Ekren v. K&E Real Estate Invs., LLC

Ekren v. K&E Real Estate Invs., LLC, 2015 NCBC 107.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
IREDELL COUNTY 12 CVS 508

LAVONNE R. EKREN,

Plaintiff,

v.
ORDER AND OPINION APPROVING
K&E REAL ESTATE INVESTMENTS, RECEIVER’S FINAL REPORT AND
LLC, and PAUL A. KONRADY, MOTION FOR APPROVAL OF
Individually, COMMISION

Defendants.

Eisele Ashburn Greene & Chapman, PA, by Douglas G. Eisele, for
Plaintiff Lavonne R. Ekren

Knox, Brotherton, Knox & Godfrey, by Lisa G. Godfrey, for Defendants
K&E Real Estate Investments, LLC and Paul A. Konrady, Individually

G. Martin Hunter, Receiver for K&E Real Estate Investments, LLC

Bledsoe, Judge.
{1} THIS MATTER is before the Court upon G. Martin Hunter’s (the
“Receiver”) Final Report of Receiver and Motion for Approval of Receiver’s
Commission (the “Motion”) as the court-appointed Receiver for Defendant K&E Real
Estate Investments, LLC (“K&E,” the “Receivership,” or the “Receivership Estate”).
The Motion seeks Court approval of the Receiver’s Final Report, the Receiver’s
rejection of the claims of North Carolina’s Realty, Inc. (“NC Realty”) and Defendant
Paul A. Konrady (“Konrady”), the Receiver’s proposal for payment of K&E’s 2015
taxes, the Receiver’s request for commission, and the Receiver’s request to make
final distributions of K&E’s assets to Plaintiff Lavonne R. Ekren (“Ekren” or
“Plaintiff”) and Konrady.
{2} The Receiver filed the Motion on July 30, 2015, together with a brief in
support of the Motion. Plaintiff filed a response consenting to the Receiver’s
Motion, and Defendant Konrady filed two responses and an affidavit objecting to
the Receiver’s Motion, in part. The Court held a hearing on the Motion on
November 12, 2015. The Receiver, counsel for Plaintiff and Konrady, and Konrady
were in attendance at the hearing.
The Receiver’s Request for Commission
{3} The Receiver seeks Court approval for payment to the Receiver of a
commission of five percent of the receipts received by the Receivership Estate
between September 1, 2014 and July 30, 2015, the payment to be made from the
cash assets of the Receivership Estate. Pursuant to N.C. Gen. Stat. § 1-507.9, “the
court shall allow a reasonable compensation to the receiver for his services, not to
exceed five percent upon receipts and disbursements, and the costs and expenses of
administration . . . .” N.C. Gen. Stat. § 1-507.9 (2013).1 It is undisputed that the
gross receipts of the Receivership Estate between September 1, 2014 and July 30,
2015 were $238,867.97. The Receiver seeks five percent of this amount, which
equals $11,943.40.
{4} Defendant Konrady contends that the Receiver’s request is excessive, both
because the Receiver has miscalculated his commission by double-counting certain
receipts, and because the Receiver has not done sufficient work to justify the
compensation requested in the circumstances here. The Court finds Konrady’s
arguments without merit.
{5} First, as to the Receiver’s commission calculation, Konrady contends that
the Receiver erred by calculating his commission based on gross receipts during the
applicable period rather than, as he had in his two prior commission requests, based
on net receipts (i.e. receipts after deducting for mortgages, real estate commissions
and closing costs). N.C. Gen. Stat. § 1-507.9, however, does not require that
commission be paid on net receipts, and the Court does not find that the Receiver’s
decision to seek commission based on net receipts in his first two applications

