237 F.

2d 137

UNITED STATES of America, Appellant and Cross-Appellee,

v.
ATLANTIC COAST LINE RAILROAD COMPANY, Appellee
and Cross-Appellant, and Mary Lou Mintz, Appellee.
No. 7212.

United States Court of Appeals Fourth Circuit.

Argued June 19, 1956.
Decided September 22, 1956.

COPYRIGHT MATERIAL OMITTED Marcus A. Rowden, Atty., Dept.

of Justice, Washington, D. C. (George Cochran Doub, Asst. Atty. Gen.,
Julian T. Gaskill, U. S. Atty., Goldsboro, N. C., and Melvin Richter, Atty.,
Dept. of Justice, Washington, D. C., on the brief), for appellant and crossappellee.
L. J. Poisson, Jr., and M. V. Barnhill, Jr., Wilmington, N. C. (Poisson,
Campbell & Marshall, Wilmington, N. C., on the brief), for appellee and
cross-appellant.
Before PARKER, Chief Judge, PRETTYMAN, Circuit Judge, and
TIMMERMAN, District Judge.
PARKER, Chief Judge.

These are cross appeals in an action brought by the United States to enforce a
claim under section 12(o) of the Railroad Unemployment Insurance Act, 45
U.S.C.A. 362(o). One Mary Lou Mintz, an employee of the Atlantic Coast
Line Railroad Company, sustained injuries while in the service of the company.
Pursuant to the provisions of the act she was paid the sum of $1105 by the
Railroad Retirement Board on account of physical disability resulting from
such injuries. She subsequently instituted suit against the railroad to recover
damages on account of the injuries; and notice was duly given the railroad of
the Board's claim to reimbursement under the act and of the duty of the railroad
to withhold payment in protection of such claim. Thereafter she recovered
judgment in the sum of $41,340, which the railroad paid into court without

notice to the court of the Board's claim under the statute and without taking any
steps to protect the Board's interest. This action was thereupon instituted in
behalf of the United States against the railroad to recover the amount of its
claim and Miss Mintz was impleaded by the railroad as a third party defendant,
whereupon the complaint of the United States was amended to ask judgment
against her, as well as against the railroad. The court entered judgment against
Miss Mintz and the railroad, jointly and severally, for the amount of the claim
but, upon a holding that Miss Mintz was primarily liable, provided that the
judgment should be enforced against the railroad only in the event collection
could not be enforced against her. The railroad has appealed from the judgment.
The United States has appealed from the requirement that the judgment be
enforced against the railroad only in the event that it cannot be collected from
Miss Mintz. She has not appealed.
2

There can be no question but that judgment was properly entered against the
railroad, as well as against Miss Mintz, for the amount of the claim. The statute
provides:

"(o) Benefits payable to an employee with respect to days of sickness shall be

payable regardless of the liability of any person to pay damages for such
infirmity. The Board shall be entitled to reimbursement from any sum or
damages paid or payable to such employee or other person through suit,
compromise, settlement, judgment, or otherwise on account of any liability
(other than a liability under a health, sickness, accident, or similar insurance
policy) based upon such infirmity, to the extent that it will have paid or will pay
benefits for days of sickness resulting from such infirmity. Upon notice to the
person against whom such right or claim exists or is asserted, the Board shall
have a lien upon such right or claim, any judgment obtained thereunder, and
any sum or damages paid under such right or claim, to the extent of the amount
to which the Board is entitled by way of reimbursement." The Board had a right
under the statute to reimbursement for the amount paid Miss Mintz from any
sum or sums payable to her on account of her injuries. When notice was given
the railroad of the Board's claim, a lien was created by express provision of the
statute upon her claim against the railroad and the judgment obtained
thereunder. The effect of the notice, as we held with respect to notice under the
tax lien statute, was to create a "statutory attachment and garnishment in which
the service of notice provided by statute takes the place of the court process in
the ordinary garnishment proceeding." United States v. Eiland, 4 Cir., 223 F.2d
118, 121. When the railroad paid in full the judgment obtained by Miss Mintz
without taking steps to protect the Board's claim of which it had notice, it
became liable, just as a garnishee would be liable who made payment to the
debtor in disregard of garnishment proceedings. See 5 Am.Jur. pp. 15-16.

