Opinion
No. 215-2012-CV-00037
02-04-2019
WHS Homes, Inc. v. Traditional Living, Inc., et al
ORDER
Judgment in the amount of $1,964,500 was entered against WHS Homes, Inc. ("WHS") in favor of Traditional Living, Inc., ("TLI") on March 28, 2018. WHS has filed a Motion to Reopen the Judgment, Stay Execution and Approve Periodic Payment Plan. TLI objects, and has filed a Motion to Re-Open Case, for Appointment of a Receiver and for Other Relief. For the reasons stated in this Order, the Motion to Reopen the Judgment, Stay Execution and Approve Periodic Payment Plan is DENIED. A hearing shall be held on TLI's request that a Receiver be appointed. In order to maintain the status quo until the pending motions are resolved, the Court orders that pending further order of this Court, the court orders that WHS shall (1) operate its business in the ordinary course, (2) use its cash in the ordinary course and not pay unusual compensation (dividends, salary, loans or other cash distributions) to its owner or members of his family (3) not encumber or permit anyone to encumber any of its assets including equipment and intellectual property, (4) not sell, transfer, or dispose of any production asset having a value in excess of $3000 or any of its intellectual property without first obtaining written permission of TLI; and notify TLI in writing within 5 days of becoming delinquent in the payment of any debt.
I
The judgment entered against WHS arises from a lawsuit which in turn arose from a 2011 Asset Purchase Agreement ("APA") between it and TLI. Essentially, WHS purchased the assets of TLI, a company that manufactured log homes. Among other terms of the APA, WHS agreed to assume $1.7 million of TLI's trade payables. The principal dispute between the parties was what constituted the trade payables under the APA. WHS argued that it fulfilled its liabilities under the APA by assuming approximately $ 2.2 million of TLI's liabilities, consisting of all of TLI's customer contracts and employee vacation time, and some of TLI's trade payables. WHS asserted that the APA permitted it to choose among the categories above at its discretion.
A four-day bench trial was held in October 2015. The trial principally involved TLI's allegation that WH S was responsible for paying $1.7 million in trade payables pursuant to the APA and WHS's allegation that TLI was liable to WHS for a number of missing assets that were not turned over at the closing. By Order dated January 15, 2016 the Court found that the parties intended that WHS pay the trade payables up to $1.7 million prior to deciding whether to assume any other liabilities. The Court found that WHS was liable to TLI in the amount of $1,022,997.99. The Court also determined that WHS is missing assets claim lacked merit. Pursuant to a provision in the APA that awarded attorney's fees to the prevailing party, after hearing the Court awarded TLI approximately $703,000 in attorney's fees and approximately $35,000 in costs.
On February 5, 2016, after WHS filed its notice of appeal, the parties filed a proposed stipulated order that in substance required WHS to operate its business in the ordinary course, and not use its cash to pay unusual compensation to his owner or members of the family, not encumber any of its assets and not sell transfer or dispose of a production asset having a value of more than $3000 or any of its intellectual property. The proposed order also required that TLI would be notified within 5 days of WHS being delinquent in the payment of any debt. The Order provided that it would remain in effect until the New Hampshire Supreme Court acted on the appeal.
The New Hampshire Supreme Court affirmed in an unreported decision. WHS Homes, Inc. v. TLI, Inc. & a, No. 2016-CV-0583 (N.H. Sup. 12/21/17). This Court then directed that the parties file any Motions relating to costs and fees incurred since the Court's prior order by March 1, 2018. Order, February 7, 2018. That time was extended by an Assented Motion which recited that the parties had exchanged information about fees and costs incurred since this Court's decision on the merits in an attempt to reach resolution on those items and pre-judgment interest. Assented Mot. to Extend March 1, 2018 Filing Deadline. Finally, on March 28, 2018 the parties filed an Assented Motion to Enter a Final Judgment Order. The Assented Motion simply recited that the parties "assent to the entry of a final judgment order in the amount of $1,964,500. The parties are submitting a proposed order with the filing of this Assented to Motion". The final judgment order submitted by the parties stated:
Judgment is hereby entered in favor of Defendants/Counter-Plaintiffs, Traditional Living, Inc., Tod H. Schweitzer, and Nestor, Inc. (collectively "TLI") and against Plaintiff/Counter-Defendant WH homes, Inc. ("W page S") in the amount of $1,964,500. This amount includes $1,019,724.21 in damages as described in this Court's Order of January 15, 2016, as modified by its Order of February 11, 2016, prejudgment interest on the damages for March 8, 2013, costs of this action and all attorney's fees incurred by TLI including on appeal. Interest on the judgment shall accrue at the legal rate, Or at such other rate is agreed by the parties, from the date of entry of this order until the judgment is satisfied.Final Judgment Order, March 28, 2018.
