Wpd Center, LLC v. Watershed, Inc. , 330 Ga. App. 289 ( 2014 )

SECOND DIVISION
ANDREWS, P. J.,
MCFADDEN and RAY, JJ.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules/
November 21, 2014
In the Court of Appeals of Georgia
A14A1429. WPD CENTER, LLC et al. v. WATERSHED, INC. et
al.
ANDREWS, Presiding Judge.
Watershed, Inc. entered into a commercial lease agreement with WPD Center,
LLC, to operate a restaurant on premises owned by WPD. Watershed sued WPD for
breach of the lease, and WPD answered and counterclaimed asserting that Watershed
breached the lease.1 WPD appeals from the trial court’s order granting partial
summary judgment in favor of Watershed and denying WPD’s motion for summary
judgment.
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Additional plaintiffs in the suit were Susan B. Owens and Emily Sailers, who
personally guaranteed the lease. The plaintiffs (appellees) are collectively referred to
as Watershed. In addition to WPD, the suit named as defendant James B. Beak,
WPD’s agent and property manager. The defendants (appellants) are collectively
referred to as WPD.
To prevail on a motion for 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.” Lau’s Corp. v. Haskins, 261 Ga. 491, 491 (405 SE2d 474) (1991);
OCGA § 9-11-56. The moving party on summary judgment may carry this burden by
affirmatively presenting evidence which negates an essential element of the
nonmoving party’s claim, or by demonstrating the absence of evidence to support an
essential element of the nonmoving party’s claim. Lau’s Corp., 261 Ga. at 491.
Applying these principles to WPD’s claims, we affirm in part and reverse in part.
1. WPD claims that the trial court erred by denying its motion for summary
judgment on all ten counts of Watershed’s complaint on the basis of defenses
asserting that Watershed’s suit for breach of the lease was barred by the doctrine of
res judicata, or, in the alternative, by an agreement between the parties.
(a) It is undisputed that, prior to the present suit (filed in Fulton Superior
Court), WPD filed a dispossessory proceeding against Watershed in the Magistrate
Court of DeKalb County; that Watershed filed counterclaims against WPD in the
dispossessory seeking damages in excess of the $15,000.00 jurisdictional limit of the
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magistrate court; and that, when the dispossessory was dismissed, the counterclaims
were dismissed with prejudice.
The doctrine of res judicata prevents the re-litigation of all claims which
have already been adjudicated, or which could have been adjudicated,
between identical parties or their privies in identical causes of action.
Before res judicata applies, three prerequisites must be satisfied - (1)
identity of the cause of action, (2) identity of the parties or their privies,
and (3) previous adjudication on the merits by a court of competent
jurisdiction.
Setlock v. Setlock, 286 Ga. 384, 385 (688 SE2d 346) (2010). For purposes of res
judicata, a voluntary dismissal with prejudice operates as an adjudication on the
merits. Fowler v. Vineyard, 261 Ga. 454, 456 (405 SE2d 678) (1991). Watershed
concedes that, based on the counterclaims it filed in the prior dispossessory action,
there is identity of the cause of action and the parties with respect to its present claims
against WPD, and that the only issue is whether adjudication on the merits occurred
in a court of competent jurisdiction.
Each magistrate court and each magistrate thereof shall have
jurisdiction and power over . . . [t]he trial of civil claims . . . in which
exclusive jurisdiction is not vested in the superior court and the amount
demanded or the value of the property claimed does not exceed
$15,000.00 . . . [and][t]he . . . issuance of writs and judgments in
dispossessory proceedings.
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OCGA § 15-10-2 (5) and (6); Setlock, 286 Ga. at 385. “[A]lthough the magistrate
court had jurisdiction over [WPD’s] dispossessory action, it did not have jurisdiction
to render a binding judgment on [Watershed’s] counterclaims . . . which sought
money damages that exceeded the $15,000 jurisdictional limit of the magistrate
court.” Id. Because the magistrate court was not a court of competent jurisdiction to
resolve those claims on the merits, the trial court correctly ruled that the doctrine of
res judicata did not bar Watershed from reasserting the same claims in the present
suit, and correctly denied WPD’s motion for summary judgment on this ground. Id.
at 386; OCGA § 9-11-56.
