Remediation Services, Inc. v. Georgia-Pacific Corp.

• Decision Date: 22 June 1993
• Docket Number: No. A93A0664,GEORGIA-PACIFIC,A93A0664
• Citation: 209 Ga.App. 427,433 S.E.2d 631
• Parties: REMEDIATION SERVICES, INC. v.CORPORATION.
• Court: Georgia Court of Appeals

Page 631

433 S.E.2d 631

209 Ga.App. 427

REMEDIATION SERVICES, INC. v. GEORGIA-PACIFIC CORPORATION.

No. A93A0664.

Court of Appeals of Georgia.

June 22, 1993.

Reconsideration Denied July 13, 1993.

Certiorari Denied Oct. 22, 1993.

John T. Croley, Jr., Fitzgerald, for appellant.

Sumner & Hewes, William E. Sumner, David A. Webster, Andrew A. Davenport, Atlanta, for appellee.

ANDREWS, Judge.

Remediation Services, Inc. sued Georgia-Pacific Corporation for amounts claimed due for dredging services seeking to recover under breach of contract or on quantum meruit. Remediation appeals from the grant of summary judgment in favor of Georgia-Pacific.

1. Georgia-Pacific moved for summary judgment on the contract claim based on the defense that it was entitled to declare the dredging contract void because it was defrauded by one of its own employees, who without the knowledge of Georgia-Pacific, represented both Remediation and Georgia-Pacific as a dual agent in the dredging contract transaction. ¹ The facts establish that Ronnie Presley was employed as an environmental engineer for Georgia-Pacific, and was regarded as the company's expert on dredging projects like the one at issue. In that capacity, Presley determined the scope of the dredging project at issue, suggested bidders for the project, and recommended Remediation as the bidder most qualified to do the work. Remediation was eventually awarded the dredging contract in August 1990 for the sum of $827,106.43. During the course of the contract, Presley assisted in reviewing progress on the dredging, and recommended additional amounts in excess of $100,000 paid to Remediation under a provision in the contract for dredging of material added to the original contract specifications.

Remediation fell behind the contract requirements for completion of the work, and disputes developed in which Remediation contended it was unable to complete the work as scheduled for the contracted price because the original "scope of work" describing the materials to be dredged, and the work to be done upon which the bid was entered, was not accurate. Ultimately, Georgia-Pacific terminated Remediation in March 1991 with the project still uncompleted after Remediation had been paid a total of $768,850.37. Remediation filed the present action in October 1991 seeking recovery of $1,734,240 as damages for breach of contract plus expenses and attorney fees.

After the suit was filed, Georgia-Pacific discovered that since Remediation was formed in 1987, Presley has owned 50 percent of the outstanding shares of the corporation, and has been listed as its Chief Executive Officer in corporate documents filed with the Secretary of State. The trial court was authorized to conclude that affidavits filed by Remediation in opposition to summary judgment did not create an issue of fact as to Presley's ownership of 50 percent of the stock of the corporation. In sworn responses to interrogatories, Remediation stated that Presley owns 50 percent of the outstanding stock, and that the company had solicited the return of his stock on several occasions. The subsequent affidavits admitted Presley obtained 50 percent of the outstanding shares when the corporation was formed in 1987, and that the shares remained in Presley's possession, but denied Presley owned the stock claiming there was an agreement prior to the present contract for Presley to surrender the shares for no payment. In the absence of any reasonable explanation for this contradiction, the trial court was authorized under the contradictory testimony rule to eliminate the testimony favorable to Remediation, and conclude that Presley has owned 50 percent of the shares of Remediation since 1987. Prophecy Corp. v. Charles Rossignol, Inc., 256 Ga. 27, 30, 343 S.E.2d 680 (1986); Thacker v. Matthews Tuxedo, 183 Ga.App. 474, 475, 359 S.E.2d 231 (1987). A question of fact remained as to whether Presley remained as an officer of Remediation during the period of the transaction at issue. Although corporate documents reflected he was an officer, other testimony showed that the remaining officers and stockholders, Robert Chaney and Bill Arant, conferred with Presley at a June 1987 meeting of the board of directors of the corporation, and Presley was removed as president and chief executive officer of the company, and replaced by Chaney.

