Lowder v. All Star Mills, Inc.

85 N.C. App. 329 | N.C. Ct. App. | 1987

EAGLES, Judge.

Defendants argue that the method the trial court used to allocate the receivership’s expenses constitutes error. We disagree.

Those who benefit from the receivership should bear its expense and, where several parties benefit, the expense should be allocated in proportion to the benefit received. See Bank v. Country Club, 208 N.C. 239, 179 S.E. 882 (1935); Graham v. Carr, 133 N.C. 449, 45 S.E. 847 (1903). Because the benefit received from the receivers’ services will largely depend on the facts in each case, the trial court has discretion in apportioning the expenses of receivership. See Simmons v. Allison, 119 N.C. 556, 26 S.E. 171 (1896); First Federal Sav. & Loan Ass’n of Gainesville v. Stephens, 226 Ga. 867, 178 S.E. 2d 170 (1970). After examining the record, we cannot say that the trial court abused its discretion in allocating the expenses based on the value of the net assets of each corporation after liquidation.

Defendants argue that the trial court’s method, by itself, does not fairly and equitably determine the benefit received by each corporation. Instead, defendants contend, the method forces shareholders of those corporations whose assets and liabilities are more easily managed to pay an unfair portion of the receivership’s expenses. Consolidated, for example, has only one asset, a farm which it leased to Hatcheries. Because of the simplicity of Consolidated’s business activity, defendants state that the trial court’s formula requires Consolidated’s shareholders to pay for expenses which were actually incurred in managing the business affairs of those corporations with more complex operations. Consequently, defendants argue that each expense and fee should be separately attributed to the specific corporation(s) it benefited.

Those arguments, however, ignore the realities of the situation. Beginning with the initial order appointing the receivers, the corporate defendants were operated as one integrated business entity. As a result, the receivers apparently did not, and could not, assign each expense to specific corporations. In addition, the trial court’s order did not charge Consolidated with any of the receivership’s expenses incurred prior to the 30 April 1984 order. From what appears in the record, the order requires Consolidated to pay only those expenses incurred in liquidating and dissolving the corporations and relieves it from any liability for expenses incurred in either the tax disputes or in managing the other corporations.

Moreover, given that it was impossible, and perhaps even inappropriate, to allocate each particular receivership expense to the particular corporation(s) which incurred it, the method employed by the trial court here is as fair and reasonable a method as the circumstances would allow. The receivers were initially charged with managing the various corporations. Subsequently, they were charged with the duty of liquidating and dissolving them. The total value of the assets of each corporation after liquidation and payment of liabilities is a reasonable indication of the amount of time and effort expended for that corporation while in receivership. Furthermore, defendants have not shown that the application of the trial court’s formula will subject any corporation to a burden out of proportion to the benefit it received.

In the past, our courts have allocated the expense of receivership through a pro rata method designed to place liability in proportion to the benefit received. See Bank v. Country Club, supra; Kelly v. McLamb, 182 N.C. 158, 108 S.E. 435 (1921); Graham v. Carr, supra. Absent a showing by defendants that there is a better method of accomplishing that objective, that is also feasible, we cannot hold that the trial court abused its discretion.

Defendants’ remaining assignments of error are without merit.

Affirmed.

Judges Wells and Greene concur.