Zachary G. Sexton v. Russell N. Sewell

SECOND DIVISION
MILLER, P. J.,
RICKMAN and REESE, 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 28, 2019
In the Court of Appeals of Georgia
A19A0751. SEXTON et al. v. SEWELL et al.
REESE, Judge.
In the case involving the breach of a real estate sales contract, the prospective
purchasers of the property at issue (“Property”), Zachary and Carrie Sexton
(“Buyers”), appeal from the grant of summary judgment to the sellers of the property,
Russell and Linda Sewell (“Sellers”) and the Sellers’ broker, Beacham & Company,
LLC, d/b/a Beacham & Company Realtors (“Broker”). The Buyers contend that the
trial court erred in ruling that the Sellers were entitled to specific performance of the
sales contract as a matter of law and that the Broker was entitled to its full
commission as liquidated damages.1 For the reasons set forth, infra, we reverse the
1
The Buyers also contend that the trial court erred in awarding attorney fees
to the Broker. This issue is addressed in Division 6, infra.
grant of summary judgment to the Sellers on their claim for specific performance of
the sales contract. In addition, we reverse the court’s grant of summary judgment to
the Broker on its claim for its commission under the sales contract.
Viewed in the light most favorable to the Buyers,2 the record shows the
following undisputed facts. In March 2017, the Buyers were searching for a home in
the Kingswood neighborhood of Atlanta, and their real estate agent learned that the
Sellers were preparing to place their Property up for sale in the near future. Before the
Property was listed for sale, however, the Buyers toured the home March 31, 2017,
and offered to purchase it for $1,775,000. The Buyers’ agent drafted a purchase and
sales agreement (the “Contract”), which the parties executed the same day, March 31,
2017, and the Buyers put down $40,000 in earnest money. The Contract provided a
two-week due diligence period, during which the Buyers could cancel the Contract
without incurring a penalty. During that period, the Property was appraised for
$1,850,000, or $75,000 more than the Contract price. The closing on the Contract was
scheduled for June 22, 2017.
On May 13, about one month after the two-week due diligence period had
expired, and almost six weeks before the closing date, the Buyers notified the Sellers
2
See Benton v. Benton, 280 Ga. 468, 470 (629 SE2d 204) (2006).
2
that they were moving to North Carolina for “personal, family reasons.” The Buyers,
however, assured the Sellers that they still intended to close on the Property. Under
the circumstances, the Buyers intended to purchase and then resell the Property, and
they asked the Sellers to accommodate them by allowing them to show the Property
to other potential buyers. The Sellers allowed the Buyers to show the Property to
potential buyers on one day, Wednesday, May 17, from 10 a.m. to 5:00 p.m., but no
re-sale resulted. Other than on that day, the Sellers did not allow the Buyers to show
the Property to other potential buyers or to list the Property for sale.3
On May 22, the Buyers notified the Sellers that they intended to unilaterally
terminate the Contract, and they relinquished the $40,000 in earnest money.4 The
Sellers refused the offer, and, on May 24, the Sellers’ attorney informed the Buyers
that, if they failed to appear at the closing on June 22, the Sellers would pursue an
3
However, between May 23 and the closing date, June 22, the Sellers showed
the Property to other potential purchasers, and the Sellers intentionally kept this
information from the Buyers. The Broker’s agent apparently informed at least some
of the potential purchasers that the asking price for the Property was $1,895,000, i.e.,
$120,000 more than the Contract price in the instant case.
4
In fact, between May 22 and the closing date, June 22, the Buyers offered to
pay the Sellers twice the amount of the earnest money, i.e., $80,000, to release them
from the Contract, but the Sellers did not respond to the offers. And, on October 31,
after the Sellers had filed suit, the Buyers offered to pay up to $85,000 to settle, but
the Sellers did not respond or make a counter-offer.
3
action seeking specific performance of the Contract and/or money damages. When
the Buyers failed to close on the Property, the Sellers filed the instant action in June
2017, seeking specific performance of the Contract, incidental damages, and attorney
fees.5 In the same suit, the Broker asserted claims for its sales commission, pursuant
to the Contract, and for attorney fees.
The Sellers filed a motion for partial summary judgment, and the Buyers filed
a cross-motion for partial summary judgment. Following hearings, the trial court
granted the Sellers’ motion and denied the Buyers’ motion, but it reserved a ruling on
the claims for “ancillary damages” and attorney fees. This appeal followed.
