Bennett v. Bennett
| Decision Date | 04 April 2022 |
| Docket Number | 18 CVS 48 |
| Citation | 2022 NCBC 15 |
| Parties | BERT L. BENNETT III, individually and on behalf of BENNETT LINVILLE FARM LLC, Plaintiff, v. GRAHAM F. BENNETT; ANN BENNETT-PHILLIPS; JAMES H. BENNETT; LOUISE BENNETT; and BENNETT LINVILLE FARM, LLC, Defendants, and JOHN J. BENNETT and JEANNE R. BENNETT, Nominal Defendants. |
| Court | Superior Court of North Carolina |
Fitzgerald Litigation, by Andrew L. Fitzgerald and D. Stuart Punger, and Brooks, Pierce, McLendon, Humphrey & Leonard L.L.P., by Jeffrey Oleynik, for Plaintiff Bert L. Bennett III.
Bell Davis & Pitt, P.A., by Kevin G. Williams and Allison B Parker, for Defendants Graham F. Bennett, Ann Bennett-Phillips, James H. Bennett, and Bennett Linville Farm, LLC.
FINDINGS OF FACT, CONCLUSIONS OF LAW, AND PARTIAL JUDGMENT (STAGE 1 ISSUES)
1. THIS MATTER came on for trial without a jury before the undersigned commencing on 28 March 2022. With the parties' consent, the trial was bifurcated so that determinations with respect to Bennett Linville Farm, LLC's controlling operating agreement and the number and identity of its managers could be decided first. Having concluded the evidence with respect to these "Stage 1" issues, the Court issues its Findings of Fact, Conclusions of Law, and Partial Judgment before proceeding with the balance of the case.
2. This is a case about a bedrock principle of contract formation: whether there was a meeting of the minds when the parties signed a document purporting to amend an operating agreement governing a limited liability company. Plaintiff Bert L. Bennett III ("Bert" or "Plaintiff") contends that there was no such meeting of the minds and, therefore, the purported amendment does not control the affairs of the LLC holding the family property, Bennett Linville Farm, LLC ("BLF" or the "LLC"). Bert's siblings, Defendants Graham F. Bennett ("Graham"), Ann Bennett-Phillips ("Ann"), and James H. Bennett ("Jim"), contend that the signed amendment does control BLF's operations.
3. The facts of this case present a unique situation. The LLC involved was organized primarily as an estate planning device for the patriarch of a family whose children, each of whom were members of the LLC, deferred to their father's decisions regarding the property without question.
4. The Bennett parents have since passed away, and the Bennett children are now divided over various actions taken on behalf of BLF. At the center of their disagreement is whether the LLC's Operating Agreement was amended in 2010 (the "2010 Amendment"). Bert contends that the 2010 Amendment is invalid, and that certain decisions made pursuant to the 2010 Amendment, including the instatement of his brother Jim as manager, are likewise invalid. Bert's brothers, Graham and Jim, along with his sister, Ann, contend (a) that the 2010 Amendment is valid; (b) that, as a result, Jim joins them as a manager of BLF; and (c) that, as the managers of BLF, their decisions have been in accordance with the 2010 Amendment.
5. Based on the following Findings of Fact and Conclusions of Law, the Court issues its Partial Judgment declaring that: (1) the 2010 amendment, (Jt. Ex. 107[1]), is valid and has been in effect since 1 October 2010; and (2) pursuant to the 2010 Amendment, BLF's managers are Graham, Ann, and Jim Bennett.
6. Plaintiff initiated this action on 3 January 2018 by filing his Complaint. (ECF No. 4.) Plaintiff has since amended his Complaint three times.[2] (ECF Nos. 5, 25, 77.) On 13 September 2019, Defendants filed an Answer and asserted counterclaims. (ECF No. 95.)
7. Defendants filed their Notice of Designation as a Mandatory Complex Business Case on 12 April 2018 under N.C. G.S. § 7A-45.4. (ECF No. 6.) On 13 April 2018, this case was designated as a mandatory complex business case by the Chief Justice. (ECF No. 3.) The case was assigned to the Honorable Adam M. Conrad on 18 April 2018, (ECF No. 2), and reassigned to the undersigned on 6 May 2021, (ECF No. 122).
