Goldmann v. Johanna Farms, Inc.

• Citation: 98 A.2d 142,26 N.J.Super. 550
• Decision Date: 11 June 1953
• Docket Number: No. 1467,1467
• Parties: GOLDMANN v. JOHANNA FARMS, Inc. et al.
• Court: New Jersey County Court

Page 550

26 N.J.Super. 550

98 A.2d 142

GOLDMANN v. JOHANNA FARMS, Inc. et al.

No. 1467.

Mercer County Court Law Division, New Jersey.

June 11, 1953.

Herman M. Wilson, Newark, for petitioner-appellee.

Frederick J. Fox, Jersey City, for respondents-appellants (John J. Connell, Trenton, Appearing).

HUTCHINSON, J.C.C.

The respondents, Johanna Farms, Inc. and Lumber Mutual Casualty Insurance Company of New York, appeal to this court from an award of total permanent disability made against them and entered in favor of the petitioner, Eugene Goldmann, by the Division of Workmen's Compensation of the Department of Labor and Industry.

The issues which are presented by this appeal are: (1) whether the award made against the respondent insurance carrier is proper; (2) whether petitioner was an employee of respondent Johanna Farms, Inc., and (3) whether the accident arose out of and in the course of the employment.

Petitioner alleges that he suffered an accident arising out of and in the course of his employment with the respondent Johanna Farms, Inc. on November 25, 1950, the date of the now-famous hurricane. Petitioner, who was a vice-president of the corporation and also its farm manager, testified that on that date, while at his home, he received a telephone call from his son, Kurt Goldmann, the assistant farm manager, who requested him to go to a milk depot on the premises leased by the respondent corporation and check the existing milk supply there. Petitioner did so, and as he was ascending the porch to his home he was blown off the steps and sustained a leg fracture.

The deputy director held that the petitioner was an employee of the respondent within the meaning of the Workmen's Compensation Act, that he suffered a compensable accident while in the pursuit of a special mission, and that the fracture sustained aggravated a pre-existing heart condition which resulted in total permanent disability. Accordingly, an award was made against the respondents Johanna Farms, Inc. and its insurance carrier, the Lumber Mutual Casualty Insurance Company of New York.

The first question to be considered is the propriety of the award made against the insurance carrier. The evening before the first hearing in this cause in the Bureau, the insurance carrier served upon the attorney for Johanna Farms, Inc. a notice of disclaimer under its policy and a reservation of rights on the grounds of noncoverage. It appears from the record that a motion was made to strike the carrier as a party, that the motion was consented to by the opposing counsel and apparently granted by the deputy director. Nevertheless, the insurance carrier was included in the award and judgment. It cannot be ascertained from the record whether the inclusion of the carrier was a result of inadvertence or whether it was an intentional act on the part of the deputy director. It is unnecessary to decide on what grounds the carrier was kept in, since in any event, the award made against it is invalid for want of jurisdiction in the Bureau to make such an award against the carrier.

R.S. 34:15--85, N.J.S.A., gives the petitioner the right to join both the employer and the insurance carrier in his claim petition, and when so joined an effective award may be obtained in the Bureau against the carrier. Brown v. Conover, 116 N.J.L. 184, 183 A. 304 (Sup.Ct.1936); Miller v. National Chair Co., 18 A.2d 847, 19 N.J.Misc. 275 (W.C.B.1941), affirmed 127 N.J.L. 414, 22 A.2d 804 (Sup.Ct.1941); Amend v. Amend, 12 N.J.Super. 425, 79 A.2d 742 (Cty.Ct.1950). However, the power of the Bureau to make an effective award against the carrier is limited to those cases where the insurance carrier does not raise the issue of non-coverage, which is a legal issue not cognizable by the Bureau and which a deputy director is without jurisdiction to decide. Whenever the issue of non-coverage is raised by the insurance carrier, any award which is subsequently rendered against such carrier is invalid, since it is awarded by a tribunal which lacked jurisdiction over the subject matter. American Mutual Liability Ins. Co. v. Chodosh, 123 N.J.L. 81, 8 A.2d 64 (Sup.Ct.1939), affirmed 124 N.J.L. 561, 12 A.2d 890 (E. & A.1940); Belanowitz v. Travelers Inc. Co., 125 N.J.L. 301, 15 A.2d 745 (E. & A.1940); Mitchell v. Taylor, 18 N.J.Misc. 255, 12 A.2d 851 (W.C.B.1940); Cunningham v. Ashurst, 131 N.J.L. 260, 36 A.2d 294 (Sup.Ct.1944).

