Court Opinion

ID: 4569408
Source: CourtListenerOpinion
Date Created: 2020-09-24 18:10:22.826533+00
Date Added: 2024-06-11T08:46:50.131650
License: Public Domain

J-A10010-20

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

    DANIELLE FISHER                 :          IN THE SUPERIOR COURT OF
                                    :               PENNSYLVANIA
              v.                    :
                                    :
    A.O. SMITH HARVESTORE           :
    PRODUCTS, INC.; A.O. SMITH      :
    CORPORATION; A.O. SMITH         :
    (HARVESTORE PRODUCTS);          :
    HARVESTORE SYSTEMS T/D/B/A      :
    HARVESTORE; COLUMBIA TEC TANK; :
    CST INDUSTRIES, INC.; AND PENN  :
    JERSEY PRODUCTS, INC.,          :
                                    :
    APPEAL OF: CST INDUSTRIES, INC. :          No. 2182 EDA 2019

            Appeal from the Judgment Entered September 20, 2019
     In the Court of Common Pleas of Bucks County Civil Division at No(s):
                          Case #: 2011-03913-0481

BEFORE:      BOWES, J., SHOGAN, J., and PELLEGRINI, J.*

MEMORANDUM BY BOWES, J.:                         Filed: September 24, 2020

        CST Industries, Inc. (“CST”) appeals from judgment entered upon the

non-jury verdict in favor of A.O. Smith Corporation (“A.O. Smith”) on its

contractual indemnification claim against CST. CST also challenges the trial

court’s post-trial award of attorney fees to A.O. Smith. We affirm.

        The facts relevant to this appeal are as follows. Harvestore Products,

Inc. (“Harvestore”) was a subsidiary of A.O. Smith that manufactured

products including roller mills, which are machines that grind grain. In 1996,

Harvestore sold certain assets to an entity not relevant to this appeal;

____________________________________________

*   Retired Senior Judge assigned to the Superior Court.
J-A10010-20

however, Harvestore retained, among other liabilities, those for the

aforementioned roller mills.    A.O. Smith dissolved Harvestore the following

year, along with another subsidiary, Peabody TecTank (“Peabody”).            A.O.

Smith then transferred the retained assets and liabilities of Harvestore and

Peabody to its Engineered Storage Products Company division (“ESPC”). The

“transfer” was solely an accounting construct, as the ESPC was not a separate

legal entity from A.O. Smith.

     In December 2000, A.O. Smith and CST entered into an Asset Purchase

Agreement (“APA”) concerning certain assets and liabilities of the ESPC

division. The APA contained the following provisions.

             [A.O. Smith], through its division, [ESPC] (the “Division”),
     is engaged in the business of designing, engineering,
     manufacturing, marketing and erecting liquid and dry bulk storage
     tanks. [CST] desires to purchase substantially all of the operating
     assets of the Division and to assume certain of the operating
     liabilities as specified herein, and [A.O. Smith] desires to sell the
     Division as an ongoing business and delegate such liabilities to
     [CST], on the terms and subject to the conditions set forth in this
     Agreement. The term “Division” is sometimes used herein as
     though it were a separate entity; when so used the term means
     that [A.O. Smith] is the entity referred to but only insofar as the
     activities, assets or liabilities relate to the Division and are
     accounted for as part of the Division’s activities. The term
     “Business” means the business of the Division as conducted as of
     the date of this Agreement.

           In reliance upon the representations and warranties made
     herein and in consideration of the mutual covenants and
     agreements herein contained, [CST] and [A.O. Smith] hereby
     agree as follows:

                           ARTICLE I
                  PURCHASE AND SALE OF ASSETS

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            1.1 Purchase and Sale.            Subject to the terms and
     conditions contained herein, at the Closing, [A.O. Smith] shall sell,
     convey, transfer, assign and deliver to [CST], and [CST] shall
     purchase and accept from [A.O. Smith], all of [A.O. Smith]’s right,
     title and interest in and to all of the assets used primarily or held
     for use primarily in the Division or the Business, and all tangible
     assets located at the Facilities . . . except the Excluded Assets and
     Nontransferred Assets . . . (collectively, the “Purchased Assets”).

           1.2    Definitions: Purchased Assets.

           1.2.1 Definitions. For purposes of this Agreement, the
     following terms have the meanings set forth below:

           ....

