Geneva Const. Co. v. Martin Transfer & Storage Co.

• Decision Date: 14 October 1953
• Docket Number: Gen. No. 10681
• Citation: 351 Ill.App. 289,114 N.E.2d 906
• Parties: GENEVA CONST. CO. et al. v. MARTIN TRANSFER & STORAGE CO.
• Court: United States Appellate Court of Illinois

Page 906

114 N.E.2d 906

351 Ill.App. 289

GENEVA CONST. CO. et al. v. MARTIN TRANSFER & STORAGE CO.

Gen. No. 10681.

Appellate Court of Illinois, Second District.

Oct. 14, 1953.

Allen, Matthews, Jordan & Dean, Aurora, Eckert, Peterson & Leeming, Chicago, for appellant.

William C. O'Brien, Aurora, for appellees.

ANDERSON, Justice.

The Geneva Construction Company, plaintiff herein, filed suit to recover compensation paid to its employee, Frank J. Powers, in the Circuit Court of Kane County, Illinois, against Martin Transfer and Storage Company, defendant. The suit was based upon paragraph 1 of section 29 of the Illinois Workmen's Compensation Act. (Ill.Rev.Stat., 1949, chap. 48, par. 166.) Geneva alleged in its complaint that its employee, Frank J. Powers, was injured in 1948 as a result of the negligence of one of the employees of the defendant. The usual allegations of negligence, due care, and proximate cause of injuries were contained in the complaint. All of the parties were under the Compensation Act at the time of the occurrence.

Subsequent to the filing of this complaint, the Supreme Court in 1952 handed down its decision in Grasse v. Dealer's Transport Co., 412 Ill. 179, 106 N.E.2d 124. In that case the Supreme Court held that paragraph 1 of section 29 of the Workmen's Compensation Act was unconstitutional. More than two years after the suit was filed, leave was asked and obtained by Frank J. Powers to intervene as a party plaintiff. The plaintiffs then obtained leave to file an amended complaint consisting of four counts. Defendant vigorously opposed the joinder of Frank J. Powers as a party plaintiff and also the motion by plaintiffs to file an amended complaint. The cause proceeded to trial with a complaint containing four counts in substance as follows:

In the first court in the amended complaint, virtually identical to the original complaint, the Geneva Construction Company asked judgment against the defendant for $3,706.83, the amount of compensation paid by it to Powers.

In the second count of the amended complaint the Geneva Construction Company alleged that a cause of action had accrued to it for damages resulting from the injuries to Powers and requested judgment in the amount of $30,000.

Count III, filed on behalf of both the Geneva Construction Company and Frank J. Powers, asked judgment against the defendant for $30,000, both for money paid out to Powers by the Geneva Construction Company and for damages for personal injuries to Powers.

Count IV of the amended complaint, on behalf of Frank J. Powers alone, was a common-law action against the defendant for $20,000, for personal injuries arising out of the accident.

Issue was joined and the cause proceeded to trial. The jury returned a general verdict for both plaintiffs against the defendant in the amount of $15,000, and judgment was entered thereon by the court. Motions for a new trial and for judgment notwithstanding the verdict were denied, from which defendant prosecutes this appeal.

The parties have agreed and stipulated in this court that the sole questions involved herein are ones of law.

Defendant contends that an employer who has paid compensation to his employee under the terms of a Workmen's Compensation Act, which contains no provision for subrogation, is left without remedy against a third party, tort-feasor, who is under the Act, who has injured the said employee. Defendant further contends that at the time the Geneva Construction Company filed its suit, it had no cause of action by virtue of the decision of the Supreme Court in the Grasse case; that at the time Geneva filed its suit, it had no cause of action under the common law by way of subrogation or otherwise; and that the alleged cause of action of Powers is barred by the Ill.Rev.Stat., 1951, chap. 83, par. 15, which provides that all actions for personal injuries shall be commenced within two years after the cause of action accrues.

The patent effect of the Grasse decision was to leave the Illinois Workmen's Compensation Act without a provision for subrogation to an employer in the position of Geneva.

