Opinion ID: 46231
Heading Depth: 3
Heading Rank: 2

Heading: Breach of Contract Claim against the MRHA

Text: 47 The MRHA disputes the jury's finding that the Mod Rehab contracts were validly assigned to Urban Developers from the Mitchell Company. The interpretation of a contract is a question of law and the appellate court is not bound by the ... standard of review [for fact findings] unless ambiguities require the court to consult extrinsic evidence. Tri-State Petroleum Corp. v. Saber Energy, Inc., 845 F.2d 575, 581-82 (5th Cir.1988). Where the very existence of the contract is at issue, however, review for sufficiency of the evidence is appropriate. Once a contract has been found and its essential terms have been identified and determined to be enforceable, the issue of breach is another question of fact, subject to review for substantial evidence. Ham Marine, 72 F.3d at 461. 48 We agree with the MRHA's contention that there is insufficient evidence of valid contract assignment from the Mitchell Company to Urban Developers, and that the purported assignment was void. The MRHA argued at trial that it had no contractual obligations to Urban Developers because the Mod Rehab contracts contained a prohibition against assignment without written permission, which the Mitchell Company never received before purporting to assign its rights and duties under the contracts to Urban Developers. MRHA further argues that even if the oral permission were sufficient to modify the contracts, it was invalid because Mississippi law requires all government board actions to be taken publicly and spread upon the minutes of the board meetings. 49 The Mississippi Supreme Court has long held that boards of supervisors and other public boards speak only through their minutes .... Thompson v. Jones County Cmty. Hosp., 352 So.2d 795, 796 (Miss.1977) (emphasis added); see also Bridges v. Bd. of Supervisors of Clay County, 58 Miss. 817 (1881). No cases directly address whether a public housing authority qualifies as such a public board, so we turn to that question first. Based on a review of the MRHA's organic statute, Mississippi case law, and the rationale underlying the spread upon the minutes requirement, we hold that it is. 50 The Housing Authority Act, Miss.Code Ann. § 43-33-1 et seq., established, in every city and county of the state of Mississippi, a public body corporate and politic to be known as the `housing authority.' Id. § 43-33-5. The legislature later provided procedures by which these local housing authorities might consolidate into larger, regional housing authorities, such as the MRHA. Miss.Code Ann. § 43-33-103 et seq. The board of supervisors of each county that is comprised in this regional housing authority is entitled to appoint a commissioner to the housing authority's board. Miss.Code Ann. § 43-33-115. The commissioners' qualifications, length of term, quorum and voting requirements, and compensation are all established by law. Miss.Code Ann. § 43-33-7; 43-33-49. 51 These housing authorities are created in perpetual succession to exercis[e] public and essential government functions, and, as public state bodies created by statute, they have no power or authority except that granted by statute. Miss.Code Ann. § 43-33-11. Finally, [t]he property of an authority is declared to be public property used for essential public and governmental purposes and such property of an authority shall be exempt from all taxes.... Miss.Code Ann. § 43-33-37. 52 The Mississippi Supreme Court has not limited the public minutes requirement to only county boards of supervisors. In Thompson, the Mississippi high court applied the minutes requirement to invalidate an employment contract that was not spread upon the minutes of a county hospital's board of trustees, dismissing the plaintiff's claim of $160,764.80 in unpaid salary, and warning [i]t was the responsibility of the plaintiff to see that the contract was properly recorded on the minutes. 352 So.2d at 798. More recently, in Tupelo Redevelopment Agency v. Abernathy, the Mississippi Supreme Court impliedly suggested that the minutes requirement would apply to an urban renewal agency created by the City of Tupelo. 913 So.2d 278, 288 (Miss.2005). The organic statute that creates such urban renewal agencies, Miss.Code Ann. § 43-35-3 et. seq., contains implementing language identical to that found in the Housing Authority Act. See, e.g., Miss.Code Ann. § 43-35-33 (There is hereby created in each municipality a public body corporate and politic to be known as the `urban renewal agency.'...); see also Miss.Code Ann. § 43-33-7 (establishing the term, voting requirements, and compensation for the board of commissioners). 