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Boodram v. Coomes

United States District Court, W.D. Kentucky, Bowling Green Division

November 21, 2018

BOODNARINE BOODRAM PLAINTIFFS a/k/a MIKE BOOKDRAM, ET AL.
v.
RONALD GLENN COOMES, PHILMO, INC., DEFENDANTS

          Ronald Glenn Coomes, pro se

          MEMORANDUM OPINION AND ORDER

          Joseph H. McKinley Jr., District Judge

         This matter came before the Court for a bench trial that commenced on March 20, 2018 and concluded on March 24, 2018. The Court has reviewed the parties' post-trial briefs and the evidence at trial, and its findings of facts and conclusions of law are set forth below.

         I. Finding of Fact

         This is a story typical of a young couple who, each for their own reasons, are attracted to one another and they decide to engage in a courtship. After expressing their desires and intentions to one another, their excitement grows, ever hopeful their partnership will fulfill their respective hopes and dreams for the future. They decide to move in together, assets are co-mingled and, as is so often the case, the romance fades as they get to know one another better. They try desperately to salvage their relationship but ultimately, they part ways, bitterness ensues, lawyers are hired, and it is left to a Court to clean up the mess. No. one ever truly wins in these situations.

         And so it was in April 2010, Plaintiff Boodnarine “Mike” Boodram, a business man living in Georgia, started a tape company with Jeff Sundermeyer. Sundermeyer introduced Boodram to the tape business, offering Boodram some old equipment from another company that he and Boodram could use to start up their own tape operation. With Sundermeyer's equipment and Boodram's financial support, the men got some of Sundermeyer's tape machines running and Apollo Manufacturing Group, Inc. (“Apollo”) was born. Apollo would buy imperfect rolls of tape from other manufacturers, rewind them, cut out the imperfections, and sell the tape into secondary markets. Although they incurred a substantial amount of startup costs to get Sundermeyer's equipment running, Boodram testified that within a few months, revenues were picking up.

         Despite Apollo trending toward higher revenues, the company was short-lived. Within a few months, Boodram became aware of another opportunity in the tape business. He learned from Sundermeyer that the Defendant Ronald Coomes was interested in selling his tape manufacturing business, Philmo, Inc. (“Philmo”), which he had operated in Franklin, Kentucky since 2005. Coomes had grown weary of his role as President of Philmo and expressed interest in selling the company so that he could pursue other interests.

         In August 2010, Boodram and Coomes first communicated by phone. Boodram and three other men - Sundermeyer, Brian Martin, and Brett Orr - presented themselves as a team seeking to take over Philmo. The four men told Coomes of their qualifications, including Boodram, who told Coomes that he had attended Queens College. The team struck up a deal with Coomes and entered into their first letter of intent, outlining a sale of Philmo's assets. Later, after Coomes expressed concerns about working with Sundermeyer and telling Boodram that Philmo could not afford the salaries of all four men interested in buying the company, Sundermeyer, Martin, and Orr were cut out of the deal. Boodram proceeded alone with plans to purchase Philmo.

         Boodram wanted to purchase Philmo and Coomes wanted out. Their end goal was the same but the Court is not convinced they ever knew for certain how they were going to get there. They entered into several letters of intent but those terms changed often. Generally speaking, the initial idea was that Boodram would move to Franklin, Kentucky to work at Philmo and learn the business. Initially, the transaction was to close in November 2010. Boodram was to purchase 49% of the business for $150, 000 and have time to organize a leveraged buyout for the remaining 51%. In October 2010, Boodram closed down Apollo and came to work at Philmo. On October 1, Boodram paid $50, 000. This money was not paid to Coomes personally, rather, it was paid into the company to help with cash flow.

         The sale was initially contemplated to be an asset sale, but questions from lawyers and accountants regarding the existing debt changed the structure to a stock sale. This delayed the closing. During this delay, Boodram was running the office according to Coomes. (Tr. Vol. I at 63.)

