Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

PHILADELPHIA ELEC. CO. v. HERCULES

February 22, 1984

PHILADELPHIA ELECTRIC COMPANY
v.
HERCULES, INCORPORATED and Gould, Inc.



The opinion of the court was delivered by: MCGLYNN

 McGLYNN, District Judge.

 In April of 1980 the Commonwealth of Pennsylvania, Department of Environmental Resources, (DER), discovered a hydrocarbon resinous material, which it deemed to be a pollutant, on property owned by Philadelphia Electric Company, (PECO), in Chester, Pennsylvania, (Chester Site). The DER required PECO to remove this resinous material from the property and the banks of the Delaware River. *fn1"

 In February of 1982, PECO brought this suit claiming negligence, private nuisance and public nuisance against Hercules Incorporated, (Hercules), on the ground that Hercules' predecessor in interest, Pennsylvania Industrial Chemical Corporation, (PICCO), had caused the contamination during its operation of a petrochemical plant at the Chester Site in the period from 1945 to 1971. Since PICCO had sold the property to Gould, Inc., (Gould), in 1971, who thereafter sold to PECO in 1974, PECO's complaint also included claims of nuisance, deceit and/or misrepresentation against Gould, on the ground that Gould contributed to the contamination and/or knew of the contamination but did not disclose this condition when it sold the property to PECO in 1974. *fn2" Both Hercules and Gould denied the claims of PECO and cross-claimed against each other. Jurisdiction of the case was based upon diversity of citizenship between the parties. See 28 U.S.C. § 1332 (West Supp.1983). After a five day trial, the jury returned a verdict in favor of PECO, *fn3" and in favor of Gould on the cross-claims.

 Presently before the court are Hercules' motions for judgment notwithstanding the verdict, pursuant to Fed.R.Civ.P. 50(b), and, in the alternative, for a new trial, pursuant to Fed.R.Civ.P. 59. Generally, a jury's verdict may be set aside only if manifest injustice will result if it were allowed to stand. The court may not substitute its own judgment for that of the jury merely because the court may have reached a different conclusion. To grant a motion for judgment n.o.v., the court must find, as a matter of law, that the plaintiff failed to adduce sufficient facts to justify the verdict. Neville Chemical Co., v. Union Carbide Corp., 422 F.2d 1205, 1210 (3d Cir.1970), cert. denied, 400 U.S. 826, 91 S. Ct. 51, 27 L. Ed. 2d 55 (1970).

 However, a motion for a new trial, unlike a motion for a judgment n.o.v., does not seek a final judgment but another trial. Thus, a motion for a new trial is within the sound discretion of the trial judge and should be granted only when the verdict is palpably contrary to the clear weight of the evidence or when a miscarriage of justice has occurred. Lind v. Schenley Industries, Inc., 278 F.2d 79, 88-89 (3d Cir.1960), cert. denied, 364 U.S. 835, 81 S. Ct. 58, 5 L. Ed. 2d 60 (1960); J. Moore & J. Wicker, 6A Moore's Federal Practice para. 59.08 (2d ed. 1983). For the reasons set forth herein, Hercules' motions will be denied.

 I. CORPORATE SUCCESSOR LIABILITY

 Hercules' first argument is that the court erroneously denied its motion for summary judgment on the issue of corporate successor liability. The inquiry regarding corporate successor liability commences with Pennsylvania law, for it controls the outcome of this diversity suit. Erie Railroad Company v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938).

 The general rule in Pennsylvania is that when one corporation merely sells or transfers all of its assets to a successor corporation, 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, 176 (1975). There are, however, certain exceptions to this rule. Liability for obligations of a selling corporation may be imposed on the purchasing corporation when: (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 Shane v. Hobam, Incorporated, 332 F. Supp. 526, 527 (E.D.Pa.1971). 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., Div. of Harris-Int. Corp., 109 N.J. Super. 555, 264 A.2d 98 (1970). Additionally, Pennsylvania has recently adopted a product-line exception. Dawejko v. Jorgensen Steel Co., 290 Pa.Super. 15, 434 A.2d 106, 111 (1981); Amader v. Pittsburgh Corning Corp., 546 F. Supp. 1033 (E.D.Pa.1982).

 In order to determine whether the sale of assets in this case falls within one of the six exceptions to the general rule of nonliability it will be necessary to examine the circumstances of the sale of PICCO assets. It is clear that if one of these exceptions apply, Hercules can be held liable for the acts of its predecessor in interest. *fn4" Shane, 332 F. Supp. at 527.

 The contract of sale between Hercules and PICCO is entitled an Agreement and Plan of Reorganization (Agreement). After setting forth the warranties of the respective corporations, the Agreement provides in Article IV § 4.1 that PICCO was to convey:

 
all of its properties and assets of every kind and description as a going concern together with but not limited to cash, monies on deposit, goodwill, including the right to use of the name PICCO, customer lists, credit and sales records and all other interests to which it has any right by ownership, use or otherwise . . . *fn5" and] . . .
 
(ii) The assumption by Hercules of any and all obligations and liabilities of PICCO under the various agreements, contracts, leases, licenses and other writing referred to in Article I herein, including those specifically excepted from the representations in Article I; and
 
(iii) The assumption by Hercules of all the debts, obligations and liabilities of PICCO as of the Closing Date, excepting therefrom the liabilities arising out of the breach of any warranty of PICCO contained herein, in any certificate or other instrument furnished hereunder, any misrepresentation by PICCO herein, or the failure of PICCO to perform under any of its agreements and contracts herein, and except liabilities of PICCO set forth in subsection (iv) for which cash is specifically reserved herein.

