Court Opinion

ID: 2753019
Source: CourtListenerOpinion
Date Created: 2014-11-19 17:06:34.130991+00
Date Added: 2024-06-11T10:18:29.465881
License: Public Domain

FOURTH DIVISION
                                MILLER, J.,
                          DILLARD and BRANCH, 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/

                                                                 November 19, 2014

In the Court of Appeals of Georgia
 A14A0926. SOVEREIGN HEALTHCARE, LLC et al. v.
     MARINER HEALTH CARE MANAGEMENT COMPANY.

      BRANCH, Judge.

      This case is before us for the second time. The first time, we ruled that three

of the four appellant healthcare companies were liable to Mariner Health Care

Management Company (“Mariner”) for prematurely terminating an administrative

services contract, and that the contract’s liquidated damages provision was

enforceable. Mariner Health Care Management Co. v. Sovereign Healthcare, LLC,

306 Ga. App. 873 (703 SE2d 687) (2010) (“Mariner I”). This time, the appellants

challenge the trial court’s judgment that all signatories to the contract must pay

liquidated damages, instead of just the one signatory specifically mentioned in the

liquidated damages clause. They also protest the trial court’s award of prejudgment
interest and its ruling that Mariner is entitled to attorneys’ fees. For reasons that

follow, we reverse in part the court’s liquidated damages judgment, but affirm the

remainder.

      Although many of the relevant facts were set out in Mariner I, a fuller account

is needed here. In October 2003, Mariner entered into an administrative services

agreement (“ASA”) with three related entities – Sovereign Healthcare, LLC

(“Sovereign”), Sovereign Healthcare Holdings, LLC (“Holdings”), and Southern

Healthcare Management, LLC (“Southern”). Holdings was the sole member of

Sovereign, which in turn was the sole member of 19 limited liability companies that

operated nursing homes in Florida. Southern provided management services to those

19 companies.

      Under the ASA, Mariner agreed to provide Sovereign with a wide variety of

administrative services, including accounting, accounts receivable, information

technology, payroll, and benefits. Mariner also agreed to provide Holdings and

Southern with more limited administrative services. The ASA provided that

Sovereign would pay Mariner a monthly fee for the services rendered to all three

entities, and Holdings guaranteed payment of that fee. The term of the ASA was five

years, and it included the following liquidated damages provision:

                                         2
      In the event Sovereign terminates this Agreement prior to the expiration
      of the [five-year] Term for any reason whatsoever, . . . Sovereign shall
      pay [Mariner], in a lump sum, as liquidated damages, an early
      termination fee equivalent to fifty percent (50%) of the total Fee that
      would have been paid to [Mariner] through the expiration of the [five-
      year] Term (“Note Repayment Early Termination Fee”).

(Emphasis in original.) The ASA also contained an attorney fees provision:

      In the event any proceeding or suit is brought to enforce this Agreement,
      the prevailing party shall be entitled to all reasonable costs and expenses
      (including reasonable attorneys’ fees) actually incurred by such party in
      connection with any action, suit or proceeding to enforce the other’s
      obligations under this Agreement.

      In November 2003, Mariner entered into six separate administrative services

agreements that the parties refer to as the “Kellett ASAs.” Under these agreements,

Mariner agreed to provide administrative services to Southern Healthcare

Management II, LLC (“Southern II”), which was managing six Florida nursing homes

that belonged to an unrelated entity. The Kellett ASAs contain terms that are

materially identical to those of the ASA, including similar liquidated damages and

attorney fees provisions.

                                          3
      In 2005, Sovereign, Holdings, and Southern sued Mariner, claiming that it had

breached an oral agreement to terminate the ASA early and had breached the ASA

itself by mishandling data. Mariner filed an answer and counterclaim alleging that the

plaintiffs – not Mariner – had wrongly terminated the ASA. On cross-motions for

partial summary judgment, the trial court ruled that Sovereign, Southern, and

Holdings were liable to Mariner for preemptively terminating the ASA. The court

further ruled, however, that the ASA’s liquidated damages provision was an

unenforceable penalty and that actual damages should be determined by a trier of fact.

