Court Opinion

ID: 4190255
Source: CourtListenerOpinion
Date Created: 2017-07-27 19:10:00.177181+00
Date Added: 2024-06-11T14:39:36.360213
License: Public Domain

IN THE SUPREME COURT OF MISSISSIPPI

                     NO. 2015-CA-00152-SCT

GROUNDWORX, LLC

v.

THOMAS A. BLANTON AND CITY OF
HATTIESBURG, MISSISSIPPI

DATE OF JUDGMENT:             01/07/2015
TRIAL JUDGE:                  HON. M. RONALD DOLEAC
TRIAL COURT ATTORNEYS:        JOSEPH ANTHONY SCLAFANI
                              R. ANDREW TAGGART
                              MONA PATEL GRAHAM
                              DAVID GLYN PORTER
                              LAWRENCE ELVIN ALLISON
                              JOHN EDWARD MILNER
                              CHARLES E. LAWRENCE, JR.
                              MICHAEL ADELMAN
                              ANNIE L. AMOS
COURT FROM WHICH APPEALED:    FORREST COUNTY CHANCERY COURT
ATTORNEYS FOR APPELLANT:      R. ANDREW TAGGART, JR.
                              MONA PATEL GRAHAM
                              DAVID GLYN PORTER
ATTORNEYS FOR APPELLEES:      MICHAEL ADELMAN
                              J. COLLINS WOHNER, JR.
                              KEITH W. TURNER
NATURE OF THE CASE:           CIVIL - STATE BOARDS AND AGENCIES
DISPOSITION:                  AFFIRMED - 07/27/2017
MOTION FOR REHEARING FILED:
MANDATE ISSUED:

     BEFORE RANDOLPH, P.J., COLEMAN AND MAXWELL, JJ.

     MAXWELL, JUSTICE, FOR THE COURT:
¶1.    Groundworx, LLC, appeals the judgment dismissing Groundworx’s breach-of-contract

action against the City of Hattiesburg. We review this judgment de novo, employing the

same standard as the trial court. Taking Groundworx’s allegations as true, we will affirm

dismissal only if it appears beyond doubt that Groundworx will be unable to prove any set

of facts to support its claim.

¶2.    After reviewing the contract between Groundworx and the City, which Groundworx

attached to its complaint, we are left with no doubt that Groundworx’s complaint was

properly dismissed for failure to state a claim. Even when we take all of Groundworx’s

allegations as true, Groundworx can cite no contractual provision the City allegedly

breached. Even if Groundworx expended millions of dollars preparing to perform under the

contract, it did so before securing the necessary financing to complete the project. And

unfortunately for Groundworx, the contract was clear—if Groundworx did not secure

financing by a certain date, the City had the right to terminate the contract. So Groundworx

can prove no set of facts to show the City breached the contract.

¶3.    Nor can Groundworx prove the City was liable under a theory of promissory estoppel.

Groundworx claims to have reasonably relied on actions and assurances made by City

officials. But under Mississippi law, the City can be liable only for actions entered on its

minutes and approved by its mayor. So as a matter of law, Groundworx cannot recover based

on unofficial City promises.

¶4.    We therefore affirm the judgment dismissing Groundworx’s complaint.

                                             2
                         Background Facts1 and Procedural History

       I.       City-Groundworx Contract

¶5.    In 2010, the City’s wastewater system was discovered to be noncompliant with federal

pollution laws. Under order to remedy the problem, the City sought proposals for a land-

application treatment system for sewage and wastewater.               On November 11, 2013,

Groundworx responded with a proposal to construct, operate, and maintain a land-application

system.

