Board of Administration v. Ames

Defendant appeals from judgment in favor of plaintiff in the sum of $5,166.78.

Questions Presented

1. When does the har of section 338, subdivision 1, Code of Civil Procedure, commence to run in this character of action ?

2. Was due process of law violated as to defendant by the proceeding before the Industrial Accident Commission between plaintiff and Highway Patrolman Hanson, in which defendant was not a party ?

3. Does the statutory program provided by sections 21451, 21452 and 21453, Government Code, deny defendant the equal protection of the law?

4. Did the releases of the State Compensation Insurance Fund and Hanson to defendant, also release plaintiff’s claim?

Record

.This.is an action brought by the Board of Administration, State Employees’ Retirement System, to recover from defendant the actuarial equivalent of the benefits for which the system is liable to Highway Patrolman Robert J. Hanson because of injuries caused by defendant’s negligence and received in. the .course of his employment as such patrolman.

The facts are agreed. Defendant, while intoxicated, drove his automobile into the rear end of a Highway Patrol vehicle stopped at a stoplight, permanently injuring Patrolman Hanson and damaging the vehicle. Hanson received industrial :accident benefits administered for the state by the State Com"pensation Insurance Fund. The State Fund and Hanson executed releases to defendant, as did the state solely for its property damage. Plaintiff was not advised of these releases until after Hanson’s retirement and did not consent to them. As a state employee Hanson was subject to retirement. Plaintiff applied to the Industrial Accident Commission in a procéeding entitled State Employees’ Retirement System, applicant, v. Robert J. Hanson, defendant, to have it determined that the disability of Hanson was industrially incurred and the extent thereof. The commission determined the disability to be industrially incurred, retired Hanson, and determined the extent of the disability and the amount to be paid to him. In the interim between that determination and the reinstatement from retirement and reemployment of Hanson, plaintiff

1. Section 338, Subdivision 1, Code of Civil Procedure.

This section provides for limiting the time within which actions may be commenced as follows: “Within three years: 1. An action upon a liability created by statute, other than a penalty or forfeiture. ”

This action is based upon sections 21451, 21452 and-21453, Government Code. Section 21451 provides: “If benefits are payable under this part because of an injury to or the death of a member and such injury or death is the proximate consequence of the act of a person other than his employer (the Sta(;e or the employing contracting agency), the board may on behalf of this system recover from such person an amount which is the actuarial equivalent of the benefits which are provided by contributions of the State or contracting agency and for which this system is liable because of such injury or death. ’ ’'

Section 21452, so far as pertinent here, provides that the board may contract with the State Fund or the Attorney General for the recovery on behalf of the system from third persons of the amount mentioned in section 21451.

Section 21453 provides, in pertinent part: “Under such contract, the state fund, in its own name, or in the name of the board, or the Attorney General for the board, may, to recover such amounts regardless of whether such injury' or death is industrial, commence and prosecute actions, file liens, or intervene in court proceedings all in the same manner and to the same extent, provided in Chapter 5, Part 1, Division 4 of the Labor Code, for the state fund or employer, except that such recovery shall not be made from benefits payable under this part because of such injury or death. The state fund or the Attorney General, as the ease may be, may compromise claims before or after commencement of suit or entry of judgment for such amount as may be approved by a person duly authorized by the board for such purpose. ...”

As this action, then, is one “upon a liability created by statute” the limitation at the time of the accident was three years, but the problem is: three years from when ? Defendant contends that the starting date of the period of limitation was the date of the accident; plaintiff, that it was the date when a determination was made that Hanson was eligible for disability retirement. The accident occurred March 10, 1956. The determination was made May 26, 1958. The complaint

At the time of the accident there was no specific provision in the Government Code as to the period of limitation on any action brought under the provisions of that code. However, subsequently and within three years of the accident, namely, in 1957, section 21455 was enacted. This section provides: “Actions brought by the board under this chapter shall be commenced within three years after the liability of the system to pay benefits is fixed. Liability of the system is fixed at the time the board approves the payment of benefits under this part.”

