Stockton v. Shadwick, A21A1715

CourtUnited States Court of Appeals (Georgia)
Writing for the CourtMarkle, Judge.
PartiesSTOCKTON v. SHADWICK et al.
Decision Date25 February 2022
Docket NumberA21A1715



No. A21A1715

Court of Appeals of Georgia, First Division

February 25, 2022


Markle, Judge.

V. Douglas Stockton appeals from the trial court's order dismissing his complaint against V. Jack Shadwick and Fred Alexander Amusement Company, Inc. (collectively "Shadwick"). On appeal, Stockton asserts that (1) the trial court erred by granting Shadwick's motion to dismiss based on its finding that (a) the parties' business agreement, which predated OCGA § 50-27-87, the statute which now governs bona fide coin-operated amusement machines (COAMs), was void and unenforceable both prior to and after the statute's enactment; (b) Stockton could not be an "operator" under OCGA § 50-27-87 and other relevant statutes; and (2) the trial court erred by dismissing his claims for (a) unjust enrichment, (b) conversion; (c)


breach of fiduciary duty; and (d) attorney fees under O.C.G.A. § 13-6-11. For the following reasons, we affirm.

We apply a de novo standard of review to a trial court's grant of a motion to dismiss. A motion to dismiss for failure to state a claim should not be sustained unless (1) the allegations of the complaint disclose with certainty that the claimant would not be entitled to relief under any state of provable facts asserted in support thereof; and (2) the movant establishes that the claimant could not possibly introduce evidence within the framework of the complaint sufficient to warrant a grant of the relief sought

(Citation omitted.) Stewart v. Johnson, 358 Ga.App. 813, 818 (4) (856 S.E.2d 401) (2021). Where, as here, a case turns on statutory interpretation and resolution of questions of law, we apply a de novo standard of review. Amazing Amusements Group v. Wilson, 353 Ga.App. 256 (835 S.E.2d 781) (2019).

So viewed, the record shows this case stems from a joint-venture business dispute and the sharing of revenues in which Stockton claims Shadwick owes him approximately $175, 000 from COAMs Stockton had at Fred Alexander Amusement Company (FAAC), which Shadwick owned.

COAMs are highly regulated and subject to the authority of the Georgia Lottery Corporation (GLC), which requires that any owner of a COAM made available for


public use must have a COAM master license. Before 1998, both Shadwick and Stockton each ran their own COAM businesses, and each had their own master license. Sometime thereafter, the parties decided to combine their businesses, with Stockton providing the locations for the machines and Shadwick providing all of the COAMs and paying all of the expenses.

Later, Stockton opted not to renew his master license, and the parties agreed to operate their COAMS solely under FAAC's master license. In 2009, the parties orally agreed to share in the cost and expenses of the business and equally divide the revenue and profits therefrom. Despite this arrangement, however, Stockton admits that he had no legal interest in FAAC as either an officer, director, or shareholder.

The parties operated under this business agreement for many years, until 2017, when Shadwick stopped paying Stockton the 50 percent profit and eventually ceased paying him his share of the revenues altogether; rather, Shadwick used Stockton's share of the profits to pay his personal debts.

Stockton then filed a verified complaint, asserting claims for breach of contract; breach of fiduciary duty; unjust enrichment; conversion; appointment of a


receiver; and attorney fees under OCGA § 13-6-11.[1] Shadwick answered, and subsequently filed a motion to dismiss the complaint for failure to state a claim, alleging that the business arrangement between the parties was illegal and unenforceable under OCGA § 50-27-87. The trial court granted Shadwick's motion and dismissed Stockton's complaint with prejudice, finding that the arrangement was illegal and void, and Stockton was not entitled to the revenue because he was not an "operator" or "master licensee" as required by OCGA § 50-27-87 and related statutes.

Stockton moved the trial court to reconsider, and it subsequently issued an order denying the motion, but clarified that the parties' alleged contract was unenforceable because it was incapable of being brought into compliance with current COAM laws enacted in 2013; Stockton's claims for breach of fiduciary duty, conversion, and unjust enrichment fail because these claims all arose from the same alleged illegal contract; and, consequently, the dependent claim for attorney fees failed as well. Stockton now appeals.

