In this employment dispute, appellee Henry Blake, the former president of appellant Brock Built, LLC, sued Brock Built alleging that Brock Built breached his employment contract by terminating him and failing to pay the severance and incentive compensation due under the terms of the contract. Blake further alleged that Brock Built tortiously breached its duty of good faith and fair dealing in determining its annual net profit for the purposes of calculating Blake’s incentive compensation. Brock Built filed a counterclaim alleging that it was Blake who breached both the contract and his fiduciary duties to Brock Built by engaging in certain conduct during his employment. Both parties filed cross-motions for summary judgment. The trial court granted Blake summary judgment on his claims for incentive and severance compensation and on Brock Built’s counterclaim for breach of fiduciary duty. In turn, the trial court denied Brock Built’s motion for summary judgment on Blake’s claims for incentive compensation and tortious breach of the duty of good faith and fair dealing. On appeal, Brock Built challenges the trial court’s ruling.
To prevail at summary judgment under OCGA § 9-11-56, the moving party must demonstrate that there is no genuine issue of material fact and that the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law. OCGA § 9-11-56 (c). A defen *817 dant may do this by showing the court that the documents, affidavits, depositions and other evidence in the record reveal that there is no evidence sufficient to create a jury issue on at least one essential element of plaintiffs case. Once the moving party discharges this burden, the nonmovant may not rest on its pleadings, but instead must come forward with evidence establishing a triable issue.
(Footnotes and emphasis omitted.)
Hanson Staple Co. v. Eckelberry,
So viewed, the evidence shows that Blake was hired by Brock Built as a construction manager in 2003. Blake subsequently was promoted first to vice president and then, in October 2005, to president of the company.
In connection with Blake’s promotion to president, he negotiated with Brock Built a contract of employment (the “Contract”). Pursuant to the terms of the Contract, Brock Built agreed to employ Blake as president through September 2007 at a designated annual base salary, after which time the contract would automatically renew for one-year terms. Brock Built agreed to provide Blake “incentive compensation” by sharing with him a set percentage of Brock Built’s “profit margin.” The Contract defined “profit margin” as
the net profit of the Company before federal and state income taxes, determined in accordance with accepted accounting practices by the accounting firm employed by the Company and adjusted to exclude the IRS inventory adjustment.
The Contract further allowed termination of the employment relationship with or without cause by either Blake or Brock Built, provided, however, that “[a]ny termination . . . shall be communicated by written notice of termination to the other party.” Finally, the Contract guaranteed Blake “severance” payments equal to one year of his annual base salary if he was terminated by Brock Built without “[clause,” as that term was narrowly defined in the Contract, but did not entitle him to severance payments if he voluntarily resigned or was terminated for cause.
On Friday, February 10, 2006, Brock Built’s owner, Steve Brock, summoned Blake into his office and conducted a meeting — which was recorded in short-hand by Brock’s secretary and later tran *818 scribed 1 — during which the employment relationship between Blake and Brock Built was severed. The parties dispute whether Blake was terminated or voluntarily resigned during the meeting. Nonetheless, Blake and Brock reconvened the following Monday, February 13, and, in a meeting transcribed in a manner consistent with the first, Brock presented Blake with a proposed severance agreement offering him a fraction of the severance payments to which he was otherwise contractually entitled to receive in the event of termination without cause. It is undisputed that Blake never signed and expressly rejected Brock’s proposed severance agreement in writing shortly after the second meeting.
In the months that followed, Blake argued that he had been terminated without cause and was entitled to severance payments in accordance with the terms of the Contract. He further contended he was owed additional incentive compensation because the consolidated financial statement upon which Brock Built based its 2005 profit margin for the purposes of calculating his share of profit was inaccurate, based upon his knowledge of the company’s financial status. Brock Built, on the other hand, maintained that Blake was not entitled to severance compensation because he voluntarily resigned from his employment and contended that he had been fully compensated based upon its calculated 2005 profits.
Blake ultimately filed the instant lawsuit, alleging breach of contract for failure to pay severance, breach of contract for failure to pay incentive compensation, tortious breach of duty of good faith and fair dealing, and entitlement to bad faith attorney fees. Brock Built counterclaimed, alleging both breach of contract and fiduciary duties and also seeking attorney fees. This appeal followed the trial court’s grant of summary judgment to Blake on its contract claims and Brock Built’s counterclaims and denial of summary judgment to Brock Built on Blake’s claims.
1. Breach of Contract — Failure to Pay Severance. Brock Built first argues that the trial court erred in granting Blake’s motion for summary judgment on his claim for severance compensation. We disagree.
