Kirin Nayyar v. Narinder Bhatia , 824 S.E.2d 675 ( 2019 )

FIFTH DIVISION
MCFADDEN, P. J.,
RICKMAN and MARKLE, JJ.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules
February 25, 2019
In the Court of Appeals of Georgia
A18A1968. NAYYAR et al. v. BHATIA.
MCFADDEN, Presiding Judge.
This appeal arises from a business dispute between Narinder Bhatia and Kirin
Nayyar, who jointly owned and operated a gas station and convenience store through
NNayyar, LLC. While Bhatia was out of the country for an extended period, Nayyar
unilaterally dissolved NNayyar and created a new entity, P and J Nayyar, LLC
(“P&J”), through which he continued to operate the store. Bhatia filed an action
against Nayyar and P&J (collectively, “the defendants”) asserting that they had
violated Georgia’s Limited Liability Company Act (OCGA § 14-11-100 et seq.), had
breached fiduciary duties, and had defrauded him. Subsequently, he petitioned the
court to appoint a receiver during the pendency of the litigation. The trial court
granted the petition and then ordered the appointment of a receiver over P&J.
The defendants appeal those rulings. They argue that the trial court erred in
finding that the statutory requirements for a receivership had been met. This question
fell within the trial court’s broad discretion and we find no manifest abuse of that
discretion. They also argue that, in ruling on the receivership petition, the trial court
invaded the province of the jury. We find no ground for reversal, because even if
some of the trial court’s factual findings unnecessarily extended into ultimate issues
that should be decided by the jury in this case, the trial court made those findings in
the context of an interlocutory ruling that will not bind the jury in subsequent
proceedings. So we affirm.
1. Requirements for receivership.
Georgia law provides for the appointment of a receiver “[w]hen any fund or
property is in litigation and the rights of either or both parties cannot otherwise be
fully protected[.]” OCGA § 9-8-1. This is an equitable remedy, similar to an
interlocutory injunction. See generally Patel v. State of Ga., 289 Ga. 479, 482 (1)
(713 SE2d 381) (2011) (interlocutory injunction and receivership both apply
equitable principles to protect parties during pendency of litigation). As such, it is
appropriate “only where there is no available adequate and complete remedy at law.”
Cantrell v. Henry County, 250 Ga. 822, 824 (1) (301 SE2d 870) (1983). See generally
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OCGA § 23-1-3 (“Equity jurisdiction is established and allowed for the protection
and relief of parties where, from any peculiar circumstances, the operation of the
general rules of law would be deficient in protecting from anticipated wrong or
relieving for injuries done.”). “The power of appointing receivers should be prudently
and cautiously exercised and except in clear and urgent cases should not be resorted
to.” OCGA § 9-8-4. Nevertheless, “the decision as to whether the circumstances are
sufficiently clear and urgent enough to warrant a receiver is committed to the trial
court’s discretion, which will not be interfered with on appeal unless it was
manifestly abused.” Alstep, Inc. v. State Bank & Trust Co., 293 Ga. 311, 313 (3) (745
SE2d 613) (2013) (citation omitted). The trial court has broad discretion to make this
determination even though, as here, the facts relevant to the determination are in
conflict. Warner v. Warner, 237 Ga. 462 (1) (228 SE2d 848) (1976). “The truth of
disputed facts is not something we can decide here; our task is to affirm the decision
of the trial court to appoint a receiver unless we determine that he abused his
discretion by so doing.” Id. (citations omitted).
The parties in this case offered evidence in the form of documentary exhibits,
verified pleadings, and the deposition testimony of Bhatia and Nayyar. While
conflicts exist in this evidence — most significantly regarding whether Bhatia sold
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his interest in NNayyar before leaving the country — when we view the evidence in
the light most favorable to the trial court’s ruling it shows the following.
Bhatia and Nayyar formed NNayyar, LLC on November 22, 2006 and through
that entity they began operating a gas station and convenience store under the name
Friendly Express. Bhatia and Nayyar each owned 50% of NNayyar and they agreed
to split the profits of Friendly Express equally.
On September 29, 2009, Bhatia left the country for an extended period of time.
He and Nayyar agreed that, while he was out of the country, Nayyar would operate
Friendly Express and would receive a specified monthly salary. Once that salary was
paid, the two would split the business’s profits equally. For a period of time, Nayyar
sent Bhatia payments and gave him reports about the business.
