# Fort Worth Lloyds v. Haygood

> Texas Supreme Court · January 23, 1952 · 151 Tex. 149

URL: https://www.frixlaw.com/law-library/cases/9767340

## Case

- **Full name:** Fort Worth Lloyds v. Tom E. Haygood Et Al
- **Court:** Texas Supreme Court
- **Decided:** January 23, 1952
- **Citations:** 151 Tex. 149; 246 S.W.2d 865; 1952 Tex. LEXIS 388
- **Precedential status:** Published
- **Opinion:** Dissent by Wilson
- **Judges:** Griffin, Wilson
- **Cited by:** 84 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9767340

## How later opinions describe it (automated extraction)

- declining to construe the statute to restrict an employee’s rights by implication when such restrictions are not found in the statute’s plain language

## Opinion text

Mr. Justice Wilson,
dissenting.
I respectfully dissent for the reason that the majority opinion seems to me to construe incorrectly Sec. 6a of Art. 8307, R.C.S. 1925.
In determining that the employee has no right to settle his portion of the lawsuit (a property right), the majority opinion ignores what ought to be the determining factor, and that is the title and control of the third party action.
Sec. 6a forces a joint venture between two inherently incompatible parties. Unless control of the third party action can be fixed in either the employee or the compensation carrier the relationship is unsatisfactory to both. One Amici Curiae says that “the scheme of the third party action known to Texas Law violates the Biblical command that the ass and the ox should not be yoked together.”
Sec. 6a has been referred to as an “inept bit of draftsmanship.” Lawlor, Texas Workmens Comp. Laxo, Sec. 411. Thirty years of confusing results emphasizes this. This legislation could be improved by eliminating the provision for an election *160 while retaining a recoupment. This would prevent a multiplicity of suits and save expense for both parties.
The carrier’s right to any of the recovery against a negligent third party are derived solely from Sec. 6a of Art. 8307. Our Workmen’s compensation law was enacted in 1913 without the present Sec. 6a. Sec. 6 of the 1913 Act related primarily to the status of employees of a subcontractor. 16 Gammel’s Laws of Texas 433. There was a clause in this section entitling the carrier to “recover indemnity” but this was given a very limited application to subcontractor situations. Aetna Life Ins. Co. v. Otis Elevator Co., Tex. Civ. App., 204 S. W. 376 , writ refused. It was generally determined that there was no subrogation independent of the statute. Fox v. Dallas Hotel Co., 111 Texas 461 , 240 S. W. 517 ; Texas & P. Ry. Co. v. Archer, Tex. Civ. App., 203 S. W. 796 , no writ history; Lawlor, Texas Workmen’s Comp. Law, Sec. 411; 38 Harvard Law Review, 971; 46 Yale Law Journal, 695; 35 Minn. Law Review, 684. Presumably to meet this situation, and to prevent two recoveries for the same injury, Consolidated Underwriters v. Kirby Lumber Co., 267 S. W. 703 ; 12 U. of Chicago Law Review, 231, 238, the Legislature in 1917 enacted Sec. 6a.
The American jurisdictions giving the carrier an interest in a third party negligence action divide roughly into two groups. The first group holds that title to the third party cause of action passes by operation of law to the carrier in what amounts to a trust relationship. The carrier controls the suit and must account to the employee for the excess recovery above its compensation paid less the reasonable cost of recovery. The second group holds that title and control of the suit remain with the employee burdened with what amounts to a lien or charge in favor of the carrier for the amount of compensation paid. Kandelin v. Lee Moor Contracting Co., 37 New Mexico 479, 24 P. 2d 731 ; 38 Harvard Law Review, 971; 46 Yale Law Journal, 695; 7 Fordham Law Review, 282; 12 U. Chicago Law Review, 231; 35 Minn. Law Review, 684; Schneider, Workmen’s Compensation Text, Vol. 3, pp. 180-228.
Since the carrier’s right in the third party action are derived solely from Sec. 6a, the problem in Texas becomes one of determining legislative intent. In this, the crucial word is subrogation. Does the doctrine of subrogation automatically assign title to the carrier?
*161 The word subrogation is a technical word, originating in surety-debtor-creditor relationships, and having a very perplexing development as it came to be applied outside its original field. ( 1
When Sec. 6a was enacted in 1917, the law in Texas, as stated in Faires v. Cockerell, supra, note 1, was that subrogadid not work an assignment. The fact that Faires v. Cockerell was overruled in 1931 by Fox v. Kroeger, supra, note 1, does not change the meaning and construction of the legislative intent in the use of the word.
