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COURT OF APPEALS
NOTICE
DECISION
DATED AND FILED
This  opinion  is  subject  to  further  editing.  If
published, the official version will appear in the
bound volume of the Official Reports.
April 13, 2000
A  party  may  file  with  the  Supreme  Court  a
petition  to  review  an  adverse  decision  by  the
Cornelia G. Clark
Court of Appeals.   See WIS. STAT. § 808.10 and
Clerk, Court of Appeals
RULE 809.62.
of Wisconsin
Nos.  99-0014 and 99-1253
STATE OF WISCONSIN                                      IN COURT OF APPEALS
DISTRICT IV
Case No. 99-0014
CHARLES TREUBER, AND DIANNE TREUBER,
PLAINTIFFS-RESPONDENTS-
CROSS-APPELLANTS,
LUMBERMEN’S UNDERWRITING ALLIANCE,
INVOLUNTARY-PLAINTIFF,
V.
NEWMAN MACHINE COMPANY, INC.
DEFENDANT-APPELLANT-
CROSS-RESPONDENT,
LINDSAY MACHINERY, INC.,
DEFENDANT-CO-APPELLANT.
Case No. 99-1253
CHARLES TREUBER, AND DIANNE TREUBER,
PLAINTIFFS,




Nos. 99-0014 and 99-1253
V.
NEWMAN MACHINE COMPANY, INC.,
DEFENDANT-APPELLANT,
LINDSAY MACHINERY, INC.,
DEFENDANT-RESPONDENT.
APPEALS  and  CROSS-APPEAL  from  judgments  of  the  circuit
court for La Crosse County:   JOHN J. PERLICH, Judge.   Judgments affirmed in
part;  reversed  in  part  and  cause  remanded  with  directions;  cross-appeal
dismissed.
Before Eich, Roggensack and Deininger, JJ.
¶1                                                                                      ROGGENSACK, J.    This products liability action was brought by
Charles and Dianne Treuber (the Treubers) because of an injury Charles suffered
as the result of what was alleged to be a defective glue press manufactured by
Raytherm,  Incorporated,  a  solely  owned  subsidiary  of  Newman  Machine
Company,  Inc.    Newman  appeals  a  judgment  against  it,  and  in  favor  of  the
Treubers, based on the legal conclusions that Raytherm was the instrumentality
(alter ego) of Newman, and also that Newman was the successor corporation to
Raytherm.   Newman also appeals a judgment based on the conclusion that it has
the legal obligation to indemnify the dealer, Lindsay Machinery, Inc., who sold the
glue press to Charles’s employer.   Because we agree with Newman that there is no
legal basis for liability against it, we reverse the judgments against it and we
remand  to  the  circuit  court  for  dismissal  of  all  claims  against  Newman.
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Nos. 99-0014 and 99-1253
Additionally,  we  dismiss  the  Treubers’  cross-appeal  because  of  our  legal
conclusions in regard to Newman.
¶2                                                                                        Lindsay also appeals a judgment in favor of the Treubers against it.
Because Lindsay was the dealer who placed the press in the stream of commerce,
it has potential liability to the Treubers for the injury that was sustained.   We also
conclude that there was sufficient evidence presented to support the jury’s findings
in favor of the Treubers; however, because the circuit court committed reversible
error when it did not instruct the jury and submit a special verdict question about
whether  the  press  was  substantially  modified  subsequent  to  its  delivery,  we
remand for a new trial on liability.   In regard to damages, we conclude there was
sufficient evidence in the record to support the jury’s findings; therefore, damages
need not be retried.
BACKGROUND
¶3                                                                                        Charles was an employee of Webster Industries, where he operated a
glue press, the Panel Master 100.   Charles was seriously injured on June 29, 1993,
when  his  left  hand  was  caught  in  the  Panel  Master.    The  Panel  Master  was
manufactured  in  1986  by  Raytherm  and  sold  to  Lindsay,  one  of  Raytherm’s
distributors, for  $35,250.    Lindsay then sold the Panel Master to Webster, for
$40,000.
¶4                                                                                        Raytherm was incorporated in Massachusetts on March  22,  1971,
under the name of ERZ, Inc. by Joseph Erz, Harry Simonds and Richard Wilder.
ERZ, whose manufacturing operations were conducted in Massachusetts, was in
the business of fabricating high frequency machinery, generally to be used in a
gluing or bonding process.    Newman, a North Carolina corporation which has
been in business since at least 1934, bought a majority of the shares of ERZ in
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Nos. 99-0014 and 99-1253
1974  and  changed  ERZ’s  name  in  1975,1  when  Newman  became  the  sole
shareholder.   Newman’s primary line of machinery was single and double four-
sided surfacers and planers that were used to remove the surface from wood.   It
also manufactured cold presses to which it was asked by customers to apply high
frequency  generators  (HF  units)  to  speed  the  glue  drying  process.    Newman
purchased Raytherm because it was one of the few companies that manufactured a
HF  unit  for  glue  bonding  of  wood  products  and  Newman  had  had  difficulty
securing sufficient HF units from another supplier to sell in conjunction with its
cold presses.
¶5                                                                                              When  Raytherm  was  first  purchased,  Joseph  Erz  remained  as
president and chief operating officer  (COO) of the corporation.    In  1975 after
Joseph Erz resigned and sold his remaining shares of stock back to Raytherm,
John Drees, an employee of Newman, acted as the interim president and COO for
approximately  one-year,  until  Raytherm  hired  Herman  Delano  as  the  COO.
Delano had significant experience in manufacturing HF units.   He ran Raytherm as
its president and COO through  1991,  when he retired.    After Delano retired,
Raytherm was unable to secure another employee with sufficient experience in
manufacturing HF units to operate Raytherm.    Therefore, Newman transferred
what was then left of Raytherm’s business to North Carolina, liquidated its assets,
and discontinued Raytherm’s operations.   Newman applied the money it received
in the liquidation of Raytherm’s assets to debt Raytherm owed Newman.   The
corporate form of Raytherm still exists, but it has no active operations or assets.
1  Between the time Raytherm was legally named ERZ, Inc. and the time when its legal
name was Raytherm, Inc., it had an intervening name.   However, neither that name nor the
circumstances surrounding it have any relevance to this appeal.    Therefore, we refer to the
manufacturer of the Panel Master simply as Raytherm.
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Nos. 99-0014 and 99-1253
¶6                                                                                      The  Treubers  brought  products  liability  and  negligence  claims
against Newman and Lindsay.   Both Newman and Lindsay denied liability to the
Treubers  and  Lindsay  cross-claimed  for  contribution  from  Newman.     The
Treubers’ personal injury claims were tried to a jury which found that when the
“RayTherm Panel Master”  “left the possession of the seller,” it was  “in such
defective condition as to be unreasonably dangerous to a prospective user as to the
limit switch”; that such defective condition was a cause of Charles’s injuries; and
that Charles was not contributorily negligent.   The principal amount of damages
awarded to the Treubers was $578,549.89, including $200,000 for future loss of
earning capacity.
¶7                                                                                      During the course of the trial, the jury was presented with evidence
supportive of two conflicting theories about how the accident happened.    The
Treubers’  expert  opined  that  a  defectively  designed  limit  switch  caused  the
accident and Newman presented evidence that the Panel Master had been modified
subsequent to its sale to Webster with a “jump wire,” which caused the accident.
As designed, the Panel Master required an operator to use two hands, before the
press would compress the wood sheets.   The two-handed requirement assured that
neither of the operator’s hands would be in the press when it cycled downward.
However, the jump wire permitted the operator to set the press in motion by
pushing one button with one hand, rather being required to push two buttons with
two hands.   Newman requested a special verdict question and jury instruction on
the issue of whether the press had been subjected to a substantial modification
subsequent to its delivery to Webster.  The circuit court refused its request.
¶8                                                                                      Because the jury also heard evidence that the press had activated in
the past when Charles had not consciously set it in motion and that Charles had
reported  this  malfunction  to  Webster,  Newman  also  requested  special  verdict
5




