Court: Court of Appeals of Georgia; October 30, 2014; Georgia; State Appellate Court
Effingham County's appeal concerns the denial of its second summary judgment motion in a breach of contract lawsuit initiated by Benjamin R. Roach, the Chapter 7 Bankruptcy Trustee for Darrell Morgan. The court allowed an interlocutory appeal due to the trial court's definitive ruling on sovereign immunity, classifying it as a directly appealable collateral order. The court affirmed the denial of summary judgment, noting that to succeed in such a motion, the moving party must demonstrate the absence of genuine material fact issues, with undisputed facts favoring judgment as a matter of law. The appellate court conducts a de novo review of the evidence, also viewing it in the light most favorable to the nonmoving party.
The background reveals that in early 2005, Morgan expressed interest in purchasing and developing a 75-acre section of a larger property in Effingham County, known as Grandview. He inquired about water and sewer utilities and zoning support from County officials, who assured him that utilities would be provided and re-zoning would be permitted. To secure financing from the Bank of Newington, Morgan needed a letter of intent from the County, which was issued on March 1, 2005, indicating projected service availability by July 2006, contingent upon a final agreement. Morgan subsequently purchased the property on July 18, 2005, after obtaining financing based on this letter. The County approved the re-zoning in October 2005, and Morgan provided a $500,000 letter of credit to the County as requested. A Development Agreement was executed on November 1, 2005, outlining responsibilities for constructing water and sewer infrastructure, with Morgan tasked to build on-site infrastructure and the County responsible for off-site infrastructure. Completion required Morgan to dedicate the on-site lines to the County.
The Agreement required GEFA to provide funding for the construction of the County's water, reuse water, and wastewater treatment system, with Morgan obligated to provide a $2.5 million letter of credit to the County and GEFA. No completion deadline for the construction was specified. On May 10, 2006, the County Board revoked previous agreements with Grandview and approved a new water/sewer agreement, which mandated Morgan to construct on-site infrastructure to be dedicated to the County, while the County would build off-site infrastructure. The County's obligation to provide sufficient water and sewage systems was contingent upon GEFA funding, but completion deadlines were left blank in the contract. If services were delayed, the County assigned any delay damages from its contractors to Morgan. Morgan was also required to furnish a $499,500 letter of credit to secure water/sewer connection fees and submitted a second letter of credit for $500,000 shortly after. The contract mandated annual payments from Morgan for any shortfalls in impact fee collections, included a severability clause, and stated that any failure or waiver of terms by either party would not affect the enforcement of the remaining terms. After the execution of the 2005 Agreement, the City of Rincon expressed interest in providing water/sewer services to Grandview to increase its customer base and avoid future infrastructure restrictions.
In early 2006, at the County's request, Morgan and OADG representatives attended a meeting where the County urged them to have Rincon provide water and sewer services instead of the County. Morgan objected, citing Rincon's insufficient capacity, but County officials assured him that the County would uphold its commitment to provide these services. Following this, Morgan did not engage in any further meetings with Rincon officials, unaware that the County was actively pursuing the substitution of Rincon as the provider and encouraging OADG to meet with Rincon. By early 2006, the Georgia Environmental Protection Division approved plans for projects funded by GEFA loans, including Grandview, yet the County had not submitted Grandview plans for approval.
The County's consulting engineer indicated that ongoing discussions with Rincon may have contributed to project delays. The County Administrator confirmed that the Grandview project was on hold pending decisions about Rincon's involvement. In July 2006, the County engineer indicated that work on Grandview would cease until discussions with Rincon were resolved, to which the County Administrator advised against publicizing the project's hold status. Throughout 2007, discussions about Rincon providing water/sewer continued, leading to further delays in designing the necessary infrastructure.
By late 2007, negotiations with Rincon had been ongoing for three months, yet Morgan was unaware of these discussions or their impact on the project timeline. Although the hold on the project was stated to be lifted in June 2007, the route for water/sewer services was realigned, delaying the County's ability to extend services until road work was completed. Morgan became aware of these delays and was informed that the County's progress depended on the Department of Transportation finishing the road work. In early 2008, due to these delays and economic changes, Morgan re-zoned his property for industrial use, which the County approved, noting that water/sewer would still be provided by the County and reflecting a reduced demand for the industrial property.
However, Morgan did not provide updated capacity needs for the industrial site, essential for infrastructure design. Later in 2008, the County removed Grandview from the GEFA funding scope but did not inform Morgan, who had not begun any work on his property due to concerns about the water/sewer assurance. Morgan expressed his frustrations to County officials starting in November 2006, but they consistently reassured him that the project would proceed.
