SECOND DIVISION BARNES, P. J., MCFADDEN and MCMILLIAN, 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. (Court of Appeals Rule 4 (b) and Rule 37 (b), February 21, 2008) http://www.gaappeals.us/rules/
March 8, 2013
In the Court of Appeals of Georgia A12A2253. GARRETT et al. v. SOUTHERN HEALTH CORPORATION OF ELLIJAY, INC.
BARNES, Presiding Judge.
Southern Health Corporation of Ellijay, Inc. entered into an option agreement
to purchase land for the development of a new hospital facility. Under the remedies
provision of the option agreement, Southern Health could recover damages from the
sellers for breach of contract only if their breach was “willful and intentional.” After
Southern Health exercised its option to purchase the land but the sellers failed to
close on the sale, Southern Health commenced this action against the sellers seeking,
among other things, damages for breach of contract, and the sellers counterclaimed
for fraudulent inducement. The trial court subsequently entered partial summary
judgment in favor of Southern Health on its breach-of-contract claim, concluding that the uncontroverted evidence showed that the sellers had willfully and intentionally
breached the option agreement, entitling Southern Health to damages under the
remedies provision as a matter of law. The trial court also granted partial summary
judgment in favor of Southern Health on the sellers’ counterclaim and denied the
sellers’ two separate motions for summary judgment.
For the reasons discussed below, we affirm the trial court’s grant of summary
judgment to Southern Health on the sellers’ counterclaim for fraudulent inducement
and its denial of the sellers’ motions for summary judgment. However, we reverse the
trial court’s grant of Southern Health’s motion for partial summary judgment on its
damages claim for breach of the option agreement because there are genuine issues
of material fact as to whether the sellers’ breach was “willful.”
Summary judgment is appropriate if the pleadings and the undisputed evidence show that there exists no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. OCGA § 9-11-56 (c). On appeal from the grant or denial of summary judgment, the appellate courts conduct a de novo review, construing all reasonable inferences in the light most favorable to the nonmoving party.
2 (Citation and punctuation omitted.) Bank of North Ga. v. Windermere Dev., Inc., 316
Ga. App. 33, 34 (728 SE2d 714) (2012). Guided by these principles, we turn to the
record in the present case.
The Parties and the Property. Southern Health operates North Georgia Medical
Center and Gilmer Nursing Home in Gilmer County, Georgia. In 2007, Southern
Health became interested in purchasing approximately 25 acres of unimproved
property located on Highway 515 in Gilmer County (the “Property”). Southern Health
wanted to build a new hospital on the Property.
The Property was comprised of six tracts. Mr. James P. Garrett, individually,
owned one of the tracts. Ms. Roberta Mundy, personally, together with Mr. Garrett,
owned another one of the tracts. The remaining four tracts were owned jointly by Mr.
Garrett and Mr. William “Randy” Mundy, Jr., until the latter’s death in 2006,
whereupon Mr. Mundy’s interest in the land passed to his estate. Following Mr.
Mundy’s death, a North Carolina court appointed his wife, Ms. Mundy, to serve as
administratrix of his estate.
Execution of the Option Agreement. Southern Health entered into negotiations
to purchase the Property from Mr. Garrett and Ms. Mundy (collectively, the
3 “Sellers”). On April 17, 2007, Mr. Garrett and Ms. Mundy, individually and as
administratrix of her late husband’s estate, executed an agreement with Southern
Health under which they granted it an irrevocable option to purchase the Property in
return for the payment of certain “option money” (the “Option Agreement”). The
Sellers represented in the Option Agreement that they were the owners of good and
marketable fee simple title to the Property, and they agreed to convey the Property at
closing by limited warranty deed if the option was exercised.
Southern Health agreed to purchase the Property for $3,300,000 if it exercised
the option. In Paragraphs 4 (d) and 22 (a) of the Option Agreement, the parties
acknowledged that the purchase price included not only the Property, but also the
installation of utility lines and facilities on the Property by Mr. Garrett and Ms.
Mundy (the “Utility Work”).
Mr. Garrett chose not to consult with an attorney before signing the Option
Agreement. All of the communications and information that Ms. Mundy received
about the Property and the Option Agreement came through Mr. Garrett. Ms. Mundy
also declined to consult with an attorney.
The Inspection Period. The Option Agreement included an initial “Inspection
Period” during which any of the parties could terminate the contract. The deadline for
4 the Inspection Period was July 23, 2007. Under Paragraph 4 (a) of the Option
Agreement, Southern Health had the right to inspect and evaluate the Property and,
if it was unsatisfied with the Property for any reason, terminate the Option Agreement
before the end of the Inspection Period. After inspecting the Property, Southern
Health elected not to terminate the Option Agreement during the Inspection Period.
