Alexander v. Steining

• Decision Date: 04 October 1990
• Docket Number: A90A1817,Nos. A90A1816,s. A90A1816
• Citation: 197 Ga.App. 328,398 S.E.2d 390
• Parties: ALEXANDER v. STEINING et al.; STEINING et al. v. ALEXANDER.
• Court: Georgia Court of Appeals

Page 390

398 S.E.2d 390

197 Ga.App. 328

ALEXANDER v. STEINING et al.;

STEINING et al. v. ALEXANDER.

Nos. A90A1816, A90A1817.

Court of Appeals of Georgia.

Oct. 4, 1990.

Rehearings Denied Oct. 19, 1990.

Certiorari Denied Nov. 21, 1990.

Quinton S. King, Atlanta, Edward C. Stone, Marietta, for appellant.

Allman & Lanner, David E. Allman, Denise R. Griffin, Atlanta, for appellants.

BIRDSONG, Judge.

Appellant Diane Alexander appeals from the order of the state court granting judgment on behalf of appellant in a non-jury suit for breach of contract of a lease-purchase agreement, consisting of two documents--a lease and a sales agreement--which incorporated each other by reference. Appellees, Henry and Sally Steining, cross-appeal from the portion of the judgment which directed defendants to pay $1,200 as increased rent as month-to-month tenants.

The judgment pertinently provides, "the court enters judgment as follows: [Appellant/]Plaintiff is entitled to retain the $2,500.00 earnest money deposit as liquidated damages and [appellees/d]efendants owe [p]laintiff $1,200.00 representing increased rent for the period of February 1, 1989 through July 31, 1989. Wherefore it is ORDERED that [p]laintiff have and recover judgment against [d]efendants in the amount of $1,200.00 plus costs of this action." Held:

I. Case No. A90A1816

1. Appellees move to dismiss this direct appeal on the grounds that judgment in this case is $2,500 or less thereby necessitating a timely application for discretionary appeal (OCGA § 5-6-35(a)(6)).

During the course of announcing his finding, the trial judge and appellant's counsel engaged in the following colloquy: "[APPELLANT'S COUNSEL]: And the judgment is $1200 ... for the plaintiff? THE COURT: That's correct. Of course, since the counterclaim has been dismissed, the $2500 is not at issue. [APPELLANT'S COUNSEL]: Correct. It is $1200. THE COURT: In effect, it's $2500 plus $1200. You get to keep the $2500." (Emphasis supplied.)

We find this judgment subject to direct appeal under the provisions of OCGA § 5-6-34(a). "Judgments are to have a reasonable intendment." 18 EGL (1981 Rev.), Judgments & Decrees, § 109. Thus, judgments must be reasonably construed in accordance with the intent of the trial court if the language discloses such intent clearly and without doubt or obscurity; judgment must be construed to give effect to intention of the judge who entered it if possible. See Watts v. State, 141 Ga.App. 127, 132(7), 232 S.E.2d 590. A judgment must be construed in its entirety, rather than merely placing undue emphasis on any particular word therein. See Shepard v. Bozeman, 222 Ga. 585, 587, 151 S.E.2d 147; Watts, supra 141 Ga.App. at 132, 232 S.E.2d 590. And, "[w]here a judgment is susceptible of two interpretations, that one will be adopted which renders it the more reasonable, effective, and conclusive, and which makes the judgment harmonize with the facts and law of the case and be such as ought to have been rendered." 18 EGL, supra at § 109. When construed in its entirety and given reasonable intendment, the judgment entered is in an amount in excess of $2,500, and accordingly subject to direct appeal. OCGA § 5-6-34(a). Appellees' motion is denied.

2. Appellant Alexander asserts, inter alia, that the lower court erred in adjudging that the $2,500 earnest money provision was liquidated damages, and in failing to grant a motion for new trial on this ground.

In an attachment captioned "Addendum 'A' to Lease Agreement," it was provided that: "Purchaser shall deposit with Seller a non-refundable Earnest Money of $2,500.00 as security for performance of [p]urchaser's obligations under this [l]ease and the related Agreement for Purchase and Sale of Real Estate. In the event of a default by [p]urchaser under the terms of this lease or the agreement for Purchase and Sale of Real Estate the entire $2,500.00 deposit shall be retained by [s]eller, and [p]urchaser shall have no claim to it...." (Emphasis supplied.)

