Chapman v. Robert Spaulding Enterprises, Inc., No. 724-10-09 Rdcv (Cohen, J., Aug. 4, 2010)

[The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the
accompanying data included in the Vermont trial court opinion database is not guaranteed.]
                                                STATE OF VERMONT

SUPERIOR COURT                                                                             CIVIL DIVISION
Rutland Unit                                                                               Docket No. 724-10-09 Rdcv


LEE R. CHAPMAN, SR.,
          Plaintiff

           v.

ROBERT SPAULDING ENTERPRISES,
INC., and ROBERT V. SPAULDING and
LORI LEA SPAULDING,
            Defendants


      DECISION ON PLAINTIFFS’S MOTION FOR SUMMARY JUDGMENT,
                       FILED FEBRUARY 17, 2010

           This is a collection action based on a debt for workers’ compensation benefits.

The plaintiff, Lee Chapman, Sr., seeks to recover from Robert Spaulding and Lori

Spaulding because they are officers and majority shareholders of Robert Spaulding

Enterprises, Inc. The plaintiff argues that it is undisputed that the defendants’ company

did not have workers’ compensation insurance and that under Vermont law he should be

able to recover against them personally. The defendants argue that Lori Spaulding should

not be personally liable under the workers’ compensation statute.

           Plaintiff Lee Chapman, Sr. is represented by Stephen Cosgrove, Esq. Defendants

Robert and Lori Lea Spaulding are represented by Theodore A. Parisi, Jr., Esq.

                                         Summary Judgment Standard

           Summary judgment is appropriate where there is no genuine issue of material fact

and the party is entitled to judgment as a matter of law. V.R.C.P. 56(c)(3). In response to

an appropriate motion, judgment must be rendered "if the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the affidavits, if any, . . . show

that there is no genuine issue as to any material fact and that any party is entitled to

judgment as a matter of law." V.R.C.P. 56(c)(3). In determining whether a genuine issue

of material fact exists, the court accepts as true allegations made in opposition to the

motion for summary judgment, provided they are supported by evidentiary material.

Robertson v. Mylan Labs, Inc., 2004 VT 15, ¶ 15, 176 Vt. 356. The nonmoving party

then receives the benefit of all reasonable doubts and inferences arising from those facts.

Woolaver v. State, 2003 VT 71, ¶ 2, 175 Vt. 397.

                                     BACKGROUND

       Robert Spaulding Enterprises, Inc. is a Vermont corporation with its principal

place of business in the town of Castleton, Vermont. Robert and Lori Spaulding are

officers of the corporation. Robert Spaulding is the president. Lori Spaulding is vice-

president and secretary of the corporation.

       The plaintiff Lee Chapman, Sr. was an employee of Robert Spaulding Enterprises.

In June 2005, Mr. Chapman suffered a work-related injury while on the job. The

defendant corporation did not have workers’ compensation insurance.

       On August 31, 2005, the Vermont Department of Labor and Industry issued an

Interim Order of Benefits, awarding Mr. Chapman temporary partial disability benefits.

On December 9, 2008, another interim order was issued by the Department, awarding

Mr. Chapman permanent partial disability benefits. Money benefits awarded by these two

orders have not been fully paid to Mr. Chapman. On September, 24, 2009, the

Department issued another interim order, determining that $23,142.84 was the overdue

amount owed to Mr. Chapman, including interest and penalties.




                                               2
       As of February 1, 2010, Mr. Chapman alleges that he is owed $24,674.98. This

amount includes the damages through September 1, 2009, interest at the legal rate from

that point until February 1, 2010, court costs, and sheriff’s fees. He now seeks to collect

the debt from Robert and Lori Spaulding, personally, under the Workers’ Compensation

Act.

                                       DISCUSSION

       Workers’ compensation law represents a public policy compromise in which

employees give up the right to sue their employers in tort, in return for which employers

assume strict liability and an obligation to provide a speedy and certain remedy for work-

related injuries. Gerrish v. Savard, 169 Vt. 468, 470 (1999).

       Under 21 V.S.A. § 687(a), employers are required to secure compensation for

their employees. The purpose of the requirement that employers will insure and keep

insured payment of compensation is not only to secure injured employees against the

financial irresponsibility of their employers, but also for the benefit of employers by

having insurers assume their obligation to pay compensation. De Gray v. Miller Bros.

Const. Co., 106 Vt. 259, 276 (1934).

