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EHLQJWKUHDWHQHGZLWKDULVNRILQMXU\IRUZKLFKQRDGHTXDWH DV LW DSSOLHG WR SURSHUW\ GDPDJH FODLPV IRU UHPRYDO RU
OHJDO UHPHG\ UHPDLQHG E\ WKH SRWHQWLDO IRU LQQXPHUDEOH FRQWDLQPHQWRIDVEHVWRVLQVWDOOHGLQEXLOGLQJV
ODZVXLWVDJDLQVW'DQD7KH7UXVWDUJXHGWKDWLQOLJKWRIWKH
GLVWULFW FRXUW¶V VXPPDU\ MXGJPHQW RUGHU LQ IDYRU RI 'DQD 2Q-DQXDU\ FRQVROLGDWLRQQRWZLWKVWDQGLQJWKH
LQMXQFWLYH UHOLHI ZDV QRW QHFHVVDU\ WR DYRLG WKH ULVN RI GLVWULFWFRXUWHQWHUHGDQRUGHUGHQ\LQJ&HORWH[¶VPRWLRQIRU
VXPPDU\MXGJPHQWRQLWVFODLPIRULQGHPQLW\LQWKH/HHFDVH
'DQD&RUSRUDWLRQY&HORWH[ 1RV 1RV 'DQD&RUSRUDWLRQY&HORWH[
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GLVPLVVHG &HORWH[¶V FODLP IRU LQGHPQLW\ LQ WKDW FDVH DQG Upon Dana’s motion, the district court enjoined the Trust
HQWHUHGDILQDOMXGJPHQWLQIDYRURI'DQD8SRQWKHGLVWULFW from "representing to any asbestos claimant against the
FRXUW¶V -DQXDU\ GLVPLVVDO RI &HORWH[¶V FODLP IRU Celotex Asbestos Settlement Trust that the Celotex Asbestos
LQGHPQLW\LQWKH/HHFDVH&HORWH[UHIXVHGWRVWLSXODWHWRD Settlement Trust has any right of action against the Dana
FRQWLQXDWLRQRID0DUFK VWLSXODWHGRUGHUHQMRLQLQJ Corporation to assign, transfer, or otherwise to convey [Dana
&HORWH[IURPLQVWLWXWLQJGLUHFWO\RULQGLUHFWO\QHZDFWLRQVRU rights]," and from "instituting or prosecuting, directly or
FODLPVLQDQ\FRXUWDQGIURPIXUWKHUSURVHFXWLQJDQ\FODLPV indirectly, in any tribunal or court (federal, state, foreign, or
FXUUHQWO\ SHQGLQJ LQ RWKHU IHGHUDO FRXUWV H[FHSW IRU WKH otherwise) other than this court, any action or claim against
1RUWKHUQ'LVWULFWRI2KLR'DQDWKHQILOHGLWVPRWLRQIRUD the Dana Corporation . . . based on any right of action
SUHOLPLQDU\ LQMXQFWLRQ LQ WKH 1RUWKHUQ 'LVWULFW RI 2KLR putatively assigned or otherwise derived or obtained from or
VHHNLQJWRFRQWLQXHWKHHIIHFWVRIWKHVWLSXODWHGRUGHUZKLFK through the Celotex Asbestos Settlement Trust." (J.A.II at
WKH GLVWULFW FRXUW JUDQWHG RQ 2FWREHU 6HH 'DQD ,QFRQQHFWLRQZLWKWKLVRUGHUWKHGLVWULFWFRXUWDOVR
&RUSY)LUHPDQ¶V)XQG,QV&RV1R :/ PDGH LW D UHTXLUHPHQW WKDW FODLPDQWV WR WKH 7UXVW VLJQ DQ
DW
WK &LU 'HF XQSXEOLVKHG SHU DFNQRZOHGJPHQWWKDWWKH\GRQRWUHFHLYHDQ\ULJKWVDJDLQVW
FXULDP &HORWH[DSSHDOHGWKHGLVWULFWFRXUW¶VRUGHUJUDQWLQJ 'DQD
'DQDLQMXQFWLYHUHOLHIDQGWKLV&RXUWDIILUPHG6HHLG
7KH GLVWULFW FRXUW JUDQWHG 'DQD¶V PRWLRQ IRU SHUPDQHQW
&HORWH[DOVRDSSHDOHGWKHGLVWULFWFRXUW¶VRUGHULQWKH/HH LQMXQFWLYHUHOLHILQSDUWXSRQWKHSUHPLVHWKDWWKLV&RXUWPD\
FDVH KRZHYHURQ2FWREHU &HORWH[ILOHGIRU&KDSWHU UHYHUVH WKH GLVWULFW FRXUW¶V JUDQW RI VXPPDU\ MXGJPHQW WR
