author: Dillard, Judge.

text:
    A11A1192.
    TURNER v. THE STATE.
    (720 SE2d 264)
   Dillard, Judge.

Cassandra Jill Turner pleaded guilty to three counts of theft by taking as a fiduciary and was sentenced by the trial court as a first offender to serve 15 years, followed by 30 years on probation. Additionally, the trial court ordered that, as a term of her probation, Turner pay her former employer, Middle Georgia Management Services (“MGMS”), a total of $1,877,531.03 in restitution. Turner appeals the trial court’s order of restitution, arguing that it erred by (1) failing to consider her current financial condition and future earning capacity; (2) failing to consider the factors required by OCGA § 17-14-10; (3) finding that the amount of the award was supported by a preponderance of the evidence; and (4) imposing the full amount of MGMS’s loss upon her in light of the evidence presented regarding the involvement of a deceased co-conspirator. For the reasons set forth infra, we vacate the trial court’s judgment with regard to the total amount of the restitution award and remand the case with direction. We otherwise affirm the judgment in all other respects.

The record shows that MGMS is a loan-provider with 17 branches throughout Georgia. Turner became the manager at MGMS’s Statesboro office in 2004, and her close friend, Barbara Morris, was employed at the same office as a customer-service representative. The Statesboro office was comprised of one part-time and three full-time employees, including Turner and Morris, who were responsible for handling the loan-making process.

In November 2008, auditors from Wells Fargo — with whom MGMS held a $10 million line of credit — conducted a semi-annual review and noticed discrepancies that were brought to the attention of Ricky Gay, an MGMS supervisor who oversaw operations at the Statesboro office and others. On December 2, 2008, Gay went to the Statesboro office to investigate an odd number of loans with rescheduled payment-due dates. Gay discovered that, unbeknownst to him, the loans had been rescheduled using his password; thus, he began to check the documentation of the approximately 500 questionable accounts.

For the first few accounts, Gay was unable to locate required documents, so he asked Turner to assist him in this endeavor. But Gay was still unable to locate the necessary supporting documentation, including signed contracts and promissory notes. He then questioned Turner about the suspicious accounts, at which point she “immediately broke down and became almost hysterical,” claiming that she had been unable to stop Morris from creating fake loans. Turner admitted to Gay that the questionable accounts were bogus and revealed that there were more. She then brought Gay a box filled with approximately 1,340 fake loans.

Shortly thereafter, Morris approached Gay in tears and also admitted to creating the fake loans, some of which were fabricated using the names and information of former MGMS clients. Turner then asked Gay if she could briefly leave the office to get something to settle her stomach, and Morris told Gay that she was going to step outside to call her daughter. Tragically, Morris instead drove home and committed suicide.

In the formal investigation that followed, the questionable loans were certified as fictitious, and Wells Fargo thereafter froze the company’s line of credit, which nearly caused MGMS to go out of business, as it was forced to use outside sources for operating funds. In the end, MGMS’s total loss resulting from the creation of the fictitious loans amounted to $1,883,542.59 — a total which excluded the company’s payment of monthly commissions and year-end bonuses that were artificially inflated due to the loan-scheme.

Thereafter, Turner was indicted, pleaded guilty to the charges against her, and was brought before the trial court for a restitution hearing. At that hearing, Turner testified that she did not receive any of the missing $1.8 million, though she did acknowledge that a percentage of her commissions and year-end bonuses were attributable to the bogus loans. Further, although Turner fully admitted to having knowledge of Morris’s actions beginning in early 2007, she claimed that Morris threatened to commit suicide whenever confronted with her misdeeds.

The State’s evidence corroborated that Turner had knowledge of the scheme but also undermined her claim of limited involvement. Indeed, the sole stockholder and owner of MGMS testified that it would have been impossible for Morris to have acted without Turner’s knowledge, and Gay testified that all of the fake loans were coded and funded through a process that only Turner had the power to conduct. Additionally, the State presented evidence that, beginning in October 2006, the loans were created using computer-user identifications for both Morris and Turner, with an analysis showing a final total that attributed $508,938.32 to Morris and $1,374,604.27 to Turner.

After a three-day hearing, the trial court ordered Turner to pay MGMS restitution in the amount of $1,877,531.03. This appeal by Turner follows.

1. Turner’s first and second enumerations of error can be dispensed with in short order. In these enumerations, Turner argues that when the trial court ordered the restitution payment, it erred by failing to consider (1) her current financial condition and future earning capacity and (2) all of the factors in OCGA § 17-14-10. We disagree.

At the outset, we note that when a trial court or other ordering authority determines the nature and amount of restitution, it “shall” consider the following factors:

(1) [t]he financial resources and other assets of the offender or person ordered to pay restitution[,] including whether any of the assets are jointly controlled; (2) [t]he earnings and other income of the offender or person ordered to pay restitution; (3) [a]ny financial obligations of the offender or person ordered to pay restitution, including obligations to dependents; (4) [t]he amount of damages; (5) [t]he goal of restitution to the victim and the goal of rehabilitation of the offender; (6) [a]ny restitution previously made; (7) [t]he period of time during which the restitution order will be in effect; and (8) [o]ther factors which the ordering authority deems to be appropriate.

And the record before us makes clear that the trial court was presented with evidence as to each of these factors.

In addition to the evidence discussed supra, the court was presented with testimony by Turner and her husband regarding the assortment of odd jobs she had obtained since her dismissal from MGMS; her then-current salary of $10.50 per hour for 28 hours per week in a healthcare position; an estimate of what housing would cost should they lose their home in a pending bankruptcy case (which had allegedly prevented them from offering restitution); an estimate of the family’s monthly expenses, including caring for two children, ages 11 and 9; and the economy’s effect on her husband’s salary.

Further, despite her admitted knowledge (and guilty plea to the charges), Turner attempted to show that the deceased Morris, whose income was less than Turner’s, was living a lifestyle inconsistent with her salary, leading to the inference that Morris had walked away with all or most of the missing $1.8 million. A number of witnesses testified regarding Morris’s somewhat extravagant purchases; an alleged gambling problem; and large, frequent deposits into her accounts and the accounts of her family members in the years leading up to the discovery of the bogus loans. Other witnesses testified regarding Turner’s more financially conservative lifestyle and pending bankruptcy.

Nevertheless, the trial court was unpersuaded by the foregoing testimony. After hearing arguments by the State’s prosecutor and Turner’s counsel, the judge opined that what Turner had actually done was corroborate the State’s evidence — namely that Morris received approximately $500,000 from the fake-loan enterprise, leaving the other $1.3 million attributable to Turner just as the computer-identification analysis had shown. The judge also expressed regret over the tragic nature of the case for the Turner family, the Morris family, and the families of the MGMS employees whose livelihoods were placed in jeopardy as a result of Turner and Morris’s scheme.

In granting restitution, the judge deviated from the State’s request for payments in one-thousand-dollar-a-month increments, believing this could not be met realistically. Instead, the judge ordered Turner to make payments in five-hundred-dollar-a-month increments. The judge also ordered that the amount of restitution be reduced by money obtained from other sources and acknowledged that the total amount would never be met unless the missing assets were located. On that issue, the judge expressed his opinion that credibility had been lacking in some testimony and that he believed the missing $1.3 million existed somewhere. Finally, the judge sentenced Turner as a first offender with 15 years to serve, noting that “[i]n the interest of restitution, first offender would not only be a benefit to those that seek restitution but, as well, to the defendant.”

Given the above-referenced evidence and the actions and comments by the trial court, Turner’s argument that the court failed to consider all of the required factors, including her then-current and future financial position, is wholly without merit. The record clearly reflects the trial court’s thoughtful consideration of the required factors.

2. Turner further contends that the State failed to demonstrate the amount of restitution by a preponderance of the evidence. And on this particular point, we agree.

Pursuant to OCGA § 17-14-7, a dispute regarding the proper amount of restitution is resolved in the required hearing “by the preponderance of the evidence.” At this hearing, the State has the burden of demonstrating the amount of loss sustained by the victim, while the defendant has the burden of demonstrating his or her financial resources and the financial needs of any dependents. Naturally, “[t]he amount of restitution ordered shall not exceed the victim’s damages.” And in this context, “damages” means

all special damages which a victim could recover against an offender in a civil action . . . based on the same act or acts for which the offender is sentenced, except punitive damages and damages for pain and suffering, mental anguish, or loss of consortium. Such special damages shall not be limited by any law which may cap economic damages.

Keeping in mind that written findings of fact are no longer required, when this Court reviews a restitution order, we have “the duty of reviewing the transcript to determine whether each party has met his or her specified burden and determining whether a restitution award was supported by the preponderance of the evidence.” And our review of the record in the case sub judice reveals that at the end of the hearing, the court instructed the State to prepare an order reflecting an award of restitution in the amount of $1,883,542.59, plus accounting fees. Thereafter, the order prepared by the State and signed by the trial court directed that Turner “pay a total of $1,932,531.03 restitution, which includes [the] $1,883,542.59 monetary loss by [MGMS] and $48,988.44 for accounting/auditing/attorney fees associated with the theft by [Turner] and her co-conspirator Barbara Morris[,] who is deceased.” That total was then reduced by $55,000 to account for payments received from an insurance policy, making $1,877,531.03 the final total to be repaid.

Although the State demonstrated the amount of money lost by MGMS through the creation of fake loans by a preponderance of the evidence (i.e., $1,883,542.59), the record does not contain sufficient evidence to support the additional $48,988.44 for “accounting/ auditing/attorney fees.” Indeed, the record contains only a vague reference to accounting expenses during Gay’s testimony, including mention of possibly having all associated bills faxed “at a later time.” But nothing in the record before us supports or explains what is encompassed by the addition of $48,988.44 in “accounting/auditing/ attorney fees associated with the theft” to the restitution award. Accordingly, we vacate the portion of the trial court’s award that is unsupported by the record and remand for further proceedings consistent with this opinion.

3. Finally, Turner contends that, due to Morris’s involvement in the loan-scheme, the trial court erred in ordering that she be responsible for the entirety of the damages when it had the authority to apportion liability. We disagree.

OCGA § 17-14-7 provides that

[i]f the ordering authority finds that more than one offender has contributed to the loss of a victim, the court may make each offender liable for payment of the full amount of restitution or may apportion liability among the offenders to reflect the level of contribution to the victim’s loss and economic circumstances of each offender.

Thus, although the trial court was permitted to apportion liability, it was not required to do so.

