Opinion
W.C. No. 4-264-006
June 5, 1997
ORDER
The claimant seeks review of a final order of Administrative Law Judge Friend (ALJ) which held DBF, LLC (DBF) liable for benefits, dismissed the claims against William Ramaglia (Ramaglia) and Donald Edick (Edick), denied the claim for temporary total disability benefits, and did not award additional compensation based on DBF's non-insured status. We affirm the order in part, set it aside in part, and remand for further proceedings.
The ALJ found that DBF was operating a restaurant known as Pepe O'Toole's. Ramaglia was a shareholder in DBF, and managed Pepe O'Toole's from October 1995 to May 1996, when it went out of business.
The claimant sustained an injury on July 24, 1995, while employed at Pepe O'Toole's. At the time of this injury, DBF did not have workers' compensation insurance.
At the hearing, the claimant presented evidence in an attempt to "pierce the corporate veil" and impose personal liability on Ramaglia and another shareholder, Edick. In support of his position, the claimant showed that some of Pepe O'Toole's employees were paid in
cash, and that Pepe O'Toole's sometimes traded supplies with Rafferty's, another restaurant owned by Ramaglia and Edick.
There was also evidence that in March 1996 Ramaglia withdrew $8,000 from Pepe O'Toole's bank account because he believed the Internal Revenue Service was going to freeze the account. He later redeposited the money. Further, in May 1995 Ramaglia transferred "inventory and equipment" from Pepe O'Toole's to Rafferty's after Pepe O'Toole's ceased operation.
The ALJ refused to "pierce the corporate veil" and impose personal liability on Ramaglia and Edick. The ALJ concluded that DBF was not used as a "mere instrumentality for the transactions of the officers's own affairs," and that Ramaglia and Edick were not attempting to use the corporate form to evade important legislative policy or perpetrate a fraud on the claimant. In support, the ALJ found that most of the business "irregularities" cited by the claimant occurred after the date of the injury, and do not "go to whether or not the corporation was actually a corporation at the time of the accident." Consequently, the ALJ found the irregularities "irrelevant and not persuasive."
The ALJ also declined to impose personal liability on Ramaglia under a theory that he "preferentially transferred" Pepe O'Toole's inventory and equipment to Rafferty's. In support of this determination, the ALJ stated that the claimant failed to establish that Ramaglia or Edick "personally received a preferential transfer" from DBF.
The ALJ denied a penalty based on DBF's alleged failure to admit or deny liability in a timely fashion. The ALJ found there was no proof that the claimant was disabled for more than three shifts, or that the injury resulted in permanent impairment or death.
Finally, the ALJ denied the claim for temporary total disability benefits. In support of this conclusion, the ALJ found that the claimant failed to present evidence that he was medically restricted from work following the injury.
The ALJ made no statement with respect to liability for a penalty based on DBF's failure to insure.
I.
On review, the claimant first contends that the ALJ erred in failing to impose personal liability on Ramaglia and Edick under the doctrine of piercing the corporate veil. Specifically, the claimant argues that the ALJ erred in concluding that Ramaglia's post-injury conduct was "irrelevant and not persuasive." We find no error.
The Court of Appeals has held that liability for workers' compensation benefits is dependent on the "relationship of the parties" at the time of the claimant's injury. Brown v. Muto, ___ P.2d ___ (Colo.App. No. 95CA1985, November 29, 1996). Thus, the ALJ properly focused on the question of whether Ramaglia and Edick were improperly utilizing the corporate form at the time of the claimant's injury so as to render them personally liable.
Here, the ALJ found that most of the business irregularities cited by the claimant occurred long after the industrial injury. Furthermore, the ALJ implicitly found that these acts did not reflect a continuing course of conduct which evidenced misuse of the corporate form at the time of the claimant's injury. We do not deny that evidence of post-injury conduct may be relevant in determining whether to pierce the corporate veil. Here, however, substantial evidence supports the ALJ's conclusion that the incidents cited by the claimant were largely isolated and did not require extraordinary equitable relief. See Smithour v. American Dream Enterprises, Inc., 778 P.2d 302 (Colo.App. 1989) (finding that corporation deliberately failed to maintain workers' compensation insurance was not sufficient, standing alone, to pierce the corporate veil).
II.
