Sunil Vatave v. Canopy Workforce Solutions, LLC

• Court: Court of Appeals of Georgia
• Decided: June 27, 2024
• Docket: A24A0552
• Status: Published

Opinion

FIFTH DIVISION MERCIER, C. J., MCFADDEN, P. J., and RICKMAN, J.

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. https://www.gaappeals.us/rules

June 27, 2024

In the Court of Appeals of Georgia A24A0552. VATAVE v. CANOPY WORKFORCE SOLUTIONS, LLC.

MERCIER, Chief Judge.

Sunil Vatave and Suresh Sharma co-founded SS Software Technologies, LLC,

which was later renamed as Canopy Workforce Solutions, LLC (“Canopy”). Vatave

served as the chief executive officer from the formation of the business in 2014 until

2022. After he resigned, Vatave filed the underlying pro se action against Canopy,

arguing that the company breached an oral contract to pay him deferred compensation

and to pay back a loan, in the total amount of $64,033. Canopy and Vatave filed cross-

motions for summary judgment. Finding that Vatave attempted to unilaterally obligate

Canopy to pay him, despite language in Canopy’s operating agreement requiring

approval by the board of directors for such agreements, the trial court granted Canopy’s motion and denied Vatave’s motion. Thereafter, Vatave filed this pro se

appeal, arguing that the trial court erred by applying the Prophecy1 rule to his

testimony, that the oral contract was valid and that Canopy ratified the contract.

Finding that a question of material fact exists as to whether Canopy ratified the

contract, we reverse in part and affirm in part.

On appeal from the grant or denial of a motion for summary judgment, we

“must conduct a de novo review of the evidence to determine whether there exists a

genuine issue of material fact, and whether the undisputed facts, viewed in the light

most favorable to the nonmoving party, warrant judgment as a matter of law.”

Newstrom v. Auto-Owners Ins. Co., 343 Ga. App. 576, 577 (1) (807 SE2d 501) (2017)

(citation and punctuation omitted).

So viewed, the evidence shows the following. Vatave and Sharma formed

Canopy in 2014 and served as its initial board of directors. Canopy’s operating

agreement provided that the “ordinary and usual decisions concerning the day to day

business affairs of the Company shall be made [sic] one (1) Manager” and provided

that Vatave was the initial manager. However, the agreement provided that, in specific

1 See Prophecy Corp. v. Charles Rossignol, Inc., 256 Ga. 27 (343 SE2d 680) (1986). 2 instances, Vatave could not make decisions unilaterally, and, instead, the board of

directors had to approve the decision. Specifically, “[a]ny proposed contract which

obligates [Canopy] to pay costs greater than Fifty Thousand [dollars]” required board

approval.

In 2016 and 2017, while Canopy was struggling financially, Vatave deferred his

compensation and loaned the company money in the total amount of $64,033. In 2018,

Canopy sought an investor, which led to a stock purchase agreement with Clipper

Ship Ventures (“CSV”). CSV invested a total of $1,000,000 in Canopy in

approximately October of 2020.

Vatave resigned from Canopy in January 2022, and he filed the underlying pro

se action, in November 2022, against Canopy, arguing that the company breached an

oral contract to pay him the deferred compensation and to pay back the loan. Vatave

claimed that the “obligation became due under said contract when the company

received through its relationship with CSV a total $1 million, which occurred in late

2020 or early 2021.”

Canopy filed a motion for summary judgment and pointed to Vatave’s verified

response to Canopy’s interrogatories, wherein Vatave stated that he “agreed on behalf

3 of himself and the company that if Canopy could secure the CSV investment, he

would wait until the first $1 million in funds came in from CSV before repaying

himself.” Canopy argued that, because the value of the alleged oral contract exceeded

$50,000, it required board approval and Vatave could not unilaterally enter into the

contract for Canopy.

