Opinion
40352.
DECIDED OCTOBER 2, 1963.
Damages, etc. Fulton Civil Court. Before Judge Camp.
Edenfield, Heyman Sizemore, Maurice N. Maloof, for plaintiff in error.
Wotton, Long, Jones Read, Calhoun A. Long, contra.
1. (a) A prior representation of one of two contracting parties cannot be relied upon by the other to vary or add to the terms of the written contract, especially where it contains an express provision that no representation not included therein shall have any force or effect.
(b) Prior misrepresentations of one of the contracting parties, to be the basis of an independent action in tort, must have been knowingly and falsely uttered for the purpose of inducing the other to enter into the contract, and the other must have relied upon and acted on them to his own injury as a result of the fraud perpetrated upon him.
(c) Allegations of this petition as to representations of the opposite contracting party, not contained in the contract and not fraudulently made, must be ignored in determining whether a right of action for damages is set forth as the result of the termination of a lease agreement.
2. Where a lease contains a provision merely to the effect that it is contingent on the understanding that beer is not to be sold on adjacent premises, and that if such condition is not met the lease agreement shall be null and void, such provision is a condition subsequent or defeasance clause, and its occurrence will operate to terminate the lease. It does not constitute a covenant that the lessor will under all circumstances restrain the lessee of the adjacent premises from selling beer, nor does it stipulate any penalty, other than termination, upon the occurrence of the contingency. No cause of action is set out for a breach of contract where the plaintiff lessee alleges merely that under an agreement that the lease should become null and void if beer was sold on adjacent premises, the lessee terminated the lease after the happening of this event.
DECIDED OCTOBER 2, 1963.
N. R. Berry filed an action for damages against American Service Company in the Civil Court of Fulton County. The petition as amended alleges that the parties entered into a three year lease with a 10 year renewal option for certain property which the defendant lessor had acquired by lease from Whitaker, for use as a food and beer establishment; that Whitaker owned adjacent property which he had leased to a person named Schaeffer; that the defendant represented to the plaintiff that its own lease contract with Whitaker contained a provision to the effect that the Schaeffer property could not be used for the sale of beer, and that the defendant would not allow beer to be sold on that property; that pursuant to the lease agreement and the reassurance of the defendant that beer would not be sold in the adjoining store, plaintiff remodeled the leased premises at an expense of $2,248.77; obtained a beer license at a cost of $213.50, and installed equipment therein which suffered a depreciation of $4,810.48 at the time of bringing this action. These sums are claimed as damages by reason of the following facts: at the time the lease was entered into, and forming a part thereof, lessor gave lessee a letter which read, "It is understood and agreed that the lease contract between American Service Company and N. R. Berry is contingent on your ability to secure a beer license to operate at 1801 Perry Boulevard, N.W. and on the understanding that the operators of the store located immediately east of 1801 Perry Boulevard not engaging in the sale of beer. In the event either of these two conditions are not met as set forth above, then the lease agreement dated April 24, 1962 is null and void."
After the lessee had occupied the premises for approximately six weeks the Schaeffer establishment commenced selling beer, which decreased the lessee's sales. Lessee then notified the defendant that unless the store discontinued such sales he would treat his lease as void. Schaeffer continued to sell beer; the plaintiff moved out, closed his business, and brought this action for damages for improvements to the property, the cost of the beer license, and the decrease in market value of his equipment. A general demurrer to the petition was overruled, and the defendant excepts.
1. The lease contains a provision as follows: "The lease contains the entire agreement of the parties, and no representation, inducements, promises or agreements between the parties not embodied herein shall be of any force or effect." If this provision is given effect, as it must be for any action on a breach of contract, no warranty or representation made by the defendant's agent but not embodied in the contract can be relied upon; the right of action, if it exists, must exist within the contract itself without regard to any prior representations or commitments of either party. Shinall Brothers v. Skelton, 28 Ga. App. 527 ( 112 S.E. 163); Georgia Agricultural Works v. Price, 11 Ga. App. 80, 83 ( 74 S.E. 718). Where all the elements of an action for deceit are present, where one party is induced to enter into a contract because of false misrepresentations by the opposite party, he ordinarily may at his election either rescind the contract and base his right of action on the fraudulent inducement, or he may affirm the contract and seek damages thereunder. If he affirms the contract he is of course bound by the stipulation in the contract that he has not entered into it on the representations of the opposite party; if he rescinds he is not bound by this agreement, which, being a part of the contract fraudulently procured, falls with it, but he must allege all the elements of an action for deceit: that the representations were made by the defendant knowingly falsely and with the intent of deceiving, and that the plaintiff relied thereon to his injury. Brown v. Ragsdale Motor Co., 65 Ga. App. 727 ( 16 S.E.2d 176); Hewlett v. Moore, 102 Ga. App. 506 ( 116 S.E.2d 660). There is no allegation here that the representations were known by the defendant to be untrue when made, or that they were made with the intent of deceiving the plaintiff and fraudulently inducing him to enter into the contract. No cause of action based on this theory is set forth, from which it follows that the allegations as to the prior representations of the defendant regarding the adjoining property are mere surplusage and must be ignored.
2. There remains the question of whether the petition sets out a right of action for breach of some provision of the lease contract, and for this purpose, without deciding the question of whether the letter delivered by the defendant to the plaintiff simultaneously with it is in fact a part of the lease, we will consider it as being so for the purpose of this discussion. The lease without consideration of the letter contains no covenant concerning freedom from competition and no reference to the adjoining property. The letter makes the lease contingent on two outside events: the plaintiff procuring a beer license, and beer not being sold on the adjoining Schaeffer premises. It then states, "In the event either of these two conditions are not met as set forth above, then the lease agreement dated April 24, 1962, is null and void." Thus, the clear language of the letter itself does not refer to these events as obligations, covenants, warranties, or agreements, but as contingencies and conditions. The effect of the occurrence of a condition subsequent, when the contract so clearly states, is to work a defeasance; in other words, the event in and of itself acts as a termination of the lease agreement under its own terms, in the absence of a waiver of such provision by the parties. Reid v. Fain, 134 Ga. 508 (1) ( 68 S.E. 97); Standard Oil Co. of Ky. v. Mansfield, 97 Ga. App. 82 ( 102 S.E.2d 85). Thereafter, whether the act be considered a forfeiture or a rescission, neither party can rely upon any express or implied covenant in the lease a breach of which would depend upon the continuance of the lease. Such situation usually arises where the lease stipulates a forfeiture as the result of some act of the lessee, as, for instance, failure to pay the rent when due. "`A forfeiture which the lessor elects to assert terminates the lease, and with it all unaccrued liabilities of the lessee upon his covenants and stipulations in the lease dependent upon the continuance of the term. Thus as a general rule the lessee is relieved from liability for subsequently accruing rents, in the absence of a stipulation in the lease for his continued liability.' 16 R. C. L. 1137." 59 ALR, Anno. pp. 1018, 1019.
The lease here did not bind the lessor to prevent Schaeffer from selling beer on his own leased premises; it merely provided for termination of the Berry lease upon this contingency. Therefore, at the time the plaintiff lessee gave notice of termination, no breach of covenant by the lessor had occurred such as would render it liable in damages. After the rescission all rights of both parties acquired under the lease were at an end. The plaintiff has set forth no action in contract because he fails to show any breach by the defendant prior to termination, and no action in tort because he has alleged no duty of the defendant toward him independent of the contract.
Since the petition fails to set forth a cause of action, the trial court erred in overruling the general demurrers.
Judgment reversed. Felton, C. J., and Eberhardt, J., concur.