Atl. Geoscience, Inc. v. Phx. Dev. & Land Inv., LLC, A16A1746

• Citation: 799 S.E.2d 242
• Decision Date: 16 March 2017
• Docket Number: A16A1746,A16A1755
• Parties: ATLANTIC GEOSCIENCE, INC. v. PHOENIX DEVELOPMENT AND LAND INVESTMENT, LLC ; and vice versa.
• Court: United States Court of Appeals (Georgia)

341 Ga.App. 81

799 S.E.2d 242

ATLANTIC GEOSCIENCE, INC.

v.PHOENIX DEVELOPMENT AND LAND INVESTMENT, LLC ; and vice versa.

A16A1746

A16A1755

Court of Appeals of Georgia.

March 16, 2017

Reconsideration Denied March 29, 2017

J. Robert Persons, Atlanta, for Appellant in A16A1746.

Michael Shannon Broun II, for Appellee in A16A1746.

William S. Cowsert, Athens, Michael Shannon Broun II, for Appellant in A16A1755.

J. Robert Persons, Atlanta, for Appellee in A16A1755.

McFadden, Presiding Judge.

These appeals arise from a professional negligence action. Phoenix Development and Land Investment, LLC ("Phoenix") hired Atlantic Geoscience, Inc. ("Atlantic") to perform an environmental study of land Phoenix wanted to purchase and develop. Atlantic reported that a portion of that land was a "soil/stone storage area." But, after purchasing the land, Phoenix was told that that portion of it was a landfill. The trial court granted summary judgment to Atlantic.

In Case No. A16A1746, Atlantic appeals from the trial court's order denying Atlantic's motion to dismiss Phoenix's appeal from the grant of summary judgment, but we find that the trial court did not abuse his discretion, and we affirm that ruling. In Case No. A16A1755, Phoenix appeals from the trial court's order granting summary judgment to Atlantic. We reverse, because there is a genuine issue of material fact as to whether Atlantic's alleged negligent misrepresentation in its environmental study proximately caused pecuniary loss to Phoenix in the form of Phoenix's pre-development expenditures made in reliance on the misrepresentation.

Case No. A16A1746.

1. Denial of Atlantic's motion to dismiss appeal.

Atlantic moved to dismiss Phoenix's appeal from the grant of summary judgment on the ground that, although Phoenix had requested that transcripts be included in the record on appeal, it did not order the transcripts of two summary judgment hearings for more than 246 days after filing its notice of appeal. See OCGA § 5-6-48 (c) (authorizing trial court to dismiss an appeal, among other reasons, "where there has been an unreasonable delay in the filing of the transcript and it is shown that the delay was inexcusable and was caused by such party"); see also Postell v. Alfa Ins. Corp. , 332 Ga.App. 22, 25 (2), 772 S.E.2d 793 (2015). The trial court denied the motion, finding that "dismissal of the appeal [was] not warranted under the circumstances" and noting that the hearing transcripts could not have been "prepared with any greater alacrity" due to the health of the court reporter. At the hearing on the motion, the trial court noted on the record, and the parties did not dispute, that the court reporter had significant health problems during the time period in question that affected his ability to work. See generally OCGA § 24-2-201 (a) & (b) (1) (permitting trial court, sua sponte, to take judicial notice of adjudicative fact, not subject to reasonable dispute, that is generally known within the trial court's territorial jurisdiction). The trial court had broad discretion in ruling on the motion to dismiss the appeal. Propst v. Morgan , 288 Ga. 862, 863, 708 S.E.2d 291 (2011). We do not condone Phoenix's delay in ordering transcripts. But we defer to the trial court's decision—in the exercise of his broad discretion and in light of the unusual circumstance of this case in which the court reporter had limited ability to prepare the transcripts—to deny the motion.

Case No. A16A1755.

2. Grant of Atlantic's motion for summary judgment.

"Summary judgment is proper when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. OCGA § 9-11-56 (c). This [c]ourt applies a de novo standard of review to an appeal from the grant of summary judgment and we view the evidence in the light most favorable to the nonmovant." Davis v. Overall , 301 Ga.App. 4, 5, 686 S.E.2d 839 (2009) (citation omitted).

