Logan Coal & Timber Corp. v. Kinzer Bus. Realty

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LOGAN COAL & TIMBER CORPORATION, Plaintiff, v. KINZER BUSINESS REALTY, LTD., Defendant.

Civil Action No. 2:22-cv-00602

United States District Court, S.D. West Virginia, Charleston Division

August 21, 2024

MEMORANDUM OPINION AND ORDER

THOMAS E. JOHNSTON CHIEF JUDGE

Pending before the Court is Plaintiff Logan Coal & Timber Corporation's (“Plaintiff”) motion for a set-off. (ECF No. 25.) Also pending are Defendant Kinzer Business Realty, Ltd.'s (“Defendant”) objections to the judicial sale. (ECF No. 26.) For the reasons more fully explained below, Plaintiff's motion is DENIED, and Defendant's objections are OVERRULED.

I. BACKGROUND

This is a partition action between two natural resource development companies. Plaintiff is a West Virginia corporation with its principal place of business in West Virginia. (ECF No. 1 at 2, ¶ 8.) Defendant is a Kentucky limited partnership.^[1](Id. at 3, ¶ 9.) Together they own, as tenants in common, roughly 8,895 acres of real estate in Mingo County, West Virginia. (ECF No. 1-1 at 5, ¶ 5.) Plaintiff owns an undivided 93% interest in the property. (Id. at 7, ¶ 8.) Defendant owns the remaining 7% interest. (Id. at 7, ¶ 9.) This shared property consists of 41 different tracts, ranging in size from over 1,300 acres to as little as half an acre. (Id. at 5-6, ¶ 6.) Many tracts are fee simple less the coal estate.^[2] (See id.) Some are surface only. (See id.) Others are the mineral estate only, also save the coal estate. (See id.) A few tracts are currently leased for oil and gas development. (See id. at 6-7, ¶ 7.) Defendant is the lessee to those leases, having acquired its leasehold interests before purchasing a share of the property. (Id.)

Plaintiff filed this partition action in the Circuit Court of Mingo County, West Virginia on November 21, 2022. (ECF No. 1-1.) Plaintiff's complaint alleged that the two parties own the subject property and went on to describe the property. (Id. at 5-7, ¶ ¶ 5-9.) The complaint further alleged that Plaintiff has carried the burden of managing and maintaining the property, while Defendant has been uninvolved. (Id. at 7, ¶ ¶ 11-12.) Seeking to end this lopsided relationship, the complaint requested that the Court partition the land. (Id. at 8-9, ¶ ¶ 14-18.) More precisely, the complaint alleged that the land could not be physically partitioned, and it requested that the Court appoint a Special Commissioner to hold a public auction and partition the land via sale.^[3](Id.)

Defendant removed the action to this Court on December 28, 2022.^[4] (ECF No. 1.) Following removal, Plaintiff moved the Court to appoint a Special Commissioner and set procedures for a judicial sale. (ECF No. 11.) Rather than opposing the motion, Defendant agreed that a sale should take place and spent the next four weeks hammering out the details with Plaintiff. (See ECF Nos. 13-16.) The parties ultimately agreed on many terms but could not agree whether a set-off would be appropriate if either party won the auction. (ECF Nos. 16, 17.) Seeing that both parties wanted a judicial sale, the Court granted Plaintiff's motion and appointed Scott A. Windom, Esq., as Special Commissioner. (ECF No. 18.) The Court then adopted the parties' agreed upon sale procedures. (Id.) As for the potential set-off, because Plaintiff was the party seeking it, the Court directed Plaintiff to brief the issue before the sale. (ECF No. 33 at 6:57:9.) Plaintiff never did.

So on December 5, 2023, the Court conducted the judicial sale at the Robert C. Byrd United States Courthouse in Charleston, West Virginia. (ECF No. 23 at 1.) Mr. Windom oversaw the auction, and five different parties-including Plaintiff and Defendant-attended and participated. (ECF No. 38.) When all was said and done, Plaintiff won the whole lot, that is, the entire 8,895 acres, with a bid of $8,000,000.00. (ECF No. 23 at 1.) Plaintiff promptly deposited $800,000.00 (the parties agreed to a 10% deposit amount) with Mr. Windom, who filed his preliminary report that same day. (Id.)

That brings the Court to the current issues before it. On December 20, 2023, Plaintiff finally filed its motion for a set-off-15 days after the sale. (ECF No. 25.) A week later, Defendant objected to the sale. (ECF No. 26.) In its written objections, Defendant urges the Court to set aside the sale, give it a chance to show that its now-sold land can be partitioned inkind, and allow it to keep the property that it lost at auction.^[5](Id.) These issues have since been fully briefed and are ripe for adjudication. (ECF Nos. 25-27, 37.)

