THIRD DIVISION BARNES, P. J., BOGGS and BRANCH, 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/
June 24, 2014
In the Court of Appeals of Georgia A14A0143. ROCA PROPERTIES, LLC et al. v. DANCE HOTLANTA, INC. et al.
BARNES, Presiding Judge.
This lawsuit involves a dispute over the sale of a professional ballroom dance
competition in Atlanta. Dance Hotlanta, Inc., the successor by merger to Hotlanta
Dance Challenge, Inc., and Nancy Senner (collectively, the “HDC Plaintiffs”) sued
Roca Properties, LLC, Elizabeth Chester, and Antonio Daza (collectively, the “Roca
Defendants”) for breach of certain promissory notes and personal guarantees
associated with the sale of the dance competition, prejudgment and postjudgment
interest, and attorney fees. The Roca Defendants answered, alleging that they had
been fraudulently induced into signing the notes and guarantees, and asserting
counterclaims for breach of contract, fraud in the inducement, indemnification,
attorney fees, and punitive damages. The trial court granted summary judgment to the HDC Plaintiffs on all of the claims and counterclaims, concluding that the
uncontroverted evidence showed that the notes were in default and that the HDC
Plaintiffs had not made any actionable false representations to the Roca Defendants
that induced them to enter into the sale. For the reasons discussed below, we conclude
that genuine issues of material fact exist in this case, and we vacate the trial court’s
summary judgment order and remand with instruction.
Summary judgment is proper only if the pleadings and evidence show “that
there is no genuine issue as to any material fact and that the moving party is entitled
to a judgment as a matter of law.” OCGA § 9-11-56 (c). “We apply a de novo
standard of review to an appeal from a grant of summary judgment, and we view the
evidence, and all reasonable conclusions and inferences drawn from it, in the light
most favorable to the nonmovant.” (Punctuation and footnote omitted.) Bonner v.
Southern Restaurant Group, 271 Ga. App. 497 (610 SE2d 129) (2005).
The Hotlanta Competition. The Hotlanta Dance Challenge is an annual
ballroom dance competition held in Atlanta every third week in October (the
“Hotlanta Competition”). The Hotlanta Competition is sanctioned by the National
Dance Council of America (“NDCA”), which is the official governing council of
dance competitions in the United States. Under NDCA rules, no other NDCA-
2 sanctioned competition can take place within 90 miles from the Hotlanta Competition
during the week it is held. Furthermore, at the time of this dispute, there were no new
competition dates available from the NDCA; thus, a party interested in hosting a
NDCA-sanctioned competition had to acquire the rights from an existing owner.
Nancy Senner and her former dance partner and boyfriend, Edwin Rivera, also
known as “Eddie Ares” (“Ares”), were the founders of the Hotlanta Competition.
Senner and Ares organized and hosted the Hotlanta Competition each year from its
inception through 2009. During that time period, the business of the Hotlanta
Competition was conducted through various companies owned solely by Senner,
including Hotlanta Dance Challenge, Inc. (“HDC”).1
The Rising Star Ball. For many years, Senner and Ares operated the Hotlanta
Competition in a single ballroom at an Atlanta area hotel. However, in 2006, Ares
developed the concept of the “Rising Star Newcomers Ball,” a competition for
amateur dancers who might be intimidated by the level of competition in the main
ballroom (the “Rising Star Ball”). Ares registered the name with the United States
Patent and Trademark Office, and Senner registered “Rising Star Newcomers Ball,
1 HDC later merged into Dance Hotlanta, Inc., which was also owned solely by Senner.
3 Inc.” with the Georgia Secretary of State “to protect the name,” even though the
registered corporate entity never had an organizational meeting or issued any stock.
From 2006 through 2009, the Rising Star Ball was conducted in a second
ballroom in conjunction with the Hotlanta Competition. The Rising Star Ball had its
own entry forms. The single brochure for the Hotlanta Competition and Rising Star
Ball was divided into separate parts for the two events and listed separate schedules
and check-in dates. The Hotlanta Competition and Rising Star Ball also gave out
separate prizes. Moreover, Ares testified that, unlike the Hotlanta Competition, the
Rising Star Ball was not sanctioned by the NDCA.
