Broydo v Baxter D. Whitney & Sons, Inc.

[*1] Broydo v Baxter D. Whitney & Sons, Inc. 2009 NY Slip Op 51295(U) [24 Misc 3d 1207(A)] Decided on June 23, 2009 Supreme Court, Kings County Schneier, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on June 23, 2009
Supreme Court, Kings County

Samoil Broydo AND ANNA BROYDO, Plaintiff, Petitioner,

against

Baxter D. Whitney & Sons, Inc., now known as NEWMAN MACHINE CO., INC., NEWMAN WHITNEY & WHITNEY MACHINE COMPANY INC., and "John Does, Inc.," intended to be distributors, servicers, repairers, sellers of parts of machine involved in plaintiff's accident on February 26, 2002, true names presently unknown, Defendants



36387/04



ATTORNEYS FOR PLAINTIFF

GEORGE N. STATFELD ESQ. 3 WEST 35TH STREET 6thFLOOR

NEW YORK, NEW YORK 10001

212-947-9166

ATTORNEYS FOR DEFENDANT/THIRD PLAINTIFF

NEWMAN MACHINE COMPANY

LITCHFIELD CAVO, LLP

420 LEXINGTON AVENUE

NEW YORK, NEW YORK 10170

212 434-0100

ATTORNEYS FOR THIRD- PARTY DEFENDANT

JRC LUMBER CORP.,

CULLEN and DYKMAN, LLP

177 MONTAGUE STREET

BROOKLYN, NEW YORK 11201

718-855-9000

Martin Schneier, J.

In this work related personal injury action,defendant Newman Machine Co., Inc. ("Newman") moves for summary judgment pursuant to CPLR sections 3212 and 3211 dismissing plaintiff's cause of action.

Third-party defendant JRC Lumber Corporation ("JRC") moves for summary judgment dismissing the defendant/third-party plaintiff's complaint along with any and all cross-claims or conterclaims interposed against the third-party defendant, JRC Lumber Corp.

Background

On February 26, 2002, plaintiff Samoil Broydo ("Broydo"), was attempting to clean a woodworking machine known as a Whitney No.97 "Double Surfacer,"bearing serial number 15203 ("subject machine"). At the time, Broydo was employed by JRC. Broydo was holding a ten-inch scraper with both hands and was pressing the scraper against a feed roller while the machine was operating. Broydo had removed a protective cowl, thereby exposing the machines fast spinning knives which were less than one inch from the feed roller. Broydo's left hand came in contact with the roller and was pulled into the knives, resulting in the loss of four fingers.

Broydo then commenced this action alleging negligence (first cause of action), breach of express and implied warranties (second cause of action), breach of implied warranties (third cause of action) and defective design (fourth cause of action). The fifth cause of action is a loss of services claim by Broydo's wife. The claim for breach of express warranties was withdrawn in the bill of particulars. Newman commenced the third-[*2]party action for indemnification and contribution against JRC, alleging that Broydo had sustained a grave injury.

It is undisputed that the Double Surfacer was manufactured in 1946 by Baxter D. Whitney and Son, Inc. ("Old Whitney"). Broydo's products liability claims are contingent upon his successful assertion that Newman is liable as a successor to Old Whitney.

Old Whitney was founded in 1837 and incorporated in Massachusetts in 1919. Newman was incorporated on March 29, 1934 in North Carolina. Pursuant to a document dated January 14, 1955, Newman purchased specified assets of Old Whitney, but did not purchase the company itself, its goodwill or, its name.

Pursuant to a separate agreement, also dated January 14, 1955, the name, goodwill and other assets of Old Whitney were purchased by an individual named William York, "as agent for a Massachusetts corporation to be formed." On February 25, 1955, Old Whitney changed its name to Winchendon Machine Co., Inc.

On January 15, 1955, a new company, also known as Baxter D. Whitney & Son, Inc. ("New Whitney") was incorporated in Massachusetts. The shares of New Whitney were held by Newman's president, George F. Newman, William York and Frank York.

Pursuant to documents dated December 10, 1975, New Whitney merged with Newman. The documents described New Whitney as a wholly owned subsidiary of Newman. The documents were signed by Frank W. York, as president of both companies.

In 1993 JRC contacted Newman to service the subject machine in preparation of it being placed back in service. This "service call" by JRC required five visits by Newman technicians to JRC to wit: on November 1, 12, December 20, 21, and 22. The Newman technicians evaluated, disassembled the subject machine, removed the parts that needed to be repaired or replaced and then reassembled the subject machine with new and repaired parts.

Discussion

Summary judgment is a drastic remedy that should only be employed when there is no doubt as to the absence of any triable issues of a material fact (Kolivas v Kirchoff, 14 AD3d 493 [2nd Dept. 2005]). "Issue finding, rather than issue determination is the courts function. If there is any doubt about the existence of a triable issue of fact, or a material issue of fact is arguable, summary judgment should be denied." (Celardo v Bell, 222 AD2d [*3]

547 [2nd Dept. 1995]).

A party moving for summary judgment has the initial burden of coming forward with admissible evidence that establishes the absence of a material issue of fact and that the cause of action has no merit. (CPLR 3212[b]; GTF Marketing, Inc. V. Colonial Aluminum, Sales, Inc.,

66 NY2d 965, 968 [1985]). Once the movant has satisfied its obligation, the burden shifts and the party opposing the motion must demonstrate by admissible evidence the existence of a factual issue requiring a trial of the action (Alvarez v Prospect Hosp., 68 NY2d 320 [1986]; Zuckerman v. City of New York, 49 NY2d 557, 560, [1980]). "Mere conclusory assertions, devoid of evidentiary facts, are insufficient for this purpose, as is reliance upon surmise, conjecture, or speculation" (Morgan v. New York Telephone, 220 AD.2d 728, 729 [2d Dept 1995]).

