WHOLE COURT
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 16, 2014
In the Court of Appeals of Georgia
A14A0718. LEGACY ACADEMY et al. v. MAMILOVE, LLC et al. JE-038
ELLINGTON, Presiding Judge.
In this case involving a dispute arising from a day care center franchise
agreement, a Gwinnett County jury rendered a verdict in favor of the plaintiffs,
franchisee Mamilove, LLC and its officers, Michele Reymond and Lorraine Reymond
(collectively, “Mamilove”), and against the franchisors, Legacy Academy, Inc. and
its officers, Frank and Melissa Turner (collectively, “Legacy”). The superior court
denied a motion for new trial filed by Legacy, and Legacy appeals from the court’s
judgment on the verdict and from its order on the motion for new trial. Legacy
contends that the trial court erred in rejecting its argument that Mamilove’s claims
were barred as a matter of law, in denying its motion for a directed verdict on all of
the claims, in excluding certain evidence, and in denying its motion for new trial.
Finding no error, we affirm.
Viewed in favor of the jury’s verdict,1 the evidence presented showed the
following facts. In 2001, sisters Michele and Lorraine Reymond entered into
discussions with Frank and Melissa Turner about opening a Legacy Academy daycare
franchise. In July 2001, the Turners gave the Reymonds a pro forma earnings claim
in the form of an income and expense statement (hereinafter, the “earnings claim”)
that was purportedly based upon the actual income and expenses of Legacy franchises
that were then in operation. According to the earnings claim, a new franchisee would
have approximately $260,000 in net income after the first year of operation and
approximately $440,000 in net income after each of the second and third years.
Relying upon the earnings claim, the Reymonds decided to open a Legacy franchise.
The Turners showed the Reymonds property on Old Peachtree Road in Gwinnett
County and the Reymonds agreed to build their daycare center there.
1
See ALEA London Ltd. v. Woodcock, 286 Ga. App. 572, 576 (2) (649 SE2d
740) (2007) (“On appeal, we examine the record in the light most favorable to the
verdict and judgment. A jury verdict, after approval by the trial court, and the
judgment thereon will not be disturbed on appeal if supported by any evidence, in the
absence of any material error of law.”) (punctuation and footnotes omitted).
2
On September 13, 2001, the Reymonds met with the Turners, who gave them
a 17-page “Franchise Offering Circular for Prospective Franchisees for Non-
Registration States” (the “franchise circular”) and a 37-page, 25-year Franchise
Agreement (the “franchise agreement”). The Reymonds did not have time to read the
documents or consult with an attorney before signing them, however, because the
Turners “pressured” them, telling them with “a sense of urgency” that they had to sign
the documents that day or other franchisees would “take” the Old Peachtree Road
location and it could be months before another location became available. As a result,
the Reymonds signed the circular, the agreement, and an amendment to the
agreement. The Reymonds also paid Legacy a $30,000 franchise fee.
The Turners subsequently informed the Reymonds that they could not build
their center at the Old Peachtree Road location after all, purportedly because of
“issues with the zoning” of that property. Several months later, in February 2002, the
Reymonds executed an agreement to purchase 2.6 acres of land in Sugar Hill from the
Turners2 and a contract with a construction company owned by Frank Turner,
2
The record shows that the Turners purchased 6.6 acres of property at the
Sugar Hill location for $440,000, and then, on the same day, sold the Reymonds a
2.26-acre parcel of the property for $525,000, thereby obtaining an immediate and
substantial profit on the land. The Turners constructed a building for the Legacy
Academy corporate headquarters on the remaining four acre parcel right behind
3
Commercial Contractors Enterprises (“CCE”), to build a daycare center on that
property. At the October 2002 closing, the Reymonds gave CCE a $40,000 check to
be applied to the building’s construction costs, executed two bank notes totaling
$1,884,450 to pay for the property and the construction of the building, and signed
a $200,000 promissory note in favor of CCE. Frank Turner told them that execution
of the note was required to reimburse CCE for “equity” it allegedly contributed to
assist with the closing of the bank loans and that they had to sign the note “or the
whole deal would fall through.” Ultimately, the Reymonds invested more than $2.2
million in the franchise and daycare center.
The Reymonds opened their daycare center in November 2002 and, by the end
of its first year of operation, they had lost $212,300. Although they recorded net
earnings of $103,692 in 2004 and $66,507 in 2005, those amounts were still far less
than the $440,000 in annual profits that the other franchisees had earned, according
to the earnings claim the Reymonds had received from the Turners.3 The Reymonds
repeatedly attempted to discuss with the Turners their concerns regarding the
Mamilove’s daycare center.
3
Net earnings for subsequent years also fell far short of those represented in
the earnings claim, with the Reymonds earning just $89,947 in 2006, $40,668 in
2007, $17,213 in 2008, and $28,299 in 2009.
4
business’ inability to enroll more children and its poor financial performance, but the
Turners “berated and badgered” them in response, telling them that they were doing
something wrong and that the lack of income was their fault for accepting part-time
enrollees, charging tuition that was too low, not marketing the center enough, etc.4
In addition, the Turners contributed to the center’s poor performance by opening two
more daycare center franchises within five miles of Mamilove’s center between 2006
and 2008. When the Reymonds tried to consult with other franchisees to compare
their financial performance, the others refused to participate due to Legacy’s policy
of discouraging the franchisees from discussing the financial performance of their
daycare centers with each other.
In 2008, five of Legacy’s franchisees jointly left the franchise and sued Legacy
and the Turners.5 While talking to some of these franchisees about their complaints
4
According to Michele Reymond, she tried to avoid complaining too often or
committing any violations of Legacy’s policies because she was concerned about
getting “default letters” from Legacy for even minor or inadvertent infractions, which
she feared would cause Legacy to take over Mamilove’s center.
5
The franchisees asserted claims for fraud, negligent misrepresentation, RICO
violations, and breach of contract. In July 2010, an arbitrator issued an award in favor
of franchisees that was later confirmed by the Superior Court of Gwinnett County. At
trial in the instant case, the parties agreed that they would not present to the jury
evidence of the arbitration award. See Division 1, infra.
5
against Legacy and the Turners, the Reymonds found out information that, combined
with Mamilove’s poor financial performance, caused them to decide to terminate their
Legacy franchise agreement. As a result, in August or September 2010, Mamilove
stopped paying Legacy the monthly five percent royalty fees and one percent
advertising fees required by the agreement. Then, on September 2, 2010, the
Reymonds’ attorney sent a letter to the Turners notifying them that the Reymonds
intended to terminate the franchise agreement, effective October 1. According to the
letter, the Reymonds believed that Legacy had violated certain rules of the Federal
Trade Commission (the “FTC Rules”) by, inter alia, failing to timely provide them
with the franchise circular and agreement and making an earnings claim that was
prohibited by the FTC. In addition, the Reymonds asserted that the strength of the
Legacy “brand” had been severely reduced due to the fraud committed by the Turners
that resulted in the 2008 litigation by the other franchisees and the “bad will” that
resulted.6
6
After removing Legacy’s insignia and other materials from the daycare center,
the Reymonds began operating the center as the “Wise Owl Academy.”
