R.T. Patterson Funeral Home, Inc. v. Head
| Decision Date | 01 December 1994 |
| Docket Number | No. A94A0962,A94A0962 |
| Citation | 215 Ga.App. 578,451 S.E.2d 812 |
| Parties | R.T. PATTERSON FUNERAL HOME, INC., et al. v. HEAD. |
| Court | Georgia Court of Appeals |
Deming, Deming, Born & Parker, Paul M. Hoffman, Norcross, for appellants.
Andersen, Davidson & Tate, Gerald Davidson, Jr., Larry C. Oldham, Atlanta, for appellee.
Plaintiff William H. Head brought this action seeking to recover damages allegedly sustained as a result of defendants' repudiation of an oral agreement for a three-party like-kind exchange of real estate combined with a sale of corporate stock in exchange of corporate assets. Named as defendants were the corporate entities R.T. Patterson Funeral Home, Inc. ("the Company"), and Patterson-Hartsock, Inc. Also named as defendants were R.T. Patterson, Thomas I. Patterson, Claude E. Hartsock, as well as a non-party to this appeal, each "Individually and in [his or] her corporate capacity." The multiple count complaint alleged fraud, tortious interference with contracts and business opportunities, breach of corporate fiduciary duty, and breach of contract. The complaint also sought punitive damages and OCGA § 13-6-11 expenses of litigation. Defendants answered, denying the existence of an agreement, and further claiming that any oral agreement to transfer real property was unenforceable because it was not in writing as required by OCGA § 13-5-30(4), the Statute of Frauds.
The case was tried before a jury on theories of fraud and breach of contract. Defendants adduced no witnesses. Viewed in the light to uphold the jury's verdicts, plaintiff's evidence showed the following: The Company "operates [two] funeral homes ..." in Gwinnett County, Georgia: the Lilburn Chapel and the Norcross Chapel. Since 1977, plaintiff has been a 40 percent shareholder in the Company and "the funeral director in charge of the Lilburn Chapel." Defendant R.T. Patterson owns the remaining 60 percent and is the Company's president. R.T. Patterson also is the sole shareholder of defendant Patterson-Hartsock, Inc., a corporation he formed "to manage real estate[.]" The other individual defendants are relatives of R.T. Patterson and are officers and directors of the Company and Patterson-Hartsock, Inc. R.T. Patterson funded an irrevocable trust which owns the real property where the Company operates the Lilburn and Norcross Chapels. R.T. Patterson "calls the shots on all [three] entities: R.T. Patterson Funeral Home, Inc., Patterson-Hartsock, Inc., and the trust...." If R.T. Patterson "wanted [the trust realty] to be conveyed, it would be conveyed ...," even though only his children are the co-trustees.
In February 1990, plaintiff approached R.T. Patterson and expressed an interest in purchasing the Lilburn Chapel portion of the business and the real estate. R.T. Patterson Plaintiff thereafter contacted Timothy L. Stewart and "worked an agreement with him whereby [Timothy L. Stewart] could net eight hundred thousand dollars out of the ... exchange and [plaintiff] would pay in turn all of the legal costs involved with facilitating that agreement."
On April 15, 1990, a meeting of the parties was held, attended by Timothy L. Stewart's tax accountant, Rex A. Millsaps, Sr., and William G. Tanner, Esq., "a neutral, non-biased attorney to handle the paperwork...." There, R.T. Patterson agreed to a sale and exchange of plaintiff's 40 percent interest in the Company in return for the inventory and assets of the Lilburn Chapel as the first step in plaintiff's leaving the Company and establishing his own funeral home. As to the second step in the overall transaction, plaintiff affirmed that "[he], Mr. [R.T.] Patterson and Mr. [Tim] Stewart [orally] reached an agreement where [a] swap of the funeral home would occur [ ... with the] clear understanding that [he was] going to end up with the Lilburn Chapel[.]" The parties stipulated to a value of $800,000 for each of the three properties to be exchanged: The Lilburn Chapel going to plaintiff, Tim Stewart's Duluth funeral home going to R.T. Patterson, and a new funeral home in Winder, Georgia going to Tim Stewart. The Winder funeral home was to be constructed with the proceeds of a loan plaintiff would be obligated to repay.