II. DISCUSSION

As just noted, the Court has two issues to resolve here. First, the Court must decide whether to grant Plaintiff a set-off. Second, the Court must decide whether it should set aside the sale, rewind the clock, and see if Defendant's now-sold property can be partitioned in-kind. The Court considers each issue in turn.^[6]

A. Plaintiff waived its right to seek a set-off

Waiver is the “intentional relinquishment of a known right.” Parsons v. Halliburton Energy Servs., Inc., 785 S.E.2d 844, 850 (W.Va. 2016) (quoting Hoffman v. Wheeling Sav. & Loan Ass'n, 57 S.E.2d 725, 735 (W.Va. 1950)). A party waives or relinquishes a right when it (1) has the right, (2) knows that it has the right, and (3) declines to exercise the right. See Syl. Pt. 4, Bruce McDonald Holding Co. v. Addington, Inc., 825 S.E.2d 779 (W.Va. 2019). “Waiver may be established by express conduct or impliedly, through inconsistent actions.” Ara v. Erie Ins. Co., 387 S.E.2d 320, 323 (W.Va. 1989). Once waived, the right is gone forever. Parsons, 785 S.E.2d at 850.

Here, Plaintiff waived its right to seek a set-off by not briefing the issue when given the chance to do so. Specifically, Plaintiff raised the set-off off issue several weeks before the sale, and the Court directed Plaintiff to brief the issue then, so that it could be resolved before any bids were placed and any money was due. However, despite having the opportunity to brief the issue and be heard, Plaintiff sat idle and passed on its chance to show that a set-off was appropriate. The Court thus finds that Plaintiff's inaction amounts to a waiver of the right and Plaintiff cannot now seek a set-off. See Addington, Inc., 825 S.E.2d at 788-89 (“[T]he law ministers to the vigilant, not to those who sleep on their rights.” (internal quotation marks omitted) (quoting State v. Blickenstaff, 804 S.E.2d 877, 880 (W.Va. 2017))).

B. Defendant is judicially estopped from seeking a partition in-kind

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Judicial estoppel is a common law rule that prevents a party from “assum[ing] a certain position in a legal proceeding,” prevailing with that position, and then “assum[ing] a contrary position” “simply because his interests have changed.” Hubbard v. State Farm Indem. Co., 584 S.E.2d 176, 186 n.21 (W.Va. 2003) (quoting New Hampshire v. Maine, 532 U.S. 742, 749 (2001)). Put differently, judicial estoppel bars “part[ies] from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in [a later] phase.” New Hampshire, 532 U.S. at 749; see also W.Va. Dep't of Transp. v. Robertson, 618 S.E.2d 506, 513 (W.Va. 2005).

Unlike other forms of estoppel, which primarily protect innocent parties from having the rug pulled out from under them by their adversaries, judicial estoppel protects courts themselves from litigants' gamesmanship.^[7] State ex rel. Universal Underwriters Ins. Co. v. Wilson, 825 S.E.2d 95, 111-12 (W.Va. 2019).

Indeed, allowing parties to play “fast and loose” with the court system-and thereby manipulate the system to their advantage-would both undermine the truth-seeking function of the judicial branch and erode the public's trust in it. Bison Ints., LLC v. Antero Res. Corp., 854 S.E.2d 211, 225 (W.Va. 2020); Robertson, 618 S.E.2d at 516; see also New Hampshire, 532 U.S. at 749-50 (recognizing that the “purpose [of judicial estoppel] is ‘to protect the integrity of the judicial process'” (quoting Edwards v. Aetna Life Ins. Co., 690 F.2d 595, 598 (6th Cir. 1982))). Since the doctrine “is intended to prevent [the] ‘improper use of judicial machinery,'” New Hampshire, 532 U.S. at 750 (quoting Konstantinidis v. Chen, 626 F.2d 933, 938 (D.C. Cir. 1980)), courts are free to raise the issue sua sponte, Wilson, 825 S.E.2d at 107 n.18; Robertson, 618 S.E.2d at 512, and may consider the equities of the entire case, Wilson, 825 S.E.2d at 109 (quoting Grochocinski v. Mayer Brown Rowe & Maw, LLP, 719 F.3d 785, 792 (7th Cir. 2013)).

However, courts cannot apply the doctrine unless four elements are met. Robertson, 618 S.E.2d at 515. First, the party against whom estoppel is contemplated must have “assumed a position on [an] issue that is clearly inconsistent with . . . a position taken earlier in the same case.” Id. Second, the two contrary “positions [must have been] taken in proceedings involving the same adverse party.” Id. Third, “the party taking the inconsistent positions [must have] benefit[ed] from his[] original position.” Id. Fourth, and finally, “the original position [must have] misled the adverse party so that allowing the estopped party to change his[] position would injuriously affect the adverse party and the integrity of the judicial process.” Id.

Defendant's conduct checks all four boxes. Starting with the first Robertson element, Defendant's current position-that the land can be partitioned in-kind-is flatly inconsistent with it its prior position that the land should be partitioned by sale. Under West Virginia's partition statute, partition by sale is available only when partition in-kind is not feasible. W.Va. Code § 37-4-3. Partition by sale, in other words, is a last resort. See id. Thus, Defendant's decision to agree to and actively...