Charles Feick, App V. The Brutsche Family Revoc. Trust, Resps

Filed
Washington State
Court of Appeals
Division Two
January 25, 2022
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION II
CHARLES FEICK, individually, derivatively
on behalf of Nominal Defendant, THE GREEN No. 54963-8-II
HARVEST CORPORATION, (Consolidated with 55213-2-II)
Appellant,
v.
THE BRUTSCHE FAMILY REVOCABLE UNPUBLISHED OPINION
TRUST, THE ESTATE OF LEOPOLD
CHANNING BRUTSCHE, MICHAEL
BRUTSCHE, MARTHA CARR, CARLES
CARR, CREATIVE SOLUTIONS
EQUIPMENT, INC.,
Respondents,
and
THE GREEN HARVEST CORPORATION,
Nominal Defendant.
PRICE, J. — In a derivative suit brought on behalf of the Green Harvest Corporation,
Charles Feick appeals the superior court’s approval of a settlement agreement, appointment of a
general receiver, denial of his motions to vacate and terminate the receivership, and denial of his
motion for reconsideration. In response, the Brutsche Family Revocable Trust, the Estate of Leo
Brutsche, and Michael Brutsche (collectively referred to as the Brutsches) bring a motion to
dismiss Feick’s appeal and request attorney fees. We deny the Brutsches’ motion to dismiss and
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request for attorney fees, but we also disagree with each of Feick’s arguments and affirm the
superior court.
FACTS
I. BACKGROUND
Green Harvest was a Washington corporation that held a cannabis producer and processor
license. Charles Feick founded Green Harvest and sought out investors. In addition to being a
shareholder, Feick served as the president and sole manager of Green Harvest.
The Brutsche Family Revocable Trust (Trust), through its trustee Leo Brutsche1, became a
shareholder in and loaned money to Green Harvest. The Trust also leased Green Harvest the
property used for its operations.
Despite substantial investment and loans from shareholders, Green Harvest was not
profitable, was accumulating debt, and was not making payments on its obligations. None of the
shareholders had received any return on their investments or payments on their loans. Eventually,
several shareholders became concerned with Feick’s management of Green Harvest as he was
continually requesting additional funds from shareholders and allegedly instructing vendors to
seek payment directly from the Trust instead of Green Harvest.
1
Since the commencement of this action, Leo Brutsche has died, and his interests now belong to
the Estate of Leo Brutsche.
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In 2017, due to these concerns, members of the board of directors, Leo Brutsche2 and
Martha Carr, removed Feick as president and installed Michael Brutsche in that role.3 Michael
stepped down as president after ten days, and then both Leo and Martha resigned from the board
of directors.
In response to the directors’ actions, Feick submitted complaints to the Washington State
Liquor and Cannabis Board (WSLCB) as well as the attorney general and attempted to bring
criminal charges against several of the shareholders. The Trust tried to resolve the conflicts
between Feick and the shareholders through mediation, but Feick refused to participate. The Trust
also repeatedly requested copies of Green Harvest’s records and asked Feick to retain counsel for
Green Harvest. Feick neither provided the records nor retained counsel.
In December 2018, Feick brought a derivative action pro se on behalf of Green Harvest
against the Brutsches as well as against Martha Carr, Charles Carr, and Creative Solutions
Equipment, Inc.4 The same day, Feick sent an email to the parties saying, “This is now attrition
and I will employ all my resources and legal networking to do all I can do to compell [sic] your
clients to pay for their crimes against [Green Harvest] and its [s]hareholders.” Clerk’s Papers (CP)
at 1010.
2
Due to the fact that multiple individuals involved in this litigation share the same last name,
certain persons are referred to using their first names. No disrespect is intended.
3
Martha Carr was also a shareholder in Green Harvest. Michael Brutsche was Leo Brutsche’s
grandson and assisted him in managing the Trust.
4
Charles Carr is Martha Carr’s son. Feick has accused him of participating in stealing money
from Green Harvest. Charles owns Creative Solutions Equipment, Inc., and it appears from the
record that Green Harvest purchased equipment from them.
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After realizing he could not represent Green Harvest pro se, Feick amended his complaint
to include individual causes of action along with the derivative suit. He raised many claims
including corporate looting and waste, embezzlement, and breach of fiduciary duty.
After Feick brought the action, Green Harvest defaulted on its lease agreement with the
Trust. Additionally, Green Harvest had a tax lien pending against it and failed to retain insurance.
