Steward v. Champion Intern. Corp., 91-7943

• Decision Date: 07 April 1993
• Docket Number: No. 91-7943,91-7943
• Citation: 987 F.2d 732
• Parties: Myrtle P. STEWARD, Earline Odom, Cessa Sellers, Hugh Caffey, Jr., Hugh G. Rosell, Jr., Brooks Garrett, Plaintiffs-Appellants, v. CHAMPION INTERNATIONAL CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 732

987 F.2d 732

Myrtle P. STEWARD, Earline Odom, Cessa Sellers, Hugh Caffey Jr., Hugh G. Rosell, Jr., Brooks Garrett Plaintiffs-Appellants, v. CHAMPION INTERNATIONAL CORPORATION, Defendant-Appellee.

No. 91-7943.

United States Court of Appeals Eleventh Circuit.

April 7, 1993.

Sidney H. Schell, W. Dewitt Reams, Mobile, AL, for plaintiffs-appellants.

G. Sage Lyons, Charles D. Miller, Mobile, AL, for defendant-appellee.

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

Before ANDERSON, Circuit Judge, MORGAN and JOHNSON, Senior Circuit Judges.

MORGAN, Senior Circuit Judge:

This case arises out of a breach of contract claim filed by plaintiffs-appellants involving the interpretation of a timber purchase agreement. The district court granted summary judgment in favor of the defendant-appellee. We REVERSE.

FACTUAL BACKGROUND

On April 1, 1958, a timber purchase agreement (hereinafter "TPA" or "agreement") was entered into by and between Frank A. Steward and Lula Minnie Steward as "seller" and Saint Regis Paper Company as "purchaser". The agreement covered land in Escambia County, Alabama, and was for a term of 60 years, beginning April 1, 1958, and continuing until December 31 2018. The plaintiffs-appellants in this action are the heirs and descendants of Frank A. Steward and Lula Minnie Steward under the contract. The appellee, Champion International Corporation (hereinafter "Champion") is the surviving corporation as the result of a merger with Saint Regis Paper Company, and as such was assigned the rights of Saint Regis Paper Company in the underlying TPA.

On December 31, 1988, Champion exercised its option to terminate the agreement early. ¹ On June 15, 1990, the appellants filed the instant action alleging that Champion breached the TPA in that it did not leave a sufficient volume of timber on the property as required by the agreement and that Champion wrongfully cut and removed hardwoods as part of Champion's "timber backlog". On August 6, 1990, Champion filed a motion to compel arbitration asking the district court to order appellants to settle the claims underlying this action through arbitration as provided by the TPA. ² Both parties agreed that arbitration was proper on the claim of whether Champion did in fact leave the proper volume of timber on the land upon termination of the agreement. However, the district court stayed the arbitrable claim pending resolution of the parties' cross-motions for summary judgment regarding the claims which were not subject to arbitration; namely, whether Champion was required to leave a volume of timber on the land, and whether Champion had the right to cut hardwood as part of the timber backlog. The district court granted summary judgment in favor of Champion on both issues.

STANDARD OF REVIEW

As a threshold matter, we must review the district court's determination that the timber purchase agreement was unambiguous. Although neither party contends that the agreement is ambiguous, under Alabama law, the determination of whether a contract is ambiguous is a question of law for the court. Terry Cove North, Inc. v. Baldwin County Sewer Auth., Inc., 480 So.2d 1171, 1173 (Ala.1985). A question of law is subject to plenary review before this court. Cathbake Investment Company, Inc. v. Fisk Electric Company, Inc., 700 F.2d 654, 656 (11th Cir.1983). When an agreement's terms are clear and certain, the court has the duty to determine the meaning of the agreement. Terry Cove, supra. The fact that the parties adopt conflicting interpretations of the contract in the throes of litigation does not create ambiguity where none exists. Hill Air of Gadsden, Inc. v. City of Gadsden, 467 So.2d 230, 233 (Ala.1985).

Upon careful review, we agree with the district court that the TPA is unambiguous. The agreement states in clear and plain language that the rights and privileges of Champion to remove timber after termination of the agreement are governed by paragraph 1B. Paragraph 1B is just as clear in delineating what those rights are. The agreement does not become ambiguous simply because some of the relevant terms used in paragraph 1B are defined in other parts of the contract. We find that the relevant terms, as defined by the TPA, as well as the respective rights and obligations of the parties are unambiguous.

