Isbell v. Smith

• Decision Date: 29 September 1989
• Parties: Cecil ISBELL, et al. v. Glenda Sue SMITH. 88-73.
• Court: Alabama Supreme Court

Page 877

558 So.2d 877

Cecil ISBELL, et al. v. Glenda Sue SMITH.

88-73.

Supreme Court of Alabama.

Sept. 29, 1989.

As Modified on Denial of Rehearing Dec. 15, 1989.

Rehearing Denied March 2, 1990.

Paul Millirons, Huntsville, for appellant Isbell.

Fob James III, Birmingham, for appellants Sullins and Core.

James R. Knight and S. Lynn Marie McKenzie of Knight & Griffith, Cullman, for appellee.

HORNSBY, Chief Justice.

This case arises out of the sale of a business. The plaintiff, Glenda Sue Smith, sued Cullman Savings and Loan Association for an accounting. She also sued Mr. Isbell for breach of the sales contract by which he purchased her business.

Ms. Smith originally purchased the business involved in this action from her brother, Ray Bailey. Ms. Smith changed the name of the business from "Rayco" to "Graphic Communications, Inc.," upon purchasing the business, the real estate upon which the business was located, and some of the Rayco assets. In order to borrow the money to purchase this business, Ms. Smith and her husband mortgaged their home in Morgan County to Cullman Savings and Loan Association in Cullman, Alabama. The entire amount of the mortgage debt was $70,000; $40,000 was used to pay Bailey for the business.

The business and its real estate were in Huntsville. Ms. Smith's attorney, Charles Sullins, also in Huntsville, prepared the documents for the sale of the business. Sullins represented Ms. Smith and Graphic Communications, Inc., in the defense of several legal matters and other business matters involving the operation of the business. Ms. Smith began to have cash flow difficulties. Sullins referred two acquaintances, Cecil Isbell and Clint Core, to Ms. Smith to discuss their buying her business. After some discussion, Isbell and Core agreed to buy the business and the real estate from Ms. Smith. Sullins prepared the contract of sale.

The written agreement was entered into between Ms. Smith and her husband, Eldridge D. Smith, and Isbell for the sale of Graphic Communications, Inc., and the real estate. Paragraph 3 of the agreement referred to the $70,000 debt the Smiths owed to Cullman Savings and Loan Association, and the agreement further indicated that $40,000 of the debt had been incurred through a loan that had been used to purchase the business. Isbell, as purchaser, agreed to pay 4/7 of the total debt, i.e., $40,000. The remainder of the mortgage ( 3/7 or $30,000) was to be paid by Ms. Smith and her husband.

Between the date of the contract and the time the contract was actually "closed," Ms. Smith's husband died. Ms. Smith collected $30,000 in life insurance benefits, which she applied to the mortgage debt, in payment of 3/7 of her obligation.

Isbell took possession and began to operate the business. Sometime later, Isbell sold an interest in the business to Clint Core. Eventually, Isbell sold the remainder of his interest to Clint Core and Charles Sullins. The sale by Isbell to Core and Sullins was made pursuant to an agreement that purported to indemnify Isbell from loss. Core and Sullins operated the business until it went bankrupt several months later.

Several questions arose following the sale of the business by Ms. Smith. The first question was whether payments were made on the remaining $40,000 debt by Isbell and the subsequent purchasers, Core and Sullins. At some point, Ms. Smith learned from Cullman Savings and Loan Association that the mortgage on her home was in default and that it was threatening foreclosure. The purchasers also learned that before, and at the time of Ms. Smith's sale of Graphics Communications, Inc., to Isbell, a tenant was occupying a portion of the premises. That tenant, Specialty Packaging Company, Inc., and/or its owner, Ronnie Seymore, had entered into an unrecorded ten-year lease with Mr. Bailey, the original owner of the premises. The lease was "discovered" after the purchase of the business by Core and Sullins. All three purchasers contended that Ms. Smith told them that the lease was from month to month. Ms. Smith disagrees.

Subsequent to the Core-Sullins purchase of the business, two outstanding debts of the business came due. One debt was the payroll taxes for the last quarter of the fiscal year that had ended just prior to the signing of Smith's contract with Isbell. Another debt consisted of medical expenses Ms. Smith sued both Isbell and Cullman Savings and Loan Association in Cullman County Circuit Court. Ms. Smith claimed that Paragraph 3 of the agreement for the sale of the business had been breached when Isbell failed to pay the remaining 4/7 of the outstanding loan. Although Ms. Smith also claimed that Paragraph 5 of the agreement pursuant to which Isbell promised to pay Smith an additional $50,000, had been breached, this issue was severed by the trial court and is not at issue in this appeal.

for an employee of Rayco, incurred before Smith purchased the business. Also, a question arose as to the amount, if any, owed by Smith to Sullins for legal fees for work done which was not connected with the sale of the business from Smith to Isbell.

