2800 CHAMBLEE DIAMOND, LLC v. YOHANNES FITSUM ( 2021 )

FOURTH DIVISION
DILLARD, P. J.,
MERCIER and COLVIN, 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.
https://www.gaappeals.us/rules
DEADLINES ARE NO LONGER TOLLED IN THIS
COURT. ALL FILINGS MUST BE SUBMITTED WITHIN
THE TIMES SET BY OUR COURT RULES.
May 25, 2021
In the Court of Appeals of Georgia
A21A0348. 2800 CHAMBLEE DIAMOND, LLC v. FITSUM et al.
MERCIER, Judge.
After a bench trial in this landlord/tenant dispute, the landlord, 2800 Chamblee
Diamond, LLC (“2800 Chamblee”) appeals from a trial court order ruling in favor of
its tenants, Yohannes Fitsum and AJTJ Investment, LLC, on their claims for damages,
and injunctive and declaratory relief. For the following reasons, we affirm in part and
reverse in part.
The record reveals that Fitsum and AJTJ Investment, LLC (collectively,
“AJTJ”) purchased the inventory of a coin laundry from a tenant leasing property in
a shopping center. In December 2018, AJTJ entered into a lease for the property
(located at 2800-D NE Expressway Access Road in Atlanta, Georgia) with the
landlord, Walton Glover. The lease provided that “Coin Laundry” was the permitted
use for the leased space. AJTJ also agreed to a list of fifteen “Special Stipulations,”
one of which provided that AJTJ “will not attempt to sell any products or services that
would be in direct competition with other Tenants in the retail center” (“the
stipulation”). AJTJ immediately began offering for sale the same snacks in the coin
laundry that the prior tenant offered, and it assured Glover that it would not expand
its offerings beyond that “grocery-wise.” At some point, however, AJTJ began
offering coin operated amusement machines (“COAMs”) and lottery tickets in the
coin laundry.1
In a letter dated September 12, 2019, Glover notified AJTJ that it was in
violation of the lease by offering and selling items that were being offered and sold
by an adjacent business owner, and Glover demanded that AJTJ “cease and desist”
from offering COAMs, and from selling lottery tickets and various other items
including food and clothing items. In the letter, Glover referenced both the stipulation
and the permitted use under the lease.
On October 1, 2019, Glover sold the property located at 2800 Northeast
Expressway NE to 2800 Chamblee, and AJTJ’s lease was assigned to 2800
1
There was evidence that the prior tenant offered COAMs at some point in the
past, but not at the time AJTJ purchased the coin laundry.
2
Chamblee. Approximately two weeks later, 2800 Chamblee notified AJTJ it was
exercising its right to terminate the lease and retake possession because AJTJ had
failed to cure the default described in Glover’s September 2019 letter.
In November 2019, AJTJ filed a complaint for declaratory and injunctive relief,
arguing that the stipulation is void and unenforceable because it “lacks a geographic
area or territory as required by Georgia law,” and that AJTJ’s use of the premises is
consistent with the permitted use under the lease. AJTJ added claims for breach of the
lease and for fraud based upon 2800 Chamblee’s demand that it “stop selling certain
goods and services.”2 2800 Chamblee answered the complaint and filed a
counterclaim for a writ of possession. However, it later dismissed its counterclaim
without prejudice, and AJTJ dismissed its claim for fraud without prejudice.
Following a bench trial, the trial court granted AJTJ’s request for declaratory
and injunctive relief. The court found that the stipulation is ambiguous because it
could be interpreted in more than one way. The court then concluded that the
stipulation is void and unenforceable as a matter of law because it lacks a geographic
restriction. The court also found that AJTJ did not exceed the lease’s permitted use
2
Fitsum testified that upon 2800 Chamblee’s demand, AJTJ stopped offering
COAMs in mid-December 2019.
3
by also offering lottery tickets, COAMs, and snacks. Finally, the court granted AJTJ
$8,713.90 in compensatory damages for loss of revenue from the COAMs, finding
that 2800 Chamblee breached the lease by “demanding that [AJTJ] remove the
COAMs or face threatened legal action.”3
2800 Chamblee now appeals, asserting that the trial court erred in granting
AJTJ declaratory and injunctive relief. It argues that the court erred in its
interpretation of the stipulation, and in finding that AJTJ’s offerings (COAMs, lottery
tickets, snacks, drinks, and sundry items) were within the lease’s permitted use for the
coin laundry. 2800 Chamblee argues further that the court erred in awarding AJTJ
compensatory damages for breach of contract. “[I]n an action for declaratory and
injunctive relief, the trial court’s findings of fact shall not be set aside unless clearly
erroneous.” Rigby v. Boatright, 330 Ga. App. 181, 182 (767 SE2d 783) (2014). But
our review of the trial court’s construction of a contract is de novo. Langley v. MP
Spring Lake, 307 Ga. 321, 323 (834 SE2d 800) (2019).