It is plaintiff’s position that the system had no cause of action until it became obligated to Hanson and that irrespective of any other provision of law the three-year limitation in section 338, subdivision 1, would not commence until 1958, and that section 21455, later enacted, is simply declaratory of existing law, but that if it constitutes a change in the law, it is one which nevertheless applies to the instant action.

We think that plaintiff’s position is well taken. Certainly when the accident occurred there then existed no liability of defendant to plaintiff created by statute or otherwise, and hence at that time plaintiff had no cause of action against defendant. How, then, could a limitation commence to run on a liability that did not exist? The statutory liability commenced when the Industrial Accident Commission determined the disability to be industrially incurred, retired Hanson, and determined the extent of the disability and the amount to be paid to him. Then, for the first time, defendant’s liability provided for in section 21451 was created, and then the limitation of section 338, subdivision 1, commenced to run.

The situation is similar to that discussed in St. Paul Fire & Marine Insurance Co. v. Cunningham, (1958) 257 F.2d 731 . There the heirs of one Rasmussen who was killed while loading logs, sued Mast Lumber Company on the theory of respondeat superior, alleging that Rasmussen’s death resulted from the negligence of Mast’s employees. A judgment against Mast was obtained. Thereafter the insurance company, as Mast’s subrogee, brought suit to recoup its losses as against the Mast employees, involved in the accident, under the authority of section 2865, Labor Code. The trial court dismissed the action on the ground that the statute of limita

It is clear that even prior to the enactment of section 21455, the statute of limitations did not commence to run on the cause of action provided by section 21451 at the time of the accident but at the time the board’s liability to Hanson accrued. Therefore, section 21455 did not change the law but merely declared the existing law.

Assuming, however, that section 21455 constituted a change in the existing law, it nevertheless applies to this action. Having been adopted prior to the time the limitation in section 338, subdivision 1, had run, it comes within the rule of extension of periods of limitation.

“It is the settled law of this state that an amendment which enlarges a period of limitation applies to pending matters where not otherwise expressly excepted. Such legislation affects the remedy and is applicable to matters not already barred, without retroactive effect. Because the operation is prospective rather than retrospective, there is no impairment of vested rights. Moreover, a party has no vested right in the running of a statute of limitation prior to its expiration. He is deemed to suffer no injury if, at the time of an amendment extending the period of limitation-for recovery, he is under obligation to pay. [Citations..] In Campbell v. Holt, 115 U.S. 620 [ 6 S.Ct. 209 , 29 L.Ed. 483 ], at page 628, it was said that statutes shortening the period or making it longer have always been held to be within the legislative power until the bar was complete.” (Mudd v. McColgan (1947) 30 Cal.2d 463 , 468 [ 183 P.2d 10 ],)

Section 21455 in nowise excepts existing actions.

Defendant attempts to make a distinction between a • law merely extending the term of a statute of limitation and - one - providing for the event (or time) at which- the -. statute -. of-

2. Due Process. Defendant not a Party in the Industrial Accident Commission Proceeding.

The program set up by the Government Code pertinent here is for plaintiff board to bring a proceeding before the Industrial Accident Commission against the state employee (Patrolman Hanson here) wherein the issues of the industrial nature of the injury and the extent of the disability are conclusively determined. Subsequently plaintiff determines the amount of money to be paid the employee by a statutory formula. (Gov. Code, § 21292.) As defendant points out, no provision is made for a third party (here defendant) who negligently causes the injuries which require the employee’s retirement, to be a party to that proceeding. Defendant contends that the statutes creating a cause of action against him, having as their measure of damages the retirement benefits granted to Hanson in the Industrial Accident Commission proceeding without any opportunity being given defendant to contest the amount of Hanson’s disability or the reasonableness of the payments, and without any provision being made by which defendant may have it determined that the disability has ended, amounts to a taking of defendant’s property without due process of law.

