Court Opinion

ID: 3537247
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:49:54.911938+00
Date Added: 2024-06-11T14:06:05.792710
License: Public Domain

ON MOTION FOR REHEARING.
A very able motion for rehearing has been filed by learned counsel for defendant (plaintiff in error) in which they challenge the propriety of our construction of Section 11 of the Compensation Act to the effect that notwithstanding the rights which definitely and affirmatively accrue to the employer thereunder, the injured employee is nevertheless a real party in interest to the action against the negligent third party, with the consequent right to maintain the action against him, in the employee's own name, and on his own behalf.
The points they make against our decision are that we have failed to distinguish between the rights acquired by subrogation as against an assignment, and have confused the two theories of the law, with the result that we have been led to construe the statute as though the employer were merely an assignee of the employee's cause of action rather than a subrogee to all rights which the employee would otherwise have possessed; that in holding that the employee is entitled to prosecute the action as a beneficiary, we have confused the right of action with the right to the proceeds of the action, inasmuch as in their view of the law no trust can arise in favor of the employee until an action has been brought by the employer, and a judgment recovered against the third party in excess of the compensation payable to the employee under the act; and that in holding that a judgment obtained by the employee would bar a subsequent action against the third party by the employer, we have deprived the employer of the right of action given him by the statute, and have gone contrary to the interpretation which the courts of last resort of other jurisdictions have given alleged similar provisions in local acts.
Considering these matters in the order stated, we are brought at the outset to the determination of whether we have construed the statute as though the employer's rights come to him by assignment from the employee; and, if so, whether we were correct in that construction.
Now there is no doubt that the statute does use the term "subrogated" in speaking of the rights which the employer acquires; and *Page 75 
it is further true, as counsel insist, that subrogation in its purest and broadest sense is the substitution of one person in the place of another with reference to the other's claim, which change in identity carries along with it a complete transfer to the subrogee of all the rights and remedies of the subrogor. However, it is equally true that the term is not always employed in this conclusive character, but, as we pointed out in our principal opinion, it is very frequently used to refer to a conventional subrogation arising out of contract between the parties, which counsel concede in their motion to mean nothing more than an assignment. Consequently, if the Legislature had the idea of true legal subrogation, or complete substitution of parties, in mind in the enactment of the statute, then counsel are doubtless correct in the construction which they would have us put upon it; but if the Legislature used the term in the conventional sense, as synonymous with assignment, it follows that our own interpretation of the statute is sound, and that the employer obtains only an interest in the cause of action by virtue of its provisions.
To our minds it is quite obvious that the Legislature in the use of the term had no idea of referring to subrogation in its widest and fullest sense, for the reason that there are too many variations and inconsistencies between the rights conferred upon and vested in the employer under the statute, and those he would acquire under the general scope of legal subrogation. For instance, subrogation in its true sense proceeds only upon the theory that payment has been made in full (State ex rel. v. Daues (Mo. Sup.), 289 S.W. 550), while under the statute the right of the employer is acquired as soon as the third party's liability attaches, and it goes to the entire amount of compensation which is payable by him, past, present, and future. Then too, it is accepted doctrine that true subrogation lies only where one secondarily liable pays the debt of another, and not where one primarily liable pays his own debt. [St. Louis  S.F. Ry. Co. v. Excello Feed Milling Co. (Mo. App.), 215 S.W. 755; Plate Glass Underwriters' Mut. Ins. Co. v. Ridgewood R. Co.,219 Mo. App. 186, 269 S.W. 659.] Here it is the employer's own debt which he pays to the employee under the provisions of the act, and not the debt of the third party; for granting that the liabilities of both the employer and the third party arise from the same accident, their respective obligations are measured by different rules and upon different theories, the employer is in no sense of the law a surety for the discharge of the liability of the third person, and in fact the employer may well be liable to the employee for compensation when, under the law of negligence, there is no liability upon the third party at all. In other words the employee has two concurrent and consistent remedies; and while it is true that he is not permitted to retain a double recovery, and that of whatever sum is ultimately recovered from the third party in the common-law *Page 76 
action for damages the employer is entitled to be recompensed for the compensation for which he is liable, all this goes only to show that it is indemnity, and not true subrogation, for which the act provides.
