EMM CREDIT, LLC v. ALEXANDER REMINGTON

THIRD DIVISION
ELLINGTON, P. J.,
ANDREWS and RICKMAN, JJ.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules
November 2, 2017
In the Court of Appeals of Georgia
A17A1031. EMM CREDIT, LLC v. ALEXANDER REMINGTON
et al.
RICKMAN, Judge.
Nearly 13 years after filing suit, EMM Credit, LLC prevailed in a jury trial
against defendants Alexander Remington, Cara Guri, and American National Holding
Corporation (“ANHC”). EMM Credit sought a declaratory judgment that Remington
is the “true owner” of ANHC, meaning that Remington owns all of the shares of
ANHC, and sought to set aside as fraudulent the conveyance of certain property from
Remington to ANHC. The jury determined that Remington is the true owner of
ANHC and that Remington fraudulently transferred property to ANHC. The trial
court subsequently issued an order granting “Defendants’ Renewed Motion for
Directed Verdict/Motion for Judgment Notwithstanding the Verdict.” EMM Credit
appeals that order , contending that the trial court erred in granting a directed verdict
on its declaratory judgment and fraudulent transfer claims and by refusing to admit
certain evidence at trial. For reasons that follow, we affirm in part and reverse in part.
On appeal from a trial court’s rulings on motions for directed
verdict and judgment notwithstanding the verdict, we review and resolve
the evidence and any doubts or ambiguities in favor of the verdict;
directed verdicts and judgments notwithstanding the verdict are not
proper unless there is no conflict in the evidence as to any material issue
and the evidence introduced, with all reasonable deductions therefrom,
demands a certain verdict.
(Citations and punctuation omitted.) Vol Repairs II Inc. v. Knighten, 322 Ga. App.
416, 417 (745 SE2d 673) (2013).
So viewed, the evidence shows that in July 1997, Alexander Remington
became a director of NewCom, Inc., now known as NCom, Inc. (“NCom”).
Remington was also the majority owner of Micro Equipment Corporation (“MEC”),
one of NCom’s largest suppliers. In 2002, Remington entered a plea agreement in
which he admitted to engaging in a scheme to defraud and embezzle money from
NCom by padding invoices from MEC to NCom. This scheme began in 1996 and
continued until 1999, resulting in the embezzlement of approximately $1,100,000.
2
Remington pled guilty to and was convicted of committing mail fraud and wire fraud
in federal court in California.
After learning about Remington’s guilty plea and investigating the nature of
the crime, NCom demanded payment from Remington. When those demands went
unanswered, NCom filed suit in federal court in California in 2003, and in 2006,
obtained a $2,533,000 judgment for intentional fraud against Remington, MEC, and
Cara Guri, MEC’s chief financial officer and Remington’s girlfriend. While the
California litigation was ongoing, NCom discovered that in 1996, Remington had
purchased an industrial building in Gwinnett County, Georgia, and immediately
transferred it to ANHC. In 2003, NCom filed suit in Georgia against Remington,
Guri, ANHC, and others, seeking, inter alia, a declaration that Remington owns all
the shares of ANHC and that NCom may enforce its judgment against those shares
and to void the allegedly fraudulent transfer of the Gwinnett County property (the
“Property”) from Remington to ANHC. In 2007, NCom assigned the California
judgment to EMM Credit Corporation, who then assigned it to EMM Credit in 2008.
EMM Credit was substituted as the party plaintiff in this case in 2009.
At trial in Georgia, the parties presented a significant amount of evidence about
the purchase and transfer of the Property. Curt Thompson testified that he had been
3
the general counsel for MEC and ANHC and also served as Remington’s personal
attorney on occasion. He was involved in Remington’s purchase of the Property in
1996 from Allstate Life Insurance Company and the subsequent transfer to ANHC.
