AgSouth Farm Credit v. Gowen Timber Co.

• Decision Date: 30 March 2016
• Docket Number: No. A15A2375.,A15A2375.
• Citation: 784 S.E.2d 913,336 Ga.App. 581
• Parties: AGSOUTH FARM CREDIT, ACA v. GOWEN TIMBER COMPANY, INC.
• Court: Georgia Court of Appeals

336 Ga.App. 581

784 S.E.2d 913

AGSOUTH FARM CREDIT, ACA

v.GOWEN TIMBER COMPANY, INC.

No. A15A2375.

Court of Appeals of Georgia.

March 30, 2016.

George Holland Rountree, Statesboro, Robert Felton Mikell, for Appellant.

Mark David Johnson, James Oliver Hodges VI, Brunswick, Samantha Allison DiPolito, Theresa Davis Beaton, for Appellee.

BRANCH

, Judge.

On appeal from a jury verdict for defendant Gowen Timber Company (Gowen Timber) in this action for timber conversion, plaintiff AgSouth Farm Credit, ACA (AgSouth) argues that the trial court erred when it denied AgSouth's motion for judgment notwithstanding the verdict because no evidence showed that Gowen Timber received written consent to cut the timber at issue. AgSouth also argues that the trial court erred when it denied its motions in limine to exclude parol evidence concerning AgSouth's alleged consent to Gowen Timber's cutting and other topics. We agree that the trial court erred when it admitted parol evidence as to AgSouth's alleged consent, which the jury apparently considered in reaching a verdict for Gowen Timber. We therefore reverse the trial court's denials of AgSouth's motions in limine and for judgment notwithstanding the verdict as to liability, but we order a new trial as to damages, interest, and attorney fees.

"The jury is the final arbiter of the facts, and the verdict must be construed by the trial and appellate courts in the light most favorable to upholding [that] verdict." Wilmock, Inc. v. French, 185 Ga.App. 259, 261(1), 363 S.E.2d 789 (1987)

(citation and punctuation omitted). So viewed, the record shows that in November 2012, AgSouth sued Gowen Timber for timber conversion pursuant to OCGA § 51–12–51(a)

, which provides that a holder of "legal title" to "an interest in land as security for debt" may recover "the unpaid portion of the secured indebtedness, interest thereon, and a reasonable attorney's fee" from any person who converts "trees growing or grown on such land" to his own uses "without the written consent" of the secured party. The "unpaid portion of the secured indebtedness" at issue in this case arose after George Gowen and Shirley Bluff, LLC defaulted on the residue of a $2 million loan first extended by AgSouth on July 29, 2009. In exchange for the loan, George Gowen and Shirley Bluff provided AgSouth with a promissory note, a deed to secure the debt in favor of AgSouth, and a security agreement. By means of the deed to secure debt, which was signed by the members of Shirley Bluff, LLC and George Gowen individually, Shirley Bluff, LLC conveyed a 1,057–acre parcel of land in Charlton County, known as the Shirley Bluff tract, as collateral for the loan. The deed provided in relevant part that the borrowers "will not, except with the written consent of [AgSouth,] cut, use or remove, or permit the cutting, use or removal of, any timber or trees on [the parcel] for sawmill, turpentine or other purposes, except for firewood and other ordinary farm purposes." (Emphasis supplied.) The deed also contained a so-called "dragnet"¹ provision to secure AgSouth's lien as to "all renewals, ... extensions, refinances, modifications, or other rearrangements thereof"; that any agreement by the lender to such modifications "shall not discharge the lien of this security deed[,] which is to remain in full force and effect until the total indebtedness secured hereby has been paid in full"; and that in the event of default, the borrowers agreed "to pay reasonable attorney[ ] fees of not less than 10% of the amount secured," as well as costs. The security agreement, which was also signed by the members of Shirley Bluff, LLC and George Gowen individually, identified the collateral securing the loan as "[a]ll merchantable or pre-merchantable standing, felled and harvested pine, hardwood, or other timber growing or to be planted" on the property. Also on July 29, 2009, Gowen Oil Company, Inc., executed a promissory note in favor of Shirley Bluff, which Shirley Bluff assigned to AgSouth with the understanding that Gowen Oil would make the payments on the loan from AgSouth based on the recovery Gowen Oil anticipated in certain lawsuits.

