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District Court of Appeal, Second District, Division 3, California.


Civ. 19400.

Decided: May 06, 1953

Victor C. Rose and Herlihy & Herlihy, Los Angeles, for petitioners. Edward J. Thomas, Jr., T. Groezinger, San Francisco, Edmund G. Brown, Atty. Gen., Irving H. Perluss, Asst. Atty. Gen., William L. Shaw, Deputy Atty. Gen., and Vincent P. Lafferty, Deputy Atty. Gen., for respondents.

Everardo Garcia was an employee of Sale's Fulton and Plaza Markets; Pacific Indemnity Insurance Company was the employer's insurer; August 3, 1950, Garcia filed with the commission an application for adjustment of claim for an injury allegedly sustained March 17, 1950, when his car was hit by a truck. On August 3rd the State of California, Department of Employment, (herein called the Department), filed a notice and request for allowance of lien in the sum of $25 per week beginning June 27th, not to exceed $746, against any amount payable as compensation for Garcia's injury of March 17th. Garcia signed a statement endorsed on the filed notice, reading: ‘I consent to the requested allowance of a lien against my compensation.’ December 12, 1950, the Department amended its claim of lien, specifying the payment of $496, consisting of $400 paid between June 27th and October 16th, and $96 hospital benefits paid between July 4th and July 16th. February 1, 1951, Garcia filed two additional applications, each claiming separate injuries on November 26, 1948, and February 2, 1949. Each claim alleged that the applicant did not quit work after either injury. Following numerous continuances granted at the instance of the parties there was a partial hearing February 21, 1952, at which time, on the suggestion that a compromise was being negotiated, the referee ordered the matters off calendar after the receipt in evidence of certain medical reports. It was shown at the hearing on February 21st that Garcia received $5,000 in settlement of his claim against a third party for his injuries of March 17, 1950, of which $200 was paid to Pacific Indemnity. March 31, 1952, an agreement between Pacific Indemnity and Garcia was filed which recited that temporary indemnity had been paid in the sum of $90, that there was a dispute as to liability, and that any and all of Garcia's claims were compromised for $1,250, subject to approval of the commission. An order was made approving the compromise and release without disposing of or mentioning the claim of lien of the Department of Employment. April 23, 1952, the Department in writing requested disposition of its claim of lien. May 5th the referee in writing notified the Department that there was nothing in the record which would enable the commission to pass on the merits of the lien, but that proof on the issue might be given within ten days. The Department responded to the effect that it was not required to produce any evidence. The referee in writing again requested the production of evidence. The Department in reply agreed that it was necessary to have evidence on which the commission could base a finding as to the merits of the claim of lien. Further hearing was noticed for August 7, 1952, for the purpose of determining whether the order approving the compromise should be amended to dispose of the claim of lien. On that date applicant was present with his attorney; Pacific Indemnity and the Department of Employment also were represented. The record of this hearing consists of 21 pages of discussion between the attorneys and the referee. No evidence was introduced. At the request of the parties for a finding on the issue the referee found as follows: ‘In all three cases there is no evidence to establish that applicant has sustained any injury which arose out of and occurred in the course of his employment or that he suffered any period of disability as result of any such injury, nor is there any evidence that will establish that he is entitled to any compensation by reason of any such period of disability,’ and reported that the compromise and release should be approved and the Department of Employment granted a lien of $496. The findings and order of the commission were in accordance with the report of the referee. September 18th Pacific Indemnity filed a petition for reconsideration, which was denied. It then joined with Garcia in this proceeding for review.

Under § 4903(f) of the Labor Code, the Department was entitled to a lien for the amount paid as unemployment compensation disability benefits if, pending a determination under division 4 of the Labor Code, there was uncertainty whether the benefits were payable under the Unemployment Insurance Act or the Workmen's Compensation Law, or, under § 4903(g), for unemployment compensation paid erroneously for a period for which the employee received temporary total disability payments as workmen's compensation. Throughout the entire proceeding before the commission no evidence was introduced as to whether Garcia had suffered a compensable injury and all parties overlooked, or disregarded, the fact that he had, by a writing filed with the commission, consented to the allowance of the claim of the Department as a lien against his compensation. Pacific Indemnity and the Department each claimed that where a compromise was effected it was under no duty to produce any evidence to prove or disprove that the disability during the period for which the applicant received unemployment insurance was one for which he had a right to workmen's compensation. They make the same contentions in the proceeding in this court, and ignore Garcia's consent to allowance of the lien, it being merely remarked by the petitioners in their reply to the answers that Garcia consented to the allowance of a lien only in the event the proof established that the Department was entitled to a lien.

At no time during the hearing was the attention of the referee called to the fact that Garcia had consented to allowance of the lien. It was not mentioned in any report or finding of the referee or the commission and the order allowing the lien was not based upon the consent.

Had the Department of Employment expressed its reliance upon the consent as a sufficient basis for allowance of its lien, it would not have been required to make any further showing of its right to a lien so long as the validity and effect of the consent was not brought in question. Upon the other hand, had the department based its claim of lien primarily upon the consent, the petitioners here would have had a right to offer any proof or any reasons why Garcia should not be held bound by it. Under these circumstances the award, insofar as it allowed the lien of the Department, may not be affirmed upon the ground that Garcia consented that it might be allowed. Considering the state of the record, we regard the consent as prima facie evidence of the validity of the claim of the Department, but we cannot give it conclusive effect when it was ignored throughout the hearing before the commission and also has been ignored in this proceeding in review.

Moreover, in view of the nonassignability of a claim for compensation, Labor Code, § 4900, the ineffectiveness of any agreement for attorney's fees or medical or hospital expense, § 4904, and the requirement that settlement agreements must have the approval of the commission, we believe that where a lien claimant presents the consent of an applicant to allowance of a lien, the commission has broad powers to require proof of the validity of the lien if there is any reason to suspect that the consent was not given freely and with full understanding.

It is an indispensable requirement that there be findings of the commission upon matters in issue sufficient to support its awards. Agreements of settlement approved by the commission are, of course, sufficient so far as the parties to the agreements are concerned, but the rights of third parties, such as lien claimants who are not parties to the agreements, must be determined in the usual course. Here, the agreement between the applicant and the insurer did not of itself establish the validity of the claim of lien of the Department. The burden of producing the evidence upon that issue in case of a compromise does not rest upon the commission, although it should require the parties to produce any necessary evidence. Here, the burden was upon the applicant and his insurer to show cause, if any they had, way they should not be bound by Garcia's consent to allowance of a lien to the Department. If, in further proceedings, the commission should give approval to the consent it would be a sufficient basis for allowance of the lien. If it should for good reason withhold approval the lien would have to be established as in any other case. The amount of an agreed settlement is ‘compensation’ against which a lien may be allowed. Aetna Life Insurance Co. v. Industrial Accident Comm., 38 Cal.2d 599, 241 P.2d 530. Findings of facts establishing a right to a lien are as necessary to allowance of the lien in case of a compromise as they are where no agreement is made.

It appears from the report of the referee after the final hearing that the omission of a disposition of the lien claim from the order approving the compromise was inadvertent. This being so, objections to the informality of the requests of the Department for adjudication of its claim may not be sustained.

The award of a lien to the Department of Employment is annulled and the matter is referred to the commission for further proceedings in accordance with the views herein expressed.

SHINN, Presiding Justice.

PARKER WOOD and VALLÉE, JJ., concur.