¶6.    After negotiations, the City and Groundworx executed a contract on January 21 and

27, 2014. Under the contract, Groundworx agreed to “design, build, construct, own, operate

and maintain the System for the purpose of collecting, treating, storing, transporting, and

disposal of the City’s Wastewater . . . .” In exchange, the “City unconditionally and

irrevocably covenant[ed] and agree[d] to pay to Groundworx . . . the interest portion of

Groundworx’s Debt Service payments”—along with other significant payments.2

       1
          Because, as part of our standard of review, we must take the allegations in the
plaintiff’s complaint as true, this opinion presents the facts as Groundworx alleged them.
See Booneville Collision Repair, Inc. v. City of Booneville, 152 So. 3d 265, 269 (Miss.
2014) (citation omitted).
       2
           In its entirety, Section 4.1.1 of the contract provided:

       City unconditionally and irrevocably covenants and agrees to pay to
       Groundworx:

       (i) beginning on the Effective Date, the interest portion of Groundworx’s Debt
       Service payments, with the same to be billed and paid in a manner to ensure
       that Groundworx receives the payments at least fifteen (15) days prior to the
       due date for the Debt Service payment;

       (ii) beginning on the date the work required by Exhibit 2.2.4.2 is complete and

                                                3
       II.    Groundworx’s Attempted Financing

¶7.    While the City agreed to make payments sufficient to service the debt, it was

Groundworx that had to obtain the $147 million to finance the project. And the contract

contained a termination provision. It expressly provided, “[i]n the event that Groundworx

has not closed its financing for the acquisition and construction of the System by June 2,

2014, either party shall have the right to terminate this Agreement by written notice to the

other delivered on or after June 2, 2014, and before the date such financing is closed.”

¶8.    Before the contract was entered, the City’s mayor sent a letter to the Mississippi

Business Finance Corporation (MBFC) in December 2013. This letter explained the City

was negotiating with Groundworx “for this public/private project” and encouraged “MBFC

to induce the bonds for Groundworx financing.” City representatives also participated in a

written presentation to potential bond insurance agencies in New York City. And the day

after the contract was executed, City representatives traveled to New York to participate in

the meeting between Groundworx and Stephens, Inc.—Groundworx’s would-be financier.

       subject to Section 2.2.7, and continuing until the payments provided for by the
       following sentence commence, the amount set forth in Exhibit 4.1.1 which
       may be adjusted based upon changed requirements of the City, and additional
       requirements which may be imposed by the Commission or the EPA and
       Groundworx’s Debt Service payments, with the same to be billed and paid in
       a manner to ensure that Groundworx receives the payments at least fifteen
       (15) days prior to the due date for the Debt Service payment; and

       (iii) during each Fiscal Year or part thereof during the Term from any monies
       legally available for such purpose to the City, at the time and in the manner
       hereinafter provided, commencing with the Accounting Effective Date of this
       Agreement, the Total Annual Requirement for such Fiscal Year.

                                             4
¶9.    According to Groundworx, “[i]t was clear to the parties that neither the bond rating

agencies nor the bond insurers would be interested in bonding the financing . . . but for the

City’s promise to increase sewer rates to pay for the financing.” So at the meeting, the City

officials talked about raising sewer rates to show “the City’s commitment to bond financing

the project.”

¶10.   Two and a half weeks later, during its February 18, 2014 meeting, the city council

adopted a resolution to raise sewer rates. But nine days later, the mayor vetoed the

resolution. So sewer rates were never raised.

¶11.   The June 2, 2014 financing deadline passed without Groundworx having closed on

its financing.

       III.      Groundworx’s Original Complaint

¶12.   Two weeks after the financing deadline, on June 19, 2014, Groundworx sued the City.

It argued the City had breached its duty to maintain a revenue stream 1.3 times the amount

of Groundworx’s anticipated debt-service payments. Groundworx demanded specific

performance—that the City be required to comply immediately with the obligation to identify

a sufficient revenue stream. If not, Groundworx alleged it would not be able to secure

financing for the project. Groundworx also requested more than $6 million in compensatory

damages.

¶13.   Groundworx also filed for a temporary restraining order (TRO) prohibiting the City

from cancelling the contract. The TRO was denied on July 14, 2014.

                                             5
¶14.   The City filed its answer on July 18, 2014. Along with its answer, the City filed a

countercomplaint for declaratory relief. The City asked the chancellor to declare: (1) the

City had no contractual duty to identify a source of revenue, but rather only a duty to make

payments when due; (2) therefore, the City had not yet breached any contractual obligation;

and (3) the City had the unilateral right to cancel the contract based on Groundworx’s failure

to obtain financing.

