Speir v. Krieger
| Decision Date | 20 November 1998 |
| Docket Number | No. A98A1246.,A98A1246. |
| Citation | 509 S.E.2d 684,235 Ga. App. 392 |
| Parties | SPEIR v. KRIEGER. |
| Court | Georgia Court of Appeals |
OPINION TEXT STARTS HERE
Merry & Associates, Rebecca S. Merry, Gainesville, Eldridge Melton, for appellant.
S. Robert Hahn, Jr., Norcross, for appellee.
This is an appeal from a Clayton County trial court's order granting appellee/plaintiff Craig Krieger's motion for summary judgment and denying appellant/defendant Thomas Lee Speir's summary judgment motion. This case is one in a series of ongoing lawsuits filed by plaintiff Krieger against McFrugal Auto Rental, Inc. ("McFrugal Auto") and its corporate officers.
McFrugal Auto is a closely held corporation whose operating officers and sole shareholders are appellant Thomas Speir and Donald Roveto, who is not a party to this appeal. Speir is registered with the Secretary of State as the Corporate Secretary and Agent for Service for McFrugal Auto; Roveto is registered as Chief Executive Officer ("CEO").
In 1993, plaintiff was injured when the vehicle he was driving was hit by a car rented from McFrugal Auto. Thereafter, plaintiff learned that McFrugal Auto carried no liability insurance on its vehicles. Plaintiff filed suit against McFrugal Auto in the State Court of Fulton County based upon McFrugal Auto's failure to carry third-party liability insurance, even though McFrugal sold such non-existent insurance to its renters, and even though such insurance coverage was mandated under state law in order to protect third parties, such as plaintiff, in case of injury. A default judgment was entered against McFrugal Auto on December 18, 1995, and a hearing was held on damages. The Fulton County State Court awarded plaintiff $257,248, $250,000 of which was in punitive damages reflecting plaintiff's claim of fraud in the sale of non-existent insurance. McFrugal Auto did not contest the award of such damages or the factual predicate that provided the foundation for the award.
However, on October 1, 1995, prior to the above judgment, McFrugal Auto's CEO Donald Roveto sold the assets of McFrugal Auto, as well as the assets of a separate, closely held corporation, McFrugal Holding Company, Inc. ("McFrugal Holding"),1 to a new corporation formed for the purpose of acquiring the assets of McFrugal Auto and McFrugal Holding, McRent-A-Car, Inc. ("McRent"). This action rendered both McFrugal Auto and McFrugal Holding insolvent.
Plaintiff then filed a suit in equity against McFrugal Auto and McFrugal Holding (the "McFrugal Entities") and McRent in the Superior Court of Fulton County, seeking to "pierce the corporate veil" between the corporations by demonstrating their fraudulent operation. In his complaint, plaintiff alleged that there existed a commingling of assets between the McFrugal Entities in order to avoid payment of debt (including plaintiff's judgment), which pierced the corporate veils of the McFrugal Entities. Plaintiff voluntarily dismissed McRent from the suit, and on January 22, 1997, a judgment was entered finding against the McFrugal Entities as to their liability for the prior $257,248 state court judgment against McFrugal Auto. As to the issues raised in plaintiff's complaint, the Fulton County Superior Court specifically found as a matter of fact and law that: (Emphasis supplied.)
No challenge was made to the findings of the Fulton County Superior Court or the factual predicates in support thereof.
Plaintiff then filed the instant suit in equity in the Superior Court of Fulton County against appellant Thomas Speir and Donald Roveto, as sole corporate, operating officers of McFrugal Auto and McFrugal Holding. For jurisdictional reasons, the case was transferred to Clayton County. In his complaint, plaintiff sought to hold Speir and Roveto, as sole corporate, operating officers and shareholders of the McFrugal Entities, liable for the judgment against the McFrugal Entities, as reflected in the orders of the two Fulton County lawsuits. In addition, plaintiff amended his complaint, alleging that Speir's and Roveto's actions demonstrated a pattern of racketeering activity within the meaning of OCGA § 16-14-1 et seq., civil Racketeer Influenced & Corrupt Organizations ("RICO") Act, and sought treble damages pursuant to OCGA § 16-14-6(c).
