                  IN THE SUPREME COURT OF MISSISSIPPI

                             NO. 2016-CA-00566-SCT

MARC B. DANIELS, SANDRA DANIELS,
CROCKER & ASSOCIATES, INC. f/k/a D & D
ENVIRONMENTAL, INC. AND MAXX
INVESTMENTS, LLC

v.

J. DENNIS CROCKER, GAIL CROCKER,
CROCKER, LTD., A SOUTH CAROLINA
CORPORATION AND GENERATIONAL EQUITY,
LLC

DATE OF JUDGMENT:                      04/06/2016
TRIAL JUDGE:                           HON. JOHN HUEY EMFINGER
TRIAL COURT ATTORNEYS:                 ROY H. LIDDELL
                                       RICHARD L. FARLEY
                                       STEPHEN HUWE
                                       C. MICHAEL ELLENBURG
                                       ERIC F. HATTEN
COURT FROM WHICH APPEALED:             MADISON COUNTY CIRCUIT COURT
ATTORNEY FOR APPELLANTS:               ROY H. LIDDELL
ATTORNEYS FOR APPELLEES:               ERIC F. HATTEN
                                       CHRISTOPHER D. MEYER
                                       RICHARD L. FARLEY
                                       REBECCA K. LINDAHL
NATURE OF THE CASE:                    CIVIL - CONTRACT
DISPOSITION:                           AFFIRMED IN PART; REVERSED IN PART
                                       AND REMANDED - 06/08/2017
MOTION FOR REHEARING FILED:
MANDATE ISSUED:

      BEFORE RANDOLPH, P.J., KITCHENS AND CHAMBERLIN, JJ.

      CHAMBERLIN, JUSTICE, FOR THE COURT:

¶1.   This appeal arises from a breach-of-contract action between Marc Daniels, Sandra

Daniels, Crocker & Associates, Inc., and Maxx Investments, LLC (collectively, “the
Danielses”) and Dennis Crocker, Gail Crocker and Crocker, Ltd. (collectively, “the

Crockers”). The Danielses entered into an Asset Purchase Agreement (the “Agreement”)

with the Crockers to acquire Crocker & Associates, Inc. (“C&A”) on March 31, 2011.1

Within eighteen months of the sale, C&A lost a number of important contracts and its

employees resigned.

¶2.    The Danielses then sued the Crockers for failing to disclose all material information

about C&A as required by the Agreement. The Crockers answered the suit and brought

counterclaims against the Danielses. After extensive discovery, the trial court granted the

Crockers’ motion for summary judgment on the Danielses’ claims against them. The

Danielses now appeal the trial court’s grant of summary judgment. After review of the

record, we affirm in part and reverse in part the grant of summary judgment and remand the

case for further proceedings.

            STATEMENT OF FACTS AND PROCEDURAL HISTORY

¶3.    In 1969, Dennis Crocker cofounded Aqua Aerobic Systems (“Aqua”), an applied

engineering business that provides solutions to municipal and industrial wastewater and

water-treatment customers. In 1977, Dennis left Aqua and founded C&A in Rock Hill, South

Carolina. Despite leaving Aqua, Dennis retained his minority shareholder’s interest in Aqua

as well as a seat on Aqua’s board. C&A was a sales representative firm for manufacturers

of water and wastewater-treatment equipment. It represented Aqua exclusively in several

       1
         In early 2011, Marc formed D&D Environmental, Inc., to acquire the assets of C&A.
At the time of the sale, D&D changed its name to C&A, and the original C&A changed its
name to Crocker, Ltd. Where these legal distinctions are not relevant, we will refer to C&A
throughout the opinion.

                                             2
territories—Virginia, North Carolina, South Carolina, Georgia, Alabama, and portions of

Florida and Tennessee. Aqua guaranteed these territories to C&A by entering into contracts

for each territory; the contracts were terminable with thirty days’ notice. Since its founding,

C&A was regularly Aqua’s number one representative firm in sales. Aqua represented fifty

to seventy percent of C&A’s revenue, depending on the year.

¶4.    C&A’s business model functioned on a long cycle. From the time it booked a project

until it received the commission from the booking was, generally, twelve to eighteen months.

Therefore, it was possible to look at a base year of bookings and project a picture of future

revenue twelve to twenty-four months in the future.

¶5.    Dennis retired from C&A in 2003 and turned over the management of C&A to his

wife Gail Crocker; later, in 2010, he gave Gail fifty percent of his interest in C&A. While

Gail testified that she was “scared to death” that Aqua would cancel its contracts with C&A

after Dennis retired, Aqua did not cancel its contracts with C&A until years later after C&A

was sold.

¶6.    In 2010, Marc Daniels, a certified public accountant (CPA), reviewed an offering

memorandum for C&A. Generational Equity (“GE”), a business broker, had compiled the

memorandum based on information it had received from the Crockers. After reviewing the

offering memorandum, Marc and his brother Stephen Daniels, met the Crockers in South

Carolina for an initial due-diligence meeting.

¶7.    After the initial meeting, the Crockers provided the Danielses with financial

disclosures of past revenue and present bookings at the request of the financial institution



                                              3
that was going to finance a portion of the transaction. Over a period of months, the Crockers

and the Danielses exchanged financial information concerning C&A, negotiated, and settled

on a purchase price of $4,000,000 for C&A. Of this figure, $2,800,000 was financed by a

bank, and the remaining $1,200,000 was owner-financed by the Crockers.

¶8.    On March 23, 2011, eight days before the parties signed the Agreement, Dennis

attended an Aqua board meeting at which the sale of Aqua was discussed. Dennis did not

disclose this to the Danielses.