Ares enjoyed organizing and hosting the Rising Star Ball because of the
“energy and enthusiasm” of the amateur dancers. After the 2009 event, Ares informed
Senner that he wanted to organize and operate a new dance competition circuit
exclusively for amateurs, which he named the “Rising Star Friendly Circuit” (the
“Rising Star Circuit”). The Rising Star Circuit would be unaffiliated with the NDCA.
Senner and Ares agreed that Senner would continue to organize and host the Hotlanta
Competition through her company HDC, while Ares would leave HDC to run his
Rising Star Circuit.
4 Initial Negotiations with the Roca Defendants. In early 2010, Elizabeth Chester
contacted Senner to see if she would be interested in having an additional partner or
selling the Hotlanta Competition. Their discussions led to negotiations between the
parties over the sale of the assets of HDC and the associated personal goodwill of
Senner to Roca Properties LLC, a company owned by Chester and Antonio Daza.
Both sides were represented by counsel throughout the negotiations. Michael Reeves,
a potential investor in Roca Properties, also was involved in the negotiations.
In March 2010, Chester, acting on behalf of Roca Properties, signed a letter of
intent to purchase the assets of HDC and the personal goodwill of Senner for a total
purchase price of $400,000. The letter stated that it was the intent of HDC to sell to
Roca Properties its assets “as they relate solely to the Competition,” defined as “the
dance competition known as the ‘Hotlanta Dance Challenge’ held in Atlanta,
Georgia.” The letter of intent made no reference to the Rising Star Ball.
Senner’s Handwritten Notes. During the parties’ negotiations, Senner provided
the Roca Defendants with corporate tax returns for the years 2007 and 2008. But the
2009 tax return for HDC had not yet been filed and thus was unavailable for the Roca
Defendants to review. Nor did Senner provide any financial software or income
5 statements, balance sheets, or a general ledger for 2009 that could be reviewed by the
Roca Defendants.
Senner did provide the Roca Defendants with a copy of her undated
handwritten financial notes drafted as part of the negotiations, but the parties dispute
whether the notes contained financial information for 2009. According to the Roca
Defendants, Senner’s handwritten notes included revenue and expense figures for the
2009 Hotlanta Competition. In contrast, Senner contended that her notes were nothing
more than projections for additional revenue sources and lower operating expenses
for the Hotlanta Competition in future years.
The Number of Paid Entries. During the parties’ negotiations, Senner also
provided the Roca Defendants with a computer printout reflecting that there had been
7,195 paid entries for the 2009 Hotlanta Competition. An “entry” represented a fee
paid for a contestant for one dance. Senner did not tell the Roca Defendants that the
7,195 figure included paid entries for the 2009 Rising Star Ball.
The Purchase Transaction. Based on Senner’s representations and the financial
documents and information provided by her, Roca Properties entered into an Asset
Purchase Agreement with HDC and Senner on April 8, 2010 (the “Purchase
Agreement”). Under the terms of the Purchase Agreement, Roca Properties agreed to
6 buy certain itemized assets of HDC associated with the Hotlanta Competition for
$200,000.
The Purchase Agreement and the schedules attached to it made no reference
to the Rising Star Ball and whether or to what extent any rights to it would be
retained by Ares. But the Purchase Agreement did provide that the parties would “use
their reasonably best efforts to cause . . . Ares” to enter into a “Release, Non-Compete
and Non-Disparagement Agreement” with the parties for a two-year period. Schedule
3.5 to the Purchase Agreement further specified that good and marketable title to
HDC’s assets excluded “[a]ny legal or equitable interest claimed by . . . Ares,” unless
and until he released and transferred any such claimed interest to the parties as part
of the contemplated non-compete agreement.
Contemporaneously with the execution of the Purchase Agreement, Roca
Properties also entered into an Agreement for Sale and Purchase of Personal
Goodwill (the “Goodwill Agreement”). Under the Goodwill Agreement, Roca
Properties agreed to buy the personal goodwill of Senner related to the Hotlanta
Competition for $200,000.
Pursuant to the terms of the Purchase Agreement and Goodwill Agreement,
Roca Properties paid $100,000 to HDC and $100,000 to Senner at closing. Roca
7 Properties also entered into two promissory notes for $100,000 each as part of the
purchase transaction: one in favor of HDC and one in favor of Senner. That same day,
Chester and Daza each signed a personal guaranty for the two notes.
