Christian Methodist Episcopal Church v. S & S Const. Co., Inc.

• Court: Mississippi Supreme Court
• Writing for the Court: Before HAWKINS; SULLIVAN; HAWKINS; BANKS; BANKS
• Citation: Christian Methodist Episcopal Church v. S & S Const. Co., Inc., 615 So.2d 568 (Miss. 1993)
• Decision Date: 11 February 1993
• Docket Number: No. 90-CA-0633,90-CA-0633
• Parties: 81 Ed. Law Rep. 1192 CHRISTIAN METHODIST EPISCOPAL CHURCH v. S & S CONSTRUCTION COMPANY, INC.

Page 568

615 So.2d 568

81 Ed. Law Rep. 1192

CHRISTIAN METHODIST EPISCOPAL CHURCH v. S & S CONSTRUCTION COMPANY, INC.

No. 90-CA-0633.

Supreme Court of Mississippi.

Feb. 11, 1993.

Randolph Walker, Bennie L. Turner, Walker & Turner, West Point, for appellant.

S. Allan Alexander, Tollison Austin & Twiford, Oxford, for appellee.

Before HAWKINS, C.J., and SULLIVAN and McRAE, JJ.

SULLIVAN, Justice, for the court:

THE FACTS

S & S Construction Company (S & S) and Mississippi Industrial College (MIC) entered into two contracts for construction on the campus of MIC, the first for $1,196,218.00, and the second for $150,269.00. Both contracts were signed by Theodore R. Debro, Jr., president of MIC. The contracts provided for progress payments as work progressed. S & S submitted monthly applications for payment for the portion of work completed during that payment period. The architect, Ledbetter Associates, certified on each application for payment that the work had actually been performed. MIC was to retain ten percent (10%) of each progress payment to insure that the work was satisfactorily performed.

Right from the start, the progress payments were late. In June, 1981, Truitt Stockton, president of S & S, contacted Debro and requested that MIC bring all payments up to date. MIC still failed to make the required progress payments on schedule. In September, 1981, Stockton sent Debro notice of S & S' intent to stop construction, pursuant to terms of the contract, on October 12 if all outstanding payments due were not paid. On October 21, when amounts due were still outstanding, Stockton wrote Debro and informed him that construction would be stopped until payment was made and S & S had proof of monies on hand to pay the balance on the contract. Two days later, MIC paid the outstanding balance due of $267,618.00. Debro then wrote to Stockton asking when construction would be resumed. This letter also explained the sources of funding for the project, listing institutional and church funds as 40.7%. S & S still refused to resume construction until assured that progress payments would thereafter be paid in a timely fashion and that MIC and Christian Methodist Episcopal Church (CME) funds were escrowed and available when needed.

In November, S & S was assured by Debro that CME General Secretary of Finance, O.T. Peeples, had placed in escrow funds sufficient for completion of construction. Peeples sent a letter to S & S on November 16, 1981, advising S & S that "C.M.E. Church is holding the funds necessary to complete the construction.... Arrangements have been made for Mr. Debro to pay an amount equal to the percentage required from the church and/or the institution on a regular monthly basis up to the completion of the project."

S & S resumed construction at MIC and continued its work until February, 1982, when MIC notified it that no further funds were available. S & S stopped construction and demanded payment of the balance due for progress payments in the amount of $286,939.00 plus retainages. S & S filed suit against MIC and obtained a default judgment in the amount of $354,979.33. MIC filed for bankruptcy and S & S was paid $39,289.20 by the Louisiana Conference of CME as part of MIC's Chapter 11 plan.

There was undisputed testimony that payments for CME were made by the Secretary of its Department of Finance, O.T. Peeples. CME, at the time of trial, owned at least some of what was formerly MIC and had hoped to use the land and buildings as a training facility for church missionary workers.

S & S filed a complaint for debt and attachment against CME seeking judgment on the ground that CME, through Dr. O.T. Peeples, General Secretary of Finance for CME, wrote a letter to S & S advising them that CME was holding the funds necessary to complete construction of buildings on the campus of MIC. S & S contended that it relied on Peeples' assurance in continuing construction on the MIC campus. CME answered claiming that if Peeples' letter was a guaranty, which CME denied, it was an ultra vires act.

After a trial on the merits, the chancellor found CME liable to S & S for the arrearages under the contract based on principles of equity akin to the doctrine of estoppel in pais. Judgment against CME in the sum of $493,860.44 was granted. After its motion for new trial was overruled, CME perfected its appeal to this Court, requesting determination of the following issues:

1. Whether Peeples' letter of November 16, 1981, constitutes a guaranty under Mississippi law;

2. Whether the November 16, 1981, letter estopped CME from denying liability to S & S;

3. Whether Peeples, who drafted and signed the letter of November 16, 1981, had authority to commit CME to a guaranty obligation;

4. If the letter constituted a guaranty, what was the extent of the obligation assumed under its terms;

5. What weight should the alleged judgment obtained by S & S against MIC by default have in determining the damages in the case at bar; and

6. Whether the chancellor erred in using the judgment against MIC in determining the damages in the case at bar, since the judgment was never put into evidence.