" 'Depending on the language used in the contract and the intent of the parties, the existence of an earnest money provision in a real estate 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 a result of the 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 [this is not such a suit]; and thirdly, the money could be liquidated damages for breach of the contract by the buyer.' " Budget-Luxury Inn v. Kamash Enterprises, 194 Ga.App. 375, 376, 390 S.E.2d 607. It has long been held that "[i]n determining whether a designated sum that is to be paid to one party in the event that the other breaches the contract is a penalty, we must ascertain whether it was inserted for the purpose of deterring the party from breaching his contract, and of penalizing him in the event he should do so, or whether it was a sum which the parties in good faith agreed upon as representing those damages which would ensue if the contract should be breached." Florence Wagon Works v. Salmon, 8 Ga.App. 197, 199, 68 S.E. 866. And " 'where, to secure the performance of the terms of a contract, there is a stipulation for the payment of a fixed, unvarying sum, upon the breach of any of several promises of varying degrees of importance ... the sum named will be construed to be a penalty.' " Florence, supra at 201, 68 S.E. 866. In addition, " '[a] contractual provision requiring payment of a stipulated sum by one of the parties upon termination or cancellation of the contract will be treated as an enforceable liquidated damages provision rather than an unenforceable penalty only if all three of 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 a penalty; and third, the stipulated sum must be a reasonable pre- estimate of the probable loss resulting from such a breach.' " Budget-Luxury, supra 194 Ga.App. at 376, 390 S.E.2d 607; see generally Southeastern Land Fund v. Real Estate World, 237 Ga. 227, 230, 227 S.E.2d 340. We have held that no particular form of words is controlling and the agreement must be examined in its entirety and in light of the circumstances under which it was made. Florence, supra 8 Ga.App. at 198, 68 S.E. 866. Further, we have held that "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." Southeastern, supra 237 Ga. at 228, 227 S.E.2d 340. However, in Oran v. Canada Life Assur. Co., 194 Ga.App. 518(2), 390 S.E.2d 879, this court opined that "in the recent case of Liberty Life Ins. Co. v. Thomas B. Hartley Constr. Co., 258 Ga. 808, 809, 375 S.E.2d 222, the Court appears to ... have held that the label the parties place on the payment is controlling on the issue of their intention." Here, as in Daniels v. Johnson, 191 Ga.App. 70, 72, 381 S.E.2d 87, "[t]here is no language in the contract showing that the parties intended this amount to be liquidated damages rather than a penalty." In Daniels, we held, "[o]f course, while the words used in the provision are by no means conclusive, [cit.], they are a critical factor in determining the intent of the parties."

Appellant, however, directs our attention to the editorial note to Ga.Code Ann. § 20-1403 (OCGA § 13-6-3), pertaining to penalties for breach of bonds, which states that "[t]he distinction between a penalty and a provision for liquidated damages is that a penalty is in effect a security for performance, while a provision for liquidated damages is a sum to be paid in lieu of performance." But see Sanders v. Carney, 118 Ga.App. 576(5)(c), 164 S.E.2d 856 (the agreement did not purport on its face to provide a penalty but merely to provide security for the performance of the contract).

Although there is merit to this contention, after examining the contested provision, particularly in light of the contents of the entire lease-purchase agreement, the circumstances surrounding the execution thereof, and the testimony of the parties concerning their intent, we find it is unclear whether the parties intended the designated, unvarying sum to provide for liquidated damages, rather than a penalty.

"As a general rule, the provisions of a contract will be construed against the draftsman, and those of a lease will be construed against the lessor." Stern's Gallery, etc. v. Corporate Property etc., 176 Ga.App. 586, 593(4), 337 S.E.2d 29. Appellant drafted the contract. However, it is a long-standing specific rule, used in resolving disputed liquidated damage provisions issues, that " '[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 damage actually shown, rather than a liquidation of the damages.' " (Emphasis supplied.) Fortune, etc. Co. v. Dept. of Transp., 242 Ga. 531, 532, 250 S.E.2d 401; Southeastern Land Fund, supra, 237 Ga. at 231, 227 S.E.2d 340; accord Mayor, etc. of Brunswick v. Aetna Indem. Co., 4 Ga.App. 722, 728, 62 S.E. 475. Whenever these two rules of contract construction are in...