Compton v. Kirby, COA02-43.

• Decision Date: 01 April 2003
• Docket Number: No. COA02-43.,COA02-43.
• Citation: 577 S.E.2d 905,157 NC App. 1
• Court: North Carolina Court of Appeals
• Parties: Brenda H. COMPTON and Curt Olson, Plaintiffs, v. David M. KIRBY, Defendant.

577 S.E.2d 905

157 NC App. 1

Brenda H. COMPTON and Curt Olson, Plaintiffs, v. David M. KIRBY, Defendant.

No. COA02-43.

Court of Appeals of North Carolina.

April 1, 2003.

Hunton & Williams, by Christopher G. Browning, Jr., Raleigh, for plaintiff-appellees.

Maupin Taylor & Ellis, P.A., by John I. Mabe, Jr., and Allen F. Reid, II, Raleigh, for defendant-appellant.

McCULLOUGH, Judge.

This case arises out of a business relationship between plaintiffs Brenda Compton and Curt Olson and defendant David Kirby. The evidence at trial showed that defendant worked in Charlotte as the President of Colliers Vinson International Property Consultants of Charlotte, Inc. (Colliers-Charlotte), a real estate brokerage firm owned by his father, Albert Kirby. Colliers-Charlotte was part of a larger entity called Colliers International, a loosely structured organization of independent commercial real estate brokers who cross-refer business to one another. In March 1996, defendant created a real estate brokerage firm called Colliers Vinson International Property Consultants of Raleigh, Inc. (Colliers Vinson of Raleigh). Defendant was the sole owner and President of Colliers Vinson of Raleigh, and plaintiffs were independent brokers who worked for him in Raleigh.

For the first nine months of its existence, Colliers Vinson of Raleigh operated without a valid real estate license due to an oversight by defendant's attorneys. On 11 December 1997, Colliers Vinson of Raleigh was administratively dissolved pursuant to N.C. Gen.Stat. § 55-14-21 for failure to file statutorily required annual reports. However, according to defendant, the business still existed and operated under the trade name of Vinson Property Consultants.

In the fall of 1996, Colliers International informed defendant that he could not use the Colliers name for his Raleigh corporation. Due to friction between Colliers International and Colliers Vinson of Raleigh and low business volume in Raleigh, defendant and his father considered closing the business and began discussing the matter with plaintiffs in September 1996. On 3 October 1996, plaintiffs met with both defendant and his father in Charlotte and the parties decided to keep the Raleigh office open. Plaintiffs and defendant agreed to change the business's name from Colliers Vinson of Raleigh to Vinson Property Consultants, and the appropriate assumed name certificate was filed in the Wake County registry.

Mr. Albert Kirby told both defendant and plaintiffs that his company would advance funds to Vinson Property Consultants to reimburse operating expenses while the office attempted to capture part of the Raleigh real estate market. According to plaintiffs, they and defendant agreed upon an arrangement whereby defendant owned 51% of Vinson Property Consultants, and each plaintiff owned 24.5%. Plaintiffs and defendant created a bank account in the name of Vinson Property Consultants, with the understanding that the money therein would be used to pay regular operating expenses. Plaintiffs deposited $24,000.00 of their personal funds into the account and told defendant that the money was a capital contribution into the partnership the three of them had just created. Each month, Vinson Property Consultants submitted a monthly tally of expenses to Colliers-Charlotte, and each month the Vinson account was reimbursed so that the bank account retained a $24,000.00 balance. Over time, Colliers-Charlotte advanced over $44,000.00 to Vinson Property Consultants.

One of the main goals of Vinson Property Consultants was to handle referrals from Colliers-Charlotte and to win approval as a referral agency for business associated with the Colliers International network. As the business got underway, plaintiffs and defendant agreed that Vinson Property Consultants should be registered as a limited liability company. Plaintiffs prepared a draft of an operating agreement, but it was never finalized and no written agreement was ever made or signed by the parties. On 12 March 1997, plaintiff Curt Olson wrote a letter to defendant and confirmed the terms of the partnership agreement that he alleged existed between himself, defendant, and Ms. Compton. Defendant called Mr. Olson the same day and expressly recognized that the terms of the partnership set out in the letter were correct.

Plaintiffs signed contracts with third parties and became personally liable for the obligations of Vinson Property Consultants. After speaking with defendant, plaintiffs obtained approval for business cards which showed each plaintiff to be a "principal" in Vinson Property Consultants. Plaintiffs maintained that, in the real estate industry, the term "principal" is synonymous with "partner" and signifies ownership and control.

