Roca Props., LLC v. Dance Hotlanta, Inc.

• Decision Date: 24 June 2014
• Docket Number: No. A14A0143.,A14A0143.
• Citation: 327 Ga.App. 700,761 S.E.2d 105
• Court: Georgia Court of Appeals
• Parties: ROCA PROPERTIES, LLC et al. v. DANCE HOTLANTA, INC. et al.

327 Ga.App. 700

761 S.E.2d 105

ROCA PROPERTIES, LLC et al.

v.DANCE HOTLANTA, INC. et al.

No. A14A0143.

Court of Appeals of Georgia.

June 24, 2014.

Genevieve Helen Dame, Hayes Michael Dever, Atlanta, for Appellant.

Gene E. Massafra, for Appellee.

BARNES, Presiding Judge.

This lawsuit involves a dispute over the sale of a professional ballroom dance competition in Atlanta. Dance Hotlanta, Inc., the successor by merger to Hotlanta Dance Challenge, Inc., and Nancy Senner (collectively, the “HDC Plaintiffs”) sued Roca Properties, LLC, Elizabeth Chester, and Antonio Daza (collectively, the “Roca Defendants”) for breach of certain promissory notes and personal guarantees associated with the sale of the dance competition, prejudgment and postjudgment interest, and attorney fees. The Roca Defendants answered, alleging that they had been fraudulently induced into signing the notes and guarantees, and asserting counterclaims for breach of contract, fraud in the inducement, indemnification, attorney fees, and punitive damages. The trial court granted summary judgment to the HDC Plaintiffs on all of the claims and counterclaims, concluding that the uncontroverted evidence showed that the notes were in default and that the HDC Plaintiffs had not made any actionable false representations to the Roca Defendants that induced them to enter into the sale. For the reasons discussed below, we conclude that genuine issues of material fact exist in this case, and we vacate the trial court's summary judgment order and remand with instruction.

Summary judgment is proper only if the pleadings and evidence show “that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” OCGA § 9–11–56(c). “We apply a de novo standard of review to an appeal from a grant of summary judgment, and we view the evidence, and all reasonable conclusions and inferences drawn from it, in the light most favorable to the nonmovant.” (Punctuation and footnote omitted.) Bonner v. Southern Restaurant Group, 271 Ga.App. 497, 610 S.E.2d 129 (2005).

The Hotlanta Competition. The Hotlanta Dance Challenge is an annual ballroom dance competition held in Atlanta every third week in October (the “Hotlanta Competition”). The Hotlanta Competition is sanctioned by the National Dance Council of America (“NDCA”), which is the official governing council of dance competitions in the United States. Under NDCA rules, no other NDCA-sanctioned competition can take place within 90 miles from the Hotlanta Competition during the week it is held. Furthermore, at the time of this dispute, there were no new competition dates available from the NDCA; thus, a party interested in hosting a NDCA-sanctioned competition had to acquire the rights from an existing owner.

Nancy Senner and her former dance partner and boyfriend, Edwin Rivera, also known as “Eddie Ares” (“Ares”), were the founders of the Hotlanta Competition. Senner and Ares organized and hosted the Hotlanta Competition each year from its inception through 2009. During that time period, the business of the Hotlanta Competition was conducted through various companies owned solely by Senner, including Hotlanta Dance Challenge, Inc. (“HDC”).¹

The Rising Star Ball. For many years, Senner and Ares operated the Hotlanta Competition in a single ballroom at an Atlanta area hotel. However, in 2006, Ares developed the concept of the “Rising Star Newcomers Ball,” a competition for amateur dancers who might be intimidated by the level of competition in the main ballroom (the “Rising Star Ball”). Ares registered the name with the United States Patent and Trademark Office, and Senner registered “Rising Star Newcomers Ball, Inc.” with the Georgia Secretary of State “to protect the name,” even though the registered corporate entity never had an organizational meeting or issued any stock.

From 2006 through 2009, the Rising Star Ball was conducted in a second ballroom in conjunction with the Hotlanta Competition. The Rising Star Ball had its own entry forms. The single brochure for the Hotlanta Competition and Rising Star Ball was divided into separate parts for the two events and listed separate schedules and check-in dates. The Hotlanta Competition and Rising Star Ball also gave out separate prizes. Moreover, Ares testified that, unlike the Hotlanta Competition, the Rising Star Ball was not sanctioned by the NDCA.

Ares enjoyed organizing and hosting the Rising Star Ball because of the “energy and enthusiasm” of the amateur dancers. After the 2009 event, Ares informed Senner that he wanted to organize and operate a new dance competition circuit exclusively for amateurs, which he named the “Rising Star Friendly Circuit” (the “Rising Star Circuit”). The Rising Star Circuit would be unaffiliated with the NDCA. Senner and Ares agreed that Senner would continue to organize and host the Hotlanta Competition through her company HDC, while Ares would leave HDC to run his Rising Star Circuit.

