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Eagle Industries11/25/1997
Upon appeal from the Court of Chancery. REVERSED and REMANDED.
In this appeal we focus on the correctness of the grant of summary judgment in a contract dispute over the interpretation of an indemnification provision. In granting summary judgment, the Court of Chancery found the contract provision to be unambiguous. We disagree and hold that the indemnification provision is ambiguous, thus raising factual issues requiring consideration of extrinsic evidence to determine the intended meaning of the provision in light of the expectations of the contracting parties. We reverse the judgment of the Court of Chancery and remand the case for proceedings consistent with this opinion.
Facts
Eagle Industries, Inc. ("Eagle") and Homecare Acquisition, Inc. ("Buyer") entered into a Stock Purchase Agreement (the "Agreement") on August t3, 1990. Pursuant to the Agreement, Eagle and its wholly-owned subsidiary, DeVilbiss Holding Company, Inc. ("Seller"), transferred substantially all of the stock of DeVilbiss Health Care, Inc. ("DHC") to Buyer on October 5, 1990 (the "Closing Date"). After the Closing Date, Buyer merged into DHC, and DHC succeeded to Buyer's interests and liabilities, including those set forth in the Agreement. DHC then became a wholly-owned subsidiary of Homecare Holdings, Inc. ("Holdings").
Article 10.8 of the Agreement provided that Eagle was responsible for fulfilling Seller's indemnification obligations under the Agreement. At issue in this case is the indemnification provision for product liability under Article 10.1 of the Agreement, which reads as follows:
(b) In addition to and without limiting any other rights or remedies of Holdings and Buyer, Seller shall indemnify Holdings and Buyer and its subsidiaries (including the Companies), and their respective officers, directors, agents and employees, and hold them harmless at all times from and after the Closing Date against and in respect of any and all Damages (i) resulting from any suit, action, arbitration or legal, administrative, governmental or other proceeding or investigation, foreign or domestic, relating to any product manufactured, purchased or sold by Parent, Seller, the Companies, or any affiliates or predecessors of Parent, Seller or the Companies prior to the Closing (including such actions or potential actions set forth in Schedule 3.18 hereto), alleging that such product was defective or was negligently or improperly designed, manufactured, packaged or marketed, without regard to when such product is sold or when such Damages accrue or arise provided, that such indemnification shall be limited to Damages arising from such suits, actions, arbitrations or other proceedings the alleged basis for which arose or occurred on or prior to the Closing Date); ....
(emphasis added). The emphasized language was added to Article 10.1 after negotiations between the parties concerning Eagle's indemnification of Buyer for product liability claims.
Buyer's initial offer dated July 9, 1990 proposed that Eagle indemnify Buyer for product liability claims involving goods manufactured or purchased by Eagle prior to the Closing Date. This proposal was reflected in the indemnification provision contained in the first draft of the Agreement. According to an affidavit submitted by Eagle's then-counsel, Bruce C. Strohm, Eagle objected to a manufacture or purchase date trigger to its indemnification obligation. At a meeting held on July 20, 1990, Strohm informed Buyer that Eagle's product liability insurance coverage was limited to suits based on alleged occurrences prior to the Closing Date. Accordingly, Eagle was not willing to indemnify Buyer for claims based on post-closin
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