IN THE SUPREME COURT OF MISSISSIPPI

NO. 96-CA-00140-SCT

IP TIMBERLANDS OPERATING COMPANY, LTD.

AND INTERNATIONAL PAPER COMPANY

v.

DENMISS CORPORATION, JOHN H. HAUBERG

1982 LIVING TRUST, ET AL.

DATE OF JUDGMENT: 01/05/96

TRIAL JUDGE: HON. JAMES E. GRAVES, JR.

COURT FROM WHICH APPEALED: HINDS COUNTY CIRCUIT COURT

ATTORNEYS FOR APPELLANTS: PHILLIP A. WITTMANN

JOHN G. CORLEW

EDWIN NEILL, III

JACKIE W. ROZIER

RICHARD C. STANLEY

ATTORNEYS FOR APPELLEES: LUTHER T. MUNFORD

JAMES A. SMITH, JR.

ROSS BASS, JR.

JAMES R. HENNESSEY

NATURE OF THE CASE: CIVIL - CONTRACT

DISPOSITION: REVERSED AND REMANDED - 4/2/98

MOTION FOR REHEARING FILED: 4/16/98

MANDATE ISSUED: 9/24/98

BEFORE PRATHER, C.J., ROBERTS AND MILLS, JJ.

ROBERTS, JUSTICE, FOR THE COURT:

STATEMENT OF THE CASE

¶1. IP Timberlands Operating Co., and International Paper Company appeal two orders of the Hinds

County Circuit Court. In construing a 1945 lease agreement with a purchase option, Judge James E.

Graves, Jr., determined as a matter of law that the purchase option unambiguously called for

appraisers to fix the lands' value, although the option expressly provided for arbitrators to fix the

value of the lands. Also, Judge Graves determined as a matter of law that the purchase option called
for the lands' value to be appraised as unencumbered from the remainder of the prepaid ninety-nine

year lease that runs through 2044. Appellants raise the following issues on appeal:

I. WHETHER THE CIRCUIT COURT ERRONEOUSLY MADE A NEW CONTRACT

FOR THE PARTIES AND VIOLATED THE FEDERAL ARBITRATION ACT?

II. WHETHER THE CIRCUIT COURT'S $38,500,000 JUDGMENT, ENTERED

WITHOUT AN EVIDENTIARY HEARING OR A TRIAL, WHICH ORDERED IPTO

AND IP TO PAY TWICE FOR PROPERTY RIGHTS BOUGHT LONG AGO,

DEPRIVED THEM OF PROPERTY WITHOUT DUE PROCESS OF LAW?

III. WHETHER THE ORDERS AND JUDGMENT ENTERED BELOW WERE

PROCEDURALLY DEFECTIVE?

STATEMENT OF THE FACTS

¶2. On October 25, 1945, the Denkmann Lumber Company authorized John H. Hauberg, President,

or John D. Shuler, Vice-President, or W. H. Giles, Vice-President, to sell and convey to International

Paper Company or Southern Kraft Timberland Corporation, all of the timber, trees, wood and other

forest products, of every nature, kind and description, including the future growth thereof, on all or

any part of the lands of the Denkmann Lumber Company, for such price and consideration and on

such terms and conditions as may be deemed fit and proper by said officers, all without any

restrictions or reservations whatsoever.

¶3. On October 25, 1945, Southern Kraft Timberland Corporation, a division of International Paper

Corporation, executed an agreement with the Denkmann Lumber Company, in which Kraft leased

approximately 140,000 acres of Mississippi land from Denkmann. Also, on the same day, Kraft

leased approximately 95,000 acres of Louisiana land in another lease agreement.

¶4. The Mississippi agreement stated that in consideration of $1,000,000 cash paid by Kraft, and a

further sum constituting the balance of the consideration, Denkmann thereby:

A

Sell, convey and warrant unto KRAFT all of the timber, trees, wood and other forest products,

of every size, kind, character and condition, together with any future growth thereof, during the

life hereof standing, lying and being on the lands described in Exhibit A hereto, which is made a

part hereof, with full right to KRAFT, its successors and assigns, to enter, cut and remove said

timber, trees, wood and other forest products whatsoever, save as hereinafter provided, which

may now be, or may hereafter, during the life of this agreement, grow, upon said lands, by

virtue of the efforts of KRAFT, its successors or assigns, by natural reforestation or

reproduction, or by any cause whatsoever, for the full term of ninety-nine (99) years from this

date, subject to the further terms, conditions and reservations hereof.

KRAFT shall have the right to cut and remove timber, trees, wood and other forest products

from said property, or from any part thereof, repeatedly, at such times as it may elect, during

the life of this contract, and the removal of all or a part of said timber, trees, wood or other
forest products from said property or any portion thereof, one or more times, shall not

terminate nor affect KRAFT'S rights at subsequent times to remove timber, trees, wood and

other forest products that may be on said property, or that may grow or be grown thereon

during the life of this contract, KRAFT being hereby granted full authority to cut and remove

any such timber, trees, wood or other forest products now on or which may hereafter grow on

any of said lands, and utilize the same for commercial purposes or any other purposes desired

by it, and no such cutting or use shall constitute waste, all of which rights are subject to the

payment of taxes on the property, or portions thereof, and to the other obligations assumed by

KRAFT and reservations made by DENKMANN, as herein set out.

B

Subject to the further terms, conditions and reservations hereof, lease and lot unto KRAFT,

with full warranty of title, the said lands for the full term of ninety-nine (99) years from this

date, with right to use said lands in the future, during the life of this contract, for the purposes,

among others, of growing timber, trees, wood and other forest products, and of promoting the

supply, stand and growth of any or all of same on said land, and or removing and marketing the

same, from time to time, and at will, the aforesaid consideration covering all such rights and

privileges as herein provided, in addition to the conveyance and rights set forth in "A" next

above.

The balance of the consideration for which the above sale is made, and for which the lease and

future operating and cutting privileges herein set out are granted, is as follows:

At KRAFT'S option, to be exercised by March 1, 1946, (a) the sum of One Million, Two

Hundred Fifty Thousand Dollars ($1,250,000) then and there to be paid in cash, or (b) a sum

equal to the total price of the timber estimated to be on said lands by a cruise made in the

manner hereinafter provided...

The said cruise shall be made by Pomeroy & McGowin, Estimators, of Wilma, Arkansas;

provided, however, that should it become apparent that Pomeroy & McGowin will be unable to

complete said cruise on or prior to March 1, 1947, either party hereto may notify the other

party of that fact and thereupon each party shall nominate one arbitrator and the arbitrators thus

nominated shall nominate a third arbitrator, and the said three arbitrators shall thereupon select

another firm of estimators, who shall complete said cruise within time limit. In case the two

arbitrators appointed by the parties are unable to agree upon the third arbitrator, said arbitrator

shall be designated by one of the Judges of the United States District Court for the State of

Mississippi...

¶5. Kraft made total payments of $2,250,000 to Denkmann as consideration for the ninety-nine year

lease. However, the agreement imposed upon Kraft the duty to pay the annual land taxes, exercise

good forestry practices and leave the land reforested for Denkmann at the end of the lease in 2044.

