500 B.R. 333
S.D.N.Y.2013Background
- Castillo Plaintiffs sued Old GM in the ED Cal for defective Saturn VTi transmissions and related claims.
- Old GM settled in July 2008; settlement funded repairs, notice costs, and attorneys’ fees but did not admit liability.
- Old GM’s 363 sale to New GM (July 2009) preceded the settlement’s effective date and defined liabilities to be assumed by New GM.
- Sale Agreement § 2.3(a)(vii)(A) stated New GM would assume liabilities under express written warranties; § 2.3(b)(xvi) preserved implied warranties and related claims with Old GM.
- Sale Order (July 5, 2009) clarified New GM would not assume implied warranties or non-warranty remedies, creating potential ambiguity about the Castillo Settlement.
- Extrinsic evidence post-sale showed Old GM and Auto Task Force intended to leave Castillo-type liabilities with Old GM; New GM initially paid some claims but later restricted to the glove-box warranty terms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Castillo Settlement is a New GM assumed liability | Castillo arises from express warranty or mixed claims; ambiguity favors assumption. | Settlement falls outside express warranty; Old GM retained it under Sale Agreement § 2.3(b). | Ambiguity exists; extrinsic evidence supports Old GM retention. |
| Whether the Sale Agreement unambiguously assigns Castillo liabilites | Text supports assignment under express warranties. | Text supports retention of implied/non-warranty claims; ambiguity remains. | Sale Agreement ambiguous; not unambiguously assigning Castillo. |
| Role of extrinsic evidence in interpreting the Sale Agreement | Extrinsic evidence shows intent to assign Castillo to New GM. | Extrinsic evidence shows intent to retain Castillo with Old GM. | Extrinsic evidence properly considered and supports retention. |
| Did New GM’s post-closing actions reflect belief of assumed liability | New GM paid or promised remedies consistent with Castillo assumption. | Payments were inertia/goodwill, not an assumption of liability. | Record shows inertia; no clear error in finding no assumption. |
Key Cases Cited
- In re Delta Air Lines, Inc., 608 F.3d 139 (2d Cir. 2010) (state-law contract interpretation governs, with NY law for ambiguity)
- Lehman Bros., 478 B.R. 570 (S.D.N.Y. 2012) (ambiguity requires extrinsic evidence; de novo on unambiguous terms)
- Greenfield v. Philles Records, Inc., 98 N.Y.2d 562 (N.Y. 2002) (intent inferred from writing; plain meaning controls if unambiguous)
- In re Brunswick Hosp. Ctr., Inc., 156 B.R. 896 (E.D.N.Y. 1993) (ambiguity requires reviewing court to assess in context; not purely legal question)
- In re Delphi Corp., 394 B.R. 342 (S.D.N.Y. 2008) (ambiguity and extrinsic evidence guide contract interpretation in bankruptcy)
- Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co., 375 F.3d 168 (2d Cir. 2004) (contract ambiguity permits extrinsic evidence on intent)
- Ceraso v. Motiva Enters., LLC, 326 F.3d 303 (2d Cir. 2003) (choice among plausible inferences not clearly erroneous)