Moreno v. Smith

• Court: Georgia Supreme Court
• Writing for the Court: BLACKWELL, Justice.
• Citation: Moreno v. Smith, 299 Ga. 443, 788 S.E.2d 349 (Ga. 2016)
• Decision Date: 05 July 2016
• Docket Number: S16A0451
• Parties: Moreno v. Smith.

299 Ga. 443

788 S.E.2d 349

Moreno

v.Smith.

S16A0451

Supreme Court of Georgia.

Decided: July 5, 2016

Gilbert M. Taylor, for Appellant.

Nathan Pate Powell, Anthony O. L. Powell, Webb Tanner & Powell P.C., for Appellee.

BLACKWELL, Justice.

Dolores Moreno is the mother of Gina Moreno, and in 2004, Dolores acquired a residential property in Gwinnett County. Three years later, Dolores gave a one-half interest in the property to Gina as a gift, and around the same time, Dolores and Gina signed a document that purports to be a contract. According to that document, Dolores agreed to sell her remaining one-half interest in the property to Gina, and Gina agreed to pay $75,000 to Dolores in $400 monthly installments. After six more years passed, Gina had made no payments to Dolores, and Dolores filed a lawsuit against Gina for breach of contract and for an equitable accounting as between tenants in common.¹ The trial court granted partial summary judgment to Dolores, concluding that the undisputed evidence showed as a matter of law that Dolores and Gina had entered into a binding and enforceable contract for the purchase and sale of the property. Following a bench trial on the question of a remedy, the trial court awarded damages to Dolores for breach of contract,² as well as fair market rent for her one-half interest as an equitable adjustment of the accounts of the tenants in common.³ Gina appeals, and we reverse in part, vacate in part, and remand for further proceedings consistent with this opinion.⁴

1. Gina contends that the trial court erred when it awarded partial summary judgment to Dolores and concluded as a matter of law that Dolores and Gina had entered into a binding and enforceable contract. We agree. Although the document that Dolores and Gina signed purports to be a binding contract, Gina offered evidence that tends to show that no contract was made. Indeed, Gina submitted an affidavit in opposition to the motion for summary judgment in which she said, among other things, that she had signed the document in question at the request of her mother for the sole purpose of enabling Dolores to demonstrate an interest in the property and that she was earning income from it. Gina also said in her affidavit that, as of the time the document was signed, Dolores consistently had made statements to indicate that Gina was not expected to pay anything to Dolores for the property.⁵

“It is well settled that an agreement between two parties will occur only when the minds of the parties meet at the same time, upon the same subject-matter, and in the same sense.” Cox Broadcasting Corp. v. Nat. Collegiate Athletic Assn. , 250 Ga. 391, 395, 297 S.E.2d 733 (1982). To determine whether the parties had the mutual assent or meeting of the minds that is essential for the formation of a binding and enforceable contract,

courts apply an objective theory of intent whereby one party's intention is deemed to be that meaning a reasonable man in the position of the other contracting party would ascribe to the first party's manifestations of assent, or that meaning which the other contracting party knew the first party ascribed to his manifestations of assent.

Id. More specifically, as one prominent commentator has explained,

in those unusual instances in which one intends that one's assent have no legal consequences[,] [u]nder the objective theory, a court will honor that intention if the other party has reason to know it. And it will honor it if the other party actually knows it.... The same result has been reached even though a written agreement is made as a sham, for the purpose of deceiving others, with an oral understanding that it will not be enforced.

E. Allan Farnsworth, Contracts § 3.7, at 122 (2d ed. 1990) (citations and footnote omitted; emphasis in original). “The circumstances surrounding the making of the contract, such as correspondence and discussions, are relevant in deciding if there was a mutual assent to an agreement, and courts are free to consider such extrinsic evidence.” McReynolds v. Krebs , 290 Ga. 850, 853, 725 S.E.2d 584 (2012) (citation and punctuation omitted). See also Farnsworth, supra at 123–124 (“Circumstances, rather than words, may also indicate a party's intention not to be bound.... [And] the fact that the parties to an agreement are members of the same family is given weight as showing an intention not to be legally bound.” (Citation omitted)). “And where such extrinsic evidence exists and is disputed, the question of whether a party has assented to the contract is generally a matter for the jury.” Fletcher v. C.W. Matthews Contracting Co. , 322 Ga.App. 751, 754 (1) (a), 746 S.E.2d 230 (2013) (citation and punctuation omitted).

Dolores relies on the parol evidence rule, arguing that where a written contract is facially clear and complete, extrinsic evidence of contractual intent is immaterial and inadmissible to vary the terms of the contract. “Although parol evidence cannot be used to contradict or vary the terms of a valid written agreement, parol evidence may be used to show no valid agreement ever went into existence.” BellSouth Advertising & Pub. Corp. v. McCollum , 209 Ga.App. 441, 444, 433 S.E.2d 437 (1993) (citations and punctuation omitted). See also Farnsworth, supra at § 7.4, at 480 (the parol evidence rule “does not come into play until the existence of an enforceable written agreement has been shown”). In particular, “the basic rule that a sham contract or a contract that the parties understood was not to be binding may be refuted by parol evidence to show that there was, in fact, no contract, is sensible and widely followed.” 6–25 Corbin on Contracts § 25.21 (2016). See also Farnsworth, supra at 480 (it may be shown, “for example, ... that the writing was a ... sham”).

Gina brought forward admissible evidence to show that Dolores and Gina did not intend to make a binding and enforceable contract when they signed the document, that the document was a mere sham, and that no binding and enforceable contract existed. And although it is the parties' intent at the time they allegedly entered the contract that matters, the evidence presented by Gina of their discussions at that time is arguably bolstered by other evidence of the circumstances surrounding the purported contract, including the ongoing relationship between the parties as mother and daughter, the undisputed fact that Dolores gifted a one-half interest...