           “Assumed Liabilities” means only the following liabilities of
     [A.O. Smith] relating to the Division, the Business or the
     Purchased Assets as of the Closing Date . . . subject to Section
     1.5    [regarding    excluded   liabilities] and    Article      XI
     [“Indemnification”]: . . .

                  (C) all liabilities in the nature of product liability,
           including, without limitation, any liability for claims made for
           injury to person, damage to property or other damage
           arising from, caused by or arising out of any product
           designed, manufactured, assembled, installed, sold, leased
           or licensed by the Division, prior to the Closing date[.]

           ....

            1.4 Assumed Liabilities. Provided that the transactions
     herein contemplated are consummated, and subject to Section 1.5
     and Article XI, [CST] will assume and pay, perform and discharge
     when due, and will indemnify [A.O. Smith] against, the Assumed
     Liabilities and no others, except as provided herein.

           1.5 Excluded Liabilities. [CST] shall not be responsible for
     any liability or obligation of [A.O. Smith] that is owed to or at the
     behest of a third party other than the Assumed Liabilities nor for
     any liability or obligation if and to the extent [A.O. Smith] has an
     indemnification obligation with respect thereto under Article XI
     (the “Excluded Liabilities”). Without limitation, [CST] shall not be
     responsible for, and the Excluded Liabilities shall include:

                                     -3-
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            ....

              (o) any liabilities of [A.O. Smith] arising out of any
      litigation matters identified in Exhibit 2.13, other than those
      matters referenced in Item 2 of Exhibit 2.13. [Exhibit 2.13 is
      entitled “Litigation.” Among other things, Item 2 lists litigation
      respecting product liability and references Exhibit 2.22. Exhibit
      2.22, “Products Liability,” includes the case of William Smith v.
      A.O. Smith Harvestore Products, Inc., a New York products
      liability action involving a roller mill.]

            ....

                             ARTICLE XI
                          INDEMNIFICATION

            ....

      11.2 Indemnification by [CST]. Subject to [certain limitations
      and qualifications], [CST] shall indemnify [A.O. Smith], and its
      officers, directors, employees, shareholders, agents and
      representatives against and hold them harmless from any
      Damages[, including reasonable attorney fees,] incurred or
      sustained by [A.O. Smith] or any of its shareholders, officers or
      directors as a result of

            (i) the breach of any term, provision, covenant or
            agreement contained in this Agreement by [CST];

            ....

            (iii) [CST]’s failure to pay, perform and discharge, when
            due, any of the Assumed Liabilities[.]

APA (Joint Trial Exhibit JX086) at 1-2, 9-10, 37-38 (some formatting modified

for ease of reading).

      Approximately one decade after the APA was executed, Danielle Fisher

initiated the instant lawsuit against A.O. Smith contending that she had been

injured by a Harvestore roller mill. A.O. Smith sought indemnification for Ms.

                                    -4-
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Fisher’s claim from CST based upon the APA. CST declined. The trial court

entered summary judgment in favor of A.O. Smith, holding that the language

of the APA indicated that CST had assumed liability for personal injuries

caused by Harvestore roller mills. Thereafter, CST’s insurers opted to settle

with Ms. Fisher, and the trial court approved the global settlement of Ms.

Fisher’s personal injury claims. A.O. Smith then filed a petition for attorney

fees, which the trial court denied.

      Multiple appeals followed. Ultimately, this Court, sitting en banc, ruled

that the trial court erred in granting summary judgment to A.O. Smith.

Vacating the grant of summary judgment, this Court did not reach the issue

of whether A.O. Smith was entitled to attorney fees under the APA.                 This

Court dismissed the related appeals as moot.        See Fisher v. A.O. Smith

Harvestore Products, Inc., 145 A.3d 738, 750 (Pa.Super. 2016) (en banc).

      On   remand,    the   trial   court   scheduled   a   trial   to   resolve   the

indemnification issues. Prior to trial, CST filed for bankruptcy in the United

States Bankruptcy Court for the District of Delaware.               As a result, the

indemnification proceedings were subject to an automatic stay.                In the

bankruptcy court, CST’s insurers, Illinois Union Insurance Company and its

affiliates and their successors (collectively identifying themselves as “Chubb”),

moved for relief from the stay. Specifically, Chubb argued that because CST’s

insurers had paid the company’s portion of the settlement to Ms. Fisher, the

indemnification claim was “essentially an action between two non-Debtors.”

