This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1994).
STATE OF MINNESOTA
IN COURT OF APPEALS
John Andersen, et al.,
Northern Hydraulics, Inc.,
defendant and third-party plaintiff,
Mr. Heater Corporation, third-party defendant,
Filed August 13, 1996
Toussaint, Chief Judge
Dakota County District Court
File No. C0-95-6734
Gary D. Bodelson, 247 3rd Avenue South, Minneapolis, MN
55415 (for respondents Andersen)
Nathan Webster Hart, Mark A. Fonken, Jardine, Logan & O'Brien,
3100 Piper Jaffray Plaza, 444 Cedar Street, St. Paul, MN 55101-
2160 (for appellant)
Patrick D. Reilly, Law Offices of Patrick D. Reilly, 2420 Dain
Bosworth Plaza, 60 South Sixth Street, Minneapolis, MN 55402
Eric J. Magnuson, Richard J. Nygaard, Edwin Cheeseboro, Rider,
Bennett, Egan & Arundel, 2000 Metropolitan Centre, 333 South
Seventh Street, Minneapolis, MN 55402 (for respondent Mr.
Considered and decided by Huspeni, Presiding Judge,
Toussaint, Chief Judge, and Foley,* Judge.
U N P U B L I S H E D O P I N I O N
TOUSSAINT, Chief Judge
Appellant Northern Hydraulics, Inc., claims that respondent
Mr. Heater Corporation is the successor corporation, for liability
purposes, to the manufacturer of an allegedly defective product and
challenges the trial court's grant of summary judgment for
respondent on this issue. We affirm.
D E C I S I O N
A motion for summary judgment shall be granted when the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue of material fact and that either
party is entitled to a judgment as a matter of law. On
appeal, the reviewing court must view the evidence in the
light most favorable to the party against whom judgment
Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993) (citation omitted).
In Minnesota, where one corporation sells or otherwise
transfers all of its assets to another corporation, the successor is
generally not liable for the debts and liabilities of the transferor,
(1) where the purchaser expressly or impliedly agrees to
assume such debts;
(2) where the transaction amounts to a consolidation or
merger of the corporation;
(3) where the purchasing corporation is merely a
continuation of the selling corporation; and
(4) where the transaction is entered into fraudulently in
order to escape liability for such debts.
J.F. Anderson Lumber Co. v. Myers, 296 Minn. 33, 37-38, 206
N.W.2d 365, 368-69 (1973); see Cooper v. Lakewood Engineering & Mfg.
Co., 45 F.3d 243, 245 (8th Cir. 1995) (iterating standard).
Appellant contends that respondent is the successor for liability purposes
to ENERCO, the manufacturer of an allegedly defective product that injured
John Andersen, arguing (1) respondent is a "mere continuation" of ENERCO,
(2) the transfer of assets from ENERCO to respondent by way of an
intervening sale of the assets to the B.D. Wait Corporation, ENERCO's
Canadian distributor, was a fraudulent conveyance made to escape liability
for potential lawsuits, and (3) respondent assumed liability for ENERCO's
Successor liability exists “where the purchasing corporation
is merely a continuation of the selling corporation.” J.F.
Anderson, 296 Minn. at 38, 206 N.W.2d at 368-69. In Niccum
v. Hydra Tool Corp., 438 N.W.2d 96 (Minn. 1989), the Minnesota
Supreme Court held:
Under the traditional rule mere continuation “refers
principally to a ‘reorganization’ of the original
corporation” under federal bankruptcy law or
through state statutory devices. J.F. Anderson, 296
Minn. at 38, 206 N.W.2d at 369. This court held that
“continuity of business, name, and management
alone, is not, we think, sufficient basis for holding a
transferee liable for the debts of the transferor.” Id.
If there is no continuation of the corporate entity --
shareholders, stock, and directors -- the successor
corporation is not liable.
Id. at 99.
Appellant asserts that respondent is a mere continuation of
ENERCO under Niccum because the two corporations shared the
same corporate officers, majority shareholders, registered agent,
and business address and both manufactured and sold heaters
under the “Mr. Heater” trademark. But Niccum held that
“mere continuation refers principally to a reorganization of the original
corporation under federal bankruptcy law or through state statutory
devices,” id., and here, other Niccum
considerations such as continuation of the corporate entity are not
present. For instance, there was no continuity of stock between ENERCO
and respondent, and there was an intervening sale of ENERCO's assets
to B.D. Wait before respondent purchased the goods. Moreover,
as noted above, the Minnesota Supreme Court has held that
continuity of business, name, and management
alone, is not, we think, sufficient basis for holding a
transferee liable to the debts of the transferor.
Id. (quoting J.F. Anderson, 296 Minn. at 38, 206 N.W.2d at 369).
Successor liability occurs where a transaction is entered into
fraudulently by a corporation in order to escape responsibility for
liabilities or debts. J.F. Anderson, 296 Minn. at 38, 206
N.W.2d at 368-69. Appellant contends there is significant evidence that
the various transactions among ENERCO, B.D. Wait, and respondent
were fraudulent conveyances made to avoid liability for future
products liability suits and also was for inadequate compensation,
arguing (1) ENERCO's sale of assets to B.D. Wait and the
subsequent purchase of the assets by respondent almost two years
later was a "strawman triangle" designed to shelter distribution
revenues from liability for products manufactured by ENERCO,
and (2) the sale of assets to B.D. Wait by ENERCO was intended
to be temporary, as the Exclusive Distributorship Agreement
between B.D. Wait and respondent required B.D. Wait to sell the
assets back to respondent upon termination of the agreement.
We find the transfer of assets from ENERCO to B.D. Wait
and the subsequent purchase of the assets by respondent from B.D.
Wait to be arms'-length transactions. For example, B.D. Wait gave
ENERCO $261,000 cash and a $75,000 promissory note for the
purchase of its “Mr. Heater” manufacturing business, adequate
consideration for those assets, especially in light of the fact that
appellant has offered no evidence as to what the fair market value
of the assets was at the time of the sale. Likewise, the conveyance
between B.D. Wait and Mr. Heater was for adequate consideration.
In addition, even if ENERCO formed respondent corporation for the
specific purpose of avoiding its debts, it is not clear that this would
create successor liability. See J.F. Anderson, 296 Minn. at
39, 206 N.W.2d at 369-70 (holding that new corporation formed by husband
and wife in order to avoid paying debts of their first corporation,
and to which assets of first corporation were transferred, was not
responsible for debts of transferring corporation); Carstedt v.
Grindeland, 406 N.W.2d 39 (Minn. App. 1987) (holding that evidence
on a summary judgment motion did not establish a “mere continuance” or a
“fraudulent conveyance” when a father, allegedly in order to escape future
royalty payments to a patent holder, sold his business to his son,
thus destroying a royalty obligation, even though son’s business
began operation without interruption after his father sold it to him
for adequate consideration, the son’s business used the same
premises and telephone as the father’s business, employed
substantially the same employees as the father’s business, and used
the same trademark and substantially the same trade name).
Successor liability arises where the purchaser expressly or
impliedly agrees to assume the transferor’s debts or liabilities.
J.F. Anderson, 206 Minn. at 37-38, 206 N.W.2d at 368.
Appellant argues that respondent’s assumption of liability for ENERCO’s
products under its Exclusive Distributorship Agreement with B.D.
Wait creates successor liability. The Exclusive Distributorship
Agreement, however, did not include ENERCO as a party, was
intended to be of limited duration, and was not in effect at the time
John Andersen was injured in 1992.
* Retired judge of the Minnesota Court of Appeals,
serving by appointment pursuant to Minn. Const. art. VI, § 10.