Ne. Mental Health-Mental Retardation Comm'n v. Cleveland

187 So.3d 601

NORTHEAST MENTAL HEALTH–MENTAL RETARDATION COMMISSION

v.V.M. CLEVELAND.

No. 2014–CA–01195–SCT.

Supreme Court of Mississippi.

March 17, 2016.

Fred L. Banks, Jr., Jackson, William Michael Beasley, Jr., Tupelo, attorneys for appellant.

Jason D. Herring, Michael S. Chapman, Gary L. Carnathan, Tupelo, attorneys for appellee.

EN BANC.

WALLER, Chief Justice, for the Court:

¶ 1. The Northeast Mental Health–Mental Retardation Commission challenges the validity of a ninety-nine-year fixed-lease agreement with a private contractor named V.M. Cleveland. The Commission contracted to pay Cleveland $18,000 per month over a ninety-nine-year period to build and to lease a facility on land owned by the Commission. Payments continued uninterrupted for ten years, until the Commission became concerned about the agreement's legality. The Commission stopped making payments and sought to rescind the agreement. The chancellor found that the agreement was enforceable and ordered the Commission to pay Cleveland $612,000 in back rent. The Commission appeals, arguing that the agreement's ninety-nine-year duration renders the agreement voidable at the Commission's discretion as a matter of law due to the rule against binding successors. The Commission also argues that the specific terms of the agreement are unreasonable, illegal, or both, and thus void ab initio as a matter of law. Because this agreement violates the common-law rule against binding successors, we reverse the chancellor's judgment and render judgment in the Commission's favor.

FACTS AND PROCEDURAL HISTORY

¶ 2. The Northeast Mental Health–Mental Retardation Commission ("the Commission") is a regional health commission established under Section 41–19–33 of the Mississippi Code and a political subdivision of the State of Mississippi. The Commission is governed by a seven-member board of commissioners, each of whom serves a four-year term.¹ Miss.Code Ann. § 41–19–35 (Rev.2013).

¶ 3. In June 2000 the Commission and V.M. Cleveland entered into a Contract and Lease Agreement ("the Agreement") to build a facility to house and operate the Commission's chemical-dependency facilities in Lee County, Mississippi. Cleveland agreed to construct the facility at his own expense on land owned by the Commission.² The Commission leased its state-owned land to Cleveland and committed to pay Cleveland $18,000 per month for ninety-nine years and to perform certain maintenance. Cleveland was not obligated to pay the Commission for the use of the land. The Agreement provided that, should the Commission have insufficient state and federal funds to make payments at any time during the ninety-nine-year period, the Commission was to quitclaim its land and the facility to Cleveland. After Cleveland completed the facility, the Commission began paying rent.

¶ 4. Four years later, the Commission hired Robert Smith as the new director. After reviewing the Agreement, Smith became concerned that the ninety-nine-year term and forfeiture clause were illegal. Based on Smith's advice, in September 2011, the Commission agreed to stop making payments and voted to void the Agreement. Up to that date, the Commission had expended $2,160,000 in lease payments to Cleveland.

¶ 5. The Commission sought a declaratory judgment in the Lee County Chancery Court, claiming that the Agreement was void on the basis that a board governing a political subdivision may not enter into agreements that bind successor boards without express statutory authority. Cleveland answered the complaint in November 2011, denying the Agreement's invalidity and asserting counterclaims for declaratory relief affirming the lease's terms and awarding specific performance and breach-of-contract damages.

¶ 6. In June 2012, Cleveland moved for summary judgment. The Commission filed a competing motion for summary judgment. In August 2012, the chancellor granted partial summary judgment in Cleveland's favor as to the Agreement's enforceability. But the chancellor found genuine issues of material fact remained as to the necessity for the Commission to rescind the lease or whether such action directly or indirectly promoted its statutory purposes. In July 2014, a trial was conducted on the remaining issues. In August 2014, the chancellor found that the Agreement was fully enforceable and awarded $612,000 in back rent to Cleveland.

¶ 7. The Commission appeals and raises the following issues: (1) whether the Agreement was voidable at the Commission's discretion as a matter of law based upon the rule against binding successors, and (2) whether the Agreement was void ab initio as a matter of law based on its unreasonable duration, fixed rental terms, and an illegal interest rate. Finding that the chancellor erred in not holding that the Agreement was voidable at the Commission's discretion due to the rule against binding successors, we reverse this judgment and render judgment in the Commission's favor. Since the first issue is dispositive of this case, we decline to address the second issue.

