Maryland Cas. Co. v. Tiffin

• Decision Date: 02 December 1988
• Citation: 537 So.2d 469
• Parties: MARYLAND CASUALTY COMPANY v. Donna H. TIFFIN, et al. 87-979.
• Court: Alabama Supreme Court

Page 469

537 So.2d 469

MARYLAND CASUALTY COMPANY v. Donna H. TIFFIN, et al.

87-979.

Supreme Court of Alabama.

Dec. 2, 1988.

Mark E. Martin, Birmingham, for appellant.

James J. Thompson, Jr., of Hare, Wynn, Newell & Newton, Birmingham, for appellees.

HOUSTON, Justice.

The issue presented for review is whether Maryland Casualty Company is entitled to full and complete reimbursement of benefits previously paid and to a release of future liability of sums to be paid under Code 1975, § 25-5-60 ("Workmen's Compensation--Compensation for Death"), when the deceased employee's widow and minor children recover damages from third parties under Code 1975, § 25-5-11(a), substantially in excess of the amount of Maryland Casualty's liability under § 25-5-60.

The attorney for the widow and minor children had a contingency fee contract of one-third of all sums recovered in the action against the third parties. Maryland Casualty does not question the reasonableness of this fee and agrees that, if it prevails here, it is obligated to pay one-third of the amount reimbursed to it and one-third of the future liability from which it is released as its proportionate amount of this attorney fee, under § 25-5-11(e).

In the case before us, the trial court ascertained that the settlement with the third parties was for an amount equal to only 20% of the value of the case. This ruling is unsupported by admissible evidence. With punitive damages the case is "worth" whatever amount will "adequately punish and deter"--nothing more, nothing less.

This Court has recognized the special nature of an attempted settlement of a minor's claim. Before such a settlement can be approved, there must be a hearing, with an extensive examination of the facts, to determine whether the settlement is in the best interest of the minor. Large v. Hayes, 534 So.2d 1101 (Ala.1988); Abernathy v. Colbert County Hospital Board, 388 So.2d 1207 (Ala.1980); Tennessee Coal, Iron & R.R. Co. v. Hayes, 97 Ala. 201, 12 So. 98 (1892).

In Large and Abernathy, the following from Tennessee Coal, Iron & R.R. Co. was quoted with approval:

"The court may upon being advised of the facts, upon hearing the evidence, enter up a valid and binding judgment for the amount so attempted to be agreed upon, but this is not because of the agreement at all--that should exert no influence--but because it appears from the evidence that the amount is just and fair, and a judgment therefor will be conservative of the minor's interests."

97 Ala. at 210, 12 So. at 103.

We probably would not sustain as "just and fair" a trial court's order settling a minor's claim for 20% of its value if the damages were compensatory. Here, though, we are dealing only with punitive damages. This Court has written that " 'the plaintiff is without legal right to them [punitive damages], as [the right to damages] attaches to actual damages suffered. Comer v. Age-Herald Pub. Co., 151 Ala. 613, 44 South. 673, 13 L.R.A. (N.S.) 525. Such damages [punitive] may be even forbidden, or affirmatively withheld, by legislative enactment, so far as impinging rights of property are concerned.' " Dowling, Admr. v. Garner, 195 Ala. 493, 496, 70 So. 150, 151-52 (1915), quoting Louisville & N.R.R. v. Street, 164 Ala. 155, 51 So. 306, 20 Am.Cas. 877 (1909). "Most courts no longer give deference to a plaintiff's claim of a right to punitive damages." T. Christensen, The Apportionment of Punitive Damages Among Joint Tortfeasors, 25 Ariz.L.Rev. 579, 585 (1983).

Since punitive damages are not to compensate a victim for loss but to punish and deter, the state alone is considered the true party plaintiff, and in seeking punitive damages, a plaintiff is an agent of the state and not a victim. Note, Apportionment of Punitive Damages, 38 Va.L.Rev. 71, 73 (1952).

Just as a trial judge would probably violate his duty in permitting a minor's claim to be settled for 20% of its value if the damages were compensatory, a trial judge would probably violate his duty in allowing the state's interest to be compromised for 20% of the punishment and deterrent effect the state is entitled to.

Because the purpose of punitive damages is not to compensate the plaintiff but to punish the wrongdoer and to deter others from committing similar wrongs in the future, the amount of the damages rests largely in the sound discretion of the trier of fact. Dees v. Gilley, 339 So.2d 1000 (Ala.1976); Boise Cascade Corp. v. Lee, 291 Ala. 666, 286 So.2d 836 (1973). The amount must be related to the degree of the wrongdoing on the part of the defendants and the necessity of preventing similar wrongs in the future; and if the action is brought under the Alabama Wrongful Death Act, Ala.Code 1975, § 6-5-410, the trier of fact cannot consider the pecuniary value of the life of the deceased, for such damages are not to compensate the family of the deceased on account of the death or to compensate for the pecuniary loss sustained by the family on account of the death. Airheart v. Green, 267 Ala. 689, 104 So.2d 687 (1958). But see the opinions of Torbert, C.J., concurring in part and dissenting in part, and Houston, J., dissenting, in Tatum v. Schering Corp., 523 So.2d 1042, 1046, 1047-63 (Ala.1988).

