Watkins Dev., LLC v. Jackson Redevelopment Auth.

• Decision Date: 03 October 2019
• Docket Number: NO. 2018-CA-00302-SCT,2018-CA-00302-SCT
• Citation: Watkins Dev., LLC v. Jackson Redevelopment Auth., 283 So.3d 170 (Miss. 2019)
• Parties: WATKINS DEVELOPMENT, LLC, and Farish Street Group, LLC v. JACKSON REDEVELOPMENT AUTHORITY, Central Mississippi Planning and Development District, Inc.
• Court: Mississippi Supreme Court

283 So.3d 170

WATKINS DEVELOPMENT, LLC, and Farish Street Group, LLC

v.JACKSON REDEVELOPMENT AUTHORITY, Central Mississippi Planning and Development District, Inc.

NO. 2018-CA-00302-SCT

Supreme Court of Mississippi.

October 3, 2019

ATTORNEYS FOR APPELLANTS: W. DAVID WATKINS, ROBERT L. GIBBS, Jackson

ATTORNEYS FOR APPELLEES: MARK D. HERBERT, GINNY Y. DELIMAN, Madison, JAMES W. SHELSON, PERNILA STIMLEY BROWN, Jackson

BEFORE RANDOLPH, C.J., ISHEE AND GRIFFIS, JJ.

ISHEE, JUSTICE, FOR THE COURT:

¶1. The Jackson Redevelopment Authority (JRA) leased several parcels along Farish Street in Jackson to the Farish Street Group (FSG). In exchange for a long-term lease and other favorable terms, FSG was given a set period of time to renovate the properties and to sublet them to retail establishments. Watkins Development, which owned half of FSG, contracted with FSG to do the renovations. The plan was to build an entertainment district on Farish Street, but after a few years only a fraction of the renovations were done, and none of the properties were occupied by tenants. JRA terminated the lease, and this litigation followed. The Hinds County Chancery Court ultimately found that the lease was properly terminated, that no party had shown it was entitled to money damages, and that Watkins Development could not take a mechanic's lien on the property. We find no error and affirm.

FACTS

¶2. The Farish Street project began more than two decades ago. Between 1997 and 2001, the Jackson Redevelopment Authority acquired properties along Farish Street. In March 2002, JRA entered into a lease with Performa Mississippi, LLC, to develop the area into the "Farish Street Entertainment District." But after six years, Performa had failed to move forward with any significant development.

¶3. During the summer of 2008, David Watkins and his company Watkins Development formed Farish Street Group, LLC, to take over the project. On June 17, 2009, Performa assigned the lease to FSG. FSG and JRA then executed an amended lease agreement on January 27, 2010. The same day, Watkins Development entered into an agreement with FSG to perform nearly all of the construction and development required by the amended lease. The construction was funded in part by a $5.4 million loan from the State.

¶4. The amended lease agreement laid out detailed and specific deadlines FSG was required to meet to refurbish and sublet the properties. It was uncontested that none of the deadlines were met, and after three years none of the properties had been sublet.

¶5. On July 13, 2013, JRA's board voted to terminate the lease as to some of the parcels for "failure to commence and/or complete construction or renovation of improvements." On July 26, 2013, JRA gave written notice of the termination as to those parcels. On September 25, 2013, JRA gave written notice of the termination of the rest of the parcels, effective October 5, 2013. And on October 7, 2013, JRA sent another letter confirming that the lease was "fully and finally terminated." JRA's letters cited FSG's "failure to commence and/or complete construction or renovation of improvements."

¶6. On October 3, 2013, another contractor hired by FSG, Dale Partners Architects, filed a mechanic's lien on the properties in the amount of $322,180.26.¹ Four days later, Watkins Development filed a mechanic's lien claiming that $4,757,484.33 was owed. JRA sued to expunge the liens.

¶7. On July 24, 2014, JRA filed a motion for partial summary judgment asking the court to declare both liens invalid. On July 23, 2015, the chancellor granted the partial summary-judgment motion, holding that the liens were invalid as a matter of law. The chancellor declined to award punitive damages, however, finding that the liens had not been filed "with a bad purpose, an evil purpose, without ground for believing the act to be lawful."

¶8. After a trial, the chancellor found that the lease was properly terminated, but he denied monetary damages to JRA because of the delay in terminating the lease and the valuable improvements that had been made to the properties. The chancellor also denied any monetary award to FSG because it had not proved "any specific monetary amount which has been gained by JRA due to FSG's actions." Dale Partners Architects did not appeal the expungement of its lien.

