## Facts

- Welco Industries, Inc. manufactured refrigeration compressor units and sold units to Applied Companies, Inc. under a series of contracts.
- Welco sued Applied for breach of contract on February 16, 1988.
- On March 30, 1988, Welco and its parent entered an asset-purchase agreement with Vickers, Inc.; Vickers paid about $8.3 million for major operating assets (including trade name, plant, equipment, inventory, patents, goodwill) and continued the business as “Vickers‑Welco.”
- The asset-purchase agreement expressly excluded certain liabilities; Vickers assumed some obligations but did not assume liabilities arising from Welco’s contracts with Applied.
- Welco later changed its name to Wesche Electric.
- Applied counterclaimed on July 20, 1989, alleging Welco supplied defective units and joined Vickers as a counterclaim-defendant, asserting successor liability (primarily “mere continuation”).

## Issues

1. Whether an asset purchaser can be held liable for the seller’s unassumed contractual obligations under successor-liability doctrines.
2. Whether the “mere continuation” exception applies when the buyer continues the seller’s business operations but lacks common ownership and management identity with the seller.

## Decision

- The Supreme Court of Ohio reversed the court of appeals and reinstated summary judgment for Vickers.
- Vickers was not liable for Welco’s unassumed contractual obligations to Applied.
- Applied failed to produce evidence supporting any exception to the general rule that an asset purchaser does not assume the seller’s debts.

## Legal Principles

- General rule: a corporation purchasing another corporation’s assets is not liable for the seller’s debts and obligations.
- Exceptions permitting successor liability: (1) express or implied assumption of liabilities; (2) de facto merger or consolidation; (3) mere continuation; or (4) fraudulent transaction intended to escape liability.
- For “mere continuation,” the key element is common identity of officers, directors, and shareholders between the seller and purchaser; continuation of the business or product line alone is insufficient.
- In contract cases, courts give substantial effect to arm’s-length allocations of liabilities in the asset-purchase agreement.
- Summary judgment is proper when the nonmoving party fails to produce evidence on essential elements of the asserted exception to nonliability.

## Conclusion

The court held that an arm’s-length asset purchaser that expressly declined to assume a seller’s contract liabilities is not responsible for those debts absent proof of an established exception, and that “mere continuation” in contract-based successor-liability claims requires continuity of corporate ownership and control rather than mere operational continuity.


Welco Indus., Inc. v. Applied Cos., 67 Ohio St. 3d 344, 617 N.E.2d 1129 (Ohio 1993)