Present:   All the Justices

INDUSTRIAL ALLOY
FABRICATORS, INC., ET AL.
                                           OPINION BY
v.   Record No. 981093           CHIEF JUSTICE HARRY L. CARRICO
                                         April 16, 1999
WILLIAMS INDUSTRIES, INC., ET AL.

           FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND
                    Melvin R. Hughes, Jr., Judge

      This is an indemnification and warranty case involving the

purchase of corporate assets by Industrial Alloy Fabricators,

Inc. (Industrial Alloy) and Precision Components Corporation

(Precision Components) from Williams Industries, Inc. (Williams

Industries) and IAF Transfer Corporation (IAF Transfer).    From a

judgment in favor of Williams Industries and IAF Transfer, we

awarded Industrial Alloy and Precision Components this appeal.

      Industrial Alloy is a Pennsylvania corporation with its

principal place of business in Richmond, Virginia.   At all

relevant times, it has been engaged in the business of providing

customers with design and production of custom pressure vessels,

tanks, reactors, distillation columns, and other process

equipment.   Precision Components, which is also a Pennsylvania

corporation, is “the majority holder” of Industrial Alloy.

Precision Components’ principal place of business is in York,

Pennsylvania.

      Williams Industries is a Virginia corporation with its

principal place of business in Fairfax County.   IAF Transfer is
also a Virginia corporation based in Fairfax County, and it is

the wholly owned subsidiary of Williams Industries.   IAF

Transfer formerly was known as Industrial Alloy Fabricators,

Inc. (a Virginia corporation), but changed its official

corporate name to IAF Transfer Corporation (a Virginia

corporation) about the time the parties entered into an “Asset

Purchase Agreement” (the Agreement), which is at the heart of

the present controversy.

     The Agreement is dated October 31, 1994.   Pursuant to its

terms, Precision Components and Industrial Alloy (the Buyers)

agreed to purchase for $3,600,000 all the assets, including the

corporate name, of the former Industrial Alloy Fabricators, Inc.

from IAF Transfer and Williams Industries (the Sellers).    The

Agreement provided that it was to be governed by and construed

in accordance with the laws of the Commonwealth of Pennsylvania.

     In § 9.1 of the Agreement, the Sellers agreed to indemnify

the Buyers “against and in respect of, any and all claims,

damages, actions, judgments, losses, liabilities, and expenses,

including reasonable fees and disbursements of counsel, incurred

by [the Buyers] arising from or in connection with . . . (a) all

Liabilities of [the Sellers], whether accrued, absolute, fixed,

contingent or otherwise, other than Assumed Liabilities.”    The

Sellers further agreed in § 9.1(b) to indemnify the Buyers

against “any breach of any covenant or obligation of [the


                                2
Sellers] incurred under this Agreement, or because any

representation or warranty by [the Sellers] contained herein

. . . shall be false or misleading.”

     In § 2.2 of the Agreement, the Buyers assumed certain

liabilities shown on an October 31, 1994 balance sheet as well

as liabilities or obligations arising under certain contracts.

Section 2.1 provided, however, that, except for the assumed

liabilities, the Buyers would not be “liable for any debt,

claim, responsibility, damages, fines, penalties, costs,

expenses, liability or obligation of [the Sellers] . . . whether

disclosed or undisclosed . . . fixed or contingent [and] whether

due or to become due.”

     Section 6.14 of the Agreement provided that the Sellers

shall comply with the provisions of the Virginia    Bulk Sales

Act, Code §§ 8.6-101 through -111, “in connection with this sale

of assets.” 1   In this section of the Agreement, the Sellers also

warranted that “there are no creditors of any type or nature

which have not specifically been disclosed by identity and

amount” to the Buyers.

