Summit Cmty. Bank, Inc. v. Se. Land, LLC, CIVIL ACTION NO. 2:19-cv-00794
| Decision Date | 12 June 2020 |
| Docket Number | CIVIL ACTION NO. 2:19-cv-00794 |
| Court | U.S. District Court — Southern District of West Virginia |
| Parties | SUMMIT COMMUNITY BANK, INC., Plaintiff, v. SOUTHEASTERN LAND, LLC, et al., Defendants. |
Before the Court is Defendant Southeastern Land, LLC's ("Southeastern") Partial Motion to Dismiss. (ECF No. 47.) For the reasons discussed more fully herein, the motion is DENIED.
This action arises from a lease agreement, dated March 24, 2005, between Plaintiff Summit Community Bank, Inc. ("Summit") and Southern West Virginia Energy, LLC ("SWVE") for, among other things, the mining of coal from real property located in Mingo County, West Virginia ("the Lease"). (ECF No. 26 at 63-64 (Lease Agreement).) At the time the Lease was executed, Eagle Mining, LLC owned 51% of SWVE. (ECF No. 26 at ¶ 12 (Am. Compl).) Consol of WV, LLC, a wholly owned subsidiary of Consol I/CNX ("Consol"), owned the remaining 49% of SWVE. (Id.) Summit is the successor trustee of the Closterman Trust ("the Trust"). (Id. at 1.) Pursuant to the trust agreement establishing the Trust, Summit is vested with authority to "manage, control and operate all of the real estate . . . belonging to the trust Estate," including the authority to lease the surface and sub-surface rights of the property for oil, gas, coal, and other minerals. (Id. ¶ 2.)
Under the terms of the Lease, the Trust is to receive royalties for coal produced from the leased property. (Id. ¶ 23.) Additionally, SWVE was to perform the lessee's obligations supported by the financial backing of Consol. (Id. ¶ 13.) SWVE and Consol of Kentucky ("COK") later merged making COK the surviving company. Thus, COK became the lessee, and Consol retained its obligations under the terms of the Lease. (Id. ¶¶ 12-14, 17.)
In July 2016, COK and Southeastern Land, LLC ("Southeastern") entered into a purchase agreement, whereby COK agreed, among other things, to assign the Lease to Southeastern and to guarantee Southeastern's performance as lessee under the Lease. (Id. ¶ 19.) Thereafter, the parties effectuated the assignment by executing an assignment and assumption agreement on August 1, 2016. COK also executed a personal guarantee ensuring Southeastern's performance under the Lease. (Id. at 96-97 (Guarantee Agreement).) According to Section 18 of the Lease, any assignment of SWVE or COK's interest as lessee required Summit or its predecessor trustee's written consent, except as otherwise provided for in the Lease. (Id. ¶ 15.) COK never requested and neither Summit nor its predecessor ever gave consent to the assignment. (Id. ¶ 21.) Instead, Summit's predecessor-in-interest objected, and Summit continues to object to Southeastern as lessee. (Id. ¶¶ 21-22.)
On November 4, 2019, Summit brought this action against Southeastern, COK, and Consol asserting various claims related to the assignment of the Lease to Southeastern and the lessee's obligations under the Lease. Summit alleges that the assignment from COK to Southeastern was improper because Summit's predecessor-in-interest objected to the assignment and never providedwritten consent as required under Section 18 of the Lease. (Id. ¶¶ 15-16, 21-22.) Additionally, Summit alleges that Southeastern, as well as the other defendants, are in default with respect to the payment of royalties and accrued interest due under the Lease. (Id. ¶¶ 23-27.) Pertinent here, the operative complaint asserts claims against Southeastern for injunctive relief directing payment of past due royalties and to cease coal mining operations on the leased property1 (Count I), specific performance to compel immediate payment of all past due royalties owed to the Trust (Count III), breach of contract (Count IV), and breach of the implied covenant of good faith and fair dealing (Count VI). Summit also seeks declarations that the alleged assignment of the Lease to Southeastern is invalid and void, that COK remains the lessee under the Lease, and that Consol is liable for COK's performance under the Lease (Count VIII and Count IX).
On December 19, 2019, Southeastern filed the instant motion to dismiss. (ECF No. 47.) Summit filed a timely response on January 2, 2020. (ECF No. 50.) Southeastern has not filed a reply. As the deadline for filing a reply has elapsed, the motion is now ripe for adjudication.
