SECOND DIVISION ANDREWS, P. J., BRANCH and PETERSON, JJ.
NOTICE: Motions for reconsideration must be physically received in our clerk’s office within ten days of the date of decision to be deemed timely filed. http://www.gaappeals.us/rules
January 26, 2016
In the Court of Appeals of Georgia A15A2184. FAIRGREEN CAPITAL, LLC v. CITY OF CANTON.
ANDREWS, Presiding Judge.
Fairgreen Capital, LLC, a property developer, sued the City of Canton for
breach of contract claiming the City failed to repay $564,312.44 in funds that
Fairgreen advanced to the City under a written agreement governing construction of
a public road on City property benefitting a Fairgreen development. The trial court
granted summary judgment in favor of the City on grounds that, under the Georgia
Constitution (Art. IX, Sec. V, Par. I), the funds owed by the City under the agreement
constituted an illegal and void debt.1 Fairgreen appeals. For the following reasons, we
affirm in part and reverse in part.
1 Fairgreen also sued the City on the basis of negligent misrepresentation. 1. Article IX, Section V, Paragraph I (a) of the Georgia Constitution prohibits
“any county, municipality, or other political subdivision” of Georgia from incurring
liability for any “new debt without the assent of a majority of the qualified voters of
such county, municipality, or political subdivision voting in an election held for that
purpose as provided by law.” Under this provision, “new debt” is a liability that is
“not to be discharged by money already in the treasury, or by taxes to be levied during
the year in which the contract under which the liability arose was made.” Greene
County School Dist. v. Circle Y Constr., Inc., 291 Ga. 111, 112 (728 SE2d 184)
(2012). “Therefore, if a municipality undertakes an obligation that extends beyond
a single fiscal year, then a new ‘debt’ has been incurred within the meaning of the
Georgia Constitution and requires voter approval.” Barkley v. City of Rome, 259 Ga.
355, 355 (381 SE2d 34) (1989). A contract incurring such “new debt,” which is
entered into by a municipality without voter approval, is void as a matter of law.
Greene County School Dist., 291 Ga. at 112.
The agreement at issue between Fairgreen and the City – called a “Cost
Participation and Reimbursement Agreement” – provided that Fairgreen was the
owner of a development which stood to benefit from a road, Reservoir Drive, to be
constructed by the City on City property as a “system improvement” included in the
2 “Capital Improvement Plan of the City . . . Road Impact Fee Program.” The
agreement recognizes that the City has a “Road Impact Fee Program which allows it
to collect impact fees from builders for placement in a Road Impact Fee Fund and
which allows [the City] to reimburse developers and owners with funds from said
Fund when those developers and owners advance funds to [the City] for the purpose
of paying [the City’s] share or the developers’ or owners’ share of the cost of building
a system improvement included in the City[‘s] . . . Capital Improvement Plan for
Roads.” The agreement provided that the City was responsible for paying the cost of
constructing the portion of Reservoir Drive located on City property; that Fairgreen
agreed to advance funds to the City necessary to pay the cost of constructing
Reservoir Drive on City property, an amount estimated to be $2,088,403.00; and that
the City agreed to reimburse Fairgreen for the funds advanced for the construction of
Reservoir Drive on City property. The agreement states that the City “has allocated
$2,500,000.00 of its Road Impact Fee Fund for construction of Reservoir Drive;” that
the City “agrees that it shall be . . . responsible for paying the cost of construction of
Reservoir Drive on [City] [p]roperty up to $2,500,000.00;” and that “[the City] agrees
to reimburse Fairgreen from the Road Impact Fee Fund for the actual amount of funds
advanced by Fairgreen up to a maximum of $2,500,000.00 for construction of
3 Reservoir Drive on the [City] [p]roperty.” As to the method of advancing funds, the
agreement provides that, every 30 days, the City shall submit to Fairgreen invoices
that the City has received from the road contractor for completed road work, and that,
within 15 days of receipt of those invoices, Fairgreen shall advance to the City funds
to pay the invoices. As to the method of reimbursement, the agreement provides that
the City will make monthly reimbursements to Fairgreen “up to a maximum of fifty
percent of the funds then available in the Road Impact Fee Fund.” The agreement
recognizes that “there will be months when fifty percent of the funds in the Road
Impact Fee Fund will be insufficient to reimburse Fairgreen for the total payments for
invoices previously advanced by Fairgreen.” In that case, the agreement provides that
“[the City] may make up any shortfalls in future monthly reimbursement payments
made to Fairgreen.” The agreement provides that [the City] “agrees to fully reimburse
Fairgreen for all advance payments made by Fairgreen to [the City] for construction
of Reservoir Drive on the [City] [p]roperty not later than five (5) years from the
Construction Start Date.” Finally, the agreement provides that, when the City has
fully reimbursed Fairgreen for funds advanced to the City to construct Reservoir
Drive on the City property, the City shall determine how much, if any, of the
4 $2,500,000.00 Road Impact Fee Fund for Reservoir Drive remains unspent, and pay
Fairgreen an amount of money equal to 33 percent of the unspent funds.
