Haworth, Inc. v. Wickes Mfg. Co.

• Citation: 532 N.W.2d 903,210 Mich.App. 222
• Decision Date: 21 April 1995
• Docket Number: Docket No. 167238
• Parties: HAWORTH, INC., Plaintiff-Appellant, v. WICKES MANUFACTURING COMPANY, Defendant-Appellee.
• Court: Court of Appeal of Michigan (US)

Page 903

532 N.W.2d 903

210 Mich.App. 222

HAWORTH, INC., Plaintiff-Appellant, v. WICKES MANUFACTURING COMPANY, Defendant-Appellee.

Docket No. 167238.

Court of Appeals of Michigan.

Submitted Dec. 7, 1994, at Grand Rapids.

Decided April 21, 1995, at 11:15 a.m.

Released for Publication June 19, 1995.

Warner, Norcross & Judd by John D. Tully, Eugene E. Smary, and Mark R. Lange, Grand Rapids, for plaintiff.

Dykema Gossett by John A. Ferroli and James R. Saalfeld, Grand Rapids, for defendant.

Before MICHAEL J. KELLY, P.J., and CONNOR and GRAVES, ^* JJ.

CONNOR, Judge.

In a declaratory judgment action, plaintiff sought to establish defendant's liability as a corporate successor of polluting corporations for environmental contamination at plaintiff's manufacturing facility. The trial court granted summary disposition for defendant pursuant to MCR 2.116(C)(10). Plaintiff appeals as of right. We affirm.

In 1971, after a series of mergers and name changes, Gulf & Western Industrial Products Company (hereafter GWIPCO) sold the assets of three companies to Grand Rapids Brass Company (hereafter Brass). As part of this transfer, Brass assumed the liabilities of the three companies it purchased. The sales agreement, provided that the transfer of assets was "SUBJECT, HOWEVER, to all of Seller's obligations, indebtedness and liabilities relating to the businesses, assets and properties being transferred hereunder." In 1976, GWIPCO, which had changed its name to Gulf & Western Liquidating Company, transferred the assets and liabilities of fourteen other divisions to Young & Ottawa Incorporated. After various mergers and purchases, Young & Ottawa became defendant.

Brass, which had by then changed its name to Crampton Manufacturing Company, sold the manufacturing facility site at issue to Roland Peterson in 1975. In 1976, Crampton Manufacturing Company transferred its remaining assets to Gulf & Western Liquidating Company, which dissolved ten years later. In 1980, Roland Peterson sold the site to plaintiff. While plaintiff was operating a plant at the site, the Department of Natural Resources informed plaintiff that the site was contaminated with various waste materials that were leaching into the soil and ground water. The DNR alleged that this contamination had been caused by companies that used the site before plaintiff. Plaintiff filed suit against defendant in 1991 as a result of the DNR's allegations. We find the trial court did not err in granting summary disposition for defendant.

In general, a purchaser of another company's assets does not become liable for the seller's obligations. Henn & Alexander, Laws of Corporations, (3rd ed), § 341, p. 967. However, an exception to this general rule occurs where the purchaser expressly or impliedly assumes the seller's liabilities. Id. Such a transfer was expressly memorialized in the sales agreement between GWIPCO and Brass, quoted supra.

Plaintiff contends that this transfer does not defeat third-party claims against the seller, GWIPCO. Generally, creditors of the seller are not limited to seeking a recovery from the purchaser unless they agree to the transaction. 15 Fletcher, Cyclopedia Corporations (perm ed), § 7116, p. 215. However, third-party claims by creditors of the purchaser are not granted the same protection. Plaintiff was never a creditor of either GWIPCO or Brass. Consequently, the argument has no merit.

Implicit in plaintiff's claim is the assumption that defendant is the successor to GWIPCO. Some courts have overridden traditional corporate successor law on the basis of the public policy that favors forcing polluters, rather than the public, to pay for environmental contamination. See, e.g., United States v. Mexico Feed & Seed Co., 980 F.2d 478, 487 (CA 8, 1992). Such courts use the "substantial continuity" test to determine whether a purchaser of the assets is liable for the pollution of a predecessor. Id. at 488. The substantial continuity test involves the following factors: (1) retention of the same employees and supervisory staff; (2) retention of the same production facility at the same site; (3) production of the same product; (4) retention of the same name; (5) continuity of assets and general business operations; and (6) whether the purchaser holds itself out to the public as the continuation of the previous enterprise. United States v. Carolina Transformer Co., 978 F.2d 832, 838 (CA 4, 1992).

