Penny L. Springer v. Nohl Electric Products Corporation

2018 WI 48

SUPREME COURT OF WISCONSIN
CASE NO.: 2015AP829
COMPLETE TITLE: Penny L. Springer,
Plaintiff-Appellant,
v.
Nohl Electric Products Corporation, General
Refractories Company, Dana Sealing Products,
LLC, John Crane, Inc., Union Carbide
Corporation, Rockbestos Surprenant Cable
Corporation a/k/a Rockbestos Products Corp and
RSCC Wire & Cable, Inc., Garlock Sealing
Technologies LLC, Anchor Packing Company, Inc.,
Gaskets, Inc., Cincinnati Valve Company, Leslie
Controls, Inc. and Trac Regulator Company, Inc.,
Defendants,
Powers Holdings, Inc. and Fire Brick Engineers
Company, Inc.,
Defendants-Respondents-Petitioners,
Secure Horizons by United Health Care Insurance
Company,
Subrogated Defendant.

REVIEW OF A DECISION OF THE COURT OF APPEALS
Reported at 370 Wis. 2d 787, 882 N.W.2d 870
(2016 – Unpublished)

OPINION FILED: May 15, 2018
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: October 2, 2017

SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Jefferson
JUDGE: William F. Hue

JUSTICES:
CONCURRED:
DISSENTED: ABRAHAMSON, J., dissents, joined by A.W.
BRADLEY, J. (opinion filed).
NOT PARTICIPATING:

ATTORNEYS:

For the defendants-respondents-petitioners, there were
briefs by George S. Peek, Eric D. Carlson, Benjamin A. Sparks,
and Crivello Carlson, S.C., Milwaukee. There was an oral
argument by Eric D. Carlson.

For the plaintiff-appellant, there was a brief by Kathryn
A. Keppel and Gimbel, Reilly, Guerin & Brown LLP, Milwaukee,
with whom on the brief was Ronald G. Tays and Tays Law Office,
Milwaukee. There was an oral argument by Ronald G. Tays.

2
 2018 WI 48
NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2015AP829
(L.C. No. 2010CV622)

STATE OF WISCONSIN : IN SUPREME COURT

Penny L. Springer,

Plaintiff-Appellant,

v.

Nohl Electric Products Corporation, General
Refractories Company, Dana Sealing Products,
LLC, John Crane, Inc., Union Carbide
Corporation, Rockbestos Surprenant Cable
Corporation a/k/a Rockbestos Products Corp and
RSCC Wire & Cable, Inc., Garlock Sealing
Technologies LLC, Anchor Packing Company, Inc.,
FILED
Gaskets, Inc., Cincinnati Valve Company, Leslie
Controls, Inc. and Trac Regulator Company, MAY 15, 2018
Inc.,
Sheila T. Reiff
Clerk of Supreme Court
Defendants,

Powers Holdings, Inc. and Fire Brick Engineers
Company, Inc.,

Defendants-Respondents-Petitioners,

Secure Horizons by United Health Care Insurance
Company,

Subrogated Defendant.

REVIEW of a decision of the Court of Appeals. Reversed.
 No. 2015AP829

¶1 DANIEL KELLY, J. When one company purchases the

assets of another, our law normally does not make the former

responsible for the latter's liabilities. There are exceptions

to that rule, however, such as when the parties use the

transaction to fraudulently escape responsibility for those

liabilities. Notwithstanding the great age of this common-law

exception to successor non-liability, we have had scant occasion

to provide guidance on how to recognize such transactions. We

take the opportunity to do so today.1 Specifically, we conclude

that the Wisconsin Uniform Fraudulent Transfer Act does not

govern the "fraudulent transaction" exception to the rule of

successor non-liability, and so we reverse the court of appeals.

I. BACKGROUND

¶2 Penny Springer's husband died in 2007 from

mesothelioma. She believes his exposure to asbestos-containing

products during his employment between 1963 and 1969 contributed

to his sickness and eventual death. She sued several companies,

including Fire Brick Engineers Company, Inc. and Powers
Holdings, Inc., alleging they were negligent in mining,

merchandising, manufacturing, supplying, installing,

1
This is a review of an unpublished decision of the court
of appeals, Springer v. Nohl Elec. Prods. Corp., No. 2015AP829,
unpublished slip op. (Wis. Ct. App. June 23, 2016) (per curiam).

2
 No. 2015AP829

distributing, or selling the asbestos products to which Mr.

Springer was exposed.2

¶3 The complaint identified Powers Holdings, Inc. as the

successor to Fire Brick Engineers Company, Inc. But the

relevant history of these companies actually goes back much

further. In the 1940s, Harry J. Schofield formed a company that

came to be known as Fire Brick Engineers Company. The business

manufactured and distributed, inter alia, asbestos-containing

refractory and foundry supplies. Several successors to this

company contained some variation of "Fire Brick Engineers" in

their names, so we will refer to the original as "FBE1." In

1983, a group of investors (including attorneys who had

previously provided legal representation to FBE1) formed a

company that would come to be known as Fire Brick Engineers

Company, Inc. ("FBE2") for the purpose of acquiring FBE1's

assets. FBE2 accepted some, but not all, of FBE1's liabilities.

Several years later, FBE2 merged with Curtis Industries, Inc.,

and adopted the name Powers Holdings, Inc. Powers Holdings,
Inc. currently does business under the name "Fire Brick

Engineers Company," but to avoid confusion, we will refer to it

only as "Powers." And because FBE2 was merged into Curtis, and

therefore no longer exists as a separate entity, our references

to "Powers" will include FBE2 unless we indicate otherwise.

2
Mrs. Springer filed her complaint on February 8, 2010, and
an amended complaint four days later. Unless the context
requires otherwise, when we refer to the "complaint," we will be
referring to the amended complaint.

