State v. the Honorable Max E. Bacon

• Decision Date: 08 January 2002
• Docket Number: SC83559
• Citation: 63 S.W.3d 641
• Parties: State ex rel., Ford Motor Company, Relator, v. The Honorable Max E. Bacon, Circuit Court of Greene County, Missouri, Associate Division, Respondent. SC83559 Supreme Court of Missouri 0
• Court: Missouri Supreme Court

State ex rel., Ford Motor Company, Relator v The Honorable Max E. Bacon, Circuit Court of Greene County, Missouri, Associate Division, Respondent

SC83559

Supreme Court of Missouri

01/08/2002

Appeal From: Original Proceeding in Prohibition

Counsel for Appellant: Robert T. Adams, Douglas W. Robinson and Julie A. Shull

Counsel for Respondent: Tamara F. deWild and Richard E. Davis

Opinion Summary:

Five plaintiffs filed product liability lawsuits against Ford Motor Company in Greene County. In each case, Ford challenged venue on the grounds that the events leading to the cases did not occur in Greene County and that it does not maintain an office there. The trial court consolidated the cases for the purpose of deciding the venue issue and concluded that Ford had sufficient connections to Greene County to establish venue. Ford sought a writ from this Court, which issued its preliminary writ in prohibition.

Court en banc holds: Venue is improper in Greene County, and the trial court is ordered to transfer the cases to a proper venue. Although Ford Motor Credit Company is a wholly owned subsidiary of Ford with an office in Greene County, it is a corporate entity that is independent from Ford. Ford Credit does not serve as Ford's agent for the transaction of its usual and customary business because it has no power to alter the legal relations between Ford and third parties. Ford is not a party to Ford Credit's financing contracts, either with the dealers or the customers. Ford Credit also is not subject to any agreement with Ford that restricts or conditions its ability to finance a dealer's inventory purchases or a consumer's vehicle purchase.

Dissenting opinion by Judge White:

This writer would hold that the plaintiffs made a sufficient showing of an agency relationship between Ford Motor Company and Ford Motor Credit Company because they proved that Ford Credit provides financing at Ford's direction to facilitate the sale and distribution of Ford-manufactured vehicles. This writer would quash the preliminary order.

Benton and Price, JJ., and Dolan and Richter, Sp.JJ., concur; White, J., dissents in separate opinion filed; Wolff, J., concurs in opinion of White, J. Holstein and Stith, JJ., not participating.

Stephen N. Limbaugh, Jr., Chief Justice

Relator, Ford Motor Company (Ford), is the defendant in several products liability suits pending before respondent in the Circuit Court of Greene County.¹ In each case, Ford raised a defense of improper venue and moved to transfer the case to a county where venue was proper. Thereafter, the cases were consolidated for purposes of deciding the venue issue, and the trial court overruled Ford's motions. Ford then sought a writ of prohibition to prevent respondent from proceeding further with the cases, and this Court issued a preliminary order in prohibition. Having determined that venue is improper in Greene County, the writ is now made absolute.

Venue in Missouri is determined by statute. Because Ford is a corporation and is the only party defendant, the relevant venue statute is section 508.040, RSMo 2000:

Suits against corporations shall be commenced either in the county where the cause of action accrued . . . or in any county where such corporations shall have or usually keep an office or agent for the transaction of their usual and customary business.

It is undisputed that the causes of action in the several suits did not accrue in Greene County and that Ford does not maintain an office in Greene County. Instead, plaintiffs predicate venue on the fact that Ford Motor Credit Company (Ford Credit), Ford's wholly-owned subsidiary, does maintain an office in Greene County and that Ford Credit acts as Ford's "agent for the transaction of its usual and customary business" there. Accordingly, it must be determined whether Ford Credit is Ford's agent.

"Agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act." Restatement (Second) of Agency sec. 1 (1958); State ex rel. Elson v. Koehr, 856 S.W.2d 57, 60 (Mo. banc 1993). The Restatement specifically states, "A corporation does not become an agent of another corporation merely because a majority of its voting shares is held by the other." Restatement (Second) of Agency sec. 14M. Therefore, an agency relationship between a parent and its subsidiary may only be established if the elements of an agency relationship exist. Id. at sec. 14.

In Elson, this Court adopted the Restatement definition of an agency relationship, which sets out three essential elements:

1) that an agent holds a power to alter legal relations between the principal and a third party; Restatement (Second) of Agency sec. 12;

2) that an agent is a fiduciary with respect to matters within the scope of the agency; Restatement (Second) of Agency sec. 13; [and]

3) that a principal has the right to control the conduct of the agent

with respect to matters entrusted to the agent; Restatement

(Second) of Agency sec. 14.

Elson, 856 S.W.2d at 60. The absence of any one of these three characteristics defeats the purported agency relationship. State ex rel. Bunting v. Koehr, 865 S.W.2d 351, 353 (Mo. banc 1993).

This case must be resolved against respondent and plaintiffs because of the absence of the first element alone. The proof as to that element is in an affidavit filed by Ford in support of its motion contesting venue. The text of the affidavit is as follows:

1. My full name is Ann On-Yee Lee, and I am employed by Ford Motor Credit Company ("Ford Credit") as Litigation Counsel.

2. I have personal knowledge of the corporate structure of Ford Motor Credit Company, and its legal relationship to Ford Motor Company. I also have personal knowledge of the business of Ford Motor Credit Company.

3. Ford Motor Credit Company is a wholly-owned indirect subsidiary of Ford Motor Company.

4. As a wholly-owned indirect subsidiary of Ford Motor Company, Ford Credit has its own offices and directors. It also has its own Articles of Incorporation and is organized under the laws of Delaware. Its principal place of business is Dearborn, Michigan.

5. Ford Credit is in the business of purchasing retail contracts and leases of automobiles entered into by the dealer and its retail and commercial customers. Ford Credit also participates in commercial lending, including providing automobiles wholesale inventory financing, and capital, revolving, and mortgage loans to Ford and non-Ford dealers.

6. Regarding wholesale floor plan (inventory) financing, a dealer orders vehicles from the manufacturer, which may be Ford Motor Company. Ford Credit advances funds to the manufacturer for the purchase of the vehicles. Ford Credit takes a security interest in the inventory and assets of the dealership to secure the financing of the vehicles. When the dealer sells a vehicle, the security interest is discharged upon payment to Ford Credit by the dealer. Ford Credit does not act as an agent of the manufacturer for these purchases.

7. Regarding retail consumer purchases of Ford vehicles, Ford Credit finances vehicle purchases by consumers who purchase Ford vehicles from automobile inventory owned by the dealerships. If a consumer chooses to finance a vehicle, the dealer (creditor) and the consumer (debtor) enter into a retail installment contract which contract could be sold to Ford Credit at the dealer's discretion. Upon purchase, Ford Credit is assigned the creditor's rights and holds a security interest in the vehicle. Ford Credit does not act as an agent of the manufacturer for these purchases.

8. A consumer is not required to finance a Ford Motor Company vehicle through Ford Credit. A consumer may choose to finance a vehicle through a bank or other credit service which may offer similar products and services.

9. The manufacturer is not a party at any time to the retail installment contract.

10. Regarding automobile leases, the dealer sells the vehicle and the lease agreement to Ford Credit. The lease agreement, as assigned to Ford Credit, does not affect the relationship between the consumer or a dealer and the manufacturer. The manufacturer is not a party to the lease agreement.

11. Interest and principle [sic] payments from consumers and dealers are received by Ford Credit.

12. Interest and principle [sic] payments received by Ford Credit are not segregated and treated as receivables or held in trust for Ford Motor company. Ford Credit does not segregate money from each installment contract with the purchaser of a Ford vehicle and forward a percentage to Ford.

13. Ford Motor Company and Ford Credit are not parties to any agreement restricting or conditioning Ford Credit's ability to finance a customer's purchase of a vehicle or a dealer's inventory purchases.

The dispositive provisions of the affidavit are 1) that Ford is not a party to Ford Credit's financing contracts, either with Ford dealers and non-Ford dealers, or the customers of those dealers, and 2) that Ford Credit is not subject to any agreement with Ford "restricting or conditioning" its ability to finance either dealers' floorplans or customers' purchases of vehicles. These factual allegations, which are uncontroverted, establish that Ford Credit has no power to alter legal relations between Ford Motor Company and third parties. Therefore, Ford Credit does not act as agent for Ford Motor Company.

The dissent concludes that an agency is established because "Ford Credit provides financing at Ford's direction for the purpose of facilitating the sale and distribution of vehicles manufactured by Ford." This conclusion is ultimately based on a refusal 1) to acknowledge that Ford Credit is a corporate entity independent from Ford, and 2) to be bound by the elements of the Restatement of Agency that this Court adopted in Elson v. Koehr. Absent...