POLY-AMERICA INC V SHRINK WRAP INTL
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STATE OF MICHIGAN
COURT OF APPEALS
POLY-AMERICA, INC.,
UNPUBLISHED
October 10, 2000
Plaintiff-Appellee/Cross-Appellant,
v
No. 212951
Wayne Circuit Court
LC No. 96-619840-CZ
SHRINK WRAP INTERNATIONAL,
Defendant-Appellant/Cross-Appellee.
Before: Whitbeck, P.J., and Fitzgerald and Markey, JJ.
PER CURIAM.
Plaintiff, Poly-America, Inc., is a Texas manufacturer of polymer films. In October and
November 1994, plaintiff sold film to Shrink Wrap Systems (“Systems”). When Systems failed to pay
for the film, plaintiff obtained a default judgment against Systems in Texas. Because collection efforts
against Systems were unsuccessful, plaintiff brought an action in Wayne Circuit Court against Shrink
Wrap International (“International”) on the theories of successor liability and fraudulent conveyance.
The trial court directed a verdict on the fraudulent conveyance claim. The jury returned a unanimous
verdict in the amount of $65,000 on the successor liability claim. During post-judgment proceedings,
the trial court awarded plaintiff interest on the judgment pursuant to MCL 600.6013(6); MSA
27A.6013(6), and also awarded pre-filing interest pursuant to MCL 438.7; MSA 19.4. The court also
awarded plaintiff mediation sanctions, but refused to allow interest on the mediation sanctions.
Defendant appeals from the judgment and post-judgment orders as a matter of right. Plaintiff cross
appeals, arguing that the trial court erred in dismissing the fraudulent conveyance claim, that the court
erred in refusing to award post-judgment interest on the mediation sanction award, and that the court
erred in granting pre-judgment interest pursuant to §6013(6) instead of MCL 600.6013(5); MSA
27A.6013(5). We affirm in part and reverse in part.
FACTS
In 1983, Gloria Horne commenced employment with American Boat Top (“ABT”), a
manufacturer of custom canvas tops for boats, and became a twenty percent owner of the company
with a $20,000 investment. ABT was owned by Othell “Red” Bickerstaff. In 1987, Bickerstaff
formed Systems, a supplier of shrink wrap film and related equipment used in winterizing boats. In
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1989, Horne became Bickerstaff’s partner in Systems, receiving a fifty percent interest in the business
without any investment.
In 1992, Horne and Bickerstaff had a “falling out” over the handling of finances and Horne left
Systems. Bickerstaff executed a note in the amount of $200,000 to pay Horne for her share of Systems
in November 1992. However, Bickerstaff never made any payments on the note.
In 1993, Systems’ business operations relocated to a warehouse owned by Horne. In March
1993, Horne went back to work for Systems because she was not being paid on the note. She
returned to her previous position involving sales and orders. She was earning a weekly salary of
$1,000. At that time, Systems’ core employees were Ruth Ann Eliason, Debbie Beringer, Harold
Franton, Michael Thanasiu, Masako Yuhas, and “Mr. Bronson.”
In late 1994, Horne realized that Systems was “going down.” At that time, Systems was late in
paying rent, late in paying wages, on COD status with most suppliers, and on pre-pay terms with others.
Horne indicated that “she knew the money was coming in, but did not know where it was going.”
In September 1994, Horne began to form International while she was still employed at Systems.
International’s business is identical to that of Systems. Both Horne and Bickerstaff’s daughter, Ruth
Ann Eliason, were forty-nine percent shareholders in International. Bickerstaff was a two percent
shareholder. Initially, Horne testified that her sole investment in International was $20,000 in November
of 1994. Later, however, Horne testified that she may have also invested $50,000 in September of
1994. Neither Bickerstaff nor Eliason made any capital contributions to International.
Horne established a banking relationship for International with Franklin Bank in October 1994
and contracted for courier service in November 1994. In December 1994, Bickerstaff told Horne that
he had business in California and did not know when he was returning. Systems ceased operating in
December 1994. According to Horne, International did not begin official operations until January 1995.