      The parties cross-appealed to this Court. We affirmed the trial court’s ruling

that Sovereign, Holdings, and Southern were liable to Mariner for early termination

of the ASA. Mariner I, 306 Ga. App. at 877-878 (4). But we reversed the trial court’s

liquidated damages ruling, holding that the ASA’s liquidated damages provision was

enforceable as a matter of law. Id. at 874-876 (1).

      Meanwhile, with the trial court’s permission, Mariner had added Southern II

as a counterclaim defendant, alleging that it had breached the Kellett ASAs. After the

remittitur from Mariner I issued, Mariner moved for the entry of judgment, seeking

liquidated damages from all counterclaim defendants on its claims for breach of the

ASA and the Kellett ASAs. The trial court granted Mariner’s motion. For breach

                                          4
of the ASA, the court entered judgment against Sovereign, Holdings, and Southern

in the amount of $8,137,559.16 in liquidated damages, as well as $3,968,682.09 in

prejudgment interest. And for breach of the Kellett ASAs, the court entered judgment

against Southern II in the amount of $4,158,040.61 in liquidated damages, plus

$2,027,870.71 in prejudgment interest. Additionally, the court ruled that Mariner is

entitled to recover attorney fees under the terms of the ASA and Kellett ASAs, but

it reserved the issue of the amount of such fees for later determination. It also

reserved ruling on Sovereign, Holdings, and Southern’s two remaining breach of

contract claims and claim for attorneys’ fees. Despite these unresolved issues, the

court made its judgment final pursuant to OCGA § 9-11-54 (b). Sovereign, Holdings,

Southern, and Southern II then filed this timely appeal.

      1. Sovereign, Holdings, and Southern (collectively, for this division only, “the

original Sovereign parties”) contend that the trial court erred by making all three

entities liable for liquidated damages under the ASA even though the ASA imposes

that obligation only upon Sovereign. The original Sovereign parties cite the black-

letter legal principle that if contractual language is unambiguous, “the court simply

enforces the contract according to the terms and looks to the contract alone for the

meaning.” RLI Ins. Co. v. Highlands on Ponce, LLC, 280 Ga. App. 798, 800 (1) (635

                                          5
SE2d 168) (2006) (citation omitted). The ASA plainly states that if Sovereign

prematurely terminates the agreement, “Sovereign shall pay . . . liquidated damages.”

Mariner does not dispute that this language does indeed obligate Sovereign, alone,

to pay liquidated damages in the event of Sovereign’s early termination. Nonetheless,

Mariner contends that all three original Sovereign parties are liable for liquidated

damages for two reasons.

      (a) First, Mariner asserts that we previously decided this issue against the

original Sovereign parties in Mariner I, and that ruling is the law of the case. Under

the law-of-the-case doctrine, a ruling by this Court “in a case shall be binding in all

subsequent proceedings in that case.” OCGA § 9-11-60 (h). But the doctrine applies

only “to actual decisions, not to issues raised but never ruled upon.” Shadix v. Carroll

County, 274 Ga. 560, 563 (1) (554 SE2d 465) (2001) (punctuation and footnote

omitted). In Mariner I, we held that the original Sovereign parties were liable for

prematurely terminating the ASA and that the liquidated damages clause was

enforceable. We did not attempt to calculate the amount of liquidated damages or

determine which entity or entities – Sovereign, Holdings, Southern, or some

combination – was responsible for paying them. Mariner I, 306 Ga. App. at 875-876

(1). Thus, we did not decide the issue presented here. Accordingly, the law-of-the-

                                           6
case rule does not foreclose us from addressing it now. See Parks v. State Farm Gen.

