GEORGIA COMMERCIAL STORES, INC.
GEORGIA COMMERCIAL STORES, INC.
BARNES, P. J., MCMILLIAN and MERCIER, JJ.
Barnes, Presiding Judge.
Commercial Stores, Inc. ("Georgia Commercial") is a
judgment creditor of Pargar, LLC, an insolvent company.
Daniel T. Forsman was the managing member of Pargar who
controlled its day-to-day operations. Unable to collect on
its debt from Pargar, Georgia Commercial sued Forsman to
recover an alleged preferential payment that Forsman
authorized Pargar to make to himself when Pargar was
insolvent and faced foreclosure on all of its assets. Georgia
Commercial alleged several causes of action against Forsman,
including breach of fiduciary duty and violation of
Georgia's Uniform Fraudulent Transfers Act, OCGA §
18-2-70 et seq. ("UFTA"). The trial court granted
summary judgment to Forsman and denied it to Georgia
Commercial on the latter's breach of fiduciary duty
claim. The trial court denied summary judgment to Forsman on
Georgia Commercial's UFTA claim. The parties now appeal
the summary judgment rulings in these companion cases.
No. A17A0727, we conclude that genuine issues of material
fact exist as to whether Forsman breached his fiduciary duty
to conserve and manage the assets of Pargar in trust for its
creditors by causing Pargar to pay him $239, 011 when the
company was insolvent and faced foreclosure on all of its
assets. Accordingly, we reverse the trial court's grant
of summary judgment to Forsman on Georgia Commercial's
breach of fiduciary duty claim, and we affirm the trial
court's denial of summary judgment to Georgia Commercial
on that claim. In Case No. A17A0728, we conclude that genuine
issues of material fact exist as to whether the $239, 011
payment to Forsman was made with the intent to defraud
Pargar's creditors and therefore affirm the trial
court's denial of summary judgment to Forsman on Georgia
Commercial's UFTA claim.
Summary judgment is appropriate only if the pleadings and
evidence "show that there is no genuine issue as to any
material fact and that the moving party is entitled to a
judgment as a matter of law." OCGA § 9-11-56 (c).
Summary judgments enjoy no presumption of correctness on
appeal, and an appellate court must satisfy itself de novo
that the requirements of OCGA § 9-11-56 (c) have been
met. In our de novo review of the grant or denial of a motion
for summary judgment, we must view the evidence, and all
reasonable inferences drawn therefrom, in the light most
favorable to the nonmovant.
(Citation and punctuation omitted.) Essien v.
CitiMortgage, 335 Ga.App. 727, 728 (781 S.E.2d 599)
viewed, the record reflects that Pargar was a Georgia limited
liability company formed in December 1998. Pargar had two
members, Forsman and the Prudential Real Estate Financial
Services of America, Inc. ("Prudential"), with
Prudential controlling a majority of the membership
interests. Forsman, a certified public accountant with
significant prior experience as a controller and chief
financial officer, managed Pargar's day-to-day operations
and served as its sole Director, President, Treasurer, and
Secretary. Prudential, however, had to approve all of
Pargar's significant financial transactions.
its formation, Pargar purchased an existing realty company
that was valued at over $16 million. Pargar funded the
purchase in part through an $11, 750, 000 loan obtained from
Prudential. The Prudential loan was secured by a first
priority blanket security interest in all of Pargar's
assets and a pledge of all of Pargar's membership
interests not already owned by Prudential. The Prudential
loan had an original maturity date of December 31, 2005,
which was later extended to June 30, 2012. Pargar also later
obtained a $250, 000 loan from Forsman pursuant to an
unsecured promissory note.
2007, Pargar entered into a written lease agreement to rent
certain property in Dunwoody for a period of 10 years, with a
lease termination date of July 31, 2017. Georgia Commercial
subsequently purchased the property, assumed the lease, and
became Pargar's landlord.
years later, when the Prudential loan to Pargar matured on
June 30, 2012, Pargar was unable to repay it. Pargar's
financial records reflect that it was insolvent both on a
"going concern" basis because it was unable to
repay all of its debts as they matured and on a "balance
sheet" basis because its debts exceeded the fair
valuation of its assets. According to Pargar's financial
records, the total value of Pargar's assets was $7, 223,
403, but it still owed $8, 496, 012 on the Prudential loan.
this same time period in 2012, Forsman, acting in his
capacity as Pargar's managing member, had Pargar pay him
$239, 011 to satisfy the outstanding balance of the unsecured
loan he had previously extended to the company. The payment
to Forsman was made with the knowledge and approval of
March 2013, when the Prudential loan remained unpaid and
Pargar's insolvent financial condition remained
unchanged, Prudential foreclosed on its first priority
security interest in Pargar's assets and on Forsman's
membership interest in Pargar. Prudential then sold
Pargar's remaining assets and began winding down the
made monthly lease payments to Georgia Commercial through
March 2013 when Prudential conducted the foreclosure, but
Pargar defaulted on its payments to Georgia Commercial from
that point forward and vacated the leased property. Georgia
Commercial was notified of Prudential's foreclosure and
sale of Pargar's assets, but not of the $239, 011 payment
made to Forsman.
Commercial sued Pargar for the rent due for the remaining
term of the lease and obtained a judgment against Pargar in
the principal amount of $1, 051, 702, plus interest. During
post-judgment discovery, Georgia Commercial first learned of
the $239, 011 that Pargar paid to Forsman in 2012 based on
his previous loan to the company.
Commercial subsequently filed the instant action against
Forsman, contending that Georgia Commercial had been unable
to collect on its judgment against Pargar in part because of
the allegedly improper $239, 011 payment to Forsman that
occurred when Pargar was insolvent and foreclosure on its
assets was imminent. Georgia Commercial sought imposition of
a constructive trust and disgorgement of the $239, 011 from
Forsman, and it alleged multiple causes of action against him
in its complaint, as amended, including breach of fiduciary
duty and intentional fraudulent transfer in violation of the
the parties filed cross-motions for summary judgment, the
trial court granted summary judgment to Forsman and denied it
to Georgia Commercial on the latter's breach of fiduciary
duty claim, concluding that Georgia Commercial had failed to
prove a sufficient causal connection between the alleged
breach and its alleged injury. The trial court denied summary
judgment to Forsman on Georgia Commercial's UFTA claim
for intentional fraudulent conveyance, concluding that
genuine issues of material fact existed as to whether ...