| Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions |
|
|
|
| Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions |
|
|
|
|
You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Virgil A. Adams v. State of Alaska, Workers' Compensation Benefits Guaranty Fund; Michael A. Heath d/b/a O&M Enterprise; and the Michael A. Heath Trust (7/24/2020) sp-7473
Notice: This opinion is subject to correction before publication in the P ACIFIC REPORTER.
Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email
corrections@akcourts.us.
THE SUPREME COURT OF THE STATE OF ALASKA
VIRGIL A. ADAMS, )
) Supreme Court No. S-17227
Appellant, )
) Alaska Workers' Compensation
v. ) Appeals Commission No. 15-029
)
STATE OF ALASKA, WORKERS'
) O P I N I O N
COMPENSATION BENEFITS )
GUARANTY FUND; MICHAEL A. ) No. 7473 - July 24, 2020
HEATH d/b/a/ O&M ENTERPRISE; )
and THE MICHAEL A. HEATH )
TRUST, )
)
Appellees. )
)
Appeal from the Alaska Workers' Compensation Appeals
Commission.
Appearances: Charles W. Coe, Law Office of Charles W.
Coe, Anchorage, for Appellant. Anna Jay and Siobhan
McIntyre, Assistant Attorneys General, Anchorage, and
Kevin G. Clarkson, Attorney General, Juneau, for Appellee
State of Alaska, Workers' Compensation Benefits Guaranty
Fund. No appearance by Appellees Michael A. Heath or The
Michael A. Heath Trust.
Before: Bolger, Chief Justice, Winfree, Stowers, Maassen,
and Carney, Justices.
WINFREE, Justice.
----------------------- Page 2-----------------------
I. INTRODUCTION
A carpenter fell from a roof while working and suffered a severe injury.
He filed a claim with the Alaska Workers' Compensation Board, and, because the
property owner for whom he worked had no workers' compensation insurance, the
Workers' Compensation Guaranty Fund was joined to the workers' compensation case.
The Fund disputed whether the property owner for whom the carpenter worked was an
"employer" as defined in the Alaska Workers' Compensation Act and contended the
worker's intoxication caused the accident. The Board decided the injury was
compensable based on two findings: (1) the property owner was engaged in a real-
estate-related "business or industry" and (2) the worker's alleged intoxication did not
proximately cause the accident. The Fund appealed to the Alaska Workers'
Compensation Appeals Commission; the Commission reversed because, in its view, the
Board applied an incorrect legal test in determining whether the property owner was an
employer and no evidence in the record could support a determination that the property
owner was engaged in a "business or industry" at the time of the injury. The
Commission decided the intoxication issue was not ripe for review. We reverse the
Commission's decision because the Board did not legally err and substantial evidence
supports its employment-status decision, and we remand to the Commission for
consideration of the intoxication issue.
II. FACTS AND PROCEEDINGS
A. Facts
Virgil Adams, a self-describedjourneyman carpenter, worked sporadically
from 2009 to 2011 at a house located on Snow Bear Drive in Anchorage. He suffered
-2- 7473
----------------------- Page 3-----------------------
a "T12 burst fracture with incomplete spinal cord injury" when he fell from the house's
roof in August 2011, and he now is permanently and totally disabled. 1
The property's legal owner at the time of the accident was The Michael A.
Heath Trust; Michael A. Heath is both the trustor and trustee. Heath lived in the house,
rented out part of it, and used part of it as a music or recording studio. In 2011 Heath
also owned a duplex rental property in the Bronx, New York and a property in White
Plains, New York, but there is no evidence the White Plains property generated income.
He testified that he previously had owned a trailer in Anchorage but was unsure when
he had sold it. The only income sources on Heath's 2011 income tax return, aside from
his Permanent Fund Dividend, were rental income, "trailer payments," a small amount
of interest income, and a cancelled debt. Heath said all income he had in 2011 was
included on his tax return, but he also received financial help from his family.
Prior to 2011 Heath had a business license for O&M Enterprise, but he had
no business license at the time of the accident. O&M Enterprise operated as a
partnership or a sole proprietorship and for two years listed a physical address on
Brayton Drive in Anchorage. The Brayton Drive address also was the physical address
listed for WHP Global, another business Heath operated; Heath had a trailer there, which
he identified as his then home. O&M Enterprise was licensed in different fields over
time: entertainment work - Heath explained he sometimes "thr[e]w parties and other
stuff like that" - real estate rental and leasing, and most recently "specialized design
services." Heath testified that all of his work was "part of O&M Enterprise," even if he
did not have a business license. Heath said that he had business meetings in public
places and did not have a physical office except a post office box.
