FIFTH DIVISION DILLARD, P. J., MERCIER and MARKLE, JJ.
NOTICE: Motions for reconsideration must be physically received in our clerk’s office within ten days of the date of decision to be deemed timely filed. https://www.gaappeals.us/rules
May 15, 2023
In the Court of Appeals of Georgia A23A0002, A23A0488. BLACKBURNE & SONS REALTY CAPITAL CORPORATION v. HUGHES CONSTRUCTION, INC. et al.; and vice versa.
MARKLE, Judge.
Blackburne & Sons Realty Capital Corporation organized a group of investors
who loaned money to build several hospice facilities, including one in Eatonton and
one in Monticello, that are the subject of these appeals. The loans were based on
certain appraisals, and, when the owners defaulted on the loans, Blackburne
discovered that the appraisals had over-valued the real property. Blackburne then
sued the appraisers, Peach Appraisal Group, Inc. (PAG), and the builder, Hughes
Company, and its owner (collectively the Hughes defendants),1 alleging that the
builder fraudulently obtained the over-valued appraisals in order to secure the loans
1 Hughes Construction, Inc.’s correct name is Hughes Company. as a means to recoup money it was owed.2 Both parties moved for summary judgment.
The trial court granted summary judgment to the Hughes defendants with regard to
the claims involving the Eatonton facility, and Blackburne appeals in Case No.
A23A0002. As to the claims involving the Monticello facility, the trial court denied
both parties’ motions and issued a certificate of immediate review. We granted the
interlocutory application, and the Hughes defendants now appeal from that order in
Case No. A23A0488. Because Blackburne is not the real party in interest, we vacate
the judgments in both cases, and remand the cases for further proceedings.
Summary judgment is appropriate if the pleadings and the undisputed evidence show that there exists no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. OCGA § 9-11-56 (c). On appeal from the grant or denial of summary judgment, the appellate courts conduct a de novo review, construing all reasonable inferences in the light most favorable to the nonmoving party.
(Citation omitted.) Rome Granite v. Pinnacle Bank, 364 Ga. App. 848, 849 (872 SE2d
895) (2022).
2 Blackburne originally filed two separate suits, one arising from the Eatonton loan and the other from the Monticello loan. The trial court considered each case separately. We have consolidated them on appeal.
2 So viewed, the record shows that the Hughes defendants were hired to build
several hospice facilities for George West.3 Relevant to these appeals, in 2011, the
Hughes defendants contracted to build a facility in Monticello, and one in Eatonton.
At some point, West stopped making payments, and the Hughes defendants ceased
construction.4
In 2015, West sought funds to complete construction of the Eatonton facility.
West contacted PAG and requested it prepare an appraisal of the property. PAG
obtained cost sheets from the Hughes defendants, showing the cost to build the
Eatonton facility, and PAG ultimately valued the finished property at $3.4 million.
Blackburne, which operates as a commercial loan broker and servicer, solicited
investors to fund the loan. Blackburne sent copies of the appraisal to its pool of
investors, and ultimately agreed to fund a loan in the amount of two million dollars
for completion of the Eatonton building.
3 Drs. George West and Peter Lee utilized a series of corporations to handle the ownership of the land and buildings, and created other companies to lease and operate the facilities. Although Blackburne conducted extensive discovery regarding the relationship between the entities, the corporate structure is not relevant to our discussion here. Because the record reflects that the Hughes defendants were in contact primarily with West, we refer to him in this opinion. 4 West was in arrears of over five million dollars.
3 For the Monticello property, Blackburne directly hired PAG to complete an
appraisal. PAG again obtained cost estimates from the Hughes defendants and valued
the Monticello property at $3.45 million. The investors received the appraisal and
Blackburne financed a loan in the amount of $2.3 million for the Monticello facility.
The funds from both loans were used to pay some of the outstanding balance West
owed the Hughes defendants.
By late 2017, the Eatonton loan went into default. Blackburne foreclosed on
the property, at which time it learned that the Eatonton property was worth only about
$675,000. In addition, the Monticello loan went into default, and Blackburne
foreclosed on that property as well.