The construction start date for Reservoir Drive was October 1, 2006.
Fairgreen’s September 2014 complaint shows that, pursuant to the agreement, it
advanced the City $1,146,529.53 to construct Reservoir Drive, and that Fairgreen
remained entitled to reimbursement for advancements made pursuant to the
agreement in the amount of $546,312.44. It is undisputed that from September 18,
2007 to March 4, 2011, the City made four payments to Fairgreen which totaled
$498,592.19.
In response to Fairgreen’s amended complaint, the City moved for summary
judgment on the breach of contract claim on the basis: (1) that funds advanced by
Fairgreen to the City, which the City had not reimbursed, constituted “new debt”
within the meaning of Article IX, Section V, Paragraph I (a) of the Georgia
Constitution and required voter approval; (2) that no such voter approval was
obtained;2 and (3) that the contract creating the “new debt” without voter approval
was void as a matter of law. Fairgreen contended in response to the City’s motion for
2 Fairgreen does not dispute facts produced by the City in an affidavit in support of the motion for summary judgment showing that no voter approval was obtained for the debt liability incurred by the City pursuant to the agreement.
5 summary judgment that the debt incurred by the City under the agreement was not
illegal or void “new debt” within the above-stated constitutional provision because
the agreement was a private impact fee agreement enforceable under the Georgia
Development Impact Fee Act (DIFA) (OCGA §§ 36-71-1 to 36-71-13).
We find that, regardless of whether the agreement at issue was authorized by
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SECOND DIVISION ANDREWS, P. J., BRANCH and PETERSON, JJ.
NOTICE: Motions for reconsideration must be physically received in our clerk’s office within ten days of the date of decision to be deemed timely filed. http://www.gaappeals.us/rules
January 26, 2016
In the Court of Appeals of Georgia A15A2184. FAIRGREEN CAPITAL, LLC v. CITY OF CANTON.
ANDREWS, Presiding Judge.
Fairgreen Capital, LLC, a property developer, sued the City of Canton for
breach of contract claiming the City failed to repay $564,312.44 in funds that
Fairgreen advanced to the City under a written agreement governing construction of
a public road on City property benefitting a Fairgreen development. The trial court
granted summary judgment in favor of the City on grounds that, under the Georgia
Constitution (Art. IX, Sec. V, Par. I), the funds owed by the City under the agreement
constituted an illegal and void debt.1 Fairgreen appeals. For the following reasons, we
affirm in part and reverse in part.
1 Fairgreen also sued the City on the basis of negligent misrepresentation. 1. Article IX, Section V, Paragraph I (a) of the Georgia Constitution prohibits
“any county, municipality, or other political subdivision” of Georgia from incurring
liability for any “new debt without the assent of a majority of the qualified voters of
such county, municipality, or political subdivision voting in an election held for that
purpose as provided by law.” Under this provision, “new debt” is a liability that is
“not to be discharged by money already in the treasury, or by taxes to be levied during
the year in which the contract under which the liability arose was made.” Greene
County School Dist. v. Circle Y Constr., Inc., 291 Ga. 111, 112 (728 SE2d 184)
(2012). “Therefore, if a municipality undertakes an obligation that extends beyond
a single fiscal year, then a new ‘debt’ has been incurred within the meaning of the
Georgia Constitution and requires voter approval.” Barkley v. City of Rome, 259 Ga.
