Georgia Bank & Trust Company of Augusta v. Trenery

Filing 108

ORDER granting in part and denying in part 74 Motion for Summary Judgment, denying 75 Motion for Summary Judgment, and notifying parties the trial in this matter will take place on September 09/27/2010. Signed by Honorable Joseph F Anderson, Jr on 08/17/2010.(bshr, )

G e o r g i a Bank & Trust Company of Augusta v. Trenery

D o c . 108

IN THE UNITED STATES DISTRICT COURT F O R THE DISTRICT OF SOUTH CAROLINA C O L U M B IA DIVISION G e o rg ia Bank & Trust Company of A u g u s ta , as personal representative of th e estate of Thomas D. McPherson, P l a in tif f , v. F ra n k T. Trenery, Jr., D e f e n d a n t, and M o b ile C a re Health Services, LLC, Interv en o r. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) C / A No.: 3:08-2371-JFA

ORDER

T h ro u g h this action, plaintiff Georgia Bank & Trust Company of Augusta ("Georgia B an k "), as personal representative of the estate of Thomas D. McPherson ("McPherson"), s e e k s to recover damages from defendant Frank T. Trenery, Jr. ("Trenery") arising out of T r e n e ry's management of Mobilecare Health Services, LLC ("Mobilecare"), a Georgia lim ite d liability company in which McPherson and Trenery were both members. Trenery and M o b ilec a re have in turn asserted numerous counterclaims, in the vein of mismanagement, m isap p rop r iatio n of funds, conversion, and breach of contract, among others. MobileCare in te rv e n e d in this suit on April 15, 2010. T h is matter comes before the court on the parties' cross motions for summary ju d g m e n t . (ECF Nos. 74, 75.) Trenery and Mobilecare move for summary judgment

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p u rsua n t to the last-man-standing provision found in paragraph 6.3 of Mobile Care's O p era tin g Agreement ("Operating Agreement"). Georgia Bank moves for summary

ju d g m e n t on Trenery's counterclaims, contending that (1) Trenery lacks standing; (2) M o b ile c are 's claims are barred by the statute of limitations; and (3) the remaining claims lack e v id e n t ia r y support. Georgia Bank also moves for summary judgment on its claim for in d e m n if ic a tio n under the Operating Agreement. Both motions have been fully briefed and th e court heard oral argument at an August 16, 2010 hearing. This order serves to announce th e rulings of the court. I. F a c tu a l and Procedural Background M o b ile C a re was formed in 1999 to provide ambulance and medical transportation s e rv ic e s. Its Operating Agreement was executed on July 9, 1999, and provided that

M c P h e rs o n would serve as the managing member, a position he held until his death on M a rc h 18, 2007. Trenery became a member of MobileCare on September 1, 1999.

M o b ile c are sold its asserts to Medcare in March of 2006 for $1,375,000, which was allocated a s follows: (1) $345,668.67 in cash at closing; (2) $392,142.07 as an assumption of debt o w e d BB&T; (3) $39,236.80 as an assumption of debt owed Ford; and (4) 597,952.46 to bear in t e re s t and be paid to MobileCare in equal monthly installments over a term of five years. A t the time of the asset sale, Mobilecare's membership comprised of Trenery, McPherson, a n d Derek Fowkes ("Fowkes"). After the asset sale, Mobilecare existed solely for the p u r p o s e of receiving payments from Medcare and distributing such payments to its members.

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B y separate agreement, Fowkes no longer holds any interest in MobileCare. T h is case arises out of a dispute between Trenery, the sole remaining member of M o b ile C a re and Georgia Bank, McPherson's successor and the personal representative of h is estate.. Georgia Bank filed suit on June 30, 2008, alleging that Trenery improperly re ta in e d McPherson's share of the distributions and that Trenery absconded with all books an d records relating to MobileCare in an effort to conceal his actions. Trenery

c o u n te rc la im e d , asserting that McPherson improperly took and used MobileCare monies for p e r s o n a l benefit without the knowledge of MobileCare or its other members. Trenery also a lle g e d McPherson's mismanagement of Mobilecare, including his alleged failure to satisfy t a x obligations, has damaged Trenery to the extent that he has had to meet certain o b lig a tio n s . II. L eg al Standard R u le 56(c) of the Federal Rules of Civil Procedure provides that summary judgment s h o u ld be granted "if the pleadings, the discovery and disclosure materials on file, and any a f f id a v its show that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). "[T]he mere existence of s o m e alleged factual dispute between parties will not defeat an otherwise properly supported m o tio n for summary judgment; the requirement is that there be no genuine issue of material f a ct." Ballenger v. N.C. Agric. Extension Serv., 815 F.2d 1001, 1005 (4th Cir. 1987) (e m p h a s is omitted). A fact is material if proof of its existence or non-existence would affect

