Vitner v. Funk, 73348

• Decision Date: 04 March 1987
• Docket Number: No. 73348,73348
• Citation: 182 Ga.App. 39,354 S.E.2d 666
• Parties: VITNER et al. v. FUNK.
• Court: Georgia Court of Appeals

Page 666

354 S.E.2d 666

182 Ga.App. 39

VITNER et al. v. FUNK.

No. 73348.

Court of Appeals of Georgia.

March 4, 1987.

Bruce W. Callner, Kathy L. Portnoy, Atlanta, for appellants.

Richard P. Reinhart, Thomas T. Tate, Atlanta, for appellee.

BEASLEY, Judge.

Plaintiff Funk brought a multi-count complaint against the three doctors with whom he practiced, a professional association, North Atlanta OB-GYN, in which he and two of the defendants had owned equal shares, and a corporation, Birthing Center of Atlanta. Despite several counts the complaint focused on two issues: 1) the failure of the two doctors, Vitner and Levine, who had equal shares of North Atlanta with Funk, to abide by and comply with the terms of their share repurchase agreement; 2) Funk's exclusion from his alleged share in a project carried on by him and the other three doctors which culminated in the formation of Birthing Center, a corporation in which Funk was given no interest.

Subsequent to answering, defendant moved to sever the two issues pursuant to OCGA § 9-11-21. This motion was denied and after protracted discovery the issues were tried together before a jury which returned special verdicts basically favoring the plaintiff. In conformity with the verdict, judgment was entered on the share repurchase agreement issue of $55,790 actual damages, $40,367 interest and $20,000 cost of litigation; on the birthing center issue $40,000 actual damages.

Funk, Vitner, Levine and Wolfson practiced obstetrics and gynecology under the title of North Atlanta which was owned equally by Funk, Vitner and Levine. The four doctors also made mutual investments under Triple S. Although Triple S was their investment vehicle, arrangements were very informal with each individual participating as to each separate investment in any amount he might choose.

Starting in 1979 the parties became interested in the concept of creating a birthing center for deliveries by midwives. Over the next two years the doctors employed experts for a project feasibility report, paid by North Atlanta, engaged financial expertise and clout in the person of Harlan Allen who was granted one-third share of the project, the doctors retaining the remaining two-thirds, and contracted to purchase the land for the center, the earnest money being supplied again by North Atlanta. Each doctor contributed such time and effort as he was able, Vitner the most since he headed coordination of the venture. Funk was next in expenditure of time. All the doctors contibuted financial support and assumed individual responsibility on various notes and loans as required.

In May of 1981 Funk decided to withdraw from North Atlanta, and verbally communicated his intention to Levine. He gave written notice on July 1 that he was leaving as of July 31. He continued to participate fully in the task of creating the birthing center. In order to effectuate the plans and to minimize tax consequences, during the fall of 1981 it was decided to create two business entities: a limited real estate partnership to hold the land (later called 830 Douglas Road) and an operating Corporation (later called the Birthing Center). In January 1982 the land purchase was closed and under the 830 Douglas Road agreement Allen had one-third share and the four doctors the remaining two-thirds. However, when the Birthing Center was formally incorporated in the summer of 1982, Allen held one-third share and the remaining two-thirds was shared by the three defendant doctors. Funk was not included. This formed the basis for the Birthing Center issue in that Funk sought either the imposition of a constructive trust or damages for the wrongful deprivation of his interest in the joint project.

Under the share repurchase provision of the North Atlanta organization agreement Vitner and Levine were to repurchase Funk's shares at book value, within 90 days of his departure. It was not until over a year later after prodding by Funk's counsel that an offer of $37,900 was made. It was rejected as being an incorrect computation of the amount due Funk, who contended that the specified method was not properly used and a much greater sum was owed. The agreement also provided for imposition of interest at prime plus one percent, which was agreed by the parties at trial to be 19%. This was the share repurchase issue in which Funk sought the amount owed him plus interest.

As to both issues Funk sought the imposition of costs of litigation under OCGA § 13-6-11 for bad faith, stubborn litigiousness and unnecessary trouble and expense. The court struck stubborn litigiousness and the jury denied any recovery under OCGA § 13-6-11 as to the Birthing Center, imposing litigation costs only as to the share-repurchase claim.

