Pacific Lumber Co. v. Industrial Acc. Com. , 22 Cal. 2d 410 ( 1943 )

CURTIS, J.

On June 21, 1941, while cutting timber on land belonging to petitioner, the Pacific Lumber Company, John Turkovich was struck by a falling tree and suffered a fracture of his leg. He filed a claim for compensation against the company before the Industrial Accident Commission. His claim was contested by the company on the ground that Turkovich was not in its employ at the time he received his injury. The commission found to the contrary, its finding being that “John Turkovich, while employed as a tie maker on June 21, 1941, at Redcrest, California, by Pacific Lumber Company, sustained injury arising out of and in the course of aforesaid employment when a tree fell upon him fracturing his right leg.” Based upon this finding an award was made in favor of Turkovich. The sole question before us in this proceeding is whether there was any substantial evidence before the commission supporting this finding.

At the time Turkovich sustained said injury he was working under a written contract between himself and the Pacific Lumber Company (referred to hereafter as the company). This written contract purported to be a conditional sales agreement, and it recited that the company agreed to sell and Turkovich agreed to buy certain designated trees for the purpose of cutting them up into logs and splitting the logs into ties, posts, shakes, stakes, etc., referred to in the written contract as “redwood split products.” The price to be paid by Turkovich, the “Buyer,” was determined “on the basis of board measure content of such timber suitable for manufacture by Buyer of such redwood split products.” Such board measure and suitability were to be determined by a representative of the company and his decision was made conclusive upon both parties. This written contract was dated March 18, 1941, and provided that the ‘ ‘ Seller hereby grants to Buyer a limited license of ingress into and egress from and occupancy of the portions of the real estate hereinabove described [being the land upon which the designated trees were standing] solely for the purpose of cutting said timber, so marked and designated, manufacturing or reducing the same into such redwood split products, storing such products and removing the same for sale and delivery elsewhere, . . . provided that this agreement is upon the condition that Buyer shall begin to cut or cause to be cut said timber so marked and designated on or before March 18, 1941, and shall have completed all of the cutting, reducing, manufacture, storage and removal of the resulting redwood split products herein referred to from the premises hereinabove described not later than June 30, 1941. ...” Payment of purchase price of said timber was to be made on the 1st and 16th days of each month, or at such other times as may be mutually agreed upon.

Paragraphs 5 and 8 of the contract read as follows:

“5. Seller may at all reasonable times send inspectors on , the premises in order to determine whether or not Buyer’s operations are being conducted in a wasteful manner or are unnecessarily wasteful and destructive of the timber or the real property on which it is located. Buyer agrees to abstain from any practice which in the judgment of the Seller ... is wasteful or destructive. For the purpose of preventing unnecessary waste Seller shall have the right to demand that all portions of each tree suitable for manufacture into split stock products be so utilized by Buyer.

“8. This agreement, or any right thereunder, may be assigned by the Seller but shall not be assignable by the Buyer without the consent of the Seller. ’ ’

The company reserved the title and ownership of the timber and products manufactured therefrom until the purchase price was fully paid, with the proviso that Turkovich might have vested in him the title to such portions of said timber in lots of not less than 1,000 feet, board measure, upon payment of the purchase price. In case the Buyer failed to pay for the timber covered by the written contract, the company was given the right, among others, to sell the products manufactured therefrom to itself, at private sale without notice, and to hold Turkovich for the balance due, if any, of the purchase price after applying proceeds of said sale to payment of the purchase price.

If we construe the written contract without reference to any extrinsic considerations, we think it shows that the company retained control over Turkovich in many essential respects. The trees which were covered by the contract were designated and marked by the company, and Turkovich was required to convert them into “redwood split products.” Turkovich had no part in their selection, nor did he have any right to the trees which he purported to buy except to use them for this one purpose. The company retained the right to determine “the board measure content” of such timber suitable for manufacture into split products, and its determination as to suitability and board measure was conclusive on both parties. The company retained the right to send inspectors on the premises to determine whether Turkovich’s manner of operation was wasteful or destructive of the timber or of the real property on which the timber was standing. The company retained the right to demand that all portions of each tree suitable for manufacture into split stock products be utilized by Turkovich. The company also retained the right to assign the written contract and to prevent Turkovich from assigning it or any of his rights thereunder. Turkovieh is the one who had the right to cut the trees but he could not assign that right, thereby showing that although the transaction purported to be a sale, it called for purely personal services on the part of Turkovich.

