text:
    A16A0636.
    PARFENUK v. THE STATE.
    (789 SE2d 332)
   Branch, Judge.

Michael Peter Parfenuk was convicted on two counts of child molestation as well as two counts of sexual battery that were merged into the convictions for child molestation for sentencing. Parfenuk was sentenced to consecutive 20-year terms for the child molestation. On appeal, he contends that the trial court erred by ruling that Parfenuk opened the door to admission of a lie detector test. He also contends that he should be sentenced only for sexual battery based on the rule of lenity and that his trial counsel was ineffective for failing to argue the rule of lenity at sentencing. For the reasons stated below, we reverse.

Construed in favor of the verdict, the evidence shows that the 14-year-old female victim reported to 911, her parents, her grandmother, a counselor, and a school resource officer that Parfenuk, age 59 at the time, had kissed her and touched her on the breasts and vaginal area while she was visiting his home; she initially reported that she had been raped, but in the conversation with her mother, she clarified that Parfenuk only had touched her. The police were called, and Parfenuk was arrested on the day of the incident and gave a statement to the police. At trial, Parfenuk testified in his own defense, and, among other things, admitted that he told someone that he had known the victim for years and that he fulfilled two roles in her life, as a “father figure” and as a “boyfriend figure.” Although Parfenuk did not mention doing so in the statement that he filled out for the police on the day of the incident, Parfenuk admitted at trial that he had kissed the victim on the lips. Parfenuk also testified on direct examination that he often had young girls at his home and that he often gave them a “peck on the lips.” He made these admissions during a lengthy narrative explanation of the sequence of events on the day of the incident, including his questioning by police. At the end of the narrative, not in response to any question, Parfenuk testified as follows:

And I spoke to Detective Bradley [while sitting in a police car outside of the Parfenuk house]. He asked me if I’d take a — voluntarily take a lie detector test. I said yes. So I followed another officer down to the police station. We waited a few minutes. Detective Bradley was there. He asked me some questions.

Neither party objected to Parfenuk’s statement. Immediately thereafter, still on direct examination, Parfenuk admitted (without again mentioning the lie detector test) that he changed his story while being questioned by Detective Bradley, that he initially denied all touching but then admitted that he had kissed the victim on the lips.

Later, during cross-examination, the State asserted that Par-fenuk had opened the door to cross-examination regarding the voice stress test that he took, including the results of the test. The State argued that without being allowed to follow up on Parfenuk’s testimony that he was asked to take the test and was willing to do so, “it leaves the impression with the jury that he was willing to do something but the police wouldn’t let him. It improperly bolsters [his testimony].” The State also argued that the evidence was relevant because Parfenuk changed his testimony regarding kissing the victim after he failed the test. Parfenuk’s counsel objected on the ground that Parfenuk’s testimony did not open the door to the results of the test that were otherwise inadmissible; the court overruled the objection but noted Parfenuk’s objection for the record. The court allowed the State to cross-examine Parfenuk about the test, during which he admitted that the officer saw two indications that he was being deceitful. The State was also allowed to recall the officer who administered the test to the stand where he testified that Parfenuk admitted to kissing the victim on the lips only after Parfenuk was told that the test indicated deception. The officer also testified that he administered the test in an effort to determine whether Parfenuk had touched the victim’s genital area or breasts and that the test showed that Parfenuk was deceptive when he denied doing so. The trial court charged the jury on the nature of polygraph/lie detector tests, including that it was up to the jury to decide what weight to give to that evidence.

Following his conviction, Parfenuk moved for a new trial, which the court denied, and Parfenuk then appealed.

1. Construed in favor of the verdict, the evidence presented was sufficient to convict Parfenuk of child molestation and sexual battery See OCGA § 16-6-4 (a) (1) (child molestation); OCGA § 16-6-22.1 (b) (sexual battery).

2. Parfenuk contends the trial court erred by allowing the State to cross-examine him regarding the lie detector test and to admit testimony regarding the results of the test. “The trial court has broad discretion in determining the scope and extent of cross-examination; absent a clear abuse of discretion, the action of the trial court will not be disturbed.” Williams v. State, 303 Ga. App. 222, 229 (4) (692 SE2d 820) (2010) (citations and punctuation omitted); see, e.g., Mayberry v. State, 301 Ga. App. 503, 507 (2) (687 SE2d 893) (2009) (trial court’s decision regarding whether defendant opened the door to certain testimony upheld absent abuse of discretion). “An abuse of discretion occurs where the trial court significantly misapplies the law or clearly errs in a material factual finding.” In the Interest of R. W., 315 Ga. App. 227, 232 (3) (c) (726 SE2d 708) (2012) (punctuation and footnote omitted).

The general rule in Georgia is that the results of polygraph tests, including voice stress tests, whether favorable or unfavorable to an accused, are not admissible in evidence, as they are not considered reliable. Price v. State, 269 Ga. 373, 375 (4) (497 SE2d 797) (1998); Salisbury v. State, 221 Ga. 718, 719 (4) (146 SE2d 776) (1966); Lockett v. State, 258 Ga. App. 178, 180-181 (2) (573 SE2d 437) (2002); see, e.g., Lemons v. State, 172 Ga. App. 193 (1) (322 SE2d 521) (1984) (holding that “[t]he court did not err in excluding evidence that the defendant had offered to take a polygraph examination”) (citation omitted). As explained by the Supreme Court of Georgia, the results of a polygraph examination are inadmissible with two exceptions, by a proper stipulation of the parties, or “to explain an actor’s conduct or motive when such is relevant to the issues on trial.” Thornton v. State, 279 Ga. 676, 679 (4) (620 SE2d 356) (2005), citing State v. Chambers, 240 Ga. 76, 76-77 (239 SE2d 324) (1977) and Morris v. State, 264 Ga. 823, 824 (2) (452 SE2d 100) (1995). Here, the parties did not stipulate to admission of the test results. Rather, the State contends that the results were necessary to explain Parfenuk’s conduct and that separate from the above exceptions to the general rule of inadmissibility, Parfenuk opened the door to introduction of the test results by his own testimony at trial. We will address this latter contention first.

In essence, the State contends that Parfenuk opened the door to the test results by testifying that he voluntarily agreed to take a lie detector test and that, after going to the police station, Detective Bradley asked him some questions. Although we find no case with these specific facts, the Supreme Court of Georgia has held that a defendant may open the door concerning the results of a polygraph examination of a witness by eliciting from the witness that the police made her take a polygraph and that the test indicated that she was telling the truth. Cargill v. State, 255 Ga. 616, 637-638 (22) (340 SE2d 891) (1986), overruled on other grounds by Manzano v. State, 282 Ga. 557 (651 SE2d 661) (2007). The same court has also held where defense counsel opened the door regarding whether the State prevented the defendant from taking lie detector tests, it was harmless, if error, to allow further evidence showing that the defendant had not requested any tests. Mullis v. State, 248 Ga. 338, 342 (15) (282 SE2d 334) (1981).

Here, however, defense counsel did not elicit testimony about the test from Parfenuk and Parfenuk did not reveal the test results, yet the State was allowed to introduce the results of the tests, not just information about a request for a test. Rather, Parfenuk’s comment, which came toward the end of a lengthy narrative, appears to have been spontaneous or inadvertent. There is no indication that defense counsel solicited the testimony And our Supreme Court has held that the mere fact that a witness informs the jury that the defendant took a lie detector test is not prejudicial to the defendant if no inference is raised as to the result or if any inferences that might be raised as to the result are not prejudicial. Lyons v. State, 271 Ga. 639, 642 (6) (522 SE2d 225) (1999); Hayes v. State, 244 Ga. App. 12, 14-15 (4) (534 SE2d 577) (2000). It follows that the same event — simply revealing that the defendant took a lie detector test — is not prejudicial to the State if no inference is raised as to the result of the test or if any inference is not prejudicial. Here, immediately after mentioning the test, albeit without expressly attributing it to the test, the defendant admitted that he changed his story while being questioned by Detective Bradley, which prejudiced Parfenuk much more than the State.

As stated above, the State’s second argument is that the results of the test were probative and therefore admissible because Parfenuk changed his story after taking the test. But the State introduced much more than the fact that Parfenuk changed his story after taking the test; the trial court allowed the State to introduce the results of the test itself. Those results were highly prejudicial to Parfenuk because they indicated that he was deceptive when denying that he touched the victim’s breasts and vaginal area.

