Lead Opinion
delivered the opinion of the Court.
On June 21, 1949, respondent, Tom E. Haygood, an employee of S. P. Braud Conveyor Service, was injured while installing in the plant of the Imperial Sugar Company certain machinery which the Conveyor Service had contracted with the Sugar Company to install. Haygood was paid $7139 as compensation for his injuries by petitioner, Fort Worth Lloyds, the compensation carrier of Conveyor Service under the Workmen’s Compensation statute. Thereafter, Haygood filed a suit against the Sugar Company, as a third party tort-feasor, and Fort Worth Lloyds intervened and sought recovery of the amount of compensation paid by it to Haygood, and for expenses and attorney’s fees. Efforts were made by the Sugar Company to settle this suit with Haygood and Fort Worth Lloyds, but no agreement was reached. Sugar Company and Haygood contend thаt no settlement was reached because of the illegal and unjust demands made by Fort Worth Lloyds as to the amount of expenses and attorney’s fees claimed. On date of trial, Sugar Company and Haygood announced in open court that they had entered into an agreement whereby Haygood, for a consideration of $12500 cash, plus an additional $100 to be paid to Haygood, in the event of an ultimate recovery of a judgment against Sugar Company in the then pending suit in excess of $12500, had assigned “all rights to levy
It is the contention of Fort Worth Lloyds that when it had proven the facts that Haygood and Sugar Company, with full knowledge of its subrogation rights, had settled Haygood’s cause of action the Sugar Company for $12500, plus the $100 additional, it was entitled to a judgment against the settling parties for the amount of its compensation payments plus reasonable expenses and attorney’s fees. It is the contention of the Sugar Company that Fort Worth Lloyds could not recover without first proving up Haygood’s cause of action against the Sugar Company.
We think this case is controlled by previous decisions of this court, among which is Traders & General Ins. Co. v. West Texas Utilities Co.,
When the Workmen’s Compensation statute was originally passed in this state in 1913, it contained no provision requiring an injured employee to make an election between suing for his compensation due him, and filing a common law suit against the third party tort-feasor; nor was there any provision subro
“Where the injury for which compensation is payable under this law was caused under circumstances creating a legal liability in some person other than the subscriber to pay damages in respect thereof, the employe may at his option proceed either at law against that person to recover damages or against the association for compensation under this law, but not against both, and if he elects to proceed at law against the person other than the subscriber, then he shall not be entitled to compensation under this law. If compensation be claimed under this law by the injured employe or his legal beneficiaries, then the association shall be subrogated to the rights of the injured employe in so far as may be necessary and may enforce in the name of the injured employe or of his legal beneficiaries or in its own name and for the joint use and benefit of said employe or beneficiaries and the association the liability of said other person, and in case the association recovers a sum greater than that paid or assumed by the association to the employe or his legal beneficiaries, together with a reasonable cost of enforcing such liability, which shall be determined by the court trying the case, then out of the sum so recovered the association shall reimburse itself and pay said cost and the excess so recovered shall be paid to the injured employe or his beneficiaries. The association shall not have the right to adjust or compromise such liability against such third person without notice to the injured employe or his beneficiaries and the approval of the board, upon a hearing thereof.”
Under this it has been held that an injured employee has an oрtion as to which of two persons he will sue, and that he cannot receive compensation if he first prosecutes his suit against the third party tort-feasor, but that after he has received compensation payment he may proceed against the third party tort-feasor, in the event the compensation carrier fails or refuses to so proceed. Texas Employers Ins. Ass’n. v. Brandon,
The constitutionality of this Section 6a was attacked in Consolidated Underwriters v. Kirby Lumber Co., (Tex. Com. App.,
“It was doubtless to remedy these defects and supply this juster and more politic substitute that the particular section (6a) of the amendment that is now under investigation was passed.” Ibid, p. 706, 2nd col., emphasis added.
