FT - Kubler v. Goerg (11/5/1990)

[Riser Adkisson LLP]

Kubler v. Goerg,
399 S.E.2d 229 (Ga.App. 07/02/1991)

COURT OF APPEALS OF GEORGIA

Nos. A90A0897, A90A0898, A90A0899

1990.GA.1617, 399 S.E.2d 229, 197 Ga. App. 667

November 5, 1990

KUBLER

v.

GOERG

Default judgment. Fulton Superior Court. Before Judge Fryer.

Rehearing Denied November 21, 1990.

Macey, Wilensky, Cohen, Wittner & Kessler, Morris W. Macey, James R. Sacca, for appellant.

Richard B. Herzog, Jr., Doffermyre, Shields & Canfield, Robert E. Shields, Powell, Goldstein,
Frazer & Murphy, Eric W. Anderson, Kilpatrick & Cody, Thomas C. Shelton, Laurel J. Lucey, for
appellee.

Carley, Chief Judge. McMurray, P. J., and Sognier, J., concur.

The opinion of the court was delivered by: Carley

A simplified statement of the facts relevant to these appeals is as follows: Dr. Bruno Kubler is
the trustee in bankruptcy for a German corporation that had secured a personal judgment in
Germany against Ms. Ingeborg Skowronek. Since Ms. Skowronek had accounts at C & S National Bank
(Bank), Dr. Kubler domesticated the German judgment in Georgia and then initiated garnishment
proceedings against the Bank in the State Court of Fulton County. Thereafter, Dr. Klaus Goerg, in
his capacity as the German-appointed trustee in bankruptcy of the estate of Heinz Kaussen, filed
a claim in Dr. Kubler's garnishment proceeding, and he also filed a complaint against Ms.
Skowronek and the Bank in the Superior Court of Fulton County. In both his garnishment claim and
his superior court complaint, Dr. Goerg alleged that Ms. Skowronek's accounts at the Bank
consisted of the proceeds of a fraudulent transfer to her from Kaussen and that, as to the
creditors of the estate, those proceeds remained the property of Kaussen. The Bank was
subsequently dismissed from Dr. Goerg's fraudulent conveyances action and Ms. Skowronek failed to
file a timely answer to his complaint. However, before a default judgment was entered against Ms.
Skowronek, Dr. Kubler moved to intervene in Dr. Goerg's fraudulent conveyances action but,
because of a stay mandated by the pendency of a related bankruptcy proceeding, no ruling was made
in either the garnishment proceeding or the fraudulent conveyances action for a ten-month period.
At the end of that period, Dr. Kubler's motion to intervene was denied and Dr. Goerg was granted
a default judgment against Ms. Skowronek. In Case No. A90A0897, Dr. Kubler appeals from the
denial of his motion to intervene and, in Case No. A90A0898, he appeals from the grant of default
judgment in favor of Dr. Goerg. In Case No. A90A0899, Dr. Goerg cross-appeals from the grant of
the default judgment, contending that the same did not provide the full relief to which he was
entitled.

Case No. A90A0897

1. OCGA § 9-11-24 (a) (2) provides, in relevant part, that "pon timely application anyone shall
be permitted to intervene in an action... hen claims an interest relating to the property or
transaction which is the subject matter of the action and he is so situated that the Disposition
of the action may as a practical matter impair or impede his ability to protect that interest,
unless interest is adequately represented by existing parties." Thus, "the requirements for
intervention under the rule are three-fold: interest, impairment resulting from an unfavorable
Disposition, and inadequate representation. [Cit.]" Lynn v. Wagstaff Motor Co., 126 Ga. App. 516,
517 (191 S.E.2d 324) (1972).

With regard to the first requirement of OCGA § 9-11-24 (a) (2), Dr. Kubler, as Ms. Skowronek's
judgment creditor, clearly had an interest in the outcome of Dr. Goerg's fraudulent conveyances
action. However, merely having an interest in the outcome of that litigation would not be
sufficient to authorize Dr. Kubler to intervene therein. OCGA § 9-11-24 (a) (2) requires that an
applicant for intervention claim "an interest relating to the property or transaction which is
the subject matter of the action...." (Emphasis supplied.) The "property" which is the subject
matter of Dr. Goerg's action is Ms. Skowronek's accounts at the Bank and the "transaction" which
is the subject matter of that action is the alleged fraudulent conveyance of that property to Ms.
Skowronek. Accordingly, in the absence of Dr. Kubler's claim of an interest relating to that
specific property or to that specific transaction, he had no right to intervene pursuant to OCGA
§ 9-11-24 (a) (2).

