Title: Johnson v. Southern Industrial Contractors

State: north-carolina

Issuer: North Carolina Supreme Court

Document:

IN THE SUPREME COURT OF NORTH CAROLINA
No. 282PA97
FILED: 6 FEBRUARY 1998
CHARLES LYNWOOD JOHNSON
v.
SOUTHERN INDUSTRIAL CONSTRUCTORS, INC.
On discretionary review pursuant to N.C.G.S. § 7A-31 of
a unanimous decision of the Court of Appeals, 126 N.C. App. 103,
484 S.E.2d 574 (1997), vacating and remanding an order entered on
3 March 1995 by Sumner, J., in Superior Court, Nash County. 
Heard in the Supreme Court 19 November 1997.
Taft, Taft & Haigler, P.A., by Thomas F. Taft and
R. Alfred Patrick, for plaintiff-appellee.
Teague, Campbell, Dennis & Gorham, L.L.P., by George W.
Dennis III and John R. Green, Jr., for unnamed party-
appellants Siemens Energy & Automation, Inc., and
Zurich-American Insurance Company.
LAKE, Justice.
This is a workers’ compensation case presenting the
question of whether a superior court may assert its jurisdiction
over the jurisdiction of the Industrial Commission, pursuant to
the provisions of N.C.G.S. § 97-10.2(j), by adding assumed future
workers’ compensation benefits to those currently paid by the
employer, to establish that an employee’s recovery from a third-
party tort-feasor was insufficient to compensate the employer’s
subrogation lien, and thus allow the trial court to determine the
amount and distribution of such lien.  The Court of Appeals held
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that the trial court was correct in including assumed future
benefits in determining the insufficiency of the third-party
judgment to compensate the subrogation lien, and thus the trial
court by this methodology had jurisdiction and the authority to
set the amount of the employer’s subrogation lien under this
statutory provision.  We hold that the trial court may not by
this means assert its jurisdiction over the jurisdiction of the
Industrial Commission, and accordingly, we reverse the Court of
Appeals.
On 17 October 1988, the plaintiff, an employee of
Siemens Energy & Automation, Inc. (Siemens), suffered a herniated
disk in his back when struck by a falling jib crane in the course
of his employment.  Siemens denied negligence on its part, but
admitted the compensability of plaintiff’s injury under the North
Carolina Workers’ Compensation Act, and through its insurance
carrier, Zurich-American Insurance Company (Zurich), began
providing compensation for plaintiff’s medical expenses and
temporary total disability benefits, pursuant to Commission
approval, in the amount of $256.00 per week.
On 7 August 1991, plaintiff filed suit against third-
party tort-feasor, Southern Industrial Constructors, Inc., the
defendant, alleging his injuries were proximately caused by the
negligence of one of defendant’s employees.  Plaintiff prevailed
at trial, and pursuant to jury verdict, judgment was entered
against defendant in the amount of $219,052.20, plus interest and
court costs in the amounts of $55,405.12 and $3,538.28,
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respectively.
On 22 December 1994, plaintiff filed a motion
requesting that the trial court determine the amount of the
subrogation lien filed by Siemens and Zurich pursuant to N.C.G.S.
§ 97-10.2(j).  On 4 January 1995, Siemens and Zurich requested
distribution of the third-party recovery by order of the
Industrial Commission pursuant to N.C.G.S. § 97-10.2(f)(1).  On 3
March 1995, pursuant to plaintiff’s motion, the trial court,
following a hearing, entered an order including, in part, the
following findings of fact:
4.  Zurich-American has asserted its
statutory lien during the course of the
third-party negligence action; the lien
includes both medical expenses and indemnity
payments.  The lien totaled $121,853.83 on
January 27, 1995 and increases by the sum of
$256.00 each week.
. . . .
8.  The plaintiff has experienced
continuous physical pain and mental suffering
since the accident.
. . . .
10.  Since the trial of this case was
concluded, the plaintiff has been evaluated
by [a psychologist] who has determined the
plaintiff is “totally disabled from
employment at any exertional level in the
national economy and that such employment in
the future is not foreseen . . . .”
11.  [Plaintiff’s] physical and mental
condition prevent him from returning to
gainful employment.  It is anticipated he
will continue to receive workers’
compensation indemnity benefits for the rest
of his life.
