Dunseath v. Nevada Industrial Commission

Does public policy require and the Nevada industrial insurance act by specific provision provide that no claimant for compensation shall contract with an attorney to represent the former in an action at law for the recovery of compensation after a claim has been finally rejected by the Nevada industrial commission? We think the answer is no, for the following reasons:

When once the Nevada industrial commission has rejected a claim, finally and in toto, the claimant has concluded so far as the Nevada industrial commission is concerned. State v. Nevada Industrial Commission, 40 Nev. 220. This case settles two points. First, that a rejected claim concludes the claimant before the commission, and, second, that the Nevada industrial commission will undoubtedly be called upon to make rejections. It also settles the point that there is no appeal from the final decision of the Nevada industrial commission, and, further, the act itself offers the claimant no recourse to the courts. He cannot ascertain from the act what course to pursue. Throughout the whole law, section 38 makes the one and only mention of recourse to the courts. This section authorizes only the Nevada industrial commission to prosecute and defend. No procedure is provided for and a claimant's rights are not mentioned. Hence, in the first case that arose under the act, our supreme court, in the case of State v. Nevada Industrial Commission, 40 Nev. 225, laid down the method of procedure for a dissatisfied claimant. This settles the further point that the claimant may have recourse to the courts. His only problem, then, is to obtain counsel to represent him. If he is without funds, as injured workmen usually are, he will probably try to enlist the services of an attorney upon a contingent basis and, if successful, enter into an agreement with the attorney; and the case being presented to the courts is finally adjudicated. If a judgment is obtained and the claimant refuses to keep his agreement with the attorney, as in the case at bar, the attorney, finding the law silent on this point, there being no mention whatever of legal procedure in such a case in the Nevada industrial insurance act, also takes refuge in the general law and, relying upon section 5376, Rev. Laws, files a lien upon the judgment and pursues the proceeds in the hands of the judgment debtor, the Nevada industrial commission. Before the passage of the Nevada industrial insurance act no one would have questioned the validity of a contract such as the one under consideration.

The writer fails to find an instance where in other states the lien has been denied in a workman's compensation case where the attorney was entitled to a fee. A digest of such cases may be found in 3d Dec. Digest, vol. 19, Master and Servant, pages 1248 et seq., Key No. 420.

It will be noted that by the repeal of sec. 37 in 1917, the Nevada industrial commission was, in effect, subrogated to all the rights and responsibilities of every employer coming under the act, where an injury to a workman is concerned. Does the law imply that an employer, by placing himself under the provisions of the act, ipso facto, bars an injured workman from making a contract with an attorney to represent him in an action to recover for an injury; that by this simple expedient the workman may not sue the employer, for the latter is now exempt, nor may the workman make a valid contract with an attorney to represent him in an action against the one to whom the responsibility has been transferred? Section 28 of the Nevada industrial insurance act, if thus construed, is a violation of section 15, article 1 of the Constitution of Nevada and of sec. 10, article 1 of the United States Constitution, in that it impairs the obligation of contracts. 12 C.J. 1056. We submit that the contention of appellant is fallacious for the reason that the Supreme Court of Nevada in the case of State v. Nevada Industrial Commission, 40 Nev., at p. 226, in speaking of the judgment of the court in a case of this character, stated: "If a claim is finally rejected in toto, that is the end of it so far as the commission is concerned unless a judgment is obtained against the commission * * * in which event the judgment will have the force of an allowed claim."

There can be no question but that under section 28 of the Nevada industrial insurance act all assignments of compensation are prohibited, and further that the right to collect compensation shall not pass to any other person by operation of law. In enacting section 28 the legislature was exercising its prerogative under the police power of the state, to the end that the amount of compensation due should remain as a fund for the exclusive use of claimant in order that such claimant may not become a public charge. As to the reasons which prompted the legislatures of the several states to enact this law, see Cunningham v. Northwestern Improvement Company (Mont.),119 P. 559; Schneider's Workman's Compensation Laws, vol. 1, sec. 3, p. 5.

We submit that section 28 of the act is constitutional. A similar provision in the act of Michigan was held by the court in the case of Mackin v. Detroit-Timkin Axle Company, 153 N.W. at p. 55, to be constitutional.

The Supreme Court of California in the case of Pacific Electric Railway Company v. Commonwealth Bonding and Casualty Insurance Company, 204 P. 262, held that an assignment by claimant of compensation payable under the law was invalid as being contrary to public policy.

Appellant insists that Nevada is the only state where the legislature has failed to provide for an attorney's lien. This argument is, we believe, sufficiently answered by the opinion of the lower court where it held that this argument of appellant furnishes conclusive proof that under the Nevada law no attorney's lien is authorized. Under the existing law claimant had a perfect right to enter into a contract and thereby becomes obligated to pay appellant attorney fees, but he could not, under the law, use the compensation money for this purpose.