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 No. 2015AP829

¶4 The record does not reflect that either FBE2 or Powers

has ever manufactured or distributed asbestos-containing

products. FBE2 acquired FBE1 via an asset purchase agreement

(the "Agreement"), which is a common method of acquiring a

business while limiting exposure to its liabilities.3 The

Agreement provided that the only liabilities FBE2 would assume

in the transaction would be a promissory note, trade accounts-

payable, open inventory purchase orders, loans against certain

life insurance policies, and FBE1's lease obligations with

respect to two properties. The Agreement disclaimed the

assumption of any other liabilities: "Buyer [FBE2] does not, by

this Agreement or otherwise, assume or agree to pay or perform

any other liabilities or obligations of Seller [FBE1] of any

kind, whether or not related to the Subjects' Business, all of

which liabilities and obligations remain the sole responsibility

of Seller."

¶5 Therefore, Powers' answer to the complaint

affirmatively asserted that Mrs. Springer had sued the wrong
company: "[T]he Plaintiff has brought an action against the

wrong entity insofar as Powers Holdings, Inc. is not liable for

the torts of its predecessor corporations based upon corporate

3
The "rule of non-liability for asset acquisitions is
frequently the reason why parties choose that option in
acquiring a business, as opposed to a merger or stock
acquisition, in which the predecessor's obligations and
liabilities continue in the surviving entity." Columbia
Propane, L.P. v. Wis. Gas Co., 2003 WI 38, ¶23, 261 Wis. 2d 70,
661 N.W.2d 776 (internal marks and quoted source omitted).

4
 No. 2015AP829

successor liability defenses." Neither the original nor the

amended complaint named FBE1 as a party. Nothing in the

pleadings recognized that FBE2 had been created long after the

period of time during which Mrs. Springer says her husband was

exposed to asbestos products, or that Powers has never

commercially dealt with asbestos-containing products. And the

pleadings asserted no facts or legal theories by which FBE2 or

Powers could be held responsible for FBE1's liabilities.

¶6 Powers eventually moved for summary judgment. It

argued, in part, that "there is no basis to impose liability on

Powers Holding, Inc. as a successor to Fire Brick Engineers

Company [FBE1]." Mrs. Springer responded that Powers is liable

to her as successor to FBE1 under the "mere continuation" and

"de facto merger" exceptions to the successor non-liability

rule. The circuit court suspended summary judgment proceedings

so the parties could engage in further discovery. Powers then

amended its motion, in response to which Mrs. Springer asserted,

for the first time, that the "fraudulent transaction" exception
to the successor non-liability rule should apply. The circuit

court, the Honorable William F. Hue presiding, granted Powers'

motion and dismissed FBE2 and Powers from the case.

¶7 Mrs. Springer appealed. Her primary argument was that

undisputed evidence proved the Agreement between FBE1 and FBE2

had the purpose of fraudulently escaping liability for FBE1's

obligations. She also argued that the circuit court erred in

granting summary judgment because there was a genuine factual
dispute as to whether the "mere continuation" and "de facto
5
 No. 2015AP829

merger" exceptions to the rule of successor non-liability

applied to Powers. The court of appeals addressed only the

"fraudulent transaction" exception. Although it noted that Mrs.

Springer did not adequately explain how a court is supposed to

determine whether there has been such a fraudulent transaction,

it concluded that "the question of whether a transfer

transaction was entered into fraudulently must be answered in

the context of Wisconsin's Uniform Fraudulent Transfer Act [Wis.

Stat. ch. 242]." Springer v. Nohl Elec. Prods. Corp., No.

2015AP829, unpublished slip op., ¶16 (Wis. Ct. App. June 23,

2016) (per curiam). So the court of appeals reversed and

remanded the cause to the circuit court for a trial in which the

jury would apply the "badges of fraud" contained in Wis. Stat.

§ 242.04 (2015-16)4 to determine whether Powers should be held

responsible for the liabilities of its predecessor company,

FBE1.

¶8 We granted Powers' petition for review, and now

reverse the court of appeals.
II. STANDARD OF REVIEW

¶9 We review the disposition of a motion for summary

judgment de novo, applying the same methodology the circuit

courts apply. Green Spring Farms v. Kersten, 136 Wis. 2d 304,

315, 401 N.W.2d 816 (1987); Borek Cranberry Marsh, Inc. v.

Jackson Cty., 2010 WI 95, ¶11, 328 Wis. 2d 613, 785 N.W.2d 615

4
All references to the Wisconsin Statutes are to the 2015-
16 version unless otherwise specified.

6
 No. 2015AP829

("We review the grant of a motion for summary judgment de

novo . . . .").

¶10 "The first step of that methodology requires the court

to examine the pleadings to determine whether a claim for relief

has been stated." Green Spring Farms, 136 Wis. 2d at 315. "In

testing the sufficiency of a complaint, we take all facts

pleaded by plaintiff[] and all inferences which can reasonably

be derived from those facts as true." Id. at 317. And we

liberally construe pleadings "with a view toward substantial

justice to the parties." Id. (citing Wis. Stat. § 802.02(6)).

"The complaint should be dismissed as legally insufficient only

if it is quite clear that under no circumstances can plaintiff[]

recover." Id.

¶11 Under the second step of this methodology, "[i]f a

claim for relief has been stated, the inquiry then shifts to

whether any factual issues exist." Id. at 315. Summary

judgment is appropriate only "if the pleadings, depositions,

answers to interrogatories, and admissions on file, together
with the affidavits, if any, 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." Wis. Stat. § 802.08(2); see also

Columbia Propane, L.P. v. Wis. Gas Co., 2003 WI 38, ¶11, 261

Wis. 2d 70, 661 N.W.2d 776 (citing and applying Wis. Stat.

§ 802.08(2)).

III. DISCUSSION

¶12 The question before us is a narrow one, to wit,
whether the Wisconsin Uniform Fraudulent Transfer Act governs
7
 No. 2015AP829

the "fraudulent transaction" exception to the rule of successor

non-liability. After resolving that question, we will then

determine whether further proceedings in this case are

necessary.

