Haarhuis v. Cheek

261 N.C.App. 358

820 S.E.2d 844

Joris HAARHUIS, Administrator of the Estate of Julie Haarhuis, (Deceased), Plaintiff,

v.Emily CHEEK, Defendant.

No. COA17-1179

Court of Appeals of North Carolina.

Filed: September 18, 2018

Copeley Johnson & Groninger, PLLC, by Leto Copeley, Durham, and Drew H. Culler, for plaintiff-appellant.

Burton, Sue & Anderson, LLP, by Walter K. Burton and Stephanie W. Anderson, Greensboro, and Ivey, McClellan, Gatton & Siegmund, L.L.P, by Charles Ivey, IV, for defendant-appellee.

McAngus, Goudelock & Courie, PLLC, by John P. Barringer and Jeffrey B. Kuykendal, Charlotte, for Universal Insurance Company.

Poyner Spruill LLP, by Cynthia L. Van Horne, Charlotte, for Burton, Sue & Anderson, LLP.

ZACHARY, Judge.

Plaintiff Joris Haarhuis, as administrator of the estate of Julie Haarhuis, appeals from the trial court's order denying his Motion for Appointment of Receiver over defendant's unliquidated legal claims against third-parties. We reverse.

Background

Defendant Emily Cheek was driving while impaired in July 2013 when she hit and killed pedestrian Julie Haarhuis. Ms. Haarhuis's husband, Joris Haarhuis, qualified as administrator of his wife's estate.

At the time of the crash, Universal Insurance Company insured defendant's vehicle. Universal determined that the value of plaintiff's claim exceeded the limits of defendant's $50,000 policy. On 2 September 2014, pursuant to Universal's offer, plaintiff agreed to release its claims against defendant in exchange for payment of the $50,000 policy limit, on the condition that payment be made within ten days. Universal received plaintiff's acceptance that same day. Two days later, Universal retained an attorney from Burton, Sue & Anderson, LLP ("Burton") to represent defendant to the extent of the policy limits. Universal forwarded plaintiff's settlement demand to the attorney. However, by the time plaintiff's settlement offer expired on 12 September 2014, plaintiff had not received a response from Universal or Burton. Plaintiff filed suit the next week, on 19 September 2014.

As the litigation proceeded, plaintiff again offered to settle, this time in exchange for a $2 million consent judgment, but plaintiff required Universal's approval. One week later, the attorney representing defendant on her exposure in excess of the policy limits wrote to Universal on defendant's behalf and demanded that it agree to settle the claims against her. This settlement would have permitted defendant to seek relief in bankruptcy. However, roughly one month later, plaintiff was informed that Universal would not approve the $2 million consent judgment. Plaintiff posits that Universal preferred that defendant not seek relief in bankruptcy, for fear that the bankruptcy trustee would pursue litigation on defendant's behalf against Universal for its failure to settle the case initially for $50,000. The case then went to trial, and on 28 April 2017 the jury entered a verdict against defendant for $4.25 million in compensatory damages and $45,000 in punitive damages. However, the Chatham County Sheriff's Office returned the writ of execution unsatisfied, as the deputy "did not locate property on which to levy" and "[d]efendant refused to pay."

One year later, with the judgment still unsatisfied, plaintiff filed a Motion for Appointment of Receiver pursuant to N.C. Gen. Stat. § 1-363. Plaintiff maintained that defendant possessed property in the form of unliquidated legal claims against Universal and Burton for their actions in causing defendant to be encumbered with a judgment of nearly $4.3 million. Specifically, plaintiff is of the position that defendant has legal claims against Universal, "including claims for breach of contract, breach of the duty of good faith and fair dealing, unfair trade practice, and tortious bad faith[,]" and against Burton for "breach of fiduciary duty and failure to meet the standard of care[.]"

According to plaintiff,

[t]he potential choses in action described above must be sued upon promptly or the applicable statute of limitations may bar an action. Defendant is wasting valuable time by her failure to take prompt legal action to recover money for the choses in action. Defendant, by her delay in pursuing the choses in action, is in the process of causing irreparable harm to Plaintiff, as Defendant has no other apparent means of satisfying the judgment against her.

Plaintiff therefore sought to have a receiver appointed of defendant's choses in action against Universal and Burton.

