Case Title: Scott v. Fagan

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1984-07-24T00:00:00Z

Document:
Scott v. Fagan1984 WY 74684 P.2d 805Case Number: 83-163, 83-164Decided: 07/24/1984JOHN E. SCOTT, JR., APPELLANT (DEFENDANT), 

v. 

ROBERT F. FAGAN, APPELLEE (PLAINTIFF). 

ROBERT F. FAGAN, APPELLANT (PLAINTIFF), 

v. 

JOHN E. SCOTT, JR., APPELLEE (DEFENDANT).
Supreme Court of Wyoming
JOHN E. SCOTT, JR., 
APPELLANT (DEFENDANT), 

v. 

ROBERT F. FAGAN, APPELLEE 
(PLAINTIFF). 

ROBERT F. FAGAN, 
APPELLANT (PLAINTIFF), 

v. 

JOHN E. SCOTT, JR., 
APPELLEE (DEFENDANT).

 
 
Appeal from the District 
Court, NatronaCounty, R.M. Forrister, 
J.

 
 
Harry E. 
Leimback, Casper, for John E. Scott, 
Jr.

Curtis L. 
Harden, Casper, 
for Robert F. 
Fagan.

Before ROONEY, C.J., and 
THOMAS, ROSE, BROWN and CARDINE, JJ.

ROSE, 
Justice.

[¶1.]     Robert F. Fagan brought 
this action against John E. Scott, Jr. to recover unpaid wages earned as a 
handyman in the repair and renovation of various rental properties owned by the 
defendant. In addition, Fagan claimed damages which had allegedly been incurred 
as a result of Scott's failure to contribute to Wyoming's unemployment fund and also sought to 
compel Scott to pay social security taxes on all earned wages. Finally, Fagan 
asked the court to award punitive damages and reasonable attorney's fees, 
because of defendant's willful and fraudulent conduct in failing to comply with 
state and federal employment security laws.

[¶2.]     In defense of these 
claims Scott urged that Fagan worked not as an employee but as an independent 
contractor who had received full compensation for his services under various 
contracts. Scott counter-claimed for past-due rent, which liability the 
plaintiff conceded at trial.

[¶3.]     Following a trial to 
the court, the district judge found Fagan to be an employee and awarded damages 
for lost unemployment benefits in the sum of $1,859.1 However, the court was unable to 
determine whether any claimed wages remained unpaid, because of the confused 
state of the records and the substantial number of documented payments made by 
Scott to the plaintiff. The court awarded punitive damages of $500, but declined 
to compensate Fagan for attorney's fees or to direct the defendant to pay social 
security taxes. The court further determined that Fagan's award was subject to a 
set-off in the amount of $1,535 for unpaid rent plus $17 for gasoline 
erroneously charged to Scott's account. Both parties have appealed. We will 
reverse the award of punitive damages and affirm the judgment in all other 
respects.

FACTS

[¶4.]     Robert Fagan and his 
family rented housing from John Scott, who owns various rental properties in 
Casper, Wyoming. During the summer of 1981, Fagan 
approached Scott and offered to paint some of his property in exchange for 
past-due rent. Scott agreed and, upon the successful completion of that project, 
hired Fagan to repair and renovate the rental units and to maintain the trucks 
and other equipment. From August 17, 1981, to March 18, 1982, Scott compensated 
Fagan at the rate of $5 per hour. On March 19, 1982, Fagan's pay increased to $6 
per hour and remained at that level until he terminated his employment on 
November 9, 1982.

[¶5.]     Scott assigned work to 
Fagan on a daily basis, frequently visited Fagan on the job, and transported him 
from one project to another. Scott provided all materials, tools, and equipment 
and authorized charges by Fagan to Scott's accounts with equipment and building 
supplies dealers. Fagan worked exclusively for Scott, except for assisting 
friends with minor projects, and often expended more than 40 hours on the job 
each week.

[¶6.]     In April, 1982, Scott 
purchased and paid for business cards, a business stamp, and invoice books, all 
purporting to represent Fagan as an independent contractor in the renovation and 
repair business. Thereafter, when Fagan wished to be paid his wages, Scott would 
make out an invoice for services performed on a contract at one of his rental 
addresses. He would then direct Fagan to acknowledge receipt of the specified 
sums by signing the invoice.

