Buchner v. Pines Hotel, Inc.

Decision Date11 March 1982
Citation87 A.D.2d 691,448 N.Y.S.2d 870
PartiesBarry BUCHNER, Respondent, v. PINES HOTEL, INC., Appellant.
CourtNew York Supreme Court — Appellate Division

Orseck, Orseck, Levine & Greenberg, Liberty (Marvin Newberg, South Fallsburg, of counsel), for appellant.

Ingber & Lagarenne, Monticello (Lawrence E. Lagarenne, Monticello, of counsel), for respondent.

Before SWEENEY, J. P., and MIKOLL, YESAWICH, LEVINE and KANE, JJ.

MEMORANDUM DECISION.

Appeal from an order of the Supreme Court at Special Term, entered May 4, 1981 in Sullivan County, which denied defendant's motion for summary judgment after trial of an issue of fact.

In this personal injury action arising out of a March 20, 1971 accident, defendant moved for summary judgment sustaining its affirmative defense that workers' compensation benefits were plaintiff's exclusive remedy (Workers' Compensation Law, § 11). This defense was expressly based upon allegations in the answer that defendant and plaintiff's employer, New Pines, Inc., were engaged in a joint venture. An immediate trial of the joint venture issue was directed, and, after such trial, Special Term found that no such joint venture existed. This appeal is from that determination.

Section 11 of the Workers' Compensation Law is available as an affirmative defense in work-related civil personal injury actions if the defendant and plaintiff's employer were engaged in a joint venture at the time of the underlying accident (Felder v. Old Falls Sanitation Co., 47 A.D.2d 977, 366 N.Y.S.2d 687, affd. 39 N.Y.2d 855, 386 N.Y.S.2d 214, 352 N.E.2d 131; Fallone v. Misericordia Hosp., 23 A.D.2d 222, 259 N.Y.S.2d 947, affd. 17 N.Y.2d 648, 269 N.Y.S.2d 431, 216 N.E.2d 594). In determining whether such a joint venture exists for purposes of section 11, courts have applied common-law criteria (see Felder v. Old Falls Sanitation Co., supra, 47 A.D.2d at p. 977, 366 N.Y.S.2d 687; Fallone v. Misericordia Hosp., supra, 23 A.D.2d at p. 225, 259 N.Y.S.2d 947).

The record established that when the accident occurred, plaintiff was formally employed by New Pines, Inc., the operator of a resort hotel. New Pines, Inc., was a wholly-owned subsidiary of the defendant corporation, whose corporate stock was entirely owned by Philip and May Schweid, their daughter, and their son-in-law, Jerome Ehrlich. Defendant held title to all the land and buildings and virtually all of the equipment of the resort hotel, including the device plaintiff was operating when he sustained his injuries. Defendant leased all such property to New Pines, Inc., under a written lease which provided a rental fee in a flat cash amount plus a percentage of excess gross profits.

Unquestionably, the operation of the business affairs of the two corporations was substantially integrated. Ehrlich acted in the capacity of general manager of both corporations in 1971. The corporations shared common officers and directors and jointly purchased property and business insurance, including workers' compensation coverage. They portrayed their financial affairs in consolidated financial statements and they adjusted their respective incomes and expenses to minimize taxes for the benefit of defendant's individual shareholders.

On the other hand, the record also established that the two corporations elected to file separate, rather than partnership, income tax returns, in which they designated their respective business activities as "resort hotel operator" (in the return of New Pines, Inc.) and "resort hotel rental" (in the return of defendant). Plaintiff and the other employees of the hotel operation were paid out of New Pines, Inc.'s payroll account. In various loan transactions involving outsiders, the lease was offered and accepted as a genuine legal instrument defining the relationship between the two corporations. Plaintiff's accounting expert testified that the corporate records did not indicate a pooling of corporate assets and were inconsistent with the existence of a joint venture.

Matter of Steinbeck v. Gerosa, 4 N.Y.2d 302, 317, 175 N.Y.S.2d 1, 151 N.E.2d 170, app. dsmd. 358 U.S. 39, 79 S.Ct. 64, 3 L.Ed.2d 45 defines the elements of a joint venture as "a mutual promise or undertaking of the parties to share in the profits of the business and submit to the burden of making good the losses (see, also, 32 N.Y.Jur., Joint Adventures, § 6, p. 279).

On the facts contained in this record, whether a joint venture existed heavily depends upon resolution of questions of credibility and conflicting inferences. The trial court need not have credited the testimony of Ehrlich, an interested witness, that the two corporations completely commingled their funds and were treated as a single entity. Given that defendant had the burden of...

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