355, 355 (381 SE2d 34) (1989). A contract incurring such “new debt,” which is
entered into by a municipality without voter approval, is void as a matter of law.
Greene County School Dist., 291 Ga. at 112.
The agreement at issue between Fairgreen and the City – called a “Cost
Participation and Reimbursement Agreement” – provided that Fairgreen was the
owner of a development which stood to benefit from a road, Reservoir Drive, to be
constructed by the City on City property as a “system improvement” included in the
2 “Capital Improvement Plan of the City . . . Road Impact Fee Program.” The
agreement recognizes that the City has a “Road Impact Fee Program which allows it
to collect impact fees from builders for placement in a Road Impact Fee Fund and
which allows [the City] to reimburse developers and owners with funds from said
Fund when those developers and owners advance funds to [the City] for the purpose
of paying [the City’s] share or the developers’ or owners’ share of the cost of building
a system improvement included in the City[‘s] . . . Capital Improvement Plan for
Roads.” The agreement provided that the City was responsible for paying the cost of
constructing the portion of Reservoir Drive located on City property; that Fairgreen
agreed to advance funds to the City necessary to pay the cost of constructing
Reservoir Drive on City property, an amount estimated to be $2,088,403.00; and that
the City agreed to reimburse Fairgreen for the funds advanced for the construction of
Reservoir Drive on City property. The agreement states that the City “has allocated
$2,500,000.00 of its Road Impact Fee Fund for construction of Reservoir Drive;” that
the City “agrees that it shall be . . . responsible for paying the cost of construction of
Reservoir Drive on [City] [p]roperty up to $2,500,000.00;” and that “[the City] agrees
to reimburse Fairgreen from the Road Impact Fee Fund for the actual amount of funds
advanced by Fairgreen up to a maximum of $2,500,000.00 for construction of
3 Reservoir Drive on the [City] [p]roperty.” As to the method of advancing funds, the
agreement provides that, every 30 days, the City shall submit to Fairgreen invoices
that the City has received from the road contractor for completed road work, and that,
within 15 days of receipt of those invoices, Fairgreen shall advance to the City funds
to pay the invoices. As to the method of reimbursement, the agreement provides that
the City will make monthly reimbursements to Fairgreen “up to a maximum of fifty
percent of the funds then available in the Road Impact Fee Fund.” The agreement
recognizes that “there will be months when fifty percent of the funds in the Road
Impact Fee Fund will be insufficient to reimburse Fairgreen for the total payments for
invoices previously advanced by Fairgreen.” In that case, the agreement provides that
“[the City] may make up any shortfalls in future monthly reimbursement payments
made to Fairgreen.” The agreement provides that [the City] “agrees to fully reimburse
Fairgreen for all advance payments made by Fairgreen to [the City] for construction
of Reservoir Drive on the [City] [p]roperty not later than five (5) years from the
Construction Start Date.” Finally, the agreement provides that, when the City has
fully reimbursed Fairgreen for funds advanced to the City to construct Reservoir
Drive on the City property, the City shall determine how much, if any, of the
4 $2,500,000.00 Road Impact Fee Fund for Reservoir Drive remains unspent, and pay
Fairgreen an amount of money equal to 33 percent of the unspent funds.
The construction start date for Reservoir Drive was October 1, 2006.
Fairgreen’s September 2014 complaint shows that, pursuant to the agreement, it
advanced the City $1,146,529.53 to construct Reservoir Drive, and that Fairgreen
remained entitled to reimbursement for advancements made pursuant to the
agreement in the amount of $546,312.44. It is undisputed that from September 18,
2007 to March 4, 2011, the City made four payments to Fairgreen which totaled
$498,592.19.
