Kitchen v. Insuramerica Corp.

• Decision Date: 19 March 2009
• Docket Number: No. A08A1986.,A08A1986.
• Citation: Kitchen v. Insuramerica Corp., 675 S.E.2d 598, 296 Ga. App. 739 (Ga. App. 2009)
• Parties: KITCHEN v. INSURAMERICA CORPORATION et al.
• Court: Georgia Court of Appeals

675 S.E.2d 598

296 Ga. App. 739

KITCHEN v. INSURAMERICA CORPORATION et al.

No. A08A1986.

Court of Appeals of Georgia.

March 19, 2009.

Fried & Bonder, David Stuart Fried, Atlanta, for Appellant.

Smith, Gambrell & Russell, Jason Southerland Bell, John Robert Autry, Atlanta, for Appellee.

PHIPPS, Judge.

This appeal concerns an agreement between Insuramerica Corporation and its former employee, Bobby Kitchen. Insuramerica, two of its subsidiaries, and its owner (collectively, "Insuramerica") sought, among other things, a declaratory judgment that the agreement did not make Kitchen a shareholder of the subsidiaries and that any agreement between the parties was unenforceable. Kitchen counterclaimed for damages based on several theories, including breach of contract. Addressing the limited question of the agreement's enforceability, the trial court granted Insuramerica's partial motion for summary judgment and denied Kitchen's cross-motion for summary judgment, holding that the agreement was not enforceable. For reasons set forth below, we find that the agreement was enforceable and thus reverse the grant of summary judgment to Insuramerica. We also reverse the denial of Kitchen's motion for summary judgment on the issue of the agreement's enforceability, but we affirm the denial of that motion to the extent the motion sought judgment as a matter of law on matters beyond the issue of the agreement's enforceability.

To prevail at summary judgment under OCGA § 9-11-56, the moving party must demonstrate that there is no genuine issue of material fact and that the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law. In reviewing a grant or denial of summary judgment, this Court conducts a de novo review of the evidence.¹

Insuramerica Corporation was the parent corporation of Insuramerica Insurance Agency, Inc. and SafeAir Agency, Inc. All three corporations were privately held. Frank Jakes, Sr. was Insuramerica Corporation's chief executive officer and sole shareholder. In May or June 2005, Jakes and Kitchen discussed the possibility of Kitchen working for Insuramerica and receiving a 25 percent ownership interest in the subsidiaries. Jakes deposed that he "agreed to give [Kitchen] 25 percent of the stock of [the subsidiaries] as incentive to come on board." He further deposed to the following agreement with Kitchen:

That upon execution of the necessary documents, that [Insuramerica Insurance Agency, Inc.] would issue [Kitchen] a number of shares of stock that would equal to 25 percent of the outstanding shares of that corporation. And then SafeAir Agency, Inc., would issue shares of stock to [Kitchen], along with the necessary documents that would equal to 25 percent of that corporation's outstanding shares.

By "necessary documents," Jakes meant a shareholder's agreement and other documents, such as a stock subscription agreement or stock purchase agreement, determined by legal counsel as required to effect the transfer.

On June 8, 2005, Kitchen and Jakes signed a "Letter of Understanding and Conditions of Employment" (the "June 8 letter"). This document stated: "This letter will both confirm and lay out the terms and conditions of employment and stock ownership of certain Insuramerica entities." The June 8 letter provided that Kitchen would hold the position of President with Insuramerica Corporation, Insuramerica Insurance Agency, Inc. and SafeAir Agency, Inc. The letter also specified Kitchen's annual salary, start date, and details concerning certain benefits. The June 8 letter then provided:

Stock Assignments & Rights

Insuramerica Insurance Agency, Inc. shall assign you 25% of its total outstanding stock. The distribution of these shares shall be in amounts and at times that [are] agreeable to both parties that will provide the best tax advantage.

SafeAir Agency, Inc. dba SafeAir Underwriters shall assign you 25% of its total outstanding stock. The distribution of these shares shall be in amounts and at times that [are] agreeable to both parties that will provide the best tax advantage.

The June 8 letter further provided that "[a]t the end of five years, Kitchen may purchase stock in Insuramerica Corporation, over time determined by G. Frank Jakes, Sr. in accordance with his retirement plan." Finally, the June 8 letter stated: "Agreements. 1. Stock Purchase Agreements[;] 2. Shareholders Agreements[;] 3. Bu[y] Sell Agreements funded by Life Insurance." The June 8 letter did not provide any further explanation about these referenced agreements and no such agreements were attached to the letter, but Jakes believed that the referenced agreements were "a necessary part of the transaction" and he told Kitchen that he would provide them for Kitchen's review and signature later.

