Majority
Opinion
On July 1, 1969, Francis Van Nuis commenced an action against Los Angeles Soap Company and Richard Nehring to recover damages for personal injuries allegedly sustained by plaintiff on May 8,
On March 2, 1970, State Compensation Insurance Fund, the employer’s carrier, filed a notice of lien in the action, notifying that any settlement or judgment recovered by plaintiff was subject to a first lien for workmen’s compensation benefits paid by the carrier to plaintiff on behalf of his employer. (Lab. Code, §§ 3850-3864.)
On December 2, 1971, the carrier filed a complaint in intervention (Lab. Code, § 3853) alleging that plaintiff’s injuries were caused by defendants’ negligence, and seeking judgment against defendants for $19,241.09, the amount of compensation benefits paid. Defendants answered the complaint in intervention, alleging that intervener was barred from recovery by reason of the contributory negligence of plaintiff and of his employer.
On June 8, 1972, the case was called for jury trial. Before commencement of the trial, a conference was held in chambers between the judge, counsel for defendants and counsel for the intervener wherein the court was advised that plaintiff’s case was settled. Counsel stipulated to the following facts: plaintiff was injured while acting in the course and scope of his employment by Richard’s Friendly Service, a gasoline station; defendant Nehring drove a vehicle owned by defendant L. A. Soap Co. onto the gas station premises where the vehicle struck plaintiff; intervener was the workmen’s compensation insurance carrier for plaintiff’s employer and paid plaintiff $19,241.09 on account of his injuries. It was further stipulated that plaintiff had settled his claim against defendants for $20,000 without intervener’s consent.[1] Intervener then moved that the settlement be set aside. The motion was denied. Intervener next moved that the recovery be impressed with a compensation lien for benefits paid. This motion likewise was denied. Finally, intervener moved that, because of the settlement, the court make a finding that defendants were negligent
1 Although not mentioned in the stipulation, the amount of the settlement shows that the settlement was not intended to and did not include the amount of intervener’s claim for reimbursement.
Intervener appeals from the judgment and from the orders denying its motions to set aside the settlement and to impress a lien thereon. The orders are not separately appealable (Code Civ. Proc., § 904.1), but may be reviewed on appeal from the judgment. (Code Civ. Proc., § 906.)
In 1971, Labor Code sections 3859 and 3860 were amended (Stats. 1971, ch. 485, §§ 1 and 2) to read as follows: Section 3859: “(a) No release or settlement of any claim under this chapter [chapter 5, entitled “Subrogation of Employer”] as to either the employee or the employer is valid without the written consent of both. Proof of service filed with the court is sufficient in any action or proceeding where such approval is required by law. (b) Notwithstanding anything to the contrary contained in this chapter, an employee may settle and release any claim he may have against a third party without the consent of the employer. Such settlement or release shall be subject to the employer’s right to proceed to recover compensation he has paid in accordance with Section 3852.” (Italics added.)
Section 3860 reads in pertinent part as follows: “(a) No release or settlement under this chapter, with or without suit, is valid or binding as to any party thereto without notice to both the employer and the employee, with opportunity to the employer to recover the amount of compensation he has paid or become obligated to pay and any special damages to which he may be entitled under Section 3852, and opportunity to the employee to recover all damages he has suffered and with provision for determination of expenses and attorney’s fees as herein provided, (b) Except as provided in Section 3859, the entire amount of such settlement, with or without suit, is subject to the employer’s full claim for reimbursement for compensation he has paid or become obligated to pay and any special damages to which he may be entitled under Section 3852, together with expenses and attorney fees, if any, subject to the limitations in this section set forth. . . .” (Italics added.)
Insofar as material to the issue on this appeal, the only
Appellant concedes that the amendments gave plaintiff the right to settle his claim against defendants without appellant’s consent. (And see: Cilibrasi v. Reiter (1951) 103 Cal.App.2d 397 [ 229 P.2d 394 ].) However, appellant argues the amendments went no further; they did not abolish appellant’s[3] right to claim reimbursement, out of the proceeds of the settlement, for benefit payments made to plaintiff. We disagree under the facts of this case.