It has been held that there is but one cause of action against the third party tort-feasor. Texas Employers’ Insurance Ass’n. v. Texas & P. Ry. Co. et al (Tex. Civ. App.),
Where suit has been first filed against the third party tortfeasor it has been held that no right of subrogation is given to to the compensation carrier, and therefore, the carrier is not liable to the injured employee, or his representatives, for any amount. Employers’ Indemnity Corporation v. Felter et al, (Tex. Com. App.),
In Houston Gas & Fuel Co. v. Perry, supra, Mrs. Perry, and as next friend for her minor daughter, sued the Gas Company and Hartford Accident & Indemnity Company for damages on account of the death of her husband and the father of the minor. After allegations of negligence against the Gas
In Hanson v. Ponder, (Tex. Com. App.),
Galveston-Houston Electric Ry. Co. et al v. Reinle, et al, (Tex. Civ. App.)
1 We believe the fundamental principle underlying the last three cases cited above is that where compensation has been paid to an injured employee, or his representatives, and they later file suit against the third party tort-feasor, the first money paid or recovered by the employee, or his representatives, belongs to the compensation carrier paying the compensation, and until it is paid in full, the employee, or his representatives, have no rights to any funds; nor have they any cause of action against the tort-feasor. This court has said in so many words in Traders & General Ins. Co. v. West Texas Utilities Co.,
“* * * It is well settled that unless ‘the association recovers a sum greater than that paid * * * by the association to the employee * * * together with a reasonable cost of enforcing such liability’ the employee cannot recоver, for there is nothing then remaining which is not absorbed by the recoupment by the association of the compensation paid the injured employee, and costs. Hanson v. Ponder, Tex. Com. App.,300 S. W. 35 ; Texas Employers Ins. Ass’n. v. Brandon,126 Tex. 636 ,89 S. W. 2d 982 ; Houston Gas & Fuel Co. v. Perry,127 Tex. 102 ,91 S. W. 2d 1052 ; Independent Eastern Torpedo Co. v. Herrington,128 Tex. 17 ,95 S. W. 2d 377 ; Mitchell v. Dillingham, Tex. Civ. App.,22 S. W. 2d 971 , writ dismissed.”
* * *
“The compromise settlement was made with full knowledge on on the part of the settlers of the association’s subrogation rights. While the alleged cause of action against the company belonged to the injured employee he owned it burdened ‘by the right of the association to recoup itself for compensation paid * * *’ In*157 dependent Eastern Torpedo Co. v. Herrington, supra (128 Tex. 17 ,95 S. W. 2d 377 , 379). It is pointed out in Fidelity Union Casualty Company et al. v. Texas Power & Light Company, Tex. Civ. App.,35 S. W. 2d 782 , 783, writ refused, that such ‘right of subrogation has existence only in the terms of this statute (sec 6a) and it can be enforced only as therein directed.’ It is also stated in the opinion that ‘the amount to be recovered’ against the third person tort feasor is ‘to be appropriated between the parties as directed by the statute,’ that is, that the association first recou/p itself out of the amount recovered, and that the excess only be paid to the injured employee. The money paid over to the employee therefore belonged, under the law, to Traders & General and both the company and the employee were charged with knowledge of that fact and had actual knowledge that Traders & General was asserting its subrogation rights in the cause at the time the settlement was made. The right of the association to reimbursement out of the first money paid is statutory; and in event the employee is permitted, without the consent of the association, to settle his claim against the alleged third person tort feasor, thus eliminating his further interest in the suit, the provisision of the statute authorizing the insurance association to enforce for the joint use and benefit of said employee cmd the association the liability of such tort feasor, is thereby nullified. Such transaction between the employee and the association would contravene the legislative purpose, and is unlawful. The money belonging to Traders & General was wrongfully paid by the utilities company to the employee, who wrongfully received it, and both were thereby rendered liable to pay to Traders & General the amount of compensation theretofore paid by it to the employee, together with the costs of enforcement, including a reasonable attorney’s fee therefor.”
In the case at bar the settlement was made not only with full knowledge of the rights of Fort Worth Lloyds, but also of the Traders & General case and its rule of law. In its findings of fact the trial court states: “17. That on September 27, 1950, (a trial day) Plaintiff Tom E. Haygood, and Defendant, Imperial Sugar Company, had not reduced their agreement to writing * * * because the Defendant’s attorney * * * had not determined how to cast the written agreement in order to remove it from the scope of conventional type ‘compromise settlement agreement’ * * * and not in violation of the decision of the Supreme Court in the case styled ‘Traders & General Ins. Co. v. West Texas Utilities Co.,’ reported in
Having elected to recover compensation — which he may do merely by showing that he was accidentally injured in the course of his employment — and having no burden to show negligence or to be subject to any other of the common law defenses, there is nothing unjust in giving to the carrier who pays the compensation the right to recoupment under the statute. The first money paid rightfully should go to reimburse the carrier who has paid, or assumed to pay, this compensation to the employee. As to any excess above the amount necessary to make the carrier whole, the statute requires the same to be paid the injured employee, or his representatives, thus insuring for him the full and total amount of his damages suffered by the injury.