                                       -5-
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Chubb’s Motion for Relief from the Automatic Stay, 10/24/17, at 4. 1 As the

funds had already been paid and any recoupment from A.O. Smith would be

realized by the insurers rather than CST, resolution of the indemnification

claim would not have any impact on the bankruptcy estate. Id.   The

bankruptcy court granted Chubb’s motion, lifting the stay and directing that,

should CST receive the return of any funds from A.O. Smith as a result of

Chubb’s litigation of the indemnification claim, CST was to immediately remit

any such amount to the insurers. Id. at Bankruptcy Court Order, 12/4/17, at

¶¶ 1-3.2

       With the stay lifted, the indemnification claim proceeded to a bench trial.

On May 7, 2019, the trial court issued findings of fact and conclusions of law

and entered a verdict in favor of A.O. Smith.       Both parties filed post-trial

motions: CST raised multiple claims of trial court error in construing the APA

and in evaluating the evidence while A.O. Smith sought the entry of judgment

against CST and Chubb for the attorney fees and costs that it incurred

subsequent to the approval of CST’s settlement with Ms. Fisher.          The trial

court denied CST’s motion, but granted A.O. Smith’s motion providing that

CST and Chubb were “jointly and severally liable to A.O. Smith for all

____________________________________________

1Chubb’s motion is in the certified record in A.O. Smith’s Motion for Post-Trial
Relief, 5/29/19, at Exhibit D.

2The order lifting the bankruptcy stay is in the certified record in A.O. Smith’s
Motion for Post-Trial Relief, 5/29/19, at Exhibit E.

                                           -6-
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reasonable attorneys’ fees and expenses that A.O. Smith has incurred in this

matter subsequent to February 8, 2013[.]”          Order (A.O. Smith’s post-trial

motion), 6/27/19, at 2.

      CST filed a timely notice of appeal, and both CST and the trial court

complied with Pa.R.A.P. 1925. The parties presented their positions at video

argument, and this appeal is ripe for our disposition.           CST presents the

following questions for our consideration:

      1.    Did the Court of Common Pleas err by failing to apply the
            law of the case as directed by the Superior Court in its en
            banc opinion?

            A.    Did the court again misapply Illinois law in holding
                  CST had to prove the non-inclusion of roller mill
                  liabilities in the APA?

            B.    Did the trial court misconstrue “Division” despite this
                  Court’s direction and the evidence at trial?

      2.    When the trial court said that CST needed to establish that
            roller mill liabilities were “Excluded Liabilities,” did it err not
            only in shifting the burden but in failing to consider the
            evidence that the liabilities were in fact expressly excluded?

      3.    Given that the trial court had already found that CST did not
            breach the indemnification obligation of the APA since it paid
            Ms. Fisher when due, and given that A.O. Smith abandoned
            any request for fees pre-trial and at trial, did the trial court
            err in awarding (A) A.O. Smith attorneys’ fees not pleaded
            until its post-trial motion; and (B) “jointly and severally”
            against CST and a non-party on the never-established
            ground that the non-party was a “successor” to CST?

CST’s brief at 3-4.

      We begin with a review of the applicable legal principles.

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        Our standard of review in non-jury cases is limited to: a
        determination of whether the findings of the trial court are
        supported by competent evidence and whether the trial court
        committed error in the application of law. Findings of the trial
        judge in a non-jury case must be given the same weight and effect
        on appeal as a verdict of a jury and will not be disturbed on appeal
        absent error of law or abuse of discretion. When this Court
        reviews the findings of the trial judge, the evidence is viewed in
        the light most favorable to the victorious party below and all
        evidence and proper inferences favorable to that party must be
        taken as true and all unfavorable inferences rejected.

Landis v. Wilt, 222 A.3d 28, 34 (Pa.Super. 2019) (quotation marks omitted).

        The APA provides that it is governed by Illinois law. See APA at 46.3

Under Illinois law, “[i]ndemnification agreements are . . . subject to the

ordinary rules of contract interpretation.” Henry v. Waller, 975 N.E.2d 93,

97 (Ill. App. Ct. 2012).

