Creech v. Agco Corporation (2006)

Our plain-English summary of Creech v. Agco Corporation (Washington Court of Appeals, May 22, 2006).

Roger Creech was diagnosed with mesothelioma in June 2002. He sued several defendants, and a jury returned a defense verdict in March 2003. A court had refused to add Oakfabco to that case unless he moved to a later trial group, and he chose to go to trial without it. He and his wife then sued Oakfabco and others in 2003, and he died two months later. His wife, Roberta, continued the case as his personal representative. She said he was exposed as a teenager in 1962 while doing maintenance work at his school, where he contacted asbestos in a 1950 Kewanee boiler. Oakfabco was assumed to be the successor to the company that bought the Kewanee boiler business in 1970. That company agreed to assume liabilities "existing and outstanding" at closing. The Court of Appeals held that Mr. Creech had no claim existing and outstanding in 1970, since he learned of his disease only in 2002. It also held that earlier cases on the same agreement did not decide this question, so Oakfabco was not collaterally estopped. The court affirmed summary judgment for Oakfabco and did not reach the bankruptcy discharge ground.

We wrote this summary from the court's opinion with the help of AI. It is not the court's wording, and it is not legal advice. The full opinion is below.

The decision

• Court: Washington Court of Appeals, 1st Division
• Decided: May 22, 2006
• Docket: No. 55973-7-I
• Stage: Appeal from summary judgment
• State: Washington

Outcome. Affirmed summary judgment for Oakfabco and against Roberta Creech, holding that Oakfabco's predecessor did not assume liability for Mr. Creech's claim and that Oakfabco was not collaterally estopped from denying liability.

What the court held. A purchaser that assumed liabilities "existing and outstanding" at the closing date did not assume a product claim that had not yet arisen at that date, even if the claim arose from a product the seller made before closing. Earlier decisions on the same assumption agreement did not decide that issue, so collateral estoppel did not apply.

Issues decided: Trial Procedure and Discovery, Successor Liability.

The people and their exposure

• Roger Creech: mesothelioma; died

Who	Work	Where	When	Products
Roger Creech	student doing school maintenance work	school he was attending (Kewanee boiler)	1962	insulating cement, Kewanee boiler (made in 1950)

The defendants

• Oakfabco, Inc. (manufacturer)
• AGCO Corporation
• Briggs & Stratton Corporation
• Clinton Engines Corporation
• Lawson Products, Inc
• School Specialty, Inc.
• Tecumseh Products Company

The court's opinion

The text below is Google Scholar's copy of the court's opinion, a public record. Numbers in brackets, such as [*921], mark where each page of the printed reporter begins.

ROBERTA CREECH, as Personal Representative of the Estate of ROGER CREECH, deceased,

Appellant,

v.

AGCO CORPORATION; BARTELLS ASBESTOS SETTLEMENT TRUST; BRIGGS & STRATTON

CORPORATION; CLINTON ENGINES CORPORATION; LAWSON PRODUCTS, INC; SCHOOL

SPECIALTY, INC.; TECUMSEH PRODUCTS COMPANY; and FIRST DOE through ONE HUNDREDTH

DOE, Defendants,

OAKFABCO, INC., Respondent.

No. 55973-7-I

Filed: May 22, 2006

The Court of Appeals of Washington, Division One.

Counsel for Appellant(s), Zachary B Herschensohn, Brayton Purcell, 621 SW Morrison St Ste 950, Portland, OR 97205-3824.

Lloyd F Leroy, Brayton Purcell Law Firm, 222 Rush Landing Road, Novato, CA 94948.

Scott Allen Niebling, Brayton Purcell, 621 SW Morrison St Ste 950, Portland, OR 97205-3824.

Counsel for Respondent(s), Robert Gregory Andre', Attorney at Law, 1601 5th Ave Ste 2100, Seattle, WA 98101-3656. Jeffrey Duane Dunbar, Ogden Murphy Wallace Pllc, 1601 5th Ave Ste 2100, Seattle, WA 98101-1686.

BECKER, J.

Appellant's husband contracted cancer and died, allegedly due to exposure as a teenager to asbestos in a Kewanee boiler. Because his claim was not "existing and outstanding" at the time Oakfabco's predecessor assumed liability for claims arising out of Kewanee boilers, the trial court correctly concluded on summary judgment that Oakfabco is not liable on the claim. And cases cited by appellant do not support her argument that Oakfabco is collaterally estopped from denying its liability on the assumption agreement.

FACTS

Roger Creech was diagnosed with a form of cancer called mesothelioma in June 2002. Mr. Creech filed an action in July 2002 against numerous defendants. He alleged that he was exposed to asbestos as a result of the defendants' negligence and contracted cancer as a result. A trial was set for March 2003.

