| State Farm Fire & Cas. Co. v Main Bros. Oil Co. |
| 2012 NY Slip Op 09142 [101 AD3d 1575] |
| December 27, 2012 |
| Appellate Division, Third Department |
| State Farm Fire & Casualty Company, as Subrogee of LucyBowditch, Respondent, v Main Brothers Oil Company, Doing Business as Main Care Energy, asSuccessor of Merger to Ackner Fuels, Inc., Appellant, et al.,Defendant. |
—[*1] Pappas, Cox, Kimpel, Dodd & Levine, PC, Syracuse (Thomas P. Givas of counsel), forrespondent.
Spain, J. Appeal from an order of the Supreme Court (Hummel, J.), entered March 20, 2012in Rensselaer County, which, among other things, denied a cross motion by defendant MainBrothers Oil Company to dismiss the complaint against it.
This action arises out of a 2009 fire that occurred at the residence of Lucy Bowditch in theCity of Troy, Rensselaer County. Per its insurance policy, plaintiff paid Bowditch for thedamages and is now subrogated to her rights against others as they relate to the fire. Plaintiffalleges, as its expert determined, that the fire was caused by the negligent installation of a boilerand enclosure, which was allegedly installed by defendant Hastings & Company, Inc. pursuant toa contract between Bowditch and Hastings in 1997 or 1998. In 1999, Ackner Fuels, Inc. enteredinto an asset purchase agreement with Hastings, whereby Ackner purchased certain assets andassumed certain liabilities of Hastings. Thereafter, in 2007, defendant Main Brothers OilCompany acquired all of the stock of Ackner pursuant to a stock purchase agreement.
In December 2010, plaintiff commenced this action against Hastings and Main Brothers,alleging negligence on the part of Hastings and that Main Brothers was liable as the successor ininterest to Hastings. Main Brothers answered and asserted a cross claim against Hastings forindemnification. Plaintiff thereafter agreed to discontinue its direct claim against Hastings andmoved for leave to amend its complaint to assert direct liability against Main Brothers based onMain Brothers' own alleged negligence in failing to discover and/or correct the defect whileservicing the boiler in the years leading up to the fire.[FN1] Main Brothers cross-moved pursuant to CPLR 3211 to dismiss plaintiff's complaint against it,alleging that the 1999 asset purchase agreement between Hastings and Ackner (hereinafter theasset purchase agreement) precluded successor liability as a matter of law (see CPLR3211 [a] [1], [7]). Supreme Court granted plaintiff's motion to amend and denied Main Brothers'cross motion, prompting this appeal by Main Brothers challenging the denial of its cross motionto dismiss the claim against it based on successor liability.[FN2]
"A 'motion to dismiss on the ground that the action is barred by documentary evidence. . . may be appropriately granted only where the documentary evidence utterlyrefutes [the] plaintiff's factual allegations, conclusively establishing a defense as a matter of law'" (Mason v First Cent. Natl. Life Ins.Co. of N.Y., 86 AD3d 854, 855 [2011], quoting Goshen v Mutual Life Ins. Co. ofN.Y., 98 NY2d 314, 326 [2002] [citation omitted]; see Kilmer v Miller, 96 AD3d 1133, 1135 [2012], lvdismissed 19 NY3d 1042 [2012]). We agree with Supreme Court that the documentaryevidence relied upon—the asset purchase agreement[FN3]—is insufficient in [*2]and of itself to bar plaintiff's claimsand, thus, we now affirm.
Main Brothers argues that the asset purchase agreement is sufficient documentary evidenceestablishing that no successor liability existed, as it clearly delineates the only assets andliabilities that were assumed by Ackner from Hastings. It is the general rule that "[a] corporationwhich acquires the assets of another is not generally liable for the torts of its predecessor"(Wensing v Paris Indus.-N.Y., 158 AD2d 164, 166 [1990]; see Schumacher vRichards Shear Co., 59 NY2d 239, 244-245 [1983]). However, this rule is subject to severalexceptions, namely that "[a] corporation may be held liable for the torts of its predecessor if (1) itexpressly or impliedly assumed the predecessor's tort liability, (2) there was a consolidation ormerger of seller and purchaser, (3) the purchasing corporation was a mere continuation of theselling corporation, or (4) the transaction is entered into fraudulently to escape such obligations"(Schumacher v Richards Shear Co., 59 NY2d at 245; see Semenetz v Sherling & Walden, Inc., 7 NY3d 194, 198 [2006]).
Main Brothers correctly asserts that the third exception, "mere continuation," cannot applybecause it requires that the selling/predecessor corporation be fully extinguished for there to besuccessor liability, and no dispute exists that Hastings continued in business after the transfer ofassets to Ackner (see Schumacher v Richards Shear Co., 59 NY2d at 245; AndrewGreenberg, Inc. v Sir-Tech Software, 297 AD2d 834, 836 [2002]). Further, no evidence offraud exits that would suggest the applicability of the fourth exception. We hold, however, thatthe asset purchase agreement, in and of itself, does not eliminate the possibility that one of thefirst two exceptions could apply.