[¶7.]     Early in November, 
1982, Scott advised Fagan that no future earnings would be paid until Fagan 
settled his rent arrearages. When Fagan failed to receive his wages due on 
November 9, he left his job and applied for unemployment compensation. Since 
Scott had made no contributions to the state employment security fund, Fagan was 
denied unemployment benefits. This suit followed.

[¶8.]     At trial Fagan produced 
his daily record books, indicating the number of hours worked and the 
compensation received from Scott. According to these records, Fagan worked hours 
for which he received no payment. Scott's evidence consisted of numerous 
canceled checks endorsed by Fagan and the receipted invoices. These documents, 
for the most part, do not correspond to the daily records kept by Fagan. Many of 
the checks bear the notation "Advance" or "Advance on [specified] Contract." 
Some checks indicate that they were issued to reimburse Fagan for expenses or to 
compensate him for a separate trash-hauling contract. As a result of this state 
of confusion, the trial judge could not determine with certainty that Fagan was 
entitled to back wages.

[¶9.]     Scott appeals the 
court's award of damages for lost unemployment benefits and the award of 
punitive damages. Fagan cross-appeals the denial of unpaid wages and attorney's 
fees. We will affirm the judgment with the exception of the award for punitive 
damages.

ISSUES

[¶10.]  Appellant Scott presents the following 
issues for review:

"1. Whether the District 
Court had jurisdiction to make the initial determination that an 
employer/employee relationship existed in the context of unemployment 
compensation.

"2. Whether the 
Unemployment Compensation Statutes require further determinations to establish 
an entitlement to benefits and did the District Court err in not making these 
determinations.

"3. Whether the District 
Court erred in finding that the Appellee was an employee under the facts of this 
case.

"4. Whether the District 
Court erred in awarding punitive damages against the 
Appellant."

[¶11.]  Cross-appellant Fagan raises these 
questions:

"I. Whether the Trial 
Court erred in refusing to grant judgment to [Cross-]Appellant for $1,752 unpaid 
wages earned by [Cross-]Appellant.

"II. Whether the Court 
erred in refusing to allow [Cross-]Appellant attorney's fees in the amount of 
$2,025 and accruing attorney's fees pursuant to Wyoming Statutes republished 
1977, Section 27-4-104."

I

"Whether the District 
Court had jurisdiction to make the initial determination that an 
employer/employee relationship existed in the context of unemployment 
compensation."

[¶12.]  Scott urges this court to invoke the 
doctrine of primary jurisdiction and overturn the trial court's determination of 
the parties' employment relationship, on the ground that the State Employment 
Security Commission, not the district court, has exclusive original jurisdiction 
to decide employment-status questions in the context of unemployment 
compensation.2 The United States Supreme Court 
described the appropriate application of the primary-jurisdiction doctrine in Far East Conference v. United States, 
342 U.S. 570, 574-575, 72 S. Ct. 492, 494-495, 96 L. Ed. 576 
(1952):

"* * * [I]n cases raising 
issues of fact not within the conventional experience of judges or cases 
requiring the exercise of administrative discretion, agencies created by 
Congress for regulating the subject matter should not be passed over. This is so 
even though the facts after they have been appraised by specialized competence 
serve as a premise for legal consequences to be judicially defined. Uniformity 
and consistency in the regulation of business entrusted to a particular agency 
are secured, and the limited functions of review by the judiciary are more 
rationally exercised, by preliminary resort for ascertaining and interpreting 
the circumstances underlying legal issues to agencies that are better equipped 
than courts by specialization, by insight gained through experience, and by more 
flexible procedure."

Thus, the 
rationale for the primary-jurisdiction rule rests in the desire for uniformity 
of regulation and the availability of a legislatively established body of 
experts. We approved of the doctrine and its rationale in Kearney Lake, Land & Reservoir Company 
v. Lake DeSmet Reservoir Company, Wyo., 487 P.2d 324 (1971), holding that 
the State Board of Control, rather than the district court, should initially 
determine the question of abandonment of water rights.

