Title: CLARKE-MOBILE COUNTIES GAS v. Prior Energy Corp.

State: alabama

Issuer: Alabama Supreme Court

Document:

834 So. 2d 88 (2002)
CLARKE-MOBILE COUNTIES GAS DISTRICT
v.
PRIOR ENERGY CORPORATION.
1002019.

Supreme Court of Alabama.
May 3, 2002.
M. Roland Nachman, Jr., and Walter R. Byars of Steiner, Crum & Baker, Montgomery; Joseph C. McCorquodale III and Christopher A. Bailey of McCorquodale & McCorquodale, Jackson; and Stephen W. Drinkard of Beasley, Allen, Crow, Methvin, Portis & Miles, Montgomery, for appellant.
David Michael Higgins and Edward P. Turner, Jr., of Turner, Onderdonk, Kimbrough & Howell, P.A., Chatom; and William F. Blair of Blair & Bondurant, Jackson, Mississippi, for appellee.
*89 HARWOOD, Justice.
Clarke-Mobile Counties Gas District (hereinafter referred to as "the Gas District") appeals the trial court's partial summary judgment for Prior Energy Corporation (hereinafter referred to as "Prior Energy"). We dismiss the appeal.
On March 24, 1997, in the Clarke Circuit Court, the Gas District sued Prior Energy; Fred O. Roe, Jr.; Michael A. Coulter; G.M. Coulter; M.A. Abernethy; the estate of Robert M. Saunders, deceased; Union Gas Company of Alabama, Inc.; and Technical Specialties, Inc. (hereinafter collectively referred to as "the defendants"). The Gas District sought to recover compensatory and punitive damages on claims of conspiracy, breach of contract, breach of fiduciary duty, fraud, intentional interference with business relationships, and usurpation of corporate opportunities, in relation to its negotiations and transactions with Prior Energy, including sales, swaps, and purchases of natural gas.[1] All of the allegations contained in the Gas District's complaint pertained to Prior Energy and Roe, the president of Prior Energy, with the exception of the allegation of breach of contract, which involved a management contract that the Gas District alleged existed between it and Union Gas Company of Alabama, Inc. On April 17, 1997, Prior Energy sued the Gas District in the Mobile Circuit Court, alleging that a "Firm Gas Sale Contract" (hereinafter referred to as "the contract") existed between it and the Gas District that included subsequent "confirmations" providing for the delivery and purchase of natural gas, which Prior Energy alleged were supplements to the contract.
On April 29, 1997, the Gas District amended its complaint to state that Prior Energy claimed that the contract existed. The Gas District disputed the existence of the contract and sought a judgment from the trial court declaring that "the alleged contract and confirmations ... be of no force and effect and that there are no contractual relations in existence between [the Gas District] and [Prior Energy]."
On April 30, 1997, Prior Energy filed a motion to dismiss or for a more definite statement, with a supporting brief that had attached as exhibits the contract and three confirmations. On May 12, 1997, Prior Energy filed a motion to dismiss or to strike the Gas District's amendment to its complaint on the grounds that Prior Energy had previously commenced litigation on the contract when it filed its complaint against the Gas District in the Mobile Circuit Court on April 17, 1997. Prior Energy contended that the Gas District's amendment was "asserted solely in an effort to effect a dismissal or transfer of those claims asserted before the Mobile County Circuit Court." Prior Energy attached as an exhibit a copy of the complaint it had filed in the Mobile Circuit Court.
On July 15, 1997, the trial court conducted a hearing on Prior Energy's motions to dismiss, motion for a more definite statement, and motion to strike. On July 30, 1997, the Mobile Circuit Court dismissed Prior Energy's complaint in an order that determined that Prior Energy's complaint was a compulsory counterclaim to the complaint the Gas District had filed in the Clarke Circuit Court. On September 5, 1997, the Clarke Circuit Court entered an order denying Prior Energy's motions to *90 dismiss and granting in part and denying in part its motion for a more definite statement. The trial court ordered the Gas District to amend its complaint to state certain information, as that information related to its allegations of fraud, with more particularity. On October 3, 1997, the Gas District filed a second amended complaint to comply with the trial court's order.
