Williams v. State Medical Oxygen & Supply, Inc.

IN THE SUPREME COURT O F T H E S T A T E O F MONTANA
C R A I G WILLIAMS,
-v-
STATE MEDICAL OXYGEN & SUPPLY, INC.
a Montana C o r p o r a t i o n ,
APPEAL FROM: District Court o f the Eleventh Judicial District,
I n and for the County of Flathead,
The Honorable Ted 0. Lympus, J u d g e presiding.
COUNSEL OF RECORD:
For Appellant:
Gene R. Jarussi, Jarussi & Bishop, Billings, Montana
For Respondent:
John R . Gordon, Reep, Spoon & Gordon, Missoula,
Montana
Submitted on Briefs: February 24, 1994
Filed:
Justice James C. Nelson delivered the Opinion of the Court.
Plaintiff/appelIant, Craig Williams, (Williams), appeals a
summary judgment in favor of the defendant, State Medical Oxygen &
Supply, Inc., (State Medical). The ~istrict
Court ruled that there
were no genuine issues as to any material fact, that State Medical
was not liable under the theory of negligent entrustment, and that,
therefore, State Medical was entitled to summary judgment as a
matter of law. We reverse and remand for further proceedings.
This is a personal injury case arising out of an incident
wherein Williams fell from the back of a pickup truck carrying a
load of mattresses. The incident occurred on May 6, 1987, while
Williams was working as an employee of Cay Enterprises. On the
morning af May 6, 1987, Brian CZoutier (Cloutier), an officer and
director of Cay Enterprises, arranged to have six teenagers
employed by that corporation, meet at his house in Kalispell. The
employees were to move mattresses from one place to a n o t h e r .
Because a vehicle was needed to transport the Cay
Enterprises' employees and mattresses, Cloutier, who was also an
officer and director of State ~edical,arranged to have a State
Medical pickup left at his home in Kalispell to be used for the
job. After the Cay Enterprises' employees met at Cloutier's home,
he gave the keys to the pickup to one of the employees, who then
drove to Big Fork. Upon arriving at Big Fork, Cloutier told the
employees that they should move as many box springs and mattresses
in each load as they could. He also instructed the employees not
to sit on the tailgate of the pickup when moving the load.
2
Cloutier did not provide ropes or any other items that the
employees could use to secure the load.
Williams was sitting on top of a load of mattresses, when the
pickup turned a corner, and Williams fell off the pickup hitting
his head on the pavement. Williams suffered injuries as a result
of this fall.
Williams filed an action in the Eleventh Judicial District,
Flathead County, seeking damages from State Medical, alleging that
it was negligent in supplying the vehicle to the Cay Enterprises'
teenage employees. State Medical moved for summary judgment.
After reviewing the briefs and hearing oral arguments of both
parties, the District Court issued an order dated August 13, 1993,
granting State Medical's motion for summary judgment, and entering
a judgment in its favor. Williams appeals from this judgment.
Our standard in reviewing a grant of summary judgment is the
same as that utilized by the District Court. That is, we use the
same criteria initially used by the District Court under Rule 56,
M.R.Civ.P. Minnie v. City of Roundup (1993), 257 Mont. 429, 431,
849 P.2d 2 1 2 , 214. Summary judgment is proper, "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." Rule 56(c), M.R.Civ.P.
In a personal injury case we start from a basic premise that
issues of negligence are not ordinarily susceptible to summary
adjudication, but are better determined at trial. Dillard v. Doe
(1992), 251 Mont. 379, 382, 824 P.2d 1016, 1018. Where factual
issues concerning negligence and causation are presented, liability
should not be adjudicated by summary judgment. Duchesneau v.
Silver Bow County (1971), 158 Mont. 369, 377, 492 P.2d 926, 931.
In such a case, it is only when reasonable minds could reach but
one conclusion, that questions of fact may be determined as a
matter of law. Brohman v. State (1988), 230 Mont. 198, 202, 749
P.2d 67, 70. (Citation omitted.) This is not such a case. Here
the central factual issues regarding negligence and negligent
entrustment must be determined by the trier of fact.
Furthermore, the District Court ruled that, on the facts
before it, State Medical was not liable under the theory of
negligent entrustment as a matter of law. We disagree. We
conclude that whether State Medical, acting through Cloutier,
negligently entrusted a pickup to Cay Enterprises' employees cannot
be decided as a matter of law, but must be decided by the trier of
fact.
