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DASET MINING CORPORATION v. INDUSTRIAL FUELS CORPORATION (03/02/84)

filed: March 2, 1984.

DASET MINING CORPORATION, A PENNSYLVANIA CORPORATION, JACOBS CONTRACTING CORPORATION, A PENNSYLVANIA CORPORATION, TASED COAL SALES, INC., A PENNSYLVANIA CORPORATION, ARMSTRONG LAND COMPANY, INC., A PENNSYLVANIA CORPORATION, SEVEN SISTERS MINING COMPANY, INC., A PENNSYLVANIA CORPORATION, AND JACOBS, JACOBS & JACOBS, A PARTNERSHIP COMPOSED OF SEABORN JACOBS, TERRENCE JACOBS, AND DARRYL JACOBS
v.
INDUSTRIAL FUELS CORPORATION, A DELAWARE CORPORATION, PEOPLES ENERGY CORPORATION, A CORPORATION, AND TWIN OAKS COAL COMPANY, A DELAWARE CORPORATION, APPELLANTS. DASET MINING CORPORATION, A PENNSYLVANIA CORPORATION, JACOBS CONTRACTING CORPORATION, A PENNSYLVANIA CORPORATION, TASED COAL SALES, INC., A PENNSYLVANIA CORPORATION, ARMSTRONG LAND COMPANY, INC., A PENNSYLVANIA CORPORATION, SEVEN SISTERS MINING COMPANY, INC., A PENNSYLVANIA CORPORATION, AND JACOBS, JACOBS & JACOBS, A PARTNERSHIP COMPOSED OF SEABORN JACOBS, TERRENCE JACOBS AND DARRYL JACOBS, APPELLANTS, V. INDUSTRIAL FUELS CORPORATION, A DELAWARE CORPORATION, PEOPLES ENERGY CORPORATION, A CORPORATION, AND TWIN OAKS COAL COMPANY, A DELAWARE CORPORATION. TWIN OAKS COAL COMPANY, A DELAWARE CORPORATION, V. DASET MINING CORPORATION, A PENNSYLVANIA CORPORATION, JACOBS CONTRACTING CORPORATION, A PENNSYLVANIA CORPORATION, TASED COAL SALES, INC., A PENNSYLVANIA CORPORATION, ARMSTRONG LAND COMPANY INC., A PENNSYLVANIA CORPORATION, JACOBS, JACOBS & JACOBS, A PARTNERSHIP, SEABORN JACOBS, TERRENCE S. JACOBS, DARRYL M. JACOBS AND MARTHA R. JACOBS, APPELLANTS. TWIN OAKS COAL COMPANY, A DELAWARE CORPORATION, APPELLANT, V. DASET MINING CORPORATION, A PENNSYLVANIA CORPORATION, JACOBS CONTRACTING CORPORATION, A PENNSYLVANIA CORPORATION, TASED COAL SALES, INC., A PENNSYLVANIA CORPORATION, ARMSTRONG LAND COMPANY, INC., A PENNSYLVANIA CORPORATION, SEVEN SISTERS MINING COMPANY, INC., A PENNSYLVANIA CORPORATION, JACOBS, JACOBS & JACOBS, A PARTNERSHIP, SEABORN JACOBS, TERRENCE S. JACOBS, DARRYL M. JACOBS AND MARTHA R. JACOBS



APPEAL FROM THE JUDGMENT ENTERED OF MAY 27, 1982 IN THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY, CIVIL NO. G.D. 80-13565. APPEAL FROM THE JUDGMENT ENTERED OF JUNE 16, 1982 IN THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY, CIVIL NO. GD80-13565. APPEAL FROM THE JUDGMENT ENTERED OF MAY 20, 1982 IN THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY, CIVIL NO. GD 80-08688. APPEAL FROM THE JUDGMENT ENTERED OF MAY 27, 1982 IN THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY, CIVIL NO. G.D. 80-08688

COUNSEL

David B. Fawcett, Jr., Pittsburgh, for Daset, etc., appellants (at Nos. 753 and 754) and appellees (at No. 634 and 648).

