Marlin Elec. Co. v. Industrial Commission

• Decision Date: 31 January 1967
• Parties: MARLIN ELECTRIC CO. et al., Appellants, v. INDUSTRIAL COMMISSION, Catherine Moloney, surviving widow of Raymond T. Moloney, decd. et al., Respondents.
• Court: Wisconsin Supreme Court

Page 74

148 N.W.2d 74

33 Wis.2d 651

MARLIN ELECTRIC CO. et al., Appellants, v. INDUSTRIAL COMMISSION, Catherine Moloney, surviving widow of Raymond T. Moloney, decd. et al., Respondents.

Supreme Court of Wisconsin.

Jan. 31, 1967.

Wickham, Borgelt, Skogstad & Powell, Milwaukee, Edmund W. Powell, Milwaukee, of counsel, for appellants.

Bronson C. La Follette, Atty. Gen., Gordon Samuelsen, Asst. Atty. Gen., Madison, for respondent, Industrial Commission.

Charles J. O'Laughlin, Chicago, Ill., for respondent, Moloney.

HANLEY, Justice.

The following three issues are presented on this appeal:

1. In view of the evidence presented was Raymond T. Moloney an employee of the Marlin Electric Company at the time of the accident?

2. Is there any credible evidence in the record to support the Commission's finding that Moloney sustained an injury growing out of and incidental to his employment?

3. In view of the evidence presented, is Aetna Casualty & Surety Company estopped from denying that Moloney was an employee of Marlin Electric Company?

The Industrial Commission found that as president the deceased carried out the normal duties and functions of an employee of small corporations and concluded he was an employee of the Marlin Electric Company at the time of the injury. The Commission finding of fact is conclusive and must be sustained if supported by credible evidence. Fitz v. Industrial Comm. (1960), 10 Wis.2d 202, 102 N.W.2d 93.

The Commission's conclusion that Moloney was an employee of Marlin Electric Company is a question of law, while the evidence establishing that relationship is a question of fact to be determined by the Commission. Duvick v. Industrial Comm. (1963), 22 Wis.2d 155, 163, 125 N.W.2d 356.

Under sec. 102.07 of the Workmen's Compensation Act an employee is described as 'Every person in the service of another under any contract of hire, express or implied, * * *'

When Moloney was elected president of Marlin Electric Company on June 11, 1963, and thereafter also assumed the duties of an employee, a contract of employment was formed. This court in Milwaukee Toy Co. v. Industrial Comm. (1931), 203 Wis. 493, 496, 234 N.W. 748, 749, said:

'* * * From the above it appears that the fiction of corporate entity is not to be lightly regarded. It applies to contracts of employment, and employment by resolution of the board of directors is a recognized method of effecting such contracts. * * *'

Appellants contend that where the alleged employee owns practically all of the stock in a corporation and has complete authority over his own employment, there is no employment relationship with the corporation. They argue that Maloney owned 80 out of 100 outstanding shares of Marlin Electric, that he made all of the final and ultimate decisions in connection with Marlin Electric and exercised complete authority over his employment.

Appellants rely on two cases to support their contention that Moloney was not an employee of Marlin Electric Company.

In Leigh Aitchison, Inc. v. Industrial Comm. (1925), 188 Wis. 218, 221, 205 N.W. 806, 807, 44 A.L.R. 1213, this court denied compensation, saying:

'* * * upon the undisputed facts she did not sustain the relation of employee to any one. While it is true she devoted practically all of her time to the carrying on of the business of the corporation, in the doing of work which might be done by employees, that is not controlling. The relationship of a person to a corporation is not determined by the nature of the services performed, but by the incidents of the relationship as they actually exist.'

It was undisputed that Aitchison owned 127 out of 131 shares of the issued stock; that she had full control of the business; that she fixed her own salary which was substantially the total amount of the earnings of the corporation; and that her injury was not incident to her regular work, which was solely of a managerial nature.

Aitchison, supra, has been distinguished often. In Milwaukee Toy Co., supra, this court said in regard to Aitchison that:

'* * * The case went upon the view that the corporation was a mere shell, adopted by Mrs. Aitchison for her protection, through the form of which she carried on her own business; that the business was her own business, and her professed employment was of herself by herself. She was not performing service for another under a contract of hire. She had no employer. * * *'

In Duvick v. Industrial Comm. (1963), 22 Wis.2d 155, 125 N.W.2d 356, this court held Duvick was not an employee. Duvick owned 125 of 128 shares outstanding in a corporation engaged in conducting a tavern business. In that case the claimant, Duvick, stated that he was self-employed and ran the tavern principally by himself. On August 20, 1958, at a meeting of the stockholders, Duvick was made liquor-license agent for the corporation by resolution. In May or June of 1959, Duvick left the tavern and returned to Minneapolis. The corporation replaced him as agent by one Tschann. Later, on November 13, 1959, Duvick returned and was injured while stacking beer cases.

In both of the above cases they were substantially 'one man' businesses. The injured party was substantially the whole business.

We believe the above-cited cases are distinguishable from the case at bar. Here, the company was started in 1946, and at that time Moloney owned 20 shares. He acquired an additional 20 in 1958 and 40 more in 1961.

This court also held in Milwaukee Toy, supra, 203 Wis. at p. 495, 234 N.W. at p. 749 that:

'* * * If the alleged employer is a corporation and the alleged employee has a controlling interest in it, the extent of his holdings and the manner in which he exerts his powers of control may be factors of some force in determining whether the alleged employee is in reality an employee of another. But, standing alone, this is of little consequence. The fundamental question is, Was such person performing service for another under a contract of hire?

'A corporation is by legal fiction a person and of course is 'another' under the terms of the workmen's compensation statute. By legal fiction the corporation is a separate entity and is treated as such under all ordinary circumstances. Circumstances occasionally arise where it appears that a person 'is simply dealing with his own property through a corporate agency as absolutely as he might deal with it as an individual,' as in Haynes v. Kenosha E.R. Co., 139 Wis. 227, 239, 119 N.W. 568, 571, 121 N.W. 124. If in such case applying the corporate fiction would accomplish some fraudulent purpose, operate as a constructive fraud, or defeat some strong equitable claim, the fiction is disregarded and the transaction is considered as one of the individual himself or of the corporation, whichever will prevent the inequitable result. * * *'

The court further went on to say at p. 496, 234 N.W. at p. 749, that:

'* * * Although one individual owns all the stock, he does not thereby become the corporation. Petersen v. Elholm, 130 Wis. 1, 109 N.W. 76, 1034; * * *'

From the foregoing material it is evident that this court recognizes and respects the fiction of the corporate entity, and normally when one can qualify as being under a contract of hire, he usually can qualify as an employee, regardless of his ownership rights in the employer corporation.

In support of their...