Penley v. Penley, 16A84

• Decision Date: 03 July 1985
• Docket Number: No. 16A84,16A84
• Citation: 332 S.E.2d 51,314 N.C. 1
• Court: North Carolina Supreme Court
• Parties: Clyde M. PENLEY v. Betty Roberts PENLEY and Hamburg Valley, Inc.

Page 51

332 S.E.2d 51

314 N.C. 1

Clyde M. PENLEY v. Betty Roberts PENLEY and Hamburg Valley, Inc.

No. 16A84.

Supreme Court of North Carolina.

July 3, 1985.

Carter & Kropelnicki by Steven Kropelnicki, Jr., Asheville, for plaintiff-appellant.

Elmore & Powell by Bruce A. Elmore, Sr., and Bruce A. Elmore, Jr., Asheville, for defendant-appellees.

FRYE, Justice.

This case involves a struggle between a Buncombe County couple, now divorced, over the ownership of a Kentucky Fried Chicken business in Hendersonville, North Carolina. The plaintiff-husband claims he is entitled to 48 percent of the business which has now been incorporated. A jury, responding to the only issue placed before them, decided that the plaintiff was indeed entitled to ownership of 48 percent of the stock of the corporate defendant. On appeal by defendant-wife, the Court of Appeals reversed, holding that plaintiff-husband had failed to prove an enforceable agreement. One judge dissented, believing that the evidence was sufficient to support the jury's verdict in favor of plaintiff-husband and that the trial court's judgment

should be affirmed. Essentially, we agree with the dissenting opinion.

FACTS

Plaintiff instituted this action by the filing of a complaint on 11 August 1981, naming as defendants his wife, Betty Roberts Penley, and the corporate defendant, Hamburg Valley, Inc. Allegations of the complaint were to the effect that the plaintiff and individual defendant were married to each other in 1949 and lived thereafter as man and wife until April 1979, when the individual defendant abandoned the plaintiff. While the plaintiff and individual defendant are citizens of Buncombe County, the corporate defendant is a North Carolina corporation with its principal place of business in Henderson County. According to the complaint, the plaintiff, in late 1967, was operating an automotive tire business in Weaverville, North Carolina, while the individual defendant had an interest in a restaurant, operated as a Kentucky Fried Chicken franchise, in Hendersonville, North Carolina. During that year defendant-wife became ill and plaintiff, at defendant's request, began spending additional time at defendant's restaurant, in order to assure its continued operation. Subsequently, defendant-wife agreed that if plaintiff would devote his full time to the operation of the restaurant business, the parties would operate that business as a joint enterprise, share equally in the ownership of its assets and divide its returns equally. Thereafter, pursuant to the aforementioned agreement, the parties operated the restaurant "as a joint enterprise, dividing its returns evenly."

Plaintiff further alleged that in late 1977 a corporation was formed pursuant to an earlier oral agreement with defendant, whereby each of the parties was to own forty-eight percent of the shares of stock in the corporation and the parties' son would own four percent of the shares. From late 1977 through 9 April 1979, plaintiff and defendant-wife served as officers and directors of the corporate defendant, both parties devoting substantially all of their efforts to the operation of the corporation's business, receiving equal salaries and benefits as employees and shareholders of the corporation.

The complaint further alleged that defendant-wife abandoned the plaintiff-husband on 9 April 1979 and filed a civil action which she voluntarily dismissed on 2 July 1979 at which time she acknowledged the plaintiff-husband's ownership interest in the corporation and property which had been purchased with the proceeds of the defendant corporation and that the parties would continue to operate the business as in the past. Subsequently, on 31 December 1979, defendant-wife again abandoned the plaintiff and since that time "has wrongfully and intentionally denied the plaintiff any rights" in the corporate defendant, "either as an officer, employee, shareholder, or otherwise" and has "wilfully and wrongfully converted to her own use and benefit" proceeds from the operation of the corporate defendant and has otherwise "so conducted the business and affairs of the [corporate defendant] as to dissipate its assets and render the interest of [plaintiff] in that corporation essentially worthless."

Plaintiff alleged that he was entitled to judgment declaring him the owner of forty-eight percent of the shares of the corporate defendant, to an accounting of the corporate transactions and of the individual defendant's transactions with regard to jointly owned property, to other injunctive relief, and to $250,000 in damages. In addition, he prayed for liquidation of the corporation pursuant to G.S. 55-125(a)(4), or in the alternative, for relief under G.S. 55-125.1, as the court deems appropriate.

