Overlook Gardens Props. v. ORIX, U.S., L.P.

• Decision Date: 21 February 2023
• Docket Number: A22A1627,A22A1633
• Parties: OVERLOOK GARDENS PROPERTIES, LLC et al. v. ORIX, USA, LP et al.; and vice versa. ORIX, USA, LP et al.; and vice versa. v. OVERLOOK GARDENS PROPERTIES, LLC et al.
• Court: Georgia Court of Appeals

OVERLOOK GARDENS PROPERTIES, LLC et al. v. ORIX, USA, LP et al.; and vice versa.

ORIX, USA, LP et al.; and vice versa. v. OVERLOOK GARDENS PROPERTIES, LLC et al.

Nos. A22A1627, A22A1633

Court of Appeals of Georgia, Fourth Division

February 21, 2023

DILLARD, P. J., MERCIER and MARKLE, JJ.

Markle, Judge.

These appeals stem from a dispute involving commercial loan transactions for financing several multifamily apartment complexes, and whether the contracts and applicable regulations required the lender to make certain disclosures. Specifically, Overlook Gardens Properties, LLC; Creekwood Apartments, LLC; Greystone at Inverness II, LLC; and Greystone Farms Apartment Community, LLC (collectively "Overlook") appeal from the Georgia State-Wide Business Court's partial grant of summary judgment in favor of Orix USA, LP; Red Mortgage Capital, LLC; and Red Capital Markets, LLC (collectively "Orix") as to Overlook's claims of breach of contract, fraud, and violations of the RICO statute. Orix cross-appeals on the narrow issue that the business court erred by failing to grant summary judgment in its favor as to one of Overlook's fraud claims. For the reasons that follow, we affirm the court's grant of summary judgment in favor of Orix as to Overlook's breach of contract, fraud, and RICO claims. We reverse the court's denial of summary judgment as to Overlook's claim of fraud regarding its loan.

In order to prevail on a motion for summary judgment under OCGA § 9-11-56, [Appellants], as the moving part[ies] must show that there exists no genuine issue of material fact, and that the undisputed facts, viewed in the light most favorable to the nonmoving party, demand judgment as a matter of law. Moreover, on appeal from the denial or grant of summary judgment the appellate court is to conduct a de novo review of the evidence to determine whether there exists a genuine issue of material fact, and whether the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law.

(Citation omitted.) Lowery v. Noodle Life, 363 Ga.App. 1 (869 S.E.2d 600) (2022).

So viewed, the record shows that Overlook is in the business of developing apartment complexes financed via loans through the Department of Housing and Urban Development's (HUD) Multifamily Accelerated Processing program (MAP). Overlook hired Orix^[1] to assist in obtaining this financing at the "best available interest rate." Between 2012 and 2015, Overlook entered into four separate FHA-insured loans with Orix, and the parties executed a series of documents memorializing the terms of the loans, including the Application Letter, a Commitment Letter, and a Rate Lock Letter.

The Application Letter allowed Orix to process the loans at a specified interest rate, and to apply to HUD for insurance on the loans. The Commitment Letter indicated that, once HUD approved the application, Orix would provide the loan with particular terms for acceptance by Overlook. Finally, the Rate Lock Letter required Overlook to be obligated under the loan, with Orix obtaining a set maximum interest rate for the loans at or below the specified rate. Additionally, the Application, Commitment, and Rate Lock Letters each contained a disclaimer indicating that neither created a fiduciary relationship between the parties. The parties also had a Confirmation Letter for each loan, which constituted the final, binding agreement between the parties as to the pricing terms that would apply to the loans.^[2] Most relevant to this appeal is the Commitment Letter, which states that Orix is solely responsible for determining the final interest rate, and confirms Orix's obligation to use its best efforts to confirm the pricing terms and to execute Overlook's loans. The Commitment Letter also gave Orix the right to secure and fund the loans by issuance of mortgage-backed securities sponsored by the Government National Mortgage Association (GNMA), and it further contained a provision indicating that Overlook reserved no rights to any benefits as a result thereof. The Commitment Letter also contained a merger clause, indicating that it superseded any previous or contemporaneous written or oral agreements between the parties.

The loans were also governed by certain HUD policies and regulations as set out in the 2011 MAP Guide. Per the regulations, the lender was not required to disclose the "trading premium" the lender earned by selling the loans on the secondary market. However, the lender was required to pay any fees to its brokers and consultants from the disclosed lender's fees. 2011 MAP Guide, Ch. 2, Sec. 2.3 (h) (1) (b).