The three-way like-kind exchange of properties was intended to qualify for non-recognition of taxable gain pursuant to § 1031 of the Internal Revenue Code. This second step was memorialized in the "Escrow and Exchange Agreement" which R.T. Patterson refused to sign. Plaintiff explained that the Stock Purchase Agreement and the "Escrow and Exchange Agreement" together made one "overall agreement with two dependent parts," and confirmed that, "if there had not been an agreement in [his mind] on the real estate transaction, [he would never have] signed the June 25 [1990] stock purchase agreement." Plaintiff only agreed "to the terms and provisions of the stock purchase agreement in reliance upon the representations of Mr. [R.T.] Patterson and the Patterson group that [he was] going to get the Lilburn Chapel[.]" Defendant R.T. Patterson also affirmed that the written Stock Purchase Agreement (which he did sign) exchanged plaintiff's 40 percent interest in the Company for the bulk of the assets at the Lilburn Chapel, because those assets "were going to stay in the Lilburn Chapel with [plaintiff] once he took ownership...." The stock agreement also contained a provision whereby plaintiff would pay R.T. Patterson approximately $59,000, which sum represented "the difference between the business volume at the [Norcross and Lilburn] chapels." According to the tax accountant, Mr. Millsaps, the division of Company personal property in the 60 to 40 percent ratio of ownership had to be a separate transaction from the exchange of real property. "It couldn't be done as one transaction and maintain a tax free status, it had to be two separate transactions." Timothy L. Stewart, a party to the like-kind exchange, Instead, Thomas I. Patterson made a separate offer to buy Stewart's Duluth funeral home for $500,000. Stewart informed plaintiff of this event.
When plaintiff and defendants met again at 5:00 p.m. on June 30, 1990, apparently to execute the three-way "Escrow and Sales Agreement," Thomas I. Patterson "advised [plaintiff] that they were ready for [him] to sign [his] stock over." Plaintiff declined, "because they had cancelled the real estate exchange with Stewart and [him]self." Thomas I. Patterson informed plaintiff that the Lilburn Chapel was for sale, but insisted for the first time that the price was "one point two million dollars...." As plaintiff left, he reiterated his refusal to perform the stock sale without the transfer of the business. Then, Plaintiff "took that to mean that [he] wasn't welcome, that [he] would not be there [... so he] had all [his] personal effects [moved] out of the funeral home."
R.T. Patterson confirmed that he "approve[d] and ratif[ied] what Thomas [I. Patterson] said to [plaintiff ...]" at the June 30, 1990, meeting and that he had earlier authorized and ratified Thomas I. Patterson's approach to Tim Stewart with a separate offer to buy Stewart's Duluth funeral home for $500,000, after plaintiff had signed the stock agreement but before R.T. Patterson signed any real estate agreement or informed plaintiff that he would not go through with the planned like-kind exchange. Other evidence further indicating that R.T. Patterson never intended to follow through with the agreed-upon transfer of the Lilburn Chapel portion of the Company's business but "concocted all this just to get [plaintiff's] stock[,]" was that he had registered and reserved the trade name "Lilburn Chapel" in his own name on April 12, 1990. In "April of 1990," three weeks after Easter Sunday, Thomas I. Patterson began soliciting Stanley Powell to work for the Company to operate "the two chapels that they owned ...," which Mr. Powell recognized as the Norcross Chapel and the Lilburn Chapel. Before the 5:00 p.m. meeting of June 30, 1990, defendants had already prepared a notice, also dated June 30, 1990, of a special meeting of the directors and shareholders of the Company, "called for the purpose of removal and election of officers and transactions of other such business...." The next day, July 1, 1990, "[t]hey fired [plaintiff's] son-in-law." Also on July 1, 1990, R.T. Patterson wrote to the Company notifying it that "it has become necessary to increase the monthly rental amounts for the two funeral homes ... [in the total amount of $10,000 per month, ... effective] August 1, 1990."
In support of his contention that his part performance rendered the oral agreement enforceable pursuant to OCGA § 13-5-31(3), plaintiff showed that he was prepared to tender his shares concurrently with the real estate exchange, that he negotiated a loan commitment from the Bank of Gwinnett County via the Small Business Administration for $876,400 using "legal descriptions of the...
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