Evaluating literary quality requires assessing interpretive dimensions such as cultural representation, emotional depth, and philosophical sophistication that resist straightforward computational measurement. We introduce SAGE, a hierarchical evaluation framework that decomposes literary quality into ontology-grounded interpretive dimensions assessed through structured large language model evaluation with multi-round iterative reflection and independent validation. We validate the framework on 100 short stories (50 canonical works, 30 pulp fiction, 20 LLM-generated narratives) across three analytical layers (cultural, emotional-psychological, existential-philosophical) using dual-mode assessment. Across 600 evaluations, the framework achieves 98.8% score convergence and greater than 94% inter-rater agreement, with near-perfect mode invariance between content-based and metadata-based evaluation. Statistical analysis reveals a consistent genre hierarchy (Canonical > Pulp > LLM, all p<0.001) with layer-specific discrimination: cultural critique and philosophical depth exhibit very large effect sizes (Cohen's d>2.4), while emotional representation shows smaller gaps (d=1.68), suggesting that affective patterns are more learnable from training data than critical stance or philosophical depth. Cross-layer correlations (r=0.649-0.683) confirm the three dimensions capture empirically distinguishable quality facets. These findings demonstrate that theory-driven LLM evaluation can achieve measurement-grade reliability and support systematic identification of where current generative models fall short of human literary production, with direct implications for scalable automated evaluation of open-ended text generation.