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Chicago Transit Auth. v. Yellow Cab Co.





Appeal from the Circuit Court of Cook County; the Hon. Thomas Rakowski, Judge, presiding.


Plaintiff appeals from dismissal of its action to recover workers' compensation benefits paid to its employee for injuries allegedly caused by defendants' negligence. It contends that the trial court (1) improperly held that, as a matter of law, a general release barred a subrogation action brought by an employer under the Illinois Workers' Compensation Act; and (2) erred in ruling that the subrogation action was within the contemplation of the parties when they executed the settlement agreement.

Plaintiff filed a complaint pursuant to section 5(b) of the Workers' Compensation Act (the Act) (Ill. Rev. Stat. 1979, ch. 48, par. 138.5(b)) seeking recovery of payments made under the Act to its employee who was injured during the course of his employment. It alleged that it had compensated its employee in the amount of $580.25, as required by the Act, and that the negligence of defendants was the proximate cause of his injuries. Defendants moved to dismiss, pursuant to section 48 of the Civil Practice Act (Ill. Rev. Stat. 1979, ch. 110, par. 48) on the ground that plaintiff had executed a full release of all its claims against defendants arising out of the occurrence described in the complaint. The release, a copy of which was attached, provided in pertinent part that in consideration of the sum of $159.22 paid by Yellow Cab Co., plaintiff did "RELEASE and forever discharge YELLOW CAB COMPANY, its officers, agents, employees, successors and assigns from all claims and demands whatsoever in law or equity, I ever had, now have, or hereafter may have * * * by reason of any matter, cause or thing whatsoever from the beginning of the world to the day of the signing of this RELEASE." After a hearing, the motion to dismiss was granted on the basis that plaintiff released its claim, and this appeal followed.


We first consider plaintiff's contention that the general release it signed did not bar its subrogation claim. Initially, it argues that the Act does not create a separate and distinct cause of action in favor of the employer but merely gives the employer the opportunity to enforce the employee's rights against a third-party tortfeasor; therefore, since the employer never has a cause of action, it can never relinquish it.

• 1 Section 5(b) of the Act (Ill. Rev. Stat. 1979, ch. 48, par. 138.5(b)) provides in relevant part that if the employee "fails to institute a proceeding against [the third party causing his injuries] at any time prior to 3 months before such action would be barred, the employer may in his own name or in the name of the employee * * * commence a proceeding * * * on account of such injury." This language creates in the employer a right akin to the common law right of subrogation. (Grasse v. Dealer's Transport Co. (1952), 412 Ill. 179, 106 N.E.2d 124, cert. denied (1952), 344 U.S. 837, 97 L.Ed. 651, 73 S.Ct. 47; Hulke v. International Manufacturing Co. (1957), 14 Ill. App.2d 5, 142 N.E.2d 717.) Therefore, plaintiff's assertion that it had nothing which could be waived finds no support in the law; rather, "the employer's common-law right of subrogation [has] been supplanted by a mode of statutory subrogation * * *. Thus, the status of the non-negligent employer is the same under section 5(b) as it would have been under the common law." (McCormick v. Zander Reum Co. (1962), 25 Ill.2d 241, 244, 184 N.E.2d 882, 883-84.) Under common law, it was held that a right of subrogation, like any other legal or equitable right, may be qualified or extinguished by contract. Hughes v. Hartford Fire Insurance Co. (1885), 17 Ill. App. 518.

Plaintiff, however, relying on Pennwalt Corp. v. Metropolitan Sanitary District (N.D. Ill. 1973), 368 F. Supp. 972, asserts that the general release here does not bar its subrogation action. In Pennwalt, plaintiff sold chemicals to defendant under a contract, but defendant did not pay an Illinois Use Tax on its purchases since both parties thought that defendant was exempt from such tax. Upon completion of the contract, defendant paid the balance due thereunder and plaintiff executed a general release. Several years later, after the Illinois Department of Revenue determined that plaintiff should have collected use tax on the transaction, plaintiff paid the tax assessed and brought suit against defendant, alleging that defendant was primarily liable for payment of the tax and that plaintiff's payment subrogated it to the State's right against defendant. The question presented was whether the general release signed by plaintiff barred its action against defendant.

The court held that a release, "no matter how broad its terms, does not include claims not within the contemplation of the parties" (368 F. Supp. 972, 979) and that, under Illinois law, a general release does not apply to unknown claims, citing Todd v. Mitchell (1897), 168 Ill. 199, 48 N.E. 35. Holding that the release signed by plaintiff contemplated only performance of the contract, the Pennwalt court refused to read it as including the unrelated matter of use tax liability, noting that plaintiff's claim was based on subrogation, and stated "[i]t has been held that a general release does not bar an action based on subrogation." 368 F. Supp. 972, 980.

It is this latter phrase which plaintiff contends is dispositive of the issue before us. However, when it is read in context, it appears that the phrase was not the basis for the court's conclusion, for immediately following it the court went on to say:

"At the time the release was executed, both Pennwalt and the District believed that the use tax issue had been long since resolved, and that the only `consideration' for the release was the balance due under the contract. Under such circumstances it must be concluded that the liability of defendant asserted by the plaintiff was beyond the contemplation of the parties and that, therefore, they could not have intended the release to include it." (368 F. Supp. 972, 980.)

Plaintiff, nonetheless, asserts that we are required to follow the reasoning of Pennwalt and hold that a general release does not bar an action based on subrogation.

• 2 We are not bound to follow decisions of Federal courts> other than the United States Supreme Court, nor those of the courts> of any State except Illinois (Corbett v. Devon Bank (1973), 12 Ill. App.3d 559, 299 N.E.2d 521), and, while the decisions of other jurisdictions may be entitled to respect, they are only given such weight as the persuasiveness of their reasoning merits (Johnson v. Country Life Insurance Co. (1973); 12 Ill. App.3d 158, 300 N.E.2d 11). Moreover, courts> should use care in adopting expressions in an opinion which go beyond the case in which they appear. United States v. Zuskar (7th Cir. 1956), 237 F.2d 528, cert. denied sub nom. Budzileni v. United States (1957), 352 U.S. 1004, 1 L.Ed.2d 549, 77 S.Ct. 564.

In applying the reasoning of those decisions, we find no basis in Pennwalt for the broad proposition that the general release here could not bar plaintiff's subrogation action. Moreover, no such a rule necessary to that court's ultimate conclusion as the specific holding therein that a general release does not include claims not within the contemplation of the parties, neither supports nor requires so sweeping a statement since it fails to explain why a right of subrogation, of all possible types of claims, would never be contemplated at the time a general release is executed. In addition, the case cited by Pennwalt as authority for this proposition, Tibbetts Contracting Corp. v. O & E Contracting Co. (1965), 15 N.Y.2d 324, 258 N.Y.S.2d 400, 206 N.E.2d 340, provides inadequate support for the generalization. In Tibbetts, the court concluded that the release in question did not bar the subrogation action before it. No reason is given for this conclusion nor is any case cited in support thereof, and it appears to be gratuitous remark, as a careful reading of the case indicates that the claim under adjudication was not within the contemplation of the parties at the time they executed the release.

• 3 In the light of the above, we decline to depart from the rule that when a release is executed with knowledge of its meaning, any cause of action covered by it is barred. (Ogren v. Graves (1976), 39 Ill. App.3d 620, 350 N.E.2d 249.) We are not persuaded that a broad exception for rights of subrogation is necessary, particularly when, under Illinois law, any claim not within the contemplation of the parties when ...

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