Court Opinion

ID: 4539182
Source: CourtListenerOpinion
Date Created: 2020-06-05 07:03:28.047062+00
Date Added: 2024-06-11T12:45:46.456245
License: Public Domain

SECOND DIVISION
                              MILLER, P. J.,
                         MERCIER and COOMER, JJ.

                   NOTICE: Motions for reconsideration must be
                   physically received in our clerk’s office within ten
                   days of the date of decision to be deemed timely filed.
                   Please refer to the Supreme Court of Georgia Judicial
                   Emergency Order of March 14, 2020 for further
                   information at (https://www.gaappeals.us/rules).

                                                                      June 4, 2020

In the Court of Appeals of Georgia
 A20A0390. IRONWOOD CAPITAL PARTNERS, LLC et al v.
     JONES.

      MILLER, Presiding Judge.

      This appeal requires us to wade into the aftermath of an investigation into

alleged mismanagement of investment properties that were held on behalf of AT&T’s

pension benefit plan trusts. Timbervest, LLC and four of its corporate officers,

Gordon Jones, II, Joel Shapiro, Walter Boden, III, and Donald Zell, Jr., entered into

a $6,000,000 settlement agreement with AT&T to resolve multiple claims of fraud

and misuse of assets under the Employee Retirement Income Security Act of 1974

(ERISA). Jones subsequently filed the instant action, seeking a declaratory judgment

that he is entitled to indemnification for any portion of the settlement for which he

may be liable, whereas Timbervest, the three remaining officers, and many of its
related entities counterclaimed to get Jones to pay a pro rata share. After the trial

court declared that Jones was entitled to indemnification, the defendants appealed,

raising fifteen enumerations of error that challenge the trial court’s declaratory

judgment, the dismissal of most of their counterclaims, and the grant of summary

judgment on Jones’s claim for breach of contract based on the delayed payment of a

dividend distribution.

      We first conclude that the clear majority of this appeal is subject to the

automatic bankruptcy stay, 11 U.S.C. § 362 (a) (1), because Shapiro has declared

bankruptcy, and so we cannot reach the merits of most of the defendants’

enumerations of error. We nevertheless conclude that we may properly address any

arguments based on Jones’s claim for breach of contract for failing to make a

distribution and the defendants’ counterclaim for breach of contract, and we agree

with the trial court that summary judgment on these two claims was appropriate

because the defendants’ delay in making a distribution to Jones was unreasonable as

a matter of law and because there is no evidence that Jones ever agreed or assented

to the demand by the other officers that he was required to pay $1.5 million to join

in the settlement. We therefore affirm the grant of summary judgment on these claims

                                         2
and remand the remainder of this appeal for the trial court to enter a stay pending

Shapiro’s bankruptcy proceedings.

      Summary judgment is appropriate when no genuine issues of material
      fact remain and the movant is entitled to judgment as a matter of law. On
      appeal, we review the grant or denial of summary judgment de novo,
      construing the evidence and all inferences in a light most favorable to
      the nonmoving party.

(Citation omitted.) LeCroy v. Bragg, 319 Ga. App. 884, 885 (1) (739 SE2d 1) (2013).

      So viewed, the record indicates that Timbervest was a Georgia limited liability

company which managed land and forestry assets related to timber and environmental

and ecological remediation. During the relevant timeframe, Shapiro was the CEO of

Timbervest, Boden was the CIO, Zell was the COO, and Jones was the president, and

all four were considered “managers” of Timbervest under the operating agreement.

Timbervest was wholly owned by Ironwood Capital Partners, LLC. Ironwood Capital

Partners, LLC was owned by Shapiro (50% share), Boden (25% share), and Zell (25%

share).1 Jones, Shapiro, Boden, and Zell each also owned a 21.75% share of another

company, TEP Investors, LLC (“TEPI”).

