Elderberry of Weber City, LLC v. Living Centers - Southeast, In
Filing
AMENDED PUBLISHED AUTHORED OPINION filed. Originating case number: 6:12-cv-00052-NKM-RSB. [999637551]. [13-2176]--[Edited 08/11/2015 by CT]
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-2176
ELDERBERRY OF WEBER CITY, LLC, a Virginia limited liability
company,
Plaintiff - Appellee,
v.
LIVING CENTERS – SOUTHEAST, INCORPORATED, a North Carolina
corporation; FMSC WEBER CITY OPERATING COMPANY, LLC, a
Delaware limited liability company; CONTINIUMCARE OF WEBER
CITY, LLC, a Florida limited liability company; MARINER
HEALTH CARE, INCORPORATED, a Delaware corporation,
Defendants - Appellants.
Appeal from the United States District Court for the Western
District of Virginia, at Lynchburg.
Norman K. Moon, Senior
District Judge. (6:12-cv-00052-NKM-RSB)
Argued:
January 28, 2015
Amended:
Decided:
July 21, 2015
August 10, 2015
Before MOTZ, GREGORY, and WYNN, Circuit Judges.
Affirmed
in
part,
vacated
in
part,
and
remanded
with
instructions by published opinion.
Judge Gregory wrote the
opinion, in which Judge Motz and Judge Wynn joined.
ARGUED: James F. Segroves, HOOPER, LUNDY & BOOKMAN, PC,
Washington, D.C., for Appellants. James Strother Crockett, Jr.,
SPILMAN THOMAS & BATTLE, PLLC, Charleston, West Virginia, for
Appellee.
ON BRIEF: Lori D. Thompson, LECLAIRRYAN, PC,
Roanoke, Virginia,
for
Appellants.
Travis
A.
Knobbe,
M. Mallory Mantiply, SPILMAN THOMAS & BATTLE, PLLC, Roanoke,
Virginia, for Appellee.
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GREGORY, Circuit Judge:
Plaintiff-appellee
Elderberry
of
Weber
City,
LLC
(“Elderberry”) filed this civil action in the Western District
of Virginia alleging breach of a lease for a skilled nursing
facility
against
defendants-appellants
Living
Centers
–
Southeast, Inc. (“Living Centers”), FMSC Weber City Operating
Company,
LLC
(“FMSC”),
(“Continium”),
and
and
breach
defendant-appellant
ContiniumCare
of
Mariner
a
of
guaranty
Health
Care,
Weber
contract
Inc.
City
against
(“Mariner”).
Separately, in the Northern District of Georgia, Mariner filed a
declaratory
judgment
action
against
Elderberry,
seeking
declaration that it had no obligations under the guaranty.
two
actions
Virginia.
were
consolidated
in
the
Western
District
a
The
of
The district court denied the parties’ cross motions
for summary judgment but held that the guaranty was enforceable
against Mariner.
Following a bench trial, the district court
entered judgment in favor of Elderberry on all counts, and found
the
appellants
jointly
and
severally
liable
for
accrued
and
future damages amounting to $2,742,029.50, plus pre- and postjudgment interest at the rate of 0.13%.
court
erred
in
awarding
damages
that
Because the district
accrued
after
the
termination of the lease, we vacate in part and remand for the
district court to recalculate damages for the appropriate time
period.
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I.
At
skilled
the
center
nursing
of
this
facility
lease
located
and
contract
in
Weber
dispute
City,
is
a
Virginia.
Elderberry leased the facility to Living Centers in November
2000 for a 10-year term.
Initially, Living Centers was not
permitted to assign the lease without prior written permission
from Elderberry.
However, in 2006, the lease was amended to
allow Living Centers to assign the lease to FMSC or any of its
subsidiaries
or
affiliates
without
prior
approval
from
Elderberry so long as Living Centers first obtained a guaranty
from Mariner. 1
In accordance with the amendment, the lease reset
for a new 10-year term commencing at the completion of certain
construction and improvements to the facility, and thus a new
lease expiration date was set for April 2017.
The required
guaranty was attached as Exhibit E to the lease amendment, and
was signed by then Executive Vice President and Chief Financial
Officer of Mariner, Boyd P. Gentry.
On January 18, 2007, Living Centers assigned the lease to
FMSC.
2011. 2
FMSC, in turn, reassigned it to Continium in November
In the midst of the assignments and amendments, the
1
Living Centers is a wholly owned subsidiary of Mariner,
while FMSC is 75% owned by Mariner through subsidiaries.
