Columbia Propane, LP v. Wisconsin Gas Co.

• Decision Date: 13 May 2003
• Docket Number: No. 01-0090.,01-0090.
• Citation: 661 N.W.2d 776,2003 WI 38,261 Wis.2d 70
• Parties: COLUMBIA PROPANE, L.P., a Limited Partnership, Plaintiff-Appellant, v. WISCONSIN GAS COMPANY, a Wisconsin Corporation, Defendant-Respondent-Petitioner, ABC INSURANCE Co., a corporation or other entity, and DEF Insurance Co., a corporation or other entity, Defendants.
• Court: Wisconsin Supreme Court

261 Wis.2d 70

2003 WI 38

661 N.W.2d 776

COLUMBIA PROPANE, L.P., a Limited Partnership, Plaintiff-Appellant, v. WISCONSIN GAS COMPANY, a Wisconsin Corporation, Defendant-Respondent-Petitioner, ABC INSURANCE Co., a corporation or other entity, and DEF Insurance Co., a corporation or other entity, Defendants.

No. 01-0090.

Supreme Court of Wisconsin.

Oral argument January 15, 2003.

Decided May 13, 2003.

For the defendant-respondent-petitioner there were briefs by O. Thomas Armstrong, John A. Caseyand Quarles & Brady LLP, Milwaukee, and oral argument by O. Thomas Armstrong and John A. Casey.

For the plaintiff-appellant there was a brief by Michael Ash, Michael B. Apfeld, John L. Clancy and Godfrey & Kahn, S.C., Milwaukee, and Gerald M. O'Brien and Anderson, Shannon, O'Brien, Rice & Bertz, Stevens Point, and oral argument by Michael B. Apfeld.

An amicus curiae brief was filed by Charles P. Graupner, Pamela L. Gergens and Michael Best & Friedrich LLP, Milwaukee, on behalf of Wisconsin Manufacturers and Commerce and the Metropolitan Milwaukee Association of Commerce.

¶ 1. WILLIAM A. BABLITCH, J.

At issue in this case is whether a company that acquires the assets of another company via an asset purchase agreement is liable for the liabilities of the selling company which are unknown to either party at the time they enter into the agreement. ¶ 2. The petitioner, Wisconsin Gas Company (Wisconsin Gas) purchased the assets of the now defunct People's Gas Company (People's Gas), primarily consisting of a tract of real property. Wisconsin Gas subsequently sold the property to Columbia Propane, L.P. (Columbia Propane). About 30 years later, environmental contamination was discovered on the property, which had been caused by the gas manufacturing operations of People's Gas. The State of Wisconsin brought an action against Columbia Propane for this environmental contamination. Columbia Propane then brought an action against Wisconsin Gas, claiming that Wisconsin Gas was liable for the environmental contamination because it had assumed all the liabilities of People's Gas when it purchased its assets.

¶ 3. The Circuit Court for Wood County, Judge Dennis D. Conway presiding, found in favor of Wisconsin Gas and granted their motion for summary judgment. The court of appeals reversed, concluding that the language in the asset purchase agreement between People's Gas and Wisconsin Gas was ambiguous regarding whether Wisconsin Gas agreed to assume unknown tort liabilities.¹ Based on (1) the general rule of non-liability for purchasing corporations in the context of asset purchase agreements; (2) the express language in the asset purchase agreement between Wisconsin Gas and People's Gas; and (3) the common interpretation and use of asset purchase agreements in the business community, we conclude that Wisconsin Gas did not assume liabilities of People's Gas that were unknown to either party at the time they entered into the asset purchase agreement. Accordingly, we reverse the decision of the court of appeals and hold that the circuit court properly granted summary judgment in favor of Wisconsin Gas.

I. FACTS AND PROCEDURAL HISTORY

¶ 4. The now defunct People's Gas owned approximately 1.4 acres of real estate in Marshfield, Wisconsin consisting of two parcels: a southern parcel and a northern parcel. From approximately 1929 to 1959, People's Gas operated a coal gas plant on the southern parcel. In 1959, Wisconsin Gas² and People's Gas began negotiations regarding the sale of the southern parcel. On November 12, 1959, Wisconsin Gas and People's Gas signed an "Agreement Between Milwaukee Gas Light Company [Wisconsin Gas] And The Stockholders Of People's Gas Company" (Stock Agreement), in which the stockholders of People's Gas agreed to sell, and Wisconsin Gas agreed to buy, all of the outstanding capital stock on the date of a specified closing.

