In re Brokers, Inc.
| Decision Date | 08 March 2007 |
| Docket Number | Bankruptcy No. 04-53451.,Adversary No. 04-06074. |
| Citation | 363 B.R. 458 |
| Court | U.S. Bankruptcy Court — Middle District of North Carolina |
| Parties | In re BROKERS, INC., Debtor. Carlton Eugene Anderson and Nelson Kirby Hodge, Plaintiffs, v. Brokers, Inc. et al., Defendants. |
Joseph R. Beatty, Hill, Evans, Duncan, Jorda & Beatty, Martha R. Sacrinty, R. Thompson Wright, Greensboro, NC, William
Edward West, Jr., Winston-Salem, NC, for Plaintiffs.
Christine L. Myatt, J. David Yarbrough, Jr., Scott C. Gayle, Joseph R. Beatty, Martha R. Sacrinty, R. Thompson Wright, Greensboro, NC, for Defendants.
THIS MATTER coming on before the court on October 25, 2006 in Winston-Salem, North Carolina upon the Motion by Brokers, Inc. for Summary Judgment. Alexander Barrett and J. David Yarbrough appeared on behalf of Brokers, Inc. ("Brokers" or "Debtor"); Joseph R. Beatty and R. Thompson Wright appeared on behalf of Carlton Eugene Anderson; and William E. West, Jr. appeared on behalf of Nelson Kirby Hodge. Having considered the motion, as well as the memorandums of law, affidavits, and arguments of counsel, the court makes the following findings of fact and conclusions of law:
FACTS
Brokers, the defendant in this proceeding, is a corporation organized and existing under the laws of North Carolina with its principal place of business in Davidson County, North Carolina. Prior to the death of its principal and sole shareholder, Dolen Bowers ("Bowers"), Brokers operated as a real estate holding, management, and development company with assets primarily consisting of real property located in Davidson, Guilford, Montgomery, and Randolph Counties. Bowers died testate on June 6, 2003,
On November 22, 2004, Brokers filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. On its Petition, Brokers listed real property in the amount of $19,146,207.00 (including over 100 lots, 96 apartments and numerous other properties), personal property in the amount of $222,859.53, secured claims in the amount of $6,655,779.60, priority claims in the amount of $374,102.89, and unsecured claims in the amount of $2,297,781.36. Since the Petition Date, the Debtor has continued to operate its business as a debtor-in-possession pursuant to 11 U.S.C. §§ 1107 and 1108 and has been in the process of an orderly liquidation.
Plaintiff Carlton Eugene Anderson ("Anderson") first began working with Brokers in the construction business in 1991 or 1992. On December 10, 1993, Anderson agreed to work with Brokers to develop the property located at 3001 Meridian Avenue. This agreement was allegedly memorialized in a written contract (the "Joint Venture Agreement"); however, the parties dispute whether this document was ever executed. The original Joint Venture Agreement is not in the possession of either Brokers or Anderson. Anderson has produced a copy of the document which indicates that Brokers and Anderson entered into a joint venture for the purpose of developing the real property at 3001 Meridian Avenue (the "Meridian Project"). The Joint Venture Agreement provides as follows:
This is a contract between Brokers Inc. and Gene Anderson for the joint venture in developing all the property at 3001 Meridian Ave. It is agreed that Brokers Inc. is to receive an amount of $225,000 plus two-thirds of all profit made from the development of the said property as each sale takes place. It is agreed the Gene Anderson is to received [sic] one-third of all profit made from the development of said property as each sale takes place after the $225,000 plus any money spent on the property for developing is paid to Brokers Inc. [sic] Also is to be deeded [sic] one-third interest in the property at that time.
Further, Gene Anderson is to rezone said property to multifamily zoning in order to develop the property to condo sights. [sic] He is to also repair the house on the property to bring it up to a standard suitable to meet the purposed [sic] development requirements with a $3,000 minimum out of pocket to be spent to reach these goals. He will be allowed to stay rent free for a minimun [sic] of 6 months while these repairs are being made. He is to be repayed [sic] for these exspenses [sic] from sales.
Further, if after six months the rezoning is not complete interest will be payed [sic] to Brokers in addition to the previous terms stated at 7% interest per year on the balance out of sale proceeds. Also at this time additional moneys ($500) will be paid either to Brokers or spent on property each month until property is under development.
