Osprey Cove Real Estate, LLC v. Towerview Constr., LLC, A17A0653

Decision Date27 October 2017
Docket NumberA17A0653
Citation343 Ga.App. 436,808 S.E.2d 425
CourtGeorgia Court of Appeals

James L. Roberts IV, St. Simons Island, Brad GRAY Proctor, for Appellant.

Hon. Amanda F. Williams, for Appellee.

Self, Judge.

In this contract dispute arising from the development and sale of residential lots in Camden County, Towerview Construction, LLC ("Towerview") filed a complaint against Osprey Cove Real Estate, LLC ("Osprey Cove") alleging fourteen separate causes of action including fraud and deceit, unjust enrichment, breach of contract, and intentional infliction of emotional distress. Osprey Cove answered and filed a motion to dismiss Towerview's complaint for failure to state a claim or, in the alternative, for a more definite statement targeting eight1 of Towerview's fourteen causes of action. See OCGA §§ 9-11-12 (b) (6), 9-11-12 (e). The Superior Court of Camden County denied Osprey Cove's motion in its entirety, and we granted Osprey Cove's application for discretionary appeal. Because there is no current provision of Georgia law which would support a claim of intentional infliction of emotional distress by a business entity, and because Towerview failed to plead certain counts related to fraud with particularity, we reverse the trial court in part for the reasons discussed below. In all other respects, we affirm the judgment of the trial court.

1. Under Georgia law,

[a] motion to dismiss pursuant to OCGA § 9-11-12 (b) (6) will not be sustained unless (1) the allegations of the complaint disclose with certainty that the claimant would not be entitled to relief under any state of provable facts asserted in support thereof; and (2) the movant establishes that the claimant could not possibly introduce evidence within the framework of the complaint sufficient to warrant a grant of the relief sought.

(Citation and punctuation omitted.) State v. Singh, 291 Ga. 525, 529 (3), 731 S.E.2d 649 (2012). To that end,

minimum pleading requirements are found in OCGA § 9-11-8 (a) (2) (A), which requires that the complaint contain "[a] short and plain statement of the claims showing that the pleader is entitled to relief," and we have held that the touchstone is fair notice—"this short and plain statement must include enough detail to afford the defendant fair notice of the nature of the claim and a fair opportunity to frame a responsive pleading."

(Citations omitted.) Aetna Workers' Comp Access v. Coliseum Medical Center, 322 Ga. App. 641, 651 (4), 746 S.E.2d 148 (2013). While "[a] trial court's ruling on a motion to dismiss for failure to state a claim is subject to de novo review[,]" Infinite Energy, Inc. v. Pardue, 310 Ga. App. 355, 356 (1), 713 S.E.2d 456 (2011), we "accept the allegations of fact that appear in the complaint and view those allegations in the light most favorable to the plaintiff." Bush v. Bank of N. Y. Mellon, 313 Ga. App. 84, 89, 720 S.E.2d 370 (2011).

So viewed, Towerview and Osprey Cove executed four construction loan agreements (the "construction contracts") to develop four residential lots in Camden County. Generally, the construction contracts deeded the lots to Towerview "as owner and ... as the general contractor and builder for the residences to be constructed on each respective lot," while Osprey Cove "acted as the mortgagee by providing [Towerview] with a construction loan and lot loan for each respective lot." Once the residence on each respective lot sold, the construction loan for the lot would be satisfied and Towerview would receive a "cost-plus fee for its construction services."

During construction, Towerview alleged that Osprey Cove "interfered" with its work by

improperly contacting [Towerview]'s various subcontractors outside the presence of [Towerview], giving [Towerview]'s subcontractors drastically different directives and instructions from what [Towerview] had given them to complete the work under the pre-approved plans and specifications, and made false statements and allegations involving [Towerview] that severely interfered with the working relationship between [Towerview] and its subcontractors.

Towerview also contended that certain provisions of the construction contracts were internally inconsistent. For example, Section 2 (b) of the construction contracts provide that Towerview "is ... indefeasibly seized of marketable title to the Property in fee simple absolute and has full power and lawful right to convey and encumber the same." However, Section 9 (a) states that Osprey Cove "shall have the sole authority to determine the sale price of the property and the sole right to direct its sale [12 months after the closing of the purchase by Towerview from Osprey Cove of the Property] and thereafter." In addition, one paragraph of Section 9 (b) directed Towerview to "list the Property for sale with St. Marys Realty or another broker directed by [Osprey Cove]" and noted that any proceeds from the sale of a lot, following satisfaction of the construction loan and builder fees, "shall be paid to [Osprey Cove]. ..." In short, Towerview alleged that Osprey Cove "never intended to convey to [Towerview] the full property rights of an owner" and that Osprey Cove interfered with Towerview's subcontractors to cause delay in an effort to trigger the default provisions of the construction loans.