As we have held in the past, the consideration of the factors in OCGA § 17-14-10 could, “in some situations, result in a determination that certain defendants should be liable for a greater share of the restitutionary amount.” And here, as discussed supra, the State presented evidence that Turner was personally responsible for approximately $1.3 million of the total loss and that her participation was necessary to effectuate the entire scheme. Accordingly, Turner has not shown that it was error for the trial court to order her to pay the entire amount of MGMS’s loss.

Decided November 22, 2011

Lovett Bennett, Jr., for appellant.

Richard A. Mallard, District Attorney, Daphne H. Jarriel, Assistant District Attorney, for appellee.

Judgment affirmed in part and vacated in part, and case remanded with direction.

Mikell, C. J., Smith, P. J., Barnes, P J., Miller, P J., Phipps, P J., Andrews, Ellington, Adams, Doyle, Blackwell and McFadden, JJ., concur.

        See OCGA § 16-8-2 (“A person commits the offense of theft by taking when he unlawfully takes or, being in lawful possession thereof, unlawfully appropriates any property of another with the intention of depriving him of the property, regardless of the manner in which the property is taken or appropriated.”). Three counts of theft by deception were nolle prossed.

       Turner withdrew a fifth enumeration of error in her reply brief.

         It appears that MGMS employees who unknowingly benefitted from the bogus loans by way of commissions and bonuses were later docked in future bonus payments in order to repay the company.

       The evidence showed that before the loan-scheme began, Turner received $14,043.09 in commissions in 2005. But after the scheme began, she received total commission payments of $33,764.79 in 2006; $72,838.37 in 2007; and $34,900.77 in 2008. Turner also received a year-end bonus of $6,000 in 2005 but a bonus of $10,000 in 2006 and $16,000 in 2007.

       For her part, Turner presented testimony that it would have been possible for Morris to use Turner’s computer identification to create fake loans — and vice versa.

       OCGA § 17-14-10 (a) (l)-(8).

       The evidence showed that Morris received a base salary of $1,600 per month with very little commission, resulting in an annual income of approximately $19,200. Turner, on the other hand, received a base salary of $2,200 per month with higher monthly commissions and a larger year-end bonus, resulting in an income that ranged from $60,514.16 in 2006 to $119,785.77 in 2007.

       Morris’s children and the mother of her grandchild also took the stand but invoked the Fifth Amendment right against self-incrimination during questioning.

       The State then agreed that the restitution order could be amended at a later date if and when the missing assets were located.

        See Dorsey v. State, 206 Ga. App. 709, 715 (8) (426 SE2d 224) (1992) (holding that transcripts of hearing showed that trial court heard and considered evidence and argument regarding defendants’ financial condition and adjusted restitution payment accordingly); see also McMahon v. State, 284 Ga. App. 192, 194 (2) (643 SE2d 236) (2007) (suggesting that court need not determine in advance that “the defendant’s net worth or financial resources projected over the intended years of repayment’’ be “mathematically sufficient to allow full payment of the amount of restitution ordered”). Accord State v. Lohr, 125 P3d 977, 981 (B) (¶ 18) (Wash. Ct. App. 2005) (“Given that the court set the minimum monthly payment at an amount that would take over 400 years to pay off, it is evident the court considered [the defendant’s] financial situation.”). Compare Britt v. State, 232 Ga. App. 780, 781 (2) (503 SE2d 653) (1998) (noting that transcript indicated the trial court’s failure to consider any factor aside from the amount of damages sustained by the victim); Pruitt v. State, 230 Ga. App. 334, 334 (1) (496 SE2d 324) (1998) (holding, under prior version of the statute requiring written findings of fact, that record revealed that trial court failed to consider all required factors, including specifically the defendant’s financial condition at the time of sentencing); Baker v. State, 183 Ga. App. 100, 100 (357 SE2d 896) (1987) (State conceded that there was no restitution hearing and, thus, required factors were not considered and “no record was made . . . ensuring consideration of the factors”).

       OCGA § 17-14-7 (b); see also OCGA § 24-1-1 (5) (“ ‘Preponderance of evidence’ means that superior weight of evidence upon the issues involved, which, while not enough to free the mind wholly from a reasonable doubt, is yet sufficient to incline a reasonable and impartial mind to one side of the issue rather than to the other.”).

       OCGA § 17-14-7 (b).

       OCGA § 17-14-9.

       OCGA § 17-14-2 (2).

       The State cites Adams v. State, 291 Ga. App. 681 (662 SE2d 782) (2008), for the proposition that this Court must determine whether the trial court’s restitution order is supported by a preponderance of the evidence. While this is a correct statement of law, Adams also incorrectly holds that the trial court must make written findings of fact when ordering restitution, a proposition that we overruled in McCart v. State, 289 Ga. App. 830, 831 (1) (658 SE2d 465) (2008), prior to deciding Adams. Although the parties take no issue with the trial court’s lack of written findings, we take this opportunity to disapprove of Adams to the extent that it conflicts with McCart. See McCart, 289 Ga. App. at 832-33 (1) (holding that “Garrett v. State and its progeny are disapproved to the extent that they are authority for any cases involving restitution orders issued on or after July 1, 2005, the effective date of the Crime Victims Restitution Act of 2005,” and that “[olpinions in the appellate cases issued after that date, including cases involving restitution orders occurring prior to that date, are also disapproved to the extent that they require written findings when ordering an offender to make restitution” (footnote omitted)); see also In the Interest of E. W., 290 Ga. App. 95, 96 (2) (658 SE2d 854) (2008) (recognizing that this Court in McCart “concluded that, due to changes in the relevant statutes, the ordering authority is no longer required to make written findings on the OCGA § 17-14-10 factors when ordering an offender to make restitution”).

        Mayfield v. State, 307 Ga. App. 630, 630 (2) (705 SE2d 717) (2011) (citation and punctuation omitted); see also McCart, 289 Ga. App. at 832 (1) (“An appellate court is capable of reviewing a transcript to determine whether each party has met his or her specified burden and determining whether a restitution award was supported by the preponderance of the evidence.”); Williams v. State, 247 Ga. App. 783, 785 (2) (b) (545 SE2d 343) (2001) (“This Court’s review of evidence is limited to questions of sufficiency . . . .” (citation omitted)).

        Compare Ezebuiro v. State, 308 Ga. App. 282, 286 (2) (b) (707 SE2d 182) (2011) (holding that evidence at trial was sufficient to sustain full award of restitution); Regent v. State, 306 Ga. App. 616, 621 (3) (703 SE2d 81) (2010) (holding that “evidence of damages was sufficient and the amount of restitution did not exceed the victim’s damages”).

        See generally Gray v. State, 273 Ga. App. 747, 751 (2) (615 SE2d 834) (2005) (“[WJhere we have found the restitution evidence insufficient to sustain the award, we have consistently remanded the case for a new restitution hearing.” (citations omitted)).

       OCGA § 17-14-7 (c) (emphasis supplied).

        See generally Jones v. State, 246 Ga. App. 596, 598 (3) (539 SE2d 602) (2000) (“The word ‘may’ is permissive, rather than mandatory.” (citation omitted)).

        See Morrison v. State, 181 Ga. App. 440, 442 (352 SE2d 622) (1987).

        See id. at 442 (“[DJefendant does not show that it would be error for the trial court to order one defendant to pay the entire restitutionary amount.”).


source: Caselaw Access Project

license: Public Domain

text:
    A11A1200.
    AMERICAN DEBT FOUNDATION, INC. v. HODZIC.
    (720 SE2d 283)
   Dillard, Judge.

American Debt Foundation, Inc. (“ADF”) appeals the trial court’s certification of a class of nine Georgia residents who contracted with the company for debt-relief services, arguing that the citizens — with Mirsada Hodzic as the class representative — failed to establish two necessary requirements to support class certification: numerosity and superiority. For the reasons noted infra, we reverse the trial court’s certification of the class.

ADF is a Florida-based debt-negotiation company that contracts with individuals to assist them in reducing their unsecured debt by negotiating the settlement of their accounts with creditors. Although the company no longer operates in Georgia or offers its services to our residents, it did so as of July 1, 2003, and Hodzic was one of nine Georgians who contracted with ADF to negotiate the settlement of her debts with creditors.

ADF’s standard formula, which indisputably applied to all Georgia clients, is to charge customers 14 percent of their total debt with approximately 10 percent of the customer’s estimated settlement amount paid upon acceptance into the program. And after generally accruing six or seven months of monthly payments into a customer’s account, ADF then begins to settle the client’s debt with his or her creditors.

As to Hodzic, upon her enrollment in November 2005, ADF sent letters to her creditors to inform them of same, but no settlement payments were ever made from Hodzic’s account with the company to her creditors, despite a down payment to enroll and nine monthly payments.

Hodzic eventually terminated her account with ADF after her debts went into default and she learned that the payments she had made to ADF were never forwarded to any of her creditors. ADF thereafter refunded Hodzic with a portion of the payments she had made to the company; however, Hodzic filed suit against the company, alleging violations of OCGA § 18-5-2, which, as amended in July 2003, provides that

[i]n the course of engaging in debt adjusting, it shall be unlawful for any person to accept from a debtor who resides in this state, either directly or indirectly, any charge, fee, contribution, or combination thereof in an amount in excess of 7.5 percent of the amount paid monthly by such debtor to such person for distribution to creditors of such debtor; provided, however, no provision of this chapter shall prohibit any person, in the course of engaging in debt adjusting, from imposing upon a debtor who resides in this state a reasonable and separate charge or fee for insufficient funds transactions.

Hodzic eventually sought class certification to represent the interests of all Georgia citizens who contracted with ADF for debt-reduction services, and the trial court granted same. This appeal by ADF follows.

At the outset, we note that in reviewing the trial court’s order granting class certification, “we will consider the factual findings as adopted by the trial court and affirm them unless clearly erroneous, and we will review the conclusions of law for an abuse of discretion.” Additionally, “it is appropriate that we look to federal cases interpreting Rule 23 of the Federal Rules of Civil Procedure, the rule upon which OCGA § 9-11-23 was based, for guidance” due to the current dearth of Georgia cases addressing same.

In order to gain class certification, a plaintiff has the burden of establishing that the prerequisites of OCGA § 9-11-23 (a) have been satisfied, those being (1) numerosity, (2) commonality, (3) typicality, and (4) adequacy. Additionally, the class must satisfy at least one ground under OCGA § 9-11-23 (b), which provides, in relevant part, that a case may proceed as a class action if

the prerequisites of OCGA § 9-11-23 (a) are satisfied and[ ] (1) the prosecution of separate actions would create a risk of inconsistent adjudications or would impair other parties’ ability to protect their interests; (2) the defendant has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or declaratory relief with respect to the whole class; or (3) questions of law or fact common to members of the class predominate over any questions affecting only individual members, and a class action is superior to other available methods for the fair and efficient adjudication of the controversy.