¶15.   The City did not wait for a declarative judgment to cancel the contract. Instead, on

August 5, 2014, the City exercised its contractual right to walk away from the agreement.

       IV.    Groundworx’s Amended Complaint

¶16.   With the contract now terminated, Groundworx moved for and was granted

permission to file an amended complaint. The amended complaint brought two counts

against the City.

¶17.   Count I alleged breach of contract, premised on two theories. First, Groundworx

alleged the contract itself obligated the City to raise revenue to cover 1.3 times the amount

of the debt service payments. And second, after the contract was executed, the City entered

an “express agreement” to raise sewer rates so Groundworx could obtain financing.

¶18.   Count II alleged promissory estoppel. Groundworx claimed the City representatives

assured Groundworx and Stephens the City would raise sewer rates, knowing Groundworx

would be unable to obtain financing if the City did not. Groundworx claimed it detrimentally

relied on these assurances to incur significant expenses on the project. Groundworx

                                              6
requested the chancellor award at least $6,266,753.42 in damages—the amount Groundworx

had spent on the now-failed project.

¶19.   On October 28, 2014, the City responded to Groundworx’s amended complaint with

a Rule 12(b)(6) motion to dismiss. See M.R.C.P. 12(b)(6). The City asserted there were no

relevant facts in dispute and Groundworx’s two claims failed as a matter of law. According

to the City, the fully integrated contract with Groundworx contained no agreement that the

City would raise sewer rates or otherwise identify a revenue stream. So Count I failed to

state a claim, as it was not based on the contract. Additionally, the City argued any promise

by a governmental body made without proper authorization is ultra vires and cannot be

enforced through the doctrine of estoppel. Thus, Count II also failed to state a claim, as

Groundworx could not recover based on unauthorized oral promises by City officials.

       V.     Blanton’s Intervention

¶20.   Between the filing of Groundworx’s original complaint and amended complaint,

Hattiesburg taxpayer and property owner Thomas Blanton moved for and was granted the

right to intervene under Rule 24.3 See M.R.C.P. 24(a)(2). Blanton immediately filed a cross-

complaint against Groundworx, seeking a declaratory judgment that the City’s contract with

Groundworx was void ab initio.

       3
          Blanton argued he had a right to intervene because he had an interest in the
litigation. This stated interest was his status as one of the taxpayers required to finance the
project and, after the project was cancelled, possibly pay a multimillion-dollar judgment in
favor of Groundworx. Blanton further asserted his interest was not adequately represented
by the City, which acted unconstitutionally when it entered into the contract with
Groundworx.

                                              7
¶21.   Blanton advanced this same argument in his own motion to dismiss Groundworx’s

amended complaint. According to Blanton, the financing scheme contemplated by the

contract violated Section 183 of the Mississippi Constitution. Among other things, this

section prohibits a city from “loan[ing] its credit in aid of [a private] corporation or

association.” Miss. Const. art. 7, § 183. So the contractual obligation to service the debt on

a wastewater treatment facility that was to be solely owned and operated by Groundworx, a

private company, was constitutionally prohibited. Thus, he argued the amended complaint

failed to state a claim because it was based on a contract that violated the Mississippi

Constitution, as well as the federal Due Process Clause. See U.S. Const. amend XIV.

¶22.   Groundworx responded by filing a motion to dismiss Blanton’s cross-complaint.

Groundworx argued Blanton’s cross-complaint should be dismissed for the same reasons his

motion to intervene should have been dismissed: (1) Blanton lacked standing to bring a

cross-complaint; and (2) Blanton’s exclusive remedy to challenge the constitutionality of the

City-Groundworx contract was to timely file a bill of exceptions under Section 11-51-75,

which Blanton failed to do.

       VI.    Judgment Dismissing All Claims

¶23.   On December 2, 2014, the chancellor heard all three pending motions to dismiss—the

City’s, Blanton’s, and Groundworx’s. At this hearing, the City disagreed with Blanton that

any express provision in the now-terminated contract violated Section 183. But the City

suggested that if the chancellor found the City was somehow extracontractually obligated to

raise sewer rates so Groundworx could obtain financing, then that particular action would

                                              8
violate Section 183. The City also asserted the contract-based reasons for dismissal argued

in its motion to dismiss.

