Kramer v. Charlevoix Beach Hotel

71 N.W.2d 226, 342 Mich. 715, 1955 Mich. LEXIS 455

• Court: Michigan Supreme Court
• Decided: June 29, 1955
• Docket: Docket 55, Calendar 46,246
• Status: Published

Opinions

Butzel, J.

E. L. Kramer, plaintiff, filed with the workmen’s compensation commission an application for hearing and adjustment of his claim. Although the Charlevoix Beach Hotel is also made a defendant, the real defendant is the Travelers Insurance Company, referred to herein as Travelers. It resists plaintiff’s claim.

In 1946, plaintiff and Ms wife, Irene, with their joint funds purchased the Charlevoix Beach Hotel on land contract and subsequently obtained a deed running to them as husband and wife, but subject to a mortgage which they executed as husband and wife to a local bank where they also maintained a joint bank account. On January 3, 1950, they filed an assumed-name certificate, stating that they were conducting the business as the Charlevoix Beach Hotel. The profits or losses were to be equally divided. The entire arrangement had all the characteristics of a partnership, except for the facts that the liquor license for the hotel was taken out in the name of plaintiff alone and there appeared on the hotel stationery the words “E. L. Kramer, Owner and Manager.”

In 1946, plaintiff and his wife took out a workmen’s compensation policy with Travelers. It was renewed from year to year, the policy in force at the time of the accident running from June 1, 1951, to June 1, 1952. On July 15, 1951, plaintiff met with a very serious accident. He fell down the stairs, struck his forehead and nose against a table and suffered, among other things, a subdural hematoma. He required hospitalization and after several weeks was removed to the University Hospital at Ann Arbor where he underwent major brain surgery. At the time of the hearing he had not yet fully recovered and was unable to return to his former duties. He filed an application for workmen’s compensation which the deputy commissioner granted, and on appeal the majority of the commission awarded compensation at the rate of $26 per week for total disability from July 16, 1951, to the time of the' hearing and thereafter until further order of the commission. He was also awarded a large sum for very heavy medical expenses. Travelers has appealed from the award by the commission. It offered and still offers to rethrii to plaintiff an amount equal to all premiums paid.

While they differed on the point of law involved and hereafter discussed, all 3 commissioners found that a partnership existed between plaintiff and his wife. To' support its contention to the contrary Travelers also points to the fact that plaintiff and his wife did not file a copartnership certificate. However, CL 1948, § 449.101 (Stat Ann §20.111), clearly states that a partnership is not required to file a certificate of partnership with the county clerk If a Certificate of doing business under an assumed náme is filed with him. The policy itself described the Charlevoix Beach Hotel as a copartnership. At the most it became a question of fact and we see no reason to disturb the finding of the commission. Such' a finding, based on competent evidence, is conclusive in the absence of fraud. CL 1948, § 413.-12 (Stat Ann 1950 Rev § 17.186); Babcock v. General Motors Corporation, 340 Mich 58. The principal issue is one of law.

Under the workmen’s compensation act, CL 1948, § 411.7, subd 2, as amended by PA 1949, No 284 (Stat Ann 1950 Rev § 17.147, subd 2), an “employee” entitled to compensátion was defined as:

. “Every person in the service of another, under any contract of hire express or implied, including aliens, including working members of partnerships, receiving wages irrespective of profits from such, including any person insured for whom and to the extent premiums are paid based on wages, earnings or profits. * *, ■*

“Any policy or contract of workmen’s compensation- insurance may, by indorsement, exclude coverage as to any 1 or more named partners. No partner so excluded shall be subject to the provisions of this act.”

The italicized portion represents an amendment enacted as PA 1949, No 284. We are here faced with the effect of this amendment and the provisions of the policy upon plaintiff’s right to compensation, in light of the established fact that he did not receive, as such, wages irrespective of profits. One of the commissioners held that as plaintiff did not receive wages irrespective of profits, he was not entitled to compensation. The majority of two, however, held that plaintiff was entitled to compensation stating that the “proofs offered show that premiums were paid for workmen’s compensation insurance based upon $3,600 of plaintiff’s annual earnmgs” and therefore he was an “employee within the statutory definition.” While it is true that the premiums were “based” upon what the commission held were annual earnings, the annual earnings, if any, were not shown except in plaintiff’s application to the commission. Plaintiff and his wife both testified that in fact they received no wages during this entire period.

• Does the. 1949 amendment obviate the necessity for showing wages irrespective of profits heretofore required in order to recover! See Thurston v. Detroit Asphalt & Paving Co., 226 Mich 505. We have held that this amendment of itself does not operate to bring ah independent contractor within the act. Scott v. Alsar Company, 336 Mich 532. The words of the amendment must be given meaning. Construing the statute as it th'en stood and giving all of its words some meaning it must be‘ said that working partners, whether they received wages irrespective of profits, or whether their premiums are based on “earnings or profit's,” were within the statutory definition and can recover unless specifically excluded from the policy by indorsement. That such was the intent of the legislature becomes clear when relevant facts are examined.