Initial Negotiations with the Roca Defendants. In early 2010, Elizabeth Chester contacted Senner to see if she would be interested in having an additional partner or selling the Hotlanta Competition. Their discussions led to negotiations between the parties over the sale of the assets of HDC and the associated personal goodwill of Senner to Roca Properties LLC, a company owned by Chester and Antonio Daza. Both sides were represented by counsel throughout the negotiations. Michael Reeves, a potential investor in Roca Properties, also was involved in the negotiations.

In March 2010, Chester, acting on behalf of Roca Properties, signed a letter of intent to purchase the assets of HDC and the personal goodwill of Senner for a total purchase price of $400,000. The letter stated that it was the intent of HDC to sell to Roca Properties its assets “as they relate solely to the Competition,” defined as “the dance competition known as the ‘Hotlanta Dance Challenge’ held in Atlanta, Georgia.” The letter of intent made no reference to the Rising Star Ball.

Senner's Handwritten Notes. During the parties' negotiations, Senner provided the Roca Defendants with corporate tax returns for the years 2007 and 2008. But the 2009 tax return for HDC had not yet been filed and thus was unavailable for the Roca Defendants to review. Nor did Senner provide any financial software or income statements, balance sheets, or a general ledger for 2009 that could be reviewed by the Roca Defendants.

Senner did provide the Roca Defendants with a copy of her undated handwritten financial notes drafted as part of the negotiations, but the parties dispute whether the notes contained financial information for 2009. According to the Roca Defendants, Senner's handwritten notes included revenue and expense figures for the 2009 Hotlanta Competition. In contrast, Senner contended that her notes were nothing more than projections for additional revenue sources and lower operating expenses for the Hotlanta Competition in future years.

The Number of Paid Entries. During the parties' negotiations, Senner also provided the Roca Defendants with a computer printout reflecting that there had been 7,195 paid entries for the 2009 Hotlanta Competition. An “entry” represented a fee paid for a contestant for one dance. Senner did not tell the Roca Defendants that the 7,195 figure included paid entries for the 2009 Rising Star Ball.

The Purchase Transaction. Based on Senner's representations and the financial documents and information provided by her, Roca Properties entered into an Asset Purchase Agreement with HDC and Senner on April 8, 2010 (the “Purchase Agreement”). Under the terms of the Purchase Agreement, Roca Properties agreed to buy certain itemized assets of HDC associated with the Hotlanta Competition for $200,000.

The Purchase Agreement and the schedules attached to it made no reference to the Rising Star Ball and whether or to what extent any rights to it would be retained by Ares. But the Purchase Agreement did provide that the parties would “use their reasonably best efforts to cause ... Ares” to enter into a “Release, Non–Compete and Non–Disparagement Agreement” with the parties for a two-year period. Schedule 3.5 to the Purchase Agreement further specified that good and marketable title to HDC's assets excluded “[a]ny legal or equitable interest claimed by ... Ares,” unless and until he released and transferred any such claimed interest to the parties as part of the contemplated non-compete agreement.

Contemporaneously with the execution of the Purchase Agreement, Roca Properties also entered into an Agreement for Sale and Purchase of Personal Goodwill (the “Goodwill Agreement”). Under the Goodwill Agreement, Roca Properties agreed to buy the personal goodwill of Senner related to the Hotlanta Competition for $200,000.

Pursuant to the terms of the Purchase Agreement and Goodwill Agreement, Roca Properties paid $100,000 to HDC and $100,000 to Senner at closing. Roca Properties also entered into two promissory notes for $100,000 each as part of the purchase transaction: one in favor of HDC and one in favor of Senner. That same day, Chester and Daza each signed a personal guaranty for the two notes.

The Non–Compete Agreement with Ares. A month after the purchase transaction, Senner, HDC, and Ares executed a “Release, Non–Compete/Non–Solicit, and Non–Disparagement Agreement” (the “Non–Compete Agreement”). Pursuant to the terms of the Non–Compete Agreement, Ares agreed not to sponsor or conduct a dance competition at the same time as the Hotlanta Competition. Under a paragraph entitled “Additional Consideration,” the Non–Compete Agreement further provided that Ares would be conveyed “the intangible and tangible property described in the attached Exhibit A.”

Exhibit A to the Non–Compete Agreement listed the property conveyed to Ares, which included “[a]ny and all interest in the Rising Star Newcomers Circuit,” “[a]ny and all...