CATHY LOU STEWART BURGESS, INDIVIDUALLY AND AS A SHAREHOLDER OF BURGESS & ASSOCIATES, INC., PLAINTIFF V. JAMES THOMAS BURGESS, JR. AND BURGESS & ASSOCIATES, INC., DEFENDANTS
No. COA09-825
IN THE COURT OF APPEALS
20 July 2010
205 N.C. App. 325 (2010)
HUNTER, JR., Robert N., Judge.
The superior court erred by exercising subject matter jurisdiction over an equitable divestiture of defendant husband‘s shares in plaintiff wife‘s shareholder suit given the nature of the relief sought and a prior equitable distribution action pending in the district court. The relief sought could be addressed in the equitable distribution action.
2. Corporations- shareholder suit-inspection-accounting-breach of fiduciary duties-subject matter jurisdiction
The superior court did not err by concluding it had subject matter jurisdiction over plaintiff‘s cause of action for inspection, accounting, and breach of fiduciary duties. The district court was barred by
Judge STROUD concurring in part and dissenting in part.
Appeal by defendants from order entered 24 March 2009 by Judge John L. Holshouser, Jr., in Rowan County Superior Court. Heard in the Court of Appeals 19 November 2009.
Womble Carlyle Sandridge & Rice, PLLC, by Mark P. Henriques and Sarah A. Motley, for plaintiff-appellee.
Ferguson, Scarbrough, Hayes, Hawkins & DeMay, P.A., by Edwin H. Ferguson, Jr., and James R. DeMay, for defendant-appellants.
HUNTER, JR., Robert N., Judge.
James Thomas Burgess, Jr. (“James“), and Burgess & Associates, Inc. (collectively “defеndants“), appeal the trial court‘s order denying defendants’ motion to dismiss for lack of subject matter jurisdiction under Rule 12(h)(3). In the motion, defendants argued that Cathy
I. BACKGROUND
James and plaintiff were married on 1 June 1996 in Rowan County, North Carolina. After ten years of marriage, the parties separated on 2 October 2006. On 13 October 2006, plaintiff instituted an action against James for divorce from bed and board and equitable distribution of marital property pursuant to Chapter 50 of our General Statutes in Rowan County District Court.
Plaintiff and James each own 50% of the shares of a residential contracting company, Burgess & Associates, Inc. James serves as sole director and president, and plaintiff serves as corporate secretary. In her divorce complaint, plaintiff requested “exclusive possession and full use” of Burgess & Associates pending an equitable distribution of the company.
On 11 July 2008, plaintiff wrote a letter to James in his capacity as president of Burgess & Associates. In the letter, plaintiff requested an inspection of Burgess & Associates’ records and books. James refused plaintiff‘s request, and on 25 July 2008, plaintiff filed a shareholder action (1) demanding an inspection of the books; (2) asking for an accounting; (3) seeking damages for breach of fiduciary duties in excess of $10,000; and (4) requesting that James be divested of his shares in the corporation as an alternative equitable remedy. With respect to the damages claim for James’ alleged breach of fiduciary duties, plaintiff asked for recovery “on behalf of the corporation as a shareholder.”
On 13 March 2009, defendants filed a motion to dismiss plaintiff‘s shareholder suit for lack of subject matter jurisdiction. In the motion, defendants argued that plaintiff had already invoked the jurisdiction of the district court over the ownership of Burgess & Associates. Defendants contended that the district court‘s jurisdiction included plaintiff‘s сlaims for inspection of books, an accounting, and damages for breach of fiduciary duties. The superior court entered an order denying defendants’ motion to dismiss on 24 March 2009. Defendants thereafter applied for a writ of certiorari to this Court under Rule 21 of the North Carolina Rules of Appellate Procedure, and the writ was granted on 15 May 2009.