2
Continium is owned and controlled by Avi Klein who was at
the time a manager of FMSC.
3
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facility
was
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subject
to
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numerous
problems,
including
being
listed as a “Special Focus Facility,” 3 nonpayment of utility
vendors, and interruptions of gas and phone service.
Continium
Although
ceased
Elderberry
making
and
rent
payments
Continium
after
thereafter
March
2012.
attempted
to
negotiate rent reductions, Continium indicated in May 2012 that
it
was
no
attempts
to
longer
able
locate
a
to
new
make
rent
tenant
were
payments.
Elderberry’s
initially
unsuccessful
because of, among other problems, the facility’s placement on
the Special Focus Facility list.
Eventually,
(“Smith/Packett”)
Elderberry
to
locate
hired
a
Smith/Packett
new
tenant,
Med-Com,
conduct
negotiations, and provide asset management services.
LLC
lease
The two
entities signed an August 8, 2012 asset management agreement,
under which Elderberry agreed to pay Smith/Packett a $150,000
signing fee for securing a new tenant, a $375,000 value fee on
June 1, 2015, so long as the new tenant was not then in default
under the new lease, and a monthly management fee of 10% of the
new tenant’s rent payable.
Subsequent to signing the asset management agreement, on
August
15,
2015,
Elderberry
sent
3
Living
Centers,
Continium,
Special Focus Facilities are “subject to more frequent
health and safety inspections.” J.A. 781.
4
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Mariner, and their attorneys at the Bernstein Law Firm a letter
demanding
immediate
payment
of
past
due
rent.
The
letter
indicated that if the payments were not made, Elderberry would
“be entitled to proceed with pursuit of its remedies under the
Lease, including, but not limited to, seeking damages in court,
termination
of
Property.”
J.A. 201-02.
were not made.
the
Lease,
and/or
taking
possession
of
the
The requested past due rent payments
Rather, on August 17, 2012, Continium discharged
the remaining residents and abandoned the facility.
On
letter
August
24,
2012,
bearing
the
subject
J.A. 607.
notice
line,
The letter stated:
that
midnight
Elderberry
EST
the
Lease
on
August
is
“LEASE
the
appellants
TERMINATION
a
NOTICE.”
“this letter shall serve as
hereby
24,
mailed
terminated,
2012.
effective
[Elderberry]
12:00
reserves
all
rights and remedies related to Tenant’s default whether under
the Lease, at law or in equity.”
Elderberry
J.A. 607.
rehabilitated
the
nursing
facility
with
Smith/Packett’s help and eventually entered into a new lease
with Nova Healthcare Group, LLC (“Nova”) for a new 10-year term
beginning
January
1,
2013.
During
the
course
of
lease
negotiations, Nova secured from Elderberry a renovation budget
and working capital totaling $1.25 million.
One week after Elderberry sent the termination letter to
the appellants, Mariner filed suit against Elderberry in the
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Northern District of Georgia, seeking a declaration that the
guaranty
breach
was
of
unenforceable.
appellants
lease
in
and
the
Thereafter,
breach
Western
of
contract
District
of
Elderberry
action
filed
against
Virginia.
a
the
Elderberry
sought damages for accrued and future rent, as well as “costs,
fees
and
expenses
rehabilitate
Elderberry
in
replacement
utilities,
the
incurred
by
property;
hiring
tenant;
insurance
Elderberry
fees
and
expended
premiums,
attorney’s fees and expenses.”
and
preserve
expenses
[Smith/Packett]
sums
to
. . .
by
real
J.A. 7.
incurred
to
locate
Elderberry
property
to
taxes;
and
by
a
pay
and
This consolidated civil
action followed.
The parties filed cross motions for summary judgment on
Elderberry’s breach of lease and breach of contract claims, and
on Mariner’s claim that the guaranty issued in connection with
the lease assignments to FMSC and Continium was void under the
Georgia statute of frauds.
Although the district court denied
both summary judgment motions, it held that the guaranty was
valid.
After the subsequent bench trial, the district court
ruled in favor of Elderberry on all claims, and concluded that
Elderberry
is
entitled
to
damages
in
the
amount
of
$2,742,029.50, plus pre- and post-judgment interest at the rate
of 0.13%.
J.A. 803-06.