A. The Rule of Successor Non-Liability

¶13 In determining whether the fraudulent transaction

exception to the rule of successor non-liability should apply in

this case, the court of appeals relied on the Wisconsin Uniform

Fraudulent Transfer Act (Wis. Stat. ch. 242 (the "WUFTA")) for

the standard by which to identify fraud in the transfer of

assets from FBE1 to FBE2. We hold today that the WUFTA does not

control the analysis of the fraudulent transaction exception.

Our opinion will first address the basic principles undergirding

the rule of successor non-liability. Then, we will explain why

the WUFTA does not control the disposition of this case.

1. The Basics of Successor Non-Liability

¶14 Our common law provides that "a corporation which

purchases the assets of another corporation does not succeed to
the liabilities of the selling corporation." Fish v. Amsted

Indus., Inc., 126 Wis. 2d 293, 298, 376 N.W.2d 820 (1985)

(quoting Leannais v. Cincinnati, Inc., 565 F.2d 437, 439 (7th

Cir. 1977)). In Wisconsin, this rule dates back to the late

nineteenth century. See Wright v. Milwaukee & St. Paul Ry. Co.,

25 Wis. 46, 52 (1869) (stating that a corporation does not "by

selling a portion of its property, or even the whole of it,

impose upon the purchaser any liability for its general debts").

8
 No. 2015AP829

¶15 There are very practical justifications for this rule.

It "protect[s] a bona fide purchaser from liabilities caused by

a predecessor corporation of which the bona fide purchaser was

unaware at the time of acquisition." Columbia Propane, L.P.,

261 Wis. 2d 70, ¶23 (quoting Eva M. Fromm, Allocating

Environmental Liabilities in Acquisitions, 22 J. Corp. L. 429,

441 (1997)). Without such a rule, assets would become

unmarketable:

If the liabilities always went with the assets, it
would be difficult to sell assets because the
purchaser would not know what he was getting. He
might be "buying" a lawsuit the expected cost of which
exceeded the value of the asset purchased, yet it
would be too late for him to back out of the sale or
renegotiate the price.
Chaveriat v. Williams Pipe Line Co., 11 F.3d 1420, 1424 (7th

Cir. 1993) (applying Illinois law). This is no less true in the

context of products liability cases, such as this one. Here's

why:

[T]he successor corporation did not create the risk
nor did it directly profit from the predecessor's sale
of the defective product; it did not solicit the use
of the defective product nor make any representations
as to its safety; nor is it able to enhance the safety
of a product that is already on the market[.]
Fish, 126 Wis. 2d at 307 (citing Bernard v. Kee Mfg. Co., 409

So. 2d 1047, 1050 (Fla. 1982); Domine v. Fulton Iron Works, 395

N.E.2d 19, 23 (Ill. App. Ct. 1979); Jones v. Johnson Mach. &

9
 No. 2015AP829

Press Co. of Elkhart, Ind., 320 N.W.2d 481, 484 (Neb. 1982);

Ostrowski v. Hydra-Tool Corp., 479 A.2d 126, 127 (Vt. 1984)).5

¶16 But this rule of successor non-liability is not

absolute; there are four well-recognized circumstances in which

it does not apply:

(1) when the purchasing corporation expressly or
impliedly agreed to assume the selling corporation's
liability; (2) when the transaction amounts to a
consolidation or merger of the purchaser and seller
corporations; (3) when the purchaser corporation is
merely a continuation of the seller corporation; or
(4) when the transaction is entered into fraudulently
to escape liability for such obligations.
Fish, 126 Wis. 2d at 298 (quoting Leannais, 565 F.2d at 439).

¶17 We are interested here in the fourth exception. Even

though it is over a century old, it has received only sporadic

attention. "There are few cases under the fraud

exception, . . . partly because creditors prefer to cast these

cases as suits to set aside a fraudulent conveyance."

Chaveriat, 11 F.3d at 1425. The scarcity is particularly

evident when the claim sounds in tort. See, e.g., Restatement

(Third) of Torts: Products Liability § 12 cmt. e (Am. Law Inst.

1998) (stating that the fraudulent transfer exception "has

rarely been used to impose successor liability for products

5
The rule applies regardless of the legal form of the
businesses involved: "[This] rule and its exceptions are
applicable, irrespective of whether a prior organization was a
corporation or a different form of business organization." Tift
v. Forage King Indus., Inc., 108 Wis. 2d 72, 77, 322 N.W.2d 14
(1982).

10
 No. 2015AP829

liability claims"); Timothy J. Murphy, Comment, A Policy

Analysis of a Successor Corporation's Liability for its

Predecessor's Defective Products When the Successor Has Acquired

the Predecessor's Assets for Cash, 71 Marq. L. Rev. 815, 819

(1988) (stating that "the fraudulent transaction exception is

usually not successfully invoked by products liability

plaintiffs").

¶18 We learn from the few available cases that the

justification for the fraudulent transfer exception is that such

transactions can leave aggrieved parties with no remedy:

This is clearest in the case where after the sale of
all its assets a corporate seller distributes the
proceeds of the sale to the shareholders and
dissolves. If the purchaser is not liable, the
transaction will have externalized the costs of the
seller's acts that gave rise to liability.
Chavariat, 11 F.3d at 1425; see also Ed Peters Jewelry Co. v. C

& J Jewelry Co., 124 F.3d 252, 266 (1st Cir. 1997) (applying

Rhode Island law) ("But since a rigid nonassumption rule can be

bent to evade valid claims, the successor liability doctrine was

devised to safeguard disadvantaged creditors of a divesting

corporation in four circumstances.").

