Bell v. Sasser, No. A99A0162

Citation238 Ga. App. 843,520 S.E.2d 287
Decision Date07 July 1999
Docket Number No. A99A0163., No. A99A0162
PartiesBELL et al. v. SASSER et al. Sasser et al. v. Bell et al.
CourtUnited States Court of Appeals (Georgia)

OPINION TEXT STARTS HERE

Gibson & Spivey, Douglas L. Gibson, Waycross, for appellants.

Dillard, Bower & East, Terry A. Dillard, Scott C. Crowley, J.B. McGee, Jr., Waycross, for appellees. RUFFIN, Judge.

In October 1991, Robert Sasser became president of Carolina Skiff, Inc., a company that manufactures boats in Waycross. Due to management disagreements, Sasser left Carolina Skiff in August 1992. In 1993, he and his son, John Sasser, started their own boat manufacturing company called Sundance Boats, Inc. (Sundance). The Sassers were the only stockholders in Sundance.

In late 1993, Seaborn W. Bell began negotiating with the Sassers about acquiring an interest in Sundance. The parties eventually entered into an agreement for the sale of the business, under which Bell would pay the Sassers $200,000 for all of the stock of Sundance (100 shares). Following the closing, Robert Sasser resumed the presidency of Carolina Skiff. Although Sundance apparently remains in business, it was not turning a profit as of late 1995.

In August 1995, Bell and Sundance filed a six-count complaint against Robert Sasser, John Sasser, and Carolina Skiff. Count 1 of the complaint sought to recover the $200,000 purchase price, alleging that the Sassers sold Bell unregistered securities in violation of Georgia law. Count 4 alleged that Robert Sasser fraudulently misrepresented to Bell that he would personally take care of any warranty work required on Sundance boats manufactured prior to the purchase, and Count 5 alleged that Robert Sasser and Carolina Skiff conspired to drive Sundance out of business.1

The parties filed cross-motions for partial summary judgment as to Count 1 of the complaint. In addition, the defendants filed a motion for summary judgment on the remaining counts. The trial court granted summary judgment in favor of the defendants on all claims except Counts 4 and 5. In Case No. A99A0162, Bell and Sundance appeal the entry of summary judgment against them on Count 1. In Case No. A99A0163, the Sassers and Carolina Skiff appeal the trial court's failure to grant summary judgment in their favor on Counts 4 and 5. For reasons that follow, we affirm in part and reverse in part.

Summary judgment is proper when "there is no genuine issue as to any material fact and ... the movant is entitled to a judgment as a matter of law." OCGA § 9-11-56(c); see also Lau's Corp. v. Haskins, 261 Ga. 491, 405 S.E.2d 474 (1991). We review the grant or denial of a motion for summary judgment de novo, construing the evidence and all reasonable inferences therefrom in the light most favorable to the nonmovant. McDuffie v. Argroves, 230 Ga.App. 723, 724(1), 497 S.E.2d 5 (1998). "[A] grant of summary judgment must be affirmed if it is right for any reason." Bob v. Hardy, 222 Ga.App. 550, 551(1), 474 S.E.2d 658 (1996).

Case No. A99A0162

1. At the closing of the Sundance purchase, the Sassers endorsed and notarized the backs of their stock certificates. The portion of the certificates indicating the transferee was left blank. However, blanks were filled in indicating that the Sassers "do hereby irrevocably constitute and appoint Seaborn W. Bell Attorney to transfer the said Shares on the books of [Sundance] with full power of substitution in the premises." The Sundance stock was not registered in accordance with the Georgia Securities Act of 1933.

After the sale, five individuals in addition to Bell invested in Sundance. The day after closing, Bell convened a meeting of the investors. New stock certificates numbered "3" through "9," totaling 400 shares, were issued to the investors, including Bell. The original stock certificates numbered "1" and "2" that Bell received from the Sassers were not transferred and apparently were retired.

Bell argues that the Sassers' sale of unregistered stock to him violated the Georgia Securities Act and that the Sassers are required to repurchase the shares at the price Bell paid for them. The trial court ruled in favor of the Sassers, finding that the Georgia Securities Act did not apply to the Sundance sale transaction and that even if it did, Bell himself had violated the Act, precluding recovery. We disagree.

