PER CURIAM:
Kanawha-Gauley Coal & Coke Company ("KG") and Pittston Minerals Group ("Pittston") bring this cross-appeal, challenging the judgment of the district court following a bench trial. We have reviewed the record. For the reasons below, we find no reversible error and affirm the judgment of the district court.
In January 1998, KG entered into a lease with Kanawha Development Corporation ("KDC"), a subsidiary of Pittston at the time. KG agreed to lease several thousand acres of its land in Fayette County, West Virginia, to KDC for mining purposes in exchange for receiving wheelage on coal transported across the premises and royalties on the coal mined from the premises. KDC also agreed to additional obligations under the lease, which included paying property taxes and taxes on the coal. In an agreement
Pittston sold its interest in KDC to Appalachian Coal Holdings ("ACH") in November 2003. Despite Pittston's attempts to end its surety relationship, KG declined to modify the agreement. Both the lease and the agreement, therefore, remained in effect after ACH's acquisition of KDC. After several years passed, the relationship between KG and KDC declined. KDC ceased mining on the property in mid-April 2008. By September of that year, KDC had failed to pay property taxes, as required by the lease, and soon thereafter KDC began failing to pay royalties on the coal it mined and sold.
In early March 2009, KG and KDC negotiated a payment plan to bring KDC's obligations current. Although ACH contributed several hundred thousand dollars on KDC's behalf, KDC ultimately failed to make its payments under the new plan. On May 22, 2009, KG sent notice of KDC's default to KDC and Pittston,
KG filed suit against Pittston on September 25, 2009, seeking unpaid royalties, property taxes, and fines. KG also requested legal costs and attorney's fees. The district court denied the parties' cross-motions for summary judgment; however, the district court found KG, as a matter of law, "did not have a duty to enforce its lien against KDC before proceeding against Pittston, who unconditionally guaranteed KDC's performance under the lease." The case then proceeded to trial.
Following a bench trial, the district court found that KDC had breached the lease and that Pittston did not prove its affirmative defense that KG breached its implied duty of good faith by failing to provide Pittston with timely notice of KDC's breaches under the lease. The district court also found that KG took reasonable steps to mitigate its damages and that reasonableness did not require KG to initiate litigation to enforce a landlord's lien against KDC before proceeding against Pittston.
The district court ultimately awarded KG $1,047,194.42 in unpaid royalties, $134,080.32 in unpaid interest on late unpaid royalties, $15,500 in late payment penalties, and $212,889.89 in unpaid taxes. It also ruled that KG was not entitled to attorney's fees because the suretyship agreement did not unambiguously provide for the recovery of such fees. The district court, therefore, entered judgment in favor of KG against Pittston for a total of $1,409,664.63. Subsequently, KG moved to alter or amend the judgment, contending that it was also entitled to post-judgment interest at the rate of 5.25% per annum for unpaid royalties. The district court, however, denied its request, and this cross-appeal followed.
Pittston first contends that the district court erred in ruling at the summary judgment stage that KG had no duty under West Virginia surety law to enforce a landlord's lien on coal and equipment owned by KDC.
We find no error in the district court's interpretation of West Virginia law. The district court recognized the unique nature of what the parties refer to as a landlord's lien, reasoning that "an unenforced inchoate landlord's lien creates an interest entirely different from an interest created by a secured transaction or lien obtained by attachment, judgment, or execution." The statutes cited by the parties codify the common law remedy of distress, which "authorized [a landlord] to distrain property of the tenant, and hold it as a sort of pledge to secure payment of rent." Nicholas L. DiVita,
The statutory "landlord's lien" in West Virginia is therefore a derivative of the distress remedy coupled with the superior priority of the interest a landlord has in a tenant's personal property once it is distrained. "This preferential right of payment operates as and has been held to constitute a lien." DiVita,
West Virginia surety law provides as follows:
We now turn to our review of the district court's judgment following a bench trial. "We review a judgment following a bench trial under a mixed standard of review-factual findings may be reversed only if clearly erroneous, while conclusions of law, including contract construction, are examined de novo."
