BEFORE THE SUPREME COURT OF MISSISSIPPI No.2011-M SCT

Transcription

1 BEFORE THE SUPREME COURT OF MISSISSIPPI No.2011-M SCT GROUND CONTROL, LLC APPELLANT vs. CAPSCO INDUSTRIES, INC., W.G. YATES & SONS CONSTRUCTION COMPANY, CAESAR'S ENTERTAINMENT CORP., flk/a HARRAH'S ENTERTAINMENT,INC., LOYE MclLVEENE, JASON DOLLAR and UNKNOWN DEFENDANTS C-F APPELLEES APPEAL FROM THE CIRCUIT COURT SECOND JUDICIAL DISTRICT HARRISON COUNTY, MISSISSIPPI BRIEF OF THE APPELLANT ORAL AGRUMENT REQUESTED SUBMITIED BY: 264 Columbus, MS Tel. (228) Fax (662) Attorney for the Appellant Ground Control, LLC

2 BEFORE THE SUPREME COURT OF MISSISSIPPI No.2011-M SCT GROUND CONTROL, LLC APPELLANT vs. CAPSCO INDUSTRIES, INC., W.G. YATES & SONS CONSTRUCTION COMPANY, CAESAR'S ENTERTAINMENT CORP., flkla HARRAH'S ENTERTAINMENT, INC., LOYE McILVEENE, JASON DOLLAR and UNKNOWN DEFENDANTS C-F APPELLEES CERTIFICATE OF INTERESTED PARTIES The undersigned counsel of record certifies that all listed persons have an interest in the outcome of this case. The representations are made in order that this Court may evaluate possible disqualifications or recusal. Ground Control, LLC, Appellant A. Frank Beaton, member in Appellant LLC Judy C. Beaton, member in Appellant LLC Capsco Industries, Inc., Appellee Christopher Killion, primary stockholder of Capsco Industries, Inc. W.G. Yates & Sons Construction Co., Appellee Caesar's Entertanment Corp., flkla Harrah's Entertainment. Inc., Appellee Blewett William Thomas, Attorney for the Appellant R. Mark Alexander, Attorney for the Appellees Mathhew McDade, Attorney for the Appellees Honorable Roger Clark, County Circuit Court Judge i

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4 TABLE OF CONTENTS CERTIFICATE OF INTERESTED PARTIES TABLE OF CONTENTS TABLE OF AUTHORITIES iii v STATEMENT OF THE ISSUES 1 STATEMENT OF THE CASE 2 STATEMENT OF THE FACTS 10 STANDARD OF REVIEW 18 STATEMENT CONCERNING ORAL ARGUMENT 19 SUMMARY OF THE ARGUMENT 19 ARGUMENT 20 I. It was reversible error for the Harrison County Circuit Court to sua sponte convert the Joint Motion to Dismiss by Yates and Harrah's to a motion for summary judgment subsequent to the hearing on the Joint Motion to Dismiss and without notice to Ground Control sufficiently in advance of the hearing date. II. Assuming it was proper for the Harrison County Circuit Court to adjudicate the Joint Motion to Dismiss as a motion for summary judgment, the Circuit Court committed reversible error when it failed to consider the verified evidence submitted by Ground Control in support of the allegation that Yates was Harrah's construction manager at the Margaritaville project and other pled claims. III. The Harrison County Circuit Court committed reversible error by expanding the terms of Miss. Code Ann in order to grant Capsco relief that was not provided under the statute and that was also in violation of Ground Control's rights under Article 3, Section 24 of the MiSSissippi Constitution. 111

5 IV. Capsco is estopped by its actions and representations to deny or void the December 2007 contract with Ground Control. V. The Harrison County Circuit Court committed reversible error by granting summary judgment against Ground Control on its tort and equitable claims that were not raised in Capsco's motion for partial summary judgment. VI. The Harrison County Circuit Court committed reversible error by failing to adjudicate Ground Control's timely motion to file a supplement complaint against the Appellees, which alleged claims that were discovered subsequent to the commencement of this case and during the preliminary stage of this litigation. CONCLUSION 50 CERTIFICATE OF SERVICE 51 IV

6 TABLE OF AUTHORITIES Constitutional and Statutory Authority U.S. Const. amend. XIV 35 Miss. Const, art, 3, 24 33,35 Miss. Code Ann Miss. Code Ann Miss. Code. Ann Miss. Code Ann ,31,34,36,39 Miss. Code Ann (a) Miss. Code Ann Miss. Code Ann ,24 3,24 Cases st Avenue, Ltd. v. City of Gulfport, 988 So. 2d 412 (Miss. App. 2008) Aladdin Construction Co. v. John Hancock Life Insurance Co., 914 So. 2d 169 (Miss. 2005) Allen v. Choice Hotels International, 942 So. 2d 817 (Miss.. App. 2006) Baum v. Ciminelli-Cowper Co., 300 A.D.2d 1028, 755 N.Y.S.2d 138 (N.Y. App. Div. 2002) Board of Education of Calhoun County v. Warner, 853 So.2d 1159 (Miss. 2003) Burns v. Washington Savings, 171 So.2d 322 (Miss. 1965) 27, v

7 C. B. Jackson & Sons Construction Co. v Davis, 365 So.2d 207 (Fla Ct. App. 1978) Camp v. Stokes, 41 So.3d 685 (Miss. 2010) Castro v. Sangles, 637 So. 2d 989 (Fla. Dist. Ct. App. 1994) City of Damascus v. Bivins, 726 S.W.2d 677 (Ark. 1987) CEF Enterprises v. Betts, 838 So. 2d 999 (Miss. App. 2003) Conrad v. Holder, 825 So.2d 16 (Miss. 2002) Cummings v. Benderman, 681 So.2d 97 (Miss. 1996) Day v. West Coast Holdings, Inc., 699 P.2d 1067 (Nev. 1985) Dews v. Halliburton Industries, Inc., 708 S.W.2d 67 (Ark. 1986) Donald v. Reeves Transport Co., 538 So.2d 1191 (Miss.1989) Ellis v. Anderson Tully Co., 727 So.2d 716 (Miss.1998) Fruchter v. Lynch Oil Co., 522 So.2d 195 (Miss. 1988) Gardner v. Reed, 207 Miss. 306, 42 So.2d 206 (1949) Hagberg v John Bailey Contractor, 435 So. 2d 580 (La. App. 1983) Harrison v. State, 800 So.2d 1134 (Miss. 2001) vi

