Res-Ga McDonough, LLC v. Taylor English Duma LLP

• Decision Date: 30 October 2017
• Docket Number: S17A1125
• Citation: 302 Ga. 444,807 S.E.2d 381
• Parties: RES-GA MCDONOUGH, LLC v. TAYLOR ENGLISH DUMA LLP et al.
• Court: Georgia Supreme Court

302 Ga. 444

807 S.E.2d 381

RES-GA MCDONOUGH, LLC

v.TAYLOR ENGLISH DUMA LLP et al.

S17A1125

Supreme Court of Georgia.

Decided: October 30, 2017

Neel, Robinson & Stafford, Shawn D. Stafford, Emilie O. Denmark, Kate B. Klug, for appellant.

Freeman Mathis & Gary, Dana K. Maine, Kevin R. Stone, for appellees.

Boggs, Justice.

Plaintiff RES-GA McDonough, LLC ("RES-GA") brought this legal malpractice action against Taylor English Duma LLP and two of its attorneys (collectively, "Taylor English"). RES-GA contends that Taylor English failed to timely assert a Uniform Fraudulent Transfers Act claim, thus damaging RES-GA's ability to satisfy its judgment against a debtor. Taylor English moved to dismiss the complaint, contending that RES-GA had failed to allege a viable underlying cause of action to support its malpractice claim. The trial court agreed and granted Taylor English's motion to dismiss. From this order, RES-GA appeals.¹ For the reasons stated below, we affirm.

The facts, as alleged in RES-GA's amended complaint, show that in November 2006, Greenleaf Developers and Construction, Inc. executed a promissory note and deed to secure debt in favor of FirstCity Bank. In connection with that loan, Michael Langino, the personal guarantor, executed a total of three personal guaranties for the repayment of the note. In 2009, FirstCity Bank was declared insolvent, and the FDIC was appointed as receiver. In February 2010, the FDIC assigned the Greenleaf note, deed to secure debt, and guaranties to Multibank 2009–1 RES-ADC Venture, LLC ("Multibank").

In April 2010, Taylor English began representing Multibank in collection efforts on the note against Greenleaf and Langino. In September 2010, Taylor English filed suit on behalf of Multibank against Langino on the guaranties ("the underlying action"). On September 13, 2010, Multibank assigned the note, guaranties and security deed to RES-GA. After a stay pursuant to Langino's bankruptcy petition was lifted, in June 2012, RES-GA was substituted as the plaintiff in the underlying action.

RES-GA alleges that "[a]round the time that [RES-GA] was substituted as the plaintiff in the [u]nderlying [a]ction," RES-GA informed Taylor English that in October 2008, Langino had transferred real property to his wife, Debbie Langino, in an apparent fraudulent transfer. Taylor English agreed to pursue setting aside that transfer under the former Georgia Uniform Fraudulent Transfers Act, OCGA § 18–2–70 et seq.("UFTA").² On August 10, 2012, the complaint in the underlying action was amended to assert UFTA claims against Michael Langino and to seek to set aside the transfer. In January 2013, Taylor English recorded a notice of lis pendens regarding the UFTA claims, and also filed a motion to add Debbie Langino as a defendant in the underlying action. On February 21, 2013, however, while the motion remained pending, Debbie Langino sold the property to a third party.³ The trial court refused to add the third party as a defendant in the underlying action, finding that he was a bona fide purchaser who took without notice of the UFTA claims against Debbie Langino. On May 24, 2013, RES-GA obtained a judgment against Michael Langino.

In 2015, RES-GA filed this action asserting claims of legal malpractice, breach of fiduciary duty, attorney fees, and punitive damages. It contends that because of Taylor English's failure to assert an UFTA claim against Debbie Langino in a timely manner, it lost the opportunity to execute its judgment against the transferred property. The parties filed numerous additional pleadings. Taylor English moved to dismiss the complaint; RES-GA responded and filed a supplementary response and amended its complaint; Taylor English filed an additional brief in support of its motion to dismiss and a motion for judgment on the pleadings, and RES-GA filed a motion to strike. After oral argument, the trial court granted the motion to dismiss on the basis that RES-GA lacked standing to pursue the UFTA claim. It also denied the motion to strike and the motion for judgment on the pleadings as moot. This appeal followed.

We begin with the well-settled standard that a motion to dismiss for failure to state a claim upon which relief may be granted should 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. If, within the framework of the complaint, evidence may be introduced which will sustain a grant of the relief sought by the claimant, the complaint is sufficient and a motion to dismiss should be denied. In deciding a motion to dismiss, all pleadings are to be construed most favorably to the party who filed them, and all doubts regarding such pleadings must be resolved in the filing party's favor. On appeal, a trial court's ruling on a motion to dismiss for failure to state a claim for which relief may be granted is reviewed de novo.

