Triple 7 Commodities, Inc. v. High Country Mining, Inc., Woodrow W. Church and Darren J. Spencer ( 2021 )

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
January 2021 Term
__________________ FILED
April 16, 2021
No. 20-0155 released at 3:00 p.m.
EDYTHE NASH GAISER, CLERK
__________________ SUPREME COURT OF APPEALS
OF WEST VIRGINIA
TRIPLE 7 COMMODITIES, INC.,
Defendant/Counterclaim Plaintiff Below, Petitioner
v.
HIGH COUNTRY MINING, INC., WOODROW W. CHURCH, and
DARREN J. SPENCER,
Plaintiffs/Counterclaim Defendants Below, Respondents
____________________________________________________________
Appeal from the Circuit Court of Mercer County, West Virginia
The Honorable Mark Wills, Judge
Civil Action No. 17-C-77-MW
AFFIRMED
____________________________________________________________
Submitted: March 2, 2021
Filed: April 16, 2021
Nicholas S. Preservati, Esq. William H. Sanders, III, Esq.
Nicholas P. Mooney, Esq. Sanders & Austin
Spilman Thomas & Battle, PLLC Princeton, West Virginia
Charleston, West Virginia Counsel for Respondents
Counsel for Petitioner
JUSTICE WOOTON delivered the Opinion of the Court.
SYLLABUS BY THE COURT
1. “In reviewing challenges to the findings and conclusions of the circuit
court, we apply a two-prong deferential standard of review. We review the final order and
the ultimate disposition under an abuse of discretion standard, and we review the circuit
court’s underlying factual findings under a clearly erroneous standard. Questions of law
are subject to a de novo review.” Syl. Pt. 2, Walker v. W. Va. Ethics Comm’n, 201 W. Va.
108, 492 S.E.2d 167 (1997).
2. Where the issue of the enforceability of a settlement agreement
requires the lower court to make findings of fact and apply contractual or other legal
principles, this Court will review its order and the ultimate disposition under an abuse of
discretion standard, its underlying factual findings under a clearly erroneous standard, and
questions of law pursuant to a de novo review.
3. “The law favors and encourages the resolution of controversies by
contracts of compromise and settlement rather than by litigation; and it is the policy of the
law to uphold and enforce such contracts if they are fairly made and are not in contravention
of some law or public policy.” Syl. Pt. 1, Sanders v. Roselawn Mem’l Gardens, 152 W.
Va. 91, 159 S.E.2d 784 (1968).
4. When the performance of one party to a contract is due before that of
the other party, an uncured failure of performance by the former discharges the latter’s duty
i
of performance only if the failure is material. If the prior nonperformance was slight or
did not go to the essence of the contract, the nonbreaching party is not relieved of its duty
of performance.
5. In determining whether a party’s nonperformance under a contract is
material for purposes of excusing the other party’s subsequent performance, the following
circumstances are significant: (1) the extent to which the injured party will be deprived of
the benefit which it reasonably expected; (2) the extent to which the injured party can be
adequately compensated for the part of that benefit of which it will be deprived; (3) the
extent to which the party failing to perform or to offer to perform will suffer forfeiture; (4)
the likelihood that the party failing to perform or to offer to perform will cure its failure,
taking account of all the circumstances including any reasonable assurances; and (5) the
extent to which the behavior of the party failing to perform or to offer to perform comports
with standards of good faith and fair dealing.
6. “Contract language is considered ambiguous where an agreement’s
terms are inconsistent on their face or where the phraseology can support reasonable
differences of opinion as to the meaning of words employed and obligations undertaken.”
Syl. Pt. 6, State ex rel. Frazier & Oxley, L.C. v. Cummings, 212 W. Va. 275, 569 S.E.2d
796 (2002).
ii
7. “The doctrine of unconscionability means that, because of an overall
and gross imbalance, one-sidedness or lop-sidedness in a contract, a court may be justified
in refusing to enforce the contract as written. The concept of unconscionability must be
applied in a flexible manner, taking into consideration all of the facts and circumstances of
a particular case.” Syl. Pt. 12, Brown ex rel. Brown v. Genesis Healthcare Corp., 228 W.
Va. 646, 724 S.E.2d 250 (2011), judgment vacated on other grounds sub nom. Marmet
Health Care Ctr., Inc. v. Brown, 565 U.S. 530 (2012).
8. “A determination of unconscionability must focus on the relative
positions of the parties, the adequacy of the bargaining position, the meaningful
alternatives available to the plaintiff, and ‘the existence of unfair terms in the contract.’”
Syl. Pt. 4, Art’s Flower Shop, Inc. v. Chesapeake and Potomac Tel. Co. of W. Va., Inc., 186
W. Va. 613, 413 S.E.2d 670 (1991).
9. “Procedural unconscionability is concerned with inequities,
improprieties, or unfairness in the bargaining process and formation of the contract.
Procedural unconscionability involves a variety of inadequacies that results in the lack of
a real and voluntary meeting of the minds of the parties, considering all the circumstances
surrounding the transaction. These inadequacies include, but are not limited to, the age,
literacy, or lack of sophistication of a party; hidden or unduly complex contract terms; the
adhesive nature of the contract; and the manner and setting in which the contract was
formed, including whether each party had a reasonable opportunity to understand the terms
iii
of the contract.” Syl. Pt. 17, Brown ex rel. Brown v. Genesis Healthcare Corp., 228 W.
Va. 646, 724 S.E.2d 250 (2011), judgment vacated on other grounds sub nom. Marmet
Health Care Ctr., Inc. v. Brown, 565 U.S. 530 (2012).
10. “Substantive unconscionability involves unfairness in the contract
itself and whether a contract term is one-sided and will have an overly harsh effect on the
disadvantaged party. The factors to be weighed in assessing substantive unconscionability
vary with the content of the agreement. Generally, courts should consider the commercial
reasonableness of the contract terms, the purpose and effect of the terms, the allocation of
the risks between the parties, and public policy concerns.” Syl. Pt. 19, Brown ex rel. Brown
v. Genesis Healthcare Corp., 228 W. Va. 646, 724 S.E.2d 250 (2011), judgment vacated
on other grounds sub nom. Marmet Health Care Ctr., Inc. v. Brown, 565 U.S. 530 (2012).
iv
WOOTON, J.:
This is an appeal from an order of the Circuit Court of Mercer County
appointing a special commissioner to execute a reformation deed in consummation of the
parties’ Confidential Settlement Agreement and Mutual Release (the “Agreement”) and
dismissing the action in its entirety. The circuit court found that the failure of respondents
High Country Mining, Woodrow W. Church, and Darren J. Spencer (collectively “High
Country”) to timely release the notice of lis pendens pertaining to the action, as required
under the Agreement, did not constitute a material “first breach” of the Agreement, and
that High Country did not waive its right to enforcement of the Agreement’s terms. The
court further found that the Agreement and its subsequent extensions were neither
procedurally nor substantively unconscionable.