On appeal, ADF challenges whether Hodzic has satisfied the numerosity requirement and, alternatively, whether the use of a class action suit is the superior method of resolving the case as set forth in OCGA § 9-11-23 (b) (3).

1. ADF first argues that Hodzic has failed to satisfy the numer-osity requirement with a class of nine Georgia citizens. We agree.

Numerosity is “the threshold factor, the sine qua non for class actions.” Upon a finding that “the ‘numerousness’ of parties makes it impracticable without great delay and other inconveniences to join them all, which would obstruct and probably defeat the purposes of justice[,]” the trial court may consider whether it represents a proper case to proceed as a class action.

Here, through the use of discovery, Hodzic only identified eight other Georgians who contracted with ADF for debt-reduction services. And while it is true that “numbers as small as 25 and 40 have been deemed sufficiently large to warrant class actions[,]” we simply cannot say that Hodzic has shown that a class of nine total members satisfies the numerosity requirement of OCGA § 9-11-23 (a) (l).

Although the focus of the numerosity requirement generally concerns “whether joinder of proposed class members is impractical” and not “whether the number of proposed class members is too few,” the Eleventh Circuit has, at least in general terms, found that a class of fewer than 21 members is inadequate. On the other hand, impracticability of joinder is generally presumed if the class includes more than 40 members. Therefore, a class of nine members would, as a general proposition, be inadequate for class certification in the absence of other factors showing that joinder is impracticable.

In the case sub judice, as to the impracticability of joinder for the nine class members, Hodzic’s sole argument before this Court is that permissive joinder would be legally impossible under OCGA § 9-11-20 (a). Hodzic argued below and argues again before us on appeal that joinder is impossible because “each individual putative class members’ claim arises as a result of separate transactions.” The trial court agreed and thereafter granted the class certification.

Pretermitting whether the trial court properly determined that joinder of the plaintiffs here was legally impossible under OCGA § 9-11-20 (a), that was not the proper query when assessing numer-osity for the purpose of a class-action lawsuit. Rather, the question is whether the class of plaintiffs is “so numerous that joinder of all members is impracticable.” To make this determination, we look not only to the number of putative members but also at all other relevant factors; for example, “the geographical dispersion of the class, the ease with which class members may be identified, the nature of the action, and the size of each plaintiffs claim.” Therefore, even if permissive joinder is impossible, this in and of itself would not warrant class certification. If it did, the numerosity requirement would be turned on its head with the possibility of classes as small as two. And although our analysis does not turn on the number of class members alone, the plain language of Federal Rule 23 (a) (1) and Georgia’s corresponding statute require “at least a minimal causal connection between the numerosity of the potential plaintiffs and the impracticability of their joinder.” Thus, even if joinder is “legally impermissible . . . for reasons unrelated to the number of potential class members!,] ” this is insufficient to support a finding of numerosity.

And here, the fact that the class contains only nine members strongly weighs against a finding of numerosity, such that Hodzic must argue and show the existence of other significant factors to warrant the satisfaction of this requirement. This, she has not done. Indeed, Hodzic was capable of identifying all putative class members, and there are no apparent geographic constraints given that all class members are Georgia residents. To the extent that Hodzic maintains that the financial status of the class members weighs in favor of a class action, this alone is insufficient to overcome the small size of the proposed class in the absence of any other compelling evidence. For these reasons, we find that the trial court abused its discretion in granting class certification.

Decided November 22, 2011.

Jason H. Coffman, for appellant.

Hurt, Stolz & Cromwell, James W. Hurt, Jr., for appellee.

2. Because we have reversed the certification of the class on Hodzic’s failure to satisfy the numerosity requirement, we need not address ADF’s alternative argument (i.e., that the use of a class-action suit is not the superior method to adjudicate the claim).

Accordingly, for all the foregoing reasons, we reverse the trial court’s certification of the class.

Judgment reversed.

Mikell, C. J., and Smith, P. J., concur.

       According to the company’s owner and president, ADF keeps a list of states in which the company does not take on clients due to regulations in those states. Georgia was added to the list after the company became aware of state regulations that it deemed to be adverse to its business model and operating procedures.

       OCGA § 18-5-2. The Code further provides that
      [a]ny person who engages in debt adjusting in violation of the provisions of Code Section 18-5-2 . . . shall ... be liable to the debtor in an amount equal to the total of all fees, charges, or contributions paid by the debtor plus $5,000.00. Such debtor shall have the right to bring a cause of action directly against such person for violation of the provisions of this chapter.
      OCGA § 18-5-4 (b) (2).

       The class was specifically defined as “[a]ll Georgia residents from whom ADF accepted fees and contributions on or after July 1, 2003 in an amount in excess of 7.5 percent of the amount paid monthly by the individual Class Plaintiffs to ADF for distribution to Plaintiff s individual creditors in violation of the Georgia Debt Adjusting Act.”

       We note that this case was previously before this Court when we dismissed ADF’s direct appeal of the trial court’s order that “merely granted a motion [to] set aside a class certification order for the purpose of permitting discovery,” which was not a directly appealable judgment. Following our dismissal, the trial court reentered an earlier order that certified the class, which is the order ADF now appeals.

        Brenntag Mid S., Inc. v. Smart, 308 Ga. App. 899, 903 (2) (710 SE2d 569) (2011).

        Id. (citation and punctuation omitted); see also EarthLink, Inc. v. Eaves, 293 Ga. App. 75, 76 (1) n.1 (666 SE2d 420) (2008) (“[Blecause OCGA § 9-11-23 is similar to Federal Rule of Civil Procedure 23, Georgia courts look to federal authority when construing our statute.” (citation omitted)).

        See OCGA § 9-11-23 (a); see also EarthLink, Inc., 293 Ga. App. at 76 (1) (“Under Georgia law, a case may proceed as a class action if all prerequisites of OCGA § 9-11-23 (a) are satisfied: numerosity, commonality, typicality, and adequacy . . . .”).

        EarthLink, Inc., 293 Ga. App. at 76 (1) (footnote omitted); see also OCGA § 9-11-23 (b).

        Ford Motor Credit Co. v. London, 175 Ga. App. 33, 35-36 (332 SE2d 345) (1985).

        Id. at 36 (citation omitted).

        Id.; see also Sta-Power Indus., Inc. v. Avant, 134 Ga. App. 952, 955 (1) (216 SE2d 897) (1975).

        See Gen. Tel. Co. of the Nw., Inc. v. EEOC, 446 U. S. 318, 330 (III) (A) (100 SC 1698, 64 LE2d 319) (1980) (holding that although the numerosity requirement “requires examination of the specific facts of each case and imposes no absolute limitations,” a class of 15 was too small in Title VII action).

        In re Checking Account Overdraft Litigation, 275 FRD 666, 672 (II) (A) (i) (S.D. Fla. July 25, 2011).

        See id.; see also Cox v. Am. Cast Iron Pipe Co., 784 F2d 1546, 1553 (II) (B) (1) (11th Cir. 1986) (“[W]hile there is no fixed numerosity rule, generally less than twenty-one is inadequate, more than forty adequate, with numbers between varying according to other factors.” (punctuation omitted) (citing 3B Moore’s Federal Practice ¶ 23.05[1] n.7 (1978))).

        Holman v. Student Loan Xpress, Inc., No. 8:08-cv-305-T-23MAP 2009 WL 4015573, at *2 (1) (M.D. Fla. Nov. 19, 2009) (“The numerosity requirement of Rule 23(a) is satisfied by the impracticability of joinder, which is generally presumed if a putative class amounts to more than forty individuals.” (citations omitted)); see also Foster v. City of Oakland, No. C 05-03110 MHP 2007 WL 219796, at *5 (N.D. Cal. Jan. 29, 2007) (“As a general rule, classes numbering greater than forty-one individuals satisfy the numerosity requirement.” (citation omitted)).

        See, e.g., Williams v. Henderson, 129 Fed. Appx. 806, 811 (II) (4th Cir. 2005) (holding that eight-member class did not satisfy the numerosity requirement); Harik v. Ca. Teachers Ass’n, 326 F3d 1042, 1051-52 (V) (1) (9th Cir. 2003) (holding that seven-, nine-, and ten-member classes did not satisfy numerosity requirement); Brown v. LTV Aerospace Corp., 232 NW2d 656, 666 (VI) (Mich. 1975) (holding that a six-member class was not “so numerous” as to qualify for class action status); Kane v. Sierra Lincoln-Mercury, Inc., 533 P2d 464, 465-66 (Nev. 1975) (holding that nine-member class did not satisfy the numerosity requirement); see also Bacon v. Honda of Am. Mfg., Inc., 370 F3d 565, 570 (II) (6th Cir. 2004) (“The facts of the case guide a court’s determination that the class is sufficiently large to make joinder impractical.” (citation omitted)).

        See OCGA § 9-11-20 (a) (“All persons may join in one action as plaintiffs if they assert any right to relief jointly, severally, or in the alternative in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences and if any question of law or fact common to all of them will arise in the action.”).