Directly in point in sustaining the liability of the railroad here are the decisions
in United States v. Luquire Funeral Chapel, 5 Cir., 199 F.2d 429, and United
States v. Hall, D.C., 116 F.Supp. 47.
4

The railroad contends that because North Carolina General Statutes, 1-239
authorizes a party against whom a judgment is rendered to pay the whole or any
part thereof to the clerk, it was absolved by such payment from further liability
on account of the Board's claim. The answer is that the judgment was by
federal statute made subject to a lien in favor of the Board for the amount of its
claim and the railroad had knowledge of this lien. It could have protected itself
by making payment into court subject to the lien and with timely notice to the
Board to intervene and protect its rights, see N.C. General Statutes, 173,
Walker v. Miller, 139 N.C. 448, 52 S.E. 125, 1 L.R.A.,N.S., 157, or by making
payment into court of the balance due Miss Mintz with notice that it was
holding the amount of the Board's claim for payment to the Board pursuant to
the statutory notice which it had received. There is nothing in the state statute
authorizing payment to the clerk which justified the railroad in ignoring the lien
on the judgment created by the federal statute, which is the controlling law in
the premises. If there is any conflict between its provisions and that of the state
statute, the latter must yield. As was well said by the learned judge below,
D.C., 135 F.Supp. 600, 605:

"* * * the Railroad or other tort-feasor to whom notice has been given as
required by the Act owes a duty to protect, by reasonable means, the Board's
lien on the claim, judgment or the proceeds therefrom. If the claim is settled,
either out of court or by consent judgment, reasonable protection of the Board's
lien certainly means withholding the amount due the Board or making other
satisfactory arrangements to have the Board's lien paid in the course of
settlement.

"If the claim is contested and final judgment is rendered on the verdict against
the Railroad or other tort-feasor, reasonable protection of the lien would seem
to require notice thereof to the Clerk to whom the money is paid, at or before
the time of payment, or in the alternative, notice to the Board, prior to payment
of the judgment, in sufficient time for the Board to file a motion in the cause or
otherwise intervene to protect its lien on the money in the hands of the Clerk."

Coming to the government's appeal, we think it entirely without substance. As

the judgment can, by its terms, be enforced against the railroad if not collected
from Miss Mintz, the government's appeal presents, at best, nothing more than
a barren technicality; and we think that even this technicality is entirely lacking
in merit. Since reimbursement under the statute must be made from the

damages paid or payable to the employee, and since Miss Mintz has received
the full amount of the damages, she should make the payment. Only if
collection cannot be made from her, should the railroad be called upon to pay
again the damages which it has already paid. Equitable principles should be
applied in enforcing this statute, which in effect creates equitable liens and
assignments, just as such principles are applied in cases arising under the
bankruptcy act. The government, in its brief, admits that the railroad, if
required to pay the judgment, is entitled to the benefit of the equity of
subrogation, by way of judgment over against Miss Mintz. We see no reason
why, under the circumstances here, it is not entitled also to have the equitable
principles of exoneration applied in its behalf in advance of payment. Glades
County, Fla. v. Detroit Fidelity & Surety Co., 5 Cir., 57 F.2d 449, 451-452;
Dobie v. Fidelity & Casualty Co. of New York, 95 Wis. 540, 70 N.W. 482, 60
Am.St.Rep. 135; Pomeroy's Equitable Remedies sec. 919. Where one of two
persons liable for a debt has received funds from which the debt should be
paid, the other is equitably entitled to have collection made, if possible, from
the one who has received the funds. His rights in equity are not to be
distinguished from those of a surety for a debt secured by pledge of collateral,
as to which see 50 Am.Jur. p. 1072; A.L.I. Restatement Security p. 357,
illustration 2. Whether the equity of the railroad should be worked out by way
of subrogation, with recovery over upon payment, or by way of exoneration,
with judgment against both parties and with direction that it be enforced first
against the party primarily liable, was a matter resting in the sound discretion
of the District Judge. Under the circumstances of the case, we think that
discretion was properly exercised here, where Miss Mintz had received the fund
from which the claim of the Board was payable and presumably had it in hand
at the time.
8

Affirmed.

TIMMERMAN, District Judge (dissenting).

10

I dissent and state my reasons therefor as follows: The fallacy in Judge Parker's
opinion lies in the assumption that the railroad owed the Board an affirmative
duty to take action to enforce the Board's lien for the Board. In his statement of
the facts, Judge Parker states:

11

"* * * and notice was duly given the railroad of the Board's claim to
reimbursement under the act and of the duty of the railroad to withhold
payment in protection of such claim." (Emphasis added.)

