Black Warrior Minerals, Inc. v. Fay

• Decision Date: 07 October 2011
• Docket Number: 1100627.
• Citation: 82 So.3d 650
• Parties: BLACK WARRIOR MINERALS, INC. v. John FAY, Jr.
• Court: Alabama Supreme Court

82 So.3d 650

BLACK WARRIOR MINERALS, INC.

v.John FAY, Jr.

1100627.

Supreme Court of Alabama.

Aug. 5, 2011.Rehearing Denied Oct. 7, 2011.

Lee R. Benton and Jamie A. Wilson of Benton & Centeno, LLP, Birmingham, for appellant.

James E. Harris of Harris Law Firm, Birmingham, for appellee.

WOODALL, Justice.

Black Warrior Minerals, Inc. (“Black Warrior”), sued Empire Coal Sales, Inc. (“Empire”), and John Fay, Jr., seeking amounts allegedly owed pursuant to a coal-purchase agreement between Black Warrior and Empire and a personal guaranty executed by Fay. The trial court entered a summary judgment in favor of Black Warrior on its claims against Empire, awarding Black Warrior $689,496.24 in damages, plus attorney fees and costs. The trial court held a bench trial on the breach-of-guaranty claim against Fay at which ore tenus evidence was presented. The trial court entered a judgment in favor of Fay, and Black Warrior has appealed that judgment. We reverse the trial court's judgment in favor of Fay and remand the case for the trial court to enter a judgment in favor of Black Warrior on its breach-of-guaranty claim against Fay.

Facts and Procedural History

On February 11, 2009, Empire entered into a coal-purchase agreement with Black Warrior, which provided, among other things, that “[Empire] agreed to purchase on open account and has purchased from [Black Warrior] in excess of ... $1,200,000 worth of coal.” That same day, Fay executed a personal guaranty, which provided, in pertinent part:

“I, John Fay, waiving demand and notice, hereby personally guarantee the collection, performance and full payment of all monetary obligations of [Empire] to [Black Warrior], including all existing debt as of the date hereof and all future obligations under [the coal-purchase] Agreement.

“In consideration of the amounts evidenced by this Agreement in excess of ... $1,200,000 payable by [Empire], the undersigned guarantees the prompt payment of said amounts, when due, whether at stated maturity, acceleration, or otherwise, and in accordance with all terms and conditions of the Agreement, and agree to all terms and conditions and affirm the waivers and consents contained herein.”

In November 2009, Black Warrior sued Empire and Fay, seeking to recover amounts allegedly owed for coal Black Warrior had provided Empire pursuant to the agreement. Black Warrior asserted claims against Empire alleging breach of contract, open account, stated account, and goods sold and delivered. Black Warrior also stated a claim against Fay alleging breach of the guaranty.

After a hearing, the trial court entered a summary judgment in Black Warrior's favor on its claims against Empire, awarding Black Warrior a total of $700,105.36, but denied Black Warrior's motion for a summary judgment on its breach-of-guaranty claim against Fay. Following a bench trial on the breach-of-guaranty claim, the trial court entered a judgment in favor of Fay, concluding that the language of the guaranty was ambiguous and finding that the guaranty applied only to amounts in excess of $1.2 million owed by Empire to Black Warrior.

Black Warrior moved the trial court for a new trial or, in the alternative, to alter, amend, or vacate its judgment on the breach-of-guaranty claim. The trial court denied that motion, and Black Warrior has appealed from the judgment in favor of Fay.

Issue

This Court must determine whether the trial court erred in concluding that the language of the guaranty was ambiguous and that the guaranty applied only to amounts owed by Empire to Black Warrior in excess of $1.2 million.

Standard of Review

“This Court set out the applicable standard for reviewing a trial court's determination that a contract is ambiguous in Winkleblack v. Murphy, 811 So.2d 521, 525–26 (Ala.2001):

“ ‘The question whether a contract is ambiguous is for a court to decide. State Farm Fire & Cas. Co. v. Slade, 747 So.2d 293 (Ala.1999). As long as the contractual terms are clear and unambiguous, questions of their legal effect are questions of law. Commercial Credit Corp. v. Leggett, 744 So.2d 890 (Ala.1999). Thus, we apply a de novo review to a trial court's determination of whether a contract is ambiguous and to a trial court's determination of the legal effect of an unambiguous contract term.

“ ‘Once the trial court determines that an ambiguity exists in a contract, the meaning of that contract is to be determined by the trier of fact. Employees' Benefit Ass'n v. Grissett, 732 So.2d 968 (Ala.1998); Glenlakes Realty Co. v. Norwood, 721 So.2d 174 (Ala.1998). In this case, the trier of fact was the trial court, and the court heard ore tenus evidence.

“ ‘ “Where ore tenus evidence is presented to the trial court in a nonjury case, a judgment based on that evidence is presumed to be correct and will not be disturbed on appeal unless a consideration of the evidence and all reasonable inferences therefrom reveals that the judgment is plainly and palpably erroneous or manifestly unjust.”

“ ‘ Bertolla v. Bill, 774 So.2d 497, 503 (Ala.1999) (quoted in Redden v. State, 804 So.2d 196 (Ala.2001)).’

“In this case, the trial court was the trier of fact and heard ore tenus evidence. Following the standard set out in Winkleblack, supra, we must engage in a two-part analysis. First, we must review de novo the trial court's determination that the guaranty is ambiguous. Second, if we find ... that the guaranty is ambiguous, we must then determine whether the trial court's holding that [the guaranty covers only debts owed to Black Warrior that exceed $1.2 million] was ‘plainly and palpably erroneous or manifestly unjust.’ ”

SouthTrust Bank v. Copeland One, L.L.C., 886 So.2d 38, 41 (Ala.2003).

Analysis

Black Warrior argues that “the trial court erred in its finding that the Guaranty ... was ambiguous and only guarantees that part of any debt which [Empire] owes [Black Warrior] in excess of $1,200,000.” Black Warrior's brief, at 10. Black Warrior argues:

“The language of the Guaranty is not ambiguous, particularly when read in conjunction with the Agreement. The Guaranty specifically states: ‘Full payment of all monetary obligations of Empire Coal Sales, Inc. ... including all existing debt as of the date hereof and all future obligations under said Agreement.’ This wording makes it clear that the parties intended for the Guaranty to be inclusive of all obligations under the Agreement. ‘Full payment’ means full payment—‘all existing’ and ‘all future’ means every debt then existing and to be incurred.”

Black Warrior's brief, at 11–12.

Black Warrior goes on to argue:

“The phrase ‘In consideration of the amounts evidence[d] by this Agreement in excess of [$1,200,000]’ contained in the Guaranty speaks to the amount of consideration recited in the Agreement as having already been tendered, and does not operate as a ‘cap’ or limitation of Defendant Fay's personal liability. The Agreement acknowledges that Empire had purchased in excess of $1,200,000 from Black Warrior.”

Black Warrior's brief, at 13 (emphasis in original).

Fay argues in response that “[t]he terms of the Guaranty are patently ambiguous” and that, “[f]rom the language of the document alone, the court could not determine what the parties intended.” Fay's brief, at 6. Fay argues that the ambiguity arises from the phrase “said amounts” in the...