       We are skeptical that an action could satisfy the commonality and typicality requirements of class certification (which the lower court held were satisfied in the case sub judice) but then fail to satisfy the similar requirements of permissive joinder. Compare In re Tri-State Crematory Litigation, 215 FRD 660, 690 (A) (2) (N.D. Ga. 2003) (noting that “(pjlaintiffs must show the presence of questions of law or fact common to the entire class” and that to satisfy the requirements for class certification, “[a] representative plaintiffs claim is typical if it arises from the same event or practice or course of conduct that gives rise to the claims of the other class members, and her or his claims are based on the same legal theory” (citation and punctuation omitted)), with OCGA § 9-11-20 (a) (“All persons may join in one action as plaintiffs if they assert any right to relief jointly, severally, or in the alternative in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences and if any question of law or fact common to all of them will arise in the action.”). See Moore v. Comfed Savings Bank, 908 F2d 834, 839 (IV) (A) (11th Cir. 1990) (holding that joinder of defendants was appropriate despite the existence of separate contracts because the subject transactions “arose out of a series of transactions or occurrences” and the claims “involved the same question of law and fact”); Campbell v. Quixtar, Inc., Civil Action No. 2:08-CV-0045-RWS, 2008 WL 2477454, at *7 (I) (C) (N.D. Ga. June 16, 2008) (holding that court could not say “with certainty” that plaintiffs’ claims did not arise out of the same series of transactions when each plaintiff had an identical contract with defendant). Cf. Alexander v. Fulton County, Ga., 207 F3d 1303, 1323-24 (III) (C) (11th Cir. 2000) (interpreting Rule 20 (a)’s use of “transaction” as possibly comprehending “a series of many occurrences, depending not so much upon the immediateness of their connection as upon their logical relationship,” which included a “systemic pattern or practice of race-based discrimination” (emphasis omitted)), overruled on other grounds by Manders v. Lee, 338 F3d 1304 (11th Cir. 2003); Banks-Jackson-Commerce Hosp. & Nursing Home Auth. v. Floyd, 300 Ga. App. 206, 208 (684 SE2d 274) (2009) (holding that joinder was inappropriate because plaintiffs’ “claims [arose] out of separate medical treatment. . . that did not constitute the same transaction, occurrence, or series of transactions or occurrences” (punctuation omitted)). See generally Thompson v. Bd. of Educ. of the Romeo Cmty. Schs., 71 FRD 398, 412 (II) (A) (W.D. Mich. 1976) (suggesting that “[Rule] 23(a) CD’s requirement that the class be ‘so numerous that joinder of all members is impracticable’ could be seen as requiring that joinder be possible except for the impracticability caused by numerosity”), reversed on other grounds by Thompson v. Bd. of Educ. of the Romeo Cmty. Schs., 702 F2d 1200 (6th Cir. 1983).

        Ziedman v. J. Ray McDermott & Co., 651 F2d 1030, 1038 (III) (5th Cir. 1981) (punctuation omitted).

        Id. (citation omitted).

       We note that Hodzic has cited no authority for the proposition that the legal impossibility of joinder alone would satisfy the “impracticability of joinder” analysis of the numerosity requirement, and this Court’s own research returned no such authority. See Barnes v. United States, 68 Fed. Cl. 492, 495 (II) (Fed. Cl. 2005) (first holding that class satisfied numerosity requirement of Rule 23 because class contained potentially thousands of members, and further noting that joinder was legally impossible due to failure to satisfy requirements of Rule 20).

        Jaynes v. United States, 69 Fed. Cl. 450, 456 (I) (C) (Fed. Cl. 2006), distinguishing Barnes v. United States, 68 Fed. Cl. 492 (Fed. Cl. 2005).

        Jaynes, 69 Fed. Cl. at 456 (I) (C).

         Cf. Thillens, Inc. v. Comm. Currency Exch. Ass’n of III., Inc., 97 FRD 668, 677 (B) (1) (N.D. Ill. 1983) (“Where the class is large, the numbers alone are dispositive of the impracticability of joinder. In such cases, the Court need not look to factors other than size, e.g., geographic dispersion of the proposed members.” (citations omitted)).

       Although Hodzic argued below that the putative class members might have difficulty obtaining knowledgeable counsel or recognizing the existence of a claim due to the lack of state appellate or federal opinions related to claims pursuant to OCGA § 18-5-2, she does not argue this on appeal, and she failed to cite any authority for that proposition. Nevertheless, we are unpersuaded that this argument is enough to overcome the presumption that a class of nine members would be practicable to join.

        See Jaynes, 69 Fed. Cl. at 455 (I) (C) (“[When] the class members are both geographically proximate and easily identified and located by means of defendant’s records, joinder is more likely practicable even in light of a large class population.”).

       We note that the statutory scheme upon which the lawsuit is based allows a successful plaintiff to recover all fees, charges, contributions, and an additional $5,000.00 from the debt adjuster operating in violation of the Georgia Code. See OCGA § 18-5-4 (b) (2) (“Any person who engages in debt adjusting in violation of the provisions of Code Section 18-5-2 . . . shall . . . be liable to the debtor in an amount equal to the total of all fees, charges, or contributions paid by the debtor plus $5,000.00. Such debtor shall have the right to bring a cause of action directly against such person for. violation of the provisions of this chapter.”).


text:
    A11A1235.
    SOUTHLAND PROPANE, INC. et al. v. McWHORTER.
    (720 SE2d 270)
   Dillard, Judge.

In 1994, Charles Arrington and Benny McWhorter formed LaGrange Propane Services, Inc. (“LPS”) as a closely held corporation. Arrington and McWhorter operated LPS until 2004, when Arrington terminated McWhorter’s employment and foreclosed on all of LPS’s assets. Thereafter, McWhorter sued Arrington, Arrington’s three sons, and Southland Propane, Inc. (the new company that Arrington and his sons had formed) (collectively “defendants”), alleging damages based on numerous claims, including defendants’ conversion of his corporate interests, defamation, breach of fiduciary duty, fraud, and intentional infliction of emotional distress. Following a trial, the jury rendered a verdict in favor of McWhorter on several of his claims, awarding him compensatory and punitive damages, and the trial court entered judgment accordingly. Defendants now appeal, arguing that the trial court erred in (1) allowing McWhorter to bring a direct action, instead of a derivative action on behalf of LPS, as to the claims pertaining to his corporate interests; (2) denying defendants’ motion for judgment notwithstanding the verdict (j.n.o.v.) as to McWhorter’s claims for conversion, fraud, breach of fiduciary duty, and intentional infliction of emotional distress; (3) denying a challenge to McWhorter’s expert witness; (4) admitting prejudicial evidence; and (5) allowing punitive damages. For the reasons set forth infra, we conclude that the trial court’s error in allowing McWhorter to bring a direct action on his corporate-interest claims and denying defendants’ motion for j.n.o.v. as to McWhorter’s intentional-infliction-of-emotional-distress claim requires reversal as to those claims and as to the award of punitive damages. Nevertheless, because the jury’s verdict in McWhorter’s favor on his defamation claim — which defendants do not appeal —can support an award of punitive damages, we remand the case for further proceedings consistent with this opinion.

At the outset, we note that “[o]n appeal from the denial of a motion for a directed verdict or for j.n.o.v., we construe the evidence in the light most favorable to the party opposing the motion, and the standard of review is whether there is any evidence to support the jury’s verdict.” However, “[w]e review questions of law de novo, applying the plain legal error standard of review.”

So viewed, the record shows that McWhorter, who was married to Charles Arrington’s sister, had worked in the propane business for over 20 years. In 1994, Arrington and McWhorter decided to start their own propane business, resulting in the incorporation of LPS. The company was created pursuant to a plan in which Arrington would provide the initial financing, own 51 percent of the stock, and act as the CEO and president. McWhorter, on the other hand, would own 49 percent of the stock, act as treasurer, and handle the day-to-day operations of the company.

Arrington initially contributed approximately $100,000 in start-up funds, and LPS operated out of property that Arrington owned and for which it paid Arrington rent. Later, LPS moved to another property owned by Arrington and his wife. To facilitate this move, Arrington’s wife transferred her half interest in the property to McWhorter, after which he and Arrington took out a loan from a local bank, which was secured by the property, in order to finance the construction of the company’s office and plant buildings. The construction of these buildings was completed by Mid-South Mechanical, which was a company wholly owned by Arrington, and the property was then leased to LPS.

Over the course of the next several years, Arrington allegedly loaned over $600,000 to LPS. During this same period of time, Arrington and McWhorter also financed the company by issuing numerous promissory notes to Arrington and his sons, David, Mike, and Greg, for loans they had provided to LPS after obtaining their own loans that were secured by various properties they respectively owned. Several of these notes were obtained so that LPS could finance United Heating and Air (“UHA”), which was a company that Arrington and McWhorter incorporated in early 2002 in an attempt to create a business that would generate income during the warmer months of the year when propane sales diminished. However, UHA was never financially successful, and it ultimately ceased operations in December 2002 after LPS foreclosed on its assets.

Throughout LPS’s existence, both Arrington and McWhorter regularly used company funds to pay for personal expenses. For instance, McWhorter made nondescript payments to his wife (Arrington’s sister), who was not employed by LPS, for a short period of time and allowed his daughter, who did work for LPS, to use company funds to have her home painted and car repaired. McWhorter also used LPS funds, with Arrington’s approval, to build a lake on his property and make various and sundry improvements to his home. Similarly, Arrington used company funds for miscellaneous personal expenses, including purchasing automobiles for his wife and son’s use. In addition, although Arrington only sporadically paid himself a salary, he regularly wrote checks to himself using company funds, and at some point in time, he authorized the use of LPS funds to pay his wife and son small salaries.

In 2003, Arrington and McWhorter’s personal and business relationship began to sour due to McWhorter’s failing marriage to Arrington’s sister, which ended in divorce later that same year. During the course of the divorce proceedings, McWhorter’s counsel opined that LPS’s debts outweighed its assets. At that same time, Arrington offered to purchase McWhorter’s stock in LPS for $200,000. And although McWhorter was initially receptive to this offer, the potential deal was scuttled when McWhorter maintained that he would attempt to seek employment with another propane business and adamantly refused to sign a noncompete clause that Arrington made a condition of any such settlement.

On April 21, 2004, Arrington and his corporate counsel confronted McWhorter at LPS’s office, accused him of misappropriating corporate funds, terminated his employment, and ordered him to immediately leave the premises. Additionally, Arrington reported his suspicions concerning McWhorter to the sheriffs department, and shortly thereafter, further reported his suspicion that McWhorter had forged company checks to various vendors so that he could pocket the funds for his own personal use. McWhorter was eventually arrested on forgery charges, but he was never incarcerated, and the charges were quickly dropped after the district attorney determined that there was not enough evidence to prosecute. Nevertheless, Arrington informed the local newspaper as to McWhorter’s arrest in an attempt to have it publicized, and he prominently displayed a copy of McWhorter’s booking photograph at LPS’s office.

A few months later, Arrington and his sons foreclosed on LPS’s assets to cover its various debts and then used the proceeds to form Southland Propane, Inc. Arrington also attempted to collect on a promissory note for approximately $198,000, which McWhorter had purportedly signed but which he maintained was a forgery.

Thereafter, McWhorter filed suit against Arrington, his three sons, and Southland Propane, alleging claims of defamation and tortious interference with business and contractual relationships. Arrington then filed suit against McWhorter to collect on the $198,000 promissory note. Three years later, McWhorter amended his complaint to allege additional claims of conversion, breach of fiduciary duty, fraud, wrongful discharge, slander of title, malicious prosecution, and intentional infliction of emotional distress. The parties then conducted extensive discovery, but following its conclusion, neither McWhorter nor the defendants filed any motions for summary judgment or even a pretrial order. Instead, the parties proceeded directly to trial, which lasted nine days.

