JTH Tax, Inc. v. Flowers
| Decision Date | 09 March 2010 |
| Docket Number | No. A09A1753.,A09A1753. |
| Citation | 691 S.E.2d 637 |
| Parties | JTH TAX, INC. v. FLOWERS. |
| Court | Georgia Court of Appeals |
691 S.E.2d 637
JTH TAX, INC.
v.
FLOWERS.
No. A09A1753.
Court of Appeals of Georgia.
March 9, 2010.
Smith, Gambrell & Russell, Edward H. Wasmuth, Jr., Atlanta, for appellant.
Smith, Welch & Brittain, John P. Webb, Stockbridge, Andrew J. Gebhardt, for appellee.
SMITH, Presiding Judge.
JTH Tax, Inc. d/b/a Liberty Tax Service ("Liberty Tax") appeals from a jury verdict in favor of Joan Flowers in this dispute arising from Flowers's sale of a tax preparation business to Liberty Tax. Liberty Tax asserts the trial court erred by denying its motion for a judgment notwithstanding the verdict (j.n.o.v.) on Flowers's claims for fraud, punitive damages, and attorney fees. For the reasons set forth below, we affirm the jury's verdict.
On appeal from a trial court's rulings on motions for directed verdict and j.n.o.v., we review and resolve the evidence and any doubts or ambiguities in favor of the verdict; directed verdicts and judgments n.o.v. are not proper unless there is no conflict in the evidence as to any material issue and the evidence introduced, with all reasonable deductions therefrom, demands a certain verdict.
(Citation and footnote omitted.) James E. Warren, M.D., P.C. v. Weber & Warren Anesthesia Svcs., 272 Ga.App. 232, 235(2), 612 S.E.2d 17 (2005).
So viewed, the record shows that Flowers sold her tax preparation business to Liberty Tax and that the sale contract provided: "The Purchase Price shall be the lesser of (a) $145,240 ("2000 Revenue") or (b) Purchaser's gross receipts for the period of January 1, 2001 to December 31, 2001 generated from all sources and from the current location of the Seller combined with subsequent location(s) if applicable (the "2001 Revenue")." With regard to payment of the purchase price, the contract provided: "The first payment shall be made on February 28, 2001 and shall equal the lesser of one-fourth of 2000 Revenue or one-fourth of 2001 Revenue as estimated at that time." The remaining
A previous letter of intent between the parties contained a different formula for calculating the purchase price: "the lesser of one times 1) Liberty's revenue from all sources for the year 2001 at this location (or combined with its subsequent location if the business is relocated), or 2) seller's revenue for the year 2000." The final sales contract was drafted by the director of Liberty Tax's business development department, Raymond Dunn. Dunn testified that he was not an attorney and that his intent was to draft a contract "to reflect what was agreed to in the letter of intent." He could not "give ... a specific reason" to explain why the purchase price language in the contract differed from the letter of intent language.
Flowers testified that she thought she would receive $145,240 for the sale of her business because Liberty Tax "had such a big marketing program and they were going to grow her business." She also testified that Liberty Tax should have generated more income in 2001 than she did in 2000 because she had to turn down some appointments in 2000 when she was sick in January, when she broke a leg in August, and when she spent time preparing to sell the business. Additionally, she testified that she started her business in 1982, that she began renting an office for a "full year in 1991," and that her business grew larger every year.
The same day that Liberty Tax purchased Flowers's business, it sold the business to a franchisee, Mary Ann Babb, who already owned another Liberty Tax franchise in Riverdale, Georgia. Babb's contract with Liberty Tax contained a sale price formula that was the mirror image of the contract between Liberty Tax and Flowers.1 Babb's Riverdale, store was purchased in late 1999, and its performance the first year "was not as good as it was the year" before the purchase. "Although it was not a bad year, it was not up to expectations." Babb purchased the Riverdale Liberty Tax location for "a flat dollar amount based on the previous year's sales." When Babb purchased the Stockbridge store, her husband, who managed the business,
made it clear that ... the purchase price would have to be conditioned on the dollar amount that we received. I didn't mind a minimum or suggested price, but at the end of the tax season or at the end of the year, the purchase price had to be equal or in some relationship to the dollars that we received that year. It couldn't just be a blanket price.
On February 28, 2001, Liberty sent Flowers a letter estimating that the 2001 gross revenues for the business would be $60,000 and including a payment of $16,311.78. Flowers protested the payment as "short" and hired an attorney.
In a letter sent July 24, 2001, Flowers's attorney wrote that the contract "clearly provides that the purchase price will be the 2001 revenue of the business plus the entire gross receipts of JTH Tax, Inc. or $145,240, whichever is less" and explained that the February payment should have been $39,484.72. The lawyer also sent two follow-up letters on August 14 and 30, 2001. On September 6, 2001, corporate counsel for Liberty Tax responded: "I am in receipt of your letter of August 30, 2001 wherein you reiterate a request for certain Liberty Tax income records. Would you please kindly point me to the specific clause or paragraph in our agreement with Joan Flowers which gives her the right to those particular records so that I may further evaluate this request." Flowers's counsel then replied:
We believe that it is implied within the sales agreement that you would make an accurate accounting of 2001 gross revenue and that Ms. Flowers would not be required to take your and your purchasers' word for the 2001 revenue. Additionally, if
Ms. Flowers could see the names and charges for the 2001 customers, it might ease her fears that customers were not pursued.
On September 25, 2001, Liberty Tax repeated its refusal to provide documentation to Flowers's counsel, citing IRS confidentiality regulations. Before suit, Liberty Tax never produced any documentation supporting its 2001 gross revenue estimate that was less than half the business's 2000 gross revenues.
In February 2002, Liberty Tax sent Flowers a Purchase Allocation Report indicating a 2001 year end gross revenue total of $60,445 and a check totaling $19,518.08. The report indicated zero receipts for the months of October, November, and December. The Liberty Tax representative who prepared the report testified that these numbers did not cause her any alarm because "in our industry there is quite often...
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