FARM SERV., INC. v. Oktibbeha Co. Bd. of Sup'rs

• Decision Date: 04 December 2003
• Docket Number: No. 2002-CA-00205-SCT.,2002-CA-00205-SCT.
• Citation: 860 So.2d 804
• Parties: FARM SERVICES, INC. v. OKTIBBEHA COUNTY BOARD OF SUPERVISORS.
• Court: Mississippi Supreme Court

860 So.2d 804

FARM SERVICES, INC. v. OKTIBBEHA COUNTY BOARD OF SUPERVISORS.

No. 2002-CA-00205-SCT.

Supreme Court of Mississippi.

December 4, 2003.

Dewitt T. Hicks, Jr., P. Nelson Smith, Jr., Columbus, attorneys for appellant.

Jackson M. Brown, Starkville, attorney for appellee.

Before PITTMAN, C.J., WALLER and GRAVES, JJ.

GRAVES, Justice, for the Court.

¶ 1. This appeal arises from a judgment of the Oktibbeha County Chancery Court terminating the lease between Farm Services, Inc. (Farm Services) and the Oktibbeha County Board of Supervisors (Board) for failure to sustain operation for more than one year and/or failure to provide employment to residents. Feeling aggrieved, Farm Services appeals and raises four issues: (1) whether the trial court erred in forfeiting the lease contract; (2) whether the trial court erred in finding that the notice terminating the lease was adequate; (3) whether the court erred in finding that Farm Services was not entitled to $5,750 in credit for overpayment on the lease contract; and (4) whether the court erred in finding that Farm Services' constitutional rights had not been violated.

FACTS AND PROCEEDINGS BELOW

¶ 2. On April 4, 1966, Oktibbeha County (County) leased 10 acres of industrial park in Starkville, Mississippi, to Riverside Oil Mill (Riverside Mill). Later on August 26, 1966, the County entered into an expanded lease contract to provide funds to aid in promoting industry, trade and the use of in state agricultural products and to reduce unemployment by the issuance of industrial revenue bonds. The County issued bonds in the amount of $250,000. With the $250,000 in bond money, the County erected a building and made other improvements. The bonds have now been retired.

¶ 3. On March 29, 1973, Riverside Mill, with County approval, sublet the lease to Cook Industries which then sublet the lease to Farm Services with County approval. The lease was assigned to Farm Services on May 26, 1978, and Farm Services assumed all liabilities, responsibilities and privileges of the original lessor, Riverside Oil Mill or known as Riverside Chemical Company at the time of the assignment. Farm Services is owned by two brothers, Sam and John McReynolds. Farms Services closed its business operations on August 29, 1997. Later, Farm Services demolished buildings and other improvements that were made with bond money. On December 27, 1999, the Board voted to terminate the lease for default because Farm Services had failed to operate a business on the site for more than a year, failed to employ residents of the county, and failed to pay rent. On the same day, Sandra Strickland, Comptroller for the County, received three delinquent checks from Farm Services. The attorney for the Board mailed Farm Services a certified letter informing Farm Services of the Board's termination of the lease on December 28, 1999. However, the letter was returned as undeliverable. Also on December 28, 1999, the Board's attorney orally notified John McReynolds, President of Farm Services, of the Board's decision to terminate the lease.

¶ 4. The Board sued Farm Services in the Oktibbeha County Chancery Court for specific performance and declaratory judgment on March 21, 2000, seeking to terminate its lease with Farm Services for failure to operate for more than one year and for failure to employ residents. The Board also prayed for four years of taxes on building improvements which had been dismantled without County approval and damages caused by dismantling of the structure owned by the County. Farm Services removed the case to U.S. District Court on April 11, 2000, alleging violations of its Fifth and Fourteenth Amendment rights. The U.S. District Court remanded the case to the chancery court, which found:

[T]he county acted in good faith when its attorney attempted to mail a notice of termination to Farm Services at the address to which it had sent previous notices which were not returned and the County should not be penalized for Farm Services failure to leave a forwarding address or to provide the County with its new address. Additionally, Farm Services had actual notice of the County's actions no later than January 17, 2000. Further, Farm Services received written notice when it was served with process on March 31, 2000. The Court finds that Farm Services was not prejudiced because it failed to receive written notice of the termination by registered mail, and its due process rights were not violated.

