Court Opinion

ID: 3202422
Source: CourtListenerOpinion
Date Created: 2016-05-11 07:04:12.547113+00
Date Added: 2024-06-11T07:39:15.875231
License: Public Domain

FIFTH DIVISION
                                PHIPPS, P. J.,
                         DILLARD and PETERSON, 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

                                                                        May 2, 2016

In the Court of Appeals of Georgia
 A16A0282. SIMS v. NATURAL PRODUCTS OF GEORGIA, LLC PE-011
     et al.

      PETERSON, Judge.

      James Sims sued Richard Creasman, Robert Wilkinson, and Natural Products

of Georgia, LLC (“Natural Products”) for breach of a promissory note, fraud, and

violation of the Georgia Securities Act (“GSA”), OCGA § 10-5-50. Following a

bench trial, the trial court entered a judgment in favor of Sims on the promissory note

and ordered Natural Products to pay the balance owed on the note, and entered

judgment for Wilkerson and Creasman on the other claims because their conduct did

not rise to the level of fraud and did not violate the GSA. Sims appeals and argues
that the trial court erred in concluding that Creasman did not commit fraud or violate

the GSA.1 Because the evidence supports the trial court’s verdict, we affirm.

      On appeal from the entry of judgment in a bench trial, we review the trial

court’s factual findings under the clearly erroneous standard and will not disturb

those findings if there is any evidence to support them. See Mail Advert. Sys., Inc. v.

Shroka, 249 Ga. App. 484, 484 (548 SE2d 461) (2001). Additionally, we view the

evidence in the light most favorable to the trial court’s verdict. Cox Interior, Inc. v.

Bayland Properties, LLC, 293 Ga. App. 612, 613 (1) (667 SE2d 452) (2008).

      So viewed, the evidence shows that around 2011 or 2012, Creasman and

Wilkerson formed Natural Products to produce and sell tomatoes grown year-round

inside greenhouses. Creasman and Wilkerson received assistance from the U.S. Small

Business Administration and presented their business plan to potential investors.

They also engaged in conversations with local representatives of Ingles Markets, Inc.

for the purchase of Natural Products’ produce.

      1
       Although Sims also raises claims against Wilkerson on appeal, he conceded
below that he was barred from asserting these claims due to Wilkerson’s bankruptcy
discharge. Therefore, we will consider only those claims against Creasman.

                                           2
      Creasman and Wilkerson subsequently approached Sims about investing in

Natural Products and presented him with the company’s business plan. Wilkerson and

Creasman advised Sims that Natural Products needed a total of $1.5 million to start

operations and asked him for $150,000 to help fund the company for a few months

until they secured additional investments, which they believed would happen based

on conversations with a potential investor in North Carolina. Sims agreed to give

$150,000 to Natural Products in exchange for the company’s promise to pay him

$525,000 in semi-annual installments beginning in February 2013. The parties

executed a promissory note in February 2012 to reflect this agreement, and the

promissory note also provided that the funds were to be used only for the purpose of

constructing greenhouses in Barrow County.

      Wilkerson and Creasman, who both signed the promissory note on behalf of

Natural Products, deposited the funds into the company’s bank account. Soon

thereafter, Wilkerson and Creasman issued checks from the bank account to pay

themselves $600 each per week and other amounts periodically as salary. Natural

Products paid Sims $50,000 in February 2013, but failed to make any other payments

and failed to construct any greenhouses with the money Sims provided.

                                         3
      Sims filed this lawsuit, alleging that the defendants defrauded him because they

knew they would not use his investment for the building of greenhouses, as they had

promised Sims, and that their actions also violated the GSA. At the bench trial,

Wilkerson testified that he and Creasman intended to pay Sims all that Sims was

owed once they received additional funding to get the business operational. Creasman

testified that he had a small operational greenhouse and believed that an investment

group would provide sufficient funding to expand the operations. Following the trial,

the trial court found in favor of Creasman on the fraud and GSA claims, and entered

a default judgment against Natural Products on the promissory note for its failure to

file an answer.

      1. Sims argues that the trial court erred in finding that Creasman’s actions did

not rise to the level of fraud because Creasman did not intend to honor the terms of

the promissory note at the time he signed it on behalf of Natural Products. In support

of his argument, Sims relies on evidence showing that subsequent to the execution

of the promissory note, Creasman used the funds from Sims’ loan to pay himself a

salary.

      In most circumstances, actionable fraud cannot be predicated on a
      promise contained in a contract because the promise is to perform some

                                          4
      act in the future, and normally, fraud cannot be predicated on statements
      which are in the nature of promises as to future events. However, an
      exception to the general rule exists where a promise as to future events
      is made with a present intent not to perform or where the promisor
      knows that the future event will not take place. Additionally, if the
      particular statement at issue in the contract was not a future promise but
      a present misrepresentation of fact, it is sufficient to support a claim for
      fraud.