6
In November 2010, Mamilove filed suit against Legacy, asserting a claim under
OCGA § 51-1-6 that was based upon Legacy’s violations of the FTC Rules,7 a claim
that Legacy violated Georgia’s RICO Act,8 and claims for fraud, negligent
misrepresentation, and rescission.9 Legacy answered the complaint and filed a breach
of contract counterclaim based upon Mamilove’s failure to pay it royalty and
marketing fees due under the franchise agreement after August 2010. The parties filed
cross-motions for summary judgment on the opposing claims, and the trial court
denied the motions.
At trial, Mamilove presented the evidence outlined above, as well as evidence
that the earnings claim the Reymonds received from the Turners in the summer of
2001 was, in fact, fraudulent. The evidence showed that the earnings claim was not
a historical representation of the actual revenues and expenses of the existing Legacy
franchises, as the Turners had claimed, but was, instead, mere speculation based upon
assumptions regarding the total revenues and expenses a franchise might experience.
7
See Division 6, infra.
8
See OCGA § 16-14-1 et seq. (the “Georgia Racketeer Influenced and Corrupt
Organizations Act”).
9
Mamilove also asserted claims against the contractor that built its daycare
center, but those claims are not at issue in this appeal.
7
In addition, Mamilove presented the testimony of four former Legacy
franchisees. Patricia Williams, who opened the first Legacy daycare center franchise
in November 1998, lost over $283,000 in her first year of operation and lost another
$147,000 in the second year. She provided her financial statements to Frank Turner
in March 2000 – over a year before the Turners gave the Reymonds the earnings
claim that was supposedly based on the performance of Williams’ center and the other
franchises. Another franchisee, Tim Paulus, testified that he was considering opening
a Legacy franchise in the summer of 2001, and Frank Turner gave him an earnings
claim that was very similar to the one the Turners gave to the Reymonds around the
same time. As with the Reymonds, Turner told Paulus that the earnings claim was
based on the actual performance of the existing Legacy franchises. The other two
franchisees, Ann Weaks and Bobby Vatalaro, testified that, when they contacted
Legacy about opening a franchise, the Turners gave them an earnings claim similar
to that given to Paulus and the Reymonds and told them that the figures shown were
not merely estimations or projections but were based on the actual revenues and
expenses of existing Legacy franchises. In reliance on the earnings claim, each
franchisee decided to open a daycare center. According to Weaks, she and the Turners
had agreed on a location for her daycare center before she signed the franchise
8
agreement, but the Turners called her one day and told her that she had to sign the
agreement immediately and pay the $40,000 franchise fee or she would lose the
location to another franchisee. As with the Reymonds, when Weaks arrived at the
Legacy office, she was given a franchise agreement to sign immediately, without an
opportunity to read it beforehand. Similarly, Vatalaro testified that, before he had
chosen a location for his center, Frank Turner unexpectedly called him and offered
him a location, telling him that he had to commit to it within 24 hours because there
was “a long list of people” who wanted the property. Both Weaks and Vatalaro
testified that their franchises lost hundreds of thousands of dollars between 2004 and
2009. And, as with the Reymonds, when Weaks complained about the losses to the
Turners, they told her that other daycare franchises were “doing fine” and that it was
her fault that her center was not succeeding.10
Testifying in their defense, the Turners denied that they or anyone on Legacy’s
behalf had given the Reymonds an earnings claim for the franchise before the
Reymonds signed the franchise agreement on September 13, 2011. The Turners also
claimed, inter alia, that they had given the Reymonds the franchise circular prior to
10
Notably, although the most Legacy daycare center franchises in operation at
one time was about twenty-five, only ten were still in operation at the time of the
2013 trial in this case.
9
September 13, and Frank Turner denied that he had ever promised the Reymonds that
they could build a center at the Old Peachtree Road location. Finally, they denied that
they had pressured or otherwise prevented the Reymonds from reading the franchise
agreement before signing it.
Based upon the evidence presented, the jury rendered a general verdict in favor
of Mamilove on all of its claims and awarded it $750,000, plus $350,000 in damages
based upon the RICO violations, and $30,000 in attorney fees. The jury also found
that Frank and Melissa Turner were personally liable for the judgments. In addition,
the jury found in favor of Mamilove on Legacy’s breach of contract counterclaim.
The court entered judgment on the verdict.11
1. On appeal, Legacy contends that the trial court erred in denying it summary
judgment on Mamilove’s claims based upon the expiration of the statute of limitation
periods for the claims. It has abandoned this issue, however.
Generally,
[a]fter verdict and judgment, it is too late to review a judgment denying
a summary judgment, for that judgment becomes moot when the court
reviews the evidence upon the trial of the case. Where a motion for
11
See Division 11, infra, regarding the trial court’s denial of Legacy’s motion
for new trial.
10
summary judgment is overruled on an issue and the case proceeds to
trial and the evidence at the trial authorizes the verdict (judgment) on
that issue, any error in overruling the motion for summary judgment is
harmless.
(Punctuation, footnotes, and emphasis omitted.) ALEA London Ltd. v. Woodcock, 286
Ga. App. 572, 575 (1) (649 SE2d 740) (2007). However,
if the legal issues raised and resolved in denying the motion for
summary judgment were not considered at trial, then the denial of the
motion is not rendered moot by the verdict and judgment. Under such
circumstances, a party may appeal the denial of summary judgment as
part of the party’s direct appeal from the final judgment, and the denial
will be reviewed and determined by this Court. See OCGA § 5-6-34
(d)[.]
(Citations and punctuation omitted.) Coregis Ins. Co. v. Nelson, 282 Ga. App. 488,
489 (1) (639 SE2d 365) (2006).
On appeal, Legacy argues that the ruling at issue is not moot because the
statute of limitation issue was not submitted to the jury at trial. This argument is
patently disingenuous, though, as the trial transcript clearly shows that Legacy
expressly abandoned its statute of limitation defense at the beginning of trial.
Specifically, the transcript shows that, during a discussion of Legacy’s objection to
11
the admission of evidence of the arbitrator’s award in suits against Legacy that had
been brought by other franchisees, Mamilove’s counsel proposed the following
compromise: “[If Legacy] were to drop the statute of limitations defense, the
arbitration award would not come in. We would still be talking [about] franchisees
[and a] similar sort of pattern of activity with respect to the RICO claim, but the
[arbitration] award doesn’t come in.” In response, Legacy’s counsel agreed that
Legacy would not assert a statute of limitation defense. Therefore, under these
circumstances, this alleged error is no longer subject to appellate review. See ALEA
London Ltd. v. Woodcock, 286 Ga. App. at 575 (1); Crawford v. Crump, 223 Ga. App.
