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McKee v. Harris-Seybold Co.

Decided: April 2, 1970.

EDWARD B. MCKEE AND BARBARA MCKEE, PLAINTIFFS,
v.
HARRIS-SEYBOLD COMPANY, DIVISION OF HARRIS-INTERTYPE CORP.; SEYBOLD MACHINE CO.; CARL W. HAGMAN AND MIEHLE-GOSS-DEXTER, INC., DEFENDANTS



On motion for summary judgment.

Breslin, R.w., J.d.c. (temporarily assigned).

Breslin

[109 NJSuper Page 558] This matter arises out of a motion for summary judgment in favor of defendant Harris-Seybold Company, Division of Harris-Intertype Corp., on the amended complaint filed by plaintiffs and cross-claims asserted by the co-defendants.

Plaintiff Edward B. McKee contends that on January 18, 1968, while an employee of the American Mission to the Greeks, Inc., Ridgefield, New Jersey, he sustained serious personal injuries while operating a paper cutting machine known as a "Dayton." The machine was manufactured in 1916 by the Seybold Machine Company of Dayton, Ohio. On November 22, 1926 Seybold entered into a contract with the Harris Automatic Press Company of Cleveland, Ohio, whereby it agreed to sell certain assets and Harris Automatic agreed to assume specified liabilities, as more particularly set forth in a contract of sale. Said contract was assigned to a new corporation, Harris-Seybold-Potter Company, and was consummated by the parties. Subsequent thereto Harris-Seybold-Potter changed its name to Harris-Seybold Company and thereafter acquired the Intertype Corporation.

In the agreement between Seybold and Harris Automatic the former sold its property, assets, business and good will and authorized the use of the names "The Seybold Machine Company" and "Seybold." Seybold agreed to change its corporate name to eliminate the word "Seybold," to not thereafter engage in any active manufacturing business and to hold Harris harmless from any undisclosed or contingent obligations not incurred in the ordinary course of manufacturing business since June 30, 1926. In accordance with the agreement Seybold changed its name to the Washington Machine Company, which was subsequently dissolved on February 9, 1928. Defendant Harris-Seybold Company Division of Harris-Intertype Corp. (hereinafter Harris) contends that it did not assume any contingent liability of the Seybold Machine Company arising out of (1) the alleged negligent design and manufacture of the machine in question by Seybold, (2) any express or implied warranties arising out of said sale, or (3) the defective design or manufacture of the machine. It further contends that it did not incur any liability by virtue of informing plaintiff's employer that the machine could be serviced by defendant Hagman. The claims asserted by plaintiff Edward McKee

against Harris are set forth in the first, second, third and fifth counts of the complaint. The fourth count is directed against defendant Hagman and alleges that he was negligent and careless in the servicing of the machine. The seventh count is directed against defendant Miehle-Goss-Dexter, Inc. (hereinafter Miehle) and alleges that it installed a safety device on said machine which was defective in design and manufacture and that it impliedly and expressly warranted that said safety device was for the intended purpose.

Defendant Hagman is the owner of a business in Long Island City, New York, which services and repairs paper cutting machinery, manufactures parts for obsolete machines and supplies parts for machines of various sizes and molds. On the recommendation of Harris his company made a service call to the American Mission on July 25, 1967. An employee, Conrad Nagel, reset the clutch of the Dayton machine and checked its operation to determine if it had the power to go through the heavy lip of paper. The only other contact with the American Mission was the sale of two used cutting knives for the machine on November 29, 1967. The knives were installed by employees of American Mission.

Defendant Miehle sells paper cutting machines, paper drilling machines, PMC die cutting and presses. In 1957 it acquired the E. P. Lawson Division. In 1936 Lawson designed a one-hand, two motion position knock-out device which it installed on the Dayton machine in question in order to comply with the requirements of New York State Department of Labor, and there was placed on the machine a label bearing the name E.P. Lawson, Inc., with the approval number 2172. It was an additional safety device to the one incorporated in the machine and known as a safety stop. Harris had no transaction or communication with the Lawson Company relating to the safety device.

Preliminarily, it must be noted that neither party requested this court to take judicial notice of Ohio law,

pursuant to Evidence Rule 9. Although Ohio may have the most substantial contacts with the instant matter, in that the contract in question was made and performed in Ohio by Ohio corporations, the subject matter of the contract being the sale of assets located mostly in Ohio, HIMC Investment Co. v. Siciliano , 103 N.J. Super. 27 (Law Div. 1968); Woll v. Dugas , 104 N.J. Super. 586 (Ch. Div. 1969); Mellk v. Sarahson , 49 N.J. 226 (1967), this court will, nevertheless, apply the law of our own jurisdiction as the forum's choice of law. See Evidence Rule 9; Graulich Caterer, Inc. v. Hans Holterbosch, Inc. , 101 N.J. Super. 61, 66 (App. Div. 1968); Donnelly v. United Fruit Co. , 75 N.J. Super. 383, 397 (App. Div. 1962), aff'd 40 N.J. 61 (1963). Parenthetically, the laws pertaining to the instant issue are basically uniform throughout the country, and since Ohio law is essentially similar to our own, neither party will be prejudiced by the court's adherence to New Jersey law.