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12.  [Plaintiff] was 47 years of age at
the time of trial and his life expectancy is
27.38 years.  Workers[’] compensation
benefits to be paid in the future at the rate
of $256.00 per week total $364,482.56.  [A
forensic economist] has determined the
present value of the future payments is
$178,908.63 using a 6% discount rate.
13.  The total present value of the
workers’ compensation lien is $300,506.46
which includes the total amount of all
payments made for medical expenses and
indemnity through January 20, 1995 and the
present value of all future indemnity
payments.
14.  The award of $219,052.20 is
exceeded by the total lien of $300,506.46 and
is insufficient to compensate the subrogation
claim of Zurich-American.
Upon these findings, the trial court concluded that it
had authority, pursuant to the provisions of N.C.G.S. § 97-
10.2(j), to determine the amount of the workers’ compensation
lien of Siemens and its insurance carrier, Zurich; that it was
fair and equitable to reduce the workers’ compensation lien to
the total sum of $25,000.00 to be paid to Zurich, with the
remaining sum of $252,995.60 from the judgment against the
defendant (the third-party tort-feasor) to be made available for
payment of court costs, attorney fees and damages to the
plaintiff; and the court so ordered.  Siemens and Zurich, as
unnamed parties in this action, filed notice of appeal to the
Court of Appeals, which upheld the jurisdictional determination
and premise of the trial court, but vacated and remanded “for
further hearing and specific findings of fact.”  Johnson v.
Southern Indus. Constructors, 126 N.C. App. 103, 116, 484 S.E.2d
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574, 581 (1997).  The petition of these parties for discretionary
review was allowed by this Court on 23 July 1997.
The plaintiff contends that the provisions of N.C.G.S.
§ 97-10.2(j) give the trial court the jurisdiction and authority
to set the amount of the subrogation lien in this case.  Section
97-10.2(j) provides in pertinent part:
Notwithstanding any other subsection in this
section, in the event that a judgment is
obtained which is insufficient to compensate
the subrogation claim of the Workers’
Compensation Insurance Carrier, or in the
event that a settlement has been agreed upon
by the employee and the third party, either
party may apply to . . . the presiding judge
before whom the cause of action is pending,
to determine the subrogation amount.  After
notice to the employer and the insurance
carrier, after an opportunity to be heard   
. . . , the judge shall determine, in his
discretion, the amount, if any, of the
employer’s lien.
N.C.G.S. § 97-10.2(j) (1991).
As this Court has stated, it is clear that the two
events under this statute “which will trigger the authority of a
judge to exercise discretion in determining or allocating the
amount of lien or disbursement are (1) a judgment insufficient to
compensate the subrogation claim of the workers’ compensation
insurance carrier or (2) a settlement.”  Hieb v. Lowery, 344 N.C.
403, 409, 474 S.E.2d 323, 326 (1996).  Plaintiff argues that the
trial court’s jurisdiction and discretion to set the amount of
the subrogation lien were triggered in this case because
plaintiff’s assumed future benefits should be included with the
compensation benefits he has already been paid when ascertaining
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the amount of the subrogation lien, and thereby, with this
composite, the judgment obtained from the third party would be
insufficient to satisfy the lien.  We decline to accept this
proposition.
Indeed, this Court has already considered and decided
this issue contrary to this premise in Hieb.  Hieb was a case
substantially similar to the circumstances in the case sub
judice, involving the amount or sufficiency of the third-party
judgment to satisfy the subrogation claim.  In Hieb, it was
argued that the plaintiff was “permanently and totally disabled
and therefore receiving lifetime benefits,” id. at 409, 474
S.E.2d at 327, and considering the compensation benefits then
paid, “plaintiffs contend it is substantially certain that the
workers’ compensation lien will exceed the amount of available
funds in the future,” id.  This Court specifically held in Hieb
that plaintiff’s “judgment is greater than the amount of St.
Paul’s lien at the time of Judge Sitton’s order and therefore is
not ‘insufficient to compensate the subrogation claim.’”  Id. at
410, 474 S.E.2d at 327.  Likewise, in the case sub judice, since
the judgment obtained from defendant is sufficient to compensate
the subrogation claim of Siemens and Zurich at the time of the
trial court’s order, the trial court was without jurisdiction to
determine the subrogation amount pursuant to N.C.G.S. § 97-
10.2(j).
