DAVID B. RAMLER v. SPARTAN CONSTRUCTION INCORPORATED
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RENDERED:
SEPTEMBER 5, 2003; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO.
2002-CA-001646-MR
DAVID B. RAMLER
APPELLANT
APPEAL FROM THE KENTON CIRCUIT COURT
HON. PATRICIA M. SUMME, JUDGE
CIVIL ACTION NO. 02-CI-00089
v.
SPARTAN CONSTRUCTION INCORPORATED
APPELLEE
OPINION
AFFIRMING
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BEFORE:
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BARBER, McANULTY, AND TACKETT, JUDGES.
McANULTY, JUDGE: David Ramler appeals from an order of the
Kenton Circuit Court granting summary judgment to Appellee
Spartan Construction Incorporated (Spartan).
Following a work-
related injury, Ramler filed a successful workers’ compensation
claim through his immediate employer, Brossart Materials
Recycling, LLC (BMR).
Subsequently, Ramler brought a common law
negligence action against Spartan, alleging “up-the-ladder”
liability.
BMR and Spartan are affiliate companies that share
various employees and office resources.
Following the
completion of limited discovery, the Kenton Circuit Court
granted summary judgment on the basis that Spartan is a
contractor as defined under Kentucky Revised Statutes (KRS)
342.610, and KRS 342.690, the exclusive remedy provision of the
Kentucky Workers’ Compensation Act, therefore precludes Ramler
from bringing the suit.
We affirm.
In September 2001, Ramler was working on a state
highway project that arose out of a contract awarded by the
Kentucky Transportation Cabinet to Faulkner Construction, LLC.
Following award of the contract, Faulkner Construction
subcontracted with Spartan to perform recycling of concrete
barriers at the site.
Subsequently, Spartan entered into an
oral agreement with BMR to carry out the recycling.
of the agreement are uncontroverted.
The terms
Spartan was to rent the
crusher used to recycle the concrete from BMR, provide other
equipment needed for the project, and reimburse BMR for the
labor employed to operate the crusher.
BMR, in turn, was to
crush the concrete barriers and to retain the crushed material
for sale.
On September 20, 2001, four of Ramler’s fingers were
severed in the course of his employment for BMR.
Following the
accident, Ramler pursued a successful workers’ compensation
claim through BMR under KRS Chapter 342.
collecting workers’ compensation benefits.
Ramler has since been
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On January 11, 2002, Ramler filed a negligence action
against Spartan in Kenton Circuit Court.
Spartan filed an
answer denying liability, and on February 27, 2002, filed a
motion for summary judgment.
The trial court initially denied
the motion and allowed the depositions to be taken of Diane
Brossart, owner of 100% of the stock in Spartan, and of Donald
Brossart, co-owner with his brother, Doug, of 98% of the stock
in BMR.1
On July 18, 2002, after the completion of the
depositions, the circuit court granted Spartan’s summary
judgment motion.
The circuit court determined that Spartan was
entitled to “up-the-ladder” immunity under the exclusive remedy
provisions of KRS 342.690 because Spartan was a contractor as
defined in KRS 342.610.
This appeal followed.
Ramler first notes that “Kentucky courts have given
the ‘liberal’ construction required by the express language of
the [Kentucky Workers’ Compensation] Act by broadly construing
the coverage provisions . . . and narrowly construing the
immunity provisions.”
Boggs v. Blue Diamond Coal Co., 590 F.2d
655, 659 (1979)(citing Bright v. Reynolds Metals Co., Ky., 490
S.W.2d 474 (1973)).
Ramler seeks to rely on this rule of
construction to avoid Spartan’s classification as a contractor.
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The remaining 2% of the stock in BMR is owned by Spartan.
3
However, as discussed below, Spartan qualifies as a contractor
under the plain meaning of KRS 342.610(2).
Applying narrow construction principles to the Act,
Ramler argues that Spartan should not be recognized as a
contractor because of its close affiliation with BMR.
Ramler
supports this argument on two main grounds: 1) that BMR is a
subsidiary of Spartan, which precludes a contractual
relationship from being formed under Boggs v. Blue Diamond Coal
Co., 590 F.2d 655 (1979); and 2) that the basic contract
principles of mutuality of obligation and arm’s length dealing
are not satisfied because of Spartan and BMR’s relationship.
The standard of review on appeal of a summary judgment
is, “whether the circuit judge correctly found that there were
no issues as to any material fact and that the moving party was
entitled to judgment as a matter of law.”
Pearson ex rel. Trent
v. National Feeding Systems, Ky., 90 S.W.3d 46, 49 (2002).
This
standard reflects the requirements of Rules of Civil Procedure
(CR) 56.03.
Further, “[t]he record must be viewed in a light
most favorable to the party opposing the motion for summary
judgment and all doubts are to be resolved in his favor.”
Steelvest, Inc. v. Scansteel Service Center, Inc., Ky., 807
S.W.2d 476, 480 (1991).
Finally, on appellate review, “[t]here
is no requirement that the appellate court defer to the trial
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court since factual findings are not at issue.”