As a threshold matter, we find that the shares of Sundance stock were "securities" within the meaning of the Act. In Cohen v. William Goldberg & Co., 262 Ga. 606, 607(1), 423 S.E.2d 231 (1992), our Supreme Court ruled that the initial inquiry for determining whether stock should be treated as securities is the "stock characterization" test set forth by the United States Supreme Court in Landreth Timber Co. v. Landreth, 471 U.S. 681, 105 S.Ct. 2297, 85 L.Ed.2d 692 (1985). Under that test,

when an instrument is both called "stock" and bears stock's usual characteristics, a purchaser justifiably may assume that the federal securities laws apply. Those characteristics usually associated with common stock are (i) the right to receive dividends contingent upon an apportionment of profits; (ii) negotiability; (iii) the ability to be pledged or hypothecated; (iv) the conferring of voting rights in proportion to the number of shares owned; and (v) the capacity to appreciate in value.

(Citations and punctuation omitted.) Cohen, supra. If, and only if, the stock does not satisfy these criteria, then the next inquiry is whether the stock otherwise qualifies as a security under OCGA § 10-5-2(16). Id. at 608-609, 423 S.E.2d 231. The appropriate analysis for this determination is the "economic reality" test set forth in Securities Exchange Commission v. W.J. Howey Co., 328 U.S. 293, 66 S.Ct. 1100, 90 L.Ed. 1244 (1946). Cohen, supra at 609, 423 S.E.2d 231. Under the economic reality test, a transaction constitutes a securities transaction if there is (1) an investment; (2) a reasonable expectation of profits; and (3) reliance on the management of another party to create the profits. Id. at 607, 423 S.E.2d 231.

In this case, the instruments in question are, on their face, certificates of shares in the Sundance corporation. Accordingly, the starting point for determining whether this stock constitutes securities under Georgia law is whether it bears the characteristics usually associated with stock. Cohen, supra; Landreth, supra at 686, 105 S.Ct. 2297. The trial court, however, concluded that this case is "difficult, if not impossible, to analyze under the Landreth stock characterization test" and therefore skipped directly to the Howey economic reality test.2 The court cited Huggins v. Chapin, 227 Ga.App. 340, 341(1), 489 S.E.2d 109 (1997), in which this Court applied the economic reality test, rather than the stock characterization test, to determine whether the sale of an interest in a closely held corporation constituted a securities transaction under Georgia law. In Huggins, the investor contributed $50,000 to Huggins in exchange for a ten percent interest in Huggins' closely held corporation. Id. at 340, 489 S.E.2d 109. Apparently, no stock certificates were ever issued or transferred to the investor, although five months later, the parties executed a document explaining that the contribution represented a ten percent ownership interest in the company. Id. at 340-341, 489 S.E.2d 109. Based on these facts, we determined that the stock characterization analysis was not workable because the investment occurred long before the parties executed the document outlining its terms. Id. at 341(1), 489 S.E.2d 109.

The situation presented here is quite different from that in Huggins. The parties executed an agreement for the sale of all outstanding Sundance stock, and on the day of closing the sellers endorsed their stock certificates, giving Bell power of attorney to transfer the shares on the books of the corporation. As in Cohen and Landreth, the transaction clearly involved stock, and thus the stock characterization test applies. See Cohen, supra at 609-610(2), 423 S.E.2d 231; Landreth, supra at 683-684, 105 S.Ct. 2297.

Applying the stock characterization test, we conclude that the shares of Sundance stock were securities within the meaning of Georgia law.3 First, the Sundance stockholders were entitled to receive dividends when profits were apportioned. Under Georgia law, the articles of incorporation must authorize at least one class of shares entitled to receive the net assets of the company upon dissolution. OCGA § 14-2-601(b)(2). As Sundance's articles of incorporation do not create separate classes of shares, then, by law, all shares must be entitled to participate in asset distribution. Second, the Sundance stock was negotiable, as evidenced by the Sassers' sale of their shares to Bell. Moreover, Sundance's by-laws expressly contemplate such transfers. Third, we find no evidence indicating that the Sundance shares could not be pledged or hypothecated. Fourth, Sundance's by-laws expressly provide that stockholders are entitled to one vote for each share of stock standing in their name. Finally, the Sundance stock apparently has the capacity to increase in value, as Bell and the Sassers negotiated a purchase price for it. We therefore find that the Sundance stock meets the stock characterization test and is subject to the Georgia Securities Act. Cohen, supra at 610, 423 S.E.2d 231.

