{ "id": 8519873, "name": "WILLIAM ASHBURN v. PHILLIP D. WICKER and RIVWIN, III, a North Carolina Corporation", "name_abbreviation": "Ashburn v. Wicker", "decision_date": "1989-08-15", "docket_number": "No. 881SC1056", "first_page": "162", "last_page": "167", "citations": [ { "type": "official", "cite": "95 N.C. App. 162" } ], "court": { "name_abbreviation": "N.C. Ct. App.", "id": 14983, "name": "North Carolina Court of Appeals" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "34 L.Ed.2d 665", "category": "reporters:federal", "reporter": "L. Ed. 2d", "year": 1972, "opinion_index": 0 }, { "cite": "93 S.Ct. 689", "category": "reporters:federal", "reporter": "S. Ct.", "year": 1972, "opinion_index": 0 }, { "cite": "409 U.S. 1077", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 6484673, 6485218, 6484839, 6485321, 6484747, 6485132, 6484524, 6484916, 6485435, 6484599, 6484443, 6485020 ], "year": 1972, "opinion_index": 0, "case_paths": [ "/us/409/1077-04", "/us/409/1077-10", "/us/409/1077-06", "/us/409/1077-11", "/us/409/1077-05", "/us/409/1077-09", "/us/409/1077-02", "/us/409/1077-07", "/us/409/1077-12", "/us/409/1077-03", "/us/409/1077-01", "/us/409/1077-08" ] }, { "cite": "466 F.2d 251", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 719704 ], "pin_cites": [ { "page": "255" } ], "opinion_index": 0, "case_paths": [ "/f2d/466/0251-01" ] }, { "cite": "607 F.2d 765", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 1431903 ], "year": 1979, "pin_cites": [ { "page": "767" } ], "opinion_index": 0, "case_paths": [ "/f2d/607/0765-01" ] }, { "cite": "582 F.2d 995", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 858067 ], "weight": 2, "year": 1978, "pin_cites": [ { "page": "999" }, { "page": "1002" } ], "opinion_index": 0, "case_paths": [ "/f2d/582/0995-01" ] }, { "cite": "28 L.Ed.2d 323", "category": "reporters:federal", "reporter": "L. 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Ct.", "weight": 2, "year": 1971, "opinion_index": 0 }, { "cite": "401 U.S. 974", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 11749414, 11749322, 11748842, 11749104, 11749041, 11749584, 11749171, 11749493, 11748986, 11749247 ], "weight": 2, "year": 1971, "opinion_index": 0, "case_paths": [ "/us/401/0974-08", "/us/401/0974-07", "/us/401/0974-01", "/us/401/0974-04", "/us/401/0974-03", "/us/401/0974-10", "/us/401/0974-05", "/us/401/0974-09", "/us/401/0974-02", "/us/401/0974-06" ] }, { "cite": "434 F.2d 727", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 2219972 ], "weight": 2, "year": 1970, "pin_cites": [ { "page": "735-36" } ], "opinion_index": 0, "case_paths": [ "/f2d/434/0727-01" ] }, { "cite": "719 F.2d 1044", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 1899274 ], "year": 1983, "opinion_index": 0, "case_paths": [ "/f2d/719/1044-01" ] }, { "cite": "699 F.2d 230", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 1510738 ], "weight": 2, "year": 1983, "pin_cites": [ { "page": "238", "parenthetical": "emphasis added" } ], "opinion_index": 0, "case_paths": [ "/f2d/699/0230-01" ] }, { "cite": "N.C. Gen. Stat. \u00a7 25-9-506", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "weight": 2, "opinion_index": 0 }, { "cite": "21 S.E. 955", "category": "reporters:state_regional", "reporter": "S.E.", "year": 1895, "pin_cites": [ { "page": "959", "parenthetical": "Clark, J., dissenting" } ], "opinion_index": 0 }, { "cite": "116 N.C. 1", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8654136 ], "year": 1895, "pin_cites": [ { "page": "8", "parenthetical": "Clark, J., dissenting" } ], "opinion_index": 0, "case_paths": [ "/nc/116/0001-01" ] }, { "cite": "637 F.Supp. 828", "category": "reporters:federal", "reporter": "F. Supp.", "case_ids": [ 3875269 ], "year": 1986, "pin_cites": [ { "page": "837" } ], "opinion_index": 0, "case_paths": [ "/f-supp/637/0828-01" ] }, { "cite": "N.C. Gen. Stat. \u00a7 55-55", "category": "laws:leg_statute", "reporter": "N.C. Gen. Stat.", "weight": 6, "pin_cites": [ { "page": "(a)" }, { "page": "(a)" }, { "page": "(a)" }, { "page": "(a)" }, { "page": "(a)", "parenthetical": "emphasis added" } ], "opinion_index": 0 }, { "cite": "275 S.E.2d 206", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1981, "pin_cites": [ { "page": "207" } ], "opinion_index": 0 }, { "cite": "51 N.C. App. 129", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 2645359 ], "year": 1981, "pin_cites": [ { "page": "130" } ], "opinion_index": 