Tidewater Oil Co. v. Workers' Comp. Appeals Bd.

• Decision Date: 10 March 1977
• Citation: 137 Cal.Rptr. 36,67 Cal.App.3d 950
• Court: California Court of Appeals Court of Appeals
• Parties: TIDEWATER OIL COMPANY, Petitioner, v. WORKERS' COMPENSATION APPEALS BOARD of the State of California et al., Respondents. Civ. 39164.

Page 36

137 Cal.Rptr. 36

67 Cal.App.3d 950

TIDEWATER OIL COMPANY, Petitioner, v. WORKERS' COMPENSATION APPEALS BOARD of the State of California et al., Respondents.

Civ. 39164.

Court of Appeal, First District, Division 1, California.

March 10, 1977.

Hearing Denied May 5, 1977.

Hanna, Brophy, MacLean, McAleer & Jensen by James R. Libien, Oakland, for petitioner.

Charles L. Swezey, Philip M. Miyamoto, Thomas J. McBirnie, San Francisco, for respondent Workers' Compensation Appeals Bd.

Sedgwick, Detert, Moran & Arnold, Francis V. Clifford, San Francisco, for respondent Phillips Petroleum Co.

Leonard & Thomas, Orinda, for respondent Hartford Accident and Indemnity Co.

MOLINARI, Presiding Justice.

By this petition for writ of review petitioner, Tidewater Oil Company (hereinafter 'Tidewater'), seeks to annul the decision of the Workers' Compensation Appeals Board (hereinafter the 'Board') determining that Tidewater must contribute towards an award made to William G. Medeiros on the basis that Tidewater is liable for such contribution as a predecessor in interest of Phillips Petroleum Company (hereinafter 'Phillips'), Medeiros' last employer, pursuant to the provisions of Labor Code section 5500.5, subdivisions (a) and (d). ¹

Subdivision (a) of section 5500.5 ² permits an employee claiming liability for occupational disease or cumulative injury to proceed only against the employers who employed him during a period of five years immediately preceding either the date of injury or the last date on which the employee was employed in an occupation exposing him to the hazards of such occupational disease or cumulative injury, whichever occurs first. Liability in such cases is limited to such employers and is not apportioned to prior years.

The limitation of liability provided for in subdivision (a) is inapplicable where, as provided in subdivision (d) of section 5500.5, ³ the employment exposing the employee to the hazards of the claimed occupational disease or cumulative injury was for more than five years with the same employer or its predecessors in interest. In such circumstances liability is Extended to all insurers who insured the worker's compensation liability of such employer during the entire period of the employee's exposure with such employer or its predecessor in interest. Accordingly, in this situation the liability for such injury or occupational disease is apportioned among the employers liable under the provisions of subdivision (a) and those liable for the prior years as provided in subdivision (d).

In the present case Medeiros was awarded benefits for an industrial injury to his right lower extremity and vascular system attributed to his continuous employment at an oil refinery at Avon, California, from October 21, 1946, to January 7, 1972.

From October 21, 1946, through July 14, 1966, the refinery was owned and operated by Tidewater and from July 15, 1966, through January 7, 1972, it was owned and operated by Phillips. The refinery was acquired by Phillips from Tidewater, pursuant to an agreement of sale which provided for the outright transfer of the refinery property from Tidewater to Phillips. Under the agreement Phillips assumed certain indebtednesses which were secured by mortgages on some of the property conveyed and Phillips assumed Tidewater's obligations to process crude oil for others. The agreement required Phillips 'take over' at the pay they were then receiving all employees who performed the majority of their services 'in connection with the assets, properties, contracts and operations' transferred to it by Tidewater. Pursuant to the provisions of the agreement the employees were to have the same rights to severance pay and seniority as they would have had if Tidewater had continued operating the refinery. The agreement provided for the transfer of the retirement credits of employees and stated that it was the intent of the parties that the employees would receive not less than the benefits which would however, did not acquire any permanent plan.

It was further provided in the agreement that Tidewater was required to maintain operations up to the transfer date. Phillips, however, did not acquire any permaent right to use Tidewater's trade names or marks nor did it assume any obligations under special contracts such as stock option agreements.

The record is unclear as to what occurred on the transfer date but the parties in their briefs have assumed that insofar as the employees at the refinery were concerned they continued to work for Phillips as they had while employed by Tidewater. It is conceded by Phillips, moreover, that it intended to take over all of Tidewater's obligations to its employees.

