Opinion
Civil Action No. 1:20-cv-04246-VMC
2022-10-05
The LAMAR COMPANY, LLC, Plaintiff, v. GOSHEN SPRINGS PROPERTY III, LLC, Defendant/Third-Party Plaintiff, v. Goshen Springs United, LLC, Third-Party Defendant.
Joe P. Reynolds, John P. Jett, Kilpatrick Townsend & Stockton, LLP, Atlanta, GA, for Plaintiff. Bryan M. Knight, Sherri G. Buda, Knight Palmer, LLC, Atlanta, GA, for Defendant/Third-Party Plaintiff.
Joe P. Reynolds, John P. Jett, Kilpatrick Townsend & Stockton, LLP, Atlanta, GA, for Plaintiff. Bryan M. Knight, Sherri G. Buda, Knight Palmer, LLC, Atlanta, GA, for Defendant/Third-Party Plaintiff.
ORDER
Victoria Marie Calvert, United States District Judge
The matter is before the Court on Plaintiff The Lamar Company, LLC ("Lamar") and Defendant Goshen Springs Property III, LLC's ("Goshen III") cross-Motions for Summary Judgment. (Docs. 75, 76). For the reasons that follow, the Court will deny Plaintiff's Motion for Summary Judgment and grant Defendant's Motion for Summary Judgment in part.
I. Background
A. The 1995 Lease of the Property
This case arises out of a dispute over the leasehold rights to a billboard located in Norcross, Georgia. (Doc. 79 ¶¶ 1, 4; Doc. 81 ¶¶ 1-2). Frank Ferris and Carter Crittenden initially owned the land on which that billboard now sits (the "Property"). (Doc. 81 ¶ 1). In 1995, Mr. Farris and Mr. Crittenden signed a 25-year lease with a predecessor of Lamar, 3M Media, to allow 3M to build and operate the billboard (the "1995 Lease"). (Doc. 79 ¶¶ 1-2, 4; Doc. 81 ¶ 2). The 1995 Lease was set to expire on November 1, 2020. (Doc. 79 ¶ 2). Under the Lease, the annual rent for years 11-25 was the greater of $27,000 or 30% of the gross income generated by the billboard on the Property. (Doc. 79 ¶ 3; Doc. 81 ¶ 3).
B. Formation of Goshen Springs United, LLC
In July 2000, Messrs. Farris and Crittenden formed a Georgia limited liability company called "Goshen Springs United, LLC" ("United"). (Doc. 79 ¶ 5; Doc. 81 ¶ 5). They were the only two members and managers of United; Mr. Farris held a 55% interest and Mr. Crittenden a 45% interest. (Doc. 79 ¶ 5; Doc. 76-7 §§ 1.1; 2.12). United's Articles of Organization provide that "Management of the Company shall be vested in one or more managers." (Doc. 76-7 at 7). United's Operating Agreement contains the following provisions relevant to this dispute:
2.12. Manager shall mean one or more managers. Specifically, Manager shall mean Frank F. Farris and Carter Crittenden or any Person or Persons who succeeds them in that capacity . . . In the event there is more than one Manager, any action to be taken by the Manager under this Company Agreement may be taken with the consent of a majority of the Managers.(Doc. 76-7 at 15 (italics added)).
6.1 Management Rights. Subject to subsection 6.2 of this Article, all decisions to be made or actions to be taken on behalf of the Company shall be performed by the Managers.(Doc. 76-7 at 17-18 (italics added)).
6.2. Certain Powers of Managers and Restrictions on Authority of Managers. Notwithstanding subsection 6.1 of this Article, unless the Members shall unanimously consent in writing, the Managers shall not take any of the following actions:
. . .
6.2.11. Enter into agreements or contracts, execute any instruments, drafts, notes and other negotiable instruments, and to give receipts, releases, and discharges;
. . .
6.2.13. Execute and modify leases with respect to any part or all of the assets of the Company.
6.6. Authority of Manager To Bind the Company. Upon the unanimous consent of the Members, the Manager and agents of the Company authorized by the Manager shall have the authority to bind the Company.(Id. at 20 (italics added)).
Shortly after forming United, Messrs. Farris and Crittenden executed a quitclaim deed to transfer the Property from themselves to United. (Doc. 79 ¶ 5; Doc. 81 ¶ 7).
C. Subsequent Transfers of Control
In 2017, United sold the Property to Goshen Springs Property, LLC, but retained the billboard leasing rights (and the 1995 Lease) through a limited warranty deed. (Doc. 81 ¶¶ 8-9; Doc. 76-7; Doc. 76-9 at 4). After the sale, United notified Lamar's real estate manager, Tim Adrien, that it had sold the Property, and sent him a copy of the 2017 limited warranty deed. (Doc. 81 ¶ 13; Doc. 76-9 at 2-4).
Despite the similarity in entity name, Goshen Springs Property, LLC is owned by an unrelated individual, Hung "Alex" Nguyen. (Doc. 81 ¶ 9). Mr. Nguyen is also the sole member of Defendant/Third-Party Plaintiff Goshen Springs Property III, LLC. (Doc. 81 ¶ 50).
