Bennett v. Bennett, 2022 NCBC 15.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION FORSYTH COUNTY 18 CVS 48
BERT L. BENNETT III, individually and on behalf of BENNETT LINVILLE FARM LLC,
Plaintiff,
v.
GRAHAM F. BENNETT; ANN BENNETT-PHILLIPS; JAMES H. FINDINGS OF FACT, CONCLUSIONS BENNETT; LOUISE BENNETT; and OF LAW, AND PARTIAL JUDGMENT BENNETT LINVILLE FARM, LLC, (STAGE 1 ISSUES) Defendants,
and
JOHN J. BENNETT and JEANNE R. BENNETT,
Nominal Defendants.
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.
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.
Earp, Judge.
I. INTRODUCTION
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.
II. PROCEDURAL HISTORY
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
1 Joint Exhibit 107 was referenced throughout the trial and is an authentic photocopy of the
original 2010 Amendment, Joint Exhibit 107A.
2 Prior to the third amendment, the Court dismissed with prejudice: (i) Plaintiff’s second
cause of action for breach of fiduciary duty against Graham, Ann, and Jim; (ii) Plaintiff’s seventh cause of action for constructive fraud against Graham, Ann, and Jim; and (iii) Plaintiff’s sixth cause of action for civil conspiracy to the extent it was based on the breach of fiduciary duty claim. See Bennett v. Bennett, 2019 NCBC LEXIS 19, at *35–36 (N.C. Super. Ct. Mar. 15, 2019). 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
3 Defendants’ Motion for Summary Judgment was granted in part and denied in part. The Court dismissed the following claims: (a) Plaintiff’s claim for declaratory judgment to the extent that it is based on the declarations requested in subparagraphs 82(b), 82(c), 82(e), 82(f), and (b) Plaintiff’s derivative claim for breach of fiduciary duty. Given the Court’s ruling, the parties stipulated that nominal defendants John J. and Jeanne R. Bennett are not necessary or proper parties. (ECF No. 139.)
4 Louise Bennett (“Louise”), another Bennett sibling and originally a defendant in this case,
filed her Answer to Plaintiff’s Third Amended Complaint on 13 September 2019, (ECF No. 94), and her Motion for Summary Judgment on 1 December 2019, (ECF No. 98). Plaintiff has since voluntarily dismissed his action as to Louise on 7 February 2022. (ECF No. 134.) 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:
a. Is the 2010 Amended and Restated Operating Agreement valid and
binding on BLF and its members?
b. How many managers does BLF have? Is Jim Bennett a manager?
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. III. FINDINGS OF FACT 5
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.)
The Avery County Property
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
5 Any determination later stated as a Conclusion of Law that should have been stated as a
finding of fact is incorporated in these Findings of Fact. Citations to the record herein are not exhaustive and do not necessarily reflect all evidence upon which corresponding findings of fact are based. 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.)
The 2001 Deed to John
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.)
6 The Bennett siblings, in birth order, are as follows: Bert, Graham, Joy, John, Louise, Terry,
Ann, and Jim. Joy died in 2001. (Tr. I 42:18, 55:3.) 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 Craver to draft a deed
which he presented to his remaining children and told them to sign. (Jt. Ex. 1.)
23. The family had a “tradition” of signing documents that required all of
their signatures at holiday gatherings, typically Thanksgiving or Christmas, when
they were all present. (See, e.g., Tr. I 93:4–7; Tr. II 239:3–5, 273:20–74:4.)
24. In 2001, Bert believed the Avery County property belonged to his father,
and he signed the deed at a family gathering without reviewing or questioning it
simply because his father asked him to sign it. (Tr. I 80:11–82:15.)
The 2007 Operating Agreement
25. In 2006, Father Bennett and Craver engaged in discussions regarding
the formation of an LLC to hold the Avery County property. Craver advised Father
Bennett that such an arrangement would be beneficial to reduce the risk of individual
liability, centralize management, and facilitate estate planning. (Tr. I 168:9–69:3;
see Tr. II 233:24–34:5.)
26. Acting on this advice, Father Bennett directed that an LLC be formed,
that the LLC be manager-managed, and that Graham and Ann be named as its
managers. (Tr. I 170:1–14 (Craver testifying that based on Father Bennett’s business
experience, he “thought that a manager managed would be more effective than trying
to get everybody to agree to everything each time”); 171:8–19 (Father Bennett chose Graham as manager because he “had all the confidence in the world” in him and in
Ann “as backup”).)
27. Craver drafted BLF’s Articles of Organization and its original operating
agreement (the “2007 Operating Agreement”) to reflect Father Bennett’s wishes. (Jt.
Ex. 6; Tr. I 171:20–72:13.)
28. The Articles of Organization were filed on 18 January 2007 and specify
that BLF is to be “manager-managed.” (Jt. Ex. 5.)
29. Schedule I to the 2007 Operating Agreement identifies the original
members as follows: Father Bennett and Mother Bennett, each owning a twenty-
three percent interest; and siblings Graham, Ann, Jim, Bert, Louise, and Terry, 7 each
owning a nine percent interest. 8 (Jt. Ex. 6, at Sch. I.)
