Berry v. Berry

• Decision Date: 13 May 2022
• Docket Number: 20-0687
• Citation: 646 S.W.3d 516
• Parties: Kenneth L. BERRY, Individually; Kenneth L. Berry, as Trustee of the Berry Dynasty Trust; Kenneth L. Berry, Trustee in a Derivative Capacity for Flying Bull Ranch, Ltd.; and Chelsea Nicole Briers, Petitioners, v. Dennis W. BERRY; Marvin G. Berry; Allen L. Berry; FB Ranch, LLC; Berry GP, Inc. d/b/a/ Berry Contracting, Inc.; Berry Contracting, LP d/b/a Bay, Ltd.; and Berry Ranches, LLC, Respondents
• Court: Texas Supreme Court

646 S.W.3d 516

Kenneth L. BERRY, Individually; Kenneth L. Berry, as Trustee of the Berry Dynasty Trust; Kenneth L. Berry, Trustee in a Derivative Capacity for Flying Bull Ranch, Ltd.; and Chelsea Nicole Briers, Petitioners,

v.Dennis W. BERRY; Marvin G. Berry; Allen L. Berry; FB Ranch, LLC; Berry GP, Inc. d/b/a/ Berry Contracting, Inc.; Berry Contracting, LP d/b/a Bay, Ltd.; and Berry Ranches, LLC, Respondents

No. 20-0687

Supreme Court of Texas.

Argued February 24, 2022

OPINION DELIVERED: May 13, 2022

Jason Murray Davis, Joshua J. Caldwell, Santos Vargas, Davis & Santos, P.C., San Antonio, Kyle R. Sears, Kyle R. Sears, Attorney at Law, Houston, for Petitioner Berry, Kenneth L.

Kyle R. Sears, Kyle R. Sears, Attorney at Law, Houston, Robert J. Gonzalez, Gonzalez & Gonzalez, Corpus Christi, for Petitioner Briers, Chelsea Nicole.

Ellen Springer, The Supreme Court of Texas, Austin, Gary E. Ramirez, Ramirez Law Offices, P.C., Corpus Christi, Thomas R. Phillips, Baker Botts L.L.P., Austin, for Respondent Berry Contracting, LP d/b/a Bay, Ltd.

Gary E. Ramirez, Ramirez Law Offices, P.C., Corpus Christi, Joshua R. Flores, Sarah Elizabeth Patel Pacheco, Jackson Walker, LLP, Houston, Thomas R. Phillips, Baker Botts L.L.P., Austin, for Respondents Berry Ranches, LLC, FB Ranch, LLC.

Ellen Springer, The Supreme Court of Texas, Austin, Gary E. Ramirez, Ramirez Law Offices, P.C., Corpus Christi, Thomas R. Phillips, Travis Gray, Baker Botts L.L.P., Austin, for Respondents Berry GP, Inc. d/b/a Berry Contracting, Inc., Berry, Allen L., Berry, Dennis W., Berry, Marvin G.

Justice Blacklock delivered the opinion of the Court.

This is a long-running dispute over the use of a family ranch. The district court rejected all the plaintiffs’ claims on summary judgment. The court of appeals reversed in part, allowing many of the claims to proceed. We conclude that all claims brought by Kenneth Berry were properly rejected by the district court but that Chelsea Berry's claims should have been allowed to proceed. The court of appeals’ judgment is affirmed in part and reversed in part, and the case is remanded to the district court for further proceedings.

I.

A.

Kenneth Berry and his daughter, Chelsea Briers, sued Kenneth's three brothers and several companies controlled by his brothers and their mother. The two sides have quarreled for many years over a family ranch, which Kenneth's parents bought over sixty years ago in the hope that their descendants would enjoy the ranch as a family legacy. The sad history of this family feud follows.

Around 1960, Marvin and Laura Berry purchased a ranch in Real County. They named it Flying Bull Ranch. In 1997, Mr. and Mrs. Berry created Flying Bull Ranch, Ltd. (the Partnership), a Texas limited partnership. They transferred ownership of the Ranch to the Partnership, in which Mr. and Mrs. Berry both owned a 49% interest as limited partners. The remaining 2% was owned by the general partner, FB Ranch, LLC (FB Ranch). Mr. and Mrs. Berry were both managers of FB Ranch. The Berrys had four sons: Kenneth, Dennis, Marvin G., and Allen.

Shortly before Mr. Berry passed away in 1997, the Berrys donated their 98% limited-partner interest in the Partnership to the Berry Dynasty Trust (Trust). The Trust became the sole limited partner. After Mr. Berry's death, Laura Berry became the sole owner and manager of FB Ranch.

Written agreements govern the Partnership and the Trust. Section 1.3 of the Partnership Agreement states that the purpose of the Partnership is "to own and manage" the Ranch "and to engage in farming, ranching and wildlife ... management and in connection with such business to own, develop, and manage the assets of the partnership." Sections 5.1 and 5.4 grant broad powers to FB Ranch, the general partner, to manage the affairs of the Partnership, but the general partner is not permitted to lease the Ranch for a term longer than three years. The Partnership Agreement further provides that the Berrys will not sell the Ranch except to each other, to a trust benefitting the family, or to another entity controlled by the Berrys or their trust. The parties agree that the Berrys considered the Ranch a special place and intended the Ranch to stay in the family.