Since that 2017 sale of the Property, both Mr. Farris and Mr. Crittenden have died. (Doc. 79 ¶ 8). After his death, Mr. Farris's interest in United passed to the Farris Family Revocable Trust (the "Trust"), and in 2019, Christopher Tierney was appointed receiver ("Receiver") over the Trust's interest in United. (Doc. 79 ¶¶ 9-11; Doc. 75-9 at 1). Mr. Tierney was assisted in managing the Trust by a team at Moore Colson, including Amanda Levesque and Rusty Lane, both certified public accountants (together, the "CPAs," and collectively with the Receiver, the "Receiver's Team"). (Doc. 81 ¶ 21). Upon Mr. Crittenden's death in 2018, his interest in United became part of his estate, which was administered by his wife, Marjorie Crittenden. (Doc. 79 ¶ 10; Doc. 81 ¶ 28).
While the record does not indicate whether Ms. Crittenden was acting as Mr. Crittenden's personal representative at all relevant times, the issue of her authority is not in dispute.
D. The Proposed Lease Renewal
At some point, the Receiver's Team came under the mistaken impression that the 1995 Lease was set to expire in November 2019, not November 2020, and they began corresponding with Lamar about the 1995 Lease. The initial communication from CPA Lane to Mr. Adrien on March 1, 2019, stated, "I work for . . . the Receiver for the Farris Family Revocable Trust and the assets of Frank F. Farris III [ ]. Frank Farris was the 55% owner in the Goshen Springs Property, LLC which hold the 34012B and 34013B leases. Attached is a copy of the Receivership Order." (Doc. 76-22 at 2). On March 25, 2019, CPA Lane sent Lamar a W-9 form on behalf of Farris Family Revocable Trust that was signed by the Receiver. The W-9 referred to "Goshen Springs United, LLC" in Box 7, for which the instructions state, "List account number(s) here (optional)." (Doc. 76-24 at 3-5).
At the time, the Receiver's Team was allegedly unaware of United's ownership of the leasing rights, and instead was under the impression that Mr. Farris and Mr. Crittenden had a partnership agreement regarding the leasing rights to the Property. (See, e.g., Doc. 75-6 at 7 (Receiver: "At the beginning we didn't know Goshen Springs United existed when we first got involved . . . We just knew that there was a partnership there between the two gentlemen.")). However, the evidence conflicts as to the actual knowledge of the Receiver's team. (See Doc. 76-70 at 4 (email from CPA Lane asking about "a parcel of land owned by Goshen Springs United, LLC"); Doc. 76-70 at 2 (March 5, 2019 email from attorney John Hollingsworth informing CPA Lane that after the sale of the Property, United "retained all rights to the billboard lease and easements with a right of first refusal to Goshen Springs Property, LLC.")).
The Court notes that this document is another example of the conflicting evidence regarding the Receiver's knowledge of Goshen Springs United, LLC. See supra note 3.
In April 2019, the Receiver's Team asked Lamar for a proposal to renew the lease. (Doc. 81 ¶¶ 25, 32). Lamar, through Mr. Adrien, provided a form entitled "Sign Location Lease" to the Receiver and the CPAs. (Doc. 81 ¶ 33). That form included a right of first refusal for Lamar, a provision which was not included in the 1995 Lease. (Doc. 81 ¶¶ 33-36; 43). The form also included increased rent of $30,000, "payable annually in advance in equal installments of [$30,000] each or [30%] of gross whichever is greater, with the first installment due on the first day of the month following commencement for the guaranteed payments and the percentage balance within [60] days of the end of each respective lease year." (Doc. 75-9 at 26). The Receiver's Team proposed some edits to the form. (Doc. 81 ¶¶ 33-37). Lamar accepted the revisions and then sent a new proposed lease (the "Proposed Lease"), which stated that the Lessors were "Farris Family Revocable Trust and Marjorie Crittenden," and included signature lines for both of them. (Doc. 79 ¶ 29; Doc. 76-31 at 12-13). Neither the form Sign Location Lease nor the Proposed Lease mentions United by name. (Doc. 76-31 at 12-13).
On or about May 1, 2019, Mr. Tierney signed the Proposed Lease "as receiver" for the Farris Family Revocable Trust. (Doc. 79 ¶¶ 28-29; Doc. 75-9 at 27). CPA Levesque then emailed the Proposed Lease containing Mr. Tierney's signature to Mr. Adrien, and asked in her email, "Are you planning on reaching out to Marjorie [Crittenden] to get her signature, or is that something you'd rather [the Receiver's firm] handle? We're hoping to get this finalized sooner rather than later so we don't have to worry about it when November rolls around." (Doc. 81 ¶ 38; Doc. 75-11 at 13). Lamar never responded to that question, and neither Lamar nor the Receiver asked Ms. Crittenden to sign the Proposed Lease at that time. (Doc. 81 ¶ 38; Doc. 79 ¶ 34).
The Proposed Lease was then signed by Lamar though Nick Brown, "Vice-President/General Manager" on or about June 4, 2019, at which time Mr. Adrien emailed a copy with Mr. Brown's signature to CPA Levesque. (Doc. 79 ¶ 28; Doc. 81 ¶ 40; Doc. 75-9 at 27; Doc. 76-35 at 2). The Proposed Lease's term was set to begin on November 1, 2019. (Doc. 79 ¶ 20; Doc. 75-9 at 26). Ms. Crittenden, despite being listed as one of the Lessors and having a signature line on the Proposed Lease, never signed the Proposed Lease. (Doc. 79 ¶ 34; Doc. 75-9). In June 2019, Mr. Adrien told Ms. Crittenden on a phone call that "the lease had been renewed." (Doc. 81 ¶ 44; Doc. 79 ¶ 35). Ms. Crittenden followed up with a letter to Mr. Adrien dated June 17, 2019, which stated, in part, "Thank you for letting me know that as of this November 2019 the lease for Goshen Springs Properties, LLC has been renewed . . . [w]ill you kindly send or email me a copy of the lease?" (Doc. 75-9 at 24). Mr. Adrien then sent her a copy of the Proposed Lease. (Doc. 79 ¶ 35).
