Indiana Industries, Inc. v. Wedge Products, Inc.

• Decision Date: 28 January 1982
• Docket Number: No. 3-181A6,3-181A6
• Citation: 430 N.E.2d 419
• Parties: INDIANA INDUSTRIES, INC., An Indiana Corporation, and Money Management Corporation, Appellants-Defendants Below, v. WEDGE PRODUCTS, INC., An Ohio Corporation, and United Tractor Company, An Ohio Corporation, Appellees-Plaintiffs Below.
• Court: Indiana Appellate Court

Page 419

430 N.E.2d 419

INDIANA INDUSTRIES, INC., An Indiana Corporation, and Money Management Corporation, Appellants-Defendants Below, v. WEDGE PRODUCTS, INC., An Ohio Corporation, and United Tractor Company, An Ohio Corporation Appellees-Plaintiffs Below.

No. 3-181A6.

Court of Appeals of Indiana, Third District.

Jan. 28, 1982.

Rhett L. Tauber, Theodoros, Anderson & Tauber, P.C., Merrillville, for appellants-defendants.

Dawn Wellman, Cohen & Thiros, Merrillville, for appellees-plaintiffs.

STATON, Judge.

Wedge Products, Inc. (Wedge) entered a purchase agreement with Indiana Industries, Inc. (Indiana) for the assets of United Tractor Division of Indiana Industries, Inc. (Tractor). ¹ The purchase agreement allowed Wedge an adjustment to the purchase price for inventory proving obsolete. Wedge instituted this cause of action to recover that adjustment and the trial court entered judgment for Wedge of $48,358.06 plus pre-judgment interest of $31,722.89. Indiana raises the following issues for our review: ²

(1) Whether the trial court erred in adopting verbatim Wedge's proposed findings of fact and conclusions of law;

(2) Whether the terms of the agreement were ambiguous regarding the methods of inventory;

(3) Whether the trial court's use of the terms "on hand" in the conclusions of law was erroneous;

(4) Whether the trial court erroneously allowed Wedge recovery for inventory not included in the purchase agreement;

(5) Whether the trial court erred in allowing pre-judgment interest;

(6) Whether the trial court erred in concluding Wedge was under no duty to mitigate damages and in denying Indiana $4,465.00 credit for such mitigation; and,

(7) Whether the trial court erred in denying Indiana a $5,000.00 credit under the terms of the agreement.

The trial court is affirmed upon issues one through five. Indiana should have been granted the $4,465.00 and the $5,000.00 credits under issues six and seven, respectively. This cause is therefore remanded for further proceedings consistent with this Opinion.

Wedge agreed to purchase the assets of Tractor from Indiana and the purchase agreement was finalized on November 15, 1968 (closing date). Under the terms of the agreement, Wedge was allowed an adjustment to the purchase price for "obsolete" inventory. "Obsolete" was defined under the agreement as inventory not "sold, used or consumed" within the three year period following the closing date. Therefore, any Tractor inventory included in the agreement on the closing date not sold, used or consumed by November 15, 1971 (obsolescence date) was "obsolete." Wedge was entitled under the agreement to be reimbursed for the value of the inventory proven "obsolete."

In finding for Wedge, the trial court entered extensive findings of fact and conclusions of law. Indiana's appeal, in essence, is a challenge to those findings and conclusions. We note at this juncture, therefore, that in reviewing the findings of fact made by the trial court, this Court will neither weigh the evidence nor judge the credibility of witnesses. We will disturb those findings only when such are clearly erroneous. The findings as found by the trial court will stand unless the record discloses no facts nor inferences therefrom which support those findings. TR. 52(A); Indiana Tri-City Plaza Bowl, Inc. v. Estate of Glueck (1981), Ind.App., 422 N.E.2d 670, transfer pending; Blade Corp. v. American Drywall, Inc. (1980), Ind.App., 400 N.E.2d 1183. However, if the error charged is the trial court's application of the law, then this Court must correctly apply the law to the trial court's findings of fact. Brokus v. Brokus (1981), Ind.App., 420 N.E.2d 1242; Merryman v. Price (1970), 147 Ind.App. 295, 259 N.E.2d 883, cert. denied, 404 U.S. 852, 92 S.Ct. 89, 30 L.Ed.2d 92.

I. Adoption of Findings of Fact

Indiana first challenges the trial court's verbatim adoption of Wedge's proposed findings of fact and conclusions of law. This Court recently stated:

"When the trial judge signs the findings of fact and conclusions of law, they become the court's findings of fact and conclusions of law... The court is responsible for their correctness... These findings of fact and conclusions of law are not weakened because they were adopted verbatim... If the proposed findings of fact and conclusions of law did not state the facts as the trial court found them to be, it would not have adopted them as its own. TR. 52(C) encourages the trial court to request the parties to submit proposed findings of fact and conclusions of law. These findings will not be set aside unless clearly erroneous...."