Plaintiff further contends that subjection (j) of this
statute must be read in pari materia with N.C.G.S. § 97-
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10.2(f)(1)(c).  Pollard v. Smith, 324 N.C. 424, 426, 378 S.E.2d
771, 773 (1989).  Subsection (f)(1)(c) provides that the employer
shall be reimbursed by order of the Commission from the proceeds
of the recovery from the third party for “all benefits by way of
compensation or medical compensation expense paid or to be paid
by the employer under award of the Industrial Commission.” 
N.C.G.S. § 97-10.2(f)(1)(c).  Therefore, plaintiff argues that
the trial court should consider and determine the future benefits
“to be paid” in determining pursuant to subsection (j) whether a
judgment obtained is insufficient.  We also decline to adopt this
proposed construction of N.C.G.S. § 97-10.2.
It is clear from our decisions that subsection (j) is
to be viewed in light of this entire statute, Pollard v. Smith,
324 N.C. at 426, 378 S.E.2d at 772, which sets forth the overall
procedure for determining the respective rights to compensation
and subrogation between the employee, the employer and any third-
party tort-feasor, and that this is entirely the province of the
Commission except in the limited circumstance set forth in
subsection (j).  We note specifically that subsection (e)
provides at length for the appropriate disbursement of the funds
available, by way of reduction of damages, subrogation and
contribution, all in avoidance of unjust, excessive or double
recovery; and subsection (f) provides a specific order of
priority for disbursement of the third-party judgment proceeds by
the Commission where the employer has admitted liability for
benefits “or if an award final in nature” has been entered by the
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Commission.  This includes the reimbursement to the employer in
subparagraph (f)(1)(c) for all benefits “paid or to be paid”
under the award of the Commission.  We further note in this
regard that in the case sub judice, the plaintiff, pursuant to
Commission approval, has been receiving temporary total
disability benefits, whereas in Hieb, the plaintiff was
permanently and totally disabled and was receiving lifetime
benefits.  The Commission, as intended by the legislature, is far
better equipped, by its established procedures, practice and
expertise, to make the determinations and dispensations
contemplated by subsections (e) and (f), with respect to the
variables of future workers’ compensation benefits, than is the
already amply burdened superior court system.
The construction advocated by plaintiff would
necessarily expand the scope and applicability of subsection (j)
and at the same time severely restrict the scope and
applicability of subsection (f).  It is entirely conceivable that
under plaintiff’s interpretation of subsection (j), virtually any
award by the Commission extending into the future could be so
projected as to render any judgment against a third party
insufficient to compensate the subrogation claim.  Subsection (j)
provides in pertinent part, “in the event that a judgment is
obtained which is insufficient to compensate the subrogation
claim” (emphasis added), and this wording clearly indicates that
the comparison between the compensation benefits paid and the
judgment is to be made at the precise time the “judgment is
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obtained.”  Plaintiff’s proposed construction would require that
this language of the statute be amended to read “in the event
that a judgment is obtained which is or may in time become
insufficient . . . ,” and this would constitute an impermissible
rewriting of this statute by this Court.
With respect to interpreting the Workers’ Compensation
Act, this Court has warned against any inclination toward
judicial legislation, and in the words of Justice Ervin, speaking
for this Court, “‘[j]udges must interpret and apply statutes as
they are written.’”  Andrews v. Nu-Woods, Inc., 299 N.C. 723,
726, 264 S.E.2d 99, 101 (1980) (quoting Montague Bros. v. W.C.
Shepherd Co., 231 N.C. 551, 556, 58 S.E.2d 118, 122 (1950)). 
This Court has long distinguished between liberal construction of
statutes and impermissible judicial legislation or the act of a
court in “‘ingrafting upon a law something that has been omitted,
which [it] believes ought to have been embraced.’”  Deese v.
Southeastern Lawn & Tree Expert Co., 306 N.C. 275, 278, 293
S.E.2d 140, 143 (1982) (quoting Rice v. Denny Roll & Panel Co.,
199 N.C. 154, 157, 154 S.E. 69, 70 (1930)).
In its acquiescence in the plaintiff’s proposed
interpretation of subsection (j), in conjunction with subsection
(f)(1)(c) of this statute, the Court of Appeals notes the
following comments from Professor Larson:
A complication that, in the nature of
things, cannot be avoided is the fact that at
the time of distribution of the third-party
recovery the extent of the carrier’s
liability for future benefits often is
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unknown.  Indeed, this would happen in almost
every serious case in which the compensation
payments are periodic and the third-party
recovery is reasonably prompt.
