Essex Group, Inc. v. Nill

• Decision Date: 29 June 1992
• Docket Number: No. 76A03-9112-CV-386,76A03-9112-CV-386
• Citation: 594 N.E.2d 503
• Parties: ESSEX GROUP, INC., As Successor to Essex International, Inc., Appellant-Plaintiff Below, v. Richard G. NILL, Charlotte A. Nill, Mary Kay Nill Doepker, Richard B. Nill, Jr., Nancy Ann Nill, and Summit Bank, as successor to the Indiana Bank and Trust Company of Fort Wayne as Guardian for Mark Steven Nill, Sarah Joan Nill, and Joseph Charles Nill, and Fort Wayne Tool, Die & Engineering Company, Appellees-Defendants Below.
• Court: Indiana Appellate Court

Page 503

594 N.E.2d 503

ESSEX GROUP, INC., As Successor to Essex International Inc., Appellant-Plaintiff Below, v. Richard G. NILL, Charlotte A. Nill, Mary Kay Nill Doepker Richard B. Nill, Jr., Nancy Ann Nill, and Summit Bank, as successor to the Indiana Bank and Trust Company of Fort Wayne as Guardian for Mark Steven Nill, Sarah Joan Nill, and Joseph Charles Nill, and Fort Wayne Tool, Die & Engineering Company, Appellees-Defendants Below.

No. 76A03-9112-CV-386.

Court of Appeals of Indiana Third District.

June 29, 1992.

Thomas M. Shoaff, James H. Ham, III, Michael J. Nader, Baker & Daniels, Fort Wayne, for appellant.

Edward L. Murphy, Jr., Miller Carson & Boxberger, Fort Wayne, Edward J. Liptak, Miller Carson & Boxberger, Bloomington, for appellees.

STATON, Judge.

Essex Group, Inc. ("Essex") appeals the dismissal of its complaint against the appellees, raising the sole issue of whether the trial court correctly concluded that Essex's complaint failed to state a claim upon which relief could be granted.

We affirm in part, reverse in part, and remand.

This is the fourth in a series of cases involving the share exchange purchase of Fort Wayne Tool & Die, Inc. by Essex. See Essex Group, Inc. v. Nill (1984), Ind.App., 462 N.E.2d 1334, cert. denied 471 U.S. 1017, 105 S.Ct. 2022, 85 L.Ed.2d 304 (Essex I ) and Essex Group, Inc. v. Nill (1989), Ind.App., 543 N.E.2d 393, reh'g denied (Essex II ). The underlying facts of all four cases are the same, and were set out in Essex I:

In 1961 Richard Nill (Nill), president of Fort Wayne Tool & Die, negotiated a trust agreement (Plan) to provide retirement and death benefits to salaried employees of the company. The Plan provided these benefits from two funds, a General Fund and an Auxiliary Fund. The employer contributed to the General Fund in sufficient amounts to purchase insurance policies in order to provide death benefits if a participant in the Plan died prior to retirement. The employer also contributed amounts to the Auxiliary Fund sufficient to convert the insurance policies into annuities upon a participant's retirement.

In 1970, Essex Group, Inc. purchased Fort Wayne Tool & Die, Inc. and assumed responsibility for the Plan. In 1976, Nill retired prior to his normal retirement date. At that time, the Plan Trustee had credited the Auxiliary Fund with $55,244.40 in excess of the amount necessary to convert Nill's insurance policy into an annuity. Thereafter, Nill sought to receive these excess funds. The Plan Trustee brought a complaint against Nill and Essex seeking a declaratory judgment regarding the status of this money in the Auxiliary Fund.

Essex I at p. 1335 (footnote omitted).

In Essex I, we directed partial summary judgment in favor of Essex on Richard Nill's claim under the Employee Retirement Income Security Act (ERISA) for the money in the Auxiliary Fund. After remand, Richard Nill was granted summary judgment on his claim for reformation of the Plan to provide for payment of excess monies to Plan participants. In Essex II, we affirmed the grant of summary judgment, holding that the Plan should be amended to add a provision left out due to a scrivener's error. Richard Nill then filed a Motion to Amend Judgment pursuant to Trial Rule 60(B), contending that under the terms of the Plan as reformed, he was also entitled to a pro rata share of any additional monies in the Plan upon its termination. Our Fourth District affirmed the trial court's denial of the Motion to Amend Judgment in a memorandum opinion. Nill v. Essex Group, Inc. (1991), Ind.App., 582 N.E.2d 489 (Essex III ).

While Essex III was still pending on appeal, Essex brought this suit alleging breach of warranties contained in the contract for acquisition of Fort Wayne Tool and Die, Inc. ("Contract"). Named as parties defendant were Richard Nill, the partnership of Fort Wayne Tool, Die & Engineering Company, ¹ and the other individuals who, along with Nill, held interests in the partnership (collectively, "Nill"). Nill moved to dismiss. The trial court held that the complaint failed to state a claim, but pursuant to Trial Rule 12(B) gave Essex an opportunity to amend its complaint. After the complaint was amended, Nill again moved to dismiss. Finding again that Essex's amended complaint failed to state a claim upon which relief could be granted, the trial court entered a judgment of dismissal. On appeal, Essex contends that dismissal of its complaint was improper.

