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OPINIONS OF THE SUPREME COURT OF OHIO
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Davis et al., Appellees, v. Loopco Industries, Inc., Appellant.
[Cite as Davis v. Loopco Industries, Inc. (1993), Ohio
Contracts -- Rules of contract construction -- Summary judgment
improperly granted, when.
(No. 92-636 -- Submitted January 19, 1993 -- Decided
April 7, 1993.)
Certified by the Court of Appeals for Cuyahoga County, No.
In 1981, defendant CMW Holdings, Inc., f.k.a. Loopco
Industries, Inc. ("Old Loopco"), manufactured and sold coil
strip slitting, processing and handling machinery to
plaintiff-appellee David L. Davis' employer, Feralloy
Corporation in Cleveland. On August 5, 1984, Withrow
Enterprises, Inc. ("Withrow") entered into an asset purchase
agreement with Old Loopco under which Withrow purchased all or
substantially all of Old Loopco's assets. Withrow then changed
its name to Loopco Industries, Inc. ("New Loopco"). Old Loopco
was voluntarily dissolved in August 1985.
On July 17, 1986, Davis sustained injuries while operating
the coil slitting machinery Old Loopco had manufactured and
sold to his employer. On July 15, 1988, Davis and his wife
Carla filed a complaint against New Loopco based on products
liability theories of strict liability and negligence. An
amended complaint was filed joining Old Loopco as a new party
defendant. New Loopco was sued on the theory of successor
The trial court granted New Loopco's motion for summary
judgment and dismissed, sua sponte, appellants' claims against
Old Loopco. Appellants appealed the summary judgment grant in
favor of New Loopco. The appellate court reversed, finding
material questions of fact were present.
The appellate court finding its judgment to be in conflict
with the judgment of the Court of Appeals for Franklin County
in Erdy v. Columbus Paraprofessional Inst. (1991), 74 Ohio
App.3d 462, 599 N.E.2d 338, certified the record of the case to
this court for review and final determination.
Ellis B. Brannon and Gary T. Mantkowski, for appellees.
Calfee, Halter & Griswold, Phillip J. Campanella and
Joseph A. Castrodale, for appellant.
Francis E. Sweeney, Sr., J. The certified question
presented by the appellate court is whether Flaugher v. Cone
Automatic Mach. Co. (1987), 30 Ohio St.3d 60, 30 OBR 165, 507
N.E.2d 331, adopted the traditional test or the expanded test
to determine whether a successor corporation is a mere
continuation of a predecessor corporation. We need not reach
this issue, however, as we find the asset purchase agreement
between the Old Loopco and New Loopco presents a genuine issue
of material fact.
Civ.R. 56(C) provides that before summary judgment may be
granted, it must be determined that: (1) No genuine issue as
to any material fact remains to be litigated; (2) the moving
party is entitled to judgment as a matter of law; and (3) it
appears from the evidence that reasonable minds can come to but
one conclusion, and viewing such evidence most strongly in
favor of the nonmoving party, that conclusion is adverse to the
party against whom the motion for summary judgment is made.
Temple v. Wean United, Inc. (1977), 50 Ohio St.2d 317, 327, 4
O.O.3d 466, 472, 364 N.E.2d 267, 274. Because summary judgment
is a procedural device to terminate litigation, it must be
awarded with caution. Doubts must be resolved in favor of the
nonmoving party. Murphy v. Reynoldsburg (1992), 65 Ohio St.3d
356, 358-359, 604 N.E.2d 138, 140. "If a contract is clear and
unambiguous, then its interpretation is a matter of law and
there is no issue of fact to be determined. Alexander v.
Buckeye Pipe Line Co. (1978), 53 Ohio St.2d 241 [7 O.O.3d 403,
374, N.E.2d 146]. However, if a term cannot be determined from
the four corners of a contract, factual determination of intent
or reasonableness may be necessary to supply the missing
term." Inland Refuse Transfer Co. v. Browning-Ferris Indus. of
Ohio, Inc. (1984), 15 Ohio St.3d 321, 322, 15 OBR 448, 449, 474
N.E.2d 271, 272-273.
The asset purchase agreement provides in part:
"1.6 Assumption of Liabilities. In connection with and
in partial consideration for its acquisition of the Purchased
Assets, Buyer shall assume as of the Effective Date * * * (iii)
certain product liability and warranty obligations, but only to
the extent expressly provided in Section 4 hereof * * *."
"4.7 Product Liability. Buyer shall assume no obligation
or liability for product liability claims relating to
occurrences taking place before the close of business on the
Effective Date; and Seller shall assume no obligation or
liability with respect to product liability claims relating to
occurrences taking place after the close of business on the
From the four corners of the purchase agreement, we cannot
determine which party is responsible for product-liability
claims occurring after the effective date of the asset purchase
agreement. The contract is neither clear nor unambiguous.
