American Mut. Liability Ins. Co. v. Reed Cleaners, s. 38806

• Citation: 122 N.W.2d 178,265 Minn. 503
• Decision Date: 07 June 1963
• Docket Number: 38866,Nos. 38806,s. 38806
• Court: Supreme Court of Minnesota (US)
• Parties: AMERICAN MUTUAL LIABILITY INSURANCE COMPANY, Appellant-Respondent, v. REED CLEANERS et al., Respondents-Appellants.

Page 178

122 N.W.2d 178

265 Minn. 503

AMERICAN MUTUAL LIABILITY INSURANCE COMPANY, Appellant-Respondent, v. REED CLEANERS et al., Respondents-Appellants.

Nos. 38806, 38866.

Supreme Court of Minnesota.

June 7, 1963.

Syllabus by the Court

1. Indemnity is a right which inures to a person who has discharged a duty which is owed by him but which, as between himself and another, should have been discharged by the other, so that if the second does not reimburse the first, the second is unjustly enriched to the extent that his liability has been discharged.

2. The doctrine of indemnity applies only where the identical duty owed by one is discharged by another.

3. In a compensation carrier's action to recover payments made to an employee covered under the Workmen's Compensation Act from a third-party tortfeasor liable to such employee, recovery by such carrier may not be had on the theory of indemnity, as the duty owed by such carrier to make payments pursuant to a schedule provided by the act is not coextensive with the liability imposed by law upon such third-party tortfeasor for negligence.

4. The right of a compensation carrier to recover payments it has made to an employee, from a third-party tortfeasor liable to such employee for the same injuries for which compensation has been paid, is limited to statutory subrogation to the rights of such injured employee, and where any right of action of such employee is barred by the statute of limitations, the right of the carrier is likewise barred.

Norman H. Nelson, Moorhead, Cupler, Tenneson, Serkland & Lundberg and Armond G. Erickson, Fargo, N.D., for appellant-respondent.

Stiening, Olson, Thysell & Gjerve, Moorhead, Wattam, Vogel, Vogel, Bright & Peterson, Fargo, N.D., for respondents-appellants.

FRANK T. GALLAGHER, Commissioner.

Appeal from a judgment in favor of defendants in an action to recover amounts paid by plaintiff, American Mutual Liability Insurance Company, as workmen's compensation.

The stipulated facts are these: Lawrence H. Roy, employed by Gamble-Robinson Company under a Minnesota contract of employment, was injured on March 4, 1953, at Fargo, North Dakota, in a collision involving a truck operated by defendant James P. Hampton and owned by defendant Reed Cleaners, a North Dakota corporation doing business in the State of Minnesota.

Roy brought suit against defendants in the District Court of Cass County, North Dakota, in October 1953 to recover damages for the personal injuries caused by this accident. Prior to trial, settlement was reached and for a consideration of $1,050 a release was executed by Roy on March 25, 1954. Neither the present plaintiff nor Gamble-Robinson Company was a party to the settlement.

At the time of the accident, Roy was an employee of Gamble-Robinson Company and plaintiff was its workmen's compensation insurer. Notice of Roy's claim for compensation benefits based on the 1953 accident was received on March 11, 1957, by plaintiff. Subsequently, Roy's claim was considered by the Industrial Commission but the referee's findings and determination awarding benefits were not filed until March 24, 1960. On appeal to the Industrial Commission, it ordered plaintiff and the employer to pay compensation pending its decision.

The present action was commenced by Gamble-Robinson Company by service of a summons and complaint on defendant Reed Cleaners on May 6, 1960, and on defendant Hampton on April 26, 1960. Subsequently plaintiff was substituted as the proper party plaintiff by agreement of counsel. The action is based on the theory that under the Workmen's Compensation Act plaintiff was subrogated to the rights of the employee to the extent of its own liability for workmen's compensation benefits. Judgment was demanded for the sum of $20,211.08.

Upon the facts so stipulated, three questions were submitted to the trial court: (1) Whether the action was barred by the applicable statute of limitations; (2) whether the release and settlement between Roy and defendants was a defense to plaintiff's action which would entitle defendants to a judgment of dismissal; and (3) whether a stipulation for dismissal with prejudice filed with the North Dakota court in Roy's action against defendants was a defense to plaintiff's action which would entitle defendants to a judgment of dismissal.