EDQNUXSWF\UHRUJDQL]DWLRQLQWKH8QLWHG6WDWHV%DQNUXSWF\ 'DQDWKHUHE\³UHVWRULQJ´WKH7UXVW¶V'DQDULJKWVDQGEHFDXVH
&RXUWIRUWKH0LGGOH'LVWULFWRI)ORULGDDQGDVDUHVXOWWKH WKLV&RXUWPD\QRWXSKROGWKHILQGLQJVRIFRQWHPSWDJDLQVW
EDQNUXSWF\ FRXUW VWD\HG DOO OLWLJDWLRQ LQYROYLQJ &HORWH[ WKH7UXVWLQ$QGHUVRQWKHUHE\UHQGHULQJWKH LQMXQFWLRQ
&HORWH[¶VSODQRIUHRUJDQL]DWLRQZDVFRQILUPHGLQ DQG ZLWKRXW IRUFH +RZHYHU WKH GLVWULFW FRXUW DOVR IRXQG WKDW
WKH7UXVWZDVFUHDWHGDV&HORWH[¶VVXFFHVVRU7KHSODQRI HYHQLQWKHIDFHRILWVVXPPDU\MXGJPHQWRUGHULQIDYRURI
UHRUJDQL]DWLRQSURYLGHGWKDWWKHDVVHWVRI&HORWH[LQFOXGLQJ 'DQDEHLQJDIILUPHGWKHWKUHDWRISRWHQWLDOKDUPWR'DQDZDV
ZKDWHYHU ULJKWV DQG FODLPV &HORWH[ PD\ KDYH XQGHU WKH VLJQLILFDQWDQGUHDOHQRXJKIRUWKHLQMXQFWLRQWRLVVXH7KH
$JUHHPHQWDQGLWVLQGHPQLILFDWLRQSURYLVLRQZHUHWUDQVIHUUHG 7UXVWDUJXHVWKDWWKHVHUHDVRQVPD\QRWVHUYHWRVXSSRUWWKH
WRWKH7UXVW7KH7UXVWWKHUHDIWHUYROXQWDULO\GLVPLVVHGWKH LVVXDQFHRIWKHLQMXQFWLRQLQDVPXFKDVWKH\DUHEDVHGXSRQ
SHQGLQJ DSSHDO LQ /HH OHDYLQJ IRU DGMXGLFDWLRQ WKH VSHFXODWLRQ DQG QRW XSRQ WKH LPPHGLDWH WKUHDW RI LQMXU\
FRQVROLGDWHGFDVHVWKDWZHUHEHIRUHWKH1RUWKHUQ'LVWULFWRI UHTXLUHGIRUDQLQMXQFWLRQWRLVVXH7KH7UXVWDOVRDUJXHVDV
2KLR 7KH 7UXVW ZDV VXEVWLWXWHG IRU &HORWH[ LQ WKH LWGLGEHIRUHWKHGLVWULFWFRXUWWKDWE\LVVXLQJWKHLQMXQFWLRQ
FRQVROLGDWHGFDVHV WKH7UXVWLVXQDEOHWRFRPSO\ZLWKWKHSODQRIUHRUJDQL]DWLRQ
DVFRQILUPHGE\WKHEDQNUXSWF\FRXUWVXFKWKDWWKH7UXVWLV
7KH 7UXVW DQG 'DQD HDFK ILOHG PRWLRQV IRU VXPPDU\ QRZIDFHGZLWKEHLQJKHOGLQFRQWHPSW:HGLVDJUHHZLWKWKH
MXGJPHQWLQWKHFRQVROLGDWHGPDWWHU7KH7UXVWILOHGDPRWLRQ 7UXVW DQG KROG WKDW WKH GLVWULFW FRXUW SURSHUO\ LVVXHG WKH
IRUVXPPDU\ MXGJPHQWRQWKHEDVLVRIWKHLQGHPQLILFDWLRQ SHUPDQHQWLQMXQFWLRQ
SURYLVLRQLQWKH$JUHHPHQW DQG'DQDILOHGDFURVVPRWLRQIRU
VXPPDU\MXGJPHQWDVWRWKDWSURYLVLRQDVZHOODVPRWLRQVIRU 3HUKDSVWKHPRVWVLJQLILFDQWVLQJOHFRPSRQHQWLQWKH
MXGLFLDOGHFLVLRQZKHWKHUWRH[HUFLVHHTXLW\MXULVGLFWLRQ
'DQD&RUSRUDWLRQY&HORWH[ 1RV 1RV 'DQD&RUSRUDWLRQY&HORWH[
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contract construction. See Ford Motor Co. v. John L. Frazier VXPPDU\ MXGJPHQW RQ WKH EDVLV RI UHV MXGLFDWD HTXLWDEOH
& Sons Co., 196 N. E. 2d 335, 337 (Ohio Ct. App. 1964). GLVFKDUJHDQGUHOHDVHDQGODWHQRWLFH
4. S&K Comp’s $900,000 Note owed to Dana but 7KHGLVWULFWFRXUWGHQLHGWKH7UXVW¶VPRWLRQIRUVXPPDU\
Transferred to Philip Carey MXGJPHQWDQGJUDQWHG'DQD¶VPRWLRQIRUVXPPDU\MXGJPHQW
7KHFRXUWDGGHGLQLWVRUGHUWKDW³VXPPDU\MXGJPHQWVKDOOEH
