author: Ray, Judge.

text:
    A12A2516.
    ROLLINS et al. v. ROLLINS et al.
    (741 SE2d 251)
   Ray, Judge.

Four siblings, Glen W. Rollins, Ruth Ellen Rollins, Nancy Louise Rollins, and O. Wayne Rollins II, are the beneficiaries of several trusts (the “Beneficiaries”). The Beneficiaries brought this action for, among other things, breach of trust and breach of fiduciary duty, against their father, Gary W. Rollins, and their uncle, R. Randall Rollins, individually and as trustees of the trusts at issue; and a family friend, Henry B. Tippie, in his capacity as a trustee of the trusts at issue. The parties cross-motioned for summary judgment, and the Beneficiaries appeal from the trial court’s order. The Beneficiaries enumerate as error the trial court’s refusal to order an accounting of family entities held within the trusts and its refusal to find that various actions by the appellees taken at the entity level, rather than the trust level, amounted to breaches of trust and of fiduciary duty. Additionally, the Beneficiaries contend that the trial court erred in its findings regarding actual harm and in granting summary judgment to the appellees. For the reasons that follow, we reverse the judgment and remand the case to the trial court for further proceedings.

Pursuant to OCGA § 9-11-56 (c),

on appeal from the denial or grant of summary judgment [,] the appellate court is to conduct a de novo review of the evidence to determine whether there exists a genuine issue of material fact, and whether the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law.

Properly viewed, this voluminous, 51-part record covering some 40 years of trust history shows the following relevant facts: O. Wayne Rollins (the “Settlor”) is the founder of a number of extremely successful enterprises yielding assets worth several billion dollars. He established the five trusts at issue in this litigation: the Rollins Children’s Trust (“RC Trust”) and four Subchapter S-Trusts. These five trusts further hold interests in a complex web of family entities and holding companies, as described below.

RC Trust

The Settlor established the irrevocable RC Trust in 1968 for the benefit of his grandchildren and great-grandchildren. The Beneficiaries at issue here are four of the nine grandchildren who benefit from the RC Trust. The Settlor’s sons, Gary and Randall, and the Settlor’s friend, Tippie, are trustees of the RC Trust. Under the terms of the trust instrument, a portion of the trust principal, as determined by a calculation contained in the indenture, was distributed to the nine grandchildren, including the four Beneficiaries at issue here, on their 25th and 30th birthdays. The RC Trust terminates when the last of the nine beneficiaries dies, with any remainder to be apportioned among their descendants. The first half of the principal has been distributed to and accepted by all the grandchildren, including the Beneficiaries here. The trustees are authorized to encroach on the corpus, at their discretion, for the grandchildren’s benefit, and to distribute income or not at their discretion. This trust originally was funded primarily with Rollins, Inc. stock. In the 1970s and 1980s, primarily to reduce tax liability, the Settlor created several family entities to hold assets within the trust: ROL, Inc., LOR, Inc., the Rollins Grandchildren’s Partnership (“RGP”), and the Rollins Holding Company (“RHC”) (collectively, the “Family Entities”).

The Subchapter S-Trusts

In 1986, again to limit tax liability, the Settlor established irrevocable Subchapter S-Trusts for the benefit of each of his nine grandchildren, including the four Beneficiaries at issue here. Gary is the sole trustee of the S-Trusts at issue in this litigation. The original assets in the S-Trusts were interests in LOR, Inc. The same year that the S-Trusts were created, the trustee purchased the S-Trusts’ LOR, Inc. stock from RGP and RHC with promissory notes, thereby using debt to acquire the LOR, Inc. stock. Further, in 1988, the Settlor created another family entity called the Rollins Investment Fund (“RIF”), held within the S-Trusts. One of the purposes of RIF was to minimize tax liability.

The trust indenture establishing the S-Trusts requires the trustee “to distribute at least annually all of the trust income to the beneficiary of such trust,” but gives the trustee discretion to determine what is income and what is principal. The trust indenture further requires that when a beneficiary turns 45 years of age, “the Trustee shall turn over to each beneficiary, free of trust, all property then remaining in such beneficiary’s trust, subject to any unpaid indebtedness of such trust.” Only one of the four Beneficiaries, Glen Rollins, has turned 45.

The Claims

The Beneficiaries here, in general, allege that following the Settlor’s death, the appellees made various changes to the structure, leadership, holdings, and distribution methods used within the various Family Entities that are held within the S-Trusts and the RC Trust. The Beneficiaries contend that the appellees have shifted power from the Beneficiaries to themselves, have ensured that the Beneficiaries’ interests in the Family Entities are illiquid and non-transfer able rather than liquid and marketable, and have established non-pro rata distribution systems, all in contravention of the trust indentures and the Settlor’s intent. These actions and others, the Beneficiaries contend, amount to breaches of trust and of fiduciary duty.

1. The Beneficiaries first contend that the trial court erred in failing to order a “judicial accounting and an accounting of the entities controlled by the trustees which hold the trust assets.” We agree.

On motion for partial summary judgment, the Beneficiaries did not seek an accounting, but rather sought only “summary judgment that Defendants have breached their fiduciary duties and committed breaches of trust. Plaintiffs do not seek summary judgment as to any particular remedy for these breaches in this motion.” The trial court granted the Beneficiaries’ summary judgment motion on this issue, finding that the appellees engaged in breaches of trust and fiduciary duties by their “failure to provide an accounting of the trust assets,” and finding that only after the complaint in the instant case was filed did the trustees provide a report on trust assets prepared by Ernst & Young. The trial court then denied “all other relief associated with this claim.” Noting that the Beneficiaries had received “complete relief” on their requests related to the accounting, the trial court then granted the appellees’ motion for summary judgment as to all claims in the Beneficiaries’ second amended complaint. The second amended complaint requested an order requiring a “third-party master or receiver” to review the books of the RC Trust and the Subchapter S-Trusts, as well as the books of LOR, Inc. and RIF, which are entities held within the trusts; additionally, the complaint requested a full accounting of the trusts and investments of the trust property. The record shows that the Ernst & Young accounting that the Beneficiaries already received covered only the S-Trusts and the RC Trust.

OCGA § 53-12-243 (a) and (b) (1) provide:

On reasonable request by any qualified beneficiary . . . the trustee shall provide... a report of information, to the extent relevant to that beneficiary’s interest, about the assets, liabilities, receipts, and disbursements of the trust, the acts of the trustee, and the particulars relating to the administration of the trust, including the trust provisions that describe or affect such beneficiary’s interest. A trustee shall account at least annually ... to each qualified beneficiary of an irrevocable trust to whom income is required or authorized in the trustee’s discretion to be distributed currently [.]

The RC Trust, by its terms, further provides for the Beneficiaries to receive periodic “statements disclosing [the] condition of the trust estate” not more often than every six months. The terms of the S-Trusts do not address accountings.

The appellees counter that they should not have to provide an accounting of the family entities held within the trusts because such an accounting is required only if the trust holds a controlling interest in the entity, and that the S-Trusts, for example, hold only minority interests in the family entities. The appellees base their argument upon a line of cases from New York courts that they contend hold that fiduciaries are obligated to account for corporate assets held in trust if either they or the trust hold a controlling, majority position in the corporation at issue. We find that these cases, which are of course persuasive authority in our state, are instructive, but must be read more broadly.

For example, in a case involving an estate in which the decedent and a fiduciary had been co-stockholders in close corporations holding realty, the beneficiaries requested an accounting, which the court granted, finding that the fiduciary, when his individual holding in the corporation was combined with that of the estate of which he was executor, held the “balance of power over the conduct of [the] corporation solely by virtue of his possession of the estate’s one-third interest therein.” The court went on to say:

It is not disputed that where a corporation is wholly owned by an estate full report of corporate transactions may be exacted of the fiduciaries. ... It is also an established principle that in the ordinary case where an estate has only a minority interest in a corporation the fiduciaries cannot be required to render an account of corporate transactions. This principle is one of practical necessity. Fiduciaries cannot be ordered to do what is impossible. But where as here the fiduciaries control a corporation by the help of the estate stock interest added to the stock interest held personally by one of them they are not disabled to make such accounts and are, therefore, under obligation to do so.

The evidence in the instant action, however, indicates that this is not “the ordinary case” in which a minority interest equates to a lack of control making it “impossible” for fiduciaries to produce the information requested. The appellees in the instant case do not argue that they lack the control to provide the information the Beneficiaries seek, nor do they contest the trial court’s determination that they are “controlling members of the various family entities.”

The parties point us to no Georgia authority directly on point, and we could find none. However, several cases from other jurisdictions are instructive. In one case, a New York court directed a fiduciary “to exhibit all information within his control which bears on the fortunes of the estate.” In another case, a New York court first recognized that “a trustee is obligated to render a full and accurate account of all his transactions in the performance of his trust, including the management of a corporation, the controlling interest of which is in the trust.” That court then went on to find that even where a trustee owned stock in a national bank in which the trust held a minority interest, the trustee still had to provide the list of stockholders the remainderman requested because

the court may control and direct the actions of the fiduciaries, and this may, whether directly or indirectly, affect their actions as officers and directors of corporations of the stock which they hold in their fiduciary capacities, and by virtue of the same power, the court may direct a fiduciary to exhibit all information within its control which bears on the fortunes of the estate and to take whatever actions may be necessary to get the required data.

The general principle here, that a trustee is obligated as a fiduciary to provide beneficiaries information that is within his control, when coupled with the mandates of OCGA § 53-12-243 (a) and (b), leads us to conclude that the trial court erred in refusing to order an accounting of the Family Entities held within the trusts.

The appellees again cite no Georgia law, nor do we find any, requiring that a trustee hold a controlling interest in an asset held within a trust before an accounting or report of information is required as to that asset or entity. The Georgia Code merely requires that a trustee “shall provide” information about, inter alia, the trust’s assets. The appellees do not contend that the Family Entities are not assets.

[W]here the court has [the] power to require fiduciaries to report the transactions of corporations in which the estate is interested the question of appropriateness should not be raised. Whether the facts revealed by an accounting in behalf of the corporation activities are or are not important can only be known after they have been exhibited. As a practical matter, therefore, in every case where the court can require disclosure of corporate affairs on an accounting by estate fiduciaries it will exercise its power in favor of disclosure.

Thus, given OCGA § 53-12-243 (a)’s clear directive that trustees “shall” provide a report of information about, inter alia, trust assets, liabilities, and “the particulars relating to the administration of the trust,” we find that the trial court erred in not ordering an accounting of the Family Entities under the appellees’ control. The trial court’s judgment on this matter is therefore reversed, and the case remanded on this issue for further proceedings not inconsistent with this opinion.

