Brett D. McNeill v. Sd&d Greenbuilt, LLC ( 2019 )

THIRD DIVISION
GOBEIL,
COOMER and HODGES, 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
March 5, 2019
In the Court of Appeals of Georgia
A18A1840. MCNEILL et al. v. SD&D GREENBUILT, LLC.
COOMER, Judge.
In this legal malpractice action, Appellants Brett D. McNeill and his law firm,
Coleman Talley, LLP, (collectively referred to herein as “Talley”) challenge the trial
court’s order denying their motion for summary judgment. Talley sought judgment
as a matter of law that it was not liable for the loss of SD&D Greenbuilt, LLC’s
(“Greenbuilt”) $150,000 earnest money deposit that was forfeited in a real estate
transaction. After the trial court denied Talley’s motion, it granted Talley’s
application for a certificate of review, and we granted its application for interlocutory
appeal. This appeal followed, and we affirm the judgment of the trial court.
The disposition of this appeal rests solely on the question of whether Berman
v. Rubin, 138 Ga. App. 849 (227 SE2d 802) (1976) bars Greenbuilt’s legal
malpractice claim. In Berman, we held that
when [a] document’s meaning is plain, obvious, and requires no legal
explanation, and the client is well educated, laboring under no disability,
and has had the opportunity to read what he signed, no action for
professional malpractice based on counsel’s alleged misrepresentation
of the document will lie.
Id. at 855. Talley argues that Berman bars Greenbuilt’s claim, and Greenbuilt
counters that Berman is inapplicable because the alleged negligence does not involve
its understanding of the contract but rather involves its reliance on Talley’s incorrect
affirmative misrepresentations as to the legal effect of negotiated extensions between
the parties. The relevant facts are set forth below.
Greenbuilt is a real estate development company that is owned by Bradley
Francis and his father, Denis Francis. Denis Francis deposed that he began his real
estate career in 1975, when he purchased apartment buildings and negotiated his
tenants’ leases. By the 1980s, Denis Francis engaged in buying, selling, and
renovating properties and personally negotiated his own purchase and sale
agreements. In 2005, he formed a company to build and sell homes, which Bradley
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helped him run. Bradley deposed that in his prior employment before Greenbuilt, he
reviewed and signed contracts on behalf his employer. Talley’s position is that the
Francises were both experienced real estate investors. Greenbuilt counters that the
Francises had limited experience in commercial real estate, which was far more
complex than their residential real estate deals.
In early 2016, Greenbuilt retained McNeill and his firm to advise and assist
with the purchase of several parcels of commercial real estate. On February 15, 2016,
McNeill drafted a letter of intent for the transaction. McNeill deposed that there were
two purchase and sale agreements, and that $150,000 of earnest money was deposited
into his firm’s trust account.1 The Purchase and Sale Agreement, executed at the end
of March 2016, listed a purchase price for four parcels of $4,200,000 and contained
provisions that outlined when and under what circumstances Greenbuilt could cancel
the contract and obtain a refund of its earnest money, specifically, Paragraphs 8 (A)
and (C). Paragraph 8 (A) pertained to the right to inspect and terminate and provided
as follows:
Right to Inspect and Right to Terminate. . . . Buyer shall have until May
11, 2016 (the “Due Diligence Date”), to determine whether the Property
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The purchase and sale agreement included in the record reflect a different earnest
money amount, but it is undisputed that the amount at issue is $150,000.
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is suitable and satisfactory to Buyer based upon Buyer’s Activities. In
the event Buyer shall determine that the Property is not suitable and
satisfactory to Buyer, Buyer shall have the right to terminate this
Agreement, for any reason and in the Buyer’s sole discretion, by giving
written notice to Seller on or before 5:00 p.m. of the Due Diligence
Date. If Buyer does not terminate this Agreement in accordance with
this Paragraph 8A on or before the Due Diligence Date, Buyer shall
have no further right to terminate this Agreement pursuant to this
Paragraph 8A. . . .
Paragraph 8 (C) provided, in pertinent part, as follows:
Environmental Testing . . . . Further, if Additional Testing is required or
recommended, Buyer shall have until May 26, 2016 to obtain the results
of the Additional Testing provided that Buyer notifies Seller of the need
for the Additional Testing before 5:00 p.m. on May 11, 2016, in which
event Buyer may extend the date of Closing pursuant to paragraph 5,
above. If the results of the Additional Testing indicate that the Property
is impacted with Hazardous Materials (as hereinafter defined) in
concentrations that exceed site specific non-residential standards, then
Buyer may terminate this Agreement by written notice to Seller on or
before May 26, 2016 and receive a return of the Earnest Money.
Bradley testified that he and his father read the contract, signed it, and understood
it.