The Non-Compete Agreement with Ares. A month after the purchase
transaction, Senner, HDC, and Ares executed a “Release, Non-Compete/Non-Solicit,
and Non-Disparagement Agreement” (the “Non-Compete Agreement”). Pursuant to
the terms of the Non-Compete Agreement, Ares agreed not to sponsor or conduct a
dance competition at the same time as the Hotlanta Competition. Under a paragraph
entitled “Additional Consideration,” the Non-Compete Agreement further provided
that Ares would be conveyed “the intangible and tangible property described in the
attached Exhibit A.”
Exhibit A to the Non-Compete Agreement listed the property conveyed to
Ares, which included “[a]ny and all interest in the Rising Star Newcomers Circuit,”
“[a]ny and all interest in the Rising Star Newcomers Ball,” and “[a]ny and all interest
in the Georgia entity registered with the Secretary of State and known as ‘Rising Star
Newcomers Ball, Inc.’” Exhibit A also listed a series of personal items that would be
conveyed to Ares, such as a sofa and floor lamp, that had been located in Senner’s
house. Although the Non-Compete Agreement had a signature line for Roca
8 Properties, counsel for Roca Properties testified that the company refused to sign it
because the inclusion of the personal items in Exhibit A “muddied the waters.”
Operation of the Rising Star Circuit. Ares founded and organized the Rising
Star Circuit of amateur ballroom dance competitions as he had planned. Ares initially
intended to use the name “Rising Star Newcomers Ball” for the annual grand finale
event for his Rising Star Circuit of amateur competitions held in Atlanta. However,
he ultimately changed the name of the grand finale event to the “American Dance
Classic.” The American Dance Classic has been held every October since 2010, after
the Hotlanta Competition held the same month.
The 2010 and 2011 Hotlanta Competitions. The Roca Defendants organized
and hosted the Hotlanta Competition in 2010 and 2011. They did not host an amateur
competition in a separate ballroom. The number of paid entries for the 2010
competition was 3,120 and for the 2011 competition was 2,958. Roca Properties did
not make a profit on either the 2010 or 2011 Hotlanta Competition. Consequently,
Roca Properties chose not to host a Hotlanta Competition in 2012.
Post-Closing Financial Disclosures. The Roca Defendants learned that the
figure of 7,195 paid entries for the 2009 Hotlanta Competition that had been supplied
to them by Senner included the number of paid entries for the Rising Star Ball.
9 Excluding the paid entries for the Rising Star Ball, the number of paid entries for the
2009 Hotlanta Competition had only been 4,911. According to the Roca Defendants,
they would not have entered into the purchase transaction had they known the true
number of paid entries for the 2009 Hotlanta Competition.
Additionally, after the 2010 and 2011 Hotlanta Competitions, the Roca
Defendants began to question the figures that had been provided to them by Senner
in her handwritten notes. HDC had filed its 2009 tax return after the closing of the
purchase transaction, and it showed revenues of $261,767, expenses of $238,711, and
profit of $23,056. If Senner’s handwritten notes were meant to show the 2009
financial performance of HDC, the financial figures in the notes reflected a profit
significantly higher than what was shown on the 2009 tax return. The Roca
Defendants asserted that they would not have entered into the purchase transaction
if they had known the actual financial condition of HDC in 2009 as reflected in the
tax return.
Dispute over Payment of the Notes. Roca Properties did not make payment on
the promissory notes to HDC and Senner when they became due. In February 2012,
the Roca Defendants advised HDC and Senner that they were rescinding the notes
and guarantees because they had been fraudulently induced to enter into the purchase
10 transaction by Senner. According to the Roca Defendants, they would not have
purchased the assets of HDC and Senner’s associated goodwill or signed the notes
and guarantees, had they known the true number of paid entries for the 2009 Hotlanta
Competition and the actual financial condition of HDC for that year.
The Lawsuit. The HDC Plaintiffs sued the Roca Defendants for breach of the
promissory notes and related personal guarantees, prejudgment and postjudgment
interest, and attorney fees. The Roca Defendants answered and asserted counterclaims
for the breach of certain express warranties contained in the Purchase Agreement,
fraud in the inducement, indemnification under the terms of the Purchase Agreement,
attorney fees, and punitive damages.