A well-drawn statute will anticipate
this problem and spell out the steps to meet
it.
2A Arthur Larson & Lex K. Larson, The Law of Workmen’s
Compensation § 74.31(e), at 514-15 (1996).  The Court of Appeals,
while correctly noting this complication with respect to
consideration of benefits “to be paid”, as provided in subsection
(f)(1)(c) for disbursement by order of the Industrial Commission,
undertakes to apply this to subsection (j) and thus allow our
superior courts to expand their jurisdiction by undertaking, as
the trial court did in this case, the type of extensive
evidentiary hearing heretofore reserved exclusively for the
expertise of the Commission.  For the reasons stated herein, we
do not perceive this to be the intent of the legislature by its
enactment of N.C.G.S. § 97-10.2(j).
The concept and provisions of the Workers’ Compensation
Act as a whole, and specifically the language of N.C.G.S. § 97-
91, make it clear, as this Court has held, that the legislature
intended for the Industrial Commission to have broad and
exclusive jurisdiction, except in narrow, specific instances, to
determine the amounts of compensation “to be paid” to injured
workers and the appropriate disposition and remedies with respect
to all parties involved, including frequently third parties.  See
Morse v. Curtis, 276 N.C. 371, 172 S.E.2d 495 (1970); Cox v. Pitt
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County Transp. Co., 259 N.C. 38, 129 S.E.2d 589 (1963). 
Exceptions to the Commission’s jurisdiction, such as that found
in N.C.G.S. § 97-10.2(j), should be construed so as to accomplish
and be consistent with the overall purposes of the Act, which
includes limiting employers’ financial liability and preventing
double recoveries to employees.  Radzisz v. Harley Davidson of
Metrolina, Inc., 346 N.C. 84, 484 S.E.2d 566 (1997).  In Radzisz,
this Court recently stated:
The purpose of the North Carolina Workers’
Compensation Act is not only to provide a
swift and certain remedy to an injured
worker, but also to ensure a limited and
determinate liability for employers. 
Barnhardt v. Yellow Cab Co., 266 N.C. 419,
427, 146 S.E.2d 479, 484 (1966).  Section 97-
10.2 and its statutory predecessors were
designed to secure prompt, reasonable
compensation for an employee and
simultaneously to permit an employer who has
settled with the employee to recover such
amount from a third-party tort-feasor.  Brown
v. Southern Ry. Co., 204 N.C. 668, 671, 169
S.E. 419, 420 (1933).  Absent extenuating
circumstances not present here, the Act in
general and N.C.G.S. § 97-10.2 specifically
were never intended to provide the employee
with a windfall of a recovery from both the
employer and the third-party tort-feasor. 
Where “[t]here is one injury, [there is]
still only one recovery.”  Andrews v. Peters,
55 N.C. App. 124, 131, 284 S.E.2d 748, 752
(1981), disc. rev. denied, 305 N.C. 395, 290
S.E.2d 364 (1982).
Radzisz, 346 N.C. at 89, 484 S.E.2d at 569.
It is clear from the provisions of N.C.G.S. § 97-10.2,
including specifically subsection (j) thereof, and the cases
which have construed it, that it was and is the intent of the
legislature that non-negligent employers are to be reimbursed for
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those amounts they pay to employees who are injured by the
negligence of third parties, and that employees are not intended
to receive double recoveries.  The rulings of the trial court and
the Court of the Appeals in the case sub judice would effect the
opposite.  We therefore hold that since the judgment for
plaintiff against the third-party tort-feasor in this case, in
the amount of $219,052.20, is greater than the amount of the lien
at the time of the trial court’s order and is thus not
“insufficient to compensate the subrogation claim,” the trial
court did not have jurisdiction to determine the amount of the
lien pursuant to N.C.G.S. § 97-10.2(j).
For the reasons stated herein, we reverse the decision
of the Court of Appeals.
REVERSED. 
============================
Justice FRYE dissenting.
Simply stated, the issue in this case is whether “the
subrogation claim of the Workers’ Compensation Insurance Carrier”
includes benefits “to be paid by the employer under award of the
Industrial Commission” for purposes of determining, pursuant to
N.C.G.S. § 97-10.2(j), whether the judgment obtained by the
employee against a third-party tort-feasor is “insufficient” to
compensate that claim.  As I read the majority opinion, which
reverses the superior court and the Court of Appeals, it holds
that the subrogation claim includes only benefits already paid at
the time of the judgment obtained by the employee against the
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tort-feasor and does not include any amounts “to be paid” by the
employer under an award by the Industrial Commission.
