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G.P. Publications Inc. v. Quebecor Printing3/4/1997
ir. 1993); Fiber-Lite Corp. v. Molded Acoustical Prod. of Easton, Inc., 186 B.R. 603, 609 (E.D.Pa. 1994), aff'd, 66 F.3d 310 (3d Cir. 1995); Glynwed, 869 F. Supp. at 275-76. It also contends that the court's instruction as to these additional factors was appropriate based on language in L.J. Best in which this Court noted that a mere continuation claim might be appropriate because in addition to lack of consideration, there was evidence that the purchasing corporation leased the same trucks as the selling corporation, had the same employees, and serviced some of the same customers. L.J. Best, 111 N.C. App. at 409, 432 S.E.2d at 440. Nevertheless, we believe that the courts in those cases applied this broader test without appreciating the rationale behind it. See Louisiana-Pacific Corp. v. Asarco, Inc., 909 F.2d 1260, 1265 (9th Cir. 1990) (court refused to apply substantial continuity test because purchaser had no knowledge of seller's potential CERCLA liability) ; U.S. v. Atlas Minerals & Chemicals, Inc., 824 F. Supp. 46, 50-52 (E.D.Pa. 1993); Allied Corp., 812 F. Supp. at 129. But see Kleen Laundry & Dry Cleaning Services, 867 F. Supp. at 1144 (finding that a successor could be held liable under CERCLA even if it did not know that predecessor had engaged in conduct that could lead to CERCLA liability). We note that the courts in the above cases would have obtained the same result if they had applied the traditional test for mere continuation. See Luxliner, 13 F.3d at 74 (continuity of shareholders and officers); Fiberlite, 186 B.R. at 606 (continuity of management); Glynwed, 869 F. Supp. at 276 (continuity of officers, directors and shareholders).
Since we believe that no public policy is served by applying the "substantial continuity" test in a situation like the instant case, where a creditor purchases collateral following a ยง 9-504 sale and continues the debtor's business in order to recover on a delinquent loan, we conclude that the trial court should have instructed the jury only as to the elements that make up North Carolina's "mere continuation" test: Continuity of ownership, inadequacy of consideration, or lack of some of the elements of a good faith purchaser for value.
Significantly, it is uncontroverted in the instant case that Signal does not share any common stockholders or directors with G.P. or TFSI II. Although G.P. did hire former Signal management employees, Romano, Valentino, and Bateman, there is no evidence that any of these three men played a large role in running Signal .
As to the issue of the adequacy of the consideration paid for Signal's assets, the trial court instructed the jury that they had to find that the method, manner, time, place and terms of the sale, including the price, were reasonable in order to answer "yes" to the issue of whether the sale was commercially reasonable, which it did. Since these factors were decided in G.P.'s favor, it follows that the jury's finding that G.P. was a mere continuation of Signal was based on the additional factors that make up the "substantial continuity" test.
Thus, when considered in light of the traditional "mere continuation" theory of successor liability, the uncontroverted evidence that Signal does not share any common stockholders or directors with G.P. or TFSI II combined with the jury's determination that the sale was commercially reasonable thereby answering the question of whether adequate consideration had been paid, mandates the Conclusion that G.P. was not a "mere continuation" of Signal. Since the evidence fails to support a finding of mere continuation, the trial court should have granted G.P.'s motion for a directed verdict and the judgment entered by the trial court must be
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