Stratton v. Garvey Intern., Inc.

• Decision Date: 02 February 1984
• Docket Number: No. 55068,55068
• Parties: Daniel K. STRATTON, Appellant, v. GARVEY INTERNATIONAL, INC., Combustion Engineering, Inc., John T. Borton, Defendants, Borton, Inc., Appellee.
• Court: Kansas Court of Appeals

Page 1290

676 P.2d 1290

9 Kan.App.2d 254

Daniel K. STRATTON, Appellant, v. GARVEY INTERNATIONAL, INC., Combustion Engineering, Inc., John T. Borton, Defendants, Borton, Inc., Appellee.

No. 55068.

Court of Appeals of Kansas.

Feb. 2, 1984.

Syllabus by the Court

1. A cause of action may arise against a manufacturer or seller in either negligence or strict liability for failure to warn of a dangerous condition in a product.

2. Rules relating to the duty of a successor entity to warn of a defect in the product of a predecessor entity are reviewed and applied.

3. The relationship of a successor entity with the customers of a predecessor entity must be more than casual and must have a consequential basis connected with the predecessor entity to establish a duty upon the successor to warn of a defect in the product of the predecessor.

4. In a product liability action against a successor corporation for injuries arising from an alleged defect in a man-lift device installed by a predecessor partnership, the successor's liability shall be determined under the traditional corporate law theory of liability.

5. Generally, when 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 transferor except: (1) where the purchaser expressly or impliedly agrees to assume such debts; (2) where the transaction amounts to a consolidation or merger of the corporation; (3) where the purchaser is merely a continuation of the selling corporation; or (4) where the transaction is entered into fraudulently in order to escape liability for such debts. Following Comstock v. Great Lakes Distribution Co., 209 Kan. 306, 496 P.2d 1308 (1972).

6. The Court of Appeals is duty-bound to follow the law as established by the Supreme Court in the absence of some indication that that Court is departing from its previously expressed position.

7. The common identity of officers and shareholders between the predecessor and successor entities, the employment of the same people to produce the same products in the same factory, the transfer of assets for less than adequate consideration and the transferor's being rendered incapable of paying its creditors because it was dissolved in either fact or law are all elements in determining whether a purchasing corporation is merely a continuation of the selling corporation, but no one element is necessarily decisive nor must all elements necessarily exist together in order to be determinative of the issue.

8. The record is examined and it is held that the trial court did not err in granting summary judgment for the defendant, Borton, Inc.

Broc E. Whitehead of Williamson & Stalcup, Chartered, Wichita, for appellant.

Eric B. Metz of Martin, Pringle, Oliver, Triplett & Wallace, Wichita, for appellee Borton, Inc.

Before REES, P.J., MEYER, J., and RICHARD W. WAHL, District Judge Assigned.

RICHARD W. WAHL, District Judge Assigned.

This is an appeal by Daniel K. Stratton, plaintiff, from the entry of summary judgment in favor of Borton, Inc., defendant, in a product liability case. Judgment was entered pursuant to K.S.A. 60-254(b), and only Stratton and Borton, Inc. are parties to this appeal. Hereafter, Stratton may be called plaintiff and Borton, Inc. may be called defendant.

Plaintiff is a grain inspector for the State of Kansas. On February 16, 1981, he was injured while riding a man-lift device located in a grain elevator in Wichita, Kansas, and owned by Garvey International, Inc. Plaintiff alleged that he lost his balance while riding the man-lift and that his leg was crushed between the lift platform and the ceiling of the floor through which the lift was passing.

The man-lift device was constructed by the predecessor of Combustion Engineering, Inc. It was installed in the elevator in 1953 by a partnership named Chalmers and Borton Contractors and Engineers, which also had constructed the grain elevator. This partnership was formed in 1926 and consisted of Clinton H. Chalmers and John T. Borton.

On August 20, 1960, Chalmers died and the partnership was dissolved through proceedings had in the Probate Court of Reno County, Kansas, entitled In the Matter of the Partnership Estate of C.H. Chalmers, deceased, in Partnership with John T. Borton, Under the Firm Name of Chalmers and Borton, Case No. 3583. A decree of final settlement was entered on August 29, 1963, according to law.

On September 6, 1960, John T. Borton, the surviving partner, completed the formation of Borton, Inc., the defendant. At the time of the incorporation, Borton owned 79.4% of the stock of Borton, Inc., and was its president.