The Purchase and Sale Agreement was executed by Allstate as seller and Remington
as buyer. There was an addendum to that agreement, which was prepared by counsel
for Allstate, and provided that “[u]pon the Closing of the purchase of the Property,
Buyer will transfer its interest in the Property to [ANHC], a Georgia corporation
wholly owned by Buyer,” with Buyer being defined as Remington. Thompson struck
through the words “wholly owned by Buyer,” and sent the document back to
Allstate.1
At the closing, Thompson represented Remington and ANHC and Remington
was present, but no other representatives of ANHC attended. Remington executed the
closing documents on behalf of himself individually and Thompson executed the
documents on behalf of ANHC. Remington purchased the Property from Allstate for
1
Thompson testified that he struck it out because it was inaccurate. He also
acknowledged later in his testimony that he had been found in contempt of court, but
when asked if he had provided false information to a judge, he asserted his Fifth
Amendment right not to testify further about the matter.
4
$1,540,000, then transferred it to ANHC for $800,000, and executed a note in favor
of Allstate for the remaining $740,000.
In addition to the Note, Remington executed a Deed to Secure Debt and a UCC
2, pledging the Property and his personal property as collateral. ANHC also pledged
certain collateral to Allstate via a UCC 2 that was prepared by Allstate and originally
had a signature line for Remington, as President of ANHC, but Thompson crossed
that out and signed it himself as Vice President and general counsel of ANHC.2
Remington, Thompson, and Guri also executed a Certified Corporate Resolution of
ANHC for the purchase of the Property. Remington signed the document as
President/CEO of ANHC.3 Shortly after the closing in April 1996, MEC leased the
building on the Property from ANHC.
One of Remington’s brothers, Seyed Hamid Zahari, also known as Gino, who
claimed that he and another brother, Mohammed Zahari, also known as Tony, had
been involved in ANHC since its inception in 1992 and that Remington was not
involved, testified that Remington purchased the Property because he and Tony were
2
Thompson testified that he crossed it out and signed his name because it was
inaccurate and he was the only one authorized to sign those documents at closing.
3
Remington also signed a signature card for ANHC’s commercial checking
account, as CEO of the corporation.
5
not sufficiently credit-worthy to complete the transaction.4 But Gino testified that they
did come up with $800,000 for ANHC’s down payment, with Tony contributing
$400,000 from his business in Dubai and Gino contributing $400,000 his father gave
him. Gino testified that the $800,000 was wired from Dubai to the United States for
the closing, but there are no records of the wire transfer. The remaining $740,000
owed to Allstate was personally guaranteed by Remington because Gino and Tony
did not have the necessary credit, and was paid with funds from MEC.
The trial included extensive testimony regarding ANHC’s stock ledger and
stock certificates. Guri testified that the original owners of ANHC were her and
Remington’s brothers, Gino and Tony. Guri identified a reconstructed stock ledger
for ANHC showing that she, Gino, and Tony owned shares in ANHC, and testified
that the original ledger was “lost or stolen or not found.” Guri also identified
replacement stock certificates dated September 2006, which indicated that she owned
300 shares, Gino owned 4900 shares, and Tony owned 4800 shares. According to
Guri, the original certificates were “lost, stolen; we don’t know.” She does not recall
ever looking at the corporate books. Gino testified that the original stock certificates
4
Gino’s video deposition was taken in Dubai, where he resided, and was
played for the jury.
6
were kept in a binder in Guri’s office, but they were lost so they asked their attorney
to prepare new ones.
EMM Credit’s director testified that, during the litigation, he had requested
documentation to support the defendants’ claim that Gino and Tony owned ANHC,
and in response, ANHC’s outside counsel sent a copy of a stock ledger. When EMM
Credit’s director questioned the legitimacy of the ledger, ANHC’s counsel responded
in October 2006 that “the stock transfer record was reconstructed by my firm as
ANHC’s corporate counsel due to lost/destroyed old records.” EMM Credit’s director
testified that the attorney “came up with different stories” about how they lost the
originals.