The Georgia Securities Act makes it unlawful to sell or offer for sale an unregistered security. OCGA § 10-5-5(a); DeBoard v. Schulhofer, 156 Ga.App. 158, 159(1), 273 S.E.2d 907 (1980). A buyer of unregistered securities has a civil remedy against the seller for the purchase price of the security, "upon the tender, where practicable, of the security at any time before the entry of judgment, or for damages if he no longer owns the security." OCGA § 10-5-14(a). See Utzman v. Caribbean &c. Dev. Corp., 107 Ga.App. 56, 57-59, 129...

To continue reading

Request your trial
18 cases
  • Ledford v. Peeples
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • May 6, 2010
    ...to sue under Georgia's version of Rule 10b-5. See Mack v. Smith, 178 Ga.App. 652, 344 S.E.2d 474, 475 (1986); cf. Bell v. Sasser, 238 Ga.App. 843, 520 S.E.2d 287, 292 (1999). Co-plaintiffs' Count Two claims fail under Fed.R.Civ.P. 12(b)(6) because co-plaintiffs were not involved in the sale......
  • U.S. Capital Funding VI, Ltd v. Patterson Bankshares, Inc.
    • United States
    • U.S. District Court — Southern District of Georgia
    • September 30, 2015
    ...conspiracy itself, but in the underlying tort committed against the plaintiff and the resulting damage." Id. (quoting Bell v. Sasser , 238 Ga.App. 843, 520 S.E.2d 287 (1999) ). Thus, the conspiracy itself "may sometimes be inferred from the nature of the acts done, the relation of the parti......
  • Ledford v. Peeples
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • May 22, 2009
    ...holding that only a buyer or seller of a security has standing to sue under Georgia's version of Rule 10b-5. Bell v. Sasser, 238 Ga.App. 843, 520 S.E.2d 287, 292 (1999). Co-plaintiffs' Count Two claims fail under Fed.R.Civ.P. 12(b)(6) because co-plaintiffs were not involved in the sale of a......
  • Dyer v. Honea
    • United States
    • United States Court of Appeals (Georgia)
    • November 15, 2001
    ...789. 9. (Punctuation omitted.) U.S. Anchor Mfg. v. Rule Indus., 264 Ga. 295, 297(1), 443 S.E.2d 833 (1994). 10. Bell v. Sasser, 238 Ga.App. 843, 852(3), 520 S.E.2d 287 (1999). 11. Individually or through his corporation, Robert K. Honea, Inc. 12. Merritt v. State Farm &c. Ins. Co., 247 Ga.A......
  • Request a trial to view additional results
3 books & journal articles
  • Business Associations - Paul A. Quiros, Lynn S. Scott, and William B Shearer Iii
    • United States
    • Mercer University School of Law Mercer Law Reviews No. 52-1, September 2000
    • Invalid date
    ...128. Id. at 1370-71. 129. Id. at 1371 (quoting Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 (1976)). 130. Id. at 1372. 131. Id. 132. 238 Ga. App. 843, 520 S.E.2d 287 (1999). 133. Id. at 843-44, 520 S.E.2d at 290. 134. Id. at 844, 520 S.E.2d at 290. 135. Id. at 850, 520 S.E.2d at 294. 136.......
  • Commercial Law - Robert A. Weber Jr.
    • United States
    • Mercer University School of Law Mercer Law Reviews No. 52-1, September 2000
    • Invalid date
    ...Clay v. Littlefield, 144 Ga. App. 88, 91, 240 S.E.2d 254, 257 (1977) (emphasis omitted)). 129. Id. at 719-20, 520 S.E.2d at 238-39. 130. 238 Ga. App. 843, 520 S.E.2d 287 (1999). 131. O.C.G.A. Sec. 10-5-1 to -24 (1994 & Supp. 1999). 132. 238 Ga. App. at 843-45, 520 S.E.2d at 290-91. 133. O.C......
  • Intellectual Property in Georgia - Laurence P. Colton and Nigam J. Acharya
    • United States
    • Mercer University School of Law Mercer Law Reviews No. 52-2, January 2001
    • Invalid date
    ...regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." U.S. const, art. I, Sec. 8, cl. 3. 3. 238 Ga. App. 843, 520 s.e.2d 287 (1999). 4. Id. at 843-44, 852-53, 520 s.e.2d at 290, 296. 5. Id. at 852-53, 520 s.e.2d at 296. 6. 120 s. Ct. 1579,_u.s._(......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT