Antley v. Small
| Decision Date | 28 June 2021 |
| Docket Number | A21A0223, A21A0224 |
| Citation | 859 S.E.2d 881,360 Ga.App. 617 |
| Court | Georgia Court of Appeals |
| Parties | ANTLEY et al. v. SMALL et al.; and vice versa. |
John E. Floyd, John H. Rains IV, Jane D. Vincent, for Appellant in A21A0223.
Craig A. Gillen, F. Edwin Hallman Jr., Anthony Charles Lake, Gus H. Small, Richard Anthony Wingate, for Appellee in A21A0223.
Craig A. Gillen, F. Edwin Hallman Jr., Anthony Charles Lake, Gus H. Small, Richard Anthony Wingate, for Appellant in A21A0224.
John E. Floyd, John H. Rains IV, Jane D. Vincent, for Appellee in A21A0224.
Gus Small is the current trustee of several trusts set up for the benefit of the Bunzl family. Bennett Kight and William Lankford, Jr., former trustees of the Bunzl trusts and non-parties to this action, defrauded the trusts of millions of dollars. In April 2017, Small and two trust-owned companies (collectively, "Small") filed a complaint against Miller & Martin PLLC and Kenneth Antley (the "Attorneys"), the attorneys for Kight and Lankford when they were trustees, alleging that the Attorneys were complicit in Kight and Lankford's misdeeds. The trial court entered a summary judgment order and subsequent reconsideration order ruling on issues regarding the applicable statutes of limitation. Small and the Attorneys1 now cross-appeal from the trial court's orders. For the reasons set forth infra, we affirm in Case No. A21A0224, affirm in part in Case No. A21A0223, and reverse in part in Case No. A21A0223 to the extent that the court reserved the applicability of OCGA § 9-3-99 as a jury question.
Viewed in the light most favorable to Small, as the nonmoving party below,2 the record shows the following. According to Small's amended complaint, Kight was a trustee from 1990 to 2015, and Lankford was a trustee from 2004 to 2015. The Attorneys began representing Kight in 2006. In 2013, Kight and Lankford filed a petition for interim accounting, and the beneficiaries responded and counterclaimed on March 13, 2013. The counterclaim alleged that Kight and Lankford committed, among other things, various acts of fraud, theft, and self-dealing. This 2013 action served as the beneficiaries’ primary vehicle for their claims against Kight and Lankford.
The trial court in that action appointed Synovus Trust Company as receiver in June 2013. In May 2015, Lankford resigned as trustee, and the trial court removed Kight as trustee. The trial court appointed Small as trustee on June 23, 2015, and Synovus produced a final transaction narrative report in August 2015.
Small filed his complaint against the Attorneys on April 26, 2017 — just over four years after the beneficiaries filed their counterclaim against Kight and Lankford, but less than two years after Small became trustee. The complaint, as amended, alleged that the Attorneys conspired with and aided and abetted Kight and Lankford in various mergers, restructurings, and reorganizations of trust assets and in numerous transactions that unlawfully benefitted Kight and Lankford, causing millions of dollars of damages to the trusts. The two major thefts alleged in the complaint were: a series of transactions in 2007 where the Bunzl trusts acquired Playmore, a historic property in North Carolina, for $18 million, and in which Kight subsequently obtained a majority interest in the property for well below market value, resulting in damages of $12 million; and when Kight created a fraudulent personal capital interest in trust assets and subsequently withdrew $4.2 million from trust assets as a purported distribution in 2011. The complaint alleged that the Attorneys aided and abetted these thefts by creating the documents necessary to accomplish these transactions and by misrepresenting the transactions to the beneficiaries.
The Attorneys filed a motion to dismiss on statute of limitation grounds, which the trial court converted to a motion for summary judgment. The trial court granted in part and denied in part the Attorneys’ motion, and later reconsidered part of its order in light of a recent federal indictment. Pursuant to those orders, the trial court found, among other things, that: the beneficiaries were on notice regarding potential fraud by March 2013 at the latest, and thus any fraud-based tolling ended on that date; a jury question existed as to whether the alleged torts arose out of the facts and circumstances of the alleged crimes, which would toll the statute of limitation for at most six years under OCGA § 9-3-99 ; a jury question existed as to whether the Attorneys’ conduct tolled the six-year statute of limitation for the Georgia Limited Liability Company Act ("LLC Act"); a jury question existed as to whether the Attorneys’ conduct tolled the six-year statute of limitation for aiding and abetting breaches of trust and fiduciary duty; and the Attorneys failed to establish a statute of limitation defense to Small's accounting claim.
After the trial court entered its reconsideration order, it issued a certificate of immediate review, and the Attorneys filed an application for interlocutory review. We granted the application, and these appeals from all the parties followed.
"We review a grant or denial of summary judgment de novo and construe the evidence in the light most favorable to the nonmovant."3 With these guiding principles in mind, we now turn to the parties’ claims of error.
1. The Attorneys argue that, under agency law, Kight's and Lankford's knowledge must be imputed to Small as the successor trustee, which would preclude any fraud-based tolling because Kight and Lankford were aware of the alleged fraud. We disagree.
As an initial matter, while the Attorneys cite to agency law to support their argument, a trust/beneficiary or trust/trustee relationship does not correspond exactly to a principal/agent one. "The relation of principal and agent arises wherever one person, expressly or by implication, authorizes another to act for him or subsequently ratifies the acts of another in his behalf."4 "The distinguishing characteristic of an agent is that he is vested with authority, real or ostensible, to create obligations on behalf of his principal, bringing third parties into contractual relations with him."5 By contrast, broadly speaking, "a trust is a fiduciary relationship with respect to property arising from a settlor's intention to impose equitable duties on a person to hold, manage, or otherwise administer that property for the benefit of another person."6 "[A] trust can only act through its trustees[,]"7 and a trust has "no independent legal existence apart from its trustees."8 While, generally, "a successor trustee is clothed with all the rights, duties and obligations of his predecessor,"9 there does not seem to be an explicit principle in trust law imputing knowledge to successor trustees. By contrast, knowledge of the agent is normally imputed to the principal.10 Both the trustee/beneficiary and principal/agent relationships, however, involve a fiduciary duty on the part of the trustee and agent.11
Still, even applying agency law, Kight's and Lankford's knowledge about the alleged fraudulent schemes with the Attorneys would not impute to Small. Knowledge is not imputed where "the person claiming the benefit of the notice or those whom he represents, colluded with the agent to cheat or defraud the principal."12 Here, Small alleges that the Attorneys colluded with Kight and Lankford to defraud the trust. Thus, under principles of agency law, knowledge would not impute to Small.
2. The Attorneys argue that the beneficiaries failed to exercise reasonable diligence to discover potential fraud after receiving certain disclosure letters from the Attorneys. The Attorneys point to two letters in particular: a 2006 letter in which the Attorneys stated that they were only representing a trust-owned LLC for a certain transaction and encouraged the beneficiaries to consult their own counsel; and a 2007 letter regarding the Playmore transaction in which the Attorneys indicated that Kight and Lankford assigned the values for the individual tracts and did not perform an appraisal.
Under OCGA § 9-3-96, the fraud-based tolling statute, "[i]f the defendant [is] guilty of a fraud by which the plaintiff has been debarred or deterred from bringing an action, the period of limitation shall run only from the time of the plaintiff's discovery of the fraud." "[T]o toll the statute of limitation under this statute, a plaintiff must show that: (1) a defendant committed actual fraud; (2) the fraud concealed the cause of action from the plaintiff; and (3) the plaintiff exercised reasonable diligence to discover the cause of action despite [his] failure to do so within the statute of limitation."13
In considering what actions will toll the running of a limitation period, the Supreme Court of Georgia has distinguished between cases where the underlying claim is actual fraud, and cases where the underlying claim is something other than fraud. When the gravamen of the underlying complaint is actual fraud, the limitation period is tolled until such fraud is discovered, or could have been discovered by the exercise of ordinary care and diligence. On the other hand, when the gravamen of the underlying action is not a claim of fraud, the statute of limitation is tolled only upon a showing of a separate independent actual fraud involving moral turpitude which deters a plaintiff from filing suit.14
"Whether a party exercised reasonable care in discovering the fraud is generally a jury question."15 However, 16 Here, given the complex and convoluted transactions involved in the alleged frauds, and the fact that the Attorneys’ letters did not clearly disclose the self-dealing by Kight and Lankford or the extent they misappropriated trust funds, we cannot say that the beneficiaries failed to exercise due...
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