Opinion ID: 553321
Heading Depth: 2
Heading Rank: 2

Heading: The Culpepper/Langston/Hurst Group Transaction.

Text: 10 On October 7, 1983, Culpepper and Langston entered into a written stock purchase agreement with the Hurst Group, pursuant to which Culpepper and Langston would each sell the Hurst Group 80% of their House of Travel shares for $32,000. The agreement set a closing date of October 14, 1983. 11 On October 14, the Hurst Group tendered payment (in the form of cash and a note to be secured by a pledge of the stock it would be receiving from Langston) to Langston; he accepted the payment and transferred 40 of his House of Travel shares to William Charles Hurst, who received the shares and held them in his name for the benefit of the Hurst Group. When the Hurst Group tendered payment to Culpepper, however, Culpepper refused to sell. Culpepper maintained that he and the Hurst Group had secretly agreed that his promise to sell his shares would not be enforced--the promise would be used only to induce Langston to sell his shares. 12 Culpepper stood his ground, and the Hurst Group decided, for the time being at least, to work with him in the effort to make House of Travel prosper. The two Hursts joined Culpepper on the company's board of directors, which had three members, 6 and agreed that Culpepper would continue to serve as president of the company. William Charles Hurst became the company's vice president and Leon Hurst its secretary and treasurer. 7 13 Under House of Travel's bylaws, it took a unanimous vote of the company's directors before the board of directors could act. 8 The Hursts believed that Georgia law precluded the board from changing this requirement 9 and therefore made no attempt to use their numerical advantage on the board to manage the company through the board of directors. As a result, Culpepper used his authority as president to dictate the day-to-day operations of the company. This arrangement, however, did little to enhance House of Travel's profitability. Although the sales volume and daily cash flow steadily increased, the company's operating expenses and need for ready cash increased further. This problem was caused, in part, by the manner in which Culpepper and the Hurst Group dealt with the company's funds; they repeatedly diverted such funds to their own personal use. In addition, Culpepper, as the firm's president, paid himself a handsome salary (given the volume of business he generated) and overpaid his wife and son, who were part-time workers. This practice of using company funds for personal expenditures became a source of strife and, eventually, even criminal accusation: Culpepper accused the members of the Hurst Group of embezzling company funds; they replied in kind. 14