Court Opinion

ID: 4444330
Source: CourtListenerOpinion
Date Created: 2019-10-04 15:05:48.879318+00
Date Added: 2024-06-11T14:25:15.696708
License: Public Domain

FIRST DIVISION
                              BARNES, P. J.,
                          MERCIER and BROWN, 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.
                               http://www.gaappeals.us/rules

                                                                 September 24, 2019

In the Court of Appeals of Georgia
 A19A0930. 6428 CHURCH STREET, LLC et al. v. SM
     CORRIGAN, LLC et al.
 A19A0931. JAMES J. CORRIGAN, AS TRUSTEE OF THE
     JAMES J. CORRIGAN 1989 TRUST v. 6428 CHURCH
     STREET, LLC et al.
 A19A0963. SM CORRIGAN, LLC et al. v. 6428 CHURCH
     STREET, LLC et al.

      MERCIER, Judge.

      These related appeals arise from a business dispute involving James Corrigan

(“James”), Shannon Corrigan (“Shannon”), Kenneth Downing (“Downing”), and their

corporations. In 2011, James, as the Trustee of the James J. Corrigan 1989 Trust, sued

Downing, 6428 Church Street, LLC (“6428 Church”), and C&S 1, LLC (“C&S”)

(collectively, “the defendants”) for numerous claims, including breach of contract and

fraud. The next year, Shannon and her company, SM Corrigan, LLC (“SMC”),
brought a separate suit against Downing and 6428 Church, alleging claims for, among

other things, breach of contract and fraud. In response to the second suit, Downing

and 6428 Church filed counterclaims for breach of contract and litigation expenses.

      The two lawsuits were consolidated in 2013, and the various parties moved for

summary judgment. In a single order, the trial court granted summary judgment to the

defendants on the fraud claims brought by James, Shannon, and SMC.1 It also granted

Shannon and SMC summary judgment on Downing and 6428 Church’s

counterclaims.

      In Case No. A19A0930, the defendants appeal the trial court’s order granting

Shannon and SMC summary judgment on their counterclaims.2 In Case No.

A19A0931, James (as Trustee of the James J. Corrigan 1989 Trust) challenges the

trial court’s grant of summary judgment to the defendants on his fraud claim. Finally,

in Case No. A19A0963, Shannon and SMC appeal the trial court’s fraud

determination as to them. For reasons that follow, we affirm in part and reverse in

      1
       Other claims alleged by James, Shannon, and SMC – including for breach of
contract – remain pending below.
      2
        Although it appears that only Downing and 6428 Church are impacted by the
trial court’s ruling in Case No. A19A0930, all three defendants are included in the
notice of appeal, so we will refer to them as “the defendants.”

                                          2
part the trial court’s ruling in Case No. A19A0930, and we affirm the rulings in Case

No. A19A0931 and Case No. A19A0963.

      Summary judgment is appropriate when “the pleadings, depositions, answers

to interrogatories, and admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that the moving party is

entitled to a judgment as a matter of law.” OCGA § 9-11-56 (c). We review the grant

of summary judgment de novo, construing the evidence and all reasonable inferences

in favor of the non-moving party. See Pacrim Assoc. v. Turner Home Entertainment,

235 Ga. App. 761, 762 (510 SE2d 52) (1998).

      So viewed, the evidence shows that James and Downing began working

together in the 1980s, brokering and investing in real estate. In 2006, the two entered

into a joint venture to purchase, refurbish, and refinance and/or sell Riverdale Villas,

an apartment complex located in Riverdale, Georgia.3 The property was acquired

using money loaned by James, and ownership was placed within 6428 Church, a

limited liability corporation of which Downing was the manager and sole member.

      3
       James alleges that his actions in the various business deals at issue here were
undertaken on behalf of the James J. Corrigan 1989 Trust.

                                           3
      James subsequently informed Downing that his sister, Shannon, wanted to

participate in the Riverdale Villas venture, and they negotiated her participation, with

James acting as her agent throughout the transaction. On June 21, 2006, Shannon

purchased a 70 percent ownership interest in the property for approximately $1.2

million. As part of the acquisition, she made an immediate capital investment of

$590,000 that was to be used to refurbish the property and to repay James a portion

of the money he had loaned to the venture. She also signed notes and guarantees for

the remainder of the purchase price. Shannon and 6428 Church executed a co-tenancy

agreement that governed their ownership interests and established 6428 Church as the

manager of the property. Shannon then transferred her 70 percent interest to SMC, her

limited liability corporation.

