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Green v. Firestone Tire & Rubber Co.

OPINION FILED FEBRUARY 29, 1984.

EDWIN N. GREEN, PLAINTIFF-APPELLANT,

v.

THE FIRESTONE TIRE AND RUBBER CO., INC., ET AL., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Kane County; the Hon. Marvin Dunn, Judge, presiding.

JUSTICE HOPF DELIVERED THE OPINION OF THE COURT:

Plaintiff Edwin N. Green brought this action against Sensation Mower, Inc., and Firestone Tire and Rubber Company, Inc. (Firestone), alleging one count of breach of warranty and one count of negligence against each of the two corporations. Plaintiff sustained injuries while operating a lawnmower allegedly manufactured by Sensation Mower, Inc., and sold by McCornack Tire & Service, Inc., of St. Charles, Illinois. It is claimed that Sensation Corporation is a successor to Sensation Mower, Inc., and that Firestone is a successor to McCornack Tire. Sensation Corporation and Firestone filed motions for summary judgment which were granted. Plaintiff appeals.

On appeal plaintiff contends that the trial court erred in granting summary judgment for defendants. During oral argument plaintiff acknowledged that in count I of his complaint he was attempting to extend the theory of products liability to a negligence claim against a predecessor corporation. Plaintiff supplies us with no authority supporting such a theory, and we know of none.

Viewed from another perspective, the central issue raised on appeal concerns the liability of successor corporations under the case of Hernandez v. Johnson Press Corp. (1979), 70 Ill. App.3d 664, 388 N.E.2d 778, where plaintiff was injured by a punch press and brought an action against the corporation which manufactured the press and its successor corporation. The Hernandez court set forth the general rule in Illinois regarding the liability of a successor corporation for debts and liabilities of the predecessor corporation. Except for certain specified circumstances, a successor corporation is not liable for the debts and liabilities of the transferor. (70 Ill. App.3d 664, 666, 388 N.E.2d 778, 779.) In the case at bar the trial court held that the defendants, which both occupied the position of successor corporations, did not fall within the exceptions set forth by Hernandez. On appeal, plaintiff argued that the trial court erred in granting summary judgments because the facts presented in the instant case fall within those exceptions. In the alternative, plaintiff urges that the Illinois law relied on by the trial court is incorrect, and that there is a trend in other States which establishes a strict liability rationale. Plaintiff urges the time has arrived for Illinois to follow this new theory.

The facts of this case show that in June or July of 1969, the plaintiff's father-in-law purchased a lawnmower alleged to have been manufactured by Sensation Mower, Inc. The mower was purchased from McCornack Tire & Service, Inc., in St. Charles. Later that year, on September 14, Firestone purchased the assets of McCornack Tire & Service, Inc. Shortly after the purchase plaintiff's father-in-law died and plaintiff became the owner of the lawnmower. Over the course of the next 10 years he used the lawnmower on a regular basis until the time of the accident.

On May 25, 1980, plaintiff was injured while mowing his yard. He was pulling the mower with him as he backed up to trim an area of grass. He backed into a tree stump, fell backwards, and as he fell his foot came in contact with the blade of the lawnmower.

Ownership of the company which manufactured plaintiff's lawnmower was transferred a number of times between the date of the sale and the date of the injury. Plaintiff's complaint named both Sensation Mower, Inc., and Firestone as party-defendants. Sensation Mower, Inc., was in existence prior to 1968 and manufactured, among other things, lawnmowers. In 1968 Sensation Mower, Inc., sold certain of its assets to Sensation Manufacturing Company. The sales agreement is not a part of the record in the case at bar, and the precise date of sale is unknown. Subsequently, on August 1, 1972, Sensation Manufacturing Company entered into an agreement to sell the assets of that corporation to Sidells Warehouse of Denver, Inc., a Nebraska corporation, nominee for the Sensation Corporation, a Nebraska corporation to be formed. The agreement became effective on August 1, 1972. The articles of incorporation were subsequently filed with the Nebraska Secretary of State. The new company came to be known as Sensation, Inc.

