Sage Atlanta Properties, Ltd. v. The Diner Group of Georgia, LLC

SAGE ATLANTA PROPERTIES, LTD. v. THE DINER GROUP OF GEORGIA, LLC et al.;

THE DINER GROUP OF GEORGIA, LLC et al.; v. SAGE ATLANTA PROPERTIES, LTD.

Nos. A21A1128, A21A1155

Court of Appeals of Georgia, Fifth Division

July 22, 2021

RICKMAN, C. J., MCFADDEN, P. J., and SENIOR APPELLATE JUDGE PHIPPS

MCFADDEN, Presiding Judge.

Sage Atlanta Properties, Ltd., a landlord, filed this action to recover amounts due under a lease and two guaranties. After a bench trial, the trial court ruled that the guaranties signed by George Hawxhurst and Christopher Murphy did not survive the renewal of the lease. We agree with the landlord that under the plain terms of the guaranties, the guarantors are liable for rent under the lease renewal. So we reverse in Case No. A21A1128.

The guarantors, together with the tenant, The Diner Group cross-appeal. They argue that the landlord's default judgment against another person-Tammi Duncan, who has been found, under the doctrine of apparent agency, to have renewed the lease-bars it from pursuing the action against them. We disagree. We hold that the trial court did not err by vacating that default judgment and allowing the landlord to elect to pursue a remedy against the tenant and the guarantors. So we affirm in Case No. A21A1155.

1. Proceedings below and on prior appeal.

In a prior appearance of this case, in which we reviewed the grant of summary judgment to guarantor Hawxhurst, we held that the record, when viewed in favor of the landlord, showed the following:

[O]n November 1, 2014, [the landlord] and [the tenant] entered into a 24-month lease of property to be used as a restaurant. [George] Hawxhurst and Christopher Murphy were guarantors for [the tenant] on the lease. The lease contained a provision for four two-year renewal options. On June 28, 2016, Tammi Duncan signed a notice of intent to exercise the option to renew and faxed the notice to [the landlord]. On the document, Duncan was identified as the owner/president of [the tenant]. Because she was not familiar with Duncan, [the landlord's] general counsel contacted the general counsel for [the tenant] and was informed that Duncan now owned Hawxhurst's shares in the company. Based on the explanation, [the landlord] accepted the renewal.

During the renewal period, [the tenant] defaulted on the lease terms and [the landlord] filed a complaint for breach of lease and an action on a personal guaranty against [the tenant], Duncan, [and guarantors] Hawxhurst, and Murphy. [The landlord] alleged that [the tenant] had breached the lease by failing to pay rent, taxes, late fees and other obligations under the lease, and that Hawxhurst and Murphy had personally guaranteed the performance of the lease obligations and thus [the landlord] was entitled to a judgment for those monies from the guarantors.

Sage Atlanta Properties v. Hawxhurst, 349 Ga.App. 758, 758-759 (824 S.E.2d 387) (2019) (footnote omitted). We reversed the grant of summary judgment to guarantor Hawxhurst on the issue of his liability under the guaranty. We held that there was "a genuine issue of material fact as to whether [the landlord was] entitled to relief under the doctrine of apparent agency," id. at 761, given that

[i]t [was] undisputed that [the landlord] undertook to ascertain Duncan's relationship with [the tenant] and was assured by a partner that she was also a partner with the group and had for the eleven months prior to the extension been involved in the operation and re-branding of the restaurant. And, it was only after receiving that assurance, and relying on Duncan's apparent partnership with [the tenant], that [the landlord] accepted the [lease] renewal.

Id. at 762. We noted that the lease documents provided that the "guarant[ies] shall continue in full force and effect during the term of the lease and for any renewal or extension thereof, and shall not be affected by any modifications, changes, alterations or revisions to the lease." Id. at 758 n. 1 (punctuation omitted).

On remand, the trial court conducted a bench trial and entered an order on the issue of the tenant's and the guarantors' liability. Addressing the remanded issue, the trial court held that, based on the emails between the parties (the emails in which the landlord sought to ascertain Duncan's relationship with the tenant), Duncan had apparent authority to renew the lease on behalf of the tenant, and the landlord justifiably relied on that authority, so the renewal of the lease was effective and the lease was enforceable against the tenant.

