United States District Court, W.D. North Carolina, Charlotte Division
CONSENT ORDER REGARDING ALLOCATION OF NET PROCEEDS
FROM SALE OF PROPERTY AT 9137 MOUNT HOLLY-HUNTERSVILLE RD,
C. Mullen United States District Judge.
matter comes before the Court upon the consent of A. Cotten
Wright, the duly appointed receiver (the
“Receiver”) in this case and Madhusudan Babulal
Shah and Bina Madhusudan Shah (the “Shahs”),
through their respective counsel, as to the allocation of the
net proceeds from the sale of real property located at 9137
Mount Holly-Huntersville Road, Huntersville, North Carolina
(the “Property”). The Receiver and the Shahs
hereby show the Court, and the Court hereby finds and holds
after a review of the record in this cause, as follows:
June 8, 2016, the Receiver was appointed as the temporary
receiver for a number of entities created and controlled by
Richard W. Davis, Jr. (“Davis”), including Davis
Financial, Inc. (“DFI”) (Doc. No. 8). On August
5, 2016, the Receiver became the permanent receiver for DFI
(Doc. No. 48).
Before this case was filed, DFI held title to the Property as
a tenant in common with the Shahs. In a series of deeds,
Davis caused DFI to grant the Shahs increasing interests in
the Property. The pertinent deeds (collectively, the
“Deeds”) are: (1) a deed dated 10/30/2006 and
recorded on 2/20/2007 conveying a 38% interest in the
Property and a neighboring parcel to the Shahs; (2) a deed
dated 12/14/2010 and recorded on 12/17/2010 conveying the
Shahs' interest in the neighboring parcel to DFI; (3) a
deed dated 12/14/2010 and recorded on 12/17/2010 conveying a
17% interest in the Property to the Shahs; and (4) a deed
dated 12/15/2010 and recorded on 6/5/2014 conveying a 13%
interest in the Property to the Shahs (the “13%
Based on the Deeds, the Shahs have claimed to hold a 68%
interest in the Property.
Receiver is informed and believes that, notwithstanding the
transfer of ownership interests in the Property to the Shahs,
DFI paid all the carrying costs associated with the Property,
including real property ad valorem taxes for past years.
Deeds state on their face that there was no taxable
consideration for each transfer of interests in the Property
to the Shahs. Further, it appears that the 13% Deed was
backdated because Davis did not begin using the address shown
for DFI on the 13% Deed until 2012 or 2013. Therefore, it
appears that the 13% Deed was a gift deed that was not
recorded within the two-year time frame proscribed by N.C.
GEN. STAT. § 47-26. The Receiver also has taken the
position that the 13% Deed is avoidable pursuant to North
Carolina's Uniform Voidable Transactions Act, N.C. Gen.
Stat. §§ 39-23.1 et seq., as either
constructively or actually fraudulent as to DFI's other
creditors. Therefore, the Receiver has taken the position
that the Shahs' interest in the Property should be
limited to 55%.
Receiver first learned of DFI's interest in the Property
in late 2016. Thereafter, the Receiver and the Shahs agreed
that the Property should be marketed for sale. During the
period that the Property was on the market, the Receiver paid
all the costs of maintaining and repairing the Property as
well as the advertising expenses required in order to conform
to the sale procedures in this case (the “Receivership
Expenses”). The Receivership Expenses totaled $7,
November 17, 2017, the Court entered its Amended Order
Granting Motion for Authority to Sell Real Property Free and
Clear of Liens - 9137 Mount Holly-Huntersville Rd. (Doc.
No. 158) authorizing the sale of the Property for a gross
sale price of $140, 000.00. After deducting the costs of the
sale, realtor commissions and taxes due on the Property, the
net sale proceeds totaled $126, 380.20. In addition to the
net sale proceeds, the receivership retained $1, 000.00 in
earnest money provided by a defaulting buyer before the sale.
Thus, a total of $127, 380.20 in net receipts was realized
with respect to the Property (the “Proceeds”).
The Receiver has held the Proceeds in the receivership
account pending a determination as to their allocation.
Deducting the Receivership Expenses from the Proceeds results
in a net of $120, 153.55 (the “Net Proceeds”).
Receiver and the Shahs have negotiated as to the appropriate
allocation of the Proceeds and the Receivership Expenses and,
subject to the Court's entry of this Order, agreed to
settle on the following terms (the “Agreement”):
(a) The Receiver will not pursue recovery from the Shahs of
their share of prior years' carrying costs paid by DFI,
including property taxes.
(b) The Shahs' ownership interest in the Property and the
Proceeds therefrom shall be set at 55%.
(c) The Receiver's ownership interest in the Property and
the Proceeds therefrom ...