The trial court heard plaintiff's Motion for Appointment of Receiver on 5 June 2017. Plaintiff's and defendant's counsel appeared at the hearing; however, counsel for Universal and Burton appeared as well. Plaintiff objected to the appearances of Universal and Burton for lack of standing as potential debtors of defendant, but the trial court nevertheless permitted Universal and Burton to argue against the appointment of a receiver. Following the hearing, the trial court entered an order containing the following findings and conclusions:

19. Defendant does not wish to have a receiver appointed for any purpose.

...

1. N.C. Gen. Stat. § 1-502 specifies when a receiver may be appointed. The circumstances of this case do not apply as the appointment of a receiver in this case would not "carry the judgment into effect," it would not "dispose of the property according to the judgment," it would not "preserve [the property] during the pendency of an appeal" and this is not a case in which the "judgment debtor refuses to apply his property in satisfaction of the judgment." See N.C. Gen. Stat. § 1-502(2) & (3).

2. The appointment of a receiver is within the discretion of the Court. See Barnes v. Kochhar , 178 N.C. App. 489, 500, 633 S.E.2d 474, 481 (2006).

3. The appointment of a receiver is an equitable remedy. See Jones v. Jones , 187 N.C. 589, 592, 122 S.E. 370, 371 (1924) ("[t]he appointment of a receiver is equitable in its nature and based on the idea that there is no adequate remedy at law, and is intended to prevent injury to the thing in controversy").

4. The court finds that the defendant has asserted that she has no property that, to a reasonable degree, could be subject to execution.

The trial court thereafter denied plaintiff's Motion for Appointment of Receiver. Plaintiff timely appealed.

Discussion

On appeal, plaintiff presents the following questions to this Court: (1) "Where a judgment creditor shows the court that a judgment debtor has unliquidated legal claims that she refuses to pursue, may the trial court refuse to appoint a receiver?" and (2) "Did the trial court properly allow non-party debtors of Defendant-Appellee judgment debtor to oppose appointment of a receiver?" We first consider plaintiff's argument concerning standing.

A. Standing

Plaintiff argues that the trial court erred when it heard and considered the arguments of Universal and Burton at the receivership hearing because "debtors of a judgment debtor have no standing to object to the appointment of a receiver in aid of execution[.]" We agree.

It is well settled that the debtor of a judgment-debtor lacks standing to object to the appointment of a receiver, as the debtor is not the "party aggrieved" in the underlying action. Lone Star Industries, Inc. v. Ready Mixed Concrete of Wilmington, Inc. , 68 N.C. App. 308, 309, 314 S.E.2d 302, 303 (1984). In Lone Star Industries, Inc. , the trial court appointed a receiver over certain property of the judgment debtor-corporation at the behest of the judgment-creditor. Id. at 308-09, 314 S.E.2d at 302-03. The judgment-creditor claimed that the judgment-debtor possessed unliquidated legal claims against one of its shareholders and one of its former shareholders. Id. at 309, 314 S.E.2d at 303. Upon appointment of a receiver over that property, the shareholders appealed. Id. With regard to whether the shareholder-appellants had standing to contest the receivership, this Court stated:

That [the shareholder-debtors] are opposed to the defendant debtor receiving the benefit of that property is understandable; but that they were able to assert their opposition in this case for so long under the circumstances is not. The [shareholder-debtors] have no standing in this Court and should have had none in the court below. They are not parties to the case, and, even if they were, their interests are entirely antagonistic to the debtor corporation, whose own interests clearly require that any sums that are owed it by others be promptly applied to its debts.

Id.

The same is true in the instant case. Universal and Burton were not, and are not, parties to the action between plaintiff and defendant, and their interests are "entirely antagonistic" to those of defendant, being that they are her potential debtors. Nor would Universal or Burton be legally aggrieved in the instant case by the appointment of a receiver. Accordingly, because Universal and Burton do not have standing to challenge the appointment of a receiver in the instant case, they were not properly before the trial court, and they are not properly before this Court. We do not consider their arguments, and the trial court erred in doing so.

B. Receivership

Next, plaintiff argues that the trial court erred when it denied plaintiff's Motion for Appointment of Receiver. According to plaintiff, the particular circumstances at issue in the instant case entitled plaintiff to have a receiver appointed in order for the receiver to investigate prosecution of defendant's unliquidated legal claims against Universal and Burton so that those funds can be applied in satisfaction of the underlying judgment. Defendant, however, argues that North Carolina law "does not mandate appointment of a receiver[,]" and that the trial court did not abuse its discretion when it declined to do so in the instant case. (emphasis added). Specifically, defendant maintains that plaintiff's motion was properly denied first, because the causes of action that plain...