Rannells v. Graham
| Decision Date | 26 August 1983 |
| Citation | 439 So.2d 12 |
| Parties | Gerald D. RANNELLS v. Ray GRAHAM, et al. AMERICAN COAL ENERGIES, INC., et al. v. Ray GRAHAM, et al. 81-382, 81-383. |
| Court | Alabama Supreme Court |
Robert B. French, Jr., for Appellant Gerald D. Rannells, Fort Payne, Morris W. Savage and Charles R. Stephens of Bankhead, Savage & Stephens, Jasper, for appellant American Coal Energies, Inc. and Shirl McArthur.
Harvey Jackson, Jr. of Tweedy, Jackson & Beech, Jasper and James K. Davis of Fite, Davis & Atkinson, Hamilton, for appellees.
These consolidated appeals involve a suit on a promissory note and a suretyship agreement. The trial court granted judgment on a jury verdict of $1,240,000.00 against the corporate maker of the note and $488,250.00 against the individual defendants who signed as sureties for the corporation. In addition to questions as to the validity of these instruments, the case presents questions regarding the pre-trial hearing and the instructions to the jury.
On December 3, 1974, Bama Coal Company, Inc., was organized as an Alabama corporation and began producing coal about the same time. The original incorporators were Ray Graham, Kenneth Watts, Dewel Emerson, T.C. Evans, and Douglas Tittle. Kenneth Watts later left the group and T.C. Evans bought his shares of stock. Dennis Mills later became a shareholder of the corporation. These individuals, other than Watts, are the plaintiffs/appellees in these consolidated appeals. They are residents of Marion County, which is the area where Bama Coal operated.
After Bama Coal was incorporated, the price of coal in the area dropped from forty dollars to eighteen or twenty dollars per ton, and the company began to experience financial difficulties. Dennis Mills came to the company to manage it and put it on sounder financial ground. Bama Coal never had a long-term contract but operated only on the spot market. The Kimberly-Clark paper mill in Childersburg bought some coal from Bama Coal, but stopped purchasing because of the high ash content of the coal.
In spite of Bama Coal's difficulty in selling its coal, it attracted several prospective buyers interested in purchasing the company. One group put up an irrevocable letter of credit for $100,000.00 as earnest money for a proposed purchase of Bama Coal. That purchase fell through, however, and payment of the letter of credit was refused on demand.
In January of 1976, Gerald Rannells of Lake Oswega, Oregon, came to Alabama in search of coal properties to lease or buy. He heard that Bama Coal might be for sale, so he came to Marion County where he met Ray Graham and Paul Ray. The officers of Bama Coal showed Rannells their equipment, facilities, coal stockpile, and some financial information. They estimated that their coal stockpile was worth approximately $100,000.00.
Rannells was working with Shirl McArthur, of Huntington, Utah. McArthur was the primary owner of American Coal Company, which conducted a large underground coal mining operation in Utah. McArthur, Rannells, Kenneth Morgan, and Robert Harris began discussions in early 1975 relative to forming a corporation to purchase coal interests in the southeast. Harris was an attorney from Jeffersonville, Indiana, with coal investments in Kentucky, Tennessee, and West Virginia. Morgan was from Tennessee and had business with Harris investing in and developing coal mines. These four individuals formed American Coal Energies, Inc., the corporation which bought Bama Coal.
After Rannells first visited Bama Coal in January of 1976, McArthur sent two employees of his Utah company to look into the possibility of buying Bama Coal: Lavon Day, a mine safety and personnel manager, and John Parker, an accountant. They briefly met with officials of Bama Coal and inspected the Bama Coal premises, and they were given a list of Bama Coal's accounts payable totalling approximately $267,000.00. After about two days in Alabama, they returned to Utah and reported to McArthur.
The parties reached an agreement to sell the stock of Bama Coal Company to American Coal Energies, Inc. A written contract, promissory note, bill of sale, and suretyship agreement were prepared as evidence of this agreement. Kenneth Morgan, as president of American Coal Energies, signed the contract and promissory note, attested by Lavon Day, on February 23, 1976. All of the stockholders of Bama Coal signed the contract as sellers. The contract and note provided, among other things, that the shares of stock in Bama Coal Company would be transferred to American Coal Energies for the sum of $810,000.00, which was to be paid according to the terms of the promissory note. A portion of the purchase price was to be guaranteed by the shareholders of American Coal Energies, Inc. The accounts payable of Bama Coal were represented to be approximately $267,000.00, against which a $100,000.00 credit for stockpiled coal was to be applied. An addendum, containing terms not material here, was later added to the contract.
On March 5, 1976, the parties met at the law office of Vinson & Guyton in Hamilton, Alabama, to close the transaction. The Bama Coal stockholders and their attorney were present, as were Rannells, McArthur, Morgan, and J. Curtis, an attorney for American Coal Energies, Inc.; Harris was not present. Rannells, McArthur, and Morgan signed the suretyship agreement. At trial they asserted that they signed as sureties only on condition that Harris also sign, but there was evidence to the contrary, as will be explained below. Jerry Guyton, the attorney for Bama Coal, held the documents in escrow pending the signature by Harris of the suretyship agreement. There was evidence that McArthur told Rannells to obtain Harris's signature.
Guyton testified that a few weeks later McArthur called him to learn if Harris had signed, and Guyton answered in the negative. Shortly thereafter, according to Guyton, Rannells came to his office and took the suretyship agreement. Rannells returned a few days later with a signature on the document that purported to be Harris's. Rannells and McArthur disputed this version of events at trial, but the parties agreed that on April 8, 1976, Guyton delivered the documents, except for the suretyship agreement, to Rannells, who signed a receipt for them. Guyton testified that he did not deliver a copy of the suretyship agreement to Rannells because, Rannells having brought the signed original to him, he assumed Rannells had made a copy to keep.
American Coal Energies took the books of Bama Coal to a new office within a few days of the March 5 closing and John Parker began verifying the accounts payable. He arrived at a figure of $388,000.00. Furthermore, the bank on which the letter of credit was drawn refused to honor it, and American Coal Energies was unable to sell the coal stockpile. American Coal Energies made one payment of $10,000.00 on the amount due under the contract and note.
The former stockholders of Bama Coal filed this suit on January 12, 1979. The complaint sought $810,000.00 plus interest and attorneys' fees from American Coal Energies, Inc., and $325,000.00 (the amount secured under the suretyship agreement) from Rannells, McArthur, Harris, and Morgan. Default judgment was taken against Harris; Morgan was dismissed as a party when plaintiffs learned that he had died in a plane crash. McArthur and American Coal Energies were represented by the same counsel throughout the pleading, trial and appeal of the case. Rannells was and is represented by separate counsel.
Several continuances were granted during the course of pleading and discovery. McArthur and American Coal Energies filed a counterclaim for fraudulent misrepresentation of the accounts payable and the value of the letter of credit and the coal stockpile. They filed motions for a pretrial conference on February 4, 1980, and March 30, 1981. McArthur and American Coal Energies state that they filed a third motion for pretrial conference on October 5, 1981, and that they have a copy of this motion marked "filed" even though it does not appear in the record.
Trial was set for November 9, 1981. On October 20, 1981, the attorneys for the plaintiffs and for McArthur and American Coal Energies appeared before the court for a pretrial conference. Because Rannells's attorney was not present, the parties agreed to have an oral conference at a later date. On November 4, a motion for continuance by McArthur and American Coal Energies was filed; they state that they filed this motion on October 20. The court entered the following order on November 4, 1981:
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