Court Opinion

ID: 2816652
Source: CourtListenerOpinion
Date Created: 2015-07-13 19:13:27.716359+00
Date Added: 2024-06-11T12:20:38.351750
License: Public Domain

FOURTH DIVISION
                                BARNES, P. J.,
                            RAY and MCMILLIAN, 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/

                                                                       July 9, 2015

In the Court of Appeals of Georgia
 A15A0767. KREIGER v. BONDS.

      MCMILLIAN, Judge.

      This appeal arises out of a “Buy-Sell Agreement for Southeast Cooler Corp.”

(the “Agreement”) executed between Steven Kreiger and Craig Bonds governing their

respective shares of stock in Southeast Cooler Corp (“SCC”). Steven Krieger1 appeals

the trial court’s grant of summary judgment to Bonds, and the denial of his own

motion for summary judgment, on Bonds’ claim for specific performance of the

Agreement. Steven Krieger also appeals the denial of his motion for summary

judgment on his counterclaim for specific performance.

      1
        For clarity, we will refer to Steven Krieger and his sister, Suzanne Krieger,
individually, by their full names.
      “We review a grant or denial of summary judgment de novo and construe the

evidence in the light most favorable to the nonmovant. Because this opinion

addresses cross-motions for summary judgment, we will construe the facts in favor

of the nonmoving party as appropriate.” (Citation omitted.) Maree v. ROMAR Joint

Venture, 329 Ga. App. 282, 283 (763 SE2d 899) (2014).

      SCC is a closely held corporation that manufactures walk-in coolers and

freezers, ice merchandisers, and some bakery-related products. Steven Krieger was

one of the two original owners of SCC, and at the time pertinent to this lawsuit,

Steven Krieger served as president and chief executive officer of SCC. Bonds was

hired in 2002 as controller and remained in that position until 2008 when he became

chief financial officer (“CFO”).2 SCC corporate documents indicate that as of January

2009, Steven Krieger held 27,500 shares of SCC and Bonds held 5,500 shares.

      On January 26, 2010, SCC adopted new bylaws (the “Bylaws”) which placed

certain restrictions on corporate borrowing and the use of the corporation’s credit.

Pertinent to this appeal, the Bylaws provided that no loan could be entered into by

SCC unless authorized by a resolution of the Board of Directors, and the Board was

      2
     At that point, Bonds became SCC’s point of contact with the company’s bank,
Community & Southern Bank.

                                         2
only authorized to lend money “in furtherance of any of the purposes of the

Corporation” and to assist any employee or director, if approved by the holders of a

majority of the voting shares.

                                  Buy-Sell Agreement

       Steven Krieger and Bonds entered into the Agreement on June 11, 2010 to

address the future disposition of the company’s stock. Section Four of the Agreement,

entitled “Mandatory Put and Call Buy-Sell,” provides that at any time, one

shareholder may offer both to sell all of his shares3 in the corporation or to buy all of

another shareholder’s shares. The Agreement requires that the offer be in writing and

that it contain certain representations, including “[a] statement that the purchase price

of the [shares] subject to the offer shall be payable in cash at closing.”

       The Agreement further provides that such offers remain open for 60 days, and

an offeree can accept either the offer to sell or the offer to buy, but not both. But if

the offeree fails to accept the offer within 60 days, the offeror has the right, within the

       3
        The Agreement actually uses the term “Rights,” which is defined to include
the person’s interest in SCC; share of the profits and losses of and the right to receive
distributions from SCC; the right to inspect SCC’s books and records; the right to
participate in management; to vote on corporate matters; and the right to act as a
corporate agent. We substitute the term “shares” for consistency in discussing the
Agreement and the buy-sell transaction.

                                            3
next 15 days, to either buy all of the offeree’s shares or to sell all his shares to the

offeree. If the offeror exercises this right, the offeree is required to sell or to buy at

the offeror’s request. And the closing on such a transaction must take place “on or

before the 10th day after such right to purchase or sell has been exercised.”