The following day, Kitchen and Jakes met again to clarify Kitchen's employment and ownership interests. Jakes printed a copy of the June 8 letter, and Kitchen changed the date on the document to June 9, 2005 (the "June 9 letter"). The two men "sat and went through each of the items laid out" in the June 9 letter, which included several notations that Kitchen wrote by hand onto the June 9 letter during the meeting after Kitchen told Jakes that he could not "see starting until these have been at least put down in writing." These handwritten notations included the following:

Revisions/Clarifications for Inclusion in Final Ownership Agreement.

— Ownership contract will note 25% of all company contingency bonus to Bobby Kitchen (25% equity) paid after 1-1-07.

— Equity — 25% ownership value is between 500-600,000. Agency equity valuation for Insuramerica Agency and SafeAir to be completed after 2006 physical[sic]year end.

— Equity = value of the gross commission income [and] contingencies for SafeAir and Insuramerica Agency.

— Past Liabilities/Debt/Loans — Frank Jakes will be responsible for these cost[s] incurred prior to my 25% ownership....

— Stock assignment will be finalized no later than 12-31-06 regardless of tax implications.

— 25% ownership equity is absolute, non-revocable and not dependent on any performance criteria, quotas[,] etc.²

Kitchen also wrote on the June 9 letter, "Frank — Please see clarification and agreements as you have committed to me. If in agreement, please sign [and] return." Jakes and Kitchen signed the letter.³

Kitchen believed that the information contained in the June 9 letter subsequently would be incorporated into another document, and Jakes prepared a draft shareholders agreement that outlined specific details of a stock transfer to Kitchen. But Kitchen denied receiving a copy of this draft agreement, and the parties did not sign any further agreements concerning an assignment of stock to Kitchen. Jakes deposed that he did not proceed with the further agreements at Kitchen's request, because Kitchen was concerned about the tax implications of the transfer. Insuramerica did not identify Kitchen as an owner in certain business and regulatory filings, but on some occasions Insuramerica or Jakes referred to Kitchen as having an equity interest in the subsidiaries.

On May 31, 2006, Insuramerica terminated Kitchen's employment. In connection with the termination, the parties discussed how to compensate Kitchen for his "equity positions" in the subsidiaries. Kitchen disagreed with the valuation method proposed by Insuramerica, believing it was not what had been agreed upon when he started work. The parties never reached an agreement, and the underlying litigation ensued.

Insuramerica moved for partial summary judgment on its declaratory judgment claim and on certain of Kitchen's counterclaims, contending that Kitchen was not a shareholder of the subsidiaries and that "any agreement" between the parties was unenforceable. Kitchen also moved for summary judgment, contending that the parties' agreement was enforceable and conveyed to him a 25 percent ownership interest in the subsidiaries.

In its summary judgment order, the trial court ruled that the "parties' general agreement to transfer a 25% interest" in the subsidiaries to Kitchen was incomplete and unenforceable as a matter of law, because the parties did not have a meeting of the minds on certain terms essential to the contract. Specifically, the court pointed to the lack of a meeting of the minds concerning the allocation of tax consequences of the transfer between the parties, the responsibility borne by the parties for future losses of the subsidiaries, and what the parties would do if Insuramerica failed to transfer the interests by December 31, 2006. Accordingly, the court granted Insuramerica's motion for partial summary judgment and denied Kitchen's motion for summary judgment.⁴

1. Kitchen contends that the court erred in finding that he did not have an enforceable agreement with Insuramerica. We agree.

The law does not favor destruction of contracts on grounds of uncertainty.⁵ Nevertheless, "indefiniteness in subject matter so extreme as not to present anything upon which the contract may operate in a definite manner renders the contract void."⁶

Under Georgia law, a contract does not exist unless the parties agree on all material terms. A contract cannot be enforced if its terms are incomplete, vague, indefinite or uncertain. Thus, a court will not enforce an agreement where it is left to ascertain the intention of the parties by conjecture. An indefinite contract, however, may acquire more precision and become enforceable because of the subsequent words or actions of the parties.⁷

"The test of an enforceable contract is whether it is expressed in language sufficiently plain and explicit to convey what the parties agreed upon."⁸

Viewed in the light most favorable to Kitchen, the evidence demonstrated a meeting of the minds between Kitchen and Jakes that by a certain date, December 31, 2006, Kitchen would be assigned a 25 percent interest in the...