At the close of EMM Credit’s case, Remington, Guri, and ANHC moved for
a directed verdict on several grounds, including that EMM Credit had failed to join
necessary parties and that fraudulent transfer claims are not assignable. The trial court
reserved ruling on the motions for directed verdict at that time and when the
defendants renewed their motions at the close of the evidence. After the jury rendered
its verdict that (1) Remington is the true owner of ANHC, (2) Remington fraudulently
transferred the Gwinnett County building to ANHC, and (3) EMM Credit filed its
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lawsuit within the applicable statute of limitations, the trial court granted defendants’
renewed motion for directed verdict/motion for judgment notwithstanding the verdict.
1. EMM Credit contends that the trial court erred by granting a directed verdict
or a judgment notwithstanding the verdict on its declaratory judgment claim.
Specifically, EMM Credit argues that the trial court invaded the province of the jury
to determine that indispensable parties were not joined and that the trial court’s
analysis under OCGA § 9-11-19 was incomplete and erroneous.
EMM Credit sought a declaration that Remington is the “true owner” of
ANHC, meaning that Remington owns all of the shares of ANHC. At the conclusion
of the trial, the jury determined that Remington was the true owner of ANHC. The
trial court granted a directed verdict or judgment notwithstanding the verdict on that
claim based on its determination that EMM Credit had failed to join indispensable
parties, Gino and Tony Zaharai. Specifically, the court found that “at least at the time
of trial, there was evidence presented that Seyed “Gino” Zaharai and Mohammad
“Tony” Zaharai owned shares of stock in ANHC, and that “[a]s [EMM Credit] has
failed to join these individuals as defendants in this case, [it] cannot obtain the relief
[it is] seeking on this claim.” The trial court did recognize, however, that the jury
8
verdict “reflects that the jury believed from the evidence presented that Defendant
Remington and not the non-parties Gino and Tony was the true owner of ANHC.”
(a) The trial court erred in determining that Gino and Tony were indispensable
parties. Pursuant to OCGA § 9-11-19 (a),
A person who is subject to service of process shall be joined as a party
in the action if: (1) In his absence complete relief cannot be afforded
among those who are already parties; or (2) He claims an interest
relating to the subject of the action and is so situated that the disposition
of the action in his absence may . . . [a]s a practical matter impair or
impede his ability to protect that interest.
The trial court determined that Gino and Tony were indispensable parties because
evidence was presented that they were issued shares of ANHC.5 Based on our review
of the evidence, we conclude that the joinder of Gino and Tony was not necessary for
a just adjudication of the merits of this case because their interests were adequately
protected by the other defendants. See Halta v. Bailey, 219 Ga. App. 178, 179 (1)
(464 SE2d 614) (1995) (joinder of grantee and first taker of shares of closely held
stock in action for declaratory judgment and claim of fraudulent conveyance was not
5
As pointed out by EMM Credit, this was actually a determination that Gino
and Tony were necessary parties under OCGA § 9-11-19 (a).
9
“necessary for a just adjudication of the merits of this action, and neither is required
for complete relief”). Gino’s videotaped testimony was presented at trial and his
testimony as to his and Tony’s ownership of the shares in ANHC was consistent with
testimony from Guri, another claimed shareholder and a named party, and with the
reconstructed stock ledger and replacement stock certificates introduced in evidence.
