Court Opinion

ID: 9717323
Source: CourtListenerOpinion
Date Created: 2023-08-26 07:01:44.506633+00
Date Added: 2024-06-11T18:23:52.570921
License: Public Domain

LARSEN, Justice,
concurring and dissenting.
I concur with the majority in affirming the order of the Superior Court, and I also adopt the memorandum opinion of the Superior Court which opinion I have attached hereto. I dissent to that portion of the majority’s disposition of this case where the majority states that the order of Superior Court is affirmed “without prejudice to the Appellant to *400pursue its subrogation claim against the Appellees and/or PECO.” Maj. op. at 399. See my concurring opinion in Heckendorn v. Consolidated Rail Corp., 502 Pa. 101, 465 A.2d 609 (1983), where I stated that “subrogation rights are always subject to equitable principles.” Id., 502 Pa. at 109, 465 A.2d at 613.
APPENDIX
In the Superior Court of Pennsylvania
No. 02847 Philadelphia 1985
Appeal from the Order entered October 23, 1985 in the Court of Common Pleas of Chester County, Civil Division No. 144 October Term, 1974.
Before: CIRILLO, President Judge, WICKERSHAM and KELLY, JJ.
MEMORANDUM:
This appeal arises from an Order entered October 23, 1985 by the Honorable John E. Stively, denying appellant’s petition to set aside or strike the satisfaction of judgment entered by court order on January 25, 1984. We reiterate the history of this action as summarized by the court below:
The captioned litigation was initiated on December 27, 1974 and arose out of a 1973 accident that occurred on the premises of defendant Philadelphia Electric Company during an overhaul of that Company’s equipment performed by additional defendant [appellant herein] Allis-Chalmers Corp. (hereinafter referred to as PECO and Allis-Chalmers, respectively). As a result of the accident, an employee of Allis-Chalmers, plaintiff Ova Win-free [appellee herein], sustained severe damage to his left hip. The subsequent proceedings may be summarized as follows:
Winfree filed suit with his wife, Lana Winfree, against PECO and PECO then joined Allis-Chalmers as an addi*401tionál defendant.1 At the conclusion of the 1982 trial, the jury found defendant PECO solely liable and determined damages in the amounts of $800,000.00 for plaintiff, Mr. Winfree, and $175,000.00 for Mrs. Winfree. The addition of delay damages brought the total to $1,187,483.28. Upon resolution of post trial motions, the plaintiffs entered judgment on the verdict and PECO filed Notice of Appeal to Pennsylvania Superior Court. In January of 1984, PECO and the plaintiffs agreed to a settlement in the form of one $800,000.00 payment by defendant PECO to the Winfrees. Upon the filing of an Order by plaintiffs that the judgment be marked satisfied, PECO withdrew its appeal from the Superior Court.
Allis-Chalmers, through its workmen’s compensation insurance carrier made certain payments to Mr. Winfree representing workmen’s compensation benefits under the Pennsylvania Workmen’s Compensation Act, 77 P.S. § 1 et seq. Through its petition to set aside or strike satisfaction of judgment and to mark judgment to the use of petitioner, Allis-Chalmers now contends that it should be subrogated out of the judgment representing the settlement between the plaintiffs and PECO.
(Trial Ct.Op. at 1-2).
The lower court declined to grant petitioner Allis-Chalmers the requested relief because: “The relief sought by petitioner is not within the power of this court to grant.” Petitioner filed timely appeal to this Court. For the reasons enunciated herein, we affirm the decision of the lower court.
