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Johnson v. Marshall & Huschart Machinery

OPINION FILED NOVEMBER 29, 1978.

IRENE JOHNSON, PLAINTIFF-APPELLANT,

v.

MARSHALL AND HUSCHART MACHINERY CO., DEFENDANT. — V & O PRESS CO., INC., DEFENDANT-APPELLEE.)



APPEAL from the Circuit Court of Cook County; the Hon. ALLEN HARTMAN, Judge, presiding.

MR. PRESIDING JUSTICE JIGANTI DELIVERED THE OPINION OF THE COURT:

The plaintiff, Irene Johnson, appeals from a summary judgment entered by the circuit court of Cook County in favor of the defendant, V & O Press Company, Inc. The plaintiff seeks damages for injuries sustained on July 23, 1974, while operating a punch press manufactured in 1937 by V & O Press Company, Inc. That company ceased to exist in 1938. The issue on appeal is whether a strict liability suit may be maintained against a successor corporation, based on torts committed by its predecessor. Marshall & Huschart Machinery Co., distributor of the press in question, is also a defendant to this suit but is not a party to this appeal.

The defendant based its motion for summary judgment on the fact that it did not manufacture the punch press which injured the plaintiff and that it had not agreed to assume liability for tort claims against its predecessors. The plaintiff appeals from the granting of that motion in favor of the defendant.

The press in question was manufactured in 1937 by a V & O Press Company, Inc. (1937 V & O). The 1937 V & O was incorporated in the State of New York in 1923. That company changed its name to Hudson Press Co. (Hudson) in 1937. In 1938, Hudson transferred title to a successor V & O Press Co. (1938 V & O). In 1942, the 1938 V & O transferred title to Marshall Field and Charles G. Cushing, a partnership, and the 1938 V & O was dissolved. The partnership did business as V & O Press Company.

In April 1944, another V & O Press Company was incorporated in the State of New York (1944 V & O). Later that year the Field/Cushing partnership transferred title to the 1944 V & O. In 1947, the 1944 V & O conveyed title to Rockwell Manufacturing Company (Rockwell), which operated the business as a division of Rockwell under the name V & O Press Company. In 1950 Rockwell transferred the title of its V & O Division to the Hartford-Empire Company (Hartford), and Hartford later changed its name to Emhart Manufacturing Company (Emhart). Both Hartford and Emhart operated the division under the names Hudson Division and V & O Division.

In 1963, Thomas Rudel contracted with Emhart for a cash purchase of the Hudson and V & O Divisions. The defendant V & O Press (New V & O) was incorporated on that same day and Thomas Rudel became chairman of the board. Rudel assigned his interest in the contract to purchase the V & O Division of Emhart to the defendant, New V & O. Rudel purchased only a portion of Emhart's assets, and Emhart continued as an active business entity subsequent to the sale. The purchase by Rudel included assumption of only some of Emhart's obligations. The New V & O acquired its assets from Rudel in exchange for all of the New V & O's stock.

All of these business entities owned and used the same real estate, manufacturing plant and offices on Union Turnpike, Greenport, New York, the plant and offices being expanded on various occasions over the years. Each company manufactured power presses and parts. The record contains no evidence of the identities of the individuals who owned these successive business entities, other than Thomas Rudel, Marshall Field and Charles Cushing.

Twenty shop and office employees of the 1937 V & O continued to work for each of the intervening business entities and have been employed by the defendant. The record contains no evidence of the total number of persons employed by either the 1937 V & O or the New V & O. The 20 employees include an accountant who today is comptroller of the New V & O; the sales manager of the 1937 V & O who worked as sales manager for the New V & O until his retirement in 1965; two engineers who were employed by each of the entities, including the New V & O; and another engineer who was both vice president in charge of engineering and a director of the New V & O until his retirement in 1968, having also worked for the 1937 V & O, and for each of the intervening V & O's.

Each of the V & O entities has used the same logo and trademark on its advertising material and presses. The New V & O has serviced machines which were manufactured by the 1937 V & O, and has also manufactured, distributed and sold replacement parts for presses built by the 1937 V & O, including parts for the press which injured the plaintiff. Some of the New V & O's customers were also customers of the 1937 V & O, and the presses manufactured by the New V & O are functionally similar to those manufactured by the 1937 V & O.

• 1 The common law and Illinois rule concerning the amenability of a corporation to a suit based on the debts and liabilities of its predecessor was stated in Alexander v. State Savings Bank & Trust Co. (1935), 281 Ill. App. 88, 96, quoting 15 Fletcher, Cyclopedia Corporations § 7122 (perm. ed.):

"`The general rule, which is well settled, is that where one company sells or otherwise transfers all its assets to another company, the latter is not liable for the debts and liabilities of the transferor. The purchasing or transferee company, that is to say, is not liable on the other company's obligations merely by reason of its succession to such company's property. To render it liable there must be an agreement express or implied, to assume the other company's debts and obligations.'"

See also Buis v. Peabody Coal Co. (1963), 41 Ill. App.2d 317, 190 N.E.2d 507; Commercial National Bank v. Newtson (1976), 39 Ill. App.3d 216, 349 N.E.2d 138.

• 2 This general rule is often held subject to a number of exceptions. Liability is found where (1) there has been a consolidation or merger of corporations; (2) the transaction is fraudulent; or (3) the purchasing company is a mere continuation of the seller. Fletcher, Cyclopedia Corporations §§ 7122-7124 (rev. ed. 1962).

The plaintiff agrees that the present status of the law is that a transferee corporation is not liable for its predecessor corporation's debts or liabilities, and she does not argue that this case falls within the exceptions. She does argue, however, that this is a products liability case and thus distinguishable. She asserts that those rules were developed to protect the rights of a corporation's ...


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