Brooks v. Willhite (In re Cook)
| Decision Date | 06 May 2020 |
| Docket Number | No. CV-18-1033,CV-18-1033 |
| Citation | 2020 Ark. App. 292,601 S.W.3d 453 |
| Parties | In the MATTER OF the ESTATE OF Charles E. COOK, Deceased Jared Brooks and Charlotte Smith, Appellants v. Amy Willhite and the Estate of Charles E. Cook, Appellees |
| Court | Arkansas Court of Appeals |
Taylor & Taylor Law Firm, P.A., by: Andrew M. Taylor, Tasha C. Taylor, Little Rock, and Jennifer Williams Flinn, for appellants.
Snellgrove, Langley, Culpepper, Williams & Mullally, Jonesboro, by: Todd Williams, for separate appellee Amy Willhite.
Sloan Law Firm, by: D. Clay Sloan, Walnut Ridge, for separate appellee Estate of Charles Cook.
Appellants Jared Brooks and Charlotte Smith appeal from the Lawrence County Circuit Court's order finding that an LLC operating agreement between Brooks and Charles Cook, deceased, lacked sufficient consideration to transfer Cook's LLC interest to Brooks without paying a buyout to Cook's estate. Brooks and Smith also appeal from the circuit court's order confirming jurisdiction. Finding no error in the circuit court's determination of its jurisdiction, we reverse and remand the order determining Cook's LLC interest to be an asset of his estate.
Charles Cook died on April 23, 2017. At the time of his death, he had three surviving children: Charlotte Smith (Brooks's mother), Crista Bowker, and Amy Willhite. Also at the time of his death, Cook had a 50 percent interest in Cook's Towing and Recovery, LLC. In December 2014, Cook and his grandson Brooks created the LLC pursuant to a seven-page operating agreement that was filed with the Arkansas Secretary of State on December 23, 2014. Brooks and Cook, as the only members, each owned a 50 percent interest in the LLC. A provision in the operating agreement provided that upon the death, incompetency, or bankruptcy of either member, that member's ownership, interest, and income from the LLC would immediately transfer to the surviving member, without any buy-out required. It also stated that a member could sell or transfer his interest with the consent of the other member but granted a right of first refusal.
On May 3, 2017, Brooks filed a petition to open the estate and for the appointment of a personal representative. The petition listed Brooks and Cook's three daughters as surviving heirs and devisees pursuant to a purported holographic will, which Brooks alleged to be Cook's last will and testament. On August 21, the circuit court entered an order appointing Brooks personal representative and finding that the holographic will was not valid. Based on this finding, the court ordered that the assets of Cook's estate pass by intestate succession to his three daughters.
On January 29, 2018, Brooks petitioned the court to admit two documents purported to be holographic wills found in Cook's safe. He also petitioned to be released as personal representative because he was listed as a beneficiary in the purported wills. The court released him as personal representative and appointed D. Clay Sloan for the position. The court also appointed Sloan to serve as the estate's legal counsel. On April 9, after a hearing, the court entered an order disallowing the admission of the holographic wills because the documents lacked clarity and the necessary testamentary intent.
Meanwhile, in November 2017, Willhite had filed a motion to determine that Cook's interest in Cook's Towing and Recovery be considered an asset of the estate and did not pass automatically to Brooks. At the April 9 hearing, the court directed the parties to submit briefs on this issue. Brooks's brief first asserted that the probate court lacked jurisdiction to address the matter because the dispute concerned property rights and did not involve a beneficiary or personal representative of the decedent's estate. He also asserted, among other things, that the operating agreement is an independent, valid, and binding contract that clearly stated the intent of the decedent to have his interest in the LLC transfer upon his death to the surviving member. Charlotte Smith filed a statement that she had no objection to the LLC being vested completely in Brooks.
Willhite's trial brief noted that the assets of the LLC include vehicles used in the towing business as well as Cook's personal residence. She attacked the validity of the creation of the LLC, arguing there is no valid business reason for Cook to have transferred his personal residence to the LLC. She further argued that there are no dates on the pages of the agreement, no page numbers, no initials of the signatories on each page, and no verification by a witness or notary. Thus, she claimed there is no proof that Cook agreed to the language transferring his interest to Brooks. Lastly, she claimed the transfer-upon-death provision in the operating agreement is an attempt to accomplish a testamentary disposition in an unverified and unwitnessed contract.
On August 31, the circuit court entered two orders regarding its determination on jurisdiction and the transfer of the LLC interest. First, the court found that it had jurisdiction over the parties and issues presented. It noted that Brooks was a party to the case since it had been opened and that he had been actively involved in actions taken on behalf of the estate until Sloan replaced him as personal representative. It further noted that Brooks only identified himself as a "stranger" to the case after the court issued a decision as to the ownership of the LLC interest by the estate.
Concerning the ownership of the LLC interest, the court's order directed that Cook's 50 percent interest in the LLC be considered an asset of his estate. The order found that the transfer of Cook's interest by virtue of the operating agreement was contractual in nature and not a testamentary transfer; however, the court found the contract failed due to lack of consideration. Because the transfer provision lacked consideration, the court severed the transfer provision from the remainder of the operating agreement per the severability clause in the agreement. The order further found that Brooks had a contractual right under the LLC agreement to purchase Cook's interest from the estate as if Cook were selling his interest to a third party under the right of first refusal clause. Brooks and Smith (collectively referred to as "appellants") now timely appeal.
We will address the appellants’ arguments out of order. Even though the appellants first contend that the circuit court erred in finding that the operating agreement did not transfer Cook's interest in the LLC to Brooks upon Cook's death, because they also allege a jurisdictional issue, we will discuss the jurisdictional issue first.
The appellants contend that the circuit court did not have jurisdiction to determine the ownership of the LLC because Brooks and the LLC are strangers to the estate. This court has defined a "stranger" to the estate as one who is not an heir, distributee, or devisee of the decedent, or a beneficiary of or claimant against the decedent's estate. Smith v. Smith , ...
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