J-E01002-16

                           2016 PA Super 177



DANIELLE FISHER                                IN THE SUPERIOR COURT OF
                                                     PENNSYLVANIA


                   v.

A.O. SMITH HARVESTORE PRODUCTS,
INC.; A.O. SMITH CORPORATION; A.O.
SMITH (HARVESTORE PRODUCTS);
HARVESTORE SYSTEMS T/D/B/A
HARVESTORE; COLUMBIA TEC TANK;
CST INDUSTRIES, INC.; AND PENN
JERSEY PRODUCTS, INC.

APPEAL OF: CST INDUSTRIES, INC.                    No. 727 EDA 2013


              Appeal from the Order Entered February 8, 2013
               In the Court of Common Pleas of Bucks County
                      Civil Division at No: 2011-03913


DANIELLE FISHER                                IN THE SUPERIOR COURT OF
                                                     PENNSYLVANIA


                   v.

A.O. SMITH HARVESTORE PRODUCTS,
INC.; A.O. SMITH CORPORATION; A.O.
SMITH (HARVESTORE PRODUCTS);
HARVESTORE SYSTEMS T/D/B/A
HARVESTORE; COLUMBIA TEC TANK;
CST INDUSTRIES, INC.; AND PENN
JERSEY PRODUCTS, INC.

APPEAL OF: CST INDUSTRIES, INC.                   No. 1960 EDA 2013


               Appeal from the Order Entered June 13, 2013
              In the Court of Common Pleas of Bucks County
                     Civil Division at No: 2011-03913
J-E01002-16




DANIELLE FISHER                                   IN THE SUPERIOR COURT OF
                                                        PENNSYLVANIA


                     v.

A.O. SMITH HARVESTORE PRODUCTS,
INC.; A.O. SMITH CORPORATION; A.O.
SMITH (HARVESTORE PRODUCTS);
HARVESTORE SYSTEMS T/D/B/A
HARVESTORE; COLUMBIA TEC TANK;
CST INDUSTRIES, INC.; AND PENN
JERSEY PRODUCTS, INC.

APPEAL OF: A.O. SMITH CORPORATION                      No. 2000 EDA 2013


                Appeal from the Order Entered June 13, 2013
               In the Court of Common Pleas of Bucks County
                      Civil Division at No: 2011-03913

BEFORE: FORD ELLIOTT, P.J.E., BENDER, P.J.E., BOWES, SHOGAN,
        LAZARUS, MUNDY, OTT, STABILE, and DUBOW, JJ.

OPINION BY STABILE, J.:                              FILED AUGUST 12, 2016

      Plaintiff, Danielle Fisher, filed this lawsuit after she injured her hand

operating a roller mill manufactured by Appellee/Cross-Appellant A.O. Smith

Corporation (“Smith”). A roller mill is a machine that grinds grain for use in

animal feed.      Harvestore Systems t/d/b/a Harvestore (“Harvestore”), a

former subsidiary of Smith, manufactured the involved roller mill (the “Roller

Mill”) in 1981.   Presently in dispute is whether Smith or Appellant/Cross-

Appellee CST Industries, Inc. (“CST”) is liable for the Roller Mill.

      After Fisher commenced her product liability claim, Smith demanded

indemnification and a defense from CST, claiming CST acquired liability for

                                      -2-
J-E01002-16


the Roller Mill through a series of asset purchase agreements. CST declined

to defend or indemnify Smith, and the two entities filed cross-claims for

indemnification against each other.            On January 14, 2013, the trial court

granted Smith’s motion for summary judgment against CST, finding CST

assumed liability for the Roller Mill.           Smith subsequently petitioned for

counsel fees and expenses it incurred in defending Fisher’s claims and

litigating against CST. On February 8, 2013, the trial court entered an order

accepting the parties’ settlement of the Fisher litigation. 1 On June 13, 2013,

the trial court denied Smith’s petition for counsel fees.

       These consolidated appeals arise from the trial court’s February 8,

2013 and June 13, 2013 orders.            CST filed a “protective appeal” from the

trial court’s February 8, 2013 order, concerned that it rendered the summary

judgment order final. Both parties appealed from the June 13, 2013 order—

Smith as the aggrieved party and CST to protect itself if the February 8,

2013 order was not the final appealable order.2           On December 9, 2014, a

____________________________________________


1
   Pursuant to the summary judgment order, CST paid the amount of the
settlement attributable to Smith. CST also reserved its right to appeal that
order.
2
   In the time between the two orders, CST raised new arguments—based on
an agreement referred to infra as the “Recknell Agreement”—challenging the
trial court’s entry of summary judgment. The parties disputed whether CST
was permitted to raise new arguments after the February 8, 2013 order.
CST admits that statutory attorney’s fees are an ancillary matter on which
the trial court can continue to proceed after entry of a final order. Samuel-
Bassett v. Kia Motors America, Inc., 34 A.3d 1, 49 (Pa. 2011), cert.
(Footnote Continued Next Page)


