Vella v. Hartford Vermont Acquisitions, Inc.

Vella v. Hartford Vermont Acquisitions, Inc. (2002-364); 176 Vt. 151;
838 A.2d 126

2003 VT 108

[Filed 21-Nov-2003]


       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.


                                 2003 VT 108

                                No. 2002-364


  Charles E. Vella	                         Supreme Court

                                                 On Appeal from
       v.	                                 Windsor Superior Court


  Hartford Vermont Acquisitions, Inc.	         October Term, 2003


  Alan W. Cook, J.

  Tim A. Clark of DesMeules, Olmstead & Ostler, Norwich, for
    Plaintiff-Appellant.

  Wayne R. Young and Harold E. Eaton, Jr. of Eaton & Hayes, P.C., Woodstock,
    for Defendant-Appellee.


  PRESENT:  Amestoy, C.J., Dooley, Johnson, Skoglund and Reiber, JJ.


       ¶  1.  DOOLEY, J.   Plaintiff Charles Vella, who suffered a
  work-related injury for which he collected workers' compensation benefits
  from his employer, appeals the superior court's order dismissing his tort
  suit against defendant Hartford Vermont Acquisitions, the owner of the
  commercial garage leased to his employer.  The trial court determined that
  defendant is a "statutory employer" under 21 V.S.A. § 601(3) and thus
  immune from the suit filed by plaintiff, whose exclusive remedy is his
  workers' compensation award.  Based on our conclusion that defendant is not
  a "statutory employer," we reverse the court's judgment and reinstate
  plaintiff's suit.

       ¶  2.  In reviewing the superior court's order dismissing plaintiff's
  suit for failure to state a claim upon which relief can be granted, we
  assume that plaintiff's factual allegations, and any reasonable inferences
  that may be drawn therefrom, are true. (FN1)  See Richards v. Town of
  Norwich, 169 Vt. 44, 48-49, 726 A.2d 81, 85 (1999).  Plaintiff's employer,
  a bus company called Premier Coach, leased defendant's commercial garage to
  wash its buses.  Under the lease agreement, defendant agreed to maintain
  the premises in a safe condition, including keeping it free and clear of
  ice and snow.  While working for his employer at the garage, plaintiff
  slipped and fell on the ice, and incurred injuries.  He received workers'
  compensation benefits from his employer and filed a negligence action
  against defendant, claiming that defendant neglected its obligation to keep
  the premises free and clear of ice.
   
       ¶  3.  Defendant moved to dismiss the suit for failure to state a
  claim, see V.R.C.P. 12(b)(6), arguing that the Workers' Compensation Act's
  exclusivity provision barred plaintiff's suit because defendant was
  plaintiff's "statutory employer," as defined by 21 V.S.A. § 601(3). 
  Defendant relies upon the workers' compensation exclusivity provision that
  prohibits an employee's suit against the employer.  See 21 V.S.A. § 622
  (except as provided in §§ 618(b) and 624, workers' compensation award
  excludes all other rights and remedies for work-related personal injuries);
  see 21 V.S.A. § 624(a) (in addition to workers' compensation award,
  employee may enforce liability of "person other than the employer"). 
  According to defendant, because it had contractually assumed Premier's duty
  to maintain the safety of plaintiff's workplace, it was also entitled to
  assume Premier's immunity from suit under § 601(3), which defines
  "employer" to include "the owner or lessee of premises or other person who
  is virtually the proprietor or operator of the business there carried on,
  but who, by reason of there being an independent contractor or for any
  other reason, is not the direct employer of the workers there employed." 
  (Emphasis added).

       ¶  4.  The superior court agreed, ruling that defendant was
  plaintiff's "statutory employer" because plaintiff had not alleged any
  negligent acts independent of the employer's nondelegable duty to maintain
  a safe workplace.  Plaintiff appeals, arguing that the trial court's
  analysis is faulty because, notwithstanding defendant's agreement to
  maintain the premises in a safe condition, defendant is merely a landlord
  and not the virtual proprietor or operator of the business carried on by
  plaintiff's employer.  Therefore, according to plaintiff, defendant is not
  a "statutory employer" entitled to immunity from plaintiff's negligence
  suit.
          
