Appeals court reverses Jasper judge in contract dispute

Steve Korris Mar. 26, 2009, 8:41am


Business owners who started tearing down a pulp mill but backed out of a contract to buy it don't owe the sellers a penny beyond earnest money and the value of scrap they sold, Ninth District appeals judges ruled on March 19.

Three judges reversed Jasper County District Judge Joe Bob Golden, who ruled that Tiger Truck LLC owed $186,500 and legal fees to Bruce's Pulp and Paper LLC.

Chief Justice Steve McKeithen and Justices David Gaultney and Hollis Horton agreed that discovery of pollution gave Tiger Truck reason to terminate the contract.

Termination rights didn't run out, McKeithen wrote, and Tiger Truck didn't waive them by continuing the demolition.

"At most, Tiger Truck delayed exercising its right to terminate until it determined that it could not promptly work around the still developing environmental issues with the property," he wrote.

The contract allowed termination without penalty if due diligence review items were not completed in 60 days.

"The evidence conclusively established that the due diligence review items were not completed in 60 days," McKeithen wrote.

"In the absence of fraud, a contract that authorizes cancellation without penalty will be enforced as it is written," he wrote.

Though Bruce's Pulp and Paper can't impose a penalty, the contract entitled it to retain $50,000 earnest money as liquidated damages.

The contract set a $4,250,000 price on the property.

When Tiger Truck terminated the contract, Bruce's Pulp and Paper sued Tiger Truck. Tiger Truck filed a countersuit.

Judge Golden held trial and ruled that, "There was no valid reason for defendant to terminate the contract."

He figured Tiger Truck owed $163,000 for alterations, $12,500 for work on hydraulic power and $11,000 for removal of underground tanks.

He awarded Bruce's Pulp and Paper $77,000 from scrap sales in an escrow account.

He awarded Bruce's Pulp and Paper $32,000 in legal fees, plus $8,000 in case of appeal to the Ninth District and $8,000 in case of appeal to the Supreme Court.

The Ninth District reversed Golden on all but the scrap account.

McKeithen wrote that an environmental consultant told Tiger Truck it couldn't insure the property unless it installed many wells to establish the depth of pollution.

"Under the circumstances we conclude as a matter of law that Tiger Truck timely exercised its right to terminate the contract," he wrote.

Brian Antweil represented Tiger Truck. John Seale represented Bruce's Pulp and Paper.

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