                                           -3-
J-E01002-16


divided three-judge panel of this Court vacated the trial court’s order

entering summary judgment in favor of Smith.3 We granted reargument en

banc by order of February 20, 2015.              After careful review, we vacate the

order granting Smith’s motion for summary judgment and dismiss the

remaining appeals as moot.

      We begin with CST’s appeal of the trial court’s order granting Smith’s

motion for summary judgment on Smith’s cross-claim.                  CST raises the

following assertions of error:

            1.     Did the Court of Common Pleas err as a matter of
      law in determining that CST expressly assumed liabilities from a
      line of business other than the line that CST had acquired? In
      particular, did the trial court err when it:

             a. failed to construe the Asset Purchase Agreement
                (“APA”) in its entirety and thus did not give proper
                weight to the structure of assumed and excluded
                liabilities or defined terms, including, inter alia,
                “Division” and “Business”;


                       _______________________
(Footnote Continued)

denied, 133 S. Ct. 51 (2012). CST also states that Pennsylvania courts have
not addressed whether pursuit of contractual attorney’s fees is an ancillary
matter.

For present purposes, we will treat the February 8, 2013 order as final and
appealable. Our ultimate decision does not rest on any argument CST raised
subsequent to that order. Given CST’s timely appeals from the February 8
and June 13 orders, our jurisdiction is not in doubt. We will not address
whether a contract-based fee petition is an ancillary matter, as that issue
has no bearing on the outcome of this appeal.
3
   Our analysis did not garner a majority, as one Judge dissented and one
Judge concurred in the result.



                                            -4-
J-E01002-16


            b. inferred from the inclusion of a single case on an exhibit
               to A.O. Smith’s representations and warranties about
               litigation pending against it that CST assumed all of the
               liabilities of all lines of business manufactured by A.O.
               Smith’s former subsidiary; and

            c. failed to address the language the parties used in the
               APA?

            2.    Did the Court of Common Pleas fail to correctly apply
      principles of Illinois law governing indemnity agreements and
      successor liability, as well as Pennsylvania summary judgment
      principles?

            3.   Could the trial court have corrected its errors in this
      regard before it entered a final order on the merits?

CST’s Substituted Principal Brief, at 6-7.

      We will address CST’s first two arguments together.       Based on our

resolution of those, we have no need to address the third. The Pennsylvania

Rules of Civil Procedure govern summary judgment motions as follows:

      Rule 1035.2. Motion

            After the relevant pleadings are closed, but within such
      time as not to unreasonably delay trial, any party may move for
      summary judgment in whole or in part as a matter of law

            (1) whenever there is no genuine issue of any material fact
            as to a necessary element of the cause of action or
            defense which could be established by additional discovery
            or expert report, or

            (2) if, after the completion of discovery relevant to the
            motion, including the production of expert reports, an
            adverse party who will bear the burden of proof at trial has
            failed to produce evidence of facts essential to the cause of
            action or defense which in a jury trial would require the
            issues to be submitted to a jury.




                                     -5-
J-E01002-16


Pa.R.C.P. 1035.2. Smith moved for and won summary judgment under Rule

1035.2(1). The trial court’s entry of summary judgment presents a question

of law, and therefore our standard of review is plenary and our scope of

review is de novo.       City of Philadelphia v. Cumberland Cnty. Bd. of

Assessment Appeals, 81 A.3d 24, 44 (Pa. 2013).

             When considering a motion for summary judgment, the
      trial court must take all facts of record and reasonable inferences
      therefrom in a light most favorable to the non-moving party. In
      so doing, the trial court must resolve all doubts as to the
      existence of a genuine issue of material fact against the moving
      party, and, thus, may only grant summary judgment where the
      right to such judgment is clear and free from all doubt.

Summers v. Certainteed Corp., 997 A.2d 1152, 1159 (Pa. 2010) (internal

citations and quotation marks omitted). We will reverse the trial court only

if we discern an error of law or abuse of discretion. Id.