        The primary goal of contract interpretation is to give effect to the
        intent of the parties. In determining the intent of the parties, a
        court must consider the contract document as a whole and not
        focus on isolated portions of the document. If the language of a
        contract is clear and unambiguous, the intent of the parties must
        be determined solely from the language of the contract document
        itself, which should be given its plain and ordinary meaning, and
        the contract should be enforced as written. However, if the
        contract language is ambiguous, the meaning of the contract
        language must be ascertained through a consideration of extrinsic
        evidence.

        The determination of whether a contract is ambiguous is a
        question of law for a court to decide. . . . If a court determines
        that a contract is ambiguous, extrinsic evidence may be
        considered by the trier of fact in determining the intent of the
        parties.

____________________________________________

3   The APA is in the certified record as Joint Trial Exhibit JX086.

                                           -8-
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Richard W. McCarthy Tr. Dated September 2, 2004 v. Illinois Cas. Co.,

946 N.E.2d 895, 903 (Ill. App. Ct. 2011) (cleaned up). Specifically, “the court

should admit parol evidence to explain ambiguities in a written document

presented as a contract.” CFC Inv., L.L.C. v. McLean, 900 N.E.2d 716, 723

(Ill. App. Ct. 2008). “Evidence as to [the] intent of parties to an ambiguous

agreement . . . may be drawn from either contemporaneous or subsequent

acts or conduct, looking to the substance and not the form of the transaction.”

Matter of Estate of Dorfman, 486 N.E.2d 310, 314 (Ill. App. Ct. 1985).

      Concomitantly, we note that “indemnity contracts are to be strictly

construed, and any ambiguity in the agreement is to be construed most

strongly against the indemnitee.” Blackshare v. Banfield, 857 N.E.2d 743,

746 (Ill. App. Ct. 2006).    “While the indemnity provision must be strictly

construed, each case also depends upon the language and facts of that

particular case.” 933 Van Buren Condo. Ass’n v. W. Van Buren, LLC, 61
N.E.3d 929, 941 (Ill. App. Ct. 2016) (cleaned up).

      With these principles in mind, we turn to the claims of error raised by

CST. In its first claim, CST contends that the trial court failed to apply the law

of the case upon remand from this Court’s en banc decision. Specifically, CST

represents that this Court’s prior decision included rulings that (1) the APA’s

definition of assumed liabilities was not sufficient to cover future roller mill

liabilities; (2) the APA does not support the conclusion that the identification

of an existing roller mill case in Exhibit 2.22 made it an assumed liability; and

                                      -9-
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(3) the APA simply does not set forth an expression of intent for CST to assume

roller mill liabilities. See CST’s brief at 34-35 (citing Fisher, supra at 20-

22). Applying to these alleged holdings the requirement of Illinois law that

agreements to indemnify be clear and explicit, CST maintains that the trial

court was obligated to conclude that no indemnification could be ordered in

this case. Id. at 37-38. CST further argues that, to the extent that extrinsic

evidence was admissible to establish the parties’ intent, the trial court ignored

some of it and overly relied upon self-serving testimony of A.O. Smith’s

representative in charge of negotiating the APA, Steve Rettler, whose

testimony allegedly contradicted the express terms of the APA. Id. at 44.

       We find no merit in CST’s arguments. First, the law of the case doctrine

provides, in relevant part, that “upon remand for further proceedings, a trial

court may not alter the resolution of a legal question previously decided by

the appellate court in the matter[.]” Mariner Chestnut Partners, L.P. v.

Lenfest, 152 A.3d 265, 282 (Pa.Super. 2016).4 “To determine whether the

law of the case doctrine applies, a court must examine the rulings at issue in

the context of the procedural posture of the case.” Id. at 282-83.

       Critically, CST’s arguments misconstrue this Court’s holding in Fisher,

supra. We did not, as CTS suggests, hold that the APA was insufficiently clear

____________________________________________

4 We agree with CST that the applicability of the law-of-the-case doctrine to
the rulings of the Pennsylvania courts adjudicating this case is a question of
Pennsylvania law. See CST’s brief at 33 (invoking Pennsylvania law).

