United States Fidelity & Guaranty Co. v. Neal

• Decision Date: 15 April 1939
• Docket Number: 12672.
• Citation: 3 S.E.2d 80,188 Ga. 105
• Parties: UNITED STATES FIDELITY & GUARANTY CO. et al. v. NEAL.
• Court: Georgia Supreme Court

3 S.E.2d 80

188 Ga. 105

UNITED STATES FIDELITY & GUARANTY CO. et al. v. NEAL.

No. 12672.

Supreme Court of Georgia

April 15, 1939

Rehearing Denied May 10, 1939.

Certiorari from Court of Appeals.

Syllabus by the Court.

A partner is not an employee of the partnership, within the terms of the workmen's compensation act, although at the time of the injury he is performing special services under a contract with his other partner, separate and independent from the articles of partnership, and is being paid compensation therefor in addition to his share in the profits of the enterprise. The Court of Appeals erred in holding to the contrary. There was no error in the other rulings.

Bryan Middlebrooks & Carter, John A. Dunaway, and Yantis C Mitchell, all of Atlanta, for plaintiffs in error.

T Reuben Burnside, of Thomson, for defendant in error.

REID Chief Justice.

Levin P. Neal, a member of a partnership composed of G. H. Malcolm and himself, made claim against the partnership and the United States Fidelity & Guaranty Company before the Industrial Board of Georgia, for compensation under the workmen's compensation act. The theory of his claim was that he was employed by the partnership as a foreman in carrying out a contract by the partnership with the State of Georgia for the construction of a bridge on a State highway. For his services he was paid $30 per week. He testified, in part, as follows:

'Q. You had that contract from the State Highway Department to build the bridge? A. Yes, sir.

'Q. Were you engaged in that work on or about the 25th of March, 1937? A. Yes, sir.

'Q. Were you acting in any other capacity than as a partner? A. As a general foreman.

'Q. Was that by separate agreement from your partnership agreement? A. Yes, sir.

'Q. Were you receiving special compensation for your work as foreman? A. Yes, sir.

'Q. How much? A. $30 a week.

'Q. The work you were doing as foreman would not have been required of you by the partnership agreement? A. No, sir.

'Q. So it took this special agreement of employment as a foreman in order to require you to perform the services which you were performing. A. Yes, sir.'

Claimant's partner, Mr. Malcolm, testified, in part, as follows:

'Q. As I understand, Mr. Neal was engaged on the job as foreman? A. Yes, sir.

'Q. At a salary of $30 a week A. Yes, sir.

'Q. That was a separate agreement entirely from your partnership agreement? A. Yes, sir.

'Q. He received this compensation, as I understand, as foreman? A. Yes, sir.

'Q. Which he would not have received as a result of the partnership agreement? A. That is right.'

On cross-examination this witness testified:

'Who hired Mr. Neal? A. We had an agreement after we went into business that we would get a salary.

'Q. You had a partnership agreement; in other words, you two men got together and agreed to take out $30 a week apiece? A. Yes, sir.'

On redirect examination he testified:

'Q. I want to ask you definitely whether or not Mr. Neal was drawing this compensation of $30 a week as foreman under an entirely separate and distinct contract from your partnership agreement? A. We had to have a foreman and superintendent. The Federal Government made us put them on the pay-roll. We had to make an affidavit of their being paid every week.

'Q. It was a separate contract, was it? A. They required that of us. If we worked on the job, we had to have a foreman and superintendent.

'Q. Mr. Neal was the man who was employed as a foreman on the job? A. Yes, sir.'

It further appears from the evidence that Mr. Malcolm, claimant's partner, took the other position, that is of superintendent, and likewise drew $30 a week therefor. The director found, in so far as important in the present appeal, as follows: 'Director finds as a matter of fact, and concludes as a matter of law (See [Chandler v. Harris], 47 Ga.App. 535 ), that at the time of the accident to Mr. Neal he was in fact a foreman employee of Malcolm & Neal at a weekly wage of $30 under special agreement, and independent of his relationship in the partnership of Malcolm & Neal, and was at the time of his accident performing services which were not incumbent upon him to perform in his capacity as a member of the partnership of Malcolm & Neal, but a separate and independent undertaking.'

