Source: https://supreme.justia.com/cases/federal/us/338/366/
Timestamp: 2019-04-24 11:51:13+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 338 › United States v. Aetna Cas. & Sur. Co.
United States v. Aetna Casualty & Surety Co.
Notwithstanding R.S. § 3477, restricting assignments of claims against the United States, an insurance company may bring an action under the Federal Tort Claims Act in its own name against the United States upon a claim to which it has become subrogated by payment to an insured who would have been able to bring such action. Pp. 338 U. S. 367-383.
(a) R.S. § 3477 does not bar transfers by operation of law. United States v. Gillis, 95 U. S. 407; Erwin v. United States, 97 U. S. 392; Goodman v. Niblack, 102 U. S. 556. Pp. 338 U. S. 370-376.
(b) It was the understanding of Congress when it passed the Tort Claims Act that subrogation claims were not within the bar of R.S. § 3477. Pp. 338 U. S. 376-380.
(c) Under Rule 17(a) of the Federal Rules of Civil Procedure, which were specifically made applicable to Tort Claims litigation, an insurer subrogee is a "real party in interest," and may sue in its own name -- even though it may be subrogated to only part of a claim. Pp. 338 U. S. 380-383.
In No. 35, a District Court dismissed an action against the United States under the Federal Tort Claims Act brought by an insurer who had reimbursed an employee of an insured for personal injuries resulting from negligence of a government employee. 76 F.Supp. 333. The Court of Appeals reversed. 170 F.2d 469. This Court granted certiorari. 336 U.S. 960. Affirmed, p. 338 U. S. 383.
In No. 36, the Court of Appeals affirmed a judgment against the United States under the Tort Claims Act in favor of an insurer who had partially reimbursed an insured whose property had been damaged through the negligence of a government employee. This Court granted certiorari. 336 U.S. 960. Affirmed, p. 338 U. S. 383.
In Nos. 37 and 38, a District Court dismissed complaints against the United States under the Tort Claims Act brought by two insurers which had reimbursed an insured for property damages resulting from negligence of a government employee. The Court of Appeals reversed. 171 F.2d 374. This Court granted certiorari. 336 U.S. 960. Affirmed, p. 338 U. S. 383.
Three cases, each presenting a slightly different aspect of the problem, were heard by the Court. In No. 35, the complaint alleges that an employee of the Federal Reserve Bank of New York was injured as a result of the negligence of an United States Post Office Department employee. Respondent insurance carrier had insured the Federal Reserve Bank against its liability for workmen's compensation, and duly paid the injured person's claim under the New York Workmen's Compensation Law, Consol.Laws, c. 67. The complaint further alleges that the injured person failed to commence any action against the United States within one year after the accident, and that his inaction operated, according to New York law, [Footnote 3] as an assignment to the insurer of his cause of action against the United States. The District Court dismissed the complaint, but the Court of Appeals for the Second Circuit reversed and remanded the cause for trial. 170 F.2d 469.
that Harding was insured by the respondent insurance carrier and, pursuant to the terms of the policy, had been paid $784.50 by the insurer, to which it was now subrogated. Judgment was thereupon entered against the United States in favor of Harding for $700 and in favor of respondent insurance company for $784.50. The Court of Appeals for the Tenth Circuit affirmed.
Nos. 37 and 38 present the situation in which two insurance companies, each of which has paid part of a claim of loss occasioned by the negligence of an employee of the United States, bring suits in their own names, each asking recovery of the amount it has paid to the assured. The District Court dismissed the complaints on motion of the Government, but the Court of Appeals for the Third Circuit reversed and remanded the causes. 171 F.2d 374. We granted certiorari in these cases, 336 U.S. 960, because of a conflict of decisions in the circuits [Footnote 4] and the manifest importance of the question.
omission complained of occurred, . . . sitting without a jury, shall have exclusive jurisdiction to hear, determine, and render judgment on any claim against the United States, for money only, . . . on account of damage to or loss of property or on account of personal injury or death caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant for such damage, loss, injury, or death in accordance with the law of the place where the act or omission occurred. Subject to the provisions of this chapter, the United States shall be liable in respect of such claims, to the same claimants, in the same manner, and to the same extent, as a private individual under like circumstances. . . . [Footnote 5]"
While the language of the Act indicates a congressional purpose that the United States be treated as if it were a private person in respect of torts committed by its employees, except for certain specific exceptions enumerated in the Act, [Footnote 6] neither the terms of the Act nor its legislative history precludes the application of R.S. § 3477 in this situation.
