The Industrial Development Board of the City of Montgomery v. George Earl Russell et al. (Montgomery Circuit Court: CV-2004-3282; CV-2005-1728)
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SUPREME COURT OF ALABAMA
OCTOBER TERM, 2012-2013
____________________
1091215
____________________
The Industrial Development Board of the City of Montgomery
v.
George Earl Russell et al.
Appeal from Montgomery Circuit Court
(CV-04-3282; CV-05-1728)
On Application for Rehearing
MURDOCK, Justice.
The opinion of August 12, 2011, is withdrawn and the
following is substituted therefor.
1091215
The
Industrial
Development
Board
of
the
City
of
Montgomery ("the IDB") appeals, pursuant to Rule 5, Ala. R.
App. P., from the Montgomery Circuit Court's interlocutory
order denying its motion for a summary judgment as to the
breach-of-contract claims asserted against it by George Earl
Russell and Thomas E. Russell, as coexecutors and cotrustees
of the wills and testamentary trusts of Earnest W. Russell and
Myrtis Russell ("the Russells") (case no. CV-04-3282), and by
Price McLemore, Mary H. McLemore, John McInnis, Jr., Timothy
N. McInnis, Charles R. McInnis, William S. Newell, and the
Peoples Bank and Trust Company, as trustee for the Adaline
Hooper
Trust
A
and
B
("the
McLemore
group")
(case
no.
CV-05-1728) (the plaintiffs in both cases are hereinafter
collectively referred to as "McLemore/Russell").
We affirm
the order of the trial court.
I.
Facts and Procedural History
Our opinions in McLemore v. Hyundai Motor Manufacturing
Alabama, LLC, 7 So. 3d 318 (Ala. 2008), and Wheeler v. George,
39 So. 3d 1061 (Ala. 2009), provide detailed renditions of the
facts that culminated in the filing of the instant actions by
McLemore/Russell
against
the
2
IDB
and
Hyundai
Motor
1091215
Manufacturing
Alabama,
LLC
("Hyundai").
We
quote
here
portions of those opinions and summarize other pertinent facts
necessary to an understanding of the arguments presented in
this appeal.
In September 2001, various State and local officials,
including officials from the City of Montgomery ("the City"),
the IDB, the Montgomery County Commission ("the County"), and
the
Montgomery
Area
Chamber
of
Commerce,
began
making
preparations to secure options to purchase property in the
Montgomery area to create an incentive package in the hope
that they could persuade Hyundai to build an industrial plant
in the Montgomery area for the purpose of manufacturing and
assembling motor vehicles.
As we explained in Wheeler:
"A significant parcel of land was an essential
component of any incentive package. B.M. Ahn, the
Hyundai representative in charge of the site
selection for the United States plant, testified
during his deposition that a critical element of an
incentive
package
offered
to
an
automobile
manufacturer was 'free land' on which to locate its
plant. Ahn also stated that Hyundai had no role in
acquiring the land and that land acquisition for an
incentive package was the responsibility of the city
or the state putting the package together.
Officials of the City, the County Commission, and
the IDB signed a letter of intent stating that they,
'in partnership with the State,' would commit to
provide an industrial site at no cost to Hyundai."
3
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39 So. 3d at 1069.
As noted in McLemore, however, "[a]lthough the funds to
purchase the property were to be provided by the City and the
County only, the option agreements on the property were
acquired by the IDB."
7 So. 3d at 322.
As we further
explained, the IDB's participation was necessary in order that
the
transaction
"'comply
with
incentives to the industry.'"
laws
for
tax
breaks
and
7 So. 3d at 322 n. 1 (quoting
the IDB's brief).
The Russells owned approximately 328 acres of land in
Montgomery County. In the fall of 2001, Reuben Thornton, who
was then chairman of the IDB, signed an option agreement on
behalf of the IDB for the purchase of the Russells' property.
In February 2002, Thornton, on behalf of the IDB, signed an
option agreement with the McLemore group for the purchase of
approximately 54 acres of land near the Russell property.
Thornton also secured on the IDB's behalf options to purchase
approximately 320 acres from Southdale, LLC, and approximately
807 acres from Helen Kathryn Wheeler and William Newton
Phillips, as trustee under the Doris R.H. Phillips Revocable
4
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Living
Trust
Agreement
dated
February
21,
2001
("Wheeler/Phillips").
