Opinion
A126132
01-10-2012
JOSEPH ROYSE, Plaintiff and Appellant, v. HEARTWORKS STUDIOS, LLC Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Humboldt County Super. Ct. No. DR050078)
In this personal injury action, Joseph Royse appeals from a judgment entered in favor of Heartworks Studios, LLC (Heartworks) following the court's order granting Heartworks's motion for nonsuit. He also appeals from several of the trial court's pretrial rulings. We reverse the court's ruling on the nonsuit as well as its ruling on Heartworks's motion for summary judgment. In all other respects, we affirm.
I. PROCEDURAL AND FACTUAL BACKGROUND
We have previously set forth the underlying facts of this action in Royse v. Lexington Ins. Co. (Nov. 26, 2008, A117798, A117875 [nonpub. opn.] (Royse I)). Royse suffered severe injuries while working on property known as the Lost Coast Ranch. This appeal concerns the fifth and sixth causes of action for negligence and negligence per se, respectively, and the eighth cause of action against Heartworks for premises liability.
On February 14, 2007, the trial court granted Heartworks's motion for summary judgment on the fifth and sixth causes of action. The court found that Heartworks was not a joint venture partner with any of the other defendants in the case, that Heartworks was not Royse's employer and had no liability for his injuries or damages under any theory of employment, and that Heartworks did not have any obligation to provide workers' compensation insurance for him. As to the eighth cause of action for premises liability, the court denied summary judgment, finding that there was a triable issue of fact as to whether the overhead high voltage power lines on the property were obvious and observable and whether Heartworks, as the property owner, had a duty to warn Royse of them.
Royse subsequently brought a motion for relief from judgment pursuant to Code of Civil Procedure section 473, subdivision (b) on the ground that Heartworks committed fraud upon the court. The court denied the motion.
Royse then moved for leave to file an amendment to the fourth amended complaint to add Lost Coast Ranch as a defendant. The trial court denied the motion.
Following Royse's presentation of his case at trial, Heartworks moved for nonsuit, contending that Esther Phelps (Phelps) was Heartworks's "independent contractor" or "hirer" and under the principles of Privette v. Superior Court (1993) 5 Cal.4th 689 (Privette), and its progeny, Royse did not establish that Heartworks, the property owner, was liable for injuries to Phelps's employee, because Royse did not prove that Heartworks knew about and concealed the dangerous condition—i.e., the overhead power lines—or that Heartworks retained control over the work or supplied defective equipment. The court granted the motion. Relying on its prior finding that Phelps and not Heartworks was Royse's employer, the court agreed with the contentions advanced by Heartworks.
This appeal followed.
We now have before us the records in Royse I, II, and III as well as the record in this appeal. We are thus privy to the following pertinent facts that were not comprehensively set forth previously.
Royse v. P.G.& E. et al., A125829, is also pending in this court, and is fully briefed. We do not address the issues in that appeal here.
The property known as the Lost Coast Ranch was owned by Heartworks at all relevant times. The Heartworks limited liability company (LLC) was created to own the ranch. The ranch has 18 bedrooms and 26 bathrooms and sits on approximately 150 acres. It was used, among other things, to provide facilities and services free of charge to DC3-E's recording artists who were allowed to stay at the ranch for free. Phelps testified that both she and her husband, Jonathan Phelps, had been working since 2002 to build the DC3-E business.
DC3-E was formed in February, 2002, and is one of the Phelpses' business entities.
On April 27, 2004, Phelps, as the sole member of Heartworks, refinanced the property with a loan from the Bank of America. The loan was for business or commercial purposes and not for "personal, family, household or other purposes."
Phelps asked Kathleen Wells to be the ranch manager in May 2004. Wells had previously worked for DC3-E. As part of her salary at the ranch, Wells was provided free lodging and meals. Part of her job was to take care of the "food, laundry, and anything else" needed by the recording artists who were staying at the ranch "so that they [could] focus on their music." Phelps was Wells's boss and she answered directly to her. Wells was paid by DC3-E and was listed as a DC3-E employee until 2005, when she began to receive paychecks from Heartworks. There were no changes to her job description when the payroll change was made; Wells was still the ranch manager, and Phelps continued to be her boss. George Enos was the caretaker of the ranch. Initially in 2003, he and his wife lived in a cottage at the ranch rent free in exchange for his work at the ranch. Beginning in the summer of 2003, he received a salary as well, and was paid by check from DC3-E's payroll. This arrangement continued until mid-2005 when Heartworks began to pay him.