We hold that the trial court erred by allowing the State to introduce the results of the voice stress tests. First, Parfenuk’s statement that he agreed to take a test was not solicited by defense counsel, and it appeared to be spontaneous and inadvertent. Further, he did not imply what the results of the test were, as the State now contends. Indeed, at trial the State argued that Parfenuk had implied only that the State refused to allow him to take a test. Second, although Parfenuk may have opened the door to some evidence regarding taking the test, the trial court allowed the State to introduce the results of the test, far exceeding any necessary rebuttal. But the results of the test, including that they showed the officer that Parfenuk was being deceptive when he denied the material allegations of the charges against him, invaded the province of the jury. “A fundamental premise of our criminal trial system is that the jury is the lie detector.” United States v. Scheffer, 523 U. S. 303, 313 (II) (B) (118 SCt 1261, 140 LE2d 413) (1998) (citation and punctuation omitted; emphasis in original) (Thomas, J., joined by three justices). This evidence went to the core of the case, as Parfenuk’s sole defense was that he denied touching the victim on the breasts and vaginal area, and therefore we cannot say that the error caused no harm. For the above reasons, we hold that the trial court abused its discretion by allowing the voice stress test results into evidence. Accordingly, a new trial should have been granted. See Cagle v. State, 132 Ga. App. 227, 228(2) (207 SE2d 703) (1974) (new trial required where witness testified that he received lying reactions from the defendant on a polygraph test and the evidence impeached the defendant).

3. In his remaining enumerations of error, Parfenuk contends his sentences should be vacated and the case remanded for resentencing only for sexual battery under the rule of lenity He also contends that his trial counsel was ineffective by not arguing for application of the rule of lenity during sentencing. Because these issues are likely to recur on retrial, we will address them now. See Chancey v. Peachtree Pest Control Co., 288 Ga. App. 767, 769 (2) (655 SE2d 228) (2007). We find no error, however.

“When the statutory law establishes different punishments for the same offense, courts sometimes apply the rule of lenity to resolve the statutory ambiguity.” Rollf v. Carter, 298 Ga. 557, 557 (784 SE2d 341) (2016) (citations omitted). “The fundamental inquiry [when assessing whether the rule of lenity applies] is whether the identical conduct[, meaning the specific conduct with which the defendant was charged,] would support a conviction under either of two [criminal statutes] with differing penalties.” McNair v. State, 326 Ga. App. 516, 519 (757 SE2d 141) (2014) (footnote omitted).

Here, Parfenuk was charged on two counts of child molestation in that he did “unlawfully perform an immoral and indecent act, to wit: fondling the primary genital area [and, in Count 2, the breasts] of [the victim], a child under 16 years of age, with intent to arouse the sexual desires of said accused.” Thus, the State was required to and did prove that Parfenuk sought to arouse his own sexual desires by touching the victim. See OCGA § 16-6-4 (a) (1). The charges of sexual battery for the same touching did not require proof of this same element. See OCGA § 16-6-22.1 (b). Thus, there is no statutory ambiguity here regarding the proper penal statute to be used in sentencing Parfenuk. Rather, child molestation was simply a greater offense into which the charge of sexual battery was properly merged. See generally Dorsey v. State, 265 Ga. App. 597, 602 (3) (595 SE2d 106) (2004). Accordingly, the rule of lenity does not apply, and trial counsel was not ineffective for not arguing for application of the rule of lenity during sentencing.

Decided July 13, 2016.

Robert L. Persse, for appellant.

Richard A. Mallard, District Attorney, Keith A. McIntyre, Benjamin T. Edwards, Assistant District Attorneys, for appellee.

Judgment reversed.

Ellington, P. J., and Mercier, J., concur.

       “On appeal from a criminal conviction, the defendant is no longer entitled to a presumption of innocence and we therefore construe the evidence in the light most favorable to the jury’s guilty verdict.” Marriott v. State, 320 Ga. App. 58 (739 SE2d 68) (2013) (citation omitted).

       The victim died sometime prior to trial.

       The State’s contention that this issue was not preserved by appellate review is belied by the record, as shown above.

       In fact in criminal trials, absent one of the above exceptions “the results of a polygraph examination... have no probative value.” Feltham v. Cofer, 149 Ga. App. 379, 381 (1) (254 SE2d 499) (1979) (citations omitted); see also Johnson v. State, 272 Ga. App. 385, 386 (2) (612 SE2d 518) (2005).

       Further, in several cases involving spontaneous remarks by a witness that he or she took a lie detector test (without mentioning the results), there was no prejudice to the defendant, especially where the trial court gave a curative instruction to the jury to disregard the unsolicited statement. Curry v. State, 291 Ga. 446, 452 (4) (729 SE2d 370) (2012); Durden v. State, 274 Ga. 868, 869 (5) (561 SE2d 91) (2002). It follows that there would also be no prejudice to the State under the same circumstances.


source: Caselaw Access Project

author: Branch, Judge.

license: Public Domain

text:
    A16A0659.
    GAPIII, INC. v. SEAL INDUSTRIES, INC.
    (789 SE2d 321)
   Branch, Judge.

This case involves the interpretation and application of two contracts entered into in January 2011 between Seal Industries, Inc., and its subsidiaries and/or related companies (collectively, “Seal”) and G. L. Ohrstrom & Co., Inc., GAPIII, Inc., Hillside Capital Incorporated, and the Ampex Retirement Trust (collectively, “the Managers”). The first of these contracts was a Management Services Agreement (“the MSA”), pursuant to which Seal agreed to pay each of the Managers a specified amount in exchange for the provision of management services. The second contract was a Subordination Agreement (“the SA”), which subordinated the Managers’ right to receive payment of their fees under the MSA to the payment rights of Seal’s lender, Fifth Third Bank (“the Bank”). After Seal unilaterally terminated the MSA as to GAPIII, that company filed the current lawsuit seeking declaratory and injunctive relief as to its rights under the MSA. Seal counterclaimed for breach of the SA, arguing that the agreement barred GAPIII from suing under the MSA so long as Seal was in default under its loan agreement with the Bank. The parties filed cross-motions for summary judgment and following a hearing, the trial court entered an order granting Seal’s summary judgment motion, dismissing GAPIII’s claims, and denying GAPIII’s motion for summary judgment as moot. GAPIII now appeals from that order, arguing that the trial court erred in finding that the SA precludes GAPIII’s lawsuit for equitable relief, as the plain language of that agreement bars only a lawsuit seeking the payment of any monies owed under the MSA. GAPIII further asserts that the trial court erred in denying its motion for summary judgment, which sought a declaration as to the continuing validity of the MSA as to GAPIII, as well as a mandatory injunction requiring Seal to allow GAPIII to perform its obligations under the MSA and to assist with the management of Seal.

For reasons explained more fully below, we agree with GAPIII that the trial court erred in finding that the SA bars GAPIII from bringing the current lawsuit. Accordingly, we reverse the trial court’s grant of summary judgment to Seal on its counterclaim for breach of the SA. We further hold that because the MSAcontains a termination provision, that agreement remains in effect as to all parties, including GAPIII, until terminated in accordance with that provision. Finally, we find that further proceedings are required on GAPIII’s claim for a mandatory injunction. We therefore remand the case for entry of an order granting GAPIII’s request for declaratory relief and for further proceedings on GAPIII’s request for injunctive relief.

In reviewing a grant or denial of summary judgment, we owe no deference to the trial court’s ruling and we review de novo both the evidence and the trial court’s legal conclusions. Muscogee County Bd. of Tax Assessors v. Pace Indus., 307 Ga. App. 532-533 (705 SE2d 678) (2011). “Similarly, the construction of a contract, including the existence or nonexistence of any ambiguities found therein, represents a question of law for the court, subject to a de novo standard of review on appeal.” Kerwood v. Dinero Solutions, 292 Ga. App. 742, 742 (666 SE2d 40) (2008) (citations omitted).

The relevant facts in this case are undisputed, and the record shows that GAPIII is a corporation owned solely by George A. Pfeil III. G. L. Ohrstrom & Co., Inc. (“GLO”) is a private investment firm in which Wright Ohrstrom, the current president and chairman of the board of Seal, is a principal. In 2009, Pfeil was an employee of GLO, and part of his job was to find investment opportunities for GLO, including potential corporate acquisitions. When a corporate target was found, GLO would form a holding company, raise capital from investors, and then have the holding company purchase the target entity As an employee of the company, Pfeil had the right to invest personally in any of the GLO-led acquisitions. GLO formed Seal in 2009 for the purpose of acquiring Seal Tech, Inc., and Pfeil, acting through GAPIII, made a personal investment in Seal.