Each of the option agreements was identical, providing
for an option period of 120 days and providing that "in no
event shall the purchase price be less than $4,500 per acre
and further provided that the purchase price shall in no event
be less than the price per acre paid to any other landowner
included in the project planned for the Property."1
In early
2002, the option agreements on the property owned by the
Russells, Southdale, and Wheeler/Phillips were amended to
provide:
"1. It is hereby agreed that the purchase price
for the Property is Four Thousand Five Hundred and
No/100 Dollars ($4,500.00) per acre. The exact
number of acres to be determined by the survey
provided by Purchaser.
"2. The option period is hereby extended for a
period of 120 days from the Effective Date of the
Option, which Effective Date is October 3, 2001. The
expiration date of the Option, as extended, is now
May 31, 2002.
"3. Except as amended hereby, the Option is in
all other respects ratified and confirmed."
1
Such a provision is known as a "most-favored-nation"
clause or a "price-escalation" clause.
5
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During the acquisition process, another landowner,
Joy
Shelton, was approached about an option to purchase her
property;2
agreement.
however,
she
refused
to
enter
into
an
option
At that point,
"[t]he IDB decided that the Shelton property was not
necessary for the incentive package. By mid-March
2002, the IDB determined that it was not going to
designate any additional funds, other than the funds
already committed, to this particular project. The
State and the IDB sent the incentive package,
including the proposed project site, to Hyundai for
consideration.
"On March 28, 2002, [however,] Ahn contacted
Todd Strange, then the director of the Alabama
Development Office. He stated that Hyundai had not
decided whether to locate the plant in Montgomery or
in Kentucky but that additional property would need
to be acquired for the rail access Hyundai required
if Montgomery was to be selected as the site for the
Hyundai plant. Ahn informed Strange that he would
need an answer by noon of the next day as to whether
the property could be acquired. Strange met with
various State, City, and County officials to discuss
Hyundai's request. Recognizing that the City and the
County would not provide additional funds to acquire
more property and that the other option agreements
contained most-favored-nation clauses, they decided
to ask CSX Transportation, Inc., the rail company,
to acquire the option to purchase the Shelton
property."
McLemore, 7 So. 3d at 323.
2
It appears that members of the Montgomery Area Chamber
of Commerce approached Shelton at this time about selling her
property for inclusion in the project.
6
1091215
As explained in McLemore, in response to an inquiry by an
official at the Alabama Development Office, a representative
of CSX Transportation, Inc., responded with the following
e-mail:
"'Regarding the [Shelton property] that will need to
be purchased, you asked if CSX would be willing to
buy this property for the State and Montgomery at
approximately $8,000.00 an acre. There is no
contract or option on the property currently and you
estimate it will cost us approximately $750,000.00
which you are willing to refund to us in some
fashion during the track construction phase. Randy
Evans, [another CSX official,] in principle agreed
to this and I ask that you fax us a letter outlining
exactly what you have in mind. The purpose of doing
it this way rather than what you did in getting
control of the other 1600 acres is to avoid paying
the other landowners $8,000.00 an acre which would
have a negative impact of $10,000,000.00 on the site
cost. The railroad does not get good land values in
a situation like this and so I think there will be
upward pressure on that $8,000 number. Moreover, the
other landowners will get wind of this ploy and may
create negative community publicity. ... In your
letter to us we would ask that you indicate exactly
how you intend to pay us during the track work
construction."
7 So. 3d at 324 (footnote omitted).
Subsequently, Bobby Bright, then mayor of the City and in
that capacity an ex officio member of the IDB, was selected as
the main representative to meet with Shelton to acquire an
assignable option agreement that would name the City, rather
7
1091215
than either the IDB or CSX, as the purchaser of the Shelton
property.
Bright obtained an assignable option naming the
City as the purchaser of the property; the purchase price of
the property was $12,000 per acre.
On April 15, 2002, in conformance with option agreements
with
the
Russells,
the
McLemore
group,
Southdale,
and
Wheeler/Phillips, the IDB gave those property owners notice
that it was exercising the options on their properties at a
price of $4,500 per acre.
to the City and the County.
The IDB then assigned the options
On May 14, 2002, the City and the
County purchased the properties for $4,500 per acre.
As for the Shelton property, we further explained in
McLemore as follows:
"The City never exercised its option on the
Shelton property. On May 22, 2002, Henry Mabry, then
director of finance for the State, sent Ahn a letter
confirming that the State would be funding the
purchase of the Shelton property, stating:
"'This is to confirm that the State of
Alabama will provide the funding for the
purchase of the 93 acres set aside for
Hyundai's rail yard on the date of closing.
This will obviate any need for Hyundai to
borrow to pay for this acquisition. In
addition, the State will pay the reasonable
due diligence costs incurred in connection
with
Hyundai's
acquisition
of
this
property. This letter of assurance is being
8
1091215
provided to you pursuant to Section 3.20 of
the Project Agreement.'
"On May 31, 2002, the day the option agreement on
the Shelton property was to expire, CSX entered into
a real-estate sales contract for the purchase of the
property at $12,000 per acre. When Hyundai learned
that CSX, and not the State, was to pay for the rail
installation and that Hyundai would be expected to
enter into a long-term contract with CSX, Hyundai
decided to install the rail using its own funds. As
a result of Hyundai's decision not to involve CSX in
rail installation, CSX assigned the real-estate
contract to Hyundai. According to the assignment
contract, CSX assigned the contract to Hyundai on
May 28, 2002, three days before the real-estate
contract between CSX and Shelton was executed. On
July 12, 2002, funds from the State of Alabama
Incentives Finance Authority were transferred to
Hyundai to pay for the Shelton property, and Hyundai
purchased the property."
7 So. 3d at 326.
Subsequently, the Russells and the McLemore group each
filed a breach-of-contract action in the Montgomery Circuit
Court against the IDB and Hyundai, alleging that the IDB and
Hyundai had breached the most-favored-nation clause in the
option agreements by not paying them $12,000 per acre for
their property.
The IDB and Hyundai filed a motion for a
summary judgment in each of these actions, which the trial
court granted.
The Russells and the McLemore group appealed;
9
1091215
this Court consolidated those appeals for the purpose of
writing one opinion.
This Court affirmed the trial court's judgment in part
and reversed it in part. Specifically, the Court reversed the
summary
judgment
for
the
IDB
as
to
the
Russells'
breach-of-contract claim because "a question for the jury
exists as to whether the amended option agreement modified or
waived
the
most-favored-nation
original option agreement."
clause
in
the
Russells'
McLemore, 7 So. 3d at 334.
The
McLemore Court also held that "the Russells' and the McLemore
group's
breach-of-contract
doctrine of merger."
claims
are
7 So. 3d at 336.
not
barred
by
Finally, the McLemore
Court concluded that
"the provisions '[i]f Purchaser elects to exercise
this Option the purchase price for the Property
shall be determined as follows' and 'the purchase
price shall in no event be less than the price per
acre paid to any other landowner included in the
project planned for the Property' are ambiguous
because reasonable persons could differ on whether
'the price per acre paid to any other landowner
included in the project' refers to a purchase price
paid only by the IDB or to a purchase price paid by
any purchaser for property included in the project.
... Because reasonable persons can differ on the
meaning of the clause, i.e., whether the language
'price per acre paid to any other landowner included
in the project' obligated the IDB to pay the
Russells and the McLemore group $12,000 per acre and
10
the
1091215
whether the Shelton property was included as part of
the project site, the evidence presents questions
for the jury to resolve ...."
7 So. 3d at 338-39.
Southdale and Wheeler/Phillips also filed an action in
the Montgomery Circuit Court; they alleged fraud, suppression,
breach
of
contract,
rescission,
and
conspiracy
against
multiple defendants including the IDB, Thornton, the City, the
County, and others, charging that the defendants had conspired
to purchase the Shelton property at a higher price than was
paid
for
their
property
and
conspired
to
do
so
without
complying with the most-favored-nation clause contained in the
option agreements.
On November 2, 2007, the trial court
entered a summary judgment in favor of the defendants on
Southdale's and Wheeler/Phillips's tort claims on the basis
that those tort claims were barred by the applicable statute
of limitations. On November 20, 2007, the trial court entered
a summary judgment in favor of the defendants on all remaining
claims.