      According to Downing, “it[] [was] always . . . my understanding that this was

a buy and refi, or buy-and-sell situation with the property, that it would be a one to

two-year type of investment.” Shannon also expected a maximum two-year

investment that would provide her a guaranteed rate of return and tax benefits. After

renovating Riverdale Villas, however, the joint venture continued to own and operate

the property well beyond this two-year time frame. No refinancing ever occurred, and

Downing testified that the property did not generate any profit and declined in value.

                                           4
      Shortly after the Riverdale Villas venture commenced, James took part in

another venture with Downing and several others to purchase the Sheraton House

Apartments, an apartment complex located in Forest Park, Georgia. On September 14,

2006, James wired Downing $400,000 for the down payment on Sheraton House.

Although a portion of the money was later repaid to James, the venture retained

$100,000, giving James a stake in the Sheraton House profits and losses. Downing

testified that James was not a party to the co-tenancy agreement governing the

Sheraton House venture, but the partnership “worked out some sort of creative deal

where he would share in the profits and losses.” Title to Sheraton House was placed

in C&S, another limited liability corporation of which Downing was the manager and

sole member.

      Within a few months, James began asking Downing questions about the

parties’ respective financial stakes in the Sheraton House venture. He posed further

questions to all of the partners regarding finances and the day-to-day operation of the

business. In reply, Downing asked James to direct all questions to him, rather than to

the other Sheraton House partners, since James was not a party to the co-tenancy

agreement.

                                          5
      Eventually, James became frustrated with what he viewed as a lack of response

to his inquiries. James demanded return of the funds he had invested in the Sheraton

House venture, plus interest. No funds were returned. At the time of Downing’s

deposition, C&S still owned Sheraton House, but the property was on the verge of

foreclosure. Although the property had a positive cash flow, two of the venture’s

other partners had removed $60,000 from the operating account without consulting

Downing or James.

      With both ventures struggling financially, James, Shannon, and SMC sued the

defendants for breach of contract, fraud, and other claims. 6428 Church filed a

counterclaim against Shannon for breach of the co-tenancy agreement. Downing and

6428 Church also alleged a counterclaim against Shannon and SMC for litigation

expenses. The defendants moved for summary judgment on the fraud allegations, and

Shannon and SMC filed a cross-motion for summary judgment on the counterclaims.

The trial court granted each motion. These appeals followed.

                               Case No. A19A0963

      1. For ease of discussion, we will first address Case No. A19A0963, in which

Shannon and SMC challenge the trial court’s order granting Downing and 6428

Church summary judgment on their fraud claim. With respect to this claim, Shannon

                                         6
and SMC alleged that before Shannon invested in the Riverdale Villas venture,

Downing and 6428 Church falsely promised that her investment would be repaid

within two years, that she would gain certain tax advantages from the investment, and

that she would receive a specified rate of return on her investment. Shannon and SMC

further alleged that she relied upon these misrepresentations in deciding to invest.

      Generally, a false representation is actionable in fraud only if it relates to an

existing fact or past event. See Infrasource v. Hahn Yalena Corp., 272 Ga. App. 703,

707 (2) (613 SE2d 144) (2005). Opinions, predictions, and conjecture regarding

future events do not give rise to a fraud claim. See id. As we have explained, “[f]raud

cannot consist of mere broken promises, unfilled predictions or erroneous conjecture

as to future events. Representations concerning expectations and hopes are not

actionable.” Id. (citation and punctuation omitted). See also Hamilton v. Advance

Leasing & Rent-A-Car, 208 Ga. App. 848, 850 (2) (432 SE2d 559) (1993)

(“[A]ctionable fraud [does not] result from a mere failure to perform promises made.

Otherwise any breach of a contract would amount to fraud.”) (citations and

punctuation omitted).

      The alleged misrepresentations in this case involve promises as to future

events, specifically, the eventual repayment of Shannon’s investment and the benefits

                                          7
she and her company would ultimately reap from participating in the venture.

