Hudson v. All Star Mills, Inc.

315 S.E.2d 514 (1984)

Lois L. HUDSON, Joe Hudson, Jennell H. Ratterree, Ellen Hudson, Bruce Hudson, David P. Lowder, W.H. Lowder, J.R. Lowder, Cynthia L. Peck, Michael Lowder, and Douglas Lowder, on behalf of All Star Mills, Inc.
v.
ALL STAR MILLS, INC., Malcolm M. Lowder, Patty S. Lowder, Henry C. Doby, Jr., John M. Bahner, John P. Rogers, Ernest H. Morton, Jr., Charles E. Herbert, Donald R. Billings, Moore & Van Allen, a Partnership, Brown, Brown & Brown, a Partnership.

No. 8320SC863.

Court of Appeals of North Carolina.

May 15, 1984.

DeLaney, Millette, DeArmon & McKnight by Ernest S. DeLaney, Charlotte, for plaintiffs.

Moore, Van Allen & Allen by Randel E. Phillips, Charlotte, for defendants Malcolm M. Lowder and Patty S. Lowder.

Jones, Hewson & Woolard by Harry C. Hewson, Charlotte, for defendants Henry C. Doby, Jr. and John M. Bahner.

Hartsell, Hartsell & Mills, P.A. by W. Erwin Spainhour, Concord, for defendant John P. Rogers.

Wade & Carmichael by R.C. Carmichael, Jr., Charlotte, for defendant Ernest H. Morton, Jr.

Nichols, Caffrey, Hill, Evans & Murrelle by William L. Stocks and Everett B. Saslow, Jr., Greensboro, for defendant Charles E. Herbert.

Walker, Palmer & Miller, P.A. by James E. Walker, Charlotte, for defendant Donald R. Billings.

Golding, Crews, Meekins, Gordon & Gray by James P. Crews, Charlotte, for defendant Moore & Van Allen.

Bailey, Brackett & Brackett by Martin L. Brackett, Jr., Charlotte, for defendant Brown, Brown, and Brown.

WELLS, Judge.

The sole question presented for review is whether the trial court erred in granting defendants' motion to dismiss under N.C. Gen.Stat. § 1A-1, Rule 12(b)(6) of the Rules of Civil Procedure. It is apparent from the wording of the order of dismissal that the trial court considered the record of proceedings in Lowder, et al. v. All Star Mills, Inc., et al, No. 79CVS015, a civil action pending in the Stanly County Superior Court. Pursuant to the provisions of Rule 12(b)(6), defendants' motions were thus converted to Rule 56 motions for summary judgment. See Smith v. Insurance Co., 43 N.C.App. 269, 258 S.E.2d 864 (1979) and cases and authorities cited therein. Accordingly, we treat the trial court's order as constituting entry of summary judgment for defendants. Summary judgment is proper when it appears that even if the facts as claimed by plaintiff are taken as true, there can be no recovery. Doggett v. Welborn, 18 N.C.App. 105, 196 S.E.2d 36, cert. denied, 283 N.C. 665, 197 S.E.2d 873 (1973).

The allegations of plaintiffs' complaint reflect attempts to circumvent the pending receivership action through collateral attacks. Attacks on the validity of receiverships by collateral actions are not permissible under North Carolina law. In Hall v. Shippers Express, 234 N.C. 38, 65 S.E.2d 333, pet. to reh. dismissed, 234 N.C. 747, 66 S.E.2d 640 (1951) our supreme court held that where a receivership court has jurisdiction over a matter the only remedy is through the receivership proceeding. The court, in response to a creditors suit, which alleged that the receivership was instituted to defraud creditors, refused to permit a collateral attack saying: "[T]he court being one of competent jurisdiction in receivership proceedings, and having acquired jurisdiction of the parties and the subject matter in controversy, it may not be interfered with by any other court of co-ordinate authority.... ``That court which first takes cognizance of the controversy is entitled to retain jurisdiction until the end of the litigation, to the exclusion of all interference by other courts of concurrent jurisdiction.'" (Citations omitted).

First plaintiffs contend that the Brown firm obtained confidential information from Horace and communicated it to Malcolm and Peggy Lowder and Moore and Van Allen. This matter was previously at issue in the receivership action and is therefore not subject to collateral attack. See Lowder II, supra. Next plaintiffs attempt to attack the appointment of the receivers because Horace was not represented by counsel. Under the rule established in Hall v. Shippers Express, supra, this is clearly not permitted.

Plaintiffs further complain about the receivers having enjoined Horace from participating in the business and about their alleged attempts to create unnecessary attorney and accounting fees. These matters are clearly within the purview of the receivership action and cannot be collaterally attacked. Plaintiffs further object to the tax settlement entered into by the receivers and contend the receivers have otherwise mismanaged the subject companies. Here again, the tax matters were at issue in Lowder II, supra, and the other issues are clearly ancillary to the receivership proceeding and must be raised there.

Finally plaintiffs' attempts to attack the receivers and bankruptcy trustees actions relating to the bankruptcy proceeding. Again, these actions may be properly addressed only in the receivership and bankruptcy proceeding.

Having determined that all plaintiffs' allegations are properly subject to the jurisdiction of the receivership action over which Judge Seay retained jurisdiction; we, therefore, hold that the trial court properly entered summary judgment for defendants.

Affirmed.

BECTON and JOHNSON, JJ., concur.