Hill v. Hill

GREENE, Judge.

Robert L. Hill (Hill) and Bob Hill Enterprises, Inc. (collectively, Defendants) appeal an amended judgment filed 12 November 1999, awarding Kevin E. Hill (Plaintiff) $450,001.00.¹

The record shows that on 14 October 1996, Plaintiff filed a complaint against Defendants, alleging claims, in pertinent part, for conversion, malicious prosecution, abuse of process, and punitive damages. Plaintiff presented evidence at trial that Hill is the sole stockholder of Bob Hill Enterprises, Inc. In 1995, Bob Hill Enterprises, Inc. owned several businesses, including Discount City (the store), an appliance and furniture store located in Havelock, North Carolina Plaintiff, Hill’s son, began working at the store when he was fourteen years old, and he became manager of the store upon graduating from high school in 1983. In 1995, he was working as the manager of the store.

In late 1995, Hill contacted Ellis Nelson (Nelson) at the certified public accounting firm of McGladrey & Pullen to inquire about the procedure for transferring ownership of the store to Plaintiff. The accounting firm then prepared documents necessary for Plaintiff to obtain a federal employer identification number in his name, doing business as Discount City Super Store. The accounting firm also prepared an application for Plaintiff to obtain a sales tax number from the State Revenue Department in his name, doing business as Discount City Super Store.

Plaintiff testified at trial that in December 1995, Hill told Plaintiff he wished to transfer ownership of the store to Plaintiff effective 1 January 1996. Hill agreed to gift to Plaintiff the entire store, including its accounts receivable, inventory, bank account, and use of the building owned by Bob Hill Enterprises, Inc. In early December 1995, Nelson sent Plaintiff a letter describing how the transfer would occur. In December 1995, Hill telephoned First Citizens Bank and told bank officials to transfer the store’s account to Plaintiffs name, doing business as Discount City Super Store. Plaintiff subsequently went to First Citizens Bank for the purpose of transferring the store’s checking account into his name, doing business as Discount City Super Store. Plaintiff ordered new checks and signature cards reflecting his name on the store’s account held by First Citizens Bank.

Beginning 1 January 1996, Plaintiff continued to operate the store in the same manner he had operated it prior to that date. Plaintiff paid the store’s bills, purchased inventory, and sold inventory. Plaintiff also filed sales tax reports and made sales tax payments in his name, doing business as Discount City Super Store, in January and in March of 1996; however, these sales tax payments were made for sales tax owed from sales made in 1995. Subsequent to 1 January 1996, all supplier accounts remained in the name of Bob Hill Enterprises, Inc. and all inventory was purchased using these accounts. Although Plaintiff set up an account in his name to purchase bedding for the store, the order for bedding was subsequently canceled. Prior to January 1996, the store’s employees were paid by payroll checks issued from Bob Hill Enterprises, Inc. After 1 January 1996, Bob Hill Enterprises, Inc. no longer issued payroll checks to the store employees; rather, Plaintiff paid the employees from the store’s bank account in Plaintiff’s name. Plaintiff testified that during January 1996, Hill occasionally came to the store to give him advice and to discuss details regarding the transfer in ownership of the store. During this time period, Bob Hill Enterprises, Inc. owned the real property upon which the store was located, and Defendants did not enter into a lease with Plaintiff for the premises.

In February 1996, a dispute arose between Hill and Plaintiff regarding a payment received by the store for appliances sold in December 1995. As a result of the dispute, Hill telephoned Plaintiff and “cussed” at him. Hill subsequently arrived at the store and continued to “cuss” at Plaintiff and a physical altercation ensued. During the altercation, Hill told Plaintiff he was “ ‘out of here’ ” and that Hill would “ ‘cut [Plaintiff] out of [the] inheritance.’ ” Plaintiff then left the store. The following day, Plaintiff arrived at the store and continued to run the business as usual. Hill came to the store a few days later and informed Plaintiff he was closing the store. Plaintiff responded that Hill could not close the store because the store belonged to Plaintiff. Hill left the store and for several weeks thereafter Plaintiff continued to run the store.