In granting summary judgment, the District Court focused on
9 390 of the Restatement (Second) of Torts, (1965), (Restatement).
That section of the Restatement provides:
One who supplies directly or through a third person a
chattel for the use of another whom the supplier knows or
has reason to know to be likely because of his youth,
inexperience, or otherwise, to use it in a manner
involving unreasonable risk of physical harm to himself
and others whom the supplier should expect to share in or
be endangered by its use, is subject to liability for
physical harm resulting to them.
We agree that, here, negligent entrustment would not lie under
that section of the Restatement. Section 390 deals with the
supplying of a chattel to a person incompetent to use it safely.
Restatement (Second) of Torts 5 390 comment (b). Here it does not
appear that the teenage driver was incompetent, nor is there any
allegation that he was not properly licensed. The fact that the
teenage driver was a minor or inexperienced, without more, does not
mean he lacked the training or experience to operate the pickup.
Smith v. Babcock (1971), 157 Mont. 81, 89, 482 P.2d 1014, 1018. In
addition, there was no allegation that the teenage driver had a
reputation as being a negligent driver. Thus, Cloutier did not
supply the pickup to a person he knew to be incompetent.
The substantive law governing Williams' claim in this case is
more appropriately set forth in Restatement 5 308, which we applied
in Bahm v. Dormanen (1975), 168 Mont. 408, 412, 543 P.2d 379, 382.
Section 308 of the Restatement provides:
It is negligence to permit a third person to use a thing
or to engage in an activity which is under the control of
the actor, if the actor knows or should know that such
person intends or is likely to use the thing or to
conduct himself in the activity in such a manner as to
create an unreasonable risk of harm to others.
Negligent entrustment encompassed in § 308 is somewhat
different than that encompassed in 5 390. Comment (b) to that
Restatement section indicates that the rule ' I . . . has its most
frequent application where the third person is a member of a class
which is notoriously likely to misuse the thing which the actor
permits him to use ...," nevertheless, the rule is also applicable
where,
...the actor [here, Cloutier] entrusts a thing [the State
Medical pickup] to a third person [the teenage driver and
employees of Cay Enterprises] who is not of such a class,
if the actor [cloutier] knows ..
. the peculiar
circumstances of the case are such as to give the actor
[Cloutier] good reason to believe that the third person
[the teenage driver and employees of Cay Enterprises] may
misuse it [the pickup]. (Emphasis added.)
Restatement (Second) of Torts 5 308 comment (b).
Here, the critical focus of the finder of fact must be on what
Cloutier had in mind as regards moving the mattresses at the time
he surrendered control of State Medical's pickup to Cay
Enterprises' driver and employees. At that time, knowing how he
intended to manage and supervise the mattress moving project --
i.e. on the "peculiar circumstances" of this case -- did he have
good reason to believe that the Cay Enterprises' driver and
employees were likely to use the pickup or to conduct themselves in
such a manner as to create an unreasonable risk of harm?
As to the "control" requirement of 9 308, comment (a) notes
that the words "under the control of the actor:"
[Alre used to indicate that the third person is entitled
to possess or use the thing or engage in the activity
only by the consent of the actor, and that the actor has
reason to believe that by withholding consent he can
prevent the third person from using the thing or engaging
in the activity.
Restatement (Second) of Torts 5 308 comment (a).
This Court addressed the element of control encompassed in
5 308 in m, 543 P.2d at 382. In w, two men, Nordahl and
Dormanen, borrowed a truck to go on a hunting trip. While Nordahl
was driving the truck he was involved in an accident, which
resulted in the deaths of both Nordahl and the plaintiff's husband.
The plaintiff brought a wrongful death action against Dormanen,
alleging he was liable under the theory of negligent entrustment.
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m, 543 P.2d at 381.
The plaintiff maintained that Dormanen had the physical power
to deprive Nordahl of the keys to the truck. This power, the
plaintiff argued, was sufficient control to establish liability
under negligent entrustment. u,
543 P.2d at 381. This Court
disagreed, holding that "the basis of negligent entrustment is
founded on control which is greater than physical power to prevent.
A superior if not exclusive legal right to the object is a
precondition to the imposition of the legal duty." m, 543 P.2d
at 382.