After careful review of the briefs of the parties, their oral arguments, the
appendix record and the applicable law, we find that the circuit court committed no error
in enforcing the Agreement and subsequent extensions by appointing a special
commissioner to execute a reformation deed pursuant to the Agreement’s terms and
dismissing the action in its entirety. We therefore affirm the circuit court’s October 2, 2019
order.
1
I. FACTS AND PROCEDURAL HISTORY
In 2016, petitioner Triple 7 Commodities, Inc. (“Triple 7”) entered into a
joint venture agreement with High Country for the purpose of taking over Wellston Coal’s
mining operations; the joint venture agreement provided that its purpose was to “perform[]
and complet[e] the purchase of Wellston Coal property and sales of contracts to end
buyers[.]” The agreement further provided for the parties to share profits on a 51/49 basis
in favor of Triple 7. Subsequent to execution of this agreement, Triple 7 acquired a deed
from Wellston for its mining properties and mineral interests, but the deed did not make
High Country a co-grantee as allegedly contemplated under the joint venture agreement.
High Country filed the instant action seeking reformation of the deed making
it a co-grantee and therefore co-owner of the Wellston minerals and permits. Triple 7 filed
a counterclaim alleging breach of fiduciary, contractual, and statutory obligations. The
case was litigated for two and a half years at which time the parties agreed to a settlement,
which was memorialized in a Confidential Settlement Agreement and Mutual Release
dated December 1, 2018.
THE SETTLEMENT AGREEMENT
Paragraph 3.1 of the Agreement provided that Triple 7 was to pay High
Country $600,000 within sixty days of the date of the Agreement in “full and final
settlement of all Claims[.]” Paragraph 3.3 of the Agreement specifically provided that if
Triple 7 timely paid the agreed settlement proceeds,
2
the Parties agree that there will not be a reformation of the
Deed to include High Country . . . as a co-grantee . . . to the
Deed for any reason[] . . . [and that] Triple 7 will continue to
own one hundred percent (100%) of the rights conveyed to
Triple 7, its successors and assigns, in the Deed[] . . . [and] all
mining-related permits for the mineral rights, which are the
subject of, and defined in the Deed[.]
If, however, Triple 7 failed to make timely payment of the settlement proceeds, Paragraph
3.2 contained a default provision, which provided for reformation of the deed in lieu of
payment of the settlement proceeds:
3.2 Non-Payment of Settlement Payment. If the
Settlement Payment is not made within sixty (60) calendar
days of the Effective Date of this Agreement, Triple 7 agrees
to a reformation of the Deed to include High Country [] as a
co-grantee of forty-nine percent (49%) of the rights that were
conveyed, sold, and granted to Triple 7 as part of the Deed
between Triple 7 and Wellston Coal, LLC . . . [and] to
cooperate and assist High Country with its attempt(s) to be
added as a co-grantee of forty-nine percent (49%) to any
mining-related permits[.]
(hereinafter the “default reformation provision”). Pertinent to the issues herein, the
Agreement further specifically required High Country to release a notice of lis pendens
filed pertaining to the action:
5. Discharge and Release of Liens/Lis Pendens. Within
fifteen (15) calendar days of the Effective Date of this
Agreement, High Country . . . agree[s] to release and discharge
any and all liens or claims of title filed against the Deed, the
mining-related permits or the mineral rights which are the
subject of, and defined in, the Deed including, without
limitation, the Notice of Lis Pendens, dated July 28, 2017 (filed
July 31, 2017), and filed in the office of the Clerk of McDowell
3
County, West Virginia in the Lis Pendens Book 0002, page
0292.
(emphasis added).
The Agreement also contained multiple release provisions. Paragraph 9.1
entitled “Mutual Releases of the Parties,” provided that “[e]ffective upon receipt of Triple
7’s Settlement Payment,” the parties “mutually, fully and forever, release one another . . .
from any and all Claims[.]” (Emphasis added). Paragraph 9.2, entitled “High Country
Releases,” provided, however, that
[u]pon execution of this Agreement by all Parties, High
Country . . . “forever discharge[s], relinquish[es], disclaim[s]
and/or release[s] any current or future claim or Claims to be a
co-grantee or joint owner of the Deed; and any claim or Claims
of ownership or title of the mining-related permits, the mineral
rights . . . or any other rights conveyed . . . through the Deed.
(emphasis added). The Agreement further provided that the parties agreed to dismiss the
case with prejudice within five calendar days of “payment of the Settlement Payment[.]”
Other pertinent provisions included 1) a stipulation that the parties’ “relationships and
agreements” were to be “governed by this Agreement on a going forward basis as of the
Effective Date”; 2) that the Agreement was “bargained for and entered into in good faith
and as a result of arms-length negotiations”; 3) that the settlement amount “constitutes a
fair and reasonable settlement” of the claims “based on [the parties’] respective individual
4
and independent assessments, with the assistance and advice of counsel, 1 of the probability
of success, the complexity, the delay in obtaining relief, and the expense of litigation”; and
4) that the Agreement “was made freely and was not made under duress or coercion.”
(Footnote added).
THE EXTENSIONS
Triple 7 did not pay the settlement amount by the original deadline. As a
result, the parties negotiated three subsequent “extensions” to the Agreement, each of
which increased the gross settlement proceeds and provided additional time for Triple 7 to
tender the settlement proceeds. Each extension was accompanied by an “extension fee,”
an increase to the settlement amount, and a written “Extension[s] to Confidential
Settlement Agreement and Mutual Release,” incorporating the new terms and providing
that all other terms remained as stated in the original Agreement. Although the parties’
briefs and the circuit court’s order all differ slightly and/or are unclear as to the precise
breakdown of extension fees and settlement proceeds as characterized in each extension,
the parties appear essentially to agree that the initial settlement amount of $600,000
1
In fact, the agreement states that it was “jointly drafted . . . with the benefit of
advice from counsel” and that “none of the Parties will claim that any ambiguity in this
Agreement shall be construed against any of the other Parties.”
5
escalated to $3.6 million by way of additional settlement amounts and extension fees, only
$900,000 of which was paid during the extension period. 2
As indicated, each agreed extension was reduced to writing and signed by
the parties, setting forth in detail the payments missed, the additional sums agreed upon,
and the new deadlines. Each reiterated—in roughly equivalent language 3 —that the
settlement proceeds continued to be for the purpose of “resolv[ing] the claims” in the
“Complaint and Counter-Complaint” and that if the new sums were not timely paid, High
Country would “have all of the rights and remedies provided under paragraphs 3.1 and 3.2
of the original Settlement Agreement[,]” i.e. the default reformation provision. 4 The
extensions further stated that “all other terms and conditions of that Confidential Settlement
Agreement and Mutual Release entered into between the Parties on December 1, 2018,
shall remain in full force and effect.”