In November 2002, Mr. Creech filed a motion for leave to add Oakfabco as a defendant. The trial court denied the motion, but allowed him the option of adding Oakfabco as a defendant if he was willing to transfer the case to a later trial group. He chose to proceed to trial in March 2003 as scheduled, without Oakfabco. The jury returned a defense verdict. In September 2003, Mr. Creech and his wife Roberta filed a similar complaint against Oakfabco and a number of other entities. Mr. Creech died from cancer two months later. In February 2004, Roberta Creech filed an amended complaint as her husband's personal representative and on her own behalf, and added claims for survival and wrongful death. In early 2005, Oakfabco successfully moved for summary judgment. Ms. Creech asks this court to reverse the trial court's ruling and remand for trial. We review an order of summary judgment de novo. Wilson v. Steinbach, 98 Wn.2d 434, 437, 656 P.2d 1030 (1982).

SUCCESSOR LIABILITY

Ms. Creech's theory of Oakfabco's liability for her husband's death is based on his exposure to asbestos in 1962. At that time, he did maintenance work in the school he was attending. His work brought him in contact with asbestos contained in the boiler, a Kewanee boiler made in 1950.

The Kewanee boiler line was owned and operated as a division of American Standard, Inc. until 1970. In that year, American Standard sold the stock and assets of its Kewanee boiler division to a new corporation formed for that purpose, the Kewanee Boiler Corporation. For purposes of summary judgment, we shall assume that Oakfabco is merely a continuation of Kewanee Boiler Corporation after a name change, and therefore has succeeded to whatever liabilities were assumed by Kewanee Boiler Corporation when it bought the Kewanee boiler division assets from American Standard. The general rule in Washington is that a corporation purchasing the assets of another corporation does not, by reason of the purchase of assets, become liable for the debts and liabilities of the selling corporation. One exception to this rule occurs where the purchaser expressly or impliedly agrees to assume liability. Hall v. Armstrong Cork, Inc., 103 Wn.2d 258, 261-262, 692 P.2d 787 (1994). Ms. Creech contends that Kewanee Boiler Corporation, Oakfabco's predecessor, expressly assumed liability for claims arising out of the old boilers. We conclude that Ms. Creech's claim is not among those for which the Kewanee Boiler Corporation assumed liability in 1970.

As part of the purchase and sale agreement on January 29, 1970, Kewanee Boiler Corporation agreed to assume and indemnify American Standard against certain liabilities of its Kewanee division "existing and outstanding at the Closing Date." Paragraph 1, "General Understanding," included a definition of the Kewanee boiler division liabilities: "Kewanee Liabilities" as used in this Agreement shall mean all the debts, liabilities, obligations and commitments (fixed or contingent) connected with or attributable to Kewanee existing and outstanding at the Closing Date, including, but not limited to, the debts, liabilities and obligations, reflected on the Kewanee Balance Sheet together with any additions, deletions or changes resulting from Kewanee's operations in the ordinary course of business since December 31, 1969, to the Closing Date for which there will be no adjustment in the purchase price.[1]

Paragraph 6, "Closing", referred in section (B)(a) to an "undertaking" that Kewanee Boiler would give to American Standard on the closing date. In the undertaking, Kewanee Boiler would agree to assume all of Kewanee's liabilities, and to indemnify American Standard against them:

B. On the Closing Date Buyer will deliver the following documents:

a. An executed undertaking wherein the Buyer will assume and agree to pay, and defend and hold Seller harmless against all Kewanee Liabilities, including, by way of specification but not limitation, the following: (i) all liabilities and obligations of Kewanee shown on the Kewanee Balance Sheet;

(ii) all liabilities and obligations of Kewanee arising since December 31, 1969, to the Closing Date inclusive of advances made by Seller;

(iii) warranty, service, repair and return obligations of Kewanee and other claims and complaints arising out of or in connection with any products manufactured, sold, leased or installed by Kewanee on or prior to the Closing Date.[2]

On the closing date, March 2, 1970, Kewanee Boiler executed the "Buyer's Undertaking Delivered Pursuant to Paragraph 6Ba".[3] The undertaking recited that as the sale had been on that day consummated pursuant to the January 1970 agreement, Kewanee Boiler agreed to assume certain liabilities, described as those "existing and outstanding at the date hereof":

Buyer does hereby assume and agree to pay, perform and discharge, and to indemnify Seller with respect to, all obligations, liabilities, debts and commitments (fixed or contingent) connected with or attributable to Kewanee, existing and outstanding at the date hereof, including by way of specification, but not limitation, the following:

(i) all liabilities and obligations of Kewanee shown on the Balance Sheet of Kewanee dated as of December 31, 1969, a copy of which is annexed hereto;

(ii) all liabilities and obligations of Kewanee arising since December 31, 1969 to the date hereof inclusive of advances made by Seller;

(iii) warranty, service, repair and return obligations of Kewanee and other claims and complaints arising out of, or in connection with any products manufactured, sold, leased or installed by Kewanee on or prior to the date hereof;

. . .