In the instant case, the District Court ruled that the pickup
was under the control of State Medical's officer, Cloutier, before
he turned the keys over to the Cay Enterprises' employees. That
being the case, it follows then, that because Cloutier had control
over the pickup before he turned it over to Cay Enterprises'
employees, he also had the power to prevent Cay Enterprises'
employees from using the vehicle. Therefore, a question of
negligent entrustment under 5 308 remains. Was State Medical,
through its officer and director, Cloutier, negligent at the time
of providing the pickup to Cay Enterprises' employees, if it knew
or should have known that Cay Enterprises1 employees would likely
use the pickup or conduct themselves in such a manner as to create
an unreasonable risk of harm to others?
To address this question we must discuss two principles of
law. The first principle concerns the law regarding when a
principal is liable for negligent acts of its agent. The second
principle concerns imputing knowledge to two separate corporations
which are dealing with one another through a common officer.
The first principle holds, that an officer of a corporation,
when acting within the course and scope of his employment, is an
agent of the corporation when dealing with third parties.
Fletcher, Cyclopedia of the Law of Private Corporations g 266 (rev.
perm. ed. 1986). Alley v. Butte & Western Mining Co. (1926), 77
Mont. 477, 492, 251 P. 5 1 7 , 522.
The law governing a principal's liability to third persons,
for the negligence of its agents or employees is found at 3 28-10-
602, MCA. That section provides:
Principal's responsibility for agentrs negligence,
omissions, and wrongs. (1) Unless required by or under
the authority of law to employ that particular agent, a
principal is responsible to third persons for the
negligence of his agent in the transaction of the
business of the agency, including wrongful acts committed
by such agent in and as a part of the transaction of such
business, and for his willful omission to fulfill the
obligations of the principal.
(2) A principal is responsible for no other wrongs
committed by his agent than those mentioned in subsection
(1) unless he has authorized or ratified them, even
though they are committed while the agent is engaged in
his service.
The focus of the inquiry is usually whether the agent was operating
within the course and scope of his employment. See cases from
Hoffman v. Roehl (1921), 61 Mont. 290, 298, 203 P. 349, 350,
through, most recently, Rollins v. Blair (1989), 235 Mont. 343,
In the instant case, the District Court found that it appeared
Cloutier was acting within the scope of his employment and
authority as an officer and director of State Medical, when he
turned the pickup over to Cay ~nterprises' employees. It also
appears from the District Court's order that Cloutier was acting
within the scope of his authority as officer and director of Cay
Enterprises when he arranged for the six teenage Cay Enterprises'
employees to move the mattresses.
Turning to the second principle, imputing knowledge to two
separate corporations which are dealing with one another through a
common officer, we start with the premise that under Montana law,
the knowledge of an agent is imputed to the principal. Section 28-
10-604, MCA. See also Empire Steel Mfg. Co. v. Carlson (1981), 191
Mont. 189, 196, 622 P.2d 1016, 1021. As a general rule, where
there are two corporations, dealing with one another through a
common officer, the question of whether one corporation is to be
charged with notice of what is known to the agent by virtue of his
relation to the other corporation depends on the circumstances of
each case. 19 C.J.S. Corporations S 637 (1990), 18B Am.Jur.2d.
Corporations g 1683 (1985). "However, [a] common officer's
knowledge of the affairs of one corporation will be imputed to the
other when such knowledge is present in his mind and memory at the
time he engages in a transaction on behalf of such other
corporation, or when such knowledge comes to him while acting for
such other corporation in his official capacity, or while acting as
an agent of such corporation, and within the scope of his
authority ..." 19 C.J.S. Corporations 637, at 288 (1990).
Therefore, albeit he was going to supervise and manage the
mattress moving project on behalf of Cay Enterprises, the knowledge
Cloutier had regarding how he would manage and supervise the
mattress moving project, at the time he turned control of the
pickup over to the Cay Enterprises employees, must be imputed to
State Medical. Such knowledge of Cloutier is a question of fact to
be determined by the trier of fact based on evidence to be
introduced at trial.
The order of proof of the various elements of Williams' cause
of action, as discussed above, is left to the sound discretion of
the trial court. However, there are issues of negligence in this
case which are not appropriately decided on summary judgment, but
which must be left for determination by the finder of fact.
Accordingly, we hold that the District Court erred in granting
summary judgment for State Medical.
Reversed and remanded for further proceedings.
We Concur:
/A.C~~~%
Chief Justice
E . Hunt, Sr.
f o r Justice Terry N. ~rieweiies