Hill v. Trailmobile, Inc.

• Decision Date: 19 February 1992
• Citation: 603 A.2d 602,412 Pa.Super. 320
• Parties: , Prod.Liab.Rep. (CCH) P 13,116 George N. HILL, Jr. v. TRAILMOBILE, INC., Blue Line Transfer Co., Central Hydraulic Co., Milwaukee Cylinder, a Versa/Tek Co., Broomall Truck Repair Co., and Robert Carl Company. Appeal of TRAILMOBILE, INC.
• Court: Pennsylvania Superior Court

Page 602

603 A.2d 602

412 Pa.Super. 320, Prod.Liab.Rep. (CCH) P 13,116

George N. HILL, Jr. v. TRAILMOBILE, INC., Blue Line Transfer Co., Central Hydraulic Co., Milwaukee Cylinder, a Versa/Tek Co., Broomall Truck Repair Co., and Robert Carl Company Appeal of TRAILMOBILE, INC.

Superior Court of Pennsylvania.

Argued Dec. 11, 1991.

Filed Feb. 19, 1992.

R. Bruce Morrison, Philadelphia, for appellant.

Robert M. Ruzzi, Philadelphia, for Milwaukee Cylinder, appellee.

Henry P. Stonelake, Philadelphia, for Robert Carl Co., appellee.

Before CIRILLO, DEL SOLE and MONTEMURO, JJ.

CIRILLO, Judge:

This is an appeal from an order entered in the Court of Common Pleas of Delaware County. We affirm.

This cause of action in tort arises from personal injuries sustained by George H. Hill, Jr. on February 29, 1984 when a truck trailer he was unloading suddenly shifted and threw him backward onto the floor of the trailer. Hill injured his lower back and head and sustained internal injuries to the groin area which resulted in chronic back pain and ultimately the loss of one testicle. The accident occurred when an allegedly defective power gear ¹ in a hydraulic lift, which was used to raise the trailer to the level of the loading platform, failed and caused the hydraulic lift to collapse. In May of 1985 Hill filed an action in strict liability against Blue Line Transfer Company ("Blue Line"), the company which had hired him to drive the trailer, and appellant Trailmobile, Inc. ("Trailmobile"), the manufacturer of the trailer.

Trailmobile and Blue Line cross-claimed, each asserting that the other was liable for Hill's injuries. Thereafter, Trailmobile and Blue Line entered into a stipulation and agreement to join as additional defendants the companies responsible for the design, manufacture and sale of the allegedly defective power gear. Pursuant to their agreement, in January of 1986 Blue Line and Trailmobile joined Central Hydraulic Company, the manufacturer of the defective power gear, and Milwaukee Cylinder, which had purchased Central Hydraulic, as additional defendants. In August of 1986, Blue Line and Trailmobile also joined the Broomall Truck Repair Company, which had been responsible for servicing the trailer, and the following November they joined Carl Young Company ("Carl Young"), the liquidators in the sale of Central Hydraulic.

In August of 1987, more than two years after Hill filed his complaint, Blue Line and Trailmobile petitioned the trial court for leave to join W.T. Young & Co., the parent company of the then-defunct Central Hydraulic, as the final additional defendant. Plaintiff Hill objected to the proposed joinder as unfair and prejudicial to him. Citing the four additional defendants already joined and the massive discovery requests their joinder had entailed, Hill argued that granting another joinder would create an unreasonable and burdensome delay in resolving his claim. Moreover, Hill contended, the requested joinder would not promote judicial economy because the asserted liability of W.T. Young & Co. was based on an entirely different factual background and involved separate and distinct legal issues from those raised in his complaint. ² The trial court denied the requested joinder, "[d]ue to the running of the statute of limitations ³ and the long delay in Hill having his claim pursued." (Trial court opinion, page 5). See Kovalesky v. Esther Williams Swimming Pools, 345 Pa.Super. 95, 105, 497 A.2d 661, 666 (1985) (The rules pertaining to joinder are "an attempt to provide a means to simplify and expedite the disposition of matters involving numerous parties ... without subjecting the original plaintiff to unreasonable delay in the prosecution of his portion of the litigation.")

Blue Line and Broomall Truck Repair Company settled with Hill through a joint-tortfeasor release, thereby eliminating themselves as parties to the suit. The remaining three companies, Trailmobile, Milwaukee Cylinder and Carl Young also entered into a joint tortfeasor release prior to trial, with each defendant paying Hill $76,666.66. However, the companies agreed to proceed to trial to have the court determine which of the three of them alone was responsible to Hill for the injuries caused by the defective power gear.