       ¶  5.  Neither party disputes that the clause "who is virtually the
  proprietor or operator of the business there carried on" contained in §
  601(3) modifies not only its immediate antecedent phrase "other person,"
  but also the previous phrase "the owner or lessee of premises."  We agree
  with this construction.  The Legislature did not immunize from liability
  all property owners and lessees, irrespective of their relationship to the
  direct employer.  Indeed, the underlying policy concerns discussed below
  suggest that the virtual proprietor or operator language applies in any
  case governed by § 601(3).  Hence, we construe the qualifying clause "who
  is virtually the proprietor or operator of the business there carried on"
  to modify both the immediate antecedent phrase "other person" and the
  previous phrase "the owner or lessee of premises." (FN2)  The highest court
  in the only other state with a nearly identical statute reached the same
  conclusion, holding that "'[a] statutory employer does not include the mere
  owner of the premises, unless the owner is also the virtual proprietor or
  operator of the business there carried on.'" Robison v. Bateman-Hall, Inc.,
  76 P.3d 951, 956 (Idaho 2003) (quoting Harpole v. State, 958 P.2d 594, 597
  (Idaho 1998)).
   
       ¶  6.  The two Idaho cases are instructive.  In Harpole, the
  state sold the timber rights on its land to the plaintiff's employer. 
  After the plaintiff was injured while logging the land, he collected
  workers' compensation benefits from his employer and then filed a tort suit
  against the state.  In Robison, the plaintiff was injured while repairing a
  mall roof for an independent contractor hired by a general contractor, who,
  in turn, was hired by the mall owner.  The plaintiff collected workers'
  compensation benefits from the independent contractor and then sued the
  general contractor and the mall owner.  Recognizing that the expanded
  statutory definition of employer was designed to prevent employers from
  avoiding workers' compensation liability by subcontracting work that they
  could have done themselves, the court concluded in those cases that the
  landowners had failed to satisfy the "true test" of determining who is a
  virtual proprietor or operator - whether the work being done by the direct
  employer could have been done by the party claiming "statutory employer"
  status.  See Robison, 76 P.3d  at 956-57 (general contractor was "statutory
  employer," but mall owner who was not in roofing or contracting business
  was not "statutory employer"); Harpole, 958 P.2d  at 597-98 (state was not
  "statutory employer" because it was not in logging business).

       ¶  7.  We recently reached the same conclusion, holding that the
  "critical inquiry" in determining whether an indirect employer is a
  "statutory employer" as defined by § 601(3) "is whether the type of work
  being carried out by the [direct employer] is the type of work that could
  have been carried out by the [indirect employer's] employees as part of the
  regular course of the business."  Edson v. State, 2003 VT 32,   7, 830 A.2d 671.  This is the critical inquiry because § 601(3)'s underlying purpose,
  like the Idaho statute, is "to prevent business owners or general
  contractors from attempting to avoid liability for workers' compensation
  benefits by hiring independent contractors to do what they would have
  otherwise done themselves through their direct employees."  Id. at   6.

       ¶  8.  In this case, it is undisputed that defendant is not in the
  busing business.  Rather, defendant is a commercial landlord and a
  distinct, separately owned corporation that leases space to Premier, but
  otherwise has no ties to Premier and no supervisory control or authority
  over Premier or its employees.  Nonetheless, defendant argues that it is
  plaintiff's "statutory employer" and therefore entitled to immunity from
  plaintiff's tort suit because it contractually assumed Premier's duty to
  maintain a safe premises where plaintiff worked.

