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08/11/95 MANNINGTON WOOD FLOORS v. PORT EPES

August 11, 1995

MANNINGTON WOOD FLOORS, INC.
v.
PORT EPES TRANSPORT, INC.



Appeal from Sumter Circuit Court. (CV-93-24). Claud D. Neilson, TRIAL JUDGE.

Released for Publication March 11, 1996.

Cook, Almon, Shores, Ingram, and Butts, JJ., concur. Houston, J., concurs as to the contract claim and Dissents as to the fraud claim. Maddox, J., recused.

The opinion of the court was delivered by: Cook

COOK, JUSTICE.

Mannington Wood Floors, Inc. ("Mannington"), appeals a judgment entered on a jury verdict in favor of Port Epes Transport, Inc. ("PET"), in PET's action against Mannington alleging breach of contract and fraud. We affirm.

PET's dispute with Mannington, a corporation producing wood products at a mill in Port Epes, Alabama, arose out of the following facts. In August 1991, Tom Tartt, a Mannington official in charge of output scheduling and product transportation, solicited bids for the trucking of wood chips to Purdue Hill, Alabama. Preston Minus, the owner and operator of L.S.E., a sole trucking proprietorship, submitted bids to Mannington for the transportation of chips. Minus's letter of submission sought, among other things, "100% of movement." *fn1

On October 22, 1991, Tartt telephoned Minus to tell him that Mannington had accepted Minus's bid for the transportation of its wood chips. In addition to the Discussion regarding the hauling of wood chips, that telephone conversation included Discussions regarding Minus's hauling of bark (see note 1) to various points of delivery in Alabama, including Demopolis, Selma, Pine Hill, and Pennington, and to one point in Mississippi. The parties tentatively agreed on prices Minus quoted for hauling bark to those points.

Subsequently, Minus met with at least three Mannington officials, including Tartt; "Raz" Carter, Mannington's Alabama operations general manager; and "Buddy" Frizzell. At this meeting, Mannington and Minus executed an instrument purporting to be a "chip hauling contract." The instrument, which was drafted by Mannington, provided in pertinent part:

"WHEREAS, [Mannington] desires to have chips, bark, sawdust and fuel generated or accumulated by [it] delivered pursuant to its contracts with International Paper Company in Selma, Alabama, McMillan Bloedel located in Pine Hill, Alabama, and Container Corporation located in Brewton, Alabama, and Alabama River in Purdue Hill, and any other locations deemed necessary, and [L.S.E.] desires to contract for the performance of said delivery, all for the consideration and on the terms hereinafter set forth;

"....

"1. For and during a period of one year beginning upon the date of execution of this contract [L.S.E.] agrees to deliver chips, bark, sawdust and fuel (hereinafter referred to [as] chips) pursuant to the provisions of this agreement.

"2. The chips to be delivered and the destination of their delivery shall be determined at the sole discretion of [Mannington].

"3. [Mannington] shall pay to [L.S.E.] $7.50 per ton for chips hauled by [L.S.E.] to Alabama River at Purdue Hill. [Mannington] shall pay to [L.S.E.] the sum of [$3.20 per ton] to Demopolis, [$7.50 per ton] to Selma, [$7.25 per ton] to Pine Hill, [$7.50 per ton] to Columbus, [$5.00 per ton] to Pennington ... with 22 ton minimum and other destinations to be negotiated consistent with above price. [Mannington] reserves the right to have chips delivered by [L.S.E.] to other destinations if the volume of chips exceeds the amount required by the contracts with the above named companies. Each individual truck driver employed by [L.S.E.] shall be responsible for weighing his load. Net 10 days from invoice.

"4. [L.S.E.] agrees to have a trailer at the chip bin as needed. [Mannington] shall notify [L.S.E.] of any change in [its] regular hours of operation. [L.S.E.] shall compensate [Mannington] at a rate of $25.00 per hour in the event of any interruption of the operation mode. L.S.E. will be responsible for cost incurred for cleaning up chips due to driver neglect. Also, L.S.E. will be responsible for the cost of reimbursement of chips as warranted.

