Opinion
No. 5-773 / 05-0406
Filed March 1, 2006
Appeal from the Iowa District Court for Polk County, Artis Reis, Judge.
Dennis Moyle, as personal representative of the estate of Bennett Moyle, appeals from the district court's grant of summary judgment in favor of Elliott Aviation, Inc. and Elliott Aviation Flight Services, Inc. AFFIRMED.
Diane Bratvold, Joseph Lawder, and Marcia Miller of Rider Bennett, L.L.P., Minneapolis, and Steven V. Lawyer of the Law Firm of Steven V. Lawyer, Des Moines, for appellant.
Richard Santi and James Wainwright of Ahlers Cooney, P.C., Des Moines, for appellees.
Heard by Zimmer, P.J., and Miller and Vaitheswaran, JJ.
This appeal arises from the wrongful death action brought by Dennis Moyle, the personal representative for the estate of Bennett Moyle. Moyle appeals from the district court's grant of summary judgment in favor of defendants Elliott Aviation, Inc. and Elliott Aviation Flight Services, Inc. We affirm.
I. Background Facts Proceedings
Bennett Moyle died when his single-engine airplane crashed on July 26, 2001, near Oshkosh, Wisconsin. Dennis Moyle, Bennett's brother and estate administrator (Moyle), filed a wrongful death action in the Iowa District Court for Polk County against four corporations: (1) Elliott Aviation of Minneapolis, Inc. (EAMI), a Minnesota corporation; (2) Elliott Aviation Flight Services, Inc. (EAFSI), an Iowa corporation; (3) Elliott Aviation, Inc. (EAI), an Iowa corporation; and (4) General Aviation Modification, Inc. (GAMI), an Oklahoma corporation. The suit alleged that each defendant was negligent in installing, inspecting, and servicing turbo-charged fuel injectors in Bennett's aircraft, ultimately leading to the fatal crash. Moyle's claim against GAMI was dismissed for lack of personal jurisdiction, and he voluntarily dismissed the claims against EAMI.
GAMI is a manufacturer of aircraft parts.
Moyle timely served an identical lawsuit against EAI, EAFSI, and EAMI in Minnesota.
EAI is the parent corporation of EAMI and EAFSI. EAI provides various administrative services to its subsidiary corporations. EAMI operates an FAA licensed aircraft repair facility at the Flying Cloud airfield in Eden Prairie, Minnesota. EAFSI's basic activity is aircraft chartering.
EAI is also the parent corporation of Elliott Aviation of Des Moines, Inc., Elliott Aviation of the Quad Cities, Inc., Elliott Aviation of Omaha, Inc., Elliott Aviation Aircraft Sales, Inc., and Elliott Aviation Technical Products Development, Inc.
EAI provides basic bookkeeping and accounting services, as well as human resources and payroll accounting services, to its subsidiaries.
EAI and EAFSI moved for summary judgment, claiming they were not involved in the installation of the fuel injectors or with the maintenance or inspection of Bennett's airplane. EAI and EAFSI contend Moyle named them as defendants only because the February 1, 1999 billing invoice for the allegedly negligent repairs erroneously listed EAFSI and EAI rather than EAMI as the corporations that installed the fuel injectors. Both corporations maintain that the incorrect names on the invoice were solely the result of clerical error. EAMI did not move for summary judgment, and it admitted that one of its employees installed GAMI fuel injectors in Bennett's aircraft at its repair facility in Minnesota.
EAMI admits in its answer to Moyle's petition that one or more of its employees performed annual condition inspections, servicing, maintenance, and provided some component parts for Bennett's aircraft.
The district court granted summary judgment in favor of EAI and EAFSI in an order that did not state the court's reasoning. Moyle now appeals.
II. Scope Standards of Review
When we review the district court's grant of summary judgment, we inquire whether the defendants demonstrated "the absence of any genuine issue of material fact and showed entitlement to judgment on the merits as a matter of law." Rants v. Vilsack, 684 N.W.2d 193, 199 (Iowa 2004) (citations omitted). We review the record in a light most favorable to Moyle to determine if the defendants met their burden. AMCO Ins. Co. v. Stammer, 411 N.W.2d 709, 711 (Iowa Ct.App. 1987).
III. Discussion
Moyle contends that genuine issues of material fact exist regarding whether EAI and EAFSI installed fuel injectors, inspected, and serviced Moyle's airplane prior to the crash; whether EAI and EAFSI appeared on the invoice by mistake; whether the corporate veil of EAI should be pierced; whether EAMI is a mere instrumentality of EAI; and whether EAI, EAFSI, and EAMI engaged in a joint venture and share tort liability. Moyle also maintains that the district court erred in granting summary judgment because the defendants are estopped from denying that they serviced the aircraft, they failed to plead the affirmative defense of mistake, and mistake is not a tort defense.
