Johnson v. Beane

616 A.2d 648, 420 Pa. Super. 193, 1992 Pa. Super. LEXIS 3255

• Court: Superior Court of Pennsylvania
• Decided: September 24, 1992
• Docket: 268
• Status: Published

Opinions

POPOVICH, Judge:

In this appeal from a judgment entered by the Court of Common Pleas of Cumberland County on April 24, 1991, following dismissal of appellant’s garnishment proceeding, the issue presented is one of first impression. For the reasons that follow, we affirm.

On August 25, 1985, appellant was involved in an automobile accident and incurred injuries some of which are of a permanent nature. Appellee Beane, the other motorist involved in the accident, admitted liability. However, his insurance company, appellee State Auto Mutual Insurance Company, (State Auto), was unable to reach agreement with the appellant and declined to settle for the policy limit of $25,000. The case went to trial on the issue of damages, and, on May 12, 1987, the jury returned a verdict for appellant in the amount of $200,000. Appellant requested $175,000 from Erie Insurance Group, (Erie), her underinsured motorist carrier. Appellant later offered to accept $100,000, but no agreement was reached. She then filed a Petition to Compel Underinsured Motorist Arbitration.

In the interim, on July 13, 1987, the trial court ruled on appellee Beane’s post-trial motions and ordered a remittitur reducing the verdict to $75,000 or, alternatively, if the remittitur was not accepted, granting appellee’s motion for a new trial. No appeal was taken and appellant filed a praecipe to enter judgment on July 30, 1987. State Auto paid the $25,000 policy limit leaving $50,000 remaining due on the judgment. Appellant and Erie agreed to settle for the remaining $50,000 of the judgment, and appellant executed a Release and Agreement which states in pertinent part:

... In consideration of such payment, I agree as follows: 1) to subrogate Erie Insurance Exchange/Erie Insurance Company to my right of recovery against any person or party legally liable to me for the amount of and for the purpose of the payment noted above; 2) that I have not and will not make any separate settlement with nor give any separate release to any person or parties who caused or alleged to have caused me the above mentioned loss or accident; 3) to authorize my attorneys, Angino & Rovner, P.C., to proceed with a bad faith/excess action against State Auto;

[1] and 4) to cooperate in prosecuting said action.

It is my understanding that Erie has agreed to advance any out-of-pocket expenses reasonably necessary to prosecute the bad faith/excess action against State Auto and if said action is successful Erie has agreed to pay its pro rata share of attorneys fees and expenses as per the contingent fee agreement entered into by Angino & Rovner, P.C. and myself a copy of which is attached____

Brief for Appellant, Exhibit D.

After making payment of the $50,000, Erie informed appellant that it did not intend “to pursue the matter any further” and closed the underinsured motorist portion of the file. Appellant acknowledged that Erie waived its subrogation rights. On June 8, 1988, appellant initiated a garnishment proceeding against State Auto claiming that the insurer had acted in bad faith in failing to settle the claim and filed a Writ of Execution for $50,000 plus interest based upon the existing judgment against Beane naming State Auto as garnishee. Appellee State Auto filed a motion for summary judgment which was denied by order of August 25, 1989. A jury trial was conducted and resulted in a hung jury and a mistrial. State Auto filed a second motion for summary judgment which was again denied.

On February 25, 1991, appellee State Auto filed a petition for a rule to show cause why: 1) the judgment entered against George L. Beane, should not be marked satisfied and 2) the garnishment proceeding should not be dismissed with prejudice. After a response was filed, the trial court issued an opinion and order dismissing the garnishment proceeding. The current appeal followed the entry of judgment.

The issue as presented by appellant is:

If an “insured” in a motor vehicle negligence accident under the Financial Responsibility Law 75 Pa.C.S.A. § 1701, et seq. obtains a verdict and judgment exceeding the tortfeasor’s liability coverage, settles with her own underinsured carrier and signs a subrogation agreement that only releases her own underinsured carrier, does the agreement constitute an assignment of all her rights to the underinsured carrier so as to preclude the injured party from executing on the judgment against the tortfeasor and/or obtaining interest and/or garnishing “bad faith” damages?

Appellant’s brief, p. 3 (emphasis provided).