In order to prevail on a motion for summary judgment under
OCGA § 9-11-56, the moving party must show that there exists no
genuine issue of material fact, and that the undisputed facts, viewed in
the light most favorable to the nonmoving party, demand judgment as
a matter of law. Moreover, on appeal from the denial or grant of
summary judgment[,] the appellate court is to conduct a de novo review
of the evidence to determine whether there exists a genuine issue of
material fact, and whether the undisputed facts, viewed in the light most
favorable to the nonmoving party, warrant judgment as a matter of law.6
5
We note that the Sellers did not file a claim for monetary damages arising
from the Buyers’ breach, with the exception of incidental damages.
6
Benton, 280 Ga. at 470.
4
With these guiding principles in mind, we turn now to the Buyers’ specific claims of
error.
1. The Buyers contend that the trial court erred when it ruled that the Sellers
were entitled to specific performance of the sales contract, despite the fact that the
Sellers had an adequate remedy at law. Thus, they argue that the trial court erred in
granting summary judgment to the Sellers and in denying their (the Buyers’) motion
for summary judgment. We agree.
“Specific performance is an extraordinary, equitable remedy, which will be
granted only if the complainant does not have an adequate remedy at law. It is not a
remedy that either party can demand as a matter of absolute right and will not be
granted in any given case unless strictly equitable and just.”7 Thus, even when
specific performance might otherwise be appropriate, it should be denied “if it would
cause unreasonable hardship or loss to the party in breach or to third persons.”8
7
Kirkley v. Jones, 250 Ga. App. 113, 115-116 (2) (550 SE2d 686) (2001). See
Clayton v. Deverell, 257 Ga. 653, 654 (3) (362 SE2d 364) (1987); Peachtree on
Peachtree Investors v. Reed Drug Co., 251 Ga. 692, 696 (2) (308 SE2d 825) (1983);
Wehunt v. Pritchett, 208 Ga. 441, 444 (67 SE2d 233) (1951); see also OCGA § 23-1-
4 (“Equity will not take cognizance of a plain legal right where an adequate and
complete remedy is provided by law[.]”).
8
Peachtree on Peachtree Investors, 251 Ga. at 697 (2) (quoting the
Restatement of Contracts, Second, § 364).
5
“As a general rule, a party to a contract may seek specific performance of a
contract upon a showing that [monetary] damages recoverable at law would not
constitute adequate compensation for another parties’ nonperformance.”9 Thus,
“[e]quitable relief is improper if the complainant has a remedy at law which is
adequate, i.e., as practical and as efficient to the ends of justice and its prompt
administration as the remedy in equity.”10 It necessarily follows that, in order to
obtain an award of specific performance, the plaintiff must present evidence to show
his “entitlement to the extraordinary remedy of specific performance”11 by, inter alia,
demonstrating that he has no adequate remedy at law.12 Therefore, the threshold
question in the instant case is whether the Sellers met their burden of showing that
9
Bagwell v. Trammel, 297 Ga. 873, 875 (1) (778 SE2d 173) (2015). See OCGA
§ 23-2-130 (“Specific performance of a contract, if within the power of the party, will
be decreed, generally, whenever the damages recoverable at law would not be an
adequate compensation for nonperformance.”).
10
Liberty Capital v. First Chatham Bank, 338 Ga. App. 48, 51 (1) (789 SE2d
303) (2016) (physical precedent only) (citation and punctuation omitted). See Kirkley,
250 Ga. App. at 115-116 (2).
11
Bagwell, 297 Ga. at 875 (1).
12
See Liberty Capital, 338 Ga. App. at 51 (1) (physical precedent only); see
also Forsyth County v. Waterscape Svc., 303 Ga. App. 623, 637 (4) (b) (694 SE2d
102) (2010) (holding that the plaintiff had met its burden of showing that it had no
adequate remedy at law and, thus, was entitled to specific performance).
6
they did not have an adequate remedy at law available to them that would have
compensated them for the Buyers’ breach of the Contract. The undisputed evidence
clearly shows that they failed to meet this burden.
