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IN THE WORKERS’ COMPENSATION COURT OF THE STATE OF MONTANA 2004 MTWCC 22 WCC No. 2002-0669 RUPERT
M. COLMORE, III, a/k/a RUPERT M. COLMORE, a/k/a UNINSURED
EMPLOYERS’ FUND and FINDINGS OF FACT, CONCLUSIONS OF LAW AND JUDGMENT Affirmed
in Part/Reversed in Part Summary: Doug Forgey was killed in an accident while fencing on a Montana ranch owned by Colmore Properties, a limited partnership, and leased by Rupert Colmore individually. Both Colmore Properties and Rupert Colmore were uninsured at the time of the accidental death. A claim for compensation on behalf of his beneficiaries was accepted by the Uninsured Employers’ Fund. Colmore Properties and Rupert Colmore seek a determination that they are not liable for death benefits and contend in the alternative that Doug was an independent contractor or that his employment was “casual employment” and therefore exempt under the Montana Worker’s Compensation Act. Held: Doug Forgey was not an independent contractor or casual employee, and Rupert Colmore was his employer. Topics:
¶1 The trial of this matter was held in Bozeman on February 12, 2003 and April 18, 2003. Petitioner Rupert M. Colmore was present. Mr. Colmore and the other petitioners were represented by Mr. Michael J. Lilly. Respondent, Uninsured Employers’ Fund, was represented by Mr. Daniel B. McGregor. Respondent, Jacqueline Renee Forgey, was present and represented by Mr. Daniel B. Bidegaray. ¶2 Exhibits: Exhibits 1 through 25 and 30 through 33 were admitted without objection. Exhibits 26 and 29 were admitted over objections. Exhibits 27 and 28 were refused. ¶3 Witnesses and Depositions: Rupert M. Colmore, Charles A. Miller, Jacqueline Renee Forgey, William Leffingwell, John Lee, Wade Estes, and Lee Ammerman testified. In addition, the parties submitted depositions of Sam Campbell, Jacqueline Renee Forgey, Rupert M. Colmore, Eunice Colmore, and Joy Smith for the Court’s consideration. ¶4 Issues Presented: The issues as set forth in the Pretrial Order are:
(Pretrial Order at 3.) On the second day of trial, the parties informed the Court that another issue had arisen regarding the proper rate of benefits. They agreed to submit that issue on an agreed statement of facts. In the agreed statement of facts, the parties agree that the benefit rate calculated by the UEF was erroneous, however, the decedent’s widow failed to object to the rate as calculated by the UEF within ninety days. Therefore, the following additional issue is presented:
(Statement of Agreed Facts at 2.) ¶5 Final briefs regarding the benefit rate were filed with the Court on May 9, 2003, at which time the case was deemed submitted. ¶6 Having considered the Pretrial Order, the testimony presented at trial, the demeanor and credibility of the witnesses, the depositions and exhibits, and the arguments of the parties, the Court makes the following: FINDINGS OF FACT ¶7 Respondent Jacqueline
Renee Forgey (Renee) is the widow of Doug Forgey (decedent), who was killed
in a work-related accident on September 14, 2000, while digging fence
post holes with a tractor auger. ¶9 From 1989 to 1993, the decedent worked at a lumber company. (Id. at 15.) ¶10 The Forgeys came to Montana in 1993. For the first three years thereafter the decedent worked at the Livingston Rebuild Center in Livingston, Montana, repairing railroad locomotives. (Id. at 14.) ¶11 In 1996 the decedent, who had grown up on a dairy farm, went to work as a ranch hand or ranch manager for the North Star Ranch near Livingston, Montana. (Id. at 14-15; Ex. 13.) He cared for cattle, repaired equipment, hayed, fenced, and did general ranch maintenance. (See Ex. 13.) ¶12 In the summer of 2000, the decedent became dissatisfied with his work at North Star Ranch and began contemplating other options, including going into a fencing business on his own. The decedent talked about the possibility of buying a fencing business owned by Rick Black or starting his own business. (Forgey Dep. at 20-21.) During the late summer of 2002, he talked to William Leffingwell (Leffingwell), a truck driver who did contract fencing on the side, asking him about augers, tractors, and bidding. Leffingwell told him it would be best to wait until spring to start any business since the fencing season was winding down for the year. ¶13 During the late summer of 2000, the decedent also talked to John Lee (Lee), Wade Estes (Estes), and Lee Ammerman (Ammerman) about the possibility of his own business. He asked Lee and Estes, who were both farm mechanics, to keep an eye out for a tractor for him. (Trial Test.) He indicated to Lee that he was going to do some fence building for Rupert Colmore (Colmore) “to get him by and started in business,” however, he also talked