1 The Court notes that N.C. Gen. Stat. § 1-507.9 governs the compensation for receivers of
corporations, and that K&E is a limited liability company. However, in the Order appointing the
Receiver, this Court (Murphy J.) specifically ordered that the Receiver would be paid pursuant to
N.C. Gen. Stat. § 1-507.9. Ekren v. K&E Real Estate Inv., LLC, No. 12 CVS 508 (N.C. Super. Ct.
Aug. 8, 2012) (order appointing receiver). The Receiver was thereafter paid pursuant to N.C. Gen.
Stat. § 1-507.9 in connection with his two prior applications for commission. The Court, therefore,
elects, in its discretion, to apply N.C. Gen. Stat. § 1-507.9 in considering the Receiver’s Motion.
precludes his request to be paid on gross receipts in the current Motion.
Compensation awarded under N.C. Gen. Stat. § 1-507.9 must be reasonable, and
the Receiver is certainly permitted to contend that reasonable compensation under
the circumstances existing during a particular period should be based on net
receipts while reasonable compensation under the circumstances existing in a
different period should be based on gross receipts. Konrady’s “miscalculation”
argument therefore fails.
{6} Next, as to Konrady’s contention that the Receiver’s request is excessive,
Konrady argues that the Receiver has already been paid over $60,000 in receiver’s
fees, attorneys’ fees, and costs and contends that the Receiver did not perform
sufficient work in the applicable period to warrant additional compensation. The
Court disagrees.
{7} The Receiver attached his computerized time records to the Motion
showing that he has spent 36.5 hours over the past year exercising his duties as
Receiver. The Receiver’s time records set forth in great detail the numerous and
varied actions the Receiver took to manage the Receivership Estate and to sell the
Receivership Estate’s last two real estate parcels after September 1, 2014. Based on
the evidence of record, the Court finds that the actions the Receiver took, and the
time the Receiver spent in furtherance of his duties under his appointment, were
reasonable and appropriate in the circumstances.
{8} Konrady also appears to suggest that the Receiver’s commission should be
reduced because, in Konrady’s view, this action was “motivated strictly by
[Plaintiff’s] spite” and because the Receiver’s fees were unnecessary in light of
Konrady’s safekeeping of K&E’s assets. Neither contention is persuasive. First,
having accepted court appointment, the Receiver is entitled to receive reasonable
compensation for his services under N.C. Gen. Stat. § 1-507.9 regardless of who or
what caused the conditions necessitating the Receivership. The Receiver’s
compensation should not be dependent upon the wisdom of his appointment. In
addition, Konrady’s complaint that the Receivership was unnecessary carries no
weight. Konrady continues to ignore that, regardless of the conduct that caused
him to conclude that he needed to transfer K&E’s assets to himself, it was that
transfer – made without any support under North Carolina law – and his decision
to forego his available legal remedies in a court of law in favor of extra-legal self-
help, that precipitated Plaintiff’s action and required the appointment of the
Receiver.
{9} In sum, the Court concludes, based upon a consideration of the entire
record before the Court, that the Receiver’s requested commission is fair and
reasonable compensation for his services between September 1, 2014 and July 30,
2015, and should be approved. Accordingly, pursuant to N.C. Gen. Stat. § 1-507.9,
the Court, in the exercise of its discretion, hereby GRANTS the Receiver’s Motion
and APPROVES a commission payment in the amount of $11,943.40 to be paid to
the Receiver out the assets of the Receivership Estate.2
Claims against the Receivership Estate
{10} The Receiver also seeks Court approval of his rejection of two claims
against the Receivership Estate.
{11} The first claim was asserted by NC Realty concerning an outstanding
invoice to K&E allegedly due since June 10, 2011 for $6,000.00 for marketing and
prep time in connection with the sale of one of K&E’s properties. Although NC
Realty raised this claim to the Receiver on June 13, 2013, NC Realty has not
brought an action against K&E for non-payment at any time.3 The Receiver
contends that any claim NC Realty can bring to collect on this alleged debt is now
barred by the three-year statute of limitations under N.C. Gen. Stat. § 1-52(1). The
Court agrees and concludes that the Receiver properly rejected NC Realty’s claim
against the Receivership Estate.

2 The Receiver did not seek recovery of attorneys’ fees in the Motion and advised at the hearing that
the Motion sets forth his final application for compensation for his services as either Receiver or as
counsel for the Receiver in this matter.

