text:
    A12A0891.
    CARSON v. OBOR HOLDING COMPANY, LLC.
    (734 SE2d 477)
   Branch, Judge.

Alan Carson is a member of Obor Holding Company, LLC, and a former employee of its wholly-owned subsidiary, Obor Digital, LLC. After Obor Digital significantly reduced his compensation, Carson claimed he had been constructively discharged from Obor Digital, resigned from the Management Committee of Obor Holding, and filed suit against Obor Holding, seeking to enjoin it from enforcing against him the restrictive covenants contained in the current Obor Holding Operating Agreement. Obor Holding moved to dismiss Carson’s complaint based upon the forum selection clause contained in the Operating Agreement, which provides that any disputes arising out of the Operating Agreement will be litigated in Florida. Carson opposed the motion to dismiss, arguing that the trial court should find the forum selection clause unenforceable because allowing a Florida court to decide the enforceability of the noncompete agreements would violate Georgia’s public policy, as that policy existed at the time he executed the Operating Agreement. In support of this claim, Carson pointed to the fact that the forum selection clause also contained a choice of law provision requiring the application of Florida law to any disputes between the parties. The court below granted the motion to dismiss and Carson now appeals from that order. Finding that the trial court erred when it found the Operating Agreement’s forum selection clause enforceable in this case, we reverse.

When an appeal is taken from a dismissal based upon a contractual forum-selection clause, we owe no deference to the decision of the court below, and our review is de novo. The Houseboat Store v. Chris-Craft Corp., 302 Ga.App. 795 (692 SE2d 61) (2010).

The facts relevant to this appeal are undisputed, and show that Obor Holding is a Florida corporation formed in 2006 for the purpose of owning Obor Digital, a company that provides software and staffing services to clients in the defense industry. Obor Holding conducts business in Florida and Georgia. At all times relevant to this case, Carson has been a Georgia resident, having lived here since 1984. He executed Obor Holding’s Amended and Restated Operating Agreement in February 2007, and that agreement became effective in July 2007. Pursuant to the Operating Agreement, the business of Obor Holding is conducted by a four-person Management Committee, with each member of that committee being a Director of the company. From February 2006 until his resignation on September 2, 2011, Carson served as a member of the Management Committee and therefore as a Director of Obor Holding. The Operating Agreement contains several restrictive covenants that apply only to the Directors of the company, including a covenant of nondisclosure, a nonsolicitation covenant, and a noncompete covenant. The Operating Agreement also has a forum selection clause, which states that any legal actions brought for the purpose of “enforcing] any rights or obligations” thereunder “shall be [brought] in Orange County, Florida.” The choice of law provision found in this clause states that the Operating Agreement shall be governed by Florida law.

In 2007, Carson went to work for Obor Digital as its Vice President of Sales. In that capacity, Carson was originally responsible for the sales of, and training services related to, a specific software product. He later helped Obor Digital build a business providing technical staffing services to clients in the defense industry. According to Carson, he was constructively discharged from Obor Digital in April 2011, when the company unilaterally reduced his sales commissions. Since that time, Carson has worked to establish a consulting business providing business development and sales advice to companies in the defense industry. In September 2011, Carson resigned from Obor Holding’s Management Committee, although he remains a member of Obor Holding. At or about the same time he resigned from the Management Committee, Carson filed the current action.

The issue before us is whether the forum selection clause contained in the Operating Agreement is enforceable against Carson. Because forum selection clauses involve procedural and not substantive rights, we apply Georgia law to determine the enforceability of the clause here, even though it contains a choice of law provision requiring that the laws of Florida shall govern. The Houseboat Store, 302 Ga. App. at 797-798 (1) (b).

Contractual forum-selection clauses are “prima facie valid” and, therefore, presumptively enforceable. OFC Capital v. Colonial Distrib., 285 Ga. App. 815, 817 (648 SE2d 140) (2007); see also The Bremen v. Zapata Off-Shore Co., 407 U. S. 1 (92 SC 1907, 32 LE2d 513) (1972). Thus, the party seeking to avoid such a clause must show a compelling reason why it should not be enforced. See SR Business Svcs. v. Bryant, 267 Ga. App. 591, 592 (600 SE2d 610) (2004). Our prior cases establish that public policy may afford a compelling reason to avoid a forum-selection clause, Iero v. Mohawk Finishing Products, 243 Ga.App. 670, 671 (534 SE2d 136) (2000), at least to the extent that proceedings in the selected forum are likely to produce a result that offends a settled public policy of Georgia, Bunker Hill Intl. v. NationsBuilder Ins. Svcs., 309 Ga. App. 503, 506 (710 SE2d 662) (2011). During the relevant time period, one such settled public policy in Georgia was that certain agreements in partial restraint of trade, if unreasonable, were unenforceable. See W. R. Grace & Co. v. Mouyal, 262 Ga. 464, 465 (1) (422 SE2d 529) (1992). Consequently, we have held that if a party can show both that a restrictive covenant violates Georgia public policy and that a court in the selected forum likely would find the restrictive covenant enforceable, a compelling reason exists to avoid the contractual forum selection clause. Bunker Hill, 309 Ga. App. at 507. As discussed more fully below, we find that Carson has made the showing necessary to avoid the forum selection clause in this case.

1. Whether a restrictive covenant violates Georgia law depends upon whether the covenant can be considered a “reasonable” restraint on competition, given the circumstances of a particular case. Specifically, the restraint imposed must be reasonably limited and it must be “reasonably necessary to protect the interest of the party in whose favor it is imposed.” (Citation omitted.) W. R. Grace & Co., 262 Ga. at 465 (1). The issue of reasonableness represents a question of law for the court, which should apply a three-part test, examining the duration, territorial coverage, and scope of the activity prohibited by the covenant. Id. Additionally, the court should consider “the nature and extent of the trade or business, the situation of the parties, and all the other circumstances.” (Citation and punctuation omitted.) Id. The test for reasonableness is applied strictly in cases involving an employer-employee relationship, while a lesser, mid-level degree of scrutiny is applied to restrictive covenants contained in professional partnership or shareholder agreements. West Coast Cambridge v. Rice, 262 Ga.App. 106, 108 (1) (584 SE2d 696) (2003). In this case, the parties devote a great deal of their argument to the issue of whether mid-level or strict scrutiny applies to the restrictive covenants found in the Operating Agreement. We find it unnecessary to decide this question, however, because even under the lesser, mid-level scrutiny, the three restrictive covenants at issue violate Georgia law.

(a) The nondisclosure covenant found in the Operating Agreement provides:

Each of the Directors has access to confidential material and information belonging to the Company. . . . Each of the Directors acknowledges the importance of keeping all information confidential and shall not, while this Agreement remains in effect and in perpetuity thereafter, . . . use any confidential information for the benefit of any party other than the Company or disclose any confidential information to any person, firm, corporation, association or other entity for any reason or purpose whatsoever, other than the benefit of the Company.

(Emphasis supplied.)

The fact that this clause purports to bind Carson “in perpetuity,” together with its failure to define “confidential information,” renders it overly broad and therefore unenforceable under Georgia law. See Cox v. Altus Healthcare &c., 308 Ga.App. 28, 31 (2) (b) (706 SE2d 660) (2011) (finding nondisclosure provisions “unenforceable on their face because they are not limited in time”); OnBrand Media v. Codex Consulting, 301 Ga. App. 141, 144 (2) (a) (687 SE2d 168) (2009) (applying mid-level scrutiny and finding a restrictive covenant overly broad and unenforceable where, inter alia, it failed to define clearly the prohibited activity); Pregler v. C & Z, Inc., 259 Ga.App. 149, 151 (2) (575 SE2d 915) (2003) (“[a] nondisclosure clause with no time limit is unenforceable as to information that is not a trade secret”) (citation and footnote omitted); Enron Capital &c. Corp. v. Pokalsky, 227 Ga.App. 727, 730 (3) (490 SE2d 136) (1997) (same).

(b) The Operating Agreement’s nonsolicitation covenant states:

While he shall serve as a Director of the Company and for a period of twenty-four months after he shall cease for any reason to serve as a Director of the Company, each of the Directors shall not. . . solicit, seek or accept business from, interfere with or endeavor to entice away from the Company any Client or employee of the Company. For purposes hereof, the term “Client” shall mean any person or entity that (i) received service of any type from [the] Company during the twenty-four month period immediately preceding the last day that the Director serves as a Director of the Company or (ii) has been contacted by the Company for the purpose of offering to provide Company services or products prior to the last day that the Director serves as a Director of the Company.

(Emphasis supplied.)

This clause violates Georgia law for at least two reasons. First, it forbids Carson from contacting any client or prospect of the company, regardless of whether Carson actually served those clients or prospects while he served as a Director of Obor Holding, but it contains no territorial restriction, a fatal flaw. “Georgia law is clear that unless the nonsolicit covenant pertains only to those clients with whom the employee had a business relationship during the term of the agreement, the nonsolicit covenant must contain a territorial restriction.” (Citation and footnote omitted.) Advance Technology Consultants v. Roadtrac, 250 Ga. App. 317, 321 (3) (551 SE2d 735) (2001). See also W. R. Grace & Co., 262 Ga. at 467 (2). And a nonsolicitation covenant that does not limit itself in such a fashion is invalid, even under reduced, mid-level scrutiny. See Physician Specialists in Anesthesia v. MacNeill, 246 Ga. App. 398, 406 (3) (539 SE2d 216) (2000) (non-solicitation covenant in partnership agreement that was not limited to patients with whom physician and former partner had previously had contact was overbroad and therefore invalid); Habif, Arogeti & Wynne, P.C. v. Baggett, 231 Ga. App. 289, 298 (3) (498 SE2d 346) (1998) (to be valid under mid-level scrutiny, a nonsolicitation covenant must either contain a territorial restriction or limit itself to those clients for whom the former partner or shareholder “had done substantial work”); New Atlanta Ear, Nose & Throat Assoc. v. Pratt, 253 Ga. App. 681, 687 (2) (560 SE2d 268) (2002).