After Seal acquired Seal Tech, Ohrstrom and Pfeil became general partners for the purpose of managing Seal, with Pfeil taking the majority of the management responsibility. GLO and GAPIII then entered into a Management Services Agreement with Seal (the “original MSA”) pursuant to which Seal paid a management fee of $200,000 per year, with GLO and GAPIII splitting that fee equally. The original MSA remained in place until January 2011, at which time Seal purchased Seal Tech’s largest competitor, Environmental Analytics (“EA”). To achieve the acquisition of EA, Seal required additional capital. Two entities represented by Brookside Equity Partners, Hillside Capital Incorporated and the Ampex Retirement Master Trust (collectively, “the Brookside entities”), provided that capital and invested in Seal. At that time, the parties replaced the original MSA with an “Amended Restated Management Services Agreement” (the MSA at issue). Under the MSA, Seal contracted with GLO, GAPIII, and the Brookside entities for the provision of management services. The Managers were “to provide financial, administrative, investor relations and other managerial services to [Seal] as may be agreed from time to time during the term of this Agreement.” To facilitate the performance of these managerial services, Seal was obligated to “furnish information to the Managers regarding [Seal] as frequently as shall be reasonably necessary.” In exchange for their services, the Managers were to receive a fee of $400,000 annually. Under the terms of the MSA, GAPIII was to receive 50 percent of this fee, the Brookside entities 30 percent, and GLO 20 percent, with the amounts due each entity to be paid in monthly installments. The MSA further provided, however:

[I]f [Seal is] unable to pay the Management Fee in whole or in part for any reason, . . . the Managers shall be entitled to receive the entire amount of all such deferred Management Fees as soon as practicable thereafter. If [Seal is] unable to pay the Management Fee in whole, [Seal] agree[s] to pay each of the Managers a pro rata portion of the Management Fee that [Seal is] able to pay in proportion to the full amount of the Management Fee that each such Manager is entitled to receive.

Finally, the MSA states that the agreement

shall continue in full force and effect until terminated by mutual consent of the parties hereto. The accrued and unpaid obligations of [Seal] owed through the date of termination of [the MSA] shall survive any termination or expiration of this Agreement to the maximum extent permitted under applicable law.

In conjunction with Seal’s January 2011 acquisition of EA, Seal also entered an amended and restated loan and security agreement with the Bank. As a condition of restructuring Seal’s debt and loaning the company additional funds, the Bank required that Seal, EA, and each of the Managers execute the SA at issue. The SA designated Seal, EA, and certain related and subsidiary companies as the “Borrowers”; designated GLO, GAPIII, Hillside, and Ampex, as the “Subordinating Parties”; and defined the “Subordinated Indebtedness” as “[a]ny and all obligations and indebtedness, now or hereafter owing or due from any one or more of the Borrowers to any one or more of the Subordinating Parties pursuant to the Management Agreement.” Under the terms of the SA, the Subordinated Indebtedness “shall be subordinate and inferior to any and all indebtedness, obligations and liabilities of each of the Borrowers, now or hereafter owed, or contingently owing, to the Bank under the Loan Agreement . . . The SA further provided, in relevant part:

Without the prior written consent of the Bank,... except for regularly scheduled payments of Management Fees pursuant to the Management Agreement in effect on the date hereof (but only so long as no Default or Event of Default [under the Loan Agreement] has occurred and is continuing or would be caused by the making of any such payment), none of the Subordinating Parties will ask, demand, sue for, take or receive from any person or party ... the whole or any part of the Subordinated Indebtedness, unless and until all Bank Obligations shall have been fully paid.

At the end of 2011, GLO, GAPIII, and the Brookside entities all agreed to begin deferring payment of the management fees owed each under the MSA. Thus, since that time those fees have accrued, but have not been paid.

At a meeting of Seal’s board of directors held on June 4, 2014, Ohrstrom informed the board that GLO intended to exercise its rights under the shareholder agreement to appoint a majority of Seal’s directors and it therefore planned to “re-slate the Board.” Approximately three weeks later, on June 24, 2014, the Seal board met again by teleconference. Pfeil was not informed of this meeting and therefore was not in attendance at the same. At that meeting, Ohrstrom was elected chairman of the board; Pfeil was removed from the board and was also removed as an officer of Seal; Ohrstrom was named as Seal’s vice president; and “the Board determined” that the “services . . . being provided by . . . Pfeil. . . under [the MSA] were no longer required by the Corporation.” Seal admits, however, that in making its determination regarding Pfeil’s services, the board never discussed the MSA’s termination provision. According to Ohrstrom, who testified as Seal’s 30 (b) (6) representative, no such discussion was necessary because the board “didn’t change anything in the MSA. We just didn’t need Mr. Pfeil’s services anymore.” Based on the board’s decision at its June 24 meeting regarding Pfeil’s services, Seal contends that as of that date, the MSA “[was] still in effect between [the] Brookside [entities], GLO, and Seal, but not as between GAPIII and Seal.” Accordingly, Seal took the position that the management fees owed GAPIII under the MSA ceased to accrue as of June 30, 2014.

In July 2014, GAPIII filed the current suit against Seal in Fulton County Superior Court. The original complaint asserted claims for declaratory and injunctive relief, breach of contract, and attorney fees. On March 27, 2015, Seal filed a motion seeking summary judgment on its counterclaim for breach of the SA, arguing that the SA barred GAPIII’s lawsuit. The parties thereafter completed discovery, and on May 1, 2015, GAPIII filed an amended and restated complaint asserting claims only for declaratory and injunctive relief and attorney fees. Seal then agreed to extend the time in which GAPIII could file its response to Seal’s summary judgment motion. GAPIII subsequently filed both a response to Seal’s motion for summary judgment and a cross-motion for summary judgment on its claims against Seal. The trial court held a hearing on the summary judgment motions, during which it held that the SA barred GAPIII’s lawsuit. Specifically, the trial court found that the SA precluded GAPIII from filing any kind of action against Seal under the MSA. The court thereafter entered an order granting summary judgment in favor of Seal on its counterclaim for breach of the SA, dismissing all of GAPIII’s claims, and denying GAPIII’s motion for summary judgment as moot. GAPIII now appeals from that order.

1. GAPIII argues that the trial court erred in granting Seal’s motion for summary judgment. We agree.

The trial court’s grant of summary judgment to Seal was based on its finding that the SAbarred GAPIII’s lawsuit for declaratory and injunctive relief. The SA provides that it will be governed by Georgia law, and under that law, “the cardinal rule of contract construction is to ascertain the intent of the parties, as evidenced by the language of the contract. . . . [I]f the terms of a contract are plain and unambiguous, the contractual terms alone determine the parties’ intent.” Miller v. GGNSC Atlanta, 323 Ga. App. 114, 118 (2) (746 SE2d 680) (2013) (citations and punctuation omitted). Here, the language of the SA provides that Seal’s Managers may receive “regularly scheduled payments of Management Fees” due under the MSA so long as Seal is not in default on its obligations to the Bank. The SA further states that none of the Managers, as Subordinating Parties, may “ask, demand, sue for, take, or receive . . . the whole or any part of the Subordinated Indebtedness unless and until all Bank Obligations shall have been fully paid.” “Subordinated Indebtedness,” in turn, is defined to include “[a]ny and all obligations and indebtedness, now or hereafter owing or due” under the MSA. (Emphasis supplied.)

In support of its summary judgment motion, Seal argued that the word “obligations,” as used in the definition of Subordinated Indebtedness, refers to legal duties of any kind, and not just financial obligations. So read, the SAbars any of the Managers from bringing any kind of suit under the MSA, including a suit that seeks only equitable relief. GAPIII, on the other hand, argues that the term “obligations,” when read in the context of the SA as a whole, bars GAPIII only from suing to recover any deferred or accrued management fees currently owed it under the MSA.

Given the parties’ reasoned disagreement as to the meaning of the term “obligations,” that term, as used in the MSA, is ambiguous. We therefore “resolve that ambiguity by applying the statutory rules of construction to ascertain the intent of the parties. Those rules require us to interpret any isolated clauses and provisions of the contract in the context of the agreement as a whole[.]” Willesen v. Ernest Communications, 323 Ga. App. 457, 459-460 (1) (746 SE2d 755) (2013) (citations and punctuation omitted). Here, the recitations contained in the SA provide, in relevant part:

[Seal] and [the] Bank have executed and delivered that certain Second Amended and Restated Loan and Security Agreement, dated as of the date here of, as amended, modified, supplemented or restated from time to time (the “Loan Agreement” The Subordinating Parties and [Seal] have entered into that certain Amended and Restated Management Services Agreement... whereby the Subordinating Parties shall provide certain management services to [Seal] in return for management fees (the “Management Fees”); and . . . [the] Bank has conditioned its agreement to enter into the Loan Agreement on the agreement of each of the Subordinating Parties to subordinate the Management Fees on the terms provided [herein].

(Emphasis supplied.)

These recitations make clear that the purpose of the SA was to ensure that none of the Managers were paid under the MSA unless the Bank was being paid under the terms of the Loan Agreement. Additionally, the SA was also meant to ensure that none of the Managers could seek payment of any deferred or accrued management fees until Seal had paid in full its debt to the Bank. In light of the clear purpose of the SA, we find that the parties intended the phrase “obligations and indebtedness” to refer only to any management fees — current, deferred, accrued, or otherwise — owed by Seal to the Managers. As used in the SA, therefore, the term “obligations” does not refer to any nonmonetary obligations or legal duties, such as the duty of good faith, that Seal might owe its Managers under that contract. See Moran v. Erk, 11 NY3d 452, 456 (901 NE2d 187) (2008) (New York law imposes an implied duty of good faith and fair dealing upon contracts, and this duty requires that “neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract”) (citations and punctuation omitted). Accordingly, we find that the SAbars GAPIII only from suing to recover any management fees that are owed it under the MSA; it does not bar GAPIII’s claims for equitable relief. Thus, GAPIII’s suit seeking both a declaration as to its rights under the MSA and injunctive relief does not breach the SA.