The damages award includes:
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(1) unpaid rent for the period from April 2012 through
August 2012 . . . ; (2) unpaid rent from the period
September 2012 though February 2013 . . . ; (3) a rent
shortfall
from
March
2013
though
April
2017;
(4) unpaid taxes, utilities, and insurance premiums
for the period from August 2012 through February 2013
. . . ; (5) maintenance fees paid during that same
period . . . ; (6) payments for architectural and
construction services. . . to bring the Facility up to
the fire code standards required by the fire marshal;
(7). . . payments to Nova [for renovations and working
capital]
. . . ;
(8)
[the
signing
fee
to
Smith/Packett] . . . ; and (9) [the value fee to
Smith/Packett].
J.A. 793 (footnote omitted).
The appellants timely appealed.
II.
Our review of a district court’s grant of summary judgment
is de novo.
French v. Assurance Co. of Am., 448 F.3d 693, 700
(4th Cir. 2006).
no
genuine
issue
“Summary judgment is appropriate when there is
of
material
fact
and
the
entitled to judgment as a matter of law.”
moving
Id.
party
is
And, “[w]e
review a district court’s judgment entered after a bench trial
under a ‘mixed standard of review.’
Under this standard, we
review the district court’s findings of fact for clear error and
conclusions of law de novo.”
Perez v. Montaire Farms, Inc., 650
F.3d 350, 363 (4th Cir. 2011) (citation omitted).
the
district
court’s
conclusions
interpretations of written contracts.
7
of
law
Our review of
extends
to
its
See FindWhere Holdings,
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Inc. v. Sys. Env’t Optimization, LLC, 626 F.3d 752, 755 (4th
Cir. 2010).
The appellants make three arguments.
First, they argue
that the district court erred in awarding damages that accrued
after Elderberry terminated the Lease. 4
Second, they contend
that Virginia law precludes awards for speculative damages, and
thus the district court’s inclusion of the $375,000 value fee in
the
damage
challenge
award
the
was
district
erroneous.
court’s
Finally,
legal
the
appellants
conclusion
that
the
guaranty satisfies the Georgia statute of frauds.
III.
The
lease
states,
and
governed by Virginia law.
construe
the
lease.
In
the
parties
agree,
that
it
is
We thus look to Virginia law to
doing
so,
we
consider
categories of damages flowing from the lease:
two
broad
rent, and non-
rent damages.
A.
We first address what portion of accrued or future rent
Elderberry is entitled to receive as part of its damages award.
This Circuit has previously observed that
4
“[Appellants] concede that Living Centers is liable for
unpaid rent for the period from April 2012 though August 24,
2012.” J.A. 794 n.14.
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when a tenant abandons leased property during the
term, the Supreme Court of Appeals of Virginia has
held that the landlord is permitted, at his option,
either (1) to refuse to accept the tenant’s surrender,
do nothing and sue for accrued rents, or (2) to reenter the premises and accept the tenant’s surrender,
thereby terminating the lease and releasing the tenant
from further liability on the lease.
tenBraak v. Waffle Shops, Inc., 542 F.2d 919, 924 (4th Cir.
1976) (footnote omitted) (citing Crowder v. Virginian Bank of
Commerce, 103 S.E. 578 (Va. 1920)).
In other words, when a
tenant abandons a lease, a landlord may sue for rent due on the
balance
of
the
lease
terminate the lease.
term
only
if
the
landlord
does
See id.; Crowder, 103 S.E. at 579.
choice belongs to the landlord.
not
The
Crowder, 103 S.E. at 579 (“The
landlord [is] under no obligation to resume possession of the
premises which ha[ve] been wrongfully abandoned, and ha[s] the
right to refuse such possession and to hold the tenant liable
under the contract.”).
Although Virginia law “thus does not provide for recovery
of
future
damages
for
the
lessor’s
losses
arising
from
the
abandonment of a contract of lease, . . . the parties are not
barred from providing for such a recovery through forfeiture
provisions in the lease.”
tenBraak, 542 F.2d at 924-25.
such provisions “must be strictly construed.”
Id. at 925.
Any
As
the Virginia Supreme Court has stated, “[t]he prevailing rule is
that parties to a contract may provide the remedy that will be
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available to them in case a breach occurs so long as the remedy
provided is not contrary to the law or against public policy.”
Bender-Miller Co. v. Thomwood Farms, Inc., 179 S.E.2d 636, 638
(Va. 1971).
possible
And “the remedy provided will be exclusive of other
remedies
only
where
the
language
employed
in
the
contract clearly shows an intent that the remedy be exclusive.”