      The Agreement also prescribes that

      [a]cceptance by the offeree of an offer to buy or to sell and the exercise
      by an offeror of the right to buy or sell shall consist of a tender of all
      documents, duly executed, necessary to convey the [shares] being sold,
      with full warranties of title thereto and appropriate arrangements made
      for the payment of the purchase price of the [shares], as the case may be.

      Moreover, under Section Two of the Agreement, neither Steven Krieger nor

Bonds were permitted to transfer, assign, or pledge their shares without the prior

written consent of the Corporation and the other shareholders, except that a

shareholder would be allowed to pledge his shares “as security for a loan with any

lending institution regularly engaged in the business of making loans” so long as the

other terms of the Agreement were met.

                                            4
                         Steven Krieger’s Representatives

      In 2010, after Steven Krieger began to experience a decline in his health and

was diagnosed with probable Alzheimer’s, he signed a power of attorney in favor of

his sister, Suzanne Krieger. Steven Krieger also hired attorney Albert Caproni in 2010

to assist him with his estate planning. And in September 2012, Steven Krieger

executed an “Irrevocable Proxy” in favor of Suzanne Krieger as to his SCC shares.

                           Exercise of Put/Call Provision

      On December 6, 2012, Krieger4 sent Bonds a letter invoking the provisions of

Section Four of the Agreement and offering either to purchase Bonds’ 5,500 shares

of SCC or to sell Bonds his 27,500 shares at a price of $63.64 per share. The letter

contained the statements required by the Agreement, including stating that the total

purchase price of $350,020 for Bonds’ shares, if Krieger purchased them, or the total

sale price of $1,750,100 for Krieger’s shares, if Bonds purchased them, “shall be

payable in cash at the Closing.” Bonds replied by letter dated January 28, 2013 that

he was accepting Krieger’s offer to sell the 27,500 shares for $1,750,100 and

scheduling the closing for February 1, 2013.

      4
        For ease of reference, we will refer to Steven Krieger and his representatives
collectively as “Krieger,” unless it is necessary to refer to a particular individual.

                                          5
                                  Bank Financing

      In an effort to fund his purchase of Steven Krieger’s shares, and without

consulting Krieger, Bonds obtained a loan commitment letter from SCC’s bank,

Community & Southern Bank (the “Bank”), to SCC for an additional $737,880 for

the stated purpose of purchasing Steven Krieger’s shares and converting them to

treasury stock. The Bank required the use of the company’s assets to obtain the loan,

and the loan commitment letter required that Bonds have 100% ownership of SCC

and “full and single authority to obligate [SCC] for [the] debt and pledge [the]

company[‘s] assets.” Bonds signed the loan commitment letter as CFO of SCC on

January 23, 2013, eight days before the scheduled closing.

      Bonds also attempted to avail himself of SCC’s $2,000,000 line of credit with

the Bank (the “LOC”) for financing the purchase. Steven Krieger was the guarantor

on the LOC, but Bonds stated that as part of the transaction, he intended to release

Steven Krieger and substitute himself as guarantor. And on January 30, 2013, in

anticipation of the closing, $1,750,100 was transferred from the LOC to the trust

account of Victor Harrison, SCC’s corporate counsel.

      However, upon discovering this arrangement, Krieger objected to Bonds’

unilateral attempt to take out a corporate loan and to use the LOC or other company

                                         6
assets in funding the stock purchase without Steven Krieger’s approval as majority

shareholder as required under the Bylaws. On January 31, 2013, Steven Krieger

signed a letter to the Bank directing that the LOC be closed. And on February 1,

2013, at Krieger’s direction, Harrison returned the $1,750,100 to the Bank from his

trust account.

                                  CLV Financing

      According to Harrison, Bonds then received approval for a loan from CLV

Asset Recovery, LLC (“CLV”) in the amount of $1,750,100 (the “CLV Loan”).5

CLV, a company organized and represented by Harrison, is primarily in the business

of buying and selling notes. According to Harrison, the loan to Bonds was the only

loan the company had ever agreed to make. Harrison said CLV consisted of three

investors, including himself.

