The HATCHETT FIRM, P.C. v. ATLANTA LIFE FINANCIAL GROUP, INC. ( 2021 )

THIRD DIVISION
DOYLE, P. J.,
MERCIER 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.
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.
March 1, 2021
In the Court of Appeals of Georgia
A20A1723. THE HATCHETT FIRM, P. C. et al. v. ATLANTA ME-006
LIFE FINANCIAL GROUP, INC.
MERCIER, Judge.
Beginning in 2014, Atlanta Life Financial Group, Inc. (“Atlanta Life”)
subleased office space to The Hatchett Firm, P. C. and Durham Law Group, P. C.
(“subtenants”). Following the subtenants’ failure to pay rent, Atlanta Life filed suit
against them, their managing director and principal claiming breach of contract.
Atlanta Life filed a motion for summary judgment on its claims and the subtenants’
counterclaims for breach of contract, recoupment, and attorneys fees, which the trial
court granted. The subtenants appeal, claiming that Atlanta Life waived its right to
collect rent and breached the sublease.1 For the following reasons, we affirm in part
and reverse in part.
Summary judgment is proper if the “pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving part is entitled
to a judgment as a matter of law[.]” OCGA § 9-11-56 (c). “In our de novo review of
the grant of a motion for summary judgment, we must view the evidence, and all
reasonable inferences drawn therefrom, in the light most favorable to the
nonmovant.” Circle K Stores v. T. O. H. Assoc., 318 Ga. App. 753, 754 (734 SE2d
752) (2012) (citation and punctuation omitted).
So viewed, the evidence showed the following. In 2012, Atlanta Life leased
office space, located at 191 Peachtree Street in Atlanta, from 191 Peachtree Project
LLC (“landlord”)2, pursuant to a “master lease.” On November 15, 2014, Atlanta Life
1
Atlanta Life also filed suit and obtained summary judgment on conversion
and writ of possession claims related to the subtenants’ refusal to return rented
furnishings and art. The subtenants do not appeal the trial court’s ruling on the writ
of possession and conversion claims.
2
At some point 191 Peachtree Project, LLC, sold the property to Banyan
Street/GAP 191 Peachtree Owner, LLC, but the briefs do not point to when the sale
occurred. For the purposes of this appeal, the date of sale is not relevant, and we will
refer to 191 Peachtree Project, LLC and Banyan, it’s successor in interest, collectively
2
and The Hatchett Firm entered into a sublease, which was subsequently amended on
June 29, 2016, to add The Durham Law Group.
Beginning in January 2018, the subtenants admittedly failed to pay the full
amount of rent required by the sublease to Atlanta Life. Furthermore, beginning in
November 2018, they ceased paying any rent to Atlanta Life. On April 12, 2019,
Atlanta Life sent a demand letter to the subtenants demanding, inter alia, the unpaid
rent.
On May 17, 2019, the subtenants entered into a lease agreement for the
subleased premises directly with the landlord. On the same day, the landlord and
Atlanta Life entered into an amended lease agreement that terminated the subleased
portion.
Atlanta Life filed the underlying lawsuit against the subtenants on May 31,
2019, alleging that the subtenants breached the sublease by failing to pay past due
rent. The subtenants filed an answer and counterclaim, seeking damages for breach
of contract, recoupment, and attorneys fees, claiming that Atlanta Life terminated the
master lease without their consent, which breached the sublease.
as “landlord.”
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1. The subtenants do not contend that they paid the full amount of rent from
January 2018 to April 2019. Instead they admit to submitting only partial rent
payments to Atlanta Life for ten months, and then failing to pay any rent to Atlanta
Life for six months. However, the subtenants claim that the trial court erred by
granting Atlanta Life’s motion for summary judgment because a genuine issue of
material fact remains as to whether Atlanta Life waived the terms of the sublease by
not issuing a demand for the unpaid rent until its April 12, 2019 letter.
A mutual departure from the terms of an agreement results in a
quasi-new agreement suspending the original terms of the agreement
until one party has given the other reasonable notice of its intent to rely
on the original terms. The question whether the parties’ mutual conduct
caused a waiver and effected a quasi-new agreement ordinarily is a
question for the jury.