¶19 The bare desire for a remedy, however, is an

insufficient rationale for imposing liability on an entity that

had no relationship with the culpable company until after the

risk was created. Therefore, the mechanism by which liability

transfers from the predecessor to the successor must reflect

culpability: "To impose liability on the successor corporation
[under the fraudulent transfer exception], the law in every

11
 No. 2015AP829

jurisdiction . . . requires a finding that the corporate

transfer of assets 'is for the fraudulent purpose of escaping

liability.'" Raytech Corp. v. White, 54 F.3d 187, 192 (3d Cir.

1995) (applying Oregon law) (quoting 15 William M. Fletcher,

Fletcher Cyclopedia of the Law of Private Corporations § 7122

at 232);6 see also United States ex rel. Bunk v. Gov't Logistics

N.V., 842 F.3d 261, 276 (4th Cir. 2016) ("The fraudulent

transaction theory turns on the intention underlying the

transfer of assets to [the successor], i.e., whether it was made

with an actual intention to hinder, delay, or defraud

creditors.") (applying Virginia law); Cashman v. Hitchcock, 293

F. 958, 962 (1st Cir. 1923) ("When a corporation receives in

good faith the transfer of all the assets of another

corporation, and pays the selling corporation full consideration

therefor, the transfer is not fraudulent," unless there

is "proof that it was made with the intention to defraud

creditors, and the grantee had knowledge of such intention.").

¶20 To help us understand the circumstances that would be
sufficient to engage the fraudulent transaction exception to the

rule of successor non-liability, we turn to our common law

experience with fraudulent conveyances.

6
"Under Fletcher's articulation of the exception,
transferring corporate assets for the purpose, or with the
intention, of escaping liability is, by definition, a transfer
of assets with fraudulent purpose." Raytech Corp. v. White, 54
F.3d 187, 192 (3d Cir. 1995).

12
 No. 2015AP829

2. Common-Law Fraudulent Conveyances
¶21 The law of fraudulent conveyances originated in

England to protect against debtors' creative efforts to put

assets beyond the reach of creditors:

Until the seventeenth century, England had certain
sanctuaries into which the King's writ could not
enter. A sanctuary was not merely the interior of a
church, but certain precincts defined by custom or
royal grant. Debtors could take sanctuary in one of
these precincts, live in relative comfort, and be
immune from execution by their creditors. It was
thought that debtors usually removed themselves to one
of these precincts only after selling their property
to friends and relatives for a nominal sum with the
tacit understanding that the debtors would reclaim
their property after their creditors gave up or
compromised their claims.
Douglas G. Baird & Thomas H. Jackson, Fraudulent Conveyance Law

and Its Proper Domain, 38 Vand. L. Rev. 829, 829 (1985).

¶22 In response to this perceived problem, Parliament

adopted what has come to be known as the Statute of 13 Elizabeth

in 1571, which voided any conveyance that a debtor "devised and

contrived of malice, fraud, covin, collusion, or guile to the

end purpose and intent to delay, hinder, or defraud creditors

and others of their just and lawful actions." See An Act

Against Fraudulent Deeds, Gifts, and Alienations, 13 Eliz. c. 5,

13
 No. 2015AP829

§ 1 (1571) (translated into modern English).7 The eminent

jurist, Lord Edward Coke, then set about identifying the methods

by which a plaintiff might prove that the conveyance was made

for a fraudulent purpose. He listed some in the famous Twyne's

Case:

1st. That this gift had the signs and marks of fraud,
because the gift is general, without exception of his
apparel, or any thing of necessity; for it is commonly
said, quod dolus versatur in generalibus.[8]

2nd. The donor continued in possession, and used them
as his own; and by reason thereof he traded and
trafficked with others, and defrauded and deceived
them.

7
In the original English, the text said that a conveyance
was void if a debtor "devysed & contryved of Malyce Fraude
Covyne Collusion or Guyle, to Thend Purpose and Intent to delaye
hynder or defraude Creditors and others of theyr juste and
lawfull Actions." An Acte agaynst fraudulent Deedes Gyftes
Alienations, &c., 13 Eliz. c. 5, § 1 (1571). "Covyne" (or
"covin," as we now spell it) is "[a] secret conspiracy or
agreement between two or more persons to injure or defraud
another." Black's Law Dictionary 446 (Bryan A. Garner, ed.,
10th ed. 2014); see also The Oxford English Dictionary 1079
(John A. Simpson & Edmund S.C. Weiner eds., 2d ed. 1989)
(identifying "covyne" as an alternative form of "covin").

Moreover, although the 1571 Parliament designed this
statute to be penal in nature, the 1623 Parliament gave it a
civil application. Bruce A. Markell, Toward True and Plain
Dealing: A Theory of Fraudulent Transfers Involving Unreasonably
Small Capital, 21 Ind. L. Rev. 469, 473 (1988) (citing 13 Eliz.
c. 5, § 1 (1571) and 21 Jac. 1, c. 19, § 7 (1623)).
8
"Dolosus versatur in generalibus" means "[a] person
intending to deceive deals in general terms." Henry Campbell
Black, A Law Dictionary Containing Definitions of the Terms and
Phrases of American and English Jurisprudence, Ancient and
Modern 387 (2d ed. 1910).

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 No. 2015AP829

3rd. It was made in secret, et dona clandestina sunt
semper suspiciosa.[9]

4th. It was made pending the writ.

5th. Here was a trust between the parties, for the
donor possessed all, and used them as his proper
goods, and fraud is always apparelled and clad with a
trust, and a trust is the cover of fraud.

6th. The deed contains, that the gift was made
honestly, truly, and bona fide: et clausulae
[10]
inconsuet' semper inducunt suspicionem.
Twyne's Case (1607) 76 Eng. Rep. 809, 812-14; 3 Co. Rep. 80b,

80b-81a (Star Chamber) (footnotes omitted). The courts

developed and refined the means of proving fraud over the

ensuing centuries. See generally Robert J. Rosenberg,

Intercorporate Guaranties and the Law of Fraudulent Conveyances:

Lender Beware, 125 U. Pa. L. Rev. 235, 248 n.33 (1976).