A. Jurisdiction and Standard of Review
We review a motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12 of the North Carolina Rules of Civil Procedure de novo. See Harper v. City of Asheville, 160 N.C. App. 209, 215, 585 S.E.2d 240, 244 (2003). Under the de novo standard of review, this Court “considers the matter anew and freely substitutes its own judgment for that of the [trial court].” In re Appeal of the Greens of Pine Glen Ltd. P‘ship, 356 N.C. 642, 647, 576 S.E.2d 316, 319 (2003) (citing Mann Media, Inc. v. Randolph Cty. Planning Bd., 356 N.C. 1, 13, 565 S.E.2d 9, 17 (2002)). This case is properly before this Court on a writ of certiorari. N.C.R. App. P. 21(a)(1) (2009) (certiorari available as to otherwise interlocutory orders of the trial court).
B. Subject Matter Jurisdiction
[1] Defendants contend that the shares of Burgess & Associates are marital property between James and plaintiff, and that the district court‘s jurisdiction to divide the parties’ shares has already been invoked by the equitable distribution action. Relying on our holdings in Garrison v. Garrison, 90 N.C. App. 670, 369 S.E.2d 628 (1988) and Hudson Int‘l, Inc. v. Hudson, 145 N.C. App. 631, 550 S.E.2d 571 (2001), defendants argue that this disposition strips the superior court of subject matter jurisdiction over plaintiff‘s shareholder action.
We agree that the scope of the district court‘s jurisdiction in the equitable distribution action includes plaintiff‘s superior court claim for divestiture of James’ shares. However, given that the district court is barred by statute from hearing plaintiffs’ derivative action, we conclude that the superior court properly found that it retained jurisdiction over plaintiff‘s causes of action for breach of fiduciary duties, accounting, and inspection of the corporate books.
Jurisdiction is “the power to hear and to determine a legal controversy; to inquire into the facts, apply the law, and to render and enforce a judgment.” High v. Pearce, 220 N.C. 266, 271, 17 S.E.2d 108, 112 (1941) (citation and internal quotation marks omitted); State v. Batdorf, 293 N.C. 486, 493, 238 S.E.2d 497, 502 (1977) (“Jurisdictional issues . . . relate to the authority of a tribunal to adjudicate the questions it is called upon to decide.“). “Subject matter jurisdiction, a threshold requirement for a court to hear and adjudicate a contro-
If a trial court has “exclusive jurisdiction,” the court has the ” ‘power to adjudicate an action or class of actions to the exclusion of all other courts[.]’ ” In re H.L.A.D., 184 N.C. App. at 386, 646 S.E.2d at 430 (quoting Black‘s Law Dictionary 869 (8th ed. 2004)). ” ‘[O]riginal jurisdiction’ means ‘[a] court‘s power to hear and decide a matter before any other court can review the matter[.]’ ” Id. at 386-87, 646 S.E.2d at 430 (citation omitted). “Continuing jurisdiction” is defined as ” ‘[a] court‘s power to retain jurisdiction over a matter after entering a judgment, allowing the court to modify its previous rulings or orders.’ ” Id. at 387, 646 S.E.2d at 430 (quoting Black‘s Law Dictionary 868 (8th ed. 2004)).
In the cases cited by defendant regarding subject matter jurisdiction, Garrison and Hudson, the district court‘s powers were first invoked under section 7A-244 as to a portion of marital property, and this Court concluded in each case that the superior court lacked subject matter jurisdiction to enter orders involving the same marital property. See Garrison, 90 N.C. App. at 670, 369 S.E.2d at 628 (partition action to divide marital home improperly brought in superior court where the marital home was already part of a pending equitable distribution claim); Hudson, 145 N.C. App. at 631, 550 S.E.2d at 571 (declaratory action brought in superior court by third parties concerning ownership of real property that was the subject of a prior equitable distribution action in district court held properly dismissed); cf. McKoy v. McKoy, ___ N.C. App. ___, 689 S.E.2d 590 (2010) (where the clerk of superior court previously obtained jurisdiction over guardianship of incompetent adult under Chapter 35A, the district court was barred from entering subsequent custody order concerning same incompetent adult under Chapter 50).