                                          - 10 -
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to justify finding the existence of an indemnification obligation under Illinois

law. Rather, we held that the issue was not so clear and free from doubt as

to permit it to be decided at summary judgment. The limited nature of our

holding could not have been more plainly expressed:

      The trial court’s decision rested on the APA’s plain language. In
      vacating the trial court’s order, we conclude only that the
      APA’s plain language does not justify entry of summary
      judgment in [A.O.] Smith’s favor. If, under the circumstances
      of this case, any extrinsic evidence is admissible and relevant, its
      import will depend on findings of fact. Any such findings must
      come from the trial court in the first instance.
Id. at 748 n.10 (citations omitted, emphasis added). Since this Court ruled

that the trial court erred in granting A.O. Smith judgment as a matter of law

because an issue of fact—the intent of the parties—precluded summary

judgment, the trial court would have violated the law of the case had it not

held a full trial for the finder of fact to resolve the issue.

      That the trial court reached the same conclusion in its verdict on remand

is not an indication that it discarded this Court’s rulings.     On the contrary,

this Court acknowledged that the language of the APA does “not foreclose the

possibility that CST assumed liabilities unrelated to the bulk storage tank

Business,” and that it “arguably supports a conclusion that CST agreed to

discharge certain liabilities not within the contractual definition of Assumed

Liabilities.” Fisher, supra at 748 & n.11. The trial court’s conclusion that

the extrinsic evidence supported A.O. Smith’s position as to the parties’ intent

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does not contradict any prior holding of this Court, and therefore does not

violate the law of the case doctrine.

      Nor do we discern any merit in CST’s argument that the trial court

ignored evidence or Illinois law. First, CST’s view of Illinois law appears to be

that if there is any ambiguity in an indemnification agreement, there can be

no indemnification obligation. In other words, it contends that Illinois law only

permits the enforcement of unambiguous indemnification contracts. However,

as our recitation of Illinois law above reveals, indemnification agreements are

subject to the same rules of construction as any other contract. Namely, such

instruments are to be construed in light of the language used and the factual

circumstances engendering their execution, with ambiguities resolved by

using extrinsic evidence to determine the parties’ intent. See, e.g., 933 Van

Buren Condo. Ass’n, supra at 941. CST offers no authority to support the

position that there can be no indemnification obligation that is not clear from

the four corners of the contract.

      As for the allegation that the trial court ignored evidence, from our

review of the trial court’s findings of fact, conclusions of law, and Pa.R.A.P.

1925(a) opinion, we see no indication that the trial court refused to consider

relevant evidence. In making its determination, the trial court expressly relied

upon the testimony of CST’s owner and president William “Don” Wagner and

his assistant Ronald Stier, as well as that of Mr. Rettler.     See Trial Court

Opinion, 11/13/19, at 8. The trial court found Mr. Rettler credible in explaining

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that the purpose of using the separate terms “Division” and “Business” in the

APA was to distinguish between: (1) the complete assets and liabilities of the

ESPC accounted for on its books, which would include liabilities of no-longer-

operating Harvestore and Peabody (“Division”); and (2) the business that

ESPC was actively conducting at the time of the agreement (“Business”).5 See

Findings of Fact, 5/7/19, at 4.

       When negotiating the liabilities that were transferred under the APA,

A.O. Smith attempted to maximize the scope of transfer, while CST sought to

narrow the scope as much as possible. Id. at 4-5. During this process, CST

had management, attorneys, and accountants review ESPC’s books, including

“financial statements, balance sheets, historical litigation and pending claims,

product liability loss runs, product failures, and historical warranty credits.”
Id. at 6.    Among the documents reviewed by CST were those related to

warranty credits and personal injury claims flowing from Harvestore legacy

products,6 as well as those arising from Peabody legacy liabilities. Id. at 7-8.

____________________________________________

5 CST argues that the distinction between Division and Business being
temporal (“with Division being ‘former’ and Business being ‘current’”) does not
make sense in viewing the APA as a whole, because “there are present-tense
descriptions attributed to the Division throughout the APA.” CST’s brief at 44.
CST misunderstands the definitions accepted by the trial court. The Division
does not refer solely to liabilities for past conduct, but rather encompasses
the current Business plus liabilities for former conduct.

6 Among these were the 1994 William Smith roller mill case in New York,
another roller mill claim by Colin Usry in 1996, a closed personal injury claim
regarding a Harvestore belt feeder.

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As such, CST was aware that the Division had exposure to liability from

Peabody and Harvestore products, including Harverstore’s Aquastore product

line, belt feeders, and roller mills. Id. at 8.