Blackburne then filed suit against PAG on behalf of the investors. Blackburne
ultimately settled with PAG, and it filed an amended complaint against the Hughes
defendants, alleging fraud and conspiracy to commit fraud.
Following extensive discovery, both Blackburne and the Hughes defendants
moved for summary judgment. In its motion, Blackburne argued that the Hughes
defendants inflated the building costs to induce it to loan the funds in order to obtain
payment on the outstanding debt, and that it was justified in relying on the cost sheets
and appraisals. In their motion, the Hughes defendants argued that Blackburne lacked
4 standing to bring a fraud claim on behalf of the investors; the claims were barred by
the statute of limitation; and the fraud claim failed on the merits because there was
no intent, justifiable reliance, or damages to Blackburne.
To address the standing issue, Blackburne submitted the deposition of its
corporate executive, who testified that Blackburne had the authority to file suit on its
investor’s behalf pursuant to a contract. She further explained that any investor who
did not wish to participate in the suit was required to assign their claims to investors
who did.
Following a hearing on the motions for summary judgment, at which the parties
disputed whether Blackburne had standing as the real party in interest, Blackburne
moved to substitute the individual investors as the real parties in interest under
OCGA §§ 9-11-17; 9-11-19. The Hughes defendants opposed the motion, noting that
Blackburne had waited nearly two years before filing the proposed substitution,
despite knowing that it was at issue. Thus the Hughes defendants argued that they
would be prejudiced if the motion were granted because discovery would have to be
reopened.
The trial court granted summary judgment to the Hughes defendants with
regard to the Eatonton property. Although the court rejected the procedural claims for
5 lack of standing and statute of limitation, it concluded that there was no justifiable
reliance because the Hughes defendants never sent the allegedly false costs to
Blackburne, and the appraisal was not prepared for Blackburne. It does not appear
that the trial court ruled on the pending motion to substitute parties. Blackburne
appeals from the order granting summary judgment to the Hughes defendants in Case
No. A23A0002.
With regard to the Monticello property, the trial court denied both parties’
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FIFTH DIVISION DILLARD, P. J., MERCIER and MARKLE, JJ.
NOTICE: Motions for reconsideration must be physically received in our clerk’s office within ten days of the date of decision to be deemed timely filed. https://www.gaappeals.us/rules
May 15, 2023
In the Court of Appeals of Georgia A23A0002, A23A0488. BLACKBURNE & SONS REALTY CAPITAL CORPORATION v. HUGHES CONSTRUCTION, INC. et al.; and vice versa.
MARKLE, Judge.
Blackburne & Sons Realty Capital Corporation organized a group of investors
who loaned money to build several hospice facilities, including one in Eatonton and
one in Monticello, that are the subject of these appeals. The loans were based on
certain appraisals, and, when the owners defaulted on the loans, Blackburne
discovered that the appraisals had over-valued the real property. Blackburne then
sued the appraisers, Peach Appraisal Group, Inc. (PAG), and the builder, Hughes
Company, and its owner (collectively the Hughes defendants),1 alleging that the
builder fraudulently obtained the over-valued appraisals in order to secure the loans
1 Hughes Construction, Inc.’s correct name is Hughes Company. as a means to recoup money it was owed.2 Both parties moved for summary judgment.
The trial court granted summary judgment to the Hughes defendants with regard to
the claims involving the Eatonton facility, and Blackburne appeals in Case No.
A23A0002. As to the claims involving the Monticello facility, the trial court denied
both parties’ motions and issued a certificate of immediate review. We granted the
interlocutory application, and the Hughes defendants now appeal from that order in
Case No. A23A0488. Because Blackburne is not the real party in interest, we vacate
the judgments in both cases, and remand the cases for further proceedings.
Summary judgment is appropriate if the pleadings and the undisputed evidence show that there exists no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. OCGA § 9-11-56 (c). On appeal from the grant or denial of summary judgment, the appellate courts conduct a de novo review, construing all reasonable inferences in the light most favorable to the nonmoving party.
(Citation omitted.) Rome Granite v. Pinnacle Bank, 364 Ga. App. 848, 849 (872 SE2d
895) (2022).
2 Blackburne originally filed two separate suits, one arising from the Eatonton loan and the other from the Monticello loan. The trial court considered each case separately. We have consolidated them on appeal.
2 So viewed, the record shows that the Hughes defendants were hired to build
several hospice facilities for George West.3 Relevant to these appeals, in 2011, the
Hughes defendants contracted to build a facility in Monticello, and one in Eatonton.
At some point, West stopped making payments, and the Hughes defendants ceased
construction.4
In 2015, West sought funds to complete construction of the Eatonton facility.
West contacted PAG and requested it prepare an appraisal of the property. PAG
obtained cost sheets from the Hughes defendants, showing the cost to build the
Eatonton facility, and PAG ultimately valued the finished property at $3.4 million.
Blackburne, which operates as a commercial loan broker and servicer, solicited
investors to fund the loan. Blackburne sent copies of the appraisal to its pool of
investors, and ultimately agreed to fund a loan in the amount of two million dollars
for completion of the Eatonton building.
3 Drs. George West and Peter Lee utilized a series of corporations to handle the ownership of the land and buildings, and created other companies to lease and operate the facilities. Although Blackburne conducted extensive discovery regarding the relationship between the entities, the corporate structure is not relevant to our discussion here. Because the record reflects that the Hughes defendants were in contact primarily with West, we refer to him in this opinion. 4 West was in arrears of over five million dollars.
3 For the Monticello property, Blackburne directly hired PAG to complete an
appraisal. PAG again obtained cost estimates from the Hughes defendants and valued
the Monticello property at $3.45 million. The investors received the appraisal and
Blackburne financed a loan in the amount of $2.3 million for the Monticello facility.
The funds from both loans were used to pay some of the outstanding balance West
owed the Hughes defendants.
By late 2017, the Eatonton loan went into default. Blackburne foreclosed on
the property, at which time it learned that the Eatonton property was worth only about
$675,000. In addition, the Monticello loan went into default, and Blackburne
foreclosed on that property as well.
Blackburne then filed suit against PAG on behalf of the investors. Blackburne
ultimately settled with PAG, and it filed an amended complaint against the Hughes
defendants, alleging fraud and conspiracy to commit fraud.
Following extensive discovery, both Blackburne and the Hughes defendants
moved for summary judgment. In its motion, Blackburne argued that the Hughes
defendants inflated the building costs to induce it to loan the funds in order to obtain
payment on the outstanding debt, and that it was justified in relying on the cost sheets
and appraisals. In their motion, the Hughes defendants argued that Blackburne lacked
4 standing to bring a fraud claim on behalf of the investors; the claims were barred by
the statute of limitation; and the fraud claim failed on the merits because there was
no intent, justifiable reliance, or damages to Blackburne.
To address the standing issue, Blackburne submitted the deposition of its
corporate executive, who testified that Blackburne had the authority to file suit on its
investor’s behalf pursuant to a contract. She further explained that any investor who
did not wish to participate in the suit was required to assign their claims to investors
who did.
Following a hearing on the motions for summary judgment, at which the parties
disputed whether Blackburne had standing as the real party in interest, Blackburne
moved to substitute the individual investors as the real parties in interest under
OCGA §§ 9-11-17; 9-11-19. The Hughes defendants opposed the motion, noting that
Blackburne had waited nearly two years before filing the proposed substitution,
despite knowing that it was at issue. Thus the Hughes defendants argued that they
would be prejudiced if the motion were granted because discovery would have to be
reopened.
The trial court granted summary judgment to the Hughes defendants with
regard to the Eatonton property. Although the court rejected the procedural claims for
5 lack of standing and statute of limitation, it concluded that there was no justifiable
reliance because the Hughes defendants never sent the allegedly false costs to
Blackburne, and the appraisal was not prepared for Blackburne. It does not appear
that the trial court ruled on the pending motion to substitute parties. Blackburne
appeals from the order granting summary judgment to the Hughes defendants in Case
No. A23A0002.
With regard to the Monticello property, the trial court denied both parties’
motions for summary judgment, finding that issues of material fact remained because
the appraisal was prepared at Blackburne’s request. The trial court issued a certificate
of immediate review, and we granted the interlocutory application. The Hughes
defendants now appeal from this order in Case No. A23A0488.
