Opinion ID: 1688195
Heading Depth: 1
Heading Rank: 9

Heading: Sycon Entities

Text: The Sycon Entities consist of Truckstell, A.B. Seimer, Inc., A.B. Seimer, individually, Marion Metal Products Co. (Successor Marion), and Sycon Corporation. The liability of these parties is derived from that of Original Marion. They could only be liable if the Original Marion was liable. The general rule is that a corporation which purchases the assets of another corporation does not succeed to the liabilities of the selling corporation. Swayze v. A.O. Smith Corp., 694 F.Supp. 619 (E.D.Ark.1988). We have recognized the general rule. See Fort Smith Refrigeration & Equip. Co. v. Ferguson, 217 Ark. 457, 230 S.W.2d 943 (1950). In Swayze, four exceptions to the general rule were set out: (1) where the transferee assumes the debts and obligations of the transferor by express or implied agreement; (2) where there is a consolidation or merger of the two corporations; (3) where the transaction is fraudulent or lacking in good faith; and (4) where the purchasing corporation is a mere continuation of the selling corporation. Swayze, 694 F.Supp. at 622. James Smith, the attorney who prepared the 1967 sale of assets from Original Marion to Truckstell/A.B. Seimer, Inc., testified that Truckstell was the purchaser and that it assigned its rights under the purchase agreement to A.B. Seimer, Inc. Smith indicated that Truckstell purchased all or substantially all of Marion's assets, including inventory, receivables, and work in process. Smith also testified that the factory employees and most of the office employees of the Original Marion continued on in their employment. His testimony indicated that the seller required the buyers and A.B. Seimer individually to execute an indemnity assumption of liability agreement as part of the consideration for the sale. A 1967 letter from Smith to the attorney for Original Marion verified the sale of assets and referred to the assumption of liability agreement. Smith testified that after the sale the name A.B. Seimer, Inc. was changed to Marion Metal Products Company, Inc. Gilbert Herr, president and CEO of the Original Marion in the 1960's, corroborated Smith's testimony. He indicated that Mr. Seimer was in charge after the purchase, but relied on employees of the Original Marion, including himself, to continue the day-to-day operation of the company. Herr testified that Successor Marion continued to make vertical lifts until he retired in 1976. Other managers and employees testified as to their continued employment and the continuity in production of goods after the Seimer purchase. Thus, Ford presented sufficient evidence for the jury to consider whether, under either the continuation exception or the express assumption exception, Truckstell, Seimer, Inc., and Seimer individually assumed the liability of the Original Marion. Plaintiffs, in their original complaint, alleged that Sycon Corporation succeeded to Original Marion's liabilities because ... on about October 15, 1971 Successor Marion merged into Sycon. In its answer, Sycon admitted that on or about October 15, 1971 various corporations merged, including Sycon Corporation and Marion Metal Products Company [Successor Marion], and the resulting company was known as Sycon Corporation. In the oral argument of this case Ford stated that it relied on plaintiffs' proof on the matter, which was never contested, as sufficient proof of Sycon's merger with Successor Marion. However, in addition, Theodore Berger and James Smith both testified that at one time Sycon Corporation succeeded to the business. The general rule is that, after a merger, the resulting corporation is liable for the debts of the other corporation. Indeed, it has been said that public policy requires that the obligations of the extinguished corporation in a merger survive as obligations of the surviving corporation. Corporations cannot by merger or consolidation escape the obligation to pay debts incurred before the merger or consolidation or defeat the right of their creditors to subject their property to the satisfaction of such debt. 19 Am.Jur.2d Corporations § 2715 (1986). In summary, the trial court did not err in instructing the jury to compare the fault of plaintiff Donald Nuckolls, Ford Motor Company, and the other defendants based on insufficient identification of the Original Marion and insufficient proof of successor liability. However, even if the giving of the instructions were in error, we would still reverse the grant of the new trial. The instructions that plaintiffs objected to were instructions numbers seven, eight, nine, thirteen, and twenty-five. Instructions seven, eight, and nine were modified versions of AMI Civil Instruction 206. Instruction seven stated that Ford contended that Marion Metal Products Co. was chargeable with fault that was a proximate cause of plaintiffs' damages and that Ford had the burden of proving such. Instruction eight stated the same as to A.B. Seimer, Inc., A.B. Seimer, individually, Successor Marion, and Truckstell