1
See AS 23.30.180 (defining permanent total disability determination).
-3- 7473
----------------------- Page 4-----------------------
Heath's business activities in 2011 were a focus of this case. When asked
at hisdeposition whether his occupation in 2011 was real estate, heanswered "[p]robably
so" and "it could have been." He clarified that he was "talking about buying, selling, and
renting" real estate but that he did not "have a business license in the real estate
business." He added: "I have a business license though and it's business to business and
. . . that's the mechanism of my company. Straight business to business."
Adams and Heath had anunconventional employment relationship. Adams
testified that he originally met Heath through a former coworker who had some type of
business relationship with Heath, although it was "[n]ot legal business." In 2009 Heath
asked Adams to build a garage at the Snow Bear Drive property, and Adams agreed.
Heath designed the building. Heath wanted Adams to bid the job, but Adams insisted
on an hourly wage. At the time of the accident, Heath had been paying Adams in cash,
for the most part daily. Adams received neither a 1099 nor a W-2 tax form for the work,
so Adams (on the advice of his tax advisor) had not reported on his tax returns any
income from Heath. When asked, Adams agreed he was "working under the table" for
Heath.
Thejob sitewasas unconventional as theemployment relationship. Adams
described the job site as "a revolving frat house." Heath called the Snow Bear Drive
property in 2010 and 2011 "just a fun place." When asked what construction-related
activities he had done at the property, Heath was "not so sure what [he] did and what [he]
didn't do, just it was a project and happy times." Adams's brother, who worked at the
Snow Bear Drive property a couple of days as an electrician, testified that the job site had
a cooler of beer located next to the area where he worked. Workers drank beer, and
Heath never told them not to.
-4- 7473
----------------------- Page 5-----------------------
Testimony about events the day of the accident conflicted, but because the
2
Board found Adams credible and Heath not credible, we rely on Adams's version.
Heath picked up Adams and his brother for work on the house. They stopped on the way
to the job, and Adams bought beer. It is unclear when work began; Adams testified that
they treated it like morning but that it was afternoon.
Adams indicated he and at least two others were working on the house that
day. Adams had been trying to locate the source of a leak in the roof and had removed
a metal covering near the chimney; Heath instructed Adams to replace the metal
covering. The house had multiple levels. To reach the chimney's level, a ladder had
been placed on a lower-level roof and shored up with cribbing consisting of scrap wood
from the job site. Adams explained that "cribbing" is "support under one of the [ladder]
legs," used to provide a level platform. Adams had put the cribbing in place a couple of
weeks earlier and had climbed the ladder "many times" before without incident. He did
not check whether the cribbing remained solidly in place when he went up the ladder the
day of the accident.
Before ascending to the roof, Adams had consumed two beers and was on
his third, but he later testified he was not intoxicated. Adams testified that Heath also
had given Adams cocaine, which he snorted shortly before climbing the ladder. As
Adams was standing on the ladder and working on the roof, the cribbing gave way.
Adams fell about 30 or 40 feet, and upon impact he noticed a loss of sensation in his
legs. One of Heath's acquaintances summoned help, and emergency services arrived
about 15 minutes later.
2 See AS 23.30.122 ("The board has the sole power to determine the
credibility of a witness. A finding by the board concerning the weight to be accorded a
witness's testimony . . . is conclusive even if the evidence is conflicting or susceptible
to contrary conclusions.").
-5- 7473
----------------------- Page 6-----------------------
A paramedic examined Adams, noted in his report that Adams smelled of
alcohol, and asked about his drinking because the paramedic planned to administer
fentanyl, which interacts adversely with alcohol. Adams indicated he had consumed
three beers. The paramedic did not think Adams was sufficiently intoxicated to prevent
administering fentanyl; the paramedic first administered a small dose, then a larger one
after observing no adverse effects. The paramedic described Adams as "pretty critical"
and "showing signs of shock." Adams was transported to the hospital, where he had
emergency surgery for a "severe T12 burst fracture" and repair of a "dural tear with
laceration of the cord." His drug screen was positive for cocaine. Adams spent time in
the hospital and has ongoing medical needs.