Id.
Additionally, “the intent of the parties as expressed in
their
contract
controls,”
and
“[i]t
is
the
court’s
responsibility to determine the intent of the parties from the
language they employ.”
Id. at 639.
Here, the relevant provision of the lease, ¶ 7(3), reads as
follows:
7.
RIGHTS IN DEFAULT.
. . . .
(3) The remedies of the Lessor for any Default
by the Lessee shall include the following:
(a) Upon any Default by the Lessee and at
any time thereafter, the Lessor may give written
notice to the Lessee that the Lessor elects to
terminate this Lease upon a specific date not less
than thirty (30) days after mailing of such notice.
This Lease shall then be terminated on the date so
specified.
(b) Upon an uncured Default by the Lessee,
and notice from the Lessor, the Lessor may reenter and
resume possession of the Property. The Lessor, at the
Lessor’s option, may remove persons and property from
the Property and may store the property in a public
warehouse or elsewhere at the expense or for the
account of the Lessee without liability for any damage
on such removal.
The Lessor’s reentry shall not be
deemed either an acceptance or a surrender of this
Lease or a termination thereof.
It is expressly
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understood and agreed that in the event of the reentry
by the Lessor by reason of a default of the Lessee,
the Lessee shall nevertheless remain liable for the
Rent and also for the taxes and insurance premiums
payable by the Lessee as provided in this Lease, for
the balance of the term herein originally demised.
. . . .
(d) The rights given to the Lessor herein
are in addition to any rights which may be given to
the Lessor by statute or otherwise.
J.A. 172.
Elderberry urges us to conclude that its rights under
the above provision are cumulative and that it thus had the
right to simultaneously (1) reenter and relet the facility, and
(2) terminate the lease and seek from the appellants rent due
for the balance of the term.
provides
“shall
that
Elderberry’s
include
the
To be sure, the above excerpt
rights
following.”
in
Id.
the
event
There
of
is
a
no
default
language
suggesting that Elderberry must choose either to terminate the
lease as provided by ¶ 7(3)(a), or to reenter the premises and
hold
the
tenant
liable
provided by ¶ 7(3)(b).
for
future
rent
and
other
fees
as
Nor are the various subparagraphs under
lease ¶ 7 separated by the disjunctive word “or.”
That
convincing.
said,
Elderberry’s
reading
of
the
lease
is
not
First, remedy provisions providing for future rent
“must be strictly construed.”
tenBraak, 542 F.2d at 925.
And
in construing remedy provisions, courts must have “due regard
for the rule that [the lease] must be construed most strongly
against the lessor.”
Va. Lumber & Extract Co. v. O.D. McHenry
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Lumber Co., 94 S.E. 173, 174 (Va. 1917).
Here, ¶ 7(3) of the
lease does not affirmatively state that the remedial provisions
are cumulative.
Rather, ¶ 7(3)(b) explicitly provides:
“The
Lessor’s reentry shall not be deemed . . . a termination” of the
lease.
J.A. 172 (emphasis supplied).
¶ 7(3)(b),
“in
the
event
of
the
And it is only under
reentry,”
remains liable for future rent and fees.
that
the
lessee
This language puts
¶ 7(3)(a) and ¶ 7(3)(b) in tension with one another.
¶ 7(3)(a)
explicitly
explicitly
leaves
terminates
the
terms
of
the
lease
the
contract,
lease
Whereas
¶ 7(3)(b)
contract
and
possibility of receiving future rent and fees in place.
the
It does
not make sense to allow simultaneously the termination of the
lease
and
continued
application
of
the
lease.
The
better
reading, and the one we adopt here, is that upon exercising its
right to terminate the lease, Elderberry extinguished any right
that it had to future rent.
Elderberry argues that we should follow the Virginia rule
that
a
remedy
provided
for
breach
of
a
contract
“will
be
exclusive of other possible remedies only where the language
employed in the contract clearly shows an intent that the remedy
be exclusive.”
Bender-Miller, 179 S.E.2d at 638.
its
Elderberry
argument,
focuses
on
whether
In advancing
the
provided within the lease are exclusive of one another.
remedies
Bender-
Miller, by contrast, focuses on whether the remedies provided in
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a contract are exclusive of extra-contractual remedies.
