Commonwealth Land Title Insurance Company v. Metro Title Corp
890 N.W.2d 395
Mich. Ct. App.2016Background
- Commonwealth Land Title obtained a default judgment in May 2012 against Metro Title Corporation (aka Metro Title Agency).
- Three months later Commonwealth sued Metro Title and Metro Equity Services, alleging Metro Title formed Metro Equity to fraudulently transfer assets to avoid collection and that Metro Equity was liable as a successor (mere continuation).
- Metro Equity moved for dismissal, admitting common ownership but arguing it did different business, purchased no stock, and assumed no liabilities; trial court denied dismissal.
- At bench trial the court granted a directed verdict dismissing the fraudulent-transfer claim but found Metro Equity was a mere continuation of Metro Title and enforced the May 2012 judgment against Metro Equity.
- Metro Equity appealed, arguing the ‘‘mere continuation’’ doctrine is no longer viable and that only the ‘‘continuity of the enterprise’’ rule applies (and not to judgment creditors).
- The Court of Appeals affirmed, holding Michigan recognizes both distinct exceptions: continuity of the enterprise (limited to products-liability contexts) and mere continuation (available in commercial/judgment-creditor contexts).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the "mere continuation" exception to successor non-liability remains viable | Commonwealth: Yes; successor liability appropriate because Metro Equity is a mere continuation of Metro Title | Metro Equity: No; only "continuity of the enterprise" survives and it does not apply to judgment creditors | Held: Mere continuation remains a distinct, viable exception and applies here |
| Whether the continuity-of-enterprise doctrine controls successor liability for a judgment creditor | Commonwealth: N/A (relied on mere continuation theory) | Metro Equity: Continuity-of-enterprise is the required test and cannot be used by judgment creditors | Held: Continuity-of-enterprise is generally limited to products-liability cases; it does not displace mere continuation in commercial contexts |
| Whether Commonwealth gave Metro Equity adequate notice of successor-liability theory at trial | Commonwealth: First amended complaint pled the successor theory | Metro Equity: Lacked notice of the theory tried at bench | Held: Complaint provided reasonable notice; trial court did not abuse discretion allowing the theory to proceed |
| Whether transfer in advance of bankruptcy precludes mere-continuation liability | Commonwealth: Transfer in advance of bankruptcy can still support mere-continuation liability | Metro Equity: Transfer/no assumption of liabilities defeats successor liability | Held: Transfers before foreclosure or bankruptcy do not preclude application of the mere continuation exception; factual issues supported liability |
Key Cases Cited
- Foster v. Cone-Blanchard Machine Co., 460 Mich 696 (1999) (summarizes traditional exceptions to successor non-liability)
- Turner v. Bituminous Casualty Co., 397 Mich 406 (1976) (establishes continuity-of-enterprise doctrine in products-liability context)
- Starks v. Michigan Welding Specialists, Inc., 477 Mich 922 (2006) (refuses to expand Turner-based exception to judgment creditors)
- Chase v. Michigan Telephone Co., 121 Mich 631 (1899) (articulates traditional separate exceptions including mere continuation)
- RDM Holdings, Ltd. v. Continental Plastics Co., 281 Mich App 678 (2008) (applies mere continuation in commercial/advance-transfer context)
- Lakeview Commons Ltd Partnership v. Empower Yourself, LLC, 290 Mich App 503 (2010) (recognizes mere continuation theory outside products cases)