Liberty Capital, LLC. v. First Chatham Bank

FOURTH DIVISION
ELLINGTON, P. J.,
BRANCH and MERCIER, 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
July 13, 2016
In the Court of Appeals of Georgia
A16A0094. LIBERTY CAPITAL, LLC. ET AL. v. FIRST JE-004
CHATHAM BANK.
ELLINGTON, Presiding Judge.
This is the second appearance in this Court of an action by First Chatham Bank
against Liberty Capital, LLC to specifically enforce an agreement by Liberty Capital
to purchase a loan related to the development of four residential lots, and for other
relief. In First Chatham Bank v. Liberty Capital, LLC, 325 Ga. App. 821 (755 SE2d
219) (2014) (physical precedent only), we affirmed the trial court’s denial of First
Chatham’s motion for summary judgment on its claim for specific performance.
Following remand, the parties agreed to equitably reform the residential lot numbers
identified in Liberty Capital’s letter to First Chatham in which Liberty Capital
committed to purchase the loan, after which First Chatham and Liberty Capital filed
cross-motions for summary judgment. The trial court granted First Chatham’s motion
for summary judgment and denied Liberty Capital’s motion for summary judgment.
On appeal, Liberty Capital contends that the trial court erred by (i) granting
summary judgment to First Chatham on its claim for specific performance, (ii)
denying summary judgment to Liberty Capital on First Chatham’s claims for fraud
and misrepresentation, (iii) failing to transfer the case to Cobb County, Georgia,
where venue was proper, and (iv) granting summary judgment to First Chatham while
there remained genuine issues of material fact. For the reasons set forth below, we
hold that the trial court erred in granting summary judgment to First Chatham on its
claim for specific performance and in denying Liberty Capital’s motion for summary
judgment on First Chatham’s claims for negligent misrepresentation and fraud. We
find Liberty Capital’s contention that the trial court erred in failing to transfer this
case to be abandoned. Accordingly, we affirm in part and reverse in part.
Under OCGA § 9-11-56 (c),
[s]ummary judgment is warranted 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 party is entitled to a judgment
as a matter of law. We review the grant or denial of a motion for
summary judgment de novo, and we view the evidence, and the
2
reasonable inferences drawn therefrom, in a light most favorable
to the nonmovant.
(Punctuation and footnotes omitted.) Assaf v. Cincinnati Ins. Co., 327 Ga. App. 475,
475-476 (759 SE2d 557) (2014).
The record shows that in 2007, Best Custom Homes, LLC (“Best Homes”)
entered into an agreement to buy four lots in Hampton Island Village development
in Liberty County, Georgia, from Hampton Island, LLC, an affiliate of Liberty
Capital. To encourage First Chatham to extend a loan to Best Homes to fund the
purchase, Liberty Capital delivered a commitment letter, dated January 11, 2008, to
First Chatham. The January 11, 2008 letter provided that it was regarding: “Sale of
Lots T004, T005, T007 and TL10 (the ‘Lots’) by Hampton Island, LLC (‘Seller’) to
Best Custom Homes, LLC (‘Purchaser’), such acquisition to be financed by a loan
(the ‘Acquisition Loan’) from First Chatham Bank (‘Lender’).” The January 11, 2008
letter further provided, in pertinent part, that
This letter represents Liberty Capital’s commitment that if the
speculative residences to be constructed on the Lots by Purchaser from
the proceeds of the Acquisition Loan are for any reason not sold by the
second anniversary of the Acquisition Loan closing date, Purchaser,
within sixty (60) days following receipt of written demand by Lender
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provided within 90 days following such second anniversary, will
purchase the Acquisition Loan from Lender.
Liberty Capital “acknowledge[d] that the provision of this letter agreement for the
benefit of Lender constitutes a material inducement to Lender’s willingness to make
the Acquisition Loan to facilitate the acquisition of the Lots by Purchaser from
Seller.”
Also on January 11, 2008, First Chatham committed, pending the receipt and
review of the “buy-back letter” from Liberty Capital, to provide a loan to Best Homes
to fund the purchase of the lots and construction of homes at Hampton Island to be
secured by “Lots V4, V7, V10, and V14.” Notwithstanding that the January 11, 2008
letter referred to Lots 4, 5, 7, and 10, and First Chatham’s commitment referred to
Lots 4, 7, 10, and 14, Best Homes purchased on January 14, 2008, with the proceeds
of the loan, four lots identified as Lots 4, 5, 9, and 10. In connection with that
transaction, Best Homes executed a Commercial Promissory Note in the principal
amount of $2,390,898 (the “Note”).
