Opinion
No. 20665
Decided April 18, 1928.
Workmen's compensation — Additional 50 per cent. penalty against noncomplying employer, unconstitutional — Section 1465-74, General Code, (103 O. L., 82) — Noncomplying employer's receiver may be sued for award granted by industrial commission.
1. The clause contained in Section 1465-74, General Code (103 O. L., 82, Sec. 27), imposing a 50% penalty on an employer in addition to the statutory award, is unconstitutional and void. On that feature the third proposition of the syllabus in DeWitt v. State, ex rel., 108 Ohio St. 513, 141 N.E. 551, is disapproved.
2. An award was made against a noncomplying employer by the Industrial Commission in favor of dependents. This was presented to the receiver in custody of the employer's assets and payment from the assets in his possession refused. Thereafter, intervening in the same court appointing the receiver, the dependents brought suit against both employer and receiver, basing their claim on said award and its disallowance by the receiver. No service was made upon the employer nor did he enter an appearance therein.
Held: That, irrespective of Section 1465-74, General Code, the dependents had a right to present their award to the receiver; and if refused allowance they could, by leave of the court appointing him, procure an adjudication on its validity. Afterwards, on questions of priority, they could be heard upon the distribution of the assets of the employer among the various claimants thereto.
ERROR to the Court of Appeals of Butler county.
This is an action instituted in the court of common pleas of Butler county by the plaintiffs in error, wherein plaintiffs in error sought to recover a judgment against the receiver upon an award made by the Industrial Commission on account of the injury and death of the dependents' husband and father in August, 1923.
The petition alleged that the decedent was employed by one George W. Hershner, who had five or more persons regularly employed in his business, and who had failed to comply with the provisions of the Workmen's Compensation Act, either as a self-insurer or by the payment of premiums into the insurance fund. The petition further alleged that on August 15, 1923, Ida M. Bredwell, the widow and dependent, filed an application with the Industrial Commission for an award for the benefit of herself and a minor son; that, between the time of filing the application and the making of the award by the commission, the defendant Antenen was by the court of common pleas of Butler county appointed receiver of Hershner's business and qualified as such. Hershner was made a party, but was not served, and did not appear in the action instituted in the court of common pleas. On January 4, 1924, after the appointment of a receiver, a hearing upon the application was had, and on April 12, 1924, the Industrial Commission made an award to the dependents, which the receiver refused and neglected to pay. Claiming a right to bring the action under the provisions of Section 1465-74, General Code, and asserting that the award constituted a liquidated claim for damages against both Hershner and the receiver, the plaintiffs in error brought this suit in the common pleas court, asking judgment for the amount of the award and also for an added penalty of 50 per cent.
The receiver moved the court to dismiss him as a party defendant, and also demurred generally to the petition, insisting that the plaintiffs had no authority for making the receiver a party to the action. The motion and demurrer were both overruled by the trial court.
The receiver thereupon answered, setting up as defenses, that Hershner did not employ regularly in his business five persons, and a denial that Bredwell met his death in the course of his employment by Hershner. Trial was had and the jury returned a verdict in favor of plaintiffs in error in the sum of $7,659, an amount which included the award made by the commission and an added 50 per cent. on the amount of the award. Judgment was rendered for the full amount of the verdict by the trial court, which ordered the judgment to be "given priority as provided by law." The cause was then prosecuted to the Court of Appeals, where the judgment of the lower court was reversed, and the cause remanded to the trial court, with instructions to dismiss the petition at the cost of the plaintiffs.
The Court of Appeals, as shown by its journal entry, held that the trial court erred in overruling the demurrer of the receiver to the petition, assigning as a reason for reversal its conclusion "that there is no authority in law for maintaining this action against Carl F. Antenen, receiver." Error is now prosecuted to this court to the judgment of the Court of Appeals.
Mr. Walton S. Bowers, and Mr. Harry S. Wonnell, for plaintiffs in error.
Messrs. Shank Shank, and Messrs. Andrews, Andrews Rogers, for defendants in error.