On 12 March 1996, Havelock Chief of Police Michael Campbell (Campbell) went to see Plaintiff at the store. Campbell informed Plaintiff that Hill, by letter, requested that Plaintiff be removed from the store. The letter, which Campbell showed to Plaintiff, advised Plaintiff that as of 31 January 1996, Plaintiff had been removed as director of Bob Hill Enterprises, Inc., that as of 1 February 1996, Plaintiff had been removed as secretary of Bob Hill Enterprises, Inc., that “effective immediately” Plaintiff’s employment with Bob Hill Enterprises, Inc. was terminated, and that Plaintiff was requested to “vacate” the store. The letter further stated that Plaintiffs continued presence at the store “will be considered trespassing and appropriate legal action will be taken against [Plaintiff].” Plaintiff showed Campbell documents purporting to reveal Plaintiff’s ownership of the store, including bank account and sales tax identification numbers. Campbell then left the store and did not force Plaintiff to vacate the premises.

The following day, 13 March 1996, a Havelock police officer came to the store with a warrant charging Plaintiff with trespass. The officer arrested Plaintiff and took him before a magistrate, who placed Plaintiff under a $2,000.00 secured bond. As a condition of the bond, Plaintiff was prohibited from going to the store, from going to any other stores owned by Bob Hill Enterprises, Inc., and from having contact with Hill. At the time Plaintiff was arrested and taken from the store, the store had approximately $190,000.00 in inventory and $100,000.00 in accounts receivable. Upon his release on bond, Plaintiff returned to the store to find that it was locked, with no employees or customers inside. The store locks had been changed, and a “no trespassing” sign was posted on the premises. Plaintiff never returned to the store again. Plaintiff was tried on the trespass charge in Craven County District Court and the case was dismissed for lack of State’s evidence. Hill subsequently transferred some of the store’s inventory to other stores belonging to Bob Hill Enterprises, Inc. and sold the remainder of the business.

At the close of Plaintiff’s evidence, Defendants made a motion to dismiss Plaintiff’s claims against them. The trial court denied the motion.

Defendants presented evidence at trial that Hill did not intend to give Plaintiff the store; rather, he intended to sell the store to Plaintiff. Hill testified he did not give the store to Plaintiff on 1 January 1996 and no transfer of the assets was ever made.

At the close of all the evidence, Defendants renewed their motion to dismiss Plaintiffs claims and the trial court denied the motion. The jury subsequently returned verdicts in favor of Plaintiff for $190,000.00 in property damage based on Plaintiffs claim for conversion, $110,000.00 for malicious prosecution, $1.00 for abuse of process, and $6,500,000.00 in punitive damages. By entry of judgment dated 28 September 1999, the trial court reduced the punitive damage award by remittitur to $330,000.00. On 8 October 1999, Defendants filed a motion for judgment notwithstanding the verdict or, in the alternative, a new trial. The trial court denied both motions, but filed an amended judgment on 12 November 1999 further reducing the punitive damage award to $250,000.00, and reducing the malicious prosecution award to $10,000.00.

The issues are whether: (I) the record contains substantial evidence Defendants gifted the assets of the store to Plaintiff and, if not, whether a directed verdict should have been granted in favor of Defendants on Plaintiff’s conversion claim; (II) the record contains substantial evidence Defendants instituted a criminal proceeding against Plaintiff for trespass without probable cause and, if not, whether a directed verdict should have been granted in favor of Defendants on Plaintiffs malicious prosecution claim; and (III) the record contains substantial evidence Defendants instituted an action for trespass against Plaintiff in order to obtain a result not properly obtainable and, if not, whether a directed verdict should have been granted in favor of Defendants on Plaintiff’s abuse of process claim.

Initially, we note Defendants did not make a motion for directed verdict at trial; rather, Defendants made a motion to dismiss Plaintiff’s claims at the close of Plaintiff’s evidence and at the close of all the evidence. “Only in an action tried without a jury may the defendant move for an involuntary dismissal [under Rule 41 of the North Carolina Rules of Civil Procedure] on the ground that upon the facts and the law the plaintiff has shown no right to relief.” Beam v. Kerlee, 120 N.C. App. 203, 213, 461 S.E.2d 911, 919 (1995), cert. denied, 342 N.C. 651, 467 S.E.2d 703 (1996). In this case, therefore, the proper motion for Defendants to make to challenge the sufficiency of the evidence would have been a motion for directed verdict. See id. We, nevertheless, elect to treat Defendants’ motions to dismiss as motions for directed verdict in order to reach the merits of Defendants’ appeal. See Hill v. Lassiter, 135 N.C. App. 515, 517, 520 S.E.2d 797, 800 (1999) (electing to treat improper motion for directed verdict as Rule 41(b) motion in order to pass on merits of trial court ruling).