In addition to Thompson’s testimony, appellees presented evidence from the current
president of and legal custodian of corporate records for ANHC, who identified
documents indicating that Tony was involved in ANHC before this lawsuit was filed
and that as of July 2009, Tony was named the chief financial officer for ANHC. The
appellees also presented testimony from an expert witness in the field of corporate
law, who testified about the proper procedure for addressing a lost stock ledger and
lost stock certificates. Thus, the appellees presented a thorough case on behalf of all
of the claimed shareholders of ANHC, and their efforts to present evidence relevant
to the ownership of ANHC were not hampered by the fact that Tony and Gino were
not parties. Accordingly, the trial court erred in determining that Tony and Gino were
indispensable parties. See Stendahl v. Cobb County, 284 Ga. 525, 529 (2) (668 SE2d
723) (2008) (where existing party presents a thorough case on behalf of itself and the
non-party, the non-party “does not fit within the definition of ‘indispensable party’
10
because the case could be decided on its merits without prejudicing the rights of the
[non-party]”); Halta, 219 Ga. App. at 179-180 (1) (trial court did not err in denying
motion for directed verdict for failure to add indispensable parties when one of the
non-parties testified at trial and defendant’s ability to present relevant testimony and
evidence was not affected by whether they were parties to action).
(b) There was at least some evidence to support the jury’s verdict on EMM
Credit’s declaratory judgment claim.
Neither a directed verdict nor a j.n.o.v. can be granted where there is
some evidence to support the verdict. Where evidence is in conflict, the
grant of such motions is error. Only when there is no evidence to
support the verdict can either a directed verdict or j.n.o.v. be granted,
because the evidence demands a verdict contrary to that returned by the
jury.
(Citations omitted.) Rental Equip. Group, LLC v. MACI, LLC, 263 Ga. App. 155, 157
(1) (a) (587 SE2d 364) (2003).
Appellees argue that no evidence supports this claim because EMM Credit has
failed to cite to any documents or testimony showing that Remington was issued
stock certificates in ANHC. But “one may have an ownership interest in a corporation
without having received stock certificates.” Kueffer Crane & Hoist Svc., Inc. v.
11
Passarella, 247 Ga. App. 327, 329 (2) (543 SE2d 113) (2000). And there is at least
some evidence to support the jury’s determination that Remington is the true owner
of ANHC, including, inter alia, the closing documents, the participants at closing,
Remington’s potential liability on behalf of ANHC after the closing, the arguably
dubious nature of the testimony regarding funding for the purchase of the Property,
and the arguably suspicious timing of and explanation for the re-creation of the
missing or lost or stolen stock ledger and stock certificates. See Halta, 219 Ga. App.
at 180 (2) (plaintiff introduced sufficient evidence from which a jury could conclude
that corporation was formed only to serve as a means by which to fraudulently
transfer assets). “The countervailing evidence, [even if substantial], could be
disbelieved by the jury and did not authorize the court to grant a directed verdict.”
Teklewold v. Taylor, 271 Ga. App. 664, 667 (1) (b) (610 SE2d 617) (2005).6
Accordingly, the trial court erred in determining that EMM Credit had failed to join
indispensable parties and in granting a directed verdict or judgment notwithstanding
the verdict on EMM Credit’s declaratory judgment claim on that basis.7
6
The jury was instructed that it must use common sense and reason to decide
what testimony to believe or not to believe.
7
Relying on OCGA § 9-4-7 (a), which provides that “[n]o declaration shall
prejudice the rights of persons not parties to the proceeding,” appellees also argue
12
2. EMM Credit contends that the trial court erroneously refused to admit a
videotaped deposition of an Allstate representative, Allstate’s closing binder, and/or
a fully executed First Addendum to the Purchase and Sale Agreement between
Allstate and Remington, without the phrase “wholly owned by Buyer” marked
through. EMM Credit argues that this evidence was critical to its case because it
shows that the parties did not strike through the phrase “wholly owned by Buyer” in
the First Addendum and is therefore dispositive as to Remington’s ownership of
ANHC and the fact that Tony and Gino have no interest in the company and are not
indispensable parties. Given our determination in Division 1 that the trial court erred
in granting a directed verdict or judgment notwithstanding the verdict on EMM
Credit’s “true owner” claim, we need not reach this issue.