Southdale and Wheeler/Phillips appealed from the
summary judgments.
That appeal was addressed in Wheeler v. George, 39 So. 3d
1061 (Ala. 2009).
Based on statements made by this Court in
11
1091215
Wheeler, the IDB filed a motion for a summary judgment in the
McLemore/Russell actions, asking the trial court to dismiss
the breach-of-contract claims against the IDB.
2010, the trial court denied the IDB's motion.
On May 3,
The IDB filed
a motion asking the trial court to certify its interlocutory
order for a permissive appeal.
court
certified
two
On May 18, 2010, the trial
controlling
questions
of
law
for
permissive appeal to this Court. The trial court stated those
questions as follows:
"1. Does the Alabama Volunteer Service Act, [Ala.
Code 1975, § 6-5-336,] bar the Plaintiffs' claims
for breach of contract?
"2. Were the obligations under the option contracts
signed by the Plaintiffs and the IDB assumed by the
City of Montgomery and Montgomery County, thus
barring any claims for breach of contract against
the IDB?"
On May 28, 2010, the IDB filed with this Court a petition
for permission to appeal the trial court's denial of its
motion for a summary judgment based on the trial court's
certification of the above-quoted questions.
granted the petition on August 17, 2010.
II.
Standard of Review
"'"We
apply
the
same
standard of review [in reviewing
12
This Court
1091215
the
grant
or
denial
of
a
summary-judgment motion] as the
trial
court
applied.
Specifically, we must determine
whether the movant has made a
prima facie showing that no
genuine issue of material fact
exists and that the movant is
entitled to a judgment as a
matter of law. Rule 56(c), Ala.
R. Civ. P.; Blue Cross & Blue
Shield of Alabama v. Hodurski,
899 So. 2d 949, 952-53 (Ala.
2004).
In
making
such
a
determination, we must review the
evidence
in
the
light
most
favorable
to
the
nonmovant.
Wilson v. Brown, 496 So. 2d 756,
758 (Ala. 1986). Once the movant
makes a prima facie showing that
there is no genuine issue of
material fact, the burden then
shifts
to
the
nonmovant
to
produce 'substantial evidence' as
to the existence of a genuine
issue of material fact. Bass v.
SouthTrust
Bank
of
Baldwin
County, 538 So. 2d 794, 797-98
(Ala.1989);
Ala.
Code
1975,
§ 12-21-12."'
"Mutual Assurance, Inc. v. Schulte, 970 So. 2d 292,
295 (Ala. 2007) (quoting Dow v. Alabama Democratic
Party, 897 So. 2d 1035, 1038-39 (Ala. 2004))."
Panayiotou v. Johnson, 995 So. 2d 871, 875-76 (Ala. 2008).
"Questions of law are reviewed de novo.
Davis v. Hanson
Aggregates Southeast, Inc., 952 So. 2d 330 (Ala. 2006)."
13
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McLemore, 7 So. 3d at 327 (quoting Catrett v. Baldwin Cnty.
Elec. Membership Corp., 996 So. 2d 196, 200 (Ala. 2008)).
III.
Analysis
As the questions certified by the trial court indicate,
the IDB argues that the McLemore/Russell breach-of-contract
claims against it should be dismissed on two alternative
grounds.
First, it contends that the Wheeler Court held that
the IDB assigned the option agreements to the City and that,
therefore, the IDB cannot be held liable for any alleged
breach of those option agreements.
Second, it contends that
the Wheeler Court concluded that the IDB is immune from all
claims in tort and contract because of the application of the
Volunteer Service Act, § 6-5-336, Ala. Code 1975 ("the VSA"),
to the IDB's chairman, Thornton.
The IDB asks this Court, as
it did the trial court, to apply these "holdings" in Wheeler
to
the
breach-of-contract
claims
brought
against
it
by
McLemore/Russell.
Before we address these arguments, however, we begin by
noting that McLemore/Russell argue that the IDB should not be
permitted to contend that it is entitled to a summary judgment
on their breach-of-contract claims because this Court in
14
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McLemore concluded that McLemore/Russell were entitled to a
jury trial on that claim.
