Spengler v. Employers Commercial Union Insurance

206 S.E.2d 693, 131 Ga. App. 443, 1974 Ga. App. LEXIS 1437

• Court: Court of Appeals of Georgia
• Decided: March 14, 1974
• Docket: 48732, 48748
• Status: Published

Opinions

Eberhardt, Presiding Judge.

These are subrogation cases under the Workmen’s Compensation Act. In Spengler it appears that Lloyd C. George was killed July 23, 1971, while in the course of his employment, as the result of an accident with a third party. Compensation was paid to his widow and minor son, but the employer’s insurer gave appropriate notices to all parties as was provided by Code Ann. § 114-403¹ (Ga. L. 1922, pp. 185, 186; 1937, pp. 528, 530; 1963, pp. 141, 145) for the protection of its subrogation and lien rights.

Thereafter the widow brought suit against the third party for the husband’s wrongful death, and her suit was pending when Code Ann. § 114-403 was repealed by Ga. L. 1972, p. 3, effective July 1, 1972. After the repeal the tort action was settled, and the proceeds (to the extent of $6,000) were placed in escrow with Bernice Spengler pending a determination of the insurer’s claim of subrogation. Spengler, as the escrow agent, and the widow brought a declaratory judgment action in which a judgment was rendered directing that the escrow fund be paid over to the Employers Commercial Union Insurance Company and that the suit be dismissed, thus in effect holding that the repeal of Code Ann. § 114-403 was not retroactive and did not affect any claim of subrogation that the insurer had.

In American Mutual it appears that Harry Dukes suffered a compensable injury September 3,1971, and by an agreement approved by the Board October 1, 1971 compensation payments were made to him. On the same date, however, the insurer gave appropriate notices to the claimant, to an alleged tortfeasor against whom the claimant was pressing a claim for damages, and to the tortfeasor’s insurance carrier, as required by § 114-403, asserting its subrogation and lien rights in any settlement or recovery that the claimant might obtain.

Dukes then instituted a common law action against the third party tortfeasor, which was pending when the General Assembly repealed Code § 114-403, the repealer being effective July 1, 1972.

The suit was settled July 21,1972 for a net recovery by Dukes of $55,361.56. On August 11,1972 the employer-carrier applied to the Workmen’s Compensation Board for a determination of change in condition and sought to enforce their subrogation and lien rights against future compensation payments. Claimant resisted, contending that by the repeal of § 114-403 the subrogation rights had been abolished.

The hearing director agreed with the contentions of the employer-insurer, and entered an award by which the insurer was authorized to credit future compensation payments against its subrogation claim until the total thereof amounted to the compensation which had been paid or which it was obligated to pay, had thus been recovered, but not to exceed the net recovery which Dukes had made by his settlement with the tortfeasor. The full board, on appeal, adopted the findings and award, but on appeal to the superior court there was a reversal.

In Spengler the employee appeals and in American Mutual the employer-insurer appeals from the adverse ruling and judgment. Held:

1. The questions raised in these appeals are identical, and we are disposing of each of the cases by this opinion and judgment.

2. "The real purpose of the provisions in the workmen’s compensation law for giving to the employer the right of subrogation has been described as a means for recouping the employer’s loss and to prevent a double recovery by the employee and to do substantial justice.” Southern R. Co. v. Overnite Transportation Co., 223 Ga. (158 SE2d 387). See also Travelers Ins. Co. v. Houck, 118 Ga. App. 154, 155 (162 SE2d 781). Code § 114-403 was enacted for the benefit of employers and their insurance carriers paying workmen’s compensation, Cheek v. J. Allen Couch & Son Funeral Home, 125 Ga. App. 438, 448 (187 SE2d 907), and gives to them an express legal right to have the amount of compensation payments reduced. Hartford Acc. & Indem. Co. v. Fidelity & Cas. Co., 183 Ga. 383, 385 (188 SE 517). The relation between the employer and employee with respect to the Act is governed by a contract created by law, in derogation of the common law rights of each, and of which the insurance policy is a part. Travelers Ins. Co. v. Ga. Power Co., 51 Ga. App. 579, 582 (181 SE 111). "The policy of insurance issued to the employer constitutes a definite contract among all parties concerned. The insurance company which has issued such policy is the person called upon and obligated to pay compensation under the provisions of the Workmen’s Compensation Act as amended; and, to the extent of the compensation paid by it to the injured employee covered by the policy of compensation insurance, is entitled to recover from the person whose act caused the injury to the injured employee . . .” General Acc. &c. Assur. Corp. v. John P. King Mfg. Co., 60 Ga. App. 281, 282 (3 SE2d 841).