During November and December 1994, in addition to the $61,000 of goods purchased from
plaintiff, Systems purchased $326,261 of goods from its principal supplier, Crayex. This constituted
approximately 400,000 pounds of film during a time in which Systems was ceasing operations.
Nonetheless, Horne insisted that there was no appreciable inventory left when she opened International
for business in January 1995.
When International opened for business in January 1995, it had all of Systems’ inventory,
furniture, phones, computers, and records. International retained all six of Systems’ telephone numbers,
and paid Systems’ past electrical bill and retained service in Systems’ name. International also paid
Systems’ past gas bill and retained gas service in Systems’ name. International paid Systems’ pager
service bill and retained the pagers. International paid Systems’ bills to the extent necessary to keep the
business operating, and contracted in Systems’ name. When International opened, the employees were
the same core employees that operated Systems. Horne testified that she never gave any supplier or
customer a written notice that Systems was out of business and that International had replaced it. She
stated that she informed employees to answer the phone “Shrink Wrap International,” and to tell
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customers that International could fill Systems’ orders. She did not know whether employees answered
the phone as instructed.
After International began operations, it began to collect Systems’ receivables and deposit them
in International’s bank account. Among the payments received were: $3,196.64 from Crest Liner,
$4,800 from Santarosa Sales, $482 from CF Sales, $2,700 from Dart Trucking, $563.70 from Leader
Ind., $1,661 and $138 from North Point, Inc., $103.65 from MacPac, $854 and $579 from Granite
Packing, $4,228.95 from Demmitt & Owens, and others. International also cashed checks from FPM
made payable to Systems in March and April 1995 in the amounts of $4,000 and $5,000. Horne was
a twenty-five percent owner of FPM.
Cathy Knight, a sales representative with plaintiff, testified that she spoke with either Horne or
Bickerstaff once a week from October 1994 through June 1995. During May and June 1995 she
spoke with them daily. Throughout that time, the phone numbers she called for Systems were always
answered “Shrink Wrap.” Knight spoke to both Horne and Bickerstaff about Systems’ outstanding
debt to plaintiff. At no time did anyone at International tell her that Systems had ceased operating.
From January through May 1995, International paid plaintiff $39,000 on Systems’ outstanding
debt. These payments came in the form of wire transfers from International’s bank (Franklin Bank) and
from checks written by Horne on International’s account. On May 8, 1995, Bickerstaff, using Systems’
letterhead, promised to pay $7,000 every other week on the arrearage and purchased $7,200 of new
inventory from plaintiff in Systems’ name. Horne testified that the money used to pay the debt was
“loaned” to Bickerstaff and secured by promissory notes. However, Horne presented no documentary
evidence or testimony to support her assertion.
In April 1995, International contracted with AT&T for telephone service in Systems’ name and
confirmed the purchase using Systems’ fax cover sheet. Horne identified herself in this transaction as
“president” of a company called “Shrink Wrap.” Bickerstaff contracted with UPS in Systems’ name in
January 1995 for a shipping label machine. International contracted with Systems’ computer software
company for work in July 1995 and October 1996 using Systems’ name.
After the close of plaintiff’s proofs, the trial court granted International’s motion for a directed
verdict on the claim of fraudulent conveyance but denied the motion for a directed verdict on the claim
of successor liability. The jury returned a unanimous verdict, finding that Shrink Wrap International was
a successor of Shrink Wrap Systems and was liable for Systems’ debts.
On June 12, 1998, Judge Tertzag heard a motion for entry of judgment. The dispute between
the parties involved the inclusion of pre-filing interest in the judgment pursuant to MCL 438.7; MSA
19.4. Defendant argued that pre-filing interest was an element of plaintiff’s proofs to the jury and that
the jury’s verdict included all pre-filing interest. Plaintiff asserted that the jury verdict included only the
amount owing by defendant and could not have included statutory pre-filing interest. The court
awarded pre-filing interest in the amount of $4,630.14 pursuant to MCL 438.7; MSA 19.4 for the time
period between the date of the Texas judgment and the date the complaint was filed in the present
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action. The court also awarded post-judgment interest in the amount of $10,413.57 pursuant to MCL
600.6013(6); MSA 27A.6013(6) from the date the complaint was filed.
