Bass v. Happy Rest, Inc.
| Decision Date | 16 March 1993 |
| Docket Number | 18053,Nos. 18029,s. 18029 |
| Citation | 507 N.W.2d 317,127 Lab.Cas.P 57 |
| Parties | 127 Lab.Cas. P 57,574 Evelyn BASS, Plaintiff and Appellant, v. HAPPY REST, INC., a South Dakota Corporation, Raybill Investments, and Lewis W. Stroud, Defendants and Appellees. Evelyn BASS, Plaintiff and Appellee, v. HAPPY REST, INC., a South Dakota Corporation, Defendant and Appellant, and Raybill Investments and Lewis W. Stroud, Defendants. . Considered on Briefs |
| Court | South Dakota Supreme Court |
Lee Burd, Sioux Falls, for plaintiff and appellant.
Daniel J. Nichols, Sioux Falls, for defendants and appellees and for defendant and appellant Happy Rest.
Evelyn Bass (Bass) appeals summary judgment for Happy Rest, Inc., (Happy Rest), Raybill Investments, Inc. (Raybill) and Lewis W. Stroud (Stroud) on all claims except breach of contract against Happy Rest. Happy Rest appeals a judgment for Bass for breach of contract. We affirm in part, reverse in part and remand.
Stroud and his wife owned all of the shares of Raybill, a Missouri corporation. Raybill owned all of the shares of Happy Rest, a South Dakota corporation. Happy Rest owned and operated the Happy Rest Motel. Raybill owned the land on which the motel was situated.
On August 8, 1988, Happy Rest, through Stroud, hired Bass to run the motel for $500 per month plus ten percent of the profits and free room and utilities. After one year, Bass' salary increased to $600 per month. On February 23, 1990, Stroud fired Bass.
Bass sued Happy Rest, Raybill and Stroud for intentional infliction of emotional distress, wrongful termination of employment and breach of contract. The trial court granted summary judgment 1 for Raybill and Stroud on all claims and for Happy Rest on the claims for intentional infliction of emotional distress and wrongful termination.
After a bench trial 2, the court entered a judgment against Happy Rest for $1,748.00 for ten percent of the net profits during the term of Bass' employment and for $171.42 wages due to Bass.
The trial court granted summary judgment dismissing Stroud personally from the lawsuit. At trial and on appeal, Bass claimed that the corporate veil should be pierced and that Stroud should be personally liable as a shareholder and officer of Raybill and president of Happy Rest. Counsel for Stroud and the trial court agreed that the issue was whether the corporate veil should be pierced and the trial court held that none of the facts alleged by Bass justified piercing the corporate veil. 3
An officer and shareholder is typically not liable for breach of contractual obligations 4 by the corporation, Baatz v. Arrow Bar, 452 N.W.2d 138 (S.D.1990), absent evidence of personal wrongdoing or facts justifying piercing the corporate veil. Mobridge Community Industries v. Toure, supra, 273 N.W.2d at 128; Farmers Feed & Seed v. Magnum Enterprises, 344 N.W.2d 699 (S.D.1984). Stroud did not commit any personal wrong 5 except the alleged intentional infliction of emotional distress. 6 Bass advanced fraudulent representation 7 of a material fact 8 to pierce the corporate veil. 9
The trial court found no fraud. We agree. Happy Rest admitted the ten percent profit sharing provision of the promised written contract. Bass did not rely on any other promise from Happy Rest.
Bass has a claim for intentional infliction of emotional distress against Stroud personally. "Every person is responsible for injury to the person ... of another caused by his willful acts...." SDCL 20-9-1. Officers and employees of a corporation are personally liable for intentional torts. In Bego v. Gordon, 407 N.W.2d 801 (S.D.1987), sovereign immunity of a school district did not protect a school district official from personal liability for an intentional tort. In Selchert v. Lien, 371 N.W.2d 791 (S.D.1985), a liquor licensee or employee was liable under the then existing version 10 of SDCL 35-4-78 for selling liquor to an intoxicated person. In Baatz v. Arrow Bar, supra, 452 N.W.2d at 141, this Court limited personal liability to the "employee [who] violated the standard of care." The individual is primarily liable for intentional wrongs and the employer is secondarily liable.
Employer or corporate liability for torts committed by an employee or officer is based on the doctrine of respondeat superior 11, which is a legal fiction designed to bypass impecunious individual tortfeasors for the deep pocket of a vicarious tortfeasor 12. Stroud is personally liable for his intentional tort. Happy Rest may be liable too, through respondeat superior, if Stroud was acting on behalf of the corporation when he committed the alleged intentional infliction of emotional distress. Bucholz, supra. We reverse the summary judgment dismissing Stroud personally on the claim of intentional infliction of emotional distress and we remand for further proceedings 13.