Following discovery, the HDC Plaintiffs moved for summary judgment on all
of their claims and the Roca Defendants’ counterclaims, contending, among other
things, that the uncontroverted evidence showed that the Roca Defendants had
defaulted on the notes and guarantees and had not been fraudulently induced into
entering into the purchase transaction. The Roca Defendants responded that there
were genuine issues of material fact as to whether they were fraudulently induced to
enter into the purchase transaction by Senner’s misrepresentations about the number
11 of paid entries for the 2009 Hotlanta Competition and about the financial condition
of HDC in 2009.
Concluding that no genuine issues of material fact existed, the trial court
granted summary judgment in favor of the HDC Plaintiffs on all of the claims and
counterclaims. The trial court found that the uncontroverted evidence showed that the
HDC Plaintiffs had not made any actionable false representations to the Roca
Defendants about the number of paid entries for the 2009 Hotlanta Competition or the
2009 financial performance of HDC, and that there was no evidence that the Roca
Defendants actually relied on any alleged misrepresentations about HDC’s 2009
financial performance. The trial court thereafter entered final judgment in favor of the
HDC Plaintiffs and jointly and severally against the Roca Defendants, awarding the
HDC Plaintiffs the principal amount owed on the notes, prejudgment and
postjudgment interest, and attorney fees and costs. This appeal followed.
1. We first address the trial court’s grant of summary judgment in favor of the
HDC Plaintiffs on their claims for breach of the promissory notes and personal
guarantees. According to the Roca Defendants, a genuine issue of material fact exists
as to whether they were fraudulently induced to enter into the notes and guarantees,
and the trial court erred in concluding otherwise.
12 A creditor suing on a promissory note establishes a prima facie case to
judgment as a matter of law by producing the note and showing that it was signed by
the debtor and is in default. Lovell v. Georgia Trust Bank, 318 Ga. App. 860, 863 (2)
(734 SE2d 847) (2012); Speir v. Nicholson, 202 Ga. App. 405, 408 (2) (414 SE2d
533) (1992). Once a prima facie case has been made by the creditor, the burden of
production shifts to the debtor to produce or point to evidence that establishes an
affirmative defense. Big Sandy Partnership v. Branch Banking & Trust Co., 313 Ga.
App. 871, 872 (1) (723 SE2d 82) (2012). Fraud in the inducement is a good defense
to the enforceability of an obligation to pay a promissory note. Jocelyn Canyon, Inc.
v. Lentjes, 292 Ga. App. 608, 611 (664 SE2d 908) (2008); Morgan v. Hawkins, 155
Ga. App. 836, 837 (1) (273 SE2d 221) (1980). Mindful of these principles, we turn
to the specific allegations of fraudulent inducement alleged by the Roca Defendants.
(a) The Number of Paid Entries for the 2009 Hotlanta Competition. In
opposing summary judgment, the Roca Defendants alleged that they had been
fraudulently induced to enter into the notes and guarantees by Senner’s
misrepresentation about the number of paid entries for the 2009 Hotlanta
Competition. According to the Roca Defendants, the evidence showed that they
acquired the Hotlanta Competition, not the Rising Star Ball, when they purchased the
13 assets of HDC pursuant to the Purchase Agreement. Senner, however, included the
number of paid entries for the Rising Star Ball in the number that she represented to
the Roca Defendants as being the number of paid entries for the 2009 Hotlanta
Competition. The Roca Defendants argued that by including entry figures for the
Rising Star Ball, a jury could find that Senner misled them about the size and success
of the 2009 Hotlanta Competition.
The trial court rejected the Roca Defendants’ argument, finding that the
uncontroverted evidence showed that the amateur dance competition known as the
Rising Star Ball was not a separate event from the Hotlanta Competition.
Consequently, the trial court concluded that when the Roca Defendants acquired the
Hotlanta Competition from HDC, they also acquired the right to host an amateur
dance competition in a second ballroom. According to the trial court,
“Rising Star Ball” was nothing more than a registered trade name, and even if Ares
retained the rights to the name, it did not make the entry numbers supplied by Senner
misleading. Rather, the trial court reasoned, because the Roca Defendants had been
conveyed the right to host an amateur dance competition in a second ballroom “under
another name had they so chosen,” the inclusion of the entry numbers for Rising Star
Ball in the number supplied by Senner was not misleading and did not constitute a
14 false representation as a matter of law. The trial court’s findings and conclusions were
in error.