It is unclear from the record what happened in the interim; but on July 16, 2019, Ms. Crittenden and her accountant sent CPA Levesque a number of edits and comments on the Proposed Lease, telling CPA Levesque that "[o]nce the Lease and Addendum have been finalized," she should "email or mail [Ms. Crittenden] a copy to sign, which [Ms. Crittenden] will then forward to [Mr. Adrien] to sign." (Doc. 75-9 at 29-34). But according to the record, no further action was taken for several months.
At some point, an addendum was discussed and drafted by one or both sides, as evidenced by Ms. Crittenden's email (Doc. 75-9 at 29-34) and the Proposed Lease version sent by CPA Levesque to Goshen III in October 2019 (Doc. 76-52 at 12-15), but the record does not contain any information about the origin of this addendum, so the Court does not draw any conclusions about it. See infra note 7.
E. Goshen III Offers to Purchase the Leasing Rights from United
In early October 2019, Defendant Goshen III made an offer to buy the 1995 Lease from United. (Doc. 81 ¶ 50). The offer was made to the Receiver's Team. (Doc. 81 ¶ 50). On October 17, 2019, the Receiver's Team sought a waiver from Lamar of its right of first refusal. (Doc. 81 ¶¶ 56-57). On October 21, 2019, CPA Levesque sent Goshen III an edited version of the Proposed Lease stating that it was a "draft of the new lease terms, although it is pretty close to what will be the final executed version" and requesting that Goshen III "send a re-priced offer based on these new terms and let me know there are anything [sic] you would like revised before it is finalized." (Doc. 81 ¶ 59). Goshen III then increased its bid based upon the increased rent amount in the Proposed Lease, making its offer "contingent on the non-renewal with Lamar [ ]." (Doc. 81 ¶ 64).
It is unclear why the Receiver's Team thought they needed to obtain a waiver of Lamar's right of first refusal at this point, because the right of first refusal provision was only in the Proposed Lease—which, even if it was a valid contract, was not set to go into effect until November 1, 2019.
The version sent to Goshen III included an addendum to the Proposed Lease. (See Doc. 76-52 at 12-15). The record does not indicate when an addendum was discussed or added. See supra note 5.
F. The Receiver Asks Lamar for an Extension in Renewing the Lease; in Response, Lamar States the 1995 Lease is Still Valid
While the Receiver's Team's discussions with Goshen III about potentially purchasing the 1995 Lease were ongoing, on October 21, 2019, the Receiver (still acting under the belief that the 1995 Lease was going to expire on November 1, 2019) directed CPA Levesque to contact Lamar to "ask . . . if [Lamar] would give us a 30 day [sic] extension in re-executing the lease. Tell [Lamar] we need to go through some court approvals and deal with some of the past owners [sic] descendants." (Doc. 81 ¶ 70). CPA Levesque emailed Mr. Adrien minutes later to make the request. (Doc. 81 ¶ 71). Mr. Adrien responded to another question in CPA Levesque's email but not that request. The next day, October 22, 2019, CPA Levesque followed up with another email:
Would it be possible to get a 30-day extension on renewing the lease? We need to go through some court approvals and deal with some of the past lease owners' descendants before we can move forward. I would think we could get through all the hoops and sign by 12/1[/19].(Doc. 76-55 at 4). The email correspondence between them then proceeded as follows:
Mr. Adrien (Oct. 22, 2019): "I will leave everything as is until I hear from you." (Id.).
CPA Levesque (Oct. 22, 2019): "Just to confirm, this is your written confirmation to extend the lease through 11/30 even without signing an executed lease renewal contract." (Id. at 3).
Mr. Adrien (Oct. 23, 2019): "We will consider the lease from 1995 as still valid which actually expires on November 14, 2020. I am not sure what cashing the checks at the increased amounts might imply . . ." (Id.)
CPA Levesque (Oct. 25, 2019): "I appreciate that the lease doesn't expire until November 14, however, we need more time to deal with some issues before we can sign. Can Lamar grant an extension on the current lease? 12/1[/19] should be enough time for us to get
everything sorted with all involved parties and get it through the courts." (Id.).While this exchange was ongoing, on October 22, 2019, Lamar issued checks to the Trust and Ms. Crittenden totaling $30,000 (i.e., the amount of rent that would have been paid under the new Proposed Lease), as referenced in Mr. Adrien's October 23 email. (Doc. 81 ¶ 81; Doc. 79 ¶ 45). It appears from the record that these checks were deposited at some point (see Doc. 76-16 at 3-4 (including endorsed copies of both checks)), but the record does not show when the checks were endorsed or deposited. It is undisputed that after this email exchange, the November 1, 2019 commencement date for the Proposed Lease passed without further discussion from either party.
Mr. Adrien (Oct. 25, 2019): "That is November of next year." (Id. at 2).
CPA Levesque (Oct. 25, 2019): "Excellent, that gives us an entire year to get through issues on our end and get the lease renewed. For some reason I had marked down November of this year, which is why we were trying to get through everything . . ." (Id.).
Mr. Adrien (Oct. 25, 2019): "Thank you Amanda" (Id.).
