Phillips Bros., Kilby Brake Fisheries, LLC v. Winstead

• Citation: 129 So.3d 906
• Decision Date: 09 January 2014
• Docket Number: No. 2011–CA–01846–SCT.,2011–CA–01846–SCT.
• Parties: Phillips BROTHERS, Kilby Brake Fisheries, LLC and Harry Simmons v. Ray WINSTEAD.
• Court: Mississippi Supreme Court

129 So.3d 906

Phillips BROTHERS, Kilby Brake Fisheries, LLC and Harry Simmons

v.Ray WINSTEAD.

No. 2011–CA–01846–SCT.

Supreme Court of Mississippi.

Jan. 9, 2014.

Luther T. Munford, Jackson, Robert G. Mayer, Wiley J. Barbour, Jr., Charles W. Wright, Jr., Meridian, L. Brooks Hooper, attorneys for appellants.

Dorsey R. Carson, Jr., John M. Lassiter, Christopher D. Meyer, Jackson, attorneys for appellee.

EN BANC.

WALLER, Chief Justice, for the Court:

¶ 1. Defendants Phillips Brothers, Kilby Brake Fisheries, LLC, and Harry Simmons seek review of a $1,724,923 judgment in favor of Ray Winstead for shareholder and employment claims. Finding multiple errors, we reverse and render in part; and remand in part.

Facts & Procedural History

¶ 2. In March 2000, Kilby Brake Fisheries, LLC, was formed as a catfish hatchery and farm. An operating agreement was signed by the three members—Harry Simmons, Phillips Brothers, LP, and Ray Winstead. The Kilby Brake operating agreement provided each member a one-third percent ownership stake in Kilby Brake. At the start of the LLC, bank loans were made and signed by all three members as guarantors. There were three loans: one in the amount of $300,300 (for the purchase of inventory), one in the amount of $201,040 (the purchase of equipment), and one in the amount of $300,900 (revolving line of credit to be used for operating expenses). Shortly after Kilby Brake was formed, Phillips and Simmons purchased an adjacent catfish farm (“the Wise Place”) to be used to support the Kilby Brake operation. Winstead declined to be a part of the purchase of the Wise Place.

¶ 3. The members agreed that Winstead would be the hatchery operator and, for his work, he would receive $30,000 per year from Kilby Brake and use of a company truck, and Kilby Brake would pay for his and his family's housing on the farm, utilities, and health insurance. Winstead, as hatchery operator, was subject to the direction of Simmons, serving as the manager under the operating agreement. Simmons, under the Kilby Brake operating agreement, was authorized to carry out the business functions of the hatchery, including borrowing money and check-writing.

¶ 4. Kilby Brake's records indicated it was profitable for only two of the almost eight years while Winstead was the hatchery operator. Simmons fired Winstead in late 2007.

¶ 5. In September 2009, Winstead filed a complaint against Kilby Brake, Harry Simmons, Chat Phillips, Simmons Farm Raised Catfish, Inc., Five Mile Fisheries, Inc., and H.D. Simmons Corp. in the Circuit Court of Yazoo County.¹ His complaint was amended to add Phillips Brothers, LP, as a defendant. Winstead alleged that Simmons and Phillips Brothers had failed to pay him his agreed-upon salary, asserting claims of fraud, breach of fiduciary duty, corporate freeze-out, conversion, slander, slander per se, and tortious interference with business relations. He also requested an accounting and dissolution of the LLC.

¶ 6. Along with their answers, Simmons, Phillips and Kilby Brake (Defendants) filed counterclaims against Winstead asserting theft, conversion, usurpation of corporate opportunities, tortious interference with business relations, conversion, theft by deception, breach of contractual and fiduciary duties, and unjust enrichment. They requested replevin and judicial dissolution. The counterclaims alleged that Winstead took Kilby Brake property for his personal use, provided property to others to use, and sold property, including fish products, food products, equipment, chemicals and fuel without authorization, while retaining all profits. The trial court granted Winstead's motion to dismiss the claims of tortious interference with Kilby Brake's business relations and claims that were barred by the three-year statute of limitations.

¶ 7. Trial commenced in April 2011 and, at the completion, a jury awarded Winstead compensatory damages in the amount of $1,160,000 and punitive damages against Simmons of an additional $100,000. The court also awarded Winstead attorneys' fees and costs in the amount of $464,923, bringing the total judgment against Harry Simmons and Phillips Brothers to $1,724,923. Further, the court awarded post-judgment interest at a rate of eight percent. Defendants appealed. The jury denied three of Defendants' four counterclaims—theft, unjust enrichment, and breach of fiduciary duty. Kilby Brake prevailed on its replevin counterclaim, and the jury ordered that Winstead return the company truck to Kilby Brake.

¶ 8. Defendants filed a motion for judgment notwithstanding the verdict (JNOV) or, in the alternative, a motion for new trial, which were denied. Although both parties asked in their pleadings for the LLC to be dissolved, they were unable to agree about the terms of dissolution. In the final judgment, the parties' claims for judicial dissolution were dismissed without prejudice. No issue is made of this dismissal on appeal. Because of the many issues in this case, we will discuss the facts relevant to each issue below.