Two years thereafter, on January 14, 2010, First Chatham notified Liberty
Capital that it was demanding that Liberty Capital purchase the Acquisition Loan
because the preconditions of the January 11, 2008 letter had been met, including that
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the residences on the lots purchased with the Acquisition Loan had not been sold. On
February 9, 2010, Liberty Capital responded with a letter indicating that it would not
honor First Chatham’s demand.
On January 5, 2011, First Chatham sued Liberty Capital for specific
performance, breach of contract, and negligent misrepresentation. First Chatham
named Best Homes, Genesis Designer Homes, LLC, Richard E. Best, and Jill M. Alba
as co-defendants. The claims against the co-defendants included a suit on the Note
against Best Homes and a claim against Genesis Designer Homes, Best, and Alba for
breach of their personal guaranties of the Note. First Chatham later amended the
complaint to assert claims against Liberty Captial for fraud and equitable reformation
of the January 11, 2008 letter.
First Chatham moved for summary judgment on its claim for specific
performance. The trial court denied the motion for summary judgment because the
terms of the contract, as reflected in the respective commitments of Liberty Capital
and First Chatham, were inconsistent, and issues of material fact remained as to the
terms of their agreement. On interlocutory appeal, we affirmed the trial court’s
judgment as there remained a genuine issue of material fact as to the essential terms
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of the parties’ agreement. First Chatham Bank v. Liberty Capital, LLC, 325 Ga. App.
at 828 (2).
Following remand, the parties stipulated and agreed to a consent order that, “to
resolve an uncertain claim,” the January 11, 2008 letter be equitably reformed to
reference “Lots TL 04, TL 05, TL 09, and TL 10.” Liberty Capital and First Chatham
then filed cross-motions for summary judgment. The trial court granted First
Chatham’s motion for summary judgment as to its claim for specific performance,
found that its breach of contract claim was moot, and denied Liberty Capital’s motion
for summary judgment as to First Chatham’s claims for negligent misrepresentation
and fraud.
1. Liberty Capital contends that the trial court erred in granting First Chatham’s
motion for summary judgment on its claim for specific performance because First
Chatham did not establish that it did not have an adequate remedy at law through an
award of damages.1 As the movant for summary judgment, First Chatham was
required to show that there was no genuine issue of material fact and that it was
entitled to judgment as a matter of law. See OCGA § 9-11-56 (c); Lindgren v. Dowis,
1
Liberty Capital also contends that summary judgment was improper because
the parties’ agreement was (i) too vague to be enforced by specific performance and
(ii) not within their power to perform, but we do not reach these additional arguments.
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236 Ga. 278, 280-281 (3) (223 SE2d 682) (1976) (trial court did not err in denying
seller’s motion for summary judgment for specific performance of an agreement for
the purchase and sale of stock as he did not show there was no issue of fact as to
laches).
Under Georgia law, “[s]pecific 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.” OCGA § 23-2-130.
“Equitable 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.” (Citation and punctuation omitted.) Besser
v. Rule, 270 Ga. 473, 475 (510 SE2d 530) (1999).
In arguing that specific performance is the appropriate remedy in this case,
First Chatham relies on authorities which address loan “repurchase” obligations. For
example, in Sun American Bank v. Fairfield Financial Svcs., 690 FSupp2d 1342
(M.D. Ga. 2010), an authority relied upon by First Chatham, the defendant bank sold
participation interests in a loan it had originated to other banks, including the
plaintiff’s predecessor in interest, in order to reduce its overall risk exposure. Id. at
1344. The repurchase obligation was the parties’ agreed-upon remedy for a breach of
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the underlying participation agreement. Id. at 1365 (III). While the court, applying
Georgia law, found specific performance of the repurchase obligation to be one of
several remedies available to the plaintiff, it relied on the principle that “[s]pecific
performance is generally available whenever the damages recoverable at law would
not be an adequate compensation for nonperformance.” Id. at 1368 (III) (citation and
punctuation omitted). And the damages for the underlying breach of the participation
agreement, which pertained to the originating bank’s disclosure obligations, were
impossible to calculate, such that the originating bank’s repurchase of the
participation interest was the most reasonable means of restoring the parties to the
position they would have been in absent the breach. See id. (“Precise legal damages
would be impossible to calculate because such calculation would require speculation
into what [the participating bank] would have done with the information [the
originating bank] was obligated to disclose.”). Here, there is no underlying breach for
which legal damages are impossible to calculate. Rather, Liberty Capital’s failure to
purchase the Acquisition Loan is the breach at issue and is not the parties’ agreed-
upon remedy for the breach.