¶24.   Following the hearing, the chancellor issued a written ruling dismissing Groundworx’s

amended complaint with prejudice. The chancellor agreed with Blanton that the City-

Groundworx contract violated Section 183. The chancellor was persuaded by Brister v.

LeFlore County, 156 Miss. 240, 125 So. 816 (1930). According to Brister, for a city to

avoid violating Section 183’s prohibition against lending its credit to a private company, a

city must maintain some element of ownership and control over the project. Id. at 249, 125

So. at 818. But the contract with Groundworx placed all ownership and control over the

project with Groundworx, while obligating the City to pay for it. Moreover, according to

the pleadings, Groundworx could not secure financing for the project without the City raising

its sewer rates, an action the mayor vetoed. The chancellor felt “[s]uch an entanglement and

conflict between the City and Groundworx” was likely “contemplated in the drafting of

Article VII, Section 183 of the Mississippi Constitution and the prohibitions contained

therein, and the due process considerations that necessarily attach thereto.” Consequently,

the chancellor found the City-Groundworx contract was void ab initio. Because “the

Constitutional issue [was] dispositive,” the chancellor found “no further issues need be

addressed.”

¶25.   On January 7, 2014, the chancellor entered a final judgment. This judgment granted

Blanton’s motion and dismissed Groundworx’s amended complaint with prejudice. Because

all of Groundworx’s claims against the City had been dismissed, the chancellor deemed the

                                             9
City’s motion to dismiss moot. He also deemed Groundworx’s motion to dismiss Blanton’s

cross-complaint moot. With all claims among the parties fully adjudicated, the judgment

became final and appealable.

¶26.   Groundworx timely appealed.

                                          Analysis

¶27.   We review the grant of a motion to dismiss de novo. Booneville Collision Repair,

Inc. v. City of Booneville, 152 So. 3d 265, 269 (Miss. 2014). “We take the allegations in the

plaintiff’s complaint as true, and the motion should be denied ‘unless it appears beyond doubt

that the plaintiff will be unable to prove any set of facts in support of his claim.’” Id.

(quoting Scaggs v. GPCH-GP, Inc., 931 So. 2d 1274, 1275 (Miss. 2006)).

¶28.   Taking Groundworx’s allegations in the amended complaint as true, our de novo

review leads to the same conclusion as the chancellor’s—Groundworx’s amended complaint

fails to state any claim against the City for which relief may be granted. Though the

chancellor followed Blanton’s constitutional route to reach dismissal, courts should avoid

declaring unconstitutional a legislative act unless compelled to do so. See W. Line Consol.

Sch. Dist. v. Greenville Mun. Separate Sch. Dist., 433 So. 2d 954, 958 (Miss. 1983). And

here, there is a separate and distinct reason Groundworx’s amended complaint must be

dismissed. So we need not address whether the contract violated Section 183. Instead, we

affirm for the contract-based reasons cited in the City’s motion to dismiss.

¶29.   In its amended complaint, Groundworx brought two claims against the City—breach

of contract and promissory estoppel. But comparing the complaint with the contract, none

                                             10
of the alleged failures by the City, even if proven true, constitute a breach of a contractually

imposed duty.

¶30.   According to the amended complaint, the City had a contractual duty to identify a

revenue stream 1.3 times the amount of the debt-service payments. But there is no language

in the fully integrated contract that supports such an obligation. Instead, the contract was

clear and unambiguous—the City’s obligations did not begin until Groundworx secured

financing and had to start servicing its debt. And if Groundworx failed to secure financing,

the contract authorized the City to cancel the project without owing anything. Thus,

Groundworx has no claim for breach of contract for failure to identify a revenue stream.