1. In related arguments, Stockton first asserts the trial court erred by granting Shadwick's motion to dismiss based on its finding that (a) the parties' business


agreement was void and unenforceable both prior to and after the enactment of OCGA § 50-27-87; and (b) Stockton was not an "operator" entitled to revenue and profits under the plain language of the relevant statutes. We examine each claim in turn, concluding that the trial court properly determined that the parties' business arrangement was illegal and thus void.

(a) The agreement was illegal and void under COAM laws.

Stockton argues that there was no statute addressing the parties' business arrangement at the relevant time of their agreement, and that there was no requirement to bring their agreement into compliance with current COAM laws. Stockton relies on All Star v. Ga. Atlanta Amusements, 332 Ga.App. 1, 9 (770 S.E.2d 22) (2015), contending that there was no requirement that the parties amend or modify their agreement to bring it into compliance with the new law because doing so would result in neither party receiving funds derived from the business; thus, such a requirement would vitiate the contract all together. We are unpersuaded.

This argument is unavailing because Stockton concedes the alleged breach did not occur until 2017, well after the statute took effect. As for Stockton's reliance on All Star, we specifically held therein that


parties who contract with respect to a regulated industry or enterprise enter those contracts subject to further reasonable regulation; when the subject of the contract is regulated, this fact controls, to some extent, the parties' reasonable expectations under the contract. In essence, such parties are presumed to contract with the knowledge that, regardless of the terms they agree to subsequent reasonable regulation might require them to amend one or more of those terms.

(Citations and punctuation omitted.) 332 Ga.App. at 9. As such, in keeping with Allstar, Stockton's agreement with Shadwick must conform to the COAM statutory framework in order to be legal and enforceable. Id. As discussed more fully below, we conclude that it does not.

Stockton also argues that the parties' agreement to form a profit-sharing partnership or joint venture does not violate the statute. We thus consider whether the parties' agreement complies with the statutory framework enacted by the General Assembly, and conclude that it does not.

Ownership and operation of a COAM business is a highly regulated industry in Georgia, and the General Assembly has clearly indicated that "the ability to operate a bona fide [COAM business] in this state constitutes a privilege and not a right." OCGA § 50-27-70 (a). To determine if the parties' agreement is enforceable, we


apply our rules of statutory construction, and give the ordinary meaning to the statutory language governing COAM businesses.

Our interpretation and application of statutory language is guided by the following principles: A statute draws its meaning, of course, from its text. Under our well-established rules of statutory construction, we presume that the General Assembly meant what it said and said what it meant. To that end, we must afford the statutory text its plain and ordinary meaning, we must view the statutory text in the context in which it appears, and we must read the statutory text in its most natural and reasonable way, as an ordinary speaker of the English language would. Though we may review the text of the provision in question and its context within the larger legal framework to discern the intent of the legislature in enacting it, where the statutory text is clear and unambiguous, we attribute to the statute its plain meaning, and our search for statutory meaning ends.

(Citations and punctuation omitted.) PTI Royston v. Eubanks, 360 Ga.App. 263, 266 (1) (861 S.E.2d 115) (2021); see also Amazing Amusements Group, 353 Ga.App. at 257-258. Furthermore,

statutes relating to the same subject matter are in pari materia and must be construed together and harmonized whenever possible. In so construing, . . . we apply the fundamental rules of statutory construction that require us . . . to avoid a construction that makes some language


mere surplusage. At the same time, we must seek to effectuate the intent of the legislature. (Citations and punctuation omitted.) Daily Underwriters of America v. Williams, 354 Ga.App. 551, 554 (2) (a) (i) (841 S.E.2d 135) (2020) (physical precedent only).

A review of the relevant COAM statutes and rules makes clear that they prohibit the agreement between Stockton and Shadwick. OCGA § 50-27-87 (c), the statute governing COAM revenue sharing agreements, mandates

[n]o person shall receive a portion of any proceeds or revenue from the operation of a bona fide coin operated amusement machine except the operator, location owner, or location operator[.]

OCGA § 50-27-70 (12) defines "operator" as

any person, individual, firm, company, association, corporation, or other business entity that exhibits, displays, or permits to be exhibited or displayed, in a place of business other than his own, any bona fide coin operated amusement machine in this state.

A location owner or operator is defined...

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