2. The Beneficiaries contend that the trial court erred in failing to find that the appellees breached their fiduciary duties for actions taken at the entity level. They argue that the appellees’ actions related to or taken through the Family Entities, including but not limited to LOR, Inc., RIF, and RHC, which are held within the trusts, should be subject to fiduciary duties like those that would apply to actions taken at the trust level itself. The appellees, while not addressing this point head-on, argue that any conflict of interest in their dual roles as trustees and as managers of the Family Entities were sanctioned by the Settlor.

The Beneficiaries claim the appellees breached their duties in shifting assets from the trusts to the Family Entities held within the trusts; in managing and administering the Family Entities; in making distributions from the Family Entities; and in altering the voting rights and control of the Family Entities. The court below held, specifically, that because the appellees’ management decisions and distributions took place at the entity level, rather than at the trust level, the Beneficiaries’ “reliance on the S-Trust terms” to establish their breach of fiduciary duty and breach of trust claims were “misplaced.” The trial court likewise found “no actionable misconduct” in the appellees’ decision to condition distributions upon the Beneficiaries’ adherence to a behavioral code of conduct that was not contained in the trust indenture because the “distribution scheme was not implemented at the S-Trust level.” For the reasons that follow, we disagree and find that, as a matter of law, the appellees may not shed their fiduciary duties in their management of and distributions from Family Entities under their control held within a trust.

(a) Fiduciary responsibility for actions at the entity level. Before initiating an analysis of whether the appellees’ specific actions at the entity level breached duties of trust or fiduciary duties, we first must examine whether their fiduciary duties owed to the Beneficiaries by virtue of the RC Trust and the S-Trusts extend to their actions related to the Family Entities held within that trust.

While Georgia case law directly on point is sparse, our Supreme Court recognized in Hanson v. First State Bank and Trust Co. that fiduciary duties may adhere to a nontrustee whose control of entities within a trust is such that his actions may be attributed to the trustee itself. In Hanson, a bank was appointed trustee and the beneficiaries’ uncle, who was not a trustee, was an executive at the trustee bank. The uncle held substantial shares of bank stock and also managed a partnership that operated family businesses held within the trust. The Supreme Court upheld the removal of the bank as trustee, reasoning that the bank was controlled by human actions, in this case, those of the nontrustee uncle, such that “the conflicts of interest between the bank’s human agent and the trusts of which it is trustee must be attributed to the bank itself.” In another case, our Supreme Court found that a corporate director who was not per se a trustee nonetheless had a fiduciary duty to shareholders whose property was under his control, and thus, the corporate director had the same obligation as a fiduciary fully to disclose material facts related to the value of the property at issue. The Court found that “[n]o process of reasoning and no amount of argument can destroy the fact that the director is, in a most important and legitimate sense, [a] trustee for the stockholder.” The Court further reasoned:

Equity abhors mere names, and looks to the substance. Whether the corporation be treated as an enlarged and amplified form of partnership and the director as managing partner, or whether he is called an agent or trustee ... he occupies a fiduciary position, and is essentially within the rule which requires agents, attorneys, bailees, partners, trustees, or other fiduciaries to exercise the highest degree of good faith as to all matters connected with the property committed to their care.

Thus, Georgia recognizes that the director with control of an entity held within a trust may have a fiduciary duty to those who hold assets in that entity, even if the director is not per se serving in the role of trustee as to the entity itself.

Other jurisdictions that have addressed this issue have determined that corporate directors who are also trustees, even when acting in their capacity as directors of corporations held within the trust, still owe fiduciary duties to trust beneficiaries. For example, in a case involving a director who held a 50 percent stake in a corporation whose shares composed the corpus of a trust of which the director was also a trustee, an Alabama court determined that where a “fiduciary has overlapping obligations as both a director and a trustee sharing a common interest, the law imposes a special duty on the fiduciary to deal fairly with both sides.” In this dual role, the “trustee [ ] should have acted with complete and undivided loyalty to his trust, excluding all personal or selfish interests as well as those of third parties.” In another case, a New York court found that where a fiduciary has “working control” of a corporation in which the estate or trust holds an interest, even if his personal share in the corporation combined with the trust’s share amounts only to a minority interest, actions taken in his capacity as president of the corporation will subject him to accountability for breach of fiduciary duty regarding the trust. Further, in In the Matter of the Estate of Schulman, a New York court found that a trustee was responsible for the business affairs of a corporation founded by the settlor, where the corporation’s shares comprised the principal of the trust over which he was trustee. The trustee, while acting in his corporate role, caused the corporation to sell most of its marketable securities and loaned the proceeds to another corporation of which he was part owner, and that corporation ultimately failed, causing the loan to become worthless. The court, rather than holding the trustee to the business judgment rule governing the actions of corporate officers as to shareholders, found that the trustee “acquired full legal authority to manage the affairs of [the corporation] by virtue of his trusteeships. This was sufficient for the application of trustee standards to his conduct of the affairs of the corporation.”

Likewise, the trustees in the instant action acquired the legal authority to manage the Family Entities held within the trusts by virtue of their trusteeships, as discussed above. It is also clear that, as discussed above, even where they do not hold majority interests, they still exercise control of the Family Entities held within the trusts. “Once a trust relationship is established between a beneficiary and a trustee managing a corporation for a trust, the fiduciary standards of care apply to his conduct regarding the affairs of the corporation.” Further, where “trustees elect themselves officers and directors, they actually operate the business as representatives of the estate.” Based on this persuasive authority, and existing Georgia law, we find that the appellees in the instant case may be held to trustee-level fiduciary standards of care as to their actions related to the Family Entities, which they control, and which are held within the trusts at issue. “Were it not so, the clever manipulation of corporate structure could result in the validation of . . . myriad . . . transactions that otherwise would be proscribed.” Thus, the trial court erred in determining that fiduciary duties do not apply to actions taken at the entity level.

(b) Breach of fiduciary duty and breach of trust for actions taken at the entity level. In three enumerations of error, the Beneficiaries contend, inter alia, that the appellees breached their fiduciary duties and duties of trust in administering the trusts and in distributing income and principal; in establishing a code of conduct that conditions distributions on the Beneficiaries’ behavior; in making non-pro rata distributions; in converting liquid, marketable assets into illiquid, unmarketable investments, partnership interests, or debt; and in shifting management and control of trust assets away from the Beneficiaries and to themselves such that distributions and assets, in contravention of the trust indentures, are not “free of trust.”

The Beneficiaries argue that these actions “effectively stripped [them] of hundreds of millions of trust assets that their grandfather put away for their benefit,” and show self-dealing, bad faith, and a conflict of interest, in that Gary and Randall serve both as trustees of the trusts at issue and as managers of the Family Entities held within the trusts. The Beneficiaries thus contend that the trial court erred in denying their motion for partial summary judgment and in granting the appellees’ motion for summary judgment. In order to prevail on their motion for partial summary judgment, the Beneficiaries were required to prove that the undisputed facts of this case established that the appellees breached their fiduciary duties and duties of trust. To defeat the appellees’ motion, they were required to show that material issues of fact remained for jury resolution on these issues such that they may be entitled to equitable relief.

In an action for breach of fiduciary duty, establishing a claim “requires proof of three elements: (1) the existence of a fiduciary duty; (2) breach of that duty; and (3) damage proximately caused by that breach.” In Division 2 (a), we found that the appellees have trustee-level fiduciary duties for actions they took related to Family Entities held within the trusts. A trustee is a fiduciary and, as such, is held to the highest standard of the law, because a fiduciary is a “person who is required to act for the benefit of another person on all matters within the scope of their relationship; one who owes to another the duties of goodfaith, trust, confidence, and candor.” OCGA § 53-12-300 provides that a “trustee shall be accountable to the beneficiary for the trust property. A violation by the trustee of any duty that the trustee owes the beneficiary shall be a breach of trust.” OCGA § 53-12-302 (a) provides that a trustee “who commits a breach of trust shall be personally chargeable with any [resulting] damages.”

(i) The unilateral amendment of the RIF general partnership. The Beneficiaries allege that the trial court erred in failing to find that the appellees breached their fiduciary duties in unilaterally altering the partnership agreement for RIF, a family entity held within the S-Trusts, and in not granting partial summary judgment to the Beneficiaries on this issue. We find that fact questions remain that are not subject to summary adjudication.

The RIF partnership agreement as drafted in 1988 named Gary and Randall, individually, as well as each Beneficiary’s S-Trust, as partners in RIF. The S-Trusts all made initial, equal capital contributions and had equal ownership interests in the partnership; Gary and Randall made greater contributions and thus had greater ownership interests. By the terms of the agreement, each partner had the right to manage the partnership, and the agreement could be amended only “with the consent of all Partners.” The agreement further provided that “ ‘Cash Flow’ for any year ... shall be distributed to the Partners at such times as the Partners shall reasonably decide, pro rata to each Partner’s interest.”

In 1993, two years after the Settlor’s death, Gary and Randall amended the RIF partnership agreement to concentrate additional management power in themselves and to permit non-pro rata distributions to themselves and other partners at their discretion. The amended RIF partnership agreement provided that the partnership “intends to make periodic distributions of cash to the Partners at such times, in such amounts, and among the Partners in such proportions as the Managing Partners [Gary and Randall] may determine in their sole and absolute discretion,” and that the managing partners “shall have complete and exclusive authority to manage and conduct the Partnership’s business and affairs. No other Partner shall participate ....” Gary and Randall signed both the original RIF agreement and the amendment individually, and Gary signed in his capacity as trustee for the Beneficiaries’ S-Trusts at issue in this litigation. None of the Beneficiaries at issue signed either RIF agreement. The Beneficiaries allege that they neither “participated in this change to the RIF partnership agreement [n]or had any knowledge of it.”

Further, on March 1, 2011, Gary and Randall executed a “Unanimous Consent of the Managing Partners of Rollins Investment Fund To Action Without a Meeting,” at which they resolved to distribute $9 million to “certain partners in RIF.” The Beneficiaries contend that neither they nor their S-Trusts received any part of this distribution; rather, it was distributed to Randall’s children, who did not sue.

The Beneficiaries assert that they were harmed by not receiving these and other distributions, contending that they were entitled to pro rata distributions under the original RIF agreement. They also contend that Gary and Randall acted outside the scope of their authority in amending the RIF agreement, without informing the Beneficiaries, to permit non-pro rata distributions.