A moving party is entitled to a directed verdict against the party bearing the burden of proof when, viewing the evidence in the light most favorable to the party bearing the burden of proof, there is no substantial evidence to support that party’s claim. Cobb v. Reitter, 105 N.C. App. 218, 220, 412 S.E.2d 110, 111 (1992). “Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” State v. Smith, 300 N.C. 71, 78-79, 265 S.E.2d 164, 169 (1980).

I

Defendants argue Plaintiff did not present substantial evidence Defendants gifted to Plaintiff the store merchandise, accounts receivable, equipment, furnishings, and records (the assets); thus, Defendants were entitled to a directed verdict on Plaintiff’s conversion claim. We agree.

Plaintiff’s claim for conversion is based on his alleged ownership of the assets, which Plaintiff claims were gifted to him by Defendants on 1 January 1996.² Plaintiff argues that subsequent to this gift, Defendants transferred some of the assets to other stores owned by Bob Hill Enterprises, Inc. and sold the remaining assets.

“Conversion is defined as ‘an unauthorized assumption and exercise of the right of ownership over goods or personal chattels belonging to another, to the alteration of their condition or the exclusion of an owner’s rights.’ ” Gallimore v. Sink, 27 N.C. App. 65, 67, 218 S.E.2d 181, 183 (1975) (quoting Wall v. Colvard, Inc., 268 N.C. 43, 49, 149 S.E.2d 559, 564 (1966)). Thus, a party cannot convert assets belonging to him.

“In order to constitute a valid gift, there must be present two essential elements: 1) donative intent; and 2) actual or constructive delivery.” Courts v. Annie Penn Memorial Hospital, 111 N.C. App. 134, 138, 431 S.E.2d 864, 866 (1993). Delivery “must divest the donor of all right, title, and control over the property given.” Id. Delivery of a gift “ ‘must be as perfect and as complete as the nature of the property and attendant circumstances will permit. ... If actual delivery is impracticable, then there must be some act equivalent to it.’ ” Huskins v. Huskins, 134 N.C. App. 101, 105, 517 S.E.2d 146, 148 (1999) (emphasis added) (quoting 38A C.J.S. Gifts § 94 (1996)), cert. denied, 351 N.C. 355,-S.E.2d-(2000).

In this case, the evidence, viewed in the light most favorable to Plaintiff, shows: in December 1995, Hill expressed an intent to give Plaintiff the store on 1 January 1996; in January 1996, Plaintiff continued to operate the store as he always had done, which included selling inventory and placing orders for inventory; subsequent to 1 January 1996, all supplier accounts remained in the name of Bob Hill Enterprises, Inc.; Plaintiff set up an account in his name to purchase bedding for the store, though the order for bedding was subsequently canceled; beginning in January 1996, Plaintiff paid employees, who had previously been paid by Bob Hill Enterprises, Inc., out of the store account which had been transferred to Plaintiff’s name in December 1995; the building occupied by the store was at all times owned by Bob Hill Enterprises, Inc.; and Plaintiff did not enter into any lease of the premises or pay any rent for the use of the premises. The evidence, which was not controverted, shows all store inventory purchased after 1 January 1996 was purchased using the supplier accounts of Bob Hill Enterprises, Inc. The record contains no evidence the ownership of inventory purchased prior to 1 January 1996 which remained in the store subsequent to that date was transferred to Plaintiff. Additionally, the record does not contain any evidence that ownership of accounts receivable or store equipment was transferred to Plaintiff from Bob Hill Enterprises, Inc. Finally, the real property itself, upon which the store was located, remained under the ownership of Bob Hill Enterprises, Inc. and Plaintiff did not enter into any lease for the use of the real property. Thus, the record does not contain any evidence that subsequent to 1 January 1996, the alleged date of the gift, Defendants were divested of “right, title, and control” over the assets. While Plaintiff may have had possession of the assets, possession alone does not constitute delivery. Smith v. Smith, 255 N.C. 152, 155, 120 S.E.2d 575, 578 (1961) (possession by donee insufficient to show delivery when there is no evidence donor “divest[ed] himself of all right and title to, and control of, the gift”). Although Plaintiff argues in his brief to this Court that the transfer of the bank account to Plaintiff is some evidence the assets were delivered to him, Plaintiff’s ownership of the bank account is not relevant to whether Plaintiff had “right, title, and control” over the assets. This is because Defendants could gift the bank account to Plaintiff without delivering to Plaintiff the other assets of the store. The record, therefore, does not contain substantial evidence the assets were gifted to Plaintiff. Accordingly, the trial court erred by failing to grant a directed verdict for Defendants on Plaintiff’s conversion claim, as Defendants could not convert assets which belonged to them.