Frederick J. Francis, Pittsburgh, for Industrial Fuels, appellant (at No. 634) and appellee (at No. 753) and for Twin Oaks, appellant (at No. 648) and appellee (at No. 754).

Cavanaugh, Rowley and Cirillo, JJ.

Author: Cirillo

[ 326 Pa. Super. Page 19]

This breach of contract case is really two cases, which were consolidated for trial, because they relate to the same factual situation and legal conflicts among the parties. In the Spring of 1980, Twin Oaks Coal Company (hereinafter "Twin Oaks") instituted an action in trespass and assumpsit in the Common Pleas Court of Allegheny County against Daset Mining Corporation, Jacobs Contracting Corporation, Tased Coal Sales, Inc., Armstrong Land Company, Inc., Seven Sisters Mining Company, Inc., Jacobs, Jacobs & Jacobs; a partnership composed of Seaborn Jacobs, Terrence S. Jacobs, Darryl M. Jacobs, and Martha Jacobs (hereinafter all referred to collectively as "Daset"). On June 3, 1980, Daset filed in Westmoreland County, a complaint in Assumpsit and Trespass against Twin Oaks, Industrial Fuels Corporation ("IFC"), and Peoples Energy Company (hereinafter "Peoples").*fn1 The case in Westmoreland County was subsequently transferred to Allegheny County and the two were consolidated. B.H. & H., Inc. was brought in as an additional defendant by Daset.

Greatly simplified, the basic facts underlying the controversy are that Twin Oaks purchased the coal-related assets of Daset, which were mainly a large number of coal leases and some strip mining equipment. The sale was consummated with a lengthy integrated agreement dated April 11, 1979. The contract stipulated that Twin Oaks was to pay Daset $3,405,026.00 and assume some of Daset's outstanding obligations. These included the reclamation of some stripped land, which had not yet been performed by Daset and the remaining payment owed by Daset to B.H. & H. The greater part of the equipment and many of the coal leases had been previously acquired by Daset from B.H. & H. At the time that the agreement was executed, Twin Oaks paid $2,405,026.00, and gave Daset a note for the

[ 326 Pa. Super. Page 20]

    remaining million, which was payable a year later.*fn2 Shortly before the due date of the note, Twin Oaks refused to pay Daset and B.H. & H. because of a number of legal grievances against Daset. Subsequently, Twin Oaks filed suit on the basis that there was a breach of the important warranty given by Daset in the agreement of April 11, 1979; namely, that the lands assigned to Twin Oaks by Daset, contained not less than four million (4,000,000) tons of recoverable bitminous coal. Daset filed suit for non-payment of the note and took the position that there was no such breach; but brought B.H. & H. into the case on the theory that if there was such a breach, it would be partly the responsibility of the latter because a number of the coal leases had been acquired from it.

At the trial, Twin Oaks did not elect to prosecute any claim against Daset except this important alleged breach of the warranty of four million (4,000,000) tons of coal. In addition, it alleged that this breach created a right to recover for the loss of tonnage and for its great expenditures for reclamation of stripped land.*fn3

[ 326 Pa. Super. Page 21]

After a lengthy jury trial, the judge submitted interrogatories to the jury. The jury found that the lease-holds sold to Twin Oaks by Daset contained four million (4,000,000) or more tons of recoverable bituminous coal as defined in the agreement. This resulted in verdicts against Twin Oaks and in favor of Daset in the amount of $1,394,892.86, and in favor of B.H. & H. in the amount of $598,701.60. Twin Oaks filed a motion for a new Trial, and Daset filed a limited motion for a new trial on the ground that the court should not have restricted its claim for interest to six percent (6%). B.H. & H. settled and has discontinued. The motions of the parties were denied and both parties appealed. We will address their claims seriatim.

As a foundation for the discussion of the parties' claims, we turn our attention to the contract. This comprehensive agreement, which embodies the rights and obligations of the parties, is a lengthy document, which was thoroughly negotiated prior to its execution on April 11, 1979. However, the controversy now before us revolves around only those certain passages, which deal with the warranty made by Daset, which state as follows:

That on, in and under the lands described in those leases listed in Section 1 of Exhibit I to the Assignment Agreement (Schedule G hereto), and which leases are effectively assigned to Buyer on the date hereof in the title condition required by this Agreement (and not subject to those exceptions or conditions that may be specified on Schedule L attached hereto), there are not less than Four Million (4,000,000) tons of recoverable bituminous coal.