Gary, as trustee of the Beneficiaries’ S-Trusts, and Randall, as a co-manager with Gary of RIF, argue that the S-Trust Indenture gave them the right to amend the RIF agreement in that it gives the trustees the power to “become or remain a partner, general or limited, in regard to any” business or property in which the S-Trusts hold an interest, and to “join with other owners in adopting any form of management” for businesses in which the trust has an interest.

Gary and Randall also argue that they acted in good faith and modified the RIF agreement, inter alia, to minimize capital gains taxes and to allow them to make distributions to the Beneficiaries’ S-Trusts, but not their own S-Trusts. They argue that the S-Trust indenture authorizes them to treat RIF distributions as principal and that principal distributions are subject to the trustee’s discretion. They also contend that since the modification, they have made a “significantly greater proportion of distributions from RIF to [the Beneficiaries] ... or their S-Trusts [ ] than they have taken themselves,” and proffer dollar figures in support of this statement. However, they do not offer any record citations that point us to relevant evidence supporting this statement.

Here, the significance of the amendment and its material impact on the Beneficiaries raises factual questions as to whether the appellees exercised the utmost good faith in altering the RIF agreement. As we found in Division 2 (a), above, Gary and Randall’s fiduciary duties do not abate when they make decisions at the entity level. Further, even at the entity level, “[corporate officers and directors have a fiduciary relationship to the corporation and its shareholders and must act in good faith.” Further, even given the breadth of discretion granted in a trust instrument, a trustee must exercise his powers in good faith, and a court of equity may intervene if trustees have abused their authority or trust. Trustees have a duty not to undertake “any act inconsistent with the interest of the beneficiary.” The appellees’ actions in amending the RIF agreement, without notifying the Beneficiaries, to further concentrate control of RIF in Gary and Randall and remove control from the Beneficiaries’ S-Trusts, and in altering the RIF agreement to sanction non-pro rata distributions wholly at Gary and Randall’s discretion, and then in sanctioning distributions that excluded the Beneficiaries, create material issues of fact as to whether the appellees breached their fiduciary duties. Given the evidence before us, it is unclear if in making non-pro rata distributions from RIF, Gary and Randall managed the trust assets under their control to the best advantage of the Beneficiaries. Our Supreme Court has held that a beneficiary need not show that the fiduciary actually succumbed to temptation; it is sufficient to show that the fiduciary allowed himself to be placed in a position where his personal interests might conflict with the interests of the beneficiaries. Accordingly, we find that a jury must resolve the central question of whether the appellees breached their fiduciary duties. Similarly, a jury must decide whether in failing to disclose the RIF amendment to the Beneficiaries, the appellees

committed constructive fraud or engaged in a conspiracy [under] OCGA § 23-2-53 [which provides:] “[Suppression of a material fact which a party is under an obligation to communicate constitutes fraud. The obligation to communicate may arise from the confidential relations of the parties or from the particular circumstances of the case.”

(ii) Code of conduct. The Beneficiaries also contend that the trial court erred in finding no breach of fiduciary duty in a conduct-based distribution system Gary and Randall imposed on assets dispensed from the Family Entities held within the trusts. The Beneficiaries contend that the system, which was used as a basis for non-pro rata distributions, was false and misleading and had no basis in any trust instrument.

For example, in effectuating the conduct-based distribution system, Gary and Randall, among other things, sent a letter to the Beneficiaries identifying themselves as “trustees” of the family entity known as LOR, Inc. and informing them that the LOR, Inc. distribution policy was being changed to condition distributions on behavioral elements including “100% attendance, preparation and meaningful participation in quarterly LOR Shareholder Meetings,” the Beneficiaries’ personal conduct, and their engagement in “serious pursuits that are meaningful, respectable and worthwhile in the opinion of the Trustees.” The letter further states, “[t]he distribution shall be calculated as a percentage of asset value,” and that “[investment performance remains an important element of the methodology,” but also states that the “distribution is not automatic or routine in nature” and is subject to modification “based on your commitment, participation and contribution to the family and to the enterprise.” Gary and Randall sent other, similar memoranda regarding another family entity, RFA, identifying themselves as “RFA Trustees” and conditioning distributions on the Beneficiaries’ conduct as well as investment performance.

The Beneficiaries contend that they were misled into accepting these strictures, in that neither RFA nor LOR, Inc. is a trust, and so Gary and Randall are not trustees of these entities. There is evidence in the record, including Gary and Randall’s own admissions, that RFA and LOR, Inc. are not trusts and that the brothers are not trustees. The Beneficiaries allege that they were injured because the alleged subterfuge was used to “cover up the fact” that Gary and Randall were distributing the Beneficiaries’ own trust funds inequitably and in ways that were contrary to the trust instruments. They point to the following deposition testimony from Randall:

Q: And even though you were taking money from the assets held in trust for my clients, you and Gary were imposing requirements on these distributions that did not have any basis in the trust instruments, correct?
A: That’s correct.

Gary and Randall argue that these uses of the word “trust” were ■merely a “shorthand” way of referring to the distribution program, and that the Beneficiaries understood this and were not misled, and there is some evidence in the record from which a jury could conclude that the Beneficiaries knew that these were not trusts.

Further, despite the discretion as to distributions granted to Gary and Randall under the terms of the S-Trust and RC Trust indentures, a fact question exists as to whether Gary and Randall abused their discretion in making distributions in an arbitrary or oppressive fashion. The evidence shows that the Beneficiaries indeed received non-pro rata distributions — or none at all, in some years — from their own S-Trusts. The record also contains evidence that on March 1, 2011, about six months after the Beneficiaries filed the instant action, through the “Unanimous Consent of the Managing Partners of Rollins Investment Fund to Action without a Meeting” memorandum mentioned in Division 2 (b) (i), Gary and Randall distributed $9 million to some RIF partners. None of that money went to the Beneficiaries, who presented evidence that this distribution and others were a “reward” for their cousins, i.e., the other beneficiaries of the trusts, who did not sue.

[A]s the Revised Trust Code and the common law agree,... a court may interfere with an exercise of discretion by a trustee only if that discretion is infected with fraud or bad faith, misbehavior, or misconduct, arbitrariness, abuse of authority or perversion of the trust, oppression of the beneficiary, or want of ordinary skill or judgment.

Trustees, even those with broad discretion, may not behave toward beneficiaries in an arbitrary fashion. For example, our Supreme Court has found that a trial court had the authority to intervene in the administration of a trust where the primary trust purpose was to provide for the beneficiary’s welfare, but the trustees arbitrarily limited support payments because they disliked the beneficiary’s wife and wanted to preserve the corpus for residual beneficiaries.

As outlined above, the record contains evidence from which the jury could infer that Gary and Randall exceeded the scope of their discretion under the trust indentures in implementing the code of conduct and in making arbitrary distributions amounting to a breach of trust or fiduciary duty. The record likewise contains evidence from which a jury could infer that, even given their fiduciary duties at the entity level, Gary and Randall were acting within the broad authority granted them by the trusts in which the entities at issue are held.

Further, given Gary and Randall’s representations that LOR, Inc. and RFA were “trusts” and that they were “trustees” of these Family Entities, “[u]nder the circumstances of this case, whether that representation was made negligently, fraudulently, or in good faith remains for the jury to resolve.” As such, any determination of whether the Beneficiaries were harmed by these actions is also for the jury, and thus, the trial court’s finding on the issue of harm is also in error.

(iii) Replacement of marketable securities held within trusts with illiquid investments held in trust entities. In their fourth enumeration of error, the Beneficiaries allege that the trial court erred in failing to rule that the “trustees breached their fiduciary duties by replacing marketable securities in the trusts with illiquid investments in trust entities that are saddled with debt and under the permanent control of the trustees.”

Given that in Division 1, we found that the trial court erred in not ordering an accounting of the very “trust entities” mentioned in this enumeration, absent the information such an accounting would reveal, any analysis or decision based on whether the trustees breached their fiduciary duties or duties of trust in their use of power as to the handling of assets and debt within those entities is premature. This enumeration is unripe for our review.

For the foregoing reasons, we reverse the judgment of the trial court, and remand the case for proceedings not inconsistent with this opinion.

Judgment reversed and case remanded.

Miller, P. J., and Branch, J., concur.

Decided March 29, 2013

Bondurant, Mixson & Elmore, H. Lamar Mixson, Timothy S. Rigsbee, Lisa R. Strauss, for appellants.

Troutman Sanders, John J. Dalton, Lynette E. Smith, James A. Lamberth, Alan W. Bakowski, Katie L. Balthrop, Sidney L. Moore III, for appellees.

Rogers & Hardin, John K. Larkins III, amicus curiae.

       (Citations omitted.) Benton v. Benton, 280 Ga. 468, 470 (629 SE2d 204) (2006).

       (Emphasis supplied.) In this compound enumeration of error, the Beneficiaries also contend that the trial court “erred in entering summary judgment for [the trustees] on all other equitable relief arising from the [trustees’] intentional refusal to provide the beneficiaries with accurate information about their trusts.” That relief includes removal of trustees, receivership for major trust entities, and rescission of self-dealing transactions. However, the Beneficiaries provide no argument and cite no authority in support of these conclusory statements. “In the absence of proper argument and corresponding citation to authority ..., we will not consider this [portion of the] enumeration.” Habel v. Tavormina, 266 Ga. App. 613, 617-618 (2) (597 SE2d 645) (2004) (citation and punctuation omitted.) See also Court of Appeals Rule 25 (c) (2). The Beneficiaries additionally argue on appeal that the trial court should hold a hearing to approve the Ernst & Young accounting that the trustees already have supplied. However, the Beneficiaries neither sought this relief nor received a ruling on it below. “Appellate courts do not consider whether summary judgment should have been granted for a reason not raised below because, if they did, it would be contrary to the line of cases holding that a party must stand or fall upon the position taken in the trial court.” Pinnacle Properties V v. Mainline Supply of Atlanta, 319 Ga. App. 94, 100 (2) (735 SE2d 166) (2012) (punctuation and footnote omitted).

       (Emphasis supplied.)

        In re Witkind’s Estate, 4 N.Y.S.2d 933, 946 (N.Y. Sur. Ct. 1938).

       (Emphasis supplied.) Id. at 945.