The cardinal rule of statutory construction is that the intention of the Legislature must be ascertained and given effect. (Code Civ. Proc., § 1859; Select Rase Materials v. Board of Equal. (1959) 51 Cal.2d 640 , 645 [ 335 P.2d 672 ].) An intention to change the law is indicated by a material change in the language of a statute. (Martin v. California Mut. B. & L. Assn. (1941) 18 Cal.2d 478 , 484 [ 116 P.2d 71 ].) ‘“The very fact that the prior act is amended demonstrates the intent to change the pre-existing law, and. the presumption must be that it was intended to change the statute in all the particulars touching which we find a material change in the language of the act.’ ” (People v. Perkins (1951) 37 Cal.2d 62 , 64 [ 230 P.2d 353 ]; Loew’s Inc. v. Byram (1938) 11 Cal.2d 746 , 750 [ 82 P.2d 1 ]; People v. Weitzel (1927) 201 Cal. 116 , 118 [ 255 P. 792 , 52 A.L.R. 811 ].) It will be presumed that every word, phrase and
2 The amendments to sections 3859 and 3860 became effective March 4, 1972. The trial was held June 8, 1972. Therefore, the question arises whether the statutes, as amended, are inapplicable in this action on the ground they operate retrospectively to deprive appellant of the right to claim reimbursement for payments made prior to 1972. As will appear subsequently herein, the amendments affect only the procedure for enforcing a claim for reimbursement where an employee settles his action against a third party without the employer’s consent. Thus, the amendments operate only prospectively because the procedure prescribed therein can become operative only when a settlement is made. In the instant action, the settlement was made in June 1972. Therefore, the amendments apply. (See: Aetna Cas. & Surety Co. v. Ind. Acc. Com. (1947) 30 Cal.2d 388 , 393-394 [ 182 P.2d 159 ]; Estate of Patterson (1909) 155 Cal. 626 , 638 [ 102 P. 941 ]; Olivas v. Weiner (1954) 127 Cal.App.2d 597 , 600-601 [ 274 P.2d 476 ]; National Auto. & Cas. Ins. Co. v. Downey (1950) 98 Cal.App.2d 586 , 590-591 [ 220 P.2d 962 ]; California Emp. etc. Com. v. Smileage Co. (1945) 68 Cal.App.2d 249 , 252 [ 156 P.2d 454 ].)
3 As used in Labor Code sections 3850-3864, which provide for the employer’s remedies against a third party tortfeasor, the term “employer” includes an employer’s workmen’s compensation insurance carrier. (Lab. Code, § 3850, subd. (b), § 3211.) Upon payment of compensation to an injured employee, the carrier becomes subrogated to the employer’s rights 'against the third party, and may enforce those rights in its own name. (Tate v. Superior Court (1963) 213 Cal.App.2d 238 , 244 [ 28 Cal.Rptr. 548 ].)
Applying these principles to sections 3859 and 3860, it appears that in enacting the 1971 amendments thereto, the Legislature intended to change the law to provide: an employee may settle his claim against a third party without the employer’s consent; (2) such a settlement is not, without more, subject to the employer’s lien for reimbursement for compensation benefits paid to the employee whenever a Witt v. Jackson, supra, 57 Cal.2d 57 , defense is pleaded; (3) the employer retains the right to recover such payments in case the employee settles, but he must do so by bringing an action against the third party pursuant to Labor Code section 3852.[4] The employer’s right to reimbursement out of the settlement proceeds remains intact only if we ignore the phrase “Except as provided in Section 3859” appearing in section 3860, subdivision (b). This we cannot do.
Appellant contends the Legislature did not intend to abolish the employer’s lien on the proceeds of a settlement made without his consent, because such a result would defeat the dual purpose of the subrogation provisions (Lab. Code, §§ 3850-3864) of the Workmen’s Compensation Act, namely: (1) to insure full reimbursement to the employer for the amount of compensation benefits paid to the employee, and (2) to prevent the employee’s double recovery of payments for the same compensable injury. (See Jacobsen v. Industrial Acc. Com. (1931) 212 Cal. 440 , 447-448 [ 299 P. 66 ]; Sanstad v. Industrial Acc. Com. (1959) 171 Cal.App.2d 32 , 35 [ 339 P.2d 943 ].) Neither of these purposes is thwarted by the amendments to sections 3859 and 3860.
