Riverbend Ford-Mercury, Inc. v. Kirksey

• Decision Date: 11 July 1990
• Docket Number: FORD-MERCUR,No. A90A0404,INC,A90A0404
• Parties: RIVERBENDv. KIRKSEY.
• Court: Georgia Court of Appeals

Page 898

395 S.E.2d 898

196 Ga.App. 307

RIVERBEND FORD-MERCURY, INC. v. KIRKSEY.

No. A90A0404.

Court of Appeals of Georgia.

July 11, 1990.

William U. Norwood III, Thomasville, for appellant.

Kirbo & Conger, Ben Kirbo, Bainbridge, for appellee.

BEASLEY, Judge.

Defendant Riverbend appeals the grant of plaintiff Kirksey's motion for summary judgment.

Kirksey, the sole shareholder of Kirksey Ford Sales, Inc., agreed on June 1, 1984, to sell the stock to several individuals also named as defendants in his suit. They, in turn, formed Riverbend to operate the business. From the time of the agreement to sell until the closing on September 7, defendants fully participated in the operation of Kirksey Ford. Prior to the purchase agreement, Kirksey Ford owed Kirksey money which he had loaned to the corporation. At the closing, Riverbend paid the loans as a part of the consideration, by giving $25,000 in cash and a promissory note for $71,914 to Kirksey. The note was to be paid by three yearly payments. Riverbend made two but refused to make the third. Kirksey sought the recovery of this amount, plus interest and attorney fees, in count one of his complaint.

In the second count of his complaint Kirksey sought to recover the sums paid to the bank which Riverbend refused to honor. During the pre-sale operation of Kirksey Ford, security agreements and other indebtedness of its customers were sold to a local bank with an obligation upon Kirksey Ford to repurchase upon default by the debtor. Kirksey individually had guaranteed the obligations to repurchase. In 1986 Riverbend refused to honor the repurchase agreement as to three conditional sales contracts previously sold to the bank. After demand, Kirksey paid this indebtedness under the terms of his guarantee.

Riverbend and the individual defendants denied the material allegations of the complaint and filed a counterclaim. Count one was predicated on fraud on the part of Kirksey involving the sale of Kirksey Ford to defendants. Counts two and three alleged fraudulent misconduct between Kirksey and Kirksey Ford as to the loans between them. Damages were sought for overpayment included in the promissory note for $71,914 given by Riverbend to Kirksey. Rescission of the note was also sought.

In 1984 Sims, a long-time associate and employee of Kirksey, determined to purchase Kirksey Ford. He employed the services of his friend, Hollis, a CPA, to prepare financial records and projections. Kirksey agreed to allow Sims and Hollis full access to the business records of Kirksey Ford. In doing this pro forma Hollis acted on behalf of Sims, who in this regard was a prospective buyer and not an employee.

Sims was unable to obtain financing or the approval of Ford Motor Company. He sought backing from the individual defendants. They became principals instead and, based upon the data prepared for Sims by Hollis, chose to purchase Kirksey Ford. Defendants took over operation of the business with Sims and Hollis as their employees right after the June 1 sales agreement. Riverbend was incorporated and the closing occurred after Ford Motor Company approved.

After discovery, which produced depositions, affidavits and various exhibits, a pretrial order was entered. In it, the contentions of defendants were stated: 1) as to plaintiff's claim, that the note sued upon was fraudulently induced, the loan from Kirksey to Kirksey Ford was not as described to defendants and was not a legitimate debt of the corporation; 2) as to their counterclaim, that the records relied upon by defendants in negotiating the sale of the stock were false and misleading; that plaintiff knew defendants, to their detriment, were relying on false figures showing unrealistic income projections and inaccurate debt; that Hollis, who prepared the projections, was acting with plaintiff's authority; that plaintiff thus defrauded defendants.

Subsequently defendants sought, by amendment, to add a fourth count to their counterclaim, asserting that plaintiff defrauded defendants: 1) by selling assets of the corporation and withholding proceeds of the sale from defendants; 2) when, with prior knowledge that he would not abide with the terms of the agreement, plaintiff violated the non-competition clause of the sales contract. Plaintiff objected to allowance of the amendment. No ruling permitting the amendment was entered.

Kirksey moved for summary judgment on his complaint and the counterclaim. The trial court entered judgment for him. Riverbend contends that there were genuine issues of material fact regarding whether Kirksey's actions were fraudulent, whether he breached his obligation to deal in good faith and whether defendants waived any inceptive fraud by failing to act immediately and restoring the opposite party to his former position prior to the transaction. No direct attack is made on the propriety of granting the motion as to Kirksey's complaint, so the judgment in favor of Kirksey on it stands.

1. In our consideration of this appeal we were faced with an incomplete record. Plaintiff's deposition was sealed and was not sent up. The depositions of Sims and Hollis were not filed. After inquiry by this court the trial court clerk certified that two depositions were subsequently filed. Upon our direction, the three depositions, containing information vital to our determination of the issues, were included in the record before us.

Traditionally, under the law of Georgia the burden is upon the party asserting error on appeal to show error by the record. Brooks v. Home Credit Co., 128 Ga.App. 176, 196 S.E.2d 176 (1973). While this eminently fair and orderly procedure had a hiatus as a result of ...