      1
        Jones had previously owned a 25% share of Ironwood Capital Partners, LLC,
but he sold his share to Shapiro.

                                         3
      In May 2015, AT&T brought an action in federal court against Timbervest,

Jones, Shapiro, Boden, and Zell, alleging multiple ERISA violations. AT&T alleged

that it entered into an agreement (through its prior entity, BellSouth) with Timbervest

for Timbervest to become an investment manager of AT&T’s pension plans and that

Timbervest specifically managed the portfolio of assets that were invested in

timberland. During this time, Timbervest conducted a sale of a piece of investment

land in Alabama (known as Tenneco Core) that was owned by the pension plan trusts.

Instead of selling the Tenneco Core property on the open market at fair market value,

Timbervest allegedly funneled the sale through a third-party controlled by

Timbervest, leading the trusts to receive a price for the land that was millions of

dollars below its market value, and allowing Timbervest and its related entities to

pocket the difference. According to the complaint, Timbervest also sold the Tenneco

Core property and a property in Kentucky using a real estate broker that was wholly

owned by Boden, instead of using a neutral third-party broker, allowing Timbervest

to effectively receive the substantial commission fees for each property sale.2

      2
         The Securities and Exchange Commission launched an investigation into
Timbervest’s practices and made an initial finding in 2014 that Timbervest and its
officers all violated the federal Investment Advisers Act of 1940 (15 U.S. C. § 80b-1,
et seq.) based on its handling of the Tenneco Core and the Kentucky property.
Following an appeal and the settlement between AT&T and the Timbervest entities,

                                          4
      The parties reached a settlement agreement on December 18, 2015, wherein

Timbervest, Shapiro, Zell, Jones, and Boden agreed to pay $6,000,000 to AT&T in

exchange for a release of all claims. Timbervest paid AT&T the full amount with the

assistance of loans made by Zell and Boden. Timbervest later paid back the loans to

Zell and Boden in full.

      Jones then filed the instant lawsuit against Ironwood Holdings, Ironwood

Capital, Timbervest, TEPI, Shapiro, Boden, and Zell. In his complaint, Jones (1)

sought a declaratory judgment against Timbervest, Ironwood, and the individual

defendants that he was entitled to indemnification from Timbervest for the payment

of his share of the AT&T settlement; (2) raised claims for breach of contract,

conversion, and breach of fiduciary duties against TEPI, Shapiro, Boden, and Zell for

the failure to make a dividend distribution to him in 2016; (3) raised a claim against

Shapiro for the failure to pay on a promissory note; (4) raised a claim against

Timbervest for conversion as to certain unreturned personal property from his office;

and (5) sought attorney fees and costs. The defendants answered the complaint and

raised ten counterclaims that included contribution, breach of contract, unjust

the SEC later dismissed its proceedings against the individual officers and ordered
only that Timbervest cease and desist from committing or causing any further
violations of the Advisers Act.

                                          5
enrichment, quantum meruit, and fraud, which all generally sought to have Jones pay

a $1.5 million pro rata share of the settlement. The defendants filed a motion for

partial summary judgment, arguing that they were entitled to judgment as a matter of

law on Jones’s declaratory judgment claim and their counterclaims for contribution

and unjust enrichment. Jones also filed a motion for partial summary judgment,

arguing that he was entitled to judgment as a matter of law on five of his claims and

eight of the counterclaims.

      Following a hearing, the trial court granted in part and denied in part Jones’s

motion for partial summary judgment and denied the defendants’ motion for partial

summary judgment. The trial court first concluded that Jones was entitled to

indemnification from Timbervest for his portion of the settlement payment under

Timbervest’s operating agreement. The trial court further concluded that Jones was

entitled to summary judgment on the eight counterclaims that he challenged in his

motion. The trial court also granted Jones summary judgment on his breach of

contract claim for the delay in paying him the TEPI distribution, but it concluded that

                                          6
factual questions precluded summary judgment on his claim against Shapiro to

enforce the promissory note. The defendants then filed the instant appeal.3

      1. As an initial matter, we must first address whether, and to what extent, this

appeal is currently properly before us. During the pendency of this appeal, Shapiro

filed a Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the

Northern District of Georgia.

