Opinion ID: 1890401
Heading Depth: 1
Heading Rank: 2

Heading: FactsSubstantive and Procedural

Text: On November 2, 1998, Cole owned all of the 1,000 shares of stock issued by Medical Holdings. That same day, Cole sold Bruce 490 of those shares for the sum of $50,000. As part of the sale, Bruce and Cole signed a Restrictive Stock Transfer Agreement, which provides, in pertinent part: 4. Retiring, Resigning or Terminated Shareholder. In the event a Shareholder should voluntarily or involuntarily retire, resign, or terminate his employment with the corporation ( said retiring, resigning or terminated stockholder being hereinafter referred to as the resigning stockholder) said resigning stockholder shall be obligated to sell his shares in the following manner: (a) Corporation's Obligation to Redeem The Corporation shall be obligated to redeem and the resigning Shareholder shall be obligated to sell to the Corporation all shares of the Corporation owned by the resigning shareholder at the time of such resignation, retirement or termination of employment. The purchase price and terms of any such purchase shall be as set forth in Paragraph 5 hereof. (b) Shareholders Option to Buy. For a period of sixty (60) days after the applicable period for the redemption of the stock by the Corporation, as to any stock which is not redeemed by the Corporation for whatever reason from the resigning stockholder, the other Stockholders shall have an option to buy and the resigning stockholder shall be obligated to sell such stock in accordance with the price and terms as determined in Paragraph 5 herein. .... 5. Valuation (a) Purchase Price The value, and for the purposes of the Agreement, the purchase price of each share of stock of the Corporation shall be determined by the Stockholders of the Corporation in the manner provided herein; the Stockholders shall, on or about November 1 of each year, and at each other such times as they see fit, agree on the value of each share of common stock of the Company. It is agreed that the value of each share of common stock of the Company is as of this date, and until the next date when a new value is fixed by the parties, One Hundred and No/100 Dollars ($100.00). Attached hereto as Exhibit `A' is a [blank exemplar] Schedule of Values as fixed by the parties for the date indicated on the schedule, and such schedule shall be and is hereby made a part of this Agreement, and when duly executed, shall be in compliance with the requirements herein contained as to the fixing of the value of each share of common stock of the Company; that, except as otherwise provided in this Agreement, such value shall in no manner be altered; and that all assets, both tangible and intangible, if any, as well as liabilities, if any, of or upon the assets of the Company have been considered in determining value. .... 13. Entire Agreement. This Contract contains the entire agreement of the parties hereto, and no modification, amendment, change or discharge of any term or provision shall be valid or binding unless signed by the party against who such provision is asserted. (Emphasis added.) Exhibit A to the Restrictive Stock Transfer Agreement reads: In accordance with the terms of Section 5 of the Restrictive Stock [Transfer] Agreement of South Butler Medical Holdings, Inc., executed and entered into by the undersigned parties as of November 2, 1998, the undersigned do hereby agree that the value of each share of common stock of the Company as of the first day of November 199_, is $ ___. __________ L.S. Harry Cole, Jr. __________ L.S. Michael David Bruce On November 2, 1998, the bylaws of Medical Holdings read, in pertinent part: 11. Number, Tenure and Qualifications: There shall be no less than one (1) Director nor more than ten (10) Directors of the Corporation. The Directors shall be elected at the annual meeting of the Stockholders and shall hold office for one (1) year until the next annual meeting of the Stockholders and until their successors have been duly elected and qualified. The number of Directors may be increased or decreased from time to time by Amendment to the By-Laws, but no decrease shall have the effect of shortening the term of any incumbent Director. Directors need not be residents of the State of Alabama or Stockholders of the Corporation. .... 19. Various Officers: The Officers of the Corporation shall be elected by the Board of Directors and shall be a President and Vice President. The Board of Directors may also choose a Chairman of the Board of Directors, additional Vice Presidents, a Secretary and a Treasurer. All offices may be held by the same person. .... 