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th e disposition of the case under the applicable law. Anderson v. Liberty Lobby, Inc., 477 U .S . 242, 248­49 (1986). An issue is genuine if the evidence offered is such that a rea so n ab le jury might return a verdict for the nonmoving party. Id. at 257. In cases where th e parties dispute material facts, "the non-moving party is entitled to have his evidence as f o re c a st assumed, his version of that in dispute accepted, and the benefit of all favorable in f e re n c es ." Henson v. Liggett Group, Inc., 61 F.3d 270, 275 (4th Cir. 1995). Moreover, the c o u r t "may not make credibility determinations or weigh the evidence." Williams v. Staples, In c ., 372 F.3d 662, 667 (4th Cir. 2004). When considering cross motions for summary judgment, the court must review each m o tio n separately on its own merits to determine whether either of the parties deserves ju d g m e n t as a matter of law. Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003). The c o u rt must endeavor to resolve factual disputes and competing inferences in favor of the p a rty opposing each motion. Id. III. D is c u ss io n T re n e ry moves for summary judgment on the basis that Georgia Bank lacks any claim to Mobilecare assets due to a last-man-standing provision in the Operating Agreement. G e o rg ia Bank moves for summary judgment on Trenery's counterclaims on the basis that T re n e ry lacks standing, his claims lack evidentiary support, and Mobilecare's claims fall o u tsid e the statute of limitations. Georgia Bank also seeks to establish the applicable statute o f limitations.

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A.

T re n e ry's Motion for Summary Judgment

T re n e ry and Mobilecare contend that pursuant to paragraphs 6.1 and 6.3 of the O p e ra tin g Agreement, the estate of McPherson may only become an "Interest Holder" in M o b ilec a re if accepted by the remaining "Members," in this case Trenery. Trenery asserts th a t because he has not accepted McPherson's estate as an "Interest Holder" or "Member," G e o rg ia Bank is a stranger to the Operating Agreement and its claims fail as a matter of law. 1. A p p lic a b le Law

A s this is a diversity action, the court must first determine the applicable law. South C a ro lin a follows the doctrine of lex loci contractu in interpreting and giving effect to c o n tra c ts . Livingston v. Atl. Coast Line R.R. Co., 180 S.E. 343, 345 (S.C. 1935). Here, the re le v a n t contract, the Operating Agreement, was executed in the State of Georgia and the a g re e m e n t itself provides that Georgia law applies. Accordingly, the court will apply the s u b s ta n tiv e law of Georgia in construing the Operating Agreement. In determining the legal relationship between the parties, South Carolina choice of law p r o v i s io n s provide that "the law . . . under which a foreign limited liability company is o r g a n i z e d govern its organization and internal affairs and the liability of its managers, m e m b e r s , and their transferees." S.C. Code Ann. § 33-44-1001(a) (2006); see, e.g., First N a t'l City Bank v. Banco Para El Comercio Exterio de Cuba, 462 U.S. 611, 621 (1983) ("As a general matter, the law of the state of incorporation normally determines issues relating to th e internal affairs of a corporation."). The succession and acceptance of members to an

