585 S.E.2d 873 (Ga. 2003), S03G0500, Acree v. McMahan

Docket Nº:S03G0500.
Citation:585 S.E.2d 873, 276 Ga. 880
Opinion Judge:CARLEY, Justice.
Party Name:ACREE et al. v. McMAHAN.
Attorney:Bouhan, Williams & Levy, Walter C. Hartridge, Roy E. Paul, David M. Conner, Savannah, Odom & Des Roches, John G. Odom, Hahira, for appellants., O. Wayne Ellerbee, Valdosta, for appellee. Bouhan, Williams & Levy, Walter C. Hartridge, Roy E. Paul, David M. Conner, Odom & Des Roches, John G. Odom, ...
Case Date:July 10, 2003
Court:Supreme Court of Georgia
 
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Page 873

585 S.E.2d 873 (Ga. 2003)

276 Ga. 880

ACREE et al.

v.

McMAHAN.

No. S03G0500.

Supreme Court of Georgia

July 10, 2003.

Reconsideration Denied Sept. 5, 2003.

[276 Ga. 883] Bouhan, Williams & Levy, Walter C. Hartridge, Roy E. Paul, David M. Conner, Savannah, Odom & Des Roches, John G. Odom, Hahira, for appellants.

O. Wayne Ellerbee, Valdosta, for appellee.

CARLEY, Justice.

Dr. Russell Acree formed Memorial Health Services, Inc. (MHS) to manage various small hospitals. MHS entered into a management agreement with Irwin County Hospital (Hospital). Acree, Dr. Howard McMahan, and Dr. Gene Jackson formed AJM, Inc. in furtherance of their agreement for McMahan and Jackson to relocate and eventually become part of the management team at the Hospital. Due to subsequent disagreements, Acree, acting in his individual capacity, agreed to purchase McMahan's and Jackson's interest in AJM for $750,000 each. For over a year, Acree caused MHS and the Hospital to make the payments for which he was obligated under the buyout agreement. After further conflict, however, Jackson discontinued his practice in the area, and Acree later terminated the payments to McMahan. Although the agreement was with Acree, McMahan brought suit against both Acree and MHS (Appellants) to recover damages for breach of contract. The jury returned a verdict against both Appellants, on which the trial court entered judgment in favor of McMahan. The Court of Appeals affirmed, concluding, as to the judgment against MHS, that the concept of reverse piercing of the [276 Ga. 881] corporate veil is applicable in Georgia and

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that the trial court did not err in its charge thereon. Acree v. McMahan, 258 Ga.App. 433, 574 S.E.2d 567 (2002). This Court granted certiorari to consider whether the doctrine of reverse piercing of the corporate veil can be applied in this state. We reject reverse piercing, at least to the extent that it would allow an "outsider," such as a third-party creditor, to pierce the veil in order to reach a corporation's assets to satisfy claims against an individual corporate insider.

An increasing number of courts have recognized the distinction between "insider" and "outsider" reverse piercing claims, first articulated in Crespi, "The Reverse Pierce Doctrine: Applying Appropriate Standards," 16 J. Corp. L. 33, 37(II)(A) (1990). Outsider reverse veil-piercing extends the...

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