Lister v. Scriver

• Decision Date: 17 March 1995
• Docket Number: No. A94A2272,A94A2272
• Parties: LISTER et al. v. SCRIVER.
• Court: Georgia Court of Appeals

Page 83

456 S.E.2d 83

216 Ga.App. 741

LISTER et al. v. SCRIVER.

No. A94A2272.

Court of Appeals of Georgia.

March 17, 1995.

Teddy R. Price, Decatur, William G. Maston, Savannah, for appellants.

Glass, McCullough, Sherrill & Harrold, Geoffrey H. Cederholm III, Atlanta, for appellee.

McMURRAY, Presiding Judge.

Plaintiffs Thomas J. Lister and 690019 Ontario, Ltd. ("Ontario") brought an action against Richard L. Scriver (defendant), alleging defendant fraudulently induced a contract ("the agreement") whereby plaintiffs subsequently assigned $150,000 to defendant for the purpose of establishing and directing the affairs of ACA Joe of Savannah, Inc. ("ACA Joe Savannah"), a corporation intended to operate under a franchise authorizing the establishment of a retail clothing store in Savannah, Georgia. Plaintiffs not only allege that defendant breached the agreement by failing to properly acquire and assign corporate assets, they also allege defendant (individually and as a corporate officer) misappropriated corporate assets and fraudulently carried out the business of ACA Joe Savannah in violation of his fiduciary duty to plaintiffs. Defendant admits entering into an agreement with plaintiffs whereby the parties agreed to enter into a joint corporate venture to develop a retail clothing store in Savannah, but denies any wrongdoing stemming from the transaction and alleges (via counterclaim) that plaintiffs misappropriated certain assets of ACA Joe Savannah after the business venture failed and upon dissolution of the corporation. Defendant also asserted accord and satisfaction as a defense, claiming the parties resolved their differences before ACA Joe Savannah was dissolved. The case was subsequently heard by a jury before hotly disputed evidence. The result was a verdict in favor of plaintiff Ontario for $177,549 and in favor of plaintiff Lister for $108,238. The jury found for the plaintiffs on defendant's counterclaim. The evidence adduced at trial, construed in a light which favorably supports the jury's verdict, reveals the following:

In the fall of 1985, defendant met with Norman Burkowski, Mark McLean and Dave Boushay ("principals") in the City of Windsor, Ontario, Canada. He was seeking funding to open a retail clothing store in Columbus, Georgia, similar to several such establishments defendant operated in the Atlanta area. Specifically, defendant informed the principals that for $100,000 he would form a corporation to operate such a business; that he would also contribute $100,000 in cash to such a corporation; that the corporation would be formed with authority to issue 100,000 shares of stock; that the principals would own 50 percent of the stock (50,000 shares) and that he would be the exclusive owner of the remaining 50,000 shares of stock. The principals' discussions with defendant continued through May 1986, principal Burkowski (apparently) acting as primary representative of the other principals.

In June 1986, the principals resolved to go through with the deal and agreed with defendant that Savannah, Georgia, would be the location of the proposed corporation's retail establishment. In the meantime, and unknown to principal Burkowski, defendant was negotiating a similar $50,000 transaction with plaintiff Lister, formerly a sales clerk at a retail establishment owned by defendant in Ontario, Canada. Defendant promised that if plaintiff Lister could raise $50,000, he would provide plaintiff Lister with a corporate title, a job and 25,000 shares of corporate stock. Defendant suggested that plaintiff Lister obtain the money from his parents.

In June 1986, the principals formed plaintiff Ontario to consummate their agreement with defendant and, during the latter part of June, they traveled from Canada to view the location in Savannah chosen by defendant for the retail store. However, defendant did not make good on his promise to show the location of the Savannah store, instead taking the principals on tours of several ACA Joe Savannah retail establishments in the Atlanta area. The principals (apparently) did not then know that defendant had not yet acquired a site for the Savannah store.