0, "case_paths": [ "/nc-app/51/0129-01" ] }, { "cite": "131 S.E.2d 666", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1963, "pin_cites": [ { "page": "671" } ], "opinion_index": 0 }, { "cite": "260 N.C. 106", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8573141 ], "year": 1963, "pin_cites": [ { "page": "112" } ], "opinion_index": 0, "case_paths": [ "/nc/260/0106-01" ] }, { "cite": "326 S.E.2d 601", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1985, "pin_cites": [ { "page": "606" } ], "opinion_index": 0 }, { "cite": "313 N.C. 33", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 4719700 ], "year": 1985, "pin_cites": [ { "page": "40-41" } ], "opinion_index": 0, "case_paths": [ "/nc/313/0033-01" ] } ], "analysis": { "cardinality": 574, "char_count": 11374, "ocr_confidence": 0.728, "pagerank": { "raw": 5.720613727352076e-08, "percentile": 0.35894023165057115 }, "sha256": "d6a6d24153f65bd7db6c9868eb6086b8c1f8ac627f7639865b87baf129497c2b", "simhash": "1:69332f3aa2b91653", "word_count": 1859 }, "last_updated": "2023-07-14T18:25:49.576177+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Judges Phillips and Parker concur." ], "parties": [ "WILLIAM ASHBURN v. PHILLIP D. WICKER and RIVWIN, III, a North Carolina Corporation" ], "opinions": [ { "text": "COZORT, Judge.\nPlaintiff sued defendant Wicker claiming that he wrongfully used funds of the defendant corporation to acquire its stock. The stock had been pledged to both plaintiff and defendant as security for separate loans each made to an employee of the corporation who used the funds to purchase the shares. In the first half of a bifurcated proceeding from which plaintiff took an appeal which was later abandoned, the trial court ruled that the debt owed plaintiff was paid, that plaintiffs interest in the stock was extinguished, and that defendant was entitled to possession of the stock. We hold that plaintiff now has no standing to challenge the loan made by the defendant corporation to defendant Wicker.\nIn 1984, defendant Wicker sold 100 shares of stock in defendant RIVWIN, III, Ltd., to George Sawyer for $25,000.00. Sawyer was named as a defendant in this proceeding, but plaintiff has voluntarily dismissed the action against him. To pay a down payment on the stock, Mr. Sawyer borrowed $11,500.00 from plaintiff, who was then Mr. Sawyer\u2019s brother-in-law. Mr. Sawyer pledged the stock purchased from defendant Wicker to plaintiff as security for the loan. He also entered into a contract with plaintiff which provided that, in the event of Mr. Sawyer\u2019s default, plaintiff was entitled to possession of the shares if the $11,500.00 note was not paid in full within 30 days of plaintiff\u2019s giving Sawyer written notice of his default. Moreover, if Mr. Sawyer defaulted, the defendant corporation agreed to buy back from plaintiff for $25,000.00 those shares he acquired as a result of the default.\nFor the remaining purchase price defendant Wicker received a promissory note from Mr. Sawyer for $13,500.00 and a pledge of the 100 shares of stock. The parties agreed that plaintiff\u2019s security interest in the stock would have priority over defendant Wicker\u2019s security interest.\nIn 1985, Mr. Sawyer was discharged from his employment with the defendant corporation. On 30 July 1985, plaintiff gave Mr. Sawyer written notice of default and stated his intention to take possession of the 100 shares if Mr. Sawyer\u2019s debt was not paid. The next day defendant Wicker tendered full payment, with interest, of Mr. Sawyer\u2019s debt to plaintiff; but plaintiff refused to accept defendant\u2019s payment. Defendant Wicker had obtained a loan from the defendant corporation to pay off Mr. Sawyer\u2019s obligation.\nIn 1986, plaintiff filed suit claiming that he was entitled to possession of the 100 shares of stock in the defendant corporation and that defendant Wicker wrongfully deprived plaintiff of his right to sell the stock back to the defendant corporation at a substantial profit. The parties consented to a bifurcated trial. The first trial concerned whether plaintiff was entitled to possession of the stock. In a bench trial the trial court ruled that plaintiff had to accept defendant Wicker\u2019s payment of Mr. Sawyer\u2019s debt, that defendant Wicker was entitled to redeem the collateral, and that defendant Wicker was entitled to keep the shares in satisfaction of his secured claims against Mr. Sawyer. Plaintiff gave notice of appeal but later abandoned his appeal and cashed the check defendant had written to pay Mr. Sawyer\u2019s obligation.