Subsequently, Vatave completed an affidavit, in support of his response to

Canopy’s motion, and averred that he and Sharma entered into an oral agreement in

January or February 20182, and they agreed to “pay [Vatave] for the missed payrolls

and loans, which we estimated in our conversation was $60,000, but only once the

investment reached $1 million, until which time I would not pay down those debts

from the company’s money[.]” In its order granting Canopy’s motion for summary

judgment, the trial court relied upon Vatave’s response to the interrogatory and found

that, pursuant to the operating agreement, Vatave lacked the authority to unilaterally

enter into the oral contract, as the value of the contract exceeded $50,000, and

therefore required board approval. In its order, the trial court found Vatave’s

2 At that time Vatave and Sharma were Canopy’s only board members. 4 subsequently filed affidavit “self-contradictory, vague or equivocal[,]” and construed

the evidence against him. This appeal followed.

1. Vatave argues that the trial court erred by applying the Prophecy rule to his

affidavit. We disagree.

When a trial court considers a summary judgment motion, the Prophecy rule

requires it “to (1) eliminate all portions of a party’s self-contradictory testimony that

are favorable to, and left unexplained by, that party; and (2) consider the remaining

evidence in favor of the party opposing summary judgment.” Thompson v. Ezor, 272

Ga. 849, 851 (1) (536 SE2d 749) (2000). However,

if a reasonable explanation is offered for the contradiction, the testimony will not be construed against the party-witness. The burden rests upon the party giving the contradictory testimony to offer a reasonable explanation, and whether this has been done is an issue of law for the trial judge.

Prophecy Corp. v. Charles Rossignol, 256 Ga. 27, 30 (2) (343 SE2d 680) (1986). “We

review conclusions of law de novo.” Pollard v. Great Dane, LLC, __ Ga. App. __,*7

(___ SE2d ___) (A24A0545) (June 18, 2024)

5 In its first set of interrogatories, Canopy asked Vatave to identify the factual

basis for the following assertion in his verified complaint: “Canopy[sic] obligation

became due under said contract when the company received through its relationship

with CSV a total $1 million, which occurred in late 2020 or 2021.” In his verified

response, Vatave stated that he “agreed on behalf of himself and the company that if

Canopy could secure the CSV investment, he would wait until the first $1 million in

funds came in from CSV before repaying himself.” However, Vatave’s subsequently

filed affidavit averred that he and Sharma entered into an oral agreement that he would

be repaid after CSV’s investment reached $1 million.

“For purposes of the Prophecy rule, testimony is contradictory if one part of the

testimony asserts or expresses the opposite of another part of the testimony.” Bradley

v. Winn Dixie Stores, 314 Ga. App. 556, 558 (724 SE2d 855) (2012) (citation and

punctuation omitted). Here, Vatave made contradictory statements regarding the

parties to the oral contract by initially stating that he made the oral contract on behalf

of himself and the company, and then later claiming that he and Sharma entered into

the contract. The trial court did not err by finding the statements contradictory. See

Smith v. Six Flags Over Georgia II, 370 Ga. App. 778, 784 (2) (a) (i) (899 SE2d 315)

6 (2024) (trial court did not err in disregarding plaintiff’s affidavit testimony that two

employees were present when she fell when she had previously testified in her

deposition that only one employee was present when she fell); Hallberg v. Flat Creek

Animal Clinic, 225 Ga. App. 212, 214-215 (1) (483 SE2d 671) (1997) (appellant’s

deposition testimony that she did not know the cause of her fall contradicted with her

subsequently filed affidavit that said she fell because the ramp was too steep).

Further, Vatave has offered no explanation for the contradiction between his

verified discovery responses and his affidavit.3 Where a party fails to offer a reasonable

explanation for the discrepancy, the trial court must “eliminate the favorable portions

of the contradictory testimony and then take all testimony on motion for summary

judgment as it then stands, and construe it in favor of the party opposing the motion

in determining whether a summary judgment should be granted.”Wright v. JDN

3 While Vatave’s appellate brief argues that his affidavit merely expanded on his prior verified response to the interrogatory, arguments in briefs are not evidence. See DirectTV v. White, 355 Ga. App. 404, 407 (1) n.3 (844 SE2d 289) (2020) (appellant’s appellate brief argument providing an explanation for a contradiction in evidence was insufficient as it was not evidence); see also Prophecy Corp., 256 Ga. at 28 (1) (“A party knows what he has sworn. If he has discovered error, it can be explained in his affidavit.”) (citation and punctuation omitted). 7 Structured Finance, 239 Ga. App. 685, 686 (1) (522 SE2d 4) (1999) (citation and

punctuation omitted, emphasis in original).