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L L C involves an entity's internal affairs. See, e.g., Multi-Media Holdings v. Piedmont C e n te r, 15 LLC, 583 S.E.2d 262, 265 (Ga. App. 2003) ("Internal affairs are those that c o n c ern the relations inter se of the corporation, its shareholders, directors, officers or a g e n ts." (internal punctuation and citation omitted)). Mobilecare was organized in Georgia a n d the court will apply Georgia law to claims involving its internal affairs. T h e operating agreement of an LLC is a contract. See, e.g., ULQ, LLC v. Meder, 666 S .E .2 d 713, 716 (Ga. App. 2008). The cardinal rule of contract construction is to ascertain th e intention of the parties. Tillman Park v. Dabbs-Williams Gen. Contrs., 679 S.E.2d 67, 7 0 (Ga. App. 2009); Mountain Aire Realty v. Birdie White Enterprises, 593 S.E.2d 900 (Ga. A p p . 2004). To that end, Georgia employs a tripartite analysis: First, if no ambiguity a p p e a rs , the court must enforce the contact according to its clear and unambiguous terms irre sp e c tiv e of all technical or arbitrary rules of construction. Tillman Park, 679 S.E.2d at 7 0 . Second, if ambiguity lurks, its presence or absence is a question of law. Third, a q u e stio n of fact arises only where an ambiguity cannot be negated by application of the s ta tu to ry rules of construction. Id. The rules of contruction require that the court determine the intent of the parties from th e entire agreement and interpret each agreement provision to harmonize with the others. Id . A contract is not ambiguous "unless and until an application of the pertinent rules of in te rp re ta tio n leaves it uncertain as to which of two possible meanings represents the true inten tio n of the parties." Crooks v. Crim, 285 S.E.2d 84, 87 (Ga. App. 1981). "However,

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n o construction is required or even permissible when the language employed by the parties in the contract is plain, unambiguous and capable of only one reasonable interpretation." Id. 2. T h e Operating Agreement

Trenery contends that because McPherson died, application of the plain terms of the O p e ra tin g Agreement effected his withdrawal from the membership of Mobilecare and the f o rf e itu re of his entire interest therein. At issue is paragraph 6.3 of the Operating Agreement. I t reads, in its entirety, as follows: Im m e d ia te ly upon the occurrence of an Involuntary Withdrawal, the successor o f the Withdrawn Member, but only if accepted by the remaining Members, s h al l thereupon become an Interest Holder, but shall not become a Member. If the Company is continued as provided in Section 7.1.3, the successor In te re st Holder shall have the rights of an interest holder but shall not be e n title d to receive in liquidation of the Interest the fair market value of the M e m b e r 's Interest as of the date the Member involuntarily withdrew from the C o m p a n y. In lieu of a successor for a Member involuntarily withdrawing a c c o rd in g to the agreement, the Withdrawn Member's percentage interest in th e Company may in the remaining Member's sole discretion, be forfeited to th e remaining Member whose percentage interest may increased thereto. (D e f s.' Mot. Summ. J., ECF. No. 75 Ex. 1 ¶ 6.3.) Pursuant to the operating agreement, an " In v o lu n tar y Withdrawal" encompasses a Member's death. (Id. ¶ Art. I.) A "Member" is d e f in e d as "each Person signing [the Operating Agreement] and any Person who is admitted a s a member of the Company." (Id.) An "Interest Holder" is "any Person who holds an Interes t, whether as a Member or as an unadmitted assignee of a Member."1 (Id.) T h e first sentence of paragraph 6.3 requires the successor of a withdrawn Member to The court will use the terms "Member" and "Interest Holder" as they are defined in the above paragraph pursuant to the Operating Agreement. 7
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o b ta in the consent of the remaining Members to become an Interest Holder. The last s e n te n c e requires the withdrawn Member's interest in Mobilecare to flow to the remaining M e m b e r s in the absence of a successor. However, the term "successor" is not defined, and it is clear that a successor is something different from an Interest Holder or a Member. In th is case it would seem that McPherson's estate, while not an Interest Holder or Member by v irtu e of the absence of Trenery's assent, is McPherson's successor, if nothing else. T h e plain terms of the contract only allow a Member's interest to cede to the r e m a i n i n g members in the absence of a successor. Here, the estate is the successor to M cP h erso n 's interest and its existence precludes Trenery from laying claim to McPherson's in te re st. This conclusion, though inescapable, does violence to the inner harmony of the O p e r a tin g Agreement. The problem is that the existence of the successor prevents a re m a in in g MobileCare Member from obtaining the interest of the Withdrawn Member, but m a k e s no provision for the Withdrawn Member's interest. The court finds that such a re a d in g leads to an unreasonable and absurd result, whereby half of MobileCare's cash flows w o u ld be caught in a twightlight zone where neither McPherson's successor nor Trenery c o u ld rightfully claim them. See Tudor v. Am. Emp. Ins. Co., 173 S.E.2d 403, 405 (Ga. Ct. A p p . 1970). T a k in g the contract as a whole, the Operating Agreement evinces an overriding intent to distribute MobileCare cash flow based on a "Percentage" memorialized from time to time in an amendment to the Operating Agreement. The Operating Agreement is equally clear