After McWhorter presented his case, the defendants moved for a directed verdict on all of his claims, individually, based on a lack of evidence. The defendants also argued, alternatively, that the claims pertaining to McWhorter’s interest in LPS should be dismissed because McWhorter failed to file a derivative action. The trial court denied this motion. And while the trial court granted a directed verdict in the defendants’ favor as to McWhorter’s claims for tortious interference, wrongful discharge, slander of title, and malicious prosecution, it denied their motion as to all remaining claims, including McWhorter’s claim for punitive damages.

At the conclusion of the trial, the jury returned a verdict in McWhorter’s favor and awarded him $600,000 against all defendants for the conversion claim; $25,000 against Arrington and two of his sons, David and Greg, for the defamation claim; $100,000 against Arrington for the breach-of-fiduciary-duty claim; $250,000 against Arrington for the fraud claim; and $250,000 against Arrington for the intentional-infliction-of-emotional-distress claim. The jury also found in McWhorter’s favor as to Arrington’s attempt to collect on the $198,000 promissory note. In addition, the jury found that Arrington acted with a specific intent to cause McWhorter harm and, thus, awarded him $225,000 in punitive damages. Subsequently, the trial court issued a judgment affirming the jury’s verdict. Defendants then filed a motion for j.n.o.v., which the trial court denied after conducting a hearing on the matter. This appeal follows.

1. Defendants contend that the trial court erred in denying their motion for j.n.o.v., arguing that McWhorter lacked standing to bring a direct action, as opposed to a derivative action, on the claims pertaining to his corporate interests. We agree that McWhorter’s claims for conversion, fraud, and breach of fiduciary duty should have been pursued via a derivative action, and therefore, we are constrained to reverse the jury’s verdict as to those claims.

A “derivative suit is brought on behalf of [a] corporation for harm done to it and any damages recovered are paid to the corporation.” And “[t]he determination of whether a claim is derivative or direct is made by looking to what the pleader alleged.” Indeed, it is “the nature of the wrong alleged and not the pleader’s designation or stated intention that controls the court’s decision.” However, “the general rule is that allegations of misappropriation of corporate assets and breach of fiduciary duty can only be pursued in a shareholder derivative suit brought on behalf of the corporation, [because] the injury is to the corporation and its shareholders collectively.”

And while plaintiffs may bring direct actions for injuries done to them in their individual capacities by corporate fiduciaries, our Supreme Court has held that “to have standing to sue individually, rather than derivatively on behalf of the corporation, the plaintiff must allege more than an injury resulting from a wrong to the corporation.” As such, “to set out an individual action, the plaintiff must allege either an injury which is separate and distinct from that suffered by other shareholders, or a wrong involving a contractual right of a shareholder which exists independently of any right of the corporation.”

That said, “a direct action may nevertheless be proper in the context of a closely held corporation where the circumstances show that the reasons for the general rule requiring a derivative suit do not apply.” The reasons for ordinarily requiring derivative suits are:

(1) to prevent multiple suits by shareholders; (2) to protect corporate creditors by ensuring that the recovery goes to the corporation; (3) to protect the interest of all the shareholders by ensuring that the recovery goes to the corporation, rather than allowing recovery by one or a few shareholders to the prejudice of others; and (4) to adequately compensate injured shareholders by increasing their share values.

Here, given that Arrington and McWhorter were LPS’s only shareholders, there was no threat of multiple lawsuits by shareholders nor any possibility that a recovery would prejudice the rights of other shareholders. Nevertheless, there was evidence presented during trial of creditors who were potentially in need of protection. In fact, McWhorter testified that one of LPS’s customers, Kimberly-Clark, had paid $750,000 in advance for propane prior to LPS being dissolved and had threatened legal action based on the fact that LPS was no longer able to perform on that contract. McWhorter further testified that Wittichen Supply, another LPS customer, was possibly in a position similar to Kimberly-Clark. In addition, McWhorter noted that LPS owed other creditors for funds it used to procure its facility’s bulk tank and company vehicles. And given the evidence regarding the existence of LPS’s creditors who may potentially need the protection afforded by a shareholder’s derivative suit, the exception permitting a direct action in the context of a closely held corporation is wholly inapplicable in the case sub judice. Accordingly, the trial court erred in failing to grant defendants’ motion for j.n.o.v. on this issue, and we, therefore, reverse the jury’s verdict as to McWhorter’s claims for conversion, fraud, and breach of fiduciary duty.

2. In light of our holding in Division 1, we need not address defendants’ separate enumerations of error that contend that McWhorter failed to provide sufficient evidence to support his claims for conversion, fraud, and breach of fiduciary duty. Furthermore, we need not address defendants’ challenge to McWhorter’s expert witness nor their contention that the trial court erred in admitting prejudicial testimony regarding Arrington’s alleged extra-marital affair, as those issues also pertain to the claims we have reversed.

3. Defendants also contend that the trial court erred in denying their motion for j.n.o.v. as to McWhorter’s intentional-infhction-of-emotional-distress claim, arguing the evidence was insufficient to support it as a matter of law. We agree.

It is well settled that to recover on a claim of intentional infliction of emotional distress, “a plaintiff must show evidence that: (1) defendants’ conduct was intentional or reckless; (2) defendants’ conduct was extreme and outrageous; (3) a causal connection existed between the wrongful conduct and the emotional distress; and (4) the emotional harm was severe.” Indeed,

[i]t has not been enough that the defendant has acted with an intent which is tortious or even criminal, or that he has intended to inflict emotional distress, or even that his conduct has been characterized by malice, or a degree of aggravation which would entitle the plaintiff to punitive damages for another tort. Liability has been found only where the conduct has been extreme and outrageous.

This Court has held that extreme and outrageous conduct is that which is “so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community.” Importantly, “[wjhether a claim rises to the requisite level of outrageousness and egregiousness to sustain a claim for intentional infliction of emotional distress is a question of law.”

The evidence of intentional infliction of emotional distress in this case fails to rise to the requisite level of outrageousness. McWhorter claims that defendants’ actions on the day that his employment with LPS was terminated constituted an intentional infliction of emotional distress. Specifically, McWhorter alleges that Arrington accusing him of misappropriating corporate funds and forgery, terminating his employment, and then ordering him to immediately leave the LPS premises constituted extreme and outrageous conduct. Nevertheless, “[cjomments made within the context of one’s employment may be horrifying or traumatizing, but [they] are generally considered a common vicissitude of ordinary life.” And “[t]he same is true of false accusations of dishonesty in the workplace.” Under the totality of the circumstances, Arrington’s conduct at the time that McWhorter’s employment was terminated did not exceed the bounds usually tolerated by society; thus, it was not extreme and outrageous.

Furthermore, McWhorter did not produce any evidence at trial that he suffered “severe” emotional harm as a result of defendants’ conduct. As we have previously held,

[e |motional distress includes all highly unpleasant mental reactions such as fright, horror, grief, shame, humiliation, embarrassment, anger, chagrin, disappointment, worry, and nausea. It is only where it is extreme that liability arises. The law intervenes only where the distress inflicted is so severe that no reasonable (person) could be expected to endure it.

And “[wjhether severe emotional distress can be found, based on the evidence presented, is a question for the court to decide.”

Here, when McWhorter was questioned by his own counsel on this issue during trial, the following exchange occurred:

Q. When you got put out on April the 21st or 22nd of 2004, did that cause any distress?
A. Oh, yes.
Q. What kind of distress?
A. Well, financial distress, mental, physical distress. I mean, it just, you know, like everything come down at one time. I mean.
Q. Emotional distress?
A. Yes.
Q. Were you, at the time that you got discharged, able to go get a job right away?
A. No, I was not.
Q. Why not?
A. I mean, wasn’t anyone hiring. I’ve always been in the propane business. And you know it was April and that was going into the summer months. You know, you really don’t hire new hires to go through the summertime.

Beyond merely reasserting that he suffered emotional distress, McWhorter offered no evidence to support this claim. Indeed, at no point during the lengthy trial did McWhorter testify about any physical, mental, or emotional symptoms he suffered that were related to his distress. Nor did he provide any evidence that defendants’ conduct caused him to take medication or seek medical or psychological help. Thus, McWhorter failed to provide sufficient evidence that he suffered from emotional distress so severe that no reasonable person could be expected to endure it. Accordingly, the trial court erred in denying defendants’ motion for j.n.o.v. and earlier motion for directed verdict as to McWhorter’s intentional-infliction-of-emotional-distress claim.

Decided November 22, 2011

Waldrep, Mullins & Callahan, Neal J. Callahan, for appellants.

Kam & Ebersbach, Michael G. Kam, Charles M. Cork III, for appellee.

4. Defendants further contend that the trial court erred in denying their motion for j.n.o.v. as to the award of punitive damages. Given our holdings supra, McWhorter’s claims for conversion, fraud, breach of fiduciary duty, and intentional infliction of emotional distress cannot provide the basis for any punitive-damages award. However, the jury’s verdict in favor of McWhorter on his defamation claim, which defendants did not appeal, could support recovery of punitive damages. Unfortunately, the verdict form in this case merely states that punitive damages should be awarded to McWhorter “against Charles Arrington” but does not allow us to determine the underlying theory upon which the jury based its award. Accordingly, the award for punitive damages must be reversed, and we remand this case for a new trial solely on the issue of whether punitive damages are warranted based on the jury’s verdict in McWhorter’s favor on his defamation claim.

Judgment reversed and case remanded with direction.

Phipps, P. J., and Andrews, J., concur.

        Park v. Nichols, 307 Ga. App. 841, 845 (2) (706 SE2d 698) (2011) (punctuation omitted).

        Timmons v. Cook, 287 Ga. App. 712, 712 (652 SE2d 604) (2007).

        Southwest Health & Wellness, LLC v. Work, 282 Ga. App. 619, 624 (2) (b) (639 SE2d 570) (2006).

        Id. at 624 (2) (a) (punctuation omitted).

        Id. (punctuation omitted).

        Barnett v. Fullard, 306 Ga. App. 148, 152 (3) (a) (701 SE2d 608) (2010).

        Phoenix Airline Svcs., Inc. v. Metro Airlines, Inc., 260 Ga. 584, 586 (1) (397 SE2d 699) (1990).

        Id. (punctuation pmitted).

        Southwest Health & Wellness, LLC, 282 Ga. App. at 626 (2) (c) (emphasis in original) (punctuation omitted).

        Id.