The filing of a bankruptcy petition automatically operates as a stay of “the

commencement or continuation . . . of a judicial . . . action or proceeding against the

debtor.” 11 U.S.C. § 362 (a) (1). “Any orders or judgments entered in violation of an

automatic bankruptcy stay are void; they are deemed without effect and are rendered

an absolute nullity.” (Citation and punctuation omitted.) Miller v. Lomax, 333 Ga.

App. 402, 404 (3) (773 SE2d 475) (2015). The appellate courts of this State are

constitutionally required to dispose of every case at the term of court for which it is

entered on the courts’ dockets for hearing or at the next term of court, and so this

      3
        Jones also filed a cross-appeal, seeking to challenge the trial court’s denial of
summary judgment on his claim against Shapiro to collect on the promissory note. As
that claim is clearly subject to the automatic bankruptcy stay provisions, we have
already separately remanded that appeal to the trial court to enter a stay pending
Shapiro’s bankruptcy proceedings.

                                           7
Court does not have the power to stay a case. See Ga. Const. of 1983, Art. VI, Sec.

IX, Para. II; Boardman v. Brenninkmeijer, 328 Ga. App. 882 (763 SE2d 267) (2014).

      The majority of the parties’ arguments on appeal concern Jones’s claim for

declaratory relief against all defendants regarding his right to be indemnified under

Timbervest’s LLC agreement. Because this claim for declaratory relief constitutes a

“judicial . . . action or proceeding against the debtor,” it is subject to the automatic

stay. See In re Johns-Manville Corp., 31 B.R. 965, 969-970 (II) (S.D.N.Y. 1983)

(action for declaratory relief against the debtor was subject to the automatic stay).

Furthermore, while the automatic stay provisions “do not ordinarily extend to a third

party,” Payless Car Rental Sys., Inc. v. Elkik, 306 Ga. App. 389, 389 n.1 (702 SE2d

697) (2010), we conclude that any action for declaratory relief against Shapiro is

inextricably intertwined with the action for declaratory relief against the other co-

defendants such that we cannot resolve any of the enumerations of error regarding the

declaratory judgment with the automatic stay in place. The declaratory judgment

claim is essentially indivisible, and there is nothing that is specific to Shapiro that we

can separate out–either the trial court declares that Jones is eligible for

indemnification or it does not. If we were to address the claim for declaratory relief

against the remaining defendants, therefore, we would be completely and entirely

                                            8
resolving the claim as to Shapiro as well. Compare Gen. Motors Acceptance Corp.

v. Yates Motor Co., Inc., 159 Ga. App. 215, 217-218 (2) (283 SE2d 74) (1981)

(concluding that certain claims against the debtor’s co-defendants were not so

“inextricably interwoven” so as to warrant imposing the bankruptcy stay on claims

against the non-debtor co-defendants). Relatedly, the trial court’s dismissal of the

defendants’ counterclaims for contribution, unjust enrichment, quantum meruit,

promissory estoppel, fraud, and breach of fiduciary duties is entirely dependent on its

declaratory judgment, and so we also cannot resolve any enumerations of error

regarding those claims with the automatic stay in place.

      On the other hand, we conclude that the automatic stay does not prevent us

from resolving the Appellants’ two enumerations of error resulting from Jones’s

breach of contract claim for TEPI’s alleged failure to make a monetary distribution

to him in 2016, at least as to all non-Shapiro defendants. See Johnson v. Regions

Bank, 301 Ga. App. 520, 520 n.1 (687 SE2d 906) (2009) (automatic bankruptcy stay

did not apply to stay claims against debtor’s co-defendants in action for damages

alleging breach of contract and various torts). We also conclude that the automatic

stay does not prevent us from resolving the appellants’ challenge to the dismissal of

their breach of contract counterclaim because that is a claim brought by the debtor,

                                          9
not against the debtor, and resolution of that claim is not dependent on the trial

court’s declaratory judgment. See Alpern v. Lieb, 11 F.3d 689, 690 (7th Cir. 1993)

(“The appeal from the dismissal of the plaintiff’s suit is not subject to the automatic

stay, because the suit was filed by rather than against the debtor.”) (citations omitted).