The third extension included one critical change to the default reformation
provision. Under this extension, in the event Triple 7 did not make timely payment of the
2
The parties disagree about how much was actually paid toward the settlement
amount over the course of the extensions. However, we find that the precise breakdown
of each extension and payments tendered is ultimately immaterial to resolution of the issues
at hand.
3
The wording differed slightly in each, but to the same effect.
4
The second and third extensions further provided that in the event of default, High
Country “shall be entitled to retain any amounts paid to them prior to the date of the failure
by Triple 7 to make any of said payments[.]”
6
settlement proceeds, High Country would be entitled to a reformation deed containing a
51/49 split of ownership in favor of High Country:
[I]n the event of any such default by Triple 7, High Country []
shall be entitled to have a Quitclaim Deed issued to them by
William H. Sanders, III, acting as Special Commissioner . . .
with High Country [] being granted ownership of 51% of all
mineral rights, permits and any and all rights and duties
conveyed by said Deed from Wellston Coal . . . and with Triple
7 being granted a forty-nine percent (49%) ownership share[.]
Triple 7 ultimately failed to make timely payment under the third extension and this
litigation ensued. 5
THE LIS PENDENS
As indicated above, the Agreement contained a provision requiring High
Country to release its notice of lis pendens within fifteen days of the effective date of the
Agreement. However, High Country failed to timely release its notice of lis pendens,
which failure went unnoticed until Triple 7 was in the process of obtaining financing for
one of the third extension’s payments, at which time the lender requested a release. Mr.
Caldwell advised High Country’s counsel of the absence of a recorded release; High
Country’s counsel then immediately prepared and filed a document which purported to
5
As to the third and final extension, Triple 7 had secured funding for $1.1 million
upon release of the lis pendens and was in the process of obtaining the final installment of
$1.8 million to “move forward” with the settlement, but requested “a few extra weeks” to
do so. High Country declined the additional extension of time for the final installment and
represents that it advised Triple 7 not to tender the $1.1 million since it would not agree to
an additional extension for the final installment. Despite providing a detailed chart of
alleged misstatements and misrepresentations contained in High Country’s brief, Triple 7
did not specifically dispute these facts.
7
release the lis pendens on the basis that “the parties to said civil action hav[e] agreed to a
settlement of all issues between them to their mutual satisfaction, said settlement having
now been partially paid.” (emphasis added). Subsequent to a deposition criticizing the
language of the lis pendens, High Country filed an “Amended Release of Lis Pendens”
which contained the above language but omitted the reference to the settlement having only
been “partially” paid.
MOTION TO APPOINT SPECIAL COMMISSIONER
When Triple 7 failed to make payment in accordance with the terms of the
third extension, High Country filed a motion for appointment of special commissioner to
execute a reformation deed making High Country a co-grantee, pursuant to the default
reformation provision of the Agreement. Triple 7 opposed the motion, claiming that High
Country’s failure to release the notice of lis pendens was the “first breach,” relieving it
from a continued duty to perform under the Agreement. It further argued that High Country
waived its right to enforce the default reformation provision by virtue of the release
language in the Agreement, which states that “[u]pon execution” of the Agreement, any
such claim to reformation was waived. Finally, Triple 7 argued that the Agreement and
subsequent extensions were both procedurally and substantively unconscionable and
therefore unenforceable.
With respect to the lis pendens, Triple 7 argued that the unreleased notice
created a cloud on the title and caused the difficulties it experienced obtaining financing to
8
pay the settlement amount. In an affidavit filed in opposition to the motion to appoint
commissioner, Triple 7’s president, Damian Caldwell, averred that “[p]otential lenders
were concerned about the fact that the Lis Pendens remained on file and inquired whether
the loan proceeds Triple 7 sought would resolve all differences with Plaintiffs and result in
a release of the Lis Pendens.” The affidavit stated further that “Triple 7 could not guarantee
that Plaintiffs would release the Lis Pendens,” and that “[a]s a result of the Lis Pendens not
being released, Triple 7 was not provided with the funding it sought.” Finally, the affidavit
provided that “[a]t least two loan brokers” reviewed the release and advised “they did not
believe it [was] a complete release[]” and “[a]s a result, they refused to lend funds to Triple
7.”
Triple 7 offered no testimony or affidavit from either broker or from any
lender to the effect that the lis pendens was the impediment to obtaining financing, relying
instead on the testimony and affidavit of Mr. Caldwell. High Country countered with Mr.
Caldwell’s deposition testimony stating that he told each lender about the lawsuit and
settlement and that the settlement funds were to be paid from the loan proceeds. 6 When
6
Mr. Caldwell testified as follows:
A. Every[] [lender] I spoke to, at that point, was made
aware of the lawsuit.
Q. So you had told them that there was an outstanding
lawsuit, and . . . also, told them that there were some
agreed settlement amounts that needed to be satisfied.
Is that correct?
(continued . . .)
9
asked which lenders told him that the reason they would not provide financing was the
unreleased lis pendens, Mr. Caldwell replied, “I have not had a conversation that I could
relay to you about that.” When asked whether anyone “came out and told you that that’s
the reason that they wouldn’t loan you any money,” Mr. Caldwell simply replied, “It’s been
my experience that lenders don’t specify every detail. They just tell you that they decline.”
The circuit court granted the motion and dismissed the matter—including
Triple 7’s counterclaim—from the docket. In a detailed and thorough order the circuit
court concluded that High Country’s failure to record a release of the notice of lis pendens
was not a material breach sufficient to trigger application of the “first breach” doctrine,
which would relieve Triple 7 from performance. The court further found that the release
A. That is correct.
Q. I assume that the understanding between you and that
lender would be that that was just a part of what the
money would be used for if they did loan money to you,
right? [T]o satisfy that obligation and to clear title to
the property?
A. That would [be] part of user proceeds. Correct.
Q. And they were aware of that? You made them aware of
that. Is that correct?
A. Yes.
The Agreement specifically permitted Triple 7 to disclose the terms of the
agreement to its “banks, lenders, financial advisors, commercial real estate advisors,
property management companies, and investment advisors who have a need or reason to
know[.]”
10
language in the Agreement which stated that High Country released its claim for
reformation of the deed “[u]pon execution of this Agreement” was ambiguous, and
construed the Agreement to waive the right to a reformation deed only upon timely
payment of the settlement proceeds. Finally, the court found that the Agreement and
extensions—despite their escalating payment requirements—were neither procedurally nor
substantively unconscionable. Accordingly, the circuit court granted the motion to appoint
special commissioner and dismissed the case in its entirety. 7 This appeal followed.
II. STANDARD OF REVIEW
We must first ascertain our standard of review, which none of the parties
address. To do so, however, we must first properly frame the ruling by the circuit court.
