OWO INVESTMENTS, INC. v. STONE INV. CO.

• Decision Date: 08 April 2010
• Docket Number: No. 2008-CA-01620-SCT.,2008-CA-01620-SCT.
• Citation: 32 So.3d 439
• Court: Mississippi Supreme Court
• Parties: O.W.O. INVESTMENTS, INC. v. STONE INVESTMENT COMPANY, INC.

32 So.3d 439

O.W.O. INVESTMENTS, INC. v. STONE INVESTMENT COMPANY, INC.

No. 2008-CA-01620-SCT.

Supreme Court of Mississippi.

April 8, 2010.

COPYRIGHT MATERIAL OMITTED

Nicholas Van Wiser, Biloxi, attorney for appellant.

Jack Parsons, Tadd Parsons, Wiggins, attorneys for appellee.

EN BANC.

CHANDLER, Justice, for the Court:

¶ 1. O.W.O. Investments, Inc., commenced a lawsuit against Stone Investments, Inc. (Stone Investments); John Diamond, individually, John Diamond; d/b/a Stone Ready Mix, LLC; and Diamond Disposal, Inc. (collectively, "Diamond"). The action involved a contract and an amended contract providing for O.W.O.'s purchase from Diamond of three hundred acres of land for a landfill in Stone County. O.W.O. alleged that Diamond had misrepresented that he owned the entire three-hundred-acre parcel when, in fact, 40.05 acres of the land were owned by Stone Investments. O.W.O. alleged that attorney Jack Parsons¹ had represented Diamond at the execution of the contract. O.W.O. further alleged that Parsons also was the attorney for Stone Investments, and that Parsons had known, when the contract and the amended contract were executed, that the 40.05 acres were owned by Stone Investments, not Diamond. O.W.O. asserted claims for seller's breach of warranties and representations, misrepresentation and fraud, imposition of a construction lien, and damages in the amount of $115,034, plus punitive damages. O.W.O. later filed a second amended complaint asserting a claim for tortious interference with contract.

¶ 2. The Chancery Court of Stone County denied Diamond's motion for summary judgment and granted Stone Investments's motion for summary judgment. O.W.O. voluntarily dismissed Diamond and pursued this appeal against Stone Investments, arguing that summary judgment was improper. Stone Investments argues that summary judgment was appropriate because, prior to O.W.O.'s execution of the amended contract, O.W.O. was placed on notice by a November 9, 2006, title opinion that the 40.05 acres were not included in Diamond's real estate holdings. Stone Investments also argues that O.W.O. incurred no damages because O.W.O. never elected to purchase the property pursuant to the amended contract.

FACTS

¶ 3. On September 20, 2006, O.W.O. and Diamond executed a statement of intent to enter into a contract to purchase real estate. On September 28, 2006, O.W.O. and Diamond entered into a "Preliminary Contract for Purchase and Sale of Real Estate, Personal Property & Equipment." The subject property included three hundred acres of real estate in Stone County, free and clear of all liens and encumbrances. In the contract, Diamond represented and warranted that he had title to the three hundred acres. The acreage included a sixty-acre landfill, only ten acres of which had been approved by the Mississippi Department of Environmental Quality (MDEQ). The contract placed the responsibility upon O.W.O. to obtain MDEQ approval. The purchase was to include all the assets of John Diamond's two businesses, Stone County Mix, LLC, and Diamond Disposal, Inc. The contract provided for a nonrefundable earnest-money deposit of $50,000 payable from O.W.O. to Diamond on or before September 28, 2006, to be credited against the purchase price. Diamond represented that all permits, licenses, zoning, and other authorizations to conduct business as a concrete plant and disposal site were "fully and completely transferrable or assumable by Purchaser in their present form and condition and without condition or modification."

¶ 4. On November 17, 2006, O.W.O.'s attorney, David Wheeler, sent Diamond's attorney, Parsons, a letter concerning the transaction. Wheeler stated that his review of the title had revealed that Diamond actually had title to only 259.05 acres, not the full three hundred acres under contract. The missing acreage, consisting of a 40.05-acre parcel, was owned by Stone Investments. Wheeler believed that Stone Investments had agreed to sell Diamond the 40.05-acre parcel for $160,000 so that Diamond could include it in the sale to O.W.O. Wheeler further stated that title to the 40.05 acres was not insurable and that a title-confirmation suit would be required to satisfy the title insurance company. Wheeler proposed that the parties take the following steps: (1) Stone Investments convey the property to Diamond in exchange for a deed of trust on the property for $160,000, payable on demand within ninety days; (2) Stone Investments and Diamond provide a signed letter of instruction to Wheeler to disburse $160,000 from the closing proceeds to Stone Investments, and an executed release of the deed of trust; (3) Diamond and O.W.O. execute a modification to the contract providing for two closing dates, the first for the 259.05 acres, and the second for the 40.05 acres, to take place after resolution of the title issues; (4) Wheeler prepare a suit to confirm title to the 40.05 acres in the name of Diamond.

