5D08-4289 5D09-210 Lindon v. Dalton Hotel

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State: Florida

Court: Florida Fifth District Court

Docket No: 5D08-4289

Case Date: 10/25/2010

Preview:IN THE DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA FIFTH DISTRICT JULY TERM 2010

HAROLD DALE LINDON, Appellant, v. CORRECTED Case Nos. 5D08-4289 5D09-210

DALTON HOTEL CORPORATION AND ROY B. DALTON, JR., Appellees. ________________________________/ Opinion filed October 29, 2010 Appeal from the Circuit Court for Orange County, Renee A. Roche, Judge. Thomas Wade Young, of Dempsey & Associates, P. A., Winter Park, for Appellant. Christopher V. Carlyle and Shannon McLin Carlyle, of The Carlyle Appellate Law Firm, The Villages, for Appellees.

ORFINGER, J. Harold Lindon appeals an order granting Roy B. Dalton, Jr.'s motions for directed verdict and summary judgment, and Dalton Hotel Corporation's (DHC) motions for directed verdict, judgment notwithstanding the verdict (JNOV), and summary judgment in a breach of contract and torts action. We affirm the summary judgment in favor of DHC and Dalton on Lindon's tort claims, but reverse the court's rulings on the motions for directed verdict and JNOV.

This case presents a dispute between Lindon, a minority shareholder in DHC; Dalton, the majority shareholder; and DHC. Dalton was the president, sole director, and chief executive officer of DHC, which was formed in April 1998. DHC was the sole general partner of Dalton Hotel, Ltd., a Florida limited partnership. Dalton, an attorney with no experience operating hotels, and Lindon, who had significant experience in the hospitality industry, entered into an understanding in 1998 to work together to develop a hotel in downtown Orlando. In October 1998, Lindon, whose tasks included

development and operations, identified a potential hotel site and moved the project forward with the parent company of Embassy Suites. Lindon negotiated with Embassy Suites on behalf of DHC, arranged and executed construction contracts and was involved in obtaining financing for the project. For these efforts, Lindon understood that he was to receive twenty-five percent of DHC's stock. In February 1999, as agreed, Dalton transferred twenty-five percent of his 100 shares of stock in DHC to Lindon. Dalton transferred another five shares to his legal assistant. Dalton's attorney prepared a shareholders' agreement which the three

shareholders and DHC executed in March 1999. Crucial to this case is the provision found in Article II(a) of the agreement, which provides: It is provided that a stockholder currently employed by the Corporation, if any, who ceases to be an employee of the Corporation shall be deemed to have served an offer to sell all of his shares of stock in the Corporation on the date such employment ceases. (Emphasis added).1 Buy-back provisions of this type require an employee shareholder to sell back stock upon termination from corporate employment. Such a provision is designed to ensure that ownership of all the stock, especially of a close corporation, stays within the control of the remaining corporate owners-employees, those who will continue to 2
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This provision became significant when Dalton informed Lindon that his employment with DHC would be terminated effective March 31, 2002, due to a significant downturn in business following the terrorist attacks of September 11, 2001. It is undisputed that Lindon was an employee of DHC when he was informed of his termination. However, a dispute existed as to when Lindon became a DHC employee, and, specifically, whether he was "currently employed" at the time that the shareholders' agreement was executed in March 1999. The parties agree that Lindon's employment status is critical because if he was a DHC employee when he signed the agreement, he was obliged to sell his shares back to DHC at the agreed-upon price. But, if he was not employed by DHC when he signed the agreement, Article II(a) of the agreement is inapplicable. Dalton informed Lindon that due to his termination, he was deemed to have served an offer to sell all of his stock in DHC back to the corporation pursuant to Article II(a). Dalton provided Lindon with a notice of a special meeting of DHC's shareholders to address the buy-back of Lindon's stock. Lindon objected to the meeting and again registered his objection at the special shareholders' meeting. Notwithstanding, on May 21, 2002, Dalton notified Lindon by letter that DHC "had effectuated the purchase of [Lindon's] shares for the sum of $0," an amount equal to the adjusted book value of the shares.2