ANALYSIS

¶ 8. The inquiry here is a question of law. Because the issue here concerns a question of statutory interpretation and contract construction, it is governed by a de novo standard of review. Epperson v. SOUTHBank, 93 So.3d 10, 16 (Miss.2012) ; Capital One Servs. v. Page, 942 So.2d 760, 762 (Miss.2006).

I. Whether the Agreement was voidable at the Commission's discretion as a matter of law based upon the rule against binding successors.

¶ 9. Under the common law in Mississippi, governing bodies, whether they be elected or appointed, may not bind their successors in office by contract, unless expressly authorized by law, because to do so would take away the discretionary rights and powers conferred by law upon successor governing bodies. See, e.g., Biloxi Firefighters Ass'n v. City of Biloxi, 810 So.2d 589 (Miss.2002) ; Smith v. Mitchell, 190 Miss. 819, 1 So.2d 765 (1941) ; American Oil Co. v. Marion County, 187 Miss. 148, 192 So. 296 (1939) ; Tullos v. Town of Magee, 181 Miss. 288, 179 So. 557 (1938) ; Edwards Hotel & City R. Co. v. City of Jackson, 96 Miss. 547, 51 So. 802 (1910). The law provides that these types of contracts are voidable at the discretion of the successor governing body. Id.

A. A political board or commission cannot prevent a successor administration from exercising an express statutory power by contract.

¶ 10. Central to our decision here is American Oil, 187 Miss. 148, 192 So. 296. The Commission argues that, according to American Oil, a contract that binds successors is voidable at the option of the successor board, and that this is especially true with lease agreements that prevent public bodies from selling their property. Cleveland responds that this Court voided the lease in American Oil solely because the statute at issue in American Oil did not grant the board the power to lease property. Since Section 41–19–33(1)(a) of the Mississippi Code grants the Commission the authority to lease, Cleveland argues that American Oil does not apply here. Cleveland correctly notes that the American Oil Court voided the lease because the board lacked statutory authority to lease county property in that case. But that was not the only reason the Court voided the lease contract.

¶ 11. In American Oil, the board of supervisors of Marion County executed a lease for county property for a term of twenty-five years. Id. at 297. The successor board filed a bill to cancel the lease executed by its predecessor board, and the trial court cancelled the lease. Id. The board of supervisors in American Oil had statutory authority to sell and convey county property. Id. But this Court found that the statutory authority "did not embrace the power to lease [county property] for a term of years." Id. at 298. The Court declared the lease null and void, reasoning that "if a predecessor board could lease county land, it would prevent its successors from exercising the power to sell and convey, the very thing which the Legislature has granted—the power to sell lands of the county which have ceased to be used or useful for public purposes." Id. at 299–300 (emphasis added).

¶ 12. The Court also held the lease contract was voidable as a matter of law because its excessive duration prevented the board from exercising its full authority to sell and convey property, even if the board had the power to lease. American Oil, 192 So. at 299. That is why this Court stated "[a] board of supervisors may not, by contract, preclude itself or its successors in office from the right and the duty to exercise the power given it by a statute, whenever, in its judgment or discretion, it is deemed necessary to exercise a clearly granted power." Id. The Court voided the lease because the board lacked statutory authority to lease and it was for an impermissible duration that bound successor boards. Cases before and after American Oil support this reading of the case. See infra ¶¶ 14–20 (discussing Biloxi Firefighters, 810 So.2d at 590–93, and Edwards Hotel, 51 So. at 803–04 ).

¶ 13. The Agreement between the Commission and Cleveland prevents future commissions from selling and conveying the subject property, exactly like the lease in American Oil The Agreement requires the Commission to pay Cleveland $18,000 a month in rent for ninety-nine years and to lease the facility on state-owned property without the ability for successor commissions to renegotiate. It attempts to bind successor commissioners, who serve only four-year terms, without any statutory authority. By entering into this Agreement, the Commission's statutory authority "[t]o acquire, own and dispose of real and personal property" under Section 41–19–33(1)(m) of the Mississippi Code clearly was impeded. We agree that the Agreement is voidable at the Commission's discretion as a matter of law.

B. The Agreement violates the rule against binding successors and is voidable as a matter of law at the Commission's discretion.

¶ 14. This Court...