3
The trial court also denied 2800 Chamblee’s request for a directed verdict
(based on a notice provision in the lease) on AJTJ’s claim for breach of contract, and
it denied both sides’ request for attorney fees. 2800 Chamblee does not enumerate
error with regard to these rulings.
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1. 2800 Chamblee argues that the trial court erred in finding that the stipulation
is ambiguous and unenforceable. We agree.
As with other contracts, the interpretation of [a] restrictive covenant[ ]
is a three-step process. Initially, construction is a matter of law for the
court. First, the trial court must decide whether the language is clear and
unambiguous. If it is, the court simply enforces the contract according
to its clear terms; the contract alone is looked to for its meaning. Next,
if the contract is ambiguous in some respect, the court must apply the
rules of contract construction to resolve the ambiguity. Finally, if the
ambiguity remains after applying the rules of construction, the issue of
what the ambiguous language means and what the parties intended must
be resolved by a jury or other factfinder. The existence or nonexistence
of an ambiguity is a question of law for the court. If the court determines
that an ambiguity exists, however, a jury question does not automatically
arise, but rather the court must first attempt to resolve the ambiguity by
applying the rules of construction[.]
Skylake Property Owners Assn. v Powell, 281 Ga. App. 715, 716 (1) (637 SE2d 51)
(2006) (citations and punctuation omitted). Further, under OCGA § 13-2-2 (2),
“[w]ords generally bear their usual and common signification[.]” And OCGA §
13-2-2 (4) provides that “[t]he construction which will uphold a contract in whole and
in every part is to be preferred, and the whole contract should be looked to in arriving
at the construction of any part[.]”
5
The list of stipulations is attached to the end of the lease after the signature
page and refers to “this Lease.” The stipulation at issue here provides: “Tenant will
not attempt to sell any products or services that would be in direct competition with
other Tenants in the retail center.” OCGA § 13-8-53 (a) permits the “enforcement of
contracts that restrict competition during the term of a restrictive covenant, so long
as such restrictions are reasonable in time, geographic area, and scope of prohibited
activities[.]”
The trial court concluded that the stipulation is “at best, ambiguous” because
the phrase “in the retail center” could identify the tenants at issue (as AJTJ argues)
or provide a geographical restriction for the stipulation (as 2800 Chamblee argues).
The court then resolved the ambiguity in favor of AJTJ, concluding that
the phrase “in the retail center” modifies and applies to the immediately
preceding term “the Tenants.” In other words, the phrase “in the retail
center,” gives definition to the word “tenants,” i.e., the type that [AJTJ]
cannot compete against . . . As written (and interpreted against the
drafter), there is no geographic restriction and the Special Stipulation
purports to restrict [AJTJ’s] ability “to sell any products or services that
would be in direct competition with other Tenants in the retail center”
at any location. On its face, the Special Stipulation would restrict [AJTJ]
from selling, even beyond the shopping center, any potentially
competitive products or services.”
6
The court then concluded that because the stipulation lacks a geographical restriction,
it is void and unenforceable.
“In construing the intent of restrictive covenants, the courts look to the intent
of the parties, which is to be collected from the whole instrument, and the
circumstances surrounding its execution.” The Stuttering Foundation v. Glynn
County, 301 Ga. 492, 500 (2) (b) (801 SE2d 793) (2017) (citation and punctuation
omitted). Further, “[w]hen an agreement consists of multiple documents that are
executed at the same time and during the course of a single transaction, those
documents should be read together.” Sofran Peachtree City v. Peachtree City
Holdings, 250 Ga. App. 46, 50 (550 SE2d 429) (2001) (citations omitted); see Dabbs
v. Key Equip. Finance, 303 Ga. App. 570, 575 (694 SE2d 161) (2010) (documents
executed 10 days apart in the course of the same transaction were sufficiently
contemporaneous). Here, the lease and stipulations were executed as part of the same
transaction. We therefore read them together.
The only reference in the stipulations to the shopping center where AJTJ’s coin
laundry is located,4 is in the restrictive covenant. But the lease makes multiple
4
The lease, dated December 31, 2018, uses the term “Shopping Center” while
the stipulation, signed on November 14, 2018, uses “retail center.” But construing
these documents together, it is clear that they refer to the same location, the shopping
7
references to the shopping center: it requires that AJTJ not take any action that would
constitute a nuisance or would disturb other tenants of the shopping center or injure
the reputation of the shopping center; addresses the organization of a merchants’
association composed of tenants in the shopping center; and mentions AJTJ’s
acknowledgment of its “general contribution to commerce within the Shopping
Center.” In looking at the entire lease and the stipulations, the only reasonable
interpretation of the restrictive covenant is that it prohibits competition with tenants
of the shopping center in the geographical area of the shopping center. See Freund
v. Warren, 320 Ga. App. 765, 768-769 (1) (740 SE2d 727) (2013) (a contract is
unambiguous when it is capable of only one reasonable interpretation); see also
Jacob’s Pharmacy Co. v. Richard & Assoc., 229 Ga. 156, 158-159 (2) (189 SE2d
853) (1972) (restrictive covenant applied only to plainly delineated shopping center,
not later acquired property). The stipulation unambiguously provides both whom
AJTJ cannot compete against and the location where competition is prohibited. The
trial court, therefore, erred in finding the stipulation ambiguous and unenforceable.
