Weinstock v. Novare Group Inc.

• Decision Date: 14 April 2011
• Docket Number: No. A10A2214.,A10A2214.
• Citation: 309 Ga.App. 351,710 S.E.2d 150
• Parties: WEINSTOCK et al.v.NOVARE GROUP, INC. et al.
• Court: Georgia Court of Appeals

309 Ga.App. 351

710 S.E.2d 150

11 FCDR 1188

WEINSTOCK et al.

v.NOVARE GROUP, INC. et al.

No. A10A2214.

Court of Appeals of Georgia.

March 28, 2011.Reconsideration Denied April 14, 2011.

Weinstock & Scavo, Wallace Hennen Ehrenclou, Atlanta, James Robert Fletcher II, for appellants.Troutman Sanders, William N. Withrow, Jr., Thomas Edward Reilly, Brian Patrick Watt, Atlanta, for appellees.MILLER, Presiding Judge.

Shaun Weinstock and David Sarif bought condominiums on the south side of Twelve Atlantic Station (“Twelve”), a residential tower located in Atlanta. Weinstock and Sarif contend that defendants Novare Group, Inc. and its alleged affiliates ¹ (collectively, “Novare”), who marketed and sold Twelve, were involved in a scheme to sell and advertise condominiums at Twelve as having spectacular city views while intending to block those same views by later constructing The Atlantic, a 46–story tower, on a lot directly south of Twelve. In their complaint, as amended, Weinstock and Sarif sued Novare raising claims of negligent misrepresentation, fraud in the inducement, negligent supervision, breach of implied easement rights, and violation of the Georgia Fair Business Practices Act, OCGA § 10–1–390 et seq. (FBPA). The trial court granted summary judgment to Novare on all claims, from which Weinstock and Sarif appeal. We affirm. Weinstock and Sarif, who did not timely rescind their purchases, could not justifiably rely on representations that were not made in their purchase contracts. The claim of fraudulent inducement, as couched by Weinstock and Sarif, does not support the conclusion that Novare induced the sale by concealing a defect in the property. Novare successfully pointed to a lack of evidence to create an issue of material fact on the claims of negligent supervision and breach of implied easement rights. Lastly, we agree with the trial court that the FBPA claim is barred by the statute of limitation.

Summary judgment is proper when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. On appeal from the grant or denial of a motion for summary judgment, this Court must conduct a de novo review of the evidence and view the undisputed facts in the light most favorable to the nonmoving party.(Footnotes omitted.) ChoicePoint Svcs. v. Graham, 305 Ga.App. 254, 255, 699 S.E.2d 452 (2010).

So viewed, the evidence shows that in 2006 Weinstock and Sarif each bought a residential condominium unit on the south side of Twelve from defendant WN Atlantic Properties, LLC. Novare Group, WN Atlantic, and the other defendants were involved in the marketing and sale of Twelve condominiums.

Twelve is a 26–story building which Novare marketed as having “spectacular city views.” Novare knew that at the time of marketing and selling of condominiums at Twelve that The Atlantic would be constructed south of Twelve and would obstruct views of the Atlanta skyline, but Novare did not disclose this fact to Weinstock and Sarif, who contend that they paid a premium for the view. Upon construction, The Atlantic obstructed the view of downtown Atlanta from Weinstock's and Sarif's condominiums.

Novare also knew that real estate agents would be asked about future development on the building pads located around the property, including the pad where The Atlantic was to be constructed. The sales agents were directed to respond to questions about whether the building would be developed and how high it might be as follows:

It is likely that all of the building lots around our building will be developed. No developments have been announced, and the timing is uncertain. They could be developed at any point in the future. There is not [sic] height limit on buildings which could be developed on those sites.

Weinstock and Sarif deposed that in response to direct questioning, real estate agents represented that the development on the property where The Atlantic is now located would be a low to mid-rise building and would not be constructed for five years.

1. Weinstock and Sarif contend that the trial court erred in granting summary judgment to Novare on Weinstock's and Sarif's negligent misrepresentation claim. We disagree.

(a) Justifiable reliance is an essential element of negligent misrepresentation. Real Estate Intl. v. Buggay, 220 Ga.App. 449, 452(3), 469 S.E.2d 242 (1996). The purchase contracts contain a comprehensive merger clause providing that the respective contracts reflected the “entire agreement” between the parties and that, among other things, no party relied upon any representation or warranty not set forth in the contract.² The purchase contracts further provide, in bold capital letters prominently located on the first page of the respective documents, that oral representations cannot be relied upon as stating the representations of the seller. Disclosures within the contracts include that “[t]he views from and natural light available to the Unit may change over time due to, among other circumstances, additional devel opment....” In light of the merger clause and the disclosures contained within the purchase contracts, Weinstock and Sarif could not rely on prior representations regarding the view from the condominiums or the height of the building to be constructed on the site now occupied by The Atlantic. See Megel v. Donaldson, 288 Ga.App. 510, 515(4), 654 S.E.2d 656 (2007) (in light of merger clause, appellant was “estopped from asserting that she relied upon [appellee's] earlier promises”); Savage v. KGE Assocs. Ltd. Partnership, 260 Ga.App. 770, 776(2)(a), 580 S.E.2d 591 (2003) (in light of entire agreement clause, “[t]he purchaser is ... barred from claiming that he or she relied on an alleged misrepresentation not contained within the agreement”) (Citation and punctuation omitted).