Barnette v.
Hospital of Louisa, Inc., Ky. App., 64 S.W.3d 828,829 (2002).
KRS 342.690 grants immunity from further liability to
“employers” and “contractors” as defined by KRS 342.610(2) when
workers’ compensation payments have been secured.
KRS 342.690
states in relevant part as follows:
(1) If an employer secures payment of
compensation as required by this chapter,
the liability of such employer under this
chapter shall be exclusive and in place of
all other liability of such employer to the
employee . . .. For purposes of this
section, the term ‘employer’ shall include a
“contractor” covered by subsection (2) of
KRS 342.610, whether or not the
subcontractor has in fact, secured the
payment of compensation.
KRS 342.610(2) defines a contractor as:
A person who contracts with another:
. . .
(b) To have work performed of a kind which
is a regular or recurrent part of the work
of the trade, business, occupation, or
profession of such person shall for purposes
of this section be deemed a contractor, and
such other person a subcontractor.
Based upon the plain language of KRS 342.610(2),
Spartan was a contractor and BMR was a subcontractor on the
highway project which resulted in Ramler’s injury.
Specifically, part of the contract between Spartan and BMR was
for BMR to perform various concrete crushing activities.
It is
uncontested that concrete crushing is, for Spartan, work “of a
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kind which is a regular or recurrent part of the work of the
trade[.] . . .”
KRS 342.610(2)(b).
The deposition testimony
shows that Spartan has contracted for this service many times
previously.
Although the concrete crushing is generally not
carried out by Spartan itself, this still qualifies as a regular
or recurrent part of Spartan’s trade.
See Fireman’s Fund Ins.
Co. v. Sherman & Fletcher, Ky., 705 S.W.2d 459 (1986) (holding a
particular category of carpentry usually subcontracted by the
defendant still satisfies the statutory definition for a regular
or recurrent part of the defendant’s work).
Citing Boggs v. Blue Diamond Coal Co., 590 F.2d 655
(1979), Ramler argues that Spartan should not be deemed a
contractor because there is a parent-subsidiary relationship
between Spartan and BMR.
Ramler contends that Boggs represents
a blanket holding that a parent and a subsidiary, because of the
nature of their relationship, are incapable of forming legally
cognizable contracts.
This argument significantly exaggerates
the holding in Boggs, however.
Under Boggs, a contract between
a parent and a subsidiary should not be recognized for purposes
of KRS 342.610(2) when the parent company so directs the
performance of the subordinate unit that the subsidiary lacks
adequate bargaining power to exercise the freedom to disagree
with the parent.
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Boggs involved an appeal of a summary judgment in
favor of the defendant, Blue Diamond Coal Co. (Blue Diamond).
The summary judgment dismissed a wrongful death action brought
by fifteen widows of miners killed in a methane gas explosion
attributed to poor ventilation in the mine shaft.
The miners
worked for Scotia Coal Company (Scotia), a wholly owned
subsidiary of the defendant parent corporation.
The Federal
District Court determined that Blue Diamond was a contractor
under KRS 342.690 and thus exempt from common law liability.
On
appeal, the Sixth Circuit reversed, holding that the
relationship involved was not “contractual either in fact or in
theory” and that “[t]he parent should not be characterized as a
‘contractor’ for the mining services of its wholly owned
subsidiary for purposes of the tort immunity provisions of the
Act.”
Boggs, 590 F.2d at 661.
The Boggs court cited a number of factors in the
relationship between Blue Diamond and Scotia in support of its
conclusion.
Among these were that Scotia was a wholly-owned
subsidiary of Blue Diamond; that no formal agreement existed
between the two companies for the mining work; and that Blue
Diamond clearly controlled all aspects of Scotia’s business.
The Boggs court further cited as factors demonstrating Blue
Diamond’s control of Scotia’s business that Blue Diamond
directed the amount of coal Scotia mined and to whom it was
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sold; that Blue Diamond retained all money from Scotia’s coal
sales; that Blue Diamond provided Scotia with money for its
operating expenses; and finally, that Blue Diamond made all
decisions regarding safety at Scotia’s mines.
Turning to the relationship between Spartan and BMR,
the two companies do have a number of common connections.
Spartan and BMR share an office building and some employees.
The safety supervisor for both corporations is Joe Garera, but
he is officially employed and paid only by Spartan.
BMR are further connected through their ownership.
Spartan and
Diane
Brossart, the mother of Donald Brossart and Doug Brossart, is
the president and sole owner of Spartan.
BMR is owned by Donald
Brossart, his brother Doug Brossart, and Spartan.
Donald and
Doug Brossart own 98% of BMR and Spartan owns the remaining 2%.
A close connection is also demonstrated by the composition of
the officers for Spartan and BMR.
The officers for the two
companies consist of the same three people: Diane Brossart, Doug
Brossart, and Donald Brossart.
However, BMR is not a wholly owned subsidiary of
Spartan.
To the contrary, Spartan owns only 2% of BMR.
There
is no evidence in the record to support Ramler’s allegation that
this 2% ownership share represents a controlling interest in
BMR.