Second, this restrictive covenant is impermissibly overbroad because it bars Carson not only from soliciting any client or prospect of Obor Holding, but also from accepting any work from any such clients or prospects who initiate contact with Carson. Such a restraint violates Georgia public policy because it “unreasonably impacts” the restricted party’s ability to make a living and the public’s ability to choose the business or professional it prefers to contract with. (Citation omitted.) Dougherty, McKinnon & Luby v. Greenwald, Denzik & Davis, 213 Ga. App. 891, 894 (2) (b) (447 SE2d 94) (1994). See also Roberts v. Tifton Med. Clinic, 206 Ga. App. 612, 615 (426 SE2d 188) (1992) (noting that even under mid-level scrutiny, a court should consider whether a restrictive covenant works an “unnecessary harshness” against the party restrained) (citation and punctuation omitted); Singer v. Habif, Arogeti & Wynne, 250 Ga. 376-377 (1) (297 SE2d 473) (1982); Waldeck v. Curtis 1000, Inc., 261 Ga. App. 590, 592 (583 SE2d 266) (2003).

(c) The Operating Agreement also contains a covenant not to compete that provides:

While he shall serve as a Director of the Company and for a period of twenty-four (24) months after he shall cease for any reason to serve as a Director of the Company, each of the Directors shall not, directly or indirectly (or through any affiliated entity), on his own behalf, or on behalf of any other person or entity which provides or sells services or products in competition with those of the Company, do any of the following within the United States of America: (a) provide any service, support, product, technology (as an employee, licensor, consultant or otherwise), to any person or entity, if such service, support, product or technology involves or relates to, in any material respect, to services or products which compete with the Company’s business (each, a “Restricted Business”), or (b) own, manage, operate, be employed by or a consultant to, join, control, finance, participate in the ownership, management, operation, control or financing of, or have any stock, equity or other interest in, either directly or indirectly, or have any right of compensation from, a company or other entity engaged in a Restricted Business.

(Emphasis supplied.)

In determining the reasonableness of a noncompete clause, we must consider both the interests of the party seeking to enforce the covenant and those of the party restricted by the covenant. Specifically, we must consider how the covenant impacts the restricted party’s ability to earn a living and to determine with reasonable certainty both the nature of the activities that are restricted and the geographic area of the restriction. W. R. Grace, 262 Ga. at 465-466 (2); Hulcher Svcs. v. R. J. Corman R. Co., 247 Ga. App. 486, 491-492 (4) (543 SE2d 461) (2000). See also OnBrand Media, 301 Ga.App. at 144 (2) (a) (applying mid-level scrutiny and considering both territorial limits and the scope of the activity restricted to determine the enforceability of restrictive covenants); Roberts, 206 Ga.App. at 615. We must then balance these considerations against the company’s business interests, including its interest in maintaining existing customer relationships established by the former partner, shareholder, or employee. W. R. Grace, 262 Ga. at 465-466 (2). See also Habif, Arogeti & Wynne, 231 Ga. App. at 294 (2) (c) (even under mid-level scrutiny “[t]he restricted activities must be reasonably related to the business interests the employer seeks to protect”) (footnote omitted).

Here, the noncompete clause is prima facie unreasonable because by restricting activity in the entire country, it contains no legitimate territorial restriction. Specifically, it fails to limit Carson’s restricted activities either to the geographic area in which he served Obor Holding clients or to the geographic area in which Obor Holding does business. See Paramount Tax & Accounting v. H & R Block Eastern Enterprises, 299 Ga. App. 596, 601 (1) (683 SE2d 141) (2009); Hulcher Svcs., 247 Ga.App. at 491-492 (4); New Atlanta Ear, Nose & Throat Assoc., 253 Ga.App. at 687 (2); Habif, Arogeti & Wynne, 231 Ga.App. at 293-294 (2) (b).

Moreover, the clause is overbroad because it effectively bars Carson from working in any capacity for, owning any interest in, or serving on the board of any competitor of Obor Holding. See Uni-Worth Enterprises v. Snider, 244 Ga. 636, 639-640 (1) (261 SE2d 572) (1979) (restrictive covenants which prohibit a party from engaging in any business or activity that might compete with his former employer are too indefinite to be enforced); Howard Schultz & Assoc. v. Broniec, 239 Ga. 181, 184 (2) (236 SE2d 265) (1977) (covenants prohibiting an employee from working for “a competitor ‘in any capacity’ impose [ ] a greater limitation upon the employee than is necessary for the protection of the employer and therefore is unenforceable”) (citations omitted); Global Link Logistics v. Briles, 296 Ga.App. 175, 178 (1) (c) (674 SE2d 52) (2009) (“A non-competition covenant which prohibits an employee from working for a competitor in any capacity, that is, a covenant which fails to specify with particularity the activities which the employee is prohibited from performing, is too broad and indefinite to be enforceable”) (citation and punctuation omitted). Put another way, these restrictions are far broader than necessary to protect Obor Holding’s legitimate business interests because the company has no legitimate business interest in not having to compete with Carson in any facet of the defense industry anywhere in the United States. Hulcher Svcs., 247 Ga. App. at 492 (5).

Given its failure to limit either the scope of activities from which Carson is prohibited in engaging or the territory in which Carson is so restricted, the noncompete clause is unreasonable and therefore unenforceable. See Rash v. Toccoa Clinic Med. Assoc., 253 Ga. 322, 324 (1) (320 SE2d 170) (1984) (even under mid-level scrutiny, restrictions must be reasonable as to territory); OnBrand Media, 301 Ga. App. at 146 (2) (a) (ii) (applying mid-level scrutiny and finding restrictive covenants unenforceable because they contained “no specific territorial limits nor any clear limits on the scope of the prohibited activity”) (footnote omitted).

2. Having found that the covenants would be unenforceable under Georgia law, we now address whether Carson can show that a Florida court would nevertheless be likely to enforce the covenants, thereby necessitating intervention by Georgia courts. To make this showing, Carson must demonstrate that a Florida court likely would apply Florida law and that, under Florida law, the covenants likely would be enforceable. See Iero, 243 Ga.App. at 672; Crump Ins. Svcs. v. All Risks, Ltd., 315 Ga. App. 490, 494 (727 SE2d 131) (2012) (Blackwell, J., concurring specially). Carson has made both of these showings.

Florida courts will enforce a choice of law provision “so long as there is a reasonable relationship between the contract and the state whose law is selected and the selected law does not conflict with Florida law or confer an advantage on a non-resident party which a Florida resident does not have.” (Citation omitted.) Forzley v. AVCO Corp. Electronics Div., 826 F2d 974,979 (II) (11th Cir. 1987). See also Southeast Floating Docks v. Auto-Owners Ins. Co., 82 S3d 73, 80 (Fla. 2012) (under Florida law, a choice of law provision will be enforced “unless applying the chosen forum’s law would contravene a strong public policy of [Florida]”) (citation omitted). Here, the evidence shows that Obor Holding is a Florida Corporation that does business in Florida, among other places. Moreover, given that the choice of law provision calls for the application of Florida law, it will present no conflicts of law or public policy issues for a Florida court. In light of these facts, therefore, we must conclude that a Florida court would honor the choice of law provision in the Operating Agreement.

Furthermore, as Obor Holding has conceded in its brief, Florida law would require a court to blue-pencil the restrictive covenants at issue so as to make them enforceable. See F. S. A. § 542.335 (1) (c) (requiring courts to modify, rather than invalidate, any restrictive covenants that violate Florida law). Additionally, even if the covenants were blue-penciled to make them comply with Florida law, there is a strong likelihood that they would still violate Georgia law. When modifying overly-broad restrictive covenants, Florida law allows a court to consider only the legitimate business interests of the party seeking to enforce the covenant. Id. It cannot consider the impact of the restraint on the party against whom enforcement is sought, a necessary requirement in Georgia. See F. S. A. § 542.335 (1) (g) (1) (in determining the enforceability of a restrictive covenant, a court “[s]hall not consider” any hardship, economic or otherwise, that “might be caused to the person against whom enforcement is sought”). Compare W. R. Grace & Co., 262 Ga. at 466 (2) (“[i]n determining reasonableness [of a restrictive covenant], consideration must be given to the employee’s right to earn a living”) (citation omitted). Moreover, a Florida court likely would enforce that part of the nonsolicitation clause which prohibits Carson from accepting business from clients or prospects of Obor Holding, even when the clients or prospects initiate the contact. See Hilb Rogal & Hobbs of Florida v. Grimmel, 48 S3d 957, 961 (Fla. App. 2010) (enforcing a nonsolicitation covenant that barred former employee from accepting business from clients of his former employer, even where he had done nothing to solicit that business). Finally, it is also likely that a Florida court would find the noncompete clause enforceable even though it prohibits Carson from working for a competitor in any capacity and despite the fact that it contains no territorial restriction. See Gold Coast Media v. Meltzer, 751 S2d 645-646 (Fla. App. 1999) (finding valid a noncompete clause that prohibited a former employee from working in any capacity for a “business in competition, directly or indirectly,” with the former employer, anywhere in the United States or Puerto Rico).

Decided November 20, 2012

As the foregoing analysis demonstrates, it is likely that a Florida court would enforce the forum selection clause at issue. And were Carson required to challenge the restrictive covenants at issue in a Florida court, applying Florida law, the covenants would almost certainly be upheld, despite the fact that they violate applicable Georgia law. Thus, enforcement of the forum selection clause would likely result in a violation of Georgia’s then-existing public policy against certain agreements in partial restraint of trade. Accordingly, we reverse the trial court’s order dismissing Carson’s complaint.

Judgment reversed.

Miller, R J., and Ray, J., concur.

Barnes & Thornburg, Thomas J. Gallo, for appellant.

Tisinger & Vance, Richard G. Tisinger, Jr., for appellee.

       The parties entered into the Operating Agreement prior to the November 2010 ratification of an amendment to the Constitution of Georgia that effected changes in Georgia law regarding restrictive covenants. As a result of that constitutional amendment, Georgia enacted new statutory provisions governing restrictive covenants in employment contracts. See OCGA § 13-8-50 et seq. However, Ga. L. 2011, p. 399, § 5 provides that the new law “shall not apply in actions determining the enforceability of restrictive covenants entered into before” the ratification of the constitutional amendment. Accordingly, we will “apply the law of restrictive covenants as it existed before [ratification].” Cox v. Altus Healthcare &c., 308 Ga.App. 28, 30 (2) (706 SE2d 660) (2011).

       The Operating Agreement reflects that Carson contributed $400,000 of the $1,472,060 in total capital contributed by Obor Holding’s ten members. In return, he received 20,000 of the company’s 110,000 units. This Operating Agreement contains the restrictive covenants at issue.

       Only four of Obor Holding’s members serve as Directors at any one time.

       The language of these covenants is set forth in full in Division 1, infra.

