Court Opinion

ID: 4169385
Source: CourtListenerOpinion
Date Created: 2017-05-17 20:12:28.745017+00
Date Added: 2024-06-11T14:24:30.289730
License: Public Domain

FIFTH DIVISION
                              MCFADDEN, P. J.,
                           BRANCH and BETHEL, JJ.

                   NOTICE: Motions for reconsideration must be
                   physically received in our clerk’s office within ten
                   days of the date of decision to be deemed timely filed.
                               http://www.gaappeals.us/rules

                                                                     April 27, 2017

In the Court of Appeals of Georgia
 A17A0617. GEORGIA DERMATOLOGIC SURGERY CENTERS,
     P.C., et al. v. DAVID B. PHARIS, et al.

      BETHEL, Judge.

      Georgia Dermatologic Surgery Centers, P.C. (“GDSC”) and Mark F. Baucom

(derivatively on behalf of, and as shareholder of, GDSC) appeal two summary

judgment orders, one of which found that all of Baucom’s counterclaims failed, and

the other of which found GDSC had to indemnify David B. Pharis for his reasonable

expenses incurred by Pharis’ successful defense in an earlier, separate lawsuit. GDSC

and Baucom challenge the basis for the summary judgment orders. We affirm the

court’s grant of summary judgment with respect to GDSC’s indemnification of Pharis,

but vacate the court’s order granting summary judgment to Pharis on Baucom’s
counterclaims and remand the case for further proceedings consistent with this

opinion.

      “We review a grant of summary judgment de novo, and we view the evidence

in a light most favorable to the nonmovant.” Georgia Dermatologic Surgery Centers,

P.C. v. Pharis, 323 Ga. App. 181, 182 (746 SE2d 678) (2013) (citation omitted). So

viewed, the evidence shows that Pharis and Baucom formerly practiced together as

dermatologic surgeons in their jointly-owned medical practice, GDSC. Baucom

removed Pharis from GDSC as an employee, officer, and director. Pharis brought suit

against GDSC over the termination, and opened his own clinic, David B. Pharis,

M.D., P.C. in early 2011. In 2012, the trial court ruled that Pharis had been illegally

terminated and ordered Pharis reinstated at GDSC as an employee and as vice-

president, secretary, and treasurer. This Court later affirmed that finding, holding that

Baucom did not have authority to terminate Pharis—such action had to come from

GDSC’s board of directors. See Georgia Dermatologic Surgery Centers, 323 Ga.

App. at 183-84 (1). The lawsuit returned to the lower court for a trial on damages.

      However, Pharis continued working for his own clinic, and Baucom conceded

during a 2014 deposition in another lawsuit between the two parties that Pharis was

                                           2
operating a lawful competing practice. Baucom also conceded that he did not then

consider Pharis to be an officer or director of GDSC at that time. Pharis demonstrated

through testimony and other documents that Baucom was listed as the only director

and officer of GDSC on its annual corporate minutes, GDSC’s annual corporate

registration statement, and tax returns for the years following the termination.

However, shortly before the trial on damages,1 Baucom delivered a letter to Pharis

indicating an intention to take legal action against Pharis for breach of fiduciary

duties to GDSC, among other things.

      On March 23, 2015, Pharis filed suit against Baucom and GDSC seeking: (1)

a declaratory judgment as to the propriety of Pharis continuing to practice in his own

clinic;2 (2) indemnification against GDSC under OCGA § 14-2-852 for Pharis’

successful defense in an earlier, separate lawsuit; and (3) attorneys’ fees and litigation

costs pursuant to OCGA § 13-6-11.3 GDSC and Baucom filed a counterclaim for

      1
       A jury awarded Pharis $1.3 million on his claim against GDSC for breach of
contract. Georgia Dermatologic Surgery Ctrs., P.C. v. Pharis, 339 Ga. App. 764 (792
SE2d 747) (Ga. App. Nov. 14 2016). This Court reversed a portion of the damages
awarded. See id. at 771-72.
      2
          This claim was later dropped.
      3
       The claim for attorney fees and costs under OCGA § 13-6-11 was also
dropped.

                                            3
breach of fiduciary duties, usurpation of corporate opportunities, civil conspiracy, and

attorney fees and costs.

       Pharis moved for summary judgment on all of GDSC and Baucom’s

counterclaims, which the trial court granted. In its order, the trial court found that

Baucom was estopped from asserting that Pharis is a director or officer of GDSC, and

that therefore Baucom and GDSC’s derivative counterclaims against Pharis for breach

of fiduciary duties and usurpation of corporate opportunities fail as a matter of law.4

The trial court further found that the failure of those two counterclaims also caused

other derivative counterclaims by Baucom and GDSC for civil conspiracy and

attorney fees to fail.

       Pharis additionally moved for summary judgment as to his claim that GDSC

was responsible for indemnifying him for his expenses in successfully defending

against an earlier, separate lawsuit as provided in OCGA § 14-2-852. The trial court

granted Pharis’ motion and found that GDSC was responsible under the statute for

       4
        At the hearing on the motion, the trial court understandably took issue with
Baucom’s actions in designating himself the only officer and director and conducting
his business without Pharis but then later bringing suit against Pharis for breach of
fiduciary duties.

