County of San Diego v. Sanfax Corp.

Decision Date14 September 1977
CourtCalifornia Supreme Court
Parties, 568 P.2d 363 COUNTY OF SAN DIEGO, Plaintiff and Appellant, v. SANFAX CORPORATION et al., Defendants and Respondents. L.A. 30651.

Robert G. Berrey and Donald L. Clark, County Counsel, and Yves A. Hebert, Deputy County Counsel, San Diego, for plaintiff and appellant.

Robert G. Steiner, Eugene J. Silva, Michael J. Weaver and Luce, Forward, Hamilton & Scripps, San Diego, for defendants and respondents.

Charles R. Ibold, Jr., Charles C. Ryan and Ibold, Anderson, Mercer & Gallagher, Santa Ana, as Amici Curiae on behalf of defendants and respondents.

TOBRINER, Acting Chief Justice.

Under Labor Code section 3852, 1 an employer who pays workers compensation benefits to an employee may sue a third party in order to recover a sum equivalent to the benefits which the employer must provide the employee, if the third party, and not the employer, is responsible for the employee's injury. At least since our decision in Aetan Casualty & Surety Co. v. Pacific Gas & Elec. Co. (1953) 41 Cal.2d 785, 264 P.2d 5, California courts have consistently held that Code of Civil Procedure section 340, subdivision 3, the statute of limitations which governs actions 'for injury . . . caused by the wrongful act or neglect of another,' governs an employer's action against a third party, just as it would govern an employee's suit against the third party. Under these decisions, an employer has one year from the date of an employee's injury in which to bring an action against a third party.

Plaintiff asks us to overturn this long-settled rule and hold that Code of Civil Procedure section 338, subdivision 1, which provides a three-year statute of limitations for '(a)n action upon a liability created by statute,' fixes the time limit for an employer's action. Alternatively, plaintiff argues that, even if Code of Civil Procedure section 340, subdivision 3, applies, the one-year period runs, not from the date of the employee's injury, but from the date upon which the employer agrees to pay or is ordered to pay for the employee's workers compensation benefits.

We reject both of plaintiff's contentions. As we shall see, the case of Aetna Casualty & Surety Co. v. Pacific Gas & Elec. Co., supra, and its progeny, in concluding that the employer's action is essentially a tort action and therefore that Code of Civil Procedure section 340, subdivision 3, should govern, accurately reflect the statutory scheme which the Legislature has set up to regulate employer and employee suits against third parties. As we shall also see, Aetna and its progeny not only reach a correct conclusion as a matter of workers compensation policy but also are entirely consistent with the usual approach which California courts take in deciding which competing statute of limitation should apply.

Much of the same reasoning which compels the application of Code of Civil Procedure section 340, subdivision 3, also underlies our conclusion that it is the date of the employee's injury, and not the date upon which the employer agrees to pay or is ordered to pay workers compensation, which triggers the running of the statute. As we shall point out, the structure of the statutory framework within which an employer sues a third party clearly reveals a legislative design that employer and employee claims against third parties be brought in parallel lines. If we were to accept plaintiff's argument, we would ignore that preference.

1. The facts.

This case comes to us on appeal from an order dismissing the complaint of plaintiff County of San Diego which the trial court entered after sustaining without leave to amend a demurrer by defendants Sanfax Corporation et al. For purposes of our review, we accept the accuracy of the facts which the County asserts in its complaint. This lawsuit is but one of the pieces of litigation which various individuals have brought in the wake of the incidents which the County's complaint describes. In order to make clear the relationship of this action to these other suits, we include in our statement of facts, in addition to the facts which the County sets out in its complaint, aspects of the procedural history of these other suits, as well as facts which emerged in the context of these suits--facts that the parties here call to our attention that neither party disputes.

On November 23, 1971, an explosion at a pollution control facility maintained by the County injured Eddy S. Edrozo and Patrick Lisi. At the time of the explosion, Edrozo and Lisi were using an industrial strength drain cleaner manufactured by Sanfax to clean the inside of a sludge line. Edrozo was a County employee. The County provided him with workers compensation benefits following the accident. Lisi was a United States Marine who, although on active duty, was working for the County as part of a civilian job training program established by agreement between the United States Marine Corps and the County. The County did not regard Lisi as its workers compensation responsibility, and did not provide him with benefits.

