Extermitech, Inc. v. Glasscock, Inc.

• Decision Date: 11 August 2006
• Docket Number: No. 1040308.,1040308.
• Citation: 951 So.2d 689
• Parties: EXTERMITECH, INC. v. GLASSCOCK, INC., and Chuck Glasscock.
• Court: Alabama Supreme Court

951 So.2d 689

EXTERMITECH, INC. v. GLASSCOCK, INC., and Chuck Glasscock.

No. 1040308.

Supreme Court of Alabama.

August 11, 2006.

Daniel S. Wolter and Brandon T. Bishop of Gaines, Wolter & Kinney, P.C., Birmingham, for appellant.

Jeffrey W. Smith of Slaten & O'Connor, Montgomery, for appellees.

NABERS, Chief Justice.¹

Extermitech, Inc., appeals from a summary judgment for Glasscock, Inc., and Chuck Glasscock (collectively "Glasscock") on Glasscock's cross-claim against Extermitech. For the reasons set forth below, we affirm that judgment in part and reverse it in part.

I. Facts

Chuck Glasscock operated Glasscock, Inc., a pest-control business in Montgomery from 1996 through 2001. On May 31, 1996, Glasscock, Inc., issued a residential termite soil treatment certificate ("the certificate") for termite-control services to the builder of a new residence at 7131 Wyngrove Drive in Montgomery. The certificate stated, in pertinent part:

"This guarantee of termite soil treatment assures the property owner that the chemical used, their [sic] concentration, the method and rate of application comply with all applicable federal and state standards.

"....

"Guarantee: Glasscock, Inc., guarantees to the property owner and/or mortgagor that the soil [at 7131 Wyngrove Drive] has been treated that the chemical used in the treatment, its concentration, rate, method and location [comply with applicable HUD regulations.]

"Glasscock, Inc., also certifies to the owner, his successor or assigns, that the soil [at 7131 Wyngrove Drive] has been treated and that the chemical used in the treatment, its concentration, the method and rate of application comply with current standards of the appropriate regulatory bodies.

"Glasscock, Inc. hereby agrees that if termite infestation should occur within one (1) year from the date of the original soil treatment, Glasscock, Inc., will retreat the soil and/or structures according to all state and federal regulatory standards in effect at the time, without cost to the owner and/or mortgagor.

"Glasscock, Inc., further agrees to repair all construction damage caused by active subterranean termites within the one (1) year builder warranty period. The repairs will be made without cost to the owner and/or mortgagor.

"The retreat warranty may be extended on a year to year basis after the original twelve (12) month period by the payment of a negotiated annual reinspection fee. The extension of the retreat warranty will be subject to the terms and conditions of a separate warranty agreement which must be agreed upon by the owner of the property at that time."

Jim McGlaughlin and Kayla McGlaughlin purchased the newly constructed house at 7131 Wyngrove Drive in 1996. The warranties in the certificate extended to the McGlaughlins, as the owners of the property, by the terms of the certificate.

The McGlaughlins allege that, between 1996 and 2001, they renewed and extended the "re-treat" warranty in the certificate by requesting that Glasscock perform termite inspections. The McGlaughlins also allege that termite infestation was evident at their house in May 2001. They contend that Glasscock had knowledge of that infestation and that, at that time, assured them that Glasscock was performing the termite re-treatment services contemplated in the certificate.

On November 1, 2001, Extermitech and Glasscock executed a "Contract for Purchase of Business" under which Extermitech agreed to pay $285,000 for the assets (including the termite-warranty contracts, equipment, inventory, and customer lists) used in the business of Glasscock, Inc. ("the purchase contract"). The purchase contract stated that the transaction was a sale of assets (not a transfer of the stock of Glasscock, Inc.), that Glasscock would not compete against Extermitech in the pest-control business in Montgomery County for five years following the closing of the transaction contemplated in the purchase contract, and that Glasscock would keep all accounts receivable resulting from termite-service work that had been performed before that closing.

The purchase contract contained multiple provisions relating to the parties' post-sale responsibility for the liabilities of Glasscock, Inc. Page one of the purchase contract stated: "This is to be a purchase of assets only; it is understood that [Extermitech] shall not assume any of the liabilities of [Glasscock]." Additionally, the following provision appears on pages 2-3 of the purchase contract:

"[Glasscock] agrees to indemnify and hold harmless [Extermitech] for any and all of its liabilities, accounts payable, or any debt which is secured by any of the inventory, equipment or other assets which are to be transferred at closing. However, it is understood that [Extermitech] will assume full responsibility and liability under termite warranties previously issued and transferred to [Extermitech] pursuant to this agreement."