3. EMM Credit contends that the trial court erred by determining that its
fraudulent transfer claim was not assignable.
that EMM Credit was precluded as a matter of law from declaring the shares
belonging to Gino and Tony invalid. As set forth above, however, Gino and Tony
were not prejudiced by not being added as parties to this action. And the jury’s
determination that Remington was the sole owner of ANHC necessarily required that
it disbelieve the evidence that Gino and Tony actually owned any interest in the
corporation.
13
In its Second Amended and Restated Complaint, EMM Credit alleged that the
1996 conveyance of the Property from Remington to ANHC was fraudulent and
sought to set it aside. At the time the initial complaint was filed, the Georgia Uniform
Fraudulent Transfers Act, OCGA § 18-2-70 et seq. (the “UFTA”), provided that “[a]
transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether
the creditor’s claim arose before or after the transfer was made or the obligation was
incurred, if the debtor made the transfer or incurred the obligation . . . [w]ith actual
intent to hinder, delay, or defraud any creditor of the debtor.” OCGA § 18-2-74 (a)
(1) (2003). Under the UFTA, a “creditor” is “a person who has a claim,” a “debtor”
is “a person who is liable on a claim,” and a “claim” is “a right to payment, whether
or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.”
OCGA § 18-2-71 (3), (4), (6) (2003). There is no dispute that NCom would qualify
as a “creditor” and Remington would qualify as a “debtor,” but the applicable version
of the UFTA does not specifically address the assignment of claims.8
8
The UFTA was amended in 2015 and is now called the Uniform Voidable
Transactions Act. See Ga. L. 2015, pp. 996, 1019, § 4A-1. The UVTA now defines
“creditor” as “a person who has a claim, regardless of when the person acquired the
claim, together with any successors or assigns.” OCGA § 18-2-71 (4). In addition,
OCGA § 18-2-74 added a subsection (c), which provides that “[i]f a creditor is a
14
OCGA § 44-12-24 provides that “a right of action is assignable if it involves,
directly or indirectly, a right of property. A right of action for personal torts, for legal
malpractice, or for injuries arising from fraud to the assignor may not be assigned.”
In Security Feed & Seed Co. of Thomasville v. Ne Smith, 213 Ga. 783 (102 SE2d 37)
(1958), the Supreme Court of Georgia construed an earlier version of this statute and
held that an assignee of accounts receivable could not maintain an action to set aside
an alleged fraudulent deed made prior to the date the accounts receivable were
assigned. Id. at 783-784 (1). In RES-GA Hightower, LLC v. Golshani, 334 Ga. App.
176 (778 SE2d 805) (2015), this Court determined that the UFTA had not displaced
Ne Smith’s construction of the statute and held that “an assignee of debt is precluded
from pursuing a fraudulent transfer claim even though the assignee meets the
definitions of a “creditor” with a “claim” under the UFTA.” Id. at 180 (1) (a). And in
Merrill Ranch Properties, LLC v. Austell, 336 Ga. App. 722 (784 SE2d 125) (2016),
a case “factually indistinguishable” from Golshani “insofar as both involve standing
to assert a fraudulent transfer claim based on the assignment of a debt,” this Court
successor or assignee, a right of action under subsection (a) of this Code section is
automatically assigned to such successor or assignee.” These amendments apply to
transfers made or obligations incurred on or after July 1, 2015. See Ga. L. 2015, pp.
996, 1029, § 7-1 (d).
15
held that an assignee of a loan lacks standing under the UFTA to contest property
transfers that occurred prior to the assignment. Id. at 732 (3).
Relying on Golshani, Merrill Ranch, and Ne Smith, the trial court granted the
motion for directed verdict on EMM Credit’s fraudulent transfer claim. EMM Credit
contends that those cases are distinguishable because they involve the assignment of
a debt and this case involves the assignment of a judgment, and that the applicable
statute is not OCGA § 44-12-24, but OCGA § 9-12-21, which provides that
[a] person in whose favor a judgment has been entered or a person to
whom a judgment has been transferred may bona fide and for a valuable
consideration transfer any judgment to a third person. In all such cases
the transferee of any judgment shall have the same rights and shall be
subject to the same equities and to the same defenses as was the original
holder of the judgment.
