Opinion ID: 3167779
Heading Depth: 2
Heading Rank: 3

Heading: Demurrer to the Counterclaim

Text: The second assignment of error concerns the circuit court’s sustaining Lambert’s demurrer to Count I of Virginia Fuel’s and Justice Companies’ original counterclaim alleging breach of contract. “A trial court’s decision sustaining a demurrer presents a question of law which we review de novo.” Desetti v. Chester, 290 Va. 50, 56, 772 S.E.2d 907, 909 (2015) (quoting Harris v. Kreutzer, 271 Va. 188, 195, 624 S.E.2d 24, 28 (2006)). “A demurrer accepts as true all facts properly pled, as well as reasonable inferences from those facts.” Id. (quoting Steward v. Holland Family Props., LLC, 284 Va. 282, 286, 726 S.E.2d 251, 253 (2012)). The counterclaim alleged that, under the Agreement, Lambert represented to Virginia Fuel that the Lambert Land Lease was “made up of 1.1 million tons of coal” and that the Alpha Lease was “made up of approximately 400,000 tons [of coal].” Virginia Fuel and Justice Companies further alleged that the representations as to the amount of coal on the Leases were material terms of the Agreement, and that Virginia Fuel would not have entered into the Agreement but for those representations. The counterclaim alleged that the amount of coal on the Lambert Land Lease was actually 869,000 tons. 6 Accordingly, Virginia Fuel and Justice Companies alleged that Lambert had breached the Agreement “by failing to deliver the amount of coal tonnage it represented in the Agreement.” They sought damages in the amount of $359,000, representing the difference in 6 All of the claimed damages in the counterclaim arise from the alleged shortfall in the amount of coal represented to be on the Lambert Land Lease. Although the Alpha Lease is mentioned in the counterclaim, there is no allegation in the counterclaim that Lambert breached the Agreement because the amount of coal located on the Alpha Lease proved to be less than the “approx. 400,000 tons” as stated in the Agreement. 15 “pro rata coal tonnage value” represented to be present on the Lambert Land Lease and the amount of mineable coal actually present. Lambert filed a demurrer to the breach of contract count of the counterclaim. Lambert alleged that, pursuant to the Agreement, Lambert gave Virginia Fuel “access to the records associated with the mining operations as well [as] an opportunity ‘to conduct a physical investigation of [Lambert’s] facilities and properties’ in order to determine among other things the amount of coal on the property.” Therefore, “[g]iven the opportunity to inspect, Virginia Fuel, as a matter of law, took the property, business and assets as is.” No written response by Virginia Fuel or Justice Companies to Lambert’s demurrer to the counterclaim is included in the record. After a hearing on the demurrer, the circuit court ruled that the counterclaim “as a matter of law fails to state a claim for breach of contract and . . . therefore [Lambert’s] [d]emurrer is well taken.” Virginia Fuel and Justice Companies were granted leave to amend their breach of contract claim. They elected, however, not to amend the counterclaim and stood on their original counterclaim. In their “Joint Written Statement of Facts and Other Incidents of the Case Pursuant to Rule 5:11,” the parties state that, in sustaining Lambert’s demurrer to the breach of contract claim in the counterclaim, the circuit court “ruled from the bench that [the] [c]ounterclaim sounded in tort not contract, that [Lambert] was contractually obligated to convey the mining permit and assign the [Leases], which it did, and that [Virginia Fuel and Justice Companies] failed to state a claim for breach of contract.” Virginia Fuel and Justice Companies argue that the circuit court erred in ruling that the breach of contract claim sounded in tort. We need not decide whether the circuit court erred in 16 stating from the bench that the counterclaim sounded in tort and not in contract. “[I]t is fundamental that ‘a court of record speaks only through its written orders.’” Upper Occoquan Sewage Auth. v. Blake Constr. Co., 266 Va. 582, 588, 587 S.E.2d 721, 724 (2003) (quoting Hill v. Hill, 227 Va. 569, 578, 318 S.E.2d 292, 297 (1984)). The circuit court’s written order in this case states nothing about whether the counterclaim sounded in contract or tort. Instead, the written order states that the demurrer was sustained with leave to amend because “the [c]ourt [finds] that the . . . [c]ounterclaim as a matter of law fails to state a claim for breach of contract and therefore [the] [d]emurrer is well taken.” Implicit in the circuit court’s sustaining the demurrer to the counterclaim was its finding that, as a matter of law, Lambert did not represent and warrant that 1.1 million tons of mineable coal would be located on the Lambert Land Lease, which was the sole breach of contract alleged in the counterclaim. On appeal, Virginia Fuel and Justice Companies argue that Lambert breached the Agreement “by failing to deliver the amount of mineable coal it represented in the Agreement.” Lambert responds that the tonnage references on Exhibit “A” to the Agreement were understood to be estimates only and not warranties as to the amount of available coal. We agree with Lambert. The Agreement provided that the assets of Lambert to be sold to Virginia Fuel pursuant to the Agreement included “certain mining leases as set out in attached Exhibit ‘A’.” With respect to the Lambert Land Lease, Exhibit “A” stated: Coal Leases will be assigned to [Virginia Fuel]. Those current leases include the Lambert Land, LLC (“LL”) coal-only and Heartwood Forestland (HFL) surface over the LL coal which the royalty together is from 8-10% on 1.1 million tons . . . . The reference to “1.1 million tons” in Exhibit “A” with regards to the Lambert Land Lease was insufficient as a matter of law to create a representation and warranty by Lambert that 17 there were, in fact, 1.1 million tons of coal on the Lambert Land Lease. It is clear from the Agreement that the parties intended to enter into separate “Assignment and Assumption Agreements, which shall contain customary provisions, conditions, representations, warranties, and terms that are mutually agreeable to the parties.” No such agreements are part of the record. We agree with Lambert, that Exhibit “A” served merely to identify the assets subject to the sale, and that the reference to “8-10% on 1.1 million tons” was an expression of estimated royalty percentages payable to owners of the coal in addition to the payments due to Lambert under the Agreement, and not a representation or warranty that 1.1 million tons of coal were on the Lambert Land Lease. 7 Again, our conclusion is supported by case law from West Virginia. In National Coal Co. v. Overholt, the lessee alleged that the lessors represented that “there were in fact 53.14 acres of coal in said boundary of land, and that 345,000 tons of coal could be mined and obtained therefrom .” 94 S.E. at 737. The Supreme Court of West Virginia held that: [t]he alleged representation or assurances of the [lessors] that there were at least 310,000 or 345,000 tons of coal in the mine, from the very nature of the subject matter of the contract could have been but the expression of an opinion that that quantity of coal could be obtained from the mine. No one in advance of the actual mining and removal of coal could do other than estimate the amount. Id. at 738-39. 8 In sum, we agree with Lambert that nowhere in the Agreement is there a clear, absolute or affirmative promise, guarantee, or warranty of a certain quantity of mineable or merchantable 7 The record does not include a copy of either the Lambert Land Lease or the Alpha Lease. 8 In quoting this passage from National Coal, we do not suggest that there can never be an enforceable representation or warranty as to the amount of a yet-to-be-mined mineral. Such an enforceable representation or warranty, however, would have to be more definite than the bare recitation in this case that the Lambert Land Lease included a “royalty . . . from 8-10% on 1.1 million tons.” 18 coal. Accordingly, we hold that the circuit court did not err in sustaining Lambert’s demurrer to the breach of contract count of Virginia Fuel’s and Justice Companies’ counterclaim.