Lamar appears to argue that there is some distinction between the language of "re-executing" (in CPA Levesque's October 21 email) versus "renewing" the lease (in CPA Levesque's October 22 email). (See Doc. 76-1 at 14). The Court finds no relevant distinction between the two terms.
Irrelevant portions have been omitted.
Lamar states, without any supporting evidence, that both checks were cashed in November 2019. (Doc. 76-1 at 15).
G. The Sale of the Lease to Goshen III Closes
On May 20, 2020, United and Goshen III entered into a purchase agreement in which Goshen III bought United's billboard leasing rights retained in the 2017 deed and United's interest in the 1995 Lease. (Doc. 81 ¶ 88). Mr. Tierney, as Receiver, executed the purchase agreement pursuant to a separate written agreement signed by Mr. Tierney and Ms. Crittenden, which stated that the Receiver "has negotiated for the sale of the asset of [United] to [Goshen III] under terms and conditions acceptable to all members of [United]. (Doc. 81 ¶ 91; Doc. 76-71 at 2-4).
H. Goshen III Disputes the Validity of the Proposed Lease
After the sale, Goshen III informed Lamar of its understanding that the 1995 Lease would terminate on November 1, 2020, and that there had been no effective renewal. (Doc. 75-12 at 2). Lamar then brought this action against Goshen III for specific performance of the Proposed Lease and attorney's fees. (Doc. 1). Goshen III filed a counterclaim, seeking declaratory judgment and attorney's fees, and brought a claim against United for contractual indemnification. (Doc. 12). Both Lamar and Goshen III have filed motions for summary judgment, which are ripe for the Court's review.
Goshen III brought several other claims against other third-party defendants, but those were dismissed by the Court's Order of April 5, 2021 (Doc. 50) or by agreement of the Parties (Doc. 53, 55).
II. Legal Standard
Federal Rule of Civil Procedure 56(a) provides "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." A factual dispute is genuine if the evidence would allow a reasonable jury to find for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A fact is "material" if it is "a legal element of the claim under the applicable substantive law which might affect the outcome of the case." Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997).
The moving party bears the initial burden of showing the court, by reference to materials in the record, that there is no genuine dispute as to any material fact that should be decided at trial. Hickson Corp. v. N. Crossarm Co., 357 F.3d 1256, 1260 (11th Cir. 2004) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). The moving party's burden is discharged merely by " 'showing'—that is, pointing out to the district court—that there is an absence of evidence to support [an essential element of] the nonmoving party's case." Celotex, 477 U.S. at 325, 106 S.Ct. 2548. In determining whether the moving party has met this burden, the district court must view the evidence and all factual inferences in the light most favorable to the party opposing the motion. Johnson v. Clifton, 74 F.3d 1087, 1090 (11th Cir. 1996). Once the moving party has adequately supported its motion, the non-movant then has the burden of showing that summary judgment is improper by coming forward with specific facts showing a genuine dispute. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). All reasonable doubts should be resolved in the favor of the non-movant. Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir. 1993). In addition, the court must "avoid weighing conflicting evidence or making credibility determinations." Stewart v. Booker T. Washington Ins., 232 F.3d 844, 848 (11th Cir. 2000). When the record as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine dispute for trial. Fitzpatrick, 2 F.3d at 1115 (citations omitted).
On cross-motions for summary judgment, "[t]he standard of review . . . does not differ from the standard applied when one party files a motion, but simply requires a determination of whether either of the parties deserves judgment as a matter of law on the facts that are not disputed." Loiseau v. Thompson, O'Brien, Kemp & Nasuti, P.C., 499 F. Supp. 3d 1212, 1219 (N.D. Ga. 2020) (quoting GEBAM, Inc. v. Inv. Realty Series I, LLC, 15 F. Supp. 3d 1311, 1315-16 (N.D. Ga. 2013)). "The Court must consider each motion on its own merits, resolving all reasonable inferences against the party whose motion is under consideration. Cross-motions may . . . be probative of the absence of a factual dispute where they reflect general agreement by the parties as to the controlling legal theories and material facts." Id. (citing U.S. ex rel. Saldivar v. Fresenius Med. Care Holdings, Inc., 972 F. Supp. 2d 1339, 1341 (N.D. Ga. 2013)).
III. Discussion
Generally, the party asserting the existence of a contract has the burden of proving its existence and its terms. Newton's Crest Homeowners' Ass'n v. Camp, 306 Ga.App. 207, 702 S.E.2d 41, 47 (2010), aff'd sub nom. Kennedy Dev. Co. v. Camp, 290 Ga. 257, 719 S.E.2d 442 (2011) (citing Overton Apparel v. Russell Corp., 264 Ga.App. 306, 590 S.E.2d 260, 262 (2003)). The Court notes that "[i]n deciding whether parties mutually assented to the terms of a contract, a court may consider the circumstances surrounding making the contract, including the parties' discussions and correspondence," and it does so here. W.D. Off. Park, LLC v. Brink's, Inc., No. 1:18-CV-03146, 2019 WL 3973945, at *4 (N.D. Ga. Aug. 22, 2019) (citing Frickey v. Jones, 280 Ga. 573, 630 S.E.2d 374, 376 (2006) ("The circumstances surrounding the making of the contract, such as correspondence and discussions, are relevant in deciding if there was a mutual assent to an agreement, and courts are free to consider such extrinsic evidence.")).