     Section 9.3 of the Agreement required the “Indemnified

Party” to notify the “Indemnifying Party” by registered mail

1
  The Code sections formerly comprising the Bulk Sales Act,
§§ 8.6-101 through –111, were repealed in 1997 and replaced by
Code §§ 8.6A-101 through -110. 1997 Va. Acts ch. 121. Because



                                  3
whenever any claim for indemnification arises under the

Agreement.   Section 9.4 gives the “Indemnifying Party” the right

to participate in the defense of any claim or demand by any

third party against the “Indemnified Party.”      And § 9.5 provided

that “the Indemnified Party shall make no settlement of any

claim that would give rise to liability on the part of the

Indemnifying Party under an indemnity contained in this Section

9 without the written consent of the Indemnifying Party.”

(Emphasis added.)

     At the time the parties entered into the Agreement in

October 1994, there was pending in the United States District

Court for the Middle District of North Carolina a products

liability action which had been initiated on March 31, 1994, by

Unitex Chemical Corporation against the former Industrial Alloy

Fabricators, Inc.   Unitex Chemical Corp. v. Industrial Alloy

Fabricators, Inc., No. 2:94CV00164 (M.D. N.C., Greensboro Div.)

(the North Carolina litigation).       It was stipulated below that

the Buyers, prior to their purchase of the assets in question,

received a letter signed by counsel for the Sellers which

provided a description and analysis of litigation pending

against the former Industrial Alloy Fabricators, Inc., including

the North Carolina litigation.   It was further stipulated that



this litigation arose prior to the revision, we will cite to the
previous sections.

                                   4
the letter was incorporated by reference into the Agreement.

However, it is undisputed that the claim asserted in the North

Carolina litigation was not one of the liabilities assumed by

the Buyers pursuant to § 2.2 of the Agreement.

     Core States Bank, N.A. (the Bank), had agreed to finance

the Buyers’ acquisition of the assets, and the Bank wanted to

protect the collateral that would act as security for the debt.

Although the Agreement required the Sellers to furnish the

Buyers a list of the Sellers’ creditors and the Buyers had

requested such a list, none had been furnished as the date

approached for closing under the Agreement, and the Bank refused

to release the funds.   As a direct result, the parties and the

Bank entered into an escrow agreement, which provided for the

establishment of an escrow account to ensure the Sellers’

compliance with the Virginia Bulk Sales Act.   Although the

Sellers believed the Bulk Sales Act did not apply to the

transaction involved in the Agreement, they acquiesced in and

agreed to the Buyers’ publication of a notice in the Richmond

Times-Dispatch of the Buyers’ intent to pay the Sellers’ debts

in full. 2



2
  Code § 8.6-103(6) provided an exception to the Bulk Sales Act
for “[t]ransfers to a person maintaining a known place of
business in this State who becomes bound to pay the debts of the
transferor in full and gives public notice of that fact.”



                                 5
     The notice, prepared by the Buyers’ then counsel, stated

that a bulk transfer was about to be made by the former

Industrial Alloy Fabricators, Inc., as the seller, to the new

Industrial Alloy Fabricators, Inc., as the buyer, and that

“Buyer has become bound by the terms of a certain agreement

between it and Seller to pay Seller’s debts in full.”   The

notice appeared in the newspaper on November 3 and 10, 1994.

The parties then proceeded to close the transaction for the

asset purchase.

     On September 18, 1995, Unitex Chemical Corporation, the

plaintiff in the North Carolina litigation, filed a complaint

against the Buyers in the United States District Court for the

Eastern District of Virginia alleging a violation of the Bulk

Sales Act for the Buyers’ failure to give Unitex notice of the

asset transfer.   Unitex Chemical Corp. v. Industrial Alloy

Fabricators, Inc., Civil Action No. 3:95CV777 (E.D. Va.,

Richmond Div.) (the Virginia Bulk Sales litigation).    In their

answer filed January 6, 1996, the Buyers responded that they

“were not required to provide [Unitex notice] because the

transaction was exempted, pursuant to Virginia Code § 8.6-103.”

Unitex then sought leave to amend its complaint to seek a

declaratory judgment that the Buyers had assumed the debts of

the former Industrial Alloy Fabricators, Inc. by virtue of the

notice published in the Richmond Times-Dispatch.