Although Golshani did not involve the assignment of a judgment, this Court
responded to attempts to distinguish Ne Smith on that basis by stating that the case
did not turn on whether the assignee had obtained a judgment because “the key
inquiry for the Court appeared to be the equitable nature of the claim and its basis in
fraud, rather than the source of the creditor’s rights vis-à-vis the debtor.” Golshani,
334 Ga. App. at 180 (1) (a). Golshani has recently been extended to a situation where
16
a creditor was assigned the rights to collect on a judgment, and this Court held that
the creditor’s UFTA claim seeking to set aside a property transfer was unassignable
for the reasons set forth in Golshani. See Callaway Blue Springs, LLLP v. West Basin
Capital, LLC, 341 Ga. App. 535, 540 (1) (801 SE2d 325) (2017); see also RES-GA
Loganville, LLC v. Panola Crossings, LLC, No. A17A0382 at *9 (August 28, 2017)
(unpublished) (“Golshani makes clear that the rule against the assignment of
fraudulent conveyance claims does not turn on whether the assignee has rights
flowing from a judgment rather than the underlying loan documents”). And in a very
recent decision, the Supreme Court of Georgia expressly agreed “with the reasoning
of the Court of Appeals in Golshani, Callaway, and Merrill, that our decision in Ne
Smith correctly stated the law [regarding an assignee’s ability to pursue a fraudulent
transfer claim] until it was changed by the enactment of [the] UVTA . . . .” RES-GA
McDonough, LLC v. Taylor English Duma LLP, ___ Ga. ___ (1) (No. S17A1125;
October 30, 2017). Based on existing authority, we are compelled to uphold the trial
court’s ruling on EMM Credit’s fraudulent transfer claim.
EMM Credit also contends that appellees have waived their right to challenge
standing because they failed to object to a motion to substitute under OCGA § 9-11-
25 (c). EMM Credit is correct that appellees have waived any right to challenge EMM
17
Credit’s substitution as a party to this litigation because that issue was resolved in a
prior appeal. See American Nat. Holding Corp. v. EMM Credit, LLC, 323 Ga. App.
655, 659 (2) (756 SE2d 1) (2013) (“when the trial court explicitly afforded the parties
opportunity to be heard on the [substitution] motion, American National advised the
court that it had ‘no objection to EMM substituting in as NCOM’”). But OCGA § 9-
11-25 (c) “is a procedural rule and does not alter the substantive rights of the parties
or the successor corporation.” Nat. City Mtg. Co. v. Tidwell, 293 Ga. 697, 700 (2)
(749 SE2d 730) (2013). Nor does it “automatically authorize the continuance of an
original action in all cases following the transfer of an interest. If a cause of action
does not survive a subsequent transfer of interest, OCGA § 9-11-25 (c), standing
alone, would not revive it.” Gene Thompson Lumber Co. v. Davis Parmer Lumber
Co., 189 Ga. App. 573, 575 (3) (a) (377 SE2d 15) (1988). We have determined, based
on existing authority, that NCom’s fraudulent transfer claim did not survive the
assignment of the California judgment. EMM Credit’s substitution as plaintiff under
OCGA § 9-11-25 (c) cannot revive it. See id.
EMM Credit contends that Appellees consented to the transferability of
NCom’s rights in a 1997 Settlement Agreement involving all parties to this appeal.
Specifically, EMM Credit relies on two components of the agreement – If NCom is
18
successful in this case, it can levy on the Property, and the agreement is binding on
NCom’s successors and assigns. Because EMM Credit will not be successful on its
fraudulent transfer claim in this appeal, we need not consider this contention.
Judgment affirmed in part, reversed in part. Ellington, P. J., and Andrews, J.,
concur.
19