      Accordingly, with the exception of Jones’s claim for breach of contract for

TEPI’s alleged failure to make the 2016 distribution against all non-Shapiro

defendants and the defendants’ counterclaim for breach of contract, we remand this

appeal to the trial court to enter a stay pending the resolution of Shapiro’s bankruptcy

proceedings. Upon the resolution of the bankruptcy proceedings or the bankruptcy

court’s lifting of the automatic stay, the defendants may re-institute the appeal by

filing a new notice of appeal in the trial court within thirty days of the date of the

entry of the order. See DCA Architects v. American Bldg. Consultants, 203 Ga. App.
598, 598-600 (1) (417 SE2d 386) (1992).

      2. As for Jones’s claim for breach of contract, the appellants argue that the trial

court erred when it granted summary judgment to Jones on his claim for TEPI’s

failure to make a dividend distribution because the trial court erroneously concluded

that the contract required the dividend payments to be made simultaneously to all

TEPI members. We conclude that the defendants’ delay in making the distribution to

                                           10
Jones was unreasonable as a matter of law, and so summary judgment was properly

entered in Jones’s favor.

      On appeal, this Court’s review of a trial court’s construction of a
      contract is de novo. To begin our inquiry, we invoke the familiar
      framework of contractual construction, which involves three steps:
      [f]irst, the trial court must decide whether the language is clear and
      unambiguous. If it is, the court simply enforces the contract according
      to its clear terms; the contract alone is looked to for its meaning. Next,
      if the contract is ambiguous in some respect, the court must apply the
      rules of contract construction to resolve the ambiguity. Finally, if the
      ambiguity remains after applying the rules of construction, the issue of
      what the ambiguous language means and what the parties intended must
      be resolved by a jury. The cardinal rule of contract construction is to
      ascertain the intention of the parties. When the terms of a contract are
      clear and unambiguous, the reviewing court looks only to the contract
      itself to determine the parties’ intent.

(Citations and punctuation omitted.) Langley v. MP Spring Lake, LLC, 307 Ga. 321,

323-324 (834 SE2d 800) (2019).

      TEPI’s operating agreement provides that

      Distributable Cash shall be distributed to the Members at such times as
      may be determined by the Manager, and shall be distributed as follows
      . . . First, to repay any Member Loans made [to the company]; and

                                          11
       Thereafter, the balance of Distributable Cash, to the Members pro rata
       in accordance with their then respective Percentage Interests.

In April 2016, TEPI made a distribution to its members, of which Jones was entitled

to a payment of $521,179.74. TEPI’s accounting records reflected that a payment was

made to Jones, and TEPI reported to the requisite tax authorities that it made a

distribution to Jones in that amount. In reality, TEPI did not pay that amount to Jones,

and the money was instead returned to TEPI’s operating account in September 2016.

Shapiro, Boden, and Zell jointly decided to withhold Jones’s distribution, and Shapiro

testified that the decision was made because Jones “owed Timbervest or Ironwood

a lot of money” from the AT&T settlement agreement. TEPI eventually paid Jones

the distribution of $521,179.74 on June 25, 2018, during the pendency of the instant

litigation.

