Court Opinion

ID: 4220018
Source: CourtListenerOpinion
Date Created: 2017-11-14 09:10:10.4373+00
Date Added: 2024-06-11T09:23:11.680578
License: Public Domain

THIRD DIVISION
                            ELLINGTON, P. J.,
                        ANDREWS and RICKMAN, 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

                                                                  November 2, 2017

In the Court of Appeals of Georgia
 A17A1031. EMM CREDIT, LLC v. ALEXANDER REMINGTON
      et al.

      RICKMAN, Judge.

      Nearly 13 years after filing suit, EMM Credit, LLC prevailed in a jury trial

against defendants Alexander Remington, Cara Guri, and American National Holding

Corporation (“ANHC”). EMM Credit sought a declaratory judgment that Remington

is the “true owner” of ANHC, meaning that Remington owns all of the shares of

ANHC, and sought to set aside as fraudulent the conveyance of certain property from

Remington to ANHC. The jury determined that Remington is the true owner of

ANHC and that Remington fraudulently transferred property to ANHC. The trial

court subsequently issued an order granting “Defendants’ Renewed Motion for

Directed Verdict/Motion for Judgment Notwithstanding the Verdict.” EMM Credit
appeals that order , contending that the trial court erred in granting a directed verdict

on its declaratory judgment and fraudulent transfer claims and by refusing to admit

certain evidence at trial. For reasons that follow, we affirm in part and reverse in part.

             On appeal from a trial court’s rulings on motions for directed
      verdict and judgment notwithstanding the verdict, we review and resolve
      the evidence and any doubts or ambiguities in favor of the verdict;
      directed verdicts and judgments notwithstanding the verdict are not
      proper unless there is no conflict in the evidence as to any material issue
      and the evidence introduced, with all reasonable deductions therefrom,
      demands a certain verdict.

(Citations and punctuation omitted.) Vol Repairs II Inc. v. Knighten, 322 Ga. App.

416, 417 (745 SE2d 673) (2013).

      So viewed, the evidence shows that in July 1997, Alexander Remington

became a director of NewCom, Inc., now known as NCom, Inc. (“NCom”).

Remington was also the majority owner of Micro Equipment Corporation (“MEC”),

one of NCom’s largest suppliers. In 2002, Remington entered a plea agreement in

which he admitted to engaging in a scheme to defraud and embezzle money from

NCom by padding invoices from MEC to NCom. This scheme began in 1996 and

continued until 1999, resulting in the embezzlement of approximately $1,100,000.

                                            2
Remington pled guilty to and was convicted of committing mail fraud and wire fraud

in federal court in California.

      After learning about Remington’s guilty plea and investigating the nature of

the crime, NCom demanded payment from Remington. When those demands went

unanswered, NCom filed suit in federal court in California in 2003, and in 2006,

obtained a $2,533,000 judgment for intentional fraud against Remington, MEC, and

Cara Guri, MEC’s chief financial officer and Remington’s girlfriend. While the

California litigation was ongoing, NCom discovered that in 1996, Remington had

purchased an industrial building in Gwinnett County, Georgia, and immediately

transferred it to ANHC. In 2003, NCom filed suit in Georgia against Remington,

Guri, ANHC, and others, seeking, inter alia, a declaration that Remington owns all

the shares of ANHC and that NCom may enforce its judgment against those shares

and to void the allegedly fraudulent transfer of the Gwinnett County property (the

“Property”) from Remington to ANHC. In 2007, NCom assigned the California

judgment to EMM Credit Corporation, who then assigned it to EMM Credit in 2008.

EMM Credit was substituted as the party plaintiff in this case in 2009.

      At trial in Georgia, the parties presented a significant amount of evidence about

the purchase and transfer of the Property. Curt Thompson testified that he had been

                                          3
the general counsel for MEC and ANHC and also served as Remington’s personal

attorney on occasion. He was involved in Remington’s purchase of the Property in

1996 from Allstate Life Insurance Company and the subsequent transfer to ANHC.