In the present case, it would be impossible to find the factors for substantial continuity. GWIPCO sold the property and assets to Brass in 1971. Defendant's predecessor-in-interest did not purchase the assets and liabilities of the fourteen other companies until January 5, 1976. Brass' successor sold its assets to GWIPCO's successor on December 1, 1976, but it had already sold the site to plaintiff's predecessor on November 15, 1975. Accordingly, the trial court did not err when it declined to embrace any common-law theories of liability.

Next, we find the trial court did not err in construing the "no liability transfer rule" of the Environmental Response Act (ERA), M.C.L. § 299.612d(1); M.S.A. § 13.32(12d)(1), to apply only to claims by the state and not to apply in the present matter. Statutory construction is a question of law. Smeets v. Genesee Co. Clerk, 193 Mich.App. 628, 633, 484 N.W.2d 770 (1992). Issues of law are reviewed de novo. Duggan v. Clare Co. Bd. of Comm'rs, 203 Mich.App. 573, 575, 513 N.W.2d 192 (1994). A trial court's primary goal in construing a statute is to ascertain and give effect to the Legislature's intent. Farrington v. Total Petroleum, Inc., 442 Mich. 201, 212, 501 N.W.2d 76 (1993).

In explaining its construction of the ERA, M.C.L. § 299.612d; M.S.A. § 13.32(12d), the trial court opined:

Because of the similarity between CERCLA ¹ and MERA ² and the fact that MERA was based on CERCLA, any deviation from CERCLA must be interpreted as an intention to create a distinction of significance. In light of this difference, it would be improper to construe MCL 299.612d(1) more broadly than its literal language. By adding the words "to the state," the legislature intended to create a cause of action only for the state, and not private claimants, against parties who transferred their liability under MERA to another.

The relevant provision of the ERA, M.C.L. § 299.612d(1); M.S.A. § 13.32(12d)(1), construed by the trial court, provides:

An indemnification, hold harmless, or similar agreement or conveyance is not effective to transfer from a person that may be liable under section 12 to the state for evaluation or response activity costs or damages for a release or threat of release to any other person the liability imposed under this act.

This Court has determined that the intent of the ERA is similar to that of the CERCLA, so it is appropriate to examine federal case law interpreting similar issues. Flanders Industries, Inc. v. Michigan, 203 Mich.App. 15, 21, 512 N.W.2d 328 (1993). The analogous federal provision, § 107(e)(1) of the CERCLA, 42 U.S.C. § 9607(e)(1), provides in pertinent part:

No indemnification, hold harmless, or similar agreement or conveyance shall be effective to transfer from the owner or operator of any vessel or facility or from any person who may be liable for a release or threat of release under this section, to any other person the liability imposed under this section.

This section has been interpreted to mean that responsible parties may not transfer their CERCLA liability to another party. See, e.g., United States v. Hardage, 985 F.2d 1427, 1433 (CA 10, 1993).

In Stolaruk Corp. v. Central Nat'l Ins. Co., 206 Mich.App. 444, 455, 522 N.W.2d 670 (1994), this Court adopted the Sixth Circuit Court of Appeals' interpretation of § 12(6) of the Leaking Underground Storage Tank Act (LUSTA), M.C.L. § 299.842(6); M.S.A. § 14.528(272)(6), found in Niecko v. Emro Marketing Co., 973 F.2d 1296, 1300-1301 (CA 6, 1992). The Stolaruk Court applied this interpretation to § 12d(1) of the ERA, M.C.L. § 299.612d(1); M.S.A. § 13.32(12d)(1), and held that a party will be liable to the government for cleanup costs, notwithstanding any agreement to the contrary. Stolaruk, supra, at 455, 522 N.W.2d 670. However, the Stolaruk Court held that § 12d does not preclude private parties from agreeing with one another to apportion cleanup costs as they see fit. Id. As the Stolaruk Court reasoned, "the Niecko interpretation prevents a party from contracting away its liability as against the government, but allows...