Kraft's rights under the lease would terminate if it failed to pay the annual land tax. Also, Denkmann

reserved "the right to make and grant any and all oil, gas, gravel and other mineral leases and

contracts necessary or desirable to the full mineral development of the said lands".
¶6. Further, the agreement allowed Kraft the right to exercise one of two purchase options for all of

the leased Mississippi land. The first was to be exercised on or before March 1, 1946, at a price of

$3.50 per acre. The second option stated:

At any time between January 1, 1986, and December 31, 1995, to purchase all of said lands, not

theretofore released from it, at a price to be fixed by three arbitrators to be named at that time -

one by DENKMANN, its successors and assigns, one by KRAFT, its successors and assigns,

and the third by the two so named; or, in case they shall be unable to agree upon said third

arbitrator, said third arbitrator shall be named upon application by either party by one of the

Judges of the United States District Courts for the State of Mississippi, after notification to the

other party of intent to apply to such Judge for such appointment, given in writing at least thirty

(30) days in advance of such application, such amount so fixed to be paid upon execution and

delivery of deed conveying such lands, with warranty as in other instance.

In either event, said deed shall contain full reservation to DENKMANN, or its assigns (Vendor

therein) of all minerals and rights therein, and the rights reasonably necessary to full mineral

development. Notice of the exercise of either of such options to be given by registered mail.

¶7. The agreement provided that if either of the purchase options were exercised, the deed would

contain full reservation to Denkmann, or its assigns of all minerals, and rights reasonably necessary to

full mineral development.

¶8. The agreement allowed Kraft and Denkmann to assign their rights and obligations. Although not

clear from a review of the record, Denkmann distributed its assets to the distributees before 1960. In

1971, the distributees of Denkmann exchanged their share of the distributed assets for $10 par value

stock in the newly formed Denmiss Corporation. Beginning as late as 1960, the Denkmann

distributees were represented by Agents and Attorneys-in-Fact, which included Denkmann former

President John H. Hauberg, and Vice-President W. H. Giles, among others. Kraft assigned its rights

to the International Paper Company, which later transferred its rights to International Paper

Timberlands Operating Co., LTD. On February 15, 1996, IPTO transferred its rights and obligations

to the purchase option back to IP, which left IPTO with the timber and leasehold estates. For

simplicity, all rights and obligations held by IP and IPTO will be referred to as belonging to IP.

¶9. On May 18, 1960, W. H. Giles, former Vice-President and then Agent of the distributees of the

Denkmann Lumber Company, contacted the distributees of the Denkmann Lumber Company in

regard to the sale of land that was part of the 1945 agreement with Kraft. Giles explained that the

Mississippi Legislature had created the Pearl River Valley Water District to construct a dam across

the Pearl River a few miles north of the City of Jackson, and that the Water District now wanted to

purchase 21,320 acres of Denkmann land to create the reservoir. Giles wrote:

As you know, the Denkmann lands are under a long term timber lease to International Paper

Company, which still has eighty-five years to run. Under this lease the Paper Company is

entitled to payment for all merchantable timber and for the value of timber growth for the next

eighty-five years. The Denkmann distributees are entitled to some value for the reversionary

interest in the land at the end of eighty-five years. All mineral rights will be excepted from the

sale.
¶10. Further, Giles explained that the Water District would not separately negotiate with Denkmann

and IP, but that IP had reached an agreement with the Water District at a price of $47 per acre. Giles

stated that after many weeks of negotiation with IP, the Denkmann Agents and Attorneys-in-Fact

agreed to accept $10 per acre for the reversionary interest in the land. The Denkmann distributees

approved the agreement, and on August 2, 1960, the Denkmann distributees conveyed a warranty

deed to the Pearl River Valley Water Supply District for development of the Ross Barnett Reservoir

"subject, however, to the fee simple ownership of all trees, timber and forest products on said lands

and their ninety-nine year lease to the surface thereof owned by International Paper."

¶11. On October 7, 1971, Rudy V. Ewing, an Agent for the distributees of the Denkmann Timber

Corporation, wrote a letter in regard to the valuation of Denmiss Corporation stock. Ewing wrote,

"trying to establish a true value is almost impossible, because the interests traded to the corporation

for stock are all reversionary interests." In an April 7, 1972 letter, Ewing again declared that there

was no way of arriving at a value for the Denmiss Corporation stock because all of its assets are

reversionary interests. On April 12, 1979, Ewing responded to a request to furnish an estimated value

stock held in the Denmiss Corporation. In this letter, Ewing stated, "The lands are under a 99 year

paid-up lease to International Paper Company."

¶12. On April 30, 1979, John H. Hauberg, former President and then Agent of the Denkmann

Lumber Company, wrote to the distributees and successors in interest of Denkmann to inform the

group of the purpose of the 1979 business meeting. Hauberg wrote:

In the immediate years ahead lies the same business that we have been doing since 1945, leasing

the mineral rights to oil companies and individual speculators who drill for oil and gas. Beyond

these years lies a negotiation with International Paper Company which has the right to buy the

lands it is now leasing from us between the years 1985-1995. There should be several million of

dollars involved.

I.P. is in the driver's seat because its lease will not expire until 2044. If it buys our lands, it will

not be offering the current market value of the lands that it can have the tree use of for another

50 to 60 years, having paid us for the lease back in 1945.

¶13. On May 31, 1979, Barton L. Bennett, a Registered Forester, wrote to Fred Reimers, an Agent

and Attorney-in-Fact for the distributees of the Denkmann Lumber Company. Bennett wrote:

Within recent months we have had the opportunity of working with two different clients toward

the termination of long-term leases and cutting contracts between the clients and large forest

industries. Before this, we felt the termination of these instruments would be quite impossible.

Legally, it still seems a remote chance to have the contracts broken. But, we now are able to

see areas of possible negotiation which may permit the landowners to obtain release of at least

part of their lands. With these thoughts in mind, the following discussion will be in the form of

an example of the calculations necessary to produce negotiating points for the possible

termination of a long-term forest lease.

¶14. Bennett predicted that Denmiss could profit by over $16,000,000 if only 25% of the leased lands

were released from the contract. Another letter from Bennett was sent to Reimers to confirm plans to

map the leased property, review the tax payments for the property, inspect the property and to make
recommendations.

¶15. On July 8, 1980, the office of John H. Hauberg again referred to the lease agreement as "paidup" until the year 2044. James H. McCuiston, a minerals agent for the distributees of the Denkmann

Lumber Company, in estimates of the value of Denmiss Corporation stock, referred to the IP

agreement as a ninety-nine year lease "paid-up" through the year 2044 on January 19, 1983, and

again on February 3, 1983.

¶16. On November 20, 1985, Denmiss sent IP a document titled "Notice of Default", in which

Denmiss alleges numerous violations of the 1945 Mississippi and Louisiana agreements. Among the

allegations is that IP's purchase option, set to begin January 1, 1986, was unenforceable.

¶17. On August 15, 1986, IP filed suit in U.S. District Court, Middle District of Louisiana against

Denmiss to confirm its property rights under both the Mississippi and Louisiana agreements. In 1990,

federal diversity jurisdiction was destroyed by the United States Supreme Court's decision in Carden

v. Arkoma Associates., 494 U.S. 185 (1990), and the case was dismissed. International Paper v.

Denkmann Assocs., 132 F.R.D. 168 (M.D.La. 1990).

¶18. On March 13, 1990, IP filed suit against Denmiss in the Leake County Chancery Court. On

August 15, 1990, Denmiss filed suit against IP in Hinds County Circuit Court. Upon motion, the

Leake County Chancery Court transferred suit to the Hinds County Chancery Court. Subsequently,

the Hinds County Chancery Court transferred the suit to the Hinds County Circuit Court.

¶19. On May 14, 1991, IP filed their claims in Hinds County Circuit Court. On February 26, 1992,

the circuit court entered a scheduling order that consolidated the two suits and created new deadlines

for discovery and trial.

¶20. On March 31, 1992, IP exercised the purchase option under the Mississippi agreement and

named Russell Milliken as its arbitrator pursuant to the purchase option to fix the purchase price. IP

filed amended pleadings seeking specific performance of the option and declaratory relief. IP

contended there was "no vagueness or uncertainty" about the meaning of the option, and

performance of the option would terminate Denmiss's claims for breach of contract. On September 3,

1992, the circuit court ruled that the purchase option was definite and would be enforced, and denied

Denmiss's motions to dismiss. On September 4, 1992, Denmiss agreed to proceed with the arbitration

provision pursuant to the lease agreement, but declared that the agreement would not serve as a

waiver of its earlier position. Denmiss named William C. Humphries as its arbitrator. On December 9,

1992, Denmiss filed a motion to compel appraisal. On December 22, 1992, IP filed a motion to

compel arbitration and to deny Denmiss's motion. On March 3, 1993, Hinds County Circuit Court

Judge James E. Graves, Jr., entered an order denying IP's motion to compel arbitration. Also, on

March 3, 1993, Judge Graves entered an order to grant Denmiss's motion to compel appraisal of

lands. Without releasing the basis of his opinion, Judge Graves stated:

That the 1945 Agreement entered into between Denmiss Corporation, John H. Hauberg Living

trust, et al and International Paper Company and IP Timberlands Operating Company, LTD.

contains in Paragraph Number 12 subparagraph b the following phrase "at any time between

January 1, 1986, and December 31, 1995 to purchase all of said lands, not theretofore released

therefrom by it, at a price to be fixed by three arbitrators to be named at that time". The Court
hereby specifically finds that that [sic] is an appraisal provision which requires that appraisers

fix the value of the lands as of the time of the appraisal; further, the Court hereby specifically

finds that appraisers shall fix the value of the lands pursuant to the option provisions and that in

making its determination about value the determination is to be unencumbered by any assumed

continuation of the 1945 Agreement inasmuch as the option provision has been invoked.

¶21. On March 12, 1993, IP filed a memorandum in support of its motion for reconsideration, or to

certify the orders for interlocutory appeal. Following Denmiss's motion to respond, Judge Graves

denied the motion for reconsideration, but granted the motion to certify the orders for interlocutory

appeal. On April 2, 1993, IP filed a notice of appeal in the Hinds County Circuit Court.

Subsequently, this Court denied IP's request for interlocutory review.

¶22. On May 23, 1994, Denmiss and IP jointly requested U.S. District Court, Chief Judge William

Barbour to appoint a third person to set an option price for the leased lands. On February 17, 1995,

Chief Judge Barbour appointed James S. George to serve "as the third arbitrator."

¶23. On October 20, 1995, the appraisers reported that they had completed their appraisal and stated

that Humphries and George agreed that the current value of the 113,500 acres of land was $38,500,

000, but that Milliken did not agree and dissented to the value reached by Humphries and George.

On October 23, 1995, IP requested that it receive a copy of the appraisers' written report. On

October 26, 1995, George responded that it was the understanding of the majority of the appraisers

that they were to merely determine an agreed value, and that no report would be forthcoming. On

November 1, 1995, Milliken informed IP and Denmiss that he had valued the property at $13,770,

000.

¶24. On November 1, 1995, IP filed a motion to set matters for jury trial. IP argued that, unlike an

arbitration, which can be reviewed only on very narrowly defined grounds, an appraisal is reviewable

both substantively and procedurally for mistakes of fact and to prevent injustice to either party. On

December 14, 1995, Judge Graves entered an order and granted Denmiss's motion for entry of

judgment. Graves found:

Upon additional evaluation of the contract clause in question and considerable examination of

relevant case law and theory, this Court determines that arbitration has indeed been completed

byway of the appraisal process. Three appraisers were chosen in compliance with the contract

clause of the 1945 agreement and this Court's previous orders. Two of the three appraisers

agreed upon a fixed price of the lands in question and thus a price to exercise the option has

been properly set. Defendants essentially contend that they were not given an opportunity to

present evidence or challenge the decision of the appraisers in a hearing. Clearly, they viewed

the process as an arbitration process as evidenced by the request for an evidentiary hearing.

Said request was denied by the appraisers. That may be an issue for appeal, but it does not

constitute sufficient grounds to grant a trial.

It is the determination of this Court that the submitted purchase price of $38,500,000 by the

appraisers is proper and Plaintiff's are entitled to judgment as a matter of law...Such judgment is

final in accordance with Rule 54(b) of the Mississippi Rules of Civil Procedure.

LOUISIANA AGREEMENT
¶25. Denmiss also brought suit for the 1945 Louisiana agreement and alleged that IP had breached

the contract, that the purchase option was unenforceable, and that the contract was void. In the

Louisiana agreement, Denkmann leased approximately 95,000 acres for ninety-nine years to Kraft,

and included a near identical purchase option for the leased lands between 1986 and 1995. IP

Timberlands Operating Co., LTD. v. Denmiss Corp., 657 So. 2d 282, 288 (La. Ct. App. 1995),

writ den., 661 So. 2d 1348 (La. 1995). Both parties appealed the judgment following a four-month

trial, in which the jury awarded Denmiss $100,000 as damages for violations of the agreement, and a

later judgment notwithstanding the verdict (JNOV) awarded an additional $2,056,905 in damages.

Id. at 287. On appeal, the Louisiana court noted the 1979 memorandum from Bennett, the forestry

consultant, in which he states that there are areas of negotiation that may release a portion of the

leased land. The Louisiana court found that the purchase option was not ambiguous, that the option

was enforceable, and that IP's breaches of the contract were not so significant as to terminate the

lease. Id. at 313-14.

DISCUSSION OF THE ISSUES

¶26. Before proceeding, this Court must confront conflicting Mississippi case law in the area of

arbitration. In Jones v. Harris, 59 Miss. 214 (1881), this Court said, "The right of either party to

revoke a submission before award made, where the submission is not a rule of court, or regulated by

statute changing the common law, is well settled and universally recognized." See also Standard Mill

Work & Supply Co. v. Mississippi Steel & Iron Co., 205 Miss. 96, 38 So. 2d 448, 451(1949);

McClendon v. Shutt, 237 Miss. 703, 115 So. 2d 740, 741 (1959). In 1957, this Court stated:

A good summary of the common-law rule, which exists in Mississippi and is applicable to this

agreement, is set forth in 3 Am.Jur., Arbitration and Award, Sec. 31: 'So long as agreements to

arbitrate, made in advance of the controversy, remain executory, different rules prevail than in

the case of executed agreements. It is settled at common law that a general agreement, in or

collateral to a contract, to submit to final determination by arbitrators the rights and liabilities of

the parties with respect to any and all disputes that may thereafter arise under the contract is

voidable at will by either party at any time before a valid award is made, and will not be

enforced by the courts, because of the rule that private persons cannot, by a contract to

arbitrate, oust the jurisdiction of the legally constituted courts...Whether the foregoing rule,

which has variously been attributed to early jealously of the courts concerning the exclusiveness

of their jurisdiction and to considerations of public policy, rests on a satisfactory basis has been

questioned, but it has been so long settled that the courts are unwilling to disturb it.

Machine Prods. Co. v. Prairie Local Lodge No. 1538 of Int'l Ass'n of Machinists, AFL-CIO, 230

Miss. 809, 94 So. 2d 344, 348 (1957).

¶27. As recently as 1995, this line of case law was still alive. In Arce v. Cotton Club of Greenville,

Inc., 883 F. Supp. 117, 118 (N.D. Miss. 1995), the U.S. District Court recognized these cases as

prevailing Mississippi law.

¶28. However, another line of case law has existed in Mississippi since at least 1917. This state, as a

matter of public policy, has long allowed parties to arbitrate their differences and to give effect to an

arbitration award. Scottish Union & Nat'l Ins. Co. v. Skaggs, 114 Miss. 618, 75 So. 437, 438
(1917). "That policy has even greater force in our present era of overcrowded judicial dockets. If

there be any type of arbitration award we should be loathe to disturb, it should be that between

private contracting parties respecting a matter of interest only to themselves and their respective

pocket books." Craig v. Barber, 524 So. 2d 974, 977 (Miss. 1988). In Hutto v. Jordan, 204 Miss.

30, 36 So. 2d 809, 812 (1948), this Court stated:

Articles of agreement to arbitrate, and awards thereon are to be liberally construed so as to

encourage the settlement of disputes and the prevention of litigation, and every reasonable

presumption will be indulged in favor of the validity of arbitration proceedings.

See also Horne v. State Bldg. Comm'n, 222 Miss. 520, 76 So. 2d 356, 358 (1954); Stout v. W. M.

Garrad & Co., 128 Miss. 418, 91 So. 33 (1922).

¶29. This Court hereby overturns the former line of case law that jealously guarded the court's

jurisdiction. Again, we expressly state that this Court will respect the right of an individual or an

entity to agree in advance of a dispute to arbitration or other alternative dispute resolution.

I. WHETHER THE CIRCUIT COURT ERRONEOUSLY MADE A NEW CONTRACT

FOR THE PARTIES AND VIOLATED THE FEDERAL ARBITRATION ACT?

¶30. IP contends that the purchase option expressly and unambiguously provided for three arbitrators

to fix the value of leased lands, and that the circuit court erred in finding, as a matter of law, that the

purchase option unambiguously contemplated appraisal. Further, IP contends that the lower court

wrongly interfered with an arbitration agreement that is covered under the Federal Arbitration Act of

1925. And, of course, Denmiss contends that the lower court properly found that the agreement

unambiguously called for the use of three appraisers to determine the value of the leased lands.

¶31. Before determining if the Arbitration Act applies and if it was violated, we must first determine

if the purchase option is an arbitration or appraisal agreement.

CONSTRUCTION OF THE PURCHASE OPTION

¶32. On the question of whether the instruments are unambiguous, and if so, their meaning and

effect, we review the lower court's decision de novo for these two issues present questions of law.

Whittington v. Whittington, 608 So. 2d 1274, 1278 (Miss. 1992); Lamb Constr. Co. v. Town of

Renova, 573 So. 2d 1378, 1383 (Miss. 1990); Dennis v. Searle, 457 So. 2d 941, 945 (Miss. 1984);

see also Moore & Munger Mktg. & Ref., Inc. v. Hawkins, 962 F. 2d 806 (8th Cir. 1992); Bennett

v. Local Union No. 66, et al., 958 F. 2d 1429 (7th Cir. 1992).

¶33. In regard to contract construction, this Court has stated:

"[T]he meaning of the language and intention of the parties to be determined by the Court is to

be found in the language used in the instrument." Id.; Pursue Energy Corp. v. Perkins, 558 So.

2d 349, 351-53 (1990); see also Simmons v. Bank of Mississippi, 593 So. 2d 40, 42-43 (Miss.

1992) [in construing written instruments, "our concern is not nearly so much what the parties

may have intended as it is what they said, for the words employed are by far the best resource

for ascertaining intent and assigning meaning with fairness and accuracy," quoting UHSQualicare v. Gulf Coast Comm. Hosp., 525 So. 2d 746, 754 (Miss. 1987) ]. Clear,
unambiguous instruments must be construed as written Cherry v. Anthony, Gibbs, Sage, 501

So. 2d 416, 419 (Miss. 1987). Courts must ascertain the meaning of the language actually used,

and not "some possible but unexpressed intent of the parties." Simmons, 593 So. 2d at 42-43,

quoting Cherry, 501 So. 2d at 416. The parties obviously disagree over that meaning, but that

fact alone does not render the instruments ambiguous. Id.

Whittington, 608 So. 2d at 1278.

¶34. The purchase option expressly stated that the price was to be fixed by three arbitrators, not

appraisal. Denmiss contends that the term "arbitrators" unambiguously contemplated appraisal,

however, the purchase option is not necessarily ambiguous. Although, the analysis for an ordinary

contract may end at the plain wording expressed, this Court has discussed the difficulty in

determining if the parties' agreement actually contemplated arbitration instead of appraisal. In

Hartford Fire Insurance Company v. Jones, 235 Miss. 37, 108 So. 2d 571, 572 (1959), this Court

stated:

Both sides have briefed this case on the theory that the report of the appraisers constituted an

award under an arbitration agreement. It seems that all of the lawyers and the court completely

overlooked the fact that the report of the appraisers is not an arbitration award. In 3 Am.Jur.,

Arbitration and Award, Sec. 3, at pp. 830-831, the distinction between the two is made quite

clear. The report of appraisers fixing the amount of a fire loss is not an arbitration and award.

We quote from the text cited: 'Arbitration is sometimes confused with other forms of procedure

which have some points of similarity. For example, agreements in, or separate from, contracts,

leaving to the decision of third persons questions of price, value, amounts, quantities, or

qualities are not, strictly speaking, submissions to arbitration, nor are such third persons

properly called arbitrators. Some of these so-called arbitrations are mere appraisements; others

have some, many, or nearly all of the characteristics of arbitrations. All of them, in one or more

particulars, differ from arbitrations. Appraisement, in particular, is perhaps most often confused

with arbitration. While some of the rules of law that apply to arbitration apply in the same

manner to appraisement, and the terms have at times been used interchangeably, there is a plain

distinction between them. In the proper sense of the term, arbitration presupposes the existence

of a dispute or controversy to be tried and determined in a quasi judicial manner, whereas

appraisement is an agreed method of ascertaining value or amount of damage, stipulated in

advance, generally as a mere auxiliary or incident feature of a contract, with the object of

preventing future disputes, rather than of settling present ones. Liability is not fixed by means of

an appraisal; there is only a finding of value, price, or amount of loss or damage. The

investigation of arbitrators is in the nature of a judicial inquiry and involves, ordinarily, a

hearing and all that is thereby implied. Appraisers, on the other hand, where it is not otherwise

provided by the agreement, are generally expected to act upon their own knowledge and

investigation, without notice of hearings, are not required to hear evidence or to receive the

statements of the parties, and are allowed a wide discretion as to the mode of procedure and

sources of information.'