It is clear that although the order on appeal granted a motion to appoint a special
commissioner, the circuit court’s order had the effect of enforcing the settlement agreement
reached by the parties. Historically, the Court has utilized a simple abuse of discretion
standard when reviewing enforcement of settlement. See DeVane v. Kennedy, 205 W. Va.
519, 527, 519 S.E.2d 622, 630 (1999) (“[W]hen this Court undertakes the appellate review
7
The court also denied High Country’s motion to strike Mr. Caldwell’s affidavit
and comments made by counsel during the hearing, which rulings are not on appeal.
Further, the circuit court’s order dealt with claims of disparagement by High Country
purportedly in violation of the Agreement. The circuit court found Triple 7 provided no
evidence of disparagement and/or evidence that any alleged disparagement caused the
funding to fail. Despite Triple 7’s insistence that it “has not abandoned that argument,”
that finding is not assigned as error. Accordingly, we decline to address it.
11
of a circuit court’s order enforcing a settlement agreement, an abuse of discretion standard
of review is employed.”).
However, the issues underlying enforcement of settlement in this matter
require our review of both the circuit court’s findings of fact and its application of basic
tenets of contract law. In such instances the Court has found it more appropriate to apply
our traditional multi-pronged standard of review, rather than a simple abuse of discretion
standard, as set forth in Syllabus Point 2 of Walker v. West Virginia Ethics Commission,
201 W. Va. 108, 492 S.E.2d 167 (1997):
In reviewing challenges to the findings and conclusions
of the circuit court, we apply a two-prong deferential standard
of review. We review the final order and the ultimate
disposition under an abuse of discretion standard, and we
review the circuit court’s underlying factual findings under a
clearly erroneous standard. Questions of law are subject to a de
novo review.
See Messer v. Huntington Anesthesia Grp., Inc., 222 W. Va. 410, 417, 664 S.E.2d 751, 758
(2008) (rejecting simple abuse of discretion standard for review of settlement
enforceability and applying multi-pronged standard of review); Certain Underwriters At
Lloyd’s, London, Subscribing To Policy No. B0711 v. Pinnoak Res., LLC, 223 W. Va. 336,
341-42, 674 S.E.2d 197, 202-03 (2008) (utilizing multi-pronged standard of review where
settlement agreement enforceability invoked application of contract principles).
Therefore, we now hold that where the issue of the enforceability of a
settlement agreement requires the lower court to make findings of fact and apply
12
contractual or other legal principles, this Court will review its order and the ultimate
disposition under an abuse of discretion standard, its underlying factual findings under a
clearly erroneous standard, and questions of law pursuant to a de novo review. The Court
is further mindful that “[t]he law favors and encourages the resolution of controversies by
contracts of compromise and settlement rather than by litigation; and it is the policy of the
law to uphold and enforce such contracts if they are fairly made and are not in contravention
of some law or public policy.” Syl. Pt. 1, Sanders v. Roselawn Mem’l Gardens, 152 W.
Va. 91, 159 S.E.2d 784 (1968). With these standards and principles in mind, we proceed
to the parties’ arguments.
III. DISCUSSION
Triple 7 asserts four assignments of error: 1) that the circuit court erred in
its handling of the materiality requirement of the “first breach” doctrine; 2) that the circuit
court erred in refusing to find waiver of the right to enforce the default reformation
provision; 3) that the circuit court erred in not finding the Agreement unconscionable; and
4) that the circuit court deprived it of due process by dismissing its counterclaim.
A. “FIRST BREACH” DOCTRINE
Triple 7 first argues that the circuit court erred in enforcing the Agreement
where High Country had committed a material “first breach” by failing to timely release
the notice of lis pendens, as required by the Agreement. While the parties summarily state
that West Virginia observes the “first breach” doctrine, this Court has established no
13
modern iteration of the doctrine or factors for its application by way of syllabus point,
notwithstanding antiquated caselaw briefly referencing its underlying principles. See Blue
v. Hazel-Atlas Glass Co., 106 W. Va. 642, 650, 147 S.E. 22, 26 (1929) (“The party to a
contract is guilty of the first breach who fails to do what he contractually is bound to do.”);
Reiser v. Lawrence, 96 W. Va. 82, 84, 123 S.E. 451, 452 (1924) (“Where the evidence
clearly shows that defendant was the first to breach the contract, the court may rightfully
reject an instruction based on the theory that plaintiff first breached the contract and thereby
excused further performance thereof by defendant.”). 8
Regardless, we find that nearly every state in the country recognizes the first
breach doctrine and has had occasion to apply it with some frequency. Most have adopted
some version of the doctrine stated as follows: “As a rule, a party first guilty of a substantial
or material breach of contract cannot complain if the other party subsequently refuses to
perform. In other words, a party is barred from enforcing a contract that it has materially
breached.” 17A Am. Jur. 2d Contracts § 589 (footnotes omitted); see also Restatement
(Second) of Contracts § 237 (1981) (“[I]t is a condition of each party’s remaining duties to
render performances to be exchanged under an exchange of promises that there be no
8
In addition to this early caselaw, the Court briefly referenced the doctrine in a
recent memorandum decision. See Standard Oil Co., Inc. v. Consolidation Coal Co., No.
15-0655, 2016 WL 6078570, at *4 (W. Va. Oct. 17, 2016) (memorandum decision) (“The
gist of the doctrine of ‘first breach’ is that the ‘party who commits the first breach of a
contract is not entitled to enforce it, or to maintain an action thereon, against the other party
for his subsequent failure to perform.’” (quoting Hurley v. Bennett, 176 S.E. 171, 175 (Va.
1934)).
14
uncured material failure by the other party to render any such performance due at an earlier
time.”).
The instant case more specifically invokes the “materiality” aspect of the rule
which has been characterized as an “exception to the [first breach doctrine] . . . when the
breach did not go to the essence of the contract, but only to a minor part of the
consideration.” 17A Am. Jur. 2d Contracts § 589. That is, only material breaches will
satisfy the doctrine and permit a nonbreaching party to escape its subsequent performance
requirements. As discussed in one of the leading authorities on contracts:
[M]odern courts and the Restatement Second recognize that
something more than a mere default is ordinarily necessary to
excuse the other party’s performance in the typical situation . .
. . [A]n uncured failure of performance by the former can
suspend or discharge the latter’s duty of performance only if
the failure is material or substantial. Thus, if the prior breach
of contract was slight or minor, as opposed to material or
substantial, the nonbreaching party is not relieved of its duty of
performance although it may recover damages for the breach.
14 Samuel Willison & Richard A. Lord, A Treatise on the Law of Contracts § 43:5 (4th ed.
2013) (footnotes omitted) (hereinafter “Williston on Contracts”). As is the case with the
doctrine itself, in our precedents this materiality element has only been referenced in dated
caselaw or in dicta. See Syl. Pt. 2, J.W. Ellison, Son & Co. v. Flat Top Grocery Co., 69 W.