Nevertheless, Shannon and SMC argue that the promises are actionable because

Downing and 6428 Church made them with a present intention not to perform. It is

true that “promises with no present intent to perform are actionable.” Infrasource,

supra. A misrepresentation regarding future events may give rise to a fraud claim

“where the promisor knows, at the time of the misrepresentation, that the future event

will not take place.” Pacrim, supra at 767 (3). The issue, therefore, is whether these

defendants made promises about repayment of and return on Shannon’s investment

without any intention of performing as promised. See id.

      The record contains no evidence of such fraudulent intent. Downing testified

that he always viewed the Riverdale Villas venture as a “one to two-year type of

investment.” Although the venture did not end within the time frame expected by the

parties, Shannon and SMC have not pointed to any proof that Downing and 6428

Church intended for the venture to extend beyond the anticipated period. Rather, the

record shows that in May 2008 – less than two years after Shannon invested in

Riverdale Villas – Downing suggested to James, who was acting as Shannon’s

representative, that the property “should be listed for sale and sold right away.” James

                                           8
agreed that the property should be sold, but indicated that delaying the sale “for at

least three months” would be best for the venture.

      Similarly, nothing in the record supports the conclusion that, at the time

Shannon joined the venture in 2006, Downing and 6428 Church intended or knew

that she would not receive her promised benefit or return from the investment.

Downing asserted that he did not expect the project to fail, but the venture had

difficulty finding “quality” tenants for the property and “getting the . . . occupancy

up to where it should be.” Moreover, James testified that the value of Riverdale Villas

“trend[ed] down quite rapidly” in 2008, as financial markets began collapsing.

Ultimately, Riverdale Villas performed poorly and often did not generate sufficient

funds to pay property expenses, requiring Downing to make contributions to the

venture’s account just to “keep the property operative.”

      On appeal, Shannon and SMC note that “[f]raudulent intent at the time of

contracting can be inferred based on subsequent conduct of the defendant that is

unusual, suspicious, or inconsistent with what would be expected from a contracting

party who had been acting in good faith.” BTL COM Ltd. v. Vachon, 278 Ga. App.

256, 261 (1) (628 SE2d 690) (2006). They further argue, based on vague deposition

testimony from Downing, that the defendants admittedly misappropriated Shannon’s

                                          9
capital contribution for their own benefit, raising a question of fact as to fraudulent

intent. We disagree.

      Downing testified that Shannon’s capital investment was to be used to repay

James for money he had loaned to the Riverdale Villas venture and to finance

renovations at the property. To this end, Downing sent approximately one-half of the

capital investment to James. As to the remaining investment, Downing stated,

“[t]hose funds most likely went into the property,” but he could not be more certain

in his testimony because he did not “have an accounting in front of [him] of those

funds” at the deposition. Upon further questioning, Downing testified that the

remaining funds were spent on the “rehabilitation effort” at Riverdale Villas, although

he could not specifically recall if all was used for the renovations. He admitted that

there was “a possibility” some of the funds had been used to finance another

investment. Asked why the money might have been used for a different investment,

Downing responded: “We would have to look at the context of the emails [between

the parties] and the way the whole deal was structured to answer that question.” He

later clarified that he did not think Shannon’s investment funds were “used for any

purpose other than Riverdale Villas[.]”

                                          10
          Such testimony does not demonstrate that Downing and/or 6428 Church

misappropriated Shannon’s invested funds for their own personal use. At most,

Downing conceded that the venture participants (which included James and Shannon)

may have decided to use some of the money for an outside purpose. But he did not

believe that this had occurred, and Shannon and SMC have put forth no evidence that

it did.

          Shannon and SMC have not pointed to any testimony, financial records, or

other evidence from which a jury could reasonably find fraudulent intent. We

recognize that the venture was not successful, and James testified that Downing failed

to fulfill his agreed-upon obligations to Shannon and SMC. But the evidence does not

support any conclusion that Downing and/or 6248 Church intended not to perform

at the time they allegedly made promises regarding Shannon’s investment. The trial

court, therefore, properly granted summary judgment to Downing and 6428 Church

on Shannon and SMC’s fraud claim. See Pacrim, supra at 767 (3) (trial court properly

granted summary judgment to defendant on fraud claim involving alleged

misrepresentation of future events; the evidence, which might have supported a claim

for breach of contract, did not demonstrate a present intention not to perform at the

time the promise was made); Compare Gunnin v. Dement, 205 Ga. App. 631, 634 (2)

                                         11
(422 SE2d 893) (1992) (affirming denial of motion for directed verdict where jury

authorized to find fraud based on unfulfilled promises regarding business investment;

although promises related to future events, evidence that defendants made no serious

effort to expand business as promised and utilized invested money for personal

expenditures raised question of fact as to intent to deceive or not perform).

