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JACOBS v. LAKEWOOD AIRCRAFT SERV.

April 3, 1981

Winifred M. JACOBS, Executrix of the Estate of Gerald Jon Jacobs, Deceased,
v.
LAKEWOOD AIRCRAFT SERVICE, INC., Beryl D'Shannon Aviation Specialties, Inc. and Flight Extenders, Inc. Winifred M. JACOBS, Executrix of the Estate of Gerald Jon Jacobs, Deceased, v. FLIGHT EXTENDERS, INC. v. LAKEWOOD AIRCRAFT SERVICE, INC.



The opinion of the court was delivered by: LORD

I. Preliminary Statement

In this products liability case, defendant Flight Extenders, Inc., a California corporation ("the California Corporation"), seeks summary judgment. Its motion implicates two developing theories: the liability of a successor corporation for torts committed by its predecessor corporation, see Woody v. Combustion Engineering, Inc., 463 F. Supp. 817, 820 (E.D.Tenn.1978); and the liability of a successor corporation for breach of its duty to warn of recently discovered defects in its predecessor's products, see Wilson v. Fare Well Corp., 140 N.J.Super. 476, 492-93, 356 A.2d 458, 467-68 (L.Div.1976). For the reasons that follow, I shall grant this motion.

 II. Facts

 Plaintiff's decedent was killed on March 24, 1978 when his Bonanza airplane crashed in Pennsylvania. Plaintiff alleges that this crash was caused by, inter alia, a defective wing tip tank fuel system which had been designed, manufactured, and sold by Flight Extenders, Inc., a Connecticut corporation ("the Connecticut corporation").

 Plaintiff did not sue the Connecticut corporation because it ceased operations in 1966. Rather, plaintiff sued the California corporation which had purchased some of the Connecticut corporation's assets. Although these two corporations were separate companies which existed at different times, plaintiff contends that the transferee corporation is liable for the injuries caused by defective products manufactured by its transferor. Resolution of this issue depends upon the nature of the contacts between the two corporations. I must therefore detail their respective corporate histories.

 The Connecticut corporation was incorporated in 1960 in Stamford, Connecticut. Ronald Bamber was its president and primary stockholder; the other stockholders were his wife and two sisters-in-law. Bamber maintained the only corporate office in Stamford. This corporation manufactured and sold tip tank systems for use on various models of the Beechcraft Bonanza airplane. It also manufactured and sold a hot lunch kit called "Flight Maid" for installation in Bonanza airplanes. There were two or three employees throughout the company's lifetime.

 The Connecticut corporation ceased all operations in April of 1966. All of its physical assets remained in Stamford. There were no outstanding liabilities or debts, and there were no accounts receivable. Nor were there any outstanding unfilled orders from purchasers.

 In July, 1968, Bamber sold some of the dormant corporation's assets to one Robert Matheson. These assets included, inter alia, tools, molds, design drawings, parts, raw materials, placards, manuals, and other documents relating to the fifteen gallon tip tank system. Bamber also sold the use of the name "Flight Extenders," along with the good will attached thereto. Matheson did not receive any customer lists nor did he buy any assets relating to the hot lunch kit. Bamber agreed not to initiate any business involving the manufacture of tip tank systems for Bonanza airplanes. However, Bamber was not obligated to change the name of his corporation or to dissolve it. Bamber had no further involvement with his corporation after the sale; ultimately he discarded all his stock. The Connecticut corporation never resumed operations after this sale to Matheson.

 Matheson paid $ 18,000 for these assets. This was a reasonable consideration. Matheson received no stock in the Connecticut corporation; nor did Bamber receive stock in any Matheson corporation.

 Matheson then formed Flight Extenders, Inc., a California corporation (the defendant here), in August or September of 1968. On September 16, 1968, he sold the assets that he had bought from Bamber to this newly formed corporation in exchange for 200 shares of its common stock. None of the officers, directors, or shareholders of the Connecticut corporation became officers, directors, or shareholders of the California corporation.

 The California corporation could not start manufacturing and selling operations immediately, however. In order to set up a manufacturing facility, Matheson had to get necessary tools, machines, and equipment, including, inter alia, a compressor, a booth for spraying, a heater, and other spraying devices. He also had to redraft the blueprints which he received from the Connecticut corporation since they were illegible and wrinkled. Moreover, he developed a new operating procedures manual and he revised Bamber's tip tank installation instructions. In addition, he had to buy the necessary raw materials because, although the Connecticut corporation had some remaining, they were too old and heavy and therefore Matheson had not shipped them from Connecticut to California. Matheson also had to buy fuel selector valves since Bamber did not have any on hand when Matheson came to pick up the assets. Consequently this was a "slow time" because of the need to set up the necessary manufacturing facilities and processes.

 The California corporation also needed to get product manufacturing authority from the Federal Aviation Authority so that it could manufacture and sell the tip tank system. The company ultimately received this authority and began manufacturing and selling the systems. These tip tank systems were slightly different from the ones that the Connecticut corporation had manufactured and sold.

 The California corporation sold only five to ten of these systems before it ceased operations and warehoused all its physical assets in January, 1970. The California corporation remained dormant until May, 1972 when its corporate shell was reactivated as the mail hauling company that it is today. It sold all its assets used in connection with the manufacture and sale of the tip tank system in May, 1973.

 The tip tank system which was part of the airplane involved in this case was not designed, manufactured, sold, assembled, installed, or serviced by the California corporation. Moreover, the California corporation did not know of the owners of this particular tip tank system.

 III. Discussion

 A. Corporate successor ...


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