Va. 380, 71 S.E. 391 (1911) (“Where a purchaser of chattels has right to rescind the contract
for breach of it, the breach must be in a material matter.”); W. Va. Human Rights Comm’n
v. Smoot Coal Co., 186 W. Va. 348, 353, 412 S.E.2d 749, 754 (1991) (“[O]nly a material
failure of performance by one party discharges the other.”). Accordingly, we now hold
15
that when the performance of one party to a contract is due before that of the other party,
an uncured failure of performance by the former discharges the latter’s duty of performance
only if the failure is material. If the prior nonperformance was slight or did not go to the
essence of the contract, the nonbreaching party is not relieved of its duty of performance.
In its first assignment of error, Triple 7 argues that High Country’s failure to
release the notice of lis pendens was a significant, material breach of the Agreement
inasmuch as it was the first action required under the Agreement—within fifteen days of
the effective date of the Agreement—and the only affirmative act required by High
Country, which it breached almost immediately. It argues that the unreleased lis pendens
hindered its efforts to obtain financing to fulfill its settlement obligations under the
Agreement, which were expressly designed to permit it to maintain 100% ownership of the
subject property.
The circuit court found, and High Country argues, that the release of the
notice of lis pendens was not only ancillary to the settlement, but ultimately
inconsequential in any event. High Country emphasizes that the lis pendens was not a
“lien” on the property; rather, it was merely notice of a lawsuit—the existence of which
Mr. Caldwell had already informed the lenders. It also notes that when the issue of the lis
pendens release was first noticed by Mr. Caldwell, he was in the course of successfully
obtaining funding for one of the final installments due under the third extension. High
Country argues that Mr. Caldwell successfully obtained that funding with the lis pendens
16
still in place and requested additional time to pay the remaining payment due under the
extension—demonstrating Triple 7’s continued willingness to consummate the settlement
despite the absence of a release.
With respect to the requirement that a performance-excusing breach be
material, it has been stated that such materiality
is ultimately a question of degree, which, it has been said,
should be decided based on the inherent justice of the matter.
Generally, [] nonperformance will attain this level of
materiality only when it goes to the root, heart, or essence of
the contract; or is of such a nature as to defeat the object of the
parties in making the contract; or, as it has sometimes been
said, when the covenant not performed is of such importance
that the contract would not have been made without it.
Williston on Contracts § 43:6 (footnotes omitted). To make a deliberative assessment of
the “materiality” factor, the circuit court carefully examined the factors contained in
Section 241 of the Restatement (Second) of Contracts:
In determining whether a failure to render or to offer
performance is material, the following circumstances are
significant:
(a) the extent to which the injured party will be deprived of the
benefit which he reasonably expected;
(b) the extent to which the injured party can be adequately
compensated for the part of that benefit of which he will be
deprived;
(c) the extent to which the party failing to perform or to offer
to perform will suffer forfeiture;
17
(d) the likelihood that the party failing to perform or to offer to
perform will cure his failure, taking account of all the
circumstances including any reasonable assurances;
(e) the extent to which the behavior of the party failing to
perform or to offer to perform comports with standards of good
faith and fair dealing.
Triple 7 asserts that the circuit court erred in its consideration of all of these “significant
circumstances,” each of which we shall address in turn.
The first “significant circumstance” affecting materiality under Section 241
of the Restatement is the extent to which the allegedly injured party will be deprived of its
expected benefit under the agreement. As to this factor, the circuit court concluded that
Triple 7 was not deprived of the benefit it reasonably expected from the Agreement by
High Country’s temporary failure to release the lis pendens because the purpose of the
Agreement was to resolve the litigation by settlement—a benefit which was still available
to Triple 7 by consummating the Agreement under its existing terms. As to this factor,
Triple 7 argues that the court erroneously adopted a rule pertaining to this factor whereby
if a party is not “completely” deprived of benefit from the agreement, the breach is not
material. Triple 7 further argues that it did not seek merely to settle the litigation, but that
its overriding purpose in entering the Agreement was to establish terms under which it
could maintain its 100% ownership of the subject property, an outcome of which it has
now been deprived.
18
We find that Triple 7’s characterization of the Agreement and its expected
benefit somewhat obtusely ignores the design of the Agreement. The Agreement provided
for settlement of the action in one of two ways: payment of the settlement proceeds,
granting Triple 7 100% ownership free and clear of High Country’s claims, or absent such
payment, execution of a reformation deed resulting in shared ownership of the subject
property. While Triple 7’s preferred settlement alternative may have been to buy out High
Country, it failed to demonstrate that the specifically negotiated alternative methods of
settlement were no longer available to it.
The circuit court correctly concluded that the obvious primary purpose of the
settlement agreement was to resolve the litigation under alternative terms which Triple 7
found acceptable at the time the Agreement was entered. The Agreement itself repeatedly
expressed its purpose in successive paragraphs as being to
fully and finally resolve any and all current or future . . . claims
arising from their relationship . . . claims in the Mercer County
Litigation . . . claims arising under the Joint Venture
Agreement . . . claims . . . related to or contesting the ownership
or title of the Deed held in Triple 7’s name, the mining-related
permits, or the mineral rights . . . [and] claims . . . related to or
contesting the ownership or title of the mineral rights[.]
The Agreement further specifically defined the “Claims” to be resolved as including “any
and all claims, counterclaims, cross-claims, and/or third-party claims, suits, complaints . .
. defenses . . . causes of action . . . liabilities . . . damages . . . compensation . . . controversies,
actions, judgments, or any other remedies or relief of any character whatsoever . . . .”
19
Moreover, the three subsequent extensions reiterated their purpose as being “to resolve the
claims of High Country . . . as per said Complaint and Counter-Complaint filed in the
Circuit Court of Mercer County, West Virginia.”
In fact, the Agreement’s intention to terminate the litigation and the parties’
relationship was so emphatically expressed that the Agreement imbedded a contingency
for non-payment of the negotiated settlement proceeds that would still resolve the
litigation, but under different relief to High Country, i.e. reformation of the deed. Triple
7’s loss of sole ownership of the property—the benefit of which it claims to have been
deprived—is not the result of High Country’s failure to record a release. It is the result of
the specifically negotiated structure of the Agreement. In that regard, Triple 7’s loss of
sole ownership was occasioned solely by its failure to pay the settlement proceeds, which
non-payment was a specifically contemplated and negotiated contingency. In fact, it
entered into three successive extension agreements to avoid triggering the default
reformation provision which would strip it of its sole ownership. More strikingly, in the
final extension and despite the continuous difficulty it experienced obtaining financing,
Triple 7 specifically negotiated away its controlling interest in the event of default for the
express purpose of extending the Agreement and holding the parties to their agreement to
fully resolve the litigation and end their relationship.
