The Saxon Group Inc. v. South Mississippi Electric Power Association

IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI
NO. 2017-CA-01482-COA
THE SAXON GROUP INC. APPELLANT
v.
SOUTH MISSISSIPPI ELECTRIC POWER APPELLEE
ASSOCIATION
DATE OF JUDGMENT: 09/21/2017
TRIAL JUDGE: HON. ROBERT B. HELFRICH
COURT FROM WHICH APPEALED: FORREST COUNTY CIRCUIT COURT
ATTORNEYS FOR APPELLANT: CLYDE X. COPELAND
JASON EDWIN WEEKS
ATTORNEYS FOR APPELLEE: MARK EDWARD NORTON
LAWRENCE CARY GUNN JR.
NATURE OF THE CASE: CIVIL - CONTRACT
DISPOSITION: AFFIRMED - 09/03/2019
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
BEFORE CARLTON, P.J., WESTBROOKS AND McCARTY, JJ.
WESTBROOKS, J., FOR THE COURT:
¶1. Southern Mississippi Electric Power Association (SMEPA) contracted with a Georgia
construction company named Saxon Group Inc. (Saxon), to provide mechanical and electrical
construction services. In violation of the construction contract, Saxon defaulted on payments
to its subcontractors and suppliers, forcing Hanover Insurance Company (Hanover), Saxon’s
surety, to assume Saxon’s posture as payor. Saxon sued SMEPA in Forrest County Circuit
Court, seeking contract reformation and alleging several claims for breach of contract.
¶2. On SMEPA’s motion, the circuit court granted partial summary judgment on Saxon’s
claim for interest owed for monies remitted to Hanover. At the conclusion of Saxon’s case
in chief, SMEPA moved for a directed verdict on Saxon’s consequential damages claim. The
court denied the motion. The jury found Saxon was entitled to recovery on all of its
remaining claims. SMEPA then filed a motion for a judgment notwithstanding the verdict,
which the court granted. Saxon’s $1.2 million verdict and corresponding claim for
consequential damages were set aside. Aggrieved, Saxon now appeals. After reviewing the
record, we affirm the circuit court’s judgments.
FACTS & PROCEDURAL HISTORY
¶3. SMEPA, now known as Cooperative Energy, is a South Mississippi electric
cooperative headquartered in Hattiesburg, Mississippi.1 Saxon was a Georgia heavy-
industrial construction company owned by Jeni Bogdan. On or about August 9, 2010, Saxon
received a “Request for Quotation” from the engineering firm, Burns McDonnell; the request
solicited bids for the opportunity to act as general contractor over SMEPA’s Moselle
Repower Project (Project. No. 49302) (“Moselle Project”).2 The Moselle Project sought to
upgrade and modernize SMEPA’s Moselle, Mississippi Power Station. Saxon, one of five
invited contractors, submitted bids for the mechanical and electrical construction contracts
associated with the project. By submitting the lowest bid, two percent lower than Yates
1
After 75 years of doing business as “Southern Mississippi Electric Power
Association,” the company changed its name to “Cooperative Energy” on November 9,
2016.
2
Burns McDonnell is a full-service engineering firm; they provided engineering and
construction oversight for the Moselle project.
2
Construction, Saxon was awarded both contracts.
¶4. Consistent with industry custom, Saxon was compelled to obtain a surety bond as a
prerequisite to securing the construction contract. The bond, obtained from Hanover,
guaranteed indemnity for SMEPA in the event Saxon failed to meet its obligations under the
Moselle contract. To acquire Hanover as its surety, Saxon signed an unqualified indemnity
agreement, assigning all of its rights under the SMEPA contract to Hanover in the event of
a default. The agreement further provided that, if necessary, Hanover would be responsible
for fulfillment of Saxon’s unrealized contractual obligations.
¶5. As the project proceeded, Saxon indeed fell behind on payments to its subcontractors
and suppliers. On or about July 2012, SMEPA was contacted by several subcontractors and
made aware of the defaults. SMEPA ceased paying Saxon based on the terms of the
construction contract, which provided that Saxon “within five (5) days after receipt of any
payment from [SMEPA]” would pay all of its material suppliers and subcontractors. As a
penalty for violating the provision, the contract stated that “[n]o payment shall be due while
[Saxon] is in default” and allowed SMEPA to withhold payment based on Saxon’s “failure
to perform.” In August 2012, Saxon sent correspondence acknowledging the delinquent
accounts and assuring SMEPA that they were on track to bring them current pending the
resolution of some disputed invoice amounts the subcontractors and suppliers submitted.