Pittston argues that the district court erred in concluding that KG had no duty to mitigate damages by enforcing its landlord's lien. The district court held that, under West Virginia law, the duty to mitigate "did not require [KG] to institute a separate, and likely costly, legal proceeding against its tenant to enforce [a] landlord's lien." Indeed, the district court noted the duty "requires only that an injured party take reasonable steps to avoid further losses." We find no error in the district court's holding, especially in light of its finding that KG acted reasonably in negotiating a payment plan and ultimately terminating the lease to avoid further losses.
Pittston next asserts that the district court erred in finding KG's notice to Pittston was adequate under the implied duty of good faith that is owed to a surety. The district court held the duty of good faith in West Virginia did "not require an obligor to provide additional notice to a surety."
Under West Virginia law, a creditor "is bound to observe good faith with the surety."
Nothing in the record suggests KG, in not notifying Pittston before May 22, 2009, withheld or concealed information from Pittston. Moreover, assuming that KG had a landlord's lien to enforce
In its cross-appeal, KG first argues that the district court erred in denying its request for attorney's fees. It contends the suretyship agreement executed by Pittston unambiguously provides for attorney's fees in the event that KDC defaults under the lease. We disagree.
Under West Virginia law, each side must bear its own attorney's fees absent "express statutory or contractual authority for reimbursement."
We agree with the district court that a general agreement "to hold [KG] harmless from any cost, charge, expense or loss due to default under [the lease by KDC]" does not unambiguously provide for the recovery of attorney's fees and costs. While the language in the agreement in
Our finding is supported by a provision of the lease that required KDC to "save harmless and defend,
Furthermore, no other provision in the lease between KG and KDC automatically authorizes attorney's fees in the event of a default. An arbitration agreement, for example, governs "any disagreement or dispute between [KG] and [KDC] as to any covenants, agreements or conditions of [the lease], or as to the performance or nonperformance thereof." But that agreement only provides that "costs [of the arbitrators] may be assessed to either [KG] or [KDC], or both of them," and that "any costs, fees, or taxes incident to enforcing an [arbitration] award shall . . . be charged against the party resisting such enforcement." It makes no sense to require Pittston, as a surety, to pay attorney's fees and costs when it is unclear KDC, as the principal to the lease, would be required to do so. Accordingly, the district court properly found the suretyship agreement did not unambiguously authorize attorney's fees and costs.
KG also contends that the district court erred in finding it was not entitled to post-judgment interest at a rate amounting to 5.25% per annum. Specifically, KG asserts that language in the lease setting a rate of prime (3.25%) plus 2% to unpaid royalties applies to the judgment as well. We disagree.
The standard rate applied to post-judgment interest equals "the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding." 28 U.S.C. § 1961(a). This rate is applied in diversity cases.
We find the district court properly denied KG's motion to alter or amend the judgment in order to apply a 5.25% post-judgment interest rate. In denying the motion, the district court cited the doctrine of merger, which it explained was "the basic principle that a contract merges into the judgment." Under the doctrine of merger, any contractual rights are extinguished as they are "changed into a matter of record and merged in the judgment, and the plaintiff's remedy is upon the later security while it remains in force."
Because of the doctrine of merger, other circuits have required that the parties first "specify a post-judgment interest rate" using "clear, unambiguous and unequivocal language."
Reviewing the lease, we find no express agreement to overcome the doctrine of merger and § 1961(a). Specifically, the agreement was that "[a]ny payment not promptly made by [KDC] to [KG] shall bear interest from the date due at two percentage (2%) points per annum above the prevailing prime interest rate then charged by Bank One, West Virginia, N.A." Without the necessary clear, unambiguous, and unequivocal language indicating the parties' express intent to agree on a post-judgment interest rate, a finding otherwise is unwarranted.
Based on the foregoing, we affirm the judgment of the district court.