Quinn v. Warnes

• Decision Date: 24 June 1983
• Court: California Court of Appeals Court of Appeals
• Parties: Ervin QUINN, Plaintiff and Appellant, v. Colin Martin WARNES, Defendant and Respondent. A014095. Civ. 51403.

Page 660

192 Cal.Rptr. 660

144 Cal.App.3d 309

Ervin QUINN, Plaintiff and Appellant, v. Colin Martin WARNES, Defendant and Respondent.

A014095.

Civ. 51403.

Court of Appeal, First District, Division 1, California.

June 24, 1983.

Elster S. Haile, Palo Alto, for plaintiff and appellant.

L. Christian Spieller, Gassett, Perry & Frank, San Jose, for defendant and respondent.

HOLMDAHL, Associate Justice.

Plaintiff and appellant Ervin L. Quinn, who obtained a judgment in Santa Clara County Superior Court against defendant and respondent Colin Warnes, appeals from its order allowing respondent a lien against the judgment.

We affirm the order allowing the lien.

Statement of Facts

The parties were involved in an automobile collision, which occurred on March 14, 1977, while appellant was acting in the course and scope of his employment. He received from El Dorado Insurance Company (hereafter, "El Dorado"), his employer's worker's compensation carrier, compensation benefits for temporary disability ($2,750) and medical benefits ($1,448.30), totalling $4,198.30.

After appellant filed his complaint against respondent, El Dorado filed its notice of lien claim in the action, requesting reimbursement of its payments. Thereafter, respondent filed his answer, denying the allegations in the complaint and alleging negligence on plaintiff's part. ¹

At some time during 1978, El Dorado became insolvent, and the insurance commissioner was appointed as liquidator of the company.

The action was referred to an arbitrator who awarded appellant $18,308.30 as damages. Respondent rejected the award.

Before commencement of the jury trial of the lawsuit, respondent and his liability insurance carrier, United Services Automobile Association (hereafter, "U.S.A.A."), purported to take an assignment of El Dorado's lien claim in exchange for payment to it of $2,099.15 by U.S.A.A., precisely half the "face amount" of the lien.

The document evidencing the assignment was apparently prepared by respondent's attorney, who signed it on May 6, 1980. It was signed by El Dorado representatives, on May 8 and May 29, 1980. It is not clear from the assignment whether appellant or his attorney was aware of it prior to the trial.

Trial itself commenced on May 27 and the next day, prior to the receipt of any testimony, the trial judge and the parties' attorneys held an in camera discussion. Among other things, respondent's attorney mentioned the fact that he had negotiated a settlement with El Dorado, which consisted of purchase of the lien for 50 percent of the lien amount. The parties then agreed upon the lien amount as being the amount of the bills incurred, and that two questions would be resolved prior to entry of judgment: (1) Whether there had been, in fact, a proper assignment of the lien claim to respondent; and, (2) if so, the amount by which any judgment for appellant must be reduced by virtue of the lien claim.

At trial no mention was made to the jury of payments by El Dorado to or for appellant nor was any mention made of the assignment. The jury returned a verdict in favor of appellant in the sum of $13,808.20. The assignment was filed with the court on June 3, 1980, and judgment on the verdict was entered on June 20, 1980.

On July 3, 1980, respondent filed a motion for an order allowing as a set-off against the judgment the full amount of the lien. After a hearing on the motion, the court ordered that respondent and U.S.A.A. be allowed a set-off or credit against the judgment of $4,198.30, the full amount of the lien.

Appellant thereafter filed his notice of appeal.

Appellant's Contentions Generally

Appellant raises a dozen or so points, but characterizes the issues on appeal as follows: (1) The purported assignment of the compensation lien to the respondent's liability insurance company is an unfair claim settlement practice; (2) there was not a legal assignment of the compensation lien claim, valid under the law; and (3) public policy considerations invalidate the purported assignment of the compensation lien. ²

Unfair Claims Settlement Practice

Appellant commences argument by citing the case of Royal Globe Ins. Co. v. Superior Court (1979) 23 Cal.3d 880, 153 Cal.Rptr. 842, 592 P.2d 329 and suggests that the lien assignment was a practice condemned in Royal Globe. As the opinion in that case states, the sole issue before the court was "whether an individual who is injured by the alleged negligence of an insured may sue the negligent party's insurer for violation of [Ins.Code, § 790.03, subd. (h) ]." (Id., at p. 884, 153 Cal.Rptr. 842, 592 P.2d 329.) An examination of the statute, however, indicates that the assignment of the lien before us is none of the numerous types of practice proscribed. Appellant has provided no case supporting the proposition that section 790.03, subdivision (h) applies to assignments of lien claims of the type in the instant case. And, even if the lien were held to be violative of the statute, we note that Royal Globe holds that a plaintiff who asserts an unfair claims settlement complaint against an insurer may not do so in the same lawsuit he brings against the insured. (Id., at p. 891, 153 Cal.Rptr. 842, 592 P.2d 329.) Yet this, in effect, is what appellant seeks to do.

