Young v. Fulton Iron Works Co.

• Decision Date: 28 April 1986
• Docket Number: No. 14042,14042
• Citation: 709 S.W.2d 927
• Parties: Prod.Liab.Rep. (CCH) P 11,053 Steven Lee YOUNG and Tammy Young, Appellants, v. FULTON IRON WORKS COMPANY, Respondent.
• Court: Missouri Court of Appeals

Page 927

709 S.W.2d 927

Prod.Liab.Rep. (CCH) P 11,053

Steven Lee YOUNG and Tammy Young, Appellants, v. FULTON IRON WORKS COMPANY, Respondent.

No. 14042.

Missouri Court of Appeals,

Southern District,

Division Two.

April 28, 1986.

Motion for Rehearing or Transfer

Denied May 20, 1986.

Application to Transfer Denied June 17, 1986.

Thomas Strong, John Wooddell, Strong, Placzek & Wooddell, P.C., Springfield, for appellants.

B.H. Clampett, Charles F. Kiefer, Jr., Daniel, Clampett, Rittershouse, Lilley, Dalton, Powell & Cunningham, Springfield, for respondent.

CROW, Judge.

The issue in this appeal is whether Fulton Iron Works Company ("Fulton") is immune from liability for an injury that occurred when a mechanical press manufactured by Ferracute Machine Company ("Ferracute") allegedly "malfunctioned," causing Steven Lee Young ("Steven") to suffer amputation of his right arm below the elbow. Steven and his wife, Tammy, sued Fulton, claiming that Steven's injury was a direct and proximate result of "the defective and unreasonably dangerous condition" of the press, and that Fulton was liable because it "is the corporate successor in interest" to Ferracute.

The trial court, on the basis of the pleadings, stipulations, and discovery, found that Fulton is not the corporate successor in interest to Ferracute, and granted summary judgment in favor of Fulton. The Youngs ("plaintiffs") appeal.

The pertinent facts, as best we are able to glean them from the record furnished us, are set out in chronological sequence.

Ferracute, a New Jersey corporation, began manufacturing mechanical presses in 1903. The press involved in this litigation was manufactured in Bridgeton, New Jersey, in 1926 and, on October 20 of that year, was shipped to Burroughs Adding Machine Company ("Burroughs"), Detroit, Michigan. The press is hereafter referred to by its serial number, 17140.

Although the details are sketchy, it appears that Ferracute became insolvent in the 1930's and "went out of business." A group of investors headed by one George Bass evidently formed a corporation, chartered by New Jersey on July 30, 1937, which was allowed to carry the Ferracute name. The new Ferracute corporation "purchased the assets" of the original Ferracute corporation "from a bankruptcy court in Atlantic City," and commenced business on August 4, 1937, manufacturing mechanical presses bearing the Ferracute name.

Around 1960, Ferracute acquired the assets of A.B. Farquhar Company, which had been "in the hydraulic press business." Ferracute then began manufacturing hydraulic presses, using the trade name "Farquhar" for them. Ferracute continued to manufacture mechanical presses labeled with the name "Ferracute."

Press 17140, the one involved in this case, remained the property of Burroughs for over 40 years, then, on January 30, 1967, it was sold to Macamo Casket Company ("Macamo") of Marshfield, Missouri, and shipped there.

In 1968, Fulton, a Delaware corporation which had been "in business" in Missouri since 1852, ¹ and which had been engaged in the manufacture of machinery used in processing sugar cane since 1890, began seeking another product line that could be manufactured in its St. Louis plant. Harold E. Miller ("Miller"), then Fulton's vice president, was assigned the task of finding such a product.

Miller began negotiating with George Bass, president of Ferracute, to purchase the Ferracute mechanical press and the Farquhar hydraulic press lines from Ferracute. The negotiations, "in almost every instance," were conducted at Ferracute's headquarters in Bridgeton, New Jersey.

The discussions culminated in an "asset purchase agreement," signed April 22, 1968, by representatives of Fulton and Ferracute. Miller recalled that the transaction was closed and the necessary documents were executed at a private club in Philadelphia, Pennsylvania, to which Bass belonged.

Assets of Ferracute purchased by Fulton included: (1) the trademarks and trade names "Ferracute" and "Farquhar," and all patents relating to Ferracute or Farquhar presses still in force, (2) engineering drawings, specifications, and details necessary to produce such presses, (3) sales literature, production records, and other Ferracute records as Fulton might select, (4) jigs and fixtures used or usable for the production of Ferracute or Farquhar presses, (5) one completed "Show Press," and (6) the "stores inventory" located at Ferracute's plant at Bridgeton, New Jersey. Additionally, Ferracute and Bass covenanted not to engage in the production or sale of presses for four years, and Ferracute promised to change its corporate name to one that did not include the words "Ferracute," "Farquhar," or "Press."