McLemore/Russell contend that
McLemore
the
is
the
law
of
case
in
this
regard.
McLemore/Russell observe that this Court has stated that,
"[u]nder the doctrine of the 'law of the case,'
whatever is once established between the same
parties in the same case continues to be the law of
that case, whether or not correct on general
principles, so long as the facts on which the
decision was predicated continue to be the facts of
the case."
Blumberg v. Touche Ross & Co., 514 So. 2d 922, 924 (Ala.
1987).
In essence, McLemore/Russell take issue with the fact
that the IDB filed a second motion for a summary judgment on
the same claims this Court addressed in McLemore, raising
defenses the IDB pleaded in its
answer to the complaint but
did not raise in its initial motion for a summary judgment.
McLemore/Russell note that the facts upon which McLemore was
decided have not changed, and thus they argue that this
Court's determination that genuine issues of material fact
exist concerning their breach-of-contract claims cannot be
challenged by the IDB in a second motion for a summary
judgment.
15
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The issues raised by the IDB in its second motion for a
summary judgment are not the same as the issues raised in the
first motion for a summary judgment and on appeal to this
Court from the trial court's ruling on the first motion.
Accordingly, there has been no holding by either the trial
court or this Court as to the issues raised in the second
summary-judgment motion; thus, no "law of the case" has been
"established" as to those issues.
See Bagley ex rel. Bagley
v. Creekside Motors, Inc., 913 So. 2d 441, 446 (Ala. 2005)
("[T]he doctrine of law of the case ... is inapplicable to
this
case
because
we
did
not,
in
the
original
appeal,
dispositively decide the issue [now raised]."); Poole v.
Prince, 61 So. 3d 258, 274 (Ala. 2010) ("Because this Court
did not definitively address in [the prior appeal] the issue
whether a binding contract existed between the parties, the
law-of-the-case doctrine does not preclude the trial court's
determination of that issue on remand.");
Lyons v. Walker
Reg'l Med. Ctr., Inc., 868 So. 2d 1071, 1077 (Ala. 2003)
("[O]n remand the issues decided by an appellate court become
the 'law of the case.'"
(emphasis added)).
16
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We now examine the arguments presented by the IDB.
The
IDB bases its argument that its assignment of the option
agreements to the City relieved it of any liability under
those agreements on the following portion of the Wheeler
opinion:
"The City first argues that the City was not a
party to the option agreements executed by the IDB
and therefore was not liable for breach of contract
because, it argues, the IDB was not acting as the
City's agent.
Under such circumstances, the City
says, it is not liable under any breach-of-contract
theory. We disagree. Pursuant to Resolution No.
111-2002, adopted by the City in June 2002 in
conjunction with the Hyundai project, 'the IDB did
exercise the purchase options, but assigned its
rights to purchase thereunder to the City and
Montgomery County (the "County"), and the City and
County each have issued debt to provide the
necessary funds and have acquired the Parcels.' As
the IDB's assignee, the City assumed the obligations
and liabilities of the assigned contracts. Meighan
v. Watts Constr. Co., 475 So. 2d 829, 834-35 (Ala.
1985)."
Wheeler, 39 So. 3d at 1083-84 (emphasis added).
In its principal brief, the IDB argues:
"Because the City of Montgomery assumed all of the
obligations under the option contracts, there can be
no liability for breach of contract on the part of
the IDB.
To establish a breach of contract,
[McLemore/Russell] must show
"'(1) the existence of a valid contract
binding
the
parties
to
the
action,
(2) [their] own performance under the
17
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contract,
(3)
the
defendant's
nonperformance, and (4) damages.'
"Congress Life Ins. Co. v. Barstow, 799 So. 2d 931,
937 (Ala. 2001) ....
[McLemore/Russell] cannot
prove the first required element -- the existence of
a valid contract binding the parties to this action.
This is because the City of Montgomery assumed all
of the obligations under the options. The IDB no
longer has any duties, obligations, rights or
remedies under the option contracts."
The IDB essentially argues that, because this Court
stated in Wheeler that the City, as the assignee of the option
agreements, is potentially liable for breach of contract, the
Court impliedly held that the IDB is not liable.
We reject
this argument for several reasons.