¶23 We adopted this ancient history as our own from the

very beginning: "[T]he principles of the English statutes

amending the common law and existing at the time of our

Revolution, suitable to our condition and in harmony with our

constitution and statutes, are a part of the common law of this

country." Harrigan v. Gilchrist, 121 Wis. 127, 219, 99 N.W. 909

(1904); accord Glinka v. Bank of Vt. (In re Kelton Motors,

9
"Dona clandestina sunt semper suspiciosa" means
"[c]landestine gifts are always suspicious." Lorna Marie, The
Judges and Lawyers' Companion, Latin Maxims and Phrases 107
(2018).
10
"Clausulae inconsuetae semper inducunt suspicionem" means
"[u]nusual clauses always excite suspicion." 1 Stewart Rapalje &
Robert L. Lawrence, A Dictionary of American and English Law 217
(1888).

15
 No. 2015AP829

Inc.), 130 B.R. 170, 177-78 (Bankr. D. Vt. 1991) ("The Statute

of 13 Elizabeth has since served as the model for common law and

modern American fraudulent conveyance laws."). Indeed, at least

one court has observed that this common law background is the

basis for the fraudulent transfer exception to the rule against

successor non-liability. Chaveriat, 11 F.3d at 1426 ("It has

been suggested, indeed, that the fraud exception to the

nonliability of successors is merely an application of the law

of fraudulent conveyances."). Consequently, we may find

reasonable guidance from that body of law.

¶24 American courts have continued their English cousins'

tradition of inquiring into the types of circumstances that may

indicate a fraudulent intent behind an asset conveyance. One of

the most common indicia of fraudulent intent is the inadequate

consideration paid for the acquired assets. See, e.g., Welco

Indus., Inc. v. Applied Cos., 617 N.E.2d 1129, 1134 (Ohio 1993)

("Indicia of fraud include inadequate consideration and lack of

good faith."); Eagle Pac. Ins. Co. v. Christensen Motor Yacht
Corp., 959 P.2d 1052, 1056 (Wash. 1998) (en banc) ("Adequate

consideration for a transfer of assets between a buying and

selling corporation is an important element when determining

whether to impose successor liability.").

¶25 The unusual nature of business activities and

arrangements surrounding a transaction have also assisted courts

in identifying fraud. The Fourth Circuit Court of Appeals, in

determining whether the fraudulent transaction exception
applied, inquired into factors such as (1) "[i]nadequacy of
16
 No. 2015AP829

consideration," (2) "[t]ransactions that are different from the

usual method of transacting business," (3) "[t]ransactions in

anticipation of suit or execution," and (4) "[t]ransactions

through which the debtor retains benefits." Bunk, 842 F.3d

at 277. The Kansas Supreme Court, in Avery v. Safeway Cab,

Transfer & Storage Co., concluded that transferring all assets

to a new entity was a fraud because (1) "[t]here was not a

formal sale of the assets . . . at a fixed price," because

(2) "[n]o formal arrangements were made to care for the other

debts of the [predecessor]," and because (3) "the negotiators

deliberately disabled it from any possible further exercise of

its corporate functions." 80 P.2d 1099, 1101 (Kan. 1938).

¶26 Long experience has taught us that these types of

circumstances frequently accompany fraudulent transactions.

However, as distillations of experience, they should not be

understood as definitive, nor comprehensive. The purpose of the

fraudulent transaction inquiry is to discover the actual intent

of those who engineered the transfer of assets from the old
company to the new——this is not a question of negligence or

strict liability. The finder of fact must consider all

circumstances tending to illuminate whether the transfer was

entered into for the fraudulent purpose of escaping liability

for the transferor's obligations.

3. The Wisconsin Uniform Fraudulent Transfer Act
¶27 The WUFTA exists independently from this common law
history, and fulfills a purpose quite separate from that of the

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 No. 2015AP829

fraudulent transaction exception to the rule of successor non-

liability. The Act is an important, but limited, tool. Whereas

the WUFTA is designed to assist creditors in collecting on

claims that may be frustrated by recent asset transfers, the

fraudulent transaction exception is a doctrine that prevents

successor companies from avoiding obligations incurred by their

predecessors. This difference in purpose is reflected in two of

the Act's specifics. First, the statute of limitations for

claims under the Act can be as short as one year after learning

the asset was transferred. Wis. Stat. § 242.09; Wis. Stat.

§ 893.425. As such, the Act is incapable of ensuring that

liability continues to reside in the proper entity, especially

when the injuries are latent and discovered years after the

corporation is known to have restructured. And second, the

remedies available under the Act center on the fraudulently

conveyed asset, rather than the successor company. The Act

allows the creditor to avoid the transfer to the extent

necessary to satisfy its claim (Wis. Stat. § 242.07(1)(a)),
attach the asset in the hands of the transferee

(§ 242.07(1)(b)), obtain an injunction or appointment of a

receiver to prevent loss of the asset (§ 242.07(1)(c)), or levy

execution on the asset or its proceeds in the hands of the

transferee (§ 242.07(2)). So, whereas the Act focuses on

recovering the asset or its value, the fraudulent transaction

exception focuses on the business entity itself and its

liability for its predecessor's obligations.

18
 No. 2015AP829

¶28 Because the WUFTA is asset-focused, it does not

account for the legislative policies and priorities embodied in

our business-related statutes. It does not address the

limitation of liability afforded to such business entities as

corporations (Wis. Stat. ch. 180), and limited liability

companies (Wis. Stat. ch. 183). The fraudulent transaction

exception to the rule of successor non-liability, on the other

hand, developed as an organic response to corporate law. See

George W. Kuney, A Taxonomy and Evaluation of Successor

Liability, 6 Fla. St. U. Bus. L. Rev. 9, 12 (2007) ("[S]uccessor

liability law is a product of the rise of corporate law in the

last half of the 19th century and early part of the 20th

century. In fact, it appears to have developed because of, and

in reaction to, the rise of corporate law.").

