ACTION COMMUNITY TELEVISION BROADCASTING NETWORK, INC. and
HERBERT GREENBERG,
Plaintiff-Appellees,
v
.
RAY LIVESAY,
Defendant-Appellant.
Bridgers, Horton, Rountree & Boyette, by Charles S. Rountree,
for plaintiff-appellee Action Community Television
Broadcasting Network, Inc.
Etheridge, Sykes, Britt & Hamlett, LLP, by William D.
Etheridge, for plaintiff-appellee Herbert Greenberg.
Adams, Portnoy & Berggren, PLLC, by Douglas E. Portnoy, for
defendant-appellant.
McGEE, Judge.
Herbert Greenberg (Greenberg) and Ray Livesay (defendant) are
each fifty percent shareholders in Action Community Television
Broadcasting Network, Inc. (Action, Inc.), which was formed in
November 1995. An organizational meeting of the shareholders was
held on 8 May 1996. Greenberg and defendant were elected officers
at this meeting, and each was given an equal shareholder interest
in the corporation. Greenberg and defendant issued a de facto one
share of stock to Grover Prevatte Hopkins (Hopkins) in order that
Hopkins could be called upon to vote and resolve any impasse that
might develop between Greenberg and defendant. Greenberg, in his capacity as president of Action, Inc., sent
a "Notice of Annual Meeting of Shareholders" on 8 May 1998
announcing a meeting to be held on 20 May 1998. At the meeting,
which defendant did not attend, Greenberg and Hopkins voted to
remove defendant as a director and voted to replace defendant with
Hopkins as a director. However, defendant and Greenberg continued
to work together at Action, Inc.
In August 2000, a dispute arose between Greenberg and
defendant, and Greenberg organized an emergency meeting in which he
and Hopkins voted to remove defendant from managerial control and
authorized filing of a lawsuit. Action, Inc. and Greenberg
(collectively plaintiffs) filed a complaint dated 22 August 2000.
In one of the claims for relief in the complaint, plaintiffs asked
the trial court to declare the legal status of Greenberg and
defendant with respect to their positions in the corporation based
on the minutes of the corporation. Plaintiffs filed a motion dated
22 November 2000 for partial summary judgment as to this issue.
The trial court granted plaintiffs' motion for partial summary
judgment in an order entered 9 January 2001. The trial court
entered an order of certification of immediate appeal pursuant to
N.C. Gen. Stat. § 1A-1, Rule 54 on 9 February 2001. Defendant
appeals from the trial court's 9 January 2001 order.
We note that a Rule 54(b) certification is reviewable by this
Court on appeal because a "trial court's denomination of its decree
[as] 'a final . . . judgment does not make it so,' if it is not
such a judgment." First Atl. Mgmt. Corp. v. Dunlea Realty Co., 131N.C. App. 242, 247, 507 S.E.2d 56, 60 (1998) (citation omitted).
The trial court's determination that there is no just reason for
delay of an appeal is accorded great deference, but it does not
bind our appellate courts because "ruling on the interlocutory
nature of appeals is properly a matter for the appellate division,
not the trial court." Estrada v. Jaques, 70 N.C. App. 627, 640,
321 S.E.2d 240, 249 (1984).
Defendant has asked this Court to review his appeal of an
interlocutory order pursuant to N.C. Gen. Stat. § 1-277 which
states
[a]n appeal may be taken from every judicial
order or determination of a judge of a
superior or district court, upon or involving
a matter of law or legal inference, whether
made in or out of session, which affects a
substantial right claimed in any action or
proceeding; or which in effect determines the
action, and prevents a judgment from which an
appeal might be taken; or discontinues the
action, or grants or refuses a new trial.
N.C. Gen. Stat. § 1-277(a) (1999). Defendant contends the trial
court's decision effectively disposes of all of plaintiffs' claims
because all of those claims were based on a determination of
whether plaintiffs properly removed defendant from managerial
control of the corporation. Defendant also contends the trial
court's order affects a substantial right.
