Lemelle v. Universal Mfg. Corp.

• Decision Date: 15 April 1994
• Docket Number: No. 93-4181,93-4181
• Parties: , 25 Bankr.Ct.Dec. 792, Bankr. L. Rep. P 75,824 Rose Ana Forbes LEMELLE, et al., Plaintiffs, Rose Ana Forbes Lemelle, Plaintiff-Appellant, v. UNIVERSAL MFG. CORP., et al., Defendants, Universal Mfg. Corp., Defendant-Appellee, Werts Novelty Co., Inc., Defendant-Appellee, USF & G, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1268

18 F.3d 1268

62 USLW 2687, 25 Bankr.Ct.Dec. 792, Bankr.

L. Rep. P 75,824

Rose Ana Forbes LEMELLE, et al., Plaintiffs, Rose Ana Forbes Lemelle, Plaintiff-Appellant, v. UNIVERSAL MFG. CORP., et al., Defendants, Universal Mfg. Corp., Defendant-Appellee, Werts Novelty Co., Inc., Defendant-Appellee, USF & G, Defendant-Appellee.

No. 93-4181.

United States Court of Appeals, Fifth Circuit.

April 15, 1994.

Rehearing Denied May 27, 1994.

Michel P. Wilty, Joel G. Davis, Robert B. Keaty, Keaty & Keaty, Lafayette, LA, for plaintiff-appellant.

David K. Buie, Max Zelden, Zelden & Rand, New Orleans, LA, for Universal Mfg Corp.

James R. Leonard, Jr., Robert R. McBride, McBride, Foret, Rozas & Leonard, Lafayette, LA, for USF & G.

Appeal from the United States District Court for the Western District of Louisiana.

Before POLITZ, Chief Judge, KING and DAVIS, Circuit Judges.

KING, Circuit Judge:

Rosemary Forbes, the mother of decedents Michael Tyrone Forbes and John Clarence Berchman Forbes, filed suit in federal district court against Universal Manufacturing Corp. and United States Fidelity and Guaranty Co. for the wrongful death of the decedents. The district court entered summary judgment for the defendants, and the plaintiff appeals. We reverse the judgment of the district court and remand for further proceedings consistent with this opinion.

I. BACKGROUND

A. Factual Background

Winston Mobile Homes, Inc. was incorporated in Alabama on August 10, 1965. On April 24, 1969, the corporation changed its name to Winston Industries, Inc. (Winston). Winston was a business generally involved with the manufacture, marketing, and sale of mobile homes.

On September 9, 1982, Winston--a wholly-owned subsidiary of Shelter Resources Corp. (Shelter), a Delaware corporation--filed a voluntary petition under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Ohio. Shelter and another of its wholly-owned subsidiaries, Lancer Homes, Inc.--a California corporation--filed voluntary petitions under Chapter 11 at the same time. The bankruptcy court consolidated all three proceedings for administrative purposes only.

On November 29, 1982, pursuant to a court order, the consumer products division of Winston was sold to American Consumer Products, Inc. (American). On January 4, 1983, pursuant to the same court order, Winston's operating assets relating to the production and sale of manufactured housing were sold to Don N. Tidwell. Tidwell gave as consideration for Winston's manufacturing assets $3,137,000 in cash and the secured assumption of accrued warranty liabilities totalling $2,399,000. After the sales to American and Tidwell, Winston's remaining assets were its corporate books and records, some cash, an income tax refund due from the sale of one of its foreign subsidiaries, notes and an account receivable from the sale of its foreign subsidiaries, and approximately twenty-four acres of undeveloped real property in Orangeburg, South Carolina.

Winston then filed its reorganization plan with the bankruptcy court on January 7, 1983. The bankruptcy court confirmed the reorganization plan on August 30, 1983, and Winston was discharged. Shelter continued to own all of the issued and outstanding capital stock of Winston.

On September 20, 1985, Werts Novelty Co. (Werts)--a Delaware corporation--purchased all of the issued and outstanding shares of capital stock of Winston from Shelter. Five days later, Winston--still an Alabama corporation--was merged into Universal Chicken Farms, Inc., a Delaware corporation and a wholly-owned subsidiary of Werts. The surviving corporation was named Winston Industries, Inc. (Winston II). On November 25, 1985, Winston II was merged into Universal Manufacturing Corp. (Universal), another subsidiary of Werts. On March 13, 1987, Werts was merged with Universal.