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th a t the Percentage can only be changed by agreement of the Members or by operation of p a ra g ra p h 6.3 (when no successor is forthcoming). Article I of the agreement requires that o n e be an Interest Holder to obtain his percentage of cash flows. G e o rg ia law provides that, in construing the terms of a contract, "[t]he rules of g ra m m a tic a l construction usually govern, but to effectuate the intention they may be d is re g a rd e d ; sentences and words may be transposed, and conjunctions substituted for each o th e r. In extreme cases of ambiguity, where the instrument as it stands is without meaning, w o rd s may be supplied." Ga. Code Ann. § 13-2-2(6). The Georgia Court of Appeals has c a u tio n e d , however, that "[a] contract should not be torn apart and construed in pieces, but th e court should look to the entire instrument and so construe it as to reconcile its different p a rts and reject a construction which leads to contradiction, in order to ascertain the true in te n tio n of the parties, which is the real purpose of the judicial construction of contracts." C o n n e ll v. Guarantee Trust Life Ins. Co., 541 S.E.2d 403, 405 (Ga. Ct. App. 2000). Though reluctant to rewrite the Operating Agreement on general principle, the court h a s come to the conclusion that its contradictory terms require the type of judicial c o n stru c tio n envisioned in section 13-2-2. Accordingly, under the authority provided by s e c tio n 13-2-2, to effectuate the intent of the parties as manifested in the entirety of the O p e r a tin g Agreement, and to avoid contradiction, the court finds, ineluctably, that the first s e n te n c e of paragraph 6.3 must be reformed. See Ardis v. Printup, 1869 WL 1711 (Ga. 1 8 6 9 ) ("[I]f we substitute the word or for the words and also, italicised above, all difficulty

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is removed, and the intention of the parties, as we gather it from the whole instrument, is c a rrie d into effect . . . ."). Substituting the conjunction "and" for "but" and moving the c o n se n t requirement to the end of the first sentence, Paragraph 6.3 shall now read: Im m e d ia te ly upon the occurrence of an Involuntary Withdrawal, the successor o f the Withdrawn Member shall thereupon become an Interest Holder, and s h a ll not become a Member, unless accepted by the other Members. If the C o m p a n y is continued as provided in Section 7.1.3, the successor Interest H o ld e r shall have the rights of an interest holder but shall not be entitled to rec eiv e in liquidation of the Interest the fair market value of the Member's In te re s t as of the date the Member involuntarily withdrew from the Company. In lieu of a successor for a Member involuntarily withdrawing according to the a g re e m e n t, the Withdrawn Member's percentage interest in the Company may i n the remaining Member's sole discretion, be forfeited to the remaining M e m b e r whose percentage interest may increased thereto. B y providing for the successor of the Withdrawing Member to become an interest holder, the c o n tra c t provides a destination for the yearly distribution of cash flows as required by p a ra g ra p h 4.1 and a method for allocating the assets of MobileCare in liquidation pursuant to paragraph 4.4.1. Georgia Bank is now an Interest Holder under the Operating Agreement. T h e court hereby denies Trenery's motion for summary judgment. B. G e o rg ia Bank's Motion for Summary Judgment

G e o rg ia Bank moves for summary judgment on ten grounds. Specifically, Georgia B a n k contends: (1) that Trenery lacks standing to assert his counterclaims individually; (2) that the Mobilecare counterclaims for conversion, breach of contract, breach of fiduciary d u ty, and recoupment are barred in whole or in part by the relevant statute of limitations; (3) th a t Trenery's counterclaims are barred by the statute of limitations to the extent they seek

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in d iv id u a l recovery; (4) that any counterclaim for misappropriation of funds by McPherson m u s t be dismissed for lack of evidence; (5) that any counterclaim for mismanagement of f u n d s by McPherson must be dismissed for lack of evidence; (6) that the conversion claim m u s t be dismissed for failure to state a claim applicable to the facts of the case; (7) that the q u a n tu m meruit claim must be dismissed for lack of standing because Trenery did not confer a benefit on McPherson; (8) that the counterclaim for claim and delivery lacks evidentiary su p p o rt; (9) that the counterclaim for an accounting is moot; and (10) that Georgia Bank is e n titled to indemnification under the Operating Agreement. 1. S t a n d in g