In addition, the definitions section of the agreement defines the term "recoverable bituminous coal" as follows:

Whenever used in this Agreement, the term "recoverable bituminous coal" shall mean bituminous coal that, as of the date hereof, can be mined and removed with the use of modern mining methods considering the generally accepted maximum stripping ratios in the area in which Sellers have conducted their mining operations.

[ 326 Pa. Super. Page 22]

March 27, 1979, from the Treasurer of Peoples to the chairman of the Board of Peoples. A portion of it entitled Reserves stated, "In place reserves of bituminous seam coal are estimated to exceed 6,000,000 tons." A second memorandum, dated February 26, 1979, stated, "I concur with their reserve [Daset's] estimate of 5.5 million raw tons in place contained in a total of 4,107 surface acres . . .".*fn5 The court also admitted another document which showed that the appellant allocated the write off of the mineral rights of the coal leases using a figure of six million two hundred thousand (6,200,000) tons.

Appellant argues that because these documents all mentioned amounts of coal in excess of that warranted, they were highly prejudicial and as such had a tendency to compel an improper decision. Further, Twin Oaks asserts that this testimony was irrelevant because neither estimates of coal reserves or in place coal nor "write off figures" are germane to the warranty of the amount of "recoverable bituminous coal", as defined in the agreement. Twin Oaks further contends that these figures all included "deep mined coal", which the trial court ruled was not included in the warranty made by Daset.

Regarding the admission of these documents, we fail to see how they prejudiced the appellant's case. The trial judge clearly ruled that the amount of coal that was being warranted was no less than four million (4,000,000) tons. He also ruled that coal reserves that could be mined by deep mining methods were excluded, as is evidenced by the following discussion:

MR. MCGINLEY: Judge, what about coal that could be deep mined as well as stripped?

[ 326 Pa. Super. Page 24]

THE COURT: What I have said I don't think has anything to do with that. A person may elect to mine coal by the deep mining method but for the purposes of the warranty and shall I say this sale of coal, I'm ruling that it was contemplated a minimum of four million tons of coal susceptible of being mined by stripping.

MR. MCGINLEY: As long as I understand the Court to beholding (sic) that the danger in the case, Judge, and what we're just trying to set forth was that if some of these mines which could have been stripped had been deep mined, that coal would have accounted for the warranties.

THE COURT: Well, it didn't happen. So, we're not faced with that.

MR. SMITH: But as I understand your ruling, Your Honor, if that particular coal that Mr. McGinley is referring to could not be stripped, then that coal which could on the other hand been deep mined, that coal is not included in the warranty; is that correct?

THE COURT: That's correct.

Further, when the estimates of coal reserves were introduced, Judge Weir overruled appellant's objections on the basis that they were admissions of the appellant that were relevant "to how much [coal] is there". At no time was this evidence purported to be estimates of the amount of coal reserves covered by the contract warranty. This testimony did not indicate the amount of "recoverable bituminous coal", which could be obtained by strip mining, but only established that the appellant estimated that there was a certain amount of coal contained in, on and under the lands in question. As to the testimony which concerned the figure used by the appellant in preparing its taxes; at no time during the testimony was there any suggestion that the figure used for depletion of these coal reserves had any correlation to the amount of coal warranted.*fn6 In addition,

[ 326 Pa. Super. Page 25]

    when the jury was charged, the judge reiterated that the figure to be considered in determining breach of the warranty was four million (4,000,000) tons and provided the jury with a copy of the definition of "recoverable bituminous coal" to use during its deliberations. Therefore, we fail to see how, under the circumstances, any confusion could have resulted from the admission of this testimony.

Appellant next contends that it was improper to permit testimony concerning Twin Oaks' financial condition and operations after the agreement was executed by the parties.*fn7 The trial court permitted this testimony because it determined that it was relevant to the appellant's motive for not paying the monies owed. Asserting that evidence of motive is irrelevant in an action for breach of warranty, appellant cites Seneca Falls Machine Co. v. McBeth, 246 F.Supp. 271 (W.D.Pa. 1965), vacated and remanded 368 F.2d 915 (3 Cir. 1966); Otto v. Imperial Casualty & Indemnity Co., 277 F.2d 889 (8 Cir. 1960); and Lane v. Bisceglia, 15 Ariz.App. 269, 488 P.2d 474 (1971).

