Sea-Hubbert Farms, L.L.C. v. Hubbert

Decision Date30 April 2013
Docket NumberNo. A-12-023,No. A-12-022,A-12-022,A-12-023
PartiesSEA-HUBBERT FARMS, L.L.C., BY AND THROUGH CLARICE BOSTON, MEMBER, APPELLANT, v. KENT C. HUBBERT, APPELLEE. JOHN BOSTON AND CLARICE BOSTON, APPELLANTS, v. KENT HUBBERT AND W & V HUBBERT FARMS LIMITED PARTNERSHIP, APPELLEES.
CourtNebraska Court of Appeals

SEA-HUBBERT FARMS, L.L.C., BY AND THROUGH CLARICE BOSTON, MEMBER, APPELLANT,
v.
KENT C. HUBBERT, APPELLEE.

JOHN BOSTON AND CLARICE BOSTON, APPELLANTS,
v.
KENT HUBBERT AND W & V HUBBERT FARMS LIMITED PARTNERSHIP, APPELLEES.

No. A-12-022
No. A-12-023

NEBRASKA COURT OF APPEALS

Filed: April 30, 2013


MEMORANDUM OPINION AND JUDGMENT ON APPEAL

NOTICE: THIS OPINION IS NOT DESIGNATED FOR PERMANENT PUBLICATION
AND MAY NOT BE CITED EXCEPT AS PROVIDED BY NEB. CT. R. APP. P. § 2-102(E).

Appeal from the District Court for Buffalo County: JOHN P. ICENOGLE, Judge. Affirmed.

Siegfried H. Brauer, of Brauer Law Office, for appellants.

Bradley D. Holbrook and Justin R. Herrmann, of Jacobsen, Orr, Lindstrom & Holbrook, P.C., L.L.O., for appellees.

INBODY, Chief Judge, and SIEVERS and RIEDMANN, Judges.

SIEVERS, Judge.

INTRODUCTION

This is the consolidated appeal in two cases from the district court for Buffalo County, Nebraska, which centers around whether the parties to this protracted and complicated litigation entered into a binding settlement agreement. The trial judge found that they did agree to a settlement, and in his journal entry, he set forth five specific things that the parties had to do to complete the agreement that the court found they had made. The appellants claim that the parties never reached an agreement because they never agreed on a "tax avoidance plan" with respect to the transfer of property and the payment of $514,000 to Clarice Boston.

Page 2

BACKGROUND

Wallace and Valjean Hubbert had three sons, Kent, Kevin, and Keith Hubbert, and one daughter, Clarice. Clarice is now married to John Boston. Clarice and her three brothers are each 25-percent owners of Sea-Hubbert Farms, L.L.C. (SHF). Kent is the managing partner and Clarice is the secretary/treasurer of SHF. The Bostons and the three Hubbert brothers are the owners of JCK Farms, L.L.C. (JCK), with the Bostons having the controlling interest. Also involved in the litigation to a lesser degree is W & v Hubbert Farms Limited Partnership (W&V). These entities are all involved in farming, and the entities, in some instances, farm adjoining land to one another.

On February 22, 1996, the Bostons purchased slightly less than an acre of land with a residence on it from W&V for the sum of $62,800. Included in the written agreement for the purchase was a grant of an easement to the Bostons over and across W&v land for the purpose of maintenance and repair of "the well, the septic tank, and the electric meter." The agreement provides that expenses for the maintenance and repair of this well, located on W&V land, would be split "60/40" between the seller and buyer, respectively. This property became the Bostons' home. Clarice testified that they had unlimited access to the well water for residential use in their home, plus they had paid the electrical costs associated with operation of the well. The well also supplied water to W&V farm ground and to JCK farm ground. With this basic background, we turn to the history of this litigation.

The first of three lawsuits filed in the district court for Buffalo County involving some of the parties and the entities we have mentioned above was filed March 20, 2008. This case was entitled "Sea-Hubbert Farms, L.L.C., by and through Clarice Boston v. Kent C. Hubbert" and designated as "CI-08-192" in the district court. The suit sought an accounting and damages from Kent, the managing partner of SHF.

The second case was filed September 15, 2008, and it was entitled "Sea-Hubbert Farms, L.L.C. v. Clarice Boston and John Boston and JCK, L.L.C.," and designated as "CI-08-643" in the district court. This case alleged that SHF's farm ground had been irrigated by a well located on JCK property but that access to such water was cut off in May 2008 by the Bostons, creating the need for SHF to purchase and sink a new well for irrigation purposes, which SHF wanted the Bostons and JCK to pay for, plus damages were sought for reduced crop yield.

