The Indiana Court of Appeals recently reversed a trial court’s decision to grant judgment in favor of a purchaser of a business’s assets after that party brought suit against the business shareholders. The purchaser alleged it was entitled to collect certain assets as part of that sale, while the business filed counterclaims for conversion of personal property and disputed an award of attorney fees. In Whiskey Barrel Planters Co. v. American Gardenworks, Inc., 966 N.E.2d 711 (Ind. Ct. App. 2012), the business (“Whiskey Barrel”) manufactured and shipped planters and garden accessories from its Indiana facility and the sole shareholders were husband and wife.
American Gardenworks (“AGW”) agreed to purchase assets from Whiskey Barrel pursuant to an agreement that AGW drafted when Whiskey Barrel’s financing began to dry up. The agreement stated that Whiskey Barrel was to sell “substantially all” of the machinery, equipment, inventory, goodwill, assets, real estate, paraphernalia, and trade name of the business and the business real estate” to AGW. Among the assets specifically listed for purchase in the agreement were Whiskey Barrel’s accounts receivable.
While the agreement was for “substantially all” of Whiskey Barrel’s assets, its balance sheet revealed that it made loans to the two sole shareholders; these were included as “Other Current Assets,” rather than accounts receivable. AGW alleged it was entitled under the agreement to collect these loans as assets, as well as season football tickets purchased by the shareholders with Whiskey Barrel funds. In its counterclaim Whiskey Barrel claimed AGW was not entitled to these assets and AGW had taken personal property belonging to the shareholders by refusing to allow them on the business property to recover those belongings.
With regard to the shareholder loans, the Court held they were not part of the asset sale, emphasizing that “substantially all” meant “most but not all of the assets.” The court also noted that “accounts receivable” was not an ambiguous term within the agreement and the balance sheet was unequivocal evidence that accounts receivable did not include the shareholder loans. The court reasoned that, as the drafter of the agreement, if AGW desired to purchase these assets, it should have listed them with the same level of specificity as it did with the other items. AGW was not entitled to the football tickets for the same reasons.
The shareholders could regain their property from AGW because they did not abandon it and AGW hired the shareholders to work at the business following the sale’s completion. There was no evidence in the record which prohibited the shareholders from keeping their personal property on the business property AGW acquired. Also at issue were attorney fees. While the trial court awarded attorney fees to AGW, counsel for AGW did not submit sufficient information to the court to determine an accurate amount to which AGW was entitled per an Indiana statute, and the Court of Appeals remanded it back to the trial court for more precise calculations.
Jeremy Fetty is a partner in the law firm of Parr Richey Frandsen Patterson Kruse with offices in Lebanon and Indianapolis. He often advises businesses and utilities (for profit, non-profit and cooperative) on organizational, human resources, and transactional matters and drafts and reviews commercial contracts.
The statements contained herein are matters of opinion and general information only and are not to be considered legal advice and should not be construed to form an attorney-client relationship. If you have any questions regarding this article, please contact an attorney.