Cs-Lakeview, Inc. v. Simon Property Group

• Decision Date: 28 March 2008
• Docket Number: No. S07G0946.,S07G0946.
• Citation: 283 Ga. 4,659 S.E.2d 359
• Parties: CS-LAKEVIEW AT GWINNETT, INC. v. SIMON PROPERTY GROUP, INC., et al.
• Court: Georgia Supreme Court

659 S.E.2d 359

283 Ga. 4

CS-LAKEVIEW AT GWINNETT, INC. v. SIMON PROPERTY GROUP, INC., et al.

No. S07G0946.

Supreme Court of Georgia.

March 28, 2008.

Reconsideration Denied April 11, 2008.

William S. Mayfield, Duane Morris, LLP, Atlanta, Roger Magnuson, David Y. Trevor, Dorsey & Whitney, LLP, Minneapolis, MN, for Appellant.

Donald A. Loft, Ross Alan Albert, Morris, Manning & Martin, LLP, John F. Manning, Manning & Associates, Atlanta, for Appellee.

CARLEY, Justice.

CS-Lakeview at Gwinnett, Inc. (CS-Lakeview) and related entities entered into a joint venture concerning commercial property with Simon Property Group, Inc. and related entities (Simon). Many of the entities involved in the joint venture are Delaware corporations and, when a complex dispute arose, Simon sued CS-Lakeview in Delaware. In a subsequent settlement agreement, the joint venture assets were divided, including a 133-acre tract of land located in Georgia, which was received by Simon. The agreement purported to give CS-Lakeview a right of first refusal with respect to that property. The agreement further provided that it was to be "subject to and construed in accordance with the laws of the state of Delaware."

When Simon received a third-party offer for the Georgia property, the parties differed as to the required procedures, and Simon eventually sold the land to the third party. CS-Lakeview sued Simon in Georgia, alleging that Simon had not allowed CS-Lakeview to exercise its right of first refusal. The trial court granted summary judgment in favor of Simon on the ground that CS-Lakeview's right of first refusal was invalid under Delaware's rule against perpetuities.

On appeal, the Court of Appeals affirmed, holding that Delaware law governed the validity of CS-Lakeview's right of first refusal and that such provision of the settlement agreement was invalid under that state's rule against perpetuities. CS-Lakeview at Gwinnett v. Simon Property Group, 283 Ga.App. 686, 688(1), 642 S.E.2d 393 (2007). The Court of Appeals further ruled that the trial court correctly refused to reform the agreement so as to remedy the parties' mutual mistake in choosing Delaware law, which invalidates the right of first refusal, in favor of Georgia law, which authorizes such a provision. CS-Lakeview at Gwinnett v. Simon Property Group, supra at 690(2), 642 S.E.2d 393. Having granted certiorari to review this latter ruling, we conclude that mutual mistake is not a valid basis upon which to nullify the parties' choice of Delaware law in order to uphold the right of first refusal.

The Court of Appeals mistakenly relied on OCGA § 23-2-27, which states that, where the facts are all known and there is no misplaced confidence or fraudulent conduct inducing the mistake or preventing its correction, "ignorance of the law by a party (not a mutual mistake by both) shall not authorize the intervention of equity.... [T]his Code section has no application to a mutual mistake of law by both parties." (Emphasis in original.) Superior Ins. Co. v. Dawkins, 229 Ga.App. 45, 48(1), fn. 2, 494 S.E.2d 208 (1997). See also A.J. Concrete Pumping v. Richard O'Brien Equipment Sales, 256 Ga. 795, 796(1), 353 S.E.2d 496 (1987) ("`(E)quity will reform a written instrument for the unilateral mistake of one party accompanied by fraud or inequitable conduct on behalf of the other party.' [Cit.]").

An alleged mutual mistake of law is governed by OCGA § 23-2-22, which applies to "[a]n honest mistake of the law as to the effect of an instrument on the part of both contracting parties, when the mistake operates as a gross injustice to one and gives an unconscionable advantage to the other. . . ." "A mistake relievable in equity is some unintentional act, omission, or error arising from ignorance, surprise, imposition, or misplaced confidence." OCGA § 23-2-21(a). "Where reformation is sought on the ground of mutual mistake, it must, of course, be proved to be the mistake of both parties. [Cit.]" A. J. Concrete Pumping v. Richard O'Brien Equipment Sales, supra. "The power to relieve mistakes shall be exercised with caution; to justify it, the evidence shall be clear, unequivocal, and decisive as to the mistake." OCGA § 23-2-21(c). See also Fulghum v. Kelly, 255 Ga. 652, 654, 340 S.E.2d 589 (1986).