Ms. Smith's claim against Cullman Savings and Loan Association was for an accounting. She alleged that she had paid 3/7 of the debt, and she asked for an accounting regarding the remaining amount due on the mortgage debt, which she contends was the responsibility of Isbell under her contract with him. Defendant Cullman Savings and Loan Association cross-claimed against Isbell, alleging that it was a third-party beneficiary under the sales contract between Ms. Smith and Isbell. Isbell filed a third-party complaint against the subsequent purchasers, Core and Sullins, based on the indemnity agreement signed at the time of the sale. Core and Sullins filed a claim against Ms. Smith alleging breach of contract, negligence, misrepresentation, and fraud. Core and Sullins alleged that Ms. Smith had negligently or recklessly misrepresented to them that Specialty Packaging had only a month-to-month oral rental agreement. Core and Sullins rely on the contract between Isbell and Smith as the basis for their claims against Smith. This Court does not accept this theory, yet such a theory does not affect the outcome of this decision.

The question of venue was raised before the trial court on several occasions. The trial court consistently ruled that venue was proper in Cullman County. The trial court also held, at one point, that Isbell, by not contesting venue at the appropriate time, had waived his right ever to contest it. The court entered summary judgment for Isbell on Isbell's third-party indemnity claim against Core and Sullins.

A jury trial was held on Smith's claim against Isbell under Paragraph 3 of the contract and on Core and Sullins's claim against Smith. Smith's claim against Cullman Savings and Loan Association for an accounting was reserved by the court, it being equitable in nature. The jury returned a verdict in favor of Ms. Smith for $80,125.03. The jury also returned a verdict for Ms. Smith on the Core-Sullins claims against her. Judgment was entered on those verdicts.

The defendants filed a motion for JNOV and a motion for new trial. The trial court observed that the plaintiff had requested that the judgment in her favor be reduced from $80,125.03 to $70,125.03 to conform to the evidence, and the court reduced the judgment accordingly. The trial court, also at the plaintiff's request, entered judgment for Sullins for $3,000 for attorney fees based on prior work he had done for her; that judgment was supported by the evidence. The trial court otherwise denied the motion for JNOV and for a new trial. As previously indicated, summary judgment was entered for Isbell against Core and Sullins on Isbell's indemnity claim. Isbell, Core, and Sullins have appealed.

ISSUES PRESENTED

The defendants have raised four issues on appeal to this Court. First, whether venue in Cullman County was proper; second, whether the trial court erred in overruling objections by counsel to closing arguments made with regard to Sullins's status as an attorney; third, whether the trial court abused its discretion in refusing a requested jury charge on whether the three purchasers were required to perform further under their contracts (i.e., to continue making Smith's payments to Cullman Savings and Loan Association) after Smith had committed an alleged material breach; and fourth, whether the trial court abused its

discretion in denying the three purchasers' motions for JNOV.

VENUE

Isbell, Core, and Sullins claim error with regard to the court's ruling on venue. The plaintiff sued an individual defendant, Isbell, and a corporation, Cullman Savings and Loan Association. An action brought by an individual "must be brought in the county where the defendant or any material defendant resides." Rule 82(b)(1)(A), A.R.Civ.P. Further, Alabama Code 1975, § 6-3-2(a)(2), provides that "[a]ll actions on contracts ... must be commenced in the county in which the defendant or one of the defendants resides." With respect to domestic corporations, § 6-3-7 provides that "a domestic corporation may be sued in any county in which it does business by agent or was doing business by agent at the time the cause of action arose."

This Court has defined the term "material defendant" as " 'one whose position is antagonistic to that of the plaintiff's because relief is sought against him.' " Ex parte Shelby County, 516 So.2d 525, 527 (Ala.1987) (quoting Ex parte Ford, 431 So.2d 1194, 1196 (Ala.1983), quoting Alabama Youth Services Board v. Ellis, 350 So.2d 405, 408 (Ala.1977)). A material defendant has been further defined by this Court as " 'a real and bona fide defendant whose interest in the result of the action is adverse to that of the plaintiff with respect to the cause of action against the other defendant.' " Ex parte Shelby County, 516 So.2d at 527 (quoting Copeland v. Loeb, 269 Ala. 295, 297, 112 So.2d 475, 477 (1959))...