3 The Receiver advised at the hearing that he had notified NC Realty through its owner, Rick
Christenberry, of the Receiver’s objection to the claim but did not receive any response from Mr.
Christenberry. NC Realty has not filed an objection to the Receiver’s rejection of NC Realty’s claim
with the Court.
{12} The second claim was asserted by Defendant Konrady through an invoice
sent by “Paul Konrady Consulting” to the Receiver dated February 4, 2015 in the
amount of $24,000.00 for alleged “financial record keeping of on-going operations,
preparation of year-end financial information for tax reporting purposes, and
financial reporting service as needed for ongoing operations of [K&E]” from 2011
through 2014. The evidence of record is undisputed that neither K&E nor the
Receiver ever entered into a contract with Konrady or Paul Konrady Consulting for
such services or requested that Konrady perform such services. Konrady contends
that a contract or request was not needed, however, under the express terms of the
Operating Agreement. Specifically, Konrady argues that Section 5.5 of the
Operating Agreement, which states that a member may charge his “regular fees for
any activity associated with the management of the corporation so long as the
activity is of the type that the member usually provides to its clients,” requires the
Receiver to recognize his claim because the fees he seeks are for “activity of the type
that he usually provides to [his] clients.”4 The Court disagrees.
{13} First, by Konrady’s own admission, he provided the alleged services to
K&E without charge “for many years” and avers that he “began charging the
Company for [his] services” only after Plaintiff began engaging in conduct he viewed
as detrimental to K&E. Konrady has provided no evidence, however, that (i) he
ever told Plaintiff that he had begun to charge K&E for his services at any time, (ii)
he ever submitted an invoice to K&E for his services prior to the institution of the
Receivership, (iii) K&E ever paid him for his services at any time, or (iv) Plaintiff or
any other person was aware that he was charging K&E for his services.
Accordingly, Konrady’s claim – supported solely by his September 1, 2015 affidavit
– appears to reflect nothing more than a long-after-the-fact decision to charge for

4 Konrady asserts in his brief, and stated again at the hearing, that his claim is based solely on the
Operating Agreement as “a specific written agreement which allows Mr. Konrady to charge for his
services in this case” and “is not [a claim] in quantum meruit.” As such, the Receiver’s contention
that Konrady’s claim should be rejected based on the equitable doctrine of unclean hands is
misplaced. See, e.g., Guessford v. Pa. Nat'l Mut. Cas. Ins. Co., 918 F. Supp. 2d 453, 469 (M.D.N.C.
2013) (“Under North Carolina law, the defense of unclean hands is only applicable when the plaintiff
seeks an equitable remedy.”) (citations and quotations omitted).
his alleged services in an effort to obtain a greater share of the final distribution of
the Receivership Estate’s remaining assets. Even if the Court were to assume that
Section 5.5 of the Operating Agreement permitted Konrady to receive payment for
bookkeeping services, the Agreement does not permit Konrady to decide,
unilaterally, months and years after the services were provided, to charge K&E for
services that were rendered free of charge at the time they were offered and
provided.
{14} In addition, the Order appointing the Receiver in August 2012 broadly
authorized the Receiver to “take charge of the day-to-day administration of [K&E]”
and did not subject the Receiver’s authority to any purported right of Konrady to
provide bookkeeping services under the Operating Agreement. It is undisputed
based on the evidence of record before the Court that (i) the Receiver did not
contract with Konrady to provide services, (ii) the Receiver did not authorize or
request Konrady to provide any services, (iii) the Receiver did not agree to pay
Konrady for any services, (iv) Konrady did not advise the Receiver that he intended
to charge for his alleged services, and (v) Konrady did not tender an invoice for his
alleged services until February 2015, almost 2½ years after the Receiver was
appointed.
{15} Under these circumstances, the Court concludes, based on its
consideration of the entire record before the Court, that the Receiver properly
rejected Konrady’s claim against the Receivership Estate.5
K&E’s 2015 Taxes
{16} The Receiver has proposed that $7,000.00 of the Receivership Estate’s
assets be deposited into the IOLTA trust account of G. Martin Hunter Attorney at
Law to be held for payment of final taxes due from the Receivership Estate. The
Receiver further proposes that he be authorized to sign K&E’s final 2015 tax
returns. The Receiver also proposes that, in the event K&E’s final tax liability is

