Roper Electric Co. v. Quality Castings

• Decision Date: 30 November 2001
• Docket Number: SD24081
• Citation: 60 S.W.3d 708
• Parties: Roper Electric Company, Plaintiff-Respondent, v. Quality Castings, Inc., and Bagby Enterprises, Inc., Defendants-Appellants. SD24081 Missouri Court of Appeals Southern District
• Court: Missouri Court of Appeals

Roper Electric Company, Plaintiff-Respondent v Quality Castings, Inc., and Bagby Enterprises, Inc., Defendants-Appellants

SD24081

Missouri Court of Appeals Southern District

11/30/2001

Appeal From: Circuit Court of Cedar County, Hon. Joseph B. Phillips

Counsel for Appellant: Thomas Pyle

Counsel for Respondent: Brent D. Green

Opinion Summary: None

Montgomery, J., and Barney, C.J., concur.

Kenneth W. Shrum, Presiding Judge

Roper Electric Company("Plaintiff") sued Quality Castings, Inc.("QCI"), and Bagby Enterprises, Inc.("Bagby")¹, and alleged the two companies owed money to Plaintiff for services provided under an oral agreement.Specifically, Plaintiff sought payment for installation, cleaning, and refurbishing certain equipment belonging to QCI.Bagby was joined in the suit because QCI was no longer operating, and Plaintiff sought payment from Bagby as the corporate continuation of QCI.

After a non-jury trial, the court entered extensive findings of fact and conclusions of law.The court found Defendants jointly and severally liable for the services provided by Plaintiff in the amount of $20,135.46 with interest from September of 1994.Bagby appeals from the judgment alleging multiple claims of trial court error.We affirm.

In relevant part, the facts precipitating the lawsuit are undisputed.In 1994, QCI hired Plaintiff for the "repair and refurbishing of electrical control panels" in an iron foundry.There were no estimates discussed, nor was there a written contract of any kind.Plaintiff requested payment from QCI on several different occasions upon completion of the project in July of 1994.QCI never paid Plaintiff, and in October of 1995, QCI was experiencing financial difficulties owing taxes for the previous quarter to the Internal Revenue Service, three months back rent, and was three months overdue on mortgage payments to a bank on a small business loan.

When Bagby's attempts to purchase a candy store and then a printing business failed, it sought to buy QCI.²On October 16, 1995, Bagby and QCI entered into a "Sale of Assets Agreement."Pursuant to that agreement, all assets of QCI were "sold" to Bagby for the following consideration: (1) Bagby was to make payments on behalf of QCI to the bank holding a security interest in the assets; (2) Bagby agreed to employ the three shareholders of QCI; and (3) Bagby agreed to pay certain notes of the three shareholders and the corporation.Succinctly stated by Bagby's president, "There was no money changed hands.I assumed the assets in return for paying future payments on the [bank] loan."³Thereafter, the business of QCI was generally operated the same way only with the new name, "Bagby Enterprises, Inc. d/b/a Quality Castings."⁴Plaintiff then attempted to collect payment from Bagby, and those efforts went unfulfilled.As a result, Plaintiff filed the underlying suit.

STANDARD OF REVIEW

This being a court-tried case, we review pursuant to the well-known principles enunciated in Murphy v. Carron, 536 S.W.2d 30, 32(Mo.banc 1976).Real Estate Investors Four, Inc. v. American Design Group, Inc., 46 S.W.3d 51, 56(Mo.App.2001).We will affirm the trial court's judgment unless there is no substantial evidence to support it, unless it is against the weight of the evidence, or unless it erroneously declares or applies the law.Id.We review the evidence and all reasonable inferences in the light most favorable to the judgment and disregard all contrary evidence and inferences.Sanders v. Ins. Co. of North America, 42 S.W.3d 1, 8[3](Mo.App.2000).Furthermore, we defer to the trial court's determination of witness credibility, and recognize that the court is free to accept or reject all, part, or none of the testimony presented.Id. at 8.