First, the Sellers could have accepted the Buyers’ tender of the $40,000 in
earnest money when the Buyers notified them that they wanted to unilaterally
terminate the Contract on May 22, which was about seven weeks after the Contract
was executed on March 31. The Sellers would then have been able to immediately put
the Property back on the market to sell to someone else while retaining the Buyers’
$40,000.13 The Sellers have failed to explain why $40,000, plus the proceeds of the
sale, would not have constituted an “adequate remedy” for them under the
circumstances presented.14
13
See generally Southeastern Land Fund v. Real Estate World, 237 Ga. 227,
228-229 (227 SE2d 340) (1976) (“Depending on the language used in the contract
and the discernible intent of the parties, the existence of an earnest money provision
in a real estate sales contract can have one of three effects in the case of a breach by
the buyer. First, the money could be considered as partial payment of any actual
damages which can be proven as the result of the buyer’s breach. Second, the money
could be applied as part payment of the purchase price in the enforcement of the
contract in a suit for specific performance by the seller. Third, the money could be
liquidated damages for breach of the contract by the buyer. A provision for earnest
money cannot, however, under Georgia law, be used for all three results[.]”).
14
The $40,000 earnest money figure equals about 2.25 percent of the Contract
price. See generally Swan Kang, Inc. v. Kang, 243 Ga. App. 684, 687 (1) (534 SE2d
7
Further, the undisputed evidence shows that, if the Sellers had placed the
Property on the market soon after the Buyers expressed their intent to terminate the
Contract, the Sellers would have been able to quickly sell the Property for at least the
Contract price. For example, in a June 16 text message to the Sellers, the Broker’s
agent told them, “I absolutely can sell your house again. There is no question about
that.”15 And it is undisputed that, in April 2017, the Property was appraised at
$1,850,000, or $75,000 more than the Contract price. Thus, if the Sellers had pursued
this option, they would have been able to keep the $40,000 in earnest money and the
proceeds from the sale of the Property.16 There is nothing in the record to suggest that
this would not have constituted an adequate remedy at law that would have precluded
an award of specific performance to the Sellers under the circumstances presented.
Second, between May 22, when the Buyers notified the Sellers that they
intended to terminate the Contract, and the proposed closing date, June 22, the Buyers
offered to pay the Sellers twice the amount of the earnest money, i.e., $80,000, to
145) (2000) (holding that, absent any evidence to the contrary, an earnest money
payment representing about two percent of the purchase price was reasonable).
15
Notably, this text was sent before the June 22 closing date.
16
The Broker’s agent even advocated for this resolution in a text message to
the Sellers.
8
release the Buyers from the Contract. Yet, the Sellers did not respond to the offer or
make a counter-offer. As above, there is nothing in the record that would support a
finding that $80,000, plus the proceeds of the sale of the Property to a different party,
would not have constituted an adequate remedy at law under the circumstances
presented.
Third, the Sellers could have immediately sued the Buyers for money damages
arising from the breach.
[I]f the real estate sales contract is silent on the remedy to be provided,
the non-breaching seller is entitled to his proven actual damages. The
ordinary measure of damages is the difference between the contract
price and the market value of the property at the time of the buyer’s
breach. If the non-breaching seller sues for actual damages, the earnest
money then becomes a fund out of which those damages are partially
paid if the proven damages exceed the amount of the earnest money.17
Therefore, this was an objective method for calculating the Sellers’ damages that
constituted another adequate remedy at law.18
17
Southeastern Land Fund, 237 Ga. at 229. Accord Quigley v. Jones, 255 Ga.
33 (334 SE2d 664) (1985); Roba v. Dotson, 315 Ga. App. 721, 722 (727 SE2d 542)
(2012).
18
In their motion for partial summary judgment in the trial court, the Sellers
argued that, because the Property had been appraised for $1,850,000 in April 2017,
9
Despite this, the Sellers argue that they were automatically entitled to specific
performance as a matter of law because monetary damages would never constitute an
adequate remedy at law, relying on the general principle that, when the contract to be
enforced involves the sale of real property, “all real property is considered unique.”
Under the circumstances presented here, this argument lacks merit.
