Breckenridge Creste Apartments v. Citicorp

• Decision Date: 24 June 1993
• Docket Number: Civ. No. 1:92-CV-2029-JEC.
• Parties: BRECKENRIDGE CRESTE APARTMENTS, LTD., a limited partnership, Plaintiff, v. CITICORP MORTGAGE, INC., Defendant.
• Court: U.S. District Court — Northern District of Georgia

826 F. Supp. 460

BRECKENRIDGE CRESTE APARTMENTS, LTD., a limited partnership, Plaintiff, v. CITICORP MORTGAGE, INC., Defendant.

Civ. No. 1:92-CV-2029-JEC.

United States District Court, N.D. Georgia, Atlanta Division.

June 24, 1993.

COPYRIGHT MATERIAL OMITTED

James E. Stephenson, Smith Currie & Hancock, Atlanta, GA, for plaintiff.

W. Rhett Tanner, Gregory R. Hanthorn, Carol M. Kayser, Jones Day Reavis & Pogue, Atlanta, GA, for defendant.

ORDER

CARNES, District Judge.

This case is presently before the Court on Defendant's Motion to Dismiss 6, Plaintiff's Motion for Leave to File Amended Complaint 11, Defendant's Motion to Supplement its Prior Reply Memorandum with Recent Authority 19, and Defendant's Motion to Dismiss Amended Complaint 9. The Court has reviewed the record and the arguments of the parties and, for the reasons set out below, concludes that this action should be dismissed.

BACKGROUND

Plaintiff, Breckenridge Creste Apartments, Ltd., developed, built, and owns an apartment complex. (Am.Compl. ¶ 4). To finance the complex, Plaintiff signed a "standby commitment letter" dated May 24, 1991 ("the Letter") sent by Defendant, Citicorp Mortgage, Inc., whereby Defendant agreed to lend to Plaintiff an amount to be later determined by a detailed analysis of the estimated income, expenses, and appraisal value of the property. (Id. ¶ 7 & Ex. A). The standby commitment had a twelve month term, and Plaintiff was required to notify Defendant of its intention to exercise the commitment within sixty days of the standby commitment's expiration. (Id. Ex. A). Plaintiff paid $78,500 as a non-refundable fee for Defendant's standby commitment. (Id. ¶ 14). The Letter set the maximum permanent loan offer at $5,250,000. (Id. Ex. A). Based on its appraisal, however, Defendant set the actual loan offer at $4,875,000, which was unacceptable to Plaintiff because of its construction loan commitments. (Id. ¶ 20).

Consequently, Plaintiff filed a diversity action¹ with the Court claiming that Defendant's failure to offer the specific loan amount of $5,250,000 constituted breach of contract, fraudulent inducement to contract, and negligent misrepresentation. Plaintiff alleges that the essential terms of the contract are partially expressed in the Letter of May 24, 1991, and that the additional terms can be supplied through parol evidence. (Am.Compl. ¶¶ 7-9, 13). Plaintiff claims to have incurred actual damages that exceed $291,250. (Id. at ¶ 25).

Rather than answer the Complaint, Defendant moved to dismiss pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted. Subsequently, Plaintiff moved for leave to file an Amended Complaint in accordance with Rule 15(a). In response to the Amended Complaint, Defendant again moved to dismiss the Amended Complaint pursuant to Rule 12(b)(6). In its latest motion, Defendant moved to supplement its Prior Reply Memorandum of Law in Further Support of its Motion to Dismiss ("Prior Reply Memorandum").

DISCUSSION

A. Plaintiff's Motion to Amend

The Federal Rules of Civil Procedure provide that "a party may amend its pleading only by leave of the court ..., and leave shall be freely given when justice so requires." FED.R.CIV.P. 15(a). "Courts have interpreted these provisions liberally, in line with the Federal Rules' overall goal of resolving disputes, insofar as possible, on the merits and in a single judicial proceeding." Spartan Grain & Mill Co. v. Ayers, 517 F.2d 214, 220 (5th Cir.1975).² In explaining the amendment standard, the Eleventh Circuit Court of Appeals has observed that "unless a substantial reason exists to deny leave to amend, the discretion of the district court is not broad enough to permit denial." Shipner v. Eastern Air Lines, Inc., 868 F.2d 401, 407 (11th Cir.1989). To determine whether there is a substantial reason to deny leave to amend, the district court should consider the following factors: (1) undue delay, bad faith, or dilatory motive on the part of the movant, (2) repeated failure to cure deficiencies by amendments previously allowed, (3) undue prejudice to the opposing party by virtue of allowance of the amendment, and (4) futility of amendment. Nolin v. Douglas County, 903 F.2d 1546, 1550 (11th Cir.1990).

Defendant does not oppose Plaintiff's motion to amend its Complaint, (Def.'s Mem. in Resp. to Pl.'s Mot. for Leave to File Am. Compl. at 1), and there is no obvious or substantial reason that warrants denial of the motion. Accordingly, the Motion to Amend the Complaint is granted.