All of plaintiffs' claims, however, have not been determined
by the trial court. Remaining before the trial court are claims
asking for a declaration of debt obligation, appointment of a
receiver, and corporate dissolution. Defendant's counterclaims
that have not been determined are a request for an accounting, adeclaration of the corporate debt owed to defendant, and also a
request for corporate dissolution. Defendant contends the request
for dissolution is moot because he will not be able to vote and
cause a deadlock among the directors, a prerequisite defendant
believes is necessary before bringing a request for dissolution.
However, defendant incorrectly concludes deadlock is a
prerequisite to a request for dissolution. As in Meiselman v.
Meiselman, 309 N.C. 279, 307 S.E.2d 551 (1983), we "note at the
outset that the enterprise[] with which we are dealing [is a] close
corporation[], not [a] publicly held corporation[]." Id., 309 N.C.
at 288, 307 S.E.2d at 557.
[M]any close corporations are companies based
on personal relationships that give rise to
certain "reasonable expectations" on the part
of those acquiring an interest in the close
corporation. Those "reasonable expectations"
include, for example, the parties' expectation
that they will participate in the management
of the business or be employed by the company.
Id., 309 N.C. at 289, 307 S.E.2d at 558 (quoting F. O'Neal, Close
Corporations: Existing Legislation and Recommended Reform, 33 Bus.
Law 873, 885 (1978)). Because of this peculiarity not found in
larger publicly traded corporations,
when personal relations among the participants
in a close corporation break down, the
"reasonable expectations" the participants
had, for example, an expectation that their
employment would be secure, or that they would
enjoy meaningful participation in the
management of the business - become difficult
if not impossible to fulfill. In other words,
when the personal relationships among the
participants break down, the majority
shareholder, because of his greater voting
power, is in a position to terminate the
minority shareholder's employment and toexclude him from participation in management
decisions.
Meiselman, 309 N.C. at 290, 307 S.E.2d at 558. As a result of the
above unique situations, North Carolina courts have determined a
minority shareholder can bring a request for dissolution, or other
equitable relief, if the "reasonable expectations" of the
shareholder have been frustrated. See Meiselman, 309 N.C. at 301,
307 S.E.2d at 564. We note that in the case before us, the two
shareholders are equal fifty percent shareholders. However,
because of the shareholder meetings in which defendant was divested
of his role as director, defendant is essentially a minority
shareholder in terms of voting power and control of Action, Inc.
Based on these principles, defendant is entitled to bring a
request for dissolution and have that request evaluated by the
trial court regardless of whether or not defendant has voting power
or whether there is actual deadlock among the managing
shareholders.
Defendant also contends that even though the order is
interlocutory, the appeal should be heard because a substantial
right has been affected. The "'substantial right' test for
appealability . . . is more easily stated than applied. It is
usually necessary to resolve the question in each case by
considering the particular facts of that case and the procedural
context in which the order from which appeal is sought was
entered." Waters v. Personnel, Inc., 294 N.C. 200, 208, 240 S.E.2d
338, 343 (1978). In determining whether a substantial right has
been affected in such a manner warranting immediate appeal,"[e]ssentially a two-part test has developed - the right itself
must be substantial and the deprivation of that substantial right
must potentially work injury to plaintiff if not corrected before
appeal from final judgment." Goldston v. American Motors Corp.,
326 N.C. 723, 726, 392 S.E.2d 735, 736 (1990).
Based on the particular facts before us, we hold defendant's
argument fails the substantial right test. While we recognize a
shareholder's ability to manage his or her own closely held
corporation is significant, we do not see how this right in this
case will be potentially injured before a final ruling is made. As
noted above, defendant has remedies available to him to protect
those rights, remedies such as dissolution and the appointment of
a receiver that have already been asked for by the parties
involved. We therefore dismiss defendant's appeal.
Dismissed.
Judges WALKER and BIGGS concur.
*** Converted from WordPerfect ***