Park Regency, LLC v. R & D Development of the Carolinas

741 S.E.2d 528, 402 S.C. 401, 2012 WL 5936692, 2012 S.C. App. LEXIS 345
CourtCourt of Appeals of South Carolina
DecidedNovember 28, 2012
DocketAppellate Case No. 2011-187167; No. 5056
StatusPublished
Cited by8 cases

This text of 741 S.E.2d 528 (Park Regency, LLC v. R & D Development of the Carolinas) is published on Counsel Stack Legal Research, covering Court of Appeals of South Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Park Regency, LLC v. R & D Development of the Carolinas, 741 S.E.2d 528, 402 S.C. 401, 2012 WL 5936692, 2012 S.C. App. LEXIS 345 (S.C. Ct. App. 2012).

Opinions

CURETON, A.J.

In this suit arising from a dispute among members of a limited liability company (LLC), the trial court dissociated R & D Development of the Carolinas, LLC (R & D) from the company and ordered the remaining members of the company to purchase R & D’s distributional interest. Appellants contend the trial court erred in (1) not considering the company’s legal obligation to repay debts to its remaining members and other relevant and undisputed evidence when valuing R & D’s distributional interest and (2) treating R & D’s liability to the other members as an offset to the fair value of its distributional interest instead of entering a judgment against the dissociated member. We affirm as modified.

[405]*405FACTS

Crossroads Retail, LLC (Crossroads) was formed for the purpose of developing a tract of land in Fort Mill (the Property), which initially consisted of 29.84 acres. After the relationships between members of Crossroads broke down, Park Regency, LLC (Park Regency); Landy Properties, LLC (Landy Properties); and Sowers Properties, LLC (Sowers Properties) (collectively, Appellants) filed this action to dissociate R & D from Crossroads. Appellants joined Hawkensen Construction, Inc. (Hawkensen) and Carl’s Construction, Inc. (Carl’s) as defendants.

Hawkensen, R & D, and Carl’s (collectively, Respondents) were owned, at least in part, by Carl Hawkensen.1 Hawken-sen was an incorporated construction company. R & D was an LLC, in which Carl Hawkensen owned an 85% interest and Chad Whitmire owned the remaining 15%. Originally incorporated in 1990, Carl’s was administratively dissolved in 1997. However, after the dissolution, Carl Hawkensen continued to operate Carl’s as a sole proprietorship.

I. Acquisition of the Property

In 2006, Hawkensen deposited $75,000 in earnest money on a contract to purchase the Property for $2,957,600. After Hawkensen failed to secure adequate funding, the seller enlisted the assistance of Eric Sowers, a mortgage broker. Sowers referred Carl Hawkensen to Roger Gaines of Park Regency, a company that had recently sold some investment property and was seeking new investment property for a section 1031 exchange.2 On July 25, 2006, the three reduced a preliminary acquisition and development agreement to writing. Later, Gaines introduced Carl Hawkensen to Steven Landy of Landy Properties, another investor. Ultimately, Park Regency agreed to provide as much as $800,000 toward the purchase of the Property, and Landy Properties provided $201,100 in [406]*406additional funds. Park Regency took out a loan in the amount of $1,922,440 to cover the remainder of the purchase price.

On September 27, 2006, Park Regency, Hawkensen, R & D, Sowers, and Landy executed a written contract (the Crossroads Commons Agreement) memorializing their intent to purchase and develop the Property. The Crossroads Commons Agreement established a sequence of events affecting the obligations and ownership interests of the parties. Park . Regency agreed to accept title to the Property pending R & D’s completion of its obligations and to transfer title as described below. Hawkensen and R & D agreed to assign Hawkensen’s rights under the purchase contract to Park Regency, establish an account “insuring Hawkensen[’s] ... performance,” pay the interest and carrying charges on loans used to develop the Property, and maintain at least $80,000 in an escrow account for that purpose. Furthermore, R & D agreed it would “[immediately commence and complete at cost the first phase of clearing and grading of the Property in a good and workmanlike manner” in compliance with a previously established budget.3 Hawkensen agreed to ensure R & D complied with its obligations.

All parties agreed that, upon R & D’s fulfillment of its obligations, the remaining members of the group would receive their ownership interests in the Property: R & D would receive a 47.5% interest, Sowers would receive a 5% interest for providing “professional services,” and Landy Properties would receive a 10% interest for supplying funds for the purchase of the Property. On October 6, 2006, Park Regency acquired title to the Property.

II. Formation of Crossroads

A. Agreement among Tenants in Common

On November 9, 2007, Park Regency, R & D, Landy Properties, and Sowers Properties (collectively, the Tenants) executed an Agreement among Tenants in Common (the TIC Agreement). The TIC Agreement recognized that the Ten[407]*407ants already owned the Property in the proportions identified in the Crossroads Commons Agreement: Park Regency owned 37.5%, R & D owned 47.5%, Landy Properties owned 10%, and Sowers Properties owned 5%. The TIC Agreement states the Tenants, as owners of the Property:

[ D]esire by this Agreement to set forth’ and confirm their mutual agreements and understandings with respect to their ownership interests in the Property, their respective rights and obligations as tenants in common of the Property, and their right to manage, rent, operate, maintain, alter, improve, lease, transfer, sell or otherwise control the disposition of the property or any part thereof.

The TIC Agreement acknowledged mutual ownership of the Property and established each Tenant’s rights and obligations, including requirements concerning a Tenant’s withdrawal from the group.

Following the appointment of a property manager, the Tenants anticipated quarterly disbursements of any monies received that exceeded the Property’s operating costs. They established an order for these disbursements. First, Park Regency and then Landy Properties would receive payments up to the amounts they had invested. Next, Hawkensen, in its capacity as Horizontal Developer, would receive payments for “its' unpaid hard costs including costs prior to closing such as initial contract deposit, engineering, surveying, etc.” Finally, the Tenants would receive payments corresponding to their proportionate shares.

In the event revenues from the Property and the Tenants’ reserves were insufficient to.pay taxes, loan payments, or other operating costs, the Tenants agreed to contribute the necessary funds in accordance with their proportionate shares. Although any Tenant’s failure to contribute would be an event of default, two provisions specifically addressed R & D’s participation. First, in the event of R & D’s uncured default for failure to contribute, the other Tenants could purchase R & D’s interest in the Property for 75% of its fair market value; “reduced further by any payment outstanding by R & D.” Second, R & D agreed to maintain $250,000 in an escrow account for the purpose of paying “all interest and other carrying charges” on the loan or loans encumbering the [408]*408Property. R & D’s failure to do so would be an event of default.

Paragraph 11 of the TIC Agreement addressed transfers of Tenants’ interests, with subsection (c) outlining events of default. In the event of a Tenant’s default, the remaining Tenants would have the option (1) to cure using funds from the defaulting Tenant’s distributions or (2) to purchase the defaulting Tenant’s interest in the Property.

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Cite This Page — Counsel Stack

Bluebook (online)
741 S.E.2d 528, 402 S.C. 401, 2012 WL 5936692, 2012 S.C. App. LEXIS 345, Counsel Stack Legal Research, https://law.counselstack.com/opinion/park-regency-llc-v-r-d-development-of-the-carolinas-scctapp-2012.