3. Hence the right of subrogation upon the giving of notice as provided for by Code Ann. § 114-403 is a substantive right, vested upon the giving of the notice, and could not be changed or impaired by a subsequent statute. Thomas v. Town of Savannah Beach, 66 Ga. App. 178 (17 SE2d 747); Code § 102-104. In that case Code Ann. § 114-403, as it stood at the time of the employee’s death, provided that the employer was entitled to set off against the compensation the gross amount of the recovery.

More than a year later § 114-403 was amended to provide that only the net amount could be set off, and the employee’s widow contended that this amendment was applicable to the pending proceeding. In rejecting that contention, this court stated (p. 181): "The widow’s right to compensation under the compensation Act, for the death of her husband, and to damages against the tortfeasor causing his death, accrued on the date of the death, March 15, 1936, which was more than a year before the approval of the Act of 1937, supra. The amounts recoverable by her, either as compensation under the Act or as damages under the death statute, were fixed as of that date and could not, without depriving her of a vested right, be changed by any enactment of the legislature after that date. Likewise, any rights which the employer or the tortfeasor may have had as respected the amount recoverable against either of them were fixed and vested as of the date of the homicide, and could in no wise be changed by any subsequent statute. Whether the employer could set off the gross amount of damages recovered against the tortfeasor or paid by the tortfeasor to the plaintiff, or could set off the net amount recovered or paid, was a substantive and vested right which could not be changed by a subsequent statute. The Act of 1937, in so far as it provides for a set-off against the compensation of the 'net damages’ which may be due or paid by the tortfeasor to the plaintiff, is not remedial and therefore has no retroactive effect.” Accord: McMullen v. Liberty Mut. Ins. Co., 119 Ga. App. 410 (167 SE2d 360); Cheek v. J. Allen Couch & Son Funeral Home, 125 Ga. App. 438, supra.

4. Subsequent to the decision in Thomas v. Town of Savannah Beach, 66 Ga. App. 178, supra, Code Ann. § 114-403 was amended to provide that the right of subrogation accrued upon the giving of written notice as provided for in the amendment. Ga. L. 1963, pp. 141, 145. Consequently, upon the giving of the notices in each of the instant cases, the employer-carrier’s right to subrogation became fixed and vested as of that time. Hartford Acc. & Indem. Co. v. Tolison, 118 Ga. App. 660 (165 SE2d 192).

5. There is nothing in the repealing statute (Ga. L. 1972, p. 3) to authorize us to conclude that it is to have a retrospective, retroactive, or remedial application, and the instant cases are governed by our Constitution, Art. I, Sec. III, Par. II (Code Ann. § 2-302), by Code § 102-104, and by the rulings in Wilder v. Lumpkin, 4 Ga. 208; Winter v. Jones, 10 Ga. 190 (54 AD 379); Hargroves v. Chambers, 30 Ga. 580, 601; White v. Ross, 40 Ga. 339; Dennington v. Mayor &c. of Roberta, 130 Ga. 494 (1a) (61 ); Bank of Norman Park v. Colquitt County, 169 Ga. 534 (150 SE 841); Seaboard A. - L. R. Co. v. Benton, 175 Ga. 491, 494 (165 SE 593); West v. Anderson, 187 Ga. 587, 588 (1 SE2d 671); Federal Deposit Ins. Corp. v. Beasley, 193 Ga. 727, 732 (20 SE2d 23); Anthony v. Penn, 212 Ga. 292 (92 SE2d 14) and similar cases, and for the same reasons are not controlled by the rulings in Bank of St. Mary’s v. State, 12 Ga. 475; Woodburn v. Western Union Tel. Co., 95 Ga. 808 (23 SE 116); Western Union Tel. Co. v. Smith, 96 Ga. 569 (22 SE 899); Western Union Tel. Co. v. Lumpkin, 99 Ga. 647 (26 SE 74); Kelly v. Hall, 191 Ga. 470 (12 SE2d 881); City of Valdosta v. Singleton, 197 Ga. 194 (28 SE2d 759); Franklin v. Harper, 205 Ga. 779, 791 (55 SE2d 221); Fulton County v. Spratlin, 210 Ga. 447 (80 SE2d 780); Fulton Bag & Cotton Mills v. Williams, 212 Ga. 783 (95 SE2d 848) and similar cases, where no vested rights were involved.

