Pembroke State Bank v. Warnell

• Citation: 471 S.E.2d 187,266 Ga. 819
• Decision Date: 13 May 1996
• Docket Number: No. S95G1819,S95G1819
• Parties: PEMBROKE STATE BANK et al. v. WARNELL et al.
• Court: Supreme Court of Georgia

Page 187

471 S.E.2d 187

266 Ga. 819

PEMBROKE STATE BANK et al. v. WARNELL et al.

No. S95G1819.

Supreme Court of Georgia.

May 13, 1996.

Reconsideration Denied June 28, 1996.

J. Littleton Glover, Jr., Glover & Davis, Newnan, for Pembroke State Bank et al.

Ronald C. Berry, Tracy O'Connell, Adams & Ellis, Savannah, Charles H. Brown, Brown & Livingston, Statesboro, and Ben F. Johnson, III, Alston & Bird, Atlanta, for Warnell et al.

HUNSTEIN, Justice.

We granted certiorari in this case to consider whether the Court of Appeals in Pembroke State Bank v. Warnell, 218 Ga.App. 98, 461 S.E.2d 231 (1995) correctly analyzed and applied this Court's decision in Brumbelow v. Northern Propane Gas Co., 251 Ga. 674, 308 S.E.2d 544 (1983).

This appeal involves four of the nine members of the Warnell family who are minority shareholders in Pembroke State Bank: Carolyn Warnell Bryan and Dorothy Warnell and their nephews, Herbert and Brooks Warnell. Ms. Warnell is an invalid; Bryan has her power of attorney. In 1990, Herbert and Brooks, along with two other relatives not involved in this appeal, retained attorney Noel Osteen to institute a lawsuit against Pembroke State Bank, its officers, and directors ("Pembroke"), arising out of a stock dispute. It is uncontroverted that Osteen was not retained by Bryan or Ms. Warnell. The suit filed by Osteen named as plaintiffs only the four Warnells who had retained him.

Pembroke's attorneys, Johnson and Brown, entered into negotiations with Osteen to settle the stock dispute. The proposal was that Pembroke would purchase plaintiffs' shares in the bank. It is uncontroverted, however, that no agreement in that regard could be arranged unless Pembroke could purchase at least 80 percent of the minority shareholders' stock. Because Bryan and Ms. Warnell between them held 43 percent of the minority stock, the parties all recognized that no agreement was possible without the participation and approval of Bryan and Ms. Warnell. Osteen proposed to meet with Bryan and all the minority shareholders to negotiate mutually-agreeable terms. Bryan, however, did not want to leave her sister in order to attend personally. In her stead, the meetings were attended either by Lewis, Bryan's attorney, or Haynes, a family friend, who relayed the developments in the negotiations to Bryan and conveyed Bryan's position on these developments to the others engaged in the negotiations.

In the negotiations that ensued, it is uncontroverted that Pembroke's attorneys knew Bryan and Ms. Warnell were not named plaintiffs in the lawsuit filed by Osteen. It is also uncontroverted that Lewis, Bryan's attorney, was present at some meetings between Osteen and Johnson, Pembroke's attorney. It does not appear from the evidence adduced at trial that Johnson ever directly asked Osteen or that Osteen ever directly represented to Johnson that he (Osteen) was the attorney for Bryan and Ms. Warnell.

When settlement seemed imminent in March 1991, Osteen contacted Bryan directly by telephone to discuss the terms that had been negotiated, and obtained her verbal agreement to be bound by that settlement. It is uncontroverted that this is the sole occasion on which Osteen spoke directly to Bryan; Osteen had no communications of any nature with Ms. Warnell. Thereafter, a dispute arose over the terms of the March 1991 agreement and the matter was presented to the superior court in September 1992, which ordered that all of the unnamed minority shareholders be added as plaintiffs. Osteen then contacted Lewis about adding Bryan and Ms. Warnell and then waited until he received written notification from Haynes in November before filing a motion to add Bryan and Ms. Warnell. The letter Haynes sent Osteen made it clear that Bryan and Ms. Warnell had agreed to participate based on the understanding that the action was "an effort to enforce the [March 1991] settlement." It is uncontroverted that no order allowing the motion to add these parties as plaintiffs was ever entered.

During the pendency of the litigation to enforce the March 1991 settlement agreement, Osteen and Johnson continued their negotiations in an effort to resolve the stock dispute. In February 1993, Osteen proposed certain terms to Johnson which the attorneys thought would be satisfactory to all parties. After discussions with Brooks Warnell and due to concerns special to him, a provision was inserted in the agreement to address those concerns and obtain his consent, which the attorneys thought would have a persuasive effect on the decision of Bryan and Ms. Warnell. However, unlike the March 1991 agreement, Osteen did not contact Bryan to obtain her personal consent to the agreement. Rather, Osteen communicated solely with Haynes, the family friend. Johnson knew Osteen had not cleared the matter with Bryan personally. When a formal document was drafted, it was signed by Herbert Warnell and other minority shareholders, but Brooks Warnell, Bryan, and Ms. Warnell refused to sign. Herbert subsequently withdrew his consent to the agreement.

Pembroke then sought to enforce the agreement. Osteen moved for and was granted an order allowing him to withdraw as counsel for various parties including Bryan and Ms. Warnell; the propriety of that order was later challenged by Bryan and Ms. Warnell. Based on the special verdict returned by the jury, the trial court entered judgment finding that Brooks and Herbert were bound by the agreement but that Bryan and Ms. Warnell were not. The Court of Appeals affirmed the trial court's ruling as to Bryan and Ms. Warnell, but reversed as to Brooks and Herbert. Because the trial court's judgment was correct under the evidence adduced and the law set forth in Brumbelow v. Northern Propane Gas Co., supra, we affirm the Court of Appeals' ruling in part (as to Bryan and Ms. Warnell) and reverse in part (as to Brooks and Herbert).

1. There is no dispute over the existence or the terms of the February 1993 agreement. Rather, the dispute is whether Osteen had the authority to enter into that agreement on behalf of Herbert, Brooks, Bryan, and Ms. Warnell. Given that this is civil litigation between private parties, the controlling law to be applied is that set forth in Brumbelow v. Northern Propane Gas Co., supra. In Brumbelow, this Court held

Under Georgia law an attorney of record has apparent authority to enter into an agreement on behalf of his client and the agreement is enforceable against the client by other settling parties. [Cits.] This authority is determined by the contract between the attorney and the client and by instructions given the attorney by the client, and in the absence of express restrictions the authority may be considered plenary by the court and opposing parties. [Cits.] The authority may be considered plenary unless it is limited by the client...