It is the general rule 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, including those arising out of the latter's tortious conduct, except where: (1) the purchaser expressly or impliedly agrees to assume such debts; (2) the transaction amounts to a consolidation or merger of the seller and purchaser; (3) the purchasing corporation is merely a continuation of the selling corporation, or (4) the transaction is entered into fraudulently in order to escape liability for such debts. Jackson v. Diamond T. Trucking Co. , 100 N.J. Super. 186 (Law Div. 1968); Andres v. Morgan , 62 Ohio St. 236, 56 N.E. 875 (Sup. Ct. 1900); Ruedy v. Toledo Factories Co. , 61 Ohio App. 21, 22 N.E. 2d 293 (App. Ct. 1939); Kloberdanz v. Joy Mfg. Co. , 288 F. Supp. 817 (D. Colo. 1968); 19 Am. Jur. 2d, § 1546, at 922. A fifth exception, sometimes incorporated as an element of one of the above exceptions, is the absence of adequate consideration for the sale or transfer. 19 Am. Jur. 2d, § 1551, at

927; 7 Fletcher, Cyclopedia of Corporations , § 4751 (1919 ed.).

I

Liability cannot be impressed upon the movant under the first exception. The contract in question provided that the purchaser and its successors, i.e. , the movant, assume certain liabilities of the seller (Seybold) enumerated in the contract. These specific liabilities were open accounts for purchasers, accrued water bills, local taxes, payroll accounts, past federal taxes owing, if any, certain sales representative contracts, and current obligations of the seller for purchase of materials and supplies and for the delivery of manufactured goods. These liabilities were in existence at the time the balance sheet attached to the contract was prepared. Since the contract was not to be consummated until February 1, 1927, it was also provided that the purchaser assume the liabilities incurred by Seybold "in the usual course of its manufacturing business, but not otherwise" subsequent to June 30, 1926 -- the date the balance sheet was prepared. (Seybold's earnings from that date were to be assigned to the buyer). In paragraph eight of the contract Seybold warranted that there were "no undisclosed or contingent obligations" of Seybold not specified in the contract, and that Seybold would hold the purchaser harmless from such undisclosed or contingent obligations.

A contract must be construed as a whole and the language employed must be given its ordinary meaning, in the absence of anything to show that the language was used in a different sense. Hudson County Newspaper Guild v. Jersey Pub. Co. , 19 N.J. Super. 440 (Law Div. 1952), aff'd 23 N.J. Super. 419 (App. Div. 1952); S.G. Young, Inc. v. B. & C. Distributors Co. , 23 N.J. Super. 15 (App. Div. 1952). Provisions of a contract must be interpreted, if possible, so as to give effect to the general purpose and intention of the parties. Josefowicz v. Porter , 32 N.J. Super. 585 (App. Div. 1954). It is clear that there was no

express assumption by the purchaser of any liabilities except those designated in the contract. It is equally manifest that the purchaser's assumption of those obligations incurred by the seller in the "usual course of manufacturing" subsequent to June 30, 1926 does not include the type of contingent liability herein sought to be imposed. "Usual" is variously defined to mean that which happens in the ordinary course of events, that which is customary or according to common practice. Dancy v. Abraham Bros. Packing Co. , 171 Tenn. 311, 102 S.W. 2d 526 (Sup. Ct. 1937); Roberts Coal Co. v. Corder Coal Co. , 143 Va. 133, 129 S.E. 341 (Sup. Ct. App. 1925); People v. Carman , 385 Ill. 23, 52 N.E. 2d 197 (Sup. Ct. 1943). The liabilities incurred by Seybold prior to June 30, 1926, expressly assumed by the purchaser, were those incident to regular upkeep of manufacturing operations, e.g. , obligations for materials and supplies purchased. The liabilities incurred by Seybold in the usual course of manufacturing subsequent to June 30, 1926, which were also expressly assumed by the purchaser, were not intended to be of an all-inclusive nature, but rather of the same type as those incurred prior to the above date. This is so especially in view of the restrictive language that appears immediately after "in the usual course of manufacturing business," i.e. , "but not otherwise." There was no contractual express or implied assumption of contingent tort liability.

II

Plaintiff also asserts that the transaction in dispute was not a mere sale of assets but a de facto merger or consolidation which would render the movant liable for the torts of Seybold. In Applestein v. United Board & Carton Corp. , 60 N.J. Super. ...


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