Woodward v NC Management Co., 162 NC App 182 (03-27) 01/06/2004

Appeal by respondents from judgment entered 17 May 2002 by Judge William C. Griffin, Jr., in Nash County Superior Court. Heard in the Court of Appeals 11 September 2003.

Helms, Mulliss, & Wicker, P.L.L.C., by Robert H. Tiller, for petitioner-appellee.

Womble, Carlyle, Sandridge & Rice, P.L.L.C., by Burley B. Mitchell, Jr., and Sean E. Andrussier, and Stubbs & Perdue, P.A., by Trawick H. Stubbs, Jr., and Jason L. Hendren, for respondents-appellants.

    CALABRIA, Judge.

    Respondents appeal the 17 May 2002 judgment of $2,735,458.00 in favor of petitioner. This is the second appeal for the parties, whose dispute arises out of the winding up of a general partnership, the North Carolina Management Company (“NCMC”) following the death of Philip D. Woodward (“Woodward”), one of the partners. A full rendition of the facts is incorporated in thisCourt's first opinion, Woodward I, which was not published. Woodward v. N.C. Mgmt. Co., 145 N.C. App. 207, 550 S.E.2d 49 (2001).
    The following facts are relevant to this appeal. NCMC provided management services for thirty-four Pizza Hut franchises. Woodward owned a thirty percent interest in NCMC and one-third of the outstanding capital stock in the thirty-four Pizza Huts. Following Woodward's death, his estate received, pursuant to a Stock Redemption Agreement (“SRA”), $4,002,277.22 as compensation for his interest in the Pizza Hut franchises. Thereafter, petitioner sought an accounting and settlement of Woodward's interest in NCMC. The trial court appointed a referee and subsequently adopted the referee's report, which favored NCMC, in a written judgment. Petitioner took exception to the referee's findings of fact as follows:
        1. Finding of Fact No. 10, which states that NCMC was not considered as an earning center, on the grounds that it is not supported by the evidence. In fact, the evidence showed that NCMC was a fully independent and fully functioning company.
        2. Finding of Fact No. 12, which states that profits of NCMC were included in the valuation of the [Pizza Hut franchises'] Corporate stock, on the grounds that it is not supported by the evidence. In fact, the evidence showed that defendants never paid the Estate for any part of NCMC.
        3. Finding of Fact No. 24, which states that the wind up of the business of NCMC was completed in July 1993, on the grounds that it is not supported by the evidence. In fact, the evidence showed that the business was continued under a new name (ECPH Management, Inc.).
On appeal, petitioner argued there were genuine issues of material fact for a jury to answer. Specifically, petitioner asserted a genuine issue of material fact existed as to both “the value of NCMC and whether the profits of NCMC were not included in the valuation of the corporate stock of the Pizza Hut franchises.” Id. After setting forth the testimony of an expert witness and the referee's findings, our Court stated “[w]e agree with petitioner that based on the record and the two valuation methods applied to NCMC, there is a genuine factual dispute as to the value of NCMC to be determined by a jury.” Id. Finally, in summarizing the genuine issues of material fact, we stated:
        The issues before the jury upon remand will be the exceptions to the referee's report asserted by petitioner, which are: (1) was NCMC an operational entity separate from the Pizza Hut Restaurants, (2) the value, if any, of NCMC, and (3) was NCMC dissolved but not wound up following Woodward's death.

Id.
    The trial court took these numbered issues and presented to the jury three interrogatories:
        ISSUE No. 1
        Was NCMC an operational entity separate from the Pizza Hut restaurants?

        ISSUE No. 2
        What is the value of the Estate's 30 percent interest, if any, in NCMC as of October 8, 1992?

        ISSUE No. 3
        Was NCMC dissolved but not wound up following Mr. Woodward's death?

The trial court began framing the issues by referring to the Court's list, but modified the second issue to add the dateWoodward died and Woodward's interest in NCMC. The jury returned a verdict finding: (1) NCMC was a separate entity from the Pizza Hut franchises; (2) Woodward's interest in the value of NCMC on the day he died was $1,549,702.00; and (3) NCMC was dissolved but not wound up following Woodward's death.
    On appeal, respondents assert the trial court erred in not presenting to the jury, either by jury interrogatory or jury instruction, the issue of whether respondents had previously paid petitioner for a portion of the $1,549,702.00 owed. We agree.
    In the first appeal, petitioner framed the valuation issue to the court as follows: “there is a genuine issue of material fact as to [(a)] the value of NCMC and [(b)] whether the profits of NCMC were not included in the valuation of the corporate stock of the Pizza Hut franchises.” Id. This Court agreed with petitioner “that based on the record and the two valuation methods applied to NCMC, there is a genuine factual dispute as to the value of NCMC to be determined by a jury.” Id. Later, this Court framed the second issue excepted to by petitioner as “the value, if any, of NCMC.” Id. Although the Court did not expressly state that there was a genuine issue of material fact as to whether the profits of NCMC had been included in the valuation of the Pizza Huts, at the end of the opinion, the Court emphasized “[t]he jury trial is limited to petitioner's specific exceptions to particular findings of fact in the referee's report and the issues based on these exceptions, as presented by petitioner. . . in her exceptions to the referee's report.” Id. Petitioner's exception to finding of fact number 12takes issue with whether the profits of NCMC were included in the valuation of the Pizza Hut franchises and whether respondents have ever paid petitioner for “any part of NCMC.” Accordingly, the trial court correctly presented to the jury the issue of whether NCMC had any value independent from the Pizza Huts; however, based upon the evidence at trial, in presenting the valuation issue to the jury, the trial court erred in not including whether petitioner had already been paid for any or all of her portion of NCMC's value.
    The trial court declined to present the prior payment issue to the jury either through interrogatory   (See footnote 1) or through instruction.   (See footnote 2) Rather, the trial court indicated that if the jury determined NCMC was a separate entity with a value, he would “draft a judgment that will deal with [the prior payment issue].” Instead, the trial court entered a judgment without addressing the issue.
    Since the prior payment issue presents a genuine issue of material fact, we remand this case to the trial court for submission of this final issue to the jury. The jury trial will again be limited to petitioner's specific exceptions to theparticular findings of fact in the referee's report; the only remaining exception being whether respondents “never paid the Estate for any part of NCMC.” Specifically, we note that respondents have asserted they are entitled to a credit for the prior payment of $1,228,133.26, representing the profits of NCMC appearing in the Pizza Hut SRA calculation, and $166,964.00, representing payments made to petitioner or on petitioner's behalf in 1992 and 1993. Accordingly, the trial will be limited to: (1) whether respondents made payment(s) to petitioner for the value of NCMC for which respondents should receive credit; and (2) if said payments were made, in what amount should respondents receive credit? If the jury finds any portion of the value owed to petitioner has been paid and should be credited, the court shall subtract the amount from the $1,549,702.00 judgment, recalculate the interest thereon and enter the ultimate judgment. The judgment of the trial court is reversed and the case is remanded for further proceedings consistent with this opinion.
    Reversed and remanded.
    Judges McGEE and HUNTER concur.
    Report per Rule 30(e).

Footnote: 1