Brock Built does not assert that Blake was terminated for cause; therefore, the Contract entitled him to severance compensation unless he voluntarily resigned. But even construing the record in the light most favorable to Brock Built, the evidence does not support a finding of voluntary resignation.
First, the Contract required written notice in the event that *819 Blake intended to resign. It is undisputed that no such notice was ever given.
Second, the transcript memorializing the February 10 meeting between Brock and Blake demonstrates no such resignation. Brock commenced the brief meeting by announcing, “I think we need to go ahead and end the relationship. I hate that its come to this but I think its in the best interest of the company and my personal interest.” Brock mentioned that he was in the process of drafting a “termination agreement” and wanted the relationship to end amicably. When Brock vaguely referenced that he had “cause” to terminate Blake, Blake inquired as to “what kind of things [he] did.” Brock responded simply, “I am not going to go into it. The issues, problems, consequences or repercussions. It’s over.” Blake then asked if that was going to be his last day and whether he needed to arrange for a ride home, to which Brock instructed him to compile a status report of his current projects and return on Monday. At no time during the meeting did Blake indicate that their employment relationship was being severed due to any voluntary conduct on his part.
Finally, at the meeting the following Monday, February 13, Brock presented Blake with his proposed termination agreement (which offered Blake less compensation than that to which he was entitled in the event of termination without cause) and instructed him to review it and “come back with comments.” By letter dated February 24, Blake objected to Brock Built’s termination of him without written notice, denied Brock Built had cause to terminate him, and demanded severance payments in accordance with the terms of the Contract.
These facts simply do not support a conclusion that Blake voluntarily resigned. Brock Built relies heavily on the fact that during the February 10 meeting, Brock offered to allow Blake to “keep [his] pride” and say that he resigned, and that during the February 13 meeting, when Brock asked if Blake had any discussions with other employees, Blake responded that he told one employee that he “was leaving” and would “probably start [his] own company.” At best, however, this evidence supports a finding that Blake was given the option to resign, which he clearly declined to do. And, contrary to Brock Built’s assertion, Blake’s statement that he “was leaving” is not synonymous with a statement that he voluntarily resigned, nor does it create a question of fact on that issue in light of the other direct evidence to the contrary. See
Bonney Motor Express v. Yates, 111
Ga. App. 754, 754-755 (1) (
*820 2. Breach of Contract — Failure to Pay Incentive Compensation. Brock Built contends that the trial court erred in granting Blake summary judgment on his claim for breach of contract based upon Brock Built’s failure to pay Blake the full amount of incentive compensation to which he was entitled. Brock Built contends that, when calculating Blake’s incentive compensation, it relied upon a 2005 consolidated financial report prepared by an outside certified public accountant which reported Brock Built’s net income as less than $1 million. Blake, on the other hand, asserts that not only is the 2005 net income figure reflected in Brock Built’s financial report inconsistent with his understanding of the company’s financial status at the time that he was terminated, but is also inconsistent with the $3 million plus net income reported on Brock Built’s sworn 2005 tax returns. In granting summary judgment to Blake, the trial court concluded that, even if there did exist a conflict in the evidence with respect to Brock Built’s 2005 net income, the conflict was created by and should be construed most strongly against Brock Built, which was bound by the sworn net income statement contained within its tax returns.
We cannot say with certainty that Blake was entitled to summary judgment as a matter of law on this breach of contract claim. Both the consolidated financial report and Brock Built’s 2005 tax returns were prepared by the same outside certified public accountant. The accountant submitted a sworn declaration in which she claimed to be unaware “of any material modifications that should be made to Brock Built’s financial statements in order for them to be in conformity with U. S. generally accepted accounting principles” and further stated that the differing net income figures contained within the two documents are not inconsistent and can indeed be rectified by taking into account the differences between financial and tax accounting.
Like both Blake and the trial court, we are troubled that Brock Built has failed to explain why the discrepancy between its net income figures is not reflected on the IRS Schedule M-l (titled “Reconciliation of Income (Loss) per Books With Income (Loss) per Return”), which reports “net income per books” and serves to identify “the different treatment of income and expense items for book and tax purposes.” See
FPL Group v. Commr. of Internal Revenue,
3. Breach of Fiduciary Duty. Brock Built next argues that the trial court erred in granting Blake summary judgment on its counterclaim for breach of fiduciary duty. According to Brock Built, the trial court disregarded critical evidence and applied the incorrect legal standard in concluding that Brock Built’s allegations were insufficient as a matter of law. Brock Built relies on two general categories of conduct in support of its argument that Blake breached his fiduciary duty: (a) With the improper motive of increasing his incentive compensation, Blake attempted to maximize Brock Built’s 2005 profit by both accelerating the construction of houses that were not scheduled to close until 2006 and by delaying the payment of invoices and bonuses until 2006; and (b) Blake neglected to properly oversee the affairs of Brock Built by failing to adequately manage the purchase order system, failing to budget engineering features in the sale prices of certain specific homes, and failing to use proper building materials for noise abatement in other specific homes.
