Sparks v. Ellis
| Decision Date | 13 July 1992 |
| Docket Number | No. A92A0120,A92A0120 |
| Citation | 205 Ga.App. 263,421 S.E.2d 758 |
| Parties | SPARKS v. ELLIS. |
| Court | Georgia Court of Appeals |
Sutherland, Asbill & Brennan, William D. Barwick, Lisa C. Foster, Charles T. Lester, Jr., Atlanta, for appellant.
Webb, Tanner & Powell, Anthony O.L. Powell, Ralph L. Taylor III, Lawrenceville, for appellee.
The dispute in this case arose out of the dissolution of Gwinnett Oral Surgery Associates ("GOSA"), a professional corporation owned by Sparks and Ellis. The case was tried to a jury, which returned a verdict against Sparks in his individual capacity, and in favor of the other defendants, GOSA and Sparks, P.C. Sparks appeals from the denial of his motion for new trial, or in the alternative for a judgment notwithstanding the verdict.
Viewing the evidence in the light most favorable to the verdict, Ellis purchased half of the stock in GOSA in July 1982. Sparks and Ellis executed five documents in connection with their co-ownership of GOSA. One of those documents was a "Buy Sell Agreement," signed by both Ellis and Sparks, which provided: "[u]pon the death or termination of employment of a shareholder, such shareholder or his legal representative, as the case may be, shall sell, and the Corporation shall buy, all, but not less than all of the Stock owned by such shareholder for a purchase price equal to the Current Value, or as modified in Section 4.4.4 below." Section 4.4.4 provided that if the value of the stock could not be agreed upon, then three appraisers would be appointed to determine the value of the stock.
In August 1987, Ellis notified Sparks of his resignation from GOSA, effective November 1987. A dispute concerning the value of Ellis' stock arose and in March 1988, an appraisal board was selected to resolve the dispute and determine the stock price.
Ellis sought to include good will as part of the valuation of the stock. In response to this, Sparks and GOSA contended that Ellis had created "negative good will." Accordingly, the attorney who represented Sparks, Sparks, P.C. and GOSA at trial sent a letter to the appraisers which stated that GOSA had determined that Ellis' presence in the corporation created a negative goodwill. In the letter, dated April 7, 1989, the attorney, who represented himself at that time as counsel for GOSA, stated:
The appraisers returned their opinion on August 20, 1989, valuing Ellis' stock at $119,000; a sum which GOSA refused to pay to Ellis.
A separate, related dispute between the parties arose over the equipment which Ellis had purchased for the corporation. As equal shareholders in the corporation, both Ellis and Sparks were obligated to purchase equipment for the three offices which GOSA leased, which obligation each doctor fulfilled by individually purchasing certain equipment and leasing it to GOSA. Ellis had obtained financing for the equipment from two different banks. At some point after Ellis' resignation, GOSA discontinued lease payments to him.
The procedural history of this case is somewhat convoluted. On May 25, 1988, Ellis filed suit against GOSA seeking return of the equipment. Sparks answered the lawsuit, denied liability and counterclaimed. In the meantime, because Ellis had discontinued payments to the banks on his notes for the equipment, the banks sued Ellis in two separate suits. Ellis added GOSA as a third-party defendant to both cases. Summary judgment was granted to the banks against Ellis. Thereafter Ellis' three lawsuits were consolidated into one. After the suits were consolidated, Ellis amended his complaint to include claims for breach of contract, conversion, libel, attorneys fees, costs and punitive damages and added Sparks and Sparks, P.C. as defendants.
The case was tried to a jury which found Sparks liable for breach of contract in the amount of $119,000, which was the value the appraisers set for Ellis' stock in GOSA as of the date of his resignation. Further, the jury found Sparks liable for conversion in the amount of $70,000; libel in the amount of $25,000; attorneys fees and costs in the amount of $45,000; and punitive damages in the amount of $25,000.
1. In his first two enumerations of error, Sparks contends that the trial court erred in two respects by failing to grant a new trial regarding Ellis' breach of contract claim. He first argues that a new trial was warranted because the contractual obligation alleged to have been breached was the obligation of GOSA and not that of him individually. Secondly, he claims that the trial court erred in failing to grant a new trial on the contract claim, because Ellis failed to allege in his pleadings that Sparks breached any contractual obligations arising out of the buy-sell agreement, making the verdict for contractual damages against Sparks individually void as a matter of law.
In Sparks' first argument, he contends that while he was individually a signatory to the buy-sell agreement, there was no contract language making any of the parties jointly and severally liable for the obligations of any other party. Therefore Sparks claims, under the contract there was no basis for his individual liability based on the provisions of the buy-sell agreement which provided that the corporation would buy out the resigning stockholders' stock.
Ellis' claims against Sparks appeared to be based on the contention, to which Sparks conceded, that after Ellis resigned from GOSA, Sparks transferred all of GOSA's assets to the account of Sparks, P.C. Ellis argues that these actions breached the agreement which had been executed at the outset of his involvement with the corporation and made GOSA unable to fulfill its obligations.
Although Sparks denied liability to Ellis, at trial he stated: "there has never been a denial that I transferred assets and liabilities to [GOSA's] successor or a divisitive reorganization corporation." Sparks admitted that part of the purpose of this transfer was to divert money from claims arising out of disputes with Ellis. There was also evidence that Sparks continued to represent himself as president of GOSA after the corporation dissolved.
Pretermitting the question of whether the contract specifically provided for joint and several liability, we find no error in the trial court's denial of Sparks' motions since the breach of contract claim against him was valid for several reasons. Sparks admitted transferring GOSA's assets to another corporation and conceded that part of the purpose of this transfer was to divert money from claims arising out of disputes with Ellis and conceded that after the corporation dissolved he continued to represent himself as president of GOSA.
"Since the evidence was in conflict as to whether [Sparks] signed the contract in an individual or representative capacity, a verdict absolving him from individual liability was not demanded, and the trial court properly denied his motion." O'Brien's Irish Pub v. Gerlew Holdings, 175 Ga.App. 162, 164, 332 S.E.2d 920 (1985). Further, there was evidence of abuse of the corporate form and Menchio v. Rymer, 179 Ga.App. 852(1), 348 S.E.2d 76 (1986); see also Kelley v. Austell Bldg. Supply, 164 Ga.App. 322(3), 297 S.E.2d 292 (1982); compare Caton v. Haynes, 260 Ga. 204, 391 S.E.2d 107 (1990). "Further if the individual who is the principal shareholder or owner of the corporation conducts his private and corporate business on an interchangeable or joint basis as if they were one, then he is without standing to complain when an injured party does the same." (Punctuation omitted.) Smith v. Hawks, 182 Ga.App. 379(4), 355 S.E.2d 669 (1987). Given the instant facts we find Sparks' first...
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