Walters v. Eagle Indemnity Co.
| Decision Date | 24 June 1933 |
| Citation | 61 S.W.2d 666 |
| Parties | WALTERS v. EAGLE INDEMNITY CO. |
| Court | Tennessee Supreme Court |
James C. Elmore and L. H. Graves, both of Memphis, for plaintiff in error.
Waring, Walker & Cox, of Memphis, for defendant in error.
This is an action by an injured workman to recover from his employer's insurer compensation for a permanent total disability. The petition was dismissed on demurrer by the circuit court, applying section 14 of the workmen's compensation statute (Pub. Acts 1919, chapter 123; Code, § 6865). The employee, Walters, has prosecuted his appeal in the nature of a writ of error to this court.
The petition avers that the injury for which compensation is claimed was caused by the servants or agents of the Choctaw Culvert & Machinery Company, and that petitioner sued that company for damages for his injuries; that during the trial of the suit for damages, on June 9, 1932, he entered a voluntary nonsuit, and thereby dismissed the action; that on the same day he executed a covenant not to sue said company, the consideration for which covenant was $2,500, and that said sum was paid to him.
The petition does not state the reason which impelled the petitioner to dismiss his action for damages, but, since the covenant not to sue was executed on the same day, we think it may be reasonably inferred that there was a causal connection between the two events. The covenant recites that "it is desired by the said E. W. Walters to dismiss his suit," indicating that the suit was pending when the covenant was executed.
The covenant not to sue, which is copied in the petition, recited the fact of the injury; that Walters was claiming compensation from his employer and had also filed his suit for damages against the covenantee, which had denied liability. It recited that "there is considerable doubt as to the liability of said Choctaw Culvert and Machinery Company and there is absolute liability under the Workmen's Compensation Act of Tennessee against the National Construction Company" (petitioner's employer).
The covenant then pursued the usual form of such instruments, binding Walters not to sue, nor to permit any other person to sue the covenantee, for damages or compensation for said injuries, and to hold the covenantee "harmless from any and all claims or liabilities growing out of any such action or proceeding."
It was stipulated in the covenant that it was not intended as a release of any claim against the covenantee, and that it should not inure in any way to the benefit of the petitioner's employer, the National Construction Company.
The section of the Compensation Law invoked by the defendant in error, the employer's insurer, contains the provision that: "Whenever an injury for which compensation is payable under this chapter shall have been sustained under circumstances creating in some other person than the employer a legal liability to pay damages in respect thereto, the injured employee may, at his option, either claim compensation or proceed at law against such other person to recover damages, or proceed against both the employer and such other person, but he shall not be entitled to collect from both," etc. Then follow the provisions subrogating the employer to the rights of the employee, in the event of an award of compensation. Pub. Acts 1919, c. 123, § 14; Code, § 6865.
If the injured employee has "collected" from the covenantee, in the sense of the quoted provision, his right to collect compensation was thereby extinguished, and the demurrer to the petition was properly sustained. Mitchell v. Usilton, 146 Tenn. 419, 425, 242 S. W. 648.
The Workmen's Compensation Act was adopted to protect industrial workers against the hazards of their employment, and to cast upon the industry in which they are employed a share of the burden resulting from industrial accidents. Partee v. Memphis Concrete Pipe Co., 155 Tenn. 441, 444, 295 S. W. 68.
The provisions of section 14 were designed to relieve the employer from this burden in cases in which the injuries are caused by the fault of other persons. The provisions against the collection of both damages and compensation, and subrogating the employer to the rights of the employee in the event compensation is awarded, were enacted for the benefit of the employer, as an integral part of the scheme of compensation. Keen v. Allison (decided May 20, 1933) 166 Tenn. ___, 60 S.W.(2d) 158.
The Compensation Act is a remedial act, and we have consistently followed the legislative injunction that it be given an equitable construction, to the end that its objects and purposes may be realized and attained. Pub. Acts 1919, c. 123, § 47; Code, § 6901.
The reported cases, in this and other jurisdictions, reveal that the practice of executing a covenant not to sue, rather than a release or discharge, in the compromise or settlement of claims for damages, has been resorted to for the purpose of avoiding the technical rule of the common law that the discharge of a wrongdoer extinguishes the cause of action arising out of the wrong, and therefore operates equally to discharge those jointly guilty thereof. We recognized that this effect may not result from a mere covenant not to sue, on the very technical ground that the covenant not to sue does not have the effect of extinguishing any part of the cause of action arising from the tort. Smith v. Dixie Park & Amusement Co., 128 Tenn. 112, 120, 157 S. W. 900.
But in Nashville Interurban Ry. Co. v. Gregory, 137 Tenn. 422, 436, 193 S. W. 1053, this court also recognized that in a subsequent suit by the covenantor against the covenantee, on the same cause of action, the latter may plead the breach of the covenant by way of set-off or recoupment, the covenant being thus given the effect of a satisfaction of the damages which the injured person might otherwise be entitled to, although not,...
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