Bruce v. Cole

• Decision Date: 24 January 2003
• Citation: 854 So.2d 47
• Parties: Michael David BRUCE v. Harry COLE, Jr., and South Butler Medical Holdings, Inc.
• Court: Alabama Supreme Court

854 So.2d 47

Michael David BRUCE v. Harry COLE, Jr., and South Butler Medical Holdings, Inc.

1000080.

Supreme Court of Alabama.

January 24, 2003.

Randy Myers of Richard Jordan, Randy Myers & Ben Locklar, P.C., Montgomery; and Simeon F. Penton II of Kaufman & Rothfeder, Montgomery, for appellant.

John E. Enslen of Enslen, Johnston & Pinkston, L.L.P., Wetumpka, for appellees.

JOHNSTONE, Justice.

I. Introduction

Harry Cole, Jr., sued Michael David Bruce for specific performance, to require Bruce to sell his stock in South Butler Medical Holdings, Inc. ("Medical Holdings"), to Cole as allegedly provided by a written agreement among the two men and Medical Holdings. Bruce similarly counterclaimed against Cole for specific performance, to require Cole to sell his stock in Medical Holdings to Bruce as allegedly provided by an alleged oral agreement between only the two men. In the same counterclaim, Bruce also claimed against Cole for damages for Cole's alleged promissory fraud in allegedly entering the oral agreement with no intention of performing. In the course of the pleadings, Medical Holdings itself became Cole's coplaintiff seeking to require Bruce to sell his stock in Medical Holdings to Medical Holdings itself as distinguished from Cole.

The opposing parties eventually filed cross-motions for summary judgment against each other, and the trial court entered summary judgment in favor of Cole and Medical Holdings and against Bruce on all claims. Specifically, the trial court entered summary judgment in favor of Cole and Medical Holdings on their respective claims for specific performance, ordered Bruce to sell his stock in Medical Holdings to Medical Holdings itself, and entered summary judgment against Bruce on the oral contract and promissory fraud theories asserted in his counterclaim. The only factual determinations on the merits expressly stated by the order are "there is [or there being] no genuine issue of material fact" and "[t]he Court finds no promissory fraud." Bruce appeals all of these adverse rulings; and we affirm the summary judgment as it applies to all claims.

II. Facts—Substantive and Procedural

On November 2, 1998, Cole owned all of the 1,000 shares of stock issued by Medical Holdings. That same day, Cole sold Bruce 490 of those shares for the sum of $50,000. As part of the sale, Bruce and Cole signed a Restrictive Stock Transfer Agreement, which provides, in pertinent part:

"4. Retiring, Resigning or Terminated Shareholder.

"In the event a Shareholder should voluntarily or involuntarily retire, resign, or terminate his employment with the corporation (said retiring, resigning or terminated stockholder being hereinafter referred to as the resigning stockholder) said resigning stockholder shall be obligated to sell his shares in the following manner:

"(a) Corporation's Obligation to Redeem "The Corporation shall be obligated to redeem and the resigning Shareholder shall be obligated to sell to the Corporation all shares of the Corporation owned by the resigning shareholder at the time of such resignation, retirement or termination of employment.

"The purchase price and terms of any such purchase shall be as set forth in Paragraph 5 hereof.

"(b) Shareholders Option to Buy.

"For a period of sixty (60) days after the applicable period for the redemption of the stock by the Corporation, as to any stock which is not redeemed by the Corporation for whatever reason from the resigning stockholder, the other Stockholders shall have an option to buy and the resigning stockholder shall be obligated to sell such stock in accordance with the price and terms as determined in Paragraph 5 herein.

"....

"5. Valuation

"(a) Purchase Price

"The value, and for the purposes of the Agreement, the purchase price of each share of stock of the Corporation shall be determined by the Stockholders of the Corporation in the manner provided herein; the Stockholders shall, on or about November 1 of each year, and at each other such times as they see fit, agree on the value of each share of common stock of the Company. It is agreed that the value of each share of common stock of the Company is as of this date, and until the next date when a new value is fixed by the parties, One Hundred and No/100 Dollars ($100.00). Attached hereto as Exhibit `A' is a [blank exemplar] Schedule of Values as fixed by the parties for the date indicated on the schedule, and such schedule shall be and is hereby made a part of this Agreement, and when duly executed, shall be in compliance with the requirements herein contained as to the fixing of the value of each share of common stock of the Company; that, except as otherwise provided in this Agreement, such value shall in no manner be altered; and that all assets, both tangible and intangible, if any, as well as liabilities, if any, of or upon the assets of the Company have been considered in determining value.

