Fish v. Amsted Industries, Inc.

• Decision Date: 26 November 1985
• Docket Number: No. 84-1254,84-1254
• Citation: 376 N.W.2d 820,126 Wis.2d 293
• Court: Wisconsin Supreme Court
• Parties: , Prod.Liab.Rep. (CCH) P 10,775 Emily FISH and Rodney Fish, Plaintiffs-Appellants, v. AMSTED INDUSTRIES, INC., a Delaware corporation, South Bend Lathe, Inc., an Indiana corporation, Defendants-Respondents, Interstate Machinery Co., Inc., an Illinois corporation, Defendant-Co- Appellant, Square D Company, a Michigan corporation and American Hospital Supply Corporation, an Illinois corporation, Defendants.

Page 820

376 N.W.2d 820

126 Wis.2d 293, Prod.Liab.Rep. (CCH) P 10,775

Emily FISH and Rodney Fish, Plaintiffs-Appellants, v. AMSTED INDUSTRIES, INC., a Delaware corporation, South Bend Lathe, Inc., an Indiana corporation, Defendants-Respondents Interstate Machinery Co., Inc., an Illinois corporation Defendant-Co- Appellant Square D Company, a Michigan corporation and American Hospital Supply Corporation, an Illinois corporation, Defendants.

No. 84-1254.

Supreme Court of Wisconsin.

Argued Sept. 30, 1985.

Opinion Filed Nov. 26, 1985.

Gary R. Kuphall (orally) and Habush, Habush & Davis, S.C., Milwaukee, for plaintiffs-appellants.

Donald H. Carlson (orally), Ahmed J. Quereshi and Riordan, Crivello, Carlson, Mentkowski & Henderson, Milwaukee, for defendants-respondents.

DAY, Justice.

This is an appeal from an order of the circuit court for Manitowoc county, Honorable Fred H. Hazelwood, circuit judge, granting the Defendants', Amsted Industries, Inc. (Amsted) and South Bend Lathe, Inc. (South Bend II), motion for summary judgment on Emily and Rodney Fish's (Plaintiffs) claim of corporate successor liability. We accepted the case upon certification from the court of appeals. This case raises the following issues: Is there sufficient "identity" between the predecessor corporation which manufactured the allegedly defective punch press (Bontrager) and either or both of the successor corporations (Amsted and South Bend II) to justify holding either or both successor corporations liable under products liability law for the alleged defect? If not, should Wisconsin adopt the "product line" exception to impose liability on either or both of the successor corporations?

We conclude that there is not sufficient identity between Bontrager and either Amsted or South Bend II to justify holding them liable for the acts of their predecessor. We decline to adopt the "product line" exception to the traditional rule of no successor corporation liability. Therefore, we affirm the decision of the circuit court.

On October 8, 1979, Emily Fish was severely injured while operating a power press, known as the "Johnson Mechanical Press," while on the premises of Hamilton Industries, her employer. The press involved here was manufactured by Bontrager Construction Company (Bontrager) in 1957, and was sold to Hamilton Industries by Interstate Machinery Co., Inc., a distributor of the presses.

Johnson Mechanical Presses were originally manufactured by the Johnson Machine and Press Company (Johnson) in Elkhart, Indiana. In 1956, Johnson transferred all of its assets and liabilities to Bontrager. Johnson continued to exist as a wholly owned subsidiary of Bontrager, but it no longer manufactured the presses. The sole share of outstanding stock in the Johnson Corporation was transferred to Bontrager in order to assign to Bontrager all rights to the Johnson trade name. Bontrager began manufacturing the Johnson press line at the Elkhart plant.

In 1962, Amsted acquired all the assets of Bontrager, including all the assets of Johnson (use of the Johnson trade name) via a cash transfer. Bontrager agreed to use its "best efforts" to make its present employees available to Amsted. Amsted agreed to assume only those liabilities of Bontrager that were necessary for uninterrupted business, and it refused to assume Bontrager's tort liabilities arising out of defects in products manufactured by Johnson or Bontrager. None of the officers or directors of Amsted were ever an officer or director of Bontrager or Johnson. However, a Bontrager vice president was employed by Amsted as a plant manager at the Elkhart plant for approximately four years following the transfer.

Amsted manufactured the Johnson press line through its wholly owned subsidiary, South Bend Lathe, Inc. (South Bend I) at the Elkhart plant, using substantially the same manufacturing facilities and equipment that were used by Bontrager and Johnson. However, South Bend I did implement its own general manufacturing policy, planning procedures and standards, and marketing procedures.

