text:
    A02A0249.
    BUSH et al. v. NORTHSIDE TRUCKING, INC. et al.
    (556 SE2d 909)
   Eldridge, Judge.

In early 2000, appellant-defendants Erik and Mary Beth Bush decided to undertake an extensive landscaping project in the backyard of their home, located in Alpharetta. Mr. Bush prepared a layout of the proposed project, and, acting on this, defendant Environmental Scapes-Fence Division, Inc. (“ESFD”) submitted its proposal to complete the project, estimating the total price to be $32,220. On April 29, 2000, the Bushes entered into an agreement with ESFD for the completion of the project under its proposal and subject to additional terms and conditions which were attached to the contract as page 2 thereof. Of these, paragraph 10 pertinently provided that “[a]Iterations, additions, or deviations shall be charged to the owner at the contractor’s normal selling price.” The project was thereafter modified to bring a proposed retaining wall closer to the Bush home to avoid encroaching upon a Fulton County easement. The Bushes paid ESFD $16,110 before work began on the project. Work then commenced but later stopped upon the Bushes’ refusal to pay an August 17, 2000 ESFD billing for materials and labor that was nearly $25,000 in excess of its $32,220 estimated original proposal for completing the project.

On September 25, 2000, appellee-plaintiff Northside Trucking, Inc., as ESFD’s subcontractor and materialman, filed a materialman’s lien under OCGA § 44-14-360 et seq. in the amount of $23,105.58 for loading, delivering, and unloading dirt, gravel, and stone at the Bushes’ residence. A month later, Northside filed the instant complaint against the Bushes and ESFD, pertinently seeking a special lien on the Bush property and leave to foreclose on it and as to ESFD damages for breach of contract and OCGA § 13-6-11 attorney fees. The Bushes and ESFD timely answered, denying the material allegations of Northside’s complaint while contemporaneously filing counterclaims against each other. The Bushes, pro se, and Northside thereafter proceeded to compulsory, nonbinding arbitration under Atlanta Judicial Circuit (“AJC”) Local Procedure 1000. On May 18, 2000, following an arbitration hearing, the arbitrators issued their award as follows: “[Northside] is entitled to enforce a materialman’s lien against the [Bushes’] property... in the sum of $24,722.97 principal & [interest plus] $6,000 [attorney fees]. We award [ESFD] the sum of $16,110[ ] to be paid by [the Bushes] unless the lien amount is paid by the Bushes.”

By their brief on appeal, the Bushes concede that they have given their consent to the arbitration award for failure to timely file a demand for trial within 30 days of the filing of the arbitration award with the AJC’s Alternative Disputes Resolution Program (“ADRP”) Administrator. See AJC Rule 1000, paragraphs 13i and 13j. Nonetheless, they contend that the award should be set aside as confusing and open to interpretation, arguing that prejudgment interest is not due in that Northside’s lien became liquidated only after judgment fixing its amount; that OCGA § 13-6-11 attorney fees are not due Northside as neither authorized by the Georgia lien statute, OCGA § 44-14-361 et seq., nor sought by its complaint; and that the principal amount due Northside is $16,110 since in no event can a materialman recover more than the contract price between the owner and general contractor. Held:

1. Prejudgment Interest. We agree that Northside was not entitled to prejudgment interest. “Prejudgment interest is allowable only where the amount recoverable is liquidated, i.e., certain and fixed, a sum which cannot be changed by the proof. A debt is liquidated when it is certain how much is due and when it is due. ... A demand is not liquidated where its amount could only be established by a jury.” (Citations and punctuation omitted.) Marathon Oil Co. v. Hollis, 167 Ga. App. 48, 51-52 (3) (305 SE2d 864) (1983). Moreover, interest on the amount of a lien may not be claimed in the absence of an agreement or judgment fixing such amount as liquidated. Cowart v. Reeves, 80 Ga. App. 161, 168 (55 SE2d 911) (1949). The amount of the lien here became liquidated only after judgment. Nevertheless the award was taken for the principal amount of the lien and interest thereon from the date it was alleged that the principal amount became due. Accordingly, the arbitrator’s award was improper as to its award of prejudgment interest to Northside.

2. OCGA § 13-6-11 Attorney Fees. A defendant is not chargeable with the expenses of litigation unless he has acted in bad faith because the constitutional right to be heard in the courts is granted to defendants as well as plaintiffs. Pickett v. Chamblee Constr. Co., 124 Ga. App. 769, 775 (9) (186 SE2d 123) (1971). By its complaint, North-side alleges bad faith in the instant litigation by ESFD alone. It follows that the award of OCGA § 13-6-11 attorney fees against the Bushes for bad faith litigation was here impermissible. Moreover, attorney fees are not lienable under the Georgia lien law and so would not be available in any event. OCGA § 44-14-361 et seq.; see also Womack Indus. v. B & A Equip. Co., 199 Ga. App. 660, 661 (1) (405 SE2d 880) (1991) (OCGA § 44-14-361 in derogation of common law and so must be strictly construed).

3. Confusion Barring Enforcement. While we are mindful of our authority to require clarification on remand of a judgment deemed confusing, Walker v. Walker, 248 Ga. App. 177, 179 (4) (546 SE2d 315) (2001), such action is unnecessary in this case. Since neither prejudgment interest nor attorney fees were allowable under the circumstances of this case, as above, the plain meaning of the trial court’s judgment adopting the arbitrator’s consent award requires that the Bushes pay over the further sum of $16,100 to Northside or to ESFD. Such payment to either party shall fully satisfy the judgment in issue. “When the language of an agreement is plain and unambiguous, the court must afford its literal meaning, despite a party’s contention that he understood the contract to mean something else. (Cit.)” Sofran Peachtree City v. Peachtree City Holdings, 250 Ga. App. 46, 50 (550 SE2d 429) (2001); see also Ashworth v. Busby, 272 Ga. 228, 230-231 (526 SE2d 570) (2000) (settlement agreement reviewed for plain meaning).

Decided December 3, 2001.

Shapiro, Fussell, Wedge, Smotherman & Martin, Nicholas S. Papleacos, David C. Moulds, for appellants.

Meriwether & Tharp, Patrick L. Meriwether, Robert L. Tharp, Hipes & Norton, Albert L. Norton, Jr., Joseph C. Peake III, for appellees.

4. In light of our disposition of Divisions 1-3, we need not address the Bushes’ remaining claim of error.

Judgment affirmed in part and reversed in part.

Smith, P. J., and Ellington, J., concur.

       The record reflects that the Bushes terminated counsel before going to arbitration. They are again represented by counsel on appeal.

       “Effective December 31, 1994, the term ‘local rules’ is no longer used. See Superior Court Rule 1.1.” Local Procedures of the AJC, Cover Sheet.

       These sections of AJC Rule 1000 provide:
      13i.
      Following a non-binding arbitration hearing, any party may file a demand for trial . . . within thirty (30) days of the filing of the arbitration award, with the ADRP Administrator, or designee who shall make a notation and entry of the date of filing of the award and the trial demand; the demand for trial shall be in the form of a pleading and shall contain the style of the case, the case number and a demand for jury or non-jury trial. Filing such demand for trial will entitle all parties to a de novo trial of all issues of fact or of law which were raised or could be raised in the arbitration hearing; such case will be tried before the judge to whom the case has been assigned in the ordinary procedure and course of time as if no arbitration hearing had been held. Arbitration proceedings shall not delay or impede the normal trial of such case.
      13j.
      If no party files demand pursuant to paragraph 13i, it shall be deemed a consent to the arbitration award and shall constitute a waiver of trial. After the expiration of such thirty (30) days without the filing of a demand, an appropriate judgment, order, or dismissal may be entered.

       Local Procedure 1000, paragraph 13j (untimely demand for jury trial deemed consent to arbitration award).


source: Caselaw Access Project

author: Ruffin, Judge.

license: Public Domain

text:
    A01A0883.
    HINDMON v. VIRGIL’S FOOD MART, INC.
    (556 SE2d 135)
   Ruffin, Judge.

Jewel Hindmon sued Virgil’s Food Mart, Inc. (“Virgil’s”) alleging that Virgil’s negligence proximately caused her to slip and fall on its premises. Finding that the undisputed evidence showed that Hindmon had actual knowledge of the condition that caused her to slip and fall, the trial court granted Virgil’s motion for summary judgment. Hindmon appeals the trial court’s order, and for reasons that follow, we affirm.

On appeal, we review the trial court’s grant of summary judgment to Virgil’s de novo and construe the evidence and all reasonable inferences therefrom in the light most favorable to Hindmon as the nonmovant. Summary judgment in favor of Virgil’s is appropriate only if there is no genuine issue of material fact concerning Hindmon’s claim.

Viewed in Hindmon’s favor, the evidence shows that, on the day of the accident, Hindmon was wearing shoes with heels one to one and one-half inches high. When Hindmon and a Mend arrived at Virgil’s, a restaurant, at approximately 1:30 p.m., it was raining. They walked through a covered porch and entered the restaurant through the front door.

