R. E. SPRIGGS, INC. (a Corporation) et al., Petitioners, v. INDUSTRIAL ACCIDENT COMMISSION and AUGUSTUS CHIARELLO, Respondents.
L. A. No. 23061
In Bank. Supreme Court of California
May 11, 1954.
42 Cal. 2d 785 | 269 P.2d 876
Everett A. Corten and Gordon W. Winbigler for Respondents.
Chiarello was employed by R. E. Spriggs, Inc. He claimed to have sustained injuries while he was delivering merchandise to the Panorama Market. Without filing suit or notifying either his employer or its insurer, he made a settlement with Panorama for $2,100 and executed a full release of all claims against it.
In the proceeding before the commission, after allowing a credit of $2,100, on its own motion the commission reopened the matter for reconsideration. By the new decision, the commission credited against the compensation award only $1,400, “being the amount recovered by the applicant . . . after payment of attorney‘s fee of $700.00, which sum is found to constitute a reasonable attorney‘s fee for services rendered in effecting recovery for the benefit of the employer.”
As grounds for annulling the award, the employer asserts that there is no statutory authority for the commission to withhold from a credit against an award of compensation the attorney‘s fees paid by an employee to effect a settlement. But even if that contention is incorrect, the argument continues, attorney‘s fees should be allowed only when fixed by a court or by an agreement between the employee‘s attorney and the employer or its insurer. Another contention is
It is agreed by all of the parties that the decisive question in this proceeding is the effect of certain amendments to the
In the Dodds case, the employee sued the third party and joined the employer and its insurer as defendants. The employer sought as a lien against the judgment in that action an amount equal to its costs of compensating the employee. Upon appeal, the employee contended that the trial court should have deducted from the amount payable by the judgment to the employer in satisfaction of its lien, the attorney‘s fees paid by the injured workman in prosecuting the action. This contention was rejected. It was pointed out that the statutory provisions relating to an employer‘s right of reimbursement define the rights of the parties and completely cover the field.
Although, under the statutes then in effect, provision was made for reimbursing an employer for its attorney‘s fees expended when prosecuting an action alone (
The 1949 amendments consist of changes to
On the other hand,
The commission construes the amendments discussed as repealing
Several policy arguments have been advanced. The commission insists that a construction of the amendments denying to it the power to fix a reasonable attorney‘s fee for effecting a settlement and to deduct that amount from the employer‘s credit against an award will tend to discourage settlements, a result which the law disfavors. The petitioners assert that such a construction will compel the employer and employee to work harmoniously in prosecuting the claim, whereas a contrary reading of the statute would invite the
There is a clear distinction between a suit to enforce the employee‘s cause of action against a third party, and a settlement which is made by the employee. The employee or employer who commences an action “shall forthwith give to the other written notice of the action, and of the name of the court in which the action is brought. . . .” (
But the Legislature has not made provision for either notice to the other party when a settlement is contemplated or for the determination of the amount of an attorney‘s fee when it is effected. The employee‘s purpose is to recover an amount in addition to his compensation award; the employer is interested primarily in the recovery below that amount. When the chances of recovery are most favorable, the amount of the settlement obtained generally will be larger and the expense of an attorney‘s fee less. Ordinarily the employee will have greater incentive to press for a favorable recovery. But when the claim is doubtful, the converse situation is presented. And there may be little incentive for the employee to press a claim whose proceeds would inure only to the benefit of the employer.
In short, to extend the provisions for recoupment of attorney‘s fees beyond their application to a judicial action would be to do so without the safeguards applicable to them. The clear and literal construction of the new amendments does not support such an extension, and, as stated in Dodds v. Stellar, supra, “[i]f there is to be any change in these statutory provisions defining the rights of the parties, the suggestion for such change should be addressed to the Legislature rather than to the courts.” (30 Cal.2d at 506.)
Other contentions are based upon the assumption that a deduction for attorney‘s fees may be allowed from a settlement and require no discussion.
That portion of the award which gives to California Compensation Insurance Company a credit of only $1,400 is an-
Shenk, J., Traynor, J., Schauer, J., Spence, J., and Bray, J. pro tem.,* concurred.
CARTER, J.—I dissent.
The majority holding here is subject to all the objections pointed out in my dissent in Dodds v. Stellar, 30 Cal.2d 496 [183 P.2d 658]. (See discussion 21 So.Cal.L.Rev. 298.)
After the decision of this court in the Dodds case the Legislature amended the Workmen‘s Compensation Act for the obvious purpose of rectifying the manifest inequities permitted by the Dodds case. Yet the majority here holds that the amendments do not embrace a case where, as here, a settlement of the claim against the tort feasor has been consummated without suit, because the Legislature did not amend
The effect of the majority holding is to make settlements with the tort feasor an impossibility. The employee will not want to settle, at least until after he has commenced an action, because he will lose his attorney‘s fees. The employer will not wish to settle for the same reason. I am assuming, and it seems that the majority opinion holds, that the employer may not deduct attorney‘s fees in case of a settlement by
The majority seems to think that unfairness will result where there is a settlement by either one or the other and hence the rule favoring compromise is not applicable. This is based on the premise, assumed by the majority, that either the employer or employee may lawfully consummate a settlement without consent of the other. The statute provides otherwise. (
Assuming the majority opinion is correct in stating, “when the third party‘s liability has been settled, either by the employee or the employer, there is no provision for reimbursement to either of them for his legal expense,” we then have a situation in which the statutes do not cover the subject of attorney‘s fees where there is a settlement, and, therefore, we must turn to the “. . . 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].)” (Winslow v. Harold G. Ferguson Corp., 25 Cal.2d 274, 277 [153 P.2d 714].) And at page 283: “[The] long prevailing rule in equity . . . 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
“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 Works 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; Winslow v. Harold G. Ferguson Corp., supra; see, also, Restatement, Restitution, § 105.)
I can see no reason why the rule announced in the authorities above cited should not be applicable to a situation such as that presented in the case at bar. Certainly all of the elements necessary to bring such rule into operation are present here and I can see no reason why it should not be invoked in the interests of justice.
For the foregoing reasons I would affirm the award.