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BIPPUS v. NORTON CO.

September 15, 1977

LESTER S. BIPPUS and BETTY JANE BIPPUS
v.
THE NORTON COMPANY, DRESSER INDUSTRIES, INC. and PNEUMO CORPORATION, CLEVELAND PNEUMATIC AIR TOOL COMPANY v. REED TOOL COMPANY, BAKER OIL TOOLS OF TEXAS, INC., BAKER OIL TOOLS, INC., BAKER INTERNATIONAL CORPORATION and BURNHAM CORPORATION



The opinion of the court was delivered by: TROUTMAN

 TROUTMAN, J.

 In this products liability action plaintiffs are seeking damages for injuries suffered by Lester Bippus when the grinding wheel exploded on the portable air grinder he was operating. Before the Court are motions for summary judgment by defendants, Dresser Industries, Inc. (Dresser) and Norton Company (Norton), and third-party defendants, Reed Tool Company (Reed), Baker Oil Tools of Texas, Inc. (Baker/Texas), Baker Oil Tools, Inc. (Baker Oil) and Baker International Corporation (Baker International). Without discussing the entire tortuous history of corporate transformations with which this case is concerned, several matters are clear. First, as plaintiffs readily agree, Baker/Texas and Baker Oil are no longer in existence. Furthermore, Baker International is a parent corporation to Reed, and Reed is an ongoing, viable enterprise. Therefore, plaintiffs have agreed to discontinue action against these parties and this Court feels that summary judgment is proper as to them.

 Second, the summary judgment actions of Reed and Dresser are both concerned with the same key issue: when Dresser purchased the portable pneumatic tool business of G. W. Murphy Industries (Murphy), did Dresser assume responsibility for products liability actions that could have arisen against Murphy for tools manufactured prior to the date of sale? If so, then Dresser is not entitled to summary judgment and Reed is; otherwise, the opposite is true. *fn1"

 The key portion of the sales agreement is Section 4.3, which reads in pertinent part as follows:

 As to whether such a provision transfers liability from the selling corporation to the purchasing corporation, the law of Pennsylvania provides that there are four circumstances in which such liability is transferred, namely, when:

 
(1) the purchaser expressly or impliedly agrees to assume such obligations;
 
(2) the transaction amounts to a consolidation or merger of the selling corporation with or into the purchasing corporation;
 
(3) the purchasing corporation is merely a continuation of the selling corporation;
 
(4) the transaction is entered into fraudulently to escape liability for such obligations.

 See Knapp v. North American Rockwell Corporation, 506 F.2d 361 (3d Cir. 1974). In the Knapp case, a sale of assets which required the selling corporation to dissolve "as quickly as possible" was held to transfer liability, in light of social policy considerations with respect to the spreading of burden of the loss.

 In the case at bar, the transfer of liability is only possible under the first condition above, namely that Dresser expressly or impliedly assumed liability for products liability obligations. Bouton v. Litton Industries, Inc., 423 F.2d 643 (3d Cir.1970) involved an agreement of sale. *fn2" In construing the agreement to transfer risk of products liability claims the Court held:

 
"The only facet of the agreement to which Litton can point with even slight comfort in support of its contention that it did not assume the obligation to insure against or pay the product liability claims is the absence of an express reference in the contract to such arising from future accidents. That absence is not significant. The draftsmen ...

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