Added to this is the further thought, which was expressed in our principal opinion, that even though the subrogation of the employer follows from the terms of the statute, and would therefore appear at first blush to arise purely by operation of law, yet the entire act is contractual as between employer and employee, and the subrogation statute is but part and parcel of the contract. Of course, we recognize the fact that even a right of pure legal subrogation may be provided for in a contract, though even so the exercise of the right will nevertheless have its basis in general principles of equity, rather than in the contract which will be treated as being merely a declaration of principles of law already existing. [Loewenstein v. Queen Insurance Co., 227 Mo. 100, 127 S.W. 72.] This means, as we understand the doctrine, that where one claims a legal subrogation by virtue of the provisions of a contract, the rights which he asserts thereunder must be such as the law would have vouchsafed to him in the absence of the contract, else the transfer of right will partake of the nature of an assignment.
Thus, if Section 11 had been omitted from our act, would the law nevertheless afford the employer the same rights as he now acquires by reason of its terms? We think not. Certainly under all principles of justice it would preclude the employee from retaining a double recovery; and inasmuch as the liability of the third party is made to continue, it would grant pro tanto
indemnification to the employer for the compensation paid by him. However, unless the doctrine of legal subrogation is to be extended beyond the limits which have heretofore been regarded as fixed, we cannot believe that the law, in the furtherance of principles of equity and under the guise of such doctrine, would transfer to the employer an interest in the employee's cause of action immediately upon the accrual of the third party's apparent liability, before the employer had paid the compensation either in part or in full, and despite the fact that the common-law liability of the third party would in most instances be far in excess of the statutory liability of the employer, and that the debt which the employer was called upon to discharge was primarily his own and not that of the third party. And this conclusion, it must be noted, is put upon the basis of what we think the statute actually says, and not what the proponents of legal subrogation claim for it.
In view of all these circumstances, we cannot escape the conclusion that the subrogation provided for in the act arises by convention, and that in legal effect the rights acquired by the employer are by assignment. If this conclusion is sound, then there is no controversy *Page 77 
over the fact that the case of Gould v. Chicago, B.  Q.R. Co.,315 Mo. 713, 290 S.W. 135, is directly in point and controlling, and that the holding in our principal opinion is correct.
The point that we have confused the right of action with the right to the proceeds of the action, and that no trust can arise in favor of the employee until an action has been brought by the employer and a judgment recovered against the third party in excess of the compensation payable to the employee under the act, is equally unavailing. Of course it goes without saying that if the employee is to sue as beneficiary, the employer must be a trustee within the meaning of the statute; and certainly for the purposes of maintaining an action, one may be the trustee of an express trust before there is a judgment collected. Familiar illustrations of this fact are to be found in the case of the assignee of a chose in action, or a claim or demand, to be sued upon and collected (Citizens Trust Co. v. Tindle, 272 Mo. 681, 199 S.W. 1025; Coffman v. Saline Valley R. Co., 183 Mo. App. 622, 167 S.W. 1053; Howe v. Mittelberg, 96 Mo. App. 490, 70 S.W. 396), as well as in the case of the insured in a policy of fire insurance containing a loss-payable clause. [Anthony v. The German American Ins. Co., 48 Mo. App. 65; Florea v. Iowa State Insurance Co. (Mo. App.), 32 S.W.2d 111, 115.]
Nor may it be said, as counsel argue, that a beneficiary within the contemplation of the statute is necessarily restricted to one for whose benefit a contract is made between two other persons. The Gould case, supra, is a fair example of the correctness of what we are saying, for there the plaintiff was held entitled to sue as beneficiary, without any pretense that there was a contract for his benefit between the government and the railroad company. In fact, the underlying purpose of our code was and is to simplify matters of pleading and procedure, and to adopt the rule in equity permitting all suits to be brought by the beneficial owner of the cause of action as the real party in interest.
As to the last charge in the motion, that in holding that a judgment obtained by the employee would bar a subsequent action by the employer we have deprived the employer of the right of action given him by statute, counsel concede that the same must necessarily be the law, if the major result reached in our opinion is to stand.
Finally counsel make mention of the Nebraska rule, which we have heretofore refused to follow. In this connection the thought has occurred to us that if the Legislature of that state could positively express its intention in the matter by adding to the identical statute the proviso that nothing therein contained should be construed to deny the right of the injured employee to bring suit against the third party in his own name, then, absent a positive expression of such intention as is the situation here, why may not the court nevertheless so construe the statute on its own part, if it finds that *Page 78 
such construction is in accord with general local laws and practices, and that the legislative intent was so indicated throughout the act? In other words, if there is no inconsistency between the terms of the original statute and the proviso added to it by the Nebraska Legislature, then likewise there is no inconsistency between the statute and the construction which we ourselves have put upon it.
For these reasons the motion of plaintiff in error for a rehearing should be overruled, and the Commissioner so recommends.