STEWART AUSBAND ENTERPRISES, INC. D/B/A SERVPRO OF NORCROSS v. CARL HOLDEN

FOURTH DIVISION
DILLARD, C. J.,
DOYLE, P. J., and MERCIER, J.
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
March 8, 2019
In the Court of Appeals of Georgia
A18A1758. STEWART AUSBAND ENTERPRISES, INC. v. DO-065
HOLDEN et al.
A18A1759. PITTMAN v. STEWART AUSBAND ENTERPRISES, DO-066
INC.
DOYLE, Presiding Judge.
Stewart Ausband Enterprises, Inc., d/b/a Servpro of Norcross (“Ausband”) sued
Carl Holden; Holden Properties of Georgia, LLC; Holdpro, LLC (collectively, the
“Holden Defendants”); James Pittman; and Pittman and Holden d/b/a Servpro of
Northeast Greenville Franchise # 10069 (“Servpro Greenville”).1 A default judgment
1
The complaint uses “Servpro Greenville” as a trade name for Holden and
Pittman. “A trade name is merely a name assumed or used by a person recognized as
a legal entity. A judgment against one in an assumed or trade name is a judgment
against him as an individual. An undertaking by an individual in a fictitious or trade
name is the obligation of the individual.” Auto-Owners Ins. Co. v. Tracy, 344 Ga.
App. 53, 55 (1) (806 SE2d 653) (2017). “The use of a trade name does not create a
separate legal entity.” Galindo v. Lanier Worldwide, 241 Ga. App. 78, 84 (3) (526
was entered against all defendants, but after further proceedings, the trial court
vacated that order, dismissed Pittman, and ruled that Ausband could not recover
damages from the remaining defendants. In Case No. A18A1758, Ausband appeals,
contending that the trial court erred by (1) ruling that the original damages award was
not supported by the record, (2) ruling that damages were unavailable because
Ausband failed to demonstrate how to apportion fault among the defendants, and (3)
setting aside the default judgment more than three years after it was entered. In Case
No. A18A1759, Pittman filed a conditional cross-appeal, contending that the trial
court erred by denying his motion to set aside the default judgment for lack of
personal jurisdiction over him. For the reasons that follow, we affirm in part and
reverse in part in Case No. A18A1758, and we dismiss as moot Pittman’s appeal in
Case No. A18A1759.
The facts necessary to the appeal are not disputed. The record shows that in
July 2012, Ausband filed a verified complaint against the defendants asserting claims
for theft/conversion, fraud, breach of the duty of loyalty, unjust enrichment, Georgia
SE2d 141) (1999). Therefore, consistent with the terminology of the complaint, we
do not treat Servpro Greenville as a separate corporate entity.
2
RICO (Racketeer Influenced and Corrupt Organizations) Act2 violations, punitive
damages, and attorney fees. In general terms, the complaint alleged that Holden (an
employee of Ausband) and Pittman stole or otherwise diverted money from Ausband.
Holden, Holden Properties, Holdpro, and Holden d/b/a Servpro Greenville made a
special appearance contesting jurisdiction and venue; Pittman failed to file an answer.
Ausband moved for entry of a default judgment as to Pittman , and after Holden failed
to respond to discovery requests, Ausband moved for sanctions and to strike his
answer.
In October 2014, the trial court entered a default judgment against Pittman as
to liability. In March 2016, after the Holden Defendants continued to fail to
participate in discovery or appear as ordered by the court, the court struck the Holden
Defendants’ answer and entered a default judgment as to liability.
In May 2016, following a hearing at which no defendant appeared, the trial
court entered a judgment in favor of Ausband for $51,418.29 in principal damages
with additional treble and punitive damages for a total award of $519,061.63.
2
OCGA § 16-14-1 et seq.
3
In December 2016, Pittman and the Holden Defendants moved to set aside the
default judgments against them under OCGA § 9-11-60 (d) (3).3 In May 2017,
following a hearing, the trial court entered an order finding no jurisdictional defects
as to the defendants,4 but setting aside the May 2016 judgment for a non-amendable
defect on the ground that treble damages were entered erroneously without adequate
support by the evidence or specificity in the verified complaint as to the principal
judgment amount. Therefore, the court set aside the default judgment and set the case
for a re-hearing on damages.
