Goody Products, Inc. v. Development Authority of the City of Manchester

• Decision Date: 20 March 2013
• Docket Number: Nos. A12A1724,A12A1725.,s. A12A1724
• Citation: 320 Ga.App. 530,740 S.E.2d 261
• Parties: GOODY PRODUCTS, INC. v. DEVELOPMENT AUTHORITY OF the CITY OF MANCHESTER. Development Authority of the City of Manchester. v. Goody Products, Inc.
• Court: Georgia Court of Appeals

320 Ga.App. 530

740 S.E.2d 261

GOODY PRODUCTS, INC.

v.DEVELOPMENT AUTHORITY OF the CITY OF MANCHESTER.

Development Authority of the City of Manchester.

v.Goody Products, Inc.

Nos. A12A1724, A12A1725.

Court of Appeals of Georgia.

March 20, 2013.

Schiff Hardin, Leah Ward Sears, Kimberly Renee Bourroughs, Michael K. Wolensky, Drew David Dropkin, Atlanta, for Appellant.

Charles A. Gower, Teresa Thomas Abell, Miranda Johnston Brash, Columbus, Mary Mendel Katz, Chambless, Higdon, Richardson, Katz & Griggs, Macon, Michael Brian Terry, Bondurant, Mixson & Elmore, Frank Mitchell Lowrey IV, Timothy Scot Rigsbee, Atlanta, for Appellee.

DILLARD, Judge.

This appeal follows a jury trial in which Goody Products (“Goody”) was found liable to the Development Authority of the City of Manchester (“DAM”) for breach of a lease agreement and fraud, resulting in an award of $6,000,000 in damages. In Case No. A12A1724, Goody contends that (1) the trial court erred in denying its motion for directed verdict as to the fraud claim; (2) the trial court erroneously permitted the jury to interpret certain lease provisions; (3) the trial court erroneously charged the jury as to the measure of damages for breach of the lease and the measure of damages as to fraud; and (4) the $6,000,000 verdict is unsupported by the evidence. In Case No. A12A1725, DAM cross-appeals and contends that the trial court erred by (1) using a pre-trial motion in limine to address the sufficiency of its claim as to damages under OCGA § 51–9–1 and (2) ruling that its damages would be addressed by its breach-of-contract claim and, therefore, that it could not proceed with a tortious-interference-with-property claim. For the reasons noted infra, we affirm the judgment below in Case No. A12A1724, and need not address the enumerations of error in Case No. A12A1725, which were contingent upon reversal in Case No. A12A1724.

Viewed in the light most favorable to the verdict,¹ the evidence reflects that in the 1960s, Meriwether County leased a manufacturing facility to Goody, a manufacturer of hair-grooming products. Eventually, Goody built an addition to this leased-portion of the building, resulting in a unified eight-acre facility—half of which Goody leased and the other half of which it owned. In 2006, Goody decided to relocate its manufacturing operations and close the MeriwetherCounty facility. And in February 2007, Meriwether County donated and deeded its portion of the facility to DAM. Thereafter, Goody and DAMenteredinto a sales contract for DAM to purchase Goody's portion of the facility on July 18, 2007.

Prior to execution of the sales contract, and unbeknownst to DAM, in April 2007, a team of workers and one Goody representative spent weeks removing copper wiring, buss ducts, and switchgears—all components of the building's electrical system—from the unified building.² The removal of these components rendered the building's fire alarm, sprinkler system, air conditioning, office lighting, and wall receptacles inoperable. In short: the eight-acre facility had no power or light, save that provided by a single lightbulb that was left hanging from a pole by an extension cord that ran down to a power substation.

Some eight months earlier, in September 2006, Goody conducted a public auction at the manufacturing facility, during which the components of the electrical system that were subsequently removed from the facility in April 2007 were sold. Goody's director of real estate notified a DAM representative about the auction on August 18, 2006, telling her that Goody intended to auction “used equipment.” The DAM representative testified that it never occurred to her that “used equipment” would include “anything that was intrinsic to the functionality of the facility”— i.e., components of the building's electrical system. As a result, DAM saw no need to have someone attend the auction because it was not in the market to purchase the sort of “used equipment” it understood Goody to be selling.