8 Herman Chanen Construction Co. v Northwest Tile & Terrazzo Co., 433 P. 2d 807 (Ariz. Ct. App. 1967) 38 Hinton v. Johnson, 942 P.2d 1061 (Ct. App. Wash. 1997) 34 Homestead Supplies, Inc. v. Executive Life Insurance Co., 81 Cal. App. 3d 978,147 Cal. Rptr. 22 (1978) 43 Kirkendall v Heckinger, 307 N.W.2d 699 (Mich Ct. App. 1981) 38 Langham v. Behnen, 39 So. 3d 970 (Miss. App. 2010) 44 Lewallen v. Slawson, 822 So.2d 236 (Miss. 2002) 30 Magill v. Lewis, 333 P.2d 717 (Nev. 1959) 38 Memphis Steam Laundry-Cleaners, Inc. v. Lindsey, 192 Miss. 224, 5 So. 2d 227 (1941) 49 Morrow v. Vinson, 666 So. 2d 802 (Miss. 1995) 36 Northern Electrical Co. v. Phillips, 660 So.2d 1278 (Miss.1995) 30 Palmer v. Biloxi Regional Medical Center, Inc., 649 So.2d 179 (Miss. 1994) 20 Pickens v American Mortgage Exchange, 269 Cal. App. 2d 299, 74 Cal. Rptr. 788 (Cal. Ct. App. 1969) 43 Plaza Builders, Inc. v. Regis, 502 So. 2d 918 (Fla. Dist. Ct. App. 1986) 38 PMZ Oil Co. v. Lucroy, 449 So. 2d 201 (MiSS. 1984) 37 VII

9 Powell v. Campbell, 912 So. 2d 978 (Miss. 2005) R.D. Reeder Lathing Co., Inc. v. Cypress Ins. Co., 3 Cal App 995, 84 Cal. Rptr. 98 (1970) Rast v. Sorrell, 240 Miss. 333,127 So.2d 435 (1961) San Diego Prestressed Concrete Co. v Chicago Title Insurance Corp., 555 P. 2d 484 (Nev. 1976) Saxon v. Harvey, 223 So.2d 620 (Miss. 1969) Sisson v. Ragland, 745 SW.2d 620 (Ark. 1988) Sullivan v. Tullos, 19 So.3d 1271 (Miss. 2009) Sykes v. State, 757 So.2d 997 (Miss. 2000) Thomas Learning Center, Inc. v. McGuirk, 766 So.2d 161 (Ala. Civ. App.1998) Transocean Enterprise, Inc. v. Ingalls Shipbuilding, Inc., 33 So.3d 459 (Miss. 2010) Tupelo Redevelopment Agency v. Gray Corp., Inc., 972 So. 2d 495 (Miss. 2007) TXG Intrastate Pipeline Co. v. Grossnickle, 716 So. 2d 991 (Miss. 1997) Wells by Wells v. Panola County Board Of Education, 645 So.2d 883 (Miss. 1994) Wesley v. Native Lumber Company, 97 Miss. 814, 53 So. 346 (1910) Yazoo & Mississippi Valley Railroad Co. v. Sideboard, 161 Miss. 4,133 So. 669 (1931) 27, viii

10 ~ Commercial Rules and Regulations of the State Board of Contractors, Rule 2(a) Commercial Rules and Regulations of the State Board of Contractors, Rule 5 Mississippi Rules of Civil Procedure, Rule 12(b)(6) Mississippi Rules of Civil Procedure, Rule 15(d) Mississippi Rules of Civil Procedure Rule ,21 Secondary Authorities Black's Law Dictionary 538 (6th ed. 1990) 36 17A Am. Jur. 2d Contracts 236, Waiver of, or estoppel to assert, statutory protection A Am. Jur. 2d Contracts 301, Restoration of benefits received as prerequisite to assertion of illegality Am.Jur.2d Contracts 302 (1964) 26 17A C.J.S.. Contracts, 519(3) (1963) 26 Prosser & Keeton, The Law of Torts, 130, 141 (5th ed. Supp.1988) 49 Restatement (Second) of Torts ix

11 STATEMENT OF THE ISSUES 1. It was reversible error for the Harrison County Circuit Court to sua sponte convert the Joint Motion to Dismiss by Yates and Harrah's to a motion for summary judgment subsequent to the hearing on the Joint Motion to Dismiss and without notice to Ground Control sufficiently in advance of the hearing date. 2. Assuming it was proper for the Harrison County Circuit Court to adjudicate the Joint Motion to Dismiss as a motion for summary judgment, the Circuit Court committed reversible error when it failed to consider the verified evidence submitted by Ground Control in support of the allegation that Yates was Harrah's construction manager at the Margaritaville project and other pled claims. 3. The Harrison County Circuit Court committed reversible error by expanding the terms of Miss. Code Ann in order to grant Capsco relief that was not provided under the statute and that was also in violation of Ground Control's rights under Article 3, Section 24 of the Mississippi Constitution. 4. Capsco is estopped by its actions and representations to deny or void the December 2007 contract with Ground Control. 5. The Harrison County Circuit Court committed reversible error by granting summary judgment against Ground Control on its tort and equitable claims that were not raised in Capsco's motion for partial summary judgment. 6. The Harrison County Circuit Court committed reversible error by failing to adjudicate Ground Control's timely motion to file a supplement complaint against the Appellees, which alleged claims that were discovered subsequent to the commencement of this case and during the preliminary stage of this litigation. 1