First, the asset purchase agreement does not conclusively establish that Ackner did notexpressly or impliedly assume liability for the contract between Bowditch and Hastings. MainBrothers relies on language in Article I, which states that "[o]nly those assets of HASTINGSwhich pertain to the sale of petroleum products and the sale and servicing of burners are includedin this Agreement," and the "ASSUMED LIABILITIES" section of Article II, which lists certainassumed liabilities and does not include any express language assuming liability for the past actsof Hastings. While this language certainly suggests that Ackner may not have assumed liabilityfor past acts of negligence related to the installation of a boiler, we agree with plaintiff that otheraspects of the asset purchase agreement render it ambiguous, precluding a finding as a matter oflaw. For example, the list of assets transferred comprehensively includes "[a]ll contracts andother agreements which have been entered into in the ordinary course of business consistent withpast practice to which HASTINGS is bound." Further, under "ASSUMED LIABILITIES," the[*3]asset purchase agreement states that "ACKNER will assumeall pre-paid fuel oil contracts (also known as customer deposits) and heating equipment servicecontracts as set forth in Schedule F," but no schedule F is attached in the record. Hence, we findthat the asset purchase agreement contains ambiguities that are subject to conflictinginterpretations, rendering dismissal based on documentary evidence inappropriate (see Thomas A. Sbarra Real Estate, Inc. vLavelle-Tomko, 84 AD3d 1570, 1571 [2011]; Angelino v Michael Freedus, D.D.S., P.C., 69 AD3d 1203, 1206[2010]; Cerand v Burstein, 72AD3d 1262, 1266 [2010]; Witiuk v Mykytiw, 216 AD2d 779, 780-781 [1995]).
Likewise, questions of fact exist regarding whether the transfer of assets to Ackner byHastings was a de facto merger that could give rise to successor liability. Under the concept of defacto merger, " 'a successor that effectively takes over a company in its entirety should carry thepredecessor's liabilities as a concomitant to the benefits it derives from the good will purchased' "(Winch v Yates Am. Mach. Co., 205 AD2d 1001, 1002 [1994], lv dismissed 84NY2d 1027 [1995], quoting Grant-Howard Assoc. v General Housewares Corp., 63NY2d 291, 296 [1984]; see Wensing v Paris Indus.-N.Y., 158 AD2d at 167). Inconducting such an inquiry, we must consider factors such as, but not limited to, whether thesuccessor purchased the predecessor's intangible assets, goodwill, customer lists, accountsreceivable, trademarks, and records, and whether there was any continuity of ownership,management, employees or the business in general (see Winch v Yates Am. Mach. Co.,205 AD2d at 1002-1003; Mitchell v Suburban Propane Gas Corp., 182 AD2d 934,935-936 [1992]; Wensing v Paris Indus.-N.Y., 158 AD2d at 167). As noted above, thelist of transferred assets in the asset purchase agreement refers to specific schedules that are notannexed thereto, leaving ambiguity as to what exactly was transferred. Moreover, the list oftransferred assets expressly includes "without limitation[,] all right, title and interest ofHASTINGS in and to all accounts receivable . . . contract rights, licenses, permits,customer prospect and marketing lists, sales data, records . . . proprietaryinformation and good will." Under these circumstances, we agree with Supreme Court thatambiguities in the asset purchase agreement preclude a finding as a matter of law that nosuccessor liability exists (see Winch v Yates Am. Mach. Co., 205 AD2d at 1002;Wensing v Paris Indus.-N.Y., 158 AD2d at 167).
To the extent that Main Brothers' cross motion to dismiss may be considered one asserting afailure to state a cause of action pursuant to CPLR 3211 (a) (7), we likewise find it unavailing.The original complaint adequately stated a cause of action against Main Brothers based on atheory of successor liability and, inasmuch as we hold that the documentary evidence does notflatly contradict this claim (see Lopes vBain, 82 AD3d 1553, 1555 [2011]), Main Brothers' cross motion was in all respectsproperly denied.
Peters, P.J., Kavanagh, McCarthy and Egan Jr., JJ., concur. Ordered that the order isaffirmed, with costs.
Footnote 1: Hastings also moved,unsuccessfully, to dismiss Main Brothers' cross claim for indemnification.
Footnote 2: To the extent that the partiespresent arguments on appeal related to Main Brothers' direct liability, they are not properlybefore us, as plaintiff was not granted leave to amend its complaint to assert direct liabilityagainst Main Brothers until entry of the order here appealed from.
Footnote 3: In support of its cross motion,Main Brothers submitted an affirmation of its attorney, an affidavit of its controller, the assetpurchase agreement and the stock purchase agreement between Ackner and Main Brothers.Because the affidavits are not documentary evidence as contemplated by CPLR 3211 (a) (1) (see Lopes v Bain, 82 AD3d 1553,1554 [2011]), the issue devolves to whether the asset purchase agreement conclusivelyestablishes that Main Brothers is not subject to successor liability. Main Brothers does not rely inits arguments on the second link in the chain of successor liability, the stock purchase agreementbetween Ackner and Main Brothers.