In that
case, the Virginia Supreme Court addressed whether the parties
“intended by virtue of” a certain contract provision “that the
remedy provided therein be exclusive of other remedies allowed
by law.”
Id. at 639 (emphasis added); see also Va. Dynamics Co.
v. Payne, 421 S.E.2d 421, 423 (Va. 1992) (observing that even if
a
lessor
lessor’s
could
“contract[]
statutorily
away”
created
a
right
statutory
. . .
would
right,
have
“the
to
be
expressly waived”); Atlas Mach. & Iron Works, Inc. v. Bethlehem
Steel
Corp.,
bankruptcy
986
F.2d
709,
a
remedy
to
as
713
a
(4th
breach
Cir.
of
1993)
(permitting
contract
where
the
contract did not explicitly state that the remedy stated therein
was exclusive).
there
rights
is
a
Our reading of Virginia case law suggests that
presumption
absent
a
clear
against
waiver
excluding
of
such
statutory
rights,
or
and
legal
our
construction of the lease here comports with that presumption.
Although our reading of the lease proscribes the collection of
future rent and other fees in the event of termination, it does
not proscribe the pursuit of any rights that Elderberry might
have outside of those provided in the lease itself.
Indeed, as
quoted above, ¶ 7(3)(d) provides that “[t]he rights given to the
Lessor herein are in addition to any rights which may be given
to the Lessor by statute or otherwise.”
13
J.A. 172.
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In light of the foregoing, we hold that Elderberry lost its
right to rent that accrued after it terminated the lease on
August 24, 2012.
Elderberry is, however, entitled to any rent
that accrued prior to termination of the lease.
B.
We
turn
next
to
non-rent
damages.
A
landlord
may,
as
Elderberry does here, seek compensation for a tenant’s failure
to return a leased facility in the required condition.
See,
e.g., Sharlin v. Neighborhood Theatre Inc., 167 S.E.2d 334 (Va.
1969).
And the Supreme Court of Virginia long ago stated that
when an action for breach of lease covenant “is brought after
the end of the term, the measure of damages is still held to be
such a sum as will put the premises in the condition in which
the tenant is bound to leave them.”
Vaughan v. Mayo Milling
Co., 102 S.E. 597, 601 (Va. 1920) (quoting Watriss v. First
Nat’l Bank of Cambridge, 130 Mass. 343, 345 (1879)).
“[T]his is
true even if the repairs have not been made by the landlord.”
Sharlin, 167 S.E.2d at 338 (citing Vaughan, 102 S.E. at 602).
Virginia’s rule is in line with the general rule that
where a lease contains a provision or option giving
the right or privilege of cancellation and the
agreement is canceled in pursuance of the right or
privilege thus given, such cancellation does not
extinguish liabilities that have already accrued under
the lease, regardless of whether the liability is that
of the party who exercised the option to cancel the
agreement or is the liability of the party against
whom cancellation was made.
Such cancellation of the
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lease does, however, terminate liabilities to accrue
in the future, such as rent, except where by express
provision in the lease termination is not to affect
the accrual of such liabilities.
49
Am.
Jur.
2d
Landlord
(footnote omitted).
and
Tenant
§ 204
(emphasis
added)
Accordingly, upon termination of a lease, a
landlord is entitled to recover liabilities accrued up to the
point of termination.
Aside from rent payments, the lease here includes covenants
requiring the lessee to pay for utility services, sales and use
taxes, general real estate taxes and special assessments, and
insurance premiums.
See J.A. 165 (Lease ¶ 3).
Moreover, the
lease provides:
Lessee will keep the Property and any and all
buildings and improvements (including inside and
outside) which are now or may be erected or placed on
said Property, in good order and repair subject to
reasonable wear and tear at its sole cost and expense.
All repairs and replacements shall be in quality and
class at least equal to the original work.
Lessee
will pay when due all costs associated with any such
repairs, replacements or other work undertaken by it,
and
will
not
suffer
any
mechanic’s
and/or
materialmen’s liens to be maintained against the
Property.
J.A. 166 (Lease ¶ 4(2)).
The lease additionally requires that
the premises be returned to Elderberry “in the same condition as
when demised to the Lessee, reasonable wear and tear and damage
by fire or other casualty insured against being excepted.”
167 (Lease ¶ 4(5)).
“will
comply
with
J.A.
Another provision states that the lessee
all
lawful
requirements
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of
the
Board
of
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Health, Police Department, Fire Department, Municipal, State and
Federal authorities.”