Paragraph 1 of section 29 of the Workmen's Compensation Act provided that where both employers are under the Act and the plaintiff's employee is injured while he and his employer are in the exercise of ordinary care as a result of the negligence of the defendant employer or his employee and compensation has been paid under the Act by the plaintiff's employer, the employee's cause of action is transferred to his employer and he may collect the compensation paid and no more and his employee can maintain no action to recover damages for his injuries.

Paragraph 2 of section 29 specifically applies only to cases where the third party tort-feasor is not bound by the Act. It is clear, therefore, that at the time Geneva filed its suit, it had no cause of action under the Compensation Act and was, therefore, without remedy unless some remedy existed at common law. The fact that at the time the original complaint was filed the cause of action was based upon paragraph 1 of section 29, subsequently held unconstitutional, is wholly immaterial. The true test of the sufficiency of the original complaint was whether or not all the essential elements of a cause of action were alleged therein. In order to determine whether or not Geneva had any cause of action at the time of the filing of the original complaint under common-law subrogation principles, an analysis of the Grasse decision is imperative.

In that case a complaint containing two counts was filed. Count I was filed in the name of the employer to recover compensation paid to its employee for injuries sustained as a result of the negligence of one of the employees of the defendant and was based upon paragraph 1 of section 29 of the Compensation Act. Count II was filed in the name of the injured employee and was a common-law action for personal injuries. On motion in the trial court, Count II was dismissed and the trial court held that by virtue of paragraph 1 of [351 Ill.App. 296] section 29 the cause of action of the employee was transferred to the employer. The Supreme Court held paragraph 1 of section 29 of the Illinois Workmen's Compensation Act to be unconstitutional and reversed the trial court in its action in allowing the motion to dismiss Count II of the complaint. The Supreme Court held that the legislative action limiting recovery to the injured employee where all parties were under the Act to the compensation paid, and permitting recovery where the defendant tort-feasor was not under the Act is an arbitrary classification without reasonable basis and does not constitute a reasonable exercise of the police power. The court further held that such legislative action violated the guarantee of due process of law and equal protection of the law under the Federal and State Constitutions as well as under section 22 of article 4 of the Illinois Constitution, S.H.A., forbidding special laws granting special privileges. The court further held that such legislative action violated section 19 of article 2 of the State Constitution which provides that every person ought to find a remedy in the law for all injuries and wrongs which an individual's person, property, and reputation may receive.

While it is vigorously argued by the defendant that the foregoing question of constitutionality was the only question decided by the court, and that the other language contained in the opinion is dictum, various other associated propositions were analyzed fully. With respect to the identical argument presented here by defendant, our Supreme Court said, 412 Ill. at page 201, 106 N.E.2d at page 136:

'The effect of our determination is to render the provision void, and to relegate the parties to such rights as they may have had prior to the enactment of the unconstitutional provision. People v. Schraeberg, 347 Ill 392, 179 N.E. 829. Under those circumstances, the rights of the parties would be governed by common-law subrogation principles, and the non-negligent employer who had paid compensation would be entitled to be subrogated to the rights of the employee against the third party tort-feasors. The employee, in turn, would not be entitled, as defendant suggests, to retain both compensation from his employer and damages against the third party, but would, under common-law principles, be required to reimburse his employer for the amount paid him from the sum recovered from the third party. Where, however, the third party tort-feasor is not bound by the act, the employer's subrogation rights would still be governed by the second paragraph of section 29, which has not been modified by our decision.

'The essential difference between the status of employers who would now be relegated to common-law subrogation rights against tort-feasors under the act, and employers who assert rights under the second paragraph of section 29 against tort-feasors who are not bound by the act, is the time when such rights may be asserted.'

The opinion holds paragraph 2 constitutional. While the opinion does not so state, it appears to us it necessarily holds that the paying employer still has a right of action under the principles of common-law subrogation. If this were not true, then paragraph 2 would be vulnerable to the same attack and would be unconstitutional for the same reasons that paragraph 1 was held invalid in that it would create an arbitrary classification without rational difference.

This part of the opinion is obviously an answer to the argument that the nonnegligent employer would not be protected and be unable to recover his compensation paid. He would not be deprived of due process of law by the holding of the court that paragraph 1 was unconstitutional. The obvious import of the foregoing language is such that this court is constrained, if not legally bound, to follow it.

Generally speaking the doctrine of subrogation is an...