      The parties went back and forth on drafts of the definition of “Assumed

Liabilities,” ultimately agreeing upon one which included “all liabilities in the

nature of product liability, including, without limitation,” liability for claims for

damages arising out of various aspects of the products and services of the

Division. Id. at 5.   CST specifically negotiated to have all Peabody liabilities,

and some Harvestore liabilities such as the belt feeder liability, enumerated

among the liabilities that were expressly excluded from the assumed liabilities.

However, while Mr. Wagner acknowledged that CST had information about the

Division’s roller mill liabilities, it did not include those among the excluded

product liabilities. Mr. Wagner simply “did not consider the roller mill liabilities

to be a ‘significant issue.’” Id. at 9. This is corroborated by the fact that the

William Smith roller mill case was actually excluded from the list of excluded

liabilities, leaving it within the realm of assumed product liabilities. See Trial

Court Opinion, 11/13/19, at 7-8.

      CST’s argument concerning the trial court’s treatment of the trial

evidence fails to appreciate that this Court’s review of the factual findings in

the instant appeal is far different that the review we conducted in Fisher.

There, this Court applied the same standard as the trial court in viewing the

record in the light most favorable to CST and examined whether judgment as

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a matter of law in favor of A.O. Smith was clear and free from doubt.         See

Fisher, supra at 741. Here, by contrast, our standard of review gives great

deference to the trial court’s factual determinations, and we must view the

evidence in the light most favorable to A.O. Smith as the verdict winner. See

Landis, supra at 34. The trial court, as fact finder, was free to accept some,

all, or none of the evidence. See Williams v. Taylor, 188 A.3d 447, 450

(Pa.Super. 2018). This Court will not second-guess credibility determinations

that are supported by the record or reweigh the evidence to CST’s liking. Id.

      The above recitation of the trial court’s analysis of the evidence does

not indicate that it refused to consider any of the testimony or exhibits offered

at trial.   Rather, the trial court concluded that the language of the APA,

augmented by the extrinsic evidence of the course of negotiations and the

difference between the terms Division and Business, established that the

parties’ intent was to include the ESPC’s product liabilities for Harvestore roller

mills in the liabilities assumed by CST. Therefore, because we discern no error

of law and the above-detailed review confirms that the trial court’s factual

findings are supported by competent evidence, CST’s first issue lacks merit.

      CST’s next issue is that the trial court improperly shifted the burden of

proof at trial.    See CST’s brief at 3.       CST maintains that instead of

acknowledging that A.O. Smith had the burden to show that CST intended to

assume liability for the roller mills, the trial court “presumed that roller mill

liabilities were included unless CST could prove it expressly excluded them.”

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Id. at 47. CST argues that, in so doing, the trial court acted “contrary to

Illinois law, the testimony at trial, and CST’s (non-existent) burden.” Id.

      CST again seeks to have this Court rule in its favor based upon snippets

of trial testimony that support its position on the factual question of the

parties’ intent. As we have already explained, that is not our role in reviewing

a non-jury verdict.     See Williams, supra at 450.           The trial court, after

considering all the evidence, concluded that the parties intended to include

roller mill liabilities among the assumed liabilities. We have no basis to disturb

that finding.

      Specifically, the court adjudged that, in defining “Assumed Liabilities”

relating to the product liability in reference to not merely the Business but also

to the Division, the parties intended to include within that definition not only

those liabilities related to the ESPC’s current products, but also those

associated with Harvestore and Peabody legacy products.            This conclusion is

in harmony with the language of the APA, which provides that “Assumed

Liabilities” included “all liabilities in the nature of product liability” except those

included among the “Excluded Liabilities.” APA at 2. Therefore, the trial court

did not shift the burden of proof to CST. Rather, it merely applied the express

language of the APA. The trial court did not commit legal error, but instead

enforced the contract as written after utilizing extrinsic evidence to determine

the parties’ intent as to the ambiguous Business/Division distinction. No relief

is due on CST’s second claim.

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      In its third and final issue, CST challenges the trial court’s award of

attorney fees to A.O. Smith. CST notes that, prior to remand, the trial court

ruled that A.O. Smith was not entitled to attorney fees under the terms of the

APA because CST complied with its indemnification obligation by settling the

claims with Ms. Fisher. CST claims that the trial court erred in reversing its

prior decision on this point.     Additionally, CST argues that A.O. Smith

abandoned its request for fees at the trial following this Court’s remand. See

CST’s brief at 4, 53-54. Moreover, CST contends that A.O. Smith waived any

right to damages for CST’s failure to indemnify under the APA when A.O. Smith

agreed that CST could settle Ms. Fisher’s claim but allowed CST to reserve the

right to appeal the trial court’s summary judgment order. Id. at 54. Finally,

CST argues that Chubb was never joined as a party to this action, and there

is no proof that Chubb is CST’s successor, meaning that Chubb has been

denied a full and fair opportunity to contest the judgment entered against it.
Id. at 55-57.