The Purchase and Sale Agreement was executed by Allstate as seller and Remington

as buyer. There was an addendum to that agreement, which was prepared by counsel

for Allstate, and provided that “[u]pon the Closing of the purchase of the Property,

Buyer will transfer its interest in the Property to [ANHC], a Georgia corporation

wholly owned by Buyer,” with Buyer being defined as Remington. Thompson struck

through the words “wholly owned by Buyer,” and sent the document back to

Allstate.1

       At the closing, Thompson represented Remington and ANHC and Remington

was present, but no other representatives of ANHC attended. Remington executed the

closing documents on behalf of himself individually and Thompson executed the

documents on behalf of ANHC. Remington purchased the Property from Allstate for

       1
       Thompson testified that he struck it out because it was inaccurate. He also
acknowledged later in his testimony that he had been found in contempt of court, but
when asked if he had provided false information to a judge, he asserted his Fifth
Amendment right not to testify further about the matter.

                                         4
$1,540,000, then transferred it to ANHC for $800,000, and executed a note in favor

of Allstate for the remaining $740,000.

      In addition to the Note, Remington executed a Deed to Secure Debt and a UCC

2, pledging the Property and his personal property as collateral. ANHC also pledged

certain collateral to Allstate via a UCC 2 that was prepared by Allstate and originally

had a signature line for Remington, as President of ANHC, but Thompson crossed

that out and signed it himself as Vice President and general counsel of ANHC.2

Remington, Thompson, and Guri also executed a Certified Corporate Resolution of

ANHC for the purchase of the Property. Remington signed the document as

President/CEO of ANHC.3 Shortly after the closing in April 1996, MEC leased the

building on the Property from ANHC.

      One of Remington’s brothers, Seyed Hamid Zahari, also known as Gino, who

claimed that he and another brother, Mohammed Zahari, also known as Tony, had

been involved in ANHC since its inception in 1992 and that Remington was not

involved, testified that Remington purchased the Property because he and Tony were

      2
        Thompson testified that he crossed it out and signed his name because it was
inaccurate and he was the only one authorized to sign those documents at closing.
      3
        Remington also signed a signature card for ANHC’s commercial checking
account, as CEO of the corporation.

                                          5
not sufficiently credit-worthy to complete the transaction.4 But Gino testified that they

did come up with $800,000 for ANHC’s down payment, with Tony contributing

$400,000 from his business in Dubai and Gino contributing $400,000 his father gave

him. Gino testified that the $800,000 was wired from Dubai to the United States for

the closing, but there are no records of the wire transfer. The remaining $740,000

owed to Allstate was personally guaranteed by Remington because Gino and Tony

did not have the necessary credit, and was paid with funds from MEC.

      The trial included extensive testimony regarding ANHC’s stock ledger and

stock certificates. Guri testified that the original owners of ANHC were her and

Remington’s brothers, Gino and Tony. Guri identified a reconstructed stock ledger

for ANHC showing that she, Gino, and Tony owned shares in ANHC, and testified

that the original ledger was “lost or stolen or not found.” Guri also identified

replacement stock certificates dated September 2006, which indicated that she owned

300 shares, Gino owned 4900 shares, and Tony owned 4800 shares. According to

Guri, the original certificates were “lost, stolen; we don’t know.” She does not recall

ever looking at the corporate books. Gino testified that the original stock certificates

      4
        Gino’s video deposition was taken in Dubai, where he resided, and was
played for the jury.

                                           6
were kept in a binder in Guri’s office, but they were lost so they asked their attorney

to prepare new ones.

      EMM Credit’s director testified that, during the litigation, he had requested

documentation to support the defendants’ claim that Gino and Tony owned ANHC,

and in response, ANHC’s outside counsel sent a copy of a stock ledger. When EMM

Credit’s director questioned the legitimacy of the ledger, ANHC’s counsel responded

in October 2006 that “the stock transfer record was reconstructed by my firm as

ANHC’s corporate counsel due to lost/destroyed old records.” EMM Credit’s director

testified that the attorney “came up with different stories” about how they lost the

originals.

