Robards v. Kantzler's Estate, Docket No. 78-4072

• Decision Date: 01 July 1980
• Docket Number: Docket No. 78-4072
• Citation: 296 N.W.2d 265,98 Mich.App. 414
• Parties: Willard ROBARDS, Plaintiff-Appellant, v. ESTATE of Leopold J. KANTZLER, Deceased, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 265

296 N.W.2d 265

98 Mich.App. 414

Willard ROBARDS, Plaintiff-Appellant, v. ESTATE of Leopold J. KANTZLER, Deceased, Defendant-Appellee.

Docket No. 78-4072.

Court of Appeals of Michigan.

July 1, 1980.

Released for Publication Sept. 24, 1980.

James S. Miner, II, Bay City, for plaintiff-appellant.

John J. McQuillan, Bay City, for defendant-appellee.

Before MacKENZIE, P. J., and BASHARA and RILEY, JJ.

BASHARA, Judge.

This case presents an issue of first impression in this state. Does the dual capacity doctrine permit an employee, injured in the course of his employment by a machine leased to the employer by a fellow employee, to state a claim otherwise barred by the exclusive remedy and coemployee immunity provisions of the Workmen's Compensation Act (hereinafter the Act)? M.C.L. § 418.131; M.S.A. § 17.237(131), M.C.L. § 418.827; M.S.A. § 17.237(827). The trial court held that plaintiff-employee's exclusive remedy was under the Act and granted accelerated judgment in favor of defendant. GCR 1963, 116.1(5).

The Court must accept well-pleaded facts of the nonmoving party as true for purposes of a motion for accelerated judgment. Empire Shoe Service, Inc. v. Gershenson, 62 Mich.App. 221, 224, 233 N.W.2d 237 (1975). Our review of the pleadings indicate that plaintiff was employed at International Mill & Timber Co. The company was a closely held corporation whose sole officer and shareholder was Leopold J. Kantzler, since deceased. While plaintiff was in the course of his employment, he was severely injured when his hand became ensnared in a machine which he was operating. This machine was personally owned by Mr. Kantzler and leased to the corporation.

As a result of the accident, plaintiff began receiving workmen's compensation benefits from the company's insurer. Plaintiff filed this products liability action against Mr. Kantzler's estate, claiming the machine lacked adequate safety devices and warnings.

Defendant immediately moved for accelerated judgment on the grounds that plaintiff's action was barred by the Act. Defendant argued that since Mr. Kantzler was plaintiff's employer and coemployee, the exclusive remedy and coemployee immunity provisions of the Act precluded plaintiff from maintaining this suit.

Plaintiff argues that he was not suing Mr. Kantzler in his capacity as employer but rather in his capacity as individual owner and lessor of the machine. Plaintiff claimed that as an individual, Mr. Kantzler stood in the shoes of a third party and was therefore liable under the Act. The trial judge ruled that individual ownership did not provide an independent basis of liability. We find that neither M.C.L. § 418.131; M.S.A. § 17.237(131) nor M.C.L. § 418.827(1); M.S.A. § 17.237(827)(1) precludes plaintiff's action and, accordingly, reverse.

Section 131 provides:

"The right to the recovery of benefits as provided in this act shall be the employee's exclusive remedy against the employer." M.C.L. § 418.131; M.S.A. § 17.237(131).

In order for section 131 to bar plaintiff's action, the lower court must have determined that Mr. Kantzler was plaintiff's employer. The record clearly establishes that plaintiff's employer was International Mill & Timber Co. The corporation was a distinct legal entity from Leopold Kantzler as an individual. A contrary finding would require us to "pierce the corporate veil". Only where fraud, sham or other improper use of the corporate form is established will the corporate entity be disregarded. Williams v. American Title Ins. Co., 83 Mich. App. 686, 269 N.W.2d 481 (1978); 7 Michigan Law & Practice, Corporations, § 5, p. 19. We find that the ends of justice will not be served by disregarding the corporate entity in order to shield defendant from liability.

Essentially, plaintiff's argument is based on the "dual capacity doctrine". This principle permits an employee to state a claim against an employer where the employer occupies a second capacity that confers upon him obligations independent of those imposed on him as employer. See 2A Larson, The Law of Workmen's Compensation, § 72.80, p. 14-112. Professor Larson states:

"The decisive dual-capacity test is not concerned with how separate or different the second function of the employer is from the first but with whether the second function generates obligations unrelated to those flowing from the first, that of employer." 2A Larson, supra, § 72.80, p. 14-117.

As lessor of a machine, defendant undertook obligations unrelated to those as an employer, including the duty to warrant and provide a machine reasonably safe for its intended or foreseeable use. See Jones v. Keetch, 388 Mich. 164, 200 N.W.2d 227 (1972).

Support in Michigan for the dual capacity doctrine is found in the recent Supreme Court opinion in Mathis v. Interstate Motor Freight System, 408 Mich. 164, 289 N.W.2d 708 (1980). In holding that an employee could recover no-fault benefits from his employer who was self-insured under the Michigan no-fault insurance act, M.C.L. § 500.3101 et seq.; M.S.A. § 24.13101 et seq., the Court stated:

"An employee may have ties with an employer other than the employer-employee relationship. They may be landlord and tenant; trustee and beneficiary; vendor and vendee and so on. We look to the laws governing the particular relationship involved to determine rights and obligations of the parties. The fact that the parties are also employer-employee does not automatically trigger the operation of the exclusive remedy provision of the WDCA. The exclusive remedy provision applies only to employers where conditions of liability under the WDCA pertain." Mathis, supra, 184, 289 N.W.2d 714.

Notwithstanding section 131, defendant asserts that since Mr. Kantzler was plaintiff's coemployee, section 827(1) bars plaintiff's action. Section 827(1) provides:

"Where the injury for which compensation is payable under this act was caused under circumstances creating a legal liability in some person other than a natural person in the same employ or the employer to pay damages in respect thereof, the acceptance of compensation benefits or the taking of proceedings to enforce compensation payments shall not...