In Seneca Falls Machine Co., the Federal District Court, applying Pennsylvania law, held that the reasons for terminating an oral contract were irrelevant when no provision was made in the contract for termination. The court then concluded that the contract could be terminated by either

[ 326 Pa. Super. Page 26]

    party at will or after a reasonable time. In Otto the appellant-agent attempted to recover punitive damages from the appellee-insurance company in an action for breach of contract. The court held that, under Missouri law, punitive damages are not recoverable in a breach of contract action. The appellant had attempted to circumvent this rule, by alleging that appellee's termination of the contract was malicious and willful. The court held that, ". . . [T]he motive of one who has the right to terminate a contract at any time is immaterial . . ." Id. at 893, 894. (Emphasis supplied). In Lane, the parties entered an agreement for the sale of a property, which was conditioned upon the purchasers being able to assume the existing mortgage at a six percent (6%) interest rate. When the mortgagee would only permit the assumption at a six and three-quarter percent (6 3/4%) interest rate, the buyers refused to purchase the property and the seller retained the $5,000.00 earnest money on deposit. The purchasers then brought suit to recover the money. The court held that the seller materially breached the contract by not providing the purchasers with the mortgage at the agreed rate. Thus, the purchasers' motive for rescinding the contract was immaterial.

As the appellee, Daset, correctly counters in its brief, these cases are inapposite to the case at bar because they concern the exercise of a contractual right; not the breach of a duty to pay. In the instant case, Twin Oaks neither had a contractual right to terminate the contract nor to refuse to pay the monies owed. In fact, its refusal to pay was in derogation of the terms of the contract, which did provide the remedy in the event that the amount of recoverable bituminous coal was less than the four million (4,000,000) tons warranted. This remedy, which was properly alleged at trial, was provided in Article VII, paragraph two, which states:

2. With respect to the representations and warranties set forth in paragraph 17 of Article IV above [recoverable bituminous coal], it is acknowledged and agreed by the

[ 326 Pa. Super. Page 27]

    parties hereto that the truth and accuracy thereof is of the essence of this Agreement and that the damages that would be incurred by Buyer in the event that said representations and warranties were untrue in any respect would be extremely difficult to measure and determine. Therefore, the parties hereto agree that, to the extent there are less than Four Million (4,000,000) tons of recoverable bituminous coal, Sellers and Warrantors jointly and severally agree to promptly reimburse Buyer in the amount of One Dollar ($1.00) per ton for each ton less than Four Million (4,000,000) tons of recoverable bituminous coal existing on in and under the lands described in the leases listed in Section 1 of Exhibit I to the Assignment Agreement (Schedule G hereto). It is agreed by Buyer and Sellers that such sum shall be paid as liquidated damages ("Liquidated Damages") for the breach of the representations and warranties set forth in said paragraph 17 of Article IV.

As stated previously, the trial judge has broad discretion regarding the admission of potentially misleading and confusing evidence. Bowers, supra. This trial was a lengthy proceeding with a great number of witnesses, many exhibits and extensive testimony. In reviewing the entire record, we can neither say that the trial judge erred in admitting any of this evidence nor that its admission constituted an abuse of discretion such that the court's judgment was manifestly unreasonable or the result of partiality, prejudice, bias or ill will. Commonwealth ex rel. Berman v. Berman, 289 Pa. Super. 91, 432 A.2d 1066 (1981); Straub v. Tyahla, 274 Pa. Super. 411, 418 A.2d 472 (1980). Also in the aggregate, we cannot say that if this testimony had been excluded, it would have changed the outcome of the case. See, Redevelopment Authority of City of Chester v. Bosacco, 46 Pa. Commw. 242, 406 A.2d 1163 (1979), appeal after remand 53 Pa. Commw. 550, 417 A.2d 1350 (1980).

Parol Evidence

Appellant next contends that the trial court erred by permitting the introduction into ...


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