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District Court of Appeal, Third District, California.


Civ. 7852.

Decided: November 21, 1950

Fred N. Howser, Atty. Gen., Irving H. Perluss, William L. Shaw, Vincent P. Lafferty, Deputy Attys. Gen., for petitioners. Edmund J. Thomas, Jr., T. Groezinger and Robert Ball, all of San Francisco, for respondent.

This is a petition to review the Industrial Accident Commission's findings and award wherein the petitioner Department of Employment of the State of California was granted a lien in the amount of $125 against compensation awarded a claimant and was denied a further claim of lien.

Petitioners pray that the award be modified to grant a lien in the total sum of $435.72.

The facts are not in dispute. The claimant, Herbert R. Wade, was injured June 22, 1948. The employer's insurer, California Casualty Indemnity Exchange, furnished medical treatment and paid compensation for temporary disability until May 15, 1949. At that time a question arose as to the nature of the claimant's continued disability and the insurer discontinued further payments. On June 22, 1949, the petitioner Department of Employment, upon application of Wade, commenced $25 per week unemployment compensation disability payments pursuant to the Unemployment Insurance Act. The payments were discontinued on October 28, 1949, the total amount paid being $435.72.

In the meantime and on July 26, 1949, Wade filed an application with respondent, Industrial Accident Commission, for adjustment of claim against the employer and insurer. On August 4, 1949, petitioner herein filed a request for a lien with the respondent against any compensation awarded the claimant, in the amount of $25 a week and continuing during the period of disability.

On December 28, 1949, the respondent filed its findings and award. It found that the claimant's industrial injury of June 22, 1948, had caused temporary total disability from the date of injury to and including July 26, 1949, entitling the claimant to $30 per week beginning June 30, 1948, and continuing to and including July 26, 1949; and that the injury had also caused 43 3/434ermanent disability, entitling the claimant to $30 a week commencing August 3, 1949, and continuing for 175 weeks. The petitioner was awarded a lien in the amount of $125. The amount represents disability benefits paid the claimant during the period June 22, 1949, to July 26, 1949, which the Commission had found to be the final period of temporary total disability. No lien was allowed against the permanent disability award.

The respondent granted petitioner a rehearing on its claim of lien. The matter was first referred to the respondent Commission as a whole and at a meeting held February 9, 1950, respondent by unanimous vote of the whole adopted as a matter of general policy that the Commission allow no liens for unemployment disability insurance against payments for permanent disability. Respondent then transferred the cause back to Panel One of the Commission for action in accordance with the policy so determined upon. On March 1, 1950, the Panel made its decision after rehearing. After referring to the findings and award of December 21, 1949, the granting of rehearing and reference to the Commission as a whole, the Penal said:

‘It appears that further proceedings are not essential to the determination of the matters pending and at issue is said cause and said Commission now makes and files its Decision after Rehearing, as follows:

‘Good Cause First Appearing Therefor:

‘It is ordered that the Findings and Award made and issued in the above entitled cause on December 21, 1949, be, and the same hereby are, affirmed and made the Decision of this Commission after Rehearing.’

Petitioner's claim of lien was made under the provisions of Section 4903 of the Labor Code of this State which provides for the allowance of liens in certain enumerated cases. That section provides that the Commission may determine and allow as a lien against any amount to be paid as compensation: A reasonable attorney's fee for legal services pertaining to any claim for compensation; the reasonable expense incurred by or on behalf of the injured employee for medical and hospital expenses; the reasonable value of living expenses of an injured employee or of his dependents subsequent to injury; reasonable burial expenses in death cases; reasonable living expenses of a wife or minor child where the injured employee has deserted or is neglecting his family; ‘The amount of unemployment compensation disability benefits which have been paid under or pursuant to the Unemployment Insurance Act in those cases where, pending a determination under Division 4 of this Code, there was uncertainty whether such benefits were payable under that act or payable hereunder.’

It is apparent from the record before us, and respondent Commission does not contend otherwise, that its action in limiting petitioner's lien to benefits paid during the period of temporary total disability as found and determined by the Commission was based solely upon a policy declaration that claims of lien by the Department of Employment for disability benefit payments made by it under the Unemployment Insurance Act, Article 10, would not be in any case allowed against any award of permanent disability compensation. And it is the avowed position of respondent that applicable statutes warrant the adoption of such a policy without exception and that the policy is in fact declarative of the purpose and intent of such statutes. With this position we cannot agree.

