Evans v. Thompson

879 P.2d 938, 124 Wash. 2d 435, 1994 Wash. LEXIS 498

• Court: Washington Supreme Court
• Decided: September 1, 1994
• Docket: 60186-1
• Status: Published

Opinions

Brachtenbach, J.

This action arises from the deaths of Frederick I. Evans and Daniel J. Kanning. Their widows sued individually and as representatives of the respective estates. The decedents were employees of Santana Trucking & Excavating, Inc. Defendants, Robert J. and Amber D. Thompson, husband and wife, are the shareholders, officers and directors of Santana.

Defendants, as individuals, own real property on which Santana dumped fill materials. A storm drain system on the property included a 20-foot-deep manhole. Decedents and a third Santana employee were on the property to inspect the drain system. Evans dropped a calculator into the manhole. He proceeded down the manhole, but did not return. Kanning went after Evans. Both died from methane gas accumulated at the bottom of the manhole.

Plaintiffs’ complaint alleges a breach of the duties owed by Defendants as owners of the real property, specifically: "The injuries and deaths . . . were proximately caused by the concealed (latent) ultrahazardous condition of Defendants’ property.” Clerk’s Papers, at 6. Defendants moved for summary judgment on the basis that Plaintiffs’ claims were barred by the Industrial Insurance Act because the Defendants and decedents were in the "same employ”. Therefore, Defendants claim the third party action against Defendants as individual landowners is not authorized by the third party statute, RCW 51.24.030(1). The trial court granted summary judgment to Defendants; the Court of Appeals affirmed in an unpublished opinion. We reverse and remand.

Two questions are presented: (1) When the defendants are landowners and constitute a completely separate legal entity from the employer of a worker, are the defendants immune under the Industrial Insurance Act for breach of their duties as landowners?; and (2) Are the officers and directors of a corporate employer immune, as a matter of law, as coemployees of a person employed by the corporation, even though at least one of the officers and directors is not employed by the corporation and performs no duties for the corporation?

The Legislature has provided for a third party action: "If a third person, not in a worker’s same employ, is or may become liable to pay damages on account of a worker’s injury . . . the injured worker or beneficiary may elect to seek damages from the third person.” RCW 51.24.030(1). The Legislature evidences a strong policy in favor of actions against third parties by assigning the cause of action to the Department of Labor and Industries if the workman elects not to bring a third party suit. RCW 51.24.050(1). The interest of the Department in reimbursement from the recovery from a third party, RCW 51.24.040, clearly supports that policy. These legislative declarations mandate policy decisions by the courts which give appropriate recognition to the third party action.

The deceased workers in this case were employed by a corporation. Plaintiffs do not sue that corporation. Rather they sue an entirely separate legal entity, legally cognizable, Defendants, husband and wife, as individuals.

These Defendants, as a legal entity entirely separate from the corporation, own the real property upon which the deceased workers met their deaths, allegedly from conditions of that real estate. Decedents are alleged to be invitees. As such, they may be owed well-established duties from Defendant husband and from Defendant wife, as landowners.

Under our holdings, the Plaintiffs do not necessarily recover. Rather, we hold that there are genuine issues of material fact as to whether Defendants, particularly Defendant wife, were in fact coemployees of the decedents. There are issues of law as to what Defendants’ duties are as landowners and factual issues as to whether those duties were breached. These latter issues are not briefed, apparently by mutual agreement.

Defendants, as individuals, acquired title to these several parcels, where the deaths occurred, for investment purposes. Clerk’s Papers, at 88, 90-92. They, as individuals, paid $91,000 to $94,000 for several parcels. They, as individuals, owe some contract balance on one parcel. The contract payments are made by the corporation, but recognizing and claiming their separate capacity, they, as individuals, show that as income in their personal tax returns. Clerk’s Papers, at 81-82, 88, 91.

Defendants, as individuals, list the property as their residence address (which it is not) to qualify their children for a certain school. Clerk’s Papers, at 97. Defendant husband lists the property as his home address on his driver’s license. Clerk’s Papers, at 99. A construction permit and a grading permit were obtained by Defendants, as individuals, for work on the property, again listing the property as their residence address. Clerk’s Papers, at 74, 100. Defendants, as individuals, pay the real estate taxes, thereby gaining a tax benefit, as individuals. Clerk’s Papers, at 82. They plan ultimately to use the property for purposes entirely unconnected to the corporation. Clerk’s Papers, at 78-80.