30. Section 2.4 of the 2007 Operating Agreement states, “There shall
initially be two (2) Managers of the Company” and identifies Graham and Ann as
BLF’s initial managers by reference to Schedule II, in which both of their names are
listed. (Jt. Ex. 6, at § 2.4 & Sch. II.)
31. Bert admits that Graham and Ann are managers of BLF. (Tr. I 95:13–
18.)
32. None of the children, including Bert, Graham, Ann or Jim, participated
in any discussions with their Father or Craver with respect to the formation of the
7 Terry Bennett, a Bennett sibling and former plaintiff, dismissed her claims against all other
parties and is therefore no longer a party in this case. (ECF No. 67.)
8 Having received his approximately thirty-five acres in 2001, John was not a party to the 2007 Operating Agreement. LLC or the content of the 2007 Operating Agreement. There was no negotiation.
Father Bennett told Craver what he wanted, and Craver documented it. (Tr. I
172:14–24.) According to Craver, “[i]t’s more or less a formation that [Father]
Bennett desired. . . . So, no, there was no haggling back and forth.” (Tr. I 172:21–
24.)
33. As was their tradition, the Bennett family members circulated signature
pages for the 2007 Operating Agreement at a holiday gathering. It is undisputed that
each of the signatures on the 2007 Operating Agreement is authentic.
34. It is further undisputed that neither Bert, nor his siblings Graham, Ann,
Jim, or Louise believed it was necessary to request to read the 2007 Operating
Agreement prior to signing it. None of them questioned their father about his
decision to form the LLC or any of the terms of the agreement. All of them signed
the 2007 Operating Agreement intending to be bound—regardless of what it said—
because it was what their father wanted, they considered the Avery County property
his, and they both trusted and respected his decisions regarding it. (See, e.g., Tr. I
93:16–94:20; Tr. II 274:7–16.)
35. The 2007 Operating Agreement went into effect on 1 February 2007.
(See Jt. Ex. 6, at Def02104–07.) On 8 February 2007, Craver filed a deed in which
each of the members transferred his or her interest in the Avery County property to
BLF. (Deed Dated February 1, 2007, Jt. Ex. 4.)
36. The 2007 Operating Agreement states that the purpose of the LLC is “to
continue the farming operation of its Members . . . and to engage in any other lawful purposes[.]” (Jt. Ex. 6, at § 1.8.) To date, the LLC has functioned primarily to hold
the family property and has not operated for profit.
37. The 2007 Operating Agreement permits amendment only through a
writing approved by the members holding a majority of the membership interest. (Jt.
Ex. 6, at § 11.5 (“This Agreement . . . may only be amended or modified by a writing
executed and delivered by the Members owning a Majority in Interest.”); see also Jt.
Ex. 6, at § 2.2 (“The following actions may not be taken by the Managers without
approval of a Majority in Interest of the Members: (a) the amendment of this
Agreement[.]”).)
38. The 2007 Operating Agreement permits BLF’s members to consent to
action without a meeting: “Any action that is to be taken at a meeting of the Members
may be taken without a meeting by written consent signed by the number of Members
that would be necessary to take the action at a meeting at which all Members entitled
to vote were present and voted.” (See Jt. Ex. 6, at § 5.6(c).) Citing this provision,
Craver testified that a meeting was not necessary to elect Jim as a manager and that
the 2010 Amendment served as written consent to the action. (Tr. I 191:24–92:19,
197:6–200:18; see Jt. Ex. 6, at § 11.5.)
The 2010 Amendment
39. In 2010, while discussing amendments to the operating agreement of
another business with Craver, Father Bennett asked whether BLF’s operating
agreement would benefit from some of the same changes. In particular, Father Bennett wanted to make transfers between family members easier and, as Craver
testified, without “a whole lot of hoopla[.]” (Tr. I 177:11–21).
40. Craver agreed that BLF would benefit from such a change and
suggested that Father Bennett, who had always funded BLF’s operations entirely
himself, also consider changes to the operating agreement to permit mandatory
capital calls by the mangers so that the “second generation owners,” his children,
would have a fair mechanism to fund BLF themselves. Correspondingly, Craver
suggested that the operating agreement allow for redemption in the event a member
did not contribute the required capital. (Tr. I 177:11–78:13.)
41. Father Bennett agreed with Craver and directed him to make the
changes discussed. At the same time, Father Bennett, concerned that both Graham
and Ann were busy in their professional lives, directed Craver to add Jim as a third
manager of BLF. (Tr. I 182:2–8).
42. In response to Father Bennett’s instructions, Craver drafted a document
he entitled, “2010 Amended and Restated Operating Agreement of Bennett Linville
Farm, LLC” (the “2010 Amendment”). Craver intended for the 2010 Amendment to
clearly reflect Father Bennett’s changes to: (i) expand the number of managers from
two to three, adding Jim as a manager, (ii) provide for mandatory contributions to
capital subject to the approval of a majority of the managers, (iii) grant BLF an option
to redeem a member’s interest under certain conditions; and (iv) change transfer
restrictions to (among other things) permit transfers by a member to the member’s
family for estate and gift tax planning purposes. (Tr. I 177:5–78:21.) 43. As with the 2007 Operating Agreement, the parties to this action were
not involved in drafting the 2010 Amendment, and there were no negotiations
regarding its contents. Father Bennett decided what the terms would be, and Craver
documented Father Bennett’s decision. (Tr. I 180:5–9.)