"All transfers and assignments . . . of any claim upon the United States, or of any part or share thereof, or interest therein . . . absolutely null and void . . ."
"(1) to insure that the United States may avoid involvement in any litigation as to the existence or extent of subrogation or other assignment of such claims, and (2) to insure that the suits and any judgments against the United States will be in the names of the original claimants so that the United States will be able to avail itself of its statutory rights in respect of venue, and of counterclaim and offset on account of any cross-claims it may have against the original claimants."
"The provisions of the statute making void an assignment or power of attorney by a Government contractor are for the protection of the Government. Hobbs v. McLean, 117 U. S. 567, 117 U. S. 576; McGowan v. Parish, 237 U. S. 285, 237 U. S. 294-295. In the absence of such a rule, the Government would be in danger of becoming embroiled in conflicting claims, with delay and embarrassment and the chance of multiple liability."
Martin v. National Surety Co., 300 U. S. 588, 300 U. S. 594 (1937). The Government contends that the inconvenience, administrative and accounting difficulties, and procedural problems which, it is apprehended, may involve the Government if subrogees are permitted to bring suits under the Tort Claims Act in their own names make this an apt situation for application of R.S. § 3477, and that that was the congressional intent.
subrogee. Only in brief and argument here was it suggested that the insurance carrier could recover if suit was brought in the name of the insured to the use of the insurer, citing for the first time United States v. American Tobacco Co., supra, a decision reflecting common law procedure, upon which reliance is now placed. [Footnote 7] It is for that reason that the opinions below were focused upon whether R.S. § 3477 is an absolute bar to recovery by the subrogee, rather than merely a bar to recovery in the name of the subrogee. We think, however, that even this limited and somewhat anomalous [Footnote 8] reliance upon R.S. § 3477 is untenable, first, because of the uniform interpretation given that statute by this Court for the past 75 years, and, second, because of many affirmative indications of congressional intent that subrogation claims should not be excluded from suit in the name of the subrogee under the Tort Claims Act.
R.S. § 3477 was enacted in 1853, as part of a statute entitled "An Act to prevent frauds upon the Treasury of the United States." [Footnote 9] Its primary purpose was undoubtedly to prevent persons of influence from buying up claims against the United States, which might then be improperly urged upon officers of the Government. [Footnote 10] Spofford v. Kirk, 97 U. S. 484, 97 U. S. 490 (1878). Another purpose, that upon which the Government now relies, has been inferred by this Court from the language of the statute. That purpose was to prevent possible multiple payment of claims, to make unnecessary the investigation of alleged assignments, and to enable the Government to deal only with the original claimant. Spofford v. Kirk, supra; Goodman v. Niblack, 102 U. S. 556, 102 U. S. 560 (1880). Most of the early cases construed the statute strictly, holding that all assignments were included within the statute, and that such assignments conferred no rights of any kind upon the assignee; that R.S. § 3477 "incapacitates every claimant upon the Government from creating an interest in the claim in any other than himself." Spofford v. Kirk, supra, at 97 U. S. 488-489. See also National Bank of Commerce v. Downie, 218 U. S. 345 (1910); Nutt v. Knut, 200 U. S. 12 (1906); St. Paul & Duluth R. Co. v. United States, 112 U. S. 733 (1885).
"The act of Congress of Feb. 26, 1853, to prevent frauds upon the treasury of the United States, which was the subject of consideration in the Gillis case, applies only two cases of voluntary assignment of demands against the government. It does not embrace cases where there has been a transfer of title by operation of law. The passing of claims to heirs, devisees, or assignees in bankruptcy are not within the evil at which the statute aimed; nor does the construction given by this court deny to such parties a standing in the Court of Claims."
