Crown Series, LLC v. Holiday Hospitality Franchising, LLC.

• Decision Date: 30 October 2020
• Docket Number: A20A1464
• Parties: CROWN SERIES, LLC et al. v. HOLIDAY HOSPITALITY FRANCHISING, LLC.
• Court: Georgia Court of Appeals

357 Ga.App. 523

851 S.E.2d 150

CROWN SERIES, LLC et al.

v.HOLIDAY HOSPITALITY FRANCHISING, LLC.

A20A1464

Court of Appeals of Georgia.

October 30, 2020

Barnes & Thornburg, Abby A. Vineyard, John T. L. Koenig, for Appellant.

Kilpatrick Townsend & Stockton, Michael W. Tyler, Kathryn Elizabeth Isted, Joe Patrick Reynolds, Atlanta, for Appellee.

Hodges, Judge.

Holiday Hospitality Franchising, LLC ("Holiday") sued Crown Series, LLC, 168 N. Michigan Series ("Crown") and Musa Tadros ("Tadros") after Crown sold certain real property slated for a Hotel Indigo in violation of the parties’ license agreement. The parties filed cross-motions for summary judgment and, following a hearing, the State Court of DeKalb County granted Holiday's motion. Crown and Tadros appeal, contending that the trial court erred in: (1) finding that a liquidated damages provision in the parties’ license agreement was enforceable; and (2) awarding prejudgment interest against Tadros in excess of a liability limitation in his personal guaranty. For the following reasons, we affirm.

"We review a grant or denial of summary judgment de novo and construe the evidence in the light most favorable to the nonmovant. Because this opinion addresses cross-motions for summary judgment, we will construe the facts in favor of the nonmoving party as appropriate." (Citation and punctuation omitted.) 905 Bernina Avenue Coop. v. Smith/Burns, LLC , 342 Ga. App. 358, 361 (1), 802 S.E.2d 373 (2017). So viewed, the record reveals that Crown purchased a real estate parcel located at 168 North Michigan Avenue, Chicago, Illinois, on June 30, 2012 for $7.25 million. Thereafter, Holiday and Crown negotiated, and ultimately executed, a November 30, 2012 license agreement to convert the property into, and then operate, a Hotel Indigo (the "License Agreement"). Concerning potential changes in ownership, Paragraph 10.H (1) of the License Agreement provided that

[n]otwithstanding any other term or provision of this License to the contrary, neither this License nor any right or interest herein is assignable or transferable by Licensee. If Licensee (i) receives an offer to purchase or lease the Hotel or any portion thereof, (ii) desires to sell or lease the Hotel or any portion thereof, or (iii) wishes to convey the Hotel, Hotel site, or any interest in the Hotel, Licensee shall give prompt written notice thereof to Licensor, stating the identity of the prospective transferee, purchaser or lessee and the terms and conditions of the conveyance, including all other information with respect thereto, that Licensor may reasonably require.

Furthermore, Paragraph 14.I of the License Agreement, entitled "Performance of the Work," included a liquidated damages provision:

In the event Licensor terminates this License due to Licensee's breach of any of its obligations under the License prior to the time that Licensee is authorized to use the System^[1] at the Hotel, Licensee shall pay to Licensor, as liquidated damages, a lump sum equal to the monthly average of all amounts that would have been payable to Licensor under paragraphs 3.B (1), (3) and (4)^[2] of this License assuming the Hotel had collected Gross Rooms Revenue based on the average daily revenue per available room for all hotels in the System for the previous twelve (12) months, as determined by Licensor, multiplied by the greater of (a) six (6) or (b) the number of full and partial months from the Term Commencement Date to the termination date of the License.

Licensor and Licensee acknowledge and agree that it would be difficult to determine the injury caused to Licensor by termination of this License. Licensor and Licensee therefore intend and agree the above liquidated damages calculations to be a reasonable pre-estimate of Licensor's probable loss and not a penalty or in lieu of any other payment.

Contemporaneously with the License Agreement, Tadros executed a personal guaranty to ensure payment on Crown's behalf if necessary (the "Guaranty").

In December 2013, the City of Chicago denied Crown's application for a building permit due to the need for a specific easement. Crown attempted, without success, to obtain an easement over the course of the next several months. Due to the continuing delay and Crown's inability to secure a building permit for the proposed hotel, Crown sold the property on December 7, 2015, for $20 million. In a December 16, 2015 letter, Holiday terminated Crown's license and notified Crown and Tadros of resulting liquidated damages totaling $2,228,936. Thereafter, Holiday demanded payment of $2,228,936 in liquidated damages from Crown and Tadros, as guarantor, in a March 18, 2016 letter.