44. During discovery in this action, two versions of the 2010 Amendment
were produced, each bearing identical signature pages with the same footer. 9
(Compare Jt. Ex. 9, with Jt. Exs. 8, 107. 10) In all respects, the content of the two
versions is the same except that Section 2.4 of one version repeats the language of
the 2007 Operating Agreement that there “shall initially be two (2) Managers of the
Company.” (Jt. Ex. 9, at § 2.4 (emphasis added).) In Section 2.4 of the other version
the language changes to “[t]here shall be three (3) Managers of the Company.” (Jt.
Exs. 8 & 107, at § 2.4.) In addition, in the “three-manager” version, the body of the
9 The footer on the signature pages in both versions of the document is C:\Documents and
Settings\graham\Local Settings\Temporary Internet Files\OLK142\00007853.DOC. Although Graham was unsure whether this footer is used by Quality Oil, where he is Chief Executive Officer, Graham testified that it does indeed contain his name. (Tr. II 260:18–22, 261:16–20.) In Joint Exhibit 9, the version of the 2010 Amendment in which section 2.4 states that there “shall initially be two (2) Managers[,]” this footer appears consistently throughout the document—although some pages contain “Brenda,” the name of Graham and Father Bennett’s assistant at Quality Oil. (Tr. II 262:11–21.) However, in Trial Exhibit 8, the version of the 2010 Amendment in which section 2.4 states that there “shall be three (3) Managers[,]” this footer appears only on the signature pages. A different footer, beginning M:\Worldox\0129 appears on each page of the body of the document. Craver testified that the “Worldox” footer was used by Craver’s law firm. (Tr. I 157:4–11.)
10 Exhibit 107A, Exhibit 107, and Exhibit 8 are the same document in all material respects.
Exhibit 107A is the original from Craver’s file and contains the firm’s footer (“ECV”) as well as Craver’s handwritten notations. Exhibit 107 is an exact duplicate of this original and was produced by Craver in response to Plaintiff’s subpoena. The content of Exhibit 8, which was produced in discovery, is the same as the content of Exhibit 107 and Exhibit 107A but it does not contain Craver’s handwritten notations. The documents are identical in every other respect. document bears a footer from Craver’s office that is different from the footer on the
signature pages.
45. Regardless of these differences, both versions provide that “Schedule II
shall be amended upon any change of Managers[,]” (Jt. Exs. 8–9, 107, at § 2.4), both
define “Manager” as “those individuals set forth in Schedule II hereto[,]” (Jt. Exs. 8–
9, 107, at § 12.1(p)), and Schedule II, attached to each version, lists the same three
managers: Graham, Ann, and Jim, just as Father Bennett instructed. (Jt. Exs. 8–9,
107, at Sch. II.)
46. It is undisputed that on or about 6 October 2010, Craver’s assistant,
Marie Davis, forwarded a draft of the 2010 Amendment to Graham to deliver to his
father, who did not have an e-mail account. (Jt. Ex. 7; Tr. I 180:18–21, 182:23–83:2.)
47. Although the e-mail transmitting the draft specifically referred to the
addition of Jim as a manager and Schedule II of the draft reflected all three
managers: Graham, Ann and Jim, Section 2.4 of the draft retained the language from
the 2007 operating agreement providing that there “shall initially be two (2)
Managers of the Company.” (Jt. Ex. 9, at § 2.4.)
48. Sometime after the draft was emailed to Graham, Craver decided to
change the language of Section 2.4 in the document from “shall initially be two (2)
managers” to “shall be three (3) managers” to be consistent with Schedule II. (See Jt.
Ex. 8.)
49. Because the language of Section 2.4 specifies that the number and
identity of the managers is controlled by Schedule II, and because the Schedule II attached to the October 6 draft identified all three managers including Jim, Craver
considered his later fine-tuning of the text in section 2.4 from “shall initially be two
(2) managers” to “shall be three (3) managers” to be superfluous. (Tr. I 196:21–25
(Craver testimony: “Section 2.4 has different verbiage meaning the same thing that
there are three managers as specified on schedule 2. One says initially there were
two managers but the managers set forth on schedule 2 and there were three people
stated.”).)
50. Both versions of the 2010 Amendment authorize, among other things,
managers to make capital calls without member consent (“Members shall make
additional Capital Contributions to the Company as determined by a majority of the
Managers.”). (Jt. Exs. 8–9, 107, at § 7.2.) Additionally, both versions of the 2010
Amendment contain the same language permitting transfers by a member to the
member’s family for estate and gift tax planning purposes, (Jt. Exs. 8–9, 107, at § 9.2),
and granting BLF an option to redeem a member’s interest under certain conditions,
(Jt. Exs. 8–9, 107, at § 9.6). These substantive changes to the original 2007 Operating
Agreement are described in an introductory clause that is identical in both versions:
“WHEREAS, the Members desire to provide for mandatory contributions to capital,
permit certain transfers to family members, and grant Company an option to redeem
a Member’s Membership Interest under certain conditions[.]” (Jt. Ex. 8, at Def01216;
Jt. Ex. 9, at Def01382; Jt. Ex. 107, at ECV00005.)