*162 Has the point under consideration already been decided? Upon considering all the cases construing Sec. 6a, I find a great number of conflicts by implication and confusing dicta (2) which cannot be reconciled, but I believe that the construction advocated in this dissent is in harmony with the holdings in most of the Texas cases.
The second sentence of Sec. 6a does not expressly declare whether title to the cause of action against the third party passes by operation of law or not.
The vital and material incident of title we are concerned *163 with here is control of the suit. The statute uses the word subrogation and then immediately afterward expressly gives the carrier a permissive right to control the suit if it chooses to do so by declaring that the carrier “may enforce in the name of the injured employe or in its own name for the joint use and benefit of said employe and the association the liability of said other person.” Hanson v. Ponder, supra; Schnick v. Morris, supra. If the Legislature had considered that control passed by virtue of subrogation, it would not have added the permissive clause. This is consistent with the definition of subrogation in Faires v. Cockerell, supra, which at the time of enactment of Sec. 6a had not been overruled. If title, and with it control, had already passed, the permissive clause would be redundant. From this, I conclude that the Legislature did not intend for control to pass under the word subrogation. Hence, under the word subrogation itself, the title to the cause of action and the right to control the case remains with the employee.
*164 The statute goes further than the word subrogation and states that the carrier may take over the control of the suit. When the carrier does so, it acts as a sort of “trustee.” Schnick v. Morris, supra. The statute does not state the circumstances under which the carrier may take over the control, and I find no cases discussing this point.
We should hold that under Sec. 6a title and with it control of the cause of action remains with the employee and that the employee’s election to take Workmen’s Compenastion does not operate as an assignment in law of the title to the third party action. Because title and control remain with the employee, the carrier has the equivalent of a lien upon the first money recovered to recoup it for compensation paid. The employee should be able to settle tentatively with the third party his portion of the cause of action. This settlement should be interlocutory in the trial court and become final upon being incorporated in the final judgment. As between the employee and the carrier, the employee still would have the duty of prosecuting the suit to final judgment. If the recovery against the third party should be in excess of the compensation paid, the carrier would be entitled to recoupment and that portion of the verdict of fact finding exceeding compensation paid would be governed by the settlement. If the case be lost or the verdict be less than the compensation paid, the carrier would be entitled to recoupment from the money tendered in the settlement.
The carrier argues that this construction would leave it but the shell of a lawsuit. This is not true. The jury need not know the true status of the parties, Myers v. Thomas, supra; Johnson v. Willoughby, Tex. Civ. App., 183 S. W. 2d 201 , affirmed in part in Otis Elevator Co. v. Allen, 143 Texas 607 , in 187 S. W. 2d 657 . The same witnesses are available.
The carrier argues that the employee as a witness would not be as effective after the settlement as before. We are required to presume that he will tell the truth in both situations. Besides, under this construction of Sec. 6a, his incentive to win the case remains the same as before settlement.
This construction of Sec. 6a is not in conflict with Traders & General Ins. Co. v. West Texas Utilities Co., supra, but is in harmony with its results. In that case the employee dismissed the third party action and thus destroyed the carrier’s right of subrogation which would be protected under this construction *165 of Sec. 6a. In that case the carrier did not take over the control of the case. In the case of Hanson v. Ponder, supra, a landmark case because in it this court for the first time recognized the employee’s right to bring the suit without the carrier, the court, after quoting Sec. 6a, said:
“The language just mentioned imports a continuing right in the compensated employee as against persons other than the employer, and the words giving the insurer the right to bring suit are permissive in form.”
Sec. 6a does not expressly prohibit or restrict the employee’s right to compromise his part of the suit, and there is no policy of the law prohibiting such settlements. Holbert v. Safe Ins. Co., 114 W. Va., 221 , 171 S. E. 422 ; Brown v. Vermont Mutual Fire Co., 83 Vt. 161 , 74 A. 1061 ; Connecticut Fire Ins. Co. v. Erie Ry Co., 73 N. Y. 399 , 29 Am. Rep. 171 . The majority opinion runs contrary to the general policy of the law favoring the settlement of litigation. The last sentence of Sec. 6a provides that the carrier “shall not have the right to adjust or compromise such liability against such third person without notice to the injured employe or his beneficiaries and the approval of the board, upon hearing thereof.” We are not called upon to determine the meaning of this sentence in the case at bar but it does show that the Legislature contemplated at least one type of compromise and placed some restrictions upon the carrier’s right to compromise. The reverse of the very situation at bar — a settlement by the carrier of its portion of the cause of action, leaving the employee to carry on the suit for the excess — was early approved by an appellate court. Lancaster v. Hunter, Tex. Civ. App., 217 S. W. 765 , no writ history.
