AAB v. JAMES BROWN ENTERPRISES, INC.

• Decision Date: 25 September 2003
• Docket Number: No. A03A0980.,A03A0980.
• Citation: 587 S.E.2d 853,263 Ga. App. 388
• Parties: ATLANTA AREA BROADCASTING, INC. v. JAMES BROWN ENTERPRISES, INC. et al.
• Court: Georgia Court of Appeals

587 S.E.2d 853

263 Ga. App. 388

ATLANTA AREA BROADCASTING, INC. v. JAMES BROWN ENTERPRISES, INC. et al.

No. A03A0980.

Court of Appeals of Georgia.

September 25, 2003.

Holland & Knight, Thomas B. Branch, III, Laurie W. Daniel, Susan E. Edlein, Atlanta, for appellant.

Albert Dallas, Thompson, Richard G. Farnsworth, Atlanta, for appellees. ANDREWS, Presiding Judge.

Atlanta Area Broadcasting, Inc. (AAB) appeals from an order of the trial court which enjoined it from exercising indemnification rights to reduce its note payment obligations under an agreement by which it purchased a radio station from Darrell Spann. For the following reasons, we reverse.

AAB purchased a radio station from Spann in 1998 pursuant to the terms of an asset purchase agreement (the purchase agreement) and began making monthly payments under the purchase agreement on a 40-year note for the benefit of Spann. The purchase was authorized by a July 1998 DeKalb County Superior Court order (the 1998 court order) entered in a suit against Spann brought by various plaintiffs claiming to be owners and creditors of the station who alleged damages and sought to enjoin the purchase. The 1998 court order denied the plaintiffs' motion to enjoin the purchase, authorized the purchase pursuant to the terms of the purchase agreement (with the exception of specific items set forth in the order), and, to preserve the purchase proceeds pending resolution of the plaintiffs' claims, ordered that payments due on the note be paid into the registry of the trial court. Although the plaintiffs brought an interlocutory appeal from the 1998 court order authorizing the purchase, they did so without obtaining a supersedeas bond, so after the purchase occurred, the appeal was dismissed as moot. Brown v. Spann, 271 Ga. 495, 520 S.E.2d 909 (1999).

After the appeal was dismissed, the plaintiffs dismissed their suit and refiled their remaining claims for damages in a suit filed in April 2000 in DeKalb County Superior Court which is the subject of the present appeal. The April 2000 suit was brought by the same plaintiffs—James Brown Enterprises, Inc.,¹ WMLD Radio Station, Inc., Reginald Simmons, Eugene Williams, Carl Gammage, and others—and again named Spann as a defendant and added as defendants, AAB, William Corey (the owner of AAB), and Ron McCarter (who worked closely with Spann to set up the purchase of the station). This suit again alleged that the plaintiffs had ownership or creditors' interests in the station and sought damages because these interests were not recognized in the purchase.

Thereafter, all the plaintiffs except Williams and Gammage dismissed their claims against the newly added defendants, AAB, Corey, and McCarter. AAB, Corey, and McCarter moved for summary judgment on the claims brought by Williams and Gammage, and Spann moved for summary judgment on all the claims remaining against him. The trial court granted summary judgment motions brought by AAB, Corey, and McCarter, but denied Spann's motion for summary judgment. Spann appealed the denial of his motion for summary judgment, but only Williams appealed the grant of summary judgment in favor of AAB, Corey, and McCarter. In our unpublished opinion in Williams v. Atlanta Area Broadcasting, 258 Ga.App. XXVI (2002), we consolidated these appeals and affirmed the grant of summary judgment to AAB and Corey, affirmed the denial of summary judgment to Spann, and reversed the grant of summary judgment to McCarter. As to the remaining claims against Spann and McCarter, we found evidence that the plaintiffs' ownership or creditors' interests in the station were defrauded by the purchase and that the plaintiffs could seek damages from the proceeds of the purchase in Spann's possession. As to Williams's claims against AAB and Corey, we found no evidence that AAB or Corey was involved in any effort to defraud the interests of the station's owners or creditors.

After the April 2000 suit was filed, AAB, invoking indemnity provisions in the purchase agreement, began to offset and deduct amounts for attorney fees it paid to defend the suit from the monthly note payments it would otherwise have been required to make under the purchase agreement. While Williams's and Spann's appeals in the April 2000 suit were pending in this court, AAB continued pursuant to the 1998 court order to pay the monthly note payments required by the purchase agreement for Spann's benefit, which were then paid by Spann's trust into the registry of the court. But AAB also continued under the indemnity provisions of the purchase agreement to offset and reduce those payments by the amount of the attorney fees it expended to defend the suit. In February 2002, while the appeals remained pending, three of the plaintiffs (James Brown Enterprises, Inc., WMLD Radio Station, Inc., and Simmons) filed a motion in the trial court moving the trial court to order AAB to pay into the trial court registry all the amounts it deducted from note payments to defend the suit. The trial court entered an order on the motion on October 10, 2002, and ordered AAB to pay all the deducted amounts into the registry of the court and to refrain from deducting any further sums from the note payments paid into the court registry pursuant to the 1998 court order. The present appeal by AAB is from those portions of the court's October 2002 order. ²

In the 1998 court order, the trial court authorized the purchase of the station by AAB from Spann pursuant to the terms of the purchase agreement, recognized that the purchase agreement provided for AAB to make monthly note payments in favor of Spann, and stated that "Spann is hereby ordered to pay or make arrangements for the payment of all monies otherwise payable to himself under the terms and conditions of [the purchase agreement] into the Registry of the Court ... until further order of the Court." AAB, which was not a party to the litigation when the 1998 court order was entered, was not ordered to do anything. Under the purchase agreement, AAB agreed to pay Spann $2,400,000 for the station, and Spann represented that he would sell the station free of all claims and rights of others. In addition to requiring AAB to make monthly note payments for 40 years on the purchase price, the purchase agreement also contained indemnity provisions requiring Spann to defend suits brought against AAB arising out of Spann's actions or failure to act in the operation of the station, or arising out of a material misrepresentation by Spann or failure to fulfill representations made in the purchase agreement. The indemnity provisions further provided that, if Spann failed to defend AAB against such a suit, AAB was allowed to defend itself, offset reasonable attorney fees incurred in its defense, and upon proper notice deduct the offset amount from AAB's payment obligations on the note. The purchase agreement contained similar indemnity provisions in favor of Spann, and further provided that, upon a final determination by a court of competent jurisdiction that any amount was improperly deducted from note payments under the indemnity provisions, AAB shall be required to repay all such amounts with interest.

The February 2002 motion brought by three of the plaintiffs in the April 2000 suit alleged that the 1998 court order authorizing the purchase prohibited AAB from using the indemnity provisions to deduct amounts from the note payments. In its order on the motion, the trial court found AAB notified Spann under the indemnity provisions that, because of Spann's failure to defend it against the plaintiffs' April 2000 suit, AAB invoked the right set forth in those provisions to defend itself and to offset and deduct attorney fees incurred in the defense from the monthly note payments. The order further found: (1) that the intent of the 1998 court order was to prohibit AAB from deducting any amounts from the note payments under the indemnity provisions of the purchase agreement, and (2) that, because questions of fact exist as to whether AAB is entitled under the indemnity provisions to make any deductions from the note payments, preservation of the status quo between the parties requires that AAB pay the full amount of the note payments so that all the purchase proceeds at issue are held in the registry of the court. Accordingly, the trial court ordered AAB to pay all amounts it had previously deducted into the...