51. Craver has no document reflecting a transmittal of the 2010
Amendment after he edited Section 2.4 and he cannot recall when or how the final version of the 2010 Amendment was sent to the Bennett family for signature.
However, he testified that the final version was sent. (Tr. I 195:12–14.)
52. As the attorney for both Quality Oil and Father Bennett personally,
Craver testified that he frequently visited and hand-delivered documents to Father
Bennett in his office at Quality Oil. (Tr. I 183:15–19.)
53. The greater weight of the evidence establishes that, after October 6,
Craver and Father Bennett reviewed the 2010 Amendment that is now Joint Exhibit
107, Father Bennett was satisfied that Craver had drafted the amendment Father
Bennett intended, and Joint Exhibit 107 is the final version of that 2010 Amendment.
54. Craver further testified that the signed original copy of the 2010
amendment that he retained in his file, a true copy of which is Joint Exhibit 107,
corresponded exactly to what he sent the Bennett family for signature, that he did
not make any change to the 2010 Amendment after receiving the signature pages,
and that he has retained this fully executed final 2010 Amendment in his file since
late 2010. 11 (Tr. I 186:1–9, 195:12–14.)
55. Craver was not present when the members signed the signature pages
and has no knowledge regarding when they signed. (Tr. I 175:11–20.) He testified
only that he drafted what Father Bennett intended, that he sent it out for signature,
and that Father Bennett’s intentions never changed throughout the drafting and
signing process. The only edit he made was to wordsmith Section 2.4, a change that
11 The original of the 2010 Amendment was not available at the time Craver testified. At Plaintiff’s request, Craver provided the original following his testimony, and it, (Jt. Ex. 107A), was admitted into evidence without objection. was prompted not by any change in Father Bennett’s intentions, but merely by
Craver’s own desire to perfect the document. (Tr. I 159:10–23.)
Signing the 2010 Amendment
56. The greater weight of the evidence establishes that, consistent with
family tradition, signature pages for what the parties understood was an amendment
to the BLF operating agreement were circulated during a family gathering at the
parents’ home in late 2010, prior to the end of the year, and that at least the following
individuals were present: Father Bennett, Mother Bennett, Bert, Graham, Ann and
Jim.
57. Bert’s signature appears on page 25 of both versions of the 2010
Amendment, immediately below the signature lines for Father Bennett and Mother
Bennett. Text above the signatures on page 25 includes the definition of
“Membership Interest” and this language:
“IN WITNESS WHEREOF, the undersigned, being all of the Members of the Company, have caused this Agreement to be duly adopted by the Company effective as of the day and year first above written, and do hereby assume and agree to be bound by and to perform all of the terms and provisions set forth in this Agreement.”
(Jt. Exs. 8–9, 107, at p. 25.)
58. The signatures of the remaining members follow on page 26 of both
versions of the 2010 Amendment. (Jt. Exs. 8–9, 107, at p. 26.)
59. At trial, each member who testified authenticated his or her own
signature, including Bert. (Tr. II 224:12–13 (Louise), 245:25–46:2 (Graham), 276:11–
14 (Ann), 296:4–7 (Jim); Tr. I 107:5–8, 119:3–6 (Bert).) Based on his familiarity with their handwriting, Craver authenticated the signatures of Mother Bennett and
Father Bennett. (Tr. I 174:7–25.)
60. No signatory who testified can recall whether a complete copy of the
2010 Amendment was present when the signature pages for the document were
circulated. However, none of them, including Bert, had a desire to read or even ask
questions about the content of the 2010 Amendment before signing it as an indication
of their agreement to be bound by it. (See, e.g., Tr. I 102:14–18 (Bert did not read or
request a copy before signing).)
61. Like his siblings, Bert, testified that he signed the 2010 Amendment
without asking to read it or asking any questions about it because of the trust and
respect he had for his father. Bert testified that he would have done whatever his
father wanted regarding the family property. (Tr. I 108:1–5 (“A. I did certainly view
that if dad wanted something done with [the property], we would be—I would be
happy to do it. Q. And that’s exactly what you did? A. That’s exactly what I did.”);
(see also Tr. II 221:21–22:2 (Louise did not read before signing; signed because dad
wanted her to), 257:9–13 (Graham signed because dad wanted him to), 274:5–16 (Ann
signed because dad wanted her to), 296:9, 297:5–13, 299:1–3 (Jim does not remember
signing; did not ask for copy before signing; trusted Father Bennett’s wishes
regarding property).)
62. Bert also testified that Graham told him that his signature was needed
for an administrative change that would allow the Bennett parents to transfer their
interests in BLF to their children, including Bert. (Tr. I 103:19–20.) Graham testified that he did not recall any such statement to Bert about the 2010 Amendment but that
he would not have told Bert something that was untrue. (Tr. II 265:6–10.) The 2010
Amendment in fact included a change in Section 9.2 making it easier for the Bennett
parents to bequeath and gift the property to their children. (Jt. Exs. 8, 9, 107, at
§ 9.2.)
63. Graham returned the completed signature pages to Craver, who
maintained them with the original of the 2010 Amendment in his business files. (Tr.
I 153:23–54:1; 194:21–22; 195:12–14.)