12 STATEMENT OF THE CASE This case arises from claims by the Appellant Ground Control, LLC ("Ground Control") for unpaid labor and materials related to the installation of underground utilities at the Margaritaville casino project in Biloxi, Mississippi ("the Margaritaville project"), and additional non-contractual claims for unpaid labor, material and cartage expenses against the Appellees Capsco Industries, Inc. ("Capsco"), W.G. Yates & Sons Construction Company ("Yates") and Harrah's Entertainment, Inc. ("Harrah's").' On December 31, 2008, Ground Control provided notice to Yates and Harrah's of its statutory liens against the Margaritaville project and the real property upon which it was constructed. There was no attempt by either of these to resolve Ground Control's claims. On August 25, 2009, Ground Control filed its Complaint for Enforcement of Lien and Other Relief in Harrison County Chancery Court, Second Judicial District, against Capsco, Yates and Harrah's (as well as several unknown defendants who were thought to be employees and/or agents of these defendants) seeking damages and other relief based upon claims that Ground Control had not been paid or reimbursed for labor, materials and other Harrah's Entertainment, Inc. is referenced as the owner of the subject real property in the various 2007 construction contracts and in Ground Control's pleadings filed in both chancery and circuit court. However, it should be noted that subsequent to the trial court's orders of dismissal, Harrah's corporate name has been changed to Caesar's Entertainment Corporation. Although the Appellant has noted the name change on the caption of those pleadings filed in the appeal, it will continue to refer to this Appellee as "Harrah's" in the briefing of this case in order to assure uniformity and to avoid any potential confusion concerning this Appellee's identity. 2

13 costs provided by Ground Control for the benefit of the Margaritaville project. 2 Specifically, Ground Control alleged the following claims in its complaint: a. Assertion of liens under Miss. Code Ann or , based upon allegations by Ground Control that Yates would be more accurately classified as a "construction manager" rather than a general contractor, based upon Ground Control's personal knowledge of the scope of Yates' work at the Margaritaville project, with Yates' status as a "construction manager" entitling Ground Control to relief under Miss. Code Ann b. Contractual claims damages or losses against the Margaritaville project owners, to- wit, Yates and Harrah's, which was the designation given these Parties under the contracts governing construction work on the Project, to the extent that Yates and Harrah's breached provisions or conditions placed in the subject contracts that were for the direct benefit of Ground Control.' c. Claims for equitable relief against Yates and Harrah's, based upon the claim by Ground Control that the unpaid work, materials and monetary advancements it has made during the course of its work on the Margaritaville project constitutes substantial and material improvements that increased the value of the Margaritaville project, and that without payment for these improvements the Margaritaville project owners (and their successors) would be unjustly enriched. 5 d. Extra-contractual claims against Capsco, based upon Ground Control's assertion that Capsco, either directly or in concert with its officers, officials or others, engaged in tortuous conduct outside the terms of the December 2007 Agreement that proximately caused Ground Control to suffer damages or losses. Specifically, Ground Control alleged that Capsco had: 2 The Plaintiff also named Abba Bonding, LLC as a fourth defendant, based upon the fact that Abba Bonding was the surety for Capsco's performance of its contractual and other obligations at the Margaritaville project. Subsequent to filing suit, it was discovered that Abba Bonding was in bankruptcy proceedings in Mobile, Alabama. For this reason, the Plaintiff did not serve Abba Bonding with process. Due to the fact that the remaining Defendants immediately sought to dismiss the claims against them, the trial court did not address the voluntary dismissal of Abba Bonding. 3 Appellant's Record Excerpts, Vol. 1, Exhibit 7, pp , Appellant's Record Excerpts, Vol. 1, Exhibit 7, p Appellant's Record Excerpts, Vol. 1, Exhibit 7, pp

14 i. engaged in acts of fraud, deception, self-dealing and concealment of material facts that either were calculated to profit Capsco and cause financial loss to Ground Control in conjunction with Ground Control's work on the Margaritaville project and its performance of the Agreement; ii. interfered with Ground Control's performance and completion of work specified in the Agreement, and it further sought to have Ground Control and its workers barred from the Margaritaville project in order for Capsco allege a breach of the Agreement and thereby profit through the alleged breach; iii. failed to correct work that Ground Control had disclosed to be either improper or not to applicable standards, and thereafter Capsco alleged that the improper work was the fault of Ground Control in order to disallow or avoid payments due Ground Control; iv. obtained payments in the sum of One Hundred Sixtytwo Thousand Seven Hundred Fifty Dollars ($162,750) from Ground Control for expenses related to the completion of the Project, and subsequently Capsco either failed to credit these payments to the outstanding balance due Ground Control for its work, or otherwise Capsco, and/or its officers and officials, failed to repay these sums paid by Ground Control; and v. such other wrongful, tortuous or fraudulent acts by Capsco, either directly or in concert with its officers, officials or others, that may be disclosed during discovery or through further investigation of the matters at issue in this Cause. 6 e. Claims against unknown defendants, which alleged claims against either unidentified third parties or officers of Capsco, who acting either individually or in concert with Capsco, caused additional losses and damages to the Ground ControL' The total claims and liens asserted by Ground Control against Capsco and the Margaritaville project owners Harrah's and Yates for work, materials and expenses incurred at the Margaritaville project was One Million Six Hundred Seventy-four Thousand Six Hundred Eighty-eight Dollars ($1,674,688). 6 7 Appellant's Record Excerpts, Vol. 1, Exhibit 7, pp Appellant's Record Excerpts, Vol. 1, Exhibit 7, p