The third case was filed on October 8, 2008, and captioned "Complaint for Temporary Restraining Order, Temporary and Permanent Injunctions." This case was entitled "John Boston and Clarice Boston v. Kent Hubbert and W & V Hubbert Farms Limited Partnership" and designated as "CI-08-715" in the district court. The Bostons alleged that the well discussed above was the only source of water for their home, that Kent had threatened to deny them access to water from the well, and that their purchase agreement gave them a right to such water. The Bostons asked for a temporary restraining order preventing Kent and W&V from depriving them of water from the well. Attached to the complaint was a letter from Kent, the general partner of W&V, dated September 17, 2008, which, among other things, advised the Bostons to stay off of W&V land and stated W&V would cease providing water to their home within 30 days. On October 10, the district court granted the temporary restraining order stopping any threatened termination of the Bostons' water supply from the W&V well and set a hearing for a later date.

Page 3

The injunction remained in effect, and on December 23, a hearing was held in the district court for the purpose of setting a bond, which the court set at $500.

In all three cases, there were answers, motions, and discovery filed and discovery conducted, which in part make up our transcripts of approximately 500 pages. However, we need not detail that activity because there is no dispute that in October 2010, the parties and their counsel turned from litigation of these cases to a clearly serious effort to settle all three of the cases on the eve of trial. What the parties did in that effort will be discussed in appropriate detail in our analysis section. For purposes of "setting the stage," we believe a fair summary of the desired end result for all parties involved in those cases was that there would be a complete severance of the Bostons from SHF, from W&V, and apparently from the three Hubbert brothers as well. And at the same time, there was to be a severance of the interests of the Hubbert brothers and SHF from JCK. The end result was to be that (1) the Hubbert brothers would own SHF and W&V, (2) the Bostons would own JCK, and (3) Clarice would be paid $514,000. Whether those settlement efforts produced a binding and enforceable settlement agreement is the fundamental question before us.

District Court Decisions.

By motions filed in each of the three cases by Kent, or entities that he managed, the district court was asked to enforce the settlement agreement against the Bostons and JCK that Kent alleged had been made on October 11, 2010. The parties and their counsel appeared before the district court on March 8, 2011, for a hearing on the motions for enforcement of the alleged settlement agreement. The trial judge stated that all three cases we have detailed above were before him that day. In simple terms, SHF, W&V, and Kent alleged that the parties had settled all three cases by agreeing that the Bostons would give up any and all interest in SHF and W&V, in exchange for two things: (1) that the Bostons would become the sole owners of JCK and (2) that the Bostons would be paid $514,000. On the other hand, the Bostons claimed that there was only a proposed settlement agreement and that Kent had never agreed to a key element the Bostons required, and thus, there was never an agreement. From the vantage point of the Bostons, this key element, upon which they claim there was never an agreement, was that the mutual transfer of the interests in the involved entities as well as the payment to them of $514,000 would be done in the most advantageous way for them from a tax standpoint in accordance with a tax avoidance or minimization plan developed by their accountant, Michael Main. According to Main's testimony at this hearing, his "plan" was that (1) the Bostons would divest themselves of all ownership rights in SHF and W&V and (2) there would be established an "escrow account" of $514,000 funded by SHF and W&V which would be accessible only by the Bostons for the sole purpose of the Bostons purchasing farm ground, but that Clarice would have to retain some equity interest in SHF to access the escrow account in order for the plan to work. An accountant for SHF testified that he had discussed Main's plan with Main and that in the accountant's opinion, regardless of the contents of documents that might be drafted to portray this as something besides a buyout of the Bostons' interest in SHF, the Internal Revenue Service would simply treat it as a sale and tax any amount over Clarice's basis in the partnerships as capital gain. The evidence suggests that the tax consequence could be in the neighborhood of $50,000.

Page 4

After this brief trial on March 8, 2011, at which three accountants and Kent testified and numerous documents were placed in evidence, the district court rendered a decision on October 6 in the case entitled "Sea-Hubbert Farms, L.L.C., by and through Clarice Boston v. Kent C. Hubbert" and designated as "CI-08-192." Among the key factual findings of the trial judge was that the parties participated in an effort to settle this case, as well as the other two pending lawsuits. The court found that the Bostons' counsel, Sieg Brauer, drafted a compromise and settlement agreement and forwarded it on October 7 to Bradley Holbrook, counsel for SHF and Kent (who apparently had authority from the other two Hubbert brothers, and thus, generally hereafter, we will use the term...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT