State Farm Fire & Cas. Co. v. Main Bros. Oil Co.

• Decision Date: 27 December 2012
• Citation: 101 A.D.3d 1575,2012 N.Y. Slip Op. 09142,956 N.Y.S.2d 695
• Court: New York Supreme Court — Appellate Division
• Parties: STATE FARM FIRE & CASUALTY COMPANY, as Subrogee of Lucy Bowditch, Respondent, v. MAIN BROTHERS OIL COMPANY, Doing Business as Main Care Energy, as Successor of Merger to Ackner Fuels, Inc., Appellant, et al., Defendant.

101 A.D.3d 1575

956 N.Y.S.2d 695

2012 N.Y. Slip Op. 09142

STATE FARM FIRE & CASUALTY COMPANY, as Subrogee of Lucy Bowditch, Respondent,

v.MAIN BROTHERS OIL COMPANY, Doing Business as Main Care Energy, as Successor of Merger to Ackner Fuels, Inc., Appellant, et al., Defendant.

Supreme Court, Appellate Division, Third Department, New York.

Dec. 27, 2012.

Wilson, Elser, Moskowsitz, Edelman & Dicker, LLP, Albany (Elizabeth Grogan of counsel), for appellant.

Pappas, Cox, Kimpel, Dodd & Levine, PC, Syracuse (Thomas P. Givas of counsel), for respondent.

Before: PETERS, P.J., SPAIN, KAVANAGH, McCARTHY and EGAN JR., JJ.

SPAIN, J.

Appeal from an order of the Supreme Court (Hummel,J.), entered March 20, 2012 in Rensselaer County, which, among other things, denied a cross motion by defendant Main Brothers Oil Company to dismiss the complaint against it.

This action arises out of a 2009 fire that occurred at the residence of Lucy Bowditch in the City of Troy, Rensselaer County. Per its insurance policy, plaintiff paid Bowditch for the damages and is now subrogated to her rights against others as they relate to the fire. Plaintiff alleges, as its expert determined, that the fire was caused by the negligent installation of a boiler and enclosure, which was allegedly installed by defendant Hastings & Company, Inc. pursuant to a contract between Bowditch and Hastings in 1997 or 1998. In 1999, Ackner Fuels, Inc. entered into an asset purchase agreement with Hastings, whereby Ackner purchased certain assets and assumed certain liabilities of Hastings. Thereafter, in 2007, defendant Main Brothers Oil Company acquired all of the stock of Ackner pursuant to a stock purchase agreement.

In December 2010, plaintiff commenced this action against Hastings and Main Brothers, alleging negligence on the part of Hastings and that Main Brothers was liable as the successor in interest to Hastings. Main Brothers answered and asserted a cross claim against Hastings for indemnification. Plaintiff thereafter agreed to discontinue its direct claim against Hastings and moved for leave to amend its complaint to assert direct liability against Main Brothers based on Main Brothers' own alleged negligence in failing to discover and/or correct the defect while servicing the boiler in the years leading up to the fire.¹ Main Brothers cross-moved pursuant to CPLR 3211 to dismiss plaintiff's complaint against it, alleging that the 1999 asset purchase agreement between Hastings and Ackner (hereinafter the asset purchase agreement) precluded successor liability as a matter of law ( seeCPLR 3211 [a][1], [7] ). Supreme Court granted plaintiff's motion to amend and denied Main Brothers' cross motion, prompting this appeal by Main Brothers challenging the denial of its cross motion to dismiss the claim against it based on successor liability.²

“A ‘motion to dismiss on the ground that the action is barred by documentary evidence ... may be appropriately granted only where the documentary evidence utterly refutes [the] plaintiff's factual allegations, conclusively establishing a defense as a matter of law’ ” ( Mason v. First Cent. Natl. Life Ins. Co. of N.Y., 86 A.D.3d 854, 855, 927 N.Y.S.2d 694 [2011], quoting Goshen v. Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314, 326, 746 N.Y.S.2d 858, 774 N.E.2d 1190 [2002] [citation omitted]; see Kilmer v. Miller, 96 A.D.3d 1133, 1135, 946 N.Y.S.2d 288 [2012],lv. dismissed19 N.Y.3d 1042, 954 N.Y.S.2d 4, 978 N.E.2d 596 [2012] ). We agree with Supreme Court that the documentary evidence relied upon—the asset purchase agreement ³—is insufficient in and of itself to bar plaintiff's claims and, thus, we now affirm.

