     Case: 10-30387        Document: 00511514885              Page: 1       Date Filed: 06/21/2011




             IN THE UNITED STATES COURT OF APPEALS
                      FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                      Fifth Circuit

                                                   FILED
                                                                                       June 21, 2011
                                            No. 10-30387
                                                                                       Lyle W. Cayce
                                                                                            Clerk
In the Matter of: EVANS INDUSTRIES INCORPORATED,

                                                                  Debtor

------------------------------------------------------------------------------------------------------------

GREIF INDUSTRIAL PACKAGING AND SERVICES, LIMITED LIABILITY
CORPORATION,

                                                                  Appellant

v.

R. PATRICK SHARP, III, as Distribution Trustee for the Distribution Trust
of Evans Industries, Incorporated,

                                                                  Appellee




                       Appeal from the United States District Court
                           for the Eastern District of Louisiana
                                 USDC No. 2:09-CV-3548


Before JONES, Chief Judge, and BENAVIDES, Circuit Judge, and AYCOCK,
District Judge.*




        *
            District Judge of the Northern District of Mississippi, sitting by designation.
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                                       No. 10-30387

PER CURIAM:**
       This dispute concerns the proper interpretation of an asset purchase
agreement between a Chapter 11 debtor and the company that purchased it out
of bankruptcy. We AFFIRM the judgment of the district court with respect to
the holdback claims for environmental liabilities and the Ingersoll-Rand
industrial equipment. We REVERSE and REMAND the judgment of the district
court with respect to the Lexington insurance premium.
                                    BACKGROUND
       Evans Industries, Inc., (“Evans”) operated a series of five leased facilities
in Louisiana and Texas that manufactured, filled, warehoused and distributed
steel drums and industrial containers. Evans filed a Chapter 11 petition in April
2006, and the bankruptcy court confirmed the reorganization plan in October
2006. The plan formed a Distribution Trust of Evans Industries ("the Trust")
and allocated most of Evans's assets to that Trust. R. Patrick Sharp, III was
appointed Trustee.
       In November 2006, on the plan’s closing date, Greif Industrial Packaging
(“Greif”) entered into an asset purchase agreement (“APA”) with Evans. Under
the APA, Evans sold its operations at the five facilities to Greif for $11,250,000.
The sale included all of Evans’s property used to conduct business at all five
premises, except for certain assets specifically excluded. However, $1,657,500
of that amount would be placed in a holdback escrow account funded by Greif.
Greif was entitled to make holdback claims against that account for certain
expenses as allowed for in the APA. Every four months, if no claims were filed,

       **
         Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.

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                                 No. 10-30387

Greif would transfer one-fourth of the amount ($414,375) from the escrow
account to the trust in accordance with the Chapter 11 plan; any disputed
charges would be submitted to the bankruptcy court for resolution.
      After Greif took over the facilities, it made two disputed claims against the
holdback. First, it claimed $649,633.75 in expenses it incurred removing and
disposing of hundreds of barrels of environmentally hazardous waste left behind
by Evans at four of the five sites. Second, it claimed $10,452.06 for payments it
made to a third party, Ingersoll-Rand, for five pieces of industrial equipment
(“Bobcat loaders”) that Evans had purchased but not yet fully paid off. Added
up, the disputed holdback claims totaled $660,085.81.
      The Trustee filed a complaint in bankruptcy court, asking the court to
order Greif to transfer the disputed funds to the trust. The Trustee also filed a
claim for the prorated portion – $97,224.12 – of an insurance premium paid by
Evans as a setoff against any valid holdback claims Greif might have. Finally,
the Trustee filed a claim for $5,238.09 in utilities deposits at the various sites
paid by Evans but refunded to Greif. The bankruptcy court ruled for the Trustee
and against Greif as to the holdback amounts and the utility deposits, but ruled
for Greif as to the setoff claim for the prorated insurance premium. The parties
cross-appealed as to the holdback issues and insurance premium setoff, although
Greif did not appeal the $5,238.09 judgment relating to the refunded utilities
deposits.
      The district court affirmed as to the holdback provisions but reversed and
remanded as to the insurance premium setoff, finding that the Trustee was
entitled to its prorated portion of the paid premium. Greif timely appealed.
                          STANDARD OF REVIEW


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                                  No. 10-30387

        The dispute is over the proper interpretation of the APA, which is a
contract. See In re Burk Dev. Co., 205 B.R. 778, 796 (Bankr. M.D. La. 1997);
11 U.S.C. § 1141(a). Matters of contract interpretation are questions of law
reviewed de novo. See In re Oxford Mgt., Inc., 4 F.3d 1329, 1334 (5th Cir. 1993);
In re Conte, 206 F.3d 536, 538 (5th Cir. 2000).
                                 DISCUSSION
        Greif challenges the district court’s holding as to the environmental
claims, the Bobcat loader claims, and the insurance premiums. We address each
in turn.
I.      ENVIRONMENTAL REMEDIATION
        After taking possession of the business premises and assets, Greif spent
nearly $650,000 to remove and properly dispose of hundreds of barrels of
hazardous waste left behind by Evans at several sites. It is not disputed that
this cleanup complied with applicable government environmental regulations.
Greif attempted unsuccessfully to claim that amount from the holdback. Greif
argues on appeal that Evans breached its warranty that the facilities complied
with all relevant environmental regulations, and, in the alternative, that the
bankruptcy court and district courts misread the relevant portion of the APA in
which Evans retained responsibility for environmental cleanup costs that
accrued prior to the APA. We reject Greif’s contentions.
        Insofar as the Peters Road and Houston leases were rejected in Evans’s
reorganization plan, and only later, by separate agreement, were resumed by
Greif, those premises were not among the assets transferred by the APA. No
liability accrues to Evans based on contamination at those sites.         As the
bankruptcy court explained, the landlords of those sites might have had recourse


