Paullas v. Andersen Excavating

• Decision Date: 16 July 1987
• Docket Number: No. 16437,16437
• Parties: Theodore PAULLAS, Claimant-Appellant, v. ANDERSEN EXCAVATING, Employer, and State Insurance Fund, Surety, Defendants-Respondents.
• Court: Idaho Supreme Court

Page 411

742 P.2d 411

113 Idaho 156

Theodore PAULLAS, Claimant-Appellant, v. ANDERSEN EXCAVATING, Employer, and State Insurance Fund, Surety, Defendants-Respondents.

No. 16437.

Supreme Court of Idaho.

July 16, 1987.

Rehearing Denied Sept. 21, 1987.

Michael J. Verbillis, Coeur d'Alene, for claimant-appellant.

Robert D. Lewis, of the firm Cantrill, Skinner, Sullivan & King, Boise, for defendants-respondents.

BISTLINE, Justice.

Andersen Excavating is the business name of a sole proprietorship of Charles V. Andersen. Andersen's business lies primarily in excavation work. Theodore Paullas has worked for several years as a truck driver and heavy equipment operator. He is president of a corporation named Paullas Enterprises, Inc. He and his wife jointly own all of the issued and outstanding stock of the corporation. His wife is an officer of the corporation and he and his wife are directors. The corporation provides insurance for its employees under the Idaho Workmen's Compensation Law by the Idaho State Insurance Fund. However, the corporation, through Mrs. Paullas, specifically rejected coverage for corporate officers who own more than ten percent of the outstanding stock and who are also directors of the corporation.

From time to time, Paullas engages in construction work using equipment owned by his corporation. Mr. Paullas and Mr. Andersen have worked jointly on projects in other instances. The manner in which they have cooperated is the following: One of the parties obtains a bid on a construction project and the other performs services for the successful bidder under oral agreements. Both parties understood that when one of them had obtained the bid on a project that the successful bidder would be the person in charge of the project. Paullas also rents equipment to other equipment operators.

In December of 1984 Andersen obtained a bid for the excavation and installation of a sewer line. Although Andersen had some equipment of his own, he used rented equipment on this project as well. He rented a backhoe, a caterpillar, bulldozer and other equipment. Paullas Enterprises supplied a front-end loader. It was understood that the loader was rented at $35 an hour for the actual time it was operated. The loader had been operated by either Andersen or another individual who was identified as an employee of Lakeshore Construction.

On the morning of December 20, 1984, Andersen telephoned Mrs. Paullas in order to request that Mr. Paullas deliver a load of gravel to the construction site. Paullas, using his dump truck, obtained the gravel and delivered it to the site in locations designated by Andersen. After the gravel had been delivered, Andersen instructed Mr. Paullas to remain at the site to operate the front-end loader.

It was understood between the parties, due to prior dealings between them, that Paullas would be paid $10 per hour for his work as a loader operator. Payment was made directly to Paullas Enterprises, Inc. In turn, the corporation paid Mr. Paullas a salary. This arrangement was utilized for purposes of accounting, as per directions of an accountant.

Andersen asked Paullas to backfill a sewer trench to a depth of three feet so that the trench could be filled and compacted over the sewer pipe. After backfilling a portion of the trench it was discovered that the front-end loader would not fit into the trench in order to level the backfill material. Andersen left the site to obtain a bulldozer that would be suitable for leveling the trench.

Paullas remained on the site and, armed with a hand shovel, entered the trench for the purpose of installing pipe, which includes shoveling bedding material under the pipe. Bedding is placed under the pipe so that the pipe will not be broken when the backfill is placed over it and compacted. While Paullas was working, the side of the trench gave way, pinned Paullas in the trench, and inflicted serious injuries.

Before the Commission, Paullas sought workman's compensation benefits for his injuries from Andersen Excavating and the State Insurance Fund. Andersen testified that he considered that Paullas was his employee on that fateful day. The surety, having denied the claim, contended that Paullas was an independent contractor and not an employee. Mr. Paullas did not file a claim on the policy issued to him by the State Insurance Fund to Paullas Enterprises because that entity had specifically rejected coverage for him because of his capacity of corporate officer, director, and major shareholder.

The Commission specifically found that Paullas's work at the Andersen construction site on December 20, 1984 was performed as an employee and corporate officer of Paullas Enterprises and not as an employee of Andersen Excavating. See R., p. 65. On reconsideration, Paullas raised for the first time the issue of whether Paullas was a loaned or borrowed servant on the date in question. The Commission ruled that the evidence did not establish that Paullas had a contract for services with Andersen or that Andersen had the right to control the details of Paullas's work as distinguished from the overall results to be achieved. As a result, the Commission denied that the injury was compensable under Andersen's insurance policy.