First, the portion of the Wheeler opinion relied upon by
the IDB addressed the City's potential liability for breach of
contract; it did not address, much less determine, the IDB's
potential liability for breach of contract.
Second, the IDB cites no authority for its proposition
that the assignment of rights under a contract relieves the
assignor
of
any
potential
for
liability
performed under the assigned contract.
for
duties
not
Moreover, the law
provides no support for such a proposition and, indeed,
supports the contrary proposition.
18
In a dissent in DuPont v.
1091215
Yellow Cab Co. of Birmingham, Inc., 565 So. 2d 190, 193 (Ala.
1990),
Justice
Jones
explained
the
distinction
between
assignment and delegation:
"In the instant case, there exist both an
assignment of rights and a delegation of duties. The
assignment-delegation distinction is relatively
straightforward: rights are assigned; duties are
delegated. When a party to a contract transfers his
rights under the contract to a third party, he has
made an assignment.
If a party to the contract
appoints a third party to render performance under
the contract, he has made a delegation. Generally
speaking, upon assignment of a right, the assignor's
interest in that right is extinguished; however,
upon the delegation of a contractual duty, the
delegating party remains liable under the contract,
unless the contract provides otherwise or there is
a novation.
Calamari and Perillo's Hornbook on
Contracts, § 18-25 (3d ed. 1987). Professor Knapp
analogizes the assignment-delegation distinction
thusly: 'If assigning a right is like passing a
football, then delegating a duty resembles more the
dissemination of a catchy tune or a communicable
disease: Passing it on is not the same as getting
rid of it.' C. Knapp, Problems in Contract Law 1161
(1976)."
(Footnote
omitted.)
See
also
Restatement
(Second)
of
Contracts § 318 (1981).
According to the portion of Wheeler relied upon by the
IDB, the IDB assigned to the City and the County its rights
under the option agreements. Assuming that this assignment of
rights carried with it a delegation of the duties owed by the
19
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IDB under the agreements, the IDB nonetheless also would have
had to demonstrate either (1) that the terms of the contracts
allowed the IDB to relieve itself of contractual liability by
way of such a delegation or (2) that the parties had entered
into novations pursuant to which McLemore/Russell agreed that
the IDB's obligations had changed.
See generally, e.g.,
Marvin's, Inc. v. Robertson, 608 So. 2d 391, 393 (Ala. 1992)
(explaining that "'[a] novation is the substitution of one
contract for another, which extinguishes the pre-existing
obligation
and
releases
those
bound
thereunder....
In
addition, the party alleging a novation has the burden of
proving that such was the intention of the parties.'" (quoting
Pilalas v. Baldwin County Sav. & Loan Ass'n, 549 So. 2d 92,
94-95 (Ala. 1989) (emphasis omitted))). The IDB does not
assert or demonstrate either condition.
trial
court's denial
of
the
IDB's
Accordingly, the
motion
for
a
summary
judgment is not due to be reversed on this ground.
We turn now to the IDB's argument that it is immune under
the VSA from the McLemore/Russell breach-of-contract claims.
We
first
note
that
the
VSA
does
not
grant
immunity
to
governmental or other entities, but grants immunity only to
20
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natural persons serving as "volunteers" for certain entities.
The
VSA,
§
6-5-336(c)(4),
Ala.
Code
1975,
defines
a
"volunteer" as "[a] person performing services for a nonprofit
organization,
a
nonprofit
governmental
entity
corporation,
without
a
hospital,
compensation,
reimbursement for actual expenses incurred."
or
other
a
than
Section 6-5-336
then provides:
"(d) Any volunteer shall be immune from civil
liability in any action on the basis of any act or
omission of a volunteer resulting in damage or
injury if:
"(1) The volunteer was acting in good
faith and within the scope of such
volunteer's official functions and duties
for a nonprofit organization, a nonprofit
corporation, hospital, or a governmental
entity; and
"(2) The damage or injury was not
caused by willful or wanton misconduct by
such volunteer."
(Emphasis added.)