¶9.    The Danielses and the Crockers entered into the Agreement on March 31, 2011. On

May 1, 2011, Marc—through Maxx Investments—agreed to pay $365,000 to the Crockers

for Crocker, Ltd.’s goodwill.

¶10.   In October 2011—seven months after the sale of C&A and after the possibility of

selling Aqua had dissipated, Dennis requested that Aqua redeem his stock. Aqua redeemed

the stock in December, and Dennis retired from Aqua’s board. In June 2012, Aqua canceled

its representation contract with C&A for North and South Carolina. Soon after this, C&A’s

sales representatives resigned, and C&A lost its remaining contracts with Aqua.

¶11.   On October 11, 2012, the Danielses filed suit in Madison County circuit court against

the Crockers, alleging that the Crockers had breached the Agreement by not disclosing “all

material information relating to [(C&A)] or the transactions contemplated by this

Agreement.” The Crockers answered the complaint and alleged counterclaims against the

Danielses. The parties took several depositions and conducted discovery. The Danielses also

designated Robert Cunningham as an expert. Cunningham was deposed and prepared an



                                             4
expert report.

¶12.   In December 2014, the Crockers filed a motion for summary judgment on the

Danielses” claims against them. On May 5, 2015, the trial court granted the Crockers’

motion for summary judgment (the “May 5 order”). The Danielses filed a motion for

reconsideration or, in the alternative, to certify the May 5 order under Mississippi Rule of

Civil Procedure 54(b). The trial court denied the motion, specifically denying both the

reconsideration and the certification.

¶13.   Next, the Danielses and the Crockers filed competing motions for summary judgment

on the Crocker’s counterclaims. On January 8, 2016, the trial court resolved the motions. On

April 6, 2016, pursuant to the Danielses’ renewed motion, the trial court certified its earlier

May 5 order. The trial court also stayed the proceedings “pending the appeal” of the May

5 order.

¶14.   The Danielses now appeal a number of issues that each relate to the trial court’s grant

of summary judgement in favor of the Crockers.2 We will first address where the trial court

erred in granting summary judgment before addressing where the trial court properly granted

summary judgment.

¶15.   The Crockers also cross-appealed the trial court’s stay of their claims against C&A.

By order filed March 2, 2017, this Court granted the Crockers’ unopposed motion to dismiss

their cross-appeal for lack of subject-matter jurisdiction. Due to the factually intensive



       2
        While Generational Equity is listed as an appellee in this appeal, the trial court’s
grant of summary judgment in favor of Generational Equity was not appealed and is
unaffected by our decision.

                                              5
nature of this appeal and the extensive record, additional facts and procedural history will be

related throughout the analysis as necessary.

                                STANDARD OF REVIEW

¶16.   We review a trial court’s grant of summary judgment de novo. Mitchell v. Ridgewood

E. Apartments, LLC, 205 So. 3d 1069, 1073 (Miss. 2016) (citing Borries v. Grand Casino,

Inc. 187 So. 3d 1042, 1045 (Miss. 2016)). Under Rule 56 of the Mississippi Rules of Civil

Procedure, “[t]he judgment sought shall be rendered forthwith if the pleadings, depositions,

answers to interrogatories and admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that the moving party is entitled to

a judgment as a matter of law.” Miss. R. Civ. P. 56(c). The burden of demonstrating that

no genuine issue of fact exists is on the moving party and “the non-moving party should be

given the benefit of every reasonable doubt” Borries, 187 So. 3d at 1046. “The evidence is

to be viewed in the light most favorable to the nonmoving party.” Mitchell, 205 So. 3d at

1073 (citing Stribling Inv., LLC v. Mike Rozier Constr. Co., Inc., 189 So. 3d 1216, 1219

(Miss. 2016)).

                                        ANALYSIS

¶17.   Due to the Crockers’ argument on the issue, we initially note that Cunningham’s

expert testimony and report is properly before the Court. It was not challenged in the trial

court below other than argument of counsel at the summary judgment hearing.3 We


       3
         There was no substantive motion to exclude Cunningham’s expert report or any of
his testimony or opinions; there was also no ruling from the trial judge on the issue. We
cannot determine whether the trial judge, in granting summary judgment, considered his
testimony and report insufficient to create a genuine issue of material fact or simply did not

                                                6
consistently have held that we “will not consider issues raised for the first time on appeal.”

Anderson v. LaVere, 136 So. 3d 404, 410 (Miss. 2014) (citing Flagstar Bank, FSB v.

Danos, 46 So. 3d 298, 311 (Miss. 2010)); see Alexander v. Daniel, 904 So. 2d 172, 183

(Miss. 2005) (recognizing “the practical effect of depriving the trial court of the opportunity

to first rule on the issue.”); see also Univ. of Miss. Med. Ctr. v. Peacock, 972 So. 2d 619,

625 (Miss. Ct. App. 2006) (noting the lack of any Daubert4 challenge at the trial level). The

report and testimony is in the record before us. To exclude it would require us to make a

determination as to its admissibility de novo. Our settled review for the admission or

exclusion of expert witnesses, though, is a review for an abuse of discretion. See Patterson

v. Tibbs, 60 So. 3d 742, 748 (Miss. 2011).

¶18.   “The law by which a contract is to be governed is that which parties intended or may

fairly be presumed to have intended.” Cox v. Howard, Weil, Labouisse, Friedrichs, Inc.,

619 So. 2d 908, 911 (Miss. 1993). Here, the Agreement’s choice-of-law provision reads:

       (d)    Law Governing. This Agreement shall be governed by and construed
              in accordance with the law of the State of South Carolina without
              regard to the choice of law principles of the State of South Carolina.

Given this provision, we will apply South Carolina law to the contract between the Danielses

and the Crockers.

¶19.   As a “[c]hoice of law analysis arises only when there is a true conflict between the

laws of two states,” we will apply Mississippi law to the remainder of the Danielses’ claims.


consider the testimony and report at all.
       4
        Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 113 S. Ct. 2786, 125 L. Ed.
2d 469 (1993).

                                              7
Zurich Am. Ins. Co. v. Goodwin, 920 So. 2d 427, 432 (Miss. 2006). There is no “true

conflict between the laws of” Mississippi and South Carolina on any of the Danielses’

noncontractual claims. Id.

       I.     The trial court erred in granting summary judgment on the
              Danielses’ contract, negligent and fraudulent misrepresentation,
              and punitive damages claims.

¶20.   Because the record contains a genuine issue as to material fact concerning the

Danielses’ contract claims and negligent and fraudulent misrepresentation claims, the trial

court erred in granting summary judgment on these claims. Further, because we are

remanding claims to be tried by a jury to determine if the Danielses are entitled to

compensation, we reverse the trial court’s grant of summary judgment on the punitive

damages claim.

              A.     Contract

¶21.   In South Carolina, “[a]n action for breach of contract is an action at law.” Lee v.

Univ. of S.C., 757 S.E.2d 394, 397 (S.C. 2014). “To recover for a breach of contract, the

plaintiff must prove: (1) a binding contract; (2) a breach of contract; and (3) damages

proximately resulting from the breach.” Hennes v. Shaw, 725 S.E.2d 501, 506 (S.C. Ct.

App. 2012) (citing Fuller v. E. Fire & Cas. Ins. Co., 124 S.E.2d 602, 610 (S.C. 1962)).

Under South Carolina law, “[t]he primary concern of the court interpreting a contract is to

give effect to the intent of the parties.” N. Am. Rescue Prod., Inc. v. Richardson, 769

S.E.2d 237, 240 (S.C. 2015). “A contract is ambiguous when it is capable of more than one

meaning or when its meaning is unclear.” Id. “If a contract’s language is unambiguous, the

plain language will determine the contract’s force and effect.” Id.

                                             8
¶22.   The warranty provision at issue here governed the Crockers’ duty to disclose material

information to the Danielses. The warranty stated:

       8. Representations and Warranties of the Seller. To induce the Buyer to enter
       into this Agreement, the Seller and the Crockers make the following
       representations and warranties:
       ...

       (m)     Material Fact. No representation or warranty by the seller contained in
               this Agreement, and no statement contained in the schedules or any
               other document, certificate or other instrument delivered or to be
               delivered by or on behalf of the Seller, pursuant to this Agreement,
               contains or will contain any untrue statement of a material fact or omits
               or will omit to state any material fact necessary, in light of the
               circumstances under which it was or will be made, in order to make the
               statements herein or therein not misleading. The Seller has disclosed
               to the Buyer all material information relating to the Business or the
               transactions contemplated by this Agreement. . . .

(Emphasis added.) The terms “material fact” and “material information” are not defined

within the Agreement. The Agreement, though, is not ambiguous.

¶23.   Therefore, we look to the plain language of the words to interpret the Agreement. A

“fact” is “[s]omething that actually exists . . . . Facts include not just tangible things . . . but

also states of mind such as intentions . . . .” Fact, Blacks Law Dictionary (10th ed. 2014).

A “material fact” is one “that is significant or essential to the issue or matter at hand; esp.,

a fact that makes a difference in the result to be reached in a given case.” Id. “Material

information” is “[i]nformation that would be important to a reasonable investor in making

an investment decision.” Id.

                       1.     2010 Drop in Bookings

¶24.   The Danielses claim the Crockers failed to disclose a forty-two-percent drop in

C&A’s bookings in 2010. The Crockers claim that their disclosures to the Danielses were

                                                 9
sufficient; they argue that the Danielses knew the number of projects that had been booked

in 2010 and could extrapolate the amount of expected future revenue from those bookings.

We find, though, that there are genuine issues of material fact as to whether the Crockers

disclosed “all material information” concerning C&A’s drop in bookings.

¶25.   The offering memorandum—compiled from information GE received from the

Crockers—discussed C&A, its financial history, and its industry. The memorandum also

included past revenue numbers for C&A as well as revenue predictions. The offering

memorandum showed a 26.5 percent decrease in revenue for 2010 but predicted a 17.9

percent growth for 2011. In her deposition, Gail admitted that “the Offering Memorandum

was prepared based primarily upon information that Dennis and I provided to Generational

Equity. The Offering Memorandum contains historical income figures of [C&A] and also

projected future performance. I provided the projected future performance numbers.” A

genuine issue of material fact remains as to whether the Danielses could have been aware of

a drop in bookings in 2010 from the information in the offering memorandum.

¶26.   Marc’s and Gail’s affidavits demonstrate multiple genuine issues of material fact as

to whether Marc was aware of C&A’s drop in bookings in 2010. Marc denied that Gail and

Dennis had told him about a drop in bookings at C&A. He claimed, “Neither Gail nor

Dennis disclosed that bookings in 2010 had dropped precipitously—by over 40%—either at

the [October 2010 due diligence] meeting in Rock Hill or at any other time before the sale

of [C&A].” Gail claimed to have told Marc that bookings had dropped in 2010. In her

affidavit, she alleged, “At this meeting, we also told Marc that 2010 sales or bookings were

lower than usual, and I explained to him the reasons for that. Marc clearly understood that

                                            10
2010 was a down year in sales for [C&A].”

¶27.   As part of the documents requested by the lender, the Crockers sent an outstanding

commissions report, dated November 30, 2010, that showed the number of bookings that

were booked and uncollected by C&A. In his affidavit, Marc addressed the November 2010

report provided by the Crockers:

       Th[e] report . . . does not–and did not–convey to me the decline in bookings
       from 2009 to 2010 or the alarming trajectory of [C&A’s] prospects, as it was
       only a snapshot of bookings as a point in November before year end and, in the
       absence of any disclosures[] of any history of orders in prior years, no context
       was provided even for the limited information that was provided. Nor was this
       raw November 2010 orders data supplied with any explanation that would
       have led me to look critically or more closely at 2010 bookings and their
       impact on revenues in the next two years.

¶28.   Thus, it is undisputed that the Crockers did disclose some information concerning

C&A’s actual bookings in 2010. However, factual questions are evident in the record that

must be resolved by a jury as to whether the disclosures revealed 2010’s actual drop in

bookings and its severity.

¶29.   Further, correspondence that Gail did not disclose to the Danielses, which she had sent

to the C&A staff, evidences knowledge of both a drop in 2010 bookings and its severe effect

on the business. On September 1, 2010, to the C&A sales representatives, Gail wrote,

       I regret to have to inform you that Melissa is no longer with us. The decision
       was strictly an economic one and did not come easy. As a result of the slump
       in bookings this year, I found it necessary to start preparing for a potential cash
       flow problem next year.

(Emphasis added.) The next day, on September 2, 2010, again, to the sales representatives,

Gail wrote, “It’s not a secret that our 2010 year to date is very slim (understatement);” On

January 19, 2011—months before the sale to the Danielses, Gail sent a year-end

                                               11
memorandum to the sales force. In the memorandum, Gail wrote, “As we are all aware, our

2010 bookings were pretty sad, however, without belaboring the point, let’s just all breathe

a sigh of relief that 2010 is now over.”

¶30.   Gail acknowledged that the drop in bookings from 2009 to 2010—more than forty

percent—was “fairly dramatic.” When questioned about whether she told the Danielses

about the effect that yearend 2010 bookings would have on revenues, she responded, “No,

nor did he ask.”

¶31.   The Danielses also offer evidence concerning the materiality of the failure to disclose

the 2010 drop in bookings. Brandy Hefner, a credit analyst who assisted in underwriting the

Danielses’ loans to purchase C&A, testified that no one informed her that there had been a

slump in bookings at C&A. She further testified that a decline in bookings would be the type

of information that she would expect a seller to disclose, and if it had been disclosed, she

would have disclosed it to the financial institution issuing the loan for its consideration.

¶32.   Lastly, Cunningham’s testimony and report demonstrated that (1) the Danielses’ due

diligence was sufficient and (2) the Danielses suffered damages due to the Crockers’ failure

to disclose material information about the 2010 drop in bookings. Cunningham testified that

the Crockers “could have been . . . more forthcoming.” Overall, Cunningham felt that Marc

had “performed reasonable due diligence.” Further, Cunningham’s report showed that the

Danielses had paid $2,915,000 in excess of the estimated fair market value of C&A.

¶33.   The trial court’s reliance on Gardner v. Little, 755 So. 2d 1273 (Miss. Ct. App. 2000),

for the proposition that the Danielses had ample time “to investigate the financial status” of

C&A was error. In Gardner, the addendum to the purchase agreement provided: “Sellers do

                                              12
not warrant the absolute accuracy of any financial statements, and Purchasers are not relying

on any of same to consummate this transaction.” Id. at 1274. Here, though, “to induce the

[Danielses] to enter into this Agreement,” the Crockers specifically warranted that “[n]o

representation or warranty . . . in this Agreement . . . omits or will omit to state any material

fact necessary, in light of the circumstances under which it was or will be made, in order to

make the statements herein or therein not misleading.” The Crockers also warranted that

they had “disclosed to the Buyer all material information relating to the Business or the

transactions contemplated by this Agreement.” In Gardner, the sellers included a disclaimer

concerning the accuracy of the information. Id. Gardner is distinguishable here where the

Crockers claimed both that the information disclosed was accurate and that they had

disclosed all material information.

¶34.   Gail and Dennis assumed a contractual duty to disclose the 2010 drop in bookings.

The evidence in the record demonstrates a factual dispute for the jury to resolve as to whether

the actual 2010 drop in bookings and Gail’s communication with the sales staff (or at least

the substance of its contents) were material information under the agreement that should have

been disclosed. We reverse the trial court’s grant of summary judgment on the issue of

whether or not the Crockers complied with their duty to disclose all material information.

                      2.     Aqua’s Decision to Solicit Purchase
                             Offers

¶35.   The Danielses claim that the Crockers failed to disclose the fact that Aqua’s board had

approved a valuation exercise eight days before C&A was sold. Dennis admits that he did

not disclose the valuation but argues that it was not material information related to C&A’s


                                               13
value, especially since Aqua never sold.        We find that the evidence in the record

demonstrates a genuine issue of material fact both as to value and causation and as to C&A’s

demise.

¶36.   Dennis knew that Aqua was accepting purchase offers as a means of valuation and

gauging the possibility of a future sale. Answering when he first became aware of an

“ownership transition plan,” Dennis stated, “That was March 23rd, 2011, in the board

meeting.” This was eight days before the Crockers sold C&A to the Daniels. Dennis

described the meeting: “There was a discussion about . . . go[ing] to five or six different

companies . . . to ascertain what value [Aqua] might have and based on the valuations as to

whether or not [Aqua] might be interested in selling.” Aqua received board approval to

proceed. The record does not indicate that any board member either abstained or voted

against the decision. It is undisputed that Dennis considered his obligations to the Danielses:

       I did consider the position that it put me in, and I wondered what I could do
       about it, but I was in a fiduciary responsibility and a secrecy agreement with
       [Aqua] that I could not violate, and if I did so, it would be at the risk of even
       a lawsuit from them back at me.