       ¶  9.  We find this argument unpersuasive.  Undoubtedly, many
  commercial landlords contractually assume the obligation to maintain their
  premises in a safe condition - an obligation that has a common law basis. 
  See Favreau v. Miller, 156 Vt. 222, 228, 591 A.2d 68, 72 (1991) (holding
  that Vermont landlords "may be held liable for exposing their tenants to
  unreasonable risks of harm in the leased premises, whether or not they
  retain 'control' of the dangerous condition").  In no way, however, does a
  landlord become a virtual proprietor or operator of a business, as required
  by § 601(3), merely by assuming that obligation.  Cf. Batmasian v.
  Ballachino, 755 So. 2d 157, 158 (Fla. Dist. Ct. App. 2000) (rejecting
  argument that mall owner was "statutory employer" by virtue of lease
  agreement in which owner assumed obligation to maintain premises).  If that
  were the case, virtually every commercial landlord would automatically be
  the "statutory employer" of their tenants' employees, a position that we
  have already rejected.  In such a scenario, commercial landlords could
  immunize themselves from tort suits merely by assuming duties - even their
  common law duties - in lease agreements to which the tenants' employees
  were not parties.  Cf. Tanguay v. Marston, 503 A.2d 834, 838 (N.H. 1986)
  (master erred in holding that suit against commercial landlord was barred
  by workers' compensation exclusivity provision; although lessor and lessee
  may agree in commercial lease agreement as to which party will maintain
  leased premises, exculpatory clauses in lease agreements have no effect on
  non-signers, such as tenant's employees).

       ¶  10.  Plainly, the Legislature never intended § 601(3) to sweep so
  broadly.  As noted, § 601(3) was intended to prevent indirect employers
  from avoiding workers' compensation liability by hiring out work that they
  would have otherwise done themselves.  Generally, such incentives do not
  exist in the context of a commercial lease arrangement when the lessor is
  uninvolved in the lessee's business.  Cf. Robison, 76 P.3d  at 958 (property
  owners engaged in same type of business as general contractors or
  subcontractors hired to work on their property have greater incentive to
  avoid workers' compensation liability).
   
       ¶  11.  Defendant maintains, however, that, by agreeing to keep its
  premises safe, it assumed Premier's duty to provide a safe workplace, and
  thus is immunized from tort suits under our previous case law holding that
  workers' compensation is the exclusive remedy when the injury arose from a
  breach of the duty to provide a safe workplace.  See Garrity v. Manning,
  164 Vt. 507, 512-13, 671 A.2d 808, 811 (1996) (adopting "Wisconsin rule,"
  under which worker who receives workers' compensation benefits is barred
  from suing individual officers, directors, or stockholders for conduct that
  amounts to breach of corporate employer's duty to provide safe workplace);
  see also Gerrish v. Savard, 169 Vt. 468, 472, 739 A.2d 1195, 1198 (1999)
  ("Wisconsin rule" examines nature of duty involved to determine whether
  negligent act was committed in capacity of employer or whether there is
  co-employee liability); Dunham v. Chase, 165 Vt. 543, 544, 674 A.2d 1279,
  1280 (1996) (mem.) (to impose liability upon corporate officer, plaintiff
  must allege more than breach of corporate duty to provide safe workplace).

       ¶  12.  For at least two reasons, we reject this argument.  First,
  the cases that defendant relies upon adopted a rule applied in the context
  of suits against corporate officers, employees, or shareholders of the
  employer that provided workers' compensation benefits.  In those cases, we
  determined the circumstances under which persons directly involved in the
  business operation could be sued by an injured employee who had collected
  workers' compensation benefits from the business.  We held that to avoid
  the employer's immunity the plaintiff must show that the duty owed by the
  defendant officer or employee of the business was a "personal duty"
  independent of "the corporate duty to maintain a safe workplace."  Dunham,
  165 Vt. at 544, 674 A.2d  at 1280; see Gerrish, 169 Vt. at 472, 739 A.2d  at
  1198 ("To establish co-employee liability, the plaintiff must show that
  there was a personal duty owed the plaintiff apart from the nondelegable
  duties of the employer."); Garrity, 164 Vt. at 513, 671 A.2d  at 811
  (employee may recover against officer or supervisor of employer after
  collecting workers' compensation benefits only when officer or supervisor
  breaches personal duty rather than duty owed primarily to employer).
   
       ¶  13.  In contrast, the instant case does not concern a suit against
  someone directly involved in the employer's business operations.  Nor does
  this case present the danger of double recovery against the employer, a
  policy concern in cases involving tort suits against corporate officers or
  co-employees.  See Gerrish, 169 Vt. at 472, 739 A.2d  at 1198 (policy
  rationale behind Wisconsin rule is "to prevent double recovery against
  employers"); Garrity, 164 Vt. at 512, 671 A.2d  at 811 ("To the extent such
  [a tort] suit is maintained against an officer, director or stockholder for
  an accident arising out of unsafe conditions at the place of employment,
  the corporation is often required to indemnify, imposing double liability
  on the employer in most cases.").  Thus, Gerrish, Dunham, and Garrity are
  not controlling under the circumstances of this case.  Those cases do not
  bestow immunity upon commercial landlords from tort suits claiming that the
  landlords failed to maintain their premises in a safe condition for their
  tenants' employees.
   
       ¶  14.  Second, even assuming that our prior case law on co-employee
  liability governed this case, defendant would not be immune from suit.  We
  are not persuaded that defendant's duty to maintain the premises is the
  same as Premier's duty to provide a safe workplace for its employees.  In
  fact, it is the kind of independent, personal duty that is inconsistent
  with the status of a "virtual employer."  While there certainly is overlap
  between the employer's duty and the landlord's duty, the duty assumed by
  defendant is both underinclusive and overinclusive when compared to
  Premier's duty to provide a safe workplace.  Any duty that arises from
  defendant's contractual obligation to maintain the premises is not limited
  to employees.  In that sense, defendant's duty is broader than the
  employer's duty to provide a safe workplace.  On the other hand,
  defendant's duty to maintain the premises is narrower in the sense that
  Premier's duty to provide a safe workplace includes every aspect of the
  workplace.  See 21 V.S.A. § 223(a) (defining employer's duties); Gerrish,
  169 Vt. at 473, 739 A.2d  at 1199 (employer's duty includes providing "safe
  tools and equipment" and is involved when piece of granite being hoisted by
  crane fell onto plaintiff).  Further, defendant's duty to maintain the
  premises in a safe condition arises from independent sources - its common
  law duty and its lease contract with the employer. 

       ¶  15.  In sum, we conclude that defendant was not "virtually the
  proprietor or operator of the business" carried on by Premier at
  defendant's premises, and thus is not a "statutory employer," as defined in
  21 V.S.A. § 601(3).  Accordingly, we reverse the superior court's order
  dismissing plaintiff's complaint.

       Reversed and remanded.


                                       FOR THE COURT:



                                       _______________________________________
                                       Associate Justice


------------------------------------------------------------------------------
                                  Footnotes


FN1.  Plaintiff filed a complaint without alleging specifically that
  defendant had contractually assumed the obligation to clear the ice and
  snow in its lease with Premier.  After the court dismissed the complaint,
  plaintiff moved to amend to allege specifically that defendant had the duty
  to remove the ice and snow under its lease.  The court denied the motion to
  amend, ruling that the added allegation did not change the result.  Because
  the court reached the merits with respect to the added language, we treat
  the complaint as amended for purposes of this decision.

FN2.  In Welch v. Home Two, Inc., 172 Vt. 632, 634, 783 A.2d 419, 422 (2001)
  (mem.), we rejected the claimant's assertion that the general contractor
  could not literally be considered a virtual operator of the business,
  stating that the claimant's position "would effectively remove general
  contractors from the statutory definition of employer unless they were the
  owners or lessees of the premises."  (Emphasis added).  The underlined
  phrase implies that the "statutory employer" status of owners and lessees
  under 21 V.S.A. § 601(3) is not limited by the clause "virtually the
  proprietor or operator of the business."  That issue was not before the
  Court, however, and thus the dicta implied in that case is not controlling
  precedent here.