While Hindmon and her friend were dining, a Virgil’s employee placed “an old shaggy rug,” approximately two by four feet in size, on the covered porch immediately outside the front door through which Hindmon had entered the restaurant. In her deposition, Hindmon described what occurred as she was leaving the restaurant:

Q. When you were coming out of the restaurant, before you fell, did you see the mat or the rug there? A. Yes, I did. And I tried to avoid it. I stepped as far as I could, and I couldn’t avoid it. Q. All right. And I know you had said something — that it was folded a bit? A. Rolled. Kind of rolled, folded. Q. Describe for me as far as what side of the rug or the mat was folded. A. I believe it was the side toward the door, kind of. It was near the door. Q. So when you walked out the door to start leaving the restaurant, you were able to notice the rug was there, and you could see that there was a folded-over part? A. Yes. Yes. And I could see that it was shaggy. Like I say, I tried to avoid it. I had a fear of somebody falling on it, and I tried to avoid it myself.

Thus, Hindmon testified, she attempted to “step over the rug,” but as she was doing so, her heel “caught on the stringy flat part” of the rug, causing her to fall. Hindmon acknowledged that the rug was “pretty visible,” and that nothing obstructed her view of the rug or distracted her attention away from the rug as she was leaving the restaurant.

In support of her contention that the trial court erred in granting summary judgment, Hindmon points to an interrogatory answer in which she stated that, as she “was attempting to exit the restaurant, she was in mid-stride when she noticed that someone had placed a shaggy rug . . . near the entrance!,]” and that although she “tried to avoid [the rug], she was unable to do so and the heel of one of her dress shoes caught on the rug, tripping her and causing her to fall.” On appeal, Hindmon argues that this interrogatory response creates a material issue of fact concerning whether she lacked sufficient knowledge of the hazard created by the rug.

Decided September 13, 2001

Reconsideration denied December 4,2001.

Johnny R. Pannell, for appellant.

Swift, Currie, McGhee & Hiers, Kristine J. Moschella, Henry L. Pruett, for appellee.

For Hindmon to recover for her injuries, she “must prove (1) that [Virgirs] had actual or constructive knowledge of the hazard; and (2) that [she] lacked knowledge of the hazard despite the exercise of ordinary care due to actions or conditions within the control of [Virgil's] .” This is because

[t]he basis of the proprietor’s liability is his superior knowledge, and if his invitee knows of the condition or hazard there is no duty on the part of the proprietor to warn [her] and there is no liability for resulting injury because the invitee has as much knowledge as the proprietor does and then, by voluntarily acting in view of [her] knowledge, assumes the risks and dangers incident to the known condition.

We agree with the trial court that Hindmon’s knowledge of the rug precludes recovery. Her deposition testimony clearly shows that the rug was visible, that Hindmon saw the rug, and that because she feared someone could fall on the rug, she attempted to avoid it herself. To the extent that Hindmon’s interrogatory response implies that she saw the rug too late to avoid falling, it contradicts her deposition testimony and is properly construed against her. Because the evidence showed that Hindmon “had actual knowledge of the hazard which caused her fall prior to encountering it,” the trial court properly granted summary judgment to Virgil’s.

Judgment affirmed.

Johnson, P. J., and Ellington, J., concur.

       See Gresham v. Bell’s Food Market, 244 Ga. App. 240 (534 SE2d 537) (2000).

       See id.

       Id.

       (Punctuation omitted.) Id. at 240-241.

        Prophecy Corp. v. Charles Rossignol, Inc., 256 Ga. 27, 30 (2) (343 SE2d 680) (1986).

       (Punctuation omitted.) Gresham, supra at 241. See also Gray v. Oliver, 242 Ga. App. 533, 535 (530 SE2d 241) (2000).


author: Mikell, Judge.

text:
    A01A0991.
    A01A0992.
    A01A0993.
    DYER v. HONEA et al. HONEA v. DYER. BAILEY v. DYER.
    (557 SE2d 20)
   Mikell, Judge.

Pursuant to a contract executed on September 25, 1995, Hal C. Dyer purchased Joel’s Restaurant & Catering (“the restaurant”) in Gwinnett County for $60,000. The restaurant was owned by Joel’s Fine Foods, Inc. (“JFFI”), a corporation closely held by Joel Honea (“J. Honea”) and his father, Robert Honea (“R. Honea”). The closing was handled by the Honeas’ long-time counsel and JFFI’s registered agent, Wayne A. Bailey. During the closing, J. Honea and R. Honea each executed an affidavit averring that there were no liens or encumbrances against the restaurant. Dyer subsequently discovered numerous liens against JFFI and a security interest in the restaurant’s equipment. He also determined that profit and loss statements on which he relied in making the purchase were inaccurate. After borrowing money to keep the restaurant afloat, Dyer finally closed it in December 1995 and sold its assets for $6,400.

Dyer then sued J. Honea, R. Honea, JFFI, Bailey, and Leslie J. Knight. Dyer alleged that Knight, a friend of J. Honea, represented himself as J. Honea’s accountant and showed him financial data supporting the profit and loss statements at issue. Dyer further alleged that JFFI, through the Honeas, as well as the Honeas individually, intentionally misrepresented the restaurant’s financial condition and that those misrepresentations induced Dyer to purchase the restaurant; that the Honeas, JFFI, and Knight conspired to defraud him; and that the corporate veil of JFFI should be pierced to permit holding the Honeas personally liable. In addition, Dyer asserted a breach of contract claim against the Honeas and JFFI based on their alleged failure to satisfy the restaurant’s debts.

Finally, Dyer asserted a legal malpractice claim against Bailey. Dyer contended that Bailey persuaded him to discontinue using his own attorney and to retain Bailey to prepare the sales contract and the remainder of the closing documents. Dyer further alleged that Bailey should have known of the existence of the lien against the equipment and should have made Dyer aware of it. In support of this claim, Dyer attached the affidavit of George T. Smith, who concluded that Bailey had violated various Canons of Ethics, Directory Rules, and Standards of Conduct promulgated by the State Bar of Georgia in his representation of Dyer.

Dyer sought punitive damages against all defendants for the alleged fraud and conspiracy. The Honeas and JFFI, Bailey, and Knight each moved for summary judgment on all issues. The trial court granted Knight’s motion, ruling that Dyer failed to offer credible evidence of Knight’s fraud or his knowledge of any fraud. In Case No. A01A0991, Dyer appeals, and we affirm, but for the reason that Dyer failed to show justifiable reliance as a matter of law. The trial court denied the motion filed by the Honeas and JFFI. Only R. Honea appeals from that order. That case is docketed as Case No. A01A0992, and we affirm in part and reverse in part. The trial court also denied Bailey’s motion, ruling that genuine issues of fact remained. Case No. A01A0993 is Bailey’s appeal, and we affirm.

Case No. A01A0991

1. In his first enumeration of error, Dyer asserts that the trial court erred in granting summary judgment to Knight because material issues of fact remain on the claim of fraudulent misrepresentation. We disagree.

To prevail on summary judgment, the moving party must show that no genuine issues of material fact remain to be tried and that the undisputed facts, viewed in the light most favorable to the nonmovant, warrant judgment as a matter of law. On summary judgment, we must construe the evidence and all reasonable inferences and conclusions that may be drawn from it most favorably to the nonmovant. So viewed, the evidence relevant to Dyer’s claims against Knight shows the following: Knight operated a tax return preparation service located in the same shopping center as the restaurant. He had befriended J. Honea and permitted J. Honea to utilize his secretary and office equipment. Knight’s secretary typed the profit and loss statements that J. Honea showed to Dyer when the two first met on August 2, 1995, to discuss purchasing the restaurant. The statements consisted of brief, one-page summaries of the profits and losses of the corporation for the years 1993 and 1994, as well as the last quarter of 1992. Dyer deposed that at the meeting, J. Honea “suggested that we get together with his accountant. . . and I could ask the questions of the man who prepared” the statements.

On or about August 6,1995, Dyer met with J. Honea and Knight. According to Dyer, Knight showed him documentation supporting the profit and loss statements and claimed that he had prepared the documents. Dyer deposed that Knight vouched for the profits and said the restaurant was a good business. Knight, however, deposed that he had never prepared any financial documents for the restaurant and did not review the documents at issue with Dyer. Knight claimed that he was unaware of the nature of the documents until he was sued.

Christine Sandquist, a waitress who was working at the restaurant when the meeting took place, deposed that before Dyer arrived, J. Honea and Knight were reviewing different financial statements with “different bottom line figures” and deciding which statement to show Dyer. However, on cross-examination, the waitress admitted that she was not paying close attention, did not hear any of their conversation, and did not know whether the different numbers represented different years.

As the moving party on a motion for summary judgment, a defendant may pierce the plaintiffs pleadings by demonstrating that there is no issue of material fact as to at least one essential element of the plaintiff’s prima facie case. The five elements essential to a tort suit for damages resulting from a material misrepresentation constituting fraud are: (1) that the defendant made the representations; (2) that at the time he knew they were false; (3) that he made them intending to deceive the plaintiff; (4) that the plaintiff justifiably relied on the representations; and (5) that the plaintiff sustained the alleged loss and damage as the proximate result of their having been made. Accordingly, to survive summary judgment on his fraud claim against Knight, Dyer had to present some evidence of justifiable reliance. This he did not do.

In order for a genuine issue of material fact to exist as to justifiable reliance, there must be some evidence that the [plaintiff] exercised [his] duty of due diligence to ascertain the truth of the matter and to avoid damage. Although questions of due diligence often must be resolved by the trier of fact, that is not always the case. A party may fail to exercise due diligence as a matter of law.