Dennis stated that he did not consult a lawyer about his obligation to the Danielses. He did

state, however, that he spoke with Robert Wimmer, Aqua’s chief executive officer, about

possibly informing the Danielses of Aqua’s valuation. Recounting his conversation with

Wimmer, Dennis stated,

       He told me I had a fiduciary responsibility to [Aqua] that superceded any other
       responsibility, that I was sworn to secrecy, and that if I divulged the
       information I had and that it ultimately damaged him with his rep force in the
       field, that I could expect legal action from him.

¶37.   However, Wimmer did not remember the conversation that Dennis claimed to have

                                              14
had with him. Also, Wimmer testified that he was not sure when he found out that Dennis

was selling C&A and did not believe that he “knew anything about it” on March 23, 2011.

Wimmer testified in his deposition that “in[] executive session . . . the shareholders and

directors that were present [were told] that [Aqua] might entertain selling the business.” He

acknowledged that Dennis was present at the meeting. He also testified that Dennis “[f]rom

that day on” was privy to the discussion about ownership transition decisions.

¶38.   We find a genuine issue of material fact exists as to whether the Crockers’ failure to

disclose Aqua’s valuation caused or contributed to the demise of C&A and subsequently

damaged the Danielses. In his affidavit, Marc claims that he would not have gone through

with the transaction had he known about Aqua’s marketing. He avers that news of Aqua’s

marketing destabilized C&A’s sales representatives when they heard about it from a

competitor. According to Marc, C&A’s sales representatives were worried about whether

Aqua would continue its contracts with C&A if it was bought by an investor with allegiances

to other representative firms. Many of Marc’s claims are disputed, but, as with all disputes

of fact, that is a determination for the jury.

¶39.   A genuine issue of material fact also exists as to whether the failure to disclose Aqua’s

decision to solicit purchase offers was material. Throughout the record, the parties agree that

Aqua represented fifty to seventy percent of C&A’s annual revenue. Further, Cunningham

testified that the actions of Aqua’s board at the March 23 meeting “change[d] everything”

and “change[d] the valuation substantially.” Also, he testified that the decision to sell Aqua

was a “material event.” He found the decision to sell Aqua “extremely relevant” and could

not “see how anyone [could] argue that it was not a material fact that [Aqua] had been put

                                                 15
up for sale.” Also, Hefner testified that the decision of Aqua’s board to market Aqua “would

have been information that I would have needed to provide to the loan officer.”

¶40.   Cunningham’s report and testimony also demonstrated a genuine issue of material fact

as to whether or not the Danielses suffered damages. Cunningham’s report concluded that

the Danielses paid $2,915,000 in excess of the estimated fair market value.            Also,

Cunningham’s testimony reaffirmed Marc’s claim that he would not have purchased C&A

had he known Aqua’s leadership was considering selling.

¶41.   We acknowledge that Dennis was in a difficult position within the bounds of

corporate law, but it was of his own making. He willingly warranted that he had disclosed

all material information related to C&A to the Danielses despite not disclosing the

information subject to the duty of confidentiality to Aqua he had assumed eight days earlier.

¶42.   A director of a corporation owes duties to the corporation that he serves and,

equitably, to its shareholders. Among these duties, a director owes a duty of care and a duty

of loyalty. Derouen v. Murray, 604 So. 2d 1086, 1092 (Miss. 1992); Omnibank of Mantee

v. United S. Bank, 607 So. 2d 76, 84, 90 (Miss. 1992). The duty of care is

       a duty to perform the officer’s or director’s functions in good faith, in a
       manner that he or she reasonably believe to be in the best interest of the
       corporation, and with the care that an ordinarily prudent person would
       reasonably be expected to exercise in a like position and under similar
       circumstances.

Derouen, 604 So. 2d at 1092.

¶43.   The duty of loyalty—the duty at issue here—“arises in that the officer or director

stands in a fiduciary relationship to his corporation and shareholders.” Id. Fiduciaries must

be “held to something stricter than the morals of the market place.” Meinhard v. Salmon,

                                             16
164 N.E. 545, 546 (N.Y. 1928). Further, the duty of loyalty “imports proscriptions on

conflicts of interest.” Derouen, 604 So. 2d at 1092. One such proscription is the duty to

maintain the confidentiality of corporate information. See Brophy v. Cities Serv. Co., 70

A.2d 5, 7–8 (Del. Ch. 1949) (“A fiduciary is . . . not to use on his own account information

confidentially given him by the beneficiary or acquired by him during the course . . . of the

fiduciary relation or in violation of his duties as fiduciary . . . unless the information is a

matter of general knowledge.”); Oberly v. Kirby, 592 A.2d 445, 463 (Del. 1991) (“It is an act

of disloyalty for a fiduciary to profit personally from the use of information secured in a

confidential relationship.”).

¶44.   Thus, Dennis was correct that he had a fiduciary duty to Aqua not to disclose the

impending sale. Dennis assumed this duty to Aqua on March 23, 2011, at the board meeting.

Eight days later, on March 31, 2011, he signed the Agreement with the Danielses that

included the warranty that he had disclosed all material information relating to C&A.

¶45.   There is enough evidence in the record to create a genuine issue of material fact as to

whether Dennis breached the Agreement by assuming a duty to Aqua and then warrantying

to the Danielses that he had disclosed all material information to them. Dennis cannot use

his duty to Aqua to shield himself from liability where he learned of material information due

to his fiduciary relationship and eight days later warranted to a third party that he had

disclosed all material information—despite withholding the confidential corporate

information.

¶46.   To be clear, the Danielses were not entitled—at any point—to Aqua’s confidential

corporate information, but Dennis cannot now avoid all liability where he voluntarily

                                              17
assumed two conflicting duties.5 Indeed, per the Agreement, his warranty to the Danielses

served to induce the Danielses to purchase C&A. Dennis cannot mislead the Danielses,

either affirmatively or through silence, and then attempt to avoid personal liability because

of a pre-existing obligation to Aqua not to disclose certain information. As a fiduciary,

Dennis was obligated to Aqua before he voluntarily assumed a conflicting duty of disclosure

to the Danielses.