(i) Evidence that the Rising Star Ball Was a Separate Event. As an initial
matter, there was evidence from which a jury could find that the Rising Star Ball was
a separate event from the Hotlanta Competition. In this regard, the Roca Defendants
pointed to evidence that the Rising Star Ball was conducted in a separate ballroom
from the professional dance competition, that the brochure for the Hotlanta
Competition and Rising Star Ball was divided into separate parts for the two
competitions, and that the Rising Star Ball had its own entry forms, schedule, check-
in days, and awards. In addition, there was evidence that the Hotlanta Competition
was founded in 1997 by Senner and Ares, while the Rising Star Ball was founded in
2006 solely by Ares. Ares also testified that unlike the Hotlanta Competition, the
Rising Star Ball was not sanctioned by the NDCA. Finally, there was evidence that
Senner registered a separate entity named “Rising Star Newcomers Ball, Inc.” with
the Georgia Secretary of State. This combined evidence, construed in favor of the
Roca Defendants, would support a finding by a jury that the Rising Star Ball was a
separate event from the Hotlanta Competition. Hence, contrary to the trial court’s
conclusion, there was some evidence that the Rising Star Ball was more than simply
15 a registered trade name; construed in favor of the Roca Defendants, the evidence
showed that it was a separate dance competition, the tangible and intangible rights to
which were distinctive from any rights associated with the Hotlanta Competition.
Accordingly, the operative question is whether the Roca Defendants acquired
any right or interest in holding the Rising Star Ball when they purchased the assets
of HDC. We conclude that there was evidence from which a jury could answer this
question in the negative. While the language of the Purchase Agreement was
ambiguous on this point, there was parole evidence from which a jury could find that
the parties understood that Ares would retain all of the rights to the Rising Star Ball.
(ii) The Language of the Purchase Agreement. The “cardinal rule” of contract
construction “is to ascertain the intention of the parties.” OCGA § 13-2-3. “Where the
contract terms are clear and unambiguous, the court will look to that alone to find the
true intent of the parties.” (Citations and punctuation omitted.) Municipal Elec. Auth.
of Ga. v. Gold-Arrow Farms, Inc., 276 Ga. App. 862, 866 (1) (625 SE2d 57) (2005).
But if the contract contains an ambiguity that cannot be resolved through the rules of
construction, the court may look outside the written terms of the contract and consider
parole evidence. Id. at 866-867 (1). See OCGA § 13-2-2 (1). And if the parole
evidence is in conflict, “the question of what the parties intended becomes a factual
16 issue for the jury.” (Citations omitted.) Dye v. Mechanical Enterprises, Inc., 308 Ga.
App. 311, 314 (708 SE2d 24) (2011). See DJ Mortgage, LLC v. Synovus Bank, 325
Ga. App. 382, 391-393 (2) (a) (i) (A) (III) (750 SE2d 797) (2013).
Here, the Purchase Agreement recites that HDC is “the owner of the certain
assets including but not limited to the name, service mark, and sanctioned approval
of a certain dance competition held annually in Atlanta, Georgia and known as the
‘Hotlanta Dance Competition’ (the ‘Competition’),” and that Roca Properties wishes
to acquire from HDC “substantially all of the assets used in promoting and
conducting . . . [the] Competition, upon the terms and subject to the conditions
hereinafter set forth.”
The “assets” of HDC being purchased by Roca Properties are defined by the
Purchase Agreement to include “all of the assets, rights, interests, client lists, client
files, intellectual property . . . used by the Competition,” with the “assets” more fully
described in an attached schedule of “Purchased Assets.” The list of “Purchased
Assets” includes “all other properties and assets of every kind and nature, tangible or
intangible owned by [HDC] and used for or held for use in connection with the
Competition, other than real property.” Also attached to the Purchase Agreement is
a schedule of “Excluded Assets.”
17 The Purchase Agreement also contains provisions relating to the rights and
interests claimed by Ares. Section 2.7 of the Purchase Agreement states that the
parties will “use their reasonably best efforts to cause . . . Ares” to enter into a
“Release, Non-Compete and Non-Disparagement Agreement” with the parties for a
period of two years. Schedule 3.5 further specifies that good and marketable title to
HDC’s assets excludes “[a]ny legal or equitable interest claimed by . . . Ares,” unless
and until any such claimed interest is released and transferred to the parties “pursuant
to the requirements of Section 2.7.”