Nos. 99-0014 and 99-1253
questions and instructions on whether Webster negligently maintained the press
and whether that was a cause of the accident.   The circuit court denied that request
as well.
¶9                                                                                       Although the jury found liability and damages against Raytherm, it
made no findings in regard to either Newman or Lindsay.   Instead, the circuit court
held a separate trial on the relationship of Newman and Lindsay to Raytherm and
determined that Raytherm acted as a “mere instrumentality” of Newman.   It also
determined that Newman was a successor corporation of Raytherm.   And finally, it
concluded that Lindsay was entitled to “contribution and/or indemnification” from
Newman for any and all monies awarded by the jury.    Therefore, it entered a
judgment  against  Newman  and  in  favor  of  the  Treubers  in  the  amount  of
$644,363.56, principal, interest and costs.   It also entered judgment in favor of the
Treubers against Lindsay in the amount of  $699,626.47, principal, interest and
costs,2 and it entered judgment in favor of Lindsay and against Newman, in the
amount of $645,777.06.  Newman and Lindsay appeal the judgments against them.
¶10    And finally, during the course of the litigation, the Treubers made a
settlement offer to Newman to settle all claims of both plaintiffs for $200,000.
The circuit court determined that the Treubers’ offer did not comply with WIS.
STAT. § 807.01(3) (1995-96).   The Treubers cross-appeal that determination.
2  Because Lindsay was assessed double costs and more interest, the Treubers’ judgment
against Lindsay was larger than their judgment against Newman.
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Nos. 99-0014 and 99-1253
DISCUSSION
Standard of Review.
¶11    Piercing the corporate veil is an equitable remedy; therefore, we
review decisions which do so under the erroneous exercise of discretion standard.
See Paterson v. Paterson,  73 Wis. 2d  150,  154,  242 N.W.2d  907,  909  (1976).
However,  in  order  to  affirm  a  discretionary  determination  there  must  be  a
reasonable  basis  in  the  record,  factually  and  legally,  for  the  circuit  court’s
determination.    See  Consumer’s  Co-op  of  Walworth  County  v.  Olsen,                  142
Wis. 2d 465, 472-73, 419 N.W.2d 211, 213 (1988).   Findings of fact made by the
circuit court will not be set aside on appeal unless they are clearly erroneous.   See
WIS. STAT. § 805.17(2) (1997-98).   Additionally, all discretionary determinations
must be grounded in the correct rule of law.   See Consumer’s Co-op, 142 Wis. 2d
at                                                                                          472-73,                                                                   419  N.W.2d  at  213.    We  give  no  deference  to  a  discretionary
determination based on clearly erroneous facts or on an erroneous view of the law.
See id.
¶12    We will sustain a jury’s answer to a special verdict question if there
is any credible evidence in the record to support it.    See D’Huyvetter v. A.O.
Smith Harvestore Prods., 164 Wis. 2d 306, 320, 475 N.W.2d 587, 592 (Ct. App.
1991).   Whether evidence was presented sufficient to warrant the submission of a
matter to the jury is a question of law subject to de novo review.   See Zintek v.
Perchik,                                                                                    163  Wis. 2d  439,  454,  471  N.W.2d  522,  527-28  (Ct.  App.  1991),
overruled on other grounds, Steinberg v. Jensen, 194 Wis. 2d 439, 534 N.W.2d
361 (1995).   However, our review of a request for a jury instruction is limited to
whether the circuit court acted within its discretion when it refused to give the
requested instruction.   See State v. Randall, 222 Wis. 2d 53, 59, 586 N.W.2d 318,
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Nos. 99-0014 and 99-1253
321 (Ct. App. 1998), review denied, 222 Wis. 2d 674, 589 N.W.2d 628 (1998).
We will reverse and order a new trial only if the instructions, taken as a whole,
communicated an incorrect statement of the law or otherwise probably misled the
jury.  See id. at 59-60, 586 N.W.2d at 321.
Newman’s Potential Liability. 3
¶13    It is undisputed that when the Panel Master was manufactured by
Raytherm, Raytherm was a solely owned subsidiary corporation of Newman.   The
Treubers and Lindsay argue that three legal doctrines support holding Newman
liable  for  Charles’s  accident  with  Raytherm’s  Panel  Master:                                (1)  Raytherm’s
corporate veil ought to be pierced because Raytherm was an instrumentality or
alter ego of Newman; (2) Raytherm’s corporate veil ought to be pierced because
Newman was Raytherm’s successor corporation; and (3) Newman and Raytherm
engaged in joint ventures.   The circuit court agreed with the Treubers and Lindsay
that the liability originating with Raytherm under Wisconsin’s product liability
law ought to be transferred to Newman.   We disagree.
¶14    We begin by noting that as a general legal principle, absent fraud or
bad faith, a corporation is not liable for the acts of its subsidiaries because there is
a  presumption  of  separateness.    See                                                          1  WILLIAM  MEADE  FLETCHER  ET  AL.,
FLETCHER CYCLOPEDIA OF THE LAW OF PRIVATE CORPORATIONS § 43, at 711-13
(perm. ed. rev. vol. 1999).   Wisconsin follows this general rule in that corporations
are treated as separate entities, notwithstanding the fact that they may be solely
3  Because of the complexity of the relationships of the parties and the issues asserted on
appeal, those issues which relate solely to Newman’s liability will be dealt with in a separate
section from those issues relative to any liability Lindsay may have.
8




Nos. 99-0014 and 99-1253
owned by another corporation or by one individual.4   In Wisconsin, the corporate
status is not one to be lightly disregarded.   See Consumer’s Co-op, 142 Wis. 2d at
474, 419 N.W.2d at 213.   The principle of corporate separateness and its salutory
effect on commerce has long been recognized in Wisconsin.   See Milwaukee Toy
Co. v. Industrial Comm’n of Wis., 203 Wis. 493, 495, 234 N.W. 748, 749 (1931).
The supreme court has explained the principle of corporate separateness and its
importance in detail.   For example, in Consumer’s Co-op it noted:
The purpose of limited liability is to promote commerce
and industrial growth by encouraging shareholders to make
capital contributions to corporations without subjecting all
of their personal wealth to the risk of the business.   This
incentive to business investment has been called the most
important legal development of the nineteenth century.
Consumer’s Co-op, 142 Wis. 2d at 474, 419 N.W.2d at 213-14 (quoting David H.
Barber, Piercing the Corporate Veil, 17 WILLAMETTE L. REV. 371, 371-72 (1981)).
¶15    In the case at hand, the circuit court held a trial to the court5 to
determine the claims against Newman and Lindsay.   At the trial’s conclusion, the
court incorporated, as its findings of fact and conclusions of law, statements which
were  taken  verbatim  from  suggestions  of  the  Treubers’  and  Lindsay’s  trial
attorneys.   The practice of having trial counsel submit proposed findings of fact
and  conclusions  of  law  is not uncommon,  nor  necessarily to be  discouraged.
4  In the proceedings before the circuit court, the parties relied on Wisconsin law to
determine  whether  Raytherm’s  corporate  veil  should  be  pierced.    Additionally,  there  is  a
presumption that Wisconsin law applies to a case tried in Wisconsin courts.  See Hunker v. Royal
Indem. Co., 57 Wis. 2d 588, 599, 204 N.W.2d 897, 903 (1973).   Therefore, based on the parties
arguments to the circuit court and the presumption of Hunker, we apply Wisconsin law.
5  Testimony  from  four  witnesses  were  offered  at  this  proceeding:    Frank  York
(Newman’s president), Jane Myers (Newman’s controller), Herman Delano (Raytherm’s former
president) and John Drees (Raytherm’s former interim president).
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Nos. 99-0014 and 99-1253
However, a circuit court must assure itself that there is adequate support in the
record for the factual findings and legal conclusions it decides to make and also
that those findings are sufficient to prove each and every element necessary to the
claims which it concludes have prevailed at trial.    Here, some of the findings
which the court adopted have no support in the record; and the totality of the facts,
as found by the circuit court, are insufficient, as a matter of law, to prove any of
the three theories which the Treubers and Lindsay contend support liability of
Newman.
1.                                                                                        Instrumentality/Alter Ego.
¶16    In  Wisconsin,  there  is  an  almost  unwavering  adherence  to
shareholder  non-liability.    However,  as  with  most  legal  principles,  there  are
exceptions.   One of those exceptions is the instrumentality or alter ego doctrine.
See FLETCHER, supra, § 43, at 719.   However, that exception is very narrow and it
requires proof of three elements before the principle of corporate separateness may
be set aside.   As the supreme court explained, in order to sustain a claim that the
corporate veil ought to be pierced because a corporation is a mere instrumentality
of its shareholder, a person seeking that relief must prove all of the following:
(1)                                                                                       Control,  not  mere  majority  or  complete
stock control, but complete dominion, not only of finances
but  of  policy  and  business  practice  in  respect  to  the
transaction attacked so that the corporate entity as to this
transaction  had  at  the  time  no  separate  mind,  will  or
existence of its own; and
(2)                                                                                       Such control must have been used by the
[corporation] to commit fraud or wrong, to perpetrate the
violation  of  a  statutory  or  other  positive  legal  duty,  or
dishonest and unjust act in contravention of plaintiff’s legal
rights; and
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Nos. 99-0014 and 99-1253
(3)                                                                                       The  aforesaid  control  and  breach  of  duty
must   proximately   cause   the   injury   or   unjust   loss
complained of.
Consumer’s Co-op, 142 Wis. 2d at 484, 419 N.W.2d at 217-18 (citation omitted).
It is important to note that all three elements must be proved before corporate
separateness can be disregarded.   And even when unfairness is present, “injustice,
absent the establishment of control, would not constitute adequate grounds to
pierce the corporate veil.”   Id. at 485, 419 N.W.2d at 218 (citation omitted).
a.                                                                                        Complete domination.
¶17    Lindsay  and  the  Treubers  rely  on  finding  number                             34  to  show
absolute control of Raytherm by Newman.    It states that  “during its period of
operations, Newman, Industrial, and Guilford[6] executed corporate guarantees on
loans from Congress Financial to Raytherm.”   However, there is no evidence in
the  record  to  support  this  finding.    The  only evidence  about  the  loans  from
Congress Financial was that they were made to Newman, not to Raytherm, and the
undisputed testimony shows that Raytherm never made payments on those loans.
¶18    Lindsay and the Treubers rely on finding number  38 in a similar
fashion.   It states that “[d]uring the period of operation of Raytherm, Frank York,
President  of  Newman,  pledged  assets  of  Raytherm  to  pay  off  Newman  debt
obligations.”   It is true that at the request of Newman’s corporate lender, Raytherm
permitted its collateral to stand as security for lending to Newman,7 just as all of
Newman’s solely owned subsidiaries were required by Newman’s lender to do.
6  Guilford Foundry and Industrial Advertising were also wholly owned subsidiaries of
Newman.
7  See Frank York’s uncontradicted testimony from his experiences as the president and
COO of Newman from 1973 through the time of trial.
11