"....

"13. Entire Agreement.

"This Contract contains the entire agreement of the parties hereto, and no modification, amendment, change or discharge of any term or provision shall be valid or binding unless signed by the party against who such provision is asserted." (Emphasis added.)

Exhibit "A" to the Restrictive Stock Transfer Agreement reads:

"In accordance with the terms of Section 5 of the Restrictive Stock [Transfer] Agreement of South Butler Medical Holdings, Inc., executed and entered into by the undersigned parties as of November 2, 1998, the undersigned do hereby agree that the value of each share of common stock of the Company as of the first day of November 199_, is $ ___.

"__________ L.S. Harry Cole, Jr "__________ L.S Michael David Bruce"

On November 2, 1998, the bylaws of Medical Holdings read, in pertinent part:

"11. Number, Tenure and Qualifications: There shall be no less than one (1) Director nor more than ten (10) Directors of the Corporation. The Directors shall be elected at the annual meeting of the Stockholders and shall hold office for one (1) year until the next annual meeting of the Stockholders and until their successors have been duly elected and qualified. The number of Directors may be increased or decreased from time to time by Amendment to the By-Laws, but no decrease shall have the effect of shortening the term of any incumbent Director. Directors need not be residents of the State of Alabama or Stockholders of the Corporation.

"....

"19. Various Officers: The Officers of the Corporation shall be elected by the Board of Directors and shall be a President and Vice President. The Board of Directors may also choose a Chairman of the Board of Directors, additional Vice Presidents, a Secretary and a Treasurer. All offices may be held by the same person.

"....

"21. Removal: Any officer elected or appointed by the Board of Directors may be removed at will and at any time by the affirmative vote of the majority of all the Directors." (Emphasis added.)

On that same day, November 2, 1998, Cole and Bruce, as shareholders of all of the stock of Medical Holdings, elected Bruce a director, to serve with Cole, the only other director; and Cole and Bruce, as such directors, elected Cole as the president and Bruce as the secretary and the treasurer of the corporation.

The function and value of Medical Holdings was that it owned 61% (later 50%) of South Butler Medical Services, L.L.C. ("Medical Services"), which, in turn, wholly owned (subject to the debt for the purchase price) the Georgiana Hospital and affiliated clinics in Butler County. The only shareholder in Medical Services other than Medical Holdings was South Butler Medical Enterprises, Inc. ("Medical Enterprises"), which was wholly owned by Dr. Jeff Voreis of Butler County. Cole wholly owned still another related corporation, South Butler Medical Management, Inc. ("Medical Management"), which, by contract with Medical Services, managed the Georgiana Hospital and affiliated clinics. About the time of the November 2, 1998 transactions, both Medical Management and Medical Services severally employed Bruce as the chief financial officer of each.

Medical Holdings did not pay Bruce a salary or fringe benefits and did not prepare Internal Revenue Service W-2 forms for Bruce. Medical Management paid Bruce's salary, and Medical Services paid Bruce's health insurance premiums. Medical Holdings did not reimburse Medical Management or Medical Services any portion of Bruce's salary or fringe benefits.

According to Bruce's deposition testimony, two weeks after he and Cole signed the Restrictive Stock Transfer Agreement, Cole orally broached the subject of a "put-call" agreement. According to Bruce, the "put-call" proposal by Cole was that, if either of them offered to purchase all of the other's shares in Medical Holdings for a stated price, the offeree could decline to sell his shares and could demand to buy all of the offeror's shares for that same stated price per share.¹ Bruce testified that he orally accepted Cole's "put-call" proposal, and that, in reliance on this alleged oral "put-call" agreement, Bruce purchased his home.

Cole denied ever discussing a "put-call" arrangement. He stated that he never intended to sell his stock to Bruce. Indeed, Cole testified, the terms of the loans for the purchase of the Georgiana Hospital and clinics provided that the lending bank could call the loans, if Cole, an individual guarantor of the loans, were to sell his stock to anyone.

According to Bruce's deposition testimony, he, Cole, and Dr. Voreis met in July 1999 to discuss the value of the Georgiana Hospital and affiliated clinics in order for each man to prepare a personal financial statement to submit to the bank which had lent Medical Services the money to buy the hospital and clinics. The bank required the statements of Cole and Dr. Voreis, who had personally guaranteed the loan, but did not require one of Bruce, who submitted one nonetheless. The three men valued the hospital and clinics at...