In preparation for trial the three defendants entered into an Agreement and Stipulation of Case Stated, and in March of 1991 the trial court heard argument on the indemnification issue. The court found in favor of Milwaukee Cylinder and Carl Young Company, and ordered Trailmobile to pay each company $76,666.67. ⁴ After its post-trial motions were filed and denied, Trailmobile filed this timely appeal.

Trailmobile presents one issue for our review:

Whether the Court below erred in concluding that the lessor of a truck trailer which contained a latently defective component part was not entitled to indemnification from the product line successor to the manufacturer of that component part?

In Pennsylvania, ⁵ when one company sells or transfers all of its assets to another company, the purchasing or receiving company is not responsible for the debts and liabilities of the selling company simply because it acquired the seller's property. Husak v. Berkel, 234 Pa.Super. 452, 457, 341 A.2d 174, 176-77 (1975). In order to hold the acquiring, or successor, company responsible for the seller's liabilities one of the following must be established: 1) the purchaser expressly or impliedly agreed to assume the obligations; 2) the transaction amounted to a consolidation or merger; 3) the purchasing corporation was merely a continuation of the selling corporation; 4) the transaction was fraudulently entered into to escape liability; and 5) the transfer was without adequate consideration and no provisions were made for creditors of the selling corporation. Id. See also Simmers v. American Cyanamid, 394 Pa.Super. 464, 576 A.2d 376 (1990).

Unjust decisions often resulted when the limited exceptions could not provide relief for plaintiffs suing successor corporations in strict liability for personal injuries caused by defective products. Therefore, in 1981 this court adopted the product-line exception to successor liability which provides that:

Where one corporation acquires all or substantially all the manufacturing assets of another corporation, even if exclusively for cash, 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.

Dawejko v. Jorgensen Steel Company, 290 Pa.Super. 15, 23, 434 A.2d 106, 110 (1981), quoting Ramirez v. Amsted Industries, Inc., 86 N.J. 332, 431 A.2d 811 (1981).

Prior to adoption of the product-line exception, courts throughout the country had provided relief for plaintiffs injured by a product manufactured by a predecessor corporation by expanding or extending one of the five recognized exceptions. However, such extension of the "continuation" exception was generally restricted to situations in which there was only one corporation after the transfer and there was also a common identity of officers, directors, and stock between the selling and purchasing corporations. Id., 290 Pa. Superior Ct. at 19, 434 A.2d at 107-08. Plaintiffs injured by products manufactured by predecessor corporations purchased by multiple corporations, or which shared no identity of corporate structure were, unfortunately, left without a remedy in strict liability. Even the expansion of the "continuation" exception to include successor corporations which were in a business of a similar nature failed to provide adequate relief. Id.

In becoming one of the few states to adopt the product-line exception to successor liability, this court explained its change in philosophy as "an attempt to implement the 'social policies underlying strict products liability.' " Id., 290 Pa. Superior Ct. at 26, 434 A.2d at 111, quoting Ramirez v. Amsted Industries, Inc., 86 N.J. 332, 358, 431 A.2d 811, 825 (1981). The court explained that strict tort liability for manufacturers of defective products rests on the proposition that

" 'the cost of an injury and the loss of time or health may be an overwhelming misfortune to the person injured, and a needless one, for the risk of injury can be insured by the manufacturer and distributed among the public as a cost of doing business.' " ... Thus, "the paramount policy to be promoted by the rule is the protection of otherwise defenseless victims of manufacturing defects and the spreading throughout society of the cost of compensating them." (citations omitted).

Id., at 22, 434 A.2d at 109 (emphasis added).

In adopting the product-line exception to successor liability for the Commonwealth, the court was particularly concerned that the underlying policy considerations which prompted adoption of the exception be understood and used as a guideline in its application. The court also stated that the product-line exception to the general rule of no liability for successor corporations may only be applied when the following three circumstances have each been established:

(1) the virtual destruction of the plaintiff's remedies against the original manufacturer caused by the successor's acquisition of the business, (2) the successor's ability to assume the original manufacturer's risk-spreading rule, and (3) the fairness of requiring the successor to assume a responsibility for defective products that was a burden necessarily attached to the original manufacturer's good will being employed by the successor in the continued operation of the business.

Dawejko, 290 Pa.Super. at 22, 434 A.2d at 109, quoting Ray v. Alad Corp., 19 Cal.3d 22, 136 Cal.Rptr. 574, 560 P.2d 3 (1977). The court continued to explain that "[w]e also believe it better not to phrase the new...