The trial judge acknowledged that only punitive damages were recoverable in this action and approved a settlement of $200,000. We must assume that he determined that the settlement of $200,000 was adequate to punish the defendants and to prevent similar wrongs in the future. The trial judge's finding that the settlement was for 20% of its value is unsupported by admissible evidence. ¹

"If the injured employee, or in case of his death his dependents, recover damages against [a party other than the employer whose act or omission caused the employee's injury or death], the amount of such damages so recovered and collected shall be credited upon the liability of the employer for compensation, and if such damages so recovered and collected should be in excess of the compensation payable under [Chapter 5, 'Workmen's Compensation,' Code 1975, §§ 25-5-1 through § 25-5-144], there shall be no further liability on the employer to pay compensation on account of such injury or death.... [T]he employer shall be entitled to reimbursement for the amount of such compensation theretofore paid on account of such injury or death...." (Emphasis added.)

Code 1975, § 25-5-11(a).

The term "employer" "... shall, if the employer is insured, include his insurer, such insurer being entitled to the employer's rights, immunities and remedies under [Chapter 5, Workmen's Compensation, Code 1975, §§ 25-5-1 through 25-5-144]." § 25-5-1(4), Code 1975. Maryland Casualty, as the insurer of the employer, has the rights and remedies provided by § 25-5-11(a).

In a zealous attempt to protect the interests of the minors, in accord with the spirit of Large v. Hayes, supra, Abernathy v. Colbert County Hospital Board, supra, and Tennessee Coal, Iron & R.R. Co. v. Hayes, supra, the trial court held that since the plaintiffs were receiving only 19.3462% of the value of their case after expenses, other than attorney fees, Maryland Casualty should receive only 19.3462% of the amount it had paid and would have paid, but for the third-party settlement, less the attorney fee, under the common fund doctrine. This resulted in Maryland Casualty's having to pay $2,692.88, in addition to the $46,110 that it had paid to the plaintiffs.

In Lewis v. Railroad Retirement Board, 256 Ala. 430, 54 So.2d 777 (1951), cert. denied, 343 U.S. 919, 72 S.Ct. 677, 96 L.Ed. 1333 (1952), this Court dealt with the common fund theory. In that case, the Court held that the services rendered by the attorneys in the suit were services for their client and that the Railroad Retirement Board only incidentally benefited from them; the Court added:

"As a result of the views which we have here expressed, the allowance of a fee cannot be sustained on a theory of services rendered for the common benefit of all the parties."

256 Ala. at 436, 54 So.2d at 782.

Judge Holmes, in Henley & Clarke v. Blue Cross-Blue Shield of Alabama, 434 So.2d 274, 276 (Ala.Civ.App.1983), wrote:

"Generally, the 'common fund' doctrine is an equitable principle designed to compensate an attorney whose services on behalf of his client operated to create, discover, increase, preserve, or protect a fund to which others may also have a claim. 7A C.J.S., Attorney & Client § 334.

"The 'common fund' doctrine has traditionally been applied to certain well defined, limited areas; most commonly, in cases for the protection of trusts, for the protection of a decedent's estate, actions where one creditor acted to the benefit of other creditors, and actions by stockholders for corporate waste and the recovery of corporate property. The doctrine has also been applied in insurance subrogation cases. See 49 A.L.R. 1149; 107 A.L.R. 749; 2 A.L.R.3d 1441; 20 Am.Jur.2d, Costs § 85.

"As a general rule, the application of the 'common fund' doctrine depends upon at least two requirements. There must be a 'fund' from which to compensate the attorney, and the attorney's services must benefit that fund. 7A C.J.S., Attorney & Client § 334(b). In addition, the benefit rendered must be a direct benefit, either to the fund or the party to be charged with the fee. Lewis v. Railroad Retirement Board, 256 Ala. 430, 54 So.2d 777 (1951), cert. denied, 343 U.S. 919, 72 S.Ct. 677, 96 L.Ed. 1333 (1952)."

Though attorney fees were denied in Henley & Clarke and Lewis v. Railroad Retirement Board, they were permitted in Smith v. Alabama Medicaid Agency, 461 So.2d 817, 820 (Ala.Civ.App.1984), where the Medicaid Agency was subrogated to the entire amount paid but had to pay the proportionate amount of the attorney fee on the amount to which it was subrogated; and in Eagerton v. Williams, 433 So.2d 436, 451 (Ala.1983), in which Justice Almon wrote for the Court:

"Consistent with the underlying philosophy of...