My construction of Sec. 6a approximates, within the language of the statute, what should be the policy of the law. In The Aetna, 138 F. 2d 37 , a subrogation suit arising under the Harbor Workers’ Compensation Act the court said:
“Prior to the amendment of the Compensation Act (Federal Harbor Workers) in 1938, any acceptance of the compensation by an injured employee forthwith worked an assignment to the employer of the employee’s right of action against third persons for his injury. This was in aid of the employer and not a limitation upon his right to subrogation. The reason for the assignment which the law thus afforded is apparent. An injured employee, especially once he has received compensation, may have neither the incentive nor the desire to press his right of *166 action against third persons responsible for his injury. Hence, the law passed to the employer the control of the employee’s right of action against third persons once the employee accepted compensation. But the possible harm from an assignment so summarily and so informally acquired became manifest. An injured employee, out of the exigencies of his non-productive situation might find it necessary to accept compensation at once without thought for his right of action against others. Yet, therewith his control of his right of action against third persons passed automatically to the employer whose interest in pressing the employee’s claim or in pressing it for more than enough to satisfy the employer’s requirements, as measured by the extent to which he voluntarily acknowledged liability for compensation might not be great.”
Applying then my construction of Sec. 6a to the present situation I find that at the beginning of settlement negotiations the carrier insisted on $9,873.11, whereas the maximum amount of the compensation paid was $7,139.00, the difference being $2,734.11. This difference was itemized in their pleadings as:
(a) $99.11 for investigation expense of the original workmen’s compensation claim,
(b) $235.00 attorney’s fees in defending the original workmen’s compensation claim,
(c) $2400.00 attorney’s fees incurred in the prosecution of the present suit.
The employee and third party thought that the demands of the carrier were excessive in amount and arbitrary. Otherwise the entire case might have been settled. Since the parties were unable to agree on a settlement of the entire case, the employee and the third party, recognizing the risks involved in the outcome of a suit for damages, agreed upon an amount which would insure a recovery by the employee and at the same time protect the third party from liability in excess of the amount agreed upon. Why should they not have that right?
The case of G. A. Stowers Furniture Co. v. American Indemnity Co., 15 S. W. 2d 544 , affords the employee little comfort. In that situation the insured blames his own insurance company for not compromising within the policy limits and allowing a case to go to a final judgment in excess of the policy limits. Here the injured employee is prevented by the carrier from compromising his portion of the cause of action exceeding the *167 subrogation claim. Suppose the third party action goes to a take-nothing judgment. Is the employee to have another cause of action against the carrier for the amount he would have received by compromise? Under the Stowers case he must prove negligence. This is a very unsatisfactory remedy to give the employee in exchange for taking away the right to control his own property.
I cannot reconcile the statement in the majority opinion that there is but one cause of action with another statement from it that “the first money paid or recovered by the employee, or his representatives, belongs to the compensation carrier paying the compensation, and until it is paid in full, the employee, or his representatives, have no rights to any funds; nor have they any cause of action against the tort-feasor.” If from the happening of the accident the employee starts with a cause of action against the third party, and if upon electing to take compensation he no longer has a cause of action until the carrier be recouped (as the majority hold), then necessarily the title to the cause of action passes by operation of law to the carriers. If this in effect be the holding of the majority, it should follow that the employee loses and the carrier gains control of the third party action. In this latter event, there is all the more reason for allowing the employee to settle, and none against it. I feel that the legislative intent was the exact opposite and that Sec. 6a should be construed as not effecting an automatic assignment of the title to the third party action to the carrier.
Perhaps the most fundamental flaw in the majority opinion and in some of the cases upon which it relies is that it fails to view this problem as one involving a division of the damages which flow from an indivisible cause of action, rather than of dividing the cause of action itself, which, because of the very nature of a negligence action, cannot be done.
The effect of the majority opinion is to create a windfall for the Sugar Company in that it allows the Sugar Company to settle with both plaintiffs for the same sum it expected to be the cost of settling with only one. Under my view of the case the judgment of the trial court should be reversed and the cause remanded for trial."
Opinion delivered January 23, 1952.
Motion for rehearing overruled April 2, 1952.
