Case Title: City of Birmingham v. Walker

Citation: 101 So. 2d 250

Docket Number: 

State: alabama

Court: Alabama Supreme Court

Date: 1958-03-06T00:00:00Z

Document:
101 So. 2d 250 (1958)
CITY OF BIRMINGHAM
v.
Herbert B. WALKER et al.
6 Div. 801.

Supreme Court of Alabama.
March 6, 1958.
*251 Geo. B. Foss, Jr., Birmingham, for appellant.
Taylor, Higgins, Windham & Perdue, Birmingham, for appellee Walker.
London & Yancey, Birmingham, for Belcher, Inc., and others.
COLEMAN, Justice.
This is an appeal from a judgment denying appellant's petition to intervene in a suit filed in the Circuit Court of Jefferson County by Herbert B. Walker, plaintiff, against S. E. Belcher, et al., defendants. In that suit, the plaintiff, Walker, sought to recover damages for personal injuries alleged to have been sustained by him as the proximate result of the negligence of defendants in operating a motor vehicle on a public highway in the City of Birmingham, Alabama.
The City of Birmingham, a municipal corporation, hereinafter referred to as the City, alleged in its petition for intervention: that the plaintiff, Walker, was at the time of his injury, and is now, a police officer employed by the City, and was at the time and place of his injury engaged in his duties as the City's employee and police officer; that as a proximate result of Walker's injuries the City lost his services for 119 days; that under Act. No. 246, General Acts 1945, page 376 (1940 Code, Title 62, §§ 330(21) to 330(48), Pocket Parts), and Rule 11.7 of the Personnel Board of Jefferson County, Alabama, which was promulgated under authority of said Act No. 246, the Personnel Board determined that the City should pay, and the City did pay, to Walker the sum of $1,266.42, for his lost services of 119 days, at his full salary rate; that under the Alabama rule of damages, Walker cannot recover for such lost time where the employer continued to pay his wages (citing 6 Ala.L.R. 79-83), but that the City "can recover by virtue of legal or conventional subrogation or both"; that Walker orally or impliedly agreed that the City *252 should be subrogated to his right of action against defendants to the extent that the City paid him his salary in said amount of $1,266.42; and that Walker orally or impliedly agreed that the City should be subrogated to any recovery he might obtain from defendants to the extent of the aforesaid salary payment. The petition further alleges that the interests of the City in said suit will not be adequately protected unless the City is allowed to intervene.
A copy of Personnel Board Rule 11.7 mentioned above is attached to the petition as Exhibit A, and is as follows:
It appears that in the above mentioned suit, judgment by agreement was entered in favor of Walker and against the defendants for $30,750. The Circuit Court denied the City's petition for intervention and ordered that all costs not heretofore taxed against defendants be taxed against the City.
The question in this case is: Where a municipality has lost the services of an employee as the result of a personal injury sustained by said employee while he was performing the duties of his employment, said injury being the proximate consequence of the negligence of a third party, and the municipality, under compulsory statutory provisions, has paid said employee at his full salary rate during the time his services were lost, is the municipality subrogated to the employee's right of action against said third party to the extent of the amount so paid by the municipality to the employee during the time he was unable to work, under the rules of the common law and without any statutory provision giving the City the subrogation rights which it claims?
By denying the City's petition to intervene, the trial court answered the foregoing question in the negative. We are of opinion that the trial court was correct in this ruling.
We have not been cited to any statute conferring the right of subrogation on the City under the circumstances of this case, and the City's claim to subrogation must, therefore, rest on the law as set out in the former decisions of this and other common-law courts.
The City contends that the principles of law which operate to place an insurer in the position of the insured, in cases where the insurer has paid a property loss caused by a third party tort-feasor, have application here; and, that upon application of those principles here, the City is subrogated to the employee's rights against the party who injured him, at least to the extent that the City has paid the employee's wages during the time he was disabled as a result of the injury.