Throughout the trial, plaintiffs pointed to numerous instances in which defendant referred to and treated them as his partners. In late 1996, defendant approved an announcement in Commercial Real Estate Today, a regional real estate publication, which stated:

David Kirby, President of Colliers Vinson International of Charlotte, North Carolina, announces the formation of Vinson Property Consultants, L.L.C. in Raleigh. Mr. Kirby is also very pleased to announce the addition of R. Curt Olson, CCIM and Brenda H. Compton as Principals in the firm.

Plaintiffs also presented the testimony of Mr. Ray McCrary, a prospective job applicant who spoke to defendant in early 1997. Mr. McCrary testified that defendant referred to plaintiffs as his partners and indicated that plaintiffs owned 49% of Vinson Property Consultants, while he owned the remaining 51%. Plaintiffs also introduced a number of documents approved (and, in some instances, signed) by defendant in which he recognized that plaintiffs were co-owners of Vinson Property Consultants. Additionally, plaintiffs were described as "partners" on their group health care application.

As a result of the discussions between themselves and defendant, plaintiffs worked approximately 60 to 70 hours per week to make the business successful. The primary goal was to make the business profitable enough to earn the right to operate as part of the Colliers network of real estate brokerages. At trial, plaintiffs testified to both long work hours and a "very stressful" period. They also testified that their efforts took up a great deal of time and left them little opportunity to earn personal commissions.

In 1997, defendant and his father conducted negotiations for the sale of both Colliers-Charlotte and Vinson Property Consultants to Colliers Macaulay Nicolls, Inc. (CMN), a large affiliate of the Colliers network. When plaintiffs learned of the possible sale and merger, they agreed that defendant was in the best position to represent the interests of Vinson Property Consultants, due to his history of association with the Colliers network. Plaintiffs allowed the discussions to proceed with the belief that defendant was negotiating on their behalf, as well as his own. However, plaintiffs later learned that, during the discussions, defendant indicated he was the sole owner of Vinson Property Consultants. Plaintiffs eventually contacted CMN and informed its representatives of their co-ownership interest in Vinson Property Consultants and their belief that the business was a partnership consisting of themselves and defendant. CMN reviewed the business records of both Colliers-Charlotte and Vinson Property Consultants and decided not to purchase Vinson Property Consultants because of its disputed ownership and its low value.

In December 1997, defendant wrote to plaintiff Brenda Compton and asked her to execute a release of her rights of ownership in Vinson Property Consultants. She refused. In February 1998, the following sales and transfers occurred in a single large transaction: Mr. Albert Kirby sold most of the assets of Colliers-Charlotte to defendant, including the exclusive right to use the Colliers name in Charlotte. Defendant sold 85% of that acquisition to CMN, who in turn divided its purchase with Colliers Pinkard (another Colliers affiliate located in Baltimore, Maryland). Defendant, CMN, and Colliers Pinkard then merged their assets into a newly formed entity called Colliers N.C. Partners, LLC. In September 1997, the licensor and owner of the Colliers name gave CMN satellite rights to develop the Colliers name in Raleigh for one year. After its formation, Colliers N.C. Partners, LLC obtained the right to use the Colliers name in Charlotte from defendant and the satellite rights to develop the Colliers name in the Raleigh market from CMN.

On 13 February 1998, defendant was named President of Colliers N.C. Partners, LLC and owned 15% of the new business. Defendant also received $80,000.00 in cash, a guaranteed salary of $72,000.00 per year for two years, a car allowance, and payment of his dues in a number of private clubs. Plaintiffs received no compensation or other consideration as a result of the transaction and were ordered to vacate the Raleigh office immediately. They were also informed that their $24,000.00 capital contribution to Vinson Property Consultants would not be returned.

On 20 February 1998, plaintiffs filed a complaint against defendant, Colliers Pinkard, and CMN, alleging the existence of a partnership between themselves and defendant and demanding a number of remedies based upon the dissolution of their business arrangement. The same day, plaintiffs also obtained an ex parte temporary restraining order which ordered defendant to refrain from "(1) ousting Plaintiffs from their business premises ... and interfering with Plaintiffs' ongoing business; and (2) selling the partnership Vinson Property Consultants, or distributing its assets to the exclusion of Plaintiffs[.]" On 5 March 1998, the trial court entered a preliminary injunction which prevented defendant from taking action to dissolve, sell, or distribute the assets of Vinson Property Consultants without plaintiff...