Smith v. Stuckey., 233 Ga. App. 103, 503 S.E.2d 284 (1998)
Linked as:
Text
Phears & Moldovan, Victor L. Moldovan, Richard E. Harris, for appellant.
Appellees W. S. Stuckey, Jr., Lynda Stuckey Franklin (the "Stuckeys") and Citizens Corporation ("Citizens") sued appellant Hal M. Smith, Jr., for specific performance of a stock option agreement, or in the alternative for a declaratory judgment. A jury granted the Stuckeys and Citizens specific performance under the agreement and awarded them attorney fees in the amount of $14,687.75. Smith appeals from the denial of his motions for directed verdict on the ground that the stock option agreement was void under the rule against perpetuities. He also appeals the trial court's denial of his motion for directed verdict on the issue of attorney fees.
In 1984, Stuckey Timberlands, Inc. began soliciting options to purchase shares of Citizens Bank & Trust Company (the "Bank") at a price of $1,700 per share. Smith gave Stuckey Timberlands an option to purchase 92 of his 292 Bank shares. After Stuckey Timberlands acquired enough options to purchase 90 percent of the 2,000 out standing shares of the Bank, it assigned the options to Citizens. The Stuckey family are the shareholders of Citizens, a holding company formed for the purpose of acquiring the Bank.
Before Citizens' acquisition of the Bank could be completed, the holders of 38 shares of the Bank's stock who had previously indicated that they would be willing to sell their shares elected to retain them. Smith agreed to sell an additional 38 of his shares so Citizens could acquire a total of 1,800, or 90 percent, of the outstanding shares. This left Smith with a total of 162 shares.
In connection with these transactions the Stuckeys and Smith negotiated an agreement regarding the disposition of Smith's remaining Bank shares. Smith was concerned that the price he received upon the sale of his shares might be discounted due to his minority status. The Stuckeys for their part eventually hoped to acquire control through Citizens of all the Bank stock.
Under the parties' agreement, Smith was granted the option after January 29, 1988, to compel the Stuckeys to purchase, through Citizens, Smith's remaining Bank stock. The agreement also gave Citizens the option to purchase Smith's stock at any time after January 29, 1995. The agreement contained no time limitation for exercising the options, but did specify a formula for determining the purchase price on the exercise of either option.
Smith never exercised his option under the agreement, but Citizens notified Smith by letter dated February 7, 1995, that it intended to exercise its option to purchase Smith's shares. The parties disagreed, however, over the price to be paid for the stock. After the parties were unable to resolve their differences, Citizens attempted a tender under the agreement. Smith refused the tender, contending that it did not reflect the proper purchase price under the option agreement.
The Stuckeys and Citizens sued Smith for specific performance under the option agreement, or in the alternative, asked the court for a declaratory judgment of the parties' rights. After discovery, each side moved for summary judgment, but the trial court denied both motions. In denying Smith's motion, the trial court rejected his argument that the rule against perpetuities (the "Rule") barred enforcement of the option agreement.
1. The first issue to be addressed is whether the Rule [1] applies to the parties' stock option agreement. The law in Georgia is unclear as to whether the Rule is applicable to property other than interests in real estate. In one 80-year-old case, the Supreme Court of Georgia found a trust deed conveying stock to be invalid under the Rule. Shewmake v. Robinson,
While the Supreme Court's later decisions raise strong doubt as to whether the Rule should be extended to personal property, we are bound under Shewmake to assume that the Rule would apply to the parties' stock option agreement. See also Bagwell v. Henson,
2. Even assuming the Rule applies, however, we hold that "there was no attempt here to affirmatively create a perpetual right to exercise the option . . .; but there was only the absence of a time limitation . . . [and in such circumstances Georgia courts have] held that the optionee had a reasonable time in which to exercise the option." Brown v. McInvale,
Nor does the record contain any evidence of bad faith to support the award of attorney fees. " '[I]t is well settled that the "bad faith" contemplated by (OCGA
reasonable time allowed by the parties' agreement. See Shiver v. Benton, 251 Ga. at 288 (holding that party's attempt to enforce their rights under agreement signed 11 years earlier was within reasonable time).
dence from which a jury could find that the contract was made in bad faith or that [Smith] breached it as a result of some sinister motive, the award of attorney's fees cannot be sustained on the basis of bad faith. . . ." Pulte Home Corp. v. Woodland Nursery &c., 230 Ga. App. at 458. Accordingly, the trial court erred in denying Smith's motions for directed verdict on the issue of attorney fees.
Martin, Snow, Grant & Napier, John T. McGoldrick, Jr., William K. McGowan, for appellee.
1998
Notes:
1. Although Georgia adopted the Uniform Statutory Rule Against Perpetuities in 1990, OCGA
The earlier statute, which was repealed when the uniform rule was adopted, provided, "Limitations of estates may extend through any number of lives in being at the time when the limitations commence, and 21 years, and the usual period of gestation added thereafter. The law terms a limitation beyond that period a perpetuity and forbids its creation. When an attempt is made to create a perpetuity, the law will give effect to the limitations which are not too remote and will declare the other limitations void, thereby vesting the fee in the last taker under the legal limitations." OCGA
2. In this instance, Citizens notified Smith by letter dated nine days after the option first became exercisable under the parties' agreement and ten years after the parties signed the agreement. It appears, therefore, that Citizens' attempt to exercise its option was within the
3. Smith also correctly argues that a bona fide controversy exists as to whether the stock option agreement was void under the rule against perpetuities. As that issue was decided by the court prior to trial, the jury was unaware of this controversy when it made its findings.
Sponsored links
This document cites
- Supreme Court of Georgia - YOUNG v. CASS., 255 Ga. 508, 340 S.E.2.d 185 (1986)
- Supreme Court of Georgia - READ v. GHDC, INC. et al., 254 Ga. 706, 334 S.E.2.d 165 (1985)
- Supreme Court of Georgia - SHIVER et al. v. BENTON et al., 251 Ga. 284, 304 S.E.2.d 903
- Supreme Court of Georgia - ST. REGIS PAPER COMPANY v. BROWN et al., 247 Ga. 361, 276 S.E.2.d 24 (1981)
- Supreme Court of Georgia - THOMAS v. MURROW et al., 245 Ga. 38, 262 S.E.2.d 802
See other documents that cite the same legislation