                                 6
     The district court never ruled on Unitex’s motion to amend

because, on March 20, 1996, the Buyers entered into a

“Stipulation and Settlement Agreement” with Unitex “to settle

all claims asserted” in the Virginia Bulk Sales litigation.

Pursuant to this agreement, Unitex dismissed the Virginia Bulk

Sales litigation in exchange for the Buyers’ agreement to pay

any judgment returned for Unitex in the North Carolina

litigation.

     The Sellers were aware of the filing of the complaint in

the Virginia litigation and of the fact that depositions were

scheduled to be taken in the case.   However, the Buyers neither

gave the Sellers prior notice of the settlement of the

litigation nor sought their consent to the terms of the

settlement agreement.

     The Buyers participated in settlement discussions

concerning the claim asserted in the North Carolina litigation

and ultimately contributed $300,000 toward settlement of that

claim.   The parties to the litigation entered into a “Settlement

Agreement and Mutual Release of All Claims” dated June 10, 1996.

     The Buyers then made demand upon the Sellers to comply with

the indemnification provisions of the Agreement.   The Sellers

made no response to the demand, and, on October 3, 1996, the

Buyers filed in the court below a two-count motion for judgment

against the Sellers seeking to recover the $300,000 the Buyers


                                 7
had contributed to settlement of the North Carolina litigation,

plus attorneys’ fees and costs.

       In Count I of the motion for judgment, the Buyers alleged a

breach of warranty by the Sellers for their failure to disclose

all the creditors of the former Industrial Alloy Fabricators,

Inc.   In Count II, the Buyers sought to enforce the

indemnification provisions of the Agreement.   In their grounds

of defense, the Sellers responded, inter alia, that they were

not liable to the Buyers because the sums for which the Buyers

sought indemnification “were the product of a settlement [of the

Virginia Bulk Sales litigation] of which [the Sellers] were

given no advance notice, and to which [the Sellers] did not

consent.”

       Both the Buyers and the Sellers filed motions for summary

judgment.   The trial court denied the Buyers’ motion and took

the Sellers’ motion under advisement.   At a bench trial, the

Sellers contended that the Buyers were not entitled to recover

because they failed to give notice of, or obtain the Sellers’

consent to, the settlement of the Virginia Bulk Sales

litigation, as required by §§ 9.3 and .5 of the Agreement.    The

Buyers contended that the notice and consent provisions of the

Agreement were not applicable because the Sellers’ liability to

indemnify the Buyers did not arise from the settlement of the

Virginia Bulk Sales litigation.   Rather, the Buyers said, the


                                  8
Sellers’ liability was a preexisting obligation arising from the

publication in the Richmond Times-Dispatch of the notice whereby

the Buyers agreed to be bound to pay the Sellers’ obligations in

full, in which publication the Sellers acquiesced.

     Upon conclusion of the trial, the court issued a letter

opinion, which it incorporated into its final order by

reference.   The court rejected the Buyers’ contention that the

notice and consent provisions of the Agreement were not

applicable and agreed with the Sellers that the Buyers’ “failure

to adhere to [the consent requirement of] Section 9.5 of the

Asset Purchase Agreement will preclude the [Buyers] from

obtaining indemnification for their contribution to the North

Carolina litigation.”

     As noted previously, the Agreement provides that it is to

be governed by and construed in accordance with the laws of the

Commonwealth of Pennsylvania.   In that Commonwealth,

“indemnification clauses are generally ‘not favored by the law’

and are subject to a strict construction compelling an

interpretation ‘against the party seeking their protection.’”

Lackie v. Niagara Mach. & Tool Works, 559 F. Supp. 377, 378

(E.D.Pa. 1983) (quoting Dilks v. Flohr Chevrolet, Inc., 192 A.2d

682, 687 (Pa. 1963)); see also Kiewit Eastern Co. v. L & R

Constr. Co., 44 F.3d 1194, 1202 (3d Cir. 1995) (Pennsylvania law




                                 9
requires that an indemnity agreement be strictly construed

against party asserting it.)

