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Antiphon, Inc. v. LEP Transp., Inc. - 183 Mich. App. 377, 454 N.W.2d 222 (1990)

Rule:

Generally, when one corporation sells its assets to another, the purchaser is not responsible for the debts and liabilities of the selling corporation. However, there are exceptions: In regard to liability of the consolidated or purchasing corporation for the debts and liabilities of the consolidating or selling corporation, such obligations are assumed (1) when two or more corporations consolidate and form a new corporation, making no provision for the payment of the obligations of the old; (2) when by agreement, express or implied, a purchasing corporation promises to pay the debts of the selling corporation; (3) when the new corporation is a mere continuance of the old; (4) when the sale is fraudulent, and the property of the old corporation, liable for its debts, can be followed into the hands of the purchaser.

Facts:

Defendant LEP Transport, Inc. (LEP) refused to release a shipment from Plaintiff Antiphon, Inc.’s (Antiphon) until Antiphon paid an additional amount that LEP claimed was due on previous shipments. Antiphon paid the amount under protest. LEP claimed that the $34,029.61 was due from Antiphon as a result of a debt owed to LEP by a company known as Seamco, Inc. (Seamco). Seamco also obtained the right to use the name "Antiphon" under the terms of the licensing agreement and thereafter formed an Indiana corporation known as Antiphon-Seamco, Inc. Both Seamco and Antiphon-Seamco employed LEP as a customs broker and freight forwarder for shipments of felt from Europe. At no time was there any common ownership of Seamco and Antiphon. On appeal, Antiphon challenged the trial court's finding of successor liability. Antiphon sought the recovery of monies allegedly wrongfully paid to LEP under theories of breach of contract, interference with an advantageous economic and business relationship, and unjust enrichment. LEP cross appealed from that portion of the judgment awarding mediation sanctions in the amount of $1,690.70.

Issue:

Could Antiphon be held responsible for the debts incurred by Seamco?

Answer:

Yes

Conclusion:

The court concluded that Antiphon could be held responsible for the debts incurred by Seamco because neither company informed LEP of the sale of the related Seamco's assets. Further, Seamco and Antiphon engaged in activities that could have reasonably led LEP to believe that the two companies were either related or that Antiphon had assumed responsibility for the liabilities incurred by Seamco. When the trial court found that Antiphon was estopped from denying successor liability the trial court, in actuality, was deciding that Antiphon’s conduct gave rise to an implied acceptance of liability and that LEP was reasonable in relying on this implied acceptance to its detriment.

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