Smith v. Gordon

• Decision Date: 07 April 2004
• Docket Number: No. A04A0449.,A04A0449.
• Citation: 598 S.E.2d 92,266 Ga. App. 814
• Parties: SMITH et al. v. GORDON.
• Court: Georgia Court of Appeals

266 Ga. App. 814

598 S.E.2d 92

266 Ga.App. 814

SMITH et al. v. GORDON.

No. A04A0449.

Court of Appeals of Georgia.

April 7, 2004.

Christopher L. Casey, Athens, for appellant.

Clifton, Sanders & Smith, Janney E. Sanders, Toccoa, for appellee.

JOHNSON, Presiding Judge.

This case arises out of a transaction involving the sale of an automobile dealership from Irene Gordon to Lee Cavendar and Robert Smith.¹ Gordon filed a motion for summary judgment to recover on a promissory note signed by Smith and Cavendar. The trial court granted Gordon's motion for summary judgment, and Cavendar appeals. We find no error and affirm the trial court's judgment.

1. When reviewing the grant or denial of a motion for summary judgment, this Court conducts a de novo review of the law and the evidence.² To prevail at summary judgment, the moving party must demonstrate that there is no genuine issue of material fact and that the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law.³ Where the movant is the plaintiff, she has the burden of presenting evidence to support her claim and the burden of piercing the defendant's affirmative defenses.⁴

Here, Gordon has met her burden of establishing a prima facie case. "A creditor in possession of a valid and signed promissory note has a prima facie right to repayment, unless the debtor can establish a valid defense."⁵ Cavendar does not dispute executing the promissory note, thus production of the note establishes a prima facie case.⁶ Cavendar, however, attempts to avoid liability on the note by raising the defenses of breach of contract and fraud. However, even when viewed in the light most favorable to Cavendar, there are no disputed material facts regarding Cavendar's obligation under the note. The trial court properly entered summary judgment in Gordon's favor.

(a) Cavendar contends Gordon breached the terms of the contract because the Purchase Agreement contained a provision requiring Gordon to assign an Option Agreement to purchase real estate. Under a heading entitled, "Conditions of Purchaser's Obligation," the Purchase Agreement noted that Cavendar's obligation to purchase the assets of the business under the Purchase Agreement was subject to four conditions on or before closing, one of which was the assignment of an Option Agreement. According to Cavendar, Gordon breached the contract by failing to assign the Option Agreement. However, there is no dispute that all the parties to the promissory note, including Cavendar, knew the Option Agreement was not assignable before the promissory note was executed. According to Smith's affidavit,

Approximately two weeks prior to our executing the promissory note to Ms. Gordon as required under the Purchase Agreement, Ms. Gordon produced a copy of the option agreement. The option agreement had a "no assignment" clause in it. We were faced with backing out of the Purchase Agreement and losing all the money I had invested in the dealership ..., or with abiding by the terms of the Purchase Agreement and trying to resolve the damages we would suffer from not having the option to purchase the land on which the dealership was located. We elected to proceed under the terms of the Purchase Agreement and executed a promissory note to Ms. Gordon....

Cavendar also acknowledges receiving a copy of the Option Agreement between the time the Purchase Agreement was signed and the promissory note was signed.

It is clear from the record that Cavendar elected to enter into the promissory note even though he knew the Option Agreement was not assignable. He has, therefore, waived any claim for damages due to the breach of this contract provision.

A waiver may be express, or may be inferred from actions, conduct, or a course of dealing. Waiver of a contract right may result from a party's conduct showing his election between two inconsistent rights. Acting on the theory that the contract is still in force, as by continuing performance, demanding or urging further performance, or permitting the other party to perform and accepting or retaining benefits under the contract, may constitute waiver of a breach. However, all the attendant facts, taken together, must amount to an intentional relinquishment of a known right, in order that a waiver may exist. ⁷

Cavendar attempts to circumvent the waiver issue by claiming that he did not intentionally relinquish his known right because he was forced to continue with the purchase of the dealership and execute the promissory note or lose his investment. This argument is unavailing.

One may not void a contract on grounds of duress merely because he entered into it with reluctance, the contract is very disadvantageous to him, the bargaining power of the parties was unequal or there was some unfairness in the negotiations preceding the agreement.⁸

Here, there is no showing that Gordon's actions deprived Cavendar of his free will. Even assuming for the sake of argument that Cavendar was experiencing economic distress, such financial difficulties do not constitute legal distress.⁹ The record before us is replete with evidence of Cavendar's failure to protect his own vital interests in this transaction. We find no error in the trial court's grant of summary judgment to Gordon.

(b) Cavendar also asserts fraud on the part of Gordon as a defense to his obligation under the promissory note. According to Cavendar, Gordon misrepresented her ability to assign the Option Agreement. However, even construing the evidence in a light most favorable to Cavendar, there are no grounds for fraud as a defense to the promissory note. A party cannot claim fraud where the matters are open to the observation of all of the parties to the contract, unless there is a special relationship of trust or confidence between the parties.¹⁰ Here, no such special relationship existed. The record reveals nothing more than an arms-length sales transaction, which does not constitute a confidential relationship.¹¹ Moreover, Cavendar could not have justifiably relied upon any representations as to the assignability of the Option Agreement because he knew the Option Agreement was not assignable before executing the promissory note.

Furthermore, the record shows that Cavendar made payments on the promissory note from November 16, 1998 through February 15, 2001.

Where a debtor voluntarily pays a part of an amount claimed to be due by his creditor on a contract which the debtor seeks to attack on the ground of duress and fraud in an action against him by the creditor for an overdue installment thereunder he is conclusively deemed to have waived the duress and fraud if at the time of the partial payment he has knowledge of all the facts upon which he now bases his claim of fraud and duress as

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