about moving back to Oregon. (Trial Test.) He mentioned to Ammerman, a local rancher who owned property adjoining the Colmore property, that he was interested in getting the equipment needed to go into a fencing business and was thinking about it for the future. But the decedent also indicated he would have trouble paying for equipment. (Trial Test.) ¶14 The most significant piece of equipment used in fencing is a tractor with an auger. (Trial Test.) ¶15 The decedent had never previously been in business for himself. ¶16 In August, the decedent approached Colmore about doing some fencing on Poison Creek Ranch, a 680-acre parcel near Livingston, which was all grassland. The ranch was owned by a limited partnership set up by Colmore; the operation and ownership of the ranch are discussed later on in this decision. In addition, Colmore personally owned another eleven acres adjacent to the Poison Creek Ranch which he acquired in 2000. ¶17 According to Colmore, the first time the decedent approached him the decedent asked him for work, said he was thinking of going into business, and asked if Colmore would help him. Colmore demurred but later in August the decedent came back, told Colmore he was no longer employed and asked for work. At that time, Colmore agreed to hire him to do fencing on an hourly basis at $12 an hour. Colmore also agreed to provide or reimburse the decedent for any materials. Colmore said he would try to find the decedent work for three to four weeks. ¶18 While Colmore benefitted from the decedent’s fence building and repair, he had not been looking for someone to repair his fences. Colmore hired the decedent more out of goodwill than his own need so that the decedent, who no longer had a job, could earn some money. ¶19 The decedent began work fencing on the Poison Creek Ranch on August 10, 2000. His fencing was limited to the Poison Creek Ranch, which was owned by the limited partnership, and did not extend to the land owned personally by Colmore. ¶20 The decedent worked from August 10, 2000, until his death on September 14, 2000. He was paid by the week. During the four pay periods preceding his death, he earned $1,800. The parties have stipulated that his weekly wage was $443. (Statement of Agreed Facts (filed May 2, 2003).) ¶21 Colmore designated the fence sections on which the decedent was to work on an as-you-go basis. Colmore would identify a section of fence that needed mending or replacement. The decedent would mend or replace that section of fence and then report its completion to Colmore. At that time, Colmore would identify additional fencing that needed mending or replacing. ¶22 The decedent determined his own hours and days of work. He also provided some of his own hand tools. However, the most important piece of fencing equipment he used was an auger mounted on a tractor for digging holes for fence posts. (Trial Test.) Colmore owned and provided that piece of equipment. ¶23 While the decedent was fencing, Colmore had to explain to him the need to use water to soak the ground where he was going to use the auger. ¶24 On September 14, 2000, the decedent was discovered dead by a fence section he was working on at the Poison Creek Ranch. He had been caught in the tractor’s auger. ¶25 At the time of his death, the decedent did not have an independent contractor’s certificate issued by the Montana Department of Labor and Industry. ¶26 A workers’ compensation claim for death benefits was filed by the decedent’s widow. ¶27 At the time of the decedent’s death, Colmore and Colmore Properties did not have workers’ compensation insurance. The claim for compensation was therefore sent to the Uninsured Employers’ Fund (UEF), which accepted liability for the claim. ¶28 The present petition was thereafter filed by Colmore Properties, the limited partnership which owns Poison Creek Ranch. Colmore Properties requested a determination that the decedent was not its employee. The Pretrial Order expanded the employment issue to encompass Colmore individually, and at trial the parties agreed that Colmore Management Company, LLC, and the limited and general partners of Colmore Properties should be added as petitioners. The request was granted. ¶29 Resolution of whether the decedent was an employee who was required to be covered by workers’ compensation insurance involves a somewhat complicated set of facts concerning ownership and control of the Poison Creek Ranch and the nature of the ranching operation. ¶30 Colmore is a longtime Tennessee resident. He farmed land in Tennessee for many years, retiring from farming in 1994. Until 1974, he raised cattle but never raised horses. ¶31 In 2000, Colmore was 60 years old. His wife, Eunice, was 57. At present he personally owns 400 acres of Tennessee land which he described as clear-cut of timber and on which he is replanting trees. ¶32 In 1997, Colmore organized Colmore Properties as a limited partnership under Tennessee law with himself as the general and managing partner. (Ex. 10.) According to the Limited Partnership Agreement of Colmore Properties, the purpose of the partnership is:
(Ex. 10 at 11-12) ¶33 The partnership was funded by a $700,000 cash contribution, which was assigned as follows: $14,000 to Colmore as general partner, $679,000 to Colmore as a limited partner, and $7,000 to Eunice, Colmore’s wife, as a second limited partner. (Ex. 10 at 39.) On January 1, 1988, an additional $100,000 was contributed by the Colmores, and Eunice was added as an additional general partner. Later on in 1998, Eunice was deleted as a general partner and the contributions reallocated in the following amounts and percentages:
(Ex. 10 at 42.) At the time the amended schedule of contributions was executed on September 1, 1998, Colmore was “Chief Manager” of Colmore Management Company, LLC, the newly designated general partner. There is no evidence of any further amendments to the partnership agreement between 1998 and the time of the decedent’s death. ¶34 According to Colmore, the limited partnership was intended as an estate planning device. Mary P. Colmore, Dale Guild Colmore, and Eunice Baxter Jackson Colmore are all children of Colmore and Eunice. ¶35 On August 12, 1997, Colmore Properties acquired the Poison Creek Ranch. (Ex. 19.) As noted earlier, the ranch consists of grassland but also has a house on it, as well as a couple of barns in disrepair and a small outbuilding. The acquisition was the result of Colmore’s longstanding interest in acquiring property in the Western United States. ¶36 On January 1, 1998, Colmore individually leased the Poison Creek Ranch from Colmore Properties. The written lease agreement is found at Exhibit 21. It is for a renewable term of five years and includes all 680 acres of pasture land, the house, and the buildings. ¶37 The purpose of the lease is expressed in paragraph 1. In relevant part it provides:
(Ex. 21 at 1, italics added for emphasis.) The lease required Colmore to oversee and pay for all agricultural activities, providing as follows:
(Id. at 3.) ¶38 The Poison Creek Ranch house needed the repair to make it habitable for the Colmores. Those improvements were paid for by the partnership. The house was ready for occupancy and the Colmores moved in on November 4, 1998. Since that time they have split their time between their Tennessee home and the Poison Creek Ranch. Generally, they live in Montana from July through mid-October and the rest of the year in Tennessee. They spend most of their time in Montana in recreational activities. They do not have a bank account in Montana and have not filed income tax returns in Montana. ¶39 As lessor of the Poison Creek Ranch, Colmore’s actual ranching and agricultural operations were minimal. He planted some small areas (less than one acre) with wheat to attract birds; pastured some of his own horses which were of no commercial value; pastured a few horses belonging to relatives or in exchange for work on or watching over the ranch; and hayed several acres. ¶40 However, Colmore testified that it has always been his intent to improve the ranch land and grow more hay and wheat, although he said that his intent arises from his love of farming rather than a profit motive. He indicated it would take six to eight years to prepare the ranch for significant agriculture and that it was his goal to do so for his family although he had no immediate intent to use the land for profit. ¶41 Moreover, and this is a critical “moreover,” Colmore brought farm equipment from Tennessee to the Poison Creek Ranch, depreciated the equipment on his income tax return, and reported the Poison Creek Ranch as a business venture for income tax purposes. The ranch equipment included three tractors, some of which were purchased in Montana in 1999, two disks, a three-bottom plow, a roller, a scraper, a grain drill, a hay rake, the auger involved in the decedent’s death, a swather and a harrow, all of which are useful in farming and ranching operations. (Trial Test.) ¶42 On his 2000 Federal Income Tax Return, Colmore filed a Schedule F – Profit or Loss from Farming. (Ex. 8.) In that schedule, he reported his expenses from both his Tennessee operations and the Poison Creek Ranch in Montana. Montana expenses taken included depreciation on his Montana farming equipment, Montana taxes, payment for fencing in Montana, payments for repairs made in Montana, and finally, and most significantly, the amount he paid as rent for leasing the Poison Creek Ranch. The Montana expenses contributed to a $140,983 loss on farming