien upon such judgment as plaintiff might obtain; that the insurance carrier rendered no assistance to plaintiff or his counsel in the prosecution of the malpractice action; that recovery was had solely by virtue of the legal services of plaintiff‘s counsel and that the insurance carrier benefited by the judgment in that its lien will be paid, whereas it otherwise would have no value; that
In opposing plaintiff‘s classification of the malpractice action as a “representative” or “class” suit, the insurance carrier cites these matters of record: that plaintiff included it as a defendant in the malpractice action; that its defense necessitated the preparation, filing and argument of certain pleadings, and ultimately separate trial on the special issue of the jurisdiction of the court over plaintiff‘s claim of liability against it; and that upon the filing of findings of fact and conclusions of law, a formal judgment of dismissal was entered in its favor in the malpractice action. The insurance carrier further refers to the independent status of its interest in plaintiff‘s action by its own counsel proceeding with the timely assertion of its lien claim therein, with which legal services plaintiff‘s counsel “had nothing whatever to do” and for which it alone was responsible. But irrespective of these factual considerations indicating the “adverse position” of the parties in the initial stages of the litigation and the independent legal procedure required of the insurance carrier as lien claimant, the latter correctly maintains that the rights of the parties are wholly governed by statute (
The Workmen‘s Compensation Act, as carried into the Labor Code, gives the employer or its insurance carrier, upon paying or becoming obligated to pay compensation to the employee for disability suffered in the course of employment as the result of negligence of a third party, the right of reimbursement for such expenditure. This right the employer or its insurance carrier may exercise in any one of three ways: It may bring an independent suit (
Plaintiff concedes that there is no statutory provision for the allowance of attorney fees from the specified reimbursement lien in the employee‘s action, but he cites in favor of such deduction the considerations prevailing when the employer or its insurance carrier brings an independent suit against the negligent third party. But these precise differences in the statutory regulations only serve to emphasize the plain distinctions made by the Legislature in this regard. Thus, by section 3854 of the Labor Code, “if the action is prosecuted by the employer [or its insurance carrier] alone, . . . after recouping for [its] special damages, together with a reasonable attorney‘s fee fixed by the court, [it] shall pay any excess to the injured employee. . . .” (Emphasis added.) In contrast to such authorized deduction of attorney fees from the amount which would otherwise be payable to the employee in the course of the employer‘s or insurance carrier‘s accounting to the employee (see State Compensation Insurance Fund v. Dalton, 13 Cal.App.2d 284, 289 [56 P.2d 962]), the employee is not allowed such item when he prosecutes the damage action and the claim of the employer or its insurance carrier for “the amount of [its] expenditures for compensation” is made “a first lien against the entire amount
Other statutory provisions pertinent to the rights of the employee and the employer or its subrogated insurance carrier in workmen‘s compensation matters strengthen the conclusion that the lien here in question is not subject to such deduction as suggested by plaintiff. Thus, section 3858 of the Labor Code provides that “after payment of the employer‘s [or the insurance carrier‘s] lien, [it] shall be relieved from the obligation to pay further compensation to or on behalf of the employee . . . up to the entire amount of the balance of the judgment, if satisfied, without any deduction.” (Emphasis added.) Section 3860 provides that “no release or settlement . . . after action and before judgment is valid and binding without notice . . . and opportunity to the employer [or its insurance carrier] to recover the amount of compensation [it] has paid or become obligated to pay” and “the entire amount of such settlement, or of any settlement without suit, is subject to the employer‘s [or the insurance carrier‘s] full claim for reimbursement for [its] compensation expenditures and liability.” (Emphasis added.) And section 3861 requires the Industrial Accident Commission to allow “as a credit to the employer [or its insurance carrier] to be applied against [its] liability for compensation, such amount of any recovery by the employee for his injury, either by settlement or after judgment, as has not theretofore been applied to reimburse the employer [or its insurance carrier].”
The order granting the Liberty Mutual Insurance Company a lien in the sum of $4,494.81 is reversed, with directions to the trial court to determine the amount of the lien allowance in accordance with the views herein expressed. The order denying plaintiff‘s application for attorney fees is affirmed. The parties will bear their own costs on these appeals.
Gibson, C. J., Shenk, J., Edmonds, J., and Traynor, J., concurred.
CARTER, J.-I dissent.
I do not agree with that portion of the majority opinion which holds that the injured employee is not entitled to have his employer (when the word “employer” is used herein it indicates the employer‘s insurance carrier) bear a share of the expenses (including attorney‘s fees) incurred in the employee‘s action for damages where he recovers from the third party tort feasor expenditures made by the employer as the result of injuries suffered by such employee by reason of the negligence of such third party tort feasor, or the holding that if the employer sues the third party tort feasor on behalf of himself and such employee he may have his attorney‘s fees and expenses paid out of the judgment recovered against such third party. We have here a simple case where an employee has suffered an injury compensable under the workmen‘s compensation law, but the injury was due to the negligence of a third party tort feasor. In such a case the employee may recover from the third person but the employer is entitled to a lien against any judgment so recovered as reimbursement for amounts paid as compensation and medical and hospital treatment to or on behalf of the injured employee.