Case No. A23A0002
1. In this case, Blackburne appeals from the trial court’s order granting
summary judgment to the Hughes defendants, arguing that the trial court erred by
(1) ignoring its claims of indirect fraud; (2) speculating about its duty to perform due
diligence where the testimony established that it was standard to rely on an appraisal;
and (3) finding that it could not have justifiably relied on the appraisal for the
6 Eatonton facility.5 The Hughes defendants urge this Court to affirm on the alternate
ground that Blackburne lacked standing to bring the fraud claims on behalf of its
investors because fraud claims are not assignable. We conclude that the standing
argument is misplaced, and the trial court erred by ruling on the summary judgment
motion before considering the pending motion to add the real parties in interest.
Under OCGA § 44-12-24, “a right of action is assignable if it involves, directly
or indirectly, a right of property. A right of action for personal torts, for legal
malpractice, or for injuries arising from fraud to the assignor may not be assigned.”6
As we have explained, “[a]n assignment is an absolute, unconditional, and completed
transfer of all right, title, and interest in the property that is the subject of the
assignment, with the concomitant total relinquishment of any control over the
property.” (Citation and punctuation omitted.) Phillips v. Selecto Scientific, 308 Ga.
5 “The tort of fraud has five elements: a false representation by a defendant, scienter, intention to induce the plaintiff to act or refrain from acting, justifiable reliance by plaintiff, and damage to plaintiff.” (Citations and punctuation omitted.) Fuller v. Perry, 223 Ga. App. 129, 131 (1) (476 SE2d 793) (1996). 6 We note that there was testimony that individual investors who did not want to participate in the lawsuit were required to assign their claims to investors who did. Given our conclusion that the trial court must address the motion to add the real parties in interest, we do not discuss the propriety of this requirement at this stage.
7 App. 412, 413 (1) (707 SE2d 615) (2011); see also 1 Ga. Forms Legal & Bus. § 7:1
(Sept. 2022) (“Generally, assignments involve the transfer of rights, including
contractual rights, choses in action, or rights in or connected with property, rather
than a transfer of property itself.”). Assignments must be in writing to be enforceable.
Phillips, 308 Ga. App. at 414 (1).
Although the Hughes defendants contend that Blackburne lacks standing
because the investors could not assign their claims to Blackburne under the plain
meaning of OCGA § 44-12-24, that is not precisely what happened here. According
to the evidence in the record, the investors have not transferred all of their rights and
interest to Blackburne; rather, the investors retain the right to receive any recovery
from the suits. Phillips, 308 Ga. App. at 413 (1). Moreover, there is no evidence of
a written assignment in the record. Id. at 414 (1). As a result, we cannot conclude that
the fraud claims have been assigned here.7
7 The Hughes defendants point to RES-GA McDonough v. Taylor English Duma, 302 Ga. 444 (807 SE2d 381) (2017); RES-GA Hightower v. Golshani, 334 Ga. App. 176 (778 SE2d 805) (2015), in support of their standing argument. But those cases are distinguishable because they involve an assignment of a debt from one entity to another and do not involve a loan servicer suing on behalf of the owners, as is the case here.
8 Instead, the Hughes defendants’ arguments highlight a similar concern:
Whether Blackburne is the real party in interest. Questions of standing and real party
in interest are related concepts. See New Cingular Wireless PCS v. Dept. of Revenue,
308 Ga. 729, 732, n. 3 (843 SE2d 431) (2020). Where, as here, the issue concerns
who suffered the injury traceable to the defendant’s conduct, it is more appropriately
considered as a real party in interest inquiry. Tri-County Investment Group v.
Southern States, 231 Ga. App. 632, 636 (2) (500 SE2d 22) (1998) (where investment
group that did not own property filed suit for damage from groundwater
contamination, defendant’s challenge to group’s standing was actually a real party in
interest objection); see also Davis & Shulman’s Ga. Practice and Procedure § 4:3
(2022-2023); 6A Charles A. Wright et al. Federal Practice and Procedure Civil § 1542
(April 2023 update) (explaining difference between standing and real party in
interest). Under OCGA § 9-11-17 (a),
[e]very action shall be prosecuted in the name of the real party in interest. A personal representative . . . a party with whom or in whose name a contract has been made for the benefit of another, or a party authorized by statute may bring an action in his or her own name without joining with him or her the party for whose benefit the action is brought[.]