The company retained the title to the timber and all products manufactured therefrom until the purchase price thereof was paid. It also retained the right to restrict the sale of the manufactured products by Turkovich to lots of not less than 1,000 feet, board measure. The company retained possession and control over the manufactured products as security for the payment of any amount due from Turkovich, and the right in a summary manner to sell the same to itself without notice at private sale. After applying the proceeds of the sale—less expenses, including attorney’s fees—to the amount due from Turkovich, the company retained the right to hold Turkovich personally for any balance due in case the proceeds of the sale were not sufficient to satisfy said indebtedness. While the company blandly states that Turkovich had full control over his work, we submit that a reading of the contract shows to the contrary. We might ask what independence Turkovich actually had under the contract. As we will later show, only a few trees were covered by any one contract and, when this contract was finished, a like contract would be given for additional trees. Any manifestation of independent action on Turkovich’s part (such as for instance, selling ties to persons other than the company) would simply end his employment. The company would simply stop “selling” trees to him and he would be through. The practical effect of the contract was to give the company complete control over Turkovich.

However, in a proceeding before the Industrial Accident Commission for an award for personal injuries, where it is contended that the written contract between the parties is not a contract of employment, oral evidence is admissible to show the inception of the agreement, the situation of the parties at the time of the execution of the contract, and the practical construction of the contract by the parties thereto in their subsequent acts. (Carlson v. Industrial Acc. Com., 213 Cal. 287 [2 P.2d 151]; Luckie v. Diamond Coal Co., 41 Cal.App. 468 [183 P. 178].) Pursuant to the above proposition of law, the Industrial Accident Commission at the hearing of the present matter received in evidence not only the written contract, but evidence of the parties as to their business relations, their situation at the time the written contract was executed, and the subsequent acts of the parties thereto in operating under said contract.

The evidence shows that the company was the owner of certain timberland and was engaged, along with the general business of manufacturing and selling lumber, in the business of manufacturing redwood split products from timber belonging to it. This was a regular branch of its business, and it employed a number of tie makers for this purpose. It required all such split products for its own business, and in addition thereto it frequently had to buy such products from other parties in order to meet the demands of its trade. All such split products so produced by its employees were of course the property of the company and were subsequently sold by it to the trade.

There was but slight conflict in the evidence which showed that Turkovich was a tie maker by occupation and, as such, he was engaged in felling trees, cutting them into logs, and splitting the logs into ties and fence posts, referred to in the contract as “redwood split products.” He had been so engaged with the company some four years prior to receiving his injury. At the beginning of his employment he was assigned a certain definite strip of land on which there were trees suitable to be manufactured into redwood split products. It was orally agreed between him and the company that he would convert these trees into ties and posts, and that he was to receive for his services a certain price per tie or post depending upon the size and measurement of the tie or post produced. He was admittedly an employee of the company under this oral agreement and was entitled to hospital service, social security benefits and workman’s compensation. This form of employment continued until some time in 1940, when Mr. Skiffington, who had charge of the split products department of the company, came to Turkovich and told him that the company was going to adopt a new system under which the tie makers were to produce split products from the timber belonging to the company. Under this new system the tie makers were to operate under a written contract and were to be without hospital service, social security benefits and workmen’s compensation. To quote the testimony of Mr. Skiffington, when asked what Turkovich said when he was asked to sign the contract, “Well, he didn’t like it too well, but he signed the contract and went on to work.” This statement in a way agrees with that of Turkovich, who, when asked what he said on that occasion, stated “Well, what can I say? I was against it, you know, but I got to do something. I got a family to support it, but I can’t get no other work because I am old age.” Turkovich signed three of such contracts, each providing for the conversion of a certain number of designated trees into ties and posts. The first was dated October 24, 1940, the second December 14, 1940, and the third March 18, 1941. It was while working under this third contract that he was injured on June 21, 1941.