In short, the Defendants, as individuals, as a legal entity entirely separate from the corporation-employer, own the property. They have paid for most of it as individuals and recognize the corporation payments as individual income. They, as individuals, obtain the tax benefits of ownership. They falsely represent to the state and a school district that this property is their residence. There is no written lease or other agreement between Defendants and the corporation. Clerk’s Papers, at 79-80.

Can Defendants, as a separate legal entity, or either of them, be liable as landowners owing duties to the decedents as invitees? More accurately, are there genuine issues of material fact about the relationships between the corporation-employer, the decedents and the Defendants, as a separate legal entity, or either of them?

There are cases in other jurisdictions supporting the Plaintiffs’ theory. Directly in point is Perkins v. Scott, 554 So. 2d 1220 (Fla. Dist. Ct. App. 1990). The facts are remarkably similar. The plaintiff worked for a corporation, S&S Pro Color, Inc. He worked in a building owned by Mr. Scott and his wife (same as here). The Scotts were the sole shareholders of S&S Color, Inc. (same as here). Mr. Scott was the president of the corporation (same as here). Plaintiff was injured when he fell down a stairway at his place of employment (same type incident as here). Plaintiff received worker compensation benefits, but sued Scott in his capacity as landlord (same as here). The court noted:

Mr. Scott argues that he is entitled to workers’ compensation immunity based either on his status as a coemployee, or on a theory that he is entitled to pierce his corporation’s veil and receive its workers’ compensation immunity [same as here]. We reject both arguments.

Perkins, at 1221.

The court’s reasoning in Perkins is compelling:

If Mr. Scott has in fact retained duties, as the owner of the building, separate and distinct from his duties as an employee of S & S Pro Color, fellow-employee immunity provides no protection for negligent breaches of those duties. . . .

. . . Having created a separate corporation to employ Mr. Perkins and having leased the building to that corporation, Mr. Scott does not have the luxury to now pierce the veil of his own corporation to receive the benefit of its immunity. ... If Mr. Scott were sued by a third party who had been injured by an employee of S & S Pro Color in the scope and course of the employee’s employment, it is clear that Mr. Scott would raise the corporate veil to protect his individual assets. Mr. Scott is not free to raise the corporate veil to block liability and yet lower it to receive immunity.

(Citation omitted.) Perkins, at 1221-22.

Doggett v. Patrick, 197 Ga. App. 420, 398 S.E.2d 770 (1990) is in point. There the plaintiff was injured in the course of his employment, allegedly due to the condition of the building leased by his employer, but owned by the defendant, individually, who was the president of the corporate employer (same as here). Plaintiff received workers’ compensation benefits, but sued defendant as the landowner (same as here). In reversing a summary judgment in favor of the landowner, the court cited Professor Larson’s text. The court in Doggett said:

Pursuant to that doctrine, " '(a)n employer may become a third person, vulnerable to tort suit by an employee, if — and only if — he possesses a second persona so completely independent from and unrelated to his status as employer that by established standards the law recognizes it as a separate legal person.’ Larson’s Workmen’s Compensation Law, § 72.81, Vol. 2A.”

Doggett, at 421 (quoting Porter v. Beloit Corp., 194 Ga. App. 591, 593, 391 S.E.2d 430 (quoting 2A Arthur Larson, Workmen’s Compensation § 72.81 (1988), cert. denied, 194 Ga. App. 912 (1990). The court also noted:

The premises were not owned in this case by the corporation-employer but by defendant Patrick in his individual capacity [same as here]. . . . Thus, at least an issue of fact is presented concerning whether the duties imposed upon defendant as a landowner are separate from those imposed upon him as a representative of plaintiffs employer.

Doggett, at 421.

In Corr v. Willamette Indus., Inc., 105 Wn.2d 217, 221-23, 713 P.2d 92 (1986), we quoted Larson (as quoted in Doggett v. Patrick, supra) and stated we might apply the dual persona doctrine in the proper case. This is that proper case.

