City of Grenada v. Whitten Aviation, Inc., 98-CA-00645-COA.

• Decision Date: 03 August 1999
• Docket Number: No. 98-CA-00645-COA.,98-CA-00645-COA.
• Citation: 755 So.2d 1208
• Parties: CITY OF GRENADA, Mississippi, Appellant, v. WHITTEN AVIATION, INC., Appellee.
• Court: Mississippi Court of Appeals

755 So.2d 1208

CITY OF GRENADA, Mississippi, Appellant, v. WHITTEN AVIATION, INC., Appellee.

No. 98-CA-00645-COA.

Court of Appeals of Mississippi.

August 3, 1999.

Rehearing Denied October 26, 1999.

Forrest W. Stringfellow, Quentin A. Daniels, Jackson, Attorneys for Appellant.

Barrett Jerome Clisby, Oxford, Attorney for Appellee.

BEFORE McMILLIN, C.J., IRVING, AND PAYNE, JJ.

IRVING, J., for the Court:

¶ 1. On April 7, 1992, Gladys M. Whitten, on behalf of Whitten Aviation, Inc. (Whitten) executed a lease with the City of Grenada (City) for the purpose of becoming a general "fixed base operator" or "FBO" at the Grenada Municipal Airport. A fixed base operator essentially functions as a service station for aircrafts at an airport. On May 20, 1997, Whitten Aviation, Inc. filed its complaint against the City, Maurice Azain, Jr. (Azain), and James Cummins (Cummins), all jointly and severally, alleging breach of contract, tortious interference with contract, and negligence per se.

¶ 2. By consent order entered on August 7, 1997, the matter was set for trial on January 14, 1998, with a pre-trial conference on January 12, 1998. On January 12, 1998, Whitten filed a motion in limine seeking to prohibit the introduction of any evidence at trial relating to any facts or circumstances outside the terms of the lease. This motion was granted, and the case went to trial on the sole issue of breach of contract. A verdict was returned for Whitten with damages assessed at $400,000. The City filed a motion for judgment notwithstanding the verdict, or in the alternative for a new trial or a remittitur. This motion was denied and the City has appealed, assigning the following issues as error:

I. WHETHER THE TRIAL COURT IMPROPERLY ATTEMPTED TO EXERCISE JURISDICTION OVER THE APPELLEE'S UNDERLYING SUIT WHERE THE APPELLEE DID NOT COMPLY WITH THE JURISDICTIONAL NOTICE OF CLAIM PRE-FILING REQUIREMENTS OF MISSISSIPPI CODE ANNOTATED SECTION 11-46-11.

II. WHETHER THE TRIAL COURT COMMITTED AN ERROR OF LAW IN INTERPRETING THE LEASE TO REQUIRE WRITTEN NOTICE FROM THE CITY REGARDING ANY DEFAULT BY WHITTEN AVIATION, INC. OF THE PROVISIONS OF THE LEASE PRIOR TO CANCELLATION, EVEN WHEN WHITTEN REPUDIATED THE ENTIRE LEASE, AND EVEN THOUGH A SEPARATE PROVISION, FULLY CAPABLE OF BEING HARMONIZED WITH THE WRITTEN NOTICE PROVISION, PROVIDED THE CITY WITH A SEPARATE, LIMITED RIGHT TO IMMEDIATELY TERMINATE THE LEASE.

III. WHETHER THE TRIAL COURT COMMITTED AN ERROR OF LAW IN INTERPRETING THE PURPORTED "RENEWAL OPTION" OF THE LEASE WHICH WAS VOID AS A MATTER OF LAW, IN SUCH A WAY AS TO ALLOW THE JURY BELOW TO AWARD DAMAGES THROUGH THE YEAR 2002, EVEN WHERE THE LEASE ITSELF WAS TO EXPIRE ON MARCH 31, 1997, BY ITS OWN TERMS.

¶ 3. We find no error as to issue I. Finding error as to issues II and III, we reverse and remand.

FACTS

¶ 4. The FBO Lease Agreement between Whitten and the City contained approximately twenty-five paragraphs, the interpretation of three of which were at issue in the trial court. We set forth those paragraphs and one other which we feel is helpful in our resolution of the issues presented. The provisions of paragraph XVI of the lease form the basis of Whitten's suit; it reads as follows:

In the event Lessee [Whitten] defaults under any of the terms hereof and fails to remedy such default within twenty (20) days after written notice of Lessor [the City], this lease or any renewal or extension hereof may be canceled by Lessor by notice of cancellation in writing mailed to lessee, certified mail, postage fully prepaid, and such cancellation shall become effective fifteen (15) days from and after the date of such notice of cancellation.

