Herrera v. Springer Corp.

• Citation: 1973 NMCA 41,85 N.M. 6,508 P.2d 1303
• Decision Date: 09 March 1973
• Docket Number: No. 1024,1024
• Parties: Elmer A. HERRERA, Plaintiff-Appellee, v. SPRINGER CORPORATION, Defendant-Appellant.
• Court: Court of Appeals of New Mexico

Page 1303

508 P.2d 1303

85 N.M. 6

Elmer A. HERRERA, Plaintiff-Appellee, v. SPRINGER CORPORATION, Defendant-Appellant.

No. 1024.

Court of Appeals of New Mexico.

March 9, 1973.

Certiorari Granted April 16, 1973.

William H. Oldaker, Oldaker & Oldaker, Albuquerque, for defendant-appellant

Dennis Cowper, Chavez & Cowper, Belen, for plaintiff-appellee.

OPINION

WOOD, Chief Judge.

The appeal involves a default judgment against Springer Corporation. There are two issues: (1) is a workmen's compensation insurer, who has paid compensation, an indispensable party in the workman's action against a third party and (2) did the trial court err in refusing to set aside the default judgment.

Indispensable party.

Plaintiff received an injury arising out of and in the course of his employment and was paid workmen's compensation by his employer's insurer. USF& G (United States Fidelity & Guaranty Company). Plaintiff sued Springer alleging Springer's breach of warranty and negligence was the cause of the accident and resulting injury. Default judgment was entered against Springer. Prior to entry of the default judgment, plaintiff's counsel informed the court of his agreement with USF&G '. . . that they will be reimbursed in the amounts they have expended or will expend for medical and compensation benefits.' Subsequent to entry of the judgment, a formal assignment was filed with the court. This assignment, executed by plaintiff, affirmed the declaration made in open court by his counsel.

Seeking to set aside the default judgment, defendant claims that USF&G was an indispensable party to plaintiff's suit against Springer and, not being a party at the time of entry of the judgment, the trial court had no jurisdiction to enter the judgment.

A court cannot proceed to judgment in the absence of an indispensable party. State v. Scarborough, 78 N.M. 132, 429 P.2d 330 (1967). The question is whether USF&G was such a party.

Any interest of USF&G in plaintiff's suit against Springer arises under § 59--10--25, N.M.S.A.1953 (Repl.Vol. 9, pt. 1). The 1971 amendment to that section is not applicable since the amendment was enacted subsequent to the date of plaintiff's accident and injury. Section 59--10--25, supra, provides that the right of a workman to recover damages for injuries occasioned by the negligence or wrong of a person other than the employer is not affected by the Workmen's Compensation Act. It also provides that a workman may not recover such damages and also claim compensation '. . . and in such case the receipt of compensation . . . shall operate as an assignment to the employer, his or its insurer . . . or (of) any cause of action, to the extent of the liability of such employer to such workman . . . which the workman . . . may have against any other party for such injuries. . . .'

Our Supreme Court has consistently held that § 59--10--25, supra is a reimbursement statute; it has also consistently held that there is but one cause of action. Varney v. Taylor, 71 N.M. 444, 379 P.2d 84 (1963); Royal Indem. Co. v. Southern Cal. Petroleum Corp., 67 N.M. 137, 353 P.2d 358 (1960); Kandelin v. Lee Moor Contracting Co., 37 N.M. 479, 24 P.2d 731 (1933). As to the workman's position under § 59--10--25, supra, Castro v. Bass, 74 N.M. 254, 392 P.2d 668 (1964) states: '. . . our statute contemplated that an employee receiving compensation had a right to sue a third party tortfeasor responsible for his injury; that this right was for the entire amount of damages suffered by the workman with the employer or his insurer to be reimbursed out of any amounts received.' We emphasize two points: the workman sues the third party for the entire amount of damages; the employer or insurer is reimbursed out of amounts received by the workman.

We examine Springer's contentions in the light of the foregoing explanation of § 59--10--25, supra. Springer contends that since there is but one cause of action and since, upon payment of compensation, a portion of the cause of action is assigned to the employer or insurer, the employer or insurer becomes an indispensable party. Springer's argument is based both on general law and on cases under our workmen's compensation law.

Examples of general law decisions are Torres v. Gamble, 75 N.M. 741, 410 P.2d 959 (1966) and Sellman v. Haddock, 62 N.M. 391, 310 P.2d 1045 (1957). See Home Fire & M. Ins. Co. v. Pan American Petroleum Corp., 72 N.M. 163, 381 P.2d 675 (1963) for an explanation of Sellman v. Haddock, supra. Torres v. Gamble, supra, states: 'Since our decision in Sellman v. Haddock . . . there can be no question that in this jurisdiction an insurer that has paid its insured for a loss, in whole or in part, is a necessary and indispensable party to an action to recover the amounts paid from a third party allegedly responsible therefor. . . .'