       As an initial matter, we note that the defendants are correct that TEPI’s

operating agreement does not specify a time as to when the dividend distributions

shall occur, except that such distributions shall occur “at such time as may be

determined by the Manager,” nor does the agreement specify that the distributions to

each member necessarily had to be made simultaneously. These facts alone do not

end our inquiry, however. First, we note that TEPI’s operating agreement contains a

                                          12
clause specifying that “[t]ime is of the essence of this agreement, and to any

payments, allocations and distributions specified under this agreement.” (Emphasis

supplied.) Second, Georgia law provides that “[i]f no definite time is stated for the

performance of a contract, the presumption is that the parties intended that

performance would be had within a reasonable time.” (Citation omitted.) Mansell 400

Assoc., L.P. v. Entex Information Svcs., Inc., 239 Ga. App. 477, 480 (4) (519 SE2d

46) (1999). “While it is the general rule that what is a reasonable time under the

circumstances attending the transaction is a matter for determination by a jury, courts

are authorized to determine that a delay in a party’s performance is unreasonable as

a matter of law.” (Citation and punctuation omitted.) DeMarco v. State Farm Mut.

Auto. Ins. Co., 346 Ga. App. 882, 885 (1) (817 SE2d 360) (2018).

      Here, TEPI and its managers waited over two years to provide Jones with a

distribution payment that he had a contractual right to receive, when the contract

contained an applicable “time is of the essence” clause and all the other members

received their payments at or around the time the 2016 distribution was made. It

appears from the record that the sole basis for the delay was the dispute over whether

Jones was required to pay any portion of the AT&T settlement. Even if we assume

that Jones owed a $1.5 million share of the settlement, however, at no point have the

                                          13
defendants identified a contractual, statutory, or court-ordered garnishment right that

would have allowed them to withhold payment of the TEPI dividend distribution to

offset Jones’s debt. This omission is particularly relevant when, as here, the debt in

question was allegedly owed to Timbervest, which is a separate entity from TEPI, and

there is no indication in the record that the profits that were source of TEPI’s

distribution were in any way linked to the alleged malfeasance by Timbervest. We

note that there is also no evidence which could demonstrate that Jones breached any

of the provisions of the TEPI operating agreement so as to be barred from receiving

his distribution, nor is there evidence that he potentially agreed to the withholding to

satisfy any debt or was mutually negotiating such an agreement. Absent a viable

justification for withholding payment for two years, “[u]nder these particular facts

and circumstances, the record shows that [the defendants] failed to perform within a

reasonable period of time as a matter of law.” See DeMarco, supra, 346 Ga. App. at

885 (1) (party’s performance was unreasonably late as a matter of law when party

waited three years to return a release form and negotiate a check); Ferguson v. Bank

of Dawson, 57 Ga. App. 639, 640 (196 S.E. 195) (1938) (tender of stock six and a half

months after the contract of sale was executed was an unreasonable time for

                                          14
performance as a matter of law). We therefore affirm the trial court’s grant of

summary judgment on this claim.

      3. The appellants also argue that the trial court erred in granting Jones interest,

attorney fees, and the income tax that Jones paid on the 2016 distribution as damages

for his breach of contract claim. The appellants, however, failed to support this

enumeration with any arguments or citations that challenge the measure of damages

specifically, and so we deem this enumeration abandoned. See Court of Appeals Rule

25 (c) (2) (“Any enumeration of error that is not supported in the brief by citation of

authority or argument may be deemed abandoned.”).

      4. The appellants further argue that the trial court erred in granting Jones

summary judgment on their counterclaim for breach of contract. The appellants argue

that the Timbervest officers reached an agreement about how they would each

contribute to the settlement and that there is a genuine issue of material fact as to

whether the parties mutually agreed that Jones would only be able to participate in the

settlement agreement if he paid 25% of the settlement amount. We disagree.

      An answer to an offer will not amount to an acceptance, so as to result
      in a contract, unless it is unconditional and identical with the terms of
      the offer. To constitute a contract, the offer must be accepted
      unequivocally and without variance of any sort . . . In determining if

                                          15
      parties had the mutual assent or meeting of the minds necessary to reach
      agreement, courts apply an objective theory of intent whereby one
      party’s intention is deemed to be that meaning a reasonable man in the
      position of the other contracting party would ascribe to the first party’s
      manifestations of assent. In making that determination, the
      circumstances surrounding the making of the contract, such as
      correspondence and discussions, are relevant in deciding if there was a
      mutual assent to an agreement, and courts are free to consider such
      extrinsic evidence.