B. Proceedings
About ten days after the accident, Adams filed an injury report with the
Board, naming Heath as his employer and saying Heath was uninsured. In September
Adams filed a written workers' compensation claim naming Heath and O&M Enterprise
as his employer and sought a number of benefits. In an amended claim, Adams asked
that the Fund be joined because his employer was uninsured. The Fund controverted
benefits based on intoxication. Over a year after the first written claim was filed, Heath
filed a "Notice of Compensation Fr[au]d," alleging that Adams had never worked for
O&M Enterprise or Heath's Trust. Heath also raised intoxication as a defense. Adams
later petitioned the Board to add the Trust as a possible employer.
The Fund asserted multiple defenses to the claim and petitioned the Board
to bifurcate the proceedings. The Fund contended that: (1) Heath was not an
"employer" as that term is defined in the Act; (2) Adams was an independent contractor
and not an employee; and (3) Adams's claim should be barred because his intoxication
-6- 7473
----------------------- Page 7-----------------------
3
proximately caused the injury. The Fund proposed a series of hearings on its defenses,
with a final hearing on the merits of Adams's claims if the Board rejected all of the
defenses. Adams asked that the petition be denied. The Board granted the petition in
part, electing to hold one hearing on all the defenses and, if Adams prevailed at that
hearing, to then hold a separate hearing to resolve disputes about Adams's entitlement
to specific benefits.
The hearing on the Fund's defenses was held in July 2015 and featured
testimony from Adams, Heath, a doctor certified to review drug and alcohol tests, the
responding paramedic, and a nearby neighbor of Heath's who had helped construct the
driveway at Snow Bear Drive. Heath was not represented by counsel at the hearing,
although he previously had been.
Adams's hearing testimony was generally consistent with his earlier
deposition testimony. He testified to having worked sporadically at the Snow Bear Drive
property from 2009, when Heath first hired him, until the 2011 accident. Adams said
Heath had made a garage into a separate apartment and that two couples and a child
occupied the apartment while Adams was working there in 2011. Adams testified that
in the house there was a recording or music studio that he had seen Heath use, and a
photo of the studio was admitted at the hearing. Adams stated Heath had "show[n] [him]
a recording that [Heath] . . . recorded there in his upstairs." From Adams's point of
view, Heath was running some type of business fromhis house. When Adams was asked
whether he had seen people come to the house for business, he implied that at least some
of Heath's business activities were illegal.
3 AlaskaStatute23.30.235providesinpertinentpartthat compensation "may
not be allowed for an injury . . . proximately caused by intoxication of the injured
employee or proximately caused by the employee being under the influence of drugs
unless the drugs were taken as prescribed by the employee's physician."
-7- 7473
----------------------- Page 8-----------------------
Adams testified that a number of people did construction work on the Snow
Bear Drive property, most of them Heath's friends or acquaintances. Adams stated that
he saw Heath pay other workers and that "sometimes money was changing hands that
didn't have anything to do with the job." Heath at times worked on the house as well.
Heath's neighbor testified that he lived nearby and had provided "dirt
work" services for the Snow Bear Drive property's driveway. The neighbor met Adams
while working for Heath. The neighbor had observed Adams and others doing
construction work on the property and understood that Heath rented out part of the
house. The neighbor did not know whether other workers were paid, but Heath paid the
invoice for the driveway work.
Heath testified at the hearing, but, like his earlier deposition testimony, his
testimony was evasive and confusing. Heath testified about his businesses, both O&M
Enterprise and WHP Global. According to Heath, WHP - which stands for Warehouse
Production - "was supposed to be the studio that [he] was promoting," and it earned
income only when it did "parties and stuff like that." Heath asserted that he did no
business with O&M Enterprise in 2011 and that it was not a construction or roofing
company. He said he rented an apartment in the Snow Bear Drive property to a friend.
Heath indicated that in 2011 he owned the Bronx property, that he no longer did, and that
he may have owned a trailer in Anchorage. He testified that his mother managed the
Bronx property.
Heath denied knowing why Adams was at his house on the day of the
accident. Heath's position was that Adams was a volunteer, as were all the people
working on the house. He said his friends often came over, staying with him and helping
around the house; in his words: "[T]hey call it chillin'." Heath said he had only once
hired someone to work on the roof leak, saying "they did the magnificent job" but there
still was a leak. Heath denied ever talking to Adams about the leak. As to the studio
-8- 7473
----------------------- Page 9-----------------------
photo Adams had introduced, Heath indicated that only he and no one else used the
equipment and that he had mixed music there; he said he had not done any shows in
2011.