J.A. 167 (Lease ¶ 4(6)).
Each of these
covenants serves as a source of damages that potentially accrued
prior to the termination of the lease.
Indeed, the district
court relied on these provisions in determining several portions
of the damages award.
Curiously, the appellants do not directly address whether
they challenge the district court’s inclusion of utility fees,
maintenance
fees,
and
the
like
in
the
damages
award.
They
merely ask this Court to reduce the judgment to $220,576.94, the
amount of unpaid rent that accrued prior to the termination of
the lease.
While this request could be seen as an indirect
challenge to the award of damages flowing from their breach of
the
covenants
listed
above
and
their
failure
to
return
the
nursing facility in the required conditions, the appellants did
not set forth arguments challenging the district court’s factual
findings
damages.
or
legal
conclusions
concerning
accrued
non-rent
They have thus waived any argument with respect to
those non-rent damages that accrued prior to termination of the
lease.
See Carter v. Lee, 283 F.3d 240, 252 n.11 (4th Cir.
2002) (“[T]his Court normally views contentions not raised in an
opening brief to be waived.”).
In
light
of
the
foregoing,
we
hold
that
Elderberry
is
entitled to non-rent damages that accrued prior to termination
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of the lease.
court
to
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We therefore remand this case for the district
recalculate
rent
and
non-rent
damages
that
accrued
prior to August 24, 2012. 5
IV.
The
finding
frauds. 6
appellants
that
the
argue
guaranty
that
the
satisfies
district
the
court
Georgia
erred
in
statute
of
Under Georgia law, “[t]he statute of frauds requires
5
Because damages are restricted to those accruing prior to
termination of the lease, we need not address the appellants’
contention that the Smith/Packett $375,000 value fee is
speculative.
By its terms, that payment necessarily accrued
after termination of the lease and therefore cannot be part of
the damages award.
Indeed, Elderberry itself categorizes the
value fee as future damages. See Resp. Br. of Appellee 25 n.9.
6
The choice of law provision in the guaranty at issue here
is blank.
Because we are exercising diversity jurisdiction in
this case, we must apply the choice of law principles of the
state in which the case was filed. Klaxon Co. v. Stentor Elec.
Mfg. Co., 313 U.S. 487, 496-97 (1941).
While Mariner’s
declaratory judgment claims regarding the guaranty were filed in
the Northern District of Georgia, those claims were transferred
to the Western District of Virginia, and Elderberry’s claims
concerning the guaranty were also filed in Virginia.
We need
not concern ourselves with whether Virginia or Georgia choice of
law rules apply, because under either analysis, we would
conclude that Georgia law applies.
This is because each state
applies the rule of lex loci contractus.
See Seabulk Offshore
Ltd. v. Am. Home Assurance Co., 377 F.3d 408, 419 (4th Cir.
2004) (observing that in Virginia, questions of “interpretation
of a contract are resolved according to the law of the state
where the contract was made”); Ferrero v. Associated Materials
Inc., 923 F.2d 1441, 1444 (11th Cir. 1991) (“[T]he Georgia
conflict of laws rule for contracts . . . is lex loci
contractus.”).
And the final act necessary to effectuate the
guaranty under either state’s law, the signature by Mariner’s
(Continued)
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that a promise to answer for another’s debt, to be binding on
the promisor, ‘must be in writing and signed by the party to be
charged therewith.’”
John Deere Co. v. Haralson, 599 S.E.2d
164, 166 (Ga. 2004) (citation omitted).
“This requirement has
been interpreted to mandate further that a guaranty identify the
debt, the principal debtor, the promisor, and the promisee.”
Id.; see also Lafarge Bldg. Materials, Inc. v. Thompson, 763
S.E.2d 444, 445 (Ga. 2014).
The guaranty here identifies and is
signed by the promisor:
Mariner.
appellants,
includes
the
guaranty
However, as noted by the
several
blanks
where
the
parties were to have identified the landlord, original tenant,
tenant, and the lease:
FOR VALUE RECEIVED, and in connection with the
assignment and transfer of the rights of tenant under
a certain Lease agreement, dated [_________], between
[LANDLORD]
(“Landlord”)
and
[TENANT]
(“Original
Tenant”), as the same was assigned by Original Tenant
to [NEW TENANT] (“Tenant”), pursuant to an Assumption
and Assignment Agreement, dated [__________] (as
further amended, modified or assigned, the “Lease”),
covering certain premises known as [FACILITY NAME AND
ADDRESS], Mariner Health Care, Inc., a Delaware
representative, took place in Georgia.