Moreover, there was a specific oral contract between the
two companies relating to the highway project.
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Spartan and BMR
are also distinct corporations individually incorporated under
separate articles of incorporation.
In addition, the two
corporations maintain separate bank accounts, file taxes
separately, and maintain their own employees.
Most importantly,
and unlike the situation in Boggs, Spartan does not dominate
BMR’s business decisions in a way that denies BMR of all
autonomy.
Based upon the deposition testimony, BMR and Spartan
appear, if anything, to operate as co-equals.
“[A] party opposing a properly documented summary
judgment cannot defeat it without presenting at least some
affirmative evidence indicating that there is a genuine issue of
a material fact.”
Pearson ex rel. Trent v. National Feeding
Systems, Ky., 90 S.W.3d 46, 49 (2002).
Spartan’s motion is
supported with deposition testimony demonstrating that a parentsubsidiary relationship does not exist, that BMR is not
dominated by Spartan, and that an agreement did exist between
the parties.
In opposition, Ramler fails to present any
affirmative evidence demonstrating that a genuine issue of
material fact exists regarding whether Spartan meets the
statutory definition of a contractor or whether Boggs is
applicable under these circumstances.
Ramler instead relies on
speculative assertions that are unsupported by the depositions
of Diane and Donald Brossart.
Ramler presented no affidavits or
deposition testimony to support the application of Boggs, and
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the record simply does not demonstrate that Spartan dominated
BMR’s business activities so as to interfere with BMR’s freedom
to contract.
In summary, Ramler has failed to demonstrate that
there is a genuine issue of material fact regarding Spartan’s
status as a contractor.
Boggs is not applicable to the present
case because BMR, in contrast to Scotia, is an autonomous
corporation and is not dominated by Spartan.
Viewing the
relationship between Spartan and BMR in the light most favorable
to Ramler, there is nothing more than unsubstantiated assertions
by the appellee that the contract between BMR and Spartan was
not negotiated on an equal footing.
Ramler next argues that summary judgment should not
have been granted because Spartan and BMR’s relationship does
not satisfy the basic contract doctrines of mutuality of
obligation and arm’s length dealing.
We disagree.
The doctrine of mutuality of obligation implicates
many of the concerns involved in the doctrine of consideration.
The basic idea can be stated as follows: “Where an agreement is
founded solely upon reciprocal promises, unless each party has
assumed some legal obligation to the other the contract is
wanting in consideration and is lacking in mutuality.”
David
Roth’s Sons, Inc. v. Wright and Taylor, Inc., Ky., 343 S.W.2d
10
389, 390 (1961).
If this principle is not satisfied, a legally
enforceable contract cannot be formed.
In the present case, the agreement between Spartan and
BMR is uncontroverted.
Inquiry into the mutuality of obligation
requires “analysis of the contract in its entirety.”
Roth’s Sons, 343 S.W.2d at 391.
David
The agreement between Spartan
and BMR required Spartan to pay the rental fee for the crusher
and to pay BMR’s employees for operating the crusher.
BMR, in
turn, was to provide the crusher and the employees to operate
it.
The only other term to the agreement was that BMR was to
keep the crushed material for sale.
“If both parties are bound by mutual obligations for
even a short period of time, the contract cannot be avoided by
either party on [the basis of lack of mutuality of obligation].”
David Roth’s Sons, 343 S.W.2d at 391.
Here, Spartan was
required to pay for BMR’s services and BMR was required to
perform them.
As each party assumed legal obligations to the
other, the obligations of Spartan and BMR in this agreement
satisfy the doctrine of mutuality of obligation.
Additionally, if consideration is found to be present,
mutuality of obligation is not required.
Restatement (Second)
of Contracts § 79 (1981) states: “If the requirement of
consideration is met, there is no additional requirement
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of . . . (c) ‘mutuality of obligation.’”
The exchange of
promises carrying a legal obligation between Spartan and BMR was
sufficient consideration to bind them.
Finally, Ramler argues that the contract between
Spartan and BMR was not valid because the parties did not deal
at arm’s length.
Spartan admits in its brief to having a very
close relationship with BMR.
However, this closeness alone does
not make their contract unenforceable.
“[T]he formation of a
contract requires a bargain in which there is a manifestation of
mutual assent to the exchange and a consideration.”
of Contracts § 17 (1981).
Restatement
The consideration involved here is
adequate and Spartan and BMR, as separate corporations, gave
“actual as well as apparent assent” to the contract.
Restatement of Contracts § 17 cmt. c (1981).
The concern in the
requirement for arm’s length dealings between parties is to
ensure that they may contract freely and effectuate their true
intentions.
That occurred here and the close relationship of
the parties was not a bar, therefore, to the formation of a
contract.
For the foregoing reasons, the judgment of the Kenton
Circuit Court is affirmed.
ALL CONCUR.
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BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Jerry M. Miniard
Florence, Kentucky
Thomas A. Sweeney
Sweeney & Fiser, PLLC
Crescent Springs, Kentucky
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