Griese-Traylor Corp. v. First Nat. Bank of Birmingham

• Decision Date: 08 May 1978
• Docket Number: No. 76-2050,GRIESE-TRAYLOR,76-2050
• Citation: 572 F.2d 1039
• Parties: CORPORATION, a Florida Corporation, Plaintiff-Appellant, v. The FIRST NATIONAL BANK OF BIRMINGHAM, a National Banking Association, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1039

572 F.2d 1039

GRIESE-TRAYLOR CORPORATION, a Florida Corporation, Plaintiff-Appellant, v. The FIRST NATIONAL BANK OF BIRMINGHAM, a National Banking Association, et al., Defendants-Appellees.

No. 76-2050.

United States Court of Appeals Fifth Circuit.

May 8, 1978.

Lester M. Bridgeman, Nancy Pyeatt, Washington, D. C., for plaintiff-appellant.

Wm. G. Somerville, Jr., Charles C. Pinckney, Birmingham, Ala., for Stoll, et al.

Harold R. Schmidt, H. Yale Gutnick, Pittsburgh, Pa., for Consol Coal, etc.

Warren B. Lightfoot, Alan K. Zeigler, Birmingham, Ala., for Consol Coal Co.

N. Lee Cooper, Donald J. Stewart, Birmingham, Ala., for First Nat. Bank.

Appeal from the United States District Court for the Northern District of Alabama.

Before TUTTLE, CLARK and RONEY, Circuit Judges.

RONEY, Circuit Judge:

Griese-Traylor Corporation, plaintiff below, appeals from the summary judgment in favor of the three defendants, The First National Bank of Birmingham (the "Bank"), Consolidation Coal Company ("Consol"), and Stoll & Stoll, Inc. (the "Stolls"). The lawsuit arose out of competing negotiations by Griese-Traylor and the Stolls to acquire an option on certain mineral interests in Tennessee from the Alabama Bank. Griese-Traylor alleges that after an oral agreement had been reached, the Bank broke its promise and entered into a contract with the Stolls. The complaint seeks compensatory damages from the Bank for breach of contract (Count V), and compensatory and punitive damages from all three defendants for intentional interference with Griese-Traylor's contractual (Count IV) and business (Count III) relations and for conspiracy to tortiously interfere with business (Count I) and contractual (Count II) relations. We affirm the district court's grant of summary judgment on all counts.

I. Background

The facts, as derived during extensive pretrial discovery and viewed in the light most favorable to Griese-Traylor, are as follows:

In October 1973, plaintiff Griese-Traylor learned from Henry Long, a Bank trust officer, of the possible availability for purchase of mineral rights in a 15,875 acre tract of land in Tennessee. Griese-Traylor offered to enter into a one-year option agreement for acquisition of the mineral rights, at an option price of $1.50 per acre and a purchase price of $15 per acre. In January of 1974, plaintiff had its attorney send the Bank a proposed option contract agreement. Long knew that Griese-Traylor proposed to sell part of its option rights to AMAX Coal Company, as it had in prior transactions with the Bank.

Around the same time, the Stolls learned that the mineral rights were for sale. The Stolls offered to buy the rights for Consol. Consol took no action on the offer until February 1974, when it learned that AMAX, its competitor, was acquiring mineral interests in property around the Bank's property. At that point, Consol entered into an agreement with the Stolls, which called for the Stolls to purchase the mineral rights from the Bank and immediately lease them to Consol for a profit. The Stolls began negotiating with the Bank. On February 18, 1974, the Stolls presented a check for $40,000 as earnest money and a conditional sales contract (which the Bank had told the Stolls it preferred to an option contract), calling for $2.50 per acre for a one-year option and $20 per acre as the purchase price.

Long told Griese-Traylor that he had a higher offer than Griese-Traylor's offer, and invited plaintiff to make a better offer. On February 26, Long talked with plaintiff on the telephone and Griese-Traylor offered a one-year option price of $4 per acre and purchase price of $25 per acre. This proposal was subject only to the approval of AMAX, and it was agreed that plaintiff would notify the Bank of AMAX's decision by March 22. Long accepted this oral offer with the condition precedent. This oral option contract is the crux of this case.

On March 18, Long told Traylor that he would mail him an acceptable form of contract. This was in the form of a conditional sales contract, rather than an option. The contract contained many blanks and some price figures different from those that had been discussed, so plaintiff could not have just signed and returned the document to the Bank. On March 22, Traylor called Long to say that AMAX had approved, thus satisfying the condition precedent. Long said he would check "upstairs" to see how plaintiff would have to deliver the $64,000 option price. When Traylor called back, Long told him the Bank had another offer (from the Stolls) which included a check as earnest money, and therefore, unless plaintiff could get a check to him that day, the Bank would accept the Stoll offer instead. It was impossible for plaintiff to get a check to the Bank on that day. The Bank entered into a written contract for the sale of the mineral option rights to the Stolls that same day, March 22.

