Thornock v. Pack River Management Co.

No. 8 6 - 3 2 6
IN THE SUPREME COURT OF THE STATE OF MONTANA
1987
LARRY THORNOCK ,
Plaintiff and Appellant,
-vs-
PACK RIVER MANAGEMENT CO., PACK RIVER
INVESTMENT CO., and MISSION INSURANCE
COMPANY,
Defendants and Respondents.
APPEAL FROM: District Court of the Twentieth Judicial District,
In and for the County of Lake,
The Honorable C.B. McNeil, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Michael J. McKeon, Anaconda, Montana
For Respondent:
Larry W. Jones; Garlington, Lohn & Robinson, Missoula,
Montana
Submitted on Briefs: Jan. 8, 1987
Decided:- July 30, 1 9 8 7
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-.XI
& -
Clerk
Mr. Justice Fred J. Weber delivered the Opinion of the Court.
In this personal injury action, Mr. Thornock appeals
from the Lake County District Court's summary judgment in
favor of defendant Pack River Management Company. We affirm.
The issues are:
1. Was summary judgment improper because factual issues
remain in dispute?
2. Did the District Court err in granting summary
judgment before discovery was completed?
Mr. Thornock's arm was traumatically amputated while he
was operating a piece of equipment at work. His employer was
Flathead Lumber Company (Flathead Lumber). Mr. Thornock has
received a full settlement from Flathead Lumber through
workers' compensation.
Mr. Thornock brought this action to recover damages from
entities other than his employer. This appeal involves only
the claim against Pack River Management Company (Pack River).
Mr. Thornock abandons any further claim against defendant
Pack River Investment Company in his brief on appeal. The
claim against defendant Mission Insurance Company has been
stayed because Mission is in conservatorship.
Pack River is a Washington partnership whose members own
85% of the stock in Flathead Lumber, a Montana corporation.
Mr. Thornock sued Pack River on a theory that it owed him a
duty to provide a safe place to work, based on its relation-
ship with his immediate employer, Flathead Lumber. He relied
upon this Court's opinion in Reynolds v. Burlington Northern,
Inc. (Mont. 1980), 621 P.2d 1028, 37 St.Rep. 1883, as author-
ity for the duty. The District Court concluded that because
of factual differences, a casting aside of the corporate
cloak was not justified in this case as it was in Reynolds.
It ruled that Mr. Thornock had presented no factual situation
which would allow him to pursue a separate claim against Pack
River. Mr. Thornock appeals from the resulting summary
judgment for Pack River.
I
Was summary judgment improper because factual issues
remain in dispute?
Mr. Thornock argues that summary judgment was improperly
granted. He says material issues of fact remain, under his
theory that Pack River is liable as a parent company to its
subsidiary Flathead Lumber. He also maintains that Pack
River is liable under either an alter-ego or a
principal/agency theory.
In a deposition, the manager of Flathead Lumber charac-
terized the relationship between Pack River and Flathead
Lumber as a parent-subsidiary relationship. Mr. Thornock
argues that under this Court's opinion in Reynolds, that
admission prohibits summary judgment because it requires Pack
River to provide a safe place for him to work.
In Reynolds, plaintiff was a lumber company employee who
was badly injured while loading woodchips into defendant
Burlington Northern's railroad cars. Plaintiff's place of
employment was a railroad siding leased from the defendant
railroad by plaintiff's employer, the wholly-owned subsidiary
of a wholly-owned subsidiary of the railroad. Several rail-
road cars had been placed on the siding by railroad employ-
ees, and the brakes had not been set. A string of empty cars
began to roll and struck a cable on which the plaintiff was
working, throwing him into the air and breaking his leg.
This Court stated that " [t]he plaintiff was performing work
more directly connected to the operations of a railroad than
to the operations of a lumber company," and that "[tlhe
plaintiff was working directly in the operations of the
railroad in every sense of the word." Reynolds, 621 P.2d at
1037 and 1038. The Court held that the defendant railroad
company owed plaintiff the duty to provide him with a safe
place to work. Reynolds, 621 P.2d at 1038.
In the present case, Mr. Thornock was injured while
working in the Flathead Lumber mill using equipment owned by
Flathead Lumber. There is no suggestion that Pack River was
or is engaged directly in the lumber business, or in a di-
rectly related business. In addition, nothing has been
presented to show that Pack River was an operating entity
engaged in operating its business at the place of injury.
This is in direct contrast to the operation of the railroad
by Burlington Northern in Reynolds. We conclude that these
factual differences are controlling and that as a result Mr.
Thornock has failed to prove that Pack River owed him the
duty to provide a safe place to work under Reynolds.
Under his alter ego and principal/agency theories, Mr.
Thornock argues that Flathead Lumber was so controlled by
Pack River that it "amounts to nothing more than a facade
that should be disregarded." He contends that the corporate
cloak should therefore be cast aside, allowing the Flathead
Lumber shareholders to be sued. The rule, as cited by Mr.
Thornock, is that the corporate cloak will not be cast aside
under either an agency or an alter ego theory unless it
appears "not only that the corporation is controlled and
influenced by one or a few persons, but, in addition . . .
that the corporate cloak is utilized as a subterfuge to
defeat public convenience, to justify wrong, or to perpetrate
fraud." 18 C.J.S., Corporations, sec. 6, p. 378, cited in
State v. Holmes (1942), 113 Mont. 303, 308, 124 P.2d 994,
996.
