United States District Court, S.D. Mississippi, Northern Division
CARLTON W. REEVES, District Judge.
Before the Court are several motions for summary judgment. Docket Nos. 76, 79, 81. Having reviewed the parties' submissions and relevant law, and after holding a hearing on the motions on January 21, 2014, the Court is now ready to rule.
I. FACTUAL AND PROCEDURAL HISTORY
In 1978, Larry Taylor and Harrell Jeanes, Sr. ("Jeanes") - the deceased father of Plaintiffs William Jeanes and Harrell Jeanes, Jr. - built two metal buildings on approximately 5.28 acres of land on Highway 49 in Richland, Rankin County, Mississippi. The buildings were to be used for heavy engine repair and parts sales. The parties dispute whether Taylor and Jeanes jointly owned the property as individuals, or whether a partnership formed by Taylor and Jeanes owned it. Nevertheless, Taylor and Jeanes operated their heavy engine repair and parts sales business at the Highway 49 property for about ten years beginning in 1978.
On August 29, 1989, Taylor and Jeanes executed an agreement whereby they leased the land and buildings (hereinafter referred to collectively as "the Premises") to Detroit Diesel Realty, Inc. ("DDR"), a Michigan corporation. Docket No. 79-1. The term of the lease was 15 years, with an end date of August 31, 2004, unless the parties were to agree otherwise. After August 2004, the lease was continued on a month-to-month basis until February 2012. The monthly rent was $10, 000 for the first 5 years of the lease period, $15, 000 for the next 5 years, and $17, 000 thereafter. The lease includes the following provisions:
5. Maintenance and Repair. Tenant shall keep and maintain the Premises in as clean, sanitary and safe a condition and in as good order and condition as when delivered to it. Tenant shall use the Premises in a fashion consistent with Owner's prior use.
In the event Tenant fails to make or initiate any repair which it is required to make hereunder within 45 days after notice from Owner specifying the nature of the repair to be made, then the Owner may make such repair without prejudice to any other right or remedy it may have because of the Tenant's default. If Owner is required to make a repair supposed to be made by Tenant, the cost thereof will be due within ten (10) days after receipt of written notice thereof by Tenant....
8. Accidents, Indemnity and Public Liability Insurance. Owner shall not be liable for any damage to person or property sustained by Tenant or others caused by any non-repair of the Premises required of Tenant hereunder. Before entering on the Premises, Tenant shall procure and maintain public liability insurance insuring against claims for bodily injury, death or property damage occurring on, in or about the Premises in the amount of not less than TWO MILLION DOLLARS ($2, 000, 000.00) for injury to or death of one person, and in the amount of not less than FOUR MILLION ($4, 000, 000.00) for injury to or death of two or more persons, and in one occurrence, and for damage to property in the amount not less than ONE MILLION DOLLARS ($1, 000, 000.00).... Such policies shall name Owner, Tenant and all mortgagees as insureds, and shall, to the extent obtainable, contain an agreement by the insurer that such policies shall not be canceled or substantially modified without at least 30 days' prior notice to Owner.
Tenant will indemnify and hold owner harmless from and against all losses, costs, damages, expenses and liability, including but not limited to reasonable attorney fees, which owner may incur or pay out by reason of (a) any injury to persons or property occurring in, on or about the Premises, even though such might have been caused or contributed to by the negligence of Owner; (b) any breach or default hereunder on Tenant's part; (c) any work done in or to the Premises; (d) any maintenance or repair work performed by or required to be performed by Tenant hereunder; or (e) any act or negligence on the part of Tenant; provided, however, to the extent of the proceeds received by Owner under any insurance furnished by Tenant, Tenant's obligation to indemnify and hold harmless Owner against the claim covered by such insurance shall be deemed to be satisfied to such extent.
10. Assignment and Subletting. Tenant may assign or sublet this Lease or any interest therein or to the Premises or any part thereof.... Notwithstanding the assignment or subletting of the Premises, Tenant shall not be released from liability hereunder whether or not the Owner is required to consent to such assignment or subletting.
23. Surrender of Possession. Upon expiration of the term of this Lease, if Tenant has elected not to acquire the Premises, Tenant shall promptly and peaceably surrender the Premises in good condition and repair except for: (i) ordinary wear and tear, and (ii) damage resulting from causes not insured against because of Owner's failure to insure the Premises as required hereunder, acts of God, or alterations or additions agreed to by Owner.
Docket No. 79-1, at 2, 3, 6.
DDR occupied the Premises from August 1989 through 1995. On January 1, 1996, pursuant to Paragraph 10 of the lease, DDR and Clarke Power Services, Inc. ("Clarke") executed a sublease that allowed Clarke to sublease the Premises from DDR under terms that were similar, although not identical, to those included in the Taylor/Jeanes-DDR lease.