In August 2011, Nayyar formed P&J. Bhatia had no ownership interest in the
new entity. Nayyar began to operate the gas station through P&J, and he stopped
sending Bhatia payments. On March 30, 2012, Nayyar filed for a voluntary
dissolution of NNayyar, LLC, and the Secretary of State terminated that entity on
April 3, 2012.1 This dissolution occurred without Bhatia’s knowledge or consent.
1
The trial court’s order incorrectly states that NNayyar was dissolved in 2011,
not 2012.
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Bhatia alleged in his lawsuit that Nayyar diverted the business’s profits to
himself or his new entity: P&J. In the course of discovery, he asked the defendants
for a full and complete accounting of the business, but the defendants did not provide
one. Nayyar deposed that questions about the business’s finances could be directed
to his accountant. Bhatia contends that the accountant could not provide the requested
information.
On February 21, 2017, Bhatia petitioned for the appointment of a receiver. At
the hearing on this motion, Bhatia’s counsel introduced evidence that P&J had been
administratively dissolved on August, 24, 2017, and represented to the court that the
defendants had failed to inform Bhatia of this fact. The defendants’ counsel stated at
the hearing that, notwithstanding the dissolution of P&J, Nayyar continued to operate
the gas station and convenience store.
In granting the petition, the trial court determined that Bhatia had an ownership
interest in the business that was at risk and that he lacked an adequate remedy at law.
The defendants argue that the trial court abused his discretion in these determinations
but, as detailed below, we find the trial court was authorized to make the conclusions
that authorized the appointment. See Warner, 237 Ga. at 462-463 (1).
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(a) The trial court did not manifestly abuse his discretion in finding that the
appointment of a receiver was justified.
“Appointing a receiver under OCGA § 9-8-1 is justified where there is a danger
that the assets at issue will be depleted or impaired if they remain in one party’s
control.” Alstep, Inc., 293 Ga. at 313 (3) (citation omitted). Here, the evidence viewed
most favorably to Bhatia showed that the defendants attempted to assert sole control
over business assets in which Bhatia had an ownership interest. It showed that Nayyar
had unilaterally dissolved the parties’ LLC and had begun operating the business
through P&J, a separate entity in which Bhatia had no interest. This evidence
authorized the trial court to find that the appointment of a receiver was justified. See
Fulp v. Holt, 284 Ga. 751, 753 (670 SE2d 785) (2008) (in case involving former law
partners with verbal agreement to split partnership profits evenly, trial court did not
abuse discretion in appointing receiver where evidence showed one partner used
firm’s funds for personal use in months prior to his decision to dissolve firm,
borrowed money on firm’s line of credit without other partner’s permission or
disclosing impending dissolution to lender, and took possession of firm records and
files); Ga. Rehabilitation Center v. Newnan Hosp., 283 Ga. 335, 336 (2) (658 SE2d
737) (2008) (trial court authorized to appoint receiver where equal owners of business
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could not agree about its management and financial affairs and no meaningful
accounting could be done because parties provided conflicting, incomplete, and
inconsistent information to accountants); Lemans Assoc. Ltd. Partnership v. Lemans
Apartments, 268 Ga. 396 (2) (489 SE2d 831) (1997) (trial court authorized to appoint
receiver over apartment complex in which petitioner had secured property interest
where there was evidence that, among other things, respondent had not paid petitioner
amounts due on note and had instead made unauthorized distributions from property);
Dixie-Land Iron & Metal Co. v. Piedmont Iron & Metal Co., 235 Ga. 503, 504 (220
SE2d 130) (1975) (trial court authorized to appoint receiver where dispute between
equal partners in company prevented their cooperation in conducting affairs of
partnership, it would be inequitable for one partner to conduct the business to the
exclusion of the other, and leaving the business assets unattended would jeopardize
the partners’ interests).
Cases cited by the defendants do not hold to the contrary. It is true, as the
defendants assert, that a trial court may not appoint a receiver solely because the
defendant in an action for damages “might be poor or even insolvent[.]” Irwin v.
Willis, 202 Ga. 463, 481 (43 SE2d 691) (1947). But the evidence in this case, viewed
most favorably to Bhatia, goes beyond the defendants’ financial condition; it shows
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their misconduct in unilaterally dissolving NNayyar, assuming control of the Friendly
Express assets, and failing to pay Bhatia according to the parties’ agreement. The
decision in Patel v. Patel, 280 Ga. 292 (627 SE2d 21) (2006), on which the
defendants heavily rely, likewise does not require reversal. That case was in a
materially different procedural posture. It involved a trial court’s decision not to
appoint a receiver and, under the relevant standard of review, the Supreme Court was
required to affirm that decision absent a manifest abuse of discretion by the trial
court. Id. at 293. See Warner, 237 Ga. at 462 (1).