See Seabulk Offshore,
Ltd., 377 F.3d at 419 (“Under Virginia law, a contract is made
when the last act to complete it is performed.”); Christian v.
Bullock, 205 S.E.2d 635, 638 (Va. 1974) (applying law of state
in which contract was executed); Gen. Tel. Co. of the Se. v.
Trimm, 311 S.E.2d 460, 461 (Ga. 1984) (“In order to determine
where a contract was made, the court must determine where the
last act essential to the completion of the contract was
done.”). Neither party disputes the application of Georgia law.
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corporation, the undersigned (hereinafter referred to
as “Guarantor,” whether one or more) hereby guarantees
unto Landlord the full and prompt payment of the rent
and all other sums and charges payable by Tenant under
the Lease (hereafter collectively referred to as
“Obligations”).
Guarantor hereby covenants that if
Tenant shall default in the payment of any of the
Obligations, Guarantor shall pay the amount due to
Landlord.
J.A. 196 (emphasis and blanks in original).
thus
whether
the
guaranty
nonetheless
The question is
sufficiently
identifies
the debt, principal debtor, and promisee.
The Supreme Court of Georgia’s recent decision in Lafarge
Building Materials examined a situation in which a guaranty was
“set off in a box at the bottom of the second page” of a credit
application.
763 S.E.2d at 445.
The guaranty identified the
principal debtor simply as “the Applicant identified on page 1
of this Application for Credit.”
incorporated
reversing
the
the
guaranty
did
Supreme
Court
credit
Georgia
not
read
application
Court
satisfy
the
Id.
of
the
The guaranty, however,
by
reference.
Appeals’
statue
guaranty
“in
of
Id.
conclusion
frauds,
that
the
conjunction
In
the
Georgia
with
the
incorporated application, and with the word ‘applicant’ bearing
its usual and common meaning.”
Id. at 447.
While the court
noted that “the better practice for lenders—the approach that
can forestall extended litigation like this case—is to simply
name the principal debtor directly in the guaranty,” the court
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nonetheless concluded that the guaranty satisfied the statute of
frauds.
Id.
In addition to approving the use of incorporated documents
to sufficiently identify the terms of a guaranty, id. at 447,
the Georgia Supreme Court has also recognized that § 24-3-3(a)
of the Georgia code 7 “authorizes the use of contemporaneously
executed writings to provide necessary terms not contained in
the
document
at
issue,
document at issue.”
Warm
Springs,
description
property;
to
S.E.2d
executed
missing
establish
correct
obvious
errors
in
the
White House Inn & Suites, Inc. v. City of
676
contemporaneously
or
179
document
from
a
the
178,
contract
terms
of
a
can
(Ga.
2009)
provide
for
the
a
property
sale
purportedly
(“[A]
of
vague
real
option
agreement; establish and correct a misnomer; correct an ‘obvious
error’;
or
conditional.”
establish
that
(citations
the
acceptance
omitted)).
In
of
an
offer
discussing
was
the
contemporaneous writings rule, the White House Inn court cited
with approval C.L.D.F., Inc. v. The Aramore, LLC, 659 S.E.2d 695
(Ga. Ct. App. 2008).
Id.
There, the Georgia Court of Appeals
construed a lease and guaranty together to correct a scrivener’s
error where “the Lease and the Guaranty were executed on the
same date, at the same time, and at the same location” and
7
Formerly Ga. Code Ann. § 24-6-3.
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“[t]he Guaranty was physically attached to the Lease and was
identified as a ‘special provision[] . . . attached . . . as
[an] exhibit and . . . made a part of th[e] Lease.’”
C.L.D.F.,
Inc., 659 S.E.2d at 696.
These
cases
and
Georgia’s
contemporaneous
writings
rule
suggest that omitting a required name or piece of information
from a guaranty does not render the guaranty unenforceable if
the omitted name or information can be readily ascertained when
the guaranty is read in conjunction with documents incorporated
by
reference,
or
with
documents
physically
attached
contemporaneously executed with the guaranty.
to
and
The guaranty in
this case, though containing a significant number of blanks, is
attached as Exhibit E to the lease amendment.