Georgia law requires that corporate officers and directors discharge their duties in good faith and with the care of an ordinarily prudent person in a like position. OCGA §§ 14-2-830 (a); 14-2-842 (a). In determining whether a corporate officer has fulfilled his or her statutory duty, Georgia courts apply the business judgment rule. See
Regenstein v. J. Regenstein Co.,
The business judgment rule protects . . . officers from liability when they make good faith business decisions in an informed and deliberate manner. The presumption is that they have acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company. Unless this presumption is rebutted, they cannot be held personally liable for managerial decisions. However, officers may be held liable where they engage in fraud, bad faith, or an abuse of discretion.
(Citations and punctuation omitted.)
TSG Water Resources v. D’Alba & Donovan Certified Public Accountants,
We agree with the trial court that Brock Built has not alleged conduct that rises to the level of fraud, bad faith or an abuse of discretion sufficient to establish a claim for breach of fiduciary duty. Even if we were to assume that Blake’s allegedly selfish motives could render Brock Built’s financial success in 2005 a breach of his duty to the company, Brock Built failed to submit any specific evidence in support of its claims. For example, contrary to its allegations that Blake inappropriately accelerated home closings, the uncontradicted evidence shows that Brock Built had contractually agreed to close the homes at issue in 2005, not in 2006. And when Blake presented a sworn affidavit asserting that he had never improperly withheld payment of an invoice, Brock Built failed to point to any such properly submitted yet intentionally delayed expense and/or any other competent evidence of invoices not being paid at Blake’s direction. When faced with Blake’s sworn statements denying these allegations, Brock Built was required to put forth some competent evidence illustrating a triable question of fact on these issues. Cottle, 849 F2d at 575 (II). See Turner Broadcasting System v. CBS, 627 FSupp. 901, 909-910 (N.D. Ga. 1985) (that corporate officers or directors may stand to gain personally from their actions does not obviate the application of the business judg *823 ment rule).
Likewise, Brock Built’s allegations regarding the deficiencies in Blake’s management and budgeting amounted at best to a showing of negligent or careless performance of Blake’s duties, which is insufficient to show breach of fiduciary duty as a matter of law. See
Medserv Corp.,
1997 U. S. Dist. LEXIS 18246 at *5-6, 10 (granting summary judgment to corporate officer despite evidence of “a laundry list of alleged failings and shortcomings in the [officer’s] performance of his duties”);
Flexible Products Co.,
In sum, the allegations in the complaint in conjunction with the record evidence are simply not sufficient to rebut the presumption that Blake made good faith business decisions in an informed and deliberate manner or to present a jury question as to whether he engaged in fraud, bad faith, or an abuse of discretion. See
Matter of Munford, Inc.,
4. Breach of Good Faith and Fair Dealing. Finally, Brock Built argues that the trial court erred in denying its motion for summary *824 judgment on Blake’s claim for breach of good faith and fair dealing. Blake asserts that Brock Built’s contractual agreement to pay him a percentage of net profits in 2005 gave rise to a fiduciary duty to calculate its profits in good faith, and that the alleged violation of that duty amounted to a tort from which he suffered damages. We disagree with Blake.
Although a duty of good faith and fair dealing arises in every contract, the mere breach of a contractual duty is insufficient to create a cause of action for tortious conduct.
Wynn v. Arias,
It is undisputed that Blake was an at-will employee of Brock Built. Indeed, the Contract specifically provided that
Blake acknowledges and agrees that his employment with [Brock Built] is expressly “at will.” Either party may terminate the employment relationship for any reason with or without cause.
Consequently, Brock Built did not owe any independent duties to Blake apart from those arising under the Contract. See
Servicemaster Co.,
It follows that the duty allegedly breached by Brock Built and the damages arising therefrom arose solely from Brock Built’s alleged breach of contract and are encompassed within that claim. See
Servicemaster Co., 252
Ga. App. at 758 (5);
Constr. Lender,
Judgment affirmed in part and reversed in part.
Notes
Although Brock Built argues in its brief that there were “errors in the transcription,” both parties agreed that the transcript accurately recounted the February 10 meeting.