Donchi, Inc. v. Robdol, LLC, A07A0209.

• Decision Date: 03 January 2007
• Docket Number: No. A07A0209.,A07A0209.
• Citation: 640 S.E.2d 719,283 Ga. App. 161
• Parties: DONCHI, INC. v. ROBDOL, LLC et al.
• Court: Georgia Court of Appeals

283 Ga. App. 161

640 S.E.2d 719

DONCHI, INC. v. ROBDOL, LLC et al.

No. A07A0209.

Court of Appeals of Georgia.

January 3, 2007.

Clayton A. Hall, Buckley King, Hawkinsville, Ralph L. Taylor, III, Hall & Hall, Gainesville, for Appellant.

G.G. Kunes Jr., David McQuary, for Appellee.

BLACKBURN, Presiding Judge.

In this action arising from a sale of property, plaintiff Donchi, Inc. sued defendants Robdol, LLC, Robert Steele, David McQuary, and Florida Commercial Exchange ("FCE"), alleging fraud, breach of contract, and unjust enrichment. Robdol and Steele successfully moved for summary judgment as to all claims, and Donchi now appeals. For the reasons set forth below, we affirm.

Summary judgment is proper when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. OCGA § 9-11-56(c); Britt v. Kelly & Picerne, Inc.¹ A de novo standard of review applies to an appeal from a grant of summary judgment, and we view the evidence, and all reasonable conclusions and inferences drawn from it, in the light most favorable to the nonmovant. Matjoulis v. Integon Gen. Ins. Corp.²

So construed, the evidence shows that David McQuary, the principal of FCE, approached Leonard Morris, Jr., the president of Donchi, to express an interest in purchasing its golf course and surrounding undeveloped property (the "property") located in Tift County, Georgia. In February 2003, McQuary and Morris negotiated a purchase agreement in which Donchi would convey the property to FCE and McQuary for $2,250,000. The agreement further provided that $300,000 of the purchase price would be paid by conveying McQuary's beach house in Wakulla County, Florida, to Morris.

Shortly after the agreement was executed, McQuary informed Morris that Robdol, a limited liability corporation with Robert Steele as its managing member, would be providing the financial backing for the transaction. Steele had previously provided McQuary with financial backing for other transactions, and at the time the purchase agreement was negotiated and executed, McQuary owed Steele approximately $400,000. Steele agreed to have Robdol provide the financial backing for the purchase of Donchi's property with the hope that development of the property surrounding the golf course would allow McQuary to repay some of his debt while also providing a return on Robdol's investment.

In May 2003, to memorialize Robdol's involvement, the parties executed an addendum to the original purchase agreement, which assigned nearly all of McQuary's and FCE's rights and obligations as buyers of the property to Robdol, including payment of the majority of the purchase price. However, with respect to the transfer of McQuary's beach house, the addendum included a condition which provided that

[r]egardless of the assignment to Buyer's assignee, Buyer shall remain fully responsible for the transfer of the Shell Point, Florida, beach home (the "Beach Home") to Seller, and for all covenants, costs of transfer and payments relating thereto. Buyer's assignee shall have no obligations or liability in that regard, except that, if Buyer fails or refuses to transfer the Beach Home to Seller simultaneously with the Closing, then Seller may elect to terminate the Contract by returning the Deposit to Buyer's assignee . . . without the Beach Home, understanding that Buyer's assignee shall have fully performed under the Contract by delivering at Closing the sum of $1,600,000.00 and the Second Mortgage and $350,000.00 promissory note secured thereby, and by paying all of Buyer's closing costs required under the Contract (except costs in connection with the transfer of the Beach Home).

On the same date that the addendum was executed, McQuary and Robdol entered into a separate Assignment and Development Agreement, which also memorialized the assignment of McQuary's rights as buyer of the Donchi property to Robdol and stipulated how the property was to be managed. The Assignment Agreement further provided that the $400,000 debt, which McQuary owed to Steele, would be satisfied upon the closing of the purchase agreement with Donchi and the transfer of the beach house to Morris.

At the closing of the transaction in August 2003, Robdol paid its portion of the $2,250,000 purchase price in the form of $250,000, an assumption of Donchi's existing debt on the property, and a second mortgage in the amount of $350,000. That same day at a separate closing, McQuary executed a warranty deed conveying the beach house to Morris, which seemingly completed the transaction. Approximately one month later, however, Morris learned that the beach house was foreclosed upon and sold during that month. Acting on behalf of Donchi, Morris initiated this action against McQuary, FCE, Steele, and Robdol, alleging numerous claims including fraud, breach of contract, and unjust enrichment. After discovery, Robdol and Steele moved for summary judgment as to all of Donchi's claims. The trial court granted their motion, and this appeal followed.

1. Donchi contends that the trial court erred in granting summary judgment as to its fraud claim, arguing that defendants provided false oral assurances that the mortgage on the beach house would be maintained and that defendants failed to disclose that the beach house was being foreclosed upon. We disagree.

"In general, a party alleging fraudulent inducement to enter a contract has two options: (1) affirm the contract and sue for damages from the fraud or breach; or (2) promptly rescind the contract and sue in tort for fraud." Ainsworth v. Perreault.³ In this case, Donchi's complaint alleges fraud and breach of contract but does not include a claim for rescission. It is therefore apparent that Donchi has elected to affirm the purchase agreement and seek damages arising from the alleged fraud and breach of contract. See id. at 472, 563 S.E.2d 135 (contract affirmed where complaint did not include claim for rescission); Markowitz v. Wieland⁴ (plaintiff affirmed contract in complaint by seeking only money damages and failing to seek rescission).

(a) Wilful Misrepresentations. In cases "where the allegedly defrauded party affirms a contract which contains a merger or disclaimer provision and retains the benefits, he is estopped from asserting that he relied upon the other party's misrepresentation and his action for fraud must fail." Authentic Architectural Millworks v. SCM Group USA.⁵ See Ainsworth, supra, 254 Ga.App. at 472(1), 563 S.E.2d 135. Stated another way, a merger clause "operates as a disclaimer, establishing that the written agreement completely and comprehensively represents all the parties' agreement." (Punctuation omitted.) Herman Homes, Inc. v. Smith.⁶ Thus, the viability of Donchi's oral pre-contract misrepresentation claim hinges on whether the purchase agreement contained a valid merger clause.

Construction of a written contract is a question of law for the trial court based on the intent of the parties as set forth in the contract which question we review de novo. Deep Six, Inc. v. Abernathy.⁷ "If the language of a contract is clear and unambiguous, we enforce those terms and need not look elsewhere to assist in the contract's interpretation." Mariner Healthcare v. Foster.⁸ Here, paragraph 16 of the purchase agreement, titled "Other Agreements," provides: "There are no agreements, promises, or understandings between the parties except as specifically set forth herein. No alterations or changes shall be made to the Contract except those in writing, signed, initialed and dated by all parties." Contrary to Donchi's assertions, the language of paragraph 16, as well as its heading, evinces the intent of the parties involved to have the entirety of their agreement represented solely by the written contract, and thus constitutes a valid merger clause. See Herman Homes, Inc., supra, 249 Ga.App. at 132-133(1), 547 S.E.2d 591; Walden v. Smith;⁹ Rivergate Corp. v. McIntosh;¹⁰ Giles v. Nationwide Mut. Fire Ins. Co.¹¹ (clause language must be read together with clause heading when construing contract). Cf. Authentic Architectural Millworks, supra, 262 Ga.App. at 829(2), 586 S.E.2d 726 (clause found not to be a merger clause based on its language and "Limited Warranty" title).

Donchi also contends generally that merger clauses are inapplicable to claims of fraud. Citing Rasmussen v. Martin¹² and Woodhull Corp. v. Saibaba Corp.,¹³ Donchi specifically argues that even if the purchase agreement contains a valid merger clause, the doctrine of merger is inapplicable here because defendants' alleged fraudulent misrepresentations were involved in the transaction. We disagree.

In Rasmussen, the Supreme Court of Georgia held that "[t]he doctrine of merger is applicable where there is no evidence of mutual mistake (or actionable fraud)." Rasmussen, supra, 236 Ga. at 269, 223 S.E.2d 663. However, that case did not involve fraud but whether a contract and a deed with conflicting references to the property at issue were evidence of mutual mistake. Id. at 268, 223 S.E.2d 663. In Woodhull Corp., we held that the merger clause in the relevant contract did not bar plaintiff's fraud claim because the defendant's misrepresentations became terms of the actual contract. Woodhull Corp., supra, 234 Ga.App. at 712(2), 507 S.E.2d 493. See also Authentic Architectural Millworks, supra, 262 Ga.App. at 828(2)(a), 586 S.E.2d 726.

Here, Donchi argues that fraud was a part of the transaction generally but does not argue that there is evidence of mutual mistake as to the parties' understanding of the purchase agreement's terms or that McQuary's alleged assurances that the beach house's mortgage would be maintained were actually integrated into the terms of the written agreement. Accordingly, the merger clause contained in the purchase agreement is applicable, and Donchi's claim alleging that McQuary's oral assurances regarding the maintenance of the mortgage on the beach...