The 2012 Bequest, Gift, and Fishing Lease
64. When Mother Bennett died in March 2012, her membership interest in
BLF passed to Graham, the personal representative of her estate, pursuant to her
will. In accordance with her will and with Section 9.2 of the 2010 Amendment,
Graham transferred Mother Bennett’s membership interest pro rata to each of the
remaining members of BLF, including Bert. (Jt. Ex. 10.) However, Bert did not sign
the document assigning Mother Bennett’s interest and did not realize that he had
received a share of her interest until he learned of it several years later in the course
of litigation involving his brother John. (Jt. Ex. 10; Tr. I 70:21–71:2, 109:23–10:4.)
65. In June 2012, Father Bennett gifted his membership interest pro rata
to each of the remaining members of BLF, including Bert, pursuant to Section 9.2 of
the 2010 Amendment. (Jt. Ex. 11.) As with Mother Bennett’s transfer, Bert did not
sign the document assigning Father Bennett’s interest and did not realize that he had received a share of his father’s interest until several years later after the family
members were in litigation. (Jt. Ex. 11; Tr. I 70:21–71:2, 112:10–15.)
66. In June 2012, Bert signed a Consent to Action Without Meeting (the
“Consent”) documenting his agreement to a fishing lease between BLF and Father
Bennett. Father Bennett paid BLF thirty thousand dollars ($30,000.00) a year under
the terms of the lease, which Bert testified was used “to cover the day-to-day
expenses, the care-taker’s expenses and just upkeep of the cabin.” (Tr. I 121:14–15.)
The Consent specifies that it is executed pursuant to the 2010 Amendment. Bert
authenticated his signature on the Consent, which was on the line directly below the
signature line for Jim. Jim’s signature line identifies him as both a manager and
member of BLF. (Jt. Ex. 12; Tr. I 114:25–15:2.)
IV. CONCLUSIONS OF LAW 12
67. Based on the foregoing Findings of Fact, the Court makes the following
Conclusions of Law.
68. The Court has jurisdiction over the parties and the subject matter of this
action.
69. This case was properly designated as a mandatory complex business
case and assigned to the undersigned. The parties stipulated to a bench trial and
consented to bifurcating the trial such that Stage 1 issues would be decided first. The
Court has heard the evidence with respect to the Stage 1 issues and has authority to
make Findings of Fact and Conclusions of Law with respect to those issues.
12 Any Findings of Fact that are more appropriately deemed Conclusions of Law are incorporated by reference into the Court’s Conclusions of Law. 70. There is a legitimate controversy with respect to the validity of the 2010
Amendment, making declaratory relief appropriate. The Court’s declaration is
necessary to determine which version of BLF’s Operating Agreement controls. See
Augur v. Augur, 356 N.C. 582, 588 (2002) (“[A] declaratory judgment should issue (1)
when [it] will serve a useful purpose in clarifying and settling the legal relations at
issue, and (2) when it will terminate and afford relief from the uncertainty, insecurity
and controversy giving rise to the proceeding.” (citation and internal quotation marks
omitted)).
71. At the outset, there is disagreement between the parties as to which
party bears the burden of proof with respect to Stage 1 issues. The Court concludes
that with respect to their claims sounding in contract, each party bears the burden of
proof with respect to the declaration(s) that party claims the Court should make,
regardless of whether that declaration occurs in Stage 1 or Stage 2. One who asserts
a fact and seeks declaratory judgment declaring that fact has the burden of proving
that fact. See e.g., Bizrobe Trust v. InoLife Techs., Inc., 2018 NCBC LEXIS 160, at
*16 (N.C. Super. Ct. Nov. 30, 2018) (denying plaintiff’s affirmative motion for
summary judgment on declaratory judgment claim where plaintiff failed to satisfy its
burden of proof); JCG & Assocs., LLC v. Disaster Am. USA, LLC, 2021 NCBC LEXIS
109, at *7 (N.C. Super. Ct. Dec. 9, 2021) (considering together declaratory judgment
claims and counterclaims when the evidence was “closely tied together”).
72. However, unlike most claims that fall neatly into one party’s camp or
the other, the Court concludes that identifying the operating agreement in effect, whether it is Plaintiff’s 2007 version or Defendants’ 2010 version, is an overarching
declaration that impacts claims made by both sides. Bert’s claim for a declaratory
judgment that the 2010 Amendment is invalid (and thus that the 2007 Operating
Agreement controls) stands in direct opposition to Defendants’ declaratory judgment
claim that the 2010 Amendment is valid (and thus that the 2007 Operating
Agreement is inoperative). Consequently, in this case both sides bear the burden of
convincing the Court by a preponderance of the evidence that their version of the
operating agreement controls.
73. “The essence of any contract is the mutual assent of [all] parties to the
terms of the agreement so as to establish a meeting of the minds.” Snyder v.
Freedman, 300 N.C. 204, 218 (1980) (citation omitted); see Mach. Co. v. Chalkley, 143
N.C. 181, 183 (1906) (“The first and most essential element of an agreement is the
consent of the parties[.]”). “Whether mutual assent is established and whether a
contract was intended between parties are questions for the trier of fact.” Creech v.
Melnik, 347 N.C. 520, 527 (1998) (citing Snyder, 300 N.C. at 217).
