Feinsod v. L. & F. Const. Co.

• Decision Date: 23 February 1939
• Citation: 122 N.J.L. 65,4 A.2d 692
• Parties: FEINSOD v. L. & F. CONST. CO. SAVITT v. L. & F. CONST. CO. et al.
• Court: New Jersey Court of Common Pleas

4 A.2d 692

122 N.J.L. 65

FEINSOD

v. L. & F. CONST. CO.

SAVITT

v. L. & F. CONST. CO. et al.

Court of Common Pleas of New Jersey, Essex County.

Feb. 23, 1939.

Appeals from Workmen's Compensation Bureau.

Proceedings under the Workman's Compensation Act by Israel Feinsod, petitioner, opposed by the L. & F. Construction Company, employer, consolidated on appeal with proceeding under the act by Morris Savitt, petitioner, opposed by the L. & F. Construction Company, employer, and the New Jersey Manufacturing Casualty Insurance Company, insurance carrier. From an award of the Workman's Compensation Bureau in favor of the petitioner in the first case, 2 A.2d 357, 16 N.J.Misc. 514, the employer appeals, and from an award of the Workman's Compensation Bureau in favor of the petitioner in the second case, 1 A.2d 752, 16 N.J.Misc. 462, the employer and insurance carrier appeal.

Judgment in accordance with opinion.

George E. Meredith, of Trenton (Kellogg & Chance and R. Robinson Chance, all of Jersey City, of counsel), for appellants.

Louis L. Feinseth, of Newark (Julius Stein, of Newark, of counsel), for appellee Israel Feinsod.

David Roskein, of Newark, for appellee Morris Savitt.

HARTSHORNE, Judge.

The two above cases are submitted together to this Court for decision on the employer's appeal from awards in the employees' favor before the Compensation Bureau, for the reason that both employees, the petitioners, were employed by the same employer, one of the respondents, were both injured in the same accident, and the major question of law involved is identical. This major issue is as to the constitutionality and construction of P.L. 1936, c. 162, p. 381, R.S. 34:15-40, covering the credit to be given the employer on the award against him, for the employee's recovery against a third party tort feasor.

A word as to the purpose of this legislation will be helpful. Originally there was uncertainty whether the employee could obtain a double recovery when an accident occurred during, and in the course of, the employment, for which a third party was responsible, one, under the Workmen's Compensation Act from his employer, the other, at common law from the tort feasor. This unsettled situation led to the enactment of certain statutes, P.L. 1913, c. 174, p. 311, P.L.1919, c. 93, p. 211, P.L.1931, c. 279, p. 704, R.S.1937, 34:15-40, the 1931 act providing that the employee's recovery from the third party should be credited on the award against the employer. In the case of Deuchar v. Standard Accident Ins. Co., 117 N.J.L. 375, 189 A. 61, this act was construed to give the employer the benefit of the full amount of such third party recovery, up to the full amount of the award itself, despite the fact that the employee had been compelled to pay his attorney a very substantial attorney's fee to obtain this third party recovery, which went to benefit the employer, not the employee. The policy of thus cutting down the award to the employee, by the amount of the fee which benefited the employer, naturally caused further question. So we find the legislature thereafter enacting the 1936 statute in question, providing for these attorney's fees to be charged against the employer, who primarily benefited from the work done, and not against the employee. Such is the pertinent legislative history, in bare outline.

But the employer here claims that the specific provisions of the 1936 act render it invalid, at least as to the cases at bar, both as a denial of due process, United States Constitution, amendment 14, sec. 1 U.S.C.A, and also as an impairment of the obligation of a contract, United States Constitution, art. 1, sec. 10, par. 1, U.S. C.A, and presumably as well under the similar contract provisions of the New Jersey Constitution, art. 4 sec. 7, par. 3. In addition, the employer claims that the act was improperly construed in the Bureau, such construction resulting in its paying some $3,500 more than it should, even if the act were validly applicable. We proceed to the examination of these claims.

As to the constitutional question, it is claimed that the rights of the employer and employee inter sese are contractual, stem from the contract of employment, and are vested by the accident. That since the accident occurred January 13, 1936, before the 1936 act took effect, on June 22, 1936, the previous act, that of 1931 (supra), governs the rights of the parties. So that the attempt by the court below to apply the 1936 act, which lessens the employer's credit on the award, below the credit fixed by the 1931 act, both took the employer's property without due process and impaired the obligation of his contract. The constitutional issue thus is, whether the employer, the minute the accident occurred, acquired a vested right to have the attorney's fee in question charged against the employee, and not against himself.

