Moreno v. Smith , 299 Ga. 443 ( 2016 )

In the Supreme Court of Georgia
Decided: July 5, 2016
S16A0451. MORENO v. SMITH.
BLACKWELL, Justice.
Dolores Moreno is the mother of Gina Moreno, and in 2004, Dolores
acquired a residential property in Gwinnett County. Three years later, Dolores
gave a one-half interest in the property to Gina as a gift, and around the same
time, Dolores and Gina signed a document that purports to be a contract.
According to that document, Dolores agreed to sell her remaining one-half
interest in the property to Gina, and Gina agreed to pay $75,000 to Dolores in
$400 monthly installments. After six more years passed, Gina had made no
payments to Dolores, and Dolores filed a lawsuit against Gina for breach of
contract and for an equitable accounting as between tenants in common.1 The
trial court granted partial summary judgment to Dolores, concluding that the
1
During the pendency of this lawsuit, Dolores passed away, Michael T. Smith was
appointed as the temporary administrator of her estate, and Smith was substituted as the
plaintiff. For purposes of this opinion, however, it is unnecessary to distinguish between
Dolores and her estate, and for the sake of simplicity, we refer to both as “Dolores.”
undisputed evidence showed as a matter of law that Dolores and Gina had
entered into a binding and enforceable contract for the purchase and sale of the
property. Following a bench trial on the question of a remedy, the trial court
awarded damages to Dolores for breach of contract,2 as well as fair market rent
for her one-half interest as an equitable adjustment of the accounts of the tenants
in common.3 Gina appeals, and we reverse in part, vacate in part, and remand for
further proceedings consistent with this opinion.4
2
As the measure of damages for breach of contract, the trial court looked to the
interest that would have accrued at the legal rate (under OCGA § 7-4-2) on the total purchase
price in the eight years that had passed from the breach until the date of judgment, and the
trial court appears to have taken no account of the fair market value of the property. On
appeal, Gina challenges that measure of damages, and she finds some support in our
precedents. See Quigley v. Jones, 255 Ga. 33, 33 (334 SE2d 664) (1985) (“It has long been
the rule that the measure of damages for breach of a contract to sell land is the difference
between the contract price and the fair market value of the land at the time of the breach.”
(Citations omitted)). Nevertheless, for the reasons that follow, we do not decide today the
proper measure of damages in this case.
3
As to the remedy on the accounting claim, the trial court found that Gina
appropriated the entire property to her own use, and it found that fair market rent was
equitable because Gina had rented the property to her in-laws at a discounted rate. The trial
court did, however, offset the award of fair market rent against the award of damages for
breach of contract. As a result, the trial court awarded $15,736.16 to Dolores for breach of
contract, and it awarded $26,263.84 to Dolores for fair market rent. On appeal, Gina
challenges the measure of the relief awarded to equitably adjust the accounts of the tenants,
but for the reasons that follow, we do not reach that issue today.
4
Because Gina complains about the propriety of the equitable relief awarded by the
trial court, this case falls within the current appellate jurisdiction of this Court in equity cases.
See Ransom v. Holman, 279 Ga. 63, 64 (1) (608 SE2d 600) (2005). We note, however, that
in cases in which a notice of appeal is filed on or after January 1, 2017, the Court of Appeals
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1. Gina contends that the trial court erred when it awarded partial
summary judgment to Dolores and concluded as a matter of law that Dolores
and Gina had entered into a binding and enforceable contract. We agree.
Although the document that Dolores and Gina signed purports to be a binding
contract, Gina offered evidence that tends to show that no contract was made.
Indeed, Gina submitted an affidavit in opposition to the motion for summary
judgment in which she said, among other things, that she had signed the
document in question at the request of her mother for the sole purpose of
enabling Dolores to demonstrate an interest in the property and that she was
earning income from it. Gina also said in her affidavit that, as of the time the
document was signed, Dolores consistently had made statements to indicate that
Gina was not expected to pay anything to Dolores for the property.5
will have jurisdiction of “[a]ll equity cases, except those cases concerning proceedings in
which a sentence of death was imposed or could be imposed and those cases concerning the
execution of a sentence of death.” See Williford v. Brown, ___ Ga. ___, ___ (2), n.1 (Case
No. S16A0177, decided May 9, 2016) (punctuation omitted) (citing and quoting from
Appellate Jurisdiction Reform Act of 2016, Ga. L. 2016, p. ___, § 1-1).
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Gina brought forward other evidence at trial that was consistent with her claim that
neither she nor Dolores intended to make a binding and enforceable contract when they
signed the document.
3
“It is well settled that an agreement between two parties will occur only
when the minds of the parties meet at the same time, upon the same subject-
matter, and in the same sense.” Cox Broadcasting Corp. v. Nat. Collegiate
Athletic Assn., 250 Ga. 391, 395 (297 SE2d 733) (1982). To determine whether
the parties had the mutual assent or meeting of the minds that is essential for the
formation of a binding and enforceable contract,
courts apply an objective theory of intent whereby one party’s
intention is deemed to be that meaning a reasonable man in the
position of the other contracting party would ascribe to the first
party’s manifestations of assent, or that meaning which the other
contracting party knew the first party ascribed to his manifestations
of assent.