Plaintiff filed a motion for summary judgment, as did Speir and Roveto. The trial court heard the matter on July 17, 1997. The Clayton County trial court, "[a]fter consideration of the arguments of counsel," found no justiciable issue of material fact and granted summary judgment to plaintiff; the court denied the defendants' summary judgment motion. In addition, the Clayton County trial court found "evidence of a specific pattern of racketeering activity, in that these defendants operated as an auto leasing company with many offices in the State, leasing vehicles to be operated upon the streets of and highways of this state without one dime's worth of liability insurance, and as Judge Bonner said [in the Fulton Superior Court case], perpetrated `fraud and injustice upon Georgia consumers.'" Pursuant to OCGA § 16-14-6(c), the trial court ordered that the damage award against the corporation be trebled to the amount of $771,744.
Roveto did not challenge the trial court's order, and a final judgment was entered against him on January 30, 1998. Appellant Speir filed this appeal. Held:
At the outset we recognize that Speir, in his notice of appeal, specifically requested that "No transcripts are to be transmitted to the Court of Appeals." This includes a transcript of the hearing on the summary judgment motions and all evidence introduced in relation thereto. This also includes the evidence and pleadings that formed the basis for the two Fulton County judgments.
It is a sound rule of appellate practice that the burden is always on the appellant in asserting error to show it affirmatively by the record. The brief cannot serve in the place of the record or the transcript for the purpose of demonstrating error or for supporting a claim of error. State v. O'Quinn, 192 Ga.App. 359, 360(1), 384 S.E.2d 888 (1989). Further, "[e]very presumption of legality will be made in favor of a judgment by a court of competent jurisdiction[,] and it will be presumed that a judgment of a court of competent jurisdiction is supported by every fact essential to make such judgment valid and binding." (Citations and punctuation omitted.) First Financial Ins. Co. v. Mathis, 214 Ga.App. 537, 539, 448 S.E.2d 87 (1994).
Thus, we will presume as factually and legally correct the Fulton County State Court order which awarded damages to plaintiff based upon plaintiff's claims that (1) McFrugal Auto failed to carry liability insurance in violation of State law, and (2) McFrugal Auto sold the non-existent liability insurance to its renters. We will presume as correct the Fulton County Superior Court's factual determination that the McFrugal Entities "were operated as one entity, commingled assets, and used corporate entities to perpetuate fraud and injustice upon Georgia consumers, of which the plaintiff was one." (Emphasis supplied.) We note that Speir did not challenge these findings or the evidence in support thereof.
Further, we will presume as correct the Fulton County Superior Court's legal determination piercing the corporate veil between the McFrugal Entities because of fraudulent operation and commingling of assets by its operators thereby perpetrating fraud and injustice on the consumers of Georgia. Speir did not challenge the determination "piercing the corporate veil" or the evidence in support thereof.
Here, our review is strictly limited to the factual and legal issues legitimately raised through the Clayton County pleadings and the Clayton County Superior Court's order as reflected in the record before us.
1. Speir contends that the Fulton County Superior Court order which "pierced the corporate veil" as to the McFrugal Entities simply held McFrugal Holding liable as the "parent company" of McFrugal Auto and did not establish liability as to the operators of the corporations. We disagree.
(a) There is no competent evidence in the record before this Court that McFrugal Holding is the "parent" corporation of McFrugal Auto.2 Moreover, Speir never attempted to allege a parent/subsidiary relationship in the trial court. In all pleadings, Speir referred to McFrugal Auto and McFrugal Holding as having individual corporate status. In the court below, Speir maintained that "[t]he McFrugal companies were `operated as one entity,' but the [Fulton Superior Court] Judgment did not remove the corporate status of any McFrugal entity." Compare Fort & Turner Enterprises v. Scrocca, 195 Ga.App. 554, 394 S.E.2d 364 (1990). We will not consider this new factual contention regarding a parent/subsidiary relationship, which apparently was neither raised nor ruled upon in the court below.
(b) On October 1, 1995, Roveto, acting on behalf of Speir as the only other shareholder and corporate officer of McFrugal Auto, sold all of the assets of McFrugal Holding and McFrugal Auto to a third corporation, McRent, formed for the specific purpose of receiving the assets. This rendered both McFrugal Auto and McFrugal Holding insolvent. Thereafter, plaintiff filed the Fulton County Superior Court suit seeking to "pierce the corporate veil" as to McFrugal Auto and McFrugal Holding.
If, as Speir contends before this Court, the "purpose" of the Fulton Superior Court action was only to pierce the veil between McFrugal Auto and McFrugal Holding "in order to allow Plaintiff to recover from the [allege...
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