Both Edrozo and Lisi brought suit against Sanfax within one year of the accident. On May 4, 1973, the County filed a lien in Edrozo's action, for the purpose of recovering its workers compensation expenses. Lisi joined the County as defendant in his action.

On November 20, 1972, Lisi filed an application for workers compensation benefits with the Workers' Compensation Appeals Board. On March 5, 1974, the County's public liability insurance carrier, representing the County in the Lisi litigation, moved for summary judgment on the ground that Lisi was a County employee and that therefore the County owed him only workers compensation benefits. 2 A short time thereafter, both Edrozo and Lisi settled their claims with Sanfax, Edrozo receiving $60,000 and Lisi, $160,000. 3 Neither Edrozo nor Lisi sought to obtain the County's consent to the settlement; Edrozo's settlement ignored the County's lien. On April 12, 1974, the trial court granted the County's motion for summary judgment in the Lisi action, ruling that Lisi was indeed a County employee for purposes of workers compensation.

The County brought this action against Sanfax on June 27, 1974. The County urged three theories of liability; a products liability theory, a negligence theory, and a fraud theory, and sought to recover as damages the workers compensation benefits which the County had already paid to Edrozo, amounting to $20,028.94, the benefits which the County owed Lisi, alleged to be in excess of $30,000, and any future workers compensation obligations to either Edrozo or Lisi which the County might incur. The County also sought punitive damages of $5 million.

Sanfax' demurrer asserted that the statute of limitations barred the County's suit. The County had not brought its action within one year of the injury to Edrozo and Lisi, the period fixed by Dode of Civil Procedure section 340, subdivision 3, the statute which Sanfax claims was relevant. The trial court agreed with Sanfax, sustained the demurrer, and dismissed the complaint.

2. An employer's action under Labor Code section 3852 is essentially a tort action; accordingly, application of the one-year statute of limitations of Code of Civil Procedure section 340, subdivision 3 is appropriate.

The County claims that Code of Civil Procedure section 338, subdivision 1, fixes the period of time within which it could sue Sanfax, and that since that statute's three-year limit had not yet run, its action was timely. Sanfax, however, argues that, under Code of Civil Procedure section 340, subdivision 3, the County had only one year from the date of the injury to Edrozo and Lisi within which to sue, and therefore that the statute of limitations does in fact bar the county's action. 4

On their face, both statutes appear to apply. The County's action, brought under Labor Code section 3852, is '(a)n action upon a liability created by statute'. (Code Civ.Proc., § 338, subd. 1.) It appears to be equally true, however, that, in bringing suit, the County seeks to recover 'for injury . . . caused by the wrongful act or neglect of another'. (Code Civ.Proc., § 340, subd. 3.) Although both statutes apparently are pertinent, this court and the Courts of Appeal have consistently held that the one-year statute in fact governs. In this section, we explain why this conclusion is correct. 5

a. Under the California workers compensation scheme, employer and employee third-party actions are interchangeable.

The California workers compensation scheme not only fixes the right of an employee who suffers a job-related injury to recover compensation from his or her employer or fellow employees (see Lab.Code, §§ 3600, 3601) but also significantly defines the rights of action of both an employee and an employer in the event that a third party is responsible for the employee's injury. These statutory provisions are 'primarily procedural.' (Roe v. Workmen's Comp. Appeals Bd. (1974) 12 Cal.3d 884, 889, 117 Cal.Rptr. 683, 528 P.2d 771.) They seek to insure, first, that, regardless of whether it is the employee or the employer who sues the third party, both the employee and the employer recover their due, and second, that, as far as possible, the third party need defend only one lawsuit.

To these ends, the workers compensation statutes set up procedures which guarantee an employee and an employer notice of each other's action, authorize the employee and the employer to intervene in each other's lawsuit, provide for mandatory consolidation of separate employee and employer actions, and grant the employee and the employer the right to share in each other's judgment or settlement. The procedures governing notice, intervention, and mandatory consolidation are relatively straightfor ward. Labor Code section 3853 provides: 'If either the employee or the...

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