The parties do not dispute that EAI is the parent corporation of subsidiaries EAFSI and EAMI or that EAI provides administrative services to its subsidiaries. They do not dispute that an employee of EAMI performed the allegedly negligent repairs on Bennett's airplane or that the billing invoice for the services listed EAI and EAFSI instead of EAMI. They also agree that EAI provides a centralized bill collection system for all of its subsidiaries and collects all the billings at the same location, and accordingly, EAMI does not keep a separate bank account from EAI.
Moyle and the defendants also concur regarding fundamental details of the Elliott corporate family structure: (1) members of the board of directors and the officers for EAI and EAMI are identical except for Joseph Smith; (2) EAMI board minutes show that EAMI's board met at the same time as EAI's board to discuss substantially similar business; (3) the Elliott family of corporations uses Elliott Aviation as a "fictitious trade name"; (4) EAFSI provides aircraft charter, aircraft management, and pilot services, while EAMI provides aircraft repair services; and (5) EAI owns one hundred percent of the stock of EAMI.
Smith is an officer, vice president, and general manager of EAMI, but not an officer of EAI.
For the reasons that follow, we find no reason to disagree with the district court's decision to grant summary judgment.
A. Clerical Error in the Invoice for Repairs
Moyle maintains the district court erred in granting summary judgment to EAFSI because the corporation offered an insufficient explanation, aside from clerical error, to explain how its name rather than EAMI's name appeared on the invoice for the allegedly negligent repairs. Upon careful review of the record, we determine the relevant and material undisputed facts support the district court's grant of summary judgment to EAFSI on this claim.
EAMI is licensed as an FAA repair facility. EAMI admits that Joe Schlosser, one of its employees, performed the repairs at issue in this case. During his deposition, Schlosser confirmed that he installed the fuel injectors in Bennett's aircraft. EAMI's general manager and vice president, Joseph Smith, provided a sworn affidavit that EAMI, not EAFSI, was responsible for the installation of the fuel injectors. Smith also testified in a deposition that even though the invoice for the repairs mistakenly named EAFSI, the money collected by EAI for the repairs was credited to EAMI, not EAFSI. The record further reveals EAFSI is not a licensed FAA repair facility. EAFSI is in the business of providing charter flights. It does not employ its own mechanics, nor is it licensed to perform maintenance or repairs on airplanes. Moyle has offered no material facts to show that the billing invoice was not the result of clerical error. In addition, Moyle has offered no facts to show that an EAFSI employee performed any work on the Moyle aircraft.
In light of the foregoing, EAFSI was entitled to summary judgment on this claim.
B. Corporate Veil Piercing and Mere Instrumentality Theories
Moyle asserts the district court should not have granted summary judgment to EAI because genuine issues of fact exist regarding (1) whether EAMI's corporate veil should be pierced and (2) whether EAMI is a mere instrumentality of EAI. We address each of his factual arguments in turn.
Moyle contends that EAMI's corporate veil should be pierced to hold EAI liable for the alleged negligence of EAMI. Under Iowa law, the corporate veil may be pierced and a parent company held liable for the acts of a subsidiary corporation only under exceptional circumstances. Briggs Transp. Co. v. Starr Sale Co., 262 N.W.2d 805, 810 (Iowa 1978). Veil piercing is appropriate where the corporation is a mere shell, serves no legitimate business purpose, and is used primarily as an intermediary to perpetuate fraud or promote injustice. Id. The burden to prove exceptional circumstances is on the party seeking to pierce the corporate veil. In re Marriage of Ballstaedt, 606 N.W.2d 345, 349 (Iowa 2000).
In this case, Moyle does not appear to seriously contend that EAMI is a mere shell, serves no legitimate business purpose, or is used primarily as an intermediary to perpetuate fraud or promote injustice. However, he argues that the record generates issues of fact regarding whether EAMI failed to maintain separate books and is undercapitalized, whether the operating finances of EAMI are kept separate from those of EAI, and whether EAMI follows legally required corporate formalities. We conclude Moyle has failed to demonstrate he is entitled to avoid summary judgment on this issue.
The undisputed facts show that EAMI is a viable corporation. It conducts a legitimate aircraft repair business, and it holds an FAA repair station license. Nothing in the record suggests that EAMI is trying to evade just responsibility for work performed on the Moyle aircraft. Moyle suggests EAMI is undercapitalized because EAMI has never undertaken any debt or loans from a bank and maintains no separate bank accounts from EAI. These allegations do not prove that EAMI does not possess sufficient resources to satisfy its financial obligations. EAMI is not insolvent, and Moyle does not dispute the existence of EAMI's $40 million liability insurance policy. Although this policy alone does not prove that that EAMI is properly capitalized, it supports EAI's contention that no exceptional circumstances justify piercing EAMI's corporate veil. All Moyle has really shown is that EAMI's parent company handles a variety of administrative functions for its subsidiaries. We find that Moyle failed to establish genuine issues of material fact sufficient to avoid summary judgment on his corporate veil piercing theory.
