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THOMAS v. HYCON

July 21, 1965

Arthur Lee THOMAS and Annie M. Thomas, Plaintiffs,
v.
HYCON, INC., Defendant



The opinion of the court was delivered by: KEECH

 This action is before the court under Rule 42(b), solely on the issue of whether defendant is "some person other than the employer" within the meaning of Maryland's Workmen's Compensation Act, Md.Ann.Code, art. 101, § 58 (1957). The facts were agreed upon by stipulation of the parties.

 On May 2, 1958, plaintiff was injured in a collision while operating a truck belonging to defendant Hycon, Inc. At the time, plaintiff was in the employment of Edmonds Art Stone Company, a corporation, and consequent to his accident, applied for and received compensation benefits by order of the Maryland Workmen's Compensation Commission. Subsequently, plaintiff brought this action against defendant Hycon, Inc., as a third party tort-feasor, alleging that the truck had defective brakes. Defendant contends that it was the employer, or so interrelated with and part of the "employer" in a single business enterprise that it is not a "third party" to the employee-employer relationship. Thus, it is contended, defendant is not liable to an action for damages for injury sustained in the course of employment, but is immune by virtue of the exclusive liability provisions of the workmen's compensation law. Md.Ann.Code, art. 101, §§ 15, 58 (1957).

 Edmonds Art Stone Company is a Delaware corporation engaged in the manufacture of cinder blocks. Hycon, also a Delaware corporation, is a wholly owned subsidiary of Edmonds, engaged in the business of sales outlet or distributor of Edmonds' products, its only other business being minor sales of related products as an accommodation to customers. It is not disputed that this organization was selected for valid business reasons. The directors and officers of Hycon were also officers and directors of Edmonds. Various brochures, letter-heads, and advertising carried the name of Hycon, Inc., with the additional words "DIVISION - EDMONDS ART STONE COMPANY", and in practical operation Hycon functioned as a department or division of Edmonds. However, separate books of account were kept by each corporation and separate profit and loss statements and income tax returns were prepared for each. Each corporation had its own employer identification number filed with the United States District Director of Internal Revenue, and each submitted separate payroll withholding tax and Social Security tax returns. The plaintiff's employment was reported on the payroll tax return of Edmonds. The stockholders and directors of each corporation held separate meetings, and separate minute books were maintained by each corporation.

 The plaintiff had been hired by Edmonds only a few weeks prior to the accident, and at that time had made known his qualifications as a truck driver. As a result, he had been assigned to drive the Hycon truck on deliveries several times before the accident.

 Edmonds' workmen's compensation insurance, like its automobile liability and general liability insurance, was carried jointly in the names of Edmonds and Hycon. No issue was raised in the compensation proceeding as to who was the "employer" liable for payment of the compensation. The case was handled with Edmonds as the named employer reporting the accident as an injury to its employee, and the loss was charged by the Rating Bureau against Edmonds and Hycon under the joint policy.

 In deciding whether defendant Hycon can be liable in negligence to this plaintiff, this court is constrained to apply the law of Maryland, despite the fact that this forum is the place of injury. Where compensation has been awarded by the state of employment, the workmen's compensation law of that jurisdiction will govern any subsequent tort action. See Jonathan Woodner Co. v. Mather, 93 U.S.App.D.C. 234, 210 F.2d 868, cert. denied, 348 U.S. 824, 75 S. Ct. 39, 99 L. Ed. 650 (1954) (dicta); Restatement, Conflict of Laws § 401, comment b (1948 Supp.).

 Under the Maryland statute, a general contractor is liable for workmen's compensation to the employees of any subcontractor engaged in the work of the general contractor, just as if they were employed by the general contractor. Md.Ann.Code, art. 101, § 62 (1957). Thus, an employee of a subcontractor, injured by the negligence of the general contractor, is not permitted to bring a tort action against the general contractor, because of the exclusive liability provisions of Section 15 of the Code. State to Use of Reynolds v. City of Baltimore, 199 Md. 289, 86 A.2d 618 (1952). When the positions are reversed, however, and an employee of the general contractor is injured by the negligence of the subcontractor, this court must accept as Maryland law that the subcontractor is amenable to suit as a third party. Hardesty v. Alliance Plumbing & Heating Co., Inc., 114 U.S.App.D.C. 360, 316 F.2d 361 (1963); 2 Larson, Workmen's Compensation § 72.32 (1961).

 Moreover, "persons other than the employer", against whom negligence suits are permitted, have been held to include fellow servants. The fact that the tort feasor is engaged in the same business enterprise as the injured party does not prevent the party injured by the negligence of a co-employee from bringing a negligence suit against such co-employee. Crown Cork & Seal Co., Inc. v. Hutter, reported in The Daily Record March 13, 1943 (Super.Ct.Balto.City); accord, Hardesty v. Alliance Plumbing & Heating Co., supra.

 Defendant's case must turn, therefore, on whether or not Hycon is a joint employer with or is identical with the employer Edmonds. No contractual relationship between Edmonds and Hycon will suffice to extend Edmonds' immunity - it must exist between the plaintiff and Hycon. For this purpose, defendant claims the relationship between Edmonds and Hycon is not one of contract, but of identity or joint venture.

 In Saf-T-Cab Service, Inc. v. Terry, 167 Md. 46, 172 Atl. 608 (1934), it was held that it was a question of fact for the jury whether a taxi fleet owning corporation was so involved with the taxi operating company by whom plaintiff was employed, but which was bankrupt, that the owning corporation could be considered the plaintiff's employer for the purposes of workmen's compensation liability. If such a finding is made in the instant case, plaintiff's action must be foreclosed, because anyone subject to workmen's compensation liability is exempted from tort liability.

 A careful comparison of the facts in Saf-T-Cab with those in the instant case does not indicate the same relationship here as that from which identity was there allowed to be inferred. In Saf-T-Cab, the enterprise was so integrated that both corporations used only one account. In the instant case, the businesses were distinct, one being in manufacturing, the other in distribution. Stocks were sold in the yard, with a complete transfer of title from Edmonds to Hycon, and separate accounts were maintained for all purposes. Such sales, with their consequent transfer of title, negate any idea of joint venture. There is no evidence of a sharing of profits and losses, or joint proprietary interest or right of mutual control over the subject matter of the enterprise which might indicate a joint venture.

 Saf-T-Cab was essentially a case in which the non-employing corporation was set up with no purpose or function other than the holding of title to the business assets. Cf. Williams v. Consumers Ice Co., 68 So.2d 246 (La.App.1953). In such a case, identity may be readily inferred. This is not such a case; Hycon has real, organic business functions and interests different from Edmonds. This court holds, therefore, that Hycon and Edmonds were not a single employer for the purposes of the Act. See Foley v. ...


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