1. Corporations; Costs--attorney fees--access to corporate records--no court order
Plaintiff shareholder was not entitled to an award of attorney fees under N.C.G.S. §
55_16_04(c) where there was no court order enforcing plaintiff's statutory right to inspection
and copying of defendant's corporate records at defendant's expense. The parties had signed a
consent order that plaintiff would have access, but that order contained no findings or
conclusions and was not an adjudication of rights.
2. Costs--attorney fees_authority to award_consent order
A provision in a consent order giving the court the authority to award attorney fees in a
dispute over access to corporate records was not valid in the absence of statutory authority.
3. Judgments_findings--bench trial_consent order_subsequent petition for attorney
fees
The trial court did not err by failing to enter findings pursuant to N.C.G.S. § 1A-1, Rule
52(a)(1) in ruling on a petition for attorney fees. That rule applies only to “actions” tried before
the trial court without a jury; here, the action had been addressed in a consent order.
Law Offices of William M. Alexander, Jr., PLLC, by William M.
Alexander, Jr., for plaintiff-appellant.
Van Winkle, Buck, Wall, Starnes & Davis, P.A., by Stephen J.
Grabenstein, for defendant-appellee.
ELMORE, Judge.
Gene H. Carswell (plaintiff) is a shareholder of
Hendersonville Country Club, Inc. (defendant) and was elected as a
director in August 1999. On 7 December 2001 plaintiff made a
request in writing to defendant that he be allowed to review andcopy certain documents, including a shareholder list. On 14
January 2002 defendant provided plaintiff access to the minutes of
board meetings and other corporate documents at the Club's
management office. While copying these documents, plaintiff
inquired about obtaining shareholder personal information. When
defendant's staff advised plaintiff that his inquiry would be
considered by management, plaintiff left the office without
completing the document review he had requested.
On 1 February 2002 plaintiff's attorney, Mr. Timothy Cosgrove,
demanded that defendant provide plaintiff with a list of names and
home addresses of all shareholders; stock transfer records; tax
returns over the past five years; and the name of defendant's 401K
administrator. Plaintiff then corresponded directly with the
President of defendant's Board of Directors, Mr. John Gould. On 13
March 2002 defendant informed plaintiff that it had already made
available for plaintiff's review the tax returns, stock transfer
records, accounting records, minutes of director and shareholder
meetings, and a list of shareholder names. Defendant indicated
that its concern for shareholder privacy prompted the decision to
withhold shareholder home addresses and phone numbers.
Despite being provided access to defendant's records, on 26
March 2002, plaintiff filed an application in Henderson County
Superior Court for inspection of business records pursuant to N.C.
Gen. Stat. § 55-16-01 et. seq. In response to plaintiff's conduct,
defendant suspended plaintiff's membership with the Club effective
2 April 2002. Defendant then filed a motion to dismiss plaintiff'scomplaint, but the parties subsequently entered into settlement
negotiations. The parties and their attorneys signed a consent
order and voluntary dismissal with prejudice of plaintiff's action;
the order was approved by Judge Zoro J. Guice on 2 July 2002. The
parties agreed that plaintiff “shall have full and ongoing access
to all records of the Club, and at Plaintiff's expense may copy
same, during normal business hours of the Club's office . . . .”
Plaintiff was granted permission to copy shareholder addresses and
telephone numbers and any other documents “that Plaintiff believes
necessary to fulfill his duties as director during his term or to
which he is entitled to as a stockholder.” The order also provided
that plaintiff was reinstated as a Club member, canceling his
suspension. With respect to the issue of attorneys' fees, the
order stated the following:
6. The parties agree to submit to this court
for decision by Brief and stipulated facts (if
the parties cannot stipulate as to facts then
by affidavit proposed by each of the parties)
without request for oral argument their
respective requests for the award of attorneys
fees in this matter. This court shall retain
jurisdiction in this matter to enforce the
terms and conditions by which the parties have
agreed and consented to the entry of this
Order as set out herein.
In accordance with the terms of the consent order, both parties
submitted affidavits setting out their requests for attorneys'
fees. Judge Baker ruled on the requests and mailed a copy of his
order along with a letter to the parties addressing their
entitlement to attorneys' fees. In this letter, Judge Baker
observed that almost every single assertion by one side wascontested by the opposing party. In the order, he determined that
each party should bear its own costs and expenses and denied the
requests for attorneys' fees. From this order entered 20 January
2004, plaintiff appeals.