       The only written document evidencing any of the terms of Carson’s employment with Obor Digital is a “Sales Compensation Policy,” dated January 1, 2010, which states at the top that it was “issued for” Alan Carson. That document contains no restrictive covenants, and there is no evidence that Carson ever entered into a noncompete or nonsolicitation agreement with Ohor Digital. We assume for purposes of this appeal that the restrictive covenants contained in the Obor Holding Operating Agreement would apply to clients and prospects of Obor Digital.

       Under the rule of lex locus fori, procedural questions are governed by the law of the forum state. See Bunker Hill Intl. v. NationsBuilder Ins. Svcs., 309 Ga.App. 503, 506 (710 SE2d 662) (2011).

       Covenants ancillary to a sale of business receive the least amount of scrutiny, and are subject to “blue-penciling,” or reformation by the court so that they reflect the actual intent of the parties. See, e.g., Watson v. Waffle House, 253 Ga. 671-672 (2) (324 SE2d 175) (1985); Paragon Technologies v. InfoSmart Technologies, 312 Ga.App. 465, 467 (718 SE2d 357) (2011). This case does not involve the sale of a business.

       In its brief, Obor Holding argues that mid-level scrutiny allows us to “blue pencil,” or reform, the restrictive covenants so that they comply with Georgia law. Obor Holding cites us to no authority for this proposition, however, and we are aware of none. Indeed, as indicated supra in note 7, the only time our Supreme Court has sanctioned the blue-penciling of restrictive covenants is where those covenants are found in a contract ancillary to the sale of a business. See, e.g., Lyle v. Memar, 259 Ga. 209 (378 SE2d 465) (1989); Watson, 253 Ga. at 671-672 (2).


source: Caselaw Access Project

author: Boggs, Judge.

license: Public Domain

text:
    A12A0919.
    EZ GREEN ASSOCIATES, LLC v. GEORGIA-PACIFIC CORPORATION et al.
    (734 SE2d 485)
   Boggs, Judge.

This litigation arises from a contract between the parties regarding a proprietary system for applying grass seed. EZ Green Associates, LLC (“EZ Green”) brought this action for breach of contract and the covenant of fair dealing against Georgia-Pacific Corporation, its assignee, GP Cellulose, LLC (formerly Koch Cellulose, LLC), and BlueYellow LLC, a GP Cellulose subsidiary (collectively, “Georgia-Pacific”). Asserting that Georgia-Pacific breached the agreement by ceasing production and by failing to market the product, EZ Green sought damages as well as bad faith penalties and attorney fees under OCGA § 13-6-11. Georgia-Pacific filed an initial motion for summary judgment, which was denied, then renewed its motion for summary judgment on additional grounds. EZ Green filed a motion for partial summary judgment on Georgia-Pacific’s liability for breach of contract. The trial court denied EZ Green’s motion and granted summary judgment in favor of Georgia-Pacific, finding no issue of material fact regarding (1) whether Georgia-Pacific made commercially reasonable efforts to sell the product, and (2) whether Georgia-Pacific had the right under the contract to cease production.

Because the record shows conflicts in the evidence regarding these issues, the grant of summary judgment in favor of Georgia-Pacific was error, and we therefore reverse. For the same reason, EZ Green was not entitled to partial summary judgment in its favor, and we therefore affirm that portion of the trial court’s order. EZ Green also appeals the trial court’s order denying its request for a privilege log. Because EZ Green has failed to demonstrate from the record that the trial court abused its discretion, we affirm that order.

The contract was originally entered into in 2003 between EZ Green and Georgia-Pacific and ultimately revised as of April 30, 2004. The contract provided that, for a period of five years, EZ Green would license its product to Georgia-Pacific, which would develop, manufacture, market, and sell the product. In May 2004, Koch Cellulose, LLC purchased Georgia-Pacific’s pulp division and acquired all of its assets, including the EZ Green agreement.

1. (a) EZ Green alleged that Georgia-Pacific breached the agreement when it failed to “act in a commercially reasonable manner” or use “commercially reasonable efforts” to develop, manufacture, market, sell, and distribute the product. The contract provided that Georgia-Pacific would make “a commercially reasonable effort” to sell the product, and further provided: “For purposes of this paragraph, EZ G[reen] agrees that [Georgia-Pacific] shall have been deemed to have met ‘commercially reasonable efforts’ if [Georgia-Pacific] sells the following product volumes,” providing a yearly target volume in acres.

In its order granting summary judgment, the trial court found that “[EZ Green] has not pointed to any evidence from which a jury could conclude that [Georgia-Pacific’s] efforts to sell the product were inconsistent with the efforts a reasonable business entity would have made under similar circumstances.” It therefore granted summary judgment on EZ Green’s claims.

We first note that the trial court found that “[t]he commercially reasonable standard applicable in this case has not been addressed by Georgia courts” and therefore relied upon Kansas law, citing a federal district court decision, Kansas Penn Gaming v. HV Properties, 727 FSupp.2d 1100, 1111 (IV) (C) (D.Kan. 2010), and South Carolina law, citing a Fourth Circuit decision, Valtrol, Inc. v. General Connectors Corp., 884 F2d 149 (I) (4th Cir. 1989). According to the trial court, these decisions define “commercially reasonable efforts” as “an objective standard requiring that a business use the efforts that a reasonable business entity would have made under similar circumstances.” (Punctuation omitted.) Kansas Penn, supra, 727 FSupp.2d at 1111.

While our courts may not have addressed the application of “commercially reasonable” in this precise context, Georgia has long-established standards for evaluating commercial reasonability. The Uniform Commercial Code and the cases interpreting its provisions repeatedly look to and construe “reasonable commercial standards.” See, e.g., OCGA §§ 11-2-103 (1) (b) (“ ‘Good faith’ in the case of a merchant means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.”), 11-3-103 (a) (4) (“ ‘Good faith’ means honesty in fact and the observance of reasonable commercial standards of fair dealing.”), 11-4A-105 (a) (6) (“ ‘Good faith’ means honesty in fact and the observance of reasonable commercial standards of fair dealing.”); Hansford v. Burns, 241 Ga.App. 407, 410-411 (2) (526 SE2d 896) (1999) (disposition of collateral under OCGA § 11-9-504, now OCGA § 11-9-610); Tifton Bank & Trust Co. v. Knight’s Furniture Co., 215 Ga. App. 471, 474 (1) (b) (452 SE2d 219) (1994) (banking practice under former OCGA § 11-3-419 with respect to depositor’s account). The federal district court decision relied upon by the trial court likewise looked to the Kansas Commercial Code for interpretation of “commercially reasonable efforts.” See Kansas Penn, supra, 727 FSupp.2d at lili (IV) (C).

Georgia courts have not held that interpretations of commercial reasonability are limited to cases brought under the Commercial Code. See, e.g., Pakwood Indus. v. John Galt Assoc., 219 Ga.App. 527, 529-530 (1) (466 SE2d 226) (1995) (assignment of lease).

Good faith is, if anything, a minimum standard of conduct in any contract. While this particular agreement does not come within the UCC, it is a commercial transaction in the broad sense and the legislature has specifically declared that good faith is a basic obligation in all such transactions. [OCGA § 11-1-203]. See also [OCGA § 13-4-20] which calls for “substantial compliance with the spirit, and not the letter only, of the contract” in its performance. “Good faith” is merely a shorter way of saying the same thing.

Crooks v. Chapman Co., 124 Ga.App. 718, 719-720 (3) (185 SE2d 787) (1971) (contract action to recover earnest money on sale of radio station).

But even under the foreign law test applied by the trial court, to determine commercial reasonableness the “court should consider all relevant factors together as part of single transaction with ultimate test to be whether parties acted toward each other in good faith and in a reasonable manner.” (Citation and punctuation omitted.) Kansas Penn, supra, 727 FSupp.2d at 1111 (C). And Georgia law is clear that “[w]hether reasonable commercial standards have been met is a question of fact to be resolved by the jury.” (Citations omitted.) Tifton Bank & Trust Co., supra, 215 Ga.App. at 474 (1) (b). Where there is evidence that a party “failed to act in a commercially reasonable manner,” summary judgment is inappropriate. Id. See also Hansford, supra, 241 Ga. App. at 410-411 (2).

Here, the record reveals that the product initially was well-received by a major retailer, but efforts to bring the product to market were largely frustrated over a period of several years. Pointing to different parts of a voluminous record, EZ Green asserts that Georgia-Pacific’s conduct was not commercially reasonable, and Georgia-Pacific asserts the opposite. But

[w]hen ruling on a motion for summary judgment, the opposing party should be given the benefit of all reasonable doubt, and the court should construe the evidence and all inferences and conclusions therefrom most favorably toward the party opposing the motion. Further, any doubts on the existence of a genuine issue of material fact are resolved against the movant for summary judgment. When this Court reviews the grant or denial of a motion for summary judgment, it conducts a de novo review of the law and the evidence.

(Citation and punctuation omitted.) Roberts v. Connell, 312 Ga. App. 515, 516 (718 SE2d 862) (2011).

Here EZ Green presented some evidence that Georgia-Pacific failed to use commercially reasonable efforts to market the product. The parties expressly agreed in the contract that the achievement of a certain yearly volume of sales would demonstrate “commercially reasonable efforts,” and that volume was not met. It is undisputed that there was substantial delay in bringing the product to market, and some evidence shows that the delay was at least in part due to Georgia-Pacific’s conduct. This conduct included, but was not necessarily limited to: the creation of a subsidiary with minimal assets and no business record and then insisting that the retailer contract exclusively with that subsidiary; a lack of relevant business experience on the part of the individuals entrusted with the marketing plan; and a preoccupation with the sale of Georgia-Pacific’s pulp division and creation of the subsidiary at the expense of the marketing plan, to the point of calculating “exit strategy,” considering operation of the business “independent of EZG” as “an essential piece of any exit strategy,” and characterizing the participation of EZ Green as a “downside.” EZ Green also presented evidence that the retailer was still willing to go forward, but Georgia-Pacific instead ceased production. Compare Kansas Penn, supra, 727 FSupp.2dat 1111 (appellant “produced virtually no evidence and no argument to suggest that [appellee’s] efforts . . . were anything other than in good faith or commercially reasonable.”).

