Megel v. Donaldson

• Decision Date: 21 November 2007
• Docket Number: No. A07A1032.,No. A07A1033.,A07A1032.,A07A1033.
• Parties: MEGEL et al. v. DONALDSON et al. Donaldson et al. v. Megel et al.
• Court: Georgia Court of Appeals

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.

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 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Development Agreement is void; whether it was induced by Donaldson's fraud; whether it is unconscionable and should be rescinded; whether it is unenforceable on account of the absence of a material term or provision, or because of accident or mistake; and whether Donaldson breached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.

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 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 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 that intention is clear and it contravenes no rule of law and sufficient words are used to arrive at the intention, it shall be enforced irrespective of all technical or arbitrary rules of construction. Further, the construction which will uphold a contract in whole and in every part is to be preferred, and the whole contract should be looked to in arriving at the construction of any part. Moreover, no construction is required or even permitted when the language employed by the parties in the contract is plain, unambiguous, and capable of only one reasonable interpretation. It is well established that a court should avoid an interpretation of a contract which renders portions of the language of the contract meaningless. Further, Georgia law imposes on both parties an implied duty of good faith in carrying out the mutual promises of the contract.

(Citations and punctuation omitted.) Homelife Communities Group v. Rosebud Park, LLC, 280 Ga.App. 120, 122, 633 S.E.2d 423 (2006). When construing contracts, words generally bear their usual and common signification, OCGA § 13-2-2(2), and dictionaries may supply the plain and ordinary sense of a word. Southern Guaranty Ins. Co. v. Duncan, 131 Ga.App. 761, 764(2), 206 S.E.2d 672 (1974). Further, contract disputes are particularly well suited for adjudication by summary judgment because construction of contracts is ordinarily a matter of law for the court. Burns v. Reves, 217 Ga.App. 316, 318(1), 457 S.E.2d 178 (1995).

2. Megel's claims denying the existence of an agreement are without merit. Even though both Megel and Sabre claim that they did not sign the Agreement, they both acknowledge that the signatures on the signature page of the Agreement are theirs. Megel maintains that they believed they were signing a document connected to the transfer of stock, and that there were several loose pages, but nothing as thick as the Agreement. She testified that she did not remember signing anything like the Agreement. Nevertheless, she acknowledges that the signature page is "obviously part of a larger document." Sabre states that he remembers nothing about the signing of the Agreement. Donaldson testified at his deposition, however, that he presented the whole document to Megel on March 4, 2004, and that they discussed the Agreement at that time.

Megel does not contend that she is unable to read or that Donaldson's fraud prevented her from reading the documents she signed before she signed it. Therefore, Megel's failure to read the Agreement does not affect its validity. One "who can read must read, or show a legal excuse for not doing so, and that fraud which will relieve a party who can read must be such as to prevent him from reading. (Citations and punctuation omitted.)" Beckwith v. Peterson, 227 Ga. 403, 404(1), 181 S.E.2d 51 (1971).

Further, we find no merit to Megel's allegation that she merely signed blank signature pages. The page of the Agreement bearing the signatures of Megel and Sabre is not blank, and the signatures are preceded by a paragraph entitled "Section 24. The Developer's Liability Limited." Section 24 consists of ten lines of type and limits...