Also during the Inspection Period, the Sellers had the right to determine
whether they wanted to be responsible for the Utility Work. Under Paragraph 4 (d)
of the Option Agreement, if the Sellers determined that they did not want to perform
the Utility Work, they had the right to terminate the Option Agreement at any time
before the end of the Inspection Period. Both Sellers testified that they did not
exercise their right to terminate the Option Agreement during that time period.
The Commitment Letter. Because the Sellers did not terminate the contract
within the Inspection Period, they were obligated under Paragraph 4 (e) of the Option
Agreement to provide Southern Health with a “commitment letter” from a surety
committing to issue a payment and performance bond that would cover the Sellers’
performance of the Utility Work (the “Commitment Letter”). The Sellers never
provided the Commitment Letter, despite several correspondence from Southern
Health demanding that they fulfill their contractual obligation.
5 The Utility Work. Because the Sellers did not terminate the contract within the
Inspection Period, they also were obligated under Paragraphs 4 (d) and 22 (a) of the
Option Agreement to perform the Utility Work within 16 months of the closing of the
sale if Southern Health exercised the option. During the summer of 2007, Mr. Garrett
met with a government engineer from the water and sewer authority, along with
Southern Health’s representatives, to discuss the Utility Work. At that meeting, Mr.
Garrett stated that he did not intend to pay for the water and sewer Utility Work,
despite the fact that the Sellers were contractually obligated to perform the Utility
Work at no additional expense to Southern Health if it exercised the option.
Separately, Mr. Garrett told Ms. Mundy several times that he intended for others to
bear at least some of the financial responsibility for performing the Utility Work, and
Ms. Mundy agreed with him.
That same summer, representatives of Southern Health met with Mr. Garrett
on another occasion to discuss the Utility Work, and he expressly refused to perform
the Utility Work unless funds from other sources were found to pay it. In response,
counsel for Southern Health explained that if the company exercised the option, it
might have no alternative but to sue to enforce the Sellers’ obligation to perform the
6 Utility Work. Mr. Garrett “basically” responded that Southern Health should “go
ahead” and sue the Sellers.
The Exercise of the Option. On October 9, 2007, Southern Health exercised the
option to purchase the Property. The parties agreed that the closing date for the sale
would be December 7, 2007.
In a letter dated October 15, 2007, Southern Health addressed the upcoming
closing and the failure of the Sellers to fulfill all of their contractual obligations up
to that point. In the letter, Southern Health formally notified the Sellers that they had
defaulted on their obligation to provide the Commitment Letter under the Option
Agreement. Southern Health demanded prompt cure and further advised the Sellers
that, regardless of whether they procured the Commitment Letter, Southern Health
expected them to provide a payment and performance bond at closing (as required by
Paragraph 22 (b) of the Option Agreement) and to perform the Utility Work within
16 months of the closing (as required by Paragraph 22 (a)).
The Failure to Close. In preparation for the scheduled closing, counsel for
Southern Health sent a letter dated November 30, 2007 to the Sellers and their
recently retained counsel that included a closing agenda and drafts of the closing
documents, requested a form of the performance bond, and solicited the Sellers’
7 comments. In a letter dated December 3, 2007, Sellers’ counsel responded to
Southern Health’s letter by pointing out a problem that he alleged had arisen with the
upcoming closing. Counsel stated in the letter that, based on advice from North
Carolina counsel, he believed that all of Mr. Mundy’s heirs (including his two
children and their spouses) would need to sign the limited warranty deed to convey
the Property to Southern Health at closing. As a “simple solution” to this problem,
counsel proposed that Southern Health accept a quitclaim deed from the Sellers rather
than the limited warranty deed required by Paragraph 8 of the Option Agreement.
In a letter from its counsel dated that same day, Southern Health rejected the
Sellers’ proposal to close on a quitclaim deed rather than a limited warranty deed.
Counsel stated that the title insurance company for the transaction had been informed
of the circumstances of the estate in North Carolina, and the insurer had advised that
it would be sufficient for only the Sellers to sign all of the closing documents. As
such, counsel for Southern Health asserted that there were no “genuine impediments”
that would prevent the Sellers from closing on the scheduled date.
Counsel for the Sellers responded to Southern Health in a letter dated
December 5, 2007, stating that the Sellers would not provide a limited warranty deed
and noting that they “were not close to being ready to close.” Counsel further asserted
8 that because the Sellers had not been represented by counsel when they initially
signed the Option Agreement, they had been unaware of the need for the heirs to sign
the warranty deed until he had been hired to represent them and had taken steps to
obtain legal advice from North Carolina counsel.
