OF JUDGMENT: 08/03/2016
COUNTY SPECIAL COURT OF EMINENT DOMAIN, HON. WILLIAM R.
BARNETT, TRIAL JUDGE
COURT ATTORNEYS: JEFFREY S. BRUNI PETER C. ABIDE
ATTORNEYS FOR APPELLANT: JEFFREY S. BRUNI DUSTIN EUGENE
USELTON MARGARET E. MURDOCK
ATTORNEYS FOR APPELLEE: PETER C. ABIDE JOSEPH WALTER GILL
RANDOLPH, PRESIDING JUSTICE
This is the fourth appeal stemming from the City of
Gulfport's taking of the Dedeaux Utility Company via
eminent domain. The only issue on appeal is whether the
interest rate on the judgment is appropriate. Because the
trial court failed to follow our mandate to set an interest
rate, we reverse and remand for entry of judgment consistent
with the evidence presented.
AND PROCEDURAL HISTORY
In 1996, Gulfport filed an eminent domain complaint against
Dedeaux. City of Gulfport v. Dedeaux Util. Co.,
Inc., 187 So.3d 139, 140 (Miss. 2016) ("Dedeaux
III"). Gulfport did not take physical control of
the utility until December 20, 2004, after a jury awarded
Dedeaux $3, 634, 757. Id. Dedeaux appealed that
verdict and Gulfport cross-appealed. Dedeaux Util. Co.,
Inc. v. City of Gulfport, 938 So.2d 838 (Miss. 2006)
("Dedeaux I"). In Dedeaux I, this
Court reversed and remanded for a new trial, and the second
jury awarded Dedeaux $5, 131, 676 for the taking. Dedeaux
III, 187 So.3d at 140. Dedeaux again appealed, and
Gulfport again cross-appealed. Dedeaux Util. Co., Inc. v.
City of Gulfport, 63 So.3d 514 (Miss. 2011)
("Dedeaux II"). This Court again reversed
and remanded in Dedeaux II, and the case was tried a
third time, resulting in a jury verdict in favor of Dedeaux
totaling $8, 063, 981. Dedeaux III, 187 So.3d at
140-41. The jury found that the fair market value of Dedeaux
as of December 3, 1996, when the complaint was filed, was $7,
082, 778. Id. at 141. It found that the fair market
value of tangible assets added to Dedeaux from December 3,
1996, to December 20, 2004, when Gulfport took physical
control, was $981, 203. Id.
Based on payments already made by Gulfport to Dedeaux, the
trial court found that Gulfport owed Dedeaux $1, 951, 102
plus interest on the amount of $7, 082, 778, and that it owed
Dedeaux $728, 117 plus interest on the amount of $981, 203.
Id. Gulfport appealed, and this Court affirmed the
trial court on all issues except interest. Id. at
141, 150-51. The trial court had determined that Mississippi
Code Section 75-17-1 applied and mandated that it award
eight-percent interest. Id. at 148-49. This Court
determined that Mississippi Code Section 75-17-7 applied,
which charged the trial court to set an interest rate.
Id. The Court then remanded "for the limited
purpose of determining a reasonable rate of interest and
issuing an order for payment of that interest."
Id. at 149.
In response to our 2016 remand, Dedeaux filed a motion to set
an interest rate. However, in its motion, Dedeaux argued that
the trial court should consider rates of return and attached
a copy of the S&P Stock Index obtained from the internet
to support its argument. At the hearing, Dedeaux argued for
rates higher than market interest rates. Alternatively, if
the court was going to consider only interest rates, Dedeaux
argued the court should compound the interest, despite this
Court's prior ruling that simple interest was the law of
the case. See Dedeaux I, 938 So.2d at 846 (Miss.
2006) (holding "legal interest" is not compounded,
but is, rather, simple interest). Dedeaux offered only one
exhibit in support of its argument. The exhibit was used to
argue that if an eight-percent rate of interest was used, it
would amount to a 4.894 percent rate of return over the
entire time period.
