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Rivers v. South Auction and Realty

Court of Appeals of Georgia, Fourth Division

June 28, 2019


          DOYLE, P. J., COOMER and MARKLE, JJ.


         Melissa Ann Rivers signed a contract to purchase a house from Jeff Powell after entering the winning bid in an auction run by South Auction Realty ("SAR"). After a dispute about the condition of the property, Rivers sought to cancel the contract and obtain a refund of her earnest money. With the dispute unresolved and the property sold to another party, the attorney holding the earnest money in escrow filed a complaint for interpleader to determine how to dispose of the earnest money.[1]Following a trial, a jury determined that Rivers was entitled to cancel and receive a refund of her earnest money, but the trial court granted a motion for a directed verdict in favor of defendants SAR and Powell. Rivers now appeals, contending that the trial court erred by (1) granting partial summary judgment to SAR, (2) directing a defense verdict by erroneously construing the purchase agreement and ignoring the evidence supporting a finding that her contractual right to cancel was triggered, (3) making certain evidentiary rulings, and (4) denying her motion for attorney fees and awarding fees to SAR.[2] For the reasons that follow, we affirm the trial court's ruling with respect to attorney fees and SAR's liability, and we reverse the trial court's grant of the directed verdict as to Rivers's right to cancel and receive a refund of her earnest money.

A directed verdict is appropriate only if there is no conflict in the evidence as to any material issue and the evidence introduced, construed most favorably to the party opposing the motion, demands a particular verdict. In reviewing the grant of a motion for a directed verdict, this Court applies the 'any evidence' test and construes the evidence in the light most favorable to the losing party.[3]

         The record shows that in July 2015, Powell hired SAR to auction a residential property he owned. An auction was held with an open house on a weekend and the end-date on the following Thursday, September 10, 2015. Rivers went to the open house and inspected the house for approximately one hour. She decided to bid on the house, ultimately entered into a contract for a total bid of $356, 400, and paid $71, 280 in earnest money to be held by the closing attorney, Christy Balbo. Rivers testified that at the time of her inspection, she observed that the house was "very nice," and all of the systems appeared to be in working order, including the upstairs air conditioning unit.

         The purchase contract specified that the transaction would close on or before October 9, 2015, with an option for the seller to extend the closing date by 30 days. It also contained the following provision regarding the condition of the property:

Seller warrants that when the sale is consummated the improvements on the Property will be in the same condition as on the date hereof [September 10, 2015], normal wear and tear accepted [sic]. However, should the premises be destroyed or substantially damaged[4] before the contract is consummated, then at the election of the Purchaser: (a) the contract may be cancelled, or (b) Purchaser may consummate the contract and receive such insurance proceeds as may be paid on the claim of loss. This election is to be exercised within ten (10) days after the amount of Seller's damage is determined.

         The contract also contained a provision whereby the parties indemnified and held harmless SAR for any liabilities or losses including attorney fees and released SAR from any claims regarding the earnest money.

         When Rivers returned to the property with Rusty Lane (the SAR proprietor) and Balbo to confirm the condition of the house on September 24, 2015, she observed that a several-foot long section of the kitchen's tile backsplash was "broken off and beat up. The tiles themselves were broken off and cracked up. It was obvious that it was excessive force because there were blunt points as though a hammer or something had hit them." Also, Rivers noticed that the thermostat for the upstairs heating and air conditioning "was off the wall[, ] and the coils or wires were all yanked out of the wall." The power was not turned on, so she could not assess the functionality of the air conditioning. She also observed that a tree in the front yard may have been struck by lightning.

         That same day, Balbo sent a letter to SAR and Powell, expressing Rivers's concerns and requesting that the backsplash be repaired, the power be restored, and any electrical damage be remedied. The letter also reserved Rivers's right to cancel the contract if the repairs were not made.

         On September 29, Balbo sent another letter stating Rivers's intention to cancel the contract in light of the issues she observed. Rivers had engaged a heating and air contractor to assess the dismantled thermostat, learning that "[a]ccording to the professionals, this is something you typically see when someone intends to damage the unit, or 'rough start' a faulty system." In light of the changed condition of the property, Rivers explained that she did not wish to proceed with the closing and requested a refund of her earnest money.

         The parties continued to discuss the issues, endeavoring to close the deal within 30 days after the original closing date. Some repairs were allegedly made, and Rivers agreed to visit the house with a local real estate agent a third time on October 27, 2015, to assess the condition of the house. The power was not turned on despite Rivers's request, and she noticed that water was leaking from the ceiling of the main floor. The water was coming from a leak in an upstairs bathroom and had soaked through the floor, collecting in the seams in the downstairs ceiling drywall and dripping from a light fixture onto the downstairs floor. The house had been locked and unoccupied while the leak was active, and it was impossible to determine exactly how long the water had been leaking. The real estate agent was able to turn off the water supply to the upstairs toilet, which stopped the leak.

         Further, after the agent was able to turn on the power to the house, Rivers determined that the upstairs air conditioning was not operational even though it had been at the time she placed her bid. The kitchen backsplash tile was never fixed.

         The closing never occurred, [5] and SAR and Powell disputed Rivers's entitlement to cancel the contract. In November 2015, Balbo interpleaded the earnest money into the trial court's registry, seeking a ruling on who was entitled to it. Rivers answered and filed crossclaims against Lane, SAR, and Powell, including breach of contract and fraud. The parties moved for summary judgment, and the trial court denied Rivers's motion and partially granted SAR's motion to the extent that the parties had waived any claims against SAR in connection with the earnest money. Lane later was dismissed as a party under corporate law theories.

         A three-day jury trial ensued, and at the close of Rivers's evidence, SAR and Powell moved for a directed verdict. The trial court deferred ruling at that time, and after hearing the defense's evidence, the jury deliberated and found that substantial damage had occurred after the contract was signed so Rivers was entitled to cancel and receive a refund of her earnest money. The trial court ultimately granted a directed verdict to the defendants, denied a request by Rivers for attorney fees from ...

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