DISCUSSION

¶ 9. The issues raised by the three defendants in this appeal fall into six categories: (1) Whether the admission of testimony regarding an oral agreement for cash contributions violated the parol evidence rule; (2) whether there was sufficient evidence to support Winstead's award for fraud; (3) whether there was sufficient evidence to support Winstead's award for corporate freeze-out; (4) whether there was sufficient evidence to support Winstead's award for breach of fiduciary duty; (5) whether Kilby Brake is entitled to a new trial; (6) whether Winstead met the requisite elements of slander per se?

I. Whether the admission of testimony regarding an oral argument for case contributions violated the parol evidence rule.

¶ 10. Winstead asserted that Simmons and Phillips Brothers had agreed to provide $600,000 in paid-in capital from cash contributions for the purchase of the startup equipment and fish inventory. Over Simmons and Phillips Brothers' objections, the trial court allowed Winstead to testify to this alleged oral agreement because the operating agreement was “silentas to the contributions.” Winstead's expert also was permitted to testify, over objections, that he believed it was the intent of Simmons and Phillips to pay $600,000 in capital, out of cash.

¶ 11. “Questions concerning the construction of contracts are questions of law that are committed to the court rather than questions of fact committed to the fact finder.” Facilities, Inc. v. Rogers–Usry Chevrolet, Inc., 908 So.2d 107 (Miss.2005) (quoting Miss. State Highway Comm'n v. Patterson Enters. Ltd., 627 So.2d 261, 263 (Miss.1993)). An appellate court applies a de novo standard of review for questions of law. Starcher v. Byrne, 687 So.2d 737, 739 (Miss.1997).

¶ 12. The relevant portion of the Kilby Brake operating agreement at issue is set out as follows:

ARTICLE VI

CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS

Section 6.1 Initial Capital Contributions. As initial capital contributions to the Company, the Members shall contribute the Property more particularly described in Schedule “A”.²

Section 6.2 Additional Contributions. Except as set forth in Section 6.1 above, no Member shall be required to make any capital contributions.

¶ 13. “The primary purpose of all contract construction principles and methods is to determine and record the intent of the contracting parties.” Royer Homes of Miss., Inc. v. Chandeleur Homes, Inc., 857 So.2d 748, 752 (Miss.2003) (citing Kight v. Sheppard Bldg. Supply, Inc., 537 So.2d 1355, 1358 (Miss.1989)). In contract construction cases, the court's focus is on the language of the contract. Royer Homes, 857 So.2d at 752 (citing Turner v. Terry, 799 So.2d 25, 32 (Miss.2001); Osborne v. Bullins, 549 So.2d 1337, 1339 (Miss.1989)). A court should look to the “four corners” of a contract to determine how to interpret it. McKee v. McKee, 568 So.2d 262, 266 (Miss.1990). It is well established that “parol extrinsic evidence is not admissible to add to, subtract from, vary or contradict written instruments, contractual in nature, and which are valid, complete, unambiguous and unaffected by accident, mistake or fraud.” Byrd v. Rees, 251 Miss. 876, 171 So.2d 864, 867 (Miss.1965). “Our concern is not nearly so much with what the parties may have intended, but with what they said, since the words employed are by far the best resource for ascertaining the intent and assigning meaning with fairness and accuracy.” In re Estate of Fitzner, 881 So.2d 164 (Miss.2003) (citing Simmons v. Bank of Miss., 593 So.2d 40, 42–43 (Miss.1992)). If the language in the contract is clear and unambiguous, the intent of the contract must be effectuated. Rotenberry v. Hooker, 864 So.2d 266, 270 (Miss.2003); see also Pfisterer v. Noble, 320 So.2d 383, 384 (Miss.1975). “The mere fact that the parties disagree about the meaning of a provision of a contract does not make the contract ambiguous as a matter of law.” Burton v. Choctaw County, 730 So.2d 1, 6 (Miss.1997) (quoting Cherry v. Anthony, Gibbs, Sage, 501 So.2d 416, 419 (Miss.1987)).

¶ 14. This Court has said that “silence alone does not necessarily create an ambiguity as a matter of law.” Facilities, Inc. v. Rogers–Usry Chevrolet, Inc., 908 So.2d 107, 115 (Miss.2005). In Facilities, Inc.,this Court found that, although the Court of Appeals held that a lease agreement between the parties was not ambiguous, the Court of Appeals improperly considered extrinsic or parol evidence in the analysis portion of its opinion. Id. at 110. We found that, although the lease agreement was silent as to whether the bonus rent would apply to new vehicle sales at the subject property, it was not ambiguous and, therefore, Rogers–Usry was not required to pay bonus rent for sales that did not occur on the leased property. Id. at 115–16 (“It is the silence, not the language of the [operating agreement], that has created this dispute. However, silence alone...