                                Case No. A19A0931

      2. We reach the same conclusion in Case No. A19A0931, which challenges the

trial court’s grant of summary judgment to the defendants on James’s fraud claim.

With respect to fraud, James asserted that Downing promised to transfer to him an

ownership interest in the profits and losses on the Sheraton House venture, but failed

to do so. He further alleged that Downing made this promise to fraudulently induce

his investment in the project. At deposition, James clarified Downing’s promise as

follows:

      [F]or my hundred thousand dollars, I was supposed to get a 15th percent
      share of the profits and losses . . . related to Sheraton House. When I say
      supposed to, it was all verbal and nothing was written down. And I was
      supposed to get – it was essentially 15 percent of the profits and losses
      of Sheraton House.

                                          12
      This alleged promise related to a future event – the eventual allocation of

profits and losses generated by Sheraton House. And once again, the evidence does

not support the conclusion that Downing made the promise with a present intention

not to perform. In fact, James has not pointed to any evidence that the defendants

deprived him of his “share in the profits and losses” of Sheraton House. The venture

still owned and operated Sheraton House at the time James filed his complaint.

Although James asserted at his deposition that Downing “hasn’t paid me anything,”

he cited no proof that the Sheraton House property had generated any profits that

should have been distributed to him. Moreover, he presented no evidence that the

defendants appropriated Sheraton House funds for their own personal benefit.4

      On appeal, James complains that Downing failed to include him in the written

co-tenancy agreement governing the Sheraton House venture and did not otherwise

provide him with requested documentation or a written agreement outlining his

interest. Downing’s alleged promise, however, did not require James’s inclusion in

the co-tenancy agreement, and it did not compel written documentation of his

      4
         At some point, two other investors who managed the property removed
$60,000 from the Sheraton House account for their own use. Downing testified that
this withdrawal was unauthorized and that he took steps to preclude further improper
withdrawals, such as by placing certain Sheraton House funds into an escrow account.
James offered no contrary evidence.

                                        13
participation in the venture. On the contrary, James admitted that everything relating

to his investment was “verbal.”

         Undoubtedly, James is dissatisfied with the manner in which Downing operated

the Sheraton Homes venture, and his complaint asserts other claims relating to that

conduct. But he has presented no evidence from which a jury could reasonably

conclude that the defendants promised him a share of the Sheraton House profits and

losses without intending to perform as promised. The trial court, therefore, properly

granted summary judgment to the defendants on James’s fraud claim. See Pacrim,

supra.

                                  Case No. A19A0930

         3. In Case No. A19A0930, the defendants argue that the trial court erred in

granting Shannon summary judgment on 6428 Church’s counterclaim for breach of

the Riverdale Villas co-tenancy agreement.5 We agree.

         5
         6428 Church alleged its breach of contract counterclaim solely against
Shannon. The counterclaim does not include SMC, presumably because SMC was not
a party to the co-tenancy agreement. Both in the trial court and on appeal, however,
the parties often failed to specify which claims and arguments apply to which party.
As a result, it appears that the trial court may have inadvertently included SMC in its
grant of summary judgment on this counterclaim. 6428 Church has not argued that
it asserted a breach of contract claim against SMC or that such claim has merit.
Accordingly, to the extent the trial court granted summary judgment to SMC on this

                                          14
      6428 Church asserted that Shannon breached the co-tenancy agreement by not

paying her share of the Riverdale Villas operating expenses, thereby saddling 6428

Church with more than its share of the expenses. Shannon admittedly never made any

payments to the Riverdale Villas venture other than those associated with acquiring

a 70 percent interest in the property. And 6428 Church offered evidence that

Downing, its sole member, deposited significant sums into the venture’s operating

account to pay the property’s expenses. Nevertheless, Shannon moved for summary

judgment on this counterclaim, arguing that 6428 Church had “adduced absolutely

no evidence supporting a calculation or itemization of damages[.]” The trial court

granted the motion.

      “Damages recoverable for a breach of contract are such as arise naturally and

according to the usual course of things from such breach and such as the parties

contemplated, when the contract was made, as the probable result of its breach.”