Seal attempts to avoid this conclusion by arguing that even if the term “obligations,” as used in the SA, refers only to monies owed under the MSA, GAPIII’s lawsuit nevertheless breaches the SA. This breach results from the fact that if GAPIII prevails in its request for declaratory relief, that declaration “will impose upon Seal a present obligation to pay,” at some time in the future, the management fees owed GAPIII under the MSA that accrued after June 30, 2014 “for services from GAPIII that Seal no longer desires.” (Emphasis in original.) This argument is without merit.

As discussed infra in Division 2, the MSA has not been terminated as to GAPIII. Even in the absence of declaratory relief, therefore, Seal would remain liable for management fees accrued to GAPIII after June 30, 2014. Thus, a declaration of GAPIII’s rights at this juncture will not create any financial obligations that Seal would not otherwise have under the MSA. GAPIII is still barred from receiving payment of any monies owed it under the MSA until the terms of the SA have been met. The declaratory judgment sought by GAPIII determines only whether that company has been improperly excluded from accruing fees under the MSA.

Finally, Seal also argues that even if the SA does not bar a claim for declaratory relief, GAPIII is not entitled to seek such relief under Georgia law. Again, we disagree.

Georgia’s Declaratory Judgment Act, OCGA § 9-4-1 et seq., provides, in relevant part:

. . . [T]he respective superior courts of this state shall have power, upon petition or other appropriate pleading, to declare rights and other legal relations of any interested party petitioning for the declaration, whether or not further relief is or could be prayed, in any civil case in which it appears to the court that the ends of justice require that the declaration should be made; and the declaration shall have the force and effect of a final judgment or decree and be reviewable as such.

OCGA § 9-4-2 (b). Our Supreme Court has interpreted this language as granting the superior courts of this State the

power to determine and settle by declaration any justiciable controversy of a civil nature where it appears to the court that the ends of justice require that such should be made for the guidance and protection of the petitioner, and when such a declaration will relieve the petitioner from uncertainty and insecurity with respect to his rights, status, and legal relations.

State Farm Mut. Auto. Ins. Co. v. Mabry, 274 Ga. 498, 500-501 (3) (556 SE2d 114) (2001), quoting Calvary Independent Baptist Church v. City of Rome, 208 Ga. 312, 314 (3) (66 SE2d 726) (1951).

A justiciable controversy exists “where a concrete issue is present, and there is a definite assertion of legal rights, and a positive legal duty with respect thereto, which are denied by the adverse party” Higdon v. City of Senoia, 273 Ga. 83, 85 (1) (538 SE2d 39) (2000) (citation and punctuation omitted). See also Sierra Craft, Inc. v. T. D. Farrell Constr., 282 Ga. App. 377, 379 (1) (638 SE2d 815) (2006) (“[a] controversy is justiciable so as to entitle a plaintiff to declaratory relief if the interested parties assert adverse claims upon an accrued state of facts”) (citations omitted). Such a controversy exists in this case. Specifically, GAPIII contends that because it has never been terminated in accordance with its terms, the MSA remains in effect and management fees have continued to accrue to GAPIII, even though the fees accrued to GAPIII since June 30, 2014 are not reflected on Seal’s books. Seal, on the other hand, contends that its decision not to accept Pfeil’s services under the MSA means that the agreement is not “in effect” as to GAPIII, that no management fees have accrued to GAPIII since June 30, 2014, and that Seal’s books should not reflect that the company owes GAPIII any such fees. Seal nevertheless contends that declaratory relief is inappropriate in this case because a party may not seek a declaratory judgment where a breach of contract action will afford the party full and complete relief. Pinnacle Benning, LLC v. Clark Realty Capital, 314 Ga. App. 609, 613 (1) (724 SE2d 894) (2012). This argument fails for at least two reasons.

First, Seal’s position assumes that GAPIII’s right to assert a breach of contract action has accrued. See Sierra Craft, 282 Ga. App. at 379 (1) (“declaratory relief is not available where the rights of the parties have already accrued”) (citation and punctuation omitted). As Seal has consistently argued throughout this litigation, however, under the terms of the SA, GAPIII currently has no right to file suit to collect the fees owed it under the MSA.

Moreover, it does not appear that such a suit, to be brought at some indeterminate time in the future, would adequately protect GAPIII’s interests — i.e., given Seal’s refusal to accrue management fees to GAPIII, such an action may not afford GAPIII “full and complete relief.” The record in this case shows that Seal is a holding company, created for investment purposes. Thus, it appears that at some point in time Seal and/or its corporate assets will be sold to a third party Additionally, Seal’s 30 (b) (6) representative testified that the accrued but deferred management fees owed under the MSA are shown on Seal’s balance sheets as a liability Thus, potential investors, purchasers, and/or lenders are aware that such debts are owed by the company This fact, in turn, serves to protect the entities to whom the management fees have accrued. Presumably, the sale of the company could not be accomplished without the liability being paid or at least assumed by the purchaser, unless some other agreement is reached with the parties to whom such fees are owed. As of now, however, Seal’s corporate records reflect that no management fees have accrued to GAPIII since June 30, 2014, the date on which Seal allegedly terminated GAPIII from the MSA. Thus, in the absence of a declaratory judgment that the MSA remains valid and binding as to GAPIII, GAPIII has no way of protecting its rights to payment of those management fees that have accrued to it since June 2014, particularly given Seal’s own declaration that GAPIII is no longer entitled to any such fees. In light of these circumstances, we find that this case is an appropriate one for declaratory relief. See Mabry, 274 Ga. at 501 (3) (policyholders could seek a declaratory judgment against insurer regarding their rights under the insurance contract, as the purpose of that suit was “to settle and afford [the policyholders] relief from uncertainty and insecurity with respect to rights, status, and other legal relations”) (citations omitted); Enron Capital & Trade Resources Corp. v. Pokalsky, 227 Ga. App. 727, 729 (1) (a) (490 SE2d 136) (1997) (“[declaratory relief is available where a legal judgment is sought that would control or direct future action”), citing Atlanta Cas. Co. v. Fountain, 262 Ga. 16, 17 (413 SE2d 450) (1992).

As the foregoing discussion makes clear, the SA does not prohibit GAPIII’s suit for equitable relief. In Division 2, therefore, we address whether GAPIII is entitled to the declaratory and injunctive relief it seeks.

2. GAPIII argues that the trial court erred in denying its motion for summary judgment on its claims for a declaratory judgment. GAPIII sought a declaratory judgment that the MSA remained in effect as to GAPIII and that management fees therefore continued to accrue to the company under that contract. Additionally, GAPIII also sought a declaratory judgment that Seal must allow it to perform its obligations under the MSA by allowing Pfeil to participate in the management of Seal. We address each of these claims separately

(a) The MSA contains a choice of law provision stating that it will be governed by New York law. Relevant New York law regarding the interpretation of contracts is similar, if not identical, to Georgia law. Like Georgia, New York law provides that contract interpretation is a question of law, A. Gugliotta Dev. v. First American Title Ins. Co. of New York, 976 N.YS.2d 172 (A. D. 2013), and New York law requires that contracts be interpreted in view of the intent of the parties. Schron v. Troutman Sanders, LLP, 20 N.Y.3d 430, 433 (986 NE2d 430) (2013). That intent, in turn, “is generally discerned from the four corners of the [contract] itself.” MHR Capital Partners LP v. Presstek, Inc., 12 N.Y.3d 640, 645 (912 NE2d 43) (2009). Thus,

[a] contractual provision that is clear on its face must be enforced according to the plain meaning of its terms. This rule applies with even greater force in commercial contracts negotiated at arm’s length by sophisticated, counseled businesspeople. In addition, courts may not by construction add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing.

Bank of New York Mellon v. WMC Mtg., 22 N.Y.S.3d 3, 6 (A. D. 2015) (citations and punctuation omitted).

Here, the plain language of the MSA provides that it remains in effect “until terminatedby mutual consent of the parties hereto.” And the MSA further states that it “may not be amended except by a written agreement executed by the parties to this Agreement.” Moreover, testifying on behalf of Seal, Ohrstrom stated that the MSA had been drafted by counsel; that it was similar to other MSAs that GLO had previously used when investing in companies; that the intent of the parties to the MSA was that the agreement would remain in place until the end of the GLO-led investment in Seal; and that the MSA was written so as to allow the Managers, as general partners, “to be in control of [their] own destinies.”