Mr. Thornock refers to deposition testimony in which the
manager of Flathead Lumber stated that Flathead Lumber was a
subsidiary of Pack River and that major corporate decisions
were discussed with the managers of the Pack River partner-
ship. The manager also testified, however, that he himself
made the day-to-day decisions and conducted the day-to-day
operation of Flathead Lumber. Further, Mr. Thornock has not
shown by affidavit or deposition any indication that Flathead
Lumber was utilized as a subterfuge to defeat public conve-
nience, to justify wrong, or to perpetrate fraud. We con-
clude that summary judgment is not precluded under the alter
ego or principal/agency theory.
We further point out that Mr. Thornock has failed to
show a legal theory under which recovery would be allowed had
he been able to prove that Pack River in fact was the princi-
pal for which Flathead Lumber was the agent, or that Pack
River was the alter ego of Flathead Lumber. Had he been
successful in proof of either the principal/agency or alter
ego theory, the result would be that Pack River would be
classed as the same entity as Flathead Lumber. Flathead
Lumber has discharged its responsibility for Mr. Thornock by
securing workers' compensation insurance, with the result
that neither Flathead Lumber nor Pack River would be sepa-
rately subject to liability for the injury which was covered
by the Workers' Compensation Act.
I1
Did the District Court err in granting summary judgment
before discovery was completed?
Mr. Thornock maintains that summary judgment was improp-
erly granted before he received answers to two sets of inter-
rogatories, two requests for production, and a request for an
admission. He cites Rule 56(c), M.R.Civ.P.:
. . . The [summary] judgment sought shall be
rendered forthwith if the pleadings, depositions,
answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that
there is no genuine issue as to any material fact
and that the moving party is entitled to a judgment
as a matter of law. ...
When Pack River moved for summary judgment, it also
moved for and was granted an extension of time to answer the
discovery requests at issue here. The District Court was
clearly aware of the pending discovery requests. It had
before it the undisputed affidavit of a Pack River partner
that Pack River was a Washington partnership and that it
owned 85% of the stock of Flathead Lumber, a Montana corpora-
tion. Copies of the Flathead Lumber corporate records from
the office of the Secretary of State were before the court.
It was undisputed that the piece of equipment on which Mr.
Thornock was injured belonged to Flathead Lumber and that the
area of injury was under the operational control of Flathead
Lumber. A copy of Mr. Thornock's petition for full and final
workers' compensation settlement with Flathead Lumber was a
part of the District Court file. The discovery requests
which remained unanswered related essentially to the business
arrangements between Pack River and Flathead Lumber. There
was nothing in these discovery requests which was aimed at
determining whether or not Pack River in some way itself was
an operating company in the specific area where the injury
took place. The interrogatories were aimed at determining
the nature of the control Pack River exercised over Flathead
Lumber. We conclude that none of the requests are aimed at
bringing forth information regarding the operations of Pack
River in such a manner as to establish that Pack River owed
Mr. Thornock a duty of providing a safe workplace. Under the
facts of this ca'se we hold that the District Court did not
err in granting summary judgment before discovery was
completed.
Affirmed.
We Concur:
Justices
Mr. Justice William E. Hunt, Sr., dissenting:
I dissent from the majority opinion and would hold that
summary judgment was inappropriate. The plaintiff is
entitled to show, after discovery, that material issues of
fact remain.
The lower court granted summary judgment to defendant
finding that Pack River owned 85% of the Thornock's employers
stock; Flathead Lumber Company, not Pack River, owned the
equipment which injured Thornock; and that Thornock failed to
counter defendant's claim that defendant was not engaged in
duties closely connected to Flathead Lumber Company.
I do not believe these stated findings are dispositive
of the issues. An entity is not necessarily immune from tort
liability to an employee of another entity that it controls
for its own independent acts of negligence. It may be held
liable under common law principles for any harm resulting
from its own reckless conduct or negligence. Reynolds v.
Burlington Northern, Inc. (Mont. 1980), 621 P.2d 1028, 37
St.Rep. 1883; 30 A.L.R. 4th 948.
This rule is not limited to the facts in Reynolds. A
rainbow of factual scenarios may create such a duty. - 2A
See
Larson, Workmen's Compensation Law, § 72.40; 30 A.L.R. 4th 948
Workers' Compensation Immunity As Extending to One Owning
Controlling Interest In Employer Corporation.
Further, the fact that Thornock had received Workers'
Compensation benefits is not dispositive of the duties owed
to him by Pack River. Thornock is entitled to thoroughly
discover facts to support his theories.
Discovery had not yet been completed by the parties.
Two sets of plaintiff's interrogatories to defendant which
requested information about the interrelationship of Flathead
Lumber Company and defendant Pack River, are unanswered. Two
sets of requests for production of documents and a request
for admission remained unanswered.
In its final order the trial court noted that Thornock
did not counter Pack River's claim that the defendants were
not engaged in duties "closely-connected" to Flathead Lumber
Company. The discovery method was the only method available
to Thornock to show a "close connection" or to show other
factors indicative of a duty owed to him since respondent was
in possession of that information. He may have been able to
establish the existence of a duty owed to him by Pack River
had he been allowed to complete discovery.
I would hold that appellant is entitled to present his
full case to the court after discovery is complete and would
therefore reverse and remand this case with instructions to
allow the parties to proceed with
I concur with the dissent of Mr. Justice William E.
Hunt, Sr.