Ins. Co., 238 Ga. App. 814 (520 SE2d 494) (1999) (law-of-the-case rule “applies only

to actual decisions, not to issues raised by the parties but never ruled upon”); see also

Currid v. Dekalb State Court Probation Dept., 285 Ga. 184, 186, n.5 (674 SE2d 894)

(2009) (rule does not extend to an “implied ruling” on an issue that “simply was not

addressed”) (citation and punctuation omitted).

      (b) Second, Mariner argues that Holdings guaranteed Sovereign’s obligations

under the ASA.1 Mariner relies on the “Fees” provision of the ASA, which states that

“Sovereign is obligated to pay, and Holdings guarantees the payment of, the fees to

be paid to [Mariner] for all Administrative Support Services rendered under this

Agreement (the “Fee”) which shall be a monthly fee equal to Four Hundred Ten

Thousand Dollars ($410,000.00).” As before, we must enforce unambiguous

contractual terms as they are written. RLI Ins. Co., 280 Ga. App. at 800 (1). And “a

court must strictly construe an alleged guaranty contract in favor of the guarantor.

The guarantor’s liability may not be extended by implication or interpretation.”

      1
          Mariner does not argue that Southern guaranteed Sovereign’s obligations.

                                           7
Community Magazine, LLC v. Color Xpress, 326 Ga. App. 330, 332 (1) (756 SE2d

564) (2014).

      The ASA’s guaranty provision provides that Holdings guarantees Sovereign’s

payment of monthly fees to Mariner. Mariner contends that the provision also means

that Holdings guarantees payment of liquidated damages. But the guaranty provision

says nothing about liquidated damages, which are mentioned in a different section of

the ASA that does not contain a guaranty. Obligating Holdings to cover Sovereign’s

liquidated damages liability would require us to extend the ASA’s limited guaranty

provision to encompass a separately defined fee – the “Note Repayment Early

Termination Fee” referenced elsewhere in the agreement. Strictly construing the

limited guaranty, however, we decline to extend the express terms thereof to include

the liquidated damages provision.2 In sum, the trial court erred by entering judgment

for liquidated damages against Holdings and Southern.

      2.       Sovereign and Southern II argue that Mariner is not entitled to

prejudgment interest on the liquidated damages amounts and that, even if such an

      2
         Mariner claims that the “Note Repayment Early Termination Fee” is really
just a subset of the “Fee” that Holdings guaranteed, but the ASA does not define it
as such. Reaching Mariner’s conclusion would require us to imply contractual terms
that are not there.

                                         8
entitlement existed, the trial court improperly calculated the interest.3 These

arguments lack merit.

      (a) Sovereign and Southern II insist that Mariner’s liquidated damages award

represents “the maximum as well as the minimum sum” – that is, the only sum – that

Mariner may collect from them. Southeastern Land Fund v. Real Estate World, 237

Ga. 227, 231 (227 SE2d 340) (1976) (punctuation omitted). OCGA § 7-4-15,

however, plainly provides that “[a]ll liquidated demands, where by agreement or

otherwise the sum to be paid is fixed and certain, bear interest from the time the party

shall become liable and bound to pay them.” Such interest is mandatory and is

awarded as a matter of law. Crisler v. Haugabook, 307 Ga. App. 796, 797 (706 SE2d

184) (2011).

      Sovereign and Southern II contend that this statute applies only to liquidated

demands, which it claims arise when contractual work is “completed and its cost

becomes fixed” or where a debt’s underlying value is not disputed,4 but not to

      3
        Holdings and Southern join in this argument, but in light of our conclusion
in Division 1 that those parties are not liable for liquidated damages, we omit
reference to them in this division.
      4
       Sovereign and Southern II cite to Swanson v. Chase, 107 Ga. App. 295 (129
SE2d 873) (1963) and Hendricks v. Blake & Pendleton, 221 Ga. App. 651 (472 SE2d
482) (1996) in order to distinguish between a “liquidated demand” and “liquidated
damages.” Those cases, however, do not embrace such a distinction.