Claimants place great reliance upon the line of cases beginning with Bank of St. Mary’s v. State, 12 Ga. 475, supra, continuing particularly through Fulton County v. Spratlin, 210 Ga. 447, supra, but a careful reading of them reveals without any peradventure that they have no application to the situations here.

The Bank of St. Mary’s and Western Union cases all involved proceedings to collect penalties, and in each of them it appeared that the law providing for collection of the penalty had been changed or repealed by a subsequent statute. In Hargroves v. Chambers, 30 Ga. 580, 602, supra, an action for debt, the court in distinguishing the penalty cases, pointed out that there is and can be no vested right to collect a penalty until a final judgment has been obtained. The court asserted, after citing numerous authorities: "The courts held in all the cases that the repeal of the law imposing the penalty defeated the recovery, and all concede that if the right was a vested one, or was secured by contract, a repeal of the law could not take away the right.” (Emphasis supplied.) This was also the holding in Woodburn v. Western Union Tel. Co., 95 Ga. 808, supra, which cited and relied upon the Bank of St. Mary’s case, and likewise in Western Union Tel. Co. v. Smith, 96 Ga. 569, supra. The headnote decision of Western Union Tel. Co. v. Lumpkin, 99 Ga. 647, supra, also a penalty case, cites for its authority the Smith case. As noted in these cases, a repeal of the penalty statute is itself a remission of the penalty. The case of Kelly v. Hall, 191 Ga. 470 (2), supra, involved a suit for punitive damages in a libel action. It appeared that pending the action a statute had been enacted providing that absent notice from the party libeled to the publisher and an opportunity to effect a correction, no punitive damages could be recovered. The court held that nothing prevented the legislature from abolishing the right to punitive damages where there had been no notice — such damages amounting to a penalty. In City of Valdosta v. Singleton, 197 Ga. 194, supra, the city contemplated the issuance of revenue certificate bonds for the purchase of an electric distribution system, and certain taxpayers sought to enjoin issuance of the bonds. After the grant of an injunction the revenue certificate law was amended to exclude electric distribution systems as a matter for which the bonds could be issued, and it was held that even though the trial court may have erred in its judgment under the law as it stood at the time, the amendment to the law impaired no vested right under the prior law and it was applied in affirming the judgment. In Fulton County v. Spratlin, 210 Ga. 447, supra, a declaratory judgment action was sought by a deputy clerk of Fulton Superior Court who had reached the mandatory retirement age under a legislative act which he contended changed the term of his office under a prior Act. But the court held that he had no vested right in holding the public office (this had nothing to do with his right to pension or retirement benefits, which is vested), and that it was proper to apply the last Act as it affected him. In Fulton Bag & Cotton Mills v. Williams, 212 Ga. 783, supra, it appeared that the legislature has abolished the right of a taxpayer to take as a deduction on his state income tax returns the amount of his federal income taxes. The court held that allowance of the deduction was purely a matter of grace extended by the state — a privilege, and not a vested right. Consequently, upon passage of the Act abolishing the deduction, it applied to returns for taxes on income earned during a portion of the year prior thereto, and to years on which it was sought to apply a carry-back of losses.

The test is whether there was a vested right. If so, no subsequent legislative Act could impair it; but if not, there is no bar to a change or abolition of it at any time before it becomes fixed by a judgment. Code § 102-104 (Const. Art. I, Sec. Ill, Par. II; Code Ann. § 2-302). In the cases sub judice the carriers’ right to subrogation vested upon the giving of notice, as the statute then required and provided, and their rights could not thereafter be impaired by a subsequent abolition of subrogation in workmen’s compensation cases.

