Wilson v. Brown

• Citation: 496 So.2d 756
• Parties: H. Jason WILSON; Wallace J. Wilson; and Hazen Air Conditioning, Inc. v. Darren Douglas BROWN. 85-370.
• Decision Date: 03 October 1986
• Court: Supreme Court of Alabama

Page 756

496 So.2d 756

H. Jason WILSON; Wallace J. Wilson; and Hazen Air Conditioning, Inc. v. Darren Douglas BROWN.

85-370.

Supreme Court of Alabama.

Oct. 3, 1986.

Vaughan Drinkard, Jr., and Clifford C. Sharpe of Drinkard & Sherling, Mobile, for appellants.

J.M. Druhan and D. Charles Holtz of Wilkins, Druhan & Ollinger, Mobile, for appellee.

HOUSTON, Justice.

This is an action by H. Jason Wilson, Wallace J. Wilson, and Hazen Air Conditioning, Inc. (hereinafter "the corporation"), against Darren Douglas Brown arising out of the sale of Brown's capital stock in the corporation to the Wilsons. The Wilsons sought to recover the amount they had paid to Brown for his stock in the corporation, on the grounds of false representations and suppression of material facts. The Wilsons had given Brown a mortgage and security agreement to secure the purchase price for Brown's stock, and the Wilsons sought to have these rescinded because of the alleged misrepresentations. Brown filed a counterclaim against the Wilsons seeking to recover on a promissory note executed to the order of Brown by the Wilsons. The trial court granted Brown's motion for summary judgment as to the Wilsons' claims against Brown and as to Brown's counterclaim against the Wilsons and the corporation. The Wilsons and the corporation appeal.

The standard of review which this Court must follow when summary judgment has been granted to a defendant on a plaintiff's claim against a defendant is well established. Summary judgment for a defendant is proper when there is no genuine issue of a material fact as to any element of a cause of action and the defendant is entitled to a judgment as a matter of law. If there is any evidence of every element of a cause of action, summary judgment is inappropriate. In determining whether there is any evidence to support every element of a cause of action in this case, this Court must review the record in a light most favorable to the plaintiffs and resolve all reasonable doubts against the defendant. Harrell v. Reynolds Metals Co., 495 So.2d 1381 (Ala.1986).

Reviewing the record in the light most favorable to the Wilsons and the corporation, we find that the trial court had the following facts before it at the time it granted Brown's motion for summary judgment. Brown and his son, David, and two other individuals, Floyd and Fondren, each bought 25% of the capital stock of the corporation from Maury Hazen in late 1979. David took the most active role of the four in the day-to-day running of the corporation. Brown came to the corporate office at least once or twice a week and knew the general condition of the business. Floyd and Fondren were basically silent stockholders. In January 1983, Floyd and Fondren tried to sell their stock to Brown and David, but no sale was ever consummated. Floyd and Fondren then contacted the Wilsons, concerning the sale of their stock. Floyd asked David to prepare a financial statement for the corporation to show the financial status of the corporation to the Wilsons. A document styled "Financial Statment [sic]--Feb." was prepared which purported to give a realistic picture of the financial status of the corporation as of February 1983. This was given to the Wilsons at a meeting not attended by Brown. A second meeting was held a week later which was attended by the Wilsons, Brown, David, and Floyd and Fondren. Brown was not contemplating selling his stock to the Wilsons or to anyone else at this time. The financial statement was passed around for everyone, including Brown, to see. Brown knew that the financial statement contained some erroneous information. The financial statement was not correct in what it reflected about the following items: (1) There was an accrued liability for payroll taxes of $16,000 as opposed to $5,000 as represented in the financial statement; (2) a check overdraft was actually $1,521.64 as opposed to $450 as reflected in the financial statement; (3) the actual accrued accounts payable owed by the corporation to others was $71,570 as opposed to $49,687 as reflected in the financial statement. In general, in the financial statement the corporation was shown to have a net worth greater than the actual net worth of the corporation. In discussing the financial aspects of the business, Brown told the Wilsons that the corporation was not financially capable of hiring Wallace Wilson; Brown advised the Wilsons of ongoing work which the corporation was performing for various individuals; Brown set forth the general condition of the business and prospective income. At the meeting, there was a general discussion that the corporation needed $10,000 in operating capital. Brown offered the books of the corporation to the Wilsons for their review; however, the Wilsons refused to examine the books because they would not have understood them and it would have cost them money to have their accountant examine them.

The "Financial statement" on which the Wilsons said they elected to rely had the following misspellings in addition to "Statment": "Recievables," "Invent iory," "Exspences," "Accurred," "Liablities," "Intrest," "Benifits," "Acc ured," "Currant," "Defurred" and "Liabilites." More importantly the amount stated for current assets was set forth in two different places within ten lines of each other, but the last entry was unexplainably almost $3,000 less than the first. After the second meeting, and after all the representations which Brown allegedly made had been...