State ex rel. Christensen v. Nugget Coal Company, 2265

Decision Date25 January 1944
Docket Number2265
Citation60 Wyo. 51,144 P.2d 944
PartiesSTATE OF WYOMING on the relation of MART T. CHRISTENSEN, State Treasurer, Plaintiff and Respondent, v. NUGGET COAL COMPANY, a Corporation, Defendant and Appellant
CourtWyoming Supreme Court

APPEAL from District Court, Albany County; H. R. CHRISTMAS and V. J TIDBALL, Judges.

Action by the State, on the relation of Mart T. Christensen, State Treasurer, against the Nugget Coal Company, a corporation for sums due under the Workmen's Compensation Law. Judgment for plaintiff, and defendant appeals.

Affirmed.

Louis J. O'Marr, Atty. Gen., John J. McIntyre, Deputy Atty Gen, and Arthur Kline, Asst. Atty. Gen., for plaintiff and respondent.

POINTS OF COUNSEL FOR APPELLANT

Throughout the United States there are a number of different systems of Workmen's Compensation plans. A majority of the states have a state monoply plan, with a self-insurance plan. In some states, the state does not have a plan of insurance of any type, and the employer must contract solely with private insurance companies. There are five state in the Union including Wyoming, which provide a sole or compulsory State Workmen's Compensation plan.

In all of these three various systems of compensation, the general rule is that the industry as a whole, is intended to be an insurer of the employe. 42 C. J. notation, Sec. 8; Schrout v. Lewis, 77 P. 2d 973; 97 P. 2d 642; 71 C. J. 245.

The Workmen's Compensation Fund of Wyoming was meant to be the insurer of the employes' injuries, rather than the individual employer.

Wyoming Revised Statutes of 1931, chapter 124 creates the fund which shall be held by the State Treasurer and by him used for the payment of all claims. It also provides that the State Treasurer shall set aside in the Reserve Fund twenty-five per cent of all moneys to be used in the general fund. Thus, we think the Legislature has made it clear that the Industrial Accident Fund is made liable for the injuries to the employees, and that employers shall be liable only for the payment of assessments upon their payrolls.

A corporation incorporated by members of a copartnership is not liable for debts of the partnership unless it has expressly assumed such obligations. Thompson on Corporations; 3rd edition, p. 12, ch. 87. Vol. 15, A. L. R. p. 1114, 1115, 1126, 1129, 1130.

A partnership is an entirely different entity than the individuals who form that partnership, and a partnership is entirely a different entity than a corporation, even though all of the members of the partnership become members of the corporation. 15 A. L. R. 1130; Bludwine Bottling Co. v. Crown Cork and Seal Co. (Ga.) 80 S.E. 853; 47 S. E. N. C. 618; Georgia Co. v. Castlebery 43 Ga. 187.

The plaintiff is bound by his pleadings and must prove the facts alleged, which, in this case, is that Swenson and Yakes organized the corporation for the sole purpose of defrauding the State and evading the payment to the Industrial Accident Fund. Of this allegation there is a total failure of proof. Williams v. Yokum, a Wyoming case, 263 P. 607.

G. R. McConnell and Ray Dimmitt, both of Laramie, for defendant and appellant.

POINTS OF COUNSEL FOR RESPONDENT

The Wyoming Workmen's Compensation Act is so drawn that each employer pays for injuries sustained by his employees through the medium of increased payroll assessments.

To escape paying increased assessments by the simple expedient of forming a corporation which continues to conduct the same business in the same place and in the same manner as before throws open a door for evasion of the Act. If such a practice were permitted to develop, the entire structure of the Act would break down.

The theory that a corporation is an entity separate and distinct from its stockholders will be disregarded in a proper case. Caldwell v. Roach, 12 P. 2d 376, 44 Wyo. 319, 334; Bryan v. Banks, 98 Cal.App. 748, 277 P. 1075, 1078; Midwest Air Etc. v. Finn, 201 Cal. 587, 258 P. 382, 386; People ex rel. v. Telephone Co. 246 Mich. 198, 224 N.W. 438, 440; 1 Fletcher Cyclopedia Corporation Law, paragraph 41.

The courts will disregard a corporate entity to prevent evasion of law, and conversely will regard it as a separate entity to prevent evasion. Fletcher on Corporations, Vol. 1, p. 170 Sec. 45; 18 C. J. Secundum, 376-7; People v. Michigan Bell Tel. Co. 246 Mich. 198, 224 N.W. 438; Chicago, Milwaukee & St. Paul Ry. Co. v. Minneapolis Civic & Commerce Assn. 247 U.S. 490, 62 L.Ed. 1229; Metropolitan Holding Co. v. Snyder, 79 F.2d 263; Fors v. Farrell, 271 Mich. 358, 260 N.W. 886; Barbour v. Thomas, 7 F.Supp. 271.

