Turnage v. Northern Virginia Steel Corporation

• Decision Date: 21 September 1964
• Docket Number: No. 9249.,9249.
• Citation: 336 F.2d 837
• Parties: Marion F. TURNAGE, Robert Gardner, Carey Hightower, Richard Vereen, James Jacobs, Henderson Shaw, and the Home Indemnity Company, Appellants, v. NORTHERN VIRGINIA STEEL CORPORATION, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

336 F.2d 837 (1964)

Marion F. TURNAGE, Robert Gardner, Carey Hightower, Richard Vereen, James Jacobs, Henderson Shaw, and the Home Indemnity Company, Appellants, v. NORTHERN VIRGINIA STEEL CORPORATION, Appellee.

No. 9249.

United States Court of Appeals Fourth Circuit.

Argued January 24, 1964.

Decided September 21, 1964.

Andrew B. Ferrari, Arlington, Va. (Robert C. Heeney, Rockville, Md., on brief), for appellants.

Oren R. Lewis, Jr., Arlington, Va. (Tolbert, Lewis & FitzGerald, Arlington, Va., on brief), for appellee.

Before SOBELOFF, Chief Judge, and HAYNSWORTH and BOREMAN, Circuit Judges.

BOREMAN, Circuit Judge.

The sole issue on this appeal involves interpretation and application of the Virginia Workmen's Compensation Act.¹ Plaintiffs are six employees of William Seltzer, a cement finisher, who were injured when the first floor of an apartment building on which they were working collapsed, and Home Indemnity Company. The apartment building, in Arlington, Virginia, known as the Dorchester Towers, was being constructed by Reinsch Construction Company, its owner, as general contractor. Since Reinsch Construction Company had only a few supervisory employees in its service, the construction work was performed primarily by subcontractors. Reinsch Construction Company contracted with architects Sheridan & Behm to design the building; with Fortune Engineering Associates to prepare the structural design; with Northern Virginia Steel Corporation to fabricate and supply the structural steel, steeltex and steel joists; with Monitor Construction Company to erect the steel; with Parker Construction Company to install the steeltex; with William Seltzer to pour and finish the concrete flooring; and with several other concerns to perform additional construction work.

The accident giving rise to plaintiffs' claims for relief was allegedly caused by the negligence of the defendant, Northern Virginia Steel Corporation, in supplying defective steel bar joists and other steel products for use in the building.² Home Indemnity Company, as William Seltzer's workmen's compensation insurance carrier, has paid workmen's compensation benefits and medical expenses to the individual plaintiffs and death benefits to the personal representative of another of Seltzer's employees who was killed in the accident; it bases its claim for relief upon its subrogation rights to the extent of the payments.³ In its answer Northern Virginia Steel Corporation denied that it was negligent in fabricating the steel and asserted further that the action against it was barred by certain provisions of the Virginia Workmen's Compensation Act. The issue as to Northern Virginia's status under the Act was tried separately. The District Court determined that Northern Virginia was engaged in the business of the owner-builder, Reinsch Construction Company, and, therefore, was under the canopy of the Act and immune from suit at common law. Accordingly, it dismissed the action and plaintiffs appealed.

We think the judgment of the District Court was compelled by the Virginia Workmen's Compensation Act, as interpreted by the Supreme Court of Appeals of Virginia, and should be affirmed. Several provisions of that Act are relevant here.

Section 65-37 (Va.Code Ann. § 65-37, Michie 1950)⁴ provides in essence that the rights and remedies granted an employee under the Act shall exclude all others. Although that section's prohibition of other remedies is in terms absolute, an exception thereto is created by section 65-38 which, in pertinent part, provides:

"* * * The making of a lawful claim against an employer for compensation under this Act for the injury or death of his employee shall operate as an assignment to the employer of any right to recover damages which the injured employee or his personal representative or other person may have against any other party for such injury or death, and such employer shall be subrogated to any such right and may enforce, in his own name or in the name of the injured employee or his personal representative, the legal liability of such other party. * * *" (Emphasis added.)