      At the close of EMM Credit’s case, Remington, Guri, and ANHC moved for

a directed verdict on several grounds, including that EMM Credit had failed to join

necessary parties and that fraudulent transfer claims are not assignable. The trial court

reserved ruling on the motions for directed verdict at that time and when the

defendants renewed their motions at the close of the evidence. After the jury rendered

its verdict that (1) Remington is the true owner of ANHC, (2) Remington fraudulently

transferred the Gwinnett County building to ANHC, and (3) EMM Credit filed its

                                           7
lawsuit within the applicable statute of limitations, the trial court granted defendants’

renewed motion for directed verdict/motion for judgment notwithstanding the verdict.

      1. EMM Credit contends that the trial court erred by granting a directed verdict

or a judgment notwithstanding the verdict on its declaratory judgment claim.

Specifically, EMM Credit argues that the trial court invaded the province of the jury

to determine that indispensable parties were not joined and that the trial court’s

analysis under OCGA § 9-11-19 was incomplete and erroneous.

      EMM Credit sought a declaration that Remington is the “true owner” of

ANHC, meaning that Remington owns all of the shares of ANHC. At the conclusion

of the trial, the jury determined that Remington was the true owner of ANHC. The

trial court granted a directed verdict or judgment notwithstanding the verdict on that

claim based on its determination that EMM Credit had failed to join indispensable

parties, Gino and Tony Zaharai. Specifically, the court found that “at least at the time

of trial, there was evidence presented that Seyed “Gino” Zaharai and Mohammad

“Tony” Zaharai owned shares of stock in ANHC, and that “[a]s [EMM Credit] has

failed to join these individuals as defendants in this case, [it] cannot obtain the relief

[it is] seeking on this claim.” The trial court did recognize, however, that the jury

                                            8
verdict “reflects that the jury believed from the evidence presented that Defendant

Remington and not the non-parties Gino and Tony was the true owner of ANHC.”

      (a) The trial court erred in determining that Gino and Tony were indispensable

parties. Pursuant to OCGA § 9-11-19 (a),

      A person who is subject to service of process shall be joined as a party
      in the action if: (1) In his absence complete relief cannot be afforded
      among those who are already parties; or (2) He claims an interest
      relating to the subject of the action and is so situated that the disposition
      of the action in his absence may . . . [a]s a practical matter impair or
      impede his ability to protect that interest.

The trial court determined that Gino and Tony were indispensable parties because

evidence was presented that they were issued shares of ANHC.5 Based on our review

of the evidence, we conclude that the joinder of Gino and Tony was not necessary for

a just adjudication of the merits of this case because their interests were adequately

protected by the other defendants. See Halta v. Bailey, 219 Ga. App. 178, 179 (1)

(464 SE2d 614) (1995) (joinder of grantee and first taker of shares of closely held

stock in action for declaratory judgment and claim of fraudulent conveyance was not

      5
       As pointed out by EMM Credit, this was actually a determination that Gino
and Tony were necessary parties under OCGA § 9-11-19 (a).

                                           9
“necessary for a just adjudication of the merits of this action, and neither is required

for complete relief”). Gino’s videotaped testimony was presented at trial and his

testimony as to his and Tony’s ownership of the shares in ANHC was consistent with

testimony from Guri, another claimed shareholder and a named party, and with the

reconstructed stock ledger and replacement stock certificates introduced in evidence.

