Stacey Taylor Trippet Special Trust v. Blevins

• Decision Date: 14 February 1996
• Docket Number: No. 19276,19276
• Citation: 545 N.W.2d 216,1996 SD 29
• Parties: STACEY TAYLOR TRIPPET SPECIAL TRUST, Terry V. Trippet II Special Trust, and T. Stuart Ducote as Trustee, Plaintiffs and Appellants, v. Bryan BLEVINS, Brian Hagg, Trustee, Ray A. Jilek, Terra Industries, Inc., Black Hills Conference Center, Inc., Defendants and Appellees, and The State of South Dakota, Defendant. . Considered on Briefs
• Court: South Dakota Supreme Court

Page 216

545 N.W.2d 216

1996 SD 29

STACEY TAYLOR TRIPPET SPECIAL TRUST, Terry V. Trippet II Special Trust, and T. Stuart Ducote as Trustee Plaintiffs and Appellants, v. Bryan BLEVINS, Brian Hagg, Trustee, Ray A. Jilek, Terra Industries, Inc., Black Hills Conference Center Inc., Defendants and Appellees and The State of South Dakota, Defendant.

No. 19276.

Supreme Court of South Dakota.

Considered on Briefs Feb. 14, 1996.

Decided March 20, 1996.

Thomas E. Brady, Spearfish, for plaintiffs and appellants.

Courtney R. Clayborne, Johnson Huffman, Rapid City, for appellees, Bryan Blevins, Brian Hagg, Ray A. Jilek, and Terra Industries, Inc.

Jon Mattson, Mattson & Rachetto, Deadwood, for appellee Black Hills Conference Center.

GILBERTSON, Justice

¶1 Trippet Trusts appeals the circuit court's grant of summary judgment concluding Trippet Trusts has no interest in the 16-acre tract of real property at issue. We affirm.

FACTS AND PROCEDURE

¶2 In March 1990, William Martindale acquired through quit-claim and warranty deeds a fee simple interest in a 16-acre tract of real property located in Deadwood, SD. Martindale recorded both deeds in the Lawrence County Register of Deeds Office on April 3 and April 6, 1990, respectively.

¶3 On April 2, 1990, Martindale entered into an agreement entitled "Acquisition and Development Agreement" (Agreement) with Terry Trippet, Linda Benson and two South Dakota corporations. Trippet, Benson, and the two corporations are referred to collectively in the Agreement as the "Trippet Group." The Agreement was recorded in the Lawrence County Register of Deeds Office on April 25, 1990. Because the language of this Agreement defines the interests of its signatories and controls the outcome of this appeal, it will be set forth in its entirety:

This letter agreement (the "Agreement") shall serve to set forth the terms and conditions of our agreement to acquire, develop and operate certain real property and improvements commonly known as the 16 Acre Tract located in Deadwood, Lawrence County, South Dakota (the "Property"). For and in consideration of the mutual covenants hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. On March 30, 1990, Martindale acquired the Property consisting of approximately 16 acres, more or less, located in Deadwood, South Dakota (the "16 Acre Tract"). The 16 Acre Tract is more particularly described on Exhibit "A" attached hereto and incorporated herein for all purposes.

Simultaneously with the execution of this Agreement, the parties agree to form a South Dakota corporation to be utilized to conduct operations at the Property. (The "16 Acre Tract Operating Entity"). The Big A Auto Parts Operating Entity shall develop and operate the Property in accordance with a development plan to be mutually agreed to by the parties in writing.

2. Martindale shall own 33.33% of the issued and outstanding shares of stock of the 16 Acre Tract Operating Entity and the Trippet Group shall own 66.67% of the issued and outstanding shares of stock of the 16 Acre Tract Operating Entity. Martindale, Benson and Trippet shall be the initial members of the board of directors of the 16 Acre Tract Operating Entity. All decision making power of the 16 Acre Tract Operating Entity shall be vested in its board of directors. Upon formation of the 16 Acre Tract Operating Entity, the parties agree to file any and all appropriate documentation with the Internal Revenue Service necessary for the 16 Acre Tract Operating Entity to elect "S Corp" status under Section 1361 et seq. of the Internal Revenue Code of 1986, as amended.

