Lifepine Roofing Partners v. Besser

594 S.E.2d 387, 265 Ga. App. 464
CourtCourt of Appeals of Georgia
DecidedJanuary 26, 2004
DocketA04A0417
StatusPublished
Cited by2 cases

This text of 594 S.E.2d 387 (Lifepine Roofing Partners v. Besser) is published on Counsel Stack Legal Research, covering Court of Appeals of Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lifepine Roofing Partners v. Besser, 594 S.E.2d 387, 265 Ga. App. 464 (Ga. Ct. App. 2004).

Opinion

Eldridge, Judge.

This is an appeal by the defendants from the grant of summary judgment to the plaintiff. Finding no error, we affirm.

On February 6, 1995, Richard D. Besser and LifePine Roofing Partners formed Timber Products Holding Company, LLC and its subsidiary, Tamark Manufacturing Company, LLC. LifePine was owned by Kenneth P. Rule and William B. Shearer, Jr.1 An operating agreement was entered into under which Besser was employed as the companies’ manager. On December 17, 1997, Besser was terminated as manager, because for three years of its existence, Tamark had massive financial losses. Under Article 10.2.2 of the agreement, LifePine notified Besser that Timber Products had assigned its “call” rights to LifePine and that LifePine was exercising such rights to acquire all of Besser’s member interest so that it would be the sole owner of Timber Products at a bargain price based upon the alleged fair market value.

[465]*465Under the operating agreement Article 1.18, Besser paid in $80,000 for a 35 percent interest and made a $200,000 loan that could be converted to a convertible preferred member interest up to the dollar amount of the loan by written election or death. Under Articles 1.17, 1.18, 1.20, and 5.1.2 (a), LifePine’s only contribution to capital had been a patent, Patent No. 4,971,125, and trade name, Trademark No. 1718,150, with an agreed fair market value of $371,428 and LifePine became a 65 percent member interest as a convertible preferred member interest in such amount. Thus, on December 17, 1997, the company had some value for such patent and trademark as assets three years after acquisition. However, the opinion rendered on August 20, 1998, by the company accountant, J. Harry Haslam, acting under Article 1.11 as designated appraiser for LifePine, stated that the company had a zero fair market value. “Since the Call rights under the operating agreement are still viable, an adequate remedy at law exists. The availability of money damages affords Besser an adequate and complete remedy, precluding the entry of injunctive relief.” (Citations omitted.) Besser v. Rule, 270 Ga. 473, 475 (510 SE2d 530) (1999). Thus, the Supreme Court held that the call had not been fully exercised at the notice, notwithstanding the position before this Court that Besser lost all rights of ownership upon the notice of the call.

The reasonable inference arises from all of the undisputed facts of this case that the reason LifePine has engaged in the time and expense to litigate this case over six years in two separate lawsuits over an allegedly insolvent company is that the patent and trademark owned by Timber Products have some value to LifePine or to whoever controls such company. LifePine was the original owner of such intangible property before making a contribution to capital of Timber Products and appears to want to again control such property through the exclusive ownership of Timber Products.

After notice of the call and the appointment of an appraiser by LifePine, under Article 1.11, Besser also had the right to name an appraiser. If Besser’s appraiser and Haslam could not agree on a fair market value, then they had to agree to name a third appraiser. A third appraiser was never named, because Besser would not name an appraiser. Thus, LifePine sought to squeeze Besser out by exercising the call rights at a cost of zero for the fair market value of Besser’s member interest and acquire sole control over the patent and trademark with no expenditure.

On December 19, 1997, Besser sued Kenneth P. Rule, William B. Shearer, Jr., Tamark Manufacturing Company, LLC, and Timber Products Holding Company, LLC, seeking legal and equitable relief to stop the call, and the defendants counterclaimed. The trial court [466]*466denied his request for injunction, and the Supreme Court affirmed. Besser v. Rule, supra at 473. This case remains pending for damages; the defendants represented to the Supreme Court that there was an adequate remedy at law and that there had been no exercise of the “call,” because the value of the membership interest could not be determined. The Supreme Court opinion stated: “LifePine has not yet closed its exercise of the ‘call’ rights as provided for by the Timber Products Agreement because of the ongoing dispute between the parties as to the formula value of the buyout.” Id. at 474, n. 2. As admitted by the defendants in their brief, such dispute remains unresolved even today.

On February 13, 2000, Besser died, and on May 10, 2002, his executrix brought this action, alleging that under the operating agreement on Besser’s death the note for $200,000 automatically converted under the convertible preferred member interest, requiring LifePine to acquire such member interest under Article 8.6.4. In 1997, LifePine contends that on the date of the call Besser lost any ownership interest in the company so that Article 8.6.4 was no longer effective at the time of his death. On July 29, 2003, the trial court granted summary judgment to the Besser estate, requiring LifePine to purchase Besser’s convertible preferred interest.

The defendants contend that the trial court misconstrued the provisions of the operating agreement in ruling that the call rights under Article 10.2.2 were not properly assigned or exercised in 1997, terminating Besser’s interest in Timber Products at that time.

In construing the operating agreement, the trial court reasoned that, under Article 8.4, there had to be a unanimous vote to sell and assign any asset of the company and the assignment of the call rights as to Besser’s member interest required his consent. Article 10.1 gives the member the right to sell his interest. Article 10.2.2 states that the “Call right may be assigned by the Company at any time.” The trial court found:

[w] hen paragraphs 10.1 and 10.2.2 are read in conjunction with each other, they give the appearance of allowing Timber Products to assign its call rights to LifePine, or any other entity, at any time. However, a call right is considered [an] asset of the company. . . . [T]he company is required to have a unanimous vote from the Members in order to dispose of any asset. This is in accordance with Art. 8, ¶ 8.4 of the Operating Agreement. Timber Products attempted to assign its call right to LifePine in accordance with Article [467]*46710. However, this was done without one of the Member’s consent — Besser.

(Footnote omitted.) The trial court misinterpreted Article 8.4. It provides:

Approval of Sale of All Assets. The Members unanimous vote shall be required to approve (a) the sale, exchange or other disposition of all or substantially all, of the Company’s assets which is to occur as [a] part of a single transaction or plan, or (b) the merger of the Company or (c) any other disposition of the Company or its assets as part of a single transaction or plan even though effected through a series of transactions.

The assignment of the call rights to Besser’s member interest does not constitute the sale of all or substantially.: all of the company’s assets where unanimous agreement was required and did not come within any of the three categories requiring unanimous action of all voters. Such language is clear and unambiguous so that the trial court did not need to construe the operating agreement but only to follow the intent of the parties. McVay v. Anderson, 221 Ga.

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Cite This Page — Counsel Stack

Bluebook (online)
594 S.E.2d 387, 265 Ga. App. 464, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lifepine-roofing-partners-v-besser-gactapp-2004.