Court Opinion

ID: 2951984
Source: CourtListenerOpinion
Date Created: 2015-09-16 21:57:57.297482+00
Date Added: 2024-06-11T11:41:46.687915
License: Public Domain

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

                                     NO. 03-09-00265-CV

Dial Thru International Corporation n/k/a Rapid Link; and Canmax Retail Systems, Inc.,
                                      Appellants

                                                v.

                         Affiliated Computer Services, Inc., Appellee

     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 53RD JUDICIAL DISTRICT
      NO. D-1-GV-05-003670, HONORABLE SCOTT H. JENKINS, JUDGE PRESIDING

                           MEMORANDUM OPINION

               Appellant Dial Thru International Corporation (“Dial Thru”), acting as assignee

of appellant Canmax Retail Systems, Inc. (“Canmax”), filed suit against appellee Affiliated

Computer Services, Inc. (“ACS”) for breach of contract. Dial Thru alleges that ACS is responsible

for certain tax liabilities of Canmax pursuant to an agreement under which ACS purchased certain

assets of Canmax. ACS filed a motion for summary judgment contesting such responsibility as a

matter of law. The district court granted ACS’s motion and entered a take-nothing judgment against

Dial Thru. We affirm.

Background

               ACS entered into an asset purchase agreement (the “Agreement”) with Canmax and

its parent company Canmax Inc.—the predecessor in interest to Dial Thru—on September 3, 1998.

Under the Agreement, Canmax agreed to sell “substantially all” of its assets to ACS.
               One of the assets ACS purchased was the right to service an existing contract between

Canmax and Southland Corporation. In 2000, the Texas Comptroller of Public Accounts conducted

a tax audit of Canmax for the period of February 1, 1995, to March 31, 1999. The Comptroller

concluded that Canmax owed taxes to the State relating to the Southland contract in the amount of

$545,304.28, as well as interest and penalties totaling $877,333.79.

               The State filed suit against Dial Thru on August 5, 2005, seeking recovery of

the delinquent taxes, interest, and penalties. Dial Thru, in turn, filed a third party action against

ACS, alleging that ACS was liable for the tax delinquency in accordance with the terms of the

Agreement. ACS sought summary judgment on Dial Thru’s third party claim. On April 13, 2009,

the district court granted ACS’s motion for summary judgment and entered a take-nothing judgment

in favor of ACS.1 Dial Thru appeals.

Analysis

               We review summary judgments de novo. Provident Life & Accident Ins. Co. v. Knott,

128 S.W.3d 211, 215 (Tex. 2003). Under the standard applicable to a traditional motion for

summary judgment, the motion should be granted only when the movant establishes that there

is no genuine issue as to any material fact and that it is entitled to judgment as a matter of law. See

       1
           ACS had filed a counterclaim against both Dial Thru and Canmax for indemnity for
any sums found to be owed by ACS to the Comptroller with respect to the audit of Canmax,
and Dial Thru had also filed a third party action against Southland. On May 22, 2008, the State
nonsuited its causes of action against Dial Thru; on February 26, 2009, Dial Thru nonsuited its
third party claim against Southland, apparently due to a settlement agreement; and on April 13, 2009,
ACS nonsuited its counterclaim in anticipation of the district court’s granting its motion
for summary judgment. Thus, the district court’s order on ACS’s motion for summary judgment
disposed of all remaining claims and became final.

                                                  2
Tex. R. Civ. P. 166a(c); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985). In

reviewing a motion for summary judgment, we accept as true all evidence favorable to the

non-movant, making every reasonable inference and resolving all doubts in the non-movant’s favor.

See Nixon, 690 S.W.2d at 548-49.

               ACS based its motion for summary judgment on the argument that the tax liability

resulting from the Comptroller’s audit was not included in the liabilities assumed by ACS under the

Agreement. Regarding the assumption of liabilities, the Agreement provides as follows:

              1.3    Assumed Liabilities. At Closing, [ACS] shall deliver to [Canmax] an
       Assumption Agreement . . . pursuant to which [ACS] shall assume, pay, perform and
       discharge (when and as they become due) the following liabilities (collectively, the
       “Assumed Liabilities”):

                      (a)     all liabilities and obligations of [Canmax] that accrue, become
               owing or arise on or after the Closing Date under the Assumed Contracts;

               ....

               1.4      Liabilities Not Being Assumed. [ACS] shall not assume or be
       responsible for any of the following liabilities or obligations of [Canmax]
       (collectively, the “Excluded Liabilities”):

               ....

                       (c)     except to the extent included as an Assumed Liability (and
               explicitly identified) pursuant to Section 1.3(d), any liability or obligation of
               [Canmax] for federal, state, local or foreign taxes associated with the Assets
               or the Business for any period prior to the Closing Date; [and]

               ....

                       (j)   all other liabilities, whether known, unknown, contingent or
               fixed of [Canmax] which are not specifically listed in Section 1.3 above.

                                                  3
ACS relies on section 1.4(c) of the Agreement. It is undisputed that the tax liability at issue here

is not included or identified in section 1.3(d) of the Agreement, is associated with the transferred

assets, and is for a period prior to the Agreement’s closing date. Therefore, in accordance with

section 1.4 of the Agreement, ACS did not assume and is not responsible for the tax liability.2

               Dial Thru, however, relies on section 1.3(a) of the Agreement. While section 1.4 sets

out the “Excluded Liabilities,” section 1.3 sets out the “Assumed Liabilities” for which ACS is

responsible to “pay, perform and discharge.” Section 1.3(a) includes in the assumed liabilities those

that “accrue, become owing or arise on or after the Closing Date under the Assumed Contracts.”

Dial Thru contends that the tax liability is an “Assumed Liability” in accordance with section 1.3(a),

and that if it is also an “Excluded Liability” in accordance with section 1.4(c), the Agreement is

ambiguous and summary judgment is improper.

               However, even if Dial Thru is correct that the tax liability became owing under

the assumed contracts after the closing date and, therefore, falls within the scope of section 1.3(a),

we find that the only reasonable interpretation of the Agreement is that the terms of section 1.4

supersede the terms of section 1.3. “If the written instrument is so worded that it can be given a

certain or definite legal meaning or interpretation, then it is not ambiguous and the court will

construe the contract as a matter of law.” Coker v. Coker, 650 S.W.2d 391, 393-94 (Tex. 1983). It

       2
           As an alternative basis for summary judgment, ACS argued that Dial Thru could not sue
for indemnification under the Agreement because Dial Thru was neither the corporate successor of
Canmax nor an assignee of Canmax’s rights. Because we affirm the district court’s judgment based
on the tax liability not being ACS’s assumed liability under the Agreement, we need not address
such alternative basis. See Pickett v. Texas Mut. Ins. Co., 239 S.W.3d 826, 840 (Tex. App.—Austin
2007, no pet.) (“We must affirm the summary judgment if any of the grounds presented to the
district court are meritorious.”).

                                                  4
is noteworthy that section 1.4(c) specifically excepts the assumed liabilities set out in subsection (d)

of section 1.3. By specifically excepting only subsection (d), section 1.4(c) indicates that the other

subsections of section 1.3—including subsection (a)—are not excepted from section 1.4(c)’s

coverage. If section 1.3 were instead intended to supersede section 1.4, such language in

section 1.4(c) would be incomplete and unnecessary. It is also noteworthy that subsection (j) of

section 1.4 identifies as excluded liabilities “all other liabilities . . . of [Canmax] which are not

specifically listed in Section 1.3.” If section 1.3 superseded section 1.4, subsection (j) would make

subsections (a) through (i) of section 1.4 superfluous. In contrast, by construing the Agreement such

that the exclusions in section 1.4 supersede the inclusions in section 1.3, all the provisions of

section 1.4 have meaning. Liabilities that might otherwise be assumed liabilities in accordance with

section 1.3 are instead excluded liabilities to the extent they are specifically included in

subsections 1.4(a) through (i), and any liability not included within section 1.3’s assumed liabilities

are excluded liabilities regardless whether they are covered by subsections 1.4(a) through (i).3

