Brockway-Smith Co. v. Traditional Living, Inc., 2012-CV-00037
| Decision Date | 21 June 2013 |
| Docket Number | NO. 2012-CV-00037,2012-CV-00037 |
| Parties | Brockway-Smith Company v. Traditional Living, Inc. and W.H. Silverstein, Inc. Traditional Living, Inc. Cross Plaintiff v. W.H. Silverstein, Inc. Cross Defendant W.H. Silverstein, Inc. Counter-claim Plaintiff and Third Party Plaintiff v. Todd H. Schweitzer d/b/a Lyme Investment Company and d/b/a Lyme Investment Partnership, Third Party Defendant |
| Court | Superior Court of New Hampshire |
Brockway-Smith Co. ("Brockway") is a vendor of building supplies. The defendant Traditional Living, Inc. ("TLI") was a Brockway customer until January 2011 when TLI sold its assets to WH Silverstein, Inc. ("WHS") pursuant to an asset purchase agreement ("APA"). As part of the APA, WHS agreed to assume certain TLI financial obligations. At the time of the closing, TLI's account with Brockway amounted to $164,857.17. $132,599.41 of this balance was for building supplies that TLI had purchased on account through January 3, 2011. The balance was for late charges.Neither TLI nor WHS paid Brockway, and Brockway brought this action against both TLI and WHS. A plethora of other actions followed.
TLI has brought a cross-claim against WHS, alleging in substance that WHS is responsible under the APA for the debt owed to Brockway. WHS has filed a Motion for Summary Judgment on TLI's cross-claim. For the reasons stated in this Order, the Motion for Summary Judgment is DENIED.
Brockway has attempted to collect the amount owed on its open account from both or either WHS or TLI. That claim has been resolved. However, the litigation between WHS and TLI has become more complex. Initially, TLI filed cross-claims against WHS for breach of contract, unjust enrichment, and indemnification, while WHS filed a single cross-claim against TLI for indemnification. As the dispute progressed, WHS filed additional claims against TLI for misrepresentation, breach of warranty, reimbursement, indemnification, unjust enrichment, conversion, and a claim under the New Hampshire's consumer protection act, all based on the APA between WHS and TLI. WHS then filed for summary judgment on TLI's cross-claim. TLI subsequently sought, and was permitted, to file an amended cross-claim, including five claims for breach of contract, unjust enrichment, and indemnification.
The issue in the pending motion for summary judgment is a narrow one. The APA required WHS to assume liabilities of TLI of no greater than $1.7 million. TLI argues that customer deposits on contracts were "Assumed Liabilities" within the meaning of the APA and that it did not have to pay TLI's trade payables of $1.7 million. TLI, on the other hand, argues that a principal part of the agreement was that WHS would pay $1.7million in trade payables, and that customer deposits were not intended to be included in the $1.7 million WHS was required to pay.
To prevail on a motion for summary judgment, the moving party must "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." RSA 491:8-a, III (2005). A dispute of fact is "material" when it "affects the outcome of litigation." Porter v. City of Manchester, 155 N.H. 149, 153 (2007). "A dispute of fact is 'genuine' if the evidence is such that a reasonable [fact finder] could return a verdict for the nonmoving party." Pennichuck Corp. v. City of Nashua, 152 N.H. 729, 739 (2005) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (citation omitted)). In order to defeat summary judgment, the non-moving party "must put forth contradictory evidence under oath, 'sufficient . . . to indicate that a genuine issue of fact exists so that the party should have the opportunity to prove the fact at trial . . .'" Phillips v. Verax, 138 N.H. 240, 243 (1994) (quoting Dolan v. Maple Leaf Health Care Ctr., Inc., 119 N.H. 424, 425 (1979)). In considering a party's motion for summary judgment, the evidence must be evaluated in the light most favorable to the non-moving party, together with all reasonable inferences therefrom. Sintros v. Hamon, 148 N.H. 478, 480 (2002).