At the core of Garrison and Hudson were two principles: (1) the same property was the subject of both the superior and district court actions, and (2) the relief sought and available was similar in
Applying these principles to this case, defendants contend that plaintiff‘s shareholder claims can be adequately addressed through the action pending in district court because: (1) the inspection and accounting requests can be handled through discovery in the equitable distribution action; (2) the claim for breach of fiduciary duties can be addressed as a distributional fаctor under
Under section 50-20, “the trial court is required to conduct a three-step analysis: 1) identification of marital and separate property; 2) determination of the net market value of the marital property as of the date of separation; and 3) division of the property between the parties.” Estate of Nelson v. Nelson, 179 N.C. App. 166, 168, 633 S.E.2d 124, 126-27 (2006), aff‘d, 361 N.C. 346, 643 S.E.2d 587 (2007). The district court is instructed by the General Assembly to effectuate an “equal” distribution, unless such a distribution of the property “is not equitable” under the circumstances.
Under the broad scope of our equitable distribution statutes, it is clear that plaintiff‘s equitable claim for divestiture of James’ shares is squarely addressed in her equitable distribution action. Plaintiff has already invoked the powers of the district court to divide the shares of Burgess & Associates, and plaintiff may not use her shareholder suit as an end-around to obtaining sole ownership of the company. To the extent the trial сourt allowed plaintiff to pursue an equitable divestiture of James’ shares in her shareholder derivative suit, we reverse the trial court‘s order.
We do not, however, reach the same conclusion on plaintiff‘s derivative claims for breach of fiduciary duties, inspection, and accounting.
1. Breach of Fiduciary Duties
[2] In her divorce action, plaintiff seeks “exclusive possession and full use” of Burgess & Associates prior to an order of equitable distribution being entered, and otherwise only requests “a reasonable and fair portion of the marital property” as to a final decision on equitable distribution. The sole parties in the action are plaintiff and James,
By contrast, plaintiff‘s derivative claim in her shareholder suit does not concern the division of marital property, and instead she asserts a separate claim for relief, outside the scope of section 50-20 and on behalf of the corporation, in superior court. Burgess & Associates is a separate legal entity, recognized as distinct from the holders of its shares, Lumber Co. v. Hunt, 251 N.C. 624, 627, 112 S.E.2d 132, 134 (1960); and though plaintiff and James are in the midst of their divorce, the company continues to exist as a corporation owned and managed by its shareholders. This legal principle entitles plaintiff to bring a shareholder derivative suit “in the right of” Burgess & Associates in order to assert the corporation‘s rights, and recover damages on behalf of the corporation3 for James’ alleged breaches of the duties of good faith and due care.
It is apparent that if plaintiff is successful in her equitable distribution action, she can only receive a portion of the issued shares of Burgess & Associates, along with any other marital or divisible property she may be awarded in the trial court‘s discretion. Should she prove that she is entitled to an unequal distribution, she may, at the most, receive a larger portion of marital or divisible property as an offset-property which she assisted in contributing to the marriage. See
In stark comparison, if plaintiff is successful in prosecuting her derivative suit for breach of the duties of good faith and due care, she may obtain a judgment against James in the right of the company in excess of $10,000 from a jury verdict. The judgment would be against James in his individual capacity, and Burgess & Associates would be able to enforce the judgment against James’ separate property. Despite thе breadth and variety of the factors in section 50-20, there is no similarity between the relief sought in plaintiff‘s equitable distribution action and the derivative suit. In particular, plaintiff sets out several factual allegations in the shareholder suit predating James’ and plaintiff‘s separation. Were we to follow defendants’ suggestion to lump the derivative suit here into subsection (11a) of
The district court in this case does not, and more importantly, cannot, obtain jurisdiction over plaintiff‘s shareholder derivative suit by statute.