The Gas District's amended complaint, in pertinent part, alleged that the defendants, including Prior Energy, had "failed to disclose material facts to and/or suppressed material facts" (count four), and had made representations that "were false and [Prior Energy had] made them willfully to induce the [Gas District] to act, or [that] were fraudulently or recklessly represented as true and intended to deceive the [Gas District]" (count five), in regard to the following items:
On November 10, 1997, Prior Energy filed an answer and counterclaims. The counterclaims, in part, sought a judgment from the trial court declaring (1) that the contract and confirmations were "valid, existing, and contractual agreements between the parties subject to termination only in accordance with the terms thereof," and (2) that Prior Energy was entitled to payment for the gas it had delivered to the Gas District. The counterclaims also included claims that the Gas District had breached the contract and that Prior Energy was due certain moneys on theories of account, open account, and goods sold and delivered. On December 3, 1997, the Gas District filed a motion to dismiss Prior Energy's counterclaims. On January 27, 1998, the trial court conducted a hearing on the Gas District's motion to dismiss; it denied the motion on March 27, 1998. On July 7, 1998, the Gas District filed an answer to Prior Energy's counterclaims. On March 2, 1999, the Gas District filed a third amendment to its complaint to add ICC Industries, Inc., and Prior Intrastate Corporation as defendants.
On September 29, 1999, Prior Energy filed a motion for a partial summary judgment; the motion contained argument and a narrative summary of undisputed facts and was supported by attached exhibits. On October 10, 2000, the Gas District filed *91 a statement of undisputed facts and a statement in opposition to Prior Energy's motion for a partial summary judgment with an attached exhibit. On October 18, 2000, Prior Energy filed a response in opposition to the Gas District's statement of undisputed facts. On October 19, 2000, the trial court conducted a hearing on Prior Energy's motion for a partial summary judgment. On January 16, 2001, it entered a summary judgment for Prior Energy on its counterclaims, finding that the Gas District owed Prior Energy $1,225,290.97 under the contract and $574,400.41 in interest. That order further certified the summary judgment as final pursuant to Rule 54(b), Ala. R. Civ. P.
The trial court's January 16, 2001, order dealt with Prior Energy's counterclaims in isolation, failing to consider the fraud claims that had been asserted by the Gas District in its complaint. That order stated, in pertinent part:
"19. The Court finds that as a matter of law the sale of natural gas is a transaction in goods as defined in Ala. Code § 7-2-105 (1975). The Court further finds that [Prior Energy] and [the Gas District] are and were `merchants' as that term is defined in Ala.Code § 7-2-104(1) (1975). The Court finds that the [UCC] as contained within the Ala. *92 Code § 7-2-101, et seq. (1975), provides the substantive law controlling the subject matter of this motion.
On February 8, 2001, the Gas District filed a motion to alter, amend, or vacate the trial court's judgment, with an attached supporting brief. On August 2, 2001, after conducting a hearing on the Gas District's postjudgment motion, the trial court entered an order that stated, in pertinent part:
(Emphasis added.) On August 16, 2001, the Gas District filed a notice of appeal to this Court.
On appeal, the Gas District argues: (1) that the trial court erred in certifying its partial summary judgment for Prior Energy as final under Rule 54(b), Ala. R. Civ. P., because, it says, the issues presented in its claims and in Prior Energy's counterclaims are "so closely intertwined that a separate adjudication would pose not only an unreasonable risk of inconsistent results, but such an improvident result would be inevitable"; and, in what it describes as a "subsidiary" argument, (2) that the trial court erred in entering the partial summary *94 judgment because, it says, there existed genuine issues of material fact.