[¶13.]  In the instant case, appellant attempts 
to invoke the doctrine of primary jurisdiction for the first time on appeal. We 
have said repeatedly that we will not consider an issue raised for the first 
time here unless it concerns the court's jurisdiction or addresses a fundamental 
right. Pine Creek Canal No. 1 v. 
Stadler, Wyo., 685 P.2d 13 (1984); ABC Builders, Inc. v. Phillips, Wyo., 632 P.2d 925 (1981); City of Rock Springs v. Police Protection Association, 
Wyo., 610 P.2d 975 (1980). Since the primary-jurisdiction doctrine rests on the principle of 
consistent and knowledgeable decision-making and concerns not at all the court's 
subject-matter jurisdiction or power to hear the case, we decline to address 
this issue.

[¶14.]  We note in passing, however, that courts 
have historically determined the existence of the employee-employer relationship 
and, therefore, possess sufficient experience and capability to rule on such 
matters.

"* * * The desirability 
of court abstention diminishes where the court faces factual issues of the sort 
that it considers routinely." United 
States v. Zweifel, 508 F.2d 1150, 1156 (10th Cir. 1975), cert. denied 423 U.S. 829, 96 S. Ct. 47, 46 L. Ed. 2d 46.

See also People v. Fremont Energy Corporation, 
Wyo., 651 P.2d 802 (1982).

II

"Whether the Unemployment 
Compensation Statutes require further determinations to establish an entitlement 
to benefits and did the District Court err in not making these 
determinations."

[¶15.]  Section 27-3-311(a)(i), W.S. 1977, of the 
Employment Security Law predicates an award of unemployment compensation upon a 
finding that an applicant who voluntarily left his work did so with good cause. 
That section provided at the time pertinent here:

"(a) An individual shall 
be disqualified from benefit entitlement for eight (8) calendar weeks if the 
commission finds that he:

"(i) Left his most recent 
work voluntarily without good cause; * * *"

This court 
defined "good cause," as contemplated by § 27-3-311(a)(i), in Sage Club, Inc. v. Employment Security 
Commission of Wyoming, Wyo., 601 P.2d 1306, 1310 
(1979):

"`* * * [S]uch a cause as 
justifies an employee's voluntarily leaving the ranks of the employed and 
joining the ranks of the unemployed; the quitting must be for such a cause as 
would reasonably motivate in a similar situation the average able-bodied and 
qualified worker to give up his or her employment with its certain wage rewards 
in order to enter the ranks of the compensated unemployed. The terms "good 
cause" and "personal reasons" connote, as minimum requirements, real 
circumstances, substantial reasons, objective conditions, palpable forces that 
operate to produce correlative results; adequate excuses that will bear the test 
of reason; just grounds for action. * * *' 81 C.J.S. Social Security and Public 
Welfare § 226a, pp. 448-452; Erie 
Resistor Corporation v. Unemployment Compensation Board of Review, 1953, 172 
Pa. Super. 
430, 94 A.2d 367, 369 * * *."

In this appeal 
Scott contends that the district court erred in failing to consider and 
determine whether Fagan terminated his employment for good 
cause.

[¶16.]  We have said in the past that a general 
finding and judgment carries with it every finding of fact which can reasonably 
and fairly be drawn in favor of the successful party. Burk v. Burzynski, Wyo., 
672 P.2d 419, 425 (1983). Furthermore, as an appellate court, we must examine 
the evidence in a light most favorable to the prevailing party and resolve all 
conflicts in the testimony and exhibits in his favor. Unless clearly erroneous, 
we will not disturb the findings of the trial court on appeal. Burk v. 
Burzynski, supra.

[¶17.]  In the instant case, Fagan testified that 
he left his job when Scott refused to pay his wages. Fagan admitted that his 
rent payments were delinquent, but contended that his past-due wages exceeded 
his rent obligation. Fagan testified: 

"* * * He [Scott] wanted 
me to work for free to pay off my rent."

We believe that 
appellant's conviction that Scott was erroneously withholding wages constitutes 
good cause under § 27-3-311(a)(i) and supports the trial court's award of 
damages for lost unemployment benefits.

III

"Whether the District 
Court erred in finding that the Appellee was an employee under the facts of this 
case."

