NATIONAL AUTOMOBILE CASUALTY INS CO v. AINGE

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District Court of Appeal, Second District, Division 1, California.

NATIONAL AUTOMOBILE & CASUALTY INS. CO. v. AINGE et al.

Civ. 17109.

Decided: September 29, 1949

Robert McWilliams, Los Angeles, for appellant. Reginald I. Bauder, W. I. Gilbert, Jr., Roger E. Kelly, Los Angeles (Henry F. Walker, of Los Angeles, of counsel), for respondents.

Plaintiff instituted an action as workmen's compensation insurance carrier under the authority of Chapter 5 of the Labor Code of California for its subrogation rights and for other items of alleged damage suffered by the injured employee.

Defendants' demurrer to plaintiff's complaint was general and special, and raised several different provisions of the statute of limitations and Probate Code in bar of the action. The general demurrer was sustained with ten days to amend. Plaintiff declined to amend and a judgment of dismissal was entered. Code Civ.Proc., sec. 581, subd. 3. From such judgment plaintiff prosecutes this appeal.

This action was brought against defendant Fannie S. Ainge as an individual and as executrix of the will of Gilbert L. Ainge, deceased. The complaint alleged that plaintiff was a corporation entitled to transact workmen's compensation insurance business as an insurer in the state of California. That defendant is an individual residing in Los Angeles. That defendant Fannie S. Ainge was appointed executrix of the will of decedent, Gilbert L. Ainge, on or about September 24, 1947. That at the time of the accident hereinafter referred to decedent was the agent, servant and employee of the individual defendant, acting in the course of his employment; that at the time of said accident defendant individual and decedent were the owners of a Buick automobile which at said time was being operated by decedent with the consent, permission and authority of defendant individual. That on or about March 27, 1942, one Julia Hall was walking northerly across Wilshire Boulevard at or near its intersection with June Street in the City of Los Angeles, and that at said time and place decedent negligently drove and operated defendants' Buick automobile in a westerly direction on Wilshire so as to cause said automobile to run against, knock down and run over said pedestrian. That as a proximate result of decedent's negligence, said Julia Hall was severely and permanently injured, and incurred and will incur medical and other expenses in certain stated sums. That at the time of the accident Julia Hall was employed by one Mrs. Vic M. Moretta as a housekeeper, and for such services was receiving certain compensation. That prior to March 27, 1942, in consideration of certain premiums paid, plaintiff issued to Mrs. Moretta a policy of workmen's compensation insurance covering her employees, which policy was in force on said date. That at the time of the accident Julia Hall was acting in the scope of her employment and her injuries arose out of and in the course of such employment. That on or about June 27, 1942, Julia Hall filed application with the Industrial Accident Commission for workmen's compensation benefits because of the injuries and disabilities hereinbefore set forth. That a hearing was held and an award made in favor of said Julia Hall.

That as a result of the award and various other awards and orders made by the Industrial Accident Commission in the proceedings relating to Julia Hall, plaintiff became liable to and did pay workmen's compensation in certain amounts and will become liable for additional amounts, all allegedly proximately caused by the accident hereinbefore mentioned, to plaintiff's damage in a stated sum. That by reason of the payments alleged above plaintiff has acquired a right of action against defendants in accordance with sections 3850 to 3862 of the California Labor Code. That decedent, Gilbert L. Ainge, died in Los Angeles October 27, 1942, and no personal representative was appointed until as aforesaid on or about September 24, 1947. The foregoing allegations were followed by a prayer for judgment.

The first question presented is whether the complaint as against respondent executrix filed herein was fatally defective because it failed to contain an allegation that a claim was filed against the decedent's estate. It is conceded by appellant that no such claim has been filed or presented and that if, under the facts of this case, a claim against the estate was essential, then the complaint fails to state a cause of action as against respondent executrix and as to her the action may not be maintained. Morrison v. Land, 169 Cal. 580, 585, 147 P. 259.

In contending that it was not necessary to allege the filing of a verified claim under Probate Code, section, 707, appellant urges that the section just referred to provides that ‘all claims arising upon contract’ must be filed or presented within the time prescribed by the Probate Code; that the claim here in question does not arise upon contract, but is based solely on negligence. It is appellant's further contention that the phrase ‘arising upon contract’ as used in Probate Code section 707 refers to a contractual relationship existing between the decedent and the claimant, and that there was no such contractual relationship in the case at bar.

Respondents first assert that regardless of whether or not the instant claim is one contingent upon or incidental to a contract, a claim was required to be filed because of the provisions of section 716 of the Probate Code, which reads as follows: ‘No holder of a claim against an estate shall maintain an action thereon, unless the claim is first filed with the clerk or presented to the executor or administrator, except in the following case: An action may be brought by the holder of a mortgage or lien to enforce the same against the property of the estate subject thereto, where all recourse against any other property of the estate is expressly waived in the complaint; but no counsel fees shall be recovered in such action unless the claim was filed or presented as aforesaid.’ (Emphasis added.)