Dedeaux's alternative argument remains that the rate of
interest should in no event be less than eight percent, as
this Court previously has upheld eight percent as being
within a judge's discretion, citing noneminent-domain
cases and, most critically, time periods outside the
suppression of market interest rates by the Federal
Reserve. Dedeaux further argued that "an
interest rate of higher than eight percent would be fair and
reasonable as a prudent investor would have been able to
receive a higher rate of return."
Dedeaux offered no legal authority to the trial court or to
this Court to support its argument that courts should enter
the speculative investment domain of rates of return on
stocks and real estate to supplant the required statutory
language of interest rates. See Miss. Code Ann.
§ 75-17-7 (Rev. 2016) ("All other judgments or
decrees shall bear interest at a per annum
rate set by the judge hearing the complaint from a
date determined by such judge to be fair but in no event
prior to the filing of the complaint.") (emphasis
added). Both are subject to vastly fluctuating return and
often are determined on unrelated market events and timing.
The City agrees that the trial court was charged with
determining a rate of interest. To satisfy our
mandate, the City offered the only witness at the hearing,
Gary Wayne Kelly, Ph.D. Kelly currently serves as Chairman of
the Department of Finance, Real Estate, and Business Law at
the University of Southern Mississippi, where he teaches
undergraduate, graduate, and doctoral-level classes. He has
been involved in the study, teaching, and understanding of
interest rates for thirty-six years. He received his Master
of Economics from Tulane and his Doctorate of Finance and
Business Administration in Finance from the University of
Alabama. He previously was employed as a professor of finance
and economics at Mississippi State University for twenty-four
years. He serves as the chairman of a Mississippi federal
Upon accepting Kelly as an expert witness in finance and
economics, the court stated that Kelly would be "allowed
to testify as an expert concerning what an interest rate is
and what market interest rates are. He will not be allowed to
testify as to what the interest rate should be in this case
since that is a legal decision to be made by me."
Kelly testified "as a concept, interest is always the
rental price of borrowed funds." Kelly testified that an
interest rate was "a fee for the rental of
funds." Conversely, Kelly defined "rate of
return" as "all of the economic changes that happen
to a position of an investor, either whether a lender or
owner from one point in time to another point in time."
In explaining the difference between interest rates and rates
of return, Kelly testified that the two could not be
"used interchangeably." Kelly not only testified
that it would not be proper to use a "so-called average
of the S&P 500 for the past twenty years" as a rate
of interest, he explained the error of conflating the two.
Kelly testified that he "performed an analysis as to the
interest rate that has historically been applied with respect
to the City of Gulfport in the financial markets from 1996 .
. . to the current year." He found that, over a
twenty-year period, the City of Gulfport had a "number
of bond issues and a number of long-term credit transactions
of several types." Kelly testified and offered as part
of an exhibit the average long-term financing rates for
Gulfport during that time, which was "right about four
percent - 3.9 to 4.04." He acknowledged some of those
transactions had favorable tax advantages for the investors.
Kelly also provided market rates available to the general
public by lending institutions and the U.S. Government in a
summary of "Selecte[d] Interest Rates 1996-2016."
He identified the interest rates for one-year
certificates of deposit, five-year certificates of deposit,
and ten-year treasury notes over the same interval. For rates
of interest on certificates of deposit, Kelly used "the
average hundred highest offer rates for CDs of 1 and 5 year
maturities. Those are daily offers. So I managed to get every
working day's offer rate for CDs. . . ." As to the
ten-year treasury notes, Kelly testified that they were
issued by the U.S. Treasury with a ten-year maturity.
In its argument to the trial court, the City politely
reminded the trial judge of his duty:
Bottom line is the Supreme Court has asked Your Honor to
determine the rate of interest and confined it to just that.
In terms of that we can understand the Court has got to
exercise discretion. And we know that discretion can't ...