Saxon demobilized from the work site in September 2012; the accounts were still past due.
A subsequent investigation into the defaulted payments revealed Saxon was, in fact, upside
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down on the contractual obligations and ultimately prompted SMEPA to contact Saxon’s
surety, Hanover, in October 2012.3
¶6. In March 2013, Hanover issued a “freeze funds” letter, demanding that SMEPA
submit the final contract payments to Hanover instead of Saxon, citing their indemnity
agreement. The surety paid all of the aggrieved vendors, disbursing a total of $3,017,455.04;
the final payment Hanover received from SMEPA was only $2,690,721.79. SMEPA agreed
that a significant delay of about two years occurred before Hanover was paid the remainder
owed on the contract. No clear explanation was provided for the delay, but there were
several factors cited in the record, namely Saxon’s failure to submit the required forms and
the ongoing litigation of the current case. After receiving a valid Certificate of Completion
on April 8, 2015, SMEPA submitted the final payment amount to Hanover on May 26, 2015.4
Saxon maintains the money was improperly withheld and faults SMEPA’s delayed payment
for its downfall. Unable to maintain as an independent company, Saxon agreed to an
acquisition of its assets by Primoris Services Corporation in 2012.
¶7. Saxon filed a complaint on February 14, 2014, blaming SMEPA for the “ruination of
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SMEPA contacted individual subcontractors and found that they were owed more
than Saxon indicated. The delinquency totals were significantly more than the total contract
with SMEPA was worth. Even if SMEPA paid out the entire amount due on the contract,
Saxon would not have been able to cover the delinquencies. Hanover was contacted to pay
the aggrieved suppliers and subcontractors.
4
The final payment submitted by SMEPA to Hanover was deficient by $326,733.25
compared to the settlement payments Hanover made to fulfill SMEPA’s outstanding debts
to suppliers and subcontractors.
4
the company.” The complaint sought equitable reformation of the parties’ mechanical
construction contract, damages for bad faith breach of contract and wrongful withholding of
amounts due related to the mechanical contract and a separate electrical contract. SMEPA
denied the allegations and filed a motion for partial summary judgment on May 29, 2015.
The court denied the motion in an order entered January 19, 2016.
¶8. Together, the parties reached a partial settlement on the wrongful withholding claim
and subsequently dismissed the reformation claim voluntarily. Despite the previous denial,
on August 12, 2016, SMEPA filed another pre-trial motion for final summary judgment on
Saxon’s remaining claims that:
(1) SMEPA improperly withheld $250,000 as liquidated damages;
(2) SMEPA wrongfully back charged Saxon in the amount of $93,326.39
for incomplete work;
(3) SMEPA owes Saxon interest on monies paid to Hanover;
(4) Saxon is entitled to consequential damages.
On December 19, 2016, the court entered an order granting partial summary judgment on
Saxon’s claim for contractual interest on monies paid to its surety; the parties proceeded to
trial on the three remaining issues.
¶9. At the conclusion of Saxon’s case, SMEPA motioned the court for a directed verdict.
The motion was denied and a jury verdict, including consequential damages of $1.2 million,
was awarded to Saxon. SMEPA responded with a motion for judgment notwithstanding the
verdict on Saxon’s consequential damages claim, which the court granted. Aggrieved, Saxon
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appeals the grant of partial summary judgment and the judgment notwithstanding the verdict.
STANDARDS OF REVIEW
¶10. This Court employs a de novo standard of review when a party appeals the grant or
denial of summary judgment. Waltman v. Engineering Plus Inc., 26 So. 3d 758, 760 (¶7)
(Miss. 2019) (citing Bullock v. Life Ins. Co. of Miss., 872 So. 2d 658, 660 (¶6) (Miss. 2004)).
The Court “examines all the evidentiary matters before it – admissions in pleadings, answers
to interrogatories, depositions, affidavits . . . [and] the evidence must be viewed in the light
most favorable to the party against whom the motion has been made.” Chapel Hill LLC v.
SoilTech Consultants Inc., 112 So. 3d 1097, 1099 (¶9) (Miss. Ct. App. 2013).