With one exception, all of the cases cited by the Sellers for this proposition
involved facts and/or law that clearly distinguished them from the instant case, in that
they involved: a buyer or renter seeking specific performance of a contract to sell or
lease property; a contract involving the sale of personal property (to which different
rules apply); or the grant of an injunction prohibiting a tenant from selling
pornographic materials.19 The exception is Hampton Island, LLC v. HAOP, LLC,20 a
but the Contract only provided for a sales price of $1,775,000, the Buyers would not
have been liable to Sellers for any damages if the Sellers had sued for money
damages, so they would have had no adequate remedy against the Buyers for the
latter’s breach. This argument suggests that the Sellers were more focused on these
particular Buyers than on the additional $100,000 or so that they might have made
from the sale of the Property to others if they had simply listed the Property for sale.
See, e.g., Footnote 29, infra.
19
See, e.g., Black v. American Vending Co., 239 Ga. 632 (238 SE2d 420)
(1977) (involved personal property); Irwin v. Dailey, 216 Ga. 630 (118 SE2d 827)
(1961) (involved renter seeking specific performance of an agreement to lease with
an option to purchase real and personal property); F. & W. Grand Five-Ten-Twenty-
Five Cent Stores v. Eiseman, 160 Ga. 321 (127 SE2d 872) (1925) (involved renter
10
case wherein this Court affirmed the trial court’s order granting summary judgment
to the sellers on their claim for specific performance of a real estate sales contract.
The essential facts in Hampton Island, however, are clearly distinguishable from the
instant case. In Hampton Island, the seller had originally purchased the property
(“Agreement 1”) from a company that was a predecessor entity of the purchaser.21
Following the original sale, the company defaulted on its obligations under
Agreement 1, and, in an effort to resolve the resulting dispute, the purchaser agreed
to buy back the property from the seller for $1,000,000.22 The parties negotiated the
conditions of a new sales contract (“Agreement 2”), which included a provision that,
if the purchaser defaulted on that payment obligation, the seller had the right to seek
suing property owner for specific performance of lease); Waterscape Svcs., 303 Ga.
App. at 637 (involved buyer seeking specific performance from seller); Ayer v.
Norfolk Timber Investment, 291 Ga. App. 409 (662 SE2d 221) (2008) (involved
buyer seeking an injunction preventing the seller from selling to a third party); Focus
Entertainment Intl. v. Partridge Greene, Inc., 253 Ga. App. 121 (558 SE2d 440)
(2001) (physical precedent only) (involved owner of mall seeking injunction against
a property owner to enforce a restrictive covenant in the deed to the property that
prohibited the sale or display of pornographic materials).
20
306 Ga. App. 542 (702 SE2d 770) (2010).
21
Id. at 542-543.
22
Id. at 543.
11
specific performance of Agreement 2.23 When the purchaser defaulted on Agreement
2, the seller sued, and the trial court granted the seller’s request for specific
performance.24
On appeal, this Court ruled that it was “well established that monetary damages
are not an adequate legal remedy where . . . the contract sought to be performed
involved the sale of unique real property[,]” and also held that the rule applied
regardless whether it was the seller or the purchaser who was seeking specific
performance.25 Then, noting that Agreement 2 specifically provided that the seller had
the right to seek specific performance if the purchaser defaulted on its payment
obligation, this Court concluded that the trial court “correctly determined that the
[seller] did not have an adequate remedy at law.”26
In this case, the Sellers contend that the Hampton Island decision established
a rule that automatically entitles them to specific performance, arguing that the case
stands for the proposition that monetary damages never constitute an adequate
23
Id.
24
Id.
25
Id. at 548 (5).
26
Id. at 549 (5).
12
remedy at law following the breach of a real estate sales contract, regardless of the
circumstances. To the extent that the ruling could be so construed, it would be dicta
because it would constitute an overly broad and conclusory rule that was not
adequately tailored to the unique facts presented in that case.27
This is because, even assuming that each and every parcel of land, house,
apartment, condominium, etc, is, in fact, “unique,” there is nothing “unique” about
cash, or more specifically, the cash of potential purchasers. As shown above, the
undisputed evidence in this case shows that the Sellers could have sold the Property
to other purchasers for a price comparable to that in the Contract (or more) if they had
listed the Property for sale after the Buyers notified the Sellers of their (the Buyers’)
intent to terminate the Contract. Then, the Sellers could have kept the proceeds of the
sale and the $40,000 in earnest money paid by the Buyers. One of the Sellers even
admitted in her deposition that, around the time the Buyers backed out of the
Contract, if someone other than the Buyers had given her a check for $1,775,000 to
purchase the Property, that would have been satisfactory to her.