Also, supporting our holding is Miller v. Massullo, 172 Mich. App. 752, 432 N.W.2d 429 (1988), appeal denied, 433 Mich. 879 (1989). Plaintiff was an employee of a corporation. Defendant was the president and principal shareholder of the corporate employer (same as here). Defendant leased a tractor-trailer to the corporation (same principle as here). Plaintiff was injured in the course of employment by the corporation. Defendant claimed immunity as a coemployee (same as here). Defendant won a summary judgment based on that immunity (same as here). The court reversed. After quoting the same passage from Larson as did the Doggett court, the Michigan court held:

Our review of the record persuades us that defendant was not entitled to summary disposition. Defendant was the owner of the tractor-trailer and had leased the vehicle to Chem-Bright [the employer of both]. Defendant received rental income under the lease and, as the owner, was expressly entitled to the tax benefits of depreciation and the investment [tax] credit on his personal income tax return. We are unconvinced that plaintiff would not have been able to show at trial that defendant’s act of leasing the vehicle to his employer was independent of, and not related to, the common employment of both, and thereby defeat defendant’s claim of immunity . . ..

(Citation omitted.) Miller, at 760.

In LaBelle v. Crepeau, 593 A.2d 653 (Me. 1991), the trial court ruled that the defendant, who was also the major shareholder, president, and treasurer of the corporate employer, had workers’ compensation act immunity. The Supreme Court reversed even though the Maine statute specifically granted immunity to officers and directors (which the Washington statute does not) as well as coemployees. The court correctly held:

Defendant, however, was not sued in his capacity as employee or corporate officer. Rather, he was sued individually as the owner of premises he leased to a separate corporate entity, solely for failure to conform to an alleged legal duty on the part of a landlord to assure the safety of the premises.

LaBelle, at 655. The facts are similar to those in this case.

Equally supportive is Rauch v. Officine Curioni, S.p.A., 179 Wis. 2d 539, 508 N.W.2d 12 (Ct. App. 1993), review denied, 513 N.W.2d 406 (1994), where an employee had been injured in the course of her employment. The defendant was the president, chief executive officer and majority owner of the corporation which employed plaintiff. The defendant had individually purchased a machine and leased it to the corporate employer (same principle as here). The trial court granted immunity to defendant. The court reversed, holding: [Defendant] personally purchasing and leasing the machine,

does not escape potential tort liability simply because he also was an employee, majority stockholder, president, or CEO of [the corporate employer].

. . . Having created the legal entity separate from [the corporate employer] to own and lease the machine, and having accepted the personal advantages derived from such an arrangement, [defendant] cannot shed that separate legal status when it works to his disadvantage.

(Citation omitted.) Rauch, at 546. The court quoted from Schweiner v. Hartford Accident & Indem. Co., 120 Wis. 2d 344, 352, 354 N.W.2d 767, 772 (Ct. App. 1984): " '[T]he legislature never intended the Worker’s Compensation Act to immunize the employer from liability for obligations arising from a source other than its role as an employer.’ ” Rauch, at 547.

In Fern v. Ussler, 428 Pa. Super. 210, 630 A.2d 896 (1993), the employee was a corporate employee, injured by an allegedly defective condition of a building leased to the corporate employer by the defendants. The defendants, husband and wife, were the president and manager and secretary-treasurer of the corporate employer (same as here). The wife, secretary-treasurer, had no duties in relation to the leased building (same as here). The trial court granted immunity. The court reversed, holding: "Hence, the mere fact that both individuals held positions of employment with the same employer at the time of the act or omission is not sufficient to show that they were in the 'same employ’ at the time of the act or omission.” Fern, at 898-99. The court held that it was for the trier of fact, not the appellate court, to determine whether the defendants had duties relating to the condition of the leased building.

Larson’s text makes this generalized statement: "It is held with virtual unanimity that an employer cannot be sued as the owner or occupier of land[.]” 2A Arthur Larson, Workmen’s Compensation § 72.82 (1988). However, this general statement refers to the situation where the entity which is the employer is also the same entity which owns the land. Thus, the injured worker cannot try to split a single legal entity into separate parts. The authorities cited by Larson make clear that the quotation does not support application of his generalization under our facts.

