YOUNG v. TITAN CONSTRUCTION COMPANY LLC

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Court of Appeals of Georgia.

YOUNG v. TITAN CONSTRUCTION COMPANY, LLC;  and vice versa.

A11A1542, A11A1543.

Decided: March 29, 2012

In June 2005, Titan Construction Company paid $1.75 million to purchase 30 undeveloped lots in a Chatham County residential development from Turners Cove Development, LLC. At the time, Titan Construction knew that Turners Cove previously had contracted to sell three of the same lots to other buyers, but Tracy Young, the managing member of Turners Cove, assured Titan Construction that “he would handle those contracts.”   Moreover, Young signed a deed of warranty to convey the 30 lots, in which Turners Cove warranted that the lots were “free and clear of any liens, claims or encumbrances,” and by which Turners Cove promised to defend the title to the lots against any “lawful claims.”   When Titan Construction later discovered that Turners Cove had contracted to sell as many as eleven of the lots to other buyers, and when Titan Construction learned that some of these buyers were asserting claims to those lots, it demanded that Turners Cove extinguish the claims of the other buyers.   Turners Cove, however, ignored this demand and did nothing.

Titan Construction then sued Young,1 asserting claims for breach of the deed of warranty and fraud.   In June 2010, the case was tried by a Chatham County jury, which returned a verdict for Titan Construction and awarded approximately $840,000 as damages for breach of the deed of warranty, $1 million as damages for fraud, and more than $465,000 as attorney fees and expenses of litigation.   The court below entered judgment on the verdict, but the court later amended its judgment and disallowed the award of attorney fees and expenses, finding that the evidence was insufficient to sustain that award.   Young now appeals from the award of damages for breach of the deed of warranty and fraud, and Titan Construction appeals from the disallowance of the award of attorney fees and expenses.2  We reverse the judgment below to the extent that it includes an award of damages for breach of the deed of warranty, but we otherwise affirm.

Case No. A11A1542

1. Young contends that the award of damages for breach of the deed of warranty must be set aside because he is not a party to the deed, and we agree.3  The evidence is undisputed that Turners Cove, not Young, is a party to the deed.   The deed explicitly identifies Turners Cove as the grantor, and the covenants and warranties set out in the deed clearly are the covenants and warranties of Turners Cove. Although Young signed the deed, he did so as the managing member of Turners Cove on its behalf, and on appeal, Titan Construction does not dispute that Young is not a party to the deed.   The members and officers of a limited liability company ordinarily have no personal liability for the obligations of the company, see Milk v. Total Pay & HR Solutions, Inc., 280 Ga.App. 449, 452–453 (634 S.E.2d 208) (2006), and generally speaking, “a person who is not a party to a contract is not bound by its terms.”  Accurate Printers, Inc. v. Stark, 295 Ga.App. 172, 178(3)(a) (671 S.E.2d 228) (2008) (citation and punctuation omitted).   Notwithstanding these settled principles of law, Titan Construction argues that Young can be held to account for breach of the deed of warranty, both because he committed fraud in connection with the deed, and because the evidence is sufficient to pierce the corporate veil of Turners Cove. We do not agree.

It is true, as Titan Construction says, that “a corporate officer may be held liable for a corporate tort when he cooperated or participated in the tort or directed it to be done.”  BTL COM Ltd. v. Vachon, 278 Ga.App. 256, 260(1) (628 S.E.2d 690) (2006).   See also Milk, 280 Ga.App. at 454.   But liability for breach of a deed of warranty is a liability that sounds in contract, not tort, and the jury in this case separately held Young liable for fraud.   Titan Construction points us to no authority for the proposition that a member or officer of a limited liability company can be held liable for breach of a contract of his company simply because he was involved in some wrongdoing in connection with that contract, and our own research has turned up no such authority.   That Young may have committed fraud in connection with the deed of warranty is no reason, we think, to hold him liable for breach of a warranty to which he is not a party.