¶ 5. The next day, on November 13, 1959, Wisconsin Gas filed an application with the Wisconsin Public Service Commission (PSC) seeking approval to acquire the assets of People's Gas by purchasing the outstanding shares of capital stock of People's Gas in accordance with the Stock Agreement and merging People's Gas into Wisconsin Gas in accordance with Wis. Stat. § 196.80(1)(c) (1959-60).³ On December 4, 1959, the PSC held a hearing on Wisconsin Gas's application for a stock purchase and merger. On December 22, 1959, Wisconsin Gas wrote a letter to the PSC informing it that it was revising the proposed form of the acquisition from a stock purchase to an asset purchase.⁴ Two days later, the legal counsel for People's Gas wrote a letter to the PSC stating that People's Gas accepted the proposed change in form from a stock purchase and merger to an asset purchase.⁵ On January 5, 1960, Wisconsin Gas and People's Gas signed an asset purchase agreement (1960 Agreement), whereby Wisconsin Gas would purchase the assets of People's Gas. The 1960 Agreement between Wisconsin Gas and People's Gas provided in relevant part:

[T]he parties now desire to cancel the aforesaid agreement dated November 12, 1959, and to supersede the same with this Agreement in order to revise the form of such transaction so as to provide that Milwaukee [Wisconsin Gas] shall acquire all of the assets, franchises and business of People's Gas through purchase thereof directly from People's Gas in consideration for cash and the assumption by Milwaukee [Wisconsin Gas] of the liabilities and obligations of People's Gas, subject to the provisions of this Agreement;

NOW, THEREFORE, in consideration of the mutual promises of the parties herein set forth, the parties do hereby agree with each other as follows:

1. (a) People's Gas hereby agrees to sell to Milwaukee [Wisconsin Gas], at the date of closing hereunder, subject to the terms and conditions of this Agreement, all of the assets, franchises and business as a going concern which immediately prior to closing shall have been owned and operated by People's Gas (the "Assets"). . . . Such sale, conveyance, transfer and delivery shall be made free and clear of any liability, obligation, imperfection of title, lien or encumbrance except only those referred to in paragraph 4(d) hereof and those liabilities and obligations which are to be assumed by Milwaukee [Wisconsin Gas] at the closing as hereinafter provided, and People's Gas agrees to indemnify and save Milwaukee [Wisconsin Gas] harmless with respect to any liability of People's Gas which is not assumed by Milwaukee hereunder.

(b) Milwaukee [Wisconsin Gas] hereby agrees, subject to the terms and conditions of this Agreement and in reliance on the representations and warranties herein contained of People's Gas, to purchase the Assets from People's Gas at the date of closing as aforesaid and to assume all of the then outstanding debts, obligations, contracts and liabilities of People's Gas, provided, that Milwaukee [Wisconsin Gas] shall have no liability with respect to the following: (ii) any obligations or liabilities incurred by People's Gas after the closing . . . .

4. As an inducement to Milwaukee [Wisconsin Gas] to purchase the Assets, People's Gas makes the following representations and warranties, and covenants that they shall be true at the time of closing:

. . . .

(c) The balance sheet as of September 30, 1959, Exhibit A hereto, has been prepared in accordance with generally accepted accounting practices; it correctly reflects the Assets, liabilities and financial status of People's Gas as of said date; People's Gas has no liabilities of any nature, whether accrued, absolute, contingent or otherwise, and whether for taxes, contract or tort claims or otherwise, for which adequate provision has not been made in Exhibit A or by insurance . . . There are no actions, suits or proceedings pending or threatened against or affecting People's Gas which are not fully covered by insurance of which would materially adversely affect the financial position or Assets or operations of People's Gas.

(Emphasis added.) Two days later, on January 7, 1960, the PSC issued its Findings of Fact, Opinion, and Order, which approved the asset purchase agreement between Wisconsin Gas and People's Gas and the transaction closed on February 1, 1960.

¶ 6. In 1962, Columbia Propane⁶ purchased the southern parcel from Wisconsin Gas. Four years prior, in 1958, Columbia Propane had purchased the northern parcel from People's Bottled Gas Company.⁷ Consequently, Columbia Propane has been the owner of the entire parcel of real estate since 1962. Subsequently, the State of Wisconsin brought an action against Columbia Propane for environmental contamination that had been caused by People's Gas, which had been discovered on the southern parcel and allegedly migrated to the northern parcel and possibly off the site.

¶ 7. Columbia Propane commenced this action against Wisconsin Gas in August 1999, alleging that based on the 1960 Agreement, Wisconsin Gas had assumed the liabilities and obligations of People's Gas for the environmental contamination. Wisconsin Gas moved for summary judgment, arguing that it had assumed only certain liabilities that were "then outstanding," which did not include unknown liabilities. Columbia Propane moved for partial summary judgment, asserting that Wisconsin Gas's motion for summary judgment should be denied and that Columbia Propane should be awarded partial summary on the successor liability issue. Columbia Propane argued that the language in the 1960 Agreement clearly demonstrated that Wisconsin Gas intended to assume the obligations and liabilities at issue in this case, especially when read in light of Wisconsin Gas's representations to the PSC. Alternatively, Columbia Propane argued that even if Wisconsin Gas did not assume all the liabilities and obligations of People's Gas, then it fraudulently entered into the transaction to escape these liabilities.

¶ 8. The circuit court granted Wisconsin Gas's motion...