3. Martindale shall be responsible for the payment of all costs and expenses necessary to acquire, develop and maintain the Property, including, without limitation, payment of the cash portion of the purchase price and all debt service payments due pursuant to the Purchase Agreement. In addition, Martindale agrees to pay the Trippet Group a developer fee in the amount of $50,000.00 (the "16 Acre Tract Developer Fee"). Fifty percent (50%) of the 16 Acre Tract Developer Fee shall be due and payable on the date the parties mutually agree to commence development of the Property. The balance of the 16 Acre Tract Developer Fee shall be due and payable by Martindale at the time of the initial distribution of Net Revenue (as hereinafter defined) generated from the Property (all costs and expenses paid by Martindale in order to acquire, develop and maintain the Property, including, without limitation, the 16 Acre Tract Developer Fee, are hereinafter collectively referred to as the "16 Acre Tract Development Costs"). In no event shall Martindale's obligation to pay the 16 Acre Tract Development Costs exceed the amount agreed to by the parties pursuant to the development plan described above. Until such time as Martindale has recovered 150% of the 16 Acre Tract Development Costs, Martindale shall be entitled to receive 66.67% of the Net Revenue generated from the Property, and the Trippet Group shall be entitled to 33.33% of the Net Revenue generated from the Property. At the time Martindale has recovered 150% of the 16 Acre Tract Development Costs, Martindale shall be entitled to receive 33.33% of the Net Revenue generated from the Property and the Trippet Group shall be entitled to receive 66.67% of the Net Revenue generated from the Property. In addition, at the time Martindale has been released from all personal liability arising out of obligations incurred by Martindale pursuant to the acquisition of the Property, Martindale shall assign, transfer and convey all of his right, title and interest in and to the Property to the 16 Acre Tract Operating Entity. In connection therewith, Martindale agrees to execute any and all documentation reasonably requested by representatives of the 16 Acre Tract Operating Entity to effectuate the transfer and assignment of the Property. All costs incurred in the transfer of the Property shall be paid by the Big A Auto Parts Operating Entity.

4. Notwithstanding the terms and conditions of Section 2 above to the contrary, until such time as Martindale has recovered 150% of the 16 Acre Tract Development Costs (a) all decisions by the board of directors of the 16 Acre Tract Operating Entity (to include all development, operating and budgeting decisions) shall require the unanimous written consent of all of the members of the board of directors and (b) all shares of stock of the 16 Acre Tract Operating Entity issued to the Trippet Group shall be pledged to Martindale to secure repayment of the 16 Acre Tract Development Costs paid by Martindale. In connection therewith, the Trippet Group agrees to execute any and all documentation reasonably requested by Martindale to effectuate the pledge of the Trippet Group shares of stock to Martindale.

5. For purposes of this Agreement, the term "Net Revenue" shall include one or any combination of the following: (a) Net Operating Income; and/or, (b) Net Sales Proceeds.

"Net Operating Income", for any period, shall mean all Gross Receipts less Expenses. Gross Receipts shall mean the gross revenues generated at the Property from all sources, including, without limitation, all rentals, gaming revenue, fees, payments, reimbursements (including all reimbursements by tenants, lessees, licensees and other users of the Property or from rental interruption or similar insurance other than casualty insurance), income or interest. Expenses shall mean the total bona fide and normal operating business expenditures incurred to generate Gross Receipts including (i) insurance premiums for insurance carried in connection with, and applicable to the Property; (ii) real estate taxes; (iii) operating, marketing, cleaning and repair of the Property which are in the nature of items properly chargeable against income according to generally accepted accounting principles, including wages and payroll costs, maintenance costs, costs of services, water and sewer charges and assessments, license fees and business taxes; (iv) regularly scheduled payments actually made on any indebtedness encumbering the Property and (v) legal fees. Notwithstanding any of the foregoing, Expenses shall not include any income taxation, depreciation, or other non-cash deductions of the 16 Acre Tract Operating Entity for federal income tax purposes.

The term "Net Sales Proceeds" shall mean the following: (1) with respect to a sale, transfer, assignment or conveyance of any legal, equitable or beneficial interest in all or any portion of the Property the amount by which (A) the total purchase price paid to the parties by any purchaser for the Property or any portion thereof, exceeds (B) the sum of (i) any reasonable and customary closing costs pertaining to such sale; (ii) any reasonable real estate commissions or brokers fees; and (iii) the outstanding principal balance of any loan encumbering the Property or any portion thereof. (2) With respect to a refinancing of all or any portion of the Property by placing a lien thereon (a "Refinancing"), the gross proceeds of such Refinancing, less the following: (i) reasonable fees, including commitment fees, brokerage fees and finance charges, paid by the 16 Acre Tract Operating Entity or the parties or disbursed out of the proceeds of such refinancing in connection with the Refinancing; (ii) reasonable closing costs paid by the 16 Acre Tract Operating Entity or the parties, including escrow fees, recording fees, attorney fees, title insurance premiums and surveyors' fees; (iii) the outstanding principal balance of any indebtedness due on the Property or on any portion thereof, together with accrued but unpaid interest thereon; and (iv) any reasonable out-of-pocket expenses incurred by the 16 Acre Tract Operating Entity or the parties. (3) With respect to an exchange of all or any portion of the...