center where the leased premises is located. See Sofran Peachtree City, supra; Dabbs,
supra.
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2. The trial court also erred in part in finding that all of AJTJ’s offerings were
within the lease’s permitted use. Article I, Section 1.1 (p) of the lease provides,
“Permitted use: Coin Laundry.” The court was correct in finding that “Coin Laundry”
is not defined in the lease, but wrongly concluded that the lease “does not expressly
limit or exclude any specific activity at issue[.]” Article V, “Use and Care of
Premises,” provides that the “[p]remises may be used only for the purpose or
purposes specified in Article [I], Section 1.1 (p) above and for no other purpose or
purposes without the prior written consent of Landlord.” Under the plain language
of the lease then, AJTJ could only offer a coin laundry. See generally Jackson County
v. Upper Oconee Basin Water Auth., 330 Ga. App. 11, 14 (2) (766 SE2d 488) (2014)
(no construction is required when the language of a contract is plain and
unambiguous). And coin laundry is commonly understood to mean a facility
providing coin operated washers and dryers. See generally Citrus Tower Boulevard
Imaging Center v. David S. Owens, MD, PC, 325 Ga. App. 1, 8 (2) (752 SE2d 74)
(2013) (looking to plain and ordinary meaning of term not defined in lease).
COAMs and lottery tickets do not fall under the common meaning of “coin
laundry” and are therefore not permitted uses under the lease in the absence of written
consent from the landlord. Thus, the trial court erred in declaring that these offerings
9
did not exceed the lease’s permitted use.5 And, as offering COAMs was not a
permitted use under the lease, AJTJ was not entitled to damages for lost revenue
when it ceased offering them upon 2800 Chamblee’s demand.
However, there was some evidence that Glover, the assignor and former
landlord, was aware that the prior owner of the coin laundry sold snacks, drinks, and
other items. Evidence also showed that Glover allowed AJTJ to sell the same items
when it purchased the coin laundry as long as AJTJ did not expand upon that
offering.6 Although under the lease, coin laundry was the only permitted use, as the
trial court found, the parties agreed that it was acceptable for AJTJ to offer some
other items “as long as they were not expanded.” This mutual departure from the
lease’s permitted use resulted in a waiver by Glover with regard to AJTJ offering
those items for sale. See, e.g., Vakilzadeh Enterprises v. Housing Auth. &c., 281 Ga.
App. 203, 205-206 (635 SE2d 825) (2006) (“a mutual departure from the terms of an
5
The trial court relied upon evidence that other coin laundries in the area
offered COAMs, the prior owner of the coin laundry here had offered COAMs at
some point in the past, and that Fitsum testified he would not have purchased the coin
laundry if he could not operate COAMs. But none of this evidence is relevant to a
determination of whether COAMs and the sale of lottery tickets were permitted uses
under the lease here.
6
It is unclear from the record exactly what items were allowed.
10
agreement results in a quasi-new agreement suspending the original terms of the
agreement”); see also OCGA § 13-4-4 (effect of mutual departure from contract
terms). And 2800 Chamblee, as the assignee, assumed such waiver. See, e.g.,
Southern Telecom v. TW Telecom of Ga., 321 Ga. App. 110, 114-115 (3) (741 SE2d
234) (2013) (assignee generally stands in the shoes of assignor and assumes
assignor’s obligations; rights of party to original contract are neither enhanced nor
diminished by assignment).
For the above-stated reasons, we reverse the trial court’s grant of declaratory
and injunctive relief in favor of AJTJ based on its findings that the stipulation is void
and unenforceable, and that offering lottery tickets and COAMs were within the
lease’s permitted use. But we affirm the declaratory and injunctive relief awarded to
AJTJ with regard to its offering of snacks and other items allowed by Glover, and by
assignment, 2800 Chamblee. And, because we conclude here that COAMs were not
a permitted use under the lease, we reverse the award of compensatory damages to
AJTJ based upon its lost revenue when it ceased offering COAMs.
Judgment affirmed in part and reversed in part. Dillard, P. J., and Colvin, J.,
concur.
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