15 On December 4, 2009, Capsco filed its answer, counterclaim and thirdparty claim against Capsco's president Frank Beaton, individually.8 The counterclaims alleged that Ground Control had committed various breaches of the December 2007 Agreement, that Ground Control had failed to repay One Hundred Fifty Thousand Dollars ($150,000) in advances made by Capsco, that ground Control had been "fired" by Yates prior to the completion of the Agreement, and that Capsco had paid in excess of One Hundred Ninety Thousand Dollars ($190,000) to complete work specified under the Agreement. 9 The third-party claims against Beaton were based upon allegations that Beaton had Frank Beaton had engaged in individual acts of fraud in regard to the Agreement. 'o On December 8, 2009, Harrah's and Yates filed a Joint Motion to Dismiss." The motion to dismiss was premised upon claims that Ground Control was a subcontractor of a subcontractor, therefore Ground Control lacked privity to assert any claims against either Harrah's or Yates. On December 29, 2009, Ground Control filed its motion to file a supplemental complaint,'2 with the supplemental complaint alleging claims of Estoppel and Waiver, Bad Faith and Self-Dealing, Accounting by Capsco of Funds Received and Disbursed, Negligent Supervision of Employees, Joint and Several Liability and seeking an assessment of punitive damages against II 12 Appellant's Record Excerpts, Vol. 1, Exhibit 8. Appellant's Record Excerpts, Vol. 1, Exhibit 8, pp Appellant's Record Excerpts, Vol. 1, Exhibit 8, pp Appellant's Record Excerpts, Vol. 2, Exhibit 11. Appellant's Record Excerpts, Vol. 1, Exhibit 10. 5

16 Capsco and its applicable officials. Ground Control additionally filed a revised complaint naming Loye Mcllveene and Jason Dollar as previously unknown defendants, '3 with their identity being discovered as a result of matters disclosed in Capsco's answer. Concurrent with these filings, Ground Control also propounded various discovery requests to Capsco, Harrah's and Yates. On January 27, 2010, Capsco, Harrah's and Yates moved to stay discovery. Capsco concurrently filed its motion for summary judgment,'4 and additionally it sought leave to file the third-party complaint against Frank Beaton. In regard to Capsco's summary judgment motion, the correct title for the motion would be "Motion for Partial Summary Judgment," as Capsco did not seek summary judgment on any issue other than an assertion that the Agreement was void due to Ground Control's lack of certification under Miss. Code Ann On February 25, 2010, Capsco filed a motion to strike Ground Control's revised complaint naming unknown defendants and its objections to the filing of the supplemental complaint. On the same day, Ground Control also filed its response to the Joint Motion to Dismiss's and Capsco's motion for partial summary judgment.'6 In its response to the motion for partial summary judgment, Ground Control also sought relief pursuant to Rule 56(f) of the Mississippi Rules of Civil Procedure. 13 Appellant's Record Excerpts, Vol. 1, Exhibit 9. Additionally, Mcllveene and Dollars were timely served with process and they remain defendants in the circuit court proceedings. 14 Appellant's Record Excerpts, Vol. 2, Exhibit Appellant's Record Excerpts, Vol. 2, Exhibit Appellant's Record Excerpts, Vol. 2, Exhibit 14. 6

17 On March 1, 2010, a hearing was held before Harrison County Chancellor Sanford R. Steckler on the dispositive motions filed by Capsco, Harrah's and Yates. After hearing the Parties' arguments, the chancellor determined that this case involved primarily legal issues, and thus it was necessary to transfer the entire case to the Harrison County Circuit Court. Additionally, the chancellor made no rulings on the Parties' pending motions. An order of transfer was entered in the chancery court proceedings on March 9, Thereafter, the case was transferred to circuit court and assigned to Circuit Court Judge Roger T. Clark. The dispositive motions filed by Capsco, Harrah's and Yates were initially set for hearing before the circuit court on June 17, 2010, with the hearing being reset for June 24, On June 22, 2010, Ground Control filed a supplemental response to Capsco's motion for summary judgment,18 with the supplemental response including evidence the Capsco itself lacked certification by the Mississippi State Board of Contractors to install underground utilities. 19 Further, the supplemental response substantiated Ground Control's claims for fraudulent inducement by Capsco and quantum meruit recovery for unpaid labor and materials. The circuit court did not hear the dispositive motions on June 24 1h, but it did confer with counsel in chambers and granted Ground Control leave to revise 17 IS 19 Appellant's Record Excerpts, Vol. 3, Exhibit 15. Appellant's Record Excerpts, Vol. 3, Exhibit 16. Appellant's Record Excerpts, Vol. 3, Exhibit 16, pp

18 discovery requests, which Ground Control submitted to Capsco, Harrah's and Yates on July 22,2010. The hearing on the de positive motions was re-set for November 17, As Ground Control has asserted as error on appeal that the Joint Motion to Dismiss was never noticed as a motion for summary judgment in advance of the November 17th hearing, it is significant that the Notice of Hearing specifically states at Paragraph 2 that the hearing is on "Joint Motion to Dismiss with Prejudice filed on behalf of W.G. Yates & Sons Construction Company and Harrah's Entertainment, Inc." In advance of the November 17, 2010 hearing, Ground Control submitted a Second Supplemental Response to Capsco's motion for partial summary judgment October 12, The Second Supplemental Response included a second affidavit from Ground Control's president and the affidavit of Ground Control's filed supervisor at the Margaritaville project. The exhibits substantiated 1) that Capsco had violated Mississippi law concerning the acceptance of bid from contractors lacking proper certification, and 2) that verified evidence existed to support Ground Control's claims for extra-contractual damages. On November 15, 2010, two days in advance of the motion hearing, Ground Control also filed its exhibits in opposition to the Joint Motion to Dismiss 22 and its motion to file supplemental response in opposition to Capsco's motion for Appellant's Record Excerpts, Vol. 3, Exhibit 20. Appellant's Record Excerpts, Vol. 3, Exhibit 17. Appellant's Record Excerpts, Vol. 3, Exhibit 18. 8

