Fonseca v. Pacific Const. Co., LTD., 5317

CourtSupreme Court of Hawai'i
Citation513 P.2d 156,54 Haw. 578
Docket NumberNo. 5317,5317
PartiesShawn Anthony FONSECA and Michelle Leilani Fonseca et al., Plaintiffs-Appellants, v. PACIFIC CONSTRUCTION CO., LTD., et al., Defendants and Third-Party Plaintiffs-Appellees, v. SPERRY CONSTRUCTION CO., INC., a corporation, Third-Party Defendant-Appellee.
Decision Date08 August 1973

Syllabus by the Court

1. The legislative purpose of HRS § 386-1, in distinguishing between primary and secondary obligations under the statutory definition of employers, was to protect the special compensation fund feature of the Hawaii workmen's compensation scheme by placing general contractors between defaulting subcontractors and the fund, and not to grant third-party immunity to general contractors.

2. The existence of incidents of a true employer-employee relationship bears heavily upon whether the respective rights and responsibilities under workmen's compensation are to be assumed in the first instance by employers and employees.

3. Compensation rights of a subcontractor's employee do not depend upon the statutory labeling of the general contractor as his employer.

4. Statutes abrogating common law rights must be strictly construed.

5. Under the workmen's compensation statute, third-party general contractors are not immune to common law negligence actions on the part of employees of their subcontractors, absent the incidents of a true employer-employee relationship.

Gene Bridges, Honolulu (Shim, Sigal, Ono & Huddy, Honolulu, of counsel), for plaintiffs-appellants.

James Kawashima, Honolulu (Kobayashi, Koshiba & Watanabe, Honolulu, of counsel), for defendants and third-party plaintiff-appellees.

Anthony Y. K. Kim, Honolulu (Conroy, Hamilton, Gibson, Nickelsen & Rush, Honolulu, of counsel), for third-party defendant-appellee.

Before RICHARDSON, C. J., MARUMOTO, ABE and LEVINSON, JJ., and MENOR, Circuit Judge, in place of KOBAYASHI, J., disqualified.

LEVINSON, Justice.

This case involves a dispute over the immunity of third parties to common law tort actions under our workmen's compensation scheme.

The facts are simple: The plaintiffs-appellants are the dependents, widow, parents and estate of John Fonseca, Jr. Fonseca was an employee of Sperry Construction Co., Inc., a subcontractor of either or both Pacific Construction Co., Ltd., and The Hawaii Corporation, hereafter referred to as the general contractors or Pacific-Hawaii. The complaint alleged that Fonseca died on February 17, 1970 in the course and scope of his employment, and that his death was the result of the negligence of the general contractors which were named as defendants and which, together with Sperry, the third party defendant, are appellees. The general contractors moved under H.R.C.P., 12(b)(6) to dismiss on the ground that they were immune under various provisions of our workmen's compensation statute, HRS Chapter 386. Prior to the hearing on the motion, the parties stipulated that Pacific-Hawaii had never listed Foneseca as an employee or paid workmen's compensation premiums for his benefit; that no workmen's compensation claim was ever made against Pacific-Hawaii; and that Sperry's insurance carrier was paying workmen's compensation benefits to the widow and children of John Fonseca, Jr. After a hearing, the judge below ordered the complaint dismissed. We reverse.

The issue before us on appeal is whether our workmen's compensation system removes all common law rights of action on the part of a worker who has received a compensable injury against a third person other than his direct employer whose misconduct has caused such injury. More specifically, in the present case, the question is whether claims under the survival and wrongful death statutes are barred under HRS Ch. 386.

The most pertinent statutory language, part of HRS § 386-1, reads as follows:

Whenever an independent contractor undertakes to perform work for another person pursuant to contract, express or implied, oral or written, the independent contractor shall be deemed the employer of all employees performing work in the execution of the contract, including employees of his subcontractors and their subcontractors. However, the liability of the direct employer of an employee who suffers a work injury shall be primary and that of the others secondary in their order. An employer secondarily liable who satisfies a liability under this chapter shall be entitled to indemnity against loss from the employer primarily liable.

Also relevant is § 386-5:

The rights and remedies herein granted to an employee or his dependents on account of a work injury suffered by him shall exclude all other liability of the employer to the employee, his legal representative, spouse, dependents, next of kin, or any one else entitled to recover damages from the employer, at common law or otherwise, on account of the injury.

Pacific-Hawaii takes the position that § 386-1 statutorily defines general contractors (also known as independent contractors in workmen's compensation jargon) as employers for purposes of the workmen's compensation system; that because of § 386-5, the exclusivity section, remedies for work-related injuries are limited to those specified under the system; and that general contractors are therefore immune to common law tort actions by employees of their subcontractors or by the dependents, relatives or estates of such employees brought under the survival and wrongful death statutes.

The appellants, of course, read the statute quite differently. They argue that the second sentence in the above-quoted section of 386-1 is decisive in that it distinguishes between primary and secondary liability, with the former burden on the direct employer of the injured workman. The appellants urge, as a consequence, that general contractors are to be regarded as statutory employers only when actually required to provide workmen's compensation benefits.