The district court found that the parties’ treatment of an HQWHUHGLQIDYRURI'DQDRQWKHEDVLVWKDW3DQDFRQ¶VPHUJHU
S&K note owed to Dana but transferred to Philip Carey RI3KLOLS&DUH\RI1HZ-HUVH\LQWRLWVHOIPDWHULDOO\DOWHUHGWKH
without recourse against Dana also supported its decision and ULVNVWR'DQDDVDQLQGHPQLWRUWKHUHE\UHOLHYLQJ'DQDRIDQ\
cut against the Trust’s position. The district court reasoned REOLJDWLRQ WR LQGHPQLI\ 3KLOLS &DUH\ RU LWV VXFFHVVRUV LQ
that to read the indemnification provision as obligating Dana LQWHUHVWLQFOXGLQJ&HORWH[DQGWKH&HORWH[7UXVWXQGHUWKH
for all of S&K’s pre-closing obligations and liabilities, as the LQGHPQLILFDWLRQDJUHHPHQW´ -$DW ,QDIRRWQRWHWR
Trust contends, would conflict with the parties’ agreement for WKHRUGHUWKHGLVWULFWFRXUWDGGHGDVIROORZV
S&K to transfer its $900,000 note to Philip Carey without
recourse. We agree that it is unlikely that the parties would 1R GHFLVLRQ LV UHDFKHG ZLWK UHJDUG WR WKH RWKHU
not have treated the note in this fashion if Dana was to be held VXPPDU\ MXGJPHQW PRWLRQV DQG LVVXHV EHFDXVH WKH
liable for all of S&K’s liabilities under the Agreement. GHFLVLRQV LQ IDYRU RI 'DQD RQ WKH LVVXHV RI WKH
LQWHUSUHWDWLRQRIWKHLQGHPQLILFDWLRQDJUHHPHQWDQGWKH
In summary, the district court properly found that under HIIHFW RI 3KLOLS &DU\ RI 1HZ -HUVH\¶V PHUJHU LQWR
§ 6.1(c) of the Agreement, Dana’s obligation to indemnify did 3DQDFRQUHVROYHWRILQDOLW\WKHOLWLJDWLRQEHWZHHQ'DQD
not trigger until such time that Philip Carey was damnified. DQGWKH&HORWH[7UXVW7RHQWHUILQDOMXGJPHQWLQWKLV
Because three years after Philip Carey bought S&K’s stock FDVH D GHFLVLRQ DV WR WKH RWKHU LVVXHV LV WKHUHIRUH
from Dana, Philip Carey then called Panacon after merging XQQHFHVVDU\$VLPSRUWDQWO\WKHLVVXHVUDLVHGE\'DQD¶V
with Briggs merged with Celotex, S&K’s liabilities at the PRWLRQIRUHTXLWDEOHGLVFKDUJHGXHWRWKHIDLOXUHRIWKH
point when damnification occurred were Celotex’s own &HORWH[ 3ODQ RI 5HRUJDQL]DWLRQ WR DFNQRZOHGJH DQG
liabilities, thereby making the district court’s summary DFFRPPRGDWH'DQD¶VULJKWVDVDSXWDWLYHLQGHPQLWRUDUH
judgment dismissal of the matter in favor of Dana proper. FRPSOH[DQGQRYHO)XUWKHUPRUHWKRVHLVVXHVUHODWHDW
OHDVWLQSDUWWRWKHUHODWLRQVKLSEHWZHHQWKLV&RXUWDQG
II. Case 99-4493: Motion for Permanent Injunction WKH%DQNUXSWF\&RXUWZLWKLWVVSHFLDOL]HGMXULVGLFWLRQ,W
LV DSSURSULDWH DFFRUGLQJO\ WR UHIUDLQ IURP DGGUHVVLQJ
In South Central Power Company v. International WKRVHLVVXHVLQDQDGYLVRU\PDQQHU
Brotherhood of Electrical Workers, Local Union 2359, this
