Kilpatrick v. White Hall on MS River, LLC

by
White Hall on MS River, LLC began with an informal gentleman’s agreement in which there would be five initial contributors each putting up $500,000 with which to purchase land from International Paper. All of the parties were aware that the price per acre would increase substantially if the sale did not take place on or before December 31, 2007. Based on assurances from Dennis Kilpatrick and Murray Moran, the sale did take place. Those assurances were that their remaining funds would be payable after the new year. Due to the fact that there was only $2 million available at closing, the interest rate at which the purchase could be made was substantially increased, and the entire acreage sought by White Hall would be encumbered by deeds of trust, making no collateral available, and making the ability to use the timber on the land unavailable. In the end, only three of the men executed the agreement: Dominick Cvitanovich, Jackie Richards, and James McBeth. The signature page provided signature lines only for the three of them. The Agreement stated that “Establishment of a Membership has been defined as a cash contribution of Five Hundred Thousand dollars ($500,000.00) for a membership interest of two (2) shares.” Exhibit A, attached to the operating agreement, showed the capital contributions by all five men. Cvitanovich, Richards, and McBeth each had contributed $500,000. The alleged ambiguity of White Hall’s membership requirements arose because, while the Agreement stated that a $500,000 capital contribution must made to become a member of White Hall, it also stated that “‘Members’ means the persons listed on attached Exhibit A.” Exhibit A included Kilpatrick, though it also showed that he possessed “0” ownership shares. The Agreement provided no procedure for including a person who failed to make the initial $500,000 contribution. Kilpatrick eventually sued White Hall to get his capital contribution refunded. The Chancery Court issued a final judgment in favor of White Hall, finding that Kilpatrick was not a member of White Hall and that Kilpatrick was not entitled to the recovery of his capital contribution. Finding no error in the Chancery Court's order, the Supreme Court affirmed. View "Kilpatrick v. White Hall on MS River, LLC" on Justia Law