The day before the scheduled closing, Southern Health wired to the escrow
agent sufficient funds that, when combined with amounts it had previously paid,
represented the full purchase price for the Property. On December 7, 2007, Southern
Health’s representatives were present in the escrow agent’s offices at the appointed
hour for closing and were prepared to consummate the transaction on its behalf.
However, the Sellers did not appear at the closing, and counsel for the Sellers
confirmed by email that they were “not ready to close.” It is undisputed that the
Sellers did not provide the Commitment Letter and performance bond to Southern
Health, did not execute any closing documents, did not convey title of the Property
to Southern Health by limited warranty deed, and did not perform the Utility Work
on the Property.
The Lawsuit. Paragraph 12 of the Option Agreement set forth certain remedies
if the failure to consummate the sale of the Property was the result of the uncured
default of the Sellers:
9 If, after Purchaser exercises the Option, said sale is not consummated by reason of the uncured default of Seller, then the Option Money shall be refunded to Purchaser, and Purchaser may exercise any and all remedies available to Purchaser at law or in equity, including an action for specific performance (in which event, the Option Money shall not be refunded to Purchaser); provided, however, Purchaser shall not be entitled to damages unless the default by Seller hereunder was willful and intentional. Pursuant to Paragraph 12, Southern Health filed the instant action for specific performance, breach of contract, fraud, attorney fees, and punitive damages after the Sellers failed to appear at the closing or otherwise consummate the sale of the Property. Southern Health later amended the complaint to withdraw its claim for specific performance and instead seek only monetary damages for the breach.
The Sellers answered and filed a counterclaim for fraudulent inducement. The
Sellers alleged in their counterclaim that language contained in Paragraph 4 (d) of the
Option Agreement regarding the Inspection Period was deceptive and had misled
them.
The Three Motions for Summary Judgment. Following discovery, the Sellers
moved for summary judgment. They asserted that the uncontroverted evidence
showed that their default on the Option Agreement was not “willful and intentional,”
and that, as a result, Southern Health was not entitled to recover damages under
Paragraph 12 of the Option Agreement. In this regard, the Sellers argued that an act
10 was not “willful” if it was “due to reasonable cause, and lacked evil intent or bad
motive,” and they contended that their default was merely the result of their failure
to sign the warranty deed after learning that Mr. Mundy’s children and their spouses
had an interest in the Property under North Carolina law.
Southern Health then filed its own motion for partial summary judgment on its
claim for breach of contract and on the Sellers’ counterclaim for fraudulent
inducement. According to Southern Health, the uncontroverted evidence showed that
the Sellers’ default on the Option Agreement was in fact “willful and intentional.” In
this respect, Southern Health argued that “willful” meant “voluntary and intentional,
not necessarily malicious,” and that the Sellers’ decision not to fulfill its obligations
under the Option Agreement had been a matter of deliberate choice rather than an
accident or happenstance. Additionally, Southern Health argued that the Sellers’
fraudulent inducement counterclaim could not be predicated simply on their failure
to properly read and understand the language in the Option Agreement.
The Sellers subsequently filed a second motion for summary judgment. They
asserted that Southern Health was not entitled to seek damages for breach because
Paragraph 20 (a) of the Option Agreement restricted the remedies available to
Southern Health, when certain contractual contingencies were not satisfied, to either
11 waiving those contingencies or terminating the contract without further recourse; that
the uncontroverted evidence showed that the Sellers had terminated the Option
Agreement during the Inspection Period in an email from their real estate broker to
Southern Health’s real estate broker; and that the Option Agreement had not been
signed by an authorized representative of Southern Health and was unenforceable
under the “equal dignity rule.”
The Summary Judgment Order. Following a hearing, the trial court granted
partial summary judgment in favor of Southern Health on its breach-of-contract claim
and on the Sellers’ counterclaim for fraudulent inducement, and the court denied the
Sellers’ two motions for summary judgment. The trial court ruled that “the only
remaining issue for determination by a jury is the amount of damages that Sellers owe
and are required to pay [Southern Health] for their willful and intentional breaches
of contract.”
1. The Sellers contend that the trial court erred in granting partial summary
judgment in favor of Southern Health on its breach-of-contract claim. In granting
partial summary judgment to Southern Health, the trial court concluded that the
uncontroverted evidence showed that the Sellers’ default on the Option Agreement
was “willful and intentional,” thereby entitling Southern Health to damages for
12 breach of contract under Paragraph 12 of the Option Agreement as a matter of law.
We conclude, however, that the phrase “willful and intentional” as used in Paragraph
12 required evidence that the Sellers’ default was done intentionally and in bad faith.
Because there was conflicting evidence regarding whether the Sellers acted in bad
faith, the trial court’s grant of partial summary judgment to Southern Health on this
issue was erroneous.