53 Only once has the Mississippi Supreme Court expressly addressed whether an other public board was bound by the minutes requirement. Rawls Springs Util. Dist. v. Novak, 765 So.2d 1288, 1291 (Miss.2000). In that case, the court invalidated a contract that was not spread upon the minutes of a water utility district's board of commissioners, noting that [a]s the District Board is a public corporation and body politic, we conclude that the District Board's action[s] fall under those generally recognized holdings that limit such bodies to speak and act only through their minutes. Id. In so concluding, the court quoted implementing language from the water district's organic statute, Miss.Code Ann. § 19-5-151 et. seq., language that is nearly identical to that found in the Public Housing Act. See Novak, 765 So.2d at 1291 (The District Board is a public corporation . . . and is `a body politic and corporate with power of perpetual succession.') (quoting Miss.Code Ann. § 19-5-165). 54 We also find support for our holding in the reasons that support the rule requiring the acts of public boards to be reflected in their minutes. The Mississippi Supreme Court has stated these reasons as follows: 55 (1) That when authority is conferred upon a board, the public is entitled to the judgment of the board after an examination of a proposal and a discussion of it among the members to the end that the result reached will represent the wisdom of the majority rather than the opinion or preference of some individual member; and (2) that the decision or order when made shall not be subject to the uncertainties of the recollection of individual witnesses of what transpired, but that the action taken will be evidenced by a written memorial entered upon the minutes at the time, and to which all the public may have access to see what was actually done. 56 Novak, 765 So.2d at 1291-92 (quoting Lee County v. James, 178 Miss. 554, 174 So. 76, 77 (1937)); see also Thompson, 352 So.2d at 796. These reasons apply with full force to the board of commissioners for the public housing authorities, who act as custodians of public property and are vested by the people of Mississippi with the power to exercise public and essential government functions consistent with quorum and voting requirements established by statute. 57 Having concluded that MRHA is bound by the minutes requirement, we now determine whether that requirement renders the unapproved contractual assignment void. We hold that it does. 58 The Mississippi Supreme Court has characterized the minutes requirement as an important public policy issue, cautioning that public interest requires adherence thereto, notwithstanding the fact that in some instances the rule may work an apparent injustice. Butler v. Bd. of Supervisors for Hinds County, 659 So.2d 578, 579 (Miss.1995) (quoting Colle Towing Co. v. Harrison County, 213 Miss. 442, 57 So.2d 171, 172 (1952)). Indeed, the policy of protecting the public's funds for use by and for the public is paramount to other individual rights which may also be involved. Butler, 659 So.2d at 579; see also id. at 581 (discussing Mississippi's past strict adherence to the requirement that a board of supervisors only be bound by a contract entered upon its minutes) and Warren County Port Comm'n v. Farrell Constr., 395 F.2d 901, 904 (5th Cir. 1968) (describing the Mississippi requirement as stringent). 59 This requirement applies not only to contract formation, but to contract modification as well. Farrell Constr., 395 F.2d at 903-04 (The only permissible method for the alteration of a contract with a board of supervisors is by a subsequent order entered on its minutes) (citing Lamar County v. Tally & Mayson, 116 Miss. 588, 77 So. 299 (1918)). Moreover, in Butler, the Mississippi Supreme Court held that the assignment of contract proceeds from a general contractor (who had contracted with the board) to a subcontractor (who had contracted only with the general contractor) had effectuated a contract alteration, rendering the assignment invalid because its approval had not been spread upon the minutes of the board. Butler, 659 So.2d at 580-81. 60 Applying these principles to our facts, we find no evidence of a valid assignment of the HAP contracts from the Mitchell Company to Urban Developers. Following the court in Butler, we hold that the minutes requirement does apply to the purported assignment here. For in Butler, the court held that an assignment of a right to mere proceeds was a contractual modification that implicated the minutes requirement, a closer question, we believe, than the assignment at issue here, where the Mitchell Company purported to assign both its rights and duties under the HAP contracts to Urban Developers. 