Benevolent Lodge No. 3 v. Davis

365 Ga.App. 564

878 S.E.2d 760

BENEVOLENT LODGE NO. 3

v.Frank J. DAVIS as Executor of the Estate of Randall L. Hattaway.

A22A0911

Court of Appeals of Georgia.

September 23, 2022

Reconsideration Denied October 12, 2022

Thomas M. Green, Spivey Pope Green & Greer, Macon, for Appellant.

Milton F. Gardner Jr., Milledgeville, Kevin Allan Wangerin, Bullard Wangerin & Corbett, Macon, for Appellee.

Dillard, Presiding Judge.

Following a grant of summary judgment in favor of Frank J. Davis, as executor of the Estate of Randall L. Hattaway, Benevolent Lodge No. 3 appeals.¹ In doing so, the Lodge claims the trial court erred because (1) contrary to the court's conclusion, the statute of limitation has not run; (2) there was evidence of a conspiracy between Hattaway and the Lodge's treasurer; and (3) officers of the Lodge exercised due diligence in attempting to discover its treasurer's theft of funds. For the reasons set forth infra , we affirm.

Viewed in the light most favorable to the Lodge (i.e. , the nonmovant),² the record shows it is a 501 (c) (3) Masonic fraternal organization. And in addition to having various membership positions, including officers (the most senior of which is referred to as the "Worshipful Master"), the Lodge has a separate board of trustees which owns its building but no other assets. Members of the board of trustees are all past Worshipful Masters with an understanding of how the Lodge operates. At one point, Hattaway was a trustee and served as the board's chairman, but by the time of the events in question, he no longer regularly attended Lodge meetings. Hattaway also operated an accounting firm and completed tax returns for the Lodge.

As for the annually elected positions, officers received no official training upon assuming their positions, nor were there any policies, procedures, or handbooks given to them. Instead, as members progressed through positions, they learned their duties by observing others while attending meetings or through "on the job" training. Nevertheless, there were bylaws and rules kept at the Lodge building and made available for members to read. And upon election, a new Worshipful Master accompanied the acting treasurer to the bank to review the Lodge's investments and holdings.

During the relevant years, Dwight Riddle served as the elected treasurer of the Lodge; and in that capacity, he periodically provided financial reports to the group as a whole—including an annual report—through oral presentations. Riddle had a reputation within the Lodge as a penny pincher, which contributed to the unequivocal trust others placed in his abilities as treasurer. As a result, neither the Worshipful Masters nor the other officers were apparently troubled by Riddle's practice of not providing them with copies of the Lodge's tax returns for their review. Instead, they all "just assumed that everything was right." Additionally, bank statements for the Lodge were sent directly to Riddle's home and were not reviewed by the Worshipful Masters or other officers. Indeed, because Riddle was so trusted, no procedures were in place to double check his work. But eventually, someone began to ask questions about the Lodge's finances.

Kelly Montgomery—who was working in law enforcement at the time—ascended through the leadership ranks of the Lodge to Worshipful Master. While doing so, he became dissatisfied with the information Riddle provided in his financial "reports" to the Lodge because they never included written documentation or exact numbers. Instead, Riddle orally reported that the Lodge had "a little bit of money over here" and "a little bit of money over there," and he repeated the same information every year. This murky and vague practice of financial reporting deeply troubled Montgomery. And as a result of his growing concerns, in 2017, he requested that Riddle submit a written annual report; but Riddle continuously delayed its production. Montgomery then reached out to Hattaway and asked to see the Lodge's tax returns up to the point before Riddle's tenure as treasurer. Montgomery suspected the Lodge was missing money based upon the prior Worshipful Master's opinion that the finances "[didn't] quite look right."

Several months after this request, Hattaway called Montgomery to his office, and Montgomery brought along the person next in line to become Worshipful Master. According to Montgomery, at that meeting, Hattaway gave him a single piece of paper entitled Accounts Receivable, which listed a number of loans made by the Lodge to different members. Most notably, this document included an "astronomical number"—i.e. , "hundreds and hundreds and hundreds of thousands of dollars"—loaned to Riddle. And upon sliding this sheet across the table, Hattaway—who informed the duo that he was planning to retire from accounting—said "I'm done," wiped his hands, and said "I can't do it anymore, I'm finished." Hattaway then handed Montgomery a stack of what Montgomery described as "IOUs" from Riddle to the Lodge, and Hattaway explained that every year when taxes came due, Riddle provided him with such documents and that it had "just gotten out of hand." Hattaway also later gave Montgomery copies of the Lodge's tax returns.