It is further understood and agreed that Brokers Inc. and Gene Anderson during this time will build houses for sale in agreed upon locations at the following terms:
1. Brokers Inc.:
A-To lend money to build houses, buy lots, and pay labor
B-To charge 1% per month interest on any outstanding money owe [sic] Brokers Inc.
C-To receive 50% of all profit
D-To furnish contrators [sic] licenses
2. Gene Anderson
A-To build and look after the construction of the houses
B-To receive his labor at an agreed rate and 50% of all profit
The Meridian Project was never commenced due to zoning issues. There is no evidence that any of the terms of the Joint Venture Agreement regarding the Meridian Project were ever effectuated.
Despite the failure of the Meridian Project, Anderson continued to work with Brokers. In his affidavit, Anderson indicates that he was Bowers'"right-hand man in running Brokers' construction projects for about ten years." Anderson contends that in 1994, the Joint Venture Agreement was orally modified to include construction projects on other properties owned by Brokers. In his deposition, Anderson described this modified agreement as one in which Brokers would furnish capital funds and a contractor's license, while Anderson, who did not have a contractor's license, would "do the work" and get paid for his labor. Anderson contends that Brokers charged 12% interest on any funds advanced to Anderson.
By Anderson's own admissions, Brokers was owned solely by Bowers, and Bowers exerted absolute control over the corporation and its assets. Bowers handled the day-to-day finances of Brokers without the help of Anderson; in fact, Anderson never handled any money on behalf of Brokers during Bowers' lifetime.1 Anderson testified in his deposition that he would have had to pursue legal remedies to obtain control or assets of Brokers, and that if he had ended his association with Brokers, Bowers would have given Anderson 25-50% of the outstanding amount allegedly owed to him.
The books and records of Brokers treated Anderson as an independent contractor. Accordingly, from 1993 through 2003, Anderson received weekly wages from Brokers in exchange for his labor. At some point during this ten year period, Anderson was appointed vice-president of Brokers.2 The most he received for this work during any single year was $31,000.00. In addition, on September 14, 1996, Brokers issued a check in the amount of $10,000.00 to Anderson, and the memo on the check indicates "Commission 1030 Ferndale" (the "Ferndale Check"). Anderson asserts that pursuant to their partnership, during this time period he and Brokers developed numerous properties in Davidson, Randolph and Guilford Counties including: 124 Payne Road; 123 Westchester; 2801 North Main Street; 2935 South Main Street; 704 Randolph Street Lots 1 through 10; Woodland Subdivision; 4819 Bisbee Road; 3703 McCustin St.; 5831 High Point Road; 1042 Ball Park; 1030 Ball Park; 3068 Green Tree; 5 Maripat Circle; 710 Railroad Street; Eastgate Village; 700 Ferndale Blvd.; and 1004 Ball Park Drive. Some of the developed properties were sold, but Brokers retained title to many of the properties and leased them to tenants. In each case, Brokers retained and reinvested the proceeds into other real estate development projects. Anderson admits that, with the exception of a partial payment upon the sale of the Ferndale property in 1996 and perhaps other miscellaneous credits, Brokers did not pay him any of the profits under the Joint Venture Agreement, either upon the sale of alleged partnership property or from the lease and rental of such properties. Anderson contends that, despite not being paid any profits, records were kept in the corporate files regarding his share of any equity for each property. No such records have been located or produced.
Plaintiff Nelson Kirby Hodge ("Dodge") began working as an employee of Brokers in 1998 and served as an officer of Brokers from 1999-2003. His responsibilities included supervising Brokers' rental properties, collecting rent, marketing rental properties, and supervising Brokers' operating budgets. Hodge received a salary for his work and does not claim that he had any type of a partnership or joint venture agreement with either Brokers or Bowers. Hodge did not have specific knowledge of a partnership or joint venture agreement between Brokers and Anderson, but he knew Anderson was in charge of building certain houses and commercial buildings.
Upon the death of Bowers on June 6, 2003, the ownership of Brokers became a matter in dispute. Hazel Bowers, Bowers' widow, and the estate of Bowers (the "Bowers Estate") each claimed ownership of the stock of Brokers. In addition, Tony Bowers, Bowers' son, asserted that he had some ownership interest in Brokers' stock, although he never made a formal claim. Mark Preston ("Preston") and Calvin Bryant were appointed co-executors of the Bowers Estate. According to Preston's affidavit, he performed accounting services for Brokers during the period from approximately December 2000 through January 29, 2004.
On July 6, 2003, Anderson and Hodge, the only directors of Brokers at that time, held a board meeting at which Anderson was elected...
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