Payless Car Rental System, Inc. v. Elkik

Citations: 702 S.E.2d 697; 306 Ga. App. 389; 2010 Fulton County D. Rep. 3275; 2010 Ga. App. LEXIS 946Docket: A10A1316

Court: Court of Appeals of Georgia; October 7, 2010; Georgia; State Appellate Court

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Payless Car Rental System, Inc. and affiliated entities (L. S Vehicle Leasing, Inc., L. S. Orlin, Inc., and Atlin, Inc.) appealed the trial court's denial of their summary judgment motion concerning counterclaims and third-party claims made by PRG Group, LLC, a franchisee managed by Anthony Elkik. The Court of Appeals of Georgia reversed the trial court's decision, emphasizing that summary judgment is appropriate when no material facts are in dispute, and the moving party is entitled to judgment as a matter of law. In reviewing the summary judgment denial, the court applied a de novo standard, considering the evidence favorably towards the opposing party.

The facts revealed that on November 1, 2005, Payless entered a Franchise Agreement with PRG, granting PRG a franchise for car rental operations at the Atlanta airport. PRG acquired the franchise via an Asset Purchase Agreement, paying $100,000 for necessary assets. The Purchase Agreement stipulated that Orlin or its assignee would lease up to 300 vehicles to PRG for the first year, enabling PRG to avoid obtaining its own financing. PRG began operations with approximately 215 vehicles from Atlin’s fleet, leased through L. S.

PRG later ordered an additional 285 rental vehicles from leasing companies, which were subleased from L. S at a cost plus markup. After 15 months, PRG sold its franchise for $1.4 million, with net proceeds of $1,239,830, but had an outstanding balance of $856,795.63 owed to L. S for leased vehicles. Consequently, Payless and L. S initiated legal action against PRG and Elkik to recover lease charges based on open account, quantum meruit, and breach of contract claims.

PRG filed counterclaims against Payless and L. S, as well as third-party claims against Orlin and Atlin, alleging breaches of the Purchase Agreement due to the failure to supply the required number of leased vehicles. PRG also claimed breaches of the implied covenant of good faith and fair dealing. In response, appellants sought summary judgment on these claims. The trial court, applying Florida law as stipulated in the Purchase Agreement's choice of law provision, denied this motion, leading to the current appeal.

Key to the appeal is the interpretation of Section 5.2 of the Purchase Agreement, which stipulates that Orlin or its assignee will lease up to 300 vehicles to PRG on commercially acceptable terms for one year post-closing. The trial court found material factual issues regarding whether appellants breached this agreement by not leasing the full 300 vehicles. The appellants argued that their obligation was conditional upon approval from fleet financing companies, as explicitly stated in Section 5.2. 

Evidence presented indicated that PRG had initially received 215 vehicles from Atlin's existing fleet and subsequently requested an additional 285 vehicles. Testimony revealed that the order for these vehicles was managed by PRG’s representative, Elkik, who confirmed he ordered and approved the additional vehicles without restrictions from appellants. Furthermore, appellants contended that they were not responsible for the delivery of the vehicles, as it was the fleet financing companies that handled shipping. Ultimately, PRG's claims were deemed unsupported, as the responsibility for vehicle delivery lay with the leasing companies, not the appellants.

Blakley testified that he was not involved in shipping or delivering vehicles to PRG, a point supported by Elkik's deposition, which confirmed that the leasing companies handled the delivery, not the appellants. Consequently, appellants demonstrated that PRG's breach of contract claim regarding the vehicle leasing requirement did not present a material fact issue. To counter this, PRG needed to provide evidence, such as affidavits or depositions, but failed to do so, leading to the conclusion that the trial court erred in denying summary judgment for the appellants on this matter.

Regarding the breach of the implied covenant of good faith and fair dealing, the appellants contended that the trial court wrongly denied their motion for summary judgment on PRG's counterclaim. The trial court's rationale was that PRG's claims for breach of an express term of the Purchase Agreement justified maintaining the implied covenant claim. However, because appellants were entitled to summary judgment on the breach of Section 5.2 of the Purchase Agreement, and under Florida law, a breach of the implied covenant cannot exist independently from a breach of express contract terms, PRG's claim fails as a matter of law. Therefore, the trial court's denial of summary judgment to the appellants on this issue was also deemed erroneous.

Additionally, Elkik filed for Chapter 7 bankruptcy, invoking an automatic stay of proceedings, which applies only to him and not to PRG, allowing the court to proceed with the appeal concerning PRG. The trial court also granted summary judgment to Elkik regarding appellants' claims against him individually, and the order denying summary judgment on PRG's claims is immediately appealable due to its connection with the appeal concerning Elkik.

PRG's failure to file a responsive brief in the appeal results in the admission of the appellants' statement of facts, supported by the record, as per relevant case law. The trial court denied the appellants' motion for summary judgment concerning PRG's claim of negligent misrepresentation, a ruling that the appellants did not contest on appeal. The record on appeal lacks a transcript of the hearing. Under OCGA 9-11-56(e), an adverse party must provide specific facts to show a genuine issue for trial when responding to a motion for summary judgment; failure to do so may lead to the entry of summary judgment against them. The legal precedent outlined indicates that a duty of good faith performance is contingent upon establishing a specific contractual obligation that has not been met by the other party.