      Smith argues, and the trial court found, that CST assumed liability for

the Roller Mill through the following series of events. In 1996, Harvestore

entered an asset purchase agreement (the “Recknell Agreement”) with

Recknell   Industries,    Ltd.   (“Recknell”),   whereby    Recknell   purchased

Harvestore’s line of automated products, including roller mills.       Harvestore

retained liabilities arising from automated products manufactured prior to

the closing date of the Recknell Agreement.        The parties dispute whether

those retained liabilities included the Roller Mill. Smith dissolved Harvestore

in 1997 and transferred its assets and liabilities to a division of Smith known

as Engineered Storage Products Company (“ESPC”). CST and ESPC entered



                                       -6-
J-E01002-16


an Asset Purchase Agreement (the “APA”) on December 15, 2000, whereby

CST purchased ESPC’s assets and certain of its liabilities.       The trial court

determined that Harvestore retained liability for the Roller Mill after the

Recknell Agreement, and that CST assumed liability for the Roller Mill

pursuant to the APA.        The trial court further determined that the APA

required CST to indemnify Smith for liability arising out of this action.

      The parties call upon us to construe the APA and the Recknell

Agreement, both of which are governed by Illinois law.

            The basic rules of contract interpretation are well settled.
      In construing a contract, the primary objective is to give effect
      to the intention of the parties. A court will first look to the
      language of the contract itself to determine the parties’ intent. A
      contract must be construed as a whole, viewing each provision in
      light of the other provisions.        The parties’ intent is not
      determined by viewing a clause or provision in isolation, or in
      looking at detached portions of the contract.

Thompson v. Gordon, 948 N.E.2d 39, 47 (Ill. 2011) (citations omitted).

      “Under Illinois law, which the parties agree governs this case, the

starting point of any contract analysis is the language of the contract itself.

If the language unambiguously answers the question at issue, the inquiry is

over.” Church v. Gen. Motors Corp., 74 F.3d 795, 799 (7th Cir. 1996).

“In   interpreting   all   contracts,   including   indemnity   agreements,   the

paramount concern and overriding purpose is to give effect to the intent of




                                        -7-
J-E01002-16


the parties.” Id. Further, “indemnity agreements are not favored in Illinois

and thus are strictly construed against the indemnitee.” Id.4

       Similarly, the Appellate Court of Illinois has written:

             When construing an agreement to indemnify, the
       agreement must be given a fair and reasonable interpretation
       based upon a consideration of all the language and provisions.
       The interpretation of an indemnity agreement also depends upon
       the factual setting of the case. An indemnity agreement must be
       set forth in clear and explicit language so that an indemnitor’s
       obligations are manifestly determinable. Although indemnity
       agreements are not void, they nevertheless are not favored and
       must be strictly construed.

Charter Bank v. Eckert, 585 N.E.2d 1304, 1310 (Ill. App. Ct. 1992); see

also Taracorp, Inc. v. NL Indus., Inc., 73 F.3d 738, 743-44 (7th Cir.

1996).

       For reference, we set forth the pertinent provisions of the Recknell

Agreement:

            WHEREAS,    Seller,  among    other   things,   designs,
       manufactures, markets, supplies and sells roller mills, batch
       mixers and agricultural feed handling conveyors and

____________________________________________


4
   Smith cites § 12.8 of the APA, which states that the APA must be
construed neutrally:

       This Agreement constitutes the product of the negotiation of the
       parties hereto and the enforcement hereof shall be interpreted in
       a neutral manner, and not more strongly for or against any party
       based on the source of the draftsmanship hereof.

APA § 12.8. In rendering our decision, we do not apply any construction
based on draftsmanship.    We do, however, apply the law of Illinois
governing indemnity agreements.



                                           -8-
J-E01002-16


     replacement parts for such equipment (“Automated Products”) at
     its plant facility in DeKalb, Illinois; and

           WHEREAS, Purchaser desires to purchase from Seller and
     Seller desires to sell to Purchaser certain assets of Seller relating
     to Seller’s Automated Products business, (“the Automated
     Products Business”) upon the terms and conditions set forth in
     this Agreement;

     1. SALE AND PURCHASE OF ASSETS

        1.1      Assets Included.       Subject to the terms and
        conditions of this Agreement, Seller agrees to sell, transfer,
        assign, convey and deliver to Purchaser, and Purchaser
        hereby agrees to purchase, acquire and accept the Assets (as
        defined below). The “Assets” shall consist of the following
        assets used by Seller in the Automated Products Business:

           (a) all machinery, storage racks, assembly tables,
        personal property and equipment listed in Schedule 1.1(a)
        attached hereto (the “Equipment”);

                                      [. . .]

        1.2      Assets Not Included. The Assets do not include:

                                      [. . .]

           (b) Automated Products manufactured by Seller on or
        before September 13, 1996[.]