¶29 We agree with the United States Supreme Court's

observation that "the failure of the statute to speak to a

matter as fundamental as the liability implications of corporate

ownership demands application of the rule that '[i]n order to
abrogate a common-law principle, the statute must speak directly

to the question addressed by the common law.'" United States v.

Bestfoods, 524 U.S. 51, 63 (1998) (quoting United States v.

Texas, 507 U.S. 529, 534 (1993)). Therefore, we conclude that

chapter 242 has not supplanted the common-law fraudulent

transaction exception to the rule of successor non-liability.

B. Dismissal of Powers

¶30 We must now determine whether there is anything left
for the court of appeals or circuit court to resolve with
19
 No. 2015AP829

respect to Powers. The court of appeals said that "[Mrs.]

Springer filed the present action against the respondents,

seeking to hold them liable under the theory of successor

liability for damages stemming from the death of Springer's

husband." Springer, No. 2015AP829, unpublished slip op., ¶1.

That is certainly what Mrs. Springer argued in the court of

appeals, but it does not describe the case she pursued in the

circuit court. What Mrs. Springer actually did in the circuit

court was "alleg[e] that the respondents are liable under

theories of negligence and strict liability." Id., ¶4. Because

she pled the latter and not the former, Powers was properly

dismissed from the case upon its motion for summary judgment.

¶31 Sometime between the joining of issue in this case and

resolution of the motion for summary judgment, the nature of

Mrs. Springer's claim against Powers changed substantially. The

issue the parties joined was whether Powers culpably engaged in

activity that resulted in Mr. Springer's exposure to asbestos.

By the time Powers moved for summary judgment, however, it had
become apparent that this claim could not succeed because FBE2

had not come into existence until many years after the period of

Mr. Springer's alleged exposure, and Powers had never engaged in

commerce with asbestos-containing products.11

11
Our review of the record confirms that it contains no
evidence that FBE2 or Powers had ever engaged in commerce with
asbestos-containing products.

20
 No. 2015AP829

¶32 Consequently, in response to the motion for summary

judgment, Mrs. Springer introduced an entirely new reason for

holding Powers liable. She tacitly acknowledged that the

relevant timeline made it impossible for FBE2 or Powers to have

been part of the causal chain between the asbestos-containing

products and her husband's death. So she instead argued Powers

should be liable to her because (1) FBE1 had transferred all of

its assets to Powers with the fraudulent purpose of escaping any

future asbestos-related liability, (2) Powers was a mere

continuation of FBE1, or (3) Powers was the product of a de

facto merger with FBE1.

¶33 However, Mrs. Springer never made a claim out of any

of these arguments; they were never more than a response to

Powers' motion for summary judgment. Her pleadings never

mentioned FBE1, either explicitly or implicitly. In neither her

original nor her amended complaint are there allegations from

which one could infer that she sought to hold Powers responsible

for FBE1's torts. She certainly had opportunity and reason to
amend her complaint to make such allegations——Powers' answer put

her on notice that she had named the wrong company: "[T]he

Plaintiff has brought an action against the wrong entity insofar

as Powers Holdings, Inc. is not liable for the torts of its

predecessor corporations based upon corporate successor

liability defenses."

¶34 We review the disposition of a motion for summary

judgment using the same methodology as the circuit court in the
first instance. Green Spring Farms, 136 Wis. 2d at 315. We
21
 No. 2015AP829

begin by "examin[ing] the pleadings to determine whether a claim

for relief has been stated." Id. When Powers filed its motion,

it was seeking judgment on Mrs. Springer's claim that it was

causally responsible for her husband's exposure to asbestos. We

will assume, without deciding, that Mrs. Springer adequately

alleged that Powers was in the causal chain of events that led

to her husband's death, and pled the necessary elements of

negligence and strict product liability. The next step requires

us to review "the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the

affidavits, if any," to determine whether we can conclude "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." Wis.

Stat. § 802.08(2). Summary judgment for FBE2 and Powers was

appropriate because the record shows the parties do not dispute

that FBE2 and Powers could not have been in the causal chain of

events inasmuch as FBE2 did not exist until after Mr. Springer's

alleged exposure to asbestos, and Powers has never bought or
sold asbestos-containing products.

¶35 That leaves the question of whether Mrs. Springer has

a viable claim against Powers based on successor liability.

This inquiry requires that we return to an examination of the

pleadings in search of allegations adequate to make out a claim

of successor liability against FBE2 and Powers. To state a

claim upon which relief may be granted, the plaintiff's

allegations must be informed by the theory of liability: "In
sum, Twombly makes clear the sufficiency of a complaint depends
22
 No. 2015AP829

on substantive law that underlies the claim made because it is

the substantive law that drives what facts must be pled.

Plaintiffs must allege facts that plausibly suggest they are

entitled to relief." Data Key Partners v. Permira Advisers LLC,

2014 WI 86, ¶31, 356 Wis. 2d 665, 849 N.W.2d 693.

¶36 A claim that a company is liable for the torts of a

predecessor company is not the same as a claim of liability for

the torts themselves. Tort claims comprise the familiar

elements of duty, breach, causation, and damage. A claim that a

successor company bears responsibility for the torts of its

predecessor is entirely different. As a separate legal entity,

Powers enjoys the presumption that it is not liable for the

misdeeds of its predecessor, even when it has succeeded to all

of its assets. See Fish, 126 Wis. 2d at 298 ("[A] corporation

which purchases the assets of another corporation does not

succeed to the liabilities of the selling corporation." (quoting

Leannais, 565 F.2d at 439)); Wright, 25 Wis. at 52 (stating that

a corporation does not "by selling a portion of its property, or
even the whole of it, impose upon the purchaser any liability

for its general debts").