An accounting is “[a] rendition of an account, either voluntarily or by court order. The term frequently refers to the report of all items of property, income, and expenses prepared by a personal representative, trustee, or guardian and given to heirs, beneficiaries or the probate court.” Black‘s Law Dictionary 22 (9th ed. 2009). An accounting is an еquitable remedy sometimes pled in claims of breach of fiduciary duty. See, e.g., Toomer v. Branch Banking & Tr. Co., 171 N.C. App. 58, 70, 614 S.E.2d 328, 337 (2005) (“Plaintiffs sought an accounting as an equitable remedy for the alleged breaches of fiduciary duty and constructive fraud.“). Our Supreme Court has said:
All fiduciaries may be compelled by appropriate proceeding to account for their handling of properties committed to their care. When the fiduciary is an executor, administrator, collector, or personal representative of a deceased, he may, at the instance of an interested party, be compelled to account by special proceeding or civil action, G.S. 28-122 and 147; or the court which appointed him may, ex mero motu, compel a proper accounting by attachment for contempt, G.S. 28-118.
Lichtenfels v. Bank, 260 N.C. 146, 148-49, 132 S.E.2d 360, 362 (1963).
Here, given that plaintiff‘s claim for accounting is inextricably tied to her claim for breach of fiduciary duties, the superior court correctly concluded that it had subject matter jurisdiction over this claim as well.
3. Inspection
As to the claim for inspection in the shareholder suit, defendants claim that plaintiff has brought her shareholder action as a tactical strategy to gain an advantage in the divorce suit. If this is true, the superior court has the power to dismiss or stay this claim, because prior to allowing plaintiff‘s claim for inspection the superior court must find: (1) the “demand is made in good faith and for a proper purpose; (2) [plaintiff] describes with reasonable particularity h[er] purpose and the records [s]he desires to inspect; and (3) [t]he records are directly connected with h[er] purpose.”
III. CONCLUSION
Since the superior court is the only court with subject matter jurisdiction over plaintiff‘s shareholder suit, we hold that the superior court properly concluded that it had subject matter jurisdiction over plaintiff‘s causes of action for inspection, accounting, and breach of fiduciary duties. However, given that the nature of the relief sought and the prior equitable distribution action pending, the superior court erred in exercising subject matter jurisdiction over the claim for equitable divestiture of James’ shares in plaintiff‘s shareholder suit. Accordingly, we affirm in part, reverse in part, and remand this case for further proceedings not incоnsistent with this opinion.
Affirmed in part and reversed in part and remanded.
Judge ERVIN concurs.
Judge STROUD concurs in part and dissents in part with separate opinion.
STROUD, Judge concurring in part and dissenting in part.
I concur in the result in the majority opinion as to affirming the trial court‘s order on the shareholder derivative claims pursuant to
I first note that I differ somewhat from the majority opinion as to the interpretation of Garrison v. Garrison, 90 N.C. App. 670, 369 S.E.2d 628 (1988) and Hudson Int‘l, Inc. v. Hudson, 145 N.C. App. 631, 550 S.E.2d 571 (2001). The majority opinion notes that “[a]t the core of Garrison and Hudson were two principles: (1) the same property was the subject of both the superior and district court actions, and (2) the relief sought and available was similar in each suit.” However, I differ with the majority opinion as to its assertion that identity of the property and similarity of relief are the controlling principles of Garrison and Hudson. The controlling principle of Garrison and Hudson is the invocation of the jurisdiction of the District Court. See Hudson Int‘l, Inc. v. Hudson, 145 N.C. App. 631, 550 S.E.2d 571 (2001); Garrison v. Garrison, 90 N.C. App. 670, 369 S.E.2d 628 (1988).
In Garrison, the husband brought an action for partition of real property while an equitable distribution action was pending, and this Court determined that
[t]he superior court ha[d] no authority to partition marital property pursuant to the provisions of G.S. 46-1 et seq. where . . . the jurisdiction of the district court ha[d] been properly invoked to equitably distribute such marital property. Had the parties not asserted their right to have the property equitably distributed pursuant to G.S. 50-20, either tenant in common could have filed a special proceeding to have the property partitioned as provided by G.S. 46-1 et seq.