119, 122 (2) (476 SE2d 855) (1996) (“A stipulation by the parties upon which a
resolution of some issue is to be made is binding even though it might in some
manner contradict or conflict with the pleadings. Evidence contrary to the stipulation
is not admissible; since it is binding, it may not be disproved.”) (citations and
punctuation omitted); see also Renee Unlimited v. City of Atlanta, 301 Ga. App. 254,
257 (1) (687 SE2d 233) (2009) (“A litigant . . . cannot submit to a ruling, acquiesce
in the ruling, and still complain of same.”) (citation and punctuation omitted).
12
2. Legacy also contends that the trial court erred in denying its motion for
summary judgment on Mamilove’s rescission claim, arguing that Mamilove waived
its right to rescind the franchise agreement by failing to seek rescission in a timely
manner as a matter of law. However, after the trial court denied the motion for
summary judgment, the parties submitted to the jury the questions of whether
Mamilove was entitled to equitable rescission of the agreement and whether it timely
moved for rescission of the agreement under the circumstances. Consequently,
because there was evidence presented at trial to support a finding by the jury that
Mamilove timely asserted its rescission claim under the circumstances presented, the
question of whether the trial court properly denied Legacy summary judgment on this
issue is moot.12 See ALEA London Ltd. v. Woodcock, 286 Ga. App. at 575 (1).
12
Further, to the extent that Legacy contends that it was entitled to a directed
verdict on this issue, the record shows that Legacy failed to raise this issue in its
motion for a directed verdict. Regardless, Legacy would not have been entitled to a
directed verdict on this issue, because there was evidence to support the jury’s finding
that Mamilove timely asserted its claim for rescission. See Krayev v. Johnson, __ Ga.
App. __ (Case No. A14A0233, decided April 21, 2014) (“[T]he question as to what
is a reasonable or proper time within which to rescind a contract depends upon the
facts of the particular case and is ordinarily a question for the jury.”) (citation and
punctuation omitted); Stubbs v. Harmon, 226 Ga. App. 631, 632 (1) (487 SE2d 91)
(1997) (“When there exists any evidence to support the jury’s verdict, and no
reversible error is otherwise committed, the verdict will stand. It is the function of the
jury to resolve conflict[s] in [the] testimony; this Court will not substitute its
13
3. Legacy contends that Mamilove waived its right to rescind the agreement as
a matter of law when it claimed that Legacy had breached the agreement, because, in
asserting that claim, Mamilove acted in a manner that was inconsistent with its
purported repudiation of the agreement. This contention lacks merit.
“In general, a party alleging fraudulent inducement to enter a contract has two
options: (1) affirm the contract and sue for damages from the fraud or breach; or (2)
promptly rescind the contract and sue in tort for fraud.” (Punctuation and footnote
omitted.) Dodds v. Dabbs, Hickman, Hill & Cannon, 324 Ga. App. 337, 340 (1) (750
SE2d 410) (2013).
Where a party who is entitled to rescind a contract on ground of fraud
or false representations, and who has full knowledge of the material
circumstances of the case, freely and advisedly does anything which
amounts to a recognition of the transaction, or acts in a manner
inconsistent with a repudiation of the contract, such conduct amounts to
acquiescence, and, though originally impeachable, the contract becomes
unimpeachable in equity.
(Punctuation and footnote omitted.) Id. at 341-342 (1).
judgment for that of the jury and will neither weigh evidence nor determine witness
credibility.”) (citations omitted).
14
In this case, the record shows that Mamilove did not affirm the contract and
then assert a breach of contract claim against Legacy in its complaint; instead, it
sought rescission of the agreement. In contrast, Legacy’s breach of contract
counterclaim asserted that Mamilove had breached the agreement by failing to pay
royalties and other fees due under the contract. Subsequently, in the consolidated
pretrial order, Mamilove, as the defendant to that counterclaim, raised the defense that
Legacy’s fraudulent conduct constituted a prior breach of the agreement that had
relieved Mamilove of its obligations under the agreement. Legacy now argues that,
by asserting a defense that was based on the agreement, Mamilove affirmed the
agreement and, thus, waived its right to rescission of the agreement. However,
there is a fundamental difference between the assertion of a “defense”
by a defendant and the assertion of a right to affirmative relief through
the filing of a “claim” . . . by one who thereby occupies the status of a
plaintiff. A “defense” is “that which is offered and alleged by the party
proceeded against in an action or suit, as a reason in law or fact why the
plaintiff should not recover or establish what he seeks. A defense is not
something by means of which the party who interposes it can obtain
relief for himself.”
(Citation and punctuation omitted.) T. V. Tempo, Inc. v. T. V. Venture, Inc., 182 Ga.
App. 198, 200 (1) (355 SE2d 76) (1987). Thus, under the circumstances presented,
15
we conclude that Mamilove did not waive its right to rescission by asserting a
contract-based defense against Legacy’s breach of contract counterclaim.
4. Legacy contends that the trial court erred in failing to grant its motion for a
directed verdict on Mamilove’s claim for rescission of the franchise agreement.
[O]n appeal from a trial court’s rulings on motions for directed verdict
and judgment notwithstanding the verdict, we review and resolve the
evidence and any doubts or ambiguities in favor of the verdict; directed
verdicts and judgments notwithstanding the verdict are not proper unless
there is no conflict in the evidence as to any material issue and the
evidence introduced, with all reasonable deductions therefrom, demands
a certain verdict.
(Citation and punctuation omitted.) Fertility Technology Resources v. Lifetek Med.,
282 Ga. App. 148, 149 (637 SE2d 844) (2006). See also Rolleston v. Estate of Sims,
253 Ga. App. 182, 185 (4) (558 SE2d 411) (2001) (“The question before this [C]ourt
is not whether the verdict and judgment of the trial court were merely authorized [by
the evidence presented], but is whether a contrary judgment was demanded.”)
(citations and punctuation omitted).
On appeal, Legacy argues that Mamilove could not prove that the Turners
fraudulently induced them to sign the agreement by showing them the earnings claims
because the agreement specifically states that Mamilove had not received any
16
representations of potential income or earning capabilities from Legacy prior to
signing the agreement.13 According to Legacy, because it is undisputed that the
Reymonds failed to read the agreement before signing it, they were estopped as a
matter of law from asserting a claim for rescission of the agreement based upon
allegations of fraudulent inducement.
It is well-settled law in Georgia that a party who has the capacity and
opportunity to read a written contract cannot afterwards set up fraud in
the procurement of his signature to the instrument based on oral
13
Specifically, the agreement contained the following relevant provisions:
24.2. No Representations, Warranties or Guarantees. Franchisor
expressly disclaims the making of, and Franchisee and each Owner
acknowledge that it has not received from Franchisor or any party on
behalf of Franchisor, any representation, warranty or guarantee, express
or implied, as to the potential volume, profit, income or success of the
business licensed under this Agreement. . . .
24.7. No Earnings Claims. Franchisee acknowledges that neither
Franchisor, nor any person on behalf of Franchisor, has made any
written, oral or visual representation of (i) earnings capability of Legacy
Academy Center; (ii) a specific level or potential sales, income, gross or
net profit for the Franchisee; or (iii) a specific level of sales, income,
gross or net profits of existing centers (whether franchised or company-
owned) other than as specifically described in the Offering Circular.