                                      [. . .]

     3. LIABILITIES AND OBLIGATIONS

        3.1        Liabilities Retained by Seller.       All liabilities,
        obligations, warranties and commitments of every kind or
        nature whatever, whether known or unknown, liquidated or
        unliquidated, fixed or contingent, which in any way arise from
        or relate to Seller’s ownership or use of the Assets, operation
        of the Automated Products Business, and the sale of
        Automated Products manufactured on or before September
        13, 1996, whenever arising, shall remain the liabilities,
        obligations, warranties and commitments of Seller. All such
        liabilities, obligations, warranties or commitments, and all
        such claims and demands based thereon or attributable

                                     -9-
J-E01002-16


          thereto shall remain the sole obligation and responsibility of
          Seller. All claims, liabilities, losses and obligations retained
          by Seller shall be collectively referred to as “Retained
          Liabilities.”

Recknell Agreement, 9/3/96 (underscoring in original).5

       To summarize the foregoing, the Recknell Agreement excludes from

the sale certain Assets, namely “Automated Products manufactured by Seller

on or before September 13, 1996[.]”                  Recknell Agreement, § 1.2(b).

Correspondingly, the Recknell Agreement provides that Harvestore, as seller,

retained “all liabilities [. . .] of every kind [. . .] which in any way arise from

or relate to Seller’s ownership or use of the Assets, operation of the

Automated      Products    Business,     and   the   sale   of   Automated   Products

manufactured on or before September 13, 1996, whenever arising[.]” Id. at

§ 3.1. Recknell, as purchaser, assumed liabilities arising “from the design,

manufacture, marketing, and supply of Automated Products; and from the

sale by Purchaser of Automated Products from and after the date of

Closing[.]”    Id. at § 3.3.     Automated Products include roller mills.      Id. at

Page 1, Paragraph 2.        As noted above, the Harvestore manufactured and

sold the Roller Mill in 1981.

       Thus, the plain language of the Recknell Agreement indicates

Harvestore retained liability for the Roller Mill.6          Moreover, the Recknell
____________________________________________


5
  The Recknell Agreement appears in the certified record as an exhibit to
CST’s October 15, 2012 motion for summary judgment.




                                          - 10 -
J-E01002-16


Agreement’s language is in accord with Illinois law holding that an

“indemnity agreement must be set forth in clear and explicit language so

that an indemnitor’s obligations are manifestly determinable.”            Charter

Bank, 585 N.E.2d at 1310. We agree with the trial court that no issue of

material fact exists as to Harvestore’s retention of liability for the Roller Mill

after the Recknell Agreement.

      Next, we turn to the APA.7            Once again, we set forth the pertinent

provisions for reference:

              AGREEMENT FOR PURCHASE AND SALE OF ASSETS

           THIS AGREEMENT (this “Agreement”), dated as of the 15th
      day of December, 2000, is made by and between A.O. SMITH
      CORPORATION, a Delaware Corporation (hereinafter “Seller”),
      and CST INDUSTRIES, INC., a Delaware corporation (hereinafter
      “Buyer”).

            The Seller, through its division, Engineered Storage
      Products Company (the “Division”), is engaged in the business of
      designing, engineering, manufacturing, marketing and erecting
                       _______________________
(Footnote Continued)
6
    CST argues on appeal that Recknell assumed liability for the Roller Mill
under the Recknell Agreement. That argument contradicts CST’s answer to
Smith’s motion for summary judgment (hence the dispute over which order
on appeal was final), wherein CST stated that liability for the Roller Mill
remained with Harvestore after the Recknell Agreement. CST’s Answer to
Smith’s Motion for Summary Judgment, 11/16/12, at ¶ 7. Further, CST’s
current construction of the Recknell Agreement commits many of the same
analytical errors CST finds in Smith’s construction of the APA. As set forth
above, we believe the Recknell Agreement is clear on Harvestore’s retention
of liability for the Roller Mill. As set forth below, we cannot say the same for
the APA.
7
  With respect to excerpts from the APA set forth in this Opinion, all
underscoring appears in the original.



                                           - 11 -
J-E01002-16


     liquid and dry bulk storage tanks. The Buyer desires to purchase
     substantially all of the operating assets of the Division and to
     assume certain of the operating liabilities as specified herein,
     and the Seller desires to sell the Division as an ongoing business
     and delegate such liabilities to the Buyer, on the terms and
     subject to the conditions set forth in this Agreement. The term
     “Division” is sometimes used herein as though it were a separate
     entity; when so used the term means that the Seller is the entity
     referred to but only insofar as the activities, assets or liabilities
     relate to the Division and are accounted for as part of the
     Division’s activities. The term “Business” means the business of
     the Division as conducted as of the date of this Agreement.

