Opinion ID: 321744
Heading Depth: 2
Heading Rank: 3

Heading: The disregard of Prosser's corporate entity

Text: 10 The court by one of its instructions directed the jury to apply Brunswick's defense of Nelson's contributory negligence not only to Prosser but also to Legion. This was error. And because the jury may have found both Brunswick and Nelson guilty of negligence which was a proximate cause of the accident, the error was prejudicial to Legion and requires a reversal of that judgment. 11 In J. I. Case Credit Corp. v. Stark, 64 Wash.2d 470, 392 P.2d 215 (1964), the Supreme Court of Washington reiterated the holding in earlier decisions 9 that a court may not 'pierce the corporate veil' to declare two corporations identical in responsibility unless the record establishes not only 'such a commingling of property rights or interests as to render it apparent that they are intended to function as one,' but also, that, 'to regard them as separate would aid the consummation of a fraud or wrong upon others.' 392 P.2d at 218. 10 We entertain grave doubt that the proof concerning the property interests and affairs of Prosser showed a sufficient commingling to meet the identity of interest requirement. 11 However, that problem aside, we nevertheless are clear that the injustice requirement is not met: to regard Prosser and Legion as separate would not 'aid in the consummation of a fraud or wrong upon' Brunswick. We accept Brunswick's proposition that a 'fraud or wrong upon others' is simply the violation of a legal duty owed the party seeking to have the intervening corporation disregarded (see Horowitz, Disregarding the Entity of Private Corporations, 14 Wash.L.Rev. 285, 294 (1940) and that all that need appear to trigger the doctrine of disregard is the existence of a duty and its avoidance. However, the duty hurdle is insurmountable. Prosser, not Legion, was Nelson's employer, and Legion neither supervised nor otherwise directed or controlled Nelson's activities. Thus Nelson's negligence, if such there was, could not be imputed to Legion. 2. The Appeal of Galliher 12 The errors assigned by Galliher are, for the most part, the same as those commonly assigned by Legion, Prosser and Nelson. None of them has merit, as we have stated above. Of the remainder, only the one that relates to the giving of an instruction on the doctrine of voluntary assumption is properly before us; and we will limit our review to it. 13 Following the entry of judgment and while Galliher's appeal was pending, the Supreme Court of Washington abolished the use of the doctrine of assumed risk as a defense when the defense of contributory negligence can be raised. Lyons v. Redding Construction Co., 83 Wash.2d 86, 515 P.2d 821 (1973). We are required, in exercising our appellate jurisdiction over this diversity case, to apply the law as presently defined by the highest court of Washington, despite the fact that the law was altered after the judgment below was entered. Vandenbark v. Owens-Illinois Glass Co., 311 U.S. 538, 61 S.Ct. 347, 85 L.Ed. 327 (1941); Alameda County v. United States, 124 F.2d 611 (1941). See 1a J. Moore, Federal Practice P0.307(3), at 3317 (2d ed. 1961). We are compelled to hold the giving of the instruction error. 12 And because the jury may have concluded that Galliher assumed the risk of injury by entering the fume-filled building and based its adverse verdict upon that finding, the error was prejudicial, and the judgment in his case must be reversed. 14 Moreover, Lyons aside, the instruction, although a correct statement of law, was abstract, 13 and its giving constituted reversible error. Albin v. The National Bank of Commerce of Seattle, 60 Wash.2d 745, 375 P.2d 487 (1962). 15 In most if not all cases in which the defense of assumption of risk is applied, the injured plaintiff will not know until after he has been injured the precise path of events by which a known risk is increased to a certain injury. 'Thus, saying that one 'fully appreciated a risk' makes sense only in relative terms; it is a way of saying that his understanding of the probability of harm was at least as good as would be achieved from some point of view chosen as a standard for judgment.' Keeton, Assumption of Risk in Products Liability Cases, 22 La.L.Rev. 122, 125 (1961). The problem is to decide whether to select appreciation of the greater or lesser risk faced by Galliher as the 'standard for judgment.' 16 Washington cases, and the policy behind the assumption of risk defense, require that the particularized risk created by the live wires be used as the focal point for testing the legal sufficiency of Galliher's knowledge. 17 Washington law interpreting assumption of risk distinguished between the generalized risk of undertaking an activity and additional extraordinary risk, requiring that before an assumption instruction be given some evidence indicate that the plaintiff was aware of the 'extraordinary' risk. In Hogenson v. Service Armament Co., 77 Wash.2d 209, 461 P.2d 311, 315 (1969), the court held that a plaintiff whose eye was injured by defective ammunition bought from defendant had not assumed the risk of being injured by the ammunition simply because he was aware of the risk of firing antique rifles. The court stated: 18 'In the instant case the plaintiff may well be held to have been aware of a generalized hazard involved in firing old guns. There was no evidence indicating that he was aware of the further specific hazard of firing cartridges of the age and condition involved. Had he been aware of this risk he may well have reevaluated his decision to engage in target practicing on the day in question . . . When there was no evidence introduced that the plaintiff was aware of the factors leading to the 'extraordinary risk,' a volenti instruction would be singularly inappropriate.' 