An option agreement, such as the one at issue here, “is simply a contract by
which the owner of property agrees with another person that he shall have the right
to buy the described property at a fixed price within a certain time specified.”
(Citation and punctuation omitted.) Kent v. Graham Commercial Realty, 279 Ga.
App. 537, 542-543 (2) (631 SE2d 753) (2006). An option agreement is subject to the
same rules governing the construction of other contracts. Jakel v. Fountainhead Dev.
Corp., 243 Ga. App. 844, 846 (534 SE2d 199) (2000).
“[T]he cardinal rule of contract construction is to ascertain the intention of the
parties.” (Punctuation and footnote omitted.) Board of Commrs. of Crisp County v.
City Commrs. of City of Cordele, 315 Ga. App. 696, 699 (727 SE2d 524) (2012). If
the terms of a contract are plain and unambiguous, the contractual terms alone
determine the parties’ intent. Id. A dictionary can supply the plain and ordinary
13 meaning of a term, see Akron Pest Control v. Radar Exterminating Co., 216 Ga. App.
495, 497 (1) (455 SE2d 601) (1995), “[b]ut a dictionary does not always provide a
complete answer.” Archer Western Contractors, Ltd. v. Estate of Pitts, __ Ga. __ (2)
(Case Nos. S12G0517, S12G0526, and S12G0527, decided Nov. 27, 2012). If a term
used in a contract “is of uncertain meaning and may be fairly understood in more
ways than one,” it is ambiguous, Akron Pest Control, 216 Ga. App. at 497 (1), and
we apply the rules of contract construction in an effort to resolve the ambiguity.
Board of Commrs. of Crisp County, 315 Ga. App. at 699. The proper construction of
a contract is a question of law for a court to determine. OCGA § 13-2-1.
Mindful of these principles, we must first determine whether the words “willful
and intentional” as used in Paragraph 12 of the Option Agreement are clear and
unambiguous. We turn first to the word “intentional,” which we conclude is
unambiguous. “Intentional” is commonly understood to mean “[d]one with the aim
of carrying out the act.” Black’s Law Dictionary (9th ed. 2009). See also Merriam-
Webst er’s Online Dictionary, http://www.merria m - we b s t e r .c o m/
dictionary/intentional (defining “intentional” as “done by intention or design”).
We reach a different conclusion with regard to the word “willful.” On the one
hand, “willful” can be defined simply as voluntary and deliberate. See Black’s Law
14 Dictionary (9th ed. 2009) (defining “willful” as “[v]oluntary and intentional, but not
necessarily malicious”). See also Gibson v. State, 265 Ga. App. 325, 328 (593 SE2d
861) (2004) (quoting American Heritage Dictionary definition of “willful” as “being
in accordance with one’s will; deliberate”) (punctuation and emphasis omitted). On
the other hand, “willful” can be defined as going beyond mere intentionality or
deliberateness to also require an element of bad faith. See In the Matter of Inquiry
Concerning Judge No. 94-70, 265 Ga. 326, 327-328 (1) (454 SE2d 780) (1995)
(“willful misconduct” refers to “actions taken in bad faith”); Weston v. Dun Transp.
& Stringer, Inc., 304 Ga. App. 84, 89 (1) (695 SE2d 279) (2010) (“Wil[l]ful conduct
is based on an actual intention to do harm or inflict injury.”) (citation and punctuation
omitted); Telecash Investments, Inc. v. Lagrone, 241 Ga. App. 66, 68 (1) (525 SE2d
112) (1999) (“willful” refers to “conduct of a criminal or quasi-criminal nature”)
(punctuation and footnote omitted).
Because “willful” has an “uncertain meaning and may be fairly understood in
more ways than one,” use of that word in Paragraph 12 of the Option Agreement is
ambiguous. Akron Pest Control, 216 Ga. App. at 497 (1). See also Johnson &
Johnson v. Guidant Corp., 525 F. Supp.2d 336, 349 (II) (B) (S.D. N.Y. 2007)
(“‘Willful’ is a notoriously ambiguous word, which can indicate any number of
15 mental states.”); 57A Am. Jur. 2d Negligence § 260 (updated Nov. 2012) (noting that
“[g]enerally, no spirit of ill will or intentional misconduct is essential to prove
willfulness,” but nevertheless noting that in some jurisdictions “willful misconduct
does involve the element of malice or ill will”). Accordingly, we must apply the rules
of contract construction in an effort to resolve the ambiguity. See Board of Commrs.
of Crisp County, 315 Ga. App. at 699.