       Trustee Randall Rollins deposed that he and co-trustee Gary Rollins controlled distributions into the RC Trust via their control of the family entities created after the Settlor’s death. Further, the record shows that Gary and Randall control the majority partnership interests in RIF, and hold all of the voting shares in RHC equally. See Monterrey Mexican Restaurant of Wise v. Leon, 282 Ga. App. 439, 448 (4) (638 SE2d 879) (2006) (where two parties together control the majority of stock in a corporation, one alone may be said to have control when other factors show he is in control).

       (Emphasis supplied.) In re Barrett’s Estate, 6 N.Y.S.2d 689, 690 (N.Y. Sur. Ct. 1938).

       (Citations omitted; emphasis supplied.) In re Murray’s Will, 88 N.Y.S.2d 579, 581-582 (N.Y. Sur. Ct. 1949).

       (Citations omitted; emphasis supplied.) Id. at 582.

       OCGA § 53-12-243 (a).

       See, e.g., Jones-Shaw v. Shaw, 291 Ga. 252, 253 (1) (728 SE2d 646) (2012) (a closely-held corporation can be a marital asset subject to equitable division in a divorce).

        In re Witkind’s Estate, supra at 944.

       There are, at present, no cases construing OCGA § 53-12-243 (a). However, rules of statutory construction typically recognize that “ ‘[sjhall’ is generally construed as a mandatory directive.” Beach v. B. F. Saul Property Co., 303 Ga. App. 689, 695 (2), n. 4 (694 SE2d 147) (2010) (citation omitted).

       See Uniform Superior Court Rule 46 (A) and (B) (giving trial courts, on their own motion or on request of the parties, the authority to appoint a special master to conduct an accounting after first giving parties notice of the appointment and an opportunity to be heard). See also Standard Bldg. Co. v. Schofield Interior Contractors, 315 Ga. App. 516, 519-520 (3) (726 SE2d 760) (2012).

       259 Ga. 710 (385 SE2d 266) (1989).

       Id. at 710 (1) (a).

       (Footnote omitted.) Id. at 712 (5) (c).

        Oliver v. Oliver, 118 Ga. 362 (45 SE 232) (1903).

       (Citations omitted.) Id. at 367.

       (Citations omitted.) Id. at 369-370.

       (Citation omitted.) Jones v. Ellis, 551 S2d 396, 403 (Ala. 1989).

       (Citation omitted.) Id. (within dual role as director and trustee, the imprudent management as a director of a company held within a trust equated to imprudent management of the trust corpus).

        In the Matter of Scuderi, 667 N.Y.S.2d 913, 913 (N.Y. App. Div. 1998).

       568 N.Y.S.2d 660 (N.Y. App. Div. 1991), appeal denied, 587 NE2d 289 (1991). See also Tannenbaum’s Estate, 248 N.Y.S.2d 749, 754 (N.Y. App. Div. 1964), aff’d, 205 NE2d 866 (N.Y. 1965) (“In dealing with corporate property, an individual who acts both in the capacity of a director of the corporation and in the capacity of a fiduciary of an estate having a proprietary interest therein, is to he held fully accountable as an estate representative”).

        In the Matter of the Estate of Schulman, supra at 661-662.

       Id. at 662.

       (Citation omitted.) In re Fruehauf Trailer Corp., 431 BR 838, 850 (F) (U.S. Bankr. Ct. C.D. Calif. 2010).

       (Citation omitted.) In re Shehan’s Will, 141 N.Y.S.2d 439, 446 (N.Y. App. Div. 1955).

        Saltzman v. Commr. of Internal Revenue, 131 F3d 87, 90 (I) (2d Cir. 1997) (“A trustee cannot alter his legal position by changing his cloak”) (citation and punctuation omitted).

       (Footnote omitted.) Hanson, supra at 712 (5) (c).

        Wolf v. Middleton, 305 Ga. App. 784, 785 (1) (700 SE2d 598) (2010).

       Id.

       (Punctuation and footnote omitted.) SunTrust Bank v. Merritt, 272 Ga. App. 485, 489 (2) (612 SE2d 818) (2005).

       (Citations and punctuation omitted.) Nalley v. Langdale, 319 Ga. App. 354, 364 (2), n. 19 (734 SE2d 908) (2012) (physical precedent only).

       Although the Revised Georgia Trust Code became effective July 1,2010, it applies to any trust regardless of the date such trust was created, with two exceptions: “to the extent it would impair vested rights” and “except as otherwise provided by law.” OCGA § 53-12-1 (b). See also McPherson v. McPherson, 307 Ga. App. 548, 550 (1) (a) (705 SE2d 314) (2011). As no party contends that either exception applies in the instant case, we proceed under the Revised Trust Code as supplemented by the common law. See id. at 550-551 (1) (a).

       (Punctuation and footnote omitted.) Aukerman v. Witmer, 256 Ga. App. 211, 219 (4) (568 SE2d 123) (2002).

       OCGA § 53-12-260.

       See Smith v. Hawks, 182 Ga. App. 379, 383 (3) (355 SE2d 669) (1987).

       (Citation omitted.) Ray v. Nat. Health Investors, 280 Ga. App. 44, 51 (5), n. 10 (633 SE2d 388) (2006).

        See Bloodworth v. Bloodworth, 260 Ga. App. 466, 471 (1) (579 SE2d 858) (2003) (material issues of fact existed for jury where executors sold family farm from estate without first informing beneficiaries who wished to bid on farm, and in contravention of agreement between executors’ counsel and beneficiaries’ counsel not to proceed immediately with sale).

       Id.

        Powell v. Thorsen, 253 Ga. 572, 574 (3) (322 SE2d 261) (1984).

       (Punctuation omitted.) Bloodworth, supra at 472 (1).

       (Citation and punctuation omitted; emphasis supplied.) Reliance Trust Co. v. Candler, 315 Ga. App. 495, 499-500 (2) (726 SE2d 636) (2012).

        Citizens & Southern Nat. Bank v. Orkin, 223 Ga. 385, 390-391 (1) (156 SE2d 86) (1967).

        Nalley, supra at 365 (2).

       (Emphasis supplied.)

       See generally Ga. Dept. of Transp. v. Douglas Asphalt Co., 295 Ga. App. 421, 425 (2) (671 SE2d 899) (2009).


source: Caselaw Access Project

author: BARNES, Presiding Judge.

license: Public Domain

text:
    A12A2537, A12A2538.
    PATTERSON v. LONG; and vice versa.
    (741 SE2d 242)
   BARNES, Presiding Judge.

These companion appeals arise out of the arbitration of a products liability case in which the arbitrator found that the buyer of a defective three-wheeled motor trike sustained $750,000 in damages resulting from a rollover accident, but was entitled to recover only 25 percent of those damages because of her own conduct. The superior court declined to modify the arbitration award and instead vacated it, concluding that the arbitrator had manifestly disregarded the law of strict liability by reducing the buyer’s damages based on contributory and comparative negligence principles. As discussed below, we affirm the superior court’s denial of the buyer’s request to modify the arbitration award. However, we conclude that the buyer failed to show that the arbitrator appreciated the existence of a clearly controlling legal principle and deliberately chose to ignore it, and thus failed to establish that the arbitrator manifestly disregarded the law. Accordingly, we reverse the superior court’s decision to vacate the arbitration award and remand with instruction that the court confirm the award.

The record reflects that Theresa Irene Long was driving a three-wheeled motor trike when it rolled over as she attempted to negotiate a curve, trapping her under the trike and resulting in severe injuries. The vehicle had been manufactured as a motorcycle but later had been customized and converted into a trike by Joe Patterson f/k/a J Dog Kustomz, LLC a/k/a JDK Body Shop (“Patterson”), who sold the trike to a customer named Holly Fowler, who later sold it to Long. After Long commenced a products liability action against Patterson for damages arising out of the accident, the parties agreed to arbitrate the case. Pursuant to the parties’ arbitration agreement, the arbitration was bifurcated into two separate hearings related to liability and damages. The parties chose not to have the hearings transcribed.

After hearing evidence on only the liability portion of the case, the arbitrator entered an order containing several pages of findings regarding the defective condition of the trike resulting from Patterson’s customization work, Long’s role in causing the rollover accident, and the relative degrees of responsibility of Patterson and Long for the accident (the “first arbitration order”). However, at no point in the order did the arbitrator use the words “strict liability’ or “negligence,” cite to any case law or statutes, or otherwise lay out the governing law he chose to apply.

More specifically, in the first arbitration order, the arbitrator found that Patterson’s “work in converting this motorcycle into a trike was of such magnitude that he became manufacturer of goods sold as new to Ms. Long’s predecessor, Ms. Fowler.” The arbitrator further found “that the trike, as converted[,] was defective in that its ability to withstand lateral acceleration forces made it more susceptible to rollover than comparable trikes,” and that the defect in the trike “in part caused this accident.” With respect to Long, the arbitrator found that “operator error contributed to cause this rollover” in that she was “turning too fast” around the curve as the result of “either intoxication or inexperience or both.” Based on these findings, the arbitrator concluded that the parties were “both responsible to different degrees,” but that Long’s conduct “was in large part the cause of this accident.” In the final section of the order, the arbitrator found that the defect in the trike caused by Patterson was “25% the proximate cause of this rollover,” while “operator error” by Long was “75% the cause of this accident.”

The arbitrator subsequently conducted a hearing on damages. After receiving evidence regarding the injuries sustained by Long, the arbitrator entered an order finding that as a result of the rollover accident, Long had “received permanent injuries, including but not limited to a right arm femur [sic] fracture, left wrist and hand fracture, right hand fractures, head injury, low back injury and serious abrasions” (the “second arbitration order”). The arbitrator concluded that “the full value of her injury [was] $750,000.” However, the arbitrator reduced Long’s damages by 75 percent to $187,500 because she was “a major contributing proximate cause of the accident” and awarded her only that reduced amount.

Long filed a motion to modify and confirm the second arbitration order in the superior court. She contended that the arbitrator’s action in reducing the full damages award by 75 percent was both “imperfect in a manner of form” and a miscalculation of figures, requiring modification of the award under OCGA § 9-9-14 (b) to reflect that the judgment awarded in this matter was $750,000. Long further contended that the arbitrator had manifestly disregarded the law of strict liability by not awarding her the full $750,000 in damages and that modification of the second arbitration award was appropriate on that ground as well.

After hearing oral argument, the superior court entered an order decliningtomodifythesecondarbitrationawardunderOCGA § 9-9-14 (b) for being imperfect in the manner of form or containing a miscalculation of figures. While the superior court agreed with Long that the arbitrator had manifestly disregarded the law of strict liability by reducing the full damages award, the court concluded that the proper remedy was to vacate, rather than modify, the second arbitration order on that ground. In vacating the second arbitration order, the superior court concluded that the arbitrator in his first arbitration order had found Patterson strictly liable for the injuries sustained by Long, and had manifestly disregarded the law of strict liability by then applying contributory and comparative negligence principles to reduce the full amount of Long’s damages in his second arbitration order. Consequently, the superior court chose to vacate the second arbitration order and remand the case to the arbitrator with instruction to reconsider its damages award without applying contributory and comparative negligence principles.

Case No. A12A2S37

1. Patterson contends that the superior court erred in vacating the second arbitration order because there was an insufficient basis for the court to conclude that the arbitrator had manifestly disregarded the law of strict liability. According to Patterson, there was insufficient evidence in the scant existing record to show that the law of strict liability rather than negligence clearly applied in this case, or that the arbitrator appreciated the existence of a clearly controlling legal principle and deliberately chose to ignore it.

“The power of a court to vacate an arbitration award has been severely limited in order not to frustrate the legislative purpose of avoiding litigation by resort to arbitration.” (Citation and punctuation omitted; emphasis in original.) Hansen & Hansen Enterprises v. SCSJ Enterprises, 299 Ga. App. 469, 470 (682 SE2d 652) (2009). Hence, the Georgia Arbitration Code, OCGA § 9-9-1 et seq., “demands that courts give extraordinary deference to the arbitration process and awards so that the trial court cannot alter the award.” Scana Energy Marketing v. Cobb Energy Mgmt. Corp., 259 Ga. App. 216, 221 (2) (576 SE2d 548) (2002). To ensure that proper deference is shown toward the arbitration process, the Arbitration Code requires a trial court to confirm an arbitration award unless one of the specific statutory grounds for vacating or modifying the award has been established. See OCGA § 9-9-12; Greene v. Hundley, 266 Ga. 592, 594-595 (1) (468 SE2d 350) (1996).

The statutory grounds for vacating an arbitration award are found in OCGA § 9-9-13 (b). Under subsection (b) (5) of that statute, the trial court is authorized to vacate an arbitration award if the rights of a party were prejudiced by “[t]he arbitrator’s manifest disregard of the law.” OCGA § 9-9-13 (b) (5).

The two-prong test for ascertaining whether an arbitrator has manifestly disregarded the law has both an objective and a subjective component. We first consider whether the governing law alleged to have been ignored by the arbitrator was well defined, explicit, and clearly applicable. We then look to the knowledge actually possessed by the arbitrator. The arbitrator must appreciate the existence of a clearly governing legal principle but decide to ignore or pay no attention to it. Both of these prongs must be met before a court may find that there has been a manifest disregard of law. An error in interpreting the applicable law does not constitute manifest disregard. The applicable law must have been deliberately ignored.

(Citations and punctuation omitted.) Hansen & Hansen Enterprises, 299 Ga. App. at 471 (1). Seo ABCO Builders v. Progressive Plumbing, 282 Ga. 308, 309 (647 SE2d 574) (2007). The burden of showing that both prongs of the test for manifest disregard of the law have been satisfied is on the party seeking to vacate the arbitration award. See Bennett v. Builders II, Inc., 237 Ga. App. 756, 757 (3) (516 SE2d 808) (1999) (“[Tjhe burden of proof is on the one seeking to set aside an award.”). “[T]his showing is an extremely difficult one to make, especially in light of the fact that an arbitrator is not required to make findings of fact or state his or her rationale in reaching decisions.” ABCO Builders, 282 Ga. at 309.

(a) Objective Prong. With respect to the objective prong of the manifest disregard test, it is undisputed among the parties that the law of products liability is “well defined” and “explicit.” In Georgia, recovery in products liability actions can be grounded on either strict liability or negligence. See Ford Motor Co. v. Stubblefield, 171 Ga. App. 331, 334-335 (2), n. 1 (319 SE2d 470) (1984). Both parties agree that if liability is imposed upon a defendant manufacturer under the doctrine of strict liability, principles of contributory and comparative negligence are inapplicable, and fault should not be apportioned between the plaintiff victim and the defendant manufacturer in awarding damages. See Deere & Co. v. Brooks, 250 Ga. 517, 518 (1) (299 SE2d 704) (1983) (concluding that “contributory negligence is not a defense to a claim of strict liability for product-caused harm”) (citation and punctuation omitted); Ford Motor Co. v. Carter, 239 Ga. 657, 662 (238 SE2d 361) (1977) (when a manufacturer is found strictly liable for a product defect, “[t]he usual defenses pertaining to negligence of a defendant may not be invoked”). See also Charles R. Adams III, Ga. Law of Torts § 25:10 (c) (2012-2013 ed.).

Both parties also agree that if a defendant manufacturer is found liable under the traditional theory of negligence, principles of contributory and comparative negligence do apply. See, e.g., Ray v. Ford Motor Co., 237 Ga. App. 316, 319-320 (2) (514 SE2d 227) (1999) (jury charge on contributory and comparative negligence appropriate with regard to plaintiff’s products liability claim sounding in negligence). Under the doctrine of comparative negligence,

where the negligence of the plaintiff joins with the negligence of the defendant in proximately causing the plaintiff’s injuries, the plaintiff will be precluded from recovering against the defendant, if the negligence of the plaintiff is equal to or greater than that of the defendant, or, if the negligence of the plaintiff is less than that of the defendant, the plaintiff’s recovery of damages will be reduced in proportion to his or her negligence.

(Emphasis omitted.) Weston v. Dun Transp., 304 Ga. App. 84, 87 (1) (695 SE2d 279) (2010). See OCGA § 51-12-33 (a), (g).

In contrast, the parties disagree as to whether the law of strict liability is “clearly applicable” in this case. Long argues that the arbitrator in his first arbitration order found Patterson strictly liable for the injuries sustained by Long, and that, as a result, the law of strict liability was clearly applicable and should have been relied upon by the arbitrator in awarding damages in the second arbitration order. Patterson responds that it is unclear from the face of the first arbitration order — which contained language tracking Georgia’s strict liability statute but also appeared to apply negligence principles by apportioning responsibility for the rollover accident between Long and Patterson — whether the arbitrator had intended to apply the law of strict liability or negligence in deciding the matter before it.

We need not resolve whether the law of strict liability is clearly applicable. Even if the law of strict liability clearly applied in this case (which is questionable), Long has failed to carry her difficult burden of establishing that the subjective prong of the test for manifest disregard has been met.

(b) Subjective Prong. As our Supreme Court explained in ABCO Builders, 282 Ga. at 309-310, to prove the subjective prong of the manifest disregard test,

clear evidence of the arbitrator’s intent to purposefully disregard the law is required. . . . [Tjhere must be concrete evidence of this intent either in the findings of the arbitrator, if he or she chooses to make such findings, or in the transcript of the arbitration hearing, if the parties choose to have the hearing transcribed.

Here, as previously noted, the arbitration hearings were not transcribed, and we therefore must look to the face of the arbitration orders, neither of which discusses the governing law, to determine whether the arbitrator purposefully disregarded the law of strict liability by apportioning damages between Long and Patterson. See id.

Turning to the arbitration orders issued by the arbitrator, we note at the outset that the second arbitration order apportioning damages based on contributory and comparative negligence principles certainly may evidence an error by the arbitrator in interpreting the law of strict liability. But an arbitrator who “incorrectly interprets the law has not manifestly disregarded it____To manifestly disregard the law, one must be conscious of the law and deliberately ignore it.” (Citation and punctuation omitted.) ABCO Builders, 282 Ga. at 309. And there is nothing in the second arbitration order, read alone or in conjunction with the first arbitration order, reflecting that the arbitrator appreciated that apportionment of damages was improper if strict liability applied “but decide [d] to ignore or pay no attention to [that principle].” (Citation omitted.) Hansen & Hansen Enterprises, 299 Ga. App. at 471 (1). Hence, given the absence of the relevant transcripts to shed light on the orders issued by the arbitrator, Long has failed to meet the standard of proof necessary for showing manifest disregard of the law. See Dan J. Sheehan Co. v. McCrory Constr. Co., 284 Ga. App. 159, 163 (2) (643 SE2d 546) (2007) (“The absence of a transcript... precludes [the petitioner seeking to vacate the arbitration award] from fulfilling its burden of showing by the record that the arbitrator manifestly disregarded the law.”) (citation and punctuation omitted); McGill Homes v. Weaver, 278 Ga. App. 622, 624 (629 SE2d 535) (2006) (same). Compare Montes v. Shearson Lehman Bros., 128 F3d 1456, 1461 (11th Cir. 1997) (manifest disregard shown where arbitrator’s award expressly recited the winning party’s argument that the controlling law should be ignored).

Long, however, argues that certain e-mail correspondence between the arbitrator and the parties’ counsel, which occurred after issuance of the first arbitration order but before issuance of the second arbitration order, reflects that the arbitrator manifestly disregarded the law. Patterson responds that the e-mail exchange, particularly the arbitrator’s final e-mail, was “unclear at best” and could not support a finding that the arbitrator manifestly disregarded the law of strict liability. We agree with Patterson.

As already noted, in the first arbitration order, the arbitrator found that Patterson was a “manufacturer” of the trike “sold as new” because of his extensive customization work; that the trike was defective; that “operator error” by Long because of intoxication and/or inexperience was “in large part” the cause of the rollover accident; and that Patterson was 25 percent of the proximate cause of the accident and Long the remaining 75 percent. The arbitrator e-mailed the first arbitration order to the parties’ counsel. In the e-mail, the arbitrator noted, “This is how I feel the case should come out. I have some concern that [the] form of the order may be impermissible, but I do not have any case law which prohibits this result. I will be willing to reconsider, if anyone can provide case law which indicates this result is not allowed by law.”

Long’s counsel responded to the arbitrator’s e-mail, asserting that the arbitrator had found Patterson liable under a strict liability theory of recovery, and that, as a result, contributory negligence principles did not apply and “under such circumstances there is no apportionment of the proximate causation, or, if there is, it is not material.” Patterson’s counsel then responded by e-mail, asserting that the arbitrator had been clear that Long “was 75% at fault in causing the accident and there [had been] no determination of strict liability,” and that he “agreed” that Long would be entitled to 25 percent of any damages ultimately awarded. In a follow-up e-mail sent to Patterson’s counsel and the arbitrator, Long’s counsel reiterated his belief that there had been a finding of strict liability, but he also responded to Patterson’s counsel, “I think you and I are on the same page that what [the arbitrator] is trying to do in his order is apportion the proximate cause for the accident.” Notably, Long’s counsel further stated, “there doesn’t appear to be any legal prohibition against [the arbitrator] apportioning the proximate cause for this accident.”