Respondents urge that the present case does not fall within the only exception created by the last quoted Probate Code section. That the section applies to all claims, with a single exception, is clear and unambiguous, does not permit of judicial interpretation or construction, specifies but one exception, and that no other may be added under the guise of judicial construction. In support of their position, respondents cite the case of George v. McManus, 27 Cal.App. 414, at pages 417 and 418, 150 P. 73, at page 75, wherein it was held, ‘* * * That the cause of action constituted ‘a claim or demand’ against the estate of Joseph McManus, deceased, in our opinion, admits of no controversy. * * * Had his death occurred before the commencement of the action, clearly, under section 1500, Code of Civil Procedure (now section 716 of the Probate Code), it would, as a condition of maintaining the suit, have been necessary to present the same for allowance against his estate; and unless waived by a failure to plead non-compliance with the statute (Bemmerly v. Woodward, 124 Cal. 568, 57 P. 561), such presentation and proof thereof was likewise necessary as a condition of recovery, notwithstanding the fact that McManus died after the commencement of the action.'

However, in the case just cited the stated conclusion—that by reason of section 716 of the Probate Code, claims must be filed in all cases as a condition of maintaining suit, was arrived at without reference to section 707. We are persuaded that to determine the character of claims that must be presented as a prerequisite to maintaining an action, it is necessary to look to section 716 as modified by section 707. The former section, when properly construed, refers only to actions upon such claims as are required to be presented to the executor or administrator for allowance under section 707. In other words, section 716 simply means that when a claim is one ‘arising upon contract’ (section 707) a claimant is required to make such presentation in order to preserve its validity as a claim against the estate. See 12 So. Calif. Law Review, pp. 430–434. We therefore hold that a claim is required to be presented against the estate only when the person presenting it is making some contractual claim against the funds or property of the estate. Thompson v. Byers, 116 Cal.App. 214, 218, 2 P.2d 496; Hardin v. Sin Claire, 115 Cal. 460, 463, 464, 47 P. 363; Kagee v. Bencich, 27 Cal.App.2d 469, 471, 81 P.2d 265; Millar v. Millar, 51 Cal.App. 718, 728, 197 P. 811.

It therefore now becomes necessary to determine whether appellant's claim here under consideration was one ‘arising upon contract.’ In Hays v. Bank of America, 71 Cal.App.2d 301, 306, 162 P.2d 679, 682 (hearing denied, certiorari denied 328 U.S. 834, 66 S.Ct. 979, 90 L.Ed. 1610), it was held that section 707 of the Probate Code does not limit the necessity of filing claims to those which are specifically and wholly covered by contract; that it applies to claims that are ‘contingent’ ‘upon contract’ or ‘* * * when the liability is merely incidental to the contract and not specifically included therein.’

Respondents urge that the right of appellant in the instant case to bring an action against an alleged negligent third person to recoup amounts paid out by it because of an injury to an employee is based upon and flows from the existence of two contracts. First, the injured party must be employed, i. e., there must have been a contract of employment between the injured party as employee and his employer. Second the insurance carrier must have issued a valid policy of workmen's compensation insurance to the employer covering the rights of the injured employee, which policy must be in effect at the time of the injury. And further, that appellant insurance carrier's right to institute this action is dependent upon the foregoing two contracts. Respondents assert that the existence of the two foregoing contracts as essential requisites to the instant action was recognized by appellant when it made allegations concerning these matters in its complaint.

Appellant, on the other hand, contends that the phrase ‘arising upon contract,’ as used in section 707 of the Probate Code, refers to a contractual relationship existing between the deceased and the claimant. That there was no such contractual relationship in this case, and that there is no liability created by statute between appellant and respondent herein. That any liability arises out of and is based solely upon the fact of the original traffic accident.

We are convinced that the phrase ‘arising upon contract’ used in section 707 of the Probate Code refers to contracts to which the decedent was a party. In the case of Hays v. Bank of America, supra, relied upon by respondents, the contract in question was one entered into by the decedent, while in the instant case any query as to how the claim in question arose would have to be answered by recourse to the alleged negligent tort of the decedent, and not to any contract entered into by him with any one else. While it is true the employer and appellant insurer had a contractual relationship to the injured third party, which relationship entitled appellant to sue decedent or his estate, nevertheless the right to maintain the action does not arise out of any contract made by the decedent, but is based solely upon an alleged tort committed by the latter, and not upon any contract to which he was a party. We therefore hold that appellant's claim is not one ‘arising upon contract’ within the contemplation of Probate Code section 707, but is based upon and arises solely out of the alleged commission of a tort—negligently driving an automobile with resultant injuries to a pedestrian—and that there was no contractual relationship to which decedent was a party that required appellant to file a claim with the executrix of the estate as an essential prerequisite to instituting the present action. While appellant's claim may be ‘contingent’ and ‘incidental’ to a contract, it bears no such relationship to any contract to which decedent was a party, and therefore need not be filed in the probate proceedings as a prerequisite to the maintenance of the instant action.