Assuming, without deciding, that Sandquist’s deposition testimony raises an inference that Knight misrepresented the profitability of the restaurant, Dyer’s fraud claim still fails, as he produced no evidence that his reliance on any alleged misrepresentation was reasonable. Dyer admitted that he conducted only a cursory review of the documents because he was “not great with figures” and it was “much easier to read” the one-page summaries. Despite his acknowledged difficulty comprehending financial statements, Dyer deposed that he neither requested copies of the documents nor sought out an accountant to review them. The evidence demonstrates conclusively that he took no action to independently verify the accuracy of the data allegedly presented by Knight. Such blind reliance precludes his fraud claim as a matter of law.

2. Dyer next contends that material fact issues remain as to whether Knight conspired with J. Honea and R. Honea to conceal the true financial condition of the restaurant. However, as Dyer’s conspiracy claim is dependent upon the viability of his fraud claim, it too must fail.

“A conspiracy is a combination of two or more persons to accomplish an unlawful end or to accomplish a lawful end by unlawful means.” “The cause of action for civil conspiracy lies not in the conspiracy itself, but in the underlying tort committed against the plaintiff and the resulting damage.” It follows that the trial court did not err in granting summary judgment to Knight on Dyer’s conspiracy claim.

Case No. A01A0992

3. Dyer asserted claims of fraudulent misrepresentation, breach of contract, conspiracy, and piercing the corporate veil against R. Honea. On appeal from the order denying him summary judgment, R. Honea raises eight enumerations of error.

(a) First we address the fraud claim based on oral misrepresentations allegedly made by R. Honea before the closing. Viewed most favorably to Dyer, the evidence shows that R. Honea told Dyer that J. Honea had done “great things” with the restaurant and that it should continue to be “a very profitable business.” Dyer asserted that R. Honea knew or should have known that his representations were false because he had made loans totaling $92,972.98 to JFFI from 1992 through 1995 and he was JFFI’s majority shareholder. Even assuming these representations were knowingly false and that they induced Dyer into purchasing the restaurant, Dyer is estopped from proving that he reasonably relied on them by the merger clause contained in the parties’ contract.

A plaintiff claiming that he was fraudulently induced into entering into a contract may elect one of two remedies: affirm the contract and sue to recover damages for its breach or rescind the contract and sue in tort to recover damages for fraud. If the party elects to affirm the contract, the merger clause estops him from asserting that he relied upon antecedent oral representations. Dyer claims that after discovering the outstanding liens against the restaurant and the discrepancies in the sales figures, he demanded rescission of the contract. No such demand appears in the record. In any event, Dyer failed to allege a cause of action for rescission in either the original complaint or the amended complaint. Instead, he sought damages flowing from the alleged fraud. Such action “constituted an election of remedies and a waiver of any rescission claim.” Accordingly, Dyer cannot recover based on any alleged oral representation preceding the execution of the contract.

(b) We next consider the denial of summary judgment to R. Honea on the fraud claim arising out of his execution of an affidavit at closing stating that there were no liens, security interests, or corporate debts affecting the restaurant. The affidavit reflects that it was offered “for the specific purpose of inducing” Dyer to purchase the restaurant. Therefore, we hold that it was made a part of the contract. Consequently, Dyer’s fraud claim based on misrepresentations contained in this document is not barred by the merger clause. “Generally, false representations that induce the party to enter into the contract are merged through the contract merger language, but since the same misrepresentations were made as part of the contract, there was no merger.” Nevertheless, Dyer’s fraud claim fails, as he failed to exercise due diligence to determine if any liens were of record prior to closing. Dyer admitted that he did not conduct a public records search, which would have revealed numerous state Department of Revenue liens as well as a UCC financing statement securing an interest in the restaurant’s equipment.

Summary judgment for the defendant is appropriate in a suit alleging fraudulent misrepresentations when the record demonstrates that the plaintiff’s reliance on the misrepresentations was not “justifiable.” In order to prove the element of justifiable reliance, the plaintiff must show that he exercised his duty of due diligence. And, “[w]hen the means of knowledge are at hand and equally available to both parties to a contract of sale, if the purchaser does not avail himself of these means, he will not be heard to say . . . that he was deceived by the representations of the seller.” On the other hand, a plaintiff is not required to prove that he “exhaust [ed] all means at his command to ascertain the truth before relying upon the representations.”

Difficulties arise for the bench and bar in discerning when the reasonableness of the plaintiff’s reliance on the representations is a question of fact for the jury and when the reliance is unreasonable as a matter of law. The case at bar concerns representations about encumbrances on the sellers’ title. Therefore precedents about active or passive concealment of tangible defects in real or personal property may or may not be apposite.

Speaking only to representations about title, including liens, encumbrances, easements, and other restrictions on use, the controlling precedents say that the location of information in public records does not necessarily defeat a claim of passive concealment. For example, in Akins v. Couch, the information could have been found in health department records. In Wiederhold v. Smith, the information could have been found in the files of the county department of public works. In both cases, the reasonableness of the buyers’ reliance on the sellers’ representations was held to be a question of fact for the jury.

In other .words, in a suit asking for damages for an allegedly fraudulent misrepresentation, the issue of the reasonableness of the plaintiff’s reliance on the representation is, more often than not, a question for the jury. However, Georgia courts over the decades have adhered to one “bright-line” rule in this area: when the falsity of the representation could have been revealed by a search of the county land records, a failure to search those records makes the reliance on the representation unjustified as a matter of law. This rule applies whether the representation concerns the purchase of real estate or concerns the purchase of personalty, in the case at bar, an asset purchase and a lease of the premises.

The reason for the rule is that the law expects citizens to exercise at least a minimum of due care to protect themselves from fraud. In the case at bar, no prudent person would invest $60,000 to buy a restaurant, i.e., the trade name, good will assets, equipment, and lease of the business, without checking the county land records to learn if any liens or security interests encumbered the assets being purchased. Local governments spend considerable money each year to maintain land records and make them available to the bar and the public. They are maintained and made available to allow the public to protect itself against precisely the type of imbroglio shown in this litigation. In Georgia, the land records also contain filings of UCC security interests and Revenue Department liens. Therefore the bright-line rule applies to transactions which would be adversely affected by such liens and security interests, whether those transactions involve real property or personalty.

It might be argued that none of the precedents establishing the bright-line rule involve representations made by affidavit and that such sworn representations should require less diligence on the part of the purchaser. However, we have not in the past applied a different rule for sworn representations, and we decline to do so here. An examination of the county land records, i.e., the records that are usually searched prior to a closing, would have revealed the liens and the security interest. Dyer’s failure to examine those records makes his reliance on R. Honea’s representations unjustified. Summary judgment on the fraud claim was appropriate.

(c) Dyer’s admission that the liens have been satisfied negates his ability to prove damages, an essential element of his breach of contract claim against R. Honea. Accordingly, the trial court erred in denying summary judgment on this claim as well.

(d) As Dyer cannot prevail on his fraud claim against R. Honea, the conspiracy claim fails as well. See Division 2, supra.

(e) Finally, R. Honea contends that the trial court erred in denying summary judgment to him on the issue of whether the corporate veil of JFFI may be pierced so as to hold him individually liable. However, as the case against JFFI remains pending below, our determination of this issue would be premature. Accordingly, the denial of summary judgment to R. Honea on this issue is affirmed.

Case No. A01A0993

4. Bailey’s cross-appeal challenges the denial of his motion for summary judgment on Dyer’s legal malpractice claim.

Construing the evidence most favorably to Dyer, we hold that disputed factual issues remain for a jury to determine.

The evidence shows that on August 10, Dyer and J. Honea briefly memorialized their initial agreement to consummate the sale of the restaurant. The transaction was delayed several weeks while Dyer awaited approval from the owner of the shopping center to transfer the lease. Dyer ultimately retained the law firm of Peevy & Lancaster to draft a formal sales agreement. On September 22, Dyer presented a copy of the agreement to J. Honea. Dyer deposed that J. Honea indicated his surprise at the complexity of the document and stated that he would fax it to his father and their attorney.

According to Dyer, he received a telephone call that evening from an individual who identified himself as Wayne Bailey. Dyer testified that the individual was “quite angry” that Dyer had delayed the transaction and accused Dyer of dealing in bad faith. Dyer further deposed that the attorney stated that he could prepare the documents quickly while protecting Dyer’s best interest.

Three days later, Dyer testified, J. Honea informed him in person that he and R. Honea considered the contract unsuitable for the purchase of a small business. According to Dyer, J. Honea then called Bailey and handed the telephone to Dyer. Dyer deposed that Bailey told him that the sales contract drafted by Peevy & Lancaster was inappropriate; that Bailey could prepare a contract by day’s end; that Bailey could represent Dyer; and that Dyer would be responsible for paying closing costs of $750. J. Honea presented a contract prepared by Bailey to Dyer that same day. Dyer testified that based on this conversation, he believed he had retained Bailey.

In his deposition, Bailey categorically denied speaking with Dyer on either September 22 or September 25. He further deposed that at the closing on September 27, he informed Dyer that he represented the Honeas and that if Dyer wished to have his attorney present, the closing could be rescheduled. In addition, he explained that the $750 rate was a flat fee for preparing the closing documents.

Dyer deposed that Bailey did not state that he represented only the Honeas. According to Dyer, Bailey said he was “very sorry” for all the “problems” Dyer had had with his attorney. Dyer deposed further that Bailey stated that J. Honea “had done a great job with that business, that he had basically taken a rat hole and turned it into a profitable location.”