Assets of Ferracute not purchased by Fulton included: (1) Ferracute's office building, production plant, pattern shop, and about 10 acres of real estate, (2) machine tools such as boring mills, lathes, grinders, and gear-making machinery, and (3) office furniture and equipment.

Additionally, Ferracute was manufacturing a number of presses that were already under contract at the time it entered into the agreement with Fulton. Ferracute retained the right to complete the work in progress, amounting to "about a year's production," totaling "probably five hundred thousand dollars worth of business." Ferracute did not, however, enter into any new contracts to manufacture or sell any more machines after the Fulton transaction.

On April 29, 1968, a week after the asset purchase agreement was signed, Ferracute, with the consent of all of its shareholders, changed its corporate name to Bridgeton Machine Company ("Bridgeton"). The certificate of amendment was filed and recorded May 2, 1968, in the office of the Secretary of State of New Jersey.

In 1967, the year preceding the transaction between Fulton and Ferracute, Ferracute had between 40 and 50 employees. Only one Ferracute employee, a "salesman" who was "familiar mainly with hydraulic presses," transferred from Ferracute to Fulton in connection with the 1968 asset purchase agreement. All other Ferracute employees remained with Ferracute. Bass had no role in Fulton before or after the 1968 transaction, and no member of the Ferracute board of directors became a director of Fulton.

Bridgeton (formerly Ferracute) completed the work in progress, then sold its equipment "to a used machinery dealer from New York." Bridgeton thereafter sold its real estate and buildings, ² and, on May 16, 1969, filed a "certificate of dissolution" with the Secretary of State of New Jersey. Asked why Bridgeton went out of business, Bass replied, "I was sixty five years of age and I couldn't find anybody else to buy the whole thing as it was."

In August, 1971, by virtue of an exchange of shares of Fulton stock for shares of stock in Katy Industries, Inc., Fulton "became a subsidiary" of Katy.

On September 9, 1982, Steven, employed by Macamo as a press operator at its Marshfield, Missouri, plant, was allegedly operating press 17140. According to plaintiffs' petition, the press "cycled unexpectedly," catching Steven's right hand and arm, causing the injury described earlier.

One count of plaintiffs' petition avers that press 17140--manufactured by Ferracute some 56 years before Steven's injury--was, in sundry respects, unreasonably dangerous when put to a reasonably anticipated use. That count, say plaintiffs, pleads "strict liability in tort." Another count pleads that Ferracute, in a multitude of respects, was negligent in the design and manufacture of press 17140.

Plaintiffs, as we read their petition, do not contend that Fulton itself was ever guilty of any tortious act or omission that would render Fulton independently liable for Steven's injury. Instead, plaintiffs' theory of liability against Fulton, as we comprehend their petition and their brief, is that by reason of the 1968 transaction between Fulton and Ferracute, Fulton "is legally responsible for the tortious acts of Ferracute."

Plaintiffs' first assignment of error states:

"The trial court erred in granting [Fulton's] motion for summary judgment (therein holding that Fulton was not liable for the press made by [Ferracute] ) because New Jersey law should be applied to determine Fulton's liability as a corporate successor and, under the established New Jersey rule, Fulton is liable because it continued to manufacture Ferracute's 'product line' of punch presses."

In their brief, plaintiffs concede that Missouri law "will govern the theories of tort liability and recovery." By that, we understand plaintiffs to say that whether press 17140 was unreasonably dangerous, and whether it was negligently designed or manufactured, will be decided under Missouri law. Nonetheless, plaintiffs insist that whether Fulton must shoulder the liability, if any, for Steven's injury is to be determined under New Jersey law. The New Jersey law on that issue, according to plaintiffs, is set forth in Ramirez v. Amsted Industries, Inc., 86 N.J. 332, 431 A.2d 811, 824-25 (1981), where it is said:

"[W]here one corporation acquires all or substantially all the manufacturing assets of another corporation, even if exclusively for cash, and undertakes essentially the same manufacturing operation as the selling corporation, the purchasing corporation is strictly liable for injuries caused by defects in units of the same product line, even if previously manufactured and distributed by the selling corporation or its predecessor."

It is evident that the trial court in the instant case, in entering summary judgment for Fulton, made no finding as to whether plaintiffs could make a submissible case that press 17140 was unreasonably dangerous, or whether plaintiffs could make a submissible case that press 17140 was negligently designed or manufactured. The trial court based its judgment on the narrow ground that, under the pleadings and evidence before it, Fulton could not be held liable for Steven's injury because (a) there...