Crab Orchard Imp. Co. v. Chesapeake & O. Ry. Co.

• Decision Date: 12 November 1940
• Docket Number: No. 4686.,4686.
• Parties: CRAB ORCHARD IMPROVEMENT CO. v. CHESAPEAKE & O. RY. CO.
• Court: U.S. Court of Appeals — Fourth Circuit

115 F.2d 277 (1940)

CRAB ORCHARD IMPROVEMENT CO. v. CHESAPEAKE & O. RY. CO.

No. 4686.

Circuit Court of Appeals, Fourth Circuit.

November 12, 1940.

Fletcher W. Mann, of Beckley, W. Va., for appellant.

Jackson N. Huddleston, of Huntington, W. Va. (C. W. Strickling and Fitzpatrick, Brown & Davis, all of Huntington, W. Va., on the brief), for appellee.

Before SOPER, DOBIE, and NORTHCOTT, Circuit Judges.

DOBIE, Circuit Judge.

This is an appeal from the final judgment of the District Court for the Southern District of West Virginia, dismissing the plaintiff's action to recover from the defendant the amount which plaintiff had been compelled to pay to the West Virginia Workmen's Compensation Fund as a consequence of the defendant's allegedly wrongful act. Crab Orchard Improvement Co. v. Chesapeake & Ohio Ry. Co., 33 F.Supp. 580.

Appellant, Crab Orchard Improvement Company (plaintiff in the original action), operated a coal mine at Eccles, West Virginia. Appellee, Chesapeake & Ohio Railway Company (a Virginia corporation), owned and operated a railroad which ran near appellant's coal mine and into and under appellant's coal tipple. On December 9, 1936, one of appellee's engines, pushing a load of empty coal cars, was being operated by an employee of appellee along appellee's spur track in the direction of the coal tipple. The rear empty coal car struck and killed one of appellant's employees, Andy Henry, while he was in the performance of his duties as an employee of appellant. Because of this death, appellant, as a member of the West Virginia Workmen's Compensation Fund (hereinafter called the Fund), was obliged to pay $4,000 into the Fund; and was further subjected to an increased rate of payment to the Fund, which up to the time of the filing of this action had amounted to $11,000.

Alleging, accordingly, that it had sustained injuries in the amount of $15,000 as a result of appellee's negligence, appellant brought an action on December 6, 1937, in the Circuit Court of Raleigh County, West Virginia, to recover the amounts paid by it under the West Virginia Workmen's Compensation Act (hereinafter called the Act). The suit was thereafter removed to the District Court of the United States for the Southern District of West Virginia. Appellee filed a motion to dismiss the action, and this motion was sustained by the District Court. This appeal was taken from the final judgment of the District Court dismissing the plaintiff's action.

As the District Court stated (33 F.Supp. at page 582): "The question presented in this case is whether an employer who has been forced to pay compensation or death benefits to the dependents of one of its employees who was killed in the course of his employment as a result of the negligence of a third party, may recover the amount so paid, through no fault of its own, from the negligent third party, in the absence of any provision for subrogation or assignment in the Compensation Act by virtue of which the payments were made."

As we view the appellant's theory of the case, there are three specific phases to this question: (1) Has the employer a common-law right of subrogation against the third party tort-feasor? (2) Has the employer a quasi-contractual action for indemnity against the tort-feasor? (3) Has the tort-feasor, by his negligent injury of the employee, breached a legal duty owed to the employer, so as to give rise to a civil action?

In considering the legal relationship and liability of employer to employee and the relationship of a third party tort-feasor to employee and to employer, we necessarily must examine the West Virginia Workmen's Compensation Act (Code W.Va.1931, 23-1-1 et seq.), the West Virginia decisions applicable thereto, and the West Virginia decisions, if any, pertaining to the principle of common-law subrogation. See Erie Ry. Co. v. Tompkins, 1938, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487.

As an introduction to these considerations, we take note of the provisions in the Workmen's Compensation Acts of most of the states, which in express terms assign to the employer, or subrogate him to, the rights of the injured employee, at least to the extent of the compensation paid. E.g., Va. Code Ann. (Michie, 1936) § 1887 (12). The express inclusion of the subrogation provision in Workmen's Compensation Acts prevents the employee from acquiring for a single injury two separate remedies — the one, in tort, against the third party tort-feasor, the other, in contract, under the Workmen's Compensation Act; for it is quite generally held that, in the absence of such an express statutory grant to the employer, the employee retains the right to collect full damages from the third party tort-feasor, in addition to his right to collect compensation under the Act. Cf. Chesapeake & Ohio Ry. Co. v. Palmer, 1927, 149 Va. 560, 140 S.E. 831, 836 (old Act); Newark Paving Co. v. Klotz, 1914, 85 N.J.L. 432, 91 A. 91 (old Act). See also notes (1940) 26 Virginia L.Rev. 524, 525; (1925) 38 Harv.L.Rev. 971, 972. And this is the rule in West Virginia where the Act has no provision covering assignment or subrogation. Merrill v. Marietta Torpedo Co., 1917, 79 W.Va. 669, 92 S.E. 112, L.R.A.1917F, 1043; Mercer v. Ott, 1916, 78 W.Va. 629, 89 S.E. 952.

