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DCV Holdings3/24/2005
owledge to include only that of Mr. Halter and Mr. James after making inquiry of the DCV management team.
At the next meeting, the parties and their attorneys (Mr. Wells and Mr. Ellin) went through each of the representations and warranties. They hashed out terms for specific topics, including Compliance with Law (§ 3.13); Real Estate (§ 3.6); Default in Contracts (§ 3.11); Litigation (§ 3.12); Permits (§ 3.14); Product Liability and Defective Products (§ 3.15); Employment Benefit Plans (§ 3.16); and Employment (§ 3.20). The evidence shows that the sellers were clear about not taking on liability for what they did not know. There is no evidence that buyers believed that the general provisions of § 3.9 would override an obligation that had specifically qualified in another representation. A second draft was submitted to sellers which included most of the sellers' proposed knowledge qualifiers and the sellers' definition of knowledge. Section 3.13 included an explicit knowledge qualifier:
Compliance with Law. To the knowledge of Sellers, the business is not being and has not been conducted, and none of the Companies has been, or is in violation of any applicable Law, except for violations which in the aggregate would not have a Material Adverse Effect.
The evidence is clear that the parties agreed that sellers would be liable for the companies' unlawful conduct only if Halter and James had had knowledge of it. Plaintiff now argues that buyers agreed to qualify the sellers' liability under 3.13 only because § 3.9 rendered sellers liable for any undisclosed liabilities regardless of sellers' knowledge. Sikorski testified to this effect at trial. However, nothing in the record and none of the testimony indicates that the parties agreed that § 3.9 trumped all other representations. If the Winward team pinned its hopes on a contract interpretation that was not conveyed to the sellers, such interpretation cannot stand. A contract will be construed against a party who maintains its own interpretation of an agreement and fails to inform the other party of that interpretation.
In fact, if it did, the hard-won knowledge qualifier contained in § 3.13 is rendered meaningless. The section warranting full disclosure is also conditioned on Halter and James' knowledge:
3.25. Full Disclosure. To Sellers' Knowledge, the representations and warranties of Sellers in this Agreement do not contain any untrue statement of a material fact or fail to state any material fact necessary to make the statements contained therein not materially false or misleading in light of the circumstances in which made.
Thus a question of law arises as to the interplay of § 3.9, § 3.13 and § 3.25.
Every contract must be interpreted to give effect to the intention of the parties. In construing intention where there is both a general and a specific provision that pertains to the same subject, courts ordinarily qualify the meaning of the general provision according to the meaning of the more specific provision.
While the word "liabilities" as used in § 3.9 may have various meanings, the language of § 3.13 clearly states that the companies were not being operated in violation of any laws, to the knowledge of the sellers. Section 3.25 reiterates that under the circumstances in which a particular disclaimer was made, the sellers did not knowingly misstate or omit any material fact. The conditions on this warranty, as to both knowledge and circumstance, confirm the sellers' unwillingness to guarantee anything outside their limited purview. As a matter of law, the Court finds that § 3.13 governs the question of whether Defendants are liable to indemnify Plaintiff f
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