No. 86-194

INTHE SUPREME COURT OF THE STATE OF MONTANA
1987

DARRELLL. SCHROCK, Claimant and Cross-Appellant,-vsEVANS TRANSFERAND STORAGE, Employer,and STATE COMPENSATION INSURANCEFUND, Insurer,
Defendants andAppellants, and
NORTH AMERICANVAN LINES,Employer, and LIBERTY MUTUAL INSURANCECO., Insurer,
Defendants and Respondents.

APPEAL FROM: TheWorkers' CompensationCourt, TheHonorable Timothy Rea-rdon,Judgepresiding.
COUNSELOF RECORD:
ForAppellant: Hughes,Kellner, Sullivan & Alke; Thomas E. Martello, Helena, Montana David L. Holland and Leonard J. Haxby, Butte,Montana
For Respondent: Garlington, Lohn & Robinson; LarryW. Jones,Missoula, Montana

Submitted on Briefs: Oct. 9,1986 Decided: 

### February 13, 1987

ClerkMr. Justice JohnConwayHarrison delivered the Opinionof the Court.

This appeal arises from a judgment and order of the Workers' Compensation Court. That court awarded claimant temporary total disability benefits from one of twopossible employers. Save for a mathematical correction,we affirm in full. The originsof this case stretchback toDecember 1983, when Evans Transfer and Storage of Butte,Montana,signed an agency agreement with North American Van Lines. North American is awell knownmotor vehicle common carrierengaged primarily in transporting household goods, wares and merchandise throughout the United States and Canada. In the ordinary course of its business, North American often leases trucks and trailers from smaller, local moving companies such
asEvans Transfer. Under the terms of this agency agreement, Evans Transfer leased a moving truck and trailer toNorth American for the latter's exclusive use and possession. Evans Transfer, however, was required to furnish a "qualified driver" for the truck and any additional necessary labor. In January 1984, Evans Transfer hired the claimant, Darrell Schrock, to drive the vehicle leased to North American. However, before becoming qualified to drive for North American, a driver was required to attend a North American training schooland thereafterbe formallyaccepted. So in May 1984, Darrell, along with hiswife, Shauna, attended a training schoolheld inBillings. Upon successful completion of the school, Darrell submitted his formal employment application to North American. North American, though, rejected Darrell's application because of a chronicallyweak back that renderedhim a high risk employee. Following Darrell's rejection, Evans Transfer and Shauna Schrock submitted to North American an employmentapplication under Shauna's name. Shauna had also successfully completed North American's training school and

was technically eligible to apply for employmentas a driver. However, she did not knowhow to drive avehicle such as the
one leased to North American. Evans Transfer submitted this application knowing that if North American approved the application,Darrell would do all the actual driving. Evans in fact told Shauna to sign a statement indicating that Shauna had taken a road test although Shaunahad never taken such a test. North American ultimately approved Shauna's employment application, certifying her to drive for North American. Evans Transferhad earlierentered into an "Independent Interstate Contractor's Agreement" with Darrell, whereby Evans provided Darrell the tractor and trailer leased to North American. Once Shauna's application was accepted, Evans allowed Darrell to drive thisvehicle containing North American shipments. Because he was not qualified to drive for North American, Darrell would print Shauna's North American authorized driver number on log book entries and give her authorized driver number to the North American dispatch office when calling to request a shipment. With Evans' knowledge, Darrell would have Shauna sign, or forge her signature on, log book entries submitted to North American. North American was not told of the fact that Darrellwas actually driving. On December 11, 1984, Darrell, working alone, was injured by a falling piece of equipment while unloading a truck carryingaNorthAmerican shipment. Darrell suffered a depressed skull fracture and has not worked since December 20, 1984. He timely filed aworkers' compensationclaim,but both Evans Transfer and North American denied liability. The Workers' Compensation Court found thatDarrellwas
an employee of Evans Transfer but not of North American andthat he was entitled to weekly temporary total disability benefits of $224.52. Darrelland Evans Transfer now appeal. The issues before this Court on appeal are (1)whether the courtbelow correctlyheld that claimantwas an employee of Evans Transfer rather than an independent contractor; (2) whether the courtproperly held that claimantwas not also an employee of North American; and (3) whether the court properly computed claimant's disabilitybenefits. We first consider Darrell's employment status with Evans Transfer. FJe note initially that the mere fact that the contract in effect between Evans Transfer and Darrell designated Darrell as an independent contractor is not dispositive. Darrell must have been independent in fact. Carlson v. Cain (Mont. 1983), 664 P.2d 913, 920, 40 St.Rep. 865,875. This analysis is founded upon our statutory definition of independent contractor. Section 39-71-120,MCA, defines an independent contractor as one who renders service in the