Heath was cross-examined about inconsistencies between his deposition
and hearing testimony. He said at one point that his "deposition is whatever [he] meant
and that's it." When confronted with his use of a Brayton Drive address on an expired
business license and his ownership of and residence at the trailer at that address, Heath
nonetheless refused to concede that he had operated O&M Enterprise from his home.
When confronted with an expired business license that showed O&M Enterprise was in
the real estate business, Heath said: "I can't answer to the question except for what's on
record . . . ."
In response to questions from a Board member, Heath denied paying
Adams or other workers in any way, saying he had not given them money, drugs, or
alcohol for work on the Snow Bear Drive property. After denying he had paid in cash
or in kind for labor, Heath commented: "They think the girls like it." Heath denied ever
having given any friends instructions about helping with construction activities;
according to him, they would "just basically . . . figure it out." When the Board asked
him about O&M Enterprise, he said that it was "always there" even though he had not
had a business license for it since 2007. When asked if he would "operate that business
and generate income without a business license," he responded: "Not necessarily . . . ."
The Board issued an interlocutory decision determining that at the time of
the accident Adams was Heath's employee, not an independent contractor, and that
Adams's alleged intoxication was not a proximate cause. The Board did not explicitly
address whether Heath was an "employer" as defined in the Act. The Fund moved for
reconsideration or modification, contending that the Board had not addressed whether
Heath or O&M Enterprise met the Act's definition of "employer." The Board modified
-9- 7473
----------------------- Page 10-----------------------
in part its decision, deciding that when Adams was injured Heath was doing business as
O&M Enterprise and his "business or industry" was "the buying, managing, and selling
of real estate."
The Fund sought Commission review shortly after the Board's
reconsideration decision. The Fund filed both a petition for review and an appeal in the
Commission, contending (as it had in the reconsideration petition) that the Board's
decision was a final decision. The Commission denied the petition for review and stayed
the appeal pending a final resolution.
In March 2017 the Board held a hearing on Adams's claim for specific
benefits and issued its final decision in June. It found Adams entitled to a number of
benefits, ordered Heath (or the Fund) to pay them, and awarded Adams attorney's fees
and costs.
The Fund revived its appeal, listing two issues for review: the Board erred
by deciding that (1) Heath was "engaged in the 'business and industry' of buying and
selling real estate, [and] was an employer under the Act" when Adams was injured and
(2) "Adams's injuries were not proximately caused by intoxication." The Fund made
both factual and legal arguments before the Commission. As a legal matter, the Fund
urged the Commission to adopt a rule other states use, that what the Fund called " de
minimis" rental activity is not a business or industry such that someone engaged in this
type of activity is an employer for workers' compensation purposes. The Fund cited our
4 but it nonetheless asked the Commission to
precedents, including Kroll v. Reeser ,
construe the Act consistently with "longstanding" cases from other states. The Fund
argued "no evidence" showed that Heath "engaged in anything beyond de minimis rental
4
655 P.2d 753, 754, 756-57 (Alaska 1982) (remanding for Board to evaluate
whether four-plex owner who planned to rent out three units was "employer" under Act).
-10- 7473
----------------------- Page 11-----------------------
activities" in 2011. It sought a legal ruling from the Commission that Heath was not an
employer as defined in the Act.
The Fund maintained that the record as a whole did not support the Board's
decision because "Heath's real estate activities [were] not unlike those of a typical
homeowner." It pointed to his testimony that family provided him financial help and
said the Bronx rental should not be included in the analysis. The Fund further argued
that O&M Enterprise "was not a going business concern in 2011," emphasizing Heath's
testimony that he had no real estate license. It asserted that the only "objective evidence"
of Heath engaging in real estate was his "2011 tax returns and one expired business
license from almost [20] years ago."
The Commission reversed the Board's first decision because, in the
Commission's view, by focusing on the test distinguishing an employee from an
independent contractor the Board applied an incorrect legal test. Based on the
Commission's reversal of the first decision, it vacated the Board's reconsideration
5 Looking at the distinction we made in Kroll between consumptive and
decision.
productive roles that homeowners who also rent property can play,6
the Commission
5 Adams contends the Commission erred in focusing on the initial decision
rather than the reconsideration decision. Although the Commission's decision to reverse
the initial decision without directly reviewing the Board's legal analysis on
reconsideration is puzzling, we conclude that any error is harmless. Despite the
Commission's statement that the Board "miss[ed] the significant issue of whether . . .
