COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 59339 ELMER E. HAVEL : : Plaintiff-appellant : : JOURNAL ENTRY -vs- : AND : OPINION AMERICAN SEAWAY FOODS, INC. : : Defendant-appellee : : DATE OF ANNOUNCEMENT : OF DECISION : NOVEMBER 21, 1991 CHARACTER OF PROCEEDING : Civil appeal from Court of Common Pleas : Case No. CP 155,647 JUDGMENT : AFFIRMED IN PART, REVERSED IN PART AND REMANDED DATE OF JOURNALIZATION : APPEARANCES: For plaintiff-appellant: For defendant-appellee: JAMES L. RYHAL, JR., ESQ. ROBERT S. BALANTZOW, ESQ. JAMES F. KOEHLER, ESQ. JEFFERY A. KEY, ESQ. JOHN F. HILL, ESQ. BENESCH, FRIEDLANDER, GALLAGHER, SHARP, FULTON COPLAN & ARONOFF & NORMAN 1100 Citizens Building Bulkley Bldg., 7th Fl. 850 Euclid Avenue 1501 Euclid Avenue Cleveland, Ohio 44114 Cleveland, Ohio 44115 - 2 - J.F. CORRIGAN, J., Plaintiff Elmer E. Havel appeals from the order of the trial court which granted summary judgment to defendant American Seaway Foods, Inc. (hereafter referred to as "Seaway") in Havel's action to have a bulk transfer of assets deemed ineffective. For the reasons set forth below, we affirm in part, reverse in part, and remand for further proceedings. I. On July 3, 1986, Havel, the president and sole shareholder of Cliffdale Corp. (hereafter referred to as "Cliffdale") of 13995 Enterprise Avenue in Cleveland, and John Bennett, president and sole shareholder of Bennett Corp. entered into an agreement to sell substantially all of Cliffdale's assets to Bennett Corp. Contemporaneous with this purchase agreement, Havel and Bennett Corp. entered into a consulting agreement, incorporated by reference into the purchase agreement, which provided in relevant part as follows: "l. Agreement for Consulting Services and Restrictive Covenant. BENNETT agrees to retain the consultative services of HAVEL and pay him for such services in the manner as is hereinafter provided ***. "2. Term. BENNETT hereby retains HAVEL as a consultant for a period of five (5) years commencing August 1, 1986 and terminating on July 31, 1991. "3. Services. HAVEL agrees to perform during said period, such advisory and consultative services commensurate with his past experience, as may be from time to time requested of him by BENNETT, *** subject, - 3 - however, to the following conditions: (a) such services shall be performed in such place or places within the United States as BENNETT and HAVEL may agree; (b) HAVEL, in the third, fourth and fifth years of the within Agreement, shall not be required to devote a major or substantial part of his time to such services; ***. "*** "5. Payments. BENNETT agrees to pay to HAVEL and in the event of his death, to his estate, in consideration for both his consulting services and his covenant not to compete for a five year period, as provided hereinafter, the sum of Three Hundred Thousand Dollars ($3000,000.00), payable in sixty (60) consecutive monthly installments of Five Thousand Dollars ($5,000.00), commencing September 1, 1986 and continuing monthly thereafter on the first day of each consecutive month until paid in full. ***. "*** "8. Consolidation or Merger or Sale of Entire Assets of BENNETT. In the event of any consolidation or merger of BENNETT into or with another corporation, or the sale of all or substantially all of the assets of BENNETT to another corporation, during the term of the within Agreement, then, and in any such event, such corporation shall assume this Agreement and become obligated to perform all of the terms and conditions hereof, and HAVEL's obligations hereunder shall continue in favor of such corporation, provided, however, HAVEL agrees to the assumption by such corporation of BENNETT's obligations hereunder. ***." Following the sale of assets to Bennett Corp., Bennett Corp. conducted business from 13995 Enterprise Avenue. Thereafter, on April 27, 1988, Bennett Corp. entered into an asset purchase agreement with defendant Seaway in which Seaway agreed to - 4 - purchase Bennett Corp.'s inventory, machinery and equipment, books and records, various intangibles, and an account receivable from John Bennett in the amount of $269,032.31. This agreement further indicated that the purchase price of the foregoing assets was $534,217.31, and that Seaway assumed none of Bennett Corp.'s debts, obligations, contracts or liabilities. On April 28, 1988, Seaway prepared a Notice of Bulk Transfer, pursuant to R.C. 1306.01 et seq, which indicated that Bennett Corp. had previously done business as Cliffdale Corporation, 13995 Enterprise Avenue in Cleveland. Seaway then sent this notice to Havel at: Cliffdale Corporation 13995 Enterprise Cleveland, Ohio 44135 Following the transfer, no further payments were made to Havel under the consulting agreement and Havel filed this action against Seaway, Bennett, Bennett Corp., and Market Services, Inc. alleging that: Bennett Corp.'s transfer of assets to Seaway was ineffective as to Havel's claims against Bennett because it did not