17
representations that differ from the terms of the contract. . . . In fact, the
only type of fraud that can relieve a party of his obligation to read a
written contract and be bound by its terms is a fraud that prevents the
party from reading the contract.
(Citations and punctuation omitted.) Novare Group v. Sarif, 290 Ga. 186, 188-189 (2)
(718 SE2d 304) (2011).
Although it is undisputed that the Reymonds did not read the agreement prior
to signing it, the parties submitted to the jury the question of whether the Turners
intentionally prevented the Reymonds from reading the agreement before they signed
it. Mamilove then presented evidence showing, inter alia, that the Turners first gave
the Reymonds the 17-page circular and 37-page agreement on September 13, 2001,
and told them that they had to sign the documents that day or another franchisee
would be allowed to take the daycare center location they had chosen and it could be
months before another location became available.14 Thus, from the evidence
presented, the jury was authorized to find that the Turners intentionally prevented the
Reymonds from reading the agreement before signing it in order to conceal from
14
Accordingly, the dissent’s statement that the Reymonds “presented no
evidence that the Turners said or did anything that prevented them from reading the
agreement before they signed it” is simply incorrect.
18
them the provisions at issue here, which the Turners knew were false.15 See Stubbs
v. Harmon, 226 Ga. App. 631, 632 (1) (487 SE2d 91) (1997) (The jury’s verdict will
15
The dissent misrepresents this conclusion by stating that “the majority
concludes that Mamilove is entitled to rescind the franchise agreement despite the
Reymonds’ failure to read it because the jury was authorized to find that they were
‘pressured’ or ‘rushed’ into signing it.” To be clear, the evidence did not only show
that the Turners merely “pressured” the Reymonds into signing the agreement before
reading it; it authorized the jury to find that the Turners actively defrauded the
Reymonds by intentionally preventing them from reading the voluminous agreement
so that they would be bound by the 25-year agreement before discovering the false
statements contained therein.
Further, the facts in the cases cited by the dissent on this issue are clearly
distinguishable from those presented in this case. The Reymonds never testified that
they could not read the agreement because they were “too busy” or “occupied with
other business.” Cf. Citicorp Indus. Credit v. Rountree, 185 Ga. App. 417, 420 (1)
(364 SE2d 65) (1987) (wherein there was no evidence that the opposing party
“employed any artifice to prevent [the plaintiffs] from reading the agreements. The
fact that [the plaintiffs] deemed themselves too busy to read the lease and
indemnification agreements prior to signing them will not authorize them to avoid
their obligations to appellant thereunder.”); Bradley v. Swift & Co., 93 Ga. App. 842,
857 (3) (93 SE2d 364) (1956) (wherein there was no evidence that the opposing party
committed any actual fraud on the guarantor from whom he was trying to collect a
debt, and the guarantor admitted that he did not read the guaranty before signing it
because he was occupied with his other business at the time). Nor did the Reymonds
contend that they signed the agreement by mistake, thinking it was a different type
of agreement, or that they had read the agreement, consulted with an attorney, and
then waited months before signing it despite their objections to certain provisions of
the agreement that they believed were contrary to their best interests. Cf. Citizens
Bank, Vienna v. Bowen, 169 Ga. App. 896, 897 (1) (315 SE2d 437) (1984), and
Tidwell v. Critz, 248 Ga. 201, 203-204 (1) (282 SE2d 104) (1981), respectively.
19
stand if there is any evidence to support it.).16 And, given such a finding, the
Reymonds cannot be deemed to have knowingly agreed to such provisions and to
have waived the instant claims as a result.
It follows that, despite the fact that the agreement stated otherwise, the
evidence presented authorized the jury to find that Frank Turner did, in fact, show the
Reymonds a fraudulent earnings claim prior to September 13, 2001, and that he did
so with the intention of inducing them to execute the franchise agreement. See
Greenwald v. Odom, 314 Ga. App. 46, 53-54 (1) (723 SE2d 305) (2012) (The
evidence presented authorized the jury to find that a revenue forecast provided by the
seller included an actionable false statement of an existing fact that was intended to
induce the buyer to enter into the purchase transaction.). Consequently, Legacy was
not entitled to a directed verdict on Mamilove’s rescission claim, and the jury’s
verdict in favor of Mamilove on that claim must be affirmed. See Fertility Technology
16
Cf. Novare Group v. Sarif, 290 Ga. at 189 (2) (wherein there was no
allegation that the sellers tried to prevent the purchasers from reading the terms of the
agreements); Raysoni v. Payless Auto Deals, 323 Ga. App. 583 (753 SE2d 313)
(2013) (wherein there was no allegation that the buyer was prevented from reading
the contract or from determining whether the seller’s oral statements were true before
he purchased a car); Campbell v. Citizens & Southern Nat. Bank, 202 Ga. App. 639,
640 (415 SE2d 193) (1992) (wherein the debtor did not claim that he was prevented
from reading the note before he signed it).
20
Resources v. Lifetek Med., 282 Ga. App. at 149; Rolleston v. Estate of Sims, 253 Ga.
App. at 185 (4); Stubbs v. Harmon, 226 Ga. App. at 632 (1).
5. Legacy contends that the trial court erred in denying its motion for a directed
verdict on Mamilove’s claims for fraud, negligent misrepresentation, and RICO
violations because the merger or “entire agreement” provision in the franchise
agreement bars these claims as a matter of law. Section 24.6 of the agreement states
as follows: “Entire Agreement. Franchisee acknowledges that this agreement
constitutes the entire agreement of the parties with respect to the matters contained
herein. This [a]greement terminates and supersedes any prior agreement between the
parties concerning the same subject matter.” According to Legacy, this provision
prevents the Reymonds from proving that they reasonably relied on the earnings
claim Frank Turner had given them before they executed the franchise agreement. It
argues that, because justifiable reliance is an essential element of Mamilove’s claims
for fraud,17 negligent misrepresentation,18 and RICO violations,19 Mamilove could not
17
See Jones v. Cartee, 227 Ga. App. 401, 405 (2) (489 SE2d 141) (1997) (“The
tort of fraud requires proof of five elements: (1) a false representation; (2) scienter;
(3) intention to induce plaintiff to act or refrain from acting; (4) justifiable reliance
by plaintiff; and (5) damage to plaintiff.”) (citation omitted).
18
See Greenwald v. Odom, 314 Ga. App. 46, 52 (723 SE2d 305) (2012)
(“[N]egligent misrepresentation requires proof of (1) the defendant’s negligent supply
21
prevail on those claims as a matter of law. Under the circumstances presented, we
disagree.
(a) As we stated in Division 3, supra, “a party alleging fraudulent inducement
to enter a contract has two options: (1) affirm the contract and sue for damages from
the fraud or breach; or (2) rescind the contract and sue in tort for fraud.” (Citations
omitted.) Jones v. Cartee, 227 Ga. App. 401, 402-403 (1) (489 SE2d 141) (1997).
