Bright v. Coastal Lumber Co.

• Decision Date: 06 May 1992
• Docket Number: No. 91-2340,91-2340
• Citation: 962 F.2d 365
• Parties: William T. BRIGHT; Patricia B. Bright, Plaintiffs-Appellants, v. COASTAL LUMBER COMPANY, a North Carolina corporation; Pittsburgh National Bank, a National Banking Association; Ned L. McClure and Ira B. Coldren, Jr., Trustees under the Revocable Life Insurance Trust Agreement of Samuel Frazee, Settlor, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 365

962 F.2d 365

William T. BRIGHT; Patricia B. Bright, Plaintiffs-Appellants, v. COASTAL LUMBER COMPANY, a North Carolina corporation;

Pittsburgh National Bank, a National Banking Association;

Ned L. McClure and Ira B. Coldren, Jr., Trustees under the

Revocable Life Insurance Trust Agreement of Samuel Frazee,

Settlor, Defendants-Appellees.

No. 91-2340.

United States Court of Appeals, Fourth Circuit.

Argued Dec. 3, 1991.

Decided May 6, 1992.

Gerard Ray Stowers, Charleston, W.Va., argued (F.T. Graff, Jr., John R. Teare, Jr., Bowles, Rice, McDavid, Graff & Love, on brief), for plaintiffs-appellants.

Stephen Ambrose Weber, Kay, Casto, Chaney, Love & Wise, Charleston, W.Va., argued, for defendant-appellee Coastal Lumber; R. Terrance Rodgers, King, Betts & Allen, Charleston, W.Va., argued, for defendants-appellees Pittsburgh Nat. Bank, McClure, and Coldren (Karen Speidel Rodgers, Kay, Casto, Chaney, Love & Wise, Charleston, W.Va., for defendant-appellee Coastal Lumber; Robert B. King, King, Betts & Allen, Charleston, W.Va., for defendants-appellees Pittsburgh Nat. Bank, McClure, and Coldren, on brief), for defendants-appellees.

Before ERVIN, Chief Judge, NIEMEYER, Circuit Judge, ^* and SHEDD, United States District Judge for the District of South Carolina, sitting by designation.

OPINION

ERVIN, Chief Judge:

William and Patricia Bright leased land in West Virginia in order to mine coal. After the Brights were unable to locate coal on the land, they sought a declaratory judgment that the leases either terminated by their own terms or by effect of a default notice that Coastal Lumber had sent. The Brights later added a fraudulent inducement claim. Coastal Lumber and the other defendants counterclaimed for continuing minimum royalties under the leases. The district court granted summary judgment against the Brights on the termination claims, while a jury returned a verdict against the Brights on the fraud issue and in favor of the defendants' counterclaim, awarding the defendants $418,000 for continuing minimum royalties. On appeal, the Brights challenge the district court's granting of summary judgment on the termination issues and four aspects of the trial. We affirm.

I.

This case involves three different coal mining leases. The Brights approached the defendants about leasing approximately 7000 acres of land. The Brights' engineer reviewed documents about the land, and the Brights also explored the land for more than a year, drilling more than thirty-five exploration holes. Finally, after twenty-seven months of exploration and negotiations, the Brights and the defendants signed the leases in question.

Lease 1 and Lease 2 were very similar to each other in their terms, and both allowed the Brights to mine coal. Lease 1 was between the Brights on one side and Coastal Lumber Co., Pittsburgh National Bank, Ned McClure, and Ira Coldren on the other. Lease 2 covered a different tract of land and was only between the Brights and Coastal Lumber. Lease 3, or the "tipple agreement," covered a third tract of land and allowed for uses of the land besides mining. Like Lease 2, the tipple agreement was between the Brights and Coastal Lumber.

The granting clause in Leases 1 and 2 stated that the Brights were leasing the land "for the purpose of mining and removing all of the merchantable and mineable coal thereon and thereunder." The termination clause in Leases 1 and 2 stated:

The term of this lease shall be a period of ten years, commencing July 1, 1986, and ending June 30, 1996. This lease shall be automatically renewed for an additional term of one year and thereafter from year to year, until the coal underlying the leased premises has been exhausted. Lessees may terminate this lease at the expiration of the fourth year of the initial term or the expiration of any subsequent lease year by giving Owner written notice thereof at least 90 days before the expiration date. The coal underlying the leased premises shall be deemed to be exhausted when there is no longer any merchantable and mineable coal underlying the leased premises. As used herein, the term "merchantable and mineable coal" means coal which can be mined and marketed at a reasonable profit to lessees at the time such coal is reached in the course of lessees' mining operation by use of practical and efficient machinery, facilities, methods and management.