The record shows, however, that Dr. Kubler was not only Ms. Skowronek's judgment creditor, but
that he had also secured the domestication of the German judgment in Georgia and had filed a
garnishment proceeding against the Bank. "Courts and text-writers have in different ways
undertaken to describe the effect created by serving a process of garnishment. It is at least an
inchoate or an incomplete lien." Anderson v. Ashford & Co., 174 Ga. 660, 662 (1) (163 S.E. 741)
(1932). Thus, by the time Dr. Goerg filed his fraudulent conveyances action, Dr. Kubler already
had "at least an inchoate or an incomplete lien" on Ms. Skowronek's accounts at the Bank and he
had, therefore, an "interest" relating to the specific property which was the subject matter of
Dr. Goerg's action. See First Nat. Bank in Newnan v. Blackburn, 254 Ga. 379 (1) (329 S.E.2d 897)
(1985); Moore v. Moore, 247 Ga. 243, 244 (1) (275 S.E.2d 334) (1981). Compare Brown v. Truluck,
239 Ga. 105 (236 S.E.2d 60) (1977); Braddy v. Dessau Realty & Ins. Co., 148 Ga. App. 589 (252
S.E.2d 10) (1978). Dr. Goerg had an interest in the accounts sufficient to authorize him to file
a claim in Dr. Kubler's pending garnishment proceeding (see Perry v. Freeman, 163 Ga. App. 186
(293 S.E.2d 381) (1982)) and Dr. Kubler likewise had an interest in those accounts sufficient to
authorize him to intervene in Dr. Goerg's subsequent fraudulent conveyances action. "The interest
of the intervenor must be of such a direct and immediate character that he will either gain or
lose by the direct effect of the judgment, and such interest must be created by the claim in
suit, or a claim to a lien upon the property, or some part thereof, which is the subject matter
of the litigation. [Cits.] The fact that a held by the intervenor would lose its priority under
the contentions of the plaintiff is such an interest as would entitle him to intervene as a party
defendant to resist the prayers of the plaintiff's petition. [Cit.]" (Emphasis supplied.)
Rossville Fed. Savings &c. Assn. v. Chase Manhattan Bank, 223 Ga. 188, 189 (1) (154 S.E.2d 243)
(1967) (construing pre-CPA law).

Turning to the second requirement of OCGA § 9-11-24 (a) (2), it appears that a Disposition
favorable to Dr. Goerg in his fraudulent conveyances action would "as a practical matter impair
or impede [Dr. Kubler's] ability to protect" his inchoate or incomplete lien on Ms. Skowronek's
accounts at the Bank. A holding that the proceeds of those accounts were not the property of Ms.
Skowronek would certainly impair or impede, if not preclude, the perfection of the lien on those
specific accounts at issue in Dr. Kubler's pending garnishment proceeding. See generally State
Farm &c. Ins. Co. v. Five Transp. Co., 246 Ga. 447, 453 (3b) (271 S.E.2d 844) (1980). Compare
Shoemake v. Woodland Equities, 252 Ga. 389, 394 (3) (313 S.E.2d 689) (1984). Intervention is
authorized "where the applicant so situated, as in our case, to be adversely affected by
Disposition of property under court control. [Cit.]" Sta-Power Indus. v. Avant, 134 Ga. App. 952,
959 (3) (216 S.E.2d 897) (1975). See also Rossville Fed. Savings &c. Assn. v. Chase Manhattan
Bank, (supra) at 189 (1).

Finally, insofar as the inadequacy of representation... is concerned, it cannot be said that Dr.
Kubler's interest in the accounts was adequately represented by Ms. Skowronek. She had failed to
file an answer to Dr. Goerg's complaint and allowed the case to go into default. See First Nat.
Bank in Newnan v. Blackburn, supra. A finding "that the representation... is... inadequate [may
be] based solely on the status and claims of the parties as revealed by the pleadings and
representations of counsel. In this case[, there were no defensive pleadings filed by Ms.
Skowronek and] the application for intervention revealed a claim of the applicant ([Dr. Kubler])
adverse to [Dr. Goerg] involving the subject matter of the pending suit...." Southwest Ga.
Production Credit Assn. v. Wainwright, 241 Ga. 355, 356-357 (2) (245 S.E.2d 306) (1978).
Therefore, "e conclude that... [Dr. Kubler's] interest not adequately represented by existing
parties." State Farm &c. Ins. Co. v. Five Transp. Co., (supra) at 453-454 (3b). Compare Shoemake
v. Woodland Equities, (supra) at 394 (3).

2. Notwithstanding the merits of Dr. Kubler's motion to intervene, Dr. Goerg urges that it
nevertheless was not timely filed and that, on this procedural basis, the trial court's denial of
the motion was authorized.