      During discovery, Harrison identified four deposits into his firm’s trust account

that were intended to cover the CLV Loan, in the amounts of $73,465.95;

$117,407.20; $200,000; and $1,400,080, respectively. Harrison said he exercised his

      5
       However, Caproni stated that Harrison told him that the financing was coming
from Midwest Note Recovery, LLC (“Midwest”), another company represented by
Harrison, which is in the same business as CLV but was organized by Robert H.
Harrison.

                                          7
authority with CLV to move the $1,400,080 from a CLV account into his trust

account, and he was responsible for one of the other three deposits. The four deposits

totaled $1,790,953.15, which amounted to $40,853.15 more than the loan amount.

But in his deposition, Harrison stated that one of the deposits should not have been

included in his calculations, although he could not remember which deposit. But if

even the smallest of the four deposits, $73,465.95, were removed from the

calculation, the total amount falls to $1,717,487.20, which is $32,612.80 below the

purchase price for Steven Krieger’s stock. Nevertheless, Harrison testified that he was

prepared to fund the sale if the appropriate documents were signed at the closing. He

stated that his trust account had sufficient funds to cover the check, and the

documents and calculations he provided in discovery reflect that the account did

contain funds in excess of the purchase price, although that balance necessarily would

have included funds from sources other than the deposits identified as coming from

CLV.

       Bonds stated that he had no idea what CLV was and did not know why they

decided to lend him the money. He never made a loan application to CLV or provided

the company with any financial information. Nevertheless, Bonds signed a “Secured

Promissory Note” (the “CLV Note”) and “Security Agreement” (“CLV Agreement”)

                                          8
with CLV on February 1, 2013, the day of the scheduled closing. These documents

indicate that the loan was to be repaid in three days, by February 4, 2013. Under the

CLV Agreement, Bonds granted CLV a security interest in and security title to his

SCC shares, which attached as of February 1, 2013.

                              First Scheduled Closing

      The first scheduled closing was attended by Harrison; Bonds; Scott Mercer, an

attorney Bonds hired to represent him at the closing; Caproni; Suzanne Krieger,

representing Steven Krieger with power of attorney; George Koenig, another attorney

representing Steven Krieger; Susan Whittle, a vice president and commercial lender

for the Bank; Adam Slipakoff, counsel for the Bank; and Scott Newland, another

attorney for the Bank. Steven Krieger did not attend.

      Although the parties communicated prior to the closing on a stock transfer

agreement and other matters, issues arose at the closing regarding payment, the

cancellation of the LOC, and Steven Krieger’s stock certificate.

                                         9
      (a) Payment

      Two days before closing, on January 30, 2015, Harrison e-mailed Caproni,

identifying himself as “representing the lender of funds6 to Craig Bonds for the

purchase of stock from your client,” and stating his preference for wiring the funds

instead of writing a check for $1,750,100. He then invited Caproni to state his

“method of preferred payment.” Caproni notified Bonds that Krieger wanted a

cashier’s check at closing. Caproni believed that Krieger was entitled to “immediately

available funds” based on the language in the Agreement requiring that payment be

made in “cash.”

      Harrison testified that he showed up at the closing on February 1, 2013, with

an unsigned check drawn on his trust account for $1,750,100.7 Harrison was there to

sign the check but would not do so until all the documents were signed. Bonds stated

      6
       According to Suzanne Krieger, prior to the closing, Bonds indicated that
Harrison would be representing him at the closing, but she reminded Bonds that
Harrison was counsel for SCC. Krieger later terminated Harrison’s representation of
SCC by letter dated February 11, 2013.
      7
        Harrison said that the request for a cashier’s check was never relayed to him,
but he would not have come to closing with a cashier’s check because he would not
have released the funds prior to seeing signed documents. However, Harrison asserts
that he would have been happy to wire the funds or to walk to his bank to convert his
signed check into a cashier’s check after the documents were signed.

                                         10
that Harrison showed the check to Caproni and Koenig at the beginning of the closing

and asked if they wanted to verify that the funds were good. But Harrison stated only

that he “raised . . . up” his unsigned check from across the room to show Krieger.

Mercer asserts that they told Krieger that they had the check and that Harrison was

prevented from handing the unsigned check to Krieger because Caproni interrupted

the transfer by raising issues regarding the LOC. Caproni and Suzanne Krieger deny

that they were ever shown a check or that any tender occurred.