(Citations and punctuation omitted.) Abramyan v. State of Ga., 301 Ga. 308, 309–310, 800 S.E.2d 366 (2017). We therefore look at the elements of RES-GA's legal malpractice claim in light of the underlying UFTA claims, in order to determine whether the trial court erred in dismissing the action.

1. "In a legal malpractice action, the plaintiff must establish three elements: (1) employment of the defendant attorney, (2) failure of the attorney to exercise ordinary care, skill and diligence, and (3) that such negligence was the proximate cause of damage to the plaintiff." (Citations and punctuation omitted.) Leibel v. Johnson, 291 Ga. 180, 181, 728 S.E.2d 554 (2012). And "[i]n order to establish the final element, the plaintiff must show that, but for the attorney's negligence in the underlying case, the plaintiff would have prevailed." (Citations and punctuation omitted.) Id. at 182, 728 S.E.2d 554. The validity of RES-GA's legal malpractice claim therefore turns upon the merits of the underlying UFTA claim, which RES-GA contends that Taylor English did not timely pursue.

At the time relevant to this action, former OCGA § 18–2–74 (a) provided in part:

A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation ... [w]ith actual intent to hinder, delay, or defraud any creditor of the debtor[.]

Such a transfer could be avoided, or other remedies pursued, if the transferee did not take the property in good faith and for a reasonably equivalent value. See former OCGA §§ 18–2–77, 18–2–78.

However, the provisions applicable here defined a "creditor" only as "a person who has a claim," see former OCGA § 18–2–71 (4), and "claim" as "a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured."⁴ Former OCGA § 18–2–71 (3). And, as the trial court correctly noted, we must also consider the separate nonassignment provision of OCGA § 44–12–24 (What rights of action may and may not be assigned.):

Except for those situations governed by Code Sections 11–2–210 and 11–9–406, a right of action is assignable if it involves, directly or indirectly, a right of property. A right of action for personal torts, for legal malpractice, or for injuries arising from fraud to the assignor may not be assigned.

Our Court of Appeals recently considered this Code section and its effect on a claim under UFTA in RES-GA Hightower, LLC v. Golshani, 334 Ga. App. 176, 778 S.E.2d 805 (2015). In a remarkably similar fact situation, Golshani personally guaranteed a note for a limited liability company and later defaulted. When the lender became insolvent, the FDIC, as receiver for the bank, assigned its interest in the debt to Multibank 2009–1 RES-ADC Venture, LLC, which in turn assigned its interest to RES-GA Hightower, LLC. Before that assignment occurred, Golshani had conveyed real property to his relatives in apparently fraudulent transfers. RES-GA filed suit seeking to set aside the conveyances under UFTA, and the trial court granted summary judgment on the basis that RES-GA lacked standing due to the nonassignment provisions of OCGA § 44–12–24. Id. at 177–178, 778 S.E.2d 805.

The Court of Appeals affirmed, relying upon the nonassignment statute and this Court's decision in Security Feed & Seed Co. of Thomasville, Inc. v. Ne Smith, 213 Ga. 783, 102 S.E.2d 37 (1958), to hold that Multibank's claim was a "right of action ... arising from fraud" and thus not assignable. 334 Ga. App. at 178–179 (1) (a), 778 S.E.2d 805. While Ne Smith predated the enactment of UFTA, the Court of Appeals concluded that Ne Smith had not been superseded by UFTA because the plain language of UFTA evinced no intent to "displace[ ] Ne Smith's construction of the nonassignment statute, which fraud provisions have not been amended in any material way. [Cits.]" Id. at 179–180 (1) (a), 778 S.E.2d 805. Finally, the Court of Appeals noted that when the General Assembly replaced UFTA in 2015, it for the first time expressly allowed subsequent assignees to pursue fraudulent transfer claims under UVTA, thus presumptively indicating a change in the existing law. Id. at 181–182 (1) (b), 778 S.E.2d 805. The court therefore concluded that RES-GA lacked standing under UFTA to pursue the fraudulent transfer claim, and affirmed the trial court's grant of summary judgment. The Court of Appeals has relied upon the nonassignment statute and Ne Smith in subsequent decisions. See Callaway Blue Springs, LLLP v. West Basin Capital, LLC, 341 Ga. App. 535, 801 S.E.2d 325 (2017) ; Merrill Ranch Props. LLC v. Austell, 336 Ga. App....