Electric Power Bd. of Chattanooga v. St. Joseph Valley Structural Steel Corp.

• Decision Date: 06 May 1985
• Citation: 691 S.W.2d 522
• Parties: Prod.Liab.Rep.(CCH)P. 10,609 ELECTRIC POWER BOARD OF CHATTANOOGA, Plaintiff-Appellee, v. ST. JOSEPH VALLEY STRUCTURAL STEEL CORPORATION, Defendant-Appellant.
• Court: Tennessee Supreme Court

Page 522

691 S.W.2d 522

Prod.Liab.Rep.(CCH)P. 10,609

ELECTRIC POWER BOARD OF CHATTANOOGA, Plaintiff-Appellee, v. ST. JOSEPH VALLEY STRUCTURAL STEEL CORPORATION, Defendant-Appellant.

Supreme Court of Tennessee,

at Knoxville.

May 6, 1985.

J. Hartley Echerd, Chattanooga (Luther, Anderson, Cleary & Ruth, Chattanooga, of counsel), for defendant-appellant.

Ewing Strang, Chattanooga (Strang, Fletcher, Carriger, Walker, Hodge & Smith, Chattanooga, of counsel), for plaintiff-appellee.

OPINION

BROCK, Justice.

This is a products liability action arising out of an accident that occurred June 12, 1979. Two employees of the Electric Power Board of Chattanooga, Wayne Autry and Jodey Bates, suffered serious personal injuries and the Power Board sustained substantial property damage when a 75 ft. aerial device, referred to as a "cherry picker," collapsed while the two men were working in its upraised bucket. Autry and Bates and their spouses brought actions for damages for personal injuries and the Power Board brought an action for property damages against Map Enterprises, Inc. which had sold the cherry picker to the Power Board, and Strato-Tower Corporation which had manufactured the machine. Later, the plaintiffs amended their complaints to bring St. Joseph Valley Structural Steel Corporation, appellant, into the litigation as a defendant alleging liability on the bases (1) that St. Joseph was independently negligent in the manufacture of certain parts which went into the cherry picker and (2) that the liability of Strato-Tower was imputable to St. Joseph because Strato-Tower was the mere instrumentality or alter-ego of St. Joseph.

At the conclusion of all of the evidence, the defendant St. Joseph made a motion for a directed verdict which was denied. The jury returned verdicts against all defendants in favor of the Autrys and the Bates and the Power Board. Responding to interrogatories submitted to the jury on behalf of St. Joseph, the jury found that St. Joseph was not guilty of negligence but did find that Strato-Tower was the alter-ego or instrumentality of St. Joseph and, on this basis, judgment against St. Joseph was entered. St. Joseph filed a motion for judgment notwithstanding the verdict or, in the alternative, for a new trial, which was denied by the trial court.

The Court of Appeals affirmed the judgments for the plaintiffs, holding that the evidence presented a jury issue respecting the question whether or not Strato-Tower was an instrumentality or alter-ego of St. Joseph. This Court granted St. Joseph's application to appeal, to consider the question:

"Whether there is any material evidence in the record which supports the jury's determination that Strato-Tower was the 'instrumentality' of St. Joseph."

In the early part of 1978, Map Enterprises, Inc. sold to the Electric Power Board of Chattanooga a 75 ft. aerial hoist which was manufactured by Strato-Tower, Inc. From the beginning, the Power Board had difficulties with the rotation of the hoist and its leveling which was controlled by rigid legs. It was decided that a hydraulic leveling device should replace the rigid legs. Strato-Tower manufactured the hydraulic leveling assembly and shipped it to the Power Board and arrangements were made for Map Enterprises to install the hydraulic device. Originally, Shannon Clements, the inventor of the aerial hoist and the Vice-President of Strato-Tower, was to be present to advise and counsel Map's employees in the installation of the new hydraulic device, but Dean Kelly, the President of Strato-Tower and also the President of St. Joseph Valley Structural Steel Corporation, discussed the situation with Mr. Clements and directed Clements not to go to Chattanooga to supervise the installation of the leveling device.

On or about November 14, 1978, C.H. Wilson, an employee of Map, did go to Chattanooga and installed the new hydraulic system. Wilson had considerable difficulty with the new hydraulic system and he telephoned Mr. Clements and informed him that the hydraulic unit had been manufactured upside down, in response to which Clements advised Wilson to turn the device over. In a second telephone call, Wilson explained to Clements that the hydraulic lift would not fit the cherry picker and later, in a third telephone conversation, Wilson advised Clements that a weld would not permit the shaft of the hydraulic device to fit between the parallel pieces of steel described as "ears." Mr. Clements instructed Wilson to trim off enough of the sides of the ears so that the weld and the cylinder shaft would have room to fit. Wilson proceeded to cut off approximately 1/2 of the ears, eliminating three of the four holes in each ear. Wilson testified that he trimmed the ears down to the level of the bed of the truck because he felt it looked neater.

On June 12, 1979, Bates and Autry were operating the hoist when it collapsed and fell to the ground. There was expert testimony that the removal of the holes from the ears weakened the structure and caused a separation from the frame of the truck. Shannon Clements testified that if he had gone to Chattanooga for the installation of the leveling device, the ears on the device would not have been cut to the extent they were cut by Wilson. There was also other expert testimony that the manner in which the modifications were made and the installation of the hydraulic system caused a binding of the leveling device against the bed of the truck thereby causing the metal to break. An expert witness also testified that immediately prior to the accident the aerial hoist was defective and unreasonably dangerous.

Dean Kelly, President of St. Joseph and Strato-Tower, ordered Shannon Clements, the Vice-President and "Manager" of Strato-Tower not to go to Chattanooga to supervise the installation of the hydraulic leveling device which failed causing the accident. Kelly claims that he gave this order to Clements purely to avoid the expense of the trip to Chattanooga and that he gave the order as the President of Strato-Tower, not as the President of St. Joseph.

Evidence was also introduced that after the cherry picker collapsed, Dean Kelly, as President of St. Joseph Valley Structural Steel Corporation, ordered an employee of that corporation, Dr. Clifford Aides, to go to Chattanooga to investigate the failure and to produce a stress analysis; that Dr. Aides, after investigating the aerial device and its failure, fabricated and back dated "specifications" consistent with the actual construction of the aerial device which "specifications" differed from the true specifications.

St. Joseph owned 81% of the stock of Strato-Tower, the remaining 19% being owned by Shannon Clements, who was the Vice-President and founder of Strato-Tower which had been a going concern under different names but under Mr. Clements' direction since the 1950s. In 1973 St. Joseph and Mr. Clements took over Strato-Tower...