Gryder v. Conley

• Citation: 352 Ga.App. 891,836 S.E.2d 120
• Decision Date: 31 October 2019
• Docket Number: A19A1285
• Parties: GRYDER et al. v. CONLEY et al.
• Court: Georgia Court of Appeals

352 Ga.App. 891

836 S.E.2d 120

GRYDER et al.

v.CONLEY et al.

A19A1285

Court of Appeals of Georgia.

October 31, 2019

Lloyd W. Walker, for appellants. James Bates Brannan Groover, Lee M. Gillis, Jr., Lauren N. Schultz, for appellees.

McFadden, Chief Judge.

In 2014, Trey Conley and Daniel Gryder established an aviation management business incorporated as Elite Flight Group, LLC ("EFG"), owned equally by the two men's LLCs (Conley Aeronautics and Gryder Networks) and managed by Conley. In June 2016, Conley closed down the company, terminated Gryder's health insurance, and locked him out. When Conley filed an application to dissolve the company, Gryder and Gryder Networks counterclaimed for breach of contract, conversion, and other claims. On appeal from the grant of summary judgment to Conley on the counterclaims, Gryder and his LLC argue that questions of fact remain as to those claims and that the trial court should have granted their own motion for summary judgment. Because we conclude that the parties' conduct creates questions of material fact as to some of Gryder and his LLC's claims, including the existence of a contract between Conley and Gryder, we reverse in part and remand for further proceedings.

"To prevail at summary judgment under OCGA § 9-11-56, the moving party must demonstrate that there is no genuine issue of material fact and that the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law. OCGA § 9-11-56 (c)." Lau's Corp. v. Haskins , 261 Ga. 491, 491, 405 S.E.2d 474 (1991).

Thus viewed in favor of Gryder and the LLC, the record shows that Conley and Gryder met in 2012 and began discussing going into business together in late 2013. On March 27, 2014, Conley e-mailed a "memorandum of understanding" detailing a "non-binding relationship" between the two men to Gryder. According to the memorandum, Gryder would take "early retirement" from his position at Delta Airlines and would "use his credentials as a pilot and flight instructor" to further the business, while Conley would manage the company with the understanding that "from time to time the business may need an injection of capital or a loan," that Gryder would be paid "at a minimum $5,000 on a monthly basis," and that Conley would "secure" and pay for "an acceptable group health insurance policy for the business[.]" The memorandum noted that it was effective for "a period of five years from the date of signing" and would be "reviewed at least annually" and that its execution was "not a formal undertaking," but also "implie[d] that the signatories will strive to reach, to the best of their ability, the objectives stated" in it. Gryder signed the memorandum on March 28. Conley's signature does not appear on the copy of the memorandum before us. At around the same time, Conley signed an operating agreement which designated the parties' respective LLCs as EFG's members and Conley as EFG's manager. The operating agreement did not contain a merger clause and, although it identified Conley's status and powers as manager, did not lay out any details as to Gryder's responsibilities or the company's day-to-day operations.

On March 31, 2014, Conley's LLC paid Gryder the first of the $5,000 payments described in the memorandum. On the same day, Gryder gave Delta notice that he was retiring and signed the last page of the operating agreement. Conley forwarded the executed copy of the operating agreement to Gryder and also wrote:

I have the original copy of our other agreement that you signed and left with me. I have now also signed it and it is kept with my original copy of this operating agreement at my house.

I think you worry too much. I am sitting on $16M. Regardless of the profit or loss of this new venture, your family needs will be met. I promise!

Trey

Conley duly obtained health insurance for Gryder and his family and began paying EFG's business expenses by means including loans from Conley's LLC.¹ In the course of 2015 and 2016, Gryder's services as a flight instructor generated more than $200,000 for EFG.

On January 14, 2015, Conley's daughter transferred $3,000 to EFG. On June 3, 2015, Conley transferred $3,000 from EFG's bank account to his daughter as repayment of a loan she had purportedly made to the LLC on May 21. EFG's bank records do not show that any such loan was made. In February 2016, and although EFG had never turned a profit, Conley transferred $4,000 from EFG's account to "pay back [a] loan from [himself]." At Conley's request, Gryder flew Conley's family to Antigua and other destinations for non-business purposes. Conley also sold one of his personal aircraft at a profit of approximately $70,000 after a period in which EFG was maintaining that and other aircraft. Conley never reimbursed EFG for those maintenance costs.