Court opined that "[a] district court’s decision to grant or -$DW ,Q&DVH1R WKH7UXVWQRZDSSHDOVWKH
deny a permanent injunction is reviewed under several GLVWULFWFRXUW¶VGHFLVLRQJUDQWLQJVXPPDU\MXGJPHQWWR'DQD
distinct standards. Factual findings are reviewed under the DQGGHQ\LQJVXPPDU\MXGJPHQWWRWKH7UXVW
clearly erroneous standard, legal conclusions are reviewed de
novo, and the scope of injunctive relief is reviewed for an )ROORZLQJWKHGLVWULFWFRXUW¶VHQWU\RIVXPPDU\MXGJPHQW
abuse of discretion." 186 F.3d 733, 737 (6th Cir. 1999) LQ'DQD¶VIDYRUWKHSDUWLHVUHTXHVWHGHQWU\RIILQDOMXGJPHQW
(citing Walters v. Reno, 145 F.3d 1032, 1047 (9th Cir. 1998)). SXUVXDQWWR)HG5&LY3 E 'DQDDOVRILOHGDPRWLRQ
'DQD&RUSRUDWLRQY&HORWH[ 1RV 1RV 'DQD&RUSRUDWLRQY&HORWH[
$VEHVWRV6HWWOHPHQW7UXVW $VEHVWRV6HWWOHPHQW7UXVW
IRUDSHUPDQHQWLQMXQFWLRQFODLPLQJWKDWZLWKRXWWKLVUHOLHI simply an indemnification provision. See, e.g., Wilson, 9
LW IHDUHG WKDW GLVSHUVDO RI ³'DQD ULJKWV´ WR WHQV LI QRW Ohio St. at 469; Midwest Specialities, Inc. 940 F. Supp. at
KXQGUHGV RI WKRXVDQGV RI FODLPDQWV E\ WKH 7UXVW ZRXOG 1168 ("Under Ohio law, . . . [t]he right to indemnity and/or
XOWLPDWHO\UHVXOWLQUHQHZHGHIIRUWVE\FODLPDQWVWROLWLJDWH contribution becomes complete and enforceable only upon
FODLPV XQGHU WKH LQGHPQLW\ SURYLVLRQ HOVHZKHUH WKDQ WKH payment by the claimant satisfying the whole of the
1RUWKHUQ'LVWULFWRI2KLR'DQDEHOLHYHGWKDWIUDJPHQWDWLRQ obligation.")
RIWKH7UXVW¶VXQLWDU\FODLPXQGHUWKHLQGHPQLW\DJUHHPHQW
PD\DOEHLWLQVRPHSUHVHQWO\XQIRUHVHHDEOHIRUPDQGIRUXP 2. Section 7.6 "Binding Effect, Benefits"
UHVXOWLQLWVEHLQJIRUFHGWROLWLJDWHPDQLIROGFDVHVLQPXOWLSOH
MXULVGLFWLRQV'DQDPDLQWDLQHGWKDWLIVXFKDQHYHQWZHUHWR The district court found that § 7.6 of the Agreement also
RFFXURQHYHQDVPDOOVFDOH'DQDZRXOGEHGLVDGYDQWDJHGE\ demonstrated the parties’ intent to limit Dana’s
WKH H[SHQVHV DQG XQFHUWDLQW\ RI GXSOLFDWLYH OLWLJDWLRQ DQG indemnification obligation. In § 7.6, the parties agreed that
SUHMXGLFHGE\WKHULVNRILQFRQVLVWHQWMXGJPHQWV neither S&K nor anyone else would benefit from the
agreement between Dana and Philip Carey:
,QUXOLQJRQ'DQD¶VPRWLRQIRUSHUPDQHQWLQMXQFWLYHUHOLHI
WKHGLVWULFWFRXUWEHJDQE\VHWWLQJIRUWKWKHSULQFLSDOLVVXHV [N]othing in this agreement express or implied is
LQYROYHG intended to confer on any person, other than the parties
hereto, any rights, remedies, agreements, understandings,
:KHWKHU WKH 7UXVW VKRXOG EH HQMRLQHG IURP obligations, or liabilities under or by reason of this
WUDQVIHUULQJ³'DQDULJKWV´SXUVXDQWWRWKHSURYLVLRQVRI Agreement.
