Shannondoah, Inc. v. Smith

• Decision Date: 26 October 1976
• Docket Number: No. 52674,No. 2,52674,2
• Citation: 140 Ga.App. 200,230 S.E.2d 351
• Parties: SHANNONDOAH, INC. v. C. W. SMITH
• Court: Georgia Court of Appeals

Page 351

230 S.E.2d 351

140 Ga.App. 200

SHANNONDOAH, INC. v. C. W. SMITH.

No. 52674.

Court of Appeals of Georgia, Division No. 2.

Oct. 26, 1976.

Louis F. Ricciuti, Atlanta, for appellant.

Burdine & Lindsey, Wendell C. Lindsey, Atlanta, for appellee.

MARSHALL, Judge.

The question presented in this appeal is whether the contract between the parties is illegal and therefore, unenforceable.

Appellant, Shannondoah, Inc. brought suit against Smith for the latter's breach of contract. The contract granted Smith the privilege of operating the Corner Tavern for one year in exchange for his paying Shannondoah certain fees plus paying the operating expenses of the tavern. One provision required Smith to comply with all city and county ordinances. Shannondoah alleged in its amended complaint that Smith operated the tavern from January 1973, to September, 1973, when he vacated the premises, resulting in certain alleged damages.

At the trial, Smith attempted to show (though he did not affirmatively plead, C.P.A. § 8(c) (Code Ann. § 81A-108(c)) that the contract was illegal in that it required him to violate a city ordinance. That ordinance, City of Atlanta Code of Ordinances, § 5-57 (1965), as amended March 5, 1971, provides that a person who has a license to sell alcoholic beverages must maintain an active participation in the operation of the premises, and a licensee may not transfer his right to operate under his license. Smith contends that another Atlanta code provision (never proved at trial) required licensees operating in the city to be residents of Atlanta. Smith testified that he was a resident of DeKalb County and could not obtain a license and therefore could not comply with the city ordinance, and that his operation of the tavern under someone else's license violated § 5-57 of the Code of Atlanta.

Smith testified that during the months of January through June, 1973, he had been operating the tavern under the license of one Chuck Garland, listed on the license as an 'agent' of Shannondoah. Smith further testified that Garland came to the Corner Tavern in June and pulled his license off the wall. Smith then had one Pat Digby, who operated a bar in the same building, obtain a license in his (Digby's) name. Digby agreed to operate both his and Smith's bar and was to receive 50% from Smith's bar. Smith continued to run the Corner Tavern in this manner for July and August. Then, in September, he notified Shannondoah and vacated the premises because, according to Smith's testimony, he was 'losing money' under this arrangement.

Based on this testimony, the trial judge entered judgment for Smith. Following remand for findings of fact and conclusions of law (Shannondoah, Inc. v. Smith, 137 Ga.App. 378, 224 S.E.2d 465), the trial court concluded that the contract was in violation of the city ordinance and was therefore illegal. Held:

We reverse. There is evidence to support the trial court's finding that the parties to the contract intended for Smith to operate the tavern under Garland's license. However, this arrangement would not violate the code if Garland actively participated in the business (of which there is evidence). If Garland transferred his license to Smith or if Garland's license was used by Smith without Garland maintaining an active participation in the business, then there would be a showing of violation of the city code. However, there is no evidence of record that either occurred. Nor is there evidence in the record that the code required Smith to live in the city. However, even if code violations were shown, we reverse because Smith has not shown that the contract could not be performed without breaking the law.

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