In 2004, Plaintiffs expressed to DDR their concern about the condition of the property, and they requested that DDR make certain repairs. In 2010, Plaintiffs hired Peoples Construction Corporation to estimate the cost of needed repairs, and they demanded that DDR pay for such repairs. DDR did not comply. The next year, on November 22, 2011, DDR gave Clarke notice that it was terminating the lease with Plaintiffs, and thereby terminating the sublease, effective February 22, 2012.
On July 18, 2012, Plaintiffs filed a Complaint against DDR, alleging that DDR had "breached the lease by failing to maintain the property as provided in the lease with the result that the leased property ha[d] deteriorated substantially and [was] unrentable." Docket No. 1, at 4. Plaintiffs further allege that DDR was obligated under the lease "to indemnify and hold owner harmless from all losses, costs, damages, expenses, liability, and attorney fees" for certain enumerated circumstances, Docket No. 1, at 3, and that DDR's actions amount to gross negligence that supports a claim for tortious breach of the lease agreement, id. at 4. Plaintiffs, therefore, argue that DDR is liable to Plaintiffs for the cost to perform repairs to the property, which was estimated to be $1, 198, 387 in 2010, for six months' lost rent at $17, 000 per month for the breach of the lease, and for punitive damages arising from tortious breach of the lease agreement. Id. at 4-5. In total, Plaintiffs allege damages of $1, 402, 000, plus punitive damages and attorneys' fees and costs. Id. at 5.
Based on the terms of the lease, DDR denies that it is liable to Plaintiffs. However, on August 16, 2012, DDR filed a third-party complaint against Clarke, asserting that to the extent DDR is found liable to Plaintiffs for any damage to the property, DDR is entitled to recover from Clarke for Clarke's breach of "its obligations under the sublease with Detroit Diesel by failing to keep the premises in a clean, sanitary and safe condition, and in good order and repair, and to otherwise maintain the property as provided in the sublease." Docket No. 7, at 3.
Plaintiffs, DDR, and Clarke have each moved for summary judgment.
II. SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A dispute is genuine "if the evidence supporting its resolution in favor of the party opposing summary judgment, together with any inferences in such party's favor that the evidence allows, would be sufficient to support a verdict in favor of that party, " St. Amant v. Benoit, 806 F.2d 1294, 1297 (5th Cir. 1987) (citation omitted), and a fact is material if it is one that might affect the outcome of the suit under the governing law, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
A party seeking to avoid summary judgment must identify admissible evidence in the record that shows a factual dispute. Fed.R.Civ.P. 56(c)(1). When evaluating a motion for summary judgment, a court must refrain from making credibility determinations or weighing the evidence. Provident Life & Accident Ins. Co. v. Goel, 274 F.3d 984, 991 (5th Cir. 2001).
The parties agree that Mississippi law applies to the interpretation of the lease and sublease that give rise to this diversity action. See Exxon Corp. v. Crosby-Mississippi Res., Ltd., 154 F.3d 202, 205 (5th Cir. 1998). The lease and sublease will each be analyzed separately under Mississippi law.
A. Taylor/Jeanes-DDR Lease
Plaintiffs allege that "DDR has breached the terms of the lease as a matter of law by failing to maintain, repair, and return the leased premises to Plaintiffs in as good a condition as when it was leased, except for ordinary wear and tear as the lease required." Docket No. 86, at 2. Plaintiffs assert that there is no genuine dispute of material fact as to the cost of repairs to the property that were caused by DDR's breach of the lease, and that, therefore, they are entitled to summary judgment. Id. The three lease provisions on which the Plaintiffs rely are as follows: (1) "Maintenance and Repair, " Docket No. 79-1, at 2; (2) "Surrender of Possession, " id. at 6; and (3) "Accidents, Indemnity and Public Liability Insurance, " id. at 3.
DDR argues that it is entitled to summary judgment because, according to DDR, Plaintiffs do not own the Premises and have no standing to enforce the lease. Further, DDR contends that the statute of limitations has expired on Plaintiffs' claims arising out of any alleged breach of DDR's duties to repair and maintain the Premises. DDR also asserts that based on the terms of the contract, DDR is not responsible for the damages claimed by Plaintiffs because the damages relate to repairs that are beyond the scope of DDR's repair obligations, and because Plaintiffs misconstrue the meaning of the indemnity clause. Finally, DDR contends that Plaintiffs' claims for tortious breach of contract and punitive damages fail as a matter of law.