This appeal presents two issues:

1. Whether the Commission erred by concluding that Paullas was not an employee of Andersen Excavating on the date of his injury.

2. Whether the Commission erred by concluding that Paullas was not a "borrowed" or "loaned" servant of Andersen Excavating on the date of his injury.

In addition, the State Insurance Fund urges us to abandon the right-to-control test for determining whether a claimant's injuries should be compensable within the provisions of Idaho's Workmen's Compensation Act and requests attorney's fees for this appeal. Our affirmative answer on Issue No. 2 is dispositive.

This Court's standard of review of Industrial Commission orders is limited to questions of law. Idaho Const. art. 5, § 9; Madron v. Green Giant Co., 94 Idaho 747, 497 P.2d 1048 (1972). Where the evidence is uncontroverted, the only question of law presented is whether the Commission made a proper application of the law to the evidence, Ledesma v. Bergeson, 99 Idaho 555, 585 P.2d 965 (1978); Wachtler v. Calnon, 90 Idaho 468, 413 P.2d 449 (1966).

In this case, the primary evidence pertinent to the issues was offered by Paullas and Andersen. Their testimony cannot be said to be conflicting, contradictory, or inherently incredible. Pierstorff v. Gray's Auto Shop, 58 Idaho 438, 74 P.2d 171 (1937), holding reaffirmed in Dinneen v. Finch, 100 Idaho 620, 603 P.2d 575 (1979); Quick v. Crane, 111 Idaho 759, 727 P.2d 1187 (1986). Thus, we may freely review the Commission's application of the law to the uncontroverted evidence.

I.

An affirmative response to either of the issues of law listed above would require a reversal of the Commission's order. Since we determine that Paullas was a "borrowed" servant of Andersen Excavating on the date of his injury, we need not discuss whether he was an employee of Andersen. Nevertheless, we observe that the two issues are closely related. Even if Paullas could not be considered Andersen's direct employee, Andersen's insurance coverage remains liable to compensate for Paullas' injuries if Paullas was a "borrowed" servant at the time of injury. The two statuses share a common test--the right-to-control test. Pinson v. Minidoka Highway District, 61 Idaho 731, 106 P.2d 1020, (1940); accord, State ex rel. Ferguson v. District Court, 164 Mont. 84, 519 P.2d 151 (1974). Pinson elaborates on the test:

In Standard Oil Co. v. Anderson, 212 U.S. 215, 29 Sup.Ct. 252, 254, 53 L.Ed. 480, the rule by which to determine whether a person is an employer is stated as follows:

"It sometimes happens that one wishes a certain work to be done for his benefit, and neither has persons in his employ who can do it nor is willing to take such persons into his general service. He may then enter into an agreement with another. If the other furnishes him with men to do the work, and places them under his exclusive control in the performance of it, those men become pro hac vice the servants of him to whom they are furnished.... To determine whether a given case falls within the one class or the other we must inquire whose is the work being performed--a question which is usually answered by ascertaining who has the power to control and direct the servants in the performance of their work."

While the authorities are not without conflict, there is a well-established rule to the effect that the question of the identity of the person who pays compensation is not controlling, and is not a circumstance which is decisive or determinative of the question whether a person to whom an employee is lent becomes his employer.... [Citations omitted.] The general test is the right to control and direct the activities of the employee, or the power to control the details of the work to be performed and to determine how it shall be done, and whether it shall stop or continue, that gives rise to the relationship of employer and employee, and where the employee comes under the direction and control of the person to whom his services have been furnished, the latter becomes his temporary employer, and liable for compensation.

Pinson, supra, 61 Idaho at 736-37, 106 P.2d at 1022. See also Brown v. Jerry's Welding & Construction Co., 104 Idaho 893, 665 P.2d 657 (1983); Nelson v. World Wide Lease, Inc., 110 Idaho 369, 716 P.2d 513 (Ct.App.1986); Wise v. Armold Transfer & Storage Co., Inc., 109 Idaho 20, 704 P.2d 352 (Ct.App.1985).

Additional factors germane to loaned employee status are: (1) whether the employee has made a contract for hire, express or implied, with the special employer, and (2) whether the work being done is essentially that of the special employer. 1CA. Larson, Workmen's Compensation, § 48.00 (1986).

In its order denying...