12

The statute in question, quoted by Judge Parker, does not impose such a duty,

12

The statute in question, quoted by Judge Parker, does not impose such a duty,
and no such duty existed at common law. In this connection, it is important to
bear in mind that the railroad is not charged with having negligently or
intentionally destroyed the Board's lien. It is charged with having failed to take
affirmative action on the Board's behalf to enforce the Board's lien.

13

It is amazing how little effort the Board exerted in its own behalf to protect its
own interests. It wrote the railroad a letter in 1948 and another in 1951. It did
nothing else. In its 1948 letter, its indifference was displayed in a remarkable
way. It said:

14

"If you want to know before making a payment or a settlement, how much has
been paid for sickness benefits, such information will be furnished."

15

How generous of the Board! How kind it was to offer to supply such
information "If you want to know * * *"!

16

In response to its 1951 letter, the Board was informed by the railroad that Miss
Mintz's case had been tried, had resulted in a verdict in favor of Miss Mintz,
and was being appealed. Still, the Board took no further action on its own
behalf but was content to delegate its responsibility to the railroad to act for it.
A reversal and a new trial followed, the new trial resulting in a verdict in favor
of Miss Mintz. A second appeal was taken, and the judgment was affirmed.
Thereafter, the railroad paid the amount of the judgment to the clerk of the
State Court, and as an afterthought, sent a telegram to the Board informing it of
such action. At this point, some official of the Board woke up to what was
going on and telephoned the clerk of the State Court, informing him of the
Board's lien and requesting him to withhold payment of the judgment until the
Board had time to protect its interests. The clerk did not feel at liberty to
comply with this request, however, and paid the entire amount over to Miss
Mintz's attorneys.

17

But the point that needs to be emphasized is that no matter how considerate the
railroad was to the Board, it was all gratuitous, because the railroad was not
required by the statute to look after the Board's affairs.

18

The result reached by a majority of this Court can have serious consequences.
A railroad is not only shackled with the Board's job but it is made an
involuntary judge of the merits of claims asserted by the Board. If it decides
that a claim asserted by the Board has merit and pays the claim out of funds due
an employee, it may later turn out that the Board's claim was invalid, and the
railroad will have to pay twice. On the other hand, if a railroad decides that a

claim asserted by the board is lacking in merit and pays the entire fund to the
employee, it may happen that the Board's claim was a valid one, and the
railroad will have to pay twice. The only way that a railroad can protect itself is
to bring an interpleader suit to settle the question. In any event, the railroad's
predicament is not a pleasant one.
19

How much more orderly it would be for the Board to look after its own affairs!
If it could not obtain a written assignment from the employee, it could
intervene in an action in which it claimed an interest. Its rights would be
protected by the Court, and the railroad would not be confronted with the
possibility of multiple liability.

20

The decision which this Court is rendering cannot be justified by the statute as
Congress enacted it. Something which is not there and which Congress did not
intend to be there must be read into it. When that is done, the Court makes itself
a legislative body and usurps power that the people denied it in the
Constitution.

21

I do not agree that United States v. Eiland, 4 Cir., 223 F.2d 118, is in point. In
that case, the Court was dealing with the effect of a levy, authorized by law, to
satisfy a statutory lien covering the very property levied on. In the instant case,
we have a statutory lien but no authorized levy. It is assumed in the majority
opinion that notice given of the existence of a lien on property is the equivalent
to a levy to satisfy the lien thereon. There is nothing in the statute to warrant
such an assumption; nor is there any analogy between notice of a lien and a
garnishment which in legal effect is no more than a warning to a person holding
another's property not to deliver it to the other but to account for it in court. I do
not agree either that United States v. Luquire Funeral Chapel, 5 Cir., 199 F.2d
429, and United States v. Hall, D.C., 116 F.Supp. 47, are in point, for in each of
these cases, the defendant had compromised and settled the employee's claim
thereby defeating the Board's lien.

22

Even if I agreed with the other members of this Court that "When the railroad
paid in full the judgment obtained by Miss Mintz without taking steps to protect
the Board's claim of which it had notice, it became liable, * * *" it would
follow as a matter of logic that I could not also agree with their second view
that the government's appeal is "entirely without substance."