) As far as our law is concerned, the word subrogation originated in England in Equity. A problem arose when a surety paid a debt and, under the common law, thus extinguished it, leaving nothing to be assigned to support his cause of action against the debtor. To meet this obvious injustice, the doctrine of subrogaion was borrowed from the Civil Law. Originally in England, under subrogation the surety secured all of the rights and remedies of the creditor, but in the eighteenth century, in what came to be called Lord Eldon’s doctrine, it was announced that equity would not decree an assignment of an admittedly extinguished cause of action because of the maxim “Equity follows the law,” but instead the surety was allowed to "step into the shoes” of the creditor, or to be “substituted” for the creditor. Morgan v. Seymour (1637) 1 Rep. Ch. 64, 1 Chan. Rep. 119, 21 Eng. Rep. 525; Ex Parte Crisp (1744) 1 Atk. 133, 26 Eng. Rep. 87; Gammon v. Stone (1749) I Ves. Sen. 339, 27 Eng. Rep. 1068; Ves. Sen. Supp. 162, 28 Eng. Rep. 488; Woffington v. Sparks (1754), 2 Ves. Sen. 570, 28 Eng. Rep. 363; Robinson v. Wilson, (1814) 2 Madd. 434, 56 Eng. Rep. 395; Copis v. Middleton (1825) Turn. & R. 223; 12 Eng. Ch. 223, 37 Eng. Rep. 1083; Simpkins v. Poulette (1824) 2 Law Journal 81; Robison v. Larkin (1824) 2 Law Journal 81; Burrus v. Cook, 117 Mo. App. 385 , 93 S. W. 888 . In this manner Equity corrected an injustice while not directly joining issue with the “common law’s reluctance to admit that a chose in action may be assigned.” Aetna Life Ins. Co. v. Moses, 287 U. S. 530 , 77 L. Ed. 477 , 53 Sup. Ct. 231. In 1856 Lord Eldon’s doctrine was repealed in England by statute. Mercantile Law Amendment Act, 1856. 19 and 20 Vict. c. 97. But the ambiguity latent in Lord Eldon’s definition of subrogation had already made its way into the American common law and raised one of the most thorny problems in Texas jurisprudence. In 1848 Lord Eldon’s doctrine was introduced into Texas jurisprudence in dicta in Close v. Fields, 2 Tex. 232 . In 1851 the court held in Holliman v. Rogers, 6 Tex. 91 , that payment by a surety extinguished the debt and therefore subrogation was not an assignment. The Supreme Court probably ruled to the contrary in 1853 in Jordan v. Hudson’s Ex’ors., 11 Tex. 82 . In 1857 (the English statute was enacted in 1856) Lord Eldon’s doctrine that subrogation is not an assignment was reversed in Sublett v. McKinney, 19 Tex. 438 . In 1882 the then new Commission of Appeals of our Supreme Court pointed out the conflict between Holliman v. Rogers, supra, and Sublett v. McKinney, supra, and elected to follow the Sublett case, but it did not have the authority and made no effort to overrule Holliman v. Rogers. However in 1895 Sublett v. McKinney, supra, was in turn expressly overruled in Faires v. Cockerell, 88 Tex. 428 , 31 S. W. 190 , 28 L. R. A. 528, with an express affirmance and return to Holliman v. Rogers. But that is not the end. In 1931 in Fox v. Kroeger, 119 Tex. 511 , 35 S. W. 2d 679 , 77 A. L. R. 663, Faires v. Cockerell was overruled. See also Hazleton v. Holt, Tex. Civ. App., 285 S. W. 1115 , writ dismissed; 10 Texas Law Review, 519.
It is clear as the majority opinion holds that there is but one cause of action. Texas Employers’ Ins. Ass’n. v. Texas & P. Ry. Co., Tex. Civ. App., 129 S.W. 2d 746 , writ dism. judg. cor.; Fidelity Union v. Texas P. & L. Co., Tex. Civ. App., 35 S.W. 2d 782 , no writ history. Either the employee or the carrier may initiate the suit, Galveston-Houston Electric Ry. Co. v. Reinle, Tex. Civ. App., 264 S.W. 783 ; Hanson v. Ponder, Tex. Com. App., 300 S.W. 35 ; Schnick v. Morris, Tex. Civ. App., 24 S.W. 2d 491 , writ refused; Epting v. Nees, Tex. Civ. App., 25 S.W. 2d 717 , writ refused. But there can be only one suit, Hart v. Traders & General Ins. Co., 144 Tex. 146 , 189 S.W. 2d 493 . It is not severable, Hartford Acc. Indem. Co. v. Weeks Drug Co., Tex. Civ. App., 161 S.W. 2d 153 , writ refused want of merit. However, both owners of this cause of action may assign their property rights in it to each other. Eastern Torpedo Co. v. Herrington, 128 Texas 17 , 95 S.W. 2d 377 ; Epting v. Nees, supra; Snodgrass v. American Surety Co., Tex. Civ. App., 156 S.W. 2d 1004 , no writ history; Foster v. Langston, Tex. Civ. App., 170 S.W. 2d 250 , no writ history; Otis Elevator Co. v. Allen, 143 Tex. 607 , 187 S.W. 2d 657 .