4 Labor Code section 3852 provides in pertinent part: “. . . Any employer who pays, or becomes obligated to pay compensation, or who pays, or becomes obligated to pay salary in lieu of compensation, may likewise make a claim or bring an action against such third person. In the latter event the employer may recover in the same suit, in addition to the total amount of compensation, damages for which he was liable including all salary, wage, pension, or other emolument paid to the employee or to his dependents.”
Amici curiae for appellant contend that sections 3859 and 3860, as amended, are unconstitutional because they deprive the employer of his property without due process of law and deny him equal protection of the laws. We disagree. There is no lack of due process. The amendments do not abolish the employer’s right to recover the amount of his compensation payments from a third party in the event of a settlement; they merely provide that he must do so by bringing an action against the third party. The equal protection argument is based on the fact that under Labor Code section 3856, subdivision (b),[6] the employer
5 This was the situation in the instant case (fn. 1).
6 Labor Code section 3856: “In the event of suit against such third party: . . . (b) If the action is prosecuted by the employee alone, the court shall first order paid from any judgment for damages recovered the reasonable litigation expenses incurred in preparation and prosecution of such action, together with a reasonable attorney’s fee which shall be based solely upon the services rendered by the employee’s attorney in effecting recovery both for the benefit of the employee and the employer. After the payment of such expenses and attorney’s fee the court shall, on application of the employer, allow as a first lien against the amount of such judgment for damages, the amount of the employer’s expenditure for compensation together with any amounts to which he may be entitled as special damages under Section 3852.”
It is true that two classes of employers may thus be created. However, the Constitution does not require uniform treatment, but only a reasonable basis for legislative classification. (Bilyeu v. State Employees’ Retirement System (1962) 58 Cal.2d 618 , 623 [ 25 Cal.Rptr. 562 , 375 P.2d 442 ].) “ ‘Wide discretion is vested in the Legislature in making the classification and every presumption is in favor of the validity of the statute; the decision of the Legislature as to what is a sufficient distinction to warrant the classification will not be overthrown by the courts unless it is palpably arbitrary and beyond rational doubt erroneous. ... A distinction in legislation is not arbitrary if any set of facts reasonably can be conceived that would sustain it.’ ” (Mathews v. Workmen’s Comp. Appeals Bd. (1972) 6 Cal.3d 719 , 739 [ 100 Cal.Rptr. 301 , 493 P.2d 1165 ]; Sacramento M. U. Dist. v. P. G. & E. Co. (1942) 20 Cal.2d 684 , 693 [ 128 P.2d 529 ].) The legislative classification is presumed to be valid and will be sustained “unless it is manifestly without support in reason.” (Western Indemnity Co. v. Pillsbury (1915) 170 Cal. 686 , 702 [ 151 P. 398 ].) An employer may recover against a third party tortfeasor for compensation payments only if the employer is free from any pleaded concurrent negligence contributing to the employee’s injuries. (De Cruz v. Reid (1968) 69 Cal.2d 217 , 222-223 [ 70 Cal.Rptr. 550 , 444 P.2d 342 ]; Witt v. Jackson, supra, 57 Cal.2d at pp. 71-73.) Where the employee’s action against the third party is pursued to judgment, there has been a trial on the issue of the employer’s concurrent negligence, if raised, and that issue has been determined; this affords a basis for the granting or denial of the employer’s lien. However, where the action terminates in settlement, ordinarily there has been no judicial determination of any of the issues raised; hence, there is no basis upon which to allow the lien. It follows that there is no constitutional infirmity in allowing the employer to claim a lien on a judgment, while denying him that right in the event of a settlement such as this one.
To summarize: under sections 3859 and 3860, as amended, an employee may settle his claim against a third party tortfeasor without the consent of the employer; such a settlement is not subject to any lien based upon the employer’s claim for reimbursement of compensation payments under
We turn now to the question whether defendants’ motion for nonsuit on the complaint in intervention was properly granted. Appellant’s right to recover on its complaint depended initially upon establishing defendants’ negligence and prevailing over any alleged contributory negligence of plaintiff. (See Brown v. Superior Court, supra, 3 Cal.3d at p. 432.) Once these factors were established, appellant would be entitled to recover unless defendants proved that plaintiff’s employer was concurrently negligent and that such negligence contributed to plaintiff’s injuries. (Witt v. Jackson, supra, 57 Cal.2d at pp. 71-73.) Appellant’s position in the trial court was that defendants’ negligence and plaintiff’s lack of contributory negligence were established by the settlement, leaving for determination only the issue of the concurrent negligence of plaintiff’s employer.