After receiving the last e-mail from Long’s counsel, the arbitrator responded, “The arguments you made to each other are exactly why I had some concern about the ‘form’ of the order, but you have arrived where I hoped you would end up. I want Ms. Long to receive 25% of a full award.” The arbitrator went on to state that if the parties could not arrive at that result through negotiation, they needed to choose a time for him to conduct a hearing on damages.

According to Long, these e-mails, culminating in the final e-mail response from the arbitrator, demonstrate that the arbitrator knew that strict liability applied and thus that damages awarded could not be apportioned based on principles of contributory and comparative negligence, but nevertheless chose to ignore that law and grant Long only 25 percent of her full damages. In our view, however, the string of e-mails relied upon by Long are ambiguous at best and are more confusing than revealing. If anything, the statement by Long’s counsel in his final e-mail to the arbitrator that “there doesn’t appear to be any legal prohibition against [the arbitrator] apportioning the proximate cause for this accident” could have led the arbitrator to believe that both parties ultimately agreed that it was within his authority to apportion responsibility for the accident between the parties in his final arbitration award. The e-mails relied upon by Long are simply not the type of clear-cut evidence required to show manifest disregard of the law by an arbitrator. Compare Montes, 128 F3d at 1461.

Lastly, in an effort to prove manifest disregard of the law in lieu of a transcript, Long relies upon an affidavit of her counsel attesting to the legal arguments that were made before the arbitrator in the hearing on damages. But OCGA § 9-9-8 (e) provides: “The arbitrators shall maintain a record of all pleadings, documents, testimony, and other matters introduced at the hearing. The arbitrators or any party to the proceeding may have the proceedings transcribed by a court reporter.” Allowing a party or his or her counsel to submit an affidavit describing what allegedly occurred at an arbitration hearing would allow an end-run around the specific methods for preserving the record enunciated in OCGA § 9-9-8 (e). Accordingly, we conclude that the affidavit submitted by Long’s counsel was inadmissible and could not be relied upon by Long to establish what was argued at the hearing on damages. Cf. OCGA § 5-6-41 (f) (describing acceptable methods for correcting trial court record that is incomplete; affidavit from a party not included among the accepted methods); Daniel v. State, 170 Ga. App. 795, 795-796 (3) (318 SE2d 218) (1984) (affidavit of appellant’s counsel regarding what occurred during trial did not serve as substitute for transcript and was inadmissible). See also Dolton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 935 A2d 295, 298-300 (D.C. 2007) (counsel’s affidavit describing evidence submitted by the parties during arbitration hearing was not permissible substitute for transcript).

For these reasons, Long failed to show that the arbitrator manifestly disregarded the law of strict liability in his award of damages in the second arbitration order. Admittedly, the second arbitration order was confusing and appeared inconsistent with both the law of strict liability and negligence. But, under the precedent of our Supreme Court and this Court, that type of error in interpreting the law, standing alone, is not enough to establish manifest disregard by the arbitrator. There simply is no competent evidence in the record to show that the arbitrator appreciated the existence of clearly governing legal principles and intentionally chose to ignore them in awarding damages. The superior court therefore erred in vacating the second arbitration order and remanding the case to the arbitrator for further proceedings.

Case No. A12A2S38

2. Long appeals the superior court’s decision to vacate the second arbitration order, contending that the superior court erred by vacating rather than modifying the order. According to Long, the arbitrator should have modified the second arbitration order because the arbitrator’s actions constituted a “miscalculation of figures” as contemplated by OCGA § 9-9-14 (b) (1), and because the arbitrator’s issuance of the damages award was “imperfect in a manner of form, not affecting the merits of the controversy” as contemplated by OCGA § 9-9-14 (b) (3).

While a trial court can modify an arbitration award on the grounds set forth in OCGA § 9-9-14 (b), “a modification cannot be substantive such that it would affect the merits of the case.” Tanaka v. Pecqueur, 268 Ga. App. 380, 383 (3) (601 SE2d 830) (2004). See Kent v. Mitchell, 319 Ga. App. 115 (735 SE2d 110) (2012); Thacker Constr. Co. v. A Betterway Rent-A-Car, 186 Ga. App. 660, 663 (368 SE2d 178) (1988). Here, Long asserted that the arbitrator misapplied the law of strict liability as it relates to damages and requested that the superior court modify the second arbitration order to increase the damages to $750,000. But increasing the amount of damages awarded to the plaintiff because of an alleged mistake of law made by the arbitrator clearly would constitute a substantive change to the award, not a mere change in form. See Tanaka, 268 Ga. App. at 383 (3) (argument that arbitration award should be modified because the damages awarded by arbitrator were too low was a matter of substance affecting merits of the case); Ralston, 236 Ga. App. at 387-388 (3) (argument that arbitrator’s award of damages should be increased to $ 1 million due to “palpable mistake of law” committed by arbitrator was not proper basis for modification of the award). Cf. Gill Plumbing Co. v. Jimenez, 310 Ga. App. 863, 868 (1) (714 SE2d 342) (2011) (discussing cases and holding, in context of discussion of trial court’s ability to modify or mold verdict entered by a jury, that “an increase in the amount of damages awarded . . . clearly is a matter of substance, not mere form”). The superior court thus committed no error in denying Long’s request to modify the second arbitration order.

Decided March 29, 2013.

Gray, Rust, St. Amand, Moffett &Brieske, Michael J. Rust, David C. Sawyer, for appellant.

Jeremy E. Citron, for appellee.

Judgment affirmed in Case No. A12A2S38. Judgment reversed in Case No. A12A2537, and case remanded with instruction.

McFadden and McMillian, JJ., concur.

       Because of a “High/Low Agreement” reached by the parties before the arbitration, Long would have been entitled to recover only $500,000 if the full $750,000 in damages had been awarded.

       OCGA § 51-1-11 (b) (1), Georgia’s strict liability statute, provides:
      The manufacturer of any personal property sold as new property directly or through a dealer or any other person shall be liable in tort, irrespective of privity, to any natural person who may use, consume, or reasonably be affected by the property and who suffers injury to his person or property because the property when sold by the manufacturer was not merchantable and reasonably suited to the use intended, and its condition when sold is the proximate cause of the injury sustained.

       On the other hand, the second arbitration order, by awarding any damages at all, could be construed as erroneously interpreting the law of negligence, in light of the arbitrator’s finding, contained in both the first and second arbitration orders, that Long’s responsibility for the accident was greater than 50 percent.

       Patterson also responds that the e-mails are inadmissible hearsay. We disagree. “When the relevance of an out-of-court statement is in the effect it had on one who heard or read it, the out-of-court statement is not hearsay.” Paul S. Milich, Ga. Rules of Evidence § 17:5 (2011-2012 ed.). Based on this principle, statements introduced to prove their effect on the hearer are admissible as nonhearsay. Id. See Allen v. State, 275 Ga. 64, 69 (4) (561 SE2d 397) (2002); Fletcher v. Fletcher, 242 Ga. 158, 161 (5) (249 SE2d 530) (1978); Coastal Health Svcs. v. Rozier, 176 Ga. App. 240, 240-241 (1) (335 SE2d 712) (1985). Thus, the e-mails to the arbitrator from the parties’ counsel were admissible to show their effect on the arbitrator rather than to prove the truth of the matters asserted in them. See id. In turn, the e-mails from the arbitrator to the parties’ counsel were admissible to show the arbitrator’s intent or mental state rather than to prove the truth of the matters asserted in them. See Edgeworth v. Edgeworth, 239 Ga. 811, 812 (239 SE2d 16) (1977); Stevens v. Way, 167 Ga. App. 688, 689 (1) (307 SE2d 507) (1983); Thompson v. Thompson, 153 Ga. App. 80, 81-82 (3) (264 SE2d 558) (1980). See also Ga. Rules of Evidence, supra, § 17:12. Our conclusions in this regard are based on the law of evidence as it existed before enactment of the new Georgia Evidence Code. See Ga. L. 2011, p. 99, § 101 (“This Act shall become effective on January 1, 2013, and shall apply to any motion made or hearing or trial commenced on or after such date.”).

       In light of our decision that the superior court erred in vacating the second arbitration order, we need not address Patterson’s remaining enumerations of error.

       Long further contends that the superior court should have modified the second arbitration order because the arbitrator “awarded on a matter not submitted” to it for consideration as contemplated by OCGA § 9-9-14 (b) (2). But Long never argued before the superior court that modification was appropriate on this statutory ground. “It is axiomatic that we will not resolve issues that were not raised and ruled upon by the trial court.” Home Depot U.S.A. v. Wabash Nat. Corp., 314 Ga. App. 360, 372 (5), n. 9 (724 SE2d 53) (2012). See Ralston v. City of Dahlonega, 236 Ga. App. 386, 388 (3) (512 SE2d 300) (1999) (refusing to consider party’s argument that trial court erred in failing to vacate arbitration award, since party had requested only modification of the award in the trial court). Consequently, Long waived her argument for modification predicated on OCGA § 9-9-14 (b) (2). By extension, her reliance on Sweatt v. Intl. Dev. Corp., 242 Ga. App. 753, 757-758 (2) (531 SE2d 192) (2000), which applied that statutory provision, is misplaced.

       Long relies upon West v. Jamison, 182 Ga. App. 565, 567-568 (356 SE2d 659) (1987), in an effort to support her argument for modification, but that case addressed whether it was proper to vacate the arbitration award at issue under the statutory predecessor to OCGA §9-9-13 (b) (3). Indeed, we expressly noted that “neither party to this appeal seriously is contending the arbitrator made clerical errors such as those contemplated [by the statutory predecessor to OCGA § 9-9-14] and which may be corrected by modification prior to confirmation.” Id.


text:
    A12A2550.
    CRIPPEN v. OUTBACK STEAKHOUSE INTERNATIONAL, L.P. et al.
    (741 SE2d 280)
   Ray, Judge.

This case comes to us from an order of the trial court granting summary judgment or partial summary judgment to the appellees on claims for breach of contract, breach of fiduciary duty, fraud, conspiracy to commit fraud, and setoff. Because we believe that the trial court erred in some of its conclusions, we hereby affirm in part, reverse in part, and remand this case to trial.

