Opinion
W.C. No. 3-112-161
October 27, 1995
FINAL ORDER
The claimant seeks review of an order issued by Administrative Law Judge Martinez (ALJ) pursuant to our Order of Remand dated April 3, 1995. We modify the ALJ's order and as modified, affirm.
In a prior order, the ALJ concluded that the respondent is liable for injuries sustained by the claimant on January 8, 1994, when the claimant fell off the roof of a barn being built for the respondent. We set aside the ALJ's order based upon our conclusion that the ALJ misconstrued the statutory amendments which are currently codified in § 8-41-402(1), C.R.S. (1995 Cum. Supp.). Section 8-41-402(1) provides that the Colorado Workers' Compensation Act (Act):
"shall not apply to the owner or occupant, or both, of residential real property which meets the definition of a `qualified residence' under section 163 (h)(4)(A) of the federal `Internal Revenue Code of 1986', as amended, who contracts out any work done to the property, unless the person performing the work is otherwise an employee of the owner or occupant, or both, of the property."
Section 163(h)(4)(A) of the Internal Revenue Service Code (IRS Code) defines "qualified residence" as the "principal residence" and "one other residence" selected and used by the taxpayer for personal enjoyment in accordance with § 280(A)(d)(1). The enforcement regulations of the IRS Code indicate that a taxpayer may treat a residence under construction as a "qualified residence" for a period of up to twenty-four months, if the residence becomes a qualified residence at the time the residence is ready for occupancy. 26 CFR ch. 1, § 1.163 10 T(p)(5).
In our April 3 order, we concluded that § 8-41-402(1) is not limited to owners or occupants of residential real property who are "statutory employers;" 2) that the term "otherwise an employee" means employment with the respondent in some manner other than performing work on the residential real property; and 3) that the statutory exemption applies to "any work" on the residential real property. We also concluded that the ALJ's findings of fact were insufficient to determine whether the respondent was the owner or occupant of a "qualified residence." Therefore, we remanded the matter for the issuance of a new order.
On remand, the ALJ determined that the barn was being built for the for the private use of the respondent's family and was located on the same property where respondent's home will be built. The ALJ found that the respondent was having the barn built as the first phase of a home building project, and the respondent intended to use the barn as temporary living quarters for he and his wife while the family home was under construction. Consequently, the ALJ determined that the claimant was working on a "qualified residence" at the time of the injury.
The ALJ also determined that, at the time of the injury, the claimant's job duties were not within the respondent's trade, business or profession, and that the respondent had no employees. Therefore, the ALJ determined that the claimant was not "otherwise an employee" of the respondent at the time of the injury.
The ALJ noted that the evidence failed to disclose that respondent completed his residence within twenty-four months of the claimant's injury, and twenty-four months from the claimant's date of injury is January 8, 1996. However, the ALJ determined that this evidentiary "gap" does not preclude the application of § 8-41-402(1). Therefore, the ALJ concluded that the claim is barred by § 8-41-402(1). Nevertheless, the ALJ denied the claim without prejudice and granted the claimant leave to refile his claim "in the event that respondent failed to establish all the elements of a qualified residence by January 8, 1996."
On review, the claimant first contends that we erred in concluding that § 8-41-402(1) applies to "actual" employers as well as "statutory" employers. We reject this argument.
The reasoning underlying our conclusion that the exemption created by § 8-41-402(1) is not limited to residential real property owners who are "statutory" employers is set forth in our Order of Remand, and need not be repeated here. In this regard, we note our decision in Adaline v. Independent Home Builders, W.C. No. 4-192-179, January 5, 1995, which we relied upon, has been affirmed by the Court of Appeals in Independent Home Builders v. Groves (Colo.App. No. 95CA0117, August 24, 1995) (not selected for publication). Moreover, claimant has not persuaded us to alter our position. Therefore, we adhere to the conclusions set forth in our April 13 order and incorporate them by reference.