Garrison at 671-72, 369 S.E.2d at 629. Garrison plainly states that where the jurisdiction of the District Court under
In Sparks v. Peacock, 129 N.C. App. 640, 500 S.E.2d 116 (1998), the husband filed a complaint against the wife seeking contribution under several promissory notes which the couple had executed dur-
[d]efendant correctly states that the district court has jurisdiction over equitable distribution actions. It is also true that where parties have brought an аction in district court under G.S. 50-20 to equitably distribute their marital property, the superior court does not have jurisdiction to divide marital property. However, where, as here, the jurisdiction of the district court has not been invoked, the superior court is not precluded from exercising jurisdiction merely because the parties are former spouses.
Id. at 641, 500 S.E.2d at 118 (emphasis added) (citations omitted).
Hudson follows Garrison and Sparks in its recognition of the importance of the invocation of the jurisdiction of the District Court in the equitable distribution action. See Hudson, 145 N.C. App. 631, 550 S.E.2d 571. In Hudson, this Court concluded that the Superior Court was divested of jurisdiction to hear an action for declaratory judgment brought by a corporation which held title to real estate which the wife, in an equitable distribution action, alleged was actually marital property which was titled to the corporation in an effort “to deprive her of marital rights[.]” 145 N.C. App. at 632-38, 550 S.E.2d at 572-75. Despite the fact that the Superior Court action included multiple parties, including numerous business entities and individuals this Court determined that
in accordance with Garrison and Sparks, where, as here, an action listed in section 7A-244 has been previously filed in district court and another action relating to the subject matter of the previously filed action is then filed in superior court, the district court‘s jurisdiction over the subject matter has already been invoked by the parties to the first action. It follows that the superior court does not have jurisdiction in the subsequently filed action, irrespective of the parties to the first action.
Because the Superior Court, Mecklenburg County, was divested of subject matter jurisdiction in the case sub judice, it properly dismissed the action without prejudice.
Id. at 637-38, 550 S.E.2d at 575. Thus, the primary inquiry is whether the jurisdiction of the District Court has been invoked as to a particular claim, not the identity of the property involved or the similarity of relief sought in the District Court action and the Superior Court action. See id. at 637-38, 550 S.E.2d at 575; Sparks at 641, 500 S.E.2d at 118; Garrison at 671-72, 369 S.E.2d at 629.
The majority opinion also bases its conclusion upon the view that the District Court cannot address all of the issues raised by the parties in regard to the corporation based on two propositions: (1) the District Court cannot order distribution of separate property in order to compensatе plaintiff for damages, as distribution in equitable distribution is limited to distribution of marital and divisible property; and (2) the District Court does not have jurisdiction to determine the issues arising under Chapter 55 of the General Statutes, specifically plaintiff‘s claims for breach of fiduciary duties, inspection of records, and accounting. I disagree that the first proposition is controlling and agree with the second proposition as to the shareholder derivative claim only.
Although I agree that the District Court cannot order a “distribution” of separate property of either husband or wife, there is no doubt that the District Court can order a distributive award as part of its equitable distribution judgment. See generally Pellom v. Pellom, 194 N.C. App. 57, 68-69, 669 S.E.2d 323, 329-30 (2008) (Trial court properly considered both marital property, divisible property, and the plaintiff husband‘s substantial ongoing income, “an obvious liquid asset from which he could pay the award[,]” in making the determination that he had the ability to pay the distributive award.); disc. review denied, 363 N.C. 375, 678 S.E.2d 667 (2009). The amount of a distributive award is not limited by the amount of marital property available to a party, but the party who has to pay a distributive award must do so from any available assets, including his separate property. See id. As also noted by the majority, the District Court has the authority to consider “any other factor the court finds to be just and proper” in making an unequal distribution, and defendant Mr. Burgess‘s alleged mismanagement of the corporation, a marital asset, could be such a factor. Therefore, I disagree with the majority that a judgment for an unequal distribution in plaintiff‘s
In order to determine the extent of the concurrent jurisdiction of the District Court and Superior Court, I must examine the applicable provisions from
Except for the original jurisdiction in respect of claims against the State which is vested in the Supreme Court, original general jurisdiction of all justiciable matters of a civil nature cognizable in the General Court of Justice is vested in the aggregate in the superior court division and the district court division as the trial divisions of the General Court of Justice. Except in respect of proceedings in probate and the administration of decedents’ estates, the original civil jurisdiction so vested in the trial divisions is vested concurrently in each division.