Georgia-Pacific contends, and the trial court found, that the retailer’s contract requirements were “onerous.” But this conclusion is not demanded by the evidence as a whole. While Georgia-Pacific asserts that the proposed retail contract included an indemnity for the retailer’s own negligence, the text of the proposed agreement itself is never cited by the parties. Instead, they refer to testimony of individuals’ recollections or impressions of the contents of the proposed agreement during negotiations that took place over a substantial period of time and which were admittedly “fluid.” And some contradictory evidence was elicited from these and other witnesses that the negotiations made progress and eventually concerned a single issue: not the precise indemnity language but the unwillingness of Georgia-Pacific to assume any financial responsibility other than through its subsidiary. On its part, EZ Green presented some evidence that the requirements were reasonable, particularly given Georgia-Pacific’s decision to deal with the retailer only through a lightly capitalized startup subsidiary with no business history. See Pakwood Indus., supra, 219 Ga. App. at 529-530 (1) (guaranty requirements commercially reasonable in light of financial difficulties of assignee).

From this evidence, a trier of fact could find that Georgia-Pacific’s efforts to fulfil its obligations under the contract were not commercially reasonable. This question therefore must be resolved by the trier of fact, considering the conflicting testimony offered by the parties and their witnesses.

(b) EZ Green also alleged that Georgia-Pacific breached the contract when it unilaterally ceased production during the term of the contract. The trial court held that this did not constitute a breach, relying upon a provision of the contract that states: “If [Georgia-Pacific] during the Payment Period ceases production of [the system], then EZ G[reen] may terminate this Agreement and the exhibits and attachments hereto.” The trial court found that production had declined to the point that “future conditions and circumstances could make continued production untenable, resulting in the decision by [Georgia-Pacific] to cease production, in which case EZ G[reen] would be authorized to terminate the Agreement.” From this, the trial court reasoned that there was “nothing for EZ G[reen] to terminate if cessation of production acted as a termination of the agreement by [Georgia-Pacific],” that the contract in that case would be meaningless, and that therefore as a matter of law Georgia-Pacific did not breach the agreement when it ceased production.

The trial court also relied upon Winterchase Townhomes v. Koether, 193 Ga. App. 161 (1) (387 SE2d 361) (1989), for the proposition that “a claim for breach of contract cannot survive where a party exercises its bargained-for rights.” In Winterchase, a real estate purchase contract for a townhouse provided that the contract could be cancelled at the purchasers’ election if the improvements to the property were “destroyed or substantially damaged before the closing.” Id. at 162. We held that, “[a]s the parties agree the townhouse was completely destroyed by . . . fire, there is no dispute that [the purchasers] timely exercised their option to cancel the contract,” and summary judgment in their favor was properly granted. (Citation omitted.) Id. at 162-163. Here, in contrast, Georgia-Pacific seeks to rely upon a contract provision giving the option to terminate to EZ Green, not Georgia-Pacific.

Moreover, the parties vehemently disagree regarding the circumstances leading up to Georgia-Pacific’s decision to cease production. The facts presented here would allow a finder of fact to conclude that Georgia-Pacific personnel were looking for “exit alternatives” and planning to “begin divesting” as early as two years before that decision was made. And, as noted in Division 1 (a), EZ Green has presented some evidence tending to show that Georgia-Pacific failed to use commercially reasonable efforts to market the product or to negotiate with the retail purchaser in good faith. This is in contrast to Winterchase, supra, which in no way suggests that the party seeking to cancel the contract had any involvement in the destruction of the subject matter.

Both the trial court and Georgia-Pacific appear to rely on the principle of impossibility or impracticability of performance. But

[u]nder general principles of contract law which continue under the Code because not displaced, difficulty, inconvenience, or unusual cost in performing, even though it may make performance of the contract a hardship, does not excuse a party from performance of an absolute, unqualified undertaking to do a thing that is possible and lawful. Mere unexpected difficulty or unforeseen expense encountered by the seller does not excuse nonperformance on his part. Thus, the fact that one who, as a dealer, had contracted to sell a stated quantity of produce would have to pay more for it than was contemplated by him when the sales agreement was entered into does not absolve him from his undertaking.

(Citation and punctuation omitted.) Swift Textiles, Inc. v. Lawson, 135 Ga.App. 799, 804 (219 SE2d 167) (1975). “The inability to control the actions of a third person whose consent or cooperation is needed for the performance of an undertaking is ordinarily not to be regarded as an impossibility avoiding the obligation.” Bright v. Stubbs Properties, Inc., 133 Ga.App. 166, 167 (210 SE2d 379) (1974). And “[t]hat it may be unwise or disadvantageous or place a hardship on one party furnishes no reason for not enforcing the contract as made. [Cit.]” Id.

In light of the evidence presented, Georgia-Pacific cannot assert a right to unilateral termination of its obligations under the contract, based upon the results of its own conduct and a contract provision giving a right of termination to the other party to the contract. The trial court erred in granting summary judgment on this basis as well.

2. Because the evidence is in conflict with regard to Georgia-Pacific’s conduct and the circumstances of the termination of the contract, for the reasons discussed in Division 1, partial summary judgment in favor of EZ Green on the issue of liability for breach of contract is likewise inappropriate. The trial court therefore did not err in denying EZ Green’s motion for partial summary judgment.

3. In its final enumeration of error, EZ Green contends that the trial court abused its discretion in refusing to require Georgia-Pacific to supplement its interrogatory responses with answers rather than general references to more than 90,000 pages of documents. It complains that the court’s ruling allowed Georgia-Pacific to withhold certain documents relating to its July 20, 2007 decision to repudiate the contract. The record reveals that the trial court held a hearing on “several discovery-related issues, including those raised in Plaintiff’s November 9, 2010 letter to the Court and Defendants’ Motion for Protective Order.” Following the hearing, the court ruled that Georgia-Pacific was not required to provide EZ Green with a privilege log identifying the documents withheld from production “on account of the attorney-client privilege or work product doctrine,” and that Georgia-Pacific “need not supplement their responses to [EZ Green’s] First Interrogatories.”

Our review of this claim of error is hindered, however, by EZ Green’s failure to provide record citations in support of its argument. In its recitation of facts, EZ Green cites only to the transcript of the hearing on the matter and the trial court’s ruling, and no citations to the record appear in the argument section of its brief on this issue. EZ Green argues that the trial court erred in failing to require Georgia-Pacific to supplement its interrogatory responses. But it fails to direct this court to the record location of Georgia-Pacific’s interrogatory responses, EZ Green’s first request for interrogatories, or the November 9, 2010 letter referred to in the trial court’s order and upon which the court relied in its ruling.

Court of Appeals Rule 25 (a) (1) provides: “Record and transcript citations shall be to the volume or part of the record or transcript and the page numbers that appear on the appellate record or transcript as sent from the trial court.” Court of Appeals Rule 25 (c) (2) (i) provides: “Each enumerated error shall be supported in the brief by specific reference to the record or transcript. In the absence of such reference, the Court will not search for or consider such enumeration.” And “[i]t is not the function of this Court to cull the record on behalf of a party in search of instances of error. The burden is upon the party alleging error to show it affirmatively in the record.” (Citation, punctuation

Decided November 20, 2012.

Stuart & Johnston, Andrew H. Stuart, Matthew A. Hood, for appellant.

King & Spalding, Elizabeth V. Tanis, Joseph P. Rockers, Merritt E. McAlister, for appellees.

and footnote omitted.) Resource Life Ins. Co. v. Buckner, 304 Ga.App. 719, 740 (7) (698 SE2d 19) (2010).

Based on EZ Green’s failure to support its enumerated error with citations to the record, we need not consider it, particularly here where the record consists of 33 volumes totaling more than 7,000 pages. See id. (where company asserted trial court erred in holding certain privileged documents were discoverable, but failed to identify those documents in the record, this court declined to consider claim of error); Walls v. Sumter Regional Hosp., 292 Ga.App. 865, 870 (3) (666 SE2d 66) (2008). We therefore have no basis upon which to consider EZ Green’s contention that the trial court abused its discretion in denying its letter request for additional discovery.

Judgment affirmed in part and reversed in part.

Doyle, P. J., and Andrews, J., concur.

       By motion and order of the court, the record and briefs were filed under seal.


text:
    A12A0966.
    FREESE II, INC. v. MITCHELL et al.
    (734 SE2d 491)
   Boggs, Judge.

Freese II, Inc., d/b/a Blazing Saddles and a/k/a Club Blaze (collectively “Freese”), failed to file a timely answer to the complaint in this wrongful death action brought by Lisa Mitchell as the administrator of her daughter Fatima Bird and conservator of her two grandchildren (“Mitchell”). The trial court denied Freese’s motion to open default and entered judgment as to liability. A jury trial on the issue of damages resulted in a verdict in favor of Mitchell and against Freese in the amount of $1,750,000.

Freese appeals from the judgment on the jury verdict, asserting that the trial court abused its discretion in refusing to open default and that it erred in entering judgment as to liability, denying its motion to compel, excluding the issue of apportionment from the jury, failing to charge on proximate cause, and imposing sanctions on Freese’s counsel. Finding no error in any respect, we affirm.

1. Freese contends that the trial court abused its discretion in denying Freese’s motion to open default. We need not consider the details of Freese’s failure to answer the complaint in a timely fashion, because Freese failed to pay costs upon moving to open default. Freese argues that the payment of costs is only required when opening default as of right within 15 days under OCGA § 9-11-55 (a), but that argument is foreclosed by our decisions as well as the plain language of OCGA § 9-11-55 (b):

At any time before final judgment, the court, in its discretion, upon payment of costs, may allow the default to be opened for providential cause preventing the filing of required pleadings or for excusable neglect or where the judge, from all the facts, shall determine that a proper case has been made for the default to be openedf.] . . .

(Emphasis supplied.) “Payment of costs is a condition precedent for opening default under OCGA § 9-11-55 (b). Merely offering to pay costs, as here, is insufficient. When this statutory requirement is not met, the trial court lacks discretion to open the default.” (Citations omitted.) Davis v. Southern Exposition Mgmt. Co., 232 Ga.App. 773, 774 (1) (503 SE2d 649) (1998); see also Campbell v. Moody, 242 Ga. App. 643, 644-645 (1) (529 SE2d 923) (2000). This enumeration of error is without merit.

2. Freese next contends that the trial court erred in entering judgment against it as to liability even though it was in default, contending that the allegations of the complaint did not establish its liability. It argues that Mitchell’s allegation that it is liable under the Dram Shop Act, OCGA § 51-1-40, is a mere conclusion of law and is not admitted by default. It argues further that its failure to file a timely answer does not admit the conclusion of law in the complaint, citing Stroud v. Elias, 247 Ga. 191 (275 SE2d 46) (1981).