When the first lot sold in August 2015, Towerview alleged that it did not receive any payment from the sale proceeds. At about the same time, St. Marys Realty stopped listing homes for sale in the St. Marys area, and Osprey Cove became a licensed real estate brokerage company. Thereafter, Towerview attempted to list the three remaining properties with other agents and brokers, but Osprey Cove refused to approve the listings. After August 2015, Osprey Cove only approved listings by Towerview if Osprey Cove was the listing agent. Towerview also alleged that Osprey Cove "failed to continuously list [the three remaining lots] for sale, refused to accept offers and refused to consummate any sales," and used two of the lots as model units rather than listing them for sale. Towerview further contended that Osprey Cove "threaten[ed]" other agents and brokers when Towerview attempted to list the lots for sale with anyone other than Osprey Cove.

According to Towerview, Osprey Cove's actions under the "sham and illusory" construction contracts created an environment in which Osprey Cove, "while acting as listing agent and broker could delay in selling the subject properties, and while acting as mortgagee could then declare [Towerview] in default of the construction loans and lot loans and foreclose out [Towerview]'s interest so that [Towerview] would receive no payment for its construction services." Ultimately, Towerview alleged that Osprey Cove's "intent from the beginning was to frustrate the purpose of the Construction Contracts, to establish a scheme to defraud [Towerview] of receiving any payment at all [,] and to declare [Towerview] in default of the Construction Contracts through no fault of [Towerview]."2

2. In its first enumeration of error, Osprey Cove contends the trial court erred in denying its motion to dismiss Towerview's claim for intentional infliction of emotional distress because Towerview, as a business entity, is unable to suffer emotional distress. We agree.

While neither party has identified any Georgia authority on point, and our research has yielded none, other courts have addressed similar claims. In Lampliter Dinner Theater v. Liberty Mut. Ins. Co., 792 F.2d 1036, 1039, n. 2 (I) (11th Cir. 1986), the Eleventh Circuit noted that Alabama's then newly-recognized "tort of outrageous conduct ... is also known as the intentional infliction of emotional distress." Id. The court agreed with the district court's dismissal of the plaintiff business's claim for outrageous conduct because "corporations cannot experience emotional distress and cannot therefore maintain a suit for outrageous conduct." Id. See also FDIC v. Hulsey, 22 F.3d 1472, 1489 (III) (10th Cir. 1994) (applying Oklahoma law; "Since a corporation lacks the cognizant ability to experience emotions, a corporation cannot suffer emotional distress. Thus, no claim for intentional infliction of emotional distress lies."); HM Hotel Properties v. Peerless Indem. Ins. Co., 874 F.Supp.2d 850, 854 (III) (A) (1) (D. Ariz. 2012) (applying Arizona law; plaintiff "failed to state a claim for intentional or negligent infliction of emotional distress because, as [an LLC], it cannot experience emotional distress"); TekDoc Svcs., LLC v. 3i–Infotech, Inc., No. 09-6573 (MLC), 2012 WL 3560794, *21 (II) (B) (2) (f), 2012 U.S. Dist. LEXIS 115728, *59 (II) (B) (2) (f) (D.N.J. 2012) (applying New Jersey law; "Business organizations cannot experience emotions and, as such, cannot experience emotional distress."); Barreca v. Nickolas, 683 N.W.2d 111, 124 (III) (B) (Iowa 2004) ("The Factory, as a limited liability company, certainly cannot suffer emotional distress; such would stretch the bounds of the legal fiction of corporate personhood too far.").

We find the logic of these authorities persuasive. Therefore, we conclude that business entities, including limited liability companies, cannot recover on claims of intentional or negligent infliction of emotional distress as a matter of law because business entities lack "the cognizant ability to experience emotions. ..."3 Hulsey, 22 F.3d at 1489 (III). Compare Oglethorpe Power Co. v. Estate of Forrister, 332 Ga. App. 693, 712 (3) (b), 774 S.E.2d 755 (2015) (in nuisance cases, "a limited liability company may have a cause of action for "discomfort and annoyance" affecting the use of its property for the purposes intended by its members and those they permit to join them"; "discomfort and annoyance" damages are therefore separate from emotional distress; see id. at 707–710 (3) (a), 774 S.E.2d 755 ] ). As a result, we find that "the allegations of [Towerview's]...

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