Troy Min. Corp. v. Itmann Coal Co., No. 16729

CourtSupreme Court of West Virginia
Writing for the CourtBROTHERTON; According to the record; McGRAW
Citation176 W.Va. 599,346 S.E.2d 749
Parties, 2 UCC Rep.Serv.2d 1248 TROY MINING CORPORATION v. ITMANN COAL COMPANY.
Decision Date20 March 1986
Docket NumberNo. 16729

Page 749

346 S.E.2d 749
176 W.Va. 599, 2 UCC Rep.Serv.2d 1248
TROY MINING CORPORATION

v.
ITMANN COAL COMPANY.
No. 16729.
Supreme Court of Appeals of
West Virginia.
March 20, 1986.
Dissenting Opinion July 12, 1986.

Page 750

[176 W.Va. 600] Syllabus by the Court

1. Unconscionability is an equitable principle, and the determination of whether a contract or a provision therein is unconscionable should be made by the court.

[176 W.Va. 601] 2. "Termination provisions of an agreement involving the sale of goods which, if applied strictly, are so one-sided as to lead to absurd results, will be declared unconscionable." Syl. pt. 2, Ashland Oil, Inc. v. Donahue, 159 W.Va. 463, 223 S.E.2d 433 (1976).

3. An analysis of whether a contract term is unconscionable necessarily involves an inquiry into the circumstances surrounding the execution of the contract and the fairness of the contract as a whole.

4. When the evidence, viewed in the light most favorable to the plaintiff, is clearly insufficient to support a verdict for him, it is the duty of the trial court, when so requested, to direct a verdict for the defendant.

5. "The burden of proving an oral modification of a written contract is on the party seeking to establish such modification, and such party must demonstrate by clear and positive evidence that the minds of the parties definitely met on the alteration." Syl. pt. 4, Bischoff v. Francesa, 133 W.Va. 474, 56 S.E.2d 865 (1949).

Martin J. Glasser, John A. Rollins, Lewis, Ciccarello, Masinter & Freidberg, Charleston, for appellant.

W. Warren Upton, Robert G. McLusky, Jackson, Kelly, Holt & O'Farrell, Charleston, for appellee.

BROTHERTON, Justice:

In this case, Troy Mining Corporation complains that the Circuit Court of Wyoming County erroneously directed a verdict in favor of Itmann Coal Company, in a suit for wrongful termination of a contract mining agreement. The main issues in the case are whether the contract between the parties, or a seven-day mutual termination clause therein, was unconscionable, and, alternatively, whether there had been an oral modification of the contract. We find no error in the proceedings, and for reasons set out below, affirm the judgment of the circuit court.

Troy Mining Corporation is the successor to V & R Coal Company. Because V & R Coal Company was the relevant entity during the period in issue, Troy Mining and its predecessors will be referred to herein as "V & R." V & R was a corporation that operated as a contract miner of coal for Itmann Coal Company in Wyoming County, West Virginia, from 1973 until its contract was terminated by Itmann on August 8, 1980.

During the period that V & R was in operation, Itmann also operated three deep mines of its own, and had ongoing contracts with nine to ten other contract mining companies. Itmann was owned jointly by Consolidation Coal Company, National

Page 751

Steel Corporation, Bethlehem Steel Corporation, and Dominion Foundries and Steel, Ltd. It was managed by Consolidation Coal Company, and its market was controlled by its four owners. Most of Itmann's production went to the three steel companies, and Consolidation Coal Company also purchased some of Itmann's coal for resale.

V & R and Itmann operated under three successive written mining agreements, executed in September, 1973, January, 1976, and November, 1979. The contracts were similar in their terms, each providing, among other things, that: V & R would mine on property owned by Itmann, and deliver all its production to Itmann; V & R would maintain a minimum production capacity (300 tons per day in the 1979 agreement), although Itmann was not required to purchase any minimum amount; Itmann could, at its option, purchase all equipment owned by V & R upon termination of the contract; and the contract could be terminated at any time without cause by either party upon seven days' written notice. The 1979 contract provided for a five-year term.

The dispute centers around the execution of the November, 1979 contract, and its termination by Itmann in August, 1980. In the fall of 1979, Itmann prepared new contracts for all its contract miners. Mike Ashcraft, an officer of Itmann, and also an employee of Consolidation Coal Company, received the final versions of these contracts in November, 1979, and was instructed to have them executed as soon as possible,[176 W.Va. 602] and to withhold checks due to contract miners until they signed the new contracts. All of the 1979 agreements, like the previous two contracts signed by V & R, included a provision allowing termination on seven days' notice, with or without cause.

The principals of V & R testified that the contract was signed under pressure, but V & R did not claim fraud or duress. Two officers of the company said that they were forced to sign before receiving a check they needed to meet an upcoming payroll, and that they were not allowed to take a copy of the contract to be reviewed by their attorneys. Itmann, however, introduced the cancelled check that V & R claimed was withheld. The endorsement on the back of the check showed that it was negotiated a day before the date on the contract. Witnesses for both sides testified that the contract was signed Wednesday, November 28, 1979, and the date on the endorsement was November 27, 1979.