           In reliance upon the representations and warranties made
     herein and in consideration of the mutual covenants and
     agreements herein contained, the Buyer and the Seller hereby
     agree as follows:

                              ARTICLE I
                     PURCHASE AND SALE OF ASSETS

            1.1 Purchase and Sale.           Subject to the terms and
     conditions contained herein, at the Closing, the Seller shall sell,
     convey, transfer, assign and deliver to the Buyer, and the Buyer
     shall purchase and accept from the Seller, all of Seller’s right,
     title and interest in and to all of the assets used primarily or held
     for use primarily in the Division or the Business, and all tangible
     assets located at the Facilities (as defined in Section 1.2.1), as
     the same are more specifically set forth in Section 1.2.2 hereof,
     except the Excluded Assets and Nontransferred Assets
     (hereinafter defined) (collectively, the “Purchased Assets”).

           1.2   Definitions; Purchased Assets.

           1.2.1 Definitions. For purposes of this Agreement, the
     following terms have the meanings set forth below:

                                      [. . .]

           “Assumed Liabilities” means only the following liabilities of
     Seller relating to the Division, the Business or the Purchased
     Assets as of the Closing Date (hereinafter defined), subject to
     Section 1.5 and Article XI: [. . .] (C) all liabilities in the nature
     of product liability, including, without limitation, any liability for
     claims made for injury to person, damage to property or other

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J-E01002-16


     damage arising from, caused by or arising out of any product
     designed, manufactured, assembled, installed, sold, leased or
     licensed by the Division, prior to the Closing date[.]

                                      [. . .]

           1.4 Assumed Liabilities. Provided that the transactions
     herein contemplated are consummated, and subject to Section
     1.5 and Article XI, Buyer will assume and pay, perform and
     discharge when due, and will indemnify Seller against, the
     Assumed Liabilities and no others, except as provided herein.

           1.5 Excluded Liabilities. Buyer shall not be responsible
     for any liability or obligation of Seller that is owed to or at the
     behest of a third party other than the Assumed Liabilities nor for
     any liability or obligation if and to the extent Seller has an
     indemnification obligation with respect thereto under Article XI
     (the “Excluded Liabilities”). Without limitation, Buyer shall not
     be responsible for, and the Excluded Liabilities shall include:

                                      [. . .]

                 (o)   any liabilities of Seller arising out of any
     litigation matters identified in Exhibit 2.13, other than those
     maters referenced in Item 2 of Exhibit 2.13.

                                      [. . .]

                             ARTICLE II
              REPRESENTATIONS AND WARRANTIES OF SELLER

             2.8 No Undisclosed Liabilities, Claims, etc. Except [. . .]
     liabilities expressly disclosed in any Exhibit to this Agreement [. .
     .] the Division or Business has no liabilities, obligations or claims
     (absolute, accrued, fixed or contingent, matured or unmatured,
     or otherwise) that are owed to or at the behest of a third party
     that would constitute Assumed Liabilities, including liabilities,
     obligations or claims which may become known or which arise
     only after the Closing and which result from actions, omissions
     or occurrence of the Seller or the Division prior to the closing.

                                      [. . .]

           2.13 Litigation. Except as set forth in Exhibit 2.13, there
     is no suit, action, investigation or proceeding pending or, to the
     knowledge of Seller, threatened expressly against the Seller, the

                                    - 13 -
J-E01002-16


       Division or the Purchased Assets which, if adversely determined,
       would adversely affect the business, operations, earnings,
       properties or the financial condition of the Division nor is there
       any judgment, decree, injunction, rule or order of any court,
       governmental department, commission, agency, instrumentality
       or arbitrator outstanding against Seller, the Division or the
       Purchased Assets having, or reasonably likely to have, any such
       effect.

                                               [. . .]

               2.22 Products Liability. Seller makes no representation or
       warranty in this Agreement as to any matters relating to product
       liability except in this Section 2.22. Except as set forth in Exhibit
       2.22, to the knowledge of Seller, there exists no claim against
       Seller in the nature of product liability, including without
       limitation, any claim for injury to persons, damage to property or
       other damage arising from, caused by or arising out of any
       product designed, manufactured, assembled, installed, sold,
       leased or licensed, or any service rendered, no reasonable basis
       exists for any such claim and the Balance Sheet reserves are
       adequate to cover the claims disclosed in Exhibit 2.22.

