GRAND FORKS PROFESSIONAL BASEBALL v. WORKERS COMP. BUREAU, 20020093.

• Decision Date: 20 December 2002
• Docket Number: No. 20020093.,20020093.
• Parties: GRAND FORKS PROFESSIONAL BASEBALL, INC., a North Dakota Corporation; David C. Thompson, individually; William Coutts, individually; and Jack Geller, individually, Appellants, v. NORTH DAKOTA WORKERS COMPENSATION BUREAU, Appellee.
• Court: North Dakota Supreme Court

654 N.W.2d 426

2002 ND 204

GRAND FORKS PROFESSIONAL BASEBALL, INC., a North Dakota Corporation; David C. Thompson, individually; William Coutts, individually; and Jack Geller, individually, Appellants, v. NORTH DAKOTA WORKERS COMPENSATION BUREAU, Appellee.

No. 20020093.

Supreme Court of North Dakota.

December 20, 2002.

David C. Thompson (argued) and Emilee O. Harren (on brief), third-year law student, under the Rule on Limited Practice of Law by Law Students, David C. Thompson, P.C., Grand Forks, N.D., for appellants.

Lawrence E. King (argued), Special Assistant Attorney General, and Lawrence A. Dopson (on brief), Special Assistant Attorney General, Bismarck, N.D., for appellee. SANDSTROM, Justice.

[¶ 1] David Thompson, Jack Geller, and William Coutts, corporate directors and officers of Grand Forks Professional Baseball, Inc., appealed from a judgment of the district court affirming an order of the North Dakota Workers Compensation Bureau holding them personally liable for unpaid corporate worker's compensation insurance premiums. We affirm, concluding the Bureau's assessment of liability against these individuals is in accordance with the law.

I

[¶ 2] Grand Forks Professional Baseball, Inc., was incorporated in September 1995 to acquire and manage a minor league baseball team. The team operated during 1996 and 1997 and was then disbanded.

[¶ 3] Initially, Kenneth Leip was the president and sole owner of the corporation. However, he divested his interest in the corporation in April 1996. At that time, Geller acquired a 17.10% interest, Thompson a 16.06% interest, and Coutts a 5.18% interest in the corporation. By September 1996, these individuals were officers and directors of the corporation.

[¶ 4] The corporation failed to make timely payment of its worker's compensation insurance premiums. The Bureau determined that for the years 1996 and 1997 the corporation owed $34,177.83, with interest and penalties. In August 1998, the Bureau instituted a collection action against the corporation for the unpaid premiums. The Bureau has not, however, pursued that lawsuit, because the corporation ceased functions and is apparently insolvent.

[¶ 5] On August 18, 2000, the Bureau issued corporate officer liability orders against Thompson, Geller, and Coutts to collect the unpaid premiums from them. They requested reconsideration, and a formal hearing was held on the Bureau's assessment. The Bureau entered a final order on June 26, 2001, assessing liability for the unpaid premiums against these individuals, and they appealed to the district court. After a hearing, the court entered a judgment upholding the Bureau's order.

[¶ 6] The district court had jurisdiction under N.D. Const. art. VI, § 8, and N.D.C.C. §§ 27-05-06, 65-10-01, and 28-32-42. The appeal to this Court is timely under N.D.R.App.P. 4(a) and N.D.C.C. § 28-32-49. This Court has jurisdiction under N.D. Const. art. VI, §§ 2 and 6, and N.D.C.C. § 28-32-49.

II

[¶ 7] The appellants do not dispute that they were officers and directors of Grand Forks Professional Baseball, Inc., during the relevant period, that the corporation was obligated to pay worker's compensation insurance premiums, or that the Bureau correctly calculated the amount of premiums due. Rather, the appellants argue they are not by statute personally liable for the unpaid corporate premiums, because none of them has a 20% ownership share in the corporation. They argue the Bureau's action against the corporation constituted an election of remedies, precluding the Bureau from suing individual corporate officers or directors. They also argue the Bureau's attempt to hold them personally liable without completing the corporate collection action violated their constitutional right to due process and equal protection.