Viewing these provisions most strongly in Davis' favor,
reasonable minds could conclude that New Loopco assumed
liability after the effective date of the transfer. This
presents a question of fact for the fact-finder. We,
therefore, affirm the judgment of the appellate court and
remand this cause to the trial court for further proceedings.
Moyer, C.J., A.W. Sweeney, Douglas, Wright, Resnick and
Pfeifer, JJ., concur.
A. William Sweeney, J., concurring. I concur in the
well-reasoned opinion and judgment of the majority. I write
separately to address the certified issue presented by this
case. As concisely stated in the majority opinion, the parties
to this action are in disagreement regarding the import of the
decision of this court in Flaugher v. Cone Automatic Machine
Co. (1987), 30 Ohio St.3d 60, 30 OBR 165, 507 N.E.2d 331.
In Flaugher, supra, a majority of the court concluded
that, in a sale-of-assets acquisition of one company by
another, the successor corporation is generally not liable for
the torts of its predecessor. However, the court recognized
the following exceptions to the rule:
"(1) the buyer expressly or impliedly agrees to assume
"(2) the transaction amounts to a de facto consolidation
"(3) the buyer corporation is merely a continuation of the
seller corporation; or
"(4) the transaction is entered into fraudulently for the
purpose of escaping liability." Id. at 62, 30 OBR at 167, 507
N.E.2d at 334.
The parties to the instant action disagree as to the
breadth of the Flaugher decision with respect to the third
exception to the rule. Appellant maintains that liability
thereunder occurs only where the successor corporation is a
"mere continuation" of its predecessor. Thus, liability under
this exception would apply only where the successor constitutes
a continuation of the corporate entity. In contrast, appellees
maintain that the Flaugher court adopted the "continuity of
enterprise" or "expanded mere continuation" doctrine under the
third exception to the rule. Thus, appellees contend that the
exception would apply if certain factors are present in a
particular case. These factors include the following:
"(1) [C]ontinuity of management, personnel, physical
location, and assets;
"(2) [D]issolution of the predecessor;
"(3) [A]ssumption of the ordinary business obligations
and liabilities by the successor; and
"(4) [T]he successor's presentation of itself as the
continuation of the predecessor." 15 Fletcher Cyclopedia of
the Law of Private Corporations (1990 Rev.) 275, Section
Inasmuch as I believe that neither theory adequately
addresses the public policy concerns which underpin the law of
products liability, I continue to adhere to the view expressed
in my dissent in Flaugher, supra, at 68, 30 OBR at 172, 507
N.E.2d at 338, that the product line theory should be adopted
as the common law of Ohio.
The facts of the present case illustrate the wisdom of the
aforementioned approach. As stated by the majority, Old Loopco
was acquired by an entity known as Withrow Enterprises, Inc.
for the purpose of continuing the Loopco product line --
including the coil slitting machinery that allegedly injured
David Davis. One may ask why Withrow decided to acquire Old
Loopco rather than undertake the manufacture of coil slitting
machinery as a new corporate enterprise. Two reasons are
immediately apparent. As an initial matter, Withrow sought to
rely on the accumulated good will that Old Loopco had
established in the marketplace. Second, Withrow could rely on
the expertise developed by Old Loopco in the years that it
manufactured such machinery.
Moreover, one must wonder why, immediately after the
acquisition, Withrow Enterprises assumed the persona of its
predecessor through adoption of its name. Clearly, it was to
represent itself as the heir of the Loopco enterprise.
Given its Herculean efforts to assume the mantle of the
Loopco corporate image and to benefit thereby, New Loopco
should be estopped from denying its acquired identity for the
purpose of products liability.
Accordingly, while I agree with the majority that a
genuine issue of fact remains regarding whether New Loopco
voluntarily assumed the liability of its predecessor, I would
not predicate liability on that basis alone. Regardless of the
nature of the agreement between Old Loopco and Withrow
Enterprises, liability need not arise exclusively as a matter
of contract law. It is axiomatic that, in the context of tort
law, two parties are not permitted to contract away the rights
of another which arise as a matter of public policy. Likewise,
Old Loopco and Withrow Enterprises should not be permitted to
agree to foreclose the rights of David Davis. Indeed, to
permit such behavior encourages the drafting of contractual
provisions which absolves both parties of liability for their
tortious acts. This occurs where liability is shifted to the
predecessor corporation in order to allow the successor to
escape liability while the predecessor is dissolved -- thereby
making it judgment-proof. The result is to leave an innocent
and injured third party with no remedy and no recourse. Such
machinations have no place in the law.
Accordingly, for the additional reasons stated in my
dissent in Flaugher, I would affirm the court of appeals.
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