In like manner for the reason that the res judicata aspect of an award of compensation is substantive and vested, we have held that the 1968 amendment to § 114-709 providing that a change in condition as relates to §§ 114-404 and 114-405 shall mean "solely an economic change,” is a substantive change and could not be applied to awards which antedated the amendment. McMullen v. Liberty Mutual Ins. Co., 119 Ga. App. 410 (167 SE2d 360); Noles v. National Engine &c. Co., 119 Ga. App. 833 (169 SE2d 185); Hartford Accident &c. Co. v. Carroll, 121 Ga. App. 78 (172 SE2d 869); City of Atlanta v. Price, 121 Ga. App. 340 (2) (173 SE2d 750); Hopper v. Continental Ins. Co., 121 Ga. App. 850 (176 SE2d 109); Jenkins Enterprises v. Williams, 122 Ga. App. 840 (178 SE2d 926). The right afforded by the notice given prior to the date of the amendment changing the law is vested and a subsequent change in the law, if applied to these cases, would run afoul of the Constitution, Art. I, Sec. Ill, Par. II (Code Ann. § 2-302), and Code § 102-104.

6. It is irrelevant that at the time of the giving of the notice or at the effective date of the Act of 1972, repealing § 114-403, there had been no recovery of damages or settlement effected by the employee against the third-party tortfeasor, because the right of sub-rogation became vested upon the giving of the notice. It is true that in Travelers Ins. Co. v. Bagwell, 116 Ga. App. 675 (158 SE2d 267), a case of attempted intervention by the employer’s insurance carrier in an action for damages by the injured employee against the third-party tortfeasor, we interpreted a Supreme Court case as holding that the right of subrogation alone as provided for by a prior § 114-403 was not sufficient to authorize such intervention, and we ruled that the lien provided for by § 114-403, as amended by Ga. L. 1963, pp. 141, 145, against the employee’s net recovery in addition to subrogation, afforded no basis for intervention since "the 'recovery’ is not in existence and the recovery is not the res in controversy, but is created by a judgment favorable to the employee.” Hence we held that the right to intervene under cited cases is dependent upon "rights in a res which is the subject matter of the controversy and the assertion of a right already in existence as to the res also already in existence.” (Emphasis supplied.)

Whatever may be the rules and restrictions as to intervention, § 114-403, as amended by Ga. L. 1963, pp. 141,145, did not provide or contemplate that a recovery or judgment be already in existence before the right to subrogation vests. This section, before its repeal, provided: "Upon giving such written notice, the person called upon to make such payment shall be subrogated, to the extent of the compensation, medical expenses and/ or funeral expenses payable, to all rights arising out of the injury or death which the injured employee or those entitled to recover on account of his death shall have against such notified persons, and shall have a lien therefor against the net recovery of any judgment or settlement recovered by the injured employee or those entitled to recover on account of the employee’s death against any of the persons so notified.” (Emphasis supplied).

In Cheek v. J. Allen Couch & Son Funeral Home, 125 Ga. App. 438, supra, the employer and its carrier brought an action against the employee, the third-party tortfeasor and its insurer, seeking to enforce its subrogation rights which had not been honored in the employee’s recovery from the tortfeasor although the § 114-403 notices had been sent. In defense it was urged that the one-year statute of limitation applicable to liens on personal property (Code § 67-2401 (2)), and the one-year statute applicable to hospital liens (Code Ann. § 67-2207), indicated that the action should have been brought within one year from the employee’s judgment against the tortfeasor. In rejecting the argument as to the statute of limitation with reference to liens on personal property, we held (p. 444): "If § 114-403 did no more than provide a lien upon the judgment or settlement obtained by one to whom compensation had been paid, and the suit were seeking no more than a foreclosure of the lien, this position might be sound. But § 114-403 does two things — it provides a right of subrogation to the party who has been obliged to pay the compensation, and in addition provides a lien on the judgment or settlement, which is in the nature of a security for the money to which the right of subrogation exists. Foreclosure of the lien is not the only remedy available; the holder of the subrogation right may, as was done here, sue upon that right, just as the holder of a chattel mortgage might sue on the debt without foreclosing the lien.” In holding that the hospital-lien statute had no application, we pointed out (p. 445) that "no right of subrogation is provided under it.” We concluded (p. 445) "that an appropriate statute relative to a limitation of time for bringing the action for the enforcement of subrogation rights under Code Ann. § 114-403 is that for money had and received under Code § 3-706, for we have held that this is a basis for enforcing the right.”

