Groundworx, LLC v. Thomas A. Blanton
234 So. 3d 363
| Miss. | 2017Background
- In January 2014 the City of Hattiesburg and Groundworx executed a fully integrated contract: Groundworx would design, build, own, operate a wastewater land-application system and obtain $147 million financing; the City covenanted to pay certain debt-service interest and related payments once Groundworx had closed financing. The contract expressly allowed either party to terminate if Groundworx had not closed financing by June 2, 2014.
- Groundworx sought financing and alleged City officials promised to raise sewer rates to support bonding; the city council approved a rate increase but the mayor vetoed it, and Groundworx failed to close financing by the contractual deadline.
- Groundworx sued the City after June 2, 2014, alleging breach of contract (claiming the City had an obligation to identify a revenue stream or had entered an extracontractual promise to raise rates) and promissory estoppel; it sought specific performance and about $6.27 million in damages.
- The City moved to dismiss under Rule 12(b)(6), arguing the integrated contract contained no obligation to identify revenue or raise rates and that unauthorized oral promises by city officials cannot bind the City.
- Intervenor Thomas Blanton asserted the contract was void ab initio under Miss. Const. art. 7, § 183 (prohibiting lending a municipality’s credit to a private corporation); the chancery court found the contract unconstitutional and dismissed Groundworx’s amended complaint with prejudice.
- On appeal the Mississippi Supreme Court reviewed de novo, affirmed dismissal, but rested its decision on contract and estoppel grounds rather than resolving the constitutional question.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the contract imposed a duty on the City to identify a revenue stream (1.3x debt service) before Groundworx closed financing | Groundworx: the contract (or its practical effect) required the City to ensure a revenue stream to enable bonding | City: the fully integrated contract created payment obligations only after Groundworx closed financing; contract expressly allowed termination if financing was not closed by the deadline | Held: No contractual duty to identify revenue stream exists in the integrated contract; dismissal affirmed |
| Whether an alleged post-contract "express agreement" by City officials to raise sewer rates created a binding contractual obligation | Groundworx: City officials orally agreed after execution to raise rates so bonding would proceed | City: Any municipal action to bind the City must be entered in its minutes per Mississippi law; no minute entry exists | Held: Oral side agreement not binding; no minute entry alleged, so no triable contract claim |
| Whether promissory estoppel can bind the City based on assurances by City representatives | Groundworx: relied to its detriment on assurances that the City would raise rates | City: Municipal promises not entered on official minutes are unauthorized and ultra vires; estoppel does not bind a city | Held: No estoppel against the City for unauthorized oral promises; estoppel claim fails |
| Whether intervenor Blanton’s constitutional challenge or his standing invalidates the contract and alters the outcome | Groundworx: appellate focus should be on Blanton’s intervention and constitutionality; Blanton lacked standing and failed to follow statutory challenge procedure | Blanton/City: Blanton can challenge; but even absent constitutional ruling, the City argues dismissal is proper on contract/estoppel grounds | Held: Court did not need to resolve constitutional or intervenor issues because dismissal is affirmed on independent contract/estoppel grounds; constitutional ruling below unnecessary to decision |
Key Cases Cited
- Booneville Collision Repair, Inc. v. City of Booneville, 152 So. 3d 265 (Miss. 2014) (standard for reviewing Rule 12(b)(6) dismissal)
- Colle Towing Co. v. Harrison Cty., 57 So. 2d 171 (Miss. 1952) (municipal acts and contracts must be evidenced by valid entry upon the minutes to bind the city)
- Nichols v. Patterson, 678 So. 2d 673 (Miss. 1996) (city councils bind municipalities only in prescribed mode and manner; minutes required)
- Brister v. LeFlore County, 125 So. 816 (Miss. 1930) (municipal credit may not be used to assist private enterprise absent appropriate public ownership/control considerations)