contribute to its successes or failures. Gallagher v. Lambert, 549 N.E.2d 136, 137 (N.Y. 1989). The shareholders' agreement established adjusted book value as the purchase price for shares purchased pursuant to Article II(a).
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Almost four years later, Lindon sued Dalton and DHC, asserting claims for breach of the shareholders' agreement against DHC and Dalton, and claims of breach of fiduciary duty and constructive fraud against Dalton. Through a series of rulings, the breach of fiduciary duty and constructive fraud claims were resolved adversely to Lindon and Lindon's breach of contract claim against DHC was effectively limited to a claim for nominal damages. At trial, the court granted a directed verdict in favor of Dalton on the breach of contract claim. Lindon's breach of contract claim against DHC was submitted to the jury, which found Lindon was not employed by DHC when he signed the agreement and was not, as a result, bound by the buy-back provisions of the shareholders' agreement. The jury further found that the adjusted book value of

Lindon's shares on the buyout date was zero, but that Lindon was entitled to "nominal" damages of $180,000.3 The trial court granted DHC's motions for directed verdict and JNOV, finding that no reasonable jury could have found that Lindon was not an employee of DHC at the time that he executed the agreement or could have awarded Lindon $180,000 in nominal damages, and entered final judgment in favor of DHC and Dalton. This appeal followed.

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After a vigorous dispute, the trial court instructed the jury that the measure of damages "is the adjusted book value of Dalton Hotel Corporation" as the date the buyout was exercised. The only evidence at trial was that the adjusted book value of Lindon's stock at the time the stock was redeemed was zero. The jury was additionally instructed that if it found the defendants breached the shareholders' agreement and that no actual loss resulted or loss "has not been established with sufficient certainty," then an award of only nominal damages for the breach would be proper. The basis for the $180,000 damage award is a mystery.

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Tort claims We conclude that the trial court correctly disposed of Lindon's tort claims by way of summary judgment. See Vesta Constr. & Design, L.L.C. v. Lotspeich & Assoc., Inc., 974 So. 2d 1176 (Fla. 5th DCA 2008); Detwiler v. Bank of Cent. Fla., 736 So. 2d 757 (Fla. 5th DCA 1999). Breach of Contract Claim against DHC Lindon argues that the trial court erred in overriding the jury's verdict on the pivotal issue in the case, i.e., whether he was an employee of DHC at the time that he signed the shareholders' agreement. It was conceded below that if Lindon was not an employee at signing, the agreement's terms allowed him to retain his stock after separation from employment with DHC. Lindon claims that given the jury's verdict, Dalton wrongfully forced him to redeem his shares in 2002. When deciding the appropriateness of a directed verdict or JNOV, Florida trial and appellate courts use the test of whether the verdict is, for JNOVs, or would be, for directed verdicts, supported by competent, substantial evidence. Speedway

SuperAmerica, LLC v. Dupont, 933 So. 2d 75, 79 (Fla. 5th DCA 2006). A motion for directed verdict or JNOV should be granted only if no view of the evidence could support a verdict for the nonmoving party and the trial court therefore determines that no reasonable jury could render a verdict for that party. See Cecile Resort, Ltd. v. Hokanson, 729 So. 2d 446, 447 (Fla. 5th DCA 1999). If there are conflicts in the evidence or different reasonable inferences may be drawn from it, then the issue is a factual one that should be submitted to the jury and not be decided by the trial court as a matter of law. Scott v. TPI Restaurants, Inc., 798 So. 2d 907, 909 (Fla. 5th DCA

