Bullington v. Union Tool Corp.

• Decision Date: 30 April 1985
• Docket Number: No. 41721,41721
• Citation: 328 S.E.2d 726,254 Ga. 283
• Parties: BULLINGTON v. UNION TOOL CORP.
• Court: Georgia Supreme Court

Page 726

328 S.E.2d 726

254 Ga. 283

BULLINGTON v. UNION TOOL CORP.

No. 41721.

Supreme Court of Georgia.

Decided April 30, 1985.

Benjamin F. Easterlin IV, Ellis, Easterlin & Peagler, P.C., Americus, for Marsha E. Bullington et al.

Thomas S. Chambless, Watson, Spence, Lowe & Chambless, Albany, for Union Tool Corp.

Billy E. Moore, Moore, Taylor & Associates, Columbus, Gene Mac Winburn, Winburn, Lewis & Barrow, P.C., Athens, amicus curiae. CLARKE, Justice.

This is a products liability action alleging defective design and manufacture of a table saw brought on grounds of negligence and strict liability. The trial court granted summary judgment to the defendant, Union Tool Corporation, holding that the defendant was not liable as a successor corporation for the torts of the company which designed and manufactured the table saw and that the claims were barred by the statute of repose in OCGA § 51-1-11(b)(2). The appellant raises issues involving liabilities of successor corporations and the constitutionality and applicability of OCGA § 51-1-11(b)(2). Pretermitting the statutory issues, we find under the facts as stipulated in this case that Union Tool is not liable as a successor corporation and therefore the judgment in its favor is affirmed.

The parties stipulated to the following facts. Appellant Bullington was injured on the job while operating the table saw in question on April 3, 1981. The saw was designed, manufactured and sold to an unknown original purchaser by Indiana Foundry Machine & Supply Company at some time prior to 1956. In 1947 the company name became Indiana Foundry Machine & Supply Co., Inc. (hereinafter the old corporation). In 1956, Indiana Foundry Machine & Supply, Inc., was incorporated (hereinafter the new corporation). The new corporation purchased the realty and most of the assets of the old corporation. There was no identity of ownership between the corporations; none of the incorporators or stockholders of either corporation were ever officers, directors or stockholders of the other.

The sale was for adequate consideration and not for an exchange of stock. The old corporation ceased doing business. The new corporation operated a manufacturing and sales business at the same location, with most of the same employees and employed the same individual as business manager. The new corporation manufactured and sold many of the same products and marketed them under the same trade name "Indiana Line" as the old corporation. However, the new corporation never sold or manufactured table saws of any kind, including the type which injured appellant Bullington.

In 1962 the new corporation merged with Union Tool Corporation and closed the Indiana operation. The merger agreement provided that the surviving corporation, Union Tool Corporation, was responsible for all liabilities of both corporations prior to the merger. The issue before the court is the effect of the 1956 sale on tort liability.

Generally, a purchasing corporation does not assume the liabilities of the seller unless: (1) there is an agreement to assume liabilities; (2) the transaction is, in fact, a merger; (3) the transaction is a fraudulent attempt to avoid liabilities; or (4) the purchaser is a mere continuation of the predecessor corporation. Fletcher, Cyclopedia of the Law of Private Corporations, § 7122; see 66 A.L.R.3d 824, 827.

The appellants contend that the new corporation should be held liable under the theory that it is a continuation of the old corporation under the stipulated facts. In Georgia, the common law continuation theory has been applied where there was some identity of ownership. Ney-Copeland & Associates, Inc. v. Tag Poly Bags, Inc., 154 Ga.App. 256, 267 S.E.2d 862 (1980); Johnson-Battle Lumber Co. v. Emanuel Lumber Co., 33 Ga.App. 517, 126 S.E. 861 (1925).

The appellant concedes that there is no identity of ownership in the present case, but contends that the continuation theory should be expanded in product liability cases because of the policies behind manufacturers liability. The court in Cyr v. B. Offen & Co., Inc., 501 F.2d 1145 (1st Cir.1974), expanded the continuation exception to successor liability where the successor was a group of employees of the predecessor who formed the new corporation, and continued to produce the same product in the same place and manner as the predecessor. In discussing the policy of spreading the risk of injury so that one who places a defective product into commerce should bear the cost of the injuries from that product the court states that a successor "carrying over the experience and expertise of the manufacturer, is likewise in a better position than the consumer to gauge the risks and the costs of meeting them. The successor knows the product, is able to calculate the risks of defects as the predecessor, is in a position to insure therefor and reflect such costs in sale negotiations, and is the only entity capable of improving the quality of the product." Cyr, at 1154. See also Turner v. Bituminous Casualty Co., 397 Mich. 406, 244 N.W.2d 873 (1976); Andrews v. John E. Smith's Sons Co., 369 So.2d 781 (Ala.1979).

Other states have adopted the rule set forth in Ray v. Alad Corp., 19 Cal.3d 22, 136 Cal.Rptr. 574, 560 P.2d 3 (1974), of expanding successor liability in product liability cases where 1) the predecessor is liquidated after the transfer, 2) the successor holds itself out to...