Appellant first argues that the trial court erred in concluding that the subrogation agreement constituted an assignment of her rights to pursue a bad-faith garnishment action. Appellant asserts that the trial court’s error is in equating “subrogation” with “assignment”. We do not agree. It is our view that the trial court was correct in its analysis. The trial court stated:

... This is a garnishment action seeking to collect the amount of the verdict in the underlying cause of action. By the same token, it is an attempt by the plaintiff to garnish amounts from State Auto Mutual Insurance Company which have already been paid by her own underinsured motorist carrier, under circumstances where that carrier, subrogated to her right of recovery, objects....

We have no difficulty accepting the proposition that where a defendant, by virture [sic] of the bad faith dealing of his own insurance company, is exposed to an excess verdict, he may bring an action against his own insurance company for bad faith. Similarly, we understand the principle that, in such cases, in lieu of an assignment by the defendant to the plaintiff of the right to bring such a bad faith claim, the plaintiff may bring the action directly against the defendant’s insurer as a garnishee.... In this case, however, the plaintiffs right to bring an action for the difference between the defendant’s insurance coverage and the verdict was subrogated to her own underinsured motorist carrier. This subrogation occurred in the context of making her whole; i.e., she was paid the entire amount of the original judgment. Black’s Law Dictionary defines garnishment as a satisfaction “of an indebtedness out of property or credits of debtor in possession of, or owing by, a third person.” In this case, the plaintiff initially had judgment against the defendant for those amounts in excess of his insurance coverage. In the meantime, however, certain critical events transpired. Specifically, the amounts owed to the plaintiff from the defendant have been paid. In making the payment, the underinsured motorist carrier made settlement with the plaintiff in accordance with a release whereby the plaintiff subrogated her rights to the insurance carrier making the payment....

We are satisfied that the plaintiff has effectively assigned her right to recover in garnishment to Erie in exchange for payment of the entire sum due her. The plaintiff has not filed a separate bad faith action but rather has chosen to proceed to garnish the original amount of the excess verdict under circumstances in which those amounts have already been paid to her....

Trial court opinion, April 17, 1991, pp. 3^1.

We cannot agree with appellant that the trial court has confused subrogation with assignment. The trial court clearly stated that appellant subrogated her right to bring a garnishment action for the amount paid to her by Erie which satisfied the original judgment.²

Appellant states that the right which she subrogated to Erie was very limited and was not an assignment of all of her rights to pursue a bad faith claim against State Auto. We question, however, what it is that appellant is pursuing in this action. In her brief she states; “On June 10, 1988, Ms. Johnson filed a Writ of Execution for $50,000, plus interest, based upon the existing judgment against Mr. Beane naming State Auto as Garnishee and then served it with Interrogatories.” Brief of appellant, p. 8 (emphasis provided). Later in her brief she states, “Ms. Johnson originally had a verdict of $200,000 that was remitted to $75,000. Even with respect to the $75,000 remitted verdict, she had to pay attorney’s fees and expenses with respect to the original tort action. Her net from the $75,000 was $42,250. Since that time, more than $10,000 of expenses has been spent in pursuing the garnishment proceeding. On the other hand, there currently exists the original $50,000 judgment against Mr. Beane which, with interest, now exceeds $63,028.37. Even if Erie had decided not to waive its right of subrogation, that right would exist only as to the $50,000 that it paid, [sic] Ms. Johnson would have been entitled to the interest and both Ms. Johnson and Erie would have had to share attorney’s fees and expenses.” Appellant’s brief, p. 18. It appears that appellant is attempting to garnish the excess amount of the judgment paid to her by her underinsured carrier plus interest and attorney’s fees with respect to the original action as well as with respect to the garnishment action.

It is clear that there can be no cause of action for interest or fees with respect to the garnishment action. Such a recovery would be premature since there has been no disposition in that action, and her entitlement is therefore very much in question.

We must then consider whether appellant may maintain the current garnishment action in which the measure of damages is the difference between Beane’s policy limits and the judgment.³ Two questions are raised; first, whether appellant may pursue a garnishment action for damages which exceed the amount of the fully satisfied judgment, and, second, whether by subrogating her right to pursue a bad-faith claim to Erie, she is precluded from pursuing the same.

A writ of execution is used to attach a debt which is owed by the garnishee to the garnishor. See Pa.R.C.P. 3101(b)(1). It would follow that if there is no debt owing to the garnishor, which in this case is the appellant, then no action would exist. We must therefore consider whether there is a debt owing from Beane or his insurer,- State Auto, and to whom the debt is owed.

