Centech, Llc v. Global Chemical Solutions, Llc
74805-0
| Wash. Ct. App. | Oct 2, 2017Background
- GCS agreed to sell all assets of its chemical distribution business to Centech under an Asset Purchase Agreement (APA); Centech made a cash down payment and issued a promissory note, personally guaranteed 50/50 by John Graff and Robert Black.
- The APA set a provisional purchase price and a July 31, 2013 "true-up" to compute a final purchase price subject to adjustments (including collectible "Questionable Assets," post-closing inventory sales, and an earn-out), capped at $1.026 million.
- Relations soured: Graff accused GCS of misrepresenting asset collectability and of Black’s misconduct; Centech reduced and ultimately stopped payments on the promissory note; GCS sued for breach and enforceability of guarantees.
- At trial the jury rejected Centech and Graff’s fraud and negligent misrepresentation defenses, found Centech liable for $453,837, and held Graff liable on his 50% guaranty.
- The superior court entered judgment (including prejudgment and post-judgment interest, costs and fees) and denied Centech’s requests for (1) extra jury instructions on warranty and frustration of purpose, (2) an offset/setoff for a settlement/confession of judgment between GCS and Black, and (3) denial of prejudgment interest.
- On appeal the Court of Appeals affirmed: instructions were adequate, frustration and warranty instructions unsupported or unnecessary; setoff was improper because the settlement/confession was contingent and unpaid; prejudgment interest was permissible because the jury award was computable from the contract.
Issues
| Issue | Plaintiff's Argument (GCS) | Defendant's Argument (Centech/Graff) | Held |
|---|---|---|---|
| Jury instructions on contract interpretation/warranty | Given instructions were sufficient; APA and law properly provided guidance | Needed additional instructions defining warranty and contract construction to apply APA language | Court: refused augmenting instructions; instructions given adequately stated law and were not misleading |
| Instruction on frustration of purpose | N/A | Frustration required because Black’s role made performance impossible | Court: denied; no evidence that Black’s nonperformance was unforeseeable or a basic assumption of the contract |
| Setoff for GCS–Black settlement/confession | Settlement not yet paid; confession of judgment contingent; no double recovery now | Centech sought $386,000 setoff (confession amount) to avoid double recovery | Court: denied setoff; settlement payments were contingent/unpaid and Centech bore burden to prove offset entitlement |
| Prejudgment interest | N/A | APA adjustments made the amount unliquidated; interest inappropriate | Court: awarded prejudgment interest; jury award was mathematically determinable from contract after correcting an accounting error |
Key Cases Cited
- Bodin v. City of Stanwood, 130 Wn.2d 726 (explains when jury instructions are sufficient)
- Havens v. C & D Plastics, Inc., 124 Wn.2d 158 (same on jury instruction standards)
- Wash. State Hop Producers, Inc. Liquidation Trust v. Goschie Farms, Inc., 112 Wn.2d 694 (doctrine of frustration of purpose)
- Weyerhaeuser Real Estate Co. v. Stoneway Concrete, Inc., 96 Wn.2d 558 (foreseeability and allocation of risk for frustration)
- Prier v. Refrigeration Eng'g Co., 74 Wn.2d 25 (definition of liquidated claim for prejudgment interest)
- Brewer v. Fibreboard Corp., 127 Wn.2d 512 (setoff and treatment of settlement proceeds)
- Coulter v. Asten Group, Inc., 155 Wn. App. 1 (offset before payment where settlement likely to be paid)
- Edmundson v. Bank of Am., 194 Wn. App. 920 (attorney fees on appeal under contractual fee provisions)