      A.O. Smith counters that CST was on notice before it settled Ms. Fisher’s

claim that A.O. Smith would be seeking attorney fees pursuant to the

indemnification provisions of the APA, and that it would seek to recover fees

that it would incur when CST appealed the summary judgment ruling. See

A.O. Smith’s brief at 56. Since this Court vacated that ruling and re-opened

the question of A.O. Smith’s entitlement to indemnification, A.O. Smith posits

that the fee claim was not ripe to be reasserted until the trial court issued its

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findings of the fact regarding CST’s breach of the APA and entered a verdict

in A.O. Smith’s favor. Id. at 58-59. A.O. Smith further asserts that CST’s

argument concerning A.O. Smith’s agreement to an appeal following the

settlement is baseless, as “A.O. Smith has consistently maintained that CST’s

decision to pursue litigation to force A.O. Smith to pay for the settlement that

CST negotiated with Ms. Fisher would result in damages in the form of

attorney’s fees that are recoverable by A.O. Smith pursuant to the APA.” Id.

at 60. Finally, A.O. Smith insists that Chubb was properly included as a payor

of the attorney fee damages because Chubb obtained leave from the

bankruptcy court to litigate CST’s indemnification claim by declaring that it

was “subrogated to the right of CST to pursue” return of the funds it paid to

Ms. Fisher. Id. at 61. A.O. Smith argues that, since Chubb took all of the

benefits of CST’s rights when it pursued CST’s claim in subrogation, Chubb

also exposed itself to all liabilities CST faced through the litigation. Id. at 63-

64.

      The trial court’s opinion on this issue is succinct, if not meager.        It

indicates merely that because it found that CST was required to indemnify

A.O. Smith, CST breached the APA by not doing so initially, and “[t]he costs

stemming from this breach are thus recoverable by A.O. Smith under the

APA.” Trial Court Opinion, 11/13/19, at 9. The court also states that the

Chubb entities “are successors in interest to CST,” citing as authority for this

proposition its order granting A.O. Smith’s post-trial motion. Id. The cited

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order contains no explanation for Chubb’s successor status or reference to

evidence thereof. However, the order references A.O. Smith’s motion, which

does include such evidentiary support. See A.O. Smith’s Motion for Post-Trial

Relief, 5/29/19, at Exhibit D (Chubb’s Motion for Relief from the Automatic

Stay, 10/24/17), and Exhibit E (Bankruptcy Court Order, 12/4/17).

      Upon thorough review of all the pertinent filings, we glean no basis to

disturb the trial court’s order. First, the APA provides that CST shall indemnify

A.O. Smith for damages it incurs, including reasonable attorney fees, as a

result of CST’s failure to “pay, perform and discharge, when due, any of the

Assumed Liabilities[.]” APA at 37-38. Such provisions are permissible under

Illinois law. See, e.g., Downs v. Rosenthal Collins Grp., LLC, 895 N.E.2d
1057, 1059 (Ill. App. Ct. 2008) (noting attorney fees are recoverable if

specifically provided for in the indemnity contract). Further, A.O. Smith placed

CST and Chubb on notice of its claim to recover future attorney-fee damages

both before and after CST settled Ms. Fisher’s claim and pursued litigation to

get that money back from A.O. Smith. See, e.g., Chubb’s Motion for Relief

from the Automatic Stay, 10/24/17, at 4.

      Second, we reject CST’s contention that it did not breach the APA

because it paid Ms. Fisher’s claim. We see no relevant distinction between (1)

forcing A.O. Smith to litigate CST’s duty to perform and then paying the

liability after CST’s efforts to avoid performing failed, and (2) paying the

liability and then forcing A.O. Smith to litigate CST’s right to recover the

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payment based upon a lack of duty to perform.               Either way, A.O. Smith

suffered damages in the form of litigation costs and attorney fees resulting

from CST’s refusal to accept and perform its contractual duty.

