Corbitt v. Harris, 74008
| Decision Date | 23 February 1987 |
| Docket Number | No. 74008,74008 |
| Citation | 182 Ga.App. 81,354 S.E.2d 637 |
| Parties | CORBITT et al. v. HARRIS et al. |
| Court | Georgia Court of Appeals |
Velma C. Tilley, Cartersville, for appellants.
Sherman C. Fraser, Atlanta, for appellees.
In 1972 appellee J. Wesley Harris entered into a partnership agreement with appellants or their predecessors in interest for the purpose of conducting certain real estate transactions. In December 1982 an audit of the partnership was conducted so as to determine the worth of the partners' respective interests with a view to one partner's selling his interest to an outsider. The audit disclosed a discrepancy in the allocation of the partnership funds amounting to at least $95,000. Appellee J. Wesley Harris, who had acted as managing partner and also as the partnership's real estate agent in the sale and rental of partnership properties, acknowledged the possibility that he was indebted to the partnership in an amount approximating the discrepancy but contended that the discrepancy was due at least in part to bookkeeping errors. He offered to (and subsequently did) convey to the partnership his interest in the partnership, amounting coincidentally to approximately $95,000, so as to "satisfy this obligation ... until ... it is resolved."
At the same time that the document containing the above statement was executed by appellee and the other partners, they executed an amendment to the partnership agreement which stated, inter alia: "It is agreed that by the signing of this agreement ... no claims of any kind will be brought against J. Wesley Harris and/or Harris Real Estate Services concerning this ... venture." Subsequent proceedings revealed that Harris' records were hopelessly muddled and incomplete and that, for whatever reason, it would be very difficult to account for all the partnership funds that had passed through his hands during the approximately ten years between the formation of the partnership and the audit which led to the discovery of the discrepancy. 1 At issue in the trial court and on this appeal is which one of the two apparently conflicting statements quoted supra controls: i.e., did the partners unconditionally release J. Wesley Harris and his alter egos forever from any and all claims arising in any manner whatsoever from the partnership venture, or did they release him only to the extent of the approximately $95,000 interest that he conveyed to them in December 1982?
The partners instituted a complaint against appellee alleging fraudulent conversion of partnership funds (Count I) and breach of the partnership contract (Count II). Appellee moved for summary judgment on both counts. The trial court denied summary judgment on Count II but conditionally granted partial summary judgment on Count I, holding that, in order to rescind the contract for fraud and sue in tort rather than affirm the contract and sue for damages, the partners must first tender back to appellee the interest conveyed to them in December 1982. The court allowed appellants twenty days to do this and thereby avoid partial summary judgment against them on Count I.
The partners declined to do this within the specified twenty days and thereafter applied for and received a certificate of immediate review of the order conditionally awarding partial summary judgment on Count I. Enumerated as error is the trial court's award of partial summary judgment. Held:
The general rule governing rescission of a contract for fraud is set forth in OCGA § 13-4-60: "A contract may be rescinded at the instance of the party defrauded; but, in order to rescind, the defrauded party must promptly, upon discovery of the fraud, restore or offer to restore to the other party whatever he has received by virtue of the contract if it is of any value." See, e.g., Kerlin v. Young, 159 Ga. 95, 125 S.E. 204 (1924); Thomson v. Walter, 160 Ga.App. 542, 287 S.E.2d 562 (1981). To effect a complete rescission, all the parties must be returned as nearly as possible to the status quo ante; there is no room for one party to have its cake and eat it, too. Ordinarily, then, one cannot in equity seek to rescind a contract (here, the partnership agreement as amended by appellee J. Wesley Harris' conveyance to the other partners of his interest in partnership property) on the ground of fraud, and at the same time retain the benefits derived from that contract (here, the approximately $95,000 interest conveyed in the amended partnership agreement). See, e.g., Jordy v. Dunlevie, 139 Ga. 325, 77...
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