PraultShell, Inc. v. River City Bank

366 Ga.App. 70

880 S.E.2d 616

PRAULTSHELL, INC. et al.

v.RIVER CITY BANK.

A22A1512

Court of Appeals of Georgia.

November 3, 2022

Charles Samuel Conerly, Smith Conerly, for Appellant.

Leon Strickland Jones, Atlanta, Jameson Kelley Killorin, Jones & Walden, for Appellee.

Phipps, Senior Appellate Judge.

In this action to recover on a promissory note and guaranty, defendant-appellants PraultShell, Inc., and Trent Prault appeal from the grant of summary judgment to plaintiff River City Bank. The appellants contend that: (i) disputed issues of fact remain as to (a) their defenses of impossibility or impracticability of performance and frustration of purpose, (b) the proper amount of damages, and (c) the attorney fees to which River City is entitled; and (ii) the trial court's summary judgment ruling was premature. For the reasons that follow, we discern no reversible error and affirm.

Viewed in the light most favorable to the appellants, the nonmovants, see Henry v. Griffin Chrysler Dodge Jeep Ram , 362 Ga. App. 459, 460, 868 S.E.2d 827 (2022), the record shows that, on March 19, 2020, PraultShell executed a promissory note in favor of River City in the amount of $952,473.82, with a maturity date of April 3, 2021 (the "Note"). PraultShell obtained the underlying loan to construct and operate a brew pub and restaurant, and the debt was secured by a lien on, inter alia, two parcels of real property (including all fixtures, equipment, and furniture therein) where the establishment was located. Prault and defendants Roger Shell, Jay Shell Entertainment, Inc., and Rome City Brewing Co., LLC, each executed an "absolute, present, unconditional, and continuing" guaranty of payment of the Note.¹

When PraultShell stopped making payments on the Note in 2021, River City sent a demand letter to the defendants declaring the debt in default. None of the defendants thereafter satisfied their obligations under the Note or guaranties.

Consequently, in July 2021, River City sued the defendants for breach of the Note, breach of the guaranties, and attorney fees. River City thereafter moved for summary judgment on all of its claims against the appellants. Following a hearing, the trial court granted River City's motion. As relevant here, the court: (i) rejected the appellants’ claims of impossibility or impracticability of performance and frustration of purpose; (ii) concluded that River City adequately established its damages; (iii) rejected the appellants’ claim that River City's right to recover attorney fees was limited to actual fees incurred; and (iv) awarded River City a total judgment of $918,031.20 (including principal, interest, late charges, and attorney fees). This appeal followed.

"We review de novo a grant or denial of summary judgment, viewing the evidence and all reasonable conclusions and inferences drawn from it in the light most favorable to the nonmovant." Henry , 362 Ga. App. at 460, 868 S.E.2d 827.

Summary judgment is proper when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. The burden on the moving party may be discharged by pointing out by reference to the affidavits, depositions and other documents in the record that there is an absence of evidence to support the nonmoving party's case. If the movant meets this burden, the nonmovant cannot rest on his pleadings, but rather must point to specific evidence giving rise to a triable issue.

Id. at 460-461, 868 S.E.2d 827 (citations and punctuation omitted); see OCGA § 9-11-56 (c), (e).

1. The appellants first contend that disputed issues of fact remain as to (a) their defenses of impossibility or impracticality of performance and frustration of purpose, (b) the amount of damages to which River City is entitled, and (c) the amount of attorney fees to which River City is entitled. We address each claim in turn.

(a) Defenses. The appellants argue that they were forced to close the brew pub and restaurant as a result of COVID-19-related executive orders temporarily closing bars and restaurants and later limiting seating capacity in such establishments, as well as "staffing and other shortages [that] made it virtually impossible to operate" such businesses. They further maintain that the closing of the brew pub and restaurant made it "impossible to repay the loan at issue per its terms." Consequently, according to the appellants, disputed questions of fact remain as to their defenses of impossibility or impracticability of performance and frustration of purpose. We disagree.

"Where, as here, a plaintiff moves for summary judgment, it has the burden of establishing the absence or non-existence of any defense raised by the defendant." Allen v. CFYC Constr. , 354 Ga. App. 890, 894 (2), 842 S.E.2d 297 (2020) (citation and punctuation omitted). "A promissory note is an unconditional contract whereby the maker engages that he will pay the instrument according to its tenor." L. D. F. Family Farm v. Charterbank , 326 Ga. App. 361, 364 (1), 756 S.E.2d 593 (2014) (citation and punctuation omitted). An "absolute guaranty" similarly is defined as "[a]n unqualified promise that the principal will pay or perform" and as "[a] guarantor's contractual promise to perform some act for the creditor — such as paying money or delivering property — if the principal debtor defaults." Black's Law Dictionary 850 (11th ed. 2019).