Depending upon which of the two actions is ultimately pursued, the
presence of a merger clause in the underlying contract may be
determinative as to the successful outcome. If the defrauded party has
not rescinded but has elected to affirm the contract, he is relegated to a
recovery in contract and the merger clause will prevent his recovery. If,
on the other hand, he does rescind the contract, the merger clause will
not prevent his recovery under a tort [claim for fraud].
of false information to foreseeable persons, known or unknown; (2) such persons’
reasonable reliance upon that false information; and (3) economic injury proximately
resulting from such reliance.”) (citation and punctuation omitted).
19
The RICO claim was based upon allegations that Legacy had committed at
least two acts of racketeering activity, including, among other crimes, theft by
deception. See OCGA § 16-8-3 (a), (b) (1) (theft by deception); OCGA § 16-14-3 (8)
(A), (9) (A) (ix) (RICO Act); see also First Data POS v. Willis, 273 Ga. 792, 795 (2)
(546 SE2d 781) (2001) (If a party cannot prove that it reasonably relied on a pre-
contractual representation, then it also cannot prove that it was deceived by that
representation. It follows that, absent proof of deception, the party cannot prevail on
claims for theft by deception or a RICO claim based upon theft by deception.).
22
(Citations and punctuation omitted.) Id. at 403 (1).
In City Dodge v. Gardner, 232 Ga. 766 (208 SE2d 794) (1974), the Supreme
Court of Georgia addressed whether a merger clause in a sales contract prevented a
buyer from prevailing on his fraudulent inducement claim when the contract had been
rescinded. In that case, the buyer asserted that, before he purchased a vehicle, the
seller told him that the vehicle had never been wrecked. Id. at 767. The buyer signed
a sales agreement that stated that the car was sold “as is” and contained the following
merger clause: “no other agreement, promise or understanding of any kind pertaining
to this purchase will be recognized.” Id. After purchasing the car, the buyer
discovered that it had been wrecked, so he tendered the car to the seller, unilaterally
rescinded the contract, and filed a tort claim for fraud and deceit. Id. Following a jury
verdict in favor of the buyer, the Supreme Court of Georgia directly addressed the
legal issue of “whether the language of the merger clause . . . was legally effective to
prevent the buyer from claiming that he relied on the seller’s misrepresentation.” Id.
at 766-767. The Court held that
the question of reliance on the alleged fraudulent misrepresentation in
tort cases cannot be determined by the provisions of the contract sought
to be rescinded but must be determined as a question of fact by the jury.
It is inconsistent to apply a disclaimer provision of a contract in a tort
23
action brought to determine whether the entire contract is invalid
because of alleged prior fraud which induced the execution of the
contract. If the contract is invalid because of the antecedent fraud, then
the . . . provision[s] therein [are] ineffectual since, in legal
contemplation, there is no contract between the parties.
(Emphasis supplied.) Id. at 770.20 In other words, a plaintiff can prevail on a claim for
fraud in the inducement, even when the sales contract contains a merger clause, if the
jury finds that the contract was invalid due to the seller’s antecedent fraud. See id.
(“[P]arol evidence of the alleged misrepresentation was admissible on the question
of fraud and deceit. As the antecedent fraud was proven to the satisfaction of the jury,
it vitiated the contract.”).
Therefore, in the instant case, because the evidence supported the jury’s verdict
in favor of Mamilove on the rescission claim, as explained in Division 4, supra, the
entire agreement – including the merger clause – was no longer valid or enforceable
against Mamilove and did not prevent the Reymonds from proving that they
20
See Novare Group v. Sarif, 290 Ga. at 190 (3) (The question of whether a
party justifiably relied on a seller’s antecedent misrepresentation “may be a jury
question in a fraud case where no contract exists or where the contract has become
void[.]” However, it is a question of law in a case where the contract remains valid
and its provisions preclude reliance on oral representations.) (citations omitted;
emphasis supplied).
24
reasonably relied on the fraudulent earnings claim when they executed the franchise
agreement. See id.21 Instead, it was for the jury to decide whether their reliance on the
earnings claim was reasonable under the circumstances presented. See id. It follows
that the trial court properly denied Legacy’s motion for a directed verdict on
Mamilove’s claims for fraud, negligent misrepresentation, and RICO violations.
(b) Still, Legacy argues that the Reymonds could not prove the element of
reasonable reliance as a matter of law because pre-contractual misrepresentations that
contradict the express terms of a valid, written contract that contains a merger clause
cannot be relied upon to vary the terms of that contract or to support a fraud claim.22
21
Cf. Novare Group v. Sarif, 290 Ga. at 190 (3) (Because the purchasers did
not prevail on their rescission claims, the contract remained valid, and the purchasers
were bound to the contract’s merger clause, which expressly stated that the purchasers
could not rely on oral representations by the sellers. It followed that the purchasers
could not prevail on their fraud and negligent misrepresentation claims, as those
claims required a showing of justifiable reliance.).
We note that, to the extent that Legacy relies on an unpublished opinion by this
Court in a previous appeal involving Legacy and a different franchisee, Legacy
Academy v. JLK, Inc. (Case No. A13A0810, decided July 5, 2013), this Court issued
that opinion pursuant to Court of Appeals Rule 36. Thus, pretermitting whether that
appeal addressed this issue, Rule 36 specifically states that such opinions “have no
precedential value.”
22
See Novare Group v. Sarif, 290 Ga. at 189 (2) (“Statements that directly
contradict the terms of the agreement . . . cannot form the basis of a fraud claim[.]”)
(citation omitted); Campbell v. Citizens & Southern Nat. Bank, 202 Ga. App. 639,
640 (1) (415 SE2d 193) (1992) (Pre-contractual statements or agreements that
25
However, the misrepresentation at issue in this case – the fraudulent content of
Legacy’s earnings claim – did not contradict or vary the merger clause or any other
provision of the agreement.23 Thus, this argument does not support the grant of a
directed verdict on these claims.
6. Legacy contends that the trial court erred in denying its motion for a directed
verdict on Mamilove’s claim for violation of a legal duty under OCGA § 51-1-6.
Under OCGA § 51-1-6, “[w]hen the law requires a person to perform an act for the
benefit of another or to refrain from doing an act which may injure another, although
contradict the express terms of a contract “cannot be used to vary the terms of a valid
written agreement purporting to contain the entire agreement of the parties, nor would
the violation of any such alleged oral agreement amount to actionable fraud.”)
(citation omitted).
