Godfrey v. Heller, 1999

• Decision Date: 16 March 1993
• Docket Number: No. 1999,1999
• Citation: 311 S.C. 516,429 S.E.2d 859
• Court: South Carolina Court of Appeals
• Parties: James B. GODFREY, III, Respondent, v. James W. HELLER, Jr., and Heller & Associates, Inc., Appellants. . Heard

Page 859

429 S.E.2d 859

311 S.C. 516

James B. GODFREY, III, Respondent, v. James W. HELLER, Jr., and Heller & Associates, Inc., Appellants.

No. 1999.

Court of Appeals of South Carolina.

Heard March 16, 1993.

Decided April 19, 1993.

James C. Rushton, III, of The Hyman Law Firm, Florence, for appellants.

Charles E. Luther, Jr., of Swearingen & Luther, Florence, for respondent.

LITTLEJOHN, Acting Judge.

James B. Godfrey commenced this action against James W. Heller (Heller), individually and as president of Heller & Associates, Inc. (the Corporation), and against the Corporation, seeking to be declared a shareholder in the Corporation and a determination as to the amount of Godfrey's interest. Heller and the Corporation denied Godfrey was a shareholder. The circuit court referred this matter to a special referee with finality. The parties agreed to bifurcate the hearing so that the special referee could first determine Godfrey's status as a shareholder and, if necessary, then determine the extent of his interest. The special referee held that Godfrey was entitled to an ownership interest in the Corporation and Heller appeals. We affirm and remand.

Godfrey alleged in his complaint that he was entitled to an order declaring he had an interest in the Corporation, requiring Heller to account to the Corporation for sums Heller received from the Corporation, requiring the Corporation to issue shares of stock to Godfrey, and requiring Heller to allow Godfrey access to the records. Accordingly, this action is in equity. See Lee v. Lee, 251 S.C. 533, 164 S.E.2d 308 (1968) (an action for an accounting is in equity); Miller v. Borg-Warner Acceptance Corp., 279 S.C. 90, 302 S.E.2d 340 (1983) (an action for injunctive relief is equitable). On appeal, in an equitable action tried by a special referee, the Court of Appeals is able to find facts in accordance with its view of the evidence. New Hampshire Ins. Co. v. The Bey Corp., Op. No. 1960, 1993 WL 56154 (S.C.Ct.App. filed Mar. 1, 1993) (Davis Adv.Sh. No. 6 at 11). However, the appellant must convince the Court of Appeals that the referee erred in his findings of fact. Id. Further, the Court of Appeals is not required to disregard the factual findings of the referee, who saw and heard the witnesses and was in a better position to judge their credibility. Costa & Sons Construction Co., Inc. v. Long, 306 S.C. 465, 412 S.E.2d 450 (Ct.App.1991).

Prior to 1982, both Godfrey and Heller were employed by Engineering Consultants, a Florence engineering firm, of which Heller owned fifty percent. In 1982, Heller decided to leave Engineering Consultants and spoke with Godfrey concerning the creation of a separate business (the Corporation). There is no dispute that the parties intended at some point in time for Godfrey to acquire up to a twenty-five percent interest in the corporation to be formed. The dispute is over whether this in fact ever occurred.

According to Godfrey, he purchased 25% of the stock in the Corporation in September 1982, when he gave Heller a check for $2,500 made payable to Heller and Associates, Inc. Heller was to contribute $7,500 and would acquire 75% of the stock in the Corporation. In his settlement with Engineering Consultants, Heller received certain equipment which he contributed to the new Corporation. Godfrey and Heller agreed to a value of about $26,800 for the equipment and Godfrey agreed to pay Heller 25% of its value ($6,700), which the parties agreed to reduce to $6,000. This transaction was not connected with Godfrey's acquisition of an interest in the Corporation, but was a "gentleman's agreement" which Godfrey made with Heller individually. In fact, Heller told Godfrey that payment for the equipment was unnecessary. Although the Corporation used the assets, Godfrey never paid the $6,000 to Heller because they never were able to work out a payment plan.

According to Heller, he contributed $7,500 cash and the $26,800 in equipment towards the Corporation, and Godfrey was to pay 25% of the Corporation's value to acquire a 25% interest. The parties agreed that the total value of the Corporation (including Heller's cash contribution) was $34,300, and 25% of that amount was $8,575. Godfrey's $2,500 check to Heller and Associates, Inc., was a down payment, leaving $6,075 due. Heller agreed to reduce the amount to $6,000. The incorporation took place in September 1982 and 1,000 shares of stock were issued to Heller. When Godfrey completed paying for the stock, as anticipated, Heller would transfer 25% (or 250 shares) to him. However, Godfrey never paid Heller the remaining $6,000 to complete the transaction, so that Godfrey is only entitled to the return of his $2,500, Heller argues.

The special referee stated the following in his order:

I find that the agreement in September, 1982 between Heller and Godfrey regarding the ownership of Heller & Associates, Inc., was that Godfrey would make an initial cash contribution of Two Thousand Five Hundred and no/100 ($2,500.00) Dollars; that Heller would make a cash contribution of Seven Thousand Five Hundred and no/100 ($7,500.00) Dollars; and, that the parties would meet to determine the value of the assets contributed by Heller at a later time and make arrangements for Godfrey to pay Heller his proportionate share.

It stretches logic to believe that Heller would contribute Seven Thousand Five Hundred and...