¶37 A claim of successor liability, as distinct from a

claim based on the underlying tort, puts on the plaintiff the

burden of establishing one of the exceptions to the rule of non-

23
 No. 2015AP829

liability.12 Because the substantive theory of liability drives

the facts a plaintiff must plead, see Data Key Partners, 356

Wis. 2d 665, ¶31, Mrs. Springer had the burden of alleging facts

sufficient to reveal that she was pursuing Powers not as the

tortfeasor itself, but as the successor to the tortfeasor.

Exceptions to the rule of successor non-liability focus almost

exclusively on the nature of the transaction by which the latter

obtained the former's assets. They have little to no

relationship with the facts supporting the tortfeasor's

liability. Consequently, facts that are sufficient to support a

claim against the tortfeasor are unlikely to be sufficient to

support a claim of successor liability.13

12
State v. Big John, 146 Wis. 2d 741, 756, 432 N.W.2d 576
(1988) ("[O]ne who relies on an exception to a general rule or
statute has the burden of proving that the case falls within the
exception."); see also Call Center Techs., Inc. v. Grand
Adventures Tour & Travel Pub. Corp., 635 F.3d 48, 52 (2d Cir.
2011) ("Because the 'general rule' is that a purchaser of assets
does not assume the predecessor's liability, it follows that the
proponent of successor liability must offer proof that one of
the aforementioned exceptions to the general rule applies.");
Dayton v. Peck, Stow and Wilcox Co. (Pexto), 739 F.2d 690, 692
(1st Cir. 1984) (stating that the proponent of successor
liability has the burden of proof regarding facts bringing
defendants within one of the exceptions to successor non-
liability).
13
In Pennison v. Chicago, Milwaukee & St. Paul Railway Co.,
a successor liability case, we concluded the complaint failed to
state a claim against the successor because its allegations did
not make out a claim of successor liability. See 93 Wis. 344,
346-347, 67 N.W. 702 (1896). We noted: "The remedy of the
plaintiff, if any, is against the Milwaukee & Northern Railroad
Company. Upon the allegations of the complaint, he has none
against the defendant company [the successor]." Id. at 347.

24
 No. 2015AP829

¶38 That is the case here. Mrs. Springer says she did not

know about the existence of FBE1 until after Powers had moved

for summary judgment. We are not persuaded this should make any

difference to our conclusion. Powers' answer put Mrs. Springer

on notice that FBE2 and Powers were not the tortfeasors she

claimed they were. And there was a nearly two-year hiatus

between the original and amended motions for summary judgment——

the specific purpose of which was to allow for additional

discovery into Powers' corporate history. Mrs. Springer had

ample opportunity to amend her complaint to assert that the

circumstances under which Powers succeeded to FBE1's assets were

such that they should make Powers liable pursuant to one of the

exceptions to the rule of successor non-liability. The

complaint does not mention successor liability at all (except

cryptically as between FBE2 and Powers, which is not at issue

here). Nor does it even acknowledge the existence of FBE1. It

necessarily follows that the complaint alleges nothing with

respect to the asset transfer between FBE1 and its successors,
the very thing that could potentially make Powers liable. So

Mrs. Springer's pleadings are silent on the only theory of

liability she now advances in her case.

¶39 Therefore, her complaint fails to "allege facts that

plausibly suggest [she is] entitled to relief" as against

Powers. See Data Key Partners, 356 Wis. 2d 665, ¶31.

Accordingly, we need not address the second step of the summary

judgment methodology. See Green Spring Farms, 136 Wis. 2d
at 318 (noting that because a viable claim had not been stated,
25
 No. 2015AP829

"we need not proceed to the next step of the summary judgment

methodology under section 802.08(2), Stats."). Powers was

entitled to summary judgment.

¶40 The dissent believes it is improper for us to address

whether Mrs. Springer adequately pled a claim of successor

liability against Powers. It worries that we raised this sua

sponte, without giving the parties an opportunity to address the

issue. It says we "reached beyond the issues presented to [the

court] to decide issues not presented or addressed by the

parties," and in doing so, surprised the parties as well as the

bench and bar. Dissent, ¶50. These are, conceptually,

legitimate concerns, and the court must always be careful not to

gratuitously address issues unnecessary to the resolution of the

matter before us. But that is not the case here.

¶41 As explained above, we are reviewing the disposition

of a motion for summary judgment. The bench and bar are aware

that in conducting such a review, the methodology we use here is

exactly what the circuit court uses. And the first step in that
methodology is "to examine the pleadings to determine whether a

claim for relief has been stated." Green Spring Farms, 136

Wis. 2d at 315. The parties assist the court in making that

determination, but they cannot confine the court's analysis to

the arguments they choose to make. See Saenz v. Murphy, 162

Wis. 2d 54, 57 n.2, 469 N.W.2d 611 (1991) ("[T]his court is not

bound by the issues as they are framed by the parties."),

overruled on other grounds by State ex rel. Anderson-El v.
Cooke, 2010 WI 40, ¶¶28-31, 234 Wis. 2d 626, 610 N.W.2d 821. If
26
 No. 2015AP829

the plaintiff's pleading is deficient as a matter of law, the

court may not pretend otherwise simply because the parties

failed to say so. Naturally, the court must be quite certain of

its footing when it makes a conclusion of law in such

circumstances. But when the deficiency is manifest, the court

must not shirk its duty. Here, not only is the deficiency

manifest, it was conceded. During oral arguments before this

court, counsel for Mrs. Springer acknowledged that "we did not

plead a common law fraud claim" against Powers. Our decision

should surprise no one.

IV. CONCLUSION

¶42 The Wisconsin Uniform Fraudulent Transfer Act does not

apply to the "fraudulent transaction" exception to the rule of

successor non-liability. Because we conclude that FBE2 and

Powers were entitled to summary judgment, there is no need for a

remand. The court of appeals is reversed.

By the Court.—The decision of the court of appeals is

reversed.

