STEPHEN VODA and ELLEN VODA v. ELM AVENUE ASSOCIATES, INC.

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3563-08T23563-08T2

STEPHEN VODA and ELLEN VODA,

by their subrogee, THE FRANKLIN

MUTUAL INSURANCE COMPANY,

Plaintiffs-Appellants,

v.

ELM AVENUE ASSOCIATES, INC.,

Defendant-Respondent.

_____________________________________

 

Submitted January 6, 2010 - Decided

Before Judges Harris and Newman.

On appeal from Superior Court of New Jersey,

Law Division, Middlesex County, Docket No.

L-5766-08.

Kearns & Duffy, P.C., attorneys for

appellants (Paul R. Duffy, on the brief).

Callan, Koster, Brady & Brennan, LLP,

attorneys for respondent (Beth S. Block,

on the brief).

PER CURIAM

This is an appeal from a grant of a summary judgment motion in favor of defendant Elm Avenue Associates, Inc., on a subrogation claim filed by Franklin Mutual Insurance Company, as subrogee to plaintiffs Stephen Voda and Ellen Voda (references to Voda are to Stephen Voda only), and from a further order denying subrogee's motion for reconsideration. We reverse, persuaded that the granting of summary judgment was premature and that further discovery is necessary, whereupon a motion for summary judgment may be ripe for consideration.

The relevant facts may be summarized as follows. The Vodas are the owners of an eight unit residential building located at 246-248 South Seventh Avenue, Highland Park, New Jersey (South Seventh). They are also sole shareholders of Elm Avenue Associates, a Subchapter S corporation, which owns a residential building located at 132-136 Elm Avenue, Rahway, New Jersey (Elm Avenue). The Vodas owned other residential property, including another property in Highland Park, two properties in Dunnellen, another property in Middlesex, and an additional property in Rahway. They are also the principals of Sevco Associates, LLC (Sevco), a holding company which includes both Highland Park properties, Dunnellen, Middlesex, and one of the Rahway, but not South Seventh, properties. Voda acts as the property manager for all of the properties he owns.

On January 21, 2008, Voda sent Merido Lopez, a handyman who worked on all of the properties, to South Seventh. Lopez's work schedule varied and, oftentimes, he would work at more than one property on any given day. On this particular day, he was at South Seventh where, on average, he worked once a week. Lopez was paid through an Elm Avenue checking account. He was also covered by workers' compensation insurance through Elm Avenue. Lopez was working in the basement at South Seventh where there was a wet drywall ceiling. When he took it down to replace it, he discovered a leaking water pipe. He went to repair the pipe by soldering it. Thereafter, he left for lunch. When he returned, the "building was engulfed in flames," according to a statement from Voda.

Lopez was a full-time employee and worked for Elm Avenue for several years. Elm Avenue paid taxes and made social security contributions on his behalf as a full-time employee. At the end of the year, Voda would sit down with his accountant and determine the amount of reimbursement to Elm Avenue from the various other properties that were serviced by Lopez as a handyman which included the South Seventh building.

Elm Avenue moved for summary judgment and subrogee Franklin Mutual cross-moved. Elm Avenue argued that Lopez was on the Elm Avenue payroll essentially for business accounting reasons. Furthermore, Lopez was working for Voda on the property Voda owned on South Seventh which had nothing to do with Elm Avenue. They pointed out that Franklin Mutual had first-party coverage here and is using this action, in which Lopez, who was the negligent person is not even a party to the action.

Franklin Mutual contended that Lopez was an employee of Elm Avenue, a separate corporate entity, who goes to another property to do work and that a fire was caused by his negligent action. Elm Avenue pays separate taxes, insurance, and is reimbursed for work done on other properties on an annual basis. Elm Avenue, it was argued, was the general employer who was vicariously liable for the negligence of its employee Lopez. Unlike the decision in Galvao v. G.R. Robert Constr. Co., 179 N.J. 462 (2004), Lopez did not injure someone but rather destroyed property owned by another legal entity. Franklin Mutual asserted that Elm Avenue retained the type of control necessary under the Galvao decision to respond vicariously for its employee's negligence.

In granting summary judgment, the trial court applied the test set forth in Galvao, supra, 179 N.J. at 472. The court noted that a two-prong test was formulated by our Supreme Court to determine whether a general employer can be held vicariously liable for the negligence of a special employee. There was a control test and a business-furtherance test. Ibid. Elm Avenue argues that neither test was satisfied.