We lack jurisdiction to resolve the claimant's contention that our interpretation of § 8-41-402(1) violates the equal protection guarantees of the Colorado and United States Constitutions. Celebrity Custom Builders v. Industrial Claim Appeals Office, ___ P.2d ___ (Colo.App. No. 94CA1937, June 15, 1995) ; Kinterknecht v. Industrial Commission, 175 Colo. 60, 485 P.2d 721 (1971). Therefore, we do not consider the claimant's arguments concerning the constitutionality of § 8-41-402(1).
Next, the claimant argues that the ALJ's findings of fact do not support a conclusion that the claimant was working on a "qualified residence" at the time of the injury. In support, the claimant contends that the respondent failed to prove that the residence was or would be completed and occupied within twenty-four months of the claimant's injury. The claimant further contends that the ALJ erred in dismissing the claim without prejudice. We agree that the ALJ erred in dismissing the claim without prejudice, but otherwise affirm the order.
The statutory exemption created by § 8-41-402(1) is an affirmative defense to the respondent's liability as the claimant's employer. See Postlewait v. Industrial Claim Appeals Office ___ P.2d ___ (Colo.App. No. 94CA2151, July 6, 1995); Valley Tree Service v. Jimenez, 787 P.2d 658 (Colo. App 1990), partially overruled on other grounds, 823 P.2d 709 (Colo. 1992). Accordingly, the claimant is correct in stating that the respondent bore the burden to that he was the owner or occupant of residential real property meeting the definition of a "qualified residence." See Atlantic Pacific Insurance Co. v. Barnes, 666 P.2d 163 (Colo.App. 1983) (burden of proof determined by "which party would be successful if no evidence were presented," and then the burden of proof is placed on the adverse party).
However, we do not believe § 8-41-402(1) requires the respondent to prove that he actually occupied the "qualified residence" within twenty four months of the claimant's injury. To the contrary, liability for workers' compensation benefits is dependent on the relationship of the parties at the time of the injury. Specifically, § 8-41-301(1)(a), C.R.S. (1995 Cum. Supp.) provides that a claimant's injury is not compensable unless "at the time of the injury both employer and employee are subject to" the Act. Therefore, we conclude that the issue is whether the respondent was entitled to treat the unfinished structure as a "qualified residence" as of January 8, 1994, not January 8, 1996. To the extent that our Order of Remand suggests the contrary, we have reconsidered the matter.
Our conclusion is consistent with Colorado AFL-CIO v. Donlon, 914 P.2d 396 (Colo.App. 1995) and Organ v. Jorgensen, 888 P.2d 336 (Colo.App. 1994), in which the Court of Appeals rejected an argument that the General Assembly intended to limit the homeowner exemption to owners or occupants of property which was inhabitable at the time of the injury, or at the time of the workers' compensation hearing on compensability. The Organ Court stated that if the owner was required to establish occupancy at the time of a workers' compensation hearing on the issue of compensability "a property owner's liability would be determined by the arbitrary relationship between an initial date of occupancy and the docketing of cases." The court concluded that the General Assembly did not intend such incongruous results, and therefore, rejected this construction. Organ v. Jorgensen, 888 P.2d 338. The Organ court added that had the General Assembly intended to limit application of the homeowner exemption to situations where the "real estate is occupied or, if under construction, is substantially completed, it could have left intact the prior version of the statute." Organ v. Jorgensen, 888 P.2d 338.
Further, the Organ Court concluded that the homeowner's exemption is not dependent on whether the property owner actually claimed a federal income tax deduction for mortgage interest payments on the property during the year of the injury. Rather, the Court held that, by incorporating the IRS Code definition of a "qualified residence," the legislature did not intend to incorporate other sections of the Code, and instead intended to change the prior law and expand the protection for the owner or occupant of a "private home" to include owners of uninhabitable residences under construction. Organ v. Jorgensen, 888 P.2d 338. Under these circumstances, we are persuaded that the General Assembly did not intend, for purposes of workers' compensation benefits, to import the IRS Code enforcement regulation requirement of actual occupancy after twenty-four months.