Despite this plain and unambiguous language and Seal’s own understanding of the MSA, however, Seal contends that the MSA remains in effect as to GLO and the Brookside entities, but is no longer in effect with respect to GAPIII. Seal insists that it is no longer bound under the MSA with respect to GAPIII because Seal made the unilateral decision that it no longer wanted Pfeil’s services. Moreover, according to Seal, the termination of the MSA as to GAPIII is valid, despite the fact that GAPIII never consented to that termination and despite the fact that the parties have never amended the MSA, either in writing or otherwise. Ohrstrom explained that Seal saw no need to amend the agreement to terminate it as to GAPIII because Seal “didn’t change anything in the MSA, we just didn’t need Mr. Pfeil’s services anymore.” Ohrstrom further explained that Seal did not “actually have to amend the agreement to choose not to take [Pfeil’s] services . . . .” He then elaborated on Seal’s view that the MSA “says that we will pay fees for services rendered, but we’re not going to [continue to] pay fees . . . for no services rendered. That’s what the [MSA] says.”

Seal’s position, however, is in direct conflict with the plain language of the MSA, which provides that the MSA remains in effect with respect to GAPIII, and management fees continue to accrue to that company, until the MSAis terminated in accordance with its own provisions. Moreover, the fact that Pfeil is no longer providing services under the MSA does not change this conclusion. As Ohrstrom acknowledged, GAPIII has “made clear it is willing, ready, and able to provide [the] services” called for under the MSA. And New York law is clear “that where one party refuses to abide by the contract, and that refusal is not justified by the actions of the other party, the other party does not have a duty to continue his performance under that contract.” Royce v. Rymkevitch, 289 N.Y.S.2d 598 (A. D. 1968). Thus, “a party to a contract cannot rely on the failure of another to perform when he has frustrated or prevented [that] performance.” A-1 Gen. Contracting v. River Market Commodities, 622 N.Y.S.2d 378 (A. D. 1995) (citation omitted). See also Computer Possibilities Unlimited v. Mobil Oil Corp., 747 N.Y.S.2d 468 (A. D. 2002) (“a repudiation [by one party to the contract] discharges the nonrepudiating party’s obligations to render performance in the future”) (citations omitted). This rule has as its basis “the familiar principle that there is an implied obligation of good faith binding parties to contracts, that [one party] will not deliberately frustrate [the] performance” of the other, and this rule “exists to serve the intent of the parties, and does not operate at cross-purposes to that intent.” Roswell Capital Partners v. Alternative Constr. Technologies, 638 FSupp.2d 360, 370 (S.D. N.Y. 2009) (citations and punctuation omitted). Accordingly, while Seal may have voted to relieve Pfeil of his management duties, that fact, without more, did not terminate or invalidate the MSA as to GAPIII.

Implicitly recognizing that its argument runs counter to the clear and unambiguous language of the MSA, Seal argues that unless we find that it had the authority to terminate unilaterally the MSA as to GAPIII, that contract becomes a perpetual contract, in violation of New York law. This argument is wholly unpersuasive.

While New York law will not allow the enforcement of perpetual contracts, it distinguishes between “perpetual” and “indefinite” contracts. Nicholas Laboratories v. Almay, Inc., 723 FSupp. 1015, 1018 (B) (S.D. N.Y. 1989), aff’d, 900 F2d 19 (2d Cir. 1990). “A perpetual contract runs without end or without provision for its termination. An indefinite contract runs without a fixed end but contains provisions under which the contract might terminate at any time.” Id. “Thus where termination has been provided for in the contract, even if continuous performance is a possibility, courts should not refuse to enforce such contracts or read into them different, conditions of termination.” Id. (citations omitted). See also Payroll Express Corp. v. Aetna Cas. & Sur. Co., 659 F2d 285, 291-292 (2d Cir. 1981) (“New York [law] limits [the] policy [of voiding contracts that lack a defined duration] to contracts having no termination provisions and has held it inapplicable to contracts of the type before us here, which do provide for termination or cancellation upon the occurrence of a specified event”) (citation omitted). In this case, the MSA contains a termination provision that specifies the conditions under which the agreement may be terminated by the parties. Accordingly, it is not a perpetual contract. See Warner-Lambert Pharmaceutical Co. v. John J. Reynolds, Inc., 178 FSupp. 655 (S.D. N.Y. 1959), aff’d, 280 F2d 197 (2d Cir. 1960) (upholding contract entered into in 1881 that lacked termination date but which obligated pharmaceutical manufacturer to pay royalties on every gross of “Listerine” mouthwash made and sold by it as long as it continued to manufacture the product); Ketcham v. Hall Syndicate, 236 N.Y.S.2d 206 (Sup. Ct. 1962), aff’d on opinion below, 242 N.Y.S.2d 182 (1st Dept. 1963) (agreement to create and provide cartoons indefinitely, subject to termination upon artist’s share of revenue falling below stipulated amount was not a perpetual contract); Ehrenworth v. George F. Stuhmer & Co., 229 N.Y. 210 (128 NE 108) (1920) (validating agreement to sell bread to an exclusive distributor as long as both parties remained in business).

In light of the foregoing, we find that the trial court erred in denying GAPIII’s claim for declaratory judgment that the MSA remains in effect as to the company. On remand, therefore, the trial court shall enter an order granting GAPIII’s request for declaratory relief on this issue.

(b) GAPIII also sought a declaratory judgment that Seal must allow the company to fulfill its duties under the MSA and allow Pfeil to assist with the management of Seal. Although styled as a claim for declaratory relief, GAPIII seeks, in substance, mandatory injunctive relief. See Mabry, 274 Ga. at 509-510 (5) (a mandatory injunction is one that requires a party to take some affirmative action, such as requiring “a party to perform contractual duties which the trial court has declared that party is obligated to perform”). A mandatory injunction, however, is viewed as an extraordinary remedy, having been described as “the strong arm of equity” Prime Bank v. Galler, 263 Ga. 286, 289 (4) (430 SE2d 735) (1993) (citation and punctuation omitted). In light of that fact, and given that the parties have not briefed the question of whether GAPIII would be entitled to such relief, we remand this issue for consideration by the trial court in the first instance. See id. (remanding to the trial court to consider whether the plaintiff could be afforded some relief less drastic than a mandatory injunction).

Decided July 13, 2016.

Bryan Cave, Curtis J. Romig, Aiten M. McPherson, for appellant.

Blitch Law, James D. Blitch TV, for appellee.

For the reasons set forth above, we reverse the trial court’s order and remand the case for further proceedings consistent with this opinion.

Judgment reversed and case remanded.

Ellington, P. J., and Mercier, J., concur in judgment only.

       Given that the trial court clerk failed to include a copy of Seal’s answer in the appellate record, our information regarding the nature of Seal’s counterclaim is taken from Seal’s summary judgment motion and appellate brief and the trial court’s order.

       GAPIII’s complaint actually requests a declaratory judgment that “Seal must allow GAPIII to perform its obligations under the [MSA] and allow [GAPIII] to assist with the management of Seal.” In substance, however, as explained more fully in Division 2 of this opinion, this request for relief seeks a mandatory injunction against Seal. We therefore view the complaint as seeking both declaratory and injunctive relief. See Forest City Gun Club v. Chatham County, 280 Ga. App. 219, 220 (633 SE2d 623) (2006) (“pleadings, motions, and orders are construed according to their substance and function and not merely by nomenclature”) (footnote omitted).

       Seal has been described as an “environmental compliance and services business,” and its business includes leak detection and repair.

       Ohrstrom testified that he and Pfeil “set up” a general partnership for management of Seal. It is unclear from the record, however, whether a separate legal entity was created reflecting that general partnership.

       The accrued fees owed each of the four Managers is reflected on Seal’s balance sheets and/or its other financial records.

       Under Georgia’s Civil Practice Act, where a corporation is named as a deponent, that company “shall designate one or more officers, directors, or managing agents, or other persons who consent to testify on its behalf .... The persons so designated shall testify as to matters known or reasonably available to the organization.” OCGA § 9-11-30 (b) (6).

       Ohrstrom also testified that as of June 30, 2014, both GLO and the Brookside entities had ceased accruing management fees — i.e., that those companies had ceased charging management fees to Seal, at least temporarily. There is no document or other evidence in the record, however, evidencing such an agreement. Moreover, Ohrstrom testified that the MSA remained in effect as to GLO and the Brookside entities, and both Ohrstrom’s deposition testimony and Seal’s pleadings reflect Seal’s position that the MSAhas been neither terminated nor amended.

       This conclusion comports with Seal’s understanding of the SA, as expressed by its 30 (b) (6) representative, Ohrstrom. When asked for Seal’s understanding of the SA, Ohrstrom replied that the agreement “outlines those monies, securities, fees payable, et cetera which are subordinated to the senior lender being paid.” (Emphasis supplied.)

