Honaker v. W. C. & A. N. Miller Development Co.

Smith, J., delivered the opinion of the Court. In each of these appeals an injured employee has been paid workmen’s compensation for injuries sustained while working in the construction of a building. In each instance, after collecting such compensation through the insurance carrier of his immediate employer, he has brought suit against the corporation with which his employer had contracted, alleging that negligence attributable to such corporation was responsible for his injury. Each such corporation is an appellee here.

Each has been held to be a statutory employer under Maryland Code (1957) Art. 101 (the Workmen’s Compensation Act), § 62 and thus immune from ²¹⁹ any liability other than that for workmen’s compensation. We shall affirm as to No. 55, Honaker, but in No. 60, Coffey, we shall reverse and remand for trial. The facts in these cases are similar but not identical. We consolidated the cases for argument because the same statute is involved and the facts in the two cases resemble one another so closely.

I — No. 55 — Honaker Dallas A. Honaker (Honaker) and his wife sued W. C. and A. N. Miller Development Company (Miller). Miller builds and sells houses in Montgomery County. It normally does not build homes to order. In this instance, however, it contracted to build one for an individual who, among other things, desired a slate roof.

Miller did not have the men and equipment to install such a roof. Therefore, it employed another corporation to do this particular work. Honaker, an employee of that corporation, was injured while installing the roof. He was paid workmen’s compensation by the roofing contractor’s insurer.

He and his wife then docketed this action against Miller, alleging that the latter provided scaffolding for Honaker’s use in the installation of the roof and that this scaffolding was so “negligently constructed and maintained” as to break, causing the injury to Honaker. The first count was to Honaker’s use and to the use of the insurer. The Honakers recovered a judgment against Miller in the Circuit Court for Montgomery County. The Court of Special Appeals reversed in W C. & A. N. Miller Dev.

Co. v. Honaker, 40 Md. App. 185 , 388 A. 2d 562 (1978), holding that Miller met the test relative to Art. 101, § 62 laid down by Judge Orth for this Court in Honaker v. W. C. & A. N. Miller Dev. Co., 278 Md. 453 , 365 A. 2d 287 (1976) (Honaker I). We held in the earlier case that the trial court had erred in entering summary judgment in favor of Miller. Accordingly, we remanded the case for trial.

Honaker regards as significant here the fact that Miller was the owner of the land on which the building was being constructed. He likewise contends that the installation of the ²²⁰ roof here was not a part of the “trade, business or occupation” of Miller as that term is used in Art. 101, § 62. II — No. 60 — Coffey A general contractor was engaged to erect a building at Anne Arundel Community College. The Derby Steel Company, Inc., made an agreement with the general contractor to furnish and erect the structural steel for the building.

Derby in turn contracted with The Prosser Company for the actual erection of the steel. Gary J. Coffey, an employee of Prosser, was injured while working on the structure. Coffey and his wife sued Derby. They alleged negligence on the part of Derby in its design and manufacture of certain of the steel and also claimed a breach of warranty by Derby in its sale of the manufactured goods.

Derby at sometime in the past has erected steel. Its president testified in a deposition that at the time relevant here it had 25 to 30 employees, none of whom were engaged in erection of steel. He said, “Companies in our business generally take the erection, too. In other words, we have always been in the erection business but we don’t actually do it, if you see what I mean.

We handle it as a sub.” Filed as an exhibit in the trial court were copies of pages in the classified section of the Baltimore City telephone directory for the years 1971 to 1976, inclusive, reflecting that Derby advertised itself as a steel fabricator and not as an erector. Derby’s president testified that the men who did the actual erection were employed by Prosser, the erection company. He further explained relative to the steel erection: Q. And these men, they are not employed by you? A. They are employed by the erection company.

Q. They are employed by Prosser? A. That’s right. They are a subcontractor of mine. My men are capable of doing it, but if I took them all out of the shop and out into the field and we spent several weeks out there putting it up, I wouldn’t be able to produce anything more, would I?