An insurance carrier may be estopped, however, from denying its liability as determined by the Bureau when it has unconditionally defended the assured in the suit without obtaining from the assured an agreement of non-waiver, or without serving a notice of disclaimer or without making a reservation of its rights until after the recovery of the judgment against the assured. O'Dowd v. U.S. Fidelity & Guaranty Company, 117 N.J.L. 444, 189 A. 97 (E. & A.1936).

There is no question of estoppel in this case, since prior to the hearing in the Bureau the carrier served a notice of disclaimer and made a reservation of its rights.

The petitioner is not without recourse against the insurance carrier, however. Upon the failure of the employer to make adequate and continuous payments, R.S. 34:15--84, N.J.S.A., provides that the employee may bring an action against the carrier to enforce the award in the County Court where his judgment is docketed. American Mutual Liability Ins. Co. v. Chodosh, supra; Cunningham v. Ashurst, supra. The proper procedure is by petition and order to show cause. Raab v. American Casualty Co., 4 N.J. 303, 72 A.2d 848 (1950).

We turn now to a more complex problem, whether the petitioner was an employee of Johanna Farms, Inc. Petitioner was, at the time of the occurrence of this accident, the vice-president of the respondent corporation and its farm manager. He testified that as farm manager he had to 'hire labor, to supervise labor, and everything to plan the work. I have to buy feed, buy cattle, and have to sell cattle, and buy and sell grain.' It was also necessary on occasion for petitioner, in the performance of his duties in and about the farm, to assist in some manual duties, such as milking the cows, washing the udders, crrying the milk, feeding and caring for the poultry and cattle and taking part in the harvesting. This testimony was corroborated by Mrs. Goldmann and petitioner's sons, Peter and Kurt. These seem to be the usual duties inherent in the position of a manager. It is significant to note that all of this testimony stands unrefuted.

The law is well settled in this State that the mere fact that one is an officer of a corporation, does not, under our Workmen's Compensation Act, necessarily preclude recovery for a compensable accident as an employee of the corporation. Such an officer may serve both as an officer and a workman under circumstances making him an employee within the meaning of the act, and if he sustains injury while performing duties in the latter capacity, there may be a recovery under the act. Adam Black & Sons v. Court of Common Pleas, 150 A. 672, 8 N.J.Misc. 442 (Sup.Ct.1930); Strang v. Strang Electric Co., 152 A. 242, 8 N.J.Misc. 873 (Sup.Ct.1930); Hannaford v. Central R. Co. of N.J., 115 N.J.L. 573, 181 A. 306 (Sup.Ct.1935); McGiffin v. Peoples Burner & Fuel Corp., 13 A.2d 498, 18 N.J.Misc. 339 (W.C.B.1940). The theory behind this proposition is that the corporate employer has an entity quite apart from that of its shareholders or officers. Adam Black & Sons v. Court of Common Pleas, supra.

It is evident from a close scrutiny of the testimony in this case that petitioner was an employee of the respondent corporation within the meaning of the Workmen's Compensation Act. Therefore, if the accident occurred while he was serving in his capacity as manager, he is entitled to compensation.

However, it is urged on this appeal that this is an instance in which the corporate veil should be pierced, and that in so doing, it will be discovered that petitioner is not a servant but a master, and as such is not entitled to the benefits of the act. This is a novel contention in this field and to pass it by would not do justice to the ingenious argument presented. It will be necessary in deciding this question to examine the events which led up to the formation of the respondent corporation and the petitioner's status therein.

In 1944 petitioner was one of four partners comprising the partnership known as Pennington Dairy Farms. Petitioner knew of a Mrs. Neustadt who owned Johanna Farms, and who at that time was desirous of selling her farm. Since Pennington Dairy Farms was in need of a bottling plant and Johanna Farms owned such a plant, negotiations were entered into which finally resulted in the following arrangement. A corporation (the respondent Johanna Farms, Inc.) was formed. Mrs. Neustadt transferred all the property of Johanna Farms to this corporation. In return, she received all of the stock of the respondent corporation, 50% Of which she sold to the individual members of the partnership, Pennington Dairy Farms. Pursuant to an agreement entered into before the incorporation, Mrs. Neustadt was to manage the creamery for the corporation at a salary of $500 per month. Petitioner was to manage the farm at a similar salary. The agreement also provided that Mrs. Neustadt was to pick two of the four directors and the Pennington Dairy Farms partners the other two. Pursuant to this agreement, Mrs. Neustadt was elected president of the corporation and petitioner was elected vicepresident. Following the incorporation, the agreements were confirmed.

On the same day that these agreements were confirmed, petitioner sent a letter to the respondent corporation wherein he recited that since he was still associated with Pennington Dairy Farms which was entitled to his full time and services, and since it was by arrangement of the said partnership that he was rendering personal services to the respondent, he authorized ...