Opinion ID: 1694753
Heading Depth: 1
Heading Rank: 3

Heading: The Second Motion for Summary Judgment

Text: After the entry of the first summary judgment, certain discovery was conducted, including the depositions of JWR employee Danny Hagood and Davant. The defendants then moved for a summary judgment with respect to the remaining fraudulent-suppression claim, arguing, among other things, that the undisputed evidence established that no suppression had in fact taken place and that the two-year statute of limitation applicable to a fraudulent-suppression claim had run. The defendants submitted Charles A. Dixon's affidavit, originally submitted with U.S. Pipe's summary-judgment motion in the Texas action, and a copy of the order and judgment in the Texas action; a copy of Davant's deposition; and copies of three letters produced by Davant from his files, written to him in 1986 and 1987 by representatives of JWR. Davant acknowledged in his deposition that the essentials of the fraudulent-suppression claim were stated in paragraph 23 of the complaint, which alleged: In violation of their duty to disclose, the defendants failed and omitted to inform plaintiff that they continued to mine coal from the Premises after January 1986, that they continued to sell coal from the Premises and receive payment for said coal after January 1986, and that they continued to pay royalties on this coal to the owner of the other one-half (1/2) undivided interest in the Premises. Under the pretense that no coal had been mined, defendants also failed and omitted to supply reconciliation statements from January 1986 to the present date. In the first of the three letters the defendants submitted in support of their motion, Dixon wrote to Davant on February 7, 1986, identifying himself as JWR's Vice President, Mining Engineering and stating, in pertinent part, as follows: In response to your question concerning our plans for mining of the property leased from you and from the Davant Trust, please note the following: 1. For the 51.75 acres in Section 3 which is leased from you and the Davant Trust: Projected Time Interval Production Remainder Fiscal Year 1986 (Feb.-Aug.) 60,000 Tons Fiscal Year 1987 0 Tons Fiscal Year 1988 60,000 Tons In 1988 the initial mining will be completed and there will be several years with no projected production. Later, some secondary mining of pillars is anticipated. The letter concluded, I hope this information is sufficient for your requirements. If you need anything further do not hesitate to call me, and provided a telephone number. Davant acknowledged in his deposition that he had received the letter and that the 51.75 acres referenced was the same tract at issue in this action. The second letter, written to Davant on January 19, 1987, by Jim Hayes, associate mine planner for JWR, enclosed a map depicting the area from which coal has been mined during the last six (6) months of 1986 and referred to the 11.75 acres leased from Davant and the Hortense Davant Trust. Hayes concluded his letter with the statement [i]f you have have any questions, feel free to contact me at and provided a telephone number. Davant acknowledged in his deposition that he had received this letter also and that he had understood it to tell him that coal had been mined from a portion of the leased premises during the last six months of 1986. On July 7, 1987, Hayes wrote Davant again, enclosing another map, this time depicting the area from which coal has been mined during the first six (6) months of 1987 from the area leased from Davant and the Hortense Davant Trust. Hayes closed his letter with the invitation to Davant to feel free to contact me at his listed telephone number, if Davant had any questions. Davant acknowledged on his deposition that he had received the letter and that it told him that coal had been mined from the 51-acre tract involved in this action during the first six months of 1987. When asked on deposition if these three letters had served to tell him that mining was taking place on the property during the time frames specified in the letters, Davant answered [a]pparently, there was more mining going on, and they sent me those letters. Why they didn't send me the tonnage reports, I don't know. Davant acknowledged that he had never telephoned or made any effort to contact anyone at U.S. Pipe or JWR during 1986 or 1987 to ask about his royalty checks, explaining that he had not done so because I didn't think they wouldn't pay me. He further acknowledged that he made no inquiry at any other time until 1999. Throughout that period, however, he had lots of contact with them. Specifically, he telephoned Danny Hagood from time to time to inquire concerning production from the Hortense Davant Trust; he simply omitted on those occasions any inquiries about the property involved in this litigation. He acknowledged that Hagood had always been very helpful and had answered any questions he had about any of the properties and conceded that I never doubted that I could get the answers that I asked for, at any time. Davant is a lawyer who has been licensed to practice in Texas since 1963, with ample experience in oil and gas, and he had dealt with oil and gas leases many times; the lease