It is true that

while a default operates as an admission of the well-pled factual allegations of the complaint, it does not admit the legal conclusions contained therein. A default simply does not require blind acceptance of a plaintiff’s erroneous conclusions of law. Nor does a default preclude a defendant from showing that under the facts as deemed admitted, no claim existed which would allow the plaintiff to recover.

(Citations and punctuation omitted.) Fink v. Dodd, 286 Ga. App. 363, 365 (1) (649 SE2d 359) (2007). And a defendant is entitled to demonstrate that all the facts as admitted by default fail to state a claim upon which relief may be granted, as in the case cited by Freese. Stroud, supra. In Stroud, the plaintiff brought a complaint for breach of a lease and sought both actual and punitive damages. Id., 247 Ga. at 191. The defendant failed to appear for trial, the court struck its answer and counterclaim, and the jury returned an award of actual and punitive damages. Id. The defendant appealed, and the Supreme Court of Georgia reversed, holding that the facts as alleged in the complaint failed to state a claim that would support an award of punitive damages. Id. at 192 (1). See also Fink, supra, 286 Ga.App. at 366 (1) (a) (allegations of complaint showed only that plaintiff was at-will employee; complaint therefore failed to state claim for wrongful termination under Georgia law).

But this is not a case in which the facts as alleged in the complaint demonstrate that it failed to state a claim for relief as a matter of law. Here, Mitchell alleged that an individual, Otis South, drove to Freese’s club where he consumed alcohol and became intoxicated, then returned to his car and began driving. Mitchell alleged that South’s blood alcohol level was 0.398, and that “[h] e was so drunk that he entered the freeway going the wrong direction,” collided head-on with the decedent, and killed her. Mitchell further alleged that the decedent had not been drinking, that she was driving her car properly in the correct direction on the freeway, “that she did nothing wrong, and there was nothing she could do to avoid the collision.” With respect to Freese, Mitchell alleged that it served alcohol to South while he was noticeably intoxicated and “knew that when Otis South left the strip club he would soon be driving.” Mitchell then alleged:

Pursuant to the Dram Shop Act, Georgia law OCGA § 51-1-40, businesses are prohibited from serving alcohol to someone who is noticeably intoxicated knowing that that person will soon be driving a motor vehicle. Defendant Club Blaze violated the Dram Shop Act and is therefore liable to Plaintiff in an amount to be determined at trial.

The facts as alleged in the complaint, together with the fair inferences and conclusions of fact to be drawn from those allegations, support a claim against Freese under OCGA § 51-1-40, and nothing in the allegations indicates that Mitchell has failed to state a claim upon which relief can be granted. “These factual admissions provide ample evidence to support the conclusion of law reached in [Mitchell’s] complaint — that is, that [Freese’s conduct] was the proximate cause of [the decedent’s] injuries.” (Citations and punctuation omitted.) Aldworth Co. v. England, 286 Ga.App. 1, 2 (1) (648 SE2d 198) (2007).

Moreover, Freese consented to the entry of the consolidated pretrial order in this action, which was prepared by the parties and adopted by the trial court. That pretrial order states as “issues for determination by the jury”: “Club Blaze is in default in this case. Accordingly, the jury should be instructed that Defendant Club Blaze has been found liable to Plaintiff and that the only thing they are to do in this case is to determine the amount of damages, if any.” Defendant’s “brief and succinct outline of the case and contentions” states, “Because the case is in default, the only issue is damages.”

The Civil Practice Act provides that once entered, the pretrial order controls the subsequent course of the action unless modified at the trial to prevent manifest injustice. The pretrial order has been likened to a rudder to the ship of litigation, and is intended to limit the claims, contentions, defenses, and evidence that will be submitted to the jury, thereby narrowing the course of the action, and expediting its resolution.

(Citations, punctuation and footnotes omitted.) Dept. of Human Resources v. Phillips, 268 Ga. 316, 318 (1) (486 SE2d 851) (1997). Liability was established by Freese’s default in this case. This enumeration of error therefore is without merit.

3. Freese contends the trial court erred in denying its motion to compel. We note initially that “[t]rial judges have broad discretion in controlling discovery, including imposition of sanctions, and appellate courts will not reverse a trial court’s decision on such matters unless there has been a clear abuse of discretion.” (Citations and punctuation omitted.) Collins v. Dickman, 295 Ga. App. 601, 603 (1) (672 SE2d 433) (2009).

Here, counsel for Freese entered an appearance on November 19, 2010 and filed a motion to open default on December 30, 2010. That motion was denied on February 2, 2011. The case was placed on a trial calendar for May 3, 2011, but Freese did not serve any discovery until May 10, 2011. Mitchell objected to the discovery on May 27, and on June 24, Freese responded to Mitchell’s objection. The pretrial calendar was set for July 14, and in the pretrial order, dated July 7, 2011 and adopted by the trial court on July 18, Freese indicated that discovery requests were “still outstanding pending ruling by the Court.” However, as the trial court observed, Freese never filed a motion, sought a ruling, or informed the court of a discovery dispute until the morning of the trial. On August 1, the parties were placed on the trial calendar for September 13,2011. Trial began on that date, and on September 9, the Friday before trial, Freese finally filed a motion to compel. After considering all these facts and circumstances and hearing argument, the trial court denied the motion to compel.

As the trial court and the parties recognized, when no answer is filed because a defendant is in default, the six-month discovery period established by Uniform Superior Court Rule 5 does not apply, and any time limits on discovery are “left to the discretion of the trial judge.” Gray v. Whisenaut, 258 Ga. 242, 243 (368 SE2d 115) (1988). Under the circumstances presented here, including Freese’s failure to bring the discovery dispute to the court’s attention for over three months, the trial court did not abuse its discretion. See Leventhal v. Setter, 208 Ga. App. 158, 161 (1) (430 SE2d 378) (1993) (denial of motion to compel filed 20 days before trial not abuse of discretion).

4. Freese contends the trial court erred in excluding the issue of apportionment from the jury’s consideration. Assuming without deciding that this issue survived default judgment as to liability, Freese failed to comply with the notice requirements of the apportionment statute, OCGA § 51-12-33 (d) (1). It filed no notice and did not raise the issue of apportionment until the first day of trial. Under the plain language of the statute, therefore, apportionment could not be considered. Ingles Markets v. Kempler, 317 Ga. App. 190, 192 (1) (730 SE2d 444) (2012).

5. Freese contends the trial court erred in failing to give its requested jury charge on proximate cause. But a judgment as to liability forecloses the issue of proximate cause.

The rule is that a defendant in default is in the position of having admitted each and every material allegation of the plaintiff’s petition except as to the amount of damages alleged. The default concludes the defendant’s liability, and estops him from offering any defenses which would defeat the right of recovery.

(Citations and punctuation omitted; emphasis supplied.) Cohran v. Carlin, 254 Ga. 580, 585 (3) (331 SE2d 523) (1985). In Dilworth v. Boeckler, 187 Ga. App. 241 (370 SE2d 17) (1988), the trial court granted a directed verdict as to liability, and then refused to give a jury instruction on proximate cause. We affirmed, observing:

We must agree with appellee that both negligence and causation were necessarily included in the trial court’s grant of a directed verdict. It is basic in our law that no liability attaches unless the negligence alleged is the proximate cause of the injury sustained. It is important to note that the directed verdict did not cover just negligence; appellee asked for and was granted a directed verdict on “liability.” . . .
Since the directed verdict included a finding that appellant was negligent and that her negligence caused all the injury alleged by appellee, all that was left for the jury to do was to decide the amount of the damages for which appellant was liable. To accomplish that task, the jury had no need for instructions dealing with causation. We find no error, therefore, in the trial court’s refusal to give appellant’s requested charges on proximate cause and intervening cause.

(Citation and punctuation omitted.) Id. Here, as we have noted in Division 2, above, the default judgment established Freese’s liability, and Freese acknowledged that it had “been found liable to Plaintiff.” The trial court therefore did not err in refusing to give an instruction on proximate cause.

Decided November 20, 2012.

E. Earle Burke, for appellant.

Speckhals & Cora, Trent B. Speckhals, for appellees.

6. Freese contends the trial court erred in imposing sanctions for misconduct upon Freese’s counsel. But the record demonstrates that the trial court imposed these sanctions against counsel personally, not Freese. “Because [Freese] was not aggrieved by the fee award, [it] lacks standing to challenge it, and we have no jurisdiction to address it on appeal.” (Citations and footnote omitted.) In the Interest of J. R. P., 287 Ga. App. 621, 624 (2) (652 SE2d 206) (2007).

7. Finally, we find that Freese’s claims on appeal are wholly without merit, and Freese could not have reasonably anticipated reversal by this court on any ground alleged. In addition, Freese has demonstrated from the inception of this litigation tactics calculated to obfuscate, delay, and postpone a resolution of the claims against it, and the trial court has already imposed sanctions against Freese and its principals. In view of this conduct both here and below, we conclude that Freese has appealed purely for the purpose of delaying enforcement of the judgment against it. Austin v. Austin, 292 Ga.App. 335-336 (664 SE2d 780) (2008).

We therefore impose frivolous appeal penalties pursuant to Court of Appeals Rule 15 (b), in the amount of $1,250 against appellant and $1,250 against its appellate counsel. Upon return of the remittitur, the trial court is directed to enter a $2,500 judgment in favor of Lisa Mitchell, as administrator of the Estate of Fatima Bird and as conservator of her grandchildren Naje Bird and Nadia Winn, in the form of a $1,250 penalty against Freese II, Inc. and a $1,250 penalty against its attorney.

Judgment affirmed.

Doyle, P. J., and Andrews, J., concur.

       Freese was served on August 6, 2010. By affidavit, Freese’s CFO and secretary stated that she received the summons and complaint on August 8 and attempted to retain counsel, but learned two days later that the attorney had been suspended from the practice of law. She swore that Freese “then retained” present counsel. Significantly, the affidavit does not specify the date on which substitute counsel was retained, hut he did not enter an appearance until November 19,2010, and he did not file a motion to open default until December 30,2010. As the trial court observed, “Defendant failed to file any responsive pleadings either within the time required by law or for more than three months after the case became in default. Defendant has offered no excuse or explanation whatsoever for this failure.” (Emphasis in original.)