We must here bear in mind the fact that these attorneys' fees are themselves but a mere item of deduction, from the credit claimed by the employer on the award against him. The question then is, When does the employer acquire a vested right to this credit, with or without this deduction of attorneys' fees? Turning to the 1931 statute, we find it expressly stated: "The obligation of the employer under this statute to make compensation [to pay the award against him in full] shall continue until the payment, if any, by such third person or corporation is made." R.S.1937, 34:15-10 (a). It is thus clear that the accident itself gives the employer no right to any credit, nor does the employee's judgment against the third party tort feasor. Even then, the employer is entitled to a credit on the award of exactly nothing. This credit is to be given the employer only if, and when, "payment * * * by such third person * * * is made." It is the payment which gives rise to the credit.

Turning 'to the 1936 act, we find there the similar provision that, "In the event that the employee * * * shall recover and be paid from the said third person or corporation," such credit shall be given. The 1936 act further provides: "(1) The obligation of the employer * * * to make compensation payments shall continue until the payment, if any, by such third person or corporation is made." R.S.1937, 34:15-40 (a). Here again the intent is clear that the credit stems from the payment.

In fact, employer's argument, that the credit stems from the accident as a contractual obligation, proves too much. For if so, the parties' rights would be vested, not by the accident, which is ordinarily tortious and certainly not contractual, but by the contract of employment, which occurred long previous to the accident. And no one has had the temerity to suggest that the legislature is bound, as to even such a substantial provision as the schedule of compensation, by the date the employee enters his employment.

But to return. Since the employer's credit stems from the payment by the third party, we turn thereto. This payment occurred, in both cases, May 27, 1937, almost a year after the 1936 act took effect. Such being the case, the Bureau has not attempted to give the 1936 act a retroactive effect. Since such act was in effect when the employer's rights to the basic credit arose, such act, in its applicability to such credit, and its subordinate attorney's fee deduction therefrom, impairs no contractual obligation and constitutes due process. Moreover, there is strength in the suggestion that the statutory change in the imposition of attorney's fees, the prime point at issue, is merely procedural and not substantive. Murphy v. Brown & Co., 91 N. J.L. 412, 103 A. 28; Doyne v. Stollerman, 131 A. 68, 3 N.J.Misc. 1171; Igoe Bros, v. National Surety Co., Err. & App, 112 N.J.L. 243, 169 A. 841, 96 A.L.R. 1422; Robinson v. Jackson, 187 A. 918, 14 N.J. Misc. 866. If so, it is well settled there is no violation of the contract clauses. Crew v. Trainor, 91 N.J.L. 87, 102 A. 905, affirmed Err. & App, 92 N.J.L. 512, 105 A. 893; Lapp v. Belvedere, Err. & App, 116 N.J.L. 563, 184 A. 837, 115 A.L.R. 429; Sayers v. Lichtman, 117 N.J.L. 5, 186 A. 537.

As for the construction of the 1936 act, the fact that the parties differ widely is doubtless due to the complicated, interdependent, mathematical, terminology employed. One of the basic purposes for the enactment of the 1936 act was, as seen above, to impose the attorney's fee, not, as previously, on the employee, but on the employer, for whose benefit the third party recovery primarily goes as a credit. The question now is, how to calculate this attorney's fee, the employee claiming that it is to be calculated upon the entire third party recovery, the employer that it is to be calculated only upon a certain "reimbursement" to the employer, ordinarily a very much smaller sum, here in fact zero. The attorney's fee is expressly defined in (5) of the statute as follows: "* * * 'Attorney's fee' shall mean such fee, but not in excess of thirty-three and one-third per cent [33 1/3 % ] of that part of the sum paid in release or in judgment to the injured employee or his dependents by such third party or corporation to which the employer or his insurance carrier shall be entitled in reimbursement under the provisions of this section, but on all sums in excess thereof, this percentage shall not be binding."

The employer reads this as meaning that this fee shall never exceed an amount equal to one-third of the "reimbursement" to the employer. This "reimbursement," in turn, according to sections (3) and (4), can never exceed the employer's payments on the award, which have been actually made previous to the payment of the third party recovery. Often, and in both the cases at bar, for instance, this "reimbursement" amounts to exactly nothing, for reasons hereinafter stated. In other words, if we adopt the employer's construction, the statutory attorney's fee here is zero. Furthermore, the employer's construction gives no rational meaning...