involved in this case was the first time he had ever dealt with an underground coal-mining lease, however. In its November 16, 2001, response to the second summary-judgment motion, the Trust submitted two letters U.S. Pipe had sent to Davant in 1987. Pertinent to an understanding of the import of those letters is paragraph 4(B) of the lease, which reads: Lessee shall pay to the Lessor a minimum royalty of Twenty-five Dollars ($25.00) per month until termination due to term or otherwise as provided for herein. All royalty paid for coal actually mined, removed and sold during any month hereunder shall be credited upon the minimum royalty for such month. All royalty due for coal actually mined, removed and sold during any month during the initial term or any extended term in excess of the minimum royalty for that month shall be credited, firstly, against any previous minimum royalty payments against which excess production royalties have not been applied, and, secondly, against any future monthly minimum royalties. That is to say that all production royalties are to be credited against any minimum royalties that become due or have been paid under the terms hereof.... In a March 24, 1987, letter to Davant, the assistant supervisor of general accounting for U.S. Pipe stated: According to the terms of our contractual agreement dated August 15, 1984 we are authorized to credit production royalties paid in excess of minimum payments due, firstly, against any previous minimum royalty payments to which excess production royalties have not been applied, and secondly, against any future monthly minimum royalties. Due to recoveries totaling $50.00 for the months of January and February, the balance of payments in excess of minimums recovered has been reduced to $670.23. If you have any questions concerning this matter, please contact me.... An April 17, 1987, letter stated: Due to price and moisture adjustments recorded during the period of May 1986-November 1986, and an overpayment resulting from an overstatement in sales price per ton during November 1986, the balance of payments in excess of minimums recovered has been reduced to $435.79 as follows: Balance, March 1987 $ 670.23 Less: Recovery April 1987 25.00 Amount payable due to price & moisture adjustment 1,455.98 (we owe you) Add: Amount resulting from over-payment Nov. 1986 1,246.54 ________ (we paid you) Balance, April 1987 $ 435.79 The information in the March 24 letter is to the effect that U.S. Pipe had paid Davant for production royalties, i.e., royalty due for coal actually mined, the sum of $720.23 and was electing to apply that production royalty balance of payments against the $25 per month minimum royalties that would otherwise have been owing for the months of January and February, as authorized by lease provision 4(B) ($670.23 + $25 + $25 = $720.23). The balance of payments in excess of minimum royalties was thus reduced to $670.23, which U.S. Pipe was authorized under paragraph 4(B) of the lease to credit against any future monthly minimum royalties. The April 17 letter advised that the $670.23 balance of payments from March was being further reduced by (1) a debit for the $25 April minimum royalty and (2) a debit in the net amount of $209.44 resulting from an overpayment credit. Thus, the royalty balance of payments for coal actually mined and previously paid for was reduced to $435.79, available for credit against future minimum royalties. Davant argues that these two letters, in the absence of reconciliation statements, indicated that no coal was being mined from the property and represented conflicting and inconsistent correspondence from Defendants, such that he acted reasonably in assuming that Defendants were not mining the Premises. (Trust's brief, p. 42.) We disagree. The February 7, 1986, letter had advised Davant that JWR expected to mine 60,000 tons of coal under the lease during the period of February to August 1986. The January 19, 1987, letter had included a map depicting the area from which coal had been mined during the period June to December 1986. As a result, as reflected by the March 24, 1987, letter, the balance of payments for royalties paid for coal actually mined amounted to $720.23 at the end of 1986. The March and April letters explained adjustments to that credit balance, and reflected that there had been no coal removed and sold from the leased premises during January, February, or March 1987, at least none sufficient to generate production royalty over minimum royalty. (The two letters reflected three $25 per month minimum royalty payments debited against the balance-of-payments credit, and the April minimum royalty was not yet due under the terms of the lease.) The April 17 letter advised Davant that there had been an overstatement in sales price per ton during November 1986, thereby acknowledging that coal had been sold during that month. Finally, the July 7, 1987, letter had included a map reflecting the area from which coal has been mined during the first six months of 1987, thereby reflecting the coal-mining activity that had transpired, by process of elimination, during April, May, and/or June 1987. The $435.79 production royalty credit balance referred to in the April 17 letter