Winfree v. Philadelphia Electric Co.

OPINION

ZAPPALA, Justice.

We granted Appellant’s petition for allowance of appeal to review the order of the Superior Court, 362 Pa.Super. 646, 520 A.2d 1222, affirming the order and judgment of the Court of Common Pleas of Chester County which had denied the Appellant’s Petition To Set Aside or. Strike Satisfaction of Judgment and to Mark Judgment to the Use of Allis-Chalmers (hereinafter Petition). The essence of the Appellant’s petition attacking the judgment is that it has an absolute right to subrogation under § 319 of the Workmen’s Compensation Act, 77 P.S. § 671. Although we do not agree with the procedure utilized by the Appellant to protect its right, we do agree that its subrogation rights under the Act are absolute.

Ova Winfree commenced litigation by the filing of a complaint alleging that the injuries he sustained were the result of the negligence of the Philadelphia Electric Company (PECO). PECO in turn joined the Appellant, Allis-Chalmers Corp., as an additional defendant seeking contribution for any damages that it may have to satisfy. At the time of the accident, Appellee, Ova Winfree, was the employee of the Appellant. Because of the injuries sustained the Appellee was unable to work, resulting in the payment of workmen’s compensation benefits to him in accordance with the Act.

At the conclusion of the trial, the jury found PECO to be solely liable and awarded damages in the amount of $800,-000 to the Appellee, Ova Winfree, $175,000 to his wife, and delay damages in the amount of $212,483.28. After the denial of post-trial motions, judgment was entered on the verdict and PECO filed an appeal to the Superior Court. In January, 1984, PECO and the Appellees agreed to settle the judgment for $800,000. The Appellees had the judgment marked satisfied and PECO withdrew its appeal.

Appellant alleged in its Petition, that it was never notified of the settlement, the satisfaction, or the withdrawal of the appeal until after the entire procedure was completed. In order to recover the workmen’s compensation benefits paid, Appellant then filed its Petition with the trial court setting forth its requested relief.

We feel compelled to initially comment on the procedure utilized by the Appellant in this matter. In Epstein v. Kramer, 365 Pa. 589, 76 A.2d 212 (1950), we noted that a Petition For A Rule To Show Cause Why A Satisfaction Of Judgment Should Not Be Stricken From The Record is equitable in nature. To grant such relief, a plaintiff must demonstrate that he was induced to record the satisfaction of judgment by fraud or mistake. However, in Epstein we affirmed the denial of the petition concluding that the appropriate remedy was an assumpsit action for breach of contract. No evidence had been offered demonstrating that the plaintiff was fraudulently induced to satisfy the judgment of record. Rather, the defendant failed to honor the agreement to pay the judgment after the judgment was satisfied on the record.

Likewise, in Neustein v. Insurance Placement Facility of Pa., 271 Pa.Super. 126, 412 A.2d 608 (1979), the Superior Court affirmed the lower court’s refusal to strike a satisfaction of judgment when the plaintiff failed to demonstrate any facts establishing either fraud or inducement in the satisfaction of the judgment. So long as the plaintiff was not duped into actually satisfying the judgment, that judgment would not be stricken.

In the case sub judice, the Appellant does not claim that the Appellees were fraudulently induced into satisfying the judgment. Instead, the Appellant contends it was defrauded by the actions of the Appellees and PECO. Thus, on the face of its petition, the Appellant would not be entitled to the relief sought since the Appellees received a jury verdict and PECO agreed to pay a settlement which obviously the Appellees have agreed to accept. The Appellees are not now alleging that PECO committed any fraud. On the face of the judgment and record facts there is no reason to strike the satisfaction. No facts have been pled showing that PECO fraudulently induced the Appellees to satisfy the judgment. Thus, the procedure utilized by Appellant was inappropriate.

Our affirmance of the denial of Appellant’s petition does not, however, deny the Appellant’s subrogation rights as the same may still be pursued through a separate action against both the Appellees and PECO. In pertinent part, § 671 states as follows:

Where the compensable injury is caused in whole or in part by the act or omission of a third party, the employer shall be subrogated to the right of the employe, ... against such third party to the extent of the compensation payable under this article by the employer; reasonable attorney’s fees and other proper disbursements incurred in obtaining a recovery or in effecting a compromise settlement shall be prorated between the employer and employe, his personal representative, his estate or his dependents. The employer shall pay that proportion of the attorney’s fees and other proper disbursements that the amount of compensation paid or payable at the time of recovery or settlement bears to the total recovery or settlement. Any recovery against such third person in excess of the compensation theretofore paid by the employer shall be paid forthwith to the employe, his personal representative, his estate or his dependents, and shall be treated as an advance payment by the employer on account of any future installments of compensation, (footnote omitted)

77 P.S. § 671.

When a statute is unambiguous on its face, its clear meaning cannot be ignored to reach a desired result. 1 Pa.C.S. § 1921. In the cited section, the statute clearly and unambiguously states that, “... the employer shall be subrogated to the right of the employee ... against such third party to the extent of the compensation payable ...” The legislature could not have manifested more clearly its intent that the subrogation rights of the employer are absolute. We have consistently held in the past that the purpose of the Act was to provide the employee an exclusive right to benefits without the necessity of proving fault in exchange for the abrogation of the employee’s common law negligence remedies. Leflar v. Gulf Creek Indus. Park No. 2, 511 Pa. 574, 515 A.2d 875 (1986); Socha v. Metz, 385 Pa. 632, 123 A.2d 837 (1956). Following the statutory scheme, we recently held that the failure to raise the Act as an affirmative defense to a tort action did not result in a waiver. Leflar, supra. Therefore, as a general principle of law, the employer's subrogation rights are statutorily absolute and can be abrogated only by choice.

