Opinion ID: 770393
Heading Depth: 2
Heading Rank: 1

Heading: Prepaid Insurance Premiums

Text: 7 Therm Acquisition claims that it purchased the unpaid insurance premiums under the plain terms of the Asset Purchase Agreement. Therm points to the broad language of the sales clause, arguing that it is unambiguous evidence that the prepaid insurance premiums were part of the purchase. Article I, section 1.1 of the Agreement states, in pertinent part 8 [Family Safety] shall sell and transfer to [Therm Acquisition] . . . all of [Family Safety]'s rights, title and interest in and to all of the assets and properties of [Family Safety] employed or held in connection with the Business, except for the Excluded Assets (as defined below) 9 J.A., vol. 1 at 24 (emphasis added). Therm argues that this section could not be clearer. [A]ll of the assets means what it says: all of the assets. The prepaid insurance premiums were, says Therm, an asset of Family Safety, and thus fell within the scope of § 1.1 of the Asset Purchase Agreement. Therm finds even better evidence that the prepaid insurance premiums were part of the purchase by looking to the definition of Excluded Assets in § 1.2 of the Agreement, which provides: 10 the following assets, rights and properties shall be specifically excluded fromthe transactions contemplated by this Agreement (the Excluded Assets): 11 . . . 12 (d) all prepaid charges, sums and fees other than prepaid insurance premiums. . . . 13 J.A., vol. 1 at 25 (emphasis added). Thus, prepaid insurance premiums are quite clearly excepted from the Excluded Assets, and the import of this is that prepaid insurance premiums were part of the purchase, concludes Therm. Based on the above, Therm argues that the contract on this point is unambiguous and that not only did the district court err by granting summary judgment in favor of Family Safety, but the district court also erred by not granting summary judgment in favor of Therm. 14 Were the Asset Purchase Agreement the only pertinent document, Therm Acquisition would have a very strong argument. But, as Family Safety points out, there are numerous schedules attached to and referenced in the Asset Purchase Agreement, and we must take these documents into account when construing the Agreement. See In re Phelps v. Dan Tucker Auto Sales, Inc. 718 So.2d 33, 36 (Ala. 1998) (Other writings, or matters contained therein, which are referred to in a written contract may be regarded as incorporated by the reference as a part of the contract and[,] therefore, may properly be considered in the construction of the contract.) (quotation omitted). See also ANCO TV Cable Co., Inc. v. Vista Communications Ltd. Partnership I, 631 So.2d 860 (Ala. 1993); K & C Development Corp. v. AmSouth Bank, N.A., 597 So.2d 671, 674 (Ala. 1992). The prepaid insurance premiums are not listed on any of the schedules of assets, and Family Safety argues that their absence indicates that they were not meant to be transferred as part of the asset sale. As the district court correctly noted, the reference to prepaid premiums as an exception to the excluded assets matched with the failure to specify them on any of the asset schedules renders the Asset Purchase Agreement ambiguous under Alabama law. See, e.g., Voyager Life Ins. Co., Inc. v. Whitson, 703 So.2d 944, 948 (Ala. 1997) (When any aspect of a contract is capable of more than one meaning, it is ambiguous.). Therefore, the district court properly denied Therm's motion for summary judgment. We are, however, less convinced of the propriety of granting summary judgment in favor of Family Safety. 15 Because the contract is ambiguous, we may properly consider extrinsic evidence in determining the intent of the parties and the scope of the Asset Purchase Agreement. See Rime Shatten Dev. Co. v. Birmingham Cable Communications, Inc., 569 So.2d 332, 334 -35 (Ala. 1990). In deciding that Therm was not entitled to the prepaid premiums as a matter of law, the district court relied on two pieces of extrinsic evidence. First, a couple of days before the closing, Vista 2000's general counsel--who was negotiating the asset sale on behalf of Family Safety--asked Therm's primary negotiator whether Therm intended to use the prepaid insurance policies. Therm replied that it did not but would be using its own, less expensive, insurance instead. Second, the district court noted that because Family Safety had fully financed the purchase of the insurance policies and the financier held a 100 percent security interest in the policies, the prepaid policies had zero net value. Based on these two pieces of evidence, together with the fact that the prepaid premiums were not listed as an asset on any schedule, the district court concluded that the unambiguous intent of the parties was not to transfer the prepaid insurance premiums to Therm. This is certainly one plausible conclusion that could be drawn from the evidence, but we do not believe that it reaches the level of certitude required for summary judgment. 16 Therm's statement to Vista 2000's general counsel that it was not going to use the policies can support the inference that Therm did not want the policies as part ofthe asset purchase. But, this is not the only supportable inference that can be drawn from Therm's statement. Drawing the inference in favor of Therm, as we are required to do in considering summary judgment, see Matsushita, 475 U.S. at 587, this statement equally supports Therm's intent to receive the insurance, cancel it, and collect the refund of the prepaid premiums. The fact that there was a security interest on the policies--which gave the insurance policies a zero net value in the hands of Family Safety--does not undermine this inference because Family Safety did not disclose the security interest to Therm (as required by the Asset Purchase Agreement). The district court took this lack of disclosure as additional evidence that the prepaid insurance was not intended as an Asset to be transferred. The lack of disclosure might illuminate Family Safety's lack of intent, but it does little to clarify Therm's expectations or the scope of the Asset Purchase Agreement. 17 Further, the district court dismissed the strongest piece of evidence supporting the inclusion of the prepaid insurance premiums as merely a vague reference. Although it may be a trifle convoluted, the Asset Purchase Agreement's reference to prepaid insurance premiums as an exception to the excluded assets is far from vague. It is instead strong evidence that Therm and Family Safety intended to include prepaid insurance premiums among the assets to be transferred to Therm. Given the clear reference to prepaid insurance premiums (which is rendered ambiguous by the absence of prepaid premiums from any schedule of assets) and the conflicting inferences that can be drawn from the extrinsic evidence, we do not believe that this issue is so one-sided that one party must prevail as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). See also Whitetail Dev. Corp. v. Nickelson, 689 So.2d 865, 867 (Ala. Civ. App. 1996) (Ambiguity in a contract precludes the trial court from entering a summary judgment.). Therefore, we reverse the district court's decision to grant summary judgment with respect to the prepaid insurance premiums. 2