Heath was an employer or someone merely repairing his home," the Commission
discussed the Board's reconsideration decision finding that Heath did business as O&M
Enterprise and "was in the real estate business." The Fund's notice of appeal to the
Commission from the reconsideration decision cited this exact finding.
6 See 655 P.2d at 757 (inquiring whether construction activity was
homeowner "cost-cutting shortcut" in consumptive role or part of homeowner "profit-
making enterprise" in productive role).
-11- 7473
----------------------- Page 12-----------------------
decided that "substantial evidence in the record as a whole supports the conclusion the
work on . . . Heath's home was consumptive rather than in furtherance of any
profit[-]making activity." The Commission noted that Heath's 2011 tax return "shows
that his only source of income" was rental income, reporting "no other income, whether
personal or business." It said there was "no evidence, other than the rental income, that
. . . Heath was in the real estate business" and pointed out that no evidence suggested that
"Heath ever had a real estate license."
The Commission decided that no evidence in the record supported the
Board's reconsideration finding that Heath was doing business as O&M Enterprise and
was in the real estate business, observing that there was "no evidence" Heath "complied
with Alaska law regarding real estate licenses." The Commission said there was "no
evidence of any profit-making enterprise undertaken by . . . Heath through which the cost
of workers' compensation insurance could be passed to an end consumer," concluding
from this that "Heath was not an employer as defined by the Act." "The Commission
decline[d] to address the issue of . . . [Adams's] intoxication" because its conclusion that
Heath was not an "employer" made the issue "moot." Adams appeals.
III. STANDARD OF REVIEW
In an appeal from the Commission, we review the Commission's decision
7 "We apply our independent judgment to questions of law that do
and not the Board's.
not involve agency expertise, including issues of statutory interpretation."8 We
independently evaluate the Commission's legal conclusion about substantial evidence
7 Alaska Airlines, Inc. v. Darrow , 403 P.3d 1116, 1121 (Alaska 2017).
8
Vandenberg v. State, Dep't of Health & Soc. Servs., 371 P.3d 602, 606
(Alaska 2016).
-12- 7473
----------------------- Page 13-----------------------
to support the Board's decision, which "necessarily requires us to independently review
9
the record and the Board's factual findings."
IV. DISCUSSION
A. There Is No De Minimis Rule Distinguishing, As A Matter Of Law,
Consumptive From Productive Roles In Real Estate Rentals.
The Act defines "employer" broadly: "a person employing one or more
persons in connection with a business or industry coming within the scope of this chapter
10
and carried on in this state." But we observed in Gaede v. Saunders that the definition
"excludes private common law employees who are employed other than 'in connection
11
with a business or industry.' " The questions in this case are (1) whether the activity
Adams was performing when he was injured was in connection with a "business or
industry" and (2) whether that determination is one of law or of fact.
Adams asserts the Commission erred when it decided that "substantial
evidence in the record as a whole support[ed] the conclusion the work on . . . Heath's
home was consumptive." Adams contends the Commission inappropriately reevaluated
the evidence to reach this conclusion because the Board found otherwise and substantial
evidence in the record supports the Board's decision. The Fund responds that the
Commission simply "reach[ed] its own legal conclusion" about the evidence. The Fund
asks us to hold that as a matter of law some de minimis level of rental activity exempts
a property owner from being an "employer" as defined in the Act.
TheFunddiscussesourprecedentsdistinguishingbetweenconsumptiveand
productive uses of labor, the distinction relied on in the Commission's decision. The
9 Smith v. CSK Auto, Inc. , 204 P.3d 1001, 1007 (Alaska 2009).
10 AS 23.30.395(20).
11 53 P.3d 1126, 1127 (Alaska 2002) (quoting AS 23.30.395).
-13- 7473
----------------------- Page 14-----------------------
Fund contends that in Kroll we recognized "that owning and renting a handful of
residential units does not necessarily amount to a productive business that can pass the
12 It asks us to interpret Kroll
cost of workers' compensation insurance to consumers."
13 excluding certain levels of rental activity as a
consistently with other states' cases
matter of law from workers' compensation coverage.