We do not deem this general law to be inapplicable because the workman is the statutory beneficiary of workmen's compensation insurance rather than the insured. Section 59--10--3, N.M.S.A.1953 (Repl.Vol. 9, pt. 1). Rather, we look to the reason behind the general law. The reason is that the insurer has the right to collect the amount it has paid from the party who caused the damage. If it has this right, it owns the right sought to be enforced and is in a position to release the third party from the liability upon which the action is grounded. In this situation the insurer is an indispensable party. Sellman v. Haddock, supra; Crego Block Co. v. D. H. Overmyer Co., 80 N.M. 541, 458 P.2d 793 (1969).

The 'right to collect' in the above situation is based on the fact that the insurer has paid what another should have paid and, having done so, the rights and remedies of the original creditor are assigned to the insurer. This is the the right of subrogation. See State Farm Mut. Auto. Ins. Co. v. Foundation R. Ins. Co., 78 N.M. 359, 431 P.2d 737 (1967).

Section 59--10--25, supra, does not deal with the right of subrogation, but with the right of reimbursement. Royal Indem. Co. v. Southern Cal. Petroleum Corp., supra. The reimbursement is out of amounts received by the workman because the workman sues for the entire amount of damages suffered. Castro v. Bass, supra. Since the 'right to collect' is in the workman, the compensation insurer does not own the right to enforce liability and cannot release the third party from liability. The result in this case is that USF&G was not an indispensable party under the concepts applied in Torres v. Gamble, supra, and Sellman v. Haddock, supra. We not consider the workmen's compensation decisions. Varney v. Taylor, supra, states:

'. . . under prior rulings of this court, it would seem that unless the insurance company is allowed to become a party-plaintiff, it will forfeit its right to reimbursement under § 59--10--25, N.M.S.A.1953. This is because we specifically held in Royal Indemnity Co. v. Southern Cal. Petroleum Corp., 1960, 67 N.M. 137, 353 P.2d 358, that the statute was a reimbursement statute, and that there was but one cause of action in the employee, even though a part of the recovery is to be paid to the employer or his insurer. The opinion in Royal was a logical result from our holdings in Kandelin v. Lee Moor Contr. Co., 1933, 37 N.M. 479, 24 P.2d 731, and Sellman v. Haddock, 1957, 62 N.M. 391, 310 P.2d 1045. Therefore, for the trial court to have found that the insurance company would not be bound by the judgment is in error, for otherwise it would contemplate the splitting of a cause of action, and, even if this were allowed, not all the parties would be before the court in the second case. Thus, as we said in Royal, there would be the lack of an indispensable party.'

The reference to 'indispensable party' in Royal does not aid Springer because the reference is to the Workman as the indispensable party. The workman is an indispensable party because it is the workman who has the claim against the third party. The intimation that the compensation insurer is indispensable appears in Kandelin v. Lee Moor Contracting Co., supra, and Varney v. Taylor, supra. We discuss those decisions.

In Kandelin, the compensation carrier was a party in the proceedings against the alleged tortfeasor, but was removed from the case prior to adjudication of the liability issue by the trial court's ruling on a plea in bar. The appellant-defendant was the tortfeasor. Our Supreme Court held the trial court erred, saying: '. . . upon the record, the defendant is entitled to an adjudication as to whether the Pacific Indemnity Company has an interest in the recovery. . . .' Our Supreme Court did not, however, disturb the verdict, but remanded the cause for determination of the insurer's right to participate in the recovery.

We question a defendant's right to an adjudication as to a compensation insurer's right to participate in the workman's recovery from the defendant. We do so because Kandelin also states: '. . . Whether the insurance carrier is entitled to any part of the recovery in this case is no concern of the appellant (defendant). . . .' The result in Kandelin may be explained on the basis the insurer was a party to the suit and had been improperly removed therefrom. This explanation is consistent with the tortfeasor's 'no concern' with the insurer's right to participate in the recovery.

Varney v. Taylor, supra, following Kandelin and Royal Indem. Co. v. Southern Cal. Petroleum Corp., supra, establishes clearly that a compensation insurer has the right to intervene in the workman's suit against a third party. It does not hold that the insurer is an indispensable party to that suit. Varney states that unless the insurer is allowed to intervene it will forfeit its right to reimbursement. This statement is incorrect. The insurer's right to reimbursement is established by § 59--10--25, supra. That right is not waived by failure to participate in the trial of the workman's action against the third party. Byers v. North...