Case Name: ROLLER-ICE, INC. et al. v. SKATING CLUBS OF GEORGIA, INC.
Court: Court of Appeals of Georgia
Jurisdiction: Georgia
Decision Date: 1989-07-05
Citations: 192 Ga. App. 140
Docket Number: A89A0083
Parties: ROLLER-ICE, INC. et al. v. SKATING CLUBS OF GEORGIA, INC.
Judges: Carley, C. J., concurs. Beasley, J., concurs specially.
Reporter: Georgia Appeals Reports
Volume: 192
Pages: 140–143

Head Matter:
A89A0083.
ROLLER-ICE, INC. et al. v. SKATING CLUBS OF GEORGIA, INC.
(384 SE2d 235)

Opinion:
McMurray, Presiding Judge.
Roller-Ice, Inc. ("Roller-Ice") brought an action against Skating Clubs of Georgia, Inc. ("Skating Clubs") to recover damages allegedly resulting from misrepresentations by Skating Clubs' agent which were made to induce Roller-Ice to purchase a roller-skating business. Skating Clubs denied the material allegations of the complaint and filed a motion for summary judgment.
During the summer of 1984, Gilbert Vuillemin, a corporate officer of Roller-Ice, began negotiating with Albert Couey, the president of Skating Clubs, to purchase a roller-skating business ("Sparkles") that was owned by Skating Clubs. Couey furnished Vuillemin with a "Profit and Loss Statement" which purportedly reflected the monthly income and expenses of Sparkles from February 1982 through the first half of September, 1984. Relying on this report, Roller-Ice executed a lease agreement for the land, equipment and building which comprised Sparkles and a contract for the option to later purchase the business. The option contract provided, in pertinent part, as follows: "It is understood and agreed by the Buyer that the Seller has made no warranties or representations as to the value of the business known and operated as 'Sparkles,' or the value of the property, the buildings thereon, other improvements, or the inventory of equipment and fixtures, and the Buyer acknowledges that it has made its own! independent investigation into the economics of the transaction and! the [value] of the business, and the Buyer specifically disclaims anji reliance upon any statements made by Seller, financial statements! profit and loss statements, or other statements which may have beer! furnished to Buyer by Seller as such was primarily for overall fora! and content rather than the accuracy of any particular figure® thereon, said statements having been originally prepared by Seller foil internal management and control purposes only." H
"[A]round the 20th of September, 1984," Roller-Ice began operl ating "Sparkles" and "in the second part of December or in the firs® part of January [1985,]" daily income report sheets were found ill "the office space at 'Sparkles' " which reflected income for the busii ness "from May through September of 1982" that was substantially less than the income reported to Vuillemin by Couey in the "Profit and Loss Statement." Vuillemin contacted Couey in an attempt to either renegotiate the lease and option contracts or to obtain a refund of monies paid by Roller-Ice to Skating Clubs for the contracts. Couey refused to compromise the contracts and Roller-Ice refused to make further payments to Skating Clubs under the terms of the agreements. As a result, Skating Clubs took possession of Sparkles. From this and other undisputed evidence, the trial court entered summary judgment in favor of Skating Clubs. Roller-Ice appeals. Held:
"Our Code provides that '(f)raud renders contracts voidable at the election of the injured party.' OCGA § 13-5-5. And, '(p)arol evidence shall be admissible to show that a writing either was originally void or subsequently became so.' OCGA § 24-6-8. Further, '(f)raud, accompanied by damage to the party defrauded, always gives a right of action to the injured party.' OCGA § 51-6-1. 'Willful misrepresentation of a material fact, made to induce another to act, upon which such person acts to his injury, will give him a right of action. . In all cases of deceit, knowledge of the falsehood constitutes an essential element of the tort. A fraudulent or reckless representation of facts as true when they are not, if intended to deceive, is equivalent to a knowledge of their falsehood. . . .' OCGA § 51-6-2." del Mazo v. Sanchez, 186 Ga. App. 120, 124 (366 SE2d 333).
The evidence in the case sub judice, showing that Couey overstated the income of Skating Clubs' business and that Roller-Ice relied on this information in negotiating the purchase of Sparkles, was sufficient to raise a genuine issue of material fact as to fraud. Nonetheless, Skating Clubs argues that the disclaimer clause in the option contract forecloses Roller-Ice from pressing its claim for fraud and deceit based on the income figures reflected in the "Profit and Loss Statement."