In February 2018, after a November 2017 damages hearing, the trial court
vacated the May 2016 damages award against Pittman on the ground that the record
lacked sufficient factual allegations or evidence to support the award against him;
found only $5,960.63 in damages admitted by default against the Holden Defendants;
found no evidence to support apportionment under OCGA § 51-12-33; and denied the
availability of RICO treble damages as well as punitive damages and attorney fees.
Based on these rulings, the trial court concluded that Ausband was not entitled to any
3
Pittman also challenged the trial court’s personal jurisdiction over him based
on a lack of service. He argued that he had never been served and had no knowledge
of the suit.
4
Pittman challenges this aspect of the order in Case No. A18A1759.
4
damages. Ausband unsuccesfully moved to set aside the order, and these appeals
follow.
Case No. A18A1758
1. In this case, Ausband challenges the trial court’s order first by arguing that
the initial damages award was authorized by the record and any defects in the award
were amendable, so it was error to vacate the award.5 Specifically, Ausband argues
that pre-judgment interest and attorney fees were properly trebled, and if they were
not, the trial court should have re-calculated the award instead of vacating it.
“Because this question is a legal one, we review the record de novo and apply a plain
legal error standard of review.”6
(a) Defects in damages award. The May 2016 order awarded damages as
follows:
5
As stated in his appellate brief, Ausband’s first enumeration appears to
challenge the timeliness of the court’s order, but his argument more specifically goes
to the substance. Despite this discrepancy, Ausband’s brief does not impermissibly
expand his enumeration, so we endeavor to address the merits of his argument. Cf.
Felix v. State, 271 Ga. 534, 539 n.6 (523 SE2d 1) (1999) (“[A]n appealing party may
not use its brief to expand its enumeration of errors by arguing the incorrectness of
a trial court ruling not mentioned in the enumeration of the errors.”).
6
Kitchen Intl., Inc. v. Evans Cabinet Corp., 310 Ga. App. 648, 653 (714 SE2d
139) (2011).
5
Principal Damages: $51,418.29
Interest: $13,658.08
Attorney Fees: $21,692.12
Expenses: $2,918.72
Subtotal: $89,687.21
Treble Damages: $269,061.63
Punitive Damages: $250,000
Total: $519,061.63
After this award was set aside, a hearing on damages was conducted, and
Ausband essentially relied on the existing record — the verified complaint and
attached checks allegedly showing funds converted by the defendants. Based on this
record, the trial court ultimately concluded that the damages Ausband sought had not
been proved properly. The court found that the damages were unliquidated and
required support by adequate evidence, there was no evidence as to apportionment,
and all but one check (“Exhibit F” for $5,960.63) attached to the complaint were part
6
of certain claims stemming from alleged thefts that Ausband had abandoned because
they otherwise were settled by restitution in other proceedings.
Further, the court pointed out that Ausband sought recovery under multiple
theories — theft/conversion, fraud, breach of the duty of loyalty, unjust enrichment,
and RICO violations — and neither the verified complaint nor the principal damages
award broke down the award by claim. Accordingly, because treble damages were
only available under RICO,7 the trial court ruled that a basis for treble damages had
not been proved.
Challenging this ruling, Ausband’s appellate brief focuses on attorney fees and
pre-judgment interest, asserting that they were appropriately included in the trebling
calculation. Pretermitting whether that is true,8 Ausband makes no argument about
7
See OCGA § 16-14-6 (c) (“Any person who is injured by reason of any
violation of [OCGA §] 16-14-4 shall have a cause of action for three times the actual
damages sustained and, where appropriate, punitive damages. Such person shall also
recover attorney’s fees in the trial and appellate courts and costs of investigation and
litigation reasonably incurred. . . .”).