461 P.2d at 315. 19 And in Regan v. Seattle, 76 Wash.2d 501, 458 P.2d 12 (1969), the court held that a go-cart driver, even though aware of the risk of injury from racing, did not assume the risk of an accident created by water on the track, which defendant had negligently failed to remove, unless plaintiff had knowledge of the extraordinary risk. (See also Fred Harvey Corp. v. Mateas, 170 F.2d 612 (9th Cir. 1948); and generally, Prosser, supra, at 447-449.) 20 The additional risk created by the energized electric wires was an 'extraordinary risk' as that term is used in Regan and Hogenson. The court in Hogenson suggests one factor to be considered in determining whether the risk is extraordinary-- whether the additional risk is sufficiently distinct from the risk of which the plaintiff is aware to cause his reconsideration of entry into the dangerous activity. The presence of the live, bare wires substantially altered the risk of entering the building by creating an unperceived potential source of ignition. 21 Moreover, as in Regan and Hogenson, while the generalized risk which the plaintiff appreciated and voluntarily confronted was not attributable to the fault of Brunswick, the latter's negligence created an additional hidden risk which altered the perceived risk, and hence was 'extraordinary.' Galliher's case, it must be remembered, did not go to the jury on a products liability theory-- Brunswick was not chargeable with creating the risk of a fume-filled building. Rather, Brunswick was allegedly negligent in inadvertently turning on the power to the wires. Thus, while Galliher's injury foreseeably occurred, as did those in Regan and Hogenson, from the risk which made the known activity dangerous-- go-carts crash, old guns misfire, and fume-filled buildings explode-- nevertheless assumption of the risk is inapplicable because Brunswick's negligence created a hidden danger which increased the probability that the known risk would result in injury. 22 Requiring proof that Galliher knew of the 'extraordinary' risk accords with the policy of the doctrine. Indeed, allowing the defense without proof of knowledge of the additional risk created by Brunswick's negligence is inconsistent with the rationale for allowing assumption of risk to operate as a defense beyond the scope of contributory negligence. 23 In the ordinary situation in which assumption of risk is applied, the plaintiff sees a dangerous situation created by defendant's negligence and, knowing the risk, undertakes to confront it. If he is injured, and the decision to confront the danger was unreasonable (as Galliher's decision to enter the building may have been), then the plaintiff will be precluded from recovery by his contributory negligence. However, even if the decision was reasonable, he is still held to have assumed the risk of his injury. Whether the result is explained in terms of extinguishment of the defendant's duty of care to the particular plaintiff, or in terms of a break in the chain of proximate causation, see Walsh v. West Coast Coal Mines, 31 Wash.2d 396, 197 P.2d 233 (1948), the rationale is essentially that when the plaintiff knows and appreciates the danger, he is in a position as good as the defendant's to avoid his injury. If the plaintiff reasonably wishes to risk injury in order to derive some sufficiently important benefit, the law assigns him, rather than the defendant, the costs if he does not make it unscathed. The rule is justified because it reduces accidents-- by refusing to transfer the costs of the accident from the faultless plaintiff to the negligent defendant, the law creates an incentive for the plaintiff to avoid even reasonable risks. 24 The policy of assigning the cost of a risk-encountering enterprise to one who chooses to embark on it conflicts with the general tort policy of fault liability, which seeks to compensate those injured through the fault of others. See Mansfield, Informed Choice in the Law of Torts, 22 La.L.Rev. 17, 23-25 (1961). We think that when, as here, the defendant's negligence has increased the risk which plaintiff can observe, the policy behind assumption of risk becomes inapplicable and the doctrine must yield. The hidden risk necessarily causes the plaintiff to underestimate the cost of proceeding, thereby biasing his decisions towards activity with a greater potential for accidents than he would consciously undertake. On the other hand, the defendant retains a superior capacity to avoid the accident because he is chargeable with knowledge of the additional risk. The assumption of risk defense, rather than providing an additional incentive to the plaintiff to avoid the risk, increases the chances for accidents by removing the defendant's incentive to avoid adding hidden to apparent risks, and correcting or warning of those created. As a result, the accident-reducing function of the defense is not served by its availability in this situation, and the defendant should be relegated to his defense of contributory negligence. 25 We conclude that both under Washington law and general tort principles the defense of assumption of risk is properly limited to those situations in which the plaintiff 'in fact understood the risk to himself and his property as well as the defendant should have understood it.' Keeton, supra, at 125. To repeat: As Galliher did not know that the wires were charged, and Brunswick allegedly should have, the instruction should not have been given. 26 In summary, the judgments against Prosser and Nelson are affirmed; those against Legion and Galliher are reversed. The latter two causes are remanded with instructions to grant a new trial. No costs allowed in No. 71-2695. Costs to appellant in No. 71-2696.