[f]or the efficient administration of justice in respect of civil matters as to which the trial divisions have concurrent original jurisdiction, the respective divisions are constituted proper or improper for the trial and determination of specific actions and proceedings in accordance with the allocations provided in this Article. But no judgment rendered by any court of the trial divisions in any civil action or proceeding as to which the trial divisions have concurrent original jurisdiction is void or voidable for the sole reason that it was rendered by the court of a trial division
which by such allocation is improper for the trial and determination of the civil action or proceeding.
Id.
“In civil matters as to which the trial divisions have concurrent original jurisdiction, G.S. 7A-243 through G.S. 7A-250 designate the superior court division or the district court division as proper or improper for trial.” Boston v. Freeman, 6 N.C. App. 736, 739, 171 S.E.2d 206, 209 (1969). Our Supreme Court has determined that the allocations of various types of actions to either the District Court or Superior Court by
Under the Judicial Department Act of 1965 both trial divisions concurrently possess the aggregate of original civil trial jurisdiction reposed in the General Court of Justice excepting only matters involving claims against the State and probate and administration of decedents’ estates as to which exclusive original jurisdiction is vested in the Supreme Court and the superior court division respectively. The Act further provides for the administrative allocations of case loads between the divisions. It is plain these allocations are not jurisdictional since a judgment is not void or voidable for reason that it was rendered by a court of the trial division which by the statutory allocation was the improper division for hearing and determining the matter.
Id. (citations omitted).
Here, the District Court has assumed jurisdiction over the equitablе distribution action based upon plaintiff‘s own complaint requesting equitable distribution and defendant Mr. Burgess‘s counterclaim which also requested equitable distribution. Plaintiff and defendant Mr. Burgess were married in 1996 and formed Burgess & Associates, Inc. (“the corporation“) in 1999. Plaintiff and defendant Mr. Burgess appear to be the sole shareholders of the corporation, with each owning equal amounts of stock in the corporation. In 2006, plaintiff specifically identified the corporation in her complaint for equitable distribution and requested “exclusive possession and full use” of the corporation pending completion of the equitable distribution case. Almost two years after filing the equitable distribution claim, plaintiff filed the shareholder derivative action in
Both plaintiff and defendant in the case sub judice elected to invoke the jurisdiction of thе District Court by filing a complaint and counterclaim for equitable distribution; therefore, both plaintiff and defendant made a choice to seek the remedies available pursuant to equitable distribution to the exclusion of the various other types of remedies which might otherwise be available to distribute assets or debts between them. See generally Garrison at 672, 369 S.E.2d at 629. However, this election could be effective only to the extent that the District Court has subject matter jurisdiction to determine the issues arising in the particular claim.
Turning to plaintiff‘s complaint in this action, I note that plaintiff specifically alleged the basis for the Superior Court‘s jurisdiction over her claims: “This Court has jurisdiction over the subject matter of this dispute pursuant to §§ 7A-240 and 7A-243 of the North Carolina General Statutes.” However, as noted above,
Except as otherwise provided in this Article, the district court division is the proper division for the trial of all civil actions in which the amount in controversy is ten thousand dollars ($10,000) or less; and the superior court division is the proper division for the trial of all civil actions in which the amount in controversy exceeds ten thousand dollars ($10,000).
