Henson v. American Family Corp., s. 68317

• Decision Date: 15 June 1984
• Docket Number: 68318,Nos. 68317,s. 68317
• Citation: 171 Ga.App. 724,321 S.E.2d 205
• Parties: HENSON v. AMERICAN FAMILY CORPORATION et al. AMERICAN FAMILY CORPORATION v. HENSON.
• Court: Georgia Court of Appeals

Page 205

321 S.E.2d 205

171 Ga.App. 724

HENSON v. AMERICAN FAMILY CORPORATION et al.

AMERICAN FAMILY CORPORATION v. HENSON.

Nos. 68317, 68318.

Court of Appeals of Georgia.

June 15, 1984.

Rehearing Denied July 24, 1984.

Certiorari Denied Dec. 4, 1984.

Francis C. Schenck, Nickolas P. Chilivis, Atlanta, for appellant.

Garland T. Byrd, Butler, Denmark Groover, Jr., Macon, Forrest L. Champion, Jr., Columbus, for appellees.

BANKE, Presiding Judge.

This case originated in May of 1978, as an action in equity by American Family Corporation to require its recently discharged general counsel, Kenneth M. Henson, to cease acting in that capacity and to turn over all corporate records and files in his possession. A temporary restraining order granting this relief was issued ex parte on the day the suit was filed, and Henson subsequently turned over the requested documents.

No further action has ever been taken on the complaint; however, the case has remained pending on a counterclaim filed by Henson alleging that the corporation breached a long-term retainer agreement with him and that a tortious conspiracy existed among several of its officers and directors to interfere with his rights under that agreement. In addition, Henson alleged a right to indemnification, pursuant to certain provisions of the corporation's articles of incorporation and by-laws, for his legal expense resulting from the litigation. The counterclaim was subsequently amended to assert additional claims for malicious use and abuse of process, libel, and tortious conspiracy to violate Henson's civil rights. The officers and agents who were alleged to have conspired to violate Henson's rights were joined as additional counterclaim defendants, as was American Family Life Assurance Corporation, a wholly owned subsidiary of American Family Corporation. At all times relevant to this litigation, American Family Corporation and American Family Life Assurance Corporation shared many of the same officers and directors (including John Amos, the president and chief executive officer of both companies) and they have been treated by both sides as a single entity for virtually all purposes. They will henceforth be referred to together in this opinion as "American Family."

In November of 1983, following 5 1/2 years of litigation and discovery which have generated almost 3,000 pages of record, the trial court issued several rulings which are the subject of these appeals. Summary judgment was granted to all the individual counterclaim defendants as to all claims and to American Family as to all the tort claims. However, the court denied cross motions for summary judgment by Henson and American Family as to the breach of contract and indemnification claims. In conjunction with these rulings, the court also granted a motion by American Family to strike all claims for punitive damages. Finally, the court entered an order continuing in effect certain restrictions which it had previously placed on Henson with respect to his attempts to obtain discovery regarding American Family's business dealings in Japan.

Despite the complexity of the litigation, the facts giving rise to Henson's counterclaims may be simply stated. On January 17, 1972, American Family's president, John Amos, delivered a letter to Henson (who had been representing the company for at least a year as a member of the firm of Kelly, Champion & Henson), stating as follows:

"I have S.E. Kelly's letter of December 27, 1971, tendering resignation of the firm of Kelly, Champion & Henson as general counsel of American Family Life Assurance Company.

"This will confirm subsequent agreements reached between this company and you.

"You propose to serve as our general counsel and to supervise all legal matters of this company. You have advised that you intend to procure one or more associates and/or partners. While it is agreed that you will manage the account, the nature of our relationship should include a general interest on the part of all of your associates and/or partners. We would be free to call upon any available associate or partner. We expect you to familiarize yourself with the nature of our business and company, its goals and objectives.

"The necessity of your employing one or more associates by virtue of the anticipated volume of work was discussed and the fact that such required, in effect, a long term commitment on your part to such associate or associates.

