Opinion
W.C. No. 4-370-674
January 21, 1999
FINAL ORDER
The respondent seeks review of an order of Chief Administrative Law Judge Felter (ALJ) which determined he is responsible for payment of the workers' compensation benefits and penalties awarded in this claim. We reverse.
On February 6, 1998, the claimant suffered a left knee injury arising out of and in the course of his employment for Reed's Auto Sales. It is undisputed that Reed's Auto Sales was uninsured for workers' compensation at the time of the injury.
Based upon the evidence presented at a hearing on May 7, 1998, the ALJ found that Reed's Auto Sales is a "sole proprietorship" which was operated by the respondent (John Reed) until December 31, 1997, when he entered into a contract to sell the business to Jeff Salanky (Salanky) and Ed Hanlon (Hanlon). The ALJ determined that Salanky and Hanlon operated a "partnership" until May 1, 1998, when the respondent "repossessed" the "sole proprietorship" because Salanky and Hanlon were unable to make required installment payments. (Tr. p. 23); CAN-USA Construction, Inc. v. Gerber, 767 P.2d 765 (Colo.App. 1988), rev'd. on other grounds, at 783 P.2d 269 (1989) (the ALJ's oral findings may be considered to interpret the ALJ's written findings).
The ALJ determined that when a sole proprietorship is transferred, the new owner takes it with its assets and liabilities, and that the claimant's pending claim for workers' compensation benefits is one of the liabilities the respondent assumed when he "took back" the business. Consequently, in an order dated May 14, 1998, the ALJ required the respondent to pay the temporary total disability benefits, medical benefits and penalties due on account of the claimant's injury. The ALJ subsequently issued a corrected order which required the respondent to pay benefits of $7,189.69 or post a bond of $12,500. The respondent timely appealed the ALJ's order and the matter was subsequently transmitted to us for review.
I.
Generally, our review is limited to the record before the ALJ. City of Boulder v. Dinsmore, 902 P.2d 925 (Colo.App. 1995). The appellate record transmitted to us from the ALJ contained the claimant's Brief in Opposition to the Petition to Review but no brief in support of the respondent's petition to review. The respondent subsequently filed a "Motion for Acceptance of Appealing Party's Brief in Support of the Petition to Review," in which he asserted that he mailed his brief to us rather than the ALJ, because of erroneous information provided by our staff. Under these circumstances, the respondent requested that we accept the late filing of his brief.
The claimant objected to our consideration of the respondent's brief. In support, the claimant relied on Saenz v. Gold Star Sausage Co., Inc., W.C. No. 4-109-501 (October 4, 1996), where we refused to consider a claimant's late-filed brief. See also Bohan v. Direct Connection Executive Courier Services, Inc., W.C. No. 4-355-119 (October 22, 1998).
The courts have held that an untimely pleading may be accepted where "unique circumstances" exist for the late filing. See P.H. v. People, 814 P.2d 909 (Colo. 1991); Converse v. Zinke, 635 P.2d 882 (Colo.App. 1981). In P.H. v. People, supra, the Supreme Court concluded that unique circumstances permitted the Court of Appeals to accept a late filed notice of appeal where counsel reasonably relied on a trial court's erroneous action in purporting to extend the deadline for filing a notice of appeal. Furthermore, the court held that the Court of Appeals abused its discretion in failing to find excusable neglect to justify an extension of time to file the notice of appeal. 635 2d at 913.
Here, the claim file maintained by the Division of Workers' Compensation reveals that the respondent's brief was received by the Industrial Claim Appeals Office on October 26, 1998. Therefore, unlike the facts in Saenz and Bohan, the respondent's brief was timely filed, just in the wrong location.
Furthermore, the claimant does not dispute the respondent's contention that he filed the brief with us rather than the ALJ due to erroneous information provided by a member of our staff. Consequently, we may not summarily reject the respondent's factual assertions concerning the reason he failed to file the brief with the ALJ. See Trujillo v. Industrial Commission, 735 P.2d 211 (Colo.App. 1987). Moreover, we conclude that the respondent's assertions constitute "unique circumstances" which justify acceptance of the late filing of his appellate brief. See P.H. v. People, supra. Therefore, we grant the respondent's Motion and shall consider the respondent's substantive arguments.
In view of our disposition, we do not consider the respondent's contention that § 8-43-301(4), C.R.S. 1998, is ambiguous concerning the proper location to file an opening brief in support of a petition to review.
II.