       Freese also argues that punitive damages are not recoverable regardless of its default. But while Mitchell originally sought punitive damages in her complaint, that element of damages was not included in the pretrial order, the jury was not instructed as to punitive damages, and punitive damages were not included in the verdict. Freese’s argument on this point therefore is without merit.

       In this section of the pretrial order, Freese also attempted, though inartfully, to raise proximate cause as relevant to the issue of damages. But, as we note in Division 5, we have repeatedly held that proximate cause is not an issue when liability has heen admitted.

       Default judgment as to liability had already heen entered because Freese filed its motion to open default with the wrong case number, and “the Court did not become aware of Defendant’s December 30, 2010 filings until after granting the Application for Default Judgment on January 14, 2011, . . . [Hjowever, Defendant’s response does not change the Court’s decision on the application for Default Judgment.”

       OCGA § 51-12-33 (d) provides:
      (1) Negligence or fault of a nonparty shall be considered if the plaintiff entered into a settlement agreement with the nonparty or if a defending party gives notice not later than 120 days prior to the date of trial that a nonparty was wholly or partially at fault.

        (2) The notice shall be given by filing a pleading in the action designating the nonparty and setting forth the nonparty’s name and last known address, or the best identification of the nonparty which is possible under the circumstances, together with a brief statement of the basis for believing the nonparty to be at fault.

       We note that Freese, in a separate appeal, is seeking review of the trial court’s orders compelling post-judgment discovery and finding Freese and its owner and officers in contempt for failing to comply with its orders and Mitchell’s discovery requests. Freese has also failed to post the supersedeas bond ordered by the trial court.


author: MILLER, Presiding Judge.

text:
    A12A0992.
    MAXUM INDEMNITY COMPANY v. JIMENEZ et al.
    (734 SE2d 499)
   MILLER, Presiding Judge.

Maxum Indemnity Company filed an action against its insured, Jose Alfredo Jimenez, and a claimant, Gill Plumbing Company, seeking a declaratory judgment that its commercial general liability (“CGL”) policy did not afford coverage for liability associated with Jimenez’s negligent pipe installation on a construction project that resulted in property damage to a dormitory at Georgia Southern University. The parties filed cross-motions for summary judgment on the coverage issues. The trial court denied Maxum’s motion, and granted Gill Plumbing’s and Jimenez’s motion, finding that the CGL policy provided coverage for the underlying claim. Maxum appeals, contending that the trial court erred in granting summary judgment in favor of Gill Plumbing and Jimenez since (i) the underlying claim did not fall within the policy’s coverage for “property damage” caused by an “occurrence”; (ii) the underlying claim did not fall within the “insured contract” exception to the “Contractual Liability” exclusion in the policy; and (iii) coverage was barred under the policy’s “Contractor’s Limitation Endorsement.” We discern no error and affirm.

“Summary judgment is proper when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. OCGA § 9-11-56 (c).” Matjoulis v. Integon Gen. Ins. Corp., 226 Ga. App. 459 (1) (486 SE2d 684) (1997). “Insurance in Georgia is a matter of contract, and we have long held that contract disputes are well suited for adjudication by summary judgment because construction of a contract is ordinarily a matter of law for the court.” (Citations and punctuation omitted.) Nationwide Mut. Fire Ins. Co. v. Somers, 264 Ga. App. 421, 423 (1) (591 SE2d 430) (2003). In this appeal, the relevant facts underlying the insurance claim are undisputed, and the only question is whether the policy covers the claim. Under these circumstances, since only the legal issue of coverage is presented, this matter can be decided by summary judgment, not declaratory judgment. There are no factual disputes. See id. at 424 (1). Our review of the trial court’s decision is de novo. See McDonald Constr. Co. v. Bituminous Cas. Corp., 279 Ga.App. 757, 760 (632 SE2d 420) (2006).

The record shows that the underlying suit involved a construction project for a dormitory on the campus of Georgia Southern University. Gill Plumbing Company and Jose Alfredo Jimenez were hired as subcontractors to install the pipes for the project. Subsequent to the construction, a pipe burst occurred at the dormitory, which caused damage to several units, including the flooring, carpet, and walls. The underlying lawsuit was filed to recover the costs to repair the property damage in the dormitory. Claims for indemnification and contribution were asserted against Gill Plumbing and Jimenez as the plumbing subcontractors. Following a trial, the jury returned a verdict finding that Jimenez was at fault for causing the property damage at the dormitory, and that Jimenez was liable for $191,382.01 in damages that arose from his negligent pipe work during the project. Based upon the jury’s verdict, the trial court entered a judgment in favor of Gill Plumbing as to its claim for indemnification against Jimenez for the property damage.

Jimenez was insured under a CGL policy issued by Maxum Indemnity Company. Maxum filed the instant declaratory judgment action, seeking a declaration that the claim against Jimenez was not covered under its policy, and thus, it had no duty to indemnify Jimenez for the damages awarded in the underlying lawsuit.

“Construction of an insurance policy is governed by the ordinary rules of contract construction, and when the terms of a written contract are clear and unambiguous, the court is to look to the contract alone to find the parties’ intent.” (Citation omitted.) Nationwide Mut. Fire Ins. Co., supra, 264 Ga. App. at 426 (3) (a). Here, the unambiguous terms of the policy provided, in relevant part, that Maxum agreed to “pay those sums that [Jimenez] becomes legally obligated to pay as ‘damages’ because of . . . ‘property damage’ to which [the] insurance applies.” The policy further stated that the insurance applied to property damage “caused by an ‘occurrence’.” In turn, the Definitions section of the policy pertinently defined “property damage” as “[p]hysical injury to tangible property, including all resulting loss of use of that property,” and defined “occurrence” to mean “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Although the policy did not specifically define the term “accident,” that term is commonly defined in Georgia as “an event which takes place without one’s foresight or expectation or design.” (Citation and punctuation omitted.) American Empire &c. Ins. Co. v. Hathaway Dev. Co., 288 Ga. 749, 751 (707 SE2d 369) (2011); see also Nationwide Mut. Fire Ins. Co., supra, 264 Ga. App. at 426 (3) (a). Consistent with this common definition of “accident,” the policy contained an exclusion stating that the insurance did not apply to property damage expected or intended from the standpoint of any insured. The policy also contained a “Contractual Liability” exclusion, which provided that the insurance did not apply to “ ‘property damage’ for which the insured is obligated to pay damages by reason of the assumption of Lability in a contract or agreement.” However, that exclusion did not apply to liability for damages “[a]ssumed in a contract or agreement that is an ‘insured contract’ ” or “[t]hat the insured would have in the absence of the contract or agreement.” An “insured contract” was pertinently defined to mean “[t]hat part of any other contract or agreement pertaining to [the insured’s] business... under which [the insured] assume[d] the tort liability of another party to pay for . . . ‘property damage’ to a third person or organization.” The policy excluded “property damage” to “[t]hat particular part of any property that must be restored, repaired or replaced because [the insured’s work] was incorrectly performed on it.” The property damage exclusion did not apply, however, to a “products-completed operations hazard,” which included the insured’s products or completed work. Lastly, the policy contained a “Contractors Limitation Endorsement” that excluded property damage sustained “by any person who [was] not [contracted with [the insured].”

1. Maxum first contends that the underlying claim did not fall within the policy’s coverage for “property damage” caused by an “occurrence.” We disagree.

Maxum’s arguments in this regard have been decided adversely by the precedents of American Empire, supra, 288 Ga. at 751-752, and SawHorse v. Southern Guar. Ins. Co. &c., 269 Ga.App. 493, 498-499 (2) (a), (b) (604 SE2d 541) (2004), which involved the same policy language and definitions of the “property damage” and “occurrence” terms as those presented here. The rulings in those cases establish that a subcontractor’s faulty workmanship that causes unforeseen or unexpected damage to other property constitutes an “occurrence” under a CGL policy. See American Empire, supra, 288 Ga. at 751-752; SawHorse, supra, 269 Ga. App. at 498-499 (2) (a), (b). Indeed, the circumstances of the instant case are substantially similar to those presented in American Empire, where the Court held that coverage under a CGL policy applied to a claim against a plumbing subcontractor to recover the cost to repair property damage caused by his faulty workmanship in construction projects. See American Empire, supra, 288 Ga. at 750-752.

Significantly, Maxum does not dispute that the underlying suit was filed after a pipe burst occurred at the dormitory, which caused property damage to several units. Here, as in American Empire, the underlying suit was pursued to recover the costs to repair the property damage caused by Jimenez’s faulty plumbing work in the construction project. The jury’s verdict entered a finding that Jimenez was at fault for causing the property damage at the dormitory and that the damages arose out of his work performed during the pipe installation. There was no evidence or suggestion that Jimenez’s plumbing mistakes were expected or intentional. Under these circumstances, the trial court correctly concluded that Jimenez’s acts constituted an “occurrence” involving “property damage” covered by the CGL policy. See American Empire, supra, 288 Ga. at 751-752; SawHorse, supra, 269 Ga. App. at 498-499 (2) (a), (b).

Maxum nevertheless argues that its policy with Jimenez did not afford coverage since the judgment entered against Jimenez in the underlying suit was for only contractual indemnity and breach of contract, which was outside the scope of the policy’s coverage for property damage arising out of tort liability. Maxum’s attempt to characterize the underlying claim as involving only contractual damages for economic loss, however, is unavailing.

It is true that

[t]he purpose of comprehensive liability insurance coverage is to provide protection for personal injury or for property damage caused by the completed product, but not for the replacement and repair of that product. . . . The coverage applicable under the CGL policy is for tort liability for injury to persons and damage to other property and not for contractual liability of the insured for economic loss because the product or completed work is not that for which the damaged person bargained. .. . Stated another way, CGL coverage is intended to cover the “potentially limitless liability” associated with the risk that the work of the insured, once relinquished or completed, will cause bodily injury or damage to property other than to the completed work itself, and for which the insured may be found liable. For there to be coverage under a CGL policy for faulty workmanship, there would have to be damage to property other than the work itself and the insured’s liability for such damage would have to arise from negligence, not breach of contract.

(Citations and punctuation omitted.) McDonald Constr. Co., supra, 279 Ga. App. at 761-762 (1). Although the complaint against Jimenez set forth both a breach of contract claim and a tort claim, both claims were based upon his defective workmanship in the pipe installation and the resulting property damage to the dormitory. The sole basis for the jury’s award of damages was the claim for the damage to the property. As explained in Glens Falls Ins. Co. v. Donmac Golf Shaping Co., 203 Ga. App. 508, 512 (3) (417 SE2d 197) (1992), a claim against an insured for defective workmanship on a construction project may be set forth as both a breach of contract claim and a tort claim. Id.

