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Mineral Res., Inc. v. Classic Coal Corp.

OPINION FILED MAY 9, 1983.

MINERAL RESOURCES, INC., ET AL., PLAINTIFFS-APPELLANTS,

v.

CLASSIC COAL CORPORATION ET AL., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Williamson County; the Hon. Robert Howerton, Judge, presiding.

JUSTICE KARNS DELIVERED THE OPINION OF THE COURT:

This appeal arises from an action for damages based on breach of contract and tortious interference with contractual relations. Plaintiffs appeal from the judgment of the circuit court of Williamson County granting defendants' motion to dismiss the first amended complaint and plaintiff's cause of action and alternative motion for judgment on the pleadings. The trial court entered judgment in favor of defendants and against plaintiffs on all counts of the first amended complaint.

Plaintiffs' first amended complaint alleges that in January 1977 defendant Adams Resources and Energy, Inc. (Adams), agreed in principle with Buddie Morris to form a joint venture, Morris Coal Company, now known as defendant, Classic Coal Company (Classic), for the purpose of developing and operating an underground mine in Williamson County, Illinois. The complaint further alleges that Adams then wrote to plaintiff, Mineral Resources, Inc. (Mineral), requesting Mineral to secure long-term coal supply contracts between the joint venture and third parties. This request was addressed to plaintiff, Hugh B. Lee, Jr., in his capacity as president of Mineral and was dated February 15, 1977. This writing set forth Adams' agreement to provide a commission of 3% of the selling price of coal sold under a long-term supply contract secured through the efforts of Minerals.

The February 15, 1977, letter stated, in pertinent part, that:

"* * * We agree and will likewise cause the producing company to agree to the following with respect to Mineral Resources sales agency:

(1) Mineral Resources shall receive a commission of 3% of selling price of coal sold under the long-term contract, F.O.B. trucks at the mine.

(2) Mineral Resources shall receive 3% of the F.O.B. trucks selling price for any long-term contracts * * *.

(3) The commissions will be paid monthly to Mineral Resources within five days of receipt of remittance from the customers.

(4) Mineral Resources will be responsible for administering the contract and other sales on which it receives commission, at its expense.

(5) Mineral Resources will exert its best effort to achieve highest obtainable sales prices consistent with market competition, coal quality and preparation and the desire to optimize production level and maximize profits.

(7) Adams will cause the producing company to fully support Mineral Resources' marketing efforts on its behalf and faithfully perform its producer responsibilities."

The complaint further alleged that Mineral, acting through Lee and plaintiff, C. Harry Foster, successfully negotiated two separate long-term coal supply agreements between Classic and the Tennessee Valley Authority (TVA) known as the "T-12" and "T-14" contracts. Under the terms of the two contracts, TVA agreed to purchase 4,060,000 tons and 4,202,600 tons of coal during the duration of the respective contracts.

After the supply contracts had been negotiated by Mineral and were executed by Classic and TVA, Classic signed and Mineral, Lee and Foster countersigned a letter from Classic entitled "Letter Agreement Concerning Fees." this eight-page letter set forth the various rights and obligations between Classic and Mineral, Lee and Foster regarding the payment of certain fees. The provisions of the letter agreement are extensive, but the most relevant portions are the following:

"1. Agency. * * * [Classic] agrees that it will not alter its contractual arrangements with T.V.A. for other than sound business reasons and shall not alter such arrangements for the sole or main purpose of reducing the amounts to be paid to the interested Parties hereunder. Except as provided in Paragraph 1, [Classic] shall retain complete flexibility in dealing with T.V.A. and all other parties concerning the Subject Coal Contracts.

2. Consummation Fee. [Classic] hereby agrees to pay to the Interested Parties [plaintiffs], in the manner provided herein and subject to the other provisions hereof, in consideration for the Interested Parties' assistance in consummating the Subject Coal Contracts an amount equal to 75% of 3% of the gross sales price for FOB the mine involved after adjustments to the price required by the respective contracts for all coal actually paid for by T.V.A. under either of the Subject Coal Contracts. The fee described in this Paragraph 1 shall be referred to herein as the `Consummation Fee.'

4. Duration of Consummation Fee Payments. [Classic] agrees to make payments of the Consummation Fee in the manner provided herein so long as payments for coal delivered are made to [Classic], its successors and assigns pursuant to the Subject Coal Contracts; provided, however, the parties recognize that it is not unusual for agreements like the Subject Coal Contracts to be amended or altered in connection with other arrangements to be made with T.V.A. and, in this regard, if [Classic] (i) alters its contractual arrangements with T.V.A. in such a way as to terminate the Subject Coal Contracts or reduce quantities of coal to be delivered to T.V.A. under the Subject Coal Contracts, and (ii) makes contractual or other arrangements with T.V.A. which cover the quantities of coal originally covered by the [Classic] No. 5 Contract and [Classic] No. 6 contract, [Classic] will continue to pay the Consummation Fee with respect to the altered arrangements of such quantities of coal originally covered by such contracts. In the event that deliveries of coal are not made under the Subject Coal Contracts or T.V.A. does not make payments under the Subject Coal Contracts, the obligation to pay the Consummation Fee shall arise only upon receipt of, and shall apply only to, the amounts paid by T.V.A.

6. Operations. The parties to this Letter acknowledge that the Interested Parties have performed services in consideration for the receipt of the Consummation fee payments and [Classic] recognizes its good faith obligation hereunder to pay such Consummation Fee after receipt of payments by T.V.A. under the Subject Coal Contracts. Except as provided in Paragraph 1, nothing in this Letter shall ever be construed to limit in any way the methods of operation in the coal mining business to be employed by [Classic]. Nor shall this Letter be construed to limit [Classic] in any way from dealing with T.V.A. and other parties concerning the Subject Coal ...


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