That is why I got ²²¹ out of that business, doing the actual work years ago, you see what I mean? When I was a real small company, why we lots of times did our own erection, and I don’t know but it has been an industry trade — what is the word I am thinking of — it is usual practice to buy steel from the fabricator erected. The Circuit Court for Anne Arundel County granted summary judgment in favor of Derby. The trial judge made the finding required by Maryland Rule 605 a, thus permitting an appeal prior to the end of the whole case.

On appeal the Court of Special Appeals affirmed in an unreported opinion (Coffey et al. v. The Derby Steel Company, Inc., et al., No. 1402, September Term, 1977, filed July 20,1978), relying upon its opinion in W. C. & A. N. Miller v. Honaker Dev. Co., supra. Ill The law The matter here before the Court is whether either Miller or Derby is “a principal contractor” who has “undertake[n] to execute any work which is a part of his trade, business or occupation,” a part of which he has contracted with some “other person as subcontractor” to perform. If Miller or Derby is found to come within these terms, then under §§ 62 and 15 of the Workmen’s Compensation Act the exclusive remedy of the employee in each instance would be under that act. 1 Roland v. Lloyd E. Mitchell, Inc., 221 Md. 11, 13 , 155 A. ²²² 2d 691 (1959), and cases there cited.

If either Miller or Derby is held not to be a statutory employer of its respective claimant, such claimant may maintain the tort action here for alleged negligence in accordance with § 58 of the Workmen’s Compensation Act. Roland, supra, 221 Md. at 13 , and cases there cited. At common law, a worker injured in the course of his employment could seek compensation for his injuries and other damages only through an action in tort. American Coal Co. v. Allegany Co., 128 Md. 564 , 98 A. 143 (1916), was a case arising under a statute originally enacted by Chapter 153 of the Acts of 1910 for the relief and sustenance of employees injured in coal and clay mining in Allegany and Garrett Counties and the dependents of employees injured or killed in such mining.

Judge Burke in that instance was writing for our predecessors subsequent to the passage of our Workmen’s Compensation Act concerning a case which arose prior to its enactment. The Court there said: ²²³ It was reactions such as this which led to the appointment by Governor Phillips Lee Goldsborough on May 11, 1913, of a commission “to prepare a bill on the question of Employers’ Liability and Workmen’s Compensation Laws to be submitted to the General Assembly at its session held in 1914,” and the enactment of our Workmen’s Compensation Act by Chapter 800 of the Acts of 1914. 2 See the preamble to that statute quoted in Solvuca v. Ryan & Reilly Co., 131 Md. 265, 267 , 101 A. 710 (1917). The statute as passed contained a major loophole in that, under its terms, an employer could, by entering into a subcontract for the performance of parts of an entire project, escape liability under the act. Chapter 597 of the Acts of 1916 contained a number of amendments to the existing sections of the Workmen’s Compensation Act and added a new section which became § 62.

The need for these changes no doubt had been indicated by experience under that act. The purpose of § 62, which has remained unchanged since its enactment, was discussed at length in State v. Bennett Bldg. Co., 154 Md. 159 , 140 A. 52 (1928): ²²² The application of the principles of the common law to suits for personal injuries sustained in hazardous employments resulted in many cases in injustice to the parties concerned as well as to the State. It filled the courts with litigation; it became the fruitful source of perjury; it engendered bitterness between employer and employee; it resulted in great economic waste, and it turned out an army of maimed and helpless people as dependents upon the charity of friends or the public.

The operation of these rules came to be regarded as “foolish, wasteful, inefficient, and barbarous,” and the national Government and a number of the States have now replaced them by efficient and humane laws. [Id. at 574.] ²²³ It is common practice in certain trades for one party to agree for a reward to complete a certain ²²⁴ work or undertaking, and then to enter into subcontracts with various parties providing for the execution by them respectively of specified parts of the whole work or undertaking, so that the whole or . part thereof would be done by such subcontractors and their assistants. In this manner the principal contractor would avoid in part the responsibility for accidents happening in the carrying out of the work or undertaking. If this responsibility were so shifted upon parties too weak financially to meet it, and who had not secured compensation to their employees in one of the ways required by the statute, an injured workman, proceeding at common law or under the Workmen’s Compensation Act, would obtain neither compensation nor damages. Furthermore, difficult questions arose with reference to whether the workman was the servant of the principal contractor rather than of his immediate employer, depending largely upon who had power to hire and discharge, to direct and control the workmen, and a variety of other circumstances.