3 Fort Worth Lloyds is entitled to recover from the plaintiff Haygood and the Sugar Company, the amount of compensation paid Haygood “together with a reasonable cost of enforcing such liability, which shall be determined by the court trying the case”, and the excess in the $12500 (which is greater than compensation paid), shall be paid to Haygood. The trial court found that the amount of compensation paid was $6800 and that the carrier had paid $339 for medical treatment, hospitalization, nursing and drugs, reasonably necessary for the alleviation of the said Tom E. Haygood’s condition, or a total of $7139, but failed to find any amount for attorney’s fees to be paid Fort Worth Lloyds. The carrier is entitled to recover a reasonable attorney’s fee to be fixed by the trial court. Smith et al v. Henger,
The judgments of both courts below are hereby reversed and this cause is remanded to the trial court with directions to enter judgment in favor of Fort Worth Lloyds against respondents Tom E. Haygood and Imperiаl Sugar Company for the sum of $7139, plus a reasonable attorney’s fee to be determined by the trial court.
Opinion delivered January 23, 1952.
Dissenting Opinion
dissenting.
I respectfully dissent for the reason that the majority opinion seems to me to construe incorrectly Sec. 6a of Art. 8307, R.C.S. 1925.
In determining that the employee has no right to settle his portion of the lawsuit (a property right), the majority opinion ignores what ought to be the determining factor, and that is the title and control of the third party action.
Sec. 6a forces a joint venture between two inherently incompatible parties. Unless control of the third party action can be fixed in either the employee or the compensation carrier the relationship is unsatisfactory to both. One Amici Curiae says that “the scheme of the third party action known to Texas Law violates the Biblical command that the ass and the ox should not be yoked together.”
Sec. 6a has been referred to as an “inept bit of draftsmanship.” Lawlor, Texas Workmens Comp. Laxo, Sec. 411. Thirty years of confusing results emphasizes this. This legislation could be improved by eliminating the provision for an election
The carrier’s right to any of the recovery against a negligent third party are derived solely from Sec. 6a of Art. 8307. Our Workmen’s compensation law was enacted in 1913 without the present Sec. 6a. Sec. 6 of the 1913 Act related primarily to the status of employees of a subcontractor. 16 Gammel’s Laws of Texas 433. There was a clause in this section entitling the carrier to “recover indemnity” but this was given a very limited application to subcontractor situations. Aetna Life Ins. Co. v. Otis Elevatоr Co., Tex. Civ. App.,
The American jurisdictions giving the carrier an interest in a third party negligence action divide roughly into two groups. The first group holds that title to the third party cause of action passes by operation of law to the carrier in what amounts to a trust relationship. The carrier controls the suit and must account to the employee for the excess recovery above its compensation paid less the reasonable cost of recovery. The second group holds that title and control of the suit remain with the employee burdened with what amounts to a lien or charge in favor of the carrier for the amount of compensation paid. Kandelin v. Lee Moor Contracting Co., 37 New Mexico 479,
Since the carrier’s right in the third party action are derived solely from Sec. 6a, the problem in Texas becomes one of determining legislative intent. In this, the crucial word is subrogation. Does the doctrine of subrogation automatically assign title to the carrier?
When Sеc. 6a was enacted in 1917, the law in Texas, as stated in Faires v. Cockerell, supra, note 1, was that subrogadid not work an assignment. The fact that Faires v. Cockerell was overruled in 1931 by Fox v. Kroeger, supra, note 1, does not change the meaning and construction of the legislative intent in the use of the word.
The second sentence of Sec. 6a does not expressly declare whether title to the cause of action against the third party passes by operation of law or not.