\nIn this the second half of the bifurcated trial, plaintiff seeks to challenge the loan the defendant corporation made to defendant Wicker which allowed Mr. Wicker to pay Mr. Sawyer\u2019s debt and to gain control of the stock. At the close of plaintiff\u2019s evidence, the trial court granted defendants a directed verdict. The issue before us is whether plaintiff had standing to challenge the loan made by defendant RIVWIN III, to defendant Wicker when plaintiff\u2019s beneficial interest, if any, in the defendant corporation consisted of a pledge of stock which secured a debt that was paid by another pledgee of the stock before plaintiff filed suit.\nThe standard of review on a motion for directed verdict is whether, viewing the evidence in a light most favorable to plaintiff, no reasonable juror could find for plaintiff. West v. Slick, 313 N.C. 33, 40-41, 326 S.E.2d 601, 606 (1985).\nInitially, we note that plaintiff cannot now claim that he was a de facto shareholder and, therefore, that he held a beneficial interest and should be entitled to sue. Plaintiff abandoned his right to challenge the tri\u00e1l court\u2019s first judgment in the first trial when he abandoned his appeal of that judgment. That judgment had the effect of ruling that plaintiff held no beneficial interest in the defendant corporation. The trial court ruled that plaintiff was entitled to payment of Sawyer\u2019s debt and defendant was entitled to keep the stock because he paid Sawyer\u2019s debt. Since no appeal was perfected from that ruling, the findings and conclusions from the first trial are binding on this appeal because they represent the law of the case. North Carolina National Bank v. Barbee, 260 N.C. 106, 112, 131 S.E.2d 666, 671 (1963); Duffer v. Royal Dodge, Inc., 51 N.C. App. 129, 130, 275 S.E.2d 206, 207 (1981).\nN.C. Gen. Stat. \u00a7 55-55(a) provides that \u201c[a]n action may be brought in this State in the right of any domestic or foreign corporation by a shareholder or holder of a beneficial interest in shares of such corporation . . . .\u201d (Emphasis added.) Defendants concede, and we agree, that a pledgee of corporate stock has a sufficient beneficial interest to have standing to sue the corporation derivatively for mismanagement, provided that he maintains an equitable interest in the collateral. See generally 19 Am. Jur. 2d Corporations \u00a7\u00a7 2340-41, 2343 at 218-19, 220 (1986); see, e.g., Federal Deposit Ins. Corp. v. Kerr, 637 F.Supp. 828, 837 (W.D.N.C. 1986). Moreover, it is clear that the pledgee must hold a beneficial interest in the shares \u201cat the time of the transaction of which he complains . . . .\u201d N.C. Gen. Stat. \u00a7 55-55(a) (1982).\nIn this case, plaintiff\u2019s security interest and, therefore, his beneficial interest existed when, on 30 July 1985, defendant Wicker allegedly procured the improper loan. See id. But plaintiff\u2019s security interest was discharged on 31 July 1985 when defendant Wicker tendered full payment of Mr. Sawyer\u2019s debt to plaintiff\u2019s attorney. 69 Am. Jur. 2d Secured Transactions \u00a7\u00a7 530, 538 at 415, 423 (1973); see also Parker v. Beasley, 116 N.C. 1, 8, 21 S.E. 955, 959 (1895) (Clark, J., dissenting). Defendant Wicker was entitled to redeem the collateral pursuant to N.C. Gen. Stat. \u00a7 25-9-506 even though plaintiff\u2019s security interest had first priority. Section 25-9-506 provides that\nthe debtor or any other secured party may unless otherwise agreed in writing after default redeem the collateral by tendering fulfillment of all obligations secured by the collateral as well as the expenses reasonably incurred by the secured party in retaking, holding and preparing the collateral for disposition, in arranging for the sale, and to the extent provided in the agreement and not prohibited by law, his reasonable attorneys\u2019 fees and legal expenses.\nN.C. Gen. Stat. \u00a7 25-9-506 (1988). In the first trial, the court ruled that defendant Wicker\u2019s tender of $11,626.79 to plaintiff was sufficient to redeem the collateral. Since plaintiff did not appeal from that ruling, plaintiff\u2019s beneficial interest in the stock of the defendant corporation was lost some eight months before he filed suit.