Wyoming State Treasurer ex rel. Worker's Compensation Division v. McIntosh

• Decision Date: 13 December 1976
• Docket Number: Nos. 4623,4624,s. 4623
• Citation: 557 P.2d 743
• Parties: WYOMING STATE TREASUPER ex rel. WORKER'S COMPENSATION DIVISION, Appellant (Intervenor below), v. Terry Dean McINTOSH, Appellee (Plaintiff below), Heil Company, a corporation, et al., (Defendants below). Terry Dean McINTOSH, Appellant (Plaintiff below), v. WYOMING STATE TREASUPER ex rel. WORKER'S COMPENSATION DIVISION, Appellee(Intervenor below), Heil Company, a corporation, et al., (Defendants below).
• Court: Wyoming Supreme Court

Page 743

557 P.2d 743

WYOMING STATE TREASUPER ex rel. WORKER'S COMPENSATION DIVISION, Appellant (Intervenor below), v. Terry Dean McINTOSH, Appellee (Plaintiff below),

Heil Company, a corporation, et al., (Defendants below).

Terry Dean McINTOSH, Appellant (Plaintiff below), v. WYOMING STATE TREASUPER ex rel. WORKER'S COMPENSATION DIVISION, Appellee(Intervenor below),

Heil Company, a corporation, et al., (Defendants below).

Nos. 4623, 4624.

Supreme Court of Wyoming.

Dec. 13, 1976.

V. Frank Mendicino, Atty. Gen., Lawrence A. Bobbitt, III, Sp. Asst. Atty. Gen., Cheyenne, for Wyoming State Treasurer ex rel. Worker's Compensation Division.

Mayne W. Miller, Casper, for Terry Dean McIntosh.

Before GUTHRIE, C. J., and McCLINTOCK, RAPER, THOMAS and ROSE, JJ.

ROSE, Justice.

This matter comes to this court upon the consolidation of two appeals arising out of the same industrial accident.

In August, 1970, Terry D. McIntosh, while working for the City of Casper in an employment covered by the Worker's Compensation Act, had his arm severed by a powered hopper mounted on a garbage truck, for which he was paid compensation in the sum of $22,898.24. Suit for third-party negligence was filed by McIntosh against the manufacturer of the garbage compactor, and he recovered damages of $104,413.00. Judgment for this amount, less $10,000.00 which he had previously received through a prior settlement with one of the defendants, was entered. McIntosh deposited $22,898.24 with the district court pending determination of how much was due and owing as refund for compensation benefits paid.

On October 23, 1975, the district court decided that an attorney's lien filed by the employee's attorney against the Division's reimbursement claim was valid and ordered one-third of this claim ($7,632.75) be distributed to the employee's attorney as his fee in satisfaction of his lien. ¹ The balance ($15,265.49) was ordered to be paid to reimburse the appropriate accounts in the Industrial Accident Fund. From this decision the Division has appealed.

The district court further found that § 27-54, W.S.1957, C.1967, as amended by Session Laws of Wyoming 1969, Chapter 191 (Repealed in 1975), ² and not § 27- 313, W.S.1957, C.1967, 1975 Cum.Supp., ³ controlled the distribution of the Division's claim and entered judgment accordingly. From this decision, McIntosh has appealed. We affirm this last-mentioned decision of the trial court.

In resolution of the attorney's-lien question, appellant-State of Wyoming urges the court's consideration of these arguments:

'I. Statutory limitations on attorneys' fees are generally upheld in workers' compensation cases.

'II. In order for an attorney to collect a fee there must exist an attorney-client relationship either by express or implied contract. The Workers' (sic) Compensation Division has no authority to retain counsel for 3rd party cases; therefore, no such relationship could have existed between claimant's counsel and the Division.

'III. The monies contained in the Industrial Accident Fund administered by the State Treasurer are public funds obtained by taxation, controlled by legislative madate (sic), and regulated by a state agency for the public welfare.

'IV. In the absence of constitutional or legislative authority, an attorney can acquire no lien on a public fund or property.

'V. The Industrial Accident Fund should be made available to all injured workers in times of need. To allow 'raids' on the fund would seriously deplete it and would be a departure from established public policy.'

The appellee McIntosh generally denies the position of the State and argues:

I. The Worker's Compensation Division would be unjustly enriched if the lien were not allowed for the reason that the worker would be paying the attorney to recover monies to reimburse the employer's account in the Industrial Accident Fund.

II. Section 27-54, supra, does not prohibit the payment of the employee's attorney's fee, to be deducted from that which the Worker's Compensation Division recovers from the employee's third-party monies and, therefore, it is within the Judge's discretion as to whether he will allow it.

