On appeal from the Superior Court of New Jersey, Law Division, Essex County.
Approved for Publication May 21, 1996.
Before Judges Baime, Kimmelman, and Bilder. The opinion of the court was delivered by Kimmelman, J.A.D. (temporarily assigned).
The opinion of the court was delivered by: Kimmelman
The opinion of the court was delivered by KIMMELMAN, J.A.D. (temporarily assigned).
Plaintiff Arsenio Vega, an employee of defendant Krementz & Company (Krementz), was injured on March 15, 1991, in Krementz'splant when the drop hammer on a punch-press die machine plaintiff was operating unexpectedly came down when a belt failed, amputating part of his thumb and crushing two fingers on his dominant right hand. Plaintiff received a workers' compensation award, but instituted this action to recover damages against the manufacturer of the machine (who could not be located for service of process) and against defendants Shiman Industries, Inc. (Shiman) and Krementz. Krementz was joined in the action not as plaintiff's employer but as the party responsible for Shiman's liabilities as a result of their merger prior to the accident. The jury returned a verdict of $25,000 in favor of plaintiff and against Krementz even though the parties had stipulated that plaintiff's out-of-pocket losses for medical expenses and lost wages were $45,855.32. On plaintiff's motion for a new trial as to damages and Krementz's cross-motion for judgment notwithstanding the verdict, the trial court granted Krementz's cross-motion, set aside the jury's verdict, and entered judgment in favor of Krementz, dismissing plaintiff's complaint. Plaintiff now appeals from that judgment.
The factual background need only be recounted briefly. Both Shiman and Krementz were in the business of manufacturing jewelry. Many years ago, Shiman purchased the machine in question from its manufacturer and had used the same in its business. Krementz, the owner of all of the outstanding shares of Shiman, operated Shiman as a wholly-owned subsidiary. On December 16, 1986, the two corporations entered into a plan of merger whereby the subsidiary corporation was to be merged into the parent, and on December 29, 1986, Krementz, as the surviving corporation, filed a Certificate of Merger with the Secretary of State of New Jersey. The ownership of Shiman's property, including the machine in question, thereby vested in Krementz. As required by law, Krementz agreed in the plan of merger to beliable for all of the obligations and liabilities of Shiman. See N.J.S.A. 14A:10-6(e).
Plaintiff's case was premised on a negligence theory that, in connection with the merger, Shiman had a duty to warn Krementz and its employees about the dangerous condition of the machine and that warning notices or labels should have been affixed to the machine. In answers to special verdict questions, the six-member jury unanimously found that Shiman was negligent in not providing an adequate guard on the machine at the point of operation and in failing to provide a warning notice on the machine, and further found that Shiman should have been aware of the dangerous condition of the machine.
In seeking to impose liability on Krementz as Shiman's successor in interest, plaintiff contends that Shiman was the "supplier" of the machine and relies upon Restatement (Second) of Torts § 388 (1965), entitled "Chattel Known to Be Dangerous for Intended Use," which provides:
One who supplies directly or through a third person a chattel for another to use is subject to liability to those whom the supplier should expect to use the chattel with the consent of the other or to be endangered by its probable use, for physical harm caused by the use of the chattel in the manner for which and by a person for whose use it is supplied, if the supplier
(a) knows or has reason to know that the chattel is or is likely to be dangerous for the use for which it is supplied, and
(b) has no reason to believe that those for whose use the chattel is supplied will realize its dangerous condition, and
(c) fails to exercise reasonable care to inform them of its dangerous condition or of the facts which make it likely to be dangerous.
The trial Judge, in setting aside the verdict and entering judgment in favor of Krementz, concluded "that the dangerous condition of the machine was open and notorious and that when Krementz took the machine, it did so with full knowledge of its defects," so that if there was a duty on the part of Shiman to warn the employees of Krementz, there was no breach of that duty by Shiman. Apparently, the trial Judge reasoned that contrary to subsection (b) of Section 388 of the Restatement (Second) of Torts, Shiman had reason to believe that Krementz would have or should have realized the dangerous condition of the machine because its ...