No. 1082 October Term, 1979, Appeal from the Judgment of the Court of Common Pleas of Philadelphia County, Trial Division, Law, No. 5426 July Term 1974.
Charles W. Craven, Philadelphia, for appellants.
Robert M. Ross, Philadelphia, for appellees.
Spaeth, Brosky and Hoffman, JJ.
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Appellee Edmund Dawejko was injured on August 2, 1972, when he was struck by sheets of steel that were accidentally
[ 290 Pa. Super. Page 18]
dropped from a lifting machine called a "Mansaver." The "Mansaver" was manufactured by Mansaver Industries, Inc., of New Haven, Connecticut, in 1957 and was sold, through a broker, to Hotpack Corporation, appellee's employer. In 1964, Mansaver Industries, Inc., sold its assets to American Chain and Cable Company, also known as ACCO, and subsequently ceased operations. ACCO formed a subdivision called Mansaver Industries, Inc., a Division of ACCO. The issue we must decide is whether appellees may recover against ACCO on principles of strict tort liability. We hold that they may recover.
The general rule is that when one company sells or transfers all of its assets to a successor company, the successor does not acquire the liabilities of the transferor corporation merely because of its succession to the transferor's assets. Husak v. Berkel Incorporated, 234 Pa. Super. 452, 341 A.2d 174 (1975). See also Knapp v. North American Rockwell Corp., 506 F.2d 361 (3d Cir. 1974) cert. denied, North American Rockwell Corp. v. Knapp, 421 U.S. 965, 95 S.Ct. 1955, 44 L.Ed.2d 452 (1975). However, there are several exceptions to this general rule:
In order to find that this general rule is not applicable and that the transferee does acquire such liability, one of the following must be shown: (1) the purchaser expressly or impliedly agrees to assume such obligation; (2) the transaction amounts to a consolidation or merger; (3) the purchasing corporation is merely a continuation of the selling corporation; or (4) the transaction is fraudulently entered into to escape liability. See Granthum v. Textile Machine Works, 230 Pa. Super. 199, 326 A.2d 449 (1974). A fifth circumstance, sometimes included as an exception to the general rule, is where the transfer was without adequate consideration and provisions were not made for creditors of the transferor. See Lopata v. Bemis Co., Inc., 383 F.Supp. 342 (E.D.Pa.1974); McKee v. Harris-Seybold Co., Division of Harris-Intertype Corp., 109 N.J.Super. 555, 264 A.2d 98 (1970); 19 Am.Jur.2d Corporations § 1546
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(1965); 15 W. Fletcher, Cyclopedia of Corporations § 7122 (Perm. ed. 1973).
Husak v. Berkel Incorporated, supra, 234 Pa. Super. at 456-57, 341 A.2d at 176-77.
See also Caberera v. Hayes-Albion Corp., C.A. No. 80-3108 (E.D.Pa. Feb. 10, 1981); Woody v. Combustion Engineering, Inc., 463 F.Supp. 817, 820 (E.D.Tenn.1978).
Sometimes in cases of strict tort liability the general rule seems to lead to an unjust result. consequently, a tendency has developed either to expand one of the recognized exceptions to the rule or to add a new exception, so that the successor corporation will be strictly liable for a defective product manufactured by the predecessor corporation.
Traditionally, a case has been held within the "continuation" exception only when there is a common identity of officers, directors and stock between the selling and purchasing corporations, and only one corporation after the transfer. See Jacobs v. Lakewood Aircraft Service, Inc., et al., F.2d (3d Cir., filed April 3, 1981); Lopata v. Bemis Co., 383 F.Supp., 342 (E.D.Pa.1974), vac. and remanded, 517 F.2d 1398 (3d Cir.), judgment reinstated, 406 F.Supp. 521 (E.D.Pa.1975); Kloberdanz v. Joy Manufacturing Co., 288 F.Supp. 817, 821 (D.Colo.1968); Wilson v. Fare Well Corp., 140 N.J.Super. 476, 356 A.2d 458 (L.Div.1976). However, in some recent decisions, a "continuation" has been defined more broadly, the emphasis being shifted from corporate formalities to an inquiry regarding the nature of the business operations.
In Cyr v. B. Offen & Co., Inc., 501 F.2d 1145 (1st Cir.1974), several employees and a financial backer had purchased the assets of a predecessor corporation after its owner died. According to the court this was a transfer in which "facial and substantive continuity were the essence of the bargain." 501 F.2d at 1152.
The purchase of good will and contract obligations was central to the agreement. Old service obligations were assumed by the purchaser and B. Offen & Co., Inc. [successor] continued to service and renovate old dryers. No
[ 290 Pa. Super. Page 20]
notice was given to known customers of B. Offen Company [predecessor] that a new or different business was beginning. B. Offen & Co., Inc. advertised itself as an ongoing enterprise, and even claimed in its advertising that it was a forty year old business. It continued to produce the same kind of product in ...