WATKINS DEVELOPMENT, LLC AND DAVID WATKINS, SR.
C. DELBERT HOSEMANN, JR., IN HIS OFFICIAL CAPACITY AS MISSISSIPPI SECRETARY OF STATE
OF JUDGMENT: 11/12/2014
COUNTY CHANCERY COURT, TRIAL HON. HOLLIS McGEHEE JUDGE
COURT ATTORNEYS: J. BRAD PIGOTT DOUGLAS T. MIRACLE CHERYN
NETZ BAKER JESSICA LEIGH LONG.
ATTORNEY FOR APPELLANTS: J. BRAD PIGOTT.
ATTORNEYS FOR APPELLEE: OFFICE OF THE ATTORNEY GENERAL BY:
DOUGLAS T. MIRACLE JAMES W. SMITH, JR. JAMES ASHLEY OGDEN
TYLER ARTHUR ROYALS.
DICKINSON, PRESIDING JUSTICE.
The Mississippi Secretary of State found that David Watkins
and Watkins Development, LLC, committed four securities-fraud
violations in connection with revenue bonds sold to finance a
renovation project at the Metrocenter mall in Jackson.
Watkins appealed and the chancery court vacated one count but
affirmed the other three. The Court of Appeals then affirmed
the Secretary on all four counts.
We granted certiorari and now reverse the Court of Appeals in
part because the Secretary failed to cross-appeal the
chancellor's decision to vacate Count I. That said, we
affirm, as did the chancellor and Court of Appeals, the
Secretary's findings on the other three counts.
AND PROCEDURAL HISTORY
David Watkins agreed to renovate the Belk building at the
Metrocenter Mall into office space for the City of Jackson.
In August 2010, Watkins formed Retro Metro, LLC, to run the
Metrocenter project. On February 21, 2011, Retro Metro
entered into an agreement with David Watkins Development,
LLC-Watkins's development company-which provided that
Retro Metro would pay Watkins Development a flat fee of $500,
000 and a mobilization fee of 25% of the Metrocenter project
To finance the project, the Mississippi Business Finance
Corporation (MBFC) had bond counsel prepare a private
placement memorandum ("PPM"). On April 5, 2011,
MBFC issued taxable revenue bonds pursuant to the PPM to
finance the project. Duncan Williams, an investment banking
firm, purchased all the bonds. The MBFC placed $4, 875, 000
in proceeds in a construction account with Bankplus under a
trust indenture. Retro Metro entered a loan agreement with
the MBFC which loaned Retro Metro the proceeds to finance the
The PPM, which Watkins helped to prepare, represented that
the bond proceeds would be used to finance the Metrocenter
project. Similar language appeared in the loan agreement and
in the bond purchase contract. The documents also represented
that Watkins had disclosed all related financial agreements.
But the development agreement between Retro Metro and Watkins
Development was not disclosed, and the PPM did not disclose
that any portion of the bond proceeds would be diverted to
Work proceeded on the project and, by June 2, 2011, Retro
Metro had made three requisitions from the construction
account. Each requisition stated the funds were withdrawn to
pay construction costs. The requisitions never referenced any
debt owed to Watkins Development.
On June 8, 2011, six days after receiving $800, 000 from the
construction account, Watkins wired $587, 084.34 from Retro
Metro's checking account to a real estate attorney in
Meridian. This was related to a contract between the City of
Meridian and Meridian Law Enforcement Center, LLC, which
Watkins had formed in April 2011 to renovate an existing
property into a police station. The funds were used to
purchase the real estate for the Meridian police station.
Later, in April 2012 after Watkins had defaulted on a payment
under the loan agreement, the Secretary of State's office
initiated administrative procedures against Watkins which
culminated in a finding that Watkins had committed four
violations of Mississippi Code Section 75-71-501.
First, the Secretary found that Watkins had violated Section
75-71-501(2) when he had failed to disclose the development
agreement between Retro Metro and Watkins Development in the
PPM or loan agreement ("Count I"). Second, the
Secretary found that Watkins had violated Section
75-71-501(1) when he had failed to disclose in the PPM, loan
documents, or requisition requests, that bond proceeds would
be used for the Meridian project ("Count II").
Third, the Secretary found that the same conduct giving rise
to Count II also violated Section 75-71-501(2) ("Count
III"). Finally, the Secretary found that Watkins had
violated Section 75-71-501(3) when he had used the bond
proceeds to purchase the Meridian property ("Count
IV"). The Secretary imposed a $25, 000 fine for each of
Counts I, III, and IV, but no fine for Count II. The
Secretary also ordered Watkins to repay the $587, 084.34 plus
interest, and $18, 047.39 toward the costs of the
Watkins appealed to the Chancery Court for the First Judicial
District of Hinds County, which vacated Count I but affirmed
Counts II, III, and IV. Watkins then appealed the
chancellor's decision, and we assigned the case to the
Court of Appeals. The Secretary did not cross-appeal the
chancellor's ruling on Count I. The Court of Appeals
affirmed the Secretary and the chancellor on Counts II, III,
and IV. The Court of Appeals reversed the
chancellor's decision on Count I and affirmed the
Secretary on that Count, even though that issue was not
appealed. Watkins then filed a petition for writ of
certiorari, which we granted.
The Court of Appeals erred by addressing a portion of
the chancellor's order that the
Secretary failed to cross-appeal.
The chancellor reversed the Secretary's finding under
Count I, that Watkins had violated Section 75-71-501(2) when
he had failed to disclose the development agreement between
Retro Metro and Watkins Development in the PPM and loan
agreement, and the Secretary did not raise that issue on
appeal. Watkins argues that the Court of Appeals erred by
addressing that issue, and by reversing the chancellor's
decision. We agree.
Watkins's notice of appeal specifically stated that he
appealed the chancellor's decision "to the extent
that such Opinion and Order affirms and does not reverse the
Final Order entered against such Petitioners by the
Respondent Secretary of State." The Secretary filed no
cross-appeal. Then, in his brief before the Court of Appeals,
the Secretary stated "[t]he Secretary did not appeal the
Chancellor's findings with respect to the Development
Agreement and thus, the issue is moot for purposes of this
appeal." Even in his response to the petition for
certiorari, the Secretary "takes no position" as to
whether the Court of Appeals properly raised this issue sua
In Dunn v. Dunn, this Court held that "an
appellee should not be required to file a cross-appeal unless
he or she is aggrieved by the trial court's
judgment." There, we quoted a Court of Appeals
decision stating "that '[i]n order for the appellee
to gain reversal of any part of the decision of a trial court
about which the appellant brings no complaint, the appellee
is required to file a cross-appeal.'" We also noted a
Michigan Court of Appeals decision which "held,
'[g]enerally, the failure to file a cross appeal
precludes the appellee from raising an issue not raised by
Here, under Dunn, the Court of Appeals erred by
addressing the portion of the chancellor's ruling that
was not appealed. So we reverse the Court of Appeals's
ruling as to Count I, and reinstate the chancellor's
decision reversing the Secretary's finding on that count.
The Secretary's other findings were supported by
When we review a "'decision by a chancery or circuit
court concerning an agency action, [we apply] the same
standard of review that the lower courts are bound to
follow.'" We may reverse the Secretary's
decision "only if it '(1) was unsupported by
substantial evidence; (2) was arbitrary and capricious; (3)
was beyond the power of the administrative agency to make; or
(4) violated the complaining party's statutory or
constitutional right.'" Further, the Secretary's
factual findings, "if supported by competent material