The provisions contained herein is intended to represent the undertakings of, and assumption of liability by, Buyer as provided by the Agreement and more specifically by Paragraph 6Ba thereof and shall not be

deemed as limiting or modifying such obligations of Buyer as provided in said Agreement.[4]

Ms. Creech focuses on the phrase in the undertaking by which Oakfabco assumed liability for "other claims and complaints arising out of, or in connection with any products manufactured, sold, leased or installed by Kewanee on or prior to the date hereof". Because her claim arises out of or in connection with a boiler manufactured, sold or installed by Kewanee prior to 1970, she contends it was expressly assumed. The determinative phrase in the undertaking, however, is "existing and outstanding at the date hereof", to which all other descriptions of liabilities assumed are subordinate. Kewanee Boiler Corporation undertook to assume claims "arising out of" the older boilers only if those claims were "existing and outstanding" in 1970.

Roger Creech was exposed to asbestos in 1962, but Ms. Creech fails to demonstrate that he had a claim that was "existing and outstanding" in 1970. It was not until 2002 that he learned of his disease. We conclude the undertaking by the Kewanee Boiler Corporation did not assume liability for the claim asserted by Ms. Creech in this lawsuit.

COLLATERAL ESTOPPEL

Ms. Creech contends, however, that Oakfabco is collaterally estopped from denying that Kewanee Boiler expressly assumed liability for personal injury claims such as hers that arise from Kewanee boilers made before 1970. She claims the issue has already been decided against Oakfabco by other courts. Ms. Creech did not squarely present this argument in her responding brief below. Challenging as a "red herring" Oakfabco's assertion that she was herself collaterally estopped from bringing the present claim, her brief stated that Oakfabco's denial of liability "amounts to nothing more than an elaborate shell game that Oakfabco plays as a matter of course whenever it is sued." A footnote in her brief says, "Oakfabco has raised this issue in previous litigation and lost. See John Purcell et al. v Oakfabco Inc."[5]

Ms. Creech does not cite authority for the proposition that she may raise collateral estoppel for the first time on appeal, and we are doubtful that the issue has been preserved. But even if it has been, it does not lead to a different result. Before the doctrine of collateral estoppel may be applied, the party asserting the doctrine must prove: the issue decided in the prior adjudication is identical with the one presented in the second action; the prior adjudication must have ended in a final judgment on the merits; the party against whom the plea is asserted was a party or in privity with the party to the prior adjudication; and application of the doctrine does not work an injustice. Nielson v. Spanaway Gen. Med. Clinic, 135 Wn.2d 255, 262-263, 956 P.2d 312 (1998). At most, the cases cited by Ms. Creech decide only that Oakfabco is liable as a successor for personal injury claims that were assumed by Kewanee Boiler Corporation in the 1970 undertaking. They do not decide that the claims assumed in 1970 necessarily included claims that would arise in the future. A Minnesota state court concluded that the undertaking assumed liability for personal injury claims, not just property damage claims. Chute v. Rozman, No. 460444 (JPS)(Dist. Ct. Minn. Oct. 2, 1984). A New York trial court, in a non-final disposition, denied Oakfabco's motion for summary judgment in which Oakfabco sought to establish that American Standard, Inc. bore sole responsibility for injuries caused by exposure to Kewanee boilers.

Anastasio v. A.O. Smith Products et al., Civ. 0105467/03 (HEF)(Sup. Ct. N.Y. County June 4, 2004). A bankruptcy court held that an unnotified post-petition claimant could not be enjoined from collecting on the claim against Oakfabco outside of the bankruptcy proceeding, but found it lacked jurisdiction to decide the issue of Oakfabco's potential liability; whether the claimant had any right to collect at all was referred to a state court. In re Kewanee Boiler Corp., 198 B.R. 519, 525 (N.D. Ill. 1996). And a California appellate court relied in part on the language of the undertaking to conclude that Oakfabco still has

the liabilities of American Standard that were assumed by Kewanee Boiler Corporation in the 1970 sale, including liability for tort claims "arising from" Kewanee products.

Purcell v. Oakfabco, Inc., No. A100654, 2004 Cal. App. Unpub. LEXIS 2837 (Cal. Ct. App. Mar. 26, 2004). Because these courts were not confronted as we are with the necessity to decide whether the "arising out of" clause in the undertaking is limited by the "existing and outstanding" clause, the element of identity of issues required for collateral estoppel is lacking. As an alternative basis for granting summary judgment, the trial court found that Oakfabco's liability for tort claims arising out of pre-1970 Kewanee boilers was discharged in bankruptcy proceedings. Because we have concluded that Ms. Creech's claim was not assumed in 1970 by Oakfabco's predecessor, we need not decide whether the bankruptcy discharged Oakfabco's liability for such claims as were assumed.

Affirmed.

DWYER and COX, JJ., Concur.

[1] Clerk's Papers 459-460 (emphasis added).

[2] Clerk's Papers 463-464 (emphasis added).

[3] Clerk's Papers 476.

[4] Clerk's Papers 476, 478 (emphasis added).

[5] Clerk's Papers 130.

Sources

• The opinion on Google Scholar
• Washington asbestos laws
• Washington asbestos exposure sites