In order to prevail on its Motion for Summary Judgment, Lamar must show that there is no genuine issue of material fact as to the existence of a valid lease renewal. Because Lamar is seeking specific performance of the Proposed Lease, the burden is on Lamar to establish its existence and terms, as well as that no defenses defeating the existence of a contract apply.
In its Counterclaim, Goshen III specifically seeks declaratory judgment. (Doc. 12 at 24-27). "Under the Declaratory Judgment Act, the court may issue a judgment declaring the parties' rights and legal relations." Frankenmuth Mut. Ins. Co. v. Five Points W. Shopping City, LLC, No. 2:20-CV-1288-KOB, 2022 WL 949888, at *8 (N.D. Ala. Mar. 29, 2022) (citing Wilton v. Seven Falls Co., 515 U.S. 277, 286, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995); 28 U.S.C. § 2201(a)). "If parties file for summary judgment concerning declaratory judgment claims, then the court applies the typical summary judgment standard concerning the particular right at issue—that is, whether a genuine issue of material fact exists and whether the moving party is entitled to judgment as a matter of law concerning the right at issue." Id. (quoting Medtronic, Inc. v. Mirowski Family Ventures, LLC, 571 U.S. 191, 199, 134 S.Ct. 843, 187 L.Ed.2d 703 (2014)) ("We have long considered the operation of the Declaratory Judgment Act to be only procedural, leaving substantive rights unchanged . . . . And we have held that the burden of proof is a substantive aspect of a claim." (internal citations and quotation marks omitted)). On Goshen III's Motion for Summary Judgment, to prevail, Goshen III must show there is no genuine issue of material fact as to the non-existence of a valid lease renewal.
After thorough consideration, the Court finds that there is no genuine issue of material fact as to the non-existence of a valid lease renewal because the doctrine of abandonment or recission applies.
A. Neither the Farris Family Revocable Trust Nor Ms. Crittenden Held a Real Property Interest in United's Property.
As a threshold issue, the Court affirms that the Trust never held a real property interest in the Property. It is undisputed that United owned the leasing rights to the Property starting when the Property was conveyed to United in 2000, and continuing after the sale of the land to Goshen Springs Property, LLC in 2017. (Doc. 81 ¶¶ 8-9, 13). Under Georgia law, an interest in a limited liability company is personal property. O.C.G.A. § 14-11-501(a). But, as Lamar correctly points out, "a member has no interest in specific limited liability company property." Id.; Veterans Parkway Devs., LLC v. RMW Dev. Fund II, LLC., 300 Ga. 99, 793 S.E.2d 398, 401 (2016) ("a member's stake in a [sic] LLC is not an interest in real property or an interest in any specific property of the LLC"); see also STC Two, LLC v. Shulman-Weiner, 325 Ga.App. 245, 750 S.E.2d 730, 734 (2013) (finding that payment made to LLC members in their individual capacities was not proper consideration for contract with LLC). The Trust, as a member, had a personal property interest in United, but it did not have a personal property interest in the leasing rights of the Property. The interest in the leasing rights belonged solely to United. (See, e.g., Doc. 76-1 at 23) ("United alone owned the right to lease with Lamar.").
Lamar was on notice of United's ownership of the leasing rights starting in March 2017. (Doc. 81 ¶ 13).
Therefore, because the Trust itself had no interest in the leasing rights, the Trust had no ability to contract for those rights outside of its capacity as a manager of United. See Great Water Lanier, LLC v. Summer Crest at Four Seasons on Lanier Homeowners Ass'n, Inc., 344 Ga.App. 180, 811 S.E.2d 1, 5-6 (2018) ("[I]t is axiomatic that a grantor in a deed can convey only that which it owns and that a grantee can take no greater title than that held by the grantor."). But, as discussed below, the Trust could not unilaterally act as manager of United.
B. United's Operating Agreement Did Not Allow the Trust to Bind United Without the Unanimous Written Consent of the Members.
Despite Lamar's arguments to the contrary, Mr. Tierney, as Receiver, did not have the "right and obligation to act as Manager of United" due to the Trust's 55% membership interest in United. (Doc. 76-1 at 24). While the Receiver, under the language of the Receivership Order, controlled the personal property interest formerly belonging to Mr. Farris, that interest remained subject to the terms of United's Articles of Organization and Operating Agreement. Under those terms, even with a 55% membership interest, the Trust had no ability to control United unilaterally.
United was organized as a manager-managed LLC. (Doc. 76-7 at 7). Under O.C.G.A. § 14-11-301, for manager-managed LLCs, "No member, acting solely in the capacity as a member, is an agent of the limited liability company." And to the extent the Receiver was acting as a manager of United at the time he signed the Proposed Lease, managerial authority is expressly limited by section 6.2 of United's Operating Agreement, which provides, in relevant part,
[U]nless the Members shall unanimously consent in writing, the Managers shall not take any of the following actions:(Id. at 18). Accordingly, the Receiver could not execute a lease on behalf of United without the written consent of Ms. Crittenden, and there is no evidence in the record that her written consent had been obtained at the time the Receiver signed the Proposed Lease. See Guarantee Co. of N. Am. v. Gary's Grading & Pipeline Co., 746 F. App'x 831, 835 (11th Cir. 2018) (quoting Findlay Brick Co. v. Am. Sewer Pipe Co., 18 Ga.App. 446, 89 S.E. 535, 536 (1916) ("Where an agent's authority is conferred and defined in writing, the scope or extent of such authority must be determined from the terms of the writing, and is to be determined and construed by the court.")). The Receiver's after-the-fact statements to the court in the Receivership action about the Proposed Lease cannot create such authority where it did not exist. Further, the Receiver represented only the Trust in those communications, so such statements cannot constitute judicial admissions by United, as Lamar argues. Nor can Ms. Crittenden's after-the-fact communications with Mr. Adrien be substituted for the requirement of her written consent pursuant to the terms of United's Operating Agreement prior to United entering into a lease.
