Para v. Richards Group of Washington Ltd. Partnership

• Decision Date: 01 September 1994
• Docket Number: No. 131,131
• Citation: 661 A.2d 737,339 Md. 241
• Parties: Joan A. PARA et al. v. The RICHARDS GROUP OF WASHINGTON LIMITED PARTNERSHIP et al. ,
• Court: Maryland Court of Appeals

Page 241

339 Md. 241

661 A.2d 737

Joan A. PARA et al. v. The RICHARDS GROUP OF WASHINGTON LIMITED PARTNERSHIP et al.

No. 131, Sept. Term, 1994.

Court of Appeals of Maryland.

July 20, 1995.

George S. Tolley, III (Gilbert H. Robinette, Bruce J. Babij, Robinette, Dugan & Jakubowski, P.A., on brief), Baltimore, for appellants.

John T. Bergin (Kevin J. McCarthy, McCarthy, Bacon & Costello, on brief), Lanham, for appellees.

Argued before ELDRIDGE, RODOWSKY, CHASANOW, KARWACKI, BELL and RAKER, JJ.

CHASANOW, Judge.

In the instant case, we must determine whether the owner and developer of a housing development who serves as the general contractor can be considered a statutory employer under the Maryland Workers' Compensation Act and whether, because of the statutory employer status, can be immune from tort liability in a suit arising out of the death of a subcontractor's employee. We hold that in the instant case, the owner /developer is a statutory employer and is therefore immune from tort liability.

I.

On December 21, 1989, The Richards Group of Washington, Limited Partnership ("Richards"), an owner and developer of new home sites, signed a contract with Razzano & Fohner, Inc. ("Razzano & Fohner") to do plumbing work on the houses under construction in section five of a new home development called Crofton Village, located in Anne Arundel County. The property on which the work was to be done was owned by Richards. Under the terms of this contract, Richards was known as the "contractor" on the Crofton Village project and Razzano & Fohner was designated as the "subcontractor." Additionally, the contract required that while working on the project, Razzano & Fohner maintain workers' compensation insurance covering its employees and that Richards be listed as a named insured on Razzano & Fohner's insurance policy.

On February 2, 1991, prior to the accident giving rise to this cause of action, Richards entered into a contract for the sale of lot 37, section 5 of Crofton Village subdivision with Joseph and Lily Chang ("the Chang Contract"). This contract was later voided, subsequent to the accident in question, when Richards learned that the Changs intended to use the property for investment purposes. After the accident, on August 23, 1991, Richards entered into a contract of sale for lot 37, section 5 with Thomas Harrington and Rebecca Ebeling.

On March 19, 1991, Brian Para, an employee of Razzano & Fohner, who was performing excavation and trenching work on lot 37, section 5 in connection with Razzano & Fohner's contract with Richards, was killed when the trench in which he was working collapsed. Joan Para, as executrix of her son's estate and individually with her husband, Carl Para, brought suit against Richards, Enterprise Washington Corporation, and Anne Arundel County in the Circuit Court for Anne Arundel County. ¹ The complaint alleged counts for negligence and wrongful death against each of the parties. The complaint identified Richards as being in the "business of promoting and supplying general and specialized contracting services in the construction of condominiums, townhouses and residential homesites" and as the "general contractor[ ] in the construction and erection of residential homesites in ... 'Crofton Village.' " In response to the complaint, Richards filed a motion for summary judgment contending that it was entitled to judgment as a matter of law because, under the then existing codification of the statutory employer provision of the Maryland Workers' Compensation Act, Maryland Code (1957, 1985 Repl.Vol., 1990 Cum.Supp.), Article 101, § 62, ² Richards was Para's statutory employer and was therefore immune from liability in a personal injury action. We note that Article 101, § 62 was transferred, with revisions, effective October 1, 1991 to Md.Code (1991), Labor and Employment Art., § 9-508. ³ See Chapter 8 of the Acts of 1991. The Revisor's Note to § 9-508 states that "[t]his section is new language derived without substantive change from former Art. 101, § 62." Thus, because the transfer of the statutory employer provision did not effect a substantive change, we will refer to § 9-508 in the course of this opinion. Art. 101, § 62 provided in pertinent part:

"(a) When any person as a principal contractor, undertakes to execute any work which is a part of his trade, business or occupation which he has contracted to perform and contracts with any other person as subcontractor, for the execution by or under the subcontractor, of the whole or any part of the work undertaken by the principal contractor, the principal contractor shall be liable to pay to any workman employed in the execution of the work any compensation under this article which he would have been liable to pay if that workman had been immediately employed by him; and where compensation is claimed from or proceedings are taken against the principal contractor, then, in the application of this article, reference to the principal contractor shall be substituted for reference to the employer...."