The WSLCB also informed Feick that Green Harvest’s cannabis license had expired due to a
failure to pay the renewal fees and provide fingerprints.
The Trust again requested that Feick retain counsel for Green Harvest to assist in
management and legal decision making and requested access Green Harvest’s records. Feick again
neither retained counsel nor permitted the Trust to access the records.
II. APPOINTMENT OF GENERAL RECEIVER
About four months after Feick brought his lawsuit, the Trust filed a motion requesting the
superior court appoint a general receiver over Green Harvest to liquidate Green Harvest’s assets
and dissolve it. The Trust argued that because of Green Harvest’s failed financial status,
dissolution was necessary and a receiver was required to protect and realize any remaining value.
Based on the information available to the Trust, Green Harvest was being managed solely by Feick
and there was no acting board of directors. The Trust further understood that a board of directors
had not met in about two years. The Trust asserted that the majority of Green Harvest’s
shareholders favored appointment of a receiver. The shareholders believed that Feick posed a
danger to the interests of Green Harvest and were concerned with the potential legal and financial
risks he had incurred for Green Harvest as well as its shareholders.
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Feick responded to the Trust’s motion by agreeing that a receiver was necessary but
arguing that the superior court should appoint a custodial receiver rather than a general receiver.
He maintained the superior court should not appoint a general receiver unless Green Harvest’s
situation failed to improve such that “dissolution and liquidation of [Green Harvest’s] assets
appear[ed] to be the only reasonable course.” CP at 22-23.
The superior court granted the Trust’s motion and appointed Research Transition
Consultants, LLC (Receiver) as the general receiver for Green Harvest.
III. SUBSEQUENT PROCEEDINGS
After its appointment, the Receiver found a potential buyer for Green Harvest’s cannabis
license. Because the cannabis license was tied to the Trust’s real property, the Receiver believed
that the value of the license would be greater if it could be offered with the property. The Receiver
reached a settlement agreement with the Brutsches that allowed the Receiver to sell the rights to
the cannabis license to the buyer while the Trust would simultaneously sell the property associated
with those license to the buyer. The Receiver requested the superior court approve such a sale,
and the request was granted. Feick did not object to the sale.
The sale of the cannabis license and the property was contingent on the superior court also
approving the settlement agreement between Green Harvest and the Brutsches. The terms of the
settlement agreement provided that Green Harvest’s assets would be sold and the Receiver would
dismiss the derivative claims brought on behalf of Green Harvest against the Brutsches. All
remaining causes of action against Feick would be assigned to the Brutsches. In exchange, the
Brutsches agreed to continue to allow Green Harvest’s holdover tenancy and to sell the property
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connected to the cannabis license. The Brutsches also agreed to release Green Harvest from
indemnification and tenant payment obligations.
Feick opposed the motion to approve the settlement agreement, arguing that the Receiver
failed to pursue debts owed to Green Harvest and the sale price for the cannabis license was too
low. Feick also filed a motion to terminate the receivership and a motion to vacate the original
receivership order.
In August 2020, the superior court considered both of Feick’s motions together with the
Receiver’s motion to approve the settlement agreement. The superior court first denied Feick’s
motions to terminate and vacate the receivership. The superior court determined that when the
Trust petitioned for a receivership, Green Harvest was not financially sound, had substantial debts,
and the financial interests of its shareholders and creditors were in jeopardy. The superior court
further found that there was no basis for exercising its discretionary authority to terminate the
receivership because there had been no showing of misrepresentation, wrongdoing, bad faith, or
other circumstances justifying termination. The superior court then approved the settlement
agreement and dismissed all derivative claims asserted on behalf of Green Harvest against the
Brutsches.
Feick filed a motion to reconsider pursuant to CR 59, arguing that the superior court erred
in failing to assign an adjunct case number to Feick’s action as required by RCW 7.60.160(2).
Feick appeared to argue that because there was no adjunct case number assigned and no stay of
proceedings, the Brutsches and the Receiver did not have standing to make certain arguments and
the superior court did not have either standing or jurisdiction to make its decisions. The superior
court denied Feick’s motion to reconsider.
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Feick filed a notice of discretionary review to this court, which we accepted as a notice of
appeal. Feick seeks review of multiple orders related to the August 2020 hearing: (1) the order
approving the settlement agreement, (2) the order denying his motions to vacate and terminate the
general receivership, and (3) the order denying his motion for reconsideration. Feick also includes
a request to review the initial order appointing the Receiver made in 2019 and raises additional
arguments about various issues.
In addition to their substantive response, the Brutsches move to dismiss Feick’s appeal,
arguing that Feick’s claims are untimely and frivolous.
ANALYSIS
I. BRUTSCHES’ MOTION TO DISMISS
The Brutsches bring a motion to dismiss Feick’s appeal of the initial 2019 order appointing
the Receiver arguing that it is untimely and frivolous. We deny the motion to dismiss.
The Brutsches claim that arguments regarding the order appointing the Receiver cannot be
raised on appeal here because that type of order is appealable as a matter of right. Because Feick
failed to file his request for review until more than one year after the appointment of the Receiver,
according to the Brutsches, his request is untimely. We reject this argument.
A party may, but need not, seek interlocutory review of an order appointing a receiver by
filing a notice of discretionary review of that decision within 30 days after entry of the order.
RAP 2.2 and 2.3. We then have discretion to grant interlocutory review or not after applying the
standard established under RAP 2.3. Alternatively, a party may include an order appointing a
receiver as an order designated for appeal when the party appeals as a matter of right after a final
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judgment under RAP 2.2. See RAP 2.4. Feick chose the latter option, and his appeal of the order
appointing the receiver was not untimely.
The Brutsches next broadly argue that we should dismiss all Feick’s claims because they
are frivolous. “ ‘[A]n appeal is frivolous if there are no debatable issues upon which reasonable
minds might differ, and it is so totally devoid of merit that there was no reasonable possibility of
reversal.’ ” Green River Cmty. Coll. Dist. No. 10 v. Higher Educ. Pers. Bd., 107 Wn.2d 427,
442-43, 730 P.2d 653 (1986) (quoting Streater v. White, 26 Wn. App. 430, 434-35, 613 P.2d 187(1980)). As discussed below, Feick’s arguments are not totally devoid of merit. Therefore, we
deny the motion to dismiss.
II. APPOINTMENT OF GENERAL RECEIVER
Feick argues that the superior court erred in appointing a general receiver. We disagree.
A. LEGAL PRINCIPLES
A “receiver” is “a person appointed by the court as the court’s agent, and subject to the
court’s direction, to take possession of, manage, or dispose of property of a person.” RCW
7.60.005(10). A receiver may be appointed “in any action involving any dispute with respect to
the ownership or governance of [any public or private] entity[] or upon the application of a person
having an interest in such an entity when the appointment is reasonably necessary to protect the
property of the entity or its business or other interests.” RCW 7.60.025(1)(u).
A receiver can be either a general receiver or a custodial receiver. RCW 7.60.015. “A
receiver must be a general receiver if the receiver is appointed to take possession and control of
all or substantially all of a person’s property with authority to liquidate that property and, in the
case of a business over which the receiver is appointed, wind up affairs.” RCW 7.60.015.
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A custodial receiver “is appointed to take charge of limited or specific property of a person or is
not given authority to liquidate a property.” RCW 7.60.015.
A superior court’s decision to appoint a receiver is reviewed for an abuse of discretion.
Mony Life Ins. Co., 135 Wn. App. 948, 952, 148 P.3d 1065 (2006). “A [superior] court abuses its
discretion when its decision is ‘manifestly unreasonable, or exercised on untenable grounds, or for
untenable reasons.’ ” Id. at 952-53 (internal quotation marks omitted) (quoting T.S. v. Boy Scouts
of Am., 157 Wn.2d 416, 423, 138 P.3d 1053 (2006)).
B. APPLICATION
Feick argues that the superior court erred in granting the petition for a general receivership
and that it should have instead appointed a custodial receiver.5 He maintains that Green Harvest
was in a good position and appointment of a general receiver was not necessary. We disagree.
Prior to appointing the Receiver, the superior court considered evidence that Green Harvest
was insolvent, not being properly managed, defaulted on its lease, and at risk of losing its
remaining assets. Evidence was presented that Green Harvest was seeking to avoid its obligations
to its vendors by instructing them to seek payment from the Trust. Moreover, dissolution, a result
favored by the majority of shareholders, required the appointment of a general receiver. A
custodial receiver would not have had the authority to sell assets and dissolve Green Harvest. See
RCW 7.60.015. Because there was evidence that a comprehensive management approach was
5
Feick also argues that the superior court should not have created a receivership at all. However,
because Feick actually argued for a custodial receivership below, that argument fails under the
invited error doctrine. See Angelo Prop. Co., LP v. Hafiz, 167 Wn. App. 789, 823, 274 P.3d 1075(2012).
