Wellmore Coal Corp. v. Patrick Petroleum Corp.

• Decision Date: 03 December 1992
• Docket Number: Civ. A. No. 91-0090-A.
• Citation: 808 F. Supp. 529
• Parties: WELLMORE COAL CORPORATION, Plaintiff, v. PATRICK PETROLEUM CORPORATION of MICHIGAN, Defendant.
• Court: U.S. District Court — Western District of Virginia

808 F. Supp. 529

WELLMORE COAL CORPORATION, Plaintiff, v. PATRICK PETROLEUM CORPORATION of MICHIGAN, Defendant.

Civ. A. No. 91-0090-A.

United States District Court, W.D. Virginia, Abingdon Division.

December 3, 1992.

COPYRIGHT MATERIAL OMITTED

Russell M. Large, Grundy, VA, for plaintiff.

William B. Poff, Julie D. McClellan, Roanoke, VA, for defendant.

MEMORANDUM OPINION

GLEN M. WILLIAMS, Senior District Judge.

This case is currently before the Court on both Plaintiff's and Defendant's motions for summary judgment. Defendant, Patrick Petroleum Corporation of Michigan ("Patrick Petroleum"), is a corporation organized and existing under the laws of the State of Michigan, with its principal place of business in Michigan. Plaintiff, Wellmore Coal Corporation ("Wellmore Coal"), is a corporation organized and existing under the laws of the Commonwealth of Virginia, with its principal place of business in Grundy, Buchanan County, Virginia. The case was properly removed to this Court pursuant to 28 U.S.C. §§ 1441, 1446. Jurisdiction is based on diversity of citizenship pursuant to 28 U.S.C. § 1332 (1992).

FACTS

By Stock Purchase Agreement ("Agreement") dated May 18, 1984, Wellmore Coal purchased from the Patrick Petroleum all of the issued and outstanding capitol stock of Patrick Coal Corporation ("PCC"), consisting of fifteen (15) shares of common stock par value one hundred dollars ($100.00) per share. Section 5.1 of the Agreement provides, inter alia, as follows:

Patrick Petroleum shall bear and remit, and shall indemnify and hold Wellmore Coal harmless against, (a) any and all federal, state and local income taxes levied or imposed upon or in connection with PCC's business that are payable or have accrued prior to and including the date of this Agreement, and (b) any and all manufacturer's excise, federal and state withholding, Federal Insurance Contributions Act, federal employment and state employment taxes, license fees and and sic other charges or taxes levied or imposed upon or in connection with PCC's business that are payable prior to and including April 30, 1984 ...

The subsequent section 5.2 reads, inter alia as follows:

Patrick Petroleum shall not have any liability for reclamation with respect to coal mining activity conducted by PCC after the date hereof, and Wellmore Coal shall indemnify and hold harmless Patrick Petroleum against any such liability. Wellmore Coal shall not have any liability for reclamation not current with respect to coal mining activity conducted by PCC through the date hereof, and Patrick Petroleum shall indemnify and hold harmless Wellmore Coal against any such liability.

Section 5.4 of the Agreement provides that as soon as it is practicable after the closing date, Wellmore Coal shall cause PCC to terminate the use of the name "Patrick." PCC is a corporation organized and existing under the laws of the Commonwealth of Virginia, with its principal place of business in Buchanan County, Virginia. As of July 31, 1992, PCC remained a corporation in good standing in Virginia, continuing to exist under the name "Patrick Coal Corporation." According to the November 1, 1992, affidavit of James W. McGlothlin, President and Chief Executive Officer of the United Company, of which Wellmore Coal is a subsidiary, a name change would entail the renegotiation or assignment of numerous leases, permits, and bonds. In his affidavit, Mr. McGlothlin states that he contacted Charles D. Robinson, Vice-President of Patrick Petroleum, advised him of the foregoing problem, requested that the leases, permits, and bonds be allowed to remain in the name of Patrick Coal Corporation, and Mr. Robinson agreed.

The United States Department of the Interior, Office of Surface Mining ("OSM") conducted an audit of particular calendar quarters of operation pertaining to mining contractors of PCC for the period of 1977 to 1987. OSM's audit revealed an adjustment in the tonnage reported of 449,957.50 tons on which Abandoned Mine Land Reclamation Fees ("reclamation fees") had not been paid. Consequently, on February 19, 1990, OSM submitted to Wellmore Coal's parent company, United Coal Company, bill number XXXXXXXXX in the amount of $136,749.13. Of this amount, Wellmore Coal alleges that the sum of $134,490.00 is attributed to the business of PCC prior to and including April 30, 1984.