(Citations and punctuation omitted.) Frickey v. Jones, 280 Ga. 573, 574-575 (630

SE2d 374) (2006).

      On October 28, 2015, during the settlement negotiations, Jones sent an e-mail

to Shapiro noting his thoughts about how the officers and Timbervest would shoulder

the cost of the settlement agreement. Jones made it clear that he did not think it would

be fair for him to pay a pro rata share because he no longer owned a share of

Ironwood Capital Partners and, by extension, Timbervest, and so he proposed to

contribute around $1,000,000 through a mixture of payments, loans, and other

provisions, subject to any indemnification rights. The next day, Jones sent another

proposal wherein he would pay $1.2 million through through a mixture of payments,

loans, and other provisions, subject to any indemnification rights.

                                          16
      On December 17, 2015, once the parties received a final draft of the settlement

agreement, Jones made it clear that he did not want to sign a settlement agreement

without a firm agreement between the four officers “about who is paying what.” The

officers held a meeting wherein they told Jones, “[Y]ou sign [the settlement

agreement] and you pay your quarter share or you’re not going to be a part” of the

settlement. Jones left the meeting and informed the other officers that he would go

home and think about the matter.

      That night, Jones sent the following e-mail to Shapiro and Timbervest’s general

counsel (who also informed Zell and Boden of Jones’s position ):

      For purposes of clarity, I wanted to reiterate the following. I am willing
      to sign the AT&T Settlement Agreement at the request of Timbervest,
      LLC in order to put to rest the claims currently pending by AT&T. As
      we have previously discussed on numerous occasions, I am not willing
      to contribute funds equal to a pro-rata share of each of the five
      defendants named in the AT&T lawsuit and am not agreeing to pay any
      specific amount of, or to be jointly and severally liable for, the
      settlement amount set forth in the AT&T Settlement Agreement. Any
      amount, if any, that I agree to contribute likely would be subject to terms
      similar to those communicated to you for the last couple of months.
      However, these previous communications have been for discussion
      purposes only and are in no manner binding on any person or party. In
      addition, by signing the Settlement Agreement, I am in no manner

                                          17
      modifying or waiving any rights to indemnification . . . . Any binding
      terms on which I would be willing to contribute funds to the settlement
      or modify or waive any indemnification rights would have to be set forth
      in a written agreement signed by all parties.

 The parties signed the settlement agreement the next day. The final settlement

agreement between the Timbervest parties and AT&T did not include any specific

provisions as to how the payments were to be divided among the Timbervest parties.

      Upon reviewing this correspondence among the Timbervest officers, all of

whom are sophisticated business officials, we discern no objective evidence

demonstrating that all the officers ever reached a mutual agreement as to how they

would divvy up the $6,000,000 payment, and we discern no objective evidence that

Jones agreed to or accepted the other officers’ demand that he pay $1.5 million as a

prerequisite for joining the AT&T settlement. While Jones did eventually sign the

settlement agreement, we find no arguably objective evidence that he agreed to be

bound to contribute one-quarter of the settlement. As such, to the extent that the other

officers made a demand of Jones, it “constituted [a mere offer,] and no binding

agreement was formed.” Frickey, supra, 280 Ga. at 576. Thus, because the pre-

settlement discussions between the Timbervest officers did not result in any binding

agreement as to how the $6,000,000 was to be paid, these discussions do not provide

                                          18
an independent contractual basis for concluding that Jones was obligated to pay a pro

rata share out of pocket, and so the trial court correctly granted summary judgment

on this claim.

      For the reasons stated above, we affirm the trial court’s grant of summary

judgment to Jones and against the defendants (except Shapiro) on his claim of breach

of contract due to the delayed dividend payment and the defendants’ breach of

contract counterclaim. We remand the remainder of this appeal so that the trial court

can enter a stay pending Shapiro’s bankruptcy proceedings.

      Judgment affirmed in part and case remanded in part. Mercier and Coomer,

JJ., concur.

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