Southern Pacific Transp. Co. v. Chabert, 91-3256
| Decision Date | 30 September 1992 |
| Docket Number | No. 91-3256,91-3256 |
| Citation | 973 F.2d 441 |
| Parties | SOUTHERN PACIFIC TRANSPORTATION COMPANY, Plaintiff-Appellee, v. Earline CHABERT, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Thomas L. Gaudry, Jr., Daniel A. Ranson, Windhorst, Gaudry, Ranson, Higgins & Gremillion, Gretna, La., for defendant-appellant.
Raymond Joseph Salassi, Jr., Ellen S. Kovach, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, La., for plaintiff-appellee.
Appeals from the United States District Court for the Eastern District of Louisiana.
Before POLITZ, Chief Judge, SMITH, Circuit Judge, and FITZWATER, * District Judge.
Earline Chabert appeals a judgment against her for $132,000 in favor of Southern Pacific Transportation Company (SOPAC). She also appeals the amount awarded on her counterclaim for attorney's fees and costs. For the reasons assigned, we affirm.
On November 3, 1982, Chabert's husband, Thomas Chabert, was killed in an automobile accident on the Greater New Orleans Bridge. At the time of his death Thomas Chabert was acting within the scope of his employment with SOPAC. On February 16, 1983, SOPAC paid a $132,000 death benefit to Chabert under the National Agreement between SOPAC and the union of which her husband was a member. Contemporaneous with the payment, SOPAC and Chabert signed a contract which provided:
In consideration of the payment of $132,000 as aforementioned both parties agree to be governed by ... the subrogation provision....
Subrogation: The carrier shall be subrogated to any right of recovery an employee or his personal representative may have against any party for loss to the extent that the carrier has made payments pursuant to this Article.
Chabert filed a wrongful death suit against various defendants which she settled, individually and on behalf of her two minor children, for $825,000. In the settlement she released all defendants from any claim arising out of her husband's accident and death. SOPAC did not participate in the suit or settlement. It filed the instant suit seeking reimbursement of the $132,000 it had paid to Chabert. Chabert counterclaimed for the attorney's fees and costs she had incurred in securing the $825,000 settlement.
After a bench trial, the district court concluded that the $825,000 payment fully compensated Chabert for her losses. The court also found that the agreement between her and SOPAC was a conventional subrogation and that Chabert and her counsel were fully aware of SOPAC's subrogation claim when they settled for $825,000 and released the tortfeasors. The court awarded Chabert $19,425.06 on her counterclaim for expenses incurred in obtaining the settlement. The offset was calculated based on the court's estimate of the amount of the legal fees attributable to the settlement, an hourly-based total of $121,406.65. This expense item was multiplied by 16%, considered SOPAC's percentage share of the recovery. Chabert timely appealed the SOPAC award and the amount awarded on her counterclaim.
Findings of fact made pursuant to a bench trial are subject to the clearly erroneous standard of review. 1 Legal conclusions are subject to plenary review. The parties agree that Louisiana law controls the instant dispute.