19 partial summary judgment. 23 The exhibits filed in opposition to the motion to dismiss consisted of excerpts from the Construction Agreement between Harrah's and Yates, which substantiated the assumption of an independent duty by Yates to assure that all subcontractors and sub-subcontractors, and the procedures through which Yates was to be advised of those entities performing work at the Margaritaville project. Additionally, the excerpts from the Construction Agreement provided additional proof that Yates was in fact a construction manager, as ten (10) of its affiliated companies were charged with the actual performance of construction work at the Margaritaville project. Additionally, Ground Control gave formal notice that it was adopting all documents and evidence submitted in opposition to Capsco's dispostive motion as evidence in opposition to Harrah's and Yates' motion to dismiss. 24 Ground Control's motion to file supplemental response was a procedural motion filed in response to Capsco's motion to strike ground Control's second supplemental response. At the time of the November 17, 2010, Capsco had not fully responded to Ground Control's requests for production of documents, filed on July 22, Eventually, Capsco did file its responses to Ground Control's requests for production of documents on December 9, Among the documents belated produced by Capsco were Yates' instructions to bidders on the Margaritaville project. Specifically, in the "Instructions to Bidders" dated November 8, J Appellant's Record Excerpts, Vol. 3, Exhibit 18. Appellant's Record Excerpts, Vol. 3, Exhibit 18, p. 395, Appellant's Record Excerpts, Vol. 3, Exhibit 21. 9

20 (commencing at CAPSCO-0016),26 Capsco was instructed at Paragraph that all bidders and their subcontractors were required to maintain proper licensing. Capsco disregarded this provision of the Instructions concerning both itself and its affiliate Ground Control, as neither Party was certified by the Board of Contractors to install underground lines and utilities. The documents withheld by Capsco until December 9, 2010, also confirm that at least ninety per cent (90%) of the work referenced in its bid was for the installation of underground utilities (see CAPSCO-0025 to 0027). Pursuant to the Rules of the Mississippi State Board of contractors, a bidding party must be certified for the specific work that it bids upon. In this instance, Capsco could not rely upon its license to install fire sprinkler systems in order to obtain a $3.3 million contract for the installation of underground utilities, and it violated Miss. Code Ann by doing so. STATEMENT OF THE FACTS During late 2007, Frank Beaton, as President of Ground Control, was approached by Loye Mcllveene and Jason Dollar, as representatives of Capsco, concerning Ground Control's ability to perform work related to the in-ground installation of water, sewage and storm drain lines at the Margaritaville project. Specifically, Capsco proposed that Ground Control undertake all excavation work 26 Appeal Record, pp A CD containing the entirety of Capsco' December 9, 2010 discovery responses is on file with the Clerk of this Court as an attachment to Ground Control's Motion to Supplement Record pursuant to Rule 10(e) of the Mississippi Rules of Appellate Procedure, with the motion to supplement being dated September 24, To the extent that Capsco's December 9, 2010 document responses appear relevant to this issues on appeal, Ground Control renews and reurges its Motion to Supplement Record. 27 See CAPSCO

21 and in-ground pipe installation under the terms of the construction contract. Capsco is an Alabama company that represents itself as a fire protection specialist in the design, fabrication and installation of sprinkler systems,28 and it had no prior experience in the installation of underground utilities nor did it maintain certification for the installation of underground utilities. 29 Loye Mcllveene was President of Capsco at this time, and he conducted all negotiations with Ground Control concerning the Margaritaville project. These negotiations took place outside the State of Mississippi. At the commencement of these negotiations, Mcllveene represented to Ground Control that Capsco had been advised by employees of Yates that bids on the Margaritaville project were to be received soon for the installation of water, sewer and storm drain lines at this project. Mcllveene additionally advised Beaton that corporate officials of Capsco, specifically Jason Dollar, had been able to obtain information directly from employees of Yates concerning the approximate bid amounts that Capsco needed to submit in order to secure these contracts. Mcllveene stated in these conversations that, due to his company's access to this information through Yates, Capsco intended to submit a bid that would assure that it was granted the contracts for the installation of these in-ground utility lines at the Margaritaville project. For these reasons, Mcllveene wanted to reach an immediate agreement " 29 Appellant's Record Excerpts, Vol. 3, Exhibit 17, p Appellant's Record Excerpts, Vol. 3, Exhibit 16, pp

22 with Ground Control on a no bid contract for the in-ground installations at the Margaritaville project. 30 After the preliminary discussion of these matters, Capsco and Ground Control began intensive negotiations and pricing in order to determine the costs necessary to undertake and complete the in-ground installations at the Margaritaville project. During these negotiations with Capsco in December 2007, Beaton disclosed to Mcllveene that Ground Control could not independently obtain a performance bond for work on the Margaritaville project, and Beaton also told Mcllveene that Ground Control's prior contracting work and in-ground installations had been in conjunction with other Alabama contractors, and that for these reasons Ground Control did not maintain any independent certification or professionallicenses. 31 After being advised of these facts, Mcllveene told Beaton that these issues would not interfere with the formation and execution of a contract for Ground Control to work at the Margaritaville project, as Capsco would provide both the performance bond and all certifications or licenses that might be required for work the Margaritaville project. Throughout these negotiations, and during the period of Ground Control's work at the Margaritaville project, Mcllveene represented to Ground Control that as President of Capsco, he was authorized to act on behalf of Capsco and make commitments and concessions to Ground Control in all matters related to the contract for in-ground installations at the Appellant's Record Excerpts, Vol. 2, Exhibit 14, pp Appellant's Record Excerpts, Vol. 2, Exhibit 14, p