V & R also alleged that soon after the 1979 contract was executed Itmann requested increased production, represented that it would be able to purchase increased tonnage for the foreseeable future, and promised that if the ash content of V & R's coal got too high, Itmann would provide V & R with another site to mine. Relying on these representations, V & R borrowed $250,000 in February, 1980, which was used to purchase and refurbish used mining equipment, including two shuttle cars, a power center, and a continuous miner, and to carry the company through a three-week shutdown in March, 1980, for installation of the newly purchased equipment. Thereafter, from April, 1980, until termination of the contract in August, 1980, V & R produced an average of 445 tons per day, which was a 45% increase over its previous coal production.

V & R produced at the elevated level for approximately four months. On August 8, 1980, Itmann sent a letter to V & R stating that its contract would be terminated in seven days and that it did not elect to purchase V & R's equipment on site. As a result of the termination, V & R discontinued operations.

V & R, by its successor, Troy Mining Corporation, thereafter sued Itmann in the Circuit Court of Wyoming County, claiming that the contract was unconscionable due to the seven-day termination clause, and that the contract had been orally modified so as to make Itmann's termination of the contract wrongful. The case was presented to a jury in a trial that lasted four days. On a motion by counsel for the defense at the conclusion of all the evidence, Judge A.R. Kingdon directed a verdict for the defendant, Itmann Coal Company. V & R

Page 752

appeals to this Court, asking that we reverse the judgment of the trial court and enter judgment for V & R, or, in the alternative, remand for a new trial.

I.

We address first V & R's claim that the seven-day termination clause in the contract mining agreement was unconscionable. Unconscionability is an equitable principle, and the determination of whether a contract or a provision therein is unconscionable should be made by the court. See Comment 3, W.Va.Code § 46-2-302 (1966); 1 Warner v. Kittle, 167 W.Va. 719, 280 S.E.2d 276, 280 (1981). We are not, therefore, confronted with the question of whether this issue should have gone to the jury, but only whether the trial court's determination was in error.

According to the record, Judge Kingdon determined that the provision was not unconscionable because it was a mutual term, and one which could reasonably be foreseen to benefit either party. All the testimony adduced at trial indicates that mutual termination on short notice is a common, or even standard, provision in a contract mining agreement. It gives the purchaser of coal the ability to stop production if it has [176 W.Va. 603] no market for the coal, and it gives the contract miner the ability to discontinue mining if he can't make his costs.

The transcript also shows that the principals of V & R were familiar with contract provisions of this kind, and knew how to use them to their advantage. The same clause can be found in the 1973 and 1976 contracts between V & R and Itmann. Darrell Young, one of the owners of V & R and its business manager, testified that he and the other principals of V & R had terminated an earlier venture after only a month of operation when they hit a fault and could not economically continue to mine. He also testified that a company he organized after termination of the Itmann contract entered into a contract with Elk Run Coal Company which allowed termination by either party without cause on 30 days' notice, and that Elk Run terminated under that provision. The evidence indicates that seven-day mutual termination provisions were included in all Itmann's contracts with its contract miners and in Consolidation Coal Company's contracts with contract miners in this region. Further, contract miners had used such termination clauses to their benefit against both Itmann and Consolidation Coal.

This evidence of common business usage, potential benefit to either party, and actual benefit to parties similarly situated on both sides indicates that the provision was not "so one-sided as to lead to absurd results." The latter is the standard set out by this Court in syllabus point 2 of Ashland Oil, Inc. v. Donahue, 159 W.Va. 463, 223 S.E.2d 433 (1976), for finding a termination provision unconscionable. 2 In that case, a "franchisee" entered into both a gas station lease and a dealer contract with a large oil company. The lease had a one-year term that was automatically renewed, but could be...

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    ...surrounding the execution of the contract and the fairness of the contract as a whole." Troy Mining Corp. v. Itmann Coal Co., 176 W.Va. 599, 346 S.E.2d 749, 750 (1986). A determination of unconscionability "is usually evaluated as of the time a contract is written," Brown I, ......
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    ...depart from the first only to the extent that its terms are inconsistent with the written document. Troy Mining Corp. v. Itmann Coal Co., 176 W.Va. 599, 346 S.E.2d 749, 754 I FIND that CAMC has alleged sufficient factual allegations to support its claim that ERC has a direct contractual rel......
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    ...Bush v. Paragon Property, Inc., 165 Or.App. 700, 997 P.2d 882 (2000) (en banc). In Syllabus Point 3, Troy Min. Corp. v. Itmann Coal Co., 176 W.Va. 599, 346 S.E.2d 749 (1986), we stated: "Unconscionability is an equitable principle, and the determination of whether a contract or a provision ......
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