In the last-cited case, the Supreme Court of Appeals of West Virginia succinctly stated that the West Virginia Act neither released the third party tort-feasor nor assigned the right of action to the employer; that it dealt solely with the relationship of employee and employer, without reference to the tort-feasor; that it created a fund to which an injured employee or his dependents (in case of death) could apply for compensation for injuries sustained in the course of, and arising out of, the employment; that the right to recover compensation out of the Fund was radically different from the right to recover damages from a tort-feasor. Mercer v. Ott, supra, 89 S.E. at page 955. The court then went on to hold that though the employee's personal representative had received damages from the third party tort-feasor, he still retained the right to receive compensation from the Fund. The converse of this holding was recognized in Merrill v. Marietta Torpedo Co., supra, where it was held that an employee, who had received compensation from the Fund, was not thereby prevented from suing the third party tort-feasor.

Although it would seem to, it does not necessarily follow that because the employee retains his right of action against the third party tort-feasor, the employer who has paid compensation as a result of this injury will not be subrogated to this right. Hence, though the Mercer and Merrill cases, supra, are very persuasive, there is no direct authority in West Virginia denying the employer the benefits of this equitable right. It thus becomes necessary to examine both the decisions in other jurisdictions and the principles governing common-law subrogation.

Professor Vance, in his outstanding treatise on Insurance (2d Ed., 1930) p. 680, seems to favor the view that the employer, who has paid compensation to his employee under an Act making no provision for subrogation, is, nevertheless, invested with a common-law right of subrogation. This same view is shared by Professor Hardman, through the analogy of fire and marine insurance. See Hardman, The Common-Law Right of Subrogation Under Workmen's Compensation Acts (1926) 26 W.Va.L.Q. 183, 184. However, we believe that under the direct authorities and under the principles governing common-law subrogation, the employer, under such a statute, is left without this remedy against the third party tort-feasor. McCullough v. John B. Varick Co., 1939, 90 N.H. 409, 10 A.2d 245; Newark Paving Co. v. Klotz, supra. See notes (1940) 26 Virginia L. Rev. 524, 525; (1925) 38 Harv.L.Rev. 971, 972 (1918) 18 Col.L.Rev. 598, 600.

The Supreme Court of Appeals of Virginia has clearly recognized that the employer has no common-law right of subrogation against the third party tort-feasor. As the court stated in United States F. & G. Co., Inc. v. Blue Diamond Coal Co., Inc., 1933, 161 Va. 373, 170 S.E. 728, 730: "The right of the employer, or his insurance carrier, does not rest on the principle of subrogation. It is wholly the creature of the statute * * *." This same position is adopted by the New Hampshire court in McCullough v. John B. Varick Co., supra. In that case, an employer brought an action similar to the one in the instant case. He had paid compensation under the New Hampshire Workmen's Compensation Act because of the injury to his employee caused by the alleged negligence of the third party tort-feasor. Like the West Virginia Act, the New Hampshire Act deals solely with the relation of employer and employee and does not concern itself with the rights and obligations of third persons. In denying the right of subrogation to the employer, the court stated (10 A.2d at page 246): "The workmen's compensation laws of many states provide that the employer shall be subrogated to the rights of an injured employee against a third person who is legally liable to him for causing the injury. Our statute contains no such provision. The repeated inclusion of these provisions in the statutes referred to would seem to indicate that, without them, the employer would have no right of subrogation, and such was the conclusion of this court with reference to cases involving the death of an employee, in Holland v. Morley Button Company, supra 83 N.H. 482, 145 A. 142."

The doctrine of subrogation and, as we shall try to show hereinafter, the doctrine of indemnity are both based upon the principle that a benefit has been conferred upon the defendant at the expense of the plaintiff. Then, since the plaintiff has discharged an obligation owed by the defendant, it seems proper for the plaintiff to be subrogated to the rights that the principal creditor had against the defendant to the extent of such...