Although codified by the Pennsylvania Workmen’s Compensation Act, 77 P.S. § 1 et seq., the right of an employer to subrogation to the extent of the compensation payable to an employee whose injuries were caused by the fault of a third party, is equitable in origin. Section 319 of the Act delineates an employer’s rights:
*402SUBROGATION OF EMPLOYER
§ 671. Subrogation of employer to rights of employee against third persons; subrogation of employer or insurer to amount paid prior to award
Where the compensable injury is caused in whole or in part by the act or omission of a third party, the employer shall be subrogated to the right of the employe, his personal representative, his estate or his dependents, against such third party to the extent of the compensation payable under this article by the employer____ Any
recovery against such third person in excess of the compensation theretofore paid by the employer shall be paid forthwith to the employe, his personal representative, his estate or his dependents, and shall be treated as an advance payment by the employer on account of any future installments of compensation.
(Emphasis added). (Sections omitted).
Despite the emphatic mandatory language of the statute, that “the employer shall be subrogated to the right of the employee,” equitable principles continue to govern Pennsylvania courts’ application of this law, and, therefore, exceptions to the mandatory nature of the statute have been recognized. See Olin Corporation v. Workmen’s Compensation Appeal Board, 14 Pa.Cmwlth. 603, 324 A.2d 813 (1974); Travelers Insurance Co. v. Hartford Accident and Indemnity Co., 222 Pa.Super. 546, 294 A.2d 913 (1972); Meehan v. City of Philadelphia, 184 Pa.Super. 659, 136 A.2d 178 (1957). Accord Curtis v. Simpson Chevrolet, 348 F.Supp. 1062 (E.D.Pa.1972).
Ordinarily, an employer’s right to be subrogated to an employee’s recovery from a third party would exist regardless of the fact that the employee recovered by way of settlement rather than verdict. Meehan, 136 A.2d at 180; Smith v. Yellow Cab Co., 288 Pa. 85, 135 A. 858 (1927). This right of subrogation is further strengthened when the subrogor has no notice of the settlement; however if the subrogor knows of the settlement, the subrogor is under a duty to exercise “reasonable diligence” in collecting its *403payment. Meehan, supra, 136 A.2d at 181. Travelers, supra, 294 A.2d at 915.
In the instant case, appellees did not inform appellant of the settlement agreement reached with PECO. Nonetheless that fact alone is not dispositive.
[O]ur Supreme Court said: ‘We have many times said that subrogation is a matter of pure equity, and is never allowed where it would be inequitable to do so. Consequently, as ‘he who would have equity must do equity,’ he must neither do nor leave undone anything which results in harm to those who are or may be affected by the subrogation which he claims.’
Smith v. Yellow Cab Co., 288 Pa. at 89, 135 A. at 860 (1927). In determining whether the subrogor “did equity,” the trial court noted, and our review of the record confirms the following facts:
Allis-Chalmers engaged in a litigation strategy designed to prevent the plaintiffs from successfully resolving their claim. Prior to trial, petitioner undertook discovery where none had been commenced by the plaintiff or defendant PECO; petitioners filed motions for sanctions against plaintiffs for delay in filing answers to petitioners’ interrogatories; petitioner arranged for the taking of a deposition of an orthopedist in Tennessee and refused to pay the cost of attendance of plaintiffs’ counsel; petitioner arranged for the travel and deposition of another Allis-Chalmers employee, Mr. Winfree’s supervisor, who testified to the contributory negligence of Mr. Winfree. At trial petitioner stated that it intended to demonstrate that ‘the accident occurred because of plaintiff’s own misconduct.’ (trial transcript, trial: June 1 — June 9, 1982, hereinafter transcript, p. 23); petitioner cross-examined Mr. Winfree about the instant of the accident, returning consistently to questions involving mis-step, slipping and falling on a surface purportedly known to the plaintiff to be grease covered. (Transcript p. 150-182); petitioner cross-examined several witnesses of whom defendant PECO intended to ask no questions, (transcript, *404p. 444-447; 501-509; 630-641). With respect to proceedings on points for charge sought by plaintiffs, petitioner frequently objected, either in conjunction with defendant PECO’s objections or through independently voiced objections. (Transcript p. 936-954). Furthermore, petitioner requested points for charge on plaintiffs contributory negligence and their effort to recover damages representing impairment of Mr. Winfree’s earning power.