APA, 12/15/00.8

       Exhibit 2.13 to the APA provides:

                                     LITIGATION

       1. See Exhibit 1.5(k) and 1.5(m).

       2. Litigation with respect to matters relating to product liability
          and product warranty is disclosed on Exhibit 2.22 and Exhibit
          2.24, respectively.

       3. Joest Vibratech, Inc. v. North Star Steel Company,
          Engineered Storage Products, et al; United States District
          Court, Northern District of Ohio Eastern Division; Case No.
          4:00CV810.

____________________________________________


8
   The APA appears in several places in the certified record, including Exhibit
6 to CST’s October 15, 2012 motion for summary judgment.



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     4. A.O. Smith Engineered Storage Products Company v. Prime
        Systems, Inc.; Circuit Court, Pasco County, Florida; Case No.
        2000 26 66 CA.

     5. Lemelson Medical, Education & Research Foundation Limited
        Partnership v. A.O. Smith Corporation, et al; United States
        District Court, District of Arizona; Case No. CIV 000662 PHX
        SMM.

APA, Exhibit 2.13.

     Finally, Exhibit 2.22 of the APA provides:

                          PRODUCTS LIABILITY

     1. See Exhibit 1.5(k).

     2. In October 1999, two men died when they were overcome by
        fumes after becoming trapped in a Harvestore silo while
        performing maintenance work. To date, no claim has been
        asserted against Seller. Seller is uncertain whether it will
        have any liabilities relating to this incident.

     3. In July 2000, one maintenance man died and two
        maintenance men were critically injured while working on a
        sugar silo when a large mass of sugar fell. Seller had sold the
        silo tank to Shick-Tube for its customer, Parco Bakery. To
        date, no claim has been asserted against Seller. Seller is
        uncertain whether it will have any liabilities relating to this
        incident.

     4. Teadit North American (“Teadit”) recommended rubber
        gaskets to Seller for use in storage tanks being installed in
        the Stocker Resources project in San Luis Obispo, California.
        Seller placed two orders for the rubber gaskets with Teadit,
        which does not manufacture the product and ordered the
        product from Industrial & Military Technologies. The rubber
        material in the gaskets disintegrated. Costs to rehabilitate
        the project are projected to exceed $200,000.        Teadit’s
        insurance company is reviewing Seller’s claim with respect to
        the product.

     5. William Smith v. A.O. Smith Harvestore Products, Inc.;
        Supreme Court, County of Jefferson, New York; Index No. 94-
        1687.

                                   - 15 -
J-E01002-16


       6. Continental Insurance Company and Pine Grove Landfill, Inc.
          v. Peabody TecTank, Inc. and Johnstown Construction
          Company; Court of Common Pleas, Schuylkill [sic] County,
          Pennsylvania; Case No S-17-1988.

       7. Rodney Woods and Janet Woods v. A.O. Smith Harvestore
          Products, Inc. et al; Circuit Court of the Eighth Judicial
          District, Pike County, Illinois; Case No. 00-L-12.

APA, Exhibit 2.22.

       As we have explained, our analysis under Illinois law begins with the

language of the contract.         Charter Bank, 585 N.E.2d at 1310.    For an

indemnity agreement, Illinois law requires the parties’ intent to be

manifestly determinable. Id. We first consider the APA’s treatment of ESPC

as a “Division.”

             [Smith], through its division, [ESPC] (the “Division”), is
       engaged     in   the    business     of  designing, engineering,
       manufacturing, marketing and erecting liquid and dry bulk
       storage tanks. [CST] desires to purchase substantially all of the
       operating assets of the Division and to assume certain of the
       operating liabilities of the Division as specified herein, and
       [Smith] desires to sell the Division as an ongoing business and
       delegate such liabilities to [CST], on the terms and subject to
       the conditions as set forth in this Agreement.

APA, Preamble, at ¶ 2.9 The APA further provides: “Division” is sometimes

used herein as though it were a separate legal entity; when so used the

term means that [Smith] is the entity referred to but only insofar as the

____________________________________________


9
   The APA is organized in consecutively numbered sections except for three
introductory paragraphs preceding the first numbered section. For clarity of
citation, we will refer to these three introductory paragraphs as the
Preamble.



                                          - 16 -
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activities, assets or liabilities relate to the Division and are accounted for as

part of the Division’s activities.”    Id.     “The term ‘Business’ means the

business of the Division as conducted as of the date of this Agreement.” Id.

      To summarize so far, CST agreed to purchase the operating assets of

ESPC and to assume certain specified liabilities.       As of the closing date,

ESPC’s Business involved fabricating and selling bulk storage tanks. ESPC’s

Business as of the closing date did not involve fabricating and selling roller

mills, and never had.