Petitioner, the Pacific Lumber Company, concedes that prior to the adoption of the plan providing for a written contract, Turkovich was in its employ and entitled to workmen’s compensation and other benefits now enjoyed by employees. Turkovich testified that after the adoption of the new plan and the signing by him of the first of the three written contracts, as stated above, and during the entire time he was working under said contracts, he carried on his work as he had while he was admittedly an employee. He cut the trees covered by his contracts and converted them into ties and posts, and left the ties and posts on the ground as he did while working as an employee, and the company sent its trucks and hauled them away as it did previously. He received practically the same pay for his services after as he did before he signed any written contract. Before he worked under the new plan, he was paid as an employee every two weeks, and the written contract called for a settlement on the 1st and 16th of each month. He worked the same hours both before and after the new plan was put into operation. He never paid any money on the so-called purchase price of the timber. The company took all ties and posts which he made from the company’s trees, and he sold none of them to anyone. There is no evidence that the company ever agreed to pay him any stated amount for these ties and posts, or that he ever agreed to accept any price for the ties and posts which he had made. The company, so far as the records show, just assumed either that the ties and posts were its property or that under the terms of the contract between it and Turkovich it had bought the ties and posts from him. Mr. Skiffington testified that he paid Turkovich $15.50 per thousand board feet for ties of a certain length, but there is nothing in the record to show that he ever told Turkovich that he was to receive that amount, or that Turkovich ever knew what price he was receiving for “his” ties and posts. There are in evidence two checks from the company to Turkovich with certain notations thereon indicating that they were given for “Split Stock Purchases,” but neither the amount of the stock “purchased” nor the price at which it was purchased is shown on either of these cheeks or on any other exhibit or testimony before the commission. He accepted the checks and, as they were practically the same in amount as those received by him before he started work under the written contracts, he asked no questions regarding them.

If we view this contract in the light of the situation of the parties at its inception, we have this situation. The company was in the business of converting its timber into ties and posts, and other redwood split products, and selling the finished products to the trade. Mr. Skiffington, in charge of the split products department of the company, so testified. He also testified that the company obtained its principal supply of such products from timber growing upon its own lands, but that the company frequently found it necessary, in order to meet the demands of the trade, to purchase such products from outside sources. It does not seem reasonable that the company, in entering into these contracts with its tie makers, ever intended that these products from its own timberlands would be sold by the tie makers to outside parties. Especially would this seem to be so when the supply from its own timber was insufficient to meet its own needs.

Beading the written contract in the light of this evidence, it would seem that the commission could reasonably have drawn the inference that the underlying purpose of said contract on the part of the company was to have its timber made into redwood split products for its own use, and for the purpose of meeting the demand of its trade, rather than to sell them to the tie makers, to be resold by the latter to third parties. Furthermore, we think that this was the construction placed on the contract by the acts of the parties subsequent to its execution. Turkovich testified that he worked the same after this new plan was adopted as before. He worked the same hours and received the same pay; that he cut and split the trees into ties and posts as he did when he was admittedly an employee, and that the company came with its trucks and hauled them away as it did before. The written contract under which he was working at the time of his injury required that Turkovich should begin to cut the timber so marked and designated on or before March 18, 1941, and should complete all of the cutting, reducing and' manufacture, storage and removal of the resulting redwood split products therein referred to from the premises described in the contract not later than June 30, 1941.

The construction placed upon this provision of the contract is shown by the evidence just narrated. Turkovich removed none of the manufactured products from the company’s premises. In fact it is doubtful whether he ever had a chance to do so, as by his testimony, which is undisputed, after he cut and split the trees into ties and posts, the company came with its trucks and hauled them away as it did when he was working as an admitted employee of the company. The company treated the ties and posts produced under the written contract as its own property in the same manner as it did those previously produced by Turkovich as its employee, and so did Turkovich. He never assumed ownership over them. He paid nothing on the contract. He made no attempt to sell them nor to dispose of them in any manner, nor did he object at any time to their being hauled away by the company as it had previously done.

These acts of the parties under the contract after its execution justified an inference on the part of the commission that the parties thereto did not regard the ties and posts after their manufacture as the property of Turkovich, for the reason that the company assumed control of them and treated them the same as when they were produced by Turkovich as an admitted employee of the company, and this was done with the consent and concurrence of Turkovich.

Therefore, whether we consider the situation of the parties at the time of their entry into the written contract or the construction placed on the contract by the subsequent acts of the parties, we find ample justification for holding that the parties contemplated that these products of the company's timber in the shape of so-called "redwood split products” were to become the property of the company when produced under the terms of the contract. The contract therefore, as construed with reference to the situation of the parties at the time of its execution and the subsequent acts of the parties, was nothing more nor less than a method employed by the company to have its timber converted into split products for its own use to be used in its own business, and that it never intended that Turkovich should own the products or have any right to sell them. In legal effect it was a contract of employment of Turkovich by the company.

