Morgan Enterprises, Inc. v. Gordon Gillett Business Realty, Inc., A90A0617

• Court: United States Court of Appeals (Georgia)
• Writing for the Court: BIRDSONG; BANKE, P.J., and COOPER
• Citation: 395 S.E.2d 303,196 Ga.App. 112
• Parties: MORGAN ENTERPRISES, INC. v. GORDON GILLETT BUSINESS REALTY, INC.
• Docket Number: No. A90A0617,A90A0617
• Decision Date: 04 June 1990

Page 303

395 S.E.2d 303 196 Ga.App. 112 MORGAN ENTERPRISES, INC.
v.
GORDON GILLETT BUSINESS REALTY, INC. No. A90A0617. Court of Appeals of Georgia. June 4, 1990.
Rehearing Denied June 25, 1990.

Page 304

[196 Ga.App. 114] Brannen, Searcy & Smith, Joseph J. Berrigan, Savannah, for appellant.

Gary M. Wisenbaker, Savannah, for appellee.

[196 Ga.App. 112] BIRDSONG, Judge.

Morgan Enterprises d/b/a Springfield Dairy Queen appeals the grant of summary judgment to the plaintiff realtor, Gordon Gillett Business Realty, Inc., which found Morgan Enterprises liable to pay $20,000 "liquidated damages" for having cancelled Gordon Gillett's realty contract before the term expired. Morgan Enterprises contends an issue of fact exists as to whether the liquidated damages clause was, in fact, an unenforceable penalty, under cases such as Fickling & Walker Co. v. Giddens Constr. Co., 258 Ga. 891, 376 S.E.2d 655. Held:

In determining whether a forfeiture provision in a contract amounts to an enforceable liquidated damages provision, or is an unenforceable penalty clause, the trial court at the summary judgment level must conduct a tripartite inquiry according to these standards: " 'First, the injury caused by the breach must be difficult or impossible of accurate estimation; second, the parties must intend to provide for damages rather than for a penalty; and third, the sum stipulated must be a reasonable pre-estimate of the ... loss.' [Cits.]" Southeastern Land Fund v. Real Estate World, 237 Ga. 227, 230, 227 S.E.2d 340. This tripartite inquiry is designed to resolve whether a provision for damages for breach amounts to "liquidated damages" under OCGA § 13-6-7.

At trial the burden is on the defaulting parties to show the provision is a penalty (Liberty Life Ins. Co. v. Thomas B. Hartley Constr. Co., 258 Ga. 808, 809, 375 S.E.2d 222), but the lay of this burden does not yet arise at the summary judgment level. Id. On cross-motions for summary judgment, each party must show there is no genuine issue of material fact regarding the resolution of these three points of inquiry and that each, respectively, is entitled to summary judgment; either party, to prevail by summary judgment, must bear its burden of proof.

Page 305

Thus, in order for plaintiff Gordon Gillett to obtain summary judgment in enforcing this "damages" provision, Gordon Gillett bears the burden to prove the foregoing three elements in its favor. Id. The trial court erred in finding Gordon Gillett had carried this burden of proof in this case.

The listing agreement in this case provides that if appellant cancelled the contract during the listing term, "the commission shall become immediately due by the [s]eller to the [b]roker." The commission[196 Ga.App. 113] in this case is described as follows: "Seller agrees to pay [b]roker ten (10%), but in any event not less than $8,000, of the purchase price." Gordon...