 In light of the exceptions to nonliability for a corporate purchaser of assets, the threshold question which this court must address is whether Hercules either expressly or impliedly assumed the instant liability when it entered into this contract with PICCO.

 A buyer of assets can avoid the implied assumption of liabilities by enumerating liabilities assumed and explicitly excluding the assumption of liabilities not enumerated. Kloberdanz v. Joy Manufacturing Co., 288 F. Supp. 817, 822 (D.Col.1968); cf. Menacho v. Adamson United Co., 420 F. Supp. 128, 133 (D.N.J.1976), citing McKee v. Harris Seybold Co., Div. of Harris-Int. Corp., 109 N.J.Super. 555, 563, 264 A.2d 98, 102 (Super Ct.1970), aff'd 118 N.J.Super. 480, 288 A.2d 585 (Super Ct.App.Div.1972). In the instant contract. However, Hercules broadly assumed all of PICCO's liabilities with certain limited exceptions. Therefore, unless one of the exceptions apply, Hercules can be held to have assumed the liability at issue.

 Citing Neville Chemical Co. v. Union Carbide Corporation, 422 F.2d 1205 (3d Cir.1970) and Husak v. Berkel, Incorporated, 234 Pa.Super. 452, 341 A.2d 174 (1975), Hercules maintains, however, that the law of Pennsylvania supports the proposition that assumptions of liability are to be strictly construed in favor of nonliability. I do not agree.

 In Neville, the plaintiff, a manufacturer of hydrocarbon resins, brought an action against the defendant, a petrochemical company, on the basis of negligence and breach of express and implied warranties for its failure to notify plaintiff of changes made in its process of manufacturing unsaturated oil for plaintiff, where such changes caused plaintiff's final product to give off an intolerable odor. Having concluded that there was sufficient evidence to uphold the jury's verdict that the defendant was negligent, the Neville court was faced with the question of whether the contract which the parties entered into insulated the defendant from liability for its own negligence. *fn6" Id. at 1216. (emphasis added). In finding that the contract clause did not exculpate the defendant from liability for its own negligence the Neville court held that while the general law of Pennsylvania is that a private party may validly contract to relieve himself from liability for the consequences of its own negligent acts, these contracts are not favored by the law and will be strictly construed with every doubt resolved against the party seeking their protection. Id. at 1221.

 Likewise, Hercules' reliance on Husak v. Berkel, Incorporated, 234 Pa.Super. 452, 341 A.2d 174 (1975), is misplaced. In Husak the plaintiff brought suit against Berkel seeking damages for personal injuries he sustained from a defective food grinding machine which plaintiff alleged Berkel's predecessor company had manufactured. Berkel, in turn, joined SCM as an additional defendant claiming that SCM not Berkel had succeeded to the liabilities of the manufacturer of the defective food grinding machine. 341 A.2d at 176. SCM moved for summary judgment on the basis of corporate successor liability. The facts which were established with respect to this issue demonstrated that SCM was indeed the successor to the manufacturer of the defective machine. Id. Nonetheless, SCM argued that Berkel's predecessor had assumed the liability for the injury when it purchased the assets and liabilities of the division of the company which had manufactured the defective machine. *fn7" On the basis of these facts the lower court granted SCM's summary judgment motion. On appeal, the Superior Court of Pennsylvania determined that although SCM would ordinarily be held liable on these claims as the successor of the company which manufactured the machine the question was whether, in light of the contract clause, Berkel's predecessor had assumed the liability for the instant injury. Id. 341 A.2d at 177. In reversing the trial court's award of summary judgment, the court found that the disputed contractual clause lacked sufficient precision to meet the standards required to relieve SCM, as a matter of law, from liability for negligence or strict liability in connection with the production of a defective machine manufactured by its predecessor. Id. 341 A.2d at 178.

 In both Neville and Husak the court strictly construed a contract where one party to the contract sought to insulate itself from liability for its own negligent acts. This is not the situation before the court today, however, and therefore neither of these cases are controlling here. Thus the only question is whether one of the exceptions to Hercules' broad assumption of liability applies.

 The gravamen of Hercules' claim of nonliability as the successor of PICCO is that PICCO breached its warranty regarding the accuracy of its financial statements when it failed to include the instant liability on its balance sheet at the time of closing. However, this liability was unknown at the time of sale and, therefore, could not have been reflected in any financial statement. Nonetheless, Hercules argues that its contract with PICCO was very clear in this regard and because the instant liability was not disclosed, it was not assumed.

 Bouton v. Litton Industries, Inc., 423 F.2d 643 (3d Cir.1970) is instructive on this issue. In Bouton the selling corporation, McKiernan-Terry, (M-T), entered into an agreement and plan of reorganization in September of 1962 with Litton Industries, Inc., (Litton), wherein Litton acquired all the assets, business and goodwill of M-T in exchange for Litton stock and the assumption by Litton of certain M-T liabilities. Id. at 645. Plaintiffs, trustees in liquidation of M-T, brought a motion for summary judgment against Litton arguing that Litton was obligated, by contract, to assume the defense of certain actions brought against M-T and to pay any judgments arising therefrom. Id. at 646. The disputed action, which is pertinent to the instant case, involved two personal injury claims which arose out of accidents ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.