This Court has found that the failure to honor a loan repurchase obligation
triggered by a breach of the parties’ agreement to be, in itself, a breach of the
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contract. See 2010-1 SFG Venture LLC v. Lee Bank & Trust Co., 332 Ga. App. 894,
907 (3) (b) (775 SE2d 243) (2015); Cleveland Motor Cars, Inc. v. Bank of America,
295 Ga. App. 100, 103 (670 SE2d 892) (2008); Rod’s Auto Finance, Inc. v. Finance
Co., 211 Ga. App. 63, 64-65 (438 SE2d 175) (1993). Thus, a failure to timely
repurchase a participation interest in a loan upon proof of a material default is “an
independent breach of the participation agreement that, if proven, would entitle [the
participating bank] to pursue money damages for the alleged failure to repurchase.”
2010-1 SFG Venture LLC v. Lee Bank & Trust Co., 332 Ga. App. 894, 907 (3) (b)
(775 SE2d 243) (2015) (citations and punctuation omitted). In reaching this
conclusion in 2010-1 SFG Venture LLC, we noted the observation of a federal district
court that “[t]he payment of the liquidation price of a loan is payment of an amount
of money, which is completely fungible . . . . There is [thus] no practical difference
between this ‘repurchase’ remedy and compensatory damages.” Id. at 907 (3) (b)
(quoting ORIX Real Estate Capital Markets, LLC v. Superior Bank, FSB, 127
FSupp2d 981, 983 (II) (A) (N.D. Ill. 2000)). First Chatham’s reliance on the
jurisprudence of “repurchase” agreements does not establish that it is entitled to the
remedy of specific performance. Indeed, our holding in 2010-1 SFG Venture LLC
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suggests that an award of damages may be an adequate remedy for the failure to
honor a repurchase obligation.
Nevertheless, First Chatham also argues that specific performance is the
appropriate remedy here because the measure of damages resulting from Liberty
Capital’s non-performance is uncertain or difficult to ascertain. See Gabrell v. Byers,
178 Ga. 16, 21 (172 SE2d 227) (1933) (noting that, notwithstanding the general rule
that specific performance of contracts in relation to personal property will not be
enforced, specific performance is available where “the measure of damages resulting
from the non-performance of the contract is uncertain or difficult of ascertainment.”).
Compare Duval & Co. v. Malcom, 233 Ga. 784, 788 (214 SE2d 356) (1975) (“The
general rule is that specific performance of contracts in relation to personal property
will not be enforced, for the reason that ordinarily compensation for breach of
contract may be had by way of an action at law for damages.”) (citation and
punctuation omitted). First Chatham presented this argument more fully in its briefing
below, wherein it contended that it was injured by not being paid the agreed-upon
purchase price of the Acquisition Loan, but also in “that it has had to carry the risk
of carrying a non-performing loan beyond the two years that it bargained for.” First
Chatham asserted that this “injury was difficult to calculate” and therefore “the best,
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and fairest, remedy” was to require Liberty Capital to specifically perform its loan
purchase obligation.
In a breach of contract case, the measure of damages “is the amount which will
compensate the injured person for the loss which a fulfillment of the contract would
have prevented or the breach of it entailed. In other words, the person injured is so
far as it is possible to do so by a monetary award, to be placed in the position he
would have been in had the contract been performed.” (Citations and punctuation
omitted.) Bennett v. Associated Food Stores, 118 Ga. App. 711, 715 (2) (165 SE2d
581) (1968). Here, if the parties’ contract had been performed, First Chatham would
have received the purchase price of the Acquisition Loan but would no longer hold
the Acquisition Loan. An award of money damages could adequately compensate
First Chatham insofar as Liberty Capital’s failure to pay the purchase price of the
Acquisition Loan, and thus place it in the same position as had the parties’ contract
been performed. First Chatham contends that holding the Acquisition Loan will result
in economic injury by exposing it to unforeseen expenses. However, to the extent that
First Chatham incurs out-of-pocket costs during the course of the litigation on
account of having to service the Acquisition Loan, it does not show that these
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amounts are difficult to calculate.2 Accordingly, we conclude that First Chatham did
not show that there was no genuine issue of material fact as to the adequacy of
damages as the legal remedy for nonperformance. Consequently, the trial court erred
in awarding summary judgment on its claim for specific performance.