8. Defendants filed their Motion for Summary Judgment on 2 December 2019, seeking entry of summary judgment on both Bert's claims and BLF's counterclaims. (ECF No. 101.) The Court heard the motion on 10 June 2020, (ECF No. 117), and issued its Order and Opinion on 16 December 2020, (ECF No. 120.)[3]
9. As a result of the Court's prior rulings and dismissals taken by the parties, the case proceeds to trial with Bert suing Defendants Graham, Jim, and Ann directly and derivatively on behalf of BLF.[4] Bert asserts a claim for declaratory judgment with respect to the validity of the 2010 Amendment, the capital calls made pursuant to it, and the decision to bar Bert and his family from accessing the property as a result of his refusal to pay capital. He requests that the Court declare the parties' ownership interests as of 13 April 2018. Bert also asserts claims for breach of contract resulting from Defendants' purchase of Louise's interest in BLF, claims for breach of the covenant of good faith and fair dealing and civil conspiracy also stemming from Louise's transfer, a claim for dissolution, and a derivative claim against his siblings for treating their capital obligations as loans to the LLC.
10. For their part, Defendants counterclaim for a declaratory judgment with respect to their right to redeem Bert's interest pursuant to the 2010 Amendment and, alternatively, assert a counterclaim for breach of contract resulting from Bert's failure to pay capital calls.
11. The parties waived their right to a jury trial and consented to a bench trial before the undersigned. The trial commenced on 28 March 2022 at the North Carolina Business Court, 1834 Wake Forest Road, Worrell Professional Center, Room 3205, Winston-Salem, North Carolina 27109. (ECF No. 128.) Given the pivotal role that a determination of the validity of the 2010 Amendment plays with respect to other issues in the case, the Court, with the consent of the parties, bifurcated the trial to decide that issue, as well as the identity of the LLC's managers, first. Specifically, the issues to be decided in Stage 1 of the trial ("Stage 1 issues") are:
12. The parties submitted proposed findings of fact and conclusions of law on 4 March 2022, and, after the close of the evidence, were permitted to revise those proposals. The Court heard final arguments and took the matter under submission on 31 March 2022.
13. The Stage 1 issues are now ripe for determination.
14. The Court incorporates herein and adopts as Findings of Fact the Stipulations filed by the parties on 28 February 2022, (ECF No. 139), and incorporated in the Pretrial Order, (ECF No. 146).
15. The Court admitted fourteen exhibits and received testimony from seven witnesses who appeared live and by deposition during Stage 1 of the trial.
16. Bert is highly educated, having received a doctoral degree in counseling psychology from Florida State University. (Bench Trial Tr. March 28, 2022 [hereinafter "Tr. I."] 44:11-12, ECF No. 156.) He operates a private practice in which he performs psychological testing. (Tr. I 51:2-3.)
17. Beginning in the 1960s, the Bennett parents purchased land totaling more than three hundred acres, still in its natural state, in the mountains of Avery County, North Carolina. (Tr. I 166:2-10.) Bert Bennett, Jr. ("Father Bennett"), an avid outdoorsman, enjoyed fishing on the property. He invited friends and took his sons along with him, first tent-camping and later staying in a cabin that was built at the intersection of two streams on land that became the "hub" of the property. (Tr. I 55:15-20, 78:3-9.)
18. Penn Craver ("Craver") is an accomplished attorney who practiced corporate, tax, wealth management and estate planning law in North Carolina for over five decades. Early in his career, Craver began providing legal services to Quality Oil Company, LLC ("Quality Oil"), an established client of his law firm. (Tr. I 146:24-47:1.) Father Bennett was an owner and the President of Quality Oil. (Bench Trial Tr. March 29, 2022 [hereinafter "Tr. II"] 228:8-10, ECF No. 157.) In due time, Craver and Father Bennett established a close professional relationship, and Craver became Father Bennett's personal attorney as well. (See Tr. I 74:8-18.) Both sides agree that Father Bennett trusted Craver implicitly. (See, e.g., Tr. I 74:19-75:1; Tr. II 234:6-11.)
19. In the 1980s, Father Bennett, after discussing his estate planning with Craver, began a "gifting" program with respect to the land he and his wife, Lillian F. Bennett ("Mother Bennett") owned in Avery County. Thereafter, for several years the Bennett parents conveyed undivided interests in tracts of land surrounding the "hub" to each of their eight children.[6] (Tr. I 166:23-67:19.)
20. At least until 2007, Bert was not aware that he had been gifted and owned a portion of the Avery County property. (Tr. I 77:22-78:2, 81:16-82:13.)
21. In 2001, John Bennett ("John"), another of the Bennett siblings, asked his father if he could exchange the tract he had been given for approximately thirty-five acres of land that he had identified near a ridge. Father Bennett agreed to the request and directed Craver to draft the necessary deed. (N.C. General Warranty Deed Dated Nov. 1, 2001, Jt. Ex. 1.)
22. Father Bennett had already given the land that John desired to his other children as part of the "gifting program"; thus, their agreement was necessary to complete the transaction. Father Bennett therefore instructed...
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