      (b) Line of Credit

      On February 1, 2013, Caproni notified Mercer and Harrison he was requiring

written confirmation showing the LOC had been repaid in full and the account closed

as conditions for the closing. Bonds’ counsel e-mailed Caproni prior to closing that

Harrison was wiring the funds back to the LOC and that he would obtain

confirmation from the Bank when it had received the money, and he invited Krieger

to independently confirm that fact. The Bank through its representatives verbally

confirmed at the closing that the LOC had a zero balance. However, neither Mercer

nor the Bank provided confirmation, written or otherwise, either before or during the

closing, that the LOC had been closed. In fact, Slipakoff disputed Krieger’s authority

to close the LOC, and Harrison asserted that SCC was not going to close the LOC.

                                         11
      (c) Steven Krieger’s Stock Certificate

      Mercer and Newland state that they asked Caproni for Steven Krieger’s stock

certificate, but Caproni responded that he did not have it and offered no explanation

for its absence. Steven Krieger’s representatives conceded that they did not have his

stock certificate with them at the closing because it could not be located, but they

believed that a replacement stock certificate could be issued.

                      Termination of First Scheduled Closing

      The February 1, 2013 closing was never consummated, and the parties agree

that Krieger was the first to leave the closing. However, they disagree as to the legal

effect of the circumstances that led to Kreiger’s departure. Bonds asserts that he made

a tender on February 1, 2013 and thus performed under the Agreement and that in

contrast Kreiger failed to perform when it came to the closing without Steven

Kreiger’s stock certificate and insisted on adding new conditions to the transactions.

On Monday, February 4, 2013, Mercer sent Caproni and Koenig a letter formally

declaring Steven Kreiger to be in default of the Agreement.

      On the other hand, Caproni stated that the February 1, 2013 closing did not

occur because Bonds never tendered payment and thus did not perform under the

Agreement. Kreiger contends that they left the closing only after the situation reached

                                          12
a deadlock and it became apparent to everyone that the parties’ differences could not

be worked out.

                             Second Scheduled Closing

      Kreiger further asserts that Bonds’ default allowed Steven Kreiger to exercise

his contingent right under the Agreement to buy Bonds’ SCC shares. In fact, on

February 1, 2013, prior to the first scheduled closing, Caproni notified Bonds’

counsel by e-mail, that “[i]f your client fails to perform at 2:00 PM today, be advised

that Mr. Kreiger is ready, willing and able to acquire Mr. Bonds’ stock at 2:00 PM on

Monday, February 4, 2013, with closing to occur in my office.” According to

Caproni, that closing occurred in his office at the stated time. Neither Bonds nor any

representative on his behalf attended that closing. Only Steven Kreiger, Suzanne

Kreiger, and Caproni were present. And exercising the power of attorney granted

under the Agreement,8 Steven Kreiger signed the documents on behalf of Bonds

transferring Bonds’ shares to Steven Kreiger. Those documents, along with cashier’s

checks totaling $350,020, were sent by Federal Express to Mercer, as attorney for

      8
        The Agreement provided that each shareholder expressly appointed “the other
as the appointing party’s agent and attorney in fact for the purpose of executing and
delivering any and all documents necessary to convey the appointing party’s [shares]
pursuant to [Section 4.]”

                                          13
Bonds for next day delivery. Caproni noted that February 4, 2013 was the 60th day

after the December 6, 2012 offer, and he asserted that it marked the day the original

offer expired. However, Bonds rejected and returned Kreiger’s tender of the certified

checks and documents purporting to transfer Bonds’ shares to Steven Kreiger.

                                       Lawsuit

      Subsequently, on February 11, 2013, Bonds filed a “Complaint for

Appointment of Receiver, Declaratory Judgment, and Injunctive Relief” against

Steven Kreiger and SCC seeking, inter alia, specific performance of the Agreement.

Steven Kreiger filed an answer and counterclaim, asserting claims for breach of

contract/specific performance; breach of fiduciary duty and violation of standard of

care; an accounting; injunctive relief and the appointment of a receiver; interest; and

attorney fees.

