Bowling v. Jack B. Parson Companies

• Decision Date: 01 June 1990
• Docket Number: No. 17893,17893
• Citation: 793 P.2d 703,117 Idaho 1030
• Parties: , 58 USLW 2748, 14 O.S.H. Cas. (BNA) 1641 Shirley BOWLING, individually and as personal representative of the estate of Carl Ruthford Bowling, deceased, Plaintiff-Appellant, v. JACK B. PARSON COMPANIES, a Utah Corporation, Defendant-Respondent.
• Court: Idaho Supreme Court

Page 703

793 P.2d 703

117 Idaho 1030, 58 USLW 2748, 14 O.S.H. Cas. (BNA) 1641

Shirley BOWLING, individually and as personal representative of the estate of Carl Ruthford Bowling, deceased, Plaintiff-Appellant, v. JACK B. PARSON COMPANIES, a Utah Corporation, Defendant-Respondent.

No. 17893.

Supreme Court of Idaho.

June 1, 1990.

McDermott, Zollinger, Box & Olley, Pocatello, for plaintiff-appellant. Keith A. Zollinger argued.

Racine, Olson, Nye, Cooper & Budge, Pocatello, for defendant-respondent. John R. Goodell argued.

McDEVITT, Justice.

This action is brought on behalf of the surviving family of Carl Bowling, who was killed in the course of his employment with Bannock Paving Company. Bannock Paving is a wholly owned subsidiary of Parson Companies. The two corporations have interlocking directorates and management.

Bowling was killed on October 16, 1986, when he was crushed by a truck operated by a fellow employee. The truck was being driven in reverse without an audible reverse warning device or an observer, in violation of OSHA safety regulations. Before the trial court the plaintiff argued that Parson Companies, through its risk manager, Dave Langrock, had undertaken to implement and supervise a program for the safe maintenance of Bannock Paving's equipment, including inspections of the premises and equipment of Bannock Paving, and had done so negligently, proximately causing Bowling's death.

The theory asserted by the plaintiff is set forth in the Restatement of Torts 2d § 324A, which creates liability if one undertakes to render services which should be recognized as necessary to the safety of a third person, where the failure to exercise reasonable care in performing the services increases the risk or harm, or the person rendering the services has undertaken to perform a duty owed by the other to the third person, or where the harm is suffered due to reliance upon the performance of the undertaking.

Dave Langrock is employed by Parson Companies as a risk manager for Parson Companies and its subsidiaries. His duties include accident investigation, safety inspections, compliance with OSHA regulations and coordination of insurance coverage. Bannock Paving has also employed its own safety officer since 1980. Since that time, Langrock has had no responsibility for safety operations at Bannock. He stated in his deposition that although it was in his power to make recommendations to management concerning unsafe conditions at Bannock, it was not a part of normal procedure. He stated that any such recommendations on his part to Bannock or Parson Companies would carry no more authority than if they came from a third party representing an insurance company.

Between 1974 and 1980, Langrock inspected the Bannock Paving premises every one or two months. In 1984 the frequency of his inspections was reduced. He stated in his deposition that after 1984, "I would just periodically come up and do a walk-around just to look at the buildings and equipment and ask the office manager with regards to any new pieces of equipment or deletions, and also with regards to upgrading the insurance on buildings and equipment...." The evidence before the trial court included three written reports on inspections of Bannock Paving by Langrock. These identified 13 separate pieces of equipment which did not have operational audible reverse warning signals.

There was deposition testimony from Mike Wood, the President of Bannock Paving, and Executive Vice-President of Parson Companies, stating that Parson Companies did not assume the safety program at Bannock Paving, but that Bannock Paving operated and enforced its own safety program.

The district court granted summary judgment to the defendant because the plaintiff failed to make a showing on the following elements under § 324A: 1) that the actions of Parson Companies were undertaken with the primary and unambiguous purpose of benefitting either Bannock Paving or its employees; 2) that Parson Companies affirmatively acted to increase the risk of harm, and that failure to abate an existing risk (nonfeasance) was not sufficient; 3) that Parson Companies' actions supplanted and not merely supplemented Bannock Paving's duty to provide a safe work place as required by § 324A(b); and 4) that either Bannock Paving or the decedent was induced to forego other remedies or precautions in order to establish reliance on the acts of Parson Companies.

On appeal the parties direct the bulk of their arguments to the question of type of proof required to fulfil the elements of a § 324A claim. However, without adopting the district court's interpretation of the Restatement of Torts, our analysis focuses upon the district court's determination that Parson Companies was entitled to a summary judgment based on the threshold issue of whether there was any undertaking at all. On that basis we hold that Parson Companies owed no duty to the employees of Bannock Paving.

No liability arises from the law of torts unless the defendant owes a duty to the plaintiff. Hoffman v. Simplot Aviation, 97 Idaho 32, 539 P.2d 584 (1975). The mere fact of a parent subsidiary relationship does not impose a duty on the parent on behalf of the subsidiary or its employees. Ross v. Coleman Co., Inc., 114 Idaho 817, 761 P.2d 1169 (1988); Fletcher v. Martin Electronics, Inc., 825 F.2d 301 (11th Cir.1987); Love v. Flour Mills of America, 647 F.2d 1058 (10th Cir.1981); Walker v. Newgent, 583 F.2d 163 (5th Cir.1978); cert. denied 441 U.S. 906, 99 S.Ct. 1994, 60 L.Ed.2d 374 (1979) (under Texas law, 100% stock ownership by parent corporation does not create agency relationship or make the subsidiary an alter ego of the parent).

It is, of course, possible to create a duty where one previously did not exist. If one voluntarily undertakes to perform an act, having no prior duty to do so, the duty arises to perform the act in a non-negligent manner. Keeton, Prosser and Keeton on the Law of Torts, § 56 pp. 380-81 (5th ed.1984). Yet such liability may only come into being to the extent that there is in fact an initial undertaking.

In this case, Langrock's function in relation to Bannock Paving was to periodically inspect the premises. Parson Companies' reason for doing so lay in its capacity as sole shareholder of Bannock Paving, and in aid of the procurement of insurance for the entirety of its operations, including Bannock Paving. During these inspections Langrock found various equipment problems, including the failure of backup warning devices, which he noted in his reports. Langrock passed on these findings to Bannock Paving.

Appellant alleges that these inspections amount to an undertaking by Parson Companies to provide safety inspections and safe working conditions on the Bannock Paving premises. However, we hold that the acts of Langrock and Parson Companies did not create a duty as to Parson for inspecting or monitoring. A sole shareholder undeniably has the right to inspect its corporate holdings. It has long been inherent in the law of corporations that within certain boundaries of reasonableness and except as limited by law, shareholders have the right to "see that their property is well managed, and to have access to the proper sources of knowledge in this respect." Guthrie v. Harkness, 199 U.S. 148, 154, 26 S.Ct. 4, 5-6, 50 L.Ed. 130 (1905), quoting Cockburn v. Union Bank, 13 La.Ann. 289. See also Hobbs v. Tom Reed Gold Mine Co., 129 P. 781, 164 Cal. 497 (1913); Melup v. Rubber Corp. of America, 181 Misc. 826, 43 N.Y.S.2d 444 (1943); Riffle v. Robert L. Parker Co., 19 Ariz. App. 100, 505 P.2d 268 (1973); 18 C.J.S. Corporation § 500. No duty is created when the shareholder inspection is done for the purposes of procurement of its own insurance. The exercise of this right by Parson Companies did not amount to undertaking Bannock Paving's duty of inspecting the work site for safety purposes.

We think that...