8
Ausband relies on Earthlink, Inc. v. Carmack, Case No. 1:03-CB-3041-TWT
2003 U. S. Dist. Lexis 9963 (decided My 7, 2003), to argue that the Georgia RICO
statute authorizes trebling an attorney fee award. But neither that case (which is dicta
on this point) nor Ausband’s brief addresses the specific language in the Georgia
RICO statute, which differs from the Federal RICO statute. Compare OCGA § 16-14-
6 (c) with 18 USC § 1964 (c). Although we do not decide the issue in this case, it is
not a foregone conclusion that the language of the Georgia RICO statute supports the
7
the crux of the trial court’s reasoning, i.e., that an evidentiary hearing on damages
was required, and the record does not otherwise demonstrate the full amount of
liquidated damages, nor which portion of the principal damages are attributable to
RICO violations and therefore subject to trebling. Ausband had the opportunity to
offer more proof at the second hearing on damages, but it essentially relied on the
verified complaint and attached exhibits.
OCGA § 9-11-55 (a) provides that in the event of a default, the
plaintiff shall be entitled to a verdict and judgment as if every allegation
of the complaint were supported by proper evidence without the
intervention of a jury, unless the action is one in tort or involves
unliquidated damages, in which event the plaintiff shall be required to
introduce evidence and establish the amount of damages before the court
without a jury, with the right of the defendant to introduce evidence as
trebled award in this case: “Any person who is injured by reason of any violation of
[the Georgia RICO statute] shall have a cause of action for three times the actual
damages sustained and, where appropriate, punitive damages. Such person shall also
recover attorney[] fees in the trial and appellate courts and costs of investigation and
litigation reasonably incurred.” Cf. Darden v. Ford Consumer Finance Co., 200 F.3d
753, 758 (III) (B) (11th Cir. 2000) (“[T]he plain language of section 16-14-6 (c)
makes it clear that the statutory award of attorney[] fees represents a separate and
distinct interest awarded to compensate each injured plaintiff individually.”).
8
to damages and the right of either to move for a new trial in respect of
such damages.9
[A] bare allegation that an amount certain is due and owing[, for
example,] under a contract [or invoice] for goods or services is
insufficient to render the damages liquidated for purposes of default. For
the [trial] court to conclude upon default that damages are liquidated and
dispense with an evidentiary hearing on damages, the plaintiff must have
alleged facts sufficient to show how the amount of damages claimed was
calculated, or the plaintiff must attach to his complaint the relevant
contract, invoices, or other documents demonstrating that the plaintiff
is due the amount claimed. Put another way, both the amount of the
damages and that the amount is fixed and certain must be ascertainable
from the complaint and the documents attached to it, and not merely by
reference to allegations of bare conclusions. The mere fact that a
defendant defaulted upon a complaint [specifying] damages in an
amount certain does not make the damages liquidated.10
The trial court correctly ruled that there was only one exhibit showing an
amount of damages sought by Ausband, i.e., Exhibit F for $5,960.63. The verified
9
(Citations and punctuation omitted.) BellSouth Advertising & Publishing
Corp. v. Kingdom Adventures, LLC, 277 Ga. App. 495, 495-496 (1) (627 SE2d 125)
(2006).
10
(Citations and punctuation omitted.) Kitchen Intl., Inc., 310 Ga. App. at
653-654 (2).
9
complaint contained certain other allegations not supported by documentation: a false
insurance claim check from State Farm for $37,776.04 ; a diverted cash payment of
$805.98 from Jonella Hawn; a diverted check from Textile Restorations for $3,376.27
; and an improperly received cash payment of $2,000 from Rochelle Lewis .
Nevertheless, “[t]he conclusory allegations of the amount owed were not sufficient
to render the damages liquidated [and therefore recoverable without support in an
evidentiary hearing.11] Otherwise[,] every case where a specific amount is stated in
the complaint as due and owing would be turned into a liquidated amount by the
default.”12 This is true even if the complaint is verified and alleges a certain amount
owed.13 Therefore, the only principal damage award supported by the record was the
11
See Kingdom Adventures, LLC, 277 Ga. App. at 496 (1) (the defendant’s
“default alone was insufficient to convert [the plaintiff]’s damages into a liquidated
claim” recoverable on the pleadings alone).