                                           4
indemnifying Pharis for the reasonable expenses incurred by his successful defense

in the 2013 litigation. This appeal of both summary judgment orders followed.

      1. Baucom and GDSC argue that the trial court erred in granting summary

judgment in Pharis’ favor because the trial court relied on unspecified principles of

equity, and because there is a dispute of material fact with respect to each of the

elements of equitable estoppel, which also formed the basis for the trial court’s grant

of summary judgment on the counterclaims asserted against Pharis.

      The essential elements of equitable estoppel are: (1) a false representation or

concealment of facts; (2) within the knowledge of the party making the one or

concealing the other; (3) the person affected thereby must be ignorant of the truth; (4)

the person seeking to influence the conduct of the other must act intentionally for that

purpose; and (5) the person complaining shall have been induced to act by reason of

such conduct of the other. Kim v. Park, 277 Ga. App. 295, 296, 626 S.E.2d 232, 233

(2006). “There can be no estoppel by conduct where both parties have knowledge or

equal means of knowing the truth.” Collins v. Grafton, Inc., 263 Ga. 441, 443 (2)

(435 SE2d 37) (1993) (citation omitted).

      The trial court did not specify how it found each of these elements were met,

and supporting evidence does not obviously appear from the record. Indeed, rather

                                           5
than defend the equitable theory on which the trial court based its order, Pharis

instead argues that the order should be affirmed as “right for any reason” because of

the dearth of evidence showing that he was reinstated as an officer or director of

GDSC. “Under the ‘right for any reason’ rule, an appellate court will affirm a

judgment if it is correct for any reason, even if that reason is different than the reason

upon which the trial court relied.” City of Gainesville v. Dodd, 275 Ga. 834, 835 (573

SE2d 369) (2002). This Court applies that principle only where “the judgment may

be sustained upon a legal basis apparent from the record and which was fairly

presented in the court below.” Bullington v. Blakely Crop Hail, Inc., 294 Ga. App.

147, 152 (3) (668 SE2d 732) (2008) (citation omitted) (emphasis supplied).

      But under these circumstances, “we have discretion either to perform an

independent de novo review of the record that was properly before the trial court in

order to determine whether summary judgment was appropriate for another reason or

to return the case to the trial court for further proceedings.” McRae v. Hogan, 317 Ga.

App. 813, 818 (4) (732 SE2d 853) (2012) (citing City of Gainesville v. Dodd, 275 Ga.

834, 838-39 (573 SE2d 369) (2002)). Here, despite the persuasive and strong

arguments from Pharis, we do not believe the record is sufficiently developed on

these points for us to act on his “right for any reason” theory. A review of the facts

                                            6
and legal issues leads us to conclude that a remand with respect to GDSC and

Baucom’s counterclaims is appropriate.

      2. Baucom and GDSC argue that the trial court should not have found that

GDSC has to indemnify Pharis for the litigation expenses he incurred in connection

with his successful defense of claims asserted against him in the 2013 lawsuit.5

Rather, Baucom and GDSC argue that at a minimum, a fact question exists as to

whether Pharis was sued as a director because Pharis was also sued as an officer in

the 2013 litigation, and therefore would have owed the same fiduciary duties he was

sued for breaching.

      OCGA § 14-2-852 provides for mandatory indemnification of reasonable

expenses incurred by a director in connection with a proceeding where the director

“who was wholly successful, on the merits or otherwise, in the defense of any

proceeding to which he or she was a party because he or she was a director of a

corporation[.]” By its express terms, the statute leaves no room for discretion.

Crocker v. Stephens, 210 Ga. App. 231, 239 (9) (435 SE2d 690) (1993), disapproved

of on other grounds by Kim v. Lim, 254 Ga. App. 627 (563 SE2d 485) (2002).

      5
      In the 2013 lawsuit, Pharis was sued for breaching his fiduciary duty to
GDSC prior to his termination.

                                         7
      The first amended complaint in the 2013 litigation reflects that Pharis was sued

by Baucom for breach of fiduciary duty in his capacity of shareholder, officer,

director, and partner. Summary judgment was granted in Pharis’ favor on all of

Baucom’s claims asserted in the 2013 lawsuit. In that order, the trial court stated that

Baucom did not have standing to assert a breach of fiduciary duty claim directly

against Pharis because the two were co-directors and co-shareholders, not partners.

      The claim against Pharis in his capacity as a director is not negated by the fact

that Baucom also asserted a claim against Pharis in his other capacities, as well. See

Crocker, 210 Ga. App. at 239 (9) (disregarding plaintiffs’ argument that party was not

entitled to indemnification because action was unrelated to his position as a director

where plaintiffs specifically alleged party breached his fiduciary duty as a director).

The trial court did not err in finding indemnification proper here.

      Judgment affirmed in part and vacated in part. Case remanded. McFadden, P.

J., and Branch, J., concur.

                                           8