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Ballard v. Combis

United States District Court, D. South Carolina, Rock Hill Division

September 1, 2016

Desa Ballard, as Successor Trustee of the Trust of Chris Combis, u/a/d 10-15-2013, Plaintiff,
v.
Diane Combis, Defendant. Desa Ballard, as Successor Trustee of the Trust of Chris Combis, Cross-claim Plaintiff,
v.
George Combis; and Diane Combis, as former Trustee of the Trust of Chris Combis, Cross-claim Defendants. In the Matter of the Estate of Chris Combis Desa Ballard, as Personal Representative of the Estate of Chris Combis, Petitioner,
v.
George Combis; Chris A. Combis; Diane Combis; and Superior Tile, Marble, and Terrazzo Corporation, Respondents. Linda Combis and Mary Combis, Plaintiffs,
v.
George Combis and Diane Combis (Individually and as former Trustee of the Revocable Trust Agreement for Chris Combis), Defendants.

          FINDINGS OF FACT AND CONCLUSIONS OF LAW AND ORDER

          Joseph F. Anderson, Jr. United States District Judge

         I. INTRODUCTION AND PROCEDURAL BACKGROUND

         These four consolidated cases all pertain to a dispute between siblings regarding financial transactions involving their father. At the Court's suggestion, the parties consented to a bench trial due to the complexity of the factual and legal issues presented.

         The Court received testimony in a five-day trial, heard extensive closing argument, and took the matter under advisement. The Court then determined that it needed additional evidence on one issue and reopened the hearing for additional testimony. The Court also directed the attorneys to exchange and submit proposed findings and conclusions, some of which have been adopted in this Order.[1]

         Before delving into the myriad of factual and legal issues presented in this case, the Court is compelled to make a few general observations. The four lawsuits resolved in this Order are but a portion of twelve lawsuits filed by the three adult children of Chris Combis and his wife, Jessie Combis. As will be seen, the Combis family enjoyed considerable financial success in the decorative tile and stone business in Charlotte, North Carolina. Unfortunately, as is often the case with closely-held family corporations, the partners were better at their craft than they were with their corporate record-keeping. This lack of documentation, coupled with testimony regarding faded memories of financial transactions that occurred nearly a decade ago, is what prompted this Court to suggest the bench trial that commenced on July 12, 2016.

         Having thus invited the family to drop this difficult and emotion-laden controversy into its lap, [2] the Court now proceeds to do its best to untangle and resolve the issues presented, with the observation that the failure to follow even rudimentary corporate formalities and reliance upon “home drawn” financial documents often sow the seeds of controversies that tax the ability of the legal system to achieve justice years later.

         Chris Combis, referred to during the trial as “Pop” (to distinguish him from his grandson of the same name and who was a party at one time to one of these actions) was the patriarch of the family who formed and operated Superior Tile, Marble, and Terrazzo, Inc. (“Superior Tile”) headquartered in Mecklenburg County, North Carolina. Eventually, Pop's son, George, [3] assumed a position with Superior Tile and, before Pop's death, took over ownership of the company.

         Among the projects for which Superior Tile provided stone and tile work were the Charlotte Panthers Stadium and the headquarters for Bank of America, both in Charlotte. At one point, George even bragged that it would be easier to produce a list of buildings in Charlotte that Superior Tile had not worked on than to provide a list of those for which the company had performed work. Suffice it to say that Superior Tile was a successful business enterprise.

         George is married to Diane, with whom Pop had a close relationship. Pop also had two daughters, Linda and Mary, both of whom counted on Pop for much of their financial support.

         Importantly, Pop and George did not maintain complete business records and constantly moved money around from the company to the various family members. Further, Pop eventually transferred ownership of Superior Tile to George. Additionally, George and Diane began a new company in Diane's name to take advantage of her status as a member of a minority. Thus, two corporate entities are involved in these actions.

         Pop died on February 3, 2009, and, shortly thereafter, the harmony that had existed was gone and the litigation began.

