Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Wallace v. Wallace

Court of Appeals of Georgia, Second Division

April 24, 2018

WALLACE
v.
WALLACE et al.

          MILLER, P. J., ANDREWS, J., and RICKMAN, J.

          Miller, Presiding Judge.

         This dispute arises from the forced sale of one brother's stock in a family-owned business, Wallace Electric Company. Dorsey "Doss" Wallace, and his brothers, Phillip and Gary, all worked for Wallace Electric and owned stock in the company. After Doss stopped working for Wallace Electric in 1994, he did not sell - and the company did not even attempt to buy - his stock as was required by the company Bylaws and the shareholders' Buy-Sell Agreement ("the Agreement"). When Phillip asked Doss about returning the shares in 2003, Doss unequivocally refused. Several years later, Doss filed a complaint alleging that Phillip and Gary breached their fiduciary duty towards him as a shareholder. During the ensuing litigation, both parties sought specific performance of either the Bylaws or the Agreement. Following a bench trial, the trial court found that Doss breached the Agreement when he did not return the stock in 1994, and it valued Doss's shares as they would have been valued in 1994, with a reduction for the minority interest Doss held. Doss now appeals. After a thorough review of the record and the applicable law, we conclude that the trial court erred in determining that Doss was required to sell his shares at the 1994 value and in applying a minority interest discount to the value of the stock. Instead, the trial court should have valued Doss's shares in 2003 when he breached the Agreement by refusing to sell his shares. Moreover, because we conclude that Doss continued to hold his shares until he breached the Agreement in 2003, the trial court erred in finding that Doss's claims for breach of fiduciary duty and tortious interference were moot. Accordingly, we vacate the trial court's order, and remand the case for further proceedings.

         "Appeals from bench trials, where the trial judge sits as the trier of fact and has the opportunity to assess the credibility of the witnesses, are reviewed under the clearly erroneous standard. We will not disturb a trial court's findings if there is any evidence to support them." (Citations and footnotes omitted.) Jenkins v. Sallie Mae, Inc., 286 Ga.App. 502 (649 S.E.2d 802) (2007). Questions of law are reviewed de novo. Lewis v. McNeely, 336 Ga.App. 696 (783 S.E.2d 172) (2016).

         The facts of this case are undisputed. Wallace Electric is a family-owned company that was incorporated in 1959 by the parties' father. The father was head of Wallace Electric and controlled the business until his death in 2000. After the father died, Gary, as president, and Phillip, as vice president, controlled Wallace Electric, increasing the company's profitability substantially.

         The stated purpose of the company is to make a profit. Additionally, because Wallace Electric was designed to be a family-owned business, only current employees of the company could retain stock. Pursuant to Wallace Electric's Bylaws, enacted in 1959, the retention and sale of stock were controlled as follows:

[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 by-laws.
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.

         (Emphasis supplied.) ("Article V" of the Bylaws).

         In 1988, Wallace Electric issued stock to all three brothers; Gary and Phillip received 30 shares (25 percent) each and Doss received 20 shares (16.67 percent).[1] Additionally, when Doss, Gary, and Phillip obtained their shares in 1988, the parties entered into the Agreement, which provided,

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.[2]
. . .
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.

         (Emphasis supplied.) Finally, the Agreement specified that damages for breach of the Agreement were "immeasurable, " and thus, the Agreement contemplated specific performance or other equitable remedies. In signing the Agreement, the parties expressly waived any defense that they had an adequate remedy at law. By its own terms, the Agreement expired in 2008.[3]

         All three brothers initially worked for Wallace Electric, but Doss left his employment in 1994. At the time Doss left Wallace Electric, he owned one-sixth of the issued stock. He did not offer to sell his stock to the company as required by the Bylaws and Agreement, however, because he planned to return to the company "at some point." Nor did Wallace Electric attempt to buy Doss's stock when his employment ceased.

         In 2003, during a review of the company's status, Gary and Phillip realized that Wallace Electric had not repurchased Doss's stock after Doss left the company. Phillip contacted Doss to inquire about Wallace Electric repurchasing Doss's stock, but they never discussed a purchase price because Doss adamantly refused to sell it. Phillip allegedly spoke to Doss again about selling the stock in 2006 or 2007, to no avail.

         In August 2011, Doss filed a complaint for an accounting and damages against Gary and Phillip, alleging breach of fiduciary duty and tortious deprivation of his interest in Wallace Electric, and seeking punitive damages and attorney fees. He subsequently moved to add Wallace Electric as a defendant, and filed an amended complaint to add claims that are not relevant to the instant appeal.

         Gary, Phillip, and Wallace Electric (collectively "the defendants") filed an answer, a counterclaim seeking damages and fees for abusive litigation, and an amended counterclaim. In the amended counterclaim, the defendants argued that, as a matter of equity, Doss should be ordered to sell his stock back to Wallace Electric at the 1994 value. Doss moved to dismiss the counterclaim as untimely, but the trial court denied the motion.

         In 2015, Doss notified Wallace Electric that he wished to sell his shares back to the company at their present value. He also filed a motion for specific performance, demanding that Wallace Electric repurchase the 25 percent interest in stock that he now owned as a result of his father's shares being reabsorbed into the company, at Wallace Electric's 2015 book value. In response, the defendants tendered Doss a check in the amount of $54, 200, which represented the 1994 book value of Doss's 16.67 percent interest in the company at that time. Doss rejected this offer. At the time, the book value of Wallace Electric was just over $8 million.

         At a bench trial, the parties agreed that there should be a buyout of Doss's shares.[4] The parties disagreed, however, about which document controlled the buyout and the appropriate year for valuing Doss's stock. Doss contended that Article V of the Bylaws controlled the manner and value of the stock purchase, and that his offer to sell his stock in 2015 required Wallace Electric to purchase the stock at the 2015 value. The defendants argued that the Agreement controlled because the Bylaws expired prior to the effective date of the Agreement, the Agreement superseded the Bylaws, and therefore, Doss was obligated to sell his stock at the 1994 value.

         The trial court found in favor of Phillip and Gary, and ordered Doss to sell his shares at the 1994 value. In doing so, however, the trial court initially did not expressly rule on any of the parties' specific legal arguments. Doss appealed to the Supreme Court of Georgia, [5] which vacated the trial court's order and remanded for the trial court to make factual findings and state its legal conclusions. See Wallace v. Wallace, 301 Ga. 195 (800 S.E.2d 303) (2017).

         On remand, the trial court found that (1) the Agreement governed the dispute because it superseded and replaced Article V of the Bylaws; (2) the Agreement was not executory in nature; (3) Doss breached the Agreement in 1994 when he failed to sell his stock upon leaving Wallace Electric; (4) the defendants' counterclaims were timely because Doss's breach continued through 2008, the complaint was filed within the statute of limitations, and the counterclaims related back to the timely-filed complaint; (5) an equitable remedy was appropriate to give effect to the parties' intent and required the conclusion that Doss be held to the terms of the Agreement as if he had sold his shares in 1994 when he left the company; and (6) in light of this conclusion, Doss's remaining claims were moot. This appeal followed.

         1. In several related enumerations of error, Doss argues that the trial court erred in concluding that (a) the counterclaim was timely; (b) the Agreement controlled; and ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.