EAI and EAMI each has its own articles of incorporation and bylaws. EAMI holds annual directors' meetings and keeps written minutes of those meetings, and it has numerous employees.
Moyle next contends there are genuine issues of material fact regarding whether EAMI is a mere instrumentality of EAI. Generally, a corporation is a separate legal entity, but when one corporation dominates another to the extent that the other is a mere instrumentality or adjunct to it, the courts will look beyond the legal fiction of distinct corporate existence as the interests of justice require. Randolph Foods, Inc. v. McLaughlin, 253 Iowa 1258, 1269, 115 N.W.2d 868, 874 (Iowa 1962).
Moyle correctly notes that the "mere instrumentality" rule is applicable where the intent is to avoid a legal obligation. See Johannsen v. Mid-Continent Petroleum Corp., 232 Iowa 805, 819, 5 N.W.2d 20, 28 (1942) (involving a defunct subsidiary corporation with no assets). However, we are unconvinced the rule has any application here. EAMI has conceded that its employees performed the allegedly negligent repairs on Bennett's airplane. The corporation did not move for summary judgment, and its financial resources include a $40 million liability insurance policy. Moreover, Moyle has failed to show the existence of any material facts that suggest EAMI is being used by EAI to avoid EAMI's legal obligations to Moyle. Accordingly, we reject this assignment of error.
C. Joint Venture
Another claim raised by Moyle is that genuine issues of material fact remain regarding whether EAI, EAFSI, and EAMI engaged in a joint venture and share tort liability. A joint venture is defined as an association of two or more persons to carry out a single business enterprise for profit or a common undertaking in which two or more combined their property, money, efforts, skill, or knowledge. Farm-Fuel Prods. Corp. v. Grain Processing Corp., 429 N.W.2d 153, 156 (Iowa 1988). The characteristics generally accepted as the criteria of a joint venture include (1) a common undertaking, (2) a joint proprietary interest in the subject matter, (3) a mutual right to control, (4) a right to share in the profits, and (5) a duty to share the losses. Id.
EAI provides administrative services for its subsidiaries, and EAMI provides maintenance and repair for aircraft. EAI and EAMI did not form an association to carry out the single business enterprise of aircraft maintenance and repair because EAMI must be licensed by the FAA to perform maintenance and repair work. EAMI is licensed for such work, but EAI is not. Moyle does not argue that EAI or EAFSI possess the mutual right to control EAMI's repairs because he concedes EAFSI provides aircraft charter, aircraft management, and pilot services, not maintenance and repair services. Neither EAI nor EAFSI had any right to control the repairs performed by EAMI. We conclude that Moyle failed to raise genuine issues of material fact regarding whether EAI or EAFSI could be held liable under a joint venture analysis.
D. Other Arguments
Moyle also asserts that the district court erred in granting summary judgment because the defendants are estopped from denying they serviced the aircraft. The doctrine of equitable estoppel is a common law doctrine that prevents a party who has made certain representations from taking unfair advantage of another when the party making the representations changes its position to the prejudice of the party who relied on the representations. ABC Disposal Sys., Inc. v. Dep't of Natural Res., 681 N.W.2d 596, 606 (Iowa 2004). The elements of equitable estoppel are (1) false representation or concealment of material facts, (2) lack of knowledge of the true facts on the part of the actor, (3) the intention that the false representation or concealment be acted upon, and (4) reliance on the false representation or concealment by the actor to his or her prejudice and injury. City of Akron v. Akron-Westfield Cmty. Sch. Dist., 659 N.W.2d 223, 226 (Iowa 2003).
Even after viewing the record in the light most favorable to Moyle, we find no genuine issues of material fact remain regarding whether the defendants are equitably estopped from denying they serviced Bennett's aircraft. Moyle has not presented facts that show EAI or EAFSI intended Bennett to act upon the incorrectly labeled invoice in a certain way or that he even noticed EAFSI and EAI were listed instead of EAMI. Moreover, as we previously mentioned, EAMI has already admitted that its mechanics performed the allegedly negligent repairs on Bennett's aircraft. We conclude Moyle did not raise disputed issues of material fact to allow his equitable estoppel claim to survive summary judgment.
Moyle's final contentions are that summary judgment was inappropriate because (1) the defense of mistake is not available to the defendants because they failed to plead it as an affirmative defense and (2) mistake is not a defense to negligence. We find no merit in these arguments. Moyle's claim is based on alleged negligence in installing GAMI fuel injectors in the airplane, not on negligent performance of some administrative task by either EAI or EAFSI. The correct identification of the alleged tortfeasor is an element of the plaintiff's claim to be proved by the plaintiff. Under the circumstances of this case, neither EAI nor EAFSI was required to plead mistake as an affirmative defense in this negligence action to prevail on its motion for summary judgment.
The February 1, 1999 billing invoice is not even mentioned in plaintiff's petition.
IV. Conclusion
We conclude the district court properly granted summary judgment in favor of EAI and EAFSI. Accordingly, we affirm the district court's ruling.