Artson, LLC v. Hudson

• Decision Date: 12 July 2013
• Docket Number: No. A13A0435.,A13A0435.
• Citation: 322 Ga.App. 859,747 S.E.2d 68
• Parties: ARTSON, LLC v. HUDSON.
• Court: Georgia Court of Appeals

322 Ga.App. 859

747 S.E.2d 68

ARTSON, LLC

v.HUDSON.

No. A13A0435.

Court of Appeals of Georgia.

July 12, 2013.

Jacquelyn F. Luther, for Appellant.

Justin James Wyatt, Marietta, for Appellee.

MILLER, Judge.

Artson, LLC appeals the dismissal of its lawsuit against David K. Hudson for failure to join indispensable parties to the action. Artson contends that the trial court erred in (1) finding that certain individuals were indispensable parties; (2) dismissing the complaint for failure to join indispensable parties because David Hudson did not move to dismiss the complaint on that ground and waived that defense; and (3) denying Artson's motion for attorney fees pursuant to OCGA § 9–11–37. For the reasons set forth below, we affirm.

When, as here, a question of law is at issue we owe no deference to the trial court's ruling and apply a de novo standard of review. See Suarez v. Halbert, 246 Ga.App. 822, 824(1), 543 S.E.2d 733 (2000).

The record shows that Artson is a Virginia limited liability corporation established in November 2003. Artson has four members—Lawyer and Doris Artis, their daughter, Denise Hudson, and their son-in-law, David Hudson—each of whom owns a twenty-five percent interest in the corporation. Artson was established for the purpose of owning, selling, managing and trading real estate, stocks, securities and other investments. Lawyer and David were the initial managing members of Artson with authority to conduct business on Artson's behalf, including the authority to manage the corporation's bank accounts and write checks therefrom.

At some point after 2003, Denise and David moved from Virginia to Marietta, Georgia. In September 2008, Denise and David initiated divorce proceedings. Thereafter, in January 2009, Lawyer, Doris and Denise signed a resolution removing David as a managing member of Artson and revoking his authority to act on behalf of the corporation.

Artson, by and through its managing member Lawyer, subsequently filed suit against David in Cobb County Superior Court for conversion, an accounting and attorney fees. David filed an answer and counterclaim, raising the defense of unclean hands, and asserting a counterclaim for conversion, an accounting and attorney fees.

Thereafter, David filed a third-party complaint against Denise and a motion for leave to add her as a third-party defendant. The third-party complaint alleged that Lawyer owned and operated a separate business known as Artis Contracting and that David and Denise owned and operated another separate business known as Acropolis Management, LLC. The third-party complaint also alleged that Artson and Artis Contracting shared business matters and finances with the knowledge of all of the parties involved and that Artson funds were used to pay for Acropolis Management's cellular telephone bills and office supplies. Finally, the complaint alleged that Denise should be jointly liable for any award against David because she received the same benefit from the use of Artson's funds as David and Lawyer. The trial court subsequently entered a consent order adding Denise as a third-party defendant.

The parties subsequently engaged in contentious discovery, which culminated in David filing a motion to compel the production of additional documents related to Artson. The trial court denied David's motion to compel and entered a consent order resolving the parties' discovery disputes.

Thereafter, David filed a motion for leave of court to add Doris as a party defendant. David also filed a petition to pierce the corporate veil and to construe Artson as Lawyer's alter ego. Artson filed a motion for partial summary judgment or, in the alternative, to strike or dismiss David's counterclaim.

On January 31, 2011, the trial court held a hearing on David's motion to add Doris as a party defendant and Artson's motion for partial summary judgment. At the hearing, the trial court denied Artson's motion for partial summary judgment and its alternative motion to strike or dismiss David's counterclaim. The trial court also ruled that Lawyer and Doris were indispensable parties and that it lacked personal jurisdiction over them. Thereafter, the trial court dismissed the case pursuant to OCGA § 9–11–19. This appeal ensued.

1. Artson contends that the trial court erred in finding that Doris and Lawyer were indispensable parties pursuant to OCGA § 9–11–19. We disagree.

OCGA § 9–11–19, which governs the joinder of necessary parties, provides that persons subject to service of process shall be joined if complete relief cannot be afforded in their absence, or they have an interest relating to the subject matter of the action such that disposition in their absence may impair their ability to protect that interest or may subject any parties to the action to a substantial risk of incurring multiple or inconsistent obligations by reason of such interest. See OCGA § 9–11–19(a). Where joinder of necessary parties is not feasable, the trial court shall determine whether the parties are indispensable and the action should be dismissed. See OCGA § 9–11–19(b).

