Opinion
No. COA15-881
04-05-2016
EHP LAND CO., Plaintiff, v. VIRGINIA W. BOSHER, ROBERT M. BOSHER, CHRISTINA BOSHER HERZ, CAROLYN BOSHER MALONEY, ROBERT M. BOSHER, JR., JENNIFER L. BOSHER, JOHN P. DOOLEY, MICHAEL C. DOOLEY, SARAH E. HERZ, ANDREW T. HERZ, CHRISTINA P. MALONEY, VIRGINIA M. MALONEY, CLIFTON H.W. MALONEY, PHIL UPTON, CINDY W. BOSHER, and HPB ENTERPRISES, a North Carolina General Partnership, Defendants.
Trimpi & Nash LLP, by John G. Trimpi, for the Plaintiff-Appellee. Wilson & Ratledge, PLLC, by N. Hunter Wyche, Jr., for the Appellee-Receiver. Graebe Hanna & Sullivan, PLLC, by Christopher T. Graebe and Mark R. Sigmon, for the Defendant-Appellant.
An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority. Citation is disfavored, but may be permitted in accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure. Perquimans County, No. 07 CVS 59 Appeal by Defendant from order entered 30 April 2015 by Judge John R. Jolly, Jr., in Perquimans County Superior Court. Heard in the Court of Appeals 12 January 2016. Trimpi & Nash LLP, by John G. Trimpi, for the Plaintiff-Appellee. Wilson & Ratledge, PLLC, by N. Hunter Wyche, Jr., for the Appellee-Receiver. Graebe Hanna & Sullivan, PLLC, by Christopher T. Graebe and Mark R. Sigmon, for the Defendant-Appellant. DILLON, Judge.
Virginia W. Bosher ("Defendant") appeals from the trial court's order approving a receiver's final report, directing the receiver's final distribution of the assets under receivership, and terminating the receivership. For the following reasons, we affirm.
I. Background
HPB Enterprises (the "Partnership") is a North Carolina general partnership formed for the purpose of acquiring, owning, and developing real estate in Perquimans County. This dispute arises out of the winding up of the Partnership's affairs.
In 1987, the Partnership was formed with its primary asset being approximately 750 acres of undeveloped real estate. In the years that followed, the Partnership successfully developed and marketed the real estate as a residential resort known as Albemarle Plantation. The acreage was developed into a golf course, pools, a marina, a fitness center, a sewer and utility plant, condominiums, and residential lots. EHP Land Co., Inc. ("EHP") is a North Carolina corporation and was an original partner in the Partnership.
In the late 1990s, under the leadership of EHP's president, Elwood Perry, Jr., EHP took over primary management of the Partnership due to the declining health of another Partnership partner, Ralph Bosher.
In May of 2001, Mr. Bosher assigned his remaining ownership interest in the Partnership to his children and some extended family members.
In October of 2005, EHP notified the Partnership that it intended to withdraw from the Partnership. The other partners, including Defendant, accepted EHP's withdrawal and elected to purchase EHP's twenty-five percent (25%) interest. However, a dispute arose regarding the interpretation of the formula for calculating the price of a withdrawing partner's interest under the Partnership Agreement. EHP thereafter filed a complaint in Perquimans County Superior Court seeking payment under its interpretation of this formula.
In June of 2011, the trial court entered summary judgment in favor of EHP against both Defendant and the Estate of Ralph Bosher, each in the amount of $1,418,588.28 plus interest at the legal rate of eight percent (8%) annually. On appeal, this Court affirmed the order of the trial court. See EHP Land Co., Inc. v. Bosher, 219 N.C. App. 650, 723 S.E.2d 174, 2012 WL 1117587 (2012) (unpublished opinion).
In the intervening time, Christina Bosher and Carolyn Bosher Maloney sought dissolution of the Partnership under court supervision, or alternately, moved for the emergency appointment of a receiver for the purpose of winding up the Partnership's affairs. The matter was designated a complex business case and came on for a hearing before the Honorable John R. Jolly, Jr.
On 3 January 2008, Judge Jolly entered an order directing, inter alia, that no party undertake any new commitments or make any major expenditures in connection with the operation of the enterprise and that certain funds deposited the previous week by Defendant, in addition to other expected receivables, be placed in the operating account for payroll and other current expenses.