The trial court nonetheless found that Hawxhurst and Murphy were not liable on the guaranties. The court found that the landlord was entitled to damages in the amount of $33, 101.03 against the tenant and provided that the landlord had 30 days in which to elect either the award in that order or an award under the previously entered default judgment against Duncan.

The parties appealed again. The landlord appealed; the tenant and the guarantors cross-appealed. We dismissed those appeals. Because the trial court had given the landlord a period of time in which to elect its remedy, we held that, "although the trial court entered default against Duncan and determined liability as to the remaining defendants, it ha[d] not yet entered final judgment."

Upon remand, the landlord elected to have the judgment against the tenant and in favor of the guarantors entered, so the court entered judgment for the landlord in the amount of $33, 101.03 against the tenant only and vacated the default judgment against Duncan.

From this final judgment, the landlord filed this appeal and the tenant and the guarantors filed this cross-appeal.

2. The guaranties apply to the renewal of the lease.

The landlord argues that under the plain language of the guaranties, the guarantors are liable for the tenant's obligations under the renewal of the lease. We agree.

"Construction of a written contract is a question of law for the trial court based on the intent of the parties as set forth in the contract, which question we review de novo. We first decide whether the language is clear and unambiguous; if it is, we simply enforce the contract according to its clear terms, looking to the contract alone for its meaning." Highwoods Realty Ltd. Partnership v. Community Loans of America, 288 Ga.App. 226, 227 (653 S.E.2d 807) (2007) (citations and punctuation omitted).

The identical guaranties provided in relevant part:

THIS GUARANTY SHALL CONTINUE IN FULL FORCE AND EFFECT DURING THE TERM OF THE LEASE AND FOR ANY RENEWAL OR EXTENSION THEREOF, AND SHALL NOT BE AFFECTED BY ANY MODIFICATIONS, CHANGES, ALTERATIONS OR REVISIONS TO THE LEASE.

The guaranties also provided that the landlord, "without notice to, without the consent of, and without affecting the liability of" the guarantors, could "modify, waive, supplement, or otherwise change any of the terms, conditions, provisions, restrictions or liabilities contained in the [l]ease." The guaranties also provided that they were "continuing" and that the guarantors waived "all defenses, legal or otherwise, available to the [g]uarantor[s], except payment in full of all amounts owed."

Under this clear and unambiguous language, the guarantors

consented in advance to any "[renewal or extension of the lease]" between lessor and lessee which may have been made and which if the guaranty were worded differently may have resulted in release of the guarantor[s]. In the case sub judice, the guarantor[s'] consent being contained in the guarant[ies] there is no release of the guarantor[s] for the reasons argued by defendant[s].

Southeastern Hose v. Prudential Ins. Co., 167 Ga.App. 356, 357-358 (2) (306 S.E.2d 308) (1983) (holding that guarantor was liable for lease renewal since it consented in guaranty to "modifications, extensions, [and] amendments" of lease). See also Dyna-Comp Corp. v. Selig Enterprises, 143 Ga.App. 462, 463 (2) (238 S.E.2d 571) (1977) (modification of terms of lease, increasing square footage and monthly rental, did not release guarantor from liability for rent where the guaranty contained an express waiver consenting to extensions and modifications in advance). Cf. LeCraw v. Atlanta Arts Alliance, 126 Ga.App. 656, 658-660 (1) (191 S.E.2d 572) (1972) (guarantors could have been held responsible for additional lease term, as long as the additional term was secured in accordance with the provisions of the lease, but they were not liable because renewal was not secured in accordance with the provisions of the lease).

"A party may consent in advance to the conduct of future transactions and will not be heard to claim his own discharge upon the occurrence of that conduct. [The guaranties] bind[ ] [the guarantors] to the renewal of [the lease], and [they] cannot claim that the renewal discharged [them]." Bank South v. Grizzle, 218 Ga.App. 462 (2) (462 S.E.2d 170) (1995) (citation and punctuation omitted).

The guarantors and the tenant argue that, under the statute of frauds, renewals of guaranties such as theirs must be in writing. This case, however, does not involve renewals of the guaranties. Hawxhurst and Murphy agreed in advance-in writing-that the guaranties would "continue in full force and effect during the term of the lease and for any renewal...." So their liability arises from the original guaranties, not from any renewal of the guaranties, and they do not argue that the original guaranties violate the statute of frauds.

The guarantors and the tenant argue that there is no evidence that Duncan had apparent authority to act for Hawxhurst or Murphy and thus to extend the guaranties on their...