In our view the issues presented are no different than those in Kroll; we
therefore provide a detailed summary of that case. Kroll, "a serviceman with a cable TV
company," wanted to build a four-plex with three rental units and one unit to house his
family.14 Kroll asked a contractor licensed in another state who was in Alaska on other
business to work on the building.15 The contractor brought his two sons to help, and
Kroll hired a few additional workers.16 One son was injured and sought workers'
17 The Board decided Kroll was the injured worker's
compensation benefits from Kroll.
employer, in part based on the contract between Kroll and the out-of-state contractor.18
We reversed, holding that the injured worker was an employee but remanding for the
Board to decide who had been the employer.19
12 See 655 P.2d 753 (Alaska 1982).
13 E.g., Setter v. Wilson , 37 P.2d 50, 52 (Kan. 1934).
14
Kroll, 655 P.2d at 754.
15 Id.
16 Id. at 754-55.
17
Id. at 755.
18
Id.
19
Id. at 755, 757.
-14- 7473
----------------------- Page 15-----------------------
We decided the Board misconstrued the statutory phrase "in connection
with a business or industry coming within the scope of this chapter" in the definition of
20
"employer." The Board interpreted it as "all business or industry is to be considered
21
We disagreed with this broad interpretation, explaining:
as covered by the Act."
[T]hepolicy question is whetherKroll'sconstruction activity,
either by itself or as an element of his rental activities, was a
profit-making enterprise which ought to bear the costs of
injuries incurred in the business, or was the construction
activity simply a cost-cutting shortcut in what was basically
[22]
a consumptive and not a productive rol[e] played by Kroll.
We required the Board to consider on remand "the threshold issue of whether Kroll's
construction activity was sufficient to establish his status as an employer."23
In Gaede we relied on Kroll to affirm a Board decision that homeowners
who hired an individual to work on their residence were not employers under the Act.24
In Gaede "there was no 'business or industry' aspect to the . . . building project" because
"the house was intended to be used only as [a] family residence."25 Because the project
lacked a connection to a "business or industry," the owners were not employers; the
worker thus was not entitled to workers' compensation.26
20 Id. at 757.
21
Id. (emphasis in original).
22
Id. (emphases in original) (footnote omitted).
23 Id.
24
53 P.3d 1126, 1127 (Alaska 2002).
25 Id.
26 Id.
-15- 7473
----------------------- Page 16-----------------------
In this case the Commission relied on Kroll 's distinction between
productive and consumptive roles to determine that Heath was not an employer as a
matter of law. The Commission did not explain how Heath's rental activities differed
so significantly from those described in Kroll as to remove them from the Act's
27 the same number
coverage. The homeowner in Kroll planned to rent out three units,
of rental units that Heath owned and rented out in 2011. And the homeowner in Kroll,
in contrast to Heath, had employment and a source of income unrelated to his
construction and rental activities.28 Our remand in Kroll for the Board to evaluate the
evidence shows that we did not consider renting three units to be so minimal as to
exclude an employer from workers' compensation coverage as a matter of law.29
The Fund cites cases from several states holding that some small rental
endeavors are exempt from workers' compensation as a matter of law. While some
states have such a legal rule,30 others, like Alaska, consider the question to be one of
31 As the Utah Supreme Court said: "The point at which the ownership of leased
fact.
27 655 P.2d at 754.
28 Id.
29 See id. at 757.
30 E.g., Stewart v. Workers' Comp. Appeals Bd., 218 Cal. Rptr. 245, 247-48
(1985); Setter v. Wilson, 37 P.2d 50, 52 (Kan. 1934); Kaplan v. Gaskill, 187 N.W. 943,
947 (Neb. 1922).
31 See Trudell v. Hibbert, 272 P.3d 331, 342 (Alaska 2012) (noting distinction
between productive and consumptive uses based on "ability to pass on to consumers the
cost of workers' compensation insurance" as test for differentiating business from
homeowner but disagreeing with superior court's "application of the test to the facts").
-16- 7473
----------------------- Page 17-----------------------
32
or rented property becomes a business . . . is usually a question of fact . . . ." The
MontanaSupremeCourt likewiseconsiders "thefacts andcircumstancessurrounding the
33 describing the line "between what is
alleged employment" when evaluating coverage,
and what is not employment" under its workers' compensation statute as "vague and
shadowy."34
We adhere to our precedent and decline to adopt a judicially created rule
designating a specific number of rental units or a certain level of management as per se
consumptive activity. The line the Fund asks us to draw is better suited to the legislature,
which can adopt an explicit rule if it believes one is needed.35 Because Heath's status as
an employer is a question of fact, not one of law, we next consider the Commission's
conclusions about substantial evidence in the record.