In May 2004, with Phelps's authorization, Wells hired Royse to work on the ranch; Wells was his supervisor. Initially he was paid in cash; subsequently he was paid for his hours at the ranch from an account maintained for Heartworks. The Phelpses funded this bank account. Funds in the account were also used to pay for other goods and services provided at the ranch.
The cash payment was made from DC3-E's petty cash.
Since Royse worked for both DC3-E and the ranch, he was instructed to separate the hours he worked at the ranch from those he worked for DC3-E's recording studio. In order to get paid, Royse submitted his time sheets to Wells's sister, Debbie Martin, who worked for DC3-E. She, in turn, would give them to Martin Woodlee, the manager of the recording studio and a DC3-E employee, who forwarded the hours to Brad Thompson, the project manager for the Phelpses. While Thompson declared that Heartworks and DC3-E did not share expenses or profits, there is evidence in the record that DC3-E received a significant benefit from Heartworks inasmuch as Heartworks provided free room and board for DC3-E's recording artists and permitted DC3-E to garage its four vehicles at the ranch.
After Royse's accident in August 2004, Dennis Barker, an engineer working for the Department of Industrial Relations of the Division of Occupational Safety and Health (OSHA), conducted an investigation and met with Enos and Martin Woodlee, who identified himself as Heartworks's manager. Woodlee confirmed that Royse was an employee of Heartworks.
Phelps, for her part, averred that Royse was "working for me personally at my ranch" when he was injured. Brad Thompson also asserted that Royse worked for "Ms. Phelps and Ms. Phelps only" and that Heartworks had no employees in 2003 and 2004.
II. DISCUSSION
A. Summary Adjudication of the Fifth and Sixth Causes of Action
We review the granting of a summary judgment de novo "considering all of the evidence the parties offered in connection with the motion . . . and the uncontradicted inferences the evidence reasonably supports." (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476.) "The evidence must be viewed in favor of the plaintiff as the losing party, construing the submissions of the plaintiff liberally and those of the defendant strictly." (Bell v. Greg Agee Construction, Inc. (2004) 125 Cal.App.4th 453, 459.) Reviewing the record de novo, we conclude there is more than sufficient evidence to raise a triable issue of fact regarding whether Royse was employed by Heartworks; indeed, most of the objective evidence points in that direction.
First and foremost, Heartworks is and always was the owner of the Lost Coast Ranch; indeed, Heartworks was created specifically for that purpose. Phelps is its sole "shareholder." Heartworks, however, is a legal entity separate and apart from Phelps. (Corp. Code, §§ 17050, 17101 [limiting liability of members].) Thus, Phelps had no ownership interest in the property where Enos, Wells, and Royse were working. (Corp. Code, § 17300.) Further, there is no evidence Phelps, herself, ever paid Royse or any of the ranch employees. Although Thompson asserted that Heartworks "did not have any employees" he also stated that Royse was paid from the Heartworks account, which was funded by the Phelpses.
Owners of limited liability companies are referred to as "members" rather than "shareholders." (See, e.g., Corp. Code, § 17050.)
Heartworks was described by Phelps as a commercial enterprise, and the evidence shows that, although it was used for family events, a significant part of its operations were conducted for the benefit of DC3-E by providing free room, board, and other services to its recording artists and other DC3-E-related persons. DC3-E was the Phelpses' business and they were working to build it up. From this evidence a fact-finder could infer that the Phelpses placed funds into the Heartworks account to compensate Heartworks for the benefits it provided to the Phelpses' new enterprise, DC3-E. As has been noted, it is those funds that were used to pay Royse as well as other ranch expenses. It is undisputed that payment to Royse for the work done on the day he was injured would have come from the Heartworks account.
Other evidence would support a finding that Heartworks was the employer of the ranch personnel. Both Wells, the ranch manager, and Enos, the ranch caretaker, were initially paid by DC3-E, and subsequently received paychecks from Heartworks. Wells and Enos lived on the Heartworks property rent free in exchange for their work at the ranch. Although Phelps was Wells's boss, Wells has never suggested that she was Phelps's personal employee; rather she stated her employers were, first, DC3-E and later Heartworks. It was Wells, as authorized by Phelps, who hired Royse and directed his work. Finally, Woodlee told Barker, an OSHA investigator, that Royse was a Heartworks employee.
In short, there was abundant evidence to defeat Heartworks's summary adjudication motion on the issue of employment. The trial court therefore erred in granting the motion.