2. Liberty Capital further contends that the trial court erred in denying its
motion for summary judgment on First Chatham’s claims for negligent
misrepresentation and fraud. We agree. Because, as set out more fully below, First
Chatham failed to exercise its requisite due diligence, these claims fail as a matter of
law.
(a) Negligent Misrepresentation. As to its claim for negligent
misrepresentation, First Chatham contends that Liberty Capital’s representation in the
Letter Agreement that it would purchase the Acquisition Loan from First Chatham
used to finance the sale of “Lots T004, T005, T007 and TL10” from Hampton Island
LLC to Best Homes was either false or mistaken in that the lots actually being sold
2
We note that, although First Chatham describes the Acquisition Loan in terms
of its costs and risk to First Chatham, the Acquisition Loan is also an asset and, as
such, might have residual value to the holder. However, First Chatham does not
contend that the measure of damages should account for the fair market value of the
Acquisition Loan, nor did it come forward with any evidence as to the Acquisition
Loan’s value or lack thereof, or as to whether any such value is impossible or difficult
to calculate.
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by Hampton Island LLC to Best Homes were lots TL 04, TL 05, TL 09, and TL 10.
First Chatham alleges that Liberty Capital was negligent in describing the wrong lots
and in failing to correct the error. And, First Chatham, maintains, Liberty Capital
knew that First Chatham was relying on the Letter Agreement in finalizing the
Acquisition Loan for the sale of lots TL 04, TL 05, TL 09, and TL 10; that First
Capital was justified in relying upon Liberty Capital’s representations in making the
Acquisition Loan; and that it was damaged as a proximate result.
The elements of a claim for negligent misrepresentation are: “(1) the
defendant’s negligent supply of false information to foreseeable persons, known or
unknown; (2) such persons’ reasonable reliance upon that false information; and (3)
economic injury proximately resulting from such reliance.” (Footnote omitted.)
Hardaway Co. v. Parsons, Brinckerhoff, Quade & Douglas, Inc., 267 Ga. 424, 426
(1) (479 SE2d 727) (1997). “[J]ustifiable reliance is an essential element of a claim
asserting negligent misrepresentation.” (Footnote omitted.) Anderson v. Atlanta
Committee for the Olympic Games, Inc., 261 Ga. App. 895, 900 (2) (584 SE2d 16)
(2003). And “[t]o show justifiable reliance, the plaintiff must establish that he
exercised his duty of due diligence.” (Citations omitted) Nebo Ventures, LLC v.
NovaPro Risk Solutions, L.P., 324 Ga. App. at 840 (1) (d). See Artzner v. A & A
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Exterminators, Inc., 242 Ga. App. 766, 771-772 (2) (531 SE2d 200) (2000)
(justifiable reliance is an essential element of a claim for negligent misrepresentation,
and a plaintiff’s failure to exercise due diligence will bar a claim for negligent
misrepresentation). Whether a plaintiff could have protected itself by the exercise of
due diligence is generally a question for the jury; however, “an exception occurs
when a plaintiff cannot offer evidence that he exercised his duty of due diligence to
ascertain the truth and to avoid damage.” (Citation omitted.) Walden v. Smith, 249
Ga. App. 32, 35 (1) (546 SE2d 808) (2001).
To the extent that Liberty Capital was negligent in failing to accurately state
the lot numbers in the January 11, 2008 letter, or in failing to correct that mistake,
that misrepresentation was apparent on the face of the document. First Chatham was
also aware of the correct lot numbers when it extended the Acquisition Loan to Best
Homes, as those numbers were set forth in the loan documentation. Thus, First
Chatham could have discovered that it was not extending a loan for the purchase of
the lot numbers set forth in the January 11, 2008 letter by reading that document,
which, in the exercise of reasonable diligence, it was required to do. See, e.g., Terry
Brantley Greenbriar Rental & Sales, Inc. v. Davis, 172 Ga. App. 107, 108 (321 SE2d
829) (1984) (“A party to a contract who can read must read or show a legal excuse
14
for not doing so.”) (citation and punctuation omitted). Further, “[i]n the absence of
special circumstances, one must exercise ordinary diligence in making an independent
verification of contractual terms and representations.” (Citation and punctuation
omitted.) Rainey v. GAFVT Motors, Inc., 269 Ga. App. 479, 481 (1) (a) (604 SE2d
840) (2004). As First Chatham failed to exercise ordinary diligence in protecting
itself from the alleged misrepresentation in the January 11, 2008 letter, it cannot
establish the element of justifiable reliance, and its claim for negligence
misrepresentation fails as a matter of law. See, e.g., Gospel Tabernacle Deliverance
Church, Inc. v. From the Heart Church Ministries, Inc., 312 Ga. App. 355, 359 (718
SE2d 575) (2011) (where the falsity of the alleged negligent misrepresentation would
have been revealed by examination of documents in plaintiffs’ possession, the
plaintiffs, as a matter of law, failed to exercise due diligence).