Section 1.1 of the Trust Agreement states that the Trust is established "for the benefit of our children, Dennis W. Berry, Kenneth L. Berry, Marvin G. Berry, and Allen L. Berry, and their issue. Such children and issue are sometimes referred to hereinafter as the ‘demand beneficiaries’ of the trust." When the Trust was created, Kenneth's daughter Chelsea was alive, and the parties agree she is a demand beneficiary. The Trust Agreement also evidences the Berrys’ desire to keep the Ranch in the family. Section 5.4 states that "[t]he trustees shall be expressly prohibited from consenting to the dissolution of [the Partnership] and from consenting to the sale of the ranch land owned by [the Partnership]."

Mr. Berry started a successful business, which remains in operation and has undergone several changes in corporate structure over the years. Its current form is Berry GP, Inc. d/b/a Berry Contracting, Inc. (Berry Contracting). Two other companies are involved in this case. Berry Contracting, LP, d/b/a Bay, Ltd. (Bay Limited), is a subsidiary of Berry Contracting. Berry Ranches, LLC, (Berry Ranches) is a company owned by Laura Berry.

At the time Mr. Berry died in 1997, his son Kenneth was president of Berry Contracting. After a falling out with his family, Kenneth resigned in 1998. According to the family, the falling out was over Kenneth's attempt to secretly sell off parts of Berry Contracting while his father was dying. In 2000, Kenneth sold his interests in the family's companies to his brothers. Litigation followed. We count at least seventeen lawsuits among Kenneth and his family, including the present suit. In 2005, the family agreed to a global settlement agreement, which contained a mutual release between Kenneth and his family, including their companies. Litigation, however, did not end.

This particular lawsuit arises from the following facts. Berry Contracting used the Ranch for business purposes over the years. It did so pursuant to oral and written lease agreements, and it paid rent to the Partnership, which owns the Ranch. For many years, Berry Contracting paid $40,000 annually to use the Ranch under an oral lease. Charles Vanaman, an attorney for Berry Contracting and other Berry companies, testified that the terms of the lease had not changed since 1989. In addition, since 1996, Berry Ranches paid the Partnership for a grazing and hunting lease on the Ranch.

The parties have very different stories about missing lease payments owed to the Partnership. Vanaman testified that, from 2000 to 2007, Berry Contracting did not make the $40,000 lease payments. Kenneth claimed this was part of a plot by his brothers, who controlled Berry Contracting, to enrich themselves. Kenneth also claimed that Berry Contracting improperly paid Berry Ranches over $600,000 to lease the Ranch. Kenneth claimed these payments should have gone to the Partnership because the Partnership, not Berry Ranches, owns the Ranch and is therefore entitled to receive the lease payments. Laura testified that the payments to the wrong company began in 2000 or 2001. Kenneth contends that this misallocation of lease payments was part of a scheme to direct the payments back to his brothers. The effect of this alleged scheme was to allow the brothers to use the Ranch to benefit themselves and Berry Contracting without paying a fair rent to the Partnership. Kenneth alleges that because the Trust holds a 98% interest in the Partnership, the failure to pay rent to the Partnership reduced the funds that flowed to the Trust, which are held for the benefit of Kenneth, his brothers, and their children.

Kenneth's brothers conceded that lease payments from Berry Contracting should not have been deposited in Berry Ranches’ account. They claimed the checks were made out to "Flying Bull Ranch" and sent to Laura, their mother, who accidentally deposited the payments in the wrong account. They say the error was due partly to a mistake in an organizational chart describing the family's myriad business entities.

In March 2007, Berry Contracting and the Partnership executed a written lease of the Ranch for the first time. The lease was retroactively dated to 2000, and a Memorandum of Lease describing the lease was recorded in the courthouse records in December 2008. The lease had an initial 25-year term, renewable for up to 99 years. Kenneth complains that the lease was "backdated" and provided inadequate compensation for the use of the Ranch. He also complains that the lease violated the Partnership Agreement's ban on leases exceeding three years and that the long duration of the lease was effectively a sale of the Ranch in violation of Section 5.4 of the Trust Agreement. Kenneth claims he did not discover the 2007 written lease until 2015. He claims his co-trustees never disclosed the existence of the written lease prior to his discovery of it.

B.

In 2016, Kenneth and his daughter Chelsea filed this suit. They sued Kenneth's three brothers, as well as FB Ranch, Berry Contracting, Bay Limited, and Berry Ranches. The suit alleges that Berry Contracting did not pay for its use of the Ranch, that payments were wrongfully sent to Berry Ranches, and that the lease's term is impermissibly long. The suit also complains that a $40,000/year lease payment is below market value.

Kenneth alleges claims in three separate capacities: as a beneficiary of the Trust, as a trustee of the Trust, and in a derivative capacity on behalf of the Partnership. Chelsea alleges her claims in her capacity as a Trust beneficiary. The petition asserts breach of fiduciary duty claims seeking damages against the other trustees—brothers Dennis, Marvin G., and Allen. It further alleges that the brothers and the other defendants conspired in, and aided and...