course of an occupationand: (1)has been andwill continue tobe free from control or direction over the performance of the services, both under his contractand in fact;and

(2) is engaged in an independently established trade, occupation, profession, orbusiness.
Todetermine whether one isactually free from control,
we adopted in Sharp 

### v. Hoerner Waldorf Corp. (1978), 178 Mont. 419, 425, 584 P.2d 1298, 1301-02, a four factor test set forth in Larson's Workman's CompensationLaw, Vol lC, S 44.00, p. 8-40. The four factors to be considered are:

(1) direct evidence of right or exercise of control; (2) method of payment; (3) furnishing of equipment; and (4) right to fire. The factual determinations reached by the court below remain largely unchallenged; Evans Transfer essentiallydisputes only the legal conclusions. Therefore, this issue is one of law and this Court is free to reach its own conclusions from the evidencepresented. See Solheimv. Tom Davis Ranch (Mont. 1984), 677 P.2d 1034, 1038, 41 St.Rep. 326, 329. Nevertheless, our own review of the evidence persuades us that the court below correctly found that Darrell was not free from control in fact and thereforewas
an employee of Evans Transfer, rather than an independent contractor. First,under their agreement, Evans Transfer furnished Darrell the equipment necessary to perform his obligations. When the employer furnishesvaluable equipment, an employment relationship is strongly suggested. 1C Larson, 5 44.34(a)

## , p. 8-121. This notion is closely related to the right of control. Any owner who furnishes equipment asvaluable as a tractor and trailer naturally maintains an interest in its
care and typicallywill retain a right to supervise its use. In its agreement with Darrell, Evans Transfer required Darrell to maintain properly the equipment provided him and required Darrell to account for all the assigned equipment "as often as required" by Evans. For these reasons,Larson finds it "not surprising that there seems to be no case on record in which the employer owned the truck but the driver

was held to be an independent contractor." 1C Larson, 

### 5 44.34(b), p. 8-139. Further, the parties agree that Evans Transfer enjoyed the right to fire Darrell if he failed to perform proper maintenance on the equipment furnishedhim. Consideration of the factors in this test is not a balancing process. Direct employment status can be established upon satisfaction of one of the four factors. Sharp, 584 P.2d at 1302. Our study of the record convinces

