Opinion
W.C. No. 4-434-766.
May 21, 2004.
FINAL ORDER
The claimant seeks review of an order of Administrative Law Judge Martinez (ALJ) which denied her request to impose personal liability on Larry Eifling (Eifling). We affirm.
Continue Care Home Health Inc. (CCHH3) was incorporated in 1995 for the purpose of providing home health services. Eifling was the sole owner and corporate officer. Medicare and Medicaid funds comprised 90 to 95 percent of CCHH3's annual income. The ALJ found that in 1997 the federal government made significant changes in the Medicare reimbursement program which detrimentally affected CCHH3 and many other home health care agencies. As a result, the ALJ found CCHH3 fell into debt.
Eifling sold CCHH3 in 1998 with an agreement that it would be managed by Home Health Care Management Inc., (HHCM). Eifling was the primary stockholder of HHCM.
The ALJ found that although HHCM was responsible for assuring that CCHH3 was insured for workers' compensation, CCHH3 had no workers' compensation coverage as of July 8, 1999, when the claimant suffered an admitted injury in the course of her employment for CCHH3. CCHH3 made direct payments to the claimant for workers' compensation until July 2001, when CCHH3's Medicare Proving Agreement was canceled. The cancellation was fatal to CCHH3's financial survival. Thereafter, Eifling made additional payments to the claimant from his personal accounts.
The claimant then applied to enforce the workers' compensation claim against Eifling personally by "piercing the corporate veil." In support, the claimant alleged that Eifling "under funded" CCHH3, commingled funds and property between his various corporations, failed to hold regular board meetings, and failed to file annual corporate reports.
The ALJ found the claimant failed to prove Eifling regarded and treated CCHH3 and its assets as his own; that he acted with complete disregard for the corporate existence; that he is attempting to hide behind the cloak of the corporation in order to promote injustice or perpetrate a fraud, and/or defeat the valid claim of a corporate creditor. (Conclusions of Law 5). Therefore, the ALJ determined the claimant failed to sustain his burden to prove grounds to pierce the corporate veil.
On review the claimant contends the ALJ misapplied the law by concentrating on the reasons for the insolvency of the CCHH3 instead of determining whether the actions of Eifling contributed to the lack of capital available to creditors once the corporation dissolved. We disagree.
The equitable doctrine of "piercing the corporate veil," allows an ALJ to impose personal liability on a corporate officer where the corporate structure is used so improperly that the continued recognition of the corporation as a separate legal entity is to be disregarded. Micciche v. Billings, 727 P.2d 367 (Colo.App. 1986). Specifically:
"if it is shown that shareholders used the corporate entity as a mere instrumentality for the transaction of their own affairs without regard to separate and independent corporate existence, or for the purpose of defeating, or evading important legislative policy, or in order to perpetuate a fraud or wrong on another, equity will permit the corporate form to be disregarded and will hold the shareholders personally responsible for the corporation's improper actions."
Micciche v. Billings, 727 P.2d at 373; see also Jarnagin v. Busby, Inc., 867 P.2d 63 (Colo.App. 1993); citing Industrial Commission v. Lavach, 165 Colo. 433, 439 P.2d 359 (1968).
Although the claimant relies on evidence Eifling was initially the sole owner of both HHCM and CCHH3, the claimant concedes that such evidence is insufficient, in and of itself, to pierce the corporate veil. See Industrial Commission, v. Lavach, supra. Similarly, a corporation's failure to obtain workers' compensation does not alone establish that the corporate structure is a mere instrumentality of the business of the principals. See Smithour v. American Dream Enterprises, Inc., 778 P.2d 302 (Colo.App. 1989). Moreover, evidence a corporate officer used his personal funds to help the corporation meet cash flow problems does not compel a finding that the corporate officer is the "alter ego" of the corporation in the absence of evidence the loans were for the furtherance of the officer's personal affairs, or evidence the officer took money from the corporation beyond any authorized salary. See Hill v. Dearmin, 44 Colo App. 123, 609 P.2d 127, 128 (1980).
Instead, the determination of whether the respondent used the corporate entity as a mere instrumentality for the transaction of his own affairs is a factual determination for the ALJ to be based upon consideration of the particular circumstances of the matter. See Micciche v. Billings, supra. Consequently, we must uphold the ALJ's determinations if supported by substantial evidence and plausible inferences drawn from the record. Section 8-43-301(8), C.R.S. 2003; Prestige Homes, Inc. v. Legouffe, 658 P.2d 850 (Colo 1983).
Contrary to the claimant's arguments, the record contains substantial evidence including the testimony of Jim Byrd, who the ALJ explicitly credited, to support the ALJ's pertinent findings of fact. (Finding of Fact 14). The claimant essentially requests that we reweigh the evidence on review. However, we have no authority to do so. Delta Drywall v. Industrial Claim Appeals Office, 868 P.2d 1155 (Colo.App. 1993).
Relying on our conclusions in Long v. Pepe O'Toole's et. al, W.C. No. 4-264-006 (June 5, 1997), the claimant also contends the ALJ erroneously focused on the period immediately preceding the industrial injury as the "most relevant period of time" for determining whether Eifling used CCHH3 as an instrumentality for the transaction of his own affairs. Again, we disagree.
In Brown v. Muto, 943 P.2d 38 (Colo.App. 1996), the Court of Appeals held that liability for workers' compensation benefits is dependent on the "relationship of the parties" at the time of the claimant's injury. Consequently in Long v. Pepe O'Tooles', supra, we held that an ALJ was correct in focusing on the question of whether the putative respondents improperly utilizing the corporate form at the time of the claimant's injury so as to render them personally liable. However, we added that post-injury conduct may also be relevant in determining whether to pierce the corporate veil. See also Prickett v. Sears, W.C. No. 4-004-097 (September 17, 1994).
In Long, the claimant cited business irregularities which occurred long after the industrial injury to prove the putative respondents improperly utilized the corporate entity of Pepe O'Tooles. However, we concluded the ALJ implicitly considered this evidence and found the post-injury acts did not reflect a continuing course of conduct which evidenced misuse of the corporate form at the time of the claimant's injury.
Here, the ALJ explicitly found that Eifling's actions at the time of the injury "were particularly relevant." Nevertheless, the ALJ also explicitly considered events relative to the dissolution of CCHH3 after the date of injury. (See Finding of Fact 11, 13). Under these circumstances, we reject the claimant's contention that the ALJ misapplied the law.
IT IS THEREFORE ORDERED that the ALJ's order dated October 8, 2003, is affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
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David Cain
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Kathy E. Dean
Linda Berry, Rangely, CO, Larry H. Eifling, Continue Care Home Health, Inc., Hollandale, MS, Amy K. Eaton, Esq., Grand Junction, CO, for Claimant.
M. Frances McCracken, Esq., Grand Junction, CO, for Respondent.