[¶ 8] Under N.D.C.C. § 28-32-19,¹ the district court must affirm the order of the agency unless it finds any of the following:

1. The order is not in accordance with the law.

2. The order is in violation of the constitutional rights of the appellant.

3. The provisions of this chapter have not been complied with in the proceedings before the agency.

4. The rules or procedure of the agency have not afforded the appellant a fair hearing.

5. The findings of fact made by the agency are not supported by a preponderance of the evidence.

6. The conclusions of law and order of the agency are not supported by its findings of fact.

On appeal, this Court under N.D.C.C. § 28-32-21 reviews the judgment of the district court in the same manner.² Questions of law, including the interpretation of a statute, are fully reviewable on appeal from a Bureau decision. Paul v. North Dakota Workers Comp. Bureau, 2002 ND 96, ¶ 6, 644 N.W.2d 884.

III

[¶ 9] Thompson, Geller, and Coutts contend a corporate officer or director cannot be held personally liable for a corporation's unpaid worker's compensation premiums under N.D.C.C. § 65-04-26.1(1), unless that individual owns at least 20% of the corporate stock. The statute provides:

An officer or director of a corporation, or manager or governor of a limited liability company, or employee of a corporation or limited liability company having twenty percent stock ownership who has control of or supervision over the filing of and responsibility for filing premium reports or making payment of premiums or reimbursements under this title and who fails to file the reports or to make payments as required, is personally liable for premiums under this chapter and reimbursement under section 65-05-07.2, including interest, penalties, and costs if the corporation or limited liability company does not pay to the bureau those amounts for which the corporation or limited liability company is liable.

The Bureau argues, and the district court found, this statute is unambiguous and imposes liability upon a corporate officer or director for unpaid premiums irrespective of whether that individual owns corporate stock.

[¶ 10] Interpretation of a statute is a question of law fully reviewable by this Court. Svedberg v. North Dakota Workers Comp. Bureau, 1999 ND 181, ¶ 8, 599 N.W.2d 323. Words used in a statute are to be understood in their ordinary sense, unless a contrary intention plainly appears. N.D.C.C. § 1-02-02. If a statute is clear and unambiguous, we do not disregard the letter of the statute under the pretext of pursuing its spirit. N.D.C.C. § 1-02-05.

[¶ 11] Relevant to this issue, we conclude the statute is unambiguous. The subject entities of the statute are separated by commas, and the coordinating conjunction "or" is used for "introducing an alternative." Webster's New World Dictionary 999 (2d College Ed.1978). The phrase "having twenty percent stock ownership" is descriptive of the subject "employee of a corporation or limited liability company," and, by comma placement, clearly is not descriptive of or applicable to the subject "officer or director of a corporation." The statute, therefore, imposes personal liability for unpaid premiums upon officers or directors of a corporation irrespective of their ownership interest in the corporation. It also, however, imposes liability upon an employee of a corporation only if that employee has a 20% stock ownership and has control of or supervision over the filing of premium reports or making payment of premiums and fails to do so.

[¶ 12] Although not necessary to resolution of this issue, the legislative history also demonstrates the appellants' interpretation is without merit. Prior to the amendment of the statute in 1995, personal liability for insurance premiums was generally imposed only against corporate officers and directors who had at least a 20% equity share in the corporation. See Raboin v. North Dakota Workers Compensation Bureau, 1997 ND 221, ¶ 6, 571 N.W.2d 833

. At that time the statute provided:

Any officer, director, or any employee having twenty percent ownership of a corporation ... is personally liable for premiums or reimbursement, including interest, penalties, and costs in the event the corporation ... does not pay to the bureau those amounts for which the employer is liable.

N.D.C.C. § 65-04-26.1(1).

[¶ 13] In 1995, the statute was amended to allow the Bureau to hold all corporate officers and directors personally liable for unpaid insurance premiums, irrespective of their stock ownership. The amendments were included in House Bill 1329, and Assistant Attorney General Robert W. Morris, counsel for the Bureau, testified before both the House and the Senate Industry, Business & Labor Committees:

This section of the Bill proposes to make several changes to the present corporate officer liability provisions of the Workers Compensation Act....

First, the Bill proposes to clarify and broaden the officers that may be held personally liable. At the present time, it is unclear from the law whether liability may be imposed upon any officer plus any employee owning over twenty percent of the stock or whether an officer must own twenty percent of the stock to be liable. The Bill proposes to amend the language of the law to clarify that the former is true. Under House Bill 1329, any officer, regardless of stock ownership, plus any employee with a twenty percent ownership interest may be held personally liable.

We hold that, under N.D.C.C. § 65-04-26.1(1), an officer or director of a...