Legal Opinions - Md. Court of Special Appeals: October 9, 2007

Summary

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Contracts: Interpretation of terms

BOTTOM LINE: Trial court erred in finding that appellant purchased the restaurant "as is" and was responsible for restaurant- related repairs incurred after appellant took possession of the restaurant, but before closing on the sale of the restaurant.

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Extract

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Legal Opinions - Md. Court of Special Appeals: October 9, 2007

CASE: Anderson Adventures, LLC v. Sam & Murphy, T/A Fins, CSA No. 1343, Sept. Term 2006 (filed Sept. 21, 2007) (Judges Hollander, BARBERA & Karwacki (retired, specially assigned)).

FACTS: On April 18, 2005, Eric Anderson, the managing member of Anderson Adventures, LLC, wrote a letter of intent to Samuel Chaney, President of Sam & Murphy, Inc., outlining his intent to purchase Fins, a restaurant located in Crofton, Maryland. The letter provided that Anderson Adventures would acquire all of the tangible and intangible assets listed on the balance sheet at the time of closing and that the total purchase price for the proposed acquisition would be $150,000.00.

The letter of intent indicated that Anderson Adventure's purchase of the restaurant was expressly contingent upon the occurrence of nine events, including, the business's conformity to all appropriate codes and regulations, and the transfer of all appropriate licenses to Anderson Adventures.

On June 22, 2005, the parties entered into an Asset Purchase Agreement and Receipt (Asset Purchase Agreement). Attached to the Asset Purchase Agreement was a Restaurant Management Agreement (Management Agreement). Pursuant to that agreement, Eric Anderson took over management of the restaurant under Sam & Murphy's liquor license, on June 27, 2005.

The parties attached a Schedule of Conditions to the Asset Purchase Agreement. Paragraph six of the Schedule of Conditions provided that all equipment documented was being purchased on an "as is" basis without warranty of merchantability of fitness for any particular purpose. However, at the closing, all equipment was required to be in working condition and to comply with all applicable codes and regulations, and Sam & Murphy, at its sole expense, was required to repair or replace any equipment not in said working condition.

Paragraph ten of the Schedule of Conditions provided that any and all accounts receivable and payable accruing to and existing as of close of business June 26, 2005, remained the sole property and responsibility of Sam & Murphy. Any and all accounts receivable and payable, which accrued immediately from and after the closing, became the sole responsibility of Anderson Adventures.

On June 27, 2005, Anderson Adventures took over possession, management, and operation of Fins. Shortly thereafter, Anderson Adventures made various repairs to the restaurant. Anderson Adventures paid for the repairs and did not seek contribution from Sam & Murphy at the time the repairs were made.

During the summer and fall of 2005, customers at the restaurant redeemed $3,951.91 in gift certificates that were issued by Sam & Murphy before June 27, 2005.

On November 7, 2005, the parties closed on the sale of the restaurant. At that time, Anderson Adventures declined to tender the full purchase price of the restaurant. It contended that it was entitled to withhold $39,993.38, for repairs to the restaurant, replacement of equipment, redemption of gift certificates, and related expenses incurred since the ...

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