Nos. 99-0014 and 99-1253
However,  this requirement tends to prove that Newman’s lender  was treating
Newman and its subsidiaries as separate entities because if they were simply one
pool of assets, Newman’s pledge of its assets would have been sufficient to reach
the assets of all its subsidiaries and no collateral agreements would have been
necessary.   Therefore, finding number 38 tends not to show absolute control of
Raytherm by Newman.
¶19    Lindsay  and  the  Treubers  also  point  to  the  persons  who  were
appointed to Raytherm’s board of directors as proof of the complete domination
element.   Raytherm’s board of directors was comprised of two or three persons
from Newman and two persons from Raytherm.   Herman Delano and Paul Angus
generally  served  as  the  two  directors  from  Raytherm.    However,  the  record
contains no evidence which indicates that either Angus or Delano were ever a
member of the board of directors of Newman, so membership on the boards of the
two companies was not identical.
¶20    Additionally, the method of appointment to the board of directors of
Raytherm is cited as evidence of complete control.   In that regard, the court made
a finding that Frank York, president of Newman, was on the board of Raytherm,
and that he appointed all of the directors of Raytherm.   While the Treubers and
Lindsay make much of this finding, we fail to see its relevance.   The record shows
that the  by-laws of  Raytherm required the  shareholders to elect  the  board of
directors.   When York made the complained of appointments, Newman was the
sole shareholder; therefore, under Raytherm’s by-laws, no one else could have
elected the directors except Newman, acting through its president, Frank York.
¶21    The circuit court also found  (finding number  8) that Raytherm’s
board of directors never met during the time that it was a wholly owned subsidiary
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Nos. 99-0014 and 99-1253
of  Newman.    While  there  was  some  trial  testimony  which  could  have  been
interpreted  to  support  this  finding,  it  is  not  significant  to  proving  whether
Raytherm was the alter ego of Newman because there was no testimony that
formal meetings were required.   Furthermore, the record shows that the board of
Raytherm had  minutes prepared and signed, evincing  the  decisions the  board
made.   It is also undisputed that Raytherm’s directors prepared and signed annual
meeting minutes in compliance with its corporate by-laws, showing it re-elected
officers each year.   Finally, the supreme court has instructed that in determining
whether  the  instrumentality  doctrine  should  be  applied,  courts  should  not  be
concerned  with  formalities  but  rather,  they  should  focus  on  the  day-to-day
operations of the corporation.   See Consumer’s Co-op, 142 Wis. 2d at 484, 419
N.W.2d at 217.
¶22    In  that  regard,  during  the  time  that  Raytherm  was  an  ongoing
operation,  and  after  Newman  had  become  its  sole  shareholder,  Raytherm
conducted  all  of  its  manufacturing  in  Massachusetts.     The  record  contains
undisputed evidence that during that time Raytherm had its own COO, who made
daily decisions for Raytherm; it had its own engineers, who designed the products
it sold; it had its own attorney, to handle its legal affairs; it had its own bank
accounts; and it had its own accountant, who maintained Raytherm’s corporate
financial records.8   Additionally, it is undisputed that Newman did not agree to pay
Raytherm’s creditors or suppliers and Newman did not collect for the sales of
Raytherm’s machines, except when it acted as one of Raytherm’s distributors.9
8  The record shows that Newman provided bookkeeping and/or accounting services to
Raytherm only when Raytherm moved to North Carolina in 1991 or 1992 and stopped all but
wind-up activities.
9  See testimony of Frank York, trial exhibit 94, the partial deposition of Herman Delano,
and testimony of Jane Myers.
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Nos. 99-0014 and 99-1253
Furthermore, it is also undisputed that Newman had a separate board of directors,
separate bank accounts, separate attorneys, separate accountants10 and separate
employees during the time it owned Raytherm, and that Newman never conducted
manufacturing activities in Massachusetts.
¶23    Cut to its essence, what the Treubers and Lindsay repeatedly rely on
is  simply  Newman’s  complete  stock  ownership  of  Raytherm.     However,
Newman’s owning all the shares in Raytherm is an insufficient reason to depart
from the usual rule of corporate separateness.   See Posyniak v. School Sisters of
St. Francis, 180 Wis. 2d 619, 636-37, 511 N.W.2d 300, 308 (Ct. App. 1993).
b.                                                                                             Perpetuation of fraud or wrong.
¶24    In addition to failing to show that Newman had complete control
over  Raytherm,  there  are  no  findings  which  show  that  whatever  elements  of
control the court believed Newman had over Raytherm were used by Newman to
commit a fraud, or a wrong, or to perpetuate the violation of a statutory or other
positive legal duty which Newman or Raytherm had to Charles.   The Treubers and
Lindsay focus on finding number 16, which states that Newman did not purchase
products liability insurance to cover Raytherm’s products.   However, they have
not identified how that operated as a fraud or the violation of a statutory or other
positive legal duty.
¶25    The court also found that Raytherm was undercapitalized.   There is
nothing in the record to show what capitalization Raytherm had in 1971 when it
10  Although Newman had a consolidated financial statement prepared for it and all of its
subsidiaries, those statements were not prepared by the same accountants and bookkeepers who
assisted with Raytherm’s financial affairs.
14