         As noted previously, the Court's fact-finding process has been made more difficult due to the lack of adequate documentation[4] for the disputed financial transactions as well as several witnesses' professed lack of memory regarding key events. “I don't recall” was a frequent response to many pertinent questions.

         Regarding the documentation of transactions in the Trust Account, George and Diane produced a ledger sheet containing cryptic entries that are of little help. As to backup documentation, Diane, when pressed, frequently said, “I gave that to my lawyer.” Such documentation was never produced at trial. The “lawyer” being referred to was one or more of the previous attorneys who have represented George and Diane during the course of their litigation. At one point during the trial, this Court interrupted the proceedings to inform Diane that merely incanting the phrase “I gave it to my [previous] lawyer” was not a substitute for producing relevant documents during discovery. Indeed, one of her previous attorneys, Charles Bridgmon (“Bridgmon”), testified for George and Diane at trial. For these reasons, the Court announced that, following the close of the trial testimony, the Court would keep the record open for an additional two days to allow the documents allegedly given to previous counsel to be retrieved from the attorneys and produced to this Court. No such documents were ever produced.

         Additionally, George was occasionally less than forthcoming. For example, one issue in the case was the extent to which George contributed monies that went into a joint account with Pop. When pressed for documentation at his deposition (which deposition was published at trial), George responded, “Well, not being smart, I don't have to show anybody where it came from.”

         Finally, at times, George's trial testimony was internally inconsistent. When asked about what happened to the hotly disputed $412, 000.00 that was allegedly loaned to him from the Trust managed by his wife, George testified (on the fourth day of trial) that approximately $150, 000.00 of it was used for the benefit of his sister Linda, to wit: a $60, 000.00 horse barn; a $20, 000.00 fence; a $63, 000.00 Suburban; a $20, 000.00 tractor; a $12, 000.00 “Gator” all-terrain vehicle; and $15, 000.00 worth of stone and tile. By the next morning of trial, however, George had retreated from this position and acknowledged on cross-examination that none of these items were purchased with the Trust monies, if they had been purchased at all.

         One other threshold issue bears mention. Mindful of its obligation to police its own jurisdiction, this Court inquired of the parties whether any or all of the claims asserted in this action (which was removed to this Court on the basis of the diverse citizenship of the parties) should be dismissed because of the so-called “probate” exception to federal jurisdiction.

         Counsel for Desa Ballard, the Personal Representative and Successor Trustee, argued, as she had since removal to this Court, that these cases belonged in state court. The two remaining groups of litigants, George and Diane, as well as Linda and Mary, suggested jurisdiction was proper in this federal Court.

         For the reasons stated in open court, this Court determined that the ownership question for certain items of personal property (such as rare coins, antiques, firearms, and watches) were probate court matters and, therefore, this Court declined to hear testimony regarding such personal property.[5]

         All remaining claims, which distilled to their essence are contract-based claims between diverse parties, were held to be properly before this Court. At the risk of oversimplification, these claims are:

(1) The $230, 000.00 Note;
(2) The $412, 000.00 “Loan” and related Breach of Fiduciary Duty Claim;
(3) The $49, 564.09 Missing Certificate of Deposit; and
(4) The Allocation of Desa Ballard's Fees as Trustee of the Trust.

         After receiving the testimony, carefully considering all the evidence, weighing the credibility of the witnesses, reviewing the exhibits and briefs, and studying the applicable law, this Court makes the following Findings of Fact and Conclusions of Law pursuant to Fed.R.Civ.P. 52. The Court notes that to the extent any of the following Findings of Fact constitute Conclusions of Law, they are adopted as such, and to the extent any Conclusions of Law constitute Findings of Fact, they are so adopted.

         II. FINDINGS OF FACT

         1. On March 11, 2003, Pop executed his last will and testament (the “Will”) and established the Chris Combis Revocable Trust (the “Trust”) under North Carolina law.

         2. Pursuant to the Will, the property in his estate (the “Estate”) at the time of his death would “pour-over” into his Trust.

         3. Pop designated himself as the original Trustee of the Trust.

         4. The Trust beneficiaries were his three adult children George, Mary, and Linda. All three children were officers of Superior Tile and, at various times, received money as salary or director's fees, although the record is not clear regarding these payments.

