No. 88-539
IN THE SUPREME COURT OF THE STATE OF MONTANA
1989
EMMA JEAN "E.J." HANDO,
Plaintiff and Appellant,
-VS-
PPG INDUSTRIES, INC., SPRING CREEK COAL
COMPANY, and NERCO, INC., jointly and
severally,
Defendants, Respondents and
Cross-Appellants.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable Russell Fillner, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Nye & Meyer; Jerrold L. Nye, Billings, Montana
For Respondents: (cross-appellants)
Moulton Law Firm; W. Anderson Forsythe, Billings,
Montana
Anderson, Brown, Law Firm; Steven H. Harman, Billings,
Montana
Pamela L. Jacklin; Stoel, Rives, Boley, Jones & Grey,
Portland, Oregon
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Decided: March 30, 1989
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Mr. Justice L. C. Gulbrandson delivered the Opinion of the
Court.
Emma Jean Hando appeals the grant of summary judgment
to NERCO, Inc. (NERCO) by the 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 b :7
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 beEore
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 11). 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 NERCOts 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. DIAgostino
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.
Employees have a statutory duty to provide a safe work
place for employees. See 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. 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., Flemrner 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 equitable, no concrete formula exists
under which a court will disregard the separate identity of
the corporate entity. Use of this remedy depends entirely
upon the circumstances of each case. See Comment, Piercing
The Corporate Veil in Montana, 44 Mont.L.Rev. 91, 92-93
(1983). However, this Court has previously required two
general factors to be present before a court will disregard
the separate and distinct identity of a corporation:
(1) The corporation must be a mere agent or alter ego of the
parent company; and (2) the corporate cloak must have been
used to defeat public convenience, justify wrong, perpetrate
fraud, or to defend crime. State ex rel. Monarch Fire Ins.
Co. v. Holmes (1942), 113 Mont. 303, 307-08, 124 P.2d 994,
996.
A subsidiary corporation may be the mere agent of a
parent company for a particular transaction if the parent
company exercises control over the conduct and activities of
the subsidiary so that in effect the subsidiary is merely
acting on behalf of the parent. State v. Holdren (1963), 143
Mont. 103, 110-11, 387 P.2d 446, 450. On the other hand, a
subsidiary is the alter ego'of the parent corporation if the
corporate affairs of both are so intertwined that, in effect,
each no longer has a separate identity. Holmes, 124 P.2d at
996. Many factors are considered to determine whether a
subsidiary is merely the alter ego of a parent corporation.
The full ownership of a subsidiary, use of the same people as
directors and officers in both corporations, and engagement
in the same general business enterprise may all be
insufficient to indicate the subsidiary is merely an alter
ego. Flemmer, 621 P.2d at 1042. Courts also look at such
factors as the same type of day-to-day business activities of
each corporation, sharing of the same address or name, the
commingling of funds, undercapitalization of the subsidiary
and failure to maintain separate business records. See,
e.g., Thornock v. Pack River Management Co. (Mont. 1987), 740
P.2d 1119, 44 St.Rep. 1284; Flemmer, 621 P.2dc 1038; Holdren,
387 P.2d 446; Shaffer v. Buxbaum (1960), 137 Mont. 397, 352
P.2d 83; Wilson v. Milner Motels, Inc. (1944), 116 Mont. 424,
154 P.2d 265; Scott v. Prescott (1924), 69 Mont. 540, 223 P.
490.
The facts asserted by Hando fail to raise a question of
fact about whether NERCO controlled the painting activities
of SCCC. The District Court did not err in holding that SCCC
did not act as the agent of NERCO in regards to this
particular transaction. NERCO admitted that it chose the
general color scheme for the Mine and that its approval was
necessary if SCCC wanted to purchase supplies in an amount
over $50,000. Yet, the SCCC plant superintendent had the
primary responsibility for making daily work assignments in
the plant, including painting assignments, and the SCCC
warehouse superintendent was responsible for recommending the
paint that would be used. Further, Hando conceded in her
deposition that SCCC provided her with the paint, dictated
the method used to apply the paint, and chose the places to
be painted.
Hando also failed to set forth facts sufficient to
raise a question of fact about whether the business
activities of SCCC were so intertwined with those of NERCO
that SCCC was a mere alter ego of NERCO. The evidence shows
that SCCC was a wholly-owned subsidiary of NERCO and that
many of the same people served as officers and directors for
both corporations. However, both did not share the same
name, nor were they located in the same state; NERCO
maintained corporate headquarters in Oregon while SCCC was
located in Montana. Additionally, although both were engaged
in the same general business, that being the mining and sale
of coal, NERCO managed the overall operation and development
of many coal mining activities in Montana, Wyoming, Indiana
and Alabama, while SCCC was engaged in the day-to-day
operations of the Spring Creek Mine in Decker, Montana.
Further, Hando introduced no evidence indicating that the
funds or the records of each corporation were commingled, or
that SCCC was undercapitalized and thus incapable of
operating as a separate corporate entity.
As a matter of law, we hold that NERCO had no duty to
provide a safe work place for SCCC employees; the alleged
facts failed to show that SCCC acted as an agent of NERCO in
regards to the daily painting and upkeep activities of the
Mine or that SCCC was merely an alter ego of NERCO.