(b) Fraud. First Chatham contends that Liberty Capital committed fraud in that
it intentionally misrepresented the lot numbers set forth in the January 11, 2008 letter
with the goal of avoiding future performance. To show fraud, a plaintiff must
establish “(1) false representation by defendant; (2) scienter [or knowledge of the
alleged falsehood]; (3) intent to induce the plaintiff to act or refrain from acting; (4)
justifiable reliance by the plaintiff; and (5) damage to the plaintiff.” (Citation and
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punctuation omitted.) Nebo Ventures, LLC v. NovaPro Risk Solutions, L.P., 324 Ga.
App. 836, 838-839 (1) (752 SE2d 18) (2013).
As in the case of its claim for negligent misrepresentation, the alleged deceit
was apparent on the face of the January 11, 2008 letter, and First Chatham’s failure
to exercise due diligence precluded it from establishing the element of justifiable
reliance. “Fraud cannot be the basis of an action if it appears that the party alleging
the fraud had equal and ample opportunity to prevent it and yet made it possible
through the failure to exercise due diligence.” (Citation and punctuation omitted.)
Isbell v. Credit Nation Lending Serv., LLC, 319 Ga. App. 19, 26 (2) (b) (735 SE2d
46) (2012).
3. Liberty Capital contends that the trial court erred in exercising jurisdiction
over it and denying its motion to transfer the case to the Superior Court of Cobb
County, where it alleges venue lies. Generally, venue in civil proceedings against
domestic and foreign corporations lies “in the county of this state where the
corporation maintains its registered office.” OCGA § 14-2-510 (b) (1). See Ga. Const.
of 1983, Art. VI, Sec. II, Par. VI. (“[V]enue as to corporations, foreign and domestic,
shall be as provided by law.”). It is undisputed that Liberty Capital maintains its
registered office in Cobb County. However, First Chatham contended below, and the
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trial court found, that venue as to the tort claims against Liberty Capital lay in
Chatham County under OCGA § 14-2-510 (b) (4), which provides, in pertinent part,
that domestic corporations and foreign corporations authorized to transact business
in Georgia “shall be deemed to reside and to be subject to venue as follows: [i]n
actions for damages because of torts, wrong, or injury done, in the county where the
cause of action originated.” First Chatham also contended below that the trial court
had the discretion to consider its claims for breach of contract and specific
performance under the principle of pendent venue because those claims arose from
the same transaction as the tort claims. See Natpar Corp. v. E. T. Kassinger, 258 Ga.
102, 104 (1) (365 SE2d 442) (1988) (“Where a plaintiff brings suit in the same county
on two claims arising from the same transaction and the Georgia Constitution
designates that county as the venue for one of those claims, the trial court has the
discretion to entertain both claims.”); C.W. Matthews Contractor Co. v. Barnett, 219
Ga. App. 763, 765 (3) (466 SE2d 657) (1996) (accord).
Liberty Capital maintains that the trial court erred in failing to transfer the case
because it was not jointly liable with the resident co-defendants, either as joint
tortfeasors or as joint obligors. But Liberty Capital does not address whether venue
as to the tort claims was proper in Chatham County under OCGA § 14-2-510 (b) (4),
17
as the trial court found. Liberty Capital also suggests that, inasmuch as it is entitled
to summary judgment on the tort claims, venue will become improper as to the
remaining contract claims once partial summary judgment is entered its favor, and
that this Court should therefore instruct the trial court to transfer the case to Cobb
County. However, Liberty Capital does not support this assertion by either argument
or citation to authority. See Court of Appeals Rule 25 (c) (“Any enumeration of error
which is not supported in the brief by citation of authority or argument may be
deemed abandoned.”). For the foregoing reasons, we deem this claim of error to be
abandoned.
4. Lastly, Liberty Capital contends that issues of material fact precluded
summary judgment. We find this claim of error to be moot in light of our findings in
Division 1, supra.
Judgment affirmed in part and reversed in part. Mercier, J., concurs. Branch,
J., concurs in Divisions 2, 3, and 4, and concurs in judgment only as to Division 1.
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