The question presented is whether a partner who performs services on behalf of and within the scope of the business of the partnership can be considered an 'employee' of the partnership, within the meaning of the provision that "Employee' shall include every person in the service of another under any contract of hire or apprenticeship, written or implied, except one whose employment is not in the usual course of the trade, business, occupation or profession of the employer' (Code, § 114-101), whether the services so rendered were performed by virtue of and pursuant to the original articles of partnership, or by virtue of a separate and independent contract thereafter entered into between the partners, for which services such partner was to receive a stated compensation in addition to his share in the profits of the partnership. In their consideration of this question, the Court of Appeals held that while, as a general rule, the mere fact that a partner renders services in behalf of the partnership, for which he is paid a stated compensation, 'is insufficient to establish the partner as a servant of the partnership, and is therefore insufficient to establish the fact that the partner is an employee of the partnership as provided in the Compensation Act,' yet where it appeared 'that the services of the partner were such as were not required of him as a member of the partnership, or that the money paid him was not due to him as a member of the partnership,' the industrial commission was authorized to find that he was an 'employee' of the partnership. The general rule and exception thus stated and applied were obtained from a former decision of the Court of Appeals in Chandler v. Harris, 47 Ga.App. 535, 171 S.E. 174, 175, wherein the court held that where a partnership operated two drugstores, proof that the injured partner was manager of one of the stores and 'looked after the business,' and received from the partnership for his services $150 a month, was insufficient to establish such partner an employee of the partnership, 'it does not appear that the services of the partner were such as were not required of him as a member of the partnership, or that the money paid him was not due to him as a member of the partnership.'

The appellate courts of every State which have had occasion to consider the question presented, with one exception, have held broadly that a partner could not be an employee of the partnership, within the meaning of the workmen's compensation act. A clear statement of the rationale of these decisions is found in Cooper v. Industrial Accident Commission, 177 Cal. 685, 171 P. 684, 685: 'The Workmen's Compensation Act clearly does not contemplate such a mixed relation as that existing between partners, wherein each member of the partnership is at the same time principal and agent, master and servant, employer and employé; and wherein each, in any services he may render, whether under his general duty as a partner, or under a special agreement for some particular service, is working for himself as much as for his associates in carrying on the business of the firm. The obvious intent of the act was to substitute its procedure for the former method of settling disputes arising between those occupying the strict relationship of master and servant, or employer and employé, by means of actions for damages. * * * the law relative to compensation as between master and servant, or employer and employé, for injuries suffered by the latter, contemplates two persons standing in this opposed relation, and not the anomaly of one person occupying the dual relation of master and servant, employer and employé, plaintiff and defendant, person entitled to a judgment or award in his favor and person bound to pay a part thereof out of his own proportionate share of the partnership property and the balance amounting possibly to the whole thereof, out of his own individual estate. Evidently the Workmen's Compensation Act did not contemplate these anomalies in its ample and detailed provisions for compensation to injured workmen and to those dependent upon them.' See Ellis v. Ellis, 1 K.B. (Eng.) 324; LeClear v. Smith, 207 A.D. 71, 202 N.Y.S. 514; McMillen v. Industrial Commission, 13 Ohio App. 310; Wallins Creek Lumber Co. v. Blanton, 228 Ky. 649, 15 S.W.2d 465; Gebers v. Murfreesboro Laundry Co., 159 Tenn. 51, 15 S.W.2d 737; Bowne v. S.W. Bowne Co., 221 N.Y. 28, 116 N.E. 364; Berger v. Fidelity Union Casualty Co., Tex.Civ.App., 293 S.W. 235, 237; Rockefeller v. Industrial Commission, 58 Utah 124, 197 P. 1038; Employers' Liability Assurance Corp. v. Industrial Accident Commission, 187 Cal. 615, 203 P. 95; Lyle v. H. R. Lyle Cider & Vinegar Co., 243 N.Y. 257, 153 N.E. 67, 47 A.L.R. 840; In re W. A. Montgomery & Son, 91 Ind.App. 21, 169 N.E. 879; Georgia Casualty Co. v. Smith, 222 Ky. 216, 300 S.W. 595; Peterson v. Department of Labor & Industries, 160 Wash. 454, 295 P. 172. In New York State the workmen's compensation act has been so amended as to provide for the issuance of employer insurance. In California the act has been so amended as to provide that 'A working member of a partnership receiving wages irrespective of profits from such partnership shall be deemed an employee within the meaning of' the act. St.Cal.1931, p. 2068, § 8(b).

The exception to this general current of authority, above alluded to, is the case of Ohio Drilling Co. v. State Industrial Commission, 86 Okl. 139, 207 P....