In re Erickson
| Citation | 89 BR 850 |
| Decision Date | 22 July 1988 |
| Docket Number | Adv. No. 87-0152.,Bankruptcy No. 87-00101-A |
| Parties | In re Kerry ERICKSON and Susan Erickson, Debtors. Marvin VIG, Plaintiff, v. Kerry ERICKSON and Susan Erickson, and Erickson Enterprises, Inc., Defendants. |
| Court | United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — District of Idaho |
Richard J. Hayden, May & Hayden, and Terrance W. Hannon, Coeur d'Alene, Idaho, for plaintiff.
Carolyn Justh, Brown & Justh, Coeur d'Alene, Idaho, for defendants.
Plaintiff Vig has filed the present adversary complaint against the defendants Erickson seeking to have a debt owed Vig declared non-dischargeable.1
Defendants were the sole shareholders of a corporation named Erickson Enterprises, Inc. (Erickson). The corporation was involved in the performance of reforestation contracts. Vig was hired by the corporation as a laborer to plant trees, ostensibly as an independent contractor. While performing his assigned duties, Vig injured his back and required medical attention; however, defendants had discontinued paying their workmen's compensation insurance premiums. The defendants did not replace the workmen's compensation insurance with a security deposit with the state treasurer. Instead, $3.00 per day was withheld from the wages of the laborers to cover their injury claims.
After Vig's injuries, he took his claim before the Industrial Commission, and in May of 1985 he was awarded $19,461.57. The Commission also found Vig to be an employee and not an independent contractor. As an employee, the Commission held Vig was entitled to be covered by workmen's compensation. After the Commission rendered its decision in January or February of 1986, the defendants dissolved their corporation. Vig then went before the Commission a second time to pursue his claim against the defendants individually.
In a decision entered October 9, 1986, the Industrial Commission again found for Vig, and the defendants were found to be personally liable on the claim of Vig. On January 14, 1987, the defendants filed a petition for relief under Chapter 7 of the Bankruptcy Code.
11 U.S.C. § 523. EXCEPTIONS TO DISCHARGE.
2 Workmen's compensation claims have been held to be property rights by the Supreme Court of Idaho.3 The present action involves the workmen's compensation claim of Vig and, therefore, the threshold issue of whether § 523(a)(6) applies to this situation has been affirmatively answered.
Defendants contend section 523(a)(6) does not apply to this factual situation because the defendants did not intend to harm the plaintiff by their actions. Such intent to cause injury is not an element of a cause of action under § 523(a)(6). The focus is not on the debtors' intent to produce the injury, but the intent to perform the act which gives rise to the injury: "When a wrongful act . . . done intentionally, necessarily produces harm and is without just cause or excuse, it is `willful and malicious' even absent proof of a specific intent to injure."4
In order to analyze the actions of the defendants I look to the findings of the Industrial Commission ruling. These findings are entitled to collateral estoppel effect in this proceeding. The findings of an administrative tribunal may be afforded collateral estoppel effect and the same may be so applied in the bankruptcy court in a determination of nondischargeability.5 Before the findings of an administrative tribunal may be given collateral estoppel effect, however, a four part test must be passed:6
1. The issue in the present suit is the same as in the prior suit 2. The issue was actually litigated in the prior suit;
3. The issue was determined by a final valid judgment in the prior suit; and
4. The determination of the issue was essential to the final judgment in the prior suit.
The issue in the second hearing before the Industrial Commission, i.e., the one which is to be afforded collateral estoppel treatment here, is identical to the issue before this Court. Both concerned the individual liability of the defendants for their failure as the sole corporate officers and shareholders to procure workmen's compensation coverage for Vig. The first test is thus met.
The issue was actually litigated before the Industrial Commission. Both parties were represented by counsel and evidence was presented. The second test has also been met.
At the conclusion of the hearing the Commission issued its "Findings of Fact, Conclusions of Law, and Award." This constitutes a final valid judgment and satisfies the third test.
The issue before the Commission was the only issue before the Commission. It was therefore essential to the final judgment. All four tests have been affirmatively met and the findings of the Industrial Commission are accepted by this Court.
Some of the findings of the Industrial Commission must be stated. The Industrial Commission found Vig to be an employee, not an independent contractor; the Ericksons are jointly and severally liable with Erickson on Vig's claim; and this liability stems from the duty of Erickson to secure payment of compensation pursuant to Idaho Code § 72-301.
The defendants admitted their failure to provide workmen's compensation for Vig. They were under a duty to do so. They intentionally failed to perform this duty. This intentional failure directly led to Vig's predicament of being without workmen's...
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