Griggs v. Capitol Mach. Works, Inc.

• Decision Date: 16 January 1985
• Docket Number: No. 14183,14183
• Citation: 690 S.W.2d 287
• Parties: Prod.Liab.Rep. (CCH) P 10,643 Joseph B. GRIGGS, Appellant, v. CAPITOL MACHINE WORKS, INC., an Active Texas Corporation, Appellee.
• Court: Texas Court of Appeals

Page 287

690 S.W.2d 287

Prod.Liab.Rep. (CCH) P 10,643

Joseph B. GRIGGS, Appellant, v. CAPITOL MACHINE WORKS, INC., an Active Texas Corporation, Appellee.

No. 14183.

Court of Appeals of Texas,

Austin.

Jan. 16, 1985.

Rehearing Denied May 15, 1985.

Stephen G. Nagle, David Nagle & Associates, P.C., Austin, for appellant.

Ronald D. Wamsted, Brown, Maroney, Rose, Barber & Dye, Austin, for appellee.

Before POWERS, KEITH ^* and GAMMAGE, JJ.

POWERS, Justice.

Joseph B. Griggs, appellant, prays that we reverse a summary judgment rendered against him in his suit against appellee, Capitol Machine Works, Inc., a corporation organized and existing under the laws of the State of Texas. The judgment orders that appellant take nothing by his suit against appellee for personal injuries. We will affirm the judgment.

THE CONTROVERSY

The Parties' Pleadings

In appellant's first amended original petition, upon which judgment was rendered below, he alleged that he was injured on or about July 16, 1982 while using a product manufactured by "Capitol Machine Works, Inc.," a corporation having the same name as appellee but one that had voluntarily dissolved in October 1979 after manufacturing Appellant sued both appellee and the dissolved corporation. Appellant's pleading sets forth four distinct causes of action, three against the dissolved corporation and one against appellee. Appellant averred that the dissolved corporation was liable to him because: (1) it had manufactured the product which was "unreasonably dangerous" and the cause of his injuries; (2) it "was negligent in the design and manufacture of the product," which negligence was the proximate cause of his injuries; and (3) it warranted that the product "was suitable for the purpose for which it was intended," the product was not so suitable, and the "lack of suitability led to" appellant's injuries. Against appellee, appellant alleged a single theory and cause of action expressed in the following words:

                and selling the particular article that allegedly caused appellant's injury.  We shall hereinafter refer to this corporation as the "dissolved corporation."   It is not a party to this appeal
                

[Appellee] purchased not only the assets, but the going business from defendant dissolved corporation, and therefore succeeded to the liabilities of the dissolved corporation, including any liability arising in this case.

(emphasis added).

It cannot be doubted that the liability asserted against appellee is vicarious only; that is to say, appellant's claim against appellee is not based upon any act or omission by appellee, but upon a theory that the law imputes to appellee a liability based upon an act or omission of the dissolved corporation. The foundation upon which appellant would base this imputation of liability presents a question of law only: Did appellee's mere purchase of the assets and going business of the dissolved corporation impose upon appellee, as a matter of law, any liability for appellant's injuries? (It is not contended by appellant that appellee is otherwise liable, as by a contract between appellee and the dissolved corporation whereunder the former agreed to assume such liability intending to benefit appellant or other third parties.) Appellee appeared and answered in the cause by general denial.

Appellee's Motion for Summary Judgment

About six weeks after its appearance, appellee moved for summary judgment, alleging that it was entitled to judgment as a matter of law because the summary-judgment record showed no genuine issue of any "real fact." The ground specified was that under the summary-judgment record it was undisputed that appellee had neither manufactured nor sold the product that had allegedly been the cause of appellant's injuries. An affidavit accompanied the motion for summary judgment. It was executed by an organizer and sole shareholder of the appellee corporation. Only a few portions of it are applicable to the issue of whether summary judgment was properly granted. In all material respects the terms of the affidavit agree with appellant's allegations: (1) the dissolved corporation, and not appellee, had manufactured and sold the particular article that had caused appellant's injuries; (2) that corporation had dissolved after such sale; and (3) appellee had purchased the assets and "going business" of the dissolved corporation. We therefore regard as surplusage those parts of the affidavit which aver that appellee had not contractually assumed any liability of the dissolved corporation, and that the shareholders and officers of the two corporations were different, for these have no bearing on the single theory of liability set forth in appellant's first amended original petition--the single theory upon which summary judgment was rendered.