Appellant renews this contention here, citing Brown v. Superior Court, supra, decided before the 1971 amendents of the Labor Code. However, Brown does not support appellant’s position and, on the contrary, indicates that the mere fact of settlement does not establish either the third party’s negligence or the employee’s lack of contributory negligence. (3 Cal.3d at pp. 431, 432.) In the instant case, the record shows only that plaintiff and defendants reached a settlement to which appellant did not consent; there is no showing that the issues of their respective negligence or contributory negligence were determined, either prior to or as an incident of the settlement. Therefore, appellant had the burden of proof (Evid. Code, § 521) of defendants’ negligence. Since appellant offered no evidence on such issue, the trial court properly granted defendants’ motion for a judgment of nonsuit on the complaint in intervention. (See Palazzi v. Air Cargo Terminals, Inc. (1966) 244 Cal.App.2d 190 , 194-195 [ 52 Cal.Rptr. 817 ]; Stephan v. Proctor (1965) 235 Cal.App.2d 228 , 231 [ 45 Cal.Rptr. 124 ]; Estate of Ivey (1928) 94 Cal.App. 576 , 581 [ 271 P. 559 ].)
The orders and the judgment are affirmed.
Files, P. J., and Jefferson, J., concurred.
Appellant’s petition for a hearing by the Supreme Court was denied March 13, 1974.
Cases cited
- Witt v. Jackson 57 Cal.2d 57 at 69-73 p. 226, p. 229, p. 231
- Cilibrasi v. Reiter 103 Cal.App.2d 397 p. 228
- Select Base Materials, Inc. v. Board of Equalization 51 Cal.2d 640 at 645 p. 228
- Martin v. California Mutual Building & Loan Ass'n 18 Cal.2d 478 at 484 p. 228
- People v. Perkins 37 Cal.2d 62 at 64 p. 228
- Loew's Inc. v. Byram 11 Cal.2d 746 at 750 p. 228
- People v. Weitzel 201 Cal. 116 at 118 p. 228
- Prager v. Isreal 15 Cal.2d 89 at 93 p. 229
- People v. Gilbert 1 Cal.3d 475 at 480 p. 229
- Woodmansee v. Lowery 167 Cal.App.2d 645 at 650 p. 229
- In re Bandmann 51 Cal.2d 388 at 393 p. 229
- Jacobsen v. Industrial Accident Commission 212 Cal. 440 at 447-448 p. 229
- Sanstad v. Industrial Accident Commission 171 Cal.App.2d 32 at 35 p. 229
- Corley v. Workmen's Compensation Appeals Board 22 Cal.App.3d 447 at 453 p. 230
- LaBorde v. McKesson & Robbins Inc. 264 Cal.App.2d 363 at 370 p. 230
- Brown v. Superior Court 3 Cal.3d 427 at 433 p. 230
- Harness v. Pacific Curtainwall Co. 235 Cal.App.2d 485 p. 231
- Bilyeu v. State Employees' Retirement System 58 Cal.2d 618 at 623 p. 231
- Mathews v. Workmen's Compensation Appeals Board 6 Cal.3d 719 at 739 p. 231
- Sacramento Municipal Utility District v. Pacific Gas & Electric Co. 20 Cal.2d 684 at 693 p. 231
- Western Indemnity Co. v. Pillsbury 170 Cal. 686 at 702 p. 231
- De Cruz v. Reid 69 Cal.2d 217 at 222-223 p. 231
- Palazzi v. Air Cargo Terminals, Inc. 244 Cal.App.2d 190 at 194-195 p. 232
- Stephan v. Proctor 235 Cal.App.2d 228 at 231 p. 232
- Brown v. Nelson 94 Cal.App. 576 at 581 p. 232