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Church Street, LLC v. SM Corrigan, LLC

Court of Appeals of Georgia, First Division

September 24, 2019

CHURCH STREET, LLC et al.
v.
SM CORRIGAN, LLC et al. JAMES J. CORRIGAN, AS TRUSTEE OF THE JAMES J. CORRIGAN 1989 TRUST
v.
6428 CHURCH STREET, LLC et al. SM CORRIGAN, LLC et al.
v.
6428 CHURCH STREET, LLC et al.

          BARNES, P. J., MERCIER and BROWN, JJ.

          MERCIER, JUDGE.

         These related appeals arise from a business dispute involving James Corrigan ("James"), Shannon Corrigan ("Shannon"), Kenneth Downing ("Downing"), and their corporations. In 2011, James, as the Trustee of the James J. Corrigan 1989 Trust, sued Downing, 6428 Church Street, LLC ("6428 Church"), and C&S 1, LLC ("C&S") (collectively, "the defendants") for numerous claims, including breach of contract and fraud. The next year, Shannon and her company, SM Corrigan, LLC ("SMC"), brought a separate suit against Downing and 6428 Church, alleging claims for, among other things, breach of contract and fraud. In response to the second suit, Downing and 6428 Church filed counterclaims for breach of contract and litigation expenses.

         The two lawsuits were consolidated in 2013, and the various parties moved for summary judgment. In a single order, the trial court granted summary judgment to the defendants on the fraud claims brought by James, Shannon, and SMC.[1] It also granted Shannon and SMC summary judgment on Downing and 6428 Church's counterclaims.

         In Case No. A19A0930, the defendants appeal the trial court's order granting Shannon and SMC summary judgment on their counterclaims.[2] In Case No. A19A0931, James (as Trustee of the James J. Corrigan 1989 Trust) challenges the trial court's grant of summary judgment to the defendants on his fraud claim. Finally, in Case No. A19A0963, Shannon and SMC appeal the trial court's fraud determination as to them. For reasons that follow, we affirm in part and reverse in part the trial court's ruling in Case No. A19A0930, and we affirm the rulings in Case No. A19A0931 and Case No. A19A0963.

         Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, 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). We review the grant of summary judgment de novo, construing the evidence and all reasonable inferences in favor of the non-moving party. See Pacrim Assoc. v. Turner Home Entertainment, 235 Ga.App. 761, 762 (510 S.E.2d 52) (1998).

         So viewed, the evidence shows that James and Downing began working together in the 1980s, brokering and investing in real estate. In 2006, the two entered into a joint venture to purchase, refurbish, and refinance and/or sell Riverdale Villas, an apartment complex located in Riverdale, Georgia.[3] The property was acquired using money loaned by James, and ownership was placed within 6428 Church, a limited liability corporation of which Downing was the manager and sole member.

         James subsequently informed Downing that his sister, Shannon, wanted to participate in the Riverdale Villas venture, and they negotiated her participation, with James acting as her agent throughout the transaction. On June 21, 2006, Shannon purchased a 70 percent ownership interest in the property for approximately $1.2 million. As part of the acquisition, she made an immediate capital investment of $590, 000 that was to be used to refurbish the property and to repay James a portion of the money he had loaned to the venture. She also signed notes and guarantees for the remainder of the purchase price. Shannon and 6428 Church executed a co-tenancy agreement that governed their ownership interests and established 6428 Church as the manager of the property. Shannon then transferred her 70 percent interest to SMC, her limited liability corporation.

         According to Downing, "it[] [was] always . . . my understanding that this was a buy and refi, or buy-and-sell situation with the property, that it would be a one to two-year type of investment." Shannon also expected a maximum two-year investment that would provide her a guaranteed rate of return and tax benefits. After renovating Riverdale Villas, however, the joint venture continued to own and operate the property well beyond this two-year time frame. No refinancing ever occurred, and Downing testified that the property did not generate any profit and declined in value.

         Shortly after the Riverdale Villas venture commenced, James took part in another venture with Downing and several others to purchase the Sheraton House Apartments, an apartment complex located in Forest Park, Georgia. On September 14, 2006, James wired Downing $400, 000 for the down payment on Sheraton House. Although a portion of the money was later repaid to James, the venture retained $100, 000, giving James a stake in the Sheraton House profits and losses. Downing testified that James was not a party to the co-tenancy agreement governing the Sheraton House venture, but the partnership "worked out some sort of creative deal where he would share in the profits and losses." Title to Sheraton House was placed in C&S, another limited liability corporation of which Downing was the manager and sole member.

         Within a few months, James began asking Downing questions about the parties' respective financial stakes in the Sheraton House venture. He posed further questions to all of the partners regarding finances and the day-to-day operation of the business. In reply, Downing asked James to direct all questions to him, rather than to the other Sheraton House partners, since James was not a party to the co-tenancy agreement.

         Eventually, James became frustrated with what he viewed as a lack of response to his inquiries. James demanded return of the funds he had invested in the Sheraton House venture, plus interest. No funds were returned. At the time of Downing's deposition, C&S still owned Sheraton House, but the property was on the verge of foreclosure. Although the property had a positive cash flow, two of the venture's other partners had removed $60, 000 from the operating account without consulting Downing or James.

         With both ventures struggling financially, James, Shannon, and SMC sued the defendants for breach of contract, fraud, and other claims. 6428 Church filed a counterclaim against Shannon for breach of the co-tenancy agreement. Downing and 6428 Church also alleged a counterclaim against Shannon and SMC for litigation expenses. The defendants moved for summary judgment on the fraud allegations, and Shannon and SMC filed a cross-motion for summary judgment on the counterclaims. The trial court granted each motion. These appeals followed.

         Case ...


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