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Safari v. RES-MS Bayfront, LLC

Court of Appeals of Georgia

July 14, 2015

SAFARI et al.
v.
RES-MS BAYFRONT, LLC et al

Fraudulent transfer. Fulton Superior Court. Before Judge Brasher.

Wagner, Johnston & Rosenthal, C. David Johnston, S. Bradley Shipe, for appellants.

Schulten, Ward & Turner, Kevin L. Ward, J. Zachary Zimmerman, for appellees.

OPINION

Branch, Judge.

Two LLCs -- RES-MS Bayfront, LLC, and RES-GA Bay Saint Louis, LLC -- that had outstanding judgments against Michael and Donna Safari filed suit against the Safaris and two Safari related entities, seeking to set aside six allegedly fraudulent property transfers. The trial court granted summary judgment in favor of the LLCs and denied the defendants' cross-motion. As a part of its decision, the trial court excluded Michael Safari's testimony regarding the value of the properties on the ground that the defendants failed to timely identify him as an expert witness. Because we find that the trial court erred by excluding Safari's testimony, we reverse.

Summary judgment is proper when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. OCGA § 9-11-56 (c). We review a grant or denial of summary judgment de novo and construe the evidence in the light most favorable to the nonmovant. Home Builders Assn. of Savannah v. Chatham

Page 638

County, 276 Ga. 243, 245 (1) (577 S.E.2d 564) (2003).

The undisputed facts show that on September 5, 2013, based on a March 2006 promissory note and related guarantees, RES-MS obtained a judgment against the Safaris and others in an amount in excess of $3 million. And on December 23, 2013, based on a November [333 Ga.App. 165] 2006 promissory note and related guarantees, RES-GA obtained a judgment against Michael Safari and others in an amount in excess of $11 million. Several months before these two judgments, RES-MS and RES-GA filed the present action seeking to set aside six property transfers[1] by the Safaris alleged to be fraudulent under the terms of the Georgia Uniform Fraudulent Transfers Act, OCGA § 18-2-70 et seq. (the " Act" ).

On September 26, 2013, the trial court entered a scheduling order providing that discovery would end January 15, 2014, and directing that the defendants identify expert witnesses by a certain date:

Disclosure of the names and opinions of the Defendant[s'] (whether in the case-in-chief, in counterclaim, in cross-claim, or in rebuttal) expert witnesses, if any, must be made no later than December 16, 2013. The disclosure shall include the names, subject matters, substance of facts and opinions, and a summary of the grounds for each opinion with respect to which any expert is expected to testify at trial on issues to which the party bears the burden of proof.

The scheduling order did not demand the identification of any other witnesses. It appears from the record that the defendants did not identify any expert witnesses by the deadline.

Following discovery, the parties filed cross-motions for summary judgment, and on June 20, 2014, the trial court entered an order granting the plaintiffs' motion and denying the Safaris'. In its order, the court addressed, among other things, the Safaris' defense that the properties could not be considered " assets" subject to the Act because they were fully encumbered by debt and the Act only governs the transfer of assets to the extent they are not encumbered. See OCGA § 18-2-71 (2) (A) (assets do not include " [p]roperty to the extent it is encumbered by a valid lien." ) (emphasis supplied); 18-2-71 (16) (" '[t]ransfer' means every mode ... of disposing of or parting with an asset ..." ); Target Corp. v. Amerson, 326 Ga.App. 734, 740 (1) (d), n. 22 (755 S.E.2d 333) (2014) (where the fair-market value of the property is less than the encumbrances on the property, the property is not considered an asset under the Act). The court then analyzed the value of the six properties and found that each had more value than its associated [333 Ga.App. 166] indebtedness and that therefore " the properties in question are 'assets' as that term is defined in the Act." In addressing that question, however, the trial court excluded any testimony by Michael Safari as to the value of the six properties on the ground that the defendants had failed to identify him as an expert witness by the deadline given in the scheduling order. The court went on to find undisputed evidence to support the plaintiffs' claim that the properties were fraudulently transferred. Accordingly, the trial court granted summary judgment in favor of RES-MS and RES-GA on their claims of fraudulent transfer of the six properties.

The appellants contend the trial court erred by excluding Safari's testimony. We agree. Although trial courts have broad discretion to control discovery, the trial court's decision to exclude Safari's testimony was erroneous as a matter of ...


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