Holiday sued Crown and Tadros in a complaint filed May 19, 2016, following Crown and Tadros’ failure to pay. Crown and Tadros moved for summary judgment alleging that Paragraph 14.I was unenforceable because it did not relate to Holiday's actual damages and because the record did not indicate that the parties intended the liquidated damages provision of Paragraph 14.I to provide for damages rather than a penalty. Holiday filed a competing motion for summary judgment, arguing that Crown and Tadros materially breached the License Agreement by selling the property to a buyer who converted the property into a competing hotel and that Crown and Tadros’ failure to secure financing for the project did not absolve them of paying the liquidated damages amount.

Following a hearing, the trial court granted Holiday's motion and awarded Holiday $2,228,936 in liquidated damages against Crown for breach of the License Agreement and against Tadros for breach of the Guaranty. The trial court also awarded Holiday $282,782.40 in attorney fees against Tadros, but in view of Tadros’ liability limitation in the guaranty, the trial court then reduced the attorney fees award against Tadros to $271,064, resulting in a total award against Tadros for $2.5 million. Finally, the trial court awarded Holiday $598,097.98 in prejudgment interest against Crown and Tadros. This appeal followed.

1. In their first enumeration of error, Crown and Tadros contend that the trial court erred in granting Holiday's motion for summary judgment because the liquidated damages provision in the License Agreement was not enforceable. Specifically, Crown and Tadros argue that: (1) the parties did not intend for Paragraph 14.I to provide for liquidated damages rather than a penalty; and (2) Paragraph 14.I is not a reasonable pre-estimate of Holiday's probable loss. We find no error.

As a threshold matter, "Georgia law allows parties to provide for liquidated damages in their contracts, and unless the provision violates some principle of law, the parties are bound by their agreement." Mariner Health Care Mgmt. Co. v. Sovereign Healthcare , 306 Ga. App. 873, 874 (1), 703 S.E.2d 687 (2010). A liquidated damages provision is enforceable if "(1) the injury caused by the breach is difficult or impossible to estimate accurately; (2) the parties intended to provide for damages rather than a penalty; and (3) the sum stipulated is a reasonable pre-estimate of the probable loss." Id. at 874-875 (1), 703 S.E.2d 687.

Determining whether a liquidated damages provision is enforceable is a question of law for the court, which necessarily requires the resolution of questions of fact.... To obtain summary judgment, the moving party must show there is no genuine issue of material fact as to the three factors set out above and that the undisputed facts warrant judgment as a matter of law. To obtain summary judgment, a defendant need not produce any evidence, but must point to an absence of evidence supporting at least one essential element of the plaintiff's claim. Our review of a grant of summary judgment is de novo, and we view the evidence and all reasonable inferences drawn therefrom in the light most favorable to the nonmovant.

(Citation and punctuation omitted.) Id. at 875 (1), 703 S.E.2d 687. In this case, Crown and Tadros do not contest the first factor of the liquidated damages analysis — that "the injury caused by the breach is difficult or impossible to estimate accurately[.]" Id. at 874 (1), 703 S.E.2d 687. Accordingly, we address in turn Crown and Tadros’ arguments concerning the second and third factors.

(a) Intent to Provide for Damages Rather than Penalty. The gravamen of Crown and Tadros’ argument that the parties did not intend for Paragraph 14.I to provide for liquidated damages is that the provision is "buried" in the License Agreement and that Tadros did not negotiate this particular section of the License Agreement. These arguments fail.³

At the outset, we note that

[t]he cardinal rule of construction is to ascertain the intention of the parties. If that intention is clear and it contravenes no rule of law and sufficient words are used to arrive at the intention, it shall be enforced irrespective of all technical or arbitrary rules of construction.... Moreover, no construction is required or even permitted when the language employed by the parties in the contract is plain, unambiguous, and capable of only one reasonable interpretation.

(Citation and punctuation omitted.) Freund v. Warren , 320 Ga. App. 765, 768-769 (1), 740 S.E.2d 727 (2013). Stated differently, "[i]f the terms of a contract are plain and unambiguous, the contractual terms alone determine the parties’ intent." (Emphasis supplied.) Garrett v. Southern Health Corp. of Ellijay , 320 Ga. App. 176, 182 (1), 739 S.E.2d 661 (2013).

Here, Paragraph 14.I applies "[i]n the event [Holiday] terminates this License due to [Crown's] breach of any of its obligations under the License prior to the time that [Crown] is authorized to use the System at the Hotel[.]" (Emphasis supplied.) In that event, Crown must pay "to [Holiday], as liquidated damages , a lump sum" pursuant to certain calculations. (Emphasis supplied.) Moreover, Paragraph 14.I provides that Holiday and Crown

acknowledge and agree that it would be difficult to

...