21. Removal: Any officer elected or appointed by the Board of Directors may be removed at will and at any time by the affirmative vote of the majority of all the Directors. (Emphasis added.) On that same day, November 2, 1998, Cole and Bruce, as shareholders of all of the stock of Medical Holdings, elected Bruce a director, to serve with Cole, the only other director; and Cole and Bruce, as such directors, elected Cole as the president and Bruce as the secretary and the treasurer of the corporation. The function and value of Medical Holdings was that it owned 61% (later 50%) of South Butler Medical Services, L.L.C. (Medical Services), which, in turn, wholly owned (subject to the debt for the purchase price) the Georgiana Hospital and affiliated clinics in Butler County. The only shareholder in Medical Services other than Medical Holdings was South Butler Medical Enterprises, Inc. (Medical Enterprises), which was wholly owned by Dr. Jeff Voreis of Butler County. Cole wholly owned still another related corporation, South Butler Medical Management, Inc. (Medical Management), which, by contract with Medical Services, managed the Georgiana Hospital and affiliated clinics. About the time of the November 2, 1998 transactions, both Medical Management and Medical Services severally employed Bruce as the chief financial officer of each. Medical Holdings did not pay Bruce a salary or fringe benefits and did not prepare Internal Revenue Service W-2 forms for Bruce. Medical Management paid Bruce's salary, and Medical Services paid Bruce's health insurance premiums. Medical Holdings did not reimburse Medical Management or Medical Services any portion of Bruce's salary or fringe benefits. According to Bruce's deposition testimony, two weeks after he and Cole signed the Restrictive Stock Transfer Agreement, Cole orally broached the subject of a put-call agreement. According to Bruce, the put-call proposal by Cole was that, if either of them offered to purchase all of the other's shares in Medical Holdings for a stated price, the offeree could decline to sell his shares and could demand to buy all of the offeror's shares for that same stated price per share. [1] Bruce testified that he orally accepted Cole's put-call proposal, and that, in reliance on this alleged oral put-call agreement, Bruce purchased his home. Cole denied ever discussing a put-call arrangement. He stated that he never intended to sell his stock to Bruce. Indeed, Cole testified, the terms of the loans for the purchase of the Georgiana Hospital and clinics provided that the lending bank could call the loans, if Cole, an individual guarantor of the loans, were to sell his stock to anyone. According to Bruce's deposition testimony, he, Cole, and Dr. Voreis met in July 1999 to discuss the value of the Georgiana Hospital and affiliated clinics in order for each man to prepare a personal financial statement to submit to the bank which had lent Medical Services the money to buy the hospital and clinics. The bank required the statements of Cole and Dr. Voreis, who had personally guaranteed the loan, but did not require one of Bruce, who submitted one nonetheless. The three men valued the hospital and clinics at $1,000,000. According to Bruce, he and Cole agreed at this time that their total stock in Medical Holdings (as 50% owner of Medical Services, which wholly owned the million-dollar hospital and clinics) had a value of $500,000 or $500 per share. Bruce and Cole each separately prepared, signed, and submitted to the lending bank a financial statement valuing his own Medical Holdings stock at $250,000. Each financial statement bore a cover certification, which reads in pertinent part: This is to certify that the information set forth on the attached generic Personal Financial Statement, dated 6/30/99 is true and correct, and I hereby request that said financial statement be accepted by [the Bank] as if it were addressed to you and the certification therein were made to you. This financial statement has been provided to [the Bank] for the purpose of obtaining credit. The bank is authorized to confirm any of the information set forth therein, and any person having knowledge regarding such information is hereby authorized to disclose that information to you.... 7/21/99 ________(sign) Date (Emphasis added.) On August 2, 1999, Cole verbally terminated Bruce as an employee of Medical Management and Medical Services. In that same month, Cole demanded that Bruce sell Cole all of Bruce's stock in Medical Holdings for $50,000 pursuant to the Restrictive Stock Transfer Agreement, and Bruce demanded that Cole sell Bruce all of Cole's stock in Medical Holdings for the same price pursuant to the alleged oral put-call agreement. On September 8, 1999, Cole sued Bruce for specific performance of the Restrictive Stock Transfer Agreement, and on January 10, 2000, Bruce countersued Cole for specific performance of the oral put-call agreement and for promissory fraud in entering the put-call agreement without intending to honor it. On March 16, 2000, Bruce received a written notice of a special meeting of the shareholders of Medical Holdings scheduled for April 3, 2000. On April 3, 2000, at the special meeting of the shareholders, Cole