In reaching this conclusion we do not ignore other evidence in the record supporting Heartworks's claim that Phelps, and only Phelps, employed Royse. But this evidence is comprised almost entirely of self-serving declarations made by Phelps and her project manager Thompson, who assert, without more, that Royse was Phelps's personal employee, essentially ignoring the Heartworks entity. Indeed, in the trial court, Heartworks argued extensively that Phelps operated the ranch for "personal interests" and purposes, that Phelps "owned" the land "through Heartworks," and that Heartworks is merely a "real estate holding company for Esther Phelps." Implicit in this argument is the contention that Heartworks held bare title to the property on behalf of its sole member, Phelps, who was then free to use it entirely for personal purposes.
Royse testified at his deposition that he understood Mrs. Phelps to be his employer, but that bare exchange in the record sheds no light on what he was told—or not told—regarding the identity of his employer or the identity of the owner of the property, and by whom. For example, he testified he had never heard of Heartworks. It was also his understanding that Mrs. Phelps owned the ranch.
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" ' "A limited liability company is a hybrid business entity formed under the Corporations Code . . . [which] provides members with limited liability to the same extent enjoyed by corporate shareholders [citation] . . . ." ' [Citation] while maintaining the attributes of a partnership for federal income tax purposes. [Citation.]" (People v. Pacific Landmark, LLC (2005) 129 Cal.App.4th 1203, 1211-1212.) Heartworks was a limited liability company created for the express purpose of owning the ranch, and for the related tax benefits. Nevertheless, Phelps described the property as "my ranch" and testified that she believed Royse was her personal employee because the ranch was her house and therefore those hired by the innkeeper to work there were her employees. An LLC cannot simply be ignored when it benefits the LLC member(s) to do so. (Pacific Landmark Hotel, Ltd. v. Marriott Hotels, Inc. (1993) 19 Cal.App.4th 615, 628 [the alter ego doctrine does not allow the corporate entity to disregard its own incorporation].) In short, there was abundant evidence that Royse was an employee of Heartworks, despite Phelps's and Heartworks's claim that he was not.
B. The Motion for Nonsuit on the Eighth Cause of Action
Royse contends the court erred in granting Heartworks's motion for nonsuit on his premises liability cause of action which alleged that Heartworks maintained a dangerous condition on the property and that Heartworks was aware of the danger associated with the unsafe low-hanging high voltage power lines on the property and failed to warn him of them.
1. The standard of review
A motion for nonsuit allows a defendant to test the sufficiency of a plaintiff's evidence before presenting its own case to the jury. (Carson v. Facilities Development Co. (1984) 36 Cal.3d 830, 838 (Carson).) It constitutes a demurrer to the evidence and thus presents a question of law—whether the evidence offered by the plaintiff could support a judgment. (Loral Corp. v. Moyes (1985) 174 Cal.App.3d 268, 272.) A nonsuit may only be granted if no evidence supports a jury verdict in the plaintiff's favor. (Elmore v. American Motors Corp. (1969) 70 Cal.2d 578, 583.)
In reviewing a trial court's grant of nonsuit, we must evaluate the evidence in the light most favorable to the plaintiff. " 'The judgment of the trial court cannot be sustained unless interpreting the evidence most favorably to plaintiff's case and most strongly against the defendant and resolving all presumptions, inferences and doubts in favor of the plaintiff a judgment for the defendant is required as a matter of law.' [Citations.]" (Carson, supra, 36 Cal.3d at p. 839.)
2. The Privette principles
As we have described, Heartworks asserted below, and asserts here, that the issue is governed by Privette, supra, 5 Cal.4th 689 and its progeny. (See e.g., Toland v. Sunland Housing Group, Inc. (1998) 18 Cal.4th 253 (Toland); Camargo v. Tjaarda Dairy (2001) 25 Cal.4th 1235; Hooker v. Department of Transportation (2002) 27 Cal.4th 198; McKown v. Wal-Mart Stores, Inc. (2002) 27 Cal.4th 219.) In Privette, the court explained that at common law, a person who hired an independent contractor was not liable to third parties for injuries caused by the contractor's negligence in performing the work. (Privette, supra, 5 Cal.4th at p. 693.) The rationale for the rule was that the hirer had no control over the mode of the work of the contractor. The work to be performed was the contractor's enterprise who would be better able to absorb accident losses incurred in the course of the contracted work. (Ibid.)
