Tindall v. H&S Homes, LLC et al
Filing
283
ORDER denying 246 Motion to File a Sur-Reply ; granting 171 Motion for Summary Judgment; denying in relevant part 172 Motion for Hearing; denying in relevant part 178 Motion for Hearing. Ordered by Judge C. Ashley Royal on 1/20/12 (lap)
THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
MACON DIVISION
TERRY CARTRETTE TINDALL,
:
:
Plaintiff,
:
v.
:
Civil Action
:
No. 5:10‐CV‐044(CAR)
H & S HOMES, LLC, et. al.,
:
:
Defendants.
:
_____________________________________
ORDER ON THE TRUST DEFENDANTS’
MOTION FOR SUMMARY JUDGMENT
Currently before the Court is the Motion for Summary Judgment [Doc. 171] filed
by Defendants “The Maude Hicks Family Trust,” “The N. Dudley Horton Revocable
Trust,” and “The Robert Dudley Horton Trust” (herein “the Trusts” or “Trust
Defendants”). Through this Motion and the supporting briefs, the Trust Defendants
attempt to show that Plaintiff’s claims of conspiracy against the Trusts fail as a matter of
law. Plaintiff concedes that this is her only claim against the Trust Defendants, and the
Court agrees that Plaintiff has failed to identify sufficient evidence of the Trusts’ actual
participation in or benefit from the alleged “conspiracy.” The Trust Defendants’
Motion for Summary Judgment is accordingly GRANTED; all other associated motions
are DENIED.
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STANDARD OF REVIEW
Summary judgment must be granted if “there is no genuine issue as to any
material fact and . . . the movant is entitled to judgment as a matter of law.” Fed. R. Civ.
P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d
265 (1986); Johnson v. Clifton, 74 F.3d 1087, 1090 (11th Cir. 1996).
On a motion for summary judgment, the moving party “always bears the initial
responsibility of informing the district court of the basis for its motion, and identifying
those portions of the pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any, which it believes demonstrate the absence of a
genuine issue of material fact” and that entitle it to a judgment as a matter of law.
Celotex, 477 U.S. at 323. If the moving party discharges this burden, the burden shifts
to the nonmoving party to go beyond the pleadings and present specific evidence
showing that there is a genuine issue of material fact (i.e., evidence that would support a
jury verdict) or that the moving party is not entitled to a judgment as a matter of law.
Avirgan v. Hull, 932 F.2d 1572, 1577 (11th Cir. 1991); see Fed. R. Civ. P. 56(e); Celotex,
477 U.S. at 324 26. Summary judgment must be entered if the nonmoving party fails “to
make a sufficient showing on an essential element of her case with respect to which she
has the burden of proof.” Celotex, 477 U.S. at 323.
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DISCUSSION
Through the present action, Plaintiff Terry Tindall is attempting to attack certain
conveyances by H&S Homes, L.L.C. as fraudulent under Georgia law. In so doing,
Plaintiff also seeks to impose liability on three trusts: “The Maude Hicks Family Trust,”
“The N. Dudley Horton Revocable Trust,” and “The Robert Dudley Horton Trust.” The
Trusts are all apparently related to the Horton family in some way, and together, the
Trusts hold 99% of the stock in Defendant Horton Industries. Horton Industries is a
holding company which owns 100% of Defendant Horton Homes; Horton Homes, in
turn, owned 100% of H&S Homes, which is now insolvent. Defendant Dudley Horton
is the highest ranking officer in all of the Horton businesses; he serves as either the
chairman of the board, president, or chief operating officer of each. Dudley Horton is
also the sole trustee of all three Trusts. In his role as trustee, Dudley Horton controls
nearly all the voting stock in Horton Industries, which he uses to choose its directors.
Prior to the alleged fraudulent conveyances by H&S, Dudley Horton was
concerned with the effect of large judgments pending against H&S and the expected
collection efforts by Plaintiff. It was suggested that Dudley Horton could possibly
protect his assets by shutting down H&S Homes and transferring H&S assets to other
Horton entities – with the goal of protecting “the investment in [H&S’s] sales lots.”
Horton Industries, under Dudley Horton’s control, then created four new subsidiaries
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which would subsequently perform much the same purpose of H&S Homes, at many of
the same locations, with former H&S assets and employees. Through various actions
by the Horton Defendants – including Dudley Horton, Horton Homes, and H&S Homes
– all of H&S’s assets were eventually transferred to other Horton entities and many were
used for the benefit of the new subsidiaries.
The Trusts, however, were not directly involved in making the decision to close
H&S Homes or to transfer the property. Though the trust certainly owned the majority
of voting shares in Horton Industries, it is undisputed that the Trusts themselves were
not directly involved with the day‐to‐day management and operation decisions of
Horton Industries, Horton Homes, or H&S Homes. The Trusts’ involvement in these
companies is apparently limited to their combined power as majority shareholder to
vote for the board of directors of Horton Industries. None of the Trusts ever served as a
member of H&S Homes, loaned money to H&S Homes, owned any assets jointly with
H&S homes, or incurred any debt with H&S Homes. The Trusts also never engaged in
any business transactions with H&S Homes, never purchased any assets from H&S
Homes, and never received any assets from H&S Homes.
Plaintiff contends, however, that the Trusts may still be held liable for the alleged
fraudulent transactions initiated or allowed by their sole trustee, Dudley Horton.