Although George Gowen, the longtime owner of the Shirley Bluff tract, died before the trial in this case, AgSouth's loan officer Dan Good testified that George Gowen knew at the July 2009 closing that he needed written consent to harvest timber from the Shirley Bluff property. Good acknowledged, however, that at the same closing, given George Gowen's and his family's longstanding ownership of the Shirley Bluff tract, and "despite it being [AgSouth's] collateral," George Gowen claimed "basically exclusive rights to cut and do what he wanted to with" the property. Some evidence thus shows that at the 2009 closing, George Gowen and Good agreed that George Gowen could "cut [ ] [his] trees so long as [he did] it in accordance with good timber management practices." George Gowen did not request or obtain a written modification of the terms of the loan documents before signing them, however. On July 30, 2009, the day after the closing, the deed to secure debt and the security agreement were recorded in Charlton County, with Uniform Commercial Code financing statements also recorded the same day.

Good visited the property twice between the original August 2009 closing and the loan's first renewal in August 2010. On the first of these visits, which occurred on or around February 1, 2010, Good walked two or three hundred yards on the property. On the second visit, which occurred on or around the original loan maturation date of August 1, 2010, George Gowen and Good drove through the property with George's son Curtis in the back seat. Although Good testified at trial that he did not notice any evidence of timber cutting or thinning on either of these visits, he admitted that the parties "talked about timber" on the second occasion. Curtis Gowen testified that his father told Good about his thinning of the Shirley Bluff property on Good's second visit and that Good approved of the thinning. Documentary evidence showed that 297 loads of timber had been harvested from the property by August 2010. George Gowen's son Doug e-mailed Good that month that the family "had only cut a small amount of timber" and that his father was "adamant" that "he wanted the leniency to cut some timber without having to apply it to the bank note."

As the parties prepared for a second renewal in the summer of 2011, AgSouth's review of the Shirley Bluff 2010 tax return showed that Gowen Timber² had harvested and had paid Shirley Bluff, LLC for $144,500 worth of Shirley Bluff timber during 2010.³ At trial, Gowen Timber's managing officer and co-owner, Alvin Hopkins, confirmed that the 2010 harvest was done without AgSouth's written consent. Before AgSouth renewed the loan for a second time on August 31, 2011, AgSouth therefore required Shirley Bluff and George Gowen to make a principal reduction of $150,000 "to make good on th[e] timber harvest" already taken, as reflected in the second, 2011 renewal of the note and deed.

In an e-mail written on August 26, 2011, five days before the second renewal, Good told Doug Gowen that he "need[ed] to get" documents "in[to] [AgSouth's] loan committee[']s hands" on the following Monday "so that we can close Tuesday or Wed[nesday] AM." Good wrote that his goal was to provide "[j]ust a little bit of something to make [the] loan committee feel confident that [the] loan will pay off soon[,] or at least pay down—below $1 million at least." Good's email went on:

I'm going to try and justify the [timber] harvest to say it was used to make last year['s] payments and interest and hope it flys [sic]. When we first closed [the] loan [in 2009,] I expected it would pay off with[in] 12–months. I told your Dad tha[t] thinning, etc. would be OK, [but] I had no idea he would clear-cut 80 acres.

The 2011 renewal documents, which were signed by George Gowen, Shirley Bluff LLC, and Gowen Oil a few days later, specified that the debtors would provide "a complete accounting of all timber removed from the property within seven days of the renewal," that "no timber [could] be removed without prior written consent" of AgSouth, and that AgSouth reserved the right to pursue defendants "for conversion of the collateral" should they not comply with the terms and conditions of the renewal. Although Good and George Gowen again discussed thinning procedures at closing, Good again did not provide any written consent to harvest timber, and there is no indication that George Gowen provided any accounting to AgSouth after the 2011 closing.

As the parties negotiated for a third renewal in August 2012, AgSouth reviewed a 2011 tax return from Shirley Bluff, LLC indicating that Gowen Timber had again harvested timber that year, for which it paid Shirley Bluff, LLC $276,523.40. Alvin Hopkins testified that by the end of 2011, Gowen Timber had harvested timber from and clear-cut approximately 200 acres of the Shirley Bluff property without AgSouth's written consent. Two AgSouth officers, including Good, testified that AgSouth never received any accounting of the 2011 harvest other than the tax returns later received in the course of the August 2012 renewal negotiations.

The parties were unable to agree to a third renewal, and the loan went into default in August 2012. AgSouth gave George Gowen, Shirley Bluff, LLC, and Gowen Oil notice of the default as well as its intention to collect attorney fees under OCGA § 13–1–11

. AgSouth also obtained an appraisal valuing the property at $2,000,000. In anticipation of a foreclosure sale, AgSouth also prepared a "Bid Rationale" that valued the outstanding principal balance at $1,876,150.80, interest at $62,851.04, late charges at $10,000, appraisal costs at $6,500, and attorney fees at $193,925.18, for an estimated total claim of $2,149,427.02. AgSouth subtracted $421,023.63, or the amount paid by Gowen Timber to Shirley Bluff, LLC for...