The critical issue here is the meaning of the term "Assumed Liabilities" within the context of Section 1.2 of the APA, and what liabilities this provision required WHS to assume. Section 1.2 provides in relevant part:
(Emphasis in original). At the time of the closing, according to WHS, liabilities existed in certain categories: 1.2(a) Trade Payables $1,831,032.07; 1.2(b) Customer Contracts $1,270,789.28; and 1.2(c) Employee Vacation Time $119,840.61. WHS's Mot. Summ. J. 3.
WHS maintains that it fulfilled its obligations under the APA when it assumed $2,208,449.57 of liabilities—some $500,000 more than it was required to pay. Specifically, WHS asserts that it:
[A]ssumed all of the existing TLI customer contracts (Item 1.2 (b)), and all of the employee vacation time (Item 1.2 (c)). It selectively assumed and paid trade payables, according to whether the relationship would be useful in WHS' ongoing business or the deliverables from the vendor were necessary to complete a TLI project which WHS had committed to complete.
WHS's Mot. Summ. J. TLI Cross-cl. 6. ("Mot. Summ. J.").
TLI objects to WHS's Motion for Summary Judgment on two grounds. First, TLI argues that the parties understood that liabilities under the APA related to tradepayables, and not customer deposits. It also argues that the deposits on customer contracts that WHS assumed should not count toward the $1.7 million cap on "Assumed Liabilities" because those deposits may never be refunded.
Second, TLI argues that the term "Assumed Liabilities" is ambiguous because: (1) the balance sheet referred to in Section 1.2(a) was not attached to the APA and WHS submitted two different documents purporting to be the balance sheet; and (2) the term "liability" could refer to an "accounting liability, a legal liability, or a common sense understanding of the term." Surreply to Mot. Summ. J. 3. WHS, on the other hand, argues that the term "Assumed Liabilities" is not ambiguous because: (1) the two different balance sheets are consistent; and (2) the term "Assumed Liabilities" has a definite and precise meaning under the APA and according to relevant accounting authority.
The interpretation of a contract is a question of law. Birch Broad., Inc. v. Capitol Broad. Corp., 161 N.H. 192, 196 (2010). The Court will give effect to clear, unambiguous language. Id. But when parties to a contract reasonably differ as to the meaning of a clause or term, the clause or term is ambiguous. Sunapee Difference, LLC v. State, _ N.H. _, _ (Apr. 30, 2013) (slip op. at *8); Birch Broad., 161 N.H. at 196.
Considering TLI's arguments in turn, TLI first asserts that the term "Assumed Liabilities" is ambiguous because Section 1.2(a) "refers to schedules and exhibits that were never attached to the APA at the time of closing." Surreply to Mot. Summ. J. 5. To support this argument, TLI seeks to admit extrinsic evidence. However, because this portion of the agreement can be reasonably interpreted without the use of extrinsic evidence, the Court declines to consider the extrinsic evidence TLI offers. Kendall v.Green, 67 N.H. 557, 562 (1894) (). And, in any event, the portion of the contract the parties dispute is Section 1.2(b), in which WHS agreed to alleges it assumed customer contract liabilities instead of trade payables as TLI wanted WHS to assume. Even if the Court admitted extrinsic evidence to interpret the exhibits that the parties failed to attach to the contract, that extrinsic evidence would be limited to the question of interpreting the schedules and exhibits only, and it would fail to address the parties central dispute—which liabilities must WHS assume first. Thus, the Court declines to decide whether the absence of the exhibits and schedules creates an ambiguity.
TLI's second argument asserts that the term "Assumed Liabilities" is ambiguous because the term "liability" has several meanings. Specifically, TLI references the Financial Accounting Standards Board ("FASB"), Statement of Financial Accounting Concepts ("SFAC"), which states: "Liabilities are probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events." SFAC No. 6 ¶ 35 (emphasis added). As TLI indicated, the SFAC also acknowledges a difference, though slight, between legally enforceable liabilities and equitable liabilities. SFAC No. 6 ¶ 40. TLI also relies on Black's Law Dictionary, which defines "liability" as: "The quality or state of being legally...
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