The respondent contends, inter alia, that the ALJ's legal conclusions concerning liability for the claimant's injury are not supported by the law. The respondent contends that because the claimant's injury occurred during the "partnership" of Salanky and Hanlon, that the assignment of liability is governed by partnership law. We agree, and therefore, reverse the order imposing liability on the respondent.
Under the Workers' Compensation Act, liability is assigned to the claimant's employer "at the time of the injury." See § 8-41-301(1)(a), C.R.S. 1998. Here, it is undisputed that the respondent did not own Reed's Auto Sales on February 6, 1998, when the claimant was injured. Rather, the ALJ found that the business was owned by the partnership of Salanky and Hanlon.
As argued by the respondent, § 7-60-136(1), C.R.S. 1998, provides that the dissolution of a partnership does not discharge the existing liability of any partner. Rather, a partner is not discharged unless there is an agreement to that effect between the partner, the partnership creditor, and the person continuing the business. Section 7-60-137(2); C.R.S. 1998.
Here, the claimant became a partnership creditor (of Salanky and Hanlon) when he suffered the compensable injury. However, there is no finding or assertion of any agreement between the claimant, the respondent and the partnership wherein the respondent agreed to assume liability for the workers' compensation claim.
Furthermore, we disagree with the ALJ's conclusion that the respondent automatically assumed liability for the claimant's injury, when he repossessed the business and resumed operations as a "sole proprietorship." We are unable to locate any law, and the claimant cites none, which supports the ALJ's determination that when a business is transferred, the new owner is automatically liable for any debts incurred by the prior owner. See Krendl Krendl, Colorado Methods of Practice, § 5.7 (1997) (owner of a sole proprietorship is personally liable for all obligations of the business). To the contrary, in Argys v. F.D. McGlothlen, 130 Colo. 490, 276 P.2d 983 (Colo. 1954), the Supreme Court held that where a seller agrees to sell and convey property connected with the operation of a business provided the purchaser makes a stipulated payment, and the seller repossesses the property on account of default, the seller's liability for the debts of the purchaser must be predicated upon an agreement to pay the debts. 276 P.2d at 984.
In Argys, the court found that the sellers of the business expressly agreed to pay the purchaser's debts after the purchaser defaulted and the sellers repossessed the business. Under these circumstances, the court held that the seller was liable to creditors for debts incurred during the purchaser's operation of the business.
Here, the ALJ did not find any agreement by the respondent to assume debts incurred by Salanky and Hanlon. Thus, the ALJ's findings do not support the conclusion that the respondent assumed liability for the workers' compensation claim when he repossessed the business.
In reaching this conclusion, we recognize that the "Transfer of Business" agreement provides that if Salanky defaults, he will "loose [sic] all rights to the company and the note would be called." However, this language does not support the conclusion that the respondent agreed to assume Salanky's debts upon Salanky's default. In fact, the Transfer agreement contains an indemnification clause holding the respondent harmless for liabilities incurred after December 29, 1997, for any purchases or consignments of the business.
Moreover, the claimant's argument that the respondent is liable under a theory of "rescission" is not persuasive. "Rescission" is an equitable remedy which renders the contract a nullity and the puts the parties in the position they were in immediately prior to entering into the contract. Eggen v. M K Trailers, 482 P.2d 435 (Colo.App. 1971). Here, the written "Transfer of Business" agreement provides that no installment payments made by Salanky "will be refunded." Further, there is no evidence the respondent refunded any payments to Salanky. Consequently, the evidence does not support a finding that there was a rescission of the sales contract. See Eggen v. M K, Trailers, supra.
In view of our conclusions, we need not consider the respondent's other arguments, including the contention that the ALJ erred in requiring him to post a bond in excess of the amount awarded for temporary disability benefits and penalties.
IT IS THEREFORE ORDERED that the respondent's Motion for Acceptance of Appealing Party's Brief in Support of Petition to Review is granted.
IT IS FURTHER ORDERED that the ALJ's Corrected Order dated June 1, 1998, is reversed insofar as it orders the respondent to pay benefits and penalties.
INDUSTRIAL CLAIM APPEALS PANEL
____________________________________ David Cain
____________________________________ Kathy E. Dean
NOTICE
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. 1998.
Copies of this decision were mailed January 21, 1999 to the following parties:
James Carter, 1633 Macon Street, Aurora, CO 80010
John Reed, 11221 East 124th Avenue, Brighton, CO 80601
William J. Macdonald, Esq., 1890 Gaylord Street, Denver, CO 80206 (For Claimant)
Greg S. Russi, Esq., 1777 South Harrison, Suite 906, Denver, CO 80210 (For Respondents)
BY: ____________