12
(Punctuation omitted.) Mitchell v. Gilwil Group, Inc., 261 Ga. App. 882, 886
(2) (583 SE2d 911) (2003). See also Kitchen Intl., Inc., 310 Ga. App. at 653-654 (2);
Carter v. Ravenwood Dev. Co., 249 Ga. App. 603, 606 (2) (549 SE2d 402) (2001).
13
See GMC Group, Inc. v. Harsco Corp., 304 Ga. App. 182, 183 (1) (695 SE2d
702) (2010) (reversing trial court ruling that damages were liquidated even if the
plaintiff “alleged a specific damages amount in its verified complaint on account” and
holding that the failure to prove damages is a nonamendable defect in the judgment).
10
$5,960.63 amount reflected in the check attached to the complaint as Exhibit F. To
the extent that the trial court ruled otherwise, it erred.
(b) Trebling under RICO. In light of our conclusion that only a single instance
of damages was supported by the record, the trial court did not err by rejecting treble
damages under RICO. To demonstrate a RICO violation, a plaintiff must “show an
injury by a pattern of racketeering activity. A pattern requires at least two interrelated
predicate offenses.”14 Because there was only evidence of a single well-pleaded
alleged RICO offense (unlawfully depositing the $5,960.63 check), Ausband failed
to demonstrate a RICO violation that would authorize treble damages.15
2. Ausband next argues that the trial court erred by ruling that the lack of
evidence supporting apportionment was fatal to recovering any damages at all. Under
the circumstances resulting from our conclusion in Division 1, we agree.
14
(Citations omitted.) Brown v. Freedman, 222 Ga. App. 213, 217 (3) (474
SE2d 73) (1996). See also Mbigi v. Wells Fargo Home Mtg., 336 Ga. App. 316, 322
(2) (785 SE2d 8) (2016) (physical precedent only).
15
See Smith v. Chemtura Corp., 297 Ga. App. 287, 292 (4) (676 SE2d 756)
(2009) (finding no RICO violation because the claim was based on a single unlawful
transaction).
11
It is the defendants’ burden to establish a basis for apportionment, and it is the
factfinder’s role to assign fault accordingly.16 Here, the award is proved only by the
allegations in the complaint, i.e., that Holden acted “in concert with” Holden
Properties, LLC, and Holdpro, LLC, to unlawfully deprive Ausband of the $5,960.63
check. These defendants offered no evidence as to apportionment, so there was no
basis to apportion the award among them or to any other party. Accordingly, the
evidence supported an award jointly against Holden, Holden Properties, and Holdpro;
and the trial court erred by holding otherwise.
3. Ausband also argues that the trial court lacked authority to set aside the
damages award more than three years after the default judgment. We disagree.
(a) Timeliness of order setting aside the damages award. The trial court entered
the default judgment as to liability against Pittman in October 2014 and against the
Holden Defendants in March 2016. It entered the first judgment awarding damages
in May 2016. In May 2017, the trial court set aside the May 2016 damages award as
16
See Brown v. Tucker, 337 Ga. App. 704, 716 (4) (788 SE2d 810) (2016)
(“The affirmative defense that the jury should apportion fault against someone other
than the defendant is no different analytically from the defense of contributory
negligence. Once the plaintiff establishes her prima facie case, the defendant seeking
to establish that someone else bears responsibility for the damages has the burden of
proving that defense.”). Cf. Johnson Street Properties, LLC v. Clure, 302 Ga. 51, 58
(1) (b) (805 SE2d 60) (2017).
12
to all defendants based on the lack of a record supporting a damages award and ruled
that a hearing on damages must be held. After a hearing on damages in which all
parties participated, the trial court entered an order in February 2018 dismissing
Pittman and setting aside the damages award against the Holden Defendants.