¶35. Mississippi case law has not construed an arbitration provision to have had contemplated

appraisal. Arbitration provisions are now recognized to be valid even before a dispute arises.
¶36. In what may be the best single source to derive intent, the 1945 agreement provided for the use

of arbitrators in one other instance. Under the lease agreement, Kraft paid $1,000,000 on the day of

the agreement and was obligated to make another payment to complete the transaction. Kraft had the

option of paying a flat $1,250,000 to make complete consideration, or Kraft could elect to pay an

amount that was to be based upon the amount of timber on the leased lands. To arrive at the total

under the second option, the parties stipulated in the agreement to a set price for different types of

lumber (for example, Kraft would pay $1.50 per one thousand feet of pine pulpwood, $7 per one

thousand feet of hardwood sawtimber, etc.) that would be multiplied by the amount of timber

estimated by a timber cruise. The agreement provided that the firm of Pomeroy & McGowin

Estimators were to make an estimate of the timber upon the lands. However, if Pomeroy could not

perform the estimate, then the parties were to each choose one arbitrator, and the two arbitrators

were to agree on the third arbitrator. If the two arbitrators could not agree upon the third arbitrator,

then the parties were to ask a U.S. District Court Judge of Mississippi to choose the third arbitrator.

These three arbitrators were to select another firm of estimators.

¶37. Under this provision of the agreement, the use of the term "arbitrators" cannot be reconciled

with the use of "appraisers". Although, arbitrators often are not limited to such a narrow decision as

choosing another firm of timber estimators, the selection of an impartial and fair firm of estimators

would be important to both Denkmann and Kraft. Thus, use of the term arbitrators in this provision

more closely reflects that the parties did, in fact, contemplate arbitrators. These parties would not

have chosen appraisers to choose an estimator. Denmiss admits that appraisers only engage in setting

a value.

¶38. As stated earlier, the plain language of the purchase option provided for the price to be fixed by

three arbitrators. Both Denkmann and Kraft were knowledgeable and experienced timberland

companies, if they had intended any meaning other than arbitrators, they could have easily substituted

such term.

¶39. Denmiss argues that the arbitration provision is merely a statement that the price is to be fixed

by appraisal and that no hearing or other procedure was intended, therefore, Denmiss contends the

agreement did not contemplate arbitration. In Munn v. National Fire Insurance Co. of Hartford,

237 Miss. 641, 115 So. 2d 54, 56 (1959), this Court held appraisers are not arbiters and that

appraisers have no power to arbitrate disputes between parties other than to value the property.

However, arbitrators conduct hearings, consider evidence and testimony, and could hire an appraiser

before making their determination.

¶40. Further, Denmiss contends that if the parties had wanted to actually subject themselves to

arbitration that the option would have expressly set out that the arbitrators would also dissolve any

disputes between the parties in regard to price. Denmiss ignores that the term arbitrators inherently

includes the investigation and procedures as applied by arbitrators. Possibly, the parties intended that

the three arbitrators conduct a hearing, hire an appraiser(s) if they wanted and then fix the price of

the lands.

¶41. This Court finds, as a matter of law, that the term 'arbitrators" as used in the purchase option

does unambiguously mean arbitrators. This Court has long held that, "Articles of agreement to

arbitrate, and awards thereon are to be liberally construed so as to encourage the settlement of
disputes and the prevention of litigation, and every reasonable presumption will be indulged in favor

of the validity of arbitration proceedings." Hutto, 36 So. 2d at 812; see also Horne, 76 So. 2d at

358; Stout v. W. M. Garrad & Co., 91 So. 33.

¶42. In construing the agreement, the plain language of the option provides for arbitrators, which

must be construed in its ordinary meaning. Both Denkmann and Kraft were knowledgeable and

experienced timber companies; thus if they had intended for appraisers to fix the value of the lands,

they could have used the term appraisers instead of arbitrators. Another provision of the agreement

provides for the use of arbitrators that is inconsistent with the term "appraisers". Although limited,

this second provision for arbitrators is consistent with the use of disinterested and impartial persons

to fairly decide an issue between the parties. Where a contract is clear and unambiguous, its meaning

and effect are matters of law which may be determined by the court. Pfisterer v. Noble, 320 So. 2d

383, 384 (Miss. 1975). The decision of the lower court is reversed and remanded for proceedings

consistent with the arbitration provision.

¶43. Even if we had determined that the term "arbitrators" did not unambiguously refer to arbitration,

the lower court still erred. The lower court found, as a matter of law, that the term arbitrators

unambiguously meant appraisers without any support or analysis for the finding. "Arbitration" and

"appraisal" are both well defined and understood terms, and the use of "arbitrators" in the purchase

option is unquestioned. As a matter of common sense, a word that has its own well defined meaning

cannot be found to unambiguously mean another. Thus, arbitrators cannot unquestionably mean

appraisers. Appraisal may be an issue in arbitration and may even be ordered, but pursuant to Munn

appraisers can do nothing but value property. If the arbitration provision is found to be ambiguous

and its meaning uncertain, questions of fact are presented which are to be resolved by the trier of

facts after plenary trial on the merits. Dennis v. Searle, 457 So. 2d 941, 945 (Miss. 1984). Further, it

is understandable that Kraft and Denkmann realized that if the option were exercised, each party

would want the best possible price and disputes would be likely. Had the lower court found that

"arbitrators" did not unambiguously call for the use of arbitrators, then the lower court necessarily

found the term to be ambiguous.

FEDERAL ARBITRATION ACT

¶44. Denmiss contends that the Arbitration Act does not apply because the parties did not intend for

the lease agreement to be subject to the Act's provisions, and because the Act does not affect

common law provisions to the contrary. Of course, IP contends that the Act does apply. The Federal

Arbitration Act provides:

A written provision in any maritime transaction or a contract evidencing a transaction involving

commerce to settle by arbitration a controversy thereafter arising out of such contract or

transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing

to submit to arbitration an existing controversy arising out of such a contract, transaction, or

refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in

equity for the revocation of any contract. 9 U.S.C. § 2 (1976).

¶45. "In enacting § 2 of the Arbitration Act, Congress declared a national policy favoring arbitration

and withdrew the power of the states to require a judicial forum for the resolution of claims which

the contracting parties agreed to resolve by arbitration. Congress has thus mandated the enforcement
of arbitration agreements." Southland Corp. v. Keating, 465 U.S. 1, 10 (1984). The Arbitration Act,

resting on Congress's authority under the Commerce Clause, creates a body of federal substantive

law that is applicable in both state and federal courts. Moses H. Cone Memorial Hosp. v. Mercury

Constr. Corp., 460 U.S. 1 (1983). "The sine qua non of the FAA's applicability to a particular dispute

is an agreement to arbitrate the dispute in a contract which evidences a transaction in interstate

commerce." Peoples Sec. Life Ins. Co. v. Monumental Life Ins. Co., 867 F.2d 809, 813 n. 4 (4th

Cir.1989).