Allis-Chalmers’ position relative to the plaintiffs was clearly stated in its summation to the jury. Petitioner raised the following points for final consideration: In the moments proceeding the accident, Mr. Winfree “took a chance” and, in so doing, he simply “slipped” and fell, causing his arm injuries. (Transcript p. 990-991). The testimony of the only eyewitness was a fellow employee and fellow union member of Mr. Winfree. (Transcript p. 992-993). Finally, petitioner characterized plaintiff’s theory of liability against defendant PECO as “absurd”, “ridiculous” and unreasonable, (transcript p. 1002).
(Trial Ct.Op. at 7-9).
Weighing against all of these actions are Allis-Chalmers’ arguments that: 1) it did attempt to assist Winfree in developing his case; and 2) Allis-Chalmers was obligated to present a vigorous defense due to an indemnity contract they had with PECO. As to the first contention, the company developed separate files for handling Winfree’s case and its own defense. (R.R. 192a, 241a). However, the record clearly reveals that while Allis-Chalmers requested and Winfree’s counsel agreed that Allis-Chalmers would be subrogated to any recovery by Winfree against PECO, it later forbade Winfree’s counsel from having contact with Allis-Chalmers’ insurance carrier. (R.R. 253a-254a, 244a). Winfree then informed Allis-Chalmers that he could no longer maintain any subrogation interest on Allis-Chalmer’s behalf. Allis-Chalmers blames lack of communications between its own departments for the difficulties appellee faced. (Appellant’s brief at 6, 7).
*405Allis-Chalmers also argues that it was compelled to present an affirmative defense once joined as a defendant due to the existence of an indemnity clause in the construction contract with PECO. Thus, Allis-Chalmers’ defense in Winfree’s action against PECO was two-fold: “(t)hat Win-free’s injuries were not due to the negligence of either PECO or itself, and that in any event it had no duty to indemnity.” (Appellant’s brief at 23). Appellant contends that defending on the indemnity grounds alone would have been an inadequate defense.2
Indeed, the record fully justifies Allis-Chalmers’ judgment that it could not depend upon PECO’s presentation of its defense and its decision to aggressively present its own. Otherwise, what would preclude the original defendant from capitulating to the plaintiff to the ultimate prejudice of the employer, if the employer is precluded from offering evidence as to anything but indemnity.
(Appellant’s brief at 23). However, the trial court’s ruling does not limit an employer’s defenses to indemnity issues alone; it merely points out that the consequences of presenting an affirmative defense of contributory negligence may include loss of subrogation when an employer concurrently fails to cooperate fully with its employee’s case. We do not preclude employers from presenting any viable defense as long as there remains a clear, unambiguous commitment to cooperate with an employee’s legitimate requests for assistance in developing the employee’s case. If that commitment wavers or fails, as it has in this case, then the equitable remedy of subrogation may be denied. Consequently, we affirm the trial court and find no merit to appellant’s arguments.
Appellant directs our attention to Curtis v. Simpson Chevrolet, supra, wherein that court held that an employer was entitled to subrogation despite certain acts by the employer that arguably made the employee’s case more difficult.
*406Here there is no charge that [employer’s] counsel failed to assist plaintiffs counsel during trial or deliberately withheld any information prior to trial. At most plaintiff has listed a series of incidents which might have been managed in a way that would have made trial preparation easier. In view of the unequivocal statutory language, the interpretations of this section, and the public policy reasons enunciated, plaintiffs assertions are insufficient. There was no showing of bad faith, no dereliction of duty, and no deliberate failure to help. Equally important, there was no showing of any prejudice to plaintiff.
