Court Opinion

ID: 4016488
Source: CourtListenerOpinion
Date Created: 2016-07-18 07:05:34.161849+00
Date Added: 2024-06-11T09:25:48.999469
License: Public Domain

FOURTH DIVISION
                              DOYLE, C. J.,
                         MCFADDEN and BOGGS, JJ.

                   NOTICE: Motions for reconsideration must be
                   physically received in our clerk’s office within ten
                   days of the date of decision to be deemed timely filed.
                               http://www.gaappeals.us/rules

                                                                      July 11, 2016

In the Court of Appeals of Georgia
 A13A1662. BOSTICK v. CMM PROPERTIES, INC. et al.

      MCFADDEN, Judge.

      In Bostick v. CMM Properties, 297 Ga. 55 (772 SE2d 671) (2015), the Georgia

Supreme Court reversed Division 2 of our opinion in Bostick v. CMM Properties, 327

Ga. App. 137 (755 SE2d 895) (2014), in which we had affirmed the trial court’s grant

of summary judgment to appellees CMM Properties, Inc., and others (collectively

“the CMM parties”) on the ground of res judicata. In reversing, the Supreme Court

found that there was not sufficient identity of the parties or their privies to permit

application of res judicata. 297 Ga. at 55, 59. Accordingly, we vacate Division 2 of

our prior opinion, adopt the Supreme Court’s judgment as our own, and hold that the

trial court erred in granting summary judgment on the ground of res judicata.
      However, the trial court also granted summary judgment to the CMM parties

on the alternative ground that a liquidated damages clause which appellant James

Bostick sought to enforce was an unenforceable penalty. We did not review that

alternative ground in our prior opinion, but we now consider it and conclude that the

trial court correctly found that the liquidated damages clause was an unenforceable

penalty. Accordingly, we affirm the trial court’s grant of summary judgment on that

basis. See Duke Galish, LLC v. Manton, 291 Ga. App. 827, 828 (662 SE2d 880)

(2008) (grant of summary judgment must be affirmed if right for any reason, whether

stated or unstated).

      This appeal arises from a third-party complaint filed by Bostick against the

CMM parties, seeking to enforce a liquidated damages provisions set forth in a lease.1

Paragraph 22 of the lease provides that upon the occurrence of a default by the lessee,

including the non-payment of rent, the lessor may pursue any of several remedies,

separately or concurrently, as set forth in sections (a) through (e) of the paragraph.

Sections (a) and (b) provide that the lessor may terminate the lease and, upon such

termination, shall be entitled to recover from the lessee liquidated damages in an

      1
        A more detailed statement of facts can be found in both our prior opinion and
the opinion of the Supreme Court cited above.

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amount equal to all rent which was then due and which would otherwise have become

due throughout the remaining term of the lease as if it had not been terminated.

Section (c) provides that the lessor may give the lessee ten days notice to cure the

default, after which the entire amount of rent due under the remainder of the lease

term shall become immediately due and payable without further notice. Section (d)

allows the lessor to terminate the lease, enter the property and re-let it for any term

the lessor deems proper, with the lessee being liable for any deficiency. And section

(e) provides that the lessor may

      declare the entire amount of . . . [r]ent and other sums which in [l]essor’s
      reasonable determination would be due and payable during the
      remainder of the [l]ease [t]erm, discounted to present value by using a
      reasonable discount rate selected by [l]essor, to be due and payable
      immediately. Upon such acceleration of such amounts, [l]essee agrees
      to pay the same at once, . . . provided, however, that such payment shall
      not constitute a penalty or forfeiture but shall constitute liquidated
      damages for [l]essee’s failure to comply with the terms and provisions
      of this [l]ease. . . . Upon making such payment, [l]essee shall receive
      from [l]essor all rents received by [l]essor from other [l]essees renting
      the [p]remises during the remainder of the [l]ease [t]erm, provided that
      the monies to which [l]essee shall so become entitled shall in no event
      exceed the entire amount actually paid by [l]essee to [l]essor pursuant
      to the preceding sentence, less all of [l]essor’s costs and expenses . . .
      incurred in connection with or in any way related to the reletting of the
      [p]remises.

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       On appeal, Bostick argues that the trial court failed to consider all of paragraph

22 of the lease and that if it had properly considered the entire paragraph, specifically

section (e), it would have found that the paragraph constitutes a valid liquidated

damages provision. However, we do not accept Bostick’s premise that the trial court

failed to consider all of paragraph 22 since the trial court’s order, although it indicates

that the initial remedy pursued was under section (a) of the lease, further indicates

that the court made its legal conclusions as to the remedy provisions set forth therein

after a review of the entire lease. Moreover, contrary to Bostick’s argument, it is

apparent from a review of paragraph 22 in its entirety, including section (e), that it

does not constitute a valid liquidated damages provision.