¶47.   This is not to say, though, that Dennis assumed any fiduciary duties to the Danielses;

we merely hold Dennis to his assumed contractual duty. Dennis’s testimony was clear that

he weighed the threat of legal action by Aqua against not disclosing the information to the

Danielses. In essence, Dennis chose his lawsuit. To be clear, he had options. He could have

simply not warranted that he had disclosed all material information to the Danielses or

warranted that he had disclosed only to the extent permitted by his fiduciary duties to Aqua.

However, this obviously would have raised red flags and potentially affected the deal. This

possibility does not relieve Dennis of his legal responsibility.

¶48.   Dennis assumed a contractual duty to the Danielses to disclose all material

information relating to C&A to the Danielses. A genuine issue of material fact existed as to

whether or not Aqua’s decision to solicit purchase offers was material. Thus, the genuine

issue of material fact precludes summary judgment here as well.




       5
        It is well-known that “one cannot serve two masters.” As the pioneering rock group
AC/DC recognized, “He’s double dealing with your best friend / That’s when the tear drops
start.”

                                             18
                      3.    Dennis Crocker’s Intent to Sell His Stock

¶49.   The Danielses also claim that the Crockers failed to disclose Dennis’s intent at the

time of selling C&A to sell or redeem his stock in Aqua. The Crockers point out that Dennis

did not seek to redeem his stock until seven months after the sale of C&A. Wimmer testified

that the ownership transition decision, presented to Aqua’s board on March 23, 2010,

included the sale of at least some of Aqua’s shares. Further, Dennis testified, “Heretofore,

we had always presumed the only way that we would ever get the value for our stock would

be to die and our estate would get it.” He also testified that he had “really gotten anxious

hoping that we would sell” Aqua because “[t]hat would represent quite a piece of money.”

It is undisputed that Dennis did raise the issue of Aqua redeeming his stock once he was

informed in October 2011 that Aqua was not going to be sold; Aqua redeemed Dennis’s

stock in 2011. Thus, a genuine issue as of material fact exists in the record as to whether

Dennis planned to sell his stock as part of the Aqua transaction or otherwise, before he sold

C&A to the Daniels.

¶50.   Further, Marc’s affidavit precludes summary judgment as to materiality. In his

affidavit, Marc stated that, at the October meeting, “The Crockers touted the longstanding

relationship Dennis had (and continued to have) with Aqua as founder, director and

shareholder.” According to Stephen, Dennis represented that Aqua would not cancel its

contracts as long as Dennis held his stock in Aqua. Stephen testified that Dennis, in response

to a question as to whether or not Aqua would stop using C&A, said, “not as long as I own

stock in it.” Regarding this representation, Cunningham testified that Dennis “implied . . .

that there was no intention of selling the company.” In his affidavit, Marc alleged that he

                                             19
would not have gone through with the purchase of C&A had the sale of Dennis’s stock been

discussed. Regarding the materiality of Dennis’s failure to disclose to C&A his plans to sell

or redeem his stock, Marc claimed that “no other principal cancelled [C&A]. It was limited

to Aqua. And the only thing that had changed was that there was no longer a Crocker

connection.”

¶51.   The Danielses assert that the Crockers’ words to the Danielses after the sale of C&A

provided further evidence of genuine issues of material fact as to whether or not Dennis’s

intent to sell his stock was material information under the Agreement. In a letter to Marc on

January 26, 2012, after the sale of C&A, Dennis wrote:

       First, I have sold all of my stock in Aqua . . . . I no longer sit on the Board of
       directors . . . . I am no longer an asset for you there. The bond between
       [C&A] and [Aqua] no longer exists, I.e. [sic] C&A is no longer a sacred cow.
       So you want to make sure that you are in their good grace. . . . Without
       AQUA, YOU ARE DEAD !! Don’t ever lose sight of that.

(Emphasis added.) The fact that Dennis had viewed himself at Aqua as an asset to the

Danielses is some evidence of a genuine issue of material fact that should have precluded

summary judgment.

¶52.   Dennis must have had the intention to sell his stock before entering into the

Agreement with the Danielses before signing the Agreement on March 31, 2011, for the

Danielses to prevail on this issue. The evidence in the record demonstrates a genuine issue

of material fact on this point. There is evidence that Dennis knew that the original transition

plan included the sale of his own stock. Once the transition plan fell through, Dennis

pursued redemption of his stock, and Aqua redeemed his stock. There is also evidence that

he communicated to the Danielses that his stock ownership in Aqua was significant to

                                              20
C&A’s success.

                B.      Negligent and Fraudulent Misrepresentation6

¶53.     The elements of a negligent misrepresentation claim are:

         (1) a misrepresentation or omission of a fact; (2) that the representation or
         omission is material or significant; (3) that the person/entity charged with the
         negligence failed to exercise that degree of diligence and expertise the public
         is entitled to expect of such persons/entities; (4) that the plaintiff reasonably
         relied upon the misrepresentation or omission; and (5) that the plaintiff
         suffered damages as a direct and proximate result of such reasonable reliance.

Saucier v. Peoples Bank of Biloxi, 150 So. 3d 719, 731 (Miss. Ct. App. 2014) (quoting

Hazlehurst Lumber Co. v. Miss. Forestry Comm’n, 983 So. 2d 309, 313 (Miss. 2008)).

These “elements must be proven by a preponderance of the evidence.” Holland v. Peoples

Bank & Trust Co., 3 So. 3d 94, 101 (Miss. 2008).

