Indus. Dev. Bd. of the City of Montgomery v. Russell

• Decision Date: 12 August 2011
• Docket Number: 1091215
• Parties: The Industrial Development Board of the City of Montgomery v. George Earl Russell et al. and Price McLemore et al.
• Court: Alabama Supreme Court

The Industrial Development Board of the City of Montgomery

v.George Earl Russell et al. and Price McLemore et al.

1091215

SUPREME COURT OF ALABAMA

SPECIAL TERM, 2011

Date: August 12, 2011

Notice: This opinion is subject to formal revision before publication in the advance sheets of Southern Reporter. Readers are requested to notify the Reporter of Decisions, Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-0649), of any typographical or other errors, in order that corrections may be made before the opinion is printed in Southern Reporter.

Appeal from Montgomery Circuit Court

(CV-04-3282; CV-05-1728)

MURDOCK, Justice.

The Industrial Development Board of the City of Montgomery ("the IDB") appeals, pursuant to Rule 5, Ala. R. App. P., from the Montgomery Circuit Court's interlocutory order denying its motion for a summary judgment as to thebreach-of-contract claims asserted against it by George Earl Russell and Thomas E. Russell, as coexecutors and cotrustees of the wills and testamentary trusts of Earnest W. Russell and Myrtis Russell ("the Russells") (case no. CV-04-3282), and by Price McLemore, Mary H. McLemore, John McInnis, Jr., Timothy N. McInnis, Charles R. McInnis, William S. Newell, and the Peoples Bank and Trust Company, as trustee for the Adaline Hooper Trust A and B ("the McLemore group") (case no. CV-05-1728) (the plaintiffs in both cases are hereinafter collectively referred to as "McLemore/Russell"). We affirm the order of the trial court.

I. Facts and Procedural History

Our opinion in McLemore v. Hyundai Motor Manufacturing Alabama, LLC, 7 So. 3d 318 (Ala. 2008), provides a detailed rendition of the facts that culminated in the filing of the instant actions by McLemore/Russell against the IDB and Hyundai Motor Manufacturing Alabama, LLC ("Hyundai"). We provide here a summary of facts sufficient to an understanding of the arguments presented in this appeal.

In September 2001, various officials of the State of Alabama, the City of Montgomery ("the City"), the MontgomeryCounty Commission ("the County"), the Montgomery Area Chamber of Commerce, and the Montgomery Water Works Board began making preparations to secure options to purchase property in the Montgomery area to create an incentive package in the hope that they could persuade Hyundai to build an industrial plant in the Montgomery area for the purpose of manufacturing and assembling motor vehicles. A significant parcel of land was an essential component of any incentive package. B.M. Ahn, the Hyundai representative in charge of the site selection for Hyundai's United States plant, testified during his deposition that a critical element of an incentive package offered to an automobile manufacturer was "free land" on which to locate its plant.

The Russells owned approximately 328 acres of land in Montgomery County. In the fall of 2001, Reuben Thornton, the chairman of the IDB, signed an option agreement on behalf of the IDB for the purchase of the Russells' property. In February 2002, Thornton, on behalf of the IDB, signed an option agreement with the McLemore group for the purchase of approximately 54 acres of land near the Russell property. Thornton also secured on the IDB's behalf options to purchaseapproximately 320 acres from Southdale, LLC, and approximately 807 acres from Helen Kathryn Wheeler and William Newton Phillips, as trustee under the Doris R.H. Phillips Revocable Living Trust Agreement dated February 21, 2001 ("Wheeler/Phillips"). During the acquisition process, the IDB approached Joy Shelton about an option to purchase her property; however, she refused to enter into an option agreement. The IDB decided that the Shelton property was not necessary for the incentive package.

Each of the option agreements was identical, providing for an option period of 120 days and providing that "in no event shall the purchase price be less than $4,500 per acre and further provided that the purchase price shall in no event be less than the price per acre paid to any other landowner included in the project planned for the Property."¹ In early 2002, the option agreements on the property owned by the Russells, Southdale, and Wheeler/Phillips were amended to provide:

"1. It is hereby agreed that the purchase price for the Property is Four Thousand Five Hundred and No/100 Dollars ($4,500.00) per acre. The exactnumber of acres to be determined by the survey provided by Purchaser.

"2. The option period is hereby extended for a period of 120 days from the Effective Date of the Option, which Effective Date is October 3, 2001. The expiration date of the Option, as extended, is now May 31, 2002.

