Hando v. PPG Industries, Inc.

• Decision Date: 02 May 1989
• Docket Number: No. 88-539,88-539
• Citation: 236 Mont. 493,771 P.2d 956
• Parties: , 57 USLW 2707 Emma Jean "E.J." HANDO, Plaintiff and Appellant, v. PPG INDUSTRIES, INC., Spring Creek Coal Company, and NERCO, Inc., jointly and severally, Defendants, Respondents and Cross-Appellants.
• Court: Montana Supreme Court

Page 956

771 P.2d 956

236 Mont. 493, 57 USLW 2707

Emma Jean "E.J." HANDO, Plaintiff and Appellant, v. PPG INDUSTRIES, INC., Spring Creek Coal Company, and NERCO, Inc., jointly and severally, Defendants,

Respondents and Cross-Appellants.

No. 88-539.

Supreme Court of Montana.

Submitted on Briefs Feb. 3, 1989.

Decided March 30, 1989.

Rehearing Denied May 2, 1989.

Nye & Meyer, Jerrold L. Nye, Billings, for plaintiff and appellant.

Moulton Law Firm, W. Anderson Forsythe, Anderson, Brown, Law Firm, Steven H. Harman, Billings, Pamela L. Jacklin, Stoel, Rives, Boley, Jones & Grey, Portland, Or., for defendants, respondents and cross-appellants.

GULBRANDSON, Justice.

Emma Jean Hando appeals the grant of summary judgment to NERCO, Inc. (NERCO) by the Thirteenth Judicial District Court, Yellowstone County. The court granted summary judgment after holding that NERCO, as the parent/grandparent corporation of Spring Creek Coal Company (SCCC), had no duty to provide a safe work place for Hando and the other SCCC employees.

The court also held that the statute of limitations applicable to this action was tolled until a medical diagnosis confirmed the causal connection between appellant's recurrent ailments and her exposure to the paint used by SCCC. The court therefore denied the motions for summary judgment by PPG Industries, Inc. (PPG) and NERCO and held that the three-year statute of limitations had not run before Hando filed her complaint in this action. NERCO and PPG each filed a cross-appeal from this denial of their motions for summary judgment.

We affirm the District Court's grant of the first motion and denial of the second.

Appellant presented the following issues upon appeal:

1. Did NERCO, as the parent or grandparent corporation of the wholly-owned SCCC subsidiary, breach its duty to provide a safe work place?

2. Does workers' compensation insurance obtained by the wholly-owned SCCC subsidiary extend to and protect NERCO, the parent or grandparent corporation, from claims arising from a work-related injury?

NERCO and PPG raised the following issue upon cross-appeal:

1. Are appellant's claims barred by the running of the statute of limitations?

The parties generally agree to the truth of the following facts for purposes of a discussion of the issues decided by the District Court's summary judgments. Emma Jean Hando (Hando) was employed by SCCC from March 3, 1980 until May of 1984. SCCC, a Montana corporation, was a wholly-owned subsidiary of NERCO, an Oregon Corporation, during this period. SCCC was formed for the purpose of owning and operating a strip coal mine in southwestern Montana. NERCO generally engaged in the business of developing, mining and selling coal through its ownership of various subsidiary corporations, such as SCCC, which controlled and supervised daily mining operations in the individual coal mines.

In 1981, Hando was assigned the duty of painting various surfaces within the coal processing plant at the Spring Creek Mine (Mine). She believed that the paint used, which was manufactured by PPG, caused her and others to suffer some adverse physical reactions. Hando was exposed to this paint again in April of 1982 when her supervisor at SCCC assigned her the job of painting within the control room at the Mine. The area in which she painted was poorly ventilated, and she briefly lost consciousness while painting. Recognizing that she had suffered an adverse reaction to the paint fumes, an SCCC supervisor contacted the poison control center in Denver, Colorado and arranged for her to have a medical examination in her hometown of Sheridan, Wyoming.

Between 1982 and 1984, Hando saw numerous physicians to determine the cause of numerous emotional, mental and physical problems (including nauseousness, dizziness, diarrhea, fatigue, depression, and recurrent infections). She believed her exposure to the paint caused these problems. Moreover, Hando and SCCC signed a workers' compensation claim in May of 1982 which stated her problems arose after she was "poisoned" by exposure to "paint vapors." Physicians at the Mayo Clinic also tested and evaluated her in late 1983 pursuant to arrangements made by SCCC after Hando complained to her employer in February of 1983 that she was unable to work around various chemicals. All these physicians who examined her prior to 1984 denied any causal connection between her continuing ailments and her paint exposure.