23 Margaritaville project. Based upon the agreement of Ground Control to the pricing and contract terms offered during these negotiations with Mcllveene, Capsco stated that it would not solicit or accept bids from any other business than Ground Control concerning the in-ground installations at the Margaritaville project. Additionally neither Mcllveene nor Capsco requested that Ground Control submit a formal written bid concerning the proposed in-ground installations at the Margaritaville project, and accordingly not written bid was submitted by Ground Control to Capsco regarding this work. 32 On December 19, 2007, Ground Control and Capsco entered into a construction contract ("the Agreement") for the performance of specific work at the Margaritaville project, with the Owners of the Project being listed in the Agreement as Yates and Harrah's. Pursuant to the terms of the Agreement, Capsco was to pay Ground Control the sum of Two and One-Half Million Dollars ($2,500,000),33 subject to applicable additions and deductions, for work to be performed at the Margaritaville project, with the Agreement specifically stating that Ground Control was to provide labor and materials for removal or capping of existing structures and piping, installation of storm drainage piping and structures, potable water lines and structures, and sanitary sewer lines and structures. After the execution of the Agreement, Ground Control commenced performing its obligations under the Agreement, and it continued to work on the 32 JJ Appellant's Record Excerpts, Vol. 2, Exhibit 14, pp Appellant's Record Excerpts, Vol. 2, Exhibit 14, p

24 Margaritaville project under the terms of the Agreement through October 28, 2008?4 During the period between December 19, 2007 and October 28, 2008, Ground Control expended considerable funds, labor and material in fulfillment of its obligations under the Agreement to perform the specified work at the Margaritaville project. At no time after the execution of the Agreement or during the time that Ground Control worked at the Margaritaville project was any objection made by Capsco, Yates or Harrah's concerning a lack of certification of responsibility by Ground Control nor was Ground Control advised that the Agreement was considered null and void due to its lack of certification of responsibility.35 On the contrary, Mcllveene issued a letter to Ground Control's loan officer on April 22, 2008, advising that Yates was retaining Three Hundred Three Thousand Dollars ($303,000) for work performed by Ground Control, with this letter being issued by Capsco in order for Ground Control to obtain additional funds for work at the Margaritaville project. 36 Clearly, Capsco knew of ground Control's lack of certification from the commencement of negotiations and it entered into a construction contract with Ground Control because there was an agreement on the construction costs. Further, Capsco and its officials allowed Ground Control to expend considerable money and labor on the Margaritaville project in disregard of the lack of certification. At various times during its performance of the Agreement, Ground Control was requested by Capsco and Yates to furnished additional labor, fixtures, Appellant's Record Excerpts, Vol. 2, Exhibit 14, p Appellant's Record Excerpts, Vol. 2, Exhibit 14, p Appellant's Record Excerpts, Vol. 3, Exhibit 17, p

25 services and materials in connection with the Agreement and the improvement of the premises. Ground Control completed all such extra-contractual obligations that was required of it, resulting in additional expenses being incurred by Ground Control in the sum of Three Hundred Sixty-five Thousand Nine Hundred Ninetyseven Dollars ($365,997) for either out of sequence work required either by Capsco and/or Yates that was not included in the contract or plans, for repairs to previously completed work at the project, or for materials, rental charges and other expenses related to the Margaritaville project, with this extra-contractual work being unpaid at the time Ground Control filed suit in As part of these extra-contractual claims, Capsco and the Owners Yates and Harrah's required Ground Control to expend the following sums for the replacement of sewage lines: a. Fifty-eight Hundred Eight Dollars ($5808) incurred as expenses for the replacement of sewage lines on March 31,2008; b. Sixty-nine Hundred Forty-nine Dollars ($6949) incurred as expenses for the replacement of sewage lines on April 11, 2008; and c, Twenty Thousand Two Hundred Forty Dollars ($20,240) incurred as expenses for the replacement of sewage lines on April 17, Ground Control was also not compensated for its expenses incurred for these repairs of damage caused by other contractors at the Margaritaville project. Specifically, Ground Control incurred further expenses totaling One Hundred Ten Thousand Dollars ($110,000) in making the following repairs to previously completed work at the Project: 15

26 a. approximately Fifty Thousand Dollars ($50,000) for repairs and modifications resulting from damages caused by Baker Concrete; b. approximately Fifty Thousand Dollars ($50,000) for repairs and modifications resulting from damages caused by Edwards Electric; and c. approximately Ten Thousand Dollars ($10,000) for repairs and modifications resulting from damages caused by Yates. Ground Control also incurred extra-contractual material expenses and handling charges of approximately One Hundred Thousand Dollars ($100,000) that were never paid or reimbursed. Ground Control further incurred extracontractual labor charges and related expenses of approximately Twenty-three Thousand Dollars ($23,000) in off-loading supplies and materials for the Margaritaville project that were not part of its obligations under the Agreement. Under the terms of the Agreement, Ground Control paid the Capsco Two Hundred Sixty-two Thousand Seven Hundred Fifty Dollars ($262,750) for material and equipment expenses and other costs incurred by or billed to Ground Control in furtherance of the completion of the Margaritaville project, however these payments by Ground Control were not properly credited by Capsco in accordance with the terms of the Agreement. Additionally, the officials of Capsco retained for personal benefit reimbursement payments by Ground Control totaling One Hundred Sixty-two Thousand Seven Hundred Fifty Dollars ($162,750),37 which were tendered directly to these Capsco officials in accordance with their specific direction and which Ground Control has sought to recover through its tort claims alleged in the Complaint. J7 Appellant's Record Excerpts, Vol. 1, Exhibit 10, pp