DISCUSSION AND DECISION

On appeal, Bagby presents three separate points of trial court error.Our resolution of Point I, however, is dispositive of the appeal.This follows because each of Bagby's points is predicated on the same assumption, namely, there must be an identity of shareholders, officers, and directors of both corporations before the "corporate continuation" principle can attend.Bagby claims that both corporations must have "identical" representatives and that this "identity" is a "necessary element" to a corporate continuation theory.We disagree.

The general rule of law in Missouri and most other jurisdictions is that where one corporation sells or otherwise transfers all of its assets to another corporation, the latter is not liable for the debts and liabilities of the former.Brockmann v. O'Neill, 565 S.W.2d 796, 798[3](Mo.App.1978);19 C.J.S.Corporationssection 657 at 314(1990);19 Am.Jur.2dCorporationssection 2704 at 513(1986);Ferdinand S. Tinio, Annotation, Similarity of Ownership or Control as Basis For Charging Corporation Acquiring Assets of Another with Liability for Former Owner's Debts, 49 A.L.R.3d 881(1973).There are, however, four exceptions to this general rule, and the one presently at issue is where the purchasing corporation is merely a continuation of the selling corporation.Brockmann, 565 S.W.2d at 798[2];19 C.J.S.at 314-15;19 Am.Jur.2d sections 2705 and 2711 at 515 and 521;49 A.L.R.3d at 883.

Bagby acknowledges these principles, but claims there must be evidence that the officers, directors, and shareholders were the same in both corporations before liability arose under the corporate continuation theory.The only authority Bagby cites for this proposition is Phillip G. Louis, Jr., 26 Missouri Practice: Business Organizations section 31.10at 106(2000).Bagby misreads this authority, but we need not detail his misconceptions.Suffice it to say, the following excerpt from the authority Bagby cites dispels his argument:

"Under this [corporate continuation] exception, the emphasis is on various factors, examples of which are: (1) Whether there is common identity of officers, directors and stockholders; (2) whether the incorporators of the successor also incorporated the predecessor; (3) whether the business operations are identical; (4) whether the transferee uses the same trucks, equipment, labor force, supervisors and name of the transferor and (5) whether notice has been given of the transfer to employees or customers."(Emphasis supplied.)

As this excerpt suggests, Missouri case law strongly leans toward the view that a lack of identity of officers, directors, and shareholders does not preclude a finding of corporate continuation, but that such identity is merely one factor in making this determination.Thus, in Flotte v. United Claims, Inc., 657 S.W.2d 387(Mo.App.1983), the court in analyzing Brockmann, noted that the "emphasis was on the common identity" as the "key element," but also the case"relied on three other factors[.]"Id. at 389.The Flotte court then affirmed a judgment that imposed liability on the successor corporation on the basis of "substantially similar shareholders, officers, and [the new corporation] engag[ing] in the same business representing the same two major customers."Id.(emphasis supplied).

In Chemical Design, Inc. v. American Standard, Inc., 847 S.W.2d 488(Mo.App.1993), the court affirmed a summary judgment that rejected an effort to impose liability on a successor corporation for the acts and omissions of a predecessor corporation.The court did not, however, base its decision exclusively on the lack of corporate officer and shareholder identity; rather, it balanced other factors, such as whether the same products were manufactured, whether notice was given to customers and employees of the new management, the fact that a new federal identification number was obtained, and "the extent of the involvement of prior officers . . . as consultants[.]"Id. at 493(emphasis supplied).Based on an analysis of all these facts, the court concluded the successor corporation had no liability.

In Young v. Fulton Iron Works Co., 709 S.W.2d 927(Mo.App.1986), this court affirmed a judgment that refused to impose liability on a successor corporation based on a "corporate continuance" theory.In doing so, this court noted there were no common incorporators, directors, officer or shareholders, yet this court did not affirm the judgment based on that fact alone.Other factors that were weighed and considered "noteworthy" in the "corporate continuation" analysis included (a) the buying corporation did not acquire all...