Our determination of the legislature's meaning in making the primary-secondary distinction is obviously essential to the disposition of this case. Unfortunately, neither legislative history nor other supplemental sources offer interpretive aid. 1 We are therefore compelled to analyze this distinction within the context of the workmen's compensation scheme as a whole to determine the intent of the legislature.

The appellants argue that the underlying purpose of providing for the contingent liability of general contractors was to protect the special compensation fund feature of the workmen's compensation system, rather than to enable a general contractor to escape third-party liability for its own negligence. We agree. This special compensation fund, as provided in HRS § 386-56 and §§ 386-151 through 155 (Supp.1972), is financed by assessment of insurance carriers and self-insured employers and pays benefits in the event of default by an employer or an employer's insurance carrier. Employees and their dependents are thereby assured of compensation regardless of insurance, so § 386-1 cannot be for their benefit.

We do not agree with the argument of the appellees, which is (1) that the legislative intent in enacting § 386-1 was to immunize general contractors from third-party liability by making them statutory employers of their subcontractors' employees in all situations, and (2) that the section is therefore only tangentially related to the special compensation fund. While the first sentence of the section initially appears to confer blanket immunity on general contractors, further consideration leads us to the conclusion that the primary-secondary distinction contained in the second sentence of the section indicates that the legislature was not concerned with third-party tort liability, but rather with making each general contractor the guarantor of compensation for the employees of its subcontractors. Inserting general contractors between defaulting subcontractors and the special compensation fund effectively prevents unscrupulous subcontractors from using all self-insured employers and carriers to pay their workmen's compensation premiums, because prior to the enactment of § 386-s, the latter two groups were required to replenish the depleted fund. Thus, as we interpret this section, its second sentence, by providing for secondary liability on the part of general contractors, confers the statutory employer status referred to in the first sentence only at those times when this contingent liability becomes actual.

Our view that the legislative intent of § 386-1 was to protect the fund rather than grant third-party immunity is reinforced by the fact that its definition of general contractors as employers provides for none of the incidents of the employer-employee relationship; this relationship lies at the heart of the theory of workmen's compensation. In Evanson v. University of Hawaii, 52 Haw. 595, 598, 483 P.2d 187, 190 (1971), we said:

Workmen's compensation laws were enacted as a humanitarian measure, to create legal liability without relation to fault. Silva v. Kaiwiki Mill Co., 24 Haw. 324, 330 (1918). They represent a socially enforced bargain: the employee giving up his right to recover common law damages from the employer in exchange for the certainty of a statutory award for all work-connected injuries. Since liability is made dependent on a nexus to the job, the essential prerequisite for coverage under workmen's compensation acts is the existence of an employer-employee relationship.

Once the employer and employee are deemed to be within the confines of the workmen's compensation system, the exact nature of the work relationship, particularly with regard to control over the work being performed, is unimportant insofar as the payment of benefits is concerned; the system is truly no-fault in this sense, since the employee collects benefits owed to him under any circumstances. The employer-employee relationship does, however, bear heavily upon whether the respective rights...

To continue reading

Request your trial
23 cases
  • Dagenhardt v. Special Mach. & Engineering, Inc., Docket No. 67751
    • United States
    • Supreme Court of Michigan
    • March 12, 1984
    ...Co., 421 F.Supp. 794 (D.Vt., 1976); Bence v. Pacific Power & Light Co., 631 P.2d 13 (Wyo.1981); and Fonseca v. Pacific Construction Co., Ltd., 54 Haw. 578, 513 P.2d 156 (1973). See also Young v. Environmental Air Products, Inc., 136 Ariz. 158, 162, fns. 5, 6, 665 P.2d 40 (1983) (en banc), a......
  • Romero v. Shumate Constructors, Inc., s. 15325
    • United States
    • Court of Appeals of New Mexico
    • October 21, 1994
    ...Lewis v. Lockard, 498 N.E.2d 1024 (Ind.Ct.App.1986); Baldwin Co. v. Maner, 224 Ark. 348, 273 S.W.2d 28 (1954); Fonseca v. Pacific Constr. Co., 54 Haw. 578, 513 P.2d 156 (1973); Nash v. Damson Oil Corp., 480 So.2d 1095 (Miss.1985); Pate v. Marathon Steel Co., 777 P.2d 428 (Utah 1989); see ge......
  • County Of Haw.‘i v. Homeowners
    • United States
    • Supreme Court of Hawai'i
    • July 9, 2010
    ...ellipses in original) (emphases omitted) (quoting Reliable, 59 Haw. at 507, 584 P.2d at 109). 13. See, e.g., Fonseca v. Pac. Const. Co., 54 Haw. 578, 579, 513 P.2d 156, 157 (1973) (determining whether a worker, who received a compensable injury against a third person other than his direct e......
  • Douglass v. Pflueger Hawaii, Inc., 26363.
    • United States
    • Supreme Court of Hawai'i
    • May 25, 2006
    ...671 P.2d 446, 449 (1983) (stating that "statutes in derogation of common law must be strictly construed"); Fonseca v. Pac. Constr. Co., 54 Haw. 578, 585, 513 P.2d 156, 160 (1973) (noting the continuing applicability of the maxim that "statutes abrogating common law rights must be strictly c......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT