Hood v. Peck, A04A1200.

• Decision Date: 25 August 2004
• Docket Number: No. A04A1200.,A04A1200.
• Citation: 269 Ga. App. 249,603 S.E.2d 756
• Parties: HOOD v. PECK.
• Court: Georgia Court of Appeals

603 S.E.2d 756

269 Ga. App. 249

HOOD v. PECK.

No. A04A1200.

Court of Appeals of Georgia.

August 25, 2004.

Paul Hoffman, Deming Parker Hoffman Green & Campbell, Norcross, for Appellant.

Neeli Ben-David, Bondurant, Mixson & Elmore, LLP, Atlanta, for Appellee.

MIKELL, Judge.

In this appeal, we affirm the judgment entered in favor of Arlene G. Peck in her suit against her tenant and its guarantor. The relevant facts follow.

On July 30, 1993, Peck entered into a commercial lease with Eurocar, Limited, whereby Eurocar agreed to lease 4,560 square feet of office space at 6518 Roswell Road in Atlanta. The monthly rent was $5,320 as of the date the lease expired, January 31, 1999. The lease also gave Eurocar the option to renew for two additional five-year terms, provided that Eurocar was not in default and that the parties mutually agreed upon the new rental amount. The option provision further stipulated that, if no agreement could be reached, and Eurocar remained in possession of the premises after January 31, 1999, then Eurocar would be a tenant at will and the rent would increase to 150% of the rent in effect at that time, which was $5,320. Upon termination of the lease, Eurocar was required to surrender the premises to Peck "in the same condition as at commencement of term, normal wear and tear only excepted." Finally, Eurocar was obligated to reimburse Peck for any attorney fees incurred in enforcing Eurocar's obligations. The lease was executed by Alfredo R. Hood, Eurocar's president and chief executive officer. Hood also signed a guaranty of Eurocar's obligations under the lease. On December 31, 1996, Hood sold his interest in Eurocar to his partner, Eduardo Caro.

Peck and Caro entered into renewal negotiations as the end of the lease approached but were unable to reach an agreement. Eurocar remained in possession of the premises but failed to pay rent in the amount of 150% of $5,320, or $7,980. Instead, Eurocar tendered $5,320 by check per month for February, March, April, May, June, July, August, and September 1999. Peck cashed these checks after writing "partial payment" on most of them, and she notified Caro that Eurocar owed the $2,660 monthly differential.

Finally Peck retained counsel, who sent a letter to Hood on August 6, 1999, notifying him that Eurocar's tenancy would end 60 days from his receipt of the letter and directing Eurocar to vacate the premises by that time. Eurocar did not respond, and on October 11, 1999, counsel delivered a letter to Hood and to Eurocar stating that the tenancy had expired and demanding immediate possession of the premises. Eurocar did not vacate, and Peck filed a proceeding against tenant holding over on October 13. Eurocar filed an answer and counterclaim. On October 21, Peck's counsel returned Caro's October rent check, stating that the tenancy had expired, that Peck would not create a tenancy at will, and that Eurocar was required to vacate the premises.

On November 10, Eurocar filed a notice of removal in federal district court. Peck moved to remand the case to state court, and the district court granted the motion on March 21, 2000. On March 28, Peck filed a motion to compel payment of rent into court. Finally, on or about April 7, 2000, Eurocar vacated the premises.

Shortly thereafter, Peck amended her complaint, alleging that Eurocar had failed to pay rent for seven months, from October 1999 through April 2000; that as a result, Eurocar was indebted to Peck in the amount of $49,742 rent, $1,040.66 interest, $3,979.36 late fees, and $5,501.20 attorney fees. Peck also sought to recover sums due for the months of February 1999 through September 1999, including $21,280 past due rent, $678.90 interest, and $2,220.89 attorney fees. Finally, Peck added a count alleging that Eurocar had damaged the premises. Peck then added Hood as a defendant, seeking recovery on the guaranty of all sums owed by Eurocar. Hood answered and filed a third party complaint against Caro. Hood also moved for judgment on the pleadings, asserting that he could not be held liable for rent accruing after expiration of the lease and that Peck's act of allowing Eurocar to remain as a tenant holding over constituted a novation. The motion was denied, and the case proceeded to a bench trial on April 23, 2003. Eurocar failed to appear and default judgment was issued against it. After hearing all of the evidence, the trial court issued judgment in favor of Peck against Hood and Eurocar, jointly and severally, in the amount of $149,433.68, including:

(1) Unpaid rent in the amount of $71,002;

(2) Late fees in the amount of $3,979.36;

(3) Interest in the amount of $21,287.97;

(4) Property damage of $1,753; (5) Loss of use/loss of rental value during repair period in the amount of [$]31,920; and (6) Attorney's fees and legal expenses in the amount of $19,491.35.¹

Hood appeals from this judgment, contending that the trial court erred by (1) holding him liable for "holdover" rent; (2) awarding late fees for rent which accrued during the holdover period; and (3) awarding loss of rental value damages. We affirm.

"On appeal, we will not disturb a trial court's findings of fact if there is any evidence to support them. However, the trial court's interpretation and application of the law to those findings are subject to de novo review."² Bearing these principles in mind, we address the enumerated errors.

1. Hood contends that, under the guaranty, he cannot be held liable for rent accruing after the lease term ended on January 31, 1999. He cites OCGA § 10-7-3 for the proposition that a contract of suretyship is one of strict law, and the surety's liability cannot be extended by implication or interpretation. Hood's reliance is misplaced, however, because his liability is established by the terms of the guaranty.³ The guaranty states that Hood "unconditionally guarantee[s] and promise[s]. . . (a) to pay Lessor . . . all rents and other sums reserved in [the Eurocar] lease . . . and (b) to perform . . . all of the covenants, terms and conditions therein required to be kept. . . by the Lessee." The lease stipulated that if Eurocar remained in possession of the premises after January 31, 1999, without the parties having reached a renewal agreement, then the rent would increase to 150% of $5,320, or $7,980. Therefore, the "holdover" rent awarded by the trial court was specifically reserved in the lease, and Hood was obligated to pay it.⁴

No case cited by Hood mandates a contrary result. In Roswell Festival v. Athens Intl.,⁵ for example, the guaranty expressly stated that the guarantor's obligations thereunder would terminate on the forty-second month of the lease in the event that no default existed.⁶ Since the lessee was not in default as of the forty-second month, the guaranty had expired according to its own terms.⁷ By contrast, the guaranty in the instant case states that it "is a continuing one and shall terminate only upon full payment of all rents and all other sums reserved in the lease." Therefore, Roswell Festival is inapposite. The other cases cited by Hood, LeCraw v. Atlanta Arts Alliance⁸ and Southeastern Hose v. Prudential Ins. Co., etc.,⁹ concerned whether the guarantor was liable for rent accruing during renewals of a lease, which was not the issue here.

Hood additionally argues that Peck increased the risk to him by failing to seek Eurocar's eviction during the eight-month period beginning in February 1999 and by returning Eurocar's rent checks beginning in October 1999. Hood is correct that under OCGA § 10-7-22, "[a]ny act of the creditor . . . which injures the surety or increases his risk or exposes him to greater liability shall discharge him." However, he omits the remainder of that Code section, which pertinently provides that "a mere failure by the creditor to sue as soon as the law allows or neglect to prosecute with vigor his legal remedies, unless for a consideration, shall not release the surety." Accordingly, Peck's failure to pursue her legal remedies as soon as the law allowed does not affect Hood's liability on the guaranty.¹⁰ Nor was she...