              [W]hile a tenant generally is not responsible for rent accruing
       after the landlord resumes possession, the parties may contract
       otherwise, provided that the lease agreement contains an explicit and
       detailed provision which clearly and unequivocally expresses the
       parties’ intention to hold the tenant responsible for after-accrued rent.
       Such accelerated rent provisions are enforceable as valid liquidated
       damages clauses if (1) the injury caused by breach of the lease is
       difficult or impossible to estimate accurately; (2) the parties intend to
       provide for damages rather than a penalty; and (3) the stipulated sum is
       a reasonable pre-estimate of the landlord’s probable loss. If these
       requirements are not met, then the accelerated rent provision fails as a
       penalty. Whether an accelerated rent provision is enforceable is a
       question of law for the court.

                                            4
Nobles v. Jiffy Market Food Store Corp., 260 Ga. App. 18, 20 (1) (579 SE2d 63)

(2003) (citations and punctuation omitted).

      In this case, even if we assume that the first two requirements for a valid

liquidated damages provision were met by paragraph 22, the third requirement that

it be a reasonable pre-estimate was not met. Indeed, section (e) of the paragraph, upon

which Bostick relies, is materially indistinguishable from the accelerated rent

provision at issue in Peterson v. P. C. Towers, 206 Ga. App. 591 (426 SE2d 243)

(1992). We found that provision, which is set out in the margin,2 to be an

      2
        The provision at issue in Peterson provided: “Landlord may, at its option,
declare the entire amount of the rent which would become due and payable during the
remainder of the term of this lease to be due and payable immediately upon ten days
written notice to Tenant of Landlord’s intent to accelerate said payments for the
unexpired term; and with reduction to present cash value of said payments based
upon a discount rate of twelve percent (12%) as the present value factor, in which
event Tenant agrees to pay the same at once, together with all rents theretofore due,
at the office of the Landlord, Atlanta, Georgia, provided, however, that such
payments shall not constitute a penalty or forfeiture or liquidated damages, but shall
merely constitute payment in advance of the rent for the remainder of the said term.
Upon making such payment, Tenant shall receive from Landlord all rents received by
Landlord from other tenants on account of said Premises during the term of this
Lease, provided, however, that the monies to which the Tenant shall so become
entitled shall in no event exceed the entire amount payable by Tenant to Landlord
under the preceding sentence of this subparagraph.” Peterson, 206 Ga. App. at 592
(2) (punctuation omitted).

                                          5
unenforceable penalty since it did not provide a reasonable estimate of actual

damages. As stated in Peterson:

      To qualify as enforceable liquidated damages, the sums sought as
      accelerated rent under the lease must be a reasonable estimate of actual
      damages. Under the lease provisions, the landlord was entitled to
      terminate the lease, evict the tenant, and then collect in advance rent
      reduced to present value which would have been payable to the end of
      the lease term. These provisions give the landlord the benefit of both
      present possession of the premises, and the present value of all future
      rent. Reduction of the accelerated rent to present value is a factor
      tending to establish that the accelerated rent sum is a reasonable estimate
      of probable loss. However, both possession of the premises and a
      present lump sum award of future rent without any calculation of
      damages based on the future rental value of the premises, and the
      likelihood of reletting, provides [the landlord] with payment potentially
      bearing no reasonable relation to actual damages. Actual damages at the
      time of the breach may be stated as the difference between the rent
      which would have been payable by the tenant under the lease, and the
      market value of the premises for the remainder of the original lease term.
      Accordingly, in order to make a reasonable estimate of the difference
      between the rent due in the lease and the actual rental value of the
      premises for the remaining term, this calculation must be conditioned on
      an assessment of future market conditions for the premises to account
      for future rental value, and the probability of reletting the premises for
      all or part of the remaining term. The present lease fails to account for
      these factors in determining the sum sought as liquidated damages.

Id. at 593-594 (3) (citations omitted).

      Likewise, in this case, paragraph 22 fails to account for the required factors in

determining the sum sought as liquidated damages. The paragraph, when considered

                                          6
in its entirety, allowed the lessor to take possession of the premises and obtain a lump

sum award of future rent without providing for an assessment of future market

conditions for the premises to account for future rental value and the probability of

reletting the premises. Because there was no reasonable estimate of the difference

between the rent due under the lease and the actual rental value of the premises for

the remaining term, “the acceleration provision was in the nature of an unenforceable

penalty, rather than a [valid] provision for liquidated damages.” Id. at 594 (3)

(citation omitted). Accordingly, the trial court did not err in granting summary

judgment on this ground.

      Judgment affirmed. Doyle, C. J., and Boggs, J., concur.

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