Nos. 99-0014 and 99-1253
was  incorporated  under  the  name  of  ERZ,  Inc.     However,  when  under-
capitalization is used as a basis for the second element of the Consumer’s Co-op
test, it is the initial capitalization that is relevant, not the capitalization when a
corporation  is  purchased  years  later  and  certainly  not  the  capitalization  of  a
corporation which has been in active business for twenty years, as Raytherm was.
The supreme court rejected the contention which Lindsay and the Treubers make
here  that  there  is  a  continuing  requirement  to  maintain  an  adequate  level  of
capitalization for an ongoing corporation.   It explained:
The adequacy of capital is to be measured as of the time of
formation  of  the  corporation.    A  corporation  that  was
adequately    capitalized    when    formed    but    which
subsequently    suffers                                                                     financial            reverses   is   not
undercapitalized.
Consumer’s Co-op, 142 Wis. 2d at 486, 419 N.W.2d at 218 (citation omitted).
c.                                                                                          Fraud/injury link.
¶26    And finally, even if Lindsay and the Treubers could have established
the first and second elements of the Consumer’s Co-op test, there are no findings,
nor have we discovered testimony in the record before us, which show that such
allegedly fraudulent conduct by Newman caused Charles’s injury.   Therefore, we
conclude that the facts as found by the circuit court are insufficient, as a matter of
law, to satisfy the test of Consumer’s Co-op necessary to prove that Raytherm was
the instrumentality or alter ego of Newman.   Because the circuit court applied the
wrong standard of law when it determined that Raytherm was the instrumentality
or alter ego of Newman, it erroneously exercised its discretion.
15




Nos. 99-0014 and 99-1253
2.                                                                                    Successor Corporation.
¶27    In  addition  to  concluding  that  Newman  had  liability  under  the
instrumentality/alter ego theory, the circuit court also concluded that Newman was
the successor corporation of Raytherm, as another basis for assigning liability to
Newman for Charles’s injuries.   Generally, the successor corporation doctrine is
available only when one corporation purchases all of the assets of another business
and one of four other conditions exist:
(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.
Tift v. Forage King Indus., Inc.,  108 Wis. 2d  72,  75-76,  322 N.W.2d  14,  15
(1982) (citation omitted).
¶28    Newman argues that the successor corporation doctrine cannot apply
where the stock of a corporation is purchased, rather than purchasing only the
assets.   We disagree because to conclude otherwise would thwart the policy that
underlies the doctrine.   As the supreme court explained, the policy that underlies
successor corporation liability is that no business, whatever the form in which it
operates, should be permitted to manufacture a defective product, place it in the
stream   of   commerce   and   escape   liability   merely   through   corporate
transformations.   See Tift, 108 Wis. 2d at 77, 322 N.W.2d at 16.   Therefore, we
conclude that when one corporation purchases all the stock in another corporation
and subsequently purchases all the assets of that corporation and also continues to
operate the business of the corporation whose stock and assets were purchased, it
is possible for successor corporation liability to arise.
16




Nos. 99-0014 and 99-1253
¶29    Here, two of the potential triggers of successor corporation liability
are  clearly absent  because  there  was no  proof  offered to show  that Newman
expressly or impliedly agreed to assume the liabilities of Raytherm and there was
no allegation that either the purchase of Raytherm stock or the sale of its assets to
a third party was fraudulently accomplished to escape liability.    In examining
whether the purchase of Raytherm’s stock constituted a merger, we note that the
key element used to determine whether there was a merger is absent.   That is,
Newman did not pay for Raytherm’s stock with stock in Newman.   It paid for the
stock with cash.   See Fish v. Amsted Indus., Inc.,  126 Wis. 2d  293,  301,  376
N.W.2d 820, 824 (1985) (citations omitted).   Additionally, as we have explained
in  detail  above,  Raytherm  operated  as  a  separate  subsidiary  corporation  of
Newman, which also suggests that no merger occurred and that Newman was not a
continuation of Raytherm.   And finally, Raytherm had a different manufacturing
business:    it  manufactured  machines  that  utilized  HF  units  to  speed  gluing
processes,  such  as  machines  used  in  automobile  carpet  installation,  furniture
upholstering and wood lamination.11   Raytherm’s specialized HF unit production
was the reason Newman purchased Raytherm.   When Delano retired and Newman
could  find  no  one  with  HF  unit  production  experience  to  operate  Raytherm,
Raytherm’s  manufacturing  ceased.     Newman  simply  didn’t  know  how  to
manufacture  the  products  that  Raytherm  did.     Newman  did  not  carry  on
11  As noted earlier, Newman’s primary line of machinery was single and double four-
sided  surfacers  and  planers  that  were  used  to  remove  the  surface  from  wood.    It  also
manufactured cold presses to which it was asked by customers to apply HF units to speed the glue
drying process.
17




Nos. 99-0014 and 99-1253
Raytherm’s business and there is no evidence to suggest that these companies
merged.   Therefore, Newman was not the successor corporation of Raytherm.12
3.                                                                                                      Joint Venture Liability.
¶30    As  a  final  basis  for  assigning  liability  for  Charles’s  injuries  to
Newman, the Treubers rely on finding number 12, that “[a]t times” Newman and
Raytherm were joint venturers in the manufacturing and sale of machinery.   If
parties engage in a joint enterprise, then each is the agent of the other, within the
scope of the enterprise, and each may be held vicariously liable to one who brings
a claim arising from the product of the joint venture.   See Spearing v. County of
Bayfield, 133 Wis. 2d 165, 173, 394 N.W.2d 761, 765 (Ct. App. 1986).   A joint
venture occurs when four essential elements are found:
(1) an agreement, express or implied, among the members
of the group; (2) a common purpose to be carried out by the
group;                                                                                                  (3)  a  community  of  pecuniary  interest  in  that
purpose, among the members; and (4) an equal right to a
voice  in  the  direction  of  the  enterprise,  which  gives  an
equal right of control.
Id. (citing RESTATEMENT (SECOND) OF TORTS § 491, cmt c (1965)).   Therefore, in
order for Newman to be liable for the injuries caused by the Panel Master, the
manufacturer of that press would have had to have satisfied all four elements set
forth in Spearing.
¶31    Newman contends that this theory of liability was not argued to the
circuit court; therefore, it is waived.   See Segall v. Hurwitz, 114 Wis. 2d 471, 489,
12  We also note that simply making one product line that the original corporation made is
insufficient to cause the purchasing corporation to be liable for the selling corporation’s defective
products.   See Fish v. Amsted Indus., Inc., 126 Wis. 2d 293, 304-05, 376 N.W.2d 820, 826
(1985).
18




Nos. 99-0014 and 99-1253
339 N.W.2d  333,  342  (Ct. App.  1983).    However, this rule is one of judicial
administration, not an absolute bar to our consideration of such an issue.    See
Wirth v. Ehly, 93 Wis. 2d 433, 444, 287 N.W.2d 140, 146 (1980).   Here, rather
than employing that rule of administration, we note that the circuit court did not
make findings sufficient to satisfy the four elements set forth in Spearing.    It
merely listed the legal conclusion that the parties were joint venturers, as a single
“finding.”
¶32    Additionally, the liability of a joint venturer is confined to the scope
of  the  enterprise.    See  Spearing,                                                      133  Wis. 2d  at  173,  394  N.W.2d  at  765.
Testimony showed that on several occasions, large presses were manufactured
where Newman would make some of the component parts and Raytherm would
make  other  parts  and  the  resulting  presses  were  then  sold  to  third  parties.
However, the Panel Master was a small press.   And, there is no evidence in the
record that Newman ever participated in the manufacture of the Panel Master 100
or shared the expenses and the profits of manufacturing that type of press.   The
Panel Master was a high frequency press, which Newman lacked the technical
expertise to produce.   Because manufacturing Panel Master 100 presses was never
a joint enterprise, we conclude that Newman and Raytherm were not engaged in a
joint  venture  sufficient  to  provide  a  legal  basis  for  liability  of  Newman  for
Charles’s injuries.
4.                                                                                          Contribution.
¶33    Our decision in regard to Newman’s lack of liability for the injuries
caused by the Panel Master also precludes liability to Lindsay on its claim for
contribution, as a right of contribution requires joint tort liability to the same
person with one party bearing an unequal proportion of the resultant damages.   See
19