B. Substantial Evidence In The Record Supports The Board's Decision.
The Commission concluded that substantial evidence in the record did not
support the Board's decision; the Commission decided instead that substantial evidence
supported only the conclusion that the work at the Snow Bear Drive property was
consumptive. Adams argues that the Commission did not properly conduct substantial
evidence review, disregarded the Board's credibility determinations, and used its own
interpretation of the evidence to arrive at its legal conclusions. Adams maintains that
32 Sorenson v. Indus. Comm'n, 598 P.2d 362, 364 (Utah 1979).
33 Weidow v. Uninsured Emp'rs' Fund, 246 P.3d 704, 710 (Mont. 2010).
34 Nelson v. Stukey, 300 P. 287, 288 (Mont. 1931), quoted in Colmore v.
Uninsured Emp'rs' Fund, 121 P.3d 1007, 1011 (Mont. 2005), overruled in part on other
grounds by Davis v. State, 187 P.3d 654 (Mont. 2008).
35 Cf. Ranney v. Whitewater Eng'g, 122 P.3d 214, 221 (Alaska 2005)
(observing line drawing that "involves balancing the benefits of greater precision against
its costs . . . is within the legislature's competence").
-17- 7473
----------------------- Page 18-----------------------
substantial evidencein therecord supported theBoard's findings thatHeathwas engaged
in the real estate business in 2011 and that the work was done to further a business
interest.
In contrast the Fund asserts: "[E]vidence demonstrates that . . . Heath was
an unsophisticated homeowner who earned a modest income through three rental
units . . . ." The Fund disagrees that the Commission engaged in fact finding and
contends the Commission simply reached a different legal conclusion than the Board
without disturbing any factual findings.
"Substantial evidenceis 'suchrelevant evidenceas areasonablemindmight
36 When applying the substantial evidence
accept as adequate to support a conclusion.' "
standard of review, "we may not reweigh the evidence or choose between competing
37 Considering these standards, we hold that substantial evidence
reasonable inferences."
in the record supports the Board's decision that Heath was an employer under the Act
and the Commission erred by not so concluding.
The Board made a number of relevant findings, noting first Heath's
deposition testimony that his business was "buying, selling, and renting real estate." The
Board also found that an expired business license for O&M Enterprise listed real estate
as its business, and Heath testified that "everything he does, he does as O&M." The
Board found that in 2011 Heath owned not only the Snow Bear Drive property but also
a duplex in New York, "from which he collected rent." The Board included in its factual
summary Heath's statement that his occupation in 2011 "probably" was "real estate."
36 DeYonge v. NANA/Marriott , 1 P.3d 90, 94 (Alaska 2000) (quoting Grove
v. Alaska Constr. & Erectors , 948 P.2d 454, 456 (Alaska 1997)).
37 Bailey v. Litwin Corp., 713 P.2d 249, 252 (Alaska 1986). The Commission
follows this rule as well. See, e.g., Municipality of Anchorage v. Mahe, AWCAC Dec.
No.129at6(Mar.16,2010),http://labor.state.ak.us/WCcomm/memos-finals/D_129.pdf.
-18- 7473
----------------------- Page 19-----------------------
Based on those facts, the Board concluded that Heath doing business as O&MEnterprise
was engaged in the "business or industry" of "buying, managing, and selling real estate."
Substantial evidence in the record supports the Board's findings. Heath's
testimony was, as the Board found, "evasive, contradictory, and equivocal." But, like
38 of Heath's testimony.39
a jury in a civil trial, the Board could "believe all, part, or none"
The Board certainly was entitled to rely on what could be characterized as an admission
against interest:40 Heath's testimony that his occupation in 2011 was "buying, selling,
and renting" real estate. Heath's testimony, coupled with his income tax return showing
income only from real estate rentals and the sale of his trailer, is evidence supporting the
Board's conclusions.
We reject the Fund's argument that having little income removes Heath's
business from the Act's "business or industry" standard. A business is not exempt from
providing workers' compensation coverage simply because it has little income.41 Nor
is Heath's lack of a real estate license material to his participation in that business, as the
Commission found. A real estate license is not required to rent or sell one's own
38 See Alaska Civil Pattern Jury Instruction 02.08 ("You may believe all, part,
or none of the testimony of any witness.").