Artson cites to no authority supporting its contention that Doris and Lawyer are not indispensable parties. Accordingly, Artson's argument in this enumeration is deemed abandoned pursuant to Court of Appeals Rule 25(c)(2). Nevertheless, as more fully set forth in Division 2 below, Artson cannot show error because the trial court properly dismissed this action after determining that Doris and Lawyer are indispensable parties over which the trial court cannot exercise personal jurisdiction, and after considering all five factors set forth in OCGA § 9–11–19(b) for determining whether this action should proceed. See Dixon v. Cole, 277 Ga. 353, 355(1), 589 S.E.2d 94 (2003).

2. Artson contends that the trial court erred in dismissing the complaint pursuant to OCGA § 9–11–19 because David did not file a motion to dismiss on that ground and he waived the defense of indispensable parties. Again, we disagree.

The issue of failure to join an indispensable party must be asserted prior to judgment or it is waived. See Adams v. Wright, 162 Ga.App. 550, 551(1), 293 S.E.2d 446 (1982). The issue may be asserted, however, “in any pleading permitted or ordered under subsection (a) of Code Section 9–11–7, or by motion for judgment on the pleadings, or at the trial on the merits.” OCGA § 9–11–12(h)(2).¹ Furthermore, the defense need not be asserted in writing. See Lee v. Collins, 249 Ga.App. 674, 676(2), 547 S.E.2d 583 (2001) (holding that the trial court may consider a motion made pursuant to OCGA § 9–11–12(h)(2), even if the motion is not made in writing). Moreover, a complaint may be dismissed for failure to join indispensable parties when the trial court lacks jurisdiction over them. See Dixon, supra, 277 Ga. at 354(1), 589 S.E.2d 94;Wright v. Safari Club Intl., 307 Ga.App. 136, 137, 706 S.E.2d 84 (2010).

The Civil Practice Act requires that pleadings be liberally construed in favor of the pleader. See Glisson v. Hosp. Auth., 224 Ga.App. 649, 654(1), 481 S.E.2d 612 (1997). So construed, we find that David effectively, albeit inartfully, asserted the issue of indispensable parties in his pleadings. Notably, David asserted in his amended answer, counterclaim and third-party complaint that all of Artson's shareholders used corporate funds for their respective personal uses and Doris and Lawyer received the largest personal benefit from misappropriation of Artson's corporate funds. David also filed a motion to add Denise as a third-party defendant; he filed a third-party complaint against Denise, alleging that she should be held equally liable for any sum awarded to Artson; and he filed a petition to pierce the corporate veil, alleging that Artson is a shell corporation and asking the trial court to hold Lawyer and Denise personally liable. Moreover, David filed a motion to add Doris as a party defendant, alleging that she committed the tort of conversion and acted jointly with Denise. Based on the foregoing, the record shows that Artson was well aware of David's contention that Lawyer and Doris were necessary parties and should have known that without their joinder its suit might not be able to proceed in Georgia. Accordingly, we address the issue of whether the trial court properly dismissed this action pursuant to OCGA § 9–11–19.

(a) Necessary Parties

OCGA § 9–11–19(a) mandates joinder of persons where complete relief cannot be afforded among those who are already parties. “When the presence of parties other than those to the original action is required for the granting of complete relief in the determination of a counterclaim[,] the court shall order them to be brought in as defendants as provided in this chapter, if jurisdiction of them can be obtained.” (Citation and punctuation omitted.) Gardner v. Gardner, 276 Ga. 189, 190, 576 S.E.2d 857 (2003); OCGA § 9–11–13(h). The concept of complete relief as set forth in OCGA § 9–11–13 and § 9–11–19(a)(1) “embraces the desirability of avoiding repetitive lawsuits on essentially the same facts or subject matter, as well as the desirability of joining those in whose absence there might be a grant of hollow or partial relief to the parties before the court.” (Citations and punctuation omitted.) Id.

Here, David alleged in his amended answer, counterclaim and third-party complaint that all of Artson's shareholders used corporate funds for their respective personal use and Doris and Lawyer garnered the largest personal benefit from misappropriation of corporate funds. In dismissing the case, the trial court specifically found that the case essentially involves a dispute between all of the shareholders of Artson and complete relief cannot be afforded to the parties in the absence of Doris and Lawyer. Artson does not challenge these findings on appeal. Accordingly, Artson failed to show that the trial court abused its discretion in determining that complete relief cannot...