For example, in support of the quoted generalization, Larson cites Carey v. Coca-Cola Bottling Co., 48 Ill. App. 3d 482, 363 N.E.2d 400 (1977). Larson notes that the defendant "was but one legal entity, an owner-employer.” 2A Arthur Larson, Workmen’s Compensation § 72.82 n.15, at 14-247 (1988). Larson then cites cases which draw the very distinction applicable here, i.e., where in fact there are separate legal entities as the employer and as the owner of the premises, action is not barred. For example, an employer was one of three partners in a general partnership. The general partnership was responsible for the parking lot where plaintiff was injured. Plaintiff sued the general partnership, as a third party; the general partnership claimed immunity because the employer was one of its members. Summary judgment for defendant was reversed because there was an issue of fact whether the partnership was a third party. Salswedel v. Enerpharm, Ltd., 107 N.M. 728, 764 P.2d 499 (Ct. App. 1988).

Larson also cites Senken v. Eklund, 146 Misc. 2d 811, 552 N.Y.S.2d 490 (Sup. Ct. 1990), which is of particular interest. The injured worker was employed by a partnership to work on a house owned by a partner and his wife. The husband, as a partner-employer, had immunity, but the wife, as a landowner with separate duties, did not. Larson also cites Karadanis v. Sourwine, 105 Nev. 793, 783 P.2d 454 (1989). In that case there was no immunity for the premises owner, which involved many of the same individuals who owned the employer, but was a totally separate partnership. 2A Larson § 72.82, at 182 (Supp. 1990).

In Couillard v. Van Ess, 152 Wis. 2d 62, 447 N.W.2d 391 (Ct. App.), review denied, 451 N.W.2d 298 (1989), the estate of a killed worker sued the owners of the building. Like this case, the owners of the building were the shareholders and officers of the corporate employer. The court held it was not necessary to invoke the dual persona doctrine because of the legal distinction between the corporate employer and the separate legal entity which owned the building and leased it to the employer. The case is direct authority here.

Next, we turn to the second issue. The requirement is (1) that each defendant must be in the same employ as the decedents and (2) that each defendant was acting in the scope and course of his or her employment.

The applicable rule is clear and well established: "If both employees have a common employer but the negligent employee is not acting in the course of his employment at the time the injury occurs, he is not immune from suit. Olson v. Stern, 65 Wn.2d 871, 400 P.2d 305 (1965).” Taylor v. Cady, 18 Wn. App. 204, 206, 566 P.2d 987 (1977). Usually it is a question for the jury whether an employee was acting within the scope of employment. Strachan v. Kitsap Cy., 27 Wn. App. 271, 274, 616 P.2d 1251, review denied, 94 Wn.2d 1025 (1980). Of course, this is the general rule. "It must be observed that the immunity attaches to the coemployee only when the co-employee is acting in the course of his employment.” (Footnote omitted. Italics ours.) 2A Arthur Larson, Workmen’s Compensation § 72.23, at 14-117 (1987).

Further, the burden is on the Defendants to establish their claimed immunity as coemployees. CR 8(c); Superior Asphalt & Concrete Co. v. Department of Labor & Indus., 19 Wn. App. 800, 804, 578 P.2d 59, review denied, 90 Wn.2d 1022 (1978).

First, as to the Defendant wife, it is not possible on this record to make the required findings to support immunity as a matter of law. (1) The wife was not employed by the corporation. (2) The wife had no duties for the corporation. (3) The wife performed no services for the corporation. (4) The wife received no wages or any form of compensation from the corporation. Since she had no job and no duties, it necessarily follows that she could not be acting in the scope and course of a nonexistent employment.

The picture is less clear as to the husband. But bearing in mind the Defendants’ burden to prove their affirmative defense of immunity, they fail to meet the standards for summary judgment. They failed to provide any evidence of the husband’s actual duties for the corporation, including whether he directed the day-to-day operations of the corporation. It is established that he was not involved in any way in directing decedents to the property where they were killed. Clerk’s Papers, at 93. Thus, it is unknown what Defendant husband’s duties were in relation to the corporate business or to the particular event. There remain genuine issues of material fact thereon.