In addition to Thompson’s testimony, appellees presented evidence from the current

president of and legal custodian of corporate records for ANHC, who identified

documents indicating that Tony was involved in ANHC before this lawsuit was filed

and that as of July 2009, Tony was named the chief financial officer for ANHC. The

appellees also presented testimony from an expert witness in the field of corporate

law, who testified about the proper procedure for addressing a lost stock ledger and

lost stock certificates. Thus, the appellees presented a thorough case on behalf of all

of the claimed shareholders of ANHC, and their efforts to present evidence relevant

to the ownership of ANHC were not hampered by the fact that Tony and Gino were

not parties. Accordingly, the trial court erred in determining that Tony and Gino were

indispensable parties. See Stendahl v. Cobb County, 284 Ga. 525, 529 (2) (668 SE2d

723) (2008) (where existing party presents a thorough case on behalf of itself and the

non-party, the non-party “does not fit within the definition of ‘indispensable party’

                                          10
because the case could be decided on its merits without prejudicing the rights of the

[non-party]”); Halta, 219 Ga. App. at 179-180 (1) (trial court did not err in denying

motion for directed verdict for failure to add indispensable parties when one of the

non-parties testified at trial and defendant’s ability to present relevant testimony and

evidence was not affected by whether they were parties to action).

      (b) There was at least some evidence to support the jury’s verdict on EMM

Credit’s declaratory judgment claim.

      Neither a directed verdict nor a j.n.o.v. can be granted where there is
      some evidence to support the verdict. Where evidence is in conflict, the
      grant of such motions is error. Only when there is no evidence to
      support the verdict can either a directed verdict or j.n.o.v. be granted,
      because the evidence demands a verdict contrary to that returned by the
      jury.

(Citations omitted.) Rental Equip. Group, LLC v. MACI, LLC, 263 Ga. App. 155, 157

(1) (a) (587 SE2d 364) (2003).

      Appellees argue that no evidence supports this claim because EMM Credit has

failed to cite to any documents or testimony showing that Remington was issued

stock certificates in ANHC. But “one may have an ownership interest in a corporation

without having received stock certificates.” Kueffer Crane & Hoist Svc., Inc. v.

                                          11
Passarella, 247 Ga. App. 327, 329 (2) (543 SE2d 113) (2000). And there is at least

some evidence to support the jury’s determination that Remington is the true owner

of ANHC, including, inter alia, the closing documents, the participants at closing,

Remington’s potential liability on behalf of ANHC after the closing, the arguably

dubious nature of the testimony regarding funding for the purchase of the Property,

and the arguably suspicious timing of and explanation for the re-creation of the

missing or lost or stolen stock ledger and stock certificates. See Halta, 219 Ga. App.

at 180 (2) (plaintiff introduced sufficient evidence from which a jury could conclude

that corporation was formed only to serve as a means by which to fraudulently

transfer assets). “The countervailing evidence, [even if substantial], could be

disbelieved by the jury and did not authorize the court to grant a directed verdict.”

Teklewold v. Taylor, 271 Ga. App. 664, 667 (1) (b) (610 SE2d 617) (2005).6

Accordingly, the trial court erred in determining that EMM Credit had failed to join

indispensable parties and in granting a directed verdict or judgment notwithstanding

the verdict on EMM Credit’s declaratory judgment claim on that basis.7

      6
        The jury was instructed that it must use common sense and reason to decide
what testimony to believe or not to believe.
      7
        Relying on OCGA § 9-4-7 (a), which provides that “[n]o declaration shall
prejudice the rights of persons not parties to the proceeding,” appellees also argue

                                         12
      2. EMM Credit contends that the trial court erroneously refused to admit a

videotaped deposition of an Allstate representative, Allstate’s closing binder, and/or

a fully executed First Addendum to the Purchase and Sale Agreement between

Allstate and Remington, without the phrase “wholly owned by Buyer” marked

through. EMM Credit argues that this evidence was critical to its case because it

shows that the parties did not strike through the phrase “wholly owned by Buyer” in

the First Addendum and is therefore dispositive as to Remington’s ownership of

ANHC and the fact that Tony and Gino have no interest in the company and are not

indispensable parties. Given our determination in Division 1 that the trial court erred

in granting a directed verdict or judgment notwithstanding the verdict on EMM

Credit’s “true owner” claim, we need not reach this issue.