B. Procedural History

Rosemary Forbes (Forbes), the mother of Michael Tyrone Forbes and John Clarence Berchman Forbes (decedents), brought suit against Universal in the United States District Court for the Eastern District of Louisiana on January 17, 1986, on the basis of diversity jurisdiction. ¹ The suit was transferred to the Western District of Louisiana on August 13, 1986. Subsequently, Forbes also named United States Fidelity and Guaranty Company (USF & G), Universal's liability insurer, as a co-defendant. ²

Forbes alleged that on December 24, 1985, a fire and the resulting damage, caused by the design and manufacture of a mobile home, directly resulted in the death of the decedents. The mobile home in question had been designed and manufactured by Winston in approximately 1970.

Universal filed a motion for summary judgment on November 2, 1987, asserting that Forbes' claim, premised on an act that did not occur until a time subsequent to Winston's discharge from bankruptcy under Chapter 11 in 1983, had been effectively foreclosed because the bankruptcy court had discharged Winston from "all supplications, demands, and/or claims of whatever character, whether provisional, liquidated, or unliquidated, fixed or contingent." Universal alternatively asserted that neither Universal nor Werts was a successor corporation to Winston and hence could not be liable for the wrongful deaths of the decedents. Universal pointed out that prior to the bankruptcy court's confirmation of Winston's reorganization plan, the operational and manufacturing assets of Winston had been sold at a court-ordered sale to Tidwell and that all that remained of Winston was a "corporate shell." It was this "corporate shell," Universal argued, that was eventually merged into other corporations and then into Universal, indicating that Universal was not a successor corporation of Winston's mobile home manufacturing business.

On December 23, 1987, the district court granted Universal's motion, dismissing Forbes' claim against Universal. The court stated that Winston's reorganization plan "clearly discharged Winston II from all obligations and demands" and that Universal had merged with Winston II on that basis. The court further stated that "[t]o hold otherwise would rearrange the careful planning and the balance of equities inherent in a bankruptcy reorganization, and would expose the purchaser of a reorganized corporation to astronomical, unpredictable liability." On January 25, 1988, USF & G filed a motion for summary judgment, asserting that inasmuch as Universal had been granted summary judgment, there could be no damages to Forbes for which USF & G was legally obligated to pay. On February 8, 1988, the court denied Forbes' motion for rehearing and granted USF & G's motion for summary judgment. Forbes' claims against other defendants remained.

Nearly four years later, on January 31, 1992, Forbes sought reconsideration of the district court's rulings of December 23, 1987, and February 8, 1988. The district court denied Forbes' request, stating that although it agreed with Forbes that a tort claim was not cognizable in reorganization unless the cause of action accrued under non-bankruptcy law prior to the confirmation of a plan, it did not agree that Universal was a successor corporation that would have liability for Winston's manufacture of mobile homes. The court based this decision on the facts that all of Winston's manufacturing and operational assets had been sold at public sale and that its mobile home business had been completely liquidated. The court thus determined that Universal, as a successor corporation, would have no liability for Forbes' tort claim.

Forbes filed a timely notice of appeal. This court dismissed her appeal, however, because a certification that the district court's rulings of December 23, 1987, and February 8, 1988, were final under Federal Rule of Civil Procedure 54(b) had not been issued. See Forbes v. Universal Manufacturing Co., No. 88-4201 (5th Cir. May 3, 1988) (unpublished opinion). On January 14, 1993, Universal and USF & G obtained a certification of final judgment on these rulings pursuant to Rule 54(b). This appeal then ensued.

II. STANDARD OF REVIEW

We review the granting of summary judgment de novo, applying the same criteria used by the district court in the first instance. That is, we review the evidence and inferences to be drawn therefrom in the light most favorable to the non-moving party. Federal Deposit Ins. Corp. v. Dawson, 4 F.3d 1303, 1306 (5th Cir.1993); Fraire v. City of Arlington, 957 F.2d 1268, 1273 (5th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 462, 121 L.Ed.2d 371 (1992). Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED.R.CIV.P. 56(c).

III. DISCUSSION

Forbes argues on appeal that the district court erred in granting summary judgment to Universal and USF & G. Forbes contends that summary judgment in favor of Universal and USF & G was improper because (1) Universal, as a successor corporation of Winston through statutory mergers, can be held liable for Winston's delictual acts, (2) the causes of action involved in this case did not accrue until December 1985 and thus could not have been discharged by the bankruptcy court's confirmation of Winston's reorganization plan in 1983, and (3) USF & G can be held liable insofar as it was Universal's liability insurer at the time her cause of action accrued. We address each of Forbes' arguments in turn.

A. Successor Corporation Liability

Forbes' first argument centers on the fact that Winston was not liquidated as a result of its Chapter 11 proceedings. According to Forbes, Winston continued to exist as a viable corporation, albeit restructured, after its reorganization plan was confirmed and it was discharged in 1983. She asserts that because Winston was eventually merged into...