would have been available to cover, to that extent, the royalties generated. Thus, contrary to the Trust's claim in its complaint that the defendants failed and omitted to inform plaintiff that they continued to mine coal from the Premises after January 1986, [and] that they continued to sell coal from the Premises and receive payment for said coal after January 1986, Davant was so informed. As noted earlier, the only uncertainty Davant expressed during his deposition was the statement, why they didn't send me the tonnage reports, I don't know. Nonetheless, as noted, he never brought the matter up despite ongoing communications with Danny Hagood. Most telling was Davant's answer during his deposition when asked why he had not telephoned to ask where his royalty checks were: Probably an omission on my part, thinking that if they were going to pay me and probably they didn't pay me, and I just went on with my day to day activities of carrying on and forgot about it. To sustain a claim of fraudulent suppression a plaintiff must prove, among other elements, `concealment or nondisclosure of material facts by the defendant.' Auto-Owners Ins. Co. v. Abston, 822 So.2d 1187, 1197 (Ala.2001) (quoting Foremost Ins. Co. v. Parham, 693 So.2d 409, 423 (Ala.1997)). Where the record indicates that the information alleged to have been suppressed was in fact disclosed, and there are no special circumstances affecting the plaintiff's capacity to comprehend, the plaintiff cannot recovery for suppression. Ex parte Alfa Mut. Fire Ins. Co., 742 So.2d 1237, 1243 (Ala.1999). In other words, plain disclosure to a person competent in intelligence and background to understand the disclosure is the legal antithesis of suppression, by definition. Allstate Ins. Co. v. Ware, 824 So.2d 739, 746 (Ala.2002). Moreover, claims alleging fraudulent suppression are subject to a two-year statute of limitation. Parham, 693 So.2d at 417. [T]he limitations period begins to run when the plaintiff was privy to facts which would `provoke inquiry in the mind of a [person] of reasonable prudence, and which, if followed up, would have led to the discovery of the fraud.' Willcutt v. Union Oil Co., 432 So.2d 1217, 1219 (Ala.1983) (quoting Johnson v. Shenandoah Life Ins. Co., 291 Ala. 389, 397, 281 So.2d 636 (1973)); see also Jefferson County Truck Growers Ass'n v. Tanner, 341 So.2d 485, 488 (Ala.1977) (`Fraud is deemed to have been discovered when it ought to have been discovered. It is sufficient to begin the running of the statute of limitations that facts were known which would put a reasonable mind on notice that facts to support a claim of fraud might be discovered upon inquiry.'). Auto-Owners, supra, 822 So.2d at 1195. As noted, despite the information contained in the letters written him during 1986 and 1987, Davant  either in his individual capacity or subsequently in his capacity as trustee of the Trust  never inquired of the defendants about the status of coal mining on the leased property. The Hortense Davant Trust was scheduled to terminate at the end of 1999 and Davant wanted to buy its interest in the leased premises along with its interest in other properties. He hired a geologist with whom he had previously worked, Reese Mallett, to investigate whether there might be any value left ..., what tonnages, [and] what had actually transpired on the 51 acres. Mallett reviewed records at JWR and conducted other investigations and reported back to Davant, who by this time was the trustee of the Trust, that about 135,000 tons of coal had been mined from the property; Davant had estimated from the royalty checks he had records of having received that only approximately 25,000 tons had been extracted. Davant followed up Mallett's report by meeting with Dixon at his office on July 29, 1999. Davant told Dixon that it appeared that JWR had mined his coal and sold it without giving him his royalty payments under the lease. Davant testified in his deposition: That was the first time I had ever had any concerns that I had not been paid  that I had not been treated honestly under the lease. In August 1999, he requested information from the bank acting as trustee for the Hortense Davant Trust concerning payments it had received, thinking that perhaps his share of royalties had been paid to the Hortense Davant Trust. The bank wrote Davant on August 25, 1999, and based on the information they shared, he continued to have concerns that he had not been paid all the royalties due under the lease. Considering all of these circumstances, we conclude that (1) no suppression or nondisclosure of the fact of post-January 1986 mining occurred, as alleged by paragraph 23 of the complaint, and (2) even assuming a lack of full disclosure, more than two years before the Trust filed this action it had received sufficient disclosures to trigger the running of the two-year statute of limitations for fraud. Therefore, the summary judgment entered for the defendants on May 1, 2003, based on the trial court's dual findings that there was no fraudulent suppression and ... the plaintiffs claim is time barred by the statute of limitations was not in error. The summary judgments are affirmed. AFFIRMED. NABERS, C.J., and SEE, BROWN, and STUART, JJ., concur.