As stated in the appellant’s brief, the garnishment action was initiated by the filing of a writ of execution based upon the existing judgment against Beane which represents the difference between his policy limits and the remitted verdict. The appellant has been fully compensated for this amount albeit through her own underinsured motorist carrier. No interest can have accrued where she received the full amount of the verdict and no part of the judgment remains unsatisfied. Finally, it has long been the rule in Pennsylvania that each party to litigation is responsible for his or her own legal fees absent a statutory provision which states to the contrary. See Estate of Wanamaker, 314 Pa.Super. 177, 460 A.2d 824 (1983); Chatham Communications, Inc. v. General Press Corp., 463 Pa. 292, 344 A.2d 837 (1975).

Garnishment is defined in part as: “... an incident to or an auxiliary of judgment rendered in principal action, and is resorted to as a means of obtaining satisfaction of judgment by reaching credits or property of judgment debtor.” Black’s Law Dictionary, 612 (5th ed. 1979). Unless there is a portion of the judgment which remains unsatisfied as to appellant, or there is some debt owed to her, it would be inequitable and illogical to permit her to pursue a garnishment action.

Appellant was paid the full amount of the remitted verdict in exchange for subrogating her right of recovery against Beane in a bad faith excess action. Therefore, the debt of Beane was satisfied as to appellant and Erie then acquired the right to pursue the excess action which appellant would have been entitled to bring before the debt to her was satisfied. See Demmery v. National Union Fire Insurance Company, 210 Pa.Super. 193, 197, 232 A.2d 21, 24 (1967) citing 6 C.J.S. Assignment § 2b (12) (explaining difference between subrogation and assignment). The principal is:

when an individual who has been indemnified for a loss subsequently recovers for the same loss from a third party, equity compels that the indemnifying party be restored that which he paid the injured party; thereby placing the cost of the injury upon the party causing the harm while preventing the injured party from profiting a “double recovery” at the indemnifying party’s expense.

Allstate Ins. Co. v. Clarke, 364 Pa.Super. 196, 201, 527 A.2d 1021, 1024 (1987). Erie is the indemnifying party to which the debt is owed and the very purpose of subrogation of the claim is to permit Erie to recoup that which it has lost. We find that it is impermissible for appellant to subrogate her right to bring a bad faith excess action to her underinsured motorist carrier and at the same time attempt to garnish the debt for which she has been fully compensated.⁴ Appellant accepted the remitted verdict without appeal and settled with her underinsurer. She has received the entire value of her judgment, and we find no error with the trial court’s decision to dismiss appellant’s garnishment proceeding.⁵

Affirmed.

JOHNSON, J., files a concurring opinion.

1. It is not clear on whose behalf a bad faith/excess action is authorized. Taken in context with the fourth clause, it appears that Erie is the intended party. This would be the most logical reading of the document. It does not, however, alter the clear intention of the first clause which subrogates appellant's right to recover for the amount paid to her by Erie.

2 . We do not read the trial court’s statement that appellant "effectively assigned her right to recover in garnishment to Erie in exchange for payment of the entire sum due her” to mean that she has assigned all of her rights to pursue an action. The trial court dismissed this action based on appellant’s subrogation of her right to garnish the amount of the excess verdict for which she had been paid. We make our decision on the same basis.

3 . In a third party garnishment action, the injured plaintiff is not suing in her own right but is an assignee of the insured and as such stands in the shoes of the insured. "It is the insured who has allegedly suffered the wrong at the hands of the insurer.” Gray v. Nationwide Mutual Insurance Company, 422 Pa. 500, 223 A.2d 8, 13 (1966).

4 . Appellant also argues that it was improper for the trial judge to consider the payment which she received from her underinsured motorist carrier because it was a collateral source. We disagree. A judgment in appellant’s favor had already been rendered and her receipt of payment from her underinsurer in no way diminished the amount to which she was entitled. It must be considered that she has received the full value of her judgment in determining the appropriateness of a garnishment action.

5 . Appellant raised the argument that the “law of the case” doctrine should have prevented the trial court from granting appellee’s motion to dismiss alter previously denying several motions for summary judgment. We find this argument to be without merit. The “law of the case” doctrine provides:

where an appellate court has considered and decided a question on appeal, that court will not, in a subsequent appeal of another phase of the same case, reverse its previous ruling, even though convinced it was erroneous.... The doctrine is inapplicable here because the rule applies only to appellate courts....

Farber v. Engle, 106 Pa.Cmwlth. 173, 177, n. 5, 525 A.2d 864, n. 5, 866 (1987). This doctrine cannot be used as appellant would have us apply it.