Bailey further deposed that at the time of the closing, he was unaware of the existence of any liens against JFFI or the restaurant. The record shows, however, that Bailey’s name appears on the original UCC financing statement reflecting James R. Heath’s lien upon the restaurant’s equipment. “In a legal malpractice action, the client has the burden of establishing three elements: (1) employment of the defendant attorney, (2) failure of the attorney to exercise ordinary care, skill and diligence, and (3) that such negligence was the proximate cause of damage to the plaintiff.”

In denying summary judgment to Bailey, the trial court ruled that genuine issues of fact remained as to the reasonableness of Dyer’s belief that an attorney-client relationship existed between Dyer and Bailey. This ruling is enumerated as error. Notwithstanding Bailey’s protests to the contrary, Dyer’s deposition testimony creates an issue of fact as to whether he reasonably believed that he had hired Bailey to represent him at the closing. Bailey’s reliance on Guillebeau v. Jenkins is misplaced. The factors which led the court in Guillebeau to affirm the grant of summary judgment to the closing attorney in a real estate transaction are absent from this case. In Guillebeau, it was undisputed that the plaintiff and the closing attorney had no contact before the closing, so that no legal advice was sought, and none given. In the instant case, it is for a jury to decide whether Bailey offered legal representation to Dyer.

5. Bailey next asserts that Dyer’s failure to rescind the sales contract bars his legal malpractice claim. This contention is meritless. The remedy of rescission refers to the “right of one party to rescind a contract, for nonperformance by the other party of his obligations thereunder. . . ,” As Bailey was not a party to the contract between the Honeas and Dyer, Dyer’s failure to plead rescission does not bar his malpractice claim against Bailey.

Pennington v. Braxley upon which Bailey relies, does not mandate a contrary result. Pennington held that a merger clause barred a disgruntled home buyer from asserting a malpractice claim against the seller’s real estate agent based on his failure to disclose that the home was infested with bats. There, the agent was a party to the contract, and no confidential relationship existed between the agent and the purchaser, as is suggested here.

Decided November 15, 2001

Reconsideration denied December 4,2001

Peevy & Lancaster, Gregory W. Lancaster, for Dyer.

Daniels & Taylor, Jerry A. Daniels, Webb & Lindsey, Jonathan J. Wade, Dennis L. Collins III, for Honea et al.

6. In his remaining enumerations of error, Bailey essentially contends that he was entitled to summary judgment because Dyer failed to produce evidence of damages proximately caused by Bailey’s alleged negligence or breach of fiduciary duty. We do not agree. Dyer testified that he would not have purchased the restaurant had Bailey informed him of the outstanding liens and that as a result of the purchase, he was forced to borrow funds to keep the restaurant open. “Once a plaintiff establishes that damages proximately flow from the defendant’s alleged conduct, mere difficulty in fixing their exact amount should not be a legal obstacle to recovery.”

7. Bailey next alleges that the pendency of viable claims against J. Honea, R. Honea, and JFFI mandates the grant of his motion for summary judgment. We disagree.

Bailey cites Allen Decorating v. Oxendine for the proposition that where the underlying action remains pending, plaintiff can prove no injury because the action may terminate favorably for the client. While the proposition is correct, it has no application in the context of the instant case. Rather, it applies to cases in which the alleged malpractice arises out of the attorney’s handling of underlying litigation on behalf of the plaintiff. As we held in Allen Decorating: “appellant cannot maintain any viable malpractice claim based on assertions of appellees’ professional negligence arising from the conduct of suits still pending judicial resolution”

Such is not the case here. Bailey handled no suit on Dyer’s behalf which remains pending. Accordingly, the principle for which Allen Decorating stands does not bar the instant malpractice claim. It follows that the trial court correctly denied Bailey’s motion for summary judgment.

Judgments affirmed in Case Nos. A01A0991 and A01A0993. Judgment affirmed in part and reversed in part in Case No. A01A0992.

Blackburn, C. J., and Pope, P. J., concur.

Troutman Sanders, William M. Droze, Daniel S. Reinhardt, for Bailey.

       The evidence shows that J. Honea had valued the business inventory at $52,696, but the sales contract failed to assign a value to the inventory.

        Lau’s Corp. v. Haskins, 261 Ga. 491 (405 SE2d 474) (1991).

        Chiaka v. Rawles, 240 Ga. App. 792 (525 SE2d 162) (1999).

        Garrett v. NationsBank, 228 Ga. App. 114, 115 (491 SE2d 158) (1997).

        GCA Strategic Investment Fund v. Joseph Charles & Assoc., 245 Ga. App. 460, 463-464 (3) (537 SE2d 677) (2000).

        Hanlon v. Thornton, 218 Ga. App. 500, 501 (1) (462 SE2d 154) (1995); Jones v. Cartee, 227 Ga. App. 401 (489 SE2d 141) (1997); Consulting Constr. Corp. v. Edwards, 207 Ga. App. 296 (427 SE2d 789) (1993); English Restaurant v. A. R. II, Inc., 194 Ga. App. 639, 641 (1) (391 SE2d 462) (1990).

       (Citation omitted.) Wender & Roberts, Inc. v. Wender, 238 Ga. App. 355, 360 (4) (518 SE2d 154) (1999).

        Jones v. Cartee, supra, 227 Ga. App. at 406; Consulting Constr. Corp. v. Edwards, supra, 207 Ga. App. at 298 (1).

       (Punctuation omitted.) U. S. Anchor Mfg. v. Rule Indus., 264 Ga. 295, 297 (1) (443 SE2d 833) (1994).

        Bell v. Sasser, 238 Ga. App. 843, 852 (3) (520 SE2d 287) (1999).

       Individually or through his corporation, Robert K. Honea, Inc.

        Merritt v. State Farm &c. Ins. Co., 247 Ga. App. 442, 447 (2) (544 SE2d 180) (2000).

        Markowitz v. Wieland, 243 Ga. App. 151, 153 (1) (532 SE2d 705) (2000).

       The only evidence that rescission was even discussed is a letter from Bailey to Dyer’s counsel dated January 19, 1996, stating that his “client does not desire to rescind the contract of sale.”

        Holloman v. D. R. Horton, Inc., 241 Ga. App. 141, 146-147 (3) (524 SE2d 790) (1999).

        Woodhull Corp. v. Saibaba Corp., 234 Ga. App. 707, 711-712 (2) (507 SE2d 493) (1998). See also Orion Capital Partners v. Westinghouse Elec. Corp., 223 Ga. App. 539, 541-543 (2) (478 SE2d 382) (1996).

        Roth v. Connor, 235 Ga. App. 866, 871 (3) (510 SE2d 550) (1998).

        Hanlon v. Thornton, supra, 218 Ga. App. at 501 (1).

        Hill v. Century 21 &c. Realty, 187 Ga. App. 754, 756 (2) (371 SE2d 217) (1988).

       (Punctuation omitted.) Id.

        Dorsey v. Green, 202 Ga. 655, 659 (44 SE2d 377) (1947).

       Compare Pirkle v. Gurr, 218 Ga. 424 (128 SE2d 490) (1962), with Simmons v. Wooten, 241 Ga. 518 (246 SE2d 639) (1978).

       271 Ga. 276 (518 SE2d 674) (1999).

       203 Ga. App. 877 (418 SE2d 141) (1992).

        Roth v. Connor, supra, 235 Ga. App. at 871 (3); Hill v. Century 21 &c. Realty, supra, 187 Ga. App. at 756 (2); Zeeman v. Black, 156 Ga. App. 82 (273 SE2d 910) (1980). See also Talmadge Bros. & Co. v. Interstate Bldg. &c. Assn., 105 Ga. 550 (31 SE 618) (1898).

       See OCGA §§ 11-9-501 (a); 34-8-167 (c).

       See Fowler v. Overby, 223 Ga. App. 803 (478 SE2d 919) (1996) (affidavit that the property was never used as a landfill).

       See OCGA §§ 11-9-501 (a); 34-8-167 (c); Trust Co. Bank v. Ga. Superior Court Clerks’ Coop. Auth., 265 Ga. 390 (456 SE2d 571) (1995). Cf. Wiederhold v. Smith, supra, 203 Ga. App. at 879 (2) (“We note that plaintiff performed a title search, as is typical of purchasers, but nothing concerning the hold on the lot was located in the deed records”).

       (Citations and punctuation omitted.) Huntington v. Fishman, 212 Ga. App. 27, 29 (441 SE2d 444) (1994).

       182 Ga. App. 225, 229-231 (1) (355 SE2d 453) (1987).

       (Punctuation omitted; emphasis supplied.) Cutcliffe v. Chesnut, 122 Ga. App. 195, 201 (2) (176 SE2d 607) (1970), citing Fletcher v. Fletcher, 158 Ga. 899 (2) (124 SE 722) (1923).

       224 Ga. App. 344 (480 SE2d 357) (1997).

       (Punctuation omitted.) Freeman v. Pittman, 220 Ga. App. 672, 674 (2) (469 SE2d 543) (1996).

       225 Ga. App. 84, 88 (2) (483 SE2d 298) (1997).

       (Emphasis supplied.) Id.


author: Blackburn, Chief Judge.

text:
    A01A1012, A01A1013.
    LANIER HOME CENTER, INC. v. UNDERWOOD et al.; and vice versa.
    (557 SE2d 76)
   Blackburn, Chief Judge.