Subsequent to the SOPAC/Chabert agreement the articles of the Louisiana Civil Code pertaining to subrogation were extensively amended by La. Acts 1984, No. 331, Sec. 1, effective January 1, 1985. In the absence of legislative expression to the contrary, substantive laws are not given retroactive effect. 2 With one exception discussed below, the pre-revision articles in effect at the time of SOPAC's payment to Chabert control the instant dispute. 3
Under Louisiana law, subrogation may be either conventional or legal. 4 Conventional subrogation occurs when the creditor or obligee, receiving payment from a third person, subrogates his rights, actions, privileges, and mortgages against the debtor or obligor; this subrogation must be express and contemporaneous with the payment. 5 A conventional subrogation may also be partial if the payment to an obligee represents only part of the total debt owed. 6 In a partial subrogation the debt is divided between the subrogor and the subrogee, making them either joint or several obligees. 7 Historically, Louisiana law has given a preference to the original creditor or subrogor over the partial subrogee. 8 This preference derives from the legal presumption that one does not act against ones own interest when subrogating another to one's rights. 9
The Sonnier court applied this maxim to a conventional, partial subrogation between an insurer and its insured. The court held that an insurer cannot recover funds advanced to its insured unless the insured has been fully compensated for the loss. 10 SOPAC makes the converse argument that if the subrogor, Chabert, has been fully compensated by her $825,000 settlement, then SOPAC, the partial subrogee, can recoup its entire $132,000 payment. We find this argument consistent with Sonnier and its progeny. In Smith v Manville Forest Products Corp., 11 the court held that if an employee who received medical benefits was subsequently fully compensated, then the employer who had paid the benefits could recoup the payment pursuant to a conventional subrogation agreement. Similarly, in Provident Life and Accident Insurance Co. v. Turner, 12 the court stated that pursuant to Sonnier, an insurer could collect the amount of a subrogation claim from insureds who had recovered the full amount of damages from the tortfeasors. The Turner court also relied upon the plurality opinion in Audubon Insurance Co. v. Farr. 13 Because the Audubon insured had breached a subrogation agreement by settling with the tortfeasors without the insurer's knowledge or consent, the insurer was awarded judgment in the amount it had paid as a partial, conventional subrogation. 14
The Audubon plurality confirmed the rule that an insured holds excess recovery in trust for the insurer. 15 This rule, rooted in insurance law, was explained thusly:
When the insured recovers from the tortfeasor an amount which, with the amount already received from his insurer, exceeds the loss actually sustained by him, he holds the excess as trustee for his insurer for whom it belongs[.] 16
Whether SOPAC is considered a partial subrogee, as described in Sonnier and the civilian tradition, or is analogized to an insurer, the result is the same: if Chabert has received full compensation, then she must reimburse SOPAC. Chabert argues that the Sonnier and Audubon rationales only apply to insurance contracts. Harrison, for example, is an early case cited for the proposition that an insured who receives a double recovery holds the excess in trust for the insurer. The Harrison court derived this rule from general treatises on insurance law and one Louisiana case. 17 The Sonnier analysis, however, is based on traditional civilian doctrines; thus we are not persuaded that Sonnier and its progeny are limited to insurance policy subrogation clauses. 18 Harrison's trustee theory has its roots in insurance law, but the Harrison rule appears intertwined with the civilian authorities 19 and, in any event, is consistent with the Sonnier line of cases.
Chabert claims that State National Fire Insurance Co. v. Sykes 20, is the controlling authority in the instant dispute. Chabert argues that SOPAC's subrogation agreement gives it a claim against the various tortfeasors with whom Chabert settled. Under this theory, these tortfeasors would then bring an indemnity action against Chabert for her violation of the settlement and release agreement. We do not find that the Sykes holding mandates this result. In Sykes, an insurer sued the tortfeasors who had injured its insureds, and then amended the complaint to state a cause of action against the insureds themselves. The issue on appeal was whether the insurer could maintain its action against the tortfeasors. The court found that it could, and that the tortfeasors in turn could bring an indemnity action against the insureds. We are not persuaded that Sykes is controlling; it does not address the issue at bar. Whether a cause of action existed against the insureds was not before the Sykes court and apparently was left unresolved after the insurer's success in recovering payment from the tortfeasors.
Chabert also argues that the terms of her agreement with SOPAC distinguish this case from the cases which allow subrogees to recoup payments directly from the subrogor. The agreement provided that SOPAC was "subrogated to any right of recovery an employee or his personal representative may have against any party for loss to the extent that the carrier has made payments pursuant to this Article." This language falls short of the reimbursement power granted in Smith and Wallace. 21 The Sonnier insurance clause, however, was similar to the clause signed by Chabert. 22 The Turner opinion did not contain a description of the terms of the subrogation agreement. We acknowledge that a Louisiana court might draw the distinction relied upon by Chabert. 23 This, however, does not appear to be the jurisprudential trend. Indeed Turner, the most recent authority, did not discuss the terms of the clause and interpreted Sonnier in support of the subrogation right. As the Sonnier clause is indistinguishable, we are impelled to conclude that a Louisiana court faced with this issue would resolve that SOPAC should recoup the advanced funds.
A second means by which a subrogation could be effected is by operation of law. A legal subrogation arises "[f]or the benefit of him who, being bound with others, or for others, for the payment of the debt, had an interest in discharging it." 24 Under the terms of SOPAC's contract with the Union, SOPAC paid Chabert $132,000 as a death benefit and thereby became legally subrogated to...
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