We recognize that the Organ decision contains a statement suggesting that the IRS Code enforcement regulation requirement of actual occupancy is imported to workers' compensation for the purposes of defining a "qualified residence" under § 8-41-402(1). Specifically, the court stated that, "to the extent" its interpretation of the statute "may be viewed" as conflicting with the statutory provisions to expedite cases, that is a matter to be resolved by the General Assembly.
However, the Organ court's remarks constitute mere dicta, and we do not find this dicta to be persuasive. In Colorado AFL-CIO v. Donlon, supra, the court declined to consider whether § 8-41-402(1) discriminates against employees by requiring them to wait twenty-four months to resolve their claims on the ground that the argument was not previously advanced in Organ. Thus, it seems unlikely that the Donlon court believed that the issue was resolved in Organ. Moreover, the Donlon court suggests that the "only purpose" for adopting the reference to a "qualified residence" was to "change the interpretation of the term "private home" adopted in Betts v. Kemper, 745 P.2d 283 (Colo.App. 1987).
Neither do we believe the claimant's analysis is consistent with the 1991 amendments to § 8-41-402(1) which were designed to expand the protection afforded to the owners of homes under construction. There are many reasons why the owner of residential real property under construction might ultimately fail to occupy the property. The owner might suffer financial problems which prevent him from completing the construction, may change employment and relocate, or may exchange the property for other residential property. We do not interpret § 8-41-402(1) as designed to deprive such owners of the protection otherwise afforded by the statute.
Here, the ALJ determined that, at the time of the injury, the claimant was performing work on residential real property which the respondent was entitled to claim as a "qualified residence." Because, the ALJ's determination is a plausible inference from the evidence he found credible, it must upheld. Section 8-43-301(8), C.R.S. (1995 Cum .Supp.); Gelco Courier v. Industrial Commission, 702 P.2d 295 (Colo.App. 1985) (if two inferences plausible, appellate court may not interfere with ALJ's selection). Furthermore, the ALJ's determination compels a conclusion that the respondent is exempt from liability under the Act. Organ v. Jorgensen, 888 P.2d 338. Consequently, the ALJ properly denied and dismissed the claim.
However, because the respondent's treatment of the property after January 8, 1994 is not pertinent to whether the respondent is liable for the claimant's injury, the ALJ erred in granting the claimant leave to refile the claim based upon whether the respondent's property subsequently becomes a "qualified residence" within the meaning of the IRS Code enforcement regulations. Therefore, the ALJ erred in dismissing the claim without prejudice.
IT IS THEREFORE ORDERED that the ALJ's order dated June 1, 1995, is modified to reflect that the claim is dismissed with prejudice. In all other respects the ALJ's order is affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
____________________________________ David Cain
____________________________________ Kathy E. DeanNOTICE
This order is final unless an action to modify or vacate this Order is commenced in the Colorado Court of Appeals, 2 East 14th Avenue, Denver, CO 80203, by filing a petition for 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 this Order is mailed, pursuant to section 8-43-301(10) and 307, C.R.S. (1995 Cum. Supp.).
Copies of this decision were mailed October 27, 1995 to the following parties:
Jerrell Brown, 520 San Juan, P.O. Box 4239, Durango, CO 81302
Louis Muto d/b/a Spearhead Enterprises, 4722 La Presna Ave., Rosemead, CA 91770
Gail C. Harriss, Esq., 572 E. Third Ave., Durango, CO 81301 (For the Claimant)
David Schutzenhofer, Employer Compliance Unit, Division of Workers' Compensation
(Interagency Mail)
Jeffrey Deitch, Esq., Cecilia Peavy, Esq., P.O. Box 2113, Durango, CO 81302
(For the Respondent)
BY: _______________________