Garrett v. S. Health Corp.

Decision Date08 March 2013
Docket NumberNo. A12A2253.,A12A2253.
Citation320 Ga.App. 176,739 S.E.2d 661
PartiesGARRETT et al. v. SOUTHERN HEALTH CORPORATION OF ELLIJAY, INC.
CourtGeorgia Court of Appeals

320 Ga.App. 176
739 S.E.2d 661

GARRETT et al.
v.
SOUTHERN HEALTH CORPORATION OF ELLIJAY, INC.

No. A12A2253.

Court of Appeals of Georgia.

March 8, 2013.


[739 S.E.2d 663]


John T. Longino, Ellijay, for Appellants.

Smith, Gambrell & Russell, Marcia M. Ernst, Colin Rhys Patrick Delaney, Atlanta, for Appellee.


BARNES, Presiding Judge.

[320 Ga.App. 176]Southern Health Corporation of Ellijay, Inc. entered into an option agreement to purchase land for the development of a new hospital facility. Under the remedies provision of the option agreement, Southern Health could recover damages from the sellers for breach of contract only if their breach was “willful and intentional.” After Southern Health exercised its option to purchase the land but the sellers failed to close on the sale, Southern Health commenced this action against the sellers seeking, among other things, damages for breach of contract, and the sellers counterclaimed for fraudulent inducement. The trial court subsequently entered partial summary judgment in favor of Southern Health on its breach-of-contract claim, concluding that the uncontroverted evidence showed that the sellers had willfully and intentionally breached the option agreement, entitling Southern Health to damages under the remedies provision as a matter of law. The trial court also granted partial summary judgment in favor of Southern Health on the sellers' counterclaim and denied the sellers' two separate motions for summary judgment.

For the reasons discussed below, we affirm the trial court's grant of summary judgment to Southern Health on the sellers' counterclaim for fraudulent inducement and its denial of the sellers' motions for summary judgment. However, we reverse the trial court's grant of Southern Health's motion for partial summary judgment on its damages claim for breach of the option agreement because there are genuine issues of material fact as to whether the sellers' breach was “willful.”

Summary judgment is appropriate if the pleadings and the undisputed evidence show that there exists no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. OCGA § 9–11–56(c). On appeal from the grant or denial of summary judgment, the appellate courts conduct a de novo review, construing all reasonable inferences in the light most favorable to the nonmoving party.

(Citation and punctuation omitted.) Bank of North Ga. v. Windermere Dev., Inc., 316 Ga.App. 33, 34, 728 S.E.2d 714 (2012). Guided by these principles, we turn to the record in the present case.


The Parties and the Property. Southern Health operates North Georgia Medical Center and Gilmer Nursing Home in Gilmer County, [320 Ga.App. 177]Georgia. In 2007, Southern Health became interested in purchasing approximately 25 acres of unimproved property located on Highway 515 in Gilmer County (the “Property”). Southern Health wanted to build a new hospital on the Property.

The Property was comprised of six tracts. Mr. James P. Garrett, individually, owned one of the tracts. Ms. Roberta Mundy, personally, together with Mr. Garrett, owned another one of the tracts. The remaining four tracts were owned jointly by Mr. Garrett and Mr. William “Randy” Mundy, Jr., until the latter's death in 2006, whereupon Mr. Mundy's interest in the land passed to his estate. Following Mr. Mundy's death, a North Carolina court appointed his wife, Ms. Mundy, to serve as administratrix of his estate.

Execution of the Option Agreement. Southern Health entered into negotiations to purchase the Property from Mr. Garrett and Ms. Mundy (collectively, the “Sellers”). On April 17, 2007, Mr. Garrett and Ms. Mundy, individually and as administratrix of her late husband's estate, executed an agreement with Southern Health under which they granted it an irrevocable option to purchase the Property in return for the payment of certain “option money” (the “Option Agreement”). The Sellers represented in the Option Agreement that they were the owners of

[739 S.E.2d 664]

good and marketable fee simple title to the Property, and they agreed to convey the Property at closing by limited warranty deed if the option was exercised.

Southern Health agreed to purchase the Property for $3,300,000 if it exercised the option. In Paragraphs 4(d) and 22(a) of the Option Agreement, the parties acknowledged that the purchase price included not only the Property, but also the installation of utility lines and facilities on the Property by the Sellers (the “Utility Work”).

Mr. Garrett chose not to consult with an attorney before signing the Option Agreement. All of the communications and information that Ms. Mundy received about the Property and the Option Agreement came through Mr. Garrett. Ms. Mundy also declined to consult with an attorney.

The Inspection Period. The Option Agreement included an initial “Inspection Period” during which any of the parties could terminate the contract. The deadline for the Inspection Period was July 23, 2007. Under Paragraph 4(a) of the Option Agreement, Southern Health had the right to inspect and evaluate the Property and, if it was unsatisfied with the Property for any reason, terminate the Option Agreement before the end of the Inspection Period. After inspecting the Property, Southern Health elected not to terminate the Option Agreement during the Inspection Period.

[320 Ga.App. 178]Also during the Inspection Period, the Sellers had the right to determine whether they wanted to be responsible for the Utility Work. Under Paragraph 4(d) of the Option Agreement, if the Sellers determined that they did not want to perform the Utility Work, they had the right to terminate the Option Agreement at any time before the end of the Inspection Period. Both Sellers testified that they did not exercise their right to terminate the Option Agreement during that time period.

The Commitment Letter. Because the Sellers did not terminate the contract within the Inspection Period, they were obligated under Paragraph 4(e) of the Option Agreement to provide Southern Health with a “commitment letter” from a surety committing to issue a payment and performance bond that would cover the Sellers' performance of the Utility Work (the “Commitment Letter”). The Sellers never provided the Commitment Letter, despite several correspondence from Southern Health demanding that they fulfill their contractual obligation.

The Utility Work. Because the Sellers did not terminate the contract within the Inspection Period, they also were obligated under Paragraphs 4(d) and 22(a) of the Option Agreement to perform the Utility Work within 16 months of the closing of the sale if Southern Health exercised the option. During the summer of 2007, Mr. Garrett met with a government engineer from the water and sewer authority, along with Southern Health's representatives, to discuss the Utility Work. At that meeting, Mr. Garrett stated that he did not intend to pay for the water and sewer Utility Work, despite the fact that the Sellers were contractually obligated to perform the Utility Work at no additional expense to Southern Health if it exercised the option. Separately, Mr. Garrett told Ms. Mundy several times that he intended for others to bear at least some of the financial responsibility for performing the Utility Work, and Ms. Mundy agreed with him.

That same summer, representatives of Southern Health met with Mr. Garrett on another occasion to discuss the Utility Work, and he expressly refused to perform the Utility Work unless funds from other sources were found to pay for it. In response, counsel for Southern Health explained that if the company exercised the option, it might have no alternative but to sue to enforce the Sellers' obligation to perform the Utility Work. Mr. Garrett “basically” responded that Southern Health should “go ahead” and sue the Sellers.

The Exercise of the Option. On October 9, 2007, Southern Health exercised the option to purchase the Property. The parties agreed that the closing date for the sale would be December 7, 2007.

In a letter dated October 15, 2007, Southern Health addressed the upcoming closing and the failure of the Sellers to fulfill all of their [320 Ga.App. 179]contractual obligations up to that point. In the letter, Southern Health formallynotified

[739 S.E.2d 665]

the Sellers that they had defaulted on their obligation to provide the Commitment Letter under the Option Agreement. Southern Health demanded prompt cure and further advised the Sellers that, regardless of whether they procured the Commitment Letter, Southern Health expected them to provide a payment and performance bond at closing (as required by Paragraph 22(b) of the Option Agreement) and to perform the Utility Work within 16 months of the closing (as required by Paragraph 22(a)).

The Failure to Close. In preparation for the scheduled closing, counsel for Southern Health sent a letter dated November 30, 2007 to the Sellers and their recently retained counsel that included a closing agenda and drafts of the closing documents, requested a form of the performance bond, and solicited the Sellers' comments. In a letter dated December 3, 2007, Sellers' counsel responded to Southern Health's letter by pointing out a problem that he alleged had arisen with the upcoming closing. Counsel stated in the letter that, based on advice from North Carolina counsel, he believed that all of Mr. Mundy's heirs (including his two children and their spouses) would need to sign the limited warranty deed to convey the Property to Southern Health at closing. As a “simple solution” to this problem, counsel proposed that Southern Health accept a quitclaim deed from the Sellers rather than the limited warranty deed required by Paragraph 8 of the Option Agreement.

In a letter from its counsel dated that same day, Southern Health rejected the Sellers' proposal to close on a quitclaim deed rather than a limited warranty deed. Counsel stated that the title insurance...

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