1. Defendants contend the trial court erred in declining to sever the case and try the two major issues separately.

Although the motion was predicated on OCGA § 9-11-21, there are two other code sections which address severance or separate trials of different claims, parties or issues. See OCGA § 9-11-20(b) and OCGA § 9-11-42(b). The parties have argued all three, plus OCGA § 9-11-42(a). That section is clearly inapplicable since it applies to the consolidation of separate actions, not the separation or bifurcation of claims or issues in one case. 9 Wright and Miller, Fed. Practice & Procedure (2d Ed.) §§ 2381 & 82, p. 252.

Since all the sections involve the discretion of the trial court, Chicago, R.I. etc. R. Co. v. Williams, 245 F.2d 397, 404 (8th Cir.1957) , ¹ and particularly since OCGA § 9-11-42(b) is the lodestar in this area, 7 Wright, Miller & Kane, Fed. Practice & Procedure (2d Ed.) § 1660, p. 437, and 3A Moore's Fed. Practice & Procedure § 20.08, p. 20-90, ² we approach this issue with the concepts of Section 42(b) as our primary guide, while also considering section 21. ³

Contrary to the assertions of defendants we do not find two very separate, compartmentalized issues here. The factor that escalated the controversy from which our two issues evolved was Funk's decision to leave the group. It is clear that from that point on at least two of the defendants believed that he should no longer participate in their investment plan for the birthing center. We recognize fully that as to the share-repurchase issue the matter involved Vitner and Levine, while the birthing center concerned two other individuals, Wolfson and Allen, plus the corporate entity Birthing Center. However, Vitner was the principal mover in both areas and Levine was vitally concerned with both. Even Wolfson as the prospective successor to Funk in North Atlanta was not uninterested. Plus, North Atlanta was being used as a conduit to fund or furnish seed money for the birthing center. There was considerable spillover in both directions as to these two issues. Certainly there was no misjoinder of the parties.

Defendants argue that in retrospect one can see that the issues should have been divided and that prejudice resulted from their confusion; that evidence not admissible in a separate trial was permitted, causing untold damage to defendants. From our perspective it seems obvious that the jury needed to be presented with the entire panorama, in order to understand the root cause of the claims. While it might be an exaggeration to describe the events here as one all encompassing transaction, there exists a very connected and related series of transactions, so that the issues arising from them were properly submitted to one jury and it was not error to refuse to bifurcate them.

"Severance is largely a matter of discretion for the trial judge, and absent clear and manifest abuse of that discretion, it will not be interfered with on appeal." Wheels & Brakes v. Capital Ford Truck Sales, 167 Ga.App. 532, 533(1), 307 S.E.2d 13 (1983).

2. Defendants assert error on the failure to direct a verdict in their favor regarding the birthing center issue. The principal argument is there was no fiduciary relation and no contract so that they were under no obligation to share the end product with Funk.

Defendant urges the principle that a confidential relationship does not exist prior to the contract or legal relationship. Cole v. Cates, 113 Ga.App. 540, 544(2), 149 S.E.2d 165 (1966). Then relying upon the premise that no relationship was created until the Birthing Center was incorporated, it is argued that Funk was omitted from participation in that entity and therefore no relationship existed as to all the prior transactions of the parties.

Because their premise is invalid we do not reach the same conclusion as defendants. Cochran v. Murrah, 235 Ga. 304, 307, 219 S.E.2d 421 (1975) construed what is now OCGA § 23-2-58 and found it "does not attempt to comprehensively enumerate the cases wherein the relation of mutual confidence is present. The showing of a relationship in fact which justifies the reposing of confidence by one party in another is all the law requires." This issue will be discussed in more detail. At this point, it is sufficient to hold that the entire business structure of the parties, their interactions and dealings over the course of several years and their common goal, all furnished a basis for a jury to find a relationship in fact which justified the reposal of confidence on the part of one party and good faith on the part of the others.

We also find no persuasive logic in defendant's argument that the necessary elements of a valid and enforceable contract were lacking because there was no meeting of the minds and no mutuality, citing Malone Constr. Co. v. Westbrook, 127 Ga.App. 709, 194 S.E.2d 619 (1972); Clayton McLendon v. McCarthy, 125 Ga.App. 76, 186 S.E.2d 452 (1971).

There is ample evidence to sustain a finding that the parties embarked on a joint enterprise, share and share alike. This joint endeavor technically might be described as a joint venture or partnership but in this instance, as in most, the distinction is not crucial and the...