      The parties filed cross-motions for summary judgment, and the trial court found

in favor of Bonds, granting his motion for summary judgment on his claim of specific

performance and denying Steven Kreiger’s motion. The trial court found as a matter

of law that Steven Kreiger breached the Agreement and waived tender by imposing

additional conditions for the closing and “generally indicating that he was unwilling

to close.” The trial court also found that the doctrine of unclean hands did not bar

                                          14
Bonds’ specific performance claim because the money from the LOC was returned

prior to the closing, and “there is no set of facts under which the LOC could have

been used to purchase [Steven Kreiger’s] shares and [Steven Kreiger] would have

remained personally liable on the LOC.” The trial court also held that Steven

Kreiger’s counterclaims for breach of contract and breach of fiduciary duty failed

because Steven Kreiger failed to show how he was damaged by Bonds’ actions.

      1. Steven Kreiger asserts that the trial court erred in ordering specific

performance of sale of his shares to Bonds. He also asserts that the trial court erred

in denying his motion for summary judgment on his own claim for specific

performance of his purchase of Bonds’ shares.

      “A party seeking specific performance of a contract must show substantial

compliance with his part of the agreement in order to be entitled to a decree.”

(Citation and punctuation omitted.) Simprop Acquisition Co. v. The L. Simpson

Charitable Remainder Unitrust, 305 Ga. App. 564, 566 (1) (b) (699 SE2d 860)

(2010). See also Clark’s Super Gas, Inc. v. Tri-State Systems, Inc., 129 Ga. App. 650,

651 (200 SE2d 472) (1973) (burden is on plaintiff to show compliance with the

conditions of the contract). And the breach of a material condition of the contract

                                         15
generally will bar specific performance. Saine v. Clark, 235 Ga. 279, 280 (219 SE2d

407) (1975).

      Moreover, Georgia law generally requires that “in order to be entitled to a

decree of specific performance, a purchaser must make an unconditional tender of the

purchase money due.” Fox Run Properties, LLC v. Murray, 288 Ga. App. 568, 573

(2) (b) (654 SE2d 676) (2007). This requirement places the burden on the purchaser

to prove that “he was able to produce the cash necessary to close the transaction in

accordance with the terms of the contract.” Haislip v. Garber, 155 Ga. App. 94, 94

(270 SE2d 237) (1980) (finding no tender occurred where buyer admitted that he had

no ability to tender the purchase price and that his only means of closing was to gain

control of the stock before payment). “[T]here must be an actual, present bona fide

offer to pay; and such requirement is not met by merely evidencing a willingness to

pay, or by an offer or intention to make a tender.” (Emphasis omitted.) Jolly v. Jones,

201 Ga. 532, 532 (2) (40 SE2d 558) (1946). “A tender properly made is equivalent

to performance, and coin need not be actually presented unless demanded. . . . [W]hile

strictly speaking a check is not legal tender, if the creditor accepts same and makes

no objection to the specie of payment, this constitutes a waiver of the form of tender.”

Brock v. Baker, 128 Ga. App. 397, 398 (1) (196 SE2d 875) (1973). See also Weldon

                                          16
v. Trust Co. Bank of Columbus, 231 Ga. App. 458, 460 (1) (499 SE2d 393) (1998)

(discussing difference between personal checks and cashier’s checks). However,

“tender is excused or waived where the seller, by conduct or declaration, proclaims

that if a tender should be made, acceptance would be refused. The law does not

require a futile tender or other useless act.” (Citations omitted and punctuation

omitted.) Fox Run Properties, 288 Ga. App. at 573 (2) (b). See also Leggett v. Todd,

110 Ga. App. 41, 45-46 (5) (137 SE2d 742) (1964) (formal tender not required where

party to whom tender is made responds with an unqualified refusal to perform).

      Additionally, Georgia law prevents a party who is guilty of unclean hands from

obtaining the equitable relief of specific performance. Under OCGA § 23-1-10, “[h]e

who would have equity must do equity and must give effect to all equitable rights of

the other party respecting the subject matter of the action.” The unclean hands

doctrine “has reference to an inequity which infects the cause of action so that to

entertain it would be violative of conscience. It must relate directly to the transaction

concerning which complaint is made. The rule refers to equitable rights respecting the

subject-matter of the action. It does not embrace outside matters.” (Citations omitted.)