us that Darrell was not in fact free from control and therefore was an employee of Evans Transfer at the time of the accident.Our second issue iswhether Darrellwas also a employee ofNorthAmerican as of the date ofhis injury. TheWorkers' Compensation Court held that Darrell was not an employee of North American as it found no contractual relationship between the twoparties. We agree. Appellants' only argument of merit rests upon the fact that Darrellwas injured in his capacity as a helper,not as
a driver. Evans Transfer correctly notes that the agency agreement in effect between Evans and North American authorized Evans to provide on its own any necessary additional labor and obligated North American to maintain workers' compensation insurance for these helpers. Thus,
runs the argument, Evans Transfer, as an agent, had the express authority to bind North American when it hired additionalhelpers. Had Evans employed Darrell merely as a helper, its argument might be persuasive. But such is simply not the
case. Evans Transfer intended that Darrell drive its truck leased to North American. Of this there is no argument. That North American rejected Darrell's application to drive this truck had little effect. After Darrell'srejection,Ron and Linda Evans and Francine Coombe, respectively the owners/operators and secretary of Evans Transfer,had Shauna submit her application to North American, knowing that Darrell would drive thevehicle. Evans Transfer then allowed Darrell to drive its vehicle containing North American shipments by having Shauna sign, or by having Darrell forge his wife's name on, the log book entries submitted to North American. Shauna did not even accompanyher husband on every shipment. Evans and the Schrocks took great pains to see that NorthAmericanwasnot told of the fact that Darrellwas driving the vehicle. The Schrocks,the Evanses and Francine Coombe all testified as to these facts. The fact that drivers help load and unload shipments did not turn Darrell intoa helper.Looking at these facts,it is clearthat Evans Transfer exceeded its authority by hiring Darrell as a driver. The agency agreement allowed Evans Transfer to hire only "qualified" drivers. North American's rejection of Darrell obviously indicated thatDarrellwasnotqualified. Further,an agent never has authority toperform an act "which is and is known or suspected by the person with whom he deals to be a fraud upon the principal." Section 28-10-409, MCA. Fraud is defined in S 28-2-405, MCA, as follows: Actual fraud,within the meaning of this part, consists in any of the following acts committedby aparty to the contract or with his connivance with intent to deceive another party thereto or to induce him to enter into the contract:

(3) the suppression of that which is trueby onehaving knowledgeorbelief of the fact;

(5) any other act fitted to deceive.
It is clear from the facts presented in the record that Evans Transfer and the Schrocks actively worked to deceive North American. The activities of Evans Transfer and the Schrocks,which allowed Darrell to drive the vehicle leased to North American in the face of North American's rejection of Darrell's application constituted actual fraud. The Schrocks and Evans Transfer cannot now be allowed to argue that this is irrelevant because of the fortuitous happenstance that Darrell was not injured while actually driving. Following North American's rejection, Evans' employment of Darrell as a driver went beyond the scope of its authorityand did notbind NorthAmerican.Finally, all parties challenge the Workers' Compensation Court's computation of weekly disability benefits. Pursuant to § 39-71-701,MCA, Darrell is entitled to 66 2/3%of his weekly wage. In its findings, the court found that Darrell's average weekly wage was $336.61. In arriving at this amount, the court accepted as accurate a computer printout of Darrell's earnings submitted by Evans and relied uponby both Evans andNorthAmerican. Darrell now objects to the lower court's reliance on this printout. He does not dispute the accuracy of this printout, only that it was never introduced into evidence. We find no error. While thisprintoutwas notpresented for admission, it represents a true and concise summary of three exhibits, all of which were admitted by stipulation of the parties. Had Darrell any problemwith the figures contained within the exhibits, he had ample opportunity to question their accuracy, either at the time of their admission or during the testimony of the exhibits' authors. One of these exhibits consists of several hundred pages and was thrust upon the lower courtby Darrell's counsel without benefit of explanation. The defendants distilled these voluminous records into a manageable summary and presented it to the court as an appendix to Evans' brief. The court's reliance upon this summarywasnot in error. The computer printout relied upon by the court shows Darrell's net income from May through December, 1984. However, the court utilized only the months of June through November, 1984, to determine Darrell's average weekly wage. The court accepted these months as the only full months of income submitted. Aside from a mathematical error, we find the court's computation correct. Given the often lengthy delay that typically resulted before Darrell received his payment from NorthAmerican via EvansTransfer,plus the fact that Darrell worked only portions of the months of May and December, thecourt did not abuse its discretion in limiting its analysis to the June-Novemberperiod. However, the Workers' Compensation Court did not make clear its method of computation. The court evidently totalled Darrell's earnings for the six-month span and then, to find his average weekly wage, divided by 24 (apparently six months at four weeks per month). Obviously, there are more than 24 weeks in six months. We therefore remand and instruct the Workers' Compensation Court to recompute Darrell's weekly disability benefits in accordance with this opinion. We otherwise affirm in full.

n

We concur: 

# 44(7v iefJustice