The vital and material incident of title we are concerned
We should hold that under Sec. 6a title and with it control of the cause of action remains with the employee and that the employee’s election to take Workmen’s Compenastion does not operate as an assignment in law of the title to the third party action. Because title and control remain with the employee, the carrier has the equivalent of a lien upon the first money recovered to recoup it for compensation paid. The employee should be able to settle tentatively with the third party his portion of the cause of action. This settlement should be interlocutory in the trial court and become final upon being incorporated in the final judgment. As between the employee and the carrier, the employee still would have the duty of prosecuting the suit to final judgment. If the recovery against the third party should be in excess of the compensation paid, the carrier would be entitled to recoupment and that portion of the verdict of fact finding exceeding compensation paid would be governed by the settlement. If the case be lost or the verdict be less than the compensation paid, the carrier would be entitled to recoupment from the money tendered in the settlement.
The carrier argues that this construction wоuld leave it but the shell of a lawsuit. This is not true. The jury need not know the true status of the parties, Myers v. Thomas, supra; Johnson v. Willoughby, Tex. Civ. App.,
The carrier argues that the employee as a witness would not be as effective after the settlement as before. We are required to presume that he will tell the truth in both situations. Besides, under this construction of Sec. 6a, his incentive to win the case remains the same as before settlement.
This construction of Sec. 6a is not in conflict with Traders & General Ins. Co. v. West Texas Utilities Co., supra, but is in harmony with its results. In that case the employee dismissed the third party action and thus destroyed the carrier’s right of subrogation which would be protected under this construction
“The language just mentioned imports a continuing right in the compensated employee as against persons other than the employer, and the words giving the insurer the right to bring suit are permissive in form.”
Sec. 6a does not expressly prohibit or restrict the employee’s right to compromise his part of the suit, and there is no policy of the law prohibiting such settlements. Holbert v. Safe Ins. Co.,
My construction of Sec. 6a approximates, within the language of the statute, what should be the policy of the law. In The Aetna,
“Prior to the amendment of the Compensation Act (Federal Harbor Workers) in 1938, any acceptance of the compensation by an injured employee forthwith worked an assignment to the employer of the employee’s right of action against third persons for his injury. This was in aid of the employer and not a limitation upon his right to subrogation. The reason for the assignment which the law thus afforded is apparent. An injured employee, especially once he has received compensation, may have neither the incentive nor the desire to press his right of*166 action against third persons responsible for his injury. Hence, the law passed to the employer the control of the employee’s right of action against third persons once the employee acceрted compensation. But the possible harm from an assignment so summarily and so informally acquired became manifest. An injured employee, out of the exigencies of his non-productive situation might find it necessary to accept compensation at once without thought for his right of action against others. Yet, therewith his control of his right of action against third persons passed automatically to the employer whose interest in pressing the employee’s claim or in pressing it for more than enough to satisfy the employer’s requirements, as measured by the extent to which he voluntarily acknowledged liability for compensation might not be great.”
Applying then my construction of Sec. 6a to the present situation I find that at the beginning of settlement negotiations the carrier insisted on $9,873.11, whereas the maximum amount of the compensation paid was $7,139.00, the difference being $2,734.11. This difference was itemized in their pleadings as:
(a) $99.11 for investigation expense of the original workmen’s compensation claim,
(b) $235.00 attorney’s fees in defending the original workmen’s compensation claim,
(c) $2400.00 attorney’s fees incurred in the prosecution of the present suit.
The employee and third party thought that the demands of the carrier were excessive in amount and arbitrary. Otherwise the entire case might have been settled. Since the parties were unable to agree on a settlement of the entire case, the employee and the third party, recognizing the risks involved in the outcome of a suit for damages, agreed upon an amount which would insure a recovery by the employee and at the same time protect the third party from liability in excеss of the amount agreed upon. Why should they not have that right?
The case of G. A. Stowers Furniture Co. v. American Indemnity Co.,
I cannot reconcile the statement in the majority opinion that there is but one cause of action with another statement from it that “the first money paid or recovered by the employee, or his representatives, belongs to the compensation carrier paying the compensation, and until it is paid in full, the employee, or his representatives, have no rights to any funds; nor have they any cause of action against the tort-feasor.” If from the happening of the accident the employee starts with a cause of action against the third party, and if upon electing to take compensation he no longer has a cause of action until the carrier be recouped (as the majority hold), then necessarily the titlе to the cause of action passes by operation of law to the carriers. If this in effect be the holding of the majority, it should follow that the employee loses and the carrier gains control of the third party action. In this latter event, there is all the more reason for allowing the employee to settle, and none against it. I feel that the legislative intent was the exact opposite and that Sec. 6a should be construed as not effecting an automatic assignment of the title to the third party action to the carrier.