\nWe hold that plaintiff had no standing to bring this suit because he failed to maintain his status as a holder of a beneficial interest throughout the pendency of the litigation. We find that such a requirement may be inferred from the language in N.C. Gen. Stat. \u00a7 55-55(a) and N.C. Gen. Stat. \u00a7 1A-1, Rule 23(b). N.C. Gen. Stat. \u00a7 55-55(a) provides that the \u201caction may be brought ... by a shareholder or holder of a beneficial interest in shares of such corporation . . . .\u201d N.C. Gen. Stat. \u00a7 55-55(a) (1982) (emphasis added). Rule 23(b) provides that a shareholder derivative suit is \u201can action brought to enforce a secondary right on the part of one or more shareholders or members of a corporation . . . .\u201d N.C. Gen. Stat. \u00a7 1A-1, Rule 23(b) (1988) (emphasis added); see, e.g., 7C C. Wright and A. Miller, Federal Practice & Procedure \u00a7 1826 (1986) (citing Lewis v. Knutson, 699 F.2d 230 (5th Cir. 1983)); Lewis v. Chiles, 719 F.2d 1044 (9th Cir. 1983); and Kauffman v. Dreyfus Fund, Inc., 434 F.2d 727 (3d Cir. 1970), cert. denied, 401 U.S. 974, 91 S.Ct. 1190, 28 L.Ed.2d 323 (1971). The rationale for the rule was described in Lewis v. Knutson:\n[F]or plaintiff to satisfy the standing requirements of Rule 23.1, he must demonstrate that he owned stock in the corporation at the time of the transaction of which he complains and throughout the pendency of the suit, which includes the bringing of the suit and its prosecution. Schilling v. Belcher, 582 F.2d 995, 999 (5th Cir. 1978). These ownership requirements are necessary because \u201c[standing [to bring a derivative action in behalf of a corporation] is justified only by the proprietary interest created by the stockholder relationship and the possible indirect benefits the nominal plaintiff may acquire qua stockholder of the corporation which is the real party in interest.\u201d Id. at 1002 (quoting Kauffman v. Dreyfus Fund, Inc., 434 F.2d 727, 735-36 (3rd Cir. 1970), cert. denied, 401 U.S. 974, 91 S.Ct. 1190, 28 L.Ed.2d 323 (1971)). See also Portnoy v. Kawecki Berylco Industries, Inc., 607 F.2d 765, 767 (7th Cir. 1979); Papilsky v. Berndt, 466 F.2d 251, 255 (2d Cir.), cert. denied, 409 U.S. 1077, 93 S.Ct. 689, 34 L.Ed.2d 665 (1972). Thus, standing under Rule 23.1 concerns the plaintiff\u2019s relationship with the real party in interest, the corporation, and not the injury of the corporation.\nKnutson, 699 F.2d at 238 (emphasis added). Since North Carolina\u2019s Rule 23(b) is substantially similar to Federal Rule 23.1 referred to above, we find the court\u2019s rationale persuasive. See generally W. Shuford, N.C. Civil Practice and Procedure \u00a7 23-1 at 192 (2d ed. 1981).\nIn this case plaintiff lost his beneficial interest by operation of law months before he filed suit in March 1986, when defendant Wicker properly tendered payment on 31 July 1985, when the trial court upheld defendant\u2019s redemption of the collateral, and when plaintiff abandoned his appeal of that judgment. Plaintiff lacked standing to challenge the defendant corporation\u2019s loan to defendant Wicker and defendants were entitled to a directed verdict.\nAffirmed.\nJudges Phillips and Parker concur.", "type": "majority", "author": "COZORT, Judge." } ], "attorneys": [ "George S. Jackson for plaintiff appellant.", "Hornthal, Riley, Ellis & Maland, by L. P. Homthal, Jr., and John D. Leidy, for defendant appellees." ], "corrections": "", "head_matter": "WILLIAM ASHBURN v. PHILLIP D. WICKER and RIVWIN, III, a North Carolina Corporation\nNo. 881SC1056\n(Filed 15 August 1989)\nCorporations \u00a7 6\u2014 loan made by corporation \u2014 plaintiff not holder of beneficial interest \u2014 no standing of plaintiff to challenge\nPlaintiff did not have standing to challenge a loan made by the corporate defendant to the individual defendant when plaintiffs beneficial interest, if any, in defendant corporation consisted of a pledge of stock which secured a debt which was paid by another pledgee of the stock before plaintiff filed suit. N.C.G.S. \u00a7 55-55(a).\nAppeal by plaintiff from Judgment of Judge Herbert Small entered 18 May 1988 in PASQUOTANK County Superior Court. Heard in the Court of Appeals 14 April 1989.\nGeorge S. Jackson for plaintiff appellant.\nHornthal, Riley, Ellis & Maland, by L. P. Homthal, Jr., and John D. Leidy, for defendant appellees." }, "file_name": "0162-01", "first_page_order": 190, "last_page_order": 195 }