Nayani v. Hassanali

Decision Date20 January 2022
Docket NumberA21A1509
Citation868 S.E.2d 465,362 Ga.App. 313
Parties NAYANI v. HASSANALI et al.
CourtGeorgia Court of Appeals

Yasha Heidari, Yenniffer Steffany Delgado, Norcross, for Appellant.

Matthew Tyson Parrish, Heather Huggins Sharp, Atlanta, for Appellee.

McFadden, Presiding Judge.

Kamal Nayani appeals from the order granting partial summary judgment to the defendants in his lawsuit alleging, among other things, that Amina Hassanali committed fraud to induce him to purchase shares in her professional corporation, Amina Medical Consultant, P.C. We hold that Nayani may not pursue his claims because his contract to purchase shares in the professional corporation is void. So we affirm.

1. Factual and procedural background.

"Summary judgment is proper ‘if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.’ OCGA § 9-11-56 (c)." Cowart v. Widener , 287 Ga. 622, 623 (1) (a), 697 S.E.2d 779 (2010). "On appeal from the denial or grant of summary judgment, the appellate court must conduct a de novo review of the evidence to determine whether there exists a genuine issue of material fact, and whether the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law." Newstrom v. Auto-Owners Ins. Co. , 343 Ga. App. 576, 577 (1), 807 S.E.2d 501 (2017) (citation and punctuation omitted).

So viewed, the record shows that Hassanali is a primary care physician. In 1999 or 2000, she organized a professional corporation, Amina Medical Consultant, P.C., to practice medicine. In April 2018 Nayani and his wife approached Hassanali about entering a partnership. The three agreed that Hassanali would sell Nayani a 40 percent ownership interest in her professional corporation and that she would retain a 60 percent ownership interest.

On May 4, 2018, Nayani, Hassanali, Amina Medical Consultant, and Hassanali's company Amina Property, LLC, the medical practice's landlord, entered an agreement for the sale of shares in and the management of Amina Medical Consultant. Nayani had given the terms to an attorney, who drafted the agreement. Hassanali did not have her own attorney.

Under the agreement, Hassanali sold Nayani 40 percent of the professional corporation for $20,000. The agreement provided that Hassanali would become the medical director of the practice with a salary of $8,000 per month, pro rated should she work more or fewer than 13 shifts per month, and that Nayani would become the managing director of the practice, with a salary of $6,000 per month. The agreement further provided that Hassanali would receive 60 percent of the profits and Nayani would receive 40 percent of the profits.

The parties amended the agreement in November 2018 and again in January 2019.

It was not long before Hassanali regretted entering the agreement and decided that she was not going to follow it. In January 2019, Hassanali told Nayani and his wife that if the practice did not show a profit within the next two months, she would take back the management of the practice.

Hassanali took over in April 2019, instructing her staff no longer to give patient bills to Nayani for processing. She changed the locks on the business because Nayani and his wife had removed from the premises the keys to the cash box and the mailbox. She also removed Nayani's access to the business's checking account.

On April 30, 2019, Nayani filed the complaint against Hassanali, Amina Medical Consultant, and Amina Property. He asserted claims of fraud and breach of contract against Hassanali and Amina Property; a claim of breach of fiduciary duty against Hassanali; a demand for an accounting against all three defendants; and a claim for the judicial dissolution of Amina Medical Consultant.

Hassanali and Amina Property moved for partial summary judgment. The trial court granted summary judgment to the defendants on Nayani's claims for fraud against Hassanali and Amina Property; breach of contract against Amina Property; breach of fiduciary duty against Hassanali; an accounting as to all defendants; and judicial dissolution of Amina Medical Consultant. Nayani filed this appeal; he does not challenge the grant of summary judgment on his fraud claim against Amina Property.

We hold that the agreement for the purchase of shares in the professional corporation is void because it violates Georgia law. And because the agreement is void, Nayani cannot pursue his claims. So we affirm.

2. Law of professional corporations.

Under the Georgia Professional Corporation Act, OCGA §§ 14-7-1 through 14-7-7, "[s]hares in a professional corporation may only be issued to, held by, or transferred to a person who is licensed to practice the profession for which the corporation is organized and who, unless disabled, is actively engaged in such practice as an active practicing member of the issuing corporation...." OCGA § 14-7-5 (a). So the agreement at issue — which was founded on a promise to transfer shares in Amina Medical Consultant, a professional corporation for the practice of medicine, to Nayani, who is not licensed to practice medicine — violates OCGA § 14-7-5 (a).

