Schnoor v. Deitchler, 90-1637

• Citation: 482 N.W.2d 913
• Decision Date: 18 March 1992
• Docket Number: No. 90-1637,90-1637
• Parties: Bernard D. SCHNOOR and Donna L. Schnoor, Appellees, v. Robert M. DEITCHLER and Ford New Holland, Inc., Appellants.
• Court: United States State Supreme Court of Iowa

Page 913

482 N.W.2d 913

Bernard D. SCHNOOR and Donna L. Schnoor, Appellees, v. Robert M. DEITCHLER and Ford New Holland, Inc., Appellants.

No. 90-1637.

Supreme Court of Iowa.

March 18, 1992.

Gregory G. Barnsten and Philip Willson of Smith, Peterson, Beckman & Willson, Council Bluffs, for appellant Deitchler.

William J. Brennan and Joseph A. Jordano of Fitzgerald, Schorr, Barmettler & Brennan, P.C., Omaha, Neb., and John P. Churchman, Council Bluffs, for appellant Ford New Holland, Inc.

Michael G. Reilly of Perkins, Sacks, Hannan, Reilly & Petersen, Council Bluffs, for appellees.

Considered en banc.

SCHULTZ, Justice.

This litigation was commenced by plaintiffs Bernard D. Schnoor and his wife Donna L. Schnoor to recover damages resulting from injuries Bernard received when his leg became entangled in a grain auger. Defendant Robert M. Deitchler owns the grain auger in question. Plaintiff Bernard alleges that defendant Ford New Holland, Inc. (Ford), is the successor corporation to Versatile Farm Equipment Operations (Versatile), manufacturer of the grain auger. The trial court submitted the issue of comparative fault of the parties to a jury. The jury determined damages and apportioned fault. The trial court entered judgments against each defendant. Defendants separately appealed. We reverse on each judgment.

Bernard, who was age sixty-four at the time of the accident, is an experienced farmer and grain hauler. Deitchler hired Bernard to haul beans from Deitchler's farm. Deitchler loaded the beans into Bernard's truck with his auger. As the truck was being filled, Bernard walked near the loading end of the auger and slipped on beans that were on the ground. His left foot went into the unguarded auger causing severe injuries to his leg.

Each defendant filed a separate notice of appeal. Ford maintains that the trial court erred in failing to grant its motion for a directed verdict because plaintiffs failed to prove that it was liable for Versatile's actions. Deitchler also asserts that the trial court should have directed a verdict in his favor. He argues that a business invitee cannot recover from the occupier of land if the condition causing the injury is open and obvious or if the business invitee has actual knowledge of the danger. Each defendant also complains of a jury instruction.

I. Successor corporation. Plaintiffs' petition alleged that Ford was the successor in interest to Versatile. Ford counters that plaintiffs failed to produce substantial evidence of this allegation.

Plaintiffs seek an exception to the general rule that a purchasing corporation is not liable for the debts or liabilities of a corporation that sells all of its assets to the purchasing corporation. DeLapp v. Xtraman, Inc., 417 N.W.2d 219, 220 (Iowa 1987). Plaintiffs urge that Ford, by its answers to two interrogatories which were received into evidence, entered into an agreement to assume the liabilities of Versatile.

We now examine the interrogatories and answers as follows:

INTERROGATORY NO. 17: Please describe in full detail the nature of the business transaction which lead to Defendant acquiring the company known as Versatile Farm Equipment Operations, i.e., whether it was a merger, a total sale, etc.

ANSWER:

New Holland of Canada Ltd. acquired selected assets of Versatile Corporation through an Asset Purchase Agreement dated May 21, 1987. On December 31, 1988, New Holland [of] Canada merged into Ford New Holland Canada, a subsidiary of Ford New Holland, Inc.

INTERROGATORY NO. 18: Please state whether or not Defendant, as part of the agreement to acquire Versatile Farm Equipment Operations, has agreed to be liable for products liability claims arising out of products manufactured and sold by Versatile Farm Equipment Operations prior to the acquisition by Defendant.

ANSWER:

A copy of sub-section 3.03(a) of the Asset Purchase Agreement is attached. This redacted copy is responsive to this particular Interrogatory.

The attached Asset Purchase Agreement between Versatile Corporation and New Holland of Canada, Ltd., provides that the purchaser agrees to assume responsibility for product liability claims and lawsuits involving products manufactured by Versatile.

We disagree with plaintiffs' claim that the interrogatory answers show that Ford agreed to assume Versatile's liability. The answers to the interrogatories expressly state that New Holland of Canada, Ltd., acquired Versatile's assets and assumed responsibility for product liability claims involving Versatile's products. New Holland of Canada, Ltd., then merged with Ford New Holland Canada, a subsidiary of defendant Ford. There are no admissions that defendant Ford assumed any liability.