The district court division is the proper division without regard to the amount in controversy, for the trial of civil actions and proceedings for annulment, divorce, equitable distribution of property, alimony, child support, child custody and the enforcement of separation or property settlement agreements between spouses, or recovery for the breach thereof.
Plaintiff‘s complaint fails to mention the section of Chapter 7A of the General Statutes which specifically addresses her claims,
The superior court division is the proper division, without regard to the amount in controversy, for actions for corporate receiverships under Chapter 1, Article 38, of the General Statutes, and proceedings under Chapters 55 (North Carolina Business Corporation Act) and 55A (Nonprofit Corporation Act) of the General Statutes.
Plaintiff‘s claims herein were brought under Chapter 55 of the General Statutes, the North Carolina Business Corporation Act, specifically
However,
Subject to the provisions of G.S. 55-7-41 and G.S. 55-7-42, a shareholder may bring a derivative proceeding in the superior
court of this State. The superior court has exclusive original jurisdiction over shareholder derivative actions.
Thus, it appears that as to shareholder derivative actions, the Legislature has vested subject matter jurisdiction solely in the Superior Court. See id. Although I can find no North Carolina case law defining “exclusive original jurisdiction,” it would appear that only the Superior Court has jurisdiction to adjudicate a shareholder derivative action. See id. The term “original jurisdiction” refers to the jurisdiction of a trial court, as opposed to an appellate court, and more than one court may have “original jurisdiction” over a particular type of case. See generally Williams v. Greene, 36 N.C. App. 80, 84, 243 S.E.2d 156, 159 (1978) (“According to common interpretation ‘original jurisdiction’ should be distinguished from ‘appellate jurisdiction’ and means that the federal District Court shall have the power to hear such cases in the first instance. It follows that since the phrase does not contemplate ‘exclusive jurisdiction,’ the state courts have concurrent jurisdiction with the federal court to entertain § 1983 claims.” (citations omitted)). Courts with “original jurisdiction” over the same matters are often described as having “concurrent jurisdiction.” See id. However, the court with exclusive jurisdiction has subject matter jurisdiction “to the exclusion of all other courts.” See In re H.L.A.D., 184 N.C. App. 381, 386, 646 S.E.2d 425, 430 (2007) (citations, quоtation marks, and brackets omitted) (“Blacks Law Dictionary, 869 (8th ed. 2004), defines ‘exclusive jurisdiction’ to mean ‘a court‘s power to adjudicate an action or class of actions to the exclusion of all other courts.’ Further, ‘original jurisdiction’ means ‘a court‘s power to hear and decide a matter before any other court can review the matter.’ (brackets omitted)), aff‘d per curiam, 362 N.C. 170, 655 S.E.2d 712 (2008).
I would interpret
[t]he several sections are to be construed in pari materia. If possible, they are to be reconciled and harmonized. If and when confronted by inescapable conflicts and inconsistencies, these must be resolved by the Court as the occasion arises. In ascertaining
the legislative intent, the judicial approach is well stated in 82 C.J.S., p. 912, Statutes, Section 385(b), as follows:
The different sections should be regarded, not as prior and subsequent acts, but as simultaneous expressions of the legislative will; but, where every means of reconciling inconsistencies has been emplоyed in vain, the section last adopted will prevail, regardless of their relative positions in the code or revision. An unnecessary implication arising from one section, inconsistent with the express terms of another on the same subject, yields to the expressed intent, and the two sections are not repugnant. Any rules contained in the code itself for determining which provision is to prevail should be followed in case of conflict. Form must give way to legislative intent in case of conflict.
Id. (citations and quotation marks omitted).
Although the general provisions of
However, application of the same principles to
(a) If a corporation does not allow a shareholder who complies with G.S. 55-16-02(a) to inspect and copy any records required by that subsection to be available for inspection, the superior court of the county where the corporation‘s principal office (or, if none in this State, its registered office) is located may, upon application of the shareholder, summarily order
inspection and copying of the records demanded at the corporation‘s expense.
