Batesville Casket Co. Inc. v. Wings Aviation Inc.

• Decision Date: 16 August 2011
• Docket Number: No. COA10–967.,COA10–967.
• Parties: BATESVILLE CASKET COMPANY, INC., an Indiana corporation, Plaintiff,v.WINGS AVIATION, INC., d/b/a Moody Funeral Home, a North Carolina corporation, Defendant.
• Court: North Carolina Court of Appeals

716 S.E.2d 13

BATESVILLE CASKET COMPANY, INC., an Indiana corporation, Plaintiff,

v.WINGS AVIATION, INC., d/b/a Moody Funeral Home, a North Carolina corporation, Defendant.

No. COA10–967.

Court of Appeals of North Carolina.

Aug. 16, 2011.

Appeal by defendant from orders entered 31 December 2009 and 12 February 2010 by Judge Zoro J. Guice in Superior Court, Jackson County. Heard in the Court of Appeals 10 March 2011.

Jeffrey W. Norris & Associates, PLLC, Waynesville, by Jeffrey W. Norris, for plaintiff-appellee.

Jones, Key, Melvin & Patton, P.A., by Fred H. Jones, Franklin, and Karen L. Kenney, for defendant-appellant.

STROUD, Judge.

Defendant appeals trial court orders appointing a receiver and awarding sanctions to plaintiff. For the following reasons, we dismiss defendant's appeal regarding the appointment of a receiver and reverse those portions of the orders regarding sanctions.

I. Background

On 7 August 2008, plaintiff obtained a monetary judgment against defendant. On or about 16 September 2008, a writ of execution was issued seeking satisfaction of the judgment, but on or about 11 December 2008 the Jackson County Sheriff returned the writ because he “did not locate property on which to levy.” On 11 March 2009, Plaintiff served defendant with “PLAINTIFF'S INTERROGATORIES AND REQUESTS FOR PRODUCTION IN AID OF EXECUTION[.]” Defendant failed to respond to the interrogatories within 30 days, as required by N.C. Gen.Stat. § 1–352.1, and plaintiff filed “PLAINTIFF'S MOTION PURSUANT TO N.C.G.S. SECTION 1–352.1 et seq. FOR DISCOVERY OF ASSETS[.]”

On 16 July 2009, the clerk of superior court of Jackson County entered an order which required defendant to:

1. Produce at the office of plaintiff's counsel all documents and things requested in plaintiff's Requests for Production within fifteen (15) days of the date of this order;

2. Respond fully to plaintiff's Interrogatories within fifteen (15) days of the date of this order.

3. Submit to an inspection of defendant's offices and grounds located at 714 W. Main Street, Sylva, NC [ (“Moody Funeral Home”) on August 4, 2009 beginning at 10:00 a.m.; and

4. Defendant's principal shall appear before the Clerk of Court for oral examination on August 4, 2009 at 12:30 p.m.

(“Discovery Order”). The record does not indicate how, when or if the Discovery Order was served upon defendant or its principal.

On 4 August 2009, plaintiff filed “PLAINTIFF'S RENEWED MOTION TO COMPEL, FOR SANCTIONS, AND FOR THE APPOINTMENT OF A RECEIVER” because defendant “refused to cooperate in any manner and refused to respond to plaintiff's requests and to comply with the Court Order.” On or about 19 November 2009, defendant responded in part to plaintiff's discovery requests, but did not provide “bank account statements” and noted that “there are no current bank accounts for Wings[.]” Defendant further noted that

BB & T foreclosed on its liens with respect to both the Moody Funeral Home realty and the business equipment and other related property. It is my understanding that Coward, Hicks & Siler, P.A. was the purchaser of the entirety.¹

It is also my understanding that, at this time, Wings Aviation, Inc. hold title only to the two cemeteries discussed in Mr. Moody's deposition, and that any funds received from the sale of lots are expended in connection with maintenance of those cemeteries. There was precious little, if any, other personalty held by the corporation, according to Mr. Moody.Defendant also asserted that

Reginald E. Moody, d/b/a Moody Services, leases the property known as Moody Funeral Home and Crematorium from Coward, Hicks & Siler, P.A. Defendant has no ownership interest in Moody Services, but Reginald E. Moody, Jr. is the President of the Defendant, and the Defendant, through Mr. Moody, conducts business for the cemeteries from the Funeral Home location. Defendant pays no rent and has no formal sub-lease with Mr. Moody.