        Cf. Barnett, 306 Ga. App. at 153-54 (3) (b) (holding that because all of corporation’s shareholders were not parties to lawsuit, risk of multiple lawsuits prohibited shareholder’s direct action); Levy v. Reiner, 290 Ga. App. 471, 474 (2) (659 SE2d 848) (2008) (same). Compare Rosenfeld v. Rosenfeld, 286 Ga. App. 61, 65 (2) (648 SE2d 399) (2007) (holding that trial court correctly found that minority shareholder of a closely held corporation could bring a direct action against her husband as majority shareholder in light of the fact that husband’s own testimony indicated that the corporation was paying its debts as they came due and that the corporation had no creditors who were at threat of not being paid).

       In reaching this conclusion, we are fully aware that there is a certain degree of cognitive dissonance involved in holding that McWhorter was required to prosecute his corporate-interest claims via a derivative action when both he and Arrington engaged in conduct (as noted supra) that would arguably justify piercing LPS and/or Southland Propane’s “corporate veil.” See Renee Unlimited, Inc. v. City of Atlanta, 301 Ga. App. 254, 259 (2) (b) (687 SE2d 233) (2009) (holding that the “concept of piercing the corporate veil is applied in Georgia to remedy injustices which arise where a party has overextended his privilege in the use of a corporate entity in order to defeat justice, perpetuate fraud or to evade contractual or tort responsibility”). Nevertheless, the existence of creditors who may potentially be in need of the protection afforded by a shareholder’s derivative suit requires us to (for the time being) respect the corporate form. Cf. All Star, Inc. v. Fellows, 297 Ga. App. 142, 148 (676 SE2d 808) (2009) (“The concept of piercing the corporate veil is based upon equitable principles,” and “[a]s a general rule, a party cannot invoke the aid of equitable principles when he does not come into court with clean hands . . . [ — i.e., when a party] seeks to assert its claim based upon its own abuse of the corporate form”) (citation and punctuation omitted); In re Kaplan, 143 F3d 807, 811-12 (II) (3rd Cir. 1998) (“The derivative injury rule holds that a shareholder (even a shareholder in a closely-held corporation) may not sue for personal injuries that result directly from injuries to the corporation . . . [and] prevents [a shareholder] from piercing the corporate veil in reverse in order to recover individually for [corporate] losses”).

        Abdul-Malik v. AirTran Airways, Inc., 297 Ga. App. 852, 856 (1) (678 SE2d 555) (2009).

        Id. (punctuation omitted).

        Biven Software, Inc. v. Newman, 222 Ga. App. 112, 113-14 (1) (473 SE2d 527) (1996) (punctuation omitted).

        Yarbray v. Southern Bell Tel. & Tel. Co., 261 Ga. 703, 706 (2) (409 SE2d 835) (1991).

        Abdul-Malik, 297 Ga. App. at 857 (1) (punctuation omitted).

        Id.

        See id. (holding that plaintiff failed to show as a matter of law that employer’s conduct was extreme and outrageous where employer interrogated plaintiff for allegedly making terroristic threats and called him a terrorist and a liar); Crowe v. J.C. Penney, 177 Ga. App. 586, 588 (1) (340 SE2d 192) (1986) (affirming summary judgment based on plaintiffs failure as a .matter of law to show extreme and outrageous conduct where employer interrogated plaintiff for theft, called her a liar, slammed his hands on the desk, and yelled at her).

        Abdul-Malik, 297 Ga. App. at 858 (1) (punctuation omitted).

        Id.

        See Jones v. Warner, 301 Ga. App. 39, 43 (3) (686 SE2d 835) (2009) (holding that plaintiffs testimony that she suffered anxiety, nervousness, sleeplessness, and irritability for one month after the arrest, as well as her failure to seek medical or psychiatric treatment for these symptoms, was insufficient to show that her symptoms were sufficiently severe); Abdul-Malik, 297 Ga. App. at 858 (1) (holding that plaintiffs emotional distress claim failed because his sleeplessness and weight gain, for which he did not take medication or seek professional help, were not sufficiently severe); Odem v. Pace Academy, 235 Ga. App. 648, 656 (2) (510 SE2d 326) (1998) (holding that emotional distress was not sufficiently severe where plaintiff suffered marginally high blood pressure but sought no professional advice).

        See Wolff v. Middlebrooks, 256 Ga. App. 268, 271-72 (3) (568 SE2d 88) (2002) (holding that punitive damages could not be awarded on underlying claims for which there was no liability).

        See Milum v. Banks, 283 Ga. App. 864, 870 (2) (642 SE2d 892) (2007) (holding that defamation may support award of punitive damages); Wolff, 256 Ga. App. at 272 (3) (same).

        See Wolff, 256 Ga. App. at 272 (3).


text:
    A11A1320.
    FIDELITY AND DEPOSIT COMPANY OF MARYLAND et al. v. LAFARGE BUILDING MATERIALS, INC.
    (720 SE2d 288)
   Dillard, Judge.

Lafarge Building Materials, Inc. (“Lafarge”) filed this action on a materialman’s lien discharge bond against Talbot Construction, Inc. (“Talbot”) and Fidelity and Deposit Company of Maryland (“Fidelity”) (collectively, “appellants”), seeking to recover payment for building materials that Lafarge supplied to the Lake Shore Mall project (the “Project”). The parties filed cross-motions for summary judgment, and the trial court denied appellants’ motion and granted partial summary judgment to Lafarge, holding that Lafarge’s failure to send a Notice to Contractor did not extinguish its lien rights because Talbot’s Notice of Commencement was legally deficient. For the reasons discussed infra, we reverse.

Viewed in the light most favorable to the nonmovant, the record shows that in May 2006, Talbot, acting as a general contractor for the Project, filed a timely Notice of Commencement in accordance with OCGA § 44-14-361.5 (b), which contained all of the requisite information save Talbot’s telephone number.

Lafarge contracted with a subcontractor, Michael B. Cline d/b/a Clinecrete (“Cline”), to provide building materials to the Project. Lafarge furnished materials that were incorporated into the Project but never sent a Notice to Contractor as required by OCGA § 44-14-361.5 (a), (c).

When Cline failed to pay Lafarge for the materials provided, Lafarge filed a materialman’s lien against the Project. In January 2008, Talbot and Fidelity recorded, as principal and surety respectively, a lien-discharge bond pursuant to OCGA § 44-14-364. Lafarge subsequently filed a lawsuit and obtained a final judgment against Cline, which included the outstanding debt owed to Lafarge related to the Project. When payment was not forthcoming, Lafarge filed the instant lawsuit, asserting a claim against the lien-discharge bond.

The parties then filed cross-motions for summary judgment. Appellants asserted that Lafarge was not entitled to payment because it failed to perfect its lien by providing a Notice to Contractor in accordance with OCGA § 44-14-361.5 (a), (c). Lafarge countered, maintaining that its duty to file the Notice to Contractor was obviated because Talbot’s Notice of Commencement was fatally deficient under OCGA § 44-14-361.5 (b), (d) in that it failed to include Talbot’s telephone number. The trial court, recognizing several competing legal principles, granted partial summary judgment to Lafarge after concluding that the missing telephone number in Talbot’s Notice of Commencement constituted a fatal defect that rendered it ineffective.

The issue before this Court, then, is whether the failure to include a contractor’s telephone number on a Notice of Commencement triggers OCGA § 44-14-361.5 (d), such that it renders inapplicable the remaining provisions of that statute. In answering this question, we, like the trial court, are mindful of the competing legal principles that must guide our analysis.

We begin by recognizing the fundamental principle of statutory construction that “requires us to follow the literal language of the statute unless it produces contradiction, absurdity or such an inconvenience as to insure that the legislature meant something else.” Thus, when “the language of a statute is plain and unambiguous, judicial construction is not only unnecessary but forbidden.”

We are further mindful that, unless a statute evinces the General Assembly’s plain and unambiguous intent to the contrary, “[a] substantial compliance with any statutory requirement. . . shall be deemed and held sufficient, and no proceeding shall be declared void for want of such compliance.” But when “a statute is plain and susceptible of but one natural and reasonable construction, . . . the legislature’s clear intent will not be thwarted by invocation of the rule of substantial compliance.” Finally, we note that “lien statutes in derogation of the common law must be strictly construed in favor of the property owner and against the materialman.” With these governing principles in mind, we turn now to the statutory provisions at issue.

The materialman-lien statutes were passed for the dual purposes of providing “a means of protecting owners and general contractors from being unfairly surprised by unknown debts of subcontractors,” as well as providing a “method of ensuring that remote subcontractors and materialmen receive compensation for their contributions to the project.” In furtherance of these stated goals, Georgia law allows for a materialman to hold a special lien on property for which it furnishes materials, but imposes upon it the duty of sending a Notice to Contractor to the owner (or agent of the owner) in order to perfect that lien. The materialman is relieved of that duty, however, in the absence of a Notice of Commencement.

OCGA § 44-14-361.5 (b) sets forth what the Notice of Commencement “shall” contain, including “[t]he name, address, and telephone number of the contractor!.]” And OCGA § 44-14-361.5 (d) clearly and unambiguously dictates the consequence of failing to file a Notice of Commencement, namely, such a failure renders the remaining provisions of that Code section inapplicable and absolves a materialman of the duty to file a Notice to Contractor in order to perfect its lien rights.

Nowhere, however, does the statute evince the General Assembly’s intended result/consequence when a Notice of Commencement is timely filed but contains less than each of the enumerated items delineated in OCGA § 44-14-361.5 (b). And in the absence of clear legislative direction, we must examine the Notice of Commencement to determine whether it substantially complies with the statutory requirements.

As stated by our Supreme Court, “ [substantial compliance does not require that the language should be exactly as prescribed by the statute but that all the essential requirements of the form be prescribed.” To this end, in General Electric Company u. North Point Ministries, Inc,, this Court held that the name of the true owner and a legal description of the subject property were essential requirements of a Notice of Commencement such that their omissions triggered OCGA § 44-14-361.5 (d), because the failure to include that information vitiated one of the primary purposes of the statute — namely, to ensure that a lien claimant could identify the property owner and receive compensation for contributions to a given project. On the other hand, in Rey Coliman Contractors, Inc. v. PCL Construction Services, Inc., we concluded that a contractor’s failure to post at the worksite an otherwise complete and timely filed Notice of Commencement was not of the same import and did not render the Notice of Commencement fatally defective.

