Fields v. Jantec, Inc.

• Decision Date: 19 August 1993
• Parties: Necole Eve FIELDS, Respondent on Review, v. JANTEC, INC., Respondent, and Edgar C. Brown, Petitioner on Review, and Broughton & Harrell Corporation, an Oregon corporation, Respondent. CC 16-90-06820; CA A71071; SC S39747.
• Court: Oregon Supreme Court

Page 95

857 P.2d 95

317 Or. 432

Necole Eve FIELDS, Respondent on Review, v. JANTEC, INC., Respondent and Edgar C. Brown, Petitioner on Review and Broughton & Harrell Corporation, an Oregon corporation, Respondent.

CC 16-90-06820; CA A71071; SC S39747.

Supreme Court of Oregon In Banc.

Argued and Submitted May 4, 1993.

Reassigned July 27, 1993.

Decided Aug. 19, 1993.

James C. Chaney of Jaqua & Wheatley, P.C., Eugene, filed the petition and argued the cause for petitioner on review.

Carl G. Kiss, Portland, argued the cause for respondent on review. Also on the response were Charles Paulson, of Paulson & Baisch, P.C.

Arthur C. Johnson and Douglas G. Schaller of amicus curiae Johnson, Clifton, Larson, Corson & Phillips, P.C., Eugene, filed a brief. Robert K. Udziela, of Pozzi, Wilson, Atchison, O'Leary & Conboy, Portland joined in the brief on behalf of amicus curiae Oregon Trial Lawyers Ass'n.

GRABER, Justice.

This is a negligence action, arising out of a workplace injury, in which we consider the personal liability of an individual in his capacity as an officer, director, and shareholder of the corporation that employed plaintiff before her injury but not at the time of her injury.

At the time the events material to our review began, Edgar C. Brown (Brown) was the sole shareholder of defendant Jantec, Inc. (Jantec). Brown also was an officer and director of Jantec. Under a franchise arrangement, Jantec operated three pizza restaurants, including Abby's Pizza Inn in Florence (Abby's).

In 1988, plaintiff began working at Abby's. Part of her job involved the use of a cheese grinder that had been installed in the early 1970s. The cheese grinder did not have a safety guard on it. Brown knew that there was no guard on the grinder.

On April 26, 1989, Brown sold all outstanding shares of Jantec to defendant Broughton & Harrell Corporation (B & H). Brown also ceased to be an officer and director of Jantec, and he had no interest in or position with B & H. On May 1, 1989, Jantec filed articles of dissolution and conveyed all assets, including the cheese grinder, to B & H. Plaintiff continued to work at Abby's under the ownership of B & H.

On January 14, 1990, while operating the cheese grinder, plaintiff lost her right hand. Plaintiff filed a workers' compensation claim, which was accepted.

Later, plaintiff filed this action for personal injury against Brown, Jantec, and B & H. As pertinent here, the second amended complaint alleged that

"Brown and Jantec were negligent in one or more of the following particulars:

"a. In having removed the safety guard from the grinder, thereby making the grinder dangerous for its intended use, having no reason to believe Plaintiff would realize the danger, and in failing to warn of its dangerous condition;

"b. In having failed to replace the safety guard, knowing or having reason to know that without said safety guard the grinder was dangerous for its intended use, having no reason to believe Plaintiff would realize the danger, and in failing to warn of its dangerous condition;

"c. In transferring the assets of Jantec Corporation to Defendant Broughton & Harrell, including the open-bowl Stimpson Grinder that was not equipped with a safety guard, knowing or having reason to know the grinder was dangerous for its intended use, having no reason to believe Plaintiff would realize the danger, and failing to warn of its dangerous condition."

All defendants moved for summary judgment pursuant to ORCP 47. The trial court granted the motions and entered judgment for all defendants. Plaintiff appealed.

The Court of Appeals held that the trial court did not err in granting summary judgment to defendant B & H, because plaintiff's exclusive remedy against her employer was under the Workers' Compensation Law, ORS 656.018. ¹ Fields v. Jantec 115 Or.App. 350, 352-54, 839 P.2d 723 (1992). The Court of Appeals held, however, that the trial court erred in granting summary judgment to defendants Jantec and Brown. The court held that Jantec and Brown were not shielded from liability under ORS 656.018, because Jantec was not plaintiff's employer at the time of the compensable injury. Id. at 358-59, 839 P.2d 723. The court also held that Brown was not protected from personal liability by his status as a corporate officer if he "authorized, directed, or participated in tortious conduct." Id. at 358, 839 P.2d 723. Finally, the Court of Appeals held that the liability of Jantec and Brown for damages caused by a failure to warn of a latent danger is not limited to that described in Restatement (Second) of Torts § 388 (1965), relating to the particular standard of care owed by a supplier of chattels. Id. at 354-358, 839 P.2d 723. Citing Fazzolari v. Portland School Dist. No. 1J, 303 Or. 1, 734 P.2d 1326 (1987), and Fuhrer v. Gearhart By the Sea, Inc., 306 Or. 434, 760 P.2d 874 (1988), the court stated that, instead, "[t]he real issue is whether it was reasonably foreseeable that plaintiff would be injured by defendants' conduct and whether their conduct was unreasonable." Id. at 357, 839 P.2d 723. Concluding that that issue should be determined by the trier of fact, the Court of Appeals reversed the judgment of the trial court as to Jantec and Brown and remanded the case against them. Id. at 358-59, 839 P.2d 723.

