Gibbons v. Tenneco, Inc.
| Decision Date | 07 September 1988 |
| Docket Number | Civ. A. No. 82-231. |
| Citation | 710 F. Supp. 643 |
| Parties | Guy GIBBONS, et al., Plaintiffs, v. TENNECO, INC., Defendant. |
| Court | U.S. District Court — Eastern District of Kentucky |
Phillip Bruce Leslie, McBrayer, McGinnis, Leslie & Kirkland, Clifford R. Duvall, Greenup, Ky., Garis L. Pruitt, Pruitt & Mussetter, Catlettsburg, Ky., for plaintiffs.
David O. Welch, Welch and Purdom, Ashland, Ky., William P. Curlin, Jr., Hazelrigg & Cox, Frankfort, Ky., for defendant.
This matter is before the Court upon defendant's motion for judgment n.o.v. or, in the alternative, for a new trial and defendant's motion for oral argument. The parties have filed responses and replies to both motions.
The plaintiffs, Guy and Carolyn Gibbons, intervened in this action against the defendant, Tenneco, Inc., to enforce a so-called "coal clause" contained in the deed of an approximately 300 acre tract of land (hereinafter called the "Justice tract") located in Greenup County, Kentucky. A three-day trial began on May 16, 1988 and the jury returned a verdict for the plaintiffs in the amount of $140,000. The Court entered judgment on May 26, 1988.
Although this action was originally filed in this Court on December 16, 1982, it has become a procedural nightmare of monumental proportions. The ambiguous wording of the "coal clause" and the shifting of plaintiffs has been a thorn in the flesh that is only now beginning to heal. A full understanding of this action cannot be realized without revisiting its procedural history.
The genesis of this controversy was on March 21, 1950. The defendant Tenneco entered into a right-of-way agreement with the plaintiffs' predecessors in title, Phillip and LaRue Justice. Tenneco wanted to run a gas pipeline through the Justice property consisting of 300 acres. While the value of the surface rights could readily be ascertained, the value of any coal reserves under the proposed path of the pipeline was far less certain. However, at that time no coal mining had been conducted on the property and the Justices were probably unsure as to when they would conduct mining operations on the property. In response to these facts, Tenneco had the option of setting a fair and reasonable value on the unmined coal, pay for the surface and the coal, and forever extinguish any right to payment for the coal.
Tenneco did not choose this option. Instead of paying cash to the Justices for the value of the right of way, Tenneco chose an option that might relieve it of any necessity of ever having to pay for the coal. This option was utilized in the form of a so-called "coal clause" in the 1950 agreement with the Justices and with over seventy other landowners similarly situated. The following is a complete statement of the "coal clause" in question:
(Right of Way Agreement, March 21, 1950). Apparently, Tenneco hoped that the Justices, their successors in title, and other landowners who entered into a similar agreement would not choose to trigger this clause by mining coal on their respective properties. The "coal clause" is fraught with ambiguity. Indeed, it almost guaranteed a lawsuit.
The next problem in this action arose because of the failure of Tenneco to define the location of the pipeline in the 1950 agreement. The pipeline was constructed on the property shortly after the agreement was signed. In 1976, Tenneco's right-of-way agent, Mr. James Stuart, approached Sam and Neva Picklesimer, the Justices' successors in title, about defining the location of the pipeline. At that time, no mention was made of the "coal clause" and the Picklesimers were told that signing the Partial Release of Easement would cost them nothing and would be beneficial to them by releasing the remainder of the property.1
On December 18, 1979, Gibbons Construction Company, Inc. ("GCC") purchased the Justice tract. The plaintiff Guy Gibbons was a principal shareholder and officer of GCC. Although originally a construction company, GCC became involved in coal mining operations and obtained mining permits for only 13 acres of the entire Justice tract. Paul Coffey Construction Company was employed to conduct the mining operations. The mining permits enabled GCC to remove the Princess No. 3 seam of coal and to conduct strip mining operations without blasting. Although the plaintiff Guy Gibbons was uncertain in his testimony as to the exact amount of coal removed, some coal was removed in 1981 and 1982.