Thus, we can
construe the guaranty together with the lease amendment.
the
lease
amendment,
the
parties
agreed
that
Living
And in
Centers
would be permitted to assign the lease to “Family Senior Care
Holdings LLC or any of its subsidiaries or affiliates” without
prior
agreed
written
to
permission
guarantee
the
from
Elderberry
lessee’s
so
long
obligations.
as
Mariner
J.A.
180.
Reading the blanks in the guaranty together with the lease and
the lease amendment, and giving the terms landlord, original
tenant, and tenant their usual and common meanings, the guaranty
sufficiently identifies Elderberry as the landlord and Living
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Centers as the original tenant. 8
See Lafarge Bldg. Materials,
763 S.E.2d at 447.
However, the blank in the guaranty representing the tenant
(i.e.,
principal
debtor)
is
not
filled
in
with
a
specific
entity, but rather with the descriptive phrase “Family Senior
Care Holdings LLC or any of its subsidiaries or affiliates.”
Because the phrase “Family Senior Care Holdings LLC or any of
its subsidiaries or affiliates” is, on its face, susceptible to
more than one meaning, we find it to be ambiguous.
v.
Weil,
contract
569
515,
defined
is
S.E.2d
as
516
(Ga.
2002)
duplicity,
See Horwitz
(“Ambiguity
indistinctness
in
or
a
an
uncertainty of meaning or expression.”).
And under Georgia law,
we
evidence
are
permitted
ambiguities
Verifone,
in
Inc.,
to
consult
parol
descriptions.”
614
S.E.2d
L.
841,
Henry
844
(Ga.
“to
Enters.,
Ct.
explain
Ltd.
App.
v.
2005)
(“[W]hile the Statute of Frauds prohibits using parol evidence
to supply completely missing terms, it does not prohibit using
parol evidence to explain ambiguities in descriptions.”).
8
We find it noteworthy that the appellants “volunteered or
offered to provide a guaranty of Mariner Health” and wanted to
“add that to the amendment in order to procure [Elderberry’s]
agreement to the assignment.”
J.A. 660; see also J.A. 663 (“A
guaranty was offered by Mr. Gentry.”). Not only that, but there
is uncontradicted testimony in the record that the guaranty was
actually “provided by Mr. Gentry” of Living Centers as part of
the lease amendment negotiations. J.A. 663.
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Using the parol evidence rule here to consult extrinsic
evidence, it is clear that the principal debtor at the relevant
time was Continium.
FMSC,
evidenced
Living Centers first assigned the lease to
by
Assumption Agreement.”
a
document
J.A. 203.
entitled
“Assignment
and
A document cited and quoted
by the district court entitled “Assignment and Assumption of
Contracts” then demonstrates that FMSC assigned the lease to
Continium on November 1, 2011. 9
Elderberry of Weber City, LLC v.
Living Centers-Se., Inc., 958 F. Supp. 2d 623, 633 (W.D. Va.
2013).
As
shown
above,
Continium
stopped
paying
rent
after
March 2012 until Elderberry terminated the lease on August 24,
2012.
was
These are the relevant rent payments for which Continium
the
principal
debtor
and
for
which
Mariner
guaranteed.
Indeed, a September 9, 2011 letter sent to Elderberry by the
appellants’ attorneys reflects exactly that understanding.
See
J.A. 199 (“Notwithstanding this proposed assignment [from FMSC
to Continium], it is intended that the Mariner Health Care, Inc.
Lease Guaranty executed in conjunction with the First Amendment
to the Lease Agreement dated June 19, 2006, shall remain in full
9
We note that the parol evidence rule, unlike the
contemporaneous writings rule, does not require the extrinsic
evidence to have been prepared at the same time.
See, e.g.,
McKinley v. Coliseum Health Grp., LLC, 708 S.E.2d 682, 684–85
(Ga. Ct. App. 2011) (affirming the trial judge’s use of parol
evidence to grant summary judgment where parol evidence
consisted of deposition testimony taken subsequent to the
execution of the contract).
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effect
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to
guaranty
Pg: 24 of 24
the
obligations
of
assignee
Continium[].”).
Given the Georgia Supreme Court’s most recent pronouncement
on that state’s statute of frauds, combined with Georgia’s parol
evidence rule, we hold that the guaranty satisfies the Georgia
statue of frauds.
V.
For the foregoing reasons, the judgment of the district
court is
AFFIRMED IN PART, VACATED IN PART,
AND REMANDED WITH INSTRUCTIONS.
24
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