Redwine v. Windham
| Decision Date | 15 February 1999 |
| Docket Number | No. A98A1961.,A98A1961. |
| Citation | 237 Ga. App. 149,513 S.E.2d 13 |
| Parties | REDWINE v. WINDHAM. |
| Court | Georgia Court of Appeals |
OPINION TEXT STARTS HERE
Millard C. Farmer, Jr., Joseph M. Nursey, Atlanta, for appellant.
Hawkins & Parnell, Howell Hollis III, Christine L. Mast, H. Lane Young II, Atlanta, for appellee. HAROLD R. BANKE, Senior Appellate Judge.
The underlying case arose after William W. Redwine sold the Beaver Lake Golf and Country Club in Meriwether County to J.C. Patel for $800,000. Before the sale, Redwine had operated the golf course as a business from May 1987 to February 1990. According to Redwine, when he sold the business to Patel, he had an established client base and a profitable business. Redwine provided seller financing for $785,000 while Patel paid $15,000 down. The sales transaction included the land for the 183-acre golf course, and, inter alia, maintenance equipment, golf carts, restaurant equipment, walk-in coolers, kitchen equipment, display cases, underground gas storage containers, as well as a maintenance building. The closing attorney, James D. Windham, properly recorded the deed to secure debt on the realty but failed to properly file a UCC-1 financing statement on the personalty.
Just over a year later, after Patel defaulted on the mortgage payments and Redwine pursued non-judicial foreclosure proceedings, Patel filed a petition for Chapter 11 bankruptcy. Redwine filed an aggregate proof of claim for $768,242.34. But due to the UCC-1 filing error, Redwine was a secured creditor as to the land valued at $400,000 but an unsecured creditor as to all the personalty. On several schedules, Patel listed the value of the golf course personalty as $25,000, which Redwine testified here was "very low." While the bankruptcy action was pending, Redwine and Patel entered into a covenant not to sue. In exchange for withdrawing his objection to Patel's "Motion for Final Decree," in the bankruptcy case, Redwine accepted a cash payment of $32,000 from Patel. Patel and Redwine expressly covenanted that any claims against other persons not a party to their agreement would not be affected. As a result of the bankruptcy, Patel's indebtedness was restructured. Patel had to pay only $368,242.34 of the $768,242.34 claim of Redwine, most of which went to the holder of the first mortgage, not to Redwine. In the end, Patel retained possession of the golf course and continued to operate the business situated thereon.
After the conclusion of Patel's Chapter 11 bankruptcy, Redwine brought the underlying legal malpractice action against Windham. It is undisputed that because of the UCC filing error, Redwine was treated as an unsecured creditor in the bankruptcy proceeding without any rights to his collateral. As to his interest in all the personalty, Redwine was a Class 9 creditor, below all other creditors, with a claim in that category for $209,653.
An experienced bankruptcy attorney and a former bankruptcy trustee, George Rosenweig, testified at trial. Rosenweig explained that some debtors would be deterred from filing for bankruptcy where the creditor was in a secured position. Rosenweig testified that unlike an unsecured creditor, a secured creditor has leverage in the event a debtor files bankruptcy because he can threaten to take the collateral back. Here, Redwine could not do so. According to Rosenweig, the amount of Patel's indebtedness to Redwine was "reduced very substantially" by Redwine's unsecured status. Rosenweig noted that,
Redwine testified that had his collateral been fully secured he would have recovered the golf course because the business could not function without the equipment. According to Redwine, because Windham failed to file the UCC documents he had no leverage and could not obtain his equipment back which enabled Patel to continue to operate the business. Redwine testified that due to the filing error, "I got beaten out of $375,000."
Although Windham conceded liability for the UCC-1 filing error, he contested damages, contending that Redwine would have recovered the same amount of money through the bankruptcy process regardless of his relegation to an unsecured creditor position. Windham argued that the measure of damages was not the amount of the unpaid notes but the value of the unsecured collateral, set by Patel at $25,000. Windham's expert claimed that because Redwine obtained a $32,000 settlement from the covenant not to sue, Redwine actually received a windfall of $7,000. Windham also contended that having been bound by the bankruptcy plan, Redwine was estopped from claiming the value of the collateral was anything other than $25,000.1
The trial court found that Redwine was "bound by the doctrine of res judicata" to the value of the unsecured property as set in the bankruptcy reorganization plan. Noting that Redwine received $32,000 which exceeded the $25,000 valuation, the court held that Redwine "suffered no damage." Finding that Redwine failed to prove that the attorney fees that he incurred in the bankruptcy case were attributable to Windham's negligence, and that Redwine failed to prove damages in the legal malpractice action, the trial court directed verdicts for Windham on both those claims. Redwine appeals. Held:
A directed verdict cannot stand unless there is no conflict in the evidence as to any material issue and the evidence when considered in the light most favorable to the non-movant demands such a verdict. OCGA § 9-11-50(a). A directed verdict must be reversed if there is "any evidence" to support a contrary verdict. Southern Gen. Ins. Co. v. Holt, 262 Ga. 267, 268(1), 416 S.E.2d 274 (1992); Dept. of Human Resources v. Thomas, 217 Ga.App. 174, 175(1)(a), 456 S.E.2d 724 (1995).
Redwine contends that it was error to direct a verdict...
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