In his petition for compensation benefits Medeiros elected to proceed solely against Phillips. Upon the application of Phillips the Board ordered that Tidewater and its insurance carrier be joined as defendants upon the claim that the liability of Medeiros' injury should be apportioned as provided in section 5500.5, subdivision (d). ⁴

The workers' compensation judge (formerly referee) in her 'Findings and Order in Re Contribution Among Defendants,' found that Tidewater was not a 'predecessor in interest' for the purposes of section 5500.5, subdivision (d), and that, therefore, neither Tidewater nor its insurance carrier was liable to Phillips for indemnity or contribution for Medeiros' compensation award. Upon a grant of reconsideration the Board found that Tidewater was a predecessor in interest for the purposes of section 5500.5, subdivision (d). Tidewater's petition for reconsideration of the Board's decision was denied and upon petition of Tidewater we granted a writ of review.

The sole issue involved is whether Tidewater is a predecessor in interest of Phillips within the meaning of section 5500.5, subdivision (d). If Tidewater is not such a predecessor in interest then Phillips must bear the entire liability for the worker's compensation recovery of Medeiros under the provisions of section 5500.5, subdivision (a).

Tidewater's primary argument is that the Board is obligated to construe the term 'predecessor in interest' according to California law of general corporate principles. The thrust of this argument is that the Legislature is presumed to have been cognizant of the meaning ascribed to phrases construed in earlier judicial opinions. Tidewater then relies upon three cases constructing California law in such a fashion that Phillips could not be a Successor in interest if that law were applied. Finally Tidewater reasons that if Phillips cannot be its successor in interest under California corporate law principles, then Tidewater cannot be Phillips' predecessor in interest for purposes of the Workers' Compensation Act.

In considering Tidewater's contentions we first observe that our research has not been able to find any California case which has defined the term 'predecessor in interest.' The cases relied upon by Tidewater are not in point. The case of Pierce v. Riverside Mtg. Securities Co., 25 Cal.App.2d 248, 77 P.2d 226, does not define either the term 'predecessor in interest' or 'successor in interest' but deals with the question of liability for the debts of a corporation which sells or otherwise transfers its assets to another. Pierce holds that where a sale of assets is made by an old corporation to a new one and the new corporation leaves the old one with sufficient assets to pay its debts a creditor of the seller cannot collect his debt from the buyer. (At p. 257, 77 P.2d 226.)

The case of Kloberdanz v. Joy Manufacturing Company, D.C., 288 F.Supp. 817, is to the same effect and holds that where a corporation continues to exist after the sale of most of its assets to another corporation the purchasing corporation is not a mere continuation of the selling corporation so as to render the purchasing corporation liable for the selling corporation's torts. (At pp. 820--821.)

The case of Ortiz v. South Bend Lathe, 46 Cal.App.3d 842, 120 Cal.Rptr. 556, was decided subsequent to the enactment of subdivisions (a) and (d) of section 5500.5. Accordingly, the Legislature could not have relied on this case. In any event, Ortiz does not define the term 'predecessor in interest.' The holding of Ortiz is that a corporation acquiring the assets, including the trade name, of another corporation was not liable for injuries caused by a defective punch press manufactured by the selling corporation where the selling and purchasing corporations were completely separate and distinct entities both before and after sale and notwithstanding that the purchasing corporation had also purchased the assets of a third corporation which had assumed the manufacturer's liabilities. (At pp. 846--848, 120 Cal.Rptr. 556.)

In the present case Phillips purchased some of Tidewater's assets, i.e., the Avon refinery. Tidewater, as a result of the sale, did not go out of existence. It did not merge with Phillips nor was Phillips a continuation of Tidewater. We are not concerned here with corporate law dealing with liability for the debts or torts of a selling corporation by a purchasing corporation, but with whether one corporation is the predecessor in interest of another within the meaning of section 5500.5, subdivision (d).

In interpreting section 5500.5, subdivision (d), we are guided by the fundamental principle of statutory construction stated in Select Base Materials v. Board of Equal., 51 Cal.2d 640, 645, 335 P.2d 672, 675, as follows: 'The fundamental rule of statutory construction is that the court should ascertain the intent of the Legislature so as to effectuate the purpose of the law. (Citations.) Moreover, 'every statute should be construed with reference to the whole system of law of which it is a part so that all may be harmonized and have effect.' (Citation.) If possible, significance should be given to every word, phrase, sentence and part of an act in pursuance of the...