Most importantly as to this factor, however, Triple 7 failed entirely to
demonstrate that the unreleased lis pendens impeded its ability to obtain financing to pay
20
the settlement proceeds which would have enabled it to consummate its preferred
settlement option. Despite Mr. Caldwell’s bald assertions, Triple 7 produced not a single
witness or affidavit from what it claimed were multiple lenders that refused financing due
to the presence of the notice of lis pendens. Without any evidence that the first breach
affected Triple 7’s ability to consummate the settlement through payment of the settlement
proceeds, it has failed to prove that High Country’s breach deprived it of any expected
benefit. In fact, Triple 7 failed to demonstrate any real consequence of High Country’s
failure to timely release the notice of lis pendens, much less a deprivation of the benefit of
its bargain. 9
We therefore agree with the circuit court’s analysis that the primary thrust of
a settlement agreement is to resolve the underlying litigation and that the release of the lis
pendens was not the purpose of this particular Agreement. It is well-understood that a
notice of lis pendens is merely notice of a suit. 10 Mr. Caldwell himself had notified the
9
Moreover, Triple 7’s argument on this factor is circular: it claims that the expected
benefit of which it was denied was 100% ownership of the property; however, the only
way to obtain that benefit (free and clear of High Country’s claims) was to tender the
settlement funds and consummate the settlement. It argues the only way to obtain the
settlement funds was for the property to be free of the notice of lis pendens and therefore
have “clear title” for use as collateral. However, not until the litigation was settled and
dismissed would the property be free of the “cloud” created by the litigation. As discussed
infra, the notice of lis pendens itself creates no lien on the property.
Admittedly, the requirement that the lis pendens be released within fifteen days
10
of the Agreement suggests that its purpose was to aid in obtaining the financing to be sought
by Triple 7. Regardless, Triple 7 failed to demonstrate that its presence interfered with
obtaining financing. As the circuit court noted, there was a “plethora” of possible reasons
why lenders would decline to provide financing to Triple 7.
21
lenders of the litigation, which served the same purpose as the lis pendens. He testified
that he advised the lenders that the financing would be used to resolve the pending
litigation, an obvious prerequisite to removing any cloud from the title irrespective of the
filed notice of lis pendens itself. See Brass Ring, Inc. v. Johnson, No. 12-1496, 2013 WL
5967039, at *4 (W. Va. Nov. 8, 2013) (memorandum decision) (“[N]otice of lis pendens
alone creates no lien or claim on the property.”); Ghent v. Meadowhaven Condo., Inc., 823
A.2d 355, 361 (Conn. App. Ct. 2003) (“[L]is pendens is not an encumbrance or burden on
the record title of the subject property.”). Further, as the circuit court observed, the lawsuit
of which it gave notice was not fully resolved through the mere release of the lis pendens;
therefore, a release would have done nothing to clear the actual cloud on the title which
was the pending litigation.
This first, largely determinative factor notwithstanding, Triple 7 contends
that the circuit court further erred with respect to the remaining considerations set forth in
the Restatement. However, we need not linger over the remaining factors inasmuch as we
find they are either inconsequential to the analysis or weigh heavily in favor of the circuit
court’s conclusion that High Country’s breach was not material.
The second enumerated “significant circumstance” under Section 241 of the
Restatement is whether Triple 7 could be adequately compensated for the benefit of which
it was deprived. Triple 7 contends that the circuit court conflated this factor with whether
or not it proved actual damages stemming from High Country’s nonperformance. It argues
22
that the injury it sustained as a result of High Country’s breach was the loss of a controlling
interest in the property, which interest is not quantifiable. In support, it notes that West
Virginia recognizes specific performance as an equitable remedy due to the uniqueness of
property, which cannot be compensated for in mere damages.
While the circuit court’s order indeed references the lack of evidence as to
“what the damages . . . would be,” we find that Triple 7 misses the circuit court’s broader
reasoning as to this factor. The circuit court’s order clearly states that “the fact that Triple
7 continued with the terms of the third Extension even after it was aware that the Notice of
Lis Pendens had not been released, makes it apparent that there was no harm resulting from
the failure to release the Notice of Lis Pendens.” Therefore, commensurate with its finding
as to the first factor, the circuit court found simply that there was no harm caused by the
lack of release for which to “compensate” Triple 7. Its findings in that regard speak more
to Triple 7’s lack of injury in the first instance than the adequacy of its proof of damages.
Indeed, the Restatement explains that this factor “is a corollary of the first [factor].” Id. §
241, cmt. c. Having correctly found that High Country’s nonperformance deprived Triple
7 of no expected benefit under the Agreement, the circuit court likewise correctly found
that the factor concerning adequacy of “compensation” available to Triple 7 does not bear
in favor of the materiality of High Country’s breach.
The remaining factors—whether High Country would suffer a forfeiture,
High Country’s ability to cure, and its good faith—likewise require little discussion. Triple
23
7 correctly notes that the forfeiture factor speaks to whether a party has already performed
to an extent which would constitute a forfeiture should the other party be excused from
performance. In this case, High Country forfeited nothing, having neither paid nor
performed in any respect before Triple 7 defaulted. Therefore, this factor lends little to the
analysis.
However, the ability to cure and good faith factors soundly weigh in favor of
a lack of materiality. Triple 7 is dismissive of High Country’s belated cure by filing the
release upon request; it attempts to characterize High Country’s failure to release the lis
pendens as the first step toward subjecting it to a “shakedown”—the subsequent extensions,
fees, and escalating settlement monies. 11 In response, High Country contends that it
exhibited the utmost good faith by filing not one, but two, releases after being advised of
its failure to do so. It further highlights its dealings with Triple 7 relative to the final
extension as evidence of its good faith. High Country represents—and Triple 7 does not
dispute 12—that when Triple 7 asked for more time to pay the final installment of $1.8
11
Triple 7 also argues heavily that the language included in the initial release to the
effect that the settlement was only “partially” paid was intentionally included in an attempt
to “squeeze” Triple 7 for greater settlement amounts while the alleged cloud on the title
remained. However, it is difficult to construe this wording as evidence of bad faith given
that it was entirely accurate; Triple 7 had in fact only partially paid the settlement.
12
See n.5, supra.
24
million, High Country’s counsel advised Triple 7 not to make the $1.1 million payment it
already had in hand because it did not intend to grant another extension.
As the circuit court correctly found, High Country immediately cured its
nonperformance by preparing a release of the lis pendens upon being notified of its failure
to do so and even provided an amended release when the release language was criticized
by Mr. Caldwell. More importantly, Triple 7 failed to demonstrate that High Country’s
nonperformance was anything but an oversight, which it corrected immediately. And
despite suggesting it was victimized by the subsequent extensions, Triple 7 failed to
establish that it entered into the extensions with anything other than a full-throated
endorsement of the parties’ original Agreement and desire to maintain resolution of the
litigation under such additional terms as necessary to finally resolve the matter.
In fact, Triple 7’s continued willingness and affirmative actions toward
consummating the settlement itself after becoming aware of High Country’s failure to file
a release likely constituted waiver of any alleged “first breach.” It is well-established that
“[i]f the [nonbreaching] party elects to continue with the contract, it cannot later suspend
performance and then claim that it had no duty to perform based upon the first material
breach. That defense is waived when the party elects to continue performance of the
contract.” Maverick Benefit Advisors, LLC v. Bostrom, 2016 382 P.3d 753, 759 (Wyo.
2016); see also Atl. Bitulithic Co. v. Town of Edgewood, 103 W. Va. 137, 143, 137 S.E.
25223, 225 (1927) (“There is no breach so long as the injured party elects to treat the contract
as continuing.”). Williston on Contracts explains
the general rule that one party’s uncured, material failure of
performance will suspend or discharge the other party’s duty
to perform does not apply when the latter party, with
knowledge of the facts, either performs or indicates a
willingness to do so, despite the breach, or insists that the
defaulting party continue to render future performance.
§ 43:15 (footnotes omitted); see also Restatement (Second) of Contracts § 246 (1981)
(“[A]n obligor’s acceptance or his retention for an unreasonable time of the obligee’s
performance, with knowledge of or reason to know of the non-occurrence of a condition
of the obligor’s duty, operates as a promise to perform in spite of that non-occurrence[.]”).
Here, it is undisputed that even after knowledge that the lis pendens had not yet been
released, Triple 7 proceeded to successfully obtain funding for a portion of the final
extension’s settlement proceeds and attempted to tender those funds, requesting an
additional extension of time for the final installment.
In sum, we agree with the circuit court’s thorough and well-reasoned analysis
of the materiality of High Country’s breach and agree that any nonperformance by High
Country was not a material breach relieving Triple 7 of its obligations under the
Agreement. We likewise find that the factors set forth in the Restatement reflect an
enumeration of the various circumstances which inform the issue of the materiality of a
party’s breach or nonperformance. Accordingly, we now hold that in determining whether
a party’s nonperformance under a contract is material for purposes of excusing the other
26
party’s subsequent performance, the following circumstances are significant: (1) the extent
to which the injured party will be deprived of the benefit which it reasonably expected; (2)
the extent to which the injured party can be adequately compensated for the part of that
benefit of which it will be deprived; (3) the extent to which the party failing to perform or
to offer to perform will suffer forfeiture; (4) the likelihood that the party failing to perform
or to offer to perform will cure its failure, taking account of all the circumstances including
any reasonable assurances; and (5) the extent to which the behavior of the party failing to
perform or to offer to perform comports with standards of good faith and fair dealing. 13
WAIVER
Next, Triple 7 argues that because of the wording of one of the release
paragraphs in the Agreement, High Country waived its right to seek reformation of the
deed. Triple 7 points to paragraph 9.2 of the Agreement which provides that “[u]pon
execution of this Agreement by all Parties, High Country . . . forever discharge[s],
relinquish[es], disclaim[s], and/or release[s] any current or future claim or Claims to be a
co-grantee or joint owner of the Deed[.]” Triple 7 argues that this language is unambiguous
and clearly provides that when the parties executed the Agreement, High Country
immediately waived its right to seek reformation of the deed. It argues further that
13
As the Restatement cautions, however, “[a] determination that a failure is not
material means only that it does not have the effect of the non-occurrence of a condition
[excusing further performance]. Even if not material, the failure may be a breach and give
rise to a claim for damages for partial breach[.]” Restatement (Second) of Contracts § 241
cmt. a.
27
paragraph 9.2 “supersedes” the mutual release language of paragraph 9.1, which is
effective only upon payment of the settlement funds, because it is specific to High
Country’s agreement to release.
High Country reiterates the circuit court’s conclusion that this singular
phrase from one paragraph of the Agreement is ambiguous in light of the Agreement’s
other provisions and that it “should not have been included[.]” It contends that suggesting
it released its right to reformation at the moment of execution of the Agreement without
knowing whether Triple 7 would default on its payment obligation—particularly given that
reformation was expressly permitted upon default—is “ludicrous.” The circuit court,
finding this provision ambiguous in light of the preceding release paragraph which states
that the mutual releases are effective “upon receipt of Triple 7’s Settlement Payment,”
concluded that the Agreement clearly contemplated releases only upon payment of the
settlement proceeds or reformation of the deed.
We agree. With regard to inconsistent contractual terms, the Court has
stated, “Contract language is considered ambiguous where an agreement’s terms are
inconsistent on their face or where the phraseology can support reasonable differences of
opinion as to the meaning of words employed and obligations undertaken.” Syl. Pt. 6, State
ex rel. Frazier & Oxley, L.C. v. Cummings, 212 W. Va. 275, 569 S.E.2d 796 (2002).
Further,
28
[i]f an inquiring court concludes that an ambiguity exists in a
contract, the ultimate resolution of it typically will turn on the
parties’ intent. Exploring the intent of the contracting parties
often, but not always, involves marshaling facts extrinsic to the
language of the contract document. When this need arises,
these facts together with reasonable inferences extractable
therefrom are superimposed on the ambiguous words to reveal
the parties’ discerned intent.
Fraternal Order of Police, Lodge Number 69 v. City of Fairmont, 196 W. Va. 97, 101 n.7,
468 S.E.2d 712, 716 n.7 (1996).
Unquestionably, the “mutual releases” provision, providing for release upon
receipt of the settlement proceeds, and the “High Country release” provision, providing for
release upon execution, are facially inconsistent. More importantly, it is patently obvious
that this language seemingly forfeiting the ability to reform the deed upon the mere
execution of the Agreement is fully at odds with the Agreement as a whole and as
specifically negotiated. Reformation of the deed served as an alternative settlement
resolution to the payment of the settlement proceeds; to construe that relief as “waived”
from the outset of the Agreement is antithetical to the parties’ expressed intentions. We
therefore find that the circuit court properly construed the ambiguous provision to
effectuate the parties’ clear intention in settlement of the case.
UNCONSCIONABILITY
Next, Triple 7 claims that the Agreement and extensions are both
procedurally and substantively unconscionable. In support, it focuses on the escalating
29
settlement amount, which it alleges was six and a half times the original settlement amount
and demonstrates its unconscionability. It claims that High Country took advantage of its
unawareness that the lis pendens had not been released to “extort” the additional sums and
that it was “required” to agree to the extensions otherwise it “would lose a substantial
interest in its property and, later, a controlling interest.”
