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Wallace v. Wallace

Supreme Court of Georgia

May 15, 2017

WALLACE
v.
WALLACE et al.

          GRANT, Justice.

         The fate of Dorsey "Doss" Wallace's stock in the family business, Wallace Electric Company, has caused a remarkable amount of disagreement between Doss and his brothers, Gary and Phillip Wallace. The parties offered competing narratives in the case below about which agreement, if any, governed the ownership of stock in Wallace Electric, and about what the terms of those agreements would require. The trial court ultimately concluded in a bench trial that Doss should be paid $54, 200 for his stock. But because the court correctly admitted that its order did not reach the factual or legal conclusions required to resolve this case, we vacate the order below and remand for proper consideration of, and conclusions regarding, the legal questions at issue in this case.

         I.

         Wallace Electric Company was incorporated in 1959 by the parties' father. In 1988, when all three brothers were working for Wallace Electric, their father awarded Gary and Phillip each a 25% share of stock in the company, awarded Doss a 16.67% share, and kept a 33.33% share for himself. Their father owned and managed the business until his death in 2000. After their father's death, Gary and Phillip took over the management of Wallace Electric. Doss, on the other hand, had been employed at Wallace Electric sporadically until his employment ended in 1994. The parties agree that the ownership of stock in Wallace Electric was intended to be reserved for employees of the company.

         In 2011, following an apparent series of family disputes, Doss filed a complaint for accounting and damages against Gary and Phillip, alleging that they had deprived Doss of his lawful interests as a shareholder of Wallace Electric.[1] During discovery, Doss filed a motion seeking a court-supervised accounting and buyout of his minority shareholder interest in Wallace Electric. Doss argued that the Wallace Electric Bylaws, which were enacted in 1959, controlled the parties' dispute. He alleged that the Bylaws restricted the retention, sale, and disposition of a shareholder's stock, as outlined in the following provision:

[I]f the employment of any stockholder or officer is terminated, for any reason, the corporation shall have the right and duty to purchase all the stock of said employee or officer and the former officer or employee shall be obligated to sell his stock pursuant to these bylaws.
The purchase price, in any event, shall be the book value of the stock (as of the time of said notice) as determined according to accepted accounting practices, and shall be binding upon the parties.

         He argued that Wallace Electric had a duty to make an offer and purchase his stock after his employment ended, a duty that the company did not fulfill. Moreover, Doss contended that the Bylaws required that the price of the stock be determined at the time the company offered to purchase his stock. Therefore, Doss contended that the value of his stock should be determined based on the date the company offered to purchase it. He maintained that because Wallace Electric had never offered him the "book value" of his stock, it had not satisfied its duties under the Bylaws-and he, therefore, was not obligated to sell. Accordingly, in his view, the buyout should be calculated based on the stock's "book value" at the time the litigation began.

         Doss admitted, however, that in 1988 the parties had entered into a Buy-Sell Agreement that also addressed the disposition of Wallace Electric stock. The Buy-Sell Agreement provided for the sale of any shareholder's stock upon death, total disability, or termination of employment. The Buy-Sell Agreement also set out a method for determining the current value of the stock in the event of a disagreement between the parties at the time of sale. Doss, however, contended that the Buy-Sell Agreement does not apply to the sale of his stock because it expired on June 30, 2008, before his brothers made any effort to purchase his stock.

         Appellees, on the other hand, argued that Doss was not entitled to demand a buyout and had anticipatorily breached his duties under the Buy-Sell Agreement by retaining his stock after his employment with Wallace Electric ended in 1994. Gary offered to purchase Doss's stock in 2003, Appellees claim, but Doss continually refused to sell. Appellees maintain that the Buy-Sell Agreement affirmatively required Doss to sell his stock when his employment with Wallace Electric ended. Appellees eventually amended their filings to explicitly request that the court order Doss to resell his shares at their 1994 value, in accordance with what they saw as the terms of the Buy-Sell Agreement.

         With respect to the Bylaws, Appellees argued that they constituted a shareholder agreement and had expired pursuant to OCGA § 14-2-732 (b) (3), a statute that sets out requirements and limits for shareholder agreements and includes a 20-year sunset provision for such agreements.[2] Alternatively, the brothers claimed that the Bylaws had been superseded by the later-enacted Buy-Sell Agreement. The brothers also maintained that because none of the parties owned stock when the Bylaws were enacted in 1959, the Bylaws did not constitute an executory contract between the parties. Instead, they argued, the parties were bound by the terms of the Buy-Sell Agreement, which was in effect and signed by the parties in 1988. Specifically, Appellees cited the following provisions of the Buy-Sell Agreement:

Upon the . . . termination of employment of a Shareholder, such Shareholder . . . 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. . . . .
In the event of termination of employment of a Shareholder, the Corporation shall purchase all of the stock owned by such Shareholder within sixty (60) days after the date of termination of employment.

         Appellees maintained that the Agreement defined "current value" as $1, 806.00 per share. Doss countered that the Agreement expired in 2008 and that its expiration resulted in a reversion to the Bylaws. He maintained that the Bylaws had not expired and were not subject to ...


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