The trial court held that the release by Roy, the stipulation of dismissal, and the judgment of dismissal entered in Roy's action against the defendants were not a defense in the present action, but determined that plaintiff's action was barred by the statute of limitations, and a judgment of dismissal was entered.

The plaintiff appeals from that portion of the judgment holding the statute of limitations a bar to its action. The defendants cross-appeal from that portion of the judgment holding that the release, the stipulation for dismissal, and the dismissal with prejudice of the North Dakota action were not a valid defense. The appeals have been consolidated for consideration by order of this court.

It is our opinion under the facts and circumstances here that the decision of the trial court that plaintiff's action was barred by the statute of limitations should be affirmed.

Here, the 6-year limitation period began to run against Roy on March 4, 1953, the date of the accident. Minn.St. 541.05. ¹ This action by the employer's insurer was not commenced against defendant Hampton until April 26, 1960, or against defendant Reed Cleaners until May 6, 1960. Thus we have a lapse of more than 7 years between the date of Roy's injuries and commencement of this action. Within that 7-year interval Roy had settled his personal injury action against the defendants, on March 25, 1954, more than 6 years before this action was commenced, and had released and discharged the defendants from all claims for injuries, known and unknown, and loss of services and medical expenses sustained to that time or which might thereafter arise as a consequence of the accident. As a result, so far as the record shows, the defendants were entitled to believe from March 25, 1954, until at least April 26, 1960, when the first pleading was served in the present action, that the Roy case was closed. That was not the situation, however, so far as plaintiff was concerned because according to the affidavit of Willis B. Park, its Minneapolis branch claims manager, the first notice of a claim by Roy under the Workmen's Compensation Act was received in its Minneapolis office on March 11, 1957, in the form of a 'NOTICE OF FILING CLAIM PETITION,' dated March 8, 1957, before the Industrial Commission. The notice was received by plaintiff about 4 years after the accident and about 2 years before the statute of limitations would run out. This should have alerted plaintiff that the employee was seeking workmen's compensation for the injuries sustained in the accident of March 4, 1953; yet no action appears to have been taken by either Gamble-Robinson Company or plaintiff until at least April 26, 1960.

Basically, plaintiff contends that its present action is one for indemnification and is not barred by the statute of limitations because the cause of action did not arise until the payment was made.

Defendants claim, however, that the plaintiff's suit is one in subrogation and not indemnity. They point out that the complaint in this action sets forth a cause of action for the employee, alleging that the employer will be required to pay money to Roy for disability and medical expense and concluding, 'therefore, the plaintiff is, under the Act, Subrogated to the rights of said Lawrence H. Roy in this action against the defendants.' The defendants claim that Minn.St.1949, § 176.06, subd. 2, was the applicable statute in effect at the time the rights of the parties were determined. ² This statute provides that where an injury for which compensation is payable is caused under circumstances also creating a legal liability for damages on the part of any party other than the employer, legal proceedings may be taken by the employee, and if the employee accepts compensation from the employer, the 'employer shall be subrogated to all of the rights of such employee.' It also provides that 'in no case shall such (other) party be liable to any person other than the employee or his dependents for any damages growing out of or resulting from such injury or death.' Thus, under the statute the only persons to whom the defendants could be held liable were Roy or his dependents, and they were barred by the statute of limitations from maintaining an action. Under these circumstances, the plaintiff cannot assert a right greater than that of Roy.

Plaintiff refers to Lang v. William Bros Boiler & Mfg. Co., 250 Minn. 521, 85 N.W.2d 412, as an acknowledgment by this court that the present action is one for indemnification. We do not consider that case controlling under the circumstances here, even though the word indemnification was used in that opinion. In that case a claim for compensation was filed by an injured employee, and thereafter an action was commenced by such employee against a third party, whose negligence allegedly caused the injuries. Subsequently and before trial of the issues, the compensation carrier made a motion to intervene in the action, which motion was granted. The injured employee then made a settlement with the defendant and was paid $18,500...