On 4 January 2008, Christina Bosher and Carolyn Bosher Maloney renewed their motion for the appointment of a receiver and moved the trial court for an order to show cause why Defendant should not be held in contempt for violating the 3 January 2008 order. On 8 January 2008, the court ordered Defendant to appear and show cause for her failure to comply with the prior order. Following the show cause hearing, the court entered a consent order dissolving the show cause order, appointing N. Hunter Wyche as the receiver of the Partnership, and enjoining Defendant or her relatives, agents, successors, or assigns from acting on behalf of the Partnership.
The court made one exception to this prohibition for Earl Upton, ordering that he act at the direction of the receiver only.
On 30 April 2015, after extensive proceedings monitoring the receiver's progress and approving various transactions recommended by the receiver, the trial court entered an order approving the receiver's final report, directing a final distribution, and terminating the receiver's services. Specifically, in relevant part for purposes of the present appeal, the court concluded that the receiver's recommended compensation for services rendered during the receivership by Mr. Perry was reasonable, and ordered that Mr. Perry be paid $212,500.00 for these services. Further, the court found that an offer submitted by Perquimans Development, LLC ("Perquimans Development") for the release of a lien on the stock of Albemarle Utility Company, the company operating the utility plant at Albemarle Plantation, was "the highest and best offer available" for this Partnership asset, ordering the receiver to accept the offer and consummate the deal. Defendant entered written notice of appeal.
II. Analysis
Defendant makes two arguments on appeal, which we address in turn.
A. Mr. Perry's Compensation
Defendant first argues that the trial court erred in determining that Mr. Perry was entitled to $212,500.00 for his services during the receivership. Specifically, Defendant contends that the court's determination was error because it violated an earlier agreement setting out the formula for calculating Mr. Perry's commission under that agreement. We disagree.
Generally speaking, appointment of a receiver is appropriate where the "plaintiff establishes an apparent right to specific property which is the subject of the action and is in possession of the adverse party or where specific property, or its rents and profits, are in danger of being lost or materially injured or impaired." Murphy v. Murphy, 261 N.C. 95, 101, 134 S.E.2d 148, 153 (1964). Receivership is commonly used "to preserve . . . specific property . . . and [] as a State substitute for Federal bankruptcy, to prevent preferences and to assure the equitable distribution of the assets of an insolvent." Sinclair v. Moore Cent. R. Co., 228 N.C. 389, 395, 45 S.E.2d 555, 560 (1947).
Accordingly, while the scope of a receiver's authority is circumscribed by the appointment of the court creating it, within the limits of that authority, the receiver may "impose liability upon the estate[.]" Harrison v. Brown, 222 N.C. 610, 614, 24 S.E.2d 470, 472 (1943). Costs of administration are one such liability, and are given priority over all other claims against the estate once preexisting liens are satisfied. Nat'l Sur. Corp. v. Sharpe, 236 N.C. 35, 52-53, 72 S.E.2d 109, 124-25 (1952). Such costs include those incurred in selling receivership property. Id. at 53, 72 S.E.2d at 125.
Our Supreme Court has held that a trial court's decision to allow payment of the administrative costs of a receivership cannot be disturbed on appeal unless "based on the wrong principle, or clearly inadequate or excessive." King v. Premo & King, Inc., 258 N.C. 701, 712, 129 S.E.2d 493, 500 (1963). That is, "[w]hile the [trial] court is vested with discretion . . . and its action is presumptively correct, [] its discretion must . . . not [be] abused[.]" Id.
In the present case, we hold that the trial court did not abuse its discretion in approving Mr. Perry's compensation. In the order being appealed, the court found that Mr. Perry was integral to negotiating the sale of the receivership property; that he had provided the receiver with valuable advice during the pendency of the receivership; and that he had secured financing necessary for the enterprise to continue to meet its ongoing capital needs while under receivership. Based on the receiver's recommendation regarding Mr. Perry's compensation for these services, the court found that $212,500.00 was reasonable under the circumstances, and ordered that he be paid this amount. This order was entered upon termination of the receivership, which had originated with an order specifically authorizing the receiver to contract with Mr. Perry as a consultant. Based on the court's previous authorization to engage his services, and its detailed, unchallenged findings regarding their value, we conclude that the court did not abuse its discretion in approving his payment for these services. Accordingly, this argument is overruled.
Defendant chiefly argues that the court's determination was error based on a provision in a 2009 purchase agreement between the Partnership and an earlier suitor interested in acquiring certain receivership property. Specifically, Defendant cites the provision from this agreement setting out the formula for calculating Mr. Perry's commission, which states that the commission is payable only out of actual principal received by the Partnership. However, Mr. Perry was not a party to this agreement, and the trial court's subsequent approval of Mr. Perry's compensation was not predicated on any contractual right of Mr. Perry under this agreement.