T re n e ry has asserted counterclaims for conversion, breach of contract, breach of f id u c ia ry duty, and recoupment, among others. However, Georgia Bank contends that each o f the foregoing claims involve injury to MobileCare, not Trenery, and that Trenery lacks s ta n d in g to bring them. Pursuant to Georgia law, when a member or shareholder sues a c o r p o r a tio n for breach of fiduciary duties owed a corporation, generally it must do so d e riv a tiv e ly or on behalf of the corporation. Phonex Airline Serv's v. Metro Airlines, 397 S .E .2 d 699 (Ga. 1990). A direct action is only appropriate where a shareholder alleges sp e c ial injury separate and apart from that suffered by the other shareholders, or where a suit a lle g e s breach of a contract right apart from any right of the corporation. Grace Bros. Ltd. v . Farley Indus., 450 S.E.2d 814 (Ga. 1994). However, an exception to this general rule a p p lie s where a suit involves a closely-held corporation and the facts do not implicate the

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tra d itio n a l policy goals that favor derivative suit. Stoker, 615 S.E.2d 1, 7 (Ga. App. 2005) re v 'd in part by 631 S.E.2d 693 (Ga. 2006). Stoker identified those goals as (1) preventing m u ltip le suits by shareholders; (2) protection of corporate creditors by ensuring that any re c o v ery goes to the corporation; (3) prevention of prejudice to other shareholders by letting o n e or a few shareholders recovery; and (4) ensuring adequate compensation to injured s h a re h o ld e rs by increasing the value of their aliquot shares. Id. Georgia Bank asserts that the majority of the wrongs for which Trenery seeks a re m e d y are wrongs against the corporation that he lacks standing to assert, relying on the g e n e ra l rule against direct suit. Trenery contends, however, that because MobileCare was a closely held LLC and because none of the Stoker factors are present, he should be p e rm itte d to avail himself of the Stoker exception. However, the parties both agree that the In te rn a l Revenue Service ("IRS") is a creditor ($268,140 in back taxes) of Mobilecare, and th a t MobileCare does not have sufficient assets to pay the entire $268,140. Somewhat creatively, Trenery suggests that, because McPherson was the "responsible p e rs o n ," McPherson's estate should be required to pay $107,458 of the $268,140, and that M o b ile C a re should be responsible for only the balance of $160, 682. Trenery represents that M o b il e C a r e has assets of $198,796 available to pay the IRS, which would leave a balance o f approximately $38,000. In Trenery's view, the IRS would not be prejudiced by a direct a c tio n because there are sufficient assets to satisfy the interest and penalties, even if the IRS w o u ld have to go to two sources to obtain the back taxes.

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G eo rg ia Bank argues that the IRS's creditor status precludes direct suit. The court a g re e s. Though perhaps more resourceful and tenacious than other creditors, the IRS would f a ce prejudice from an individual recovery by Trenery. To wit, the IRS would need to show th a t a "`responsible person' willfully failed to perform a duty to collect, account, or pay over th e taxes" owed. Lostocco v. D'Eramo, 518 S.E.2d 690 693 (Ga. Ct. App. 1999). To allow d ire c t suit would prejudice the IRS to the extent that it would require the IRS to pursue an e s ta te which may or may not have sufficient funds to satisfy the obligation and would also re q u ire the IRS to establish wilfulness on the part of McPherson prior to any recovery. N e ith e r hurdle comes in to play if MobileCare is required to bring suit in its own name. A c c o rd in g ly, the court finds that the presence of the IRS as a creditor and MobileCare's lack o f funds to satisfy its obligation precludes the availability of the Stoker exception. 2. T h e Statute of Limitations

A s jurisdiction in this case is based on diversity of citizenship, the court must apply th e conflict of laws rules of the forum state, South Carolina. Klaxton Co. v. Stentor Co., 313 U .S . 487 (1941); Guaranty Trust Co. v. York, 326 U.S. 99 (1945) (federal court must apply sta te statute of limitation). Under the applicable South Carolina choice of law rule, lex fori, S o u th Carolina generally applies its own statute of limitations. See State v. So. Farm Bureau L if e Ins. Co., 219 S.E.2d 80, 85 (S.C. 1975); but see Hughes v. Doe, 316 S.E.2d 383 (S.C. 1 9 8 4 ) and Taylor v. Murray, 204 S.E.2d 747 (Ga. 1974) (applying two-year limitation of a c tio n for wrongful death where it is a substantive provision of state statute). See also