Greg and Roberta Underwood purchased a home from Lanier Home Center, Inc. The septic tank system subsequently failed because it had been placed in unsuitable soil. The Underwoods sued Lanier and its principal, James Norton, for breach of contract, breach of warranty, negligence, and fraudulent concealment, claiming damages and demanding rescission of the sales contract. The trial court granted partial summary judgment to Lanier on the fraudulent concealment claim and dismissed Norton as a party defendant. The Underwoods then amended their complaint to assert a claim for equitable rescission of the sales contract for nonperformance. The case went to trial, and the jury found for the Underwoods. In Case No. A01A1012, Lanier appeals the judgment entered in connection with this verdict. In Case No. A01A1013, the Underwoods cross-appeal, claiming the trial court erred in granting Lanier’s motion for partial summary judgment and in dismissing Norton as a party defendant. For reasons which follow, we affirm in Case No. A01A1012, and we affirm in part and reverse in part in Case No. A01A1013.

Case No. A01A1012

In September 1996, the Underwoods contracted to buy a residence from Lanier. The septic tank system failed the following May, and raw sewage backed up into the home; the system continued to fail throughout the period the house was occupied. The Underwoods contacted Lanier, and an employee referred them to Every Oliver, the subcontractor who had installed the septic tank. The Under-woods and Oliver discussed adding more line to the system, but it became clear that this solution was not an option because the house had been placed too close to a neighbor’s property. The Underwoods then discovered that county health officials had not approved the septic tank system because it was located in unsuitable soil. The Underwoods filed this action on August 7, 1997.

1. Lanier claims the trial court erred in submitting the Under-woods’ equitable rescission claim to the jury because the Under-woods’ remedy lay not in equitable rescission, but in damages for breach of warranty. An adequate remedy at law may render equitable relief improper. See Sherrer v. Hale. Georgia law allows equitable rescission for nonperformance of a contract: “A party may rescind a contract without the consent of the opposite party on the ground of nonperformance by that party but only when both parties can be restored to the condition in which they were before the contract was made.” OCGA § 13-4-62. See Jones v. Gaskins. This right of equitable rescission must be construed alongside the principle that a mere breach of warranty will not annul a sale, but only allows a recovery of damages. Milam v. Gray. The remedy of rescission for nonperformance is appropriate when the breach is so substantial and fundamental as to defeat the object of the contract. Martin v. Rollins, Inc. Here, the failure of the septic tank system made the home uninhabitable. The failure goes to the fundamental purpose of the contract. The remedy of rescission was appropriately put before the jury.

2. Lanier claims that it was entitled to a directed verdict on the Underwoods’ rescission claim because (1) the Underwoods prevented Lanier from fulfilling its warranty obligation to repair the septic tank system, and (2) the Underwoods exercised dominion and control over the property inconsistent with rescission. We disagree.

“A directed verdict is authorized only when there is no conflict in the evidence as to any material issue and the evidence introduced, with all reasonable deductions therefrom, shall demand a particular verdict.” (Punctuation and footnote omitted.) Withington v. Valuation Group The evidence does not demand a finding that Lanier offered to effectively repair the defect in the sanitation system. Greg Underwood testified that Lanier never offered to fix the septic tank, and Roberta Underwood testified that a Lanier employee represented that, with respect to the septic tank, Lanier was not concerned with anything outside the manufactured home.

Similarly, the evidence does not demand a finding that the Underwoods exercised control inconsistent with rescission of the contract. Shortly after the Underwoods learned of the full extent of the problems with the septic system, they sued, seeking rescission. In general, a rescinding party, when discovering the facts that authorize rescission, must “at once announce his purpose and adhere to it[; otherwise he can not avoid or rescind such contract.” (Punctuation omitted.) Pearson v. George. The Underwoods did continue to live on the property, but this does not mean they acquiesced to the sale in view of their continuing demand that Lanier reverse the transaction.

3. Lanier claims the trial court erred by failing to give a complete charge to the jury of the circumstances under which equitable rescission is appropriate. Lanier complains that the charge gave the jury the impression that the remedy of rescission is available for every breach of contract, so long as the aggrieved party tenders or restores the benefits received under the contract. Lanier made no objection to the jury instructions at trial, and so the standard of our review is whether the instruction, as a whole, was substantially erroneous and harmful as a matter of law. See OCGA § 5-5-24 (c).

This claim is without merit. The trial court instructed the jury: ‘You must then determine if any of the terms [of the contract] have been breached by the defendant. If so, you must determine if the plaintiffs should be permitted to rescind the contract or in the alternative if they’ve been damaged the amount of their damage.” The trial court later instructed: “Generally in this state a party desiring to rescind a contract must as a condition precedent to such rescission, that is before it can rescind, restore or tender the benefits received under the contract.” Lanier presents these statements together in its argument, as if the instructions were presented as one thought, implying that a breach of contract always authorizes rescission. But the instructions were not presented to the jury in immediate sequence and are accurate in themselves. We have reviewed the jury instructions, and taken as a whole, we find no substantial error that is harmful as a matter of law.

4. Lanier argues that the jury verdict was excessive and unconscionable. The verdict was that the contract be rescinded, that Lanier take the property back, clear the Underwoods’ responsibility to the finance company, and pay $30,000. The restoration of the parties to their previous positions when effecting the rescission of a contract is an equitable and not a technical process. See Intl. Software Solutions v. Atlanta Pressure Treated Lumber Co. But “the rescinding party shall derive no unconscionable advantage from the rescission.” Id. The gravamen of Lanier’s complaint is that, by requiring Lanier to pay $30,000 and satisfy the mortgage, the Underwoods will have lived in the home, rent-free, for 42 months. Nevertheless, the sanitation problems associated with the failed septic tank were extreme, and the property could be said to have had no fair rental value. The $30,000 is roughly equal to what the Underwoods paid their finance company, including the down payment and monthly payments, during the period they occupied the home. The recovery is not unconscionable. The trial court did not err in overruling Lanier’s motion for a new trial and entering its judgment on the jury’s verdict.

Case No. A01A1013

5. In their cross-appeal, the Underwoods claim the trial court erred in granting partial summary judgment to Lanier on their claim for fraudulent concealment of a defect.

Summary judgment is proper when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. OCGA § 9-11-56 (c). A de novo standard of review applies to an appeal from a grant of summary judgment, and we view the evidence, and all reasonable conclusions and inferences drawn from it, in the light most favorable to the nonmovant.

Matjoulis v. Integon Gen. Ins. Corp.

“To survive a motion for summary judgment on a fraud count, some evidence must support each of the five elements, which are: a false representation by a defendant; scienter; intention to induce the plaintiff to act or refrain from acting; justifiable reliance by plaintiff; and damage to the plaintiff.” Harris v. Distinctive Builders, An action for fraud in the sale of real estate can be based on wilful misrepresentation, active concealment, or passive concealment:

Fraud in the sale of real estate may be predicated upon a wilful misrepresentation, i.e., the seller tells a lie; upon active concealment where the seller does not discuss the defect but takes steps to prevent its discovery by the purchaser; and thirdly a passive concealment where the seller does nothing to prevent the discovery but simply keeps quiet about a defect which though not readily discernible [ ] is known to the seller. Georgia law has placed a special duty of disclosure on the builder-seller that markets its new homes to consumers. The “passive concealment” exception to the general rule of caveat emptor places upon the seller a duty to disclose in situations where he or she has special knowledge not apparent to the buyer and is aware that the buyer is acting under a misapprehension as to facts which would be important to the buyer and would probably affect his decision.

(Citations omitted.) Holloman v. D. R. Horton, Inc. However, the mere existence of a defect in the property does not show knowing concealment by a builder-seller. Hall v. Richardson Homes.

Oliver submitted an affidavit stating that he had installed the septic tank system and met with the county inspector; that he did not believe at the time that the county had disapproved the system; and that he submitted a bill to Lanier without additional communication. Oliver’s affidavit, if uncontroverted, shows that Lanier had no actual knowledge of the defect in the septic tank system.

The Underwoods first contend that they can establish a case for fraud without showing Lanier’s actual knowledge of the defect. It appears Lanier was in violation of OCGA § 31-3-5.1 by installing a septic tank in violation of county regulations. It can be reasonably inferred that Lanier failed to ascertain that the septic system had been approved by the county and that failure to do so was negligent. The Underwoods argue that they can therefore show “fraud through negligence.” Brookshire v. Digby. But this species of fraud involves the reckless representation of facts as true without knowledge. Id.; Worthey v. Holmes; Rose Mill Homes v. Michel. We find no evidence of reckless representation by Lanier.

The Underwoods also contend that there was a jury question whether Lanier had actual knowledge of the defect in the septic tank system. We agree. The affidavit of Greg Underwood affirms that Oliver told him that Oliver had informed a Lanier official that the Underwood lot was a problem lot and that he was unsure if the septic tank system would be approved by the county. This affidavit is inconsistent with Oliver’s testimony that he did not communicate with Lanier about the septic tank system other than to submit his bill and is evidence of a prior inconsistent statement.

In Gibbons v. State, the Supreme Court held that “a prior inconsistent statement of a witness who takes the stand and is subject to cross-examination is admissible as substantive evidence.” The logical extension of the Gibbons rule is to permit a non-moving party to withstand a motion for summary judgment by submitting sworn testimony averring personal knowledge of the existence of a prior inconsistent statement made by the witness upon whose sworn testimony the movant relies.

