Garrell "Gary" McCutcheon Jr., and Melissa K. McCutcheon v. Pavco Trucking Co. Inc., and Titan Transfer, Inc. (mem. dec.) ( 2018 )

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D), FILED
this Memorandum Decision shall not be Aug 09 2018, 7:47 am
regarded as precedent or cited before any
court except for the purpose of establishing CLERK
Indiana Supreme Court
Court of Appeals
the defense of res judicata, collateral and Tax Court
estoppel, or the law of the case.
ATTORNEY FOR APPELLANTS ATTORNEYS FOR APPELLEE
Thomas E. Scifres TITAN TRANSFER, INC.
Thomas E. Scifres, P.C. Darren A. Craig
Salem, Indiana Carly J. Tebelman
Frost Brown Todd LLC
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Garrell “Gary” McCutcheon Jr., August 9, 2018
and Melissa K. McCutcheon, Court of Appeals Case No.
Appellants-Plaintiffs, 10A05-1711-PL-2713
Appeal from the Clark Circuit
v. Court
The Honorable Andrew Adams,
Pavco Trucking Co. Inc., and Judge
Titan Transfer, Inc., Trial Court Cause No.
Appellees-Defendants. 10C01-1505-PL-44
Robb, Judge.
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Case Summary and Issue
[1] Garrell and Melissa McCutcheon appeal following the trial court’s grant of
summary judgment to Titan Transfer, Inc. (“Titan”). The McCutcheons raise
several issues on appeal which we consolidate and restate as whether the trial
court erred when it granted summary judgment to Titan. Concluding that no
genuine issues of material fact remained and that Titan was entitled to
summary judgment as a matter of law, we affirm.
Facts and Procedural History
[2] Pavco Trucking Company, Inc. (“Pavco”), operated a trucking company in
Clarksville, Indiana. Pavco employed the McCutcheons to haul freight by
truck. Pavco terminated the McCutcheons’ employment on February 14, 2014.
[3] On March 1, 2014, Titan and Pavco executed the Purchase Agreement which
enumerated a number of Pavco’s assets that would be transferred to Titan in
exchange for consideration of $40,000, an additional amount of cash equal to
two weeks of Pavco’s payroll, and a covenant-not-to-compete. The Purchase
Agreement provided in relevant part in Section 3:
[Pavco] represents and warrants to [Titan]:
***
(b) There are no judgments, liens, claims, actions or proceeding
[sic] against the assets being conveyed except as described herein.
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Appellant’s Appendix, Volume 2 at 87.
The Purchase Agreement further provided in Section 11:
[Pavco] shall be responsible for all debts, obligations, leases and
expenses of the business prior to February 28, 2014, at midnight,
and shall indemnify and hold [Titan] harmless from any liability
thereon. [Titan] shall be responsible for all debts, obligations and
expenses of the business after said effective date and shall
indemnify and hold [Pavco] harmless from any liability thereon.
Id. at 90.
[4] The McCutcheons filed suit against Pavco and Titan on April 27, 2015, alleging
four claims of retaliatory discharge and wrongful termination. Id. at 19-24.
Titan appeared in the suit and answered the complaint. Pavco did not appear.
The McCutcheons ultimately obtained a default judgment against Pavco for
$180,656.28. Id. at 79-80. On April 6, 2017, the McCutcheons filed
proceedings supplemental against Titan seeking satisfaction of their default
judgment, arguing that, as a term of the Purchase Agreement, Titan had agreed
to assume liability for Pavco’s debts and obligations after February 28, 2014.1
Id. at 10, 83-84.
[5] On May 19, 2017, Titan moved for summary judgment, arguing in relevant part
that Titan could not be held liable for any of the allegations in the
1
As of the last date in the trial court’s chronological case summary, no hearing on the McCutcheons’
proceedings supplemental had occurred. Appellant’s App., Vol. 2 at 15.
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McCutcheon’s complaint because Titan had never employed the McCutcheons
and because Titan had not assumed any liability from Pavco arising from
Pavco’s employment of the McCutcheons. Id. at 10, 95. In support of its
motion, Titan designated the Affidavit of Phillip Edwards, President of Titan,
who averred that Pavco and Titan had no mutual stockholders, members of
boards of directors, or shareholders. Id. at 121-22. Edwards also averred that
the transfer of assets from Pavco to Titan did not involve the transfer of any
stock. Id. at 122. In addition, Titan designated a certificate of existence from
the Indiana Secretary of State showing that Pavco existed and was authorized
to conduct business as of May 19, 2017. Id. at 136. The McCutcheons opposed
Titan’s motion and also moved for summary judgment, reasserting their
argument that, pursuant to the Purchase Agreement, Titan had assumed
liability for Pavco’s debts and obligations after February 28, 2014, and that their
default judgment was a debt that arose after that date. Id. at 140-52. As part of
the evidence in support of their summary judgment filings, the McCutcheons
designated their Affidavit in which they averred that after the transaction
between Pavco and Titan, Titan continued to use Pavco’s phone and facsimile
numbers, office personnel, equipment, and accounts, and that no change in
business had occurred. Id. at 137-38. The McCutcheons also designated the
Purchase Agreement and an article from the Shelbyville Times-Gazette
announcing Titan’s “acquisition” of Pavco. Id. at 161-68, 178.