27
By so stating, we do not suggest that this Court erred in affirming the grant
of specific performance to the seller in Hampton Island, particularly given the unique
facts presented therein.
13
Further, it is undisputed that the Sellers did not make any changes to the
Property to accommodate these specific Buyers that caused the Sellers to incur
additional expenses28 or that made the Property less attractive to other potential
purchasers. Simply put, there was nothing “unique” about the Buyers in this case that
would support an order requiring these specific Buyers to purchase the Property.29
28
On the contrary, the Contract specifically states that the Property was being
sold “as is.” Cf. Hughes v. Great Southern Midway, 265 Ga. 94 (454 SE2d 130)
(1995) (The Supreme Court affirmed the trial court’s grant of the seller’s request for
specific performance because the seller had rezoned the property at the insistence of
the buyer, who then breached the sales contract.).
29
Significantly, the record disproves any suggestion that the Sellers actually
wanted the Buyers, specifically, to own the Property due to some prior relationship
between the parties or the Sellers’ particular fondness for the Buyers. Instead, the
record shows that the Sellers never met the Buyers prior to receiving the Buyers’
notice of their intent to terminate the Contract and that, after receiving the notice, one
of the Sellers texted the Broker, “I see [the Buyers] planning [their] revenge and
escape!!! I am so negative about [them,]” “I really despise the [Buyers]! I really wish
we could make them close[,]” and “I want [the Buyers] to hurt too.” The Seller also
specifically texted that it would be a “pleasure” to sell the Property to another
potential buyer so she would not have to deal with “devious people like [the Buyers,]”
describing them as “lack[ing] integrity and class.” She also referred to the Buyers as
“[b]ottom feeders[ ]” and “dirty, no integrity. No honor slime. !!!”
Given this evidence, we emphasize that breach-of-contract damages are
intended to compensate the injured party for the breach and are not authorized to
punish the breaching party. See OCGA §§ 13-6-10 (“Unless otherwise provided by
law, exemplary damages shall never be allowed in cases arising on contracts.”); 51-
12-5.1 (a) (“[T]he term ‘punitive damages’ is synonymous with the terms ‘vindictive
damages,’ ‘exemplary damages,’ and other descriptions of additional damages
awarded because of aggravating circumstances in order to penalize, punish, or deter
14
Thus, we reject the assertion that, simply because real property is generally
considered to be “unique,” the Sellers in this case were automatically entitled to
specific performance of the Contract.
The Sellers also argue that, under the decisions of the Supreme Court of
Georgia in Laseter v. Brown,30 Golden v. Frazier,31 and Holloway v. Giddens,32 a
contract that is “in writing, signed by the parties, [is] certain and fair, [provides] for
adequate consideration, and [is] capable of being performed[, is] specifically
enforceable.”33 While those cases hold that specific performance is an “appropriate”
a defendant.”); 51-12-5.1 (c) (“Punitive damages shall be awarded not as
compensation to a plaintiff but solely to punish, penalize, or deter a defendant.”);
Clayton, 257 Ga. at 655 (5) (b) (“[I]n an action for breach of contract, punitive
damages cannot be awarded in the absence of evidence showing tortious conduct on
the part of the defendant.”).
30
251 Ga. 179 (304 SE2d 72) (1983).
31
244 Ga. 685, 687 (1) (261 SE2d 703) (1979).
32
239 Ga. 195, 197 (236 SE2d 491) (1977), overruled on other grounds, Brown
v. Frachiseur, 247 Ga. 463, 465 (277 SE2d 16) (1981).
33
Laseter, 251 Ga. at 180 (2). The Sellers also cited to CDM Custom Homes
v. Windham, 280 Ga. App. 728, 731-732 (1) (634 SE2d 780) (2006); Stinchcomb v.
Wright, 278 Ga. App. 136, 139 (2) (a) (628 SE2d 211) (2006); Bourke v. Webb, 277
Ga. App. 749, 751 (1) (627 SE2d 454) (2006), for this proposition.
