Semenetz v. Sherling & Walden, Inc.

• Court: New York Supreme Court — Appellate Division
• Writing for the Court: Crew Iii
• Citation: Semenetz v. Sherling & Walden, Inc., 21 AD3d 1138, 801 N.Y.S.2d 78, 2005 NY Slip Op 6560 (N.Y. App. Div. 2005)
• Decision Date: 01 September 2005
• Docket Number: 97722.
• Parties: BRIDGET SEMENETZ, Individually and as Parent and Guardian of SEAN SEMENETZ, an Infant, Respondent, v. SHERLING & WALDEN, INC., et al., Defendants, and SAWMILLS & EDGERS, INC., Appellant.

21 A.D.3d 1138

801 N.Y.S.2d 78

2005 NY Slip Op 06560

BRIDGET SEMENETZ, Individually and as Parent and Guardian of SEAN SEMENETZ, an Infant, Respondent, v. SHERLING & WALDEN, INC., et al., Defendants, and SAWMILLS & EDGERS, INC., Appellant.

97722.

Appellate Division of the Supreme Court of the State of New York, Third Department.

September 1, 2005.

Appeal from an order of the Supreme Court (Ledina, J.), entered July 9, 2004 in Sullivan County, which, inter alia, denied a motion by defendant Sawmills & Edgers, Inc. for summary judgment dismissing the complaint against it.

CREW III, J.

In 1998, defendant S&W Edger Works, Inc. (hereinafter Edger Works), an Alabama corporation, manufactured and sold a sawmill to Semenetz Lumber Mill, Inc., a New York corporation located in the Village of Jeffersonville, Sullivan County. On July 26, 1999, Sean Semenetz was using the sawmill when his right hand was drawn into the machine causing partial amputation of several of his fingers.

In October 2000, Edger Works sold all of its assets, including goodwill, trade names and inventory, to defendant Sawmills & Edgers, Inc. (hereinafter Sawmills), an Alabama corporation with its principal place of business in Alabama. Thereafter, Edger Works changed its name to defendant Sherling & Walden, Inc.

In April 2002, plaintiff commenced this products liability action seeking money damages individually and as parent and guardian of Semenetz. Sawmills answered, pleading lack of personal jurisdiction as an affirmative defense, and moved for dismissal of the complaint against it on that ground. Supreme Court denied the motion and this appeal by Sawmills ensued.

We begin with the observation that there can be no jurisdiction here based on the "corporate presence" doctrine (see Business Corporation Law §§ 1301, 1314; CPLR 301) or New York's long-arm statute (see CPLR 302 [a]). As to the former, it is clear that Sawmills is a nondomiciliary corporation that is not doing business in New York. As to the latter, Sawmills did not come into existence until after the accident giving rise to this litigation and could not, therefore, have engaged in tortious conduct that caused Semenetz's injuries. We likewise reject plaintiff's contention that jurisdiction may be predicated on Sawmills' failure to warn. Again, assuming Sawmills had a duty to warn, that duty did not arise until after Sawmills acquired the assets of Edger Works, a time well after the injury that forms the basis of this lawsuit. Finally, there is no quantifiable evidence that Sawmills derived substantial revenue from interstate commerce. In short, plaintiff failed to prove that Sawmills was subject to in personam jurisdiction under any of the traditional notions provided for in our long-arm statute (see CPLR 302 [a] [3] [ii]).

Nevertheless, plaintiff contends, and Supreme Court found, that Sawmills is subject to New York jurisdiction based upon the "product line" exception to the traditional successor corporate liability rule. As a general rule, "a corporation which acquires the assets of another is not liable for the torts of its predecessor," with four exceptions not applicable here (Schumacher v. Richards Shear Co., 59 NY2d 239, 244 [1983]). There are two additional exceptions, not yet embraced by the Court of Appeals, known as the "product line" exception and the "continuing enterprise" exception.¹ In order for a successor corporation to be liable for the torts of its predecessor under the "product line" exception, it must appear that the injured party's remedy against the original manufacturer was destroyed by the successor's acquisition of all the predecessor's assets, the successor continued to manufacture the same line of products as the predecessor, the successor had the ability to assume the predecessor's risk-spreading role and the successor benefitted from the predecessor's goodwill (see Ray v. Alad Corp., 19 Cal 3d 22, 560 P2d 3 [1977]). Having concluded that this exception was applicable to Sawmills, Supreme Court held that inasmuch as Edger Works was subject to long-arm jurisdiction pursuant to CPLR 302 (a) (1), Sawmills likewise was subject to such jurisdiction as the successor to Edger Works. We disagree.

The "product line" and "continuing...