"3. Except as amended hereby, the Option is in all other respects ratified and confirmed."

In March 2002, Hyundai changed the location of rail access to its proposed plant, which required the acquisition of the Shelton property. Mayor Bobby Bright, then mayor of the City and in that capacity an ex officio member of the IDB, was selected as the main representative to meet with Shelton to acquire an assignable option agreement designating the City as the purchaser of the Shelton property. Bright obtained an assignable option designating the City, not the IDB, as the purchaser of the property; the purchase price of the property was $12,000 per acre.

On April 15, 2002, in conformance with option agreements with the Russells, the McLemore group, Southdale, and Wheeler/Phillips, the IDB gave those property owners notice that it was exercising the options on their properties at a price of $4,500 per acre. The IDB then assigned the optionsto the City and the County. On May 14, 2002, the City and the County purchased the properties for $4,500 per acre.

The City never exercised its option on the Shelton property. Instead, on May 31, 2002, the day the option agreement on the Shelton property was to expire, CSX Transportation, Inc. ("CSX"), the rail company, entered into a real-estate sales contract for the purchase of the property at $12,000 per acre. When Hyundai learned that CSX, and not the State, was to pay for the rail installation and that Hyundai would be expected to enter into a long-term contract with CSX, Hyundai decided to install the rail using its own funds. As a result of Hyundai's decision not to involve CSX in the rail installation, CSX assigned the real-estate sales contract on the Shelton property to Hyundai. According to the assignment contract, CSX assigned the contract to Hyundai on May 28, 2002, three days before the real-estate sales contract between CSX and Shelton was executed. On July 12, 2002, funds were transferred from the Alabama Incentives Financing Authority to Hyundai to pay for the Shelton property, and Hyundai purchased the property.

Subsequently, the Russells and the McLemore group each filed a breach-of-contract action in the Montgomery Circuit Court against the IDB and Hyundai, alleging that the IDB and Hyundai had breached the most-favored-nation clause in the option agreements by not paying them $12,000 per acre for their property. The IDB and Hyundai filed a motion for a summary judgment in each of these actions, which the trial court granted. The Russells and the McLemore group appealed; this Court consolidated the appeals for the purpose of writing one opinion.

This Court affirmed the trial court's judgment in part and reversed it in part. Specifically, the Court reversed the summary judgment for the IDB as to the Russells' breach-of-contract claim because "a question for the jury exists as to whether the amended option agreement modified or waived the most-favored-nation clause in the Russells' original option agreement." McLemore, 7 So. 3d at 334. The McLemore Court also held that "the Russells' and the McLemore group's breach-of-contract claims are not barred by the doctrine of merger." 7 So. 3d at 336. Finally, the McLemore Court concluded that

"the provisions, '[i]f Purchaser elects to exercise this Option the purchase price for the Property shall be determined as follows' and 'the purchase price shall in no event be less than the price per acre paid to any other landowner included in the project planned for the Property' are ambiguous because reasonable persons could differ on whether 'the price per acre paid to any other landowner included in the project' refers to a purchase price paid only by the IDB or to a purchase price paid by any purchaser for property included in the project. ... Because reasonable persons can differ on the meaning of the clause, i.e., whether the language 'price per acre paid to any other landowner included in the project' obligated the IDB to pay the Russells and the McLemore group $12,000 per acre and whether the Shelton property was included as part of the project site, the evidence presents questions for the jury to resolve . . . . "

7 So. 3d at 338-39.

Southdale and Wheeler/Phillips also filed an action in the Montgomery Circuit Court; they alleged fraud, suppression, breach of contract, rescission, and conspiracy against multiple defendants including the IDB, Thornton, the City, the County, and others, charging that the defendants had conspired to purchase the Shelton property at a higher price than was paid for their property and conspired to do so without complying with the most-favored-nation clause contained in the option agreements. On November 2, 2007, the trial court entered a summary judgment in favor of the defendants onSouthdale's and Wheeler/Phillips's tort claims on the basis that those tort claims were barred by the applicable statute of limitations. On November 20, 2007, the trial court entered a summary judgment in favor of the defendants on all remaining claims. Southdale and Wheeler/Phillips appealed from the summary judgments.

That appeal was addressed in Wheeler v. George, 39 So. 3d 1061 (Ala. 2009). Based on statements made by this Court in Wheeler, the IDB filed a motion for a summary judgment in the McLemore/Russell actions, asking the trial...