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                                  No. 10-30387

to filing a claim against Evans under the terms of the plan, but they forfeited
their opportunity. Greif has abandoned any claim as an assignee or subrogee of
those landlords.
      Similarly, the St. Gabriel lease was assumed by Evans and transferred
under the APA, after Evans had cured any defaults under the lease by paying
the landlord $300,000. At the time Greif acquired the lease, then, it was not in
default.
      Greif contends, however, that its claim is payable under the APA based on
(l) Evans’s alleged breach of various environmental warranties concerning
Evans’s acknowledged storage of hazardous waste materials and (2) Evans’s
retention of environmental liability claims. The critical paragraphs of the APA,
§ 2.3 and § 2.3.13, however, consign responsibility to Evans but do not say that
Greif could engage in remediation on its own initiative and turn over the bill to
the holdback fund. We are not persuaded that the lower courts committed any
reversible error in their analysis of this issue.
II.   BOBCAT LOADER PAYMENTS
      After taking control of the facilities, Greif mistakenly made payments
totaling $10,452.06 to Ingersoll-Rand, for five Bobcat loaders that Evans had
purchased but not yet fully paid off. Greif had no legal duty to make the
payments. Indeed, the confirmed reorganization plan called for Ingersoll-Rand
to be paid from the sale proceeds, although it apparently was not paid and came
to Greif for satisfaction.
      The bankruptcy court concluded that since the debt was not retained by
Evans under the APA, Greif cannot claim a material breach by Evans, and
therefore cannot exercise its right against the holdback. Having reviewed the


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                                  No. 10-30387

record, the parties’ briefs and oral presentations, we reach the same conclusion
for essentially the same reasons.
III.   PRORATED INSURANCE PREMIUM
       The final issue is whether Evans’s Lexington commercial property
insurance policy covering a period both before and after the APA was among the
assets transferred to Greif under the APA, or was part of a separate transaction.
In the latter case, Greif would owe Evans its prorated share of the coverage:
$97,224.06. Greif concedes that it benefits from the policy which it asked Evans
to transfer, but it asserts that it paid for the policy via the APA. Reversing the
bankruptcy court, the district court found that the policy was the subject of a
valid post-petition contract between Evans and Greif and ordered Greif to pay
Evans $97,224.06.
       The APA does not discuss this insurance policy explicitly. Insurance
appears in only two sections of the APA – Schedule A (Bill of Sale and
Assignment) and Schedule G (Excluded Assets).              Both provisions discuss
“[p]repaid insurance deposits, tax refunds, prepaid vendor deposits and other
deposits of all other forms including utility deposits . . . .” Greif contends the
APA was all-encompassing: Evans sold to Greif, under APA § 1.1, “any and all
of its assets owned or used by [Evans] in connection with the Business, wherever
located (except for the Excluded Assets), including but not limited to the
following . . .” When the APA is silent on a particular asset, according to Greif,
the court should hold that the asset was transferred.
       The Trustee contends that the exclusion of such a significant item as the
insurance policy is a sign that the parties did not intend it to be part of the APA.
The Trustee further argues that the pre-paid premium is essentially a “prepaid


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                                  No. 10-30387

insurance deposit” and is therefore an excluded asset under Schedule G. Greif
counters that pre-paid premiums are not “deposits” because the term “deposit”
refers to something that might be refunded, whereas pre-paid insurance
premiums are not intended to be refunded.
      We find Greif’s argument more persuasive. Because the APA intended to
transfer all of Evans’s assets, and because it specifies that its list of assets is
non-exclusive, the insurance coverage was transferred to Greif when the APA
closed. Although the policy took effect post-petition, the plan was not confirmed
until five months after the policy took effect; both parties obviously were aware
of its existence when the APA was consummated. The terms in Schedule G do
not exclude transfer of the insurance policy because insurance “premiums”
plainly are not “deposits.” In light of the APA’s all-inclusive nature, we are
unwilling to contort the meaning of “deposit” to fit Evans’s preferred definition.
      Because the APA effectively, if silently, transferred the policy to Greif,
Greif need not reimburse Evans for the prorated premium.
      We reverse the judgment of the district court and remand with
instructions to reject the Trustee’s setoff claim of $97,224.06.
                                CONCLUSION
      For the foregoing reasons, we affirm the judgment of the district court with
respect to the holdback claims for environmental liabilities and the Ingersoll-
Rand industrial equipment payments, but reverse and remand with respect to
proration of the Lexington insurance premium.
        AFFIRMED IN PART, REVERSED IN PART, and REMANDED.




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