         Another letter of intent was signed by Boodram (on behalf of Apollo) and Coomes (on behalf of Philmo) on December 9, 2010 (Pls.' Ex. 1 and Def.'s Ex. 7, hereinafter, the “LOI”.) It called for the purchase price for the remaining 51% to be paid to Coomes over time. According to the LOI, Apollo was to purchase a 49% share of Philmo stock for $200, 000 in three separate payments. The first payment of $50, 000 was to be paid on November 10, 2010, [1] the second payment of $75, 000 was to be paid on December 9, 2010 and a final payment of $75, 000 was to be paid on January 10, 2011. Apollo was to seek refinancing on existing Philmo debt, and if successful, Apollo had the right to purchase the remaining 51% share of Philmo stock for $1, 492, 055.90 in payments to commence in August of 2015 until paid in full by December 2020. Coomes agreed to stay on the Philmo payroll for thirty-six (36) months, receiving an annual salary of $46, 000.

         On the same day the LOI was signed, Boodram made a second cash contribution of $75, 000. This payment brought Boodram's total capital contribution to Philmo to $125, 000. Although the LOI called for a final $75, 000 payment to be paid in January, it was not made. Boodram testified that the hold up in his last payment was attributed to Coomes, who had arranged for a stock purchase agreement to be drafted. A final payment of $50, 000, instead of $75, 000, was made on April 5, 2011. Defendant's Exhibit 7 has a notation in Coomes' handwriting that three payments were made totaling $175, 000, which was $25, 000 short on the cash payments to be made under the LOI. However, as noted earlier, the terms of this deal changed often and it seems, according to Coomes' testimony, that “at the end of the day” the $175, 000 cash, plus an allowance of $25, 000 for “garbage tape” was the agreed upon consideration for the 49% share, even though this money did not go directly to Coomes individually. (Tr. Vol. I at 56.) At trial, Coomes voiced an objection as to the authenticity of Plaintiff's Exhibit 1. He first questioned the date of the document, and then questioned whether he would have actually agreed to those terms which delayed his complete pay out. In any event, the Court finds the document to be authentic.

         Boodram testified that after the execution of the December 2010 LOI, his expectation was that closing would take place on January 10, 2011, when the last payment toward the 49% share was due. However, the closing did not take place because the stock purchase agreement was not yet prepared.

         In February, Coomes presented Boodram with a stock purchase agreement. Boodram and his wife, Shelleza (“Shelly”) signed a copy of that agreement in March and gave their signed copy to Coomes. (Pls.' Ex. 3 and Def.'s Ex. 1, hereinafter, the “SPA.”) Boodram testified that he did not keep a copy of the document he signed. Like the LOI, the SPA provides for Boodram to pay Coomes $200, 000 for 49% of Philmo stock. However, despite there having already been $125, 000 paid into the company by Boodram, the SPA states that Boodram would pay $75, 000 cash at closing and deliver a promissory note to Coomes for $125, 000, which would be due and payable on or before April 30, 2015. There is testimony that this provision was written so Coomes would personally receive $200, 000 for the 49% share. Defendant's Exhibit 1 contains a promissory note from Boodram and his wife to Coomes and his then wife in the amount of $125, 000. In the SPA, Boodram agreed to secure financing to purchase the remaining 51% of Philmo, with a closing to occur on or before August 31, 2012. Section 1.5 of the SPA states that if Boodram leaves his employment at Philmo for any reason or if he fails to manage the company in a manner acceptable to Coomes, Coomes shall reacquire the 49% share from Boodram by paying him one-half the purchase price. Also, if Boodram was unable to acquire financing for the remaining 51%, Coomes was obligated to purchase back the 49% share for one-half the purchase price.

         During the bench trial, several different versions of the SPA were presented to the Court. The SPA contained in Defendant's Exhibit 1 has provisions that the remaining 51% of Philmo stock is to be sold to Boodram at a price of One Million Four Hundred Thousand Dollars ($1, 400, 000.00). In the SPA marked as Plaintiff's Exhibit 3, Boodram's price for 51% of Philmo stock is the same One Million Four Hundred Thousand Dollars, but the parenthetical amount is stated as $1, 100, 000.00. Also, Section 1.2 of Plaintiff's Exhibit 3 has an acknowledgement that Boodram contributed, as goodwill, inventories and equipment to Philmo with a value of $215, 000. Section 1.2 of Defendant's Exhibit 1 does not mention any goodwill contributions. Boodram suspects the version he signed was different from both of the versions presented at trial and he accuses Coomes of changing the terms to become more favorable to him. Boodram questions specifically Section 1.5 of the SPA which states that if he fails to close, he only got back one half of his investment.