On August 7, 1998, Judge Tertzag heard a motion for mediation sanctions. International filed
no written objection to the motion and relied only on a verbal objection at the hearing. Defendant
objected to plaintiff’s hourly rate of $140, claiming it should be $100 per hour because defendant’s
attorney charged that rate. The court suggested that the parties try to compromise on the issue of
mediation sanctions. The parties agreed to a total figure, including costs and fees, of $25,316.95. The
court denied interest on the mediation sanctions.
I
International claims that the trial court should have directed a verdict in favor of International on
the claim of successor liability because plaintiff failed to prove that Systems had ceased its ordinary
business operations, liquidated, and dissolved. We disagree.
When evaluating a motion for directed verdict, this Court must consider the evidence in a light
most favorable to the nonmoving party, making all reasonable inferences in favor of the nonmoving
party. Locke v Pachtman, 446 Mich 216, 223; 521 NW2d 786 (1994). Directed verdicts are
appropriate only when no factual dispute exists upon which reasonable minds could differ. Brisboy v
Fibreboard Corp, 429 Mich 540, 549; 418 NW2d 650 (1988).
Generally, when one corporation sells its assets to another, the purchaser is not responsible for
the debts and liabilities of the selling corporation. Antiphon, Inc v LEP Transport, Inc, 183 Mich
App 377, 382; 454 NW2d 222 (1990). However, there are exceptions to the general rule:
The law is well settled in regard to liability of the consolidated or purchasing
corporation for the debts and liabilities of the consolidating or selling corporation. Such
obligations are assumed (1) when two or more corporations consolidate and form a
new corporation, making no provision for the payment of the obligations of the old; (2)
when by agreement, express or implied, a purchasing corporation promises to pay the
debts of the selling corporation; (3) when the new corporation is a mere continuance of
the old; (4) when the sale is fraudulent, and the property of the old corporation, liable
for its debts, can be followed into the hands of the purchaser. [Id. at 382-383, citing
Chase v Michigan Tel Co, 121 Mich 631, 634; 80 NW 717 (1899).].
Here, a review of the record reveals that plaintiff’s cause of action for successor liability was
based on the third exception: that the new corporation is a mere continuance of the old.
The parties apparently believed below that, to succeed on the claim of successor liability,
plaintiff had to establish that there was a “continuity of enterprise” between the corporations. See
Turner v Bituminous Casualty Co, 397 Mich 406; 244 NW2d 873 (1976), where the Court noted
the exceptions to the general rule regarding successor liability, but
“rejected the narrow strictures of traditional corporate successor nonliability as
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inapplicable to a products liability case. The Turner Court reasoned that the traditional
corporate law approach was neither legally nor logically related to the policy
considerations underlying the evolving law of products liability. Therefore, in its stead,
the Turner Court adopted the rule of “continuity of enterprise” for products liability
cases which arise subsequent to corporate transfers. [Pelc v Bendix Machine Tool
Corp, 111 Mich App 343, 352; 314 NW2d 614 (1981).]
Turner’s “continuity of enterprise” has been applied only in products liability cases. Turner
has not been interpreted by any case law as requiring proof of all four elements to establish a prima facie
case of successor liability in a case where the issue is whether a successor corporation can be held liable
for the debts incurred by the selling corporation. Hence, we believe that analysis of this issue under the
rubric of Antiphon is appropriate.
International argues that plaintiff failed to prove that International is merely a continuance of
Systems because Systems is still operating. However, viewed in a light most favorable to plaintiff, the
evidence revealed that Systems ceased operating in early December 1994. Horne testified that Systems
and International never operated at the same time and that International commenced operations in
January 1995. She also testified that she directed her staff to tell callers that Systems was out of
business. Absolutely no evidence was presented to support a finding that Systems was operating during
the relevant time period. Further, abundant evidence was presented that International merely continued
Systems’ business operation. Hence, the trial court properly denied the motion for directed verdict of
the claim of successor liability.
