Burr v. South Bend Lathe, Inc.

• Decision Date: 27 June 1984
• Docket Number: No. 1-83-18,1-83-18
• Citation: 18 Ohio App.3d 19,18 OBR 43,480 N.E.2d 105
• Parties: , 18 O.B.R. 43 BURR, Appellant, v. SOUTH BEND LATHE, INC., Appellee. *
• Court: Ohio Court of Appeals

Page 19

18 Ohio App.3d 19

480 N.E.2d 105, 18 O.B.R. 43

BURR, Appellant, v. SOUTH BEND LATHE, INC., Appellee. ^*

No. 1-83-18.

Court of Appeals of Ohio, Third District, Allen County.

June 27, 1984.

Syllabus by the Court

Where the plaintiff is injured by a defective product manufactured by and purchased from a predecessor corporation, the defendant successor corporation which has merely purchased assets of the predecessor corporation may not be held strictly liable for those injuries absent an agreement by the successor to assume the liabilities of the predecessor, even where the defendant carries on the same business, manufactures the same product line under the same trade name, and profits from the goodwill, advertising and established market of its predecessor.

Michael F. Colley Co., L.P.A., and Dana Deshler, Jr., Columbus, for appellant.

Cory, Leonard, Witter & Cheney and William C. Leonard, Lima, for appellee.

PER CURIAM.

This is an appeal by plaintiff from a judgment entered on March 17, 1983, by the Court of Common Pleas of Allen County, wherein that court ordered that the motion for summary judgment, filed by defendant on March 2, 1981, be granted.

This cause arose on the complaint filed by plaintiff on June 26, 1980, wherein it was alleged that defendant was strictly liable for a traumatic injury plaintiff sustained, on January 15, 1979, at her job as a result of her operating an allegedly defective and unreasonably dangerous mechanical press.

Plaintiff alleged that defendant was in the business of manufacturing and selling not only the brand of machine press involved in this case, but, also, the specific Johnson No. 823 press which was allegedly defective and dangerous.

Defendant denied this allegation in its answer and, indeed, raised the issue again when it moved for summary judgment. In support of its motion, defendant maintained that it was not the manufacturer of the Johnson No. 823 press involved in this case and that it assumed no liability for the manufacture of said press.

Defendant's motion for summary judgment was accompanied by two affidavits and one additional affidavit in support of the motion was filed subsequent to the actual filing of the motion.

These affidavits, along with answers to interrogatories and the pleadings, comprised the material available for the lower court's determination on the motion for summary judgment. These materials also disclose the chronological scheme of events necessary to the resolution of the issue before this court, which scheme of events is as follows:

On September 13, 1937, Johnson Machine and Press Corporation ("Johnson Machine") was incorporated at Elkhart, Indiana. Thereafter, and until September 1, 1956, Johnson Machine manufactured mechanical presses under the brand name of "Johnson."

On September 1, 1956, Johnson Machine became a wholly-owned subsidiary of Bontrager Corporation ("Bontrager"), an Indiana corporation which started in 1925. From September 1, 1956, until August 31, 1962, Bontrager manufactured machine presses under the name of its subsidiary, Johnson Machine, and sold the presses under the "Johnson" brand name.

The machine press that plaintiff was operating on January 15, 1979, was purchased from Bontrager's subsidiary, Johnson Machine, in 1958, by the Yoder Company of Cleveland, Ohio. That this is the same machine press is evident from the statements in the Carmen affidavit and letter attached as an exhibit to defendant's answers to interrogatories, from which it is apparent machine press, serial number 58160, is the machine press herein involved.

On August 29, 1962, Amsted Industries Incorporated ("Amsted") purchased the assets of Bontrager. According to the purchase agreement involved in that transaction, Amsted assumed no responsibility for defective products manufactured by Bontrager.

On August 31, 1962, Amsted assigned all of its rights and obligations under the purchase agreement with Bontrager to South Bend Lathe, Inc., a wholly-owned subsidiary of Amsted which is not the defendant in the instant case. Thereupon, South Bend Lathe, Inc. took possession of the operating assets acquired from Bontrager.

On September 29, 1965, South Bend Lathe, Inc. was dissolved by Amsted, and its assets and liabilities were transferred to Amsted. The former subsidiary was thereafter operated by Amsted, as an unincorporated division called South Bend Lathe ("Division"), which continued to manufacture presses sold under the "Johnson" trade name.

On July 3, 1975, Amsted sold its entire division to LWE, Inc., which, on July 18, 1975, changed its corporate name to South Bend Lathe, Inc., defendant herein. Defendant presently continues to manufacture and sell "Johnson" brand machine presses.

It is apparent that defendant, which is completely independent of Amsted, assumed no responsibility, by the express terms of its purchase agreement with Amsted or otherwise, for "Johnson" presses manufactured or sold in 1958 by Bontrager's subsidiary, Johnson Machine.

In the instant appeal, plaintiff raises one assignment of error, to wit:

"The trial court erred in granting summary judgment on behalf of Appellee, for Appellee was liable as the successor of the manufacturer of the defective product which injured Appellant."

The basic issue to be resolved, therefore, is whether a manufacturing corporation can be held strictly liable, under a products liability theory, for injuries allegedly sustained as the result of a defective and unreasonably dangerous product manufactured by an independent corporation which is distant in time of existence and distinct in corporate structure from the present corporation where both the manufacturer and the later corporation manufactured similar products under the same trade name, but where the present corporation has assumed no liability for products manufactured by the manufacturer.

Some confusion is inherent in terminology utilized in some of the authorities concerning predecessor or successor corporations. Essentially a predecessor corporation is simply one earlier in time and the successor later in time. The critical relationship, however, is the chain of responsibility or liability. The merger of two companies may well carry with it the liabilities of each, but the purchase of assets of one corporation by another does not necessarily carry such liability. It is for this reason that careful analysis must be made of the exact relationships involved and that reliance not be placed upon such ambiguous terms as predecessor or successor.

The general rule, we believe, in a case of this type can be stated thusly:

"In the absence of statute, it has generally been held that while a corporation which acquires assets from another corporation does not thereby become liable for the debts and obligations of the transferor, such liability may be imposed where there is an express or implied assumption of the obligations by the transferee; where the transaction for the transfer of assets amounts to a consolidation or merger of the two corporations; where the transferee is a mere continuation or reincarnation of the transferor; or where the transaction for the transfer of assets is fraudulent or otherwise lacks some elements of a purchase in good faith. And more specifically, it has been widely recognized that where one or more of these bases of liability have been established, the transferee corporation may be held liable for the damages or injuries caused by a product issued by the transferor."

See, generally, Annotation (1975), 66 A.L.R.3d 824....