The general rule is that when an insurer pays the insured in accordance with the insurance contract for a loss of property proximately resulting from fire caused by the actionable misconduct of a third party, the insurer becomes, by the doctrine of equitable subrogation, the owner, pro tanto, of the claim of the insured against the third party. If such payment only partially reimburses the insured for the loss, the insurer is subrogated only to the extent of the amount paid, and the insured remains the owner of the claim for *253 the unreimbursed amount of the loss. If such payment by the insurer fully reimburses the insured for the property loss, then the insurer is subrogated to the entire right of insured against the third party.
This doctrine is based on the theory that the insurer is a surety for the third party, who is the principal obligor to the insured, and so, upon the principle that one who has paid a debt for which another is primarily liable should be substituted for and have the rights of the primary creditor against the primary debtor, the insurer, with respect to the claim of insured against the third party tort-feasor, is held to be substituted for the insured to the extent of the amount so paid by the insurer. The equity of such principle is said to be that the insured has only one claim and is entitled to one payment only, and that the loss should ultimately fall on the third party who caused it. This principle appears to be generally accepted with respect to indemnity contracts relating to property, and was recently stated by this court in a case involving insurer's right of subrogation on a tort claim for theft as follows:
As to an insurer who has paid under a life insurance contract upon the death of the insured proximately caused by the actionable misconduct of another, subrogation to a right of action against the third-party tort-feasor causing the death has been denied. The rule has been stated as follows:
Another text contains the following statement:
The City's argument is based on the proposition that its position is analogous to the position of an insurer of property rather than the position of an insurer under a life or accident policy. Cases from Illinois and Pennsylvaia support appellant's contention.
*254 In an Illinois case, decided in 1954, the court was called upon to decide whether or not in the absence of statutory subrogation, an employer could recover from a third-party tort-feasor the amount of compensation which the employer had paid to the injured employee under the Illinois Workmen's Compensation Act. Geneva Construction Co. v. Martin Transfer & Storage Co., 4 Ill. 2d 273, 122 N.E.2d 540, 543. In that case the court observed:
In Alabama, statutory provision for subrogation of the employer to such rights of the injured employee against a third party is found in Title 26, § 312, Code 1940, as last amended.
The Illinois court also noted that in jurisdictions where the employer's commonlaw right of subrogation has been considered, there is a conflict in the decisions and rationale of the courts. Numerous decisions allowing subrogation and others to the contrary are cited in the opinion. The Illinois case adopted the view allowing the employer to be subrogated, largely on the principles which obtain in fire insurance cases, and in pertinent part said:
As hereinafter indicated, we are persuaded that the accident insurance analogy is the better view. Moreover, the question of the common-law right of the insurer of an employer under the Workmen's Compensation Act to be subrogated to an injured employee's right of action against a third-party tort-feasor has been previously considered by this court. In holding that such insurer had no right of subrogation in the absence of statute, this court said:
Although there is authority to the contrary, we think the better reasoning has been concisely summarized as follows:
The Pennsylvania cases supporting appellant's contentions arose under a statute of that State which required a city to make payments to certain employees injured in line of duty. It does not appear that the statute gave the city any right of subrogation, yet the court held that the city could recover from the third-party tort-feasor.
In City of Philadelphia v. Philadelphia Rapid Transit Co., 1940, 337 Pa. 1, 10 A. 434, the decision was that the city must assert its claim by intervention in the suit by the employee against the third party and not in a separate suit. Without extended discussion, the city's right to subrogation appears to have been assumed, and the opinion recites in pertinent part:
However, in Potoczny, to Use of City of Philadelphia v. Vallejo, 1952, 170 Pa.Super. 377, 85 A.2d 675, the Superior Court of Pennsylvania expressly held that the city was entitled to subrogation for sums paid an employee under the same statute, and in support of its holding cited Insurance Co. of North America v. Fidelity Etc. Co., 123 Pa. 523, 16 A. 791, 2 L.R.A. 586, and Fidelity Title & Trust Co. v. People's Natural Gas Co., 150 Pa. 8, 24 A. 339, as well as the Rapid Transit case, supra.
Insurance Co. of North America v. Fidelity Etc. Co. and Fidelity Title & Trust *256 Co. v. People's Natural Gas Co., supra, were both cases involving the subrogation rights of an insurer under a policy of fire insurance, and no question of the subrogation rights of an employer or of an insurer against accidental personal injury was involved or considered. Gildner v. First National Bank & Trust Co. of Bethlehem, 342 Pa. 145, 19 A.2d 910, also relied on, concerned subrogation rights of creditors to the proceeds of a mortgage; and First National Bank of Ashley v. Reily, 165 Pa. Super. 168, 67 A.2d 679, also cited, dealt with the subrogation rights of an execution purchaser to recover for the payment of taxes. While these authorities which were cited by the court did set out the doctrine of subrogation pertinent to the respective cases, those decisions did not concern the right of subrogation against a third party liable for negligently causing injury to the person of another.
In the Potoczny case, supra [170 Pa. Super. 377, 85 A.2d 676], the court allowed the city's claim to subrogation on principles which are applied in cases of tort claims for damage to property where the insurer has paid the loss. The opinion makes no mention of any distinction between claims for injury to insured property and claims for injury to insured persons. All the parties in that case appear to have agreed that the city should be subrogated, because the opinion contains the following pertinent statement:
"Neither plaintiff nor defendant objected to the city's subrogation, * *."
While the Potoczny case is authority to support appellant's contentions in the case at bar, its persuasive force is greatly impaired by the lack of adversary character in that proceeding with respect to the precise question presented in the instant case in which the opposing parties now vigorously contest their contradictory contentions. While the Potoczny case is authority under the statutes and cases of Pennsylvania, we are not persuaded that we should follow it here.
In the instant case, the payments made by the City to its policeman, Walker, were payments of an obligation the City owed because of its contract with Walker. Those payments were not made to satisfy any obligation due from the tort-feasor to Walker. The City's obligation arose from the contract with Walker, not from the tort of the third party.
We recognize that there are equities which favor the contention of appellant. The underlying philosophy which has motivated the enactment of a workmen's compensation act would appear to be best served when the ultimate loss falls on the tort-feasor who causes the loss, rather than on the innocent employer. Nevertheless, the statute here involved was not drawn to carry out that philosophy. Accordingly, in the absence of legislation, we must follow the rules of the common law.
The laws governing the City and its employees constitute the contract of the City with its policeman. One part of that contract is the provision that the employee injured in line of duty without fault shall be allowed "leave with pay." The City claims subrogation because it has paid under that provision of the contract. The statute provides that the Personnel Board shall provide for "sick leave with pay." Title 62, § 330(39), Code 1940. There is no suggestion that this includes the power to provide for subrogation.
The situation is no different than would be the case if the employee had entered into the same contract provisions with an insurance company as the other contracting party in place of the City. If the insurance company in such case should seek to be subrogated to the employee's rights against a third-party tort-feasor injuring the employee, subrogation would not be allowed in the absence of a provision in the contract giving the insurer the right of subrogation. The rule has been stated as follows:
There is no provision for subrogating the City to its injured employee's rights in the statutes and rules in the instant case, and the City is in the same situation as an insurer with a similar contract. The City's remedy in future cases is to make a new contract. In the instant case, the City is without remedy, because the court cannot make a contract for the parties, nor legislate.