B. Best Offer for Lien on Albemarle Utility Company Stock
Defendant next argues that the trial court erred in allowing the receiver to sell the Partnership's lien interest in the Albemarle Utility Company stock to Perquimans Development where she presented what she asserts was a superior offer. Specifically, Defendant contends that the court erred in allowing the receiver to accept the offer by Perquimans Development because it was not in the best interests of the Partnership and its creditors. We disagree.
Generally, "[w]ith respect to the court, the parties to the suit in which he is appointed, creditors and other interested persons, and the property in receivership, the position of the receiver is that of an officer of the court." Lowder v. All Star Mills, Inc., 309 N.C. 695, 701, 309 S.E.2d 193, 198 (1983). Thus, while "[t]he receiver is a representative and protector of the interests of creditors and shareholders alike," see id., "[p]roperty in the actual or constructive possession of the receiver is in custodia legis, as the possession of the receiver is that of the court," see Pelletier v. Greenville Lumber Co., 123 N.C. 596, 599, 31 S.E. 855 (1898) (emphasis in original). As the receiver "is not appointed for the benefit of either party and does not derive his authority from either one," see Lowder, 309 N.C. at 701, 309 S.E.2d at 198, the receiver's authority inheres not in the agency of an owner or creditor, but rather in "the applicable statutes, together with the directions and instructions of the court in its order appointing him," see First-Citizens Bank & Trust Co. v. Berry, 2 N.C. App. 547, 551, 163 S.E.2d 505, 508 (1968). Accordingly, "[t]he receiver [h]olds and disposes of all property coming into his hands in his official capacity under the direction of the court." Id.
Defendant contends that the trial court erred in allowing the receiver to accept what she asserts was an inferior offer for the Partnership's lien on the stock of Albemarle Utility Company. However, as an officer of the court, while responsible for representing and protecting Defendant's interest in Albemarle Utility Company, the receiver also represented all other owners' and creditors' interests in this property. See Lowder, 309 N.C. at 701, 309 S.E.2d at 198. Therefore, the receiver, and the trial court, in approving the receiver's recommendation, was required to act in the best interests of all parties concerned, not just those of Defendant. Accordingly, the superiority of Defendant's offer to herself would not have required its recommendation by the receiver and ultimate approval by the court.
Moreover, the order allowing the acceptance of the competing offer reflects a careful consideration of its merits. Specifically, the court found that Perquimans Development had offered an original, total amount of $115,000 for "(a) release of the [Partnership] lien on [the Albemarle Utility Company stock] (in the amount of $100,000) and (b) release of one lot (in the amount of $15,000)" and that Perquimans Development had agreed to pay an additional $12,000 for certain used Albemarle Utility Company equipment, resulting in a total purchase price of $127,000. Based on these findings, the court concluded that the offer was the highest and best available "without intensive and likely expensive marketing[.]" Based on these unchallenged findings in support of the receiver's recommended disposition of the lien on Albemarle Utility Company, we hold that the trial court did not abuse its discretion in concluding that this offer was the best available. Accordingly, this argument is overruled.
Our Supreme Court has held that "[a] trial court's actions constitute an abuse of discretion upon a showing that the actions are manifestly unsupported by reason and so arbitrary that they could not have been the result of a reasoned decision." State v. Williams, 361 N.C. 78, 81, 637 S.E.2d 523, 525 (2006) (internal marks omitted). In the present case, the trial court's order noted specifically that though Defendant appeared to propose to purchase the note creating the obligation from which the lien arose and the deeds of trust securing the obligation, due to previously approved sales of receivership property, the secured position of these deeds of trust had likely already been "cut off." The trial court, therefore, did not find merit in Defendant's proposal. We note that the court may well have also, without saying as much in its order, agreed with certain characterizations of Defendant's business acumen and general management of the affairs of the Partnership prior to the appointment of the receiver in reaching the conclusion that the Perquimans Development offer was the best available, and may have considered the possibility that prolonging Defendant's involvement in the affairs of Albemarle Plantation after the winding up of the Partnership's affairs was not in the best interests of its owners or creditors going forward. Nevertheless, in holding that the trial court's conclusion was not an abuse of discretion, we need not endorse the precise reasoning employed by the court in reaching the conclusion it did. Rather, we need only address whether the conclusion was the product of a reasoned decision. See id. We hold that it was.
III. Conclusion
For the reasons stated herein, the order of the trial court is affirmed.
AFFIRMED.
Judges BRYANT and ZACHARY concur.
Report per Rule 30(e).