¶46. Doubts as to the availability of arbitration must be resolved in favor of arbitration. Moses H.

Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983). "[U]nless it can be said with

positive assurance that an arbitration clause is not susceptible of an interpretation which would cover

the dispute at issue, then a stay pending arbitration should be granted." Wick v. Atlantic Marine,

Inc., 605 F.2d 166, 168 (5th Cir.1979) (citing United Steelworkers of Am. v. American Mfg. Co.,

363 U.S. 564 (1960), and Seaboard Coastline R.R. Co. v. National Rail Passenger Corp., 554 F.2d

657 (5th Cir.1977) (per curiam)).

¶47. In the case sub judice, we easily recognize that the timber industry, on a national level, meets the

minimum threshold of affecting or bearing upon interstate commerce, and thus initiating the Federal

Arbitration Act. Individually, the 1945 Mississippi agreement meets the minimum threshold to initiate

the Act, because both Kraft and Denkmann held forest lands in multiple states, as evidenced by a

second agreement between them for Louisiana lands. Contrary to Denmiss's position that Denkmann

and Kraft did not elect into the Act's coverage, the Act mandates a policy favoring arbitration. Thus,

the policy in favor of arbitration could only be cast aside if we had determined the purchase option

was ambiguous. Mississippi case law regarding arbitration and the Federal Arbitration Act are

consistent with one another. As discussed above, Mississippi has long observed a policy of favoring

agreements to arbitrate, and this Court hesitates to disturb an agreement that knowledgeable and

experienced parties freely enter into. Also, discussed above, we have determined that the purchase

option unambiguously provided for three arbitrators to fix the value of the leased lands. These

arbitrators will determine the value through one or more hearings, during which Denkmann and IP

will have the opportunity to produce evidence in support of their respective positions. Further, the

arbitrators may employ one or more appraisers to help in fixing the price of the leased lands.

¶48. In addition to establishing a strong presumption in favor of arbitration, the Act also limits the

role of the court to determining whether an issue is arbitrable. The court's sole function is to

determine whether the claim is referable to arbitration. Once that determination is made, the court

may not delve further into the dispute. "The courts ... have no business weighing the merits of the

grievance, considering whether there is equity in a particular claim, or determining whether there is

particular language in the written instrument which will support the claim." United Steelworkers of

Am. v. American Mfg. Co., 363 U.S. 564, 567 (1960).

II. WHETHER THE CIRCUIT COURT'S $38,500,000 JUDGMENT, ENTERED

WITHOUT AN EVIDENTIARY HEARING OR A TRIAL, WHICH ORDERED IPTO

AND IP TO PAY TWICE FOR PROPERTY RIGHTS BOUGHT LONG AGO,

DEPRIVED THEM OF PROPERTY WITHOUT DUE PROCESS OF LAW?

¶49. Although, we previously determined that the purchase option was indeed an agreement to
arbitrate, we believe it is proper for this Court to discuss the proper valuation method to be used by

the arbitrators, and to clearly delineate Mississippi law.

¶50. The lower court determined that the purchase option intended for the appraisers to value the

lands unencumbered by the remainder of the ninety-nine year lease. Ambiguity of a contract, or its

terms and a contract's meaning and effect are issues of law that are reviewed de novo by this Court.

Whittington, 608 So. 2d at 1274. This Court must construe the agreement as made by the parties and

give the words of the document their commonly accepted meaning. If no ambiguity exists, this Court

will accept the plain meaning of the instrument as the intent of the parties. Contracts are solemn

obligations and the Court must give them effect as written.

CONSTRUCTION OF THE TERM "WARRANTY"

¶51. IP argues Kraft acquired two estates in the leased lands under the 1945 agreement, which were

later assigned to IP. IP states that prior to the 1992 exercise of the option, it owned all of the timber,

trees, wood and other forest products on the land and that it owned the balance of the prepaid ninetynine year lease expiring in the year 2044. IP contends that the lower court improperly instructed the

appraisers not to consider the balance of the ninety-nine year leasehold interest, and that the improper

instruction forced the appraisers to value the land as if it were unencumbered, which resulted in an

appraisal of $38,500,000. Finally, IP states that the improper appraisal has forced IP to pay again for

an interest that it purchased in 1945.

¶52. Denmiss contends that Kraft agreed "to purchase all of said lands, ...with warranty as in other

instances." Further, Denmiss contends that the purchase option is consistent with the doctrine of legal

merger, wherein IP's lessor estate merges into the greater estate and thereby terminated the lessor

estate. Denmiss stated that if the parties had intended to value the lands encumbered with the

remainder of leasehold interest that the purchase option would have so provided.

¶53. In 1958, this Court discussed the application of legal merger to contracts in Mississippi, and

stated:

We are not concerned here with the doctrine of legal merger. 'Indeed,' as stated in Pomeroy's

Equity Jurisprudence, Fifth Ed., Vol. 3, p. 144, par. 787, 'the doctrine of legal merger is now

practically extinct both in England and in the United States, for equitable principles are

generally applied by the courts of both countries. The doctrine is not now operative, either at

law or in equity, if thereby the intention of the parties will be frustrated.'Consequently, the

courts will not compel a merger of estates where the party in whom the two interests are vested

does not intend such merger to take place, or where it would be inimical to the interest of the

party in whom the several estates have united. Mobley v. Harkins, 14 Wash.2d 276, 128 P.2d

289, 143 A.L.R. 88. It is undoubtedly true that, generally, a tenancy for years merges in a

freehold estate, when the tenancy and the freehold are held by one person at one and the same

time without any intermediate estate, and the lease is thereby terminated. 'Termination does not,

however, always follow the acquisition of the landlord's title by the tenant. The question

whether or not a merger affecting a termination of the lease results depends on what will best

serve the interests of justice and the intention of the parties.' 51 C.J.S. Landlord and Tenant S

94, p. 666.
Zouboukos v. Costas, 232 Miss. 860, 100 So. 2d 781, 785 (1958).

¶54. In the case sub judice, if the leased lands were valued as encumbered, rather than unencumbered,

the appraisal would be substantially less than $38,500,000. Accordingly, we will not enforce the

doctrine of legal merger to terminate IP's interest without first determining the parties intent to

terminate the encumbrance.(1)

¶55. Denmiss contends that usage of the phrase "with warranty as in other instances" shows the

intent of the parties to convey the leased lands free of encumbrance from the remainder of the lease.

Miss. Code Ann. § 89-1-33 provides that the word "warrant" without restrictive words in a

conveyance has the effect of embracing all covenants known to common law: seisin, power to sell,

freedom from encumbrance, quiet enjoyment and warranty of title.