      Next, we consider the APA’s puzzling treatment of the word “Division.”

The APA purportedly defines ESPC as the Division, but also provides that the

term Division refers to Smith in cases where it appears the Division is a

separate legal entity. ESPC is not a separate legal entity or wholly owned

subsidiary of Smith, but part of the same legal entity as Smith.        As such,

ESPC’s assets and liabilities are Smith’s assets and liabilities.

      The Preamble explains that CST will assume certain of the Division’s

liabilities, and § 1.2.1 of the APA defines those as:

             “‘Assumed Liabilities’ means only the following liabilities of
      Seller relating to the Division, the Business or the
      Purchased Assets as of the Closing Date [. . .] (C) all
      liabilities in the nature of product liability, including,
      without limitation, any liability for claims made for injury to
      person, damage to property or other damage arising from,
      caused by or arising out of any product designed,
      manufactured, assembled, installed, sold, leased or
      licensed by the Division, prior to the Closing date.




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Id. at § 1.2.1 (Assumed Liabilities) (underscoring in original, bolded

emphasis added).        Section 1.4 of the APA provides that CST “will assume

and pay, perform and discharge when due, and will indemnify Seller against,

the Assumed Liabilities and no others, except as provided herein.”       Id. at

§ 1.4.

         As explained above, Harvestore retained liability for roller mills

manufactured prior to the Recknell Agreement.               Smith subsequently

dissolved Harvestore and transferred Harvestore’s assets and liabilities to

ESPC.       CST argues ESPC was never in the business of designing or

manufacturing roller mills, and therefore the APA’s definition of assumed

liabilities does not encompass the Roller Mill.       Smith argues that the APA

defines “Division” more broadly than “Business,” and that while ESPC was

never in the business of selling roller mills, ESPC assumed Harvestore’s roller

mill liabilities for tax and accounting purposes.10

         Language in the first sentence of the Assumed Liabilities definition,

“relating to the Division, the Business, or the Purchased Assets . . . ,”
____________________________________________


10
      The parties dispute the import of documentary evidence purportedly
indicating CST’s awareness of the roller mill liabilities on ESPC’s books. The
trial court’s decision rested on the APA’s plain language. Trial Court Opinion,
10/1/13, at 7. In vacating the trial court’s order, we conclude only that the
APA’s plain language does not justify entry of summary judgment in Smith’s
favor. If, under the circumstances of this case, any extrinsic evidence is
admissible and relevant, its import will depend on findings of fact. See
Farm Credit Bank v. Whitlock, 581 N.E.2d 664, 667 (Ill. 1991). Any such
findings must come from the trial court in the first instance.




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supports Smith’s argument that “Division” as used in the APA is a broader

term than “Business.”         In other words, “Division” arguably encompasses

more than the “Business” of fabricating bulk storage tanks.         Nonetheless,

the definition of Assumed Liabilities in § 1.2.1 does not, in and of itself,

establish that CST agreed to assume liability for all future litigation involving

roller mills—an asset CST did not acquire and that was never a part of its

business or that of ESPC. Stated another way, roller mills were not among

the Purchased Assets, nor were they ever a part of the Business of ESPC,

nor did they have any obvious relation to Smith’s ESPC Division as of the

closing date of the APA. We observe that the trial court’s opinion ignores the

first sentence of § 1.2.1, which refers to the closing date. While we agree

with Smith that the Preamble and § 1.2.1 do not foreclose the possibility

that CST assumed liabilities unrelated to the bulk storage tank Business,11

we do not believe these sections confirm that CST assumed additional

liabilities.   As stated several times above, Illinois law requires “clear and

explicit language      so   that an      indemnitor’s obligations are   manifestly

determinable.” Charter Bank, 585 N.E.2d at 1310.




____________________________________________


11
    Indeed, § 1.4, in stating CST will discharge the Assumed Liabilities “and
no others, except as provided herein[,]” arguably supports a conclusion
that CST agreed to discharge certain liabilities not within the contractual
definition of Assumed Liabilities. APA, § 1.4 (emphasis added).



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      Article II of the APA contains a section titled “No Undisclosed

Liabilities, Claims, etc.”   Id. at § 2.8.     That section provides, in relevant

part, that except for:

            liabilities expressly disclosed in any Exhibit to this
      Agreement [. . .] the Division or Business has no liabilities,
      obligations or claims (absolute, accrued, fixed or contingent,
      matured or unmatured, or otherwise) that are owed to or at the
      behest of a third party that would constitute Assumed Liabilities,
      including liabilities, obligations or claims which may
      become known or which arise only after the Closing and
      which result from actions, omissions or occurrences of the Seller
      or the Division prior to the closing.