                                           9
contractual liquidated damages clauses. The statute, however, recognizes that a debt

may become “fixed or certain” by “agreement,” i.e., through the execution of a

reasonable, bargained-for liquidated damages provision. See Holloway v. State Farm

Fire & Cas. Co., 245 Ga. App. 319, 321 (1) (b) (537 SE2d 121) (2000) (statutory

prejudgment interest available when a debt is “settled, acknowledged, or agreed”)

(punctuation and footnote omitted; emphasis supplied). Based upon OCGA § 7-4-

15’s plain language, Mariner is entitled to prejudgment interest. See Maz Medics v.

Satellite Advertising Systems, 194 Ga. App. 583, 584 (2) (391 SE2d 446) (1990)

(affirming award of prejudgment interest on judgment entered pursuant to liquidated

damages clause in contract).5

      5
         Sovereign and Southern II note, accurately, that a non-breaching party who
elects liquidated damages may not also recover actual damages. See Sweatt v. Intl.
Dev. Corp., 242 Ga. App. 753, 756 (1) (531 SE2d 192) (2000). Sovereign and
Southern II then define prejudgment interest as a type of “actual damages”
incompatible with the recovery of liquidated damages. As an initial matter, this
argument conflicts with the plain language of OCGA § 7-4-15. Further, the cases
upon which Sovereign and Southern II rely either do not apply in this context, see
Monessen Southwestern R. Co. v. Morgan, 486 U. S. 330, 335 (II) (A) (108 SCt 1837,
100 LE2d 349) (1988) (addressing the proper measure of damages for Federal
Employers’ Liability Act claims), or merely state dicta. See Jefferson Randolph Corp.
v. Progressive Data Systems, 251 Ga. App. 1, 4 (1) (a) (553 SE2d 304) (2001)
(liquidated damages clause was unenforceable penalty, but court noted that if
liquidated damages had been available, parties “cannot elect between liquidated and
actual damages; prejudgment interest would be actual damages”) (citations omitted),
rev’d on other grounds, Progressive Data Systems v. Jefferson Randolph Corp., 275
Ga. 420 (568 SE2d 474) (2002).

                                         10
       (b) Sovereign and Southern II argue that the trial court erred by using the

statutory interest rate to calculate prejudgment interest, rather than the lower rate

established in the ASA for the payment of late administrative fees. In its motion for

entry of judgment, Mariner sought prejudgment interest at the statutory rate of seven

percent. See OCGA § 7-4-2 (a) (1) (A).6 In their response to Mariner’s motion,

Sovereign and Southern II objected to an award of prejudgment interest on a number

of grounds, but did not challenge the applicability of the statutory rate or alert the trial

court to the different rate set forth in the ASA. By failing to object to the use of the

statutory rate in the trial court, Sovereign and Southern II have waived this argument

on appeal. See Anderson Constr. Co. of Fort Gaines v. Colquitt County School Dis.,

170 Ga. App. 270, 273-274 (3) (316 SE2d 851) (1984) (challenge to award of

       6
           OCGA § 7-4-2 (a) (1) (A) provides as follows:

              The legal rate of interest shall be 7 percent per annum simple
       interest where the rate percent is not established by written contract.
       Notwithstanding the provisions of other laws to the contrary, except
       Code Section 7-4-18, the parties may establish by written contract any
       rate of interest, expressed in simple interest terms as of the date of the
       evidence of the indebtedness, and charges and any manner of repayment,
       prepayment, or, subject to the provisions of paragraph (1) of subsection
       (b) of this Code section, acceleration, where the principal amount
       involved is more than $3,000.00 but less than $250,000.00 or where the
       lender or creditor has committed to lend, advance, or forbear with
       respect to any loan, advance, or forbearance to enforce the collection of
       more than $3,000.00 but less than $250,000.00.