(b) Weinstock and Sarif argue that because they sought to rescind the purchase contracts that they need not be restricted to reliance upon representations made within the purchase contracts themselves. “It is inconsistent to apply a disclaimer provision of a contract in a tort action brought to determine whether the entire contract is invalid because of alleged prior fraud which induced the execution of the contract.” City Dodge v. Gardner, 232 Ga. 766, 770, 208 S.E.2d 794 (1974). See del Mazo v. Sanchez, 186 Ga.App. 120, 125, 366 S.E.2d 333 (1988) (“If the party elects to rescind the contract as voidable, he is not bound by the provisions of the rescinded contract. If the defrauded party elects to affirm the contract and sue for damages for fraud and deceit he is bound by the contract provisions.”) (citation omitted). Weinstock and Sarif further assign error to the trial court's finding that they affirmed the contract by failing to seek rescission in the original complaint.

“In general, a party alleging fraudulent inducement to enter a contract has two options: (1) affirm the contract and sue for damages from the fraud or breach; or (2) promptly rescind the contract and sue in tort for fraud.” (Citation omitted.) Ekeledo v. Amporful, 281 Ga. 817, 819(1), 642 S.E.2d 20 (2007). In this case, Weinstock and Sarif did not attempt to rescind the purchase contract before filing suit, nor did they raise a rescission claim contemporaneously therewith. Compare Nexus Svcs., Inc. v. Manning Tronics, Inc., 201 Ga.App. 255, 256, 410 S.E.2d 810 (1991) (rescission is a prerequisite to the filing of the action). The original complaint filed on April 24, 2008 alleged fraud in the inducement and violation of the FBPA. Almost a year later, on March 23, 2009, Weinstock and Sarif amended their complaint to include a prayer to rescind the purchase contract.³ “An announcement of the intent to rescind the contract must be made in a timely fashion, as soon as the facts supporting the claim for rescission are discovered.” Holloman v. D.R. Horton, 241 Ga.App. 141, 146(3), 524 S.E.2d 790 (1999) (“The original complaint, by affirming the contract and seeking damages resulting from the alleged fraud without alleging any cause of action for rescission, constituted an election of remedies and a waiver of any rescission claim.”) Id. at 146–147(3), 524 S.E.2d 790. Weinstock and Sarif do not contend that they learned of the alleged fraud only after filing their complaint.

We have generally found that a claim for damages unaccompanied by a claim for rescission operates as an election to affirm the underlying contract. Megel, supra, 288 Ga.App. at 515(3), 654 S.E.2d 656 (appellant failed to pursue claim for rescission until filing amended complaint); Authentic Architectural Millworks v. SCM Group USA, 262 Ga.App. 826, 827(1), 586 S.E.2d 726 (2003) (contract affirmed where appellant only sought money damages in counterclaim and failed to seek rescission until after appellee raised the issue); Markowitz v. Wieland, 243 Ga.App. 151, 153(1), 532 S.E.2d 705 (2000) (even if there were an attempted rescission, complaint for damages without a claim for rescission affirmed the contract); Consulting Const. v. Edwards, 207 Ga.App. 296, 298(1), 427 S.E.2d 789 (1993) (“appellants' attempt to rescind the contract in response to the appellee's motion for summary judgment was untimely,” and as a result affirmed the contract). Weinstock and Sarif argue that the fraud claim set forth in their original complaint was nevertheless sufficient to support their claim for rescission. Arko v. Cirou, 305 Ga.App. 790, 793, n. 2, 700 S.E.2d 604 (2010) and Conway v. Romarion, 252 Ga.App. 528, 531–532(1), 557 S.E.2d 54 (2001), relied on by Weinstock and Sarif for this point, are distinguishable. Compare Sarif v. Novare Group, Inc., 306 Ga.App. 741, 744(1), 703 S.E.2d 348 (2010) (construing pleadings favorably to appellants in context of a motion for judgment on the pleadings).⁴

In Conway, the plaintiffs did not set forth a specific rescission claim in their original complaint, but they asserted their intent to rescind in a timely fashion...