comply with R.C. Chapter 1306; Seaway had incurred successor-in-interest liability on the debt; and that the transfer of assets was fraudulent. Havel subsequently settled with Bennett, Bennett Corp. and Market Services, Inc. and on August 18, 1989, Seaway moved for summary judgment as to Havel's remaining claims. The trial court granted this motion and Havel now appeals. - 5 - II. Introduction Summary judgment is governed by Civ. R. 56(C) which provides in pertinent part as follows: "Summary judgment shall be rendered forthwith if the pleading, depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence in the pending case, and written stipulations of fact, if any, timely filed in the action, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. *** A summary judgment shall not be rendered unless it appears from such evidence or stipulation and only therefrom, that reasonable minds can come to but one conclusion and that conclusion is adverse to the party against whom the motion for summary judgment is made, such party being entitled to have the evidence or stipulation construed most strongly in his favor. ****" One of the principal purposes of this summary judgment rule is to isolate and dispose of factually unsupported claims or defenses. Celotex Corp. v. Catrett (1986), 477 U.S. 317, 323- 324. The plain language of the rule mandates the entry of summary judgment, after adequate time for discovery, and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Id. at 322. In such a situation, there can be no "genuine issue as to any material fact," since a complete failure - 6 - of proof concerning an essential element of a non-moving party's case necessarily renders all other facts immaterial. Id. However, the party seeking summary judgment always bears the initial burden of informing the court of the basis of its motion and identifying those portions of the record which it believes demonstrate the absence of a genuine issue of material fact. Id. at 323. In this case, plaintiff asserts that genuine issues of material fact precluded the award of summary judgment to Seaway. In support of this claim, plaintiff raises three arguments which we address in turn below. "A.Seaway Foods Did Not Strictly Comply with the Bulk Sales Act's Notice Provision, Thus Rendering the Bulk Transfer Between Bennett and Seaway Ineffective as Against Havel's Creditor Rights, as a Matter of Law." A "bulk transfer" is "is any transfer in bulk and not in the ordinary course of the transferor's business of a major part of the materials, supplies, merchandise, or other inventory as defined in section 1309.07 of the Revised Code, of an enterprise subject to sections 1306.01 to 1306.09 of the Revised Code." R.C. 1306.01. With the exception of certain transfers which are not relevant here, see R.C. 1306.02, the bulk transferor must prepare a list of his existing creditors, in accordance with R.C. 1306.03(A). This list must be signed and sworn to or affirmed by - 7 - the transferor or his agent, and must contain the names and business addresses of all creditors of the transferor with the amounts when known. R.C. 1306.03(B). Responsibility for the completeness and accuracy of the list of creditors rests with the transferor, and the transfer is not rendered ineffective by errors or omissions therein unless the transferee is shown to have had knowledge. R.C. 1306.03(C). See, also, Hall v. White (Dec. 2, 1988), Lucas App. No. L-88-023, unreported. R.C. 1306.05 in turn dictates that this notice to creditors "shall be delivered personally or sent by registered mail to all the persons shown on the list of creditors furnished by the transferor, pursuant to section 1306.03 of the Revised Code, and to all other persons who are known to the transferee to hold or assert claims against the transferor." The transferee's failure to meet the requirements of R.C. 1306.05 renders the transfer ineffective against any creditor of the transferor. R.C. 1306.04. In this case, Seaway moved for summary judgment as to Havel's bulk transfer claim and demonstrated that it sent Havel a Notice of a Bulk Transfer by registered mail, and that Havel admitted in interrogatories that he was "aware of the possibility that Seaway Foods could purchase all of the assets of Bennett Corp. in approximately March of 1988." In opposition, Havel demonstrated that Seaway had knowledge of his consulting agreement, but it sent the statutory notice to him at 13995 - 8 - Enterprise Avenue, Bennett Corp.'s business address, and mail receipt for the notice was accepted by John Bennett's secretary. From the foregoing, we find that there are genuine issues of material fact regarding whether Bennett Corp. erroneously listed Havel's business address on its creditor's list and whether Seaway had knowledge that Havel's business address was no longer 13995 Enterprise Avenue, such to render the transfer ineffective pursuant to R.C. 1306.03(C). Accordingly, Havel's first argument is