II
International asserts that the trial court erred by refusing to give a supplemental jury instruction.
The determination whether supplemental jury instructions are applicable and accurate is within the trial
court’s discretion. Stoddard v Manufacturers Nat’l Bank of Grand Rapids, 234 Mich App 140,
162; 593 NW2d 630 (1999). There is no reversible error if, on balance, the theories of the parties and
the applicable law are adequately and fairly presented to the jury. Murdock v Higgins, 454 Mich 46,
60; 559 NW2d 639 (1997).
Horne testified that Systems began operating again in 1997.
International asked the court to instruct the jury that:
In light of this statement,
[I]f you find that Shrink Wrap Systems is still in business, then you cannot find
that Shrink Wrap International is a successor corporation and you must find no cause of
action against Poly-America regarding their claim that Shrink Wrap International is a
successor corporation of Shrink Wrap Systems.
The trial court refused to read the instruction, instead instructing the jury in accordance with the four
prong test established in Turner, supra. The court reasoned that if the predecessor corporation closed,
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and then reopened, the reopening should not vitiate the successor liability that accrued through its
dormancy.1
The instruction requested by International did not adequately state the law. The Turner test
required plaintiff to prove that “the selling corporation ceased its ordinary business operation, liquidated
and dissolved as soon as legally and practically possible.” Plaintiff was not required to prove that
Systems did not resume doing business in the future. The instructions as given by the trial court
adequately stated the applicable law.
III
International argues that the jury’s finding that there was a “continuity of management,
personnel, physical location, assets, and general business operations of the selling corporation” was
against the great weight of the evidence. An objection going to the great weight of the evidence can be
raised only by a motion for new trial before the trial court. Hyde v University of Michigan Bd of
Regents, 226 Mich App 511, 525; 575 NW2d 36 (1997). International did not bring a motion for
new trial.2 Failure to raise the issue by the appropriate motion waives the issue on appeal, People v
Winters, 225 Mich App 718, 729; 571 NW2d 764 (1997), unless failure to consider the issue would
result in a miscarriage of justice. People v Noble, 238 Mich App 647, 658; 608 NW2d 123 (1999).
Because the evidence was sufficient to support the jury’s verdict, a miscarriage of justice will not result
from our failure to review this issue.
IV
International contends that the trial court erred by admitting the Texas default judgment and the
Michigan civil judgment into evidence because the probative value of the evidence was outweighed by
the danger of unfair prejudice. MRE 403. International did not raise an objection substantially on this
ground at trial.3 To preserve an evidentiary issue for review, a party opposing the admission of
evidence must object at trial and specify the same ground for objection that it asserts on appeal. MRE
103(a)(1); Kubisz v Cadillac Gage Textron, Inc, 236 Mich App 629, 637; 601 NW2d 160 (1999).
Absent an objection, appellate review is limited to whether admission of the evidence resulted in
manifest injustice. People v Ramsdell, 230 Mich App 386, 404; 585 NW2d 1 (1998). Here, the
judgments were admitted to confirm the amount of the debt owing from Systems to plaintiff. Plaintiff’s
account representative independently verified, from corporate records, that the two judgments reflected
the amount owing to plaintiff from Systems. Indeed, it is uncontroverted that Systems owed plaintiff at
1
We note that Horne presented no documentary or testimonial evidence to support the claim that
Systems reopened.
2
Rather, International brought a motion for judgment notwithstanding the verdict.
3
At trial, International’s objection came in the form of a challenge to foundation. International
questioned whether the proffered document (the Texas judgment) was kept in the ordinary course of
plaintiff’s business. International lodged no objection to the admission of the Michigan judgment.
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least $65,000. The dispute at trial was whether International could be held liable for the debt. Thus,
admission of the evidence did not result in manifest injustice.
V
International maintains, without objection below and without citation to supporting authority, that
all post-judgment motions should be set aside because the trial judge did not preside over the motions.
This issue is not properly preserved because it was not raised before and addressed by the trial court.
People v Grant, 445 Mich 535, 546; 520 NW2d 123 (1994); Fast Air, Inc v Knight, 235 Mich
App 541, 549; 599 NW2d 489 (1999). Further, an appellant may not merely announce his position
and leave it to this Court to discover and rationalize the basis for his claims, Wilson v Taylor, 457 Mich
232, 243; 577 NW2d 100 (1998), nor may he give only cursory treatment with little or no citation of
supporting authority. People v Kelly, 231 Mich App 627, 641; 588 NW2d 580 (1998).
Consequently, we decline to address this issue.
VI
International argues that the court erred by awarding statutory interest because the jury verdict
already included interest. A review of the lower court record reveals that International’s argument is
factually flawed. At trial, the jury was asked only to determine whether International was liable for
Systems’ debts and, if so, the amount of the debt. Evidence was presented regarding the amount of the
unpaid invoices for merchandise received by Systems. The issue of interest was never presented to the
jury.
VII
International argues that the trial court erred by awarding pre-judgment interest for the period of
time between the date of the Texas judgment and the filing of the present complaint.4 The award of pre
judgment interest is a matter within the trial court’s discretion. Holland v Earl G. Graves Pub Co,
Inc, 33 F Supp 2d 581, 583 (ED Mich, 1998); Cataldo v Winshall, Inc, 3 Mich App 290, 295-296;
142 NW2d 28 (1966).
In Holland, supra at 583, the court stated:
With respect to interest potentially accruing before the filing of the complaint . .
. “generally, Michigan courts have included interest as an element of damages as a
matter of right where the amount claimed is liquidated.” Jones v Jackson Nat’l Life
Ins Co, 819 F Supp 1382, 1383 (WD Mich, 1993) (citing Banish v City of
Hamtramck, 9 Mich App 381, 385; 157 NW2d 445 (1968)). A claim for damages is
defined as being “liquidated” where, as in the case at bar, “the amount thereof is fixed,
4
International relies on MCL 600.6013(6); MSA 27A.6013(6) in support of its argument. However,
pre-judgment interest is governed by MCL 438.7; MSA 19.4.
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has been agreed upon, or is capable of ascertainment by mathematical computation or
operation of law.” . . . . As the Jones court stated, in cases where the amount claimed is
liquidated, “interest generally has been allowed from the date when the claim accrued or
in other words, ‘from the date compensation would have been due had it been paid
voluntarily.’” [Jones, supra at 1383 (quoting Currie v Fiting, 375 Mich App 440,
454; 134 NW2d 611 (1965)).].
MCL 438.7; MSA 19.4 provides that:
In all actions founded on contracts, express or implied, whenever in the
execution thereof any amount in money shall be liquidated or ascertained in favor of
either party, by verdict, report of referees, award of arbitrators, or by assessment made
by the clerk of the court, or by any other mode of assessment according to law, it shall
be lawful . . . to allow and receive interest upon such amount. . . .
The court may, in its discretion, award plaintiff pre-judgment interest. Here, plaintiff’s claim was
liquidated because Systems shipped the goods to Systems together with an invoice for payment.
Hence, plaintiff is entitled to receive interest “from the date compensation would have been due had it
been paid voluntarily.” Currie, supra at 454. Here, the trial court used the date of the Texas judgment
as the date from which plaintiff would have been entitled to receive interest.5 The trial court did not
abuse its discretion in awarding plaintiff pre-judgment interest as an element of damages.
VIII
International asserts that the trial court erred by awarding mediation sanctions without a hearing
regarding attorney fees or hours. Whether a party is entitled to sanctions, and the amount of actual
costs and attorney fees, are within the trial court’s discretion. Beach v State Farm Mutual
Automobile Ins Co, 216 Mich App 612, 625-626; 550 NW2d 580 (1996).
International argues that the $140 hourly fee charged by plaintiff’s attorney was unreasonable.
In calculating reasonable attorney fees, the trial court may take into consideration the fees generally
charged by attorneys in that circuit. See, e.g., Michigan Basic Property Ins Ass’n v Hackert
Furniture Distributing Co, 194 Mich App 230, 234, 236; 486 NW2d 68 (1992). The record
reveals that the trial court determined that the hourly rate charged by plaintiff’s counsel was lower than
the fees charged by attorneys in Wayne County. The fee charged to International by their counsel is not
necessarily determinative of a reasonable attorney fee.