Evidence also showed that the other two stockholders and officers of Remediation knew Presley was employed by Georgia-Pacific when Remediation entered into the contract at issue. However, affidavits filed on behalf of Remediation also stated that Presley had no involvement in the operation or management of Remediation since 1987, and had not received any compensation from Remediation, directly or indirectly since that time. Remediation further denied having any contact with Presley concerning the procurement of the contract, the specifications for the contract, the bidding procedure, or negotiations on the contract. Other evidence showed that in November 1990, Presley sent a copy of a Georgia-Pacific intra-company memo to Remediation indicating his monitoring and assessment of the dredging process and the problems incurred by Remediation. Furthermore, Remediation's March 1991 letter to Georgia-Pacific by its acting president, Chaney, stated that Chaney was of the opinion from the start of the dredging project that Presley was overseeing or responsible for it being done. Presley denied having exerted any influence in his duties at Georgia-Pacific over the award and administration of the contract. There is no evidence that Presley had the authority to award the bid to Remediation, or enter into the dredging contract with Remediation on behalf of Georgia-Pacific.

The following principles apply to the defense raised by Georgia-Pacific to the contract claim:

"The law imposes upon every agent the obligation to exercise, for and in behalf of his principal, skill, loyalty, and absolute good faith. It is of the essence of the contract of the agent that he will use his best skill and judgment to promote the interest of his employer. This the agent can not do if he is the agent for both parties. To represent both parties as their agent is to undertake inconsistent duties. A mutual agency requires the consent of both principals to the mutuality of the agency. An agent can not use his best skill and judgment to promote the interest of his employer where he acts for two persons whose interests are essentially adverse. Such a situation places the agent under a temptation to deal unjustly with one or both of his principals. He thus commits a fraud on his principals in undertaking, without their consent or knowledge, to act as their mutual agent.... Where the agent of the vendor is also the agent of the purchaser, the effect of the dual agency would be to authorize the vendor to repudiate the transaction, if he acts promptly after discovery of the situation. Where an agent without the full knowledge and consent of his principal represents the adverse party in a transaction, his contracts relating thereto are voidable at the option of the principal. It follows that the purchaser could equally repudiate the transaction.... [In the case of a contract] executed in whole or in part [such defrauded principal] may by acting promptly and before the rights of innocent parties have intervened, upon restoration of any benefit which he has received, rescind the contract and recover back the property or rights with which he has parted under it. It makes no difference that the principal was not in fact injured, or that the agent intended no wrong, or that the other party acted in good faith. This doctrine is based upon the ground that the double agency is a fraud upon the principal, and that by reason of such fraud he is not bound by any transaction entered into with the other party." (Citations and punctuation omitted.) Napier v. Adams, 166 Ga. 403, 406-408, 143 S.E. 566 (1928); see also Smith v. Harvey-Given Co., 182 Ga. 410, 414-416, 185 S.E. 793 (1936); Franco v. Stein Steel, etc., Co., 227 Ga. 92, 95, 179 S.E.2d 88 (1970); OCGA § 10-6-24 (agent may not buy or sell for himself); OCGA § 10-6-25 (agent may not make a personal profit from the agency). The same general considerations apply to prohibit an agent from buying from or selling to his principal, without the principal's knowledge (OCGA § 10-6-24), and to prohibit an agent from making a secret profit while acting on behalf of his principal. OCGA § 10-6-25. Accordingly, dual agency per se is not prohibited, nor is a contract made through a dual agency void per se, rather the contact created is voidable by the principal, only where the dual agency is unknown to the principal. Spratlin, Harrington & Thomas, Inc. v. Hawn, 116 Ga.App. 175, 178-180, 156 S.E.2d 402 (1967). Where dual agency is relied on as a defense to a breach of contract claim, the defendant principal must prove the fact of such agency, and his lack of knowledge. Id. at 179, 156 S.E.2d 402.

It is undisputed that Georgia-Pacific had no knowledge of Presley's interest in Remediation until after the contract was terminated. Accordingly, we must determine whether the facts establish as a matter of law that Presley acted in the capacity of a dual agent for Georgia-Pacific and Remediation. "The relation of principal and agent arises wherever one person, expressly or by implication, authorizes another to act for him or subsequently ratifies the acts of another in his behalf." OCGA § 10-6-1. "At times and in some contexts we have tended to equate servant with agent, but the relationships are very different. At common law, and in all of the jurisdictions of this country ... the difference in concept is fundamental and substantial. Generally the servant performs work or labor for the master, sometimes skilled and sometimes not, while the agent, within the ambit of his authority, represents his principal in some business dealing. H...