The claimant next contends that the ALJ erred in failing to impose liability on Ramaglia under the "theory of liability of director for a preferential transfer." The claimant argues that Ramaglia, acting as a manager and shareholder of DBF, improperly transferred inventory and equipment to Rafferty's after Pepe O'Toole's closed. The claimant reasons that this conduct serves to impose personal liability on Ramaglia because he was aware of DBF's insolvency, and sought to benefit himself by transferring DBF's assets to another corporation in which he was also a shareholder. We conclude that the ALJ's finding of fact are insufficient to support appellate review of this issue.
In support of this argument, the claimant relies on John Boyle Co. v. Colorado Patio Awning Co., 654 P.2d 335 (Colo.App. 1982), for the proposition that Ramaglia had a legal duty to the claimant while acting as manager and shareholder of DBF after the injury. The claimant reasons that this duty prohibited Ramaglia from transferring DBF's property to Rafferty's without accounting to the claimant as DBF's creditor.
DBF's argument notwithstanding, we do not read the Boyle case as being predicated solely on the Bulk Sales Act. Rather, we understand the case to hold that the defendant (Basham) did not have a security interest, under the Bulk Sales Act, in the inventory which he diverted from the defunct corporation. The court went on to hold, as a separate matter, that Basham had a duty to the creditors of the defunct corporation to account for the value of the property which he transferred away from the corporation. Cf. Collie v. Becknell, 762 P.2d 727 (Colo.App. 1988).
Moreover, in the Boyle case Basham transferred the property to a new corporation in which he was also a shareholder. Under these circumstances, the court stated that it did not matter that Basham "acted an intermediate transferee in the transfer of assets." See also, New Crawford Valley, Ltd. v. Benedict, 877 P.2d 1363 (Colo.App. 1993) (where director transferred corporate property to another corporation in which he was a shareholder, claim for breach of duty to creditor was stated).
Applying these principles here, the ALJ's findings are insufficient to support his conclusion. Since Ramaglia was one of two shareholders in Rafferty's, the value of the Rafferty's investment was enhanced by the transfer of the property from Pepe O'Toole's. Thus, Ramaglia stands in the same position as Basham in the Boyle case.
It follows that the ALJ's denial of the claim for relief based on preferential transfer is not supported by his findings. The mere fact that Ramaglia did not retain personal possession of Pepe O'Toole's inventory and equipment is insufficient to defeat the theory advanced by the claimant.
However, Ramglia asserts that the ALJ was obliged to make findings of fact concerning Ramaglia's intent and knowledge. The ALJ did not address these issues, nor did he determine whether they are legally relevant. Under these circumstances, we consider it appropriate to remand the matter to the ALJ for entry of new findings of fact and conclusions of law concerning the "theory of preferential transfer." The order should address the applicability of the theory, the elements of the theory, and whether or not they exist under the circumstances of this case. The ALJ may, in the exercise of his discretion, hold an additional hearing on this issue.
III.
The claimant next contends that the ALJ erred in denying a penalty under § 8-43-203(1), C.R.S. (1996 Cum. Supp.). The claimant argues that even if it is accepted that there was no evidence of lost time or permanent physical impairment, DBF had a duty to admit or deny liability once it had knowledge or notice of the claim for compensation. In support, the claimant states that DBF "did not deny receiving notice of Mr. Long's claim." We find no error.
It is certainly true that the last sentence of § 8-43-203(1) imposes a duty on an employer or insurer to admit or deny liability within twenty days of obtaining knowledge or notice of the claim for compensation. However, it is also true that the claimant had the burden of proof to establish the right to the penalty. Section 8-43-201, C.R.S. (1996 Cum. Supp.). Here, the claimant presented no evidence concerning when DBF received notice or knowledge of the claim for benefits. In fact, the claimant's brief does not even suggest a date on which the penalty should begin to run. Under these circumstances, we perceive no error in the ALJ's denial of the claim for penalties. Campbell v. IBM Corp., 867 P.2d 77 (Colo.App. 1993).
IV.
The claimant next contends that the ALJ erred in failing to address the issue of additional compensation for non-insurance. We reject this argument.
Section 8-43-408(1), C.R.S. (1996 Cum. Supp.), provides that in cases where the employer is not insured, "the amounts of compensation or benefits provided" shall be increased by fifty percent. However, in Industrial Commission v. Hammond, 77 Colo. 414, 236 P. 1006 (1925), our Supreme Court held that payment for medical benefits does not constitute the payment of "compensation or benefits" within the meaning of the statute. See also, Wild West Radio, Inc. v. Industrial Claim Appeals Office, 886 P.2d 304 (Colo.App. 1994). Because the ALJ has not awarded any benefits except medical benefits, there is no basis for awarding additional compensation.