As to the contention that the evidence is sufficient to pierce the corporate veil of Turners Cove, such a theory of liability was never put to the jury.   It is not among the theories of liability identified in the consolidated pretrial order,4 and although Titan Construction nevertheless requested a jury charge on piercing the veil, the court below refused to give such a charge.5  We cannot uphold a jury verdict upon a theory of liability that was never put to the jury, and for this reason, even if the evidence were sufficient to pierce the veil, it cannot sustain the verdict against Young for breach of the deed of warranty to which he was not a party.  Plaza Properties, Ltd. v. Prime Business Investments, 240 Ga.App. 639, 643(2)(d) (524 S.E.2d 306) (1999).   Accordingly, we reverse the judgment below to the extent that it awards damages to Titan Construction for breach of the deed of warranty.

2. Young contends that the evidence is insufficient in two respects to sustain the award of damages for fraud.   First, the evidence fails to show, he says, that Titan Construction justifiably relied on any misrepresentation attributable to him and suffered injury as a result, and for this reason, the jury was not authorized to return a verdict against him for fraud.6  Second, even if the jury properly returned a verdict against him for fraud, the damages that the jury awarded, he contends, are not within the range of damages established by the evidence.   We are not persuaded.

(a) To prove its fraud claim, Titan Construction was required to prove that Young misrepresented some fact material to the purchase of the 30 lots, that he did so knowingly, that he did so with the intent to induce Titan Construction to enter into the purchase transaction, that Titan Construction justifiably relied on his misrepresentation, and that Titan Construction sustained some injury as a result.   See Merritt v. Marlin Outdoor Advertising, Ltd., 298 Ga.App. 87, 92(3) (679 S.E.2d 97) (2009).   Young contends that Titan Construction failed to prove two of these elements, justifiable reliance and injury as a result of the misrepresentation.   We disagree.

Viewed in the light most favorable to Titan Construction,7 the evidence shows that Young gave repeated assurances to Titan Construction that Turners Cove would hold Titan Construction harmless against any adverse claims concerning the title to the 30 lots.   Although Titan Construction knew that Turners Cove previously had entered into contracts to sell some of the lots to other persons, Young assured Titan Construction that those contracts were “his obligations,” that “he would handle those contracts,” and that any potential claims arising from those contracts “were dealt with.”   Moreover, Young signed the deed of warranty, in which Turners Cove assured that the 30 lots were “free and clear of any liens, claims or encumbrances,” and by which Turners Cove promised to “forever WARRANT and DEFEND the said premises against the lawful claims of all persons whomsoever.”   These assurances were, of course, assurances that Young gave on behalf of Turners Cove, but if they amount to a fraud, as we noted in Division 1, Young may be held personally liable in tort for his role as the instrument of that fraud.   See BTL COM, 278 Ga.App. at 260(1).   And although fraud, generally speaking, “cannot be predicated on statements that are in the nature of promises as to future events,” TechBios, Inc. v. Champagne, 301 Ga.App. 592, 594(1)(a) (688 S.E.2d 378) (2009), when “a promise as to future events is made with a present intent not to perform,” it properly may form the basis for a fraud claim.  JTH Tax, Inc. v. Flowers, 302 Ga.App. 719, 725(2)(b) (691 S.E.2d 637) (2010).

Here, there is evidence from which a jury might properly have concluded that, when Young gave these assurances, he knew and intended that Turners Cove never would defend the title of the lots against adverse claims.   As we have explained before, “[f]raudulent intent at the time of contracting can be inferred based on subsequent conduct of the defendant that is unusual, suspicious, or inconsistent with what would be expected from a contracting party who had been acting in good faith.”  BTL COM, 278 Ga.App. at 261(1) (citations omitted).   The evidence in this case shows that Young failed to disclose to Titan Construction the full extent to which the 30 lots were potentially encumbered by contracts to sell to other buyers,8 that Young misled Titan Construction about the extent to which such other buyers actually had asserted claims to the lots,9 and that, when Titan Construction demanded that Turners Cove extinguish such claims, Turners Cove did absolutely nothing to attempt to extinguish the claims, and Young refused to even respond to the demand.   From this evidence, the jury properly could have found, we think, that the assurances given by Young in connection with the sale of the 30 lots to Titan Construction were fraudulent.