In general, a pleading must include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2); see McCleary-Evans v. Md. Dep't of Transp., State Highway Admin., 780 F.3d 582, 585 (4th Cir. 2015) (). To withstand a motion to dismiss made pursuant to Federal Rule of Civil Procedure 12(b)(6), a complaint must plead enough facts "to state a claim to relief that is plausible on its face." Wikimedia Found. v. Nat'l Sec.Agency, 857 F.3d 193, 208 (4th Cir. 2017) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. Stated another way, the factual allegations in the complaint "must be sufficient 'to raise a right to relief above the speculative level.'" Woods v. City of Greensboro, 855 F.3d 639, 647 (4th Cir. 2017) (quoting Twombly, 550 U.S. at 555). Well-pleaded factual allegations are required; labels, conclusions, and a "formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555; see also Ms. King v. Rubenstein, 825 F.3d 206, 214 (4th Cir. 2016) .
In evaluating the sufficiency of a complaint, the court first "identif[ies] pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Iqbal, 556 U.S. at 679. The court then "assume[s] the[] veracity" of the complaint's "well-pleaded factual allegations" and "determine[s] whether they plausibly give rise to an entitlement to relief." Id. Review of the complaint is "a context-specific task that requires [the court] to draw on its judicial experience and common sense." Id. "[T]o satisfy the plausibility standard, a plaintiff is not required to plead factual allegations in great detail, but the allegations must contain sufficient factual heft to allow a court, drawing on judicial experience and common sense, to infer more than the mere possibility of that which is alleged." Nanni v. Aberdeen Marketplace, Inc., 878 F.3d 447, 452 (4th Cir. 2017) (internal quotation marks omitted).
Southeastern moves to dismiss Counts I, II, VIII and IX of the Amended Complaint on the basis that waiver and ratification estop Summit from asserting these claims. (ECF No. 48 at 1.)
Summit's claims are premised, in part, on the assertion that the supposed assignment under the Lease is invalid and, thus, "Southeastern is a trespasser on the Leased Premises." (ECF No. 26 at ¶ 38.) Southeastern argues that these claims fail as a matter of law because "Summit has allowed Southeastern to remain in possession of the leased premises and has accepted substantial royalty payments from Southeastern" without objection between July 2017 and December 2019. (ECF No. 48 at 3-5.) Southeastern contends that, as a result, "Summit has waived any legal right to assert that the assignment to Southeastern was invalid or deny that Southeastern is Summit's current lessee" under West Virginia law. (Id. at 2.)
The West Virginia Supreme Court of Appeals held in Kanawha-Gauley Coal & Coke Co. v. Sharp, 80 S.E. 781, 781-82 (W. Va. 1914) that "[i]f a lessor, with knowledge of a breach by the lessee of the restriction against assignment of the lease, permits the assignee to remain in possession of the premises and accepts subsequently accruing rents from him, the breach is waived." Unlike in Sharp, however, the Lease at issue here contains a non-waiver provision that provides Summit is not precluded from asserting rights in the future that it fails to initially exercise under the Lease. (ECF No. 26 at 73.) In particular, the non-waiver provision expressly states that "acceptance by [Summit] of any payments after occurrence of a Default shall not constitute a waiver of any such Default . . . ." (Id.) Notwithstanding the existence of this non-waiver provision, Southeastern contends that the holding of Sharp applies here to bar Summit's claims.
In support of this assertion, Southeastern cites Lowe's Home Centers Inc. v. THF Clarksburg Dev. Two, LLC, No. 1:12-cv-72, 2014 WL 1048521 (N.D. W. Va. March 18, 2014). There, the Northern District of West Virginia "predict[ed] that West Virginia courts would follow the majority of states and hold that no waiver clauses are themselves subject to waiver upon a showing that the party asserting the clause has waived its rights under another provision of the contract." Id. at *7. However, the Lowe court offers no rationale for this principle nor has the West Virginia Supreme Court of Appeals spoken directly on this point concerning whether a party can waive a non-waiver provision by conduct or waiver of another clause in the contract. But see Dunbar Hous. Auth. v. Nesmith, 400 S.E.2d 296, 300 (W. Va. 1990) ().
Southeastern argues that its proposition is further supported by the West Virginia Supreme Court of Appeal's decision in Citibank, N.A. v. Perry, 797 S.E.2d 803 (W. Va. 2016). In Perry, the court considered whether a creditor waived...
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