       Here, defendant Robert Spaulding Enterprises did not carry workers’

compensation insurance. When an employer fails to secure worker’s compensation as

required by statute and an employee reasonably believes that he or she has received a

personal injury by accident arising out of and in the course of employment with that

employer, then if the employer is a corporation the officers and majority stockholders of

the corporation shall be personally liable for any worker’s compensation benefits owed to

the injured employee. 21 V.S.A. § 687(b)(1). Defendant Lori Spaulding holds two officer




                                             3
positions with the corporation—vice-president and secretary.

 Defendant Lori Spaulding argues that although she is a corporate officer, she should not

be held personally liable for the workers’ compensation debt because she didn’t control

any aspect of the business in which the corporation was engaged. She argues for the

application of the “three-part inquiry” conducted in Rock v. Dept. of Taxes, 170 Vt. 1

(1999).

          In Rock, the issue was whether an individual could be held personally liable for a

 corporation's delinquent trust taxes, especially those of a small, closely held

 corporation. 170 Vt. at 2. Under the relevant statute, in effect at the time of the dispute,

 “[a]ny person who fails to withhold the required tax or to pay it to the commissioner as

 required . . . shall be personally and individually liable for the amount of such tax; and

 if the person is a corporate entity, the personal liability shall extend . . . to any officer or

 agent of the corporation who as an officer or agent of the corporation is under a duty to

 withhold the tax and transmit the same to the commissioner . . . .” Rock, 170 Vt. at 4

 (citing 32 V.S.A. § 5844(a)).

          The Supreme Court adopted a three-part inquiry for analyzing whether an

 individual has a duty to remit trust taxes under the statute. The Court look at (1) the

 person's position within the power structure of the corporation; (2) the authority of the

 officer or employee as established by the articles of incorporation; and (3) whether the

 person actually exercised control over the finances of the business. Rock, 170 Vt. at

 9-10 (citing Dep’t of State Revenue v. Safayan, 654 N.E.2d 270, 273 (Ind. 1995); State

 v. Equinox House, Inc., 134 Vt. 59, 60-61 (1975)).

          The defendant now seeks to have this Court apply the Rock three-party inquiry in




                                               4
deciding whether she should be held personally liable for the worker’s compensation

debt. She argues that the statute at issue in Rock is analogous to the worker’s

compensation statute, and therefore the three-party inquiry is appropriate. The Court

does not agree.

      The statute at issue in Rock applied to “any officer or agent of the corporation

who as an officer or agent of the corporation is under a duty to withhold the tax and

transmit the same to the commissioner . . . .” Rock, 170 Vt. at 4 (citing 32 V.S.A.

§ 5844(a)). Thus, the statue specifically applied only to certain corporate officers—

those who had a duty to withhold and transmit taxes. The Legislature deliberately

limited application to certain individuals.

      This is not the case, however, under the worker’s compensation statute, which

provides that in the event a corporate employer fails to secure workers’ compensation,

“the officers and majority stockholders of the corporation shall be personally liable for

any worker’s compensation benefits owed to the injured employee.” 21 V.S.A.

§ 687(b)(1). One of the reasons that Vermont requires employers to insure and keep

insured payment of compensation is to secure injured employees against the financial

irresponsibility of their employers. De Gray, 106 Vt. at 276. The Legislature did not

limit liability only to those officers who have a duty to secure worker’s compensation.

By the terms of the statute, liability applies to all officers of the corporation. Thus, the

Court finds the Rock three-part inquiry inapplicable.

      It is undisputed that the plaintiff suffered a work-related injury while on the job.

Furthermore, the defendant corporation did not carry workers’ compensation insurance,

and thus did not secure workers’ compensation under 21 V.S.A. § 687. Finally,




                                              5
 defendant Lori Spaulding was vice-president and secretary of the defendant corporation

 during the period at issue. Therefore, defendant Lori Spaulding is personally liable for

 the workers’ compensation benefits owed to the plaintiff under 21 V.S.A. § 687(b)(1).

 There is no genuine issue of material fact and the plaintiff is entitled to judgment as a

 matter of law under V.R.C.P. 56(c)(3).

                                        ORDER

      Plaintiff Lee Chapman’s Motion for Summary Judgment, filed February 17, 2010,

is GRANTED.


      Dated at Rutland, Vermont this _____ day of ________________, 2010.


                                                     ____________________
                                                     Hon. William Cohen
                                                     Superior Court Judge




                                             6