       In this regard, we note that had the parties to the SA intended to bar the Managers from bringing any suit under the MSA, regardless of the nature of the claim being asserted, then the SAcould (and should) have expressed that intent in unequivocal terms. And we are not at liberty to rewrite the contractual clause at issue under the guise of interpreting it. See Rabun & Assoc. Constr. v. Berry, 276 Ga. App. 485, 487 (1) (623 SE2d 691) (2005).

       Indeed, as discussed more fully below in Division 2, Ohrstrom explained that the MSA was drafted so as to protect the interests of the managing entities — i.e., to ensure that the managing entities were able to protect the investment of both their time and their money.

       Seal cites Conrad v. Golden, 89 N.Y.S.2d 689 (A. D. 1949) for the proposition that a contract which provides it will terminate by mutual consent of the parties is, in fact, terminable at will. That portion of Con rad relied on by Seal, however, is nothing more than dicta. The actual holding in Conrad was that the contract at issue was “too vague and indefinite to be enforced!,]” as it failed to “set forth the full intention of the parties with such certainty and explicitness that the intention of the parties [could] be ascertained with a reasonable degree of certainty.” Id. at 689.

       Although the MSA is governed by New York law, the relief available with respect to the MSA is governed by the law of Georgia, as the forum state. See Brinson v. Martin, 220 Ga. App. 638, 638 (1) (a) (469 SE2d 537) (1996) (“[u]nder the rule of lex fori, procedural or remedial questions are governed by the law of the forum, the state in which the action is brought”) (citation and punctuation omitted).


author: Peterson, Judge.

text:
    A16A0518.
    PROGRESSIVE MOUNTAIN INSURANCE COMPANY v. BISHOP
    (790 SE2d 91)
   Peterson, Judge.

Progressive Mountain Insurance Company (“Progressive”) appeals from the denial of its motion for summary judgment in this coverage dispute with its insured, James Bishop. The trial court held that there was a jury question as to the sufficiency of Bishop’s excuse for delay in notifying Progressive about a motor vehicle accident in which he was injured. Progressive argues that the trial court erred by failing to consider the entire body of relevant case law on insurance contracts and by failing to recognize that (1) the prompt notice provision in Bishop’s policy created a condition precedent to coverage; (2) Bishop’s failure to notify Progressive of the accident until 10 months and 25 days after it occurred was unreasonable as a matter of law and thereby foreclosed coverage; (3) Bishop’s excuse for the delay in notice was unjustifiable; and (4) the excuse Bishop offered in an affidavit was contradicted by his later deposition testimony. These related enumerations of error relate to the same ultimate question in this appeal: Did Progressive show as a matter of law that Bishop failed to give notice “promptly” under his policy with the insurance company such that coverage was foreclosed? Answering that question in the negative, we affirm.

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-ll-56(c). We review a grant or denial of summary judgment de novo and construe the evidence in the light most favorable to the nonmovant. Home Builders Ass’n of Savannah v. Chatham Cty., 276 Ga. 243, 245 (1) (577 SE2d 564) (2003).

So viewed, Bishop was injured in a motor vehicle collision on December 12,2012. At the time of the collision, Bishop was the named insured of a Progressive motor vehicle policy that provided for $500,000 in uninsured/underinsured motorist (“UM”) coverage. The policy provided:

For coverage to apply under this policy, you or the person seeking coverage must promptly report each accident or loss even if you or the person seeking coverage is not at fault. You or the person seeking coverage must provide us with all accident/loss information including time, place, and how the accident or loss happened. You or the person seeking coverage must also obtain and provide us the names and addresses of all persons involved in the accident or loss, the names and addresses of any witnesses, and the license plate numbers of the vehicles involved.

Bishop was treated for his injuries, initially receiving trigger point injections and epidurals. Following the collision, he was in contact with the at-fault driver’s insurance company and was aware that there was liability coverage to cover his claim. On October 17, 2013, he hired an attorney Through counsel, he gave notice of the accident to Progressive on November 6, 2013. Bishop underwent surgery related to his injuries in December 2014.

In both an affidavit and in his deposition, Bishop offered explanations for the delay in giving notice to Progressive. In the April 2015 affidavit, Bishop said he had not anticipated that his claim would create exposure to his UM coverage until about October 2013. He said he had hoped in May 2013 that his treatment would conclude soon, but his pain persisted and worsened. He contacted counsel after he realized his injuries were more serious than expected and his medical bills began to increase. At his deposition given a few weeks after he signed the affidavit, he reaffirmed that he initially did not think his injuries were serious enough to warrant notifying Progressive of the accident. Bishop acknowledged in his deposition that he had never read his policy with Progressive and was not aware that it required him to notify Progressive of any motor vehicle accident over which he sought coverage.

After Bishop filed a lawsuit over the accident against the other driver, Progressive filed an answer in its own name, seeking dismissal of any claims against it and making a cross-claim against the defendant. Progressive later moved for summary judgment on the ground that Bishop failed to report the accident promptly to the insurance company. The trial court denied the motion after a hearing, saying Bishop’s declaration that he was initially unaware of the severity of his injuries and evidence that Bishop gave notice to Progressive soon after seeking legal representation made the case one for a jury The trial court granted a certificate of immediate review, and we granted Progressive’s application for interlocutory appeal.

1. Progressive argues that the trial court failed to consider that the notice provision found in Bishop’s policy is a condition precedent to coverage. When possible, we construe insurance policies to provide coverage, so as to advance the benefits intended to be accomplished by such policies. See Plantation Pipe Line Co. v. Stonewall Ins. Co., 335 Ga. App. 302, 310 (2) (780 SE2d 501) (2015). However, “a forfeiture of insurance coverage may result when an insured fails to satisfy a condition precedent to coverage under the contract.” Id. In particular, an insured who cannot demonstrate justification for failure to comply with a notice provision that is expressly made a condition precedent to coverage is not entitled to either a defense or coverage, even if the insurer does not show actual harm from a delay in notice. Id. at 310-11 (2).

[Cjonversely, where a notice provision is not expressly made a condition precedent to coverage of the insurance contract, an insured’s failure to comply with the notice provision will result in a forfeiture of coverage only if the insurer demonstrates that it was prejudiced by the insured’s failure.

Id. at 311 (2) (emphasis in original).

[T]he general rule is that a notice provision in an insurance policy is only considered a condition precedent to coverage if it expressly states that a failure to provide such notice will result in a forfeiture of the insured’s rights or uses language which otherwise clearly expresses the intention that the notice provision be treated as a condition precedent.

Plantation Pipe Line Co., 335 Ga. App. at 312 (2) (citation and punctuation omitted). Policy language that merely requires the insured to give notice of a particular event does not by itself create a condition precedent. Id. A general provision that no action will lie against the insurer unless the insured has fully complied with the terms of the policy will suffice to create a condition precedent. See Lankford v. State Farm Mut. Auto. Ins. Co., 307 Ga. App. 12, 14 (703 SE2d 436) (2010) (noting policies at issue provided that “[t]here is no right of action against” the insurance company “until all the terms of this policy have been met”); see also Plantation Pipe Line Co., 335 Ga. App. at 312 (2) n.14 (citing cases).

Bishop’s policy contained a general provision requiring his full compliance with the policy’s terms: “We may not be sued unless there is full compliance with all the terms of this policy.” Progressive argues that the notice provision in Bishop’s policy creates a condition precedent to coverage, particularly in the light of that general requirement that the insured must comply fully with the policy’s terms before the insurer may be sued. We agree, as the policy predicated coverage on compliance with all the terms of the policy, which of course includes the notice provision. See Barclay v. Stephenson, 337 Ga. App. 365, 372 (3) (b) (787 SE2d 322) (2016) (notice provision precondition to coverage, given provision that “[n]o action shall be brought against” the insurer “unless an insured has complied with the policy provisions” (emphasis omitted)); Lankford, 307 Ga. App. at 14 (notice provision precondition to coverage in the light of provision that “[t]here is no right of action against” insurer “until all the terms of this policy have been met”). In order to obtain coverage under his policy, therefore, Bishop must show that he complied with the notice provision or demonstrate justification for failing to do so. See Plantation Pipe Line Co., 335 Ga. App. at 310-11 (2).

2. Progressive argues that the nearly 11-month delay in Bishop giving notice of the accident was unreasonable as a matter of law and therefore foreclosed coverage. We disagree. “Under Georgia law, whether an insured gave an insurer timely notice of an event or occurrence under a policy generally is a question for the factfinder.” Plantation Pipe Line Co., 335 Ga. App. at 306 (1). An insured may be able to present justification for delay in giving notice, and whether that justification was sufficient is generally a fact-based inquiry for a jury. Id. “Nevertheless, the facts and circumstances of a particular case may render an insured’s delay in giving notice of an occurrence to his insurer unjustified and unreasonable as a matter of law.” Id. (citation omitted).