[6] On October 19, 2017, the trial court entered its order granting summary
judgment for Titan, providing in relevant part:
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The McCutcheons’ claims fail against [Titan] because the events
alleged in the [complaint] occurred while the McCutcheons were
working for [Pavco], and the McCutcheons never worked for
[Titan]. Although [Titan] later acquired some of Pavco’s assets,
it did not assume any liability arising from Pavco’s employment
of the McCutcheons.
Id. at 16. This appeal ensued.
Discussion and Decision
[7] The McCutcheons contend that the trial court erred in concluding that Titan
was entitled to judgment as a matter of law, arguing that Titan expressly agreed
to assume liability for their default judgment against Pavco as part of the
Purchase Agreement.2
I. Standard of Review
[8] When reviewing a trial court’s grant or denial of summary judgment, we apply
the same standard as the trial court. Travelers Cas. & Sur. Co. v. United States
Filter Corp., 895 N.E.2d 1172, 1176 (Ind. 2008). “We must decide whether
there is a genuine issue of material fact that precludes summary judgment and,
if not, whether the moving party is entitled to judgment as a matter of law.” Id.
(citing Ind. Trial Rule 56(C)). “We also construe the designated evidence in a
light most favorable to the nonmoving party.” Id.
2
Pavco does not participate in this appeal.
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[9] Matters of contract interpretation are particularly well-suited for de novo
appellate review because they generally present questions purely of law. In re
Indiana State Fair Litig., 49 N.E.3d 545, 548 (Ind. 2016). A contract may be
construed on summary judgment if it is not ambiguous or uncertain, or if any
ambiguity may be resolved without the aid of a factual determination. Id. “The
meaning of a contract is a question for the factfinder, precluding summary
judgment, only where interpreting an ambiguity requires extrinsic evidence.”
Id.
II. Assumption of Liability
A. Asset Only Transfer
[10] In Indiana3 the general rule concerning corporate successor liability is that when
one corporation simply purchases the assets of another, as opposed to
purchasing the stock of another, the buyer does not assume the debts and
liabilities of the seller. Winkler v. V.G. Reed & Sons, Inc., 638 N.E.2d 1228, 1233
(Ind. 1994). There are four generally recognized exceptions to the rule, namely
where (1) there is an implied or express agreement to assume the obligation; (2)
a fraudulent sale of assets was done in order to escape liability; (3) the purchase
3
The Purchase Agreement contained a choice of law provision dictating that the Agreement would be
interpreted according to Tennessee law. Appellant’s App., Vol. 2 at 92. However, in their appellate briefs,
both parties cite Indiana law only. The McCutcheons assert that Titan acknowledged in a summary
judgment pleading that no conflict exists between Indiana and Tennessee law on contract interpretation.
Brief of Appellant at 13 n.2. However, the McCutcheons did not include that pleading in their Appendix.
As neither party has invoked the Purchase Agreement’s choice of law provision, we will interpret the
Agreement according to Indiana law.
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was actually a de facto consolidation or merger; and (4) the purchaser is a mere
continuation of the seller. Id. It is the first of these exceptions upon which the
McCutcheons rely, arguing that Titan expressly agreed through the Purchase
Agreement to assume Pavco’s liability for their judgment. Brief of Appellant at
15. The McCutcheons contend that there “is disagreement on the issue of
whether this was simply, and solely, an ‘asset purchase,’” id. at 14, but they also
acknowledge that the transfer of assets from Pavco to Titan did not involve the
transfer of any stock, id. at 17. In their reply to Titan’s brief on appeal, the
McCutcheons acknowledge that Titan did not assume all of Pavco’s debt as a
result of the asset transfer. Appellant’s Reply Brief at 6. Thus, inasmuch as the
McCutcheons argue that Titan assumed liability for their judgment strictly
because of the nature of the transfer of assets from Pavco to Titan, we reject that
argument as waived. See Reed v. Reid, 980 N.E.2d 277, 296-97 (Ind. 2012)
(holding that failure to comply with Indiana Appellate Rule 46(A)(8) by failing
to support a contention with cogent reasoning, citation to authority, and
citation to the record results in waiver of the issue).