In addition, International argues that the trial court should have held an evidentiary hearing
regarding the necessity of the services provided by plaintiff’s counsel as a result of International’s
rejection of the mediation evaluation. However, International did not request an evidentiary hearing, and
5
Arguably, plaintiff would have been entitled to pre-judgment interest from the date on which payment
on the invoice was due.
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consented to the entry of the order for mediation sanctions. The amount of the sanctions entered on the
order was negotiated between the parties, not the trial court. Consequently, International has waived
this argument.
IX
On cross-appeal, 6 plaintiff argues that the trial court erred in refusing to award post-judgment
interest on the mediation sanction award. We agree. Pursuant to MCL 600.6013(6); MSA
27A.6013(6):
Interest under this subsection shall be calculated on the entire amount of the
money judgment, including attorney fees and other costs. However, the amount of
interest attributable to that part of the money judgment from which attorney fees are
paid shall be retained by the plaintiff, and not paid to the plaintiff’s attorney.
Accordingly, attorney fees awarded as mediation sanctions are subject to interest. Pinto v Buckeye
Union Ins Co, 193 Mich App 304, 312; 484 NW2d 9 (1992).
Plaintiff also argues on cross-appeal that the trial court erred in granting pre-judgment interest
pursuant to §6013(6). Plaintiff suggests that interest should have been granted pursuant to MCL
600.6013(5); MSA 27A.6013(5), because the action was based on a written instrument.
The term “written instrument” is not defined in § 6013. However, in Yaldo v North Pointe Ins
Co, 457 Mich 341, 346; 578 NW2d 274 (1998), the court found the term to be clear and
unambiguous in determining that an insurance policy is a written contract. The Court noted that:
The Legislature’s choice to impose a higher rate of interest on defendants who
enter into written contracts is not arbitrary. First, there is a distinction between contract
claims and tort claims. Tort claimants often do not have a preexisting relationship with
their tortfeasors. On the other hand, there is a preexisting relationship between two
parties who have signed a written contract. Greater expectations regarding
performance and payments are likely to exist when the parties have established their
rights and responsibilities before a controversy arises.
While so great a distinction is not found between written contracts and oral
contracts, there is nevertheless a greater degree of certainty when a written contract is
involved. It would be logical for the Legislature to impose a higher interest rate for
written instruments. [Id. at 350.]
6
Plaintiff argues in the cross-appeal that the trial court erred in dismissing the fraudulent conveyance
claim. However, plaintiff states that it has raised this argument “only in the unlikely event that
defendant/appellant is granted relief on appeal . . . . [T]his argument is moot if the defendant’s appeal is
denied” (because the remedies for the two claims overlap). Thus, in light of our decision to affirm the
jury’s verdict, we need not address this issue.
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International contends that “the purchase orders and invoices combine to form a contract, a written
agreement.” We disagree. No evidence was presented regarding how the business relationship
between Systems and plaintiff operated. At most, evidence was presented that plaintiff shipped
merchandise to International and then sent an invoice for the merchandise. No evidence was presented
to support a factual finding that a written contract existed between plaintiff and Systems with regard to
the shipment of merchandise that would constitute a “written contract” as that term is used in the statute
and interpreted in Yaldo. Hence, we conclude that interest was properly awarded pursuant to
§ 6013(6).7
We reverse the trial court’s denial of plaintiff’s motion for interest on the mediation sanctions
and costs and remand for further proceedings consistent with this opinion. In all other respects the
judgment is affirmed. Jurisdiction is not retained.
/s/ William C. Whitbeck
/s/ E. Thomas Fitzgerald
/s/ Jane E. Markey
7
Plaintiff’s alternative argument regarding the statutory rate of interest on the Texas judgment is moot
because the present action is independent of the Texas action. Further, judgment was set aside because
Systems was not properly served with the summons and complaint.
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