Hence as the statute says, there is not just a lien against the recovery, but a subrogation "to all rights” which the employee may have against the notified third persons, particularly his cause of action. By giving notice prior to the repeal of § 114-403, the compensation carrier became subrogated to this cause of action and stood in the employee’s shoes with relation to the tortfeasor causing the injuries.² To hold that the legislature could abolish the right of the carrier, who stands in the employee’s shoes, to proceed against the tortfeasor, would mean that the legislature could also abolish the cause of action of the employee himself, or could repeal the wrongful death statute tomorrow and cause all pending wrongful death claims simply to abate, or could otherwise affect the status of the parties as to a liability which had become fixed at the time of the injury or death. This the legislature cannot do. Seaboard A. L. R. Co. v. Benton, 175 Ga. 491, 494, supra; Mayor &c. of Savannah v. Hartridge, 8 Ga. 23 (9); Bussey v. Bishop, 169 Ga. 251 (150 SE 78, 67 ALR 287); Bank of Norman Park v. Colquitt County, 169 Ga. 534 (150 SE 841); Code § 102-104.

7. The lien against the employee’s recovery from the tortfeasor is in aid of, or is security for, the right of subrogation, which became a valuable, vested right in the instant case upon giving notice, and the lien right can no more be interfered with than the subrogation right.

8. "A constitutional Act of the legislature is equivalent to a contract, and when performed, is a contract executed; and whatever rights are thereby created, a subsequent legislature cannot impair. ” (Emphasis supplied.) Winter v. Jones, 10 Ga. 190 (5), supra; Franklin v. Mayor &c. of Savannah, 199 Ga. 426, 429 (34 SE2d 506); Hargroves v. Chambers, 30 Ga. 580, 602, supra. "A repealing act will not be given a retroactive operation so as to divest previously acquired rights or to impair the obligation of a contract previously made by virtue of and pending the existence of such law.” Bank of Norman Park v. Colquitt County, 169 Ga. 534 (3), supra. Accordingly, the subsequent repeal of § 114-403 could not divest the employer-carrier’s right to take credit against future compensation and medical payments to the extent of the net recovery from the tortfeasor, but not exceeding the total compensation to be paid.

Judgment affirmed in No. 48732; reversed in No. 48748.

Case No. 48732:

Argued November 6, 1973 Decided March 14, 1974 Rehearing denied March 29, 1974 Adams, O’Neal, Hemingway & Kaplan, H. T. O’Neal, Jr., for appellants. George N. Skene, for appellee.

Case No. 48748:

Argued November 8, 1973

Decided March 14, 1974

Rehearing denied March 29, 1974 Brackett, Arnall & Stephens, H. P. Arnall, H. A. Stephens, Jr., for appellants. Mundy, Gammage & Cummings, E. Lamar Gam-mage, Jr., William W. Mundy, for appellee. Bell, C. J., Hall, P. J., Been, Quillian, Clark and Stolz, JJ., concur. Pannell and Evans, JJ., dissent.

1 This Code section provided: "Whenever any person is called upon to pay compensation, medical expenses and/or funeral expenses on account of injury or death compensable under this Act, and such person contends that a person or persons other than the employer is liable to pay damages, on account of such injury or death, to the injured employee or those entitled to recover for the employee’s death; such person called upon to make such payment may give to the persons contended to be so liable and to the injured employee or those entitled to recover on account of his death written notice of such contention and of the fact that the person giving notice is required to make such payment. Upon giving such written notice, the person called upon to make such payment shall be subrogated, to the extent of the compensation, medical expenses and/or funeral expenses payable, to all rights arising out of the injury or death which the injured employee or those entitled to recover on account of his death shall have against such notified persons, and shall have a lien therefor against the net recovery of any judgment or settlement recovered by the injured employee or those entitled to recover on account of the employee’s death against any of the persons so notified.”

2 "Subrogation originated in equity; and in the absence of statute the right to subrogation, or the right to be subrogated, that is placed in the shoes of another, is not enforceable as such in an action at law. [Cits.] The reasons underlying the adoption of the doctrine of subrogation by courts of equity are to a great extent substantially the same as the reasons underlying the adoption of the remedy of money had and received by courts of law. Subrogation is not, strictly speaking, a remedy, but is rather an equitable principle engendering a cause of action enforceable in equity.” Jasper School District v. Gormley, 184 Ga. 756,759 (193 SE 248). See also Lee v. Holman, 182 Ga. 559 (186 SE 189); Cornelia Bank v. First Nat. Bank of Quitman, 170 Ga. 747 (154 SE 234).