61 Moreover, there is no evidence spread upon the minutes of the MRHA's board of commissioners that they approved the assignment. Not only was there undisputed testimony at trial in this respect, but there was also undisputed testimony that the Board had never so much as made reference to the HAP contracts during the relevant time period. In fact, the only action taken by the board that affected the HAP contracts was the resolution approving the Fiscal Year 2002 budget, on July 15, 2001, which declined to request further funding from HUD for those contracts. 62 Urban Developers argues in response that, even if the assignment is legally void, the Board should be estopped in equity from denying it. 12 Urban Developers notes that the officers of the MRHA made oral promises that the Mod Rehab contracts could be assigned to Urban Developers, and that, after the transfer, the MRHA continued to make rent subsidy payments to Town Creek and to demand compliance with the federal housing quality standards. Finally, Urban Developers notes that during the rental dispute, all letters from the MRHA were addressed to its principle member, Shahid Shaikh. 63 The general rule, however, is that [s]uch contracts when so entered upon the minutes may not be varied by parol nor altered by a court of equity. Farrell Constr., 395 F.2d at 904 (emphasis added) (citing McPherson v. Richards, 134 Miss. 282, 98 So. 685 (1924)). The plaintiff's invocation of equities to meet the spread upon the minutes requirement is usually prohibited, in part, because each person, firm or corporation contracting with a board of supervisors is responsible to see that the contract is legal and properly recorded on the minutes of the board. Thompson, 352 So.2d at 797; see also id. at 798 (It was the responsibility of the plaintiff to see that the contract was properly recorded on the minutes). The Colle Towing case is often cited as an example of the harsh application of Mississippi's spread on minutes requirement, equity notwithstanding. There, the Harrison County Board of Supervisors' president entered into an oral contract (later conceded to be invalid) with Colle Towing to perform emergency repairs on a drawbridge across the back bay of Biloxi. The board subsequently ratified the oral contract upon its minutes and began partial payment. After a dispute arose over the amount due, Colle Towing sued the Board in quantum meruit 13 and the district court dismissed. The Supreme Court of Mississippi affirmed, holding that: 64 It has been repeatedly held in this State that a board of supervisors can contract and render the county liable only by a valid order duly entered upon its minutes, that all persons dealing with a board of supervisors are chargeable with knowledge of this law, that a county is not liable on a quantum meruit basis even though it may have made partial payments on a void oral contract, and, moreover, that in such case there is no estoppel against the county.  65 Colle Towing, 57 So.2d at 172 (citations omitted) (emphasis added). 66 More recently, the Mississippi Supreme Court again declined to estop a public board, this time a public utility district. Rawls Springs Utility District v. Novak, 765 So.2d 1288, 1292 (Miss. 2000). The president and chief executive officer of the utility district, Bryant, had entered into an oral agreement with a developer, Novak, for the utility district's maintenance staff to install thirty-two water meters at Novak's trailer park. Id. at 1290. Bryant and Novak agreed to a price of $50 per installation, an agreement which was contrary to, and purported to modify, the utility district's regulations, which provided for a charge of $300 per installation. Id. During the following six years, the utility district billed Novak thirty-two times at the $50 rate, and Novak promptly made payment. 67 When the district board became aware of the oral agreement, they demanded back-payment from Novak for the already-installed meters. The Supreme Court of Mississippi reversed the chancellor's ruling that the board was estopped from asserting a claim for back payment, holding that: 68 Bryant, and not the District Board, properly speaking through its minutes, entered into the subject agreement with Novak. Although Bryant may be said to be estopped from asserting a claim inconsistent with his representation to Novak, the District Board itself never spoke through its minutes to authorize meter installations for $50. The District Board has not changed its position or done other acts to justify the imposition of equitable estoppel. The District Board is not attempting to deny what it previously induced another party to believe and take action on. Nor is the District Board guilty of acts or declaration designed to induce another to alter his position injurious to himself. 69 Id. at 1292. 70 Urban Developers' best case is Cmty Extended Care Ctrs. v. Bd. of Supervisors for Humphreys County, a case in which the Mississippi Court of Appeals equitably estopped a county board of supervisors from arguing that the technical omission of not having the lease contract itself spread across the minute book should invalidate the lease contract. 