S. Star Enter. Corp. v. Mcdonald Windward Partners, L.P.

872 S.E.2d 901

SOUTHERN STAR ENTERPRISE CORPORATION

v.MCDONALD WINDWARD PARTNERS, L.P.

A22A0480

Court of Appeals of Georgia.

May 5, 2022

Review Denied June 10, 2022

Perry Allan Phillips, Marietta, for Appellant.

Brian E. Daughdrill, John C Rogers Rogers, for Appellee.

Reese, Judge.

McDonald Windward Partners, L.P. ("MWP") sued Southern Star Enterprise Corporation ("Southern Star") (collectively, "the parties") seeking damages related to the breach of a commercial lease, in addition to attorney fees. Southern Star filed an answer and a counterclaim seeking to recover its security deposit. MWP subsequently filed a motion for partial summary judgment on its breach of contract claim and for summary judgment on Southern Star's counterclaim. The trial court granted MWP's motion, and Southern Star appealed. For the reasons set forth infra, we affirm in part and reverse in part.

Viewed in the light most favorable to Southern Star, as the non-moving party,¹ the record shows the following. The parties entered into a commercial lease agreement (the "Lease"), which allowed Southern Star to occupy property located in Forsyth County. The Lease's term began on August 1, 2016, and ran until August 31, 2019. Shortly before Southern Star occupied the property, the parties also entered into an agreement to abate the first two months of rent by 50 percent so long as Southern Star did not "default[ ] in its obligations under the Lease[.]"

Pursuant to the Lease, rent was due on or before the first day of each calendar month, and failure to pay rent within five days of the due date resulted in a late fee of five percent of the rent payment owed. "[F]ailure to pay such amount within ten (10) days [was] an event of default[.]" The Lease also required Southern Star to provide an estoppel certificate within ten days of a request by MWP, to maintain various types of insurance, and to provide a security deposit of $8,310. The Lease further provided that "[u]pon the occurrence of any event of default" by Southern Star, MWP could use the security deposit "to the extent necessary to make good any arrears of rent or other payments due [MWP] and any other damage ... caused by such event of default." Finally, the Lease stated that "at the termination of this Lease by lapse of time or otherwise, [Southern Star shall] deliver immediate possession of the Premises to [MWP]." However, in the case of a holdover tenancy, Southern Star would pay MWP "an amount equal to two hundred percent (200%) of the rent in effect on the termination date."

On December 14, 2016, MWP sent Southern Star a letter stating that Southern Star was in default, in part, for late rent payments, and that if it did not cure the defaults, the previously abated rent would become due and payable. MWP sent a subsequent letter stating that because Southern Star remained in default, the previously abated rent, in addition to late fees, were due and payable, and that MWP would use the security deposit to cover these amounts. The letter also demanded that Southern Star restore the security deposit to the original amount. Southern Star's counsel responded, asking MWP for a breakdown of the late fees so the parties could "settle this up."

MWP sent another letter in March 2017 stating that Southern Star remained in default for, inter alia, failing to make timely rent payments and for failing to restore the security deposit, which MWP had applied to the previous past-due rent and late fees.

The next letter MWP sent to Southern Star regarding late rent payments was on July 12, 2019, when it stated that Southern Star remained in default and owed fees for late rent payments from February 2017 to July 2019. MWP sent another letter in early August, again requesting that Southern Star pay these late fees and restore the security deposit to its original amount, and stating that MWP had learned from another tenant that Southern Star had damaged the premises.

MWP contacted Southern Star again in mid-August demanding that it vacate the premises and have all repairs completed by August 31, the end of the Lease's term, and that Southern Star would be liable for damages related to its failure to surrender the property.

On September 3, 2019, after the Lease's term had ended, MWP sent Southern Star a letter demanding possession of the premises because Southern Star "remain[ed] in possession of the Premises and [was] holding over." On September 10, MWP emailed Southern Star stating that to avoid an assessment of holdover rent (i.e., 200 percent of the base rent amount) and a dispossessory proceeding, Southern Star should reply by 10:00 a.m. the following morning indicating that Southern Star no longer claimed possession of the premises and that MWP could change the locks. Although Southern Star's counsel replied early the morning of September 11 that she would try to reach Southern Star, when MWP did not receive an e-mail from Southern Star stating that it no longer claimed possession of the premises, MWP informed Southern Star that it would proceed as indicated in the previous e-mail.