Ms. Skowronek was in default at the time Dr. Kubler filed his motion to intervene. However,
default judgment had not yet been entered and, in fact, was not entered until some ten months
thereafter. See generally First Nat. Bank in Newnan v. Blackburn, supra. Compare Cipolla v.
F.D.I.C., 244 Ga. 444 (260 S.E.2d 482) (1979); Harkness v. State of Ga., 185 Ga. App. 770 (365
S.E.2d 552) (1988); Doe v. Garcia, 177 Ga. App. 61 (338 S.E.2d 710) (1985). Moreover, "a
consideration of whether an application to intervene has been timely filed does not depend solely
on the amount of time that may have elapsed since institution of the action." Liberty Nat. Bank
&c. Co. v. Diamond, 231 Ga. 321, 325-326 (IV) (201 S.E.2d 400) (1973).

As we have held in Division 1, Dr. Kubler did have an interest in Ms. Skowronek's accounts at the
Bank by virtue of his pending garnishment proceeding, and he was so situated that his ability to
protect his interest would, as a practical matter, be impeded or impaired by an unfavorable
Disposition of Dr. Goerg's fraudulent conveyances action. Accordingly, Dr. Kubler should have
been named and served as a defendant in Dr. Goerg's fraudulent conveyances action from the
outset. See OCGA § 9-11-19 (a) (2) (A). "Generally, whether an intervention is timely is a matter
within the sound discretion of the trial court and such discretion will not be controlled. Yet,
where, as in the present case, intervention is sought prior to judgment by a necessary party who
should have been named and served in the original complaint, such intervention should have been
allowed and the failure to do so amounts to an abuse of discretion. Rather than prejudicing the
rights of [Dr. Goerg,] the permitting of such intervention would result in a judgment (assuming
that [he was] finally successful) binding against [Dr. Kubler] whereas otherwise [Dr. Goerg's
right to the proceeds of Ms. Skowronek's accounts in the Bank] would remain doubtful." (Emphasis
supplied.) State of Ga. v. Bruce, 231 Ga. 783, 786 (204 S.E.2d 106) (1974).

3. Dr. Kubler met all three of the requirements for intervention of right pursuant to OCGA § 9-11-
24 (a) (2). State Farm &c. Ins. Co. v. Five Transp. Co., (supra) at 452 (3). His motion to
intervene was timely filed. State of Ga. v. Bruce, supra. It follows that the trial court erred
in denying Dr. Kubler's motion.

Case No. A90A0898

4. "Only a party to the case can appeal from a judgment or one who has sought to become a party
by way of intervention, and has been denied that right. [Cits.]" Johnson v. Rex Evans RV Center,
160 Ga. App. 189, 191 (286 S.E.2d 509) (1981). Dr. Kubler is one who sought to become a party-
defendant by way of intervention and, as we have held in Case No. A90A0897, he was erroneously
denied the right to become Ms. Skowronek's co-defendant in Dr. Goerg's fraudulent conveyances
action.

However, in the instant appeal, Dr. Kubler seeks appellate review of the default judgment that
was entered in favor of Dr. Goerg against Ms. Skowronek. "hen a judgment is entered by default,
the parties to that judgment are the plaintiff and the defaulting defendant. His default operates
as an admission of the truth of the well-pleaded material facts alleged against him. [Cits.]
However '... an admission predicated upon a default is operative against the particular party who
makes default, and does not bind a co-defendant who appears and contests the litigation.' [Cit.]
Just as a judgment is not binding on persons who are neither parties nor privies to it ([cits.]),
so a default judgment is not binding on co-defendants who are not in default. [Cits.]" Peek v.
Southern Guar. Ins. Co., 240 Ga. 498, 499 (1) (241 S.E.2d 210) (1978).

"'(P)roper procedure is followed, after a default is entered against the non-appearing defendant,
by proceeding to a trial of all the issues raised by the appearing defendants.' [Cits.] Thus as
against [Dr. Kubler], [Dr. Goerg] must prove [the allegations of his complaint]. We do not
perceive how the default judgment [against Ms. Skowronek] has adversely affected [Dr. Kubler] as
[an intervening] co-defendant, and appeal [from that default judgment] must be dismissed.
[Cits.]" Avis Rent A Car System v. Rice, 132 Ga. App. 857, 858 (2) (209 S.E.2d 270) (1974).

Case No. A90A0899

5. Although Dr. Goerg's cross-appeal from the grant of the default judgment was timely filed, the
result of our holding in Case No. A90A0897 is that he does not now "stand to receive benefit or
advantage by a decision of his cross-appeal." OCGA § 5-6-48 (e). If an appellant or cross-
appellant "would receive no benefit by reversal of the case, [his appeal] is moot. [Cits.]"
Chaplin v. State, 141 Ga. App. 788, 789 (1) (234 S.E.2d 330) (1977). Accordingly, Dr. Goerg's
cross-appeal is hereby dismissed pursuant to OCGA § 5-6-48 (b) (3).

Judgment reversed in Case No. A90A0897. Appeals dismissed in Case Nos. A90A0898 and A90A0899.