In determining whether a complaint should be dismissed for failure to state a claim, facts alleged in the complaint must be taken as true. Dismissal is appropriate only where it appears that under no set of facts could plaintiffs be granted relief. Thiele v. Ind. Dept. of Highways (1985), Ind.App., 472 N.E.2d 1274.

Essex bases its cause of action on the following provisions of the Contract:

3. Representations and Warranties of the Shareholders

The Shareholder and each of the partners of the Shareholder, jointly and individually, hereby represents and warrants to Essex as follows:

* * * * * *

3.8 Lists of Properties, Contracts, Etc. The Company has heretofore delivered to Essex complete and accurate lists and descriptions of the following:

3.8.1 All insurance policies, bonus plan, deferred income plans, profit-sharing plans, and pension plans of the Company in force;

* * * * * *

3.10 Compliance with Contracts and Commitments. To the best of his knowledge, the Company has complied with the provisions of all leases, contracts, commitments or understandings to which it is a party or under which it is bound and is not in default under any of them except possibly for immaterial defaults not involving any material adverse effect upon the Company's position thereunder or its business assets. Except as set forth in the lists delivered pursuant to Paragraph 3.8 hereof, the Company has no obligation or liabilities of any kind to any partner of the Shareholder and has no employment, stock option or other agreements of any character with, or deferred income, bonus, profit sharing, health, accident, or insurance plan covering any of its officers or employees and has no pension obligations and is not presently making any pension or retirement payments to any present or former officer or employee.

* * * * * *

8.2. Undertakings. The Shareholder (or any one or more partners thereof) and Essex shall indemnify and hold harmless the other party from all claims, demands, liabilities, loss or damage (including reasonable counsel fees and other reasonable out-of-pocket expenses) arising subsequent to the Closing out of any breach of any such representation, warranty, covenant or agreement by the other party.

Record, pp. 151-164. In addition, at the close of the transaction, Nill executed a document certifying that all of the representations and warranties made in the Agreement were true at the time of closing. Record, p. 169. Essex alleges that since the Plan was reformed to permit lump sum distributions as a result of a scrivener's error, the pension plan provided to Essex by Nill was not "complete and accurate" as warranted in the Contract.

Generally, a party may allege an action for breach of contract by pleading: 1) the existence of a contract; 2) the breach thereof by the defendants; and 3) damages. Peterson v. Culver Educational Foundation (1980), Ind.App., 402 N.E.2d 448, 461, reh'g denied. A promise in a contract may take the form of a warranty. A warranty is:

"an assurance by one party to a contract of the existence of a fact upon which the other party may rely. It is intended precisely to relieve the promisee of any duty to ascertain the fact for himself; it amounts to a promise to indemnify the promisee for any loss if the fact warranted proves untrue, for obviously the promisor cannot control what is already in the past."

Shambaugh v. Lindsay (1983), Ind.App., 445 N.E.2d 124, 127, quoting Metropolitan Coal Co. v. Howard (2d Cir.1946), 155 F.2d 780, 784. See also CBS Inc. v. Ziff-Davis Publishing Co. (1990), 75 N.Y.2d 496, 554 N.Y.S.2d 449, 452, 553 N.E.2d 997, 1000. This passage accurately describes the warranties contained in the Contract--the assurance of the existence of facts, with a promise of indemnity if the facts proved untrue. The scope of the indemnification clause in the agreement defines the remedy for breach: the breaching party "shall indemnify and hold harmless the other party from all claims, demands, liabilities, loss or damage (including reasonable counsel fees and other reasonable out-of-pocket expenses)" caused by the breach of warranty. Record, p. 164.

In its amended complaint, Essex alleges the existence of the Contract and attaches a copy. Essex also alleges the existence of the warranty (contained in the Contract) that the description of the pension plan given to Essex at the time of the agreement was accurate. Moreover, Essex alleges that the warranty has been breached, as evidenced by the fact that the contract was reformed to include a term not found in the written contract at the time of acquisition. These allegations are sufficient to withstand a motion to dismiss on the first two elements of the breach of warranty claim.

Nill argues that the warranty could not have been breached because the reformation of the Plan related back to its inception. This argument has no merit. Even though the reformation of the Plan related back to its inception, the omitted terms were not disclosed to Essex at the time of the making of the Contract. This nondisclosure is the basis of the breach of warranty action. Nill also argues that there is no evidence that Essex relied upon the Plan, citing Essex II at 396-397. Essex correctly points out that reliance is not an element of a breach of warranty claim. CBS, supra; Shambaugh, supra.

The third element--damages--is more problematic. As a result of the alleged breach of warranty, Essex claims it has incurred the following expenses for which it is...