Steven v. Roscoe Turner Aeronautical Corporation

• Decision Date: 31 October 1963
• Docket Number: No. 14051.,14051.
• Citation: 324 F.2d 157
• Parties: Kathryn E. STEVEN, Administratrix of the Estate of George A. Steven, deceased, Plaintiff-Appellant, v. ROSCOE TURNER AERONAUTICAL CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

324 F.2d 157 (1963)

Kathryn E. STEVEN, Administratrix of the Estate of George A. Steven, deceased, Plaintiff-Appellant, v. ROSCOE TURNER AERONAUTICAL CORPORATION, Defendant-Appellee.

No. 14051.

United States Court of Appeals Seventh Circuit.

October 31, 1963.

James H. Ferguson, Bloomington, Ind., Gerald H. Gottlieb, Beverly Hills, Cal., Phillip Melangton, Jr., Indianapolis, Ind., for appellant.

William F. Welch, John I. Bradshaw, Jr., Marshall E. Williams, Cecil A. Taylor, French M. Elrod, Elrod, Taylor & Williams, McHale, Cook, Welch & McKinney, Indianapolis, Ind., for defendant-appellee.

Before HASTINGS, Chief Judge, and DUFFY and MAJOR, Circuit Judges.

HASTINGS, Chief Judge.

This is an action by plaintiff Kathryn E. Steven, administratrix of the estate of George A. Steven, deceased, against defendant Roscoe Turner Aeronautical Corporation (RTAC) for the alleged wrongful death of plaintiff's husband, George A. Steven.

Plaintiff's decedent was killed as the result of an airplane crash. The airplane was chartered by deceased and others from Turner Aviation Corporation (TAC).

Plaintiff alleged that TAC was an agent of RTAC. She contended in the alternative that TAC was a mere corporate instrumentality of RTAC.

The district court entered an order sustaining RTAC's motion for summary judgment. From the resulting summary judgment, plaintiff appealed.

RTAC is an Indiana corporation, organized in 1931. Its principal place of business is Wier Cook Airport, Indianapolis, Indiana. It operates an aircraft sales and service business and holds a day and night air taxi operating certificate, for the carrying of passengers, issued by the Civil Aeronautics Authority. There are eight persons on the board of directors of RTAC. Roscoe Turner is chairman and two of the other seven are Madonna Turner and French Elrod. Madonna Turner is also president of RTAC.

TAC was incorporated in Indiana in 1953 by Roscoe Turner, French Elrod and Cecil Taylor. Roscoe Turner is president and Madonna Turner secretary-treasurer. TAC's principal place of business is Hulman Field, Terre Haute, Indiana. It engages in selling and servicing aircraft and carrying passengers for hire. Its air taxi certificate was issued in December, 1955, and authorized daytime flights only.

Richard O. Meserve was employed as general manager of TAC in December, 1953 by Roscoe and Madonna Turner. In 1955, Meserve became vice president of TAC.

From December, 1955 through March, 1957, TAC employed one pilot and owned one single engine airplane. When needed, additional airplanes and pilots were sent to TAC by RTAC. Roscoe Turner instructed Meserve to use only aircraft owned by TAC or RTAC.

On March 6, 1957, at approximately 4:30 P.M., a scheduled flight of Lake Central Airlines to Chicago was canceled at Terre Haute, Indiana. A group of stranded passengers was anxious to get to Chicago that evening, among them plaintiff's decedent. Plaintiff's decedent and five others went to the office of TAC to inquire about a charter flight. A twin engine aircraft capable of carrying all six persons was requested. Meserve quoted them the price of such aircraft. The group considered this price too high since they would have to pay the additional expense of the flight of the plane from RTAC in Indianapolis to Terre Haute. It was finally agreed that the six passengers would be transported to Chicago by TAC, three each in two single engine planes.

Meserve piloted one aircraft which flew to Meigs Field in Chicago and landed at 7:15 P.M. without incident.

The second airplane was flown by Vernon Hux who did not have a license to carry passengers. Both flights took place at night in violation of TAC's air taxi certificate.

The airplane piloted by Hux crashed near Grant Park, Illinois, at approximately 7:10 P.M., killing plaintiff's decedent. The airplane had been rented by TAC from Wremco Enterprises, Inc., an Indiana corporation, whose only asset was this airplane. Meserve and Hux were officers and shareholders of Wremco. Meserve arranged for the rental. Neither Roscoe Turner nor RTAC had knowledge of the existence of Wremco and Turner had instructed Meserve to use only airplanes belonging to RTAC and TAC.

Plaintiff originally filed suit against RTAC, TAC, Wremco Enterprises, Inc., Vernon Hux and Richard Meserve. RTAC was voluntarily dismissed from this suit on plaintiff's motion.

