Callaway v. Garner
| Decision Date | 25 March 2014 |
| Docket Number | A13A2150 |
| Court | Georgia Court of Appeals |
| Parties | CALLAWAY et al. v. GARNER et al. |
SECOND DIVISION
NOTICE: Motions for reconsideration must be physically received in our clerk's office within ten days of the date of decision to be deemed timely filed.
Following a bench trial, the trial court ordered the estate of Cason J. Callaway, Jr. (the "Callaway Estate") to specifically perform an agreement to purchase shares of Callaway Blue Springs Water Company ("Callaway Blue") from two shareholders for $1,200,000 and awarded the shareholders prejudgment interest and attorney fees. The Callaway Estate now appeals, contending that the trial court erred in granting specific performance of the stock purchase agreement and in awarding prejudgment interest and attorney fees. For the reasons discuss below, we affirm the trial court's grant of specific performance and award of prejudgment interest, but we reverse the court's award of attorney fees.
"On appeal from the entry of judgment in a bench trial, we view the evidence in the light most favorable to the trial court's verdict." Westmoreland v. JW, LLC, 313 Ga. App. 486, 487 (722 SE2d 102) (2012). We will affirm a trial court's factual findings in a bench trial if there is any evidence to support them because "[s]uch a standard gives the proper deference to the trial court, which is in the best position to judge the credibility of witnesses." Cox v. Bayland Properties, LLC, 293 Ga. App. 612, 613 (1) (667 SE2d 452) (2008). Mindful of this deferential standard, we turn to the evidence presented at the bench trial in this case.
The Course of Dealing Between the Garners and Mr. Callaway. Larry Garner, Sr., and his son, Larry Garner, Jr., have operated a family construction business for many years. Through their company, Garner Construction, the Garners began a relationship with Cason J. Callaway, Jr. ("Mr. Callaway") in the 1980s through a series of construction projects commissioned by him. During the course of their 20-year business relationship, the Garners performed 40 to 60 construction projects for Mr. Callaway. Almost all of the projects were performed on an oral agreement confirmed by a handshake and without written contracts. The Garners and Mr. Callaway never had a dispute over their 20-year history of conducting business through oral agreements.
Callaway Blue. Since the 1930s, the Callaway family has owned property in Harris County, Georgia, containing a natural spring. In the late 1990s, the Garners and Mr. Callaway began discussing the possibility of using the natural spring to start a commercial spring water bottling business. The Garners and Mr. Callaway ultimately formed a water bottling business, Callaway Blue, and they entered into a shareholders' agreement in 2001 that placed certain restrictions on the sale of their stock (the "2001 Shareholders' Agreement").
Larry Garner, Jr. served as Chief Operating Officer and President of Callaway Blue. At the time of the events at issue in this litigation, the Board of Directors of Callaway Blue included Mr. Callaway, his wife, and his four children, with Mr. Callaway serving as Chairman and Chief Executive Officer.
Stock Ownership in Callaway Blue. Initially, the Garners owned 45 percent of Callaway Blue and Mr. Callaway owned 55 percent. In 2002 and 2003, stock was issued to Mr. Callaway's wife and his four children.
In 2003, Mr. Callaway agreed to purchase 6,000 shares of Callaway Blue from Larry Garner, Sr. for $200 per share. The sale was completed by Mr. Callaway delivering a personal check for $1.2 million. There were no written contracts prepared to memorialize the stock sale.
In 2004, non-voting shares of Callaway Blue were issued and sold to Callaway family members and were valued at $180 per share. In addition to the Callaway family members who already owned stock, non-voting shares were issued and sold to Mr. Callaway's grandchildren.
The 2004 Shareholders' Agreement. In October 2004, an amended shareholders' agreement was executed by the then-current shareholders - the Garners, Mr. Callaway, his wife, and his four children (the "2004 Shareholders' Agreement"). The 2004 Shareholders' Agreement contained stock transfer restrictions and retained many of the terms of the original 2001 Shareholders' Agreement, including a section limiting any shareholder from transferring shares in Callaway Blue to anyone (including another shareholder), other than to the shareholder's spouse or lineal descendants. Section 4 of the 2004 Shareholders' Agreement addressed "impermissible transfers" and provided Callaway Blue and the other shareholders with an option to buy "all[] of the Stock attempting to be transferred" within a certain time period after receiving notice of the impermissible transfer. Section 5 established a specific procedure for computing the value of the stock in the event that Callaway Blue or the other shareholders decided to exercise their option. The 2004 Shareholders' Agreement stated that any transfer carried out in a manner not "in accordance with this Agreement" would be "void and ineffective."