¶ 5. Accordingly, on November 20, 2006, the parties entered into an amended contract that superceded the September 28, 2006, contract. The amended contract provided for O.W.O.'s purchase of the three hundred acres in two parcels, Parcel A-1 for $1,620,000, and Parcel A-2 for $80,000. Parcel A-2 comprised the 40.05-acre parcel. The amended contract stated that O.W.O. had paid Diamond the $50,000 nonrefundable earnest-money deposit on or before September 28, 2006, to be credited against the purchase price of Parcel A-1.² Diamond both represented and warranted he had merchantable title to the three hundred acres and that he would commence a suit to confirm title to Parcel A-2 "in order to obtain insurable and good and merchantable title to said Parcel A-2." The amended contract provided for a closing date on Parcel A-1 of on or before January 3, 2007, with O.W.O. to give Diamond seven days' written notice of the time and place of closing. The contract provided for a closing date on Parcel A-2 to be within fourteen days of the entry of a final, nonappealable order of the chancery court confirming fee simple title to Parcel A-2 in John Diamond.

¶ 6. On December 28, 2006, Wheeler sent a letter to Parsons requesting an extension of the closing date due to two problems. First, O.W.O. had not been furnished any evidence that the 40.05 acres had been conveyed to Diamond by Stone Investments. Second, due to amendments to the MDEQ rules and regulations concerning the operation of landfills, O.W.O. had been unable to confirm that the existing permit to operate the ten-acre landfill could be assumed by O.W.O. Wheeler averred that these two problems constituted material misrepresentations under the amended contract. Therefore, he requested extension of the January 3, 2007, closing date by thirty days, assuming O.W.O. had received written verification that the permit was transferrable, and assuming O.W.O. had been furnished proof of the transfer of the 40.05 acres to Diamond and the initiation of a title-confirmation suit. In a January 2, 2007, letter from Wheeler to Parsons, Wheeler stated he had received no reply to the December 28, 2006, letter. Wheeler stated that O.W.O. was unwilling to close until the issues were resolved.

¶ 7. On January 4, 2007, O.W.O. filed a complaint for specific performance and damages. O.W.O. alleged that during due diligence, questions had arisen as to whether certain environmental permits, licenses, zoning, and other authorizations were transferrable, and that Diamond had misrepresented that he had title to the full three hundred acres of land, while in reality, 40.05 acres were titled in the name of Stone Investments. O.W.O. claimed that Diamond had refused its request for thirty days' additional time prior to closing to address these problems. On April 23, 2007, O.W.O. filed its first amended complaint for damages, requesting a return of the $50,000 earnest-money deposit, $40,034.80 in due-diligence expenses for engineering services to determine whether there was compliance with MDEQ regulations, attorneys' fees, and punitive damages.

¶ 8. On April 20, 2007, Stone Investments filed a motion to dismiss for lack of jurisdiction. A basis for the motion was that, on March 19, 2007, it had sold the 40.05 acres to E-Z Disposal, Inc. In a response to the motion to dismiss, O.W.O. contended that a lis pendens on the 40.05 acres had been filed with the original complaint, which rendered the sale to E-Z Disposal, Inc., a nullity. On May 24, 2007, O.W.O. moved to add E-Z Disposal, Inc., as a necessary party. On September 20, 2007, the trial court entered an agreed judgment providing that the defendants would withdraw the motion to dismiss, and authorizing O.W.O. to file an amended complaint within fifteen days.³

¶ 9. Stone Investments answered and admitted its ownership of the 40.05 acres, and that Diamond had represented to O.W.O. that it had full title to and right to sell the three hundred acres, including the 40.05 acres owned by Stone Investments. Stone Investments denied that Parsons had represented Stone Investments in the matter. Stone Investments counterclaimed for fraud, alleging that O.W.O. had fraudulently entered into a contract to purchase property, because O.W.O. continually had requested extensions and orally had offered an amount lower than the contract price. Stone Investments requested specific performance of the contract, removal of the lis pendens, and $400,000 in damages caused by the placement of the lis pendens on the property.

¶ 10. On April 30, 2008, Diamond moved for summary judgment. On the same day, Stone Investments filed a motion for summary judgment, asserting that a contractual relationship between Stone Investments and O.W.O. had never existed, and that there was no legal basis for the court to hold Stone Investments liable to O.W.O. for misrepresentations. Stone Investments requested dismissal from the lawsuit and cancellation of the lis pendens. Stone attached a copy of an unexecuted...