Kilburn v. Patrick
| Decision Date | 09 November 1999 |
| Docket Number | No. A99A1585.,A99A1585. |
| Citation | 241 Ga. App. 214,525 S.E.2d 108 |
| Parties | KILBURN v. PATRICK. |
| Court | Georgia Court of Appeals |
OPINION TEXT STARTS HERE
Womble, Carlyle, Sandridge & Rice, Everett W. Gee III, Atlanta, for appellant.
Meadows, Ichter & Trigg, Cary Ichter, Steven M. Kushner, Atlanta, for appellee.
Steven Patrick sued Galen Kilburn, Jr., Kilburn Young Asset Management Corporation (KYAMC), Robert Young, and Donald Burton for conversion and breach of fiduciary duty stemming from the defendants' alleged conversion of shares of KYAMC stock that had been given to Patrick. After the trial court directed a verdict against Kilburn on the conversion claim, the jury found that defendants had breached their fiduciary duty and awarded punitive damages and attorney fees against Kilburn. Kilburn appeals, contending that the trial court erred in (1) directing a verdict on conversion; (2) permitting an award of punitive damages and attorney fees; (3) admitting prejudicial evidence; and (4) failing to give a requested jury charge. For reasons that follow, we reverse.
In August 1989, Kilburn hired Patrick to work for Galen Kilburn & Company (GKC), a real estate development company. Kilburn subsequently formed KYAMC with Robert Young. Corporate documents designated Kilburn as chairman, Young as president/chief executive officer, Patrick as vice-president, and Sandra Hutchenson, another employee of GKC, as secretary/treasurer.
(Emphasis supplied.)
On August 15, 1995, Patrick resigned. According to Patrick, he resigned only from GKC, but remained a shareholder, officer and director of KYAMC. Kilburn, on the other hand, said that Patrick resigned from both GKC and KYAMC, and he reminded Patrick that, by resigning, he would be walking away from a significant amount of money in KYAMC.
In a letter dated August 16, 1995, Kilburn wrote Patrick that he was exercising his option to purchase Patrick's shares in KYAMC in accordance with the shareholder agreement. Kilburn then forwarded a check in the amount of $14,594.56—the book value of the stock—which Patrick refused. Subsequently, KYAMC made distributions to its shareholders, but did not pay Patrick.
Patrick brought suit against Kilburn for converting his shares in KYAMC and against Kilburn, KYAMC, and the other officers for breaching their fiduciary duty.3 At trial, Patrick and Kilburn disputed whether the shareholder agreement gave Kilburn the right to purchase Patrick's stock. Patrick argued that the agreement did not give Kilburn any such right because the stock purchase provision applied only to "employees" of KYAMC, and he was not an employee. The trial court agreed and directed a verdict against Kilburn on the conversion claim and awarded $108,396.25 in compensatory damages.
With regard to the remaining claims, the jury found that all defendants breached a fiduciary duty, but that Kilburn, alone, acted in bad faith. Although the jury awarded no compensatory damages on the breach of fiduciary duty claim, it ordered Kilburn to pay punitive damages and attorney fees to Patrick.
1. Kilburn asserts that the trial court erred in directing a verdict on conversion. We agree. A directed verdict is proper only where there is no conflict in the evidence on any material issue, and the evidence, with all reasonable deductions construed in favor of the nonmovant, demands a particular verdict.4 Here, the evidence did not demand a finding that Kilburn converted shares of stock owned by Patrick.
"[C]onversion involves an unauthorized assumption and exercise of the right of ownership over personal property belonging to another, in hostility to his rights."5 The very essence of conversion is that the act of dominion is wrongfully asserted.6 Thus, if a party has a right to assert ownership, the act of dominion is not wrongful and does not constitute conversion. Accordingly, if the shareholder agreement gave Kilburn the right to purchase Patrick's shares at book value, then he could not have converted the stock.7
Under the express language of the shareholder agreement, Kilburn had the unilateral right to purchase Patrick's shares of stock if Patrick withdrew, resigned or was terminated "from his employment by the Corporation." The trial court found that the term "employment" was unambiguous because employment is commonly understood as a master-servant relationship. In directing a verdict against Kilburn, the trial court concluded that "there is simply no evidence from which a jury could determine that Mr. Patrick was an employee of [KYAMC]." We disagree.
Under Georgia law, the term "employment" is capable of a broader meaning than that given by the trial court. Significantly, according to the Georgia Business Corporation Code, an "[e]mployee includes an officer" of the corporation.8 In the workers' compensation context, an employer-employee relationship may be inferred where one receives valuable services from another and retains the right to discharge the one performing the services.9 Although payment of compensation is relevant to the issue of employment, it is not dispositive.10
The trial court erred in concluding that there was no evidence that Patrick was in the employment of KYAMC. Patrick was the vice president of KYAMC. As such, he acknowledged that he could be fired from the company. Although Patrick did not receive a salary for his work at KYAMC, he did perform services for the company. Patrick helped locate office space for KYAMC, participated in company meetings, and signed and processed checks for the company. At one point, he served as the comptroller of the company.11 In a KYAMC business proposal, Patrick was listed as "key personnel." And, on direct examination, Patrick asserted that he was "integral in the success of [KYAMC]." Under these circumstances, there is at least some ambiguity as to whether Patrick was in the employ of KYAMC.
As there is an ambiguity, we turn to the rules of contract construction to determine whether the ambiguity may be resolved.12 "If after applying the rules, the ambiguity still remains, then the trier of fact must resolve the ambiguity."13
Here, the rules of construction resolve the ambiguity. We note the rule that, "[t]he construction which will uphold a contract in whole and in every part is to be preferred, and the whole contract should be looked to in arriving at the construction of any part."14 Thus, in interpreting the agreement, we must strive to give it a reasonable and effective meaning that does not render some sections meaningless.15
Under the express terms of the shareholder agreement, the only majority shareholders were Kilburn and Young, and the only minority shareholders were Patrick and Hutchenson. Using the traditional master-servant definition of employment, neither minority shareholder was an "employee" of the company. So this definition of the word "employment" renders the clause granting Kilburn the right to purchase the shares from a minority shareholder meaningless. On the other hand, both minority shareholders were officers of KYAMC. By using the definition of the term "employment" found in the corporate code, we give the contract a reasonable interpretation that...
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