Orix engaged Scott Taccati of Trillium Capital Resources, a commercial real estate loan consulting firm (collectively, "Taccati"), to assist with the loan process. Orix paid Taccati for his services based on a fee-splitting agreement comprised of a portion of the fees it received from Overlook and a portion of the trade premiums Orix received after selling the loans on the secondary market. Additionally, with respect to the Overlook loan specifically, Orix submitted a document to HUD, which specified that it would pay Taccati $22,080 for his services from the initial service charge it collected from Overlook.

Orix secured an interest rate for all four loans lower than the maximum rate set in the Rate Lock Letters, and the parties closed on the respective loans. At closing, Overlook's counsel certified that there were no side deals or transactions outside the four corners of the loan documents that would in any way alter or modify the written loan terms. After the closing, Orix sold the loans on the secondary market and earned a profit on them.

Believing that it was deceived into entering these contracts at the proposed interest rates because Orix failed to fully disclose the interest rates and the fees it paid to Taccati, Overlook filed suit in state court, asserting claims of breach of contract, fraud, and violations of the RICO statute. Orix moved for summary judgment, and, thereafter, the case was transferred to the business court.

Following a hearing, the business court granted in part Orix's summary judgment motion, finding, among other things, that: (1) in support of its breach of contract claim, Overlook presented no agreement showing that Orix was obligated to obtain the best interest rate, nor had it presented any evidence showing Overlook could have achieved better interests rates than those actually procured by Orix; and (2) that Orix was under no obligation to disclose to Overlook the profit it made from selling their loans on the secondary market. The business court found, however, that one of Overlook's fraud claims survived summary judgment to the extent it was based on an alleged misrepresentation Orix made to HUD regarding the fees Taccati would receive. These appeals followed.

Case No. A22A1627

1. Overlook's claims for breach of contract, fraud, and violations of the RICO statute are premised on its contention that Orix failed to use its best efforts to secure the best interest rates on the loans, and it failed to disclose the fees Taccati would receive for his services in connection with securing the loans. We address each of Overlook's claims separately, but find its arguments unpersuasive.

(a) Breach of contract claims

Overlook asserts that Orix breached its contractual promise to exercise good faith in obtaining the best available interest rates. We disagree.

"[T]he elements for a breach of contract claim in Georgia are the (1) breach and the (2) resultant damages (3) to the party who has the right to complain about the contract being broken." (Citations omitted.) Bazemore v. U.S. Bank Nat. Assn., 363 Ga.App. 723, 731 (e) (872 S.E.2d 491) (2022).

[T]he cardinal rule of contract construction is to ascertain the intention of the parties, as set out in the language of the contract. Indeed, it is well established that the construction of a contract is a question of law for the court, involving three analytical steps: The first step is to decide whether the language of the contract is clear and unambiguous. If so, the contract is enforced according to its plain terms, and the contract alone is looked to for meaning. Second, if the language of the contract is ambiguous in some respect, the rules of contract construction must be applied by the court to resolve the ambiguity. And finally, if ambiguity remains after applying the rules of construction the issue of what the ambiguous language means and what the parties intended must be resolved by a jury [or the trial court at a bench trial]. So, when the terms of a contract are clear and unambiguous, the reviewing court looks only to the contract itself to determine the parties' intent.

(Citations, punctuation and emphasis omitted.) Emory Healthcare v. van Engelen, 362 Ga.App. 818, 821-822 (870 S.E.2d 223) (2022). Moreover,

we must look at the instrument as a whole and consider it in light of all the surrounding circumstances. Thus, the favored construction will be that which gives meaning and effect to all the terms of the contract over that which nullifies and renders meaningless a part of the document.

(Citation and punctuation omitted.) Primary Investments v. Wee Tender Care III, 323 Ga.App. 196, 198 (1) (746 S.E.2d 823) (2013).

(i) No contractual duty to provide "best available rates."

To begin, the loan documents at issue describe Orix's obligation to Overlook - to process the loans at a specified interest rate to be accepted by Overlook; to apply to HUD for insurance on the loans; and to obtain an interest rate at or below the rate specified in the Rate Lock Letter. It is undisputed that Orix fulfilled these obligations by securing the loans for Overlook at...