Morgan expressed his reliance on assurances from the County regarding the provision of water and sewer services, stating that despite contemplating legal action after mid-2006 due to inaction, he chose to remain invested and continued making payments. He indicated that he felt wronged when the bank foreclosed on his property in November 2009, believing that had the County fulfilled its promises, he could have sold the property.
In the context of bankruptcy, Morgan filed for Chapter 11 in summer 2009, which converted to Chapter 7 by February 2010, with a discharge on January 7, 2011. The bank obtained relief from the automatic stay and foreclosed in November 2009. Roach, acting on Morgan's behalf, filed a suit against the County and its Board on December 22, 2010, alleging breach of contract, promissory estoppel, negligent misrepresentation, and seeking punitive damages.
The County’s motion for summary judgment on July 16, 2012, resulted in the dismissal of claims against individual defendants but was partially denied for breach of contract and promissory estoppel claims against the County. Roach later dismissed the promissory estoppel claim, leading the County to appeal, which was dismissed due to procedural issues.
Upon remand, the County renewed its summary judgment motion, citing grounds such as contract invalidity and sovereign immunity. The trial court, finding the second motion nearly identical to the first, incorporated previous findings and denied the motion. The County argued the trial court erred in denying summary judgment on the breach of contract claim, referencing a related case where a similar agreement was deemed void under Georgia law due to regulatory violations, but ultimately, the trial court's decision was upheld.
The 2006 Agreement's enforceability is upheld despite a potentially void 'impact fee' clause, as it contains a severability provision allowing the remainder of the contract to remain effective. Contracts can be entire or severable, with severability determined by the parties' intent, often expressed through a specific clause. The 2006 Agreement includes various obligations, such as the County's commitment to provide water/sewer services to Grandview, which are severable from the impact fee clause. The trial court correctly concluded that these obligations remain unaffected by prior rulings regarding the impact fee.
The County argues that Roach's breach of contract claim is barred by sovereign immunity, asserting that Roach has not identified a valid written contract. However, the court's earlier determination that the 2006 Agreement is enforceable negates this argument, allowing Roach's claim to proceed. The County also sought summary judgment on the basis that Roach cannot demonstrate damages, a necessary element for a breach of contract claim. Roach seeks damages that arise naturally from the breach, as contemplated by the parties at the time the contract was formed.
The County's appeal regarding damages centers on the assertion that the 2006 Agreement explicitly prohibits claims for consequential damages or economic losses due to delayed performance. The relevant clause contains two key components: it prohibits damages from delays caused by force majeure (irrelevant here) and limits the County's liability for consequential damages or economic losses from delays, unless the County fails to perform after receiving written notice of default from the Developer. It is undisputed that Morgan did not provide such notice or attempt to fulfill the County's obligations for off-site water/sewer services.
Under Georgia law, no-damage clauses are not enforceable for delays or their causes that the parties did not anticipate, and such clauses must be clear and specific. Evidence presented by Roach indicates that the delay in providing water/sewer services to Grandview was partly due to the County's extended negotiations with the City of Rincon, which the Developer was unaware of. The clause in question does not address this specific type of delay, leading to a factual issue for the jury regarding whether the parties intended for such delays to be covered by the clause.
The County's argument that Roach can only claim consequential damages was not further developed on appeal, and while Roach did not specify exact damages, the trial court recognized that property value diminution is a valid measure of damages. Therefore, the trial court appropriately found that there is a factual issue regarding damages for diminution in value. Additionally, the County claims Roach's claims are time-barred due to failure to provide timely ante litem notice as required by OCGA 36-11-1, which mandates presentation of claims against counties within 12 months after they accrue.
The County contends that Roach's claim began at the end of 2006 due to the 2006 Agreement, which mandated water/sewer availability to Grandview by that year. Consequently, the County argues that Roach's ante litem notice filed on September 29, 2010, was untimely. In contrast, Roach asserts that he only recognized a potential claim against the County following the property's foreclosure in November 2009 and points to a separate breach by the County in March 2009 when it removed Grandview from the 'Phase II' projects list. Roach also claims that the County's actions to hide project holds tolled any ante litem requirements. Under Georgia law, a breach of contract claim accrues at the time of breach, not when damages are discovered. The critical factor is when Roach could have successfully maintained an action, which depends on when the County allegedly breached the 2006 Agreement.