Under N.C.G.S. § 97-10.2(j), if an employee obtains a
judgment against a third-party tort-feasor “which is insufficient
to compensate the subrogation claim” of the workers’ compensation
carrier, the presiding superior court judge, upon application of
either party, may determine the amount, if any, of the employer’s 
lien.  What this means is that, notwithstanding the fact that the
subrogation claim exceeds the amount of the judgment, the
superior court may, in its discretion, set the lien at an amount
that is less than the subrogation claim.
In the instant case, the presiding superior court judge 
determined, pursuant to his authority under N.C.G.S. §
97-10.2(j), that the judgment obtained by plaintiff was
insufficient to compensate the subrogation claim and, in his
discretion, reduced the subrogation amount, that is,
“determine[d] . . . the amount . . . of the employer’s lien.” 
N.C.G.S. § 97-10.2(j) (1991).  This comports with the purpose of
subsection (j) which is to allow the injured employee to receive
a portion of the recovery obtained in his lawsuit against the
negligent third party.  The Court of Appeals agreed that the
superior court proceeded correctly under N.C.G.S. § 97-10.2(j),
but remanded the case for further hearing and specific findings
of fact.  The majority now reverses the Court of Appeals, holding
“that the trial court may not by this means assert its
jurisdiction over the jurisdiction of the Industrial Commission.”
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The majority relies on Hieb v. Lowery, 344 N.C. 403,
474 S.E.2d 323 (1996), to support the conclusion that plaintiff’s
future benefits may not be included when ascertaining the amount
of the workers’ compensation carrier’s claim for purposes of
triggering N.C.G.S. § 97-10.2(j).  Although I dissented in Hieb,
I am bound by the decision of the Court in that case.  However, I
do not believe Hieb is controlling in the instant case.  The
relevant issue in Hieb was whether the word “judgment” in
N.C.G.S. § 97-10.2(j) referred to the amount awarded by the trial
court or to the proceeds actually available to satisfy the
judgment.  This Court settled the question by according judgment
its “plain meaning,” holding that the jury verdict of over
$1.2 million, as modified, constituted the judgment rather than
the $475,000 in insurance proceeds that were actually available
to satisfy the judgment.
In this case there is no dispute as to the amount of
the judgment.  Rather, we are called upon to determine what
constitutes the workers’ compensation carrier’s “subrogation
claim.”  The Workers’ Compensation Act, chapter 97 of the North
Carolina General Statutes, does not define the term “subrogation
claim.”  However, where the employer has filed a written
admission of liability for benefits or a final award has been
entered by the Industrial Commission, the insurance carrier’s
right to subrogation, authorized by N.C.G.S. § 97-10.2(g), is
determined by the employer’s right, under N.C.G.S. §
97-10.2(f)(1)(c), to reimbursement “for all benefits . . . paid
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or to be paid by the employer under award of the Industrial
Commission.”  N.C.G.S. § 97-10.2(f)(1)(c) (emphasis added). 
Therefore, to the extent that the workers’ compensation insurance
carrier will pay benefits in the future, the carrier will have a
“subrogation claim” for those payments against any amount
obtained by settlement, judgment, or otherwise from a third-party
tort-feasor.  This claim entitles the insurance carrier to pursue
its right to a lien “[i]n any proceeding against or settlement
with the third party.”  N.C.G.S. § 97-10.2(h).
The carrier’s right to subrogation does not cease to
accrue at the precise moment that the judgment is obtained. 
Rather, it continues as to all benefits to be paid in the future
by the employer under award of the Industrial Commission.  It is
therefore inequitable to deny the existence of that component of
the subrogation claim when comparing it with the judgment for
purposes of determining the judgment’s sufficiency under N.C.G.S.
§ 97-10.2(j).  Because I conclude that the meaning of
“subrogation claim” under N.C.G.S. § 97-10.2(j) includes amounts
“to be paid” by the workers’ compensation carrier as well as
those which have already been paid at the time the judgment is
obtained, I must agree with the Court of Appeals that the trial
court properly considered benefits “to be paid” in determining
the insufficiency of the third-party judgment to compensate the
subrogation claim.  For this reason, I cannot join the majority
opinion.
Justice WEBB joins in this dissenting opinion.
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