Waiver of Attorney's Fee on Lien Amount

Appellant argues that: "Labor Code Section 3856(b) gives plaintiff an absolute right to reasonable litigation expenses and a 'reasonable attorney's fee' as a reduction of the employer's carrier's lien amount. Although plaintiff's counsel has in fact waived his right to attorney fees earned in prosecuting this action, and does not seek to renege now and collect such fee, defendant's, United Services Automobile Association, Real Party in Interest, purported assigned lien can only be the net amount remaining 'After the payment of such expenses and attorney's fee ...' Labor Code Section 3856(b)." However, we conclude, first, that his attorney's waiver of a fee on the amount of the lien is not rendered ineffective by section 3856, and, second, the attorney having waived the fee, the statute does not require that the amount which could otherwise have gone to him should now go to appellant. In fact, since the lien amount represents benefits already paid to appellant, to give him a portion of the lien amount would result in a "double recovery" of the type criticized in Witt v. Jackson, supra, 57 Cal.2d 57, 17 Cal.Rptr. 369, 366 P.2d 641.

Validity of Assignment of the Lien

Appellant attacks the validity of the assignment. In essence, he argues that there is no proof that the persons who signed the assignment were authorized to do so. Apparently, the lower court was satisfied with the validity of the assignment. But assuming its invalidity, what has Quinn lost? Nothing. If the assignment is null and void, then respondent and U.S.A.A. would be entitled to reimbursement for the consideration paid for the "assignment" and the lien in the full amount would be asserted by El Dorado or the insurance commission for its creditors. And appellant would receive the same net amount. In any event, this court has no record upon which to evaluate the authority of any of the signatories on the assignment.

Appellant next argues that the instant case should be distinguished from respondent's citations of authority permitting the assignment: Hone v. Climatrol Industries, Inc. (1976) 59 Cal.App.3d 513, 130 Cal.Rptr. 770. In the alternative, he argues that Hone should be disapproved. ³

In the Hone case, the employee sued the third-party tortfeasor. The employer's worker's compensation carrier filed a complaint in intervention. The carrier then settled with the tortfeasor for $10,000. In exchange, the carrier assigned the employer's lien rights to the tortfeasor and dismissed its complaint in intervention. The effect of this arrangement was to prevent the tortfeasor from raising the issue of the employer's own negligence. ⁴ After a judgment for plaintiff, and over his objection, the court granted a lien for $81,000 against the judgment. The appellate court upheld the order granting the lien, but reversed the lower court's refusal to award attorney fees to the plaintiff's attorney based on the liened portion of the judgment.

Significantly, in Hone it appears that at the time the tortfeasor and employer's carrier brought up the proposed arrangement at an in camera hearing, the employee's attorney made no objection. The court held that the employee was estopped from asserting the invalidity of the assignment on appeal because the record reflected: "(1) [T]hat counsel for carrier State Fund and third-party Climatrol made a full disclosure of the nature of the settlement agreement including the assignment of the lien and the reasons therefor to the court and plaintiff's counsel; (2) that there is no evidence whatsoever indicating collusion by way of a secret compact or to support a finding of fraud or deceit on the part of either counsel for carrier State Fund or third-party defendant Climatrol; (3) that at no time did plaintiff's counsel object to the agreement and assignment or to the dismissal of the complaint in intervention by the trial court and knew the lien was still on file and its intended use; (4) that apparently plaintiff's counsel derived some benefit from the arrangement since he entered into a stipulation with defense counsel as to the amount of the compensation benefit payments in the sum of $81,307.73 which eased his burden of proof on the element of damages; and (5) plaintiff's counsel registered no objection to the court's instructing the jury on BAJI No. 15.10 that it should determine plaintiff's total damage irrespective of worker's compensation and that the law provides a means by which the rights of the person paying compensation benefits will be protected." (Hone v. Climatrol Industries, Inc., supra, 59 Cal.App.3d 513, 523, 130 Cal.Rptr. 770.)

In the instant case, the record does not suggest...