On July 29, 1964, Bontrager was dissolved, and all of its assets were distributed to its shareholders. On August 2, 1965, Johnson was dissolved by Amsted, and its sole asset, the Johnson stock, was distributed to Amsted. On September 29, 1965, Amsted dissolved its subsidiary, South Bend I, but continued to operate it as an unincorporated division under the name South Bend Lathe. South Bend Lathe continued to manufacture the Johnson press. In 1966, Amsted sold the Elkhart plant, and transferred its manufacturing operations to the South Bend, Indiana plant of South Bend Lathe.

In 1975, Amsted sold the Johnson press line business to LWE, Inc., an Indiana corporation, which subsequently changed its corporate name to South Bend Lathe, Inc. (South Bend II). Amsted agreed to indemnify South Bend II for any liability claims arising out of defects in the Johnson press line.

Amsted is no longer involved in the manufacturing of the Johnson press line. South Bend II (an entirely different entity from the South Bend Lathe subsidiary and division of Amsted) continues to manufacture the Johnson press line.

The Plaintiffs brought a products liability claim against Amsted and South Bend II sounding in negligence and strict liability. The complaint alleges that as successor corporations Amsted and South Bend II are liable to the Plaintiffs for the acts of their predecessor corporation, Bontrager, in manufacturing an allegedly defective press.

The circuit court denied Plaintiffs' summary judgment motion asking the court to find, as a matter of law, that Amsted and South Bend II were responsible as successor corporations for the acts of a predecessor corporation. Based on its uncertainty as to the meaning of the term "identity," used by this court in Tift v. Forage King Industries, Inc., 108 Wis.2d 72, 322 N.W.2d 14 (1982) as a basis for imposing liability on successor corporations, the circuit court granted Amsted's and South Bend II's motion for summary judgment, holding that they could not be liable for claims of corporate successor liability.

The court of appeals certified the appeal to this court, raising the issue of whether the Tift decision expanded the "mere continuation" exception to the traditional rule of no successor corporation liability elucidated in Leannais v. Cincinnati, Inc., 565 F.2d 437 (7th Cir.1977).

As a general rule, "a corporation which purchases the assets of another corporation does not succeed to the liabilities of the selling corporation." Leannais, 565 F.2d at 439. There are four well recognized exceptions to this general rule:

"(1) when the purchasing corporation expressly or impliedly agreed to assume the selling corporation's liability; (2) when the transaction amounts to a consolidation or merger of the purchaser and seller corporations; (3) when the purchaser corporation is merely a continuation of the seller corporation; or (4) when the transaction is entered into fraudulently to escape liability for such obligations." Leannais, 565 F.2d at 439.

Both the Plaintiffs and the defendants (Amsted and South Bend II) agree that the traditional exceptions to the general rule of nonliability do not apply to the succession in this case. It is the Plaintiffs' contention that the Tift decision expanded the second and third exceptions by setting forth the concept of "identity."

In Tift, the plaintiff was injured on October 4, 1975, while using an allegedly defective chopper box that was manufactured in 1961-1962 by a sole proprietorship doing business as Forage King Industries. In 1968, the sole proprietor and another person (the original owner of the business) formed a partnership which shortly thereafter "metamorphosed into a corporation," Forage King Industries, Inc. (Forage King). The proprietor and former proprietor were the sole shareholders of the corporation which retained the same employees, manufactured the same products, retained the same name and sold to the same dealers as had the sole proprietorship that manufactured the allegedly defective chopper box. Tift, 108 Wis.2d at 74, 322 N.W.2d 14. Late in 1968, the sole proprietor became the sole shareholder of Forage King. On January 30, 1975, Tester Corporation purchased all of the stock of Forage King. The plaintiffs in Tift brought an action against Forage King and its insurer. Tester Corporation was not a defendant. The circuit court granted the defendant's motion for summary judgment, finding that none of the exceptions to the general rule applied.

The question posed in the Tift case was "whether a business corporation which acquired substantially all of the assets of a predecessor sole proprietorship but which is substantially the same business organization and manufactures an almost identical product as its predecessor may be liable for injuries caused by a defective product manufactured by the predecessor." Tift, 108 Wis.2d at 73, 322 N.W.2d 14. This court answered the question affirmatively. The Plaintiffs in this case argue that this court expanded the exceptions to the general corporate successor rule of nonliability by the following language: "Exceptions two and three to the corporate rule demonstrate that, when it is the same business organization that one is dealing with, whether it be by consolidation, merger, or continuation, liability may be enforced. These are tests of identity." Tift, 108 Wis.2d at 79, 322 N.W.2d 14. Plaintiffs argue that this court relied on two factors to determine if identity exists: whether all the assets of the predecessor were acquired by the successor corporation, and whether the same product was being manufactured by substantially the same manufacturing process throughout the organizational transformations. While a definition of what constitutes "identity" was not provided in Tift, the Plaintiffs in this case argue that this court's decision in Cody v. Sheboygan Machine Co., 108...