Borton, Inc. assumed no debts or liabilities of the partnership. All assets and liabilities of the Chalmers and Borton Partnership were administered through the partnership estate in the Reno County Probate Court. At the time of the death of Chalmers, there were some nineteen contracts to be completed by the partnership. These contracts were completed by Borton as the surviving partner in cooperation with the partnership estate. All records and books of account for these contracts were kept completely separately from the records of Borton, Inc. Borton, Inc. rented the business office from the partnership estate for a fair and normal rental. Until 1963, that office was also used to conclude the partnership business. Borton, Inc. employed substantially all of the partnership employees, but during the partnership administration two separate payrolls were maintained. At the final settlement of the partnership estate, all partnership assets were distributed in equal shares to John T. Borton and to the estate of Clinton H. Chalmers, deceased.

Ultimately, Borton, Inc. purchased the office building, office equipment, construction equipment, blueprints and designs of the partnership. All assets acquired by Borton, Inc. from the partnership were for full and adequate consideration paid to the partnership estate.

Other than such notices as were necessary through the probate administration of the partnership assets and liabilities, Chalmers and Borton Partnership gave no formal notice to former customers of its dissolution, nor did Borton, Inc. give any notice to the partnership customers that it was engaged in the business of constructing grain elevators. Borton, Inc. at no time nor in any manner held itself out to be a successor to the Chalmers and Borton Partnership business.

Like the partnership, Borton, Inc. did not construct man-lift devices. It constructed grain elevators and installed man-lift devices into them. Neither the partnership nor Borton, Inc. entered into any continuing service or maintenance contracts concerning grain elevators constructed. Borton, Inc. did perform some repair work on elevators constructed by the partnership, including the Garvey International, Inc. elevator in Wichita where the plaintiff's injury occurred. Borton, Inc. did perform some repair work on man-lift devices which had been installed by the partnership, but did not perform any repair or maintenance service on the man-lift upon which the plaintiff was injured. Plaintiff alleges that on two occasions, Borton, Inc. installed "gates" or "safety gates" on man-lift devices which had been installed by the partnership. The record reveals that Borton, Inc. did install some "safety gates" on a man-lift in the elevator at Cimarron, Kansas. No other such installation appears in the record.

Borton resigned his positions as an officer and director of Borton, Inc. on September 2, 1975. On December 2, 1975, he entered into a contract with Borton, Inc. to sell all of his stock to the corporation for $2,665,491.70. Final payment under this contract is to be made on September 30, 1984.

Plaintiff initially filed this action solely against Garvey International, Inc., as the owner of the elevator. By his first amended petition, he named Borton, Inc. as a defendant. A second amended petition set forth a claim against John T. Borton. Plaintiff's claims as alleged against Borton, Inc. were based upon theories of strict liability in tort, negligence and breach of an implied warranty of merchantability and an implied warranty of fitness for a particular purpose. In the trial court, as on appeal, plaintiff placed principal reliance on breach of a duty to warn. Borton, Inc. moved for summary judgment which was granted by the trial court and a final judgment was entered under K.S.A. 60-254(b ).

Plaintiff has appealed, claiming three separate issues in which he alleges the trial court erred. These shall be considered separately and in the order presented in plaintiff's brief.

I. Did the district court err in granting summary judgment to Borton, Inc. on the issue of duty to warn?

Plaintiff asserted that the defendant breached a duty to warn him of a dangerous and hazardous condition in the man-lift device. The trial court rejected this claim and held that, even when construing the facts of this case in the light most favorable to the plaintiff, there were no facts to support this theory. Plaintiff claims that there were factual issues in dispute making the entry of summary judgment on this issue erroneous.

The rules governing summary judgment are well established in this state. Summary judgment is authorized if the pleadings, depositions, answers to interrogatories and affidavits, if any, show that no genuine issue of material fact remains in dispute, and a party is entitled to judgment as a matter of law. McAlister v. Atlantic Richfield Co., 233 Kan. 252, 662 P.2d 1203 (1983); Nordstrom v. Miller, 227 Kan. 59, 605 P.2d 545 (1980); Every v. Jefferson Ins. Co. of N.Y., 4 Kan.App.2d 715, 610 P.2d 645 (1980).

The Kansas Supreme Court has recognized that a cause of action may arise in either negligence or strict liability for failure to warn of a dangerous condition in a product. Mays v. Ciba-Geigy Corp., 233 Kan. 38, 661 P.2d 348 (1983); Jones v....