Relying on the Restatement (Second) of Conflict of Laws § 187(2) cmt. e and several cases, CS-Lakeview contends that, in choosing a governing law which rendered the right of first refusal invalid, the parties made a mutual mistake and would have chosen Georgia law if they had considered the issue. However, this Court has declined to adopt § 187(2) of the Restatement (Second) of Conflict of Laws, and continues to adhere to traditional conflicts of law rules. Convergys Corp. v. Keener, 276 Ga. 808, 812, 582 S.E.2d 84 (2003). Compare Kipin Indus. v. Van Deilen Intl., 182 F.3d 490, 493(II) (6th Cir. 1999) (applying law of Michigan, which follows §§ 187 and 188 of the Second Restatement of Conflict of Laws); Russell J. Weintraub, Commentary on the Conflict of Laws, § 7.3C, p. 495 (5th ed. 2006) (advocating adherence to the Second Restatement).

In light of OCGA § 1-3-9, the law of the jurisdiction chosen by parties to a contract to govern their contractual rights will be enforced unless application of the chosen law would be contrary to the public policy or prejudicial to the interests of this state. Convergys Corp. v. Keener, supra at 810, 582 S.E.2d 84.

"`"[A] contract should not be held unenforceable as being in contravention of public policy except in cases free from substantial doubt where the prejudice to the public interest clearly appears."' (Cit.) . . . `Enforcement of a contract or a contract provision which is valid by the law governing the contract will not be denied on the ground of public policy, unless a "strong case" for such action is presented; mere dissimilarity of law is not sufficient for application of the public policy doctrine....' (Cits.)" [Cit.]

Nationwide General Ins. Co. v. Parnham, 182 Ga.App. 823, 825(4), 357 S.E.2d 139 (1987). "The fact that the law of the forum state is different than the law of the foreign state does not mean that the foreign state's law necessarily is against the public policy of the forum state. [Cit.]" Punzi v. Shaker Advertising Agency, 601 So.2d 599, 600 (Fla. App.1992).

"The policy of giving effect to the parties' intent to have a binding contract and the general policy of contract validation come into conflict when the law that the parties have chosen would invalidate the whole contract." (Emphasis in original.) Scoles, Hay, Borchers & Symeonides, Conflict of Laws § 18.11, p. 982 (4th ed. 2000). However, under either the traditional approach or the Restatement, where, as here,

the law chosen by the parties invalidates only a part of the contract, the parties' expectations of having a binding contract are satisfied. Consequently, in the absence of special circumstances, there is little reason to allow one party to pick the favorable and discard the unfavorable provisions of the chosen law. [Even] [t]he Second Restatement does not support this type of private eclecticism, and most cases have expressly rejected it. [Cits.] (Emphasis in original.)

Scoles, supra at p. 983. See also Symeon C. Symeonides, "Choice of Law in the American Courts," 48 Am. J. Comp. L. 143, 162(IV)(1)(d) (2000) (Restatement (Second) of Conflict of Laws § 187(2) cmt. e "contemplates the analytically and practically different situation in which the chosen law invalidates the entire contract rather than merely a provision thereof"); Larry Kramer, "Rethinking Choice of Law," 90 Colum. L.Rev. 277, 332(IV)(C) (1990) ("there is no a priori reason to conclude that the rule of validation reflects the parties' `true' intentions better than the choice made explicitly in the contract").

It matters not that the parties may not have been actually aware of the [invalidating effect of Delaware's rule against perpetuities] when they signed the [settlement agreement]. They agreed to be bound by [Delaware] substantive law, of which the [rule against perpetuities] is a part.

Boatland v. Brunswick Corp., 558 F.2d 818, 822(II) (6th Cir.1977).

In reviewing the foregoing Georgia law on mutual mistake, as well as commentary and foreign authority with respect to contractual choice-of-law provisions, we conclude that the type of conflict that arose in the present case is not relievable in equity as a mutual mistake in this state. Again, the equitable power to relieve mistakes must be "exercised with caution," and the evidence regarding the mistake must be "clear, unequivocal, and decisive." OCGA § 23-2-21(c). Furthermore, to reform a contract based upon mutual mistake, it must be shown that the alleged mistake resulted in a contract which fails to express accurately the intention of the parties. Zaimis v. Sharis, 275 Ga. 532, 533(1), 570 S.E.2d 313 (2002); Fox v. Washburn, 264 Ga. 617, 618(1), 449 S.E.2d 513 (1994). It is clear that the parties expressly selected the choice-of-law provision of their contract. CS-Lakeview has proved that such provision invalidates a single other contractual term. However, it does not invalidate the entire contract, and a choice of Georgia law may have had its own undesirable implications for the multiple entities and properties involved in the settlement agreement. It is not possible to conclude that the parties clearly and unequivocally intended the choice-of-law provision to fall whenever it would invalidate any provision of the contract. To assume that the parties intended for the right of first refusal to be effective instead of their choice of law is not any more justifiable than the converse assumption. Application of the doctrine of mutual mistake in this case would erroneously be based upon a mere dissimilarity of law.

The dissent's desire to apply the doctrine based upon "special circumstances" other than the ground of public policy is...