Facts
- Dolores Moreno owned a residential property in Gwinnett County, Georgia.
- In 2004, Dolores acquired the property.
- In 2007, Dolores conveyed a one-half interest in the property to her daughter, Gina Moreno, as a gift.
- Around the same time, Dolores and Gina signed a document that, on its face, purported to be a contract under which Dolores would sell her remaining one-half interest to Gina for $75,000, to be paid in $400 monthly installments.
- Gina contended she signed the document only so Dolores could show she had an income-generating property interest, and that both women understood Gina was not actually expected to pay.
- Gina submitted sworn testimony that Dolores repeatedly said Gina did not have to pay anything for the remaining interest.
- Over the next six years, Gina made no payments to Dolores.
- Dolores sued Gina for breach of contract and also sought an equitable accounting between tenants in common regarding the property.
- While the litigation was pending, Dolores died. Michael T. Smith, as temporary administrator of Dolores’s estate, was substituted as plaintiff, and the case proceeded in that posture.
- On the estate’s motion, the trial court granted partial summary judgment on the breach-of-contract claim, treating the signed writing as conclusive and ruling that the parol evidence rule barred Gina’s evidence about the parties’ intent.
- After a bench trial on remedies, the trial court awarded contract damages and also awarded fair market rent as an equitable adjustment in the tenants-in-common accounting.
- Gina appealed to the Supreme Court of Georgia.
Issues
- Whether the trial court erred by granting partial summary judgment on breach of contract when Gina presented sworn evidence that the parties did not mutually assent to be bound by the signed writing.
- Whether the parol evidence rule barred Gina’s testimony offered to show the writing was a sham and that no enforceable contract was formed.
- Whether the trial court’s damages award and equitable rent/accounting relief could stand when contract formation remained in dispute.
Decision
- The Supreme Court of Georgia reversed the grant of partial summary judgment on the breach-of-contract claim.
- The Court held that Gina’s evidence created a genuine issue of material fact about mutual assent and whether the parties intended the writing to be binding.
- The Court held the parol evidence rule did not bar evidence offered to show that no contract was formed (including evidence that a signed writing was not meant to have legal effect).
- Because the remedies were premised on the existence of an enforceable contract, the Court reversed the contract-damages award, vacated the equitable accounting/fair-market-rent relief, and remanded for further proceedings.
Legal Principles
- A binding contract requires mutual assent; an agreement exists only when the parties’ minds meet on the same subject matter and in the same sense.
- Georgia applies an objective approach to assent: a party’s intent is measured by the meaning a reasonable person in the other party’s position would give to the party’s words and conduct in context, or the meaning the other party knew the party attributed to those manifestations.
- The parol evidence rule generally prevents extrinsic evidence from varying or contradicting the terms of a valid, integrated written contract.
- The parol evidence rule does not exclude extrinsic evidence offered to show that a purported contract never came into existence—such as evidence that a facially complete writing was a sham and not intended to be binding.
- Summary judgment is improper when admissible evidence creates a genuine dispute of material fact on contract formation, including whether the parties intended a signed writing to have binding effect.
- When liability for breach of contract is not established as a matter of law, awards of contract damages and related equitable adjustments dependent on that liability cannot stand.
Conclusion
Because Gina presented sworn evidence that the parties signed the document only for appearances and did not intend it to create an enforceable payment obligation, the existence of mutual assent was a fact question for trial; the Supreme Court of Georgia therefore reversed summary judgment on breach of contract, set aside the associated damages and equitable rent/accounting relief, and remanded for further proceedings.