(Punctuation omitted.) Lowe v. Hadley. See also State Farm &c. Ins. Co. v. Swetmon. Lowe is on point. Lanier presents Oliver’s testimony to establish that Lanier had no knowledge of the defect in the septic tank system. Greg Underwood’s testimony is admissible as Oliver’s prior inconsistent statement, and as substantive evidence, that Lanier did know about the problems with the septic tank system. As discussed above, actual knowledge of a defect not readily ascertainable to the buyer and which is not disclosed by a builder-seller can establish fraud for passive concealment. Lanier’s argument that Oliver’s statement to Underwood is hearsay is misplaced in view of the statement’s admissibility as a prior inconsistent statement. Accordingly, summary adjudication of this issue was improper.

6. The Underwoods further maintain that the trial court erred in dismissing Norton as a party defendant. Norton, who is the president of Lanier, owned the land before it was transferred to Lanier to be sold to the Underwoods. The Underwoods claim that Norton had a duty to properly install the septic tank system and that, as a builder-seller, he cannot escape liability by claiming that an independent contractor was liable for the negligent work. See Seely v. Loyd H. Johnson Constr. Co. The evidence shows that Norton had no active involvement in installing the septic tank system and had no knowledge of any defects in the system. He held legal title to the land, but was not involved in construction of the home or overseeing the installation of the septic tank system, which was Lanier’s responsibility. While a builder cannot escape liability for negligent construction by transferring the property to another, Holmes v. Wort hey, Norton is not a builder-seller. The trial court did not err in dismissing Norton as a party defendant.

7. Lastly, the Underwoods argue that the trial court erred in granting summary judgment to Lanier on their claim for attorney fees. “The expenses of litigation generally shall not be allowed as a part of the damages; but where the plaintiff has specially pleaded and has made prayer therefor and where the defendant has acted in bad faith, has been stubbornly litigious, or has caused the plaintiff unnecessary trouble and expense, the jury may allow them.” OCGA § 13-6-11. If there is no evidence of bad faith or stubborn litigiousness, a court may grant a defendant’s motion for summary judgment on the issue of attorney fees. See Garrett v. Women’s Health Care &. But in an action for fraud, the imposition of attorney fees is for the jury. See Hill Aircraft &c. Corp. v. Flanders. In view of our ruling that a jury question remains on the issue of fraudulent concealment, it was error to grant Lanier’s motion for summary judgment on the issue of attorney fees.

Decided November 21, 2001

Reconsideration denied December 4,2001.

Stewart, Melvin & Frost, Nancy L. Richardson, D. Thomas LeFevre, Rex J. McClinton, for appellant.

Edmund A. Waller, for appellees.

Judgment affirmed in Case No. A01A1012. Judgment affirmed in part and reversed in part in Case No. A01A1013.

Pope, P. J., and Mi-hell, J., concur.

        Sherrer v. Hale, 248 Ga. 793, 797-798 (2) (285 SE2d 714) (1982).

        Jones v. Gaskins, 248 Ga. 510, 511-512 (1) (284 SE2d 398) (1981).

        Milam v. Gray, 80 Ga. App. 356, 358 (56 SE2d 168) (1949).

        Martin v. Rollins, Inc., 138 Ga. App. 649, 651 (226 SE2d 771) (1976).

        Withington v. Valuation Group, 249 Ga. App. 8, 11 (547 SE2d 594) (2001).

        Pearson v. George, 209 Ga. 938, 945 (2) (77 SE2d 1) (1953).

        Intl. Software Solutions v. Atlanta Pressure Treated Lumber Co., 194 Ga. App. 441, 442 (390 SE2d 659) (1990).

        Matjoulis v. Integon Gen. Ins. Corp., 226 Ga. App. 459 (1) (486 SE2d 684) (1997).

        Harris v. Distinctive Builders, 249 Ga. App. 686, 690 (2) (549 SE2d 496) (2001).

        Holloman v. D. R. Horton, Inc., 241 Ga. App. 141, 143-144 (2) (524 SE2d 790) (1999).

        Hall v. Richardson Homes, 168 Ga. App. 593, 597 (4) (309 SE2d 825) (1983).

        Brookshire v. Digby, 224 Ga. App. 512, 516 (481 SE2d 250) (1997).

        Worthey v. Holmes, 249 Ga. 104 (287 SE2d 9) (1982).

        Rose Mill Homes v. Michel, 155 Ga. App. 808, 810 (273 SE2d 211) (1980).

        Gibbons v. State, 248 Ga. 858, 862 (286 SE2d 717) (1982).

        Lowe v. Hadley, 193 Ga. App. 525 (388 SE2d 394) (1989).

        Hill Aircraft &c. Corp. v. Flanders, 143 Ga. App. 504, 505 (1) (239 SE2d 155) (1977).

        State Farm &c. Ins. Co. v. Swetmon, 228 Ga. App. 538, 539-540 (492 SE2d 678) (1997).

        Seely v. Loyd H. Johnson Constr. Co., 220 Ga. App. 719, 720-721 (1) (470 SE2d 283) (1996).

        Holmes v. Worthey, 159 Ga. App. 262, 271 (282 SE2d 919) (1981).

        Garrett v. Women’s Health Care &c., 243 Ga. App. 53, 54-55 (1) (532 SE2d 164) (2000).


author: Johnson, Presiding Judge.

text:
    A01A1093, A01A1094.
    A01A1095.
    SERVICEMASTER COMPANY, L.P. et al. v. MARTIN (two cases). MARTIN v. SERVICEMASTER COMPANY, L.P. et al.
    (556 SE2d 517)
   Johnson, Presiding Judge.

Ray Martin sued his former employer, the ServiceMaster Company, L.P., and its successor, the ServiceMaster Company (collectively “ServiceMaster”), for breach of a written employment contract. Martin’s complaint also contained language sounding in tort. ServiceMaster filed its answer in which it strongly denied the factual allegations of Martin’s complaint. But the trial court struck ServiceMaster’s answer as a sanction for discovery abuse, and the case proceeded to trial on the issue of damages. The trial court allowed the jury to consider both tort claims and breach of contract claims. Finding for Martin on both contract and tort theories, the jury awarded him over $1 million in compensatory damages, interest, attorney fees, and $135 million in punitive damages. The trial court subsequently reduced the total compensatory damages award to approximately $461,000 and reduced the punitive damages award to $45 million and entered judgment for Martin in those amounts.

ServiceMaster has indicated in a supplemental brief that it is not pursuing its appeal in Case No. A01A1094, which sought review of an order denying its motion to reduce a bond required by the trial court. Furthermore, the appeal in that case has been rendered moot as a result of a prior order entered by this Court and by this opinion addressing the merits of the other two cases. For these reasons, the appeal in Case No. A01A1094 is dismissed.

In Case No. A01A1093, ServiceMaster appeals the judgment entered on the jury’s verdict as reduced by the trial court. In Case No. A01A1095, Martin appeals from the trial court’s order dismissing his breach of fiduciary duty claim and the trial court’s order reducing the amount of his judgment.

Case No. A01A1093

1. ServiceMaster vehemently argues that this is a breach of contract case. Martin just as vehemently argues that this is a tort case. Therefore, we must first address the effect of the trial court’s order striking ServiceMaster’s answer and the resulting default. Our decision on this issue will define the parameters of our analysis of the remaining issues.

In relevant part, OCGA § 9-11-55 (a) provides that when a case is in default, the plaintiff is entitled to judgment “as if every item and paragraph of the complaint or other original pleading were supported by proper evidence.” The effect of this provision is well settled in Georgia law. As the Supreme Court of Georgia and this Court have consistently held, a default operates as an admission of the well-pled facts alleged in the complaint, but not the conclusions of law contained therein:

A judgment by default properly entered against parties sui juris operates as an admission by the defendant of the . . . definite and certain allegations and the fair inferences and conclusions of fact to be drawn from the allegations of the declaration. Conclusions of law [ ] and facts not well pleaded and forced inferences are not admitted by [the] default judgment.

The default concludes the defendant’s liability and estops him from offering any defenses which would defeat the right of recovery. However, while the default in this case operates as an admission by ServiceMaster of the well-pled factual allegations in Martin’s complaint and amended complaint, it does not admit allegations not well pled, forced inferences, or conclusions of law. The default does not preclude ServiceMaster from showing that under the facts as deemed admitted, no claim existed which would allow Martin to recover.

We look now to those facts which are deemed admitted in order to determine what cause or causes of action those facts are legally sufficient to support. Viewed in this light, the evidence conclusively establishes that Martin worked as a sales representative in ServiceMaster’s educational food service división under a written employment contract. The written employment contract was entered into on January 1, 1994, but Martin had been employed by ServiceMaster since 1987. The written employment contract had been in effect for some months before ServiceMaster’s alleged decision to sell its food service division.

The evidence includes the written contract and conclusively establishes its terms. Under the contract, Martin earned a fixed base salary of $50,000 per year, as well as commissions at the rate of 12 percent of the “commissionable gross profit” from each completed sale he made. In addition to these compensation provisions, the written contract provided incentives which would increase the fixed base salary and award shares of ServiceMaster common stock if Martin achieved certain levels of sales performance.