In a letter from McNeill to Greenbuilt, dated April 1, 2016, McNeill explained
that the due diligence date was May 11, 2016, and that the buyer could terminate for
any reason by 5:00 p.m. on the due diligence date and the earnest money would be
immediately refunded. That letter also included a table that outlined the contract dates
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and other important dates. In pertinent part, the table provided May 11, 2016 as the
due diligence date, May 26, 2016, as the due diligence date if additional testing was
required, and a closing date of May 26, 2016. On April 15, 2016, Denis Francis
emailed McNeill, stating “I saw that the closing date has been extended. Does this
mean that the due diligence period has been moved back two weeks also?” McNeill
responded:
At this point, we are still awaiting approval from the Seller to perform
the Phase Two environmental study. Once they consent to the study, the
Closing Date will automatically be extended. . . . But yes, you can
terminate for environmental issues up to May 26th, if they consent to the
additional testing. All other due diligence will still need to be performed
before May 11th. McNeill also explained that the earnest money would
only be released to the seller if the buyer committed an uncontested
breach of contract or at closing. On April 19, 2016, McNeill informed
Greenbuilt that he had received verbal approval for phase two
assessment, “but I am still waiting on . . . confirmation of extension of
the closing date and right to terminate.” McNeill received written
approval on April 22, 2016.
As of May 7, 2016, the financing for the project was not secure. Bradley
testified that he shared this fact with McNeill. Environmental testing was conducted,
which revealed large amounts of chlorine in the ground, but Greenbuilt did not
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attempt to terminate the contract for that reason. On May 9, 2016, McNeill emailed
seller’s counsel the following: “This email is to confirm the extension of the Due
Diligence Period for environmental issues to May 26th, and the closing to June 10th.
. . . Buyer has asked me to confirm these dates once more before the expiration of the
original due diligence date (May 11).” On the same day, McNeill emailed Greenbuilt,
noting May 26, 2016, as an important date upon which the extended due diligence
terminated.
On May 25, 2016, Denis Francis emailed McNeill seeking clarification about
the earnest money. Specifically, Denis Francis asked if he would be able to recoup
the earnest money once the due diligence period had passed. McNeill responded as
follows:
In regards to the earnest money: To be as clear as possible, if you don’t
terminate the contract by tomorrow, that money goes “hard”, meaning
it is fully earned by the seller. If you fail to close by________[space left
blank] for any reason after tomorrow COB, whether it’s a choice or an
inability to raise the funds, it will be considered a breach of contract and
the earnest money will be owed to the seller. The only chance that you’d
get the EM back after that point would be if, after tomorrow, the seller
failed to close for some reason. I obviously don’t want to scare you, but
I do want to stress the significance of moving beyond tomorrow. Our
firm is holding the money, but under the contract, we’d be obligated to
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disburse it to the seller if you all fail to close. That disbursement can be
contested, and the funds can be remitted to the court where both sides
can argue about who it belongs to, but I wouldn’t recommend that unless
you can seriously point to a reason that the seller caused the breach. At
this point, I can’t think of any whatsoever. . . . If you and Brad are
growing concerned about the ability to raise the money, or if there is any
other reason you might choose to terminate, please fill me in.
On May 26, 2016, Bradley Francis emailed McNeill a proposed “Extension of
Purchase Agreement Due Diligence Extension,” indicating he was meeting with an
unidentified party and asking if the document was sufficient. The document was
unsigned and did not include the proposed extended date. McNeill responded that the
document was sufficient.
Apparently the parties did not agree to the extension, and Bradley Francis sent
a letter to the seller’s attorneys on May 26, 2016, to terminate the purchase of the
properties and seek a refund of the earnest money. After the close of business, the
seller’s attorneys informed McNeill via email that Greenbuilt apparently thought that
the due diligence date with right to terminate for any reason was extended through
5:00 p.m. that day, which was incorrect, and that Greenbuilt sought the return of the
earnest money, which the seller’s attorney said would not be refunded.
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Greenbuilt sued Talley for professional negligence, asserting that Talley
provided negligent advice about the deadline for cancelling the contract. Greenbuilt
referred to the April 1 letter from McNeill, which listed May 26, 2016, as the due
diligence date if additional testing were required. Specifically, Greenbuilt asserted
that Talley led it to believe that the due diligence termination date was May 26, 2016,
when in fact, that date only applied if there was a need for additional environmental
testing. Greenbuilt also alleged that Talley, as late as May 25, 2016, misrepresented
in correspondence that the contract could still be terminated due to choice or an
inability to raise funds.
Talley subsequently filed a motion for summary judgment, arguing that the
“duty to read” defense, as originally set forth in Berman, 138 Ga. App. at 849, barred
Greenbuilt’s malpractice claim because Greenbuilt should have understood when and
under what circumstances the contract could be terminated based on the plain
language of the contract. Greenbuilt responded, arguing that Talley had admitted to
giving patently erroneous legal advice. Specifically, Greenbuilt argued that Talley
communicated that the right to terminate was extended without specifying that only
the environmental testing period had been extended. The trial court summarily denied
the motion for summary judgment, finding that genuine issues of material facts
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precluded the grant of summary judgment. Talley was granted a certificate of
immediate review, and this Court granted Talley’s application for interlocutory
review. This appeal followed.