On 31 December 2009, the trial court entered an order (“Receivership Order”) granting “PLAINTIFF'S RENEWED MOTION TO COMPEL, FOR SANCTIONS, AND FOR THE APPOINTMENT OF A RECEIVER”.² The trial court ordered the receiver, Sheila Gahagan, CPA, to “enter upon and take possession and control of the business at 714 W. Main Street in Sylva.” The Receivership Order further

acknowledged that defendant's principal has claimed that he is still conducting business in the same location under a slightly different name. However, nothing, including the signage, has changed and it appears that business is and has been conducted under the fictitious name “Moody Funeral Home.” The receiver shall have the power and authority to review all transactions and report concerning what business has been transacted and what business continues to be transacted, including all transactions relating to the two cemeteries which remain in the defendant's formal corporate name. It is also acknowledged that defendant no longer owns the real property at 714 W. Main Street, but it has acknowledged to this Court that it is still using that location for its current activities pursuant to an agreement with the current owner, that it continued to conduct business in that location even after the transfer of the property to the current owner, and that there has been no real change in the operations, other than the volume of business, since the time of the filing of this action.On 13 January 2010, plaintiff's counsel submitted attorney fee affidavits as directed by the Receivership Order.

On 20 January 2010, Coward, Hicks & Siler, P.A., as counsel for REM, Inc., filed a motion to intervene pursuant to N.C. Gen.Stat. § 1A–1, Rule 24(a) and a motion to vacate the Receivership Order pursuant to Rule 60(b). REM alleged that it owns Moody Funeral Home, but “does not own or control the Defendant.” REM claimed that it was previously defendant's landlord, but it had evicted defendant. REM requested “in the alternative” that the receivership be limited to “the business only, and not the real property where the business was previously conducted, to the effect that the receiver would not have possession of the real property and its improvements.” On 3 February 2010, the trial court allowed REM to intervene.

On 25 January 2010, defendant filed a “MOTION FOR RELIEF FROM ORDER AND FOR STAY” alleging that the receivership order is void because it calls for the receiver to

‘take possession and control of the business at 714 W. Main Street in Sylva’, when the evidence before the Court is that ‘the business at 714 W. Main Street in Sylva’ is not owned by the named Defendant in this action, but instead by a third party, not a party to this action, and not subject to the jurisdiction of the Court in this action.

Defendant further alleged that it did “not possess the necessary licenses to provide funeral home services—the licenses that permit the operation of the funeral home business at 714 West Main Street in Sylva, are in the name of Reginald E. Moody, Jr., not a party to this action.”

On 28 January 2010, defendant filed notice of appeal from the Receivership Order. On 12 February 2010, the trial court entered an order awarding sanctions in the amount of $3,300.00 to plaintiff, based upon the Receivership Order and the attorney fee affidavits submitted as directed by the Receivership Order (“Sanctions Order”). On 25 February 2010, defendant filed notice of appeal from the Sanctions Order. On 8 March 2010, the trial court entered an order staying any action upon defendant's “MOTION FOR RELIEF FROM ORDER AND FOR STAY” and plaintiff's “MOTION FOR Contempt and Motion for Additional Sanctions[.]” ³

II. Interlocutory Receivership Order

Defendant's first two issues on appeal are regarding the appointment of the receiver in the Receivership Order. Defendant's brief states that “[t]he Order required the receiver to conduct an accounting and to report back to the Court; as such, the Order is interlocutory.” However, defendant claims that the Receivership

Order provided broad authority to the receiver both with respect to the ongoing business operations of Defendant–Appellant (Wings Aviation, Inc.), but also with respect to the rights of third parties, not before the Court at the time the receivership was ordered (including REM, Inc., which was later permitted to intervene.) ⁴

Defendant contends

substantial rights have been affected, particularly where the receiver expresses an intent to begin the process of selling the assets to pay off the corporation's debts ... and where as here, the receiver has failed to file the necessary annual reports with the Secretary of State to avoid administrative dissolution.⁵ ... Without immediate review, [its] assets and corporate opportunities may be lost or irreparably prejudiced.

... [T]he Appellant here has a substantial right in managing its own corporation. [Defendants'] right to manage and control its business will be effectively destroyed by the appointment of a receiver, who has far-reaching powers under Judge Guice's [Receivership O]rder of 29 December 2009.... The receivership will result in a disruption in and perhaps the complete destruction of [defendant's] business, and thus the normal course of procedure is inadequate to protect the substantial right affected by the order sought to be appealed.... If the appeal is not immediately heard from the order appointing a receiver, Defendant–Appellant's business and ability to produce income may be destroyed and its reputation irreparably harmed.(Quotation marks, brackets, and footnote omitted.) Defendant also claims that interlocutory appeals from orders appointing receivers have previously been considered by the appellate courts, “thereby implying without establishing that such orders inherently affect substantial rights. See, e.g., Lowder v. All Star Mills, Inc., 301 N.C. 561, 581, 273 S.E.2d 247, 259 (1981); York v. Cole, 251 N.C. 344, 345, 111 S.E.2d 334, 335 (1959).” (Quotation marks and brackets omitted.)

Plaintiff...