In the' operation of a partnership it is difficult to tell with exactitude what the profits for the ensuing year will he. Siich a determination can only be accurately made at the end of the year. Premiums on prepaid insurance, however, in the first place- must be based upon a sum certain. It is therefore necessary to., fix. at a specific figure the amount of-remuneration upon which at least a minimum premium will be based. ' “

Attached to the basic policy were provisions applicable to those insured in Michigan. One such was the following: - -

“7. If this employer is a partnership, the remuneration of each of its partners shall be included at the fixed amount of $2,000 per annum and premium shall be paid thereon unless such partner is designated in the declarations or by indorsement as excluded.”

Effective June 1,1951, the figure of $3,600 was substituted for the $2,000. Plaintiff paid premiums based on these figures for the 5 or so years that he thought he was insured. In addition the policy provided :

“2. The premium is based upon the entire remuneration earned, during the policy period, by all employees of this employer engaged in the business operations covered by the policy.”

These stipulations and figures were not arrived at out of thin air. The provisions of the insurance code, made specifically applicable to workmen’s compensation insurance, require insurers, either individually or through rating bureaus, to file “every manual of classifications, every manual of rules and rates,” et cetera, with the insurance commissioner. CL 1948, § 545.4 (Stat Ann 1953 Cum Supp § 24.567 [4]). It is further provided in that same section that every filing “shall indicate the character and extent of the coverage contemplated.” Michigan Amended Rule 7 of section 13 of the workmen’s compensation and employer’s liability manual on file with the insurance commissioner provides as follows:

“(7) Copartnerships. Where an employer is a copartnership all partners are covered by the policy except the partners who are specifically excluded by indorsement of the policy. The payroll of each partner not specifically excluded, for the purposes of premium computation, shall be the fixed amount of $3,600 per annum.”

The Travelers must have adopted this rule, for not only is their above-quoted policy provision similar to it, but also paragraph 7 of the basic policy itself herein involved refers specifically to the “rules of the manual of rates in use by the company upon the date of the issue of this policy.”

Thus Travelers with the approval of the insurance commissioner set the remuneration earned by plaintiff and his wife at a certain figure without regard to whether or not an amount more or less than that figure was in fact earned by the insured. It drafted the policy. Its agents were in a position to know the financial condition of the Charlevoix Beach Hotel, as Hawley and Bridge, the agents who sold plaintiff the insurance, were cashier and president respectively of the bank where plaintiff did his business. Travelers accepted premiums “based” on these figures presupposed to be plaintiff’s remuneration. The rule adopted and referred to by the cofiipany, to repeat, stated that “where an employer is a co-partnership all partners are covered by the policy except the partners who are specifically excluded by indorsement of the policy.” Such a broad undertaking leaves no room for the defense here interposed that plaintiff is not covered because he earned no wages. The fact that the broad term “remuneration” was used rather than “wages” tends to indicate that the company was complying with the all-encompassing “wages, earnings or profits” language of the amendment.

Travelers has objected to the consideration of the manual of rules, rates and classifications filed with and accepted by the insurance commissioner on the ground that no mention of them was made at the hearing before the commission or in the briefs first filed in this Court. However, this Court notified respective counsel to file briefs on this particular subject and they did so. We take judicial notice of these rules. This no longer becomes a question of fact, but one of law, and we see no reason to refer the case back to the commission for introduction of the manual filed as required by statute and referred to in the policy.

As a matter of practice partnerships do not generally distinguish between forms of remuneration to the partners. Money is taken out, as was done in this case, when needed, without regard to whether it actually is “wages,” “earnings,” or “profits.” The legislature apparently enacted the amendment to broaden and conform the coverage of the act, insofar as partners are concerned, to this manner of doing business in the partnership form. To decide otherwise would be to make compensation dependent upon mere nomenclature or accounting practice rather than upon a substantive relationship. The fact that plaintiff did not earn wages irrespective of profits has now become irrelevant. The statute as we interpret it now provides coverage to a partner “for whom and to the extent that premiums are paid based on wages, earnings or profits” (emphasis added), as well as to the partner who earns wages irrespective of profits. The effect of the policy provisions and the rules referred to herein was to “base” the premium upon plaintiff’s “remuneration.” He is therefore within the statutory definition and entitled to compensation.

The award of the commission is affirmed, with costs.

Boyles, Reid, and Kelly, JJ., concurred with BtjtZEL, J. Carr, C. J., and Sharpe, and Dethmers, JJ., concurred in the'result.