DISCUSSION

Forfeiture of Lease

¶ 5. Farm Services argues that the trial court's decision to forfeit the lease on the basis that Farm Services dismantled a building was erroneous. Farm Services concedes that it did dismantle an antiquated building, unusable silos, and disposed of rusted farm equipment. Farm Services advised that fertilizer residue caused the buildings to be in danger of explosion. Farm Services also contends that the court disregarded provisions of the lease that gave it the right to alter the nature of the fertilizer and feed business and to remove any machinery or equipment that was obsolete or uneconomical to maintain. Farm Services suggests that members of the Board and the Board's attorney were aware of the dismantling of the buildings. Farm Services also claims that one supervisor participated in helping to remove dismantled portions of the building. Farm Services advances that it was error for the court to state that although the County had notice of the dismantling, waiver did not apply to the Board.

¶ 6. The construction of a contract is a question of law to be reviewed de novo. Gulfside Casino P'ship v. Miss. State Port Auth. at Gulfport, 757 So.2d 250, 257 (Miss.2000). A contractual clause should be objectively construed. See id. "[T]he first rule of contract interpretation is to give effect to the intent of the parties," however, the words utilized are "the best resources for ascertaining intent and assigning meaning with fairness and accuracy." Simmons v. Bank of Miss. 593 So.2d 40, 42 (Miss.1992). "[M]ere disagreement about the meaning of a contract clause does not make it ambiguous as a matter of law." Gulfside Casino P'ship, 757 So.2d at 257 (quoting Simmons, 593 So.2d at 42-43).

¶ 7. Farm Services' assertion that the trial judge forfeited the lease because Farm Services dismantled buildings on the property is partly correct. The court did find that "Farm Services breached provisions of the lease by dismantling structures and improvements built with County bond money," however, this finding was ancillary. The judgment clearly states that the trial judge declared that (1) "the lease is terminated and canceled for Farm Service, Inc.'s default due to its failure to be in operation for more than one year and/or failure to provide employment to residents and to decree immediately possession of the property to the County"; and (2) "that the lease is terminated for failure of lessee to rectify breaches within 60 days of the Board's order on December 12, 1999, or the attempted registered notice to Farm Services on December 28, 1999 or within 60 days of filing of this action." Furthermore, the Board stated in its "Order to Terminate the Farm Services Lease" that "the lease has been broken by Farm Services, Inc. for failure to be in operation for more than one year as well as having failed to pay the annual rental for several years...."

¶ 8. The lease provides in pertinent part:

3. Employment: ... Mill will exercise due diligence to maintain and operate a manufacturing, processing, warehousing, or other similar type industry in said building expansion project, and to provide steady employment in such operations provided that this agreement is predicated on the continued peaceful operation of the building enterprise of the premises described in this contract and the continued peaceful relationship by and between County, the Mill and all Mill employees. County and the Mill expressly agree and understand that Mill shall not be required to do any of the above things during any period of time or times when any of the above things are interrupted or when Mill may reasonably anticipate that any of the above things will be interrupted by or as a result of disputes, activities of any person or persons (whether employed by Mill or not), events or circumstances beyond the control of Mill or its management; it is further agreed and understood that Mill shall not be held responsible for factors beyond its control not for interruptions to employment caused by civic commotion, riot, labor disputes and acts of government. It is further agreed that Mill shall not be deemed guilty or chargeable with any breach of covenant or agreement contained in this paragraph unless and until Mill has failed for a continuous period of one year to comply with the provisions hereof, and that in the event of such failure, County may cancel this lease.

¶ 9. Farm Services agreed in its lease assignment from Riverside Chemical Company, assignor, dated May 26, 1978, "to assume all of Assignor's title to and interest in the Lease including all rights, privileges and obligations arising thereunder...." In doing so, Farm Services also agreed to the "Employment" provision. The record reveals that Farm Services ceased its operations and has not employed residents since August 29, 1997. John McReynolds explained that operations ceased because of the embargoes on Russia due to conflicts in Afghanistan. He noted that the Russians lost faith in the United States and began to buy soybeans from other sources and this caused the feed business to go under.

¶ 10. The evidence offered that the cessation of operation was beyond Farm Services' control was not sufficient to shelter Farm Services under the exception that it is not to be held responsible for factors beyond its control nor for interruptions to employment caused by civic commotion, riot, labor disputes and acts of government. Farm Services did breach the lease by...