[1] Plaintiff contends that an award of attorneys' fees was
mandated under N.C. Gen. Stat. § 55-16-04. We disagree. Our
General Statutes permit a shareholder who properly demands and is
denied access to corporate records to apply for court-ordered
inspection and copying of the requested documents at the
corporation's expense. See N.C. Gen. Stat. § 55-16-04(a) and (b).
The statute further provides that
If the court orders inspection and copying of
the records demanded, it shall also order the
corporation to pay the shareholder's costs
(including reasonable attorneys' fees)
incurred to obtain the order unless the
corporation proves that it refused inspection
in good faith because it had a reasonable
basis for doubt about the right of the
shareholder to inspect the records demanded.
N.C. Gen. Stat. § 55-16-04(c) (2003). Thus, the language of the
statute is clear that attorneys' fees may only be awarded following
a court order requiring the corporation to allow inspection and
copying of the records demanded by the shareholder. Here, the
court did not enter an order to this effect. Rather, the parties
agreed that plaintiff would have ongoing access to defendant's
records and signed a consent order which was approved by the court.
This consent order is not an adjudication of rights in favor of
plaintiff because it contains no findings of fact or conclusions of
law by the trial court. See Ibele v. Tate, 163 N.C. App. 779, 781,594 S.E.2d 793, 795 (2004) (consent judgment which contains no
findings or conclusions is merely recital of parties' agreement;
not an adjudication of rights); Crane v. Green, 114 N.C. App. 105,
106, 441 S.E.2d 144, 144-45 (1994) (with the exception of domestic
relations cases, a consent judgment is merely a court-approved
contract without a judicial determination). As there was no court
order enforcing plaintiff's statutory right to inspection and
copying of defendant's corporate records at defendant's expense,
plaintiff was not entitled to an award of attorneys' fees under
N.C. Gen. Stat. § 55-16-04(c).
[2] Next, plaintiff argues that Paragraph 6 of the consent
order provides the court with authority to award attorneys' fees.
However, “[a]s a general rule contractual provisions for attorney's
fees are invalid in the absence of statutory authority.” Forsyth
Municipal ABC Board v. Folds, 117 N.C. App. 232, 238, 450 S.E.2d
498, 502 (1994) (citing Enterprises, Inc. v. Equipment, Co., 300
N.C. 286, 289, 266 S.E.2d 812, 814-15 (1980)). The only exception
recognized by our Supreme Court deals with contractual provisions
for attorneys' fees contained in separation agreements. See
Bromhal v. Stott, 341 N.C. 702, 462 S.E.2d 219 (1995). Thus, even
though the consent order contained an express provision permitting
the parties to seek recovery of attorneys' fees, neither party is
entitled to an award of fees absent statutory authority. See
Harborgate Prop. Owners Ass'n v. Mountain Lake Shores Dev. Corp.,
145 N.C. App. 290, 297-98, 551 S.E.2d 207, 212 (2001) (provision in
consent judgment for attorneys' fees invalid in absence ofstatutory authority), disc. review denied, 356 N.C. 301, 570 S.E.2d
506 (2002); see also Lee Cycle Ctr., Inc. v. Wilson Cycle Ctr.,
Inc., 143 N.C. App. 1, 11-12, 545 S.E.2d 745, 752 (contractual
provision notwithstanding, parties could not recover attorneys'
fees without express statutory authority), aff'd, 354 N.C. 565, 556
S.E.2d 293 (2001). As the court properly denied the requests of
both parties, plaintiff's argument is overruled.
[3] Finally, plaintiff argues that the trial court erred in
failing to enter findings pursuant to N.C. Gen. Stat. § 1A-1, Rule
52(a)(1). We disagree. Rule 52(a)(1) of the North Carolina Rules
of Civil Procedure applies only to “actions” tried before the trial
court without a jury. See N.C. Gen. Stat. § 1A-1, Rule 52(a)(1)
(2003); Tay v. Flaherty, 100 N.C. App. 51, 55, 394 S.E.2d 217, 219
(Rule 52(a)(1) inapplicable to hearing on petition for attorneys'
fees because an “action” was already in existence; petition must be
characterized as motion for court order pursuant to Rule 7(b)(1)),
disc. review denied, 327 N.C. 643, 399 S.E.2d 132 (1990). Here,
the parties filed petitions for attorneys' fees and sought an order
of the court; plaintiff's action had already been addressed in the
consent order. Therefore, Rule 52(a)(1) does not apply to the
court's order denying the petitions for an award of attorneys'
fees.
We hold that the trial court properly denied both parties'
requests for attorneys' fees and affirm the court's order directing
each party to pay its own costs and expenses.
Affirmed. Chief Judge MARTIN and Judge McCULLOUGH concur.
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