In July 1986, defendant contacted principal Burkowski and advised him that $30,000 was needed to purchase a franchise for the proposed store in Savannah and that plaintiff Ontario's contribution for the franchise would be $15,000. Plaintiff Ontario borrowed the money on a line-of-credit and delivered it to defendant. Unfortunately and unknown to plaintiff Ontario, defendant did not purchase the needed franchise for the retail store he planned to develop with plaintiff Ontario. Instead, he deposited the funds in his personal bank account and purchased franchise rights which were used for other stores developed by defendant in the Savannah area. Thereafter, defendant advised principal Burkowski that the $15,000 tendered for the franchise would be forfeited if plaintiff Ontario did not come up with the balance of the parties' agreement and, to this extent, plaintiff Ontario borrowed aggregate sums totaling $85,000 secured by principal Burkowski's home and real estate held by plaintiff Ontario. Defendant promised that he would personally guarantee these loans. However, when the parties memorialized their agreement in writing on August 1, 1986, defendant did not include such a guaranty. Instead, the agreement only provided that ACA Joe Savannah (which was not yet formally incorporated) would provide plaintiff Ontario with monthly dividends sufficient to service said loans.

On August 5, 1986, unknown to plaintiff Ontario, defendant executed a lease agreement in his individual capacity for the purpose of establishing the retail establishment contemplated during negotiations with plaintiff Ontario. This lease provides defendant with $80,000 to renovate the retail space and an additional $25,000 loan, apparently an incentive for negotiating the lease. Defendant deposited the $80,000 designated for improvement of the lease premises in his bank account. ¹

On August 10, 1986, defendant entered into an agreement with plaintiff Lister whereby Lister raised $50,000 in cash (acquired in part via a loan secured by his parents' home) and gave the money to defendant in exchange for 25,000 shares of ACA Joe Savannah, a job managing the retail establishment recently set up by defendant in Savannah and a promise of becoming a corporate officer. At that time, plaintiff Lister was unaware of the agreement between defendant and plaintiff Ontario. He was led to believe that defendant owned 50 percent of the corporate stock in ACA Joe Savannah. Thereafter, defendant deposited most of plaintiff Lister's $50,000 contribution into his personal bank account and, on August 11, 1986, defendant formally incorporated ACA Joe Savannah.

Plaintiff Lister began managing an "ACA Joe" retail clothing store set up by defendant, working hard to overcome initial undercapitalization by defendant and depressed conditions at the shopping center where the store was located. The store managed by plaintiff Lister simply did not enjoy good pedestrian traffic and this deficiency was the result of unclean conditions at the shopping center and a corresponding low rate of occupancy by other retail tenants.

In June 1987, plaintiff Ontario first learned of defendant's transactions with plaintiff Lister and principal Burkowski and immediately contacted defendant to investigate. Defendant gave no good explanation and, as a consequence, principal Burkowski (and apparently others) traveled to Georgia and met with defendant and plaintiff Lister to resolve the matter. It was later determined that the best course would be to move toward closing the ACA Joe Savannah retail store. Thereafter, plaintiffs and defendant agreed to dissolve the corporation and allow plaintiffs to take the remaining assets of the corporation, i.e., whatever cash remained, the store's inventory and ACA Joe Savannah's franchise. However, before execution of this agreement, principal Burkowski discovered that defendant never acquired a franchise for the "ACA Joe" store managed by plaintiff Lister. He therefore decided not to go through with the deal struck with defendant and, on January 22, 1988, called an emergency meeting of the stockholders of ACA Joe Savannah. It was then resolved, with defendant's consent, to dissolve the corporation and liquidate its assets. Plaintiffs thereafter seized the assets of the corporation and used them in an unsuccessful attempt to establish another "ACA Joe" retail store in South Carolina.

After judgment was entered on the jury's verdict, defendant filed a motion for judgment n.o.v. or, alternatively, for a new trial. The trial court granted both of these motions and this appeal followed. Held:

1. Plaintiffs contend the trial court erred in granting a judgment n.o.v., arguing the evidence was sufficient to sustain the jury's verdict based on fraud, breach of fiduciary duty and accord and satisfaction.

" '[T]he primary question for determination is whether the evidence introduced, with all reasonable deductions therefrom demanded a verdict for the defendant, as the standards for granting a motion for judgment n.o.v. are the same as those governing direction of a verdict. (Cits.) (T)he motion for judgment n.o.v. may be granted only when, without weighing the credibility of the evidence, there can be but one reasonable conclusion as to the proper judgment. Where there is conflicting evidence, or there is insufficient evidence to make a "one-way" verdict proper, judgment n.o.v. should not be awarded. In considering the motion, the court must view the evidence in the light most favorable to the party who secured the jury verdict. And this approach governs the actions of appellate courts as well as trial courts.' Bryant v. Colvin, 160 Ga.App. 442, 444 (287 SE2d 238) (1981). ' "While it is erroneous for a court to direct a verdict in favor of a particular ...