At the outset it should be noted that the majority opinion holds (as I have above stated) that the workmen‘s compensa-
If the provision authorizing attorney‘s fees to the employer but not to the employee is invalid, then we have no provision in either case and the equitable principle (hereafter discussed) requiring a sharing of the fees must be enforced. On the other hand, I would be disposed to hold that while the statute would be unconstitutional if construed as allowing attorney‘s fees to the employer only, in view of the rule that a statute must be construed to avoid invalidity if possible, it would be reasonable to construe this statute to authorize both the employer and employee to share the attorney‘s fees regardless of who prosecutes the action, thus avoiding discrimination and the denial of equal protection to the employee.
Turning to the question of the construction of the provisions of the workmen‘s compensation statute it is clear that there is no authority for either granting or denying the employee the right to require the employer to pay his share of the attorney‘s fees. After providing that either the employer or employee may bring the action against the tort feasor, and for notice by the one bringing the action to the other, it is stated: “The court shall first apply, out of the entire amount of any judgment for any damage recovered by the employee, a sufficient amount to reimburse the employer
The majority opinion argues that because attorney‘s fees are allowed to the employer expressly that the absence of a
Thus, we have no provision one way or another on attorney‘s fees or the sharing thereof. Hence, the equitable principle that when expenditures are incurred to recover a common fund (the judgment against the tort feasor which inures to the benefit of both employer and employee) the beneficiaries of the fund must share those expenditures or, as said in Winslow v. Harold G. Ferguson Corp., 25 Cal.2d 274, at 277 [153 P.2d 714]: “It is a well-established doctrine of equity jurisprudence that where a common fund exists to which a number of persons are entitled and in their interest successful litigation is maintained for its preservation and protection, an allowance of counsel fees may properly be made from such fund. By this means all of the beneficiaries of the fund pay their share of the expense necessary to make it available to them. (14 Am.Jur. § 74, p. 47; Trustees of Int. Imp. Fund v. Greenough, 105 U.S. 527 [26 L.Ed. 1157]; Estate of Marre, 18 Cal.2d 191 [114 P.2d 591]; see, also, notes 49 A.L.R. 1149; 107 A.L.R. 749.)” And at page 283: “[The] long prevailing rule in equity which allows such charge as a proper means of securing contribution from those entitled to participate in the benefits of the litigation. And such counsel fees are customarily made senior to other claims against the fund. (Scott v. Superior Court, 208 Cal. 303 [281 P. 55].) . . . Where a lawyer has rendered such valuable service as to make available a fund for a class, even though he appeared for only one claimant, it is equitable that his compensation and expenses should come from the entire fund saved for all classes concerned before it is distributed. (Sprague v. Ticonic Nat. Bank, 307 U.S. 161 [59 S.Ct. 777, 83 L.Ed. 1184].) Counsel‘s right to compensation under such circumstances arises from the benefit conferred upon those who would have suffered loss but for his timely intervention, and not by reason of an agreement to pay his fees. . . . As is stated in Estate of Marre, 18 Cal.2d 191, 192 [114 P.2d 591]; ‘Plaintiffs who have succeeded in protecting, preserving or increasing a fund for the benefit of themselves and others may be awarded compensation from the fund for the services of their attorneys.’ This principle is derived from the equitable concept that where one of a group has borne the cost of litigation resulting in
“Not only is it established that the litigant is entitled to be compensated for the expense he has incurred in the prosecution of such an action, but there is created in favor of the attorney who renders the service an equitable lien against the fund so preserved. (Central Railroad & Bkg. Co. v. Pettus, 113 U.S. 116 [5 S.Ct. 387, 28 L.Ed. 915]; Colley v. Wolcott, 187 F. 595 [109 C.C.A. 425]; Muskegon Boiler Workers v. Tennessee Valley I. & R. Co., 274 F. 836.)
“These equitable considerations sustain appellant‘s position as to the priority of his claim against the trust fund. . . . Nor on equitable considerations should the claim of the federal government for income taxes accrued before the commencement of this action stand on a distinguishable level in relation to appellant‘s allowance for counsel fees for preservation of the fund. The latter, viewed as an expense of judicial administration in making the trust assets available for distribution to claimants, should properly take priority.” [Emphasis added.]
In my opinion the equitable principle discussed above is applicable to the facts of this case. It has been applied in many cases involving similar factual situations. (See Hardware Mut. Casualty Co. v. Butler, 116 Mont. 73 [148 P.2d 563]; Ellis v. Atlantic Refining Co., 308 Pa. 287 [163 A. 531, 83 A.L.R. 936]; Appeal of Harris, 323 Pa. 124 [186 A. 92, 96]; Wilson v. Pittsburgh B. & I. Works, 85 Pa.Super. 537.)
The order denying plaintiff‘s application for attorney‘s fees should be reversed.
Schauer, J., concurred.