Manufacturing. Instruction nine stated the same as to Randall Ford. Instruction thirteen, AMI Civil 306, stated that the word fault means negligence and breach of warranty and supplying a product in a defective condition. Instruction twenty-five is AMI Civil 2111, concerning comparative fault and joint tortfeasors, and was given as follows: If you find that Donald Nuckolls was free of any fault which was a proximate cause of his claimed damages, then Donald Nuckolls is entitled to recover the full amount of any damages you may find he has sustained from any fault of Ford Motor Company which you find to have proximately caused these damages. If you should find that any damages sustained by Donald Nuckolls were caused by fault on the part of Donald Nuckolls and also were proximately caused by fault on the part of Ford Motor Company, then you must compare the percentage of fault to Donald Nuckolls, Ford Motor Company and any other party identified in these instructions contended by Ford Motor Company to be guilty of fault, proximately causing damage to Donald Nuckolls. If the fault of Donald Nuckolls was of less degree than the total fault of Ford Motor Company and all other parties identified in these instructions whom you find to be chargeable with fault, then Donald Nuckolls and Betty Nuckolls are entitled to recover from Ford Motor Company any damages which you may find they have sustained after you have reduced their damages in proportion to the degree of Donald Nuckolls's own fault. On the other hand, if the fault of Donald Nuckolls was equal to or greater than the total fault of Ford Motor Company and all of the parties identified in these instructions whom you find to be chargeable with fault, then Donald Nuckolls and Betty Nuckolls are not entitled to recover any damages. The court, in instruction number ten, instructed the jury that more than one party could be deemed to have proximately caused plaintiffs' injuries, and, in instruction number fifteen, instructed the jury that if you find that the negligence or fault of Ford Motor Company proximately caused damage to Donald and Betty Nuckolls, it is not a defense that some other persons may also have been to blame. The jury was given four verdict forms. They were as follows: (1) We, the jury, find in favor of the Plaintiff, Donald Nuckolls, and fix his damages as follows: (2) We, the jury, find in favor of Betty Nuckolls and fix her damages as follows: (3) We, the jury, find in favor of Ford Motor Company on the claims of Donald Nuckolls: (4) We, the jury, find in favor of Ford Motor Company on the claims of Betty Nuckolls[.] The jury answered verdict forms (3) and (4) in favor of Ford. In order to have done so the jury could have determined that plaintiffs failed to prove liability on the part of Ford. This finding would not have involved the other defendants. Alternatively, the jury could have determined that Donald Nuckolls was partially at fault and that his fault was equal to or greater than that of Ford and any other parties to whom the jury found that fault should be attributed. This finding would not have been affected by the addition of fault of other parties. If a jury determines the plaintiff is fifty percent or more at fault, it does not matter whether there is one defendant or multiple defendants. Thus, the plaintiffs could not have been harmed by the instructions, even if they had been erroneous. Plaintiffs contend that the introduction of the fault of the other parties misled the jury and caused the jury to think that the other parties were responsible. However, the addition of fault of other parties and the comparison of the fault of those parties against plaintiff Donald Nuckolls's fault would not have affected the verdict. Instruction fifteen instructed the jury that it was not a defense for Ford if some other person may also have been at fault. In addition, considering the options given to the jury in comparing fault under instruction twenty-five, it is obvious that there is no way the addition of fault of the other defendants could have affected the verdict as between Ford and plaintiffs. Thus, even if the instructions had been given in error, they could not have materially affect[ed] the substantial rights of appellees. See A.R.C.P. Rule 59(a). We have stated that a moving party under Rule 59(a) must demonstrate that its rights have been materially affected by demonstrating that a reasonable possibility of prejudice has resulted from the error. Diemer v. Dischler, 313 Ark. 154, 852 S.W.2d 793 (1993). Diemer involved a granting of a new trial under subsection (2) of section (a) of Rule 59, concerning juror misconduct. However, the standard is equally applicable to Rule 59(a)(8), involving errors of law, because section (a) states at the beginning that all the grounds must materially affect the rights of the moving party. Since a reasonable possibility of prejudice was not demonstrated, the trial court erred in granting a new trial. We reverse and remand for reinstatement of the jury verdict and entry of orders consistent with this opinion.