 |
 |
to fill out a simple form to connect to Personal Injury Lawyers in your area.
|
|
|
|
|
G.P. Publications Inc. v. Quebecor Printing3/4/1997
s a mere continuation of a prior debtor corporation. As the Glynwed court noted, this Court must not elevate form over substance, rather we must look to the substance of the transaction to determine its true nature. We reject plaintiff's suggestion that allowing a successor liability action to proceed following a 9-504 sale would violate Article 9. Instead, we note that UCC ยง 1-103 provides that principles of equity supplement the provisions of the UCC unless they are displaced by a particular provision. The mere continuation theory of the equitable doctrine of successor liability supplements the provisions of 9-504. We believe that neither the drafters of the UCC nor the state legislatures which enacted comparable provisions intended to elevate form over substance by providing an absolute bar against successor liability following a 9-504 sale where the new corporation is a mere continuation of the original debtor.
Since we hold that a successor liability claim is not absolutely barred where a secured creditor purchases the debtor's assets via Article 9, we now set forth our reasons for holding in this case that the issue of "mere continuation" should not have been submitted to the jury.
The traditional rule regarding "mere continuation" is that "a corporate successor is the continuation of its predecessor if only one corporation remains after the transfer of assets and there is identity of stockholders and directors between the two corporations." Ninth Ave. Remedial Group v. Allis-Chalmers Corp., 195 B.R. 716, 724 (N.D.Ind. 1996) (citing U.S. v. Carolina Transformer Co., 978 F.2d 832, 838 (4th Cir. 1992); Kleen Laundry & Dry Cleaning Services, Inc. v. Total Waste Management Corp., 817 F. Supp. 225, 231 (D.N.H. 1993); Allied Corp. v. Acme Solvents Reclaiming, Inc., 812 F. Supp. 124, 129 (N.D.Ill. 1993)). "This exception encompasses the situation where one corporation sells its assets to another with the same people owning both corporations." Ninth Ave. Remedial Group, 195 B.R. at 724 (citing City Environmental, Inc. v. U.S. Chemical Co., 814 F. Supp. 624, 635 (E.D.Mich. 1993)). Therefore, the traditional approach emphasizes continuity of stockholders and directors between the selling and purchasing corporation. U.S. v. Mexico Feed and Seed Co., Inc., 980 F.2d 478, 487 (8th Cir. 1992); Carolina Transformer Co., 978 F.2d at 838.
A review of the case law reveals that North Carolina follows the traditional approach to the "mere continuation" theory. See Bryant v. Adams, 116 N.C. App. 448, 448 S.E.2d 832 (1994), disc. review denied, 339 N.C. 736, 454 S.E.2d 647 (1995); Coffin v. ISS Oxford Services, Inc., 114 N.C. App. 802, 443 S.E.2d 352 (1994); Budd Tire Corp. v. Pierce Tire Co., 90 N.C. App. 684, 370 S.E.2d 267 (1988). This jurisdiction also considers two factors in addition to the issue of continuity of ownership: (1) inadequate consideration for the purchase; and (2) lack of some of the elements of a good faith purchaser for value. Id. at 687, 370 S.E.2d at 269 (citations omitted). In fact, a purchaser conceivably could be found to be the corporate successor of the selling corporation even though there is no continuity of ownership. See L.J. Best Furniture Distributors v. Capital Delivery Service, 111 N.C. App. 405, 432 S.E.2d 437 (1993).
In the instant case, the trial court instructed the jury as to the elements that make up the traditional test; however, it also provided the following instruction:
You may also consider factors such as the following in determining whether G.P. is a mere continuation of Signal . . . whether there was a continuity of management personnel, physical location, assets and general business operations; whether there was a cess
Page 1 2 3 4 5 6 7 8 9 10 North Carolina Personal Injury Attorneys
Personal Injury Lawyers
|
| |
to fill out a simple form to connect to Personal Injury Lawyers in your area.
|
|