¶11. Likewise, the Court applies a de novo standard when reviewing a judgment
notwithstanding the verdict. The court must determine whether the trial court “properly
found that the jury’s verdict was not supported by a legally sufficient evidentiary basis.”
White v. Stewman, 932 So. 2d 27, 36 (¶25) (Miss. 2006). Furthermore, we must consider the
evidence in the light most favorable to the non-movant, giving him the benefit of all
favorable inferences that may be reasonably drawn from the evidence. Id. (citing Steele v.
Inn of Vicksburg Inc., 697 So. 2d 373, 376 (Miss. 1997)). If, after viewing the evidence in
this manner, we conclude that reasonable men could only have found in favor of the movant,
we must reverse and render. Id. Conversely, if we find substantial evidence to support the
verdict (i.e., “evidence of such quality and weight that reasonable and fair-minded jurors in
the exercise of impartial judgment might have reached different conclusions”) then we must
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affirm the jury’s verdict. Id.
DISCUSSION
I. Summary Judgment on Contractual Interest Claim
¶12. SMEPA asserts no contractual interest payments are owed to Saxon because (1) Saxon
assigned any and all payment rights to its surety, Hanover, and (2) all payments by SMEPA
were remitted by the due date outlined in the contract. Saxon, however, contends the monies
for interest are due, and despite the assignment, should be paid to their company to prevent
SMEPA from receiving a windfall. Saxon holds SMEPA accountable for the payment
defaults that ultimately triggered the assignment to Hanover. The circuit court granted
summary judgment on Saxon’s claim for interest, reasoning that Saxon had assigned all of
its rights, including any interest due on delayed payments, to Hanover. We agree.
¶13. Saxon argues the indemnity agreement with Hanover provides a reversionary right to
sue SMEPA for funds owed under their original contract and allows bifurcation of the
Moselle contract payment rights; Hanover gained rights to the principal, while Saxon
maintained the rights to the alleged interest due. We find no evidence in the record to
support Saxon’s contention. “The general rule in Mississippi is that the right to receive
money due or to become due under an existing contract may be assigned.” So. Miss.
Planning and Dev. Dist. v. Alfa Gen. Ins. Corp., 790 So. 2d 818, 820 (¶12) (Miss. 2001)
(citing Great S. Nat’l Bank v. McCullough Envtl. Servs. Inc., 595 So. 2d 1282, 1286 (Miss.
1992)). In Ford v. White, 495 So. 2d 494 (Miss. 1986), the Court held that the “assignee
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must acquire all [the] rights, interests and remedies available to the assignor.” To secure
bonding, Saxon executed an expansive indemnity agreement, in which “all monies retained,
due, or due in the future on account of any contract . . . in which any or all of the indemnitors
have an interest . . . ” were assigned to Hanover as its surety for the Moselle Project contract.
(Emphasis added). There is no mention of limited assignment. The agreement provided the
assignment would go into effect if Saxon “delay[ed], default[ed] . . . or breach[ed] any
contract secured by [the] bond, or fail[ed], neglect[ed], or refuse[d] in any manner to timely
pay for any labor or material used in the prosecution of any contracts secured by [the] bond.”
¶14. Neither party disputes the payment defaults to subcontractors and suppliers or the fact
that Hanover stepped into Saxon’s place to bring the accounts current. “[P]robably there are
few doctrines better established than that a surety who pays the debt of another is entitled to
all the rights of the person he paid to enforce his right to be reimbursed” and this is “known
as the right of subrogation.” Pearlman v. Reliance Ins. Co., 371 U.S. 132, 136-37 (1962).
“Subrogation is the substitution of one person in place of another, whether as creditor or as
the possessor of any rightful claim.” St. Paul Prop. & Liab. Ins. Co. v. Nance, 577 So. 2d
1238, 1241 (Miss. 1991). We find that Saxon indeed defaulted and, as subrogee, Hanover
rightfully assumed rights to the Moselle contract in toto.
¶15. The circuit court correctly found no genuine issue of material fact with regard to any
interest payments due. Any rights or payments owed to Saxon, as outlined in the original
agreement, were assigned to Hanover upon default to the subcontractors and suppliers. Now
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absent privity, Saxon cannot enforce the contract terms against SMEPA and lacks standing
to pursue the current claim on Hanover’s behalf. Therefore, it is unnecessary to address
payment timeliness. Accordingly, we affirm the grant of summary judgment.
