Liberty Mutual Insurance v. George Colon & Co.

Lehman, J. The Workmen’s Compensation Law (Cons. Laws, ch. 67) imposes upon the employer and insurance carrier an obligation to pay compensation to the dependents of the employee, or where “ there are no persons entitled to compensation ” to pay into a special *308 fund the sum of $1,000. (§ 15, subds. 8 and 9.) In this case there were “ no persons entitled to compensation ” because the administratrix of the employee brought suit against the defendant for wrongfully causing the death of the decedent, and the dependents recovered in that action a sum larger than the compensation provided in the statute. The plaintiff consequently was compelled to pay the sum of $1,000 into the special fund and that payment operated to give to the employer a cause of action for the amount of such payment against a person not in the same employ whose negligence or wrong caused the death of the employee. (§ 29.) The cause of action is created for the purpose of placing upon the person whose negligence or wrong caused the death of a workman the obligation to indemnify the employer or carrier who, because of such death, is required to make payment to the State Treasurer. If by denial or defense interposed in the proceedings under the Workmen’s Compensation Law the carrier could have defeated the claim of payment to the State Treasurer; — if the award was invalid — then the carrier is not entitled to indemnification and has no cause of action against a third party. Even where a carrier could not defeat the claim made in the proceedings under the Workmen’s Compensation Law and the award is valid, it can still obtain indemnification from a third party only by establishing that the third party is hable for causing the death of the employee by its negligence or wrong. No adjudication can be made that a third party is hable upon a cause of action for indemnification without opportunity afforded to the third party to contest the cause of action asserted against it in regard to every element that enters into that cause of action. (Phoenix Indemnity Co. v. Staten Island R. T. Ry. Co., 251 N. Y. 127; affd., 281 U. S. 98, 108.) In that case the Supreme Court of the United States said: “ In creating the cause of action in order to obtain this indemnification, there was *309 no lack of due process of law, as there was none in the means affirmed by the State for enforcing the liability. In the action to enforce it the appellant, could as the state court has held in the present case, avail itself of any defense which it has or ever had. It has a right to establish, if it can, that there could have been no recovery in the negligence action which it settled, and may test the validity of the awards against the insurance carrier by any defense which the carrier could have interposed, as it was not a party to that proceeding and is not bound thereby.’ ” The third party defendant in that case was not a party to the proceedings, under the Workmen’s Compensation Law, in which an award was made. It had no right to interpose a defense in those proceedings and we held, therefore, that it was not bound by any adjudication in that proceeding and could still “ test the validity of the awards against the insurance carrier by any defense which the carrier could have interposed.” Here .the defendant’s affirmative defense concedes the validity of the award and does not assert that the carrier could have interposed any defense in the proceedings against it. It does not deny that it has paid a judgment recovered against it for negligence in causing the death of the employee, but asserts in its second defense that the death of the employee “ occurred by reason of his own negligence.” That issue has already been adjudicated against it in an action to - which it was a party. Because the plaintiff was not a party to that action, the defendant claims the right to litigate that issue anew in this action. Nothing that was said in Phoenix Indemnity Co. v. State Island R. T. Ry. Co. (supra) lends support to that claim. There the action brought in behalf of the dependents of the deceased employee against the third party was settled and there was no adjudication that the third party was hable. All that we said was that the defendant there had “ a right to establish, if it can, that there *310 could have been no recovery in the negligence action which it settled” (p. 138). Here, as we have said, a judgment was recovered in the negligence action, and it cannot now be contended that " there could have been no recovery ” in that action. Of course if contributory negligence had not been a defense in that action, or even if the burden of proof upon that issue had been different, there might be sound ground for holding that the defendant might again litigate that issue, but we are agreed that in this action, as in the action in which recovery was had, contributory negligence is an affirmative defense upon which the same defendant had the same burden of proof. The usual rule that in an action to enforce an obligation of indemnity, a judgment in a prior action, establishing the liability of 'the person to whom indemnity is due, is not binding upon the indemnitor unless “ vouched in” to the earlier action, has, of course, no application where the indemnitor is the defendant in the original action. Here the only possible ground for holding that the judgment in the negligence action is not binding upon the defendant is that the plaintiff was not a party to that action. The general rule is that the estoppel of a judgment must be mutual, and since the judgment is binding only upon the parties to the action, no stranger to the action may assert an estoppel by judgment against a party to the action. There are some well-established exceptions to that rule which are difficult to classify. The problem here presented is perhaps novel. The obligation of the defendant does not arise from contract or from any breach of duty owed to the plaintiff. It is imposed by law as a penalty where a breach of duty to an employee causes the death of such employee. The personal representatives of the deceased employee established in the negligence action brought by them the defendant’s liability to them. May the defendant again assert in this action that it was not liable to them? *311 Where compensation is awarded to an employee or his dependents the employer or carrier has no right of action against a third party except as such rights are based upon subrogation or assignment of the cause of action against such third party. In such case if the injured workman has brought an action against a third party, an adjudication in that action effectively binds the employer and carrier, though not parties to the action. They must pay the compensation provided by the statute in excess of any recovery by the plaintiff in that action, and no cause of action remains against the third party to which" they are entitled by subrogation or assignment. Only where an award is paid to the State Treasurer because of “ injury causing death, in which there are no persons entitled to compensation ” does such payment operate to give to the employer or carrier a cause of action in addition to the cause of action of the legal representatives of the deceased. If in such case there are no dependents, the employer or carrier must make the payment required by the statute regardless of the outcome of the action brought by the representatives of the deceased. There it may be argued that the employer or carrier has no connection with the plaintiff in the action and is not bound by any adjudication. The argument fails where there are dependents. Then the adjudication does bind the employer and carrier, though not parties to the action. If it results in a judgment in favor of the third party or a recovery against him which affords a dependent less compensation than is provided by the statute, then the employer or carrier remains liable for the excess and the statute does not" create any cause of action in his favor. If it results in a judgment which does provide full compensation to all dependents, then the employer or carrier comes under an obligation to pay $1,000 to the State Treasurer and may resort to a cause of action, against the third person, created by the Legislature in order to provide indemnification for such payment. *312 The Legislature has made the amount of recovery in an action brought by an injured workman or his dependents against a third party the measure of the employer’s obligation to pay compensation; the recovery in the action against a third person, enuring to the benefit of the dependents of a deceased employee, is made the basis of an obligation imposed by statute upon others who were not parties to the action, and the same statute creates a right of action for indemnity in their favor against the defendant in the original action. The Legislature could hardly have intended that the right of the dependents to recover in the original action should be litigated again in the action brought for indemnity by those obligated to pay as a result of the recovery in the original action. The defendant has had full opportunity to litigate the issue of its responsibility for the death of the workman in the action brought by the representatives of the deceased. It cannot maintain that a judgment against it in that action is not in accordance with due process of law merely because it results in the imposition of a penalty as well as damages since a judgment in its favor would have been a conclusive adjudication that no penalty could be collected. The only questions that remain open in this action relate to the proceedings against the plaintiff for an award. The judgment should be affirmed, with costs.