meritorious and we reverse and remand as to Havel's bulk transfer claim. "B.Seaway Committed Actionable Fraud, Through the Asset Agreement With Bennett and the Forgiving of Bennett's Promissory Note to Bennett Foods Resulting in Successor-in-Interest Liability on the Part of Seaway." As to the claim for fraud we note that the elements of common law fraud are as follows: "(a) a representation or, where there is a duty to disclose, concealment of a fact, "(b) which is material to the transaction at hand, "(c) made falsely, with knowledge of its falsity, or with such utter disregard and recklessness as to whether it is true or false that knowledge may be inferred, "(d) with the intent of misleading another into relying upon it, "(e) justifiable reliance upon the representation or concealment, and - 9 - "(f) a resulting injury proximately caused by the reliance." Burr v. Stark Cty. Bd. of Commrs. (1986), 26 Ohio St. 3d 69, paragraph two of the syllabus. As to Havel's assertion of resulting "successor-in-interest" corporation liability, we note that this avenue of liability was explained in Flaugher v. Cone Automatic Machine Co. (1987), 30 Ohio St. 3d 60, 62 as follows: "Where there is *** a sale of a corporation's assets, the buyer corporation is not liable for the seller corporation's tortious conduct unless one of the following four exceptions applies: "(1) the buyer expressly or impliedly agrees to assume such liability; "(2) the transaction amounts to a de facto consolidation or merger; "(3) the buyer corporation is merely a continuation of the seller corporation; or "(4) the transaction is entered into fraudulently for the purpose of escaping liability." (Emphasis added.) See, also, Burr v. South Bend Lathe, Inc. (1984), 18 Ohio App. 3d 19, 21. See, generally, Annotation, Products Liability: Liability of Successor Corporation for Injury or Damage Caused by Product Issued by Predecessor (1975), 61 A.L.R. 3d 824. In support of its motion for summary judgment, Seaway asserted that Havel could not maintain a cause of action for common law fraud because he could not produce any evidence of a representation, or a concealment and a duty to disclose. Seaway - 10 - further asserted that there was no successor-in-interest liability because this legal theory was inapplicable as the facts presented did not involve damage caused by a product. In opposition to the motion, Havel claimed that Seaway had defrauded him by indicating in its Asset Agreement with Bennett Corp. that the transfer would not result in the breach of any agreement to which Bennett Corp. was bound, and that the successor-in-interest theory was viable here. As Havel was not a party to Seaway's Asset Agreement with Bennett Corp., Havel has not asserted a genuine issue of material fact, and the trial court properly granted the motion as to the common law fraud claim pursuant to Celotex Corp. v. Catrett, supra. Further, because this matter clearly does not concern an injury or damage occasioned by one of Bennett Corp.'s products, we will not recognize successor-in-interest liability here, as a matter of law. Havel's second argument lacks merit. "C.Under O.R.C. 1302.44(a) Bennett Had No Power to Transfer Good Title to Seaway Thus Preserving Havel's Rights as a Creditor of Bennett." R.C. 1302.44 deals with good faith purchasers of goods and provides in part: "(A) A purchaser of goods acquires all title which his transferor had or had power to transfer except that a purchaser of a limited interest acquires rights only to the extent of the interest purchased. *** - 11 - "(D) The rights of other purchasers of goods and of lien creditors are governed by the provisions of sections 1309.01 to 1309.50, inclusive; 1306.01 to 1306.09, inclusive; and sections 1307.01 to 1307.40, inclusive, of the Revised Code." In this case, Havel's complaint contained no allegations which could fairly be considered to relate to R.C. 1302.44. It is equally apparent that R.C. Chapter 1306 is more pertinent to this matter than is R.C. Chapter 1302. Accordingly, this claim does not present a factual or legal barrier to the award of summary judgment. Havel's third argument lacks merit. The judgment of the trial court is reversed and remanded as to Havel's bulk transfer cause of action. - 12 - It is ordered that appellee and appellant equally share the costs herein taxed. The Court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this Court directing the Court of Common Pleas to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. FRANCIS E. SWEENEY, P.J. and JAMES D. SWEENEY, J., CONCUR. JUDGE JOHN F. CORRIGAN N.B. This entry is made pursuant to the third sentence of Rule 22(D), Ohio Rules of Appellate Procedure. This is an announce- ment of decision (see Rule 26). Ten (10) days from the date hereof, this document will be stamped to indicate journaliza- tion, at which time it will become the judgment and order of the court and time period for review will begin to run. .