Nos. 99-0014 and 99-1253
Giese v. Montgomery Ward, Inc. 111 Wis. 2d 392, 404, 331 N.W.2d 585, 591
(1983) (citation omitted).   Because we have concluded that Newman is not a joint
tortfeasor, contribution cannot lie against it.13
5.                                                                                                      Costs.
¶34    In  their  cross-appeal,  the  Treubers contend  that the  circuit court
erred  when  it  found  their  statutory settlement  offer  insufficient  to  justify  the
doubling of costs.   However, because we have concluded that there is no legal
basis for liability against Newman by the Treubers or by Lindsay, Newman will
not be required to pay any costs.   Therefore, we do not address the merits of the
parties’ arguments in this regard.   And finally, because there are no damages for
Newman to pay, its contention that interest was improperly assessed against it is
moot and we choose not to address it.
Lindsay’s Potential Liability.14
¶35    The circuit court also entered judgment in favor of the Treubers
against Lindsay, as the dealer who sold the Panel Master.   A dealer of a defective
product may be held strictly liable for injuries caused by a defective product, if it
actively placed the defective product in the stream of commerce.   See Sedbrook v.
Zimmerman Design Group, Ltd., 190 Wis. 2d 14, 25-26, 526 N.W.2d 758, 762-
63  (Ct. App.  1994)  (citing Dippel v. Sciano,  37 Wis. 2d  443,  155 N.W.2d  55
13  According to the filings in this court, Lindsay and Newman agree that if Newman is
not liable to the Treubers, it is not liable to Lindsay as well.  See July 6, 1999 motion by Attorney
Steeves on behalf of Lindsay.
14  Although the Treubers sued in both negligence and strict liability for a defective
product, the circuit court dismissed all negligence claims against Lindsay.   That decision has not
been appealed.   Therefore, we address only the potential liability which may be strictly imposed
for a defective product.
20




Nos. 99-0014 and 99-1253
(1967)).   Here, it is undisputed that Lindsay was a regular dealer of manufacturing
equipment when it purchased the Panel Master from Raytherm and sold it to
Webster.   Additionally, even though the Panel Master was shipped directly from
Raytherm to Webster and Lindsay never had control of it, that undisputed fact, in
and of itself, is insufficient to foreclose all potential liability against Lindsay.   See
Sedbrook, 190 Wis. 2d at 29-30, 526 N.W.2d at 764.
¶36    Here, Webster asked Lindsay to find it a particular type of machine.
Lindsay submitted a quote for the Panel Master, which Webster accepted.  Lindsay
then paid Raytherm $35,250 for the press and sold it to Webster for $40,000.   In
so doing, it was an active participant in placing the Panel Master into the stream of
commerce and it opened the door to potential liability for injuries resulting from
its use.   See id.
¶37    Lindsay also contends that if it has potential liability to the Treubers,
it is entitled to a dismissal because there was insufficient evidence to support the
jury’s finding that:                                                                         (1) the Panel Master was in such a defective condition as to be
unreasonably dangerous due to the limit switch; and (2) that the defective limit
switch was a cause of Charles’s injuries.   We review this challenge by examining
the record to determine if it contains any credible evidence to support the jury’s
finding.   See D’Huyvetter, 164 Wis. 2d at 320, 475 N.W.2d at 592.   Here, the jury
heard the testimony of the Treubers’ expert who opined that the limit switch was
defective in its design and that defect caused the accident.   If the jury believed this
testimony, it was sufficient to support the findings the jury made in the special
verdict.   Therefore, this contention is not sufficient for reversal of the judgment
against Lindsay.
21