Moreover, there is evidence from which a jury might properly have concluded that Titan Construction justifiably relied upon these assurances and that it was injured as a result.   When Titan Construction purchased the 30 lots, it intended to construct townhouses on the lots for resale, and its owner explained at trial that, without a deed of warranty, it never would have agreed to purchase the lots.   And when Turners Cove failed to extinguish adverse claims to the lots, it impaired the ability of Titan Construction to resell the lots, inasmuch as Titan Construction could not itself warrant good title to prospective purchasers.   Although Titan Construction ultimately was able to sell most of the lots for a profit,10 the jury might nevertheless have properly found that the impairment occasioned by the failure of Turners Cove to honor its warranty delayed the resale of at least some of the lots.   As a result of that delay, the jury might properly have concluded, Titan Construction incurred costs in addition to those that it otherwise would have incurred, was exposed to changes in market conditions for longer than it otherwise would have been, and suffered an impairment of its revenue stream, which caused Titan Construction to fall behind on the repayment of its lenders and eventually led to the lenders foreclosing on several of the lots.   This is sufficient to show reliance and injury as a result for purposes of the fraud claim.

(b) We turn now to the contention that the damages that the jury awarded for fraud were not within the range established by the evidence.  “In a tort case, the determination of damages rests peculiarly within the province of the [jury], and when the [jury] considers consequential damages in such a case, every particular and phase of the injury may enter into its consideration.”   French v. Dilleshaw, _ Ga.App. _ (1) (Case No. A11A1605, decided Feb. 1, 2012) (citations and punctuation omitted).   Here, there was evidence that Titan Construction paid $150,000 to extinguish three adverse claims, and it incurred approximately $26,000 in additional costs in connection with defending against a lawsuit asserting such claims.   There was evidence at trial that Titan Construction lost at least three lots with clouded title to foreclosure and that each of the lots had an unimproved value of approximately $125,000.   Titan Construction effectively lost a fourth lot with clouded title to a short sale, and for purchase and construction loans upon that lot and the three lots lost to foreclosure, Titan Construction paid its lenders nearly $250,000 in interest.   There was some evidence that, if Titan Construction had been able to sell these four lots in the ordinary course, it would have earned profits of approximately $500,000.   In addition, there was evidence that the owner of Titan Construction spent substantial time dealing with the problems caused by the failure of Turners Cove to extinguish adverse claims, at a cost to Titan Construction of approximately $150,000.   The award of $1 million as damages for fraud is within the range established by the evidence,11 and we affirm that portion of the judgment below.

Case No. A11A1543

3. Titan Construction contends that the court below erred when it disallowed the award of attorney fees and expenses.   Titan Construction, however, failed to offer sufficient evidence at trial from which the jury could calculate the amount of attorney fees and expenses to which it was entitled.   As we have explained before, “evidence of the existence of a contingency fee contract, without more, is not sufficient to support an award of attorney fees.”   Nichols v. Main Street Homes, 244 Ga.App. 591, 594(2)(b) (536 S.E.2d 278) (2000) (citation and punctuation omitted).   Instead, the value of the professional services rendered by an attorney must be shown.  Id. And this showing necessarily involves evidence of “hours, rates, or [some] other indicator of the value of professional services rendered.”  Hercules Automotive v. Hayes, 194 Ga.App. 135, 137(4) (389 S.E.2d 571) (1989) (emphasis omitted).  “A naked assertion that the fees are ‘reasonable,’ without any evidence of hours, rates, or other indication of the value of the professional services actually rendered is inadequate.”  Hsu's Enterprises v. Hospitality Intl., 233 Ga.App. 309, 311(2) (502 S.E.2d 776) (1988).

At trial, Titan Construction introduced evidence of its contingent-fee agreement with its lawyer, elicited testimony that this contingent-fee arrangement was reasonable, and claimed that it was entitled to recover more than $470,000 in attorney fees and expenses.   But other than the stipulation in the contingent-fee agreement that the hourly rate of the lawyer was $200, Titan Construction offered no proof of the value of the services rendered by its lawyer.   In particular, it brought forward no evidence of the hours that its lawyer spent on the case, evidence without which the hourly rate of the lawyer is absolutely meaningless.  “An attorney cannot recover for professional services without proof of their value.”  Hercules Automotive, 194 Ga.App. at 137(4) (citation and punctuation omitted).   Because the evidence is not sufficient to sustain the award of attorney fees and expenses, the court below did not err when it disallowed that award.