Taken together, these provisions of the Purchase Agreement are ambiguous
regarding the conveyance of the Rising Star Ball. Notably, although the Purchase
Agreement contains a broad definition of the “Assets” and the “Purchased Assets”
conveyed to the Roca Defendants, it makes no reference to any right or interest in the
Rising Star Ball in its definition of the “Competition” or “Assets,” in its schedules of
“Purchased Assets” and “Excluded Assets,” or in any other paragraph or schedule.
Furthermore, while Schedule 3.5 indicates that certain “legal or equitable interest[s]”
are being retained by Ares unless and until he transfers those rights to the parties as
part of a non-compete agreement, the Purchase Agreement does not further specify
what particular “interests” are being retained by Ares.
18 Under these circumstances, it is simply unclear from the language of the
Purchase Agreement whether the Roca Defendants were being conveyed any right or
interest in holding the Rising Star Ball when they purchased the assets of HDC, or
whether Ares was retaining all of the rights to the Rising Star Ball. Moreover, the
parties have not pointed to any rules of construction that would resolve the ambiguity,
and we have found none. Therefore, we may look outside the four corners of the
Purchase Agreement and consider parole evidence. See Municipal Elec. Auth. of Ga.,
276 Ga. App. at 866-867 (1).
(iii) The Parole Evidence. Our review of the parole evidence leads us to
conclude that there was evidence from which a jury could find that the parties never
intended for the Roca Defendants to obtain any right or interest in holding the Rising
Star Ball as part of the Purchase Agreement. According to Chester, throughout the
negotiations, she informed Senner that the Roca Defendants did not want to purchase
the Rising Star Ball or have any involvement with Ares, whom Chester believed had
a bad reputation in the dance community. Chester further testified that the Roca
Defendants did not host an amateur dance competition in a second ballroom as part
of the 2010 and 2011 Hotlanta Competitions because that was “Ares’ competition”
and they “did not purchase it.”
19 Ares likewise testified that the Roca Defendants did not intend to purchase any
assets associated with the Rising Star Ball, which would include the trademark and
the right to host the competition. Furthermore, in their respective affidavits, Chester
and Daza averred that Senner represented to them on several occasions that the Rising
Star Ball would not be part of the sale of the assets of HDC to Roca Properties and
that Ares would take the Rising Star Ball and operate it on his own.
Counsel for Roca Properties likewise testified that the parties had several
discussions about Ares and the Rising Star Ball, and that it was made clear to Senner
that Chester did not want to work with Ares. According to Roca Properties’ counsel,
all of the parties understood through their discussions that Ares would continue to
operate the Rising Star Ball on his own and that any assets associated with that
amateur competition would not be purchased as part of the sale. Reeves, the potential
investor in Roca Properties who was involved in the negotiations, also testified that
Senner represented to him that she was not including the Rising Star Ball as part of
the sale.
Finally, “[t]he subsequent conduct of the parties to an agreement may be
considered as evidence of their intent.” Tidwell v. Bassett, 271 Ga. App. 867, 869
(611 SE2d 123) (2005). The evidence showed that a month after the parties entered
20 into the Purchase Agreement, the HDC Plaintiffs and Ares executed the Non-
Compete Agreement under which the HDC Plaintiffs agreed to transfer to Ares “any
and all interest in the Rising Star Newcomers Circuit,” “any and all interest in the
Rising Star Newcomers Ball,” and “[a]ny and all interest in the Georgia entity
registered with the Secretary of State and known as ‘Rising Star Newcomers Ball,
Inc.’” Indeed, after the parties entered into the Purchase Agreement, Ares organized
and operated the Rising Star Circuit, which included an amateur dance competition
held every year in October in Atlanta, without any protest from the parties. This
evidence further indicates that the parties never contemplated that the Roca
Defendants would obtain a right or interest in holding the Rising Star Ball; instead,
all of those rights were retained by Ares.