II. Judgment Notwithstanding the Verdict
¶16. Saxon also contends that the circuit court erred in granting SMEPA’s Motion for
Judgment Notwithstanding the Verdict. As the “reviewing court,” we are “concerned with
what the contracting parties have said to each other” and “the objective fact – the language
of the contract.” Royer Homes of Miss. Inc. v. Chandeleur Homes Inc. 857 So. 2d 748, 752
(¶9) (Miss. 2003) (citing Turner v. Terry, 799 So. 2d 25, 32 (Miss. 2001)); Osborne v.
Bullins, 549 So. 2d 1337, 1339 (Miss. 1989). Courts should “seek the legal purpose and
intent of the parties from an objective reading of the words employed in the contract to the
exclusion of parol or extrinsic evidence.” Royer, 857 So. 2d at 752 (¶9). The construction
contract signed by both parties includes a waiver of consequential damages and reads:
Section 4. Wavier of Consequential Damages: Neither party shall be
responsible to the other for, or held liable for, consequential damages,
including, without limitation, damages in the nature of loss of use of existing
property, loss of profits, loss of contract, loss of product or business
interruption.
The jury was instructed to find in favor of SMEPA if “[the above] paragraph was agreed to
by both parties . . . .”5 Saxon argues the jury correctly found that it did not “agree” with the
waiver of damages clause in the contract. However, Saxon’s owner, Jeni Bogdan testified
5
Jury Instruction D-9 contained the instruction.
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to the contrary at trial.
SMEPA Attorney: Both parties to this contract gave up the right to sue each
other for consequential damages; did they not?
Bogdan: Yes, sir.
SMEPA Attorney: If this power plant had been held up for an inordinate
amount of time, SMEPA would not have had the right to
sue Saxon for loss of use of the existing property, loss of
profits, loss of contract, or loss of product or business
interruption; isn’t that correct?
Bogdan: Yes, but they would have had the option . . . to have the
work done should Saxon have defaulted on any of that.
SMEPA Attorney: But the point is SMEPA gave up the right to sue your
company for consequential damages under this clause?
Bogdan: That is how it reads, yes, sir.
SMEPA Attorney: And your company also gave up the right to sue SMEPA
for consequential damages under this clause; didn’t it?
Bogdan: Yes, sir, we did.
¶17. Additionally, Saxon cites four exceptions to the enforcement of a no-damage-for-
delay clause set forth in Mississippi Transportation Commission v. SCI Inc., 717 So. 2d 332,
338 (¶26) (Miss. 1998) (holding that despite a no-damage-for-delay clause, damages may be
recovered when the delay (1) was not contemplated by the parties; (2) resulted from fraud;
(3) extended an unreasonable length of time such that the contract could be justifiably
abandoned; or (4) was not named as one of the delays listed within the clause). SMEPA
conceded that such clauses can be likened to the waiver of consequential damages at issue
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here. But, Saxon failed to introduce, request, or object to the exclusion of a jury instruction
on the SCI exceptions at the circuit court. Therefore, Saxon cannot raise them now. Saxon
asserts the instructions given to the jury were erroneous without the SCI exceptions, but their
argument is ill-reasoned and without merit. Failure to request or propose a plausibly
favorable jury instruction rests with Saxon, not the circuit court or SMEPA. In fact, the
record indicates that a jury instruction on the SCI exceptions was mistakenly submitted by
SMEPA for consideration, and ultimately dismissed voluntarily by Saxon’s trial counsel.
Saxon may not now argue that the “instruction was erroneous for a reason other than the
reason assigned on objection to the instruction at trial.” Young v. Robinson, 538 So. 2d 781,
783 (Miss. 1989). No such objection was made to the proposed and accepted D-9 jury
instruction. Given the instructions submitted to the jury, the circuit court correctly granted
the judgment notwithstanding the verdict.
CONCLUSION
¶18. We find no genuine issue of material fact existed with regard to Saxon’s claim for
interest on monies paid by SMEPA to Hanover and affirm the grant of summary judgment.
Additionally, the trial court correctly concluded that Saxon was precluded from seeking
consequential damages; thus the judgment notwithstanding the verdict was properly granted.
¶19. AFFIRMED.
BARNES, C.J., CARLTON AND J. WILSON, P.JJ., GREENLEE, TINDELL,
McDONALD, LAWRENCE AND McCARTY, JJ., CONCUR. C. WILSON, J., NOT
PARTICIPATING.
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