GCC did not attempt to mine all the coal adjacent to the pipeline easement that could be commercially mined but for the presence of the pipeline. It could be inferred that the mining was done for the purpose of "mining the covenant" rather than the coal. Evidently, GCC believed that its actions in attempting to mine some of the coal on the Justice tract entitled it to receive compensation for all coal that could not be mined but for the pipeline.2
On December 1, 1982, GCC filed an action against Tenneco in Greenup Circuit Court for damages under the "coal clause". Tenneco removed the case to this Court on December 16, 1982. While this action was proceeding, GCC filed a Chapter 11 bankruptcy petition on April 5, 1983. The Court did not become aware of the petition until Tenneco filed a motion to dismiss on October 24, 1983. As a result of this information, the Court transferred this action to the bankruptcy court on November 14, 1983.3
While in bankruptcy court, one of GCC's creditors, the Bank of Ashland, filed a motion for relief from the automatic stay so that it could foreclose on its mortgage on the Justice tract. On October 25, 1983, the bankruptcy court lifted the automatic stay for the purpose of selling the Justice tract. The bank foreclosed on the property on June 26, 1984. Unable to obtain a suitable price for the property, the bank bid in the property at the foreclosure sale for $50,000. A Master Commissioner's Deed was executed and delivered to the Bank of Ashland on September 28, 1984. The deed made no mention of the pending litigation against Tenneco and there was no formal assignment of GCC's chose in action to the Bank of Ashland.
In addition to the debt owed by GCC, Guy and Carolyn Gibbons were personally liable for a deficiency in the amount of $20,878.82. To satisfy this deficiency, the Gibbons agreed to purchase the Justice tract from the bank for $69,278.35 and the bank conveyed the property to the Gibbons on September 28, 1984. Again, the deed did not mention the pending lawsuit against Tenneco. However, an express assignment of the bank's right to collect on its deficiency judgment was made to Guy Gibbons on February 22, 1985. Of course, there was no mention of GCC's chose in action, i.e., its right to collect under the "coal clause" from Tenneco.
(Bankruptcy Order, June 26, 1985, p. 2). The bankruptcy court focused its decision upon the fact that the Gibbons, as successors in interest, now had possession of the unmined coal beneath the pipeline. (Transcript, June 12, 1985, pp. 42-50.) Since there had been no separation of mineral from the fee simple right, the bankruptcy court believed that the cause of action for the coal passed to the Gibbons.4 Id.
On September 6, 1985, the Gibbons moved to transfer this action back to district court. The bankruptcy court overruled the motion and the Gibbons filed a notice of appeal with this Court. At the time the appeal was considered, this action appeared to be a non-core unrelated proceeding over which the bankruptcy court had no jurisdiction. However, since the bankruptcy court had no procedural mechanism to transfer this action to district court, on December 10, 1986, this Court took jurisdiction of this action by withdrawing the previous order referring this action to bankruptcy court.
After becoming sidetracked on a number of issues,5 the trial began on May 16, 1988. At the beginning, the parties brought up the issue of whether GCC would be mentioned as a plaintiff. Although the bankruptcy court allowed GCC to remain a party for purposes of maintaining a claim for lost profits,6 GCC no longer actively pursued this action after the case was redocketed in this Court. Apparently, the two attorney's representing GCC were no longer being paid as evidenced by their notices of intent to assert attorney's fee lien filed on July 10, 1987 and May 19, 1988. Moreover, the limitation of GCC's claim to lost profits probably decreased GCC's chances for a successful outcome on its remaining claim in light of the bankruptcy court's finding that the Gibbons were the real parties in interest for purposes of the unmined coal beneath the pipeline.
Although Tenneco raised the issue of GCC being the real party...
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