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2001); see Etheredge v. Walt Disney World Co., 999 So. 2d 669, 671 (Fla. 5th DCA 2008).4 Here, the trial court misapplied this standard in granting the JNOV. While Dalton and DHC presented significant evidence supporting their position that Lindon was an employee of DHC at the time that he executed the shareholders' agreement, there was some evidence that supported the jury's verdict that he was not so employed. For example, Lindon testified that he was not an employee at the time that he signed the shareholders' agreement in March 1999, and he was also not receiving a salary. In addition, when the parties signed the shareholders' agreement in March 1999, Lindon also executed a federal employee eligibility verification form (I-9), in which DHC declared, under penalty of perjury, "that the employee [Lindon] began employment on August 19, 1999."5 The trial court minimized this evidence, explaining that Lindon's testimony was self-serving and not competent substantial evidence; that the absence of a regular salary was understandable given that DHC was a start-up business, and Lindon received stock in lieu of a salary; and that the I-9 verification form was not conclusive of employment status. While the court's analysis may have been relevant in considering DHC and Dalton's alternative motion for a new trial based on a "manifest weight of the evidence"

Lindon observes that in pre-trial rulings denying summary judgment, the trial court on two occasions stated that the issue of whether he was "currently employed" by DHC when he signed the shareholders' agreement presented a disputed issue of material fact. However, the determination in a summary judgment context that a disputed issue of material fact exists is not dispositive of whether the plaintiff presented a case at trial sufficient to withstand a motion for directed verdict. See Ameriseal of N. E. Fla., Inc. v. Leiffer, 738 So. 2d 993 (Fla. 5th DCA 1999).
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Lindon did not prepare the I-9 form. 6

standard, it was inappropriate in considering a JNOV.

Lindon's testimony did not

contradict his previous position in the litigation or a clear written understanding between the parties. Instead, his testimony was competent evidence of his status with DHC and was buttressed by the I-9 verification form. Accordingly, we conclude that the trial court erroneously made a credibility determination by weighing Lindon's testimony and other evidence. See Johnson v. Swerdzewski, 935 So. 2d 57 (Fla. 1st DCA 2006) (explaining in context of reversing JNOV that once trial court submits case to jury, credibility assessment of testimony is assigned to jury). Having concluded that Lindon presented some evidence in support of his contention that he was not an employee of DHC when he signed the shareholders' agreement, we are compelled to reverse the JNOV order. In doing so, we remand for consideration of DHC's alternative motion for a new trial.6 In considering that motion, the court should determine whether the verdict is contrary to the manifest weight of the evidence. If it is deemed to be so, the court should order a new trial on the breach of contract claim against DHC. See Smith v. Brown, 525 So. 2d 868 (Fla. 1988). Breach of Contract Claim against Dalton Lindon also contends that based upon the verdict, he was entitled to retain his DHC stock after separating from employment, and that Dalton wrongfully caused DHC to redeem his stock, thereby breaching the shareholders' agreement. The trial court granted a directed verdict in favor of Dalton at the close of the evidence, concluding that section 607.0732(6), Florida Statutes (2002), insulates Dalton from personal liability from Lindon's breach of contract claim. We disagree. DHC had alternatively moved for a new trial (and for remittitur) but because of its disposition of the motion for JNOV, the trial court deemed these motions to be moot. 7
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The shareholders' agreement was one "among Dalton Hotel Corp. . . . Roy B. Dalton, Jr., Beth H. Nelson and Dale Lindon." It provides that "any party may enforce this Agreement by specific performance, suit for damages or otherwise." Dalton claims, and the trial court agreed, that section 607.0732(6) shields him from individual liability. Conversely, Lindon posits that because Dalton was a party to the shareholders' agreement, his actions render him personally liable for breach of the agreement. The validity of shareholder agreements is recognized by Florida law. 607.0732, Fla. Stat. (2002). Specifically, section 607.0732(6) provides: 607.0732. Shareholder agreements .... (6) The existence or performance of an agreement authorized by this section shall not be a ground for imposing personal liability on any shareholder for the acts or debts of the corporation even if the agreement or its performance treats the corporation as if it were a partnership or results in failure to observe the corporate formalities otherwise applicable to matters governed by the agreement. As the statute clearly states, it protects individual shareholders who sign a shareholders' agreement from personal liability for "the acts or debts of the corporation." It does not

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