Roca Properties, LLC v. Dance Hotlanta, Inc.
327 Ga. App. 700
| Ga. Ct. App. | 2014Background
- Seller Nancy Senner (via Hotlanta Dance Challenge/HDC) sold the Hotlanta Dance Challenge assets and her personal goodwill to Roca Properties for $400,000 (half paid at closing, two $100,000 notes and personal guaranties for the balance).
- Negotiations produced disputed handwritten financial notes from Senner and a 7,195 paid-entries figure for 2009; Roca later learned the 7,195 included entries from an amateur event called the Rising Star Ball.
- The Purchase Agreement and Goodwill Agreement did not expressly mention the Rising Star Ball; the contract required efforts to obtain a noncompete/release from Ares (the Rising Star founder).
- After closing, Ares executed a separate Noncompete Agreement under which he received interests in the Rising Star Ball; Ares thereafter ran a separate amateur circuit (American Dance Classic).
- Roca ran Hotlanta in 2010–2011, lost money, defaulted on the notes, then rescinded the notes claiming fraudulent inducement based on (1) the inflated 2009 entries number and (2) allegedly misleading handwritten financial figures. HDC sued to collect; Roca counterclaimed.
- Trial court granted summary judgment to HDC on notes, guaranties, attorney fees, and on Roca’s counterclaims; the appellate court vacated and remanded, finding genuine factual disputes.
Issues
| Issue | Plaintiff's Argument (HDC/Senner) | Defendant's Argument (Roca) | Held |
|---|---|---|---|
| Whether Roca was fraudulently induced to sign notes/guaranties based on 2009 entries | Senner argues the entry figure was not misleading because Rising Star was not a separate event or, even if separate, Roca acquired the right to host an amateur event | Roca says the 7,195 figure deceptively combined Hotlanta and Rising Star entries; Rising Star was a separate event retained by Ares, so the figure misrepresented Hotlanta’s size | Reversed summary judgment: factual disputes exist about whether Rising Star was separate and whether Roca acquired rights to it, so a jury could find misrepresentation |
| Whether Senner’s handwritten financial notes were actionable misrepresentations (vs. projections) | Senner contends the notes were undated projections of future revenues/expenses and thus nonactionable predictions | Roca contends the notes were presented as 2009 financial figures (2009 tax return unavailable at the time) and were relied on in deciding to buy | Reversed: conflicting evidence about the intended purpose of the notes and Roca’s reliance creates a triable issue |
| Whether Roca actually relied on alleged misrepresentations | HDC argues there is no evidence of actual reliance on the notes or entries figure | Roca points to deposition testimony and affidavits that the notes and entry numbers formed the basis of their purchase decision | Reversed: evidence of reliance (affidavits, deposition testimony) makes reliance a jury issue |
| Whether summary judgment on attorney fees and all counterclaims was proper | HDC asserted same grounds for summary judgment as to fees and counterclaims | Roca maintained its counterclaims (fraud, breach of warranties, indemnification, punitive damages) survive given the factual disputes | Reversed: because primary summary judgment was improper, related fee and counterclaim rulings are vacated and remanded |
Key Cases Cited
- Bonner v. Southern Restaurant Group, 271 Ga. App. 497 (sets summary judgment de novo standard and view of facts for nonmovant)
- Lovell v. Ga. Trust Bank, 318 Ga. App. 860 (prima facie collection on note requires signed note and default)
- Speir v. Nicholson, 202 Ga. App. 405 (note-collection principles)
- Jocelyn Canyon, Inc. v. Lentjes, 292 Ga. App. 608 (fraud in inducement as a defense to note enforcement)
- Big Sandy Partnership v. Branch Banking & Trust Co., 313 Ga. App. 871 (burden shifts to debtor to produce affirmative defenses after creditor’s prima facie case)
- Greenwald v. Odom, 314 Ga. App. 46 (opinions/predictions about future events not actionable fraud)
- Municipal Elec. Auth. of Ga. v. Gold-Arrow Farms, Inc., 276 Ga. App. 862 (parol evidence admissible to resolve ambiguities in contract)