We also note that the ALJ has reserved issues not specifically determined. Should the ALJ later determine that the claimant is entitled to compensation or benefits within the meaning of § 8-43-408(1), he may increase the claimant's compensation according to the statute.
V.
Finally, the claimant contends that the ALJ erred in denying temporary total disability benefits on the ground that there was no proof of medical restrictions after the injury. In support of this proposition, the claimant argues that the ALJ erroneously found that he was released from the hospital the same day that the injury occurred. To the contrary, the claimant points out his testimony that he was kept overnight. Moreover, the claimant relies on Dr. Heare's medical report of August 1, 1995, in which it is stated that the claimant is to remain on a splint for one month, and then discontinue the splint and return to "regular activities." We are not persuaded.
Initially, we note that temporary disability benefits are not payable unless the claimant demonstrates that he has suffered a disability which lasts longer than three days from the day he left work. Section 8-42-103(1)(a), C.R.S. (1996 Cum. Supp.). Thus, even if the claimant did remain in the hospital overnight, that would not constitute evidence to establish that he was restricted for a sufficient length of time to warrant temporary disability benefits.
Further, as the ALJ held, the claimant was required to present credible evidence establishing that he was medically restricted from performing his regular duties. See Burns v. Robinson Dairy, Inc., 911 P.2d 661 (Colo.App. 1995); Ray v. Martin Marietta Corp., W.C. No. 4-210-328 (March 22, 1995), aff'd., Ray v. Industrial Claim Appeals Office, (Colo.App. No. 95CA0553, July 27, 1995) (not selected for publication). This is true because if a claimant's ability to perform regular employment is sufficient to terminate temporary disability benefits, the attending physician's opinion that the claimant has never been disabled from regular employment is necessarily sufficient to preclude the initiation of temporary disability benefits. See § 8-42-105(3)(c), C.R.S. (1996 Cum. Supp.).
Here, the ALJ found that Dr. Heare's August 1, 1995 report did not establish that the claimant was restricted from performing his regular employment. As the ALJ recognized, the August 1 report did not state that the claimant was incapable of performing the "regular duties" of his employment. In fact, the evidence indicates the claimant was right-handed, and that the injury was to his left hand. Under these circumstances, we cannot substitute our judgment for that of the ALJ concerning the inferences to be drawn from the medical evidence. Section 8-43-301(8), C.R.S. (1996 Cum. Supp.).
IT IS THEREFORE ORDERED that the ALJ's order dated September 26, 1996, is set aside insofar as it determined that respondent Ramaglia is not liable for the claimant's benefits. On this issue, the matter is remanded for further proceedings consistent with the views expressed herein.
IT IS FURTHER ORDERED that the ALJ's order is otherwise affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
______________________________ David Cain
______________________________ Bill WhitacreNOTICE This Order is final unless an action to modify or vacate the Order is commenced in the Colorado Court of Appeals, 2 East 14th Avenue, Denver, Colorado 80203, by filing a petition to review with the court, with service of a copy of the petition upon the Industrial Claim Appeals Office and all other parties, within twenty (20) days after the date the Order was mailed, pursuant to §§ 8-43-301(10) and 307, C. R. S. (1996 Cum. Supp.).
Copies of this decision were mailed June 5, 1997 to the following parties:
Adam J. Long, 206 23rd Ave., Greeley, CO 80632
DBF, LLC d/b/a Pepe O'Toole's, P.O. Box 1902, Greeley, CO 80632-1902
William Ramaglia and Donald Edick, 5990 West 10th St., Greeley, CO 80634
Frank Christiansen, P.O. Box 1902, Greeley, CO 80631
Rafferty's, Inc., 5990 West 10th St., Greeley, CO 80634
Colorado Compensation Insurance Authority, Attn: Carolyn A. Boyd, Esq. (Interagency Mail)
Regina M. Walsh Adams, Esq., 1122 9th St., Ste. 202, Greeley, CO 80631 (For DBF and William Ramaglia)
Britton Morrell, Esq., 1102 5th St., Ste. A, Greeley, CO 80631 (For the Claimant)
By: _______________________________