Nos. 99-0014 and 99-1253
¶38    Lindsay then argues that even if the evidence is sufficient to support
the jury’s findings, a new trial is warranted because the circuit court committed
prejudicial error when it refused to submit a special verdict question on whether
the Panel Master had been substantially modified, subsequent to its delivery.15   As
delivered, the press could not be activated to cycle downward, unless two buttons
were pushed.   Those two buttons were spaced in such a way that an operator could
not commence the pressing action by which Charles was injured without using two
hands, thereby assuring that both of the operator’s hands were out of harm’s way.
However, testimony was presented by the defendants that the Panel Master had
been modified subsequent to delivery by the insertion of a  “jump wire” in the
amperite tube circuitry.   The use of this jump wire permitted the machine to be
operated  by  using  only  one  of  the  two  buttons  which  the  manufacturer  had
installed.   Therefore, it could be operated with only one hand.
¶39    Strict liability in a products case does not make a dealer an insurer
for all injuries that could arise from the use of a machine, nor does it impose
absolute liability.   See Dippel, 37 Wis. 2d at 459-60, 155 N.W.2d at 63.   In order
to establish a dealer’s liability, a plaintiff must prove all of the following elements:
(1) that the product was in a defective condition when it left
the  possession  or  control  of  the  seller,                                                      (2)  that  it  was
unreasonably dangerous to the user or consumer, (3) that
the  defect  was  a  cause                                                                          (a  substantial  factor)  of  the
plaintiff’s injuries or damages, (4) that the seller engaged in
the business of selling such product or, put negatively, that
this is not an isolated or infrequent transaction not related
15  The Treubers contend that Lindsay waived this argument by not participating in the
last two days of trial which dealt with the form of the special verdict and jury instructions.
However, Newman requested a special verdict question on modification.   Under the facts of this
case, it matters not whether Lindsay made the request or whether Newman made it.   Therefore,
we reject this waiver argument because the circuit court had the opportunity to consider the same
argument we are now addressing on appeal.
22




Nos. 99-0014 and 99-1253
to  the  principal  business  of  the  seller,  and                                            (5)  that  the
product was one which the seller expected to and did reach
the  user  or  consumer  without  substantial  change  in  the
condition it was when he sold it.
Glassey v. Continental Ins. Co.,  176 Wis. 2d  587,  599,  500 N.W.2d  295,  300
(1993)  (emphasis in original).    A  “substantial change” has been defined as a
“change in the design, function or character of the product linked to the accident.”
Id. at 600, 500 N.W.2d at 301.   Whether a change is substantial is a question for
the jury, unless the evidence is undisputed and permits only one meaning.   Id. at
605, 500 N.W.2d at 303.
¶40    Here, the evidence was conflicting.   The defendants presented expert
testimony that there had been a substantial change in the Panel Master by the
addition of the jump wire, which permitted Charles to commence the downward
cycle of the press by using only one hand, thereby causing his injury; and the
Treubers presented evidence that the limit switch was the cause of the accident,
which switch was not affected by the jump wire.    The defendants requested a
special verdict question and instruction on whether the Panel Master had been
substantially modified subsequent to delivery, but the circuit court refused to give
it.   In so doing, it relieved the Treubers from proving the fifth Glassey element, to
the prejudice of Lindsay.   Therefore, we conclude that Lindsay is entitled to a new
trial  on  whether  it  is  strictly  liable  to  the  Treubers  for  the  injuries  Charles
sustained.   See Odya v. Quade, 4 Wis. 2d 63, 75, 90 N.W.2d 96, 103 (1958).
¶41    Lindsay also contends that there was insufficient proof to support the
jury’s finding that Charles suffered a loss of earning capacity of $200,000.   While
damages  for  lost  earning  capacity  are  not  required  to  be  supported  with
mathematical precision, credible evidence must be presented upon which the jury
could “estimate with reasonable probability what would have happened had the
23




Nos. 99-0014 and 99-1253
injury not occurred.”    Schulz v. St. Mary’s Hosp.,  81 Wis. 2d  638,  657,  260
N.W.2d 783, 789 (1978).   Here, the Treubers presented a vocational expert, Dr.
Ross Lynch, who opined that Charles’s loss of capacity in wages was $12,563 per
year, for approximately ten years.   Lynch also testified that Charles had a loss of
benefits above and beyond the loss of capacity in wages.   He did not state what
dollar amount that might be.   However, Harry Turner testified that Charles’s loss
of  benefits  on  monthly  basis  was  as  follows:                                                    $384.70  for  health  insurance
premiums and $3.58 for life insurance premiums.   If the jury took the testimony of
Lynch that Charles’s loss of earning capacity would extend over approximately
ten  years,  it could  have found he  lost a total of  $46,164 in  health insurance
premiums and $429.60 in life insurance premiums.   Additionally, Turner testified
that over the next eight years Charles would have lost $4,450 in bonuses, with
additional years running at $500 per year.   Therefore, we conclude that sufficient
evidence  was presented  to  support  the  jury’s decision on  the  loss of  earning
capacity element of the damages it found; and as a result, damages do not need to
be retried.
CONCLUSION16
¶42    Because we agree with Newman that there  is no legal basis for
liability against it, we reverse all judgments against it and we remand to the circuit
court for dismissal of all claims against Newman.   Additionally, because Lindsay
was the dealer who placed the press into the stream of commerce, it has potential
liability to the Treubers.   We conclude that there was sufficient evidence presented
16  This case has been under submission for a long time, in part because counsels’
citations to the record often did not support the proposition asserted prior to the record citation.
Accuracy on counsels’ part is a great assistance to this court and we request that in future appeals
more care be given to this part of counsels’ appellate work.
24




Nos. 99-0014 and 99-1253
to support the jury’s findings about the defective condition of the limit switch
which  it  made  in  favor  of  the  Treubers;  however,  because  the  circuit  court
committed reversible error when it did not instruct the jury and submit a special
verdict question about whether the press was substantially modified subsequent to
delivery,  we  remand  for  a  new  trial  on  liability.    In  regard  to  damages,  we
conclude there was sufficient evidence in the record to support the jury’s findings;
therefore, damages need not be retried.
By the Court.—Judgments affirmed in part; reversed in part and
cause remanded with directions; cross-appeal dismissed.
Not recommended for publication in the official reports.
25

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