In cases in which a policy’s notice provision gives no specific time frame, there is no bright-line rule on how much delay is too much. We have held that a delay as long as or longer than that involved in this case presents a question for a jury. See Rucker v. Allstate Ins. Co., 194 Ga. App. 407, 407-08 (390 SE2d 642) (1990) (delay of nearly one year; construing provision that said insurer must be notified “promptly”); Sands v. Grain Dealers Mut. Ins. Co., 154 Ga. App. 720, 721 (270 SE2d 8) (1980) (11-month delay; construing provision that required notice be given “as soon as practicable”); Norfolk & Dedham Mut. Fire Ins. Co. v. Cumbaa, 128 Ga. App. 196, 199 (2) (196 SE2d 167) (1973) (19-month delay; applying “as soon as practicable” provision). We also have held that a four-month delay was unreasonable as a matter of law. See Bituminous Cas. Corp. v. J. B. Forrest & Sons, Inc., 132 Ga. App. 714, 716-18 (1) (209 SE2d 6) (1974) (reversing trial judge’s rejection of insurance company’s bid for declaratory judgment based on provision that required notice be given “as soon as practicable”).

Here, Bishop has presented evidence that he did not give notice to Progressive sooner because he did not realize the extent of his injuries and thought the other driver’s insurance would be sufficient to cover them. As in Rucker, where we found that the insured’s ignorance of the extent of injuries to a child hit while riding a bicycle could excuse a delay in notice, see Rucker, 194 Ga. App. at 408, a jury might well find this to be a sufficient justification. Although the record is unclear on this point, the evidence suggests that Bishop may have had some hidden injury as a result of the car accident, the extent of which was not immediately apparent.

This is unlike Manzi v. Cotton States Mut. Ins. Co., 243 Ga. App. 277 (531 SE2d 164) (2000) (physical precedent only), in which we found that a provision that requires notice be given within 60 days is triggered at the time of an accident, irrespective of when an insured seeking uninsured motorist coverage discovers that a tortfeasor is uninsured. For one thing, Bishop’s policy did not contain a time certain for giving notice, merely requiring him to report accidents “promptly.” Moreover, the existence of another driver’s insurance generally may be determined quickly with some degree of diligence. The extent of a plaintiff’s injuries — which may determine whether other available insurance is adequate — may take considerable time to reveal itself.

Our decision in Lankford also is distinguishable. In that case, the plaintiff’s employer, whose car the plaintiff had been driving at the time of the accident, sought and received monies under the other driver’s liability policy Lankford, 307 Ga. App. at 12-13. The plaintiff, however, did not give his insurer written notice that he was seeking uninsured motorist coverage until he filed a lawsuit — nearly two years after the accident, and more than a year after he underwent surgery in connection with the injuries he received in the accident and his attorney requested and received disclosure of the other driver’s policy limits. Id. at 13. We concluded that the plaintiff did not provide notice “as soon as reasonably possible” as required by his policy, saying the required notice was to be given as soon as possible after the accident, not as soon as possible after the other driver’s coverage was exhausted or the plaintiff became concerned that his losses might exceed the other driver’s policy limits. Id. at 14. However, we also relied on case law to the effect that a delay of two years was unreasonable as a matter of law, acknowledging that the notice requirement in the plaintiff’s policy “affords some leeway,” just not unlimited leeway Id. at 15 (citation and punctuation omitted). Here, the delay was less than 11 months, and Bishop provided notice more than a year before undergoing surgery for his injuries. We cannot say that Lankford demands a finding that the delay in Bishop giving notice was unreasonable as a matter of law.

Progressive argues that Bishop’s initial failure to recognize the severity of his injuries cannot justify his delay in giving notice because an insured cannot rely on his own subjective beliefs or conclusions as an excuse. Progressive cites cases with a variety of factual scenarios for the proposition that Bishop’s justification is not a valid one. See Allstate Ins. Co. v. Walker, 254 Ga. App. 315, 316-17 (1) (562 SE2d 267) (2002) (ignorance of policy does not justify nearly one-year delay in giving notice); Snow v. Atlanta Int’l Ins. Co., 182 Ga. App. 1 (354 SE2d 644) (1987) (ignorance of policy does not excuse 10-month delay in giving notice); Int’l Indem. Co. v. Smith, 178 Ga. App. 4, 5 (1) (342 SE2d 4) (1986) (52-month delay unreasonable as a matter of law and not justified by insured’s illiteracy); Bituminous Cas. Co., 132 Ga. App. at 717 (1) (insured did not attempt to show anything that prevented it from giving notice sooner than four months from time of accident); Edwards v. Fidelity & Cas. Co. of New York, 129 Ga. App. 306, 307 (1) (199 SE2d 570) (1973) (five-month delay in giving notice of accident involving third party’s fall from fire escape connected to building owned by insured not justified by insured’s arguments that report of accident was hearsay); Buffalo Ins. Co. v. Star Photo Finishing Co., 120 Ga. App. 697, 706-07 (3) (172 SE2d 159) (1969) (that plaintiff misplaced the policy did not excuse it from complying with 60-day proof of loss requirement). However, none of these factual scenarios is similar to that presented by this case and thus none counsels us to find as a matter of law that Bishop’s delay of notice was unreasonable. As discussed above, Rucker, in which we said a lack of evidence that the insured was aware of the extent of injuries to a child hit by a car justified a one-year delay in giving notice to the insurance company, is more analogous. See Rucker, 194 Ga. App. at 408. Bishop arguably offers an even better excuse, given that he presented affirmative testimony that he thought his treatment would conclude much sooner, whereas a collision between a car and a child on a bike would normally prompt a driver to exercise some diligence in discerning the level of the injury to the child. Lankford, in which we said that a two-year delay could not be justified by a delay in the insured’s awareness that he might need to utilize uninsured motorist coverage, also presents analogous facts. Lankford, 307 Ga. App. at 16. But, again, the significant difference in the length of delay involved distinguishes that case from this one.

Finally, Progressive argues that Bishop’s explanation that he initially did not recognize the extent of his injuries cannot justify the delay in giving notice because he later contradicted it. In his affidavit, Bishop said that he initially had not anticipated that his claim would create exposure to his uninsured motorist coverage but contacted counsel after he realized that his injuries were more serious. At his deposition a few weeks later, he reaffirmed that explanation but also said that he had never read his policy and was not aware of its notice requirement. Progressive correctly points out that, when a party acts as his own witness, a trial judge considering a motion for summary judgment is not to consider any of that witness’ testimony that is self-contradictory, unless a reasonable explanation for the contradiction is given. See Thompson v. Ezor, 272 Ga. 849, 851 (1) (536 SE2d 749) (2000). However, the testimony cited by Progressive is not self-contradictory. Bishop acknowledged not reading the policy and not being aware of the prompt notice requirement. But Bishop did not testify that his failure to provide notice was due to a belief that the policy did not require notice. And the record contains no undisputed facts establishing such a belief. Instead, Bishop testified that he did not provide such notice sooner because he initially underappreciated the extent of his loss. This testimony does not conflict with his lack of knowledge of the policy’s precise terms. Therefore, the trial court did not err in considering Bishop’s explanation that he initially was unaware of the extent of his injuries.

We recognize that our jurisprudence on the question of what constitutes sufficiently prompt notice under an insurance contract like Bishop’s is not easily harmonized. Indeed, some of our prior decisions are difficult, to reconcile with each other, as is not uncommon in an area that calls for a fact-specific inquiry And we are mindful of the critical importance of enforcing contracts as written; a legal system that does not undermines civilization itself.

But Progressive’s problem here is a direct result of the language it chose to use. Whether an insured has provided notice “promptly” is an inherently fact-specific question of the kind we leave juries to answer. If insurance companies wish greater certainty, they might consider using different, less flexible contractual language that establishes precise deadlines, suchas the 60-day provision in Manzi. In the absence of such contractual precision, the fundamental starting point for our analysis is that generally a jury is to decide whether an insured has presented adequate justification to render delayed notice nevertheless sufficiently “prompt.” See Plantation Pipe Line Co., 335 Ga. App. at 306 (1). Although the facts and circumstances of an individual case may sometimes make such a delay unjustified as a matter of law, see id., we cannot say on this record that this is such a case.

Decided June 30, 2016

Reconsideration denied July 14, 2016 —

Glover, Blount & Kerr, Percy J. Blount, for appellant.

The Sullivan Law Firm, Patrick B. Sullivan, Robert B. Sullivan, for appellee.

Judgment affirmed.

Phipps, P. J., and Dillard, J., concur.

       Although Bishop’s complaint is not included in the record on appeal, it does not appear that Bishop sued Progressive directly.

