Empire Shoe Co. v. NICO Industries, Inc.

• Decision Date: 29 October 1990
• Docket Number: No. A90A1333,A90A1333
• Citation: 197 Ga.App. 411,398 S.E.2d 440
• Parties: EMPIRE SHOE COMPANY v. NICO INDUSTRIES, INC.
• Court: Georgia Court of Appeals

Page 440

398 S.E.2d 440

197 Ga.App. 411

EMPIRE SHOE COMPANY v. NICO INDUSTRIES, INC.

No. A90A1333.

Court of Appeals of Georgia.

Oct. 29, 1990.

Lamberth, Bonapfel, Cifelli & Willson, Jerrell P. Rosenbluth, Carter L. Stout, Atlanta, for appellant.

Drew, Eckl & Farnham, Stevan A. Miller, Haas, Bridges & Kane, Stephen R. Kane, Branch, Pike & Ganz, Caroline C. Kresky, Hurt, Richardson, Garner, Todd & Cadenhead, C. Michael Johnson, Atlanta, for appellee.

SOGNIER, Judge.

Empire Shoe Company, a tenant in the Healey Building in downtown Atlanta, brought suit against the building owner, Healey Building Associates, Ltd. (HBA), to recover damages allegedly resulting from delays in renovation of the building. HBA then filed a third-party complaint for indemnification and contribution against NICO Industries, Inc., HBA's renovation contractor. The trial court granted partial summary judgment to third-party defendant NICO on Empire Shoe's claims against defendant HBA for lost profits and damaged inventory and denied Empire Shoe's motion for reconsideration. Empire Shoe appeals.

The record reveals that in March 1985, appellant and HBA's predecessor executed a five-year lease with two five-year renewal options for retail space in the Healey Building to be used by appellant for a retail shoe store. HBA subsequently purchased the building and assumed the landlord's interest under the lease. As part of its plan for renovating the building, HBA negotiated an amendment to the lease whereby the parties agreed that HBA would endeavor to begin work by June 1, 1986, to substantially complete the interior work by August 1, and to achieve substantial completion of all areas affecting appellant by October 1, 1986 so that appellant could complete its tenant finish work in time for the Christmas buying season. The amendment also provided for rent abatement during the construction period and required HBA to provide safe, dry storage for appellant's inventory during the work.

Pursuant to this amendment, appellant vacated the leased premises in the summer of 1986 and appellee began work. It is undisputed that the work was not substantially complete until at least late March 1987 and that appellant did not resume retail operations until October 1, 1987. Sometime during early 1987, appellant's inventory and fixtures stored in the sub-basement sustained severe water damage. Appellant filed this action in October 1987, seeking compensatory and punitive damages for the construction delay and the damage to its goods and fixtures.

1. Although this matter is not raised by either party, we must address the threshold question of NICO's right as a third-party defendant to assert a motion for summary judgment against appellant, the original plaintiff. A proper third-party complaint must be predicated on secondary liability to the original defendant for its liability on the main claim, not on direct liability from the third-party defendant to the original plaintiff. Southern R. Co. v. Union Camp Corp., 181 Ga.App. 691, 693(2), 353 S.E.2d 519 (1987). Nonetheless, "[t]he third-party defendant may assert against the plaintiff any defenses which the third-party plaintiff has to the plaintiff's claim." OCGA § 9-11-14(a). Accord Opatut v. Guest Pond Club, 188 Ga.App. 478, 482(10), 373 S.E.2d 372 (1988). "For the purpose of defense against plaintiff's complaint, a third party defendant is in the law suit as an adverse party to the same extent as the defendant and must act accordingly. This assures a third party defendant complete defense protection in an action where he may be liable for the judgment in favor of the plaintiff. [Cits.]" F & D Property Co. v. Alkire, 385 F.2d 97, 100 (10th Cir.1967). A third-party defendant is "entitled to participate to the fullest extent as though he had been originally a defendant. To the extent that he fail[s] to exercise that privilege of participation, he [does] so at his peril, for a third-party defendant is bound by the adjudication of the third-party plaintiff's liability to the plaintiff." (Footnote omitted.) Knell v. Feltman, 174 F.2d 662, 665(I) (D.C.Cir.1949). Thus, the third-party defendant, by participating fully in the defense of the case, is entitled to a complete defense of the action and will not be prejudiced by any lack of diligence on the part of the original defendant.

Other courts have recognized that this right to assert defenses authorizes a third-party defendant to resist the plaintiff's motion for summary judgment on the same grounds as the defendant could use (F & D Property, supra); to move to disqualify plaintiff's counsel (Oyster v. Bell Asbestos Mines, 568 F.Supp. 80 (E.D.Pa.1983)); to move to transfer the action for lack of jurisdiction over the defendant (Ferrigno v. Ocean Transport, Ltd., 188 F.Supp. 179 (S.D.N.Y.1960)); and to use a defense available to the defendant to obtain dismissal of the plaintiff's complaint as to the third-party defendant even though the defendant does not raise the issue (Lewis v. Borg-Warner Corp., 64 Misc.2d 454, 315 N.Y.S.2d 56 (1968)). We must consider, however, whether this right to assert defenses of the third-party plaintiff authorizes a third-party defendant to move for summary judgment against the original plaintiff on the basis that the plaintiff is not entitled to judgment against the defendant. Our research has yielded no Georgia case on point. Section 56 of the Civil Practice Act, OCGA § 9-11-56(b), permits "[a] party against whom a claim ... is asserted" to move "for a summary judgment in his favor as to all or any part thereof." The Georgia Supreme Court held in Taylor v. Donaldson, 227 Ga. 496, 498-499, 181 S.E.2d 340 (1971) that section 56 must be construed with section 1 of the Act (OCGA § 9-11-1), which provides that "[t]his chapter shall be construed to secure the just, speedy, and inexpensive determination of every action," and accordingly the term "claim" in section 56 should be "broadly interpreted." While our courts have evolved a rule of strict construction in favor of the party opposing summary judgment, that rule applies to our construction of the evidence, not to the scope of the statute's applicability to claims and parties. See, e.g., Georgia Farm Bureau Mut. Ins. Co. v. Allstate Ins. Co., 190 Ga.App. 593, 594, 379 S.E.2d 619 (1989); Watkins v. Nationwide, etc., Ins. Co., 113 Ga.App. 801, 802, 149 S.E.2d 749 (1966). Accordingly, given the mandate of OCGA § 9-11-1, the broad interpretation to be given to the type of "claim" against which summary judgment may be sought, and the right of a third-party defendant to participate fully in the defense of the primary action to protect its own interests, we hold that a third-party defendant is entitled to move for summary judgment against the original plaintiff on any ground for which the original defendant would be entitled to summary judgment against the plaintiff.

2. We now address the merits of appellant's challenge to the trial court's ruling. Appellant first enumerates as error the grant of summary judgment to NICO on the claim for lost profits for the period attributable to the construction delay. In support of its summary judgment motion, NICO submitted the deposition testimony of appellant's president, Marshall Nerenbaum, who acknowledged that appellant, which was qualified as a subchapter S corporation under 26 U.S.C. § 1361 et seq., had reported losses on its income tax returns for several years prior to the period at issue, and that, like many closely held family businesses, appellant distributed its profits in the form of salaries to the employees, most of whom were family members. Nerenbaum acknowledged that the business loss claim related primarily to the salaries paid while the business was not in operation. (We note that appellant has presented a separate claim for the salary expenses, and the trial court denied summary judgment to NICO on that issue.) Appellant submitted no affidavits or other testimony in response to the motion, taking the position that NICO had not set forth a prima facie case so as to shift the burden of proof to appellant. The trial court disagreed, and awarded summary judgment to NICO because it had established that appellant had no profits in prior years and thus was not entitled to recover lost profits as a matter of law.

Ordinarily, anticipated profits are too speculative to be recovered, "but where the business has been established, has made profits and there are definite, certain and reasonable data for their ascertainment and such profits [were] in the contemplation of the parties at the time of the contract, they may be recovered ... even though they can not be computed with exact mathematical certainty." Mizell v. Spires, 146 Ga.App. 330, 332(2), 246 S.E.2d 385 (1978). However, a claimant may recover lost profits "only if the business has a proven 'track record' of profitability. The jury is not permitted to speculate as to what the allegedly lost profits might have [been]. [Cit.]" Stern's Gallery, etc., v. Corporate Property, etc., 176 Ga.App. 586, 592(3), 337 S.E.2d 29 (1985). Accord Molly Pitcher, etc., v. Central, etc., R. Co., 149 Ga.App. 5, 12, 253 S.E.2d 392 (1979)...