23
Cf. Novare Group v. Sarif, 290 Ga. at 188-189 (2) (Although the sellers of
high-rise condominiums told purchasers that the units would have “spectacular city
views,” the purchasers all signed written agreements that expressly stated that the
views “may change over time.”) (citation omitted); First Data POS v. Willis, 273 Ga.
at 794-796 (2) (Although the purchasers of a business told the sellers that they
intended to increase the size of the business, thereby providing additional revenue to
the sellers, the agreement stated that the purchasers could cease operations of the
business entirely without notice to the sellers.); Raysoni v. Payless Auto Deals, 323
Ga. App. at 586-588 (1), (2), 589 (Although a salesman told a buyer that the car he
was interested in purchasing had not been wrecked, the written sales contract stated
that the car was being sold “AS-IS NO WARRANTY,” that none of the salesman’s
statements were binding on the seller, and that the vehicle had been reported as
damaged at auction.).
26
no cause of action is given in express terms, the injured party may recover for the
breach of such legal duty if he suffers damage thereby.”
Mamilove’s claim under this statute was based upon Legacy’s violations of the
FTC Rules, specifically the FTC’s Disclosure Requirements and Prohibitions
Concerning Franchising, 16 CFR §§ 436.1 - 436.5. Under the FTC Rules,
a franchisor must provide to prospective franchisees a complete and
accurate basic disclosure document containing information relating to
the franchisor and its existing franchisees. 16 CFR §§ 436.2-436.5.[24]
24
The FTC Rules require, inter alia, that franchisors provide prospective
franchisees with a copy of the current franchise circular and agreement “at least 14
calendar-days before the prospective franchisee signs a binding agreement with, or
makes any payment to, the franchisor[.]” 16 CFR § 436.2 (a). The Rules also require
that, if a franchisor provides a prospective franchisee “information about the actual
or potential financial performance of its franchised and/or franchisor-owned outlets,”
there must be “a reasonable basis for the information,” and the information must be
included in the disclosure documents provided at least 14 days before the agreement
is executed. 16 CFR § 436.5 (s). Further, the Rules state as follows:
If the franchisor makes any financial performance representation to
prospective franchisees, the franchisor must have a reasonable basis and
written substantiation for the representation at the time the
representation is made and must state the representation in the Item 19
disclosure. The franchisor must also disclose the following: (i) Whether
the representation is an historic financial performance representation
about the franchise system’s existing outlets, or a subset of those outlets,
or is a forecast of the prospective franchisee’s future financial
performance. . . . (ii) If the representation relates to past performance of
27
A franchisor’s failure to disclose that information is an unfair or
deceptive trade practice that violates § 5 of the Federal Trade
Commission Act (FTCA). 16 CFR § 436.2; 15 USC § 45.
Palermo Gelato v. Pino Gelato, 2013 U. S. Dist. LEXIS 9931 (1), n. 2 (W.D. Penn.
2013).
On appeal, Legacy argues that 15 USC § 45 allows a franchisee, like
Mamilove, to file a complaint with the FTC asserting a franchisor’s alleged violations
of the FTC Rules and that, if Mamilove had done so, the FTC could have filed a
“cause of action” on Mamilove’s behalf. Legacy contends that, because OCGA § 51-
1-6 only applies when a “cause of action” is not available to the injured party, OCGA
§ 51-1-6 does not provide a remedy for Mamilove in this case.25
However, the phrase “cause of action” in the context of OCGA § 51-1-6 refers
to an injured party’s right to bring a private lawsuit. “OCGA § 51-1-6 authorizes a
plaintiff to recover damages for the breach of a legal duty . . . when that duty arises
the franchise system’s existing outlets, the material bases for the
representation[.]
16 CFR § 436.5 (s) (3).
25
Legacy does not dispute that it owed a legal duty to Mamilove under the FTC
Rules.
28
from a statute that does not provide a private cause of action.” (Citation and
punctuation omitted; emphasis supplied.) Pulte Home Corp. v. Simerly, 322 Ga. App.
699, 705 (3) (746 SE2d 173) (2013). The plain language of 15 USC § 45 clearly
shows that the statute does not provide a private cause of action. Instead, the statute
provides that, if the FTC believes that a franchisor has intentionally violated its rules
against unfair or deceptive acts, it will conduct a “hearing.”26 Then, if it finds a
violation, it will issue a cease and desist order.27 If the FTC subsequently finds that
the franchisor has violated the cease and desist order, it may issue, at most, a civil
penalty to be paid to the United States, not to the injured party.28 Thus, there is no
26
See 15 USC § 45 (b) (“Whenever the Commission shall have reason to
believe that any such person, partnership, or corporation has been or is using any . .
. unfair or deceptive act or practice in or affecting commerce, and if it shall appear to
the Commission that a proceeding by it in respect thereof would be to the interest of
the public, it shall issue and serve upon such person, partnership, or corporation a
complaint stating its charges in that respect and containing a notice of a hearing[.] .
. . If upon such hearing the Commission shall be of the opinion that the method of
competition or the act or practice in question is prohibited by this Act, it shall make
a report in writing in which it shall state its findings as to the facts and shall issue and
cause to be served on such person, partnership, or corporation an order requiring such
person, partnership, or corporation to cease and desist from using such method of
competition or such act or practice.”).
27
Id.
28
See 15 USC § 45 (l) (“Any person, partnership, or corporation who violates
an order of the Commission after it has become final, and while such order is in
29
merit to Legacy’s contention that the FTC could have filed a cause of action on behalf
of Mamilove.29
Accordingly, we conclude that Mamilove was entitled to pursue a claim under
OCGA § 51-1-6 based upon Legacy’s violations of the FTC Rules. See Holiday
Hospitality Franchising v. 174 West Street Corp., 2006 U. S. Dist. LEXIS 49177 (III)
(A) (2) (N.D. Ga. 2006).30 It follows that, because there was evidence to support the
effect, shall forfeit and pay to the United States a civil penalty of not more than
$10,000 for each violation, which shall accrue to the United States and may be
recovered in a civil action brought by the Attorney General of the United States.”);
see also 15 USC § 45 (m) (1) (A) (“The Commission may commence a civil action
to recover a civil penalty in a district court of the United States against any person,
partnership, or corporation which violates any rule under this Act respecting unfair
or deceptive acts or practices . . . with actual knowledge or knowledge fairly implied
on the basis of objective circumstances that such act is unfair or deceptive and is
prohibited by such rule. In such action, such person, partnership, or corporation shall
be liable for a civil penalty of not more than $10,000 for each violation.”).
29
Moreover, the federal courts have repeatedly ruled that the FTC’s franchise
disclosure rules, 16 CFR §§ 436.2-436.5, “do not create a private right of action.”
(Citations omitted.) Holiday Hospitality Franchising v. 174 West Street Corp., 2006
U. S. Dist. LEXIS 49177 (III) (A) (2) (N.D. Ga. 2006). See, e.g., Bans Pasta v. Mirko
Franchising, 2014 Dist. LEXIS 19953 (W.D. Va. 2014) (“[N]either the FTC Act nor
[16 CFR § 436.5] gives rise to a private cause of action, and numerous courts have
so held.”); Palermo Gelato v. Pino Gelato, 2013 U. S. Dist. LEXIS 9931 (II) (W.D.
Penn. 2013) (“It is well settled that [16 CFR § 436.5] may only be enforced by the
FTC, and does not create a private cause of action.”) (citations omitted).