39 See AS 23.30.122 (giving Board "sole power to determine" witness
credibility and making Board's findings "subject to the same standard of review as a
jury's finding in a civil action").
40 Cf. Alaska R. Evid. 804(b)(3) (excluding from hearsay rule statements
against interest).
41 See AS 23.30.075(a) ("An employer . . . shall . . . insure and keep insured
for the employer's liability under this chapter . . . .").
-19- 7473
----------------------- Page 20-----------------------
42
property, as Heath did. And Heath's failure to renew the O&M Enterprise business
license is not dispositive evidence that he did not conduct business as that entity as the
Commission surmised. Heath's statement that "[e]verything [he did] is part of O&M
Enterprise" supports the Board's decision that he in fact continued doing business as
O&M Enterprise, even if he did not comply with the legal business operating
requirements.
The Commission stated there was "no evidence" that the work on the Snow
Bear Drive property "benefit[t]ed any business" Heath pursued. But repairing a rental
apartment's leaky roofpresumablybenefits theproperty owner's rental business because
43 The
a landlord has a duty to "keep the premises in a fit and habitable condition."
Commission commented on the "limited" evidence that Heath undertook any business
from his home, but it did not discuss the photograph of Heath's studio or Adams's
credible testimony, corroborated to an extent by Heath, about Heath using the studio for
his entertainment business. Additionally, Heath's prior use of his home address on
business licenses for O&M Enterprise permits the inference that he conducted business
from his home, even if he testified that his business's only physical office was his post
office box.
The Commission cited Heath's lack of any source of income other than the
three rental units he owned to support its decision that work on the Snow Bear Drive
home was consumptive. The Commission failed to explain why a tax return reporting
income almost solely from rental properties could not be interpreted as evidence that
Heath was involved in the real estate business in 2011, as he testified at his deposition.
Heath said his tax return reported all of his 2011 income, and it showed no other source
42 AS 08.88.900(a)(1).
43 AS 34.03.100(a)(1).
-20- 7473
----------------------- Page 21-----------------------
of income. Adams, whom the Board found credible, testified the work he was doing was
intended to fix a leak affecting the part of Heath's home that he was renting out. Heath's
lack of income from any source other than his rental properties together with Adams's
testimony support the Board's conclusion that Heath's rental business benefitted from
the work.
We also note that Heath listed the Snow Bear Drive property as a multi-
family residence on Schedule E of his 2011 income tax return. As the Montana Supreme
Court said about a similar issue: "Listing the property on Schedule E represents to the
Internal Revenue Service that the taxpayer uses the property as business rental
44 This evidence supports the Board's determination that Heath was engaged
property."
in the "business or industry" of "buying, managing, and selling real estate" and the
conclusion that the roof repair was done as part of that business.
TheCommission erroneously concluded that theevidencebeforetheBoard
could support only a finding that Heath's employment of Adams was consumptive rather
than productive. Substantial evidence supports the Board's decision that Heath was an
employer engaged in the "business or industry" of "buying, managing, and selling real
estate" and that the work Adams did was part of that business.
C. On Remand The Commission Must Consider The Intoxication Issue.
The Commission did not make a decision about the intoxication issue,
saying that the issue was "moot." The Fund's brief before us summarized the issue but
did not ask us to review or decide it. Adams contends the issue should be remanded to
the Commission. Because we reverse the Commission's decision that Heath was not an
44
Weidow v. Uninsured Emp'rs' Fund, 246 P.3d 704, 711 (Mont. 2010).
-21- 7473
----------------------- Page 22-----------------------
employer under the Act, the Fund's appeal of the intoxication issue is ripe for review.
On remand the Commission must consider the Fund's appeal of that issue. 45
V. CONCLUSION
We REVERSE the Commission's determination that Heath was not an
employer, and we REMAND to the Commission for consideration of the intoxication
issue. We do not retain jurisdiction.
45 Cf.Jordanv. State,420P.3d 1143,1158-59 (Alaska2018)(remanding case
for further findings when constitutional protection was related to reasonable expectation
of privacy and trial court had made no relevant findings).
-22- 7473
 |
| Case Law Statutes, Regs & Rules Constitutions Miscellaneous |
|