Curtis, at 1065. (Emphasis added). The facts of Curtis are inapposite to our case in that the record herein reflects that there was not a clear, unambiguous commitment to fully cooperate with the employee’s legitimate request; this can only be considered as a “deliberate failure to help.” Allis-Chalmers’ half-hearted effort to aid appellee’s personal injury claim against PECO was submerged under the aggressive, affirmative defense of contributory negligence which Allis-Chalmers prepared, and eventually presented at trial. Therefore, we agree with the trial court that the facts of Arendas v. Rich & Company Inc., 220 F.Supp. 957 (W.D.Pa.1963), are more to the point. *407Curtis at 1065. (Emphasis added). Allis-Chalmers’ counsel did not cooperate with Winfree’s counsel, and rebuffed requests for assistance. (R.R. at 262a).
*406In the Arendas case, plaintiff’s decedent was allegedly killed by reason of defendant’s failure to provide a safety device. In the resulting suit, decedent’s employer was joined as a third party defendant. The jury rendered a verdict for both defendants and the matter was settled between the plaintiff and the defendant while a motion for a new trial was being considered. The employer’s lien on the settlement proceeds was stricken because during trial counsel for the employer had not cooperated with counsel for the plaintiff and had resisted making certain records available. Moreover, the employer was content with the verdict in favor of the defendant. Analyzing these factors, the Court concluded there should be no subrogation rights in the settlement proceeds.
*407The lower court, in the case before us, correctly declined to distinguish Arendas from Curtis, and perceived that the cases, read in conjunction, suggest a test which we adopt and enunciate as: where an employer/carrier deliberately fails to aid, or obstructs, or prejudices the employee/plaintiff, that employer has waived its right to subrogation. Although we face an issue of first impression herein, we rely upon both federal cases which have held similarly, see Curtis, Arendas, supra, and on the wisdom espoused by our sister state, Delaware.
In Baio v. Commercial Union Insurance Co., 410 A.2d 502 (1979), the Delaware Supreme Court held that, if a conflict of interest exists for an employer/carrier in seeking to protect its rights, its conduct is governed by equitable principles; where the employer/carrier fails to “do equity” in regard to its employee, the employer/carrier waives its right to subrogation relief. In Baio, as in the instant case, the employer/carrier not only failed to assist the employee, but sought to deny the employee any recovery. Baio, at 507.
Thus we do not hesitate to affirm the trial court’s decision that Allis-Chalmers has waived its right to subrogation in this case.
As a final procedural point, we note that the trial court ruled that Allis-Chalmers’ petition to strike or set aside the satisfaction of judgment and to mark judgment to the use of petitioner was “not within the power of this Court to grant.” (Trial Ct.Op. at 2). The Court based its reasoning on the premise that “the components of a judgment, once stricken or set aside, do not remain available for reapportionment at the request of a petitioning party.” (Trial Ct.Op. at 3). It is true that when a judgment is stricken, the original judgment is destroyed; it is as though no judgment had ever been entered. Malicia v. Proietta Catering & Cocktail Lounge, Inc., 270 Pa.Super. 342, 411 *408A.2d 751 (1979). However, a satisfaction of judgment is different; the motion to strike a satisfaction of judgment is addressed to the Court’s equitable discretion. Epstein v. Kramer, 365 Pa. 589, 76 A.2d 212 (1950); Neustein v. Insurance Placement Facility, 271 Pa.Super. 126, 412 A.2d 608 (1979). The motion to strike may be granted if satisfaction was improperly entered. Finally, the right to have an entry of satisfaction struck is subject to the intervening rights of innocent third persons, whose interests may be protected in the strike-off order. See Ackerman v. Josephs, 31 Co.Ct. 5, 6 Lack.Jur. 190; Standard PA Practice 2d § 78-45 (1983). Therefore, had Allis-Chalmers properly demonstrated that either the satisfaction was improperly entered, or that Allis-Chalmers was an innocent third party, it would have been entitled to the relief requested. We find Allis-Chalmers failed to demonstrate any appropriate ground for relief. Accordingly, we affirm the order of the lower court.

. Several other defendants were originally named but were later dropped from the action.

. We note the jury ultimately found that Allis-Chalmers was not liable on their indemnity contract with PECO.