Moreno v. Smith

In the Supreme Court of Georgia



                                                Decided: July 5, 2016


                         S16A0451. MORENO v. SMITH.


      BLACKWELL, Justice.

      Dolores Moreno is the mother of Gina Moreno, and in 2004, Dolores

acquired a residential property in Gwinnett County. Three years later, Dolores

gave a one-half interest in the property to Gina as a gift, and around the same

time, Dolores and Gina signed a document that purports to be a contract.

According to that document, Dolores agreed to sell her remaining one-half

interest in the property to Gina, and Gina agreed to pay $75,000 to Dolores in

$400 monthly installments. After six more years passed, Gina had made no

payments to Dolores, and Dolores filed a lawsuit against Gina for breach of

contract and for an equitable accounting as between tenants in common.1 The

trial court granted partial summary judgment to Dolores, concluding that the


      1
          During the pendency of this lawsuit, Dolores passed away, Michael T. Smith was
appointed as the temporary administrator of her estate, and Smith was substituted as the
plaintiff. For purposes of this opinion, however, it is unnecessary to distinguish between
Dolores and her estate, and for the sake of simplicity, we refer to both as “Dolores.”
undisputed evidence showed as a matter of law that Dolores and Gina had

entered into a binding and enforceable contract for the purchase and sale of the

property. Following a bench trial on the question of a remedy, the trial court

awarded damages to Dolores for breach of contract,2 as well as fair market rent

for her one-half interest as an equitable adjustment of the accounts of the tenants

in common.3 Gina appeals, and we reverse in part, vacate in part, and remand for

further proceedings consistent with this opinion.4

       2
          As the measure of damages for breach of contract, the trial court looked to the
interest that would have accrued at the legal rate (under OCGA § 7-4-2) on the total purchase
price in the eight years that had passed from the breach until the date of judgment, and the
trial court appears to have taken no account of the fair market value of the property. On
appeal, Gina challenges that measure of damages, and she finds some support in our
precedents. See Quigley v. Jones, 255 Ga. 33, 33 (334 SE2d 664) (1985) (“It has long been
the rule that the measure of damages for breach of a contract to sell land is the difference
between the contract price and the fair market value of the land at the time of the breach.”
(Citations omitted)). Nevertheless, for the reasons that follow, we do not decide today the
proper measure of damages in this case.
       3
          As to the remedy on the accounting claim, the trial court found that Gina
appropriated the entire property to her own use, and it found that fair market rent was
equitable because Gina had rented the property to her in-laws at a discounted rate. The trial
court did, however, offset the award of fair market rent against the award of damages for
breach of contract. As a result, the trial court awarded $15,736.16 to Dolores for breach of
contract, and it awarded $26,263.84 to Dolores for fair market rent. On appeal, Gina
challenges the measure of the relief awarded to equitably adjust the accounts of the tenants,
but for the reasons that follow, we do not reach that issue today.
       4
         Because Gina complains about the propriety of the equitable relief awarded by the
trial court, this case falls within the current appellate jurisdiction of this Court in equity cases.
See Ransom v. Holman, 279 Ga. 63, 64 (1) (608 SE2d 600) (2005). We note, however, that
in cases in which a notice of appeal is filed on or after January 1, 2017, the Court of Appeals

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       1. Gina contends that the trial court erred when it awarded partial

summary judgment to Dolores and concluded as a matter of law that Dolores

and Gina had entered into a binding and enforceable contract. We agree.

Although the document that Dolores and Gina signed purports to be a binding

contract, Gina offered evidence that tends to show that no contract was made.

Indeed, Gina submitted an affidavit in opposition to the motion for summary

judgment in which she said, among other things, that she had signed the

document in question at the request of her mother for the sole purpose of

enabling Dolores to demonstrate an interest in the property and that she was

earning income from it. Gina also said in her affidavit that, as of the time the

document was signed, Dolores consistently had made statements to indicate that

Gina was not expected to pay anything to Dolores for the property.5




will have jurisdiction of “[a]ll equity cases, except those cases concerning proceedings in
which a sentence of death was imposed or could be imposed and those cases concerning the
execution of a sentence of death.” See Williford v. Brown, ___ Ga. ___, ___ (2), n.1 (Case
No. S16A0177, decided May 9, 2016) (punctuation omitted) (citing and quoting from
Appellate Jurisdiction Reform Act of 2016, Ga. L. 2016, p. ___, § 1-1).
       5
        Gina brought forward other evidence at trial that was consistent with her claim that
neither she nor Dolores intended to make a binding and enforceable contract when they
signed the document.

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      “It is well settled that an agreement between two parties will occur only

when the minds of the parties meet at the same time, upon the same subject-

matter, and in the same sense.” Cox Broadcasting Corp. v. Nat. Collegiate

Athletic Assn., 250 Ga. 391, 395 (297 SE2d 733) (1982). To determine whether

the parties had the mutual assent or meeting of the minds that is essential for the

formation of a binding and enforceable contract,

      courts apply an objective theory of intent whereby one party’s
      intention is deemed to be that meaning a reasonable man in the
      position of the other contracting party would ascribe to the first
      party’s manifestations of assent, or that meaning which the other
      contracting party knew the first party ascribed to his manifestations
      of assent.