To overcome the fact that Defendant wife was not in fact an employee and had no corporate duties, and that the scope and nature of the husband’s duties are unknown, the Defendants argue as a matter of law, the individual Defendants are (1) corporate employees and (2) necessarily acting within the scope and course of their corporate employment.

In reality, the nature and scope of the duties of a director and an officer are defined in the corporate bylaws. None is in the record. The controlling statute provides that a corporation may dispense with or limit the authority of its directors and prescribe who will perform some or all of the duties of its directors. RCW 23B.08.010(3).

The Defendants contend that two Court of Appeals cases support its holding that officers and directors are by definition corporate employees. In fact, neither is persuasive and both clearly are distinguishable.

First is Peterick v. State, 22 Wn. App. 163, 190, 589 P.2d 250 (1977), review denied, 90 Wn.2d 1024 (1978), overruled on other grounds by Stenberg v. Pacific Power & Light Co., 104 Wn.2d 710, 719, 709 P.2d 793 (1985). The opinion is not entirely clear, but it appears the sued officers and directors were in fact corporate employees. The defendants’ brief in Peterick specifically refers to those officers and directors being employed by the corporation. Br. of Resp’t, at 37-38. The Peterick opinion makes no analysis of the issue, but only asserts its conclusion without consideration of the facts. Contrast this case where at least Defendant wife is not a corporate employee and the husband’s status is unknown.

The second case relied on by Defendants is Kimball v. Millet, 52 Wn. App. 512, 513, 762 P.2d 10 (1988), review denied, 111 Wn.2d 1036 (1989). It bears no relation to this case. There the injured plaintiff, an employee of a corporation, was injured by a bull owned by the corporation. The individual defendants owned the land where the corporation operated its farm, but the land had nothing to do with the injury. Not only was there no basis for individual liability by the defendants simply owning the farm, but the defendants were employed by the corporation. The Kimball court specifically noted that the plaintiff and defendants were in fact coemployees, which may not be true here. The court’s gratuitous remark about the Defendants being corporate officers is of no significance to its holding and certainly is without any analysis of the point.

Because the Defendants draw no distinction between officers and directors, it must be assumed that either an officer or a director would have coemployee immunity. Several realistic hypothetical fact patterns will demonstrate that this contention is contrary to the command of the Industrial Insurance Act concerning third party actions, and leads to absurd ^consequences.

Assume that a husband and wife own a corporation with 200 employees. The bylaws dispense with any specific duties for a director as authorized by RCW 23B.08.010(3). They name their 16-year-old daughter as a director. Because she is married to an 18-year-old, she is of full legal age and entitled to be a corporate director. RCW 26.28.020 (all minors married to person of full age shall be deemed to be of full age). If the 16-year-old daughter negligently injures any of the 200 corporate employees who was acting within the scope of his or her employment, the daughter is completely immune from liability. Thus, if immunity attaches as a matter of law, there would be no inquiry as to whether the daughter was an employee of the corporation or had any duties. Therefore, not only is the injured employee deprived of a claim against the daughter, but the industrial insurance fund bears the whole burden of the damages and is deprived of its right of reimbursement for third party liability. Next, assume the ABC corporation is a publicly held corporation with 5,000 employees. D is an outside director, but has no specific duties under the bylaws. Driving while intoxicated, D kills one of the corporate employees who is driving a corporate car on business. If immunity attaches as a matter of law, D has complete immunity. There would be no inquiry whether the intoxicated driver had any connection with corporate business. Because D was named on a piece of paper as a director, immunity automatically would follow as a matter of law. Again, the fund bears the cost; reimbursement to the fund is denied.

The purpose of the exclusive remedy provision of the workers’ compensation law is to give immunity to the employer and coemployees acting in the scope and course of their employment. Its purpose is not to create artificial immunity to one whose only connection with the corporate employer’s business is having his or her name on a piece of paper as an officer and/or director. To provide immunity as a matter of law denies the right of a third party action against the person actually responsible for the injury or death. That would frustrate the direction of the Legislature that the Department be reimbursed from proceeds of such third party action.

We reverse the summary judgment and remand for further proceedings.

Utter, Smith, Guy, and Johnson, JJ., concur.