In September 2006 and March 2007, prior to removal of the electrical-system components, Goody granted DAM an option to purchase the Goody-owned portion of the facility for $750,000 and $500,000, respectively.³ It is undisputed that the facility was operational with all electrical components intact at these times and that the option contracts were for sale of the building “as is.” Thus, DAM's representative testified that given the “as is” language of those contracts and the operational status of the facility when she visited in connection with these agreements, she understood that DAM would receive “a functional facility.”

Thereafter, in July 2007, after both option contracts had expired, DAM and Goody entered into the final sale agreement by which Goody would sell its portion of the facility to DAM for $500,000. Prior to the execution of this agreement, the DAM representative toured the facility again in May 2007 after Goody had ceased operations and the power was no longer on (the facility was toured by flashlight), but she testified that she was unaware that components of the electrical system had been removed the month before. But when the representative called the power company to change the account into DAM's name in order to turn the power back on, she was informed that the facility was “missing the switchgear.” At trial, the representative explained that she initially did not understand the extent of what this “missing switchgear” meant to the functionality of the facility and had no reason to believe that it was a significant issue. Thus, when DAM signed the sales contract in July 2007, it was unaware that the entire electrical system had been removed, and the sales contract provided that the property included “all land and buildings and fixtures,” although it permitted Goody to remove machinery and equipment.

But the extent and severity of the electrical-system problems became apparent after Georgia Power called in an electrical contractor for assistance when the lights would not come on. The contractor walked around the building and quickly realized that all of the power-distribution components were missing from the facility, describing its current state as one appearing to have been ravaged by a tornado.⁴ As a result, DAM immediately spent $383,000 in order to install temporary lighting in the manufacturing portion of the facility.

With lighting temporarily restored, DAM enlisted two individuals who had previously worked for the company and performed the majority of Goody's installation work in the relevant facility. And after one month of inspections and calculations, DAM received an estimate of what it would cost to restore the building to full electrical function by replacing each of the numerous removed components. The total amount, including a standard fifteen-percent markup, was $4,268,743.65 to install buss ducts, switchgears, and copper wiring— i.e., $2.8 million for the DAM-owned portion of the building and $1,468,743.65 for the Goody-owned portion of the building.

Thereafter, the dispute between the parties centered around Goody's removal of the electrical-system components. DAM sued Goody for breach of the lease that controlled the DAM-owned portion of the building and for fraud with regard to the sale of the Goody-owned portion of the building. Ultimately, the jury returned a verdict in favor of DAM, finding that Goody breached the lease, engaged in fraud, and owed DAM $6,000,000 in damages. This consolidated appeal follows.

1. First, Goody contends that the trial court erroneously denied its motion for directed verdict as to DAM's fraud claim because DAM could not assert that the claimed misrepresentations were inconsistent with the terms of the parties' sales contract. We disagree.⁵

Specifically, Goody argues that because DAM retained the benefits of the bargain of the sales contract, which contained a merger clause, it was estopped from asserting that it relied upon representations outside of those contained in the agreement.⁶ To that end, Goody contends that because the sales contract provided that “[a]ny fixtures attached to the property are included in the sale,” DAM could not successfully assert a claim for fraud because the relevant electrical equipment had been removed prior to execution of the agreement. According to Goody, DAM advanced its fraud claim “based upon representations in the two expired and void option contracts, which had nothing to do with the sale, and what DAM's [e]xecutive [d]irector thought was included in the sale,” which Goody contends ultimately had the effect of varying the unambiguous terms of the sales contract.⁷ In response, DAM contends that (1) the merger clause did not bar a claim for fraud because the claim was “based on intrinsic defects in the subject matter of the contract, namely that Goody had removed the electrical system from the facility,” and (2) the contract itself contained misrepresentations to the extent that the electrical equipment constituted fixtures.

In reviewing the denial of Goody's motion for directed verdict, we note that a directed verdict is appropriate only if “there is no conflict in the evidence as to any material issue and the evidence introduced, construed most favorably to the party opposing the motion, demands a particular verdict.” ⁸ And here, the trial court properly denied Goody's motion. The expired option contracts were not used to vary the terms of the sales contract but were instead evidence from which the jury could determine that (1) there was an intrinsic defect at the time of sale ⁹ and/or (2) the sales contract itself contained a misrepresentation.¹⁰ As DAM repeatedly argued, the option contracts and the circumstances surrounding them were evidence of DAM's due diligence as to its inspections of the building prior to execution of the contract, which represented that fixtures would be included. And indeed, Goody's director of real estate testified that his own...