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Voda v. ELM Avenue Associates

February 2, 2010


On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-5766-08.

Per curiam.


Submitted January 6, 2010

Before Judges Harris and Newman.

This is an appeal from a grant of a summary judgment motion in favor of defendant Elm Avenue Associates, Inc., on a subrogation claim filed by Franklin Mutual Insurance Company, as subrogee to plaintiffs Stephen Voda and Ellen Voda (references to Voda are to Stephen Voda only), and from a further order denying subrogee's motion for reconsideration. We reverse, persuaded that the granting of summary judgment was premature and that further discovery is necessary, whereupon a motion for summary judgment may be ripe for consideration.

The relevant facts may be summarized as follows. The Vodas are the owners of an eight unit residential building located at 246-248 South Seventh Avenue, Highland Park, New Jersey (South Seventh). They are also sole shareholders of Elm Avenue Associates, a Subchapter S corporation, which owns a residential building located at 132-136 Elm Avenue, Rahway, New Jersey (Elm Avenue). The Vodas owned other residential property, including another property in Highland Park, two properties in Dunnellen, another property in Middlesex, and an additional property in Rahway. They are also the principals of Sevco Associates, LLC (Sevco), a holding company which includes both Highland Park properties, Dunnellen, Middlesex, and one of the Rahway, but not South Seventh, properties. Voda acts as the property manager for all of the properties he owns.

On January 21, 2008, Voda sent Merido Lopez, a handyman who worked on all of the properties, to South Seventh. Lopez's work schedule varied and, oftentimes, he would work at more than one property on any given day. On this particular day, he was at South Seventh where, on average, he worked once a week. Lopez was paid through an Elm Avenue checking account. He was also covered by workers' compensation insurance through Elm Avenue. Lopez was working in the basement at South Seventh where there was a wet drywall ceiling. When he took it down to replace it, he discovered a leaking water pipe. He went to repair the pipe by soldering it. Thereafter, he left for lunch. When he returned, the "building was engulfed in flames," according to a statement from Voda.

Lopez was a full-time employee and worked for Elm Avenue for several years. Elm Avenue paid taxes and made social security contributions on his behalf as a full-time employee. At the end of the year, Voda would sit down with his accountant and determine the amount of reimbursement to Elm Avenue from the various other properties that were serviced by Lopez as a handyman which included the South Seventh building.

Elm Avenue moved for summary judgment and subrogee Franklin Mutual cross-moved. Elm Avenue argued that Lopez was on the Elm Avenue payroll essentially for business accounting reasons. Furthermore, Lopez was working for Voda on the property Voda owned on South Seventh which had nothing to do with Elm Avenue. They pointed out that Franklin Mutual had first-party coverage here and is using this action, in which Lopez, who was the negligent person is not even a party to the action.

Franklin Mutual contended that Lopez was an employee of Elm Avenue, a separate corporate entity, who goes to another property to do work and that a fire was caused by his negligent action. Elm Avenue pays separate taxes, insurance, and is reimbursed for work done on other properties on an annual basis. Elm Avenue, it was argued, was the general employer who was vicariously liable for the negligence of its employee Lopez. Unlike the decision in Galvao v. G.R. Robert Constr. Co., 179 N.J. 462 (2004), Lopez did not injure someone but rather destroyed property owned by another legal entity. Franklin Mutual asserted that Elm Avenue retained the type of control necessary under the Galvao decision to respond vicariously for its employee's negligence.

In granting summary judgment, the trial court applied the test set forth in Galvao, supra, 179 N.J. at 472. The court noted that a two-prong test was formulated by our Supreme Court to determine whether a general employer can be held vicariously liable for the negligence of a special employee. There was a control test and a business-furtherance test. Ibid. Elm Avenue argues that neither test was satisfied.

The court acknowledged that the W-2 form specifically listed Lopez as employed by Elm Avenue and that workers' compensation was paid by Elm Avenue. Elm Avenue was also reimbursed by the other companies in which Voda was the principal for Lopez's work. In addressing the two-prong test of Galvao, the motion court found that Elm Avenue was the general employer but that Elm Avenue was Voda who directed all of the daily work of Lopez. The court found it "difficult... to determine whether it was Stephen Voda, the individual exercising control over Lopez, or was it Stephen Voda, through -- through his corporation Elm Avenue Associates exercising the control over Lopez." The court was unable to draw any conclusion based on the existing record.

In addressing whether the special employee furthered the business of the general employer, the motion judge determined that he did not. The court determined that the work Lopez was performing that day had nothing to do with Elm Avenue nor was Elm Avenue deriving any economic benefit from this work. As the motion court put it: "Voda was deriving the economic benefit from the work being performed by Lopez as he was repairing the building which Voda owned for Voda's benefit." Applying the business-furtherance test, the court concluded that Elm Avenue was not vicariously liable for the alleged negligence of Lopez and granted summary judgment.

On the motion for reconsideration, which sought to take the depositions of Voda and possibly the accountant, the court denied the motion. In denying the motion, the court commented that cross-motions for summary judgment inform the court that there is no general issue of material fact in dispute and that the court can rely on the certifications presented. The court rejected the contention that Voda's deposition should be taken. ...

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