The sale of the assets of Glasscock, Inc., closed in or about January 2002; the point at which the transaction closed is hereinafter referred to as "the closing."² Effective as of the closing, Glasscock assigned the certificate for the McGlaughlins' house to Extermitech and ceased operations.

In May 2002 Extermitech performed a termite inspection of the McGlaughlins' house. The McGlaughlins allege that the certificate, which included the re-treat warranty, was renewed at that time by their payment of a reinspection fee. The McGlaughlins further allege that, in August 2002, they noticed evidence of termite infestation in the same part of their house as the infestation reported to Glasscock in May 2001.

In March 2003 the McGlaughlins sued Glasscock and Extermitech in the Montgomery Circuit Court, asserting the following claims: count I—fraud;³ count II— negligence and wantonness; count III— breach of contract; and count IV—breach of warranties. The McGlaughlins' claims have not yet been adjudicated at trial.

Relying principally on the provision in the purchase contract under which Extermitech "assume[d] full responsibility and liability under termite warranties," Glasscock filed a cross-claim against Extermitech, requesting the following relief:

"[If] the finder of fact determines that [Glasscock is] in any way responsible for any damage to [the McGlaughlins] in the underlying action, Extermitech [should] ... indemnify [Glasscock] for any judgment returned [against Glasscock] in [the McGlaughlins'] cause; [and]

"Extermitech ... should reimburse [Glasscock] for all attorney's fees incurred to date and in the future in the underlying cause."

Glasscock filed a motion for a summary judgment on its cross-claim on April 29, 2004. The trial court granted that motion "in its entirety" on October 18, 2004, after considering Glasscock's submissions on summary judgment, the parties' briefs, and arguments of counsel. The trial court certified its judgment as final under Rule 54(b), Ala.R.Civ.P.

II. Standard of Review

The well-settled standard of review for a summary judgment was recently stated in Prince v. Poole, 935 So.2d 431 (Ala.2006):

"`This Court's review of a summary judgment is de novo. We apply the same standard of review as the trial court applied. Specifically, we must determine whether the movant has made a prima facie showing that no genuine issue of material fact exists and that the movant is entitled to a judgment as a matter of law. Rule 56(c) Ala. R. Civ. P. In making such a determination, we must review the evidence in the light most favorable to the nonmovant. Once the movant makes a prima facie showing that there is no genuine issue of material fact, the burden then shifts to the nonmovant to produce "substantial evidence" as to the existence of a genuine issue of material fact. Ala.Code 1975, § 12-21-12. "[S]ubstantial evidence is evidence of such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved."'"

935 So.2d at 442 (quoting Dow v. Alabama Democratic Party, 897 So.2d 1035, 1038-39 (Ala.2004)) (citations to cases omitted). Further, when reviewing a summary judgment, we consider the record in a light most favorable to the nonmovant and resolve all reasonable doubts against the movant. Prowell v. Children's Hosp. of Alabama, 949 So.2d 117, 126 (Ala.2006). Moreover, we consider questions of law de novo when reviewing a summary judgment. Alabama Elec. Coop., Inc. v. Bailey's Constr. Co., 950 So.2d 280 (Ala.2006).

III. Discussion

The facts pertinent to Glasscock's summary-judgment motion are undisputed. Referring to the language in the purchase contract stating that Extermitech "assume[d] full responsibility and liability under termite warranties," the trial court ordered Extermitech to indemnify Glasscock for any judgment that may be entered in favor of the McGlaughlins and against Glasscock in the McGlaughlins' action against Glasscock and Extermitech. Extermitech's argument on appeal is that the trial court misinterpreted the intended scope of the indemnity provision in the purchase contract when it ordered Extermitech to indemnify Glasscock for conduct that occurred before the closing.

The McGlaughlins' claims arise from alleged acts and omissions in the performance of termite-control services that occurred both before and after the closing. Before the closing, Glasscock issued the certificate, which contained termite warranties for the McGlaughlins' residence, and performed termite-control service at that residence. Extermitech does not dispute that after the closing it had responsibility to perform the termite-warranty services and obligations contemplated in the certificate Glasscock assigned to Extermitech as part of the sale of its assets. Extermitech concedes that it should indemnify Glasscock for claims resulting from Extermitech's failure, after the closing, to perform obligations in the assigned certificate.

The operative indemnity provision...