15
remedy under such circumstances,34 none of them hold that a court of equity must
order that a contract be specifically performed simply if the contract meets such
criteria. More importantly, in none of those cases did the appellate court address
whether the plaintiffs had an adequate remedy at law that would have precluded
specific performance.35 Thus, while the cases hold that a plaintiff may seek specific
performance if the sales contract meets certain requirements, they do not stand for the
proposition that the plaintiff is automatically entitled to specific performance absent
a showing that no adequate remedy at law exists.36
Finally, the Sellers argue that, because the Contract did not require them to
accept the earnest money if the Buyers defaulted,37 but instead allowed them to
34
See, e.g., Laseter, 251 Ga. at 180 (2).
35
See Laseter, 251 Ga. at 180 (2); Golden, 244 Ga. at 687 (1); Holloway, 239
Ga. at 197; CDM Custom Homes, 280 Ga. App. at 731-732 (1); Stinchcomb, 278 Ga.
App. at 139 (2) (a); Bourke, 277 Ga. App. at 751 (1).
36
See generally State v. Walker, 295 Ga. 888, 893 (764 SE2d 804) (2014)
(Appellate court decisions “stand only for the points raised by the parties and decided
by the court. Questions which merely lurk in the record, neither brought to the
attention of the court nor ruled upon, are not to be considered as having been so
decided as to constitute precedents.”) (citations and punctuation omitted).
37
The Contract provided that, if the Buyers defaulted, the Sellers could accept
the earnest money as “liquidated damages in full settlement of all claims of Seller[s]
against Buyer[s,]” but also stated that nothing in the Contract prevented the Sellers
16
choose “any lawful remedy” for the breach,38 they “had the absolute right” to choose
specific performance. However, because the Sellers could have obtained an award of
monetary damages that adequately compensated them for the Buyers’ breach, then
specific performance was not a “lawful remedy” for them to choose, because they had
an adequate remedy at law available to them.
Thus, we conclude that the Sellers failed to meet their burden of showing that
they had no adequate remedy at law and, as a result, failed to demonstrate that they
were entitled to the equitable award of specific performance of the Contract.39
Consequently, the trial court erred in granting summary judgment to the Sellers on
from refusing to accept the earnest money as liquidated damages.
38
The Contract provided: “Rights of Buyer or Seller: A party defaulting under
this Agreement shall be liable for the default. The non-defaulting party may pursue
any lawful remedy against the defaulting party.”
39
See Peachtree on Peachtree Investors, 251 Ga. at 697 (2) (holding that,
under the circumstances presented, the trial court did not err in finding that money
damages constituted an appropriate relief and in denying the plaintiff’s claim for
specific performance as a result); Liberty Capital, 338 Ga. App. at 53 (1) (physical
precedent only) (holding that the trial court erred in awarding the plaintiff specific
performance of the contract when the plaintiff failed to show that there was no
adequate measure of damages that would remedy the defendant’s nonperformance as
a matter of law).
17
their claim for specific performance and in denying summary judgment to the Buyers
on that claim.
2. The Buyers contend that the Sellers were not entitled to specific performance
of the Contract because they (the Buyers) had no notice prior to executing the
Contract that the Sellers could seek specific performance as a remedy if they (the
Buyers) breached the Contract. It is undisputed that the Contract does not refer to
specific performance as a remedy for a breach,40 and the record shows that the first
time the Buyers had notice that the Sellers might seek specific performance was on
May 24, shortly after the Buyers had notified the Sellers that they wanted to terminate
the Contract and relinquish the earnest money.
The Buyers present a compelling argument that, absent some notice in the sales
contract, it is unlikely that a typical purchaser of real property would understand that
they could still be compelled to purchase the property if they decided to back out of
40
Cf. Quigley, 255 Ga. at 34, n. 1 (The contract stated that, in the event the sale
was not closed due to the inability or fault of the purchaser, “the earnest money is to
be applied by seller to seller’s damages, but receipt of such money by seller shall not
prejudice or eliminate seller’s right to obtain specific performance and/or recover
additional damages under this contract.”) (punctuation omitted); Hampton Island,
LLC, 306 Ga. App. at 543 (The real estate sales contract specifically stated that, if the
buyer defaulted on its payment obligation under the contract, the seller had the right
to seek specific performance and damages.).
18
the Contract (versus simply forfeiting the earnest money). However, the Supreme
Court of Georgia has held that specific performance is an available remedy for the
breach of a contract for the sale of real property, even if the contract does not say so,
unless the contract expressly excludes specific performance as an option.41 Thus, even
though the Contract in this case did not expressly exclude specific performance as a
remedy for the Buyers’ breach, the Sellers were not barred from seeking specific
performance.