27 During the course of its work at the Margaritaville project, Ground Control received payments of Five Hundred Fifty-four Thousand One Hundred Forty-one Dollars ($554,159) from Capsco for that work specified in the Agreement. As of November 1, 2008, there was a balance of One Million Three Hundred Eight Thousand Five Hundred One-one Dollars ($1,308,691) being owed to Ground Control for work performed under the terms of the Agreement. Ground Control was due additional payments for extra-contractual work, expenses and repairs at the Margaritaville project that totaled Two Hundred Sixty-five Thousand Nine Hundred Seven-seven Dollars ($265,997). On December 2008, Ground Control gave a "stop pay" notice to Yates and Harrah's regarding its lien on any moneys retained for work performed at the Margaritaville project by Ground Control. Ground Control alleged that on the basis that Yates had served as Harrah's construction manager, the privity of the parties allowed Ground Control to assert this lien. It was subsequently discovered by Ground Control that during the latter part of 2009, and after this litigation commenced, Capsco sought payment from Yates of the moneys retained by Yates for work at the Margaritaville project. This included money retained for work performed by Capsco. Specifically, Kenny Kossow, who worked as Ground Control's field supervisor at the Margaritaville project and who was subsequently employed by Capsco in a similar capacity, attended a meeting in Birmingham, Alabama, with Casco's owner Chris Killion, its president Loye Mcllveene, its Margaritaville project manager Jason Dollar and 17

28 two (2) attorneys from the Balch & Bingham law firm. During this meeting the collection of payment for the out of sequence work and damage repairs performed by Ground Control was discussed, as well as the fact that Ground Control had filed a lawsuit against Capsco and provided stop pay notices with both Harrah's and Yates for unpaid work at the Margaritaville project. Both Capsco's officials and its attorneys agreed that they would go forward with the claims against Harrah's and Yates for the retained funds claimed by Ground Control in disregard of the claims in this litigation. During February 2010 Capsco successfully arbitrated its claims for the payment of the retained funds claimed by Ground Control, and Yates paid Capsco approximately Six Hundred Eighty Thousand Dollars ($680,000) for various work performed by Ground Control at the Margaritaville project. 3S There is no evidence that Yates attempted to avoid or defend the claims by Capsco on the basis that had received Ground Control's stop pay notice dated December 31,2008. STANDARD OF REVIEW This Court conducts a de novo review when deciding whether the trial court properly granted a motion for summary judgment. Conrad v. Holder, 825 So.2d 16, 18 (Miss. 2002). Likewise, this Court applies de novo review to questions of law, including the constitutionality of a statute. Wells by Wells v. Panola County Board Of Education, 645 So.2d 883, 888 (Miss. 1994). In reviewing questions of law, this Court proceeds de novo. Sykes v. State, 757 So.2d 997, 999 (Miss. 2000) (citing Ellis v. Anderson Tully Co., 727 So.2d 3f Appellant's Record Excerpts, Vol. 3, Exhibit 17, pp

29 716, 718 (Miss.1998); Cummings v. Benderman, 681 So.2d 97, 100 (Miss. 1996)). STATEMENT CONCERNING ORAL ARGUMENT The Appellant Ground Control believes that oral argument would be beneficial, as this case involves issues of contractor certification pursuant to Chapter 3, Title 31 of the Mississippi Code and statutory interpretation that have not previously been addressed by this Court. SUMMARY OF THE ARGUMENT The Appellee Capsco has alleged that Chapter 3, Title 31 of the Mississippi Code provides complete immunity to suit for a property owner that contracts with a contractor lacking requisite certification by the State Board of Contractors. The Harrison County Circuit Court concurred with Capsco and dismissed all claims asserted by the Appellant Ground Control against Capsco. Ground Control alleges that the dismissal was improper because 1) the statute limits relief to voiding the contract, and 2) Ground Control alleged claims against. Capsco that are not subject to Chapter 3, Title 31 of the Mississippi Code. The Appellees Harrah's and Yates sought dismissal of the claims alleged against them by Ground Control on the premises that there was a lack of privity between them and Ground Control. Ground Control responded by submitting verified evidence that Yates was in fact a construction manager, as opposed to the primary contractor, which would establish privity between these Parties and allow Ground Control to prosecute its claims against these Parties. The Harrison 19

30 County Circuit Court committed reversible error by disregarding Ground Control's verified evidence substantiating its claim. Ground Control additionally alleged equitable claims against all of the Appellees that sought payment for unpaid labor and materials. Additionally, tort and extra-contractual claims were pled by Ground Control against Capsco. ARGUMENT I. IT WAS REVERSIBLE ERROR FOR THE HARRISON COUNTY CIRCUIT COURT TO SUA SPONTE CONVERT THE JOINT MOTION TO DISMISS BY YATES AND HARRAH'S TO A MOTION FOR SUMMARY JUDGMENT SUBSEQUENT TO THE HEARING ON THE JOINT MOTION TO DISMISS AND WITHOUT NOTICE TO GROUND CONTROL SUFFICIENTLY IN ADVANCE OF THE HEARING DATE. Subsequent to the November 17, 2010 motion hearing, the Harrison County Circuit Court granted summary judgment sua sponte in regard to the Joint Motion to Dismiss filed by Yates and Harrah's,39 although these Parties specifically sought dismissal of Ground Control's claims pursuant to Rule 12(b)(6) of the Mississippi Rules of Civil Procedure. 40 For this and those other specific reasons set forth herein, it was in error for the Court to adjudicate the Joint Motion to Dismiss as a motion for summary judgment. A trial court errs when it converts a defendant's motion to dismiss to one for summary judgment without giving the plaintiff ten days' notice before a hearing on the converted motion for summary judgment. See generally, Sullivan v. Tullos, 19 So.3d 1271, 1277 (Miss. 2009); Palmer v. Biloxi Regional Medical J9 40 Appellant's Record Excerpts, Vol. 1, Exhibit 5. Appellant's Record Excerpts, Vol. 2, Exhibit