(b) The trial court also rejected WPD’s claim that there was an agreement
between the parties in conjunction with dismissal of the dispossessory action that
resolved the dispute and barred Watershed’s present claims. The record shows that
the parties signed a letter agreement recognizing that the dispossessory action and the
counterclaims in the magistrate court were being dismissed, and further stating that,
“[t]he parties hereby further agree that all obligations owed and to be owed by any
party under the lease are hereby reaffirmed.” The trial court found the plain meaning
of the letter (which contained no waiver or release language) was that the parties were
reaffirming the enforceability of the lease, and that there was no settlement of the
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present claims based on the lease. In fact, WPD conceded in the trial court that the
letter was an agreement between the parties “to reaffirm their obligations under the
Lease.” Although the trial court ultimately based its ruling on other grounds, under
the right for any reason rule, we affirm the trial court’s denial of WPD’s motion for
summary judgment on this claim. City of Gainesville v. Dodd, 275 Ga. 834 (573 SE2d
369) (2002); OCGA § 9-11-56.
(c) WPD also contends that it was entitled to summary judgment because the
record shows that, when the parties dismissed the dispossessory action and
counterclaims, the parties filed a “Joint Stipulation of Dismissal” in the magistrate
court. Because this claim was not asserted by WPD in the trial court as a basis for
summary judgment, and was not ruled on by the trial court, it presents nothing for
appellate review. Calhoun GA NG, LLC v. Century Bank of Ga., 320 Ga. App. 472,
477 (740 SE2d 210) (2013).
2. WPD claims that the trial court erred by granting summary judgment in favor
of Watershed on its claim that WPD breached the lease agreement by refusing to
consent to a sublease of the premises requested by Watershed.
The lease contains a provision which states that: “It is agreed that [Watershed]
may have the right to sub-lease the premises in part or in its entirety provided [WPD]
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is given prior written notice and [Watershed] receives [WPD’s] approval (which will
not unreasonably be withheld and shall be subject to the criteria set forth in Paragraph
15.02).” Paragraph 15.02 of the lease sets forth criteria for WPD to consider when
evaluating whether or not to approve a proposed sublease, including the type of
business the subtenant proposes to operate, its reputation and expertise, and adequate
assurance of the subtenant’s financial condition, stability, and ability to pay the rent.
[A] lease clause providing that a lessor cannot unreasonably
withhold consent to assign the lease is a covenant upon the landlord . .
. [U]nder such a clause, the term “reasonable” cannot comprehend
arbitrary or capricious reasons, or merely personal preferences . . . [–]
the term refers to considerations of fairness and commercial
reasonableness. Although the question of reasonableness and
unreasonableness is most often a jury issue, in plain and palpable cases
the determination may be made by the court.
Pakwood Indus., Inc. v. John Galt Assoc., 219 Ga. App. 527, 529 (466 SE2d 226)
(1995) (punctuation and citations omitted); Stern’s Gallery of Gifts, Inc. v. Corporate
Property Investors, Inc., 176 Ga. App. 586, 592-597 (337 SE2d 29) (1985). Where
a lease contains a clause requiring that such consent not be unreasonably withheld,
a withholding of consent, which fails the test of fairness and commercial
reasonableness, constitutes a breach of the lease. Id. at 596.
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We find that the facts in this case present a jury issue as to whether or not WPD
unreasonably withheld consent to the proposed sublease. The record shows WPD
found that the proposed subtenant was financially capable and otherwise acceptable
as a subtenant. But we find the record does not support the trial court’s conclusion
that WPD simply rejected the proposed subtenant (despite being acceptable under the
criteria set forth in paragraph 15.02 of the lease) and that WPD acted unreasonably
as a matter of law. The record contains evidence which could support a finding by a
jury that, during negotiations with WPD, the proposed subtenant conditioned its
willingness to sublease for Watershed’s remaining term on WPD’s willingness to
extend the lease term or agree to a new lease term. Under these circumstances,
whether or not WPD acted unreasonably in breach of the lease was a jury issue.
