Burgess & Brown v. Gorlin & Long

• Decision Date: 25 February 1988
• Docket Number: 44992,Nos. 44965,s. 44965
• Citation: 365 S.E.2d 405,258 Ga. 127
• Parties: BURGESS & BROWN v. GORLIN & LONG. FIRST GEORGIA BANK v. GORLIN & LONG.
• Court: Georgia Supreme Court

Page 405

365 S.E.2d 405

258 Ga. 127

BURGESS & BROWN v. GORLIN & LONG.

FIRST GEORGIA BANK v. GORLIN & LONG.

Nos. 44965, 44992.

Supreme Court of Georgia.

Feb. 25, 1988.

As Amended Feb. 29, 1988.

Reconsideration Denied March 30, 1988.

J. Wayne Moulton, Moulton, Carriere, Cavan & Maloof, Conyers, for Samuel E. Burgess, et al.

Larry H. Chesin, Meals, Kirwan, Goger, Winter & Parks, Robert N. Meals, P.C., Atlanta, for First Georgia Bank.

Taylor W. Jones, Rickman P. Brown, Jones & Ludwick, Atlanta, Joseph Lefkoff, Lefkoff, Duncan, Grimer & Dermer, Atlanta, for Steve Gorlin, et al.

PER CURIAM:

In this law suit the appellees; Steve Gorlin and Nick Long, sued the appellants; Samuel Burgess, Joseph Brown, the First Georgia Bank, and others for damages alleging fraud and unjust enrichment. The appellants' motions for directed verdicts were denied. The verdict and judgment were based upon fraud only. We reverse the Court of Appeals opinion in Gorlin v. Halpern, 184 Ga.App. 10, 360 S.E.2d 729 (1987).

The parties and their roles in this controversy appear as follows: Howard Halpern, President and Chief Executive Officer of American Food Purveyors, Inc., a food distribution company, (AFP); Daniel Baitcher, President and Chief Executive Officer of Amerdyne Industries, Inc. (Amerdyne); Samuel Burgess, Officer at First Georgia Bank in charge of the AFP account; Joseph Brown, Officer at First Georgia bank who assisted Burgess with the AFP account; Steve Gorlin, former stock broker, currently financial analyst and business promoter; and his friend and attorney, Nick Long. It is important to understand the relationship of each of these parties to one another.

Howard Halpern started AFP and within a few short years he built the company from virtually nothing to a company with annual sales of almost $10 million. The company experienced tremendous growth, but was not making a profit because it was undercapitalized from its inception. At the end of 1971, AFP had a negative net worth of approximately $70,000.

Daniel Baitcher owned Amerdyne. Amerdyne was registered with the Securities and Exchange Commission and shares in Amerdyne were traded over-the-counter. At the end of 1971, Amerdyne had a positive net worth of $250,000.

Steve Gorlin is a financial prodigy. At age 21 he was the youngest person to ever obtain a license from the SEC, a license that was revoked at one time.

Nick Long is the attorney who represented Gorlin in the license revocation proceeding, and they have both an attorney-client relationship and a friendship.

Gorlin learned that Amerdyne was attempting to acquire AFP. Gorlin's interest in becoming involved in the possible merger stemmed from the fact that Wall Street analysts were looking with favor on food industry stocks. Gorlin expected to make a great deal of money by obtaining shares in Amerdyne prior to a possible secondary public offering of Amerdyne. Gorlin discussed his plans with Nick Long who also became interested. Gorlin and Long began extensive investigations of Amerdyne and AFP sometime during November of 1972. As part of their investigation of AFP they talked with Burgess and Brown.

A written agreement was signed on January 8, 1973, between Amerdyne, AFP, Baitcher, Gorlin, and Halpern which stated, in part: "Gorlin agrees to obtain for Amerdyne the sum of $250,000, to be loaned to Amerdyne in full on or before February 15, 1973. ... Said proceeds are for the purpose of a contribution to the capital by Amerdyne to [AFP] pursuant to the Letter of Intent between them executed December 19, 1972." ¹ The agreement provided that if Gorlin could obtain, through a reputable underwriter, $1,500,000 for the purchase of Amerdyne shares, Baitcher would convey to Amerdyne and Amerdyne would convey to Gorlin 750,000 shares for obtaining the proceeds. The agreement also required Baitcher to transfer to Gorlin "in consideration for Gorlin's obtaining the [$250,000] loan, 250,000 shares of Amerdyne stock. Said shares shall be issued to Gorlin at the rate of one share of each dollar of loan obtained, up to the maximum of 250,000 shares." Gorlin was also granted two stock options under the agreement. The first option allowed Gorlin to purchase an additional 180,000 shares of Amerdyne at a dollar per share provided, however, if he failed to obtain all of the loan proceeds, the option would be null and void. The second option allowed Gorlin to purchase an additional 153,430 shares of Amerdyne stock for $0.18 per share provided, however, that if he failed to obtain all of the loan proceeds the second option would be null and void.

The money Gorlin obtained for Amerdyne pursuant to the agreement was given to Amerdyne by way of four checks issued to "Amerdyne Industries, Inc." and signed by Gorlin. On the bottom left side of three of the checks he wrote, "loan." The total of the four checks that Gorlin issued to Amerdyne was $135,000. Gorlin's checks were deposited into the Amerdyne account; thereafter, Amerdyne issued its checks to AFP.

On February 22, 1973, Amerdyne executed a promissory note, signed by Daniel Baitcher, to Steve Gorlin for $150,000 in which Amerdyne promised to pay Gorlin "On or before February 22, 1974 or upon receipts from underwriting, whichever comes first $150,000 with interest at the rate of 8%." (Long was not included on the note.)

Approximately four months after Gorlin issued his first check to Amerdyne, the First Georgia Bank...