operations he reported on his 2000 income tax return. Total income from farming operations was reported as $8,545, of which $8,500 was probably from the sale of a piece of equipment. ¶43 The UEF has been paying death benefits based on an average weekly wage of $300. The parties agree the calculation is erroneously based on dividing the $1,800 in wages reported for the four weeks prior to the decedent’s death by six instead of four. (Statement of Agreed Facts (filed May 2, 2003).) ¶44 Renee was provided with a determination letter setting forth the UEF’s erroneous calculation but did not discover the error at that time and did not object to the calculation until more than ninety days after the determination letter. (Id.) ¶45 Once brought to the attention of the UEF, it agreed it had miscalculated benefits. The parties have stipulated the decedent’s proper weekly wage for purposes of benefits is $443.00. (Id.) CONCLUSIONS OF LAW ¶46 This case is governed by the 1999 version of the Montana Workers’ Compensation Act since that was the law in effect at the time of the claimant’s industrial accident. Buckman v. Montana Deaconess Hospital, 224 Mont. 318, 321, 730 P.2d 380, 382 (1986). ¶47 This case involves a claim for death benefits by the decedent’s statutory beneficiaries, who are the decedent’s widow and two children. ¶48 The first question the Court must address in this case is whether the decedent was an independent contractor at the time of his death. If he was not, then he was an employee and I must address three additional questions. The first of the additional questions is who was his employer? The second question is whether his employment was “casual employment,” thereby exempting his employer from workers’ compensation insurance coverage requirements and liability. The third and final question is whether Renee’s request for an increase in benefits based on the recalculation of the decedent’s average weekly wage is time-barred. 1. Independent Contractor or Employee? ¶49 Insurance coverage requirements and liability are generally governed by section 39-71-401(1), MCA (1999), which provides:
“Employer” is broadly defined as encompassing any person or entity “who has a person in service under an appointment or contract of hire, expressed or implied, oral or written . . .” § 39-71-117(1), MCA (1999). Whether Colmore, individually, or Colmore Properties is determined to have hired the decedent, either fits the statutory definition of employer. Thus, critical inquiry is whether the decedent was an employee. ¶50 Employee is defined in section 39-71-118(1), MCA (1999), as follows:
Thus, if the decedent was an independent contractor, he was not an employee and neither Colmore or Colmore Properties is liable for obtaining insurance coverage for him or for death benefits. ¶51 This brings me to yet another statutory provision, that defining independent contractor. The definition is set out in section 39-71-120, MCA (1997), and provides:
Under this section, unless both requirements of subsection (1) – commonly known as the A-B test – are met, the decedent must be deemed an employee of either Colmore Properties or Colmore individually. ¶52 Application of the A-B test is discussed in the recent case of Wild v. Fregein Construction, 2003 MT 115:
No extensive discussion of either part of the test is required in the present case for it is clear that the decedent met neither test. ¶53 Under part A, the consideration of the four factors “is not a balancing process, rather ‘. . . independent contractorship . . . is established usually only by a convincing accumulation of these and other tests, while employment . . . can if necessary often be solidly proved on the strength of one of the four items (above).’” Sharp v. Hoerner Waldorf Corp., 178 Mont. 419, 424, 584 P.2d 1298, 1301 (1978) (quoting from Larson, Workmen's Compensation Law, Vol. 1A, s 44.). The following facts demonstrate that Colmore, either individually or as general partner of Colmore Properties, exercised control over the decedent’s work:
¶54 The part B test is also not met. While the decedent expressed a desire to go into the fencing business for himself, he never in fact did so. He did not purchase the essential equipment necessary for fencing, i.e., a tractor and auger, because he did not have the financial where-with-all to do so. The evidence presented fails to show that after his employment with North Star Ranch terminated the decedent ever obtained any fencing work other than that for Colmore or that he, in fact, established an independent fencing business. ¶55 I must conclude that the decedent’s fencing work on the Poison Creek Ranch was as an employee and not as an independent contractor. I therefore turn to the next question, which is, who was his employer? 