Equifax, Inc. v. 1600 PEACHTREE, LLC

• Decision Date: 29 June 2004
• Docket Number: No. A04A0042, No. A04A0043.
• Citation: 601 S.E.2d 519,268 Ga. App. 186
• Parties: EQUIFAX, INC. v. 1600 PEACHTREE, L.L.C. 1600 Peachtree, L.L.C. v. Equifax, Inc.
• Court: Georgia Court of Appeals

601 S.E.2d 519

268 Ga. App. 186

EQUIFAX, INC. v. 1600 PEACHTREE, L.L.C.

1600 Peachtree, L.L.C. v. Equifax, Inc.

Nos. A04A0042, A04A0043.

Court of Appeals of Georgia.

June 29, 2004.

Certiorari Denied September 27, 2004.

William Boice, Steven Moore, Kilpatrick Stockton LLP, Atlanta, for Appellant/Appellee.

Richard Robbins, Julianne Belaga, Brian Burgoon, Sutherland, Asbill, Brennan, Atlanta, Johnnie Cochran, The Cochran Firm, Los Angeles, CA, for Appellee/Appellant.

MILLER, Judge.

1600 Peachtree, L.L.C. (Landlord) sued Equifax, Inc. (Equifax) for breach of contract and fraud and to seek a declaratory judgment as to the enforceability of the terms of a certain contract. The trial court awarded partial summary judgment to Landlord on its breach of contract claim, granted partial summary judgment to Equifax on Landlord's fraud claim, and determined that the need for declaratory relief was moot. Equifax appeals and Landlord cross-appeals from that judgment. For the reasons that follow, we affirm in both cases.

When reviewing the grant or denial of summary judgment, we conduct a de novo review of the law and the evidence and construe the evidence and all reasonable deductions therefrom in favor of the nonmoving party. Holbrook v. Stansell, 254 Ga.App. 553, 562 S.E.2d 731 (2002). When reviewing a trial court's ruling on a legal question, we owe no deference to that court. Suarez v. Halbert, 246 Ga.App. 822, 824(1), 543 S.E.2d 733 (2000).

So considered, the evidence shows that in 1994, Landlord became the owner of a building complex located at 1600 Peachtree Street in Atlanta (Old Equifax Building or Premises) after purchasing the Old Equifax Building from Equifax in a sale/leaseback transaction. As part of that 1994 transaction, Equifax and Landlord entered into a 15-year headquarters facility lease (original lease). In 1997, Equifax informed Landlord that it was contemplating erecting a new corporate headquarters and that it might want to vacate the Premises early (except for one of the three buildings). At that time, more than 12 years remained on the original lease. After negotiations, to accommodate Equifax's plan to build a new headquarters building, the parties executed a lease termination agreement on March 5, 1998. Equifax and Landlord also executed a space lease under which Equifax leased Building C of the Premises through December 31, 2013.

The lease termination agreement was a highly detailed contract that committed Equifax to certain payment or reimbursement structures to Landlord for two distinct periods. Under Section 4 of the lease termination agreement, Equifax guaranteed that Landlord would receive $263,480 each month as though the original lease had not terminated early. Section 4(i) stated that Equifax

hereby guarantees and agrees that ... during the period commencing on the Termination Date and ending on March 31, 2004 (the "Period"):

(i) The rents received by [Landlord] from [Equifax] under the Space Lease ... between [Landlord] and [Equifax] ... herewith together with the aggregate rent paid by third party tenants for all or parts of the Premises under leases ... made pursuant to Section 5 hereof (the "Actual Rent") will on a monthly basis equal all Rent ($263,480.00 per month) and Additional Rent which would have been payable under the Lease (the "Original Rent") had the Lease not been terminated and [Equifax] hereby agrees and promises to pay to [Landlord] any deficiency between the Original Rent and the Actual Rent;

In addition, as to the expenditures for taxes, insurance, and certain other expenses, Equifax promised to pay Landlord "any deficiency between the Actual Charges Incurred and the Reimbursements." Similar terms and payment obligations were set forth for a second period, April 1, 2004, through December 31, 2013. Thus, under the lease termination agreement, any rent Landlord received from third-party tenants was to be credited against Equifax's financial obligations to Landlord, subject to certain specified calculations. In sum, although the lease termination agreement released Equifax from its original lease with Landlord, Equifax undertook financial obligations that ensured that Landlord would receive a certain minimum amount of income, as though the original lease continued in effect, initially $263,480 per month ($3,161,760 per year) then later, a different amount.

iXL Enterprises, a start-up Internet consulting firm, expressed interest in leasing the Old Equifax Building from Landlord. Before Landlord entered into a lease with iXL in December 1999, Landlord and Equifax executed an amended and restated lease termination agreement on December 6, 1999. At the same time, Landlord and Equifax also executed an amended and restated space lease to shorten the term of Equifax's occupancy of Building C of the Premises, allegedly to accommodate iXL's move-in schedule.

Under the amended and restated lease termination agreement, Equifax's financial obligations to Landlord continued. Like the lease termination agreement, Equifax's financial obligations to Landlord are offset by rent payments to Landlord from third-party tenants, specifically including iXL. The amended and restated lease termination agreement establishes a different payment schedule for the second term to "equal or exceed the following: [two subperiods with different amounts of annual rent, initially $955,945.75 through 12/31/08 thereafter $1,025,893.00 until 12/31/13]." Like its predecessor agreement, it contains provisions to address taxes, insurance, and expenses, as well as the costs of operation, maintenance, and repairs.

Problems arose between Landlord and iXL during iXL's tenancy. During 2000, iXL faced severe financial difficulties that purportedly resulted in substantial disputes between Landlord and iXL. Twice in 2001, Landlord filed suit against iXL over rent-related issues. The first suit was dismissed after iXL brought its rent current, and the second suit resulted in settlement between iXL and Landlord. Under the amended and restated lease termination agreement, Equifax had the right to approve the termination of the iXL lease. Equifax, by its counsel, expressly waived such right. Under a settlement and mutual release agreement entered by Landlord and iXL, iXL and Landlord agreed to the termination of iXL's lease and to the dismissal of their respective claims and counterclaims in the pending litigation, provided that iXL paid $1.8 million to Landlord. The settlement between iXL and Landlord became effective September 26, 2001.

Having settled with iXL, Landlord submitted written requests for payment to Equifax in conjunction with the supporting documentation as to Landlord's calculations of the amounts due from Equifax under the amended and restated lease termination agreement. Subsequent to the fourth such notification, Equifax's counsel informed Landlord, for the first time, by a letter dated November 7, 2001, that Equifax no longer owed any amount to Landlord. Equifax's counsel asserted that as a result of Landlord's conduct in dealing with iXL and due to Landlord's unreasonable actions in attempting to re-lease the Premises under unreasonable terms, Equifax was discharged from liability as a guarantor under OCGA §§ 10-7-22 and 10-7-21. Citing OCGA § 10-7-22, Equifax claimed that by increasing Equifax's risk and exposing Equifax to greater liability, Landlord's actions had resulted in the discharge of Equifax as guarantor under the amended and restated lease termination agreement. Equifax also claimed that by changing the nature and terms of that agreement, under OCGA § 10-7-21, Landlord's "novation," obtained without the consent of the surety, had discharged Equifax from all liability to Landlord. Equifax asserted, "[u]nder both of these important and long-standing principles of Georgia law, Equifax has no further liability under the Guaranty Agreement."

After Equifax denied any liability to Landlord and refused to honor the terms of the amended and restated lease termination agreement, Landlord filed suit against Equifax. In Count I, Landlord asserted that Equifax had breached the amended and restated lease termination agreement by refusing to pay the actual amounts already due and by anticipatorily repudiating the agreement, "thereby rendering all amounts due under the Agreement fully payable." Under Count II, Landlord asserted a claim for negligent and intentional fraud and misrepresentation, alleging that Equifax had "made numerous representations and assurances to Landlord and its lenders that it would honor its obligations to Landlord, that it would guarantee a rental income stream to Landlord, and that its agreements with Landlord are and would be valid." Landlord claimed that Equifax willfully and knowingly made "numerous misrepresentations and omissions of material fact to Landlord."

Equifax answered and counterclaimed for declaratory relief to seek a judicial determination that the amended and restated lease termination agreement is, in fact, a guaranty which would then authorize Equifax to avail itself of the statutory protections afforded to guarantors. Equifax filed a motion for summary judgment, and Landlord moved for partial summary judgment on its breach of contract claim.

After a hearing, the trial court determined that the amended and restated lease termination agreement is not a "guaranty" within the legal meaning of the term under Georgia law.¹ The trial court noted that the agreement "is not a guaranty in the sense that Equifax has guaranteed iXL's rent, rather it has guaranteed a rental stream, and iXL is the tenant that the parties contemplated would take over the premises, at least at the outset." Deciding that the clear and unambiguous terms of the contract established that it is not a guaranty, the trial court also found that "Equifax is not protected by the statutory discharge protections contained in OCGA § 10-7-20 et seq."

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