Raybill was a Missouri corporation owned by Stroud and his wife. Stroud was president. Raybill owned all of the stock of Happy Rest and the land on which the Happy Rest Motel was situated. Raybill, however, did not manage the motel or hire or fire Bass. Bass cites no authority for holding Raybill liable. 14 We affirm the summary judgment dismissing Raybill.
WRONGFUL TERMINATION.
Bass claimed wrongful termination of her employment with Happy Rest. Employees may be terminated at-will in South Dakota 15, except for (1) terminations that contravene public policy 16, (2) employees with express "for cause only" agreements or implied "for cause only" cases where an employee handbook contains a detailed list of exclusive grounds for discharge and a mandatory specific procedure the employer agrees to follow 17, or (3) an employee who accepted employment after being promised future promotion to a certain position 18.
Bass claims that Stroud and Happy Rest's conduct took her employment out of the at-will doctrine. First, Bass alleged that she was promised a contract that was never delivered. Bass must show the provisions in the "would be" contract that would take her out of the at-will doctrine. Petersen v. Sioux Valley Hosp. Ass'n, 486 N.W.2d 516 (S.D.1992) (Petersen I ). Bass only proved that the contract would include a provision to share ten percent of the profits. The agreement to share profits addresses the amount of compensation and does not take Bass out of the at-will doctrine. See e.g., Merritt v. Edson Exp., Inc., 437 N.W.2d 528 (S.D.1989). 19
Second, Bass alleged that Happy Rest failed to provide worker's compensation insurance or benefits. Bass also claimed that when she was injured on the job deicing sidewalks, Stroud laughed because she "fell on her ass." Bass further claimed that she was fired for paying someone $26 to shovel the sidewalks after she fell. In addition, Bass claimed that not only did Happy Rest refuse to provide health insurance or worker's compensation but also Stroud fired her after she was injured and canceled her private health insurance which she paid herself. Bass argued that Stroud and Happy Rest's actions violated a public policy that employees be treated decently.
This Court has repeatedly rejected the theory that there is an implied covenant of good faith and fair dealing in employment contracts. Breen v. Dakota Gear & Joint Co., Inc., supra, 433 N.W.2d at 224-25 (Sabers, J., dissenting on this issue); Johnson v. Kreiser's, Inc., supra, 433 N.W.2d at 228 (Sabers, J., specially concurring); Butterfield v. Citibank of South Dakota, supra, 437 N.W.2d at 864 (). Therefore, alleged bad treatment by Happy Rest and Stroud do not take Bass out of the at-will doctrine.
Bass alleged no other contravention of public policy. There was no express written or oral agreement that termination would be "for cause only" and no handbook and mandatory procedures that implied that termination would be "for cause only." Happy Rest could fire Bass at-will. We affirm the summary judgment on Bass' claim of wrongful termination.
The trial court granted summary judgment on Bass' claim that Stroud and Happy Rest intentionally inflicted emotional distress on her. The tort of intentional infliction of emotional distress was first recognized in First National Bank of Jacksonville v. Bragdon, 84 S.D. 89, 167 N.W.2d 381 (1969). The elements were whether the act was intentional, unreasonable and the actor should have recognized that the act was likely to cause illness or emotional distress. This test was carried forward in Ruple v. Brooks, 352 N.W.2d 652 (S.D.1984), Ruane v. Murray, 380 N.W.2d 362 (S.D.1986) and Groseth Intern. Inc. v. Tenneco Inc., 440 N.W.2d 276 (S.D.1989) (Groseth II ). Tibke v. McDougall, 479 N.W.2d 898, 906-07 (S.D.1992), rejected the "broader" rule of the foregoing line of cases and adopted the "narrower" rule from Groseth Intern, Inc. v. Tenneco, Inc., 410 N.W.2d 159 (S.D.1987) (Groseth I ) and Mackintosh v. Carter, 451 N.W.2d 285 (S.D.1990).
The elements of intentional 20 infliction of emotional distress are:
(1) Extreme and outrageous conduct by the defendant;
(2) Intent to inflict severe emotional distress;
(3) The extreme and outrageous conduct caused plaintiff's injury; and
(4) Plaintiff suffered an extreme disabling emotional response.
Tibke v. McDougall, supra, 479 N.W.2d at 906. Intentional infliction of emotional distress includes reckless conduct resulting in emotional distress. Wangen v. Knudson, 428 N.W.2d 242, 246 (S.D.1988); Petersen v. Sioux Valley Hosp. Ass'n, 491 N.W.2d 467 (S.D.1992) (Petersen II ).
Review of the trial court's grant of summary judgment is limited to the record before the trial court at the time of the ruling, not what later developed at trial. Petersen I, supra, 486 N.W.2d at 519. If under...
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