756 So.2d 798, 804 (Miss. App.1999). 14 In that case, Community Care Extended Centers (CECC) offered to lease a nursing home from the Humphreys County Board of Supervisors. The Board then responded to the offer with a detailed resolution, reflected in the minutes, describing the property to be leased and authorizing the president of the Board to execute that specific lease. In accordance with the resolution, a 20-year lease was signed between the president of the Board and CECC. The lease contract was filed in the land records of the chancery clerk. The minute book and records of the board of supervisors are maintained by the chancery clerk. Id. at 802. Seven years later, on two separate occasions, the Board expressly acknowledged the existence of the lease contract with CECC by approving, upon its minutes, detailed amendments to the lease. Six years after the amendments, the Board notified CECC that it considered the lease contract void, threatening to repossess the nursing home unless CECC agreed to renegotiate. 71 The court of appeals first held that the minutes requirement had been satisfied, explaining that the lease contract was entered sufficiently into the Board's minutes to bind the Board to its terms and conditions. Id. at 801. The court explained, Looking at the minutes of the Board throughout the thirteen year period the lease contract has been in effect, we find sufficient evidence of the Board's intent to be bound by the lease contract. Id. at 802. And further, In this case, there was a substantial entry [in the minutes]—a resolution that authorized the president to execute `the original lease' that inferentially was physically presented to the Board and was recorded less than two weeks later. Id. at 803. 72 Then, in the alternative, the court applied equitable estoppel against the Board, holding that the resolutions passed by the board, as detailed above, were sufficient to estop the Board from denying its existence. Id. at 804. In conclusion, the court of appeals noted that although no estoppel may be enforced `against the state or its counties where the acts of their officers were unauthorized,' . . . the resolution entered on the Board minutes shows the supervisors unanimously approved the lease contract with CECC and authorized the Board president to sign the lease contract on behalf of the Board. Id. at 804. 73 The facts of our case far more closely resemble Novak than CECC. There is no evidence that the MRHA's board of commissioners even knew of the existence, let alone approved, the assignment from the Mitchell Company to Urban Developers (or any other assignment). The only evidence in the record that supports Urban Developers' position, is a resolution passed by the board of commissioners and entered upon its minutes in 1984, sixteen years before Urban Developers was even formed, which states RESOLVED, that the Chairman and Executive Director of the Authority are hereby authorized to execute all documents necessary to participate in the Rental Rehabilitation Program. MRHA Minutes of the Board of Commissioners 287 (Feb. 15, 1984). 74 This resolution is far less connected to the matter in question than the three resolutions upon which the court of appeals in CECC relied to enforce equitable estoppel against the Humphreys County board of supervisors. There, the resolutions authorized the president to execute a specific document, relating to a specific transaction. Then, when amendments to the lease contract were necessary, the board approved those amendments through resolutions spread upon their minutes. Here, where a contractual modification was also necessary to assign the rights and duties of the Mitchell Company to Urban Developers, the plaintiff never sought approval of the Board, and instead relied on the oral promises only of Wilson and Murphy. 75 In this respect, our case resembles Novak. For although it might be said that Wilson and Murphy can be estopped from asserting a claim inconsistent with their representation to Urban Developers, the Board itself never spoke through its minutes to authorize the assignment. Novak, 765 So.2d at 1292. The Board has not changed its position or done other acts to justify the imposition of equitable estoppel. Id. The Board is not attempting to deny what it previously induced another party to believe and take action on. Id. Nor is the Board guilty of acts or declaration designed to induce another to alter his position injurious to himself. Id. 76 Accordingly, we reverse the district court's denial of the MRHA's motion for judgment as a matter of law on Urban Developers' breach of contract claim. The assignment of the HAP contracts from the Mitchell Company to Urban Developers was void. 77