Opinion ID: 588206
Heading Depth: 2
Heading Rank: 2

Heading: The Property Warranty Claim

Text: 18 Hendricks claims Callahan breached the Property Warranty by failing to provide clear title to the Aberdeen leasehold. In conjunction with this warranty claim, he contends Callahan breached the Litigation Indemnity Agreement by failing to indemnify Dealers Supply from any effect of the lien litigation. The district court granted Callahan's motion for summary judgment on this claim, and we review that decision using the same standard as the district court. We must decide whether there is no genuine issue of material fact and the nonmoving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). We view the evidence in the light most favorable to the nonmoving party and give the nonmoving party the benefit of all reasonable inferences to be drawn from the evidence. Moore v. Webster, 932 F.2d 1229, 1230-31 (8th Cir.1991). 19 The district court held that [i]n light of the full disclosure of the litigation in the Purchase Agreement and Cunningham's 5 fuull knowledge of the lien prior to closing, Callahan's failure to disclose the lien in the Financial Statements did not breach the Property Warranty in the Purchase Agreement. On appeal, Hendricks concedes that he was aware of the lien and that he did not rely on its non-existence in purchasing the stock of Callahan Steel. Rather, Hendricks claims he relied on Callahan's promises to provide clear title and to indemnify Hendricks from any losses that may result from the existence of the lien. 20 Essentially, Hendricks argues that Callahan breached the Property Warranty and Litigation Indemnity Agreement by refusing to provide clear title to the Aberdeen leasehold when Hendricks demanded it. Those provisions of the Purchase Agreement, however, do not impose such an obligation upon Callahan. In the Property Warranty, Callahan promised to provide clear title to all its properties, except for ... liens and encumbrances and other matters reflected in the Balance Sheet. Although the lien on the Aberdeen leasehold was not listed in the balance sheet, Hendricks concedes he was aware of the lien and therefore the lien falls within this exception to the Property Warranty. In the Litigation Indemnity Agreement, Callahan agreed to hold [Hendricks] harmless in and for all liabilities that may inure to [Callahan Steel] related to the [Aberdeen litigation]. Hendricks argues that the inability to sell the Aberdeen leasehold to API (or more specifically, the fact that API refused to purchase the leasehold subject to the lien) is a liability ... related to the [Aberdeen litigation]. We disagree. 21 When Hendricks purchased the stock of Callahan Steel, he knew there was a lien on the Aberdeen leasehold and agreed to allow Callahan to proceed with the litigation concerning that lien. Callahan promised to hold Hendricks harmless for any liabilities related to the litigation. The Property Warranty did not give Hendricks the right to demand clear title to the Aberdeen leasehold at any time. Hendricks claims that such a construction of the Purchase Agreement is unreasonable because Hendricks must be able to sell the assets he purchased. Under our construction, however, he was free to sell exactly what he purchased--the Aberdeen leasehold, subject to the lien and with Callahan's promise to hold him harmless for any liabilities resulting from the litigation. The fact that API was unwilling to purchase what Hendricks had purchased does not mean that Callahan breached the Property Warranty. 22 Hendricks also argues that under Financial Timing Publications v. Compugraphic Corp., 893 F.2d 936 (8th Cir.1990), an issue of material fact exists concerning reliance and summary judgment is inappropriate. Financial Timing, a fraud case under Minnesota law, does not support Hendricks' position. In Financial Timing, we held that summary judgment was inappropriate because an issue of fact remained concerning whether the purchaser had relied on various statements by the seller. 893 F.2d at 942-44. Here, however, we hold that Callahan did not promise to provide clear title to the Aberdeen leasehold on demand, and therefore Callahan did not breach any warranty. We affirm the district court's grant of summary judgment on this claim.