     In the interpretation of a contract, Pennsylvania law

requires that “‘each and every part of it must be taken into

consideration and given effect, if possible, and the intention

of the parties must be ascertained from the entire instrument.’”

Bethlehem Steel Corp. v. MATX, Inc., 703 A.2d 39, 42 (Pa. Super.

1997) (quoting Marcinak v. Southeastern Greene School District,

544 A.2d 1025, 1027 (Pa. Super. 1988)); see also Department of

Transp. v. Manor Mines, Inc., 565 A.2d 428, 432 (Pa. 1989) (when

interpreting a contract, court must give effect to all its

provisions).

     With respect to indemnification, the common law of

Pennsylvania requires that “[w]hen a party settles a claim with

an injured individual, then sues the party primarily responsible

for the harm for indemnity, the settling party must prove[,

inter alia,] that proper notice was given to the party from whom

it seeks indemnity.”   Consolidated Rail Corp. v. Youngstown

Steel Door Co., 695 F. Supp. 1577, 1581 (E.D.Pa. 1988); see also

Tugboat Indian Co. v. A/S Ivarans Rederi, 5 A.2d 153, 156 (Pa.

1939) (one secondarily liable for injury may recover indemnity

from one primarily responsible provided he has given proper

notice).




                                10
     On appeal, the Buyers contend, as they contended below,

that the notice and consent provisions of the Agreement did not

apply to their settlement of the Virginia Bulk Sales litigation

because that “settlement did nothing more than recognize an

obligation previously created [upon the Buyers] by virtue of the

Bulk Sales Act public notice.”   The Buyers state that § 9.5

requires consent when a settlement “would give rise to liability

on the part of the Indemnifying Party.”   They then note that in

Plymouth Township v. Borough of Larksville, 110 A. 801 (Pa.

1920), the Pennsylvania Supreme Court defined the term

“liability” as including “every kind of obligation, even

obligations that are unascertained or imperfect.”    Id. at 802.

     From this, the Buyers argue that, “even though the monetary

amount of the obligation to Unitex was unascertained at the time

of the Agreement, liability still attached to Buyers at the time

of the Bulk Sales Act public notice in November, 1994,” and that

it was this event, which had the Sellers’ approval, and not the

settlement of the Virginia Bulk Sales litigation, which “gave

rise to the Sellers’ indemnification liability.”    Hence, the

Buyers conclude, the settlement of the Virginia litigation “had

no legal significance,” and the trial court erred when it

selected the settlement “as the triggering event.”

     We disagree with the Buyers’ conclusion.   To adopt their

view would, contrary to Pennsylvania law, require a strict


                                 11
construction of the indemnification provisions of the Agreement

against the Sellers, rather than the Buyers,   fail to give

effect to each and every part of the Agreement, deny the Sellers

the right to prior notice as provided by § 9.3 of the Agreement

and Pennsylvania common law, and effectively write the consent

provision of § 9.5 out of the Agreement.

     Although we express no opinion on the subject, the Buyers

may be correct in saying, as they say on brief, that upon

publication of the Bulk Sales notice, they “became

unconditionally liable to pay the North Carolina product

liability claim.”   However, as the Sellers point out, § 9.5 of

the Agreement “by its terms is not concerned with the time at

which the basis of Buyers’ liability . . . arose” but, instead,

“the event triggering the [Buyers’] obligation to seek and

obtain the [Sellers’] consent is the [Buyers’] ‘settlement of

any claim that would give rise to liability on the part of the

[Sellers] under an indemnity contained in [the Agreement].’”

