Continental Inv. Corp. v. Cherry

Decision Date13 October 1971
Docket NumberNos. 1,2,46182,Nos. 46181,3,s. 46181,s. 1
Citation124 Ga.App. 863,186 S.E.2d 301
PartiesCONTINENTAL INVESTMENT CORPORATION v. James D. CHERRY et al. CONTINENTAL INVESTMENT CORPORATION v. E. W. VanHOUTEN
CourtGeorgia Court of Appeals

Syllabus by the Court

1. The motion to dismiss the appeal is denied.

2. In a complaint by a corporation against its directors on the theory of conspiracy to defraud, the facts constituting the fraudulent dealing must be alleged with sufficient specificity to show a relation to identifiable transactions. Mere conclusions with no showing of a basis of fact are insufficient. Only after this statutory requirement is met can the rule be applied that the complaint will not be dismissed unless it appears that the plaintiff would not be entitled to relief under any state of facts that could be proved to support the claim.

The appellant corporation sued its defendant directors for damages based on their alleged fraud and breach of fiduciary obligations to it. A motion to dismiss for failure to state a claim and a motion for more definite statement were filed; the plaintiff amended and grounded its claim on the averments that between 1958 and 1965 the defendants conspired together to exploit the plaintiff's corporate assets for their personal benefit; that properties owned by the defendants were sold to the plaintiff at grossly inflated prices; that they wrongfully realized substantial profits at the expense of the plaintiff; that they regularly received salaries and other compensation for which no services were rendered; that through the use of dummy corporations, strawmen and other individuals and organizations unknown to plaintiff they purchased parcels of real estate and resold them to plaintiff at grossly inflated prices; that they sold property owned by the plaintiff to other corporations, organizations and individuals at prices much less than their true value in order to benefit themselves individually, that they misrepresented the true facts surrounding their purchases and sales to the plaintiff and its stockholders and that these fraudulent misrepresentations of the facts and circumstances surrounding the purchase and sale of real estate were in violation of their fiduciary duty and obligations to plaintiff's shareholders and constituted fraud. The court sustained the motion for dismissal on the pleadings. The dual appeal was necessitated by the fact that orders taken as to various defendants were sustained on separate dates.

Peek, Whaley & Haldi, Glenville Haldi, J. Robert Hardcastle, Atlanta, for appellant.

Arnall, Golden & Gregory, Cleburne E. Gregory, Jr., Alexander Cocalis, Elliott H. Levitas, Jones & Somers, John Paul Jones, Sam G. Dettelbach, Atlanta, for appellees.

DEEN, Judge.

1. Defendants have moved to dismiss the appeal in this court in Case No. 46181 on the ground that an unreasonable time elapsed between the mailing by the clerk of the trial court of a second bill for costs (the initial bill having been paid and additional costs having accrued thereafter) payment for which latter was not received until thirteen days after the billing date. The trial court may only dismiss on such a motion when there has been 'an unreasonable delay in the transmission of the record to the appellate court, and it is seen that such delay was inexcusable and was caused by the failure of a party to pay costs in the trial court.' Code Ann. § 6-809(b). The statute does not indicate what amount of delay will be adjudged unreasonable and inexcusable, but this is a rule for the benefit of the appellate court and the length of time involved to reach such result must be presumed within its discretion under the circumstances of the case. It has been suggested in our previous decisions that a delay of over thirty days may prima facie be so considered. Jones v. State, 123 Ga.App. 672, 182 S.E.2d 190; Lake Spivey Parks, Inc. v. Jones, 118 Ga.App. 60(1b), 162 S.E.2d 801. In considering whether a period of less than thirty days is unreasonable and inexcusable, this court must consider the incidence of weekends and nonjuridical days, the time consumed by mailing the bill until its receipt and mailing payment, and perhaps other extenuating circumstances if they are made to appear. The motion to dismiss is denied.

2. Code Ann. § 81A-109(b) which is in the language of Rule 9(b) of the Federal Rules of Civil Procedure requires that in all averments of fraud, the circumstances constituting the fraud must be stated with particularity. It is generally recognized that this exception to the general liberality of pleading permitted under these rules, although to be construed in pari materia with the remainder of the Act, in effect retains a long standing rule obtaining at common law and in many states, including Georgia, and requires that facts must be alleged which if proved would lead clearly to the conclusion that fraud had been committed. Chicago Title & Trust Co. v. Fox Theatres Corp., D.C., 182 F.Supp. 18; Kohler v. Jacobs, 5 Cir., 138 F.2d 440; Duane v. Altenburg, 7 Cir., 297 F.2d 515, 518(5). In the Duane case allegations that materials were available at prices far below the prices paid for materials and services, that stock was purchased at excessive prices, and general allegations of value with no showing of market value were held insufficient in an action based on fraudulent mismanagement by corporate directors. There, as here, no finger was pointed at any identifiable transaction. 'The circumstances constituting the alleged fraud must be pleaded with sufficient definiteness so as to advise the adversary of the claim which he must meet.' United States v. Gill, D.C., 156 F.Supp. 955. Conclusory statements which allege improper representation and lack of good faith must be followed by supporting facts, and catagorical assertions of fraud amounting only to conclusions are not deemed admitted by a motion to dismiss. Rubens v. Ellis, 5 Cir., 202 F.2d 415, 417; Lusk v. Eastern Products Corp., 4 Cir., 427 F.2d 705. This is also the rule in Georgia; to the effect that the allegations of fraud must be specific and factual as to the acts comprising the fraud under both the present and former pleading rules see Diversified Holding Corp. v. Clayton McLendon, Inc., 120 Ga.App. 455(2), 170 S.E.2d 863 and Sellers v. Johnson, 207 Ga. 644, 63 S.E.2d 904. Only after this has been done, where the point is raised, can the rule stated in Butler v. Cochran, 121 Ga.App. 173(2), 173 S.E.2d 275 and Harper v. DeFreitas, 117 Ga.App. 236(2), 160 S.E.2d 260 be applied that 'a motion to dismiss a complaint for failure to state a claim should not be granted unless the averments in the complaint disclose with certainty that the plaintiff would not be entitled to relief under any state of facts that could be proved in support of the claim.' The trial court in the present case properly granted the plaintiff leave to amend and make his allegations of fraud more certain; where, thereafter,...

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    • United States
    • United States Court of Appeals (Georgia)
    • March 17, 1995
    ...214 Ga.App. 7, 9(1), 446 S.E.2d 774 (1994).2 This view goes back to a statement by this court in Continental Invest. Corp. v. Cherry, 124 Ga.App. 863, 865(2), 186 S.E.2d 301 (1971), regarding claims of fraud under OCGA § 9-11-9(b). At that time, the requirement for malpractice affidavits di......
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    ...that fraud has been committed, as required by Code Ann. § 81A-109(b) (Ga.L.1966, pp. 609, 620). Continental Investment Corp. v. Cherry, 124 Ga.App. 863(2), 186 S.E.2d 301 (1971). As we have held in Division 1, supra, the appellees were under no duty to discover and inform the appellant of t......
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