74. In addition, “[w]hen a party affixes his signature to a contract, he is
manifesting his assent to the contract.” Mosely v. WAM, Inc., 167 N.C. App. 594, 599
(2004).
75. The Court concludes that the 2010 Amendment that was admitted into
evidence as Joint Exhibit 107 (the original as Joint Exhibit 107A) is the controlling
operating agreement for BLF for the reasons that follow. 76. First, the greater weight of the evidence proves that BLF’s members
holding a majority of the membership interests, including Bert, knew they were
assenting to an amendment to the BLF Operating Agreement when they each put
their names on signature pages in 2010.
77. The greater weight of the evidence further proves that BLF’s members
holding a majority of the membership interests, including Bert, knew that the
signature page they each signed would be attached to the final version of the
amendment to the operating agreement containing the terms that Father Bennett
had specified to BLF’s attorney, Penn Craver.
78. Bert testified that he neither asked to read the 2010 Amendment nor
asked his father or the managers any questions regarding the 2010 Amendment prior
to signing the page signifying his assent to it. Bert signed because, when it came to
the Avery County property, “[i]f dad wanted something done with it . . . I would be
happy to do it.” (Tr. I 108:2–3.)
79. The greater weight of the evidence establishes that Joint Exhibit 107
accurately reflects the terms Father Bennett wanted to be included in the 2010
Amendment and that Father Bennett’s intention with respect to those terms did not
change from the time he articulated them to Craver until the signature pages were
attached to Joint Exhibit 107.
80. Therefore, the Court concludes, that the evidence, by its greater weight,
establishes that the members holding a majority of the membership interests in BLF,
including Bert, assented to the 2010 Amendment that is Joint Exhibit 107. 81. Bert cites several cases to support his position that the fact that the
signatures were on pages separated from the body of the agreement when they were
signed, coupled with the change Craver made to Section 2.4 of the 2010 Amendment,
requires the conclusion that there was no meeting of the minds with respect to the
2010 Amendment. The Court disagrees. The greater weight of the evidence
establishes that the parties’ overarching and indisputable intention was to agree to
the terms their father wanted. The signature pages each of them signed were
attached —as they intended—to a document drafted by Craver to achieve what their
father wanted.
82. In GECMC 2006-C1 Carrington Oaks, LLC v. Weiss, 2017 N.C. App.
LEXIS 532 (N.C. Ct. App. 2017) (unpublished), the signatory signed “between thirty
and forty signature pages” each time he visited a law firm so that they could be used
for various real estate transactions. The signatory was unaware that one of those
signature pages would be “eventually attached” to a guaranty agreement and,
therefore, the Court of Appeals held that his signature did not indicate an assent to
be bound to the guaranty agreement. Id. at *3. In contrast, the parties here signed
one set of signature pages and were aware that they would be attached to the
amended operating agreement their father wanted, once it was finished, and each of
them accepted their father’s terms unquestionably without the need even to read
them.
83. The cases cited by Bert from courts in Illinois and New York are
similarly distinguishable. In Midwest Mfg. Holding, L.L.C. v. Donnelly Corp., 1998 U.S. Dist. LEXIS 1398 (N.D. Ill. 1998), the parties entered into several letters of
intent. For convenience purposes the defendant signed an unaffixed signature page
before negotiations were finalized. Negotiations then failed. The court, recognizing
that the executed signature page was “merely . . . a convenience[,]” noted that the
parties had “additional, outstanding, material issues still . . . open and need[ing] to
be resolved” on the date the signatory signed, precluding an intent to be bound by the
final document. 1998 U.S. Dist. LEXIS 1398, at *11–12. Similarly, in Chariot Grp.,
Inc. v. American Acquisition Partners, L.P., 751 F. Supp. 1144 (S.D.N.Y 1990), the
defendant signed a signature page for “convenience only” while negotiations were still
ongoing between the parties. 751 F. Supp. at 1151.
84. Conversely, here, Father Bennett’s intentions were fixed at the time the
parties signed the signature pages, and his intentions did not change. There was no
negotiation over the terms of the amendment. His children, including Bert, simply
agreed to sign a document that reflected their father’s intentions. Consequently,
nothing about the act of attaching their signature pages to the correct, final document
reflecting those intentions defeated the formation of the contract.
85. Moreover, none of the parties, including Bert, testified that the change
Craver made to Section 2.4—regardless of whether it was made before or after the
signature pages were completed—was a deciding factor in his or her decision to assent
to the 2010 Amendment. The only material factor was their father’s wishes, and
there was no evidence to suggest that Craver’s edit did anything other than ensure
that he had captured Father Bennett’s wish that Jim be made a manager of BLF. 86. It also bears mentioning that the law is well-settled in North Carolina
that “[t]he duty to read an instrument or to have it read before signing it, is a positive
one, and the failure to do so, in the absence of any mistake, fraud or oppression, is a
circumstance against which no relief may be had, either at law or in equity.” Harris
v. Bingham, 246 N.C. 77, 78–79 (1957); see Town of Belhaven v. Pantego Creek, LLC,
250 N.C. App. 459, 470 (2016) (“In North Carolina, parties to a contract have an
affirmative duty to read and understand a written contract before they sign it.”);
Westmoreland v. High Point Healthcare Inc., 218 N.C. App. 76, 83 (2012) (“It has long
been the law in North Carolina that the law will not relieve one who can read and
write from liability upon a written contract, upon the ground that he did not
understand the purport of the writing, or that he has made an improvident contract,
when he could inform himself and has not done so.” (citation and internal quotation
marks omitted)); Ussery v. Branch Banking & Trust Co., 368 N.C. 325, 336 (2015)
(“One who executes a written instrument is ordinarily charged with knowledge of its
contents, and he may not base his action on ignorance of the legal effect of its
provisions in the absence of considerations such as fraud or mistake[.]” (citing Mills
v. Lynch, 259 N.C. 359, 362 (1963) and Pierce v. Bierman, 202 N.C. 275, 279 (1932)).