Finally, we are confronted with the question of whether the statute of limitations barred the maintenance of the action here in question. It is conceded that the applicable statute of limitations is subdivision 1 of section 338 of the Code of Civil Procedure, which provides for a three-year limitation period. Appellant contends that the three-year period starts on the date of each payment of compensation. We shall first give consideration to the applicability of the statute as to respondent Fannie S. Ainge as an individual.

Labor Code, Division 4, Part 1, Chapter 5, sections 3850 to 3862, provides for the rights of an employer and an employer's insurance carrier against a negligent third person who causes compensable injury to an employee, while the latter is within the scope of his employment. Section 3852 establishes the right of an employer to sue a third party tort-feasor, and among other provisions, states: ‘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.’ Labor Code section 3850 defines ‘employer’ as including the latter's insurance carrier.

Manifestly, the right to commence an action against a third party tort-feasor arises immediately when the employer (or insurance carrier) ‘pays, or becomes obligated to pay’ workmen's compensation benefits to the injured employee. The obligation of the employer arises on the receipt of compensable injury by the employee, and the statute of limitations prescribing the time within which application for compensation must be made to the Industrial Accident Commission commences to run from the time of the accident. Ehrhart v. Industrial Accident Comm., 172 Cal. 621, 624, 158 P. 193, Ann.Cas.1917E, 465. Commencement of proceedings before the commission does not create the obligation. It already exists, and the appropriate proceedings merely determine its existence. It is not essential that the employer or insurance carrier should actually have made any payments of compensation benefits to the employee in order to maintain an action against the alleged tort-feasor. Merino v. Pacific Coast Borax Co., 124 Cal.App. 336, 344, 12 P.2d 458. The complaint contains no allegations to toll the running of the statute against the defendant individual. Therefore as to her the action could ‘* * * only be commenced within the periods prescribed in this title, after the cause of action shall have accrued.’ Code Civ.Proc. sec. 312. When suit may be maintained thereon, a cause of action has accrued, and the statute of limitations commences to run at the date of accrual. Leahey v. Department of Water & Power, 76 Cal.App.2d 281, 286, 173 P.2d 69; Rose v. Dunk-Harbison Co., 7 Cal.App.2d 502, 504, 506, 46 P.2d 242. In Irvine v. Bossen, 25 Cal.2d 652, 658, 155 P.2d 9, 13, it was said: ‘It is a fundamental principle in determining when the statute of limitation commences to run, that it runs from the time a cause of action accrues and it invariably accrues when there is a remedy available.’

In order to uphold appellant's contention that the statute of limitations would begin to run on the date of each payment of compensation, it would be necessary to ignore these fundamental rules. A perusal of sections 3850 to 3862 would indicate that the Labor Code contemplates but one action for recovery against a third party tort-feasor. In the case at bar the action accrued at the time of the accident, because at that time a remedy was available. Irvine v. Bossen, supra, 25 Cal.2d page 658, 155 P.2d page 13. The right to bring a suit on the completely existing cause of action does not depend upon whether the insurance carrier has or has not made any payment to the injured employee under an award. Merino v. Pacific Coast Borax Co., supra, 124 Cal.App. page 344, 12 P.2d page 461.

In the case now engaging our attention the complaint alleges that the accident as the result of which the employee received compensable injury occurred on March 24, 1942, and that an award was made by the commission against the insurance carrier, under which it made payments to and on behalf of the employee, on August 12, 1942. The complaint was not filed until March 31, 1948, more than five years after the award and six years after the accident. Since the statute commenced to run ‘from the time a cause of action accrues and it invariably accrues when there is a remedy available,’ Irvine v. Bossen, supra, 25 Cal.2d page 658, 155 P.2d page 13, it is at once apparent that the instant action, as to the individual respondent, was commenced too late.

In so far as the cause of action against respondent executrix is concerned, a different situation is presented. The accident, as pointed out, occurred March 27, 1942. The alleged tort-feasor, Gilbert Lewis Ainge, died on October 27, 1942, and letters testamentary were issued on September 24, 1947. The instant action was commenced on March 31, 1948.

Section 3851 of the Labor Code provides: ‘The death of the employee or of any other person, does not abate any right of action established by this chapter.’ (Emphasis added.) And the statute of limitations is expressly suspended as to respondent executrix by section 353 of the Code of Civil Procedure, which states: ‘If a person against whom an action may be brought dies before the expiration of the time limited for the commencement thereof, and the cause of action survives, an action may be commenced against his representatives, after the expiration of that time, and within one year after the issuing of letters testamentary or of administration.’

The action against the executrix having been commenced within a year after the issuance of letters testamentary, the statute of limitations had not run as to her.

For the foregoing reasons, the judgment of dismissal as to the individual defendant Fannie S. Ainge is affirmed, and as to the defendant executrix the judgment is reversed and the cause remanded with directions to overrule the general demurrer of such defendant and allow her a reasonable time within which to answer plaintiff's complaint. Neither party to recover costs on appeal.

WHITE, Presiding Justice.

DORAN and DRAPEAU, JJ., concur.