Circle K Stores, supra at 754-755 (1) (citation and punctuation omitted). See also
OCGA § 13-4-4. “The burden of proof lies with the party asserting waiver[.]” Miller
v. Hiawassee Allen Family, LLC, ___ Ga. App. ___ (849 SE2d 500) (2020) (citation
and punctuation omitted).
In 1979, our Supreme Court answered the following question in the
affirmative: “does the evidence of repeated late, irregular payments accepted by the
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seller create a factual dispute as to whether a quasi new agreement was created”?3
Smith v. Gen. Finance Corp. of Ga., 243 Ga. 500 (255 SE2d 14) (1979); See also Ga.
Const. of 1983, Art. VI, Sec. VI, Par. VI (“The decisions of the Supreme Court shall
bind all other courts as precedents.”). While the Smith case discussed the sale of an
automobile and dealt with late, irregular payments, rather than partial or non-existent
rent payments, the underlying logic is identical to the issue at hand. See id. at 500. By
repeatedly accepting payment (or nonpayment) in deviation from the terms stipulated
in the sublease, a factual dispute arose as to whether a quasi-new agreement was
created. See id. at 501. Atlanta Life did not object to the partial payment or non-
payment until 16 months after the subtenants first failed to pay the rent in full.
Furthermore, the existence of an anti-waiver provision in the sublease does not
preclude waiver, as acceptance of irregular payments raises a jury question as to
whether the anti-waiver provision in the sublease was waived. Id.; see also Yash
Solutions v. New York Global Consultants, 352 Ga. App. 127, 136 (1) (a) (834 SE2d
3
In Smith, the quasi-new agreement was formed pursuant to Code 20-116, a
pre-cursor to OCGA § 13-4-4, which states that “[w]here parties, in the course of the
execution of a contract, depart from its terms and pay or receive money under such
departure, before either can recover for failure to pursue the letter of the agreement,
reasonable notice must be given to the other of intention to rely on the exact terms of
the agreement. The contract will be suspended by the departure until such notice.”
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126) (2019) (“under Georgia law, a no-waiver or anti-waiver provision in a contract
may itself be waived.”)
There is no dispute in the present matter that Atlanta Life accepted partial rent
payment or no rent payment at all from the subtenants for 16 months, and Atlanta Life
does not claim that it notified the subtenants of its desire to adhere to the sublease’s
terms until 16 months after the first partial rent payment. As such, pursuant to Smith,
an issue of material fact exists as to whether that acceptance created a quasi-new
agreement. See also Jaraysi v. Sebastian, 318 Ga. App. 469, 475-476 (1) (c) (733
SE2d 785) (2012) (disapproved of on other grounds by George v. Hercules Real
Estate Svcs., 339 Ga. App. 843, 851 (2) (a) (ii) (795 SE2d 81) (2016); Shalom Farms
v. Columbus Bank & Trust, 169 Ga. App. 145, 147 (2) (312 SE2d 138) (1983)
(physical precedent only) (whether a party’s failure to make payments created the
existence of a quasi-new agreement was a question for the jury); Baxter v. Ga. Fed.
S & L, 152 Ga. App. 753, 753-754 (1) (264 SE2d 242) (1979). Accordingly, the trial
court erred by granting summary judgment to Atlanta Life on its breach of contract
claim, and the ruling is reversed. See Smith, supra; compare Circle K, supra at 755 (1)
(where landlord did not accept the partial rent payments “without identifying to the
tenant that he’s underpaying his rent” there was no fact issue as to waiver); Duncan
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v. Lagunas, 253 Ga. 61, 62-63 (1) (316 SE2d 747) (1984) (no mutual departure from
contract when three late payments were accepted because the accepting party gave an
“expression of displeasure,” which conveyed that he did not intend to waive the terms
of the contract).
2. The subtenants claim that the trial court erred by granting summary judgment
to Atlanta Life on their counterclaim for breach of contract, recoupment, and
attorneys fees. In support of their claim, the subtenants state: “Atlanta Life did not
dispute that it breached the Master Lease by failing to pay rent to [the landlord].