87. Even if the Court were to conclude that Graham presented the
amendment to Bert as a change to allow the Bennett parents to transfer their
interests, the Court concludes that Bert was not relieved of his duty to read the amendment before signing it. 13 He admits that nothing prevented him from inquiring
further as to the changes being made or from obtaining a copy of the proposed
amendment and reading it before signing. (Tr. I 103:2–18); Ussery, 368 N.C. at 338
(reliance on verbal assurances contrary to contract’s contents was unreasonable
because the signatory was “misled through his own want of reasonable care and
circumspection” (citation and internal quotation marks omitted)). Had he requested
a copy and read it prior to signing, under either version of the 2010 Amendment, he
would have seen that Jim was to become a manager.
88. Second, the final edit Craver made to Section 2.4 of the 2010
Amendment did not change the meaning of the provision. Under either reading of
the 2010 Amendment, (compare Jt. Ex. 9, with Jt. Exs. 8, 107), the outcome would be
the same: Jim was added as a manager of BLF.
89. The plain language of Section 2.4 establishes that Schedule II controls
the number and identity of the managers. The operative language of the section is:
“The name of the initial Managers are set forth on Schedule II attached hereto and
made a part hereof, which Schedule II shall be amended upon any change of
Managers.” (Jt. Ex. 6, at § 2.4.)
90. The number and identity of BLF’s managers on Schedule II is consistent
in the two versions of the amendment before the Court. (Compare Jt. Ex. 9, at Sch.
II, with Jt. Exs. 8 & 107, at Sch. II.) Only the text describing the managers changed
13 Notably, Bert has not alleged a claim for fraud. He alleges only that Graham provided him the signature pages and represented that he needed Bert’s signature for “administrative purposes.” (Third Am. Comp. ¶ 31.) from one version to the other, and it is a distinction without a difference. Joint
Exhibit 9 retains the language from the 2007 Operating Agreement that there “shall
initially be two (2) Managers of the Company.” There were, indeed, “initially” two
managers. But the controlling Schedule II in the 2010 Amendment correctly listed
Father Bennett’s intended three managers, Graham, Ann and Jim. Therefore,
Craver’s subsequent decision to delete the word “initially” in recognition of the fact
that he was drafting an amendment, and to change “two managers” to “three
managers” to make the text consistent with the controlling schedule, was not
necessary to accomplish Father Bennett’s intention that Jim become the third
manager of the LLC and was of no consequence to the validity of the 2010
Amendment.
91. The terms in the version of the 2010 Amendment that was admitted as
Joint Exhibit 107 were the terms intended by Father Bennett, and Father Bennett’s
intentions with respect to those terms did not change at any point throughout the
drafting and execution of the 2010 Amendment.
92. Schedule II of each of the competing versions of the 2010 Amendment
lists three managers: Graham, Ann and Jim. The Court therefore concludes that Jim
became a manager of BLF as of 1 October 2010, the effective date of the 2010
93. Third, even if Bert did not understand or agree to the terms of the 2010
Amendment that his father wanted, he was in the minority. As noted above,
amending the 2007 Operating Agreement required a vote of the members holding a majority of the membership interests. (Jt. Ex. 6, at § 11.5.) At trial, members
Graham, Ann, Jim, and Louise each testified that he or she signed the signature
pages for the 2010 Amendment with the intent to be bound to the 2010 Amendment
that was admitted as Joint Exhibit 107 and that establishes Jim as a manager of
BLF. Craver testified, unopposed, that Father Bennett’s intent was likewise as
stated in Joint Exhibit 107. At that time, these members alone collectively held fifty-
nine percent of the membership interests of BLF, constituting a majority. (Jt. Ex. 6,
at Sch. I.)
94. Moreover, by statute, “[a]ny person bound by the operating agreement
is bound by any amendment adopted, as provided in the operating agreement.”
N.C.G.S. § 57D-2-31(e). Thus, Bert, who was bound to the 2007 Operating
Agreement, is similarly bound to the 2010 Amendment that was approved by the
majority. For this reason alone, the 2010 Amendment (Joint Exhibit 107) is valid and
controlling with respect to all members, including Bert.
95. As to whether BLF’s members were required to sign a “Consent to Action
Without Meeting” to effectuate their decision for Jim to be a manager, the Court
concludes that the 2010 Amendment itself constitutes effective written consent in
accordance with Section 5.6(c) of the 2010 Amendment, and no additional writing was
necessary. (See e.g., Ord. Mot. Prelim. Inj. ¶ 13, ECF No. 87 (“[Bert argues] that this
written consent must exist separate and apart from any writing required to
memorialize the amendment. The Court disagrees. By its terms, nothing in the original operating agreement prevents the members from consenting to action and
memorializing an amendment in the same writing.”).)