Further, when the legislature passed the
VSA, it declared in § 6-5-336(b):
"(1) The willingness of volunteers to offer
their services has been increasingly deterred by a
perception that they put personal assets at risk in
the event of tort actions seeking damages arising
from their activities as volunteers;
and
"(2) The contributions of programs, activities,
services to communities is diminished and
21
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worthwhile programs, activities, and services are
deterred by the unwillingness of volunteers to serve
either as volunteers or as officers, directors, or
trustees
of
nonprofit
public
and
private
organizations;
"(3) The provisions of this section are intended
to encourage volunteers to contribute their services
for the good of their communities and at the same
time provide a reasonable basis for redress of
claims which may arise relating to those services."
(Emphasis added.)
The IDB attempts to find support for its position in the
following portion of this Court's opinion in Wheeler:
"It is undisputed that Thornton served as an
unpaid volunteer member of the IDB. He was employed
full-time in his own insurance business, and he
served as the chairman of the IDB on a voluntary
part-time basis. The IDB is a 'governmental entity'
as
defined
in
the
Volunteer
Service
Act,
§ 6-5-336(c)(1). See also Harris v. Ethics Comm'n,
585 So. 2d 93, 95 (Ala. Civ. App. 1991), in which
the Court of Civil Appeals quoted with approval a
statement from a trial court's order stating that
industrial development boards 'clearly reflect
attributes and characteristics of a governmental
entity.' Accordingly, Thornton is a volunteer under
the Volunteer Service Act and is entitled to
immunity so long as his actions or inactions were
not wanton or willful.
"....
"Because we have determined that Thornton is
entitled to immunity under the Volunteer Service
Act, the IDB is also entitled to immunity.
In
Hollis v. City of Brighton, 885 So. 2d 135, 141-42
(Ala. 2004), the plaintiffs sued the City of
22
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Brighton, alleging that the city had failed to
extinguish a fire at their house and had prevented
the plaintiffs from trying to extinguish it. This
Court held:
"'The
vicarious
liability
of
a
putative
master
under
the
rule
of
respondeat superior depends upon the
liability of the putative servant.
See
Larry Terry Contractors, Inc. v. Bogle, 404
So. 2d 613, 614 (Ala. 1981) ("'[W]hen [a]
principal and his agent are sued in [a]
joint action in tort for misfeasance or
malfeasance of the servant, and his
liability for the conduct of said servant
is under the rule of respondeat superior,
a verdict in favor of the servant entitles
the master to have the verdict against him
set aside.'") (quoting Louisville & N.R.R.
v. Maddox, 236 Ala. 594, 600, 183 So. 849,
853 (1938)), and Gore v. City of Hoover,
559 So. 2d 163, 165 (Ala. 1990), overruled
on other grounds, Franklin v. City of
Huntsville, 670 So. 2d 848 (Ala. 1995)
(holding that a city could not be held
vicariously liable for the act of a
magistrate who was immune from liability).
Thus, if a putative servant is not liable,
either because he is innocent or because he
is immune, no liability exists to be
visited upon the putative master under the
rule of respondeat superior. Id.
"'....
"'As
discussed
above,
the
firefighters, the putative servants in the
case now before us, were volunteers who did
not receive compensation for their service
as volunteer firefighters. Consequently,
they were immune from liability for
negligence under the Volunteer Service Act.
23
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Because the firefighters were immune from
liability
for
negligence
under
the
Volunteer Service Act, no liability for
negligence could befall them to be visited
upon the City [of Brighton], the putative
master in the case now before us.'
"The IDB cannot be held vicariously liable for the
acts of its chairman because Thornton was immune
from liability under the Volunteer Service Act. The
summary judgment entered in favor of the IDB is due
to be affirmed on this alternative ground."
Wheeler, 39 So. 3d at 1089-91 (emphasis added).
The IDB
argues that the foregoing supports the conclusion that the IDB
is
immune
from
liability
under
the
VSA
as
to
the
insulated
from
McLemore/Russell's claims of breach of contract.
The
principle
that
an
entity
may
be
vicarious liability that would otherwise result from the
misfeasance or malfeasance of its employee or agent where the
employee or agent enjoys immunity for his or her acts or
omissions is not apposite here.
This is a breach-of-contract
action against the IDB, a party to the contract at issue,
alleging its breach of that contract.
The following argument
in the brief of the appellees, the Russells and the McLemore
group, is meritorious:
"The breach occurred when the IDB failed to pay
the
full
purchase
price
for
the
property.