31 Center, Inc., 649 So.2d 179, 183 (Miss. 1994). It is an absolute necessity that the trial court inform the parties of its intent to convert a Rule 12(b)(6) motion to a Rule 56 motion for summary judgment and give the parties the opportunity to submit materials in opposition to the motion. Donald v. Reeves Transport Co., 538 So.2d 1191, 1196 (Miss.1989). The failure to give a party ten days' notice before a hearing on the converted motion is a fundamental error that has consistently resulted in reversal by the appellate courts and remand of the case for further proceedings. Prior to the November 17, 2010 motion hearing, Ground Control had no notice that Yates or Harrah's Rule 12(b)(6) motion had been formally converted to a motion for summary judgment, nor does record show that the attorney for Yates or Harrah's had requested that their Rule 12(b)(6) motion be heard as a motion for summary judgment. 41 Further, the Court did not advise Ground Control at this hearing or at any other time that the Rule 12(b)(6) motion would be considered as a motion for summary judgment. In spite of these omissions, Ground Control did respond to the motion to dismiss with verified evidence supporting its allegation that Yates was a construction manager. However, the lack of notice caused Ground Control to respond only to the motion to dismiss. Had proper notice been given, Ground Control would have focused on the evidence refuting summary judgment, rather than focusing on its objections to the motion to dismiss. Accordingly, it was error for the Court to grant summary 41 Appellant's Record Excerpts, Vol. 3, Exhibit 20, Defendants' Re-Notice of Hearing, dated October 28,

32 judgment sua sponte after the November 17, 2010 hearing under these facts and in disregard of the notice requirements of Rule 56. II. ASSUMING IT WAS PROPER FOR THE HARRISON COUNTY CIRCUIT COURT TO ADJUDICATE THE JOINT MOTION TO DISMISS AS A MOTION FOR SUMMARY JUDGMENT, THE CIRCUIT COURT COMMITTED REVERSIBLE ERROR WHEN IT FAILED TO CONSIDER THE VERIFIED EVIDENCE SUBMITTED BY GROUND CONTROL IN SUPPORT OF THE ALLEGATIONS THAT YATES WAS HARRAH'S CONSTRUCTION MANAGER AT THE MARGARITAVILLE PROJECT AND OTHER PLED CLAIMS. Ground Control stated three (3) cognizable causes of action in its initial pleadings against Harrah's and Yates. First, it asserted that Yates was a construction manager at the Margaritaville project,.2 and therefore privity existed between Harrah'sNates and Ground Control, provided Ground Control proves at trial that Yates was Harrah's construction manager at the project. Whether Yates is either a "general contractor" or "construction manager" is a question of fact to be determined at a trial on the merits. Aladdin Construction Co. v. John Hancock Life Insurance Co., 914 So. 2d 169, (Miss. 2005), citing Baum v. Ciminelli-Cowper Co., 300 A.D.2d 1028, 1029, 755 N.Y.S.2d 138, (N.Y. App. Div. 2002). In support of this factual assertion, Ground Control references the following verified evidence in the record: a. Frank Beaton, President of Ground Control, stated in his February 19, 2010 affidavif'3 that as a result of his work at the Margaritaville project, he had the opportunity to observe the operations and responsibilities of Appellant's Record Excerpts, Vol. 1, Exhibit 7, pp , ~~ Appellant's Record Excerpts, Vol. 2, Exhibit 13, pp

33 Yates concerning the work performed at this construction site and based upon these observations, Mr. Beaton stated under oath: i. the project manager for Yates was Jason Wold, who Beaton personally observed being regularly involved in project management and related planning; ii. Mr. Wold's comments during meetings with the project's contractors indicated that he was involved in cost, time and quality management concerning the completion of the Margaritaville project; iii. Mr. Wold was involved daily meetings with Beaton and other contractors at the Margaritaville project concerning both safety issues and matters related to the management and coordination of the various concurrent construction activities at the construction site; iv. Mr. Wold was involved in the administration of my contracts for work at the Margaritaville project and the changes or amendments that were subsequently made these contracts; v. during the course of his involvement with the Margaritaville project, Beaton did not observe any building, installation or other type of work that could be classified as either construction work or manual labor being performed at the construction site by anyone identified as an employee or representative of W.G. Yates & Sons Construction Company; and vi. during the course of his involvement with the Margaritaville project, Beaton observed the operations of all of the various contracting companies performing work at the construction site, and none of the contracting companies performing construction work at this project represented themselves as being W.G. Yates & Sons Construction Company or that they were the employees and/or representatives of Yates. b. Kenneth Kossow, field supervisor for Ground Control, LLC and then subsequently for Capsco at the Margaritaville project, stated in his October 4, 2010 affidavit«that due to both the nature of his job responsibilities at the Margaritaville project and his interaction with the supervisors employed by Yates Construction at this project, Mr. Kossow stated under oath: 44 Appellant's Record Excerpts, Vol. 3, Exhibit 17, pp

34 i. Yates Construction was not directly involved in performing any specific construction work at the Margaritaville project, but rather the construction work during this initial phase was performed by (in addition to Ground Control and Capsco) Baker Concrete, JESCO, Garrison Steel, F&F Trucking and Grading, and RLS Construction, Inc.; and ii. the only work Kossow observed performed by the employees of Yates Construction at the Margaritaville project was the oversight of the respective contractors in order to assure compliance with design specifications, safety oversight, coordination of the overall work by the various project contractors, directing contractors to perform out of sequence work, and the inspection and approval of the work performed by the contractors at the project. The Beaton and Kossow affidavits clearly provide sufficient verified proof that an genuine issue of material fact exists concerning Ground Control's allegations that Yates was the construction manager at the Margaritaville project. It was reversible error for the circuit court to ignore the Beaton and Kossow affidavits in the adjudication of the motion filed by Harrah's and Yates. A determination at trial that Yates was a construction manager would allow Ground Control to assert statutory liens under Miss. Code Ann As Ground Control's allegations state a cognizable claim upon which relief may be granted, and the Beaton and Kossow affidavits confirm existence of genuine issues of material fact regarding this claim, it was reversible error for the circuit court to grant summary judgment or dismiss this claim against Harrah's and Yates. Ground Control alleged a second claim against Yates based upon the fact that Yates had specifically undertaken contractual liability with Harrah's to assure that all parties providing labor, services and materials at the Margaritaville project 24