The 2004 Shareholders' Agreement further provided that "[a]ll notices, . . . waivers and other acts under this Agreement shall be in writing" and that its terms could be amended "only . . . by a subsequent written agreement executed by all of the then shareholders of the Stock then outstanding." Additionally, the 2004 Shareholders' Agreement stated that "After-Acquired Stock," including "non-voting shares," would be subject to its terms. Hence, when some of Mr. Callaway's grandchildren purchased non-voting shares in Callaway Blue later in 2004, those shares were covered by the 2004 Shareholders' Agreement.
The Role of Ken Callaway. Mr. Callaway was 76 years old when he formed Callaway Blue with the Garners, and his health declined over the ensuing years. Consequently, in 2005, Mr. Callaway asked his son, Ken Callaway, to serve as his "eyes and ears" and assist him in handling his business and personal affairs. Mr. Callaway also executed a power of attorney authorizing his children to make decisions and manage his affairs for him. Nevertheless, despite his health problems, Mr. Callaway continued to participate in Callaway Blue and still "generally did what he wanted to do" without interference from other family members.
After his father spoke with him about his declining health, Ken Callaway began appearing at Callaway Blue to stay apprised of the business, and, in 2006, he was placed on the corporate payroll as a "family representative" and became "involved with the day to day and overall operations of the water company." Ken Callaway would report all significant business matters involving his father to his mother and his three siblings.
Negotiations Regarding the Sale of the Garners' Stock. Ken Callaway and the Garners did not get along with one another. After observing that Ken Callaway was "becoming more and more involved in the company," Larry Garner, Jr. advised the Callaway family that he had taken Callaway Blue as far as his skills would allow and that he wanted to sell the remainder of his shares and relinquish his role as President. In response, the Callaway family had a meeting to discuss the purchase of Larry Garner, Jr.'s shares and decided to hire an appraiser to value them.
On September 1, 2006, the Callaway family made a written offer to purchase Larry Garner, Jr.'s shares for $55 per share based on an appraisal of the stock that they had obtained. The offer letter was signed by Mr. Callaway, his wife, and his four children. Attached to the offer was a draft "letter of intent" that specified three "conditions precedent" to closing on the sale.
Larry Garner, Jr. rejected the $55 offer on September 6, 2006, but negotiations continued over the proper valuation of the stock and included discussions of the Callaway family purchasing the remaining shares of both Garners. On January 26, 2007, Larry Garner, Jr. sent a letter to Ken Callaway discussing the valuation of the shares and noting that it was his intent to "faithfully follow[] the procedures outlined in our Shareholders' Agreement." Ken Callaway responded in a letter to Larry Garner, Jr. on January 30, 2007, advising, among other things, that the "Shareholders' Agreement does not apply to the facts and circumstances" and that "Section 4 of the . . . Shareholders' Agreement . . . does not prohibit the type of transfer we have been considering since [the summer of] 2006."
The January 31, 2007 Meeting and "Handshake" Agreement. At Mr. Callaway's request, a face-to-face meeting was scheduled for January 31, 2007 to come to a final agreement with the Garners on the stock price. Bob Hidell and Kathy Ransome, two consultants with experience in valuing water bottling companies, were asked to moderate the meeting. With both parties' permission, Hidell and Ransome also agreed to represent the Garners and assist them in evaluating any offer made by the Callaway family.
Hidell and Ransome sent written notice of the January 31, 2007 meeting to the "Members of the Callaway Family" and "Members of the Garner Family." The letter stated that the contemplated negotiations between the Callaway family and the Garners during the meeting "cannot be considered to be within the framework established by the [2004 Shareholders' Agreement]," but advised that the 2004 Shareholders' Agreement would "remain[] in full force and effect without modification or nullification" if no agreement to purchase the Garners' shares was reached at the meeting.
The January 31, 2007 meeting was held at Callaway Blue and was attended in-person by Mr. Callaway, the Garners, Ken Callaway, and Mr. Callaway's personal secretary. Hidell and Ransome participated in the meeting by speaker phone.
The substance of the meeting was the subject of the testimony of several witnesses at trial. During the meeting, the Callaway family...
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