Section 207, Subdivision (b), of the Unemployment Insurance Act, 3 Deering's Gen.Laws, Act 8780d, provides that: ‘An individual shall not be eligible for unemployment compensation disability benefits for any week of unemployment due primarily to a disability, for which week the commission [California Employment Stabilization Commission] finds that with respect to such disability he has received, or is entitled to receive, in the form of cash payments, benefits under a workmen's compensation law, or employer's liability law of this State, or of any other state, or of the Federal Government, provided, however, that if such benefits are less than the weekly amount he would have otherwise received as disability benefits under Article 10 of this act, he shall be entitled to receive for such week, if otherwise eligible, disability benefits, reduced by the amount of such cash payments.’

Wade, the injured person in this matter, though he had for a time received in the form of cash payments benefits under the Workmen's Compensation law of this State, was not receiving such payments when he applied for disability benefits under the Unemployment Insurance Act. The benefits he had received had been paid by his employer's insurance carrier without any application having been made to the respondent Commission for an award. Therefore when he applied for unemployment disability benefits the petitioner, as a condition precedent to payment, had to find that he was not eligible for cash benefits under the Workmen's Compensation Act. Presumptively it made such a finding. But that finding could in no way bind the respondent when, upon application made to it, the same question of eligibility arose. And it did come to an opposite conclusion. It made an award of compensation to be paid.

When, in the same proceeding, the respondent acted on petitioner's claim of lien, it was bound to follow its own statute as to allowableness. That claim was allowable if benefits had been paid pursuant to the Unemployment Insurance Act and had been paid in a case where, pending a determination by respondent, there was uncertainty as to whether the recipient was entitled to an industrial accident award.

The record certified to us discloses that respondent neither made nor claims to have made any finding, express or implied, that these stated conditions of allowableness did not exist. Indeed the claim was allowed in part. What respondent did and what it here claims the right and power to do was first to declare a policy to disallow such a claim wherever and to the extent that it would be payable out of a permanent disability award, and then to apply that policy by denying that part of petitioner's claim which would be so payable.

Respondent seeks to support its action upon two grounds:

First, it argues that because Section 4903 of the Labor Code uses the word ‘may’ in authorizing the Commission to grant liens it had an absolute discretion to grant or deny the lien claimed by petitioner herein. With this reasoning we cannot agree. It is true, as respondent contends, that the word ‘shall’ is defined as mandatory and the word ‘may’ as permissive. Labor Code, Sec. 15. But Section 5 declares: ‘Unless the context otherwise requires, the general provisions hereinafter set forth shall govern the construction of this code.’ This section precedes and limits Section 15, to which we have referred. In Garrison v. Rourke, 32 Cal.2d 430, 437, 196 P.2d 884, 889, the Supreme Court passed upon sections of the Elections Code identical to Sections 5 and 15 of the Labor Code and held that these sections were but a codification of the rule that words otherwise generally mandatory or permissive will be given a different meaning when the provisions of the statute require it. The court said: ‘By section 5 of the Elections Code the general definition of ‘shall’ given in section 15 governs unless the ‘provision or the context’ otherwise requires. True, neither the provision nor the context literally otherwise requires; and such literal inconsistent requirement would not be a normal expectation. However, as noted, the provisions of the statute negative any intent to divest the court of jurisdiction and in that sense require a meaning different from the definition of section 15. Section 15 codifies the generally accepted meanings of the words ‘shall’ and ‘may’. Section 5 must therefore be deemed to be a codification of the well-known rule that words otherwise generally mandatory or permissive will be given a different meaning when the provisions of the statute, properly construed, require it.' See, also, California Trust Co. v. Bennett, 33 Cal.2d 694, 204 P.2d 324, and Goodman v. Board of Education, 48 Cal.App.2d 731, 120 P.2d 665.

We think it clearly appears that the purpose of Section 4903(f) of the Labor Code is to enable the Department of Employment to recover unemployment disability payments in cases where the statutory conditions for the allowance of a claim have been met and that where those conditions have been met the respondent must allow the lien. Recognition of an absolute discretion to grant or to deny a lien in such a situation would be violative of the statutory purpose.