Indiana Tri-City Plaza Bowl, Inc. v. Estate of Glueck, supra, 422 N.E.2d at 674. Indiana's challenge is therefore without merit. ³

II.

Methods of Inventory

Indiana next challenges the trial court's conclusion:

"1. That the parties entered into a clear, unambiguous contract...."

Indiana asserts the agreement was ambiguous regarding the method of inventories to be used in the determination of the adjustment to the price.

Both parties to this appeal agree the only pertinent portions of the contract are as follows:

"4. CALCULATION OF INVENTORY SELLING PRICE AND ADJUSTMENT TO

PURCHASE PRICE

"4.1 A physical inventory of Tractor as of October 1, 1968 shall be conducted prior to the Closing Date under the observation of certified public accountants selected by, and to be paid by, American and any other reasonable number of representatives of American as shall be selected by it. Inventory shall be priced at the lower of cost or market on a first in, first out basis in accordance with generally accepted accounting principles."

"4.3 Indiana further agrees to reimburse American at the end of the three-year period following the Closing Date (after having received written notice from American) in an amount or amounts equal to the value of any of Tractor's Inventory sold to American hereunder which proves to have been obsolete on the Closing Date or which through subsequent determination was not in existence on the Closing Date; provided, however, that no such reimbursement shall be made except to the extent that the amount to be reimbursed exceeds the amount of $5,000. For the purposes of this Agreement, the term obsolescence shall mean any inventory which is not sold, used or consumed three years following the Closing Date. Indiana agrees and warrants that all Inventory is and shall be physically located at or about the plant of Tractor, except for finished goods in the hands of dealers on consignment and materials in the hands of processors for modification into component parts. Any such obsolete inventory for which American is reimbursed by Indiana, shall, if requested by Indiana, be returned to Indiana.

"5. COMPLETION AND ASSIGNMENT OF ORDERS

"5.3 American agrees to complete and fully perform the purchase commitments taken and entered into in the ordinary course of Tractor's business and in customary and usual amounts which shall be unfilled as of the Closing Date."

Indiana first argues that sections 4.1 and 4.3 should be construed together to require the physical movement of the inventory after the closing date to be based upon a first-in-first-out procedure. Indiana further argues that the adjustment to price under section 4.3 should also be based upon the same first-in-first-out procedure for the physical movement of the inventory. Indiana concludes that if the trial court had found this construction of the purchase agreement provisions, then Indiana would be liable for little or no reimbursement for "obsolete" inventory.

In addressing a dispute over contract terms, the court must first examine the contract to determine whether the terms are ambiguous. Piskorowski v. Shell Oil Co. (1980), Ind.App., 403 N.E.2d 838. The contract terms are ambiguous if reasonable men would find the terms of the contract susceptible to more than one interpretation. Piskorowski v. Shell Oil Co., supra; Boswell v. Lyon (1980), Ind.App., 401 N.E.2d 735. If there is no ambiguity, the terms of the contract are conclusive, Boswell v. Lyon, supra, and the construction regarding those terms is a matter of law to be determined by the court. Piskorowski v. Shell Oil Co., supra.

We agree with the trial court and find no ambiguity in the contract. Rather, Indiana seeks to bootstrap its position by "interpreting" ambiguities into the purchase agreement and then interjecting terms favorable to itself.

As denoted by its title, part four of the purchase agreement controlled the price and the adjustment of the price of the inventory. Section 4.1 required a physical inventory of Tractor before the closing date. The inventory "price" was determined "at the lower of cost or market on a first in, first out basis in accordance with generally accepted accounting principles." The only factor addressed by section 4.1 was the "price" determined for Tractor's inventory on the specific date of October 1, 1968. Section 4.1 had no other function under the contract than to place an agreed upon value for the Tractor inventory for the closing date. Section 4.1 makes no reference to the physical movement of the Tractor inventory after the closing date.

In pertinent part, section 4.3 states that Indiana shall reimburse Wedge "in an amount ... equal to the value of any of Tractor's Inventory sold to (Wedge) hereunder which proves to have been obsolete.... For the purposes of this Agreement, the term obsolescence shall mean any inventory which is not sold, used or consumed three years following the Closing Date." This provision allows for reimbursement for inventory at the end of three years which has not been sold, used or consumed. There is nothing in section 4.3 pertaining to the method of inventory nor the valuation of the inventory. Wedge was to be "reimbursed" the value determined at the closing date of any "obsolete" inventory. That value was determined as the "price" of individual items under section 4.1.

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