         5. At the time Pop established the Trust, he owned one house (the “Lochridge House”) located at 718 Lochridge Road in Charlotte, North Carolina. The Lochridge House was unencumbered by a mortgage.

         6. In 2003, Pop purchased a house and real property (the “Horseshoe House”) located at 9313 Horseshoe Circle in Fort Mill, South Carolina. Although Pop and George signed the mortgage for the Horseshoe House, George did not sign the note that required $1, 289.56 per month payments.[6]

         7. Mary resided in the Lochridge House from prior to the creation of the Trust until the house was sold in 2013. Title was never placed in her name.

         8. Linda has resided in the Horseshoe House from the time Pop purchased it until the present day. Title was never placed in her name.

         9. With the exception of one $1, 289.56 mortgage payment made by Linda on the Horseshoe House, neither sister has paid any consideration for their occupation of either house.

         10. George has never resided in either the Horseshoe House or the Lochridge House.

         11. On July 14, 2005, Pop and Superior Tile entered into a loan agreement (the “$230, 000.00 Note”), under which Pop agreed to provide Superior Tile with the use of $230, 000.00. In return, Pop received a note, obviously drafted by a non-lawyer, which reads as follows:

July 14, 2005
RE: Loan Agreement
This agreement is between CHRIS COMBIS and SUPERIOR TILE AND MARBLE CORPORATION.
CHRIS COMBIS agrees to loan SUPERIOR TILE AND MARBLE $230, 000.00. The terms and conditions are as follows:
1) In exchange for the use of $230, 000.00, SUPERIOR TILE AND MARBLE agrees to the following:
a) Pay interest quarterly at the rate of 7%.
b) For the life of the loan, SUPERIOR TILE AND MARBLE agrees to continue to pay MARY COMBIS and LINDA COMBIS a salary of $150.00 per week.
c) SUPERIOR TILE AND MARBLE agrees to pay the personal insurance for MARY COMBIS and LINDA COMBIS.
d) SUPERIOR TILE AND MARBLE agrees to pay the automobile insurance (one vehicle each) for MARY COMBIS and LINDA COMBIS.
This loan will be terminated 30 days after the death of CHRIS COMBIS and the monies will be put back in his estate.
Accepted: s/ CHRIS COMBIS
SUPERIOR TILE & MARBLE CORPORATION Accepted: s/ GEORGE C. COMBIS, President

         12. On April 21, 2006, Pop executed a First Amendment and Restatement of his Trust, replacing himself with Diane as Trustee. Both Linda and Mary consented to Diane's appointment.

         13. On or about the time of the naming of Diane as Trustee, Diane and Linda met with Paul Hattenhauer (“Hattenhauer”), the lawyer who drafted Pop's Will and the Trust, regarding Diane's duties as the new Trustee. Hattenhauer also provided Diane with a book describing the duties and responsibilities of a trustee.

         14. George and Pop were co-owners with right of survivorship of a Wachovia Securities investment account (the “Joint Account”).[7] On April 30, 2006, the value of the funds held in the Joint Account was $387, 590.14.

         15. During the month of April 2006, Pop withdrew the entirety of the funds held in the Joint Account without George's consent and exercised sole control over the funds.

         16. On September 11, 2006, Pop conveyed the Lochridge House into the Trust.

         17. On October 13, 2006, Pop conveyed the Horseshoe House into the Trust.

         18. On April 18, 2007, Pop filed a lawsuit against George, Diane, and Superior Tile claiming that Superior Tile was in breach of the $230, 000.00 Note and prayed for the recovery of $230, 000.00, together with interest.

         19. On July 27, 2007, Pop caused a check in the sum of $417, 359.01 to be drafted from an account of which he was the sole owner.

         20. On August 1, 2007, Pop and Diane deposited the $417, 359.01 check in a Park Sterling Bank account owned by the Trust.

         21. On August 2, 2007, Pop filed a voluntary dismissal without prejudice of the North Carolina lawsuit ...


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