Id. More specifically, as one prominent commentator has explained,

      in those unusual instances in which one intends that one’s assent
      have no legal consequences[,] [u]nder the objective theory, a court
      will honor that intention if the other party has reason to know it.
      And it will honor it if the other party actually knows it. . . . The
      same result has been reached even though a written agreement is
      made as a sham, for the purpose of deceiving others, with an oral
      understanding that it will not be enforced.

E. Allan Farnsworth, Contracts § 3.7, at 122 (2d ed. 1990) (citations and

footnote omitted; emphasis in original). “The circumstances surrounding the

making of the contract, such as correspondence and discussions, are relevant in


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deciding if there was a mutual assent to an agreement, and courts are free to

consider such extrinsic evidence.” McReynolds v. Krebs, 290 Ga. 850, 853 (2)

(725 SE2d 584) (2012) (citation and punctuation omitted). See also Farnsworth,

supra at 123-124 (“Circumstances, rather than words, may also indicate a party’s

intention not to be bound. . . . [And] the fact that the parties to an agreement are

members of the same family is given weight as showing an intention not to be

legally bound.” (Citation omitted)). “And where such extrinsic evidence exists

and is disputed, the question of whether a party has assented to the contract is

generally a matter for the jury.” Fletcher v. C.W. Matthews Contracting Co., 322

Ga. App. 751, 754 (1) (a) (746 SE2d 230) (2013) (citation and punctuation

omitted).

      Dolores relies on the parol evidence rule, arguing that where a written

contract is facially clear and complete, extrinsic evidence of contractual intent

is immaterial and inadmissible to vary the terms of the contract. “Although parol

evidence cannot be used to contradict or vary the terms of a valid written

agreement, parol evidence may be used to show no valid agreement ever went

into existence.” BellSouth Advertising & Pub. Corp. v. McCollum, 209 Ga.

App. 441, 444 (2) (433 SE2d 437) (1993) (citations and punctuation omitted).

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See also Farnsworth, supra at § 7.4, at 480 (the parol evidence rule “does not

come into play until the existence of an enforceable written agreement has been

shown”). In particular, “the basic rule that a sham contract or a contract that the

parties understood was not to be binding may be refuted by parol evidence to

show that there was, in fact, no contract, is sensible and widely followed.” 6-25

Corbin on Contracts § 25.21 (2016). See also Farnsworth, supra at 480 (it may

be shown, “for example, . . . that the writing was a . . . sham”).

      Gina brought forward admissible evidence to show that Dolores and Gina

did not intend to make a binding and enforceable contract when they signed the

document, that the document was a mere sham, and that no binding and

enforceable contract existed. And although it is the parties’ intent at the time

they allegedly entered the contract that matters, the evidence presented by Gina

of their discussions at that time is arguably bolstered by other evidence of the

circumstances surrounding the purported contract, including the ongoing

relationship between the parties as mother and daughter, the undisputed fact that

Dolores gifted a one-half interest in the property to Gina, the subsequent failure

of Gina to make any monthly payments to Dolores, the failure of Dolores to

assert a breach more promptly, and the repeated statements of Dolores that the

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property belonged to Gina and that Gina did not have to pay her anything.

Dolores disputed that evidence and presented her own evidence to show that she

and Gina entered into a binding and enforceable contract. But courts are not

authorized to weigh disputed evidence and resolve conflicts in the evidence on

summary judgment. See Nguyen v. Southwestern Emergency Physicians, 298

Ga. 75, 84 (3) (779 SE2d 334) (2015). Accordingly, we conclude that there is

a genuine issue of disputed fact about the existence of a binding and enforceable

contract in this case, and the trial court erred by granting partial summary

judgment to Dolores on her claim for breach of contract. See Terry Hunt Constr.

Co. v. AON Risk Svcs., 272 Ga. App. 547, 552 (3) (613 SE2d 165) (2005).

      2. Because a genuine issue of material fact remains as to whether Gina

breached any contract, we not only reverse the grant of partial summary

judgment, but we also must reverse the award of damages for breach of contract.

In addition, because the existence of a binding and enforceable contract between

the parties may bear upon their obligations to one another as tenants in common,

see, e.g., Borum v. Deese, 196 Ga. 292, 295 (2) (26 SE2d 538) (1943), we

vacate the award of relief as to the equitable accounting claim, which cannot be

resolved until it is finally determined whether a contract exists. For these

                                       7
reasons, therefore, the judgment of the trial court is reversed in part and vacated

in part, and the case is remanded for further proceedings consistent with this

opinion.

      Judgment reversed in part and vacated in part, and case remanded with

direction. All the Justices concur.




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