As explained in Division 1, supra, however, the Sellers failed to show that they
were entitled to specific performance due to the lack of an adequate remedy at law.
Thus, this issue is moot.
3. The Buyers also argue that the trial court erred in granting summary
judgment to the Sellers on the claim for specific performance because jury issues
exist as to whether the Sellers failed to mitigate their damages42 and whether the
41
See Laseter, 251 Ga. at 180 (1); Southeastern Land Fund, 237 Ga. at 228-
229 (The Court held that, even if a real estate contract does not mention specific
performance as a remedy, specific performance is still available unless it is
specifically excluded, although the contract in that case actually mentioned specific
performance as a potential remedy that could be pursued by the non-breaching party.).
42
See OCGA § 51-12-11 (“When a person is injured by the negligence of
another, he must mitigate his damages as far as is practicable by the use of ordinary
care and diligence. However, this duty to mitigate does not apply in cases of positive
19
Sellers acted with “unclean hands”43 to prevent the Buyers from closing on the
contract. Given our decision in Division 1, supra, however, those issues are moot.
4. The Buyers contend that the trial court erred in awarding the Broker its
commission under the sales contract. Specifically, the Buyers argue that the liquidated
damages provision in the Contract constituted an unenforceable penalty as a matter
of law and that a jury issue existed as to whether the Broker was entitled to the entire
commission. The provision states:
Rights of Broker: In the event a party defaults under this Agreement, the
defaulting party shall pay as liquidated damages to every broker
involved in this transaction with whom the defaulting party does not
have a brokerage engagement agreement an amount equal to the share
of the commission the broker would have received had the transaction
and continuous torts.”).
43
See Hampton Island, LLC, 306 Ga. App. at 546 (3) (“Georgia law provides
that a party can be barred from obtaining the equitable relief of specific performance
if he is guilty of unclean hands. . . . The unclean hands doctrine has reference to an
inequity which infects the cause of action so that to entertain it would be violative of
conscience.”) (citations and punctuation omitted); see also OCGA § 23-1-10 (“He
who would have equity must do equity and must give effect to all equitable rights of
the other party respecting the subject matter of the action.”).
20
closed. . . . The liquidated damages referenced above are a reasonable
pre-estimate of the Broker[‘s] actual damages and are not a penalty.44
(a) As an initial matter, to the extent that the trial court granted summary
judgment to the Sellers on their claim for specific performance and granted judgment
in favor of the Broker on its claim to the full commission under the Contract, such
ruling was erroneous. Because the trial court upheld the Contract when ordering
specific performance, the Sellers were bound by the Contract as written, i.e., as if
there had been no breach.45 So viewed, the Contract provided that the “Seller[s] shall
pay a [six percent] commission at closing to be split between [the Broker] and [the
Buyers’ Broker] ([three] percent and [three] percent).”46 Thus, if the Contract in this
case was going to be enforced as written, then the Sellers had to “bear the contractual
obligation of paying the commission to the [Broker].”47 It follows that the trial court
44
The Contract also provides that “[t]he Brokers herein are signing this
Agreement to reflect their role in this transaction[.]”
45
See Golden, 244 Ga. at 688 (4).
46
Given the Contract’s sale price of $1,775,000 for the Property, a three
percent commission for the Broker would have equaled $53,250.
47
Golden, 244 Ga. at 688-689 (4).
21
erred to the extent it ordered the Buyers to pay the Broker’s sales commission on top
of the Contract price for the Property.
(b) However, because we are reversing the grant of specific performance of the
Contract in this case, as explained in Division 1, supra, the Buyers could be held
liable for paying the Broker’s sales commission under the Contract, in addition to the
Sellers’ monetary damages for the Buyers’ breach. The issue remains whether, under
the circumstances presented, the provision requiring the Buyers to pay the full amount
of the Broker’s sales commission is an enforceable liquidated damages provision or
an unenforceable penalty for the Buyers’ breach.