30
See generally Pulte Home Corp. v. Simerly, 322 Ga. App. at 705 (3) (This
Court concluded that the duties imposed by Georgia’s water quality statutes and the
30
jury’s verdict against Legacy on that claim, the trial court did not err in denying
Legacy’s motion for a directed verdict thereon.
7. Legacy contends that the trial court erred in denying its motion for a directed
verdict on its counterclaim for breach of contract based upon Mamilove’s failure to
pay royalty and advertising fees to Legacy after the Reymonds discovered Legacy’s
fraud and terminated the franchise agreement in 2010. However, because the jury
found that the franchise agreement was rescinded due to Legacy’s antecedent fraud,
as discussed in Division 4, supra, no contractual fee obligation survived for
Mamilove to breach. See City Dodge v. Gardner, 232 Ga. at 770 (Because the
evidence supported the jury’s conclusion that the entire contract was invalid due to
the defendant’s antecedent fraud, the defendant could not rely on the contract’s
provisions, as they had no legal effect.).
Moreover, even if Mamilove had been obligated to pay such fees to Legacy
after terminating the agreement, Legacy failed to produce any evidence at trial to
federal Clean Water Act, 33 USC prec. §1251 et seq., fall within the ambit of OCGA
§ 51-1-6.); Cardin v. Telfair Acres of Lowndes County, 195 Ga. App. 449, 450 (393
SE2d 731) (1990) (This Court concluded that the regulations of the federal
Occupational and Safety Health Administration constituted an enforceable duty under
the law, and a breach of those regulations was a violation of law. Thus, the
regulations were admissible as evidence of an employer’s legal duty, the violation of
which may give a cause of action under OCGA § 51-1-6.).
31
prove the amount of fees Mamilove failed to pay, instead relying on a purely
speculative estimate of the franchise’s possible revenue for the remainder of the
contract period. “Damages must be proved by evidence which furnishes the jury with
sufficient data to enable them to calculate the amount with reasonable certainty. Proof
of damages cannot be left to speculation, conjecture and guesswork.” (Citation and
punctuation omitted.) Olagbegi v. Hutto, 320 Ga. App. 436, 439-440 (2) (740 SE2d
190) (2013). Accordingly, this alleged error lacks merit.
8. Legacy contends that the trial court erred in denying its motion for a directed
verdict on Melissa Turner’s individual liability for Mamilove’s claims. Because there
was evidence presented at trial to support the jury’s finding on Melissa Turner’s
individual culpability for Mamilove’s claims, and because Legacy has failed to cite
to any evidence or authority to demand a contrary finding, the trial court did not err
in refusing to direct a verdict on this factual issue. See Fertility Technology
Resources v. Lifetek Med., 282 Ga. App. at 149; Rolleston v. Estate of Sims, 253 Ga.
App. at 185 (4); Stubbs v. Harmon, 226 Ga. App. at 632 (1).
9. Legacy contends that the trial court abused its discretion in excluding the tax
returns of one of its other franchisees, JLK, Inc. and JLK Holdings, Inc. The trial
court excluded the evidence after concluding that it constituted hearsay. Legacy has
32
failed to cite to any evidence or authority to show that this conclusion was erroneous
and that, as a result, the court abused its discretion in excluding admissible
evidence.31 Accordingly, this alleged error is deemed abandoned. See Court of
Appeals Rule 25 (c) (2).
10. Legacy contends that the trial court abused its discretion in excluding the
tax returns of a separate business, The Cutting Board, Inc., that was owned solely by
Lorraine Reymond. The trial court excluded the evidence on the basis that it was
irrelevant to the issues presented at trial. Because Legacy failed to tender the evidence
at trial and has not cited to any authority on appeal to support this alleged error, this
argument is deemed abandoned. See Court of Appeals Rule 25 (c) (2).
11. Legacy contends that the trial court abused its discretion in denying its
motion for a new trial.32 According to the motion, Michele Reymond allegedly
committed perjury during the trial when she testified that she did not have an
31
See Carter v. State, 296 Ga. App. 598, 601, n. 7 (675 SE2d 320) (2009) (This
Court reviews a trial court’s ruling on the admission of evidence under an abuse of
discretion standard.).
32
See Hopper v. M&B Builders, 261 Ga. App. 702, 705 (1) (b) (583 SE2d 533)
(2003) (“When a trial judge decides not to grant a new trial, he becomes the trier of
fact, and his discretion in refusing the motion will not be disturbed unless manifestly
abused.”) (footnote omitted).
33
opportunity to review the franchise circular and agreement prior to signing them. In
support of the motion, Legacy claimed that it had a copy of the circular and
agreement on which Reymond had made handwritten notes, thus proving that she had
thoroughly reviewed the documents before signing them.
Under OCGA § 5-5-23, the trial court is authorized to grant a new trial “in any
case where any material evidence, not merely cumulative or impeaching in its
character but relating to new and material facts, is discovered by the applicant after
the rendition of a verdict against him and is brought to the notice of the court within
the time allowed by law for entertaining a motion for a new trial.”
Grants of new trial on the ground of newly discovered evidence are not
favored and are addressed to the sound discretion of the trial court. The
trial court’s decision will not be disturbed absent a manifest abuse of
discretion. To obtain a new trial based on newly discovered evidence,
the evidence supporting the motion must satisfy six criteria: (1) it must
have been discovered after the trial or hearing; (2) its late discovery was
not due to lack of diligence; (3) it is so material that its introduction in
evidence would probably produce a different result; (4) it is not merely
cumulative; (5) the affidavit of the witness must be attached to the
motion (or its absence accounted for); and (6) it does not operate only
to impeach a witness. All six criteria must be satisfied for a new trial to
be warranted.
34
(Footnotes omitted.) Hopper v. M&B Builders, 261 Ga. App. 702, 704 (1) (b) (583
SE2d 533) (2003).
In this case, in arguing that Reymond had lied during her trial testimony as to
when she received the circular and agreement from Legacy, Legacy is relying on
copies of the documents that, by its own admissions, it possessed prior to and during
trial. Thus, the documents are not newly discovered evidence that might, under
certain circumstances, authorize the grant of a new trial. Further, even if the
documents had been newly discovered evidence, their only purpose would be to
impeach Reymond’s testimony as to when she received the documents from Legacy.33
Because even newly discovered evidence that merely serves to impeach a trial
witness’ testimony does not authorize the grant of a new trial under OCGA § 5-5-23,
the trial court did not abuse its discretion in denying Legacy’s motion. Hopper v.
M&B Builders, 261 Ga. App. at 704 (1) (b).
Judgment affirmed. Phipps, C. J., Barnes, P. J., and McFadden, J., concur.
Andrews, P. J., Ray and McMillian, JJ., dissent.
33
See OCGA § 24-6-621 (“A witness may be impeached by disproving the
facts testified to by the witness.”).
35
A14A0718. LEGACY ACADEMY, INC. et al. v. MAMILOVE,
LLC et al.