     In other words, § 9.5 contemplates that regardless of the

point in time at which liability may arise against the Buyers

for a claim within the intendment of the Agreement, it is not

the attachment of such liability to the Buyers but the

subsequent settlement of the claim that is decisive.   Under the

terms of § 9.5, not until that time arrives does there exist a

“settlement . . . that would give rise to liability on the part


                                12
of the Indemnifying Party under an indemnity contained in [the

Agreement].”   The settlement of the Virginia Bulk Sales

litigation was such a settlement, the Sellers’ consent thereto

was required, and, in the words of the trial court, the Buyers’

“failure to [obtain the consent] will preclude [them] from

obtaining indemnification for their contribution to [settlement

of] the North Carolina litigation.”

     The Buyers, however, cite a statement in the trial court’s

letter opinion that “a liability or debt cannot be ‘pre-

existing’ if it has yet to be imposed.”   The Buyers then argue

that if the publication of the Bulk Sales notice did not impose

indemnification liability upon the Sellers then the liability

was not imposed until the Buyers contributed the $300,000 toward

settlement of the North Carolina litigation.    This settlement,

the Buyers say,   occurred with the Sellers approval, as

demonstrated by two letters written by the Sellers’ corporate

counsel shortly before the $300,000 was paid.

     However, the trial court made the explicit finding that

“[n]either letter evinces ‘consent’ by the [Sellers] to the

Virginia settlement nor is it a waiver of the consent

requirement under the Agreement.”    Our reading of the two

letters satisfies us of the correctness of the trial court’s

finding.   Indeed, the first letter, addressed to the Buyers’

counsel, while noting that the addressee earlier had been


                                13
authorized to contribute $300,000 toward the effort to settle

the North Carolina litigation, stated that “[t]here has not been

any waiver, settlement or other understanding between [the

Buyers] and [the Sellers] regarding the efforts to settle or

defend this case, and all rights have been reserved as asserted

in the various correspondence or otherwise.”

     The second letter, addressed directly to Precision

Components, while urging the Buyers to settle the North Carolina

litigation, stated that “[the Sellers] believe that your

voluntary assumption of the Unitex claim under [the agreement

settling the Virginia Bulk Trades litigation], without notice to

or consent by us, relieves us of any obligation to indemnify you

for the claim and constitutes a violation of the Asset Purchase

Agreement.”

     Finally, the Buyers argue that the trial court erred in

denying them recovery on the breach of warranty claim alleged in

Count I of their motion for judgment.   The Buyers base this

claim upon a purported violation by the Sellers of § 6.14 of the

Agreement, which required the Sellers to furnish the Buyers a

list of creditors as described by Code § 8.6-104 of the Bulk

Sales Act and to   warrant “that there are no creditors of any

type or nature which have not specifically been disclosed by

identity and amount to [the Buyers.]”   The Buyers complain that

the Sellers did not provide them with a list of creditors and


                                14
did not specifically disclose all creditors by identity and

amount.

     The Buyers assert that the trial court implicitly held that

the Buyers’ failure to comply with the consent provision of

§ 9.5 “cut off their breach of warranty claim.”   However, we

find nothing in the trial court’s letter opinion or final order

to support this argument.   Rather, in its letter opinion, the

trial court adopted the Sellers’ proposed findings of fact and

conclusions of law.    Included was a finding that any failure of

the Sellers to furnish a list of creditors was not the proximate

cause of any damage to the Buyers since they had sufficient

information from “the due diligence performed on [the Sellers]”

to satisfy “any obligations [the Buyers] had under § 8.6-104

[and –105] of the [Bulk Sales] Act to send notices to [the

Sellers’] creditors.”

     Furthermore, as the Sellers point out, “the only creditor

of [the former Industrial Alloy Fabricators, Inc.] relevant to

this litigation is Unitex, and it is undisputed that Sellers

specifically disclosed to Buyers the existence of Unitex’s

outstanding claim . . . well in advance of the closing date of

the asset purchase.”    Hence, any discussion of the Sellers’

failure to furnish a list of irrelevant   creditors would be

purely academic.




                                 15
     For the reasons assigned, we will affirm the judgment of

the trial court.

                                                        Affirmed.




                               16