Judgment in Case No. A11A1542 affirmed in part and reversed in part;  judgment in Case No. A11A1543 affirmed.   Barnes, P. J., and Adams, J., concur.

FOOTNOTES

FN1. Turners Cove was dissolved in May 2008, a couple of months before Titan Construction filed its lawsuit..  FN1. Turners Cove was dissolved in May 2008, a couple of months before Titan Construction filed its lawsuit.

FN2. Young appeals in Case No. A11A1542, and Titan Construction appeals in Case No. A11A1543.   We address both appeals in this opinion..  FN2. Young appeals in Case No. A11A1542, and Titan Construction appeals in Case No. A11A1543.   We address both appeals in this opinion.

FN3. Because we reverse the award of damages for breach of the deed of warranty upon this ground, we need not address the other claims of error with respect to that award..  FN3. Because we reverse the award of damages for breach of the deed of warranty upon this ground, we need not address the other claims of error with respect to that award.

FN4. See Dept. of Human Resources v. Phillips, 268 Ga. 316, 318(1) (486 S.E.2d 851) (1997) (once entered, the pretrial order limits the claims, contentions, defenses, and evidence to be submitted to the jury, unless it is modified at trial to avoid a manifest injustice)..  FN4. See Dept. of Human Resources v. Phillips, 268 Ga. 316, 318(1) (486 S.E.2d 851) (1997) (once entered, the pretrial order limits the claims, contentions, defenses, and evidence to be submitted to the jury, unless it is modified at trial to avoid a manifest injustice).

FN5. Titan Construction has taken no appeal from the refusal of the court below to charge on piercing the veil, so that issue is not properly before us.   See Braziel v. Brooks, 246 Ga. 530, 531 (272 S.E.2d 73) (1980)..  FN5. Titan Construction has taken no appeal from the refusal of the court below to charge on piercing the veil, so that issue is not properly before us.   See Braziel v. Brooks, 246 Ga. 530, 531 (272 S.E.2d 73) (1980).

FN6. Young also argues that the fraud claim is barred by the doctrine of merger, but this argument does not warrant much discussion.   Young says that Titan Construction admitted in its arguments to the jury that any prior representations merged into the deed of warranty, and under the doctrine of merger, Titan Construction could not have justifiably relied upon such prior representations for the purposes of its fraud claim.   But Young points to no merger provision in the contractual documents concerning the sale of the 30 lots, see Donchi, Inc. v. Robdel, LLC, 283 Ga.App. 161, 163(1)(a) (640 S.E.2d 719) (2007), and in any event, Titan Construction relies on alleged misrepresentations contained in the contractual documents themselves, so any merger would not bar its fraud claim.   See Gaines v. Crompton & Knowles Corp., 190 Ga.App. 863, 866(4)(C) (380 S.E.2d 498) (1989).   Moreover, even if Titan Construction argued merger to the jury, a statement of such a legal conclusion is not binding as an admission in judicio.   See Bollers v. Noir Enterprises, 297 Ga.App. 435, 437(1) (677 S.E.2d 338) (2009);  Kothari v. Patel, 262 Ga.App. 168, 174–175(4) (585 S.E.2d 97) (2003)..  FN6. Young also argues that the fraud claim is barred by the doctrine of merger, but this argument does not warrant much discussion.   Young says that Titan Construction admitted in its arguments to the jury that any prior representations merged into the deed of warranty, and under the doctrine of merger, Titan Construction could not have justifiably relied upon such prior representations for the purposes of its fraud claim.   But Young points to no merger provision in the contractual documents concerning the sale of the 30 lots, see Donchi, Inc. v. Robdel, LLC, 283 Ga.App. 161, 163(1)(a) (640 S.E.2d 719) (2007), and in any event, Titan Construction relies on alleged misrepresentations contained in the contractual documents themselves, so any merger would not bar its fraud claim.   See Gaines v. Crompton & Knowles Corp., 190 Ga.App. 863, 866(4)(C) (380 S.E.2d 498) (1989).   Moreover, even if Titan Construction argued merger to the jury, a statement of such a legal conclusion is not binding as an admission in judicio.   See Bollers v. Noir Enterprises, 297 Ga.App. 435, 437(1) (677 S.E.2d 338) (2009);  Kothari v. Patel, 262 Ga.App. 168, 174–175(4) (585 S.E.2d 97) (2003).

