Moreno v. Smith
788 S.E.2d 349, 2016 Ga. LEXIS 461, 299 Ga. 443 (2016)
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Rule of Law:
Parol evidence is admissible to demonstrate that the parties never mutually assented to form a binding contract, even when a written agreement appears complete on its face. Such evidence can be used to show that the purported agreement was a sham and that there was no "meeting of the minds" necessary for contract formation.
Facts:
- In 2004, Dolores Moreno acquired a residential property.
- In 2007, Dolores gifted a one-half interest in the property to her daughter, Gina Moreno.
- Around the same time, Dolores and Gina signed a document stating that Gina would purchase Dolores's remaining one-half interest for $75,000, payable in $400 monthly installments.
- Gina claims she signed the document at Dolores's request for the sole purpose of helping Dolores demonstrate that she had an interest in the property and was earning income from it.
- Gina alleges that at the time of signing, Dolores consistently stated that Gina was not expected to pay anything for the property.
- Over the next six years, Gina made no payments to Dolores.
Procedural Posture:
- Dolores Moreno sued Gina Moreno in a Georgia trial court, alleging breach of contract and seeking an equitable accounting.
- The trial court granted Dolores's motion for partial summary judgment, ruling as a matter of law that a binding contract existed.
- Following a bench trial on remedies, the trial court awarded damages to Dolores for breach of contract and fair market rent on the accounting claim.
- Gina Moreno, as the appellant, appealed the judgment to the Supreme Court of Georgia.
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Issue:
Does extrinsic evidence suggesting that a written agreement was a sham, and that the parties did not intend to be legally bound, create a genuine issue of material fact regarding the existence of an enforceable contract?
Opinions:
Majority - Blackwell, Justice.
Yes. Extrinsic evidence showing that a written document was a sham not intended to be legally binding creates a genuine issue of material fact as to the existence of an enforceable contract. Contract formation requires a 'meeting of the minds,' or mutual assent, which is determined using an objective theory of intent. However, a court will honor a party's intention for an agreement to have no legal consequences if the other party knew or had reason to know of that intention. The parol evidence rule, which bars extrinsic evidence from varying the terms of a valid written contract, does not apply until the existence of a valid contract has been established. Therefore, parol evidence is admissible to show that no valid agreement ever came into existence, such as when a writing was a sham. Here, Gina presented admissible evidence—including her affidavit about their discussions, their mother-daughter relationship, and the subsequent course of conduct—that the document was a sham. Because this created a factual dispute about the parties' intent, the trial court was not authorized to resolve it on summary judgment, and the question must be decided by a jury.
Analysis:
This decision reinforces a critical exception to the parol evidence rule, clarifying that the rule only applies after the existence of a valid contract has been proven. It emphasizes that the foundational question of mutual assent must be resolved first, and extrinsic evidence is permissible to challenge a contract's very existence. The case highlights that courts will consider surrounding circumstances, such as discussions and the parties' relationship, in determining contractual intent, especially within family contexts. This precedent makes it more difficult to obtain summary judgment in breach of contract cases where one party credibly alleges the written agreement was a non-binding sham.