Id. More specifically, as one prominent commentator has explained,
in those unusual instances in which one intends that one’s assent
have no legal consequences[,] [u]nder the objective theory, a court
will honor that intention if the other party has reason to know it.
And it will honor it if the other party actually knows it. . . . The
same result has been reached even though a written agreement is
made as a sham, for the purpose of deceiving others, with an oral
understanding that it will not be enforced.
E. Allan Farnsworth, Contracts § 3.7, at 122 (2d ed. 1990) (citations and
footnote omitted; emphasis in original). “The circumstances surrounding the
making of the contract, such as correspondence and discussions, are relevant in
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deciding if there was a mutual assent to an agreement, and courts are free to
consider such extrinsic evidence.” McReynolds v. Krebs, 290 Ga. 850, 853 (2)
(725 SE2d 584) (2012) (citation and punctuation omitted). See also Farnsworth,
supra at 123-124 (“Circumstances, rather than words, may also indicate a party’s
intention not to be bound. . . . [And] the fact that the parties to an agreement are
members of the same family is given weight as showing an intention not to be
legally bound.” (Citation omitted)). “And where such extrinsic evidence exists
and is disputed, the question of whether a party has assented to the contract is
generally a matter for the jury.” Fletcher v. C.W. Matthews Contracting Co., 322
Ga. App. 751, 754 (1) (a) (746 SE2d 230) (2013) (citation and punctuation
omitted).
Dolores relies on the parol evidence rule, arguing that where a written
contract is facially clear and complete, extrinsic evidence of contractual intent
is immaterial and inadmissible to vary the terms of the contract. “Although parol
evidence cannot be used to contradict or vary the terms of a valid written
agreement, parol evidence may be used to show no valid agreement ever went
into existence.” BellSouth Advertising & Pub. Corp. v. McCollum, 209 Ga.
App. 441, 444 (2) (433 SE2d 437) (1993) (citations and punctuation omitted).
5
See also Farnsworth, supra at § 7.4, at 480 (the parol evidence rule “does not
come into play until the existence of an enforceable written agreement has been
shown”). In particular, “the basic rule that a sham contract or a contract that the
parties understood was not to be binding may be refuted by parol evidence to
show that there was, in fact, no contract, is sensible and widely followed.” 6-25
Corbin on Contracts § 25.21 (2016). See also Farnsworth, supra at 480 (it may
be shown, “for example, . . . that the writing was a . . . sham”).
Gina brought forward admissible evidence to show that Dolores and Gina
did not intend to make a binding and enforceable contract when they signed the
document, that the document was a mere sham, and that no binding and
enforceable contract existed. And although it is the parties’ intent at the time
they allegedly entered the contract that matters, the evidence presented by Gina
of their discussions at that time is arguably bolstered by other evidence of the
circumstances surrounding the purported contract, including the ongoing
relationship between the parties as mother and daughter, the undisputed fact that
Dolores gifted a one-half interest in the property to Gina, the subsequent failure
of Gina to make any monthly payments to Dolores, the failure of Dolores to
assert a breach more promptly, and the repeated statements of Dolores that the
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property belonged to Gina and that Gina did not have to pay her anything.
Dolores disputed that evidence and presented her own evidence to show that she
and Gina entered into a binding and enforceable contract. But courts are not
authorized to weigh disputed evidence and resolve conflicts in the evidence on
summary judgment. See Nguyen v. Southwestern Emergency Physicians, 298
Ga. 75, 84 (3) (779 SE2d 334) (2015). Accordingly, we conclude that there is
a genuine issue of disputed fact about the existence of a binding and enforceable
contract in this case, and the trial court erred by granting partial summary
judgment to Dolores on her claim for breach of contract. See Terry Hunt Constr.
Co. v. AON Risk Svcs., 272 Ga. App. 547, 552 (3) (613 SE2d 165) (2005).
2. Because a genuine issue of material fact remains as to whether Gina
breached any contract, we not only reverse the grant of partial summary
judgment, but we also must reverse the award of damages for breach of contract.
In addition, because the existence of a binding and enforceable contract between
the parties may bear upon their obligations to one another as tenants in common,
see, e.g., Borum v. Deese, 196 Ga. 292, 295 (2) (26 SE2d 538) (1943), we
vacate the award of relief as to the equitable accounting claim, which cannot be
resolved until it is finally determined whether a contract exists. For these
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reasons, therefore, the judgment of the trial court is reversed in part and vacated
in part, and the case is remanded for further proceedings consistent with this
opinion.
Judgment reversed in part and vacated in part, and case remanded with
direction. All the Justices concur.
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