"5. All chips hauled pursuant to this agreement shall be from [Mannington's] Epes facility. In the event of a permanent shutdown or abandonment of the Epes facility, [Mannington] shall give to [L.S.E.] thirty (30) days' notice prior to the date of the shutdown. [L.S.E.] agrees to continue to haul the chips generated or accumulated during this last period of operation up to the last day of operation.

"6. [Mannington] agrees that [L.S.E.] shall be given the exclusive right to haul chips generated or accumulated by [Mannington] during the term of this agreement. In the event [L.S.E.] is unable or fails to haul all chips pursuant to this agreement, [Mannington] shall have the right to obtain these services from other sources. In the event [Mannington] is unable to obtain these services for the same or lesser rates as provided herein, [L.S.E.] shall indemnify [Mannington] for any sums expended in excess of the rates contained herein.

"7. It is agreed that this is a requirements contract. [L.S.E.] is not guaranteed a minimum number of loads but is guaranteed the exclusive right to haul all loads generated."

(Emphasis added.) The effective date of the agreement was January 22, 1992.

During the time of the Discussions leading to the execution of the agreement, Tartt and Carter told Minus that Mannington would eventually open a market for its chips in Japan and would then ship some or all of its chips by barge, rather than by L.S.E.'s trucks. However, Minus was told that the barging would not begin until the period of approximately January to April 1993.

Before the effective date of the contract, Minus and one other person, formed a corporation -- Port Epes Transport, Inc. ("PET") -- for the purpose of hauling Mannington's wood products. With Mannington's permission, L.S.E. assigned the contract to PET.

In order to perform its responsibilities under the contract, PET, with Mannington's knowledge and acquiescence, purchased additional equipment, incurring expenses in the amount of $500,000. PET began hauling chips and bark on January 22, 1992.

In March 1992, Tartt telephoned Minus and told him that the Japanese market had materialized faster than Mannington had anticipated, that shipments to Japan were imminent, and, consequently, that Mannington would immediately be barging its chips to Mobile for export. Thereafter, Mannington shipped virtually all its chips by barge. Although Mannington continued to transport bark by PET's trucks, it is undisputed that from January 22, 1992, to January 22, 1993, Mannington barged 447,000 tons of chips to Mobile. When Minus complained to Mannington's officials about the reduction in the volume of chips available for transportation, Frizzell and Carter told him that "there would always be the bark" to haul.

Moreover, in September 1992, Percy Zeigler, Jr., Mannington's chief financial officer in charge of Alabama operations, began complaining about the amount PET was receiving for hauling bark, and pressed Minus to renegotiate the prices. On September 28, 1992, a meeting -- attended by Carter, Zeigler, Minus, and the other PET shareholder -- was convened to discuss the matter. At that meeting, or as a result of that meeting, PET agreed to a reduction in the bark-haulage rates in exchange for an extended expiration date on his exclusive contract to haul the bark. In effect, PET agreed to lower its prices for hauling bark in exchange for a "second," or, renegotiated, contract, the duration of which was from October 1, 1992, to September 30, 1993. The agreement reflecting the renegotiated prices was memorialized in a letter from Minus addressed to Carter and dated September 29, 1992. Carter subsequently signed this agreement. On October 1, 1992, PET began hauling bark under the renegotiated contract.

Two months later, that is, in December 1992, Tartt telephoned Minus and told him that Mannington was preparing to barge about 70% of its bark. Minus warned Tartt of "serious problems" if it began barging bark. Nevertheless, Mannington almost immediately began barging bark to Mobile.

On March 19, 1993, PET and L.S.E. filed a four-count complaint against Mannington and Zeigler. Count One alleged that Mannington had breached the "first" contract. Count Two alleged that Mannington had breached the "second" contract.

Counts Three and Four alleged fraud in the inducement of both contracts. More specifically, Count Three contained the following allegations:

"2. In October or November of 1992, the plaintiff and defendants had entered into the original requirements contract, Raz Carter, as General Manager of Mannington's Epes facility, and others told Mr. Minus that he would be the exclusive hauler of all chips, bark, sawdust and fuels for fifteen (15) to eighteen (18) months.

"3. The representations made by the defendants were false and the defendants knew they were false or the defendant, without knowledge of the true facts, recklessly misrepresented them or the defendants' representations were made by mistake ...


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