II

Defendants argue the trial court erred by failing to grant Defendants a directed verdict on Plaintiff’s claim for malicious prosecution. We agree.

“A person commits the offense of second degree trespass if, without authorization, he enters or remains on premises of another: (1) After he has been notified not to enter or remain there by the owner_” N.C.G.S. § 14-159.13 (1999).

“In order to recover in an action for malicious prosecution, plaintiff must establish that defendant: (1) instituted, procured or participated in the criminal proceeding against plaintiff; (2) without probable cause; (3) with malice; and (4) the prior proceeding terminated in favor of plaintiff.” Williams v. Kuppenheimer Manufacturing Co., 105 N.C. App. 198, 200, 412 S.E.2d 897, 899 (1992). Probable cause is “ ‘the existence of such facts and circumstances, known to him at the time, as would induce a reasonable man to commence a prosecution.’ ” Id. at 201, 412 S.E.2d at 900 (quoting Pitts v. Village Inn Pizza, Inc., 296 N.C. 81, 87, 249 S.E.2d 375, 379 (1978)). When the facts are not in dispute, the question of whether probable cause exists is a question of law. Id.

In this case, the undisputed evidence shows Bob Hill Enterprises, Inc. owned the premises upon which the store was located; Plaintiff did not enter into a written or unwritten lease with Bob Hill Enterprises, Inc. to occupy the premises; on the day prior to his arrest for trespass, Plaintiff received written notification that “effective immediately” he was no longer employed by Bob Hill Enterprises, Inc.; and the written notification requested that Plaintiff “vacate” the premises and notified Plaintiff that his continued presence at the store would be “considered trespassing.” Based on this undisputed evidence, Defendants had probable cause to believe Plaintiff was on Defendants’ premises without authorization after being notified by Defendants that Plaintiff was not to remain on the premises. The record, therefore, does not contain substantial evidence Defendants instituted the trespass proceeding without probable cause. Accordingly, Defendants were entitled to a directed verdict on Plaintiff’s malicious prosecution claim.

Ill

Defendants argue the trial court erred by failing to grant a directed verdict in favor of Defendants on Plaintiff’s abuse of process claim. We agree.

Abuse of process is “ ‘the malicious perversion of a legally issued process whereby a result not lawfully or properly obtainable under it is attended to be secured.’ ” Fowle v. Fowle, 263 N.C. 724, 728, 140 S.E.2d 398, 401 (1965) (quoting Melton v. Rickman, 225 N.C. 700, 703, 36 S.E.2d 276, 278 (1945)). Evidence is insufficient to support an action for abuse of process, when the process instituted “was used only for the purpose for which it was intended, and the result accomplished was warranted and commanded by the writ.” Id.

In this case, the process instituted against Plaintiff by Defendants was a criminal charge of second-degree trespass. The undisputed evidence shows the process was used for the lawful purpose of removing Plaintiff from property owned by Defendants and keeping Plaintiff off of this property subsequent to his removal. This result was permitted based on the warrant for Plaintiff’s arrest and his subsequent bond. The record, therefore, does not contain substantial evidence of Plaintiff’s abuse of process claim. Accordingly, Defendants were entitled to a directed verdict on Plaintiff’s abuse of process claim.

Because directed verdicts should have been granted in favor of Defendants on Plaintiff’s claims for conversion, malicious prosecution, and abuse of process, we reverse the trial court’s 28 September 1999 judgment and 12 November 1999 amended judgment. Furthermore, because we reverse these judgments, we need not address Defendants’ additional assignments of error.

Reversed.

Judge JOHN concurs. Judge TYSON dissents.

1 . We note that the judgment in this case, dated 28 September 1999, awarded Plaintiff $630,001.00 following remittitur of a jury verdict awarding Plaintiff $6,800,001.00. The trial court, however, filed an amended judgment on 12 November 1999, following further remittitur of the jury verdict. Defendants give notice of appeal from both the judgment and amended judgment. Additionally, Defendants appeal the trial court’s denial of their motion for judgment notwithstanding the verdict or, in the alternative, a new trial.

2 . Plaintiff’s claim for conversion does not include a claim against Defendants for conversion of the store’s bank account; thus, whether the bank account was gifted to Plaintiff is not at issue in this case. We, nevertheless, note the undisputed evidence shows Plaintiff retained possession of all funds in the store’s bank account and Plaintiff, therefore, would have no ground to claim these funds had been converted by Defendants.