¶56. If this were the only language pertaining to the quality of title to be sold contained in the 1945

agreement, our analysis would end. However, Denkmann agreed to "lease and lot unto KRAFT, with

full warranty of title, the said lands for the full term of ninety-nine (99) years...with right to use said

lands in the future, during the life of contract...the aforesaid consideration covering all such rights and

privileges". In consideration, Kraft paid Denkmann $2,250,000, which represented the only cash that

Denkmann was to ever receive under the lease. In the lease provision, the use of the term "warranty"

is inconsistent with § 89-1-33, because a lessee cannot hold all covenants. Kraft was indisputably

granted the right to use the leased lands for forestry purposes for ninety-nine years, undisturbed by

Denkmann unless certain breaches occurred. Thus, Kraft was vested with the covenant of seisin or

possession through the year 2044. See Standard Fruit & S.S. Co. v. Putnam, 290 So. 2d 612, 615

(Miss. 1974); Collins v. Wheeless, 171 Miss. 263, 157 So. 82 (1934); Crowell v. New Orleans & N.

E. R. R., 61 Miss. 631 (1884). A lessee is vested with rights in the leased property and clothed with

the same power of control and possessory rights as if they were the owner. Standard Fruit & S.S.

Co., 290 So. 2d at 615. Thus, Denkmann no longer held all covenants of warranty.

¶57. This Court finds that the 1945 lease agreement gave IP a vested right to possession of the lands

through the prepaid lease. Therefore the purchase option did not intend that a warranty deed could be

conveyed by Denmiss because of their lack of having any possessory rights until 2044. The lower

court erred, and the appraisers should have fixed the value of the encumbered lands. We find

Mississippi law will protect the lessee, and we decline to enforce legal merger in the absence of clear

intent to do so.

¶58. However, even if we had found that the agreement was inconclusive as to the parties intent, then

the consideration of extrinsic evidence would be proper to determine their intent.

CONSIDERATION OF EXTRINSIC EVIDENCE

¶59. In Baylot, 147 So. 2d at 494 , this Court stated:

"Whenever the terms of a contract are susceptible of more than one interpretation, or an

ambiguity arises, or the intent and object of the contract cannot be ascertained from the

language employed, parol evidence may be introduced to show what was in the minds of the

parties at the time of making the contract..." 20 Am.Jur., Evidence, Sec. 1147. The ambiguity

may arise from words which are uncertain when applied to the subject matter of the contract.
Traders' Ins. Co. of Chicago v. Edwards Post, 1905, 86 Miss. 135, 38 So. 779.

¶60. Denmiss contends that, if the Court reaches this level of inquiry, supporting documents show the

intent of the parties was for Kraft to pay fair market value for the land. Denmiss contends that the

1946 purchase option, $3.50 per acre, exceeded the land's fair market value before the lease went

into effect. In support, Denmiss cites two letters, both written before the execution of the agreement

in which Denkmann valued the lands at $2.47 per acre and Kraft valued the land at $3.00 per acre.

Although these letters may be authentic, they do not help to ascertain the parties' intent when the

agreement was executed, because they are do not reflect the parties intent.

¶61. Denmiss cites another letter, written by W. H. Giles on August 30, 1945, again prior to when

the agreement was reached, in which he stated that he and another Denkmann representative met

with IP in which the parties discussed a lease with a purchase to buy. Giles stated, "[a] ninety-nine

year lease with an option to them to buy the land on or after forty years at the appraised price at that

time will be satisfactory..." However, this letter, too, pre-dates the agreement and therefore it does

not embody the final agreement between Kraft and Denkmann.

¶62. As stated in the facts above, the record contains letters from former President Hauberg and

Vice-President Giles of Denkmann who were specifically authorized to lease the subject lands to

Kraft. These letters, written in the years following the agreement, indicate their understanding of the

final agreement.

¶63. In 1960, Giles, acting in his capacity as an Agent, wrote to the Denkmann distributees and urged

them to approve a condemnation sale to the state. Giles described the Denkmann distributees as

owning a reversionary interest in the land, because the lands were under a lease with IP that would

not expire for another eighty-five years. Giles stated that the distributees should approve a settlement

in which Denkmann would receive $10 per acre, and IP $37 per acre. The distributees approved the

agreement, and subsequently the Ross Barnett Reservoir was constructed.

¶64. In the 1970's, Ewing, another Agent for the Denkmann distributees, wrote several letters and

stated that the Denkmann lands are under a ninety-nine year paid-up lease, which made valuing the

reversionary interest difficult. However, the most helpful letter to determine the parties' intent was

written by Hauberg, the former President of Denkmann and an Agent for the distributees. In 1979,

Hauberg wrote the Denkmann distributees and Denmiss shareholders and stated, "I.P. is in the

driver's seat because its lease will not expire until 2044. If it buys our lands, it will not be offering the

current market value of the lands that it can have the tree use of for another 50-60 years, having paid

us for the lease back in 1945."

¶65. These letters from Denkmann officials indicate a clear understanding that IP held a pre-paid

lease through 2044, which left Denkmann with only a reversionary interest in the lands. Hauberg

stated that IP would not offer fair market value of the lands because of the vested leasehold

encumbrance until 2044.

¶66. This Court finds that there is no doubt the parties intended for the lands to be valued under the

purchase option at their encumbered value. Letters from Denkmann officials who were specifically

and expressly authorized to enter into the agreement with Kraft clearly express this construction.

Therefore, the circuit court erred.
III. WHETHER THE ORDERS AND JUDGMENT ENTERED BELOW WERE

PROCEDURALLY DEFECTIVE?

¶67. As discussed earlier, the circuit court erred in its construction of the purchase option to

unambiguously provide for appraisal rather than the expressed arbitration provision. Further, the

lower court erred in determining, as a matter of law, that the lands were to be valued as

unencumbered by the vested leasehold interest. Thus, the lower court erred in entering judgment in

favor of Denmiss.

¶68. Two smaller issues will be discussed here. First, Denmiss presented land deeds to IP which

specifically reserved sand and gravel. In turn, IP refused to accept the deeds because the purchase

option did not specifically preserve their reservation. However, Denmiss contends that the purchase

option gave Denkmann full reservation of all minerals including sand and gravel, because under the

lease agreement, Denkmann had reserved unto itself mineral rights, specifically including gravel.

Denmiss reasons that sand is of like kind and character as gravel and thus sand is also reserved.

¶69. A review of the record does not indicate that this issue was presented or litigated in the lower

court. Denmiss did not contend that they were entitled to sand and gravel until after the lower court

found the appraisal to be correct and ordered IP to accept the deeds. Because the lower court did not

expressly rule upon this issue, this issue is not properly before this Court. Upon remand, the lower

court should conduct a hearing to determine if sand and gravel were reserved by Denkmann.

¶70. Second, IP contends that the Hinds County Circuit Court was an improper forum for this suit.

IP asks that the suit be remanded to a chancery court in a county in which some of the lands are

located. IP points out that none of the lands are within Hinds County. IP contends that suits involving

real property should be brought in the chancery court of the county in which the lands can be found.

Miss. Code Ann. § 11-5-1 provides that suits respecting real property may be brought in the chancery

court in which the real property is found, and in other cases, suit may be brought in the county in

which the defendant may be found.