In the fall of 2016, after Conley discovered that Gryder had not disclosed his two suspensions by the FAA, one of which resulted in Gryder's arrest, the relationship between the two men deteriorated. On October 31, 2016, Conley's attorney sent Gryder a letter stating that the men's "business arrangement ... must be terminated." A few days later, Conley shut down EFG's website; disabled Gryder's e-mail accounts (including the personal MindSpring account Gryder had been using since at least 2011); terminated Gryder's health insurance; locked Gryder out of the company hangar; and transferred EFG's remaining funds to Conley's personal account. Gryder never recovered years' worth of e-mails sent to and from his MindSpring account before June 9, 2016, including pictures of his wife, who had died in 2011.

On December 20, 2016, Conley's LLC brought the instant application for the judicial dissolution of EFG. As later amended, and with Conley and Gryder personally joined, Conley and his LLC asserted claims of fraud, breach of fiduciary duty against Gryder and his LLC, and also sought attorney fees and punitive damages. Gryder himself asserted counterclaims for breach of contract (the memorandum of understanding); promissory estoppel; defamation; violations of the Georgia Computer Systems Protection Act, OCGA § 16-9-93, and the Stored Communications Act, 18 USC § 2701 ; and attorney fees and costs. Gryder's LLC asserted counterclaims for an accounting, declaratory relief, conversion, breach of fiduciary duty, unjust enrichment, breach of contract, and attorney fees and costs. The trial court initially denied the parties' cross-motions for summary judgment. When Conley renewed his motion, accompanied by new evidence in an unrelated Arkansas dispute that Gryder was exploring a business opportunity in the summer of 2016, the trial court applied the rule in Prophecy Corp. v. Charles Rossignol, Inc. , 256 Ga. 27, 343 S.E.2d 680 (1986) ;² held that Gryder had not intended to be bound by the memorandum; and granted summary judgment to Conley and his LLC on Gryder's counterclaim for breach of contract. The trial court also granted Conley summary judgment on Gryder's counterclaims for promissory estoppel and computer trespass and on all of Gryder Networks' counterclaims.

On appeal from that judgment, Gryder and his LLC assert that the grant of summary judgment was erroneous because questions of fact remain as to Gryder's counterclaims for breach of contract, promissory estoppel, and computer trespass. Gryder and his LLC also assert that questions of fact remain as to Gryder Networks' counterclaims for conversion, breach of fiduciary duty, and unjust enrichment, and that their own motion for summary judgment should have been granted.

1. Gryder Networks argues that a question of fact remains as to whether Conley converted Gryder Networks' equipment, tools, and other property. We agree.

"Under Georgia law, conversion consists of an unauthorized assumption and exercise of the right of ownership over personal property belonging to another, in hostility to his rights; an act of dominion over the personal property of another inconsistent with his rights; or an unauthorized appropriation." Farm Credit of Northwest Fla. ACA v. Easom Peanut Co ., 312 Ga. App. 374, 381 (3) (a), 718 S.E.2d 590 (2011) (citation and punctuation omitted). If the defendant came into possession of the property lawfully, the plaintiff must show that the defendant "unlawfully refuse[d] to return the plaintiff's property after the plaintiff demand[ed] its return. ..." Williams v. Nat. Auto Sales , 287 Ga. App. 283, 285 (1), 651 S.E.2d 194 (2007). Such is the case here, and whether Conley unlawfully refused to return Gryder's property is a question of disputed fact.

Conley does not dispute that he possessed the property or that Gryder demanded its return, but he argues that he made multiple good faith attempts to return it. Gryder testified that none of Conley's offers of opportunities for Gryder to remove the property was for sufficient time to allow him to remove it. This is some evidence that creates a question of fact on the issue of conversion. See Thomas v. Statewide Beverage Equipment , 152 Ga. App. 293, 294 (1), 262 S.E.2d 575 (1979).

2. Gryder Networks argues that a question of fact remains as to whether Conley breached fiduciary duties owed to Gryder Networks. We agree.

Conley admits that he owed fiduciary duties to Gryder Networks. He argues that Gryder Networks has not demonstrated that it suffered damages from any breach, because any damages Gryder Networks may have suffered were outweighed by the benefits it received for engaging in the same behavior — using EFG services and resources without paying for them.

Gryder Networks points to evidence that the benefits Gryder Networks received, maintenance of its aircraft, were contemplated by the parties' arrangement so that Gryder's aircraft could be used to generate revenue for EFG. It points to evidence that services provided to Conley's aircraft, on the other hand, were a benefit to Conley personally.

Moreover, Conley bases his argument that he is entitled to...