In response to Fairgreen’s amended complaint, the City moved for summary
judgment on the breach of contract claim on the basis: (1) that funds advanced by
Fairgreen to the City, which the City had not reimbursed, constituted “new debt”
within the meaning of Article IX, Section V, Paragraph I (a) of the Georgia
Constitution and required voter approval; (2) that no such voter approval was
obtained;2 and (3) that the contract creating the “new debt” without voter approval
was void as a matter of law. Fairgreen contended in response to the City’s motion for
2 Fairgreen does not dispute facts produced by the City in an affidavit in support of the motion for summary judgment showing that no voter approval was obtained for the debt liability incurred by the City pursuant to the agreement.
5 summary judgment that the debt incurred by the City under the agreement was not
illegal or void “new debt” within the above-stated constitutional provision because
the agreement was a private impact fee agreement enforceable under the Georgia
Development Impact Fee Act (DIFA) (OCGA §§ 36-71-1 to 36-71-13).
We find that, regardless of whether the agreement at issue was authorized by
DIFA, the agreement clearly arranged a loan from Fairgreen to the City for funds
necessary to construct Reservoir Road on the City property and created a debt which
the City was obligated to repay regardless of whether the City had sufficient impact
fees to reimburse Fairgreen.3 The City’s unpaid debt obligation, which Fairgreen
3 Under OCGA § 36-71-3 (a), “[m]unicipalities and counties which have adopted a comprehensive plan containing a capital improvements element are authorized to impose by ordinance development impact fees as a condition of development approval on all development pursuant to and in accordance with the provisions of this chapter.” In assessing these impact fees, “a municipality must give a developer who constructs ‘system improvements’ that are required or accepted by the municipality impact fee credits for the present value of such improvements.” Fulton Greens, Limited Partnership v. City of Alpharetta, 272 Ga. App. 459, 461 (612 SE2d 491) (2005); OCGA § 36-71-7 (a). Moreover, OCGA § 36-71-7 (b) provides that, “[i]n the event that a developer enters into an agreement with a . . . municipality to construct, fund, or contribute system improvements such that the amount of the credit created by such construction, funding, or contribution is in excess of the development impact fees which would otherwise have been paid for the development project, the developer shall be reimbursed for such excess construction, funding, or contribution from development impact fees paid by other development located in the service area which is benefitted by such improvements.” Finally, as to the creation of private agreements under DIFA, OCGA § 36-71-13 (b), provides that
6 seeks to collect in the present suit, constituted a “new debt” obligation incurred by the
City which extended beyond a single fiscal year and required voter approval under
Article IX, Section V, Paragraph I (a) of the Georgia Constitution. In the absence of
voter approval, the contract creating the debt was void as a matter of law. Greene
County School Dist., 291 Ga. at 112; see H. G. Brown Family Limited Partnership
v. City of Villa Rica, 278 Ga. 819, 820-822 (607 SE2d 883) (2005) (contract entered
into by municipality in excess of authority to enter contracts is void; void contract not
validated by part performance or detrimental reliance). The trial court correctly
granted the City’s motion for summary judgment on the breach of contract claim.
2. We reverse the trial court to the extent it granted summary judgment in favor
of the City on Fairgreen’s negligent misrepresentation claim. In its motion for
summary judgment in response to the amended complaint, the City did not move for
“[n]othing in this chapter shall be construed to prevent or prohibit private agreements between property owners or developers and municipalities . . . in regard to the construction or installation of system improvements and providing for credits or reimbursements for system improvement costs incurred by a developer including interproject transfers of credits or providing for reimbursement for project improvement costs which are used or shared by more than one development project.” Even assuming, without deciding, that the agreement at issue was enforceable under DIFA, nothing in DIFA conflicts with the provision of the Georgia Constitution, Article IX, Section V, Paragraph I (a), requiring that any “new debt” which the City undertook as a liability pursuant to the agreement receive voter approval.
7 judgment on the negligent misrepresentation claim. The trial court erred by granting
summary judgment on an issue not raised in the motion and without giving Fairgreen
proper notice that the issue would be considered. Knight v. American Suzuki Motor
Corp., 272 Ga. App. 319, 324-325 (612 SE2d 546) (2005).
Judgment affirmed in part and reversed in part. Branch and Peterson, JJ.,
concur.