RIVER CONSERV. CO. v. Gulf States Paper Corp.

• Decision Date: 31 May 2002
• Citation: 837 So.2d 801
• Parties: RIVER CONSERVANCY COMPANY, L.L.C. v. GULF STATES PAPER CORPORATION.
• Court: Alabama Supreme Court

837 So.2d 801

RIVER CONSERVANCY COMPANY, L.L.C. v. GULF STATES PAPER CORPORATION.

1001725.

Supreme Court of Alabama.

May 31, 2002.

John P. McClusky, Tuscaloosa, for appellant.

Clark Summerford of Zeanah, Hust, Summerford, Davis and Drayton Pruitt, Jr., of Pruitt, Pruitt & Watkins, Livingston, for appellee.

LYONS, Justice.

This is an appeal of a judgment declaring the rights of the parties under a lease of real property. On March 22, 1999, Gulf States Paper Corporation ("Gulf States") filed a declaratory-judgment action against River Conservancy Company, L.L.C. ("River Conservancy"). On October 27, 2000, the trial court entered a declaratory judgment in favor of Gulf States. River Conservancy appeals from that judgment.

I. Facts

On May 19, 1969, Gulf States entered into a timber purchase agreement with E.O. Eddins and Anne E. Eddins. Pursuant to the agreement, the Eddinses conveyed to Gulf States all of the timber on a tract of land in Sumter County, hereinafter referred to as "the Eddins tract." The purchase agreement provided, in pertinent part:

"Sellers hereby convey unto Buyer all of the existing timber of all sizes and descriptions, including all seedlings, saplings, trees, stumps and other forest growth, regardless of size or species...."

The purchase agreement gave Gulf States 40 years from the execution of the contract to remove all timber and forest products conveyed by the purchase.

On the same day, Gulf States entered into a lease agreement with the Eddinses, for a term of 40 years, beginning on May 19, 1969, and ending on May 18, 2009.¹ The lease agreement provided, in pertinent part:

"2. During the term of this Lease, Gulf States shall have all rights to grow, cut and to remove timber from the Premises (in addition to the timber separately conveyed by a timber purchase agreement between the parties hereto as of this date), and shall have the full and complete possession, use, control and enjoyment of the Premises, and all possessory rights with respect thereto, including agricultural rights, except only those rights hereinafter specifically reserved to Lessors.

"Without limiting the generality of the foregoing, Gulf States shall have the right to protect, cultivate, spray, thin, deaden and otherwise manage all timber and timber products on the premises and to cut, harvest, mill and process all timber and timber products ... which are now growing or shall come into existence during the term of this lease (in addition to the timber separately conveyed by the timber purchase agreement between the parties hereto as of this date), or to contract with others for such acts to be done, and to use, sell, or otherwise dispose of such timber and timber products for its benefit in such manner as it may elect."

Paragraph 19 of the lease agreement provided:

"Seed Trees

"19. For the purpose of re-stocking the land following the final harvest cut Gulf States will select from the then existing stand of timber a minimum of five (5) dominant or co-dominant trees per acre to be left as seed trees."

On April 2, 1997, Martha Anne Eddins Kelly, an heir of E.O. Eddins and Anne E. Eddins, assigned the lease agreement to Bony F. Barrineau. On April 16, 1997, Kelly conveyed the Eddins tract to Bony F. Barrineau by warranty deed. This conveyance was subject to the timber purchase agreement and the lease between Gulf States and the Eddinses. On May 21, 1997, Barrineau conveyed the Eddins tract to River Conservancy. This conveyance was also subject to the timber purchase agreement and the lease. The warranty deed expressly reserved Kelly's right to receive proceeds under the timber purchase agreement.

In 1998, Gulf States decided to exercise its rights under the timber purchase agreement to harvest timber on the Eddins tract. Representatives of Gulf States met with representatives of River Conservancy to discuss the timber harvest; however, a controversy arose over the restocking of the harvested timber. Specifically, a controversy arose over whether the "seed-tree" provision in paragraph 19 of the lease agreement applied to both hardwood trees and pine trees. River Conservancy claimed that paragraph 19 of the lease agreement required that Gulf States leave both hardwoods and pine trees on the property as seed trees. Gulf States contended that paragraph 19 referred only to pine trees, requiring that it select a minimum of five dominant or codominant pine trees per acre to be left as seed trees. According to Gulf States, at the time the lease was executed, hardwood trees were not regenerated using the "seed-tree" method; thus, Gulf States contended, at the time it entered into the lease agreement with the Eddinses, both parties intended that Gulf States was entitled to harvest all of the hardwood on the tract, and it was required to leave only pine seed trees after its final harvest.