The statutes creating a cause of action against defendant follow the Labor Code provisions which create a cause of action in favor of the employer or insurer against a third party tortfeasor whose conduct requires the employer to pay workmen’s compensation benefits to the injured employee. There, as well as here, the third party is in no way privy to the proceeding by which the employer becomes obligated to pay compensation benefits. It is well settled that the creation of such cause of action in favor of the employer

Defendant’s liability is not determined in -the Industrial Accident Commission proceeding. It is determined in'this-' action. If the trial court had found- that - Hanson’s injuries' were not caused by defendant’s negligence plaintiff could not have prevailed. The amount of liability óf the retirement system to Hanson is determined by the commission. Section 3854, Labor Code, made applicable by section 21453, Government Code, provides, in effect, that the amount of liability sustained by the retirement system can be received in evidence and is considered as proximately resulting from the injury sustained by Hanson. That this is the measure of damages in an action of this kind is shown by the analogous situation in City of Sacramento v. Central Cal. Traction Co. (1926) 78 Cal.App. 215 , 218-219 [ 248 P. 307 ], dealing with an action by the employer, City of Sacramento, against the defendant third party tortfeasor, for the amount expended by the city in medical, surgical and hospital treatment and compensation paid its employees injured through the defendant’s negligence. The court said: “The jury determined from the evidence that appellant [the third party tortfeasor] was liable and the amount of liability was merely a matter of computation based upon the provisions of the Workmen’s Compensation Act and flowed naturally from the fact of liability. If as a matter of law, the respondent [city] paid or had become obligated to pay such compensation, the damages sustained by the respondent were necessarily the amounts so paid or incurred by the terms of the act. (Citing Moreno v. Los Angeles Transfer Co., 44 Cal.App. 551 [ 186 P. 800 ].)

. . . The law has imposed an obligation upon an employer to pay compensation to its injured employees and has given it a right of subrogation as against a tort-feasor who had negligently injured the employee to the extent of the compensation so paid by the employer. ’ ’

The Supreme Court (p. 222) in denying a hearing, stated: “ Such denial, however, should not be taken as an approval of what is said in the opinion indicating that the measure of damages in such eases is the amount fixed by the Workmen’s Compensation Act for injuries to be paid by the employer to the employee or his dependents. (See Western States etc. Co. v. Bayside Lbr. Co., 182 Cal. 140 [ 187 P. 735 ].)” The Supreme Court’s statement withholding approval of the lan

Sacramento, supra ( 78 Cal.App. 215 ), held, in effect, that under the Workmen’s Compensation Act, where liability for injury to an employee by a third party tortfeasor is determined (and in the case at bench it was determined by the trial court) the measure of damages for that injury is subject to legislative control and that the amount of damages may be determined in some proceeding other than that which determines the liability of the third party. It should be pointed out that in that case there was no hearing or industrial accident proceeding to determine the amount of damages, as there was here in the Industrial Accident Commission proceeding. There, the City of Sacramento, without a hearing, determined the cost of the medical, surgical and hospital treatment for the injured employees, their average weekly earnings and the period of time over which such injury and incapacity

There is a legitimate difference between employees in private business and those in state employ which makes a separate classification of the latter reasonable. Private employment is purely contractual, and a corporation operating a retirement plan can make such conditions as may be agreed to by the employee. It could provide that the amount payable to the injured employee shall be reduced by the amount recovered by the employee from the third person or that the employee must bring an action against the third person as a condition to receiving benefits from the retirement plan. The state retirement system cannot do this. Its obligations are fixed by law and it must pay benefits whether or not the employee proceeds against the third party.