However, according to TLI no payment has ever been made on the judgment. WHS has filed a Motion to Reopen Judgment, Stay Execution and Approved Periodic Payment Plan ("Motion to Re-Open"). WHS claims that it consented to the entry of the judgment "if TLI agreed to 2 conditions" and that on March 23, TLI agreed to each one; (1) payment of the judgment be made over time payable on business performance; and (2) Tod Schweitzer is prepared to sell the Claremont real estate WHS rents from TLI's principal, as part of the payment of the judgment. It seeks that this Court stay any steps TLI takes to enforce the judgment and approve a payment plan proposed by WHS, including purchase of the Claremont property for $900,000. WHS also seeks attorney's fees. TLI objects, and seeks appointment of a Receiver.
II
A judgment concludes the parties on all issues that were decided or necessarily involved in the proceedings. See, e.g. Thibeault v. Lambert, 87 N.H. 77 (1934). New Hampshire follows the common-law rule that if a court has jurisdiction of the parties and its proceeding, its judgment, however erroneous, is valid until reversed and set aside and cannot be collaterally attacked. Bickford v. Bickford, 74 N.H. 448 (1908); See generally Restatement (Second) Judgments, §§ 69-72. Nonetheless, New Hampshire courts have long stated that fraud will vitiate a judgment, and a court of equity may declare it a nullity. Wingate v. Haywood, 40 N.H. 437, 441 (1860). More recently, while not deciding whether a judgment may be set aside on grounds of perjury in all cases, the New Hampshire Supreme Court has held that a fraud on the court is sufficient to set aside a judgment. Conant v. O'Meara, 167 N.H. 644, 652 (2015).
WHS does not allege fraud. Rather, it suggests that it consented to the judgment only because TLI agreed to two conditions that the parties had been discussing. No conditions are mentioned to the judgment itself. In support of its argument, WHS quotes an email of March 23, 2018 from TLI's counsel, Geoffrey Witt, Esq. to WHS's counsel, William Chapman, Esq. which provides, in relevant part:
BillWHS asserts that "relying on those two representations, WHS consented and later that afternoon TLI submitted a proposed judgment to the Court". Mot. to Re-Open, ¶ 4.
Following up on our conversation:
1. Tod Schweitzer agrees that payment of the judgment may be made over time payable on business performance).
2. Tod Schweitzer is prepared to sell the Claremont property as part of the payment of the judgment. We have not agreed on the price or terms of any such sale.
Geoffrey
To the extent WHS seeks to set aside the judgment, its argument cannot succeed. In the first place, the judgment does not reference any condition. No such showing has even been alleged, let alone made, that the email between the parties, even if relevant, would establish a binding agreement. The words "business performance" are so vague as to be virtually meaningless. Moreover, a contract for the sale of real estate that does not set forth the price term is unenforceable. MacThompson Realty, Inc. v. City of Nashua, 116 N.H. 175, 179 (2010). A consent decree, like any other judgment, may not be amended absent a showing of accident, fraud or mistake. Town of Bedford v. Brooks, 121 N.H. 262, 266 (1981). It follows that the judgment entered by the court is binding upon the parties.
III
WHS also seeks that the Court enjoin TLI from executing on the judgment and approve its' proposed payment plan to pay the judgment over a period of years. WHS recites that the parties have been attempting to negotiate a payment plan. Significantly, WHS does not seek to have the Court enforce any specific agreement, but rather argues that the Court should "stay any steps TLI takes to enforce the judgment"; and "approve WHS's December 10 payment plan, including purchase of the Claremont property for $900,000". Mot. to Re-Open, Request for Relief B and C. WHS argues that the Court should fashion a periodic payment plan in accordance with RSA 524:6-a, the periodic payment statute.
WHS relies upon Quality Carpets, Inc. v. Carter, 133 N.H. 87 (1991), in which the New Hampshire Supreme Court upheld a trial court order in favor of a judgment debtor which stayed execution on a default judgment and ordered, under RSA 524:6-a, that the judgment debtor must make a lump sum partial payment followed by periodic payments to satisfy the judgment. But the Court did not find that RSA 524:6-a created a right in a debtor to insist upon periodic payments rather than being required to pay a judgment. Rather, the Court simply held that the statute did not prohibit the trial court from exercising its discretion to stay execution of a judgment and order periodic payments by an individual, and that the statute "essentially codified the existing inherent powers of a judge to order defendant to make periodic payments". Id. at 889 The New Hampshire Supreme Court has stated that "the Legislature's intent in passing RSA 524:6-a was to give judgment creditors a new method of obtaining payment (periodic rather lump-sum payments), not a new source of payment." In re Estate of Bergquist, 166 N.H. 531, 536 (2014).