                                            11
prejudgment interest waived where counsel failed to object below to damages amount

that included prejudgment interest).7

      3. All four Sovereign entities (collectively, for this division only, “Sovereign”)

claim that the trial court erred by holding that Mariner is entitled to recover attorney

fees, in an amount to be determined later, under the ASA and Kellett ASAs.

Sovereign makes three arguments in this regard, none of which is persuasive.

      Sovereign first argues, as it did with prejudgment interest, that the award of

liquidated damages establishes Mariner’s maximum recovery and therefore precludes

attorney fees. This argument lacks merit, as the ASA and Kellett ASAs specifically

provide both for liquidated damages and for attorney fees.

      Next, Sovereign contends that Mariner failed to comply with OCGA § 13-1-11

(a), which applies to “[o]bligations to pay attorney’s fees upon any note or other

evidence of indebtedness.” Specifically, Sovereign charges that Mariner did not

provide it with written notice of its attorney fees claim and ten days’ opportunity to

      7
         Sovereign and Southern II cite Swainsboro Cabinet Co. v. Ed Johns Constr.
Co., 299 Ga. App. 462 (682 SE2d 599) (2009), and Bevington v. Cavalry Portfolio
Svcs., LLC, 319 Ga. App. 746 (738 SE2d 329) (2013), for the proposition that
objections to prejudgment interest may not be waived, but those cases are
distinguishable. In Swainsboro Cabinet Co., the objecting party had no opportunity
to raise the issue below, 299 Ga. App. at 464 (2), n. 2; and Bevington did not address
the issue of waiver at all. 319 Ga. App. at 748-749 (4). Anderson Constr. Co., 170 Ga.
App. at 273-274 (3), by contrast, is directly on point.

                                          12
pay the underlying debt without the attorney fees. See OCGA § 13-1-11 (a) (3).

Mariner does not dispute the lack of notice, but points out – correctly – that the

statute does not apply to “personal services contract[s]” because they do not qualify

as “note[s] or other evidence of indebtedness.” Vaughters v. Outlaw, 293 Ga. App.

620, 623 (2) (668 SE2d 13) (2008) (citations, punctuation and footnotes omitted)

(OCGA § 13-1-11 did not apply to contract for legal representation); see also

O’Brien’s Irish Pub v. Gerlew Holdings, 175 Ga. App. 162, 166 (4) (332 SE2d 920)

(1985) (statute inapplicable to exclusive real estate listing agreement). Because the

ASA and Kellett ASAs were agreements to perform accounting and other

administrative services, Mariner was “under no duty to notify [Sovereign] of its

intention to seek attorney fees under the contract[s].” O’Brien’s Irish Pub, 175 Ga.

App. at 166 (4).8

      Finally, Sovereign argues that the trial court erred by declaring Mariner to be

the “prevailing party” within the meaning of the agreements’ attorney fees provisions

      8
        Sovereign cites Best v. C B Decatur Court, LLC, 324 Ga. App. 403 (750 SE2d
716) (2013), in which we noted that the OCGA § 13-1-11 “should be construed
broadly.” Id. at 408 (2) (a). But there, we simply followed Supreme Court precedent
holding that leases count as “other evidence of indebtedness” within the meaning of
the statute, see Radioshack Corp. v. Cascade Crossing II, LLC, 282 Ga. 841, 842
(653 SE2d 680) (2007); we did not purport to overrule precedent holding that the
statute does not encompass service contracts.

                                         13
because Sovereign has two breach of contract claims, as well as its own claim for

attorney fees, still pending against Mariner. Sovereign argues that these pending

claims “could alter the balance of who ultimately prevails.” We need not reach this

issue. Because the trial court has reserved determination of the amount of attorney

fees to be awarded, its decision on this issue is not final and may be revised as

necessary once all outstanding claims have been adjudicated.

      Judgment affirmed in part and reversed in part. Miller and Dillard, JJ.,

concur.

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