Opinion ID: 664912
Heading Depth: 2
Heading Rank: 1

Heading: Successor Corporation Liability

Text: 15 Forbes' first argument centers on the fact that Winston was not liquidated as a result of its Chapter 11 proceedings. According to Forbes, Winston continued to exist as a viable corporation, albeit restructured, after its reorganization plan was confirmed and it was discharged in 1983. She asserts that because Winston was eventually merged into Universal, applicable state statutory merger laws make it clear that Universal can now be held liable for her claim. 16 The essence of Universal's contention, however, is that because Winston's reorganization plan provided that Winston's consumer products division and its operating assets relating to the production and sale of mobile homes had been liquidated, the confirmation of that plan constituted the liquidation of Winston. According to Universal, the corporation that was eventually merged into it was only a corporate shell, a different legal entity than that which had existed prior to the Chapter 11 proceedings. Universal therefore asserts that Forbes' claim against Universal is precluded under any theory of successor liability. Alternatively, Universal contends that because Tidwell expressly assumed Winston's liabilities for its mobile home operations when he purchased Winston's manufacturing assets in 1983, it is Tidwell and not Universal who can be held liable for Forbes' claim. 17 The purpose of Chapter 11 reorganization is  'to assist financially distressed business enterprises by providing them with breathing space in which to return to a viable state.'  Little Creek Dev. Co. v. Commonwealth Mortgage Corp. (In re Little Creek Dev. Co.), 779 F.2d 1068, 1073 (5th Cir.1986) (quoting In re Winshall Settlor's Trust, 758 F.2d 1136, 1137 (6th Cir.1985)). Such reorganization thus permits the rehabilitation of an ongoing business. 18 We have recognized that the Bankruptcy Code does, however, contemplate liquidating reorganizations. Sandy Ridge Dev. Corp. v. Louisiana Nat'l Bank (In re Sandy Ridge Dev. Corp.), 881 F.2d 1346, 1352 (5th Cir.1989) (determining that sections 1129(a)(11), 1123(a)(5), and 1123(b)(4) of the Bankruptcy Code indicate that a reorganization plan may result in the liquidation of the debtor). Although the distribution of all the debtor's property to creditors under a liquidating plan of reorganization is not improper under the Code, the bankruptcy court's approval of a liquidating plan of reorganization does not ipso facto liquidate the corporation. 19 The record indicates that Winston was not liquidated. Winston's reorganization plan specifically states that if the plan received court approval, Winston's board of directors could then determine whether or not they wish[ed] to merge or consolidate, or dissolve.... The plan itself thus specifically contemplated the corporation's continued existence as a viable corporate entity. Winston's disclosure statement likewise contemplated Winston's continued corporate existence after Winston emerged from reorganization proceedings. The disclosure statement pronounced that [t]he Debtor's objective is to consummate a public sale of the Assets as set forth herein for the highest and best bid ... as quickly as possible in order to preserve the viability of the Debtor's Business as a going concern.... Further, Winston continued to exist as a corporate entity under Alabama law until September 1985 when it was merged into Universal Chicken Farms, pursuant to statutory provisions of Alabama and Delaware law. We thus conclude that the bankruptcy court's approval of Winston's reorganization plan did not liquidate Winston. 3 20 We also conclude that pursuant to applicable statutory law, Universal is a successor corporation of Winston and, as such, is legally responsible for all of Winston's liabilities, including the possible liability for Forbes' claim. As noted above, in September 1985, Winston was merged into Universal Chicken Farms, pursuant to statutory provisions of Alabama and Delaware law. The surviving corporation, Winston II, existed as a Delaware corporation. Under both Alabama and Delaware law, the assets and liabilities of merging corporations become the responsibility of the surviving corporation. See ALA.CODE ANN. 10-2A-145 (1975) 4 ; DEL.CODE ANN. tit. 8, Sec. 259 (1953). 5 Hence, Winston II became legally responsible for the liabilities of both Universal Chicken Farms and Winston, including negligence and products liability claims against Winston. 21 The record also indicates that in November 1985, Winston II was merged into Universal, pursuant to statutory provisions of Delaware law. Universal thus became responsible for Winston II's liabilities, including those which Winston II had assumed from Winston and Universal Chicken Farms. 22 Universal also argues, however, that even if it is deemed to be a successor corporation of Winston, Winston's liabilities at issue in this case were expressly assumed by Tidwell, according to the terms of the purchasing agreement by which Tidwell purchased the manufactured housing production division of Winston and which was approved by order of the bankruptcy court on January 6, 1983. Universal asserts that these liabilities included all liabilities generated by Winston's pre-petition manufacturing activities and that thus the possible liability for Forbes' claim lies only with Tidwell. 23 As an initial matter, we express some doubt that Universal's assertion is, as a matter of fact, true. Exhibit A to Winston's reorganization plan reflects that Tidwell assumed accrued warranty liabilities and actually identifies the aggregate amount of those liabilities appearing on a December 24, 1982, financial statement. As a matter of generally accepted accounting principles, it is doubtful that Winston's ultimate liability to Forbes was accrued as of December 24, 1982. More important, however, is the fact that the terms of Tidwell's purchase, and the associated court order, are not a part of the record. Universal, as the party moving for summary judgment, had the responsibility for bringing forward that documentation to establish that no genuine issue of fact existed for trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986) (explaining that the party seeking summary judgment always bears the initial responsibility of demonstrating to the district court the absence of a genuine issue of material fact, even when the non-movant bears the burden of proof at trial); Russ v. Int'l Paper Co., 943 F.2d 589, 592 (5th Cir.1991) (noting that the movant must satisfy its obligation that there are no fact issues warranting trial before the non-movant is required to produce any evidence in opposition to the summary judgment motion). This Universal failed to do, and summary judgment on this theory was, therefore, improper. 6