5 In light of the Court’s approval of the Receiver’s rejection of Konrady’s claim, the Court declines to
consider Plaintiff’s additional contention that Section 5.5’s exclusion of fees for activities that are
considered “managing the Company” also bars Konrady’s claim.
less than $7,000.00, the Receiver shall pay the amount less than $7,000.00 to
Konrady, and in the event K&E’s final tax liability is greater than $7,000.00,
Plaintiff and Konrady shall pay the amount in excess of $7,000.00 to the Receiver in
equal shares. Neither Plaintiff nor Konrady advanced any objection to the
Receiver’s proposal in their briefs on the Receiver’s Motion, and counsel for each
indicated their consent to the Receiver’s proposal at the hearing. The Court finds
the Receiver’s proposal fair and reasonable under the circumstances and approves
the proposal as set forth in this Order.
Final Distributions
{17} The parties indicated at the hearing that, subject to their disagreement
concerning the Receiver’s rejection of Konrady’s claim, they agree that the final
distribution of the Receivership Estate’s assets should be made as follows:
Beginning Balance $276,724.42
Tax holdback ($7,000)
Receiver’s Commission ($11,943.40)
Amount to be distributed $257,781.02
1. To Konrady6 ($60,000.00)
2. To Plaintiff7 ($95,000.00)
To Konrady ($95,000.00)
3. To Konrady8 ($7,781.02)
{18} The Court finds that the Receiver’s proposed distribution is consistent
with the terms of the Second Amendment and, in light of the Court’s approval of the

6 The parties and the Receiver agree that Konrady is to receive the first $60,000 of any distribution

pursuant to paragraph 1(a) of the Second Amendment to Operating Agreement dated October 20,
2007 between Plaintiff and Konrady (the “Second Amendment”).

7 The parties and the Receiver agree that after payment of the first $60,000 under paragraph 1(a) of

the Second Amendment, the next $190,000 of any distribution is to be paid equally between Plaintiff
and Konrady in accordance with their respective membership interests in K&E pursuant to
paragraph 1(b) of the Second Amendment.

8 The parties and the Receiver agree that the next $45,000 in assets “shall be first distributed to

Konrady or his successors as a preferred distribution” pursuant to paragraph 1(c) of the Second
Amendment.
Receiver’s rejection of Konrady’s claim, approves the Receiver’s proposed
distribution of final proceeds as follows:
Beginning Balance $276,724.42
Tax holdback ($7,000.00)
Receiver’s commission ($11,943.40)
To Konrady ($162,781.02)
To Plaintiff ($95,000.00)
Total Payments ($276,724.42)
Conclusion
{19} IT IS, THEREFORE, ORDERED, ADJUDGED AND DECREED as
follows:
a) The Receiver’s Final Report is APPROVED.
b) The Receiver’s rejection of the claims of NC Realty and Konrady is
APPROVED.
c) The Receiver’s proposal regarding the 2015 tax returns is
APPROVED and (i) the Receiver shall be permitted to place
$7,000.00 into the IOLTA general trust account of G. Martin
Hunter Attorney at Law to be held for payment of final taxes, (ii)
the Receiver is authorized to sign final 2015 tax returns for the
Receivership Estate, (iii) in the event K&E’s final 2015 tax liability
is less than $7,000.00, the Receiver shall pay the amount less than
$7,000.00 to Konrady, (iv) in the event K&E’s tax liability is greater
than $7,000.00, Plaintiff and Konrady shall pay the amount greater
than $7,000.00 to the Receiver in equal shares, and (v) the Receiver
shall be permitted to file a motion to compel contribution in this
Court against either Plaintiff or Konrady should either fail to pay
their portion of any tax liability in excess of $7,000.00.
d) The Receiver’s request for commission is APPROVED and the
Receiver is entitled to receive, and is authorized to pay, a
commission in the total amount of $11,943.40 from the assets of the
Receivership Estate.
e) The Receiver’s request for payment of a final distribution is
APPROVED and the Receiver is authorized to pay Plaintiff the
total amount of $95,000.00 and to pay Konrady the total amount of
$162,781.02 as final distributions of the Receivership Estate’s
assets; provided, however, that payment under this paragraph 18(e)
shall not affect the payments contemplated under paragraph 18(c)
and further that the parties shall share equally the cost of any bank
fees that the Receiver may incur prior to the payments required
under this Order.
f) The Receiver shall notify the Court when K&E’s 2015 tax returns
have been filed, when the Receiver may be discharged, and when
the case may be closed on the Court’s docket. In the event the
Court has not closed the case by February 1, 2016, the Receiver
shall provide a written status report to the Court.
SO ORDERED, this the 12th day of November 2015.

/s/ Louis A. Bledsoe, III
Louis A. Bledsoe, III
Special Superior Court Judge
for Complex Business Cases