96. Finally, Bert is quasi-estopped from denying the 2010 Amendment’s
validity. Quasi-estoppel, also known as “estoppel by benefit,” “is directly
grounded . . . upon a party’s acquiescence or acceptance of payment or benefits by
virtue of which that party is thereafter prevented from maintaining a position
inconsistent with those acts.” Godley v. Cnty. of Pitt, 306 N.C. 357, 361 (1982)
(citation omitted); see Kyle v. Felfel, 254 N.C. App. 684, 693 (2017) (stating that quasi-
estoppel “is designed to prevent a party from benefitting by taking two clearly
inconsistent positions.” (citation and internal quotation marks omitted)). The
doctrine “rests upon principles of equity and is designed to aid the law in the
administration of justice when without its intervention injustice would result.”
Brooks v. Hackney, 329 N.C. 166, 173 (1991) (internal citation and quotation marks
omitted).
97. “Under a quasi-estoppel theory, a party who accepts a transaction or
instrument and then accepts benefits under it may be estopped to take a later position
inconsistent with the prior acceptance of that same transaction or instrument.”
Whitacre P’ship v. Biosignia, Inc., 358 N.C. 1, 18 (2004) (citation and quotation marks
omitted); see Cap. Outdoor Adver., Inc. v. Harper, 7 N.C. App. 501, 505 (1970) (“[I]t is
settled law in North Carolina that a party will not be allowed to accept benefits which
arise from certain terms of a contract and at the same time deny the effect of other
terms of the same agreement.” (citing Shuford v. Oil Co., 243 N.C. 636 (1956)). 98. Thus, a defendant seeking to bar a plaintiff’s claim through the
application of the doctrine of quasi-estoppel must show that the plaintiff (1) with
knowledge of the facts (2) now takes a position inconsistent with his or her former
position (3) to the disadvantage of another. See generally Eugene R. Anderson,
Preventing Inconsistencies in Litigation with a Spotlight on Insurance Coverage
Litigation: The Doctrines of Judicial Estoppel, Equitable Estoppel, Quasi-Estoppel,
Collateral Estoppel, “MEND the Hold,” “FRAUD on the Court” and Judicial and
Evidentiary Admissions, 4 Conn. Ins. L.J. 589, 661 (1997). Defendants’ success in
making this showing is necessarily fact dependent. See, e.g., Whitacre P’ship, 358
N.C. at 18; 28 Am. Jur. 2d Estoppel and Waiver § 173 (“[W]hether the facts presented
adequately establish estoppel is for the jury or other trier of fact to decide.”).
99. Bert’s signature on the June 2012 “Consent to Action Without Meeting”
that authorized a fishing lease between BLF and Father Bennett states explicitly on
its face that it is an action taken pursuant to the 2010 Amendment. (Jt. Ex. 12.)
Bert’s signature on the Consent establishes his knowledge of and intent to be bound
by its terms. The evidence establishes that Bert benefitted from his father’s financial
contribution to the upkeep of the property by way of the fishing lease. Having relied
on the 2010 Amendment for this benefit, the Court concludes that the doctrine of
quasi-estoppel prevents Bert from now denying the 2010 Amendment’s validity. 14
14 However, the Court does not conclude, as Defendants contend, that Bert is quasi-estopped
from denying the 2010 Amendment’s validity based on the Bennett parents’ transfers, even though both transfers also expressly reference the 2010 Amendment. (Jt. Exs. 10–11.) Bert’s signature was not on either the estate assignment or the gift assignment, and there is no evidence that he read or otherwise had knowledge of either document. Equity does not prevent Bert from denying the 2010 Amendment’s validity because he benefitted from it CONCLUSION
100. Based on the foregoing Findings of Fact and Conclusions of Law, it is
HEREBY ORDERED, ADJUDGED, and DECREED as follows:
i. The Court hereby ENTERS JUDGMENT declaring that the 2010
Amended and Restated Operating Agreement that was admitted as
Trial Exhibit 107 is BLF’s controlling operating agreement and has
been in full force and effect since 1 October 2010.
ii. The Court hereby ENTERS JUDGMENT declaring that, since 1
October 2010 and at all times thereafter, and pursuant to BLF’s
controlling operating agreement, there have been three managers of
BLF: Graham F. Bennett, Ann Bennett-Phillips and James H.
Bennett.
iii. Having resolved the Stage 1 issues, the Court will hear evidence with
respect to the remaining issues in the case. The parties are directed
to appear on 6 April 2022 at 9:30 A.M. to proceed accordingly.
IT IS SO ORDERED, this the 4th day of April, 2022.
/s/ Julianna Theall Earp Julianna Theall Earp Special Superior Court Judge for Complex Business Cases
while completely unaware of the facts. See Steubner Realty 19, Ltd. v. Cravens Rd. 88, Ltd., 817 S.W.2d 160, 164 (Tex. Ct. App. 1991) (“[E]stoppel precludes a party, with knowledge of the facts, from taking a position inconsistent with his or her former position to the disadvantage or injury of another[.]” (emphasis added)).