Because the tipple agreement did not address coal mining, it had a different termination clause, which allowed termination "[i]n the event that the lessees' coal operation shall become economically unfeasible for any reason or if the company ceases to operate a coal mine in the immediate vicinity."

For two years after the leases took effect, the Brights were unable to locate any merchantable and mineable coal on the land. Then, in August 1988, they stopped paying the minimum royalties that were due under the lease. Coastal Lumber notified the Brights on November 14, 1988 that they were in default and that "[i]f this default is not corrected within five (5) days of receipt of this notice, then th[ese] Coal Mining Lease[s] will be terminated." The Brights responded on December 2 that they had received the "letters dated November 14, 1988 which terminated our three lease agreements," and continued not paying minimum royalties. Coastal Lumber and the other defendants (collectively, hereinafter, "Coastal Lumber") then replied that the leases had not been terminated, leading to this litigation.

During jury voir dire, a potential juror named Marks said that he was a friend of one of Coastal Lumber's lawyers and that he had a financial interest in a pending lawsuit that also involved a coal mining lease, and that as a result he might have a "subconscious" bias that he could not rule out "one hundred percent." The Brights challenged Marks for cause. The district judge inquired further and decided that Marks could be a fair and impartial juror, rejecting the Brights' challenge. The Brights then exercised a preemptive challenge to excuse Marks from the jury.

In his opening statement, Coastal Lumber's counsel described the two termination issues and noted that the court had "disposed of" them. The counsel then characterized the Brights' remaining theory, fraud, as "lately contrived." To try to prevent these statements from prejudicing the Brights, the district court gave a curative instruction, explaining that a party's decision to change or add to its legal complaint is unremarkable.

During trial, counsel for Coastal Lumber asked a witness about a previous court finding, in a 1978 case, that the property the Brights had leased was valuable. The Brights' counsel objected and also stated that the finding had been otherwise. The district court sustained the objection and also told the counsel for both sides that he was concerned that the jury had heard the question asked and then contradicted without answer. The judge and the counsel discussed the matter twice more the next day, and the judge proposed to explain to the jury what the finding had been and that it had no bearing on this lawsuit. All the counsel consented, and the judge later so instructed the jury. His instruction included the fact that he had previously found the property to be worth $2,000,000.

Instructing the jury at the close of trial, the district court stated that the Brights had assumed the risk of the absence of coal in all three leases:

The two leases and the tipple agreement involved in this case are what is known as contracts of hazard. A contract of hazard in regard to coal mining leases means that the lessees, who are the plaintiffs in this case, assumed the risk that there was no merchantable and mineable coal on the leased property, including the absence of coal processed through the tipple that they leased.

After its deliberations, the jury returned a verdict rejecting the Brights' fraudulent inducement claim and awarded the lessors $418,000 for continuing minimum royalties under the three leases.

II.

The Brights raise six issues on appeal, two based on the summary judgment and four arising out of the trial.

A.

We begin with the summary judgment issues, bearing in mind that we review summary judgments de novo. See, e.g., Higgins v. E.I. Du Pont de Nemours & Co., 863 F.2d 1162, 1166-67 (4th Cir.1988). The Brights argue first that the first two leases terminated by their own terms due to the lack of "merchantable and mineable" coal on the land. As with any contract, we first examine the plain language of the leases. See, e.g., Sally-Mike Properties v. Yokum, 175 W.Va. 296, 332 S.E.2d 597 (1985). The parties appear to have intended the termination clause to govern the length of the leases, so we begin by analyzing that clause. The termination clause first states that the leases cover a ten year term. Next, the clause explains what is to happen at the expiration of the ten years: The contract remains renewable from year to year until the coal is "exhausted." Then, the clause provides that the Brights can terminate the lease after the fourth year or any additional year upon giving ninety days' notice. Finally, the clause defines when the coal will be deemed "exhausted," which is when there is no longer any merchantable and mineable coal underlying the land.

Thus, by the very terms of the leases, exhaustion of the coal, or merchantability/mineability, is only relevant after the original ten year term has expired. The leases only allow the Brights one way out--giving notice after four years. If the parties had intended to allow the lessees to terminate the lease if there was a total lack of merchantable and mineable coal underlying the land, they could have so stated. The court should not read terms into a contract when parties dealing at arm's length have not inserted them. See, e.g., R.E.X., Inc. v. Trio Foods Enters., Inc., 183 W.Va. 217, 395 S.E.2d 217 (1990).

In addition to the plain meaning of the first two leases,...