In 1922 the Federal Circuit Court of Appeals said that, under the real party in interest rule, Sec. 6a vested the “entire legal title to the cause of action * * * in the association primarily for its own security” and therefore in determining diversity of citizenship the citizenship of the carrier and not the employee controlled, 3 Moore’s Fed. Practice, 2d ed., Sec. 17.09, p. 1346. However, upon a plea of privilege the residence of the employee and not the carrier is “the residence of plaintiff” even though the carrier be a party plaintiff along with the employee. In a suit filed by the carrier against a negligent railroad in the carrier’s home county, the court held that Sec. 6a “transferred” the cause of action but that venue did not “follow the chose in action” because “the transfer of this cause of action did not create greater remedies than those possessed by the original owners.” Commercial Standard Ins. Co. v. Texas & N.O. Ry. Co., Tex. Civ. App., 198 S.W. 2d 913 .
There is a line of cases which hold that both owners of this cause of action are not required to be parties to a suit to enforce it. Mitchell v. Dillingham, Tev. Civ. App., 22 S.W. 971 , no writ history; Wm. Cameron & Co. v. Gamble, Tex. Civ. App., 216 S.W. 459 , no writ history. But a judgment in a suit brought by the employee alone will bar a separate suit by the carrier. Texas Employers’ Ins. Ass’n. v. Brandon, 126 Tex. 636 , 89 S.W. 2d 982 ; Employers’ Indemnity Corp. v. Felter, Tex. Com. App., 277 S.W. 376 ; Hart v. Traders & General Ins. Co., supra. Where the carrier does not join in the suit, the employee may not recover for the carrier, even though the carrier be made a party defendant and its right acknowledged in the pleadings of the employee, Mitchell v. Dillingham, *163 supra; Houston Gas & Fuel Co. v. Perry, 127 Tex. 102 , 91 S.W. 2d 1052 . This case would seem to hold by implication that the title to the cause of action had passed by operation of law to the carrier. But there is a line of cases which reaches an apparently contrary result and seem to hold that the title to the cause of action is in the employee. Graves v. Poe, Tex. Civ. App., 118 S. W. 2d 969 , writ dismissed; Younger Bros. v. Moore, Tex. Civ. App., 135 S. W. 2d 780 , writ dismissed, judg. cor.; Snodgrass v. American Surety Co., supra.
There are a number of cases containing statements that the cause of action “belongs to the employee” burdened by the right of the carrier to recoup itself, Eastern Torpedo Co. v. Herrington, supra; Traders & General Ins. Co. v. West Texas Utilities, supra; Myers v. Thomas, 143 Tex. 502 , 186 S. W. 2d 811 , 16 Tex. Law Review, 437.
In Schnick v. Morris, supra, it is stated that the cause of action is “jointly owned” by both the carrier and the employee.
The first sentence of Sec. 6a has been construed in a series of cases culminating in the recent case of Fort Worth Lloyds v. Essley, Tex. Civ. App., 235 S. W. 2d 700 , writ refused, holding that the mere filing of a suit constitutes an election “to proceed at law.” Although it is not usually necessary to supply a statute with a rationale, these cases have done so, and all place their construction upon the impairment by the employee of the carrier’s right of subrogation. Thus where a widow of a deceased employee prosecuted a suit against a third party to a final take-nothing judgment in ignorance of her compensation rights, it was held nevertheless that she had made a binding election which was a bar to her compensation case because she had impaired the carrier’s right of subrogation. Employers’ Indemnity Co. v. Felter, supra. There could have been no actual impairment of the subrogation in the Felter case unless that term included the right to control the trial of the suit. The Felter case indicates that the court thought then that title and control passed to the carrier. See also, Ocean Accident & Guarantee Corp. v. Cooper, Tex. Civ. App., 294 S.W. 248 , writ refused. But all of this is dicta in these election cases as their result can be rested on the wording of the statute itself without a rationale.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9767340. Public record. Not legal advice.