Moses v. Pennebaker

• Decision Date: 16 November 2011
• Docket Number: No. A11A0839.,A11A0839.
• Parties: MOSES et al. v. PENNEBAKER.
• Court: Georgia Court of Appeals

11 FCDR 3686

312 Ga.App. 623

719 S.E.2d 521

MOSES et al.

v.PENNEBAKER.

No. A11A0839.

Court of Appeals of Georgia.

Nov. 16, 2011.

Stephen M. Katz, Marietta, for appellants.

Alston & Bird, Jay D. Bennett, Nowell Donald Berreth, Daniel Christopher Norris, Atlanta, for appellee.

PHIPPS, Presiding Judge.

This appeal involves claims related to the judicial dissolution of a limited liability company. One of the members of the company appeals from the judgment entered against him and in favor of the company's only other member, citing as error: the court's award of damages based on claims asserted after the court entered judgment on the dissolution petition; the method by which the court calculated the company's value; and the award of attorney fees, punitive damages, and damages for conversion, breach of fiduciary duty and usurpation of corporate opportunities. For the reasons that follow, we affirm the judgment.

The two members of International Merchandise Group, LLC (“IMG”) were S. Douglas Moses and Ashley Pennebaker. In April 2002, Pennebaker filed a petition for judicial dissolution and interlocutory injunction, citing OCGA § 14–11–603.¹ In the petition, which named Moses as a defendant and IMG as a nominal defendant, Pennebaker alleged that he and Moses were unable to agree on any material decisions necessary for the operation of IMG and that it was not reasonably practicable for IMG to carry on its business in conformity with its articles of organization. Alleging that Moses had not responded to his attempts to amicably dissolve the company, Pennebaker sought a decree dissolving IMG, terminating the authority of persons to act for IMG (except for certain, specified acts), distributing IMG's net assets to its members, and granting such other relief as the court deemed just and proper. Moses filed an answer in which he, among other things, asserted a counterclaim alleging that Pennebaker was liable for fraud and breach of fiduciary duty. In June 2002, the court entered a consent order directing the parties to select an accounting firm and effectuate an audit of IMG's financial records.

In April 2003, the court entered a consent order granting a “final judgment on the issue of dissolution.” The order provided:

Pursuant to OCGA § 9–11–54,² the Court expressly finds that there is no just reason for delay and expressly directs that the Clerk shall enter this order as a final judgment on the issue of dissolution, but the Court shall retain jurisdiction to enter any ancillary or other equitable relief to effect the winding up and termination of IMG ... and to effect the other dictates of this Order in any other ways necessary.

In the order, the court dissolved IMG, terminated every person's authority to act for IMG (except regarding certain, specified acts), (re)ordered an audit of IMG's financial records, ordered the parties to cooperate with the auditors, and ordered that certain acts be performed after the audit was conducted. The order did not specifically address Moses's counterclaim.

In November 2003, Pennebaker filed an amendment to the petition for dissolution, adding a claim for wilful conversion of IMG's funds and for attorney fees (pursuant to OCGA § 13–6–11). In the amendment, Pennebaker asserted that Moses had violated the June 2002 and April 2003 court orders by not cooperating in the audit and the winding up of IMG's business, by seizing and using IMG's assets without authority, and by setting up a competing company.

Pennebaker also filed a motion to enforce the court's prior orders and, in May 2004, the court ordered Moses to pay into a trust account (pending the outcome of the case) funds that the court found he had improperly withdrawn in October 2002 from IMG's bank account. In August 2004, the court found Moses in contempt of court for failing to comply with the May 2004 order (though the court denied Pennebaker's demand to have Moses incarcerated based on its finding that Moses's failure to fully pay the ordered sums was not wilful but was due to an inability to pay).

In October 2004, Pennebaker filed a second amendment to his petition, this time asserting, inter alia, claims for breach of fiduciary duty and usurpation of corporate opportunities, and for compensatory and punitive damages. Pennebaker alleged, inter alia, that Moses

has taken control of IMG without authority, managed IMG unilaterally and without authority, set up a company to compete with IMG, cashed an IMG check without proper endorsement, failed to cooperate with regard to the Court-ordered audit, failed to comply with other Court orders and with the Court-ordered judicial dissolution of IMG, and converted and improperly used IMG funds for his own personal use, along with using more than $108,000 of IMG funds to pay his personal legal bills.