Before closing this opinion, we wish to call attention to some further points discussed in the briefs filed in the case. The first of these concerns the compensation received by Turkovich while working under the written contracts. We have made the statement that Turkovich received practically the same compensation after he operated under the written contract as he did while working for the company as an admitted employee. Turkovich so testified. At the close of the hearing before the commission the referee asked for a statement from the company showing the amount received by Turkovich before and after the written contract was entered into. The company, in answer to the request, mailed to the commission a letter of date October 1, 1941. This letter purported to give the receipts of Turkovich for one year prior to the execution of the first of said contracts, which showed that he received only a little over $100 per month. The letter also purported to give his receipts for ten months during which he was working under the written contracts and it showed that his monthly receipts were over $190 per month. In this letter the receipts of Turkovich were given for the month of April, 1941, at $367.11 and for the month of May, 1941, at the sum of $403.88. The company also introduced in evidence during the hearing, its Exhibit 6, which contained two checks given to Turkovich by it for the two months of April and May, 1941. The check for the month of April contained a notation as follows:

“Split Stock Purchases..................$367.11

Less Tour Trade Ledger Account........186.36

$180.75”

The check was for $180.75 only. A similar situation is shown on the check given for the month of May and is as

follows:

“Split Stock Purchases..................$403.88

Less Tour Trade Ledger Account........201.28

$202.60”

This cheek was only for said amount of $202.60. As we interpret the notations on these checks, the item “Split Stock Purchases,” from the company’s standpoint, represents the amount the company paid Turkovich for the split products produced by him for the respective months, and the item “Less Tour Trade Ledger Account” represents the amount Turkovich owed the company under the conditional sales contract for the timber used by him in producing said products. If we are correct in this interpretation of the checks, then Turkovich for these two months received only about one-half the amount which the letter of October 1 purports to show he did receive. As to the remaining months during which Turkovich operated under written contracts, there is nothing in the record to show directly that they are incorrect, nor is there anything to show that they are correct, as the company only offered in evidence the two checks for the months of April and May. As the statement in the letter of October 1 is shown to be decidedly incorrect for these two months, we do not feel justified in giving it full credit in respect to amounts paid Turkovich for the remaining months. This letter of October 1 simply produces a conflict in the evidence as to Turkovich’s receipts under the written contracts. The commission evidently accepted Turkovich’s testimony upon that issue and we are bound by its finding.

Some stress is laid by the company upon the fact that prior to the time Turkovich entered its employ as a tie maker, it had operated under written contracts similar to those employed by it and under which Turkovich was working at the time of his injury.. We are unable to perceive how that fact can have any particular bearing upon its relations with Turkovich. It makes the further point that it changed its plan of operations from the relation of employer and employee to that set forth in the written contract for reasons other than to avoid the benefits and privileges that the law now accords to an employee. It undoubtedly had these latter in mind, as its representative informed Turkovich that under the newly adopted plan, the company would not be liable for either hospital privileges, social security or workmen’s compensation. The reason for the change of plan is in no way controlling, for if under the new plan the status of employer and employee still continued, the reason for adopting the written contract plan is not material. The written contract under which Turkovich was operating at the time of his injury was prepared entirely by the company, and, therefore, according to the well established rule of construction, is to be construed in favor of Turkovich and against the company. (Laidlaw v. Marye, 133 Cal. 170 [65 P. 391].) Furthermore, the provisions of the Labor Code are to be liberally construed by the courts with the purpose of extending their benefits for the protection of persons injured in the course of their employment. (See. 3202, Lab. Code.) (See, also, Liptak v. Industrial Acc. Com., 200 Cal. 39 [251 P. 635]; Harris v. Industrial Acc. Com., 204 Cal. 432 [268 P. 902]; LaFranchi v. Industrial Acc. Com., 213 Cal. 675 [3 P.2d 305].)

The commission under the facts before it found that Turkovich was an employee of the company at the time of his injury, and that the injury sustained by him arose out of and in the course of his employment. Whether Turkovich was an employee or not was a question of fact for the determination of the commission. (Schatter v. Industrial Acc. Com., 11 Cal.2d 46, 51 [77 P.2d 836].) In reviewing the findings of the commission, the courts are without power to disturb them unless there is a lack of substantial evidence. The courts are not concerned with conflicts. (Associated Indem. Corp. v. Industrial Acc. Com., 18 Cal.2d 40, 42 [112 P.2d 615].) Where there is substantial evidence to support the findings and order of the commission, the reviewing court may not substitute its views for those of the commission and annul the award. (Morris v. Industrial Acc. Com., 40 Cal.App.2d 94 [104 P.2d 408].) If the findings of the Industrial Accident Commission are supported by inferences which may fairly be drawn from evidence, even though the evidence is susceptible of opposing inferences, the reviewing court will not disturb the award. (Schaller v. Industrial Acc. Com., supra.)

In view of these authorities as applied to the evidence before the commission, we are of the opinion that the commission was justified in finding that Turkovich was an employee of the company at the time of his injury. Accordingly, the award in his favor should be affirmed and it is so ordered.

. Gibson, C. J., Shenk, J., Carter, J., and Traynor, J., concurred.