III. Under § 29-2, W.S.1957, C.1967, the attorneys' lien statute, the employee's attorney has a lien for a reasonable fee to be paid from the funds to be paid the Worker's Compensation Division out of third-party recovery monies.

When the issues and arguments are reduced to their lowest common denominator, there remains but one question for this court's resolution. It is:

Is the state's statutory lien prescribed in § 27-54 enforceable in the face of an attorney's fee lien claim under § 29-2, for a portion of the amount which the statute provides should be returned to the state?

We hold that the trial court erred in deciding that an attorney, under the general attorneys' lien statute, § 29-2, supra, could enforce his lien against those sums set aside by statute out of third-party damages which the legislature, in § 27-54, has specifically mandated will be refunded to the state. The district court's holding on this point is reversed.

Section 27-54 contains no provision for the payment of attorney's fees, except through the language of the section which reads:

'After deducting the reasonable cost of recovery or collection, which cost shall not exceed thirty-three and one-third percent (33 1/3%) (of the recovery), . . .'

The cost of 'recovery or collection' includes attorney's fees. ⁴

The statute, therefore, clearly makes allowance for all legislatively-contemplated attorney's fees for all services rendered in a third-party action. The language about costs (which Brown, supra, holds to include attorney's fees), together with the rest of the statutory-disbursal formula, is unequivocal and unambiguous, leaving no room for court interpretation. ⁵ The statute provides very simply that there may first be deducted one-third of the third-party recovery for 'costs of recovery or collection.' One-third of the remainder of the recovery must be paid to the employee. If there are sufficient monies remaining after these two deductions, the balance (of the third-party fund) is assigned to repayment to the Industrial Accident Fund all of the benefits paid the worker. If, after deducting one-third of the recovery for costs and one-third for the worker, there is not a sufficient balance with which to reimburse the fund for all benefits paid, then only two-thirds of the amount remaining may be applied to fund-repayment-the rest to go to the employee.

There can be no doubt about the plain meaning of the statute which can be ascertained by simply reading it. There is no ambiguity. There is no room for interpretation.

In Brown v. State, supra, we held that the state could attach conditions upon the distribution of third-party recovery funds under the Workmen's Compensation Law. ⁶ That is what it has done here. The legislature has provided, with specificity, a formula by which the refunding of disbursed worker's benefit payments will be accomplished.

The majority rule is that where the statute provides a limitation upon or formula for the payment of attorney's fees in a Worker's Compensation Act, it must be followed. The Arizona Supreme Court, in Ruth v. Industrial Commission, 107 Ariz. 572, 490 P.2d 828 (1971), has held the employee to be responsible for the repayment of all money paid out of the fund in his behalf. The same court recently held in Liberty Mutual Ins. Co. v. Western Casualty & Surety Co., 21 Ariz.App. 363, 519 P.2d 216 (1974), a statute providing the state with a lien on the amount actually expended is not to be made subject to a collection fee.

The Ohio Supreme Court, in the case of McCamey v. Payer, 135 Ohio St. 660, 22 N.E.2d 127 (1939), stated that agreements made which are not in accordance with statutory provisions are unenforceable when it said:

'. . . (W)e cannot escape the inhibitions contained in our organic and statutory law by approving a contract of the type presented (contingent fee contract in excess of statutory amounts for attorneys' fees) . . .'

Notwithstanding the provisions of § 27-54, which first reserves to the employee a sum equivalent to one-third of the third-party recovery to be set aside for 'reasonable cost of recovery or collection,' appellee argues that his attorney has a lien for an additional one-third of all sums which the statute provides must be reimbursed to the state.

There is no statutory authority for such attorney's fee payment to be made by the state or received by the attorney from the state. The attorney was not hired by the state to recover third-party damages-could not have been employed by the state for this purpose-and there is, consequently, no attorney-client relationship between the state and the injured employee's lawyer. The right to a lien arises by contract of employment, express or implied, between an attorney and his client and may not be extended to others who may have an interest in the litigation but who have not employed the attorney.

It was said that an attorney's lien

'. . . app(lies) solely to the personal relation existing between the attorney and his client, and can in no condition of affairs be extended to or affect the rights of other persons who may be interested in the litigation but who have not employed such attorney . . .' In re Gillaspie (D.C.W.Va.) 190 F. 88, 91. See also 7 C.J.S. Attorney and Client § 208, p. 1138, 'Scope of lien restricted by relation.' ⁷

In Wyoming, since the state may not be a party to actions which seek to recover damages from negligent third persons, the state is not, therefore, subrogated to the rights of the injured employee in any such litigation. For this reason there cannot be an express or an implied contract requiring the state to pay the employee's attorney's fees for collecting the money which, under the statute, must be reimbursed to the state as refund for benefits paid. ⁸

The employee says § 27-54 does...