Charter Medical Management Co. v. Ware Manor, Inc.

283 S.E.2d 330, 159 Ga. App. 378, 1981 Ga. App. LEXIS 2614
CourtCourt of Appeals of Georgia
DecidedJuly 8, 1981
Docket61644, 61645
StatusPublished
Cited by51 cases

This text of 283 S.E.2d 330 (Charter Medical Management Co. v. Ware Manor, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Charter Medical Management Co. v. Ware Manor, Inc., 283 S.E.2d 330, 159 Ga. App. 378, 1981 Ga. App. LEXIS 2614 (Ga. Ct. App. 1981).

Opinion

Carley, Judge.

In December 1974, Ware Manor, Inc. (“Ware Manor”), a nursing home corporation, entered into an agreement with Charter Medical Management Company (“Charter”) whereby Charter would manage a nursing home facility which, at the time of the agreement, was under construction. In May of 1975, pursuant to the agreement of the parties, the facility opened and began operation under Charter’s management. From May 1975 through February 1976 the facility failed to make a profit and, in fact, showed a loss of $76,263.00. As a result of these losses, Ware Manor decided to terminate the management agreement and discussions to this effect were held in February of 1976. These discussions resulted in the execution by Ware Manor of two promissory notes in favor of Charter. The first note dated March 10,1976 in the principal amount of $10,000.00 was due on April 9,1976. The second note also dated March 10,1976 was in the principal amount of $27,833.68 and called for payment in nine equal installments commencing on April 30,1976. Subsequently, the agreement to terminate the management contract was reduced to writing and consented to by Ware Manor on March 22, 1976.

The $10,000.00 note was ultimately paid in full. However, Ware Manor defaulted on the second note and this suit was then instituted by Charter seeking to recover the unpaid principal of $27,833.68, plus interest and attorneys fees. Ware Manor answered and admitted execution of the note, receipt of the attorneys fees notice pursuant to Code Ann. § 20-506 and that no payments had been made on the note. However, Ware Manor defended on the basis of total failure of *379 consideration for the note, misrepresentation, and alleged duress in the execution thereof. Ware Manor also counterclaimed, alleging fraud and deceit in the inducement of the management contract and a breach thereof based upon alleged mismanagement.

After discovery the case proceeded to trial. The trial court overruled Charter’s motion for directed verdict made at the close of all the evidence. A jury verdict was returned against Charter on the note and in favor of Ware Manor in the amount of $10,000.00 on the counterclaim. A motion for judgment notwithstanding the verdict was filed by Charter and denied. In Case No. 61644 Charter appeals and in Case No. 61645 Ware Manor cross-appeals.

In the main appeal Charter contends that the trial court erred in failing to grant its motion for directed verdict, in entering judgment upon the jury verdict in favor of Ware Manor, and in denying its motion for judgment notwithstanding the verdict. Charter’s prima facie right to judgment was established by uncontested evidence showing execution of the note, compliance with the statutory requirements of Code Ann. § 20-506, and non-payment of the note. Code Ann. § 109A-3 — 307 (2); Freezamatic Corp. v. Brigadier Ind. Corp., 125 Ga. App. 767 (189 SE2d 108) (1972). Therefore, the issues for resolution in the main appeal are limited to a determination of the viability of Ware Manor’s defenses to the note and the validity of Ware Manor’s counterclaim.

1. With regard to the failure of consideration defense, the record reveals that management fees due Charter for each month that it operated the nursing home had been deferred by virtue of an addendum to the management contract. It is uncontested that the promissory note sued upon represented unpaid management fees which had accrued up until the time the parties agreed to terminate their relationship. However, Ware Manor alleged that “[sjince the execution of said note [it] has ascertained that said services were performed in such a negligent and unskillful manner as to be totally worthless and without value to [Ware Manor] . . .” (Emphasis supplied.)

“Want or failure of consideration is a defense ... except that no consideration is necessary for an instrument or obligation thereon given in payment of or as security for an antecedent obligation of any kind.” Code Ann. § 109A-3 — 408; Beazley v. Ga. R. Bank &c. Co., 144 Ga. App. 215 (241 SE2d 39) (1977). “The execution of a note in payment of an account operates to cut off all defenses to the account of which the maker then had knowledge. [Cits.]” Ameagle Contractors v. Va. Supply &c. Co., 144 Ga. App. 477 (1) (241 SE2d 594) (1978). Accord, Berry v. Atlas Metals, 152 Ga. App. 437, 439 (263 SE2d 179) (1979).

*380 In the instant case, it is clear that the promissory note sued upon was given in payment of the antecedent obligation which Ware Manor owed to Charter for services rendered under the management contract. As the termination agreement specifically refers to Ware Manor’s obligations on both notes, it is clear that the note sued upon constituted at least a portion of the consideration for the agreement between the parties to terminate the management contract. Cf. Smith v. Rothstein, 131 Ga. App. 632 (3) (206 SE2d 592) (1974). The evidence reveals that Ware Manor was continually aware of the money losses incurred by the facility, that Ware Manor began expressing dissatisfaction with such losses after the third or fourth month of Charter’s management, and that Ware Manor knew at the time of the execution of the note that the business had sustained losses totalling approximately $76,000.00. Thus, to the extent that Ware Manor relied upon such losses to support its contention that Charter’s services were worthless, Ware Manor was aware of this defense prior to execution of the note. For the foregoing reason, the defense of failure of consideration is without merit.

2. Ware Manor also asserted that it was fraudulently induced to execute the note by virtue of false representations by Charter that its services rendered under the management contract had been performed in a proper and skillful manner. “In order to show fraud and misrepresentation in the procurement of the contract as a defense to an action on the contract, it is not sufficient to show that false representations were made, which were known to be false and which were made with the intention to deceive. It must also be shown that the defendant exercised due care to discover the fraud... [Cits.] ” Dr. Pepper Finance Corp. v. Cooper, 215 Ga. 598, 601 (112 SE2d 585) (1960). “ ‘Misrepresentations are not actionable unless the hearer was justified in relying on them in the exercise of common prudence and diligence.’ [Cits.]” Daugert v. Holland Furnace Co., 107 Ga. App. 566, 569 (130 SE2d 763) (1963).

Applying the foregoing principles to the facts of the instant case, Ware Manor’s defense based upon alleged misrepresentation is not viable. First, no evidence was introduced that any statements relating to the nature or quality of the past services rendered by Charter were made by anyone at the time of execution of the note. Secondly, Ware Manor’s contention that the services rendered by Charter were not performed in a proper and skillful manner was premised upon the fact that the nursing facility lost approximately $76,000.00 prior to the termination of the management contract. As discussed above, it is apparent that Ware Manor was aware of these losses prior to its execution of the note as payment for the past services. Under these facts, even assuming these alleged *381

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Bluebook (online)
283 S.E.2d 330, 159 Ga. App. 378, 1981 Ga. App. LEXIS 2614, Counsel Stack Legal Research, https://law.counselstack.com/opinion/charter-medical-management-co-v-ware-manor-inc-gactapp-1981.