It is true that the HDC Plaintiffs presented evidence supporting a different view
of the Rising Star Ball and of what the parties intended to be conveyed in the
Purchase Agreement. But given the evidence produced by the Roca Defendants, there
is a genuine issue of material fact as to whether the Rising Star Ball was a separate
event from the Hotlanta Competition, and whether the Roca Defendants were
conveyed any interest or right in holding the Rising Star Ball as part of the Purchase
Agreement. If a jury were to find that the Rising Star Ball was a separate event and
21 that the Roca Defendants were not conveyed any rights to it, a jury could likewise
find that Senner’s inclusion of the number of paid entries for the Rising Star Ball in
the number for the 2009 Hotlanta Competition provided to the Roca Defendants was
misleading and constituted a false representation. Thus, the trial court based its grant
of summary judgment to the HDC Plaintiffs on an erroneous ground.
(b) Financial Information about the 2009 Hotlanta Competition. In opposing
summary judgment, the Roca Defendants also alleged that they had been fraudulently
induced to enter into the notes and guarantees by Senner’s misrepresentations about
the financial condition of HDC in 2009. Specifically, the Roca Defendants contended
that Senner’s handwritten notes provided to them during the negotiations included
revenue and profit figures for the 2009 Hotlanta Competition that were grossly
inflated and misled them about the true financial condition of HDC. In contrast, the
HDC Plaintiffs contended that Senner’s notes were simply projections for additional
revenue sources and lower operating expenses for the Hotlanta Competition in future
years and thus could not provide the basis for a claim of fraudulent inducement.
Agreeing with the HDC Plaintiffs, the trial court found that the uncontroverted
evidence showed that the handwritten notes provided to the Roca Defendants by
Senner contained mere projections for growth in future years, not representations
22 about the financial performance of the 2009 Hotlanta Competition. The trial court
further found that there was no evidence that the Roca Defendants relied on the
handwritten notes as representations of the performance of the Hotlanta Competition
in 2009 when deciding to enter into the purchase transaction. As such, the trial court
concluded that there was no evidence of any fraudulent misrepresentations by Senner
about the profitability of the Hotlanta Competition in 2009 and no evidence of
reliance by the Roca Defendants on the handwritten notes. We disagree with both of
these conclusions reached by the trial court.
(i) The Interpretation of Senner’s Handwritten Notes. Our precedent makes
clear that under Georgia law,
mere opinions, predictions, and conjectures relating to future events cannot form the basis of a fraud claim. It is axiomatic that a false representation made by a defendant, to be actionable, must relate to an existing fact or a past event. Fraud cannot consist of mere broken promises, unfilled predictions or erroneous conjecture as to future events. Representations concerning expectations and hopes are not actionable.
(Citation and punctuation omitted.) Greenwald v. Odom, 314 Ga. App. 46, 52-53 (1)
(723 SE2d 305) (2012).
23 Here, Senner’s handwritten notes are undated and do not contain any notations
stating the purpose of the notes. The first page of the notes lists revenue sources for
the Hotlanta Competition with total revenue listed as “356,595 - 373,765.” The
second page again lists revenue sources and includes a total revenue figure of
$373,765. The final page details a list of expenses for the Hotlanta Competition
totaling $186,000.
Senner submitted an affidavit in which she averred that the notes were not
intended to represent the financial performance of the Hotlanta Competition in 2009.
Rather, she averred that the notes were nothing more than projections for additional
revenue sources and lower expenses for the operation of the Hotlanta Competition in
future years. In her affidavit, Senner went through each line of her notes in an effort
to explain how the figures represented projections for future revenues and expenses,
and she pointed out that her notes listed a range of possible revenue and rounded
expense figures, consistent with the numbers being projections of future performance.
The trial court agreed with Senner’s interpretation of the handwritten notes. But
the Roca Defendants presented evidence that the notes were intended to provide them
with information about the financial performance of the Hotlanta Competition in
2009, given that the 2009 tax return and other financial documents for that year were
24 not available for their review. Specifically, Daza testified that Senner’s handwritten
notes were shown to the Roca Defendants during a meeting before the purchase
transaction and were intended to provide them with the financial numbers for the
2009 Hotlanta Competition. According to Daza, the notes contained rounded figures
in certain places because Senner could not remember the exact numbers when she
wrote out her notes. Likewise, Roca Properties’ counsel testified that he was provided
a copy of the handwritten notes from HDC’s attorney and was told that the notes were
intended to represent the revenues and expenses for 2009. Lastly, Reeves averred in
his affidavit that the parties attended an in-person meeting with Senner on March 10,
2010, and his own notes from that meeting reflect that Senner informed them that
total revenues for 2009 were $356,000, total expenses were $186,000, and total profit
was $170,000, which was generally consistent with information contained in Senner’s
handwritten notes.