Successor Liability

As a general rule, a corporation that purchases the assets of another is not liable for the torts of its predecessor (Schumacher v. Richards Shear Co., Inc., 59 NY2d 239, 244 [1983]). The successor corporation may be held liable if the transaction falls into one of the following exceptions: "(1) it expressly or impliedly assumed the predecessor's tort liability, (2) there was a consolidation or merger of seller and purchaser, (3) the purchasing corporation was a mere continuation of the selling corporation, or (4) the transaction is entered into fraudulently to escape such obligations" (id at 245).

With respect to the first exception, there was no express assumption of liability in the contract. Nor is there any evidence of an implied assumption of liability. In fact, the entire transaction appears to be designed to evade any assumption of liability. Furthermore, there is no allegation of fraud that would implicate the fourth exception.

In Grant-Howard Assocs. v General Housewares Corp., the Court of Appeals stated that the second and third exceptions "are based on the concept that a successor that effectively takes over a company in its entirety should carry the predecessor's liabilities as a concomitant to the benefits it derives from the good will purchased" (63 NY2d 291, 296 [1984]). This expansive interpretation was limited by the more recent opinion in Semenetz v. Sherling & Walden, Inc., (7 NY3d 194 [2006]). In Semenetz, the Court of Appeals declined to recognize a "product line" exception for successor liability and adhered to the four Schumacher exceptions. In its ruling the Court stated in pertinent part that: [*4] "As for whether liability should be imposed upon the successor corporation because it enjoys the benefit of its predecessor's goodwill, "any benefit the successor acquired through the goodwill or reputation of the predecessor's product line was considered and negotiated for at the time of the sale and constituted part of the sale price. To hold the successor liable for defects in products manufactured by the predecessor would be forcing the successor to pay twice for . . . goodwill""

(Id. at 200, quoting, Fish v Amsted Indus., Inc., 126 Wis2d 293, 309, 376 NW2d 820, 828 [1985]).

With respect to the second exception, there was no formal consolidation or merger. However, successor liability may still arise if the transaction was a "de facto merger." "The hallmarks of a de facto merger are the [c]ontinuity of ownership; cessation of ordinary business and dissolution of the predecessor as soon as possible; assumption by the successor of the liabilities ordinarily necessary for the uninterrupted continuation of the business of the acquired corporation; and, a continuity of management, personnel, physical location, assets, and general business operation'" (AT & S Transp., LLC v. Odyssey Logistics & Technology Corp., 22 AD3d 750, 752 [2d Dept 2005], quoting, Fitzgerald v. Fahnestock & Co., 286 AD2d 573, 574 [1st Dept 2001). In the instant case, there was, however, no continuity of ownership, management, personnel or physical location. Although Newman marketed machinery under the name Baxter D. Whitney and Son, it did not continue the manufacture of any of the machines that had been made by Old Baxter. Thus, there is insufficient evidence to support a claim of de facto merger.

Finally, since Old Whitney survived the transactions, even as a "meager" entity, Newman cannot be considered a "mere continuation" of Old Whitney under the third exception (Schumacher, supra, at 245).

Duty to Warn

Plaintiff alleges that because Newman had serviced the subject machine and had expertise regarding it, that Newman had a duty to warn JRC of defects or dangers in the use of the subject machine. Broydo argues that Newman's breach of this duty gives rise to its negligent failure to warn cause of action.

The subject machine that Broydo was cleaning when he was injured was sold by Old Whitney to J. Cohen & Bros. ("Cohen") in 1946. The [*5]subject machine came into possession of JRC when JRC purchased some of the assets of the dissolving Cohen in 1972.

Broydo alleges that Newman is liable for its alleged negligence in failing to warn of those dangers which it knew or had reason to know of. Such a duty to warn "commonly is imposed because of some special relationship, frequently economic, not only for those bearing special responsibilities such as common carriers and innkeepers, but on defendants generally...." Schumacher, supra, at 246.

The Schumacher court noted that factors to be considered in determining the existence of a duty to warn include "[s]ucession to a predecessor's service contracts, coverage of the particular machine under a service contract, service of that machine by the [successor] corporation, [and] a [sucessor] corporation's knowledge of defects and of the location or owner of that machine." Id. at 247 (quoting, Travis v. Harris Corp., 565 F.2d 443, 449 [7th Cir.1977]). The Schumacher court found issues of material fact existed where the defendant corporation had serviced the machine approximately ten years before the injury, had contacted the plaintiff's employer to solicit business, and had supplied replacement parts for the machine. On the other hand, a single service is insufficient to establish a special relationship between the parties (Sullivan v Joy Mfg. Co., 70 NY2d 806 [1987]).

In the instant case, the relationship between the parties consists of only a single service call in 1993 which, notwithstanding that it took place over five days, is insufficient to create a "special relationship." Thus, the movants have made a prima facie showing of entitlement to summary judgment as a matter of law in that in the instant case there was no "special relationship" between JRC and Newman, as successor to the manufacturer of the subject machine, which would impose a duty to warn on Newman.

In opposition, plaintiff failed to raise a triable issue of fact.

Conclusion

Based on the foregoing, the motion for summary judgment by defendant Newman Machine Co., Inc. is granted and the complaint is dismissed.

The motion for summary judgment by defendant JRC Lumber Corporation is also granted and the third-party complaint is dismissed.

This constitutes the Decision and Order of the Court. [*6]

_______________________

J.S.C.