       Third, as noted above, Chubb sought leave from the court in which CST’s

bankruptcy was pending to purse the instant indemnification claim by

representing to that court that it was “essentially an action between two non-

Debtors” because the real impact of the resolution of the indemnification claim

would be felt by Chubb and the other insurers who paid Ms. Fisher’s

settlement. Chubb’s Motion for Relief from the Automatic Stay, 10/24/17, at

4. In another filing, Chubb expressly invoked its subrogation rights under

Pennsylvania law to be legally substituted for CST in the instant case to

recover the amount it paid to A.O. Smith on CST’s behalf. See Response and

Reservation of Rights, 11/7/17, at 4.7             See also id. at 5 (“Insurers are

therefore subrogated to the right of CST to pursue the indemnity claim, and,

if successful, recover amounts paid to A.O. Smith under the settlement

agreement.” (unnecessary capitalization omitted))

       “It is well-established that subrogation is derivative in nature, placing

the subrogee in the precise position of the one to whose rights and disabilities

he is subrogated.” Universal Underwriters Ins. Co. v. A. Richard Kacin,

____________________________________________

7This filing is in the certified record in A.O. Smith’s Motion to Dismiss CST’s
Claims, 2/26/18, at Exhibit E.

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Inc., 916 A.2d 686, 694 (Pa.Super. 2007) (cleaned up).        8   “[S]ubrogation is

not an inflexible legal concept but an exercise of equitable powers, and a court

is to enforce subrogation interests with a proper equitable discretion and with

a due regard for the legal and equitable rights of others.” Prof’l Flooring

Co., Inc. v. Bushar Corp., 152 A.3d 292, 302 (Pa.Super. 2016).

       As CST’s subrogee, Chubb succeeded to CST’s position in this case, and

thereby had both notice of A.O. Smith’s allegations of breach and damages in

the nature of fees, and a full and fair opportunity to be heard on both issues.

Not only did Chubb step into CST’s shoes, it was the driving force behind A.O.

Smith’s incursion of the costs and fees of the trial. As such, we conclude that

naming Chubb, itself, in the fee order was within the trial court’s flexible

exercise of equitable discretion invoked by Chubb through its filings. Accord

Nathan A. Watson Co. v. Employers Mut. Cas. Co., 218 S.W.3d 797, 803

(Tex. App. 2007) (“[W]e hold that when an insurer sues in subrogation under

a contract, it is entitled to all of the rights of its subrogee and likewise exposed

to all of its liabilities.”).

       Finally, the fact that the trial court had denied A.O. Smith’s initial fee

request, which included the costs of defending Fisher’s claims, did not prevent

A.O. Smith from later pursuing the damages it sustained as a result of CST’s

____________________________________________

8 As the question whether Chubb could pursue CST’s claims in Pennsylvania
court does not involve construction or interpretation of the APA, we again
agree that Pennsylvania rather than Illinois law is applicable to the issue.

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efforts to undo its performance of an assumed liability. See, e.g., Wright v.

Misty Mountain Farm, LLC, 125 A.3d 814, 818 (Pa.Super. 2015) (“A trial

judge may always revisit her own pretrial rulings without violating the law of

the case doctrine.”). Indeed, Chubb acknowledged in its motion to lift the

bankruptcy stay that A.O. Smith had not abandoned its attorney fee request,

and thus should have fully expected the claim to resurface when it obtained

relief from the bankruptcy stay.

      Nor does the fact that the fee request was not renewed until after trial

warrant reversal.    Until the trial court made the factual finding that CST

breached the APA, the nature and extent of A.O. Smith’s damages caused by

CST’s breach was unknown. Moreover, while attempting to get the bankruptcy

court’s approval to pursue CST’s claim, Chubb acknowledged that this would

be the procedure used: “the indemnity claim must be fully and finally

resolved before a petition can be filed or a decision may be rendered

on the attorneys’ fees claim.” Chubb’s Motion for Relief from the Automatic

Stay, 10/24/17, at 4 (unnecessary capitalization omitted, emphasis added).

Chubb cannot now complain that it was unaware that, if A.O. Smith prevailed

in the indemnification trial, a post-trial petition for attorney fees would likely

follow. As such, we hold that none of the attorney fee arguments merits relief.

      For all the above reasons, we affirm the grant of A.O. Smith’s post-trial

motion and the judgment entered upon the trial court’s verdict.

      Judgment affirmed.

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Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 9/24/20

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