MCMILLIAN, Judge, concurring in part and dissenting in part.
For the reasons set forth below, I must respectfully dissent to Division 4 and
Division 5 of the majority opinion.
1. Contrary to the majority’s holding in Division 4, Legacy was entitled to a
directed verdict on Mamilove’s claim for rescission of the franchise agreement.
As the majority states, it is undisputed in this case that Michele Reymond and
Lorraine Reymond did not read the franchise agreement prior to signing. Further, as
the majority acknowledges, it is “well-settled law in Georgia that a party who has the
capacity and opportunity to read a written contract cannot afterwards set up fraud in
the procurement of [the contract] based on . . . representations that differ from the
terms of the contract.” (Citation and punctuation omitted.) Novare Group v. Sarif, 290
Ga. 186, 188-189 (2) (718 SE2d 304) (2011). Nevertheless, the majority concludes
that Mamilove is entitled to rescind the franchise agreement despite the Reymonds’
failure to read it because the jury was authorized to find that they were “pressured”
or “rushed” into signing it.
But being pressured or rushed into signing an agreement does not provide a
legal excuse for not reading the agreement. As the Supreme Court also explained in
Novare, “[i]n fact, the only type of fraud that can relieve a party of his obligation to
read a written contract and be bound by its terms is a fraud that prevents the party
from reading the contract. . . . To be able to rescind a contract, the fraud must be of
a nature that the [party seeking to rescind the contract was] deprived of an
opportunity to read the agreements.” (Emphasis supplied.) Id. at 189 (2). In this case,
although the Reymonds set out evidence that the Turners “rushed” or “pressured”
them into signing the agreement “right then” by telling them they would lose the
franchise opportunity if they did not act, they presented no evidence that the Turners
said or did anything that prevented them from reading the agreement before they
signed it. Citizens Bank, Vienna v. Bowen, 169 Ga. App. 896, 897 (1) (315 SE2d 437)
(1984) (the fact that one party was in a “hurry” to have the agreements signed does
not mean the other party was prevented from reading it); see also Tidwell v. Critz, 248
Ga. 201, 203 (1) (282 SE2d 104) (1981) (“threat of losing a job or fear of such loss
2
not duress which will void a contract”); Citicorp Indus. Credit v. Rountree, 185 Ga.
App. 417, 420 (1) (364 SE2d 65) (1987) (“[t]he fact that appellees deemed
themselves too busy to read the . . . agreements prior to signing them will not
authorize them to avoid their obligations”); Bradley v. Swift & Co., 93 Ga. App. 847,
856 (3) (93 SE2d 364) (1956) (being occupied with other business does not mean
party was fraudulently induced to sign).
Thus, Mamilove was bound by the terms of the franchise agreement, which
contained a merger clause and disclaimers1 that it had not received any
1
Paragraph 24.2 of the franchise agreement provides:
No Representations, Warranties or Guarantees. Franchisor expressly
disclaims the making of, and Franchisee and each Owner acknowledge
that it has not received from Franchisor or any party on behalf of
Franchisor, any representation, warranty or guarantee, express or
implied, as to the potential volume, profit, income or success of the
business licensed under this Agreement.
Paragraph 24.7 provides:
No Earnings Claims. Franchisee acknowledges that neither Franchisor,
nor any person on behalf of Franchisor, has made any written, oral or
visual representation of (i) earnings capability of Legacy Academy
Center; (ii) a specific level of potential sales, income, gross or net profit
3
representations concerning potential income or earnings claims prior to signing the
agreement. Accordingly, Mamilove could not rescind the agreement based upon
allegations that they were fraudulently induced to enter into the agreement based on
a false earnings spreadsheet, and the trial court should have granted Legacy’s motion
for directed verdict on this claim. Novare, 290 Ga. at 189 (2) (“[p]urchasers are not
entitled to back out of a written agreement whose terms expressly contradict the oral
representations on which Purchasers claim to have relied.”); Campbell v. Citizens &
Southern Nat. Bank, 202 Ga. App. 639, 640 (1) (415 SE2d 193) (1992) (party not
prevented from reading the contract cannot claim he was fraudulently induced to sign
by promises which contradict the contract terms).
for the Franchisee; or (iii) a specific level of sales, income, gross or net
profits of existing centers (whether franchised or company-owned) other
than as specifically described in the Offering Circular.
The merger clause was contained in paragraph 24.6 and provides:
Entire Agreement. Franchisee acknowledges that this agreement
constitutes the entire agreement of the parties with respect to the matters
contained herein. This Agreement terminates and supersedes any prior
agreement between the parties concerning the same subject matter.
4
2. Because Mamilove was not entitled to rescind the agreement, I also disagree
with the majority’s conclusion in Division 5 that the disclaimers and merger clause
contained in the agreement were ineffectual. In other words, because Mamilove
“[was] not entitled to rescission as a remedy, they are bound by the terms of their
[agreement].” Novare, 290 Ga. at 190 (3). Cf. City Dodge, Inc. v. Gardner, 232 Ga.
766 (208 SE2d 794) (1974). These provisions precluded the Reymonds’ claim that
they reasonably relied on or were deceived by the earnings spreadsheet when they
executed the franchise agreement. Accordingly, the trial court should have granted
Legacy’s motion for directed verdict on Mamilove’s claims for fraud, negligent
misrepresentation, and RICO violations. Novare, 290 Ga. at 190 (3) (“Since
Purchasers are estopped from relying on a representation outside of the agreement,
they cannot sustain any of the causes of action that require justifiable reliance.”);
First Data POS, Inc. v. Willis, 273 Ga. 792, 796 (2) (546 SE2d 781) (2001) (“merger
clause . . . precludes any subsequent claim of deceit based upon pre-contractual
representations.”); W. R. Grace & Co.-Conn. v. Taco Tico Acquisition Corp., 216 Ga.
App. 423, 426 (1) (454 SE2d 789) (1995) (“[t]his [C]ourt has consistently held that
disclaimers in contracts prevent justifiable reliance on other representations
purportedly made by the parties.”).
5
3. Mamilove argues, however, that even if we were to decide that it was not
entitled to rescind the franchise agreement and accordingly it was bound by its terms,
we nevertheless must sustain the jury’s verdict as long as the verdict in its favor on
its other claims remains extant. But as our Supreme Court explained in Georgia
Power Co. v. Busbin, 242 Ga. 612, 616-617 (8) (250 SE2d 442) (1978), “the [general]
verdict2 cannot stand for the reason that this court cannot determine whether the
verdict was entered upon a proper basis.” See also Godwin v. Godwin, 265 Ga. 891,
892 (1) (463 SE2d 685) (1995). Accordingly, I believe that Legacy must be granted
a new trial on its other claims, including their negligence claim under OCGA § 51-1-
6.3
I am authorized to state that Presiding Judge Andrews and Judge Ray join in
this opinion.
2
The verdict form was general as to liability for the claims asserted.
3
I concur with the majority’s conclusion in Division 1 that Legacy waived the
statute of limitation defense as to this claim.
6