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H u n te r v. Johnson, 376 S.E.2d 371 (Ga. 1989) ("Statutes of limitation look only to the re m e d y and so are procedural."). This is true for actions sounding in both contract and tort. C a ld w e ll v. Seaboard Air Line Ry., 53 S.E. 746, 754 (S.C. 1906) ("Matters bearing upon the e x e cu tio n , the interpretation, or validity of a contract are determined by the law of the place w h e re the contract is made. Matters connected with its performance are regulated by the law p re v a ilin g at the place of performance. Matters respecting the remedy, such as bringing of su its, admissibility of evidence, statutes of limitation, depend upon the law of the place where th e suit is brought."). Generally, in South Carolina, a plaintiff has three years from the time he knew or s h o u ld have known he had a cause of action to bring suit. S.C. Code Ann. § 15-3-530. M a h e r v. Tietex Corp., 500 S.E.2d 204 (S.C. Ct. App. 1998) ("Pursuant to the discovery rule, a breach of contract action accrues not on the date of the breach, but rather on the date the a g g rie v e d party either discovered the breach, or could or should have discovered the breach th ro u g h the exercise of reasonable diligence."). A cause of action should have been d isc o v e re d through exercise of reasonable diligence when the facts and circumstances would h a v e put a person of common knowledge and experience on notice that some right had been in v a d e d or a claim against another party might exist. Benton v. Roger C. Peace Hosp., 443 S .E .2 d 537 (1994). a. M o b ile C a re 's Counterclaims and the Statute of Limitations

T h e parties entered into a tolling agreement on March 16, 2010. Because a three-year

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s ta tu te of limitations applies to all of MobileCare's claims, no claims that MobileCare knew o f , or should have known of, prior to March 16, 2007, are actionable. b. T re n e ry's Counterclaims and the Statute of Limitations

T re n e ry asserted his compulsory counterclaims on July 21, 2008 (ECF No. 7.) in re sp o n s e to Georgia Bank's complaint filed June 30, 2008. Burlington Indus. v. Milliken & C o ., 690 F.2d 380 (4th Cir. 1982) ("[T]he institution of plaintiff's suit tolls or suspends the ru n n in g of the statute of limitations governing a compulsory counterclaim"); but see W h itf ie ld Const. Co. v. Bank of Tokyo Trust Co., 525 S.E.2d 888 (S.C. Ct. App. 1999) (w h e re counterclaim not included in original responsive pleading, later amendment did not r e la te back). Trenery contends, however, that the discovery rule and the doctrine of adverse d o m in a t io n should provide for larger limitations period. Georgia Bank argues that because T re n e ry had access to all of Mobilecare's books, he was on notice of any claims arising out o f McPherson's financial management of MobileCare. In support, Georgia Bank cites Berry v . Mcleod for the proposition that inquiry notice will suffice. 492 S.E.2d 794 (1997). Berry d e a lt with a challenge to a bond issue and the court seemed to be talking about the situation w h e re documents are required to be filed on the public record in conformance with a statute. Id . at 799­800. The instant matter does not involve documents on the public record filed in c o n f o rm a n c e with a statute. However, it does involve the analogous situation of a corporate d o c u m e n t maintained in conformance with a contract to which Trenery, the counterclaimant,

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is a party vested with the right to inspect the corporate books pursuant to paragraph 8.1 of the Operating Agreement. After reviewing the briefs and the relevant caselaw, the court f in d s that the better rule holds that a contract right to LLC information is sufficient to charge T re n e ry with constructive notice of a claim. Accordingly, the relevant cut-off date for T re n e ry's claims is June 30, 2005. 3. M is a p p ro p ria tio n of Funds and Mismanagement Counterclaims

G e o rg ia Bank asserts that Trenery has failed to put forth sufficient factual matter to e sta b lis h that McPherson misappropriated funds or to establish that McPherson mismanaged th e MobileCare. However, the court finds that genuine issues of material fact preclude s u m m a ry judgment as to each of these claims. 4. C o u n te rc la im for Conversion