27
 No. 2015AP829.ssa

¶43 SHIRLEY S. ABRAHAMSON, J. (dissenting). I write

separately to make two points.

¶44 First, the majority confusingly muddles what does and

does not constitute indicia of fraud for purposes of the

fraudulent transfer exception to the general rule against

successor liability. I conclude that courts may consult the

badges of fraud listed in the Wisconsin Uniform Fraudulent

Transfer Act (WUFTA) as indicative of a fraudulent transfer.

The unique facts of each case inform the court's search for

objective manifestations of fraud.

¶45 Second, unlike the majority, I would not dismiss

Springer's amended complaint. Neither Fire Brick Engineers

Company, Inc. nor Powers Holding, Inc. (collectively

"defendants") has ever challenged the sufficiency of Springer's

amended complaint on the issue of successor liability. Neither

the circuit court nor the court of appeals addressed the

sufficiency of Springer's amended complaint on the issue of

successor liability.
¶46 The majority sua sponte raises and decides this issue

without affording Springer an opportunity to address the issue

or seek leave to amend her complaint.

¶47 The majority justifies its summary dismissal of

Springer's amended complaint by stating that Springer "had

opportunity and reason to amend her complaint" to allege

successor liability. Majority op., ¶33.

¶48 Springer's adversaries, however, never claimed that
the pleadings were deficient after being put on notice in

1
 No. 2015AP829.ssa

Springer's opposition to the defendants' motion for summary

judgment that she was pursuing a theory of successor liability.

Springer did not move to amend her complaint because there was

no adversarial challenge to the sufficiency of her pleadings

after the defendants were put on notice of her theory of

successor liability. If the defendants believed that Springer

had not adequately pleaded her theory of successor liability,

they could have so argued. They did not.

¶49 The issues of whether Springer's complaint adequately

pleads successor liability, and if not, whether Springer should

be granted leave to amend her complaint, are not issues properly

before this court. The parties should be given notice the court

is concerned about these issues and should be given an

opportunity to address these issues.

¶50 The court has once again reached beyond the issues

presented to it to decide issues not presented or addressed by

the parties. The majority, again, surprises the parties, the

bench, and the bar.
¶51 The frequency and cavalier attitude with which this

court surprisingly decides an issue without providing parties

notice of the issue or an opportunity to address the issue is

troubling. Due process requires (at a minimum) notice and an

opportunity to be heard. Schroeder v. City of New York, 371

U.S. 208, 212 (1962); State v. Nelson, 2014 WI 70, ¶19, 355

Wis. 2d 722, 849 N.W.2d 317; Jensen v. Wis. Elections Bd., 2002

WI 13, ¶22, 249 Wis. 2d 706, 639 N.W.2d 537.

2
 No. 2015AP829.ssa

¶52 For cases decided this term that illustrate the

court's growing bad habit of addressing issues without giving

parties notice and the opportunity to address the issue (in

violation of due process), see Manitowoc Company, Inc. v.

Lanning, 2018 WI 6, 379 Wis. 2d 189, 906 N.W.2d 130 (overruling

Heyde Cos., Inc. v. Dove Healthcare, LLC, 2002 WI 131, 258

Wis. 2d 28, 654 N.W.2d 830, without providing parties notice or

opportunity to brief the issue of Heyde's continuing validity

and when doing so was unnecessary to the court's resolution of

the case); Sands v. Menard, 2017 WI 110, 379 Wis. 2d 1, 904

N.W.2d 789 (dismissing unjust enrichment claim for being

inadequately pleaded despite the pleading issue never being

raised at any point during litigation).1

1
In contrast with the cases described above in which the
court decides issues not addressed or argued by the parties,
State v. Reyes Fuerte, 2017 WI 104, 378 Wis. 2d 504, 904
N.W.2d 773, is an example of the court and the parties
essentially ignoring the issue presented and discussed in the
petition for review that induced the court to grant the petition
and addressing a new, different issue the parties present.

In Reyes Fuerte, the petition for review phrased the issue
presented as follows:

Now that criminal defense attorneys are obligated to
advise their clients about the immigration
consequences of their pleas, Padilla v. Kentucky, 559
U.S. 356 (2010), should the Wisconsin Supreme Court
overturn its decision in State v. Douangmala, 2002 WI
62, 253 Wis. 2d 173, 646 N.W.2d 1, and reinstate the
harmless error rule to prohibit a defendant who was
aware of the potential immigration consequences of his
plea from being able to withdraw the plea just because
the circuit court failed to give a statutory
immigration warning that complied with Wis. Stat.
§ 971.08(1)(c)?

(continued)
3
 No. 2015AP829.ssa

¶53 I am concerned that this court's erosion of due

process rights will continue unabated until the people of this

state are left with nothing but a faint shadow of what once was

a constitutionally protected right.

¶54 I dissent.

¶55 I am authorized to state that Justice ANN WALSH

BRADLEY joins this dissent.

Given the articulation of the issue presented for review in
Reyes Fuerte, one might expect that an analysis of Padilla would
be front and center in the briefs filed in this court. It is
not. Padilla did not drive the parties' analyses.

The court errs when it allows and condones parties'
phrasing an issue one way in the petition for review (thus
inducing the court to grant the petition) and then fundamentally
changing the issue presented when the case is actually being
litigated and argued in this court. This practice allows the
parties and the court to violate court rules and is unfair to
litigants who attempt to follow the rules the court has adopted.

United States Supreme Court Justice Antonin Scalia (joined
by Justice Elena Kagan) made this point as follows:

I would not encourage future litigants to seek review
premised on arguments they never plan to press, secure
in the knowledge that once they find a toehold on this
Court's docket, we will consider whatever workaday
arguments they choose to present in their merits
briefs.

City & Cty. of San Francisco v. Sheehan, 135 S. Ct. 1765, 1779
(2015) (Scalia, J., concurring in part, dissenting in part).

4
 No. 2015AP829.ssa

1