The court acknowledged that the W-2 form specifically listed Lopez as employed by Elm Avenue and that workers' compensation was paid by Elm Avenue. Elm Avenue was also reimbursed by the other companies in which Voda was the principal for Lopez's work. In addressing the two-prong test of Galvao, the motion court found that Elm Avenue was the general employer but that Elm Avenue was Voda who directed all of the daily work of Lopez. The court found it "difficult . . . to determine whether it was Stephen Voda, the individual exercising control over Lopez, or was it Stephen Voda, through -- through his corporation Elm Avenue Associates exercising the control over Lopez." The court was unable to draw any conclusion based on the existing record.

In addressing whether the special employee furthered the business of the general employer, the motion judge determined that he did not. The court determined that the work Lopez was performing that day had nothing to do with Elm Avenue nor was Elm Avenue deriving any economic benefit from this work. As the motion court put it: "Voda was deriving the economic benefit from the work being performed by Lopez as he was repairing the building which Voda owned for Voda's benefit." Applying the business-furtherance test, the court concluded that Elm Avenue was not vicariously liable for the alleged negligence of Lopez and granted summary judgment.

On the motion for reconsideration, which sought to take the depositions of Voda and possibly the accountant, the court denied the motion. In denying the motion, the court commented that cross-motions for summary judgment inform the court that there is no general issue of material fact in dispute and that the court can rely on the certifications presented. The court rejected the contention that Voda's deposition should be taken. The court did not find that to be an appropriate basis for a motion for reconsideration and denied the motion.

On appeal, plaintiffs raise the following arguments for our consideration:

POINT I THE TRIAL JUDGE ERRED IN GRANTING RESPONDENT'S NOTICE OF MOTION FOR SUMMARY JUDGMENT FILED IN LIEU OF AN ANSWER ON JANUARY 9, 2009.

POINT II THE TRIAL JUDGE ERRED IN FAILING TO IMPUTE THE NEGLIGENCE OF MERIDO LOPEZ TO HIS EMPLOYER.

POINT III DEFENDANT, ELM AVENUE, SEEKS TO DISREGARD THE CORPORATE STRUCTURE.

POINT IV THE TRIAL COURT ERRED IN DENYING PLAINTIFF'S NOTICE OF MOTION FOR RECONSIDERATION.

We need not address all the points raised above because we are convinced that summary judgment should not have been granted. We note that the motion judge was unable to determine on this record whether Voda was acting in his capacity as property manager for Elm Avenue or as the individual property owner of South Seventh when he had the handyman, Lopez, go to that property. Deposition testimony which could be more probing than the statement of February 26, 2008, secured by Whelan Adjustment, which provided the main but limited discussion of Voda's role as property manager and property owner. The motion judge properly could not decide which hat Voda was wearing that day, nor can we, on this record. That determination is critical in deciding the control test prong under the Galvao decision.

With regard to the business-furtherance test, the motion judge did decide that there was no business-furtherance purpose and that no economic benefit was derived by Elm Avenue from the work performed that day. In other words, the business-furtherance test was not satisfied. We disagree on the present record.

Much was made of a business plan to utilize the services of Lopez for all of the various properties owned by the Vodas, either themselves or in a limited liability format. We do not know the proportion of reimbursement in relationship to work done by Lopez at the various properties and whether this was just designed to reduce the overhead of Elm Avenue or was an income generation proposition. In addition to Voda's deposition, his accountant, with whom he conferred with to determine the amount of reimbursement, would have been helpful in determining the issue of whether the business-furtherance test was met or not.

Furthermore, the record indicates that the use of the services of a handyman was part of a business plan to utilize that person for all of the Voda properties. We are not informed whether the reimbursement scheme was in keeping with that plan or was just, as characterized, as a pass-through type of transaction "as noted in the Galvao decision." Id. at 474. This is an area to be explored through the discovery process. While we appreciate the motion judge's comment that both sides agreed that cross-motions for summary judgment indicated there was no disputed material issues of fact, we are persuaded that is not the case. We are satisfied that the record was too incomplete to make the determination that the business-furtherance test was not met.

Reversed and remanded.

(continued)

(continued)

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A-3563-08T2

February 2, 2010