(b) If a corporation does not within a reasonable time allow a shareholder to inspect and copy any other record, the shareholder who complies with G.S. 55-16-02(b) and (c) may apply to the superior court in the county where the corporation‘s principal office (or, if none in this State, its registered office) is located for an order to permit inspection and copying of the records demanded. The court shall dispose of an application under this subsection on an expedited basis.
Unlike
For example,
[u]pon motion of either party or upon the court‘s own initiative, the court shall impose an appropriate sanction on a party when the court finds that:
(1) The party has willfully obstructed or unreasonably delayed, or has attempted to obstruct or unreasonably delay, discovery proceedings, including failure to make discovery pursuant to G.S. 1A-1, Rule 37, or has willfully obstructed or unreasonably delayed or attempted to obstruct or unreasonably delay any pending equitable distribution proceeding, and
(2) The willful obstruction or unreasonable delay of the proceedings is or would be prejudicial to the interests of the opposing party.
Delay consented to by the parties is not grounds for sanctions. The sanction may include an order to pay the other party the amount of the reasonable expenses and damages incurred because of the willful obstruction or unreasonable delay, including a reasonable attorneys’ fee, and including appointment by the court, at the offending party‘s expense, of an accountant, appraiser, or other expert whose services the court finds are necessary to secure in order for the discovery or other equitable distribution proceeding to be timely conducted.
Because the District Court has no jurisdiction over shareholder derivative claims under
Although this dissent reaches nearly the same result as the majority opinion, although for different reasons, I also wish to state my concern that this case could have very damaging, and most likely unintended, consequences for parties to equitable distribution actions in North Carolina. I do not believe that this result is in keeping with the purpose and intent of the equitable distribution law. The majority‘s opinion, which leaves both the equitable distribution
I fear that this case may introduce the corporate “strike suit” to a new forum: equitable distribution. The Official Comment to
A great deal of controversy has surrounded the derivative suit, and widely different perceptions as to the value and efficacy of this litigation continue to exist. On the one hand, the derivative action has historically been the principal method of challenging allegedly improper, illegal, or unreasonable action by management. On the other hand, it has long been recognized that the derivative suit may be instituted more with a view to obtaining a settlement favorable to the plaintiff and his attorney than to righting a wrong to the corporation (the so-called “strike suit.“)
In the context of an equitable distribution case involving a corporation which is solely owned by the husband and wife, where the District Court will ultimately distribute the shares of the corporation, the potential for abusе of a shareholder derivative action is tremendous. Many married couples own family businesses as closely-held corporations in which the husband and wife are the sole shareholders. Upon separation and divorce, it is unfortunately exceedingly common for one spouse to accuse the other of some sort of malfeasance in relation to the corporation. In any such case, there is now the potential for a shareholder derivative action in Superior Court. In fact, after this case, attorneys may believe that they must consider filing a shareholder derivative action in addition to the equitable distribution claim in order to secure the possibility of a complete recovery for their clients. As few attorneys who specialize in or routinely practice family law are also conversant in shareholder derivative actions in Superior Court, or vice-versa, each party would most likely have to retain two attorneys or law firms to provide representation in the two separate actions, thus increasing the costs of litigation substantially.
Certainly the hypothetical outcomes discussed above are not the only potential outcomes. I would note that our record includes no information regarding the substantive issues raised by the equitable distribution action between plaintiff and defendant Mr. Burgess, and nothing in this dissent should be considered as an expression of any opinion as to the merits of that claim or the shareholder derivative claim. My concern is only with the procedural dilemma which is created by the separation of the equitable distribution action from the shareholder derivative action in the context of a corporation entirely owned by the husband and wife because of the “exclusive original jurisdiction” provision of
For the reasons stated above, I therefore concur in part and dissent in part. I would reverse the Superior Court‘s order as to denial of dismissal of plaintiff‘s claims for divestiture of shares and inspection of corporate records; I would affirm as to denial of dismissal of plaintiff‘s shareholder derivative claim including claims for accounting and breach of fiduciary duty.