¶54.     The elements of a fraudulent misrepresentation claim are:

         (1) a representation, (2) its falsity, (3) its materiality, (4) the speaker’s
         knowledge of its falsity or ignorance of its truth, (5) his intent that it should be
         acted on by the hearer and in the manner reasonably contemplated, (6) the
         hearer’s ignorance of its falsity, (7) his reliance on its truth, (8) his right to rely
         thereon, and (9) his consequent and proximate injury.

Virginia Coll., LLC v. Blackmon, 109 So. 3d 1050, 1054-55 (Miss. 2013) (quoting Schmidt

v. Catholic Diocese of Biloxi, 18 So. 3d 814, 831 (Miss. 2009)). These elements “must be

proven by clear and convincing evidence.” Levens v. Campbell, 733 So. 2d 753, 761 (Miss.

1999).

¶55.     We have long recognized the principle that a party is liable for its silence where its



         6
         The facts relevant to this issue that were discussed under the Contract analysis, in
(I)(A) above, are incorporated by reference into this analysis.

                                                   21
silence “relate[s] to material fact or matter known to the party and . . . it is [the party’s] legal

duty to communicate to the other contracting party.” Guastella v. Wardell, 198 So. 2d 227,

230 (Miss. 1967). Further, “the duty to disclose is based upon a theory of fraud that

recognizes that the failure of a party to a business transaction to speak may amount to

suppression of a material fact which should have been disclosed and is, in effect, fraud.”

Green Realty Mgmt. Corp. v. Mississippi Transp. Comm’n, 4 So. 3d 347, 350 (Miss. 2009).

Also, the Restatement (Second) of Torts provides that a “party to a business transaction is

under a duty to exercise reasonable care to disclose to the other before the transaction is

consummated . . . matters known to him that he knows to be necessary to prevent his partial

or ambiguous statement of the facts from being misleading.” Restatement (Second) of Torts

§ 551(2)(b) (1977).

¶56.   The record contains no evidence that the alleged fraud by the Crockers was overt in

nature. However, the record contains enough evidence to reverse the grant of summary

judgment on the Danielses’ fraudulent-misrepresentation claims due to the factual question

of whether or not the Crockers’ silence about material facts was fraudulent.

                       1.     2010 Drop in Bookings

¶57.   As set forth supra, a factual dispute exists as to whether or not the Crockers disclosed

the previous history of C&A’s bookings that would have allowed the Danielses to discover

the drop in bookings in 2010 and whether the Crockers knew that 2010’s low bookings

would affect C&A’s future.

¶58.   Sufficient evidence exists to establish a genuine issue as to whether or not the

Crockers knew the drop in bookings would affect C&A’s finances, whether they failed to

                                                22
disclose their knowledge of the impact and whether this silence amounted to fraud.

¶59.   Under Mississippi law, silence concerning a material fact may amount to fraudulent

suppression of that fact where the silent party knows that its silence will be relied on by the

other party. See Green, 4 So. 3d at 350. Therefore, a genuine issue of material fact exists

as to both negligent and fraudulent misrepresentation on this issue.

                     2.      Aqua’s Decision to Solicit Purchase
                             Offers and Dennis Crocker’s Intent to
                             Sell His Stock

¶60.   Sufficient evidence is present in the record to create a genuine issue of material fact

concerning whether or not the Crockers are liable for misrepresentation on the issues of

Dennis’s knowledge, the materiality of Aqua’s decision to solicit purchase offers, and

Dennis’s intent to sell his stock. While the evidence on the issue does not indicate fraud of

an overt nature, the record demonstrates enough evidence to create a question for a jury as

to whether the Crockers’ silence was, in fact, fraudulent. Dennis knew that Aqua had

decided to solicit purchase offers when he signed the Agreement with the Danielses. There

also is evidence that he knew any potential sale of Aqua would include his stock in Aqua.

While Wimmer testified that the board of directors was “very surprised” by the proposal to

sell Aqua, surprise is not enough to relieve Dennis and the Crockers of their legal duty to

disclose once they knew of the proposed sale of Aqua and Dennis’s stock in Aqua. The

Crockers had a duty to disclose “matters . . . that [they] kn[ew] to be necessary to prevent

[their] partial or ambiguous statement of the facts from being misleading.” Therefore, a

genuine issue of material fact exists as to both negligent and fraudulent misrepresentation on

this issue.

                                              23
               C.      Punitive Damages

¶61.   In their amended complaint, the Danielses plead a claim for punitive damages. We

find that the trial court erred in granting summary judgment on this claim. To prevail on a

claim for punitive damages, “the plaintiff ‘must prove that the breach was the result of an

intentional wrong or that a defendant acted maliciously or with reckless disregard of the

plaintiff’s rights.’” T.C.B. Constr. Co. v. W.C. Fore Trucking, Inc., 134 So. 3d 701, 704

(Miss. 2013) (quoting Pursue Energy Corp. v. Abernathy, 77 So. 3d 1094, 1101 (Miss.

2011)) (“An award of punitive damages is an extraordinary remedy, reserved for the most

egregious cases, and designed to discourage similar misconduct.”); see also Miss. Code Ann.

§ 11-1-65(1)(a) (Rev. 2014) (recognizing that punitive damages are proper only in cases of

“actual malice, gross negligence which evidences a willful, wanton or reckless disregard for

the safety of others, or . . . actual fraud.”).

¶62.   Section 11-1-65(1)(b) provides that “[i]n any action in which the claimant seeks an

award of punitive damages, the trier of fact shall first determine whether compensatory

damages are to be awarded and in what amount, before addressing any issues related to

punitive damages.” Miss. Code Ann. § 11-1-65 (1)(b) (Rev. 2014). As we are remanding

several of the Danielses’ claims to be tried, it is appropriate here to reverse the grant of

summary judgment on punitive damages. The issue of punitive damages should be addressed

by the trial judge in accordance with Section 11-1-65(1)(b) after it is determined whether or

not the Danielses are entitled to an award for compensatory damages.