Moreover, there is no evidence in the record that Watershed provided WPD
with written notice of the proposed subtenant in accordance with the formal notice
provisions of the lease, although there is evidence Watershed provided informal
written notice, and that WPD met with the proposed subtenant. The lease contained
a provision requiring that Watershed give written notice to WPD of a claimed breach
in order to give WPD 30 days to perform before being deemed in default of the lease.
There is no evidence that Watershed complied with this notice provision with respect
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to its claim that WPD breached the lease by unreasonably withholding consent to the
proposed sublease. The trial court ruled, as a matter of law, that WPD waived these
notice provisions by its actions. But the lease also provided that “no waiver by [WPD]
of any provision of this Lease shall be deemed to have been made unless expressed
in writing and signed by [WPD],” and there is no evidence that WPD made a written
waiver. Although a contractual provision against waiver may itself be waived by
conduct of the parties, we find the trial court erred by ruling as a matter of law that
WPD waived the provisions regarding notice. See Smith v. General Finance Corp.
of Ga., 243 Ga. 500, 501 (255 SE2d 14) (1979); Radha Krishna, Inc. v. Desai, 301
Ga. App. 638, 641 (689 SE2d 78) (2009). Whether under the circumstances WPD
waived the notice provisions and the provision against waiver is a jury issue. Id.Accordingly, the trial court erred by granting summary judgment in favor of
Watershed on its claim that WPD breached the lease agreement by refusing to consent
to the sublease. OCGA § 9-11-56.
3. The trial court correctly granted summary judgment in favor of Watershed
on WPD’s counterclaim for past due rent under the lease. OCGA § 9-11-56.
The trial court ruled that, because WPD accepted Watershed’s surrender of the
premises, rent obligations under the lease terminated in May 2012.
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A surrender of a lease by operation of law may arise from any condition
of facts voluntarily assumed by the parties and incompatible with the
continued existence of the relation of landlord and tenant between them.
Where a landlord exercises a control over the premises inconsistent with
the tenant’s right of occupation, he thereby discharges the tenant from
liability for future rent, and a cancellation or rescission of the contract
is thus effected by agreement of the parties, express or implied.
Savannah Yacht Corp. v. Thunderbolt Marine, Inc., 297 Ga. App. 104, 111 (676
SE2d 728) (2009) (punctuation and citations omitted). The record shows that in May
2012 WPD sent Watershed a written demand for possession of the premises; that
Watershed complied with the demand by surrendering possession of the premises to
WPD and returning the key; and that WPD took possession and changed the locks.
WPD’s agent, Beak, testified that WPD understood this to be a surrender of the
premises. Under these circumstances, the trial court correctly found as a matter of law
that WPD accepted surrender of the premises and discharged Watershed from liability
for future rent.
4. WPD contends that the trial court erred by granting summary judgment in
favor of Watershed on its claims for attorney fees under the lease.
The lease provides that:
In the event [WPD] or [Watershed] shall be in default in the
performance of any of its obligations under this Lease, and an action
shall be brought for the enforcement thereof in which it shall be finally
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and no further appeal determined that [WPD] or [Watershed] was in
default, the party in default shall pay to the other party all attorney’s fees
and litigation expenses incurred or paid by it in connection therewith.
The trial court awarded attorney fees pursuant to this provision to Watershed
on its claim that WPD defaulted under the lease by unreasonably withholding consent
to the proposed sublease. See Division 2, supra. Because we reversed the trial court’s
grant of summary judgment in favor of Watershed on this claim, the trial court’s
award of attorney fees on this claim is also reversed.
The trial court also awarded Watershed attorney fees pursuant to the lease
provision on the basis that Watershed was granted summary judgment on WPD’s
counterclaim for unpaid rent. The above-cited lease provision awards attorney fees
to the party who successfully brings an action establishing that the other party was
in default under the lease. The provision does not award attorney fees to a party for
successfully defending against the other party’s default claim. The trial court’s award
of attorney fees to Watershed for successfully defending against WPD’s counterclaim
is reversed.
Judgment affirmed in part and reversed in part. McFadden and Ray, JJ.,
concur.
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