" 'Where the purchaser of personal property has been injured by the false and fraudulent representations of the seller as to the subject matter thereof, he ordinarily has an election whether to rescind the contract, return the article, and sue in tort for fraud and deceit, or whether to affirm the contract, retain the article, and seek damages resulting from the fraudulent misrepresentation.' Nichols v. Williams Pontiac, Inc., 95 Ga. App. 752 (98 SE2d 659)." City Dodge v. Gardner, 130 Ga. App. 502, 503 (1) (203 SE2d 729). " 'However, depending upon which of the two actions is ultimately pursued, the presence of a merger [or disclaimer] clause in the underlying contract may be determinative as to the successful outcome. If the defrauded party has not rescinded but has elected to affirm the contract, he is relegated to a recovery in contract and the merger [or disclaimer] clause will pre vent his recovery. (Cit.) If, on the other hand, he does rescind the contract, the merger [or disclaimer] clause will not prevent his recovery under a tort theory. . . .' [Potomac Leasing Co. v. Thrasher, 181 Ga. App. 883, 886-887 (354 SE2d 210)]." del Mazo v. Sanchez, 186 Ga. App. 120, 127, supra. It is from this perspective that Roller-Ice argues that a genuine issue of material fact remains as to whether it rescinded the lease and option contracts.
"A contract may be rescinded at the instance of the party de- ! frauded; but, in order to rescind, the defrauded party must promptly, upon discovery of the fraud, restore or offer to restore to the other party whatever he has received by virtue of the contract if it is of any value." OCGA § 13-4-60.
In the case sub judice, Vuillemin testified that, after discovering the income records which reflected substantially lower monthly income figures than those provided by Couey, he contacted Skating Clubs and "offered Mr. Couey to renegotiate the contract and offered him if he didn't want to do anything to just refund [Roller-Ice] because we were cheated." Vuillemin reinforced this testimony in an affidavit, wherein he deposed that he "brought [the income] discrepancies to the attention of Mr. Couey and asked him to either (1) Refund the $150,000.00 [Roller-Ice initially paid to Skating Clubs for the lease and option contracts] and declare the contracts between Roller-Ice, Inc., and Skating Clubs of Georgia, Inc., null and void, thus returning everyone to the status quo as it existed prior to the execution of the contracts; or (2) renegotiate the contracts to reflect the true financial figures."
"Where a party who is entitled to rescind a contract on ground of fraud or false representations, and who has full knowledge of the material circumstances of the case, freely and advisedly does anything which amounts to a recognition of the transaction, or acts in a manner inconsistent with a repudiation of the contract, such conduct amounts to acquiescence, and, though originally impeachable, the! contract becomes unimpeachable in equity. If a party to a contract! seeks to avoid it on the ground of fraud or mistake, he must, upon! discovery of the facts, at once announce his purpose and adhere to it.I Otherwise he can not avoid or rescind such contract." Gibson v. Alford, 161 Ga. 672, 673 (5) (132 SE 442).
In the case sub judice, Roller-Ice's offer to renegotiate the con* tracts with Skating Clubs amounted to an affirmative recognition ora the contracts, thereby cutting off Roller-Ice's option to avoid or re-1 scind the lease and option contracts. See Gibson v. Alford, 161 Ga. 672, 686, supra, and Thompson v. Growers Fin. Corp., 49 Ga. App. 119 (1) (174 SE 192). Consequently, having made its election, Rollerl Ice is bound by the merger or disclaimer clause in the option contrae* and cannot allege reliance on the "Profit and Loss Statement" pro* vided by Skating Clubs prior to the execution of the contract. See Condios, Inc. v. Driver, 145 Ga. App. 537 (1) (244 SE2d 85). Compare Alpha Kappa Psi Bldg. Corp. v. Kennedy, 90 Ga. App. 587 (83 SE2d 580), where the purchaser could have discovered the purported fraud by diligence before the execution of the sales contract. It follows that the trial court did not err in granting summary judgment in favor of Skating Clubs.
Decided July 5, 1989.
W. Roland Campbell, for appellants.
W. Allen Separk, Adele Grubbs, for appellee.
Judgment affirmed.
Carley, C. J., concurs. Beasley, J., concurs specially.