If “willful” is defined as voluntary and deliberate, its meaning would be
interchangeable with the meaning of “intentional” used in the same paragraph of the
Option Agreement. But it is a well-established rule of contract construction that a
court should avoid an interpretation of a contract which renders any of its terms
meaningless or mere surplusage. See Flynt v. Life of South Ins. Co., 312 Ga. App.
430, 435 (1) (718 SE2d 343) (2011). See also Woodbery v. Atlas Realty Co., 148 Ga.
712, 715 (1) (98 SE2d 472) (1919) (noting that “none of the words [in a contract] are
to be considered as redundant, if a reasonable intendment can be given them”). Thus,
to avoid rendering the word “intentional” in Paragraph 12 as mere surplusage, we
must construe the word “willful” to include an element of bad faith. See Pomerance
v. Berkshire Life Ins. Co. of America, 288 Ga. App. 491, 494-495 (1) (654 SE2d 638)
(2007) (avoiding construction of the term “substantial” in an insurance contract that
16 would render it interchangeable with the term “material” used in the same contract)
(physical precedent only); Tyson v. McPhail Properties, 223 Ga. App. 683, 689 (6)
(478 SE2d 467) (1996) (concluding that contract “would not have used two different
terms in two sequential paragraphs to describe the same thing”). See also
Metropolitan Life Ins. Co. v. Noble Lowndes Intl., Inc., 643 NE2d 504, 508 (N.Y. Ct.
App. 1994) (concluding that in light of the language of the contract, the term “willful”
“was intended by the parties to subsume conduct which is tortious in nature, i.e.,
wrongful conduct in which defendant willfully intends to inflict harm on plaintiff at
least in part through the means of breaching the contract between the parties”).
It follows that to recover damages under Paragraph 12 of the Option
Agreement, Southern Health must show that the Sellers’ default, which resulted in the
failure to consummate the sale of the Property, was done intentionally and in bad
faith. And while the uncontroverted evidence shows that the Sellers’ decision not to
appear at or otherwise carry through with the closing of the sale of the Property was
intentional, there is conflicting evidence on the issue of bad faith.
The Sellers argued to the trial court that their failure to close “was due to
reasonable cause, and lacked evil intent or bad motive.” In this respect, they
contended that their failure to close was caused by their need to have Mr. Mundy’s
17 heirs consent to and sign the closing documents, a problem of which they were
unaware until they retained counsel during the course of the transaction. According
to the Sellers, they refused to close because they did not want to sign a limited
warranty deed representing that they had full and complete title to the Property when
the heirs also had an interest in the Property. To support their argument, the Sellers
could point to the letters from their counsel to Southern Health explaining the
problem involving the heirs, and Mr. Garrett’s deposition testimony that he was
unable to convince Brian Mundy, who was one of the heirs, to consent to the sale of
the Property by the time of the scheduled closing. Additionally, Brian Mundy testified
in his deposition that initially he had not wanted the sale of the Property to occur and
was hesitant about the transaction when he first met with Mr. Garrett about it.
In contrast, Southern Health maintained in the trial court that the alleged issue
over Mr. Mundy’s heirs was manufactured by the Sellers, and that “the real reason”
the Sellers would not close was that they had made the decision not to perform the
Utility Work or their other obligations under the Option Agreement. Southern Health
pointed to evidence that before the issue of the heirs arose as a point of contention
between the parties, the Sellers failed to obtain a Commitment Letter, and Mr. Garrett
repeatedly stated that he was unwilling to pay for the Utility Work as required in the
18 Option Agreement. Furthermore, to support its position that the issue of the heirs was
a mere pretext, Southern Health pointed to deposition testimony from Ms. Mundy that
she believed the dispute between the parties was over the Utility Work, that she was
unaware of any communication between Mr. Garrett and her children (i.e., Mr.
Mundy’s heirs) about the sale of the Property, that her children never objected to the
sale of the Property, and that her children never claimed to have any interest in the
Property. Southern Health also pointed to other portions of Brian Mundy’s deposition
testimony where he appeared to contradict himself by stating that he had never been
asked by anyone to attend the closing or to sign a warranty deed, and could not recall
having ever refused to sign a warranty deed for the Property.
In light of the conflicting evidence, a genuine issue of material fact exists as
to whether the Sellers defaulted on the Option Agreement in bad faith, and thus as to
whether their default was “willful” as that word must be construed in this case.
Accordingly, a jury must resolve whether the Defendant’s default was “willful,”
which will determine whether Southern Health can recover damages for breach of
contract under Paragraph 12 of the Option Agreement. See generally Columbus
Clinic, P.C. v. Liss, 252 Ga. App. 559, 562 (556 SE2d 215) (2001) (“The intention
with which an act itself is done is peculiarly a question for the jury.”); Coleman v.
19 Garrison, 80 Ga. App. 328, 334 (5) (56 SE2d 144) (1949) (question of whether
defendant’s act is “wil[l]fully or innocently done is generally for the jury”) (citation
and punctuation omitted). We thus reverse the trial court’s grant of partial summary
judgment to Southern Health on its claim for breach of contract.1
2. The Sellers also contend that the trial court erred in granting partial summary
judgment to Southern Health on their counterclaim for fraudulent inducement. Their
counterclaim was predicated on Paragraph 4 (d) of the Option Agreement, which
provided in relevant part:
Seller and Purchaser acknowledge and agree that it is Purchaser’s intention that the Purchase Price includes not only the Property, but also the Utility . . . Work, all as more particularly described in Section 22 below. During the Inspection Period, Seller shall determine whether or not it desires to be responsible for the performance of such construction work, at no cost or expense to Purchaser. Purchaser agrees to provide Seller with such documentation as shall reasonably be required by the applicable governmental jurisdiction to assist Seller in making its determination hereunder, including, but not limited to, providing Seller with such engineering studies as may reasonable be required by such applicable governmental jurisdiction . . . .
1 Because genuine issues of material fact exist, we affirm the trial court’s denial of the Sellers’ first motion for summary judgment on Southern Health’s breach-of- contract claim.
20 (Emphasis supplied.) According to the Sellers, the highlighted contractual language
was deceitful and inconsistent with what the Sellers had understood would be
provided to them by Southern Health during the Inspection Period to assist them in
determining whether they wished to perform the Utility Work.
The Sellers’ counterclaim for fraudulent inducement was without merit, as the
trial court properly concluded.
Although [the Sellers] asserted that the written terms of the [Option Agreement] deviated from what [they] understood the terms would be, one cannot claim to be defrauded about a matter equally open to the observation of all parties, absent the existence of a special relationship of trust or confidence. It was incumbent upon [the Sellers] to exercise ordinary diligence to make [their] own independent verification of the contractual terms[,] and [their] failure to do so bars an action based on fraud.
(Citations omitted.) Fuller v. Greenville Banking Co., 230 Ga. App. 63, 64-65 (1)
(495 SE2d 320) (1997). See also Campbell v. Citizens & Southern Nat. Bank, 202 Ga.
App. 639, 640 (1) (415 SE2d 193) (1992) (“One not prevented from reading the
contract, and having the capacity and opportunity to do so, cannot after signing it
claim he was fraudulently induced to sign by promises which contradict the express
21 terms of the contract.”). Hence, we affirm the trial court’s grant of Southern Health’s
motion for partial summary judgment on the fraudulent-inducement counterclaim.
3. The Sellers also contend that the trial court erred in denying their second
motion for summary judgment in which they raised several arguments for why
Southern Health’s claims should be dismissed. We will discuss each of their
arguments in turn.
(a) In seeking summary judgment, the Sellers argued that under Paragraph 20
(a) of the Option Agreement, Southern Health’s only two options upon the Sellers’s
failure to perform certain “closing contingencies” before the closing date (such as
providing the Commitment Letter and the performance bond) was to waive those
contingencies or terminate the contract. Because Southern Health never terminated
the Option Agreement, the Sellers argued that Southern Health necessarily waived all
of the “closing contingencies” by expressing its intent to proceed with the closing on
December 7, 2007 and thus could not predicate its damages claim on the Sellers’
failure to perform any of those contingencies. We are unpersuaded.
Paragraph 20 of the Option Agreement provided in relevant part:
CLOSING CONTINGENCIES. Notwithstanding anything to the contrary contained in this Agreement, the obligations of Purchaser under
22 this Agreement shall be and are hereby made subject to and contingent upon the satisfaction of certain contingencies (hereinafter referred to as the “Closing Contingencies”), which are more particularly described below. The Closing Contingencies are for the benefit of Purchaser, and Purchaser may at any time waive all or any thereof without affecting any of other terms and conditions of this Agreement. Each party hereto shall exercise reasonable, good faith efforts to satisfy those of the Closing Contingencies for which it is responsible (as indicated below).
A. Should any of the Closing Contingencies set forth in this Section 20 (A) . .. fail to be satisfied on or before the Closing Date, then Purchaser may elect either to (a) waive such contingency by written notice to Seller, or (b) terminate this Agreement by written notice to Seller, in which event the sum of $100.00 shall be disbursed to Seller out of the Option Money, and the entire balance of the Option Money shall be refunded to Purchaser and (except as otherwise herein expressly provided) no party hereto shall have any further rights or obligations hereunder.
(Emphasis supplied.) Paragraph 20 (a) then provided a list of “Closing
Contingencies” that had to be performed by the Sellers on or before the closing date,
which encompassed providing the Commitment Letter and the performance bond.