2. Who Was the Employer? ¶56 Identifying the employer is actually straightforward. While Colmore Properties owned the Poison Creek Ranch, Colmore individually leased the ranch and was responsible for its agricultural operations. Individually, he was clearly the decedent’s employer. 3. Casual Employment? ¶57 The final question to be answered in determining liability for the decedent’s death is whether the decedent’s employment by Colmore was exempt under the Workers’ Compensation Act (WCA). The WCA expressly exempts numerous employments and employees from its requirements. One of the exemptions, upon which the petitioners rely, is the exemption for casual employment. That exemption is found in section 39-71-401(2), MCA (1999), which provides:
In section 39-71-116(7), MCA (1999), “casual employment” is defined as follows:
¶58 It is apparent to me that Colmore hired the decedent not out of any immediate business need, but out of Colmore’s concern that the decedent needed a job and an income, and was acting more as a good Samaritan than as a businessman when he hired the decedent. However, he cannot escape the requirements of the law. His casual employment argument is alluring until one examines his Federal tax returns, his lease agreement with Colmore Properties, and his own intention to ultimately develop the Poison Creek Ranch for agriculture. His deduction of expenses for the Poison Creek Ranch, including expenses for fencing, on his 2000 income tax return belies his argument that his operation of the ranch was not business-related. I find and conclude, as I must, that the decedent’s employment was not casual. 4. Benefits Dispute ¶59 Finally, I address the beneficiaries’ request to increase benefits to reflect the decedent’s actual, average weekly wages. As noted earlier, the UEF incorrectly calculated the decedent’s average weekly wage by dividing his total wage for the four weeks preceding his death by six instead of four. ¶60 Petitioners and the UEF resist the request based on Renee’s failure to contest the UEF’s benefits determination within ninety days as required by section 39-71-520, MCA (1993), which provides:
The section applies only if there was a “dispute” over benefits. In this case, the evidence shows a mutual mistake of fact rather than a “dispute” regarding benefits. All parties assumed the correctness of the calculations. ¶61 A settlement of workers’ compensation claims is governed by contract law and may be reopened where both parties were laboring under a mutual mistake of facts when the contract was made. South v. Transportation Ins. Co., 275 Mont. 392, 401, 913 P.2d 233, 235 (1996). While the UEF’s determination of a claimant’s benefit rate was a unilateral one, a failure to contest the determination within ninety days in effect constitutes the claimant’s acquiescence and consent to the determination. The determination thereby becomes an agreement between the parties as to rate. I see no reason why the mutual mistake doctrine governing settlements should not apply equally to such an agreement where both the determination and the claimant’s acquiescence to that determination are based on a mutual mistake of fact which materially affects the determination. I therefore conclude that the rate determination may be reopened on account of the parties’ mutual mistake and that benefits should be increased to reflect the decedent’s average weekly wage of $443, the amount stipulated to by the parties as the decedent’s average weekly wage. 5. Indemnification ¶62 Section 39-71- 504, MCA (1997), requires an uninsured employer to indemnify the UEF for “an amount equal to all benefits paid or to be paid from the fund to an injured employee of the uninsured employer.” In light of the previous findings, Colmore, individually, must reimburse the UEF for all death benefits it is required to pay to the beneficiaries of the decedent. JUDGMENT ¶63 The decedent was an employee of Rupert Colmore, individually, at the time of his death on September 14, 2000, in a work-related accident. Since Colmore was uninsured at the time of the decedent’s death, the UEF is liable for benefits payable to the decedent’s statutory beneficiaries. Colmore must, in turn, indemnify the UEF for death benefits the UEF is obligated to pay the beneficiaries. ¶64 The decedent’s widow, Renee, is entitled to her costs and shall file a memorandum of costs in accordance with Court rules. ¶65 This JUDGMENT is certified as final for purposes of appeal. ¶66 Any party to this dispute may have twenty days in which to request a rehearing from these Findings of Fact, Conclusions of Law and Judgment. DATED in Helena, Montana, this 4th day of March, 2004. (SEAL) \s\ Mike McCarter
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