In its sole enumeration of error, Talley argues that Greenbuilt cannot establish
that Talley’s alleged misrepresentation of the contract’s termination deadline caused
Greenbuilt to overlook the deadline. Talley maintains that Georgia law does not allow
Greenbuilt to rely on its lawyer’s representation of the deadline in lieu of Greenbuilt’s
own review of the termination provision. Talley relies heavily on Berman, which was
a legal malpractice case arising out of a divorce proceeding. In that case, the appellant
sued his attorney for negligent misrepresentation of his divorce settlement, which
included a provision that explained that when the husband earned in excess of the
stipulated amount of his income, “the amount of child support per child for that year
and alimony for the wife for that year shall be increased by 15% of such increase.”
Berman, 138 Ga. App. 849-850 (emphasis in original). The trial court construed the
agreement to require payment of 15% of the increased earnings to each child and to
his wife, which amounted to 60% of his increased earnings, and the husband argued
that his attorney represented that the additional payments would total only 15% of his
earnings. Id. at 850. We noted therein that
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[a]lthough it would otherwise be a jury question as to whether or not
defendant [the attorney] had breached his duty towards [the husband],
. . . [t]he record affirmatively shows that [the attorney’s]actions were not
the cause of the alleged injury to appellant [husband]. The agreement in
this case is not ambiguous, nor is it technical or laced with “legal
jargon.” Appellant . . . admits that an initial draft of the agreement was
unsatisfactory to him, that the draft was changed, that he read the
changes, that he initialed each and every page, and that he placed his
signature on the final page.
Id. at 854. Based on these facts, we held, as stated earlier, that
when the document’s meaning is plain, obvious, and requires no legal
explanation, and the client is well educated, laboring under no disability,
and has had the opportunity to read what he signed, no action for
professional malpractice based on counsel’s alleged misrepresentation
of the document will lie.
Id. at 855. Greenbuilt counters that Berman is inapplicable because the alleged
negligence did not involve the deadlines set forth in the contract but McNeill’s
affirmative misrepresentations as to the legal effect of the extension of those dates
which Talley negotiated after the contract was signed that Greenbuilt did not have a
chance to review. We agree.
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Since Berman, we have explained that the decision in that case “was perhaps
among those rare cases in which the questions of negligence and proximate cause
could be removed from the jury” because the meaning and legal effect of the disputed
portions of the agreement in that case were obvious. Kushner v. McLarty, 165 Ga.
App. 400, 402 (1) (300 SE2d 531) (1983). We noted in Kushner that even Berman
recognized that its holding was a limited one, and our decision
should not be read to state or imply that an attorney may not be held
responsible for his negligent draftsmanship whenever the client can or
does read the document. Indeed, where the document requires
substantive or procedural knowledge, is ambiguous, or is of uncertain
application, the attorney may well be liable for negligence,
notwithstanding the fact that his client read what was drafted.
Id. This case, however, does not turn upon negligent draftmanship, like Berman, but
rests instead on the effect of subsequent communications regarding potential
alterations to the provisions of the contract.
In Paul v. Smith, Gambrell & Russell, 283 Ga. App. 584 (642 SE2d 217)
(2007), we affirmed the denial of summary judgment where the issue was not the
complexity or simplicity of the documents involved but the effect of executing the
documents. Id. at 592 (3). We stated, “[u]nlike Berman, the alleged negligence
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attributed to the law firm in the instant case does not relate so much to a factual issue
as it does to the legal effect of the [merger documents] that appellant[s] signed.” Id.
See generally, Whorter, Ltd. v. Irvin, 154 Ga. App. 89, 91 (2) (267 SE2d 630) (1980)
(plaintiff entitled to rely on the competence of attorney based on their attorney-client
relationship and course of dealing rather than his own reading of the documents).
Although Paul, supra, is not completely factually analogous, it lends some support
to Greenbuilt’s argument that the outcome here cannot simply be based on the reading
of the contract where the alleged negligence relates to communications from McNeill
regarding potential changes to the contract that occurred after they read it.
In the communication between McNeill and Greenbuilt on April 19, 2016,
McNeill stated that he was waiting on confirmation of the extension of the closing
date and the right to terminate, which could have led Greenbuilt to the conclusion that
the termination date was still in play. On May 9, 2016, McNeill’s correspondence
aligned with the contract termination dates. Yet, on May 25, 2016, the communication
between McNeill and Denis Francis could be construed such that the contract could
be terminated for reasons other than the environmental testing as late as May 26,
2016. Therefore, reasonable minds could disagree as to whether the Francises were
entitled to rely on their communications with McNeill after the signing of the
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contract, as opposed to the language contained therein. Consequently, the question
of whether Talley committed legal malpractice depends upon the answers to factual
questions that must be resolved by a jury. Accordingly, the trial court did not err
when it concluded that genuine issues of fact precluded the entry of summary
judgment.
Judgment affirmed. Gobeil and Hodges, JJ. concur.
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