WKH3ODQ DQG
(J.A. at 371-72.) The practical effect of this section is that it
7KHQDWXUHRIWKHQRWLFHWKDWVKRXOGEHJLYHQWR demonstrates that under the terms of the Agreement, S&K
FODLPDQWVDERXWWKLVFRXUW¶VSULRURUGHUVDQGGHFLVLRQV was not relieved of its obligations and liabilities for which it
ZKHUHE\DOOOLWLJDWLRQUHODWLQJWRWKHLQGHPQLW\SURYLVLRQ was not an indemnitee.
PD\EHEURXJKWRQO\LQWKLVFRXUWDQGVXPPDU\MXGJPHQW
KDV EHHQ HQWHUHG LQ 'DQD¶V IDYRU RQ WKH PHULWV RI WKH 3. Section 2.8 "Absence of Undisclosed Liabilities"
7UXVW¶VFODLPXQGHUWKHLQGHPQLW\SURYLVLRQ
In this section, Dana warranted that in accordance with
-$,, DW The district court then noted that Dana’s generally accepted accounting principles, S&K’s balance
fears originated "in the persistent desire of counsel for sheet made full and adequate provision for all obligations and
asbestos claimants to sue Dana in disparate courts of their liabilities, fixed or contingent, of that company, and that no
choice, rather than in a single court." The district court cited such obligations or liabilities in an aggregate amount greater
the Lee case which originated in Georgia and the suit that than $10,000 were not reflected or reserved against in the
balance sheet. Therefore, the effect of this section is to
allocate a category of S&K’s liabilities to Philip Carey and,
as found by the district court, interpreting the indemnification
:H
VKDOO UHIHU WR WKH MRLQW DSSHQGL[ VXEPLWWHG LQ FRQQHFWLRQ ZLWK
agreement provision as making Dana liable for all of S&K’s
liabilities would render § 2.8 surplusage, in violation of
&DVH 1R DV ³-$,,´ IRU HDVH RI UHIHUHQFH
'DQD&RUSRUDWLRQY&HORWH[ 1RV 1RV 'DQD&RUSRUDWLRQY&HORWH[
$VEHVWRV6HWWOHPHQW7UXVW $VEHVWRV6HWWOHPHQW7UXVW
This conclusion is supported by the plain language of § 6.1(c) Celotex filed in the Middle District of Florida against Dana as
as well as the other provisions of the contract. We are not examples of the type of split litigation that Dana feared.
persuaded otherwise by the Trust’s attempt to distinguish
between "loss" and "liability" for purposes of determining The district court also made note of the fact that Celotex
when the obligation to indemnify is triggered. did not seek leave to have its claim against Dana litigated on
the merits in the bankruptcy proceedings, but instead
1. Other Subsections of Section 6.1 facilitated the attempt of Anderson Memorial Hospital to seek
recovery against Dana on the indemnity provision through a
Subsection (a) and (b) of section 6.1 also support the lawsuit in South Carolina state court, in derogation of the
conclusion that subsection (c) is a simple indemnification 1987 injunction. The district court found that in order to
agreement and not an agreement to pay. For example, the accomplish its end of suing Dana in South Carolina state
language of subsections (a) and (b) reads that Dana agrees to court, Celotex assigned a portion of its claim against Dana to
"reimburse and indemnify" Philip Carey "against and in a putative class of asbestos property damage claimants. The
respect of," district court opined that the express purpose of that
assignment was to enable counsel for Anderson to pursue
(a) any loss, liability or damage to [Philip Carey] or Dana under the indemnity provisions of the Agreement in
[S&K], in excess of the reserve for bad debt loss, if any, South Carolina. The district court also expressly noted that
reflected in the Balance Sheet, resulting from the in response to the show cause motion filed by Dana against
noncollection of any receivable (other than receivables Anderson in the South Carolina suit, Anderson was found in
owing by [Philip Carey]) referred to in Section 2.2(b) contempt of the 1987 injunction. The district court also took
hereof; note of the fact that "the parties and lawyers in the Chapter 11
proceeding created the mechanism for claim splitting as
(b) any loss, liability or damage to [Philip Carey] or presently found in the plan . . . . [t]hereby [allowing]
[S&K] arising from any breach of any representation or Celotex’s unitary claim against Dana to be atomized into