Southern Star responded the same day that it had vacated the premises and removed all of its property on or before the end of the term, and that one of its employees had attempted to tender keys to a representative of MWP who had refused to accept them. Southern Star also advised that MWP could change the locks and that it had been free to do so since Southern Star had attempted to tender the keys. MWP responded that no such tender had occurred, but it proceeded to change the locks on September 12 and paid a total of $10,881.88 to repair the interior of the property.

MWP sued Southern Star for breach of contract and sought to recover damages under the Lease, and Southern Star filed a response and a counterclaim. Following a hearing, the trial court granted MWP's motion for summary judgment and awarded it $13,032.38 in damages and $2,001.12 in interest based on the "contractual interest rate of 8%" contained in the Lease. This appeal followed.

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.... We apply a de novo standard of review to an appeal from a grant of summary judgment and view the evidence, and all reasonable conclusions and inferences drawn from it, in the light most favorable to the nonmovant.²

With these guiding principles in mind, we now turn to Southern Star's claims of error.

1. Southern Star argues that the trial court erred in granting MWP's partial motion for summary judgment on its breach of contract claim. Specifically, Southern Star asserts that MWP was not entitled to summary judgment on the following issues: (1) damages stemming from repairs to the premises; (2) late fees; (3) prejudgment interest based on the rate contained in the Lease; and (4) holdover rent.

(a) Repairs. Southern Star argues that the trial court erred in granting summary judgment on MWP's claim for damages stemming from its repairs to the premises, in part, because MWP failed to establish the fair market value of the premises before Southern Star's occupancy.

This Court has held that

it is essential that the plaintiff prove with a reasonable degree of certainty and specificity the condition of the premises, or the portions of them in question, both at the inception and at the termination of the tenancy, or that [it] show specific acts of waste or damage the results of which at the end of the term had not been repaired.³

Here, although MWP did not offer evidence of the premises’ condition before Southern Star's tenancy, it did present evidence of specific acts of damage that Southern Star failed to repair. In August 2019, MWP informed Southern Star that it had learned from another tenant that Southern Star had damaged the premises. Not only was such damage subsequently detailed in photographs and invoices describing the costs of the repairs, which MWP paid for, but Southern Star also submitted testimony that it had "bumped" the wall with a forklift and did not deny damaging the property. Thus, because MWP proved specific acts of damage committed by Southern Star, it was not required to establish the condition of the premises prior to Southern Star's occupancy.⁴

Additionally, although Southern Star makes a passing assertion that any property damage was excused because MWP failed to remove interior walls as the parties agreed, this argument is unpersuasive. While the Lease contained plans to remove interior walls on the property that were not completed, this does not excuse Southern Star's failure to refrain from damaging the walls.⁵ To excuse this damage, Southern Star's "nonperformance must have been caused by conduct of [MWP] which made [its] performance useless or impossible."⁶ Even though Southern Star offered evidence that its representative had informed MWP that "the walls made it harder to maneuver the forklifts in the Premises[,]" "[n]othing in this record ... raises the issue that [MWP] made [Southern Star's] performance useless or impossible."⁷ Thus, Southern Star's obligation to refrain from damaging the property's walls was not rendered impossible, and thereby negated, simply because the walls made maneuvering its forklift more difficult.

Finally, Southern Star asserts that MWP must prove its employees were negligent in damaging the walls to prevail on its claim for damages related to the repairs. While the Lease does state that "Tenant shall repair and pay for any damage caused by the negligence of Tenant, or Tenant's employees, agents or invitees, or caused by Tenant's default hereunder[,]" this language falls within the paragraph titled "LANDLORD'S REPAIRS" and does not specifically address any damage done to the premises’ walls. The subsequent paragraph, in contrast, is titled "TENANT'S REPAIRS" and states, in part, that "Tenant shall not damage any wall or disturb the integrity and support provided by any wall and shall, at its sole cost and...