BTL COM Ltd. v. Vachon, 278 Ga. App. 256, 258 (628 SE2d 690) (2006) (citations

and punctuation omitted). “Fraudulent intent at the time of contracting can [also] 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.” Id. at 261 (1) (628 SE2d 690) (2006) (citation omitted).

Actionable fraud, however, does not “result from a mere failure to perform promises

made. Otherwise any breach of a contract would amount to fraud.” J. Kinson Cook

of Ga., Inc. v. Heery/Mitchell, 284 Ga. App. 552, 558 (d) (644 SE2d 440) (2007)

(citation omitted). “[T]he question of intent to deceive or not to perform is in all cases

the dominion of the fact finder; on appeal, the presumption lies in favor of the verdict

where there is any evidence to support it.” Gunnin v. Dement, 205 Ga. App. 631, 633

(2) (422 SE2d 893) (1992) (internal punctuation and citations omitted).

                                            5
      Viewing the trial evidence in the light most favorable to the trial court’s

verdict, the evidence supports the trial court’s finding that Creasman did not commit

fraud. Upon approaching Sims to request funding, Wilkerson and Creasman advised

Sims that the $150,000 they sought would fund Natural Products for a few months

until they secured a total of $1.5 million to get the business fully operational.

Although Creasman and Wilkerson used the funds from Sims’ loan to pay themselves

weekly salaries of $600 each, rather than construct greenhouses as provided in the

promissory note, these payments are not, as a matter of law, a business practice that

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

contracting party who had been acting in good faith. As the fact-finder in this case,

the trial court was authorized to reject Sims’ claim that the payment of salaries

subsequent to the execution of the promissory note showed that Creasman lacked the

present intent to comply with the agreement at the time the agreement was executed.

See Pacrim Assocs. v. Turner Home Entm’t, Inc., 235 Ga. App. 761, 767 (3) (510

SE2d 52) (1998) (trial court properly granted summary judgment to defendant where

no evidence showed defendant had a present intent not to comply with its promise to

retain plaintiff as an exclusive licensing agent for one year); Futch v. Lowndes Cnty.,

297 Ga. App. 308, 311 (1) (676 SE2d 892) (2009) (affirming grant of summary

                                          6
judgment to county where no evidence showed that county’s promise to re-grade

ditch was made with present intent not to perform). Therefore, the trial court was

authorized to conclude that Creasman did not commit fraud.

      2. Sims next argues that the trial court erred in concluding that Creasman did

not violate OCGA § 10-5-50, which provides:

      It is unlawful for a person, in connection with the offer, sale, or purchase
      of a security, directly or indirectly: (1) To employ a device, scheme, or
      artifice to defraud; (2) To make an untrue statement of a material fact or
      omit to state a material fact necessary in order to make the statement
      made, in the light of the circumstances under which it is made, not
      misleading; or (3) To engage in an act, practice, or course of business
      that operates or would operate as a fraud or deceit upon a person.

OCGA § 10-5-50 requires a showing of intent to defraud. See Branan v. State, 285

Ga. App. 717, 720 (2) (a) (647 SE2d 606) (2007) (decided under previous Code

section).

      In support of Sims’ argument that Creasman intended to defraud him in

violation of OCGA § 10-5-50, Sims generally relies on the evidence regarding

Creasman’s payments of weekly salaries. We have already concluded above in

Division 1, however, that the trial court was authorized to conclude that this evidence

did not establish an intent to defraud.

                                           7
      Sims also argues that the promissory note2 itself was fraudulent because it

omitted the fact that Natural Products needed $1.5 million before it would construct

a greenhouse. Even though the promissory note makes no mention of this

requirement, Wilkerson testified that he and Creasman advised Sims that Natural

Products needed $1.5 million to start the business, and Sims’ loan or investment

would be used to fund the company for a few months until they secured additional

funding. Wilkerson testified that he and Creasman intended to pay Sims all that he

was owed once they received additional funding to get the business operational. The

trial court, as the fact finder in this case, was authorized to accept Wilkerson’s

testimony that Sims was aware that additional funding was required before Natural

Products was operational. See Hayes v. Alexander, 264 Ga. App. 815, 817 (1) (592

      2
       Because Wilkerson and Creasman intended to use Sims’ funds in conjunction
with additional investments, and promised a $375,000 return on his $150,000 “loan,”
the promissory note met the definition of a security as provided under OCGA § 10-5-
2. See Rasch v. State, 260 Ga. App. 379, 384-85 (1) (579 SE2d 817) (2003) (a
promissory note can be a security instrument if it is “an investment in a common
venture; (2) premised on a reasonable expectation of profits; and (3) to be derived
from the entrepreneurial or managerial efforts of others”) (citations and punctuation
omitted).

                                         8
SE2d 465) (2003). Because there is evidence supporting the trial court’s finding that

Creasman did not intend to defraud Sims, we must affirm.

      Judgment affirmed. Phipps, P. J., and Dillard, J., concur.

                                         9