. . .
6.2.11. Enter into agreements or contracts, execute any instruments, drafts, notes and other negotiable instruments, and to give receipts, releases, and discharges;
[or]
6.2.13. Execute and modify leases with respect to any part or all of the assets of the Company[.]
C. Questions of Fact Remain as to Whether the Receiver Was Acting Under Apparent Authority When Signing the Proposed Lease.
Even though the Receiver, under the terms of United's Operating Agreement, did not have actual authority to execute the Proposed Lease on behalf of United, his actions could still bind United if he was acting with apparent authority at the time. The scope of apparent authority for a manager in a manager-managed LLC is set out in O.C.G.A. §14-11-301:
(b) If the articles of organization provide that management of the limited liability company is vested in a manager or managers:
. . .
O.C.G.A. § 14-11-301 (emphasis added).(2) Every manager is an agent of the limited liability company for the purpose of its business and affairs, and the act of any manager, including, but not limited to, the execution in the name of the limited liability company of any instrument for apparently carrying on in the usual way the business and affairs of the limited liability company of which he or she is a manager, binds the limited liability company, unless the manager so acting has, in fact, no authority to act for the limited liability company in the particular matter, and the person with whom he or she is dealing has knowledge of the fact that the manager has no such authority.
Apparent authority "must be based on acts of the principal which have led the third party to believe reasonably the agent had such authority." Intelligent Inv. Int'l LLC v. Fu, No. 1:17-CV-5296-RWS, 2021 WL 4236876, at *11 (N.D. Ga. Aug. 31, 2021) (citing Stallings v. Sylvania Ford-Mercury, 242 Ga.App. 731, 533 S.E.2d 731, 734 (2000); Hinely v. Barrow, 169 Ga.App. 529, 313 S.E.2d 739, 741 (1984)). "[W]here the only evidence that a person is an agent of another party is the mere assumption that such agency existed, or an inference drawn from the actions of that person that [she] was an agent of another party, such evidence has no probative value and is insufficient to authorize a finding that such an agency exists." Id. (quoting Hinely, 313 S.E.2d at 741).
Whether the Receiver had apparent authority to sign the Proposed Lease here raises several embedded legal and factual questions. First, was the Receiver's purported execution "in the name of the limited liability company" when United's name never actually appeared on the face of the Proposed Lease?
Second, pursuant to O.C.G.A. § 14-11-301, did Lamar have "knowledge of the fact that the manager ha[d] no [actual] authority" at the time of the signing of the Proposed Lease, especially given that CPA Levesque's transmission email of May 1, 2019 indicated that the Receiver's Team intended for Ms. Crittenden to sign the Proposed Lease? (See Doc. 75-11 at 13 ("Attached is the signed lease . . . [a]re you planning on reaching out to Marjorie to get her signature, or is that something you'd rather [the Receiver's Team] handle? We're hoping to get this finalized sooner rather than later so we don't have to worry about it when November rolls around.")).
Third, Goshen III is correct that the Proposed Lease would be subject to the statute of frauds, unless an exception applies. See Nacoochee Corp. v. Suwanee Inv. Partners, LLC, 275 Ga.App. 444, 620 S.E.2d 641, 643 (2005) ("To satisfy the statute of frauds, a contract creating the relation of landlord and tenant for a period in excess of one year must be in writing.") (internal citation and quotation marks omitted). Accordingly, the equal dignity rule, codified at O.C.G.A. § 10-6-2, would also apply. The equal dignity rule states, "[w]here the exercise or performance of an agency is by written instrument, the agency shall also be created by written instrument . . ." O.C.G.A. § 10-6-2; see 20/20 Vision Ctr., Inc. v. Hudgens, 256 Ga. 129, 345 S.E.2d 330, 334 (1986) ("[S]ince a contract creating the relation of landlord and tenant for a period in excess of one year must be in writing, the authority of an agent to execute such a contract likewise must be in writing").
The party entering into a contract subject to the statute of frauds that is to be executed by the counterparty's agent "is under a duty to inquire and ascertain . . . what the limits of the [agent's] authority are." Fleet Bus. Credit, LLC v. Solarcom LLC, No. 1:04-CV-2455-BBM, 2005 WL 8154917, at *12 (N.D. Ga. Nov. 14, 2005) (quoting 20/20 Vision Ctr., 345 S.E.2d at 334) (citations omitted). The record does not show that Lamar inquired or attempted to ascertain the limits of the Receiver's authority, despite its actual notice of the fact that the leasehold rights were held by United (Doc. 81 ¶ 13; Doc. 76-9 at 2-4) and the fact that it received a copy of the Receivership Order (Doc. 76-22 at 2). But Georgia courts have found that even if the equal dignity rule is not met and the party dealing with the agent fails to inquire as to the agent's authority, apparent authority may still exist depending on the facts of the case. See 20/20 Vision, 345 S.E.2d at 334 n.4 ("It is a question to be decided under the facts of each case as to whether the complaining party is barred from obtaining relief because of his or her negligence in not ascertaining whether an agent, imbued by the principal with apparent authority, had actual, written authority to enter into the contract."). Therefore, a question remains as to whether Lamar should be precluded from claiming it did not have actual knowledge, since it was under a duty to inquire and ascertain the limits of the Receiver's authority to execute the Proposed Lease.