                                                  24
       II.    The trial court properly granted summary judgment on the
              Danielses’ indemnity and rescission claims as well as Marc’s and
              Sandra Daniels’ claims, individually.

¶63.   The trial court properly granted summary judgment to the Crockers on the Danielses’

indemnity and rescission claims. Further, Marc’s and Sandra’s claims, as individuals, fail

as a matter of law.

              A.      Indemnity

¶64.   The Danielses claim that they are entitled to indemnification by the Crockers pursuant

to the Agreement. As already discussed, we will apply South Carolina law to the issues

governed by the Agreement. See Miller, 481 So. 2d at 262.

¶65.   “Contractual indemnity involves a transfer of risk for consideration, and the contract

itself establishes the relationship between the parties.” Rock Hill Tel. Co. v. Globe

Commc’ns, Inc., 611 S.E.2d 235, 237 (S.C. 2005). The provision at issue states:

       (a)    Indemnification by the Seller. . . . The Seller and the Crockers, jointly
              and severally, shall indemnify, defend, and hold Buyer harmless from,
              and reimburse the Buyer for, any losses, fees, costs, expenses, damages,
              liabilities, or claims (including, without limitation reasonable attorneys’
              fees and costs) arising out of, based upon, or resulting from . . .
              misrepresentations or inaccuracy contained in any representation or
              warranty of the Seller in this Agreement. . . .

       (b)    Notice of Claims. The Buyer shall promptly give written notice of its
              claim to the Seller and the Crockers (collectively, the “Indemnifying
              Party”) whenever the Buyer shall have determined that there are facts
              or circumstances which render the Indemnifying Party liable for
              indemnification under this Section . . . . Such notice . . . shall set forth
              in reasonable detail the basis for the claim, the nature of the liabilities
              and the amount thereof, to the extent known.

(Emphasis added.) In their amended complaint, the Danielses did not allege that they

“promptly g[a]ve written notice” of their claim to the Crockers. After a review of the record,

                                              25
we are convinced that the Danielses did not comply with this condition in the Agreement.

Thus, the trial court did not err in granting summary judgment on the Danielses’ indemnity

claims against the Crockers.

              B.     Rescission

¶66.   The Danielses also asked the trial court to rescind the sale of C&A. “Rescission of

a contract is allowed in cases of fraud, mistake, or material breach.” Jackson Motor

Speedway, Inc. v. Ford, 914 So. 2d 779, 783 (Miss. Ct. App. 2005) (citing Cenac v. Murry,

609 So. 2d 1257, 1273 (Miss. 1992)). To prevail on a claim for rescission of a contract, a

party must “pro[ve] . . . fraud by clear and convincing evidence.” Ezell v. Robbins, 533 So.

2d 457, 461 (Miss. 1988). Further, “[u]pon discovery []of [the fraud], the one defrauded

must act promptly and finally to repudiate the agreement.” Turner v. Wakefield, 481 So. 2d

846, 849 (Miss. 1985) (citing Stoner v. Marshall, 358 P.2d 1021, 1022-23 (Colo. 1961)); see

also Gardner, 755 So. 2d at 1276 (recognizing a party’s duty, upon discovery of fraud, “to

either promptly rescind the contract or affirm the contract and maintain an action in

damages.”).

¶67.   The Danielses’ claim for rescission fails as a matter of law. The Danielses did not

“act promptly and finally to repudiate the agreement” when they discovered the actions that

they believed were fraudulent. By January 26 2012, the Danielses knew about the 2010 drop

in bookings, Aqua’s decision to solicit purchase offers and Dennis’s selling of his stock.

However, the Danielses waited until October 2012 to attempt a rescission of the Agreement.

While the delay does not affect their other claims, a claim of rescission requires “prompt”

action. Therefore, the trial court did not err in granting summary judgment to the Crockers

                                            26
on the Danielses’ rescission claim because there was no genuine issue as to material fact as

a matter of law.

              C.     Marc and Sandra Daniels’s Claims, Individually

¶68.   Lastly, the trial court properly granted summary judgment on Marc and Sandra

Daniels’s claims as individuals. In Mississippi, “a corporation is a separate, distinct entity

from its stockholders.” Durham v. Univ. of Miss., 966 So. 2d 832, 835 (Miss. Ct. App.

2007). Further, “an individual shareholder of [a company] does not have standing to pursue

[a] claim for damages from an alleged breach” of contract. Id. These governing principles

hold true in cases of fraud as well. See Schiff v. Mao, Inc., 31 So. 3d 650, 652 (Miss. Ct.

App. 2010) (“[Plaintiff] was never a party to the agreement that forms the basis of his fraud

claim.”). Therefore, the trial court’s grant of summary judgment was proper.

                                      CONCLUSION

¶69.   Because the record demonstrates genuine issues of material fact as to the Danielses’

contract, negligent and fraudulent misrepresentation, and punitive damages claims, we

reverse in part the grant of summary judgment. Since the trial court properly granted

summary judgment on the Daniels’s rescission and indemnity claims as well as Marc and

Sandra Daniels’s claims as individuals, we also affirm in part the grant of summary

judgment. We remand this case to the trial court for further proceedings consistent with this

opinion.

¶70.   AFFIRMED IN PART; REVERSED IN PART AND REMANDED.

    WALLER, C.J., RANDOLPH, P.J., KITCHENS, KING, COLEMAN,
MAXWELL AND BEAM, JJ., CONCUR.         DICKINSON, P.J., NOT
PARTICIPATING.

                                             27