During the course of his employment under this written contract, Martin negotiated a contract with George Washington University for ServiceMaster to manage the university’s food service facilities. The evidence deemed admitted conclusively establishes his right to receive the commission on this and other contracts. The facts also establish his right to receive the incentive compensation described above based upon his sales performance levels as a result of this and his other sales. By ServiceMaster’s internal calculations, Martin earned, but did not receive, at least $181,713.40 in commissions on various accounts, including this university account. In addition, the well-pled allegations in Martin’s complaint show that under the contract’s incentive terms Martin was entitled to a base salary increase to $61,000 per year and earned an award of at least 550 shares of ServiceMaster common stock. ServiceMaster never increased his base annual salary, nor did it transfer ownership of the common stocks or deliver the share certificates to Martin. Another provision of the written contract obligated ServiceMaster to pay Martin severance pay in an amount equal to two weeks of his fixed base salary at the increased base salary rate of $61,000 per year, or a little more than $2,300, but it was never paid.

ServiceMaster subsequently fired Martin and the other employees of its food service division and refused to pay him any of the commissions and benefits. Although ServiceMaster disputed Martin’s entitlement to the compensation, the default judgment precludes its argument that the sales involved did not produce profits and were therefore not commissionable.

The facts deemed admitted also show that ServiceMaster intended to sell its educational food service business to a competitor; that it intended, as a result, to terminate the division sales force, including Martin, before closing this sale; and that it intended to deny Martin and its other sales representatives commissions they had already earned. It is deemed admitted that ServiceMaster knew Martin would never receive compensation for his past or ongoing work, but concealed that fact, as Martin continued working. These facts establish that ServiceMaster is liable for its breach of the employment contract and also allow the jury to consider whether ServiceMaster acted in bad faith in the transaction.

2. Our task is to determine what causes of action the well-pled facts will support. Contrary to Martin’s contention and the trial court’s actions, as a matter of law these facts do not establish or support a claim that ServiceMaster is liable to Martin in tort. While Martin labels various counts of the complaint and amended complaint “tortious interference with property” and “breach of duty’ and attempts to set forth causes in action for tort, the labels used by Martin are not determinative.

It is well settled that mere failure to perform a contract does not constitute a tort. A plaintiff in a breach of contract case has a tort claim only where, in addition to breaching the contract, the defendant also breaches an independent duty imposed by law. This is true even in situations where the contract is breached in bad faith, where the courts have consistently held that punitive damages are not available because there has been no tort. Here, a thorough and careful review of the well-pled factual allegations of Martin’s complaint and amended complaint, and the written contract itself, shows that all the duties which Martin complains were breached by ServiceMaster arise directly from, not independent of, Martin’s written employment contract. All issues dealing with the extent of the duties owed to Martin, whether the duties were breached, the injury which flowed from the breach, and the remedy for any such breach are controlled by Martin’s written employment contract. From these facts it is clear that in the absence of its contractual duties, ServiceMaster owed and breached no independent duty to Martin.

ServiceMaster argues that the trial court erred in allowing Martin to pursue claims for tortious interference with property and fraud because these claims were not pled in his amended complaint. According to Martin, these claims are included in Count 7 of his amended complaint, which is entitled “Breach of Duty” and alleges that ServiceMaster (1) owed him duties of fidelity, honesty, and good faith, and (2) intentionally breached these duties through fraud and deceit, “with an evil motive and with a reckless disregard of [Martin’s] rights.” We address these issues separately below.

(a) Tortious Interference with Property. In his original complaint, Martin alleged that he was entitled to shares of ServiceMaster stock. He pled two claims relating to the stock shares: a breach of employment contract claim, and a tort claim for conversion. The conversion claim asserted that (1) ServiceMaster owed Martin a payroll check, shares in ServiceMaster, and other benefits and monies; (2) these items, he alleged, constituted property rights belonging to Martin; and (3) ServiceMaster refused and failed to deliver his property to him. Martin deleted this count in his amended complaint, and the trial court noted that Martin had dismissed this claim for conversion.

Martin subsequently filed his amended complaint alleging what he labeled a “breach of duty” tort cause of action. He argues that this amended complaint authorizes a valid claim for tortious interference with property because ServiceMaster owed him a certain number of ServiceMaster shares, but refused to deliver his share certificates. However, the “breach of duty” tort claim in Martin’s amended complaint says nothing whatsoever about the stock shares.

Contrary to his assertions, while Martin asserted facts supporting a contractual claim for the stock shares, he did not plead facts which would support a tort claim for the stock shares. In fact, such a claim was specifically dismissed by Martin. We, therefore, agree with ServiceMaster’s argument that the jury should not have been allowed to consider this claim for tortious interference with property. As to this claim, ServiceMaster’s motion to dismiss and related motions should have been granted.

(b) Fraud. Martin’s fraud count is also entitled “Breach of Duty” and consists of facts alleging that ServiceMaster owed him duties of fidelity, honesty, and good faith, and intentionally breached these duties through fraud and deceit, “with an evil motive and with a reckless disregard of [Martin’s] rights.” The facts specifically establish that ServiceMaster (1) falsely claimed Martin was not entitled to receive a commission on the George Washington University contract, (2) gave false and deceptive reasons for nonpayment of the commission owed on the George Washington University contract, and (3) intentionally deceived Martin about the reasons for nonpayment of his commissions.

Although a duty of good faith and fair dealing is implied in every contract, this duty is contractual in nature and does not ordinarily give rise to tort liability. While ServiceMaster could be held liable in tort if, in addition to violating a contract obligation, it also violated a duty, independent of contract, to avoid harming him, Martin does not specify facts which would support a finding that ServiceMaster owed him any duty independent of those created by the written employment contract.

[W]here defendant’s negligence ends merely in nonperformance of the contract and where defendant is not under any recognized duty to act apart from the contract, the courts generally still see no duty to act affirmatively except the duty based on — and limited by — defendant’s consent. In those circumstances, an action in tort may not be maintained for what is a mere breach through non-action or through ineffective performance (which is the same thing) of a contract duty — the duty must arise independent of contract to constitute a tort.

Here, to the extent that ServiceMaster violated a duty of good faith and fair dealing, the well-pled facts show that such a duty was imposed solely by the written employment contract, and not by any recognized independent duty under tort or other provision of law. Thus, these allegations do not authorize a remedy over and above that to which Martin is entitled as a result of the breach of contract. The only additional remedy authorized by law under these facts is an award of attorney fees and expenses of litigation as provided by OCGA § 13-6-11.

Martin contends in his appellate brief that the injury caused by the alleged fraud is ServiceMaster’s “theft of Martin’s services by means of false representations and concealment of material facts.” However, the only misrepresentations and concealment alleged in the amended complaint occurred after Martin had performed the services at issue. The complaint and amended complaint do not allege any false statements or concealment inducing Martin to provide ongoing or future services. Thus, Martin’s reliance on Kent v. A. O. White, Jr., Consulting Engineer, P.C. and Wilson v. S & L Acquisi tion Co. is misplaced. In those cases, the injury was caused by the alleged fraud: the Kent plaintiff was not paid for work performed in reliance on misrepresentations, while the Wilson plaintiff was not paid moving expenses incurred in reliance on misrepresentations.

Moreover, well-established case law refutes Martin’s assertion that “[t]he terms of Martin’s employment contract do not constrain his recovery in tort for the value of his services.” “Any breach of contract must arise from the contract, and does not give rise to an action for tort, whether or not such breach was negligent or wilful.” The allegations of Martin’s amended complaint cannot serve to convert a claim in contract into a discrete claim in tort. They add nothing of substance to the breach of contract claim. Accordingly, Service-Master’s motion to dismiss and related motions should have been granted as to Martin’s attempted fraud claim.

(c) Punitive Damages. It is well settled that punitive damages are not available in breach of contract claims. Although Martin’s prayer for relief requested an award of punitive damages, the prayer is not an allegation of fact in the complaint which requires an answer, and it is not part of Martin’s cause of action. Thus, the default is of no effect on this issue. ServiceMaster’s motion to dismiss and related motions should have been granted as to Martin’s claim for punitive damages.

3. Based on our holding in Division 2, it is clear that this case must be remanded for a new trial on damages. Because Martin is not entitled to recover in tort, such claims may not be submitted to the jury. We cannot merely affirm the aggregate amount as awarded by the jury and reduced by the trial judge for breach of contract because we cannot ascertain from the record whether this amount includes all of Martin’s valid contractual claims, including commissions, base pay, severance pay, and his entitlement to the value of shares of common stock earned but not delivered to him.

Because a jury could find, based upon the facts deemed admitted, that ServiceMaster acted in bad faith, was stubbornly litigious, or caused Martin unnecessary trouble and expense, the trial court is also authorized to submit Martin’s claims for attorney fees and litigation expenses to the jury. The evidence may properly include testimony regarding the hours Martin’s attorneys were required to spend on the discovery and other aspects of this case, from investigation through the trial. Evidence of other discovery disputes in other cases in which ServiceMaster has been involved would not be relevant or material.

Decided November 15, 2001

Reconsideration denied December 4,2001

Alston & Bird, James C. Grant, Jeffrey J. Swart, King & Spalding, Chilton D. Varner, Robert D. Hays, Jr., for appellants.

Byrne, Moore & Davis, Francis X. Moore, for appellee.

4. ServiceMaster’s remaining enumerations of error are rendered moot by our holdings above.

Case No. A01A1095

5. Martin contends the trial court erred in dismissing his tort claim for breach of fiduciary duty. He specifically alleges that ServiceMaster owed him a fiduciary duty to properly calculate and pay his commissions, and he relies on the allegations in his amended complaint to establish the existence of a confidential relationship. However, the well-pled facts in Martin’s complaint and amended complaint show that Martin was merely an employee of ServiceMaster. Generally, the relationship between an employer and employee is that of arms-length bargaining, and the law will not imply confidentiality. Here, there are no well-pled facts from which a jury could find a confidential relationship. Martin’s conclusory statements are not admitted by ServiceMaster’s default, and the trial court properly dismissed Martin’s breach of fiduciary duty claim.