On appeal from a grant of summary judgment, we review the evidence de novo, viewing it in the light most favorable to the nonmovant, to determine whether a genuine issue of fact remains and whether the moving party is entitled to judgment as a matter of law. Summary judgment is proper only when no issue of material fact exists and the moving party is entitled to judgment as a matter of law.

So viewed, the evidence shows that appellant Kevin Crippen (“Crippen”) was a long term employee of appellee Outback Steakhouse International, L.P. (“OSI”), having started at one of its restaurants as a server/bartender in 1990 and working his way up the corporate ladder. He was promoted to managerial positions in Florida and then Atlanta, and ultimately, in 2002, was promoted to Vice President of Operations of the Asia Pacific Market and sent overseas. He lived in Japan and Hong Kong from 2002 through 2009 while working for OSI, all the while without a formal, written employment contract. He was paid salary and bonuses for his efforts.

In 2008 and 2009, while working for OSI, Crippen purchased a minority interest in three restaurants in Asia, and purchased interests in or consulted with seven companies that supplied food and other related materials to restaurant operations. OSI was a customer of some of these companies, and to some degree, remains so. Crippen did not disclose his outside interests to OSI.

In December 2009, OSI promoted Crippen to Senior Vice President of Operations, and for the first time, he was presented with and executed a written employment agreement. This agreement, the Officer Employment Agreement (the “Employment Agreement”), was dated January 1,2010. In conjunction therewith, he relocated back to Atlanta, where he worked until he was terminated on November 16, 2010. Crippen’s termination came about after OSI discovered his investments inAsia in the three restaurants, as well as his consulting with or interest in companies from whom OSI purchased food products. OSI considered this to be a violation of the Employment Agreement and its internal ethics policy.

In this action, OSI seeks to require Crippen to pay to it any monies that he made from his side investments and consulting in Asia, as well as any salary or other compensation that it paid to him between 2008 and 2010. While OSI acknowledges that Crippen is entitled to be compensated for a buy-out of his interests in certain limited partnerships related to OSI (hereinafter, the “OSI Limited Partnerships”), which he contractually may not keep due to his termination, OSI seeks an offset of said funds with what it claims Crippen owes to OSI due to his alleged wrongful actions with respect to OSI.

Both Crippen and OSI filed cross-motions for summary judgment. From the trial court’s grant of summary judgment or partial summary judgment to OSI on certain of its claims, Crippen appeals.

1. Crippen claims that the trial court erred in its conclusion that as a matter of law he had violated the Employment Agreement. We disagree.

The Employment Agreement included various provisions that would prevent the activities of which OSI now complains. For example, pursuant to ¶ 9(a), Crippen promised that he would not “individually or jointly with others, directly or indirectly, whether for [his] own account or for that of any person or entity, engage in or own or hold any ownership interest in any person or entity engaged in a restaurant business.” Further, ¶ 8(c)(ii) includes a provision allowing OSI to terminate Crippen for cause should he conduct himself dishonestly. Pursuant to ¶ 3(d) of the Employment Agreement, Crippen promised to “devote one hundred percent (100%) of [his] full business time, attention, energies, and effort to the business affairs of the Company.” Yet, it is undisputed that he failed to comply with these terms. After he signed the Employment Agreement, he continued to own his interests in other restaurants, despite the clear terms of the Employment Agreement, and he did not report such ownership to OSI when required as a part of its annual reporting process. He was hardly honest in this endeavor.

Crippen seeks to excuse this conduct, in part, by claiming (1) that his ownership interest in these other companies occurred before the Employment Contract was executed in 2010, which is true, and (2) that the provisions preventing him from investing in other restaurant businesses are overbroad and illegal under Georgia law as being against public policy. First, while owning an interest in and consulting with other restaurant related businesses could not have been a violation of the Employment Agreement before it was executed, continuing to own that interest thereafter was prohibited. Additionally, pretermitting whether the restriction on investing in other restaurants was overbroad, this argument is waived in that it was not raised in the trial court.

Issues presented for the first time on appeal furnish nothing for us to review, for this is a court for correction of errors of law committed by the trial court where proper exception is taken. One may not abandon an issue in the trial court and on appeal raise questions or issues neither raised nor ruled on by the trial court.

Much of the dispute between the parties in this case centers around the issue of damages, as Crippen claims that OSI had not been damaged by any of his actions or inaction, whether they are wrongful or not. However, it is clear that a lack of damages would not be a bar to a breach of contract claim by OSI. “In every case of breach of contract the injured party has a right to damages, but if there has been no actual damage, the injured party may recover nominal damages sufficient to cover the costs of bringing the action.”

2. Crippen complains that the trial court erred in granting summary judgment to OSI on its claims for breach of fiduciary duty. We agree.

As stated by the trial court, OSI claims that Crippen violated his fiduciary duty to OSI in that he (1) owned and worked for outside restaurants and suppliers, and (2) conducted official OSI business with those outside restaurants and suppliers. As to the latter allegation that he breached his duty by allegedly directing OSI’s business to the outside companies in which he had an interest, the trial court denied OSI’s motion for summary judgment; the court found that it was undisputed that OSI’s vendors were selected on pricing and quality, and that the decisions were made based thereon. Also, there was disputed testimony as to whether Crippen even participated in the vendor selections by OSI. As there is no appeal by OSI on this point, this issue will remain for the jury to resolve.

The former claim regarding owning/working for outside restaurants is another matter. In holding that OSI is entitled to summary judgment on this theory, the trial court, improperly in our view, relied upon the terms of the Employment Agreement and its requirement that Crippen must apply 100 percent of his “full business time, attention, energies and effort” to OSI. Clearly, Crippen did not fulfill this contractual term, as the trial court so held and as we have found in Division 1 herein. Yet, this claim is more than a breach of contract.

To prove that Crippen breached his fiduciary duty, OSI must show “(1) the existence of a fiduciary duty; (2) breach of that duty; and (3) damage proximately caused by the breach.” Irrespective of damages, there must have been a breach of a duty in the first instance. While beginning in 2010 Crippen’s contract may have prevented him from owning an interest in restaurants or companies doing business with OSI, it remains an open question as to whether, and to what extent, that Crippen’s outside interests were in any way contrary to, in competition with, or adverse to his employer.

OSI argues that Crippen’s payments from these business interests were “kickbacks,” but this term is conclusory and self-serving. Indeed, the trial court made it clear that it did not determine that the prices OSI paid for its goods, or the quality of the goods themselves, were anything out of the ordinary or that Crippen had anything to do with the vendors that were selected. It relied merely upon the violation of the contractual “full business time” provision for its ruling. While it may be true that an agent breaches a duty of loyalty owed to his employer by using his position for his own personal benefit to the detriment of his employer, the trial court made no such conclusion as to the facts herein. Accordingly, summary judgment on this count is reversed, and this claim is remanded for trial.

3. Crippen claims the trial court erred in granting summary judgment to OSI on its claims for fraud and conspiracy to commit fraud. We agree.

To sustain a claim for fraud, a plaintiff must prove that the defendant made a false representation or concealment of a material fact, with scienter and an intention to induce the plaintiff to act or refrain from acting, justifiable reliance by the plaintiff on the representation or concealment, and resultant damages to the plaintiff. Assuming without deciding whether the other elements of fraud could be established by these facts, at a minimum summary judgment was inappropriate in that OSI did not prove, or at least a question of fact exists, whether OSI was damaged by the alleged fraudulent conduct of Crippen.

In ruling in favor of OSI on these counts, the trial court found that OSI was entitled to the same type of damages that it sought for breach of fiduciary duty; that is, the so called “secret profits” that Crippen made from these outside businesses between 2008 and 2010, as well as the compensation paid by OSI to Crippen during those years. This holding obviously looks to the language of OCGA § 10-6-31, which states: “If [an agent] shall have violated his engagement, he shall be entitled to no commission.” A “breach of fiduciary duty negates the unfaithful agent’s right to any compensation . . . .” Yet, by its very terms, this provision can apply only in cases where an employee or agent breaches his duty of loyalty. Neither the trial court nor OSI has cited to, and we cannot so find, any cases where this statutory provision provides a remedy for an ordinary claim of fraud.

Rather, the measure of damages for fraud is the actual loss sustained. As argued by Crippen in his brief on appeal, “OSI did not establish any loss of revenue, loss or diversion of customers, loss of business opportunities, loss of employees, or any monetary loss whatsoever occasioned by [his] purported concealment [of his collateral business dealings].” While this remains to be judged by the evidence at trial, it is true that throughout this case OSI has sought merely these “secret profits” that Crippen obtained from the outside companies and the compensation that it has paid to Crippen, without proving a relationship whatsoever to any actual harm or damages that it suffered. At trial, should the other elements of fraud and/or conspiracy to commit fraud be proven, OSI must demonstrate that it suffered actual damages to prevail on these claims.

4. Crippen claims that fact questions exist as to the amount he is due for his ownership interests in the OSI Limited Partnerships. We agree.

Pursuant to Article VII of each of the OSI Limited Partnership agreements, Crippen must surrender his investments therein due to the termination of his employment with OSI. At the same time, he is entitled to be paid for the value of these investments. The agreements set forth an elaborate procedure for the valuation and determination of the price to be paid for these buy backs, which includes, among other things, the work of expert appraisers.

Within its order, the trial court concluded that the value of Crippen’s interests in the limited partnerships was $259,071.39. Although this amount was alleged in the Complaint and ratified by OSI’s Chief Financial Officer, Howard Leigh, this amount was disputed by Crippen. There is no evidence in the record, other than the self-serving, unsupported contentions of OSI’s Chief Financial Officer of the value of these interests. Leigh personally performed no calculations, could not name the specific person or persons who did, and could not testify to the specific methodology used in the calculations. His statements amounted to mere hearsay. Evidence on summary judgment is held to the same standards as at trial, and generalized statements and conclusions have no probative value.

Decided March 29, 2013.

Stites & Harbison, J. D. Humphries III, Catherine M. Banich, Robert D. Douglass, for appellant.

Parker, Hudson, Rainer & Dobbs, J. Marbury Rainer, Megan L. Hinkle, for appellees.

A trial is required to set the value of Crippen’s interests in the OSI Partnerships, in the absence of an agreement of the parties or the implementation of the process outlined in the limited partnership agreements. Accordingly, the trial court’s conclusion as to the value of these interests was in error.

Judgment affirmed in part and reversed in part, and case remanded.

Miller, P. J., and Branch, J., concur.

        Rubin v. Cello Corp., 235 Ga. App. 250 (510 SE2d 541) (1998).

