Speedway Motorsports, Inc. v. Pinnacle Bank

• Decision Date: 29 March 2012
• Docket Number: A11A2352.,A11A2351,Nos. A11A2350,s. A11A2350
• Citation: 315 Ga.App. 320,12 FCDR 1334,727 S.E.2d 151
• Parties: SPEEDWAY MOTORSPORTS, INC. et al. v. PINNACLE BANK. Speedway Motorsports, Inc. et al. v. Blihovde et al. Speedway Motorsports, Inc. et al. v. Blihovde et al.
• Court: Georgia Court of Appeals

315 Ga.App. 320

727 S.E.2d 151

12 FCDR 1334

SPEEDWAY MOTORSPORTS, INC. et al.

v.PINNACLE BANK.

Speedway Motorsports, Inc. et al.

v.Blihovde et al.

Speedway Motorsports, Inc. et al.

v.Blihovde et al.

Nos. A11A2350, A11A2351, A11A2352.

Court of Appeals of Georgia.

March 29, 2012.

Smith, Welch, Webb & White, A.J. Welch Jr., William Albert White, McDonough, Santana Tarail Flanigan, for appellants.

Thompson, O'Brien, Kemp & Nasuti, R. Michael Thompson, Norcross, Delia Corinne Elder, Bret T. Thrasher, Miller & Martin, Denise Arenth Miller, Andersen, Tate & Carr, Thomas T. Tate, Robert Matthew Reeves, Meredith N. Atwood, Carlton Fields, Adam Lewis Hoipkemier, Eugene A. Medori, Jr., John E. Tomlinson, Eric T. Johnson, for appellees.

BLACKWELL, Judge.

Between April 2006 and September 2010, David R. Blihovde, Jr., allegedly defrauded Speedway Motorsports, Inc. and its subsidiary, Speedway Motorsports International, Ltd., of more than $5 million. Speedway ¹ discovered the fraud after Blihovde died in October 2010, and about a month later, it filed a lawsuit against several individuals and businesses to whom Blihovde allegedly had diverted the proceeds of his fraud, seeking damages for unjust enrichment, the avoidance of certain transfers under the Uniform Fraudulent Transfers Act, OCGA § 18–2–70 et seq., the recognition of constructive trusts or equitable liens on assets acquired with the proceeds of the fraud, and a declaratory judgment that such assets are the property of Speedway. The court below found that Speedway failed to state a claim against several of these defendants upon which relief properly might be granted, and it dismissed those claims. Speedway appeals from these dismissals.²

The standard for a dismissal under OCGA § 9–11–12(b)(6) for failure to state a claim is settled and familiar. At a minimum, a complaint must contain “[a] short and plain statement of the claims showing that the pleader is entitled to relief,” OCGA § 9–11–8(a)(2)(A), and “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.” Benedict v. State Farm Bank, FSB, 309 Ga.App. 133, 134(1), 709 S.E.2d 314 (2011) (citations omitted). If the complaint gives fair notice, “it should be dismissed for failure to state a claim only if ... its allegations disclose with certainty that no set of facts consistent with the allegations could be proved that would entitle the plaintiff to the relief he seeks.” Id. (citation and punctuation omitted). “Put another way, if, within the framework of the complaint, evidence may be introduced which will sustain a grant of relief to the plaintiff, the complaint is sufficient.” Id. (citation and punctuation omitted). “Like the court below, when we assess the sufficiency of the complaint on appeal, we must accept the allegations of fact that appear in the complaint and view those allegations in the light most favorable to the plaintiff.” ³Bush v. Bank of N.Y. Mellon, 313 Ga.App. 84, 89, 720 S.E.2d 370 (2011). And on appeal from the dismissal of a complaint, we owe no deference to the decision of the court below, and we must decide for ourselves whether the complaint states a claim upon which relief might properly be granted. See Benedict, 309 Ga.App. at 134(1), 709 S.E.2d 314.

According to its second amended complaint,⁴ Speedway, in March 2004, hired Oasis Trading Group, LLC, of which Blihovde was a member, to provide consulting services to Speedway about opportunities in the petroleum products business. Speedway advanced funds to Oasis each month for expenses incurred in connection with these consulting services, and Blihovde prepared invoices to Speedway reflecting these expenses. Beginning in 2006, Blihovde misrepresented these expenses and sent fraudulent invoices to Speedway, and when Speedway advanced funds for these expenses, he misappropriated substantial portions of the advances for himself. By September 2010, Blihovde had obtained more than $5 million from Speedway by his fraud. Then, on September 30, 2010, Speedway notified Oasis that it intended to discontinue its monthly advances of expenses. About a week later, Blihovde died, and soon thereafter, Oasis discovered the fraud and disclosed it to Speedway. We turn now to the specific claims asserted by Speedway that the court below dismissed.

