ERICKSON v. GOODELL OIL CO. INC., 384 Mich. 207 (1970)

180 N.W.2d 798

No. 6 June Term 1970, Docket No. 52,333.Supreme Court of Michigan.
Decided November 12, 1970.

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Appeal from Court of Appeals, Division 3, T.G. Kavanagh, P.J., and McGregor and Elliott, JJ., reversing and remanding Houghton, Stephen D. Condon, J. Submitted June 3, 1970. (No. 6 June Term 1970, Docket No. 52,333.) Decided November 12, 1970.

15 Mich. App. 398 reversed.

Complaint by John Erickson and Shirley Erickson against Goodell Oil Company, Inc. for injuries suffered by plaintiff John Erickson on defendant’s property. Accelerated judgment for defendant. Plaintiffs appealed to the Court of Appeals. Reversed and remanded. Defendant appeals. Reversed and remanded.

Wisti, Jaaskelainen Bourland, for plaintiffs.

Messner, LaBine Vairo (by David R. Mechlin), for defendant.

T.E. BRENNAN, C.J.

THE CASE

Plaintiff was hired during the year 1963 by Robert Goodell of the Goodell Oil Company to work with his son, Stuart Goodell, at a retail gasoline station known as Bridge Service. Defendant Goodell Oil Company owned the building including fixtures and equipment and also the realty of the Bridge Station through an undisclosed arrangement with Stuart Goodell, who was operating the station under an assumed, but unfiled, name. In January, 1964, defendant resumed operation of the gas station to the exclusion of Stuart Goodell, but continued using

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the name Bridge Service Station. Plaintiff was injured on the premises on or about October 20, 1964, at which time both Goodell Oil Company and plaintiff were subject to the Michigan Workmen’s Compensation Act. Defendant voluntarily paid compensation under the act until plaintiff returned to work approximately seven months later.

Plaintiff brought this suit alleging negligence by defendant as a third-party tortfeasor in maintaining the premises. The complaint specifically alleged that plaintiff was the employee of Bridge Service at the time of his injury. Defendant filed a motion for accelerated judgment[1] contending that defendant’s “absorption” of the Bridge Service Station resulted in plaintiff becoming defendant’s employee, and that the negligence action would thus be barred since an employee’s exclusive remedy for injuries suffered during the course of his employment would be limited to workmen’s compensation benefits.[2] Plaintiff filed a timely jury demand.

At the hearing on the motion for accelerated judgment, plaintiff contended that he had no knowledge of the “absorption” and thus could not be considered an employee of defendant in the absence of some showing of assent to the new relationship, either expressly or by implication. Based upon the evidence adduced at the hearing, the trial judge granted defendant’s motion for accelerated judgment, finding as a matter of law, that an implied contract of hire existed. Confining the issue solely to the question of whether there was any evidence presented at the hearing on the motion for accelerated judgment which would establish that plaintiff knew that defendant had become his true employer, the Court of Appeals remanded for a trial on the

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merits, finding that, as a matter of law, no implied contract of hire existed between the parties to the lawsuit.[3]

DISCUSSION

The parameters of decision may be readily stated. Before benefits or rights under the Workmen’s Compensation Act can be claimed, an employer-employee relationship, established by a contract of employment must be shown to exist. Boshaw v. J.J. Newberry Co. (1932), 259 Mich. 333; Grand Rapids v. Crocker
(1922), 219 Mich. 178; Vaivida v. Grand Rapids (1933), 264 Mich. 204. The act is predicated on the existence of such a relationship. Chaffee v. Stenger (1960), 361 Mich. 57. Acceptance of voluntary payments of benefits made by a putative employer after application for an award of compensation does not foreclose a subsequent legal action for common-law negligence if it is later discovered that no employer-employee relationship in fact existed at the time of plaintiff’s injury. Holcomb v Bullock (1958), 353 Mich. 514. Nor can the mere acceptance of such benefits constitute proof of the existence of the requisite relationship. Chaffee v. Stenger, supra.

The question of whether an employer-employee relationship existed between plaintiff and defendant at the time of the injury was a disputed issue of fact at the hearing. Both lower courts recognized the pivotal question to be the existence of an implied contract of hire between the parties.[4] A contract implied in fact arises under circumstances which, according to the ordinary course of dealing

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and common understanding, of men, show a mutual intention to contract. In re Munro’s Estate (1941), 296 Mich. 80. A contract is implied in fact where the intention as to it is not manifested by direct or explicit words between the parties, but is to be gathered by implication or proper deduction from the conduct of the parties, language used or things done by them, or other pertinent circumstances attending the transaction. Miller v Stevens (1923), 224 Mich. 626. The existence of an implied contract, of necessity turning on inferences drawn from given circumstances, usually involves a question of fact, unless no essential facts are in dispute. See 100 CJS, Workmen’s Compensation, § 611. The question of an employee-employer relationship presents an issue of fact. In Chaffee v. Stenger, supra, p 60, Mr. Justice SOURIS, speaking for a unanimous Court, stated:

“Indeed, the relationship between the parties was a disputed issue of fact at the hearing on the motion to dismiss, made so by the declaration’s express averment that plaintiff was not defendant’s employee and by the answer’s denial thereof and averment that workmen’s compensation benefits had been accepted by plaintiff * * *.”

In Chaffee, as in the instant case, the trial court decided the issue of the employment relationship on defendant’s motion before trial. This procedure, as contrasted with that employed i Holcomb v. Bullock, supra, was deemed improper:

“The important point is that in Holcomb’s Case, there was a judicial determination, at the trial, of the relationship between the parties. There has been no such determination in the case at bar. It cannot be said yet, of course, that a bilateral or a unilateral mistake has been made, nor can it be said until plaintiff’s status is determined. But, plaintiff

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is entitled to such a determination, and he was deprived thereof by the trial court’s dismissal on motion.” (Emphasis added.)Chaffee, supra, p 60.

This conclusion was explicitly based on a court rule:

“Section 3 of Court Rule No 18 (1945) provides that the trial court shall deny without prejudice a motion to dismiss `if disputed questions of fact are involved’ in an action at law if the opposite party demands that the issue be submitted to a jury. As noted, a disputed question of fact did exist * * *.” Chaffee, supra, pp 60, 61.

Former Court Rule 18 was the predecessor of the accelerated judgment rule, GCR 1963, 116, which likewise guarantees a jury trial of disputed factual issues upon timely demand.[5]

DECISION

Since the existence of an employer-employee relationship grounded in an implied contract for hire presented a disputed question of fact raised by the pleadings, the trial court should have denied defendant’s motion for accelerated judgment in view of plaintiff’s timely demand for jury trial. The case is remanded for a determination, at the trial, of the status of plaintiff at the time of the accident. If plaintiff is not found to be an employee of defendant at the time of injury and plaintiff is awarded damages in his action against defendant as third-party

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tortfeasor, it would follow as a necessary corollary to the subrogated right conferred on an employer by the Workmen’s Compensation Act,[6] allowing reimbursement of the subrogee only to the extent of the amount paid in discharge of the obligation assumed by the subrogee, that defendant would be entitled to a setoff against any recovery of an amount equal to the total amount of compensation previously paid.

The decision of the Court of Appeals is reversed and the case is remanded to the trial court for further proceedings in accordance with this opinion.

DETHMERS, BLACK, T.M. KAVANAGH, and ADAMS, JJ., concurred with T.E. BRENNAN, C.J.

KELLY and T.G. KAVANAGH, JJ., did not sit in this case.