The 2006 Agreement's language requires the County to ensure the availability of water/sewer, and provides that if these services are not available by a certain date, the County assigns any delay damages from contractors to the Developer. The contract's incomplete terms necessitate construction by the court, which may consider parol evidence to ascertain the parties' intent. In situations where the parties do not specify a completion date, a reasonable time is implied based on the context, with what constitutes reasonable time being a factual question for the jury. The County's assertion that the lack of specific dates implies a due date of December 31, 2006, is rejected, as the second blank is also unfilled. Evidence suggests the parties initially anticipated a July 2006 completion date, but delays in finalizing the contract could have impacted this timeline. Thus, the conclusion is that the parties intended a reasonable timeframe for project completion, the determination of which is a jury question.
The jury must determine whether Morgan reasonably accepted project delays caused by external factors, specifically delays resulting from the DOT's prohibition of work on the water/sewer line during road realignment. Evidence suggests that these delays affect the anticipated completion timeline for the County's installation of water/sewer services to Grandview. Morgan claims that the County's alleged fraudulent concealment of a breach of contract claim tolled the period for ante litem notice. To support tolling, Morgan must prove that the County's actions prevented him from recognizing his breach of contract claim. The record indicates delays in 2006 and 2007 due to discussions with Rincon about water/sewer services and the County's failure to inform Morgan of these delays, making the issue unsuitable for summary judgment. Consequently, there are factual questions regarding the timing of the alleged breach and whether Morgan's breach of contract claim is timely under OCGA 36-11-1.
Additionally, the County argues that summary judgment is warranted due to Morgan's failure to mitigate damages, as the 2006 Agreement allowed him to notify the County of a default and extend the water/sewer lines himself, which he did not do. However, the timing of the breach remains a factual issue. By early 2008, Morgan attempted to rezone the property for industrial use to advance the project amid changing economic conditions, and the County acknowledged it would provide water/sewer services in the rezoning documents. Therefore, questions remain regarding when Morgan's duty to mitigate arose and whether his actions were reasonable.
The County also contests the denial of its motion for summary judgment on Roach's claim for litigation expenses under OCGA 13-6-11, arguing that Roach's breach of contract claim fails as a matter of law, a contention that the court has rejected. Without additional arguments, the trial court's denial of summary judgment is affirmed. The ruling was made on October 30, 2014, with reconsideration denied on November 20, 2014. The collateral order doctrine permits direct appeals of certain interlocutory rulings, particularly regarding sovereign immunity. The property involved was partly purchased by the Old Augusta Development Group, with a smaller portion acquired by Gregg Howze in his individual capacity.
The County contends that the letter of credit was not delivered, while Roach asserts that Morgan had previously provided the County a letter of credit in October, which facilitated a GEFA loan. During a board meeting, the County Administrator acknowledged the existence of a $500,000 letter of credit from Morgan. Effingham County has utilized similar contracts in past transactions, leading to a breach of contract claim against a developer for unpaid impact fees (Effingham County Bd. of Commrs. v. Park West Effingham, 308 Ga. App. 680, 2011). There are factual disputes regarding Morgan's reliance on OADG for his property development, as rezoning requests were submitted by someone else and Morgan missed several meetings.
Roach has modified his complaint multiple times, adding individual County commissioners as defendants and introducing claims for negligence and fraud, while dropping the fraudulent misrepresentation claim. He later voluntarily dismissed claims against the County for negligent misrepresentation, negligence, punitive damages, and fraud, and a consent order removed the Board of Commissioners as a defendant. According to OCGA 36-71-4 (d), development impact fees cannot be collected before issuing a building permit.
The case differs from Park West, where the County sought to enforce a void provision of the agreement without addressing its severability. Roach's lawsuit involves the County's failure to provide water/sewer services to Grandview, with the allegedly void provision deemed severable. The County claims the 2006 Agreement was nullified due to Morgan reducing capacity needs through rezoning but fails to support this assertion with further explanation or legal authority.
The contract includes a force majeure clause limiting liability for non-performance resulting from uncontrollable events and states that the County is not liable for consequential damages or economic losses from service delays. Consequential damages are defined as indirect losses not immediately resulting from an injurious act. In Georgia, to toll the statute of limitations for fraud, three conditions must be met: the fraud must involve moral turpitude, conceal the cause of action from the plaintiff, and the plaintiff must have exercised reasonable diligence in discovering the cause of action despite any concealment. The limitations period is extended until the plaintiff discovers the fraud.