Main Brothers argues that the asset purchase agreement is sufficient documentary evidence establishing that no successor liability existed, as it clearly delineatesthe only assets and liabilities that were assumed by Ackner from Hastings. It is the general rule that “[a] corporation which acquires the assets of another is not generally liable for the torts of its predecessor” ( Wensing v. Paris Indus.-N.Y., 158 A.D.2d 164, 166, 558 N.Y.S.2d 692 [1990];see Schumacher v. Richards Shear Co., 59 N.Y.2d 239, 244–245, 464 N.Y.S.2d 437, 451 N.E.2d 195 [1983] ). However, this rule is subject to several exceptions, namely that “[a] corporation may be held liable for the torts of its predecessor if (1) it expressly or impliedly assumed the predecessor's tort liability, (2) there was a consolidation or merger of seller and purchaser, (3) the purchasing corporation was a mere continuation of the selling corporation, or (4) the transaction is entered into fraudulently to escape such obligations” ( Schumacher v. Richards Shear Co., 59 N.Y.2d at 245, 464 N.Y.S.2d 437, 451 N.E.2d 195;see Semenetz v. Sherling & Walden, Inc., 7 N.Y.3d 194, 198, 818 N.Y.S.2d 819, 851 N.E.2d 1170 [2006] ).

Main Brothers correctly asserts that the third exception, “mere continuation,” cannot apply because it requires that the selling/predecessor corporation be fully extinguished for there to be successor liability, and no dispute exists that Hastings continued in business after the transfer of assets to Ackner ( see Schumacher v. Richards Shear Co., 59 N.Y.2d at 245, 464 N.Y.S.2d 437, 451 N.E.2d 195;Andrew Greenberg, Inc. v. Sir–Tech Software, 297 A.D.2d 834, 836, 746 N.Y.S.2d 736 [2002] ). Further, no evidence of fraud exits that would suggest the applicability of the fourth exception. We hold, however, that the asset purchase agreement, in and of itself, does not eliminate the possibility that one of the first two exceptions could apply.

First, the asset purchase agreement does not conclusively establish that Ackner did not expressly or impliedly assume liability for the contract between Bowditch and Hastings. Main Brothers relies on language in Article I, which states that “[o]nly those assets of HASTINGS which pertain to the sale of petroleum products and the sale and servicing of burners are included in this Agreement,” and the “ASSUMED LIABILITIES” section of Article II, which lists certain assumed liabilities and does not include any express language assuming liability for the past acts of Hastings. While this language certainly suggests that Ackner may not have assumed liability for past acts of negligence related to the installation of a boiler, we agree with plaintiff that other aspects of the asset purchase agreement render it ambiguous, precluding a finding as a matter of law. For example, the list of assets transferred comprehensively includes “[a]ll contracts and other agreements which have been entered into in the ordinary course of business consistent with past practice to which HASTINGS is bound.” Further, under “ASSUMED LIABILITIES,” the asset purchase agreement states that “ACKNER will assume all pre-paid fuel oil contracts (also known as customer deposits) and heating equipment service contracts as set forth in Schedule F,” but no schedule F is attached in the record. Hence, we find that the asset purchase agreement contains ambiguities that are subject to conflicting interpretations, rendering dismissal based on documentary evidence inappropriate ( see Thomas A. Sbarra Real Estate, Inc. v. Lavelle–Tomko, 84 A.D.3d 1570, 1571, 921 N.Y.S.2d 919 [2011];Angelino v. Michael Freedus,...