High Country responds that there was no inequity in the parties’ bargaining
positions as Mr. Caldwell has banking experience and is “financially [] experienced and
more financially savvy” than High Country’s principals. High Country submits that Triple
7 eagerly agreed to the settlement and subsequent extensions in an effort to protect its sole
ownership of four million tons of metallurgical coal, which allegedly had a value far greater
than the settlement amount of $3.6 million. The circuit court agreed and found that the
Agreement and extensions were entered into with advice of counsel, by sophisticated
parties, freely negotiated, and with no hidden terms. More specifically, the court found
that the ultimate value of the metallurgical coal at issue (estimated at or around $100
million) well justified the escalating settlement amount. 14
14
Triple 7, however, adduced testimony at the summary judgment hearing that the
price of metallurgical coal had actually fallen from the time the settlement agreement was
first executed, as contrasted with the escalating settlement price. Regardless, Triple 7 itself
makes abundantly clear that its desire to avoid the default reformation provision and retain
100% ownership provided its motivation to continue to agree to the extensions.
30
This Court has issued the following guidance on unconscionability:
The doctrine of unconscionability means that, because
of an overall and gross imbalance, one-sidedness or lop-
sidedness in a contract, a court may be justified in refusing to
enforce the contract as written. The concept of
unconscionability must be applied in a flexible manner, taking
into consideration all of the facts and circumstances of a
particular case.
Syl. Pt. 12, Brown ex rel. Brown v. Genesis Healthcare Corp., 228 W. Va. 646, 724 S.E.2d
250 (2011), judgment vacated on other grounds sub nom. Marmet Health Care Ctr., Inc.
v. Brown, 565 U.S. 530 (2012). Further, “[a] determination of unconscionability must
focus on the relative positions of the parties, the adequacy of the bargaining position, the
meaningful alternatives available to the plaintiff, and ‘the existence of unfair terms in the
contract.’” Syl. Pt. 4, Art’s Flower Shop, Inc. v. Chesapeake and Potomac Tel. Co. of W.
Va., Inc., 186 W.Va. 613, 413 S.E.2d 670 (1991).
We find that the circuit court correctly determined that the Agreement and
extensions were not unconscionable—either procedurally or substantively. This Court has
held that
[p]rocedural unconscionability is concerned with inequities,
improprieties, or unfairness in the bargaining process and
formation of the contract[] . . . . includ[ing], but [] not limited
to, the age, literacy, or lack of sophistication of a party; hidden
or unduly complex contract terms; the adhesive nature of the
contract; and the manner and setting in which the contract was
formed, including whether each party had a reasonable
opportunity to understand the terms of the contract.
31
Syl. Pt. 17, in part, Brown, 228 W. Va. 646, 724 S.E.2d 250. None of these considerations
are present here. As per the language of the Agreement itself, it was “made freely and . . .
[without] duress or coercion”; it was “bargained for and entered into in good faith and as a
result of arms-length negotiations . . . based on [the parties’] respective individual and
independent assessments, with the assistance and advice of counsel, 15 of the probability of
success, the complexity, the delay in obtaining relief, and the expense of litigation.” 16
Further, any suggestion of procedural unconscionability relative to the terms of the
settlement and manner of formation is completely undermined by the serial nature of the
negotiations. The terms of the original Agreement were highly detailed; each extension
cautiously carved out new or additional terms and diligently reserved the original terms as
set forth in the lengthy and exhaustive original Agreement. The fact that the extensions
were successively negotiated following extended periods of time during which the parties
would reconvene and revisit their agreement, making limited and considered
modifications, plainly evidences a process which was devoid of any inequity for either
party.
Much the same can be said of the alleged substantive unconscionability of
the Agreement and extensions. The Court has explained that
In fact, the Agreement states that it was “jointly drafted . . . with the benefit of
15
advice from counsel” and that “none of the Parties will claim that any ambiguity in this
Agreement shall be construed against any of the other Parties.”
As indicated supra, these provisions from the original Agreement were expressly
16
reserved as remaining in “full force and effect” in the subsequent extensions.
32
[s]ubstantive unconscionability involves unfairness in the
contract itself and whether a contract term is one-sided and will
have an overly harsh effect on the disadvantaged party. The
factors to be weighed in assessing substantive
unconscionability vary with the content of the agreement.
Generally, courts should consider the commercial
reasonableness of the contract terms, the purpose and effect of
the terms, the allocation of the risks between the parties, and
public policy concerns.
Brown, Syl. Pt. 19. There is no question that the gross settlement amount swelled
substantially as additional time was requested by Triple 7 to consummate the monetary
settlement. It is also self-evident that Triple 7 voluntarily engaged in re-negotiating the
Agreement and extensions to avoid triggering the default reformation provision, a
provision to which it had freely and willingly agreed in the first instance. High Country
had no advantage over Triple 7 at the time this provision was originally negotiated, nor at
any time during negotiation of the extensions.
The corner into which Triple 7 painted itself was entirely of its own making.
It voluntarily agreed to what it now claims is an unconscionable contingency in the event
it failed to obtain funding for the settlement—funding it apparently never fully had in hand
at the time it agreed to the default reformation provision. Its interest in agreeing to the
Agreement and extensions was to maintain its status as sole owner of a potentially very
profitable mineral interest, yet it gambled with this status by willingly and repeatedly,
conditioning its ownership on its ability to pay settlement funds which it clearly did not
have. We therefore conclude that the circuit court committed no error in finding that the
Agreement and extensions were neither procedurally nor substantively unconscionable.
33
DUE PROCESS
Finally, Triple 7 claims it was deprived of due process by the circuit court’s
dismissal of the case, including its counterclaim, in the order on appeal. Triple 7 insinuates
that the dismissal of its counterclaim was a sua sponte error since High Country did not
request dismissal of the case or counterclaim; instead, it sought appointment of a
commissioner. More specifically, Triple 7 claims that the Agreement provided for
dismissal only upon payment of the settlement proceeds; since it did not pay, it claims High
Country was not entitled to dismissal. However, as we observed at the outset, the circuit
court’s order served in effect to enforce the settlement, irrespective of how the motion was
styled. Upon enforcement of the terms of the Agreement, there was nothing left pending
per the language of the Agreement.
The Agreement specifically provides that its intention is for the “[p]arties to
this Agreement . . . to fully and finally resolve any and all current or future Claims (as
defined in paragraph 1.1 herein below)[.]” Paragraph 1.1 defines “Claims” as including
“counterclaims.” The third extension, which governed the parties’ Agreement for purposes
of enforcement, also expressly states that it is for the purpose of resolving “the Parties’
claims and counterclaims as filed in the Circuit Court of Mercer County, West Virginia[.]”
Finally, the Agreement expressly directed High Country to file a dismissal of the case with
prejudice upon payment of the settlement proceeds, under the assumption that is how the
case would resolve—as opposed to the triggering of the default reformation provision.
34
Regardless, by appointing a commissioner to execute the reformation deed, the circuit court
effectively enforced the settlement as agreed, the purpose of which was to bring the
litigation to an end. Accordingly, we find the circuit court committed no error in dismissing
the case in its entirety.
IV. CONCLUSION
For the reasons set forth above, we affirm the October 2, 2019 order of the
Circuit Court of Mercer County, West Virginia.
Affirmed.
35