¶31.   The amended complaint also alleged the City breached an “express agreement” to

raise sewer rates. According to the complaint, this agreement was not part of the fully

integrated contract. Instead, this side deal was struck after the contract was executed. But

the only way the City could enter a binding contract to raise sewer rates is “by a valid order

duly entered upon its minutes.” Colle Towing Co. v. Harrison Cty., 213 Miss. 442, 448-49,

57 So. 2d 171, 172 (1952) (citations omitted); see also Nichols v. Patterson, 678 So. 2d 673,

676 (Miss. 1996) (holding city councils can bind their cities “only when acting within their

authority and in the mode and manner by which this authority is to be exercised under the

statutes, and that their contracts, and every other substantial action taken by them must be

evidenced by entries on their minutes, and can be evidenced in no other way”). And here,

Groundworx does not allege the agreement to raise sewer rates is evidenced on the minutes.

Rather, it alleges the opposite—an order to raise rates was never entered because the mayor

                                              11
vetoed the city council’s decision. So Groundworx has no triable breach-of-contract claim

based on the City’s alleged failure to raise sewer rates.

¶32.   For the same reason, Groundworx has no estoppel claim based on the unfulfilled

promise to raise rates. As a matter of law, “there is no estoppel against a [city].” Colle

Towing Co., 213 Miss. at 448, 57 So. 2d at 172. The law that City representatives “can

contract and render the [City] liable only by a valid order duly entered upon its minutes” is

so clear and consistent that “all persons dealing with [the City]”—including

Groundworx—“are chargeable with knowledge of this law[.]” Id.; see also Butler v. Bd. of

Supervisors for Hinds Cty., 659 So. 2d 578, 582 (Miss. 1995). For purposes of our review,

we take as true Groundworx’s allegation that individual city representatives promised to raise

sewer rates so Groundworx could obtain financing. However, as a matter of law, this

promise cannot reasonably be relied upon or enforced by Groundworx unless it is on the

City’s minutes. Thus, Groundworx has no estoppel claim.

¶33.   Groundworx has suggested these contract-based reasons to affirm dismissal are

outside the scope of this appeal. As Groundworx frames it, we must decide solely about

Blanton—his intervention and constitutional argument.         But Blanton is not the only

appellee—the City is too.4 The final judgment did not merely resolve a dispute between

       4
         On appeal, the City seeks no relief different from what the chancellor granted.
Instead, it asks us to affirm the chancellor’s final judgment. Thus, we reject Groundworx’s
contention the City had to file a cross-appeal in order to reassert its nonconstitutional
arguments for dismissal. See Brown v. Yates, 68 So. 3d 758, 762 (Miss. Ct. App. 2011)
(holding that an appellee must file a cross-appeal “in order for the appellee to gain reversal
of any part of the decision of a trial court about which the appellant brings no complaint”)
(emphasis added).

                                             12
Blanton and Groundworx. It adjudicated the claims Groundworx brought against the City,

finding the amended complaint against the City failed on its face as a matter of law. And as

an appellee, the City “is entitled to argue and rely upon any ground sufficient to sustain the

judgment below.” Kirksey v. Dye, 564 So. 2d 1333, 1337 (Miss. 1990).

¶34.   Admittedly, Groundworx raises interesting questions about intervenor standing, the

application of Section 11-51-75, and the scope of Section 183’s prohibition.5 But even if we

answered these questions in Groundworx’s favor, it would not obtain the relief it

seeks—reversal of the judgment of dismissal in favor of the City and remand of its claims

against the City to chancery court.

                                        Conclusion

¶35.   Unfortunately for Groundworx, even accepting its allegations are true, it simply has

no legal avenue to recover its investment in the project before financing fell through and the

contract was terminated. We therefore affirm the judgment dismissing Groundworx’s claims.

¶36.   AFFIRMED.

    WALLER, C.J., DICKINSON AND RANDOLPH, P.JJ., KITCHENS, KING,
COLEMAN AND CHAMBERLIN, JJ., CONCUR. BEAM, J., NOT
PARTICIPATING.

       5
         Specifically, Groundworx’s four appellate issues are: (1) the chancellor failed to
recognize Blanton lacked standing to intervene; (2) the chancellor failed to recognize the
procedures of Section 11-51-75—which Blanton did not follow—provided Blanton the
exclusive remedy to challenge the constitutionality of the contract; (3) the chancellor erred
in ruling the City-Groundworx contract was unconstitutional; and (4) the chancellor erred
in not granting Groundworx’s motion to dismiss Blanton’s cross-complaint.

                                             13