      3. EMM Credit contends that the trial court erred by determining that its

fraudulent transfer claim was not assignable.

that EMM Credit was precluded as a matter of law from declaring the shares
belonging to Gino and Tony invalid. As set forth above, however, Gino and Tony
were not prejudiced by not being added as parties to this action. And the jury’s
determination that Remington was the sole owner of ANHC necessarily required that
it disbelieve the evidence that Gino and Tony actually owned any interest in the
corporation.

                                          13
      In its Second Amended and Restated Complaint, EMM Credit alleged that the

1996 conveyance of the Property from Remington to ANHC was fraudulent and

sought to set it aside. At the time the initial complaint was filed, the Georgia Uniform

Fraudulent Transfers Act, OCGA § 18-2-70 et seq. (the “UFTA”), provided that “[a]

transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether

the creditor’s claim arose before or after the transfer was made or the obligation was

incurred, if the debtor made the transfer or incurred the obligation . . . [w]ith actual

intent to hinder, delay, or defraud any creditor of the debtor.” OCGA § 18-2-74 (a)

(1) (2003). Under the UFTA, a “creditor” is “a person who has a claim,” a “debtor”

is “a person who is liable on a claim,” and a “claim” is “a right to payment, whether

or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent,

matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.”

OCGA § 18-2-71 (3), (4), (6) (2003). There is no dispute that NCom would qualify

as a “creditor” and Remington would qualify as a “debtor,” but the applicable version

of the UFTA does not specifically address the assignment of claims.8

      8
        The UFTA was amended in 2015 and is now called the Uniform Voidable
Transactions Act. See Ga. L. 2015, pp. 996, 1019, § 4A-1. The UVTA now defines
“creditor” as “a person who has a claim, regardless of when the person acquired the
claim, together with any successors or assigns.” OCGA § 18-2-71 (4). In addition,
OCGA § 18-2-74 added a subsection (c), which provides that “[i]f a creditor is a

                                          14
       OCGA § 44-12-24 provides that “a right of action is assignable if it involves,

directly or indirectly, a right of property. A right of action for personal torts, for legal

malpractice, or for injuries arising from fraud to the assignor may not be assigned.”

In Security Feed & Seed Co. of Thomasville v. Ne Smith, 213 Ga. 783 (102 SE2d 37)

(1958), the Supreme Court of Georgia construed an earlier version of this statute and

held that an assignee of accounts receivable could not maintain an action to set aside

an alleged fraudulent deed made prior to the date the accounts receivable were

assigned. Id. at 783-784 (1). In RES-GA Hightower, LLC v. Golshani, 334 Ga. App.

176 (778 SE2d 805) (2015), this Court determined that the UFTA had not displaced

Ne Smith’s construction of the statute and held that “an assignee of debt is precluded

from pursuing a fraudulent transfer claim even though the assignee meets the

definitions of a “creditor” with a “claim” under the UFTA.” Id. at 180 (1) (a). And in

Merrill Ranch Properties, LLC v. Austell, 336 Ga. App. 722 (784 SE2d 125) (2016),

a case “factually indistinguishable” from Golshani “insofar as both involve standing

to assert a fraudulent transfer claim based on the assignment of a debt,” this Court

successor or assignee, a right of action under subsection (a) of this Code section is
automatically assigned to such successor or assignee.” These amendments apply to
transfers made or obligations incurred on or after July 1, 2015. See Ga. L. 2015, pp.
996, 1029, § 7-1 (d).

                                            15
held that an assignee of a loan lacks standing under the UFTA to contest property

transfers that occurred prior to the assignment. Id. at 732 (3).

      Relying on Golshani, Merrill Ranch, and Ne Smith, the trial court granted the

motion for directed verdict on EMM Credit’s fraudulent transfer claim. EMM Credit

contends that those cases are distinguishable because they involve the assignment of

a debt and this case involves the assignment of a judgment, and that the applicable

statute is not OCGA § 44-12-24, but OCGA § 9-12-21, which provides that

      [a] person in whose favor a judgment has been entered or a person to
      whom a judgment has been transferred may bona fide and for a valuable
      consideration transfer any judgment to a third person. In all such cases
      the transferee of any judgment shall have the same rights and shall be
      subject to the same equities and to the same defenses as was the original
      holder of the judgment.

       Although Golshani did not involve the assignment of a judgment, this Court

responded to attempts to distinguish Ne Smith on that basis by stating that the case

did not turn on whether the assignee had obtained a judgment because “the key

inquiry for the Court appeared to be the equitable nature of the claim and its basis in

fraud, rather than the source of the creditor’s rights vis-à-vis the debtor.” Golshani,

334 Ga. App. at 180 (1) (a). Golshani has recently been extended to a situation where

                                          16
a creditor was assigned the rights to collect on a judgment, and this Court held that

the creditor’s UFTA claim seeking to set aside a property transfer was unassignable

for the reasons set forth in Golshani. See Callaway Blue Springs, LLLP v. West Basin

Capital, LLC, 341 Ga. App. 535, 540 (1) (801 SE2d 325) (2017); see also RES-GA

Loganville, LLC v. Panola Crossings, LLC, No. A17A0382 at *9 (August 28, 2017)

(unpublished) (“Golshani makes clear that the rule against the assignment of

fraudulent conveyance claims does not turn on whether the assignee has rights

flowing from a judgment rather than the underlying loan documents”). And in a very

recent decision, the Supreme Court of Georgia expressly agreed “with the reasoning

of the Court of Appeals in Golshani, Callaway, and Merrill, that our decision in Ne

Smith correctly stated the law [regarding an assignee’s ability to pursue a fraudulent

transfer claim] until it was changed by the enactment of [the] UVTA . . . .” RES-GA

McDonough, LLC v. Taylor English Duma LLP, ___ Ga. ___ (1) (No. S17A1125;

October 30, 2017). Based on existing authority, we are compelled to uphold the trial

court’s ruling on EMM Credit’s fraudulent transfer claim.

      EMM Credit also contends that appellees have waived their right to challenge

standing because they failed to object to a motion to substitute under OCGA § 9-11-

25 (c). EMM Credit is correct that appellees have waived any right to challenge EMM

                                         17
Credit’s substitution as a party to this litigation because that issue was resolved in a

prior appeal. See American Nat. Holding Corp. v. EMM Credit, LLC, 323 Ga. App.

655, 659 (2) (756 SE2d 1) (2013) (“when the trial court explicitly afforded the parties

opportunity to be heard on the [substitution] motion, American National advised the

court that it had ‘no objection to EMM substituting in as NCOM’”). But OCGA § 9-

11-25 (c) “is a procedural rule and does not alter the substantive rights of the parties

or the successor corporation.” Nat. City Mtg. Co. v. Tidwell, 293 Ga. 697, 700 (2)

(749 SE2d 730) (2013). Nor does it “automatically authorize the continuance of an

original action in all cases following the transfer of an interest. If a cause of action

does not survive a subsequent transfer of interest, OCGA § 9-11-25 (c), standing

alone, would not revive it.” Gene Thompson Lumber Co. v. Davis Parmer Lumber

Co., 189 Ga. App. 573, 575 (3) (a) (377 SE2d 15) (1988). We have determined, based

on existing authority, that NCom’s fraudulent transfer claim did not survive the

assignment of the California judgment. EMM Credit’s substitution as plaintiff under

OCGA § 9-11-25 (c) cannot revive it. See id.

      EMM Credit contends that Appellees consented to the transferability of

NCom’s rights in a 1997 Settlement Agreement involving all parties to this appeal.

Specifically, EMM Credit relies on two components of the agreement – If NCom is

                                          18
successful in this case, it can levy on the Property, and the agreement is binding on

NCom’s successors and assigns. Because EMM Credit will not be successful on its

fraudulent transfer claim in this appeal, we need not consider this contention.

      Judgment affirmed in part, reversed in part. Ellington, P. J., and Andrews, J.,

concur.

                                         19