[¶18.]  The definition of "employment" found in § 
27-3-104(b), W.S. 1977, of the Employment Security Law governs the 
employee-or-independent-contractor question in this action for damages resulting 
from lost unemployment benefits. That section provides:

"(b) Services performed 
by an individual for wages is [are] employment subject to this act unless the 
commission finds:

"(i) The individual is 
free from control or direction over the performance of services by contract and 
by fact;

"(ii) The service is 
outside the usual course of business for which the service is performed or it is 
performed outside all of the employing unit's places of business; 
and

"(iii) The individual is 
customarily engaged in an independent trade, occupation, profession or 
business."

Under this 
statute a wage earner is an employee subject to the Act, unless the presence of 
three specified circumstances establishes his status as an independent 
contractor.

[¶19.]  We have had occasion to consider this 
statute in the past. In Unemployment 
Compensation Commission of Wyoming v. Mathews, 56 Wyo. 479, 111 P.2d 111, 
121 (1941), we declined to lay down any general rules, emphasizing that each 
case must be decided upon its own set of facts. We noted in Tharp v. Unemployment Compensation 
Commission, 57 Wyo. 486, 121 P.2d 172, 176 (1942), and See Ben Realty Co. v. Employment Security 
Commission, Wyo., 416 P.2d 220, 223 (1966), that the right of either party 
to terminate services at will indicates the relationship of employer and 
employee. We have identified as a key factor supporting a finding of the 
employer-employee relationship the right of the hiring party to control the 
place of work, the scope of work, and the physical premises where the work is 
performed. Tharp v. Unemployment 
Compensation Commission, supra.

[¶20.]  In the instant case, Scott visited Fagan 
on the jobsite several times a day, gave direction as to the work in progress, 
interrupted work to take Fagan to other jobsites, and required Fagan to work on 
many different projects each week. These circumstances indicate that Scott 
exercised extensive control over Fagan's daily, work-related activities. 
Furthermore, Fagan performed most of his services on the premises owned by 
Scott. Any of the trappings indicative of Fagan's status as an independent 
contractor were purchased by Scott and used by Fagan in order to obtain his 
weekly wages. We conclude that this evidence amply supports the trial court's 
finding that Fagan worked as an employee, rather than as an independent 
contractor, within the contemplation of the Employment Security 
Law.

IV

"Whether the District 
Court erred in awarding punitive damages against the 
Appellant."

[¶21.]  We recently reviewed the policies in 
support of punitive damages awards in Adel v. Parkhurst, Wyo., 681 P.2d 886 
(1984). We pointed out that punitive damages are intended to punish the 
defendant and to deter others from similar conduct, not to compensate the 
plaintiff. 681 P.2d  at 890. Consistent with this purpose of punishment, we 
established a rule requiring evidence of the defendant's wealth whenever the 
plaintiff seeks punitive damages:

"* * * We now hold that 
in the absence of evidence of a defendant's wealth or financial condition an 
award of punitive damages cannot be sustained." Adel v. Parkhurst, supra, 681 P.2d  at 
892.

Since no 
evidence of Scott's financial condition was presented in this case, we will 
reverse that portion of the judgment awarding $500 in punitive damages to 
Fagan.

V

"Whether the Trial Court 
erred in refusing to grant judgment to [Cross-]Appellant for $1,752 unpaid wages 
earned by [Cross-]Appellant."

[¶22.]  Throughout his employment with Scott, 
Fagan kept daily records of the number of hours worked and the wages received. 
These records establish that Fagan worked 1,465.5 hours at $5 per hour and 
1,393.5 hours at $6 per hour, for a total of $15,688.50 in wages. Fagan's record 
books indicate that he received substantially less than that amount in 
compensation.

[¶23.]  Fagan concedes that his records do not 
accurately reflect the number and amount of payments received from Scott. He 
contends, however, that the canceled checks and invoices presented by Scott at 
trial establish payment only in the amount of $13,936, leaving a balance due of 
$1,752.50.

[¶24.]  Fagan's position in this court rests 
entirely on his interpretation of the exhibits presented by both parties at 
trial. The district judge, in his decision letter, described these exhibits as 
confusing and concluded:

"* * * The net result of 
all this confusion * * * is that the Court really cannot be sure that plaintiff 
is owed more wages in any specific sum, and perhaps is owed no dollars net at 
all in this area."

Under these 
circumstances, we have the right and duty to examine the record and reach our 
own independent conclusion from the substantial evidence available as to whether 
Fagan was entitled to additional compensation. Douglas Reservoirs Water Users Association 
v. Cross, Wyo., 569 P.2d 1280, 1285 
(1977).