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necessary, including the possible dissolution of Green Harvest and liquidation of its assets, the
superior court did not abuse its discretion in appointing a general receiver.
III. MOTIONS TO VACATE & TERMINATE RECEIVERSHIP
Feick argues that the superior court erred in denying his motions to vacate and terminate
the receivership. We disagree.
A. LEGAL PRINCIPLES
A receiver may be appointed by the superior court when dissolution of a private entity is
sought if an appointment is requested by “a person having an interest in such an entity.”
RCW 7.60.025(u). The superior court also has the authority to terminate a receivership. RCW
7.60.290(5). We review a decision of whether to terminate a receivership for an abuse of
discretion. Bero v. Name Intelligence, Inc., 195 Wn. App. 170, 179, 381 P.3d 71 (2016).
B. APPLICATION
Feick appears to argue that the superior court erred in denying his motion to terminate and
his motion to vacate the receivership under RCW 7.60.290(5) because the receivership was
procured wrongfully or in bad faith. Regarding both motions, Feick claims that because the Trust
and its trustee misrepresented themselves as parties of interest that could request a receivership,
the superior court should have terminated and vacated the receivership. We disagree.
The Trust had an interest in Green Harvest because it was a shareholder, and the trustee
had authority to act on behalf of the Trust. This interest in Green Harvest permitted the Trust,
through its trustee, to initially request the receivership. Accordingly, we find that the superior
court did not abuse its discretion by denying Feick’s motions to terminate and vacate the
receivership.
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IV. MOTION FOR RECONSIDERATION
Feick argues that the superior court should have granted his motion for reconsideration of
the superior court’s approval of the settlement and denial of his motions to vacate and terminate
the receivership. Feick asserts that the superior court was divested of jurisdiction when it (1) failed
to stay the case pursuant to RCW 7.60.110(1)(a)), and (2) failed to assign an adjunct case number
(which Feick asserts is required under RCW 7.60.160(2)).6 We disagree.
First, RCW 7.60.110(1)(a) provides that an order appointing a general receiver operates as
a stay of “[t]he commencement or continuation . . . of a judicial, administrative, or other action or
proceeding against the person over whose property the receiver is appointed that was or could
have been commenced before the entry of the order of appointment, or to recover a claim against
the person that arose before the entry of the appointment.” (Emphasis added.) Such a stay
automatically expires 60 days after the appointment of a receiver. RCW 7.60.110(2).
Feick does not provide authority to support his argument that a failure to issue a stay under
this statute divested the superior court of jurisdiction. Assuming violating the statute could have
this result, the superior court did in fact order a stay of proceedings under RCW 7.60.110 as part
of its order appointing a receiver. Consistent with the statute, the stay expired after 60 days,
making it largely inapplicable because Feick’s complaints are rooted in actions occurring well
outside this statutory period. Because the superior court’s stay satisfied the requirements of the
statute, Feick’s argument fails.
6
Feick also couches his arguments in terms of divestment of the superior court’s “standing” to
issue its orders. Appellant’s Opening Br. at 26-28, 32-41. Feick, however, does not explain or
provide authorities supporting his allegation of the superior court’s lack of “standing.” Therefore,
we do not further address it. See RAP 10.3(a).
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Feick’s argument also fails because his application of the statute is overly broad. Feick
appears to argue that the superior court should have stayed all proceedings indefinitely. However,
in addition to only requiring a stay for 60 days, the statute only applies to actions in which the
entity in receivership is a defendant (as in a proceeding “against the person over whose property
the receiver is appointed”). RCW 7.60.110. Because the case below was originally postured as a
shareholder derivative suit, Green Harvest is more properly aligned as a plaintiff. Green Harvest
was listed as a nominal defendant in the action, but nothing on the record indicates that Green
Harvest has substantively acted as a defendant. In fact, Green Harvest entered into a settlement
agreement as a plaintiff with the defendants. Because the statute does not apply as urged by Feick,
the superior court’s failure to order a stay could not have affected its jurisdiction.
Second, relying on RCW 7.60.160(2), Feick also argues the superior court was divested of
jurisdiction because it failed to assign an adjunct case number. The statute provides:
Litigation by or against a receiver is adjunct to the receivership case. The clerk of the
court shall assign a cause number that reflects the relationship of any litigation to the
receivership case. All pleadings in adjunct litigation shall include the cause number
of the receivership case as well as the adjunct litigation number assigned by the clerk
of the court. All adjunct litigation shall be referred to the judge, if any, assigned to
the receivership case.