6. Martin’s contentions regarding the trial court’s reduction of damages are moot.

Judgment reversed and case remanded in Case No. A01A1093. Judgment affirmed in Case No. A01A1095. Appeal dismissed in Case No. A01A1094.

Ruffin and Ellington, JJ., concur.

       (Punctuation omitted.) Stroud v. Elias, 247 Ga. 191, 193 (1) (275 SE2d 46) (1981); see also Azarat Marketing Group v. Dept. of Admin. Affairs, 245 Ga. App. 256, 257 (1) (b) (537 SE2d 99) (2000); Spears v. Mack & Bernstein, P.C., 227 Ga. App. 743, 744 (1) (490 SE2d 463) (1997).

        Cohran v. Carlin, 254 Ga. 580, 585 (3) (331 SE2d 523) (1985).

        Azarat Marketing Group, supra.

       See Wynn v. Arias, 242 Ga. App. 712, 716 (3) (531 SE2d 126) (2000); Brown v. Hilton Hotels Corp., 133 Ga. App. 286, 288-289 (1) (211 SE2d 125) (1974).

       See Wynn, supra; S & A Indus. v. Bank Atlanta, 247 Ga. App. 377, 381 (4) (543 SE2d 743) (2000).

       See Hub Motor Co. v. Burdakin, 192 Ga. App. 872, 874 (2) (386 SE2d 854) (1989).

       See Wynn, supra.

        Orkin Exterminating Co. v. Stevens, 130 Ga. App. 363, 365 (203 SE2d 587) (1973).

       (Citation and punctuation omitted.) Id.

       Compare Spears, supra at 745-746 (2) (an independent duty of good faith arises where the employment agreement stated that the employee was to be treated as a partner in the company during her employment, giving rise to a fiduciary duty).

       238 Ga. App. 792, 793-794 (1) (520 SE2d 481) (1999).

       940 F2d 1429, 1439 (11th Cir. 1991).

        Kent, supra at 793.

        Wilson, supra at 1439-1440.

       (Punctuation omitted.) A. L. Williams & Assoc. v. Faircloth, 259 Ga. 767, 769-770 (3) (d) (386 SE2d 151) (1989); see generally Burritt v. Media Marketing Svcs., 204 Ga. App. 848, 850 (5) (420 SE2d 792) (1992).

        Faircloth, supra.

        Trust Co. Bank v. C&S Trust Co., 260 Ga. 124, 126 (1) (390 SE2d 589) (1990); McDuffie v. Argroves, 230 Ga. App. 723, 726 (3) (497 SE2d 5) (1998).

        Drug Emporium v. Peaks, 227 Ga. App. 121, 128 (2) (c) (488 SE2d 500) (1997).

        Atlanta Market Center Mgmt. Co. v. McLane, 269 Ga. 604, 607 (1) (b) (503 SE2d 278) (1998); Cochran v. Murrah, 235 Ga. 304, 307 (219 SE2d 421) (1975).


author: Smith, Presiding Judge.

text:
    A01A1244.
    WRIGHT et al. v. COOK.
    (556 SE2d 146)
   Smith, Presiding Judge.

This is the second appearance of this case in this court. See Wright v. Swint, 224 Ga. App. 417 (480 SE2d 878) (1997). Charles and Rhonda Wright brought suit against A. Ronald Cook, an attorney, and others, alleging that Cook performed a faulty title search on property the Wrights purchased in 1985, then assured them in 1993 that the defect would be cured, but did nothing to accomplish this. In this appeal, the Wrights appeal from the trial court’s order granting summary judgment to Cook. We find that summary judgment was not warranted, because regardless of whether Cook did or did not represent the Wrights at closing, a genuine issue of material fact remains in dispute with regard to whether he voluntarily undertook to correct the defect in title when it was discovered and then did not do so. We therefore reverse the grant of summary judgment to Cook.

The defect in the Wrights’ title was not discovered until 1993, when they attempted to refinance the mortgage on their property. The Wrights alleged that when they informed Cook of the defects, he made assurances to them that he would remedy the problem, which was never done. Swint, supra at 417-418. They contend that this inaction constituted a breach of fiduciary duty and fraud. In Swint, we reversed the trial court’s grant of Cook’s motion to dismiss. The motion to dismiss was granted on the ground that the Wrights’ claim against Cook sounded in legal malpractice, which was barred for two reasons: First, the action was barred by the statute of limitation; and second, Cook never acted as the Wrights’ attorney.

On appeal, this court held that the issue of representation was “in factual dispute,” and it should not have been resolved by the trial court on a motion to dismiss. Swint, supra at 418 (1). We further held that if Cook represented the Wrights, an action for legal malpractice against him for performing the defective title search in 1985 was barred by the four-year statute of limitation. Id. at 419 (2). But if a jury found that Cook acted as the Wrights’ attorney “on or after November 29, 1990, but did so negligently or negligently failed to do so, then the four-year statute of limitation does not bar an action for legal malpractice against him for acts he committed on or after November 29, 1990. [Cit.]” Id. at 418 (1). Moreover, if Cook represented the Wrights on or after November 29, 1990, he would also have “stood in a fiduciary capacity to them. [Cit.]” Id. If he represented to the Wrights that he would cure the defective chain of title and reissue a new deed curing the defect, such promises created new duties and obligations. Failure to make good these promises also “may have breached a contractual duty for which action for damages may lie. The statute of limitation for such action being four years (OCGA § 9-3-25),” it did not expire for acts committed within four years prior to November 29, 1994, when the action was filed. Id. at 419 (3).

The case then returned to the trial court, where the Wrights renewed a motion for recusal, which had previously been denied. The ground for the motion was that Cook was both a practicing attorney and one of the county’s judges. He served as a juvenile court judge and city court judge, and he had acted pro hac vice in the State Court of Spalding County, in which this action was filed. The motion was granted this time, and a senior superior court judge was appointed to hear the case. Cook then filed a motion for summary judgment, along with a notice of his request for filing several depositions. The Wrights filed a cross-motion for summary judgment, and after hearing, the trial court granted Cook’s motion and denied that of the Wrights.

Although the record on this appeal includes additional evidence, nothing in that evidence persuades us to change our conclusion that the issue of whether Cook represented the Wrights, either before or after November 29, 1990, is in factual dispute. While generally the relation of attorney and client is a matter of contract, the contract may be express or implied from the conduct of the parties. In the Matter of Dowdy, 247 Ga. 488, 491 (277 SE2d 36) (1981). And here, unlike the situation in Williams v. Fortson, Bentley & Griffin, 212 Ga. App. 222 (441 SE2d 686) (1994), relied upon by Cook, no disclaimer of representation was presented to the Wrights by Cook at closing. But even if Cook represented the Wrights at the closing, any claims against him stemming from that closing are barred both by the statute of limitation and by the law of the case, since that issue was decided in Swint, supra.

As to what transpired after the closing, the evidence is in conflict. Cook testified that after the closing, neither the bank nor the Wrights contacted him about the title. Mr. Wright testified on his deposition that he last had contact with Cook at the closing in issue. He testified, however, that his wife “probably” had contact with Cook when they discovered the defect in the title in 1993, because she “handled all of it.” Mr. Wright testified that after speaking with Cook, his wife told him Cook said “it would be taken care of.” Mrs. Wright testified, in direct conflict with Cook’s testimony, that she spoke with him a number of times after the closing: “somewhere in the vicinity of four or five times probably in ’93” and “[t]wo, maybe three times” in 1994. All these conversations had to do with the cloud on the Wrights’ title. In these conversations, he “assured [her] that he would take care of the matter.” On one occasion, she went to Cook’s office to find out “what was going on on the closing concerning the cloud that was on the title.” She spoke with Cook for ten to fifteen minutes, and he told her he was going to the courthouse to check on the title and he would get back to her. She last had contact with Cook in 1994, and nothing had been done.

Decided October 17, 2001

Reconsideration denied December 4, 2001

William R. L. Latson, for appellants.

Gray, Hedrick & Edenfield, L. Bruce Hedrick, for appellee.

A jury could believe that Cook undertook to correct the defect in title on the Wrights’ behalf, and the Wrights relied on this promise to their detriment. If so, he created a duty to the Wrights. Simmerson v. Blanks, 149 Ga. App. 478 (254 SE2d 716) (1979). In performing that duty, even if he acted gratuitously he was obligated to exercise a reasonable degree of care and skill as an attorney. Id. at 480-481. The question of whether he made this promise must be decided by a jury, because the deposition testimony of Mrs. Wright and that of Cook are in direct conflict. “Where the facts, as testified to by the parties, create a conflict in the evidence as to a material issue, summary judgment is precluded. [Cit.]” Bearden v. Bearden, 231 Ga. App. 182, 184 (499 SE2d 359) (1998). The trial court’s grant of summary judgment to Cook was therefore error.

Judgment reversed.

Barnes and Phipps, JJ, concur.

       On his deposition, Cook testified that he certified the title to the bank, and not the Wrights, and that he did not then or ever represent the Wrights. Mrs. Wright testified that Cook represented her “through the bank.” The bank officer was unsure.