C o n v e rsio n is "the unauthorized assumption in the exercise of the right of ownership o v e r goods or personal chattels belonging to another to the exclusion of the owner's rights." S S I Med. Serv's, Inc. v. Cox, 392 S.E.2d 789, 792 (S.C. 1990). Georgia Bank asserts that c o n v e rs io n is inappropriate because the money allegedly converted has not been identified w ith sufficient specificity. Its argument is that because the money was not separately m a in ta in e d (that it was commingled) it could not be converted. Trenery argues that the sums are determinable and definite, and therefore susceptible of a claim for conversion. The court a g r e e s with Trenery. However, the court finds that this claim must be brought by

M o b ile C a re , as any monies allegedly converted would have come from MobileCare, and not

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T re n e ry. The court also finds the cases cited by Georgia Bank inapposite for the reasons d e taile d in Trenery and MobileCare's response. At bottom, the conversion counterclaim s e e k s a definite sum of money allegedly converted by an individual. In that circumstance a c o n v e rs io n claim is proper. See Cox, 392 S.E.2d at 792 ("Money may be the subject of c o n v e rs io n when it is capable of being identified."). 5. C o u n ter c laim for Quantum Meruit

G e o r g ia Bank argues that Trenery's claim for quantum meruit must be against M o b ile c a re , not McPherson's estate. To recover pursuant to a theory of quantum meruit, a c la im a n t must show: (1) his performance as agent of services valuable to the defendant; (2) e ith e r at defendant's request or knowingly accepted by the defendant; (3) defendant's receipt o f which without compensating claimant would be unjust; and (4) claimant's expectation of c o m p e n s a tio n when the services were rendered. Razavi v. Shackelford, 580 S.E.2d 253 (Ga. C t. App. 2003). Trenery contends that he is entitled to payment for services rendered to M o b ileC a re subsequent to the death of McPherson. However, even assuming Trenery's acts w e n t uncompensated, Trenery fails to show how such services were valuable to Georgia B a n k rather than MobileCare. Accordingly, Trenery's claim for quantum meruit against G e o rg ia Bank is dismissed with prejudice. 6. C o u n te rc la im s for Claim and Delivery and an Accounting

In its response, Trenery abandoned his demand for claim and delivery and both parties ag ree that an accounting is no longer necessary or desirable. Accordingly, these claims are

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d is m is s e d without prejudice. 7. In d e m n i f ic a tio n of Georgia Bank under the Operating Agreement

G e o rg ia Bank asserts that paragraph 5.5 of the Operating Agreement provides that e a c h manager shall be indemnified by Mobilecare for acts within the scope of their authority e x c ep ts for willful misconduct or gross negligence. Georgia Bank contends that there is no e v id e n c e of willful or grossly negligent conduct and that it is therefore entitled to in d e m n if ic a tio n . Trenery contends that Georgia Bank is not entitled to indemnification b e c au s e the acts and omissions of McPherson constitute gross negligence, were not the in the sco p e of McPherson's authority, and were not in the best interests of Mobilecare. The court f in d s that genuine issues of material fact preclude summary judgment on this issue. IV . C o n c lu s io n B e c a u s e the court finds that the Operating Agreement clearly evidences the parties' in te n t to avoid forfeiture in the event of a successor, and because a successor is different fro m an "Interest Holder" or a "Member," Trenery and MobileCare's motion for summary jud g m en t is denied. Turning to Georgia Bank's motion for summary judgment, the court f in d s (1) that the IRS constitutes a creditor pursuant to Stoker, precluding direct suit by T re n e ry; (2) that the three-year South Carolina statute of limitations applies to all claims, and th a t no causes of action arising prior to June 30, 2005, are actionable by Trenery, and none p rio r to March 16, 2007, are actionable by MobileCare; (3) that genuine issues of material f a ct preclude summary judgment on the misappropriation and mismanagement

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c o u n te rc la im s ; (4) that genuine issues of material fact preclude summary judgment on G e o r g ia Bank's claim for indemnification; (5) that the quantum meruit counterclaim against G e o rg ia Bank should be dismissed with prejudice; (6) that Trenery lacks standing to bring th e conversion counterclaim; and (7) that the counterclaims for an accounting and claim and d e liv e ry are moot. The trial in this matter shall take place on September 27, 2010. IT IS SO ORDERED.

A u g u st 17, 2010 C o lu m b ia , South Carolina

J o s e p h F. Anderson, Jr. U n ite d States District Judge

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