Private pension plans or insurers have no right against the third party where, through the action of that party, they are required to make payments to the members of the plan. In Fifield Manor v. Finston (1960) 54 Cal.2d 632 , 639 [ 7 Cal.Rptr. 377 , 354 P.2d 1073 ], the court said: “Plaintiff has not cited to us any case in the California courts where a right of subrogation to a cause of action for tortious injury to the person has been recognized, except in cases where such right of subrogation has been expressly granted by statute. The Legislature where it has desired to give a right of subrogation in such cases, has done so in express language. ...” (Italics added.) The opinion then gives examples of such express language, among others, “Government Code, section 21451, giving the State Retirement System a cause of action against a person causing a member’s injury or death, to recover the actuarial equivalent of the benefits for which the system is liable ...” (P. 640.) As pointed out in Sacramento Mun. Util. Dist. v. Pacific Gas & Elec. Co. (1942) 20 Cal.2d 684 , 693 [ 128 P.2d 529 ] no constitutional principle is violated

The classification of state employees is based upon a difference from that of employees in private business and has a substantial relation to the purpose for which the legislation was designed, namely, to require reimbursement to the state by the person responsible for retirement benefits being paid by the state to an employee injured through the negligence of that person. Moreover, defendant is not in a position to urge that private insurers or private pension plans are discriminated against by the Government Code program, as he is in neither category. As said in A. F. Estabrook Co. v. Industrial Acc. Com. (1918) 177 Cal. 767 , 769 [ 177 P. 48 ], “a contention that a statute denies equal rights and privileges by discriminating between persons and classes of persons ‘may not be raised by one not belonging to the class alleged to be discriminated against. ’ ”

In Bilyeu, supra, 58 Cal.2d at page 624, it was further contended that the subrogation provisions of section 21451 “constitute an unlawful assignment of a personal cause of action arising from a tortious injury.” The court held: “ [T]here is no constitutional prohibition which would prevent the Legislature from . . . authorizing the instant assignment to a public agency. ” (P.624.)

4. The Releases.

Prior to obtaining any retirement benefits from plaintiff, Hanson and the State Fund released defendant from all claims either of them had. Plaintiff obviously neither knew of nor consented to such releases. Defendant contends that because of such releases, there were no rights to which plaintiff could succeed by subrogation. The subrogation provisions of the State Employees’ Retirement Law adopt by reference the subrogation provisions of the Workmen’s Compensation Act. (See Bilyeu, supra, 58 Cal.2d 618 .) This includes section 3859, Labor Code. Section 3859, Labor Code,

While a release by the State Fund would be effective as to any liability under the Workmen’s Compensation Act, it is not effective under the retirement statutes. Public officers and bodies have only the authority given them by law and no power is given the State Fund either under the Workmen’s Compensation Act or under the retirement statutes to execute a general release on behalf of the system. “ One who deals with a public officer stands charged presumptively with a full knowledge of that officer’s powers and is bound at his peril to ascertain the extent of his power to bind the government of which he is an officer, and any act of an officer to be valid must find express authority in the law or be necessarily incidental to a power expressly granted.” (Bear River etc. Corp. v. County of Placer (1953) 118 Cal.App.2d 684 , 690 [ 258 P.2d 543 ].)

Defendant contends that “plaintiff . . . had the right and opportunity to set off against the retirement benefits receivable by Hanson, those sums of money paid to Hanson by the defendant.” Apparently what defendant means is that as defendant had paid Hanson and the State Compensation Insurance Fund $5,000, plaintiff board could offset that amount as to any sums which would become due Hanson from the board by reason of his retirement. Assuming that the board had such right of setoff, the board nevertheless had the right to proceed directly against defendant under the retirement statutes. It was not compelled to set off. Moreover, the State Compensation Insurance Fund, as compensation insurer of the Highway Patrol, would be entitled to recover the one year’s full salary paid to Hanson in lieu of workmen’s com

The judgment is affirmed.

Sullivan, J., and Molinari, J., concurred.

Appellant’s petition for a hearing by the Supreme Court was denied June 12, 1963.