II. Breach of Contract (Count V)

The district court correctly held that the oral contract between Griese-Traylor and the Bank is unenforceable because the statute of frauds requires option contracts for the sale of land to be in writing. This is true, regardless of whether the Tennessee or Alabama statute of frauds applies.

Since this is a diversity case, the federal district court is required to follow the conflict of laws rules of the state in which it sits, here Alabama. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496-497, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Alabama generally judges the validity of a contract by the law of the state where the contract was entered into or, where the contract is to be performed in another jurisdiction, by the law of the state of performance. J. R. Watkins Co. v. Hill, 214 Ala. 507, 108 So. 244, 245 (1926). Where land is concerned, however, Alabama appears to apply the "lex loci rei sitae " rule: all matters involving title to land (such as descent, alienation and transfer of property) are governed by the law of the state where the real property is located. See Hall v. Proctor, 242 Ala. 636, 7 So.2d 764, 768 (1942); Phillips v. Phillips, 213 Ala. 27, 104 So. 234, 236 (1925); Nelson v. Goree's Adm'r, 34 Ala. 565, 579 (1859). Griese-Traylor contends this is an executory contract, to be performed in Alabama, and hence is governed by Alabama law and the Alabama statute of frauds. The district court found the option contract involves an interest in Tennessee land, and thus covered by the Tennessee statute of frauds.

Whether the Alabama or Tennessee statute of frauds is applied, however, the result will be the same. Under both states' statutes of frauds, an oral option contract involving realty is unenforceable.

The Alabama statute of frauds provides that "every contract for the sale of lands, tenements, or hereditaments, or any interest therein" is void unless such agreement is in writing. Ala.Code tit. 20, § 3(5). The Tennessee statute, Tenn.Code Ann. § 23-201(4), is to the same effect. In both states, a contract for the sale of a mineral interest is a contract for the sale of an interest in lands, tenements, or hereditaments, and thus covered by the statute. Riddle v. Brown, 20 Ala. 412, 417-418 (1852); Price v. Tennessee Products & Chemical Corp., 53 Tenn.App. 624, 384 S.W.2d 301 (1964). The only question then is how each state treats an oral option contract for the purchase of land.

The district court ruled that Tennessee, if presented with the question, would follow the majority of decisions which hold that an option to buy real property comes within the proscription of the statute of frauds. See 37 C.J.S. Statute of Frauds § 117. Griese-Traylor has not, before this Court or below, challenged the district court's interpretation of Tennessee law.

Griese-Traylor contends, however, that Alabama would not follow the majority rule. In plaintiff's view, an oral option on realty is not subject to the Alabama statute of frauds, since an option does not create an interest in land under Alabama law. In support of its position, Griese-Traylor cites Fullenwider v. Rowan, 136 Ala. 287, 34 So. 975 (1903), which says that an option "is not an estate in land and an option is not a contract of sale." 34 So. at 979. When the language Griese-Traylor quotes from Fullenwider is put in context, it is clearly inapposite to the present situation. In Fullenwider, defendants gave plaintiff Fullenwider a written option to buy their land for.$19,000 within 60 days. Fullenwider paid $500 for the option. Within the option period, he paid another $7,500, and a second written contract was drawn up, giving Fullenwider a year to pay the remaining $12,000 purchase price plus interest. Plaintiff did not pay the $12,000 within the year, but did tender it soon thereafter. Defendants contended that the second contract was also an option, in which time is of the essence, and the plaintiff not having timely exercised it, the defendants could keep all moneys paid under it. The court decided that the second contract exercised the first option and was itself an agreement to sell lands in which time was not of the essence, so that plaintiff was entitled to the property on payment of the full purchase price. It was in this context that the court differentiated among the three possible transactions in land:

A transaction between two, may be, (1) a sale of lands; (2) an agreement to sell lands, or, (3) what is generally called an option. . . . "The first is an actual transfer of the title from the grantor to the grantee by appropriate instrument of conveyance; the second is a contract to be performed in the future, and if fulfilled, results in a sale; it is preliminary to the sale, and is not a sale. . . . The third, an option, originally is neither a sale nor an agreement to sell. It is simply a contract by which the owner of property agrees with another, that he shall have the right to buy the property at a fixed price within a time certain. He does not sell his...