Under OCGA § 9-11-60 (d) (3), “[a] motion to set aside may be brought to set
aside a judgment based upon . . . [a] nonamendable defect which appears upon the
face of the record or pleadings. . . .” Such a motion need not be filed in the same term
of court, but it must be filed within three years of the entry of the challenged
judgment as required by OCGA § 9-11-60 (f).17
As noted above, the May 2016 damages award was unauthorized by the record,
and as such constituted a nonamendable defect.18 The trial court set aside that award
in 2017 and held a hearing; in 2018, the trial court entered the final order in this case
dismissing Pittman and denying damages to Ausband. Because the 2017 and 2018
orders were entered within three years after the May 2016 damages award, they were
17
See Wright v. Archer, 210 Ga. App. 607, 608 (2) (436 SE2d 775) (1993) (“It
has long been the rule in Georgia that a motion to set aside a judgment based upon
lack of jurisdiction or because a non-amendable defect is apparent on the face of the
record can be filed outside of the court term in which the judgment was rendered.”).
18
See GMC Group, Inc., 304 Ga. App. at 183 (1).
13
not time barred by OCGA § 9-11-60 (f). With respect to Pittman, the original default
judgment against him was entered in October 2014, and the trial court set aside the
damages award as to Pittman in the May 2017 order, which also was within three
years of the default judgment against Pittman.
Put more simply, in all of these cases, the challenged judgment was the entry
of the May 2016 damages award. The deadline in OCGA § 9-11-60 (f) applies to
“entry of the judgment complained of.”19 Even if the defendants could not set aside
the entry of default against them (and the effect of any well-pleaded allegations), the
default against each defendant was entered with the amount of damages to be
determined after a future hearing, with the burden on the plaintiff to perfect the record
as to the damages they sought. Because the trial court’s 2018 order setting aside the
judgment as to damages was within three years of the 2016 damages award, the 2018
order was not untimely.20
19
(Emphasis supplied.)
20
See Willett Lincoln-Mercury, Inc. v. Larson, 158 Ga. App. 540, 541 (2) (281
SE2d 297) (1981).
14
(b) Sufficiency of Pittman allegations. Ausband also challenges the trial court’s
conclusion that the complaint lacks well-pleaded facts that, when deemed true or
admitted, demonstrate liability on the part of Pittman.
[I]t is axiomatic that a default does not result in the admission of
allegations that are not well-pled or that are the result of forced
inferences. The failure to answer or to appear at trial serves as an
admission of the facts alleged in the complaint, but not of the
conclusions of law contained therein. So while a default operates as an
admission of the well-pled factual allegations in a complaint, it does not
admit the legal conclusions contained therein. A default simply does not
require blind acceptance of a plaintiff’s erroneous conclusions of law.
Nor does a default preclude a defendant from showing that under the
facts as deemed admitted, no claim existed which would allow the
plaintiff to recover.21
A review of the complaint reveals that it makes specific factual allegations as
to the Holden defendants, detailing how Holden diverted checks from Servpro of
Norcoss for his personal gain, but it does not contain specific allegations that Pittman
himself took part in any of the enumerated thefts. Each cause of action
(theft/conversion; fraud and deceit; breach of duty of loyalty; RICO) is predicated on
21
(Punctuation omitted.) Blue View Corp. v. Bell, 298 Ga. App. 277, 278-279
(1) (679 SE2d 739) (2009).
15
alleged conduct undertaken by Holden or his corporate entities but not by Pittman.
The bare conclusion that Pittman was part of a scheme does not follow from the facts
well pleaded. Accordingly, the trial court did not err by dimissing Pittman.
In sum, we affirm the trial court’s judgment except to the extent that it denied
damages of $5,960.63 as supported by Exhibit F and the relevant allegations against
Holden, Holden Properties, and Holdpro. Ausband does not challenge the trial court’s
ruling that attorney fees and punitive damages were not supported by the record, so
those rulings stand affirmed.22
Case No. A18A1759
In light of our ruling above affirming the trial court’s dismissal of Pittman,
Pittman’s cross-appeal is dismissed as moot.
Judgment in Case No. A18A1758 affirmed in part and reversed in part. Case
No. A18A1759 dismissed. Dillard, C. J., and Mercier, J., concur.
22
See Cotton v. Smith, 310 Ga. App. 428, 429 (1) (714 SE2d 55) (2011) (ruling
that because the appellant failed to assert any error as to a specific ruling in the trial
court’s order, any error as to that ruling was deemed abandoned, and that ruling was
affirmed by operation of law). See also Court of Appeals Rule 25 (c) (2).
16