         Coomes is not exactly certain which version is correct. He testified, “So I believe the contract that made sense yesterday at least that looked right from the standpoint was the one we agreed on, but I still believe that's why no one really knows. It was just too convoluted. An unsophisticated buyer and unsophisticated seller that's trying to make something work will come up with some crazy ideas.” (Tr. Vol. IV at 98.) One thing is clear however-the only SPA signed by both parties is the one marked as Plaintiff's Exhibit 3.

         It is unclear when the SPA was executed by Coomes. The date written on the agreement is March 31, 2011. Plaintiffs suspect that Coomes backdated the agreement because of a separate agreement that Coomes had with a broker, Gary Soloway. Back in 2010, when Coomes began looking for a buyer for Philmo, he and Soloway entered into an Exclusive Listings Agreement in which Coomes agreed to pay Soloway a brokerage commission upon the sale of Philmo. (See Pls.' Ex. 4). Email discussion between Coomes and his attorney, Scott Crabtree, indicate that Coomes took steps to avoid signing the SPA in order to avoid paying a brokerage free to Soloway. (See Pls.'s Ex. 26.) This desire may explain the promissory note that Coomes executed in favor of Boodram for $200, 000 that was executed on March 31, 2011. (See Attachment to Def.'s Ex. 1.) Testimony about this promissory note indicates that its purpose was to make the $200, 000 paid into the company by Boodram look like a loan rather than payment toward the purchase of the company. The broker issue may also explain why the transaction did not close as provided in any version of the SPA.

         The promissory note from Philmo to Boodram in the amount of $200, 000 is a peculiar thing. It is not mentioned in any iteration of the SPA. Boodram testified he never loaned any money to Philmo and that he never requested Philmo to execute a promissory note to him. The only explanation he ever received for the note's existence had to do with the broker's commission. (Tr. Vol. III at 48.) And there is certainly plenty of evidence to suggest that the promissory note was just a charade to disguise the sale and avoid paying the broker a commission. However, when the parties were trying to salvage their deal, email and text exchanges referred to “your debt” and “my debt” which makes no sense considering the terms of the SPA, because the only promissory note it mentions is Boodram's in favor of Coomes in the amount of $125, 000.00. Coomes testified however, that at the end of March, when the SPA was executed by Boodram, Coomes did not think Boodram would ever be able to come up with the rest of the money to buy the company, so he did not feel there was any risk at having to pay a broker. “So I said let's do it. If he comes up with it, then it's worth it to pay the broker right now just to have this thing done. And if he doesn't, then he doesn't. We'll adhere to the notes in the contract and I'll start paying him back.” (Tr. Vol. IV at 107.)

         The Court questions Coomes' reference to “the notes in the contract” because, as previously mentioned, the SPA only refers to a promissory note from Boodram. Any repayment from Coomes under Section 1.6 of the SPA was to be made within 60 days of default. But, based on the parties conduct and discussions after the break up, it seems as if Coomes believed Philmo was indebted to Boodram, pursuant to the promissory note in the amount of $200, 000.00. Coomes said several times that Philmo's loan to Boodram would revert to Boodram's loan to him if the deal was closed. In other words, if Boodram came up with all the money and closed on the deal, Philmo's note would be torn up, forgiven, reverted, whatever, but no money would be owed to Boodram. Presumably, if Boodram did not close on the deal, then Boodram was owed $200, 000 pursuant to the promissory note. Perhaps this was what Coomes thought was fair, i.e., Boodram paid $200, 000 into the company and the company should pay him back if the deal fell through. However, as noted, none of this was reflected in the SPA.

         Plaintiffs also suggest that an email exchange between Coomes and Crabtree indicates that Crabtree was still making changes to the SPA in April 2011. (Pls.' Ex. 26.) The email clearly shows confusion on the part of Coomes as to whether the SPA was fully prepared or not, but Crabtree's response does not conclusively show that there were revisions left to be made. Rather, Crabtree's response “[i]t should not take more than a couple of days, I would guess to schedule this and get it closed, after the time runs” appears to be a reference as to when the deal could close after the brokerage contract expired rather than a direct response to the question actually posed by Coomes---which was how long it would take to get the contract done. ...


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