Georgia law . . . recognizes that the parties may agree in their
contract to a sum to liquidate their damages. [OCGA § 13-6-7 provides]:
[“If] the parties agree in their contract what the damages for a breach
shall be, they are said to be liquidated, and unless the agreement violates
some principle of law, the parties are bound thereby.” In deciding
whether a contract provision is enforceable as liquidated damages, the
court makes a tripartite inquiry to determine if the following factors are
present: First, the injury caused by the breach must be difficult or
impossible of accurate estimation; second, the parties must intend to
provide for damages rather than for a penalty; and third, the sum
stipulated must be a reasonable pre-estimate of the probable loss.48
48
Southeastern Land Fund, 237 Ga. at 230 (citations, punctuation, and
emphasis omitted).
22
“Of course, whether a provision represents liquidated damages or a penalty does not
depend upon the label the parties place on the payment but[,] rather[,] depends on the
effect it was intended to have and whether it was reasonable.”49 “[I]n cases of doubt[,]
the courts favor the construction which holds the stipulated sum to be a penalty, and
limits the recovery to the amount of damages actually shown, rather than a liquidation
of the damages.”50
Here, the undisputed evidence shows that, at the time the parties entered into
the Contract, the Broker had not performed any significant efforts to sell the Property.
Although, in March 2017, the Sellers were planning to put the Property on the market
soon, they had not yet chosen a real estate agent or listed the Property for sale. Thus,
prior to the Contract being executed, the Broker had no contract with the Sellers, and
had not listed the Property, erected any “for sale” signs, staged or photographed the
Property, or taken any other efforts to market the Property. Indeed, it was the Buyers’
agent who contacted the Broker’s agent, a resident of the Kingwood neighborhood,
49
Id. at 228.
50
Id. at 231 (citation and punctuation omitted). See Swan Kang, Inc., 243 Ga.
App. at 686 (1) (“The party who defaults under the contract bears the burden of
proving that the liquidated damages clause is an unenforceable penalty. The
enforceability of such a clause is a question of law for the court.”).
23
to see if any properties were available in the area. The Buyers’ agent then obtained
permission to show the Property to the Buyers on March 30, 2017, and by the end of
the next day, the Buyers had viewed the Property and made an offer, their agent had
drafted the Contract, and the parties had executed the Contract without any changes.
Under these circumstances, the Broker has failed to demonstrate that, at the time the
Contract was executed, a $53,250 sales commission constituted “a reasonable pre-
estimate of the [Broker’s] probable loss.”51
Moreover, the record shows that the Sellers encouraged the Broker to sue for
its commission in order to strengthen the Sellers’ “case” and force the Buyers to
“cave,” i.e., acquiesce and close on the Property. In response, the Broker’s agent
texted that the Buyers “need to learn a big lessen the hard way.”
Under these circumstances, we find that the Contract provision at issue
constitutes an unenforceable penalty and that the trial court erred in granting
summary judgment to the Broker on its claim for the full amount of the sales
commission under the provision.
51
Southeastern Land Fund, 237 Ga. at 230 (citations and punctuation omitted).
24
However, because a jury issue remains as to the Broker’s actual damages, if
any, a grant of the Buyers’ motion for summary judgment is precluded. Therefore,
this issue must be addressed in the trial court on remand.
5. The Buyers contend that the trial court erred in granting summary judgment
to the Sellers on the claim for incidental damages that allegedly arose from the
Buyers’ breach of the Contract. However, the trial court’s order states that, while the
court granted the Sellers’ motion for summary judgment, the court would consider the
“issue[ ] of ancillary damages” on its next available trial calendar. Thus, it appears
that the trial court reserved judgment on the claim for incidental damages.52 It follows
that there is nothing for this Court to review on this issue in the instant appeal.
6. The Buyers also contend that the trial court erred in awarding the Broker its
attorney fees. However, the trial court’s summary judgment order specifically
reserved a ruling on the issue of attorney fees, stating that the issue would be heard
on the next available trial calendar. Thus, there is nothing for this Court to review on
this issue at this time.
52
This conclusion is supported by the pre-trial order filed in the record after the
court issued its summary judgment order. In the pre-trial order, the parties identified
the issue of “incidental damages/carrying costs” as one that required resolution by a
jury.
25
In summary, we reverse the grant of summary judgment to the Sellers on their
claim for specific performance. In addition, we reverse the grant of summary
judgment to the Broker on its claim for its commission under the Contract, and
remand that issue to the trial court for jury resolution.
Judgment reversed and case remanded with direction. Miller, P. J., and
Rickman, J., concur.
26