Stewart v. Telex Communications, Inc.

• Decision Date: 22 November 1991
• Court: California Court of Appeals Court of Appeals
• Parties: , Prod.Liab.Rep. (CCH) P 13,129 Roger E. STEWART, et al., Plaintiffs and Appellants, v. TELEX COMMUNICATIONS, INC., Defendant and Respondent. C008749.

Page 669

1 Cal.Rptr.2d 669

1 Cal.App.4th 190, Prod.Liab.Rep. (CCH) P 13,129

Roger E. STEWART, et al., Plaintiffs and Appellants, v. TELEX COMMUNICATIONS, INC., Defendant and Respondent.

C008749.

Court of Appeal, Third District, California.

Nov. 22, 1991.

Review Denied Feb. 20, 1992.

Thorsnes, Bartolotta, McGuire & Padilla, Michael D. Padilla, R. Christian Hulburt and Daral Mazzarella, San Diego, for plaintiffs and appellants.

Weintraub, Genshlea, Hardy, Erich & Brown, Thomas C. Richards and Charles E. Bauer, Sacramento, for defendant and respondent.

SPARKS, Associate Justice.

Plaintiff Roger E. Stewart was horribly burned when the antenna he was installing on a roof came into contact with a high voltage wire, sending a surge of electricity through his body. In this action for strict liability, the plaintiff and his wife, Lora, claim the antenna was defectively insulated and failed to carry an adequate warning. But the manufacturer of the offending antenna had long since declared bankruptcy and gone out of business. The defendant, Telex Communications, Inc. (Telex), purchased most of the bankrupt manufacturer's assets from the trustee in bankruptcy. The question on appeal is whether the defendant is subject to liability for plaintiffs' injuries on a "successor corporation" theory. The trial court granted the defendant's motion for summary judgment and dismissed the action because it did not find any successor liability. Because defendant was not a causal factor in the bankruptcy of the manufacturer, we agree that it did not assume any liability for the defective product of the bankrupt manufacturer when it purchased the assets from the trustee. We shall therefore affirm.

I Summary Judgment Motion

"Since a summary judgment motion raises only questions of law regarding the construction and effect of the supporting and opposing papers, we independently review them on appeal, applying the same three-step analysis required of the trial court. First, we identify the issues framed by the pleadings since it is these allegations to which the motion must respond by establishing a complete defense or otherwise showing there is no factual basis for relief on any theory reasonably contemplated by the opponent's pleading.... [p] [Second], we determine whether the moving party's showing has established facts which negate the opponent's claim and justify a judgment in [the] movant's favor.... [p] When a summary judgment motion prima facie justifies a judgment, the third and final step is to determine whether the opposition demonstrates the existence of a triable, material factual issue.... A sufficient motion cannot be successfully resisted by counterdeclarations which create immaterial factual conflicts outside the scope of the pleadings; counterdeclarations are no substitute for amended pleadings." (AARTS Productions, Inc. v. Crocker National Bank (1986) 179 Cal.App.3d 1061, 1064-1065, 225 Cal.Rptr. 203 [citations omitted].) Because the facts are not disputed, we need only briefly recount the allegations of the complaint and the showing made in the motion for summary judgment.

A.

The allegations material to this appeal are minimal. ¹ This action, as noted, arose from severe personal injuries suffered by plaintiff on July 27, 1984, while erecting an antenna for a citizen's band radio on a friend's roof. The antenna inadvertently came into contact with an overhead power line, allowing high-voltage electricity to course through him and burn him. The antenna had been manufactured by Hy-Gain Electronics Corp. (Hy-Gain). In connection with their strict liability theory of tort liability (containing the sole allegations relevant to defendant Telex), the plaintiffs alleged, "defendant Hy-Gain Electronics Corp. ... prior to April 20, 1978, was engaged in the business of manufacturing, designing, assembling, inspecting, packaging and distributing C.B. antennae[ ] for sale to the general public, including the particular Hy-Gain Model 500 referred to herein." At all times prior to the accident, Hy-Gain Electronics Corp. "knew of the high probability and intended that its antennae, including the Model 500, would be purchased, used and installed by members of the general public without inspection for defects." On or about April 20, 1978, "defendant TELEX ... purchased all [Hy-Gain Electronics Corp.'s] assets and thereby acquired, among other things, the manufacturer's plant, equipment, fixtures, inventory, trade name, goodwill[,] and customer lists, and since that date ha[s] continued to manufacture and sell C.B. antennae to the general public." The plaintiffs further alleged the Hy-Gain Model 500 antenna was defective in design and manufacture because it had "no or insufficient insulation against electric current and shock" and because it had inadequate warnings of its "extreme and dangerous electric conductivity." As a result, when Mr. Stewart was installing the antenna in a foreseeable and intended manner, he was injured as a "direct and proximate result of the defects ... described [above]...." Mrs. Stewart appended a cause of action for loss of consortium. In its answer, defendant denied all of these allegations.

