Court Opinion

ID: 9771910
Source: CourtListenerOpinion
Date Created: 2023-08-29 16:59:52.594087+00
Date Added: 2024-06-11T07:31:39.612266
License: Public Domain

John A. Fooleman, Justice. I respectfully dissent. 1 agree with the majority in many particulars. I agree that the question presented is as narrow as the majority state it to be. I would keep it just that narrow.1 In order to do so, and to put the question in proper perspective, it is necessary that more of the background on which the summary judgment was granted be disclosed. It was alleged in the complaint that Oliver had actual knowledge of the lack of the proper safety guard required by the safety code on a machine operated bjr appellant. It was also alleged that Oliver specifically assigned appellant to the operation of this machine without remedying the defect or warning appellant. It was further alleged that Oliver had twice previously been warned by the Department of Labor of this deficiency and of the clear and present danger posed to the safety of employees required to operate it. These allegations were not controverted by the affidavit in support of Oliver’s motion for summary judgment. I also agree that a “third party” is an entity other than the employer and employee. • I further agree that most of the cases cited in the majority opinion really fail to reach the issue here. It seems to' me that at least one of them lends more support to my position than to that of the majority, as will presently be demonstrated. I do not agree that appellant is asking us to pierce the corporate veil. Actually the reverse is true. Appellee, the majority stockholder in a family corporation, has asked that the corporate veil hung by him and his family for their personal protection against business creditors be pierced for his own benefit when recognition of the separate entity would subject him to liability in a personal capacity as an employee of the corporate structure erected by him. Arkansas is quite liberal in affording corporate protection to a business enterprise. We have even permitted the formation of one-man corporations. Both the legislative and judicial branches have generally required a corporate status more similar to the leopard than to the chameleon. The holding of the majority would' let appellee change his protective coloration as the mood strikes him. The rule announced by the majority in this case is this: if a majority stockholder of a family corporation, who also manages the business and supervises the employees, is sued as a “third party” tort-feasor by an employee of the corporation he may, at his option, disregard the corporate fiction he created and seek the immunity from common law tort liability he would have had as an individual employer under the Workmen’s Compensation Law. Such a result allows the appellee to “eat his cake and have it too” and is patently inconsistent with the rules heretofore announced by this court pertaining to “piercing the corporate veil.” In Rounds & Porter Lbr. Co. v. Burns, 216 Ark. 288, 225 S.W. 2d 1, this court said, “It is only when the privilege of transacting business in corporate form has been illegally abused to the injury of a third person that the corporate entities should be disregarded.” This, decision was followed by Plant v. Cameron Feed Mills, 228 Ark. 607, 309 S.W. 2d 312. There the corporate veil was pierced in an equity action to enforce a labor and materialman’s lien on a building. The defendant corporations were a parent and a subsidiary which the court said were identical for the purposes of the suit. We held that even though the corporations were, legally separate entities, it would constitute a constructive fraud on the lien claimant to allow them to claim entirely separate existences. Although we said that justice required the piercing of the fiction of the corporate entity, we added that the rule should be applied with great caution. In Black and White v. Love, 236 Ark. 529, 367 S.W. 2d 427, we reaffirmed our conclusions as set out in Round & Porter Lbr. Co. v. Burns, supra, and pierced the veil of a corporation to prevent, “piitting fiction.above right and justice.” Finally, in Banks v. Jones, 239 Ark. 396, 390 S.W. 2d 108, we refused to pierce the corporate veil, saying, “We agree with the chancellor that the evidence in the instant case does not support a finding that there was an illegal abuse of the corporate form to the injury of the appellant.” Thus the majority of the court have for the first time permitted the corporate fiction to be disregarded at the option of the incorporaters for their own benefit and not for the benefit of one injured by the illegal abuse by another of the privilege of transacting business as a separate corporate entity. . This holding is not only inconsistent with our previous decisions with reference to the equitable rule permitting the piercing of the corporate veil, but it is inconsistent with our holding in Brooks v. Claywell, 215 Ark. 913, 224 S.W. 2d 37. There we held that the’managing officer of a corporation, owned by him, his sister and brother-in-law, from which he took all the profits and of which he was in absolute control, was an employee of the company for the purpose of determining whether that company was subject to the Workmen’s Compensation Act. My position is not unprecedented. In Adams v. Fidelity and Casualty Co. of New York, 107 So. 2d 496 (La. App. 1958), the Louisiana court had before it a case which is closely analogous to this one. In that case plaintiff employee sought to sue several high-ranking corporate officers and stockholder directors of the corporation employer as a “third party” under a workmen’s compensation statute similar to our own. The defendants contended that because the complaint alleged that they failed to perform duties which arose out of their position as officers and directors of the corporation they were therefore liable only to their corporate employer and not to a third party such as an ¡employee. This contention was rejected. It is strikingly similar to the majority’s assertion that if the corporation were the employer and Oliver were the mere president he was not liable in tort or under the compensation act for injuries sustained by corporate employees who are injured on defective corporate owned and maintained machines and equipment. The Adams case has been followed in Travelers Ins. Co. v. Brown, 338 F. 2d 229 (5th Cir. 1965) and Herbert v. Blankenship, 187 So. 2d 798 (La. App. 1966). In the latter case two of the defendants were officers and the stockholders of the employer corporation. The court there said that officers or agents of corporate employers may themselves be liable in part insofar as their own personal negligence contributed to the accident causing injury to an employee even though the exclusive remedy against the corporation itself for the workman’s injuries was in compensation. Other cases in which suits by injured employees against officers, directors and stockholders of a corporation as “third parties” have been permitted include Webster v. Stewart, 210 Mich. 13, 177 N.W. 230 (1920); Witherspoon v. Salm, Ind. App., 237 N.E. 2d 116 (1967). In Echols v. Chattooga Mercantile Co., 74 Ga. App. 18, 38 S.E. 2d 675 (1946), cited by the majority, the defense of the general manager of the corporation against a tort action by an employee was that the manager was the alter ego of the corporation. The court rejected this defense. In Evans v. Rohrbach, 35 N.J. Super. 260, 113 A. 2d 838 (1955), also cited by the majority, the court indicated that a director or officer who committed a tort or directed a tortious act to be done or who participated or cooperated therein was liable to third persons injured thereby, even though liability might also attach to the corporation. I should point out that the decision in Peet v. Mills, 76 Wash. 437, 136 P. 685 (1913) might appear to give some support to the position of the majority were it not for the fact that the Workmen’s Compensation statute involved abolished all civil actions arising out of an employment except those expressly saved by the act. The only actions saved were those for injuries caused by the act of a third party not in the same employ as the injured workman. I cannot sanction the misuse of the equitable device of piercing the corporate veil to arrive at a desired result under the Workmen’s Compensation Law. It is, perhaps, a hard rule of law that would require the court to acknowledge the separate legal existence of 7-11 Laundry Cleaners, Inc. from appellee J. P. Oliver who is the principal stockholder and manager. However, it is my view that this problem addresses itself to the legislature, not the courts. I would reverse. Byrd, J., joins in this dissent.  In this respect it should be made clear that there is no appeal from the summary judgment in favor of Mrs. Oliver.