Chadwick v. Air Reduction Company

• Decision Date: 18 March 1965
• Docket Number: Civ. A. No. C 64-383.
• Citation: 239 F. Supp. 247
• Parties: Roy CHADWICK and Russell Chadwick, a Minor, etc., Plaintiffs, v. AIR REDUCTION COMPANY, Inc. and the Gordon Armstrong Company, Inc., Defendants.
• Court: U.S. District Court — Northern District of Ohio

239 F. Supp. 247

Roy CHADWICK and Russell Chadwick, a Minor, etc., Plaintiffs, v. AIR REDUCTION COMPANY, Inc. and the Gordon Armstrong Company, Inc., Defendants.

Civ. A. No. C 64-383.

United States District Court N. D. Ohio, E. D.

March 18, 1965.

Sindell, Sindell, Bourne & Markus, Cleveland, Ohio, and Anderson, Storms & Anderson, Holdrege, Neb., for plaintiffs.

Hauxhurst, Sharp, Cull & Kellogg, Cleveland, Ohio, Michael R. Gallagher, Cleveland, Ohio, of counsel, for defendant Air Reduction Co., Inc.

Arter, Hadden, Wykoff & Van Duzer, Cleveland, Ohio, Crawford Morris, Cleveland, Ohio, of counsel, for defendant Gordon Armstrong Co., Inc.

GREEN, District Judge.

This action was brought by plaintiffs against Air Reduction Company, Inc. and The Gordon Armstrong Company, Inc., a dissolved Ohio corporation, to recover for alleged personal injuries to Russell Chadwick, a minor, and his father's losses in connection therewith.

In the complaint it is alleged that prior to August 3, 1963 defendant Gordon Armstrong Company, Inc. conveyed its assets to its shareholders, who conveyed them to defendant Air Reduction Company by an agreement the terms and conditions of which were not known to plaintiff.

The complaint further alleges that the defendants manufactured a baby incubator known as "Armstrong X4 Model 500, Serial No. 19283," and that prior to August 3, 1963 said incubator was purchased by the Lexington Community Hospital, Lexington, Nebraska; that on or about August 3, 1963, plaintiff, Russell Chadwick, then a premature infant 17 days of age, was placed in said incubator; that his right foot became lodged in the heating element of said incubator, causing him to sustain serious injuries to his foot. The complaint further states that:

"The injuries suffered by plaintiff Russell Chadwick were the direct and proximate result of the defendants' negligence and/or of defendants' breach of an express or implied warranty to the effect that said incubator was reasonably fit and safe for the use intended."

Defendant Air Reduction Company, Inc. has filed an answer to the complaint. Subsequent to filing its answer, Air Reduction Company moved for summary judgment.

Defendant Gordon Armstrong Company, Inc. has filed a motion to quash summons and to dismiss the complaint.

MOTION OF AIR REDUCTION COMPANY FOR SUMMARY JUDGMENT

In its answer Air Reduction Company denied the allegations of the complaint concerning the transfer of Gordon Armstrong's assets to its shareholders who, it was stated, then conveyed them to defendant. In the answer it is alleged that under a purchase agreement dated July 21, 1961, a copy of which was attached to the answer, defendant Air Reduction Company purchased the assets of defendant Gordon Armstrong Company from the Gordon Armstrong Company, and not from its shareholders. Defendant Air Reduction Company denied that it assumed the obligations of the Gordon Armstrong Company.

The answer further denies that defendant Air Reduction Company manufactured or placed into the channels of commerce the baby incubator referred to in the complaint, and alleges that it was sold to the Lexington Hospital by defendant Gordon Armstrong Company under a purchase order dated March 6, 1952 (which date is nine years before Air Reduction Company purchased the assets of Gordon Armstrong Company).

As a part of the purchase agreement between Gordon Armstrong Company and Air Reduction Company, as attached to the answer, it was provided:

6. Product Liability

* * * Seller shall remain solely responsible for, and shall hold Buyer free and harmless from, any and all claims, actions or suits against it in respect of any equipment or products sold by Seller prior to the Closing Date.

11. Survival of Representations

The respective representations, warranties, covenants and agreements of Seller and Buyer contained herein shall survive the Closing Date for three (3) years * * * provided further that * * * the Seller's liability arising out of the matters referred to in such notice shall not exceed $5,000.00.

The motion for summary judgment on behalf of defendant Air Reduction Company, Inc. is predicated on the proposition that when one company sells all of its assets to another company, the latter is not liable for the debts and liabilities of the transferor, including the torts of the transferor company. Pfisterer v. Toledo B. G. & S. Traction Co., 89 Ohio St. 172, 106 N.E. 18 (1913); Fletcher Cyclopedia Corporations (1961 Rev.Ed.) §§ 7122, 7123.

In response to the motion for summary judgment, plaintiff does not contravene the fact that Air Reduction Company purchased the assets of Gordon Armstrong Company, nor is there a claim that the transfer was in any respect fraudulent. Further, plaintiff does not contravene defendant's assertion that it was not a participant in the design, sale or service of the subject incubator.

In support of the allegations of negligence on the part of defendant Air Reduction Company, plaintiff asserts that it will be shown that at the time of, and subsequent to, the acquisition of the assets of Gordon Armstrong Company, the Air Reduction Company had knowledge of other claims against Gordon Armstrong Company arising out of defective designs of baby incubators. Plaintiff contends that Air Reduction Company, having knowledge of the defective conditions of the incubators manufactured by Gordon Armstrong Company, was under a duty to notify the Lexington Hospital, among other past purchasers, of the danger presented by the incubator sold to it by Gordon Armstrong Company some nine years earlier.

Defendant Air Reduction Company denies that it was under any duty to warn Gordon Armstrong Company's past customers of any negligence on the part of Gordon Armstrong Company in the design and manufacture of the incubator.

It is basic law that before negligence may be predicated on a failure to act, there must be a violation of a duty. Gelfand v. Strohecker, 150 F.Supp. 655, 661 (D.C.N.D., Ohio 1956).

The issue thus resolves itself to a question of whether a corporation which purchases the assets of another corporation, and as a consequence of the said purchase becomes aware that the seller corporation had put a negligently designed device into the channels of commerce, is under a duty to warn third persons of its vendor's negligence.

Neither counsel have cited any authority directly in point, and independent research has failed to disclose any such decision.

In considering this issue of the duty to warn, it is stated in The Law of Torts by Harper & James, at page 1046:

"At the other end of the spectrum are cases where the peril to the plaintiff has come from a source in no way connected with defendant's conduct or enterprises or undertakings, past or present, but where the defendant has it in his power by taking some reasonable precaution to remove the peril. Here the law has traditionally found no duty, however reprehensible and unreasonable the defendant's failure to take the precaution may be."

The authors do state that exceptions to this rule of nonliability are arising, but that "the principal exceptions, however, have been those arising out of a special relationship between the parties," id. p. 1048. See also Prosser on Torts (2d ed.) p. 184.

In this case, under the facts established by the pleadings and exhibits, Air Reduction Company was a stranger to the act...