After learning of these financial improprieties, Montgomery called a meeting with the other Lodge officers. And during that meeting, the officers learned of the multi-year series of high-dollar "loans" purportedly made by the Lodge to Riddle, totaling more than $700,000. Although members were permitted to borrow money from the Lodge, it was not a common practice to do so; and the decision of whether to make a loan to a member had to be voted upon by the entire Lodge as a matter of protocol under the bylaws and memorialized in meeting minutes.³ And importantly, no loans were ever approved by the Lodge to Riddle. So, upon making this discovery, the officers decided to involve law enforcement (the local sheriff was a member of the Lodge), and were told to take control of any Lodge financial materials in Riddle's possession. They did, and after providing the requested materials, Riddle walked out to his vehicle, retrieved a gun, and committed suicide in the parking lot. During the GBI investigation that followed, a previously unknown investment account was discovered, and it was from that account Riddle had taken the money for his "loans."⁴ Thereafter, the Lodge entered into a settlement agreement with Riddle's estate.

On July 3, 2019, the Lodge filed suit against the then deceased Hattaway's estate, alleging Hattaway was negligent in failing to inform the Lodge of the apparent theft of funds by Riddle and that he fraudulently concealed the negligence. Additionally, the Lodge made a claim for 158 "separate violations" of the Georgia civil Racketeer Influenced and Corrupt Organizations Act ("RICO")⁵ based upon allegations that Hattaway aided and abetted Riddle in 148 of the 158 instances of stealing Lodge funds. The Lodge later amended its complaint to remove the allegations of negligence and fraud but maintained its assertion that Hattaway aided and abetted Riddle in violating the civil RICO statute in 148 instances.

The Estate proceeded to file a motion for summary judgment, arguing that (1) the statute of limitation as to the civil RICO claims expired so as to bar the Lodge's action; (2) rather than over 100 separate violations of the RICO statute, one continuous act damaged the Lodge; (3) the Lodge could have discovered the harm through exercising due diligence; and (4) there was no showing Hattaway committed two predicate acts under the RICO statute.

Following a hearing on the motion, the trial court granted the Estate's motion for summary judgment, concluding there was no evidence to support the assertion that Hattaway entered into a conspiracy with Riddle from 2011 to 2017. Furthermore, the court concluded the Lodge's claims were barred by the five-year statute of limitation in OCGA § 16-14-8 and that a 2015 amendment to that statute did not restart the statute of limitation for the Lodge's action. This appeal by the Lodge follows.

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."⁶ And a defendant may prevail on such a motion by showing the court that "the documents, affidavits, depositions and other evidence in the record reveal that there is no evidence sufficient to create a jury issue on at least one essential element of plaintiff's case."⁷ Importantly, a defendant

who will not bear the burden of proof at trial need not affirmatively disprove the nonmoving party's case; instead, the burden on the moving party may be discharged by pointing out by reference to the affidavits, depositions and other documents in the record that there is an absence of evidence to support the nonmoving party's case.⁸

Then, if the moving party discharges this burden, the nonmoving party "cannot rest on its pleadings, but rather must point to specific evidence giving rise to a triable issue."⁹ With these guiding principles in mind, we turn now to the Lodge's specific enumerations of error.

1. For starters, the Lodge contends the trial court erred in granting summary judgment in the Estate's favor when there were genuine issues of material fact as to whether Hattaway entered into a conspiracy with Riddle. More specifically, the Lodge argues that there remains a genuine issue of material fact as to whether Hattaway was "associated with or participated in Riddle's enterprise through a pattern of racketeering activity or whether he conspired with Riddle and committed an overt act to effect the object of the conspiracy" in violation of OCGA § 16-14-4 (b) or (c). We disagree.

To establish a valid civil RICO claim, a plaintiff must "show that the defendant violated or...