Secondly, respondent argues that good reason existed for its action in partially denying the petitioner's claim, whether or not it had absolute discretion, and herein it relies upon the history of the applicable statutes. It calls our attention to the following: Prior to 1945 the Workmen's Compensation Act provided that where an industrial injury caused both temporary disability and permanent disability, the injured employee upon being given a permanent disability rating was entitled to permanent disability indemnity only in the amount that such permanent disability indemnity exceeded the amount of temporary disability indemnity theretofore paid to the employee. Section 4661 of the Labor Code then provided: ‘Where an injury causes both temporary and permanent disability, the injury employee is not entitled to both a temporary and permanent disability payment, but only to the greater of the two.’

Respondent says that application of the foregoing provisions frequently resulted in most or all of the employee's permanent disability award being consumed by the credit to the employer or insurance carrier for the temporary disability indemnity theretofore paid to the employee; that this defeated the very purpose of the permanent disability award, which is to compensate the employee for his ‘diminished ability * * * to compete in an open labor market’, Labor Code, Section 4660, and to provide him with sustenance for a period of time in order to enable him to accommodate his mode of life and means of livelihood to the hardship which he has suffered because of his industrial injury. Respondent quotes from Campbell on Workmen's Compensation, Volume 1, page 728: ‘The theory of permanent disability rating is that an employee of any stated age, occupation and disability will be able to rehabilitate and readjust himself to his new earning capacity within an average period. The ratings are so computed as to provide disability indemnity during that estimated period.’

Respondent urges that the net effect of the application of the provisions of Labor Code Section 4661, in effect prior to 1945, was that although the employee was in form awarded a substantial permanent disability rating for his readjustment and rehabilitation, in substance he frequently received little or no cash payment, and in order to remedy this situation the Legislature amended Labor Code Section 4661 in 1945 and again in 1947, so that when Herbert Wade's industrial injury occurred on June 22, 1948, the section read: ‘Where an injury causes both temporary and permanent disability, the injured employee is entitled to compensation for any permanent disability sustained by him in addition to any payment received by such injured employee for temporary disability. * * *’

They say that had the Commission granted petitioner's claim of lien in force then a part of the permanent disability award would have been taken from the employee and precisely the situation which the Legislature sought to avoid by its amendment to Section 4661 of the Labor Code would have occurred, and the respondent's award of permanent disability would have been reduced. So the respondent says finally that it was an appropriate exercise of its discretion and in full accord with the Legislature's intent for it to deny that part of petitioner's claim of lien which would have to be paid out of his permanent disability award.

We think that the foregoing is not permissible statutory construction. After the amendments of 1945 to the Labor Code referred to had been made, and in 1947, the Legislature amended Section 4903(f) of the Labor Code by adding the lien provisions applicable to petitioner's claim. The Legislature made no distinction between compensation payable as temporary disability and compensation payable as permanent disability. Admittedly both are compensation and embraced within the meaning of the first part of the section which authorizes liens ‘against any amount to be paid as compensation’. Therefore, to say, as respondent argues here, that with respect to allowance of liens, the Legislature intended to distinguish between the two kinds of compensation is to do violence to the plain words of the section. Had the Legislature intended to make such a distinction it had opportunity to do so when the matter of allowing liens in favor of petitioners was before it and it added the provision for such an allowance. To permit such a distinction to be made by respondent or for the court to make it would, we think, be not statutory construction, but an attempt by the respondent or the court to legislate. It may well be that such a distinction should be made as a thing to be desired. It may well be that the better policy would limit petitioner's claim of lien to allowance against the temporary disability award only, but that is a matter for the Legislature to decree.

For the reasons given that portion of the award refusing to allow petitioner's claim of lien against the permanent disability award is annulled and the cause is remanded to respondent with instructions to proceed to determine whether the statutory conditions for allowance of the balance of petitioner's claim of lien exist, and whether petitioner did, pursuant to the Unemployment Insurance Act, pay to Wade disability benefits when there was uncertainty whether such benefits were payable under that Act or payable under the Labor Code. If it finds such statutory condition to concur it is directed to allow the lien, payable out of compensation awarded, whether it must come out of temporary or permanent disability benefits.

VAN DYKE, Justice.

ADAMS, P. J., and PEEK, J., concur.