OCGA § 13-6-2. The evidence in this case raises a jury question as to whether

Shannon’s alleged breach of the co-tenancy agreement forced 6428 Church to fully

fund operating expenses that should have been shared by Shannon. Although

Shannon complains that 6428 Church failed to sufficiently prove the specific

claim, we find no error.

                                        15
expenses it incurred, “the lack of evidence regarding the actual amount of damages

is not dispositive on a motion for summary judgment in a breach of contract case.”

Eastview Healthcare v. Synertx, 296 Ga. App. 393, 398 (4) (674 SE2d 641) (2009).

“This is because . . . in every case of breach of contract, the injured party has a right

to damages, but, if there has been no actual damage, the injured party may recover

nominal damages sufficient to cover the costs of bringing the action.” Id. at 399 (4)

(citations and punctuation omitted).

      The record contains evidence from which a jury could award 6428 Church

damages (either actual or nominal) from Shannon’s alleged breach of the co-tenancy

agreement. The trial court, therefore, erred in granting Shannon summary judgment

on this counterclaim. See Eastview Healthcare, supra.

      4. The defendants further argue that the trial court erred in granting Shannon

and SMC summary judgment on the litigation expense counterclaim asserted by

Downing and 6428 Church. As pled, the counterclaim has two facets. First, 6428

Church alleged that Shannon is liable for litigation expenses under Paragraph 18 (g)

of the co-tenancy agreement, which provides for recovery of such expenses by the

prevailing party in any litigation involving the agreement. Second, Downing and

6428 Church asserted that Shannon and SMC have acted in bad faith and been

                                           16
stubbornly litigious, entitling them to an award of litigation expenses pursuant to

OCGA § 13-6-11.6 The trial court granted Shannon and SMC summary judgment on

both facets of this counterclaim, concluding that “[a]s [d]efendants’ underlying claim

for breach of the [c]o-[t]enancy agreement fails, so does their derivative claim for

attorney’s fees.”

      (a) This ruling was error and must be reversed as to 6428 Church’s

counterclaim for litigation expenses against Shannon. As found in Division 3,

Shannon was not entitled to summary judgment on the counterclaim for breach of

contract. And questions of fact remain with respect to 6428 Church’s derivative

counterclaim for litigation expenses, particularly regarding paragraph 18 (g) of the

co-tenancy agreement. Summary judgment, therefore, was improper as to this

counterclaim.

      (b) The trial court, however, correctly granted summary judgment to SMC on

6428 Church’s counterclaim for litigation expenses, which is based solely on OCGA

§ 13-6-11. As we have noted, this code section “does not permit the recovery of

      6
       “The expenses of litigation generally shall not be allowed as a part of the
damages; but where the plaintiff has specially pleaded and has made prayer therefor
and where the defendant has acted in bad faith, has been stubbornly litigious, or has
caused the plaintiff unnecessary trouble and expense, the jury may allow them.”
OCGA § 13-6-11.

                                         17
expenses incurred in defending a lawsuit.” Dennis-Smith v. Freeman, 277 Ga. App.

822, 825 (3) (627 SE2d 872) (2006) (citations omitted; emphasis in original). The

record shows that 6428 Church did not assert a substantive counterclaim against

SMC. Accordingly, because 6428 Church is merely a defendant as to SMC, its claim

for litigation expenses against the company fails as a matter of law. See Dennis-

Smith, supra; Langley v. Nat. Labor Group, 262 Ga. App. 749, 754 (3) (586 SE2d

418) (2003) (“[A] defendant may only assert a counterclaim under OCGA § 13-6-11

if it has a viable independent counterclaim[.]”).

      (c) The same fatal flaw undermines Downing’s counterclaim against Shannon

and SMC for litigation expenses under OCGA § 13-6-11. Downing is not a party to

6428 Church’s counterclaim for breach of contract or any other substantive

counterclaim. He is merely a defendant. Shannon and SMC, therefore, were entitled

to summary judgment on his litigation expense counterclaim. See Dennis-Smith,

supra; Langley, supra.

      Judgments in Case Nos. A19A0931 and A19A0963 affirmed. Case No.

A19A0930 affirmed in part and reversed in part. Barnes, P. J., and Brown, J.,

concur.

                                         18