Atlanta Life did not dispute that [the landlord] filed an eviction proceeding against
Atlanta Life.” However, the subtenants fail to support these statements with any
citations to the record, contrary to the requirements in Court of Appeals Rule 25 (a)
(1) and (c) (2) (i). “We remind counsel that it is not the job of the Court of Appeals
to cull the record on behalf of a party, and that a lack of proper citations greatly
hinders our consideration of the issues on appeal.” Bulgin v. Ga. Dept. of Transp.,
292 Ga. App. 1, 2 (1) (663 SE2d 730) (2008) (citation and punctuation omitted).
Furthermore, “the burden is on the party alleging error to show it affirmatively by the
record. When the burden is not met, the judgment complained of is assumed to be
correct and must be affirmed.” Fleming v. Advanced Stores, 301 Ga. App. 734, 736
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(688 SE2d 414) (2009) (citation and punctuation omitted). As the subtenants do not
support this claim of breach of contract with citation to the record, it is deemed
abandoned. See Court of Appeals Rule 25 (c) (2) (i).
The subtenants also claim that Atlanta Life breached the sublease by executing
an amended master lease with the landlord, which terminated the portion of the
master lease regarding the subleased property. The subtenants claim that by signing
the amended master lease, Atlanta Life breached a provision of the sublease which
stated that Atlanta Life would not terminate the master lease “without the prior
express written consent” of the subtenants.
However, the subtenants, Atlanta Life, and the landlord signed a document
titled “Consent to First Amendment to Sublease,” which provided that if the master
lease expires or terminates for any reason during the term of the sublease, the
sublease simultaneously terminates or expires. The consent agreement also contained
a provision stating in the event there were any conflicts between the consent
agreement and the sublease, the provisions of the consent agreement “prevail
unaffected” over the sublease. If the sublease’s prior approval requirement was read
into the consent agreement, it would frustrate the provision that allows for the master
lease to be terminated (absent the subtenants’ approval), and to subsequently
8
terminate the sublease. As such, the consent agreement conflicted with the sublease
requirement that Atlanta Life obtain the subtenant’s written consent prior to the
termination of the master lease. Therefore, the consent agreement prevailed over the
sublease. And Atlanta Life did not breach the sublease when it entered into an
amended master lease (terminating the sublease) because it was allowed to do so by
the consent agreement, which covered the same subject matter. See Wallace v. Bock,
279 Ga. 744, 746 (1) (620 SE2d 820) (2005) (“An existing contract is superseded and
discharged whenever the parties subsequently enter upon a valid and inconsistent
agreement completely covering the subject-matter embraced by the original
contract.”) (citation, emphasis and punctuation omitted). As such, the subtenant’s
counterclaim for breach of contract fails, and we affirm the trial court’s ruling
granting summary judgment to Atlanta Life on that claim.
Additionally, the subtenants’ claims for recoupment and attorneys fees also fail
as they are dependent on their breach of contract claim.4 As discussed above, there
is no issue of material fact as to whether Atlanta Life breached its sublease with the
4
“A recoupment is a right of the defendant to have a deduction from the
amount of the plaintiff’s damages because the plaintiff has not complied with the
cross-obligations or independent covenants arising under the contract being sued
upon.” Automated Print v. Edgar, 288 Ga. App. 326, 330 (2) (654 SE2d 413) (2007);
see OCGA § 13-7-13.
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subtenants. As such, the claim that Atlanta Life is liable for recoupment fails, and we
affirm the trial court’s grant of summary judgment on this ground. Similarly, the
subtenants’ derivative claim for attorneys fees fails. See Houston Hosps. v. Felder,
351 Ga. App. 394, 399 (4) (829 SE2d 182) (2019) (“derivative claims of attorney fees
. . . will not lie in the absence of a finding of compensatory damages on an underlying
claim”) (citation and punctuation omitted).
Judgment reversed in part, affirmed in part. Doyle, P. J., and Hodges, J.,
concur.
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