The common pleas court rendered judgment in favor of the plaintiffs in error, not only for the amount of the award, but also for an added penalty of 50 per cent. imposed by Section 1465-74, General Code (103 O. L., 82, Section 27). The Court of Appeals was of the opinion that the clause therein relating to the 50 per cent. was unconstitutional and void. In so holding the Court of Appeals evidently followed the conclusion announced by five judges of this court in De Witt v. State, ex rel. Crabbe, Atty. Genl., 108 Ohio St. 513-533, 141 N.E. 551. Adhering to their conclusion in that case, the majority of this court hold that the clause contained in said Section 1465-74, General Code, imposing a 50 per cent. penalty in addition to the statutory award, is unconstitutional and void. The trial court, therefore, erred in the inclusion of such penalty as a part of the judgment.
Instead of modifying the judgment of the trial court by the elimination of the amount of the penalty, the Court of Appeals reversed the judgment in its entirety and rendered final judgment in favor of the receiver. It remanded the cause to the trial court, with instructions to dismiss the petition of the plaintiffs in error. The reason assigned by the appellate court was that the Workmen's Compensation Law, being purely a creature of the statute, no authority was therein given to bring a suit against the receiver for an award, although such authority to sue the employer had been expressly provided by Section 1465-74, General Code, and that, when sued, the employer could contest all the jurisdictional facts necessary to be determined by the commission before making an award for compensation. Pittsburg Coal Co. v. Industrial Commission of Ohio, 108 Ohio St. 185, 140 N.E. 684.
Since the employer was not served with summons and did not enter his appearance in the trial court, this cause must be treated as an action against the receiver alone. An award had been made by the commission in favor of the dependents on April 12, 1924. The award was for $5,000, and for $159 additional for medical, funeral, and hospital bills. The petition against the employer and receiver in this case was filed on May 27, 1925. No service was had upon the employer, who was claimed to have absconded in the meantime. This suit was brought in the same court that appointed the receiver. The possession of the assets held by the receiver was the possession of the court. At the outset, when the action was originally brought, no leave to sue the receiver had been asked of the court, but, prior to the trial, application for leave to sue was made and granted by the court who had appointed the receiver and had the property of the employer in custodia legis.
In the trial court, therefore, the cause assumed an aspect whereby a claim in the nature of an award had been presented to the receiver and refused, and authority was given by the court to bring an action against its receiver. The receiver answered, denying that Bredwell had met his death in the course of his employment, and alleging that the employer did not employ regularly five or more persons in his business. Plaintiff demurred to the answer and this demurrer was overruled. Whether, on failure of the employer to defend, the receiver could make the same defense to the award that the employer could have made, under the Pittsburg Coal Co. case, supra, need not now be determined, since these issues were found in favor of the plaintiff below. It would seem, however, that these defenses would inure to the benefit of the receiver, who, by virtue of Section 11897, General Code, is empowered to defend actions in his own name under the control of the court.
Although there was no judgment against the employer, there was a judgment against the receiver for the claim disallowed by him. The effect of that judgment was an adjudication of the claim as a valid one against the assets of the employer, which must be ultimately distributed by the court, having due regard for the provisions of Section 1465-83, General Code.
The judgment of the Court of Appeals would leave the dependents, who had obtained an award, remediless in their effort to intervene and obtain satisfaction or partial satisfaction of their award from the assets of the employer in the custody of the court.
We are of the opinion that, irrespective of Section 1465-74, General Code, the dependents, having obtained an award from the commission, had a right to present their claim to the receiver, and that if refused by him, they could intervene by leave of the court appointing the receiver and there procure an adjudication on its validity. Afterwards, on questions of priority, they could be heard upon the distribution of the assets of the employer among the various claimants thereto, where the court could give due regard to legal priorities.
The judgment rendered by the Court of Appeals is reversed, and the cause is remanded to the Court of Appeals with instruction to consider the errors assigned and presented on the record therein.
Judgment reversed and cause remanded.
MARSHALL, C.J., DAY, KINKADE, ROBINSON and MATTHIAS, JJ., concur.
ALLEN, J., concurs in proposition 2 of the syllabus and in the judgment.