[McLemore/Russell] did not sue Reuben Thornton
24
1091215
individually because he had no personal liability
for the breach by merely signing the option on
behalf of the IDB. They also did not sue Mr. Gallion
because the election to purchase the property was
signed by him in a representative capacity on behalf
of the IDB. An individual signing a contract on
behalf of a corporate entity has no liability for
breach of that contract. If an agent, in [signing]
a contract, discloses his principal and makes it
appear on the face of the paper that it is the
contract of the principal and he signs it as agent,
of course the principal is bound, the undertaking
being within the agency, and the agent is not. Lutz
v. Van Heynigen Brokerage Company, 199 Ala. 620,
625, 75 So. 284, 286 (1917); Professional Business
Systems, Inc. v. Kaufman, 507 So. 2d 421 (Ala.
1987).
"The IDB, in its most recent Motions for Summary
Judgment, is confusing agency law, as it pertains to
an agent's authority to sign a contract for his
principal, with a master-servant relationship that
allows for culpability on the part of the master for
the torts of its servants on the theory of
respondeat superior. [McLemore/Russell] have not
alleged liability against the IDB based upon
respondeat superior for the acts of its agents. The
liability of the IDB in this case is for breach of
a purchase contract by the IDB after it elected to
exercise the option through its authorized agent,
Mr. Gallion, but failed [-- i.e., the IDB failed --]
to pay the full purchase price."
(Emphasis in original.)
The doctrine of vicarious liability is premised on the
fact that an agent or employee has committed his or her own
misfeasance or malfeasance - - i.e., the agent or employee has
violated a duty created and imposed by law upon him or her, as
25
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an individual -- in circumstances under which the law also
deems it appropriate to hold accountable the principal.
A
duty created by contract is one imposed upon the party to the
contract, not directly upon the employee or agent of that
party.
If an employee or agent acting within the scope of his
or her employment or agency acts in a manner that causes the
principal to be in breach of the principal's contract, the
breach is that of the principal itself, not of the employee,
who is not a party to the contract.
The concept of vicarious
liability is jurisprudentially inapposite (and unnecessary) in
such a circumstance.
Finally, it may also be noted that §
11-54-87, Ala. Code
1975, provides, in part, as follows:
"(a) The industrial development board shall have
the following powers together with all powers
incidental thereto or necessary for the performance
of those stated in this subsection:
"....
"(2) To
prosecute and
court having
matter and of
(Emphasis added.)
sue and be sued and to
defend civil actions in any
jurisdiction of the subject
the parties ...."
To hold that the VSA and the above-quoted
portion of this Court's opinion in Wheeler render an entity
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immune from all claims -- including claims arising in contract
–- essentially would eliminate any field of operation for the
above-emphasized language in § 11-54-87, except where an agent
or employee has acted willfully or wantonly. "Statutes should
be construed together so as to harmonize the provisions as far
as practical."
(Ala. 1991).
Ex parte Jones Mfg. Co., 589 So. 2d 208, 211
Clearly, pursuant to § 11-54-87, industrial
development boards are given the power to purchase property
and to enter into contracts for that purpose.
Although the
VSA clothes volunteers -- such as members of the IDB's board
of
directors
--
from
liability
in
tort
so
long
as
the
volunteers' actions are not willful and wanton, and thereby
also renders the IDB itself immune from vicarious liability,
§
6-5-336
does
not
operate
to
prevent
an
industrial
development board from being sued and facing liability for
breaches by it of its contracts.
The trial court did not err
in denying the IDB's motion for a summary judgment on this
ground.
IV.
Conclusion
The trial court's order denying the IDB's motion for a
summary judgment, in which the trial court rejected the IDB's
27
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arguments that the IDB should be relieved from liability based
on its assignment of it rights under the option agreements and
that it is immune from suit under the VSA, is due to be
affirmed.
APPLICATION
OVERRULED;
OPINION
OF
AUGUST
12,
WITHDRAWN; OPINION SUBSTITUTED; AFFIRMED.
Stuart, Bolin, Shaw, Wise, and Bryan, JJ., concur.
Moore, C.J., concurs in the result.
Main, J., recuses himself.
28
2011,
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