Hampton Island, LLC v. HAOP, LLC, 306 Ga. App. 542, 546 (3) (702 SE2d 770)

(2010).

                                           17
      Bonds opted to purchase Steven Kreiger’s 27,500 shares after Kreiger triggered

the put/call provision of the Agreement. Thus, to perform under the Agreement,

Bonds was required to tender “duly executed” documents for conveying the shares

and make “appropriate arrangements” for the payment of the purchase price.

Additionally, the offer was for payment in cash and required that Bonds indemnify

Steven Kreiger against any loss, claim, or damage arising out of any guaranty of any

debt of SCC borrowed money.

      The testimony is undisputed that none of the documents presented at closing

were signed, including the release of Kreiger from his guaranty of the LOC and the

check for the purchase price. And the evidence is in conflict as to whether or how the

check was presented to Kreiger. Moreover, in order to raise the funds for the purchase

price, Bonds granted CLV a security interest in and security title to his SCC shares

as collateral for the CLV Loan, and that interest and title had attached the day of the

first closing. It is undisputed that CLV is not a “lending institution regularly engaged

in the business of making loans” as required under the Agreement, because this was

the only loan the CLV had ever made. Additionally, evidence exists to suggest that

Bonds planned to meet his obligations under the CLV Loan with corporate funds and

credit and not his own funds. In fact, two days before the closing, Bonds caused

                                          18
corporate funds to be transferred to Harrison’s trust account to fund the purchase,

although these funds were later returned. Nevertheless, Harrison stated that he was

willing to fund the purchase price at the time of the closing and raised an unsigned

check in the air. The record also shows that Steven Kreiger’s representatives did not

have his stock certificate at the closing and imposed additional conditions not

contemplated by the Agreement shortly before the closing. Kreiger also was the first

to leave the closing.

      Therefore, we find that numerous fact issues remain in this case, including

whether Bonds made the requisite tender of the necessary documents and payment;

whether the form of payment purportedly tendered conformed with the Agreement’s

and the offer’s requirement of “cash”; whether Bonds made “appropriate

arrangements” for the payment of the purchase price; whether Bonds’ execution of

the CLV Loan documents constituted a breach of the Agreement and, if so, whether

the breach was material; whether Kreiger had the right to impose additional

conditions in response to Bonds’ prior attempt to use corporate credit to fund the

purchase; whether Kreiger’s actions signaled an intent not to proceed with the

transaction, thus breaching the Agreement and/or waiving tender; and whether

Bonds’ actions in attempting to fund the purchase with corporate funds violated the

                                         19
Bylaws and the Agreement, thus constituting unclean hands barring his specific

performance claim. Accordingly, we find that the trial court erred in granting Bonds

summary judgment on that claim.

      2. For the same reasons, we find that the trial court properly denied Steven

Kreiger’s motion for summary judgment on Bonds’ claim and on his own claim for

specific performance. In addition to the issues previously noted, we find that issues

of fact exist as to whether Steven Kreiger’s conditional right to buy Bonds’ shares

was triggered by the failure of the first scheduled closing or whether Bonds had

additional time to perform under the Agreement (i.e., up until ten days after his

written exercise of the offer to buy Steven Kreiger’s shares or until February 7, 2013);

or whether Bonds waived any such additional time by failing to schedule another

closing within the requisite period.9

      Judgment affirmed in part and reversed in part. Barnes, P. J., concurs. Ray,

J., concurs in judgment only.

      9
        To the extent that Steven Kreiger also enumerated error in the trial court’s
denial of his motion for summary judgment on Bonds’ claim that he improperly used
his power of attorney to purchase Bonds’ stock, we deem such error abandoned
because he failed to present any argument or authority on this issue. See EZ Green
Assoc., LLC v. Georgia-Pacific Corp., 331 Ga. App. 183, 190 (3), n. 26 (770 SE2d
273) (2015); Court of Appeals Rule 25 (2).

                                          20