Plaintiff specifically contends that, through the actions and decisions of Dudley Horton,
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the Trusts “participated in the conspiracy to fraudulently avoid” H&S Homes’ liability
to Plaintiff by fraudulently transferring property belonging to H&S.
As a general rule, a trust will not be held liable for the torts of its trustee. See
Miller v. Tranakos, 209 Ga. App. 688, 689, 4344, S.E.2d 84, 86 (1993). Thus, even if the
Court assumes that Dudley Horton conspired to enter into fraudulent transactions, his
conduct would not entitle Plaintiff to invade the Trusts simply because Dudley Horton
was their sole trustee. Under Georgia law, it cannot “be presumed that the beneficiaries
or owners of the trust corpus knew of any wrongdoing through use of trust funds.” Id.
Before a trust can be held liable, there must be some proof that the trust actually
benefitted from or was complicit in the conspiracy alleged. See id.
On the other hand, public policy certainly cannot allow a trustee to funnel
ill‐gotten gains into a trust and the trust to then evade repayment of the money as a
so‐called innocent beneficiary. See id. A trust may thus be required to satisfy a
trustee’s liability if it is proven that the trust “actually benefitted from the trustee’s
misdeeds or [if] some other equity, such as conspiratorial knowledge or unjust
enrichment,” authorizes an invasion into the trust. Id. Proof of a benefit received by
the trust, however, must “be more than mere suspicion arising from circumstances . . . ,
and must point to specific culpability or, at least, a specifically proved unjust
enrichment.” Id.
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In this case, Plaintiff argues that the Trusts may be implicated in the alleged
conspiracy through evidence that Defendant Dudley Horton was the sole trustee of all
three Trusts, that the Trusts held a majority ownership interest in Horton Industries,
which in turn owned both Horton Homes and H&S, and that Dudley Horton used his
power and authority over these Horton companies to make fraudulent transactions –
which ultimately protected the Trusts’ investment in Horton Industries. In short,
Plaintiff contends that if Dudley Horton is a conspirator, the Trusts are too.
There is no evidence, however, of any actual conspiratorial knowledge or
participation by the Trusts. Again, it is undisputed that the Trusts were not involved in
the day‐to‐day operations of Horton Industries, Horton Homes, or H&S Homes. The
Trusts merely owned the controlling stock in Horton Industries, which allowed their
trustee, Dudley Horton, to choose the board of directors. Dudley Horton, on the other
hand, was very involved in the daily operations of the Horton companies, independent
of his role as a trustee. Dudley Horton was the highest ranking officer of the Horton
companies; he was the president of Horton Industries and the chairman of the board for
H&S Homes. Plaintiff has not identified any evidence suggesting that Dudley Horton
was working in his capacity as “trustee,” as opposed to his role as president or chairman
of the board, when he allegedly conspired to make fraudulent transfers of H&S assets.
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Plaintiff, in fact, does not dispute that Dudley Horton was only authorized as
trustee to vote the shares owned by the Trusts to elect the directors of Horton Industries.
This action has not been connected to any part of the conspiracy, and there is no
evidence that Dudley Horton was otherwise vested with authority, in his capacity as
trustee, to make any decisions regarding the management of Horton Industries, Horton
Homes, or H&S Homes. Moreover, from the evidence identified, it appears that the
Trusts were no more than shareholders in Horton Industries, and Georgia has long
recognized that shareholders are not personally liable for corporate acts unless the
corporate veil has been successfully pierced. EnduraCare Therapy Mgmt, Inc. v. Drake,
298 Ga. App. 809, 681 S.E.2d 168 (2009). Plaintiff has not done that here.
The actual benefit received by the Trusts because of Horton’s conduct is also
somewhat unclear. There is no evidence that the Trusts directly received any funds or
assets because of the transfers. Nor is there any evidence before the Court that the stock
owned by the Trusts would have in fact decreased in value or that the Trusts’ investment
in Horton Industries would have otherwise been injured if H&S assets were sold to
satisfy Plaintiff’s judgment. Plaintiff simply asks this Court and the jury to make the
assumption that the Trusts did benefit financially from the alleged fraudulent transfers.
Proof of the alleged benefit to the Trusts, however, must “be more than mere suspicion
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arising from circumstances.” Miller, 209 Ga. App. at 689. Actual proof of the benefit
or some other unjust enrichment is required. See id.
Plaintiff has thus not identified sufficient evidence from which a jury might
conclude that Dudley Horton was acting in his capacity as trustee of the Trusts when he
participated in the alleged conspiracy; that the trust directly benefitted from the alleged
conspiracy; or that the trust should be culpable for any other compelling reason. The
Trust Defendants’ Motion for Summary Judgment [Doc. 171] is accordingly GRANTED.
Because the Court further finds that the issues raised in the present motions were
sufficiently briefed by the parties, no further briefing or oral argument is required. For
this reason, Plaintiff’s Motion to File a Sur‐Reply [Doc. 246] and the parties’ Motions for
Oral Argument [Docs. 172 & 178] are also DENIED, in relevant part.
SO ORDERED this 20th day of January, 2012.
S/ C. Ashley Royal
C. ASHLEY ROYAL, CHIEF JUDGE
UNITED STATES DISTRICT COURT
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