As an initial matter, the unambiguous language of Paragraph 20 (a) makes clear
that the provision was intended to be “for the benefit of Purchaser,” Southern Health.
23 To read the provision as Sellers do to restrict, rather than expand, Southern Health’s
remedies under the Option Agreement would be inconsistent with this clearly
expressed intent. See generally Board of Commrs. of Crisp County, 315 Ga. App. at
699 (ascertaining the intent of the parties is the “cardinal rule” of contract
construction); Ashkouti v. Widener, 231 Ga. App. 539, 541 (3) (500 SE2d 337) (1998)
(contractual provision intended for plaintiff’s benefit could be waived by him and
should not be used to preclude plaintiff’s breach-of-contract claim).
Furthermore, Southern Health did not sue the Sellers merely for their failure
to carry out one or more of the listed “Contract Contingencies” prior to the scheduled
closing. Rather, Southern Health sued the Sellers for their total default on the Option
Agreement resulting in the failure to consummate the sale of the Property, a lawsuit
specifically authorized by Paragraph 12 of the Option Agreement. Under the
applicable rules of statutory construction, “the whole contract should be looked to in
arriving at the construction of any part.” (Citation and punctuation omitted.) Immel
v. Immel, 298 Ga. App. 424, 426 (680 SE2d 505) (2009). Courts are “to give effect
to each provision[] and to interpret each provision to harmonize with [the] other[s].”
(Punctuation and footnote omitted.) Board of Commrs. of Crisp County, 315 Ga. App.
at 700. Thus, Paragraph 20 (a) must be read together with Paragraph 12, which
24 provided Southern Health the right to recover damages for a “willful and intentional”
default by the Sellers, if the sale of the Property was “not consummated by reason of
[the Sellers’] uncured default.”
When read in conjunction with Paragraph 12, it is clear that Paragraph 20 (a)
was not intended to curtail the right of Southern Health to sue for breach of contract
if the sale of the Property failed to occur. More specifically, in the event that the
Sellers failed to perform any one of the “Closing Contingencies,” Paragraph 20 (a)
gave Southern Health the option to terminate the contract or waive the contingency
and insist on closing the sale. However, if the closing ultimately failed to occur due
to the uncured default of the Sellers, then Paragraph 12 authorized Southern Health
to sue for breach of contract. That is what occurred here. Consequently, Southern
Health was authorized to bring the instant action for damages pursuant to Paragraph
12 of the Option Agreement, and the trial court did not err in denying summary
judgment to the Sellers on the asserted ground.
(b) The Sellers further argued in their second motion for summary judgment
that the uncontroverted evidence showed that they had terminated the Option
Agreement during the Inspection Period through a July 9, 2007 email from their real
estate broker to Southern Health’s real estate broker. The Sellers maintained that the
25 Option Agreement was not longer binding on them from that point forward and could
not be relied upon by Southern Health to support their breach-of-contract claim.
Again, we are unpersuaded.
On its face, the July 9, 2007 email did not effect a termination of the Option
Agreement. The email was from one real estate broker to another expressing the
broker’s belief that the sale would not close, and there is no evidence that the email
was forwarded or copied to any of the contracting parties, even though the Option
Agreement required all notices to be delivered “to the party being given such notice
at the address of such party set forth” in the contract. Moreover, the email expressly
acknowledged that the parties were “still under contract” and did not use the word
“terminate” or any other words of similar import.
Additionally, three days after the email, the parties signed an amendment to the
Option Agreement extending the Inspection Period, which would have been pointless
if a termination had just occurred. And, on November 7, 2007, four months after the
email, the parties signed an “Amendment to Option Agreement,” expressly stating
that the Option Agreement “shall remain in full force and effect as originally
executed.” Finally, both Sellers testified that they did not terminate the Option
Agreement during the time frame of the Inspection Period.
26 Under these circumstances, the July 9, 2007 email from one broker to another
cannot reasonably be construed as notice from the Sellers to Southern Health that they
were terminating the Option Agreement. Rather than effecting a termination of a
$3,300,000 deal, the email simply involved one broker expressing her belief to the
other that the transaction ultimately would not close. The trial court therefore
committed no error in rejecting the Sellers’ argument that they were entitled to
summary judgment because the Option Agreement had been terminated during the
Inspection Period. See, e. g., King Indus. Realty v. Rich, 224 Ga. App. 629, 630 (2)
(481 SE2d 861) (1997) (warnings or predictions of future termination did not
themselves constitute notice of termination as required under contract); Shiflett v.
Anchor Rome Mills, 78 Ga. App. 428, 433 (3) (50 SE2d 853) (1948) (landlord’s letter
could not be construed as notice of termination of lease contract, given that “nowhere
in said purported notice did it state that the contract was cancelled or that the same
was terminated”).
