Indus. Dev. Bd. of Montgomery v. Russell

• Decision Date: 29 March 2013
• Docket Number: 1091215.
• Citation: 124 So.3d 127
• Parties: The INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MONTGOMERY v. George Earl RUSSELL et al.
• Court: Alabama Supreme Court

124 So.3d 127

The INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF MONTGOMERY

v.George Earl RUSSELL et al.

1091215.

Supreme Court of Alabama.

March 29, 2013.

Thomas T. Gallion III and Constance C. Walker of Haskell Slaughter Young & Gallion, LLC, Montgomery; and Jesse P. Evans III of Haskell Slaughter Young & Rediker, LLC, Birmingham, for appellant.

Randy Myers and Frank H. Hawthorne, Jr., of Hawthorne & Myers, LLC, Montgomery, for appellees.

Kimberly O. Fehl, Legal Department, City of Montgomery, for amicus curiae City of Montgomery in support of the appellant's application for rehearing.

Tyrone C. Means of Thomas Means Gillis & Seay, PC, Montgomery, for amicus curiae Montgomery County Commission, in support of the appellant's application for rehearing.

On Application for Rehearing

MURDOCK, Justice.

The opinion of August 12, 2011, is withdrawn and the following is substituted therefor.

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 the breach-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 opinions in McLemore v. Hyundai Motor Manufacturing Alabama, LLC, 7 So.3d 318 (Ala.2008), and Wheeler v. George, 39 So.3d 1061 (Ala.2009), provide detailed renditions 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 quote here portions of those opinions and summarize other pertinent facts necessary to an understanding of the arguments presented in this appeal.

In September 2001, various State and local officials, including officials from the City of Montgomery (“the City”), the IDB, the Montgomery County Commission (“the County”), and the Montgomery Area Chamber of Commerce, 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. As we explained in Wheeler:

“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 the 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. Ahn also stated that Hyundai had no role in acquiring the land and that land acquisition for an incentive package was the responsibility of the city or the state putting the package together. Officials of the City, the County Commission, and the IDB signed a letter of intent stating that they, ‘in partnership with the State,’ would commit to provide an industrial site at no cost to Hyundai.”

39 So.3d at 1069.

As noted in McLemore, however, “[a]lthough the funds to purchase the property were to be provided by the City and the County only, the option agreements on the property were acquired by the IDB.” 7 So.3d at 322. As we further explained, the IDB's participation was necessary in order that the transaction “ ‘comply with laws for tax breaks and incentives to the industry.’ ” 7 So.3d at 322 n. 1 (quoting the IDB's brief).

The Russells owned approximately 328 acres of land in Montgomery County. In the fall of 2001, Reuben Thornton, who was then 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 purchase approximately 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”).

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 purchaseprice 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 exact number 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.”

During the acquisition process, another landowner, Joy Shelton, was approached about an option to purchase her property; ² however, she refused to enter into an option agreement. At that point,

“[t]he IDB decided that the Shelton property was not necessary for the incentive package. By mid-March 2002, the IDB determined that it was not going to designate any additional funds, other than the funds already committed, to this particular project. The State and the IDB sent the incentive package, including the proposed project site, to Hyundai for consideration.

“On March 28, 2002, [however,] Ahn contacted Todd Strange, then the director of the Alabama Development Office. He stated that Hyundai had not decided whether to locate the plant in Montgomery or in Kentucky but that additional property would need to be acquired for the rail access Hyundai required if Montgomery was to be selected as the site for the Hyundai plant. Ahn informed Strange that he would need an answer by noon of the next day as to whether the property could be acquired. Strange met with various State, City, and County officials to discuss Hyundai's request. Recognizing that the City and the County would not provide additional funds to acquire more property and that the other option agreements contained most-favored-nation clauses, they decided to ask CSX Transportation, Inc., the rail company, to acquire the option to purchase the Shelton property.”

McLemore, 7 So.3d at 323.

As explained in McLemore, in response to an inquiry by an official at the Alabama Development Office, a representative of CSX Transportation, Inc., responded with the following e-mail:

“ ‘Regarding the [Shelton property] that will need to be purchased, you asked if CSX would be willing to buy this property for the State and Montgomery at approximately $8,000.00 an acre. There is no contract or option on the property currently and you estimate it will cost us approximately $750,000.00 which you are willing to refund to us in some fashion during the track construction phase. Randy Evans, [another CSX official,] in principle agreed to this and I ask that you fax us a letter outlining exactly what you have in mind. The purpose of doing it this way rather than what you did in getting control of the other 1600 acres is to avoid paying the other landowners $8,000.00 an acre which would have a negative impact of $10,000,000.00 on the site cost. The railroad does not get good land values in a situation like this and so I think there will be upward pressure on that $8,000 number. Moreover, the other landowners will get wind of this ploy and may create negative community publicity.... In your letter to us we would ask that you indicate exactly how you intend to pay us during the track work construction.”

7 So.3d at 324 (footnote omitted).

Subsequently, 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 that would name the City, rather than either the IDB or CSX, as the purchaser of the Shelton property. Bright obtained an assignable option naming the City 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 options to the City and the County. On May 14, 2002, the City and the County purchased the properties for $4,500 per acre.

As for the Shelton property, we further explained in McLemore as follows:

“The City never exercised its option on the Shelton property. On May 22, 2002, Henry Mabry, then director of finance for the State, sent Ahn a letter confirming that the State would be funding the purchase of the Shelton property, stating:

“ ‘This is to confirm that the State of Alabama will provide the funding for the purchase of the 93 acres set aside for Hyundai's rail yard on the date of closing. This will obviate any need for Hyundai to borrow to pay for this acquisition. In addition, the State will pay the reasonable due...