During the hearing held on the parties' motions for summary judgment, Plaintiffs conceded that their claims for tortious breach of contract and punitive damages are not supported by the evidence. Therefore, summary judgment shall be granted in favor of DDR as to those claims. Each of the Plaintiffs' and DDR's remaining arguments will be addressed, starting with the threshold issues of standing and the statute of limitations.
Under Article III of the United States Constitution, federal courts may adjudicate only actual "Cases" and "Controversies." U.S. Const. art. III, § 2, cl. 1. "The irreducible constitutional minimum of standing contains three elements: injury-in-fact, causal connection, and redressability." Time Warner Cable, Inc. v. Hudson, 667 F.3d 630, 635 (5th Cir. 2012) (quotation marks and citations omitted). To establish standing "[i]n a suit based upon contractual theory[, ]... privity of contract must have been shown." Barrett Computer Servs., Inc. v. PDA, Inc., 884 F.2d 214, 216 (5th Cir. 1989) (footnote and citations omitted). DDR argues that Plaintiffs do not have standing to sustain their claims against DDR because although Jeanes and Taylor signed the lease that is the subject of this suit, a partnership formed by Jeanes and Taylor, not Jeanes and Taylor as individuals, owned the Premises at the time it was leased to DDR.
In support of its argument, DDR relies on the deposition testimony of Taylor, William Jeanes, and Harrell Jeanes, Jr. Taylor testified that the Taylor and Jeanes partnership owns the Premises, and that the partnership was formed in about 1976, with Jeanes owning 50% of the partnership and Taylor Machinery Corporation, a Mississippi corporation of which Taylor is the president, owning 50%. According to Taylor, the partnership now consists of William Jeanes and Harrell Jeanes, Jr.-who inherited Jeanes' share of the partnership after Jeanes and his wife died-and Taylor Machinery Corporation.
When asked whether a construction company named Taylor and Jeanes built the Premises, Harrell Jeanes, Jr. testified that "[w]e just ran our own project, " but if there was a company name, "it would have had to be the Taylor and Jeanes partnership." Docket No. 76-2, at 2-3. William Jeanes also testified that a partnership named Taylor and Jeanes owns the Premises. Harrell Jeanes, Jr. testified that the partnership is neither an LLC nor an LLP, and William Jeanes said that he does not know how the partnership was set up. Taylor testified that no papers were filed to form the partnership.
In response to DDR's motion for summary judgment, Plaintiffs acknowledge that their deposition testimony may have been "confusing when taken out of context, " but they insist that they as individuals, not a partnership, own the Premises. Docket No. 105, at 3-5. They submitted a joint affidavit to support their contention:
No partnership has owned any interest in the leased premises since it was purchased by Larry L. Taylor and Harrell F. Jeanes, Sr. in the 1970s as individuals. Larry L. Taylor and Harrell F. Jeanes, Sr. rented the entire 20 acres on which the leased premises is located to Taylor &[ ]Jeanes, Inc. until DDR leased it on August 29, 1969. As shown in Addendum 1 to that lease, Mississippi Valley Title Insurance Company report No. 1362-R dated August 25, 1989 showed that Larry L. Taylor and Harrell F. Jeanes, Sr. were owners of the leased premises....
... No partnerships are involved in ownership of the leased premises.
Docket No. 105-1, at 1-2.
While a party typically cannot demonstrate a genuine dispute of fact by contradicting his own previous sworn statement, Holtzclaw v. DSC Communications Corp., 255 F.3d 254, 259 (5th Cir. 2001) (citation omitted), Plaintiffs have presented other evidence to establish a dispute of fact. They point out that the first sentence of the lease states that "THIS LEASE... is between LARRY L. TAYLOR and HARRELL F. JEANES, (hereinafter called Owner')...." Docket No. 79-1, at 1. In that sentence, the phrase "Mississippi partnership" was crossed out after Taylor's and Jeanes' names. Id. at 1. Further, the lease includes the signatures of Taylor and Jeanes with no mention of a partnership under the signature line. Id. at 9. Addendum 1 to the lease also refers to Taylor and Jeanes as "Owner" of the Premises. Id. at 12.
Plaintiffs' evidence is sufficient to present a genuine dispute of fact regarding whether a partnership or Plaintiffs as individuals own the Premises. Therefore, summary judgment based on the standing issue is inappropriate. See Ass'n of Cmty. Orgs. for Reform Now v. Fowler, 178 F.3d 350, 357 (5th Cir. 1999) ("When the defendant moves for summary judgment because of lack of standing, ... the plaintiff must submit affidavits and comparable evidence that indicate that a genuine issue of fact exists on the standing issue.") (quotation marks and citation omitted); United States v. One Parcel of Real Property Located at Route 2, Box 293, Lena, Miss., 46 F.Supp.2d ...