Jones v. Johnson Mach. and Press Co. of Elkhart, Ind.

• Decision Date: 04 June 1982
• Docket Number: No. 44085,44085
• Parties: Danny L. JONES, Appellant, v. JOHNSON MACHINE AND PRESS COMPANY OF ELKHART, INDIANA, a foreign corporation, et al., Appellees.
• Court: Nebraska Supreme Court

Page 481

320 N.W.2d 481

211 Neb. 724

Danny L. JONES, Appellant, v. JOHNSON MACHINE AND PRESS COMPANY OF ELKHART, INDIANA, a foreign corporation, et al., Appellees.

No. 44085.

Supreme Court of Nebraska.

June 4, 1982.

Syllabus by the Court

Products Liability: Corporations. A corporation which purchases the assets of another corporation does not succeed to the liabilities of the selling corporation except (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.

R. Steven Geshell and Robak & Geshell, Columbus, for appellant.

Thomas M. Maul and Albert, Leininger & Grant, Columbus, for appellees.

Heard before KRIVOSHA, C. J., and BOSLAUGH, McCOWN, CLINTON, WHITE, HASTINGS, and CAPORALE, JJ.

McCOWN, Justice.

The plaintiff filed this products liability case in 1979 seeking recovery for injuries allegedly arising out of his operation of a punch press manufactured by one of the defendants in 1955. Default judgment was entered against the corporate defendant which manufactured the press. The remaining defendants other than the plaintiff's employer are corporations which succeeded the manufacturing corporation in the subsequent manufacture, distribution, and sale of the press. A special appearance was sustained as to one defendant and summary judgment in favor of the remaining defendants was entered. The plaintiff has appealed.

Plaintiff's amended petition alleges that on July 8, 1977, while working at the plant of Dale Electronics, Inc., in Columbus, Nebraska, his hand was caught in a punch press and he lost several fingers. The petition alleges that the punch press was manufactured and assembled in a defectively and unreasonably dangerous condition without warning signs or shields to prevent such an accident. It also alleged breach of implied warranty and negligent design, manufacture, assembly, sale, distribution, and installation of the punch press.

The punch press was manufactured by Johnson Machine and Press Company of Elkhart, Indiana, in 1955. In August 1956 Bontrager Corporation acquired the assets and liabilities of the Johnson company in exchange for Bontrager common stock. Johnson retained its corporate shell as a Bontrager wholly owned subsidiary but transacted no business, owned no assets but trade names, and engaged in no corporate activities. From September 1, 1956, until August 31, 1962, Bontrager manufactured presses sold under the Johnson name. The one share of Johnson stock which remained in the shell corporation was issued to Bontrager on August 20, 1962, and was by then the only share of capital stock outstanding.

On August 29, 1962, Amsted Industries Incorporated purchased all of Bontrager's assets for cash. Amsted expressly assumed certain specified liabilities of Bontrager, which did not include any liabilities for defective products. The purchase contract provided that Amsted did not assume and would not be liable for any obligations other than those expressly assumed. In addition, the contract provided that all machines sold prior to the closing date of the contract were products of Bontrager for which Bontrager alone was responsible. Bontrager and its shareholders agreed not to compete with Amsted for a period of 5 years.

On August 31, 1962, the sole share of Johnson stock outstanding in the Johnson shell corporation was transferred on the Johnson stock records from Bontrager to Amsted and a new certificate issued in Amsted's name. On the same date Amsted assigned all its rights and obligations under the purchase contract with Bontrager to South Bend Lathe, Inc., a wholly owned subsidiary of Amsted. South Bend Lathe, Inc., took possession of Bontrager's assets on September 1, 1962, and continued to manufacture presses utilizing substantially the same facility and equipment as both Bontrager and Johnson had. The presses were sold under the Johnson trade name and Johnson continued to be merely a corporate shell.

No officer or director of Amsted was ever an officer, director, stockholder, or employee of Bontrager or Johnson, and no officer or director of Johnson or Bontrager was ever an officer or director of Amsted, prior to the 1962 sale. No officer or director of Bontrager ever became an officer or director of Amsted, although one officer of Bontrager was employed as a plant manager for approximately 4 years after the sale. Bontrager was dissolved on July 29, 1964, and its assets were distributed to its stockholders. Johnson was dissolved by Amsted on August 2, 1965, and its assets, consisting solely of trade names, were distributed to Amsted, the sole stockholder.

On September 29, 1965, South Bend Lathe, Inc., was dissolved by Amsted and its assets and liabilities transferred to Amsted, its sole shareholder. The former subsidiary was then operated as an unincorporated division of Amsted under the name of South Bend Lathe, which continued to manufacture presses sold under the Johnson trade name. In 1966 the manufacturing operations were moved from Elkhart, Indiana, to South Bend, Indiana.

In July 1975 Amsted sold the South Bend Lathe division to LWE Inc., which then changed its corporate name to South Bend Lathe, Inc., which is completely independent from Amsted. South Bend Lathe, Inc., has continued to manufacture presses in South Bend, Indiana, under the Johnson name.

On December 31, 1980, the District Court entered its order sustaining the...