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Medical Center of Central Georgia, Inc. v. Macon Health Center, Inc.

Court of Appeals of Georgia, First Division

May 24, 2018

MEDICAL CENTER OF CENTRAL GEORGIA, INC.
v.
MACON HEALTH CENTER, INC. et al.

          BARNES, P. J., MCMILLIAN and REESE, JJ.

          McMillian, Judge.

         Medical Center of Central Georgia, Inc.[1] (the "Hospital") appeals the trial court's denial of its motion for summary judgment in this action against Macon Health Center, Inc. ("Center") and Macon Health Club, Inc. ("Club") in connection with Center's and Club's right to exercise an option to lease a gym facility that the Hospital decided to close. The Hospital also appeals the trial court's partial grant of a motion for interlocutory injunction filed by Center and Club. Because we find no genuine issues of material fact preventing the grant of summary judgment and because the issues regarding the now-expired interlocutory injunction are moot, we reverse.

         Summary judgment is appropriate when the moving party can "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law [.]" OCGA § 9-11-56 (c). "The party opposing summary judgment is not required to produce evidence demanding judgment for it, but is only required to present evidence that raises a genuine issue of material fact." (Citation omitted.) Examination Mgmt. Svcs. v. Steed, 340 Ga.App. 51, 51-52 (794 S.E.2d 678) (2016). "We review a grant or denial of summary judgment de novo and construe the evidence in the light most favorable to the nonmovant." (Citation omitted.) Matson v. Bayview Loan Servicing, LLC, 339 Ga.App. 890, 890 (795 S.E.2d 195) (2016).

         So viewed, the evidence shows that under the terms of an agreement dated March 5, 1991 (the "Agreement"), the Macon-Bibb County Hospital Authority, d/b/a Medical Center of Central Georgia, a public, not-for-profit hospital (the "Authority"), bought the building containing the gym and the gym's equipment from Center, which, at the time, was doing business as the Macon Health Club. The Agreement granted the Authority the right to the name "Macon Health Club" and contemplated that the Authority would continue to operate a gym facility on the premises "so long as it can feasibly do so." The Agreement further provided that in the event the Authority failed to meet its obligations to maintain the gym or announced its intention to close the facility prior to December 1, 2020, Center had the right to exercise a lease option for the gym property (the "Lease Option"). However, the Agreement also contained the following provision requiring that Center maintain its legal corporate standing (the "Good Standing Requirement") in connection with its exercise of the Lease Option:

The parties recognize that the option hereby granted to [Center] to lease the premises up to December 13, 2020, contemplates that [Center] will remain a corporation in good standing under the laws of the State of Georgia. [Center], therefore, represents that it will take such action as is necessary through the form of annual filings with the Secretary of State or otherwise to maintain the corporate existence in good standing of [Center].

         In 1995, the Authority assigned the Hospital title to the gym property and all of the Authority's rights and responsibilities under the Agreement pursuant to a lease transfer agreement. From that point, therefore, the Hospital and Center were the two parties to the Agreement. However, in 2001, Center, which was first incorporated in 1887, was administratively dissolved by the Georgia Secretary of State.

         Seven years later, in August 2008, the Hospital, prompted by declining gym membership, began a financial and operational analysis of the gym and on October 1, 2008, made the administrative decision to close the facility. The Hospital sent a letter to Center's board members announcing this decision in October 2008. On January 30, 2009, Club was incorporated as a new entity under the same name as Center, i.e., Macon Health Center, Inc.[2] Shortly thereafter, on February 5, 2009, Donald J. Cornett, the president of Club, signed a letter as "Chairman, Macon Health Center, Inc." responding to the Hospital's October 2008 letter informing Center's board about its decision to close the gym. In the letter, Cornett explained that

[t]he purpose of this letter is to respond to your letter of October 7, 2008, to the Macon Health Center, Inc. Board announcing the intention of [the Hospital] to cease operating the Macon Health Club. Pursuant to the terms of Paragraph 11.04 of that Agreement dated March 5, 1991, between the . . . Authority. . . and Macon Health Center, Inc. ("MHC"), MHC hereby gives written notice to [the Hospital] of its intent to lease the space described . . . in the Agreement for a term ending December 13, 2020.

         While the language of the letter purports to exercise the Lease Option on behalf of the entity the letter identified as a party to the Agreement, i.e., "Macon Health Center, Inc., ('MHC'), " Cornett avers in this litigation that he sent the letter in his capacity as president of Club, which was not a party to the Agreement. On March 11, 2009, Cornett, on behalf of "MHC, " and the Hospital jointly notified the gym's members of the Hospital's decision to cease gym operations and Club's intention to exercise the Lease Option. The Hospital and Club continued to negotiate over the future of the gym, and on September 27, 2009, the Hospital and Cornett, again on behalf of "MHC, " entered into a Memorandum of Understanding (the "Memorandum"), under which the Hospital agreed to continue operating the gym and Club agreed to assist in finding additional financing and increasing membership. Both Cornett and another witness averred that Cornett also signed that document in his capacity as an officer of Club, because, as Cornett explained, he "had no authority to sign for any other entity." Then, in 2012, Club, too, was dissolved by the Secretary of State for failure to file its annual registration.

         Four years later, on September 13, 2016, the Hospital again announced its intention to close the gym. In response, Club successfully applied and received reinstatement of its corporate status as of September 26, 2016. Club also requested, and the Hospital agreed to, an extension of the date of the gym's closing to March 12, 2017. Negotiations continued regarding the possibility of a new lease, and Club made the decision to exercise the Lease Option. And on December 7, 2016, an attorney sent the Hospital a letter on behalf of "MHC" to notify it of this decision. The Hospital acknowledged receipt of this notice on December 9, 2016, expressing "hope for a resolution agreeable to the parties which serves the interest of the Community[.]" However, the Hospital asserts that it believed it was negotiating with Center and only discovered for the first time in February 2017 that Center had been administratively dissolved in 2001 and that Club was a separate corporate entity. Shortly thereafter, the Hospital filed its Complaint for Declaratory Judgment in this action, asking the trial court to declare and affirm that:

(a) because CENTER materially breached the Good Standing Requirement and is now a permanently defunct entity, CENTER lost the Option to Lease; (b) as a permanently defunct entity, CENTER may not assign the Agreement to CLUB; and (c) CLUB has no standing to exercise the Option to Lease.

         Center and Club filed a timely answer, counterclaim, and verified petition for injunction to keep the gym in operation pending the litigation. Within a week and prior to any discovery, the Hospital filed its motion for summary judgment. The parties subsequently entered into a consent order in which the Hospital agreed to make its general counsel available for a deposition "on subject areas that relate to Defendants' claim of standing to enforce the 1991 agreement" and to keep the gym open through March 30, 2017.

         Following a hearing, the trial court issued its order denying the Hospital's motion for summary judgment and granting Club's petition for an interlocutory injunction to preserve the status quo until April 30, 2017. In reaching this decision, the trial court found that Center was administratively dissolved and was time-barred ...


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