On March 28, 1990, OSM issued a second notice for the monies due for the tonnage adjustment shown in its audit. Wellmore Coal allegedly tendered payment in the amount of $136,749.13 to OSM on May 25, 1990, by check number 5880 drawn on NCNB National Bank of Florida, payable to the order of the Office of Surface Mining. According to Wellmore Coal, its agents conducted numerous conversations with Patrick Petroleum and its agents regarding Patrick Petroleum's obligation under the terms and conditions of the Agreement to indemnify Wellmore Coal for all taxes, fees, and other charges or taxes levied or imposed upon or in connection with PCC's business that were payable prior to and including April 30, 1984.

According to Patrick Petroleum, the audit was conducted from 1988 through the summer of 1989, long after Wellmore assumed control of PCC. Patrick Petroleum further claims that its first notice of the audit and assessment was a letter dated September 21, 1990, four months after Wellmore Coal allegedly paid OSM and two years after the initiation of the OSM audit.

Patrick Petroleum has refused to reimburse Wellmore Coal for the AML fees attributable to the business of PCC prior to and including April 30, 1984. On July 10, 1991, Wellmore Coal filed its initial pleading, alleging that Patrick Petroleum's refusal to indemnify Wellmore Coal constitutes a breach of the terms and conditions of the Agreement and moving this Court for judgment in the amount of $134,490.00 together with interest. Wellmore Coal filed a motion for summary judgment on July 6, 1992 and Patrick Petroleum likewise filed a motion for summary judgment on August 10, 1992.

DISCUSSION

Under Federal Rule of Civil Procedure 56(c) a trial judge must grant summary judgment when there is no genuine issue as to any material fact and the moving party is entitled to summary judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986). Summary judgment is appropriate in contract actions when the relevant language of the contract is unambiguous. Winn v. Aleda Constr. Co., 227 Va. 304, 307, 315 S.E.2d 193, 194 (1984).

In the present case, Patrick Petroleum contends that there is no genuine issue of material fact regarding Wellmore Coal's right to indemnification of reclamation fees under the Agreement. Patrick Petroleum contends that reclamation fees are not "charges or taxes" within the meaning of the Agreement and, therefore, are not fees for which Patrick Petroleum should indemnify Wellmore Coal. Wellmore Coal contends that Patrick Petroleum's refusal to indemnify constitutes a breach of the terms and conditions of the Agreement.

Reading the Agreement as a single document, the Court concludes that Section 5.1, which provides that Patrick Coal will be responsible for "license fees and and sic other charges or taxes levied or imposed upon or in connection with PCC's business," includes reclamation fees, thus entitling Wellmore Coal to partial summary judgment. The Court also concludes that the issues of liability, amount of damages, and use of the name "Patrick," are questions involving disputed issues of material fact, which, as such, are inappropriate questions for summary judgment.

I. Reclamation Fees As Taxes

Patrick Petroleum urges the Court to read Section 5.1 of the Agreement in isolation, but this the Court cannot do. Indemnity agreements are subject to general rules of contract construction. Seaboard Air Line R.R. Co. v. Richmond-Petersburg Turnpike Auth., 202 Va. 1029, 1033, 121 S.E.2d 499, 503 (1961). Under general rules of contract construction, the Agreement must be read as a single document. See e.g., Berry v. Klinger, 225 Va. 201, 208, 300 S.E.2d 792, 796 (1983); Quesenberry v. Nichols, 208 Va. 667, 670, 159 S.E.2d 636, 638 (1968).

If sections of a contract may be read together without conflict, then the court must give effect to all of the language of the contract. Berry, 225 Va. at 208, 300 S.E.2d at 796. Meaning must be given to every section of a contract where possible. Id. The meaning of a contract "is to be gathered from all its associated parts assembled as the unitary expression of the agreement of the parties." Id.

Patrick Petroleum, focusing only on the language in Section 5.1, correctly observes that the section does not mention "reclamation fees" per se. Relying on the absence on any explicit mention of such fees, Patrick Petroleum argues that the Agreement does not clearly and definitely show an intention for it to indemnify Wellmore Coal for reclamation fees. Read out of context, Section 5.1, upon which Patrick Petroleum relies, does appear to support Patrick Petroleum's conclusion. However, read as a whole, the language of the Agreement compels a contrary conclusion. The plain language of the Agreement requires Patrick Petroleum reimburse Wellmore Coal for reclamation fees.

Under Section 5.1 of the Agreement, Patrick Petroleum must indemnify Wellmore Coal for charges or taxes incurred in connection with PCC's business that are payable prior to and including April 30, 1984. While the section does not list reclamation fees, neither does it purport to exclude them. Section 5.1 does itemize certain charges and taxes that Patrick Petroleum will be responsible for, but it also concludes by stating inclusively "license fees and and sic other charges or taxes."

The section immediately following 5.1, Section 5.2, entitled "Reclamation Activity," requires Patrick Petroleum to indemnify Wellmore Coal for reclamation with respect to coal mining activity conducted by PCC through the date...