B. Defendant's Motion to Supplement

Defendant requested the Court's leave to supplement its Prior Reply Memorandum with a recently decided case from the Georgia Court of Appeals, Studdard v. George D. Warthen Bank, 207 Ga.App. 80, 427 S.E.2d 58 (1993). In Studdard, the Georgia Court of Appeals affirmed a lower court decision that determined that the statute of frauds bars recovery for breach of contract and fraud where the breach is of an alleged oral promise to extend a specific amount of credit. Id. Despite the existence of a writing for a loan for $40,000, the court held that the statute of frauds barred the admissibility of an oral promise to lend an additional $80,000, as the loan for $40,000 did not establish the truth of the oral promise to lend the additional $80,000. Id. at 81, 427 S.E.2d 58.

In the present case, Defendant disputes the existence of a contract based on a statute of fraud defense for a part written and part oral promise to lend money. (Def.'s Reply Mem. in Supp. of Mot. to Dismiss at 3-7). Thus, the Studdard decision is relevant to the issues to be decided. Because Studdard was decided after the Prior Reply Memorandum was submitted to the Court, there is no obvious bad faith in Defendant's motion to supplement, nor is there undue prejudice to Plaintiff in allowing supplementation. Hence, in the interest of justice, the Motion to Supplement is granted.

C. Motion to Dismiss

For purposes of a Rule 12(b)(6) motion to dismiss, the complaint is construed in the light most favorable to the plaintiff and its allegations of material facts are taken as true. Harris v. Menendez, 817 F.2d 737 (11th Cir.1987). To determine whether to grant a Rule 12(b)(6) motion to dismiss, the court primarily considers the allegations in the pleadings, although exhibits attached to the complaint may also be taken into account. Case v. State Farm Mutual Auto. Ins. Co., 294 F.2d 676 (5th Cir.1961); Jacksonville Newspaper Printing Pressmen & Assistants' Union No. 57 v. Florida Publishing Co., 340 F.Supp. 993, 995 (M.D.Fla.), aff'd, 468 F.2d 824 (5th Cir.1972), cert. denied, 411 U.S. 906, 93 S.Ct. 1531, 36 L.Ed.2d 196 (1973). See also 5A CHARLES A. WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1357, at 299 (2d ed. 1984).

1. Breach of Contract

In Georgia, the construction and interpretation of a written contract is a matter of law. Maggard Truck Line, Inc. v. Deaton, Inc., 573 F.Supp. 1388, 1392 (N.D.Ga.1983), aff'd in part mem., 783 F.2d 203 (11th Cir.1986). Thus, when the contract is attached to the complaint as an exhibit, dismissal is appropriate if the court finds that no possible relief can be granted under any construction of the contract sued upon. Florida Publishing Co., 340 F.Supp. at 995.

Plaintiff alleges that the Letter drafted by Defendant and signed by both parties partially reflected an executory contract that committed Defendant to offer a loan of $5,250,000. (Am.Compl. ¶ 7). The Amended Complaint alleges that Defendant made oral promises that the full amount of the loan would be offered, and that these promises induced Plaintiff to sign the Letter and pay the $78,750 non-refundable fee. (Id. ¶¶ 13-15). Defendant, on the other hand, argues that the commitment fee is merely the cost to consider the loan application in the future, and that the statute of frauds bars a breach of contract action because the essential terms of a present contract to lend money are not evidenced by a writing. (Def.'s Reply Mem. in Supp. of Mot. to Dismiss at 4).

After considering the Letter of May 24, 1991 (which was attached to the Amended Complaint as an exhibit) and taking Plaintiff's allegations of material facts as true, the Court concludes that the Letter is at most a present promise to extend an offer of a loan for an amount to be determined upon the completion of a detailed analysis of Plaintiff's ability to meet its loan obligations. The Letter unambiguously states that the maximum loan amount to be considered is $5,250,000. The use of the word "maximum" implies that a lesser amount is contemplated by the parties conditioned on the completion of the detailed analysis of Plaintiff's financial ability to meet its loan commitments.

Nevertheless, Plaintiff alleges that Defendant made oral promises that establish an enforceable contract to lend the maximum amount contemplated by the standby agreement. Georgia contract law, however, requires that in order to bind the promisor of any commitment to lend money, the promise must be in writing and signed by the party to be charged therewith. GA.CODE ANN. § 13-5-30(7) (Michie 1982). Every essential element of the contract must be in writing, and a written memorandum cannot depend upon parol evidence to supply any necessary terms of the contract. Smith v. Cox, 247 Ga. 563, 277 S.E.2d 512, 513 (1981) (part performance exception to the statute of frauds affirmed on an oral and written lease-purchase agreement for the sale of land where the seller accepted rent payments).

Full or partial performance by a party, however, may remove the promise from the statute. Id. 277 S.E.2d at 513; GA.CODE ANN. § 13-5-31 (Michie 1982). Nevertheless, such performance must be essential to the terms of the contract sued upon, and substantial enough to result in a detriment to one party and a benefit to the other to such an extent that the refusal to enforce the contract will result in fraud. Hudson v. Venture...