Adler v. Hertling, s. A94A1831-A94A1834

• Citation: 451 S.E.2d 91,215 Ga.App. 769
• Decision Date: 18 November 1994
• Docket Number: Nos. A94A1831-A94A1834,s. A94A1831-A94A1834
• Parties: ADLER et al. v. HERTLING et al. ROGERS v. HERTLING et al. STONE HARBOR LTD. PARTNERSHIP v. HERTLING et al. HERTLING et al. v. STONE HARBOR LTD. PARTNERSHIP et al.
• Court: United States Court of Appeals (Georgia)

Page 91

451 S.E.2d 91

215 Ga.App. 769

ADLER et al. v. HERTLING et al.

ROGERS v. HERTLING et al.

STONE HARBOR LTD. PARTNERSHIP v. HERTLING et al.

HERTLING et al. v. STONE HARBOR LTD. PARTNERSHIP et al.

Nos. A94A1831-A94A1834.

Court of Appeals of Georgia.

Nov. 18, 1994.

Reconsiderations Denied Dec. 19, 1994.

Mark S. Vanderbroek, William Loeffler, Ralph H. Greil, Troutman Sanders, Mark A. Kelley, Stephen V. Kern, Kitchens, Kelley & Gaynes, P.C., Lawrence A. Rosenbluth, Atlanta, for Adler and Stone Harbor.

J. Steven Parker, Robert D. Terry, Parker, Terry & Center, Decatur, for Hertling.

POPE, Chief Judge.

Plaintiff Julius Hertling is a limited partner in Sahara Club/Desert Village Associates Limited Partnership ("Sahara Club"), which was formed to own and operate Regency Park apartments in Atlanta. Hertling brought suit, individually and on behalf of Sahara Club, against Stone Harbor Limited Partnership ("Stone Harbor") and Stone Harbor's individual limited partners, Jerome Adler, Richard Adler, Thomas Adler and Sheldon Rogers (collectively referred to as the "Limited Partners"). Stone Harbor was formed to own and operate Stone Harbor Townhouses in Atlanta. In the first amended complaint, Hertling asserts claims against Stone Harbor and the Limited Partners for conversion pursuant to OCGA § 14-8-14, for money had and received, on open account, and for common law conversion. Hertling also asserts a claim for constructive trust against Stone Harbor and the Limited Partners and a claim for attorney fees. It is undisputed that both Stone Harbor and Sahara Club shared a common general partner, Jules Aaronson. It is also undisputed that Stone Harbor and Sahara Club's apartment communities were both managed by Jason Property Management Company ("Jason"), another entity in which Jules Aaronson had a financial interest.

On or about December 1, 1987, Sahara Club refinanced its Regency Apartment real estate. As a result of this refinancing Sahara Club received net proceeds of approximately $2.8 million. It is undisputed that these proceeds were deposited into Sahara Club's operating account number 000000141-4 ("Account 141-4") at First American Bank on December 1, 1987. Bank records show that on December 9, 1987, $1,808,777.71 of the refinancing proceeds were transferred from Account 141-4 to another account at First American, numbered 0000000301-8, and known as the "Jason Property Management Trust Account" ("Account 301-8"). The record shows that Jason set up Account 301-8 so that funds belonging to various entities it managed could be aggregated for placement into overnight investments and then returned, with interest, to the individual entities that contributed the funds. In order to facilitate these overnight investments, Jason and various entities it managed, including Sahara Club, entered into an "Investo-Matic Agreement" with First American Bank. Paragraph 15 of the Investo-Matic Agreement specifically states that: "Company and Owners agree that all funds in the various accounts of the Communities are to be held by Company in escrow for the benefit only of the Community from which the funds were derived...." (Emphasis supplied.) The Investo-Matic Agreement was signed by Jason's president, by a representative of the bank and by Jules Aaronson, as a general partner of the other entities, which included Sahara Club. Stone Harbor was not a party to the Investo-Matic Agreement.

On December 9, 1987, the same day Sahara Club transferred the abovementioned portion of its refinancing proceeds to Account 301-8, the record shows that Jules Aaronson, acting as general partner of Stone Harbor and on its behalf, caused $1,998,531.52 to be distributed from Account 301-8, by wire, to the Limited Partners. It is undisputed that these distributions were made to the Limited Partners because of their contributions to Stone Harbor. Two wire transfers were made. The first transfer of $477,983.57 was sent to defendant Sheldon Rogers. The second transfer of $1,520,547.95 was sent to defendant Thomas Adler for his own benefit and for the benefit of Jerome Adler and Richard Adler. Of the total amount wired to Thomas Adler, the record shows that he kept $980,110.95 and distributed $270,219 to Richard Adler and $270,219 to Jerome Adler.