RCW 7.60.160(2).
On its face, the provision requires the superior court to assign an adjunct case number to
litigation “by or against a receiver.” RCW 7.60.160(2). The statute ensures that litigation
involving a receiver remains separate from the case in which a receiver is actually appointed.
RCW 7.60.160(2). It applies only to situations where a receiver is an actual party to the litigation,
either as a plaintiff or a defendant. RCW 7.60.160(2).
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Here, again, Feick provides no support for his argument that the superior court’s
jurisdiction is affected by violating this statute. But even if that is the result, like the stay provision
discussed above, the statute does not apply in this case. Although the Receiver was appointed as
part of this action, there is no litigation by or against the Receiver at issue. The Receiver is neither
a plaintiff nor a defendant in this action. Because the Receiver is not a party to this action, the
superior court was not required to assign an adjunct case number.
Since the statutory provisions for stays and adjunct case numbers in receiverships do not
apply, we find that the superior court did not err in denying Feick’s motion for reconsideration.
V. ADDITIONAL ARGUMENTS
Feick makes several additional arguments that are not adequately supported to permit our
review. For example, Feick argues that the superior court erred in finding that the Trust had
standing “to file a legal action representing [Green Harvest] as a true party of interest.” Opening
Br. at 39. Feick’s arguments in support of this contention are muddled, and he fails to point to
facts in the record that support this contention. Therefore, we decline to address this issue. See
RAP 10.3(a).
Feick also appears to argue that the superior court erred in approving the settlement
agreement because the sale price for the cannabis license was too low, even though he failed to
object to the approval of the sale below. Feick offers no legal citations to support addressing his
unpreserved argument. Therefore, we decline to address it. See RAP 10.3(a).
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Feick next argues that the superior court erred in permitting the Trust and Bill Stewart 7 to
supposedly act as “co-receivers” along with the Receiver for Green Harvest. Feick fails to point
to facts in the record that support his contention that they were acting as co-receivers for the Green
Harvest. Therefore, we decline to address this argument. See RAP 10.3(a).
Finally beyond his arguments against the motion for reconsideration, Feick persists in his
global position about “adjunct case numbers” to argue that all the superior court rulings “on
receivership, the settlement and the real estate owned by the Trust” should be vacated for a lack of
standing and jurisdiction. Opening Br. at 26. Again, Feick provides no authority indicating this
would be the result from an “adjunct case number” violation but, as explained above, because this
case did not involve litigation by or against the Receiver, the statute requiring adjunct case numbers
does not apply.
VI. ATTORNEY FEES & SANCTIONS
The Brutsches request that we impose sanctions and award attorney fees pursuant to RAP
18.9 because Feick’s appeal was frivolous. Martha Carr, in her joinder of the Brutsches’ motion
to dismiss, also requests that she be awarded her attorney fees under RAP 18.9.8 We deny the
respondents’ requests.
7
Bill Stewart is Martha Carr’s attorney.
8
Charles Carr also requests his attorney fees on appeal. However, because he fails to properly
devote a section of his brief to this request, we do not address it. RAP 18.1(b). See Stiles v.
Kearney, 168 Wn. App. 250, 267, 277 P.3d 9 (2012) (“Argument and citation to authority are
required under the rule to advise the court of the appropriate grounds for an award of attorney fees
and costs.”).
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Sanctions and attorney fees may be imposed under RAP 18.9(a) where we find that an
appeal is frivolous. RAP 18.9(a). “ ‘[A]n appeal is frivolous if there are no debatable issues upon
which reasonable minds might differ, and it is so totally devoid of merit that there was no
reasonable possibility of reversal.’ ” Green River Cmty. Coll. Dist. No. 10, 107 Wn.2d at 442-43(quoting Streater, 26 Wn. App. at 434-35).
Although Feick’s arguments on appeal are weak and baseless at points, they are not so
totally devoid of merit that there was no reasonable possibility of reversal. Therefore, we deny the
respondents’ requests for attorney fees and sanctions.
CONCLUSION
In conclusion, we deny the Brutsches’ motion to dismiss and affirm the superior court.
A majority of the panel having determined that this opinion will not be printed in the
Washington Appellate Reports, but will be filed for public record in accordance with RCW 2.06.040,
it is so ordered.
PRICE, J.
We concur:
GLASGOW, A.C.J.
WORSWICK, J.
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