In March 2008, finding that Moses had wilfully and intentionally failed to comply with the court's orders entered in May 2002, June 2002, April 2003 and May 2004 (as well as three other orders) regarding, among other things, the audit and various payment requirements, the court entered an order striking Moses's answer and dismissing his counterclaim with prejudice. The court entered final judgment in favor of Pennebaker as to Moses's liability on all of Pennebaker's claims. The court reserved for trial the issue of damages.

In July 2008, a bench trial was held on the issue of damages. In September 2010, the court entered judgment in favor of Pennebaker and against Moses for one-half of the value of IMG, wilful conversion of corporate assets, breach of fiduciary duty and usurpation of corporate opportunities, punitive damages and attorney fees. Moses appeals from the September 2010 judgment.³

1. Moses contends that the trial court erred in considering claims that Pennebaker asserted in amendments to his petition because the amendments were filed after the court entered final judgment on Pennebaker's dissolution petition. The court did not err in allowing the amendments.

“A party's right to amend a complaint is very broad.” ⁴ A party may amend his pleading as a matter of course and without leave of court at any time before the entry of a pretrial order.⁵ “While the right to amend is very broad, it may not be exercised after the case has been tried and judgment rendered therein.” ⁶ Accordingly, a party is not entitled to amend his complaint to assert a new cause of action after judgment is entered.⁷ But “[a] judgment is not final unless it disposes of the entire controversy, leaving nothing for the trial court to do in the case.” ⁸

When Pennebaker amended his complaint in November 2003 and October 2004, no pretrial order had been filed; the April 2003 judgment was not intended to be a pretrial order, given that the court ordered the parties in February 2008 to file within a certain time period a consolidated pretrial order. Moreover, the April 2003 judgment did not dispose of the entire controversy. Moses's counterclaim was still pending, inasmuch as the April 2003 order did not address it. Finally, the April 2003 order granting judgment on the dissolution claim expressly provided that the court “retain[ed] jurisdiction to enter any ancillary or other equitable relief to effect the winding up and termination of IMG ... and to effect the other dictates of this Order in any other ways necessary.”

Pennebaker was authorized to amend his pleadings when he did because the court had not entered a pretrial order ⁹ and had not entirely disposed of the claims asserted in the case.¹⁰ This was not a case in which the litigation had ended and the case was “finished.” ¹¹ The trial court has wide discretion to allow an amendment and, unless there is a manifest abuse of that discretion, this court declines to interfere.¹² Moses has shown no abuse of discretion.¹³

2. Moses contends that the court erred in calculating damages as to Count 1 (dissolution of the corporation) because (a) it should have based the valuation on the date of judicial dissolution; and (b) Pennebaker did not prove that he was entitled to $450,939.23 as his share of IMG's capital account.

(a) In its findings of fact, the court stated that one of the primary reasons for the company's “breakup” was Moses's failure in April 2000 to repay a loan to Pennebaker, and that in January 2002, Pennebaker notified Moses that he wished to end the business and divide IMG's assets. The court calculated IMG's value using 2001 figures based upon its finding that Pennebaker had ceased participating in the operation of IMG in about January 2002. An expert witness testified that he reviewed IMG's tax returns for the years 1999 through 2001 (which his firm had prepared) and its general ledgers for 2002.

Moses asserts that the court should have instead determined Pennebaker's interest based on IMG's value as of April 23, 2003, when the court entered the order dissolving IMG. However, Moses has not cited, and we have not found, any authority for his position that the value of Pennebaker's interest must be determined as of the date the court dissolves the company. Further, Moses has pointed to no evidence of a specific valuation of IMG as of the date of judicial dissolution, or for any time after 2002. The issue of damages is a matter for the factfinder that generally should not be disturbed on appeal. ¹⁴ As such, the trial court's award of damages will be upheld so long as it is within the range of testimony presented at trial.¹⁵

Where a trial court found that a shareholder had been deprived of his interest in the corporation, the court held that the valuation of the corporation and the shareholder's interest were determined based on when the shareholder was deprived of his ownership interest.¹⁶ This court has also affirmed an award of damages in which members of a limited liability company agreed that the company's valuation was determined based on when one member ceased working and the other member began operating the business on her...