The fact that Ford New Holland Canada is a subsidiary of defendant Ford does not aid plaintiffs. A subsidiary corporation is one in which another corporation, a parent corporation, owns the majority of shares of its stock. Black's Law Dictionary 1280 (5th ed. 1979). Ownership by a parent corporation of the stock of another corporation does not create an identity of corporate interest between the two corporations so as to render acts by one to be the acts of another. Inn Operations, Inc. v. River Hills Motor Inn Co., 261 Iowa 72, 83-84, 152 N.W.2d 808, 815 (1967). Under ordinary circumstances, a subsidiary corporation is treated as an entity separate from its stockholders or in this case the parent corporation. See id. at 84, 152 N.W.2d at 815-16. As a result, "the separate corporate personality enables corporate stockholders to limit their personal liability...." Briggs Transp. Co. v. Starr Sales Co., 262 N.W.2d 805, 809 (Iowa 1978).

Exceptions to the general rule of limited stockholder liability do exist which allow piercing of the corporate veil to impose liability on stockholders in certain circumstances. Id. at 810. Courts have disregarded the separate corporate personalities of parent and subsidiary corporations in certain circumstances to prevent the parent corporation from perpetuating a fraud, evading just responsibility, or defeating public convenience. Inn Operations, 261 Iowa at 84, 152 N.W.2d at 815.

Applying the above law to this case, we consider defendant Ford to be a separate corporate entity that can be held liable only if justification exists to pierce the corporate veil to impose liability on defendant Ford as stockholders of Ford New Holland Canada. The record contains no evidence that Ford committed any acts which fall within one of the exceptions allowing the imposition of liability upon defendant Ford as the majority stockholder. Consequently, we conclude that the record does not contain substantial evidence that defendant Ford assumed responsibility for the product liability claims of Versatile.

Plaintiffs urge that Ford should be estopped from asserting that it is not the corporate entity which is responsible for the product liability claims of Versatile. They assert that Ford's evasive answers to plaintiffs' interrogatories suggest that Ford was responsible for the product liability claims in this case. Plaintiffs further claim that if Ford was improperly named a defendant in this suit, Ford's remedy was by pretrial motion. We do not agree with either of these contentions.

This is not the appropriate time for plaintiffs to complain about defendant's answers to their interrogatories. It is obvious from reading Ford's answers to Interrogatories 17 and 18, that Ford did not specifically answer the questions. Rather than being dishonest, Ford's answers were evasive and incomplete. Plaintiffs did nothing to protect themselves, however. Plaintiffs' remedy is found in Iowa Rule of Civil Procedure 134, entitled "Failure to Make Discovery; Consequences." If interrogatory answers are obviously incomplete and evasive, the interrogating party should not be allowed to wait until the close of evidence at trial to request the sanction of estoppel to raise a defense be imposed on the answering party. Consequently, we reject plaintiffs' claim of estoppel.

Also, we do not believe that Ford was required to file a pretrial motion claiming it was not responsible for Versatile's product liability claims. In its answer, Ford denied that it was a successor in interest to Versatile. The burden of proof was then on plaintiffs to establish that defendant Ford had agreed to assume the product liability claims of Versatile.

We believe this issue requires a factual hearing and cannot be settled by a motion to dismiss or strike. Plaintiffs cite McCall v. Pitcairn, 232 Iowa 867, 871, 6 N.W.2d 415, 418 (1942), as authority for the proposition that if a defendant claims it was not the proper party, its remedy was by pretrial motion and the defendant is then estopped to raise this claim at the close of evidence. In McCall, this court held that under the evidence presented, defendant railroad receivers were operating the railroad and were responsible for plaintiff's claim. Id. Additional language regarding the timing of defendant's claim of improper joinder and estoppel were unnecessary to the decision in McCall and does not bind us now.

In sum, we disagree with both of plaintiffs' claims of estoppel. The trial court erred in failing to direct a verdict in favor of Ford. Under this ruling we need not consider other matters raised by defendant Ford.

II. Duties of occupier of land. Plaintiffs alleged in their petition that defendant Deitchler was negligent in failing to have a guard on the loading end of the grain auger and in failing to warn Bernard of this defect. At the close of evidence, Deitchler moved for a directed verdict claiming plaintiffs did not present substantial evidence of a breach of duty. Deitchler urges that as an occupier of land he owed no duty of care to a business invitee because the condition of the auger was open and obvious and Bernard had actual knowledge of the danger. He claims the trial court's denial of his motion was error.

We first review the...