(b) The trial court did not manifestly abuse his discretion in finding that Bhatia
lacked an adequate remedy at law.
The evidence that Bhatia was an equal shareholder in NNayyar and a co-owner
of property over which the defendants had improperly obtained sole control
authorized the trial court to conclude that Bhatia lacked an adequate remedy at law.
If NNayyar’s “assets were dissipated because no receiver was appointed, any remedy
at law would be meaningless.” Fulp, 284 Ga. at 753 (citation and punctuation
omitted). See D. C. Micro Dev. v. Lange, 259 Ga. App. 611, 614 (3) (578 SE2d 251)
(2003).
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Our Supreme Court’s decision in Coe Manufacturing Co. v. Dublin & Laurens
Bank, 160 Ga. 675 (182 SE 908) (1925), which the defendants cite for the proposition
that the trial court erred in this conclusion, is inapposite. It did not involve business
assets co-owned by the parties. Instead, it concerned a creditor’s effort to have a
receiver appointed over the assets of a debtor, even though the creditor did not have
a lien over the property and the relevant statute at that time provided that “‘[c]reditors
without lien can not, as a general rule, enjoin their debtors from disposing of
property, nor obtain injunction or other extraordinary relief in equity.’” Id. at 676 (a)
(quoting § 5495 of Civil Code (1910)).
2. Province of the jury.
The defendants argue that the trial court erred in making factual findings, based
on conflicting evidence, that instead should have been reserved for the jury. We find
no basis for reversal.
Without question, a trial court may make factual findings in ruling on a petition
for a receiver. See 7 Ga. Proc. Special Remedies and Proceedings § 5:7 (2018)
(“Whether or not the appointment of a temporary receiver is justified [is a] question[
] of fact between the contending parties and must be determined in the first instance
in the trial court.”) (citations omitted). See also, e.g., Popham v. Yancey, 284 Ga. 467,
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468 (667 SE2d 353) (2008) (where appellant did not provide transcript of evidentiary
hearing on petition to appoint receiver, appellate court “must assume that there was
sufficient competent evidence to support the trial court’s findings”) (citation omitted;
emphasis supplied). The trial court may make such findings as are necessary to rule
on the receivership petition even when the facts relevant to that petition are disputed.
See Fulp, 284 Ga. at 753 (factual dispute regarding extent of parties’ oral agreement
to split profits); Warner, 237 Ga. at 462-463 (1) (noting rule that trial court has broad
discretion to appoint receiver where evidence is in conflict, and finding evidence
authorized trial court’s findings regarding party’s misconduct that supported
appointment of receiver). At this stage, the trial court’s factual findings are
interlocutory; they merely preserve the status of the property for which a receiver is
appointed “until the final disposal of all questions, legal or equitable, involved in the
action.” Benton v. Turk, 188 Ga. 711, 726 (3) (4 SE2d 580) (1939) (citation and
punctuation omitted). An order appointing a receiver, in which the trial court made
factual findings based on disputed facts, does not finally determine issues of fact and
law, nor does it decide any rights between the parties. See Fulp, 284 Ga. at 753;
Conner v. Yawn, 200 Ga. 500, 506 (37 SE2d 541) (1946).
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Simply put, the interlocutory factual findings made by the trial court in
deciding whether to appoint a receiver have no bearing on any ultimate decision on
the merits of Bhatia’s lawsuit. If the case proceeds to a jury, the parties will be free
to present evidence that conflicts with the trial court’s factual findings on the
receivership question, and the jury will be free to make its own factual findings
supported by that evidence. Consequently, the defendants’ assertion that the trial
court improperly made some findings that were unnecessary to decide the
receivership question is not a ground for reversal; because the trial court’s findings
are not conclusive between the parties in this case, there is no reversible error. See
Carter v. Puckett, 237 Ga. 494 (228 SE2d 878) (1976) (affirming trial court’s
interlocutory injunction over argument that trial court improperly adjudicated ultimate
fact on hearing). See generally Blue Cross/Blue Shield of Ga./Atlanta v. Pouseman,
167 Ga. App. 240, 243 (305 SE2d 855) (1983) (error must be harmful to be
reversible). Cf. Oliver v. Forshee, 224 Ga. 200, 202 (1) (160 SE2d 828) (1968) (trial
court’s ruling at interlocutory hearing that parties had forfeited their lease and would
have to vacate premises immediately was an improper final adjudication of ultimate
issue).
Judgment affirmed. Rickman and Markle, JJ., concur.
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