In relation to its argument that the issues presented in its claims are intertwined with Prior Energy's counterclaims to such an extent that the certification of the summary judgment on the counterclaims as final pursuant to Rule 54(b) will necessarily lead to inconsistent results, the Gas District relies on Gray v. Central Bank of Tuscaloosa, N.A., 519 So. 2d 477 (Ala.1987), and Branch v. SouthTrust Bank of Dothan, N.A., 514 So. 2d 1373 (Ala.1987). Prior Energy argues in rebuttal that the trial court properly relied on Pate v. Merchants National Bank of Mobile, 409 So. 2d 797 (Ala. 1982). Prior Energy asserts in its brief to this Court that "[t]he fact that claims arise out of the same set of operative facts does not prevent them from being treated as multiple and subject to separate adjudication," and that its counterclaims alleging violations of the Uniform Commercial Code ("UCC") were separate and distinct from the Gas District's tort claims. It further asserts that the trial court thoroughly considered the possibility of inconsistent results in entering a summary judgment on its counterclaims. In its reply brief, the Gas District states:
In Pate v. Merchants National Bank of Mobile, supra, Merchants National Bank sued the Pate Foundation and individual guarantors to recover on a promissory note. Merchants National thereafter filed a motion for a summary judgment on its complaint. In an amended answer to Merchant National's complaint, Cornelia Pate, one of the individual guarantors, asserted a counterclaim alleging that Merchants National had wrongfully converted funds in a checking account belonging to her. She alleged that the wrongful conversion had taken place in 1979; the promissory note at issue was executed in 1980. The trial court entered a summary judgment for Merchants National and certified it as final pursuant to Rule 54(b), but reserved ruling on the counterclaim Pate had asserted for wrongful conversion. Pate appealed, arguing that the trial court could not certify its judgment as final pursuant to Rule 54(b) while leaving her counterclaim pending. This Court, in determining that the trial court's judgment was due to be affirmed, stated:
"Cates v. Bush, 293 Ala. 535, 540, 307 So. 2d 6 (1975).
409 So. 2d  at 799-800.
The facts of Pate clearly represent the type of situation Rule 54(b) was intended to cover. There was little, if any, factual overlap between the claim and the counterclaim asserted in Pate, which bolsters the conclusion that they were separate claims. Merchants National asserted a claim based upon a promissory note executed in 1980, while Pate's counterclaim for wrongful conversion was based upon events alleged to have occurred in 1979. However, Pate does not address the "intertwining-ofclaims" concept; it instead relies only upon the settled proposition that multiple claims may arise out of the same set of operative facts, citing and quoting from Cates v. Bush, 293 Ala. 535, 307 So. 2d 6 (1975). Thus, the trial court's reliance on Pate to determine that the Gas District's claims and Prior Energy's counterclaims were not "so closely intertwined that separate adjudications would pose an unreasonable risk of inconsistent results" was not entirely warranted.
In cases more factually analogous to this one, where the intertwining-of-claims concept was involved, this Court has set aside Rule 54(b) certifications. In Branch v. SouthTrust Bank of Dothan, N.A., supra, SouthTrust Bank sued A.G. Branch and Clint Owens, alleging they had defaulted on a promissory note. After the trial court entered a default judgment against Owens, Branch filed an answer to SouthTrust's complaint and a cross-claim against Owens, and SouthTrust filed a motion for a summary judgment against Branch. Branch then filed an amended answer that contained a counterclaim alleging that he had relied upon a fraudulent representation of an agent of SouthTrust when he executed the promissory note. SouthTrust thereafter filed an amended motion for a summary judgment on both its claim and Branch's counterclaim. The trial court entered a summary judgment for SouthTrust on its claim, but denied it a summary judgment on Branch's counterclaim. The trial court subsequently certified its partial summary judgment for SouthTrust as final pursuant to Rule 54(b). On appeal, Branch argued that the trial court had abused its discretion in certifying the partial summary judgment as final.