Guided by the foregoing statutory language and precedents, we conclude that the absence of Talbot’s telephone number presents a technical, as opposed to substantive, omission and thus does not render the remaining provisions of the statute inapplicable. Unlike a failure to adequately identify the owner and property at issue, a failure to include the telephone number of the contractor, who is otherwise accurately identified by name and address, presents merely a potential inconvenience to a materialman trying to contact same. As such, because Talbot’s Notice of Commencement substantially complied with OCGA § 44-14-361.5 (b), and because we are charged with construing lien statutes in favor of a landowner and against the materialman, we conclude that the omission of Talbot’s telephone number in the Notice of Commencement did not relieve Lafarge of its duty to file a Notice to Contractor. We therefore reverse the trial court’s grant of partial summary judgment to Lafarge.

Judgment reversed.

Mikell, C. J., and Smith, P. J., concur.

Decided November 22, 2011.

David J. Merbaum, for appellants.

Dietrich, Evans, Scholz & Williams, Scott A. Schweber, for appellee.

        Matjoulis v. Integon Gen. Ins. Corp., 226 Ga. App. 459, 459 (486 SE2d 684) (1997) (“A de novo standard of review applies to an appeal from a grant of summary judgment, and we view the evidence, and all reasonable conclusions and inferences drawn from it, in the light most favorable to the nonmovant.”); see also OCGA § 9-11-56 (c); Ga. Primary Bank v. Atlanta Paving, Inc., 309 Ga. App. 851, 851 (711 SE2d 409) (2011).

       Pursuant to OCGA § 44-14-361.5 (b), the Notice of Commencement must be filed with the clerk and physically posted at the job site no later than 15 days after a contractor physically commences work on the property, and “shall include”:
      (1) [t]he name, address, and telephone number of the contractor; (2) [t]he name and location of the project being constructed and the legal description of the property upon which the improvements are being made; (3) [t]he name and address of the true owner of the property; (4) [t]he name and address of the person other than the owner at whose instance the improvements are being made, if not the true owner of the property; (5) [t]he name and the address of the surety for the performance and payment bonds, if any; and (6) [t]he name and address of the construction lender, if any.

        Telecom USA, Inc. v. Collins, 260 Ga. 362, 363 (1) (393 SE2d 235) (1990) (citation and punctuation omitted).

        Abdulkadir v. State, 279 Ga. 122, 123 (2) (610 SE2d 50) (2005) (punctuation and footnote omitted).

       OCGA § 1-3-1 (c); see also Gen. Elec. Credit Corp. v. Brooks, 242 Ga. 109, 115 (249 SE2d 596) (1978) (declaring that if a statute “is silent as regards the degree of compliance required, we must assume that the legislature intended in its passage that a ‘substantial compliance’ with its terms would be deemed sufficient”).

        Cook v. NC Two, L. P., 289 Ga. 462, 464 (712 SE2d 831) (2011) (citations and punctuation omitted).

        Beacon Med. Prod., LLC v. Travelers Cas. & Sur. Co. of America, 292 Ga. App. 617, 619 (665 SE2d 710) (2008) (citation and punctuation omitted); see Metromont Materials Corp. v. Cargill, Inc., 221 Ga. App. 853, 855 (473 SE2d 498) (1996).

        Roofing Supply of Atlanta, Inc. v. Forrest Homes, Inc., 279 Ga. App. 504, 506 (1) (632 SE2d 161) (2006); see OCGA § 10-7-31 (a); OCGA § 44-14-361.5 (a).

        Roofing Supply of Atlanta, Inc., 279 Ga. App. at 506 (1).

        See OCGA § 44-14-361.5 (a). The Notice to Contractor, which must be sent within 30 days from the filing of the Notice of Commencement or 30 days following the first delivery of materials to the property, whichever is later, “shall include”:
      (1) [t]he name, address, and telephone number of the person providing labor, services, or materials; (2) [t]he name and address of each person at whose instance the labor, services, or materials are being furnished; (3) Ttlhe name of the project and location of the project set forth in the notice of commencement; and (4) [a] description of the labor, services, or materials being provided and, if known, the contract price or anticipated value of the labor, services, or materials to be provided or the amount claimed to be due, if any.
      OCGA § 44-14-361.5 (c) (l)-(4).

       OCGA § 44-14-361.5 (d).

       OCGA § 44-14-361.5 (b) (1).

       Pursuant to OCGA § 44-14-361.5 (b), the same consequence results from a contractor’s failure to provide a copy of the Notice of Commencement within ten days of receiving a written request for the same from any subcontractor, materialman, or other person.

        See generally DeKalb County v. Buckler, 288 Ga. App. 346, 348 (654 SE2d 193) (2007) (holding that substantial compliance with a statute may be sufficient, even if a statutory requirement is expressed with the word “shall,” “in the absence of injury to the defendant and in the absence of a penalty for failure to comply with the statute” (citation and punctuation omitted)). Cf. Melton v. Pac. S. Mortgage Trust, 241 Ga. 589, 592-93 (247 SE2d 76) (1978) (applying the rule of substantial compliance while noting that, although materialman’s lien statutes are generally to be strictly construed against the lienholder, “this rule of construction is properly addressed to the classes of persons who may claim a lien, and the improvements and property on which a lien may be obtained”). Compare Cook, 289 Ga. at 463-65 (holding that notice in a garnishment proceeding is “of constitutional dimension” and declining to extend the rule of substantial compliance to the notice requirements plainly set forth in the statute).

        Brooks, 242 Ga. at 118; see Sierra Craft, Inc. v. T.D. Farrell Constr., Inc., 282 Ga. App. 377, 384 (3) (638 SE2d 815) (2006) (“[W]hen there is actual compliance as to all matters of substance then mere technicalities of form or variations in the mode of expression should not be given the stature of noncompliance.” (citation and punctuation omitted)).

       289 Ga. App. 382 (657 SE2d 297) (2008).

        See id. at 385-86 (noting that the statutory scheme provided for indexing the Notice of Commencement under the name of the true owner); see also Harris Ventures, Inc. v. Mallory & Evans, Inc., 291 Ga. App. 843, 844-45 (1) (662 SE2d 874) (2008).

       296 Ga. App. 892 (676 SE2d 298) (2009).

        See id. at 895-96.


text:
    A11A1352, A11A1353.
    BAYVIEW LOAN SERVICING, LLC v. BAXTER; and vice versa.
    (720 SE2d 292)
   Dillard, Judge.

This is the second time this case has appeared before us. In Baxter v. Bayview Loan Servicing, LLC (“Baxter I”), we reversed the grant of summary judgment to Bayview and remanded the case to the superior court to consider whether Bayview took a security deed on certain real property with constructive notice of Baxter’s mortgage lien on the same property. On remand, Baxter filed a motion for summary judgment, which the trial court granted. In a subsequent order, the trial court calculated the value of Baxter’s interest in the subject property using the difference between the purchase price at the foreclosure sale and Bayview’s subrogated first-priority interest. The only issues before us in these cross-appeals are whether the trial court (1) properly determined the priority of the parties’ security interests in the real property and (2) accurately calculated the junior lienholder’s interest in the property following a foreclosure sale. Concluding that it did, we affirm.

Our story begins in October 2005, when Ellis Baxter entered into a contract with his ex-wife and son pursuant to which he sold his interest in Fielding Partners, a general partnership consisting previously of only himself and his son. The purchase price of the general partnership was secured by certain real property (the “Property”). When Baxter sued his ex-wife and son alleging breach of the agreement, he filed, on February 17, 2006, a notice of lis pendens, asserting an interest in the Property, which was recorded on February 21, 2006.

On February 27, 2006, the predecessor-in-interest to Bayview Loan Servicing, LLC (Bayview and its predecessor, collectively, “Bayview”), closed a loan in favor of Fielding Partners (“Fielding Loan”), now comprised solely of Baxter’s ex-wife and son. The Fielding Loan was secured by a deed to secure debt on the Property. A portion of the Fielding Loan was then used to satisfy a preexisting security deed held by LIB Properties, Inc. (“LIB”), and Baxter’s ex-wife and son received the remainder. Bayview’s title search prior to the closing did not discover Baxter’s lis pendens.

Upon learning of the lis pendens and Baxter’s asserted lien on the Property, Bayview successfully moved to intervene in the lawsuit between Baxter and his ex-wife and son. In the interim, Bayview foreclosed on the Property under the power of sale in the security deed, bid on the Property at an advertised foreclosure sale, and purchased the same for $780,977. Bayview subsequently moved to cancel Baxter’s lis pendens in order to facilitate the sale of the Property to a third party. The trial court permitted Bayview to cancel the lis pendens upon posting a surety bond, and Bayview sold the Property to the third party for $1,050,000.

Bayview then moved for summary judgment in the lawsuit, arguing that (1) the contractual agreement that Baxter executed with his ex-wife and son failed to grant Baxter a lien on the Property; (2) if Baxter did have a lien on the Property, it was subordinate to that of Bayview’s security deed; and (3) in any event, the doctrine of equitable subrogation entitled Bayview to a first-priority security interest for the amount of its loan that was used to satisfy the preexisting deed to secure debt in favor of LIB. The trial court granted Bayview’s motion in a summary opinion.

In Baxter I, we held that Baxter created (via the contractual agreement) a valid mortgage lien in his favor against the Property and that, regardless of which interest was superior, Bayview was subrogated to the rights of LIB and, therefore, held a first-priority security deed on the Property in the amount equal to that secured by the preexisting LIB loan. As to the priority of the remainder of Bayview’s interest, we reversed the grant of summary judgment to Bayview and remanded the case to the superior court to consider whether Bayview took its security deed with constructive notice of Baxter’s mortgage lien. In so doing, we held that the recorded lis pendens functioned as prima facie evidence of Bayview’s notice, but nonetheless noted that the record did not contain Bayview’s title search and was otherwise devoid of evidence as to the date on which the title search was performed and/or any circumstances tending to explain why the lis pendens was not discovered.

On remand, Baxter filed, for the first time, his own motion for summary judgment, arguing that the lis pendens placed Bayview on constructive notice of his claimed security interest as of the date it was recorded, rendering his security interest superior to that of Bayview’s as a matter of law.

Bayview opposed the motion, asserting that it acted diligently in closing the Fielding Loan but, due to circumstances outside of its control, was unable to discover the lis pendens. Bayview still failed to produce a copy of the title search, instead submitting two affidavits in support of its argument. In the first, a partner in the law firm that served as closing attorney for the Fielding Loan averred that it was firm policy to update a title search conducted more than one month before a closing; that this policy conformed with generally accepted industry standards and practices; and that the firm conducted an updated title search on the Property in February 2006, with an effective date of January 10, 2006, which did not reveal the lis pendens. In the second affidavit, the chief deputy clerk of the superior court responsible for managing the lis pendens public records averred that Baxter’s lis pendens, filed February 17, 2006 and recorded February 21, 2006, was not made available on the public-information database until March 13, 2006. And as noted by the trial court, the clerk did not assert that the delay was abnormal, nor did he contend that any error had occurred in the clerk’s office, but inferred only that the lag time between the recording of the lis pendens and its posting on the public database was a normal part of the indexing process.