Under section 65-38 any amount collected by the employer in excess of the amount which he has paid or for which he is liable is held for the benefit of the injured employee. The effect of section 65-38, as construed by the Virginia Supreme Court of Appeals, is to preserve, subject to the subrogation rights of the employer, the injured employee's common-law right of action against any "other party."⁵ The term "other party" is nowhere defined in the Act but section 65-99, in addition to requiring the employer to maintain insurance for the payment of compensation, provides that "while such insurance remains in force he or those conducting his business shall only be liable to an employee for personal injury or death by accident to the extent and in the manner herein specified." (Emphasis added.)

Interpreting section 65-38 (then section 12) in accordance with the language of section 65-99 (then section 11) and considering "the theory, the history and the broad purpose of the act," the Virginia Supreme Court of Appeals in Feitig v. Chalkley, 185 Va. 96, 38 S.E.2d 73, 76 (1946), held that the term "any other party" refers exclusively "to those persons who are strangers to the employment and the work, and does not include those who have accepted the act and are within the express terms of section 11 — `he (employer) or those conducting his business.'"

In addition to the sections mentioned, sections 65-26, 65-27 and 65-28⁶ of the Act are particularly pertinent here. Essentially, these sections provide (1) that an owner who contracts with any other person to perform work which is a part of his trade, business or occupation shall be liable under the Act to all employees engaged in the work as if they were employed directly by him; and (2) that a contractor who contracts to perform work for another person (for example, the owner) which work is not a part of such other person's trade, business or occupation, shall be liable under the Act to all employees engaged in such work. As explained in Sykes v. Stone & Webster Engineering Corporation, 186 Va. 116, 41 S.E.2d 469 (1947), the purpose of these sections is

"to bring within the operation of the Compensation Act all persons engaged in any work that is a part of the trade, business or occupation of the original party who undertakes as owner, or contracts as contractor, to perform that work, and to make liable to every employe engaged in that work every such owner, or contractor, and subcontractor, above such employe. But when the employe reaches an employer in the ascending scale, of whose trade, business or occupation the work being performed by the employe is not a part, then that employer is not liable to that employe for compensation under section 20(a) now §§ 65-26 to 65-29. At that point paragraph 5 of section 12⁷ intervenes and the employe\'s right of action at common law is preserved." Id. at 41 S.E.2d 472.

Stated another way, the effect of sections 65-26 to 65-29 in the specified circumstances is to render the owner or contractor the statutory employer of all employees engaged in the work.⁸ Thus, the owner is not only liable under the Act to all employees engaged in work which is part of his trade, business or occupation, regardless of how far removed they may be from contractual relationship with him, but in accordance with sections 65-37 and 65-99 he is immune from suit at common law by such employees. Moreover, under section 65-99 those persons conducting the business of the owner or contractor who is made a statutory employer are likewise protected from actions for damages brought by such employees.⁹

As this court recently emphasized in Bristow v. Safway Steel Products, 327 F.2d 608 (1964), it is the aim of the Virginia Workmen's Compensation Act, as interpreted by that state's highest court, that the financial risk of accidental personal injuries inherent in any project be borne by and limited to that project to the extent specified therein. Consequently, where a project is undertaken either by an owner as part of his trade, business or occupation or by a general contractor, the responsibility in damages of any party to a workman injured in the project must be tested with reference to his relationship to the overall project. If the defendant was engaged in work which was part of the undertaking of the owner or general contractor, regardless of his relationship to the injured workman and his immediate employer, the sections previously mentioned operate to place the economic loss upon the project and to limit the workman's recovery to that specified in the Act. On the other hand, where the injury was caused by the negligence of one not engaged in the over-all undertaking, a "stranger to the business," it is not an accident inherent in the project, the cost of which should ultimately be borne by the project, and the injured workman's rights and remedies outside of the statute are preserved.¹⁰

In the instant case it is undisputed that the construction of the apartment building was a part of the business of Reinsch Construction Company as owner and general contractor. The injured workmen who were working as cement finishers and helpers in the employ of a subcontractor, William Seltzer, at the time of the accident were unquestionably engaged in the work undertaken by Reinsch Construction Company and under sections 65-26 to 65-29 became its statutory employees. The crucial inquiry is whether the defendant, Northern Virginia Steel Corporation, was also engaged in the work of Reinsch Construction Company.

Plaintiffs take the position that Northern Virginia was a mere supplier of steel and, as such, was not engaged in the business of Reinsch Construction Company. We think this position is untenable. The evidence disclosed that the activities of Northern Virginia in connection with the construction project...