The operating agreement provided that Vatave had to obtain board approval for

“[a]ny proposed contract which obligates [Canopy] to pay costs greater than Fifty

Thousand [dollars.]” Accordingly, Vatave was required to obtain approval from

Sharma, the other board member at the time, in order to enter into an oral contract on

behalf of Canopy to pay the missed compensation and loan because the value exceeded

$50,000. The trial court properly applied Prophecy to the favorable portions of

Vatave’s contradictory testimony, and found that Vatave lacked the authority to

unilaterally bind Canopy to a contract with a value exceeding $50,000.

2. We agree with Vatave, however, that the trial court erred by granting

summary judgment to Canopy because the evidence raised an issue of material fact as

to whether Canopy ratified the otherwise unenforceable oral contract.4 “Ratification

occurs if a principal, with full knowledge of all the material facts, accepts the benefits

of an unauthorized act, or retains such benefits after discovering the material facts.”

4 Of note, while Vatave argued in his response to Canopy’s motion for summary judgment that Canopy ratified his actions, the trial court did not rule on the issue of ratification in its order granting summary judgment to Canopy. 8 Brock v. Yale Mtg. Corp., 287 Ga. 849, 855 (3) (700 SE2d 583) (2010) (citation

omitted); see OCGA § 10-6-52 (“A ratification by the principal shall relate back to the

act ratified and shall take effect as if originally authorized. A ratification may be

express or implied from the acts or silence of the principal. A ratification once made

may not be revoked.”). “Whether ratification occurs is usually a fact question for the

jury.” Brock, 287 Ga. at 854 (3)

Here, Vatave points to his affidavit wherein he averred that, in May 2018, he

informed the board members that he “agreed to wait for the $1 million to come in

before paying myself the debts I was owed.” Further, Canopy prepared a disclosure

schedule for investors, which was provided to the board, wherein it was disclosed that:

“The company is behind in 9 salary payments to Sunil Vatave totaling with taxes

$58,706.63 [and] a $2,000 loan from Mr. Vatave . . . which the Company expects to

repay according to a reasonable schedule over the next 12 months.”

Where a principal is informed by his agent of what he has done, the principal must express his dissatisfaction within a reasonable time, otherwise his assent to his agent’s acts will be presumed. Unless the principal repudiates the act promptly or within a reasonable time, a ratification will be presumed.

9 Merritt v. Marlin Outdoor Advertising, 298 Ga. App. 87, 91 (2) (b) (679 SE2d 97)

(2009) (citation and punctuation omitted).

A jury issue remains as to whether Canopy had full knowledge of the material

facts of the oral contract, whether Canopy repudiated the agreement, or whether a

ratification occurred. Evidence, viewed most favorably to Vatave, shows that the

board of directors were aware that Vatave had forgone compensation payments and

made a loan to Canopy during a period of financial hardship for Canopy. Further,

evidence shows that Vatave agreed that Canopy would repay the amount to him after

it received $1,000,000 total in investments by CSV, and that the board of directors

was aware of this oral contract. As such, questions of material fact exist as to whether

ratification occurred. See Merritt, 298 Ga. App. at 91 (2) (b) (where evidence was in

conflict, a jury issue remained as to whether the manager had any authority to bind his

principal or whether a ratification occurred); Governor’s Towne Club v. Caffrey Constr.

Co., 273 Ga. App. 284, 288-289 (2) (614 SE2d 892) (2005) (where a construction

company worked on a golf course, and submitted invoices, one of which was paid, a

jury issue remained as to whether the golf club had full knowledge of the material facts

regarding the purported agreement to work on the golf course). Accordingly, we

10 reverse in part the trial court’s grant of summary judgment to Canopy and hold that

an issue of material fact remains as to ratification.

Judgment affirmed in part, reversed in part. Rickman, J., concurs. McFadden,

concurs in part and dissents in part.