FN7. With respect to this issue, Young appeals from the denial of his motion for judgment notwithstanding the verdict.   Consequently, we view the evidence in the light most favorable to Titan Construction, and we consider only whether any evidence appears to sustain the verdict.   See Holland v. Holland, 277 Ga. 792, 792 (596 S.E.2d 123) (2004)..  FN7. With respect to this issue, Young appeals from the denial of his motion for judgment notwithstanding the verdict.   Consequently, we view the evidence in the light most favorable to Titan Construction, and we consider only whether any evidence appears to sustain the verdict.   See Holland v. Holland, 277 Ga. 792, 792 (596 S.E.2d 123) (2004).

FN8. Titan Construction knew that three lots were the subject of such contracts, but in fact, Turners Cove had contracted to sell eleven of the 30 lots to other buyers..  FN8. Titan Construction knew that three lots were the subject of such contracts, but in fact, Turners Cove had contracted to sell eleven of the 30 lots to other buyers.

FN9. At the time of the sale of the 30 lots, Young gave an affidavit to Titan Construction, in which Young averred that there were only “[p]otential [c]laims arising from [these] contracts.”   When he made the affidavit, however, Young knew that litigation already was pending with respect to some of the lots, and claims had been asserted formally with respect to other lots.   Young failed to disclose these actual claims to Titan Construction..  FN9. At the time of the sale of the 30 lots, Young gave an affidavit to Titan Construction, in which Young averred that there were only “[p]otential [c]laims arising from [these] contracts.”   When he made the affidavit, however, Young knew that litigation already was pending with respect to some of the lots, and claims had been asserted formally with respect to other lots.   Young failed to disclose these actual claims to Titan Construction.

FN10. In his briefs, Young repeatedly points to the fact that Titan Construction ultimately made a profit on its purchase of the 30 lots.   That fact does not, however, mean that Titan Construction necessarily suffered no injury as a result of the fraud.   It only means that Titan Construction found some success in its effort to mitigate its damages.   For all we know, Titan Construction might have profited a great deal more, but for Turners Cove's failure to fulfill its promises under the deed of warranty..  FN10. In his briefs, Young repeatedly points to the fact that Titan Construction ultimately made a profit on its purchase of the 30 lots.   That fact does not, however, mean that Titan Construction necessarily suffered no injury as a result of the fraud.   It only means that Titan Construction found some success in its effort to mitigate its damages.   For all we know, Titan Construction might have profited a great deal more, but for Turners Cove's failure to fulfill its promises under the deed of warranty.

FN11. Young argues that the measure of damages in a case involving fraud in connection with the sale of property is the difference between the value of the property as it actually was and the value of the property as it was represented to be.   That is, to be sure, a proper measure of damages in such a case.   See Kunzler Enterprises v. Rowe, 211 Ga.App. 4, 5 (438 S.E.2d 365) (1993).   But the differential in value is merely a measure of the direct damages in this case, and consequential damages are a distinct element of damages.   See OCGA § 51–12–3 (distinguishing direct and consequential damages).   And even if there is, as Young contends, no evidence in this case from which a jury could measure the direct damages, there is sufficient evidence of consequential damages, and the damages awarded by the jury are within the range of those consequential damages.   Moreover, we see no indication that the damages awarded in this case for fraud amount to a double-recovery of any element of damages..  FN11. Young argues that the measure of damages in a case involving fraud in connection with the sale of property is the difference between the value of the property as it actually was and the value of the property as it was represented to be.   That is, to be sure, a proper measure of damages in such a case.   See Kunzler Enterprises v. Rowe, 211 Ga.App. 4, 5 (438 S.E.2d 365) (1993).   But the differential in value is merely a measure of the direct damages in this case, and consequential damages are a distinct element of damages.   See OCGA § 51–12–3 (distinguishing direct and consequential damages).   And even if there is, as Young contends, no evidence in this case from which a jury could measure the direct damages, there is sufficient evidence of consequential damages, and the damages awarded by the jury are within the range of those consequential damages.   Moreover, we see no indication that the damages awarded in this case for fraud amount to a double-recovery of any element of damages.

Blackwell, Judge.