B.

The defendant had originally moved for summary judgment in 1989. The court ultimately denied the motion without prejudice because it found a triable issue of material fact as to who manufactured the antenna and because it believed the facts were sufficiently similar to Ray v. Alad Corp. (1977) 19 Cal.3d 22, 136 Cal.Rptr. 574, 560 P.2d 3, to come within Alad 's announced special exception to the general rule against imposition upon a successor corporation of its predecessor's liabilities. (Id. at p. 30, 136 Cal.Rptr. 574, 560 P.2d 3.) In the trial court's view, "those similarities essentially are that there is no remedy for the Plaintiff against the predecessor. The successor does have the ability to spread this risk and the successor has been in fact utilizing the goodwill and reputation of the predecessor."

The defendant renewed its motion for summary judgment in 1990. As part of that motion, defendant filed its separate statement of undisputed material facts. (Code Civ.Proc., § 437c, subd. (b).) In their response to this statement of undisputed facts, plaintiffs agreed it was undisputed that the particular antenna involved in the accident was manufactured and sold by Hy-Gain before 1976; that Hy-Gain petitioned for bankruptcy; and that the defendant had purchased some of Hy-Gain's assets, including antennas, from the trustee in bankruptcy in a subsequent bankruptcy sale.

In their responding statement, plaintiffs also set forth "additional disputed and undisputed material facts." ² These facts showed that plaintiff Roger Stewart was injured while installing a Model 500 Penetrator antenna and that Hy-Gain manufactured that model. They further revealed that defendant made the following purchases of assets previously owned by Hy-Gain: (1) several manufacturing facilities, including the main facility in Lincoln, Nebraska, as well as two hangar facilities there, and two facilities in Puerto Rico; (2) all of its manufacturing equipment, machinery, tools and tooling, including those specifically relating to the manufacture of antennas; (3) all of its inventory, including raw materials, semi-finished goods and finished goods, with the exception of certain radios; (4) all of its manufacturing designs, plans, blueprints, engraving and drawings, including those relating to the antennas and specifically including the Model 500 Penetrator antenna; (5) its ownership interest in offices, including the office furniture, furnishings, equipment and fixtures, with the exception of the furniture and fixtures in the main corporate office; (6) all of its patents, patents pending, trademarks, and trade names, including those relating to antennas and the Model 500 Penetrator antenna; (7) all of its customer lists; and (8) all of its sales orders and its cost records, production records and similar books and records for the purpose of determining and evaluating price and production. In addition to these purchases, defendant also "employed Hy-Gain's personnel, including management and factory personnel to continue in the manufacturing operations at Hy-Gain's facilities." In addition, defendant created a Hy-Gain Division and continued using the Hy-Gain trademark in manufacturing and selling antennas, specifically including the Model 500 Penetrator. Finally, defendant "manufactured and sold through its Telex/Hy-Gain Division a Model 500 Penetrator antenna identical to that manufactured by Hy-Gain."

In its order granting the defendant's motion for summary judgment, the trial court held that the Alad exception applied only where the successor's acquisition of assets is the cause of the extinction of the plaintiffs' remedies against the predecessor. Since it was the bankruptcy of Hy-Gain which had destroyed the present plaintiffs' remedy against it, and not the purchase by defendant of the bankrupt's assets, defendant was without liability.

II Liability of Successor Corporation

We turn to the legal question of whether defendant Telex is entitled to summary judgment on these facts. The logical springboard of our analysis is the decision in Ray v. Alad Corp., supra, 19 Cal.3d 22, 136 Cal.Rptr. 574, 560 P.2d 3. As a treatise explains it, "[a]lthough an entity is not involved in the design, manufacture, assembly, marketing or distribution of a product, under a special exception judicially created by the California Supreme Court [in Alad ], it is possible for that entity to be held strictly liable in tort for a defect in a product." (Brisbois, Cal. Products Liability (1985) § 41, p. 50.) In Alad, "prior to plaintiff's injury [Alad II] succeeded to the business of [Alad I] through a purchase of Alad I's assets for an adequate cash consideration. Upon acquiring Alad I's plant, equipment, inventory, trade name, and good will, Alad II...