11 A24A0552. VATAVE v. CANOPY WORKFORCE SOLUTIONS,

LLC.

MCFADDEN, Presiding Judge, concurring in part and dissenting in part.

I agree with the majority that whether Canopy ratified any agreement to pay

Vatave is an issue of material fact requiring the reversal of the grant of summary

judgment to Canopy. So I concur in Division 2.

But I would hold that the trial court erred in excising evidence essential to

Vatave’s breach of contract claim as mutually contradictory under Prophecy Corp. v.

Charles Rossignol, Inc., 256 Ga. 27, 28 (1) (343 SE2d 680) (1986). The trial court

excised Vatave’s statements about the parties’ agreement to pay his deferred salary

and to repay his loans to the company. But those statements, read in context, are not

mutually contradictory. So while I concur in Division 2, I respectfully dissent from

Division 1.

Vatave testified to the basis for his contract claim in an affidavit. He testified

that he and Suresh Sharma, who together owned a majority of the company, agreed

that the company would pay Vatave his deferred salary and repay his loans to the

company once it had received a $1 million investment from venture capital company

CSV. As for the company’s side, I proposed and Mr. Sharma and I stated our agreement, from the perspective as the majority of the board, and me as the CEO, that contingent upon closing of the CSV transaction the Company would . . . pay me for the missed payrolls and loans, which we estimated in our conversation was $60,000, but only once the investment reached $1 million, until which time I would not pay down those debts from the company’s money.

The majority holds that Vatave’s response to Interrogatory 14 contradicts this

affidavit. But that interrogatory did not ask about contract formation. Rather, it asked

about Vatave’s assertion that Canopy’s obligation “under said contract” — that is

presuming the existence of that contract — became due when the company received

$1 million in funding. The prior interrogatory, Interrogatory 13, on the other hand, did

concern contract formation. It asked Vatave to identify the factual basis for his

assertion that, “The agreement between Canopy and [Vatave] is a legally valid and

enforceable contract to pay deferred compensation and certain loans made prior to

Canopy receiving its first outside capital investment in June 2018.”

Vatave’s affidavit is also consistent with the allegation in his verified complaint

that, in anticipation of the funding being invested in June 2018, Vatave and Sharma

2 agreed on behalf of Canopy that Canopy would pay Vatave’s deferred salary and repay

his loans after the first $1 million of capital came through.

Although Vatave’s statements may appear contradictory in a vacuum, the

statements are better understood as responses to different questions when viewed in

context, as Vatave argued below. “Thus, the purported contradictory statements of

[Vatave] were not left unexplained and should not have been construed against [him]

by the trial court.” Founders Kitchen & Bath v. Alexander, 334 Ga. App. 389, 394 (779

SE2d 668) (2015). “The contradictory testimony rule of Prophecy . . . does not apply.”

Brown v. Seaboard Constr. Co., 317 Ga. App. 667, 668 (1) (732 SE2d 325) (2012)

(affidavits were not contradictory, and thus Prophecy did not apply, when the last

affidavit simply clarified the prior ones).

So I would hold that the trial court erred by finding Vatave’s testimony to be

self-contradictory and by granting summary judgment to Canopy on Vatave’s breach

of contract claim and denying Vatave’s motion for partial summary judgment for this

reason. “Under these circumstances, there is, at the very least, a genuine issue of

material fact as to whether” Vatave and Canopy have such a contract. Founders, 334

Ga. App. at 394. So I dissent from Division 1 of the majority opinion.

3 But I agree with the majority that whether a ratification occurred is a question

of material fact, and so the trial court erred in granting Canopy summary judgment for

this reason, as well. So I concur in Division 2 of the majority opinion.1

1 To the extent that they are not addressed by the above analysis, I would hold that Vatave has abandoned his remaining enumerations of error by failing to support them with meaningful argument. “[M]ere conclusory statements are not the type of meaningful argument contemplated by our rules.” McAllister v. State, 351 Ga. App. 76, 95 (6) (c) (830 SE2d 443) (2019). See Court of Appeals Rule 25 (d). 4