Assessments under the Wyoming Workmen's Compensation Law, like assessments under the Social Security and Unemployment Compensation Laws, are generally treated as taxes. Groves v. Commissioner of Internal Revenue, 99 F.2d 179; Higgens v. Smith, 308 U.S. 473, 84 L.Ed. 406; Griffiths v. Helvering, 308 U.S. 355, 84 L.Ed. 319; Coudon v. Tait, 56 F.2d 208; Great Oak Building & Loan Assn. v. Rosenheim, 19 A.2d 95.

The Wyoming Workmen's Compensation law is different from any other state. Most state compensation laws provide for coverage by private insurance carriers. The Wyoming plan contemplates that each employer pay for his own losses.

An employer may not evade liability for an injury to an employee by use of a corporation, partially or largely, owned by himself. Hawkins v. Bryan (Okla.) 261 P. 167; Dixie Coal Min. & Mfg. Co. et al v. Williams, 221 Ala. 331, 128 So. 799; Whipple, et al v. Industrial Commission, 121 P. 2d 876.

Courts have disregarded the separate corporate existence in many types of cases where its recognition would result in the evasion of a statute. State v. Safford (Ohio), 159 N.E. 829; People v. Murphy (Cal.) 62 P. 2d 592.

Actual fraud does not need to be proven. Caldwell v. Roach, 44 Wyo. 399; Metroplitan Holding Co. v. Snyder, 97 F.2d 263; Hamilton Ridge Lumber Sales Corporation, et al v. Wilson, 25 F.2d 592; In re Burntside Lodge, Inc., 7 F. Sup. 785; Tennesee Consol Coal Co. v. Home Ice & Coal Co. et al. 156, S.W. 454.

BLUME, Justice. KIMBALL, C. J. and RINER, J., concur.

OPINION

BLUME, Justice.

This is an action brought on January 10, 1940, by the State of Wyoming, on behalf of the State Treasurer, against the Nugget Coal Company, a corporation, to recover sums due under the Workmen's Compensation Law. The equitable issues were referred to the Hon. H. R. Christmas, Judge of the Third Judicial District, who found in favor of the plaintiff on these issues. Thereupon, a final judgment in the amount of $ 3860.52, later reduced to $ 559.95, was rendered in favor of the plaintiff and against the defendant corporation by the Hon. V. J. Tidball, Judge of the Second District. From that judgment the defendant corporation has appealed to this Court.

From 1935 to July 6, 1939, N. A. Swenson and Frank Yates, Jr., operated a coal mine in this State as a copartnership under the name of Nugget Coal Company. While they were thus operating and on March 30, 1939, one Wayne Johnson, one of its employees, was severely injured. Thereafter and on July 6, 1939, the copartnership organized the corporation herein involved under the name of Nugget Coal Company. At the time of the injury to Wayne Johnson the copartnership had to its credit in the Industrial Accident Fund of this State, in charge of the State Treasurer, the sum of $ 439.68. By reason of awards made to and on behalf of Wayne Johnson, and paid out of the Industrial Accident Fund, the account of the copartnership was at the time of the trial of this case overdrawn in the sum of $ 6930.64. The copartnership ceased to pay any money into this fund after the corporation was organized, on the theory that it did not thereafter employ any persons. The corporation sought to open up a new account in the Industrial Accident Fund, paying a smaller percentage of its payroll than would have been necessary to be paid if the account of the partnership had been continued, and the payments made had been credited to it. The Workmen's Compensation Department in the office of the State Treasurer refused to permit the corporation to open up a new account, claiming that the account of the partnership should be continued on the theory that the corporation was but a continuance of the partnership. An agreement was finally entered into under which the Department accepted payments made by the corporation without prejudice to the rights of the State. The amounts paid in accordance with the agreement add up to $ 1807.99. In this action the State claims that the corporation is but the alter ego of the partnership and as such would be responsible for the amount paid out as compensation to and for Wayne Johnson. The defendant corporation denies such liability and claims to be a distinct and separate entity, and hence not responsible for any compensation due for accidents while the copartnership existed. The trial court took the view taken by the State, although finding that the evidence failed to disclose that there was any actual intent to defraud the State, and the amount of the judgment herein is the difference between the overdraft of the copartnership and the amount paid by the corporation.

As already stated, the copartnership operated the coal mine in question from 1935 to July 6, 1939. During 1935 Frank Yates Jr., who had an equal interest in the business with N. A. Swenson, helped in managing the business of the copartnership, but he left for Colorado in 1936, and from that time on N. A. Swenson was the general manager of the business, with an office at Laramie, Wyoming. One L. E. Dupont was the foreman at the mine. When the corporation was organized on July 6, 1939, the interests of the copartnership in its real estate, including the coal mine, was...

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