Our current statutory employer provision codified at § 9-508 provides:

"Liability of principal contractor for compensation.

(a) In general.--A principal contractor is liable to pay to a covered employee or the dependents of the covered employee any compensation that the principal contractor would have been liable to pay had the covered employee been employed directly by the principal contractor if:

(1) the principal contractor undertakes to perform any work that is part of the business, occupation, or trade of the principal contractor;

(2) the principal contractor contracts with a subcontractor for the execution by or under the subcontractor of all or part of the work undertaken by the principal contractor; and

(3) the covered employee is employed in the execution of that work."

Richards argued that it was a general contractor on the Crofton Village project and that Razzano & Fohner had entered into an agreement with Richards as subcontractors on the project. Richards therefore argued that it was Para's statutory employer and that Para's exclusive remedy was through the Workers' Compensation Act. Appellants, the Paras, responded to the motion for summary judgment by arguing that Richards could not be Para's statutory employer because, at the time of the accident, Richards was the owner of the lot on which Para was injured and the owner of property could not be a statutory employer without first entering into a contract with a third party to perform work and then delegating part of that work under a subcontract. Richards later filed a Supplemental Memorandum in Support of Motion for Summary Judgment in which it introduced the Chang contract to refute the Paras' assertions that Richards was the owner of the property at the time of the accident. The Paras then filed a response, arguing that under workers' compensation law, a statutory employer is established only if there is an existing principal or antecedent contract with a third party at the time the subcontract is entered into. Thus, the Paras argued, because the Chang contract was not in existence at the time of the formation of the subcontract between Richards and Razzano & Fohner, Richards could not be considered Para's statutory employer.

A hearing on Richards's motion for summary judgment was held before Judge Robert H. Heller, Jr. ⁴ Judge Heller issued a Memorandum Opinion and Order granting Richards's motion for summary judgment. Judge Heller recognized the existence of the Chang contract, but noted that "the existence of the Chang contract is not dispositive of the Court's decision to grant the motion [for summary judgment]." Instead, the court found that:

"The Court agrees with Plaintiffs that there was no 'antecedent undertaking, or principal contract' to build the townhouse for a third party, prior to the December 21, 1989 'Subcontractor's Contract' between Richards Group and R & F.... Although Richards Group had not contracted to build the townhomes prior to December 21, 1989, it was known and understood by all the parties that the townhomes to be developed in Crofton Village were eventually to be sold to the public. The Court notes that in developing residential communities it is common practice for the owner-developer to execute 'subcontracts' prior to selling the property to third parties. The owner-developer, for example, will typically contract for the construction of roads, foundations, roofing, plumbing, and electrical work, prior to sale to the public."

The court further recognized the unfairness that would result if it accepted the Paras' argument that the contract with the Changs needed to precede the contract between Richards and Razzano & Fohner. The court noted:

"Plaintiffs admit that if, for example, Brian Para had died while working on Lot 36, which was pre-sold to a third party prior to December 21, 1989, then Richards Group would be a 'statutory employer.' This hypothetical demonstrates the inconsistencies and unfairness that may arise--Employee X, injured on a pre-sold lot may be compensated by his 'statutory employer' under the Act, while Employee Y, injured on an unsold lot, may be left without a remedy under the Act because no statutory employer-employee relationship is deemed to have existed. Such inconsistency and unfairness is not in accord with the purpose of section 62, and contrary to the intent of the statute."

The court therefore found that "[i]n this situation, the issue of whether a statutory employer-employee relationship exists, should not turn on the date each lot was sold to the public" and therefore granted the motion for summary judgment, finding that Richards was Para's statutory employer. The Paras filed a Motion for Reconsideration of Grant of Summary Judgment or, in the Alternative, for Entry of Final Judgment. On August 2, 1994, Judge Heller granted the Paras' request for certification of final judgment. The Paras...