The trial court granted summary judgment to Baxter after concluding that Bayview had constructive notice of Baxter’s claim of lien on the Property at the time it took the deed to secure debt, rendering Baxter’s lien superior to the unsubrogated portion of Bayview’s security interest. In a subsequent order, the trial court also calculated the value of Baxter’s interest using the difference between the price Bayview paid for the Property at the foreclosure sale and Bayview’s subrogated first-priority interest. These cross appeals follow.

Case No. A11A1352

In Case No. A11A1352, Bayview appeals the trial court’s grant of summary judgment to Baxter on the issue of constructive notice. Specifically, Bayview asserts it overcame the prima facie evidence that it had constructive notice of Baxter’s mortgage lien and created, at the very least, a genuine issue of material fact (through its proffered evidence) that the lis pendens was not available for public viewing until after the loan closing had occurred. We disagree.

It is well established that “a [lien] takes effect, as against the interests of third persons without notice, from the time it is filed for record in the clerk’s office.” Thus, “[a]ll that is required of the [lien holder] and all that he can do is to file his [lien] for record.” And while the documents creating Baxter’s mortgage hen were themselves not in recordable form, his filing of the lis pendens was — as we held in Baxter I — the functional equivalent of filing the lien for the purpose of providing notice of his claimed interest in the Property, and the lis pendens became effective upon its recording. Thus, once recorded, the lis pendens placed Bayview on constructive notice of Baxter’s claim of lien, regardless of whether it had been indexed and/or placed on the public database by the time Bayview conducted a title search.

Indeed, it is undisputed that Baxter filed his notice of lis pendens on February 17, 2006, that the lis pendens was recorded on February 21, 2006, and that Bayview closed on the Fielding Loan on February 27, 2006. And Bayview has not presented any evidence tending to establish that the lis pendens was defective or that it was otherwise legally insufficient to provide notice. It follows, then, that Bayview accepted its deed to secure debt with constructive notice of Baxter’s mortgage lien as a matter of law.

Bayview nonetheless argues that our opinion in Baxter I gave it an opportunity to escape the foregoing result by showing that its failure to discover the lis pendens was due to no fault of its own. And while we recognize that the direction given on remand in Baxter I suggested that certain evidence might be sufficient to defeat summary judgment on the issue of constructive notice, that opinion should not and cannot be read to conflict with the well-established Supreme Court precedent set forth supra that otherwise controls the facts of this case. In sum, because Bayview established only that it failed to discover the properly filed and recorded lis pendens because same had not yet been placed on the public database, it simply cannot overcome the conclusion that it had constructive notice of the lis pendens as a matter of law. Thus, the trial court properly determined that Baxter’s mortgage lien is superior to the unsubro-gated portion of Bayview’s security deed.

Case No. A11A1353

In Case No. A11A1353, Baxter argues that the trial court erred in determining the value of his interest in the Property. In its damage award, the trial court calculated Baxter’s interest using the difference between the purchase price of the Property at the foreclosure sale ($780,977) and Bayview’s subrogated first-priority interest ($616,663.99), ultimately concluding that Baxter was entitled to a maximum award of $164,313.01, not to exceed the unpaid amount of Baxter’s judgment against his ex-wife and son.

On appeal, Baxter argues that the trial court erred in using the purchase price of the Property at the time of foreclosure in order to calculate his interest. He asserts instead that the trial court was required to calculate his interest by subtracting Bayview’s subro-gated interest from the fair market value of the Property at the time the lis pendens was removed, which he contends was represented by the price at which the Property sold to the third party ($1,050,000). We disagree.

As decided in Baxter I, Bayview held a subrogated first-priority interest in the Property and, therefore, was the senior creditor at the time of foreclosure. It is well established that “[w]here the holder of the senior encumbrance on realty forecloses on the property, the purchaser obtains title free of all inferior liens and any junior liens attach to the surplus of the proceeds.” It follows, then, that Baxter’s mortgage lien was legally extinguished at the time of the foreclosure and, at that point, Baxter’s claim was transferred to the surplus of funds remaining after Bayview’s first-priority interest had been satisfied. And because both the purchase price at the foreclosure sale ($780,977) and the value of Bayview’s subrogated interest ($616,663.99) were undisputed, the trial court properly held that Baxter was entitled to a maximum damage award of $164,313.01.

Judgment affirmed.

Mikell, C. J., and Smith, E J., concur.

Decided November 22, 2011.

King & Spalding, Emily L. Shoemaker, Paul Hastings, J. Allen Maines, Shauna T. Phillips, for appellant.

Gibson, Deal & Fletcher, John W. Gibson, Michael R. Dunham, for appellee.

       301 Ga. App. 577 (688 SE2d 363) (2009).

        Id. at 584-86 (1) (b).

        Id. at 578-79.

        Id. The contractual agreement creating Baxter’s security interest in the Property was never recorded. Id. at 580.

        Id. at 581.

        Id.

         Id.

        Id.

         Id.

        Id.

        Id. at 581-82.

        Id. at 582.

        Id. at 582 (1). Baxter’s claims against his ex-wife and son proceeded to a bench trial, and the trial court issued a judgment in Baxter’s favor. Id. at 582, n. 8.

        Id. at 582-84 (1) (a).

        Id. at 586-88 (1) (c).

        Id. at 584-86 (1) (b).

        Id. at 586 (1) (b).

       Baxter argues that the affidavit at issue contained inadmissible hearsay and lacked probative value because the affiant did not aver that he personally conducted the title search, nor did Bayview attach to the affidavit (or tender in the record) a copy of the title search upon which the affiant relied. See OCGA § 9-11-56 (“Sworn or certified copies of all papers or parts thereof referred to in an affidavit shall be attached thereto or served therewith.”); Morgan v. Horton, 308 Ga. App. 192, 197 (2) (707 SE2d 144) (2011) (refusing to consider expert’s assertions made in reliance on a manual, the contents of which were not attached to the affidavit nor contained in the record). We need not consider this argument because, as explained infra, the averments in the affidavit have no impact on our holding.

        Leeds Building Products, Inc. v. Sears Mortgage Corp., 267 Ga. 300, 302 (2) (477 SE2d 565) (1996) (punctuation omitted); see OCGA § 44-2-2 (b); Byers v. McGuire Prop., Inc., 285 Ga. 530, 531-32 (1) (679 SE2d 1) (2009).

        Leeds, 267 Ga. at 302 (2) (punctuation omitted).

        Baxter I, 301 Ga. App. at 584 (1) (b); see OCGA §§ 44-14-30, 44-14-610; Kennedy v. W. M. Sheppard Lumber Co., Inc., 261 Ga. 145, 147 (2) (401 SE2d 515) (1991) (“A lis pendens becomes effective upon filing in the office of the superior court clerk.”).

        See Leeds, 267 Ga. at 302 (2) (holding that a third-party purchaser of real property was “in no better position because he closed on his property after the . . . deed was filed with the clerk of court, but before the deed was indexed”).

        Compare Gallagher v. Buckhead Community Bank, 299 Ga. App. 622, 626-27 (2) (683 SE2d 50) (2009) (purchaser of real property did not have constructive notice of a judgment lien against the seller that fell outside of the chain of title and, unbeknownst to purchaser, was filed under a name different from that used by the seller during the transaction); Hopkins v. Virginia Highland Associates, L. P., 247 Ga. App. 243, 246-47 (1) (541 SE2d 386) (2000) (a deed that fails to comport with the statutory requirements, even if recorded, is not constructive notice to a subsequent bona fide purchaser).

        Leeds, 267 Ga. at 302; Willie v. Hines-Yelton Lumber Co., 167 Ga. 883 (146 SE 901) (1929); Georgia Primary Bank v. Atlanta Paving, Inc., 309 Ga. App. 851, 853-54 (1) (711 SE2d 409) (2011).

       Both parties contend that the opposing party waived various arguments made on appeal; however, we conclude that each party properly preserved their respective arguments in the trial court.

        Baxter I, 301 Ga. App. at 586-88 (1) (c).

        Murray v. Chulak, 250 Ga. 765, 771 (3) (300 SE2d 493) (1983).

        See generally Federal Land Bank of Columbia v. Bank of Lenox, 192 Ga. 543, 546 (2) (16 SE2d 9) (1941) (“It is the general rule that a sale under a regularly exercised power in a security deed or mortgage is equivalent to a foreclosure proceeding, and not only extinguishes the right of redemption, but divests all junior mortgages and other junior incumbrances on the property.”); Dodson v. Farm & Home Sav. Ass’n, 208 Ga. App. 568, 569 (430 SE2d 880) (1993) (“Surplus moneys arising on foreclosure stand in place of the land itself as to liens thereon or vested rights therein.”); Bob Parrott, Inc. v. First Palmetto Bank, 133 Ga. App. 447, 449 (2) (211 SE2d 401) (1974) (“The holder of a subordinate loan deed may claim surplus funds accruing from the foreclosure of the first loan.”).

       Baxter argues that Bayview failed to prove with competent evidence that it paid fair market value for the Property at the foreclosure sale. Baxter’s argument is irrelevant under the procedural posture of this case, since his lien was extinguished and his claim attached to the surplus of the proceeds — the amount of which is undisputed — at the time of the foreclosure sale. See Murray, 250 Ga. at 771 (3). Baxter has made no challenge to the manner in which the foreclosure sale was advertised and/or conducted. See generally Giordano v. Stubbs, 228 Ga. 75, 78 (1) (184 SE2d 165) (1971) (“All that is required of [a priority deed holder] is to advertise and sell the property according to the terms of the instrument, and that the sale be conducted in good faith.” (punctuation omitted)); Kennedy v. Gwinnett Commercial Bank, 155 Ga. App. 327, 330 (1) (270 SE2d 867) (1980) (“[T]he duty to sell the property according to the terms of the deed and to conduct the sale in good faith does not include a requirement that a specific amount such as the fair market value of the property be obtained.”). If Baxter believed the fair market value of the Property to be above what Bayview paid at the foreclosure sale, Baxter could have protected his junior lien by submitting a competitive bid to purchase the Property at that time.