We have not been cited to nor found any provision of the statute which would expressly authorize the Personnel Board to make a rule providing for subrogation. While the question is not before us, we deem it not inappropriate to observe that it may be doubted that such a provision can be made effective without an act of the legislature of this State so providing. We hasten to add that we are not presently aware of any obstacle to such legislative action.
The right of an accident insurance company to be subrogated to the insured's right of action against a third party who had injured him was considered in Gatzweiler v. Milwaukee Electric Ry. & Light Co., 136 Wis. 34, 116 N.W. 633, 634, 18 L.R.A.,N.S., 211. In that case the court held that an accident insurance policy is more like life than like fire insurance and should be classed with the former rather than the latter as to the insurer's right of subrogation, "* * * because in case of casualty insurance the right of the assured is not determinable by any definite rule for computing the money equivalent for the damages, as in the case of fire insurance; that the right to recover the stated or other sum is a property right bought and paid for by the assured as in case of life insurance, not a mere right to indemnity for a definitely ascertainable pecuniary loss. If it be true that in the absence of some stipulation to the contrary a contract of casualty insurance is not for the reasons stated by the Texas court (in Aetna Life Ins. Co. v. J. B. Parker & Co., 96 Tex. 287, 72 S.W. 168, 580, 621) one of indemnity giving rise in the circumstances of this case to the right of subrogation as against the party wrongfully causing the injury, and yet the parties might give it that character by a stipulation to that effect, so far as we can discover there was no such stipulation in the contract in question. * * *." 116 N.W. 634.
The Texas court stated the reasons for denying subrogation to an insurer against personal injury as follows:
In Mercer Casualty Co. v. Perlman, 62 Ohio App. 133, 23 N.E.2d 502, paragraph 2 of the syllabus by the court in that case recites as follows:
The opinion further recites in pertinent part as follows:
With respect to the insurer's right to subrogation by reason of an attempted assignment of the claim for insured's wrongful death by her administrator, the court in Mercer Casualty Co. v. Perlman, supra, held such attempted assignment ineffective, and quoted the following statements:
In the case at bar, the City has no relation to the third party who injured the City's employee other than that of contractor with the injured employee and the City's contract obligation is the medium through which the employee's injury is brought home to the City. The City's obligation to pay its injured policeman is not a contract of indemnity. There is no provision for subrogation of the City in the statutes to which we have been cited.
We are of opinion that the conclusion here reached is supported also by the following cases: Employers' Liability Assur. Corp., etc. v. Daley, 183 Misc. 975, 51 N.Y.S.2d 567; affirmed 271 App.Div. 662, 67 N.Y.S.2d 233; (dissent in 271 App.Div. 662, 68 N.Y.S.2d 743); 297 N.Y. 745, 77 N.E.2d 515; Suttles v. Railway Mail Ass'n, 156 App.Div. 435, 141 N.Y.S. 1024; The Federal No. 2, 2d Cir., 21 F.2d 313; United States v. Atlantic Coast Line R. Co., D.C., 64 F. Supp. 289; Crab Orchard Imp. Co. v. Chesapeake & O. Ry. Co., 4 Cir., 115 F.2d 277; Fox v. Dallas Hotel Co., 111 Tex. 461, 240 S.W. 517; Maryland Casualty Co. v. Paton, 9 Cir., 194 F.2d 765; Aetna Life Ins. Co. v. Otis Elevator Co., Tex.Civ.App., 204 S.W. 376.
*259 We are further of opinion that the City cannot succeed under its claim to conventional subrogation by reason of the alleged assignment or agreement made by its policeman. This court has said:
The provisions of §§ 78, 87, and 101, Title 9, Code 1940, do not operate to give the City a right of subrogation in this case. See City of Birmingham v. Trammell, Ala., 101 So. 2d 259.
In view of the conclusion here reached, we do not consider appellees' argument that the City's case is moot.
For the reasons stated, we hold that the City is not subrogated to the policeman's cause of action against the third party alleged to have caused his injury. Because the City has no right to subrogation, either legal or conventional, its petition to intervene was properly denied and the judgment appealed from is affirmed.
Affirmed.
All the Justices concur except STAKELY, J., not sitting.