Pillar Development, Inc. Pillar entered into an agreement to sell 81 residential subdivision lots to Fuqua Construction Company, Inc. and Newman Homes, Inc. jointly referred to as FCC/NH for $90,000 per lot representing a total sales price of $7,290,000. After FCC/NH refused to close on the agreement, Pillar retained FCC/NH’s $150,000 earnest money deposit as liquidated damages pursuant to the agreement. FCC/NH sued Pillar and the escrow agent1 seeking to recover the earnest money and claiming that its refusal to close was justified by Pillar’s breach of the agreement. Pillar answered and counterclaimed asserting that FCC/NH breached the agreement by refusing to close and seeking award of the earnest money as reasonable liquidated damages under the agreement.2 The trial court granted FCC/NH’s motion for summary judgment on their claims against Pillar, and denied Pillar’s motion for summary judgment on its counterclaim. Pillar appeals from these rulings, and for the following reasons, we reverse. The agreement for sale of the 81 subdivided lots by Pillar to FCC/NH provided in section 7.1.10 that, prior to closing, Pillar would develop the lots so that they “will be subdivided and platted to permit the construction of single family homes in accordance with all applicable rules, regulations, ordinances and requirements of each governmental authority having jurisdiction over the Property.” In addition to setting forth Pillar’s responsibility for development of streets, drainage, water systems and all utilities necessary for the construction of single family homes on the lots, the agreement also contained the following provisions with respect to developing sewer service for the lots: FCC/NH hereby acknowledges that the Subdivision shall not be serviced by public sewer but by individual septic systems. Pillar has received approval from the Fulton County Health Department for such systems and shall have no further responsibility with regard to sewer service or systems for the Subdivision except the Amenity Feature. FCC/NH hereby acknowledges that development, construction and installation of septic systems shall be the responsibility and at the expense of FCC/NH. Because the property at issue is located within the jurisdiction of Fulton County in an area with no access to the public sewer system, the County will not permit the construction of a single family home on any lot in the subdivision unless the Fulton County Heath Department FCHD has approved the installation of a septic tank system on that lot. Approval is obtained with respect to each individual lot by providing the FCHD with evidence, including a satisfactory water percolation test, showing that the lot is suitable for installation of a septic system.
Prior to the closing date, FCC/NH became concerned about whether Pillar had acquired approval from the FCHD for installation of a septic system on all the individual lots. Based on these concerns, FCC/NH asserts that it orally asked Pillar to provide a written guaranty that Pillar would buy back any lot on which FCC/NH could not obtain a building permit after the closing because the lot lacked septic system approval from the FCHD, and that Pillar agreed to bring such a guaranty to the closing. According to Pillar, when FCC/NH made the request for the buy-back guarantee two days before the closing date, Pillar considered the request but agreed to provide the buy-back guarantee only if FCC/NH would agree to renegotiate the purchase price of the lots. No renegotiation occurred. At the closing, Pillar presented a proposed letter agreement to FCC/NH stating that it had received “development approval” from the FCHD for the use of septic systems on the lots; that it understood an “additional approval” must be obtained from the FCHD for use of a septic system on each individual lot, and that, with respect to any lot on which FCC/NH was unable to obtain such additional approval, Pillar would “assist and support your efforts to obtain such approval.” The proposed letter agreement was not adopted. Because FCC/NH suspected that Pillar had not obtained approval from the FCHD for installation of septic systems on all the individual lots, and because Pillar refused to provide the requested buy-back guarantee, FCC/NH refused to close on the agreement for purchase of the lots.