As a result of the disagreement between the parties, Gulf States sought a judgment declaring the rights, status, obligations, and liabilities of Gulf States and River Conservancy with respect to the lease agreement and the timber purchase agreement. The complaint also requested the court to declare that Gulf States had the right under the lease agreement and the timber purchase agreement to harvest all timber on the Eddins tract and, after the final harvest cut, to restock the land using currently accepted forestry practices to be selected by Gulf States without interference by River Conservancy. Finally, Gulf States' complaint asked the court to declare that River Conservancy did not have a right to obtain Gulf States' plans and proposals regarding its timber management and timber harvesting. River Conservancy filed an answer and a counterclaim, asking the court to determine which trees Gulf States could and could not harvest; the extent to which River Conservancy was entitled to have knowledge of, and participate in, Gulf States' plan to harvest the timber; the scope of Gulf States' seed-tree-regeneration obligations to River Conservancy; the extent to which the lease agreement required Gulf States to respect and preserve River Conservancy's hunting and fishing rights on the Eddins tract; the extent to which River Conservancy was permitted to withdraw disputed parcels from any proposed harvest of timber; and the extent to which both parties were obligated to comply with environmental laws and principles existing to protect the land.

During the trial of the case, Gulf States presented two proposed timber-harvest cutting plans. Those plans were entitled "Timber Harvest Proposal Number One" and "Timber Harvest Proposal Number Two." Timber Harvest Proposal Number One would allow Gulf States to harvest 3 of the 16 compartments on the Eddins tract per year from 2001 through 2003. The plan provided for a harvest of two compartments in 2004, and one compartment per year from 2005 through 2009.

Timber Harvest Proposal Number Two would allow Gulf States to perform select cutting through each of the 16 compartments in the first 3 years, from 2001 through 2003. During this process Gulf States would cut and remove some of the timber it had purchased in 1969. The plan provided for a final harvest from 2004 through 2009, during which Gulf States would harvest all the timber in the hardwood areas and leave a minimum of five dominant or codominant seed trees in the pine-tree areas.

After a hearing on the matter, the trial court entered a judgment for Gulf States. The court concluded that Timber Harvest Proposal Number Two was "in keeping with the spirit and plain language of the lease." However, the court ordered Gulf States to leave both hardwood and pine seed trees to restock the Eddins tract. The court found that River Conservancy had actual notice of the existence of the timber purchase agreement and the lease agreement before it purchased the property and that it knew that the property was subject to the terms of the timber purchase agreement and the lease agreement. The court concluded that Gulf States had the right under the timber purchase agreement and the lease agreement to go upon the land to cut and remove timber to which it is entitled as a preliminary cut or cuts, leaving a sufficient number of hardwood trees and pine trees from which to select seed trees at the final harvest. The court held that Gulf States may return to conduct a final harvest cut before the lease expired and at that time shall select and leave at least five dominant or codominant seed trees per acre from the then existing stand. The court appointed Jim Jeter, an employee of the Alabama Forestry Commission, or his successor in office, to supervise Gulf States' final cut of the timber to ensure that the trees selected to be left are seed trees and that they are dominant or codominant trees of the then existing stand.

II. Did the trial court improperly consider extrinsic evidence to determine the intent of the parties at the time of the execution of the lease?

At trial Gulf States argued that paragraph 19 of the lease agreement was ambiguous because, it said, the provision did not specify the species of the seed trees it was required to leave after the final harvest. The trial court, in apparent agreement, allowed Gulf States to present several witnesses who testified that the term "seed tree" as that term was used in 1969 did not apply to hardwoods. The trial court also allowed Jack Loper, the vice president in charge of forestry at Gulf States when Gulf States entered into the lease agreement, to testify as to which species of trees Gulf States had intended that paragraph 19 refer to. Loper testified that the lease agreement was a form lease document Gulf States had used when there were pine trees on the land being leased. Loper testified that provisions such as paragraph 19 were not included in leases for land that had no pine trees on it. Loper also testified that at the time of the execution of the lease agreement, Gulf States did not intend for ...