Having concluded that the TPA is unambiguous, the construction and effect of the agreement are questions of law which may be decided by summary judgment. Warrior Drilling & Eng'g Co. v. King, 446 So.2d 31, 33 (Ala.1984). Our review of a grant of summary judgment is plenary. Ryder Int'l Corp. v. First Am Nat'l Bank, 943 F.2d 1521, 1523 (11th Cir.1991).

I. TIMBER VOLUME

The first issue this Court shall address is whether the TPA required Champion to leave a volume of timber on appellants' property after termination of the agreement. Appellants argue that the TPA provided, in essence, that upon termination of the agreement and return of the land to appellants, there would be a sufficient volume of pine timber on the property to produce an average annual growth of 1479 cords. Appellants contend that the volume of timber that could be cut by Champion was limited by the agreement to an amount that would not reduce the average annual growth to an amount less than 1479 cords of pine pulpwood. Appellants claim that Champion breached the TPA by failing to manage the land and timber so as to insure an annual growth of 1479 cords. ³ Champion responds that there is no provision in the contract imposing an obligation on Champion to leave any volume of timber on appellants' property.

The district court, in granting summary judgment in favor of Champion, relied heavily on the absence of any volume requirements in the termination clause of paragraph 1B. ⁴ The lower court reasoned that any volume requirements imposed under paragraph 4B were inapplicable in the event of termination under paragraph 1B. We do not agree. We conclude that the TPA imposed restrictions on the volume of pine timber which could be cut annually which had the effect of requiring Champion to leave the original volume of pine timber on the land after termination of the agreement.

Champion is correct in asserting that there are no express provisions directly imposing an obligation on Champion to leave a specific volume of pine timber standing. In fact, the agreement clearly allows Champion to cut and remove as much hardwood timber as it desired during the term of the agreement, consistent with the requirement to use good forestry practices. ⁵ Consequently, Champion was under no obligation to leave any volume of hardwood timber on the land upon termination of the agreement. ⁶ The same is not true with respect to pine timber. The TPA imposed specific restrictions on the amount of pine timber which could be cut and removed annually. By limiting the amount of pine timber that could be cut and removed, the agreement prohibited Champion from reducing the original volume of timber.

Initially, Champion was required to purchase, and allowed to cut and remove, 1479 cords of pine pulpwood annually. ⁷ The annual purchase price was based on the estimated average annual growth of pine pulpwood as calculated by periodic cruises. ⁸ If the most recent cruise estimated the annual growth of pine timber to be less than 1479 cords, then Champion was restricted to cutting the lesser amount. ⁹ Likewise, if the estimated annual growth was greater than 1479 cords, then Champion was authorized to cut the greater amount.

The plain language of the TPA shows that the parties intended that Champion pay for, and be allowed to cut, the annual growth of pine pulpwood. The amount of pine timber which Champion had a right to cut and remove could never exceed the amount of pine timber estimated to be grown that year plus any uncut pine timber placed in the backlog and carried over from previous years. Since the subject property had a standing volume of pine pulpwood at the commencement of the contract and since Champion was only authorized to purchase and either harvest or place in its backlog the annual average growth of pine pulpwood, then there must necessarily remain at the termination of the contract, a volume of pine pulpwood sufficient to maintain the estimated average annual growth of 1479 cords of pine pulpwood.

The TPA was similar to a trust fund where the beneficiary is entitled to withdraw the annual interest but cannot infringe upon the corpus of the trust. Each year the beneficiary can withdraw the interest earned or allow it to remain in the trust and grow, but the beneficiary can never withdraw more than the total accumulated interest. Likewise, each year Champion could cut and remove an amount of pine timber equal to the annual growth, or it could leave some or all of that amount on the land and allow it to grow. The annual growth, like interest rates, was subject to change from year to year. Nevertheless, Champion could not infringe upon or reduce the original volume of pine timber on the property.

We do not reach the issue of whether Champion did in fact leave the proper volume of pine pulpwood on appellants' property. Both parties agree that this issue is subject to arbitration under the TPA. However, the district court ruling implies that Champion's termination under paragraph 1B cured any defects which may have existed at the time of termination. Termination under paragraph 1B released both parties from the "terms, provisions and obligations imposed upon them", but it did not excuse either party from responsibility for breach of the agreement which may have occurred prior to termination. We hold that if Champion did not leave a sufficient volume of pine pulpwood on the land at the time of termination of the TPA, then it was in breach of the agreement. Our holding should make clear that absent a breach of the TPA, there should be a sufficient volume on the property to maintain...