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LLC v. Lindfield Holdings, LLC

Court of Appeals of Georgia, Second Division

June 27, 2018


          MILLER, P. J., ANDREWS and BROWN, JJ.

          BROWN, JUDGE.

         BPP069, LLC ("the buyer") appeals from the trial court's order granting summary judgment in favor of Lindfield Holdings, LLC and Damon Barner (collectively "the defendants") on its complaint for fraud arising out of the sale of real property in the City of Newnan ("the City"). The buyer asserts that its fraud claim should have been submitted to the jury because (1) the defendants "knowingly misrepresented the zoning status of the property and concealed the fact that the City intended to demolish the property"; and (2) the buyer should not be charged with constructive knowledge of demolition orders filed outside the chain of title. For the reasons explained below, we affirm the portion of the trial court's order granting summary judgment to the defendants for their alleged misrepresentations regarding zoning. We reverse the trial court's conclusion that the defendants were entitled to summary judgment in connection with alleged misrepresentations regarding the City's planned demolition of the property.

Summary judgment is appropriate when no genuine issues of material fact remain and the movant is entitled to judgment as a matter of law. On appeal, we review the grant or denial of summary judgment de novo, construing the evidence and all inferences in a light most favorable to the nonmoving party.

(Citation and punctuation omitted.) Seki v. Groupon, Inc., 333 Ga.App. 319 (775 S.E.2d 776) (2015).

         In the summer of 2012, the two parcels ultimately sold to the buyer were foreclosed upon by Wells Fargo Bank, NA, as trustee for two different loan trust entities. These parcels were zoned Urban Rural - Historical Infill (RU-I) by the City and have a street address of 4 and 6 St. Clair Street. While this zoning prohibits multi-family housing, the parcels at issue had been granted a legal non-conforming use status. According to a city planner, "[a] property's legal non-conforming use may be verified by completing an Application for Zoning Verification, attainable from the City of Newnan Planning and Zoning Department."

         In August 2013, the City posted on the parcels a notice of non-compliance with Sec. 1.040 (3) of its zoning ordinance.[1] In September 2013, the City passed resolutions declaring the buildings on the parcels "unsafe building[s]." The resolutions, which were recorded in the public record on October 21, 2013, authorized the City to repair or demolish the buildings if the owner failed to do so within 60 days. On November 7, 2013, the City posted a notice on the parcels that the buildings had been declared unsafe. On November 14, 2013, the City posted on the parcels notices of demolition that referenced its September resolutions regarding repair or demolition. In March 2014, the City determined that the property had not been used as multi-family housing for over six months.

         In early July 2014, Lindfield Holdings received title to the parcels from Wells Fargo, in its capacity as trustee, through separate quitclaim deeds. Five days after it obtained title for both of the parcels, Lindfield Holdings entered into a purchase and sale agreement with the buyer. Barner, a member and agent of Lindfield Holdings, signed the contract on its behalf. The contract provided that the "Seller warrants that at the time of closing Seller will convey good and marketable title to said Property by general warranty deed subject only to: (1) zoning." The contract entitled the buyer to "examine title and furnish Seller with a written statement of title objections at or prior to the closing." Finally, the buyer was granted a seven day due diligence period, during which the buyer could "determine whether or not to exercise Buyer's option to proceed or not proceed with the purchase of the Property."

         According to Barner's affidavit, the notices posted by the City with regard to noncompliance with the zoning ordinance, unsafe buildings, and demolition remained posted on the property throughout the transaction for the sale of the parcels to the buyer. Barner alleged in his affidavit that "Defendants disclosed the existence of these notices to [the buyer's realtor, ] Kelly Brown," but he provided no details about the disclosure or when it took place. Brown submitted an affidavit stating that she showed the property to a representative of the buyer "on numerous occasions" and that "[f]rom [her] initial showing of the property through the closing of the property . . ., there were no demolition notices or other notices posted on the property." She denied that Lindfield Holdings or its CFO, William Davidson, ever told her "that the property was under a demolition order and had lost its non[-]conf[o]rming use pursuant to the county zoning ordinance." Davidson "only told [her] that there was an issue with the back title as a result of a previous foreclosure [and] that he was having the title fixed."

         The demolition resolutions recorded for each parcel do not include a legal description. Depending upon how it is viewed, the resolutions either list the wrong street address for the owner identified or identify the wrong owner for the street address listed. Specifically, the demolition resolution against 4 St. Clair Street lists the name of the owner of 6 St. Clair Street, and the demolition resolution against 6 St. Clair Street lists the name of the owner of 4 St. Clair Street.[2]

         A real estate closing attorney submitted an affidavit for the buyer stating that he had reviewed the "abstract of the title" used for the closing between the buyer and Lindfield Holdings.[3] Based upon his review of the documents, he opined that "[a] title search of [the parcels] using the standard title examination methods would not reveal the demolition orders as being in the chain of title." (Emphasis supplied.) He then opined that "[t]he two . . . demolition resolutions are not in the chain of title for this property and this error is the reason why the demolition orders were not disclosed through the due diligence of [the buyer]." Under his view, the resolutions listed the wrong owner for the street address listed rather than the wrong street address for the owner listed. His affidavit does not address whether someone searching the public record for both parcels[4] should have discovered the discrepancy in the resolutions since each incorrectly listed either the other's street address or owner.

         Lindfield Holdings' sale of the parcels to the buyer closed on July 30, 2014, and the quitclaim deeds executed earlier in the month that conveyed title to Lindfield Holdings were recorded the following day. During the closing, Barner signed a seller's affidavit in which he swore that there were no encumbrances of record affecting title to the parcels and that good merchantable title could be conveyed free and clear of liens and encumbrances other than taxes for the year 2014 and those not yet due and payable.

         On August 8, 2014, William Davidson, the CFO of Lindfield Holdings, filed an "Application for Special Exception" with the City to change the "allegedly single family" zoning classification for the parcels to "multi family." The application completed by Davidson lists Lindfield Holdings as the property owner even though the parcels had been sold a week before.[5] On September 2, 2014, a city planner recommended that the special exception request be denied. The city planner noted in his report that Lindfield Holdings "was informed of all the non-conforming issues surrounding [the parcels] prior to the purchase of the [parcels] and entered into the transaction with full knowledge of the fact that these apartments were non-conforming and may not be allowed to continue." The City denied the application for a special exception and the multi-family apartment buildings on the parcels were demolished by the City sometime before mid-December 2014. In January 2015, the buyer received bills from the City totaling $17, 179.90 for the demolition of the buildings.

         The buyer filed suit against Lindfield Holdings, Barner, and Davidson, but was unable to obtain service upon Davidson. In its complaint, the buyer asserted causes of action for breach of contract, fraud, and negligent misrepresentation and sought to rescind the contract in addition to recovering general and special damages, attorney fees, costs, and punitive damages. The specific misrepresentations asserted in the complaint include: the defendants "represented the Property as being multi-family development having a total of eight (8) units and as being in compliance with local, state and federal laws"; the defendants failed to disclose "the loss of the [parcels'] non-conforming use status, nor the City's two demolition Resolutions"; and the defendants ...

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