DISCUSSION

1. Materiality of Breach of Lease

¶9. Farish Street Group admits it breached its development obligations under the lease, "early and often," as the chancellor found. But the developers assert FSG substantially complied with the lease, and consequently the chancellor was required to reinstate it. The developers contend that the timetables were "arbitrary" and "political cover" and that they were "assured time and time again that the timetable would be modified, as needed, to fit the realities of the market conditions and the progress of the development." The developers maintain that market conditions were difficult and that there were unexpected construction delays, but they say they worked hard to secure investment and to proceed with the development to the extent it was possible. They give varying figures for the total investment, but they assert it was more than $10 million.

¶10. The developers argue that FSG's failure to complete the construction on time was not a material breach of the lease and that substantial compliance with the construction requirements of the lease would have rendered FSG's breaches immaterial and not a basis to terminate the lease. "Rescission of a contract is allowed in cases of fraud, mistake, or material breach." Daniels v. Crocker , 235 So. 3d 1, 17 (Miss. 2017) (internal quotation marks omitted) (quoting Jackson Motor Speedway, Inc. v. Ford , 914 So. 2d 779, 783 (Miss. Ct. App. 2005) ). The remedy for a breach of contract that is not material is money damages, not rescission. Id. This Court has said,

The termination of a contract is an "extreme" remedy that should be "sparsely granted." [citations omitted]. Termination is permitted only for a material breach. A breach is material when there "is a failure to perform a substantial part of the contract or one or more of its essential terms or conditions, or if there is such a breach as substantially defeats its purpose," Gulf South Capital Corp. v. Brown , 183 So. 2d 802, 805 (Miss. 1966), or when "the breach of the contract is such that upon a reasonable construction of the contract, it is shown that the parties considered the breach as vital to the existence of the contract," Matheney v. McClain , 248 Miss. 842, 849, 161 So. 2d 516, 520 (1964).

J.O. Hooker & Sons, Inc. v. Roberts Cabinet Co. , 683 So. 2d 396, 402–03 (Miss. 1996) (alteration in original) (quoting UHS-Qualicare v. Gulf Coast Cmty. Hosp., Inc. , 525 So. 2d 746, 756 (Miss. 1987) ). In the particular context of a lease,

A tenant's right to possession may not be conditioned on perfect performance of the lease but may be forfeited only upon a material breach or a violation of a substantial obligation .... A tenant's immaterial or trivial breach, or a relatively minor failure of performance on the part of one party, does not justify a forfeiture of the lease.

52 CJS Landlord and Tenant § 189 (2019) (footnotes omitted) (citations omitted), Westlaw.

¶11. At the outset, we note that the developers assert the chancellor found they had substantially complied with the lease, but the chancellor never made such a finding. Instead, the chancellor observed that FSG had claimed substantial compliance under the lease. But the chancellor rejected the claim.

¶12. "A chancellor's findings of fact will not be disturbed unless they are manifestly wrong or clearly erroneous, or unless the chancellor applied an erroneous legal standard." Stover v. Davis , 268 So. 3d 559, 563 (Miss. 2019) (internal quotation marks omitted) (quoting Wright v. Roberts , 797 So. 2d 992, 997 (Miss. 2001) ). The developers criticize the chancellor's decision on both factual and legal grounds, but we find that they have failed to show any error. First, they point out that the chancellor did not discuss their substantial-performance argument at length; he noted the argument had been made and then rejected it, saying only that he "had no basis upon which to reinstate the lease." The chancellor then said that it was "clear FSG failed to meet all the provisions and deadlines contained in the lease, thereby breaching same." According to the developers, the chancellor erroneously held that the lease could be terminated as a result of any violation, however trivial. But the chancellor actually was referring to monetary damages, as evidenced by the next sentence: "However, this Court further finds no merit in JRA's request for damages, costs, and attorney's fees." We are satisfied that the chancellor did not apply an erroneous legal standard as to the materiality of the breach.

¶13. Since there has been no showing the chancellor applied an erroneous legal standard, the materiality of the breach was a question of fact for the chancellor and is subject to a deferential review by this Court. See Sanford v. Federated Guar. Ins. Co. , 522 So. 2d 214, 217 (Miss. 1988). "A chancellor's findings of fact will not be disturbed unless they are manifestly wrong or clearly erroneous ...." Stover v. Davis , 268 So. 3d 559, 563 (Miss. 2019) (internal quotation marks omitted) (quoting Wright v. Roberts , 797 So. 2d 992, 997 (Miss. 2001) ).

¶14. On the merits of their materiality argument, the developers assert that FSG performed substantial work on the properties: it spent millions of dollars on construction and development. This argument misses the mark, as "substantial performance" is a legal term of art meaning "performance of all important particulars ...." Garner v. Hickman , 733 So. 2d 191, 196 (Miss. 1999) (quoting Bevis Constr. Co. v. Kittrell , 243 Miss. 549, 139 So. 2d 375, 379 (1962) ). In the context of a lease,

The factors set forth in the Restatement of Contracts (Second) for

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