(c) Lastly, the Sellers argued that they were entitled to summary judgment
because the Option Agreement had not been executed by a representative of Southern
27 Health shown to have authority to act on its behalf, and because the contract was
unenforceable under the “equal dignity rule.” These arguments lack any merit.2
First, the uncontroverted evidence showed that the Option Agreement was
executed by a representative of Southern Health authorized to act on its behalf. The
first page of the Option Agreement identified Southern Health as the purchaser, and
Paragraph 11 expressly provided that “[e]ach party hereto warrants to each other party
hereto that the warranting party has full power and authority to enter into this
Agreement and perform its obligations hereunder.” The signature page of the Option
Agreement reflects that it was signed by Sheila Brockman, in her capacity as the
Assistant Secretary of Southern Health, and both Ms. Brockman and her direct
supervisor testified in their respective depositions, without contradiction, that Ms.
Brockman had authority to sign the contract on behalf of Southern Health. The Sellers
have not pointed to any conflicting evidence which would suggest that Ms. Brockman
lacked authority to act on behalf of Southern Health, and we have found none.
2 On appeal, the Sellers also argue for the first time that the Option Agreement was unenforceable because there is no competent evidence of record that Southern Health’s Board of Directors voted to approve the Option Agreement, as required by Paragraph 20 (b) of the contract, which listed certain “Closing Contingencies” that had to be satisfied by Southern Health. Because the Sellers failed to raise this argument in the trial court, we decline to consider it here. See Wellons, Inc. v. Langboard, Inc., 315 Ga. App. 183, 186 (1) (726 SE2d 673) (2012).
28 Second, the Sellers’ argument that the Option Agreement was unenforceable
under the “equal dignity rule” as set forth in OCGA § 10-6-2 is misplaced. Pursuant
to that rule, “the authority of an agent to execute an instrument required by the Statute
of Frauds to be in writing must also be in writing.” Dunn v. Venture Building Group,
283 Ga. App. 500, 502 (1) (642 SE2d 156) (2007). See OCGA § 10-6-2 (“Where the
exercise or performance of an agency is by written instrument, the agency shall also
be created by written instrument[.]”). Because the Statute of Frauds requires that an
option contract for the purchase of land be in writing, see OCGA § 13-5-30 (4);
Estate of Ryan v. Shuman, 288 Ga. App. 868, 871 (1) (655 SE2d 644) (2007), the
authority of an agent to execute such a contract likewise must be in writing. See
Dunn, 283 Ga. App. at 502 (1). Nevertheless, even if Ms. Brockman’s authority to
sign the Option Agreement on behalf of Southern Health was given to her verbally
rather than in writing, the Sellers are not the correct parties to challenge her authority
under the “equal dignity rule.” See Barron Reed Constr. v. 430, LLC, 275 Ga. App.
884, 886 (1) (622 SE2d 83) (2005) (concluding that “in cases where the [‘equal
dignity rule’] is invoked, the invoking party is the principal who is challenging the
authority of its own alleged representative”) (citations and punctuation omitted).
29 Thus, the Sellers were not entitled to rely upon the “equal dignity rule” in support of
their second summary judgment motion, which the trial court properly denied.
Judgment affirmed in part and reversed in part. McFadden, J., concurs.
McMillian, J., specially concurs.
A12A2253. GARRETT et al. v. SOUTHERN HEALTH
CORPORATION OF ELLIJAY, INC.
MCMILLIAN, Judge, concurring specially.
Although I concur fully in Divisions 2 and 3, I cannot agree with all that is said
in Division 1. I am particularly concerned that the majority has rewritten the parties’
agreement to insert an additional term –“bad faith”--which is itself subject to varying
interpretations and which the majority does not define.
I do believe, however, that under the terms of the Option Agreement, a genuine
issue of material fact exists as to whether the Sellers’ default was “willful and
intentional.” The parties did not and could not have intended for the Sellers to go
forward with the closing if there was a true legal impediment to the Sellers’ ability
to close. And, clearly, the inability to give clear title to the property would constitute such an impediment.1 For this reason, and based on the facts as presently developed,
I agree that the issue of whether the Sellers’ default was “willful and intentional” for
purposes of recovering damages under the Option Agreement must be submitted to
a jury for resolution.
1 In rejecting the Sellers’ proposal to close on a quitclaim deed rather than a limited warranty deed, counsel for Southern Health relied on information from the title insurance company to assert that there were no “genuine impediments” to prevent the Sellers from closing. This suggests that even Southern Health expected that the parties not go forward with the closing if the Sellers truly had a legal impediment to conveying clear title.