warranty contained herein . . . . thousands of separate, free-standing claims assigned to
individual asbestos claimants." (J.A.II at 110.) The district
(J.A. at 371.) These two provisions, aside from expressly court expressed its concern that "[n]o similar provision
agreeing to indemnify S&K as well as Philip Carey, expressly applies under the plan to Celotex’s insurers. From the record
state the type of harm that triggers the duty to indemnify; presently before this court, it appears that no similar provision
namely, "loss, liability, or damage . . . for bad debt loss . . . has ever been included in other asbestos-related bankruptcy
reflected in the Balance Sheet," § (a), or "loss, liability, or reorganization plans." (J.A.II at 111.) The court opined:
damage . . . arising from any breach of any representation or
warranty," § (b), thus differentiating these subsections from No one suggests any other explanation for this aspect
(c) which does not provide for the nature of the harm that of the plan other than a desire to deny Dana the
must occur as precondition for indemnification. As noted protection of [the 1987] injunction and deprive it of a fair
above, and as found by the district court, the additional opportunity to litigate the merits of the indemnification
language in subsections (a) and (b) as opposed to subsection claim to finality in a single proceeding in a single court.
(c) indicates that the parties intended to limit the application I find that the motivating purpose of claim splitting
of subsection (c), and that under Ohio law, subsection (c) is among tens, if not hundreds of thousands of Celotex’s
'DQD&RUSRUDWLRQY&HORWH[ 1RV 1RV 'DQD&RUSRUDWLRQY&HORWH[
$VEHVWRV6HWWOHPHQW7UXVW $VEHVWRV6HWWOHPHQW7UXVW
claimants is to compel Dana to accede to the demand that accrual."); see also Midwest Specialities, Inc. v. Crown Indus.
it settle the Trust’s claim for indemnity under the S&K Prods. Co., 940 F. Supp. 1160, 1168 (N.D. Ohio 1996)
stock purchase agreement. ("Under Ohio law, . . . [t]he right to indemnity and/or
contribution becomes complete and enforceable only upon
(J.A.II at 111.) payment by the claimant satisfying the whole of the
obligation.")
The district court thereby granted Dana’s motion for
injunctive relief as well as the parties request for Rule 54(b) An Ohio bankruptcy case also makes clear the distinction
certification of its order granting Dana summary judgment. between a contract to indemnify and a contract to pay, noting
It is from the district court’s order granting Dana permanent that the obligation to pay under the former is not triggered
injunctive relief that the Trust now appeals in Case No. 99- until the indemnitee is damnified:
4493.
If an agreement is to simply indemnify, and nothing
DISCUSSION more, then damage must be shown before the indemnitee
is entitled to recover. On the other hand, however, if
I. Case No. 99-4494: Motions for Summary Judgment there is an agreement to stand for a debt or to pay a sum
certain, then it is no defense that the indemnitee has
7KLV&RXUWUHYLHZVDJUDQWRIVXPPDU\MXGJPHQWGHQRYR suffered no loss.
'H3LHURY&LW\RI0DFHGRQLD)G WK&LU
6XPPDU\ MXGJPHQW LV DSSURSULDWH ZKHUH ³WKH In re Highland Group, Inc., 136 B.R. 475, 478 (Bankr. N.D.
SOHDGLQJV GHSRVLWLRQV DQVZHUV WR LQWHUURJDWRULHV DQG Ohio 1992). Highland involved a contract between a retailer
DGPLVVLRQVRQILOHWRJHWKHUZLWKWKHDIILGDYLWVLIDQ\VKRZ and one of its suppliers, and provided that the supplier "will
WKDWWKHUHLVQRJHQXLQHLVVXHDVWRDQ\PDWHULDOIDFWDQGWKDW indemnify and hold harmless J.C. Penney and J.C. Penney’s
WKHPRYLQJSDUW\LVHQWLWOHGWRDMXGJPHQWDVDPDWWHURIODZ´ agents and employees from and against any and all loss,
)(' 5 &,9 3 F liability or damage." Id. at 478-79. The bankruptcy court
found that because the language of the agreement did not
The district court held that the indemnification provision as contain any language to suggest that it stood for a debt or to
provided in the Agreement between Dana and Philip Carey pay a sum certain, the contract by its terms was one for
limited Dana’s obligation to instances in which Philip Carey indemnity. Id. at 479.