Erwin v. United States, 97 U. S. 392, 97 U. S. 397 (1878).
supra, that an assignment by operation of law is not always exempt from the bar of R.S. § 3477, but that, in addition, the assignment must be of a kind that will not involve the Government in the procedural difficulties previously referred to. All of the cases in which R.S. § 3477 has been held inapplicable on the ground of assignment by operation of law are explained as presenting situations in which the Government could suffer no such procedural embarrassments. In cases of transfer by descent, Erwin v. United States, supra, consolidation of corporations, Seaboard Air Line R. Co. v. United States, 256 U. S. 655 (1921), and purchase at a judicial sale in a corporate reorganization, Western Pacific R. Co. v. United States, 268 U. S. 271 (1925), it is pointed out that the Government may deal with the substituted representative as it would have dealt with the claimant if there had been no substitution. Rights of counterclaim and set-off are said to be retained against the universal successor, while such universal assignments by operation of law can give rise to no controversies as to the existence and extent of the transfer for adjudication between the United States and the original claimant and his trustee, receiver, or administrator.
"The language of the statute, 'all transfers and assignments of any claim upon the United States, or any part thereof, or any interest therein,' is broad enough (if such were the purpose of Congress) to include transfers by operation of law, or by will. Yet we held it did not include a transfer by operation of law, or in bankruptcy, and we said it did not include one by will. The obvious reason for this is that there can be no purpose in such cases to harass the government by multiplying the number of persons with whom it has to deal, nor any danger of enlisting improper influences in advocacy of the claim, and that the exigencies of the party who held it justified and required the transfer that was made."
102 U.S. at 102 U. S. 560; italics added. See also Hager v. Swayne, 149 U. S. 242, 149 U. S. 247-248 (1893). The fact that some administrative problems may be the unintended byproducts of an involuntary assignment was not thought to be an evil within the scope of a statute aimed at fraud and harassment. That interpretation has, for nearly a century, exempted all transfers by operation of law from the prohibition of R.S. § 3477.
or loss of privately owned property where the amount of the claim does not exceed $1,000, caused by the negligence of any officer or employee of the Government acting within the scope of his employment."
"whether such a claim, which, if made by the owner of the property damaged, could have been certified, may properly be certified if made by an insurance company which has become subrogated to the rights of the owner to receive compensation for the damage suffered."
Claims Act, permitted recovery "on account of damages to or loss of privately owned property. . . ."
section 3477 was of universal application and covered all claims against the United States in every tribunal in which they might be asserted, indicated, in language not necessary to the decision, that transfers or assignments compelled by law or resulting from the operation of law might not have been within the purview of section 3477."
"Now, from that time on, one exception after another has been carved from section 3477 until, now, the courts recognize many types of adverse claims as the basis for what, in effect, are third-party suits against the Government, including suits based upon assignments by operation of law, subrogation, and equitable liens."
Hearings before Subcommittee No. 3 of the House Committee on the Judiciary, on H.R. 6442, 77th Cong., 2d Sess. (1942) at p. 3.
It cannot therefore be seriously contended that Congress and the executive departments were not cognizant of the exemption of subrogation claims from R.S. § 3477 when the Tort Claims Act was passed. The broad sweep of its language assuming the liability of a private person, the purpose of Congress to relieve itself of consideration of private claims, and the fact that subrogation claims made up a substantial part of that burden are also persuasive that Congress did not intend that such claims should be barred.
an entire loss suffered by the insured, it is the only real party in interest, and must sue in its own name. 3 Moore, Federal Practice (2d Ed.) p. 1339. If it has paid only part of the loss, both the insured and insurer (and other insurers, if any, who have also paid portions of the loss) have substantive rights against the tortfeasor which qualify them as real parties in interest.
"a vestige of the common law's reluctance to admit that a chose in action may be assigned, [which] is today but a formality which has been widely abolished by legislation."