In light of the conflicting evidence regarding Senner’s handwritten notes, the
trial court erred in concluding that the uncontroverted evidence showed that the notes
were mere projections of future performance and thus were non-actionable
predictions and conjecture about future events. Construed in favor of the Roca
Defendants, the evidence would support a finding that the handwritten notes were
25 provided by Senner to supply the Roca Defendants with information about the
financial performance of the Hotlanta Competition in 2009, and thus could support
a claim for fraudulent inducement.
(ii) Reliance on Senner’s Handwritten Notes. Critical to any fraud claim is
proof that the victim actually relied on the representation forming the basis for his or
her claim. Bithoney v. Fulton-DeKalb Hosp. Auth., 313 Ga. App. 335, 344 (2) (721
SE2d 577) (2011). Generally, questions about reliance are for the jury to determine.
Orion Capital Partners, L.P. v. Westinghouse Elec. Corp., 223 Ga. App. 539, 542 (2)
(b) (478 SE2d 382) (1996).
The trial court erred in finding that there was no evidence that the Roca
Defendants relied on Senner’s handwritten notes as representations of the 2009
financial performance of the Hotlanta Competition when deciding to enter into the
purchase transaction. Chester and Daza averred in their affidavits that they executed
the Purchase Agreement and other closing documents based on Senner’s
representations to them and based on the financial documents provided to them as
part of the negotiations over the purchase transaction, which included Senner’s
handwritten notes. Furthermore, Ares testified in his deposition that the numbers in
the handwritten notes “were mostly the numbers we were basing our purchase” of
26 HDC’s assets on. This affidavit and deposition testimony, combined with the
evidence presented by the Roca Defendants discussed supra in Division 1 (b) (i),
would support a finding that the Roca Defendants actually relied on Senner’s
handwritten notes as representations of the 2009 financial performance of the
Hotlanta Competition in deciding to enter into the Purchase Agreement and other
closing documents. It follows that the trial court erred in concluding that there was
no evidence of reliance on the handwritten notes.
(c) In summary, fraudulent inducement can serve as a defense to a claim for
breach of a note or guaranty. Jocelyn Canyon, Inc., 292 Ga. App. at 611; Morgan,
155 Ga. App. at 837 (1). In the present case, there are issues of fact regarding whether
the HDC Plaintiffs made any false representations to the Roca Defendants about the
number of paid entries and financial performance of the 2009 Hotlanta Competition
as part of the negotiations over the purchase transaction, and whether the Roca
Defendants actually relied on the alleged misrepresentations about the 2009 financial
performance. The trial court erred in concluding otherwise and in granting summary
judgment to the HDC Plaintiffs on their claims for breach of the promissory notes and
personal guarantees based on those erroneous legal conclusions.
27 2. The trial court granted summary judgment in favor of the HDC Plaintiffs on
their claim for attorney fees and on all of the Roca Defendants’ counterclaims for the
same reasons that it granted summary judgment to the HDC Plaintiffs on their claims
for breach of the notes and guarantees. Hence, the trial court erred in granting
summary judgment to the HDC Plaintiffs on the attorney fees claims and the
counterclaims for the same reasons previously discussed.
3. The HDC Plaintiffs raised several additional grounds for summary judgment
that were not addressed or ruled upon by the trial court in its order. Pursuant to City
of Gainesville v. Dodd, 275 Ga. 834, 838-839 (573 SE2d 369) (2002), we exercise
our discretion and decline to address the additional grounds not ruled upon by the
trial court. See Medical Center of Central Ga. v. City of Macon, __ Ga. App. __ (2)
(Case No. A13A1928, decided March 27, 2014). Consequently, we vacate the trial
court’s summary judgment order and remand for the trial court to consider in the first
instance the additional grounds raised by the HDC Plaintiffs in support of their
motion for summary judgment. See id.; City of Gainesville, 275 Ga. at 838-839.
Judgment vacated and case remanded with instruction. Boggs and Branch, JJ.,
concur.