was damnified, either by an unsuccessful defense of a claim
based on a tort by S&K, or by payment of such a claim. The Here, the contract provides that Dana would "reimburse and
district court based its holding "on the plain meaning of indemnify" Philip Carey; therefore, as found by the district
§ 6.1(c) [the indemnification provision], whereby Dana court, the contract was one for indemnification and, under
agreed to ‘reimburse and indemnify’ Philip Carey for the Ohio law, Dana’s obligation to pay was not triggered until
‘obligations and liabilities’ of Smith & Kanzler Company." Philip Carey was damnified. In other words, Dana could only
(J.A. at 140.) The district court also based its holding on be successfully sued under the indemnity agreement for some
other provisions in the Agreement which were more loss or obligation imposed on Philip Carey for the tortious
expansive than § 6.1(c) in that they benefitted Dana, Philip conduct of S&K i.e., when Philip Carey was damnified as
Carey, and S&K alike. However, with regard to § 6.1(c), the a result of S&K’s conduct. See Wilson, 9 Ohio St. at 469.
'DQD&RUSRUDWLRQY&HORWH[ 1RV 1RV 'DQD&RUSRUDWLRQY&HORWH[
$VEHVWRV6HWWOHPHQW7UXVW $VEHVWRV6HWWOHPHQW7UXVW
the just claims against said firm J. M. Tooker & Co., then district court explained, the parties expressly excluded S&K
this obligation is to be void and of no effect; otherwise to as an indemnitee as evidenced by the final language of
remain in full force and virtue. § 6.1(c) as opposed to prior drafts of this section.
Wilson, 9 Ohio St. at 469. The Supreme Court of Ohio The district court rejected the Trust’s reading of the
looked at this provision and opined that Agreement that being that pursuant to § 6.1(c) Dana agreed
to be obligated for all of S&K’s pre-closing obligations and
[t]he phrase ‘settle up and liquidate,’ in the connection liabilities because this reading conflicted with the parties’
of this bond, taken in connection with the accompanying agreement to "a) transfer Smith & Kanzler Company’s
recital, is equivalent to the word pay and imposes the $900,000 note to Philip Carey and b) allocate any undisclosed
obligation to pay all the debts of the late firm of J. M. obligations and liabilities of Philip Carey which need not
Tooker & Co., and is readily distinguishable from an have been disclosed in accordance with generally accepted
obligation to indemnify against a liability to pay. And accounting principles." (J.A. at 140.) The district court
the doctrine seems to be now well established, by a further opined that it was required to read § 6.1(c) in
current of decisions both in this country and in England, accordance with Ohio’s common law of indemnification
that if there be a contract to indemnify simply, and which makes clear that an agreement to indemnify differs
nothing more, then damage must be shown before the from a commitment to pay. (J.A. at 140) (citing Wilson v.
party indemnified is entitled to recover; but if there be an Stillwell, 9 Ohio St. 468, 470 (1869).) Finally, in rendering
affirmative contract to do a certain act, or to pay a certain its decision, the district court was persuaded by Dana’s
sum or sums of money, then it is no defense to say that argument that as a result of the Agreement, Philip Carey got
the plaintiff has not been damnified; and that the measure exactly what Dana had to sell -- a wholly owned subsidiary
of damages in such case is the amount agreed to be paid, whose liabilities could not, as a result of shareholder
or the proper expense of doing the act agreed to be done. immunity, be imposed on the parent company, and Dana
could not therefore now be required to have greater liability
Id. at 469-70 (emphasis added). In other words, the Supreme than what it had when it owned S&K. We agree with the
Court of Ohio held that inclusion of the phrase "settle up and district court’s reasoning and conclusion.