Following an examination of Hando in early 1984, Dr. Anderson of Billings, Montana stated his belief that her problems may have been caused by her toxic exposure to paint at the Mine. Dr. Anderson referred her to Dr. Randolph in Chicago, Illinois for further tests. Tests conducted in Chicago confirmed that her ailments were due to her sensitivity to petrochemicals and that her exposure to the PPG paint while employed by SCCC most likely triggered this sensitivity. Hando informed SCCC that she was unable to work, even at a receptionist position with the company, due to her chemical hypersensitivity. Consequently, her employment with SCCC ended on May 30, 1984.

On October 25, 1985, Hando filed a complaint against PPG, NERCO and SCCC. She amended this complaint on May 21, 1986 to include a products liability claim against PPG (Count I) and a claim for failure to provide a safe work place against NERCO (Count II). The additional claims against SCCC have since been settled and no issue remains to be tried against SCCC.

NERCO filed its motion for summary judgment on March 21, 1988, contending that it owed no duty as a matter of law to provide SCCC employees with a safe work place. After hearing the motion on May 18, 1988, the District Court granted summary judgment holding that NERCO owed no duty to provide Hando with a safe work place.

PPG also filed a motion for summary judgment, contending that Hando's claim was barred because the three-year statute of limitations applicable to this action had run prior to the filing of her complaint. On May 12, 1988, PPG asked the court to reconsider its denial of this motion in light of recent case law. NERCO filed a supplemental motion for summary judgment, thereby joining with PPG to argue the statute of limitations had run. The District Court denied these motions for summary judgment holding that the statute of limitations had been tolled until April of 1984 when a physician diagnosed the causal connection between Hando's ailments and her exposure to the PPG paint. Consequently, the three-year statute of limitations had not expired when Hando filed her complaint in October of 1985.

On October 24, 1988, the District Court entered its final amended judgment, pursuant to Rule 54(b), M.R.Civ.P., on those issues decided by its summary judgment rulings. Hando appealed from the court's grant of summary judgment on the issue of the lack of duty to provide a safe work place owed by NERCO. PPG and NERCO filed a cross-appeal from the court's denial of their motions for summary judgment on the issue of the running of the statute of limitations.

The first issue presented for review involves the duty owed by NERCO to provide a safe work place for SCCC employees. Appellant Hando contends that material issues of fact exist about whether NERCO was directly involved in the activities of its wholly-owned SCCC subsidiary and therefore liable, under either an agency or alter ego theory, for employment injuries suffered by SCCC employees due to an unsafe work place. Consequently, Hando argues the District Court erred in granting NERCO's motion for summary judgment on the issue of a duty owed by NERCO.

The general rule is that summary judgment is proper only if no genuine issue exists as to any material fact and if the moving party is entitled at law to a judgment. Rule 56(c), M.R.Civ.P. Once the moving party has shown that no material issue of fact exists and that she is entitled to judgment as a matter of law, the burden shifts. The opposing party then must come forward with substantial evidence sufficient to raise a factual issue, or the court may grant summary judgment on the matter before the court. D'Agostino v. Schaap (Mont.1988), 748 P.2d 466, 468, 45 St.Rep. 14, 16. NERCO, as the moving party in the present case, had the burden of showing that no factual issues existed which were material to a determination of whether it had a duty to provide a safe work place to SCCC employees. NERCO also had the burden of proving that it was entitled to summary judgment as a matter of law because the SCCC subsidiary was not its agent or alter ego, and that NERCO was therefore a separate corporation entity with no legal duty to provide a safe work place to employees of SCCC. We hold that NERCO met both these burdens.

Employers have a statutory duty to provide a safe work place for employees. See Secs. 50-71-201, -202, MCA. This Court previously has held that this duty generally is owed only by the immediate corporation employer. See, e.g., Shannon v. Howard S. Wright Constr. Co. (1979), 181 Mont. 269, 593 P.2d 438. This limitation upon the duty serves to foster the growth of corporations by protecting the corporate owners, whether shareholders or a parent corporation, from liability for those "obligations incurred in the management of the business of the corporation." See Barnes v. Smith (1913), 48 Mont. 309, 316, 137 P.2d 541, 543.

On occasion, however, courts may extend the obligations and resulting liabilities of a subsidiary corporation to a parent or grandparent corporation. This extension of liability is achieved by disregarding the separate corporate entity and treating the subsidiary and parent as one corporation, a process otherwise known as "piercing the corporate veil." See, e.g., Flemmer v. Ming (Mont.1980), 621 P.2d 1038, 1042, 37 St.Rep. 1916, 1919. Piercing the corporate veil is an equitable remedy used to curb injustices resulting from the improper use of a corporate entity. Because the remedy is...