Case No. A11A2350

1. In September 2008, Blihovde purchased a residence in Gwinnett County for nearly $1.5 million. According to Speedway, Blihovde used the proceeds of his fraud to pay a part of the purchase price, and he borrowed $1.2 million from Pinnacle Bank to pay the rest.⁵ In connection with his purchase of the residence, Blihovde gave a security interest in the residence to the Bank, and he used the proceeds of his fraud to purchase mortgage insurance for the benefit of the Bank. Blihovde subsequently used more than $200,000 that he obtained by his fraud to make improvements to this residence. In February 2011, the Bank foreclosed its security interest and acquired title to the residence.⁶ Based on these allegations, Speedway sued the Bank, contending that the Bank was unjustly enriched by the interests that Blihovde conveyed to it, that the conveyance of such interests are avoidable as fraudulent transfers, and that Speedway has a constructive trust and equitable lien upon the residence, which have priority over the Bank's security interest and survive the foreclosure. On the motion of the Bank, the court below dismissed the claims against it, and we affirm in part and reverse in part.

As our Supreme Court has explained, “a bona fide purchaser for value is protected against outstanding interests in land of which the purchaser has no notice[, and] a grantee in a security deed who acts in good faith stands in the attitude of a bona fide purchaser, and is entitled to the same protection.” Brock v. Yale Mortgage Corp., 287 Ga. 849, 852(2), 700 S.E.2d 583 (2010) (citations and punctuation omitted). Similarly, the Uniform Fraudulent Transfers Act provides that a fraudulent transfer is not voidable under OCGA § 18–2–74(a)(1) against “a person who took in good faith and for a reasonably equivalent value.” OCGA § 18–2–78(a). For these reasons, the Bank says, the claims that Speedway asserts against it fail. Perhaps anticipating that the Bank would assert these defenses,⁷ Speedway alleged in its second amended complaint that the Bank should be charged with constructive knowledge that Blihovde had defrauded Speedway, averring that Blihovde made false representations on his loan application to the Bank, that these representations would have caused a reasonable lender to make further inquiries, that the Bank had a duty to make such inquiries, and that such inquiries would have revealed the fraud. If the Bank were to be charged with knowledge of the fraud, of course, it might be sufficient to overcome these defenses. On appeal, however, the Bank vigorously disputes that it owed any duty to Speedway to make further inquiry about the loan application, even accepting, for the sake of argument, the allegation that the application was suspicious. About this, perhaps the Bank is right,⁸ but it simply does not matter for the purposes of this appeal.

Whether or not Speedway has alleged facts in its second amended complaint that, if true, would be sufficient to disprove these defenses, a plaintiff has no obligation to anticipate and plead away any defenses in his complaint. See OCGA § 9–11–8(a)(2) (complaint requires “short and plain statement of the claims” and “demand for judgment”). A motion to dismiss for failure to state a claim can properly be granted upon an affirmative defense only when the elements of the defense are admitted by the plaintiff or “completely disclosed on the face of the pleadings.” Murrey v. Specialty Underwriters, 233 Ga. 804, 807, 213 S.E.2d 668 (1975). See also Ghertner v. Solaimani, 254 Ga.App. 821, 825, n. 4, 563 S.E.2d 878 (2002) (“Where the facts necessary to establish an affirmative defense are admitted or not controverted, the court may dispose of the matter upon a motion to dismiss....”); Liner v. North, 194 Ga.App. 175, 179(2), 390 S.E.2d 263 (1990) (affirmative defense “may be properly raised by motion where the facts are admitted or are not controverted or are completely disclosed on the face of the pleadings”) (citation and punctuation omitted); Flanders v. Georgia Farm Bureau Mut. Ins. Co., 171 Ga.App. 188, 188–189, 318 S.E.2d 794 (1984) (same). Consequently, if the facts alleged in the complaint affirmatively prove a defense, a court may dismiss the complaint based upon the defense, but if the facts alleged in the complaint merely fail to affirmatively disprove a defense, no dismissal is warranted. Here, the allegations of the second amended complaint may or may not disprove the defenses on which the Bank relies, but they do not affirmatively prove those defenses.⁹ For these reasons, we reverse the dismissal of the claims against the Bank under the Uniform Fraudulent Transfers Act and for a constructive trust, equitable lien, and declaratory judgment, as well as the derivative claim for attorney fees and expenses of litigation.

The claim against the Bank for unjust enrichment, however, properly was dismissed. Speedway admitted in its second amended complaint that the Bank, in fact, loaned $1.2 million to Blihovde, and there is no allegation that Blihovde gave any value to the Bank except that to which it was entitled under the terms of the loan. Accordingly, the second amended complaint shows that the Bank has received nothing in the nature of a windfall and has not, therefore, been unjustly enriched. See Eastside Carpet Mills v. Dodd, 144 Ga.App. 580, 581, 241 S.E.2d 466 (1978) (“[T]he bank was not unjustly enriched, having received only those funds to which it was entitled as a result of its loan....”). For this reason, we affirm the dismissal of the...