¶71. IP brought suit in the Leake County Chancery Court for a declaration of its rights, later Denmiss

brought suit against IP in the Hinds County Circuit Court for breach of contract and recission. After

the Leake County Chancery Court transferred the chancery court action to the Hinds County

Chancery Court, the Hinds County Chancellor transferred the suit to the circuit court for judici al

efficiency because suits were pending in both courts arising from the same set of facts and

circumstances. This case is before us in a Rule 54(b) certification from Hinds County Circuit Court,

and as stated other issues are still pending there between these parties. Thus, the sand and gravel

issue should be remanded to the same court.

¶72. It is clear that if one issue is properly before the circuit court it has jurisdiction to decide all

issues. The leading case discussing pendent jurisdiction of the circuit court is Hall v. Corbin, 478

So.2d 253 (Miss. 1985). That case involved the scope of jurisdiction and available remedies in circuit

court ancillary to a replevin action. The Court stated:

We (and every other court in the land) have long held that once a court acquired actual subject

matter jurisdiction of an action, other claims (whether asserted by one or more of the original

parties or by new or intervening parties), ancillary or pendent to the original claim could also be
litigated in that action even though the ancillary or pendent claim standing alone may have been

beyond the court's jurisdiction. To fall within pendent or ancillary jurisdiction, the intruding

claim must arise out of the same transaction or occurrence as the principal claim or, as others

put it, out of a common nucleus of operative fact. The principal context in which we have

recognized these notions is that where "legal claims" have been asserted in chancery court,

pendent tot he principal equity claim. There is no reason or principle why the converse should

not also be true: where a circuit court has jurisdiction of an action at law, it may hear and

adjudicate in that action all claims, including those with an equitable smell, arising out of the

same transaction and occurrence as the principal claim. Indeed, the converse would appear even

more appropriate in that our circuit courts are courts of general jurisdiction, while our chancery

courts are regarded as courts of special or limited jurisdiction.

Hall v. Corbin, 478 So.2d at 255.

¶73. The fact that issues are pending in the Hinds County Circuit Court gives that court pendent

jurisdiction to hear the sand and gravel issue which is being remanded by this Court. Certain of the

pending issues involve claims by IP that Denmiss breached the contract in bad faith. Since this is the

same contract which gives rise to the sand and gravel issue, it can fairly be said that this issue arises

from the same transaction or occurrence as the pending claims. Thus, jurisdiction is proper. Accord

Gibson v. Mauel, 534 So.2d 199, 200 n.2 (Miss. 1989) (circuit court could consider motion for

preliminary injunction); Dye v. State, 507 So.2d 332, 337-38 (Miss. 1987) (circuit court could hear

claims for equitable relief). See also McDonald v. Holmes, 595 So.2d 434, 437 (Miss. 1992) ("[w]e

have made clear that our trial courts, chancery and circuit, have full jurisdiction to adjudicate all

claims in a single action without regard to whether they arise in equity or at law").

¶74. There is no compelling reason to require litigation of the sand and gravel issue, which is

essentially a matter of contract interpretation, in a court other than the one in which related issues are

still pending and in which any final arbitrator's award may be filed for judgment.

CONCLUSION

¶75. We have construed the 1945 lease agreement and purchase option and have found that the lower

court erred in finding as a matter of law that the arbitration agreement, pursuant to the purchase

option, unambiguously called for appraisers. Further, the lower court erred in finding, as a matter of

law, that the parties intended for the land to be given an unencumbered value.

¶76. This Court finds that the parties unambiguously entered into an agreement to fix the value of the

lands by use of arbitrators. Also, the 1945 lease agreement gave IP a possessory interest in the land

through the year 2044, which interest could not be divested by Denmiss. Further, letters by

Denkmann officials, who entered into the 1945 agreement, unequivocally show the parties'

understanding that IP had prepaid the lease agreement, and upon exercise of the option to purchase

that IP would pay the encumbered value of the land. In the absence of a ruling by the lower court, we

will not review the issue of the alleged reservation of sand and gravel. Because issues are still pending

in Hinds County Circuit Court, it has pendent jurisdiction to hear the sand and gravel issue which is

being remanded by this Court.

¶77. REVERSED AND REMANDED TO THE CIRCUIT COURT OF HINDS COUNTY.
PRATHER, C.J., PITTMAN, P.J., BANKS, SMITH AND MILLS, JJ., CONCUR. McRAE, J.,

CONCURS IN PART AND DISSENTS IN PART WITH SEPARATE WRITTEN OPINION

JOINED BY SULLIVAN, P.J. WALLER, J., NOT PARTICIPATING.

McRAE, JUSTICE, CONCURRING IN PART AND DISSENTING IN PART:

¶78. I concur with the majority's decision to reverse and remand the case to the Circuit Court of

Hinds County. However, I disagree with the finding that the Federal Arbitration Act is applicable and

question why, instead, the arbitration provisions of Miss. Code Ann. § 11-15-1 et seq. were not

considered. I further do not join the majority's overruling of a line of cases which it perceives as

creating an incongruity in our law of arbitration.

¶79. I do not agree with the majority's conclusion that the Federal Arbitration Act is applicable to the

case sub judice merely because "the timber industry on a national level, meets the minimum threshold

of affecting or bearing upon interstate commerce" and because both Kraft and Denkmann, the parties

to the original agreement, held timberlands in several states. To so find makes a federal case, for all

intents and purposes, out of a simple Mississippi land contract. The 1945 agreement at issue

expressly covered only those timberlands located in Madison, Rankin, Scott, Leake and Neshoba

Counties in Mississippi. The Louisiana land holdings were covered by a separate contract and were

the subject of a separate lawsuit. See IP Timberlands Operating Co., Ltd. v. Denmiss Corp., 657

So. 2d 282 (La. Ct. App. 1995). While I agree that the 1945 agreement unambiguously provides for

arbitration, I would find that the arbitration provisions of Miss. Code Ann. § 11-15-1 (1972) are

applicable, and not the Federal Arbitration Act.

¶80. I further disagree with the majority's decision to overrule those cases which "jealously guarded

the court's jurisdiction" over arbitration cases. Again, looking at the arbitration provisions set forth in

Miss. Code Ann. § 11-15-1 et seq., the circuit court has jurisdiction to confirm, modify, correct and

even vacate arbitration awards. See Miss. Code Ann. §§ 11-15-125, 129, 133, 135 and 137. Neither

these provisions nor the case law can be construed as impinging upon the individual's right to utilize

arbitration as a means of alternative dispute resolution.

¶81. The original agreement called for the timberlands at issue to be valued by three arbitrators. That

was done and a valuation of $38.5 million was established. As the circuit court found, to that extent,

the purchase agreement should be honored.

SULLIVAN, P.J., JOINS THIS OPINION.

1. Consideration of the parties intent is consistent with cases presented by both parties. See Lassiter
v. Kaufman, 581 So. 2d 147 (Fla. 1991); Klair v. Reese, 531 A. 2d 219 (Del. 1987); TCC Enters. v.

Estate of Erny, 717 P. 2d 936 (Ariz. 1986); Summit Industrial Equip., Inc. v. Koll/Wells Bay

Area, 230 Cal. Rptr. 565 (1986); Petters Diner, Inc., v. Stellakis, 493 A. 2d 1261 (N.J. 1985).