                Dial Thru also argues that ACS waived its argument that it is not responsible

for the tax liability under the Agreement. First, Dial Thru refers to the Comptroller’s assessment of

taxes against ACS for the same transactions and audit period at issue here, and ACS’s settlement of

such claim for $275,000. The elements of waiver include (1) an existing right, benefit, or advantage

held by a party, (2) the party’s actual knowledge of its existence, and (3) the party’s actual intent to

        3
          Dial Thru also refers to section 6.2 of the Agreement, which requires ACS to indemnify
Canmax for ACS’s failure to discharge any assumed liability. However, because we interpret the
Agreement, as a matter of law, such that ACS did not assume any liabilities included in section 1.4,
section 6.2 does not affect our analysis.

                                                   5
relinquish the right, or intentional conduct inconsistent with the right. Ulico Cas. Co. v. Allied Pilots

Ass’n, 262 S.W.3d 773, 778 (Tex. 2008). ACS contends that its settlement with the Comptroller

is not inconsistent with its construction of the Agreement. ACS alleges, and Dial Thru does not

dispute, that the Comptroller’s claim against ACS was based on ACS being the purchaser of

Canmax’s assets irrespective of the terms of the Agreement. See Tex. Tax Code Ann. § 111.020(a),

(b) (West 2008). There is no evidence that the Comptroller’s claim against ACS was in any way

based on the Agreement’s assumption-of-liability provisions. Therefore, even if by settling with the

Comptroller ACS has waived any argument that it is not liable to the Comptroller under the tax code,

ACS has not thereby waived its argument that it is not liable under the terms of the Agreement.

                Next, Dial Thru argues waiver based on the assertion that the tax liability is not

an assumed liability under the Agreement being an affirmative defense and ACS’s making only

a general denial in its pleadings. See Tex. R. Civ. P. 94; Shoemake v. Fogel, Ltd., 826 S.W.2d
933, 937 (Tex. 1992) (“Generally, an affirmative defense is waived if it is not pleaded.”). However,

as the plaintiff asserting a breach of contract claim, Dial Thru has the burden to prove that

ACS breached the Agreement. See Foster v. Centrex Capital Corp., 80 S.W.3d 140, 143-44

(Tex. App.—Austin 2002, pet. denied). To satisfy its burden, Dial Thru had to show that the

tax liability was among ACS’s assumed liabilities under the Agreement. Dial Thru cites no authority

for the proposition that an assertion that an asset purchase agreement excludes the liability at issue

among those assumed by the buyer constitutes an affirmative defense. See Carbona v. CH Med.,

Inc., 266 S.W.3d 675, 679-81 (Tex. App.—Dallas 2008, no pet.). Instead, Dial Thru relies on cases

in which a defendant sought to avoid its responsibility under an agreement based on the agreement’s

                                                   6
limitation of liability provision, see, e.g., Continental Holdings, Ltd. v. Leahy, 132 S.W.3d 471, 475

(Tex. App.—Eastland 2003, no pet.), or based on the other party’s negligence, see, e.g., Delta Eng’g

Corp. v. Warren Petroleum, Inc., 668 S.W.2d 770, 772-73 (Tex. App.—Houston [1st Dist.] 1984,

writ ref’d n.r.e.). Unlike those cases, ACS’s assertion that the tax liability is excluded from its

assumed liabilities tends to directly rebut Dial Thru’s factual assertions. See Gorman v. Life Ins. Co.,

811 S.W.2d 542, 546 (Tex. 1991) (“Pleading an affirmative defense . . . seeks to establish an

independent reason why the plaintiff should not recover.”). ACS was not, therefore, required to

affirmatively plead its defense.

                We affirm the judgment of the district court.

                                                __________________________________________

                                                G. Alan Waldrop, Justice

Before Chief Justice Jones, Justices Waldrop and Henson

Affirmed

Filed: August 3, 2010

                                                   7