Defendants' response was in the form of an answer and counterclaim presenting six defenses. The first defense was failure to state a claim upon which relief could be granted, together with a motion to dismiss pursuant to Rule 12 of the Rules of Civil Procedure. The second defense was a motion for summary judgment pursuant to Rule 56 on the ground that there was no genuine issue as to any material fact. The third defense admitted the residence of the The fourth and fifth defenses were as follows:

                parties, the marriage, plaintiff's interest in the Weaverville Tire Company, defendant's illness and "that she permitted the plaintiff at his request to assist her somewhat in the operation of the [Kentucky Fried Chicken] business."   Defendants further admitted the filing of the Articles of Incorporation of the business "on or about the 29th day of December 1978" (sic) and that "from December 28, 1977 until April 9, 1979, both parties received equal salaries as employees of the corporate defendant."   Most of the other allegations in the twenty-nine paragraphs of the complaint were denied.  Defendants further admitted that defendant-wife filed a civil action in Buncombe County District Court, the reconciliation of the parties and her voluntary dismissal of the action.  Defendants also admitted that defendant-wife had control of the corporate books and records of the corporate defendant and further admitted that no dividends were paid to the plaintiff "as he is not a stockholder."
                

FOURTH DEFENSE

That if the Court finds there was any agreement between the Plaintiff and Defendant with regard to the ownership of the corporation which is enforceable at law or that the Plaintiff is otherwise entitled to be declared owner of a portion of the corporate stock, then the Defendants respectfully plead both the three-year and 10-year statutes of limitation in bar of the Plaintiff's claim.

FIFTH DEFENSE

That the Plaintiff has never paid any capital amount into the corporation nor participated in the corporate affairs and has waived any interest which he otherwise might have in the corporation.

With reference to the fourth defense, the parties stipulated that there would be no reliance by defendants on the statute of limitations except insofar as it could have been plead and relied on in a previous case filed by defendant-wife and to which the plaintiff filed his action and counterclaim on 27 March 1981.

The sixth defense and counterclaim alleged that beginning in the early 1970's and continuing until the parties separated on the 2nd day of January, 1980, defendant-wife purchased with her sole and individual funds a number of items of real and personal property, including the real property and buildings upon which the Kentucky Fried Chicken franchise is located and others and had record title placed jointly in her name and the name of the plaintiff-husband, although it was never her intention to give the plaintiff a vested ownership interest in the property or to transfer control of the property to him. Defendants prayed that the relief requested by plaintiff be denied and that defendant-wife be named the true and sole owner of the property identified in the counterclaim. Subsequently, defendants were allowed to amend the answer in order to plead the Statute of Frauds.

Plaintiff's evidence consisted of his own testimony and that of his younger brother, Jim Penley; portions of the deposition of defendant-wife from a previous action; and several exhibits, including the Articles of Incorporation of Kentucky Fried Chicken of Hendersonville, Inc., and the amendment changing the name of the corporation to Hamburg Valley, Inc. Plaintiff's motion to amend the complaint to conform to the evidence was allowed without objection. Defendants' motion to dismiss was denied. Defendants then took a voluntary dismissal of their counterclaim, without prejudice.

Defendants' evidence consisted of the testimony of the individual defendant, Betty Penley, and Rebecca Hancock Inders, director of franchising for Kentucky Fried Chicken, and certain exhibits, including the franchise for the Kentucky Fried Chicken outlet in Hendersonville, North Carolina, which was issued to Betty Penley. Defendants renewed their motion to dismiss, which was denied.

Following jury arguments by counsel for both parties and Judge Friday's charge, the following issue was, by prior stipulation, submitted to the jury: Is the plaintiff entitled to ownership of forty-eight percent of Defendant-wife appealed to the Court of Appeals, asserting twenty-six assignments of error relating primarily to evidentiary issues, the judge's charge to the jury, and the manner in which the trial was conducted. Assignment Number 10 asserted error in the failure of the trial judge to dismiss plaintiff's case at the conclusion of the plaintiff's evidence and again at the conclusion of all of the evidence on the ground that the plaintiff's evidence and all of the evidence failed to prove and support any legal basis which would support any of the relief sought by the plaintiff. Assignment 26 asserted error in denial of defendants' motions to set aside the "judgment" as being contrary to the...