(i) Impossibility. "[T]he cardinal rule of contract construction is to ascertain the intent of the parties, as evidenced by the language of the contract," because "the law obligates us to enforce the plain terms of the contract into which the parties entered."

Miller v. GGNSC Atlanta , 323 Ga. App. 114, 118 (2), 746 S.E.2d 680 (2013). Nevertheless, "[i]mpossible, immoral, and illegal conditions are void and are binding upon no one." OCGA § 13-3-5. Similarly, "[i]f performance of the terms of a contract becomes impossible as a result of an act of God, such impossibility shall excuse nonperformance, except where, by proper prudence, such impossibility might have been avoided by the promisor." OCGA § 13-4-21. Consequently, "impossibility of performance is a defense to the enforcement of a contract." Allen , 354 Ga. App. at 894 (2), 842 S.E.2d 297.

An impossibility defense predicated on mere financial inability, however, fails as a matter of law. Hampton Island, LLC v. HAOP, LLC , 306 Ga. App. 542, 547 (4), 702 S.E.2d 770 (2010).

[S]ubjective impossibility, that is, impossibility which is personal to the promisor and does not inhere in the nature of the act to be performed, does not excuse nonperformance of a contractual obligation. Accordingly, the fact that one is unable to perform a contract because of his inability to obtain money, whether due to his poverty, a financial panic, or failure of a third party on whom he relies for furnishing the money, will not ordinarily excuse nonperformance, in the absence of a contract provision in that regard.

Id. at 547-548 (4), 702 S.E.2d 770 (citation and punctuation omitted); accord Calabro v. State Med. Ed. Bd. , 283 Ga. App. 113, 115 (1), 640 S.E.2d 581 (2006) ("[I]mpossibility of performance of a contract covenant personal to the promissor does not excuse nonperformance.") (citation and punctuation omitted).

Here, whether the appellants had no choice but to close the brew pub and restaurant and whether it was objectively "impossible" for them to fulfill their obligations under the Note and guaranty are two separate issues. Assuming, without deciding, that it was "impossible" to continue to operate the brew pub and restaurant for the reasons alleged, it does not necessarily follow that it was "impossible" for the appellants to have repaid their indebtedness. And even if that were the case, it would establish no more than financial inability, which, under Hampton Island, LLC , constitutes mere "subjective impossibility" and is insufficient to excuse nonperformance.² 306 Ga. App. at 547-548 (4), 702 S.E.2d 770. If the rule were otherwise, the financial inability of any borrower to make payments under any loan would excuse nonperformance, an absurd result. Consequently, the trial court properly rejected the appellants’ defense of impossibility.³ Compare id. at 542, 547-548 (4), 702 S.E.2d 770 (in a case involving a claim for specific performance of a contract for the sale of land, the defendant-buyer's "alleged inability to pay ... could not serve as a basis for its defense of impossibility, and the trial court properly granted summary judgment to the [plaintiff-sellers]"), and Elavon, Inc. v. Wachovia Bank, N.A. , 841 F.Supp.2d 1298, 1305-1306 (IV) (A) (1) (N.D. Ga. 2011) (rejecting a claim that the 2008 economic downturn excused a bank's failure to perform its obligations under a contract with a provider of merchant processing services), with Allen , 354 Ga. App. at 894-895 (2), 842 S.E.2d 297 (concluding that disputed issues of fact remained as to the viability of the defendant's claim that his inability, to date, to get certain property subdivided rendered it impossible to fulfill his contractual obligation to convey a portion of that property, insofar as a disputed factual issue also remained as to what constituted a reasonable time for performance), and Miller , 323 Ga. App. at 124 (2), 746 S.E.2d 680 (concluding that the unavailability of an arbitral forum required by an arbitration agreement rendered the agreement impossible to enforce).

(ii) Impracticability. The defense of Impracticability of performance is rooted in Uniform Commercial Code provisions governing the sale of goods, and thus has no application here. See OCGA § 11-2-615 (a) (providing that "[d]elay in delivery or nondelivery in whole or in part by a seller ... is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable" by certain contingencies); Calabro , 283 Ga. App. at 115 (1), 640 S.E.2d 581 (concluding that impracticability of performance was not available as...