A contractor who undertakes a construction proj ect is required by law to exercise ordinary care not to endanger the persons or property of others. This legal duty is imposed on the contractor by the express or implied contractual relationship created when the contractor undertakes the project. The breach of this legal duty, imposed by contract, but existing in law apart from the contractual obligation, may constitute both a tort arising from the contract, and a breach of the contractual relationship itself. In such tort cases the injury to the plaintiff has been an independent injury over and above the mere disappointment of plaintiffs hope to receive his contracted-for benefit.

(Citations and punctuation omitted.) Id.The underlying claim against Jimenez was to recover the cost of repairing the damage to the dormitory caused by his negligent workmanship, and thus, it was covered under the CGL policy. See American Empire, supra, 288 Ga. at 751-752. Compare McDonald Constr. Co., supra, 279 Ga. App. at 761-762 (1) (holding that CGL policy did not provide coverage for costs to replace tiles in order to comply with a construction contract; there was no evidence of any damage to property, and the tiles were only replaced because they failed to conform to the contract’s requirements); Mack v. Nationwide Mut. Fire Ins. Co., 238 Ga. App. 149, 149-150 (517 SE2d 839) (1999) (insurance policy did not provide coverage for reimbursement of finance charges since the loss of use of money did not relate to physical injury to tangible property).

2. Maxum next contends that coverage was barred by the policy’s “Contractual Liability’ exclusion and did not fall within the “insured contract” exception to the exclusion. Alternatively, Maxum argues that the terms of the “insured contract” exception need not be reached in light of the initial consideration that the policy did not cover the claim. In this regard, Maxum merely reasserts its arguments that the underlying claim was for “contractual indemnity only” and did not pertain to tort liability. Again, Maxum’s arguments are without merit.

Contrary to Maxum’s argument, the policy’s “Contractual Liability’ exclusion does not apply in this case. The exclusion stated that the policy did not cover “ ‘property damage’ for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement.” The policy further expressed, however, that the exclusion did not apply to liability for damages “[a]ssumed in a contract or agreement that is an ‘insured contract’ ” or “[t]hat the insured would have in the absence of the contract or agreement.” Significantly, Jimenez’s obligation to pay the damages award was not based upon a contractual assumption of liability, but rather, was based upon his tort liability arising from his own negligent pipe workmanship. For the reasons explained in Division 1 above, we reject Maxum’s attempts to mischaracterize the underlying claim as for “contractual indemnity only.” To the extent that Jimenez was directly liable in tort for the property damage caused by his negligence, regardless of the contract, the exclusion did not apply.

Maxum’s reliance upon Scottsdale Ins. Co. v. Great American Assurance Co., 271 Ga.App. 695 (610 SE2d 558) (2005), is misplaced. In Scottsdale, a landlord leased certain space to a vision care provider pursuant to a lease agreement. Id. The lease agreement contained a provision in which the landlord agreed to indemnify the tenant from liability and damages incurred for personal injury arising out of any occurrence at the leased premises. Id. The vision care provider was subsequently sued by its patient for medical malpractice based upon a claim that her medical condition had been misdiagnosed. Id. at 696. The vision care provider’s insurer brought a claim against the landlord’s insurer, contending that the lease agreement was an “insured contract” affording coverage under the landlord’s business liability policy. Id. at 696. We held that the policy did not provide coverage for the claim since the policy did not insure against the landlord’s failure to abide by the terms of the lease agreement. Id. at 696 (1). Notably, in reaching our holding, we recognized that the alleged “injury” was the failure to fulfill its contractual obligation to indemnify the tenant. Id. at 697 (1). There was no claim that the landlord engaged in any negligence or tortious conduct that gave rise to the patient’s underlying suit.

The instant case is clearly distinguishable from Scottsdale. Here, the claim against Jimenez was based on his own tortious negligence which caused the property damage at issue. As such, the underlying claim was not merely based upon a contractual claim, but rather was predicated upon Jimenez’s tort liability for which coverage under the CGL policy applied. See American Empire, supra, 288 Ga. at 751-752.

3. Lastly, Maxum argues that coverage was barred by the policy’s “Contractors Limitation Endorsement.” This argument is likewise without merit.

Decided November 20, 2012.

Freeman, Mathis & Gary, William H. Buechner, Jr., Philip W. Savrin, for appellant.

Taylor & Viers, Richard T. Taylor, Drew, Eckl & Farnham, Stevan A. Miller, Chad E. Jacobs, for appellee.

The cited endorsement contained an exclusion for “Contracted Persons,” which provided that

[the] insurance does not apply to . .. “property damage” .. . sustained by any person who is:
1. Contracted with [the insured] or with any insured for services; or
2. Employed by, leased to or contracted with any entity that is:
A. Contracted with [the insured] or with any insured for services; or
B. Contracted with others on [the insured’s] behalf for services.

By its terms, the exclusion barred coverage for damage sustained by fellow contractors or subcontractors on the project, not to other third parties who sustained property damage as a result of the work on the project. The damage was sustained by Georgia Southern University, not by a contractor on the project. Consequently, the exclusion did not apply. To construe the terms of the exclusion differently would be contrary to the purpose of CGL policy insurance and make the policy coverage illusory. When the provisions of an insurance contract are repugnant to one another, the provision most favorable to the insured will be applied. See Isdoll v. Scottsdale Ins. Co., 219 Ga.App. 516, 518 (1) (466 SE2d 48) (1995). The policy’s terms provided coverage for property damage arising out of the insured’s completed work on the project. The exclusion, which otherwise failed to define the term “Contracted Persons,” cannot be construed in a manner that would be repugnant to the coverage terms or render the CGL policy illusory.

The trial court’s decision granting summary judgment in favor of Gill Plumbing and Jimenez was proper.

Judgment affirmed.

Ray and Branch, JJ., concur.

       This is the third appearance of this case before this court. See Gill Plumbing Co. v. Jimenez, 310 Ga.App. 863 (714 SE2d 342) (2011) (“Jimenez IF’); Jimenez v. Gilbane Bldg. Co., 303 Ga. App. 125 (693 SE2d 126) (2010) (“ Jimenez I"). The background facts and procedural history of the underlying case are as fully set forth in Jimenez I, supra, 303 Ga. App. at 126, and in Jimenez II, supra, 310 Ga. App. at 864-866, and need not be restated here.


author: BARNES, Presiding Judge.

text:
    A12A1040.
    McCLENDON v. THE STATE.
    (734 SE2d 505)
   BARNES, Presiding Judge.

Jason Kelly McClendon appeals from the order of the trial court denying his “Motion to Hold Judgment Void Pursuant to OCGA § 17-9-4.” McClendon was found guilty of voluntary manslaughter and sentenced to serve 20 years in confinement, but his sentence was reduced to 15 years by the Sentence Review Panel. McClendon contends that the trial court erred in holding void the Sentence Review Panel’s order that modified his original sentence. Upon our review, we reverse.

On September 14, 1996, McClendon, then 14 years old, was found guilty of the voluntary manslaughter of his mother. He was given the maximum sentence of 20 years to serve in confinement. McClendon’s conviction was affirmed by this Court on direct appeal in an unpublished opinion (McClendon v. State, 226 Ga. App. XXIX (1997)), and the remittitur was filed and recorded in the Superior Court of Monroe County on July 16,1997. On June 4, 2001, McClendon, pro se, filed an application for an out-of-time review by the Sentence Review Panel. On January 18, 2002, the Review Panel reduced his sentence to “twenty years, serve fifteen, balance probated.” On March 29,2002, the panel entered another order, nunc pro tunc to January 18, 2002, reducing McClendon’s sentence to “twenty years, serve fifteen.” McClendon was released from prison on September 25, 2010, after serving 15 years, and apparently ordered to report to the State Probation Department.

Over the next several months, it was alleged, on multiple occasions McClendon violated his probation by failing to report and failing to notify his probation officer of his address. On June 21, 2011, the State filed a “Petition for Modification/Revocation of Probation” alleging that McClendon had violated the terms of his probation “which are fully set forth in the original order” by, among other things, violating “special condition to complete requirements of intensive probation, [and] failure to abide by rules and regulations of intensive probation.” The petition also alleged that McClendon had committed another crime, “Possession of Drugs/Weapons by an Inmate and Criminal Interference with Government Property.” At the hearing on the petition, McClendon moved to dismiss the revocation petition, arguing that the trial court lacked jurisdiction to impose new probation terms. The State introduced into evidence a document signed by McClendon entitled “Special Conditions of Intensive Probation Supervision” dated March 22, 2011. It provided that McClendon was assigned to the Intensive Probation Supervision Program and listed certain conditions of probation. The trial court denied McClendon’s motion to dismiss and entered an order in which it purported to revoke the “balance” of McClendon’s twenty-year sentence — four years, two months and twelve days in confinement.

McClendon filed a motion to void the order revoking his probation pursuant to OCGA § 17-9-4, arguing that, pursuant to the Sentence Review Panel’s modification order, he was not on probation. Subsequently, the State filed a “Motion to Hold as Void and a Nullity the Orders of the Sentencing Review Panel Dated January 18, 2002, and February 22, 2002.”

After a hearing, the trial court denied McClendon’s motion, granted the State’s motion, and entered an order voiding the Review Panel’s two orders upon finding that the panel had lacked authority to modify McClendon’s sentence and that his original sentence of twenty years in confinement was valid. The trial court found that the Review Panel lacked subject matter jurisdiction over McClendon’s application in 2002 because it was not filed within the 30-day filing limitation provision in former OCGA § 17-10-6 (a), and that there was no evidence in the record that McClendon had been granted an extension of time to file the application.

The trial court also held that the Review Panel did not have authority to “modify a straight prison time sentence as to make it a split sentence (to probate or suspend a portion of the sentence).” It found that the Review Panel’s order reducing McClendon’s sentence to “twenty years, serve fifteen” was in common parlance a sentence of fifteen years to be served in prison and the balance to be served on probation, and concluded that the Panel’s orders were void and the original sentence of twenty years confinement was still valid.

1. In two related enumerations, McClendon contends that the trial court erred in denying his motion to void the order revoking his probation pursuant to OCGA § 17-9-4 and granting the State’s motion to void the Sentence Review Panel order because the trial court lacked subject matter jurisdiction over the modification of his punishment, and the order doing so violated the Fifth Amendment prohibition against double jeopardy. Upon our review, we reverse.