¶ 5. The City's defense was that it was entitled to terminate the lease, in accordance with the "immediate termination" provisions of paragraph X of the lease agreement, for a breach of the terms and conditions of that paragraph. Paragraph X addresses aviation fuel equipment, dispensing, handling, storage, and the obligation of Whitten with regard to the same. It provides:

The term "Aviation Fuel", as used herein, includes aviation propellants of every kind and character, including gasoline, kerosene, oil and grease, or other as may be defined by state or federal law or regulation. The compliance with all state and federal regulations and laws concerning fuel storage facilities, including leased real or personal property, shall be the Lessee's [Whitten's] responsibility and cost. Further, if the Lessee [Whitten] chooses to lease fuel facilities and/or equipment from a third party supplier, then the Lessee [Whitten] shall be solely responsible for their safe and lawful operation and maintenance. All leased or owned fuel facilities shall be brought into compliance with all local, state, and federal rules, regulations, and laws at the Lessee's [Whitten's] expense. Any additional local, state, and federal rule, regulation, and law affecting the operation and maintenance of leased fuel facilities and equipment which becomes effective during the term of this lease shall also be the sole responsibility of the Lessee [Whitten] for the costs of compliance. The expense of any monthly (or other interval) testing, inspections or other similar activity shall be conducted solely at the expense of the Lessee [Whitten], and all such test results shall be immediately provided to the Lessor [the City]. Should a spill, leak or other failure occur from the operation of leased or owned fuel facilities or equipment, the Lessee [Whitten] shall pay all costs of any Environmental Assessment, engineering, or clean up costs which may be necessary as mandated by the appropriate local, state, or federal agency.

Failure to comply with any or all of the requirements contained within this Section shall be grounds for immediate termination of the lease at the discretion of the Lessor. (emphasis added).

¶ 6. Paragraph I, which contains the so-called "renewal option" for the lease agreement, provides as follows:

Lessor [the City] does hereby lease, let and demise to Lessee, subject to the terms and conditions herein stated, for an initial period beginning April 1, 1992 and ending March 31, 1997, with the right to extend said lease for an addition [sic] term of five (5) years, upon such terms as agreeable between the parties and upon written notice of at least sixty (60) days in advance of the expiration of the lease, if it is determined by Lessor [the City] that Lessee [Whitten] has performed its obligations under this lease in a satisfactory and lawful manner by providing suitable and reasonable services by complying with the minimum standards required by federal, state and city statutes, ordinances or regulations, located at the Grenada Municipal Airport.

In the event that the parties are unable to reach terms acceptable to both, then this option shall be terminated and be null and void and have no effect.

¶ 7. Paragraph V addresses payment of rent and provides that the City may declare the lease agreement void if rent is not paid in a timely manner. The specific provisions are as follows:

The prompt payment of monies herein-above provided shall be of the essence hereof, and, if not promptly paid when due on or before the fifteenth day of each month, this lease shall become immediately void at the option of the Lessor, upon notice of which the Lessee will immediately vacate said premises and surrender possession thereof to Lessor without diminution of the liabilities of Lessee. A schedule of fees charged shall be furnished monthly by the Lessee to the Lessor and the Lessor shall audit Lessee's books on a yearly basis, in January of each year.

¶ 8. The following is a chronology of events leading up to the suit:

October 23, 1995: Whitten sends letter, almost one and one-half years in advance of the stated expiration date of the FBO lease, March 31, 1997, purporting to request a renewal of the FBO Lease Agreement;

December 21, 1995: Whitten requests renewal of other leases with City for hangars at the Grenada Airport; when informed that these leases would have to be awarded by bid pursuant to state law, Willie Whitten informed James Cummins (airport manager) that he was "out of there," and that the fuel farm fixed base operation would be discontinued as of March 31, 1996, which date was a year before the FBO Lease Agreement was to expire, and the exact date when Whitten's alleged "lucrative" agreement for fueling military aircraft expired;

December 26, 1995: Whitten is informed, by hand-delivered letter, of the City's understanding that Whitten would not be operating as FBO beyond March 31, 1996. Deficiencies in the FBO-leased premises noted therein, including improper, non-compliant fuel handling/storage in violation of local, state, and federal regulations;

December 27, 1995: Letter from Whitten, attempting to re-negotiate hangar lease, not FBO lease;

December 29, 1995: Inspection conducted of the FBO-leased premises; numerous violations noted, including improper fuel handling/storage;

January 9, 1996: Meeting of Grenada City Council wherein Willie Whitten was in attendance; Council Minutes reflect the following action taken: Motion was made to void all contracts with Whitten Aviation; to include the airport managers contract, to authorize the City Manager and James Cummins to work with Whitten Aviation for a reasonable time (60 days) to negotiate an acceptable Fixed Base Operator (FBO) contract and present it to the Council for review by George Thornton.... Motion carried;

Jan.-Mar. 1996: City and Whitten negotiate unsuccessfully for different FBO Lease Agreement;

February 9, 1996: Whitten sends letter to City, stating that because FBO lease agreement was "terminated," Whitten would be leaving as FBO on March 31, 1996; Whitten leaves as FBO on March 31, 1996.

ANALYSIS OF ISSUES PRESENTED

I. DID THE TRIAL COURT IMPROPERLY ATTEMPT TO EXERCISE JURISDICTION OVER THE APPELLEE'S UNDERLYING SUIT WHERE THE APPELLEE DID

...