[¶25.]  After carefully examining the exhibits 
and accompanying testimony, we agree with Fagan that his uncontradicted and 
unimpeached daily records establish that he worked a sufficient number of hours 
to justify compensation of $15,688.50. We cannot agree, however, with Fagan's 
computation of the amount paid by Scott as shown by the canceled checks and 
invoices. Considering only those checks which pertain to Fagan's wages, 
including many checks marked "Advance," two checks purporting to be loans,3 and one check for $311.22 bearing 
the notation "Adv. for truck accident," (No. 809, 6/14/82) we conclude that 
Scott established payment to Fagan of $15,642.72. In addition, Scott produced 
one receipted invoice for $312 (No. 6159, 8/19/82), for which no corresponding 
canceled check was introduced, bringing to $15,954.72 the total, established 
payment to Fagan in wages. Even excluding the questionable advance for the truck 
accident, we conclude that Scott carried his burden of proof with respect to the 
affirmative defense of payment.4 See Morrison v. Reilly, Wyo., 511 P.2d 970, 972 (1973); Rule 8(c), W.R.C.P. Since 
proof of payment constitutes a complete defense to a suit for remuneration, 
Natrona Service, Inc. v. Continental Oil Company, 435 F. Supp. 99, 
113 (D.C.Wyo. 1977), aff'd 598 F.2d 1294 (10th Cir. 1979), we hold that the 
trial court properly denied Fagan's claim for unpaid wages. 

VI

"Whether the Court erred 
in refusing to allow [Cross-]Appellant attorney's fees in the amount of $2,025 
and accruing attorney's fees pursuant to Wyoming Statutes republished 1977, 
Section 27-4-104."

[¶26.]  Section 27-4-104(b), W.S. 1977, upon 
which Fagan bases his claim for attorney's fees, provides:

"Whenever an employee who 
has quit or has been discharged from service has cause to bring suit for wages earned and 
due, and shall establish in court the amount which is justly due, the court 
shall allow to the plaintiff interest on the past due wages at the rate of 
eighteen percent (18%) per annum from the date of discharge or termination, 
together with a reasonable attorney fee and all costs of suit." (Emphasis 
added.)

Since Fagan 
failed to establish in court that wages were justly due, he cannot recover 
attorney's fees pursuant to this provision.

[¶27.]  The judgment of the district court is 
reversed with respect to punitive damages and affirmed in all other 
respects.

1 These damages were 
computed according to the formula set out in § 27-3-303, W.S. 1977, of the 
Wyoming Employment Security Law.

2 Section 27-3-601, W.S. 
1977, creates the Employment Security Commission of Wyoming. Section 27-3-602, 
W.S. 1977, charges the Commission with administering the Wyoming Employment 
Security Law, §§ 27-3-101 through 27-3-704, W.S. 1977, which duty includes 
determining an applicant's eligibility for unemployment 
benefits.

3 Fagan testified that 
loans were to be deducted from future wages.

4 The discrepancy between 
our computations and those of Fagan results from (1) his unexplained failure to 
include checks in Exhibit L totaling more than $1,000; (2) his failure to 
account for the receipted invoice for $312; (3) his erroneous exclusion of a 
$350 payment as outside the pertinent time frame; and (4) his treatment of the 
advance for the truck accident as an irrelevant payment to a "Truck 
Account."

ROONEY, Chief Justice, specially 
concurring.

[¶28.]  I hesitate to set forth the resolution 
which I would make of this appeal inasmuch as the net result would not be other 
than that reached by the majority of the court. In short, I agree that the 
evidence was sufficient to reflect the existence of an employer-employee 
relationship. I also believe the evidence reflects an effort by both parties to 
conceal the employer-employee relationship by setting up indicia of an 
independent contractor relationship which did not, in fact, 
exist.

[¶29.]  Accordingly, I would hold both parties to 
have come into court with dirty hands and I would have left them in whatever 
positions they found themselves at the time the action was started. Walker v. Board of County Commissioners, 
Albany County, Wyo., 644 P.2d 772, 776 (1982); Takahashi v. Pepper Tank & Contracting 
Co., 58 Wyo., 330, 131 P.2d 339, 356 (1942).