Re/Max of Georgia, Inc. v. Real Estate Group on Peachtree, Inc.

• Decision Date: 22 October 1991
• Docket Number: Nos. A91A0742,A91A0743,s. A91A0742
• Citation: 201 Ga.App. 787,412 S.E.2d 543
• Parties: RE/MAX OF GEORGIA, INC. et al. v. REAL ESTATE GROUP ON PEACHTREE, INC. HUDSON et al. v. REAL ESTATE GROUP ON PEACHTREE, INC.
• Court: Georgia Court of Appeals

Page 543

412 S.E.2d 543

201 Ga.App. 787

RE/MAX OF GEORGIA, INC. et al. v. REAL ESTATE GROUP ON PEACHTREE, INC.

HUDSON et al. v. REAL ESTATE GROUP ON PEACHTREE, INC.

Nos. A91A0742, A91A0743.

Court of Appeals of Georgia.

Oct. 22, 1991.

Reconsideration Denied Nov. 13, 1991.

Certiorari Denied Jan. 13, 1992.

Palmer & Berman, Jeffrey N. Berman, William A. Wehunt, Atlanta, for appellants (case no. A91A0742).

Haley & Kaye, Arnold S. Kaye, Norcross, for appellants (case no. A91A0743).

Branch, Pike, Ganz & O'Callaghan, Gregory J. Digel, Atlanta, Fletcher & McCurdy, William A. Fletcher, Jr., W. Phillip McCurdy III, Norcross, for appellee.

SOGNIER, Chief Judge.

The Real Estate Group on Peachtree, Inc. d/b/a Re/Max on Peachtree (Peachtree), the assignee of a franchise agreement with Re/Max of Georgia, Inc., brought suit against Re/Max of Georgia; another franchisee, Re/Max Northeast, Inc. (Northeast); Northeast's president and licensed broker, Stacy L. Burton; and two of Northeast's licensed real estate agents, Starke Hudson and David Liles, alleging that Hudson and Liles, with the knowledge and approval of Burton and Northeast, had established a Re/Max real estate sales office within the territory granted exclusively to Peachtree in its franchise agreement and that Re/Max of Georgia had failed to defend and protect Peachtree from the infringement as required by the franchise agreement. A jury trial resulted in a verdict in favor of Peachtree. The appeals of Re/Max of Georgia, Northeast, and Burton (Case No. A91A0742) and Hudson and Liles (Case No. A91A0743) are consolidated here for review.

At trial, Leah Jennings, appellee's president and licensed broker, testified that she considered Hudson and Liles' office to be an infringement of her protected territory and brought it to the attention of Howard McPherson, president of Re/Max of Georgia, requesting that he enforce the protected territory provision of the agreement. McPherson visited the two offices and consulted with the chief legal officer of its parent organization, Re/Max International. Jennings testified that at a meeting McPherson arranged among all the parties McPherson described the Hudson-Liles office as a "blatant infringement." Jennings testified that Burton informed her at that meeting that if she forced Hudson and Liles to move their new office the loss of referral business from Hudson and Liles would cause him to lose six of his agents, and that Liles threatened to "bankrupt" her if she continued her complaints.

McPherson sought the help of the Broker/Owners Advisory Council in resolving the dispute, and after meeting with the council advised Burton by letter that it was his opinion and that of Re/Max International that the Hudson-Liles office was "an infringement upon the territorial rights [of appellee's] franchise agreement and a violation of your franchise agreement as well." In the letter, McPherson gave Burton a date certain by which either the infringing office must be closed or the licenses of Hudson and Liles transferred to appellee. However, when Burton, Northeast, Hudson, and Liles advised McPherson that they would not comply the deadline was not enforced. Jennings testified that because agents realized they could work with Hudson and Liles without paying a fee to Re/Max, appellee had difficulty recruiting and keeping agents, which was the mainstay of her brokerage office's income. Eventually, appellee voluntarily ceased doing business because of financial problems.

1. The franchise agreement in issue granted to franchisees an exclusive license to use a particular system in the operation of a real estate agency within a certain exclusive territory. Re/Max of Georgia argues that because Hudson and Liles did not use that system in its entirety and did not call themselves a Re/Max office, their office within appellee's protected territory did not constitute an infringement of the franchise agreement, and thus the trial court erred by failing to grant its motion for a directed verdict on appellee's claim for breach of contract. We do not agree.

"In reviewing the overruling of a motion for a directed verdict, the proper standard to be utilized by the appellate court is the any evidence test." (Citations and punctuation omitted.) Stratton Indus. v. Northwest Ga. Bank, 191 Ga.App. 683, 685-686(1), 382 S.E.2d 721 (1989). Viewing the evidence in a light most favorable to appellee, as required, id. at 686(1), we find some evidence that although Hudson and Liles did not use the name "Re/Max," their office operated as a Re/Max office in fact, thereby infringing the franchise agreement. Appellee adduced evidence at trial that despite Hudson and Liles' assurances to Jennings to the contrary, they participated as agents in numerous residential real estate sales in the period during which their "construction" office was open within appellee territory and that although their real estate licenses were held at Northeast, their real estate sales transactions were carried out at the newly established office. Testimony was adduced from other Re/Max franchisees that the right to have a "protected territory" was crucial to any franchisee; that the franchise would be virtually worthless without such a right; and that although the franchise agreement required Re/Max of Georgia to enforce the protected territory provision, McPherson was reluctant to do so because he feared liability to Burton, who had many agents and a large sales volume. This evidence sufficed to show the existence of a duty owed by Re/Max of Georgia and a breach of that duty in its failure to enforce the provision in that agreement granting appellee an exclusive territory. Accordingly, the trial court did not err by denying Re/Max of Georgia's motion for a directed verdict on this issue. See generally id.

2. Re/Max of Georgia also contends the trial court erred by denying its motion for a directed verdict as to damages for breach of contract because the measure of damages used by the court was incorrect. Re/Max of Georgia contends the trial court's reliance on Pacific Mut. Life Ins. Co. v. Caraker, 31 Ga.App. 707(1), 121 S.E. 876 (1924) was erroneous and that appellee could not, as a matter of law, recover for expenses incurred in contemplation of its performance of the contract, but instead was only entitled to recover lost profits.

The parties cite no Georgia cases specifically setting forth the measure of damages for breach of a territorial covenant in a franchise agreement, and our research has uncovered none. Generally, "[d]amages recoverable for a breach of contract are such as arise naturally and according to the usual course of things from such breach and such as the parties contemplated, when the contract was made, as the probable result of its breach." OCGA § 13-6-2. " 'The measure of damages in the case of a breach of contract is the amount which will compensate the injured person for the loss which a fulfillment of the contract would have prevented or the breach of it entailed. In other words, the person injured, is, so far as it is possible to do so by a monetary award, to be placed in the position he would have been in had the contract been performed.' [Cits.]" Bennett v. Associated Food Stores, 118 Ga.App. 711, 715, 165 S.E.2d 581 (1968).

The measure of damages used here, appellee's net expenses in attempting to comply with the contract--i.e., the expenses borne by appellee in its effort to meet its obligations under the franchise agreement less the income it derived from the contract--was...