Perhaps the most fundamental flaw in the majority opinion and in some of the cases upon which it relies is that it fails to view this problem as one involving a division of the damages which flow from an indivisible cause of action, rather than of dividing the cause of action itself, which, because of the very nature of a negligence action, cannot be done.
The effect of the majority opinion is to create a windfall for the Sugar Company in that it allows the Sugar Company to settle with both plaintiffs for the same sum it expected to be the cost of settling with only one. Under my view of the case the judgment of the trial court should be reversed and the cause remanded for trial."
Opinion delivered January 23, 1952.
Motion for rehearing overruled April 2, 1952.
Notes
) As far as our law is concerned, the word subrogation originated in England in Equity. A problem arose when a surety paid a debt and, under the common law, thus extinguished it, leaving nothing to be assigned to support his cause of action against the debtor. To meet this obvious injustice, the doctrine of subrogaion was borrowed from the Civil Law. Originally in England, under subrogation the surety secured all of the rights and remedies of the creditor, but in the eighteenth century, in what came to be called Lord Eldon’s doctrine, it was annоunced that equity would not decree an assignment of an admittedly extinguished cause of action because of the maxim “Equity follows the law,” but instead the surety was allowed to "step into the shoes” of the creditor, or to be “substituted” for the creditor. Morgan v. Seymour (1637) 1 Rep. Ch. 64, 1 Chan. Rep. 119, 21 Eng. Rep. 525; Ex Parte Crisp (1744) 1 Atk. 133, 26 Eng. Rep. 87; Gammon v. Stone (1749) I Ves. Sen. 339, 27 Eng. Rep. 1068; Ves. Sen. Supp. 162, 28 Eng. Rep. 488; Woffington v. Sparks (1754), 2 Ves. Sen. 570, 28 Eng. Rep. 363; Robinson v. Wilson, (1814) 2 Madd. 434, 56 Eng. Rep. 395; Copis v. Middleton (1825) Turn. & R. 223; 12 Eng. Ch. 223, 37 Eng. Rep. 1083; Simpkins v. Poulette (1824) 2 Law Journal 81; Robison v. Larkin (1824) 2 Law Journal 81; Burrus v. Cook,
It is clear as the majority opinion holds that there is but one cause of action. Texas Employers’ Ins. Ass’n. v. Texas & P. Ry. Co., Tex. Civ. App.,
In 1922 the Federal Circuit Court of Appeals said that, under the real party in interest rule, Sec. 6a vested the “entire legal title to the cause of action * * * in the assoсiation primarily for its own security” and therefore in determining diversity of citizenship the citizenship of the carrier and not the employee controlled, 3 Moore’s Fed. Practice, 2d ed., Sec. 17.09, p. 1346. However, upon a plea of privilege the residence of the employee and not the carrier is “the residence of plaintiff” even though the carrier be a party plaintiff along with the employee. In a suit filed by the carrier against a negligent railroad in the carrier’s home county, the court held that Sec. 6a “transferred” the cause of action but that venue did not “follow the chose in action” because “the transfer of this cause of action did not create greater remedies than those possessed by the original owners.” Commercial Standard Ins. Co. v. Texas & N.O. Ry. Co., Tex. Civ. App.,
There is a line of cases which hold that both оwners of this cause of action are not required to be parties to a suit to enforce it. Mitchell v. Dillingham, Tev. Civ. App.,
There are a number of cases containing statements that the cause of action “belongs to the employee” burdened by the right of the carrier to recoup itself, Eastern Torpedo Co. v. Herrington, supra; Traders & General Ins. Co. v. West Texas Utilities, supra; Myers v. Thomas,
In Schnick v. Morris, supra, it is stated that the cause of action is “jointly owned” by both the carrier and the employee.
The first sentence of Sec. 6a has been construed in a series of cases culminating in the recent case of Fort Worth Lloyds v. Essley, Tex. Civ. App.,