First American Bank's records show that at the beginning of the day on December 9, 1987, Account 301-8 had a balance of $530,321.91. The bank records also show that on that day a total of $1,945,341.34 was deposited into Account 301-8, $1,808,777.71 of which was comprised of Sahara Club refinancing proceeds, and $136,563.63 of which consisted of funds from other entities. Hertling contends that based on the above, at least $1,331,645.98 of the total $1,998,531.52 transferred to Stone Harbor and the Limited Partners necessarily consisted of money belonging to Sahara Club.

Hertling filed suit against Stone Harbor and the Limited Partners on behalf of Sahara Club pursuant to OCGA § 14-8-37, as a partner who had not wrongfully dissolved the partnership and, in the alternative, requested that the trial court wind up the affairs of Sahara Club in accordance with said statute. The Limited Partners filed a motion to dismiss the complaint for failure to join indispensable parties. The trial court denied the motion. Stone Harbor and the Limited Partners then filed a motion to dismiss the complaint for failure to state a claim, or in the alternative, for summary judgment. Subsequently, Hertling filed a motion for partial summary judgment on behalf of Sahara Club as to the statutory conversion claim under OCGA § 14-8-14, the common law conversion claim and the constructive trust claim.

On January 7, 1994, a hearing was held on the parties' cross motions for summary judgment. Upon conclusion of the hearing the trial court granted summary judgment to Hertling and Sahara Club as to the conversion claims and denied Stone Harbor and the Limited Partners' summary judgment motion. The trial court delayed ruling on whether Sahara Club was entitled to interest from the date of the conversion and whether $290,000 that Hertling received in a settlement of a federal court lawsuit against Sahara Club, Jules Aaronson, Jason and other parties, should be set-off against any monies recovered on the conversion claims in this case. On January 27, 1994, Stone Harbor and the Limited Partners filed a request for reexamination of the trial court's ruling as to summary judgment. On that date, they also filed the affidavit of Jerrell Rosenbluth, with attached exhibits, and the Limited Partners filed third party complaints. Hertling and Sahara Club moved to strike the Rosenbluth affidavit and the third party complaints as untimely.

By order dated February 24, 1994, the trial court set forth in detail its ruling with regard to the grant of summary judgment to Hertling and Sahara Club. The trial court found that no issue of material fact existed as to liability based on the conversion claims and that not less than $1,331,645.98 of the total $1,998,531.52 transferred to the Limited Partners consisted of funds belonging to Sahara Club. Additionally, the trial court determined that the Limited Partners' liability was established by operation of OCGA § 14-9A-48, which states that "[a] limited partner holds as trustee for the partnership: ... [m]oney or other property wrongfully paid or conveyed to him on account of his contribution." Consequently the trial court entered judgment against Stone Harbor in the amount of $1,331,645.98 and judgment against the Limited Partners in the following amounts: Thomas Adler, $980,110.95; Sheldon Rogers, $477,983.57; Richard Adler, $270,219; and Jerome Adler, $270,219. The court also ordered that the judgment could be enforced severally against Stone Harbor and the Limited Partners until the total amount of the judgment against Stone Harbor, together with post judgment interest from the date of the order, was satisfied. The court rejected the argument that the $290,000 received by Hertling in the settlement of his federal lawsuit should be set off against any recovery on the conversion claims, noting that the federal lawsuit involved different parties and different causes of action. Furthermore, the trial court, pursuant to OCGA § 7-4-15, denied Hertling and Sahara Club's request for prejudgment interest on the ground that the damages in the case were unliquidated as the amount of damages was in dispute.

In its February 24, 1994 order, the trial court also denied Stone Harbor and the Limited Partners' request for reexamination of the court's proposed ruling as to the grant of partial summary judgment to Hertling and Sahara Club. Additionally, the trial court granted Hertling and Sahara Club's motion to strike the Rosenbluth affidavit, and dismissed the Limited Partners' third party complaints without prejudice.

Jerome Adler, Richard Adler and Thomas Adler appealed from the trial court's February 24, 1994 order and from the denial of their motion to dismiss for failure to join indispensable parties. Their appeal was docketed in this court as case number A94A1831. Sheldon Rogers' appeal, which is based on the same grounds as the Adlers' appeal, was docketed in this court as case number A94A1832. Stone Harbor's appeal of the trial court's February 24, 1994 order was docketed in this court as case number A94A1833. In case number A94A1834, Hertling and Sahara Club appeal that portion of the trial court's order denying them prejudgment interest on the conversion claims.

Case Nos. A94A1831,

A94A1832, A94A1833

Stone Harbor and each of the Limited Partners rely on and specifically incorporate by reference the arguments and enumerations of error found in the others' individual appellate briefs. Consequently, we will combine the arguments and enumerations of error set forth in Case Nos. A94A1831, A94A1832 and A94A1833 and address them as a whole below.

1. Stone Harbor and the Limited Partners contend...