THE LAW

I.

Whether Peeples' Letter of November 16, 1981, Constitutes a

Guaranty under Mississippi Law.

CME argued that Peeples' letter did not constitute a guaranty; this is the same conclusion reached by the chancellor, who found CME obligated to S & S based on principles of equity. Even S & S admitted the chancellor did not find the letter constituted a guaranty, but argued that had he so found, he would have been correct. This issue, as presented, provides this Court with nothing to review.

II.

Whether the Letter of November 16, 1981, Estopped CME from

Denying Liability to S & S.

The chancellor's determination that CME was estopped from denying liability to S & S is a conclusion of law. In reviewing errors of law, this Court proceeds de novo. Cooper v. Crabb, 587 So.2d 236, 239 (Miss.1991).

Notwithstanding our respect for and deference to the trial judge, on matters of law it is our job to get it right. That the trial judge may have come close is not good enough.

Cooper, 587 So.2d at 239, quoting UHS-Qualicare, Inc. v. Gulf Coast Community Hospital, Inc., 525 So.2d 746, 754 (Miss.1987).

Equitable estoppel precludes a party from denying a material fact which he has previously induced another to rely upon, whereby the second party changed his position in such a way that he would suffer injury if denial was allowed. Koval v. Koval, 576 So.2d 134, 137 (Miss.1991). Estoppel is based on "public policy, fair dealing, good faith and justice." Id., citing 28 Am.Jur.2d 647, Sections 27 and 28. See also PMZ Oil Co. v. Lucroy, 449 So.2d 201, 206 (Miss.1984). Where it would be substantially unfair to allow a party to deny what he has previously induced another party to believe and take action on, equitable estoppel may be enforced. Koval, 576 So.2d at 138; PMZ Oil, 449 So.2d at 207. Subjective intent to mislead is unnecessary, so long as the acts of the party sought to be estopped, viewed objectively, were calculated to and did mislead the other party. Koval, 576 So.2d at 138; PMZ Oil, 449 So.2d at 208.

The party asserting equitable estoppel must show that he has changed his position, to his detriment, in reliance upon the conduct of another. PMZ Oil, 449 So.2d at 206, citing Birmingham v. Conger, 222 So.2d 388, 392-393 (Miss.1969); Ivy v. Grenada Bank, 401 So.2d 1302, 1303 (Miss.1981); Thomas v. Bailey, 375 So.2d 1049, 1052 (Miss.1979). Where one of two innocent parties will suffer a loss from the default or fraud of a third party, the party in the best position to protect himself should bear the loss. Western Cas. and Sur. Co. v. Honeywell, Inc., 380 So.2d 1385, 1389 (Miss.1980); XYOQUIP, Inc. v. Mims, 413 F.Supp. 962, 967 (N.D.Miss.1976). The burden of proof is on the party pleading equitable estoppel. Chapman v Chapman, 473 So.2d 467, 470 (Miss.1985); Hathorn v. Illinois Cent. Gulf R. Co., 374 So.2d 813, 817 (Miss.1979).

S & S successfully showed that it changed its position, to its detriment, in reliance upon the conduct of CME. S & S had stopped construction at MIC and only resumed work after receiving CME's letter stating that funds necessary for completion of the construction were being held by the church and that arrangements had been made for MIC to pay the percentage required on a monthly basis until completion of the project. S & S changed its position in reliance on CME's assurance and suffered detriment--it was not paid for the work performed. Although CME claims it was an innocent party injured by Peeples' assurance to S & S, CME, as the entity who placed Peeples in his position of Secretary of Finance, was in a better position than was S & S to protect itself from losses resulting from Peeples' conduct. S & S was seeking to protect itself when it asked for assurance that funds were on hand for completion of the construction project. It follows that CME should bear the loss resulting from Peeples' assurance.

S & S claims this assurance from CME promised full payment to S & S. CME claims that if any promise was made, it was only that the church's percentage of the contract price would be paid. (CME argues this is 25%; a letter from Debro to Stockton shows this percentage is 40.7.) Viewed objectively, as it must be since no subjective intent to mislead is necessary, the assurance seems to say that although MIC would only pay the 40.7% on a monthly basis, CME had in hand the total amount S & S would be due upon completion of the project. The assurance, again viewed objectively, was calculated to and did mislead S & S to believe that all monies necessary for completion of the construction project were on hand. The doctrine of equitable estoppel should be enforced because it would be substantially unfair to allow CME to deny this assurance upon which S & S relied to its detriment.

CME also argues that the chancellor's finding...