9 See also Phillips, 308 Ga. App. at 412-413 (1); OCGA § 9-2-21 (a) (a tort action is
to “be brought in the name of the person whose legal right has been affected.”).
In the amended complaint, Blackburne alleged that “[p]ursuant to the Loan
Servicing and Equity Interest Agreement executed by the lender, Plaintiff is
authorized to file suit on behalf of the lender to initiate litigation related to or arising
out of the Loan.” Notably, however, no such loan servicing agreement appears in the
record on appeal. See Alta Refrigeration v. AmeriCold Logistics, 301 Ga. App. 738,
748 (3) (688 SE2d 658) (2009) (trial court properly denied motion to add insurers as
plaintiffs where there was no evidence in the record that company assigned right of
action to insurers).
Moreover, Blackburne’s corporate representative testified that Blackburne
forwarded the appraisals to the investors for their review before they decided to
invest, and that any recovery would belong solely to the investors. Thus, whether an
investor relied on the appraisals is a claim specific to each individual investor, as is
the potential amount of damages. Blackburne retains no right to any recovery. As a
result, we must conclude that Blackburne is not the real party in interest. Equitable
Life Assurance Society of U. S. v. Tinsley Mill Village, 249 Ga. 769, 772 (294 SE2d
495) (1982) (although condo association had capacity to sue on behalf of condo
10 owners for nuisance, it lacked standing to do so because it was not the real party in
interest where any recovery belonged to the individual condo owners).
Generally, we may affirm a trial court’s order if it is right for any reason. City
of Gainesville v. Dodd, 275 Ga. 834, 835 (573 SE2d 369) (2002). But the procedural
posture of the case does not permit us to do so here. Although it is true that a
defendant may raise an objection based on real party in interest at any time, including
at trial, “[a]n objection that a party is not the real party in interest does not go to the
merits of an action, but rather is a matter in abatement.” (Citations and punctuation
omitted.) Jones Motor Co. v. Anderson, 258 Ga. App. 161, 162 (573 SE2d 429)
(2002). Under OCGA § 9-11-17 (a), “[n]o action shall be dismissed on the ground
that it is not prosecuted in the name of the real party in interest until a reasonable time
has been allowed after objection for ratification of commencement of the action by,
or joinder or substitution of, the real party in interest.” See also Smith v. 6595 R.
Corp., 269 Ga. App. 651, 652 (605 SE2d 58) (2004). Thus, summary judgment,
which is a ruling on the merits, is not an appropriate remedy where a party has raised
a real party in interest objection. Id. at 651.
Here, the parties argued during the summary judgment hearing whether
Blackburne was the real party in interest with standing to bring suit. After the hearing,
11 Blackburne moved to add the investors as the real parties in interest. It does not
appear that the trial court considered or ruled on that pending motion prior to granting
summary judgment. Accordingly, we must vacate the trial court’s order granting
summary judgment, and remand the case for the trial court to consider the pending
motion to substitute the real parties in interest prior to ruling on any motion for
summary judgment. See Oldham v. Landrum, 363 Ga. App. 284, 289-290 (2) (870
SE2d 82) (2022); see also Phoenix on Peachtree Condo. Assn. v. Phoenix on
Peachtree, LLC, 294 Ga. App. 447, 451 (6) (669 SE2d 229) (2008) (trial court erred
by granting summary judgment before considering motion to add condominium
owners as real parties in interest).
Case No. A23A0488
2. In this appeal, the Hughes defendants argue that the trial court erred by
denying their motion for summary judgment with regard to the Monticello facility
loan. They assert that (1) Blackburne lacked standing to bring the suit because fraud
claims cannot be assigned; (2) the claims are barred by the statute of limitation; and
(3) the claims fail on the merits.
Here, the Hughes defendants raised the same standing argument in the case
arising from the Monticello loan. Given our conclusion in Division 1 that the trial
12 court must determine whether Blackburne may add the real party in interest before
ruling on summary judgment, we vacate and remand the trial court’s order in this case
as well.
Judgments vacated, and cases remanded. Dillard, P. J., and Mercier, J.,
concur.