The Court accordingly finds that there is a genuine issue of material fact as to whether the Receiver was acting under apparent authority at the time he signed the Proposed Lease. But that does not end the Court's inquiry.
D. Even If the Proposed Lease Was a Valid Contract, Lamar Agreed to Abandon or Rescind It, Thus Waiving Any Right to Enforcement.
Even assuming arguendo that the Receiver had apparent authority and therefore the Proposed Lease was a valid contract at the time it was entered into, the Proposed Lease was no longer valid after Lamar agreed to abandon or rescind it in October 2019. As such, the Proposed Lease never went into effect because the scheduled effective date was November 1, 2019, and Lamar has waived its right to seek enforcement of the Proposed Lease.
The Court notes that there appears to be no substantive difference in Georgia law between "abandonment" and "mutual recission" when no obligations have yet accrued under a contract. See Hon. John K. Larkins III, Contracts Law and Litigation § 10:5 (2d ed.).
Under Georgia law, parties may "by mutual consent abandon an existing contract between them so as to make it not thereafter binding and the contract may be rescinded by conduct as well as by words." Emory Healthcare, Inc. v. Farrell, 359 Ga.App. 621, 859 S.E.2d 576, 580-81 (2021) (quoting WorksiteRX, LLC v. DrTango, Inc., 286 Ga.App. 284, 648 S.E.2d 775, 776 (2007)); see also Holloway v. Giddens, 239 Ga. 195, 236 S.E.2d 491, 492 (1977), overruled on other grounds by Brown v. Frachiseur, 247 Ga. 463, 277 S.E.2d 16 (1981); Hennessy v. Woodruff, 210 Ga. 742, 82 S.E.2d 859, 862 (1954). "Indeed, for purposes of rescission, a meeting of the minds may be shown by 'the conduct of one party inconsistent with the continued existence of a contract, or abandonment or repudiation of the contract, and knowledge of, and acquiescence to, such abandonment or repudiation by the other.' " Id. at 581 (quoting GGNSC Louisville Hillcreek, LLC v. Estate of Bramer, 932 F.3d 480, 487 (6th Cir. 2019)); see also Crop Prod. Servs., Inc. v. Moye, 345 Ga.App. 228, 812 S.E.2d 565, 569-70 (2018) (quoting Fidelity Nat. Bank v. Reid, 180 Ga.App. 428, 348 S.E.2d 913, 915 (1986)) (" '[A] rescission is in itself a contract and depends on a mutual understanding and agreement' of the parties."). A recission must be proven "clearly and satisfactorily." Crop Prod. Servs., 812 S.E.2d at 570 (citing Pope v. Thompson, 157 Ga. 891, 122 S.E. 604, 605 (1924)). And if it can be proven, "rescission of a contract by consent . . . shall be a complete defense." Id. (citing O.C.G.A. § 13-5-7); see also Brooks v. Boykin, 194 Ga.App. 854, 392 S.E.2d 46, 47 (1990); Allen Housemovers v. Allen, 135 Ga.App. 837, 219 S.E.2d 489 (1975).
Therefore, even if the Proposed Lease was a valid contract, Mr. Adrien's emails to CPA Levesque dated October 23 and 25, 2019 establish that Lamar agreed to abandon or rescind the Proposed Lease, and instead consented that the 1995 Lease would remain in effect through its scheduled end date in November 2020. (Doc. 76-55 at 2-3 (Adrien email, October 23, 2019: "We will consider the lease from 1995 as still valid which actually expires on November 14, 2020."; Adrien email, October 25, 2019: "That is November of next year.")). At the end of the exchange, CPA Levesque wrote, "Excellent, that gives us an entire year to get through issues on our end and get the lease renewed." (Doc. 76-55 at 2). Mr. Adrien responded, "Thank you Amanda." (Id.). Mr. Adrien's statements clearly and satisfactorily show that Lamar agreed that the 1995 Lease would continue to be in effect until its scheduled end date in November 2020, and that the Proposed Lease would not go into effect on its scheduled November 1, 2019 commencement date. Mr. Adrien's statements are "inconsistent with the continued existence" of the Proposed Lease as a valid contract, and Lamar has waived any right to enforce the Proposed Lease. See, e.g., Delli-Gatti v. Mansfield, 223 Ga.App. 76, 477 S.E.2d 134, 138 (1996) (finding that the conduct of the party seeking enforcement of contract "resulted in a waiver of right to assert a breach of contract claim"); Allen, 219 S.E.2d at 491 ("Plaintiff's acts and conduct were inconsistent with any rights under the contract, and he was debarred from any right to sue on the contract."). The emails between CPA Levesque and Mr. Adrien establish mutual consent to continue the term of the 1995 Lease until November 2020 and to abandon the Proposed Lease.
Lamar points to the checks "totaling $30,000" it issued on October 22, 2019 to the Trust and Ms. Crittenden as evidence of performance on the new Proposed Lease (Doc. 79 ¶ 45), but those checks were issued before Mr. Adrien and CPA Levesque's email correspondence in which Mr. Adrien agreed to abandon or rescind the Proposed Lease. Mr. Adrien knew the checks had already been issued at the time of his October 23, 2019 email to CPA Levesque because he referenced them in that email. (Doc. 76-55 at 3 (Adrien email, October 23, 2019: "I am not sure what cashing the checks at the increased amounts might imply.")). Still, in the same email (and in his subsequent emails), he agreed that the 1995 Lease was valid until its scheduled end date in November 2020, thereby abandoning or rescinding the Proposed Lease. The issuance of the checks does not contradict Lamar's abandonment or recission. The Court finds that as a matter of law, the Proposed Lease is not a valid contract, and Lamar has waived the right to enforce it by its conduct.
