Megel v. Donaldson, No. A07A1032.

• Court: United States Court of Appeals (Georgia)
• Writing for the Court: Barnes
• Citation: 654 S.E.2d 656,288 Ga. App. 510
• Parties: MEGEL et al. v. DONALDSON et al. Donaldson et al. v. Megel et al.
• Docket Number: No. A07A1032.,No. A07A1033.
• Decision Date: 21 November 2007

654 S.E.2d 656 288 Ga. App. 510 MEGEL et al.
v.
DONALDSON et al.
Donaldson et al.
v.
Megel et al. No. A07A1032. No. A07A1033. Court of Appeals of Georgia. November 21, 2007.

[654 S.E.2d 658]

Bogart & Bogart, George R. Ference, Hill, Kertscher & Wharton, Peter F. Schoenthaler, Eric G. Maurer, Atlanta, for appellants.

Smith, Gambrell & Russell, Dana M. Richens, Atlanta, for appellees.

BARNES, Chief Judge.

In Case No. A07A1032, Dorothy Megel and Zana Sabre¹ (collectively "Megel") appeal the grant of partial summary judgment to John L. Donaldson, Faye K. Donaldson, and Senoia Manor, LLC, (collectively "Donaldson"), and in Case No. A07A1033, Donaldson appeals the denial of his motion for summary judgment on Megel's claims for conversion and breach of contract. As we find the trial court correctly granted summary judgment to Donaldson in Case No. A07A1032, that judgment is affirmed. The judgment in Case No. A07A1033, however, must be reversed because we find that the trial court erred by denying in part Donaldson's motion for summary judgment.

Megel alleges that the trial court erred by finding no genuine issue of material fact existed on whether the entirety of the agreement to develop Senoia Manor was contained within the terms of the parties' explicit understandings as of December 5, 2003; whether Donaldson breached the understandings of December 2003 or should be estopped from

654 S.E.2d 659

denying enforcement of those agreements; whether Megel assented to the Development Agreement; whether the Development Agreement is void; whether it was induced by Donaldson's fraud; whether it is unconscionable and should be rescinded; whether [288 Ga. App. 511] it is unenforceable on account of the absence of a material term or provision, or because of accident or mistake; and whether Donaldson breached fiduciary duties owed to Megel in his "capacities as corporate officers/directors, majority shareholders, or otherwise."

This dispute arose from Megel's investment of 250,000 in a project to build a senior citizen living facility called Senoia Manor that Donaldson intended to develop in Senoia. An essential part of the project was changing the zoning where Donaldson intended to build Senoia Manor from single family to multifamily zoning. If the zoning was not changed, the project could not be developed, and ultimately the project failed because the local authorities refused to change the zoning. During the interim, the money Megel invested was spent for, among other things, Donaldson's living expenses.

Megel initially sued Donaldson for conversion, breach of contract, and fraud because of the way the money was spent. Megel contended that Donaldson took their money and spent it on living expenses. Later Megel amended the complaint seeking to rescind the contract and alleging fraud, securities violations, breach of fiduciary duties, and conversion. Donaldson contended, however, that the provision in the contract stating that the money could be spent on "salaries (general or normal household living expenses)" authorized him to spend the money as he did.

Although Megel and Sabre deny signing a development agreement, a document entitled Development Agreement ("the Agreement"), dated March 4, 2004, is in the record and the document bears their signatures. The Agreement provided that Donaldson's company, Rivercrest Development, would develop the project on behalf of Senoia Manor, LLC, in which Megel owned a 30 percent interest.

Section 4 of the Agreement, entitled Compensation/Payment states "The Developer shall earn a compensation for performance of the Development Services in the amount and manner set forth on Exhibit B attached hereto. (the `Development Fee')." Exhibit B, which follows the signature page of the Agreement, states:

Exhibit B

Developer Fees

The Developer's fee of 896,046 shall be payable at closing, with 842,213 of this fee (when paid by Owner to Developer) to be contributed to the Project by Developer as equity investment in exchange for a seventy percent (70%) membership interest in Owner.

[288 Ga. App. 512] Use of Investor Funds

Dorothy P. Megel and Zana F. Sabre shall contribute 252,000 to Senoia Manor, LLC in exchange for their membership interests in Owner of fifteen percent (15%) each, with these funds to be used as needed, estimated as approximately 15,000 to 20,000 per month, for salaries (general or normal household living expenses), overhead (general expenses including telephone and rent), and soft costs (general costs including surveys, land contracts, engineering and other expenses as described in the Development Budget) during development, construction and stabilization, estimated at 18 to 24 months. Megel and Sabre are hereby each granted rights of first refusal on up to fifteen percent (15%) interests in ownership entities of Developer in subsequent projects, subject to agreement between the parties.

Additionally, the Agreement in Section 14 contains the following provision:

Entire Agreement/Written Modifications. This Agreement contains the entire understanding between the parties with respect to the subject matter hereof. All representations, promises, and prior or contemporaneous understandings, between the parties with respect to the subject matter hereof are merged hereinto and expressed herein; and any and all prior understandings between the parties with respect to the subject matter hereof are hereby canceled. This Agreement shall not be amended, modified, or supplemented without

654 S.E.2d 660

the written agreement of the parties at the time of such amendment, modification or supplement.

The trial court found the agreement was not unconscionable, the absence of a written budget did not render the agreement unenforceable, the merger clause in the contract defeated Megel's fraud claims, Donaldson was not Megel's fiduciary, the Georgia Securities Act did not apply, and Megel was not entitled to rescind the contract based upon accident or mistake. Therefore, the court granted summary judgment to Donaldson on those claims. The court found that Megel entered into the contract with Donaldson and "simply failed to read it."

The court, however, denied Donaldson's motion for summary judgment on Megel's claim that Donaldson's investment of 50,000 in another project, Bethany Manor, was not authorized by the agreement because the court found an issue of fact on whether the [288 Ga. App. 513] development fees amounted to a salary that could be used in other projects. Megel appeals from the grant of summary judgment to Donaldson and Donaldson cross-appeals from the denial of summary judgment on the Bethany Manor claim.

Case No. A07A1032

1. The standards applicable to motions for summary judgment are announced in Lau's Corp. v. Haskins, 261 Ga. 491, 405 S.E.2d 474 (1991). In Georgia,

[t]he cardinal rule of construction is to ascertain the intention of the parties. If...