The vice-president of Sensation Corporation, Albert Schinker, filed an affidavit in support of Sensation's motion for summary judgment. In that affidavit Schinker indicated the lawnmower identified in the complaint was manufactured in 1968 or 1969 by either Sensation Mower, Inc., or by Sensation Manufacturing Company. He did not know which company made the mower because the precise date of manufacture had not been established. He indicated that the production of that model of that lawnmower was discontinued in 1969 and Sensation Corporation did not come into existence until 1972. Therefore it was urged Sensation was not in any way involved with the design, manufacture or sale of the lawnmower identified in the complaint. The affidavit also set forth certain provisions of the agreement for the sale of assets entered into by Sidells Warehouse of Denver, Inc., a Nebraska corporation, as nominee for the Sensation Corporation, the corporation that was formed. The portion of that sales agreement which distributed the debts and liabilities of the corporation provided that certain responsibilities regarding liability insurance were made by each party. This provision is quoted in the first issue discussed below. The agreement also indicated that the sale of assets was a cash sale rather than transfer of stock. The Schinker affidavit also stated no present or former stockholders, directors, or officers of Sensation, Inc., had ever been stockholders, directors of officers of Sensation Mower, Inc., or of Sensation Manufacturing Company.

At the hearing on Sensation, Inc.'s motion for summary judgment plaintiff contended that defendant-corporation was a "mere continuation of its predecessor corporation, Sensation Manufacturing." After arguments the trial court decided that there was no genuine issue of fact presented in the briefs or affidavits. The court found that under the Hernandez case there was no showing in the facts presented to show an assumption of the predecessor corporation's debts by the successor corporation. (Hernandez v. Johnson Press Corp. (1979), 70 Ill. App.3d 664, 388 N.E.2d 778.) The court held that the sales agreement did not provide for an assumption of debts, and because none of the exceptions set forth in Hernandez were present, it granted the motion for summary judgment.

Defendant, Firestone Tire & Rubber Company, Inc., was granted summary judgment for largely the same reasons as those just discussed. The lawnmower in issue was originally purchased from McCornack Tire & Service, Inc. (McCornack), who was not named as a defendant. Approximately three months after the purchase of the lawnmower, on September 14, 1969, McCornack was sold to Firestone. That transaction was made pursuant to a sales agreement which provided:

"5. [McCornack] will assume full liability and pay any and all taxes, unemployment compensation contributions, workmen's compensation claims or premiums and all other obligations of whatsoever kind or nature arising from the operation of the Company's business prior to the effective date. It is understood that personal property taxes assessed prior to the effective date of this Agreement shall be paid by the Company and are not to be prorated."

The deposition of Warren Kammerer, who, along with Robert McCornack, was one of the owners of McCornack, indicated that the sale of McCornack Tire was a cash sale. Robert McCornack had no involvement in the new Firestone store. Warren Kammerer was rehired as store manager and became president and 49% owner of Firestone. Firestone retained ownership of the rest of the shares of the corporation. Firestone contends that the operation of the store differs greatly from what it was as McCornack Tire. The new business was required to follow the procedures and policies of Firestone and report to Firestone's zone office. Although some of the original employees of McCornack Tire were retained, not all were rehired.

Most important is the fact that the Firestone store sold different products from McCornack Tire. Specifically the new business was directed by Firestone to not sell Sensation products, which included their line of lawnmowers.

After the hearing on Firestone's motion for summary judgment the trial court noted that there was no genuine issue of fact, that Firestone was the purchaser of the assets of McCornack Tire, and that the sale date was September 14, 1969. The court noted that it was a cash sale and no exchange of stock was made. Plaintiff made no counter affidavit of this allegation and although plaintiff sought to bring the case within the exceptions of the Hernandez case (Hernandez v. Johnson Press Corp. (1979), 70 Ill. App.3d 664, 388 N.E.2d 778), the court held the facts were not applicable to those exceptions. The court noted that although the mower in issue had been taken into the Firestone store for servicing there was no structural or ...


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