Aetna Life Ins. Co. v. Moses, 287 U. S. 530, 287 U. S. 540 (1933). Under the Federal Rules, the "use" practice is obviously unnecessary, as has long been true in equity, Garrison v. Memphis Insurance Co., 19 How. 312 (1856), and admiralty, Liverpool & Great Western Steam Co. v. Phenix Insurance Co., 129 U. S. 397, 129 U. S. 462 (1889). Rule 17(a) was taken almost verbatim from Equity Rule 37. No reason appears why such a practice should now be required in cases of partial subrogation, since both insured and insurer "own" portions of the substantive right, and should appear in the litigation in their own names.
(1890), (applying a state code under the Conformity Act). 3 Moore, Federal Practice (2d Ed.) p. 1348. Both are "necessary" parties.Rule 19(b), Federal rules of Civil Procedure. [Footnote 19] The pleadings should be made to reveal and assert the actual interest of the plaintiff, and to indicate the interests of any others in the claim. Additional parties may be added at any stage of the proceedings, on motion of the United States, upon such terms as may be just. Rule 21.
"The exemption of the sovereign from suit involves hardship enough, where consent has been withheld. We are not to add to its rigor by refinement of construction where consent has been announced."
* Together with No. 36, United States v. World Fire & Marine Insurance Co., on certiorari to the United States Court of Appeals for the Tenth Circuit; No. 37, United States v. Yorkshire Insurance Co., on certiorari to the United States Court of Appeals for the Third Circuit, and No. 38, United States v. Home Insurance Co., also on certiorari to the United States Court of Appeals for the Third Circuit .
60 Stat. 842, formerly codified as 28 U.S.C. § 931 et seq. The new Judicial Code became effective on Sept. 1, 1948, while these actions were pending on appeal, and the provisions formerly embodied in the Tort Claims Act are now distributed through various chapters of the new Code.
10 Stat. 170 as amended, 31 U.S.C. § 203.
"such failure shall operate as an assignment of the cause of action against such other . . . to the person, association, corporation, or insurance carrier liable for the payment of such compensation."
Courts of Appeals in seven circuits have upheld the right of subrogees to sue under the Tort Claims Act. State Farm Mutual Liability Insurance Co. v. United States, 172 F.2d 737; Aetna Casualty & Surety Co. v. United States, 170 F.2d 469; Yorkshire Insurance Co. v. United States, 171 F.2d 374; United States v. South Carolina State Highway Dept., 171 F.2d 893; Old Colony Insurance Co. v. United States, 168 F.2d 931; National American Fire Insurance Co. v. United States, 171 F.2d 206; United States v. Chicago, R.I. & P. R. Co., 171 F.2d 377.
The Court of Appeals for the Fifth Circuit reached a contrary conclusion, United States v. Hill, 171 F.2d 404, Judge Hutcheson dissenting. Reargument was ordered before the full bench and, upon reconsideration, the original opinion was modified, 174 F.2d 61, 63, Judge Hutcheson concurring in the result "as in substantial accordance with the views the dissent expressed."
Formerly 28 U.S.C. § 931. This section is now divided, and, with immaterial changes, appears in 28 U.S.C. §§ 1346(b) and 2674.
See 28 U.S.C. § 2680.
Petitioner's argument is, in effect, that R.S. § 3477 does not prevent the assignment of substantive rights against the United States, but merely controls the method of procedure by which the assignee may recover. This position is in square conflict with Spofford v. Kirk, 97 U. S. 484, and is not justified by anything said in Martin v. National Surety Co., 300 U. S. 588. Furthermore, it would require that the real party in interest provisions of the Federal Rules of Civil Procedure, rule 17(a) be disregarded, despite the fact that they are made specifically applicable to suits under the Tort Claims Act, and that suits against the Government in which a subrogee owns the substantive right be conducted according to the old common law procedures in effect prior to the promulgation of the Federal Rules. Petitioner admits as much by its reliance upon United States v. American Tobacco Co., 166 U. S. 468. This is not to say that R.S. § 3477 was "repealed" by the Federal Rules, but that a new interpretation of the statute which is incompatible with the Rules, as expressly incorporated in the Tort Claims Act, must be clearly justified.