Brown petitioned for review. We allowed the petition and now reverse the decision of the Court of Appeals with respect to him. ²

On review of a summary judgment, this court determines whether there was a genuine issue as to any material fact and whether the moving party was entitled to judgment as a matter of law. ORCP 47C; Stevens v. Bispham, 316 Or. 221, 223, 851 P.2d 556 (1993). In reviewing a trial court's ruling on a motion for summary judgment, this court views the evidence and all reasonable inferences to be drawn from it in the light most favorable to the nonmoving party. Whitaker v. Bank of Newport, 313 Or. 450, 452, 836 P.2d 695 (1992).

We will consider each of plaintiff's three specifications of negligence against Brown in turn. The first specification of negligence is Brown's alleged removal of the safety guard from the cheese grinder. With respect to that allegation, there was no genuine issue of material fact. The affidavits and other evidence in support of, and in opposition to, defendants' motions for summary judgment demonstrate without dispute that the grinder had no safety guard when Jantec first acquired it and that Brown did not remove a safety guard.

We next consider plaintiff's second specification of negligence. Therein, plaintiff alleged that Brown was liable for failing "to replace the safety guard on the cheese grinder" and failing to warn plaintiff of its dangerous condition.

3A Fletcher Cyclopedia of the Law of Private Corporations § 1135 (1986 ed. & Supp. 1992 at 66-67) states:

"The fact that one is acting as a corporate representative does not insulate him [or her] from individual liability for his [or her] tortious acts. In other words, if an officer or agent of the corporation through his or her own fault injures another to whom he or she owes a personal duty, that officer or agent is personally liable to the injured third party regardless of whether the act resulting in injury is committed by or for the corporation. It does not matter that liability might also attach to the corporation. Personal liability attached, regardless of whether the breach was through malfeasance, misfeasance or nonfeasance." (Footnotes omitted.)

See also Beri, Inc. v. Salishan Properties, Inc., 282 Or. 569, 580, 580 P.2d 173 (1978) (where the defendants were "charged with active participation on their own account[s], not merely in their capacities as corporate officers," in the tortious conduct alleged by the plaintiffs, the trial court erred in sustaining the defendants' demurrers). Under those principles, Brown is not insulated from liability for his negligence, if any, merely because of his status as a corporate officer, director, or agent of Jantec.

The question remains, however, whether the second specification of negligence against Brown nevertheless is barred by the provisions of the Workers' Compensation Law, ORS 656.001 et seq. ORS 656.018(1)(a), set out ante at note 1, provides that the workers' compensation liability of an employer who has complied with the requirements of the Workers' Compensation Law

"is exclusive and in place of all other liability arising out of compensable injuries to the subject workers[.]"

ORS 656.018(2), also set out ante at note 1, further provides that a subject worker's rights under the Workers' Compensation Law "are in lieu of any remedies that [the worker] might otherwise have for such injuries against the worker's employer * * *, common law or statutory, except to the extent the worker is expressly given the right under this chapter to bring suit against the employer of the worker for an injury." See also ORS 656.005(13) (defining an "employer" as a person who "contracts to pay a remuneration for and secures the right to direct and control the services of any person"); ORS 656.017 (establishing employers' duties in regard to compliance with the Workers' Compensation Law).

Jantec was a complying employer under the Workers' Compensation Law when Brown allegedly failed to replace the safety guard on the cheese grinder and failed to warn plaintiff of the machine's dangerous condition. Jantec's compliance conferred a statutory exemption from liability on Brown, as well as on the corporation. See ORS 656.018(3), set out ante at note 1 (providing that "[t]he exemption from liability given an employer under this section is also extended to the * * * officers and directors of the employer"). ³ Jantec was not, however, a complying employer, within the meaning of the Workers' Compensation Law, at the time that plaintiff suffered her injury; it no longer was her employer at all. This court has not previously considered...