After discussing Pate and how the facts of that case presented the situation that Rule 54(b) was intended to cover, this Court, in setting aside the Rule 54(b) certification and remanding the case, stated:
In Gray v. Central Bank of Tuscaloosa, supra, Central Bank sued, alleging a default on a promissory note. Frank Gray was a defendant by virtue of his being a guarantor of the note. Only a 1983 agreement signed by Gray was the subject of the appeal before this Court. Gray and another defendant filed an answer that asserted the affirmative defense of fraud; the answer also contained a counterclaim by Gray alleging fraudulent misrepresentation and civil conspiracy against Central Bank and a bank officer, as an agent of the bank. Central Bank thereafter filed a motion for a summary judgment on both its complaint and Gray's counterclaim. The trial court entered a summary judgment for the bank on Gray's counterclaim, but left the bank's claim on the promissory note pending. Upon motion of Central Bank, the trial court certified the summary judgment on Gray's counterclaim as final under Rule 54(b). On appeal, this Court, finding that the facts of that case were analogous to those of Branch, supra, determined that Central Bank's claim on the promissory note and Gray's counterclaim alleging fraud should not be adjudicated separately "[b]ecause the issues in these two claims [were] `closely intertwined' and because a separate adjudication would indeed pose an unreasonable risk of inconsistent results." 519 So. 2d  at 479.
We conclude that the trial court erred in relying on Pate, supra, in certifying as final pursuant to Rule 54(b), its summary judgment on Prior Energy's counterclaims and in determining that the Gas District's claims, including fraud, were not intertwined with Prior Energy's counterclaim. In Branch, supra, and Gray, supra, this Court held that opposing claims of breach of contract (specifically default), and fraud, based upon the same set of facts, should not be separately adjudicated. To allow the Gas District's and Prior Energy's claims to be separately adjudicated in this case would similarly pose an unreasonable chance of inconsistent results and the trial court's Rule 54(b) certification on the summary judgment it entered on Prior Energy's counterclaims is of no effect. The rationale of Branch and Gray is also applicable to this case, inasmuch as the Gas District's liability on the contract could be affected by its claims that Prior Energy obtained that liability fraudulently. Thus, the trial court should not have ruled on Prior Energy's UCC counterclaims in isolation and certified that judgment as final, without considering the Gas District's opposing claims of fraud, which could affect the extent of Prior Energy's liability under the contract.[2]
Because the trial court's Rule 54(b) certification was invalid, this appeal is from a nonfinal judgment. Accordingly, the Gas District's argument that the appeal must be dismissed is correct.[3] Our *97 determination in this regard makes further consideration of the propriety of the trial court's summary judgment for Prior Energy on its counterclaims unnecessary.
APPEAL DISMISSED.
MOORE, C.J., and SEE, BROWN, and STUART, JJ., concur.
[1]  Because the Gas District and Prior Energy are the sole parties to this appeal, we discuss only the filings pertinent to those parties. As a result of the multiple parties involved and the extensive discovery that has taken place in this case, large periods of time elapsed between many of the pertinent filings.
[2]  We also note that the UCC provides that, unless displaced by its particular provisions, principles of fraud and misrepresentation or other invalidating causes supplement its provisions. See § 7-1-103, Ala.Code 1975. It also provides remedies for fraud. See § 7-2-721, Ala.Code 1975.
[3]  Even if the Gas District had not raised the intertwining-of-claims issue on appeal, it would nevertheless be our duty to dismiss this appeal. "When it is determined that an order appealed from is not a final judgment, it is the duty of the Court to dismiss the appeal ex mero motu." Powell v. Republic Nat'l Life Ins. Co., 293 Ala. 101, 102, 300 So. 2d 359, 360 (1974)(citing Taylor v. Major Fin. Co., 289 Ala. 458, 268 So. 2d 738 (1972); Tarvin v. Tarvin, 266 Ala. 214, 95 So. 2d 397 (1957)).