The Appellees and both lower courts rely upon Olin Corporation v. Workmen’s Compensation Appeal Board, 14 Pa.Commw. 603, 324 A.2d 813 (1974) and Travelers Insurance Co. v. Hartford Accident and Indemnity Co., 222 Pa.Super. 546, 294 A.2d 913 (1972), to support the conclusion that the Appellant is estopped from exercising its subrogation rights by equitable principles. In Olin, Commonwealth Court upheld the claimant’s right to pursue workmen’s compensation benefits even though he did not protect his employer’s future subrogation claim. The court held that since no benefits had been paid prior to the dismissal of the third party complaint, the claimant had not affected the employer’s subrogation rights. More importantly, the court held that statutory benefits arise without regard to the possible liability of third persons. Thus, workmen’s compensation benefits are not contingent but absolute.

In Travelers Insurance Co., supra, the injured employee entered into a consent judgment against joint tortfeasors and satisfied the judgment upon payment. Prior to the settlement, the Appellant-plaintiff, the employee’s workmen’s compensation carrier, had advised the Appellee-defendant, the insurance carrier for one of the tortfeasors, of its subrogation claim. However, the plaintiff never advised the employee or his attorney of its claim, nor did it intervene in the personal injury action. While the court did recognize subrogation as an equitable remedy, it did so in the context of the application of the concept of promissory estoppel. Thus, if the workmen’s compensation carrier had justifiably relied upon the liability carrier’s protection of its rights in the third party negligence action, then promissory estoppel would be applicable and the workmen’s compensation carrier would be entitled to proceed to recoup the benefits it paid. However, since the workmen’s compensation carrier did not prove any evidence of negligence as to the cause of the employee’s injuries, it was foreclosed from being reimbursed as a subrogee under Broderick v. Great Lakes Casualty Co., 152 Pa.Super. 449, 33 A.2d 653 (1943).

In addition, both lower courts relied upon Meehan v. City of Philadelphia, 184 Pa.Super. 659, 136 A.2d 178 (1957). In Meehan, the plaintiff and the City of Philadelphia filed a joint action against the third party tortfeasor for damages arising out of the injuries the plaintiff received as the result of a motor vehicle accident. Both then settled the cause of action against the tortfeasor. Prior to the settlement, the City had paid the plaintiff benefits under the Act of June 28, 1935, P.L. 477, 53 P.S. § 637 and the Workmen’s Compensation Act. The City then tried to recover a credit for any workmen’s compensation benefits paid or to be paid. In rejecting the City’s claim, the court relied upon equitable principles and held that the plaintiff had been led to believe that his settlement with the City resolved all subrogation claims by the City. Therefore, the City was precluded from pursuing any further claims against Meehan.

Notwithstanding the Appellees’ contentions, the cited cases are just as supportive of the Appellant’s position as of the Appellees’. In both Traveler’s Insurance Company and Meehan, the court looked to the interplay between the claimant and his employer to determine whether estoppel was appropriate in supporting a denial of subrogation rights. In each case, estoppel did not apply to the obtaining of benefits, only to the enforcing of the subrogation rights. In the case, sub judice, the lower courts agreed with the Appellees’ argument that the Appellant should be denied its subrogation rights because it did not fully cooperate in obtaining a negligence judgment. In fact, the Appellees argue that Appellant acted in direct controvention of their interests. There appears to be some support for Appellees’ argument in the record. However, Appellant’s actions must be viewed in the context in which they arose. Appellees seem to lose track of the fact that Appellant was joined by the original defendant in a cause of action in negligence based upon contribution or indemnification. Thus, the Appellant did in fact become an adversary. It therefore was not unreasonable for the Appellant to pursue the actions it did.

Reliance upon the equitable principles espoused in Traveler’s Insurance Company and Meehan is misplaced in that this Appellant’s actions were in furtherance of its pursuit to exonerate itself from liability. Adopting Appellees’ argument would be placing the employer in the dubious position of cooperating with its employee and running the risk of being found solely liable or vigorously pursuing its own exoneration and losing its subrogation rights. We will not subject employers to this choice. We therefore hold that under these circumstances the right of subrogation is absolute.

The Order of the Superior Court is affirmed without prejudice to the Appellant to pursue its subrogation claim against the Appellees and/or PECO.¹

LARSEN and PAPADAKOS, JJ., filed concurring and dissenting opinions.

1 . It seems to be in dispute as to how much was paid by the Appellant to the Appellee, Ova Winfree, in workmen’s compensation benefits. Because of our disposition it is unnecessary for us to calculate in the first instance what benefits were paid or what credit should be given for attorney’s fees. Such determination can be made at the time the Appellant proceeds to enforce its subrogation rights against Appellees, PECO or both.