Other sections of the Act made it unlawful for officers of the United States or Members of Congress to have any interest in claims against the Government or to act for claimants, penalized bribery or undue influencing of Members of Congress, and prohibited the destruction or withdrawal of public records.
See, e.g., St. Paul & Duluth R. Co. v. United States, 112 U. S. 733, 112 U. S. 736; Butler v. Goreley, 146 U. S. 303, 146 U. S. 311; Hager v. Swayne, 149 U. S. 242; Ball v. Halsell, 161 U. S. 72, 161 U. S. 79; Price v. Forrest, 173 U. S. 410, 173 U. S. 421; National Bank of Commerce v. Downie, 218 U. S. 345, 218 U. S. 356; Western Pacific R. Co. v. United States, 268 U. S. 271, 268 U. S. 275.
For example, transfers by will or intestacy, which are not within the prohibition of R.S. § 3477 under the cases, would obviously multiply the persons with whom the United States must deal and might very well embroil it in conflicting claims.
42 Stat. 1066, 31 U.S.C. § 215.
Reported at 36 Ops.Atty.Gen. 553. See Holtzoff, Tort Claims Against the Federal Government, 9 Law & Contemp.Prob. 311, 318; The Federal Tort Claims Act, 42 Ill.L.Rev. 344, 349.
57 Stat. 66, 31 U.S.C. § 224d.
"Such a provision of law leaves undisturbed, as between the parties, the rights of the insured and of insurance companies and others who have become subrogated to the rights of the owners of the property or of the person who is injured or whose death results, but permits the Government to settle with a single claimant and without the necessity of inquiry into, or determination of, the relative rights of the parties."
H.R.Rep. No. 312, 78th Cong., 1st Sess., p. 2.
"to appropriate the sum of $143,279.94 to 22 fire insurance companies in full satisfaction of their subrogation claims against the United States. . . ."
The Committee made specific reference to Attorney General Mitchell's opinion, noted that, since that time, the War Department had paid subrogation claims of less than $1,000 under the Military Claims Act, 31 U.S.C. § 223, and disapproved that department's refusal to certify claims of over $1,000. To the assertion that Congress had consistently refused to recognize subrogation claims as barred by R.S. § 3477, the Committee report contains the flat denial: "That statement is not in accordance with the fact," and cites a number of subrogation claims favorably acted upon by Congress. The bill was favorably reported, H.R.Rep. No. 2655, 79th Cong., 2d Sess., but, nine days later, the Tort Claims Act was passed, § 131 of which provided that no private bill should authorize payment of money for claims for which suit might be brought under that Act, extending retroactively to claims accruing after January 1, 1945. Since the claims involved had accrued subsequent to that date, the insurance company subrogees brought suit in a federal district court, where the Government once more interposed a defense based on R.S. § 3477, despite the Committee's specific approval of payment directly to the subrogees. The defense was rejected. Niagara Fire Ins. Co. v. United States, 76 F.Supp. 850.
Formerly 28 U.S.C. § 932. See note 8 supra.
"an interest of such a nature that a final decree cannot be made without either affecting that interest, or leaving the controversy in such a condition that its final termination may be wholly inconsistent with equity and good conscience."
See Delaware County v. Diebold Safe & Lock Co., 133 U. S. 473, 133 U. S. 488 (1890); Hubbard v. Manhattan Trust Co., 87 F. 51; Rogers v. Penobscot Mining Co., 154 F. 606; 3 Moore, Federal Practice (2d ed.) p. 2178.
The counterclaim statute, 28 U.S.C. § 1346(c), confers jurisdiction on district courts over any "counterclaim, or other claim or demand whatever on the part of the United States against any plaintiff commencing an action." The offset statute, 31 U.S.C. §§ 71, 227, directs the deduction from judgments and allowed claims against the United States of debts as to which "the plaintiff therein shall be indebted to the United States." (Italics added.) We need not and do not consider what rights of counterclaim and set-off may lie in the United States in suits brought by insurer subrogees. Cf. United States v. Munsey Trust Co., 332 U. S. 234 (1947); Defense Supplies Corp. v. United States Lines Co., 148 F.2d 311.

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