"It was agreed that in consideration of the above general services, you will receive a retainer fee, effective April 1, 1972, payable monthly, of $27,200.00 for the balance of 1972, and thereafter such retainer shall continue on an annual basis, payable monthly, for a period of not less than five (5) years. In addition to the retainer it would be expected that we would be billed for time and expenses of your associate members and for any extra-ordinary time and effort expended by you, specifically in the matters of actual litigation, prolonged negotiations, securities registrations, acquisitions, mergers, real estate title examinations, etc.

"This letter shall constitute a binding contract between parties; same having been entered into on behalf of our company by me as president and general manager of the corporation. I am certain that our relations will be pleasant and mutually beneficial to you and our company. Please indicate your acceptance on the attached copy."

Henson executed his acceptance of this offer, as requested. On September 18, 1975, Amos sent him another letter, supplementing the 1972 letter as follows:

"Under date of January 17, 1972, I confirmed to you our agreement whereby you would serve as General Counsel of American Family Life Assurance Company. It is recognized that the volume of work requires a long term commitment on your part as well as a long term commitment in providing the desired services. This limits and restricts your general practice. It is to the advantage of the company that you retain your identity as an independent counsel, but at the same time be available on a full time basis.

"Insofar as any employee benefits are concerned you qualify as a full time employee.

"Your salary will be adjusted from time to time to equate in purchasing power the annual salary when established.

"The minimum term of your employment is extended for an additional ten (10) years and will continue thereafter on an annual basis until terminated or further extended.

"This letter supplements our original agreement."

Henson executed his written acceptance of these terms, and the two letters together constitute the alleged contract upon which Henson seeks to recover.

American Family's Board of Directors initially elected Henson to the position of general counsel in April of 1972, "subject to removal by action of the Board at any time it shall be deemed necessary," and the board continued to elect him to that post each year thereafter until 1978. On May 3, 1978, Amos notified Henson in writing that he was discharged as general counsel and instructed him to surrender all corporate files and records. The action in equity was initiated two days later.

During his tenure as general counsel, Henson's annual salary was increased twice, once in December of 1972 to $30,000 per year, and again as of January 1977 to $45,000 per year. There has never been any dispute as to the amount of compensation called for under the agreement. Held:

1. The trial court did not err in concluding that material issues of fact remain to be tried as to whether the letter agreements constitute an enforceable retainer contract between Henson and American Family. The primary factual issue is whether Amos was authorized by the board of directors to enter into such a contract. Under the applicable corporate by-laws, Amos, as president, had general charge of the business and was empowered to sign and execute all "authorized" contracts on American Family's behalf. While it is quite clear that the board of directors never expressly authorized Amos to sign either of the letter agreements, Henson contends that he relied on Amos' implied or apparent authorization to sign such contracts on the corporation's behalf. He further contends that the board impliedly ratified the agreements by confirming him as general counsel annually from 1972 to 1978, with knowledge of their existence. The counterclaim defendants, on the other hand, maintain that the existence of the letters was not revealed to the board until after Henson's discharge; and Amos has testified that at the time he and Henson signed the 1972 letter, he told Henson that the board would never ratify the arrangement if it were submitted for their approval. The counterclaim defendants further argue that Henson is estopped from alleging that he relied in good faith on Amos' apparent authority because, having handled the corporation's legal affairs both before and after 1972, Henson either knew or should have known the extent of Amos' actual authority under the articles of incorporation and by-laws.

While the above circumstances certainly may make it difficult for Henson to prove his case at trial, we cannot conclude as a matter of law on the record before us that the letter agreements either were or were not authorized by the board of directors. Accord Newton v. Social Circle &c. Co., 174 Ga. 320, 162 S.E. 667 (1931); Eminent Household of Columbian Woodmen v. George E. Benz & Co., 11 Ga.App. 733 (2), 736, 76 S.E. 99 (1912). Similarly, we cannot say as a matter of law that the transaction does not meet the criteria set forth in OCGA § 14-2-155(a)(3), governing the validity of contracts between corporations and interested officers. To be entitled to summary judgment, a party must conclusively eliminate all material issues in the case, even those upon which the opposing party would have the burden of proof at trial, and the latter is given the benefit of all reasonable doubts and all favorable inferences...