In order to obviate these contingencies, and more certainly to assure the workman his contemplated compensation, the statute has imposed, under a certain state of circumstances, a liability to pay upon the principal contractor, although he might not have been held at common law the employer of the injured workman. {Id. at 161-62.] The Court spelled out the impact of the statute: The effect of this provision, when brought into operation through the designated state of circumstances, is to impose the absolute liability of an employer upon the principal contractor, when he was not in law the employer of the injured workman. The result then is that where the prescribed ²²⁵ conditions exist, the principal contractor becomes by the act the statutory employer of any workman employed in the execution of the work. [Id. at 162.] In Honaker I Judge Orth discussed for the Court a number of our prior cases including Bennett Building Co. The Court said: It is manifest on the face of § 62 of Art. 101, that in order to invoke its provisions there must be: (1) a principal contractor 4 (2) who has contracted to perform work (3) which is a part of his trade, business or occupation; and (4) who has contracted with any other party as a subcontractor for the execution by or under the subcontractor of the whole or any part of such work. [Id. 278 Md. at 459-60 .] We quote from n. 4 of that opinion: 4. “Principal contractor” is not synonymous with “general contractor.” In Kegley v. Vulcan Rail & Constr. Co., 2Ó3 Md. 476, 101 A. 2d 822 (1954), we rejected an attempt to read the words “principal contractor” in the statute as referring to the general contractor. We said, at 480, 101 A. 2d at 823 : “We find no such limitation in the language or purpose of [§ 62] and the last paragraph dealing with the interpleading of intermediate contractors when a claim is filed, is clearly predicated upon their liability for compensation.” [Id. 278 Md. at 460 .] The record before us in that case did not include “a contract on the part of Miller to build a house.” Id. at 463 .

This was the reason for the remand. However, the exhibits filed by Miller on the remand included a “custom building contract” between it and Mr. and Mrs. Dejanikus, for whom the house was being built. Statutes such as ours are discussed in IB A. Larson, ²²⁶ Workmen’s Compensation Law§ 49.12 (1978). He states that, despite variations in language, with a surprising degree of harmony, the eases applying these assorted phrases agree upon the general rule of thumb that the statute covers all situations in which work is accomplished which this employer, or employers in a similar business, would ordinarily do through employees.

Of course, when the statute says expressly (as many do) that a contractor who subcontracts any part of his own contract becomes the statutory employer of the subcontractor’s employees, the question whether the subdivided work is part of the principal contractor’s work usually answers itself. The very fact that it is a parcelled-out fraction of the main job is proof enough. In such a case, as when a building contractor subcontracts the plumbing work, it would be no defense on the part of the building contractor that it is customary to get such work done through independent contractors. [Id. at 9-12 (footnote omitted).] Larson then goes on to discuss in some detail cases involving variations of facts and statutory terminology. Id. at 9-13 — 33.

However, these cases do not involve situations where the principal contractor is a general contractor of a project such as a construction contract. As the author makes clear in the last two sentences of the passage quoted above, these cases are in a different and analytically less difficult category. Our statute here states that a contractual relationship must exist between the principal contractor and the immediate employer for there to be liability for an award for workmen's compensation. This Court has so interpreted § 62.

Warren v. Dorsey Enterprises, 234 Md. 574, 578 , 200 A. 2d 76 (1964); Roland v. Lloyd E. Mitchell, Inc., 221 Md. 11, 19 , 155 A. 2d 691 (1959); and Long Co. v. State Accident Fund, 156 Md. 639, 647 , 144 A. 775 (1929). Thus, according to Larson, the fact that the work done by an individual's employer “is a parcelled-out fraction of the main job is proof enough” that one who parcels out is also a principal contractor. ²²⁷ The bases for determining whether a firm is a statutory employer can perhaps be better understood by reference to two cases holding that firms were not statutory employers. In Ryan v. Bethlehem Sparrows Point Shipyard, 209 F. 2d 53 (4th Cir. 1953), the court held that a shipbuilder was not the statutory employer of an employee of a refrigerating company. The employee had been sent on board a ship to correct faulty