voted his 510 shares of stock to terminate Bruce as a director of Medical Holdings. Bruce voted his 490 shares of stock against terminating himself as a director of Medical Holdings. By that majority vote, Bruce was terminated as a director, and Cole was left as the only remaining director. Cole then voted his 510-share majority of stock to decrease the number of corporate directors from two to one, and Bruce voted his 490-share minority against the decrease. Finally, Cole voted his majority in favor of, and Bruce voted his minority in opposition to, reelecting Cole as the sole director. On April 5, 2000, at a special meeting of the new single-director board of directors of Medical Holdings, Cole terminated Bruce as secretary and as treasurer of Medical Holdings. Cole then authorized Medical Holdings to redeem Bruce's stock in accordance with the Restrictive Stock Transfer Agreement. By letter dated April 18, 2000 and signed by Cole, Medical Holdings notified Bruce of his termination as secretary and as treasurer of that corporation. By that same letter, pursuant to the Restrictive Stock Transfer Agreement, Medical Holdings demanded to redeem all of Bruce's stock for $100 per share, a total of $49,000 for all 490 shares. Medical Holdings tendered the $49,000 in forms of payment allowed by paragraph 5(b) of the Restrictive Stock Transfer Agreement. Bruce refused to sell his stock for $100 per share, but agreed to sell his stock for a total of $250,000. Medical Holdings refused to pay Bruce $250,000. On June 23, 2000, Cole amended his complaint and added Medical Holdings as a plaintiff seeking specific performance of the stock redemption provisions of the Restrictive Stock Transfer Agreement. That same day, Cole and Medical Holdings filed a motion for a summary judgment and submitted a narrative summary of the undisputed facts. Cole also answered Bruce's counterclaim. On July 20, 2000, answering the amended complaint, Bruce asserted that Cole and Medical Holdings lacked standing to seek specific performance of the Restrictive Stock Transfer Agreement because, Bruce alleged, he had not been terminated from his positions as director, secretary, and treasurer of Medical Holdings. Alternatively, Bruce answered that Cole lacked standing to seek specific performance because Cole had not offered to purchase Bruce's stock after Bruce had been terminated as director, secretary, and treasurer of Medical Holdings. On July 26, 2000, Bruce moved for a partial summary judgment on Cole's claim for specific performance. On August 24, 2000, the trial court entered a summary judgment in favor of Cole and Medical Holdings and ordered Bruce to convey his stock to Medical Holdings within 30 days for the sum of $49,000 ($100 per share). Bruce moved to alter, to amend, or to vacate the judgment, submitted a supporting brief, and moved for a stay of the judgment. The trial court denied the motion to stay, but amended the judgment by extending the 30-day period for Bruce to convey his stock to Medical Holdings. The trial court denied all other postjudgment relief. On appeal, Bruce states his issues as follows: 1. Did the trial court err in granting the motion for summary judgment of... Cole and Medical Holdings on their two counts of specific performance where the evidence presented to the trial court established that there existed genuine issues of material fact with respect to the meaning and application of the Restrictive Stock Transfer Agreement entered into between ... Cole and... Bruce? 2. Did the trial court err in granting the motion for summary judgment of... Cole and Medical Holdings on the counterclaim of ... Bruce ... where sufficient evidence was presented to the trial court to establish that ... Bruce was entitled to the relief sought, namely, enforcement of the parties' agreement that ... Bruce's stock was worth $250,000.00 or some other sum to be determined by the jury, a determination by the jury that the attempted termination of ... Bruce was ineffectual, and enforcement of the Put-Call agreement entered into between Bruce and Cole? 3. Did the trial court err in granting the motion for summary judgment on the counterclaim of ... Bruce for promissory fraud where the evidence presented to the trial court established that there existed genuine issues of material fact with respect to whether ... Cole intended to deceive ... Bruce when they entered into the Put-Call agreement? 4. Did the trial court err in denying the motion for partial summary judgment of ... Bruce on the claim of ... Cole seeking specific performance (Count I of the Plaintiff's Complaint) where the evidence presented to the trial court established that ... Cole lacked standing to compel transfer of ... Bruce's stock and where there is no legal or contractual obligation in ... Bruce to transfer his stock to ... Cole? This opinion will select the issues that are determinative and will address them in logical order.