       In so concluding, we do not mean to suggest, as Progressive does, that the trial court erred. Although Progressive complains that the trial court failed to recognize that the notice provision was a condition precedent to coverage, the trial court’s ruling did not turn on any failure by the insurance company to show prejudice. The trial court therefore appears to have determined implicitly that the notice provision is a condition precedent.

       Progressive correctly notes that, soon after deciding Rucker, we said in a whole court decision that the Rucker court never should have considered the defense of lack of notice, because that case involved coverage for a claim by a third party, and lack of notice of an accident is not a defense available to an insurer in such a scenario. See Ginn v. State Farm Mut. Auto. Ins. Co., 196 Ga. App. 640, 642 (396 SE2d 582) (1990) (whole court); see also Cotton States Mut. Ins. Co. v. Phillips, 256 Ga. App. 70, 71 (567 SE2d 719) (2002) (lack of notice exclusion enforceable against a third party injured by insured when the injured third party has access to other insurance funds). But we have never said that Rucker s analysis of the issue that it did address was error. Moreover, our reliance on Rucker is not to suggest that by itself that decision dictates the outcome of this case. Rather, the fact-based question presented here calls upon us to consider our prior decisions as data points on a scatter plot, and we find Rucker to be a helpful such data point.

       It seems appropriate to rely on our precedent construing provisions that require notice be given “as soon as practicable” or similar language in this case involving a provision requiring that notice be given “promptly.” The word “promptly” essentially means to do something as soon as possible. See Webster’s New Collegiate Dictionary 942 (9th ed. 1991) (defining “prompt” as “being ready and quick to act as occasion demands” and “performed readily or immediately”); see also Certified Indem. Co. v. Thun, 165 Colo. 354, 359 (439 P2d 28) (1968) (equating policies that require notice to be given “as soon as practicable” or use terms such as “immediate,” “prompt,” “forthwith,” or “within a reasonable time”).

       In a motion for reconsideration, Progressive also argues that we disregarded precedent establishing that a party is charged with knowing the contents of his contract, contending that because Bishop did not read his policy, his failure to notify Progressive was not justifiable as a matter of law. These arguments are some what in tension, however. It is true that one who signs a contract, including an insurance contract, is presumed to know its contents, and the law requires more than mere ignorance of the contract to avoid its terms. Int’l Indem. Co., 178 Ga. App. at 5 (1). However, the logical corollary of this proposition is that an insured’s knowledge of the policy terms or lack thereof is irrelevant, not dispositive. Int’l Indem. Co., cited by Progressive, is illustrative. In that case, we held that an insured’s illiteracy — “in and of itself” — did not excuse his failure to notify his insurer of an injury “as soon as practicable, ” as required by his policy. Id. at 5 (1). Rather than concluding that the insured’s ignorance of the policy terms itself mandated a conclusion that the delay in giving notice was unjustified, we went on to analyze separately (albeit briefly) whether the 52-month delay was unreasonable as a matter of law, concluding that the answer was yes given that the long delay was unexcused. Id. Progressive’s argument that Bishop’s failure to read the policy means that the insurance company wins the case is not supported by law.


author: ANDREWS, Presiding Judge.

text:
    A15A1933.
    LINCOLN & KATHERINE WILLIAMS IRREVOCABLE TRUST et al. v. DELIVERANCE TEMPLE CHURCH OF GOD IN CHRIST OF ATLANTA.
    (789 SE2d 372)
   ANDREWS, Presiding Judge.

This appeal is from the grant of judgment on the pleadings for the plaintiff in a declaratory judgment action over the ownership of a church property.

The plaintiff/appellee, Deliverance Temple Church of God in Christ of Atlanta, commenced this action seeking a declaration that it owned the property upon which it is situated. In answering the complaint, the defendants/appellants, the Lincoln & Katherine Williams Irrevocable Trust and trustee Daryl Williams, also claimed ownership of the subject property and by counterclaim, likewise sought a declaration of its ownership and an order ejecting the appellee from the property

The appellee’s pleadings set forth the following. In May 1997, the Greater Life Pentecostal Church, Inc., and its trustee executed a warranty deed for the property to Calvin Darden, Patricia Darden, and Lincoln Williams, Sr., as co-trustees of the Deliverance Temple Church of God in Christ, Inc., a New York Corporation, as joint tenants with a right of survivorship. On February 13, 1998, the Dardens and Williams as co-trustees executed a deed to secure debt on the property After the appellee church was established, the Rev. Lincoln Williams, Sr., and his son, Daryl Williams, served as co-pastors and conducted the church’s ministry on the subject property.

Subsequently, Daryl Williams left the church to form his own, and Roney Hall took his place as co-pastor. Hall became full pastor in 2008 when the Rev. Lincoln Williams became unable to serve due to illness. On May 5,2011, Calvin Darden, Patricia Darden, and Lincoln Williams, Sr., as individuals, executed a quitclaim deed for the property to the Lincoln & Katherine Williams Irrevocable Trust. Shortly afterward, Daryl Williams, as trustee of that irrevocable trust, demanded the appellee church to vacate the premises. Two separate dispossessory proceedings brought by Daryl Williams and the irrevocable trust were eventually filed, but both were ultimately dismissed.

The appellee church submitted the controversy over the property ownership to the Church of God in Christ, Inc., Judicial Review Committee/Ecclesiastical Appeals Court on July 15, 2011. On November 29, 2012, that entity issued its decision explaining that the national church organization required warranty deeds for property purchased on behalf of a member church to include a trust clause stating the property was held in trust for the benefit of the member church. The 1997 deed in the instant case did not comply, and so the ecclesiastical appeals court ordered the appellee to amend the warranty deed to add such a trust clause. The appeals court also noted that the appellee church was not associated with the Deliverance Temple Church of God in Christ, Inc., a New York Corporation, and that the appellants failed to respond to its requests for documentation to support their claim for the property.

In answering the complaint, the appellants admitted the 1997 warranty deed identified the Dardens and the Rev. Lincoln Williams, Sr., as co-trustees of the Deliverance Temple Church of Godin Christ, Inc., a New York Corporation, but otherwise denied all other substantive allegations.

On September 30, 2014, the trial court granted the appellee church’s motion for judgment on the pleadings; declared the May 2011 quitclaim deed null and void; and ordered the appellee to file a corrective deed showing itself as the proper owner. Finding the appellants failed to defend the action throughout the course of the litigation and thereby caused the appellee unnecessary expense and trouble, the trial court also awarded the appellee $5,000 attorney fees. This appeal followed.

Decided July 14, 2016.

Shingler Lewis, Joyce G. Lewis, Ashley E. Wilson, for appellants.

B. Wayne Phillips; Richardson Legal Services, Cheryl D. Richardson, for appellee.

1. The appellants contend the trial court erred in granting judgment on the pleadings for the appellee, because the pleadings did not completely fail to state a defense, or a cause of action in the counterclaim. We agree.

“[T]he granting of a motion for judgment on the pleadings under OCGA § 9-11-12 (c) is proper only where there is a complete failure to state a cause of action or defense.” (Citation and punctuation omitted.) Holland Ins. Group v. Senior Life Ins. Co., 329 Ga. App. 834, 836 (1) (766 SE2d 187) (2014). “For the purposes of the motion, all well-pleaded material allegations of the opposing party’s pleading are to be taken as true, and all allegations of the moving party which have been denied are taken as false.” (Citations omitted.) Pressley v. Maxwell, 242 Ga. 360 (249 SE2d 49) (1978).

In the instant case, other than admitting the 1997 warranty deed for the property identified the Dardens and the Rev. Lincoln Williams, Sr., as co-trustees for the Deliverance Temple Church of God in Christ, Inc., a New York Corporation, the appellants denied all other material allegations set forth in the complaint. The appellee argues that admission totally defeats the claim of ownership asserted by the Lincoln & Katherine Williams Irrevocable Trust and Daryl Williams as trustee. However, the admission does not completely establish the appellee as owner either. The decision of the ecclesiastical appeals court, relied upon by the appellee itself, concluded the appellee Deliverance Temple Church of God in Christ of Atlanta was not associated with the Deliverance Temple Church of God in Christ, Inc., a New York Corporation, which was the grantee on the 1997 warranty deed. In short, neither the appellee nor the appellants have pleaded an unassailable claim of ownership. Accordingly, applying the principle stated in Pressley v. Maxwell, supra, it does not appear the instant case was a proper one for judgment on the pleadings.

2. In light of our reversal of the judgment on the pleadings, the attorney fees award under OCGA § 13-6-11 must be vacated. See Scarborough v. Hunter, 293 Ga. 431, 439 (3) (746 SE2d 119) (2013).

Judgment reversed.

Doyle, C. J., and Ray, J., concur.

       This Court originally transferred the appeal to the Supreme Court, as a case involving title to land. However, the Supreme Court transferred the case back to this Court, explaining that the case did not involve title to land because the “appellee’s suit below did not seek recovery of the property from appellants’ possession.”