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IN THE SUPREME COURT
OF THE STATE OF MONTANA
NORMA O. GONZALES,
Plaintiff and Appellant,
Defendants and Respondents.
James D. Moore, Attorney at Law, Kalispell, Montana
James R. Walsh, Smith, Walsh, Clarke & Gregoire, Great Falls, Montana
Submitted on Briefs: June 13, 2002
Decided: November 26, 2002
1 On summary judgment, the Twentieth Judicial District Court, Sanders County, concluded as a matter of law that a Certificate of Independent Contractor Exemption issued by the Montana Department of Labor and Industry is conclusive proof of a worker's status in the face of evidence that the Certificate was obtained by fraud. We reverse and remand.
FACTUAL AND PROCEDURAL BACKGROUND
2 Norma O. Gonzales fell from the roof of a carport that she was painting on September 25, 1998, sustaining severe injuries. Alleging by Complaint that Lawrence Walchuk hired her to paint a house owned by Robert and Phyllis Ekblad, Gonzales claimed that her employers failed to provide her with a safe workplace and workers' compensation insurance coverage. Walchuk denied that an employer-employee relationship existed. The Ekblads answered with the affirmative defense that Gonzales worked as an independent contractor and was unprotected by workers' compensation or the property owners' insurance.
3 Through discovery,
Gonzales learned that a Certificate of Independent Contractor Exemption
("Certificate") had been issued in her name by the Montana
Department of Labor and Industry a few weeks prior to the accident.
She also discovered that the Ekblads are corporate officers and major
shareholders in the Hot Springs Telephone Company, which was the actual
lessee of the residence when the accident occurred. The Company provided
the residence to Walchuk as partial compensation for his employment.
5 On November 26, 2001, the District Court denied the motion to amend the pleadings and granted complete summary judgment in favor of Walchuk and the Ekblads. The court held that the Certificate issued to Gonzales by the Department of Labor and Industry provides conclusive proof of Gonzales's employment status as an independent contractor, pursuant to § 39-71-401(3)(c), MCA.
6 We rephrase
the issues raised on appeal as follows:
8 2. Whether the District Court abused its discretion by denying Gonzales's motion for leave to amend her Complaint?
STANDARD OF REVIEW
9 The standard of review for a grant of summary judgment is de novo. This Court will apply the same evaluation as the district court based upon Rule 56, M.R.Civ.P. The moving party must establish both the absence of genuine issues of material fact and entitlement to judgment as a matter of law. Bruner v. Yellowstone County (1995), 272 Mont. 261, 264, 900 P.2d 901, 903. Once the moving party has met its burden, the opposing party must present material and substantial evidence, rather than mere conclusory or speculative statements, to raise a genuine issue of material fact. Bruner, 272 Mont. at 264, 900 P.2d at 903. Our standard of review of a question of law is whether the legal conclusions of the trial court are correct. Spain v. Montana Department of Revenue, 2002 MT 146, 20, 310 Mont. 282, 20, 49 P.3d 615, 20 (citation omitted).
10 The District Court ruled as a matter of law that the approval of Gonzales's application for an independent contractor exemption by the Department of Labor and Industry constitutes conclusive proof of Gonzales's employment status under the Montana Workers' Compensation Act. Section 39-71-401(3)(c), MCA, states:
Accordingly, the court found that the exemption was effective at the time of the accident and concluded that Gonzales was an independent contractor without standing to rely upon the Montana Safety Act, Title 50, ch. 71, part 2, Montana Code Annotated.
presented evidence and argument before the District Court to rebut the
argument that the issuance of a Certificate constitutes conclusive proof
of her status. In her brief in opposition to summary judgment, she argued
that she worked as an employee on the house-painting project and did
not meet the statutory definition of an independent contractor. She
also claimed that she neither knowingly applied for an independent contractor's
exemption nor authorized her employer to seek an exemption on her behalf.
Stating that she informed Walchuk that she had not previously worked
as a painter before he hired her, Gonzales asserted that Walchuk fraudulently
induced her to complete and sign an Independent Contractor Exemption
Affidavit ("Affidavit"). Gonzales also claimed that Walchuk
then submitted the sham Affidavit to the State of Montana without her
knowledge or consent. Citing Moschelle v. Hulse (1980), 190
Mont. 532, 622 P.2d 155, for the proposition that fraud vitiates a contract
from its inception and § 28-2-401, MCA, which states that consent
is not real or free when obtained through fraud, Gonzales argued that
the Respondents' fraud invalidates both her consent to execute the Affidavit
and the Department's issuance of the exemption Certificate.
13 It is well settled that "a complaint must put a defendant on notice of the facts the plaintiff intends to prove; the facts must disclose the elements necessary to make the claim; and the complaint must demand judgment for the relief the plaintiff seeks." Larson v. Green Tree Financial Corp., 1999 MT 157, 35, 295 Mont. 110, 35, 983 P.2d 357, 35 (citation omitted). The complaint must provide a defendant with notice and an opportunity to defend himself. Larson, 35.
stated in her Complaint and Demand for Jury Trial that she was an employee
of the Respondents within the meaning of the Workers' Compensation Act.
She claimed that the Respondents not only failed to provide a safe workplace,
they also failed to provide workers' compensation coverage for her.
Thus, the Complaint clearly put Walchuk and the Ekblads on notice that
Gonzales intended to prove that she was an employee who was injured
in the course of her employment and wrongly denied workers' compensation
16 In this case, the District Court did not order Gonzales to reply to the Ekblads' Answer, which raises the affirmative defense that due to Gonzales's independent contractor status, the Respondents bear no liability for her injuries. Therefore, under Rule 8, M.R.Civ.P., no further pleadings were permitted without permission of the court. The Respondents acknowledge that they were aware of Gonzales's contention that the Certificate was obtained by fraud more than a year before they filed a motion for summary judgment. The Respondents attached a copy of the Certificate to their First Request for Admissions, which Gonzales answered on August 11, 2000, with the following statement:
Both parties conducted further discovery on the circumstances surrounding the completion and submission of Gonzales's application Affidavit to the Department of Labor and Industry.
17 While Rule 9(b), M.R.Civ.P., requires that a claimant plead fraud with particularity to support a claim for damages, nothing in our Rules of Civil Procedure bars a court from considering evidence of fraud or misrepresentation presented to avoid an affirmative defense on summary judgment. The burden of the party opposing summary judgment is to present substantial evidence that raises a genuine issue of material fact. Accordingly, we conclude that evidence presented by Gonzales indicating that the Respondents fraudulently induced her to complete and sign an independent contractor Affidavit, which the Respondents then submitted to the State of Montana, was properly before the District Court despite the court's denial of Gonzales's motion to amend her Complaint.
18 The Respondents
also argue on appeal that Gonzales desired to engage the District Court
in exactly the sort of fact-intensive inquiry that the Legislature specifically
intended to avoid by setting forth the legal presumption that approval
of an application for an exemption by the Department of Labor and Industry
is conclusive as to the status of an independent contractor. They point
out that the Legislature enacted § 39-71-401(3)(c), MCA, to provide
a method for a worker to declare his or her employment status before
an accident occurs and to give employers the security of knowing when
they are responsible for furnishing workers' compensation coverage.
20 The District
Court issued no findings on the real circumstances of Gonzales's employment
and appeared to regard evidence that the application for independent
contractor status was obtained by fraud as immaterial. The court granted
summary judgment to the Respondents based solely on the legal presumption
that an approved application is conclusive as to the status of an independent
contractor, pursuant to § 39-71-401(3)(c), MCA.
22 Robert Ekblad, who was Walchuk's supervisor at the Hot Springs Telephone Company, testified that he directed Walchuk to have each of the women hired to paint the house obtain an exemption from workers' compensation and unemployment insurance coverage. Walchuk acknowledged that he presented Gonzales and Hunter with the applications for exemptions required by the Montana Department of Labor and Industry. He asked Hunter and Gonzales to fill in the blanks on the standardized forms and brought the women before a notary public where the Independent Contractor Exemption Affidavits were signed and notarized.
to Gonzales's deposition testimony, she told Walchuk that she could
not read English and relied upon Walchuk to explain the purpose and
meaning of the Affidavit he asked her to complete. Walchuk did not read
the Affidavit to Gonzales but explained that the form was "not
important" and only necessary for "tax purposes." With
spelling help from Walchuk and Hunter, Gonzales listed her occupation
as "painter" and filled in her mailing address. She told Walchuk
that she did not have a social security number and was directed to enter
her husband's number in the space provided. Gonzales also testified
that the notary did not ask for identification or inquire whether she
understood what she was signing.
25 The undisputed evidence presented by Gonzales that her employers committed fraud upon her and the State of Montana raises a genuine issue of material fact regarding the validity of the Certificate of Independent Contractor Exemption issued to Gonzales by the Department of Labor and Industry. Therefore, we conclude that Gonzales, as the non-moving party, met her burden in opposing summary judgment. Although Gonzales also marshaled evidence before the District Court to support an argument that she worked as an employee on the house-painting project and not as an independent contractor, we reach no conclusion regarding Gonzales's employment status at the time of her accident and leave resolution of this matter to the trial court on remand.
26 We hold that the presumption set forth in § 39-71-401(3)(c), MCA, that issuance of a Certificate of Independent Contractor Exemption is conclusive as to the status of an independent contractor, presupposes that the applicant knowingly and voluntarily completes and submits the application. We further hold that this presumption does not survive in the face of proof that the Certificate was obtained by fraud. Consequently, we conclude the District Court erred by granting summary judgment as a matter of law.
27 We reverse the grant of summary judgment in favor of Walchuk and the Ekblads and remand for further proceedings consistent with this opinion. Gonzales presented substantial evidence that raised a genuine issue of material fact as to whether the Certificate was obtained by fraud. Thus, she has met her burden in opposing summary judgment. We do not reach the issue of whether the District Court abused its discretion by denying Gonzales's motion for leave to amend the pleadings and trust the court will have an opportunity to reconsider such a motion upon remand.
28 Reversed and remanded.
/S/ W. WILLIAM LEAPHART
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