Privette further explained that the peculiar risk doctrine developed as an "exception to the general rule of nonliability to ensure that innocent third parties injured by the negligence of an independent contractor hired by a landowner to do inherently dangerous work on the land would not have to depend on the contractor's solvency in order to receive compensation for the injuries." (Privette, supra, 5 Cal.4th at p. 694.) In Privette, the court examined whether the peculiar risk doctrine should apply where an independent contractor's employee who is injured on the job as a result of the contractor's negligence seeks to recover against the person who hired the contractor. (Id. at p. 696.) The California Supreme Court held that the employee could not recover, holding that the extension of tort liability under the peculiar risk doctrine to the employees of an independent contractor hired to do dangerous work "advances no societal interest that is not already served by the workers' compensation system." (Id. at p. 692.)
The scope of the Privette rule has been held to include claims that the hirer failed to take special precautions (Toland, supra, 18 Cal.4th at p. 267) and that the hirer was negligent in hiring the contractor whose negligence caused the injury (Camargo v. Tjaarda Dairy, supra, 25 Cal.4th at pp. 1244-1245). More recently, the court considered whether a landowner who hires an independent contractor is liable to an employee of that contractor who is injured on the job as a result of hazardous conditions on the landowner's premises. (Kinsman v. Unocal Corp. (2005) 37 Cal.4th 659, 664 (Kinsman).) The court concluded "that a landowner that hires an independent contractor may be liable to the contractor's employee if the following conditions are present: the landowner knew, or should have known, of a latent or concealed preexisting hazardous condition on its property, the contractor did not know and could not have reasonably discovered this hazardous condition, and the landowner failed to warn the contractor about this condition." (Ibid., fn. omitted.)
3. Analysis
" 'An independent contractor is one who, in rendering services, exercises an independent employment or occupation and, represents his employer only as to the results of his work, and not as to the means whereby it is to be accomplished. . . . The chief consideration which determines one to be an independent contractor is the fact that the employer has no right of control as to the mode of doing the work contracted for.' [Citations]." (3 Witkin, Summary of Cal. Law (10th ed. 2005) Agency and Employment, § 21, p. 60, italics added.)
We have reviewed the record on appeal and have not found a scintilla of evidence to support the predicate fact upon which Heartworks relies, viz., that Phelps was an independent contractor hired by Heartworks. Indeed, there is no evidence of any relationship—contractual or otherwise—between Heartworks and Phelps other than that of LLC and member. There is no evidence that Phelps was engaged in an employment or occupation providing services to Heartworks or to anyone else, nor is there any evidence that Royse was the employee of an independent contractor. The trial court nonetheless accepted Heartworks's theory that Phelps was Royse's employer and that Phelps was an independent contractor. It then applied the Privette-Toland-Kinsman analysis in granting nonsuit.
The court's premise, that the issue was governed by Privette and its progeny was mistaken. On the record before us, this is not the case of an injury to an employee of an independent contractor hired by a landowner. (See Kinsman, supra, 37 Cal.4th at p. 664.) To the contrary, the evidence demonstrated that Phelps was the sole member of Heartworks, that Heartworks owned the ranch, and that Phelps gave direction to Wells and Enos who were working at the ranch. There being no evidence that Wells and Enos were either Phelps's employees or were independent contractors, and there being no evidence that Phelps herself was an independent contractor, there was no basis for the court to apply the principles of Privette and grant Heartworks's motion for nonsuit.
C. Royse's Remaining Claims
Royse also argues that the court erred in denying his motion for relief from judgment under section 473. We need not reach this issue because we are reversing the summary judgment entered in favor of Heartworks, to which that motion was directed. Accordingly, Royse's motion to set aside that judgment is moot.
Royse also repeats his contention that the court abused its discretion in not permitting him to amend the fourth amended complaint to add Lost Coast Ranch, an unincorporated association, as a defendant. We fully addressed this issue on the merits in Royse IV and determined that Lost Coast Ranch was owned by Heartworks at the time of the accident; there was no basis to permit the amendment to add it as a party to the action. (Royse IV, supra, A125621, at pp. 5-6.)
III. DISPOSITION
The judgment is reversed with respect to the summary judgment and nonsuit entered in favor of Heartworks. Royse's appeal of the court's order denying his motion for relief from judgment under section 473 is dismissed as moot. In all other respects, the judgment is affirmed. Royse shall recover his costs on appeal.
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RIVERA, J.
We concur: ____________
REARDON, Acting P. J.
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SEPULVEDA, J.