Id. at § 2.8 (emphasis added).        The APA contains several exhibits that

expressly disclose pending litigation.       Among those is Exhibit 2.22, which

corresponds to § 2.22 of the APA. Section 2.22 is titled “Products Liability.”

It provides as follows:

             Seller makes no representation or warranty in this
      Agreement as to any matters relating to product liability except
      in this Section 2.2. Except as set forth in Exhibit 2.22, to the
      knowledge of Seller, there exists no claim against Seller in the
      nature of product liability, including without limitation, any claim
      for injury to persons, damage to property or other damage
      arising from, caused by or arising out of any product designed,
      manufactured, assembled, installed, sold, leased or licensed, or
      any service rendered, no reasonable basis exists for any such
      claim and the Balance Sheet reserves are adequate to cover the
      claims disclosed in Exhibit 2.22.

Id. at § 2.22.

      Exhibit 2.22 is a numbered list of seven items, one of which is a

products liability claim involving a roller mill. It is captioned “William Smith

v. A.O. Smith Harvestore Products, Inc.” Id. at Exhibit 2.22, ¶ 5. Based on



                                      - 20 -
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this item, the trial court and Smith argue that CST assumed liability for any

and all such claims. We cannot agree.

         As we have already explained, we do not believe the APA’s definition of

Assumed Liabilities is sufficiently clear to encompass all future roller mill

liability. Nothing in the APA supports a conclusion that the items in Exhibit

2.22 constitute Assumed Liabilities.      The contractual definition of Assumed

Liabilities does not reference Exhibit 2.22.          Rather, § 1.5, governing

“Excluded Liabilities,” references Exhibit 2.22. Section 1.5 provides: “Buyer

shall not be responsible for any liability or obligation of Seller that is owed to

or at the behest of a third party other than the Assumed Liabilities[.]” Id. at

§ 1.5.     Section 1.5 includes an itemized list of Excluded Liabilities, one of

which is “litigation matters identified in Exhibit 2.13, other than those

matters referenced in Item 2 of Exhibit 2.13.” Id. at § 1.5(o). Exhibit 2.13,

in turn, contains a list of five items.    Item 2 on that list refers to Exhibit

2.22.     In other words, the APA carves Exhibit 2.22—the only reference to

litigation involving a roller mill—out of a list of otherwise excluded activities.

         In summary, Smith advocates for a conclusion that CST assumed

liability for rollers mills, an asset that never was part of ESPC’s business or

that of CST. As of the APA’s closing date, ESPC was in the business of bulk

storage tanks. Nothing in the APA indicates that roller mill liabilities were

among ESPC’s liabilities at that time. In our view, the APA does not set forth




                                      - 21 -
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a clear expression of the parties’ intent for CST to assume liability for any

future claims involving roller mills, including the Fisher litigation.

      Ultimately, our decision rests on the standard of review applicable to

summary judgment motions, which are to be granted only in cases where

the moving party’s right to judgment is “clear and free from all doubt.”

Summers, 997 A.2d at 1159. Our analysis of the APA convinces us that the

trial court erred in concluding that Smith’s right to judgment is clear and

free from doubt. The APA, insofar as it governs CST indemnity obligation in

the current matter, is convoluted and confusing. The law of Illinois requires

clarity, such that CST’s obligations are manifestly determinable. For these

reasons, the trial court erred in granting Smith’s summary judgment motion.

      At docket number 727 EDA 2013, we vacate the order of February 8,

2013 insofar as it rendered final the trial court’s summary judgment order in

favor of Smith. We do not disturb the remainder of that order. Given our

disposition of at 727 EDA 2013, we dismiss the appeals at numbers 1960

EDA 2013 and 2000 EDA 2013 as moot.

      Order of February 8, 2013 affirmed in part and vacated in part.

Appeals at 1960 EDA 2013 and 2000 EDA 2013 dismissed as moot. Case

remanded. Jurisdiction relinquished.

      President Judge Emeritus Ford Elliott, Judge Bowes, Judge Mundy, and

Judge Ott join the opinion.




                                      - 22 -
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     Judge Dubow files a concurring opinion in which President Judge

Emeritus Bender, Judge Lazarus, and Judge Ott join.

     President Judge Emeritus Bender concurs in the result.

     Judge Shogan files a dissenting opinion.

     This decision was reached prior to Judge Mundy’s appointment to the

Supreme Court.

Judgment Entered.




Joseph D. Seletyn, Esq.
Prothonotary



Date: 8/12/2016




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