The parties dispute much of the evidence, and Atlantic argues that we should apply the rule articulated in Prophecy Corp. v. Charles Rossignol, Inc. , 256 Ga. 27, 28 (1), 343 S.E.2d 680 (1986), to construe the arguably contradictory testimony of Phoenix's manager against Phoenix, even though Phoenix is the nonmovant. We decline to do so, because Phoenix's manager is not a party to this case and the excerpts of his testimony included in the record before us do not reflect that he gave the testimony as Phoenix's representative under OCGA § 9-11-30 (b) (6). The Prophecy rule does not apply to the testimony of a non- party witness. Thompson v. Ezor , 272 Ga. 849, 851 (2), 536 S.E.2d 749 (2000).

Viewed in the light most favorable to Phoenix as the nonmovant, the evidence showed that in early 2008, Phoenix hired Atlantic to conduct a "Phase 1 Environmental Assessment"—a "field and paper study" which does not involve physical sampling of soil or water—of approximately 45 acres of real property ("the property") that Phoenix proposed to buy and develop into a residential community. As part of its work, Atlantic issued a written report. It reported that an adjacent landowner had encroached on and was using a small portion of the property as a "soil/stone storage yard." Atlantic also wrote that it did not recommend an additional environmental investigation.

Relying in part on Atlantic's environmental study, Phoenix bought the property on February 29, 2008, and began pre-development work on it. The following year, Phoenix's manager participated in forming a partnership to invest in and further the development of the property. That partnership—South Milledge Investment Group ("SMIG")—entered into an agreement with Phoenix under which SMIG would purchase the property from Phoenix and pay Phoenix fees for developing and managing the property. In accordance with that agreement, Phoenix conveyed the property to SMIG by a deed dated October 1, 2009.

Meanwhile, Phoenix had been in discussions about the encroachment with the adjacent landowner. In a September 8, 2009 letter to Phoenix, the adjacent landowner referred to the encroachment as a "landfill." This was Phoenix's first indication that the encroachment was a landfill. Concerned, Phoenix and SMIG began exploring ways to develop the property that took this information into account. Ultimately, however, SMIG's principals determined that, due to the landfill, the property could not be developed as planned because it was not economically viable.

The bank that financed Phoenix's 2008 purchase of the property closed in early 2010. In November 2010, after Phoenix unsuccessfully sought to extend or restructure the loan encumbering the property with the successor bank, that bank instituted foreclosure proceedings. At that point, SMIG conveyed the property back to Phoenix, which then filed for bankruptcy in an effort to protect the property from foreclosure. In June 2011, SMIG dissolved. Phoenix continued, unsuccessfully, to search for other investors to develop the property. Ultimately the successor bank foreclosed on the property.

In its complaint, Phoenix alleged that Atlantic was professionally negligent for failing to disclose the existence of the landfill and argued that it suffered damages that were directly and proximately caused by this negligence. The crux of Phoenix's theory of damages was that the "late" discovery that the property contained a landfill caused the failure of its development plans with SMIG, and it presented evidence of the amount of money that it would have received from SMIG pursuant to those parties' agreement had the development proceeded as they intended. Phoenix also presented evidence that it had incurred pre-development costs. Phoenix expressly did not seek to recover any diminution in the property's value.

Atlantic argued that it was entitled to summary judgment on grounds of proximate causation and the recoverability of Phoenix's claimed damages. The trial court agreed and granted the motion, finding that Phoenix's claimed damages were not recoverable under the economic loss rule and, alternatively, that there was no evidence showing its damages were proximately caused by Atlantic's alleged negligence. We disagree.

The economic loss rule does not bar Phoenix from seeking pecuniary damages in this case. That rule "generally provides that a contracting party who suffers purely economic losses must seek [its] remedy in contract and not in tort." Gen. Elec. Co. v. Lowe's Home Centers , 279 Ga. 77, 78 (1), 608 S.E.2d 636 (2005) (footnote omitted). But this case concerns an alleged negligent misrepresentation, albeit a misrepresentation made by a professional in the alleged breach of its professional responsibilities. The essence of Phoenix's professional negligence claim against Atlantic is that, in breach of its...