[W]here a statute provides that persons proposing to engage in a certain business shall procure a license before being authorized to do so, and where it appears from the terms of the statute that it was enacted not merely as a revenue measure but was intended as a regulation of such business in the interest of the public, contracts made in violation of such statute are void and unenforceable. Where a statute enacts, for the purpose of securing a more effectual compliance with its requirements in respect to the licensing of certain occupations, that no one shall engage in or carry on any such occupation until he shall have obtained the license as provided by law, it is an express prohibition without more particular words.

Moore v. Dixon , 264 Ga. 797, 799-800 (2), 452 S.E.2d 484 (1994) (citations and punctuation omitted). Accord Ga. Cent. Credit Union v. Weems , 157 Ga. App. 439, 440 (1), 278 S.E.2d 88 (1981). See also OCGA § 13-8-1 ("A contract to do an ... illegal thing is void."). In other words, a contract that is only permitted to be entered into by a person holding a license issued as a regulatory measure is void if the person did not hold such a license at the time the contract was entered into. JR Constr./Electric, LLC v. Ordner Constr. Co. , 294 Ga. App. 453, 454, 669 S.E.2d 224 (2008).

"Contracts that obviously and directly tend in a marked degree to bring about results that the law seeks to prevent can not be made the ground of a successful suit [and] are against public policy." Orkin Exterminating Co. v. Dewberry , 204 Ga. 794, 809 (2), 51 S.E.2d 669 (1949) (citation and punctuation omitted), overruled in part on other grounds in Barry v. Stanco Communications Products, 243 Ga. 68, 71 (3), 252 S.E.2d 491 (1979). And such contracts "will not be enforced even if the defendant fails to raise this issue as an affirmative defense." Ga. Receivables v. Kirk , 242 Ga. App. 801, 802 (2), 531 S.E.2d 393 (2000).

Nayani argues that even if the law prohibits him from being an owner of the professional corporation, that does not mean that the parties’ agreement is void, given that the parties acted as partners for a year. But he does not explain how the parties’ business relationship saved the agreement from being illegal.

Nayani argues that the agreement required the parties to cooperate, so they could have converted the professional corporation into a corporation for profit. But, again, he does not explain how Hassanali's promise (in the void agreement) to cooperate saved the agreement from being illegal.

Nayani argues that under OCGA § 14-7-5 (e), the professional corporation would automatically become a for-profit corporation by operation of law. That subsection of the Act provides:

If a professional corporation at any time ceases to have a shareholder licensed or otherwise authorized to practice and actually practicing, the profession for which the corporation is organized, or if a professional corporation does not redeem, cancel, or transfer the shares of a disqualified, retired, or deceased person in accordance with this Code section, the corporation shall cease to be a professional corporation and shall operate as a corporation for profit organized under Chapter 2 of this title for the sole purpose of liquidation. The corporation may at any time after it ceases to be a professional corporation change its purpose by amending its articles.

OCGA § 14-7-5 (e) (emphasis added). By its terms, however, that subsection simply allows a professional corporation that does not redeem, cancel, or transfer the shares of a disqualified person to operate as a corporation for profit "for the sole purpose of liquidation." Contrary to Nayani's argument, the subsection does not automatically convert a professional corporation into a for-profit corporation that can continue in business.

Finally, Nayani argues that under Georgia Supreme Court authority, the parties’ agreement is not void. He relies on Sherrer v. Hale , 248 Ga. 793, 285 S.E.2d 714 (1982), but Sherrer is distinguishable. In that case, our Supreme Court affirmed an interlocutory injunction that ordered the reversion of a professional corporation into a traditional business corporation and the reinstatement of a non-professional's shareholder interest in that traditional business corporation. Id. at 793, 285 S.E.2d 714. The defendant, a licensed physician, had converted his business from a professional corporation into a traditional business corporation in order to permit the non-professional plaintiff to become a shareholder. Id. Some years later, the defendant-physician received legal advice that the conversion of the business from a professional corporation to a...

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