Moreo~rer, Hando failed to assert any facts indicating SCCC
was incorporated to "defeat public convenience, justify
wrong, protect fraud, or defend crime." Holdren, 387 P.2d at
451. We also hold that no genuine material issue of fact
exists in relation to the issue of whether an agency or alter
ego in fact existed. Hando's argument that NERCO was
actively involved in subsidiary activities is merely a
conclusory statement without the support of any new facts,
other than those generally discussed above. Hando also
failed to allege any facts showing that NERCO had an
independent duty, because her employment was directly related
to the physical operations of NERCO, to provide Hando with a
safe work place. Hando was injured on the SCCC, and not the
NERCO, iob site while engaged in a job related to the daily
upkeep of the SCCC Mine and while using paint purchased and
owned by SCCC. - Reynolds v. Burlington Northern, Inc.
Cf.
(1980), 621 P.2d 1028, 37 St.Rep. 1883 (holding that a parent
corporation owed a duty to provide a safe work place to that
subsidiary employee injured by equipment owned by the parent
railroad corporation and while working on a job site
belonging to the railroad). Consequently, we hold the
District Court did not abuse its discretion when it granted
summary judgment and held that NERCO did not have a duty to
provide Hando with a safe place to work.
The second issue presented upon appeal questions
whether workers' compensation insurance owned by SCCC would
protect NERCO from liability for claims arising because of an
unsafe SCCC work place. We need not discuss this issue
having held that NERCO had no duty to provide Hando with a
safe work place and thus may not be held liable for any
injuries arising from the unsafe work place of its
subsidiary.
The third issue, raised upon cross-appeal, challenges
the District Court's holding that the statute of limitations
was tolled until a medical diagnosis causally connected
Hando's exposure to toxic paint fumes with her various
continuing ailments. PPG and NERCO assert that the statute
of limitations began to run in April of 1982 after her last
on-the-job exposure to the paint which she believed caused
her injuries. By statute, Hando had three-years from the
date of this last injury to file a claim against NERCO and
PPG. This three-year period expired in April of 1985, yet
Hando did not file her claim until October of 1985. PPG and
NERCO therefore assert that Hando's claims against them are
barred.
A three-year statute of limitations does indeed apply
to tort claims or products liability claims. Section
27-2-204, MCA. The law sets such statutes of limitations as
an equitable measure intended to prevent the litigation of
stale claims by requiring that a party file a claim within a
reasonable period of time while the evidence supporting the
claim is still fresh. E.W. v. D.C.H. (Mont. 1988), 754 P.2d
817, 819, 45 St.Rep. 778, 780. The statute of limitations in
any given case generally begins to run upon the occurrence of
the last wrongful act relevant to the cause of action. The
statute of limitations is not tolled until a plaintiff
discovers her legal right to bring an action for known
injuries. The statute also is not tolled until a plaintiff
learns the facts out of which a known cause of action arose.
Bennett v. Dow Chemical Co. (Mont. 1986), 713 P.2d 992, 994,
43 St.Rep. 221, 224. This Court has, however, tolled the
statute of limitations until a plaintiff discovers the
injury, or until he should have discovered the injury with
the use of due diligence, if the injury is self-concealing.
Johnson v. St. Patrick's Hosp. (1966), 148 Mont. 125, 417
P.2d 469. A statute of limitations has even been tolled
until the legal cause of an injury is determined, although
the injury itself is apparent, if equity so demands. Hornung
v. Richardson-Merrill, Inc. (D.Mont. 1970), 317 F.Supp. 183.
In Hornung, the Federal District Court Judge in Billings
tolled the statute of limitations until the plaintiff
discovered that the drug MER/29 may have caused his
cataracts. - at 185.
Id
The facts in the present case indicate that although
Hando was very much aware of those continuing physical,
emotional and mental ailments she suffered after her exposure
to the paint, she did not know the cause of those injuries
until May of 1984. Prior to that time, she and SCCC
suspected that her ongoing ailments stemmed from her exposure
to the paint manufactured by PPG. She even filed a workers'
compensation claim in May of 1982 based upon this belief.
However, the veracity of her belief was not known until May
of 1984. Medical tests done in Chicago at that time provided
Hando with a medical diagnosis that her continuing problems
were due to a "sensitivity to petrochemicals," a sensitivity
most likely triggered by her exposure to the PPG paint while
working for SCCC in 1981-82.
Hando's failure to learn the cause of her ongoing
injuries was not due to a lack of diligence on her part.
Between 1982 and 1984, Hando saw numerous physicians,
including physicians at the renowned Mayo Clinic in
Minnesota, to determine the cause of her ongoing problems.
No physician who examined Hando during this period attributed
her continuing ailments to her exposure to the PPG paint.
The facts in this case therefore are dissimilar to those in
the E.W. case. In E.W., the plaintiff knew that the sexual
molestation by her stepfather was tortious, she knew she
suffered from psychological problems as a result of the
tortious conduct by her stepfather, yet she failed to file a
complaint until thirteen years after she reached the age of
majority. See, E.W., 754 P.2d at 818. In contrast, Hando
did not know that her exposure to the PPG paint caused her
continuing medical problems, nor was her exposure to the
paint obviously tortious. Further, she continued to seek a
medical diagnosis for her ongoing problems. Consequently, we
hold that the facts in the present case are comparable to
those in Hornung, and not to those in E .W. , and we likewise
hold that the three-year statute of limitations did not begin
to run until a medical opinion was rendered in April-May of
1984 linking her injuries to her exposure to the PPG paint.
Hando filed her claims against PPG and NERCO in October
of 1985, well within the three-year statute of limitations.
PPG and NERCO therefore are not entitled to summary judgment
on this issue and the District Court did not abuse its
discretion when it denied the cross-appellants' motions for
summary judgment.
Affirmed.
We concur:
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ef 'Justice
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Justices