       OCGA § 9-11-56. Accord Field v. Lowery, 300 Ga. App. 812, 813 (686 SE2d 422) (2009).

       These investments were discovered pursuant to an investigation by OSI of plans by Crippen in October 2010 to purchase an interest in a Chili’s restaurant in Hong Kong, which had come to light due to certain e-mails OSI discovered.

       In 2007, Crippen entered into 11 separate limited partnership agreements with other limited partners of OSI and became a limited partner in each entity. Upon termination, the limited partnership agreements require a buy back of his interests.

       (Citation and punctuation omitted.) Assn. Svcs., Inc. v. Smith, 249 Ga. App. 629, 632 (1) (549 SE2d 454) (2001).

       OCGA § 13-6-6.

       (Citation and punctuation omitted.) Nash v. Studdard, 294 Ga. App. 845, 849-850 (2) (670 SE2d 508) (2008).

        Hanson Staple Co. v. Eckelberry, 297 Ga. App. 356, 361 (2) (677 SE2d 321) (2009).

        Sun Nurseries v. Lake Erma, LLC, 316 Ga. App. 832, 835 (1) (730 SE2d 556) (2012).

        Vinson v. E.W. Buschman Co., 172 Ga. App. 306, 309-310 (1) (323 SE2d 204) (1984).

        Kent v. White, P.C., 238 Ga. App. 792, 794 (1) (o) (520 SE2d 481) (1999).

       See Howard v. Sellers & Warren, P.C., 309 Ga. App. 302, 306 (2) (709 SE2d 585) (2011). (“In order to prove conspiracy to commit fraud, a plaintiff must show... conduct that constitutes a tort. Absent the underlying tort, there can be no liability for civil conspiracy.”) (citations and punctuation omitted).

        Resolute Ins. Co. v. Norbo Trading Corp., 118 Ga. App. 737, 741 (1) (165 SE2d 441) (1968).


author: Boggs, Judge.

text:
    A12A1843, A12A1844.
    RIVER WALK FARM, L.P. et al. v. FIRST CITIZENS BANK AND TRUST COMPANY, INC. (two cases).
    (741 SE2d 165)
   Boggs, Judge.

In these related appeals, River Walk Farm, L.P., Covington River Partners, L.P., Liberty Land Group, LLC, Robert A. Anchen, and Taylor B. Knox (collectively “River Walk”) appeal from the trial court’s orders confirming the foreclosure sale of real property under two security deeds by First Citizens Bank and Trust Company (“First Citizens”). Finding no error, we affirm.

In confirming a nonjudicial foreclosure sale under OCGA § 44-14-161, the trial court “shall require evidence to show the true market value of the property sold under the powers and shall not confirm the sale unless it is satisfied that the property so sold brought its true market value on such foreclosure sale.” OCGA § 44-14-161 (b).

[T]he trial judge in a confirmation proceeding sits as the trier of fact, and its [factual] findings and conclusions have the effect of a jury verdict. Thus, witness credibility and the weight of the evidence proffered by the parties at a confirmation hearing are to be judged by the trial court, and not this Court on appeal. For this reason, we will not disturb the trial court’s decision if there is any evidence to support it, and we view the evidence in the light most favorable to the trial court’s judgment.

(Citations, punctuation and footnotes omitted.) Metro Land Holdings Investments v. Bank of America, 311 Ga. App. 498, 498-499 (716 SE2d 566) (2011).

Viewed in this light, the evidence shows that in May 2007, River Walk Farm, L.P. executed an “Acquisition and Development Loan Agreement” and a promissory note to Georgian Bank in the amount of $6,500,000. The promissory note was renewed in 2009 in the amount of $6,190,000. Covington River Partners, L.P., Liberty Land Group, LLC, Robert A. Anclien, and Taylor B. Knox executed guaranties in favor of Georgian Bank. River Walk Farm and Covington River Partners, L.P. each executed a security deed in favor of Georgian Bank on the two parcels of property at issue here.

In September 2009, Georgian Bank was closed, and the FDIC was appointed as receiver. First Citizens purchased and became the successor in interest to the loan documents; a representative of First Citizens identified the promissory notes, loan agreement, guaranties, and security deeds. In May 2010, River Walk defaulted on the loan, and First Citizens foreclosed on the property.

In January 2011, First Citizens, as the highest bidder, purchased the property securing the note and guaranties for $1,215,500 and $995,000. First Citizens then filed petitions to confirm and approve the sales for the purpose of pursuing a deficiency judgment. The trial court held a joint hearing with respect to both parcels of property and confirmed the sales. This appeal followed.

Case No. A12A1843

1. In its first enumeration of error, River Walk argues that First Citizens failed to show that it recorded an assignment of the deed to secure debt before the foreclosure sale, and that the trial court therefore erred in confirming the sale. But we have held that this issue is outside the scope of a confirmation hearing:

The only purpose of the confirmation statute is to subject the creditor’s potential deficiency claim to the condition that the foreclosure sale under power be given judicial approval. The confirmation proceeding does not result in a personal judgment and it does not adjudicate the title of the property sold. Except as to the confirmed amount of the sale, it does not establish the liability of any party with regards to the indebtedness.

(Citations and punctuation omitted; emphasis in original.) Boring v. State Bank & Trust Co., 307 Ga. App. 93, 95 (1) (704 SE2d 207) (2010), citing Vlass v. Security Pacific Nat. Bank, 263 Ga. 296, 297 (1) (430 SE2d 732) (1993).

River Walk argues that Boring does not apply because the objection there was framed in terms of standing, while River Walk instead cites the statutory requirements of OCGA § 44-14-162 (b). But this argument is foreclosed by White Oak Homes v. Community Bank & Trust, 314 Ga. App. 502, 504-505 (3) (724 SE2d 810) (2012), in which the appellant raised the same argument. It contended that the assignment was not filed prior to the sale and that the trial court therefore erred in confirming it. In support it expressly cited

OCGA § 44-14-162 (b), which provides that “[t]he security instrument or assignment thereof vesting the secured creditor with title to the security instrument shall be filed prior to the time of sale in the office of the clerk of the superior court of the county in which the real property is located.” [Appellant] contends that the statute requires an assignment be filed prior to sale.

(Citation, punctuation, footnote and emphasis omitted.) Id. at 504-505. In response, we held, citing Boring-.

[I]ssues involving standing and assignment are outside the scope of a confirmation hearing: The only purpose of the confirmation statute is to subject the creditor’s potential deficiency claim to the condition that the foreclosure sale under power be given judicial approval. The confirmation proceeding does not result in a personal judgment and it does not adjudicate the title of the property sold. Except as to the confirmed amount of the sale, it does not establish the liability of any party with regards to the indebtedness.
A confirmation proceeding is a limited statutory proceeding in which an assignment issue is not relevant. Therefore, the issue of whether [the foreclosing bank] was a real party in interest is not relevant to this confirmation proceeding, which was commenced in accordance with OCGA § 44-14-161 (a) by the person instituting the foreclosure proceedings. The issues of standing and assignment were irrelevant to the confirmation proceeding.

(Citations, punctuation and footnote omitted; emphasis supplied.) Id. at 505 (3). This enumeration of error is without merit.

2. In its second enumeration of error, River Walk contends that First Citizens “purposefully foreclosed upon real property in which [it] did not have a valid security interest” because of an error in the security deed’s legal description of the property.

But, as noted above, the issues decided by the trial court in confirmation of a foreclosure under power of sale are limited in scope. If no evidence is presented that an error in the legal description chilled the sale, there is no error. Shantha v. West Ga. Nat. Bank, 145 Ga. App. 712, 713 (244 SE2d 643) (1978) (error in legal description in warranty deed and security deed); Oates v. Sea Island Bank, 172 Ga. App. 178, 179 (2) (a) (322 SE2d 291) (1984) (error in legal description in advertisement). The trial court expressly found that “[Respondents failed to produce any evidence to suggest that the error ‘chilled’ or otherwise impacted the bidding at the sale,” and River Walk points to no such evidence in its brief. This enumeration of error is likewise without merit.

Case No. A12A1844

3. River Walk’s first enumeration of error is identical to that asserted in Division 1, supra, and is without merit for the reasons stated there.

4. In River Walk’s second enumeration of error, it contends that the trial court erred in finding that the sale of the property brought its true market value, because First Citizens “failed to present any evidence regarding the true market value of large portions of the Property sold at the Foreclosure Sale.” River Walk claims that the valuation of the property under the Covington River Partners security deed should have, but did not, include eight residential lots, land upon which amenities were located, and 217 acres of land subject to a conservation easement. The only evidence pointed to by River Walk in support of this contention is the testimony of its appraiser. He testified that he began his appraisal with the legal description in the security deed, then subtracted “the lots that had already been released and built on,” and concluded that there was additional land on the site that had not been accounted for, and that it was “part of the foreclosure.” But this expert referred to no legal description or plat to identify the allegedly missing property.

Decided March 14, 2013

Reconsideration denied April 3, 2013.

Schreeder, Wheeler & Flint, John A. Christy, Jared W. Heald, for appellants.

Moreover, the security deed, the deed under power of sale, and the appraisal report prepared by First Citizens’ appraiser all recite the same legal description of the property foreclosed upon. And First Citizens’ appraiser testified that the property evaluated was three parcels of “excess land on the periphery of the development” amounting to approximately 90 acres. River Walk points to no other evidence to support its assertion that the foreclosure included additional land that was not part of the appraisal. And the trial court was at liberty to discount the testimony of River Walk’s expert, particularly since he did not identify the records on which he based his conclusory opinion.

On appellate review, the test is not whether this court would have accepted appellant’s expert appraisals as the most reliable and accurate, but whether the record contains any evidence to support the findings of the trial court that the property brought its true market value at the foreclosure sale. Further, Georgia law has long held that the trier of fact may believe or disbelieve all or any part of the testimony of any witness.

(Citations, punctuation and footnotes omitted.) Metro Land, supra, 311 Ga. App. at 500.

We therefore conclude that, under the applicable standard of review, the trial court’s finding that the property brought its true market value was supported by some evidence, and we therefore affirm.

Judgments affirmed.

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

Taylor, English & Duma, JohnJ. Richard, SeanR. Smith, Jason R. Curies, Samuel B. Zeigler, for appellee.

       In Duke Galish, LLC v. SouthCrest Bank, 314 Ga. App. 801 (726 SE2d 54) (2012), relied on by River Walk, we explicitly declined to reach the issue of failure to comply with OCGA § 44-14-162 (b). Id. at 803 (1).