Davis v. Loopco Industries, Inc.

• Decision Date: 07 April 1993
• Docket Number: No. 92-636,92-636
• Parties: DAVIS et al., Appellees, v. LOOPCO INDUSTRIES, INC., Appellant.
• Court: Ohio Supreme Court

Page 64

66 Ohio St.3d 64

609 N.E.2d 144

DAVIS et al., Appellees, v. LOOPCO INDUSTRIES, INC., Appellant.

No. 92-636.

Supreme Court of Ohio.

Submitted Jan. 19, 1993.

Decided April 7, 1993.

In 1981, defendant CMW Holdings, Inc., f.k.a. Loopco Industries, Inc. ("Old Loopco"), manufactured and sold coil strip slitting, processing and handling machinery to plaintiff-appellee David L. Davis' employer, Feralloy Corporation in Cleveland. On August 5, 1984, Withrow Enterprises, Inc. ("Withrow") entered into an asset purchase agreement with Old Loopco under which Withrow purchased all or substantially all of Old Loopco's assets. Withrow then changed its name to Loopco Industries, Inc. ("New Loopco"). Old Loopco was voluntarily dissolved in August 1985.

On July 17, 1986, Davis sustained injuries while operating the coil slitting machinery Old Loopco had manufactured and sold to his employer. On July 15, 1988, Davis and his wife Carla filed a complaint against New Loopco based on products liability theories of strict liability and negligence. An amended complaint was filed joining Old Loopco as a new party defendant. New Loopco was sued on the theory of successor liability.

The trial court granted New Loopco's motion for summary judgment and dismissed, sua sponte, appellants' claims against Old Loopco. Appellants appealed the summary judgment grant in favor of New Loopco. The appellate court reversed, finding material questions of fact were present.

The appellate court, finding its judgment to be in conflict with the judgment of the Court of Appeals for Franklin County in Erdy v. Columbus Paraprofessional Inst. (1991), 74 Ohio App.3d 462, 599 N.E.2d 338, certified the record of the case to this court for review and final determination.

Ellis B. Brannon, Sharon Center, and Gary T. Mantkowski, Medina, for appellees.

Calfee, Halter & Griswold, Phillip J. Campanella and Joseph A. Castrodale, Cleveland, for appellant.

FRANCIS E. SWEENEY, Sr., Justice.

The certified question presented by the appellate court is whether Flaugher v. Cone Automatic Mach. Co. (1987), 30 Ohio St.3d 60, 30 OBR 165, 507 N.E.2d 331, adopted the traditional test or the expanded test to determine whether a successor corporation is a mere continuation of a predecessor corporation. We need not reach this issue, however, as we find the asset purchase agreement between the Old Loopco and New Loopco presents a genuine issue of material fact.

Civ.R. 56(C) provides that before summary judgment may be granted, it must be determined that: (1) No genuine issue as to any material fact remains to be litigated; (2) the moving party is entitled to judgment as a matter of law; and (3) it appears from the evidence that reasonable minds can come to but one conclusion, and viewing such evidence most strongly in favor of the nonmoving party, that conclusion is adverse to the party against whom the motion for summary judgment is made. Temple v. Wean United, Inc. (1977), 50 Ohio St.2d 317, 327, 4 O.O.3d 466, 472, 364 N.E.2d 267, 274. Because summary judgment is a procedural device to terminate litigation, it must be awarded with caution. Doubts must be resolved in favor of the nonmoving party. Murphy v. Reynoldsburg (1992), 65 Ohio St.3d 356, 358-359, 604 N.E.2d 138, 140. "If a contract is clear and unambiguous, then its interpretation is a matter of law and there is no issue of fact to be determined. Alexander v. Buckeye Pipe Line Co. (1978), 53 Ohio St.2d 241 [7 O.O.3d 403, 374 N.E.2d 146]. However, if a term cannot be determined from the four corners of a contract, factual determination of intent or reasonableness may be necessary to supply the missing term." Inland Refuse Transfer Co. v. Browning-Ferris Indus. of Ohio, Inc. (1984), 15 Ohio St.3d 321, 322, 15 OBR 448, 449, 474 N.E.2d 271, 272-273.

The asset purchase agreement provides in part:

"1.6 Assumption of Liabilities. In connection with and in partial consideration for its acquisition of the Purchased Assets, Buyer shall assume as of the Effective Date * * * (iii) certain product liability and warranty obligations, but only to the extent expressly provided in Section 4 hereof * * *."

"4.7 Product Liability. Buyer shall assume no obligation or liability for product liability claims relating to occurrences taking place before the close of business on the Effective Date; and Seller shall assume no obligation or liability with respect to product liability claims relating to occurrences taking place after the close of business on the Effective Date."

From the four corners of the purchase agreement, we cannot determine which party is responsible for product-liability claims occurring after the effective date of the asset purchase agreement. The contract is neither clear nor unambiguous. Viewing these provisions most strongly in Davis' favor, reasonable minds could conclude that New Loopco assumed liability after the effective date of the transfer. This presents a question of fact for the fact-finder. We, therefore, affirm the judgment of the appellate court and remand this cause to the trial court for further proceedings.

Judgment affirmed.

MOYER, C.J., and A. WILLIAM SWEENEY, DOUGLAS, WRIGHT, RESNICK and PFEIFER, JJ., concur.

A. WILLIAM SWEENEY, Justice, concurring.

I concur in the well-reasoned opinion and judgment of the majority. I write separately to address the certified issue presented by this case. As concisely stated in the majority opinion, the parties to this action are in disagreement regarding the import of the decision of this court in Flaugher v. Cone Automatic Mach. Co. (1987), 30 Ohio St.3d 60, 30 OBR 165, 507 N.E.2d 331.

In Flaugher, supra, a majority of the court concluded that, in a sale-of-assets acquisition of one company by another, the successor corporation is generally not liable for the torts of its predecessor. However, the court recognized the following exceptions to the rule:

"(1) the buyer expressly or impliedly agrees to assume such liability;

"(2) the transaction amounts to a de facto consolidation or merger;...