As the Parties have not raised the issue of whether restitution of the overpayment of rent in these checks should be granted to Lamar, the Court does not address it.
Because Lamar's Count I fails as a matter of law, Lamar's Count II for attorney's fees cannot survive independently of the underlying claim, so it fails as well.
E. Goshen III's Claim for Attorney's Fees Requires Determination by the Factfinder on the Question of Bad Faith.
Attorney's fees are recoverable in a contract action under Georgia law when a party has specially pleaded and where the "defendant has acted in bad faith, has been stubbornly litigious, or has caused the plaintiff unnecessary trouble and expense." Kin Chun Chung v. JPMorgan Chase Bank, N.A., 975 F. Supp. 2d 1333, 1351 (N.D. Ga. 2013) (citing O.C.G.A. § 13-6-11).
In SRM Grp., Inc. v. Travelers Prop. Cas. Co. of Am., the Georgia Supreme Court overruled several prior cases and found that a defendant prevailing on an independent counterclaim could recover attorney's fees under O.C.G.A. § 13-6-11 as a "plaintiff-in-counterclaim." 308 Ga. 404, 841 S.E.2d 729, 731 (2020); see also Shea v. Best Buy Homes, LLC, 533 F. Supp. 3d 1321, 1343 (N.D. Ga. 2021) (citing Tri-State Consumer Ins. v. LexisNexis Risk Sols., Inc., 858 F. Supp. 2d 1359, 1371 (N.D. Ga. 2012)). Goshen III asserts its counterclaims in such a capacity here.
1. Bad Faith
Bad faith under O.C.G.A. § 13-6-11 means "bad faith connected with the transaction and dealings out of which the cause of action arose, rather than bad faith in defending or resisting the claim after the cause of action has already arisen." Chung, 975 F. Supp. 2d at 1351 (quoting Lewis v. D. Hays Trucking, Inc., 701 F. Supp. 2d 1300, 1313 (N.D. Ga. 2010)). "Bad faith requires more than 'bad judgment' or 'negligence,' rather the statute imports a 'dishonest purpose' or some 'moral obliquity' and implies 'conscious doing of wrong' and a 'breach of known duty through some motive of interest of ill will.' " Id.
"Under Georgia law, '[o]nly in the rare case where there was absolutely no evidence to support the award of expenses of litigation would the trial court be authorized to grant summary adjudication on such issues.' " Hughey v. KTV's Transport., LLC, No. 1:19-CV-03499-SDG, 2022 WL 902841, at *3 (N.D. Ga. Mar. 28, 2022) (quoting Am. Med. Transp. Grp., Inc. v. Glo-An, Inc., 235 Ga.App. 464, 509 S.E.2d 738, 741 (1998)). "Even slight evidence of bad faith can be enough to create an issue for the jury." Chung, 975 F. Supp. 2d at 1351 (quoting Lloyd's Syndicate No. 5820 v. ACGO Corp., 319 Ga.App. 260, 734 S.E.2d 899, 907 (2012), vacated in part on other grounds 328 Ga.App. 862, 763 S.E.2d 251 (2014)). Because the Court cannot conclude here that there is "absolutely no evidence" of bad faith by Lamar, the Court cannot grant summary judgment on Goshen III's claim for attorney's fees.
2. Stubborn Litigiousness or Unnecessary Trouble and Expense
In contrast to bad faith, however, the other two grounds for granting attorney's fees under O.C.G.A. § 13-6-11 fall under a slightly different standard. Here, "the existence of a 'bona fide controversy' between the parties precludes an award of attorney fees premised on stubborn litigiousness" or unnecessary trouble and expense. Nash v. Reed, 349 Ga.App. 381, 825 S.E.2d 853, 856-57 (2019) (citing Horton v. Dennis, 325 Ga.App. 212, 750 S.E.2d 493 (2013); Daniel v. Smith, 266 Ga.App.637, 597 S.E.2d 432 (2004)). "Although whether a bona fide controversy exists is normally a question for the jury to decide, we have also repeatedly held that, if a bona fide controversy clearly exists between the parties, there is not 'any evidence' to support an award based on stubborn litigiousness . . . ." Horton, 750 S.E.2d at 498. The Court finds in this case that a bona fide controversy existed between the Parties, and thus attorney's fees on the grounds of stubborn litigiousness or unnecessary trouble and expense are not available. Therefore, the only surviving ground for Goshen III's attorney's fees claim is bad faith, which is an issue for the consideration of the factfinder. The Court accordingly denies summary judgment as to Goshen III's claim for attorney's fees.
IV. Conclusion
For the foregoing reasons, the Court GRANTS Defendant's Motion for Summary Judgment as to Count I and DENIES as to Court II. The Court DENIES Plaintiff's Motion for Summary Judgment.
Defendant/Third-Party Plaintiff's claims against Third-Party Defendant Goshen Springs United, LLC are DISMISSED as MOOT.
The Parties are DIRECTED to prepare and submit their proposed consolidated pretrial order in compliance with Local Rule 16.4, NDGa.
SO ORDERED this 5th day of October, 2022.