TLI has not filed a petition in accordance with RSA 524:6-a but has stated that it is "prepared to accept monthly payments instead of execution if the judgment is paid within three to four years. Obj. to Pltf.'s Mot. to Re-Open, ¶ 20. TLI has filed a Cross-Motion to Re-Open, for Appointment of a Receiver and for Other Relief (Cross-Motion to Re-Open). In support of its request for appointment of a Receiver, TLI asserts that it is a significant creditor of WHS as it has a judgment of nearly $2 million and that it "has an acute interest in ensuring that both the going concern value and the assets of WHS are preserved while its judgment remains unsatisfied". Cross-Motion to Reopen Case, for Appointment of Receiver and for Other Relief (Pltf.'s "Cross-Motion"), ¶ 14-29. A periodic payment plan, even if authorized by statute would be inappropriate in the circumstances of this case. In order to determine the propriety of the payment, the Court would need to become intimately involved with the details of an ongoing business. WHS's request for an evidentiary hearing pursuant to RSA 524:6-a, to determine appropriate monthly payment is DENIED.
in fact, TLI has noted that it is not altogether clear that the periodic payment statute is even applicable in cases involving jural persons. As TLI points out, one of the statute's purposes is to preserve to the debtor the "necessities of life", Sheedy v. Merrimack County Superior Court, 128 N.H. 51, 55 (1986), a concern unrelated to a corporation. Obj. to Motion to Reopen. ¶ 19, n.1. --------
IV
TLI argues that the Court should appoint a Receiver under RSA 491:7-a (l), the enabling statute for the Business and Commercial Dispute Docket ("BCDD"). WHS objects, asserting that appointment of a Receiver under the statute would require its assent. The Court disagrees with both parties. RSA 491:7-a (l) is not the basis of the Court's authority to appoint a Receiver, but merely a description of the one of types of cases that may be heard in the BCDD.
Receivership is not a cause of action. Appointment of a receiver is an equitable remedy available to a court to manage disposition of assets of an insolvent or potentially insolvent debtor. See generally, In the Matter of Dawn M. O'Neil and Eugene E. O'Neil, Jr. 159 N.H. 615, 624 (2012); Staples v. Dix & Staples Co., Inc. 85 N.H. 115 (1931). The First Circuit has stated, discussing New Hampshire law, that "although a receivership is not an end in itself, there can be no doubt that a court of equity has power to appoint a receiver when the appointment is ancillary to some form of final relief which is appropriate for equity to give." Garden Homes, Inc. v. United States, 200 F.2d 299, 301 (1st Cir 1952). A receivership is a tool of a creditor that enables a flexible and effective approach to the preservation of a debtor's assets and the liquidation of those assets for maximum value. See generally James J. Brown and Eric S. Benderson, Judgment Enforcement, § 7.01 (Aspen Publishing Co. 2019). Appointment of a receiver may be appropriate where there is fraudulent conduct on the part of a defendant, imminent danger of the property will be lost or squandered, or the inadequacy of available legal remedies. Consolidated Rail Corporation v. Fore River Railway Co., 861 F.2d 322, 326-327 (1st Cir. 1988). But the power to appoint a receiver is "a power to be exercised with great caution, and, if possible with the consent or acquiescence of the parties interested in the fund." Munsey v. G.H. Tilton Co., 91 N.H. 51, 52 (1940).
The Court cannot determine on the record before it would be an appropriate exercise of its equitable powers to appoint a Receiver. Accordingly, a hearing shall be held at which the Court will consider TLI's request for a Receiver.
In order to maintain the status quo until the pending motions are resolved, the Court orders that pending further order of this Court, the court orders that WHS shall (1) operate its business in the ordinary course, (2) use its cash in the ordinary course and not pay unusual compensation (dividends, salary, loans or other cash distributions to its owner or members of his family (3) not encumber or permit anyone to encumber any of its assets including equipment and intellectual property, (4) not sell, transfer, or dispose of any production asset having a value in excess of $3000 or any of its intellectual property without first obtaining written permission of TLI; and notify TLI in writing within 5 days of becoming delinquent in the payment of any debt.
SO ORDERED
2/4/19
DATE
s/Richard B . McNamara
Richard B. McNamara,
Presiding Justice RBM/