The Supreme Court of the United States in several cases has held, even where a statute is enacted after the contract is executed and such statute affects the obligations of the parties, that it cannot be construed as impairing the obligations of the contract. Capital Trust Company v. Calhoun, 250 U.S. 208; Calhoun v. Massee, 253 U.S. 170; Nutt v. Knut, 200 U.S. 12; Powell v. Jennings, 48 N.C. 547. See, also, Yeiser v. Dysart, 69 L.Ed. 775.

In the case of Brearley School v. Ward, 94 N.E. 1001, the court held, concerning the statement to impair the obligations of contract, that "to impair is in some way to weaken or diminish the power which the courts had when the contract was made to enforce it." We submit, therefore, that under the facts no obligation of contract is impaired, but on the contrary the contract, at the time it was entered into, was invalid because its provisions were in direct violation of section 28.

OPINION Appellant brought this action in the court below against the Nevada industrial commission to compel the commission to pay him the sum of $600 out of an award to an injured workman. It is alleged in the complaint that said amount is the agreed compensation for appellant's services as an attorney for securing for said workman an enlarged compensation in an action instituted in the district court against the commission.

Respondent filed a demurrer to the complaint, and as grounds of demurrer alleged that the complaint did not state facts sufficient to constitute a cause of action, and further that the contract sued upon was in direct violation of the specific provisions of the statutes of Nevada and contrary to public policy.

The demurrer was sustained by the court and judgment entered thereon. The judgment is based upon the conclusion of the court that the contract for compensation of the attorney out of the moneys of the award is void under the provisions of section 28 of the Nevada industrial insurance act (Stats. 1913, c. 111), as amended by Stats. 1915 at page 291, c. 190, sec. 10. The section in part reads:

"Compensation payable under this act, whether determined or due, or not, shall not, prior to the issuance and delivery of the warrant therefor, be assignable; shall be exempt from attachment, garnishment, and execution, and shall not pass to any other person by operation of law."

1. Appellant contends that the provisions of this section are not applicable in a case like this where an enlarged compensation has been awarded by a court, but are applicable only to an original award made by the commission. We do not agree with this contention. The terms of the section are clearly against it. The exemptions and prohibitions found in the section apply to all "compensation payable under the act."

If the district court had jurisdiction of the action for an enlarged compensation, how can it be said that the claim rejected by the commission and finally awarded by the court is not compensation payable under the act. Counsel virtually conceded jurisdiction by instituting that action, and such jurisdiction has not been questioned by counsel in any of the cases of that character coming to this court. It has been held by this court that, after a claim for compensation had been rejected by the commission, a judgment might be obtained against it in a court of competent jurisdiction. State v. Nevada Industrial Commission, 40 Nev. 220,161 P. 516, 518. In this regard the court said:

"If a claim is finally rejected in toto, that is the end of it so far as the commission is concerned, unless a judgment is obtained against the commission in a court of competent jurisdiction, in which event the judgment will have the force of an allowed claim. Should the commission refuse to pay such final judgment, mandamus would be an appropriate remedy."

As such a judgment has the force of an allowed claim and it is the duty of the commission to pay it, the compensation awarded by the judgment comes clearly within the scope of section 28.

2, 3. Counsel for appellant calls our attention to Richey v. Ziegler, 89 Cal.App. 35, 264 P. 293. It is claimed that the case is directly in point and in accord with his contention. While counsel did not discuss the case, we think the statement he must rely on to the effect that the defendants could not invoke the defense of the invalidity of the assignment is inconsistent with the purpose of section 28 of our act. This section clearly expresses the intention of the legislature that the award shall be paid only to the claimant. A contract to the contrary is of no force and effect. Pacific Electric Ry. Co. v. Commonwealth Bonding Casualty Ins. Co. et al., 55 Cal.App. 704, 204 P. 262.

4. It is further contended that said section is in violation of section 15, article 1, of the Constitution of Nevada, and of section 10, article 1, of the Constitution of the United States. This contention is likewise untenable.

To impair, within the meaning of the constitutional inhibition, "is in some way to weaken or diminish the power which the courts had when the contract was made to enforce it, if enforcible specifically, or to give remedy by damages for failure to perform it." Miller on Const. of U.S. p. 541; quoted in Brearley School v. Ward,201 N.Y. 358, 367, 94 N.E. 1001, Ann. Cas. 1912B, 251. Mr. Justice Miller, in his treatise on the Constitution of the United States, at page 531, speaking of the meaning of this constitutional inhibition, also says:

"What is meant is that after the contract has been made no state shall make a law which impairs its force, and it does not mean anything more than that."

The section assailed by appellant was enacted long prior to the contract in question. Consequently, under the elementary rule stated above the obligation of this contract could not be impaired by it. 6 R.C.L. p. 326, par. 315, and cases cited in notes 14, 15, 16, and 17.

5. In appellant's closing brief are found objections on other constitutional grounds, but we think they are without merit. Lynch and appellant were not prohibited by the section from contracting for the payment of an attorney fee to the latter, but from agreeing that it should be paid out of the award. We are satisfied that the provisions of the section in this regard are within the police power of the legislature. Appellant denounces the statute as unjust, but this consideration was for the legislature.

The judgment of the lower court should be affirmed.

It is so ordered.