[11] As an additional preliminary matter, we note that Winkler, which is cited by
both parties, itself relied on Markham v. Prutsman Mirror Co., 565 N.E.2d 385
(Ind. Ct. App. 1991), as authority for the above-referenced rule of successor
liability and its exceptions. Winkler, 638 N.E.2d at 1233. In enunciating the
rule and its exceptions, the Markham court also held that “[s]uccessor in assets
liability, under these exceptions, takes place only when the predecessor
corporation no longer exists, such as when a corporation dissolves or liquidates
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in bankruptcy.” Markham, 565 N.E.2d at 387. However, nothing in the
authority cited by the court in Markham for this proposition explains why this
should be so where two corporate entities have expressly contracted for one to
assume the other’s liabilities. See id. (citing Wewoka Petroleum Corp. v. Gilmore,
319 P.2d 285, 289 (Okla. 1957) (holding that, pursuant to state statute,
voluntarily dissolved corporations continue to exist for purposes of being sued);
and Wilkerson v. C.O. Porter Mach. Co., 567 A.2d 598, 600-09 (N.J. Super. Law
Div. 1989) (examining the applicability of New Jersey’s product-line theory of
successor liability to the purchase of assets from predecessor corporation’s
bankruptcy)). In Winkler, our supreme court did not adopt this portion of
Markham, and we see no reason to disregard a contractual agreement made by
two corporate entities in an arms-length transaction simply because the
predecessor corporation continues to exist. As such, we address the issue of
whether Titan agreed to assume Pavco’s liability for the instant judgment as
part of the Purchase Agreement without reference to Pavco’s continued
corporate viability.
B. The Purchase Agreement
[12] The goal of the interpretation of contracts is to give meaning and effect to the
intention of the parties as expressed in the language of the contract itself. U.S.
Fidelity & Guar. Co. v. Warsaw Chem. Co., 990 N.E.2d 18, 21 (Ind. Ct. App.
2013), trans. denied. We construe the instrument as a whole, giving effect to
every portion, if possible. Id. Furthermore, we attempt to construe contractual
provisions so as to harmonize the agreement. Grimes v. Crockrom, 947 N.E.2d
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452, 455 (Ind. Ct. App. 2011). We discern the meaning of a contract by
considering all of its provisions, not individual words, phrases, or even
paragraphs read alone. Care Grp. Heart Hosp., LLC, v. Sawyer, M.D., 93 N.E.3d
745, 756 (Ind. 2018). We first examine the contract language to determine
whether it is ambiguous. Id. at 752. If the language is unambiguous, we give
the words used their plain and ordinary meaning in the context of the whole
contract, without substitution or addition. Id.
[13] Both parties contend that the Purchase Agreement is unambiguous, see Br. of
Appellant at 19-22; Appellee’s Brief at 11-14, and we agree. Pursuant to the
plain wording of the contract, Pavco was to be responsible for all “obligations”
of the business which existed prior to February 28, 2014. Appellant’s App.,
Vol. 2 at 90. The word obligation “has many wide and varied meanings [and]
may refer to anything that a person is bound to do or forbear from doing,
whether the duty is imposed by law, contract, promise, social relations,
courtesy, kindness, or morality.” Black’s Law Dictionary (10th ed. 2014). In
addition, Pavco unambiguously warranted to Titan in the Purchase Agreement,
“There are no . . . claims . . . against the assets being conveyed except as
described herein.” Appellant’s App., Vol. 2 at 87. A claim may be defined as a
cause of action. Id. The word “claim” as used in the Purchase Agreement is
not modified by any language limiting its meaning to claims which were
already filed. No claims against Pavco’s assets were otherwise described in the
Purchase Agreement. Id. at 86-94.
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[14] Reading these terms and provisions together so as to give effect to each, the
warranty provision indicates that parties intended that no existing claims were
being transferred from Pavco to Titan as part of the transfer of assets. A claim
against a party falls within the general definition of “obligation” because the
party’s legal duties are implicated by the accrual of a cause of action. The
McCutcheons had a cause of action against Pavco as of the date of their
termination on February 14, 2014. See Jean v. Dugan, 20 F.3d 255, 265 (7th Cir.
1994) (applying Indiana law and holding that a claim for retaliatory discharge
accrues upon termination of employment). Since the McCutcheons’ claim
against Pavco was an obligation of the business that existed prior to February
28, 2014, it fell within the obligations reserved to Pavco pursuant to the
Purchase Agreement and for which Pavco agreed to hold Titan harmless. Any
other reading of the Purchase Agreement would render Pavco’s warranty
pertaining to claims meaningless and ineffective. The McCutcheons do not
address the warranty provision pertaining to claims. Rather, they invite us to
discern the meaning of the Purchase Agreement by concentrating solely upon
Section 11 in isolation, see Appellant’s Reply Br. at 5, and by considering their
action against Pavco and Titan only in its last incarnation when it was reduced
to judgment. This invitation runs afoul of the rule of contract construction
which requires us to discern the intent of the parties by examining the contract
as a whole. Care Grp. Heart Hosp., 93 N.E.3d at 756. Titan did not expressly
assume Pavco’s liability for any claim resulting from Pavco’s employment of
the McCutcheons, and the trial court’s grant of summary judgment was proper
because Titan was entitled to summary judgment as a matter of law.
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Conclusion
[15] Concluding that Titan did not expressly assume liability for a claim that existed
against Pavco prior to the effective date of the Purchase Agreement, we affirm
the trial court’s grant of summary judgment to Titan.
[16] Affirmed.
Najam, J., and Altice, J., concur.
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