liquidate" took this agreement out of the bounds of the rule
that a general agreement to indemnify requires that the We begin with the plain language of § 6.1(c) as it appears
indemnitee be damnified before triggering the indemnitor’s in final form in the Agreement:
obligation to pay. Thus, Wilson supports the proposition that
damages must be shown before the party indemnified is 6. Indemnification
entitled to recover under a contract to indemnify which does
not specify otherwise. This principle of Ohio has been 6.1 Indemnification. The Shareholder [Dana]
repeatedly embraced since Wilson was decided many years agrees to reimburse and indemnify Purchaser [Philip
ago. See Firemen’s Ins. Co. of Newark, N.J. v. Antol, 471 Carey] against and in respect of:
N. E. 2d 831, 835 (Ohio App. 3d 1984) (Whiteside, J.,
concurring) ("Unlike a subrogated claim, a claim for ***
indemnity does not arise until payment is made in the absence
of an express contractual provision providing for an earlier
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(c) all obligations and liabilities of the Subject Accordingly, having found that Dana did not agree to
Corporation [S&K] whether accrued, fixed, contingent or indemnify S&K, but instead agreed to indemnify Philip Carey
otherwise, aggregating in excess of $10,000, arising on for any liability that it may have suffered as a result of S&K’s
or before November 30, 1968 to the extent not reflected tortious conduct, the issue becomes what triggered Dana’s
or reserved against in the Balance Sheet; . . . . obligation to indemnify. In other words, did Dana become
obligated to indemnify for S&K’s tortious conduct at the time
(J.A. at 370-71.) Accordingly, as found by the district court, the agreement was made, or did the obligation to indemnify
the very terms of § 6.1(c), provide that Dana agreed to arise at some later dater date when damnification occurred.
reimburse and indemnify Philip Carey for "all obligations and The district court found that under Ohio law, Philip Carey had
liabilities of the Subject Corporation [S&K];" Dana did not, to suffer a damnification before Dana was required to
however, agree to indemnify S&K for its liabilities as indemnify Philip Carey for S&K’s tortious conduct.
evidenced by a prior draft which provided as much, but was
rejected. Specifically, the prior draft provided that Dana The Trust argues that the district court erred in this regard
would "indemnify and hold Purchaser [Philip Carey] and the because Dana agreed to indemnify Philip Carey for all
Subject Corporation [S&K] harmless against and in respect "liabilities" that it may suffer as a result of S&K’s conduct,
of . . . ." (J.A. at 594-96 (emphasis added).) Therefore, by and not for all "losses," thereby rendering the triggering point
the language of the final draft as well as the what appears to of Dana’s obligation at the time the liabilities accrued, and
be the intent of the parties, Dana agreed to indemnify Philip not at the point when Philip Carey actually suffered a loss.
Carey alone for any liabilities that it incurred as a result of The Trust maintains that there are two types of
S&K being found to be a tortfeasor. See Skivolocki v. E. Ohio indemnification agreements one which covers losses
Gas Co., 313 N. E. 2d 374, 376 (Ohio 1974) (noting that the thereby requiring the indemnitee to suffer an out-of-pocket
court must look to the language of the agreement to interpret loss before the indemnitor is required to pay, and one which
the parties’ intent when interpreting a contract dispute). The covers liabilities thereby requiring the indemnitee to protect
Trust has offered nothing that has persuaded us to conclude against liabilities when they accrue and that because the
otherwise. Agreement provided that Dana would indemnify Philip Carey
for any of S&K’s liabilities, Philip Carey did not have to
The Trust disagrees with this reading of the Agreement and actually suffer a loss before Dana’s obligation as an
maintains that it is not necessary to look at extrinsic evidence indemnitor was triggered. The Trust relies upon Wilson v.
of prior drafts because the Agreement is plain on its face. We Stilwell, 9 Ohio St. 467 (1869) in support of its position. The
are not persuaded by this argument, however, where even Trust further contends that the district court’s interpretation
without the extrinsic evidence of a prior draft, a logical of Wilson was erroneous. We disagree with the Trust in all
reading of the language of the Agreement cannot be respects.
interpreted to mean that Dana agreed to indemnify S&K for
its actions as a tortfeasor. See Lovewell v. Physicians Ins. In Wilson, the provision in question provided:
Co., 679 N. E. 2d 1119, 1121 (Ohio 1997) (stating the "the
construction of contracts is a matter of law to be resolved by The condition of this obligation is such that whereas
the court"); Carroll Weir Funeral Home, Inc. v. Miller, 207 the above-bounden John M. Tooker has agreed to pay all
N. E. 2d 747, 749 (Ohio 1965) (noting that contract terms are the liabilities of the late firm of J. M. Tooker & Co. If
to be given their usual and ordinary meaning). the said John M. Tooker shall settle up and liquidate all