There is between the parties, therefore, no controverted issue of any material fact, for they agree upon those facts necessary to decide, as a matter of law, appellant's allegation that appellee is liable to him solely by reason of purchasing the assets and going business of the dissolved corporation, the legal entity that actually manufactured and sold the specific article that allegedly caused appellant's injuries--a The trial court granted appellee's motion for summary judgment and severed appellant's remaining claims against the dissolved corporation, also a defendant in the cause but not a party to this appeal. This appeal ensued.

theory said by appellant to be a novel one in this jurisdiction.

HOLDINGS AND DISCUSSION

Appellant brings to this Court two points of error that we shall discuss in order. We turn first to his "products liability" claim.

The Theory of Imputed Strict Liability

Appellant's pleaded cause of action against appellee is facially susceptible of an interpretation that would include a theory that appellee succeeded to all liabilities of the dissolved corporation, whether for debt, negligence, or breach of contract, including breach of a warranty of fitness. ¹ However, appellant's brief under his first point of error limits and links his contention of imputed liability solely to recovery for personal injuries based upon the theory of "products liability." Appellee's theory finds support in some jurisdictions, as pointed out below. ²

We turn then to the basic issue: Does the common law affirmatively impose upon a corporation strict liability for personal injuries caused by an unreasonably dangerous product manufactured and sold by another corporation, when the former has purchased all the assets and going business of the latter and continues to make and supply the same product line as that which includes the unreasonably dangerous product? (We assume that appellee did, indeed, continue the "product line," a point not established either way in the summary-judgment record.)

Appellant's theory of imputed liability, the "products line" theory, finds varying degrees of support in the highest courts of some jurisdictions. Ray v. Alad Corp., 19 Cal.3d 22, 136 Cal.Rptr. 574, 560 P.2d 3 (1977); Ramirez v. Amsted Industries, Inc., 86 N.J. 332, 431 A.2d 811 (1981); Dawejko v. Jorgensen Steel Co., 290 Pa.Super. 15, 434 A.2d 106 (1981); Tift v. Forage King Industries Inc., 108 Wis.2d 72, 322 N.W.2d 14 (1982); Rivers v. Stihl, 434 So.2d 766 (Ala.1983). The theory was stated as follows in Ramirez v. Amsted Industries, Inc., supra:

[W]here one corporation acquires all or substantially all the manufacturing assets of another ... and undertakes essentially the same manufacturing operation as the selling corporation, the purchasing corporation is strictly liable for injuries caused by defects in units of the same product line, even if previously manufactured and distributed by the selling corporation or its predecessor. The social policies underlying strict products liability in New Jersey are best served by extending strict liability to a successor corporation that acquires the business assets and continues to manufacture essentially the same line of product as its predecessor, particularly where the successor corporation benefits from trading its product line on the name of the predecessor and takes advantage from its accumulated good will, business reputation and established customers.

431 A.2d at 825. The "social policies" underlying strict liability for unreasonably dangerous products may be summarized generally as follows:

The purpose behind such policy has been to insure that the costs of injuries resulting from defective products are borne, as a cost of doing business, by the persons who put the products into the channels of commerce rather than by the injured persons who ordinarily are powerless to protect themselves, without imposing upon such persons the problems inherent in pursuing negligence remedies. As otherwise stated, this policy involves the placing of liability on the party primarily responsible, who is in a position to most effectively reduce the hazards to life and health arising from their products, and the securing of an adequate remedy for the injured plaintiff. The imposition of strict liability involves the task of balancing between the need for adequate recovery for the person injured and the need for viable enterprise, and weighing the means available for avoiding the risk of harm against the utility of the product.

72 C.J.S. Supplement Products Liability § 7, 10-11 (1975).

How then are the foregoing "social policies" translated into the creation of a new liability on the part of one who did not in any respect participate in putting "into the channels of commerce" the specific article that caused the specific plaintiff's injuries? The new liability is judicially created as a common law tort. The rationale is said to be this: the "successor corporation" should be held liable because: (1) it may protect itself by purchasing insurance, the cost of which may be passed on to the consumer of the product; (2) it is presumed as a matter of law to have a...