Former OCGA § 17-10-6 titled “[rjeview of sentences of imprisonment for period exceeding 12 years by three-judge panel,” provided that

the defendant shall have the right to have the sentence or sentences reviewed by a panel of three superior court judges to determine whether the sentence or sentences so imposed are excessively harsh____Any defendant seeking a review of such sentence or sentences shall make application therefor within 30 days of the date on which the sentence was imposed by a judge of the superior court or after the remittitur from the Court of Appeals or Supreme Court affirming the conviction is made the judgment of the sentencing court, whichever occurs last.

OCGA § 17-10-6 (a). And additionally, the statute provided that “[t]he panel shall not have the authority... to reduce any sentence to probation or to suspend any sentence,” OCGA § 17-10-6 (c), and that “any order issued by the panel reducing or refusing to reduce any sentence covered by an application shall be binding on the defendant and the superior court which imposed the sentence.” OCGA § 17-10-6 (d).

Generally, a trial court loses subject matter jurisdiction over the issue of punishment at the end of the term in which the defendant was convicted and sentenced, unless the sentence originally imposed was void. Sledge v. State, 245 Ga. App. 488 (537 SE2d 753) (2000). “A sentence is void if the court imposes punishment that the law does not allow. When the sentence imposed falls within the statutory range of punishment, the sentence is not void[.]” (Citations and punctuation omitted.) Jones v. State, 278 Ga. 669, 670 (604 SE2d 483) (2004). In cases where the sentence is not void and the defendant filed an application for review of his sentence under former OCGA § 17-10-6, “as long as the sentence is one which is otherwise covered by an application, a [Sentence Review] Panel decision is totally insulated from a trial court’s claim of reinvested subject matter jurisdiction over the question of punishment.” Benefield v. State of Ga., 276 Ga. 100 (575 SE2d 453) (2003). Thus, as “[a]ny order issued by the Panel reducing or refusing to reduce any sentence covered by an application shall be binding on the defendant and the superior court which imposed the sentence,” OCGA § 17-10-6 (d), the trial court’s subject matter jurisdiction is “strictly limited to determining whether the sentences for which [the defendant] had sought review were among those which the Panel was statutorily authorized to reduce.” Id.

Here, the trial court found that the Panel’s reduced sentence was void because the application for review was filed outside of the 30-day application period and void because the Panel was not statutorily authorized to give McClendon a probated sentence. Regarding the purported probated sentence, the Panel amended its first sentence reduction which provided for five years probation. In the amended reduction, the Panel’s sentence was “twenty years, serve fifteen.” The trial court interpreted the language as a sentence of 15 years to be served in prison and the balance to be served on probation.

It is true that the Panel did not have authority to modify a sentence to include probation where the initial sentence did not provide for probation. Davenport v. State, 155 Ga.App. 388 (271 SE2d 34) (1980). However, the Panel remedied any error in its amended order which removed the probation language and instead used the revised language “twenty years, serve fifteen.” Even if the language could be interpreted as an unauthorized imposition of probation, the sentence would not be void on that basis because the Panel was authorized to reduce the overall sentence from 20 years to 15.

In Warren v. State, 204 Ga. App. 191 (418 SE2d 783) (1992), Warren had been sentenced to serve twelve months on Count 1, ten years on Count 2, and one year on Count 3, and after he filed an application for review of the sentence, the Panel reduced the second count to five years with two years to be served in custody and the remainder on probation. Id. The trial court determined that while the reduction of Warren’s sentence to five years was within the authority of the Sentence Review Panel, the Panel lacked authority to probate a portion of that five-year sentence because the trial court’s original sentence did not specify any terms and conditions of probation that could be adopted by the Panel. Id. This Court affirmed the trial court’s order finding that the five-year reduction was valid and agreed that

[s]ince the imposition of the terms and conditions of probation is a matter for the trial judge pursuant to OCGA § 17-10-1 (a), where no such conditions have been provided by the trial court, the case is not one in which the panel may appropriately reduce a prison sentence by partial conversion of the prison sentence to probation.

Id.

Likewise here, even if the “twenty years, serve fifteen” language could somehow convey an attempt to probate five years of McClendon’s twenty-year sentence, his original sentence did not provide for any terms and conditions of probation which could have been adopted by the Panel. Reducing the 20-year sentence to 15 years in confinement was clearly within the authority of the Panel, see OCGA § 17-10-6 (a), and the trial court erred in finding that the Panel’s order was void on that basis. See Warren, 204 Ga. App. at 191.

The trial court also found that the Panel’s reduced sentence was void because McClendon filed his application outside the time period allowed in OCGA § 17-10-6 (a), which provides that applications for sentence review are to be filed

within 30 days of the date on which the sentence was imposed by a judge of the superior court or after the remittitur from the Court of Appeals or Supreme Court affirming the conviction is made the judgment of the sentencing court, whichever occurs last.

The trial court held that, pursuant to Rule 24 of the Rules for the Superior Courts Sentence Review Panel, the Panel would only have had jurisdiction to review the application for sentence review if the sentencing court had granted McClendon permission to file the application outoftime. The trial court concluded that, since there was no evidence in the record that the sentencing judge had granted such an application, the Review Panel’s exercise of jurisdiction was a nullity and its sentence reduction void.

It is undisputed that McClendon’s application was filed well outside of the statutory 30-day period. The remittitur from this Court was filed and recorded in the Superior Court of Monroe County on July 28,1997, and McClendon filed his application for an out-of-time review in January 2001. It is also clear that the Sentence Review Panel had an alternate path for considering out-of-time requests for review in addition to the process outlined in Rule 24.

McClendon filed an application for an out-of-time review on June 4, 2001, and the Panel forwarded the application to the sentencing court with a letter directing it to “[p]rocess this request and forward the appropriate documents to the panel along with a copy of the request within 10 days of receipt” and that “[eligibility for sentence review will be determined by the Panel.” The docketing notice subsequently sent to McClendon from the Panel was on a pre-printed form which indicated the status of the application. There was an option which reflected that the application had been filed more than 30 days after the sentence or remittitur and that therefore the Panel was “determining whether an OUT-OF-TIME review will be granted.” Another option, which was the one marked on McClendon’s notice, stated that his out-of time review had been granted and directed him to submit his argument or memorandum within 15 days of the September 13, 2001 docketing date.

Here, the Panel clearly acted under the authority of an accepted process to consider late-filed applications for sentence review. Although the trial court found that the Panel had acted outside of the guidelines provided for in the Panel’s Rule 24, it is clear from the record that the Panel forwarded the application to the sentencing court to be “processed,” and that the application was then sent back to the Panel. It is not outside the realm of possibility that the “processing” was in keeping with Rule 24’s direction that the Panel must be “ordered to [grant the application] by a court of competent jurisdiction.”

Thus, in this case, “[u]pon the [appellate court’s] affirmance of [McClendon’s] sentence[ ], all subject matter jurisdiction in that regard passed from the [appellate court] and became invested exclusively in the Panel, rather than in [the trial court].” Benefield, 276 Ga. at 101. Pursuant to OCGA § 17-10-6 (d), the trial court had no authority to review the panel’s sentence reduction, which was binding on the defendant and the superior court which imposed the sentence. “[A]s long as the sentence is one which is otherwise ‘covered by an application,’ a Panel decision is totally insulated from a trial court’s claim of reinvested subject matter jurisdiction over the question of punishment.” Id. at 101-102 (2). “[The trial court’s] subject matter jurisdiction was strictly limited to determining whether the sentence [ ] for which [McClendon] had sought review [was] among those which the Panel was statutorily authorized to reduce.” Id. at 102.

OCGA § 17-10-6 (a) enumerates those sentences which are subject to a defendant’s request for Panel review. That provision specifies that, in any case, except cases in which the death penalty is imposed or cases involving a serious violent felony as defined in subsection (a) of Code Section 17-10-6.1, in which a sentence of 12 or more years, or several consecutive sentences which total 12 or more years, has been fixed and imposed by a judge, without a jury, the defendant shall have the right to have the sentence or sentences reviewed by a panel of three superior court judges to determine whether the sentence or sentences so imposed are excessively harsh.

Decided November 20, 2012.

Leo J. Right, Jr., for appellant.

Richard G. Milam, District Attorney, for appellee.

Benefield, 276 Ga. at 102.

Accordingly, because McClendon’s sentence was longer than 12 years and therefore clearly subject to a sentence review under OCGA § 17-10-6 (a), and his application for an out-of-time sentence review was granted, the trial court’s reinvested subject matter jurisdiction over the question of the sentencing was improper. See Warren, 204 Ga. App. at 191 (under applicable statutes, Panel has no original probationary authority over unprobated sentences); Davenport, 155 Ga. App. at 389 (Panel’s statutory authority extends to modification of initially probated sentences); compare Benefield, 276 Ga. at 102 (trial court did not have subject matter jurisdiction over any issues related to the Panel’s decision, including the constitutionality of the statute which created the Panel).

The trial court’s order reinstating McClendon’s 20-year sentence and voiding the order of the Panel is reversed, and it is directed to reinstate the Panel’s sentence of 15 years to serve in confinement. Consequently, McClendon’s sentence was fully served when he was released on September 25, 2010.

2. Based on our holding in Division 1, we need not address McClendon’s remaining enumeration regarding double jeopardy issues.

Judgment reversed.

Adams and McFadden, JJ., concur.

       “The judgment of a court having no jurisdiction of the person or subject matter, or void for any other cause, is a mere nullity and may be so held in any court when it becomes material to the interest of the parties to consider it.” OCGA § 17-9-4.

       As of July 1, 2007, former OCGA § 17-10-6 was repealed, and OCGA § 17-10-6.3 came into effect with guidelines for completing any matters still pending before the Panel. Ga. L. 2007, pp. 595, 596, §§ 2, 3.

       Out-of-time applications for Review of Sentence will be granted only when the Panel is ordered to do so by a court of competent jurisdiction or if the sentencing judge certifies to the Panel that an appropriate and timely explanation of the right of sentence review was not made to the defendant; however the sentencing judge shall have the right to grant a discretionary out-of-time review.
      Rule 24, Rules for the Superior Courts Sentence Review Panel of Georgia.

       Some of the language in this provision is not legible, but it appears to instruct the applicant not to submit arguments until further notice.