On February 26, 1959, plaintiff commenced the present action against RTAC as sole defendant, in the Circuit Court of Cook County, Illinois. RTAC obtained removal, based on diversity of citizenship, to the United States District Court for the Northern District of Illinois. Thereafter, the case was transferred to the United States District Court for the Southern District of Indiana, where it was consolidated with the original case against TAC, et al.

On May 18, 1962, RTAC filed a motion for summary judgment. It contended that no genuine issue as to any material fact was present and therefore it was entitled to judgment as a matter of law.¹ In support of its motion, RTAC filed affidavits of Madonna Turner, Roscoe Turner and Meserve.

In response to such motion, plaintiff offered in evidence a copy of the transcript of testimony by Roscoe Turner taken at a hearing before the Civil Aeronautics Board (CAB), the decision of the CAB, depositions of Roscoe Turner and Meserve, affidavits of counsel and corporate records of Wremco, TAC and RTAC.

The copy of the transcript of testimony by Roscoe Turner before the CAB was filed by plaintiff on June 28, 1962. The CAB hearing had been held in October, 1957, and resulted in the revocation of TAC's air taxi certificate. RTAC was not a party to this proceeding.

On July 7, 1962, RTAC filed a motion to strike this copy, giving as a reason, inter alia, its lack of certification. This motion was sustained by the district court on August 15, 1962.

On August 24, 1962, plaintiff filed a request for extension of time to allow plaintiff to secure a certification of the transcript from the CAB. The district court granted plaintiff's request. Plaintiff had previously been directed to file depositions and other writings on or before August 24, 1962. The date was reset for September 5, 1962 so that plaintiff might have time to obtain the required certification.

The hearing on motion for summary judgment was held September 5, 1962. Plaintiff introduced in evidence business documents which were obtained by a subpoena duces tecum served to RTAC on August 31, 1962. These documents were for the years 1953 to 1957, for both RTAC and TAC. They were the corporate minutes and records of stockholders' meetings, federal income tax returns, Indiana gross income tax returns, employment security returns to the State of Indiana, social security forms, annual corporate reports to the Secretary of the State of Indiana and payroll records and time cards of Meserve, Donald McClure, mechanic for both RTAC and TAC, Paul Schlundt, chief pilot for RTAC and Dale Mason, vice president and member of the board of directors of TAC. RTAC produced as many of these documents as it could obtain in the short period of time between receiving the subpoena and the hearing.

Plaintiff had not read these documents prior to the hearing. The court granted a recess for this purpose. Plaintiff had not obtained certification of the copy of the CAB transcript. Plaintiff moved for a second extension of time for the purpose of obtaining such certification, adducing additional evidence from witnesses and obtaining other evidence. Although this motion was denied, the court read and considered the CAB copy.

The district court allowed plaintiff to conduct oral examinations at the hearing. Plaintiff questioned Madonna Turner, Schlundt and McClure.

After considering the aforementioned evidence, the district court entered summary judgment in favor of RTAC, stating "* * * that there was no genuine issue as to the fact that Turner Aviation Corporation was a separate corporation and was not so organized, managed, or controlled as to constitute a mere instrumentality or alter ego of Roscoe Turner Aeronautical Corporation * * *."

The evidence, except the testimony of Roscoe Turner before the CAB tended to show the following in respect to control of TAC by RTAC. Roscoe and Madonna Turner owned approximately 70% of the stock of TAC; three of the five directors and two of the three incorporators of TAC were directors or officers of RTAC; on occasion, a mechanic from RTAC would do work for TAC and be paid for such work by TAC; and on occasion, pilots from RTAC would pilot charter planes of RTAC for TAC. These pilots were paid by RTAC which would then bill TAC for use of the planes and services of its pilots.

The testimony of Roscoe Turner at the CAB hearing is substantially as follows in respect to control of TAC by RTAC. Meserve's managerial acts were subject to approval by Roscoe Turner; Roscoe Turner, Madonna Turner or Mason made one or two trips a week to TAC to help Meserve supervise; and Meserve had no authority to employ pilots for TAC without Roscoe Turner's approval.

The issue presented to this court is whether the evidence, relating to TAC being an agent or instrumentality of RTAC, is such that RTAC is entitled to judgment as a matter of law, there being no genuine issue as to any material fact.

It is clear that no genuine issue is presented by the allegation in the complaint that TAC was an agent of RTAC in the transactions which resulted in the fatal flight. There is no evidence that RTAC expressly made TAC its agent. An often cited authority in the area of parent and subsidiary corporation relationships states that "except in cases of express agency * * * the Instrumentality Rule alone furnishes a practicable medium to break down the statutory immunity * * *. Indeed, a sincere application of agency rules would largely destroy the protection afforded stockholders by incorporation." Powell, Parent and...